Facts:
In the proceedings for the liquidation of the Mercantile Bank of China, the appellant presented a written claim alleging: that when this bank ceased to operate on September 19, 1931, his current account in said bank showed a balance of P9,657.50 in his favor; that on the same date his savings account in the said bank also showed a balance in his favor of P20,000 plus interest then due amounting to P194.78; that on the other hand, he owed the bank in the amount of P13,262.58, the amount of the trust receipts which he signed because of his withdrawal from the bank of certain merchandise consigned to him without paying the drafts drawn upon him by the remittors thereof; that the credits thus described should be set off against each other according to law, and on such set off being made it appeared that he was still the creditor of the bank in the sum of P16,589.70. And he asked that the court order the Bank Commissioner to pay him the aforesaid balance and that the same be declared as preferred credit. The claim was referred to the commissioner appointed by the court, who at the same time acted as referee, and this officer recommended that the balance claimed be paid without interest and as an ordinary credit. The court approved the recommendation and entered judgment in the accordance therewith. The claimant took an appeal.
ISSUES:
1.Whether or not the current account and savings deposits are preferred credits in cases involving insolvency and liquidation of the bank.
2.Whether or not the deposits could be offset with the debt of the depositor with the bank.
3.Whether or not the deposits should earn interest from the time the bank ceased to operate.
RULING:
1.The SC ruled that, these deposits are essentially merchantile contracts and should, therefore, be governed by the provisions of the Code of Commerce. In accordance with article 309, the so-called current account and savings deposits have lost the character of deposits properly so-called, and are converted into simple commercial loans, because the bank disposed of the funds deposited by the claimant for its ordinary transactions and for the banking business in which it was engaged. That the bank had the authority of the claimant to make use of the money deposited on current and savings account is deducible from the fact that the bank has been paying interest on both deposits, and the claimant himself asks that he be allowed interest up to the time when the bank ceased its operations. Moreover, according to section 125 of the Corporation Law and 9 of Act No. 3154, said bank is authorized to make use of the current account, savings, and fixed deposits provided it retains in its treasury a certain percentage of the amounts of said deposits.
2.It appears that even after the enactment of the Insolvency Law there was no law in this jurisdiction governing the order or preference of credits in case of insolvency and liquidation of a bank. But the Philippine Legislature subsequently enacted Act No. 3519, amended various sections of the Revised Administrative Code, which took effect on February 20, 1929, and section 1641 of this latter Code. as amended by said Act provides:
SEC. 1641. Distribution of assets. — In the case of the liquidation of a bank or banking institution, after payment of the costs of the proceeding, including reasonable expenses, commissions and fees of the Bank Commissioner, to be allowed by the court, the Bank Commissioner shall pay the debts of the institution, under of the court in the order of their legal priority.
From this section 1641 we deduce that the intention of the Philippine Legislature, in providing that the Bank Commissioner shall pay the debts of the company by virtue of an order of the court in the order of their priority, was to enforce the provisions of section 48, 49 and 50 of the Insolvency Law in the sense that they are made applicable to cases of insolvency or bankruptcy and liquidation of banks. No other deduction can be made from the phrase “in the order of their legal priority” employed by the law, for there being no law establishing any priority in the order of payment of credits, the legislature could not reasonably refer to any legislation upon the subject, unless the interpretation above stated is accepted.
Examining now the claims of the appellant, it appears that none of them falls under any of the cases specified by section 48, 49 and 50 of the Insolvency Law; wherefore, we conclude that the appellant’s claims, consisting of his current and savings account, are not preferred credits.
3. “It may be stated as a general rule that when a depositor is indebted to a bank, and the debts are mutual — that is, between the same parties and in the same right — the bank may apply the deposit, or such portion thereof as may be necessary, to the payment of the debt due it by the depositor, provided there is no express agreement to the contrary and the deposit is not specially applicable to some other particular purposes.” (7 Am. Jur., par. 629, p.455; United States vs. Butterworth-Judson Corp., 267 U.S., 387; National Bank vs. Morgan, 207 Ala.., 65; Bank of Guntersville vs. Crayter, 199 Ala., 699; Tatum vs. Commercial Bank & T. Co., 193 Ala., 120; Desha Bank & T. Co. vs. Quilling, 118 Ark., 114; Holloway vs. First Nat. Bank, 45 Idaho, 746; Wyman vs. Ft. Dearborn Nat Bank, 181 Ill., 279; Niblack vs. Park Nat. Bank, 169 Ill., 517; First Nat Bank vs. Stapf., 165 Ind., 162; Bedford Bank vs. Acoam, 125 Ind., 584.) The situation referred to by the appellees is inevitable because section 1639 of the Revised Administrative Code, as amended by Act No. 3519, provides that the Bank Commissioner shall reduce the assets of the bank into cash and this cannot be done without first liquidating individually the accounts of the debtors of said bank, and in making this individual liquidation the debtors are entitled to set off, by way of compensation, their claims against the bank.
