(Negotiable Instruments –Requisites for an instrument to become negotiable)
Facts: Defendant bank issued 280 certificates of time deposits (CTDs) in favor of Angel dela Cruz whom herein defendant acknowledges as a depositor of the aggregate amount of P1,120,000.00.
A sample text if the CTDs is reproduced below.
SECURITY BANK
AND TRUST COMPANY
6778 Ayala Ave., Makati No. 90101
Metro Manila, Philippines
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT
Rate 16%
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR THOUSAND ONLY, SECURITY BANK 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.
(Sgd. Illegible) (Sgd. Illegible)
—————————— ———————————
AUTHORIZED SIGNATURES
Plaintiff alleged that said CTDs were delivered to them by Angel dela Cruz as security for purchases of fuel products made with Caltex.
Plaintiff formally informed the defendant bank of its possession of the CTDs and claim payment of its value.
Defendant bank rejected the plaintiff’s demand and claim for payment of the value of the CTDs after the latter failed to furnish the former a copy of the document evidencing the guarantee agreement with Angel dela Cruz, as well as details of obligation of Angel dela Cruz as requested.
The respondent court dismissed the complaint of plaintiff for payment of the value of the CTDs on the ground that the CTDs are non-negotiable instruments and that petitioner did not become a holder in due course of the said certificates of deposit.
Issue:
- WON the CTDs are negotiable instruments.
- WON petitioner can rightfully recover the CTDs.
Held:
1. YES. The CTDs in question are negotiable instruments for it meets the requirements of the law for negotiability. Section 1 Act No. 2031 enumerates the requisites for an instrument to become negotiable:
(a) It must be in writing and signed by the maker or drawer;
(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
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
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. In the construction of a bill or note, the intention of the parties is to control, if it can be legally ascertained.
The documents provide that the amounts deposited shall be repayable to the depositor – 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.
2. No. 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, and 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.
CASE EATER 