Case Digest (G.R. No. L-7817)
Facts:
Velayo v. Shell Company of the Philippine Islands, Ltd., G.R. No. L-7817, October 31, 1956, Supreme Court En Banc, Felix, J., writing for the Court. Plaintiff-appellant Alfredo M. Velayo sued in his capacity as assignee of the insolvent Commercial Air Lines, Inc. (CALI); Shell Company of the Philippine Islands, Ltd. was defendant-appellee; intervenors included Alfonso Sycip, Yek Hua Trading Corporation, Paul Sycip, and Mabasa & Co.From the start of CALI’s operations, Shell supplied its fuel; Shell’s local Credit Manager, Desmond Fitzgerald, handled collections, while authorization for extensions came from Shell’s London representatives. By August 1948 Shell’s Manila books showed a substantial unpaid balance from CALI. CALI’s management and principal creditors met informally on August 6, 1948 to discuss CALI’s insolvency and a proposed sale of assets to Philippine Air Lines (PAL). Present were representatives of major creditors, including Fitzgerald for Shell; a working committee was formed to preserve CALI’s assets and study a fair pro rata distribution of proceeds should the sale proceed or insolvency be unavoidable.
Despite attending the working-committee meeting on August 9, 1948, Shell telegraphed an assignment of its credit against CALI to its American affiliate, Shell Oil Company, Inc., on that same day; a formal deed of assignment followed on August 10. The American affiliate promptly filed suit in San Bernardino County, California, on August 12, 1948, and obtained writs of attachment against a CALI Douglas C-54 aircraft then in California; a default judgment followed in January 1949. CALI filed a petition for voluntary insolvency in the Philippines on October 7, 1948; Velayo was elected and confirmed as assignee and obtained the deed of conveyance of CALI’s assets in November 1948.
As assignee, Velayo filed suit in the Court of First Instance of Manila (No. 6966) on December 17, 1948 seeking (1) an injunction to restrain Shell from prosecuting the U.S. action or (2) damages in double the value of the C-54 if the foreign attachment deprived the insolvent estate of the plane. The trial court denied preliminary injunctive relief and, after trial, dismissed Velayo’s complaint and the intervenors’ complaints in intervention on February 26, 1954. Velayo appealed to the Supreme Court.
The Supreme Court, in a decision promulgated October 31, 1956 (Felix, J.), reversed the trial court and held Shell liable for damages for having acted in bad faith to the prejudice of CALI’s creditors; the Court remanded determination of the plane’s value to ...(Subscriber-Only)
Issues:
- Did the Shell Company of the Philippine Islands, Ltd. act in bad faith and betray the confidence of CALI’s creditors by assigning its credit to its U.S. affiliate so as to defeat the creditors’ collective interest in the C-54 aircraft?
- If Shell so acted, may the assignee recover damages, and what form and amount of...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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