Traders Royal Bank, petitioner vs.

CA, Filriters Guaranty Assurance

Corporation(Filriter) and Central Bank of the Philippines, respondents.

Republic of the Philippines Supreme Court Manila, 1997

Traders Royal Bank, petitioner vs. CA, Filriters Guaranty Assurance

Corporation(Filriter) and Central Bank of the Philippines, respondents.

TRB filed a petition for mandamuns to compel the Central Bank of the
Philippines to register the transfer of the subject Central Bank Certificate of
Indebtedness (CBCI) to TRB.

RTC assigned CBCI by Philippine Underwriters Finance Corporation(Philfinance

) in favour of Philfinance, and subsequent assignment of the same CBCI by
Philfinance in favour of TRB null and void and of no force and effect.

TRB appeals (CA affirms), TRB filed a petition for review before the SC

SC affirmed

Facts:
Filriters registered owner of CBCI . Filriters transferred it to Philfinance by
one of its officers without authorization from the company. Subsequently Philfinance
transferred same CBCI to TRB under a repurchase agreement. When Philfinance
failed to do so.The TRB tried to register in its name in the CB. The latter didnt want
to recognize the transfer.

Issue:
Whether the CBCI is negotiable instrument or not.
Whether the Assignment of registered certificate is valid or null and void.
Rule:
Under section 1 of Act no. 2031 an instrument to be negotiable must conform to the
following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.

Under section 3, Article V of Rules and Regulations Governing Central Bank

Certificates of Indebtedness states that the assignment of registered certificates
shall not be valid unless made at the office where the same have been issued and
registered or at the Securities Servicing Department, Central Bank of the
Philippines, and by the registered owner thereof, in person or by his representative,
duly authorized in writing. For this purpose, the transferee may be designated as
the representative of the registered owner.

Application/Analysis:
The CBCI is not a negotiable instrument, since the instrument clearly stated
that it was payable to Filriters, and the certificate lacked the words of negotiability
which serve as an expression of consent that the instrument may be transferred by
negotiation.

Obviously the Assignment of certificate from Filriters to Philfinance was null

and void. One of officers who signed the deed of assignment in behalf of Filriters did
not have the necessary written authorization from the Board of Directors of Filriters.
For lack of such authority the assignment is considered null and void.

Conclusion/Holdings:

Before the instruments become negotiable instruments, the instrument

must conform to the requirements under the Negotiable Instrument Law. Otherwise
instrument shall not bind the parties.
Clearly shown in the record is the fact that Philfinances title over CBCI is
defective since it acquired the instrument from Filriters fictitiously. Under 1409 of
the Civil Code those contracts which are absolutely simulated or fictitious are
considered void and inexistent from the beginning. Under 1409 of the Civil Code
those contracts which are absolutely simulated or fictitious are considered
void and inexistent from the beginning.

pellant.