THIRD DIVISION

[G.R. No. 105774. April 25, 2002]

GREAT ASIAN SALES CENTER CORPORATION and TAN CHONG LIN, petitioners, vs.
THE COURT OF APPEALS and BANCASIA FINANCE AND INVESTMENT
CORPORATION, respondents.
The Facts

Great Asian is engaged in the business of buying and selling general merchandise, in
particular household appliances. On March 17, 1981, the board of directors of Great Asian
approved a resolution authorizing its Treasurer and General Manager to secure a loan from
Bancasia in an amount not to exceed P1.0 million. The board resolution also authorized
Arsenio to sign all papers, documents or promissory notes necessary to secure the loan. On
February 10, 1982, the board of directors of Great Asian approved a second resolution
authorizing Great Asian to secure a discounting line with Bancasia in an amount not
exceeding P2.0 million. The second board resolution also designated Arsenio as the
authorized signatory to sign all instruments, documents and checks necessary to secure the
discounting line.
On March 4, 1981, Tan Chong Lin signed a Surety Agreement in favor of Bancasia to
guarantee, solidarily, the debts of Great Asian to Bancasia. On January 29, 1982, Tan
Chong Lin signed a Comprehensive and Continuing Surety Agreement in favor of Bancasia
to guarantee, solidarily, the debts of Great Asian to Bancasia. Thus, Tan Chong Lin signed
two surety agreements (Surety Agreements for brevity) in favor of Bancasia.
Great Asian, through its Treasurer and General Manager Arsenio, signed four (4) Deeds of
Assignment of Receivables (Deeds of Assignment for brevity), assigning to Bancasia
fifteen (15) postdated checks. Nine of the checks were payable to Great Asian, three were
payable to New Asian Emp., and the last three were payable to cash. Various customers
of Great Asian issued these postdated checks in payment for appliances and other
merchandise.
Great Asian and Bancasia signed the first Deed of Assignment on January 12, 1982
covering four postdated checks with a total face value of P244,225.82, with maturity dates
not later than March 17, 1982. Of these four postdated checks, two were dishonored.
Great Asian and Bancasia signed the second Deed of Assignment also on January 12, 1982
covering four postdated checks with a total face value of P312,819.00, with maturity dates
not later than April 1, 1982. All these four checks were dishonored. Great Asian and
Bancasia signed the third Deed of Assignment on February 11, 1982 covering eight
postdated checks with a total face value of P344,475.00, with maturity dates not later than
April 30, 1982. All these eight checks were dishonored. Great Asian and Bancasia
signed the fourth Deed of Assignment on March 5, 1982 covering one postdated check with
a face value of P200,000.00, with maturity date on March 18, 1982. This last check was
also dishonored. Great Asian assigned the postdated checks to Bancasia at a discount
rate of less than 24% of the face value of the checks.

Arsenio endorsed all the fifteen dishonored checks by signing his name at the back
of the checks. Eight of the dishonored checks bore the endorsement of Arsenio below the
stamped name of Great Asian Sales Center, while the rest of the dishonored checks just
bore the signature of Arsenio. The drawee banks dishonored the fifteen checks on maturity
when deposited for collection by Bancasia, with any of the following as reason for the
dishonor: account closed, payment stopped, account under garnishment, and
insufficiency of funds. The total amount of the fifteen dishonored checks is P1,042,005.00.
After the drawee bank dishonoured the Check March 16, 1982, Bancasia referred the
matter to its lawyer, Atty. Eladia Reyes, who sent by registered mail to Tan Chong Lin a
letter dated March 18, 1982, notifying him of the dishonor and demanding payment from him.
Subsequently, Bancasia sent by personal delivery a letter dated June 16, 1982 to Tan
Chong Lin, notifying him of the dishonor of the fifteen checks and demanding payment from
him. Neither Great Asian nor Tan Chong Lin paid Bancasia the dishonored checks.

