01. Traders Royal Bank vs.

CA, Filriters, Central Bank

02. Filriters through a Detached Agreement transferred ownership to
Philfinance a Central Bank Certificate of Indebtedness. 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.
03. HELD: 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.
04. 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 specified person or entity for a period of
time.
05. 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 iswas 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 Philfinances 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.
Furthermore, the transfer wasn't in conformity with the regulations set
by the CB. Giving more credence to rule that there was no valid
transfer or assignment to petitioner.
06.

(G.R. No. 93397, 269 SCRA 15)

Filriters is the registered owner of CBCI No. D891. Under a deed of assignment dated
November 27, 1971, Filriters transferred CBCI No. D891 to Philippine Underwriters
Finance Corporation (Philfinance).

Subsequently, Philfinance transferred CBCI No. D891, which was still registered in the
name of Filriters, to appellant Traders Royal Bank (TRB). The transfer was made under a
repurchase agreement dated February 4, 1981, granting Philfinance the right to
repurchase the instrument on or before April 27, 1981.

When Philfinance failed to buy back the note on maturity date, it executed a deed of
assignment, dated April 27, 1981, conveying to appellant TRB all its rights and title to
CBCI No. D891.

Armed with the deed of assignment, TRB then sought the transfer and registration of
CBCI No. D891 in its name before the Security and Servicing Department of the Central
Bank (CB). Central Bank, however, refused to effect the transfer and registration in view
of an adverse claim filed by defendant Filriters. Left with no other recourse, TRB filed a
special civil action for mandamus against the Central Bank in the Regional Trial Court of
Manila.

The suit, however, was subsequently treated by the lower court as a case of interpleader
when CB prayed in its amended answer that Filriters be impleaded as a respondent and
the court adjudge which of them is entitled to the ownership of CBCI No. D891. Failing
to get a favorable judgment, TRB now comes to this Court on appeal.

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 CBCI is free from any defect of title.

The appellate court said that the CBCI is not a negotiable instrument, since the
instrument clearly stated that it was payable to Filriters, the registered owner. It lacked
the words of negotiability, which serve as an expression of consent that the instrument
may be transferred by negotiation.

Facts:

Filriters Guaranty Assurance Corporation (Filriters) the registered owner of CBCI No.
D891 transferred the CBCI to Philippine Underwriters Finance Corporation (Philfinance)
under a deed of assignment the Central Bank Certificates of Indebtedness (CBCI)

Under a repurchase agreement, Philfinance transferred CBCI No. D891, which was still
registered in the name of Filriters, to appellant Traders Royal Bank (TRB), granting
Philfinance the right to repurchase the instrument on or before April 27, 1981.

PhilFinance failed to repurchase the CBCI on the agreed date of maturity.

When Philfinance failed to buy back the note on maturity date, it executed a deed of
assignment, dated April 27, 1981, conveying to appellant TRB all its rights and title to
CBCI No. D891.

with the deed of assignment, TRB then sought the transfer and registration of CBCI No.
D891 in its name before the Security and Servicing Department of the Central Bank
(CB). Central Bank, however, refused to effect the transfer and registration in view of an
adverse claim filed by defendant Filriters.

Issues:
1. Whether or not the CBCI is a negotiable instrument.

Ruling:
2. 1. No. The petition is without merit. The CBCI is read,
3. x x x The Central Bank of the Philippines (the Bank) for value
received, hereby promises to pay to bearer, or if this Certificate of
indebtedness be registered, to FILRITERS GUARANTY
ASSURANCE CORPORATION, the Registered owner hereof, the
principal sum of FIVE HUNDRED THOUSAND PESOS. x x x
4.
5. As worded, the instrument provides a promise to pay Filriters Guaranty
Assurance Corporation, the registered owner hereof. Very clearly, the instrument
is payable only to Filriters, the registered owner, whose name is inscribed thereon.
It lacks the words of negotiability which should have served as an expression of
consent that the instrument may be transferred by negotiation.

