WEEK 1
o Central Bank shall treat the registered owner as the absolute owner
TRADERS ROYAL BANK VS. CA
What is the case?
 A case to compel the Central Bank of the Philippines to register the
transfer of the subject Central Bank Certificate of Indebtedness (CBCI) to
Traders Royal Bank
 CBCI: part of the reserve investment against liabilities
o Certs for the creation and maintenance of a permanent
improvement revolving fund similar to a bond.
o Being equivalent to a bond it is properly understood as an
acknowledgement of an obligation to pay a fixed sum of money
Quickies:
 Filriters is the registered owner of the subject CBCI.
 Under a deed of assignment, Filriters transferred the CBCI to Philippine
Underwriters Finance Corporation (Philfinance).
 Subsequently, Philfinance transferred the CBCI, which was still registered
in the name of Filriters, to Traders Royal Bank (TRB).
o The transfer was made under a repurchase agreement granting
Philfinance the right to repurchase the instrument on or before
April 27, 1981.
o Philfinance failed to buy back the note on maturity date so it
executed a deed of assignment conveying to TRB all its right and
the title to the subject CBCI.
 Armed with the deed of assignment, TRB then sought the transfer and
registration of the CBCI 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.
Filtriters claimed as special defenses the ff:
 The executed DA forms which transfers the CBCI to TRB is a personal act
of the VPs and not the corporate act of Filriters
 This DA = patently void and inoperative because the assignment is
without the knowledge and consent of directors of Filtriters and not duly
authorized in writing by the Board
 Subject DA → executed without consideration, against Art. 1409, CC
 The transfer of dimunition of reserve investments of Filriters is expressly
prohibited by law, is immoral and against public policy
 Assignment of the subject CBCI = capital impairment and solvency
deficiency of Filriters
 Subject CBCI is not a negotiable instrument as a certificate of
indebtedness is not payable to bearer but is registered in the name of
Filriters.
 Provision on transfer of the CBCIs provides
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
 The CBCI involved substantial amount and its assignment clearly
constitutes disposition of "all or substantially all" of the assets of Filriters,
which requires the affirmative action of the stockholders
 TRB knew full well that that the assignment by Philfinance of the subject
CBCI is not a regular transaction made in the usual course of business
 TRB then has acted in bad faith and with knowledge of the illegality and
invalidity of the assignment
RTC Ruling: In favour of PhilFinance but the assignment of PhilFinance to TRB is
null and void and without force and effect.
CA Proceedings
 TRB argues that the CBCI = negotiable instrument and because it
acquired the certificate from PhilFinance as a holder in due course, its
possession of the same is thus free from any defect 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 liable parties thereon.
 Affirmed RTC ruling:
o 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.
o Assignment of the certificate from Filriters to Philfinance =
fictitious
 Why?
 Made without consideration
 Does not conform to CB Circular which
provides that there will be no assignment unless
made by the registered owner or his
representative duly authorized in writing
o TRB’s claimed interest has no basis since it was derived from
PhilFinance whose interest was inexistent having acquired the
certificate through simulation
 What actually happened was that Philfinance merely
borrowed the CBCI from FIlriters, a sister corp, to
guarantee its financing operations.
ISSUE: WON the CBCI is a negotiable instrument?
HELD: NO
The CBCI is payable to FILRITERS GUARANTY ASSURANCE
CORPORATION, and to no one else, thus, discounting TRB’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 that characterizes 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 the certificate of
indebtedness as it merely to pay a sum of money to a specified person or
entity for a period of time.
Caltex vs. CA
 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.
TRB knew that Philfinance is not registered owner of the CBC.
 The fact that a non-owner was disposing of the registered CBCI owned by
another entity was a good reason for petitioner to verify of inquire as to
the title Philfinance to dispose to the CBCI.
Moreover CBCI is governed by a Circular known as the Rules and Regulations
Governing Central Bank Certificates of Indebtedness which provides that
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.
 The VP who signed the Filriters - Philfinance deed of assignment did not
have the necessary written authorization from the BoD of Filriters to act
for them.
 So, the sale from F to P was fictitious, void and inexistent as there was no
consideration for the same.
Such is fatal because if P has no tittle over the subject certificate to convey to
Traders Royal Bank. And this feed into the doctrine that no man can do anything
except what he can do lawfully.