On May 21, 1982, Great Asian filed with the then Court of First Instance of Manila a
petition for insolvency
Ruling of the Trial Court
The Court finds that the plaintiff has established its causes of action against the defendants.
Ruling of the Court of Appeals
On appeal, the Court of Appeals sustained the decision of the lower court. The court is more
inclined to accept the appellees version, to the effect that the subject deeds of assignment
are but individual transactions which -- being collectively evidentiary of the loan
accommodation and/or credit line it granted the appellant corporation -- should not be taken
singly and distinct therefrom.
The Issues
1. WHETHER ARSENIO HAD AUTHORITY TO EXECUTE THE DEEDS OF ASSIGNMENT
AND THUS BIND GREAT ASIAN;
2. WHETHER GREAT ASIAN IS LIABLE TO BANCASIA UNDER THE DEEDS OF
ASSIGNMENT FOR BREACH OF CONTRACT PURSUANT TO THE CIVIL CODE,
INDEPENDENT OF THE NEGOTIABLE INSTRUMENTS LAW;
The Courts Ruling
The petition is bereft of merit.

First Issue: Authority of Arsenio to Sign the Deeds of Assignment

In the ordinary course of business, a corporation can borrow funds or dispose of assets of
the corporation only on authority of the board of directors. The board of directors normally
designates one or more corporate officers to sign loan documents or deeds of assignment
for the corporation.
To secure a credit accommodation from Bancasia, the board of directors of Great Asian
adopted two board resolutions on different dates, the first on March 17, 1981, and the
second on February 10, 1982. These two board resolutions, as certified under oath by Great
Asians Corporate Secretary Mario K. Tan.
The first board resolution expressly authorizes Arsenio, as Treasurer of Great Asian, to
apply for a loan accommodation or credit line with Bancasia for not more than P1.0 million.
Also, the first resolution explicitly authorizes Arsenio to sign any document, paper or
promissory note, including mortgage deeds over properties of Great Asian, to secure the
loan or credit line from Bancasia.
The second board resolution expressly authorizes Great Asian to secure a discounting line
from Bancasia for not more than P2.0 million. The second board resolution also expressly
empowers Arsenio, as the authorized signatory of Great Asian, to sign, execute and deliver
any and all documents, checks x x x necessary or incidental to secure the discounting line.
The second board resolution specifically authorizes Arsenio to secure the discounting line
under such terms and conditions as (he) x x x may deem fit and proper.
As plain as daylight, the two board resolutions clearly authorize Great Asian to
secure a loan or discounting line from Bancasia. The two board resolutions also
categorically designate Arsenio as the authorized signatory to sign and deliver all the
implementing documents, including checks, for Great Asian. There is no iota of doubt
whatsoever about the purpose of the two board resolutions, and about the authority of
Arsenio to act and sign for Great Asian. The second board resolution even gave Arsenio full
authority to agree with Bancasia on the terms and conditions of the discounting line. Great
Asian adopted the correct and proper board resolutions to secure a loan or discounting line
from Bancasia, and Bancasia had a right to rely on the two board resolutions of Great Asian.
Significantly, the two board resolutions specifically refer to Bancasia as the financing
institution from whom Great Asian will secure the loan accommodation or discounting line.
Armed with the two board resolutions, Arsenio signed the Deeds of Assignment
selling, and endorsing, the fifteen checks of Great Asian to Bancasia. On the face of
the Deeds of Assignment, the contracting parties are indisputably Great Asian and Bancasia
as the names of these entities are expressly mentioned therein as the assignor and
assignee, respectively. Great Asian claims that Arsenio signed the Deeds of Assignment in
his personal capacity because Arsenio signed above his printed name, below which was the
word Assignor, thereby making Arsenio the assignor.
The Deeds of Assignment enabled Great Asian to generate instant cash from its fifteen
checks, which were still not due and demandable then. In short, instead of waiting for the
maturity dates of the fifteen postdated checks, Great Asian sold the checks to
Bancasia at less than the total face value of the checks. In exchange for receiving an
amount less than the face value of the checks, Great Asian obtained immediately
much needed cash. Over three months, Great Asian entered into four transactions of this
nature with Bancasia, showing that Great Asian availed of a discounting line with Bancasia.

