69 Phil.

621

[ G.R. No. 45963, October 12, 1939 ]

CARLOS PARDO DE TAVERA AND CARMEN PARDO DE TAVERA

MANZANO, PLAINTIFFS AND APPELLANTS, VS. EL HOGAR
FILIPINO, INC., DEFENDANT AND APPELLEE. TAVERA-LUNA,
INC., DEFENDANT AND APPELLANT; VICENTE MADRIGAL,
DEFENDANT AND APPELLEE.
DECISION

MORAN, J.:
On January 17, 1931, defendant corporation, Tavera-Luna, Inc., obtained a loan of
P1,000,000 from El Hogar Filipino, Inc., for the purpose of constructing the Crystal Arcade
building: on its premises at Escolta, Manila. To secure this loan, the corporation executed a
first mortgage on said premises and on the building proposed to be erected thereon.  On
February 11, 1932, Tavera-Luna, Inc., secured from El Hogar Filipino an additional loan of
P300,000 with the same security executed for the original loan.  The Tavera-Luna, Inc.,
thereafter, defaulted in the payment of the monthly amortizations on the loan; whereupon, El
Hogar Filipino foreclosed the mortgage and proceeded with the extra-judicial sale of the
Crystal Arcade building, at which it was the highest bidder for P1,363,555.36. One day
before the expiration of the period of redemption, Carlos Pardo de Tavera and Carmen Pardo
de Tavera Manzano, in their capacity as stockholders of the Tavera-Luna, Inc., instituted the
present action against Tavera-Luna, Inc., and El Hogar Filipino, Inc., to annul the two
secured loans as well as the extra-judicial sale made in favor of the latter. Vicente Madrigal
was included as party defendant because of his having signed the second contract of loan as
holder of a second mortage on the property. Tavera-Luna, Inc., filed a cross-complaint
against its co-defendant El Hogar Filipino, seeking also to annul the two loans
aforementioned. From the judgment dismissing the complaint and cross-complaint, plaintiffs
and cross-complainant took the present appeal.
The most important question raised by appellants is whether or not the two secured loans are
null and void. It is contended that they are, on the ground that the Crystal Arcade building,
given as security for the loans, is a public building.  This contention is predicated upon
section 171 of the Corporation Law which reads as follows:
"It shall be unlawful for any building and loan association to make any loan after the date
when this Act, as amended, shall become effective upon property that is suitable for use only
as a manufacturing plant, theater, public hall, church, convent, school, club, hotel, garage, or
other public building.  To facilitate the investment of the idle funds of a building and loan
association, however, the Bank Commissioner, with the approval of the Secretary of Finance,
may, in special instances, waive the provisions of this paragraph."
We find it unnecessary to determine, in the instant case, whether the Crystal Arcade is or is
not a public building, for, even if it is, the loans are valid. It may be said, in passing, that the
evidence is sufficient to show that the Secretary of Finance and the Bank Commissioner had
knowledge of the loans and of the security given therefor, and that they have impliedly
approved the same. On the other hand, under the legal provision above quoted, a loan given
on a property which may be considered as a public building, is not, in itself, null and void. It
is unlawful to make loans on that kind of security, but the law does not declare the loans,
once made, to be null and void. The unlawful taking of the security may constitute a misuser
of the powers conferred upon the corporation by its charter, for which it may be made to
answer in an action for ouster or dissolution; but certainly the stockholders and depositors of
the corporation should not be punished with a loss of the money loaned nor the borrower be
rewarded with it.  As held by the Supreme Court of the "United States, in a similar case:
"The statute does not declare such a security void.  If congress so meant, it would have been
easy to say so; and it is hardly to be believed that this would not have been done, instead of
leaving the question to be settled by the uncertain result of litigation and judicial decision * *
*.
"We cannot believe it was meant that stockholders, and perhaps depositors and other
creditors, should be punished and the borrower rewarded, by giving success to this defense
whenever the offensive fact shall occur. The impending danger of a judgment of ouster and
dissolution was, we think, the check, and none other contemplated by congress.
"That has been always the punishment prescribed for the wanton violation of a charter, and it
may be made to follow whenever the proper public authority shall see fit to invoke its
application." * * * (Union Nat. Bank of St. Louis vs. Matthews, 98 U. S., 621; 25 L. ed.,
188.)
In the same case it has been likewise held that:
"Where it is a simple question of authority to contract, arising either on a question of
regularity of organization or of power conferred by the charter, a party who has had the
benefit of the agreement cannot be permitted, in an action founded upon it, to question its
validity."
Fletcher on this matter says :
"There is a direct conflict in the decisions as to the effect of a charter or statutory prohibition
against discounting or lending money on certain securities.  If the statute expressly declares
that securities taken in violation of the prohibition shall be void, such securities cannot be
enforced. Some courts have gone further and have held that the mere fact of prohibition
renders them unenforceable; but this construction is not supported by the weight of authority.
The better opinion is that where the charter of a corporation or some other statute prohibits it
from lending money on certain kinds of security, but does not declare that prohibited
securities taken by it shall be void, they are not void, and may be enforced by it. The taking
of such security is a misuser of the powers conferred upon the corporation by its charter, for
which the state may enforce a forfeiture, but the misuser cannot be set up by the borrower to
prevent the corporation from enforcing the security.  In case of a state statute prohibiting
savings banks from lending their funds on the security of names alone, it has been held that a
savings bank may enforce payment of a promissory note taken for money loaned in violation
of the statute." (Vol. 7, Fletcher Cyc. Corp., sec. 3616, pp. 744, 745.)
It is contended that the contracts in question are not of mortgage, but of antichresis. The
distinction, however, is immaterial, for even if the contracts are of antichresis, the extra-
judicial foreclosure of the security is valid. Stipulations in a contract of antichresis for the
extra-judicial foreclosure of the security may be allowed in the same manner as they are
allowed in contracts of mortgage and of pledge. (El Hogar Filipino vs. Paredes, 45 Phil., 178;
Peterson vs. Azada, 8 Phil., 432, 437.)
Appellants contend that El Hogar Filipino has been given the possession and administration
of the Crystal Arcade building, so that it may apply the rentals thereof to the payment of
interest and the capital owed by Tavera-Luna, Inc., and that due to the negligence of El Hogar
Filipino, no rentals sufficient to cover the monthly amortizations on the debt had been
realized therefrom.  The alleged negligence is made to consist in the failure of El Hogar
Filipino to advertise the rooms of the Crystal Arcade building for rent and to employ agents
to solicit and attract tenants. But the evidence presented to this effect has been sufficiently
contradicted by the evidence adduced by defendant-appellee. Besides, it appears that El
Hogar Filipino appointed Jose V. Ramirez as its representative in the management and
administration of the Crystal Arcade building, and the appointment was made in agreement
with Tavera-Luna, Inc. The ability of Ramirez to do the work entrusted to him is not
disputed. As a matter of fact, Ramirez, during his management of the building, was a
stockholder and director of the Tavera-Luna, Inc., and was serving that corporation as its
secretary and treasurer. Under all these circumstances, we see no reason to disturb the
findings of the lower court.
Judgment is affirmed, with costs against appellants.
Avanceña, C. J., Villa-Real, Imperial, Diaz, and Concepcion, JJ., concur.
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