Nego Digests

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 creditor’s 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 another’s 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 Baños, Laguna. Luz was to be paid $140,000.00 for the entire project. For Kalalo’s 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. **The accepted rule is that the negotiability or non­negotiability of an instrument is determined from   the   writing,  that   is,  from   the  face   of  the   instrument  itself.   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.