Republic of the Philippines
[G.R. No. L-7817. October 31, 1956.]
ALFREDO M. VELAYO, in his capacity as Assignee of the insolvent COMMERCIAL AIR LINES, INC. (CALI), Plaintiff-Appellant, vs. SHELL COMPANY OF THE PHILIPPINE ISLANDS, LTD.,Defendant-Appellee, YEK HUA TRADING CORPORATION, PAUL SYCIP and MABASA & CO., intervenors.
D E C I S I O N
Antecedents — The Commercial Air Lines, Inc., which will be hereinafter referred to as CALI, is a corporation duly organized and existing in accordance with the Philippines laws, with offices in the City of Manila and previously engaged in air transportation business. The Shell Company of the P. I., Ltd., which will be designated as the Defendant, is on the other hand, a corporation organized under the laws of England and duly licensed to do business in the Philippines, with principal offices at the Hongkong and Shanghai Bank building in the City of Manila.
Since the start of CALI’s operations, its fuel needs were all supplied by the Defendant. Mr. Desmond Fitzgerald, its Credit Manager who extended credit to CALI, was in charge of the collection thereof. However, all matters referring to extensions of the term of payment had to be decided first by Mr. Stephen Crawford and later by Mr. Wildred Wooding, who represented in this country Defendant’s Board of Directors, the residence of which is in London, England (Exhs. 4-B and 4-A).
As of August, 1948, the books of the Defendant showed a balance of P170,162.58 in its favor for goods it sold and delivered to CALI. Even before August 6, 1948, Defendant had reasons to believe that the financial condition of the CALI was far from being satisfactory. As a matter of fact, according to Mr. Fitzgerald, CALI’s Douglas C-54 plane, then in California, was offered to him by Mr. Alfonso Sycip, CALI’s President of the Board of Directors, in partial settlement of their accounts, which offer was, however, declined by Mr. Crawford, probably because upon inquiries made by Mr. Fitzgerald sometime before August 6, 1948, for the purpose of preparing the report for its London office regarding CALI’s indebtedness, Col. Lambert, CALI’s Vice President and General Manager, answered that the total outstanding liabilities of his corporation was only P550,000, and the management of Defendant probably assumed that the assets of the CALI could very well meet said liabilities and were not included to take charge of the sale of CALI’s said Douglas C-54 plane to collect its credit.
On August 6, 1948, the management of CALI informally convened its principal creditors (excepting only the insignificant small claims) who were invited to a luncheon that was held between 12: 00 and 2: 00 o’clock in the afternoon of that day in the Trade and Commerce Building at 123 Juan Luna St., Manila, and informed them that CALI was in a state of insolvency and had to stop operation. The creditors present, or represented at the meeting, were: Mr. A. L. Bartolini, representing Firestone Tire & Rubber Co.; Mr. Quintin Yu, representing Commercial News; Mr. Mark Pringle, representing Smith, Bell & Co. (Lloyds of London); Messrs. Vicente Liwag, C. Dominguez and Pacifico Agcaoili, representing National Airports Corporation; Messrs. W. J. Bunnel and Manuel Chan, representing Goodrich International Rubber Co.; Mr. G. E. Adair, representing Goodyear Tire & Rubber Co.; Mr. J. T. Chuidian, representing Gibbs, Gibbs, Chuidian & Quasha; Mr. E. Valera, representing Mabasa & Co.; Mr. D. Fitzgerald, representing Shell Co. P.I. Ltd.; and Mr. Alfonso Z. Sycip, representing himself, Yek Hua Trading Corporation and Paul Sycip (Exhs. NN, JJJ, MM, QQQ, II-4, SS, TT, UU, VV, WW, XX, YY, ZZ, AAA, BBB, CCC, DDD, EEE, FFF, GGG, and HHH).