G.R. No. 44510. December 24, 1938
THE BACHRACH MOTOR CO., INC., PLAINTIFF AND APPELLEE, VS. JOSE ESTEVA AND TEAL MOTOR CO., INC., DEFENDANTS AND APPELLANTS.
IMPERIAL, J.:
is an appeal taken by the defendants Jose Esteva and Teal Motor Co.,
Inc., from the decision rendered by the Court of First Instance of
Manila ordering said defendants, jointly and severally, to pay the
plaintiff the sum of P46,500, with interest thereon at 12 per cent per
annum from May 10, 1930, until fully paid, plus the sum of P2,000 by
way of attorney’s fees and costs; and the co-defendant Teal Motor Co.,
Inc., to pay the defendant Jose Esteva the sum of P46,500, with
interest thereon at 12 per cent per annum from May 10, 1930 until fully
paid, the sum of P2,000, plus an additional sum of P6,293.16 by way of
damages, with legal interest thereon from February 12, 1932, until
fully paid.
The plaintiff brought this action to recover
from the defendants the sum of 954,749.41, the amount of twenty-two
promissory notes executed by the defendant Esteva in favor of Teal
Motor Co., Inc., and endorsed by the latter in favor of the plaintiff,
together with the stipulated interest of 12 per cent per annum, plus
the amount of P13,687.35 as attorney’s fees, equivalent to 25 per cent
of the amount due. Teal Motor Co., Inc., answered the complaint,
practically acquiescing in the allegations thereof. Jose Esteva filed
his re-amended answer and by way of counterclaim and cross-complaint
against the plaintiff and the co-defendant Teal Motor Co., Inc.,
alleged that in March 1930 a liquidation of his account with the latter
company showed that he was then indebted to it in the sum of P64,500;
that to secure the payment of said obligation he executed in favor of
the Teal Motor Co., Inc., a mortgage on fourteen autotrucks, eleven
trailers and 1 Buick automobile; that to facilitate the payment of his
indebtedness he agreed with the manager of Teal Motor Co., Inc., that
he would organize a corporation to be called “Insular Express Company”,
which upon organization and after payment of P10,000, would assume all
the obligation, the balance to be paid at the rate of P1,000 a month,
without interest; that to this end he solicited the cooperation of
Guillermo Dy Buncio who gave him all the necessary help in the
organization of the corporation; that while the incorporation papers
were under preparation, Teal Motor Co., Inc., in connivance with the
plaintiff and its then manager, E. M. Bachrach, foreclosed the mortgage
executed by him, thereby illegally depriving him of the possession of
the autotrucks, trailers and automobile which he had mortgaged; that
the value of said motor vehicles at the time they were illegally seized
was P105,730, and that the business in which he was engaged yielded an
annual profit of not less than P20,000; and that the motor vehicles
seized and sold could still be used for eight consecutive years from
which he could have obtained profits in the amount of P160,000 which,
added to the sum of P72,957.06 paid by him on account of the price of
said vehicles, makes a total of P232,957.06, representing all the
damages suffered by him as a result of the foreclosure of the mortgage
and the sale of all the motor vehicles. The plaintiff and Teal Motor
Co., Inc., objected to the admission of the reamended answer, and on
March 3, 1932, the trial court denied the admission of the same. Jose
Esteva excepted to the order and filed another motion praying that the
accompanying cross-complaint against the plaintiff, Teal Motor Co.,
Inc., and E. M. Bachrach, be admitted. In said cross-complaint the
defendant made the same allegations contained in his re-amended answer
by way of counterclaim and cross-complaint. Teal Motor Co., Inc.,
objected to said petition and the trial court in its order of June 20,
1932, admitted the pleading, not as a cross-complaint but as part of
the special defense of the defendant Esteva. The latter proposed other
amendments to the answer. On May 20, 1933, the trial court rendered its
decision in the case ordering Jose Esteva and Teal Motor Co,, Inc.,
jointly and severally, to pay the sum of P34,749.41, plus the interest
thereon at 12 per cent annually from December 10, 1931, until fully
paid and an additional sum of P3,483.72 as penalty. Teal Motor Co.,
Inc., was likewise ordered to pay the plaintiff the sum of P20,000,
plus the interest thereon at 12 per cent annually from December 10,
1931, until fully paid, and the further sum of P2,000, as penalty. Jose
Esteva appealed from said decision and this court in case G. R. No.
