CALTEX, INC. VS.
COURT OF APPEALS, AND SECURITY BANK AND TRUST
COMPANY, 10 AUGUST 1992, G.R. NO. 97753
FACTS:
 Security Bank and Trust Company (Security Bank), a commercial banking institution,
through its Sucat Branch issued 280 certificates of time deposit (CTDs) in favor of
Angel dela Cruz who deposited with Security Bank the total amount of P1,120,000
 Angel delivered the CTDs to Caltex for his purchase of fuel products and on March
18, 1982: Angel informed Mr. Tiangco, the Sucat Branch Manager that he lost all
CTDs, submitted the required Affidavit of Loss and received the replacement.
 On March 25, 1982, Angel dela Cruz negotiated and obtained a loan from Security
Bank in the amount of P875,000 and executed a notarized Deed of Assignment of
Time Deposit.
 On November 1982, Mr. Aranas, Credit Manager of Caltex went to the Sucat branch
to verify the CTDs declared lost by Angel.
 November 26, 1982: Security Bank received a letter from Caltex formally informing it
of its possession of the CTDs in question and of its decision to pre-terminate the
same.
 December 8, 1982: Caltex was requested by Security Bank to furnish: a copy of the
document evidencing the guarantee agreement with Mr. Angel dela Cruz the details
of Mr. Angel's obligation against which Caltex proposed to apply the time deposits.
 Security Bank rejected Caltex demand for payment because it failed to furnish a copy
of its agreement w/ Angel.
 April 1983, the loan of Angel dela Cruz with Security Bank matured
 August 5, 1983: CTD were set-off w/ the matured loan
 Caltex filed a complaint praying the bank to pay 1,120,000 plus 16% interest
 CA affirmed RTC to dismiss complaint
ISSUES:
1. W/N the CTDs are negotiable
2. W/N Caltex as holder in due course can rightfully recover on the CTDs
RULING: Petition is Denied and appealed decision is affirmed.
First Issue: YES.
Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the
requisites for an instrument to become negotiable, viz:
a) It must be in writing and signed by the maker ordrawer;
b) Must contain an unconditional promise or order to pay a sum certain in money;
c) Must be payable on demand, or at a fixed or determinable future time;
d) Must be payable to order or to bearer; and -check
e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
Herein, the documents provide that the amounts deposited shall be repayable to the
depositor = bearer. 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 negotiability or non-negotiability of
an ,instrument is determined from the writing, that is, from the face of the instrument itself
Second Issue: NO. Although the CTDs are bearer instruments, a valid negotiation thereof for
the true purpose and agreement between it and De la Cruz, as ultimately ascertained,
requires both delivery and endorsement of CTDs were in reality delivered to it as a security
for De la Cruz' purchases of its fuel products. 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.
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. 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:
Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be pledged.
The instrument proving the right pledged shall be delivered to the creditor, and if negotiable,
must be indorsed.
Art. 2096. A pledge 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.
Art. 1625. An assignment of credit, right or action shall produce no effect as against third
persons, unless it appears in a public instrument, or the instrument is recorded in the Registry
of Property in case the assignment involves real property.

