G.R. No. L-41506             March 25, 1935
Hontiveros declined to order the foreclosure
PHILIPPINE REFINING CO., INC., plaintiff-appellant,
vs.
FRANCISCO JARQUE, JOSE COROMINAS, and ABOITIZ &
CO., defendants.
JOSE COROMINAS, in his capacity as assignee of the estate of the
insolvent Francisco Jarque, appellee.
Thos. G. Ingalls, Vicente Pelaez and DeWitt, Perkins and Brady for
appellant.
D.G. McVean and Vicente L. Faelnar for appellee.
MALCOLM, J.:
First of all the reason why the case has been decided by the court in
banc needs explanation. A motion was presented by counsel for the
appellant in which it was asked that the case be heard and determined by the
court sitting in banc because the admiralty jurisdiction of the court was
involved, and this motion was granted in regular course. On further
investigation it appears that this was error. The mere mortgage of a ship is a
contract entered into by the parties to it without reference to navigation or
perils of the sea, and does not, therefore, confer admiralty jurisdiction.
(Bogart vs. Steamboat John Jay [1854], 17 How., 399.)
Coming now to the merits, it appears that on varying dates the Philippine
Refining Co., Inc., and Francisco Jarque executed three mortgages on the
motor vessels Pandan and Zaragoza. These documents were recorded in
the record of transfers and encumbrances of vessels for the port of Cebu and
each was therein denominated a "chattel mortgage". Neither of the first two
mortgages had appended an affidavit of good faith. The third mortgage
contained such an affidavit, but this mortgage was not registered in the
customs house until May 17, 1932, or within the period of thirty days prior to
the commencement of insolvency proceedings against Francisco Jarque;
also, while the last mentioned mortgage was subscribed by Francisco Jarque
and M. N. Brink, there was nothing to disclose in what capacity the said M. N.
Brink signed. A fourth mortgage was executed by Francisco Jarque and
Ramon Aboitiz on the motorship Zaragoza and was entered in the chattel
mortgage registry of the register of deeds on May 12, 1932, or again within
the thirty-day period before the institution of insolvency proceedings. These
proceedings were begun on June 2, 1932, when a petition was filed with the
Court of First Instance of Cebu in which it was prayed that Francisco Jarque
be declared an insolvent debtor, which soon thereafter was granted, with the
result that an assignment of all the properties of the insolvent was executed
in favor of Jose Corominas.
On these facts, Judge Jose M.
of the mortgages, but on the contrary sustained the special defenses of fatal
defectiveness of the mortgages. In so doing we believe that the trial judge
acted advisedly.
Issue:
Whether or not the mortgages were defective.
Vessels are considered personal property under the civil law. (Code of
Commerce, article 585.) Similarly under the common law, vessels are
personal property although occasionally referred to as a peculiar kind of
personal property. (Reynolds vs. Nielson [1903], 96 Am. Rep., 1000; Atlantic
Maritime Co vs. City of Gloucester [1917], 117 N. E., 924.) Since the term
"personal property" includes vessels, they are subject to mortgage agreeably
to the provisions of the Chattel Mortgage Law. (Act No. 1508, section 2.)
Indeed, it has heretofore been accepted without discussion that a mortgage
on a vessel is in nature a chattel mortgage. (McMicking vs. Banco Español-
Filipino [1909], 13 Phil., 429; Arroyo vs. Yu de Sane [1930], 54 Phil., 511.)
The only difference between a chattel mortgage of a vessel and a chattel
mortgage of other personalty is that it is not now necessary for a chattel
mortgage of a vessel to be noted in the registry of the register of deeds, but it
is essential that a record of documents affecting the title to a vessel be
entered in the record of the Collector of Customs at the port of entry. (Rubiso
and Gelito vs. Rivera [1917], 37 Phil., 72; Arroyo vs. Yu de Sane, supra.)
Otherwise a mortgage on a vessel is generally like other chattel mortgages
as to its requisites and validity. (58 C.J., 92.)
The Chattell Mortgage Law in its section 5, in describing what shall be
deemed sufficient to constitute a good chattel mortgage, includes the
requirement of an affidavit of good faith appended to the mortgage and
recorded therewith. The absence of the affidavit vitiates a mortgage as
against creditors and subsequent encumbrancers. (Giberson vs. A. N.
Jureidini Bros. [1922], 44 Phil., 216; Benedicto de Tarrosa vs. F. M. Yap Tico
& Co. and Provincial Sheriff of Occidental Negros [1923], 46 Phil., 753.) As a
consequence a chattel mortgage of a vessel wherein the affidavit of good
faith required by the Chattel Mortgage Law is lacking, is unenforceable
against third persons.
In effect appellant asks us to find that the documents appearing in the record
do not constitute chattel mortgages or at least to gloss over the failure to
include the affidavit of good faith made a requisite for a good chattel
mortgage by the Chattel Mortgage Law. Counsel would further have us
disregard article 585 of the Code of Commerce, but no reason is shown for
holding this article not in force. Counsel would further have us revise
doctrines heretofore announced in a series of cases, which it is not desirable
to do since those principles were confirmed after due liberation and constitute
a part of the commercial law of the Philippines. And finally counsel would
have us make rulings on points entirely foreign to the issues of the case. As
neither the facts nor the law remains in doubt, the seven assigned errors will
be overruled.

Judgment affirmed, the costs of this instance to be paid by the appellant.

Avanceña, C.J., Street, Villa-Real, Abad Santos, Hull, Vickers, Imperial,

Butte, and Goddard, JJ., concur.
JOSE MCMICKING, sheriff of the city of Manila, Plaintiff-Appellee, v. EL
BANCO ESPANOL-FILIPINO, ET AL., Defendants. — MANUEL
AYALA, Appellant.
Rosado, Sanz & Opisso,, for Appellant.
Ortigas & Fisher, for Appellee.
SYLLABUS
1. SHIPS AND SHIPPING; STATUTORY LIENS IN FAVOR OF CREW. —
Article 646 of the Code of Commerce creates a statutory lien upon a ship in
favor of the crew engaged in operating the same, and this lien takes certain
preference in accordance with the provisions of article 580. The wages due
the crew and the expenses incurred in maintaining the vessel during the last
voyage constitute a lien which takes preference over a lien created by
pledging the ship as security for money borrowed. But there is no provision of
law which authorizes the use of funds received from the sale of a mortgaged
vessel to pay prior liens.
2. PLEADING AND PRACTICE; ACTION BY REAL PARTY IN INTEREST;
ASSIGNMENT OF ACTIONS. — Under section 114 of the Code of Civil
Procedure only the real party in interest may sue. This section, however,
recognizes the assignment of rights of action and also recognizes that when
one has such a right assigned to him he is then the real party in interest and
may maintain an action upon such claim or right. Said section, however,
should not be construed to prohibit the maintenance of an action by one who
is legally authorized to represent the real parties in interest, when brought in
the name of the latter.
DECISION
JOHNSON, J.  :
From the record the following facts appear.
b9b9First. That prior to the 21st day of February, 1907, one Sanchez and
one Cue Suan as a sociedad en comandita were the owners of certain
steamship, known as the Hock-Tay.
Second. That on the 21st day of February, 1907, the said sociedad borrowed
from El Banco Espanol-Filipino the sum of P30,000 at 8 per cent per annum
from the 21st day of September, 1907, until paid, and gave as security for the
payment of said sum a chattel mortgage executed and delivered in
accordance with Act No. 1508 of the Philippine Commission.
Third. That said mortgage was duly recorded in the office of the collector of
customs of the port of Manila on the 27th day of February, 1907, in the
record of conveyances of titles, mortgages and hypothecations of vessels
documented at said port
Fourth. That said mortgage was duly recorded in the office of the register of
property of the city of Manila on the 13th day of September, 1907, in
accordance with the provisions of section 4 of said Act (No. 1508).
Fifth. That, upon the 10th day of October, 1907, El Banco Espanol-Filipino
caused to be delivered to the sheriff of the city of Manila the said chattel
mortgage on the said steamer, Hock-Tay, together with notice that the terms
of said mortgage had been broken by the mortgagors, and requested that the
sheriff sell said mortgaged property in accordance with the provisions of
section 14 of said Act (No. 1508).
Sixth. The sheriff gave notice to said mortgagors of said request on the part
of the said mortgagee (El Banco Espanol-Filipino) and that said ship would
be sold in accordance with the law.
Seventh. That due notice was given of the sale of said mortgaged property
(the Hock-Tay) in accordance with the provisions of said Act.
Eighth. That the date fixed for the sale of said property was the 27th day of
October, 1907.
Ninth. That, upon the 27th day of October, 1907, Manuel Ayala served upon
the said sheriff the following notice:jgc:chanrobles.com.ph
"MANILA, October 26, 1907.
"To the Sheriff of the City of Manila.
"SIR: As captain of the steamer Hock-Tay, the judicial sale of which has been
advertised by you for the 28th instant, at 9 o’clock, a. m., I make demand
upon you not to deliver to the Banco Espanol-Filipino the sum of P4,441.92,
which is the amount of the wages of the crew and expenses of supplies now
owing, and which, in accordance with the Code of Commerce, constitute
preferred claims; I make this claim in writing and under oath, as shown by the
attached affidavit.
"Very respectfully,

"(Signed) MANUEL AYALA."cralaw virtua1aw library
The attached affidavit is as follows:jgc:chanrobles.com.ph
"CITY OF MANILA, PHILIPPINE ISLANDS, ss. :jgc:chanrobles.com.ph
"Manuel Ayala, being first duly sworn, says that he is the holder of a captain’s
license authorizing him to command vessels of any tonnage in Philippine
waters; that he is at the present time captain of the steamer Hock-Tay,
registered in the port of Manila, P. I. That the said steamer Hock-Tay has
been attached by the sheriff of Manila, who has announced the judicial sale
thereof of the 28th instant to satisfy a credit with article 580 of the Code of
Commerce, the money due to the captain and other members of the crew for
salaries is entitled to preference over the claim of the bank; that the amounts
owing by the ship for her equipment and provisions are also entitled to
preference; that the wages due the captain and crew as shown by the
shipping articles and account books of the vessel amount to the sum of
P2,840.19; that the sum of P1,601.73 is now owing to the affiant for
provisions, equipment and supplies furnished the vessel and expended
during her last voyage upon proper authority.
"(Signed) MANUEL AYALA.
"Subscribed and sworn to before me, etc."cralaw virtua1aw library
Tenth. On the 27th day of October, 1907, the steamer was sold to the highest
bidder for cash for the sum of P30,000.
On the 30th day of October, 1907, the sheriff of the city of Manila filed a
complaint in the Court of First Instance of the city of Manila in which the
foregoing facts were, in substance, alleged, which complaint concluded with
the following prayer:jgc:chanrobles.com.ph
"The plaintiff asks the court:jgc:chanrobles.com.ph
"1. That the defendants be requested to interplead their respective rights to
said funds.
"2. That, upon the delivery of the said funds to such person or persons
ordered by the court, the plaintiff be relieved of any responsibility as to all the
defendants in connection with said funds; and
"3. That the plaintiff be granted any other remedy which the court may deem
just and equitable."cralaw virtua1aw library
To this complaint the defendant Manuel Ayala answered and alleged his
claim or lien which he held against the said ship Hock-Tay. On the 9th day of
November, 1907, the defendant El Banco Espanol-Filipino presented its
answer in which it attempted to show that neither the said Sanchez Et. Al.,
nor the said Manuel Ayala had any right whatever to participate in the
proceeds of the sale of said ship by said sheriff, and claimed that all of the
money except the legal expenses should be paid to said bank. The record
does not disclose whether or not the said sociedad en comandita filed an
answer in said cause.
Upon the 4th day of August, 1908, the attorneys for El Banco Espanol-
Filipino and for the said Manuel Ayala entered into an agreement in the
words and figures following:jgc:chanrobles.com.ph
"For the purposes of this suit it is hereby stipulated between the
representatives of the Banco Espanol-Filipino and of Captain Don Manuel
Ayala, as follows:jgc:chanrobles.com.ph
"First. That the facts alleged in the paragraphs 1, 2, 4, 5, 6, 7, 8, and 9 of the
complaint of interpleader filed in these proceedings by J. McMicking, as
sheriff of the city of Manila, are true.
"Second. That it is true that the mortgage deed of the steamer Hock-Tay,
which appears literally copied in paragraph 5 of the said complaint, was duly
recorded by the Banco Espanol-Filipino in the office of the collector of
customs of Manila, on the 27th day of February, 1907, and in the registry of
chattel mortgages of the city of Manila on the 13th day of September, 1907.
"Third. That the limited partnership named "Sanchez y Cue Sang," sociedad
en comandita, was the owner of the aforesaid steamer Hock-Tay at the date
on which the representative of that partnership executed the mortgage deed
of said steamer in favor of the Banco Espanol-Filipino.
"Fourth. That there is no credit, arising from the maintenance of the steamer
Hock-Tay, recorded in the mercantile registry in favor of Captain Ayala.
"Fifth. That the last voyage of the steamer Hock-Tay prior to her sale by
virtue of the mortgage executed by the partnership owner of the same in
favor of the Banco Espanol-Filipino, began on the 12th of September, 1907,
and ended on the 29th of September of the same year.

"Sixth. That the allegations contained in paragraphs 1, 2, 5, 6, and 7 of the
answer of Manuel Ayala are true.
"Seventh. That Captain Manuel Ayala was the one who collected from the
agents "Sanchez y Cue Sang," sociedad en comandita, the wages of the
crew hired by him and who distributed the same among them, the said crew
having nothing to do with the ship’s agents whom they did not know and with
whom they made no contract except through Captain Ayala.
"Eighth. That the officers and crew of the steamer Hock-Tay, the same as all
those belonging to the coastwise trade of these Islands, were hired upon a
monthly salary with food and drink.
"Ninth. That Inchausti & Co., as charterers charterer meaning: a person or
company that rents a plane or ship of the steamer Hock-Tay, paid to Manuel
Ayala, during the month of September, 1907, all the expenses for
subsistence, with the exception of those corresponding to the maintenance of
the officers and crew, and that the balances appearing in Exhibits C and D,
attached to the answer of Manuel Ayala, only refer to the food and drink of
the officers and crew
"Tenth. That the firm of H. J. Andrews & Co. was the authorized agent of the
partnership "Sanchez y Cue Sang," sociedad en comandita, the owner of the
steamer Hock-Tay, and that G. Andrews was authorized to represent the firm
of H. J. Andrews & Co.
"Eleventh. That the days of service of the crew and officers referred to in the
statement contained in Exhibit B, attached to the answer of Captain Manuel
Ayala, are intended to correspond to a number of successive days from the
1st day of October, 1907.
"Twelfth. That the port of Manila was, during all the dates referred to in his
suit, the port of entry of the steamer Hock-Tay.
"Thirteenth. That on the date of the sale of the steamer Hock-Tay, under the
mortgage executed by the partnership owner of the said vessel in favor of the
Banco Espanol-Filipino, the amount of the lien created on said vessel in favor
of the mortgage creditor was the sum of thirty thousand (P30,000) pesos,
Philippine currency, with the interest thereon at the rate of 8 per cent per
year, from the 21st of September, 1907, the date of the last payment of
interest.
"The respective parties signing this stipulation pray the court to render a
decision in the case in accordance with the facts contained herein,
respectively waiving the submission of other evidence.
"Manila, August 4, 1908
(Signed) "Ortigas & Fisher,
"Attorneys for the Banco Espanol-Filipino.
(Signed) "Rosado, Sanz & Opisso,
"Attorneys for Don Manuel Ayala."cralaw virtua1aw library
Upon this agreed statement of facts the cause was submitted to the lower
court and after due consideration of the facts that court rendered a judgment
upon the 29th day of September, 1908, the dispositive part of which was in
the words following:jgc:chanrobles.com.ph
"The court therefore finds that there is due the defendant Ayala from the
proceeds of the sale of the vessel and in preference to the claim of the
mortgagee the said sum of P756.66. It is therefore considered and adjudged
that the judgment herein of January 20, 1908, be and the same is hereby
vacated and that the sheriff of Manila, out of the proceeds of the sale of said
vessel as reported by him, pay to the defendant Manuel Ayala the said sum
of P756.66, and that the balance of said proceeds less the costs of this
proceeding be paid to the mortgagee, the Banco Espanol-Flipino."cralaw
virtua1aw library
From the decision of the lower court the defendant Manuel Ayala duly
appealed and made the following assignments of
error:jgc:chanrobles.com.ph
"The Court of First Instance of Manila, in rendering judgment in the above
entitled case, committed error:jgc:chanrobles.com.ph
"I. In considering the credit of the Banco Espanol-Filipino as unquestionably
a mortgage credit, in a suit in which the adverse party in interest is not the
debtor, but a third party.
"II. In not acknowledging the lien existing in favor of all the credits claimed by
the Appellant.
"III. In making, for the purposes of compliance with a mercantile contract,
computations of time which violate the provisions of articles 57 and 60 of the
Code of Commerce, giving to article 646 of the same code a restrictive
construction which leads to an absurdity.
"IV. In giving to the food and drink of the crew, who give their services for
salary and maintenance, a distinct character of salary or rent like an industrial
contract of lease.
"V. In not granting the appellant Ayala the wages corresponding to the
subordinate crew employed by him on the ship, and who are unable to claim,
by themselves, their salaries, on account of the small amount of the same
and the wandering character of the life imposed upon them by their
occupation.
"VI. In granting the credit of the Banco Espanol-Filipino a preference over a
great part of those claimed by the appellant Ayala, which were expenses
incurred for the maintenance and benefit of the vessel during the existence of
the mortgage in favor of the bank."cralaw virtua1aw library
El Banco Espanol-Filipino did not appeal from the judgment of the lower court
and therefore whatever error may have been committed by the lower court to
the prejudice of the said bank can not now be considered.
Issue: WON
The Claim of the defendant Manuel Ayala is based upon the theory that the
wages of the crew and expenses incurred for the ship and furnishing supplies
for the same have a preference over the claim of the other defendant, El
Banco Espanol-Filipino. The defendant, the said Ayala, evidently bases his
claim upon the provisions of articles 580 and 646 of the Code of Commerce.
Article 580 is as follows:jgc:chanrobles.com.ph
"In all judicial sales of vessels for the payment of creditors, the following shall
have preference in the order stated:jgc:chanrobles.com.ph
"1. The credits in favor of the public treasury which are accounted for by
means of a judicial certificate of the competent authority.
"2. The judicial costs of the proceedings, according to an appraisement
approved by the judge or court.
"3. The pilotage charges, tonnage dues, and the other sea or port charges,
proven by means of proper certificates of the officers intrusted with the
collection.
"4. The salaries of the caretakers and watchmen of the vessel and any other
expense connected with the preservation of said vessel, from the time of
arrival until her sale, which appear to have been paid or are due by virtue of a
true account approved by the judge or court.
"5. The rent of the warehouse where the rigging and stores of the vessel
have been taken care of, according to contract.
"6. The salaries due the captain and crew during their last voyage, which
shall be vouched for by virtue of the liquidation made from the shipping
articles and account books of the vessel, approved by the chief of the bureau
of merchant marine where there is one, and in his absence by the counsel, or
judge, or court.
"7. The reimbursement for the goods of the freight the captain may have sold
in order to repair the vessel, provided the sale has been ordered by a judicial
instrument executed with the formalities required in such cases, and
recorded in the certificate of the registry of the vessel.
"8. The part of the price which has not been paid the last vendor, the credits
pending for the payment of material and work in the construction of the
vessel, when it has not navigated, and those arising from the repair and
equipment of the vessel and its provisioning with victuals and fuel during its
last voyage.
"In order that said credits may enjoy the preference contained in this number,
they must appear by contracts recorded in the commercial registry, or if they
were contracted for the vessel while on a voyage and said vessel has not
returned to the port where she is registered, they must be proven with the
authority required for such cases and entered in the certificate of the record
of said vessel.
"9. The amounts borrowed on bottomry bonds before the departure of the
vessel, proven by means of the contracts executed according to law and
recorded in the commercial registry, the amounts borrowed during the
voyage with the authority mentioned in the foregoing number, filling the same
requisites, and the insurance premium, proven by the policy of the contract or
certificate taken from the books of the broker.
"10. The indemnity due the shippers for the value of the goods shipped,
which were not delivered to the consignees, or for averages suffered for
which the vessel is liable, provided either appear in a judicial or arbitration
decision."cralaw virtua1aw library
By reference to paragraph 6 of said article 580, as above quoted, it is seen
that in all judicial sales of vessels the salaries due the captain and the crew
during the last voyage shall be paid in accordance with the preferences
mentioned in said article out of the proceeds of said ship. Article 646 of said
Code of Commerce provides:jgc:chanrobles.com.ph
"The vessel with her engines, rigging, equipment, and freights shall be liable
for the pay earned by the crew engaged per month or for the trip, the
liquidation and payment to take place between one voyage and the other.
"After a new voyage has been undertaken, credits such as the former shall
lose their right of preference."cralaw virtua1aw library
This article creates a lien upon a ship in favor of the crew engaged in the
operation of the same and this lien in favor of the crew takes certain
preference in accordance with the provisions of said article 580. The wages
due the crew and expenses incurred in maintaining the ship during the last
voyage constitute a lien under the law and take preference over a lien
created by giving the ship as security for money borrowed. The crew,
therefore, under article 580 of the Commercial Code, for their wages, etc., for
the last voyage, have a prior lien upon a ship, to the lien created in the
present case by the chattel mortgage. Liens in favor of the crew under these
circumstances are known as legal liens and whoever buys a ship or loans
money and takes a chattel mortgage as security, takes the ship subject to
such prior liens. In the present case the said mortgage was executed and
delivered in accordance with the provisions of Act No. 1508 of the Philippine
Commission. The ship was sold by the sheriff of the city of Manila in
accordance with the provisions of section 14 of that Act. Section 14 provides
the method of disposing of the funds received under such a sale. The method
is as follows:jgc:chanrobles.com.ph
"The proceeds of such sale shall be applied to the payment, (1) of the cost
and expenses of keeping and sale; (2) to the payment of the demand or
obligation secured by such mortgages; (3) the residue shall be paid to
persons holding subsequent mortgages in their order and (4) the balance
shall be paid to the mortgagor or person holding under him or
demand."cralaw virtua1aw library
It will be seen that there is no provision in the law for using the funds
received in the sale of mortgaged property for the payment of amounts due
on prior liens. The reason is plain why no such provision was made. It is that
in no case can such a sale or a sale based upon the second mortgage or lien
upon property affect in any way prior liens. To illustrate: Suppose that "A held
a mortgage against the ship in question, executed, delivered a recorded prior
to the date of the mortgage executed, delivered, and recorded to and by El
Banco Espanol-Filipino. Certainly the sale of the ship under the mortgage in
favor of the second mortgage could in no way affect the rights which "A" held
against the ship and the purchaser under the sale of the mortgage in favor of
Banco Espanol-Filipino would take the ship subject to the claim which "A"
held against the same. The lien which Manuel Ayala and the other members
of his crew held against the said ship were exactly analogous to the claims of
"A" in the above illustration. Therefore the sale of the ship under the
mortgage in question in no way divested the line which the law created in
favor of the said Manuel Ayala and his crew against the ship in question. His
remedy is, therefore, not against the money which was received under said
sale, but against the ship by foreclosing his lien (a right to keep possession of
property belonging to another person until a debt owed by that person is
discharged. )against the same. It is true that under a sale of personal
property in accordance with section 14 of said Act, the sheriff has a right to
pay the costs and expenses of keeping and sale, but we are not of the
opinion that this relates to the cost of keeping and maintaining the ship prior
to the time when the sheriff takes possession of it for the purpose of selling
the same.
Issue: WON Captain Manuel Ayala is allowed the sum of P756.66 out of the
proceeds of the sale.
The Code of Commerce refers to two methods of sale: one a judicial and the
other a voluntary sale. Article 580 provides how the funds received from a
judicial sale shall be distributed and for the cancellation of liens held against
the ship. But it can not be contended, even under the provisions of article
583, that the mere fact that a ship has been sold under a judicial sale, the
rights of prior lien holders, who were not parties to the procedure under which
such sale took place, were foreclosed.
The rights of persons not parties to a proceeding can not be affected thereby.
Article 582 gives a certain time within which the creditors shall present and
enforce their liens when the sale is a voluntary one. Article 579 and 584
provide a method of collecting or enforcing not only the liens created under
section 580 but also for the collection of any other kind of lien whatsoever.
The appellant alleges that the lower court committed an error in not allowing
Manuel Ayala to collect the amount due the other members of the crew. The
lower court denied the right of Ayala to collect the amount the amount due
the other members of the crew upon the theory that he was not the real
person in interest and was not, therefore, permitted to collect the amount
under section 114 of the Code of Procedure in Civil Actions. The lower court
allowed Ayala to collect the amount that was due him, as well as the amount
which was due other members of the crew and which had been assigned to
him. With reference to the amounts which had been assigned to him he was
the real party in interest and, if he was entitled to recover at all he was
entitled to recover not only what was due him but what had been assigned to
him. But under no theory could be recover the amount due to the other
members of the crew whose claims had not been assigned to him. Said
section 114 of the Code of Procedure in Civil Actions expressly provides that
every action must be prosecuted in the name of the real party in interest. This
section of the code recognizes the assignments of rights of action and also
recognizes that when one has a right of action assigned to him he is then the
real party in interest and may maintain an action upon such claim or right.
The purpose of section 114 is to require the plaintiff to be the real party in
interest, or, in other words, he must be the person to whom the proceeds of
the action shall belong, and to prevent actions by persons who have no
interest in the result of the same. Of course the said section can not be
construed to prohibit the maintenance of an action by one who is legally
authorized to represent the real parties in interest.

In view of the fact that the defendant El Banco Espanol-Filipino did not
appeal from the judgment of the lower court in which the defendant Manuel
Ayala was allowed the sum of P756.66 out of the proceeds of the sale, we
make no change in the result of the decision in the lower court.

