G.R. No. L-12808; May 30, 1961
International Tobacco Co., Inc., plaintiff-appellant, vs. Wang Wan Tat and Pek Hock Leng, defendants-appellees.

FACTS

On December 10, 1956, defendant Wang Wan Tat executed a promissory note in favor of plaintiff International Tobacco Co., Inc., for P5,000. The note stated it was payable “Twelve (12) months after date” in four equal quarterly installments. To secure this obligation, both defendants executed a Surety Bond on the same date. The bond explicitly stated the principal amount was “payable on four (4) equal installments for a period of twelve (12) months commencing on December 10, 1956.” It further conditioned that if the principal failed to pay as stipulated, the surety would, upon demand, immediately pay the full amount. When Wang Wan Tat failed to pay any of the quarterly installments due within that twelve-month period, the plaintiff filed a collection suit on June 28, 1957.
The defendants moved to dismiss the complaint, arguing the action was premature because the promissory note’s phrase “twelve months after date” meant the entire obligation matured only on December 10, 1957. The trial court agreed, dismissing the complaint for lack of cause of action, reasoning that since the twelve months had not yet lapsed, the note was not yet due and demandable.

ISSUE

Whether the trial court correctly dismissed the complaint for lack of cause of action on the ground that the promissory note was not yet due and demandable when the suit was filed.

RULING

The Supreme Court reversed the trial court’s order of dismissal. The legal logic centers on the interpretation of the promissory note and the surety bond as constituting one integrated contract. While the promissory note alone, stating “twelve months after date,” could be ambiguously interpreted as a single maturity date, the contemporaneously executed surety bond clarified the payment terms. The bond explicitly stipulated that the P5,000 was “payable on four (4) equal installments…commencing on December 10, 1956.” This created an obligation to pay in quarterly installments within the twelve-month period. Consequently, the failure to pay any installment as it fell due within that period constituted an immediate breach, giving rise to a cause of action. The Court emphasized that the surety bond’s condition made the full amount immediately demandable from the surety upon the principal’s default on the installment payments. Since the complaint alleged that not a single installment was paid within the stipulated quarters, a valid cause of action was sufficiently stated. The case was remanded to the trial court for further proceedings. A secondary motion to dismiss the appeal based on an alleged novation via a subsequent promissory note was denied for lack of proper authentication and plaintiff’s non-conformity.