CALTEX (PHILIPPINES), INC., PETITIONER, VS. COURT OF APPEALS AND SECURITY BANK AND TRUST COMPANY, RESPONDENTS.

This petition for review on certiorari impugns and seeks
the reversal of the decision promulgated by respondent court on March 8, 1991
in CA-G.R. CV No. 23615^[1]
affirming, with modifications, the earlier decision of the Regional Trial Court
of Manila, Branch XLII,^[2] which
dismissed the complaint filed therein by herein petitioner against private
respondent bank.

The undisputed background of this case, as found by the court a
quo and adopted by respondent court, appears of record:

“1. On various dates,
defendant, a commercial banking institution, through its Sucat Branch issued
280 certificates of time deposit (CTDs) in favor of one Angel dela Cruz who
deposited with herein defendant the aggregate amount of P1,120,000.00, as
follows: (Joint Partial Stipu­lation of
Facts and Statement of Issues, Original Records, p. 207; Defendant’s Exhibits 1
to 280):

“2. Angel dela Cruz delivered the said
certificates of time deposit (CTDs) to herein plaintiff in connection with his
purchase of fuel products from the latter (Original Record, p. 208).

“3. Sometime in March
1982, Angel dela Cruz informed Mr. Timoteo Tiangco, the Sucat Branch Manager,
that he lost all the certificates of time deposit in dispute. Mr. Tiangco advised said depositor to
execute and submit a notarized Affidavit of Loss, as required by defendant
bank’s procedure, if he desired replacement of said lost CTDs (TSN, February 9,
1987, pp, 48-50).

“4. On March 18, 1982,
Angel dela Cruz executed and delivered to defendant bank the required Affidavit
of Loss (Defendant’s Exhibit 281). On
the basis of said affidavit of loss, 280 replacement CTDs were issued in favor
of said depositor (Defendant’s Exhibits 282-561).

“5. On March 25, 1982,
Angel dela Cruz negotiated and obtained a loan from defendant bank in the
amount of Eight Hundred Seventy Five Thousand Pesos (P875,000.00). On the same date, said depositor executed a
notarized Deed of Assign­ment of Time Deposit (Exhibit 562) which stated, among
others, that he (dela Cruz) surrenders to defendant bank ‘full control of the
indicated time deposits from and after date’ of the assignment and further
authorizes said bank to pre-terminate, set-off and ‘apply the said time
deposits to the payment of whatever amount or amounts may be due’ on the loan
upon its maturity (TSN, February 9, 1987, pp. 60-62).

“6. Sometime in November,
1982, Mr. Aranas, Credit Manager of plaintiff Caltex (Phils.) Inc., went to the
defendant bank’s Sucat branch and presented for verification the CTDs declared
lost by Angel dela Cruz alleging that the same were delivered to herein
plaintiff ‘as security for purchases made with Caltex Philippines, Inc.’ by
said depositor (TSN, February 9, 1987, pp. 54-68).

“7. On November 26, 1982,
defendant received a letter (Defendant’s Exhibit 563) from herein plaintiff
formally informing it of its possession of the CTDs in question and of its
decision to pre-terminate the same.

“8. On December 8,
1982, plaintiff was requested by herein defendant to furnish the former ‘a copy of the document evidencing the
guarantee agreement with Mr. Angel dela Cruz’ as well as ‘the details of Mr.
Angel dela Cruz’ obligations against which’ plaintiff proposed to apply the
time deposits (Defendant’s Exhibit 564).

“9. No copy of the
requested documents was furnished herein defendant.

“10. Accordingly, defendant
bank rejected the plaintiff’s demand and claim for payment of the value of the
CTDs in a letter dated February 7, 1983 (Defendant’s Exhibit 566).

“11. In April 1983, the
loan of Angel dela Cruz with the defendant bank matured and fell due and on
August 5, 1983, the latter set-off and applied the time deposits in question to
the payment of the matured loan (TSN, February 9, 1987, pp. 130-131).

“12. In view of the
foregoing, plaintiff filed the instant complaint, praying that defendant bank
be ordered to pay it the aggregate value of the certificates of time deposit of
P1,120,000.00 plus accrued interest and compounded interest therein at 16% per
annum, moral and exemplary damages as well
as attorney’s fees.

