BLUE BAR COCONUT COMPANY, PLAINTIFF AND APPELLEE, VS. ISABELO S. HILARIO, ET AL., DEFENDANTS AND APPELLANTS.

On March 16, 1955 Blue Bar Coconut Company, hereinafter referred to as Blue
Bar, commenced this action in the lower court against the spouses Isabelo S.
Hilario and Encarnacion Gozum, to foreclose: (1) a real estate and chattel
mortgage (Exhibit A) executed on March 31, 1948 by said spouses and (2) a
chattel mortgage executed on December 12, 1947 by Isabelo S. Hilario (Exhibit
F). In view of the latter’s death after the filing of the complaint, he was
substituted as party-defendant by his children; and as some of them were minors
at the time, they were, in turn, represented in the case by their, mother as
guardian ad litem.

On May 10, 1955 appellants filed their answer virtually admitting all the
material allegations of the complaint, alleging, however, that they failed to
comply with their obligation under the mortgage contract Exhibit A because Blue
Bar had violated the terms and conditions of a certain agreement (Annex 1
attached to their pleading) entered into on January 27, 1948 between Isabelo S.
Hilario, on the one hand, and on the other, not Blue Bar but the Philippine
Desiccated Coconut Corporation, a corporation duly organized and existing under
and by virtue of the laws of Delaware, U.S.A., and duly authorized to do
business in the Philippines. They likewise interposed a counterclaim to recover
from Blue Bar considerable sums of money by reason of the latter’s alleged
failure to comply with the aforesaid agreement.

On May 24, 1955 Blue Bar filed a reply which also contained its answer to the
counterclaim. The latter alleged that the facts set forth in the counterclaim
did not constitute a cause of action against Blue Bar.

On August 13, 1955 appellants filed a motion to include the Philippine
Desiccated Coconut Corporation as a third-party plaintiff or third-party
defendant. Blue Bar objected to the motion, and on August 20 the trial court
denied it. Appellants’ motion for reconsideration suffered the same fate.

When the case was called for trial on August 10, 1955 appellants’ counsel
informed the court that “The only controverted fact was the exact amount of the
indebtedness” (trans. p. 6, August 10, 1955), and thereafter they submitted to
the court the following partial stipulation of facts:

“Come now the parties, assisted by their respective attorneys, and to this
Honorable Court respectfully submit for approval the following stipulation of
facts:

1. That under date of May 31, 1948, the spouses, Isabelo S. Hilario and
   Encarnacion Gozum de Hilario as mortgagors, executed that certain mortgage of
   even date in favor of the Blue Bar Coconut Company and the Philippine Desiccated
   Corporation under the terms and conditions therein contained. Said mortgage
   contract is submitted herewith as Exhibit A.

2. That as part of the said mortgage was that certain real estate and chattel
   mortgage executed by the said spouses in favor of the Hongkong and Shanghai
   Banking Corporation dated November 17, 1947, with its corresponding annexes
   consisting of the list of machineries. The real estate mortgage executed in
   favor of the Hongkong and Shanghai Banking Corporation is marked as Exhibit A-2,
   and the inventory of machineries as Exhibits A-3 and A-4. Paragraph 4 of Exhibit
   A, which has been marked as Exhibit A-1 to show the rights of Blue Bar Coconut
   Company to institute the present action in its sole capacity.

   The mortgage executed by the said spouses in favor of the Hongkong and
   Shanghai Banking Corporation was on December 20, 1949, cancelled as evidenced by
   Exhibits B and B-1. Consequently, the Blue Bar Coconut Company became the first
   mortgagee of all the properties mentioned in Exhibit A-2.

3. That with respect to the indebtedness referred to and the object of the
   present complaint, secured by the mortgagee, Exhibit A, the deceased Isabelo S.
   Hilario admitted under date of September 12, 1951, that there was the total
   amount due by him on his mortgage debt aforestated, the sum of P316,122.78, as
   evidenced by the document attached hereto and marked as Exhibit C, which bears
   the signature of John D. McCord and Isabelo S. Hilario.

