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Digests on cases assigned by Atty Francis Joseph Ampil on Negotiable Instruments Law
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Traders Royal Bank v. CA
Doctrine: Absent words of negotiability like promise to pay the registered owner an instrument is
non-negotiable.
Facts:
- Filriters executed a Detached Assignment on the Central Bank Certificate of Indebtedness (CBCI) to
Philfinance to STAD (sold, transfer, assign and deliver) such certificates. The detached assignment
contains an express authorization to irrevocably authorize the said issuer to transfer the said
bond/certificates.
-Traders Royal Bank entered into a Repurchase Agreement with Philfinance to buy, transfer and
deliver at an amount of Php519,361 such CBCI Certificates with face value of Php500,000.
-However, Philfinance failed to repurchase the certificates at maturity date on April 27, 1981,
because of the fact that checks Philfinance issued bounced due to insufficient funds. Owing to the
default, Traders Royal Bank executed the detached assignment to enable the transferring of CBCI’s
title and register it on the books of Central Bank.
- Traders Royal Bank presented the two Detached Assignments and the CBCI certificates to the
Securing Service Department of Central Bank and requested to effect the transfer of CBCI
certificates on its books and issue a new certificate in the name of Traders Royal Bank.
- Central Bank failed and refused to register the transfer, because "No transfer thereof shall be
valid unless made at said office (where the Certificate has been registered) by the registered
owner hereof, in person or by his attorney duly authorized in writing, and similarly noted hereon,
and upon payment of a nominal transfer fee which may be required, a new Certificate shall be
issued to the transferee of the registered holder thereof." And Traders Royal Bank is alleging that
the said Detached Assignments are sufficient authorizations in writing by Filriters and Philfinance.
Issue:
Whether the CBCI is a negotiable instrument and as a certificate of indebtedness is not payable to
bearer but is a registered in the name of Filriters.
Held:
No, it is not a negotiable instrument for the reason that it is absent of words of negotiability because
it only provides a promise "to pay Filriters Guaranty Assurance Corporation, the registered owner
hereof." Very clearly, the instrument is payable only to Filriters, the registered owner, whose name
is inscribed thereon.
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 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. This freedom in
negotiability is totally absent in a certificate indebtedness as it merely to pay a sum of money to a
specified person or entity for a period of time. Thus, the transfer to TRB is only an assignment. And
since the transfer by Filriters to Philfinance is fictitious, no valide transfer to TRB was effected.
Caltex v. CA
Doctrine: To effect a transfer of a pledged negotiable bearer instrument, delivery and
indorsement needs to be effected. Transfer constitutes delivery and intent to transfer rights on
such negotiable instrument.
Facts:
- Angel Dela Cruz have gotten from the bank a Certificate of Deposits(CTD) to deliver to Caltex, in
consideration of fuel products.
- Angel Dela Cruz allegedly reported to the Defendant bank that he had lost the CTDs, the Defendant
bank required the submission of Affidavit of loss to facilitate the replacement of CTDs. Then the
CTDs was replaced.
- Angel Dela Cruz then negotiated and obtained a loan from the Defendant bank with the deed of
assignment on the CTDs.
- The Deed of Assignment states that "full control of the indicated time deposits from and after
date" of the assignment and further authorizes said bank to pre-terminate, set-off and "apply the
said time deposits to the payment of whatever amount or amounts may be due" on the loan upon
its maturity.
- Caltex verified the CTDs declared lost by Angel to the Defendant bank and Caltex received a letter
informing Caltex that Angel had pre-terminated the CTDs.
- Accordingly, defendant bank rejected the plaintiff's demand and claim for payment of the value of
the CTDs in a letter dated February 7, 1983 although the loan of Angel fell due on August 1983.
- In view of the facts, Caltex filed a complaint praying that the bank pay the aggregate value of CTDs.
Issues: WON
(1) that the subject certificates of deposit are non-negotiable despite being clearly negotiable
instruments; NO
(2) that petitioner is a holder in due course and should be accorded payment, NO and
Held:
(1) It follows the requirements of negotiability as states in Section 1, wherein the CTDS where in
writing and signed by the maker, it was payable in a determinable future time, it was
payable to bearer.