40233[1] reversed the
appealed decision and remanded said case to the trial court for new
trial. In accordance with the decision of this court Jose Esteva then
filed an amended answer wherein he alleged the counterclaim and
cross-complaint disallowed by the trial court in his re-amended answer.
The plaintiff and Teal Motor Co., Inc., having answered the
cross-complaint of the defendant Jose Esteva, the latter interposed a
demurrer to the answer of the first entity, which demurrer was
overruled by the trial court, to which said defendant Esteva exempted.
Finally on July 20, 1935, the trial court rendered the decision
above-mentioned. Jose Esteva and Teal Motor Co., Inc., appealed from
said decision.
Between September 1, 1927 and January 1,
1930, Jose Esteva bought from Teal Motor Co., Inc., fourteen
autotrucks, eleven trailers and one Buick automobile for the
sum of P105,730. On April 8, 1930, a liquidation was made which showed
that Esteva was owing P54,500, the balance of the purchase price of
said motor vehicles. Esteva then executed in favor of the Teal Motor
Co., Inc., twenty-two promissory notes, the first of which for the
amount of P1,000, matured on May 10, 1930 and the last for the amount
of P7,500 became due on February 10, 1932. To secure said promissory
notes, Esteva, on the same date, mortgaged all the motor vehicles in
favor of Teal Motor Co., Inc. Once in possession of the promissory
notes, Teal Motor Co., Inc., endorsed the same to the plaintiff,
reserving, however, the mortgage. Thereafter Esteva paid the eight
promissory notes when they fell due, namely, those corresponding to May
up to December, 1930, amounting to P8,000, but he failed to pay each of
the promissory notes for P6,000 corresponding to January, February and
March, 1931. Esteva having defaulted in the payment of the last three
promissory notes, Teal Motor Co., Inc., foreclosed the mortgage of the
motor vehicles on March 31, 1931. After said motor vehicles had been
attached, the sheriff sold the same at the public auction to Teal Motor
Co., Inc., for P20,000. After the mortgage executed’ in favor of Teal
Motor Co., Inc., was thus foreclosed, the plaintiff, in turn, brought
an action against Jose Esteva and Teal Motor Co., Inc., to recover from
both the amount of the promissory notes executed by Esteva. The amount
of the unpaid promissory notes was P46,500, plus the interest thereon
of 12 per cent per annum, and 25 per cent of the amount owing by way of
attorney’s fees.
APPEAL OF JOSE ESTEVA
-
In its answer to the cross-complaint filed by Jose Esteva, the
plaintiff alleged as a special defense that the foreclosure proceedings
of the mortgage executed by Esteva were valid because he consented
thereto and voluntarily delivered all the mortgaged motor vehicles, and
it likewise alleged that the decision rendered by this court declaring
illegal and void said proceedings neither bound the plaintiff, nor
resolved definitely the controversy because the same was not raised or
squarely submitted in the appeal. Jose Esteva demurred to said special
defense. The trial court overruled said demurrer and this resolution is
the subject matter of the first assignment of error of the appellant
Esteva.In the decision rendered in the first appeal,
G. R. No. 40233 (59 Phil., 490, 493-495), this court made the following
rulings:“With reference to the assigned errors, we may say generally that we
either find unsustainable or unnecessary to discuss errors 1, 2, 3, 4,
7, and 8, and that we find sustainable error 5 in toto and errors 6 and 9 in part.“Our Chattel Mortgage Law, Act No. 1508, in its section B, defines a
chattel mortgage as ‘a conditional sale of personal property as
security for the payment of a debt, or the performance of some other
obligation specified therein.’ Section 5 of the law sets forth the form
of a chattel mortgage, which form was substantially followed in the
present instance. Otherwise, the law is silent with reference to the
facts before us. However, there are certain basic principles which it
is only needful to write down in order to see clearly the correct
result.“In the law of chattel mortgages the debt is the principal thing. The
mortgage is but an incident to the debt. Separated from the debt, the
mortgage has no determinate value. Customarily the foreclosure of the
mortgage accompanied as it is by the debt follows in due course without
mishap. Ordinarily also, the transfer of the debt carries with it the
mortgage. So a sale and delivery of notes secured by a chattel
mortgage, although unaccompanied by an assignment of the mortgage
itself, authorizes the purchaser to act as the mortgagee’s agent and to
do whatever he could have done to enforce the mortgage. So likewise,
whatever discharges the debt discharges the mortgage. All this unless
there be an agreement to the contrary.“Possibly as good a presentation of the applicable law as any is that to be found in the old case of Langdon vs.
