Peoples Bank and Trust Co. v.

Odom | Gab
February 25, 1937
PEOPLE BANK AND TRUST COMPANY, Plaintiff-Appellee, v. W. J. ODOM, Defendant-Appellant
Imperial, J.
NATURE: Appeal
SUMMARY: W. J. Odom entered into a contract with A. D. Gibbs whereby Gibbs authorized Odom to construct 2 buildings upon Gibbs
land. Odom then leased out various parts of the 2 buildings, with one of the lessees being Peoples Bank and Trust Co. (PBTC). Due to
the contracts entered into with PBTC, Odom obtained an overdraft from PBTC, the amount of which was increased multiple times.
Odom also executed various securities for the overdraft, with its various amount increases. After drawing funds upon PBTC through
overdrafts, as of January 4, 1934, Odoms account showed a balance against him of P138,403.68, including stipulated interest up to
said date. PBTC then brought an action with the Manila CFI to recover from Odom the balance of the overdraft and to foreclose the
mortgage of properties to guarantee his obligation. The CFI later ordered Odom to pay to PBTC P138,403.68, with 9% interest per
annum from January 4, 1934 until fully paid, plus P500 as attorney's fees and the costs. After Odom appealed to the SC, the SC
affirmed the CFIs judgment, except the part ordering the public sale of the mortgaged rights, with costs to Odom.
DOCTRINE (related to topic):

An assignment to guarantee an obligation is, in effect, a mortgage, not an absolute conveyance of title, which confers
ownership on the assignee.
FACTS:

W. J. Odom entered into a contract with A. D. Gibbs (Exhibit E) whereby Gibbs authorized Odom to construct 2
buildings with 3 floors each upon Gibbs land.
o The Sugar News Co. Building was completely constructed and its 1st floor was occupied by the Peoples Bank and
Trust Co. (PBTC), but the 2 upper floors were not fully equipped; the Edward J. Nell Co. Building was then under
construction.
o Under the contract, Odom bore all the expenses of consideration of the Sugar News Co. Building and Gibbs assigned
to him all the rents which the building may produce for 8 years from: (1) November 1, 1926 as to the 1st floor then
already occupied and (2) as to the other floors to be equipped, from the date they are fully equipped.
o As to the Edward J. Nell Co. Building, the parties agreed that Odom would bear all the expenses of construction until
it is fully completed and in consideration thereof, Gibbs assigned to him all the rent which it may produce for 8 years,
3 months from the date of the termination of its construction; this period was to be counted from the completion of
each floor in the event that the floors comprising the building should not be completed and equipped at the same
time.

Due to the contracts entered into with PBTC, Odom obtained an overdraft from PBTC of P110,000.
o To secure this overdraft, Odom assigned to the PBTC all his rights, title, and interest in the contracts of lease
with the Sugar News Co., Manila Machinery and Supply Co., Inc., and T. Yamamoto of the various parts of the
Sugar News Company Building and the rights, title, and interest which he had acquired in the land on which
the said building was constructed under the contract he had with A. D. Gibbs.
o Also as security, Odom assigned to the PBTC an insurance policy for P100,000 issued by the Manufacturers
Life Insurance Company. (Exhibit C)

Odoms overdraft was increased to P150,000.

o To secure the payment thereof, Odom assigned to PBTC by guaranty the same securities which he had given
for the overdraft of P110,000. (Exhibit B)

The overdraft was again increased to P165,000.

o To guarantee the payment thereof, Odom assigned to PBTC his rights, title, and interest in the contracts of
lease with Edward J. Nell Co., El Progreso, Inc., and France & Goulette of various parts of the Edward J. Nell
Company Building, in whatever contracts of lease of any portion of the same building which he may enter in
the future, and the rights, title, and interest which he had in the land occupied by the building according to his
contract with A. D. Gibbs. (Exhibit D)
o Odom also assigned to PBTC his right to collect the rents of the Edward J. Nell Company Building. (Exhibit F)

Pursuant to the aforesaid contracts, Odom drew funds upon PBTC through overdrafts.

January 4, 1934: Odoms account showed a balance against him of P138,403.68, including stipulated interest up to said
date.

PBTC then brought an action with the Manila CFI to recover from Odom the balance of the overdraft and to foreclose
the mortgage of properties to guarantee his obligation.

