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Caltex Vs CA

The Supreme Court ruled that the certificates of time deposit (CTDs) in question were negotiable instruments as they met the requirements under the Negotiable Instruments Law. Specifically, the CTDs stated that the amounts deposited were repayable to the "bearer", not to a specific individual. However, the plaintiff Caltex could not recover amounts from the CTDs because there was no valid negotiation through both delivery and endorsement of the CTDs to Caltex, as they were only delivered as security for fuel purchases, not as payment.

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149 views2 pages

Caltex Vs CA

The Supreme Court ruled that the certificates of time deposit (CTDs) in question were negotiable instruments as they met the requirements under the Negotiable Instruments Law. Specifically, the CTDs stated that the amounts deposited were repayable to the "bearer", not to a specific individual. However, the plaintiff Caltex could not recover amounts from the CTDs because there was no valid negotiation through both delivery and endorsement of the CTDs to Caltex, as they were only delivered as security for fuel purchases, not as payment.

Uploaded by

Karen Ryl Lozada Brito
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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4. Caltex (Philippines), Inc. v.

Court of Appeals,
G.R. No. 97753, 10 August 1992, (212 SCRA 448)

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.  The CTDs in question are
negotiable instruments as they meet the requirements of the law for negotiability as provided for
in Section 1 of the Negotiable Instruments Law.  The documents provide that the amounts
deposited shall be repayable to the depositor. And according to the document, the depositor 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.

**Copy of CTD in the case**


Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR
THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000 & 00 CTS Pesos,
Philippine Currency, repayable to said depositor 731 days. after date, upon presentation
and surrender of this certificate, with interest at the rate of 16% per cent per annum.

FACTS: The defendant, Security Bank and Trust Company, a commercial banking institution
issued 280 Certificate of time deposit (CTDs) in favor of Angel Dela Cruz who deposited with
the Security Bank the total amount of P1.2 Million. Angel delivered the CTDs to Caltex, in
connection with his purchased of fuel products from the latter.

Subsequently, Angel informed the bank that he lost all the CTDs, and thus executed an affidavit
of loss to facilitate the issuance of the replacement CTDs. Angel negotiated and obtained a loan
from Security Bank in the amount of P875, 000 and executed a notarized Deed of Assignment
of Time Deposit.

When Caltex presented said CTDs for verification with the bank and formally informed the bank
of its decision to pre-terminate the same, the bank rejected Caltex’ claim and demand as Caltex
failed to furnish copies of certain requested documents. In 1983, dela Cruz’ loan matured and
the bank set-off and applied the time deposits as payment for the loan.

Caltex filed a complaint praying the bank to pay 1,120,000 plus 16% interest. However, the
lower court dismissed the instant petition on the ground that the subject certificates of deposit
are non-negotiable. On appeal, CA affirmed the lower court's dismissal of the complaint and
ruled that the CTDs in question are non-negotiable instruments because 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.

ISSUE: Whether or not the certificates of time deposits (CTDs) are negotiable instruments?

HELD: YES. The CTDs in question are negotiable instruments as they meet the requirements of
the law for negotiability as provided for in Section 1 of the Negotiable Instruments Law.

The documents provide that the amounts deposited shall be repayable to the depositor. And
according to the document, the depositor 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. However, petitioner cannot recover
on the CTDs. Although the CTDs are bearer instruments, a valid negotiation thereof for the true
purpose and agreement between it and dela Cruz, as ultimately ascertained, requires both
delivery and indorsement. In this case, there was no indorsement as the CTDs were delivered
not as payment but only as a security for dela Cruz' fuel purchases.

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 (and we even disregard the fact that the amount involved
was not disclosed) 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.

Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the
requisites for 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.

On this score, 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.

WHEREFORE, on the modified premises above set forth, the petition is DENIED and the
appealed decision is hereby AFFIRMED.

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