G.R. No. 89252 May 24, 1993
RAUL SESBREÑO, petitioner, vs. HON. COURT OF APPEALS, DELTA MOTORS CORPORATION AND PILIPINAS BANK, respondents.

FACTS

On February 9, 1981, petitioner Raul Sesbreño made a money market placement of P300,000.00 with Philippine Underwriters Finance Corporation (Philfinance), Cebu Branch, with a 32-day term maturing on March 13, 1981. Philfinance issued to petitioner: (a) a Certificate of Confirmation of Sale “without recourse” of one Delta Motors Corporation Promissory Note (DMC PN) No. 2731; (b) a Certificate of Securities Delivery Receipt indicating the sale of the note, with a notation that the security was in the custodianship of Pilipinas Bank per Denominated Custodian Receipt (DCR) No. 10805; and (c) post-dated checks payable on the maturity date. On March 13, 1981, the checks were dishonored for insufficient funds. On March 26, 1981, Philfinance delivered DCR No. 10805 issued by Pilipinas Bank, confirming custody of DMC PN No. 2731 (with a face value of P2,300,833.34, maturing April 6, 1981, issued by Delta, with Philfinance as payee/registered holder) and stating that upon written instructions, the bank would undertake physical delivery of the securities fully assigned to petitioner if the DCR remained outstanding thirty days after maturity. Petitioner demanded physical delivery of the note from Pilipinas Bank, but the bank did not comply, referring the demands to Philfinance for instructions per their custodianship agreement. Petitioner also demanded payment from Delta, which denied liability, explaining it had agreed with Philfinance to offset DMC PN No. 2731 against a Philfinance promissory note in Delta’s favor. Philfinance was placed under SEC and Central Bank management on June 18, 1981. Pilipinas Bank delivered the note to the SEC. Petitioner filed an action for damages against Delta and Pilipinas Bank. The trial court dismissed the complaint. The Court of Appeals affirmed, holding petitioner could not recover from Delta as the note was non-negotiable and any liability lay with Philfinance, which was not impleaded.

ISSUE

1. Whether petitioner can recover from Delta his assigned portion of DMC PN No. 2731.
2. Whether Pilipinas Bank is solidarily liable on the DMC PN No. 2731 based on the DCR.
3. Whether the corporate veil between Philfinance, Delta, and Pilipinas Bank should be pierced.

RULING

1. Petitioner cannot recover from Delta. DMC PN No. 2731 was stamped “NON NEGOTIABLE,” thus it could not be negotiated. However, a non-negotiable instrument may be assigned, but the assignee acquires only the rights of the assignor and is subject to the defenses available against the assignor. Delta and Philfinance had agreed to offset DMC PN No. 2731 against Philfinance PN No. 143-A. This compensation was effective upon the concurrence of the requisites (i.e., that both parties be mutually creditors and debtors of each other) and extinguished both debts to the concurrent amounts. The offsetting agreement was made before Philfinance assigned part of the note to petitioner. Therefore, petitioner as assignee merely stepped into the shoes of Philfinance and was subject to the defense of compensation. Delta had no remaining obligation to Philfinance, and consequently to petitioner, on the note.
2. Pilipinas Bank is not solidarily liable. The DCR was a custodianship receipt, not a guarantee of payment. It confirmed custody of the securities and undertook to deliver them upon written instructions from the owner (Philfinance) and if the DCR remained outstanding thirty days after maturity. The bank’s obligation was merely to follow instructions for physical delivery. It did not guarantee the value of the securities or assume liability for the debt represented by the note. The bank acted as a custodian or depositary, and its duty was to return the identical thing deposited upon proper demand. Petitioner’s demands were referred to Philfinance per their agreement, and Philfinance gave no instructions. The bank eventually delivered the note to the SEC when Philfinance was placed under management. The bank did not breach its custodial duty.
3. The corporate veil should not be pierced. Petitioner’s claim that Philfinance, Delta, and Pilipinas Bank belong to the “Silverio Group of Companies” is insufficient to justify disregarding their separate corporate personalities. The mere fact that corporations have common stockholders or are part of a group does not, by itself, warrant piercing the veil. There must be evidence that the corporate entity was used to commit fraud, defeat public convenience, justify wrong, protect crime, or perpetuate injustice. No such evidence was presented. Each corporation maintained its separate identity, and petitioner’s recourse is against Philfinance, with which he directly contracted.