The CFI ordered Odom to pay to PBTC P138,403.68, with 9% interest per annum from January 4, 1934 until fully paid, plus
P500 as attorney's fees and the costs.
o The judgment also decreed that the principal and interest should be paid within 3 months, failing which the mortgaged
properties will be sold at public auction, consisting of the rights, title, and interest of Odom in the contracts of lease of
the 2 buildings and his rights, title, and interest in the land on which the 2 buildings are constructed, and that the
proceeds of the sale should be applied to the payment of the amount of the judgment.

Odom appealed from said CFIs judgment to the SC.

ISSUE #1:

W/N Exhibit D took the place of Exhibits B and C (NO)

RATIO #1:

Exhibit D was executed, according to the contract itself, as a result of the increase of the overdraft to P165,000 and the
additional guaranty given by Odom, consisting of the assignment of guaranty of his rights in his contracts of lease of the
Edward J. Nell Company Building and of his rights in the land occupied by the same building.

Clause 3 of Exhibit D stipulated that Exhibit C was incorporated therein and also constituted a guaranty of the payment of the
overdraft as increased to P165,000.

Due to these facts, it is evident that the intention of the parties was neither to set aside the previous contracts nor to substitute
Exhibit D therefor.
ISSUE #2:

W/N the CFI should have held that the obligation contracted by Odom was with a term and the parties not having
fixed the date of payment, PBTC should have first brought an action to fix said date under CC, Art. 1128 1 (NO)
RATIO #2:

Exhibit D is a complement of Exhibits B and C, hence, Exhibit Ds language and the intention of the parties must be interpreted
in relation to and jointly with Exhibits B and C under CC, Art. 1285.

It was expressly stipulated in Exhibits B and C that the obligation contracted by Odom shall expire and be due upon demand of
the PBTC and since Exhibit C was incorporated in Exhibit D and Odom was required by the PBTC to pay all his indebtedness,
the obligation was without a term and it became due and demandable.

Thus, CC, Art. 1128 is inapplicable.

ISSUE #3 (MAIN):

W/N Exhibits B, C, and D are mortgages or assignment of rights (MORTGAGES)

RATIO #3:

Exhibits B, C, and D were really mortgages inasmuch as they were executed to guarantee the principal obligations of
the Odom, consisting of the overdrafts of the indebtedness resulting therefrom.

It appears in each of Exhibits B, C, and D that the Odom assigned to the PBTC all his rights in the contracts of lease, in
the land, and in the insurance policy to guarantee his indebtedness resulting from the overdrafts.

An assignment to guarantee an obligation is, in effect, a mortgage, not an absolute conveyance of title, which confers
ownership on the assignee. (Title Guaranty & Surety Co. v. Witmire; Polhemus v. Trainer; Campbell v. Woodstock Iron Co.;
Dunham v. Whitehead; Woodward v. Crump)

In Exhibits C and D, it was stipulated that if Odom should comply with all the conditions of the contracts and should
pay his indebtedness, together with interest, the assignments would become null and void; otherwise, they would
remain in full force.
o If the parties' intention was that the assignments are absolute and not by guaranty or mortgage, the stipulation
would not have been made because it would be inconsistent with the will of the contracting parties.
ISSUE #4:

W/N Odoms civil liability has ceased, with him now not owing PBTC anything (NO)
RATIO #4:

The assignments Odom made not being absolute and PBTC having established that Odom has not paid his total overdraft, he
is not yet relieved of his obligation.
ADDITIONAL DISCUSSION:

Under the contracts, PBTC was authorized to collect the rents of the 2 buildings during the period which might be that fixed in
the contract between the Odom and Gibbs.
o The SC said might because the contracts of lease have not been put in evidence, hence, it could point out the
duration thereof with precision.

However, the PBTC liquidated the account of the Odom up to January 4, 1934 only and in the appealed judgment, it was
decreed that the mortgaged rights be sold at public auction should Odom fail to pay his indebtedness within 3 months.

If the indebtedness has already been paid with the rents which the PBTC failed to account for, then there would be no ground
to take the aforementioned step. If the indebtedness has not yet been fully paid, neither would it be proper to sell any of the
rights in the mortgage contracts of lease because the latter have already matured, according to the contract with Gibbs.
o Thus, it is necessary to provide for the one and the other case.

As to the insurance policy, nothing can be said about it as the appealed judgment was silent thereon.
DISPOSITION
The appealed judgment was affirmed, except the part ordering the public sale of the mortgaged rights, with costs to Odom.

1 When it is to be inferred from the nature and circumstances of the obligation that it was intended to grant the debtor time to pay and
the term is not otherwise stated, the courts should fix the date of the maturity of the obligation.