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    Traders Royal Bank Vs CA Digest 1997

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    Wilfred Martinez
    The Supreme Court ruled that a Central Bank Certificate of Indebtedness (CBCI) held by Traders Royal Bank was not a negotiable instrument and was not validly transferred through multiple assignments. The CBCI was originally issued to and registered under Filriters Guaranty Assurance Corporation. Filriters purported to assign the CBCI to Philippine Underwriters Finance Corporation, but this assignment was found to be invalid as it did not comply with Central Bank regulations requiring the registered owner to authorize transfers in writing. Philippine Underwriters then attempted to assign the CBCI to Traders Royal Bank, but this assignment was also invalid as it derived from the previous invalid assignment. Therefore, Traders Royal Bank did not have a valid claim to the

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    Traders Royal Bank Vs CA Digest 1997

    Uploaded by

    Wilfred Martinez
    622 views2 pages
    The Supreme Court ruled that a Central Bank Certificate of Indebtedness (CBCI) held by Traders Royal Bank was not a negotiable instrument and was not validly transferred through multiple assignments. The CBCI was originally issued to and registered under Filriters Guaranty Assurance Corporation. Filriters purported to assign the CBCI to Philippine Underwriters Finance Corporation, but this assignment was found to be invalid as it did not comply with Central Bank regulations requiring the registered owner to authorize transfers in writing. Philippine Underwriters then attempted to assign the CBCI to Traders Royal Bank, but this assignment was also invalid as it derived from the previous invalid assignment. Therefore, Traders Royal Bank did not have a valid claim to the

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    Case Digest for the Negotiable Instruments case "Traders Royal Bank vs Court of Appeals 1997"

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    Traders Royal Bank vs CA Digest 1997

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    The Supreme Court ruled that a Central Bank Certificate of Indebtedness (CBCI) held by Traders Royal Bank was not a negotiable instrument and was not validly transferred through multiple assignments. The CBCI was originally issued to and registered under Filriters Guaranty Assurance Corporation. Filriters purported to assign the CBCI to Philippine Underwriters Finance Corporation, but this assignment was found to be invalid as it did not comply with Central Bank regulations requiring the registered owner to authorize transfers in writing. Philippine Underwriters then attempted to assign the CBCI to Traders Royal Bank, but this assignment was also invalid as it derived from the previous invalid assignment. Therefore, Traders Royal Bank did not have a valid claim to the

    Copyright:

    © All Rights Reserved
    Download as ODT, PDF, TXT or read online from Scribd
    Download as odt, pdf, or txt
    622 views2 pages

    Traders Royal Bank Vs CA Digest 1997

    Uploaded by

    Wilfred Martinez
    The Supreme Court ruled that a Central Bank Certificate of Indebtedness (CBCI) held by Traders Royal Bank was not a negotiable instrument and was not validly transferred through multiple assignments. The CBCI was originally issued to and registered under Filriters Guaranty Assurance Corporation. Filriters purported to assign the CBCI to Philippine Underwriters Finance Corporation, but this assignment was found to be invalid as it did not comply with Central Bank regulations requiring the registered owner to authorize transfers in writing. Philippine Underwriters then attempted to assign the CBCI to Traders Royal Bank, but this assignment was also invalid as it derived from the previous invalid assignment. Therefore, Traders Royal Bank did not have a valid claim to the

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    G.R. No.

