Asia Banking Corporation v. Olsen
REITERATIONFacts
The Antecedents: Walter E. Olsen & Co., Inc. obtained a loan of P200,000 from Asia Banking Corporation for land purchase. To secure this loan, stockholders of the corporation, including Walter E. Olsen, executed a joint and several promissory note. Subsequently, the corporation executed a promissory note and a mortgage on the purchased land in favor of its codefendants and Mr. A. D. Gibbs to secure them against any payments they might be compelled to make to the plaintiff. Later, on April 25, 1921, Walter E. Olsen, as president and treasurer, mortgaged the same land to the plaintiff (Asia Banking Corporation) to secure the P200,000 loan. Due to this second mortgage, the first mortgage in favor of the codefendants could not be paid. Procedural History: The plaintiff prayed for a judgment against the defendants jointly and severally for P200,000 with interest, subrogation in place of the defendants (except the corporation) as to the mortgage, cancellation of the mortgage, and sale of the land if the loan was not paid. All defendants, except Walter E. Olsen, agreed to the judgment prayed for. The lower court dismissed the complaint against certain defendants, sentenced Walter E. Olsen & Co., Inc. to pay the plaintiff, ordered the sale of the mortgaged land in default of payment, and ordered the cancellation of the mortgage in favor of the other defendants, subrogating the plaintiff therein. The Appeal: Walter E. Olsen appealed the judgment. The appellant alleged that the lower court erred in cancelling the mortgage in favor of the defendants and in considering documents attached to the complaint without their express introduction in evidence.
Issue(s)
Whether the lower court erred in cancelling the mortgage in favor of the defendants. Whether the lower court erred in considering documents attached to the complaint without their express introduction in evidence.
Ruling
The Supreme Court affirmed the judgment of the lower court with costs against the appellant. The Court held that the appellant could not object to the cancellation of the mortgage in favor of the defendants, as he himself, in his capacity as president and treasurer, had executed a subsequent mortgage on the same land in favor of the plaintiff, which required the cancellation of the prior mortgage for its efficacy. The Court also ruled that there was no error in considering the documents attached to the complaint, as their authenticity was deemed admitted due to the absence of a sworn denial under Section 103 of the Code of Civil Procedure.
Ratio Decidendi
On Issue 1: The Court held that the appellant, Walter E. Olsen, could not object to the cancellation of the mortgage executed in favor of his codefendants and Mr. A. D. Gibbs. As president and treasurer of Walter E. Olsen & Co., Inc., Olsen himself executed a mortgage on the same land in favor of the plaintiff, Asia Banking Corporation. This subsequent mortgage could not be recorded and acquire full efficacy without the prior mortgage being cancelled. Therefore, Olsen could not refuse to do what was necessary for the efficacy of the mortgage he executed on behalf of the corporation. Furthermore, the mortgage in favor of the defendants was solely to secure reimbursement for any amounts they might have to pay the plaintiff. Since they were absolved from all liability on account of the loan, that mortgage had no further purpose. On Issue 2: The Court found no error in the lower court's consideration of the documents attached to the complaint without their express introduction in evidence. The defendants, in their answer, did not present a denial under oath of the authenticity of these documents. Under Section 103 of the Code of Civil Procedure, the authenticity of such documents is deemed admitted when not denied under oath. This admission relieves the plaintiff from the duty of formally presenting these documents as evidence. The court may and should consider facts admitted by the parties without the necessity of further evidence for a proper decision of the case.
Main Doctrine
The Court held that a subsequent mortgage on a property cannot be registered and acquire full efficacy if it requires the cancellation of a prior mortgage on the same land. Furthermore, a mortgage intended to secure reimbursement for a loan becomes purposeless if the parties it was meant to protect are absolved from liability for that loan. The authenticity of documents attached to a complaint is deemed admitted if not denied under oath, relieving the plaintiff of the burden of formal introduction of evidence.