Sesbreno vs.

CA
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GR 89252, 24 May 1993
FACTS
On 9 February 1981, Raul Sesbreno made a money market placement in the amount of P300,000
with the Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32 days.
PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor
Corporation Promissory Note (2731), the Certificate of Securities Delivery Receipt indicating the
sale of the note with notation that said security was in the custody of Pilipinas Bank, and
postdated checks drawn against the Insular Bank of Asia and America for P304,533.33 payable
on 13 March 1981. The checks were dishonored for having been drawn against insufficient funds.
Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno; but
Sesbreno learned that the security was issued 10 April 1980, maturing on 6 April 1981, has a face
value of P2,300,833.33 with PhilFinance as payee and Delta Motors as maker; and was stamped
non-negotiable on its face. As Sesbreno was unable to collect his investment and interest
thereon, he filed an action for damages against Delta Motors and Pilipinas Bank.

ISSUE
Whether non-negotiability of a promissory note prevents its assignment.
HELD
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 if it is in
bearer form. A negotiable instrument, instead of being negotiated, may also be assigned or
transferred. The legal consequences of negotiation and assignment of the instrument are
different. A negotiable instrument may not be negotiated but may be assigned or transferred,
absent an express prohibition against assignment or transfer written in the face of the
instrument. herein, there was no prohibition stipulated.

Sesbreno vs CA
RAUL SESBREO vs HON. COURT OF APPEALS, DELTA MOTORS CORPORATION AND PILIPINAS
BANK
G.R. No. 89252 May 24, 1993
FACTS: Raul Sesbreno made a money market placement in the amount of P300,000 with PhilFinance, with a
term of 32 days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor

Corporation Promissory Note (DMC PN No. 2731), the Certificate of Securities Delivery Receipt indicating the
sale of the Note with notation that said security was in the custody of Pilipinas Bank, and postdated checks
drawn against the Insular Bank of Asia and America for P304,533.33 payable on 13 March 1981. The checks
were dishonored for having been drawn against insufficient funds. Philfinance delivered to petitioner
Denominated Custodian Receipt (DCR).
Petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas, and handed her a demand letter
informing the bank that his placement with Philfinance in the amount reflected in the DCR 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.
Petitioner later made similar demand letters again asking private respondent Pilipinas for physical delivery of
the original of DMC PN No. 2731.
Petitioner also made a written demand upon private respondent Delta for the partial satisfaction of DMC PN No.
2731, explaining that Philfinance, as payee thereof, had assigned to him said Note to the extent of
P307,933.33. Delta, however, denied any liability to petitioner on the promissory note.
As petitioner had failed to collect his investment and interest thereon, he filed an action for damages against
private respondents Delta and Pilipinas.
ISSUE: WON DMC PN No. 2731 marked as non-negotiable may be assigned?
HELD: YES. 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 bill of lading, did not destroy its assignability, but the
sole effect was to exempt the bill from the statutory provisions relative thereto, and a bill, though not

negotiable, may be transferred by assignment; the assignee taking subject to the equities between the original
parties. 12 (Emphasis added)
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.