Bank Of The Philippine Islands v. Pineda

BIDIN, J.:

This is a Petition for Review on certiorari, seeking the reversal of the Decision of the First Division1 of the Court of Appeals in CA- G.R. No. 66365-R entitled "Benjamin Pineda, etc., plaintiff-appellee vs. Southern Industrial Projects Inc., Bacong Shipping Company, S.A. Gacet Inc., Interocean Shipping Corporation and Peoples Bank and Trust Co., defendant-appellant, " affirming the decision of the trial court, the dispositive portion of which reads: Wherefore, the appealed decision being in accordance with the law and the evidence, the same is hereby affirmed, with proportionate cost against appellant. The facts of this case as found by the Court of Appeals are as follows: Southern Industrial Project, Inc. (SIP for short) is a corporation the majority stockholder of which is the Concon Family.

Bacong Shipping Company, S.A. (Bacong, for short) is a Panamanian corporation organized to operate vessels purchased by SIP under Panamanian Flag and its president is Gregorio A. Concon. SIP and/or Bacong purchased the vessels SS "Southern Comet," SS "Southern Express"

and SS "Southern Hope," thru financing furnished by defendant Peoples Bank and Trust Company, now the Bank of the Philippine Islands. To secure the payment of whatever amounts maybe disbursed for the aforesaid purpose, the said vessels were mortgaged to Peoples Bank and Trust Company.

For the operation of the said vessels, these were placed under the booking agency of defendant Interocean Shipping Corporation, with the undertaking that the freight revenues from their charter and operation shall be deposited with the Trust Department of Peoples Bank and Trust Company and that disbursements made therefrom shall be covered by vouchers bearing the approval of SIP. As Peoples Bank and Trust Company and SIP were not satisfied with the amount of revenues being deposited with the said Bank, it being suggested that diversions thereof were being made, Gregorio A. Concon of SIP and/or Bacong and Roman Azanza of Peoples Bank and Trust Company, organized S.A. Gacet, Inc. to manage and supervise the operation of the vessels with Ezekiel P. Toeg as the manager thereof. Accordingly, on August 15, 1966, a Management Contract (Exh.

A., Exh. 1-SIP and Exh. 3-Peoples Bank) was entered into between SIP and GACET, Inc., placing the supervision and management of the aforementioned vessels in the hands of GACET, Inc., which was to run for a period of six (6) months, renewable at the will of the parties, without however, terminating the booking agency of interocean Shipping Corporation.

The said Management Contract stipulates, among others, that - The agent GACET may not borrow money for the husbanding of vessels "without special authority" from the appellant bank (5 [f]) All office records required as well as books of accounts" shall "be available for inspection"

by the appellant bank and "may at any time temporarily take possession of such records and books to make a complete audit" (5 [h]) The appellant bank may-obtain copies of documents from any or all of GACET's booking agents pertaining to transactions entered into by said booking agents" (5 (h)) ); The appellant bank has the right "(t)o inquire and obtain information, by telephone, or otherwise such data as the name of the shippers, nature of cargo, destination of cargo, freight rates, etc.

" (5 (h)) ); and, The appellant bank has the right "(t)o check on remittances made by shipper to the booking agent" etc.

(5)).

Likewise, under the terms of said Management Contract, the Peoples Bank and Trust Company was designated as depository of all revenues coming from the operation of the subject vessels thereby enabling it to control all expenses of GACET, Inc., since they win all be drawn against said deposit. During the period comprising March 16, 1967 and August 25, 1967, GACET and Interocean in performing their obligations under said Management Contract, contracted the services of herein plaintiff-appellee, Benjamin Pineda doing business under the name and style "Pioneer Iron Works," to carry out repairs, fabrication and installation of necessary parts in said vessels in order to make them seaworthy and in good working operation.

Accordingly, repairs on the vessels were made. Labor and materials supplied in connection therewith, amounted to P 84,522.70, P 18,141.75 of which was advanced by Interocean, thereby leaving a balance of P 62,095.95. For this balance, Interocean issued three checks (Exhibit I) and the third one for P 17,377.57 (Exh.

J). When these checks were however presented to the drawee, Peoples Bank and Trust Company, they were dishonored as defendant Interocean stopped payment thereon (Exhs. H-2,I-2 & J-2).

Meanwhile and by reason of the inability of SIP and/or Bacong to pay their mortgage indebtedness which was past due since 1964, the mortgagee Peoples Bank and Trust Company threatened to foreclose the mortgage on said vessels. In order to avoid the inconvenience and expense of imminent foreclosure proceedings, SIP and/or Bacong sold said vessels to Peoples Bank by way of dacion en pago. The sale is evidenced by three (3) deeds of sale all dated January 19, 1968 (Exhs.

C, D, & E). Immediately preceding the execution of said deeds of sale, SIP, Bacong and Peoples Bank executed a "Confirmation of Obligation" (Exh.

"B") whereby SIP and Bacong (1) acknowledged being indebted to defendant bank, the payment of which indebtedness was secured by chattel mortgages on said vessels, (2) agreed to sell and convey to defendant bank the aforementioned vessels by separate deed of sale for the total purchase price of P 3,038,000.00 to be applied as partial payment on account of their mortgage indebtedness; and (3) expressly recognized that after such application, a substantial balance will still remain unpaid and owing by SIP and Bacong which remaining balance they have agreed to confirm and pay to the bank on demand with 12% interest per annum. Likewise, listed in the "Confirmation of Obligation" were some of the accounts acknowledged and confirmed by the parties to be outstanding at the time, in connection with the subject vessels as follows- a) Accrued Salaries and allotments.

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. . P180,687.04 b) National Shipyard .

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. . 31,068.57 c) Pioneer Iron Works : .

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82,877.57 d) Pacific Engineering Corporation . . .

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152,094.85 e) Esso Standard Eastern Account . . .

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. 1,693,913.25 f) Cost of bailing out of the vessels in Japan crews, salaries, etc. .

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. . 328,692.50 TOTAL.

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