“After trial, the court a quo rendered its decision dismissing the instant complaint.”^[3]

On appeal, as earlier stated, respondent court affirmed the lower
court’s dismissal of the complaint, hence this petition wherein petitioner
faults respondent court in ruling (1) that the subject certificates of deposit
are non-negotiable despite being clearly negotiable instruments; (2) that
petitioner did not become a holder in due course of the said certificates of
deposit; and (3) in disregarding the pertinent provisions of the Code of
Commerce relating to lost instruments payable to bearer.^[4]

The instant petition is bereft of merit.

A sample text of the certificates of time deposit is reproduced
below to provide a better understanding of the issues involved in this
recourse.

“SECURITY
BANK

AND
TRUST COMPANY                               
No. 90101

6778 Ayala Ave., Makati

Metro Manila, Philippines

SUCAT OFFICE                                 P 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

SECURITY BANK

the sum of PESOS: FOUR THOUSAND ONLY. SUCAT OFFICE P4,000 & 00 CTS Pesos,

Philippine Currency, repayable to said
depositor __731 das.__ after date, upon presentation

and surrender of this certificate, with
interest at the rate of __16%___ per cent per annum.

___________(Sgd. Illigible____________                  _________(Sgd. Illigible)_______

AUTHORIZED SIGNATURES”^[5]

Respondent court ruled that the CTDs in question are
non-negotiable instruments, rationalizing as follows:

“x x x While it may be true that the
word ‘bearer’ appears rather boldly in the CTDs issued, it is important to note
that after the word ‘BEARER’ stamped on the space provided supposedly for the
name of the depositor, the words ‘has deposited’ a certain amount follows. The document further provides that the
amount deposited shall be ‘repayable to said depositor’ on the period
indicated. Therefore, the text of the
instrument(s) themselves manifest with clarity that they are payable, not to
whoever purports to be the ‘bearer’ but only to the specified person indicated
therein, the depositor. In effect, the
appellee bank acknowledges its depositor Angel dela Cruz as the person who made
the deposit and further engages itself to pay said depositor the amount indicated
thereon at the stipulated date.”^[6]

We disagree with
these findings and conclusions, and hereby hold that the CTDs in question are
negotiable instruments. Section 1 of
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 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 CTDs in question undoubtedly meet the requirements of the law
for negotiability. The parties’ bone of
contention is with regard to requisite (d) set forth above. It is noted that Mr. Timoteo P. Tiangco,
Security Bank’s Branch Manager way back in 1982, testified in open court that
the depositor referred to in the CTDs is no other than Mr. Angel de la Cruz.

x x x

“Atty. Calida:

q     In
other words Mr. Witness, you are saying that per books of the bank, the
depositor referred (sic) in these certificates states that it was Angel dela
Cruz?

witness:

a     Yes,
your Honor, and we have the record to show that Angel dela Cruz was the one who
cause (sic) the amount.

Atty. Calida:

q     And
no other person or entity or company, Mr. Witness?

witness:

a     None,
your Honor.”^[7]

x x x

“Atty. Calida:

q     Mr.
Witness, who is the depositor identified in all of these certificates of time
deposit insofar as the bank is concerned?

witness:

a     Angel
dela Cruz is the depositor.”^[8]

x x x

On this score, 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.^[9]
In the construction of a bill or
note, the intention of the parties is to control, if it can be legally
ascertained.^[10]
While the writing may be read in the
light of surrounding circumstances in order to more perfectly understand the
intent and meaning of the parties, yet as they have constituted the writing to
be the only outward and visible expression of their meaning, no other words are
to be added to it or substituted in its stead. The duty of the court in such case is to ascertain, not what the parties
may have secretly intended as contradistinguished from what their words
express, but what is the meaning of the words they have used. What the parties meant must be determined by
what they said.^[11]

Contrary to what
respondent court held, the CTDs are negotiable instruments. The documents provide that the amounts
deposited shall be repayable to the depositor. And who, according to the document, is the depositor? It 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.

