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CALTEX v. CA

FACTS:

The pertinent facts of this case are as follows:

The petitioner filed a complaint against the respondent bank after the latter rejected its demand for payment of 280 certificates of time deposit (CTDs) amounting to P1,120,000. The CTDs were issued by the bank's Sucat Branch in favor of Angel dela Cruz. Dela Cruz then delivered the CTDs to the petitioner in connection with his purchase of fuel products. However, dela Cruz later claimed that he lost all the CTDs and executed an Affidavit of Loss. The bank issued replacement CTDs based on the affidavit of loss.

Dela Cruz then obtained a loan from the bank and executed a Deed of Assignment of Time Deposit, surrendering control of the CTDs to the bank. Sometime later, the petitioner presented the CTDs to the bank, claiming that they were given to them as security. The petitioner demanded payment but the bank rejected the demand. Eventually, the bank set-off and applied the CTDs to the payment of dela Cruz's loan.

The petitioner filed a complaint seeking payment for the CTDs, but the trial court dismissed the complaint. On appeal, the respondent court affirmed the dismissal. The petitioner now seeks reversal of the decision, arguing that the CTDs are negotiable, that they became a holder in due course, and that the provisions of the Code of Commerce relating to lost instruments payable to bearer were disregarded.

The case revolves around the negotiability of Certificates of Time Deposits (CTD) issued by Security Bank and Trust Company (Security Bank). The CTDs had the word "BEARER" stamped on the space meant for the depositor's name, followed by the phrase "has deposited" a certain amount, which shall be repayable to the depositor on a specified date. The CTDs did not explicitly state that the depositor is Angel de la Cruz, but rather, that the amounts deposited are payable to the bearer of the documents.

The lower court ruled that the CTDs are non-negotiable instruments, as they are payable only to the specified person indicated in the document, which is the depositor. On the other hand, Security Bank argues that the CTDs meet the requirements for negotiability under the Negotiable Instruments Law. Security Bank's branch manager testified that the depositor referred to in the CTDs is Angel de la Cruz.

The Supreme Court, in its ruling, disagreed with the lower court's findings and concluded that the CTDs are negotiable instruments. The Court stressed that the negotiability or non-negotiability of an instrument is determined from the writing on the face of the instrument itself. The CTDs state that the amounts deposited shall be repayable to the bearer, not specifically to Angel de la Cruz. The Court also noted that if the intention was to pay the amount only to Angel de la Cruz, Security Bank could have explicitly stated that on the CTDs. Thus, the amounts deposited are repayable to whosoever may be the bearer of the CTDs at the time of presentment.

ISSUES:

  1. Whether the amounts deposited in the certificates of time deposits (CTDs) are repayable specifically to Angel de la Cruz or to whosoever may be the bearer thereof.

  2. Whether the petitioner can rightfully recover on the CTDs.

  3. Whether the petitioner is a holder of the certificate of time deposits (CTDs) in question.

  4. Whether the petitioner has a legal right over the CTDs.

  5. Whether the respondent bank observed the requirements of the law in the case of lost negotiable instruments and the issuance of replacement certificates.

  6. Whether or not the issue of respondent bank's alleged negligence can be raised on appeal in relation to the petitioner's entitlement to the proceeds of the certificates of time deposit (CTDs).

RULING:

  1. The amounts deposited in the CTDs are repayable to whosoever may be the bearer thereof. Respondent bank's intention to pay the amount to Angel de la Cruz only was not expressed in clear and categorical terms in the documents. Therefore, the amounts deposited are repayable to whoever may be the bearer of the CTDs.

  2. The petitioner cannot rightfully recover on the CTDs. Although the CTDs are bearer instruments, a valid negotiation of the CTDs requires both delivery and endorsement. In this case, the CTDs were delivered to petitioner as a security for De la Cruz's purchases of its fuel products, and not as payment. Therefore, petitioner's claim to recover on the CTDs is denied.

  3. The petitioner is not a holder of the CTDs in question.

  4. The petitioner does not have a legal right over the CTDs.

  5. The issue regarding the respondent bank's alleged negligence was not timely raised in the lower court and is consequently barred by estoppel.

  6. The issue of respondent bank's alleged negligence cannot be raised on appeal in relation to the petitioner's entitlement to the proceeds of the CTDs. It is agreed that the broad ultimate issue of petitioner's entitlement to the proceeds can be premised on various legal reasons and causes of action, rendering the pre-trial delimitation of issues useless. Even assuming that the issue of negligence was raised in the court below, the provisions of the Code of Commerce on which petitioner seeks to anchor respondent bank's negligence are permissive and not mandatory. The word "may" used in the provisions indicates that it is discretionary for the "dispossessed owner" to apply for the issuance of a duplicate. Furthermore, the Code of Commerce provisions do not categorically restrict or prohibit the issuance of a duplicate or replacement instrument without compliance with the outlined procedure, and no mandatory precedent requirement is established.

PRINCIPLES:

  • The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.

  • The doctrine of estoppel holds that an admission or representation made by a party is conclusive upon that party and cannot be denied or disproved as against the party relying on it.

  • The character of a transaction between parties is determined by their intention, regardless of the language used or the form of the transfer.

  • The Negotiable Instruments Law states that 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.

  • Negotiation of negotiable instruments requires a transfer of the legal title to the instrument, either by indorsement or delivery, to constitute the transferee as the holder.

  • Mere delivery of the instrument as security does not constitute a negotiation. The terms of the security and subsequent disposition must be contractually provided for.

  • Where the holder has a lien on the instrument arising from contract, the holder is deemed a holder for value to the extent of their lien. The requirements and effects of a pledge shall be governed by the Civil Code provisions on pledge of incorporeal rights.

  • A pledge of negotiable instruments 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.

  • An assignment of credit, right, or action shall produce no effect against third persons unless it appears in a public instrument or is recorded in the Registry of Property if it involves real property.

  • Issues raised for the first time on appeal and not timely raised in the lower court are barred by estoppel.

  • Parties are expected to disclose all issues of law and fact at a pre-trial conference, and the determination of issues at the pre-trial conference bars the consideration of other questions on appeal.

  • The use of the word "may" in a provision indicates that it is permissive and discretionary, not mandatory.

  • Provisions establishing a right of recourse for a dispossessed owner and an option for the party liable on a bearer instrument do not categorically restrict or prohibit the issuance of a duplicate or replacement instrument without compliance with the prescribed procedure.