G.R. No. 36207; October 26, 1932
IRINEO G. CARLOS, plaintiff-appellant, vs. MINDORO SUGAR CO., ET AL., defendants-appellees.

FACTS

Plaintiff Irineo G. Carlos sought to recover the value of four bonds (Nos. 1219-1222) issued by defendant Mindoro Sugar Company and guaranteed by defendant Philippine Trust Company. The bonds were part of a P3,000,000 bond issue secured by a deed of trust conveying Mindoro Sugar’s property to Philippine Trust as trustee. Philippine Trust sold the bonds, endorsing each with a guarantee of payment of principal and interest. The Court of First Instance of Manila held only Mindoro Sugar liable, absolving Philippine Trust. Carlos appealed, contending Philippine Trust’s guarantee was valid and binding.

ISSUE

Whether the Philippine Trust Company’s guarantee of the bonds issued by the Mindoro Sugar Company is ultra vires and therefore invalid.

RULING

No. The guarantee is valid and binding. The Philippine Trust Company’s primary purpose, as stated in its articles of incorporation, is to engage in the trust business, which includes dealing in and guaranteeing securities. The guarantee was executed pursuant to a board resolution and was within the corporation’s express powers. The doctrine of ultra vires does not apply as the contract was within the corporation’s implied or incidental powers and was performed by one party (the plaintiff). Furthermore, the prohibition under the Corporation Law for banking institutions against incurring liabilities exceeding paid-in capital is inapplicable because Philippine Trust is primarily a trust company, not a bank, and it held sufficient assets (the mortgaged property from Mindoro Sugar) to cover the guaranteed obligation. The appealed decision is reversed, and Philippine Trust Company is held solidarily liable with Mindoro Sugar Company.

AI Generated by Armztrong.