CALTEX vs. CA
 Security Bank and Trust Company issued 280 Certificate of Time Deposits
to Angel dela Cruz and Angel deposited with SBTC, spread over 11
different days 1,120,000
 Angel delivered the CTDs to Caltex for his purchase of fuel products from
Caltex
 Angel informed the bank manager of SBTC that he lost all the subject
CTDs
 Bank manager advised Angel to execute and submit an affidavit of loss if
he wants his CTDs replaced
 Angel was able to comply and so 280 replacement CTDs were issued to
her
 Angel then obtained a loan from SBTC for 875k
o Executed a notarized Deed of Assignment of Time Deposit
stating that he surrenders to SBTC full control over the indicated
time deposits
Where the conflict started: Credit manager of Caltex went to SCTC and presented
for verification the CTDs declared lost by Angel
 SBTC requested Caltex to furnish it a copy of the document evidencing the
guarantee agreement with Angel
 No copy of the requested documents was furnished
 SBTC rejected Caltex’ demand and claim for payment over the CTDs
 Loan of Angel fell due and he applied the CTDs as payment for his loan
 Caltex files this complaint
o Prayer: SBTC be ordered to pay the aggregate value of CTD +
accrued interest + compounded interest
 RTC: Ruled against Caltex
 CA: Affirmed Caltex
o Subject CTDs are non negotiable
 . While it may be true that the word "bearer" appears
rather boldly in the CTDs issued, it is important to note
that after the word "BEARER" stamped on the space
provided supposedly for the name of the depositor, the
words "has deposited" a certain amount follows.
  The document further provides that the amount
deposited shall be "repayable to said depositor" on the
period indicated.
 Therefore, the text of the instrument(s) themselves
manifest with clarity that they are payable, not to
whoever purports to be the "bearer" but only to the
specified person indicated therein, the depositor.
 In effect, the appellee bank acknowledges its depositor
Angel dela Cruz as the person who made the deposit and
further engages itself to pay said depositor the amount
indicated thereon at the stipulated date.
o Caltex = not a holder in due course
ISSUE: WON the CTDs are negotiable instruments/ meet the requirement of the
law for negotiability
HELD: YES, he CTDs in question are negotiable instruments.
 Section 1, NILfor an instrument to become negotiable, viz:
(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.
 The CTDs in question undoubtedly meet the requirements of the law for
negotiability.
 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
 Contrary to what CA held, the CTDs are negotiable instruments.
 The documents provide that the amounts deposited shall be repayable to
the depositor.
o And who, according to the document, is the depositor?
 It is the "bearer."
 The documents do not say that the depositor is Angel de
la Cruz and that the amounts deposited are repayable
specifically to him.
 Rather, the amounts are to be repayable to the bearer of
the documents or, for that matter, whosoever may be the
bearer at the time of presentment.
 Under the Negotiable Instruments Law, an instrument is negotiated when
it is transferred from one person to another in such a manner as to
constitute the transferee the holder thereof, and a holder may be the payee
or indorsee of a bill or note, who is in possession of it, or the bearer
thereof.
ISSUE: WON there was a valid negotiation to Caltex
HELD: NO
 There was no negotiation in the sense of a transfer of the legal title to the
CTDs in favor of Caltex, in which situation, for obvious reasons, mere
delivery of the bearer CTDs would have sufficed.
 Here, the delivery thereof only as security for the purchases of Angel (and
we even disregard the fact that the amount involved was not disclosed)
could at the most constitute Caltex only as a holder for value by reason of
his lien.
 Accordingly, a negotiation for such purpose cannot be effected by mere
delivery of the instrument since, necessarily, the terms thereof and the
subsequent disposition of such security, in the event of non-payment of the
principal obligation, must be contractually provided for.
 The CTDs were only delivered but not indorsed.
o Caltex failed to produce documentary evidence of any contract of
pledge or guarantee
 On the other hand, the assignment of the CTDs made by Angel in favor of
SBTC was embodied in a public instrument. With regard to this other
mode of transfer, the Civil Code specifically declares:
o Art. 1625.
An assignment of credit, right or action shall produce no effect as
against third persons, unless it appears in a public instrument, or
the instrument is recorded in the Registry of Property in case the
assignment involves real property.
 SBTC duly complied with this statutory requirement.
 Contrarily, Caltex, whether as purchaser, assignee or lien holder of the
CTDs, neither proved the amount of its credit or the extent of its lien nor
the execution of any public instrument which could affect or bind private
respondent.
 Necessarily, therefor as between Caltex and SBTC, the bank has definitely
the better right over the subject CTDs
METROPOLITAN BANK & TRUST CO. vs. CA
 Eduardo Gomez opened an account with Golden Savings and in 2 mos
deposited 38 treasury warrants with a total value of 1,755,228
o All drawn by the Phil. Fish Marketing Authority and signed by
its GM and Auditor
o 6 were payable to Gomez
o 32 indorsed by their respective payees, followed by Gomez as
second indorser
  All these warrants were indorsed by one Gloria Castillo as cashier of
Golden Savings and deposited to its Savings Account in Metrobank
Calapan
 Warrants were then sent for clearing by the branch office to the principal
office, which forwarded the warrant to the Bureau of Treasury for special
clearing
 More than 2 weeks after, Castillo inquired on won the warrants had been
cleared adnd was told to wait.
