Philippine National Bank v. Philippine Trust Company

DIAZ, J.:

This case was commenced by the plaintiff bank in the Court of First Instance whence it came to compel the two defendant entities to pay it, jointly and severally, an indemnity of P250,000 with legal interest on said sum from November 4, 1939, for damages which it alleges to have sustained by reason of their violation of certain contracts into which the three had entered on September 1, 1924, and January 5, 1923. (Exhibits J and C.) The defendants answered, denying the facts set forth in the complaint, excepting those relating to the personality of the three as corporations organized in conformity with law, and alleging the three special defenses specified in their answer. After trial, the lower court made the findings appearing in the decision and rendered judgment in the following terms: The court finds that defendants, far from benefiting at the cost or to prejudice of the plaintiff, suffered enormous and irreparable losses in their attempt to rehabilitate the Mindoro Sugar Company with the object of recovering the value of their first mortgage and also, if possible, that of the second mortgage of plaintiff.

Plaintiff's action is wholly without merit. Wherefore, the complaint is dismissed, with costs against the plaintiff. So ordered.

The lower court decided the case in the manner above-indicated after considering the following stipulation of facts which the parties had submitted together with the documents' therein mentioned: STIPULATION OF FACTS AND RECORD OF PRESENTATION OF DOCUMENTARY EVIDENCE AND OBJECTIONS THERETO Come now the parties to the above-entitled case, by their undersigned attorneys, and hereby agree to the following facts: 1. That the parties admit the allegations contained in paragraph 1 of the amended complaint of plaintiff referring to the residence, personality and capacity to sue and to be sued of the parties hereto. 2.

That on December 21, 1917, the Mindoro Sugar Company, a corporation duly organized and existing under and by virtue of the laws of the Philippine Islands, executed a deed of trust in favor of the Philippine Trust Company as trustee, a copy of which is attached as Exhibit 1 to the amended answer of defendants of May 31, 1935, and is hereby made a part of this stipulation of facts, as Exhibit A. 3. That on April 14, 1921, the Mindoro Sugar Company executed a mortgage in favor of the Philippine National Bank, a certified copy of which is hereto attached as Exhibit B and is made a part hereof. 4.

That on January 5, 1923, the parties hereto entered into an agreement, a copy of which is attached to the original complaint as Exhibit A and another copy of which is hereto attached as Exhibit C and made a part hereof. 5. That the Mindoro Sugar Company having failed to pay the mortgage debt secured by the mortgage attached hereto as Exhibit B and having otherwise failed to comply with the conditions contained therein, and pursuant to the agreement contained in Exhibit C hereof, the Philippine National bank brought a foreclosure suit in the Court of First Instance of Mindoro against the Mindoro Sugar Company in which the Philippine Trust Company as trustee was made a party defendant by reason of said deed of trust, said case being docketed as civil case No. 370; a certified copy of the complaint and decision therein rendered being hereto attached as Exhibits D and D-1, respectively, a certified copy of the excerpt from the minutes of the session of the Supreme Court of the Philippine Islands held on January 12, 1925, as Exhibit D-2, and a certified copy of the judgment rendered by the Supreme Court of the Philippine Islands in the said case, dated January 23, 1925, as Exhibit D-3.

6.

Plaintiff offers in evidence a memorandum signed by M.H. O'Malley on November 9, 1923, marked Exhibit E. The defendants admit the authenticity of the memorandum and the sending thereof to plaintiff; that M.H. O'Malley was the then President of the Philippine Trust Company and, with the observation that the terms of the agreements of January 5, 1923, and September 1, 1924, attached to the original complaint as Exhibits A and B and referred to in this stipulation as Exhibits C and J, respectively, are clear and require no evidence aliunde of their correct interpretation, make no objection thereto. Plaintiff observes, on the other hand, that the terms of the agreements of January 5, 1923 and September 1, 1924, are not so clear without evidence aliunde as defendants themselves raise the issue in their second amended answer as to the purpose and intent of the parties to said agreement; and plaintiff further makes similar observations in hereafter offering Exhibits F, G, H, I, I-1, K, K-2 and O-4.

In reply to the foregoing observation of plaintiff upon the assumption that such observation as well as those of defendants will serve in lieu of objections and answers thereto, defendants contend that the allegations of their reamended answer as to the purposes and intent of the agreement of September 1, 1924, are in support of the literal and logical meaning of said agreement and in answer to the allegations of plaintiff's complaints to the effect that the purposes and intent of the parties were different from those expressed in said agreement. 7. Plaintiff offers in evidence the joint letter of the Philippine Trust Company and the Union Insurance Society of Canton, Ltd., under date July 16, 1924, to the Philippine National Bank which has been marked Exhibit F for identification.