4. Upon this point a distinction must be made between the interest which the deposits should earn from their existence until the bank ceased to operate, and that which they may earn from the time the bank’s operations were stopped until the date of payment of the deposits. As to the first class, it should be paid because such interest has been earned in the ordinary course of the bank’s business and before the latter has been declared in a state or liquidation. Moreover, the bank being authorized by law to make us of the deposits, with the limitation stated, to invest the same in its business and other operations, it may be presumed that it bound itself to pay interest to the depositors as in fact it paid interest prior to the date of the said claims.
As to the interest which may be charged from the date the bank ceased to do business because it was declared in a state of liquidation, SC held that the said interest should not be paid. Under articles 1101 and 1108 of the Civil Code, interest is allowed by way of indemnity for damages suffered, in the cases wherein the obligation consists in the payment of money. In view of this, SC held that in the absence of any express law or any applicable provision of the Code of Commerce, it is not proper to pay this last kind of interest to the appellant upon his deposits in the bank, for this would be anomalous and unjustified in a liquidation or insolvency of a bank. This rule should be strictly observed in the instant case because it is understood that the assets should be prorated among all the creditors as they are insufficient to pay all the obligations of the bank.
In view of all the foregoing considerations, SC affirmed the part of the appealed decision for the reasons stated herein, and it is ordered that the net claim of the appellant, amounting to P13,611.21, is an ordinary and not a preferred credit, and that he is entitled to charge interest on said amount up to September 19, 1931.
Friday, April 20, 2012
PEOPLE'S BANK AND TRUST COMPANY vs. DAHICAN LUMBER COMPANY (G.R. No. L-17500 May 16, 1967)
Facts:
On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West Virginia corporation licensed to do business in the Philippines sold and assigned all its rights in the Dahican Lumber concession to Dahican Lumber Company - hereinafter referred to as DALCO - for the total sum of $500,000.00, of which only the amount of $50,000.00 was paid. Thereafter, to develop the concession, DALCO obtained various loans from the People's Bank & Trust Company amounting, as of July 13, 1950, to P200,000.00. In addition, DALCO obtained, through the BANK, a loan of $250,000.00 from the Export-Import Bank of Washington D.C., evidenced by five promissory notes of $50,000.00 each, maturing on different dates, executed by both DALCO and the Dahican America Lumber Corporation, a foreign corporation and a stockholder of DALCO,
As security for the payment of the abovementioned loans, on July 13, 1950 DALCO executed in favor of the BANK a deed of mortgage covering five parcels of land situated in the province of Camarines Norte together with all the buildings and other improvements existing thereon and all the personal properties of the mortgagor located in its place of business in the municipalities of Mambulao and Capalonga, Camarines Norte. On the same date, DALCO executed a second mortgage on the same properties in favor 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 contained a provision extending the mortgage lien to properties to be subsequently acquired by the mortgagor.
Both mortgages were registered in the Office of the Register of Deeds of Camarines Norte. In addition thereto DALCO and DAMCO pledged to the BANK 7,296 shares of stock of DALCO and 9,286 shares of DAMCO to secure the same obligation.
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 first mortgage securing it. Subsequently, the BANK gave DALCO and DAMCO up to April 1, 1953 to pay the overdue promissory note.c
After July 13, 1950 - the date of execution of the mortgages mentioned above - DALCO purchased various machineries, equipment, spare parts and supplies in addition to, or in replacement of some of those already owned and used by it on the date aforesaid. Pursuant to the provision of the mortgage deeds quoted theretofore regarding "after acquired properties," the BANK requested DALCO to submit complete lists of said properties but the latter failed to do so. In connection with these purchases, there appeared in the books of DALCO as due to Connell Bros. Company (Philippines) - a domestic corporation who was acting as the general purchasing agent of DALCO -the sum of P452,860.55 and to DAMCO, the sum of P2,151,678.34.chan
On December 16, 1952, the Board of Directors of DALCO, in a special meeting called for the purpose, passed a resolution agreeing to rescind the alleged sales of equipment, spare parts and supplies by CONNELL and DAMCO to it.
On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded that said agreements be cancelled but CONNELL and DAMCO refused to do so. As a result, on February 12, 1953; ATLANTIC and the BANK, commenced foreclosure proceedings in the Court of First Instance of Camarines Norte against DALCO and DAMCO.
Upon motion of the parties the Court, on September 30, 1953, issued an order transferring the venue of the action to the Court of First Instance of Manila.
On August 30, 1958, upon motion of all the parties, the Court ordered the sale of all the machineries, equipment and supplies of DALCO, and the same were subsequently sold for a total consideration of P175,000.00 which was deposited in court pending final determination of the action. By a similar agreement one-half (P87,500.00) of this amount was considered as representing the proceeds obtained from the sale of the "undebated properties" (those not claimed by DAMCO and CONNELL), and the other half as representing those obtained from the sale of the "after acquired properties".
ISSUE:
WON the "after acquired properties" were subject to the deeds of mortgage mentioned heretofore. Assuming that they are subject thereto,
WON the mortgages are valid and binding on the properties aforesaid inspite of the fact that they were not registered in accordance with the provisions of the Chattel Mortgage Law.