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,
petitioner’s aforesaid witness merely declared that Angel 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. Hence, the situation would require any party
dealing with the CTDs to go behind the plain import of what is written thereon
to unravel the agreement of the parties thereto through facts aliunde. This need for resort to extrinsic evidence
is what is sought to be avoided by the Negotiable Instruments Law and calls for
the application of the elementary rule that the interpretation of obscure words
or Stipulations in a contract shall not favor the party who caused the
obscurity.^[12]

The next query
is whether petitioner can rightfully recover on the CTDs. This time, the answer is in the negative. The records reveal that Angel de la Cruz,
whom petitioner chose not to implead in this suit for reasons of its own,
delivered the CTDs amounting to P1,120,000.00 to petitioner without informing
respondent bank thereof at any time. Unfortunately for petitioner, 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 indorsement. For, although petitioner seeks to deflect this fact, the CTDs
were in reality delivered to it as a security for De la Cruz’ purchases of its
fuel products. Any doubt as to whether
the CTDs were delivered as payment for the fuel products or as a security has
been dissipated and resolved in favor of the latter by petitioner’s own
authorized and responsible representative himself.

In a letter dated November 26, 1982 addressed to respondent
Security Bank, J. Q. Aranas, Jr., Caltex Credit Manager, wrote: “x x x
These certificates of deposit were negotiated to us by Mr. Angel dela Cruz to
guarantee his purchases of fuel products” (Underscoring ours.)^[13] This
admission is conclusive upon petitioner, its protestations
notwithstanding. Under the doctrine of
estoppel, an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying
thereon.^[14]
A party may not go back on his own acts and representations to the prejudice of
the other party who relied upon them.^[15]
In the law of evidence, whenever a party has, by his own declaration, act, or
omission, intentionally and deliberately led another to believe a particular
thing true, and to act upon such belief, he cannot, in any litigation arising
out of such declaration, act, or omission, be permitted to falsify it.^[16]

If it were true
that the CTDs were delivered as payment and not as security, petitioner’s,
credit manager could have easily said so, instead of using the words “to
guarantee” in the letter aforequoted. Besides, when respondent bank, as defendant in the court below, moved
for a bill of particulars therein^[17]
praying, among others, that petitioner, as plaintiff, be required to aver with
sufficient definiteness or particularity (a) the due date or dates of payment
of the alleged indebtedness of Angel de la Cruz to plaintiff and (b) whether or
not it issued a receipt showing that the CTDs were delivered to it by De la
Cruz as payment of the latter’s alleged indebtedness to it, plaintiff
corporation opposed the motion.^[18]
Had it produced the receipt prayed for, it could have proved, if such truly was
the fact, that the CTDs were delivered as payment and not as security. Having opposed the motion, petitioner now
labors under the presumption that evidence willfully suppressed would be
adverse if produced.^[19]

Under the foregoing circumstances, this disquisition in Integrated
Realty Corporation, et al. vs. Philippine National Bank, et al.^[20]
is apropos:

“x x x Adverting again to the Court’s pronouncements in Lopez, supra,
we quote therefrom:

‘The character of the transaction between the parties is to be
determined by their intention, regardless of what language was used or what the
form of the transfer was. If it was intended
to secure the payment of money, it must be construed as a pledge; but if there
was some other intention, it is not a pledge. However, even though a transfer, if regarded by itself, appears to have
been absolute, its object and character might still be qualified and explained
by contemporaneous writing declaring it to have been a deposit of the property
as collateral security. It has been
said that a transfer of property by the debtor to a creditor, even if sufficient
on its face to make an absolute conveyance, should be treated as a pledge if
the debt continues in existence and is not discharged by the transfer, and that
accordingly the use of the terms ordina­rily importing conveyance of absolute
ownership will not be given that effect in such a transaction if they are also
commonly used in pledges and mortgages and therefore do not unqualifiedly
indicate a transfer of absolute ownership, in the absence of clear and
unambiguous language or other circumstances excluding an intent to pledge.’”

Petitioner’s insistence that the CTDs were negotiated to it begs
the question. 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,^[21]
and a holder may be the payee or indorsee of a bill or note, who is in
possession of it, or the bearer thereof.^[22]
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 (and we even disregard the fact that the
amount involved was not disclosed) 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.

The pertinent law on this point is that 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.^[23] 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,^[24]
which inceptively provide:

“Art. 2095. Incorporeal rights, evidenced by negotiable instruments, x x x 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.”

