Negotiable Instruments Case Digest: BPI v. Fidelity &Surety Co. (1927)


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.