Caltex v.

CA

FACTS:

Security Bank and Trust Co. issued 280 certificates of time deposit (CTD) in favor of one Mr.
Angel dela Cruz who deposited with the bank P1.12 million. Dela Cruz delivered the CTDs to
Caltex in connection with his purchase of fuel products from the latter. Subsequently, dela Cruz
informed the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate the
issuance of the replacement CTDs. When Caltex presented said CTDs for verification with the
bank and formally informed the bank of its decision to preterminate the same, the bank rejected
Caltex’ claim and demand as Caltex failed to furnish copies of certain requested documents. In
1983, dela Cruz’ loan matured and the bank set-off and applied the time deposits as payment for
the loan. Caltex filed a complaint which was dismissed on the ground that the subject certificates
of deposit are non-negotiable.

ISSUE:

Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.

RULING:

The CTDs in question are negotiable instruments as they meet the requirements of the law for
negotiability as provided for in Section 1 of the Negotiable Instruments Law. The documents
provide that the amounts deposited shall be repayable to the depositor. And according to the
document, the depositor 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. However, petitioner cannot recover on the CTDs. Although the CTDs
are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it
and dela Cruz, as ultimately ascertained, requires both delivery and indorsement. In this case,
there was no indorsement as the CTDs were delivered not as payment but only as a security for
dela Cruz' fuel purchases.

**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. The CTDs in question are
negotiable instruments as they meet the requirements of the law for negotiability as provided for
in Section 1 of the Negotiable Instruments Law. The documents provide that the amounts
deposited shall be repayable to the depositor. And according to the document, the depositor 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.