Caltex (Philippines) Inc. vs.

CA GR 97753, 10 August 1992 Second Division,

Regalado (J) Facts: On various dates, Security Bank and Trust Co. (SEBTC),
through its Sucat branch, issued 280 certificates of time deposit (CTD) in
favor of one Angel dela Cruz who deposited with the bank the aggregate
amount of P1.12 million. Anger de la Cruz delivered the CTDs to Caltex in
connection with his purchase of fuel products from the latter. Subsequently,
dela Cruz informed the bank that he lost all the CTDs, and thus executed an
affidavit of loss to facilitate the issuance of the replacement CTDs. De la
Cruz was able to obtain a loan of P875,000 from the bank, and in turn, he
executed a notarized Deed of Assignment of Time Deposit in favor of the
bank. Thereafter, Caltex presented for verification the CTDs (which were
declared lost by de la Cruz) with the bank. Caltex formally informed the bank
of its possession of the CTDs and its decision to preterminate the same. The
bank rejected Caltex claim and demand, after Caltex failed to furnish copy
of the requested documents evidencing the guarantee agreement, etc. In
1983, de la Cruz loan matured and the bank set-off and applied the time
deposits as payment for the loan. Caltex filed the complaint, but which was
dismissed. Issue [1]: Held [1]: Whether the Certificates of Time Deposit (CTDs)
are negotiable instruments. The CTDs in question meet the requirements of
the law for negotiability. Contrary to the lower courts findings, the CTDs are
negotiable instruments (Section 1). Negotiability or non-negotiability of an
instrument is determined from the writing, i.e. from the face of the
instrument itself. The documents provided that the amounts deposited shall
be repayable to the depositor. The amounts are to be repayable to the
bearer of the documents, i.e. whosoever may be the bearer at the time of
presentment. Issue [2]: Held [2]: Whether the CTDs negotiation require delivery
only. Although the CTDs are bearer instruments, a valid negotiation thereof
for the true purpose and agreement between it (Caltex) and de la Cruz
requires both delivery and indorsement; as the CTDs were delivered to it as
security for dela Cruz purchases of its fuel products, and not for payment.
Herein, there was no negotiation in the sense of a transfer of title, or legal
title, to the CTDs in which situation mere delivery of the bearer CTDs would
have sufficed. The delivery thereof as security for the fuel purchases at most
constitutes Caltex 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 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