Barach Motor Co. vs. Talisay-Silay Milling Co.

No. 35223
Romualdez, J.

Sept. 17, 1931

Facts:
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December 22, 1923: Talisay-Silay Miling Co. Inc., (TSMC) was indebted to PNB. To secure the
payment for its debt, TSMC was able to induce its planters, including a certain Mariano Lacson
Ledesma, to mortgage their land to the creditor bank.
o To compensate the farmers for the risk they took, TSMC passed a resolution on the same
date (later amended March 23, 1928) that undertook to credit the owners of mortgaged
lands every year with a sum equal to two percentum of the debt secured according to the
yearly balance, the payment of the bonus being made at once, or in part from time to
time, as soon as the central became free from its obligation to PNB and had funds thereof.
Bachrach Motor Co., Inc. later on filed a complaint against TSMC for the delivery of P13,850 (or
promissory notes or other instruments of credit for that sum) on June 30, 1930 representing the
bonus of Mariano Lacson Ledesma given by TSMC, and to render accounting on the amount that
the sugar central owed Ledesma and that the sale made by Ledesma be declared null and void
(Not specified what sale this isa conjecture would be that MLL sold his land to Cesar
Ledesma).
o PNB: filed a third party claim alleging a preferential right to whatever amount MLL
would be entitled. PNB claimed that such bonuses constitute civil fruits of the land
mortgaged to said bank.
o Cesar Ledesma: said he was buyer in good faith .
o Bachrach: as a response to the bank, said that its credit against MLL was prior and
preferential to the bank.
CFI Iloilo: held that Bachrach has the preferred right over MLLs bonus.
Hence, this petition.

Issues/Held:
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Art. 355 of the (old) CC considers three things as civil fruits: 1. Rents of buildings; 2. The
proceeds from leases of lands; 3. Income from perpetual or life annuities, or other similar sources
of revenue (shortened by the court as 3. certain kinds of income). As the bonus in the case is
not of rent nor proceeds from lease, can it be a form of income?
o SC: No. Said bonus bears no immediate, but only a remote and accidental relation to the
land mentioned, having been granted as compensation for the risk of having subjected
ones land to a lien in favor of the bank for the benefit of the entity granting said bonus.
o In short, this is not civil fruits or income from mortgaged property, which, as far as
concerned, has nothing to do with it. This stems from MLLs generosity in facing the
danger (of mortgaging ones land) for the protection of the central.
o Hence the amount of the bonus is not based upon the value, importance or any other
circumstance of the mortgaged land, but upon the total value of the debt thereby secured.

Judgment Affirmed.