Peoples Bank Vs Dahican Lumber Digest

PEOPLE'S BANK AND TRUST COMPANY vs.

DAHICAN LUMBER COMPANY After July 13, 1950 - the date of execution of the mortgages mentioned
(G.R. No. L-17500 May 16, 1967) above - DALCO purchased various machineries, equipment, spare parts and
supplies in addition to, or in replacement of some of those already owned
Facts: and used by it on the date aforesaid. Pursuant to the provision of the
mortgage deeds quoted theretofore regarding "after acquired properties,"
On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West the BANK requested DALCO to submit complete lists of said properties but
Virginia corporation licensed to do business in the Philippines sold and the latter failed to do so. In connection with these purchases, there
assigned all its rights in the Dahican Lumber concession to Dahican Lumber appeared in the books of DALCO as due to Connell Bros. Company
Company - hereinafter referred to as DALCO - for the total sum of (Philippines) - a domestic corporation who was acting as the general
$500,000.00, of which only the amount of $50,000.00 was paid. Thereafter, purchasing agent of DALCO -the sum of P452,860.55 and to DAMCO, the
to develop the concession, DALCO obtained various loans from the People's sum of P2,151,678.34.chan
Bank & Trust Company amounting, as of July 13, 1950, to P200,000.00. In On December 16, 1952, the Board of Directors of DALCO, in a special
addition, DALCO obtained, through the BANK, a loan of $250,000.00 from meeting called for the purpose, passed a resolution agreeing to rescind the
the Export-Import Bank of Washington D.C., evidenced by five promissory alleged sales of equipment, spare parts and supplies by CONNELL and
notes of $50,000.00 each, maturing on different dates, executed by both DAMCO to it.
DALCO and the Dahican America Lumber Corporation, a foreign corporation
and a stockholder of DALCO, On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC,
demanded that said agreements be cancelled but CONNELL and DAMCO
As security for the payment of the abovementioned loans, on July 13, 1950 refused to do so. As a result, on February 12, 1953; ATLANTIC and the
DALCO executed in favor of the BANK a deed of mortgage covering five BANK, commenced foreclosure proceedings in the Court of First Instance of
parcels of land situated in the province of Camarines Norte together with Camarines Norte against DALCO and DAMCO.
all the buildings and other improvements existing thereon and all the
personal properties of the mortgagor located in its place of business in the Upon motion of the parties the Court, on September 30, 1953, issued an
municipalities of Mambulao and Capalonga, Camarines Norte. On the same order transferring the venue of the action to the Court of First Instance of
date, DALCO executed a second mortgage on the same properties in favor Manila.
of ATLANTIC to secure payment of the unpaid balance of the sale price of
the lumber concession amounting to the sum of $450,000.00. Both deeds On August 30, 1958, upon motion of all the parties, the Court ordered the
contained a provision extending the mortgage lien to properties to be sale of all the machineries, equipment and supplies of DALCO, and the
subsequently acquired by the mortgagor. same were subsequently sold for a total consideration of P175,000.00
which was deposited in court pending final determination of the action. By
Both mortgages were registered in the Office of the Register of Deeds of a similar agreement one-half (P87,500.00) of this amount was considered
Camarines Norte. In addition thereto DALCO and DAMCO pledged to the as representing the proceeds obtained from the sale of the "undebated
BANK 7,296 shares of stock of DALCO and 9,286 shares of DAMCO to secure properties" (those not claimed by DAMCO and CONNELL), and the other
the same obligation. half as representing those obtained from the sale of the "after acquired
properties".
Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon
its maturity, the BANK paid the same to the Export-Import Bank of
Washington D.C., and the latter assigned to the former its credit and the Issue:
first mortgage securing it. Subsequently, the BANK gave DALCO and
DAMCO up to April 1, 1953 to pay the overdue promissory note.c W/N the plaintiffs are entitled to damages and on what basis.
Held:

The Court held that the plaintiffs' right to recover damages from the
defendants is based on the provisions under Art. 1313 and 1314 of the New
Civil Code which provide that creditors are protected in cases of contracts
intended to defraud them; and that any third person who induces another
to violate his contract shall be liable for damages to the other contracting
party. Similar liability is demandable under Arts. 20 and 21 — which may be
given retroactive effect (Arts. 225253) — or under Arts. 1902 and 2176 of
the Old Civil Code.

The facts of this case, as stated heretofore, clearly show that DALCO and
DAMCO, after failing to pay the fifth promissory note upon its maturity,
conspired jointly with CONNELL to violate the provisions of the fourth
paragraph of the mortgages under foreclosure by attempting to defeat
plaintiffs' mortgage lien on the "after acquired properties". As a result, the
plaintiffs had to go to court to protect their rights thus jeopardized.
Defendants' liability for damages is therefore clear.
However, the measure of the damages cannot be determined yet

considering that the sale of the real properties subject to the mortgages
under foreclosure has not been effected, and considering further the lack
of evidence showing that the true value of all the properties already sold
was not realized because their sale was under stress, the Court felt that it
does not have the true elements or factors that should determine the
amount of damages that plaintiffs are entitled recover from defendants.
It is, however, considered that upon the facts established, all the expenses
of the Receivership, which was deemed necessary to safeguard the rights
of the plaintiffs, should be borne by the defendants, jointly and severally,
in the same manner that all of them should pay to the plaintiffs, jointly a
severally, attorney's fees awarded in the appealed judgment.
In consonance with the portion of this decision concerning the damages

that the plaintiffs are entitled to recover from the defendants, the record of
this case shall be remanded below for the corresponding proceedings.

Peoples Bank Vs Dahican Lumber Digest

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PEOPLE'S BANK AND TRUST COMPANY vs.

However, the measure of the damages cannot be determined yet

In consonance with the portion of this decision concerning the damages

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