PNB VS. MANILA OIL

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5)  PNB VS. MANILA OIL

Invalid stipulations will not affect the negotiability of the instrument with all the requisites present under Section 1 of NIL. 

Philippine National Bank, plaintiff-appellee vs. Manila Oil Refining and By-Products Company Inc., defendant-appellant

G.R. No. 18103. June 8, 1922

Facts: 

Appeal from the judgment of the Court of First Instance of Manila.

The manager and the treasurer of Manila Oil Refining executed and delivered to the Philippine National Bank, a written instrument with authorization on its face that in case the note be not paid at maturity, it authorizes any attorney in the PNB to appear in the name of the respondent and confess judgment for the above sum (61,000.00) with interest, a release of all errors and waiver of all rights to inquisition and appeal and to the benefit of all laws exempting property, real or persona), from levy for sale. (commission of judgment is commonly known as judgment note)

Manila Oil Company failed to pay the promissory note on demand. PNB brought action in the Court of First Instance of Manila to recover P61,000.00 the amount of the note, together with the interest and costs. An Attorney associated with PNB entered his appearance in representation of the defendant and filed motion confessing judgment, the defendant however objected strongly to the unsolicited representation of the attorney.

Defendant filed a Demurer (a request to a court pleading that it should dismiss a lawsuit on the grounds that there is no legal claim made or for which relief can be granted), and this was overruled.

Appellant claims that the instrument is not negotiable because of the stipulation is not valid re: in a promissory note whereby in case the same is not paid at maturity, the maker authorizes any attorney to appear and confess judgment thereon for the principal amount, with interest, costs, and attorney's fees and waived all errors, rights to inquisition, and appeal, and all property exemptions.

ISSUE: 

Whether or not the warrants of Attorney to confess judgment affect the negotiability of the instrument.

HELD:

No, as provided in Section 5 of the Negotiable Instruments Law: the negotiable character of an instrument otherwise negotiable is not affected by a provision which authorizes a confession of judgment, although the last paragraph of said Section said that nothing shall validate any provision or stipulation which are otherwise illegal. 

Thus, as Warrants of attorney to confess judgment are void as against public policy and is not authorized nor contemplated in our law, because 1) they enlarge the field for fraud, 2) because under these instruments the promisor bargains away his right to a day in court, as regards to the constitutional safeguards to the right to take a man's property only after a day in court and after due process of law, contemplate that all defendants shall have opportunity to be heard. 

However, the note is still negotiable if all the requisites in Section 1 of the NIL are present. It is only the stipulation is avoided. 

Judgment appealed was set aside. The case was remanded to lower court for further proceeding. 

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