Case Digest (G.R. No. 27026)
Facts:
The case involves George C. Arnold as the plaintiff and the International Banking Corporation as the defendant. The events leading to the case took place between February 27, 1920, and July 31, 1921, in the City of Manila. Arnold was the manager of Willits & Patterson, Ltd., a domestic corporation, under a contract that entitled him to receive one-half of the profits from the corporation's business directly credited to him. The defendant, a foreign banking corporation, was aware of this contract and the plaintiff's entitlement to the profits.
In mid-1920, Willits & Patterson, Ltd. became heavily indebted to the defendant, leading to various agreements where the defendant took control of the corporation's assets as security for the debt and provided necessary funds for its operations. Arnold claimed that the corporation made a profit of P180,000 from a transaction involving the sale of coconut oil, of which he was entitled to P90,000. However, the defend...
Case Digest (G.R. No. 27026)
Facts:
Parties Involved
- Plaintiff and Appellee: George C. Arnold, a resident of Manila.
- Defendant and Appellant: International Banking Corporation, a foreign banking corporation licensed to operate in the Philippines.
Background of the Case
Plaintiff’s Role and Contract with Willits & Patterson, Ltd.
- George C. Arnold was the manager of Willits & Patterson, Ltd., a domestic corporation.
- He had a contract with the corporation entitling him to one-half of the profits from its business, which were to be credited directly to him and not passed through the profit and loss account.
- The defendant, International Banking Corporation, was aware of this contract.
Indebtedness of Willits & Patterson, Ltd.
- In July and August 1920, Willits & Patterson, Ltd. became heavily indebted to the defendant.
- The defendant took over the corporation’s assets as security for the debt and assumed control of its operations, advancing funds to keep the business running.
First Cause of Action: Coconut Oil Transaction
- On February 27, 1920, Willits & Patterson, Ltd. entered into contracts for the purchase and sale of 500,000 kilos of coconut oil, financed by the defendant.
- The transaction yielded a profit of P180,000, half of which (P90,000) belonged to the plaintiff under his contract.
- The purchasers, Cruz & Tan Chong Say, issued nine promissory notes totaling P180,000, payable at the defendant’s office.
- The defendant collected P105,000 in principal and P4,833.83 in interest, but applied the entire amount to the corporation’s debt, allegedly misappropriating P54,916.91 (half of the collected amount) that belonged to the plaintiff.
- On July 6, 1921, the defendant paid the plaintiff P30,000 on account of his share but refused to pay the balance or recognize his ownership of the remaining uncollected notes.
Second to Seventh Causes of Action
- The plaintiff alleged similar claims for profits from other transactions involving copra and coconut oil sales, as well as commissions earned by Willits & Patterson, Ltd.
- He claimed that the defendant wrongfully appropriated his share of the profits and applied them to the corporation’s debt.
Defendant’s Defense
- The defendant denied the plaintiff’s claims and argued that the contracts in question were not executed or ratified by Willits & Patterson, Ltd.
- It also claimed that the corporation was insolvent and that all proceeds from sales were applied to the debt under a contract dated September 7, 1920, which the plaintiff, as president and manager, had signed.
Issue:
- Whether the defendant is legally liable to the plaintiff for one-half of the profits from the transactions specified in the complaint.
- Whether the contract of September 7, 1920, between Willits & Patterson, Ltd. and the defendant, absolves the defendant from liability to the plaintiff.
- Whether the plaintiff is estopped from enforcing his contract with Willits & Patterson, Ltd. against the defendant.
Ruling:
The Supreme Court reversed the lower court’s judgment and dismissed the complaint, ruling in favor of the defendant, International Banking Corporation. The Court held that the plaintiff was estopped from claiming his share of the profits under his contract with Willits & Patterson, Ltd. due to his actions and the terms of the September 7, 1920 contract.
Ratio:
Validity of the September 7, 1920 Contract
- The contract between Willits & Patterson, Ltd. and the defendant was valid and binding. It provided that all proceeds from sales would be applied to the corporation’s debt to the defendant.
- The plaintiff, as president and manager of Willits & Patterson, Ltd., signed the contract and was fully aware of its terms.
Estoppel of the Plaintiff
- The plaintiff’s actions and conduct, both before and after the execution of the September 7, 1920 contract, estopped him from asserting his claim against the defendant.
- He ratified and approved the contract by his actions, including signing documents and overseeing the corporation’s operations under the defendant’s control.
No Liability of the Defendant
- The defendant acted in accordance with the contract and applied the proceeds from sales to the corporation’s debt, as agreed.
- The plaintiff’s claim for one-half of the profits was not enforceable against the defendant, as the defendant was not a party to the original contract between the plaintiff and Willits & Patterson, Ltd.
Payment of P30,000
- The payment of P30,000 to the plaintiff was not evidence of the defendant’s liability for his share of the profits but rather compensation for his services under the September 7, 1920 contract.