Defendants admit its authenticity and the sending of the same to plaintiff and, with the observation that the terms of said agreement of September 1, 1924, are clear and require no evidence aliunde as to their correct interpretation, make no objection thereto. In order to complete the sense of Exhibit F defendants offer defendants' Exhibit F-1 which is admitted to be a true copy of the letter of June 17, 1924, mentioned in Exhibit F and it is agreed that it shall be considered in connection therewith. 8.

Plaintiffs offers in evidence an excerpt from the minutes of the board of directors of the Philippine National Bank of July 18, 1924, marked Exhibit G. Defendants admit the authenticity thereof and, with the observation that the terms of said agreement of September 1, 1924 are clear and require no evidence aliunde as to their meaning, make no objection thereto. 9. Plaintiffs offers in evidence the joint letter of the defendants to the plaintiff under date July 23, 1924, marked Exhibit H. Defendants admit its authenticity and the sending of the same to plaintiff and, with the observation that the terms of said agreement of September 1, 1924 are clear and require no evidence aliunde as to their meaning, make no objection to the admission of said letter.

10. Plaintiff offers in evidence letters of the Philippine Trust Company to the Philippine National Bank marked Exhibits I and I-1, respectively, and dated August 7 and 8, 1924. Defendants admit their authenticity and the sending thereof to plaintiff and, with the observation that the terms of said agreement of September 1, 1924 are clear and require no evidence aliunde as to their meaning, make no objection to the admission of said letters.

11. Plaintiffs offers in evidence the agreement of September 1, 1924, which is attached to the original complaint as Exhibit B, is pleaded in defendants' answers and has been marked Exhibit J of this stipulation, and defendants join with plaintiff in the offer thereof as evidence in this case. 12.

Plaintiff offers in evidence Exhibit K, being a letter of May 6, 1925, of the defendant Philippine Trust Company to the plaintiff Philippine National Bank.

Defendants admit its authenticity and the sending of the same to plaintiff and, with the same observation as to the clarity of the terms of said agreement of September 1, 1924, make no objection to the admission of such letter. It is stipulated that the language of the last paragraph of Exhibit K, "whatever balance may be due your bank after liquidation of the crop just harvested" refers to loans of the Philippine National Bank made under the three-party financing agreement mentioned in the agreement of January 5, 1923 (Exhibit C of the stipulation) and has no reference to the second mortgage in question; that said three-party financing agreement began before the execution of the said agreement of January 5, 1923, and all advances thereunder were fully liquidated before the resignation of the Philippine Trust Company as trustee as shown by the statement marked Exhibit K-1 and made a part of this stipulation.

Plaintiff also offers in evidence an excerpt from the minutes of the board of directors of the Philippine National Bank of May 8, 1925 marked Exhibit K-2. Defendants admit its authenticity and, with the same observation as to the clarity of the terms of said agreement of September 1, 1924, make no objection to the admission of said Exhibit K-2. 13.

Plaintiff offers in evidence the notices given by the Philippine National Bank to the defendants and to Mons, M.J. O'Doherty, successor of the defendant Philippine Trust Company as trustee under the deed of trust and which notices bear date April 17, 1929, and are marked Exhibits L, L-1 and L-2. Defendants admit their authenticity and the receipt thereof but object to that portion thereof assuming the liability of the defendants under the agreement of September 1, 1924 as self-serving and inadmissible to vary the terms of that agreement. In connection with Exhibits L, L-1 and L-2, it is stipulated that the properties and franchises of the Mindoro Sugar Company were first advertised on April 1, 1929 to be sold on May 1, 1929, by Mons.

M.J. O'Doherty as trustee under the deed of trust in place of the Philippine Trust Company, resigned, as evidenced by the advertisements in the Free Press marked defendants' Exhibits L-3, L-4, L-5 and the affidavit of publication of April 20, 1929 marked defendants' Exhibit L-6 and all attached hereto and made a part thereof. 14. Plaintiff offers in evidence the notices of sale of August 26, 1929, which is signed by Francisco Ortigas, Leopoldo Kahn, Wenceslao Trinidad, Joseph E.H. Stevenot and Fulgencio Borromeo constituting the board of trustees which succeeded Mons.