For all of the foregoing reasons, the judgment of the lower court is hereby
affirmed, without any special finding as to costs.

Arellano, C.J. Torres, Mapa and Carson, JJ., concur.


G.R. No. L-31865             February 28, 1930
MARIANO B. ARROYO, provincial Sheriff of Iloilo, plaintiff-appellee,
vs.
MARIA CORAZON YU DE SANE, JOSE, M. PO PAUCO, and PO SUY
LIONG, defendants-appellants.
PHILIPPINE NATIONAL BANK, defendant-appellee.
Luis G. Hofileña for appellant Corazon Yu de Sane.
Tomas Villa-Real, Teofilo del Rosario and Tiburcio Lutero for appellants Po
Pauco and Po Suy Liong.
Plaintiff-appellee in his own behalf.
Roman J. Lacson for defendant-appellee National Bank.
MALCOLM, J.:
In the Court of First Instance of Iloilo, the sheriff of that province instituted an
action to compel the various persons and entities with claims to the lorchas
China and Cuylim to interplead with one another to determine their
conflicting rights. As a result, Po Suy Liong, Ti, Liong & Co., J. M. Po Pauco,
Maria Corazon Yu de Sane, and the Philippine National Bank presented their
respective answers and complaints. Thereafter, it is probable that a hearing
was had and evidence taken, although no such evidence has been
transcribed and elevated to this court, which means that we must perforce
accept the findings of fact made by the trial judge. His decision conclude with
the following pronouncements:
In view of these proven facts, the court holds that the mortgage of
the lorchas China and Cuylim executed in favor of J. M. Po Pauco through
notarial deed Exhibit 2, and the transfer of said mortgage by J. M. Po Pouco,
the mortgagee, to the Philippine National Bank through notarial deed Exhibit
1, duly recorded in the registry of deeds of the Province of Iloilo on November
29, 1919, are valid and legal.
The fact that this mortgage was not registered in the Bureau of Customs of
the port of Iloilo until March 5th of this year does not invalidate it; since it was
proved at the trial of this case that such deferred registration was due to
certain doubts entertained by the collector of customs of the port of Iloilo
touching the applicability of Act No. 3324, amending section 1176 of the
Administrative Code; and that said collector only decided to admit and
register said mortgage upon lochas China  and Cuylim  in March of this year
after receipt of advice from Manila regarding the applicability of Act No. 3324,
which was approved on December 4, 1926, to a mortgage executed on
November 6, 1918, in favor of a Chinese subject — a prohibition not found in
the original section 1176 of the Administrative Code, but which went into
effect when the aforementioned Act No. 3324, approved on December 4,
1926, took effect.
But the lorchas China  and Cuylim  do not, by the mere fact of being
mortgaged, cease to pertain to the Lim Ponzo Navigation Co., as evidence
by certificates of ownership Exhibits A and B; and being property
appertaining to the Lim Ponzo Navigation Co., they were validly attached, as
shown by Exhibits E, F, G and , levied upon by virtue of the writ of execution
Exhibit I, issued December 6, 1928, upon petition of plaintiff Maria Corazon
Yu de Sane filed in Civil case No. 7688, Exhibit C. It was on December 6,
1928, that by virtue of said writ of execution the sheriff levied upon the lochas
China and Cuylim, which, according to Exhibit F, had been attached on
December 4, 1928; it being understood that both attachment and execution
were subject to all liens existing upon said lorchas on the date of the
attachment, which liens were the mortgages in favor of J. M. Po Pauco
transferred by the same to the Philippine National Bank, according to Exhibits
1 and 2.
The aforementioned writ of execution Exhibit I was not carried out by the
sheriff because the Philippine National Bank filed a third-party claim, Exhibit
12, and according to Exhibit 14, Maria Corazon Yu de Sane, the judgment
creditor, failed to give indemnity bond as required by the sheriff.
But the court also holds that the provincial sheriff of Iloilo did not act legally
when, after giving notice, Exhibit 15, on December 28, or 29, 1928, he
dissolved the attachment levied upon the lorchas China  and Cuylim, and
delivered them to J. M. Po Pauco, as was proved at the trial of this case, for
on December 28, 1928, those lorchas were under the control of this court in
the instant case, wherein, on December 17, 1928, the complaint of
interpleading filed by the sheriff was entered in the docket, and, without
authority of the court in the instant case, said sheriff should not have
assumed to dispose of the lorchas China and Cuylim as he did. The
complaint of interpleading filed on December 17, 1928, was presented by the
provincial sheriff of Iloilo, according to paragraph 11 thereof, for the purpose
of protecting himself from any claim that might arise from the sale only the
person of the sheriff, but also the lorchas  in his possession which were the
object of contradictory claims filed by several persons. But the sheriff, by his
own authority, and without the knowledge and authority of this court,
disposed of said lorchas, as stated in Exhibit 15, and in so acting he
assumed full responsibility for all his acts.
The court holds that the now defendants Maria Corazon Yy de Sane may, if
she so desires, ask for another order of execution in civil case No. 7688, and
may by virtue thereof attached the lorchas China  and Cuylim, and order their
sale by public auction subject to the mortgage executed thereon by the
owner, the Lim Ponzo Navigation Co., in favor of the Philippine National
Bank, which is hereby declared valid.
The court holds that the damages at the rate of P100 a day claimed by
defendants Po Suy Liong, Ti Liong & Co., and J. M. Po Pauco through the
counterclaim contained in their answer filed on December 18, 1928, have not
been proved.
As to the cross-complaint filed by the Philippine National Bank against J. M.
Po Pauco, Maria Corazon Yu de Sane, Po Suy Liong, and Ti Liong & Co., the
court finds that the basic facts thereof have been established, as heretofore
stated in paragraphs numbered 2, 3, 4, 5, and 6, holding J. M. Po Pauco in
debt to the Philippine National Bank for the sum of P131,994.95, including
interest up to March 31, 1928, and the interest mentioned in Exhibit 10, from
April 1, 1928, until payment, to which is added the stipulated 10 per cent of
the sum total by way of attorney's fees, which the court hereby reduced to 5
per cent of the whole.
This debt of J. M. Po Pauco is secured by a mortgage of the property
described in Exhibits 1 and 3, already due and demandable when the cross-
complaint was filed by the Philippine National Bank.
Let judgment be entered for the Philippine National Bank, ordering J. M. Po
Pauco to pay to it the sum of P131,994.95, plus the interest mentioned in
Exhibit 10, from April 1, 1928, until payment, plus 5 per cent of the debt as
attorney's fees and costs of collection.
If said J. M. Po Pauco fails to pay the amount of this judgment within three
months from the date hereof, the court will decree the sale of the mortgaged
property, as prayed for by the Philippine National Bank in its cross-complaint;
and should be the proceeds of the sale thereof fall short of the amount of this
judgment, a writ of execution shall issue against whatsoever unexempted
property said J. M. Po Pauco olds, until the whole balance remaining is
satisfied.
Maria Corazon de Sane, and Po Suy Liong & Co. are hereby absolved from
the cross-complaint interposed by the Philippine National Bank against them.
The Philippine National Bank, J. M. Po Pauco, Po Suy Liong, and Ti Liong &
Co., are hereby absolved from the cross-complaint interposed against them
by Maria Corazon Yu de Sane.
From the aforementioned decision and judgment, two appeals have been
taken, one by Maria Corazon Yu de Sane, and the other by J. M. Po Pauco
and Po Suy Liong. These appeals will be disposed of in order.
I. The appeal of Maria Corazon Yu de Sane related to the preference to the
two lorchas as between herself and the Philippine National Bank. Among the
facts found by the trial judge, it is gleaned that the lorchas China and Cuylim
were owned by the Lim Ponzo Navigation Co. On November 6, 1918, the
two lorchas were mortgaged to J. M. Po Pauco to guarantee a loan of
P20,000. Two days later, the mortgage was duly registered in the office of
the register of deeds of Iloilo. On November 28, 1919, J. M. Po Pauco
executed a mortgage in favor of the Philippine National Bank to protect a
loan of P50,000, and covering, among other things, the titles, rights, and
interests which Po Pauco had the lorchas China  and Cuylim. One day later,
this mortgage was registered in the office of the register of deeds of Iloilo.
Subsequently, the credit of Po Pauco with the Philippine National Bank was
increased to P90,000 which, with accrued interest, is alleged to now reach
the sum of P131,994.95. To return again to the chattel mortgage, it was only
recorded in the office of the collector of customs of Iloilo on March 5, 1929.
Maria Corazon Yu de Sane secured a judgment against the Lim Ponzo
Navigation Co. for P7,179.65. In due course, a writ of attachment and an
execution were secured, the date of the latter being December 6, 1928. The
notice of seizure was recorded by the collector of customs of Iloilo on
December 4, 1928, on which date the records of that office disclosed the
vessels as free from encumbrances.
Mariano Arroyo, the sheriff of Iloilo instituted an action with the CFI for the
purpose of protecting himself from any claim that might arise from the sale of
said lorchas; and this protection thus invoked covered not only the person of
the sheriff, but also the lorchas in his possession which were the object of
contradictory claims filed by several persons.
CFI: mortgage of the lorchas China and Cuylim executed in favor of J. M. Po
Pauco, and the transfer of said mortgage by J. M. Po Pauco, the mortgagee,
to the Philippine National Bank are valid and legal.
Maria Corazon Yun de Sane filed an appeal. She contends that she has
preference on the two Iorchas between herself and PNB.
ISSUE: Whether Maria has a better right as against PNB over the two
Iorchas?
The registration of vessels is now governed by the Administrative Code.
Section 1171 thereof provides:
Record of documents affecting title. — In the record of transfers and
incumbrances of vessels, to be kept at each principal port of entry, shall be
recorded at length all transfers, bills of sale, mortgages, liens, or other
document which evidence ownership or directly or indirectly affect the title of
registered vessels, and therein shall be recorded all receipts, certificates, or
acknowledgments canceling or satisfying, whole or in part, any such
obligation. No other record of any such document or paper shall be required
than such as is affected hereunder.
It is clear that section 1171 of the Administrative Code has modified the
provisions of the Chattel Mortgage Law, Act No. 1508, particularly section 4
thereof. It is now not necessary for a chattel mortgage of a vessel to be noted
in the registry of the register of deeds. On the other hand, it is essential that a
record of documents affecting the title of a vessel be entered in the office of
the collector of customs, at a port of entry (Rubiso and Gelito vs. Rivera
[1917], 37 Phil., 72; 2 Araneta, Administrative Code, note to section 1171).
The law as now existing is designed to protect persons who deal with a
vessel on the strength of the record title. Mortgages on vessels, although not
recorded, are good as between the parties. But as against creditors of the
mortgagor, an unrecorded mortgage is invalid (37 Cyc., 54).
Consolidating the facts, we find the mortgage of the Philippine National Bank
dated November 28, 1919, but not recorded in the office of the collector of
customs until March 5, 1929. The execution sued out by Maria Corazon Yu
de Sane was dated December 6, 1928, and noted at the port of entry two
days prior thereto. Under these facts, the execution holder would have a prior
right over the unrecorded mortgage. However, in the decision of the trial
court we find an explanation of the delay which appears to have been proved
at the trial, and which we must accept since there is nothing in the record to
the contrary. His Honor states that the fact that the mortgage was not
registered in the office of the collector of customs of Iloilo until March 5, 1929,
was because of the doubts entertained by the collector relative to the
applicability of Act No. 3324 to a mortgage executed in 1918 in favor of a
Chinese subject. This uncontradicted fact must be taken as curing the bank's
defective title. That the collector of customs did not perform his duty was no
fault of the bank. Constructive registration of the mortgage must, therefore,
be accepted.
his mortgage, so far as the record discloses, has never been recorded in the
office of the collector of customs. But the appeal of Po Pauco does present a
rather anomalous condition of affairs.
It will be recalled that the action was begun by the several parties
interpleading. On these pleadings, the trial judge was led to order the
foreclosure of the mortgage of the Philippine National Bank against Po
Pauco. But the record does not disclose that any one other than the attorney
for Po Pauco was notified, that any summons was issued, or that an
opportunity was afforded Po Pauco to interpose his defense, if he had any.
Obviously, the procedure provided by law for the foreclosure of a mortgage
must be substantially carried out. It is no answer for the appellee to state that
no objection was interposed in the lower court. The question is one which
goes to the jurisdiction of the court, and a question of this nature may be
raised for the first time on appeal.
With the foregoing pronouncements which, except as they related to the
judgment of the Philippine National Bank against J. M. Po Pauco, in the main
coincide with the pronouncements of the trial judge, the judgment appealed
from will in part be affirmed and in part set aside, and the record remanded to
the court of origin for further proceedings. It will be so ordered, without
special pronouncement as to costs in this instance.
Johnson, Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.

We rule that as between the appellant, Maria Corazon Yu de Sane, and the
appellee, the Philippine National Bank, the latter has a superior claim in the
amount of P20,000, the amount of the mortgage of Po Pauco which was
transferred to the Philippine National Bank.

II. The remaining appeal concerns the respective rights of Jose M. Po Pauco
and Po Suy Liong on the one hand and the Philippine National Bank on the
other. There is no particular merit in the arguments offered on behalf of Po FLORENTINA ALEMAN, ET AL., Plaintiffs-Appellees, v. PRESENTACION
Suy Liong, for his mortgage was not on the boats themselves, and moreover
DE CATERA, ET AL., Defendants-Appellants.
[G.R. No. L-13694. March 25, 1961.]
CIRILA SAUL, ET AL., Plaintiffs-Appellees, v. PRESENTACION DE
CATERA, ET AL., Defendants-Appellants. SOUTHERN MOTORS
INC., Intervenor-Appellant.
Estefanio V. Gaspe for Plaintiffs-Appellees.
Benjamin A. Defensor and Pedro Puga for Intervenor-Appellant.
Diosdado Garingalao for intervenor-defendant-appellant.
SYLLABUS
1. CHATTEL MORTGAGES; MOTOR VEHICLES; WHEN DEEMED
BINDING UPON THIRD PERSONS. — A chatter mortgage of motor
vehicles, to be binding upon third persons, should not only be registered in
the Chattel Mortgage Registry, but also recorded in the corresponding Motor
Vehicles Office as required by section 5 (1) of the Revised Motor Vehicles
Law. (Olaf N. Borlough v. Fortune Enterprise, Inc. Et. Al., 100 Phil 1063; 53
Off. Gaz. 4070).
DECISION
PADILLA, J.:
On motion dated 7 and filed on 10 December 1957 by the intervenor-
appellant, objected to by the appellees, the Court of Appeals forwarded to
this Court the two cases by resolution adopted on 7 January 1958, for only a
question of law is raised.
The facts of the two cases heard jointly, as found by the Court of First
Instance of Iloilo are, as follows:chanrob1es virtual 1aw library
Presentacion de Catera is and was the owner and operator of . . . in the
province of Iloilo. One of her trucks was the "Catera No. 5." In the morning of
January 21, 1954, said passenger truck driven by Marianito Amborgo. While
it was traveling on the highway at Tabucan, Cabatuan, Iloilo, it fell into the
ditch because it was over speeding as the driver was trying to overtake
another truck. Florentina Aleman and her son Antonio Real who at that time
were on the lawn in front of their house were hit by said truck thereby causing
the instantaneous death of said Antonio Real and the injury of Florentina
Aleman. Civil Case No. 2969 is for recovery of damages instituted by
Florentina Aleman and her husband Federico Real for the death of their son
and for the injury of Florentina Aleman.
One of the passengers of the aforesaid truck was Jose Ontanillas. This man
was killed as a result of the mishap. The plaintiffs in civil case No. 2970 are
his widow and children.
Another passenger of the ill-fated truck was Zosimo Montefrio. He too was
killed in the disaster. His widow and children filed a complaint in intervention
for the recovery of damages in civil case No. 2970.
The victims Real et al filed a complaints on 27 January 1964. On 9 February
1954 the defendants filed separate answers, later on amended, to each
complaint. By a writ of attachment issued by the Court the provincial sheriff of
Iloilo attached one of the buses owned by the defendant Presentacion de
Catera, a Chevrolet bearing motor No. 0223054T54J, serial No. CAP-MNL-
41092, known as "Catera No. 4." On 13 May 1955 the Southern Motors, Inc.
filed with the provincial sheriff a third-party claim to the bus. On 16 May in
both cases the plaintiffs filed with the court a motion to strike out the third-
party claim filed by the motor company. On 17 May the motor company filed
a reply and objection to the motion to strike out and on 23 May a
supplemental reply and objection. On 13 June it filed a motion to intervene.
On 14 June the Court entered an order quashing the third party claim filed
with the sheriff. On 16 June the plaintiffs objected and replied to the motion to
intervene. On 18 June the motor company filed a reply to the objection. On
20 June the Court granted the motion to intervene. On 22 June the intervenor
motor company filed an answer in intervention setting up a counterclaim and
praying that it be declared the owner of the bus attached by the sheriff to
answer for the damages awarded to the plaintiffs; that the writ of attachment
be quashed; that the attaching provincial sheriff be ordered to release and
deliver to it the aforesaid bus; and that it be paid the sum of P500 for
attorney’s fees and costs. On 24 June it moved to quash the attachment on
the bus. On 1 July the plaintiffs objected to the motion to quash. On 5 July
the plaintiffs replied to the answer in intervention. On 11 July the plaintiffs
Aleman et. Al, and the Southern motors filed a joint motion submitting the
cases for judgment as far as the controversy between them was concerned.
On 3 October the Court rendered a judgment the dispositive part of which
reads, as follows:chanrob1es virtual 1aw library
WHEREFORE, judgment is hereby rendered as follows:chanrob1es virtual
1aw library
Civil Case No. 2969

Presentacion de Catera is hereby sentenced to pay, jointly and severally with
Marianito Amborgo, the plaintiffs in Civil Case No. 2969, for the death of
Antonio Real who was a child of 5 years old, the sum of P4,000.00 as
compensatory damages, plus P2,000.00 as moral damages, plus P1,000.00
as attorney’s fees, plus the costs of the suit. For the injuries suffered by
Florentina Aleman, the said Presentación de Catera is also sentenced, jointly
and severally with Marianito Amborgo, to pay said Florentina Aleman
compensatory damages in the amount of P500.00.
Civil Case No. 2970
Presentacion de Catera is hereby sentenced to pay, jointly and severally with
Marianito Amborgo, the plaintiffs in Civil Case No. 2970, for the death of Jose
Ontanillas the sum of P6,000.00 as compensatory damages, plus P2,000.00
as moral damages, plus P1,000.00 as attorney’s fees, plus costs of suit.
Presentacion de Catera, jointly and severally with Marianito Amborgo, is
likewise sentenced to pay the plaintiffs in the complaint in intervention, for the
death of Zosimo Montefrio, the sum of P6,000.00 as compensatory damages,
plus P2,000.00 as moral damages, plus P1,000.00 as attorney’s fees.
x           x          x
The counter-claim of Southern Motors, Inc. is dismissed.
From the dismissal of the counterclaim the intervenor Southern Motors, Inc.
on 17 October 1955 filed in both cases a notice of appeal, an appeal bond in
the sum of P120 and a record on appeal. On 25 October the defendant
Presentación de Catera also filed a notice of appeal and on 11 November an
appeal bond in the sum of P60 and a record on appeal. On 29 November the
trial court entered an order allowing the record on appeal filed by
Presentación de Catera in civil case No. 2969 but disallowing that filed in civil
case No. 2970, because only one appeal bond in the sum of P60 had been
filed.
In the Court of Appeals, on 5 January 1956 the appellees moved for the
dismissal of the appeal (CA-G.R. No. 17516-R which is that in civil case No.
2969), for failure of the appellants to file and serve a brief within the time
provided for by the Rules, to which motion the latter filed an objection. By a
resolution adopted on 4 February 1957 the Court of Appeals denied the
motion to dismiss, the same being premature. On 10 June the appellees filed
anew a motion to dismiss the appeal which on 18 June was objected to by
the appellants. On 20 June the appellees replied to the objection. On 14
August 1957 the Court of Appeals resolved to declare the appeal taken by
Presentación de Catera in CA-G.R. No. 17516-R abandoned and dismissed.
Hence, the appeal before the Court is that taken by the intervenor Southern
Motors, Inc. in both cases from that part of the judgment dismissing its
counterclaim. The question for determination is:
Issue: WON the Southern Motors has a preferred right to the bus under
attachment.
which has a preferred right to the bus under attachment — the Southern
Motors, Inc. in whose favor, as seller of the bus, a chattel mortgage thereon
had been executed and recorded in the corresponding registry of deeds, or
the families of the vehicular accident victims who, having been awarded
damages for death and injuries, had caused an attachment on the said bus
owned by the operator whose purchase and ownership thereof had been
recorded in the Motor Vehicles Office.
The intervenor-appellant contends that, being the one that sold by installment
the bus to one Wenceslao Defensor who, to secure the payment of the
remaining unpaid installments, mortgaged the same in its favor, a chattel
mortgage registered in the Registry of Deeds, it should be preferred to and
over the claim of the appellees who are just judgment creditors. On the other
hand, the appellees argue that by allowing the vendee-mortgagor Wenceslao
Defensor to sell the bus to Presentación de Catera and the latter to record in
the Motor Vehicles Office the sale in her favor, the intervenor-appellant had
waived its mortgage lien on the bus, and for that reason the money judgment
rendered for the appellees is preferred.
In Olaf N. Borlough v. Fortune Enterprise, Inc. Et. Al., 53 Off. Gaz. 4070, this
Court held that "A mortgage in order to affect third persons should not only
be registered in the Chattel Mortgage Registry, but the same should also be
recorded in the Motor Vehicles Office as required by section 5(e) of the
Revised Motor Vehicles Law." Here, the Southern Motors, Inc. did not record
in the Motor Vehicles Office the mortgage executed in its favor. Such being
the case the mortgage is ineffective as far as the appellees are concerned.
Its right or interest, therefore, in the truck, because of the mortgage
constituted in its favor, cannot prevail over that of the appellees who though
mere judgment creditors may be deemed innocent purchasers, deriving their
right from an innocent purchaser, the bus owner-operator Presentación de
Catera, who had her purchase of the bus from Wenceslao Defensor recorded
in the Motor Vehicles Office.
The part of the judgment appealed from is affirmed, with costs against the
intervenor-appellant Southern Motors, Inc.
G.R. No. L-15260             August 18, 1920
FAUSTO RUBISO, plaintiff-appellant,
vs.
FLORENTINO RIVERA, ET AL., defendants-appellees.
Canillas and Cardenas for appellant.
M. P. Leuterio for appellees.
VILLAMOR, J.:
About April, 1915, Fausto Rubiso and Florentino Rivera had a litigation
concerning the ownership of the pilot boat Valentina. Rivera acquired it on
January 4, 1915, from its original owner the Chinaman Sy Qui, but did not
inscribe his title in the mercantile registry according to article 573 of the Code
of Commerce in relation to article 2 of Act No. 1900.
Subsequently Rubiso bought said pilot boat in a sale at public auction for the
sum of P55.45 on January 23, 1915, and inscribed his title in the mercantile
registry on March 4th of the same year
. The suit was decided by the Court of First Instance of Manila in favor of the
plaintiff Rubiso on September 6, 1915. On the 11th day of said month the
court issued a writ of execution, upon the petition of the plaintiff(Rubiso)n, in
order to proceed, as said plaintiff alleged, to the salvage of the pilot boat
which at that time was stranded in the sitio of Tingloy, Batangas. The order
of execution was stayed upon the filing of a bond for P1,800 by the defendant
Rivera who alleged in support of his objection, that the pilot boat was already
salvaged and had been taken to Maricaban, Batangas. The judgment having
been brought to this court by appeal it was affirmed in a judgment rendered
on October 30, 1917 (R.G. N. 11407).1 The cause having been sent to the
Court of First Instance for the execution of judgment the sheriff of Batangas
who undertook to enforce the writ of execution was able to deliver to the
plaintiff Rubiso nothing but the pilot boat itself in a seriously damaged
condition and two useless sails.
Such are the facts which gave rise to the present action for the recovery of
the damages in the sum of P1,200 which the plaintiff and appellant Fausto
Rubiso alleges he has suffered by the destruction and loss of the pilot
boat Valentina and its equipment which were caused, according to the
complaint, by the fault and negligence of the defendants Florentino Rivera
and others.
The answer having been filed and the trial having taken place, the court
rendered judgment in favor of the defendants without any special
pronouncement as to costs. From this judgment the plaintiff appealed. The
motion for new trial having been overruled, the appellant presented the
corresponding bill of exceptions assigning in his brief the following a errors:
(a) The finding that there was not sufficient evidence to establish the amount
of the expenses sought to be recovered; (b) the finding that the pilot
boat Valentina had no legal value in August, 1915; (c) in rendering judgment
absolving the defendants in this case; and (d) in overruling the motion for
new trial presented by the plaintiff on the ground that the judgment is against
the weight of the evidence.
In a series of uninterrupted decision before and after the promulgation of the
Civil Code, the doctrine has been established that all judgment for damages
whether arising from a breach of contract or resulting from some provision of
law, must be based upon satisfactory evidence of the real existence of the
damages alleged to have been suffered. (Sanz vs. Lavin and Bros., 6 Phil.,
299.)
Has the existence of the damages sought to be recovered in this case been
satisfactorily established? The court below decided this question of fact
adversely to the plaintiff and we are of the opinion that this findings is
sustained by the evidence. Plaintiff (Rubiso) declares that in February, 1915,
he visited and examined the pilot boat Valentina  in the barrio of Tingloy and
that on said day he found it in good condition, and that he saw all of its tackle
and rigging; but on cross-examination by the attorney for the defendants
(Rivera) he admitted that on said date he was unable to take possession of
the vessel because the person in charge of it would not permit him even to
approach. Estanislao Jili who accompanied Fausto Rubiso in order to see the
pilot boat Valentina in February, 1915, affirms that they did not go on board
the vessel because the person in charge of it would not permit them to do so.
This same witness and Jose Soriano as a witness of the plaintiff state that at
that time the boat was not in a seaworthy condition, because its bottom was
damaged and it had no equipments.
If what has been said is not yet sufficient to find that the pretense of the
appellant as to his first assignment of error is unsustainable, we still have the
uncontradicted testimony of Juan Velino, Irineo Martinez and Mariano Villas,
witnesses for the defendants, who declared on the seriously damaged
condition of the pilot boat long before its acquisition by the appellant.
Juan Velino declared that in August, 1914, the boat was aground in
Dayhagan, Mindoro; it was somewhat repaired and about November of the
same year it sailed from that place and suffered on the way such damages
and troubles that it had to be taken to Tingloy for new repair, some vessels'
tools and equipments having been borrowed from another boat because
those of the Valentina had been destroyed; and the storm destroyed the
vessel so much that it could not be taken to the Island of Maricaban except
by means of rafts. To the same effect is the testimony of Irineo Martinez.
Mariano Villas testified that in December, 1914, the Valentina anchored in
Tingloy alongside his vessel and as he was interested in the purchase of this
pilot boat, the sale of which was advertised in Manila, he examined it and
then saw that he would not buy it even for P400, because it was completely
destroyed. There can be no doubt as to the competency of this witness to
testify on the question of the price of the pilot boat Valentina because
according to him he had ordered the construction of boats of the same size
and condition during that period. The lower court declares in its judgment that
this witness appears to it as sufficiently trustworthy, and we find no basis
whatever on the record to doubt the correctness of the finding of the trial
judge who saw and observed him while he was testifying.
We, therefore, are of the opinion that the finding of the court that there was
not sufficient proof to establish the amount of the defendants' claim is in
accordance with the merits of the case.
As to the second error assigned by the appellant it should be noted that, as
appears in the record the pilot boat Valentina was stranded in Tingloy since
the month of November, 1914, that is, two months before it had been
acquired by the plaintiff at public auction and ten months before the judgment
declaring him to be the owner thereof, was rendered. The appellant(Rubiso) ,
in his first complaint of April 10, 1915, for the recovery of the pilot
boat Valentina, affirms that the boat was then in the same worthless
condition in which it was in 1914, and the evidence we have examined in this
case show that in fact in August or September, 1915, it was in the worse of
conditions and was utterly worthless. Without attempting to determine the
durability of a boat made of wood stranded for a period of ten months, as is
the case with the boat in question, we are of the opinion, and so declare, that
according to the proofs adduced in this case, the court did not err in declaring
in its judgment that the pilot boat Valentina did not have any legal value in
August, 1915.
The defendant in his brief interposes the defense of res judicata based upon
the judgment of this court in the action between Fausto Rubiso et al. and
Florentino Rivera who are the parties in the present case.
In that case it was held:
With respect to the indemnification for damages claimed by the plaintiff,
besides the fact [that according to the proceedings taken subsequently to the
date on which the judgment appealed from was rendered, it appears that the
pilot boat has already left in good condition the place where it had been
stranded and is at present found anchored in the port of Maricaban,] the truth
is that the record does not offer positive proof of the amount of the damages
caused, and on the other hand it cannot be declared that the defendant had
acted in bad faith for he acquired the vessel previous to its acquisition at
public auction by the plaintiff Rubiso who, for the reason already given, is the
true and sole owner of said pilot boat. (Decision of October 30, 1917, R. G.
No. 11407 [Rubiso and Gelito vs. Rivera, 37 Phil., 72].)
WON Florentino Rivera is liable for damages.
It having been declared in a previous action that the defendant Rivera did not
act in bad faith and that therefore he was not liable for damages, it would be
necessary to show in the present case that the destruction of the boat and
the loss of its equipments took place after the final judgment was rendered in
that case and by reason of the fault and negligence of the defendants, which
is not the case here. What appears from the evidence presented by the
defendant and uncontradicted by that presented by the adverse parties, is
that from September, 1915, to March 7, 1918, which was the date of the
execution of the judgment of this court affirming that of the lower court, the
boat continued aground in the Island of Maricaban awaiting the final
judgment in the action with respect to ownership and naturally exposed to the
action of sea water and the inclemencies of the weather, things which were
beyond the control of the defendant Rivera.
It thus now appears that the damages claimed by the plaintiff are the same
damages that he claimed in the first action. To speak more accurately, the
appellant first sued for the recovery of the vessel and damages in the sum of
P1,750. Judgment was rendered as to the first in his favor but against him as
to the second. And now he comes back again claiming damages.
The case now under consideration is analogous to that of Palanca
Tanguinlay vs. Quiros (10 Phil., 360). In that case the question was
extensively discussed whether a previous judgment constitutes an
adjudication of the subject-matter of a new suit between the same parties to
such extent that it can not again be tried anew. It was held that according to
articles 306 and 307 of the Code of Civil Procedure, a judgment rendered in
an action for the recovery damages for property lost is a bar to any other
action between the same parties for the recovery of the same property or its
value. In the course of the decision the court held:
The American books are full of similar cases, an instance being Hatch vs.
Coddington (32 Minn., 92), in which it was held that a former action between
the same parties to recover damages for a wrongful conversion of personal
property was a bar to a subsequent suit to recover possession of the specific
property itself, notwithstanding the difference of form and that the relief
sought and the subject-matter of the cause of action were regarded as the
same. Nor is it altogether clear that the law of Spain was different. Señor
Manresa, in his commentary on article 1252 of the Civil Code, cites a
decision of the supreme court of 25th of April, 1900 (vol. 8, p. 555), holding
that in a real action a judgment in a former personal suit between the same
parties for indemnity for the use of the same property operated as cosa
juzgada.

