Zamboanga Transportation Company v. Bachrach Motor Co

VILLA-REAL, J.:

We are here concerned with two appeals, one taken by the defendant the Bachrach Motor Co., Inc., from the judgment of the Court of First Instance of Zamboanga in civil case No. 1286 of said court (G.R. No. 27694) holding that the chattel mortgage executed by the president and general manager of the plaintiff corporation, the Zamboanga Transportation Co., Inc., is null and void, and ordering the register of deeds of said province to cancel the registration of said mortgage at the instance of said defendant, the Bachrach Motor Co., Inc., with costs; and the other by the defendant Zamboanga Transportation Co., Inc., from the judgment of the Court of First Instance of Manila in civil case No. 28123 (G.R. No. 27997) ordering said defendant Zamboanga Transportation Co., Inc., the sum of P18,298.58, with 10 per cent interest on the sum of P6,254.81, from May 19, 1925, and legal interest on the balance of said sum from May 23, 1925, when the complaint was filed, plus the costs, and dismissing all the counterclaims and cross complaints set up by the defendant corporation.

In support of its appeal, the Bachrach Motor Co., Inc., assigns the following alleged errors as committed by the Court of First Instance of Zamboanga in its judgment to wit: 1. The trial court erred in not finding that Mr. Jose Erquiaga, president, general manager, director, stockholder, auditor, attorney and legal adviser, and principal witness of the Zamboanga Transportation Co., Inc., personified and practically constituted that corporation at the time he signed the chattel mortgage in question in its behalf; 2. The trial court erred in not finding that the so-called board of directors of the Zamboanga Transportation Co., Inc., was composed of "dummy"

directors, who were mere puppets in the hands of the said Jose Erquiaga; 3. The trial court erred in not finding that the pretended resolution of the said so-called board of directors dated of May 20, 1925 (Exhibit FF), purporting to disapprove the chattel mortgage in question was mere contrivance of the said Jose Erquiaga, framed up for the purpose of attempting to avoid the obligation of said mortgage; 4. Trial court erred in holding that the chattel mortgage in question was void and of no effect because it had not been previously approved by the Public Utility Commission; 5.

The trial court erred in not dismissing plaintiff's complaint. In support of its appeal the Zamboanga Transportation Co., Inc., in turn assigns the following alleged errors as committed by the Court of First Instance of Manila, to wit: 1. The Manila trial court erred in holding that chattel mortgage in question was valid and binding upon the corporation notwithstanding the fact that it was disapproved by a resolution of its board of directors and that it had not been previously approved by the Public Utility Commission as required by law; 2.

In not finding that Jose Erquiaga, president and general manager of the corporation, executed and signed said mortgage upon the express condition that it would not be valid unless it was ratified by a resolution of the board of directors, as required by the by-laws of the corporation and that it was agreed that in case said mortgage was not approved by said board of directors, Bachrach would be at liberty to foreclose the other two previous mortgage which were the real basis of the debt represented by the mortgage in question; 3.

In not finding as a fact that all previous contracts of any kind signed by Jose Erquiaga, as president or general manager or by his predecessors in office, affecting the company, had to be submitted for approval or ratification by the board of directors, as shown by the minutes kept by the secretary of the corporation, and that Bachrach was in possesssion of and knew the by-laws of the company at least since 1923; 4. In not finding that it was verbally agreed between the said Jose Erquiaga and E. M. Bachrach that the chattel mortgage in question would not be registered in the offices of the register of deeds concerned until it was approved by the board of directors of the mortgagor and by the Public Utility Commission; 5. In not finding that it was also agreed between said Jose Erquiaga, E. M. Bachrach, and Mons.

Jose Clos, Bishop of Zamboanga, in connection with the execution of the agreement of February 14, 1925, that the mortgagee would not foreclose said mortgage before the return of the Bishop of Zamboanga from his trip to Rome calculated to last six months, and without first giving the bishop opportunity to pay the whole amount of the mortgage with a ten per cent rebate; 6. In utterly disregarding the testimony, in support of mortgagor's contention, of the Right Rev. Jose Clos, Bishop of Zamboanga, and in not admitting his deposition, as corrected by deponent, notwithstanding the fact that said deposition was obtained at mortgagee's request, and the questions made to the bishop were made by mortgagee's attorney in the absence of the mortgagor or his attorney; 7. In not finding as a fact that at least two of the directors, Jose Camins and Ciriaco Bernal, were big stackholders owning nearly twenty thousand pesos of stock each and were not dummy directors who were mere puppets in the hands of said Jose Erquiaga, president and general manager of the corporation; 8.

In finding that the mortgator took advantage of the alleged benefits of the mortgage in question with the full knowledge of said board of directors and that the validity of the mortgage was not disputed until after the mortgagee began proceedings for the foreclosure of said mortgage, when as a matter of fact the mortgagor filed the action in the Zamboanga court asking that the mortgage, be declared null and void as soon as he discovered that the mortgage had been registered with the register of deeds of Zamboanga, contrary to what had been stipulated, and before the mortgator had any notice that the mortgagee was going to foreclose said mortgage; 9. In finding that the execution of the chattel mortgage in question was merely a novation of the two previous mortgages in favor of the mortgagee and of the mortgage in favor of the Bishop of Zamboanga; The complaint filed by the Zamboanga Transportation Co., Inc., against the Bachrach Motor Co., Inc., in the Court of First Instance of Zamboanga seeks the annulment of a chattel mortgage executed on Febuary 14, 1925 (Exhibit B and C), by the plaintiff's president and general manager in favor of the Bachrach Motor Co., Inc. The complaint filed by the Bachrach Motor Co., Inc., against the Zamboanga Transportation Co., Inc., in the Court of First Instance of Manila seeks the foreclosure of said chattel mortgage.

By their respective assignments of error both appellants raise questions of fact as well as of law, rendering it necessary to make our findings of facts. The preponderance of the evidence established the following pertinent and essential facts: Both appellants are corporations created and organized under the laws of the Philippine Islands. The Zamboanga Transportation Co., Inc., is managed by a board of directors composed of five stockholders elected at a general annual meeting of the stockholders.

The directors for the year 1925 were elected at the general meeting of the stockholders on January 26th of that year, as appears from the following copy of the minutes: MINUTES OF THE GENERAL MEETING OF STOCKHOLDERS OF THE ZAMBOANGA TRANSPORTATION CO., INC., HELD ON JANUARY 26, 1925, IN THE OFFICES OF THE COMPANY AT NO. 20 CORCUERA STREET, ZAMBOANGA, P. I. The meeting was called to order with the Vice-President, Mr. Jose Erquiaga, in the absence of the President, Mr. Jose Longa, as chairman at 5 o'clock in the afternoon of this 26th day of January 1925, the following stockholders being present either personally or by proxy: Shares Carlos Camins, in his own behalf 1 Jose Erquiaga, in his own behalf 466 Valera C. de Erquiaga, for Jose Erquiaga 1,800 Eduardo Montenegro, for Jose Erquiaga 1,000 Mons. Jose Clos, Bishop of Zamboanga, for Jose Erquiaga 2,410 Mission of the society of Jesus, for Jose Erquiaga 115 Melecio Ramos, for Jose Erquiaga 40 Jose Arguirre, for Jose Erquiaga 200 Ciriaco Bernal, in his own behalf 1,854 Superior of the Jesuit Fathers, for Jose Erquiaga 200 Dolores C. de Longa, for G. J. Cristobal 1,950 G. J. Cristobal, in his own behalf 1 Total