Traders Royal Bank v CA (Negotiable

named or otherwise indicated therein with

Instruments Law)

reasonable certainty.

TRADERS ROYAL BANK V CA G.R. No. 93397

Under section 3, Article V of Rules and Regulations

March 3, 1997

Governing Central Bank Certificates of

FACTS:

registered certificates shall not be valid unless

Filriters registered owner of Central Bank

Certificate of Indebtedness (CBCI). Filriters
transferred it to Philfinance by one of its officers
without authorization from the company.
Subsequently, Philfinance transferred same CBCI
to Traders Royal Bank (TRB) under a repurchase
agreement. When Philfinance failed to do so, The
TRB tried to register in its name in the CBCI. The
Central Bank did not want to recognize the
transfer.
Docketed as Civil Case No. 83-17966 in the
Regional Trial Court of Manila, Branch 32, the
action was originally filed as a Petition for
Mandamus 5 under Rule 65 of the Rules of Court,
to compel the Central Bank of the Philippines to
register the transfer of the subject CBCI to
petitioner Traders Royal Bank (TRB).
DECISION OF LOWER COURTS: * RTC: transfer is
null and void. * CA: The appellate court ruled that
the subject CBCI is not a negotiable instrument.
Philfinance acquired no title or rights under CBCI
No. D891 which it could assign or transfer to
Traders Royal Bank and which the latter can
register with the Central Bank. Thus, the transfer
of the instrument from Philfinance to TRB was
merely an assignment, and is not governed by the
negotiable instruments law.
APPLICABLE LAWS:
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

Indebtedness states that the assignment of

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.
ISSUES & RULING: 1. Whether the CBCI is
negotiable instrument or not.
The pertinent portions of the subject CBCI read:
xxx xxx xxx
The Central Bank of the Philippines (the Bank) for
value received, hereby promises to pay bearer, of if
this Certificate of indebtedness be registered, to
FILRITERS GUARANTY ASSURANCE
CORPORATION, the registered owner hereof, the
principal sum of FIVE HUNDRED THOUSAND
PESOS.
NO. 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.
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.
2. Whether the Assignment of registered certificate
is valid or null and void.

certain in money; (c) Must be payable on demand,

IT'S NULL AND VOID. Obviously the Assignment of

or at a fixed or determinable future time; (d) Must

certificate from Filriters to Philfinance was null

be payable to order or to bearer; and (e) Where the

and void. One of officers who signed the deed of

instrument is addressed to a drawee, he must be

assignment in behalf of Filriters did not have the

necessary written authorization from the Board of

dated January 3, 1975 of the Equitable Banking

Directors of Filriters. For lack of such authority the

Corporation; and (2) P13,130.00 in cash. The

assignment is considered null and void.

private respondent refused to accept the check as

Clearly shown in the record is the fact that

Philfinance's 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

well as the cash deposit. The respondent judge

upheld private respondent's claim that he has the
right to refuse payment by means of a check, the
respondent Judge citing Section 63 of the Central
Bank Act, and Article 1249 of the New Civil Code.

fictitious are considered void and inexistent from

the beginning.

ISSUE: Whether or not the private respondent can

Petitioner knew that Philfinance is not registered

validly refuse acceptance of the payment of the

owner of the CBCI No. D891. The fact that a non-

judgment obligation made by the petitioner

owner was disposing of the registered CBCI owned

consisting of P50,000.00 in Cashier's Check and

by another entity was a good reason for petitioner

P13,130.00 in cash which it deposited with the Ex-

to verify of inquire as to the title Philfinance to

Officio Sheriff before the date of the scheduled

dispose to the CBCI.

auction sale.

OTHER NOTES:

RULING: It is to be emphasized that it is a well-

1. The mere ownership by a single stockholder or

by another corporation of all or nearly all of the
capital stock of a corporation is not of itself a
sufficient reason for disregarding the fiction of
separate corporate personalities.
New Pacific Timber & Supply Co., Inc vs.

known and accepted practice in the business

sector that a Cashiers Check is deemed cash.
Moreover, since the check has been certified by the
drawee bank, this certification implies that the
check is sufficiently funded in the drawee bank
and the funds will be applied whenever the check
is presented for payment. The object of certifying a

Seneris [No. L-41764. December19, 1980.]

check is to enable the holder to use it as money.

FACTS: Herein petitioner was the defendant in a

it operates as an assignment of a part of the funds

complaint for collection of a sum of money filed by

to the creditors. Hence, the exception provided in

the private respondent. On July 19, 1974, a

Section 63 of the Central Bank Act which states

compromise judgment was rendered by the

that checks which have been cleared and credited

respondent Judge in accordance with an amicable

to the account of the creditor shall be equivalent to

settlement entered into by the parties. For failure

a delivery to the creditor in cash the amount equal

of the petitioner to comply with his judgment

to that which is credited to his account. The

obligation, the respondent Judge, issued an order

Cashiers Check and the cash are valid payment of

for the issuance of a writ of execution. Accordingly,

the obligation of the petitioner. The private

writ of execution was issued for the amount of

respondent has no valid reason to refuse the

P63,130.00 pursuant to which, the Ex Officio

acceptance of the check and cash as full payment

Sheriff levied upon the following personal

of the obligation

properties of the petitioner and set the auction sale

thereof on January 15, 1975. Prior to January 15,
1975, petitioner deposited with the Clerk of CFI the
sum of P63,130.00 for the payment of the
judgment obligation, consisting of the following. (1)
P50,000.00 in Cashier's Checks No. S314361

When the holder procures the check to be certified,

Tibajia Jr. v. Court of Appeals [G.R. No. 100290.