From what has been said the judgment appealed from should be, and is
hereby, affirmed, with costs against the appellant. So ordered.

G.R. No. L-8437             March 23, 1915
THE HONGKONG & SHANGHAI BANKING CORPORATION, plaintiff-
appellee,
vs.
ALDECOA & CO., in liquidation, JOAQUIN IBAÑEZ DE ALDECOA Y
PALET, ZOILO IBAÑEZ DE ALDECOA Y PALET, CECILIA IBAÑEZ DE
ALDECOA Y PALET, and ISABEL PALET DE GABARRO, defendants-
appellants.
WILLIAM URQUHART, intervener-appellant.
Antonio Sanz and Chicote and Miranda for appellants.
Hausermann, Cohn and Fisher for appellee.
TRENT, J.:
This action was brought on January 31, 1911, by the plaintiff bank against
the above-named defendants for the purpose of recovering from the principal
defendant, Aldecoa & Co., an amount due from the latter as the balance to its
debit in an account current with the plaintiff, and to enforce the subsidiary
liability of the other defendants for the payment of this indebtedness, as
partners of Aldecoa & Co., and to foreclose certain mortgages executed by
the defendants to secure the indebtedness sued upon.
Judgment was entered on the 10th of August, 1912, in favor of the plaintiff
and against the defendants for the sum of P344,924.23, together with interest
thereon at the rate of 7 per cent per annum from the date of the judgment
until paid, and for costs, and for the foreclosure of the mortgages. The court
decreed that in the event of there being a deficiency, after the foreclosure of
the mortgages, the plaintiff must resort to and exhaust the property of the
principal defendant before taking out execution against the individual
defendants held to be liable in solidum with the principal defendant, but
subsidiarily. Judgment was also entered denying the relief sought by the
intervener. All of the defendants and the intervener have appealed.
The defendants, Joaquin Ibañez de Alcoa, Zoilo Ibañez de Alcoa, and Cecilia
Ibañez de Alcoa, were born in the Philippine Islands on March 27, 1884, July
4, 1885, and . . . , 1887, respectively, the legitimate children of Zoilo Ibañez
de Alcoa and the defendant, Isabel Palet. Both parents were native of Spain.
The father's domicile was in Manila, and he died here on October 4, 1895.
The widow, still retaining her Manila domicile, left the Philippine Islands and
went to Spain in 1897 because of her health, and did not return until the latter
part of 1902. the firm of Aldecoa & Co., of which Zoilo Ibañez de Aldecoa,
deceased, had been a member and managing director, was reorganized in
December, 1896, and the widow became one of the general or "capitalistic"
partners of the firm. The three children, above mentioned, appear in the
articles of agreement as industrial partners.
On July 31, 1903, Isabel Palet, the widowed mother of Joaquin Ibañez de
Aldecoa and Zoilo Ibañez de Aldecoa, who were then over the age of 18
years, went before a notary public and executed two instruments (Exhibits T
and U), wherein and whereby she emancipated her two sons, with their
consent and acceptance. No guardian of the person or property of these two
sons had ever been applied for or appointed under or by virtue of the
provisions of the Code of Civil Procedure since the promulgation of the Code
in 1901. After the execution of Exhibit T and U, both Joaquin Ibañez de
Aldecoa and Zoilo Ibañez de Aldecoa participated in the management of
Aldecoa and Co, as partners by being present and voting at meetings of the
partners of the company upon matters connected with its affairs.
On the 23rd of February, 1906, the defendant firm of Aldeco and Co.
obtained from the THE HONGKONG & SHANGHAI BANKING
CORPORATION a credit in account current up to the sum of P450,000 upon
the terms and conditions set forth in the instrument executed on that date
(Exhibit A). Later it was agreed that the defendants, Isabel Palet and her two
sons, Joaquin and Zoilo, should mortgage, in addition to certain securities of
Aldecoa and Co., as set forth in Exhibit A, certain of their real properties as
additional security for the obligations of Aldecoa and Co. So, on March 23,
1906, the mortgage, Exhibit B, was executed wherein certain corrections in
the description of some of the real property mortgaged to the bank by Exhibit
A were made and the amount for which each of the mortgaged properties
should be liable was set forth. These two mortgages, Exhibits A and B, were
duly recorded in the registry of property of the city of Manila on March 23,
1906.
On the 31st day of December, 1906, the firm of Aldecoa and Co. went into
liquidation on account of the expiration of the term for which it had been
organized, and the intervener, Urquhart, was duly elected by the parties as
liquidator, and be resolution dated January 24, 1907, he was granted the
authority expressed in that resolution (Exhibit G).
On June 30, 1907, Aldeco and Co. in liquidation, for the purposes of certain
litigation about to be commenced in its behalf, required an injunction bond in
the sum of P50,000, which was furnished by the bank upon the condition that
any liability incurred on the part of the bank upon this injunction bond would
be covered by the mortgage of February 23, 1906. An agreement to this
effect was executed by Aldecoa and Co. in liquidation, by Isabel Palet, by
Joaquin Ibañez de Aldecoa, who had then attained his full majority, and by
Zoilo Ibañez de Aldecoa, who was not yet twenty-three years of age. In 1908,
Joaquin Ibañez de Aldecoa, Zoilo Ibañez de Aldecoa, and Cecilia Ibañez de
Aldecoa commenced an action against their mother, Isabel Palet, and
Aldecoa and Co., in which the bank was not a party, and in September of that
year procured a judgment of the Court of First Instance annulling the articles
of copartnership of Aldecoa and Co., in so far as they were concerned, and
decreeing that they were creditors and not partners of that firm.
The real property of the defendant Isabel Palet, mortgaged to the plaintiff,
corporation by the instrument of March 23, 1906 (Exhibit B), was, at the
instance of the defendant, registered under the provisions of the Land
Registration Act, subject to the mortgage thereon in favor of the plaintiff, by
decree, of the land court dated March 8, 1907.
On the 6th of November, 1906, the defendants, Isabel Palet and her three
children, Joaquin Ibañez de Aldecoa, Zoilo Ibañez de Aldecoa, and Cecilia
Ibañez de Aldecoa, applied to the land court for the registration of their title to
the real property described in paragraph 4 of the instrument of March 23,
1906 (Exhibit B), in which application they stated that the undivided three-
fourths of said properties belonging to the defendants, Isabel Palet, Joaquin
Ibañez de Aldecoa, and Zoilo Ibañez de Aldecoa, were subject to the
mortgage in favor of the plaintiff to secure the sum of P203,985.97 under the
terms of the instrument dated March 22, 1906. Pursuant to this petition the
Court of Land Registration, by decree dated September 8, 1907, registered
the title to the undivided three-fourths interest therein pertaining to the
defendants, Isabel Palet and her two sons, Joaquin and Zoilo, to the
mortgage in favor of the plaintiff to secure the sun of P203,985.97.
On December 22, 1906, Aldecoa and Co., by a public instrument executed
before a notary public, as additional security for the performance of the
obligations in favor of the plaintiff under the terms of the contracts Exhibits A
and B, mortgaged to the bank the right of mortgage pertaining to Aldecoa
and Co. upon certain real property in the Province of Albay, mortgaged to
said company by one Zubeldia to secure an indebtedness to that firm.
Subsequent to the execution of this instrument, Zubeldia caused his title to
the mortgaged property to be registered under the provisions of the Land
Registration Act, subject to a mortgage of Aldecoa and Co. to secure the sum
of P103,943.84 and to the mortgage of the mortgage right of Aldecoa and
Co. to the plaintiff.
As the result of the litigation Aldecoa and Co. and A. S. Macleod, wherein the
injunction bond for P50,000 was made by the bank in the manner and for the
purpose above set forth, Aldecoa and Co. became the owner, through a
compromise agreement executed in Manila on the 14th of August, 1907, of
the shares of the Pasay Estate Company Limited (referred to in the contract
of March 13, 1907, Exhibit V), and on the 30th day of August of that year
Urquhart, as liquidator, under the authority vested in him as such, and in
compliance with the terms of the contract of June 13, 1907, mortgaged to the
plaintiff, by way of additional security for the performance of the obligations
set forth in Exhibits A and B, the 312 shares of the Pasay Estate Company,
Limited, acquired by Aldecoa and Co.
On the 31st day of March, 1907, Aldecoa and Co. mortgaged, as additional
security for the performance of those obligations, to the plaintiff the right of
mortgage, pertaining to the firm of Aldecoa and Co., upon certain real estate
in that Province of Ambos Camarines, mortgaged to Aldecoa and Co. by one
Andres Garchitorena to secure a balance of indebtedness to that firm of the
sum of P20,280.19. The mortgage thus created in favor of the bank was duly
recorded in the registry of deeds f that province. On the 31st day of March,
1907, Aldecoa and Co. mortgaged as further additional security for the
performance of the obligations set forth in Exhibits A and B, the right of
mortgage pertaining to the firm of Aldecoa and Co. upon other real property
in the same province, mortgaged by the firm of Tremoya Hermanos and
Liborio Tremoya, to secure the indebtedness of that firm to the firm of
Aldecoa and Co. of P43,117.40 and the personal debt of the latter of
P75,463.54. the mortgage thus created in favor of the bank was filed for
record with the registrar of deeds of that province.
On the 30th day of January, 1907, Aldecoa and Co. duly authorized the bank
to collect from certain persons and firms, named in the instrument granting
this authority, any and all debts owing by them to Aldecoa and Co. and to
apply all amounts so collected to the satisfaction,  pro tanto, of any
indebtedness of Aldecoa and Co. to the bank.
By a public instrument dated February 18, 1907, Aldecoa and Co.
acknowledged as indebtedness to Joaquin Ibañez de Aldecoa in the sum of
P154,589.20, a like indebtedness to Zoilo Ibañez de Aldecoa in the sum of
P89,177.07. On September 30, 1908, Joaquin, Zoilo, and Cecilia recovered a
judgment in the Court of First Instance of Manila for the payment to them f
the sum of P155,127.31, as the balance due them upon the indebtedness
acknowledged in the public instrument dated February 18, 1907.
On November 30, 1907, Joaquin, Zoilo, and Cecilia instituted an action in the
Court of First Instance of the city of the Manila against the plaintiff bank for
the purpose of obtaining a judicial declaration to the effect that the contract
whereby Aldecoa and Co. mortgaged to the bank the shares of the Pasay
Estate Company recovered from Alejandro S. Macleod, was null and void,
and for a judgment of that these shares be sold and applied to the
satisfaction of their judgment obtained on September 30, 1908. Judgment
was rendered by the lower court in favor of the plaintiffs in that action in
accordance with their prayer, but upon appeal this court reversed that
judgment and declared that the mortgage of the shares of stock in the Pasay
Estate Co. to the bank was valid.
In October, 1908, Joaquin and Zoilo Ibañez de Aldecoa instituted an action
against the plaintiff bank for the purpose of obtaining a judgment annulling
the mortgages created by them upon their interest in the properties described
in Exhibits A and B, upon the ground that the emancipation buy their mother
was void and of no effect, and that, therefore, they were minors incapable of
creating a valid mortgage upon their real property. The Court of First Instance
dismissed the complaint as to Joaquin upon the ground that he had ratified
those mortgages after becoming of age, but entered a judgment annulling
said mortgages with respect to Zoilo. Both parties appealed from this
decision and the case was given registry No. 6889 in the Supreme Court.1
On the 31st day of December, 1906, on which date the defendant Aldecoa
and Co. went into liquidation, the amount of indebtedness to the bank upon
the overdraft created by the terms of the contract, Exhibit A, was
P516,517.98. Neither the defendant Aldecoa and Co., nor any of the
defendants herein, have paid or caused to be paid to the bank the yearly
partial payments due under the terms of the contract, Exhibit A. But from time
to time the bank has collected and received from provincial debtors of
Aldecoa and Co. the various sums shown in Exhibit Q, all of which sums so
received have been placed to the credit of Aldecoa and Co. and notice duty
given. Also, the bank, from time to time, since the date upon which Aldecoa
and Co. went into liquidation, has received various other sums from, or for
the account of, Aldecoa and Co., all of which have been duly placed to the
credit of that firm, including the sum of P22,552.63, the amount of the credit
against one Achaval, assigned to the bank by Aldecoa and Co. The balance
to the credit of the bank on the 31st day of December, 1911, as shown on the
books of Aldecoa and Co., was for the sum of P416.853.46. It appeared that
an error had been committed by the bank in liquidating the interest charged
to Aldecoa and Co., and this error was corrected so that the actual amount of
the indebtedness of Aldecoa and Co. to the plaintiff on the 15th of February,
1912, with interest to December 10, 1912, the date of the judgment, the
amount was P344,924.23.
The trial court found that there was no competent evidence that the bank
induced, or attempted to induce, any customer of Aldecoa and Co. to
discontinue business relations with that company. The court further found
that Urquhart had failed to show that he had any legal interest in the matter in
litigation between plaintiff and defendants, or in the success of either of the
parties, or an interest against both, as required by section 121 of the Code of
Civil Procedure. No further findings, with respect to the facts alleged in the
complaint of the intervener, were made.
Aldecoa and Co. insist that the court erred:
1. In overruling the defendant's demurrer based upon the alleged ambiguity
and vagueness of the complaint.
2. In ruling that there was no competent evidence that the plaintiff had
induced Aldecoa and Co.'s provincial debtors to cease making consignments
to that firm.
3. In rendering a judgment in a special proceeding for the foreclosure of a
mortgage, Aldecoa and Co. not having mortgaged any real estate of any kind
within the jurisdiction of the trial court, and the obligation of the persons who
had signed the contract of suretyship in favor of the bank having been
extinguished by operation of law.
The argument on behalf of the defendant in support of its first assignment of
error from the complaint that Aldecoa and Co. authorized the plaintiff bank,
by the instrument Exhibit G, to make collections on behalf of this defendant,
and that the complaint failed to specify the amount obtained by the bank in
the exercise of the authority conferred upon it, the complaint was thereby
rendered vague and indefinite. Upon this point it is sufficient to say that the
complaint alleges that a certain specific amount was due from the defendant
firm as a balance of its indebtedness to the plaintiff, and this necessarily
implies that there were no credits in favor of the defendant firm of any kind
whatsoever which had not already been deducted from the original
obligation.
With respect to the contention set forth in the second assignment of error to
the effect that the bank has prejudiced Aldecoa and Co. by having induced
customers of the latter to cease their commercial relations with this
defendant, the ruling of the court that there is no evidence to show that there
was any such inducement is fully supported by the record. It may be possible
that some of Aldecoa and Co.'s customers ceased doing business with that
firm after it went into liquidation. This is the ordinary effect of a commercial
firm going consideration, for the reason that it was a well known fact that
Aldecoa and Co. was insolvent. It is hardly probable that the bank, with so
large a claim against Aldecoa and Co. and with unsatisfactory security for the
payment of its claim, would have taken any action whatever which might
have had the effect of diminishing Aldecoa and Co.'s ability to discharge their
claim. The contention that the customers of Aldecoa and Co. included in the
list of debtors ceased to make consignments to the firm because they had
been advised by the bank that Aldecoa and Co. had authorized the bank to
collect these credits from the defendant's provincial customers and apply the
amounts so collected to the partial discharge of the indebtedness of the
defendant to the bank. Furthermore, the bank was expressly empowered to
take any steps which might be necessary, judicially or extrajudicially, for the
collection of these credits. The real reason which caused the defendant's
provincial customers to cease making shipments was due to the fact that the
defendant, being out of funds, could not give its customers any further credit.
It is therefore clear that the bank, having exercised the authority conferred
upon it by the company in a legal manner, is not responsible for any
damages which might have resulted from the failure of the defendant's
provincial customers to continue doing business with that firm.
In the third assignments of errors two propositions are insisted upon: (1) that
in these foreclosure proceedings the court was without jurisdiction to render
judgment against Aldecoa and Co. for the reason that firm had mortgaged no
real property within the city of Manila to the plaintiff; and (2) that the
mortgages given by this defendant have been extinguished by reason of the
fact that the bank extended the time within which the defendant's provincial
debtors might make their payments.
We understand that the bank is not seeking to exercise its mortgages rights
upon the mortgages which the defendant firm holds upon certain real
properties in the Provinces of Albay and Ambros Camarines and to sell these
properties at public auction in these proceedings. Nor do we understand that
the judgment of the trial courts directs that this be done. Before that property
can be sold the original mortgagors will have to be made parties. The banks
is not trying to foreclose, in this section, any mortgages on real property
executed by Aldecoa and Co. It is true that the bank sought and obtained a
money judgment against that firm, and at the same time and in the same
action obtained a foreclosure judgment against the other defendants. If two
or more persons are in solidum  the debtors mortgage any of their real
property situate in the jurisdiction of the court, the creditor, in case of the
solidary debtors in the same suit and secure a joint and several judgment
against them, as well as judgments of foreclosure upon the respective
mortgages.
The contention that the extensions granted to Aldecoa and Co.'s debtors,
with the consent and authority of that firm itself, has resulted in
extinguishment of the mortgages created by Aldecoa and Co. or of the
mortgages created by partners of that company to secure its liabilities to the
bank, is not tenable. The record shows that all the sureties were represented
by Urquhart, the person elected by them as liquidator of the firm, when he
agreed with the bank upon the extensions granted to those debtors. The
authority to grant these extensions was conferred upon the bank by the
liquidator, and he was given authority by all the sureties to authorized the
bank to proceed in this manner.
With respect to the contention that the bank should be required to render an
account of collections made under authority of Exhibit G, it is sufficient to say
that the bank has properly accounted for all amounts collected from the
defendant's debtors, and has applied all such amounts to the partial
liquidation of the defendant's debt die to the bank. It is true that the sum for
which judgment was rendered against Aldecoa and Co. is less than the
amount originally demanded in the complaint, but this difference is due to the
fact that certain amounts which had been collected from Aldecoa and Co.'s
provincial debtors by the bank were credited to the latter between the date on
which the complaint was filed and the date when the case came on for trial,
and the further fact that it was necessary to correct an entry concerning one
of the claims inasmuch as it appears that this claim had been assigned to the
bank absolutely, and not merely for the purposes of collection, as the
bookkeeper of the bank supposed, the result being that instead of crediting
Aldecoa and Co. with the full face value of this claim, the bookkeeper had
merely credited from time to time the amounts collected from this debtor. We,
therefore, find no error prejudicial to the rights of this defendant.
Doña Isabel Palt makes the following assignment of errors:
1. That the court erred in failing to hold that her obligation as surety had been
extinguished in accordance with the provisions of article 1851 of the Civil
Code.
2. That the court erred in refusing to order for the benefit of this appellant that
the property of Aldecoa and Co. should be exhausted before the plaintiff firm
should be entitled to have recourse to the property of this defendant and
appellant for the satisfaction of its judgment.
This appellant does not contend that she is not personally liable in
solidum with Aldecoa and Co. for the liability of the latter firm to the plaintiff in
the event that the appeal taken by Aldecoa and Co. should unsuccessful. We
have just held that the judgment appealed from by Aldecoa and Co. should
be affirmed. But Doña Isabel Palet does not contend that her liability as a
partner for the obligations of Aldecoa and Co., although solidary, is
subsidiary, and that she is entitled to insist that the property of Aldecoa and
Co. be first applied in its entirety to the satisfaction of the firm's obligations
before the bank shall proceed against her in the execution of its judgment.
The trial court directed that the mortgaged properties, including the properties
mortgaged in the event that Aldecoa and Co. should fail to pay into court the
amount of the judgment within the time designated for that purpose. the court
recognized the subsidiary character of the personal liability of Doña Isabel
Palet as a member of the firm of Aldecoa and Co. and decreed that as to any
deficiency which might result after the sale of the mortgaged properties,
execution should not issue against the properties of Doña Isabel Palet until
all the property of Aldecoa and Co. shall have been exhausted. The
properties mortgaged by Doña Isabel Palet were so mortgaged not merely as
security for the performance of her own solidary subsidiary obligation as a
partner bound for all the debts of Aldecoa and Co., but for the purpose of
securing the direct obligation of the firm itself to the bank. We are, therefore,
of the opinion that the trial court committed no error upon this point.
It is urged on behalf of Doña Isabel Palet that the mortgages executed by her
upon her individual property have been canceled. The ground for this
contention is that Aldecoa and Co. undertook by the contract of February 23,
1906, to discharge its liability to the plaintiff bank at the rate of not less than
P50,000 per annum, and that therefore it was the duty of the bank to sue
Aldecoa and Co. as soon as that firm failed to pay at maturity any one of the
partial payments which it had promised to make, and to apply the proceeds,
from the sale of the property of Aldecoa and Co. to the satisfaction of this
indebtedness, and that the fact that the bank failed to do so is equivalent to
an extension of the term of the principal debtor, and that the effect of this
extension has been to extinguish the obligation of this defendant as a surety
of Aldecoa and Co. It is also contended that the bank expressly extended the
term within which Aldecoa and Co. was to satisfy its obligation by allowing
Aldecoa and Co. to furnish additional security. Doña Isabel Palet alleges that
all these acts were done without her knowledge or consent.
The extension of the term which, in accordance with the provisions of article
1851 of the Civil Code produces the extinction of the liability of the surety
must of necessity be based on some new agreement between the creditor
and principal debtor, by virtue of which the creditor deprives himself of his
right to immediately bring an action for the enforcement of his claim. The
mere failure to bring an action upon a credit, as soon as the same or any part
of its matures, does not constitute an extension of the term of the obligation.
Doña Isabel Palet is a personal debtor jointly and severally with Aldecoa and
Co. for the whole indebtedness of the latter firm to the bank, and not a mere
surety of the performance of the obligations of Aldecoa and Co. without any
solidary liability. It is true that certain additional deeds of mortgage and
pledge were executed by Aldecoa and Co. in favor of the bank as additional
security after Aldecoa and Co. had failed to meet its obligation to pay the first
installment due under the agreement of February 23, 1906, but there is no
stipulation whatever in any of these documents or deeds which can in any
way be interpreted in the sense of constituting an extension which would bind
the bank to waiter for the expiration of any new term before suing upon its
claim against Aldecoa and Co. We find nothing in the record showing either
directly or indirectly that the bank at any time has granted any extension in
favor of Aldecoa and Co. for the performance of its obligations. The liquidator
of Aldecoa and Co. authorized the bank to grant certain extensions to some
of the provincial debtors of Aldecoa and Co. whose debts were to be paid to
the bank under the authority conferred upon the bank by Aldecoa and Co.
There is a marked difference between the extension of time within which
Aldecoa and Co.'s debtors might pay their respective debts, and the
extension of time for the payment of Aldecoa and Co.'s own obligations to the
bank. If the bank was had brought suit on its credit against Aldecoa and Co.,
for the amount then due, on the day following the extension of the time of
Aldecoa and Co.'s debtors for the payments of their debts, it is evident that