In the financing industry, the term discounting line means a credit facility with a
financing company or bank, which allows a business entity to sell, on a continuing
basis, its accounts receivable at a discount.[12] The term discount means the sale
of a receivable at less than its face value. The purpose of a discounting line is to
enable a business entity to generate instant cash out of its receivables which are still
to mature at future dates. The financing company or bank which buys the receivables
makes its profit out of the difference between the face value of the receivable and the
discounted price.

Second Issue: Breach of Contract by Great Asian

Bancasias complaint against Great Asian is founded on the latters breach of contract under
the Deeds of Assignment. There is one vital suspensive condition in the Deeds of
Assignment. That is, in case the drawers fail to pay the checks on maturity, Great Asian
obligated itself to pay Bancasia the full face value of the dishonored checks, including
penalty and attorneys fees. The failure of the drawers to pay the checks is a suspensive
condition,[16] the happening of which gives rise to Bancasias right to demand payment from
Great Asian.
By express provision in the Deeds of Assignment, Great Asian unconditionally
obligated itself to pay Bancasia the full value of the dishonored checks. In short, Great
Asian sold the postdated checks on with recourse basis against itself. This is an obligation
that Great Asian is bound to faithfully comply because it has the force of law as between
Great Asian and Bancasia.
Great Asian and Bancasia agreed on this specific with recourse stipulation, despite the fact
that the receivables were negotiable instruments with the endorsement of Arsenio. The
contracting parties had the right to adopt the with recourse stipulation which is separate and
distinct from the warranties of an endorser under the Negotiable Instruments Law.
The explicit with recourse stipulation against Great Asian effectively enlarges, by
agreement of the parties, the liability of Great Asian beyond that of a mere endorser
of a negotiable instrument. Thus, whether or not Bancasia gives notice of dishonor
to Great Asian, the latter remains liable to Bancasia because of the with recourse
stipulation which is independent of the warranties of an endorser under the
Negotiable Instruments Law.
There is nothing in the Negotiable Instruments Law or in the Financing Company Act (old or
new), that prohibits Great Asian and Bancasia parties from adopting the with recourse
stipulation uniformly found in the Deeds of Assignment. Instead of being negotiated, a
negotiable instrument may be assigned.[17] Assignment of a negotiable instrument is
actually the principal mode of conveying accounts receivable under the Financing Company
Act. Since in discounting of receivables the assignee is subrogated as creditor of the
receivable, the endorsement of the negotiable instrument becomes necessary to enable the
assignee to collect from the drawer. This is particularly true with checks because collecting
banks will not accept checks unless endorsed by the payee. The purpose of the
endorsement is merely to facilitate collection of the proceeds of the checks.

The purpose of the endorsement is not to make the assignee finance company a holder in
due course because policy considerations militate against according finance companies the
rights of a holder in due course.[18] Otherwise, consumers who purchase appliances on
installment, giving their promissory notes or checks to the seller, will have no defense
against the finance company should the appliances later turn out to be defective. Thus, the
endorsement does not operate to make the finance company a holder in due course. For its
own protection, therefore, the finance company usually requires the assignor, in a separate
and distinct contract, to pay the finance company in the event of dishonor of the notes or
checks.

As endorsee of Great Asian, Bancasia had the option to proceed against Great Asian under
the Negotiable Instruments Law. Had it so proceeded, the Negotiable Instruments Law
would have governed Bancasias cause of action. Bancasia, however, did not choose this
route. Instead, Bancasia decided to sue Great Asian for breach of contract under the Civil
Code, a right that Bancasia had under the express with recourse stipulation in the Deeds of
Assignment.
Under the Negotiable Instruments Law, notice of dishonor is not required if the
drawer has no right to expect or require the bank to honor the check, or if the drawer
has countermanded payment.[19] In the instant case, all the checks were dishonored
for any of the following reasons: account closed, account under garnishment,
insufficiency of funds, or payment stopped. In the first three instances, the
drawers had no right to expect or require the bank to honor the checks, and in the
last instance, the drawers had countermanded payment.