PACHECO vs. COURT OF APPEALS G.R. No. 126670 December 2, 1999
FACTS:
Spouses Pacheco are engaged in the construction business. Due to financial difficulties
arising from the repeated delays in the payment of their receivables for the construction
projects from the DPWH, petitioners were constrained to obtain a loan of P10,000.00 from
Mrs. Vicencio. Vicencio acceded.
Instead of merely requiring a note of indebtedness, however, her husband Mr. Vicencio
required petitioners to issue an undated check as evidence of the loan which allegedly will not
be presented to the bank. Despite being informed by petitioners that their bank account no
longer had any funds, Mrs. Vicencio insisted that issue the check, which according to her was
only a formality Vicencio also required Virginia’s husband to sign the check on the same
understanding that the check is not to be encashed but merely intended as an evidence of
indebtedness which cannot be negotiated.
Pacheco obtained another loan of P50,000.00 from Mrs. Vicencio. For the new loan, she also
required Virginia to issue three (3) more checks in various amounts. With the payment of the
previous debt, Virginia asked for the return of the first check but Vicencio told her that her
filing clerk was absent. Vicencio told Virginia that they can no longer locate the folder
containing that check.
When the remaining balance of P15,000.00 on the loans became due and demandable,
petitioners were not able to pay despite demands to do so. On August 3, 1992, Vicencio went
to petitioners’ residence to persuade Virginia to place the date “August 15, 1992″ on checks
nos. 101756 and 101774, although said checks were respectively given undated to her.
Despite being informed by petitioner Virginia that their account with RCBC had been closed
as early as August 17, 1989, Mrs. Vicencio and her daughter insisted that she place a date
on the checks allegedly so that it will become evidence of their indebtedness.
Pacheco was surprised to receive a demand letter from Mrs. Vicencio’s spouse informing
them that the checks when presented for payment on August 25, 1992 were dishonored due
to “Account Closed”. 2 informations for estafa were filed against Pacheco.
RTC convicted them and CA affirmed.
ISSUE: WON there was deception on the part of the Pacheco spouses?
RULING: NO.. A check has the character of negotiability and at the same time it constitutes
evidence of indebtedness. By mutual agreement of the parties, the negotiable character of a
check may be waived and the instrument may be treated simply as proof of an obligation.
There cannot be deceit on the part of the obligor, petitioners herein, because they agreed
with the obligee at the time of the issuance and postdating of the checks that the same shall
not be encashed or presented to the banks. As per assurance of the lender, the checks are
nothing but evidence of the loan or security thereof in lieu of and for the same purpose as a
promissory note. By their own covenant, therefore, the checks became mere evidence of
indebtedness. It has been ruled that a drawer who issues a check as security or evidence of
investment is not liable for estafa.
Vicencio could not have been deceived nor defrauded by petitioners in order to obtain the
loans because she was informed that they no longer have funds in their RCBC accounts.
With the assurance that the check will only stand as a firm evidence of indebtedness, Virginia
placed a date on the check. Under these circumstances, Mrs. Vicencio cannot claim that she
was deceived or defrauded by petitioners in obtaining the loan. In the absence of the
essential element of deceit, no estafa was committed by petitioners.
Moreover, a check must be presented within a reasonable time from issue. By current
banking practice, a check becomes stale after more than six (6) months. In fact a check long
overdue for more than two and one-half years is considered stale. In this case, the checks
were issued more than three years prior to their presentment.
It is clear that the checks were not intended for encashment with the bank, but were delivered
as mere security for the payment of the loan and under an agreement that the checks would
be redeemed with cash as they fell due. Hence, the checks were not intended by the parties
to be modes of payment but only as promissory notes.
Since complainant and his wife were well aware of that fact, they cannot now complain there
was deception on the part of petitioners. Awareness by the complainant of the fictitious nature
of the pretense cannot give rise to estafa by means of deceit. When the payee was informed
by the by the drawer that the checks are not covered by adequate funds it does not give rise
to bad faith or estafa.
RODRIGO RIVERA v. SPOUSES SALVADOR CHUA AND S. VIOLETA CHUA
FACTS:
 Feb 1995: Rivera obtained a loan from his friends, the Sps Chua. The loan for
P120K was written in a promissory note. Rivera agreed to pay 5% monthly interest
rate from the date of default (Dec 31, 1995) until the entire obligation is fully paid. He
also agreed to pay 20% of the total amount due for attorney’s fees, in case the note
was referred to a lawyer for collection.
 Oct 1998: Rivera issued a check to the Sps Chua, as payee, with an amount of
P25K.
 Dec 1998: Sps Chua received another check, drawn against Rivera’s account, duly
signed and dated but blank as to the payee and amount. As per understanding by
the parties, the check was issued in the amount of P133,454.00 with “cash” as
payee.
 The 2 checks were dishonored due to “account closed.”
 By May 1999, Rivera owed P366K, covering the principal and the 5% monthly
interest.
 Due to the continued refusal to pay, the Sps filed a case in MeTC.
 In Rivera’s Answer, he claimed that (1) he did not execute the promissory note
(forgery), (2) that whenever he obtained a loan from the sps, it was always
covered by a security, (3) there was an existing loan not yet due with the sps,
secured by a REM, (4) the 2nd check was only issued for P1,300 not P133K, (5)
there were no prior demands for payment.
 MeTC ruled in favor of the Sps Chua. During trial, the sps presented a NBI Senior
Documents Examiner, who testified that the signature in the Promissory Note
compared to other documents with Rivera’s signature were signed by the same
person.
 RTC affirmed MeTC but deleted the atty’s fees.
 CA affirmed in part but reduced the interest from 60% to 12 % per annum and
reinstated the atty’s fees.
 Both parties appealed.
 SC affirmed CA with respect to the reduction of the interest rate to 12% p.a.
ISSUE:
1. W/N the promissory note was valid
2. W/N NIL should have been applied
RULING:
First Issue: YES. The PN was valid and not forged.
Rivera did not offer any clear, positive and convincing evidence to prove his claim of forgery.
Mere variance of signatures cannot be considered as conclusive proof that it was forged. His
claim cannot defeat the testimony of the NBI handwriting expert on the integrity of the PN.
While it is true that resort to experts is not mandatory or indispensable to the examination or
the comparison of handwriting, TC, on its own, using the handwriting expert testimony only as
an aid, found the disputed document valid.
Aside from the expert’s testimony, the statement of the husband and actual view of the
questioned signatures and specimen signatures during the trial were used to reach the
decision.
Rivera alleged that it was illogical for a money lender (Sps) to extend another loan, knowing
he was already in default.
There is nothing inconsistent with the sps’s 2 and successive loan accommodations to
Rivera: one, secured by a real estate mortgage and the other, secured by only a Promissory
Note.
It was also possible that given the relationship between the parties, Rivera was allowed a
substantial amount of time before the Sps demanded payment of the obligation due under the
Promissory Note.
Second Issue: NO. NIL should not have been applied and demand was no longer
necessary
The P.N. was not a negotiable instrument following NIL Sec. 1 and 184. The PN was
made out to a specific person (Sps Chua) and not to order or to bearer or to the order of
the Sps Chua as payees.
The Promissory Note is unequivocal about the date when the obligation falls due (31 Dec
1995). Following Art. 1169 NCC, demand by the creditor is no longer necessary for delay to
exist, when the obligation expressly declares.
Due to the delay in payment, Rivera was liable to pay interest as indemnity for damages
(Art 2209, NCC). Article 2209 is specifically applicable in this instance where:
a. the obligation is for a sum of money;
b. the debtor, Rivera, incurred in delay when he failed to pay on or before 31
December 1995; and
 c. the PN provides for an indemnity for damages upon default of Rivera which
is the payment of a 5% monthly interest from the date of default.
SC did not consider the stipulation on payment of interest as a penal clause
although Rivera, as obligor, assumed to pay additional 5% monthly interest on the
principal amount of P120,000.00 upon default.