M.J. O'Doherty as trustee under said deed of trust Exhibit A of the stipulation of facts. The defendants admit the authenticity of said notice which is marked Exhibit M for identification and join with the plaintiff in the introduction hereof as evidence. 15.

Plaintiff offers in evidence that deed of sale of November 5, 1930, executed by the justice of the peace of San Jose, Mindoro, in favor of the Roman Catholic Archbishop of Manila which has been marked Exhibit N, and defendants admit the authenticity thereof and join with the plaintiff in the introduction of said deed. 16. It is stipulated that there was no provision made for the recognition or payment of the second mortgage in the sale of the properties of Mindoro Sugar Company by said board of trustees under the deed of trust as disclosed by Exhibits M and E hereof.

It is further stipulated that after the month of April, 1929, neither of the defendants further financed the crops or the operation of the Mindoro Sugar Estate.

It is further stipulated that the defendants gave no notice to plaintiff of the cessation of the financing of the crops or operation of the Mindoro Sugar Estate, but it is the contention of the defendants that the plaintiff was, in the month of April, 1929, as shown by Exhibits L, L-1 and L-2 fully informed by the contents of the published notice of sale (Exhibit L-3) of the resignation of defendant Philippine Trust Company as trustee under the deed of trust and of the proposed sale of the property and franchises of the Mindoro Sugar Company by the succeeding trustee under said deed of trust; that such resignation as trustee of the Philippine Trust Company and the proceedings to foreclose the deed of trust were inconsistent with the further financing of the operation of the Mindoro Sugar Company and were ample warning to the plaintiff to take whatever steps it believed necessary to protect its right if considered of any value under its second mortgage (Exhibit B) and under the decision of foreclosure thereof (Exhibit D-1 hereof).

Plaintiff insists, however, that it also had rights under the agreements marked Exhibits C and J hereof. It is further stipulated that the plaintiff never executed the judgment of foreclosure (Exhibit D-1) by the sale of the properties of the Mindoro Sugar Company thereunder and never collected the amount of said second mortgage or any part thereof. It is further stipulated that if the Articles of Incorporation of the San Jose Development Co., mentioned in said agreement of January 5, 1923 (Exhibit C hereof) were ever drafted, that prospective corporation was never capitalized and never functioned.

17. Plaintiff offers in evidence a letter of December 27, 1928, to the plaintiff bank which has been marked Exhibit O for identification. Defendants admit the authenticity of said letter and the sending thereof to plaintiff and make no objection thereto.

The defendants offer the letters which are correlated to Exhibit O as follows: Letter of March 31, 1928, written by the Philippine Trust Company as trustee to the Philippine National Bank proposing to pay the latter a nominal sum for plaintiff's second mortgage and the judgment in foreclosure thereon and which letter is marked defendants' Exhibit O-1 for identification; letter of the Philippine National Bank dated April 11, 1928, in reply to Exhibit O-1 and which letter of April 11, 1928, is marked defendants' Exhibit O-2; letter of April 21, 1928, of the Philippine Trust Company as trustee to the plaintiff bank marked defendants' Exhibit O-3 for identification. Plaintiff admits the authenticity of defendants' Exhibits O-1, O-2 and O-3 and makes no objection to their introduction in connection with Exhibit O. 18. Plaintiff offers in evidence an except from the minutes of the board of directors of the plaintiff bank of February 15, 1929, marked Exhibit O-4, in which the proposal of the Philippine Trust Company as trustee (Exhibit O) is rejected.

Defendants admit the authenticity of the excerpt (Exhibit O-4) but object to that part thereof which assumes the liability of the Philippine Trust Company as trustee to the plaintiff bank for the full amount of its second mortgage as a self-serving statement and contend that the same is inadmissible to vary the terms of the agreement of September 1, 1924. 19. In order to further clarify the record evidence offered by the plaintiff as Exhibits L, L-1 and L-2 and M and N, the defendants mark and present the following: Original letter of March 13, 1929, of Earl B. Schultz as Bank Commissioner to the Philippine Trust Company recommending its resignation as trustee, marked defendants' Exhibit P for identification; Proceedings of April, 1929 regarding the resignation of the Philippine Trust Company as trustee under said deed of trust of December 21, 1917, marked defendants' Exhibit Q for identification; Proceedings regarding the appointment on April 1, 1929 of Mons.

M.J.

