GSIS vs CA (170 SCRA) 23 February

Facts:
Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr. and Mrs. Flaviano Lagasca, execu
deed of mortgage in favor of petitioner Government Service Insurance System and subsequ
another deed of mortgage in connection with two loans granted by the latter in the sums of P 11,5
and P 3,000.00, respectively. A parcel of land covered co-owned by said mortgagor spouses, was
as security under the aforesaid two deeds. They also executed a 'promissory note to be jointly, sev
and solidarily
The Lagasca spouses executed an instrument denominated "Assumption of Mortgage" under which
obligated themselves to assume the aforesaid obligation to the GSIS and to secure the release
mortgage covering that portion of the land belonging to herein private respondents and which
mortgaged to the GSIS. 4 This undertaking was not fu

Upon failure of the mortgagors to comply with the conditions of the mortgage, particularly the paym
the amortizations due, GSIS extrajudicially foreclosed the mortgage and caused the mortgaged pro
to be sold at public au

Private respondents filed a complaint against the petitioner and the Lagasca spouses in the f
Court of First Instance of Quezon City, praying that the extrajudicial foreclosure "made on, their pro
and all other documents executed in relation thereto in favor of the Government Service Insu
System" be declared null and
Private respondents alleged that they signed the mortgage contracts not as sureties or guaranto
the Lagasca spouses but they merely gave their common property to the said co-owners who
solely benefited by the loans from the

The trial court dismiss the complaint for lack of cause of action but the Court of Appeals reverse
decision of the trial

Issue:
Whether or not the promissory note and the mortgage deeds are negotiable instrum

Held:
No, the executed documents are not nego
In submitting their case to this Court, both parties relied on the provisions of Section 29 of Act No.
otherwise known as the Negotiable Instruments Law, which provide that an accommodation party i
who has signed an instrument as maker, drawer, acceptor of indorser without receiving value the
but is held liable on the instrument to a holder for value although the latter knew him to be on
accommodation

This approach of both parties appears to be misdirected and their reliance misplaced. The prom
note hereinbefore quoted, as well as the mortgage deeds subject of this case, are clearly not nego
instruments. These documents do not comply with the fourth requisite to be considered as such
Section 1 of Act No. 2031 because they are neither payable to order nor to bearer. The note is pa
to a specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act No. 2031 wou
apply; governance shall be afforded, instead, by the provisions of the Civil Code and special law
mortgages.
Therefore due to the lack of the essential requisites the promissory note and the deed of mortgage
negotiable document of

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