TRADERS ROYAL BANK V.

CA
269 SCRA 15
FACTS:
Filriters through a Detached Agreement transferred ownership to Philfinance a Central
Bank Certificate of Indebtedness (CBCI). It was only through one of its officers by which the
CBCI was conveyed without authorization from the company. Petitioner and Philfinance
later entered into a Repurchase agreement, on which petitioner bought the CBCI
from Philfinance. The latter agreed to repurchase the CBCI but failed to do so. When the
petitioner tried to have it registered in its name in the CB, the latter didn't want to recognize
the transfer.
ISSUE:
Whether or not the CBCI is a negotiable instrument and Petitioner has the right register the
CBCI in its name.
HELD:
1. No. The CBCI is not a negotiable instrument.
The instrument provides for a promise to pay the registered owner Filriters. 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 negotiation.
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 outabsent in a
certificate of indebtedness as it merely acknowledges to pay a sum of money to a
specified 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.
2. No. Petitioner is not entitled to register the CBCI in its name.
Philfinance’s title over 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.