PEOPLE’S BANK AND TRUST CO. V.

ODOM 032
GR No. L-43670, 25 February 1947, Imperial, J.
Digested by Trixie Peralta

SUMMARY: ​W. J. Odom entered into a contract with Gibbs whereby the latter authorized the former to
construct 2 buildings. Odom then leased out various parts of the buildings. PBTC was one of the lessees.
By virtue of these contracts with PBTC, Odom obtained an overdraft from the same bank. The overdraft
was subsequently increased twice after. Odom executed various securities for the initial and subsequent
overdrafts. PBTC brought an action to collect the balance against Odom’s account. CFI ruled in favor of
PBTC, ordering Odom to pay the balance with 9% interest, attorneys fees, and costs of suit. SC affirmed
the CFI judgment, but deleted the order of the public sale of the mortgaged rights.

FACTS:
• Odom entered into a contract with A.D. Gibbs, whereby Gibbs authorized him to
construct 2 concrete buildings with 3 floors each.
o The building was eventually called the Sugar News Co. Building. People’s Bank
and Trust Co. (PBTC) occupied its 1st floor.
o The other building, which came to be called the Edward J. Nell Co. Building, was
then still under construction.
• Odom bore all the expenses of construction. In consideration for this, Gibbs assigned to
him all the rents which the Sugar News Co. Building may produce for a period of 8 years from:
o First floor (occupied by PBTC) : November 1, 1926
o Remaining 2 floors which were then unequipped: from the date they were fully
equipped
• It was also agreed that Odom would bear the expenses of construction with regard to the
Edward J. Nell Co. Building, and in consideration, Gibbs assigned to him all the rent which it
may produce for a period of 8 years and 3 months from the date of the termination of
construction. However, in the event that each floor would be constructed at different times, it
would be counted from the completion of each floor.
• By virtue of these contracts, Odom obtained an overdraft from PBTC amounting to Php
110,000. To secure this, Odom assigned to PBTC all his rights, title, and interest in the
contracts of lease over the Sugar News Co. Building, as well as the land it stood on. As
additional security, the defendant also assigned an insurance policy for P100,000 issued by the
Manufacturers Life Insurance Company (Exhibit C).
• The overdraft was increased to Php 150,000. As further security, Odom assigned to
PBTC a guaranty over the same securities (Exhibit B).
• The overdraft was again increased to Php 165,000. To guarantee this, he assigned to
PBTC all his rights, title, and interest in the contracts of lease over the Edward J. Nell Building
(Exhibit D).
• PBTC and Odom entered into another agreement whereby the latter assigned to the
former his right to collect the rents of the Edward J. Nell Company Building to secure the
overdraft of Php 165,000 with interest at 9% pa.
• Odom drew fund upon PBTC by way of overdrafts. The balance against him amounted
to Php 134, 403.68.
• PBTC brought this action to recover the balance from Odom and to foreclose the
mortgage of properties to guarantee his obligation.
• CFI: ordered Odom to pay the amount plus 9% interest pa, attorney’s fees and costs.
o The amount should be paid within 3 months. If not, the mortgaged properties will
be sold at public auction.

ISSUES & HOLDING:

• WoN Exhibit D took the place of Exhibit B and C- ​NO.
o Since it was executed as a result of the increase of the overdraft to Php 165,000
as well as the additional guarantee, it is evident that the intent of the parties was neither to set
aside the previous contracts nor to substitute Exhibit D therefor.
• WoN the obligation contracted by Odom was with the term- ​NO.
o Odom’s argument was that the obligation was one with a term and the parties not
having fixed the date of payment, PBTC should have first brought an action to fix said date
pursuant to Art. 1128 of the Civil Code.
o Exhibit D is a complement of Exhibits B and C, and so, they must be interpreted
together. Exhibits B and C expressly stipulate that the obligation shall expire and be due upon
demand of PBTC.
• WoN the lower court erred in finding that Exhibits B, C, and D are mortgages- ​YES.
Odom argued that the contracts are assignments of rights, because in none of the said
contracts did the parties intend to constitute a mortgage.
o A careful perusal of the provisions of the contracts shows that they were indeed
mortgages because they were executed to guarantee the principal obligations of Odom,
consisting of the overdrafts of the indebtedness resulting therefrom.
o It positively appears in each of them that the defendant assigned to the plaintiff
all his rights in the contracts of lease, in the land, and in the insurance policy to guarantee his
indebtedness resulting from the overdrafts. An assignment to guarantee an obligation as in
effect a mortgage and not an absolute conveyance of title which confers ownership on the
assignee.

In view of the foregoing, we affirm the appealed judgment, except that part ordering the public
sale of the mortgaged rights, with costs to the defendant and appellant. The plaintiff is ordered
to account to the defendant for the rents received from two buildings which have not been
included in its liquidation, Exhibit G-4, and within ten days from notice of this judgment by the
court of origin, it shall file a written liquidation showing the final state of the account of the
defendant. So ordered.