Aside from the fact that the CTDs were only delivered but not
indorsed, the factual findings of respondent court quoted at the start of this
opinion show that petitioner failed to produce any document evidencing any
contract of pledge or guarantee agreement between it and Angel de la Cruz.^[25]
Consequently, the mere delivery of the CTDs did not legally vest in petitioner
any right effective against and binding upon respondent bank. The requirement under Article 2096
aforementioned is not a mere rule of adjective law prescribing the mode whereby
proof may be made of the date of a pledge contract, but a rule of substantive
law prescribing a condition without which the execution of a pledge contract
cannot affect third persons adversely.^[26]

On the other hand, the assignment of the CTDs made by Angel de la
Cruz in favor of respondent bank was embodied in a public instrument.^[27] With
regard to this other mode of transfer, the Civil Code specifically declares:

“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.”

Respondent bank duly complied with this
statutory requirement Contrarily, petitioner, whether as purchaser, assignee or
lienholder of the CTDs, neither proved the amount of its credit or the extent
of its lien nor the execution of any public instrument which could affect or
bind private respondent. Necessarily,
therefore, as between petitioner and respondent bank, the latter has definitely
the better right over the CTDs in question.

Finally, petitioner faults respondent court for refusing to delve
into the question of whether or not private respondent observed the
requirements of the law in the case of lost negotiable instruments and the
issuance of replacement certificates therefor, on the ground that petitioner
failed to raise that issue in the lower court.^[28]

On this matter, we uphold respondent court’s finding that the
aspect of alleged negligence of private respondent was not included in the
stipulation of the parties and in the statement of issues submitted by them to
the trial court.^[29]
The issues agreed upon by them for resolution in this case are:

“1.     Whether or not
the CTDs as worded are negotiable instruments.

2.       Whether or not
defendant could legally apply the amount covered by the CTDs against the
depositor’s loan by virtue of the assignment (Annex ‘C’).

3.       Whether or not there
was legal compensation or set off involving the amount covered by the CTDs and
the depositor’s outstanding account with defendant, if any.

4.       Whether or not
plaintiff could compel defendant to preterminate the CTDs before the maturity
date provided therein.

5.       Whether or not
plaintiff is entitled to the proceeds of the CTDs.

6.       Whether or not the
parties can recover damages, attorney’s fees and litigation expenses from each
other.”

As respondent court correctly observed, with appropriate citation
of some doctrinal authorities, the foregoing enumeration does not include the
issue of negligence on the part of respondent bank. An issue raised for the first time on appeal and not raised
timely in the proceedings in the lower court is barred by estoppel.^[30]
Questions raised on appeal must be within the issues framed by the parties and,
consequently, issues not raised in the trial court cannot be raised for the
first time on appeal.^[31]

Pre-trial is primarily intended to make certain that all issues
necessary to the disposition of a case are properly raised. Thus, to obviate the element of surprise,
parties are expected to disclose at a pre-trial conference all issues of law
and fact which they intend to raise at the trial, except such as may involve
privileged or impeaching matters. The
determination of issues at a pre-trial conference bars the consideration of other
questions on appeal.^[32]

To accept petitioner’s suggestion that respondent bank’s supposed
negligence may be considered encompassed by the issues on its right to
preterminate and receive the proceeds of the CTDs would be tantamount to saying
that petitioner could raise on appeal any issue. We agree with private respondent that the broad ultimate issue of
petitioner’s entitlement to the proceeds of the questioned certificates can be
premised on a multitude of other legal reasons and causes of action, of which
respondent bank’s supposed negligence is only one. Hence, petitioner’s submission, if accepted, would render a
pre-trial delimitation of issues a useless exercise.^[33]

Still, even assuming arguendo
that said issue of negligence was raised in the court below, petitioner still
cannot have the odds in its favor. A
close scrutiny of the provisions of the Code of Commerce laying down the rules
to be followed in case of lost instruments payable to bearer, which it invokes,
will reveal that said provisions, even assuming their applicability to the CTDs
in the case at bar, are merely permissive and not mandatory. The very first article cited by petitioner
speaks for itself:

“Art. 548. The dispossessed
owner, no matter for what cause it may be, may apply to the judge or
court of competent jurisdiction, asking that the principal, interest or
dividends due or about to become due, be not paid a third person, as well as in
order to prevent the ownership of the instrument that a duplicate be issued
him.” (Emphases ours.)

x x x

The use of the word “may” in said provision shows that
it is not mandatory but discretionary on the part of the “dispossessed
owner” to apply to the judge or court of competent jurisdiction for the
issuance of a duplicate of the lost instrument. Where the provision reads “may,” this word shows that
it is not mandatory but discretional.^[34] The
word “may” is usually permissive, not mandatory.^[35]
It is an auxiliary verb indicating liberty, opportunity, permission and
possibility.^[36]

