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SECOND DIVISION

G.R. No. L-39641 February 28, 1983

METROPOL (BACOLOD) FINANCING & INVESTMENT CORPORATION, Plaintiff-Appellee, vs. SAMBOK MOTORS COMPANY and NG SAMBOK SONS MOTORS CO., LTD., Defendants-Appellants.

DE CASTRO, J.:

The former Court of Appeals, by its resolution dated October 16, 1974 certified this case to this Court the issue issued therein being one purely of law.chanroblesvirtualawlibrary chanrobles virtual law library

On April 15, 1969 Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd., in the amount of P15,939.00 payable in twelve (12) equal monthly installments, beginning May 18, 1969, with interest at the rate of one percent per month. It is further provided that in case on non-payment of any of the installments, the total principal sum then remaining unpaid shall become due and payable with an additional interest equal to twenty-five percent of the total amount due.chanroblesvirtualawlibrary chanrobles virtual law library

On the same date, Sambok Motors Company (hereinafter referred to as Sambok), a sister company of Ng Sambok Sons Motors Co., Ltd., and under the same management as the former, negotiated and indorsed the note in favor of plaintiff Metropol Financing & Investment Corporation with the following indorsement: chanrobles virtual law library

Pay to the order of Metropol Bacolod Financing & Investment Corporation with recourse. Notice of Demand; Dishonor; Protest; and Presentment are hereby waived.

SAMBOK MOTORS CO. (BACOLOD)

By: chanrobles virtual law library

RODOLFO G. NONILLO Asst. General Manager

The maker, Dr. Villaruel defaulted in the payment of his installments when they became due, so on October 30, 1969 plaintiff formally presented the promissory note for payment to the maker. Dr. Villaruel failed to pay the promissory note as demanded, hence plaintiff notified Sambok as indorsee of said note of the fact that the same has been dishonored and demanded payment.chanroblesvirtualawlibrary chanrobles virtual law library

Sambok failed to pay, so on November 26, 1969 plaintiff filed a complaint for collection of a sum of money before the Court of First Instance of Iloilo, Branch I. Sambok did not deny its liability but contended that it could not be obliged to pay until after its co-defendant Dr. Villaruel has been declared insolvent.chanroblesvirtualawlibrary chanrobles virtual law library

During the pendency of the case in the trial court, defendant Dr. Villaruel died, hence, on October 24, 1972 the lower court, on motion, dismissed the case against Dr. Villaruel pursuant to Section 21, Rule 3 of the Rules of Court. ¹ chanrobles virtual law library

On plaintiff's motion for summary judgment, the trial court rendered its decision dated September 12, 1973, the dispositive portion of which reads as follows: chanrobles virtual law library

WHEREFORE, judgment is rendered: chanrobles virtual law library

(a) Ordering Sambok Motors Company to pay to the plaintiff the sum of P15,939.00 plus the legal rate of interest from October 30, 1969; chanrobles virtual law library

(b) Ordering same defendant to pay to plaintiff the sum equivalent to 25% of P15,939.00 plus interest thereon until fully paid; and chanrobles virtual law library

(c) To pay the cost of suit.

Not satisfied with the decision, the present appeal was instituted, appellant Sambok raising a lone assignment of error as follows: chanrobles virtual law library

The trial court erred in not dismissing the complaint by finding defendant appellant Sambok Motors Company as assignor and a qualified indorsee of the subject promissory note and in not holding it as only secondarily liable thereof.

Appellant Sambok argues that by adding the words "with recourse" in the indorsement of the note, it becomes a qualified indorser that being a qualified indorser, it does not warrant that if said note is dishonored by the maker on presentment, it will pay the amount to the holder; that it only warrants the following pursuant to Section 65 of the Negotiable Instruments Law: (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has a good title to it; (c) that all prior parties had capacity to contract; (d) that he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.chanroblesvirtualawlibrary chanrobles virtual law library

The appeal is without merit.chanroblesvirtualawlibrary chanrobles virtual law library

A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser's signature the words "without recourse" or any words of similar import. ² Such an indorsement relieves the indorser of the general obligation to pay if the instrument is dishonored but not of the liability arising from warranties on the instrument as provided in Section 65 of the Negotiable Instruments Law already mentioned herein. However, appellant Sambok indorsed the note "with recourse" and even waived the notice of demand, dishonor, protest and presentment.chanroblesvirtualawlibrary chanrobles virtual law library

"Recourse" means resort to a person who is secondarily liable after the default of the person who is primarily liable. ³Appellant, by indorsing the note "with recourse" does not make itself a qualified indorser but a general indorser who is secondarily liable, because by such indorsement, it agreed that if Dr. Villaruel fails to pay the note, plaintiff-appellee can go after said appellant. The effect of such indorsement is that the note was indorsed without qualification. A person who indorses without qualification engages that on due presentment, the note shall be accepted or paid, or both as the case may be, and that if it be dishonored, he will pay the amount thereof to the holder. ⁴ Appellant Sambok's intention of indorsing the note without qualification is made even more apparent by the fact that the notice of demand, dishonor, protest and presentment were an waived. The words added by said appellant do not limit his liability, but rather confirm his obligation as a general indorser.chanroblesvirtualawlibrary chanrobles virtual law library

Lastly, the lower court did not err in not declaring appellant as only secondarily liable because after an instrument is dishonored by non-payment, the person secondarily liable thereon ceases to be such and becomes a principal debtor. ⁵His liabiliy becomes the same as that of the original obligor. ⁶Consequently, the holder need not even proceed against the maker before suing the indorser.chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE, the decision of the lower court is hereby affirmed. No costs.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.

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ABAD SANTOS, J., concurring:chanrobles virtual law library

I concur and wish to add the observation that the appeal could have been treated as a petition for review under R.A. 5440 and dismissed by minute resolution.chanroblesvirtualawlibrarychanrobles virtual law library

ABAD SANTOS, J., concurring:

I concur and wish to add the observation that the appeal could have been treated as a petition for review under R.A. 5440 and dismissed by minute resolution.