GOVERNMENT SERVICE INSURANCE SYSTEM vs. COURT OF APPEALS G.R. No. L-40824, February 23, 1989

Fact:
Private respondents, together with the spouses Lagasca, executed a deed of mortgage, in favor of petitioner GSIS of deed of mortgage. A parcel of land co-owned by said mortgagor spouses Lagasca and Private respondents was given as security under the aforesaid deed. Lagasca executed an instrument denominated “Assumption of Mortgage” under which they obligated themselves to assume the aforesaid obligation to the GSIS and to secure the release of the mortgage covering that portion of the land belonging to herein private respondents and which was mortgaged to the GSIS. This undertaking was not fulfilled, GSIS extrajudicially foreclosed the mortgage and caused the mortgaged property to be sold at public auction. Private respondents filed a complaint against the petitioner and the Lagasca spouses in the CFI praying to declared the extrajudicially foreclosed of GSIS of their property is null and void. The trial court dismissed the complaint for failure to establish a cause of action. Said decision was reversed by the respondent Court of Appeals, Hence this case.

Issue:
Whether the transaction of the parties was covered by the Negotiable Instruments Law?

Held:
No, the promissory note hereinbefore quoted, as well as the mortgage deeds subject of this case, are clearly not negotiable instruments. These documents do not comply with the fourth requisite to be considered as such under Section 1 of Act No. 2031 because they are neither payable to order nor to bearer. The note is payable to a specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act No. 2031 would not apply; governance shall be afforded, instead, by the provisions of the Civil Code and special laws on mortgages.

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