Commercial Law

Elizalde Company vs Biñan Transportation Company

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58 OG 5886 – Mercantile Law – Negotiable Instruments Law – Negotiable Instruments in General – Unconditional Promise To Pay

Biñan Transportation Company bought two motor vehicles.  They signed a promissory note and to secure payment, they mortgaged the motor vehicles.  The promissory notes were negotiated and were not paid.  So Elizalde who was holding the promissory note sued.  Biñan’s defense was that the promissory note was not negotiable because it was mentioned that it was subject to chattel mortgage.

ISSUE: Whether the note was negotiable.

HELD: Yes.  For reference to mortgage to destroy negotiability, the promise to pay must be burdened with the terms and conditions of the chattel mortgage.  Since the reference to the chattel mortgage did not make the promise to pay burdened with the terms and conditions of the chattel mortgage, the promissory note was still negotiable.

NOTE: Digest courtesy of Jimenez Transcripts (Negotiable Instruments Law). [Can’t find the full text of the case]

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