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NEGOTIATION had been issued on 10 April 1980; that it would mature on 6 April

1. Modes of transfer 1981; that it had a face value of P2,300,833.33, with the
133. What property right is the promissory note evidenced? Philfinance as payee and private respondent Delta Motors
Right to collect the amount specified. It is a personal right Corporation (Delta) as maker; and that on face of the
134. How does the NI be transferred? promissory note was stamped NON NEGOTIABLE. Pilipinas
By negotiation of the instrument and by assignment did not deliver the Note, nor any certificate of participation in
Negotiation. It ordinarily involves indorsement (in regard to respect thereof, to petitioner.
other than bearer paper) so that "negotiation" and "indorsement"
are often used interchangeably. Negotiation makes it possible Petitioner later made similar demand letters again asking private
for the transferee to acquire a better right to a negotiable respondent Pilipinas for physical delivery of the original of DMC
instrument that the transferor had. Whether the holder is a PN No. 2731.
holder in due course depends upon factors other than the fact
of negotiation Petitioner also made a written demand upon private respondent
Assignment. It is the less usual method/ which may or may Delta for the partial satisfaction of DMC PN No. 2731, explaining
not involve an indorsement in the sense of a writing on the back that Philfinance, as payee thereof, had assigned to him said
of the instrument. A bill or note, whether negotiable or non- Note to the extent of P307,933.33. Delta, however, denied any
negotiable, may be transferred by assignment. By its nature, liability to petitioner on the promissory note.
there can be no "negotiation" of a non-negotiable instrument.
Although it may be transferred by indorsement and delivery, the As petitioner had failed to collect his investment and interest
assignee acquired the instrument subject to the rules applicable thereon, he filed an action for damages against private
to non-negotiable paper respondents Delta and Pilipinas.
135. How does the N-NI be transferred?
By assignment only ISSUE: WON DMC PN No. 2731 marked as non-negotiable may
136. Why cant the N-NI be negotiated? be assigned?
Because the law prohibits expressly not to transfer
137. What are the advantages of the 3rd party if NI has been HELD: YES. Only an instrument qualifying as a negotiable
transferred through negotiation? instrument under the relevant statute may be negotiated either
He may be a holder in due course and free from all defenses by indorsement thereof coupled with delivery, or by delivery
from personal defenses alone where the negotiable instrument is in bearer form. A
138. What is the disadvantage of the 3 rd party if the NI is negotiable instrument may, however, instead of being
transferred by assignment? negotiated, also be assigned or transferred. The legal
He is free from personal defenses consequences of negotiation as distinguished from assignment
of a negotiable instrument are, of course, different. A non-
2. Concept of negotiation negotiable instrument may, obviously, not be negotiated; but it
139. What is the concept of negotiation? may be assigned or transferred, absent an express prohibition
Section 30 of the NIL provides that against assignment or transfer written in the face of the
Sec. 30. What constitutes negotiation. An instrument is instrument:
negotiated when it is transferred from one person to another in
such manner as to constitute the transferee the holder thereof. The words not negotiable, stamped on the face of the bill of
If payable to bearer, it is negotiated by delivery; if payable to lading, did not destroy its assignability, but the sole effect was
order, it is negotiated by the indorsement of the holder to exempt the bill from the statutory provisions relative thereto,
completed by delivery. and a bill, though not negotiable, may be transferred by
assignment; the assignee taking subject to the equities between
CASES: Sesbreno v. CA; consolidated v. IFC the original parties. 12 (Emphasis added)
FACTS: Raul Sesbreno made a money market placement in the
amount of P300,000 with PhilFinance, with a term of 32 days. DMC PN No. 2731, while marked non-negotiable, was not at
PhilFinance issued to Sesbreno the Certificate of Confirmation the same time stamped non-transferable or non-assignable.
of Sale of a Delta Motor Corporation Promissory Note (DMC PN It contained no stipulation which prohibited Philfinance from
No. 2731), the Certificate of Securities Delivery Receipt assigning or transferring, in whole or in part, that Note.
indicating the sale of the Note with notation that said security
was in the custody of Pilipinas Bank, and postdated checks 3. Ways of negotiation
drawn against the Insular Bank of Asia and America for 140. What are the physical acts to qualify negotiation?
P304,533.33 payable on 13 March 1981. The checks were If payable to bearer, it is negotiated by delivery; if payable to
dishonored for having been drawn against insufficient funds. order, it is negotiated by the indorsement of the holder
Philfinance delivered to petitioner Denominated Custodian completed by delivery.
Receipt (DCR). 141. How will you indorse?