    93397 March 3, 1997


    TRADERS ROYAL BANK, petitioner,
    vs.
    COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the
    PHILIPPINES, respondents.
    FACTS:
    On November 27, 1979, Filriters Guaranty Assurance Corporation (Filriters) executed a "Detached Assignment" . . .,
    whereby Filriters, as registered owner, sold, transferred, assigned and delivered unto Philippine Underwriters Finance
    Corporation (Philfinance) all its rights and title to Central Bank Certificates of Indebtedness of PESOS: FIVE
    HUNDRED THOUSAND (P500,000) and having an aggregate value of PESOS: THREE MILLION FIVE HUNDRED
    THOUSAND (P3,500,000.00);
    The aforesaid Detached Assignment contains an express authorization executed by the transferor intended to
    complete the assignment through the registration of the transfer in the name of PhilFinance, which authorization is
    specifically phrased as follows: '(Filriters) hereby irrevocably authorized the said issuer (Central Bank) to transfer the
    said bond/certificates on the books of its fiscal agent;
    On February 4, 1981, petitioner entered into a Repurchase Agreement with PhilFinance . . ., whereby, for and in
    consideration of the sum of PESOS: FIVE HUNDRED THOUSAND (P500,000.00), PhilFinance sold, transferred and
    delivered to petitioner CBCI 4-year, 8th series, Serial No. D891 with a face value of P500,000.00 . . ., which CBCI was
    among those previously acquired by PhilFinance from Filriters as averred in paragraph 3 of the Petition;
    Pursuant to the aforesaid Repurchase Agreement (Annex "B"), Philfinance agreed to repurchase CBCI Serial No.
    D891, at the stipulated price of PESOS: FIVE HUNDRED NINETEEN THOUSAND THREE HUNDRED SIXTY-ONE &
    11/100 (P519,361.11) on April 27, 1981;
    PhilFinance failed to repurchase the CBCI on the agreed date of maturity.
    PhilFinance executed a Detached Assignment in favor of the Petitioner TRB to enable the latter to have its title
    completed and registered in the books of the respondent. And by means of said Detachment, Philfinance transferred
    and assigned all, its rights and title in the said CBCI (Annex "C") to petitioner TRB.
    Petitioner presented the CBCI together with the two (2) aforementioned Detached Assignments to the Central Bank
    and requested the latter to effect the transfer of the CBCI on its books and to issue a new certificate in the name of
    petitioner as absolute owner thereof;
    Respondent failed and refused to register the transfer as requested, and continues to do so notwithstanding petitioner's
    valid and just title over the same and despite repeated demands in writing.
    The express provisions governing the transfer of the CBCI were substantially complied with the petitioner's request for
    registration, to wit:
    "No transfer thereof shall be valid unless made at said office (where the Certificate has been
    registered) by the registered owner hereof, in person or by his attorney duly authorized in writing, and
    similarly noted hereon, and upon payment of a nominal transfer fee which may be required, a new
    Certificate shall be issued to the transferee of the registered holder thereof."
    Without a doubt, the Detached Assignments presented to respondent were sufficient authorizations in writing executed
    by the registered owner, Filriters, and its transferee, PhilFinance, as required by the above-quoted provision;
    Upon such compliance with the aforesaid requirements, the ministerial duties of registering a transfer of ownership
    over the CBCI and issuing a new certificate to the transferee devolves upon the respondent;
    Upon these assertions, TRB prayed for the registration by the Central Bank of the subject CBCI in its name.
    For its part, Filriters interjected as Special Defenses the following:
    xxx xxx xxx
    17. Plaintiff had acted in bad faith and with knowledge of the illegality and invalidity of the assignment.
    a) The CBCI No. 891 is not a negotiable instrument and as a certificate of indebtedness is not payable
    to bearer but is a registered in the name of Filriters;
    b) The provision on transfer of the CBCIs provides that the Central Bank shall treat the registered
    owner as the absolute owner and that the value of the registered certificates shall be payable only to
    the registered owner; a sufficient notice to plaintiff that the assignments do not give them the registered
    owner's right as absolute owner of the CBCI's;
    c) CB Circular 769, Series of 1980 (Rules and Regulations Governing CBCIs) provides that the
    registered certificates are payable only to the registered owner (Article II, Section 1).
    RTC Decision: In its Decision dated April 29, 1988, the Regional Trial Court found the assignment of CBCI No. D891
    in favor of Philfinance, and the subsequent assignment of the same CBCI by Philfinance in favor of Traders Royal Bank
    null and void and of no force and effect.
    CA Decision: The petitioner assailed the decision of the trial court in the Court of Appeals, but their appeals likewise
    failed.
    In the appellate court, petitioner argued that the subject CBCI was a negotiable instrument, and having acquired the
    said certificate from Philfinance as a holder in due course, its possession of the same is thus free from any defect of
    title of prior parties and from any defense available to prior parties among themselves, and it may thus, enforce

