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THURSDAY, 14 SEPTEMBER 2017

BPI VS FIDELITY & SURETY COMPANY OF THE PHIL ISLANDS (1927)

J. Malcolm

PROCEDURAL SHIZ

Aug 25, 1922 Original action commenced by BPI against Laguna Coconut Oil and
Fidelity & Surety Company of the Phil Islands

Fidelity & Surety Comp. interposed a demurrer to BPIs complaint, which was
sustained by the TC

BPI filed an amended complaint

Fidelity & Surety again demurred, which was again sustained

BPI appealed to SC, where the ruling was reversed and the case was remanded

End Skirmish 1 (so this was useless info?)

On return to TC, Fidelity & Surety Comp filed an answer

Laguna Coconut Oil Co. made no defense and judgment by default obtained
against it

Case submitted to court upon a stipulation of facts

Upon the pleadings and agreed facts, TC rendered judgment against the Fidelity &
Surety Comp. for the full amount of the note, with interest

From this judgment, Fidelity & Surety Comp. appealed to SC

Assignments of error found to be well taken

Principal reason action involved a reformation of the contract of guaranty, which


was not put in issue by the pleadings

Judgment reversed and the action dismissed without prejudice to the bringing of
another action upon the same cause

End Skirmish 2 (zomg)

October 20, 1925 BPI commenced new action against Fidelity & Surety Comp in
CFI Manila

Defendant demurred

TC overruled demurrer, defendant answered

Evidence produced on behalf of BPI

Judgment was in favor of BPI for sum of P50K

From this judgment, Fidelity & Surety Comp has appealed

J. Malcolm: Last na to, please

STATEMENT OF FACTS

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April 26, 1920 Laguna Coconut Oil Co. executed in favor of the Phil. Vegetable Oil
Comp. the promissory note:

May 3, 1920 Fidelity & Surety Comp. made a notation on the note, reading as
follows:

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May 4, 1920 Phil Vegetable Oil Comp. endorsed the note in blank and delivered it
to BPI

possible that Phil Vegetable Oil Comp was paid the sum of P50K therefore

After maturity of the note, demand for its payment was made on Laguna Coconut Oil
Co., Phil Vegetable Oil Comp. and Fidelity & Surety Comp

all refused to pay

Laguna Coconut Oil Co. being admittedly insolvent

Correspondence of BPI with Fidelity & Surety is on record


accdg to BPI this indicates the responsibility assumed by defendant
defendant objects, saying this is of minor importance

Innote
their last appearance in the TC, BPI made an eort to connect the promissory
of P50K with an existing obligation of the Phil. Vegetable Oil Comp in the
form of another promissory note

The evidence was also intended to demonstrate that a clear error had been
committed when reference was made to the Laguna Coconut Oil Co. in the notation
on the note

this theory was confirmed by the TC

TC judge said that the note could not have been discounted by the Laguna
Coconut Oil Co. and that this must logically have been done by the BPI

REQUIREMENT OF EVIDENCE TO PROVE MUTUAL MISTAKE MORE THAN MERE


PREPONDERANCE OF EVIDENCE

Code of Civil Procedure, Sec 285 a written agreement is presumed to contain


all the terms of the agreement
Civil Code has articles to the same eect

However, the Code of Civil Procedure permits evidence of the terms of the
agreement other than the contents of the writing in the following case:
Where a mistake or imperfection of the writing, or its failure to express the
true intent and agreement of the parties is put in issue by the pleadings

This was construed by the US SC in Phil Sugar Estates Devt Comp. vs Govt of the
Philippine Islands: The courts of equity will reform a written contract where,
owing to mutual mistake, the language used therein did not fully or accurately
express the agreement and intent of the parties

Also stated that the relief by way of reformation will not be granted unless the
proof of mutual mistake be of the clearest and most satisfactory character