Moreover, under common law, delay in notice of dishonor, where such notice is required,
discharges the drawer only to the extent of the loss caused by the delay.[20] This rule finds
application in this jurisdiction pursuant to Section 196 of the Negotiable Instruments Law
which states, Any case not provided for in this Act shall be governed by the provisions of
existing legislation, or in default thereof, by the rules of the Law Merchant. Under Section
186 of the Negotiable Instruments Law, delay in the presentment of checks discharges the
drawer. However, Section 186 refers only to delay in presentment of checks but is silent on
delay in giving notice of dishonor. Consequently, the common law or Law Merchant can
supply this gap in accordance with Section 196 of the Negotiable Instruments Law.

Great Asian is, however, correct in saying that the assignment of the checks is a sale, or
more properly a discounting, of the checks and not a loan accommodation. However, it is
precisely because the transaction is a sale or a discounting of receivables, embodied in
separate Deeds of Assignment, that the relevant provisions of the Civil Code are applicable
and not the Negotiable Instruments Law.

Caltex vs Court of Appeals and Security Bank and Trust Co., 212 SCRA 449, GR No. 97753,
August 10, 1992
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.
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.

(Negotiable Instruments Requisites for an instrument to become negotiable)

Facts: Defendant bank issued 280 certificates of time deposits (CTDs) in favor of Angel dela
Cruz whom herein defendant acknowledges as a depositor of the aggregate amount of
P1,120,000.00.
Plaintiff alleged that said CTDs were delivered to them by Angel dela Cruz as security for
purchases of fuel products made with Caltex. Plaintiff formally informed the defendant bank
of its possession of the CTDs and claim payment of its value. Defendant bank rejected the
plaintiffs demand and claim for payment of the value of the CTDs after the latter failed to
furnish the former a copy of the document evidencing the guarantee agreement with Angel
dela Cruz, as well as details of obligation of Angel dela Cruz as requested. The respondent
court dismissed the complaint of plaintiff for payment of the value of the CTDs on the ground
that the CTDs are non-negotiable instruments and that petitioner did not become a holder in
due course of the said certificates of deposit.
Issue:
WON the CTDs are negotiable instruments.
WON petitioner can rightfully recover the CTDs.
Held:
1. YES. The CTDs in question are negotiable instruments for it meets the requirements of
the law for negotiability. Section 1 Act No. 2031 enumerates the requisites for an instrument
to become negotiable:
(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 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.

The documents provide that the amounts deposited shall be repayable to the depositor 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.
2. No. 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.
In the present case, however, there was no negotiation in the sense of a transfer of the legal
title to the CTDs in favor of petitioner 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 de la Cruz could at the most constitute petitioner 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

