TRADERS ROYAL BANK V.

CA

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 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.