GSIS V CA (RACHO) 170 SCRA 530; REGALADO; February 23, 1989 FACTS -Mr. and Mrs.

Racho, together with Mr. and Mrs. Lagasca, executed deeds of mortgage (11.5K and 3k). A parcel of land co-owned by the mortgagor spouses was given as security. They also executed a 'promissory note" which states in part:
... for value received, we the undersigned ... JOINTLY, SEVERALLY and SOLIDARILY, promise to pay the GOVERNMENT SERVICE INSURANCE SYSTEM the sum of . . . (P 11,500.00) Philippine Currency, with interest at the rate of six (6%) per centum compounded monthly payable in . . . (120)equal monthly installments of . . . (P 127.65) each.

-The Lagascas failed to pay the amortizations. The land was extrajudicially foreclosed. -2 years later, the Rachos filed a complaint against the Lagascas and GSIS, praying that the foreclosure be declared void for lack of notice required under law. They alleged that they signed the mortgage contracts and promissory notes not as sureties or guarantors of the Lagascas. -RTC dismissed the case. The CA reversed, saying that the Rachos were an accommodation party. The mortgage was therefore void as the GSIS failed to give personal notice (notice given was thru publication) to them as to the delinquency of the amortizations and as to the subsequent foreclosure. Thus, the foreclosure was declared void. ISSUE/S 1. WON the promissory note was a negotiable instrument 2. WON the property of the Rachos was liable under the mortgage contracts 3. WON there was a proper notice of the foreclosure HELD 1. 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."

2. YES

Ratio Article 2085 of the Civil code says third persons who are not parties may secure an obligation by mortgaging their own property. Reasoning So long as valid consent was given, the fact that the loans were solely for the benefit of the Lagasca spouses would not invalidate the mortgage with respect to Rachos share in the property. In consenting thereto, their share in the property would secure the performance of the principal obligation. 3. YES Ratio Act 3135 does not require personal notice to the mortgagor. Notice thru publication is sufficient Disposition Judgment reversed.