GR L 8369; (April, 1956) (Digest)
G.R. No. L-8369; April 20, 1956
THE NATIONAL CITY BANK OF NEW YORK, plaintiff-appellant, vs. YEK TONG LIN FIRE & MARINE INSURANCE CO., defendant-appellant.
FACTS
In Civil Case No. 4178 of the Court of First Instance of Pampanga, Rafael Fernandez was appointed receiver of the properties of the Mabalacat Sugar Company. The defendant, Yek Tong Lin Fire & Marine Insurance Co., acted as surety on Fernandez’s receiver’s bond for P100,000, which obligated them to answer for damages caused to the properties of Mabalacat Sugar Company due to the receiver’s negligence, abandonment, or other inexcusable cause. As receiver, Fernandez issued three sugar quedans (Nos. 306, 307, and 324) which were later assigned to him in his private capacity. Fernandez, in his private capacity, pledged these quedans to the plaintiff, National City Bank of New York, as security for an overdraft credit facility. The Bank later discovered the quedans were fraudulent, as the sugar they represented did not exist, causing the Bank a loss of P11,611.03. Fernandez was later replaced as receiver due to insolvency proceedings, and the receivership case was terminated on June 29, 1940. The Bank demanded payment from the Insurance Company on the receiver’s bond and, upon refusal, filed the present action for recovery.
ISSUE
Whether the plaintiff Bank has a cause of action to recover its losses directly from the defendant Insurance Company based on the receiver’s bond filed for Rafael Fernandez.
RULING
No. The Supreme Court affirmed the trial court’s dismissal of the complaint. The receiver’s bond was executed specifically in favor of the Mabalacat Sugar Company and was conditioned to answer only for damages caused to the properties of the Mabalacat Sugar Company due to the receiver’s acts. The complaint did not allege, nor was it proven, that the Mabalacat Sugar Company suffered any damage from the receiver’s issuance of the fraudulent quedans. The bond was not intended for the benefit of third parties, such as the Bank, who may have suffered losses from transactions with the receiver in his private capacity. Therefore, the Bank has no direct cause of action against the Insurance Company on this bond. The Court clarified that Fernandez’s replacement as receiver did not discharge the bond, as the receivership had not been fully settled, and that the Manila trial court had jurisdiction since the receivership case had already terminated and both parties resided in Manila.