TOPIC: Non-negotiable promissory notes may nevertheless be assigned or transferred.

RAUL SESBRENO VS. COURT OF APPEALS, DELTA MOTORS CORPORATION

AND PILIPINAS BANK
G.R. NO. 89252
May, 24, 1993

FACTS:
Petitioner Raul Sesbreno made a money market placement in the amount of
P300,000.00 with the Philippine Underwriters Finance Corporation (Philfinance) with a
term of 32 days that would mature on March 13, 1981. Philfinance issued the following
documents to the petitioner: Certificate of Confirmation of Sale without recourse of Delta
Motors Corporation Promissory Note (DMC PN) No. 2731, 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, and post-
dated checks payable on March 13, 1981.

On March 13, 1981, petitioner sough to encash the postdated checks issued by
the Philfinance; however, the checks were dishonored for having been drawn against
insufficient funds. The petitioner learned that on the face of promissory note was
stamped “NON NEGOTIABLE”. Despite of several demands, respondent Pilipinas never
released DMC PN No. 2731 nor any other instrument in respect thereof, to petitioner on
the ground that Philfinance never did provide the appropriate instructions. The petitioner
had failed to collect his investment and interest thereon so he filed an action for
damages against private respondent Delta and Pilipinas in the RTC however it was
dismissed for lack of merit and for lack of cause of action. The respondent Court of
Appeals affirmed the decision of the trial court. Hence, this petition for review on
certiorari was filed.

ISSUE:
WHETHER OR NOT NON-NEGOTIABLE INSTRUMENT MAYBE ASSIGNED OR
TRANSFERRED.

RULING:
Yes, non-negotiable instrument maybe assigned or transferred. Only an
instrument qualifying as a negotiable instrument may be negotiated either by
endorsement thereof coupled with delivery, or by delivery alone where the negotiable
instrument is in bearer form. 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.

In the present case, DMC PN No. 2731, while marked “non-negotiable”, was not
at the same time stamped “non-transferrable” or “non-assignable”. It contained no
stipulation which prohibited Philfinance from assigning or transferring, in whole or in
part, that Note.