Caltex v. CA

G.R. No.
97753 August 10, 1992 ISSUES:
CALTEX (PHILIPPINES), INC., petitioner, 1. What is the rule in determining the negotiability of an instrument?
vs. 2. WON the CTDs are negotiable instruments.
COURT OF APPEALS and SECURITY BANK AND TRUST 3. WON Caltex is in estoppel.
COMPANY, respondents. 4. WON Caltex is a holder for value.
FACTS: HELD:
On various dates, Security Bank issued 280 certificates of time deposit (CTDs) in favor of 1. The accepted rule is that the negotiability or non-negotiability of an instrument is
one Angel dela Cruz who deposited the aggregate amount of P1,120,000.00 which were determined from the writing, that is, from the face of the instrument itself. In the
delivered by the latter to Caltex in connection with his purchased of fuel products. 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
Sometime in March 1982, Angel dela Cruz informed Mr.Timoteo Tiangco, the Sucat circumstances in order to more perfectly understand the intent and meaning of the
Branch Manager, that he lost all the certificates of time deposit in dispute. Following Mr. parties, yet as they have constituted the writing to be the only outward and visible
Tiangco’s advice, Angel executed and delivered to Security bank the required Affidavit of expression of their meaning, no other words are to be added to it or substituted in
Loss. On the basis of said affidavit of loss, 280 replacement CTDs were issued in his its stead. The duty of the court in such case is to ascertain, not what the parties
favor. 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.
On March 25, 1982, Angel dela Cruz negotiated and obtained a loan from Security bank
and executed a notarized Deed of Assignment of Time Deposit surrendering "full control 2. YES.
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 The CTDs are negotiable instruments. The documents provide that the amounts
whatever amount or amounts may be due" on the loan upon its maturity. deposited shall be repayable to the depositor. And who, according to the
document, is the depositor? It is the "bearer." The documents do not say that the
Sometime in November, 1982, Mr. Aranas, Credit Manager of Caltex went to the Security depositor is Angel de la Cruz and that the amounts deposited are repayable
bank's Sucat branch and presented for verification the CTDs declared lost by Angel specifically to him. Rather, the amounts are to be repayable to the bearer of the
alleging that the same were delivered to Caltex "as security for purchases made with documents or, for that matter, whosoever may be the bearer at the time of
Caltex Philippines, Inc.". Caltex was requested by Security Bank to furnish the former "a presentment.
copy of the document evidencing the guarantee agreement with Mr. Angel dela Cruz" as
well as "the details of Mr. Angel dela Cruz" obligation against which Caltex’ proposed to On the wordings of the documents, therefore, the amounts deposited are
apply the time deposits. However, no copy was furnished so Security Bank rejected repayable to whoever may be the bearer thereof. Thus, Caltex's aforesaid witness
Caltex’ demand and claim for payment of the value of the CTDs. merely declared that Angel de la Cruz is the depositor "insofar as the bank is
concerned," but obviously other parties not privy to the transaction between them
In view of the foregoing, Caltex filed the instant complaint praying for the payment of the would not be in a position to know that the depositor is not the bearer stated in the
CTDs of P1,120,000.00 plus accrued interest and compounded interest therein at 16% per CTDs. Hence, the situation would require any party dealing with the CTDs to go
annum, moral and exemplary damages as well as attorney's fees. behind the plain import of what is written thereon to unravel the agreement of the
parties thereto through facts aliunde. This need for resort to extrinsic evidence is
The trial court dismissed the complaint which was affirmed by the CA ruling that (1) that what is sought to be avoided by the Negotiable Instruments Law and calls for the
the subject certificates of deposit are non-negotiable despite being clearly negotiable application of the elementary rule that the interpretation of obscure words or
instruments; (2) that petitioner did not become a holder in due course of the said stipulations in a contract shall not favor the party who caused the obscurity.
certificates of deposit; and (3) in disregarding the pertinent provisions of the Code of
Commerce relating to lost instruments payable to bearer. 3. YES.
In a letter dated November 26, 1982 addressed to respondent Security Bank, J.Q.
Aranas, Jr., Caltex Credit Manager, wrote: ". . . These certificates of deposit were
negotiated to us by Mr. Angel dela Cruz to guarantee his purchases of fuel
products". This admission is conclusive upon Caltex, its protestations
notwithstanding. Under the doctrine of estoppel, an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon. A party may not go back on his
own acts and representations to the prejudice of the other party who relied upon
them. In the law of evidence, whenever a party has, by his own declaration, act,
or omission, intentionally and deliberately led another to believe a particular thing
true, and to act upon such belief, he cannot, in any litigation arising out of such
declaration, act, or omission, be permitted to falsify it.
4. YES.
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 Caltex 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 Caltex 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.
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. 23 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.

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G.R. No.

97753 August 10, 1992 ISSUES:

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

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