Title
Bank of the Philippine Islands vs. Fidelity and Surety Company of the Philippine Islands
Case
G.R. No. 23252
Decision Date
Sep 24, 1925
A promissory note dispute involving a guarantee by Fidelity & Surety Company, misinterpreted by the trial court, leading to Supreme Court reversal due to lack of proper pleadings for contract reformation.
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Case Digest (G.R. No. 23252)

Facts:

Execution of the Promissory Note

On April 26, 1920, the Laguna Cocoanut Oil Company executed a promissory note in favor of the Philippine Vegetable Oil Company for the sum of P50,000, payable one month after the date. The note included provisions for 9% interest per annum in case of non-payment at maturity and an additional P5,000 for costs, expenses, and attorney’s fees.

Guarantee by Fidelity & Surety Company

On May 3, 1920, the Fidelity & Surety Company of the Philippine Islands (appellant) made a notation on the note, stating: "For value received, we hereby obligate ourselves to hold the Laguna Cocoanut Oil Co. harmless against loss for having discounted the foregoing note at the value stated therein."

Endorsement and Discounting of the Note

On May 4, 1920, the Philippine Vegetable Oil Company endorsed the note in blank and delivered it to the Bank of the Philippine Islands (plaintiff), which paid P50,000 for it. After the note matured, demands for payment were made on the Laguna Cocoanut Oil Company, the Philippine Vegetable Oil Company, and the Fidelity & Surety Company, all of whom refused to pay. The Laguna Cocoanut Oil Company was insolvent.

Filing of the Complaint

On August 25, 1922, the Bank of the Philippine Islands filed a complaint against the Laguna Cocoanut Oil Company and the Fidelity & Surety Company to recover the amount of the note. The plaintiff alleged that the Fidelity & Surety Company, by its notation, had contracted to pay the note on behalf of the Laguna Cocoanut Oil Company.

Stipulation of Facts

The case was submitted to the trial court based on a stipulation of facts, which included the execution of the note, the guarantee by the Fidelity & Surety Company, the endorsement to the plaintiff, and the failure of all parties to pay the note.

Issue:

  1. Whether the trial court erred in holding that the Fidelity & Surety Company’s guarantee should be interpreted as securing the Bank of the Philippine Islands instead of the Laguna Cocoanut Oil Company.
  2. Whether the trial court erred in rendering judgment against the Fidelity & Surety Company for the full amount of the note, including interest and attorney’s fees.
  3. Whether the trial court erred in overruling the defendant’s motion for a new trial.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)


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