Sps. Pedro and Florencia Violago vs. BA Finance Corp.
and o While the case was on-going, Esmeraldo conveyed
Avelino Violago
Topic: Elements of Negotiable Instrument
Petitioners: Pedro and Florencia Violago (Spouses)
Respondents: BA Finance Corp. (BA Finance) and Avelino Violago
(Avelino)
DOCTRINE: For an instrument to be considered as a negotiable
instrument, all the following requisites must be complied with: (a) It
must be in writing and igned by the maker or drawer; (b) Must
contain an unconditional promise or order to pay a sum certain in
money; (c) Must be payable on demand, or at a fixed or determinable
future time; (d) Must be payable to order or to bearer; and (e) Where
the instrument is addressed to a drawee, he must be named or
otherwise indicated therein with reasonable certainty.
FACTS
Avelino, president of Violago Motor Sales Corp. (VMSC)
offered to sell a Toyota Cressida Model 1983 car to his
cousin, Pedro Violago and wife Florencia.
o Downpayment is only 60,500 with balance to be
finances by BA Finance.
Upon agreeing to purchase the car, the spouses and Avelino
signed a promissory note (PN) binding themselves to pay
jointly and severally to the order of VMSC the remaining
balance in 36 monthly installments.
o VMSC issued sales invoice in favor of spouses and
the spouses executed chattel mortgage (CM) over
the car in favor of VMSC.
o 60,500 remitted to VMSC.
VMSC endorsed the PN to BA Finance without recourse.
o After receiving the full payment from VMSC, it
executed a Deed of Assignment over the PN and
CM in favor of BA Finance.
Unaware of the prior sale of the same car to Esmeraldo
VIolago, another cousin of Avelino (car registered in LTO
San Rafael), the spouses filed the sales invoice with the LTO
which later on issued the Cert. of Registration in the name of
Pedro.
the car to Jose Olvido who executed a CM over the
vehicle in favor of one Generoso Lopez as security
for loan.
o The PN was later on endorsed to BA Finance.
Despite demands, there was no delivery of the vehicle.
Accordingly, the spouses did not pay the monthly
amortization to BA Finance.
BA Finance filed a complaint for Replevin with damages
against the spouses praying for the delivery of the vehicle to
BA Finance, or payment of the financed amount.
o RTC issued an order of replevin. It eventually ruled
in favor of BA Finance.
o After RTC denied the MR and Motion to Quash Writ
of Execution due to lack of service of summons, the
spouses filed a petition for certiorari
Spouses filed their answer:
o Never received the vehicle
o Vehicle previously sold to Esmeraldo
o BA Finance was not a holder in due course
o Recourse of BA Finance should be against VMSC
Spouses also filed a 3rd party complaint against Avelino
praying that he be held liable in case they be held liable to
BA Finance.
o Avelinos MTD was denied.
RTC: Spouses should deliver the car to AB Finance or in the
alternative, to pay BA Finance jointly and severally, but the
spouses are entitled to be indemnified by Avelino.
Upon appeal to CA, spouses argued that:
o PN is negotiable instrument thus NIL should be
applied (not Civil Code)
o Since VMSC was not the owner of the car at the
time of the sale, such sale was null and void for
failure in the cause or consideration of the PN.
o BA Finance is not a holder in due course since it
knew that the car was never delivered to the
spouses.
CAs decision:
 o PN was a negotiable instrument and that BA o Names the drawees with certainty. The indorsement
Finance was a holder in due course (NIL, Sec.8, 24, by VMSC to BA Finance appears likewise to be valid
52). and regular.
o Spouses should have impleaded VMSC (seller of the
car and creditor in PN).
o Since VMSC is an indispensable party, any
judgment will not bind it or be enforced against it.
o Avelino is liable for damages to the spouses without
prejudice to the action of the spouses against VMSC
and Avelino in a separate action.
o Third party complaint against the spouses is
dismissed.

ISSUE
WON the PN is a negotiable instrument

HELD: YES. PN is clearly negotiable, all the requisites of a

negotiable instrument are present. CAs decision is set aside
insofar as it dismissed without prejudice the 3 rd party complaint
of spouses against Violago.
Requisites of a Negotiable Instrument:
Section 1. Form of Negotiable Instruments. An instrument to
be negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a
sum certain in money;
(c) Must be payable on demand, or at a fixed or
determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must
be named or otherwise indicated therein with reasonable
certainty.
The PN clearly satisfies the requirements of a NI under the
NIL.
o It is in writing and signed by the Violago spouses
o Has an unconditional promise to pay a certain
amount
o On specific dates in the future which could be
determined from the terms of the note
o Made payable to the order of VMSC