Case Digest (G.R. No. 72593)
Facts:
In Consolidated Plywood Industries, Inc., Henry Wee, and Rodolfo T. Vergara v. IFC Leasing and Acceptance Corporation (G.R. No. 72593, April 30, 1987), the petitioner is a logging corporation that in early 1978 contracted to buy two *used* Allis crawler tractors (models HD-21-B and HD-16-B) from Atlantic Gulf & Pacific Company of Manila through its sister company, Industrial Products Marketing (“seller-assignor”). The tractors, delivered to the petitioner’s concession area in Baganga, Manay, and Caraga, Davao Oriental, carried an express ninety-day warranty of performance and parts availability. The parties executed on April 5, 1978 a deed of sale with chattel mortgage and a promissory note for ₱1,093,789.71, and by separate deed the seller-assignor assigned its mortgage rights and endorsed the note in favor of the respondent, a financing corporation. Within fourteen days of delivery, the first tractor broke down; nine days later, the second failed. Despite repeated requestsCase Digest (G.R. No. 72593)
Facts:
- Contract and acquisition of tractors
- Consolidated Plywood Industries, Inc. (petitioner) engaged in logging needed two used Allis Crawler Tractors for its 1978 operations. Industrial Products Marketing (IPM) offered two units (HD-21-B and HD-16-B), warranted 90 days’ performance and availability of parts.
- On April 5, 1978, petitioner executed a Deed of Sale with Chattel Mortgage and Promissory Note for P1,093,789.71, payable in 24 monthly installments. Simultaneously, IPM assigned chattel mortgage and promissory note to IFC Leasing and Acceptance Corporation (respondent). Petitioner paid P210,000 down payment; seller-assignor delivered tractors and stationed mechanics.
- Breakdown, warranty claim, and attempted reconditioning
- Fourteen days after delivery, one tractor failed; nine days later, the second also broke down. Petitioner notified IPM on April 25, 1978; IPM’s mechanics attempted repairs but tractors remained unserviceable.
- Petitioner delayed installment payments pending warranty fulfillment. On April 7, 1979, petitioner requested IPM to recondition and sell the units, pay respondent from proceeds, sharing any surplus; IPM did not respond.
- Litigation history
- Respondent sued petitioners for the principal, accrued and future interest, attorney’s fees, and costs. Petitioners counterclaimed for damages (P20,000 attorney’s fees; P5,000 litigation expenses).
- Trial court (Apr. 20, 1981) ordered petitioners to pay principal, interest, 10% attorney’s fees and costs; disallowed counterclaim. IAC (July 17, 1985) affirmed, holding the note negotiable, respondent a holder in due course, and warranty defense unavailable. Motion for reconsideration denied (Oct. 17, 1985). Petitioners filed certiorari under Rule 45.
Issues:
- Is the promissory note a negotiable instrument under the Negotiable Instruments Law?
- Is respondent a holder in due course or merely an assignee of the non-negotiable note?
- Can petitioners invoke breach of warranty, failure of consideration and rescission against respondent?
- Does extrajudicial rescission of the contract discharge petitioners’ obligations under the note?
- Does assignment of the chattel mortgage convert the installment sale into a loan?
- Is the promissory note admissible in evidence without documentary stamps?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)