PNB vs THE PHILIPPINE VEGETABLE OIL CO.

FACTS: In 1920, the Vegetable Oil Co found itself in financial straits. It was in debt of approximately P30M. PNB was the largest creditor, owing the bank P17M. PNB was secured principally by a real and chattel mortgage for P3.5M. The Vegetable Oil Co executed another chattel mortgage in favor of the bank on its vessels Tankerville and HS Everette to guarantee the payment of sums not to exceed P4M.

Mr. Phil C. Whitaker, the General Manager of the Vegetable Oil Co., made his first offer to pledge certain private properties to secure the creditors of the Oil Company. At the instance of Mr. Whitaker but inspired to action by the PNB, a receiver for the Oil Company was appointed by the CFI Manila.

During the period when a receiver was in control of the Oil Company, Creditors transferred to Mr. Whitaker a part of their claims against the Oil Company via an agreement. PNB was not a direct party to the agreement although its officials had full knowledge of its accomplishment and its general manager placed his OK at the end of the final draft. PNB then obtained a new mortgage from the Oil Company. Shortly thereafter, the receivership for the Oil Company was terminated (Feb 1922). The bank suspended the operations of the Company, and closed the plant.

PNB Bank filed an action to foreclose its mortgage on the property of the Vegetable Oil Company. The Vegetable Oil Company on its part countered with certain special defenses with a counterclaim for P6,000,000. Phil. C. Whitaker presented a complaint in intervention. The judgment rendered was in favor of the PNB and against the defendant which was ordered to pay the sum of P15,787,454.54, representing the liquidation between the plaintiff and the defendant, with legal interest. The counterclaim and the complaint in intervention were dismissed.

ISSUE: W/N the PNB ever made any contract binding the bank to provide the necessary operating capital to the Vegetable Oil Co.

HELD: The issue relates to the applicability or non-applicability of the Statue of Frauds. The broad view is that the Statute of Frauds applies only to agreements not to be performed on either side within a year from the making thereof. Mr. Whitaker has entirely performed his part of the agreement, equity would argue that all evidence be admitted to prove the alleged agreement.

Portions of the minutes of the Board of Directors disclose that the Board authorized advances to the Oil Company to the extent of more than P1M. No contract entered into by the General Manager of the Bank would be valid unless made with the advice and consent of its Board of Directors. What the Board had decreed was that the Oil Company be financed under the receivership to the extent of P500,000. No indication that the Board had ever consented to an agreement for practically unlimited backing of the Oil Company, or that it had ratified any such promise made by the General Manager.

No definite agreement binding on the bank but only a general intimation proffered by the General Manager of the Bank in conference that his bank contemplated financing the operations of the Oil Company.

Case remanded to the lower court for entry of judgment and further proceedings.