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. 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 circumstances 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.
(2) The records reveal that Angel de la Cruz, whom petitioner chose not to implead in this suit
for reasons of its own, delivered the CTDs amounting to P1,120,000.00 to petitioner without
informing respondent bank thereof at any time. Unfortunately for petitioner, although the
CTDs are bearer instruments, a valid negotiation thereof for the true purpose and
agreement between it and De la Cruz, as ultimately ascertained, requires both delivery
and indorsement. For, although petitioner seeks to deflect this fact, the CTDs were in reality
delivered to it as a security for De la Cruz' purchases of its fuel products. Any doubt as to
whether the CTDs were delivered as payment for the fuel products or as a security has been
dissipated and resolved in favor of the latter by petitioner's own authorized and responsible
representative himself.
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. Here, CTDs were pledged Caltex
to secure the payment of the fuel bought by Angel, therefore Caltex was not constituted as
a transferee holder but a holder for value constituting his lien when CTDs where delivered
to him.
Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be
pledged. The instrument proving the right pledged shall be delivered to the creditor,
and if negotiable, must be indorsed.
Art. 2096. A pledge shall not take effect against third persons if a description of the
thing pledged and the date of the pledge do not appear in a public instrument.
Metropolitan Bank and Trust Company v. CA
Facts: Philippine Fish Marketing Authority drawn warrants amounting to 1,755,228.37 � Indorsed
to Gomez, who opened an account in Golden Savings � Indorsed by Golden Savings, who opened
an account in MBTC.
Golden Savings was able to withdraw from MBTC account even before the maturity date amounting
to 968,000� Gomez was able to withdraw from the Golden Savings amounting to 1,167,500.
Eventually, the 32 warrants was dishonored by the Bureau of Treasury and MBTC demanded the
refund to make up for the deficit in its account wherein Golden Savings rejected.
Issue:
1. Whether the treasury warrants constitute negotiable instrument.
2. Whether MBTC is entitled to demand the amount dishonored from Golden Savings.
Held:
1. No, it is not negotiable for the following reasons:
a. Stamped on its face is the word “non-negotiable”
b. It is payable from a particular fund, Fund 501, because it is a promise with a
condition, a condition that the source fund where payment should come is sufficient
to cover the debt. As stated in Section 1, (b) Must contain an unconditional order to
pay a sum certain in money.
2. No, Metrobank cannot demand from Golden Savings the reimbursement of such amount.
Besides the fact that Metrobank acted in negligence from the act of disbursing the amount
before the maturity of the treasury warrants. Further, 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. The simple reason is that this law is not applicable to the non-negotiable
treasury warrants. 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. 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."
PNB v. Concepcion Mining Company, et.al.
Facts: The action is collection on the promissory note which pertinently reads:
Manila, March 12, 1954
NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank . . . .
In case it is necessary to collect this note by or through an attorney-at-law, the makers and indorsers shall pay ten percent (10%) of the amount due on the note as attorney's fees, which in no case shall be less than P100.00 exclusive of all costs and fees allowed by law as stipulated in the contract of real estate mortgage. Demand and Dishonor Waived. Holder may accept partial payment reserving his right of recourse again each and all indorsers.
(Purpose — mining industry) "Please issue check to — Mr. Jose S. Sarte" CONCEPCION MINING COMPANY, INC., By: (Sgd.) VICENTE LEGARDA President (Sgd.) VICENTE LEGARDA (Sgd.) JOSE S SARTE
Motion for reconsideration was filed due to the fact that Don Vicente Legarda is one of the
signatories, and should have been included as party-defendant and his liability should be
determined in pursuance of the PN.
Issue:
Whether to grant such Motion to determine the extent of liability of Don Vicente Legarda
Held:
No, Motion for reconsideration on petition for relief on suspension of execution of judgment should
be suspended due to the fact under Section 17 (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. And as provided in Article 1216 of the New Civil Code, 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.