Sesbreño v CA et al, GR No. 89252, May 24, 1993 [Case Digest]

 

Sesbreño v CA et al,

GR No. 89252, May 24, 1993

Facts:

            Petitioner Raul Sesbreño made a money market placement in the amount of P300,000.00 with the Philippine Underwriters Finance Corporation ("Philfinance"); the placement, with a term of thirty-two (32) days, would mature on 13 March 1981.

            Petitioner sought to encash the post-dated checks issued by Philfinance. However, the checks were dishonored for having been drawn against insufficient funds.  Philfinance delivered to petitioner the DCR No. 10805 issued by private respondent Pilipinas Bank ("Pilipinas").

            On 2 April 1981, petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas, Makati Branch, and handed to her a demand letter informing the bank that his placement with Philfinance in the amount reflected in the DCR No. 10805 had remained unpaid and outstanding, and that he in effect was asking for the physical delivery of the underlying promissory note. Petitioner then examined the original of the DMC PN No. 2731 and found: that it had a face value of P2,300,833.33, with Philfinance as "payee" and private respondent Delta Motors Corporation ("Delta") as "maker;" and that on face of the promissory note was stamped "NON-NEGOTIABLE." Pilipinas did not deliver the Note, nor any certificate of participation in respect thereof, to petitioner.

            Petitioner later made similar demand letters, dated 3 July 1981 and 3 August 1981.  Pilipinas allegedly referred all of petitioner’s demand letters to Philfinance for written instructions, as had been supposedly agreed upon in a "Securities Custodianship Agreement" between Pilipinas and Philfinance. Philfinance never did provide the appropriate instructions; Pilipinas never released DMC PN No. 2731, nor any other instrument in respect thereof, to petitioner. Petitioner admits that DMC PN No. 2731 was non-negotiable but contends that that Note had been validly transferred, in part, to him by assignment and that as a result of such transfer, Delta as debtor-maker of the Note, was obligated to pay petitioner the portion of that Note assigned to him by the payee Philfinance.

 

Issue:

            Whether or not a non-negotiable instrument can be transferred.

 

Held:

            Yes.

 

Ratio:

            The negotiation of a negotiable instrument must be distinguished from the assignment or transfer of an instrument whether that be negotiable or non-negotiable. Only an instrument qualifying as a negotiable instrument under the relevant statute may be negotiated either by endorsement thereof coupled with delivery, or by delivery alone where the negotiable instrument is in bearer form. A negotiable instrument may, however, instead of being negotiated, also be assigned or transferred. The legal consequences of negotiation as distinguished from assignment of a negotiable instrument are, of course, different. A non-negotiable instrument may, obviously, not be negotiated; but it may be assigned or transferred, absent an express prohibition against assignment or transfer written in the face of the instrument.