HELD:
Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all property of every nature and description taken in exchange or replacement, as well as all buildings, machineries, fixtures, tools, equipments, and other property that the mortgagor may acquire, construct, install, attach; or use in, to upon, or in connection with the premises - that is, its lumber concession - "shall immediately be and become subject to the lien" of both mortgages in the same manner and to the same extent as if already included therein at the time of their execution. Such stipulation is neither unlawful nor immoral, its obvious purpose being to maintain, to the extent allowed by circumstances, the original value of the properties given as security.
Article 415 does not define real property but enumerates what are considered as such, among them being machinery, receptacles, instruments or replacements intended by owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and shall tend directly to meet the needs of the said industry or works
On September 8, 1948, Atlantic Gulf & Pacific Company of Manila, a West Virginia corporation licensed to do business in the Philippines sold and assigned all its rights in the Dahican Lumber concession to Dahican Lumber Company - hereinafter referred to as DALCO - for the total sum of $500,000.00, of which only the amount of $50,000.00 was paid. Thereafter, to develop the concession, DALCO obtained various loans from the People's Bank & Trust Company amounting, as of July 13, 1950, to P200,000.00. In addition, DALCO obtained, through the BANK, a loan of $250,000.00 from the Export-Import Bank of Washington D.C., evidenced by five promissory notes of $50,000.00 each, maturing on different dates, executed by both DALCO and the Dahican America Lumber Corporation, a foreign corporation and a stockholder of DALCO,
As security for the payment of the abovementioned loans, on July 13, 1950 DALCO executed in favor of the BANK a deed of mortgage covering five parcels of land situated in the province of Camarines Norte together with all the buildings and other improvements existing thereon and all the personal properties of the mortgagor located in its place of business in the municipalities of Mambulao and Capalonga, Camarines Norte. On the same date, DALCO executed a second mortgage on the same properties in favor 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 contained a provision extending the mortgage lien to properties to be subsequently acquired by the mortgagor.
Both mortgages were registered in the Office of the Register of Deeds of Camarines Norte. In addition thereto DALCO and DAMCO pledged to the BANK 7,296 shares of stock of DALCO and 9,286 shares of DAMCO to secure the same obligation.
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 first mortgage securing it. Subsequently, the BANK gave DALCO and DAMCO up to April 1, 1953 to pay the overdue promissory note.c
After July 13, 1950 - the date of execution of the mortgages mentioned above - DALCO purchased various machineries, equipment, spare parts and supplies in addition to, or in replacement of some of those already owned and used by it on the date aforesaid. Pursuant to the provision of the mortgage deeds quoted theretofore regarding "after acquired properties," the BANK requested DALCO to submit complete lists of said properties but the latter failed to do so. In connection with these purchases, there appeared in the books of DALCO as due to Connell Bros. Company (Philippines) - a domestic corporation who was acting as the general purchasing agent of DALCO -the sum of P452,860.55 and to DAMCO, the sum of P2,151,678.34.chan
On December 16, 1952, the Board of Directors of DALCO, in a special meeting called for the purpose, passed a resolution agreeing to rescind the alleged sales of equipment, spare parts and supplies by CONNELL and DAMCO to it.
On January 13, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded that said agreements be cancelled but CONNELL and DAMCO refused to do so. As a result, on February 12, 1953; ATLANTIC and the BANK, commenced foreclosure proceedings in the Court of First Instance of Camarines Norte against DALCO and DAMCO.
Upon motion of the parties the Court, on September 30, 1953, issued an order transferring the venue of the action to the Court of First Instance of Manila.
On August 30, 1958, upon motion of all the parties, the Court ordered the sale of all the machineries, equipment and supplies of DALCO, and the same were subsequently sold for a total consideration of P175,000.00 which was deposited in court pending final determination of the action. By a similar agreement one-half (P87,500.00) of this amount was considered as representing the proceeds obtained from the sale of the "undebated properties" (those not claimed by DAMCO and CONNELL), and the other half as representing those obtained from the sale of the "after acquired properties".
ISSUE:
WON the "after acquired properties" were subject to the deeds of mortgage mentioned heretofore. Assuming that they are subject thereto,
WON the mortgages are valid and binding on the properties aforesaid inspite of the fact that they were not registered in accordance with the provisions of the Chattel Mortgage Law.
HELD:
Under the fourth paragraph of both deeds of mortgage, it is crystal clear that all property of every nature and description taken in exchange or replacement, as well as all buildings, machineries, fixtures, tools, equipments, and other property that the mortgagor may acquire, construct, install, attach; or use in, to upon, or in connection with the premises - that is, its lumber concession - "shall immediately be and become subject to the lien" of both mortgages in the same manner and to the same extent as if already included therein at the time of their execution. Such stipulation is neither unlawful nor immoral, its obvious purpose being to maintain, to the extent allowed by circumstances, the original value of the properties given as security.
Article 415 does not define real property but enumerates what are considered as such, among them being machinery, receptacles, instruments or replacements intended by owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and shall tend directly to meet the needs of the said industry or works
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