Petitioner Raul Sesbreño made a money market placement in the amount of P300,000.00 with the Philippine Underwriters Finance Corporation (“Philfinance”). The latter issued a Certificate of Confirmation of Sale “without recourse” from Delta Motors Corporation Promissory Note, a Certificate of securities indicating the sale to petitioner, with the notation that the said security was in custodianship of Pilipinas Bank, andpost-dated checks payable with petitioner as payee, Philfinance as drawer. Petitioner approached private respondent Pilipinas Bank and handed her a demand letter informing the bank that his placement with Philfinance had remained unpaid and outstanding, and that he in effect was asking for the physical delivery of the underlying promissory note. Pilipinas did not deliver the Note, nor any certificate of participation in respect thereof, to petitioner.
(a) Whether or not Pilipinas Bank is liable for its action.
(b)Whether or not non-negotiable instruments are transferrable.
(1) YES. Private respondent Pilipinas bank is liable for damages plus legal interest thereon by arising out of its breach of duty. By failing to deliver the Note to the petitioner as depositor-beneficiary of the thing deposited, Pilipinas effectively and unlawfully deprived petitioner of the Note deposited with it. Whether or not Pilipinas itself benefitted from such conversion or unlawful deprivation inflicted upon petitioner, is of no moment for present purposes.In the case at bar, the custodian-depositary bank Pilipinas refused to deliver the security deposited with it when petitioner first demanded physical delivery thereof. Instead of complying with the demand of the petitioner, Pilipinas purported to require and await the instructions of Philfinance, in obvious contravention of its undertaking under the DCR to effect physical delivery of the Note upon receipt of “written instructions” from petitioner Sesbreño.
(2) YES. 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. It is important to bear in mind that 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.