Pilipinas Bank v Glee Chemical Laboratories

X – Glee Chemical Laboratories Y – Pilipinas Bank

BAR Question:
X applied for a loan from Y, secured by a real estate mortgage. X claims that they never received
the proceeds of the loan because Y applied them to a loan contracted by a third person. Y claims that
the real estate mortgage had a stipulation in favor of a third person. SC held that the stipulation is not
valid because it was not proven that such was added with the approval of X’s president.

Should the stipulation pour autrui be given effect?

Suggested answer:
NO.
SC said that notarization only creates a presumption of the due execution of a document, and
such may still be overcome by other evidence. To constitute a valid stipulation pour autrui, it must be
the purpose and intent of the stipulating parties to benefit the third person and it is not sufficient that
the third person may be incidentally benefited by the stipulation. In this case, an acceptance of such
stipulation can take effect only if X’s president (Cheng Yong) indeed intended to insert such stipulation
in the Real Estate Mortgage.
Y claims that the stipulation is valid, contending that it was notarized, and thus, validly
executed. In this case, the presumption cannot even be used by Y in its favor because the clerk admitted
that X’s president and manager were not present during its notarization.

NO.
SC said that notarization only creates a presumption of the due execution of a document, and
such may still be overcome by other evidence. To constitute a valid stipulation pour autrui, it must be
the purpose and intent of the stipulating parties to benefit the third person and it is not sufficient that
the third person may be incidentally benefited by the stipulation. In this case, an acceptance of such
stipulation can take effect only if X’s president (Cheng Yong) indeed intended to insert such stipulation
in the Real Estate Mortgage.
Y claims that the stipulation is valid, contending that it was notarized, and thus, validly
executed. In this case, the presumption cannot even be used by Y in its favor because the clerk admitted
that X’s president and manager were not present during its notarization.