4. That under date of June 27, 1952, by virtue of certain advances made by the
   plaintiff to the defendants, said mortgage indebtedness was increased by a few
   pesos, as of said date, June 27, 1952, to P316,851.75, as evidenced by the
   document marked Exhibit D, which bears at the bottom thereof the signature of
   Esperanza Gozum de Hilario, surviving spouse of the deceased Isabelo S. Hilario.

5. That on July 21, 1953, in a communication addressed by counsel for Blue Bar
   Coconut Company to Isabelo S. Hilario, hereto attached as Exhibit E, the latter
   again acknowledged his indebtedness to be P316,871.75 as of March 5, 1952.

6. That the aforesaid indebtedness is exclusive of stipulated interest as
   contained in the deed of mortgage and the corresponding attorney’s fees likewise
   as stipulated in the deed of mortgage, Exhibit A.

7. That independent of the real estate mortgage above referred to; Isabelo S.
   Hilario likewise executed in favor of the plaintiff a chattel mortgage on a
   certain landing barge, as evidenced by the document, Exhibit F, to secure the
   payment of the sum of P7,000.00.

8. That the sum of P7,000.00 referred to in Exhibit F, has already been
   consolidated in the amount of P316,871.75 referred to in Exhibit E.

9. That Isabelo S. Hilario having died on June 24, 1954, he is substituted
   herein by his children whose names are already placed as party defendants herein
   together with their mother, Esperanza Gozum de Hilario.

10. That neither the deceased Isabelo S. Hilario nor the defendants herein above
    have effected payment of the total amount due by them in favor of the plaintiff
    in the total sum of P316,871.75 aside from interests, costs and attorney’s
    fees.”

The case was set for the continuation of the trial on November 28, 1955 On
that date Blue Bar presented George N. Ivory as witness and made a formal offer
of its documentary evidence, which was admitted without opposition. Thereafter
Blue Bar rested its case. Thereupon appellants’ counsel made an oral motion for
the postponement of the trial upon the ground that he had just received a note
to the effect that their principal witness—a certain Mr. Gozum—was in Bayambang,
Pangasinan. When the court asked him what was going to be the testimony of said
witness, he stated that Gozum would testify “on the substance of our
counterclaim”. Asked again what would be the nature of such testimony,
appellants’ counsel stated:

“He will testify that the Bayambang Desiccated Coconut Company was going in
full production pursuant to the contract entered into “between the Philippine
Desiccated Coconut Company and Mr. Hilario. Then suddenly the Blue Bar Coconut
Company told them to stop because of the low price of copra in the United States
without consulting Mr. Hilario, and as a result of the stoppage of work the
factory collapsed and that was the direct reason of our inability to comply with
the obligation.” (Transcript of Nov. 28, 1955, pp. 24-25)

Counsel for Blue Bar, for his part, made the following statement:

“Precisely he asked the Court in a formal motion to include the Philippine
Desiccated Coconut Company to sustain the defense he has alleged, and the Court
denied that motion to include the Philippine Desiccated Coconut Corporation for
the reason that the contract alleged by them partly includes the present
contract and has no relationship whatsoever for the present case is one for
foreclosure of mortgage. Secondly, the Philippine Desiccated Coconut Corporation
is not a party to this action. In view of these grounds which we have presented
in our opposition, the Court denied the motion to include the Philippine
Desiccated Coconut Corporation.” (Id. pp. 25-26)

After considering the contentions of the parties, the court made the
following ruling:

“This case was set for hearing this morning and the parties were duly
notified of the hearing of this case since November 9, 1955. Therefore, the
defendants have had sufficient time to prepare their evidence in this case. The
motion for transfer based on information without supporting affidavits is
therefore denied, and for the reason that whatever supposed evidence to be
presented by the witness who is not here now is highly speculative and does not
constitute that defense.” (Id. p. 26)

On December 5, 1955 the trial court rendered the decision appealed from, the
dispositve part of which reads as follows:

“Wherefore, judgment is hereby rendered:

1. Ordering the defendants to pay to the plaintiff, within the period of ninety
   (90) days, the total sum of P316,871.75 with 6% interests thereon per annum,
   computed as follows:

   (a) On the sum of P148,466.58, representing the original mortgage debt of the
   defendants; interests at the rate of 6% per annum from May 31, 1948, date of the
   mortgage deed, Exhibit ‘A’ until fully paid.