the fact of such extension having been granted could not served in any sense
as a defense in favor of Aldecoa and Co. against the bank's action, although
this extension would have been available to Aldecoa and Co.'s debtors if suit
had been brought to enforce their liabilities to Aldecoa and Co. We must,
therefore, conclude that the judgment appealed from, in so far as it relates to
Doña Isabel Palet, must likewise be affirmed.
The intervener, William Urquhart, assigns these errors:
1. The court erred in holding that the proof fails to show a case for
intervention within the meaning of section 121 of the Code of Civil Procedure.
2. The court erred in failing to give preference to the credit of the liquidator
Urquhart for his salary.
The trial court found, as we have said, that Urquhart had failed to show that
he had any legal interest in the matter in litigation between the plaintiffs and
the defendants, or in the success of any of the parties, or any interest against
both. The proof upon this branch of the case consists of the following agreed
statement of facts:
Mr. Urquhart is a creditor of Aldecoa and Co. in the sum of P21,000 due him
for money loaned by him to Aldecoa and Co. before they went into
liquidation.
Aldecoa and Co., in liquidation, owe Mr. Urquhart the liquidator P14,000 as
salary.
Section 121 of the Code of civil Procedure provides that:
A person may, at any period of a trial, upon motion, be permitted by the court
to intervene in an action or proceeding, if he has legal interest in the matter in
litigation, or in the success of either of the parties, or an interest against both.
The intervener is seeking to have himself declared a preferred creditor over
the bank. According to the above- quoted agreed statement of facts, he is a
mere creditor of Aldecoa and Co. for the sum of P21,000, loaned that firm
before it went into liquidation. This amount is not evidenced by a public
document, or any document for that matter, nor secured by pledge or
mortgage, while the amount due the bank appears in a public instrument and
is also secured by pledges and mortgages on the property of Aldecoa and
Co., out of which the intervener seeks to have his indebtedness satisfied. It
is, therefore, clear that the intervener is not entitled to the relief sought, in so
far as the P21,000 is concerned.
The bank insists that, as the intervener had been in the employ of Aldecoa
and Co. for several years prior to the time that the latter went into liquidation,
it cannot be determined what part of the P14,000 is for salary as such
employee and what part is for salary as liquidator. We find no trouble in
reaching the conclusion that all of the P14,000 represents Urquhart's salary
as liquidator of the firm of Aldecoa and Co. The agreed statement of facts
clearly supports this view. It is there stated that Aldecoa and Co. in liquidation
owed the liquidator P14,000 as salary. The agreement does not say, nor can
it be even inferred from the same, that Aldecoa and Co. owed Urquhart
P14,000, or any other sum for salary as an employee of that firm before it
went into liquidation. Under these facts, is the intervener a preferred creditor
over the bank for this amount?
In support of his contention that he should be declared a preferred creditor
over the bank for the P14,000, the appellant cites the decision of the
supreme court of Spain of March 16, 1897, and quotes the following from the
syllabus of that case:
That the expense of maintenance of property is bound to affect such persons
as have an interest therein, whether they be the owners or creditors of the
property; therefore payment for this object has preference over any other
debt, since such other debts are recoverable to the extent that the property is
preserved and maintained.
There can be no question about the correctness of this ruling of the supreme
court of Spain to the effect that the fees of a receiver, appointed by the court
to preserve property in litigation, must be paid in preference to the claims of
creditors. But this is not at all the case under consideration, for the reason
that Urquhart was elected liquidator by the members of the firm of Aldecoa
and Co. Neither do we believe that the contention of the appellant can be
sustained under article 1922 of the Civil Code, which provides that, with
regard to specified personal property of the debtor, the following are
preferred:
1. Credits for the construction, repair, preservation, or for the amount of the
sale of personal property which may be in the possession of the debtor to the
extent of the value of the same.
The only personal property of Aldecoa and Co. is 16 shares of the stock of
the Banco-Español-Filipino; 450 shares of the stock of the Compañia
Maritima; 330 shares of the stock of the Pasay Estate Co., Ltd; and certain
claims against debtors of Aldecoa and Co., mentioned in Exhibit G.
The shares of stock in the Banco Español-Filipino and the Compañia
Maritima were pledged to the bank before Aldecoa and Co. went into
liquidation, so Urquhart had nothing to do with the preservation of these. The
stock of the Pasay Estate co., Ltd., was pledged to the bank on August 30,
1907, on the same day that it came into the possession of Aldecoa and Co.
and by the terms of the pledge the bank was authorized to collect all
dividends on the stock and apply the proceeds to the satisfaction of its claim
against Aldecoa and Co. The credits set forth in Exhibit G were assigned to
the bank on January 30, 1907, so, it will be seen, that the Pasay Estate
shares were in the possession of Aldecoa and Co., or its liquidator, only one
day. Urquhart had been liquidator twenty-eight days when the credits,
mentioned in Exhibit G, were assigned to the bank. If it could be held that
these two items bring him within the above quoted provisions of article 1922,
he could not be declared a preferred creditor over the bank for the P14,000
salary for the reason that, according to his own showing, he had been paid
for his services as liquidator up to January, 1910. It is the salary since that
date which is now in question. The only property of Aldecoa and Co. which
the liquidator had anything to do with after 1910 was the real estate
mortgages on real property cannot be regarded as personal property, and it
is only of personal property that article 1922 speaks.
The judgment appealed from, in so far as it relates to Urquhart, being in
accordance with the law and the merits of the case, is hereby affirmed.
The appellants, Joaquin and Zoilo Ibañez de Aldecoa, make the following
assignments of error:
1. The court erred in not sustaining the plea of lis pendens  with respect to the
validity of mortgages claimed by the plaintiff, which plea was set up as a
special defense by the defendants Joaquin and Zoilo Ibañez de Aldecoa, and
in taking jurisdiction of the case and in deciding therein a matter already
submitted for adjudication and not yet finally disposed of.
2. The court erred in hot sustaining the plea of res adjudicata set up as a
special defense by these defendants with respect to the contention of plaintiff
that these defendants are industrial and general partners of the firm of
Aldecoa and Co.
3. The court erred in holding that the defendants Joaquin and Zoilo Ibañez de
Aldecoa were general partners (socios colectivos) of the firm of Aldecoa and
Co., and is rendering judgment against them subsidiarily for the payment of
the amount claimed in the complaint.
The basis of the first alleged error is the pendency of an action instituted by
the appellants, Joaquin and Zoilo, in 1908, to have the mortgages which the
bank seeks to foreclose in the present action annulled in so far as their
liability thereon is concerned. That action was pending in this Supreme Court
on appeal when the present action was instituted (1911), tried, and decided
in the court below.
The principle upon which plea of another action pending is sustained is that
the latter action is deemed unnecessary and vexatious. (Williams vs. Gaston,
148 Ala., 214; 42 Sou., 552; 1 Cyc. 21; 1 R. C. L., sec. 1.) A statement of the
rule to which the litigant to its benefits, and which has often met with
approval, is found in Watson vs. Jones (13 Wall., 679, 715; 20 L. ed., 666):
But when the pendency of such a suit is set up to defeat another, the case
must be the same. There must be the same parties, or at least such as
represent the same interest, there must be the same rights asserted, and the
same relief prayed for. This relief must be founded on the same facts, and
the title or essential basis of the relief sought must be the same. The identity
in these particulars should be such that if the pending case has already been
disposed of, it could be pleaded in bar as a former adjudication of the same
matter between the same parties.
It will be noted that the cases must be identical in a number of ways. It will be
conceded that in so far as the plea is concerned, the parties are the same in
the case at bar as they were in the action to have the mortgages annulled.
Their position is simple reversed, the defendants there being the plaintiffs
here, and vice versa. This fact does not affect the application of the rule. The
inquiry must therefore proceed to the other requisites demanded by the rule.
Are the same rights asserted? Is the same relief prayed for?
The test of identity in these respects is thus stated in 1 Cyc., 28:
A plea of the pendency of a prior action is not available unless the prior
action is of such a character that, had a judgment been rendered therein on
the merits, such a judgment would be conclusive between the parties and
could be pleaded in bar of the second action.
This test has been approved, citing the quotation, in Williams vs.
Gaston (148 Ala., 214; 42 Sou., 552); Van Vleck vs. Anderson  (136 Iowa,
366; 113 N. W., 853); Wetzstein vs. Mining Co.  (28 Mont., 451; 72 P., 865). It
seems to us that unless the pending action, which the appellants refer to, can
be shown to approach the action at bar to this extent, the plea ought to fail.
The former suit is one to annul the mortgages. The present suit is one for the
foreclosure of the mortgages. It may be conceded that if the final judgment in
the former action is that the mortgages be annulled, such an adjudication will
deny the right of the bank to foreclose the mortgages. But will a decree
holding them valid prevent the bank from foreclosing them. Most certainly
not. In such an event, the judgment would not be a bar to the prosecution of
the present action. The rule is not predicated upon such a contingency. It is
applicable, between the same parties, only when the judgment to be
rendered in the action first instituted will be such that, regardless of which
party is successful, it will amount to res adjudicata  against the second action.
It has often been held that a pending action upon an insurance policy to
recover its value is not a bar to the commencement of an action to have the
policy reformed. The effect is quite different after final judgment has been
rendered in an action upon the policy. Such a judgment may be pleaded in
bar to an action seeking to reform the policy. The case are collected in the
note to National Fire Insurance Co. vs. Hughes (12 L. R. A., [N. S.], 907). So,
it was held in the famous case of Sharon vs. Hill (26 Fed., 337), that the
action brought by Miss hill for the purpose of establishing the genuineness of
a writing purporting to be a declaration of marriage and thereby establishing
the relation of husband and wife between the parties could not be pleaded in
abatement of Senator Sharon's action seeking to have the writing declared
false and forged. The court said:
This suit and the action of Sharon vs. Sharon  are not brought on the same
claim or demand. The subject matter and the relief sought are not identical.
This suit is brought to cancel and annul an alleged false and forged writing,
and enjoin the use of it by the defendant to the prejudice and injury of the
plaintiff, while the other is brought to establish the validity of said writing as a
declaration of marriage, as well as the marriage itself, and also to procure a
dissolution thereof, and for a division of the common property, and for
alimony.
Incidentally, it was held in this case that a judgment of the trial court declaring
the writing genuine was not res adjudicata  after an appeal had been taken
from the judgment of the Supreme Court. So, in the case ta bar, the fact that
the trial court in the former action holds the mortgages invalid as to one of the
herein appellants is not final by reason of the appeal entered by the bank
from that judgment.
Cases are also numerous in which an action for separation has been held not
to be a bar to an action for divorce or vice versa. (Cook vs. Cook, [N. C.], 40
L. R. S., [N. S.], 83, and cases collected in the note.) In Cook vs. Cook it was
held that a pending action for absolute divorce was not a bar to the
commencement of an action for separation. The above authorities are so
analogous in principle to the case at bar that we deem the conclusion
irresistible, that the pending action to annul the liability of the two appellant
children on the mortgages cannot operates as a plea in abatement in the
case in hand which seeks to foreclose these mortgages. The subject matter
and the relief asked for are entirely different. The facts do not conform to the
rule and it is therefore not applicable.
With reference to the second alleged error, it appears that a certified copy of
the judgment entered in the former case, wherein it was declared that these
two appellants, together with their sister Cecilia, were creditors and partners
of Aldecoa and Co., was offered in evidence and marked Exhibit 5. This
evidence was objected to by the plaintiff on the ground that it was res inter
alios acta and not competent evidence against the plaintiff or binding upon it
in any way because it was not a party to that action. This objection was
sustained and the proffered evidence excluded. If the evidence had been
admitted, what would be its legal effect? That was an action
in  personam  and the bank was not a party. The judgment is, therefore,
binding only upon the parties to the suit and their successors in interest (sec.
306, Code of Civil Procedure, No. 2).
The question raised by the third assignment of errors will be dealt with in a
separate opinion wherein the appeal of Cecilia Ibañez de Aldecoa will be
disposed of.
The appellants whose appeals are herein determined will pay their respective
portions of the cost. So ordered.
Arellano, C. J., Torres and Araullo, JJ., concur.
Moreland, J.. concurs in the result.
Johnson, J., dissents.
TRENT, J.:
In Hongkong and Shanghai Banking Corporation vs. Aldecoa and Co. et al.,
R. G. No. 8437, just decided, we said that the correctness of the judgment
declaring that the defendants, Joaquin, Zoilo, and Cecilia Ibañez de Aldecoa,
are subsidiarily liable to the bank as industrial partners of Aldecoa and Co.
for the debts of the latter, would be determined in a separate opinion.
The facts are these: Joaquin, Zoilo, and Cecilia Ibañez de Aldecoa were born
in the Philippine Islands, being the legitimate children of Zoilo Ibañez de
Aldecoa and Isabel Palet. Both parent were native of Spain, but domiciled in
Manila, where the father died in 1895. At the time of his death the father was
a member and managing director of an ordinary general mercantile
partnership known as Adecoa and Co. In December, 1896, Isabel Palet, for
herself and as the parent of her above-named three children, exercising
the patria potestad, entered into a new contract with various persons
whereby the property and good will, together with the liabilities of the firm of
which her husband was a partner, were taken over. The new firm was also
an ordinary general mercantile partnership and likewise denominated
Aldecoa and Co. Although having the same name, the new firm was entirely
distinct from the old one and was, in fact, a new enterprise. The widow Isabel
Palit entered into the new partnership as a capitalistic partner and caused her
three children to appear in the articles of partnership as industrial partners. At
the time of the execution of this new contract Joaquin was twelve years of
age, Zoilo eleven, and Cecilia nine.
Clauses 9 and 12 of the new contract of partnership read:
9. The industrial partners shall bear in proportion to the shares the losses
which may result to the partnership from bad business, but only from the
reserve fund which shall be established, as set forth in the 12th clause, and if
the loss suffered shall exhaust said fund the balance shall fall exclusively
upon the partners furnishing the capital.
12. The industrial partner shall likewise contribute 50 per cent of his net
profits to the formation of said reserve fund, but may freely dispose of the
other 50 per cent.
The question is presented, Could the mother of the three children legally bind
them as industrial partners of the firm of Aldecoa and Co. under the above
facts? If so, are they liable jointly and severally with all their property, both
real and personal, for the debts of the firm? That all industrial partners of an
ordinary general mercantile partnership are liable with all their property, both
personal and real, for all the debts of the firm owing to third parties precisely
as a capitalistic partner has long since been definitely settled in this
jurisdiction, notwithstanding provisions to the contrary in the articles of
agreement. (Compañia Maritima vs. Muñoz, 9 Phil. Re., 326.)
There are various provisions of law, in force in 1896, which must be
considered in determining whether or not the mother had the power to make
her children industrial partners of the new firm Aldecoa and Co.
Article 5 of the Code of Commerce reads:
Persons under twenty-one years of age and incapacitated persons may
continue, through their guardians, the commerce which their parents or
persons from whom the right is derived may have been engaged in. If the
guardians do not have legal capacity to trade, or have some incompatibility,
they shall be under the obligation to appoint one or more factors who
possess the legal qualifications, and we shall take their places in the trade.
As the firm of which it is claimed the children are industrial partners was not a
continuation of the firm of which their deceased father was a member, but
was a new partnership operating under its own articles of agreement, it is
clear that article 5, supra, does not sustain the mother's power to bind her
children as industrial partners of the new firm.
Article 4 of the Code of Commerce reads:
The persons having the following conditions shall have legal capacity to
customarily engage in commerce:
1. Those who have reached the age of twenty-one years.
2. Those who are not subject to the authority of a father or mother or to a
marital authority.
3. Those who have the free disposition of their property.
The appellant children had not a single one of these qualifications in 1896
when the mother attempted to enter them as industrial partners of the firm of
Aldecoa and Co.
It is claimed that the power of the mother to bind her children as industrial
partners is within her parental authority as defined by the Civil Code. Articles
159 to 166 which compose chapter 3 of the Civil Code, entitled "Effect of
parental authority with regard to the property of the children," defined the
extent of the parental authority over the property of minor children. Article
159 provides that the father, or, in his absence, the mother, is the legal
administrator of the property of this children who are under their authority.
Article 160 gives to such parent the administration and usufruct of property
acquired by the child by its work or industry or for any good consideration.
We take it that all the property possessed by the children at the time the
contract of partnership was entered into in 1896 had been acquired by them
either by their work or industry or for a good consideration. The children were
at that time under the authority of their mother.
Article 164 reads:
The father, or the mother in a proper case, cannot alienate the real property
of the child, the usufruct or administration of which belongs to them, nor
encumber the same, except for sufficient reasons of utility or necessity, and
after authorization from the judge of the domicile, upon hearing by the
department of public prosecution, excepting the provisions which, with regard
to the effects of transfers, the mortgage law establishes.
The mother did not secure judicial approval to enter into the contract of
partnership on behalf of her children. Does member ship in an ordinary
general mercantile partnership alienate or encumber the real property of an
industrial partner? Clearly a partner alienates what he contributes to the firm
as capital by transferring its ownership to the firm. But this, in the case of an
industrial partner, is nothing. An industrial partner does not alienate any
portion of his property by becoming a member of such a firm. Therefore, the
mother did not violate this prohibition of article 164 in attempting to make her
children industrial partners. But the article in question also prohibited her
from encumbering  their real property. This undoubtedly prohibits formal
encumbrances such as mortgages, voluntary easements, usufructuary rights,
and others which create specific liens upon specific real property. it has been
held to prohibit the creation of real rights, and especially registrable leases in
favor of third persons. (Res., Aug. 30, 1893.) The same word is used in
article 317 of the Civil Code in placing restrictions upon the capacity of a child
emancipated by the concession of the parent to deal with his own property. In
commenting on this latter article, Manresa asks the question, "To what
encumbrances does the code in speaking of emancipated children?" and
answers it as follows:
The prohibition against encumbering real property is so explicit . . . that we
consider it unnecessary to enumerate what are the incumbrances to which
the law refers. All that signifies a limitation upon property, such as the
creation, modification, or extinction of the right of usufruct, use, habituation,
emphyteusis, mortgages, annuities, easements, pensions affecting real
property, bonds, etc., is, in an express consent of the persons who are
mentioned in the said article 317. (Vol. 2, p. 689.)
In commenting upon the same article, Sanchez Roan says practically the
same thing. (Vol. 5, p. 1179.) Neither of these commentators refers to the
right of an emancipated child to enter into a contract of partnership without
the parent's consent. The question, in so far as we have been able to
ascertain, does not appear to have ever been discussed, either by the courts
or the commentators. It is significant, however, that a contract of surety is
placed by both the above mentioned commentators among the prohibited
contracts. The encumbrance placed upon the real property of a surety is
precisely the same as the encumbrance placed upon the real property of an
industrial partner. That is, prior to judgment on the principal obligation or
judgment against the partnership, the property is not specifically liable, and
the creditor has n preferred lien thereon or right thereto by reason of the
bond or partnership contract, as the case may be. After judgment, the
property of the surety or of the industrial partner, both real and personal, is doubted that the two children had capacity, with their mother's consent, to
subsidiarily subject to execution. The evident purpose of both article 164, enter into a contract of partnership, and, by so doing, make themselves
prohibiting the parent from encumbering the real property of his child without industrial partners, thereby encumbering their property. Conceding that the
judicial approval, and of article 317, placing the same prohibition upon the children under these circumstances could enter into such a contract with their
emancipated child in the absence of the parent's approval, is the same. It is mother, her express consent to the ratification of the contract by the two
desired that the child's real property shall be frittered away by hasty and ill- children does not appear of record. The result flowing from the ratification
advised contracts entered into by the one having the administration thereof. being the encumbrance of their property, their mother's express consent was
Both articles would fail of their purpose if the parent or the child, as the case necessary.
might be, could do indirectly what could not be done directly. In other words,
there would be little purpose in prohibiting a formal encumbrance by means For the foregoing reasons the judgment appealed from, in so far as it holds
of a mortgage, for instance, when a subsidiary liability by means of a bond or the three children liable as industrial partners, is reversed, without costs in so
membership in a partnership could as effectually deprive the child of its real far as this branch of the case is concerned. So ordered.
property. This proposition rests upon the theory that the mother could have Arellano, C. J., Torres and Araullo, JJ., concur.
freely disposed of the child's personal property in 1896 and that the only Moreland, J., concurs in the result.
recourse open to them would have been an action against their mother for Johnson, J., dissents.
the value of such property. If this theory be true, the result would not be
changed for the reason that children were either industrial partners or they
were not. If they were, they are liable to the extent of both their real and
personal property for the debts of the firm. If they were not, they are in no
way liable. There can be only two kinds or classes of partners in a firm of this
kind, capitalistic and industrial. Both are personally liable to third persons for
the debts of such a firm. To say that the children are industrial partners, but
liable only to the extent of their personal property, would be to place them in
a different class of partners. As the mother did not secure judicial approval,
the contract wherein she attempted to make her children industrial partners,
with all the consequences flowing therefrom, was, therefore, defective and
that act of itself in no way made the children liable for the debts of the new
firm.

The question remains, Did any of the children validly ratify the contract after
acquiring capacity to do so? Cecilia was never emancipated and there is no
evidence indicating that she has ever ratified the contract by word or deed.
She is, therefore, completely exonerated from liability for the debts of
Aldecoa and Co.