Buel ([1832], 9 Wend., N. Y., 80). This was a case of a chattel
mortgage being executed on a steam engine and with the debt shown by
two notes. The notes which this mortgage was given to secure were
assigned to a third party. The question was, did not the mortgage pass
with the notes as incidents to them and should the action not have been
brought in the name of the third party? The court answered: ‘A mortgage
of either real or personal estate is but an accessory or incident to
the debt, or the security which is given as the evidence of the debt.
The assignment of the security passes the interest in the mortgage. The
mortgage cannot exist as an independent debt. If by special agreement
it does not accompany the security assigned, it is ipso facto extinguished, and ceases to be a subsisting demand.’“In the instant case, the mortgage cannot be impliedly found to have
passed as an incident of the debt because there was an agreement to the
contrary. The Teal Motor Co., Inc., retained the mortgage and
foreclosed it, while the Bachrach Motor Co., Inc., received the
promissory notes and sued upon them. What was the legal effect of this
unique arrangement knowingly entered into? As to the mortgage, it
ceased to exist because there was no debt to which it could attach. The
foreclosure proceedings were as a consequence a nullity. As to the
debt, the promissory notes unpaid, they were obligations of Esteva to
the Teal Motor Co., Inc., which assigned its rights to the Bachrach
Motor Co., Inc. The latter, as a holder of the notes, could sue upon
them. But what cannot be countenanced is the separation of the notes
from the mortgage and both the foreclosure of the mortgage and a suit
on the notes.“The rights of Bachrach Motor Co., Inc., are as above indicated and
include the privilege of securing payment from Esteva of all that is
due on the promissory notes. The rights of Esteva, who has been injured
by an illegal foreclosure of the mortgage, consist in securing damages
from the entities who caused him these damages. In this connection it
may be said that the evidence is sufficient to establish the
interlocking relationship between the Teal Motor Co., Inc., and the
Bachrach Motor Co., Inc. The action of Esteva would, therefore, lie
against both corporations. This conclusion is the more evident when we
realize that to hold otherwise might simply result in permitting Esteva
to prove damages against the Teal Motor Co., Inc., a corporation with
possibly no visible assets. The corresponding obligations of the
Bachrach Motor Co., Inc., the Teal Motor Co., Inc., and Jose Esteva
will necessarily have to be determined at a new trial, at which the
Bachrach Motor Co., Inc., can establish the debt due from Esteva and
the latter can set off against the debt whatever damages he can prove
at the trial.”And thereafter it entered the judgment in the following dispositive part:
“Agreeable to the foregoing pronouncements, the appealed judgment will
be set aside, and the record remanded for a new trial, with permission
to the parties to file their corresponding pleadings, and present their
evidence. So ordered, the costs of this instance to be paid by the
plaintiff and appellee.”A reading of the aforequoted part of said decision will show that
the validity of all the proceedings followed in the foreclosure of the
mortgage of the motor vehicles was raised directly in said appeal, and
that this court, after considering the contentions of the parties, held
that said judicial proceedings were null and void for the reason that
the mortgage invoked by Teal Motor Co., Inc., had ceased to exist. By
virtue of said decision the defense interposed by the plaintiff in its
answer to the cross-complaint of Jose Esteva was already res judicata
and the trial court should not have consented to its inclusion in said
pleading. Obviously, after the said decision, the plaintiff could not
again discuss the validity of the mortgage inasmuch as this court has
declared the same inexistent and the judicial proceedings for the
foreclosure thereof null and void. The first assignment of error
should, therefore, be sustained. - In the new
trial of the case the plaintiff attempted to prove and adduced evidence
which was admitted by the trial court, tending to establish that the
foreclosure proceedings were valid and legal because Jose Esteva
voluntarily gave his consent thereto and also voluntarily delivered the
motor vehicles to Teal Motor Co., Inc. Counsel for Esteva objected to
said kind of evidence invoking the decision of this court. The trial
court overruled the objection and received the evidence. In his second
assignment of error Esteva contends that the trial court erred in said
ruling. We believe that this second assignment of error should be
sustained because the trial court should not have received such
evidence. - In the appealed decision
the trial court found that only Teal Motor Co., Inc., was liable for
damages suffered by Jose Esteva, absolving therein the plaintiff. This
part of the decision is the subject of the third assignment of error.
