Caltex (Philippines), Inc. v.

CA, 1992
Facts:
Private respondent, issued 280 certificates of time deposit (CTDs) in favor of one
Angel dela Cruz who deposited with herein private respondent the aggregate
amount of P1,120,000.00. A sample of text of the CTDs is as follows: This is to
Certify that BEARER has deposited in this Bank the sum of PESOS: FOUR SECURITY
BANK THOUSAND ONLY. 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.
Dela Cruz delivered the said CTDs to herein petitioner in connection with his
purchase of fuel products from the latter. Thereafter, Dela Cruz informed the Branch
Manager of private respondent, that he lost all the certificates of time deposit in
dispute and on the basis of an affidavit of loss, 280 replacement CTDs were issued
in favor of said depositor.
Dela Cruz then negotiated and obtained a loan from respondent bank in the
amount of P875,000.00 and he executed a notarized Deed of Assignment of Time
Deposit which stated, that he surrenders to private respondent full control of the
time deposits and further authorizes said bank to pre-terminate, set-off and 'apply
the said time deposits to the payment of whatever amount or amounts may be due'
on the loan upon its maturity.
Private respondent then received a letter from petitioner formally informing it of
its decision to preterminate the CTDs in its possession alleging that they were
delivered by Dela Cruz as security for purchases made with Petitioner.
Private respondent rejected the petitioners demand and claim for payment of the
value of the CTDs. When the loan of Dela Cruz matured and fell due, the private
respondent set-off and applied the time deposits in question to the payment of the
matured loan.
Petitioner filed the instant complaint. After trial, the RTC rendered its decision
dismissing the complaint.
On appeal, respondent court affirmed the lower court's dismissal of the complaint
stating that the CTDs are payable, not to whoever purports to be the `bearer' but
only to the specified person indicated herein, the depositor. In effect, the appellee
bank acknowledges its depositor Angel de la Cruz as the person who made the
deposit and further engages itself to pay said depositor the amount indicated
thereon at the stipulated date."
Issue:
Whether the CTDs in question are negotiable instruments.
Ruling:
Yes. The CTDs in question undoubtedly meet the requirements of the law for
negotiability including Section 1(d) of the NIL. 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. Contrary to what respondent court
held, the CTDs are negotiable instruments. The documents provide that the
amounts 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
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.
The situation would require any party dealing with the CTDs to go behind the plain
import of what is written thereon to unravel the agreement of the parties thereto
through facts aliened. This need for resort to extrinsic evidence is what is sought to
be avoided by the Negotiable Instruments Law and calls for the application of the
elementary rule that the interpretation of obscure words or stipulations in a contract
shall not favor the party who caused the obscurity.
However, petitioner cannot rightfully recover on the CTDs for lack of negotiation as
the CTDs were in reality delivered to it as a security for De la Cruz' purchases of its
fuel products. 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, 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 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.
Aside from the fact that the CTDs were only delivered but not indorsed, 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. On the other hand, the assignment of the CTDs made by Angel de
la Cruz in favor of respondent bank was embodied in a public instrument.
Necessarily, therefore, as between petitioner and respondent bank, the latter has
definitely the better right over the CTDs in question.
EQUITABLE BANKING CORP V IAC
161 SCRA 518
FACTS:
In 1975 Casals (who represented himself as general manager of Casville
Enterprises, a business engaged in processing and procurement of lumber products)
went to Edward J. Nell Co. and told the companys sales engineer Claustro of his
interest in purchasing a Garrett skidder, one of the many merchandise the company

was selling. Casals was referred to Javier, Nells EVP, who asked for cash payment
for the skidders. Casals said that Casvile had a credit line with Equitable Bank. Javier
then agreed to have two units of skidders paid by way of domestic letter of credit
instead of cash. Each unit was to cost P485,000.
The domestic letter of credit was to be payable in 36 months and was to be opened
within 90 days after date of shipment of the skidders. The first installment was to be
due 180 days after shipment and interest was pegged at 14% p.a. Casals requested
that one unit be delivered to Cagayan de Oro before April 24, 1976 together with all
its accessories. The letter of credit was to be opened on or before June 30, 1976.
The skidder was shipped on May 3. On June 15, 1976 Casals handed Nell Co. a
check amounting to P300,000 postdated August 4, 1976 followed by another check
with the same date. Nell Co. considered the checks as partial payment for the
skidder or as reimbursement for the marginal deposit due from Casals.
Casals informed Nell Co. that its application for a letter of credit had been approved
by Equitable but informed the company that a sum of P400,000 was needed to
stand as collateral in favor of Equitable. The amount include P100,000 to clear the
title of the Estrada property which was to act as security for the trust receipts
issued by the bank. To facilitate the transaction, Nell Co. issued a check for the said
amount in favor of Equitable even if the marginal deposit was supposed to be
produced by Casville. Casals wrote Equitable to apply for two letters of credit (an on
sight letter of credit for P485,000, a 36-month letter of credit for P606,000 and cash
marginal deposit of P300,000) to cover its purchase of the skidders. The skidders
were to be mortgaged as security. The bank responded favorably, stipulating a
required 30% cash margin deposit, a real estate collateral and chattel mortgage of
the equipment.
Casville sent three postdated checks to Nell Co. attached to a letter informing the
latter of the bank requirements. The cash margin deposit was to amount to
P327,300 and adding the P100,000 needed for the Estrada property, the total
amount due to Equitable was P427,300. The postdated checks from Casville were
intended to cover the checks issued by Nell Co. to Equitable. The postdated checks
amounted to P427,300. Nell Co. issued a check worth P427,300 payable to
Equitable Bank. The check was made payable to the order of Equitable Banking
Corp. A/C of Casville Enterprises. The check was sent to Equitable through Casals.
Casals deposited the check in Equitable Bank and the teller accepted it
as deposit in Casals checking account. Casals then withdrew the amount deposited.
Upon presentation for encashment, Nell Co. discovered that the three checks
amounting to P427,300 were all dishonored for having been drawn against a closed
account. Nell Co. checked the status of the letter of credit and was informed by
Equitable that no letter of credit had been opened and that the entire amount of
P427,300 had been withdrawn.Casals and Casville recognized their liability towards
Nell Co. so they assigned the Garrett skidder to the latter for the amount of
P450,000 as partial satisfaction.
In determining the liability of Equitable Bank to Nell Co., the trial court held that
Casals, Casville

and Equitable Bank were solidarily liable to Nell Co. for the amount of P427,300
erroneously
credited by Equitable to Casvilles account.
ISSUE:
Whether or not Equitable is liable to Nell Co.
RULING:
No. The check was patently ambiguous. By making the check read Pay to
Equitable Banking Corp., order of A/C of Casville Enterprises, the payee ceased to
be indicated with reasonable certainty. As worded it could be accepted as deposit to
the account of the party named after the symbols A/C or payable to the bank as
trustee or as agent for Casville Enterprises with the latter being the ultimate
beneficiary. The ambiguity was to be construed against Nell Co. who caused the
ambiguity.
The check was also initially negotiable and neither was it crossed. The crossing of
the check and
the stamping of the words non-negotiable were made by the bank and not by
Nell. It simply meant
that the same check would thereafter be no longer negotiated.Nells own acts and
omissions were the proximate causes of its own defraudation.