a. Following Art. 1226, NCC, the stipulation in the Promissory Note is

designated as payment of interest, not as a penal clause, and is simply an
indemnity for damages incurred by the Spouses Chua because Rivera
defaulted in the payment of the amount of P120,000.00. The measure of
damages for the Rivera’s delay is limited to the interest stipulated in the
Promissory Note. In apt instances, in default of stipulation, the interest is that
provided by law.
b. CA found the 5%/month or 60%/annum, on top of the legal interest and
attorney’s fees, steep, tantamount to it being illegal, iniquitous and
unconscionable.

However, since the issue on the reduction of interest was already disposed by
SC, res judicata should apply.

As to the legal interest, Nacar v. Gallery Frames was used as guide.

a. The applicable rates of legal interest from 1 January 1996, the date of default,
to date when this Decision becomes final and executory are (1) 12% per
annum from 1 January 1996 to 30 June 2013; and (2) 6% per annum FROM 1
July 2013 to date when this Decision becomes final and executory.

As for the legal interest accruing from 11 June 1999, when judicial demand was made, to the
date when this Decision becomes final and executory, such is likewise divided into two
periods: (1) 12% per annum from 11 June 1999, the date of judicial demand to 30 June 2013;
and (2) 6% per annum from 1 July 2013 to date when this Decision becomes final and
executory.