We believe that the contention of the appellant Esteva is well-founded.
In the decision of this court it is said :“* * * The rights of Esteva, who has been injured by an illegal
foreclosure of the mortgage, consist in securing damages from the
entities who caused him these damages. In this connection it may be
said that the evidence is sufficient to establish the interlocking
relationship between the Teal Motor Co., Inc., and the Bachrach Motor
Co., Inc. The action of Esteva would, therefore, lie against both
corporations. This conclusion is the more evident when we realize that
to hold otherwise might simply result in permitting Esteva to prove
damages against the Teal Motor Co., Inc., a corporation with possibly
no visible assets. The corresponding obligations of the Bachrach Motor
Co., Inc., the Teal Motor Co., Inc., and Jose Esteva will necessarily
have to be determined at a new trial, at which the Bachrach Motor Co.,
Inc., can establish the debt due from Esteva and the latter can set off
against the debt whatever damages he can prove at the trial.” This
conclusion arrived at by the court clearly means that for the damages
occasioned to Esteva, the plaintiff and Teal Motor Co., Inc., should be
held jointly and severally liable, and that Esteva may set off the
amount of said damages against the judgment which the plaintiff may
obtain against him for the amount of the unpaid promissory notes. The
trial court, therefore, erred in not ordering both the plaintiff and
Teal Motor Co., Inc., to pay said damages, and in limiting the
liability to the codefendant Teal Motor Co., Inc. -
In the fourth assignment of error the appellant Esteva contends that
the trial court erred in declaring that the average life of the
attached motor vehicles is only five years. It is contended that
according to the evidence adduced by him said motor vehicles could have
been used for not less than eight years longer. We have reviewed the
evidence presented on this point and we are convinced that the
preponderance thereof justifies the conclusion of the trial court. We
may add, further, that in a transportation business like the one in
which the motor vehicles were to be used, said vehicles could not have
stood such rigorous and continuous service for a longer period than
that fixed by the trial court. - Neither do
we find any merit in the fifth assignment of error, wherein the
appellant Esteva claims that the trial court erred in declaring that
the motor vehicles should have an annual 20 per cent depreciation. The
preponderance of the evidence adduced sustains the conclusion of the
trial court. Naturally the expert witness for the appellant Esteva
testified that the depreciation should have been less than that fixed
by the trial court, but the fact is that the conclusion reached by said
court is sufficiently supported by a preponderance of all the evidence. -
In the sixth assignment of error Esteva contends that the trial court
erred in holding that the value of the motor vehicles was only P54,500
on the date when they were attached, or on March 31, 1931. We believe
that this assignment of error should be sustained. Accepting the very
findings of the trial court, it seems obvious that the value of said
motor vehicles should have been more. The trial court found in its
decision that the original value of the motor vehicles was P105,730 and
that their depreciation up to the date of attachment was P41,580.60.