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. The duty of the court in such case is to ascertain, not what the parties may
have secretly intended as distinguished from what their words express, but what is the
meaning of the words they have used. What the parties meant must be deter-mined 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.

Crystal v CA

FACTS: Petitioner redeemed property, which has been sold upon execution,
with a check issued to the buyer Ocang. The CA found that the check for
P11200 paid by petitioner for the redemption in dispute has been dishonored,
in the face of the other findings in the same decision of the CA indicating that
instead of having been dishonored, the said check had only become stale,
albeit it being replaced with new ones from time to time.

HELD: Surely, for a check to be dishonored upon presentment, on the one

hand, and to be stale for not being presented at all in time, are incompatible
developments that naturally have variantly legal consequences. Thus, if
indeed the check in question had been dishonored, then there can be no
doubt that the petitioners redemption was null and void. On the other hand,
if it had only become stale, then it becomes imperative that the
circumstances that caused its non-presentment be determined, for if this
wasnt due to the fault of petitioner, then it would be unfair to deprive him of
the rights he acquired as redemptioner, particularly, if after all, the value of
the check has otherwise been received or realized by the party concerned.

The case was remanded to the trial court to receive all relevant and
competent evidence to the issue of whether or not Ocang has received in one
form or another, the full amount as redemption price of the four parcels of
land in dispute as well as to the other facts.

It was found out that Ocang, when he applied for a writ of possession, there
was paymen

Facts:

The Supreme Court, in its decision of 25 February 1975, affirmed the decision of the
Court of Appeals holding that Raymundo Crystals redemption of the property acquired
by Pelagia Ocang, Pacita, Teodulo,Felicisimo, Pablo, Lydia, Dioscoro and Rodrigo, all
surnamed de Garcia, was invalid as the check whichCrystal used in paying the
redemption price has been either dishonored or had become stale (Ergo, the valueof the
check was never realized). Crystal filed a motion for reconsideration.

Issue:

Whether the conflicting circumstances of the check being dishonored and becoming stale
affect thevalidity of the redemption sale.

Held:

For a check to be dishonored upon presentment and to be stale for not being presented at
all in time areincompatible developments that have variant legal consequences. If indeed
the questioned check wasdishonored, the redemption was null and void. If it had only
become state, it becomes imperative that thecircumstances that caused its non-
presentment be determined, for if it was not due to the fault of the drawer, itwould be
unfair to deprive him of the rights he had acquired as redemptioner. Herein, it appears
that there is astrong showing that the check was not dishonored, although it became stale,
and that Pelagia Ocang hadactually been paid the full value thereof. The Supreme Court,
thus, reconsidered its decision and remandedthe case to the trial court for further
proceedings

Facts:

In its decision promulgated on February 25, 1975, SC

affirmed the decision of CA in favor of private
respondent which held that petitioner's redemption of
the property acquired by said respondents in an
execution sale pursuant to a final judgment of the CFI of
Cebu, was invalid inasmuch as the check which
petitioner had used in paying the redemption price had
been either dishonored or had become stale. Petitioner
filed the instant motion for reconsideration.

Issue:

Whether the check being dishonored and becoming stale

affect the validity of the redemption sale.

Held:

For a check to the dishonored upon presentment on the

one hand, and to be stale for not being present-ed at all
in time, on the other, are incompatible developments
that naturally have variant legal consequences. Thus, if
the check in question had been dishonored, then there
can be no doubt that petition-er's redemption was null
and void. On the other hand, if it had only become stale,
then it becomes imperative that the circumstances that
caused its non-presentment be determined, for if this
was not due to the fault of the petitioner, then it would
be unfair to deprive him of the rights he had acquired as
redemptioner, particularly, the value of the check has
otherwise been received or realized by the party
concerned.
There is a strong showing in the motion for
reconsideration that not only was said check not
dishonored, although it became stale, but that
respondent Pelagia Ocang had actually been paid
already the full value thereof. And in this connection, it
is notable that in the comment of respondents on
petitioner's motion for reconsideration, there is no clear
and categorical denial of these important and decisive
facts. SC reconsidered its decision and remanded the
case for further proceedings.

