PEOPLE’S BANK AND TRUST CO. VS. DAHICAN LUMBER COMPANY, GR NO. L-17500, 16 MAY 1967, 20 SCRA 84

PEOPLE’S BANK AND TRUST CO. VS. DAHICAN LUMBER COMPANY,

GR NO. L-17500, 16 MAY 1967, 20 SCRA 84

TOPIC/DOCTRINE

The stipulation in a mortgage contract that properties, which the mortgagor may acquire, construct, install, attach or use in its lumber concession, shall be subject to the mortgage lien is a common and logical provision in cases where the original properties mortgaged are perishable or subject to inevitable wear and tear or were intended to be sold or used but with the understanding that they would be replaced with others to be thereafter acquired by the mortgagor. Such a stipulation is lawful and not immoral and is intended to maintain, insofar as possible, the original value of the properties given as security.

FACTS

September 1948, Atlantic, a West Virginia corporation licensed to do business in the Philippines sold and assigned all its rights in the Dahican Lumber concession to Dahican Lumber Company. To fully paid and develop the concession, DALCO obtained a loan from the bank evidence by 5 promissory notes of $50K maturing on different dates.

 

As security for the payment of loans, DALCO mortgage five lands in Camarines Norte together with the buildings existing thereon and other personal properties located in its place of business. Another mortgage on the same properties was made in favor of Atlantic to secure the payment of the unpaid balance.

 

Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its maturity, the BANK paid the same to the Export-Import Bank of Washington D.C. and the latter assigned to the former its credit and the first mortgage securing it. Subsequently, the BANK gave DALCO and DAMCO up to April 1,1953 to pay the overdue promissory note. DALCO purchased various machineries, equipment, spare parts and supplies in addition to, or in replacement of some of those already owned and used by it on the date aforesaid. Pursuant to the provision of the mortgage deeds quoted heretofore regarding "after acquired properties", the BANK requested DALCO to submit complete lists of said properties but the latter failed to do so. On December 16, 1952, the Board of Directors of DALCO in a special meeting called for the purpose, passed a resolution agreeing to rescind the alleged sales of equipment, spare parts and supplies by CONNELL and DAMCO to it.On January 23, 1953, the BANK, in its own behalf and that of ATLANTIC, demanded that said agreements be cancelled but CONNELL and DAMCO refused to do so. As a result, on February 12,1953, ATLANTIC and the BANK, commenced foreclosure proceedings in the Court of First Instance of Camarines Norte against DALCO and DAMCO.

ISSUE

WON the "after acquired properties" were subject to the deeds of mortgage mentioned heretofore. Assuming that they are subject thereto.

RULING

Yes.

The court held that the stipulation in a mortgage contract that properties, which the mortgagor may acquire, construct, install, attach or use in its lumber concession, shall be subject to the mortgage lien is a common and logical provision in cases where the original properties mortgaged are perishable or subject to inevitable wear and tear or were intended to be sold or used but with the understanding that they would be replaced with others to be thereafter acquired by the mortgagor. Such a stipulation is lawful and not immoral and is intended to maintain, insofar as possible, the original value of the properties given as security.

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