Deducting the latter amount from the former the difference is
P64,149.40 which should doubtless be the value of the motor vehicles on
the date of attachment or of foreclosure of the mortgage. We do not
agree with the claim of the appellant that the value of said motor
vehicles, on said date should be P73,280 because the evidence does not
justify the same. - Esteva paid the licenses
for all the motor vehicles attached for the whole year 1931. In the
account which he presented in order to show the damages suffered by him
he included an item for P1,746.34 representing a fraction of the
licenses paid by him corresponding to the period from March 31, 1931,
when said vehicles were attached, to December 31 of the same year. The
trial court disapproved said item, holding that it cannot be considered
a part of the damages recoverable by Esteva because the latter, at any
rate, was under a duty to pay the licenses for the whole year. In his
seventh assignment of error Esteva contends that said ruling of the
trial court is erroneous. We agree with the appellant that the court
thus erred. Had the appellant foreseen that he could continue operating
his motor vehicles only up to the date of their attachment, he
doubtless would have paid only for the license for three months. But we
believe that the obligation of the appellant to pay the license for one
year should not determine his right to be reimbursed. The truth is that
the amount claimed by Esteva is a direct result of the damages suffered
by him by reason of the illegal act done by Teal Motor Co., Inc., in
confabulation with the plaintiff, and under article 1107 of the Civil
Code he should be indemnified therefor. - After analyzing the evidence the
trial court concluded that Esteva realized a profit of P20,453.08 from
the time he acquired the motor vehicles until they were attached, or an
average monthly profit of P524.43. But in fixing the number of years to
which Esteva would be entitled by way of profits, the trial court
granted him only for one year, upon the ground that damages for a
longer period would be speculative. In his eighth assignment of error
the appellant contends that the trial court should have awarded him
more damages under this claim. We rule that the conclusion reached by
the trial court should be sustained because, taking into account the
nature of the business in which the appellant Esteva was engaged, it
would really be problematical and speculative to hold that he could
have realized more profit for this supposes a longer operation of the
business. And even if the average life of the motor vehicles had been
calculated at five years, it would not be incorrect to affirm that the
same could be reduced to one year, or two, depending upon how the
appellant would fare in the operation of the business. -
The appellant claims in his ninth assignment of error that the
indemnification for profit which he was unable to realize should have
been fixed by the trial court at more than P6,293.16. This amount
represents the profit for one year based upon the average monthly
profit allowed the appellant by the trial court. In view of our ruling
on the eighth assignment of error, we believe that this assignment of
error should likewise be overruled. - The
appellant Esteva also claims indemnification for the goodwill of his
business. The value of the goodwill of his business has been calculated
at P63,085.49. The trial court did not award him anything under this
claim. In his tenth assignment of error the appellant contends that the
lower court erred in not awarding him said indemnification. A proper
resolution of this assignment of error requires that we clarify the
meaning of “good-will” in order to determine if the business of the
appellant really had a good-will and, consequently, if he is entitled
to be indemnified therefor.Lord Eldon defined “good-will” as the “probability that the
old customers will resort to the old place” (12 R. C. L., p. 977; Smock
vs. Pierson, 68 Ind., 405; 34 Am. Rep., 269; Zeigler vs. Sentzner, 8 Gill & J. [Md.], 150; 29 Am. Dec., 534; Brown vs. Benzinger, 118 Md., 29; 84 Atl., 79; Ann. Cas., 1914B, 582; Morgan vs. Schuyler, 79 N. Y., 490; 35 Am. Rep., 543; People vs. Roberts, 159 N. Y., 70; 53 N. E., 685; 45 L. R. A., 126; Von Bremen vs. MacMonnies, 200 N. Y., 41; 93 N. E., 186; 21 Ann. Cas., 423; 32 L. R. A. [N. S.], 293; Slack vs. Soddoth, 102 Tenn., 375; 52 S. W., 180; 73 A. S. R., 881; 45 L. R. A., 589; Trego vs.
Hunt [1896], A. C., 7; 73 L. T. N. S., 514; 44 W. R., 225; 65 L. J.,
Ch. 1; 12 Eng. Rul. Cas., 442). Judge Story gave another comprehensive
definition of “good-will” saying that it is the advantage or benefit
which is acquired by an establishment beyond the mere value of the
capital stock, funds or property employed therein, in consequence of
the general public patronage and encouragement which it receives from
constant or habitual customers on account of its local position, or
common celebrity, or reputation for skill, or affluence, or
punctuality, or from other accidental circumstances or necessities, or
even from ancient partialities or prejudices. This definition has been
accepted by the courts in numerous cases, among which are (Metropolitan