Edugue v. Ocampo

da. de Eduque vs. OcampoGR L-222, 26 April 1950Second Division, Moran (CJ)Facts:

On 16 February 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de
Leon, DonaEscolastica delos Reyes and Don Jose M. Ocampo, with amount s of P40,000
and P15,000, both payablewithin 20 years with interest of 5% per annum. Payment of the
loans was guaranteed by mortgage on realproperty. On 6 December 1943, Salvacion F.
Vda de Eduque, as administratrix of the estate of Dr. JoseEduque, tendered payment by
means of a cashiers check representing Japanese War notes to Jose M.Ocampo, who
refused payment. By reason of such refusal, an action was brought and the cashiers
check wasdeposited in court. After trial, judgment was rendered against Ocampo
compelling him to accept the amount,to pay the expenses of consignation, etc. Ocampo
accepted the judgment as to the second loan but appealed asto the first loan

Issue:

Whether there is a tender of payment by means of a cashiers check representing war

notes.

Held:

Japanese military notes were legal tender during the Japanese occupation; and Ocampo
impliedlyaccepted the consignation of the cashiers check when he asked the court that he
be paid the amount of thesecond loan (P15,000). It is a rule that a cashiers check may
constitute a sufficient tender where no objectionis made on this ground

03. Salvacion Vda. de Eduque, etc. vs. Jose Ocampo

(G.R. No L-222, 86 PHIL 216)

Facts:

On February 16, 1935, Dr. Jose Eduque secured two

loans from Mariano Ocampo de Leon, Doa Escolastica
de los Reyes and Don Jose M. Ocampo, the first in the
amount of P40,000 and the second in the sum of
P15,000, both payable within the period of twenty
years, with interest at the rate of 5% per annum.
Payment of these two loans was guaranteed by
mortgage on real property. In the mortgage contract it
is stipulated that any of the mortgage creditors may
receive payment and execute deeds of cancellation of
the mortgage debts.

On December 6, 1943, plaintiff and appellee, as

administratrix of the estate of the deceased Dr. Jose
Eduque, tendered payment, by means of cashier's check,
of the total amount of the two loans, P55,000, to
defendant-appellant Jose M. Ocampo, one of the
creditors, who refused to accept payment. By reason of
such refusal, an action was brought and a cashier's
check for the total amount of P55,000 deposited in
court. After trial, judgment was rendered against
defendant compelling him to accept the P55,000 de-
posited in court, to issue deeds for cancellation of the
mortgage debts, and to pay the expenses of consignation
and costs.

Defendant accepted the judgment with respect to the

second loan of P15,000 but appealed to the first loan.

Issue:

Whether tender of payment by means of a cashier's

check representing Japanese war notes is valid.

Held:

Yes. SC previously held that Japanese military notes

were legal tender during the Japanese occupation. But
appellant argues, further, that the consignation of a
cashier's check, which is not legal tender, is not binding
upon him. This question, however, has never been
raised in the lower court. Upon the contrary, defendant
accepted impliedly the consignation of the cashier's
check when he himself asked the court that out of the
money thus consigned he be paid the amount of the
second loan of P15,000. It is a rule that "a cashier's
check may constitute a sufficient tender where no
objection is made on this gro

04. New Pacific Timber & Supply Co. Inc. vs. Seneris,
Tong and ex-officio sheriff Abdulwahid(G.R. No. L-
41764, 101 SCRA 686)

Facts:

Petitioner is the defendant in a complaint for collection

of a sum of money filed by the private respondent. On
July 19, 1974, a compromise judgment was rendered by
the respondent Judge in accordance with an amicable
settlement entered into by the parties. It was agreed
that petitioner will pay to private respondent P54,
500.00 at 6% interest per annum and P6, 000 as
attorney's fee, P5, 000 of which was paid.

