Traders Royal Bank vs. CA

Traders Royal bank vs. Court of Appeals, Filriters Guaranty Assurance Corp.
269
SCRA 15 (1997)
Petition for review on certiorari is the decision of the respondent Court of

Appeals affirming the nullity of the transfer of Central Bank Certificate of
Indebtedness No. D891 with a face value of P500,000.00.
Facts:
On November 27, 1979 Guaranty Assurance Corporation (Filriters) executed

a “detached agreement’’ whereby Filriters, as registered owner, sold transferred,
assigned and delivered unto Philippine Underwriters Finance Corporation
(Philfinance) all it rights and title to Central Bank Certificates of Indebtedness of
PESOS: Five hundred thousand (P500,000.00) and having an aggregate value of
Pesos: three million five hundred thousand pesos (P3,500,000.00).
Through a Detached Agreement, the said CBCI was transferred to Phil

finance by one of Filriters officers without authorization from the company itself.
Later on, Philfinance transferred agreement. When Philfinance failed to repurchase
back the CBCI upon its maturity, TRB tried to register it in its name but the Central
Bank of the Philippines did not recognize the transfer.
The action was originally filed a Petition for Mandamus under Rule 65 of the
Rules of Court, to compel the Central Bank to register the transfer of the subject
CBCI to petitioner TRB. RTC held that the transfer is null and void.
Upon elevation to the CA, the appellant court ruled that the subject CBCI is
not a negotiable instrument. Philfinance acquired no title or rights under CBCI No.
D891 which it could assign or transfer to TRB and which the latter can register with
the Central Bank. Thus, the transfer of the instrument from the Philfinance to TRB
was merely an assignment and is not governed by NIL.
ISSUE: Whether or not, CBIC is a negotiable instrument.
RULING: No, the instrument provides for a promise to pay Filriters Guaranty
Assurance Corporation, the registered owner. Very clearly, the instrument was only
payable to Filriters. It lacked the words of negotiability which should have served as
an expression of the consent that the instrument may be transferred by
negotiations.
The subject CBCI indicates that the same is payable to Filriters Guaranty
Assurance Corporation, and to no one else, discounting the petitioner’s submission
that the same is negotiable instrument, and that it is a holder in due course of the
certificate.
The language of negotiability which characterize a negotiable paper as a

credit instrument is its freedom to circulate as a substitute for money. Hence,
freedom of negotiability is the touchstone relating to the protection of holders in
due course, and the freedom of negotiability is the foundation for the protection,
which the law throws around a holder in due course. This freedom in negotiability is
totally absent in a certificate of indebtedness as it merely acknowledges to pay a
sum of money to a specific person or entity for a period of time.
The transfer of the instrument from Philfinance to TRB was merely an

assignment, and is not governed by the negotiable instruments law. The pertinent
question then is-was the transfer of the CBCI from Filriters to Philfinance and
subsequently from Philfinance to TRB, in accord with existing law, so as to entitle
TRB to have the CBCI registered in its name with the Central Bank? Clearly shown
in the record is the fact that Philfinance’ s title over the CBCI is defective since it
acquired the instrument from Filriters fictitiously. Although the deed of assignment
stated that the transfer was for value received; there was really no consideration
involved. What happened was Philfinance merely borrowed CBCI from Filriters, a
sister corporation. Thus, for lack of any consideration, the assignment made is a
complete nullity. Furthermore, the transfer wasn’t in conformity with the
regulations set by the Central Bank, giving more credence to the rule that there
was no valid transfer or assignments to petitioner TRB.

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Traders Royal bank vs. Court of Appeals, Filriters Guaranty Assurance Corp.

Petition for review on certiorari is the decision of the respondent Court of

On November 27, 1979 Guaranty Assurance Corporation (Filriters) executed

Through a Detached Agreement, the said CBCI was transferred to Phil

ISSUE: Whether or not, CBIC is a negotiable instrument.

The language of negotiability which characterize a negotiable paper as a

The transfer of the instrument from Philfinance to TRB was merely an

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