The other two children, Joaquin and Zoilo, were emancipated by their mother
after they had reached the age of eighteen and prior to seeking annullment of
the contract of partnership had participated by vote and otherwise in the
management of the firm, as is evidenced by Exhibits W, Y, and Z. These
various acts sufficiently show a ratification of the partnership contract and
would have the effect of making the two children industrial partners if they
had been of age at that time. Ratification is in the nature of the contract. It is G.R. No. L-19527             March 30, 1963
the adoption of, and assent to be bound by, the act of another. (Words and
Phrases, vol. 7, p. 5930.) From the effect of emancipation it cannot be RICARDO PRESBITERO, in his capacity as Executor of the Testate
Estate of EPERIDION PRESBITERO, petitioner,
vs.
THE HON. JOSE F. FERNANDEZ, HELEN CARAM NAVA, and the
PROVINCIAL SHERIFF OF NEGROS OCCIDENTAL, respondents.
San Juan, Africa and Benedicto and Hilado and Hilado for petitioner.
Paredes, Poblador, Cruz and Nazareno and Manuel Soriano for
respondents.
REYES, J.B.L., J.:
Petition for a writ of certiorari against the Court of First Instance of Negros
Occidental.
It appears that during the lifetime of Esperidion Presbitero, judgment was
rendered against him by the Court of Appeals on October 14, 1959, in CA-
G.R. No. 20879,
... to execute in favor of the plaintiff, within 30 days from the time this
judgment becomes final, a deed of reconveyance of Lot No. 788 of the
cadastral survey of Valladolid, free from all liens and encumbrances, and
another deed of reconveyance of a 7-hectare portion of Lot No. 608 of the
same cadastral survey, also free from all liens and encumbrances, or, upon
failure to do so, to pay to the plaintiff the value of each of the said properties,
as may be determined by the Court a quo upon evidence to be presented by
the parties before it. The defendant is further adjudged to pay to the plaintiff
the value of the products received by him from the 5-hectare portion
equivalent to 20 cavans of palay per hectare every year, or 125 cavans
yearly, at the rate of P10.00 per cavan, from 1951 until possession of the
said 5-hectare portion is finally delivered to the plaintiff with legal interest
thereon from the time the complaint was filed; and to pay to the plaintiff the
sum of P1,000.00 by way of attorney's fees, plus costs.
This judgment, which became final, was a modification of a decision of the
Court of First Instance of Negros Occidental, in its Civil Case No. 3492,
entitled "Helen Caram Nava, plaintiff, versus Esperidion Presbitero,
defendant."
Thereafter, plaintiff's counsel, in a letter dated December 8, 1959, sought in
vain to amicably settle the case through petitioner's son, Ricardo Presbitero
but no response coming from the Ricardo.
When no response was forthcoming, said counsel asked for, and the court a
quo ordered on June 9, 1960, the issuance of a partial writ of execution for
the sum of P12,250.00. On the following day, June 10, 1960, said counsel, in
another friendly letter, reiterated his previous suggestion for an amicable
settlement, but the same produced no fruitful result. Thereupon, on June 21,
1960, the sheriff levied upon and garnished the sugar quotas allotted to
plantation audit Nos. 26-237, 26-238, 26-239, 26-240 and 26-241 adhered to
the Ma-ao Mill District and "registered in the name of Esperidion Presbitero
as the original plantation-owner", furnishing copies of the writ of execution
and the notice of garnishment to the manager of the Ma-ao Sugar Central
Company, Bago, Negros Occidental, and the Sugar Quota Administration at
Bacolod City, but without presenting for registration copies thereof to the
Register of Deeds.
Plaintiff Helen Caram Nava (herein respondent) then moved the court, on
June 22, 1960, to hear evidence on the market value of the lots; and after
some hearings, occasionally protracted by postponements, the trial court, on
manifestation of defendant's willingness to cede the properties in litigation,
suspended the proceedings and ordered him to segregate the portion of Lot
608 pertaining to the plaintiff from the mass of properties belonging to the
defendant within a period to expire on August 24, 1960, and to effect the final
conveyance of the said portion of Lot 608 and the whole of Lot 788 free from
any lien and encumbrance whatsoever. Because of Presbitero's failure to
comply with this order within the time set forth by the court, the plaintiff again
moved on August 25, 1960 to declare the market value of the lots in question
to be P2,500.00 per hectare, based on uncontradicted evidence previously
adduced. But the court, acting on a prayer of defendant Presbitero, in an
order dated August 27, 1960, granted him twenty (20) days to finalize the
survey of Lot 608, and ordered him to execute a reconveyance of Lot 788 not
later than August 31, 1960. Defendant again defaulted; and so plaintiff, on
September 21, 1960, moved the court for payment by the defendant of the
sum of P35,000.00 for the 14 hectares of land at P2,500.00 to the hectare,
and the court, in its order dated September 24, 1960, gave the defendant
until October 15, 1960 either to pay the value of the 14 hectares at the rate
given or to deliver the clean titles of the lots. On October 15, 1960, the
defendant finally delivered Certificate of Title No. T-28046 covering Lot 788,
but not the title covering Lot 608 because of an existing encumbrance in
favor of the Philippine National Bank. In view thereof, Helen Caram Nava
moved for, and secured on October 19, 1960, a writ of execution for
P17,500.00, and on the day following wrote the sheriff to proceed with the
auction sale of the sugar quotas previously scheduled for November 5, 1960.
The sheriff issued the notice of auction sale on October 20, 1960.
On October 22, 1960, death overtook the defendant Esperidion Presbitero.
Proceedings for the settlement of his estate were commenced in Special
Proceedings No. 2936 of the Court of First Instance of Negros Occidental;
and on November 4, 1960, the special administrator, Ricardo Presbitero, filed
an urgent motion, in Case No. 3492, to set aside the writs of execution, and
to order the sheriff to desist from holding the auction sale on the grounds that
the levy on the sugar quotas was invalid because the notice thereof was not
registered with the Register of Deeds, as for real property, and that the writs,
being for sums of money, are unenforceable since Esperidion Presbitero died
on October 22, 1960, and, therefore, could only be enforced as a money
claim against his estate.
This urgent motion was heard on November 5, 1960, but the auction sale
proceeded on the same date, ending in the plaintiff's Helen Nava putting up
the highest bid for P34,970.11; thus, the sheriff sold 21,640 piculs of sugar
quota to her.
On November 10, 1960, plaintiff Nava filed her opposition to Presbitero's
urgent motion of November 4, 1960; the latter filed on May 4, 1961 a
supplement to his urgent motion; and on May 8 and 23, 1961, the court
continued hearings on the motion, and ultimately denied it on November 18,
1961.
On January 11, 1962, plaintiff Nava also filed an urgent motion to order the
Ma-ao Sugar Central to register the sugar quotas in her name and to deliver
the rentals of these quotas corresponding to the crop year 1960-61 and
succeeding years to her. The court granted this motion in its order dated
February 3, 1962. A motion for reconsideration by Presbitero was denied in a
subsequent order under date of March 5, 1962. Wherefore, Presbitero
instituted the present proceedings for certiorari.
A preliminary restraining writ was thereafter issued by the court against the
respondents from implementing the aforesaid orders of the respondent
Judge, dated February 3, 1960 and March 5, 1962, respectively. The petition
further seeks the setting aside of the sheriff's certificate of sale of the sugar
quotas made out in favor of Helen Caram Nava, and that she be directed to
file the judgment credit in her favor in Civil Case No. 3492 as a money claim
in the proceedings to settle the Estate of Esperidion Presbitero.
The petitioner denies having been personally served with notice of the
garnishment of the sugar quotas, but this disclaimer cannot be seriously
considered since it appears that he was sent a copy of the notice through the
chief of police of Valladolid on June 21, 1960, as certified to by the sheriff,
and that he had actual knowledge of the garnishment, as shown by his
motion of November 4, 1960 to set aside the writs of execution and to order
the sheriff to desist from holding the auction sale.
Issue: Squarely at issue in this case is whether sugar quotas are real
(immovable) or personal properties. If they be realty, then the levy upon them
by the sheriff is null and void for lack of compliance with the procedure
prescribed in Section 14, Rule 39, in relation with Section 7, Rule 59, of the
Rules of Court requiring "the filing with the register of deeds a copy of the
orders together with a description of the property . . . ."
In contending that sugar quotas are personal property, the respondent, Helen
Caram Nava, invoked the test formulated by Manresa (3 Manresa, 6th Ed.
43), and opined that sugar quotas can be carried from place to place without
injury to the land to which they are attached, and are not one of those
included in Article 415 of the Civil Code; and not being thus included, they fall
under the category of personal properties:
ART. 416. The following are deemed to be personal property:
xxx     xxx     xxx
4. In general, all things which can be transported from place to place without
impairment of the real property to which they are fixed.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts
be admitted and approved by this Honorable Court, without prejudice to the
parties adducing other evidence to prove their case not covered by this
stipulation of facts. 1äwphï1.ñët
Respondent likewise points to evidence she submitted that sugar quotas are,
in fact, transferred apart from the plantations to which they are attached,
without impairing, destroying, or diminishing the potentiality of either quota or
plantation. She was sustained by the lower court when it stated that "it is a
matter of public knowledge and it is universal practice in this province, whose
principal industry is sugar, to transfer by sale, lease, or otherwise, sugar
quota allocations from one plantation to any other" and that it is "specious to
insist that quotas are improvements attaching to one plantation when in truth
and in fact they are no longer attached thereto for having been sold or leased
away to be used in another plantation". Respondent would add weight to her
argument by invoking the role that sugar quotas play in our modern social
and economic life, and cites that the Sugar Office does not require any
registration with the Register of Deeds for the validity of the sale of these
quotas; and, in fact, those here in question were not noted down in the
certificate of title of the land to which they pertain; and that Ricardo
Presbitero had leased sugar quotas independently of the land. The
respondent cites further that the U.S.-Philippine Trade Relations Act,
approved by the United States Congress in 1946, limiting the production of
unrefined sugar in the Philippines did not allocate the quotas for said
unrefined sugar among lands planted to sugarcane but among "the sugar
producing mills and plantation OWNERS", and for this reason Section 3 of
Executive Order No. 873, issued by Governor General Murphy, authorizes
the lifting of sugar allotments from one land to another by means only of
notarized deeds.
While respondent's arguments are thought-provoking, they cannot stand
against the positive mandate of the pertinent statute. The Sugar Limitation
Law (Act 4166, as amended) provides —
SEC. 9. The allotment corresponding to each piece of land under the
provisions of this Act shall be deemed to be an improvement attaching to the
land entitled thereto ....
and Republic Act No. 1825 similarly provides —
SEC. 4. The production allowance or quotas corresponding to each piece of
land under the provisions of this Act shall be deemed to be an improvement
attaching to the land entitled thereto ....
And Executive Order No. 873 defines "plantation" as follows:
(a) The term 'plantation' means any specific area of land under sole or
undivided ownership to which is attached an allotment of centrifugal sugar.
Thus, under express provisions of law, the sugar quota allocations are
accessories to land, and can not have independent existence away from a
plantation, although the latter may vary. Indeed, this Court held in the case
of Abelarde vs. Lopez, 74 Phil. 344, that even if a contract of sale
of haciendas omitted "the right, title, interest, participation, action (and) rent"
which the grantors had or might have in relation to the parcels of land sold,
the sale would include the quotas, it being provided in Section 9, Act 4166,
that the allotment is deemed an improvement attached to the land, and that
at the time the contract of sale was signed the land devoted to sugar were
practically of no use without the sugar allotment.
As an improvement attached to land, by express provision of law, though not
physically so united, the sugar quotas are inseparable therefrom, just like
servitudes and other real rights over an immovable. Article 415 of the Civil
Code, in enumerating what are immovable properties, names —
10. Contracts for public works, and servitudes and other real rights over
immovable property. (Emphasis supplied)
It is by law, therefore, that these properties are immovable or real, Article 416
of the Civil Code being made to apply only when the thing (res) sought to be
classified is not included in Article 415.
The fact that the Philippine Trade Act of 1946 (U.S. Public Law 371-79th
Congress) allows transfers of sugar quotas does not militate against their
immovability. Neither does the fact that the Sugar Quota Office does not
require registration of sales of quotas with the Register of Deeds for their
validity, nor the fact that allocation of unrefined sugar quotas is not made
among lands planted to sugarcane but among "the sugar producing mills and
plantation OWNERS", since the lease or sale of quotas
are voluntary transactions, the regime of which, is not necessarily identical
to involuntary transfers or levies; and there cannot be a sugar plantation
owner without land to which the quota is attached; and there can exist no
quota without there being first a corresponding plantation.
Since the levy is invalid for non-compliance with law, it is impertinent to
discuss the survival or non-survival of claims after the death of the judgment
debtor, gauged from the moment of actual levy. Suffice it to state that, as the
case presently stands, the writs of execution are not in question, but the levy
on the quotas, and, because of its invalidity, the levy amount to no levy at all.
Neither is it necessary, or desirable, to pass upon the conscionableness or
unconscionableness of the amount produced in the auction sale as
compared with the actual value of the quotas inasmuch as the sale must
necessarily be also illegal.
As to the remedial issue that the respondents have presented: that certiorari
does not lie in this case because the petitioner had a remedy in the lower
court to "suspend" the auction sale, but did not avail thereof, it may be stated
that the latter's urgent motion of November 4, 1960, a day before the
scheduled sale (though unresolved by the court on time), did ask for
desistance from holding the sale.
WHEREFORE, the preliminary injunction heretofore granted is hereby made
permanent, and the sheriff's certificate of sale of the sugar quotas in question
declared null and void. Costs against respondent Nava.
Bengzon, C.J., Padilla, Labrador, Barrera, Paredes, Dizon and Regala, JJ.,
concur.
Makalintal, J., took no part.
G.R. No. L-16513             January 18, 1921
THE UNITED STATES, plaintiff-appellee,
vs.
MANUEL TAMBUNTING, defendant-appellant.
Manuel Garcia Goyena for appellant.
Acting Attorney-General Feria for appellee.
STREET, J.:
This appeal was instituted for the purpose of reversing a judgment of the
Court of First Instance of the city of Manila, finding the accused, Manuel
Tambunting, guilty of stealing a quantity of gas belonging to the Manila Gas
Corporation, and sentencing him to undergo imprisonment for two months
and one day, of arresto mayor, with the accessories prescribed by law; to
indemnify the said corporation in the sum of P2, with subsidiary imprisonment
in case of insolvency; and to pay the costs.
The evidence submitted in behalf of the prosecution shows that in January of
the year 1918, the accused Manuel Tambunting and his wife became
occupants of the upper floor of the house situated at No. 443, Calle
Evangelista, in the city of Manila. In this house the Manila Gas Corporation
had previously installed apparatus for the delivery of gas on both the upper
and lower floors, consisting of the necessary piping and a gas meter, which
last mentioned apparatus was installed below. When the occupants at whose
request this installation had been made vacated the premises, the gas
company disconnected the gas pipe and removed the meter, thus cutting off
the supply of gas from said premises.
Upon June 2, 1919, one of the inspectors of the gas company visited the
house in question and found that gas was being used, without the knowledge
and consent of the gas company, for cooking in the quarters occupied by the
defendant Manuel Tambunting and his wife: to effect which a short piece of
iron pipe had been inserted in the gap where the gas meter had formerly
been placed, and piece of rubber tubing had been used to connect the gas
pipe of rubber tubing had been used to connect the gas pipe in kitchen with
the gas stove, or plate, used for cooking.
At the time this discovery was made, the accused, Manuel Tambunting, was
not at home, but he presently arrived and Tambunting admitted to the agent
to the gas company that he had made the connection with the rubber tubing
between the gas pipe and the stove, though he denied making the
connection below. He also admitted that he knew he was using gas without
the knowledge of the company and that he had been so using it for probably
two or three months.
The clandestine use of gas by the accused in the manner stated is thus
established in our opinion beyond a doubt; and inasmuch as the animo
lucrandi  is obvious, it only remains to consider, first, whether gas can be the
subject to larceny and, secondly, whether the quantity of gas appropriated in
the two months, during which the accused admitted having used the same,
has been established with sufficient certainty to enable the court to fix an
appropriate penalty.
Some legal minds, perhaps more academic than practical, have entertained
doubt upon the question Issue: WONwhether gas can be the subject of
larceny/theft; but no judicial decision has been called to our attention wherein
any respectable court has refused to treat it as such. In U.S. vs. Genato (15
Phil., 170, 175), this court, speaking through Mr. Justice Torres, said ". . . the
right of the ownership of electric current is secured by article 517 and 518 of
the Penal Code; the application of these articles in cases of subtraction of
gas, a fluid used for lighting, and in some respects resembling electricity, is
confirmed by the rule laid down in the decisions of the supreme court of
Spain of January 20, 1887, and April 1, 1897, construing and enforcing the
provisions of articles 530 and 531 of the Penal Code of that country, articles
identical with articles 517 and 518 of the code in force in these Islands."
These expressions were used in a case which involved the subtraction and
appropriation of electrical energy and the court held, in accordance with the
analogy of the case involving the theft of gas, that electrical energy could
also be the subject of theft. The same conclusion was reached in U.S. vs.
Carlos (21 Phil., 553), which was also a case of prosecution for stealing
electricity.
The precise point whether the taking of gas may constitute larceny has never
before, so far as the present writer is aware, been the subject of adjudication
in this court, but the decisions of Spanish, English, and American courts all
answer the question in the affirmative. (See U.S. vs. Carlos, 21 Phil., 553,
560.)
In this connection it will suffice to quote the following from the topic
"Larceny," at page 34, Vol. 17, of Ruling Case Law:
There is nothing in the nature of gas used for illuminating purposes which
renders it incapable of being feloniously taken and carried away. It is a
valuable article of merchandise, bought and sold like other personal property,
susceptible of being severed from a mass or larger quantity and of being
transported from place to place. Likewise water which is confined in pipes
and electricity which is conveyed by wires are subjects of larceny."
As to the amount and value of the gas appropriated by the accused in the
period during which he admits having used it, the proof is not entirely
satisfactory. Nevertheless we think the trial court was justified in fixing the
value of the gas at P2 per month, which is the minimum charge for gas made
by the gas company, however small the amount consumed. That is to say, no
person desiring to use gas at all for domestic purposes can purchase the
commodity at a lower rate per month than P2. There was evidence before the
court showing that the general average of the monthly bills paid by
consumers throughout the city for the use of gas in a kitchen equipped like
that used by the accused is from P18 to 20, while the average minimum is
about P8 per month. We think that the facts above stated are competent
evidence; and the conclusion is inevitable that the accused is at least liable to
the extent of the minimum charge of P2 per month. The market value of the
property at the time and place of the theft is of court the proper value to be
proven (17 R.C.L., p. 66); and when it is found that the least amount that a
consumer can take costs P2 per months, this affords proof that the amount
which the accused took was certainly worth that much. Absolute certainty as
to the full amount taken is of course impossible, because no meter wad used;
but absolute certainty upon this point is not necessary, when it is certain that
the minimum that could have been taken was worth a determinable amount.

It appears that before the present prosecution was instituted, the accused
had been unsuccessfully prosecuted for an infraction of section 504 of the
Revised Ordinances of the city of Manila, under a complaint charging that the
accused, not being a registered installer of gas equipment had placed a gas
installation in the house at No. 443, Calle Evangelista. Upon this it is argued
for the accused that, having been acquitted of that charge, he is not now
subject to prosecution for the offense of theft, having been acquitted of the
former charge. The contention is evidently not well-founded, since the two
offenses are of totally distinct nature. Furthermore, a prosecution for violation
of a city ordinance is not ordinarily a bar to a subsequent prosecution for the
same offense under the general law of the land. (U.S. vs. Garcia Gavieres,
10 Phil., 694.)

The conclusion is that the accused is properly subject to punishment, under

No. 5 of article 518 of the Penal Code, for the gas taken in the course of two
months a the rate of P2 per month. There being no aggravating or
attenuating circumstance to be estimated, it results that the proper penalty is
two months and one day of arresto mayor, as fixed by the trial court. The
judgment will therefore be affirmed, with costs against the appellant, it being
understood that the amount of the indemnity which the accused shall pay to
the gas company is P4, instead of P2, with subsidiary imprisonment for one
day in case of insolvency. So ordered.

Mapa, C.J., Araullo, Malcolm and Villamor, JJ., concur.

