(1) Sambok Motors Company (Sambok) indorsed a promissory note made by Dr. Villaruel in favor of plaintiff Metropol Financing with the words "with recourse"; (2) "With recourse" means Sambok agreed to pay if Dr. Villaruel defaulted, making Sambok a general indorser rather than a qualified indorser; (3) Sambok also waived notice requirements, confirming its intent to be liable as a general indorser; (4) When Dr. Villaruel defaulted and the note was dishonored, Sambok's liability became that of a principal debtor
(1) Sambok Motors Company (Sambok) indorsed a promissory note made by Dr. Villaruel in favor of plaintiff Metropol Financing with the words "with recourse"; (2) "With recourse" means Sambok agreed to pay if Dr. Villaruel defaulted, making Sambok a general indorser rather than a qualified indorser; (3) Sambok also waived notice requirements, confirming its intent to be liable as a general indorser; (4) When Dr. Villaruel defaulted and the note was dishonored, Sambok's liability became that of a principal debtor
(1) Sambok Motors Company (Sambok) indorsed a promissory note made by Dr. Villaruel in favor of plaintiff Metropol Financing with the words "with recourse"; (2) "With recourse" means Sambok agreed to pay if Dr. Villaruel defaulted, making Sambok a general indorser rather than a qualified indorser; (3) Sambok also waived notice requirements, confirming its intent to be liable as a general indorser; (4) When Dr. Villaruel defaulted and the note was dishonored, Sambok's liability became that of a principal debtor
(1) Sambok Motors Company (Sambok) indorsed a promissory note made by Dr. Villaruel in favor of plaintiff Metropol Financing with the words "with recourse"; (2) "With recourse" means Sambok agreed to pay if Dr. Villaruel defaulted, making Sambok a general indorser rather than a qualified indorser; (3) Sambok also waived notice requirements, confirming its intent to be liable as a general indorser; (4) When Dr. Villaruel defaulted and the note was dishonored, Sambok's liability became that of a principal debtor
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No. L-39641. February 28, 1983.* protest and presentment were all waived.
The words added by said
METROPOL (BACOLOD) FINANCING & INVESTMENT CORPORATION, appellant do not limit his liability, but rather confirm his obligation as a plaintiff-appellee, vs. SAMBOK MOTORS COMPANY and NG SAMBOK general indorser. SONS MOTORS CO., LTD., defendants-appellants. Same; Same; Same; Same; Same; After dishonor of the note, a person Mercantile Law; Negotiable Instruments; Indorsements; Qualified secondarily liable becomes a principal debtor.—Lastly, the lower court indorsement constitutes indorser a mere assignor of title to the did not err in not declaring appellants as only secondarily liable because instrument and relieves indorser of general obligation to pay instrument after an instrument is dishonored by non-payment, the person if instrument is dishonored.—A qualified indorsement constitutes the secondarily liable thereon ceases to be such and becomes a principal indorser a mere assignor of the title to the instrument. It may be made by debtor. His liability becomes the same as that of the original obligor. adding to the indorser’s signature the words “without recourse” or any Consequently, the holder need not even proceed against the maker words of similar import. Such an indorsement relieves the indorser of the before suing the indorser. general obligation to pay if the instrument is dishonored but not of the liability arising from warranties on the instrument as provided in Section DE CASTRO, J.: 65 of the Negotiable Instruments Law already mentioned herein. The former Court of Appeals, by its resolution dated October 16, 1974 Same; Same; Same; Interpretation; “Recourse,” meaning of; Words “with certified this case to this Court the issue issued therein being one purely recourse” in indorsement of promissory note means a general of law. indorsement or an indorsement without a qualification as to liability of indorser on the note; Words added in the note “notice of demand, On April 15, 1969 Dr. Javier Villaruel executed a promissory note in favor dishonor, protest and presentment are hereby waived” confirm a party’s of Ng Sambok Sons Motors Co., Ltd., in the amount of P15,939.00 payable obligation as a general indorser.