    payment of the instrument for the full amount thereof against all parties liable thereon.
    In ignoring said argument, the appellate court ruled that the CBCI is not a negotiable instrument, since the instrument
    clearly stated that it was payable to Filriters, the registered owner, whose name was inscribed thereon, and that the
    certificate lacked the words of negotiability which serve as an expression of consent that the instrument may be
    transferred by negotiation.
    ISSUE:
    Whether or not the CBCI is a Negotiable Instrument (NO It was merely an assignment, and is not governed by the
    negotiable instruments law)
    HELD:
    Obviously, the assignment of the certificate from Filriters to Philfinance was fictitious, having made without
    consideration, and did not conform to Central Bank Circular No. 769, series of 1980, better known as the "Rules and
    Regulations Governing Central Bank Certificates of Indebtedness", which provided that any "assignment of registered
    certificates shall not be valid unless made . . . by the registered owner thereof in person or by his representative duly
    authorized in writing."
    Petitioner's claimed interest has no basis, since it was derived from Philfinance whose interest was inexistent, having
    acquired the certificate through simulation. What happened was Philfinance merely borrowed CBCI No. D891 from
    Filriters, a sister corporation, to guarantee its financing operations.
    Petitioner's present position rests solely on the argument that Philfinance owns 90% of Filriters equity and the two
    corporations have identical corporate officers, thus demanding the application of the doctrine or piercing the veil of
    corporate fiction, as to give validity to the transfer of the CBCI from registered owner to petitioner TRB. 14 This renders
    the payment by TRB to Philfinance of CBCI, as actual payment to Filriters. Thus, there is no merit to the lower court's
    ruling that the transfer of the CBCI from Filriters to Philfinance was null and void for lack of consideration.
    Admittedly, the subject CBCI is not a negotiable instrument in the absence of words of negotiability within the meaning
    of the negotiable instruments law (Act 2031).
    The pertinent portions of the subject CBCI read:
    xxx xxx xxx
    The Central Bank of the Philippines (the Bank) for value received, hereby promises to pay bearer, of if
    this Certificate of indebtedness be registered, to FILRITERS GUARANTY ASSURANCE
    CORPORATION, the registered owner hereof, the principal sum of FIVE HUNDRED THOUSAND
    PESOS.
    xxx xxx xxx
    Properly understood, a certificate of indebtedness pertains to certificates for the creation and maintenance of
    a permanent improvement revolving fund, is similar to a "bond,". Being equivalent to a bond, it is properly
    understood as acknowledgment of an obligation to pay a fixed sum of money. It is usually used for the
    purpose of long term loans.
    The appellate court ruled that the subject CBCI is not a negotiable instrument, stating that it is only payable to Filriters
    and no one else therefore it lacks the words of negotiability that should have served as an expression of consent that
    the instrument may be transferred by negotiation.
    A reading of the subject CBCI indicates that the same is payable to FILRITERS GUARANTY ASSURANCE
    CORPORATION, and to no one else, thus, discounting the petitioner's submission that the same is a 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 touchtone 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
    indebtedness as it merely to pay a sum of money to a specified person or entity for a period of time.
    As held in Caltex (Philippines), Inc. v. Court of Appeals
    The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the
    writing, that is, from the face of the instrument itself. In the construction of a bill or note, the intention of
    the parties is to control, if it can be legally ascertained. While the writing may be read in the light of
    surrounding circumstance in order to more perfectly understand the intent and meaning of the parties,
    yet as they have constituted the writing to be the only outward and visible expression of their meaning,
    no other words are to be added to it or substituted in its stead. The duty of the court in such case is to
    ascertain, not what the parties may have secretly intended as contradistinguished from what their
    words express, but what is the meaning of the words they have used. What the parties meant must be
    determined by what they said.
    Thus, the transfer of the instrument from Philfinance to TRB was merely an assignment, and is not governed
    by the negotiable instruments law.
    ACCORDINGLY, the petition is DISMISSED and the decision appealed from dated January 29, 1990 is hereby
    AFFIRMED.
    SO ORDERED.

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