G.R. No. L-8414 February 28, 1957
MANGHARAM B. HEMMANI, Petitioner-Appellant, vs. THE EXPORT
CONTROL COMMITTEE, Respondent-Appellee.
De la Cruz, Fernandez & Mate for appellant.
Office of the Solicitor General Ambrosio Padilla and Assistant Solicitor
General Jose G. Bautista for appellee. chanrobles virtual law library
The Solicitor General has made a accurate exposition of the facts of the
case. They may be summarized as follows: On August 28, 1952, petitioner
requested permission from the Export Control Committee, created under
section 2 of Republic Act No. 613 and composed of the Secretary of
Agriculture and Natural Resources as Chairman, the Secretary of National
Defense and the Administrator of the Economic Coordination, as Members,
to ship to his Hudson Sedan, Model 1949, Motor No. 48149039, valued at
P4,500, to Osaka, Japan, on board the S. S. President Wilson, "to be used in
connection with his business thereat." The respondent Committee approved
the request on the same day, on condition that petitioner would file a bond
equal to the value of the car, to guarantee the return of the same in the
Philippines within six months from the date of its
shipment.chanroblesvirtualawlibrary chanrobles virtual law library
On August 29, 1952, petitioner posted with the Filipinas Compa�ia de
Seguros a surety bond (Annex A) in the sum of P4,500 in favor of the
Republic of the Philippines (Bureau of Customs), guaranteeing that the
Hudson Sedan car would be re-exported back to the Philippines from Japan
within six months from the execution of the bond. Accordingly, petitioner took
the car in question to Osaka, Japan, on August 29, 1952, but failed to bring it
back to the Philippines as promised. Instead petitioner filed two requests for
extension of six months each to be followed to re-export the car back to the
Philippines until March 1, 1954, alleging that he was still on a business tour
and it would be impracticable to return the car on time. Notwithstanding the
two extensions given him by the respondent the car in question was not
brought back in the
But the responetn wasn’t able to brought back the car in question to the
Philippines.
On February 24, 1954, Atty. Teotimo A. Roja, in behalf of the petitioner,
requested the respondent to order the cancellation of the surety bond of
P4,500 that he and the Filipinas Compa�ia de Seguros (Bond No. 27914)
had executed, alleging that it would be impracticable and expensive to return
the car to Manila, considering its dilapidated condition and utility in Japan, but
the respondent denied said request, though at its meeting held on February
24, 1954 it decided to reduce the liability under the bond to P2,250.00 for the
reason that this was the value that the car would have at the state it was then
if it were brought back in the Philippines, thus allowing a depreciation of 15
per cent each year.chanroblesvirtualawlibrary chanrobles virtual law library
On May 13, 1954, petitioner requested respondent for reconsideration of its
resolution of February 24, 1954, alleging that: (1) the Committee had no
jurisdiction to imposed said penalty; and (2) granting, for the sake of
argument that the Committee had jurisdiction to impose said penalty, the
penalty imposed was highly excessive and violative of the Constitutional
prohibition against excessive  fines". Again this motion for reconsideration
was denied by the respondent under date of June 30, 1954; hence the
institution of this petition in the Court of First Instance of Manila on July 6,
1954, which was answered by the Solicitor General in due time. The case
was then submitted on the stipulation embodying the facts aforementioned,
and the Court rendered decision on September 24, 1954. dismissing the
petition for lack of merit, with costs against the petitioner.
From this decision the petitioner appealed to Us and in the instance his
counsel maintains that the lower court erred:
1. In not finding that appellant's car in question is personal effect and
therefore not subject to statutory or reglementary prohibition against
exportation;chanrobles virtual law library
2. In not sustaining appellant's claim that the bringing out of his car in the
instant case did not constitute exportation;chanrobles virtual law library
3. In not finding that the respondent had acted without jurisdiction in requiring
appellant to file a bond and later ordering its forfeiture; andchanrobles virtual
law library
4. In denying the petition for certiorari.
Section 3 of Republic Act No. 613, approved on May 11, 1951, authorizes the
President "to control, curtail, regulate and/or prohibit the exportation or re-
exportation of materials, goods and things referred to in Section 2 of the Act
and to issue rules and regulations as would be necessary to carry out the
provisions thereof". Section 2 of said Act prescribes in turn "that all applicants
for permit to export or re-export any of the articles mentioned in the
preceeding section 1, should be filed before a Committee to be composed of
the Secretary of Agriculture and Natural Resources as Chairman, the
Secretary of National Defense and the Administrator of Economic
Coordination as Members". Republic Act No. 613 further provides the
following:
SEC. 1. In order to promote economic rehabilitation and development and to
safeguard national security, it shall be unlawful to any person, association or
corporation to export or re-export to any point outside the PHILIPPINES
MACHINERIES AND THEIR SPARE PARTS, scrap metals, medicines,
foodstuffs, abaca seedlings, gasoline, oil, lubricants and military equipment
or supplies suitable for military use without a permit from the President which
may be issued in accordance with the provisions of the next succeeding
section.
In virtue of the power vested in him, the President issued on June 19, 1951,
Executive Order No. 453, series of that year (47 Off. Gaz. No. 6, p. 2793),
section 2 whereof reads as follows:
SEC. 2. The exportation of all articles included in the list marked Annex A,
hereto attached as an integral part of this Order, is absolutely
prohibited: Provided, however, That licenses issued or authority granted prior
to the effectivity of Republic Act No. 613, by the Interdepartmental Committee
from February 28, 1951, by the Civil Aeronautics Board or the Civil
Aeronautics Administration and by the Sugar Quota Office on nonferrous
metals pursuant to the Cabinet Resolution of November 21, 1950, are valid
and subsisting.
(The articles pertinent to this case that are included in the list marked Annex
A referred to above as enumerated in Paragraph IV of said annex which will
be quoted hereafter).chanroblesvirtualawlibrary chanrobles virtual law library
The President, however, amended this Executive Order by another, No. 482,
issued on October 31, 1951 (47 Off. Gaz., No. 10, p. 5039), in the following
manner:
SEC. 2. The exportation of all articles in the list marked Annex A, hereto
attached as an integral part of this Order, is absolutely prohibited; Provided,
however, That in exceptionally meritorious cases and where the Committee
is fully satisfied that the overall economic and military requirements of the
country are not prejudiced, such exportation may be allowed subject to the
provisions of Section 4 of this Order, (which refers only to applications
concerning articles included in the list marked Annex C and not in Annex A).
Because of the amendment made by Executive Order No. 482, the Hudson
Sedan automobile herein involved was allowed by the Committee to be
exported to Osaka, Japan, with the obligation on the part of the plaintiff to
report it back to the Philippines from Japan within the period granted to him
to do so, extensions included, which obligation he failed to fulfill. Naturally, he
is in duty bound to abide by the consequences of his failure and must pay the
amount of the bond he posted, as ultimately reduced, or P2,250.
Plaintiff, however, contends that this car in question was his personal
effect and, therefore, not subject to statutory or reglementary prohibition
against exportation. It seems, however, that plaintiff confuses the term
"personal effects" with "property of the person" or personal property". As
pointed out by the Solicitor General:
Issue” WON the contention of Hemmani that this car in question is
his  personal effect  is right.
The word "personal" used with "effects" much restrict its meaning
(Child vs. Orton, 183, A. 709, 710-119 N. J. Eq. 438), and certainly (that
meaning, cannot be understanding without any qualifying words includes
only such tangible property as attends the person.
Among the articles the exportation of which is prohibited according to said
Executive Order are:
IV. Imported Machinery (light and heavy), mechanical, electrical, agricultural,
construction, engineering, and transportation equipment of all types,
including surplus equipment, spare parts, accessories, wires and other allied
articles, except those already approved by the Bureau of Customs or NICA or
order Government agencies as well as licenses covered in section 2
herein.chanroblesvirtualawlibrary chanrobles virtual law library
It is undisputed that petitioner's car is covered with the term "transportation
equipment of all types" and not as "personal effects", as counsel would want
to classify it. Petitioner's car was admittedly brought by him to Osaka, Japan,
"to be used in connection with his business" (p. 16, Record on Appeal) , and
that when he asked for extension of time to re-export the motor vehicle back
to the Philippines, his reason was that he was still on a business tour, (p. 17,
Record on Appeal).chanroblesvirtualawlibrary chanrobles virtual law library
If by personal effects of passengers in transit transportation equipment used
in one's business were included, then it would be a simple matter to defeat
the intention of the law, that is, to promote the economic and industrial
development of the country. To seal any possible loophole, the Executive
Order made it clear that exportation of all articles included in the list is
prohibited irrespective of the use for which they were intended.
The cardinal rule in the interpretation of law is to ascertain and give effect to
the legislative intent (Roldan and Daza vs. Villaroman (1949), 69 Phil. 12),
and the intention of the Legislature in enacting a law is part of the law itself,
and is to be followed and applied, where ascertainable, in construing
apparently conflicting provisions (Altaban vs. Masbate Consolidated Mining
Co., et al. (1940) - 69 Phil. 696). These principles of statutory construction
are more true in the case at bar because the wording of the law is too plain
and clear.chanroblesvirtualawlibrary chanrobles virtual law library
On the other hand, the Solicitor General further contends that contrary to the
assertions of plaintiff's counsel, the respondent is expressly authorized by the
provisions of section 6 of said Executive Order No. 453 to require the
petitioner to file a bond in this case to insure either the reaching of goods to
their intended destination or its return to the Philippines, and section 4 of
Republic Act No. 613 provides that in case of a violation of said Acts which
regulates, controls and/or prohibits certain exports from the Philippines, the
materials intended for export in violation of said Act and the rules and
regulations thereunder, shall be confiscated by and forfeited to the
Government. Consequently, if the petitioner violated the provisions of said
Executive Orders by not returning or re-exporting back to the Philippines the
automobile in question, and this property cannot be confiscated because it is
beyond the jurisdiction of this country, it would appeal to reason that plaintiff
should pay the equivalent value of the automobile which he placed beyond
the reach of the Government to the Philippines, That is why he was required
to give the bond and should pay the Government for the automobile that it
should not seized and forfeit.chanroblesvirtualawlibrary chanrobles virtual
law library
But even assuming arguendo, that the respondent were not authorized to
require the petitioner to file the bond in question, nevertheless, the Republic
of the Philippines being a political entity has an incident to its sovereignty the
capacity to enter into contracts and take bonds in cases appropriate to the
just exercise of its power through its instrumentalities or agencies whenever,
as in the instant case, such contracts or bonds are not prohibited by law,
although the making of such contracts or the taking of such bonds may not
have been specifically prescribed by any pre-existing statute (Solicitor
General's brief, p. 6-8).chanroblesvirtualawlibrary chanrobles virtual law
library
Certainly petitioner could not have taken from the Philippines his automobile
if he had not furnished the bond required from him and which he voluntarily
furnished. He had been enjoying the benefits which the bond intended to
secure and now he cannot come and allege that he is not bound by the terms
of the bond. The present case has a legal aspect similar to the one We
solved in the case of Compa�ia General de Tabacos de Filipinas and S. S.
Co. of 1912& S. S. Co. Svandoorg (A. P. Moller, Maersk Line),
petitioner, vs. The Collector of Internal Revenue, respondent, G.R. No. L-
9071, promulgated January 31, 1957. It appeared in that case:
That while the M/V Hulda Maersk, represented locally by Tabacalera, was
moored alongside Manila's Pier no. 9, its chief steward, Henry Anderson,
took from its stores 30 cases of cigarettes of foreign manufacture, which he
sold to two persons in uniform for two thousand dollars ($2,000.00). With this
help the cargo was surreptitiously unloaded and withdrawn from the
pier, import taxes  unpaid. The Customs authorities somehow discovered the
anomaly, and promptly investigated. Anderson admitted the sale; Captain
Jansen, the ship's master, swore that the cigarettes belonged to the ship's
stores and declared their willingness to pay the corresponding duties upon
presentation of the bill to their local agents, the Tabacalera. The latter in turn,
thru its Acting Manager of the Shipping Department Edward N. Bosch, who
was present during the investigation, signed the following guaranty:
The Commission of Customs
Manila
DEAR SIR:chanrobles virtual law library
We hereby confirm our agreement to pay immediately upon presentation of
the corresponding bills, all taxes due on 30 (Thirty) Cases Chesterfield,
Lucky Strike and Camel cigarettes, each case containing fifty cartoons of two
hundred cigarettes each, removed from the above vessel.
Accordingly, on March 5, 1952, upon receipt of the corresponding bill,
Tabacalera paid the amount of P6,613.05 representing specific taxes on the
aforesaid cigarettes. Thereafter it submitted a request for refund, which the
Collector of Internal Revenue denied, and the Court of Tax Appeals likewise
denied.
In the cited case Tabacalera's demand for returned was made after the ship
Hulda Maersk and the persons involved in the attempted smuggle had
already left the Philippines, a fact that the Bureau of Customs would not have
allowed to happen if the Tabacalera had not agreed to pay the taxes due
upon presentation of the bill, and We affirmed the decision of the Board of
Tax Appeals rendered in the case.chanroblesvirtualawlibrary chanrobles
virtual law library
Wherefore, on the strength of the foregoing considerations and finding no
error in the decision appealed from, We hereby affirmed the same, with costs
against plaintiff. It is so ordered.chanroblesvirtualawlibrary chanrobles virtual
law library
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo,
Labrador, Concepcion, Reyes, J.B.L. and Endencia, JJ., concur.
G.R. No. L-42091             November 2, 1935
GONZALO CHUA GUAN, plaintiff-appellant,
vs.
SAMAHANG MAGSASAKA, INC., and SIMPLICIO OCAMPO, ADRIANO
G. SOTTO, and EMILIO VERGARA, as president, secretary and treasurer
respectively of the same, defendants-appellees.
Buenaventura C. Lopez for appellant.
Domingo L. Vergara for appellees.
BUTTE, J.:
This is an appeal from a judgment of the Court of First Instance of Nueva
Ecija in an action for a writ of mandamus. The case is remarkable for the
following reason: that the parties entered into a stipulation in which the
defendants admitted all of the allegations of the complaint and the plaintiff
admitted all of the special defenses in the answer of the defendants, and on
this stipulation they submitted the case for decision.
The complaint alleges that the defendant Samahang Magsasaka, Inc., is a
corporation duly organized under the laws of the Philippine Islands with
principal office in Cabanatuan, Nueva Ecija, and that the individual
defendants are the president, secretary and treasurer respectively of the
same; that on June 18, 1931, Gonzalo H. Co Toco was the owner of 5,894
shares of the capital stock of the said corporation represented by nine
certificates having a par value of P5 per share; that on said date Gonzalo H.
Co Toco, a resident of Manila, mortgaged said 5,894 shares to Chua Chiu to
guarantee the payment of a debt of P20,000 due on or before June 19, 1932.
The said certificates of stock were delivered with the mortgage to the
mortgagee, Chua Chiu. The said mortgage was duly registered in the office
of the register of deeds of Manila on June 23, 1931, and in the office of the
said corporation on September 30, 1931.
On November 28, 1931, Chua Chiu assigned all his right and interest in the
said mortgage to the plaintiff and the assignment was registered in the office
of the register of deeds in the City of Manila on December 28, 1931, and in
the office of the said corporation on January 4, 1932.
The debtor, Gonzalo H. Co Toco, having defaulted in the payment of said
debt at maturity, the plaintiff foreclosed said mortgage and delivered the
certificates of stock and copies of the mortgage and assignment to the sheriff
of the City of Manila in order to sell the said shares at public auction. The
sheriff auctioned said 5,894 shares of stock on December 22, 1932, and the
plaintiff Gonzalo Chua having been the highest bidder for the sum of
P14,390, the sheriff executed in his favor a certificate of sale of said shares.
The plaintiff tendered the certificates of stock standing in the name of
Gonzalo H. Co Toco to the proper officers of the corporation for cancellation
and demanded that they issue new certificates in the name of the plaintiff.
The said officers (the individual defendants) refused and still refuse to issue
said new shares in the name of the plaintiff.
The prayer is that a writ of mandamus be issued requiring the defendants to
transfer the said 5,894 shares of stock to the plaintiff by cancelling the old
certificates and issuing new ones in their stead.
As special defense, the defendants refused to cancel said certificates (Co
Toco’s) and to issue new ones in the name of Chua Guan because prior to
the date of the latter’s demand (4 February 1933), 9 attachments had been
issued and servedand noted on the books of the corporation against Co
Toco’s shares and Chua Guan objected to having these attachmentsnoted
on the new certificates which he demanded
The special defenses set up in the answer are as follows: that the defendants
refuse to cancel the said certificates standing in the name of Gonzalo H. Co
Toco on the books of the corporation and to issue new ones in the name of
the plaintiff because prior to the date when the plaintiff made his demand, to
wit, February 4, 1933, nine attachments had been issued and served and
noted on the books of the corporation against the shares of Gonzalo H. Co
Toco and the plaintiff objected to having these attachments noted on the new
certificates which he demanded. These attachments noted on the books of
the corporation against the shares of Gonzalo H. Co Toco are as follows:
MISSING PAGES: 475-477.
It will be noted that the first eight of the said writs of attachment were served
on the corporation and noted on its records before the corporation received
notice from the mortgagee Chua Chiu of the mortgage of said shares dated
June 18, 1931. No question is raised as to the validity of said mortgage or of
said writs of attachment and the sole question presented for decision is
whether the said mortgage takes priority over the said writs of attachment.
It is not alleged that the said attaching creditors had actual notice of the said
mortgage and the question therefore narrows itself down to this: Did the
registration of said chattel mortgage in the registry of chattel mortgages in the
office of the register of deeds of Manila, under date of July 23, 1931, give
constructive notice to the said attaching creditors?
In passing, let it be noted that the registration of the said chattel mortgage in
the office of the corporation was not necessary and had no legal effect.
(Monserrat vs. Ceron, 58 Phil., 469.) The long mooted question as to
whether or not shares of a corporation could be hypothecated by placing a
chattel mortgage on the certificate representing such shares we now regard
as settled by the case of Monserrat vs. Ceron, supra. But that case did not
deal with any question relating to the registration of such a mortgage or the
effect of such registration. Nothing appears in the record of that case even
tending to show that the chattel mortgage there involved was ever registered
anywhere except in the office of the corporation, and there was no question
involved there as to the right of priority among conflicting claims of creditors
of the owner of the shares.
The Chattel Mortgage Law, Act No. 1508, as amended by Act No. 2496,
contains the following provision:
SEC. 4. A chattel mortgage shall not be valid against any person except the
mortgagor, his executors or administrators, unless the possession of the
property is delivered to and retained by the mortgagee or unless the
mortgage is recorded in the office of the register of deeds of the province in
which the mortgagor resides at the time of making the same, or, if he resides
the Philippine Islands, in the province in which the property is
situated: Provided, however,  That if the property is situated in a different
province from that in which the mortgagor resides, the mortgage shall be
recorded in the office of the register of deeds of both the province in which
the mortgagor resides and that in which the property is situated, and for the
purposes of this Act the City of Manila Shall be deemed to be a province.
The practical application of the Chattel Mortgage Law to shares of stock of a
corporation presents considerable difficulty and we have obtained little aid
from the decisions of other jurisdictions because that form of mortgage is ill
suited to the hypothecation of shares of stock and has been rarely used
elsewhere. In fact, it has been doubted whether shares of stock in a
corporation are chattels in the sense in which that word is used chattel
mortgage statutes. This doubt is reflected in our own decision in the case
of Fua Cun vs. Summers and China Banking Corporation (44 Phil., 705), in
which we said:
". . . an equity in shares of stock is of such an intangible character that it is
somewhat difficult to see how it can be treated as a chattel and mortgaged in
such a manner that the recording of the mortgage will furnish constructive
notice to third parties. . . ."And we held that the chattel mortgage there
involved: "at least operated as a conditional equitable assignment." In that
case we quoted the following from Spalding vs. Paine's Adm'r. (81 Ky., 416),
with regard to a chattel mortgage of shares of stock:
"These certificates of stock are in the pockets of the owner, and go with him
where he may happen to locate, as choses in action, or evidence of his right,
without any means on the part of those with whom he proposes to deal on
the faith of such a security of ascertaining whether or not this stock is in
pledge or mortgaged to others. He finds the name of the owner on the books
of the company as a subscriber of paid-up stock, amounting to 180 shares,
with the certificates in his possession, pays for these certificates their full
value, and has the transfer to him made on the books of the company,
thereby obtaining a perfect title. What other inquiry is he to make, so as to
make his investment certain and secure? Where is he to look, in order to
ascertain whether or not this stock has been mortgaged? The chief office of
the company may be at one place today and at another tomorrow. The owner
may have no fixed or permanent abode, and with his notes in one pocket and
his certificates of stock in the other — the one evidencing the extent of his
interest in the stock of the corporation, the other his right to money owing him
by his debtor, we are asked to say that the mortgage is effectual as to the
one and inoperative as to the other."
But the case of Fua Cun vs. Summers and China Banking Corporation,
supra, did not decide the question here presented and gave no light as to the
registration of a chattel mortgage of shares of stock of a corporation under
the provisions of section 4 of the Chattel Mortgage Law, supra.
Issue: WON the attaching creditors are entitled to priority over the defectively
registered mortgage of Guan.
Section 4 of Act No. 1508 provides two ways for executing a valid chattel
mortgage which shall be effective against third persons. First, the possession
of the property mortgage must be delivered to and retained by the
mortgagee; and, second, without such delivery the mortgage must be
recorded in the proper office or offices of the register or registers of deeds. If
a chattel mortgage of shares of stock of a corporation may validly be made
without the delivery of possession of the property to the mortgagee and the
mere registration of the mortgage is sufficient to constructive notice to third
parties, we are confronted with the question as to the proper place of
registration of such a mortgage. Section 4 provides that in such a case the
mortgage resides at the time of making the same or, if he is a non-resident,
in the province in which the property is situated; and it also provides that if
the property is situated in a different province from that in which the
mortgagor resides the mortgage shall be recorded both in the province of the
mortgagor's residence and in the province where the property is situated.
If with respect to a chattel mortgage of shares of stock of a corporation,
registration in the province of the owner's domicile should be sufficient, those
who lend on such security would be confronted with the practical difficulty of
being compelled not only to search the records of every province in which the
mortgagor might have been domiciled but also every province in which a
chattel mortgage by any former owner of such shares might be registered.
We cannot think that it was the intention of the legislature to put this almost
prohibitive impediment upon the hypothecation of shares of stock in view of
the great volume of business that is done on the faith of the pledge of shares
of stock as collateral.
It is a common but not accurate generalization that the situs of shares of
stock is at the domicile of the owner. The term situs is not one of fixed of
invariable meaning or usage. Nor should we lose sight of the difference
between the situs of the shares and the situs of the certificates of shares.
The situs of shares of stock for some purposes may be at the domicile of the
owner and for others at the domicile of the corporation; and even elsewhere.
(Cf. Vidal vs. South American Securities Co., 276 Fed., 855; Black Eagle
Min. Co. vs. Conroy, 94 Okla., 199; 221 Pac,, 425 Norrie vs. Kansas City
Southern Ry. Co., 7 Fed. [2d]. 158.) It is a general rule that for purposes of
execution, attachment and garnishment, it is not the domicile of the owner of
a certificate but the domicile of the corporation which is decisive. (Fletcher,
Cyclopedia of the Law of Private Corporations, vol. 11, paragraph 5106. Cf.
sections 430 and 450, Code of Civil Procedure.)
By analogy with the foregoing and considering the ownership of shares in a
corporation as property distinct from the certificates which are merely the
evidence of such ownership, it seems to us a reasonable construction of
section 4 of Act No. 1508 to hold that the property in the shares may be
deemed to be situated in the province in which the corporation has its
principal office or place of business. If this province is also the province of the
owner's domicile, a single registration sufficient. If not, the chattel mortgage
should be registered both at the owner's domicile and in the province where
the corporation has its principal office or place of business. In this sense the
property mortgaged is not the certificate but the participation and share of the
owner in the assets of the corporation.
Apart from the cumbersome and unusual method of hypothecating shares of
stock by chattel mortgage, it appears that in the present state of our law, the
only safe way to accomplish the hypothecation of share of stock of a
Philippine corporation is for the creditor to insist on the assignment and
delivery of the certificate and to obtain the transfer of the legal title to him on
the books of the corporation by the cancellation of the certificate and the
issuance of a new one to him. From the standpoint of the debtor this may be
unsatisfactory because it leaves the creditor as the ostensible owner of the
shares and the debtor is forced to rely upon the honesty and solvency of the
creditor. Of course, the mere possession and retention of the debtor's
certificate by the creditor gives some security to the creditor against an
attempted voluntary transfer by the debtor, provided the by-laws of the
corporation expressly enact that transfers may be made only upon the
surrender of the certificate. It is to be noted, however, that section 35 of the
Corporation Law (Act No. 1459) enacts that shares of stock "may be
transferred by delivery of the certificate endorsed by the owner or his
attorney in fact or other person legally authorized to make the transfer." The
use of the verb "may" does not exclude the possibility that a transfer may be
made in a different manner, thus leaving the creditor in an insecure position
even though he has the certificate in his possession. Moreover, the shares
still standing in the name of the debtor on the books of the corporation will be
liable to seizure by attachment or levy on execution at the instance of other
creditors. (Cf. Uy Piaoco vs. McMicking, 10 Phil., 286, and
