SESBRENO VS.

CA
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.

Nelia Ponce vs Court of Appeals

In 1969, Jesusa Afable and two others procured a loan from Nelia Ponce in the amount of
$194,016.29. In June 1969, Afable and her co-debtors executed a promissory note in favor
of Ponce in the peso equivalent of the loan amount which was P814,868.42. The
promissory note went due and was left unpaid despite demands from Ponce. This prompted
Ponce to sue Afable et al. The trial court ruled in favor of Ponce. The Court of Appeals
initially affirmed the trial court but it later reversed its decisions as it ruled that the
promissory note under consideration was payable in US dollars, and, therefore pursuant to
Republic Act 529, the transaction was illegal with neither party entitled to recover under
the in pari delicto rule.
ISSUE: Whether or not Ponce may recover.
HELD: Yes. RA 529 provides that an agreement to pay in dollars is null and void and of no
effect however what the law specifically prohibits is payment in currency other than legal
tender. It does not defeat a creditors claim for payment, as it specifically provides that
every other domestic obligation whether or not any such provision as to payment is
contained therein or made with respect thereto, shall be discharged upon payment in any
coin or currency which at the time of payment is legal tender for public and private debts. A
contrary rule would allow a person to profit or enrich himself inequitably at anothers
expense.
On the face of the promissory note, it says that it is payable in Philippine currency the
equivalent of the dollar amount loaned to Afable et al. It may likewise be pointed out that the
Promissory Note contains no provision giving the obligee the right to require payment in a
particular kind of currency other than Philippine currency, which is what is specifically
prohibited by RA No. 529. If there is any agreement to pay an obligation in a currency other
than Philippine legal tender, the same is null and void as contrary to public policy, pursuant
to Republic Act No. 529, and the most that could be demanded is to pay said obligation in
Philippine currency.

Octavio Kalalo vs Alfredo Luz

Octavio Kalalo is an engineer whose services were contracted by Alfredo Luz, an architect
in 1961. Luz contracted Kalalo to work on ten projects across the country, one of which was
an in the International Rice Research Institute (IRRI) Research Center in Los Baos,
Laguna. Luz was to be paid $140,000.00 for the entire project. For Kalalos work, Luz
agreed to pay him 20% of what IRRI is going to pay or equivalent to $28,000.00.
ISSUE: Whether or not Kalalo should be paid in US currency.
HELD: No. The agreement was forged in 1961, years before the passage of Republic Act
529 in 1950. The said law requires that payment in a particular kind of coin or currency
other than the Philippine currency shall be discharged in Philippine currency measured at
the prevailing rate of exchange at the time the obligation was incurred. Nothing in the law
however provides which rate of exchange shall be used hence it is but logical to use the
rate of exchange at the time of payment.

Caltex vs CA
FACTS:
Security Bank and Trust Co. issued 280 certificates of time deposit (CTD) in favor of
one Mr. Angel dela Cruz who deposited with the bank P1.12 million. Dela Cruz
delivered the CTDs to Caltex in connection with his purchase of fuel products from the
latter. Subsequently, dela Cruz informed the bank that he lost all the CTDs, and thus
executed an affidavit of loss to facilitate the issuance of the replacement CTDs. When
Caltex presented said CTDs for verification with the bank and formally informed the
bank of its decision to preterminate the same, the bank rejected Caltex claim and
demand as Caltex failed to furnish copies of certain requested documents. In 1983,
dela Cruz loan matured and the bank set-off and applied the time deposits as payment
for the loan. Caltex filed a complaint which was dismissed on the ground that the
subject certificates of deposit are non-negotiable.
ISSUE:
Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.
RULING:
The CTDs in question are negotiable instruments as they meet the requirements of the
law for negotiability as provided for in Section 1 of the Negotiable Instruments Law. The
documents provide that the amounts deposited shall be repayable to the depositor. And
according to the document, the depositor is the "bearer." The documents do not say that
the depositor is Angel de la Cruz and that the amounts deposited are repayable
specifically to him. Rather, the amounts are to be repayable to the bearer of the
documents or, for that matter, whosoever may be the bearer at the time of presentment.
However, petitioner cannot recover on the CTDs. Although the CTDs are bearer
instruments, a valid negotiation thereof for the true purpose and agreement between it
and dela Cruz, as ultimately ascertained, requires both delivery and indorsement. In
this case, there was no indorsement as the CTDs were delivered not as payment but
only as a security for dela Cruz' fuel purchases.
**Theacceptedruleisthatthenegotiabilityornonnegotiabilityofaninstrumentisdetermined
from the writing, that is, from the face of the instrument itself. The CTDs in question are
negotiableinstrumentsastheymeettherequirementsofthelawfornegotiabilityasprovidedfor
in Section 1 of the Negotiable Instruments Law. The documents provide that the amounts
depositedshallberepayabletothedepositor.Andaccordingtothedocument,thedepositoris
the"bearer."ThedocumentsdonotsaythatthedepositorisAngeldelaCruzandthatthe
amountsdepositedarerepayablespecificallytohim.Rather,theamountsaretoberepayableto
thebearerofthedocumentsor,forthatmatter,whosoevermaybethebeareratthetimeof
presentment.