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Caltex (Philippines), Inc.

vs Court
of Appeals

212 SCRA 448 Mercantile Law Negotiable Instruments Law Negotiable Instruments in
General Bearer Instrument Certificate of Time Deposit

In 1982, Angel de la Cruz obtained certificates of time deposit (CTDs) from Security Bank
and Trust Company for the formers deposit with the said bank amounting to P1,120,000.00.
The said CTDs are couched in the following manner:

This is to Certify that B E A R E R has deposited in this Bank the sum of _______ Pesos,
Philippine Currency, repayable to said depositor _____ days. after date, upon presentation
and surrender of this certificate, with interest at the rate of ___ % per cent per annum.

Angel de la Cruz subsequently delivered the CTDs to Caltex in connection with the
purchase of fuel products from Caltex.

In March 1982, Angel de la Cruz advised Security Bank that he lost the CTDs. He executed
an affidavit of loss and submitted it to the bank. The bank then issued another set of CTDs.
In the same month, Angel de la Cruz acquired a loan of P875,000.00 and he used his time
deposits as collateral.

In November 1982, a representative from Caltex went to Security Bank to present the CTDs
(delivered by de la Cruz) for verification. Caltex advised Security Bank that de la Cruz
delivered Caltex the CTDs as security for purchases he made with the latter. Security Bank
refused to accept the CTDs and instead required Caltex to present documents proving the
agreement made by de la Cruz with Caltex. Caltex however failed to produce said

In April 1983, de la Cruz loan with Security bank matured and no payment was made by de
la Cruz. Security Bank eventually set-off the time deposit to pay off the loan.

Caltex sued Security Bank to compel the bank to pay off the CTDs. Security Bank argued
that the CTDs are not negotiable instruments even though the word bearer is written on
their face because the word bearer contained therein refer to depositor and only the
depositor can encash the CTDs and no one else.

ISSUE: Whether or not the certificates of time deposit are negotiable.

HELD: Yes. The CTDs indicate that they are payable to the bearer; that there is an
implication that the depositor is the bearer but as to who the depositor is, no one knows. It
does not say on its face that the depositor is Angel de la Cruz. If it was really the intention of
respondent bank to pay the amount to Angel de la Cruz only, it could have with facility so
expressed that fact in clear and categorical terms in the documents, instead of having the
word BEARER stamped on the space provided for the name of the depositor in each CTD.
On the wordings of the documents, therefore, the amounts deposited are repayable to
whoever may be the bearer thereof.

Thus, de la Cruz is the depositor insofar as the bank is concerned, but obviously other
parties not privy to the transaction between them would not be in a position to know that the
depositor is not the bearer stated in the CTDs.

However, Caltex may not encash the CTDs because although the CTDs are bearer
instruments, a valid negotiation thereof for the true purpose and agreement between Caltex
and De la Cruz, requires both delivery and indorsement. As discerned from the testimony of
Caltex representative, the CTDs were delivered to them by de la Cruz merely for guarantee
or security and not as payment.