Uson vs. Diosomito, 61 Phil., 535.) This unsatisfactory state of our law is well
known to the bench and bar. (Cf. Fisher, The Philippine Law of Stock
Corporations, pages 163-168.) Loans upon stock securities should be
facilitated in order to foster economic development. The transfer by
endorsement and delivery of a certificate with intention to pledge the shares
covered thereby should be sufficient to give legal effect to that intention and
to consummate the juristic act without necessity for registration.lawphil.net
We are fully conscious of the fact that our decisions in the case of Monserrat
vs. Ceron, supra, and in the present case have done little perhaps to
ameliorate the present uncertain and unsatisfactory state of our law
applicable to pledges and chattel mortgages of shares of stock of Philippine
corporations. The remedy lies with the legislature.
In view of the premises, the attaching creditors are entitled to priority over the
defectively registered mortgage of the appellant and the judgment appealed
from must be affirmed without special pronouncement as to costs in this
instance. 1
Malcolm, Villa-Real, Imperial, and Goddard, JJ., concur.
G.R. No. L-42462             August 31, 1937
THE BACHRACH MOTOR CO., INC., plaintiff-appellant,
vs.
MARIANO LACSON LEDESMA, TALISAY-SILAY MILLING CO., INC., and
THE PHILIPPINE NATIONAL BANK, defendant-appellees.
William E. Greenbaum and Ohnick and Opisso for appellant.
Nolan and Hernaez for appellee Talisay-Silay Milling Co., Inc.
Roman J. Lacson and Francisco Fuentes for appellee Philippine National
Bank.
IMPERIAL, J.:
This is an action brought by the plaintiff to recover the amount of the
judgments obtained by it in civil cases Nos. 31597 and 31821 of the Court of
First Instance of Manila, praying in its complaint: (a) That the transfer of
certificate of stock dividends No. 772 of the Talisay-Silay Milling of the
Philippine National Bank, be declared null and void, as against the plaintiff:
(b) that the Talisay-Silay Milling Co., Inc., ordered to cancel the entry of the
transfer of the 6,300 stock dividends covered by certificate No. 772, made by
it on its books in favor of the Philippine National Bank; (c) that said stock
dividends be sold to satisfy the judgment obtained by it in civil cases Nos.
31597 of the Court of First Instance of Manila; (d) that the Talisay-Silay
Milling Co., Inc., be ordered to pay to it amount of P21,379.39, with interest
on the sums and from the dates set forth in paragraph XV of the complain, or
any part thereof necessary to complete payment of said sums and interest
thereon , in case the 6,300 stock dividends can not be sold or the proceeds
of the sale thereof should be insufficient to cover the sums in question, and
(e) that the defendants pay the costs of the suit. The plaintiff appealed from
the judgment declaring the right of the Philippine National Bank to the 6,300
stock dividends a preferred one, and absolving the defendants from the
complaint, with costs.
The parties submitted the case upon the following stipulation of facts, to wit:
STIPULATION OF FACTS. — That the plaintiff, the Bachrach Motor Co.,
Inc., on June 30, 1927, obtained judgment in civil case No. 31597 of the
Court of First Instance of Manila against the defendant Mariano Lacson
Ledesma, in the sum of P3,442.75, with interest thereon from March 30,
1927, with costs. That a writ of execution of said judgment was issued on
August 20, 1927, and Jose Y. Orosa was appointed Special sheriff to
execute it. That on October 4, 1927, said Jose Y. Orosa, as special sheriff, in
compliance with the writ of execution in question, attached all right, title to
and interest which the defendant Mariano Lacson Ledesma may have in
"Any bonus, dividend, share of stock, money, or other property which that
defendant is entitle to receive from the Talisay-Silay Milling Co., Inc., by
virtue of the fact that such defendant has mortgage his land in favor of the
Philippine National Bank to guarantee the indebtedness of the Talisay-Silay
Milling Co., Inc., or which such defendant is entitled to receive from the
Talisay-Silay Milling Co., Inc., on account of being a stockholder in the
corporation or which he is entitled to receive from that corporation for any
other cause or pretext whatsoever." That notice of said attachment was
served not only upon the defendant Mariano Lacson Ledesma but also upon
the herein defendant the Talisay-Silay Milling Co., Inc., which received a
copy of the notice of attachment, as evidenced by the Annex A attached to
this stipulation of facts. That on October 3, 1927, the herein plaintiff, the
Bachrach Motor Co., Inc., obtained judgment in case No. 31821 of the Court
of First Instance of Manila against the defendant Mariano Lacson Ledesma,
in the sum of four thousand four hundred pesos and seventy-eight centavos
with interest at 10 per cent per annum on the sum of P3,523.82 from April 30,
1927; in the sum of P14,171, 52 with interest at 10 per cent per annum on
the sum of P13,290.89 from April 30, 1927; and in the sum of P1,150.72 with
the legal interest of 6 per cent per annum thereon from May 25, 1927, and
the costs. A copy of said judgment is attached to this stipulation of facts and
marked Annex B. That a writ of execution of said judgment was issue,
thereby causing the attachment, sale and adjudication to the plaintiff the
Bachrach Motor Co., Inc., for the sum of P100, Philippine currency, of the
defendant Mariano Lacson Ledesma's right of redemption over the following
properties to wit: "Original certificate of title No. 1929 (Lot No. 1473 of the
Cadastral Survey of Bacolod) containing an area of 2,647 square meters,
more or less.
Original certificate of title No. 2978 (Lot No. 1475 of the Cadastral Survey of
Bacolod) containing an area of 8.501 square meters, more or less.
Original certificate of title No. 2624 (Lot No. 1474 of the Cadastral Survey of
Bacolod) containing an area of 8,714 square meter, more or less.
Original certificate of title No. 9443 (Lot No. 426 of the Cadastral Survey of
Talisay) containing an area of 150,301 square meters more or less. Original
certificate of title No. 1928 (Lot No. 1472 of the Cadastral Survey of Bacolod)
containing an area of 36,818 square meters, more or less. Original certificate
of title No. 2923 (Lot No. 1489 of the Cadastral Survey of Bacolod) containing
an area of 286,879 square meters, more or less. Original certificate of title
No. 356 (Lot No. 4-A of the Cadastral Survey of Bacolod) containing an area
of 641,448 square meters, more or less. Original certificate of title No. 356
(Lot No. 4-B of the Cadastral Survey of Bacolod) containing an area of
280,556 square meters, more or less. Original certificate of title No. 356 (Lot
No. 4-C of the cadastral Survey of Bacolod) containing an area of 2,842,946
square meters, more or less." The certificate of sale issued by the provincial
sheriff of Occidental Negros in favor of the Bachrach Motor Co., Inc., on
March 29, 1928, is attached to this stipulation of facts, and marked Annex C.
That on the date of the issuance of the execution in case No. 31597 of the
Court of First Instance of Manila as well as on that of the issuance of the
execution and sale of the properties described in Exhibit C, in case No.
31821 of the same court, said real properties were mortgaged to the
Philippine National Bank to secure the payment to said bank by Mariano
Lacson Ledesma of the sum of P624,000, Philippine currency, by virtue of an
instrument executed by the debtor Mariano Lacson Ledesma in favor of said
bank on August 9, 1923. said instrument of mortgage is copied on pages 18
to 32, both inclusive, of the bill of exceptions in case No. 8136 of the Court of
First Instance of Iloilo (G. R. No. 35223), which is attached to this stipulation
of facts and marked Annex D. That in the same instrument of mortgage
(pages 18 to 32 of Annex D) said debtor Mariano Lacson Ledesma
mortgaged in favor the bank, as part of the securities to ensure compliance
with his obligation, the following shares owned by him in the Talisay-Silay
Milling Co., Inc., to wit: 1,540 share covered by Certificate No. 147; 520
shares covered by Certificate No. 146; 40 share covered by Certificate in the
preceeding two paragraph, there was another mortgage constituted on the
above-described real properties in favor of the Philippine National Bank, to
answer for the debts contracted by the Central Talisay-Silay Milling Co., with
said bank. That on December 22, 1923, the defendant, Central Talisay-Silay
Milling Co. resolved to grant a bonus or compensation to the owners of the
real properties mortgaged to answer for the debts contracted by said central
with the Philippine National Bank, for the risk incurred by said properties
upon being subjected to said mortgage lien, and the resolution in question
the defendant Mariano Lacson Ledesma was allotted the sum of P19,911.11,
Philippine currency, which sum, however, would not be payable until the
month of January, 1930. That on September 29, 1928, the Philippine
National Bank brought an action against the defendant Mariano Lacson
Ledesma and his wife Concepcion Diaz for the recovery of a mortgage credit
which, together with interest thereon amounted to P853,729.49 on said date.
Sometime later that is, on January 2, 1929, the Philippine National Bank
amended its complaint by including the Bachrach Motor Co., Inc., as party
defendant, among other, because they claim to have some right to certain
properties which are the subject matter of this complaint." Said case bears
No. 4706 of the Court of First Instance of Occidental Negros. That on
January 30, 1929, the defendant Bachrach Motor Co., Inc., file a general
denial. That after due hearing the Court of First Instance of Bacolod on
September 3, 1930, rendered judgment in case No. 4706 of said court in
favor of the Philippine National Bank and against the defendant Mariano
Lacson Ledesma, sentencing the latter to pay the amount claimed by said
bank and ordering, upon failure to satisfy said amount, the sale at public
auction of the real properties mortgaged under the instrument of mortgage
appearing on pages 18 to 32 of Annex D. That the real estate and chattel
mortgage deed in question (pages 18 to 32 of Annex D), marked as Exhibit
G, was among the exhibits presented in said case No. 4706 of the Court of
First Instance of Occidental Negros. That likewise, among the exhibit
presented in said case No. 4706 of the Court of First Instance of Occidental
Negros, was Exhibit H which was a deed of mortgage of certain carabaos
belonging to the debtor Mariano Lacson Ledesma, executed by the latter in
favor of the Philippine National Bank on January 21, 1925. That in the
decision rendered by the Court of First Instance of Occidental Negros in case
No. 4706 thereof, said court, referring to stock certificates Nos. 145 and 147
of the Talisay-Silay Milling Co., Inc., which were pledged or mortgaged by
virtue of Exhibit G of said No. 4706, rendered the following ruling: "(e) With
respect to the chattel mortgaged bank, which are described in Exhibit G and
H, the Philippine National Bank, as soon as this judgment becomes final,
shall have authority to sell them in accordance with the provisions of section
23 of Act No. 2938, immediately informing this court of whatever action it may
take in the premises." That during the pendency of case No. 4706 of the
Court of First Instance of Bacolod referred to in the foregoing paragraphs, the
plaintiff Bachrach Motor Co., Inc., on December 20, 1929, brought an action
in the Court of First Instance of Iloilo against the Talisay-Silay Milling Co.,
Inc., recover from it the sum of P13,850 against the bonus or dividend which,
by virtue of the resolution of December 22, 1923, said Central Talisay-Silay
Milling Co., Inc., had declared in favor of the defendant Mariano Lacson
Ledesma as one of the owners of the hacienda which had been mortgaged to
the Philippine National Bank to secure the obligation of the Talisay-Silay
Milling Co., Inc. in favor of said bank.
 December 20, 1929: Bachrach brought an action in the CFI against
the Talisay-Silay Milling Co., Inc., to recover P13,850 against the
bonus or dividend w/c, by virtue of the resolution of December 22,
1923, Central Talisay-Silay Milling Co., Inc., had declared in favor of
Ledesma as one of the owners of the hacienda which had been
mortgaged to the PNB to secure the obligation of the Talisay-Silay
Milling Co., Inc. in favor of said bank
Copy of said complaint appears on pages 2 to 5 of the bill of exceptions in
case No. 8136 of the Court of First Instance of Iloilo (G. R. No. 35223),
Annex D of this stipulation of facts. That on January 30, 1930, the Philippine
National Bank sought permission to intervene in said case No. 8136 of the
Court of First Instance of Iloilo and after the permission had been granted,
said bank, on February 13, 1930, filed a complaint in intervention alleging
that it had a preferred right to said bonus granted by the central to the
defendant Mariano Lacson Ledesma as one of the owners of the haciendas
which had been mortgaged to said bank to answer for the obligations of the
Central Talisay-Silay Milling Co., Inc., basing such allegation on the fact that,
as said properties were mortgaged to it by the debtor Mariano Lacson
Ledesma, not Talisay Milling Co., Inc., but also by virtue of the deed of
August 9, 1923 (pages 18 to 32 of Annex D) and said bonus being a civil fruit
of the mortgaged lands, said bank was entitled to it on the ground that the
mortgage of August 9, 1923, had become due. That after the trial of civil case
No. 8136 of the Court of First Instance of Iloilo, said court, on December 8,
1930, rendered judgment in favor of the plaintiff Bachrach Motor Co., Inc.,
Upon appeal, the Supreme Court, on September 17, 1931, 1 affirmed the
judgment of the lower court, holding that the bonus had no immediate relation
to the lands in question but merely a remote and accidental one and,
therefore, it was not a civil fruit of the real properties mortgaged to the
Philippine National Bank to secure the obligation of the Talisay-Silay Milling
Co., Inc., being a mere personal right of Mariano Lacson Ledesma. The
decision of the Supreme Court published in Volume 30, No. 104, of the
Official Gazette, on August 29, 1932, is attached to this stipulation of facts
and marked Annex E. That on January 24, 1930, that Talisay-Silay Milling
Co., Inc., issued stock certificate No. 772 for 3,600 shares, as stock dividend
to Mariano Lacson Ledesma, which certificate was ordered by Mariano
Lacson Ledesma to be delivered to Roman Lacson, attorney for the
Philippine National Bank, by virtue of the letter of February 27, 1930, Annex
G of this stipulation of facts, and of the letter of the Philippine National Bank
dated January 18, 1930, Annex G-1. Said 6,300 shares constituted the stock
dividend allotted to Mariano Lacson Ledesma for his 2,100 original shares in
the Talisay-Silay Milling Co., Inc., which were given as pledge to the
Philippine National Bank under the deed of mortgage appearing on pages 18
to 32 of Annex D prior to the issuance of stock certificate No. 772, an were
covered by Stock Certificates Nos. 145, 146 and 147 of the Talisay-Silay
Milling Co., Inc. That stock certificate No. 772 was issued by virtue of
resolution No. 4 of the general meeting of stockholders of the Talisay-Silay
Milling Co., Inc., which resolution is quote in paragraph 8 of the complaint in
this case. That in a letter of March 25, 1930, addressed by the Philippine
National Bank to the Talisay-Silay Milling Co., said bank informed the letter
that the 6,300 shares represented by stock certificate No. 772 had been
given by Mariano Lacson Ledesma as pledge to the Philippine National
Bank. Said letter is attached to this stipulation of facts as Annex H. That said
stock certificate No. 772 has continuously been in the possession of the
Philippine National Bank from February 27, 1930, to February 25, 1931, but
like stock certificates Nos. 145, 146 and 147, it was registered in the books of
the Talisay-Silay Milling Co. in the name of Mariano Lacson Ledesma. That
on August 11, 1930, the plaintiff Bachrach Motor Co., by virtue of an alias
execution issued in case No. 31821 of the Court of First Instance of Manila,
attached all right, title to an interest which the defendant Mariano Lacson
Ledesma might have in Any bonus, dividend, shares of stock, money or other
property specially on the sum of P19,911.11 which the defendant is entitled
to receive from the Talisay-Silay Milling Co., Inc., by virtue of the fact that
such defendant has mortgage his lands in favor of the Philippine National
Bank to guarantee the indebtedness of the Talisay-Silay Milling Co., Inc., or
which such defendant is entitled to receive from the Talisay-Silay Milling Co.,
Inc., on account of being stockholder in that corporation, or which he is entitle
to receive from that corporation for any other cause or pretext whatsoever."
In connection with the proceedings and attachment made notice of
garnishment was served on the Talisay-Silay Milling Co., Inc., as evidence by
Annexes I and J of this stipulation of facts. That on February 5, 1931, the
provincial the is positive part of the decision rendered in civil case NO. 4706
of the Court of First Instance of Occidental Negros, copy of which is attached
to this stipulation of facts as Annex I, sold at public auction not only the 2,100
share specified in the deed of August 9, 1923, but also the 6,300 shares
covered by stock certificate No. 772, the sale of said shares having been
made by order and under the direction of the attachment creditor Philippine
National Bank. A copy of the certificate of sale marked Exhibit K is attached
hereto. That on February 25, 1931, the Talisay-Silay Milling Co., Inc., upon
petition of the Philippine National Bank, as shown by the letter dated
February 19,1931, marked and attached to this stipulation as Annex L, which
letter was accompanied by the certificate of sale Exhibit K, issued stock
certificate No. 1155 representing 8,968 shares, which include the 6,300
shares formerly represented by stock certificate No. 772 and the 2,100
shares formerly represented by stock certificates Nos. 145, 146 and 147, the
bank having acknowledged receipt of certificate No. 1155 in a letter of March
4, 1931, marked as Exhibit M. Attention is invited to the fact that of the 8,969
shares represented by stock certificate No. 1155, 568 shares formerly
belonged to Concepcion Diaz e Lacson wife of the defendant Mariano
Lacson Ledesma, and of the 568 shares, 142 were mortgaged under the
deed of August 9, 1923, and 426 were the stock dividend that had
corresponded to said 142 shares. That on the same date, February 25,1931,
Marino Lacson Ledesma endorsed the back of stock certificate No. 772 in
favor of the Philippine National Bank. Said stock certificate with the
endorsement in question is attached to this stipulation of facts and marked
Annex N. That both on the date on which the garnishment was carried out by
the Bachrach Motor Co., that is, on August 11, 1930, and on the date on
which the 6,300 shares, covered by stock certificate No. 772, were sold, case
No. 8136 of the Court of First Instance of Iloilo (G. R. No. 35223) was still
pending. That the amount of the actual indebtedness of the defendant
Mariano Lacson Ledesma to the plaintiff the Bachrach Motor Co. is
P21,377.34 with the interest and other sums specified in paragraph XV of the
complaint. That the real properties mortgaged to the Philippine National Bank
were sold for P300,000 Philippine currency; the mortgaged carabaos for
P2,000 Philippine currency, and all the shares, that is, the 8,968 share for the
sum of P90,000 Philippine currency, the bank having been the highest bidder
herein all these sales, there still remaining unpaid in civil case No. 4796 of
the Court of First Instance of Occidental Negros the sum of P695,421.74, as
stated in Annex 9. That the notices of garnishment issue by virtue of the
execution in cases Nos. 31597 and 31821 of the Court of First Instance of
Manila are the same notices of attachment and garnishment mentioned in the
complaint in the case No. 8136 of the Court of First Instance of Iloilo and
presented as evidence in said case, and are the same notices mentioned in
this case now submitted to the court for decision. That on March 20,1925, the
Philippine National Bank served notice on the Talisay-Silay Milling Co., Inc,
of the pledge made by Mariano Lacson Ledesma to said bank of the shares
represented by stock certificates Nos. 145, 146 and 147, and on March 25th
the Talisay-Silay Milling Co., Inc., acknowledged receipt thereof and
considered itself notified of said pledge, as evidenced by Annexes P and Q of
this stipulation of facts, That prior to the declaration of stock divided by virtue
of resolution No. 4 of the regular meeting of stockholders of the Talisay-Silay
Milling Co., Inc., the shares of this corporation were quote in private sales at
P32 a share; and immediately after the declaration of stock dividend, the
quotation of said shares dropped by P7 or P8 a share, the same having been
P11.25 a share on the date of their sale at public auction. Upon this
stipulation of facts, the parties submit the case to the court for decision.
I. The plaintiff bases the preferred right invoked by it over the 6,300 stock
dividends, certificate No. 772, on the garnishment made thereon by reason of
the issuance of the alias execution in civil case No. 31821 of the Court of
First Instance of Manila, which garnishment was carried out on August 11,
1930. The plaintiff contends in its first assignment of error that these stock
dividends were certificate No. 772 thereof was delivered to the Philippine
National Bank and when the Talisay-Silay Milling Co., Inc., entered them in
its books in the name of said bank and issued certificate No. 1166 in favor of
the latter. The contention is unfounded because it appears that the stock
dividends in question were pledged to the bank prior to the garnishment and
because certificate No. 772 was in the possession of said bank from
February 27, 1930. The reasons upon which this court base its opinion in
declaring that the stock dividends were pledge beforehand to the Philippine
National Bank will be stated in the discussion of the following assignment of
error.
II. In the stipulation of facts, it appears stipulated by the parties that, by virtue
of the letters of the Philippine National Bank and having been so asked by
Mariano Lacson Ledesma, certificate No. 772 covering the 6,300 stock
dividends was delivered as security to Attorney Roman Lacson as
representative of the bank, on February 27, 1930, in view of the fact that the
original shares covered by certificate Nos. 145, 146 and 147 had been
previously mortgaged to the same bank. On February 25, 1931, the Talisay-
Silay Milling Co., Inc., in conformity with the letter of the Philippines National
Bank of the 19th of said month, cancelled certificate No. 772 and in lieu
thereof issued certificate No. 1155 in favor of said bank, which certificate
includes the 6,300 stock dividends, among other shares. On the other hand,
the garnishment obtained by the plaintiff, upon which it bases all its alleged
preferred right was notified to the parties and became effective on August 11,
1930, more than five months after the delivery of certificate No. 772. The
plaintiff, in its second assignment of error, maintains that the pledge is
ineffective as against it because evidence of its date was not made to appear
in a public instrument and concludes that its right to the 6,300 stock
dividends is superior and preferred. It is admitted that the delivery of the
certificate in question and the pledge thereof were not made to appear in a
public instrument.
It is true, according to article 1865 of the Civil Code, that in order that a
pledge may be effective as against third person, evidence of its date must
appear in a public instrument in addition to the delivery of the thing pledged
to the creditor. This provision has been interpreted in the sense that for the
contract to affect third person, it must appear in a public instrument in
addition to delivery of the thing pledged (Ocejo, Perez and Co., vs.
International Banking Corporation, 37 Phil., 631: Tec Bi & Co. vs. Chartered
Bank of India, Australia and China, 41 Phil., 596; Te Pate vs. Ingersoll, 43
Phil., 394). It cannot be denied, however, that section 4 of Act No. 1508,
otherwise known as the Chattel Mortgage Law, implicitly modified article
1865 of the Civil Code in the sense that a contract of pledge and that of
chattel mortgage, to be effective as against third persons, need not appear in
public instruments provided the thing pledged or mortgaged be delivered or
placed in the possession of the creditor. In the case of Mahoney vs.
Tuason (39 Phil., 952, 958), where this doctrine was laid down, it was stated;
"From the foregoing provisions of the abovecited Act, it is inferred that the
same does not entirely repeal the provisions of the Civil Code, but only
modify them in part and amplify them in another, as may be seen from an
examination of, and comparison between, the provisions of the Civil Code
regarding pledge and the abovequoted provisions of Act No. 1508. Article
1865 of the Civil Code provides that no pledge shall be effective against a
third person unless evidence of its date appears in a public instrument. The
provision of this article has, undoubtedly, been modified by section 4 of the
Chattel Mortgage Law, in so far as it provides that a chattel mortgage shall
not be valid against any person except the mortgagor, his executors or
administrators, unless the possession of the property is delivered to and
retained by the mortgagee or unless the mortgage is recorded in the office of
the register of deeds of the province in which the mortgagor resides. From
the date the said Act No. 1508 was in force, a contract of pledge or chattel
mortgage should be deemed legally entered into and should produce all its
effects and consequences, provided it appears to have been in some manner
perfected and that the things pledged have been delivered, and in a contrary
case, and even if the creditor has not received them or has not retained them
in his custody, provided that the contract of pledge or chattel mortgage
appears in a notarial document and is inscribed in the registry of deeds of the
province." Therefore, this court holds that the pledge of the 6,300 stock
dividends is valid against the plaintiff for the reason that the certificate was
delivered to the creditor bank, notwithstanding the fact that the contract does
not appear in a public instrument.
The plaintiff further contends that the pledge could not legally exist because
the certificate was not the shares themselves, making it understood that a
certificate of stock or of stock dividends can not be the subject matter of the
contract of pledge or of chattel mortgage. Neither is this contention tenable.
Certificates of stock or of stock dividends, under the Corporation Law, are
quasi negotiable instruments in the sense that they may be given in pledge or
mortgage to secure an obligation. The question is settled in this wise by the
weight of American authorities and it is the modern doctrine of general
acceptance by the courts.
In view, however, of the fact that certificates of stock, while not negotiable in
the sense of the law merchant, like bills and notes, are so framed and dealt
with as to be transferable, when property endorsed, by mere delivery, and as
they frequently convey, by estoppel against the corporation or against prior
holders, as good a title to the transferee as if they were negotiable, and
inasmuch as a large commercial use is made of such certificates as collateral
security, and it is to the public interest that such use should be simplify and
facilitated by placing them as nearly as possible on the plane of commercial
paper, they are often spoken of and treated as quasi negotiable, that is as
having some of the attributes and partaking of the character of negotiable
instruments, in passing from hand to hand, especially where they are
accompanied by an assignment and power of attorney, executed in blank, to
transfer them to anyone who may obtain possession as holders, even though
such assignment and power are under seal. (14 C. J., 665, sec 1034; South
Bend First Nat. Bank vs. Lanier, 20 Law. ed., 172; Weniger vs. Success Min.
Co., 227 Fedd., 548; Scott vs. Pequonnock Nat. Bank, 15 Fed., 494.)
III. In the third assignment of error, the plaintiff maintains that the court erred
in holding that the stock dividends are civil fruits or an extension of the
original shares. This court deems it unnecessary to determine whether or not
the stock devidends are civil fruits or an extension of the original shares. This
point becomes immaterial after the case has been decided in the manner
stated in the discussion of the second assignment of error .
IV. In the forth assignment of error, the plaintiff contends that court erred in
not declaring null and void the sale of the 6,300 stock dividends in execution
of the judgment rendered in favor of the Philippine National Bank in civil case
No. 4706 of the Court of First Instance of Occidental Negros. Inasmuch as
this court has declared that the stock dividends in question were pledged to
the bank, it follows that the sale thereof in execution of said judgment is legal
and valid.
V. In the fifth assignment of error, the plaintiff argues that the court erred in
declaring the Philippine National Bank's right to the stock dividends a
preferred one. After it has been held that these stock dividends had been
pledged to the Philippine National Bank and that this contract was prior to the
garnishment of the plaintiff, it appear clear that the court violated no law in
holding the right of the Philippine National Bank, as pledgee, a superior one.
VI. The plaintiff assigns as sixth and last error committed by the court the fact
of its having absolved all the defendants. The case having been decided in
favor of the Philippine National Bank, on the grounds stated in passing upon
the second assignment of error, the absolution of the defendants is
unavoidable, thereby making this last assignment of error likewise untenable.
For the foregoing consideration the appealed judgment is affirmed, with the
costs of this instance to the plaintiff-appellant. So ordered.
Avanceña, C.J., Villa-Real, Abad Santos, Diaz, Laurel and Concepcion, JJ.,
concur.

