RAUL SEMBRENO V.

CA, DELTA MOTORS CORPORATION

Facts: Sembreno placed a money market placement with
Philippine Underwriters Finance Corporation (Philfinance). As
such, Philfinance issued the following documents: (1)
Certificate of Confirmation of Sale, (2) Certificate of
Securities Delivery Receipt, indicating the sale of DMC PN
No. 2731 and indicating that the securities custodian is
Pilipinas Bank, and (3)post-dated checks payable on the
maturity date 13 March 1981 of Sembrenos placement.
On the maturity date, Sembreno encashed the said checks,
however, it was dishonoured because it was drawn against
insufficient funds.
Sembreno went to Pilipinas Bank to obtain the DMC PN No.
2371. He found out that the DMC PN which represents the
underlying value of the transaction is issued 10 April 1980,
and will mature on 10 April 1981. The said DMC PN No.
2371 has Philfinance as its payee, Delta Motors Corporation
as its Maker, and has a stamp of NON-NEGOTIABLE on its
face.
Sembreno then demanded Delta Motors Corporation for the
delivery of the securities and partial payment of such money
market placement due to the fact that Philfinance assigned
Sembreno such DMC PN No. 2371 in the amount of P307,000
on a without recourse basis. However, Delta Corporation
rebutted that the said instrument has already been paid-of
in the form of compensation as against a P.N. No. 143-A
Philfinance issued in favor of Delta Corporation. Sembrano
filed an action for damages as against Delta Corporation.
Issue:

Whether there was a valid transfer of DMC PN No. 2371 from

Philfinance to Sembrano despite the fact that it was nonnegotiable instrument. Yes.
Discussion:
DMC PN No. 2731 while marked non-negotiable was not at
the same time stamped non-transferrable or nonassignable. . 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. A nonnegotiable 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.
elta's complaint that the partial
assignment by Philfinance of DMC PN No. 2731 had been
efected without the consent of Delta, we note that such
consent was not necessary for the validity and enforceability
of the assignment in favor of Sembrano. Delta's argument
that Philfinance's sale or assignment of part of its rights to
DMC PN No. 2731 constituted conventional subrogation,
which required its (Delta's) consent, is quite mistaken, due to
the fact that conventional subrogation must be clearly
established by the unequivocal terms of the substituting
obligation or by the evident incompatibility of the new and
old obligations on every point. Furthermore, the assignment
of PNs and other financial instruments
is a common
transaction of Philfinance as it is engaged in the business of
buying and selling of debt instruments and other securities.