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...

Facts:

Parties and Background

• Plaintiff: George C. Arnold, a resident of Manila, who served as manager and president of Willits & Patterson, Ltd.
• Defendant: International Banking Corporation, a foreign banking institution licensed to operate in the Philippine Islands.

Plaintiff’s Agreement with Willits & Patterson, Ltd.

• Prior to February 27, 1920, and until July 31, 1921, the plaintiff managed Willits & Patterson, Ltd. under a contractual arrangement entitling him to one‐half of the net profits of the corporation.
• The contract provided that profits pertaining to the business of the corporation—credited directly to him and bypassing the profit and loss account—were his rightful share.

Transactions Involving Financial Assistance

• The corporation became heavily indebted to the defendant, prompting it to extend financial assistance and assume control over the corporation’s operations.
• The defendant advanced funds necessary for business operations.
• An array of contracts were executed by Willits & Patterson, Ltd. using funds advanced by the defendant.
• Specific transactions involved the purchasing and selling of coconut oil and copra:
• A contract for the purchase and sale of 500,000 kilos of coconut oil generated a profit of P180,000, half of which was contractually owed to the plaintiff.
• Due to non-payment by the coconut oil purchasers, promissory notes amounting to P180,000 were executed, part of which (P54,916.91 or one-half) is alleged to have been misappropriated.
• Additional transactions were alleged on:
• Sale and purchase of 1,012.38 metric tons of copra (profit P5,230.65; plaintiff’s share P2,615.32).
• Sale of 171,730 kilos of coconut oil (profit P2,132.28; plaintiff’s one-half claim).
• Sale to Spencer Kellog & Sons, Inc. (profit P36,391.89; plaintiff entitled to half).
• Sale to E. A. Stevenson & Company (profit P20,435.91; plaintiff’s one-half alleged misappropriation).
• Commission earnings from January 1, 1921, to July 31, 1921, amounting to P12,323.62 (half share of P6,161.81).
• An additional claim for P1,373.09.

Plaintiff’s Demands and Payments Made

• The plaintiff repeatedly demanded the balance of his one-half share from the proceeds of the various transactions and recognition as the owner of the uncollected notes.
• The defendant, despite full knowledge of the contract and plaintiff’s rights, applied all proceeds from these transactions to satisfy the heavy indebtedness of Willits & Patterson, Ltd.
• On July 6, 1921, the defendant paid the plaintiff P30,000, which the plaintiff contends was merely a partial payment toward his rightful one-half interest.

Defendant’s Pleadings and Counterclaims

• Procedural Matters:
• The defendant initially filed a demurrer arguing that the complaint did not state sufficient facts to constitute a cause of action; the demurrer was overruled.
• The defendant subsequently filed an answer with general and specific denials.
• Denials and Specific Defenses:
• The defendant denied that the contracts (especially those evidenced by Exhibits J and K) were executed or ratified by Willits & Patterson, Ltd., or by the defendant.
• It asserted that prior to September 7, 1920, Willits & Patterson, Ltd. was already indebted in the amount of P1,209,068.46 and was insolvent.
• Contract of September 7, 1920:
• Allegedly executed by the plaintiff (as president) and defendant’s representative (S. Williams), the contract provided that:
• Willits & Patterson, Ltd. would assign all its rights in sales contracts to the defendant.
• Proper instruments of pledge would secure advances made by the defendant.
• Proceeds from the sale of coconut oil and other products would be used primarily to liquidate the indebtedness, with any balance applied to reduce the overdraft.
• The defendant contended that the financial assistance was rendered upon the special instance of the plaintiff and that all transactions were done under the strict terms of the contract, which placed control of sales proceeds in the defendant’s hands.
• Subsequent Developments:
• The operations and transactions continued under the control of the defendant until July 31, 1921.
• After full application of the funds advanced, Willits & Patterson, Ltd. remained significantly indebted to the defendant.

Lower Court Proceedings and Judgment

• The lower court rendered judgment in favor of the plaintiff, awarding P102,064.87 plus interest, and recognized the plaintiff’s undivided one-half interest in the remaining uncollected promissory notes.
• The defendant’s motion for new trial was denied, and on appeal, it raised multiple errors concerning evidentiary rulings, the admission of exhibits, and the interpretation of testimony.

Issue:

• Whether the defendant is legally liable to the plaintiff for one-half of the profits derived from the transactions involving Willits & Patterson, Ltd.
• Whether the contractual arrangements—specifically the contract of September 7, 1920—alter or extinguish the plaintiff’s prior contractual right to a one-half share of profits as initially agreed in the contract dated July 31, 1916.
• Whether the defendant’s application of the proceeds exclusively to the liquidation of Willits & Patterson, Ltd.’s indebtedness precludes any additional profit-sharing with the plaintiff.
• Whether the partial payment of P30,000 by the defendant constitutes an acknowledgment of the plaintiff’s profit interest or merely a liberal compensation for services rendered.
• Whether the plaintiff, through his actions and ratification of the contract executed as president and manager, is estopped from enforcing or claiming a separate entitlement to profit shares from the defendant.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)