   (b) On the sum of P161,405.17, representing advances made by the plaintiff to
   the defendants, from May 31, 1948, until September 12, 1951 date of liquidation
   (See Exhibit C); interests at the rate of 6% per annum from September 12, 1951,
   until fully paid.

   (c) On the sum of P7,000.00, representing the chattel mortgage Exhibit F,
   covered by the second cause of action; interests at the rate of 6% per annum,
   from the date of filing this action, i.e., March 16, 1955, until fully
   paid.

2. Ordering the defendants to pay to the plaintiff a sum equivalent to 10% of
   the total indebtedness, principal and interests, as aforestated as stipulated
   attorney’s fees; and

3. For the costs of this action.

In default of payment as hereinabove
ordered, the properties, real and personal, referred to and covered by the deed
of real and chattel mortgage Exhibits ‘A’, ‘A-3’ and ‘A-4’ (except the
properties covered by Transfer Certificate of Title Nos. 45079 and 59669 of the
Register of Deeds of Manila), and the landing barge referred to and covered by
the deed of chattel mortgage, Exhibit “F”, be ordered sold and the proceeds of
sale applied to the payment of the amounts adjudged plaintiff herein and that
said defendants and all persons claiming under them subsequent to the execution
of the said mortgagees be barred and foreclosed of all rights, claim or equity
of redemption over said properties. And in the event that the proceeds of the
sale of the said properties be insufficient to satisfy the judgment herein
rendered the Court hereby orders defendants jointly and severally to pay
whatsoever balance or deficiency remaining on the mortgage indebtedness that may
be unsatisfied, out of their other properties, if any, derived from the estate
of the spouses Isabelo S. Hilario and Encarnacion Gozum de Hilario, until the
total amount due plaintiff is fully and finally satisfied.

The counterclaim of defendants is hereby dismissed for lack of merit.

So Ordered.

We are now urged by appellants to reverse the above decision upon the ground
that the lower court erred: (1) in denying their motion to include the
Philippine Desiccated Coconut Corporation as a third-party plaintiff or
third-party defendant; (2) in dismissing their counterclaim; (3) in rendering
judgment for appellee and against them for the full amount demanded in the
complaint, and (4) in denying their motion for postponement made in open
court.

We may summarize the facts stipulated by the parties as follows: on May 31,
1948 the Hilario spouses executed the deed of second mortgage Exhibit A to
secure the payment of the sum of P148,466.58, plus 6% interest per annum
thereon, which they owed Blue Bar and its sister corporation, the Philippine
Desiccated Coconut Corporation, including any other amount which said
corporations may thereafter advance or pay for the account and benefit of said
spouses to the Hongkong and Shanghai Banking Corporation or to any other party.
As the properties covered by Exhibit A were already mortgaged to the Hongkong
and Shanghai Banking Corporation, it was agreed that said second mortgage shall
automatically become first mortgage upon payment by said corporations or either
of them of the mortgaged debt owing to said bank. This was done on December 20,
1949 and the bank executed the corresponding release of its first mortgage. The
mortgage Exhibit A was duly registered.

On December 12, 1947 Isabelo S. Hilario also executed in favor of Blue Bar
the chattel mortgage Exhibit F to secure payment of the sum of P7,000.00 he owed
said mortgagee.

Blue Bar and the Philippine Desiccated Coconut Corporation had made advances
for the account of appellants pursuant to the mortgage contract Exhibit A in the
total sum of P316,851.75. This amount already included the original P148,466.58
mentioned in said mortgage contract, as well as the P7,000.00 secured by the
chattel mortgage Exhibit F, but it did not include stipulated interests and
attorney’s fees. The total amount constituting the mortgage debt had been long
overdue and had not been paid notwithstanding corresponding demands when the
present action was commenced.

