Title
Caltex , Inc. vs. Court of Appeals
Case
G.R. No. 97753
Decision Date
Aug 10, 1992
CTDs issued to Angel dela Cruz were assigned to Security Bank as loan security. Caltex claimed ownership but failed to prove valid negotiation or entitlement. SC ruled in favor of the bank.
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Case Digest (G.R. No. 97753)

Facts:

CTDs Issued to Angel dela Cruz: Security Bank and Trust Company issued 280 Certificates of Time Deposit (CTDs) amounting to P1,120,000.00 in favor of Angel dela Cruz on various dates in February and March 1982.

Delivery of CTDs to Caltex: Angel dela Cruz delivered the CTDs to Caltex (Philippines), Inc. in connection with his purchase of fuel products from Caltex.

Loss and Replacement of CTDs: In March 1982, Angel dela Cruz informed the bank that he lost the CTDs. He executed an Affidavit of Loss, and the bank issued replacement CTDs.

Loan and Assignment of CTDs: On March 25, 1982, Angel dela Cruz obtained a P875,000.00 loan from the bank and executed a Deed of Assignment, assigning the CTDs to the bank as security for the loan.

Caltex’s Claim: In November 1982, Caltex presented the original CTDs to the bank, claiming ownership and demanding payment. The bank rejected Caltex’s claim, stating that the CTDs had already been assigned to it as security for dela Cruz’s loan.

Legal Action: Caltex filed a complaint against the bank, seeking payment of the CTDs’ value. The lower court dismissed the complaint, and the Court of Appeals affirmed the dismissal.

Issue:

  1. Whether the CTDs are negotiable instruments.
  2. Whether Caltex became a holder in due course of the CTDs.
  3. Whether the bank lawfully applied the CTDs to dela Cruz’s loan.
  4. Whether Caltex is entitled to the proceeds of the CTDs.
  5. Whether the issue of the bank’s negligence in handling the lost CTDs can be raised on appeal.

Ruling:

  1. Negotiability of CTDs: The Supreme Court held that the CTDs are negotiable instruments because they meet the requirements under the Negotiable Instruments Law, including being payable to bearer.

  2. Holder in Due Course: Caltex is not a holder in due course. The CTDs were delivered to Caltex as security for dela Cruz’s fuel purchases, not as payment. There was no valid negotiation because the CTDs were not indorsed.

  3. Bank’s Right to Apply CTDs to Loan: The bank lawfully applied the CTDs to dela Cruz’s loan because he had assigned them to the bank as security, and the assignment was properly documented.

  4. Caltex’s Entitlement to Proceeds: Caltex is not entitled to the proceeds of the CTDs because it failed to prove a valid claim over the instruments.

  5. Issue of Negligence: The issue of the bank’s alleged negligence in handling the lost CTDs was not raised in the lower court and cannot be raised for the first time on appeal.

Ratio:

  1. Negotiability of Instruments: The CTDs are negotiable because they are payable to bearer, contain an unconditional promise to pay a sum certain, and are payable at a fixed future time.

  2. Negotiation Requires Indorsement: For an instrument to be negotiated, it must be transferred in a manner that vests the transferee with legal title. Mere delivery of bearer instruments is sufficient for negotiation, but in this case, the CTDs were delivered as security, not as payment. Caltex did not acquire legal title to the CTDs.

  3. Assignment of CTDs: The assignment of the CTDs to the bank was valid and enforceable because it was documented in a public instrument. Caltex, on the other hand, failed to produce any document evidencing a pledge or guarantee agreement with dela Cruz.

  4. Pre-Trial Determination of Issues: Issues not raised during pre-trial cannot be raised on appeal. The issue of the bank’s negligence was not included in the pre-trial stipulation and is therefore barred.

  5. Discretionary Nature of Replacement Procedures: The provisions of the Code of Commerce on lost instruments are permissive, not mandatory. The bank was not obligated to follow a specific procedure before issuing replacement CTDs.

The Supreme Court denied Caltex’s petition and affirmed the Court of Appeals’ decision.


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