G.R. No. 47424 ; June 28, 1941
EL BANCO NACIONAL FILIPINO, plaintiff-appellant, vs. BACOLOD-MURCIA MILLING CO., INC., defendant-appellee.

FACTS

The defendant, Bacolod-Murcia Milling Co., Inc., obtained a credit from the plaintiff, Banco Nacional Filipino. The payment was guaranteed by a mortgage on the lands of its adherent planters. In consideration of the risk assumed by these properties and to compensate the owners, the defendant, on June 7, 1929, agreed to issue bonds or debt certificates in favor of these planters in amounts proportional to the value of their mortgaged properties. The form of these certificates was prepared with the plaintiff’s approval. The certificates state that their amount is payable when the Bacolod-Murcia Milling Co., Inc., is free of debt, has sufficient available funds, and its Board of Directors orders said payment, subject to certain conditions. One condition, pertinent to this case, is that if the beneficiary is or should become a debtor of the Central (the milling company) for any reason, its amount, or the necessary part thereof to pay said debt, shall be credited to his account when the Board of Directors agrees to pay said certificate; and if the beneficiary is not or does not become indebted to the Central, but is indebted to the plaintiff Banco Nacional Filipino, the amount of the certificate shall be delivered to the bank when the Board of Directors orders its payment.
The defendant Central issued several debt certificates in favor of Jose Benares, totaling P132,489.81, with the last one issued on October 8, 1935. On this date, Jose Benares owed the Central P86,049.84 and owed the plaintiff bank P634,463.27. Subsequently, Jose Benares obtained a loan from the defendant Central for P5,000.
When the defendant Central paid the total amount of the certificates (P135,489.81), it deducted from this amount not only the P86,049.84 that Benares owed at the time the certificates were issued, but also the P5,000 loaned to him later.
The plaintiff bank opposes the payment by the defendant Central to Benares of this P5,000 amount.

ISSUE

The sole question in this case is the interpretation of the debt certificate issued by the defendant Central in favor of Benares: namely, whether the debts to be deducted from the certificate’s amount are those Benares had at the date of the certificate’s issuance, or those existing at the date of its payment.

RULING

The Court affirmed the lower court’s decision, holding that the terms of the certificate are clear in the sense accepted by the trial court. The amount to be deducted from the certificate’s proceeds is the amount Benares is or should become indebted to the Central. Literally, the certificate refers to the debt Benares had at the date of issuance and any he might incur thereafter. This is clearer considering the certificate states that this deduction is to be made when the Board of Directors agrees to its payment. It is evident from the certificate’s terms that the debts of Benares to the defendant, to be deducted from the proceeds, include not only those existing at the date of issuance but also those incurred up to the date of payment. The appealed judgment is confirmed, with costs against the appellant.