BANK OF THE PHILIPPINE ISLANDS vs CA

It was quite apparent that the three checks which appellee Salazar deposited were not
indorsed. Three times she deposited them to her account and three times the
amounts borne by these checks were credited to the same. And in those separate
occasions, the bank did not return the checks to her so that she could have them
indorsed. Neither did the bank question her as to why she was depositing the checks
to her account considering that she was not the payee thereof, thus allowing us to
come to the conclusion that defendant-appellant BPI was fully aware that the
proceeds of the three checks belong to appellee.
A.A. Salazar Construction and Engineering Services filed an action for a sum of money with
damages against herein petitioner Bank of the Philippine Islands (BPI) on December 5, 1991
before Branch 156 of the Regional Trial Court (RTC) of Pasig City. The complaint was later
amended by substituting the name of Annabelle A. Salazar as the real party in interest in
place of A.A. Salazar Construction and Engineering Services. Private respondent Salazar
prayed for the recovery of the amount of P267,707.70 debited by petitioner BPI from her
account.
Petitioner BPI, in its answer, alleged that on August 31, 1991, Julio R. Templonuevo, thirdparty defendant and herein also a private respondent, demanded from the former payment
of the amount of P267,692.50) representing the aggregate value of three (3) checks, which
were allegedly payable to him, but which were deposited with the petitioner bank to private
respondent Salazars account without his knowledge and corresponding endorsement.
Accepting that Templonuevos claim was a valid one, petitioner BPI froze the Account of
A.A. Salazar and Construction and Engineering Services, instead of Account No. 02031187-67 where the checks were deposited, since this account was already closed by private
respondent Salazar or had an insufficient balance.
Private respondent Salazar was advised to settle the matter with Templonuevo but they did
not arrive at any settlement. As it appeared that private respondent Salazar was not entitled
to the funds represented by the checks which were deposited and accepted for deposit,
petitioner BPI decided to debit the amount of P267,707.70 from her Account No. 0201-058848 and the sum of P267,692.50 was paid to Templonuevo by means of a cashiers
check. The difference between the value of the checks (P267,692.50) and the amount
actually debited from her account (P267,707.70) represented bank charges in connection
with the issuance of a cashiers check to Templonuevo.
In the answer to the third-party complaint, private respondent Templonuevo admitted the
payment to him of P267,692.50 and argued that said payment was to correct the malicious
deposit made by private respondent Salazar to her private account, and that petitioner
banks negligence and tolerance regarding the matter was violative of the primary and
ordinary rules of banking. He likewise contended that the debiting or taking of the
reimbursed amount from the account of private respondent Salazar by petitioner BPI was a
matter exclusively between said parties and may be pursuant to banking rules and
regulations, but did not in any way affect him. The debiting from another account of private

respondent Salazar, considering that her other account was effectively closed, was not his
concern.
After trial, the RTC rendered a decision, rendered in favor of the plaintiff [private respondent
Salazar] On appeal, the Court of Appeals (CA) affirmed the decision of the RTC.

Petitioner therefore filed this petition on these grounds:

I.
The Court of Appeals committed reversible error in misinterpreting Section 49 of the
Negotiable Instruments Law and Section 3 (r and s) of Rule 131 of the New Rules on
Evidence.
Petitioner argues thus:
1.
There is no presumption in law that a check payable to order, when found in
the possession of a person who is neither a payee nor the indorsee thereof, has been
lawfully transferred for value. Hence, the CA should not have presumed that Salazar was a
transferee for value within the contemplation of Section 49 of the Negotiable Instruments
Law,[8] as the latter applies only to a holder defined under Section 191of the same.[9]
The petition is partly meritorious.
First, the issue raised by petitioner requires an inquiry into the factual findings made by the
CA. The CAs conclusion that the deductions from the bank account of A.A. Salazar
Construction and Engineering Services were improper stemmed from its finding that there
was no ineffective payment to Salazar which would call for the exercise of petitioners right to
set off against the formers bank deposits.

(b)
That these checks which had an aggregate amount of P267,692.50 were payable
to the order of JRT Construction and Trading, the name and style under which Templonuevo
does business;
(c)
That despite the lack of endorsement of the designated payee upon such
checks, Salazar was able to deposit the checks in her personal savings account with
petitioner and encash the same;
(d)
That petitioner accepted and paid the checks on three (3) separate occasions
over a span of eight months in 1990; and
(e)
That Templonuevo only protested the purportedly unauthorized encashment of
the checks after the lapse of one year from the date of the last check.[10]