—“Recourse” means resort to a person in twelve (12) equal monthly installments, beginning May 18, 1969, with who is secondarily liable after the default of the person who is primarily interest at the rate of one percent per month. It is further provided that liable. Appellant, by indorsing the note “with recourse” does not make in case on non-payment of any of the installments, the total principal sum itself a qualified indorser but a general indorser who is secondarily liable, then remaining unpaid shall become due and payable with an additional because by such indorsement, it agreed that if Dr. Villaruel fails to pay the interest equal to twenty-five percent of the total amount due. note, plaintiff-appellee can go after said appellant. The effect of such indorsement is that the note was indorsed without qualification. A person On the same date, Sambok Motors Company (hereinafter referred to as who indorses without qualification engages that on due presentment, the Sambok), a sister company of Ng Sambok Sons Motors Co., Ltd., and note shall be accepted or paid, or both as the case may be, and that if it under the same management as the former, negotiated and indorsed the be dishonored, he will pay the amount thereof to the holder. Appellant note in favor of plaintiff Metropol Financing & Investment Corporation Sambok’s intention of indorsing the note without qualification is made with the following indorsement: even more apparent by the fact that the notice of demand, dishonor,
Page 1 of 3 Pay to the order of Metropol Bacolod Financing & Investment Corporation with recourse. Notice of Demand; Dishonor; Protest; and (a) Ordering Sambok Motors Company to pay to the plaintiff the sum of Presentment are hereby waived. P15,939.00 plus the legal rate of interest from October 30, 1969;
SAMBOK MOTORS CO. (BACOLOD) (b) Ordering same defendant to pay to plaintiff the sum equivalent to 25% of P15,939.00 plus interest thereon until fully paid; and By: (c) To pay the cost of suit. RODOLFO G. NONILLO Asst. General Manager Not satisfied with the decision, the present appeal was instituted, The maker, Dr. Villaruel defaulted in the payment of his installments appellant Sambok raising a lone assignment of error as follows: when they became due, so on October 30, 1969 plaintiff formally presented the promissory note for payment to the maker. Dr. Villaruel The trial court erred in not dismissing the complaint by finding defendant failed to pay the promissory note as demanded, hence plaintiff notified appellant Sambok Motors Company as assignor and a qualified indorsee Sambok as indorsee of said note of the fact that the same has been of the subject promissory note and in not holding it as only secondarily dishonored and demanded payment. liable thereof.
Sambok failed to pay, so on November 26, 1969 plaintiff filed a complaint Appellant Sambok argues that by adding the words "with recourse" in the for collection of a sum of money before the Court of First Instance of indorsement of the note, it becomes a qualified indorser that being a Iloilo, Branch I. Sambok did not deny its liability but contended that it qualified indorser, it does not warrant that if said note is dishonored by could not be obliged to pay until after its co-defendant Dr. Villaruel has the maker on presentment, it will pay the amount to the holder; that it been declared insolvent. only warrants the following pursuant to Section 65 of the Negotiable Instruments Law: (a) that the instrument is genuine and in all respects During the pendency of the case in the trial court, defendant Dr. Villaruel what it purports to be; (b) that he has a good title to it; (c) that all prior died, hence, on October 24, 1972 the lower court, on motion, dismissed parties had capacity to contract; (d) that he has no knowledge of any fact the case against Dr. Villaruel pursuant to Section 21, Rule 3 of the Rules of which would impair the validity of the instrument or render it valueless. Court. 1 The appeal is without merit. On plaintiff's motion for summary judgment, the trial court rendered its decision dated September 12, 1973, the dispositive portion of which A qualified indorsement constitutes the indorser a mere assignor of the reads as follows: 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 WHEREFORE, judgment is rendered: Such an indorsement relieves the indorser of the general obligation to
Page 2 of 3 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.
"Recourse" means resort to a person who is secondarily liable after the
default of the person who is primarily liable. 3 Appellant, 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.
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. 5 His liabiliy becomes the same as that of the original obligor. 6 Consequently, the holder need not even proceed against the maker before suing the indorser.
WHEREFORE, the decision of the lower court is hereby affirmed. No costs.