Moreover, as correctly analyzed by private respon­dent,^[37]
Articles 548 to 558 of the Code of Commerce, on which petitioner seeks to
anchor respondent bank’s supposed negligence, merely established, on the one
hand, a right of recourse in favor of a dispossessed owner or holder of a
bearer instrument so that he may obtain a duplicate of the same, and, on the
other, an option in favor of the party liable thereon who, for some valid
ground, may elect to refuse to issue a replacement of the instrument. Significantly, none of the provisions cited
by petitioner categorically restricts or prohibits the issuance a duplicate or
replacement instrument sans compliance with the procedure outlined
therein, and none establishes a mandatory precedent requirement therefor.

WHEREFORE, on the modified premises above set
forth, the petition is DENIED and
the appealed decision is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, and Nocon, JJ., concur.

---

^[1]
Per Justice Segundino G. Chua, with the concurrence of Justices Santiago M. Kapunan
and Luis L. Victor.

^[2]
Judge Ramon Mabutas, Jr., presiding; Rollo, 64-88.

^[3]
Rollo, 24-26.

^[4]
Ibid., 12.

^[5]
Exhibit A, Documentary Evidence for the Plaintiff, 8.

^[6]
Rollo, 28.

^[7]
TSN, February 9, 1987, 46-47.

^[8]
Ibid., id., 152-153.

^[9]
11 Am. Jur. 2d, Bills and Notes, 79.

^[10]
Ibid.; 86.

^[11]
Ibid., 87-88.

^[12]
Art. 1377, Civil Code.

^[13]
Exhibit 563, Documentary Evidence for the Defendant, 442: Original Record,
211.

^[14]
Panay Electric Co., Inc. vs. Court of Appeals, et al., 174 SCRA 500
(1989).

^[15]
Philippine National Bank vs. Intermediate Appellate Court, et al., 189
SCRA 680 (1990).

^[16]
Section 2(a), Rule 131, Rules of Court.

^[17]
Original Record, 152.

^[18]
Ibid., 154.

^[19]
Section 3(e), Rule 131, Rules of Court.

^[20]174
SCRA 295 (1989), jointly decided with Overseas Bank of Manila vs. Court
of Appeals, et al., G.R. No. 60907.

^[21]
Sec. 30, Act No. 2031.

^[22]
Sec. 191, id.

^[23]
Sec. 27, id.; see also Art. 2118, Civil Code.

^[24]
Commentaries and Jurisprudence on the Philippine Commer­cial Laws, T. C.
Martin, 1985 Rev. Ed., Vol. I, 134; Art. 18, Civil Code; Sec. 196, Act No.
2031.

^[25]
Rollo, 25.

^[26]
Tec Bi & Co. vs. Chartered Bank of India, Australia and China, 41
Phil 596 (1916); Ocejo, Perez & Co. vs. The International Banking
Corporation, 37 Phil. 631 (1918); Te Pate vs. Ingersoll, 43 Phil. 394
(1922).

^[27]
Rollo, 25.

^[28]
Ibid., 15.

^[29]Joint
Partial Stipulation of Facts and Statement of Issues, dated November 27, 1984;
Original Record, 209.

^[30]
Mejorada vs. Municipal Council of Dipolog, 52 SCRA 451 (1973).

^[31]
Sec. 18, Rule 46, Rules of Court; Garcia, et al. vs. Court of Appeals,
et al., 102 SCRA 597 (1981); Matienzo vs. Servidad, 107 SCRA 276 (1981);
Aguinaldo Industries Corporation, etc. vs. Commissioner of Internal
Revenue, et al., 112 SCRA 136 (1982); Dulos Realty & Development
Corporation vs. Court of Appeals, et al., 157 SCRA 425 (1988).

^[32]
Bergado vs. Court of Appeals, et al., 173 SCRA 497 (1989).

^[33]
Rollo, 58.

^[34]
U.S. vs. Sanchez, 13 Phil. 336 (1909); Capati vs. Ocampo, 113
SCRA 794 (1982).

^[35]
Luna vs. Abaya, 86 Phil. 472 (1950).

^[36]
Philippine Law Dictionary, F. B. Moreno, Third Edition, 590.

^[37]
Rollo, 59.