Compañia General de Tabacos v. Jimenez
REITERATIONFacts
The Antecedents: Plaintiff-appellee, La Compañia General de Tabacos de Filipinas, filed an action against defendants-appellants, Mateo Jimenez and Socorro Fortich, to collect P17,500 with interest and to foreclose a real estate mortgage executed as security. Mateo Jimenez was designated as a consignee for the plaintiff's vessel, receiving commissions on freight and handling funds for copra purchases. A mortgage was executed on May 8, 1927, but was refused registration due to defects. Consequently, a second mortgage was executed on June 3, 1927, on the same property and registered under Act No. 3344. Later, the plaintiff discovered Jimenez was short P17,500. On February 18, 1928, Jimenez executed a public document acknowledging this indebtedness, payable within three years with 10% annual interest, stating it was secured by the May 8, 1927 mortgage. Procedural History: The Court of First Instance of Occidental Misamis rendered a decision ordering Mateo Jimenez to pay P17,500 plus interest, and in case of non-payment, ordering the public auction of the mortgaged properties. The court also absolved the plaintiff from the defendants' counterclaims and ordered the defendants to pay costs. The Petition: The defendants appealed the decision, raising several assignments of error, primarily concerning the refusal to admit their second amended answer and questioning the trial court's findings of fact and order of foreclosure.
Issue(s)
Whether the trial court erred in refusing to admit the defendants' second amended answer. Whether the trial court erred in its findings of fact and order of foreclosure of the mortgage.
Ruling
The judgment of the trial court is affirmed. The defendants are ordered to pay P17,500 with interest, and in case of default, the mortgaged property will be sold at public auction to satisfy the judgment. If the proceeds are insufficient, an order of execution will be issued against the defendants' other properties.
Ratio Decidendi
On the refusal to admit the second amended answer: The Court held that the trial court did not err in refusing to admit the second amended answer. The defendants' attempt to deny the due execution of the mortgage (Exhibit A) was made by their attorney, not by the defendants themselves, and was based on "best knowledge and information." This does not constitute a denial under oath as required by Section 103 of the Code of Civil Procedure, which mandates a specific declaration by the defendant that they did not sign the document or that it is otherwise false or fabricated. An attorney's oath based on "best knowledge and information" is insufficient for such a denial, as the defendants are the ones with direct knowledge of the execution of the instrument. Therefore, no issue was raised regarding the genuineness and due execution of Exhibit A. On the findings of fact and order of foreclosure: The Court found no error in the trial court's findings of fact and order of foreclosure. The defendant Mateo Jimenez acknowledged his indebtedness of P17,500 in Exhibit B, dated February 18, 1928. Furthermore, he signed Exhibit D on May 16, 1928, an itemized statement of his account showing a balance of P40,476.68 against him. He also prepared and signed Exhibit C on June 27, 1928, accounting for this sum with a liquid balance of P17,500. These acknowledgments, coupled with the clear intent of the parties to refer to the registered mortgage of June 3, 1927, which replaced the defective mortgage of May 8, 1927, supported the trial court's decision. The Court reasoned that even if the acknowledgment document had not mentioned the mortgage, the plaintiff could still pursue foreclosure proceedings because the indebtedness arose from a breach of trust, and the mortgage was executed to secure the balance of funds entrusted to the defendant.
Main Doctrine
A mortgage executed to secure a debt arising from a breach of trust can be foreclosed even if the acknowledgment of indebtedness does not explicitly refer to the mortgage, provided the parties intended to refer to the registered mortgage that replaced a defective one.