 Gomez was then not allowed to withdraw from his account
 Exasperated with Castillo’s inquiries, Metrobank finally allowed Golden
Savings to withdraw from the proceeds of the warrants.
o First withdrawal: 508k
o Second withdrawal: 310k
o Third withdrawal: 150k
 Golden Savings allowed Gomez to make withdrawals from his own
account
o 1, 167, 500
 Metrobank informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury
o Demanded that Golden Saving refund the amount it had
previously withrdawn
 Demand was rejected by Golden Savings
 Metrobank sued Golden Savings in the RTC
 RTC Ruling: In favour of Golden Savings
 CA: Affirmed RTC
ISSUE: WON the treasury deposits are negotiable instruments?
HELD: No
 Clearly stamped on their face is the word "non-negotiable." Moreover, and
this is of equal significance, it is indicated that they are payable from a
particular fund, to wit, Fund 501.
 The following sections of the Negotiable Instruments Law, especially the
underscored parts, are pertinent:
o Sec. 1. — Form of negotiable instruments. — 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.
o Sec. 3. When promise is unconditional. — An unqualified order or
promise to pay is unconditional within the meaning of this Act
though coupled with —
(a) An indication of a particular fund out of which
reimbursement is to be made or a particular account to be debited
with the amount; or
(b) A statement of the transaction which gives rise to the
instrument judgment.
But an order or promise to pay out of a particular fund is not
unconditional.
 The indication of Fund 501 as the source of the payment to be made on the
treasury warrants makes the order or promise to pay "not unconditional"
and the warrants themselves non-negotiable.
o There should be no question that the exception on Section 3 of
the Negotiable Instruments Law is applicable in the case at bar.
 Abubakar vs. Auditor General
o The petitioner argues that he is a holder in good faith and for
value of a negotiable instrument and is entitled to the rights and
privileges of a holder in due course, free from defenses. But this
treasury warrant is not within the scope of the negotiable
instrument law. For one thing, the document bearing on its face
the words "payable from the appropriation for food
administration, is actually an Order for payment out of "a
particular fund," and is not unconditional and does not fulfill one
of the essential requirements of a negotiable instrument (Sec. 3
last sentence and section [1(b)] of the Negotiable Instruments
Law).
 Metrobank cannot contend that by indorsing the warrants in general,
Golden Savings assumed that they were "genuine and in all respects what
they purport to be," in accordance with Section 66 of the Negotiable
Instruments Law.
o The simple reason is that this law is not applicable to the non-
negotiable treasury warrants.
o The indorsement was made by Gloria Castillo not for the purpose
of guaranteeing the genuineness of the warrants but merely to
deposit them with Metrobank for clearing.
o It was in fact Metrobank that made the guarantee when it
stamped on the back of the warrants: "All prior indorsement
and/or lack of endorsements guaranteed, Metropolitan Bank &
Trust Co., Calapan Branch."
 Golden Savings relied on Metrobank to determine the validity of the
warrants through its own services. The proceeds of the warrants were
withheld from Gomez until Metrobank allowed Golden Savings itself to
withdraw them from its own deposit. It was only when Metrobank gave
the go-signal that Gomez was finally allowed by Golden Savings to
withdraw them from his own account
 1,167, 500 → Charged to Metrobank
  586, 589 → Charged to Golden Savings

PNB vs. CONCEPCION MINING COMPANY

 This is a case for collection of a sum of money that was filed against
Concepcion Mining Company in connection with a promissory note
Vicente Legarda and Jose Sartes issued
 This promissory note was issued in favor of PNB.
 The defendants allege that the co-maker Vicente Legarda is already dead
and they express that the estate of the deceased is in the process of judicial
determination and because of this, they prayed that the said estate be
included as party-defendant.
 CFI Judgement: Inclusion of said defendant is unnecessary and immaterial
according to Art. 1216 of the Civil Code which states
o The creditor may proceed against any one of the solidary debtors
or some of them simultaneously. The demand made against one of
them shall not be an obstacle to those which may subsequently be
directed against the others so long as the debt has not been fully
collected
And Sec. 17, NIL:
o Construction where instrument is ambiguous. — Where the language
of the instrument is ambiguous or there are omissions therein, the
following rules of construction apply:
xxx xxx xxx
(g) Where an instrument containing the word "I promise to pay"
is signed by two or more persons, they are deemed to be jointly
and severally liable thereon.

ISSUE: WON the estate of Legarda should be included in the suit

HELD: NO- pursuant to Sec. 17(g) of the NIL
 And Sec. 17, NIL:
o Construction where instrument is ambiguous. — Where the language
of the instrument is ambiguous or there are omissions therein, the
following rules of construction apply:
xxx xxx xxx
(g) Where an instrument containing the word "I promise to pay"
is signed by two or more persons, they are deemed to be jointly
and severally liable thereon.
 As the promissory note was executed jointly and severally by the same
parties, namely, Concepcion Mining Company, Inc. and Vicente L. Legarda
and Jose S. Sarte, the payee of the promissory note (PNB) had the right to
hold any one or any two of the signers of the promissory note responsible
for the payment of the amount of the note.
 This judgment of the lower court should be affirmed.