G.R. No. L-7485; August 23, 1956
CHIU CHIONG and COMPANY, INC., plaintiff-appellee, vs. NATIONAL CITY BANK OF NEW YORK, defendant-appellant.

FACTS

Plaintiff Chiu Chiong and Company, Inc., a corporation engaged in grocery and cold store business, instituted an action in the Court of First Instance of Manila to recover from defendant National City Bank of New York sums of money allegedly paid twice for the same pre-war obligation. At the outbreak of World War II, plaintiff was indebted to defendant for credit facilities and advances, amounting to P44,580.59 plus interest. During the Japanese occupation, plaintiff paid this obligation to the Japanese Bank of Taiwan, Ltd., as liquidator of defendant Bank. After liberation, plaintiff applied for new credit facilities from defendant in 1945 and 1947. The 1945 application was denied because plaintiff refused to make arrangements for paying its pre-war obligation. In April 1947, plaintiff renewed its application and, facing business paralyzation, executed a promissory note in favor of defendant for P50,143.42 (representing its pre-war debt) payable at P1,000 monthly with 5% interest, and an undertaking of suretyship guaranteeing new credit facilities up to P60,000. Defendant granted the new credit facilities based on this arrangement. Plaintiff paid the monthly installments from June 1947 until fully liquidating the promissory note in May 1950. In July 1949, plaintiff’s counsel demanded the release of the suretyship and refund of the payments made on the promissory note, arguing that the occupation-era payment to the Bank of Taiwan was valid. Defendant released the suretyship documents but declined the refund. Plaintiff filed a complaint seeking recovery of the amounts paid on the promissory note, alleging it was executed on the understanding that if payments during the occupation were declared valid by courts, the note would be void and payments refunded. Defendant denied this understanding, asserting the promissory note was executed for valuable consideration—the grant of new credit facilities. The trial court ruled in favor of plaintiff, ordering defendant to refund the payments with interest. Defendant appealed.

ISSUE

1. Whether the evidence shows the promissory note was executed on the understanding that payments made on it would be refunded if courts validated the occupation-era payments to the Bank of Taiwan.
2. If not, whether the trial court erred in not absolving defendant and dismissing its counterclaim.

RULING

1. No, the evidence does not show such an understanding. The promissory note itself, the best evidence, was not produced; plaintiff alleged it was not returned, while defendant claimed it was returned per banking practice. Parol evidence offered by plaintiff to incorporate a contemporaneous condition not in the written note is inadmissible under the rule that parties are presumed to have reduced all essential conditions to writing, and such evidence cannot add terms absent fraud or mistake (Yu Tek & Co. vs. Gonzales, 29 Phil. 384). The Court found the promissory note was executed for valuable consideration—the new credit facilities—as defendant would not have granted them otherwise. The trial court’s view that no businessman would pay P50,143.42 to secure P60,000 in credit was speculative and contradicted by plaintiff’s actual payments. Estoppel also bars plaintiff’s claim, as it accepted the benefits of the new credit facilities and made payments on the note without protest until 1949, thereby ratifying the agreement (Bismorte vs. Aldecoa & Co., 17 Phil. 486).
2. Yes, the trial court erred. The complaint should be dismissed. The Court also dismissed defendant’s counterclaim.
The decision appealed from is reversed. Judgment is entered dismissing both plaintiff’s complaint and defendant’s counterclaim, with costs against plaintiff-appellee.