G.R. No. 76788 - Salas vs. Court of Appeals

On February 6, 1980, petitioner Juanita Salas purchased a motor vehicle from Violago Motor Sales Corporation (VMS) for ₱58,138.20, evidenced by a promissory note dated February 11, 1980.
The promissory note was subsequently endorsed to Filinvest Finance & Leasing Corporation (private respondent), which financed the purchase.

Petitioner defaulted on her installment payments beginning May 21, 1980, citing a discrepancy in engine and chassis numbers discovered after an accident on May 9, 1980.
Private respondent filed Civil Case No. 5915 before the Regional Trial Court (RTC) of San Fernando, Pampanga, to collect the unpaid balance.
On September 10, 1982, the RTC rendered judgment ordering petitioner to pay ₱28,414.40 with 14% interest from October 2, 1980, plus ₱1,000 attorney’s fees; it dismissed petitioner’s counterclaim and imposed costs against her.

Both parties appealed. Petitioner alleged fraud, bad faith, and misrepresentation by VMS, seeking to nullify her obligation.
On October 27, 1986, the Court of Appeals modified the RTC judgment, ordering petitioner to pay the remaining balance of ₱54,908.30 with 14% interest from October 2, 1980, until full payment; it affirmed all other aspects and awarded costs to petitioner.

Petitioner filed a petition for review on certiorari, assigning twelve errors centered on VMS’s alleged fraud and contending no valid contract existed, invoking the law on sales by description (Art. 1481, NCC).
She asserted that private respondent should proceed against VMS directly and that she need not implead VMS in the collection suit.
Private respondent countered that the issues were already resolved by the Court of Appeals and that a separate breach-of-contract action against VMS was pending on appeal.

Whether the promissory note is a negotiable instrument under the Negotiable Instruments Law.
Whether Filinvest, as endorsee, qualifies as a holder in due course entitled to enforce payment free of defenses.

Whether petitioner may set up the alleged fraud, bad faith, and misrepresentation of VMS as a defense against private respondent.
Whether due process permits adjudication of petitioner’s fraud claims in a suit where VMS is not a party.