Petitioner concedes that when it credited the value of the checks to the account of private
respondent Salazar, it made a mistake because it failed to notice the lack of endorsement
thereon by the designated payee. The CA, however, did not lend credence to this claim and
concluded that petitioners actions were deliberate, in view of its admission that the mistake
was committed three times on three separate occasions, indicating acquiescence to the
internal arrangement between Salazar and Templonuevo. The CA explained thus:
It was quite apparent that the three checks which appellee Salazar deposited were not
indorsed. Three times she deposited them to her account and three times the amounts
borne by these checks were credited to the same. And in those separate occasions, the
bank did not return the checks to her so that she could have them indorsed. Neither did the
bank question her as to why she was depositing the checks to her account considering that
she was not the payee thereof, thus allowing us to come to the conclusion that defendantappellant BPI was fully aware that the proceeds of the three checks belong to appellee.
If there was indeed no arrangement between Templonuevo and the plaintiff over the three
questioned checks, it baffles us why it was only on August 31, 1991 or more than a year
after the third and last check was deposited that he demanded for the refund of the total
amount of P267,692.50.
A prudent man knowing that payment is due him would have demanded payment by
his debtor from the moment the same became due and demandable. More so if the
sum involved runs in hundreds of thousand of pesos. By and large, every person, at
the very moment he learns that he was deprived of a thing which rightfully belongs to
him, would have created a big fuss. He would not have waited for a year within which to
do so. It is most inconceivable that Templonuevo did not do this.[12]
In the present case, the records do not support the finding made by the CA and the trial
court that a prior arrangement existed between Salazar and Templonuevo regarding the
transfer of ownership of the checks. This fact is crucial as Salazars entitlement to the value
of the instruments is based on the assumption that she is a transferee within the
contemplation of Section 49 of the Negotiable Instruments Law.
Section 49 of the Negotiable Instruments Law contemplates a situation whereby the payee
or indorsee delivers a negotiable instrument for value without indorsing it, thus:
Transfer without indorsement; effect of- Where the holder of an instrument payable to his
order transfers it for value without indorsing it, the transfer vests in the transferee such title
as the transferor had therein, and the transferee acquires in addition, the right to have the
indorsement of the transferor. But for the purpose of determining whether the transferee is a
holder in due course, the negotiation takes effect as of the time when the indorsement is
actually made. [17]

It bears stressing that the above transaction is an equitable assignment and the transferee
acquires the instrument subject to defenses and equities available among prior parties.
Thus, if the transferor had legal title, the transferee acquires such title and, in addition, the
right to have the indorsement of the transferor and also the right, as holder of the legal title,
to maintain legal action against the maker or acceptor or other party liable to the transferor.

The underlying premise of this provision, however, is that a valid transfer of ownership of the
negotiable instrument in question has taken place.

Traders Royal Bank, petitioner vs. CA, Filriters Guaranty Assurance Corporation(Filriter) and
Central Bank of the Philippines, respondents.

Traders Royal Bank, petitioner vs. CA, Filriters Guaranty Assurance

Corporation(Filriter) and Central Bank of the Philippines, respondents.

TRB filed a petition for mandamuns to compel the Central Bank of the Philippines to
register the transfer of the subject Central Bank Certificate of Indebtedness (CBCI) to TRB.

RTC assigned CBCI by Philippine Underwriters Finance Corporation(Philfinance ) in

favour of Philfinance, and subsequent assignment of the same CBCI by Philfinance in
favour of TRB null and void and of no force and effect.

TRB appeals (CA affirms), TRB filed a petition for review before the SC

SC affirmed

Facts:
Filriters registered owner of CBCI . Filriters transferred it to Philfinance by one of its
officers without authorization from the company. Subsequently Philfinance transferred same
CBCI to TRB under a repurchase agreement. When Philfinance failed to do so.The TRB
tried to register in its name in the CB. The latter didnt want to recognize the transfer.

Issue:
Whether the CBCI is negotiable instrument or not.
Whether the Assignment of registered certificate is valid or null and void.

Rule:
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 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.

Under section 3, Article V of Rules and Regulations Governing Central Bank Certificates of
Indebtedness states that the 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.

Application/Analysis:
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.

Obviously the Assignment of certificate from Filriters to Philfinance was null and void.
One of officers who signed the deed of assignment in behalf of Filriters did not have the
necessary written authorization from the Board of Directors of Filriters. For lack of such
authority the assignment is considered null and void.

Conclusion/Holdings:

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.
Clearly shown in the record is the fact that Philfinances 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 fictitious are considered void and
inexistent from the beginning