Case Digest (G.R. No. L-29493)
Facts:
In People’s Bank and Trust Co. and Atlantic, Gulf and Pacific Co. of Manila v. Dahican Lumber Co. (126 Phil. 354, May 16, 1967), Atlantic, a West Virginia corporation, sold its rights in a Philippine lumber concession to Dahican Lumber Company (DALCO) on September 8, 1948, for US $500,000, of which only US $50,000 was paid. To develop the concession, DALCO borrowed ₱200,000 from the People’s Bank and Trust Company (BANK) and secured a US $250,000 loan from the Export-Import Bank of Washington, D.C., evidenced by five promissory notes co-signed by Dahican American Lumber Corporation (DAMCO). On July 13, 1950, DALCO executed two mortgages over five Camarines Norte parcels and their improvements: the first in favor of BANK (as trustee for the Export-Import Bank) to secure all bank and Export-Import obligations, and the second in favor of Atlantic to secure the unpaid US $450,000 balance. Each mortgage contained an “after-acquired property” clause extending the lien to substitutionsCase Digest (G.R. No. L-29493)
Facts:
- Parties and initial transactions
- Atlantic, Gulf & Pacific Co. of Manila (ATLANTIC) sold its Dahican lumber concession to Dahican Lumber Co. (DALCO) on September 8, 1948 for US$500,000; US$50,000 was paid, US$450,000 remained unpaid.
- To develop the concession, DALCO borrowed P200,000 from People’s Bank & Trust Co. (BANK) and, through BANK, obtained US$250,000 from the Export-Import Bank (five US$50,000 notes), jointly executed by DALCO and its shareholder Dahican American Lumber Corp. (DAMCO).
- Security instruments and subsequent developments
- On July 13, 1950, DALCO executed two registered mortgages over five Camarines Norte land parcels, buildings, improvements and “all personal property”—first mortgage in favor of BANK (as trustee for Ex-Im Bank) and second mortgage in favor of ATLANTIC to secure US$450,000 balance; both contained an “after-acquired property” clause. DALCO and DAMCO pledged shares to BANK.
- DALCO defaulted on the fifth note; BANK paid Ex-Im Bank and acquired the credit, extending payment to April 1, 1953. Meanwhile, DALCO purchased additional machinery and equipment but failed to inventory them. DALCO owed CONNELL Bros. (PH) P452,860.55 and DAMCO P2,151,678.34. On December 16, 1952, DALCO’s board rescinded the equipment sales by DAMCO and CONNELL, but these rescission agreements were not honored on demand.
- Foreclosure proceedings, receivership and sale
- February 12, 1953: ATLANTIC and BANK filed foreclosure in Camarines Norte CFI, obtained preliminary injunction and appointed a receiver (later discharged and reinstated); CONNELL intervened March 18, 1953. Venue was transferred to Manila CFI (Civil Case No. 20987).
- August 30, 1958: parties agreed to sell DALCO’s machinery and supplies for P175,000—half allocated to “undebated properties,” half to “after-acquired.”
- July 15, 1960: trial court rendered judgment condemning DALCO to pay BANK P300,000 + interest/fees; DALCO to pay ATLANTIC P900,000 + interest/fees; DALCO to pay CONNELL and DAMCO their claimed balances; distributing sale proceeds; allocating receivership costs pro rata. July 16, 1960: supplementary decree ordering land auction after 90 days if notes unpaid. All parties appealed.
Issues:
- Coverage and validity of after-acquired properties
- Are after-acquired properties subject to the real estate mortgages?
- Are those mortgages valid as to after-acquired property despite non-registration under the Chattel Mortgage Law?
- Does rescission of sales by DALCO, DAMCO and CONNELL impair the mortgage lien on after-acquired properties?
- Procedural and relief questions
- Was the foreclosure action premature given the April 1, 1953 extension?
- How should sale proceeds, damages, attorneys’ fees and receivership costs be allocated?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)