Bank vs. St. Louis Dispatch Co., 149 U. S., 436; Howard vs. Taylor, 90 Ala., 241; Bell vs. Ellis, 33 Cal., 620; Donleavey vs. Johnston, 24 Cal., A., 319; Armstrong vs. Atlantic Ice, etc., Corp., 141 Ga., 464; Douthart vs. Logan, 86 111. A., 294; Millspaugh Laundry vs. Sioux City First Nat. Bank, 120 Iowa, 1; Carey vs. Gunnison, 17 N. W., 881; Smith vs. Smith, 51 La Ann., 72; Bergamini vs. Bastian, 35 La. Ann., 60; Brown vs. Benzinger, 118 Md., 29; Sessinghaus Milling Co. vs. Hanebrink, 247 Mo., 212; Haverly vs. Elliott, 39 Nebr., 201; Smith vs. Gibbs, 44 N. H., 335; Boon vs. Moss, 70 N. Y., 465; Matter of Ball, 161 App. Div., 79; 146 N. Y. S., 499; Freeman vs. Freeman, 86 App. Div., 110; 83 N. Y. S., 478; Howe vs. Searing, 19 N. Y. Super., 354; Lane vs. Barnard, 103 Misc., 707; 170 N. Y. S., 946).According to the evidence the transportation business of Esteva had
been functioning with success for a period of about four years and
during that time it built a reputation for satisfactory service
rendered, and acquired good and steady customers and passengers who
constantly used its autotrucks and trailers. The evidence has likewise
established that had the business of the appellant continued he could
have counted on the same patronage and protection of his old and steady
customers in addition to new ones whom he could have succeeded in
attracting. Considering these circumstances it cannot be denied that
the business of the appellant Esteva had a good-will.What is now left to be determined is the value to be given to the
good-will of the business of the appellant, taking into account all the
circumstances above-mentioned. It has been held by various courts of
the Union that to find the reasonable value of a good-will the average
net profits for a period of years is multiplied by a number of years,
such number being suitable and proper, having reference to the nature
and character of the particular business under consideration (Matter of
Ball, 161 App. Div., 79; 146 N. Y. S., 499; In re Silkman, 121 App. Div., 202; 105 N. Y. S., 872; Von Au vs.
Magenheimer, 115 App. Div., 84; 100 N. Y. S., 659; Matter of Bd. of
Water Supply, 81 Misc., 19; 142 N. Y. S., 373; Matter of Keahon, 60
Misc., 508; 113 N. Y. S., 926; In re Demarest, 157 N. Y. S.,
653, 655). Applying this rule and taking into account the uncertain
nature of the transportation business of the appellant up to a certain
point, we believe that an indemnification of the good-will equivalent
to the profits obtained by the appellant for one year would in this
case be sufficient and reasonable. In other words, the appellant should
be indemnified for the good-will of his business in the sum of
P6,293.16. - In the eleventh assignment of
error the appellant contends that the trial court erred in declaring
that a mechanic with several years of experience in automobile shops is
not an expert who may testify as to the average life of motor vehicles;
and in the twelfth and last assignment of error it is contended that
the trial court likewise erred in considering the false testimony of
the witness E. M. Bachrach. We believe that these two assignments of
error are without merit. Even if we admit that the trial court so
erred, the errors thus committed do not justify a reversal or
modification of the appealed decision, in view of the other evidence
adduced which the trial court considered in reaching the conclusions to
which these assigned errors are addressed.APPEAL OF TEAL MOTOR COMPANY, INC.
-
In disposing of the appeal of Jose Esteva we referred to the decision
of this court promulgated in the first appeal (G. R. No. 40233, supra),
declaring that the mortgage executed in favor of Teal Motor Co., Inc.,
had already ceased to exist when said entity seized the motor vehicles,
and that all the proceedings followed in the foreclosure of said
mortgage were null and void. In its first assignment of error the
appellant Teal Motor Co., Inc., contends that such declaration is a
mere dictum and that it cannot be considered a decision in the strict
and legal sense. Said appellant contends that it could not be a final
determination of the points involved in said declaration or decision
because neither in the pleadings nor at any time did Jose Esteva
question directly the existence of the mortgage and the validity of the
foreclosure proceedings. What is more, the appellant contends that
Esteva could not discuss said points because he had voluntarily
delivered possession of the motor vehicles and with full knowledge had
consented to the public sale of said vehicles as a consequence of the
foreclosure proceedings. After consulting the record we do not hesitate
to conclude that appellant’s contentions are not well-taken. An
examination of the record shows that from the very beginning Jose
Esteva maintained the theory that the Teal Motor Co., Inc., had
illegally appropriated all the motor vehicles, and that contrary to law
and in violation of the last agreement entered into between them, and
in connivance with the plaintiff, it foreclosed the mortgage which,
having been cancelled by the last agreement, had already ceased to
exist, as a result of which it Had succeeded in acquiring said vehicles
at a public auction which was likewise illegal, for the sum of P20,000,
which sum was very much less than the actual value given by said
appellant thereto on the date when they entered into the last contract.
