Title
Blanco vs. Compania General de Tabacos de Filipinas
Case
G.R. No. L-10810
Decision Date
Nov 29, 1960
Appellants challenged bond redemption by Tabacalera during Japanese occupation, alleging fraud and breach of trust. Court upheld redemption as lawful, citing valid authority and force majeure.
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Case Digest (G.R. No. L-10810)

Facts:

Background of the Parties:

  • Appellant Josefina Ruiz de Luzuriaga Blanco is the widow, and the other appellants are the children of Eugenio Mas Fernandez, who died in Barcelona, Spain, in May 1933. Eugenio Mas Fernandez left behind properties, including bonds of Central Azucarera de Bais, which were deposited with and administered by Compania Gral. de Tabacros de Filipinas (Tabacalera).

Bond Issuance and Purchase:

  • On November 15, 1928, Central Azucarera de Tarlac (Central) issued debenture bonds worth P1,000 each, payable on or before November 15, 1943, with 8% annual interest. These bonds were issued under a trust indenture (Exhibit "1").
  • Tabacalera and its affiliates purchased a significant number of these bonds. Appellants purchased 115 bonds, of which 74 remained unredeemed by January 1, 1942.

Deposit of Bonds:

  • The 74 unredeemed bonds were deposited with Tabacalera under deposit receipts (Exhibits F and G), which stated that the bonds were held for custody and collection of dividends or interests. The receipts also noted that Tabacalera was not responsible for cases of force majeure.

Power of Attorney:

  • On October 5, 1939, appellants executed a power of attorney (Exhibit 4) in favor of Tabacalera, authorizing it to manage the deposited bonds, including collecting interest, redeeming, selling, or exchanging them.

Redemption of Bonds:

  • On March 15, 1943, the Central notified Tabacalera of its intention to redeem the bonds. Notices were published in newspapers, and the Central secured a loan from the Bank of Taiwan to fund the redemption.
  • On May 15, 1943, the Central paid Tabacalera P2,500,000 in Japanese military notes to redeem the bonds. Tabacalera deposited the amount in a special account and redeemed 1,987 bonds, including appellants' 74 bonds.

Post-Redemption Events:

  • The proceeds from the redemption of appellants' bonds (P74,000 in Japanese military notes) were deposited with Tabacalera. During the Japanese occupation, Tabacalera had sufficient funds to cover this amount.
  • After the war, the Japanese military notes became worthless, leading appellants to question the validity of the redemption and seek recovery of the bond value.

Issue:

  1. Fraud and Breach of Trust:

    • Whether Tabacalera and the Central engaged in a fraudulent scheme to redeem the bonds, to the detriment of the bondholders, particularly the appellants.
  2. Ratification of Redemption:

    • Whether appellants ratified the acts of Tabacalera and the Central regarding the redemption of the bonds.
  3. Validity of Tabacalera's Authority:

    • Whether Tabacalera lost its authority to act as appellants' agent due to a change in circumstances, particularly the Japanese occupation and the use of Japanese military notes.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Conclusion:

The Supreme Court found no merit in appellants' claims of fraud, breach of trust, or invalidity of Tabacalera's authority. The redemption of the bonds was lawful, and the subsequent depreciation of the Japanese military notes was beyond the control of Tabacalera and the Central. The appealed judgment was affirmed.


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