Sesbreno v. Court of Appeals: Jurist

Sesbreno v.
Court of Appeals
jurist
222 SCRA 466 (1993)
FACTS:
On 9 February 1981, petitioner Raul Sesbreño made a money market

placement in the amount of P300,000.00 with the Philippine
Underwriters Finance Corporation (“Philfinance”), Cebu Branch; the
placement, with a term of thirty-two (32) days, would mature on 13
March 1981, Philfinance, also on 9 February 1981, issued the following
documents to petitioner:
(a) the Certificate of Confirmation of Sale, “without recourse,” No.

20496 of one (1) Delta Motors Corporation Promissory Note (“DMC
PN”) No. 2731 for a term of 32 days at 17.0% per annum;
(b) the Certificate of securities Delivery Receipt No. 16587 indicating

the sale of DMC PN No. 2731 to petitioner, with the notation that the
said security was in custodianship of Pilipinas Bank, as per
Denominated Custodian Receipt (“DCR”) No. 10805 dated 9 February
1981; and
(c) post-dated checks payable on 13 March 1981 (i.e., the maturity

date of petitioner’s investment), with petitioner as payee, Philfinance
as drawer, and Insular Bank of Asia and America as drawee, in the total
amount of P304,533.33.
On 13 March 1981, petitioner sought to encash the postdated checks

issued by Philfinance. However, the checks were dishonored for
having been drawn against insufficient funds. On 26 March 1981,
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 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 the security had been issued on 10 April 1980; that it would
mature on 6 April 1981; that it had a face value of P2,300,833.33, with
the 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.
As petitioner had failed to collect his investment and interest thereon,

he filed an action for damages with the Regional Trial Court against
private respondents Delta and Pilipinas. The trial court dismissed the
complaint and counterclaims for lack of merit and for lack of cause of
action.
Petitioner appealed to respondent Court of Appeals the Court of

Appeals denied the appeal and held:
ISSUE:
Whether or not the non-negotiability of a promissory note prevents its
assignment.
RULING:
A non-negotiable instrument may not be negotiated but may be

assigned or transferred.
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 indorsement 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. The words
“not negotiable,” stamped on the face of the instrument, did not
destroy its assignability, but the sole effect was to exempt the same
from the statutory provisions relative thereto, and though not
negotiable, may be transferred by assignment; the assignee taking
subject to the equities between the original parties.
In assignment, the assignee is merely placed in the position of the

assignors and acquires the instrument subject to all the defenses that
might have been set up against the original payee.
DMC PN No. 2731, while marked “non-negotiable,” was not at the
same time stamped “non-transferable” or “non-assignable.” It
contained no stipulation which prohibited Philfinance from assigning or
transferring, in whole or in part, that Note.
SO ORDERED.
*Case digest by Earl M. Acoymo, JD-IV, Andres Bonifacio Law School,

SY 2019-2020

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Sesbreno v.

222 SCRA 466 (1993)

On 9 February 1981, petitioner Raul Sesbreño made a money market

(a) the Certificate of Confirmation of Sale, “without recourse,” No.

(b) the Certificate of securities Delivery Receipt No. 16587 indicating

(c) post-dated checks payable on 13 March 1981 (i.e., the maturity

On 13 March 1981, petitioner sought to encash the postdated checks

On 2 April 1981, petitioner approached Ms. Elizabeth de Villa of private

As petitioner had failed to collect his investment and interest thereon,

Petitioner appealed to respondent Court of Appeals the Court of

A non-negotiable instrument may not be negotiated but may be

The negotiation of a negotiable instrument must be distinguished from

A negotiable instrument may, however, instead of being negotiated,

A non-negotiable instrument may, obviously, not be negotiated; but it

In assignment, the assignee is merely placed in the position of the

*Case digest by Earl M. Acoymo, JD-IV, Andres Bonifacio Law School,

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