G.R. No. L-26743 October 19, 1927
Lessons Applicable: Consideration and Accomodation Party (Negotiable Instruments Law)FACTS: Laguna Coconut Oil (guaranteed by Fidelity and Surety) > Phil. Veg Oil (indorsed in blank)> BPI = BPI against ? (Laguna/Phil. Veg. Oil/Fidelity and Surety)
- Laguna Coconut Oil Company executed the following promissory note in favor of the Philippine Vegetable Oil Company:
P50,000.00.
One month after date we promise to pay to the Philippine Vegetable Oil Company, Inc., or order at City of Manila, Philippine Islands, the sum of fifty thousand pesos (P50,000), Philippine currency; value received.
In case of non-payment of this note at maturity, we are to pay interest at
the rate of nine per cent (9%) per annum on the said amount and the further sum of P5,000 in full, without any deduction as and for costs, expenses and attorney's fees for collection whether actually incurred or not.
Manila, Philippine Islands, April 26, 1920.
LAGUNA COCONUT OIL CO.
By BALDOMERO COSME
President
- May 3, 1920: Fidelity & Surety Company made the following notation on the note:
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.
- May 4, 1920: Philippine Vegetable Oil Company indorsed the note to BPI in blank
- BPI instituted actions against Laguna Oil (insolvent) and Fidelity Surety
- RTC: against Fidelity and Surety and demanded it to pay the note
- “BPI” should have been placed in the indorsement rather than “Laguna Oil”
ISSUE: W/N Fidelity Surely should be the only one liable for having made the notation as guarantee and not an accomodation party
HELD: YES.
- Trial court's judgment as it stands clearly involves a reformation of the contract of guaranty and it is elementary that the facts upon which relief by reformation is sought must be put in issue by the pleadings.
- court of equity cannot reform an instrument except on allegations, which make out a case for the equitable remedy asked.
- fails to express the real agreement; or
- mutual mistake
- on account of fraud of one them
- fraud or inequitable condition on one side and mistake on the other
- In this connection it should be borne in mind that contracts of suretyship and guarantee are strictly construed in favor of the surety or guarantor.
- Unless otherwise stated in the instrument, a negotiable promissory note implied prima facie valuable consideration moving to the maker whether the words "value received" appear in it or not.
- An accommodation note showing on its face in express terms that it had been issued for no consideration would be of little or no use to the payee, and for that reason, if for no other, practically all accommodation notes are so drawn as to either express or imply a valuable consideration prima facie.