O'Doherty as trustee under said deed of trust of December 21, 1917, in place of the Philippine Trust Company, marked defendants' Exhibit R for identification; Proceedings regarding the acceptance by Mons. M.J. O'Doherty on April 1, 1929 of his appointment as trustee under said deed of trust, marked defendants' Exhibit S for identification; Proceedings regarding the resignation of Mons. M.J. O'Doherty as such trustee and the appointment as a board of trustees of Francisco Ortigas, Leopoldo Kahn, Wenceslao Trinidad, Joseph E.H. Stevenot and Fulgencio Borromeo in place of Mons.

M.J. O'Doherty on the 14th of June, 1929, marked defendants' Exhibit T for identification; Proceedings regarding the acceptance of the said Francisco Ortigas, Leopoldo Kahn, Wenceslao Trinidad, Joseph E.H. Stevenot and Fulgencio Borromeo as a board of trustees in place of Mons. M.J. O'Doherty under date June 15, 1929, marked defendants' Exhibit U for identification; Signed duplicate of certificate of the justice of the peace of San Jose, Mindoro, as to the sale of the properties under the deed of trust of December 21, 1917, in conformity with the notice of sale of August 26, 1929, heretofore marked Exhibit M-8, and which certificate of sale is necessary to complete the record consisting of said Exhibits M and N, and which is marked defendants' Exhibit V for identification; Affidavit of the notice of sale of August 26, 1929, which is also necessary to complete the record of proceedings of foreclosure under the deed of trust, and which affidavit of publication is marked defendants' Exhibit W for identification.

Plaintiff admits the authenticity of defendants' Exhibits P to W, inclusive, and makes no objection to their introduction as evidence. 20. It is stipulated that the sums due from the Mindoro Sugar Company and secured by said deed of trust at the time of its foreclosure were as recited in paragraph 4 of the reamended answer of the defendants, and that the sales price of three million pesos (P3,000,000) bid on the property of the Mindoro Sugar Company at the time of said sale on November 4, 1929 was applied on account of the indebtedness of five million, five hundred thirty-nine thousand three hundred forty and 84/100 pesos (P5,539.340.84) due to the Roman Catholic Archbishop of Manila, and that none of the other creditors mentioned in said paragraph 4 of the reamended answer received any part of the sales price of the said properties.

21. Defendants ask that clauses 3 and 4 of the first special defense of the reamended answer be treated as amended to conform to the agreed facts so as to read as follows: "3. That on the 1st day of April, 1929, the Philippines Trust Company at the suggestion of the Bank Commissioner resigned as trustee for the bondholders of Mindoro Sugar Company, and said bondholders appointed in its place Mons.

M.J. O'Doherty, Archbishop of Manila, as trustee, and said Philippine Trust Company as such former trustee thereupon surrendered possession of the properties and franchises of the said Mindoro Sugar Company to the said Mons. M.J., O'Doherty; that thereupon the said Mons. M.J. O'Doherty as such trustee advertised the properties of said Mindoro Sugar Company for sale under said deed of trust at San Jose, Mindoro, on May 1, 1929, but desisted from making the sale at that time in order to give the prospective sale more publicity and afford prospective buyers more time in which to prepare for the purchase buyers more time in which to prepare for the purchase; that on the 15th day of June, 1929, the said Mons.

M.J. O'Doherty resigned as such trustee and Messrs. Francisco Ortigas, Leopoldo Kahn, Wenceslao Trinidad, Joseph E.H. Stevenot and Fulgencio Borromeo were appointed as a board of trustees under the terms of said deed of trust to take the place of Mons. M.J. O'Doherty who thereupon surrendered possession of the properties of the said Mindoro Sugar Company to said board of trustees of trustees.

"4.

That on the 26th of August, 1929, the said board of trustees readvertised said properties of the Mindoro Sugar Company for sale at San Jose, Mindoro, on the 4th of November, 1929, and at that time and place caused the same to be duly sold at public auction by justice of the peace of San Jose, Mindoro, in accordance with the provisions of the Deed of Trust to satisfy certain amounts due from the Mindoro Sugar Company under the said deed of trust, namely: 1. Roman Catholic Archbishop of Manila . .

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P5,539.340.84 2. Installment and interest due Philippine Government on account of Friar Land sale, certificate No. 2 . .

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. 240.857.22 3. Philippine Trust Company for advances .

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777,126.26 4. Bondholders, principal and interest . .

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3,303,739.20 Total . . .

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