In paragraphs 17 and 18 of his first answer, dated January 6, 1932,
Jose Esteva had already alleged these facts by way of special defense;
in paragraphs 16, 17 and 13 of his re-amended answer, dated February
12, 1932, Jose Esteva reiterated the same allegations; in paragraphs 7,
8 and 9 of his cross-complaint, dated June 15, 1932, Jose Esteva again
made the same allegations and, finally, in his brief tiled in case G.
R. No. 40233, supra, Jose Esteva assigned as errors 5, 6 and
9 the fact that the trial court did not declare said allegations or
special defenses sufficiently established. It is true that the
cross-complaint was not admitted by the trial court, which was one of
the reasons why Esteva appealed, but this court in its decision held
that said cross-complaint was proper and should have been admitted. As
to whether said allegations or special defenses or cross-complaint were
substantiated and proven, an examination of the record shows that they
were satisfactorily established by the evidence adduced by the
plaintiff. In fact, the evidence of the plaintiff and of Jose Esteva
has shown that the mortgage had ceased to exist on the date when the
motor vehicles were seized, and that said mortgage, upon petition of
Teal Motor Co., Inc., was foreclosed because the said company had
endorsed the promissory notes which were secured by the mortgage.
Bearing in mind all these details, there is no basis for the allegation
that this court decided questions which have neither been raised by the
pleadings nor submitted by the parties in their respective briefs. It
is needless to state that at the first trial of this case, the parties
were the same, and the plaintiff as well as the appellant Teal Motor
Co., Inc., had all the opportunity they wanted to be heard by the trial
court and by this court. Obviously, under these circumstances, it
cannot be successfully contended that the decision of this court on the
points above-mentioned is a mere dictum. What has been decided is the
law of the case and binds all the parties (article 1252, Civil Code,
and sections 306, par. 2, and 307, Code of Civil Procedure; Limjap vs. Vera Moguer, 11 Phil., 439; Peñlosa vs. Tuason, 22 Phil., 303; Donato vs. Mendoza, 25 Phil., 57; Juan vs. Go Cotay, 26 Phil., 328; Agregado vs. Munoz, 26 Phil, 456; Pascual vs. Del Saz Orozco, 28 Phil., 521; Bayot vs. Zurbito, 39 Phil., 659). -
In its second assignment of error the appellant Teal Motor Co., Inc.,
contends that the trial court erred in not finding that it continued to
be the creditor of Jose Esteva by virtue of the mortgage and that its
indorsement of the promissory notes to the plaintiff was solely for the
purpose of guaranteeing its obligation to the latter. What is herein
claimed openly runs counter to what has been decided in case G. R. No.
40233, supra. It would seem needless to recall that this
court already decided that the herein appellant had no interest in the
mortgage inasmuch as the latter had ceased to exist. If this is so, it
cannot be claimed that said appellant still continued to be the
creditor of Jose Esteva. At any rate what has been decided and
converted into res judicata cannot be discussed anew in this
appeal. Article 1843 of the Civil Code and the decision of this court
in the case of Banco Español Filipino vs. Donaldson Sim & Co. (5 Phil., 418), invoked by the appellant, are not applicable. -
In its third assignment of error the appellant alleges that the trial
court erred in finding it liable to Jose Esteva for damages. The
contention is also contrary to the finding in the decision rendered in
case G. R. No. 40233, supra. In the decision rendered in said
case it has been held that Teal Motor Co., Inc., is liable, jointly
with the plaintiff, to Jose Esteva for all damages caused to the latter
by their illegal acts. - The appellant claims in its fourth assignment of error that the trial court erred: (a)
In not granting a reasonable salary to the manager of the business of
Jose Esteva, although the management was in the hands of the owner of
the motor vehicles, and in not deducting said salary from the income of
the business of Esteva; (b) in computing the interest on the indebtedness in the manner made by the trial court; and (c)
in appraising the value of the motor vehicles. We do not believe that
the trial court committed any of these alleged errors. Esteva had the
right to run his business as he pleased, without paying the manager any
salary, provided his operations do not violate any law. He was not
bound by any legal provision to pay a salary to the manager, who was he
himself, and evidently he could serve as such without pay. With respect
to the interest, the trial court disapproved the method employed by the
