Labor Code of the Philippines

Philippine National Bank v The Philippine Vegetable Oil Co., Inc.

Eka Casila

Facts

* In 1920, the Vegetable Oil Co found itself in financial straits. It was in debt of approximately P30M.

* PNB was the largest creditor, owing the bank P17M. PNB was secured principally by a real and chattel mortgage for P3.5M. The Vegetable Oil Co executed another chattel mortgage in favour of the bank on its vessels Tankerville and HS Everette to guarantee the payment of sums not to exceed P4M.

* Mr. Phil C. Whitaker, the General Manager of the Vegetable Oil Co., made his first offer to pledge certain private properties to secure the creditors of the Oil Company.

* At the instance of Mr. Whitaker but inspired to action by the PNB, a receiver for the Oil Company was appointed by the CFI Manila.

* During the period when a receiver was in control of the Oil Company,

* Creditors transferred to Mr. Whitaker a part of their claims against the Oil Company via an agreement

* PNB was not a direct party to the agreement although its officials had full knowledge of its accomplishment and its general manager placed his OK at the end of the final draft

* PNB obtained a new mortgage from the Oil Company

* Shortly thereafter, the receivership for the Oil Company was terminated (Feb 28, 1922), the bank suspended the operations of the Company, and definitely closed its plant.

* The Oil Company interposed with a counterclaim for P6M and Whitaker presented a complaint in intervention. Trial court found for PNB, ordering the Company to pay P15,787,454,54, with legal interest, attorney’s fees, and costs, and the usual order to foreclose the mortgage. Counterclaim and intervention were dismissed.

Issue/Holding/Ratio

1. W/N the Feb 20,1922 mortgage between PNB and the Company is valid – NO

a. Side issue: PNB challenged the right of Whitaker as intervenor to ask that the mortgage contract be declared null and void. SC held that Whitaker is more vitally...