By signing
Petitioner approached Ms. Elizabeth de Villa of private 142. How will you deliver?
respondent Pilipinas, and handed her a demand letter informing Hand in or transfer the instrument physically
the bank that his placement with Philfinance in the amount
reflected in the DCR had remained unpaid and outstanding, and 4. Concept of delivery
that he in effect was asking for the physical delivery of the 143. Is there a need of deed of assignment or other similar
underlying promissory note. Petitioner then examined the papers for the transfer of the instrument?
original of the DMC PN No. 2731 and found: that the security No
144. Is there a need of deed of a separate paper such deed of ISSUE: Whether or not there is a cause of action against
assignment to effect transfer? respondent Sima Wei in as far as the crossed checks are
No, it is sufficient if there was indorsement and delivery concerned.
145. Why does an order instrument needs an indorsement?
because he must have to order the maker to pay other person HELD: NO. The payee of a negotiable instrument acquires no
146. What do signature of indorsers of an order instrument interest with respect thereto until its delivery to him. Without the
represent? initial delivery of the instrument from the drawer to the payee,
It represents the order of the indorser to the person primarily there can be no liability on the instrument. Moreover, such
liable/maker to pay other person to whom he negotiate the delivery must be intended to give effect to the instrument. Here,
instrument non-delivery of said checks to petitioner-payee, the former did
147. If the instrument is payable to order, is it absolute that they not acquire any right or interest therein and cannot therefore
be negotiated special indorsement? assert any cause of action, founded on said checks, whether
No, because they may be indorsed in blank against the drawer Sima Wei or against any of the other
respondents.
CASE: Dela Victoria vs. Burgos
FACTS: Raul Sebreo filed a complaint for damages against 5. Indorsement
Fiscal Bienvenido Mabanto Jr. of Cebu City. Sebreo won and a. Concept
he was awarded the payment of damages. Judge Burgos Indorsement is the writing of the name of the payee on the
ordered De La Victoria, custodian of the paychecks of Mabanto, instrument with the intent either to transfer the title to the same,
to hold the checks and convey them to Sebreo instead. De La or to strengthen the security of the holder by assuming a
Victoria assailed the order as he said that the paychecks and contingent liability for its future payment, or both
the amount thereon are not yet the property of Mabanto because The payee by signing (indorsing) the instrument and delivering
they are not yet delivered to him; that since there is no delivery it to another person (in payment of debt payee owes him or for
of the checks to Mabanto, the checks are still part of the public any other reason) becomes an indorser. The person who
funds; and the checks due to the foregoing cannot be the proper receives the indorsed instrument is the indorsee. He can indorse
subject of garnishment. the Instrument to some else and thus become an indorser as
well.
ISSUES: Indorsement alone without delivery conveys no title and creates
no holder. Indorsement in accordance with Section 191,
(a) Whether or not a check in the hands of the drawer is already paragraph 8 means an indorsement completed by delivery. It
owned by the payee. applies to both bills and notes.
(2) An indorsement is not only a mode of transfer. It involves
(b) Whether or not an undelivered salary check may already also a new contract and an obligation on the part of the indorser
transfer title to the payee. an implied guaranty that the instrument will be duly paid
according to the terms thereof. By his indorsement, the indorser
HELD: becomes a party to the instrument, and may be held liable for its
payment even without receiving any consideration therefor, (see
(a) NO. Section 16 of the Negotiable Instruments Law is clear Sec. 29.) Each indorsement generates an additional contract
that where the instrument is no longer in the possession of a between the indorser and aU subsequent Holders.
party whose signature appears thereon, a valid and intentional b. How made
delivery by him is presumed until the contrary is proved. Proof Sec. 31. Indorsement; how made. The indorsement must
to the contrary is its own finding that the checks were in the be written on the instrument itself or upon a paper attached
custody of petitioner. In this case, as said checks had not yet thereto. The signature of the indorser, without additional words,
been delivered to Mabanto, Jr., they did not belong to him and is a sufficient indorsement
still had the character of public funds. c. Kinds
i. special and blank
(b) NO. Under Section 16 of the Negotiable Instruments Law, ii. conditional
every contract on a negotiable instrument is incomplete and iii. qualified
revocable until delivery of the instrument for the purpose of iv. restrictive
giving effect thereto. As ordinarily understood, delivery means
the transfer of the possession of the instrument by the maker or 148. What are the different kinds of indorsement?
drawer with intent to transfer title to the payee and recognize 1. Special vs. Blank
him as the holder thereof. Here, there is no delivery to speak of 2. Restrictive vs. Unrestrictive
as the salary check is not yet in the hands of Mabanto Jr. as the 3. Conditional vs. Unconditional
holder. 4. Qualified vs. Unqualified
149. What are the implication of the different kinds of
CASE: Development vs. Simai indorsement aside from special and blank
FACTS: Respondent Sima Wei drew crossed checks for the In R vs. U = right on indorsee is affected; C vs. U = effect to
petitioner, but were not delivered accordingly. It came in the indorsement; Q vs. U = effect to liability of indorser
possession of Lee Kian Huat without petitioner-payees 150. When do you find a special indorsement important?
indorsement. It is important as to how further negotiation be made
151. What is being hindered by condition?