Case Summary (G.R. No. 89252)
Petitioner
Raul Sesbreno, who purchased from Philfinance a participation in Delta PN No. 2731 in exchange for a P300,000 placement plus interest, and sought enforcement against Delta and Pilipinas after Philfinance defaulted.
Respondents
Delta Motors Corporation (“Delta”), maker of the non-negotiable promissory note; Pilipinas Bank, custodian of the note under a depositary (custodianship) agreement reflected in DCR No. 10805.
Key Dates
• 10 April 1980: Delta issues PN Nos. 2730 and 2731 to Philfinance; Philfinance’s note No. 143-A issued to Delta.
• 9 February 1981: Sesbreno’s P300,000 money market placement; sale and assignment of a portion of Delta PN No. 2731 to Sesbreno; issuance of DCR No. 10805.
• 13 March 1981: Maturity of placement; post-dated checks dishonored.
• 26 March 1981: Sesbreno receives DCR No. 10805.
• 14 July 1981: Sesbreno notifies Delta of his assignment rights.
• 28 September 1982: Complaint filed in RTC, Cebu City.
• 5 August 1987: RTC dismisses complaint.
• 21 March 1989: CA affirms dismissal.
• 24 May 1993: Supreme Court decision under the 1987 Constitution.
Applicable Law
• 1987 Philippine Constitution
• Negotiable Instruments Law (distinction between negotiation and assignment)
• Civil Code Articles on assignment (Arts. 1285, 1626), compensation (Arts. 1279–1281), deposit (Art. 1988), and solidarity (Art. 1207)
• P.D. No. 678 (money market transactions)
Facts
- Sesbreno placed P300,000 with Philfinance, which sold him, without recourse, a P2,300,833.33 Delta promissory note due 6 April 1981, to the extent of P304,533.33 including interest.
- The note was non-negotiable but not expressly non-assignable. Philfinance deposited it with Pilipinas as custodian under DCR No. 10805.
- On maturity, Sesbreno’s checks were dishonored. He demanded physical delivery of the note from Pilipinas and partial payment from Delta. Both refused, citing offsetting against Philfinance’s note No. 143-A and procedural requirements.
- Philfinance went under joint SEC/Central Bank management; the note remained with SEC.
- Sesbreno sued Delta and Pilipinas for damages; trial and appellate courts dismissed for lack of cause of action, noting Philfinance’s non-joinder.
Issues
- Can Sesbreno, as assignee of part of Delta PN No. 2731, enforce payment against Delta?
- Is Pilipinas solidarily liable to Sesbreno under the custodianship receipt?
- Should the corporate veil be pierced to bind Delta and Pilipinas for Philfinance’s obligations?
Ruling on Sesbreno’s Rights Against Delta
• Assignment versus negotiation: Non-negotiable instruments may be validly assigned absent a transfer prohibition; Delta PN No. 2731 was assignable.
• Assignment validity: Delta’s April 1980 agreement did not bar assignment; Sesbreno furnished value in good faith.
• Effect of offsetting (compensation): Sesbreno failed to notify Delta of his assignment until after PiN 2731 and Philfinance PN No. 143-A both matured, triggering automatic compensation under Civil Code Art. 1279.
• Notice requirement: Under Arts. 1285 and 1626, a debtor who pays prior to notice of assignment is discharged. Sesbreno’s belated notice rendered Delta’s defense of compensation valid.
• Conclusion: Delta had no liability to Sesbreno for the assigned portion.
Ruling on Pilipinas’s Liability
• Nature of custodianship receipt: DCR No. 10805 merely acknowledged Pilipinas’s depositary role, not an obligation to pay in solidum under the promissory note.
• No express solidarity: Civil Code Art. 1207 requires express agreement or law for solidary liability; none exists here.
• Deposit contract and duty: Pilipinas, as custodian, owed beneficiary Sesbreno the return of the deposited security upon demand, under Civil Code Art. 1988.
• Breach: Pilipinas refused to deliver the note u
Case Syllabus (G.R. No. 89252)
Facts
- On February 9, 1981, petitioner Raul Sesbreno placed ₱300,000.00 in a 32-day money-market placement with Philippine Underwriters Finance Corporation (“Philfinance”), Cebu Branch, maturing March 13, 1981.
- Philfinance issued to Sesbreno on the same date:
• Certificate of Confirmation of Sale “without recourse,” No. 20496, covering Delta Motors Corporation Promissory Note (“DMC PN”) No. 2731 (32 days, 17% p.a.)
• Certificate of Securities Delivery Receipt (“SDR”) No. 16587 showing the sale of DMC PN No. 2731, held in custodianship by Pilipinas Bank per Denominated Custodian Receipt (“DCR”) No. 10805
• Post-dated Insular Bank checks dated March 13, 1981 totaling ₱304,533.33 (principal plus interest) - On maturity (March 13, 1981) the checks were dishonored for insufficient funds.
- On March 26, 1981, Sesbreno received DCR No. 10805 from Pilipinas Bank, confirming its custody of DMC PN No. 2731 (face value ₱2,300,833.33; maturity April 6, 1981) and promising to deliver the Note upon Sesbreno’s written instruction if DCR remained outstanding 30 days after maturity.
- Sesbreno demanded physical delivery of the original DMC PN No. 2731 on April 2, July 3 and August 3, 1981; Pilipinas Bank refused, awaiting Philfinance’s instructions under their custodianship agreement.
- Sesbreno also demanded partial satisfaction (₱307,933.33) from Delta on July 14, 1981, as assignee of that amount under the Note; Delta denied liability, citing an agreed offset against Philfinance PN No. 143-A.
- Philfinance was placed under joint SEC/Central Bank management on June 18, 1981; SEC retained custody of DMC PN No. 2731.
Issues
- Whether Delta, as maker of a “non-negotiable” promissory note, became liable to Sesbreno for the assigned portion of DMC PN No. 2731.
- Whether Pilipinas Bank, as custodian under DCR No. 10805, is solidarily liable to Sesbreno for the assigned amount.
- Whether compensation by operation of law discharged Delta’s obligation to Sesbreno in the absence of timely notice.
- Whether the corporate veil among Philfinance, Delta and Pilipinas Bank can be pierced to hold all three jointly liable.
Procedural History
- September 28, 1982: Sesbreno filed an action for damages against Delta and Pilipinas Bank in RTC Cebu (Branch 21).
- August 5, 1987: RTC dismissed complaint and counterclaims for lack of merit and cause.
- Appeal to Court of Appeals (C.A.-G.R. CV No. 15195).
- March 21, 1989: CA affirmed RTC, holding Philfinance (not impleaded) solely liable; cost against Sesbreno.
- July 17, 1989: CA denied reconsideration.