For failure of the petitioner to comply with his

judgment obligation, the respondent Judge, upon motion
of the private respondent, issued an order for the
issuance of a writ of execution for the amount of P63,
130.00 pursuant to which, the Ex-Officio Sheriff levied
upon the personal properties of the petitioner and set
the auction sale. However, prior to the auction sale,
petitioner deposited with the Clerk of Court, CFI
Zamboanga City the sum of P63, 130.00 for the payment
of the judgment obligation, consisting of P50, 000.00 in
Cashier's Check and P13, 130.00 in cash.

Private respondent refused to accept the check as well

as the cash deposit. Private respondent insisted that the
sale must proceed and the Ex-Officio Sheriff proceeded
with the auction sale. Private respondent is the highest
bidder in the amount of P50, 000.00 with a deficiency
of P13, 130.00.

Issue:

Whether payment of cashiers check be considered valid

payment of the judgment obligation.

Held:

Yes.

It is to be emphasized in this connection that the check

deposited by the petitioner in the amount of P50, 000 is
not an ordinary check but a Cashier's Check of the
Equitable Banking Corporation. As testified to by the Ex-
Officio Sheriff with whom it has been deposited, it is a
certified crossed check.

It is a well-known and accepted practice in the business

sector that a Cashier's Check is deemed as cash.
Moreover, since the said check had been certified by the
drawee bank, by the certification, the funds represented
by the check are transferred from the credit of the
maker to that of the payee or holder, and for all intents
and purposes, the latter becomes the depositor of the
drawee bank, with rights and duties of one in such
situation. Where a check is certified by the bank on
which it is drawn, the certification is equivalent to
acceptance. Said certification "implies that the check is
drawn upon sufficient funds in the hands of the drawee,
that they have been set apart for its satisfaction, and
that they shall be so applied whenever the check is
presented for payment. It is an understanding that the
check is good then, and shall continue good, and this
agreement is as binding on the bank as its notes in
circulation, a certificate of deposit payable to the order
of the depositor, or any other obligation it can assume.
The object of certifying a check, as regards both parties,
is to enable the holder to use it as money." When the
holder procures the check to be certified, "the check
operates as an assignment of a part of the funds to the
creditors." Hence, the exception to the rule enunciated
under Section 63 of the Central Bank Act to the effect
"that a check which has been cleared and credited to the
account of the creditor shall be equivalent to a delivery
to the creditor in cash in an amount equal to the amount
credited to his account" shall apply in this case.
NEW PACIFIC TIMBER V. SENERIS 101 SCRA 686

FACTS: New Pacific Timber and Supply was the defendant in a case for
collection of money. Upon failure to comply with the compromise agreement,
a writ of execution was issued and its properties were levied. Prior though to
the auction sale, petitioner deposited with the trial court a cashiers check
but private respondent refused to accept.

HELD: The check deposited by the petitioner is no ordinary check but a

cashiers check. It is a well-known and accepted practice in the business
sector that a cashiers check is deemed as cash. Moreover, since the said
check had been certified by the drawee bank, by the certification, the funds
represented by the check are transferred from the credit of the maker to that
of the payee or holder, and for all intents and purposes, the latter becomes
the depositor of the drawee bank, with rights and duties of one in such
situation. The certification by the bank is equivalent to acceptance. It is an
understanding that the check is good then, and shall continuegood, and this
agreement is binding on the bank as its notes in circulation, a certificate of
deposit payable to the order of the depositor, or any other obligation it can
assume. The object of certifying the check as regards both parties is to
enable the holder to use it as money. Hence the exception to the rule on
Section 64 of the CB Act to the effect that a check which has been cleared
and credited to the account of the creditor shall be equivalent to a delivery to
a creditor in cash in an amount equal to the amount credited to his account
shall apply in this case.