222 SCRA 466 (1993)
On 9 February 1981, petitioner Raul Sesbreño made a money market placement in the amount of P300,000.00 with the Philippine Underwriters Finance Corporation (“Philfinance”), Cebu Branch; the placement, with a term of thirty-two (32) days, would mature on 13 March 1981, Philfinance, also on 9 February 1981, issued the following documents to petitioner:(a) the Certificate of Confirmation of Sale, “without recourse,” No. 20496 of one (1) Delta Motors Corporation Promissory Note (“DMC PN”) No. 2731 for a term of 32 days at 17.0% per annum; (b) the Certificate of securities Delivery Receipt No. 16587 indicating the sale of DMC PN No. 2731 to petitioner, with the notation that the said security was in custodianship of Pilipinas Bank, as per Denominated Custodian Receipt (“DCR”) No. 10805 dated 9 February 1981; and (c) post-dated checks payable on 13 March 1981 (i.e., the maturity date of petitioner’s investment), with petitioner as payee, Philfinance as drawer, and Insular Bank of Asia and America as drawee, in the total amount of P304,533.33.
On 13 March 1981, petitioner sought to encash the postdated checks issued by Philfinance. However, the checks were dishonored for having been drawn against insufficient funds. On 26 March 1981, Philfinance delivered to petitioner the DCR No. 10805 issued by private respondent Pilipinas Bank (“Pilipinas”).
On 2 April 1981, petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas, Makati Branch, and handed her a demand letter informing the bank that his placement with Philfinance in the amount reflected in the DCR No. 10805 had remained unpaid and outstanding, and that he in effect was asking for the physical delivery of the underlying promissory note.
Petitioner then examined the original of the DMC PN No. 2731 and found:
That the security had been issued on 10 April 1980; that it would mature on 6 April 1981; that it had a face value of P2,300,833.33, with the Philfinance as “payee” and private respondent Delta Motors Corporation (“Delta”) as “maker;” and that on face of the promissory note was stamped “NON NEGOTIABLE.” Pilipinas did not deliver the Note, nor any certificate of participation in respect thereof, to petitioner.
As petitioner had failed to collect his investment and interest thereon, he filed an action for damages with the Regional Trial Court against private respondents Delta and Pilipinas. The trial court dismissed the complaint and counterclaims for lack of merit and for lack of cause of action.
Petitioner appealed to respondent Court of Appeals the Court of Appeals denied the appeal and held:
Whether or not the non-negotiability of a promissory note prevents its assignment.
A non-negotiable instrument may not be negotiated but may be assigned or transferred.
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.
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. The words “not negotiable,” stamped on the face of the instrument, did not destroy its assignability, but the sole effect was to exempt the same from the statutory provisions relative thereto, and though not negotiable, may be transferred by assignment; the assignee taking subject to the equities between the original parties.
In assignment, the assignee is merely placed in the position of the assignors and acquires the instrument subject to all the defenses that might have been set up against the original payee.
DMC PN No. 2731, while marked “non-negotiable,” was not at the same time stamped “non-transferable” or “non-assignable.” It contained no stipulation which prohibited Philfinance from assigning or transferring, in whole or in part, that Note.
*Case digest by Earl M. Acoymo, JD-IV, Andres Bonifacio Law School, SY 2019-2020