accountant of the plaintiff as well as the system followed by the
accountant of Esteva in finding the interest stipulated and due upon
the promissory notes. The trial court took as a basis the agreement as
to interest appearing in each of the promissory notes and computed the
same as shown in the following table:NotesMaturityAmountInterest1930No. 1…………. May 10………………………………. P1,000.00P10.00No. 2…………. June 10………………………………. 1,000.0020.00No. 3…………. July 10………………………………. 1,000.0030.00No. 4…………. Aug. 10………………………………. 1,000.0040.00No. 5…………. Sept. 10………………………………. 1,000.0050.00No. 6…………. Oct. 10………………………………. 1,000.0060.00No. 7…………. Nov. 10………………………………. 1,000.0070.00No. 8…………. Dec. 10………………………………. 1,000.0080.001931No. 9…………. Jan. 10 ………………………………. 6,000.00540.00No. 10…………. Feb. 10 ………………………………. 6,000.00600.00No. 11…………. Mar. 10 ………………………………. 6,000.00660.00No. 12…………. Apr. 10 ………………………………. 6,000.00720.00No. 13…………. May 10 ………………………………. 1,000.00130.00No. 14…………. June 10 ………………………………. 1,000.00140.00No. 15…………. July 10 ………………………………. 1,000.00150.00No. 16…………. Aug. 10 ………………………………. 1,000.00160.00No. 17…………. Sept. 10 ………………………………. 1,000.00170.00No. 18…………. Oct. 10 ………………………………. 1,000.00180.00No. 19…………. Nov. 10 ………………………………. 1,000.00190.00No. 20…………. Dec. 10 ………………………………. 1,000.00200.001932 No. 21 …………. Jan. 10 ………………………………. 7,000.001,470.00No. 22 …………. Feb. 10 ………………………………. 7,500.001,650.00And it concluded that the interest due on the promissory notes amounted
to P2,160 only; the accountant for the plaintiff thereby making Esteva
further indebted in the sum of P2,935 by way of interest. Considering
the terms of the promissory notes, in connection with the interest
which Esteva bound himself to pay, we are convinced that the
computation made by the trial court is correct and does not violate any
principle or rule of accounting. As to the value given to the motor
vehicles, we have already said, in deciding the sixth assignment of
error of the appellant Jose Esteva, that it should be P64,149.40. It is
needless for us to indulge in further discussion than that already
made. Suffice it to say that our conclusion is supported by a
preponderance of all the evidence. - In the fifth assignment of
error the appellant Teal Motor Co., Inc., contends that the trial court
erred in not declaring that the motor vehicles were in a bad condition
when they were voluntarily delivered by Esteva. We find no merit in
this assignment of error. The evidence has shown, and it was so
declared by the trial court, that the motor vehicles, on the date
mentioned, were in such good condition that they could continue
operating and rendering the services for which they were acquired for
another period of five years. - In its sixth
assignment of error said appellant contends that the trial court erred
in ordering it to pay Esteva the amounts above-mentioned, with the
interest thereon and for the purposes specified. And in the seventh and
last assignment of error it contends that the trial court should have
granted its motion for new trial.
With respect to
the sums of money and the interest thereon which should be paid by this
appellant, the same should be modified to conform with the result of
the appeal and in the manner stated in this decision. With respect to
the motion for new trial, we believe that the trial court should have
granted the same in order to correct the errors herein mentioned; but,
at any rate, said errors have been corrected in this decision.
In view of the foregoing considerations and upon modification of the appealed decision, we hold (a) that the plaintiff and Teal Motor Co., Inc., by virtue of the decision rendered by this court in case G. R. No. 40233, supra,
are jointly and severally liable to Jose Esteva for damages suffered by
the latter as a result of the attachment or seizure of the motor
vehicles and the foreclosure of the mortgage; (b) that the value of the said motor vehicles on the date when they were seized by Teal Motor Co., Inc., was P64,149.40; (c)
that Jose Esteva is entitled to be indemnified for the good-will of his
transportation business, which indemnity shall be in the sum of
P6,293.16; and (d) that Jose Esteva may set off the indemnity
awarded him against the amount which he is bound to pay the plaintiff
for the amount of the promissory notes, with interest thereon, and the
penalties; and as thus modified, the decision appealed from is affirmed
in all other respects, without special pronouncement as to the costs in
this instance. After the record has been remanded to the court of
origin, it shall issue a writ of execution of this judgment as herein
provided. So ordered.
Avanceña, C. J., Villa-Real, Diaz, Laurel, and Concepcion, JJ., concur.
[1] 59 Phil., 490.