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TRADERS ROYAL BANK V.

CA
269 SCRA 15
FACTS:
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.

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.

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.

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
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.