7/28/2019 LAGMAY Velayo vs Shell
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Velayo vs Shell
October 31, 1956
Ponente: J. FelixFacts:
Defendant Shell Company of the Philippine Islands is the
official supplier of gasoline of Commercial AirlinesInc. (CALI)
Prior to 1948, Commercial Airlines (CALI) owed P170,162 to Shell
and CAL offered its C-54 plane aspayment to Shell Company (the
plane was in California) but Shell at that time declined as it
thought CALIhad sufficient money to pay its debt
In 1948 however, CALI was going bankrupt so it called upon an
informal meeting of its creditors. In thatmeeting, the creditors
agreed to appoint representatives to a working committee that would
determine theorder of preference as to how each creditor should be
paid
They also agreed not to file suit against CALI but CALI did
reserve that it will file insolvency proceedingsshould its assets
be not enough to pay them up
Shell Company was represented by a certain Fitzgerald to the
three man working committee Later, the working committee convened
to discuss how CALIs asset should be divided amongst the
creditors but while such was pending, Fitzgerald sent a
telegraph message to Shell USA advising the latterthat Shell
Philippines is assigning its credit to Shell USA in the amount of
$79k, thereby effectivelycollecting almost all if not the entire
indebtedness of CALI to Shell Philippines
Shell USA got wind of the fact that CALI has a C-54 plane is
California and so Shell USA petitioned before aCalifornia court to
have the plane be the subject of a writ of attachment which was
granted Meanwhile, the stockholders of CALI were unaware of the
assignment of credit made by Shell Philippines to
Shell USA and they went on to approve the sale of CALIs asset to
the Philippine Airlines
In September 1948, the other creditors learned of the assignment
made by Shell. This prompted theseother creditors to file their own
complaint of attachment against CALIs assets. CALI then filed
for
insolvency proceedings to protect its assets in the Philippines
from being attached
Velayos appointment as CALIs assignee was approved in lieu of
the insolvency proceeding. In order forhim to recover the C-54
plane in California, it filed for a writ of injunction against
Shell Philippines in orderfor the latter to restrain Shell USA from
proceeding with the attachment and in the alternative thatjudgment
be awarded in favor of CALI for damages double the amount of the
C-54 plane
The C-54 plane was not recovered. Shell Company argued it is not
liable for damages because there isnothing in the law which
prohibits a company from assigning its credit, it being a common
practice
Issue:
Whether or not the defendant acted in bad faith and is therefore
liable for damages?
Held:
The Supreme Court ruled in the affirmative The basis of such
liability, in the absence of law, is Article 21 of the Civil Code
The defendant clearly acted in bad faith when it schemed and
effected the attachment of the C-54 plane o
its debtor CALI by assigning its credit to its sister company in
the United States
It took advantage of its knowledge that insolvency proceedings
would most probably be instituted by CALIif its creditors fail to
come up with an understanding as to the manner of distribution of
the assets
According to Article 21 of the New Civil Code, Any person who
willfully causes loss and injury to anotherin a manner that is
contrary to morals, good customs or public policy shall compensate
the latter for thedamage
A moral wrong or injury, even if it does not constitute a
violation of a statute law, should be compensatedby damages. Moral
damages (Art. 2217) may be recovered (Art. 2219). In Article 20,
the liability fordamages arises from a willful or negligent act
contrary to law. In this article, the act is contrary to
morals,good customs or public policy.