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Local courts have applied the rule that the amount of evidence necessary to sustain
a prayer of relief where its sought to impugn a fact in a document is always MORE
THAN A MERE PREPONDERANCE OF EVIDENCE

ISSUE

W/N BPI showed with more than a mere preponderance of evidence that there
was a mutual mistake which would give rise to a relief by way of reformation
NO

BEFORE RESOLVING THE CASE, MUST FIRST LOOK AT WHAT THE COURT SAID
WHEN THE CASE WAS LAST IN THE SC

Mr. Justice Ostrand observed that the writing upon which the note is brought does
not in terms show any obligation in favor of BPI and the action can only be
maintained upon the theory that the writing does not express the true intent of the
parties. We may surmise that the guarantee in question was intended for the benefit
of the party who subsequently discounted the note, but we cannot be certain.

Itandwasthatthenthepointed out that the note may have been merely an accommodation note
guaranty may have intended for the protection of the maker

But the parties did not take advantage of this suggestion (di nila ginamit as an
argument?)

An examination of the note and guaranty discloses that in the notation to the note,
the word hold is interlined

indicates that the VP of the Fidelity & Surety Comp had his particular attention
called to the language of the note, and corrected the typewritten matter by
inserting in ink the word quoted

That the writer of the notation fell into a further error in obligating the company to the
Laguna Coconut Oil Co. may be possible

The the writer may have had in mind to use the words Phil Vegetable Oil Comp.
may also be possible

That the names of the 2 parties before the guarantor were Laguna Coconut Oil Co.
and Phil Vegetable Oil Co.

The guaranteeing comp couldnt very well have assumed that the BPI at a later
date was contemplating discounting the note

Also apparent on the face of the note that it was to draw interest at maturity

this fact would disprove discount of the note by the BPI on or before May 3, 1920

In truth, not certain that the bank ever did discount the note

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Atdiscounted
least, BPI in its 2nd amended complaint averred that the promissory note was
by the Phil. Vegetable Oil Comp.

BPI PRESENTED BOOKKEEPING ENTRIES NOT CONCLUSIVE

The bookkeeping entries of the bank are hardly competent against a stranger to the
transaction, such as Fidelity & Surety Comp in this case

Moreover, it will not escape notice that 1 entry at least in BPIs Exhibit E has been
changed by erasing the words y Fidelity & Surety Co. of the Phil. Islands and
substituting Phil. Vegetable Oil Co. garantizado p. Fidelity & Surety Co. of the Phil.
Islands

The bookkeeping entries taken at their face value are NOT CONCLUSIVE

CORRESPONDENCE BETWEEN THE PARTIES NOT AN ADMISSION

The correspondence between the parties fails to disclose either an express or


implied admission that the defendant had executed the guaranty in question in favor
of BPI

Nothing in the exhibits from which any such admission can be inferred

An attempt to interpret the correspondence only leads one further in the field of
speculation

BUT the rule is than an admission or declaration, to be competent, must have been
expressed in definite, certain and unequivocal language

Here, the exhibits are couched in language which is neither definite, certain nor
unequivocal for nowhere do they contain an admission of a guaranty made by
Fidelity & Surety Comp for the protection of the BPI

NOT A MUTUAL MISTAKE FIDELITY NOT A PARTY TO THE MISTAKE

To justify the reformation of a written instrument upon the ground of mistake, the
concurrence of 3 things are necessary:

First, that the mistake should be of a fact;

Second, that the mistake should be proved by clear and convincing evidence

Third, that the mistake should be common to both parties to the instrument

The rule is that the mistake must be MUTUAL

There may have been a mistake here, but it would be straining the natural course of
events to hold that Fidelity & Surety Comp. a party to that mistake

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We cannot bring ourselves to conclude that the plainti, by proof of the clearest and
most satisfactory character constituting more than a preponderance of the evidence,
has established a mutual mistake. Instead, the proof is left far behind that goal.

RULING

Judgment appealed from will be reversed and the proceedings definitely dismissed.