Philippine National Bank v. Court of Appeals
REITERATIONFacts
The Antecedents: Remington Industrial Sales Corporation (Remington) filed a complaint for sum of money against Marinduque Mining and Industrial Corporation (MMIC) for unpaid purchases of construction materials and merchandise amounting to P921,755.95, plus interest and attorney's fees. Procedural History: Remington amended its complaint multiple times to include Philippine National Bank (PNB), Development Bank of the Philippines (DBP), Nonoc Mining and Industrial Corporation (NMIC), Maricalum Mining Corporation (Maricalum), Island Cement Corporation (Island), and Asset Privatization Trust (APT) as co-defendants. Remington alleged that these entities should be treated as one, disregarding the corporate veil, due to suspicious circumstances surrounding the foreclosure and transfer of MMIC's assets to newly created corporations allegedly owned and managed by PNB and DBP. The trial court ruled in favor of Remington, holding the defendants jointly and severally liable. The Court of Appeals affirmed this decision. PNB, DBP, NMIC, Maricalum, Island, and APT appealed. The Petition: The Philippine National Bank (PNB) appealed the decision of the Court of Appeals, questioning its liability for the unpaid goods supplied by Remington to MMIC, which were included in the foreclosure of MMIC's mortgaged properties by PNB.
Issue(s)
Whether the Philippine National Bank is liable to pay for unpaid goods and merchandise supplied by Remington Industrial Sales Corporation to Marinduque Mining and Industrial Corporation. Whether the inclusion of unpaid goods in the foreclosure sale by PNB makes PNB liable to the unpaid seller.
Ruling
The Court REVERSED the decision of the Court of Appeals and DISMISSED the complaint of Remington Industrial Sales Corporation as against defendants Philippine National Bank and Development Bank of the Philippines. The obligation to pay for the unpaid goods remains with Marinduque Mining and Industrial Corporation.
Ratio Decidendi
On the liability of PNB for unpaid goods: The Court held that Remington's claim was for unpaid purchases from MMIC. PNB foreclosed its mortgages on MMIC's property, which included the goods sold by Remington. However, Remington had already relinquished ownership of the merchandise to MMIC upon delivery. MMIC was the owner of the goods at the time of foreclosure. The failure of MMIC to pay the purchase price did not automatically revert ownership to Remington unless the sale was invalidated. Therefore, PNB's act of including the unpaid goods in its foreclosure sale and acquiring them at auction did not make PNB an obligor to pay for those unpaid goods. Remington had no cause of action against PNB for the recovery of the value of the goods, as PNB caused Remington no injury. The obligation remained solely with MMIC. Any damage to Remington was damnum absque injuria. On the inclusion of unpaid goods in the foreclosure sale: The Court clarified that the foreclosure sale by PNB was an exercise of a legal right granted to PNB as a mortgagee. The goods, though unpaid by MMIC, were legally owned by MMIC at the time of foreclosure. PNB's acquisition of these goods through foreclosure did not create a new contractual obligation on PNB's part to pay Remington for the original sale to MMIC. The ownership had transferred to MMIC, and PNB merely acquired MMIC's ownership interest in those assets through the foreclosure process. Thus, the inclusion of these goods in the foreclosure did not render PNB liable to Remington.
Main Doctrine
A bank that forecloses on the assets of a debtor corporation, which assets include goods sold on credit by a third party to the debtor, does not become liable to the unpaid seller for the purchase price of those goods. The ownership of the goods transferred to the debtor upon delivery, and the failure to pay does not automatically revert ownership to the seller. The obligation to pay remains with the debtor corporation.