CALTEX (PHILIPPINES), INC., vs. CA and SECURITY BANK AND TRUST COMPANY,.

FACTS:
In 1982, Angel de la Cruzobtainedcertificates 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 documents.
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.