June 4, 1993]
FACTS

Tibajia spouses delivered to Sheriff the total money

his placement with Philfinance had remained

judgment in cashiers check and cash.Private

unpaid and outstanding, and that he in effect

respondent, Eden Tan, refused to accept the

payment made by the Tibajia spouses and instead
insisted that the garnished funds deposited with
the cashier of the Regional Trial Court of Pasig,
Metro Manila be withdrawn to satisfy the judgment
obligation. Tibajias filed a motion to lift the writ of
execution on the ground that the judgment debt
had already been paid. The motion was denied.
ISSUE
Whether or not payment by means of cashiers

was asking for the physical delivery of the

underlying promissory note. Pilipinas did not
deliver the Note, nor any certificate of
participation in respect thereof, to petitioner.
ISSUES
(a) Whether or not Pilipinas Bank is liable for
its action.
(b)Whether or not non-negotiable instruments

check is considered payment in legal tender.

are transferrable.

RULING

RULING

NO. A check, whether a managers check or ordinary

(1) YES. Private respondent Pilipinas bank is

check, is not legal tender, and an offer of a check in

liable for damages plus legal interest thereon

payment of a debt is not a valid tender of payment and

may be refused receipt by the obligee or creditor. A check
is not legal tender and that a creditor may validly refuse

by arising out of its breach of duty. By failing

to deliver the Note to the petitioner as

payment by check, whether it be a managers, cashiers

depositor-beneficiary of the thing deposited,

or personal check. The Supreme Court stressed that,

Pilipinas effectively and unlawfully deprived

We are not, by this decision, sanctioning the use of a

petitioner of the Note deposited with it.

check for the payment of obligations over the objection of

the creditor.

Whether or not Pilipinas itself benefitted from

such conversion or unlawful deprivation

Sesbreo v. Court of Appeals [G.R. No.

inflicted upon petitioner, is of no moment for

89252. May 24, 1993]

present purposes.In the case at bar, the

FACTS
Petitioner Raul Sesbreo made a money
market placement in the amount of
P300,000.00 with the Philippine Underwriters
Finance Corporation (Philfinance). The latter
issued a Certificate of Confirmation of Sale
without recourse from Delta Motors
Corporation Promissory Note, a Certificate of
securities indicating the sale to petitioner,
with the notation that the said security was in
custodianship of Pilipinas Bank, andpostdated checks payable with petitioner as payee,
Philfinance as drawer. Petitioner approached
private respondent Pilipinas Bank and handed
her a demand letter informing the bank that

custodian-depositary bank Pilipinas refused to

deliver the security deposited with it when
petitioner first demanded physical delivery
thereof. Instead of complying with the demand
of the petitioner, Pilipinas purported to require
and await the instructions of Philfinance, in
obvious contravention of its undertaking
under the DCR to effect physical delivery of
the Note upon receipt of written instructions
from petitioner Sesbreo.
(2) YES. A non-negotiable instrument may,
obviously, not be negotiated; but it may be
assigned or transferred, absent an express
prohibition against assignment or transfer
written in the face of the instrument. It is

important to bear in mind that

money order and deposited it to the

the negotiation of a negotiable instrument

appellants account upon clearance. Mauricio

must be distinguished from the

Soriano, Chief of the Money Order Division

assignment or transfer of an instrument

notified the Bank of America that the money

whether that be negotiable or non-negotiable.

order deposited had been found to have been

Only an instrument qualifying as a negotiable

irregularly issued and that, the amount it

instrument under the relevant statute may

represented had been deducted from the

be negotiated either by indorsement thereof

banks clearing account. The Bank of America

coupled with delivery, or by delivery alone

debited appellants account with the same

where the negotiable instrument is in bearer

account and give notice by mean of debit

form. A negotiable instrument may, however,

memo.

instead of being negotiated, also be assigned

or transferred. The legal consequences of

Issue:

negotiation as distinguished from assignment

of a negotiable instrument are, of course,
different.

in question is a negotiable instrument

Held:

Philippine Education Co. vs. Soriano

L-22405

Whether or not the postal money order

June 30, 1971

No. It is not disputed that the Philippine

postal statutes were patterned after similar
statutes in force in United States. The Weight

Facts:

of authority in the United States is that postal

Enrique Montinola sought to purchase

from Manila Post Office ten money orders of

200php each payable to E. P. Montinola.
Montinola offered to pay with the money
orders with a private check. Private check
were not generally accepted in payment of
money orders, the teller advised him to see the
Chief of the Money Order Division, but instead
of doing so, Montinola managed to leave the
building without the knowledge of the teller.
Upon the disappearance of the unpaid money
order, a message was sent to instruct all
banks that it must not pay for the money
order stolen upon presentment. The Bank of
America received a copy of said notice.
However, The Bank of America received the

money orders are not negotiable instruments,

the reason being that in establishing and
operating a postal money order system, the
government is not engaged in commercial
transactions but merely exercises a
governmental power for the public benefit.
Moreover, some of the restrictions imposed
upon money orders by postal laws and
regulations are inconsistent with the character
of negotiable instruments. For instance, such
laws and regulations usually provide for not
more than one endorsement; payment of
money orders may be withheld under a variety
of circumstances.