CALTEX (PHILIPPINES) VS. COURT OF APPEALS

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2) CALTEX (PHILIPPINES) VS. COURT OF APPEALS

G.R. NO. 97753. AUGUST 10, 1992


The Certificate of Time Deposit is Negotiable Instrument.

But delivery thereof only as security for the purchases and without endorsement could constitute petitioner only as a holder for value by reason of his lien.

CALTEX (PHILIPPINES), PETITIONER VS. CA AND SECURITY BANK AND TRUST COMPANY, RESPONDENTS


FACTS:


On various dates, defendant bank issued 280 certificates of time deposits (CTDs) in favor of Angel Dela Cruz who deposited with herein defendant the aggregate amount of P1,120,000.00. Angel delivered the saied CTDs to herein plaintiff Caltex in connection with his purchase of fuel products from the latter.


Angel informed the Sucat Branch Manager of the defendant Bank and  on the basis of affidavit of loss, 280 replacement CTDs were issued in favor of said depositor Angel; after days, she negotiated and obtained a loan from defendant bank in the amount of P 875,000.00 and on the same date she executed a Deed of Assignment of Time Deposit which stated that he (dela Cruz) surrenders to defendant bank full control of the indicated time deposits from and after the date of the assignment and further authorizes the bank to preterminate, set off and apply the said time deposits to the payment of whatever amounts may be due in the loan upon its maturity.


Sometime in November 1982, the Credit Manager of plaintiff Caltex went to defendant bank and presented for verification the CTDs declared lost by Angel alleging that the same were delivered to them as security for purchases made with them by said depositor. Subsequently, the defendant bank received a letter from Caltex informing them of its possession of the CTDs and its decision to pre—terminate the same. The Bank requested Caltex to furnish the copy of the document evidencing the guarantee agreement but no copy was furnished hence Bank rejected the plaintiff’s demand and claim for payment of the value of CTDs.


In April 1983, the loan of Angel with the defendant bank matured and fell due on August 1983, the latter set off and applied the same deposits in question to the payment of the matured loan.

In view of the foregoing, plaintiff filed an instant complaint praying that defendant bank be ordered to pay it the aggregate value of the CTDs of P 1,120,000.00 plus accrued interest and compounded interest therein of 16% per annum plus other damages. Petitioner alleges that respondent court erred in its ruling that CTDs are not negotiable instruments, that the petitioner is not holder in due course and in disregarding the provision of Code of Commerce relating to lost instruments payable to bearer.


ISSUE:


             1) Whether or not the Certificate of Time Deposit is Negotiable Instrument.
      2) Whether Petitioner can rightfully recover on the CTDs.


HELD:


    1 )     Yes. Section 1 of Act No. 2031 (The Negotiable Instruments Law) enumerates the requisites for an instrument to become negotiable.

    a)     It must be in writing and signed by the maker or drawer

    b)     It must contain an unconditional promise or order to pay a sum certain in money

    c)     It must be payable on demand, or at a fixed, or determinable future time

    d)    It 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.


CTDs in question undoubtedly meet the requirements of the law for negotiability. The Instrument contained the term bearer without the name of Angel in it.


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 distinguished 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)     No. CTDs were in reality delivered it as a security for Angel’s purchases of its fuel products as expressly stated in the letter of the petitioner to herein respondent bank as he uses as guarantee and not as payment therefore applying the doctrine of estoppel, the petitioner admission is conclusive upon the person relying thereon.


The pertinent law on this point is that where the holder has a lien on the instrument arising from contract, he is deemed a holder for value to the extent of his lien. As such holder of collateral security, he would be a pledgee but the requirements therefor and the effects thereof, not being provided for by the Negotiable Instruments Law, shall be governed by the Civil Code provisions on pledge of incorporeal rights, which inceptively provide:


“Art. 2095. Incorporeal rights, evidenced by negotiable instruments, x x x 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.” Aside from the fact that the CTDs were only delivered but not indorsed, the factual findings of respondent court quoted at the start of this opinion show that petitioner failed to produce any document evidencing any contract of pledge or guarantee agreement between it and Angel de la Cruz. Consequently, the mere delivery of the CTDs did not legally vest in petitioner any right effective against and binding upon respondent bank.





Under the Negotiable Instruments Law, an instrument is negotiated when it is transferred form 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.

Petition Denied. Decision affirmed.

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