In the light of the facts above set forth, it is obvious that appellants’
third assignment of error is entirely without merit.

Neither did the trial court err in denying appellants’ motion to include the
Philippine Desiccated Coconut Corporation as a third-party plaintiff or as a
third-party defendant.

Although the money constituting the mortgage debt was advanced by Blue Bar
and the Philippine Desiccated Coconut Corporation, the mortgage contract Exhibit
A expressly provided that the mortgage was solely in favor of Blue Bar instead
of being in. favor of both corporations. It also provided that “for the purposes
of the said mortgage and all legal incidents in relation therewith, the
obligations of the mortgagors shall be deemed and considered joint and several
and consolidated in favor of Blue Bar as sole mortgagee.” Blue Bar, therefore,
had the perfect right to sue alone for the foreclosure of the mortgage.

If the Philippine Desiccated Coconut Corporation was not an indispensable
party plaintiff, neither could it be considered as an indispensable third-party
defendant for the reasons advanced in appellants’ motion appearing at pages
128-129 of the Record on Appeal, namely: that there are common questions of law
or fact arising between said corporations in connection with the action before
the court, and that its inclusion as third-party defendant would avoid
multiplicity of suits amd save time. In their motion appellants did not allege
that they were entitled, as against the Philippine Desiccated Coconut
Corporation, which was not a party to the action, to contribution, indemnity,
subrogation or any other relief, in respect of the plaintiff’s claim. It was,
therefore, right for the lower court to deny its inclusion as third-party
defendant.

It appears, however, that appellants’ counterclaim alleged, inter alia, that
Blue Bar and the Philippine Desiccated Coconut Corporation had failed to comply
with the terms and conditions of the agreement attached to their pleading as
Annex 1, executed on January 27, 1948 by and between Isabelo S. Hilario, on the
one hand, and the Philippine Desiccated Coconut Corporation only, on the other.
Under this agreement, Hilario agreed to sell and the Philippine Desiccated
Coconut Corporation to buy, under the terms therein set forth, all the
desiccated coconut manufactured by Hilario in his factory at Bayambang,
Pangasinan. On the assumption that said agreement was in respect of, or related
to the mortgage contract Exhibit A the Philippine Desiccated Coconut Corporation
could have been included, as third-party defendant. This matter, however, was
one purely within the sound discretion of the trial court and we cannot now hold
that it abused such discretion in any serious manner because the denial of
appellants’ motion does not bar them from suing the Philippine Desiccated
Coconut Corporation in a separate case to recover damages for breach of
contract, and because appellants’ motion for the inclusion of said corporation
as a third-party defendant was fatally defective in that it did not allege any
of the grounds that, according to Rule 12, Rules of Court, would justify such
inclusion.

The dismissal of appellants’ counterclaim was also in order in view of the
lack of evidence to sustain it. As stated heretofore, appellants’ motion for
postponement of the trial made in open court was denied and the case was
submitted for decision without their presenting any evidence. On the other hand,
there is absolutely nothing in the stipulation of facts to support their
counterclaim.

Appellants’ last contention that the trial court erred in denying their
motion for postponement is also untenable.

In the first place, the record shows that appellants had more than ample time
to come to court on the last day of trial with all their witnesses. In the
second place, appellants’ counsel could not even give clear and categorical
statement as to what his alleged witness, Mr. Gozum, would testify. It is true
that he stated that he expected the witness to testify on their counterclaim,
but according to the record, Blue Bar was not a party to the contract on the
breach of which appellants based their counterclaim. Such being the case the
trial court correctly found that Blue Bar could not be held liable in damages
for committing a breach thereof.

Besides, it is already settled law that the granting of a motion for
postponement being one directed to the sound discretion of the trial court, its
resolution on the matter will not be interfered with hy a higher court unless it
was rendered with grave abuse of discretion prejudicial to the rights of the
movant. In this case appellants have not made any satisfactory showing that
there has been such grave abuse of discretion.

Wherefore, the decision appealed from is hereby affirmed, with
costs.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes,
J.B.L., Paredes, De Leon, and Natividad, JJ., concur.