BLACK EAGLE MINING CO.
v.
CONROY et al.
Syllabus
¶0 1. Corporations -- Shares of Stock -- Status as Personalty.
Whenever the capital stock of any corporation is divided into shares, and
certificates therefor are issued, such shares of stock are personal property.
2. Same -- Certificate of Stock as Evidence of Property.
A certificate of stock in a corporation is merely the paper representative of an
incorporeal right, and stands on a footing similar to that of other muniments
of title. It is not the property itself, but is merely the symbol or paper evidence
of the property, shares of stock.
3. Executors and Administrators--Situs of Property--Shares of Corporate
Stock.
For the purpose of administration, the situs of shares of stock in a
corporation, as evidenced by certificates of stock, is in the state in which the
corporation was organized and has its place of business.
4. Same -- Estate of Nonresident -- Right of Creditors to Local Administration.
Where a nonresident died, owning shares of stock in a corporation organized
under the laws of this state and having its principal place of business in this
state, and foreign administration acquired possession of the certificates of
stock, the same does not affect the rights of creditors to have an
administrator of the estate of said nonresident appointed in this state, who
will have jurisdiction over said shares of stock, which may be subjected to
payment of the indebtedness of the deceased, in this state.
Verne E. Thompson, for plaintiff in error.
A. C. Towne and E. C. Fitzgerald, for defendants in error.
JARMAN, C.
¶1 This was an action in the district court of Ottawa county by Essie Conroy,
M. T. Long, and J. A. Long against the Black Eagle Mining Company, a
corporation, for damages for the alleged conversion of certain shares of
stock. The cause was tried to the court without a jury and judgment was
rendered for the plaintiffs in the sum of $ 701, from which the defendant
brings error. The cause was submitted upon an agreed statement of facts,
the material portion thereof being as follows:
"The Black Eagle Mining Company is a corporation organized under the laws
of Oklahoma and having its headquarters and principal place of business at
Miami, Ottawa county, Oklahoma, and the books and records of the
corporation and of the shares of stock are kept at Miami; that Jane
McSpadden, nee Russell, owned 50 shares of stock in the Black Eagle
Mining Company of the par value of $ 10 each and held Stock Certificate No.
90 issued by the company for said stock; that she owned no property in
Oklahoma except this stock; that Mrs. McSpadden was a resident of and died
in Sebastian county, Arkansas, in 1920 as the owner of said shares of stock
and at the time of her death she had physical possession of the stock
certificate; John Conroy was appointed in Sebastian county, Arkansas, as
administrator of the estate of Mrs. McSpadden, who took possession of this
Stock Certificate and after the estate was administered upon, said Stock
Certificate was distributed under orders of the court to the plaintiffs, Essie
Conroy, M. T. Long and J. A. Long, sole heirs of Mrs. McSpadden.
While administration was pending in Sebastian county, Arkansas, an
application was made in the county court of Ottawa county, Oklahoma, by a
creditor of Mrs. McSpadden residing in Ottawa county, Oklahoma, for the
appointment of an administrator of the estate of Mrs. McSpadden, and Steen
M. Johnson was appointed by the county court of Ottawa county, Oklahoma,
as such administrator, who filed a petition to procure an order from the
county court of Ottawa county to sell the shares of stock of Mrs. McSpadden
in the Black Eagle Mining Company for payments of debts due in Ottawa
county, said order was granted and the stock was offered for sale and was
bid in by J. B. Pinnell and C. H. Pinnell, doing business under the firm name
of Pinnell Brothers, for a cash consideration of $ 350, which sale was
confirmed and approved by the county court of Ottawa county, Oklahoma,
and an order was made by said court directing that the Black Eagle Mining
Company issue certificates to Pinnell Brothers for said stock, which was
done."
¶2 The defendant CONROY contends that the shares of stock of Mrs.
McSpadden in the Black Eagle Mining Company are personal property and
that the situs of this property, for administration purposes, is in Ottawa
county, Okla., the domicile of the corporation. The plaintiffs concede that the
shares of stock are personal property but contend that the situs of said
property is at the residence of the owner, which was in Sebastian county,
Ark., and as the stock certificate was in the physical possession of the owner,
Mrs. McSpadden, in Sebastian county, Ark., at the time of her death and
passed into the physical possession of the plaintiffs, as heirs, that said
plaintiffs became the owners of the shares of stock represented by said
certificate.
Situs - the place to which, for purposes of legal jurisdiction or taxation, a
property belongs.
¶3 The main question presented is whether the county court of Ottawa
county, Okla., had jurisdiction to administer on the shares of stock of Mrs.
McSpadden in the Black Eagle Mining Company.
If the county court of Ottawa county had such jurisdiction, then it is by virtue
of the third subdivision of section 1088, Comp. Stat. 1921 (6193, Rev. Laws
1910), which provides that letters of administration may be granted in any
county of the state of Oklahoma, in which any part of the property or estate of
the deceased may be, where the decedent died out of the state and was not
a resident thereof at the time of his death. In order to determine this question
it is necessary to ascertain whether the shares of stock of Mrs. McSpadden
in the Black Eagle Mining Company are property in Ottawa county, Okla. In
the outset, it is important to note the language used by the statute in defining
shares of stock, which is as follows:
"* * * Whenever the capital stock of any corporation is divided into shares,
and certificates therefor are issued, such shares of stock are personal
property and may be transferred," etc. Section 5318, Comp. Stat. 1921.
¶4 It will be observed that it is the shares of stock that are personal property
and not the certificates of stock. There is a distinction between a stock
certificate and a share of stock. The certificate is merely the evidence of the
ownership of stock, just as a note is the evidence of an indebtedness. "A
stock certificate is merely the paper representative of an incorporeal right,
and stands on a footing similar to that of other monuments of title. It is not in
itself property, but is merely the symbol or paper evidence of property; hence
the proprietory right may exist without a certificate." 10 Cyc. 588. It is
immaterial, therefore, where the stock certificate is located; the thing we are
concerned with is the location or domicile of the shares of stock. By section
5318, Comp. Stat. 1921, shares of stock are defined as personal property. In
enacting this statute, the Legislature was acting for Oklahoma, and since
shares of stock are personal property in Oklahoma, the county courts of this
state have jurisdiction to appoint an administrator of the estate of a
nonresident who dies owning stock in an Oklahoma corporation. It is well
settled that shares of stock may, for certain purposes, have a situs at two
separate places at the same time, such as rights to title, taxation, etc. 2 Cook
on Corporations (7th Ed.) 363. We are dealing with shares of stock as
property for the purpose of administration, separate and apart from its owner.
Shares of stock are a peculiar kind of personal property, and are unlike other
classes of personal property in that the property right of shares of stock can
only be exercised or enforced where the corporation is organized and has its
place of business and can exist, only, as an incident to and connected with
the corporation, and, this class of property is inseparable from the domicile of
the corporation itself. "For the purpose of determining where administration is
proper, shares of corporate stock have been considered personal property in
the county where the corporate property is located. * * *" 18 Cyc. 73. "It has
frequently been said that personal property has no situs, but follows the
domicile or person of the owner. This is true to the extent that the law of the
domicile is held to govern the succession and descent of personal property of
an estate. But this principle does not always apply in determining the location
of assets for the purpose of conferring jurisdiction on a court for their
administration. * * * It is a general rule that for the purpose of founding
administration, all simple contract debts are assets at the domicile of the
debtor, and the locality of the debt for this purpose is not affected by a
promissory note or bill of exchange having been given for it." 11 R. C. L. 67.
"There has been some question as to whether an action concerning shares
of stock should be brought in the home of the holder of the certificates, or
where they are located, or in the jurisdiction where the corporation which
issued them is located. As the habitation or domicile of the company is and
must be in the state that created it, the property represented by its certificates
of stock for most purposes properly may be deemed to be held by the
company within the state whose creature it is, whenever it is sought by suit to
determine who is its real owner. The stock of a corporation for which a
certificate has been issued to a subscriber or purchaser is, nevertheless,
deemed to be in possession of the corporation, and, as property in its
possession, may be subjected to proceedings in aid of execution against a
stockholder." 7 R. C. L. 167.
¶5 "The general rule is that shares of stock in a corporation are personal
property, whose location is in the state where the corporation is created. It is
true that for purposes of taxation and some other similar purpose stock
follows the domicile of the owner; but considered as property separated from
its owner, stock is in existence only in the state of the corporation. On this
point the Supreme Court of the United States has said: 'The certificates are
only evidence of the ownership of the shares, and the interest represented by
the shares is held by the company for the benefit of the true owner. As the
habitation or domicile of the company is and must be in the state that created
it, the property represented by its certificates of stock may be deemed to be
held by the company within the state whose creature it is, whenever it is
sought by suit to determine who is its real owner.'" 4 Thompson on
Corporations (2nd Ed.) sec. 3471. The Supreme Court of California, in the
case of Murphy v. Crouse, 135 Cal. 14, 66 P. 971, held that shares of stock
for the purpose of ad- ministration have their situs within the state where the
corporation is organized and has its place of business. The facts in that case
are similar to those of the instant case; the main question there was, whether
the administrator in Minnesota of the estate of the deceased who died in
Minnesota in the possession of certificate of shares of stock of the
corporation in California had jurisdiction of said shares of stock or whether
said shares of stock were under the jurisdiction of the administrator in
California, where the corporation was organized and had its place of
business. In commenting on this question, the court in the body of the opinion
used the following language, to wit:
"And this brings us to the principal contention of the respondent. He contends
that shares of stock, negotiable notes, and all choses in action evidenced by
writing, have their situs where the owner resides, and when they are in the
physical possession of the owner at the time of his death, and pass into the
physical possession of the representative, he is the owner, and may transfer
them, and such title will be recognized everywhere. Such rule is recognized
in some states, and by comity the personal representative has been allowed
to collect debts in a foreign jurisdiction when the debtors pay voluntarily, but
he cannot sue as executor in such foreign country. No country will allow a
foreign court to exercise its jurisdiction within its borders. Perhaps by comity
such assignment of a chose in action would be permitted in this state when
there is no local administration. But I do not see how an assignment of a
foreign executor would be held good here, where we do not admit that the
executor himself was vested with title. It is true, however, that for most
purposes a chose in action adheres to the person of the owner, but for the
purpose of founding administration this is not true. For such purpose the situs
is where the debtor resides. For this exception there are at least two good
reasons: It may be necessary to bring an action upon notes to enforce
payment, and this a foreign administrator or executor cannot do. As to other
personal property, it may be necessary to have the aid of the law for its
recovery and protection. But the main reason, no doubt, why local
administration is provided for, is for the protection of local creditors and
claimants. No state should allow property to be taken from its borders until
debts due its own citizens have been satisfied. Our statute provides for
administration upon the estate of any nonresident who has died, leaving
property in this state. To obtain such letters, it is necessary to show that there
are creditors, or that the property requires care to preserve it. And a mode is
provided for ascertaining whether there are creditors. The administration,
though called 'Ancillary' to distinguish it from the admin- istration of the last
residence of the decedent, is wholly independent of it."
¶6 Counsel for plaintiffs cite some authorities holding the opposite to the
propositions above stated, among which being the case of Miller's Estate v.
Executrix of Miller's Estate (Kan.) 90 Kan. 819, 136 P. 255, but the dissenting
opinion, 136 P. 255, written by Chief Justice Johnston and concurred in by
two Asso- ciate Justices of the Supreme Court of Kansas, is more in accord
with reasoning and with the weight of authority; and we think the conclusion
set out in the dissenting opinion is the proper one, to wit:
"In my view the Legislature intended that property such as shares of stock
situated in Kansas should be administered in Kansas, and that it was never
the legislative inten- tion that property of a decedent should be removed from
the state until the debts due to its own citizens had been paid. The officers of
the corporation are really the agents and representatives of the owners of the
shares wherever they may be, and their claims must be presented in Kansas
in order to obtain either the profits in the enterprise or a share of the assets in
case of final dissolution and distribution. The property being situated in
Kansas, the administrator appointed in Missouri did not acquire any title to
the shares, and has no authority to dispose of them."
¶7 While the courts are not uniform in their holdings on this question, yet the
great weight of authority is in keeping with the holding of the California courts
and in keeping with the holding of the Supreme Court of Alabama and other
states, wherein it is held:
"For the purpose of administration, the situs of the interest in a corporation,
as evidenced by certificates of stock, is in the state in which the corporation
was organized and has its place of business; and the fact that a nonresident
died owning stock in a corporation organized and having its place of
business in this state, and the foreign administration acquired possession of
the certificates of stock, does not affect the situs of the interest owned by the
decedent in such corporation." Grayson v. Robertson, 122 Ala. 330, 25 So.
229; Winter v. London, 99 Ala. 263, 12 So. 438; Luce v. R. R. Co., 63 N.H.
588, 3 A. 618; In Re Fitch, 160 N.Y. 87, 54 N.E. 701; Wyman v.
Halstead, 109 U.S. 654, 27 L. Ed. 1068, 3 S. Ct. 417; Jellenik v. Huron
Copper Mining Co., 177 U.S. 1, 44 L. Ed. 647, 20 S. Ct. 559; Way v.
International Port. Cement Co. (Wash.) 100 Wash. 182, 170 P. 553.
¶8 The Supreme Court of Oklahoma, in the case of Harris v. Ins. Co., 75
Okla. 105, 182 P. 85, held that for the purpose of attachment the situs of
shares of stock is within Oklahoma, where the corporation resides, and may
be lawfully levied upon in such state, though owned by a nonresident. The
court, in that case, recognized that shares of stock are property in Oklahoma,
where the corporation is organized and transacts its business; otherwise,
there would be nothing to attach, and if such shares of stock are property in
Oklahoma, then, under section 1088, Comp. Stat. 1921, an administrator
could be appointed in Oklahoma and could lawfully and rightfully exercise
jurisdiction over such shares of stock. It would be manifestly unfair to permit
persons to organize a corporation under the laws of Oklahoma and incur
indebtedness there and later move out of the state and carry their certificates
of stock with them and then to hold that their shares of stock in the
corporation in Oklahoma are not subject to the jurisdiction of our courts, to
protect the creditors. The county court of Ottawa county, Okla., had
jurisdiction to appoint an ancillary administrator of the estate of Mrs.
McSpadden, and to subject the shares of stock of Mrs. McSpadden to the
payment of her indebtedness in Oklahoma.
G.R. No. 155076               January 13, 2009
LUIS MARCOS P. LAUREL, Petitioner,
vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court,
Makati City, Branch 150, PEOPLE OF THE PHILIPPINES & PHILIPPINE
LONG DISTANCE TELEPHONE COMPANY Respondents.
RESOLUTION
YNARES-SANTIAGO, J.:
On February 27, 2006, this Court’s First Division rendered judgment in this
case as follows:
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
assailed Orders of the Regional Trial Court and the Decision of the Court of
Appeals are REVERSED and SET ASIDE. The Regional Trial Court is
directed to issue an order granting the motion of the petitioner to quash the
Amended Information.
SO ORDERED.1
By way of brief background, petitioner is one of the accused in Criminal Case
No. 99-2425, filed with the Regional Trial Court of Makati City, Branch 150.
The Amended Information charged the accused with theft under Article 308
of the Revised Penal Code, committed as follows:
On or about September 10-19, 1999, or prior thereto in Makati City, and
within the jurisdiction of this Honorable Court, the accused, conspiring and
confederating together and all of them mutually helping and aiding one
another, with intent to gain and without the knowledge and consent of the
Philippine Long Distance Telephone (PLDT), did then and there willfully,
unlawfully and feloniously take, steal and use the international long distance
calls belonging to PLDT by conducting International Simple Resale (ISR),
which is a method of routing and completing international long distance calls
using lines, cables, antenae, and/or air wave frequency which connect
directly to the local or domestic exchange facilities of the country where the
call is destined, effectively stealing this business from PLDT while using its
facilities in the estimated amount of P20,370,651.92 to the damage and
prejudice of PLDT, in the said amount.
CONTRARY TO LAW.2
Petitioner filed a "Motion to Quash (with Motion to Defer Arraignment)," on
the ground that the factual allegations in the Amended Information do not
constitute the felony of theft. The trial court denied the Motion to Quash the
Amended Information, as well petitioner’s subsequent Motion for
Reconsideration.
Petitioner’s special civil action for certiorari was dismissed by the Court of
Appeals. Thus, petitioner filed the instant petition for review with this Court.
In the above-quoted Decision, this Court held that the Amended Information
does not contain material allegations charging petitioner with theft of personal
property since international long distance calls and the business of providing
telecommunication or telephone services are not personal properties under
Article 308 of the Revised Penal Code.
Respondent Philippine Long Distance Telephone Company (PLDT) filed a
Motion for Reconsideration with Motion to Refer the Case to the Supreme
Court En Banc. It maintains that the Amended Information charging petitioner
with theft is valid and sufficient; that it states the names of all the accused
who were specifically charged with the crime of theft of PLDT’s international
calls and business of providing telecommunication or telephone service on or
about September 10 to 19, 1999 in Makati City by conducting ISR or
International Simple Resale; that it identifies the international calls and
business of providing telecommunication or telephone service of PLDT as the
personal properties which were unlawfully taken by the accused; and that it
satisfies the test of sufficiency as it enabled a person of common
understanding to know the charge against him and the court to render
judgment properly.
PLDT further insists that the Revised Penal Code should be interpreted in the
context of the Civil Code’s definition of real and personal property. The
enumeration of real properties in Article 415 of the Civil Code is exclusive
such that all those not included therein are personal properties. Since Article
308 of the Revised Penal Code used the words "personal property" without
qualification, it follows that all "personal properties" as understood in the
context of the Civil Code, may be the subject of theft under Article 308 of the
Revised Penal Code. PLDT alleges that the international calls and business
of providing telecommunication or telephone service are personal properties
capable of appropriation and can be objects of theft.
PLDT also argues that "taking" in relation to theft under the Revised Penal
Code does not require "asportation," the sole requisite being that the object
should be capable of "appropriation." The element of "taking" referred to in
Article 308 of the Revised Penal Code means the act of depriving another of
the possession and dominion of a movable coupled with the intention, at the
time of the "taking," of withholding it with the character of permanency. There
must be intent to appropriate, which means to deprive the lawful owner of the
thing. Thus, the term "personal properties" under Article 308 of the Revised
Penal Code is not limited to only personal properties which are "susceptible
of being severed from a mass or larger quantity and of being transported
from place to place."
PLDT likewise alleges that as early as the 1930s, international telephone
calls were in existence; hence, there is no basis for this Court’s finding that
the Legislature could not have contemplated the theft of international
telephone calls and the unlawful transmission and routing of electronic voice
signals or impulses emanating from such calls by unlawfully tampering with
the telephone device as within the coverage of the Revised Penal Code.
According to respondent, the "international phone calls" which are "electric
currents or sets of electric impulses transmitted through a medium, and carry
a pattern representing the human voice to a receiver," are personal
properties which may be subject of theft. Article 416(3) of the Civil Code
deems "forces of nature" (which includes electricity) which are brought under
the control by science, are personal property.
In his Comment to PLDT’s motion for reconsideration, petitioner Laurel
claims that a telephone call is a conversation on the phone or a
communication carried out using the telephone. It is not synonymous to
electric current or impulses. Hence, it may not be considered as personal
property susceptible of appropriation. Petitioner claims that the analogy
between generated electricity and telephone calls is misplaced. PLDT does
not produce or generate telephone calls. It only provides the facilities or
services for the transmission and switching of the calls. He also insists that
"business" is not personal property. It is not the "business" that is protected
but the "right to carry on a business." This right is what is considered as
property. Since the services of PLDT cannot be considered as "property," the
same may not be subject of theft.
The Office of the Solicitor General (OSG) agrees with respondent PLDT that
"international phone calls and the business or service of providing
international phone calls" are subsumed in the enumeration and definition of
personal property under the Civil Code hence, may be proper subjects of
theft. It noted that the cases of United States v. Genato,3 United States v.
Carlos4 and United States v. Tambunting,5 which recognized intangible
properties like gas and electricity as personal properties, are deemed
incorporated in our penal laws. Moreover, the theft provision in the Revised
Penal Code was deliberately couched in broad terms precisely to be all-
encompassing and embracing even such scenario that could not have been
easily anticipated.
According to the OSG, prosecution under Republic Act (RA) No. 8484 or
the Access Device Regulations Act of 1998 and RA 8792 or the Electronic
Commerce Act of 2000 does not preclude prosecution under the Revised
Penal Code for the crime of theft. The latter embraces unauthorized
appropriation or use of PLDT’s international calls, service and business, for
personal profit or gain, to the prejudice of PLDT as owner thereof. On the
other hand, the special laws punish the surreptitious and advanced technical
means employed to illegally obtain the subject service and business. Even
assuming that the correct indictment should have been under RA 8484, the
quashal of the information would still not be proper. The charge of theft as
alleged in the Information should be taken in relation to RA 8484 because it
is the elements, and not the designation of the crime, that control.
Considering the gravity and complexity of the novel questions of law involved
in this case, the Special First Division resolved to refer the same to the Banc.
We resolve to grant the Motion for Reconsideration but remand the case to
the trial court for proper clarification of the Amended Information.
Article 308 of the Revised Penal Code provides:
Art. 308. Who are liable for theft. – Theft is committed by any person who,
with intent to gain but without violence against, or intimidation of persons nor
force upon things, shall take personal property of another without the latter’s
consent.
The elements of theft under Article 308 of the Revised Penal Code are as
follows: (1) that there be taking of personal property; (2) that said property
belongs to another; (3) that the taking be done with intent to gain; (4) that the
taking be done without the consent of the owner; and (5) that the taking be
accomplished without the use of violence against or intimidation of persons
or force upon things.
Prior to the passage of the Revised Penal Code on December 8, 1930, the
definition of the term "personal property" in the penal code provision on theft
had been established in Philippine jurisprudence. This Court, in United
States v. Genato, United States v. Carlos, and United States v. Tambunting,
consistently ruled that any personal property, tangible or intangible, corporeal
or incorporeal, capable of appropriation can be the object of theft.
Moreover, since the passage of the Revised Penal Code on December 8,
1930, the term "personal property" has had a generally accepted definition in
civil law. In Article 335 of the Civil Code of Spain, "personal property" is
defined as "anything susceptible of appropriation and not included in the
foregoing chapter (not real property)." Thus, the term "personal property" in
the Revised Penal Code should be interpreted in the context of the Civil
Code provisions in accordance with the rule on statutory construction that
where words have been long used in a technical sense and have been
judicially construed to have a certain meaning, and have been adopted by
the legislature as having a certain meaning prior to a particular statute, in
which they are used, the words used in such statute should be construed
according to the sense in which they have been previously used.6 In fact, this
Court used the Civil Code definition of "personal property" in interpreting the
theft provision of the penal code in United States v. Carlos.
Cognizant of the definition given by jurisprudence and the Civil Code of
Spain to the term "personal property" at the time the old Penal Code was
being revised, still the legislature did not limit or qualify the definition of
"personal property" in the Revised Penal Code. Neither did it provide a
restrictive definition or an exclusive enumeration of "personal property" in the
Revised Penal Code, thereby showing its intent to retain for the term an
extensive and unqualified interpretation.1avvphi1.zw+ Consequently, any
property which is not included in the enumeration of real properties under the
Civil Code and capable of appropriation can be the subject of theft under the
Revised Penal Code.
The only requirement for a personal property to be the object of theft under
the penal code is that it be capable of appropriation. It need not be capable of
"asportation," which is defined as "carrying away."7 Jurisprudence is settled
that to "take" under the theft provision of the penal code does not require
asportation or carrying away.8
To appropriate means to deprive the lawful owner of the thing.9 The word
"take" in the Revised Penal Code includes any act intended to transfer
possession which, as held in the assailed Decision, may be committed
through the use of the offenders’ own hands, as well as any mechanical
device, such as an access device or card as in the instant case. This
includes controlling the destination of the property stolen to deprive the
owner of the property, such as the use of a meter tampering, as held in
Natividad v. Court of Appeals,10 use of a device to fraudulently obtain gas, as
held in United States v. Tambunting, and the use of a jumper to divert
electricity, as held in the cases of United States v. Genato, United States v.
Carlos, and United States v. Menagas.11
As illustrated in the above cases, appropriation of forces of nature which are
brought under control by science such as electrical energy can be achieved
by tampering with any apparatus used for generating or measuring such
forces of nature, wrongfully redirecting such forces of nature from such
apparatus, or using any device to fraudulently obtain such forces of nature. In
the instant case, petitioner was charged with engaging in International Simple
Resale (ISR) or the unauthorized routing and completing of international long
distance calls using lines, cables, antennae, and/or air wave frequency and
connecting these calls directly to the local or domestic exchange facilities of
the country where destined.
As early as 1910, the Court declared in Genato that ownership over
electricity (which an international long distance call consists of), as well as
telephone service, is protected by the provisions on theft of the Penal Code.
The pertinent provision of the Revised Ordinance of the City of Manila, which
was involved in the said case, reads as follows:
Injury to electric apparatus; Tapping current; Evidence. – No person shall
destroy, mutilate, deface, or otherwise injure or tamper with any wire, meter,
or other apparatus installed or used for generating, containing, conducting, or
measuring electricity, telegraph or telephone service, nor tap or otherwise
wrongfully deflect or take any electric current from such wire, meter, or other
apparatus.
No person shall, for any purpose whatsoever, use or enjoy the benefits of
any device by means of which he may fraudulently obtain any current of
electricity or any telegraph or telephone service; and the existence in any
building premises of any such device shall, in the absence of satisfactory
explanation, be deemed sufficient evidence of such use by the persons
benefiting thereby.
It was further ruled that even without the above ordinance the acts of
subtraction punished therein are covered by the provisions on theft of the
Penal Code then in force, thus:
Even without them (ordinance), the right of the ownership of electric current
is secured by articles 517 and 518 of the Penal Code; the application of
these articles in cases of subtraction of gas, a fluid used for lighting, and in
some respects resembling electricity, is confirmed by the rule laid down in the
decisions of the supreme court of Spain of January 20, 1887, and April 1,
1897, construing and enforcing the provisions of articles 530 and 531 of the
Penal Code of that country, articles 517 and 518 of the code in force in these
islands.
The acts of "subtraction" include: (a) tampering with any wire, meter, or other
apparatus installed or used for generating, containing, conducting, or
measuring electricity, telegraph or telephone service; (b) tapping or otherwise
wrongfully deflecting or taking any electric current from such wire, meter, or
other apparatus; and (c) using or enjoying the benefits of any device by
means of which one may fraudulently obtain any current of electricity or any
telegraph or telephone service.
In the instant case, the act of conducting ISR operations by illegally
connecting various equipment or apparatus to private respondent PLDT’s
telephone system, through which petitioner is able to resell or re-route
international long distance calls using respondent PLDT’s facilities
constitutes all three acts of subtraction mentioned above.
The business of providing telecommunication or telephone service is likewise
personal property which can be the object of theft under Article 308 of the
Revised Penal Code. Business may be appropriated under Section 2 of Act
No. 3952 (Bulk Sales Law), hence, could be object of theft:
Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods,
wares, merchandise, provisions, or materials otherwise than in the ordinary
course of trade and the regular prosecution of the business of the vendor,
mortgagor, transferor, or assignor, or any sale, transfer, mortgage, or
assignment of all, or substantially all, of the business or trade theretofore
conducted by the vendor, mortgagor, transferor or assignor, or all, or
substantially all, of the fixtures and equipment used in and about the
business of the vendor, mortgagor, transferor, or assignor, shall be deemed
to be a sale and transfer in bulk, in contemplation of the Act. x x x.
In Strochecker v. Ramirez,12 this Court stated:
With regard to the nature of the property thus mortgaged which is one-half
interest in the business above described, such interest is a personal property
capable of appropriation and not included in the enumeration of real
properties in article 335 of the Civil Code, and may be the subject of
mortgage.
Interest in business was not specifically enumerated as personal property in
the Civil Code in force at the time the above decision was rendered. Yet,
interest in business was declared to be personal property since it is capable
of appropriation and not included in the enumeration of real properties. Article
414 of the Civil Code provides that all things which are or may be the object
of appropriation are considered either real property or personal property.
Business is likewise not enumerated as personal property under the Civil
Code. Just like interest in business, however, it may be appropriated.
Following the ruling in Strochecker v. Ramirez, business should also be
classified as personal property. Since it is not included in the exclusive
enumeration of real properties under Article 415, it is therefore personal
property.13
As can be clearly gleaned from the above disquisitions, petitioner’s acts
constitute theft of respondent PLDT’s business and service, committed by
means of the unlawful use of the latter’s facilities. In this regard, the
Amended Information inaccurately describes the offense by making it appear
that what petitioner took were the international long distance telephone calls,
rather than respondent PLDT’s business.
A perusal of the records of this case readily reveals that petitioner and
respondent PLDT extensively discussed the issue of ownership of telephone
calls. The prosecution has taken the position that said telephone calls belong
to respondent PLDT. This is evident from its Comment where it defined the
issue of this case as whether or not "the unauthorized use or appropriation of
PLDT international telephone calls, service and facilities, for the purpose of
generating personal profit or gain that should have otherwise belonged to
PLDT, constitutes theft."14
In discussing the issue of ownership, petitioner and respondent PLDT gave
their respective explanations on how a telephone call is generated.15 For its
part, respondent PLDT explains the process of generating a telephone call as
follows:
38. The role of telecommunication companies is not limited to merely
providing the medium (i.e. the electric current) through which the human
voice/voice signal of the caller is transmitted. Before the human voice/voice
signal can be so transmitted, a telecommunication company, using its
facilities, must first break down or decode the human voice/voice signal into
electronic impulses and subject the same to further augmentation and
enhancements. Only after such process of conversion will the resulting
electronic impulses be transmitted by a telecommunication company, again,
through the use of its facilities. Upon reaching the destination of the call, the
telecommunication company will again break down or decode the electronic
impulses back to human voice/voice signal before the called party receives
the same. In other words, a telecommunication company both
converts/reconverts the human voice/voice signal and provides the medium
for transmitting the same.
39. Moreover, in the case of an international telephone call, once the
electronic impulses originating from a foreign telecommunication company
country (i.e. Japan) reaches the Philippines through a local
telecommunication company (i.e. private respondent PLDT), it is the latter
which decodes, augments and enhances the electronic impulses back to the
human voice/voice signal and provides the medium (i.e. electric current) to
enable the called party to receive the call. Thus, it is not true that the foreign
telecommunication company provides (1) the electric current which transmits
the human voice/voice signal of the caller and (2) the electric current for the
called party to receive said human voice/voice signal.
40. Thus, contrary to petitioner Laurel’s assertion, once the electronic
impulses or electric current originating from a foreign telecommunication
company (i.e. Japan) reaches private respondent PLDT’s network, it is
private respondent PLDT which decodes, augments and enhances the
electronic impulses back to the human voice/voice signal and provides the
medium (i.e. electric current) to enable the called party to receive the call.
Without private respondent PLDT’s network, the human voice/voice signal of
the calling party will never reach the called party.16
In the assailed Decision, it was conceded that in making the international
phone calls, the human voice is converted into electrical impulses or electric
current which are transmitted to the party called. A telephone call, therefore,
is electrical energy. It was also held in the assailed Decision that intangible
property such as electrical energy is capable of appropriation because it may
be taken and carried away. Electricity is personal property under Article 416
(3) of the Civil Code, which enumerates "forces of nature which are brought
under control by science."17
Indeed, while it may be conceded that "international long distance calls," the
matter alleged to be stolen in the instant case, take the form of electrical
energy, it cannot be said that such international long distance calls were
personal properties belonging to PLDT since the latter could not have
acquired ownership over such calls. PLDT merely encodes, augments,
enhances, decodes and transmits said calls using its complex
communications infrastructure and facilities. PLDT not being the owner of
said telephone calls, then it could not validly claim that such telephone calls
were taken without its consent. It is the use of these communications facilities
without the consent of PLDT that constitutes the crime of theft, which is the
unlawful taking of the telephone services and business.
remanded to the trial court and the prosecution directed to amend the
Amended Information, to clearly state that the property subject of the theft
are the services and business of respondent PLDT. Parenthetically, this
amendment is not necessitated by a mistake in charging the proper offense,
which would have called for the dismissal of the information under Rule 110,
Section 14 and Rule 119, Section 19 of the Revised Rules on Criminal
Procedure. To be sure, the crime is properly designated as one of theft. The
purpose of the amendment is simply to ensure that the accused is fully and
sufficiently apprised of the nature and cause of the charge against him, and
thus guaranteed of his rights under the Constitution.
ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed
Decision dated February 27, 2006 is RECONSIDERED and SET ASIDE. The
Decision of the Court of Appeals in CA-G.R. SP No. 68841 affirming the
Order issued by Judge Zeus C. Abrogar of the Regional Trial Court of Makati
City, Branch 150, which denied the Motion to Quash (With Motion to Defer
Arraignment) in Criminal Case No. 99-2425 for theft, is AFFIRMED. The case
is remanded to the trial court and the Public Prosecutor of Makati City is
hereby DIRECTED to amend the Amended Information to show that the
property subject of the theft were services and business of the private
offended party.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice

Therefore, the business of providing telecommunication and the telephone

service are personal property under Article 308 of the Revised Penal Code,
and the act of engaging in ISR is an act of "subtraction" penalized under said
article. However, the Amended Information describes the thing taken as,
"international long distance calls," and only later mentions "stealing the
business from PLDT" as the manner by which the gain was derived by the
accused. In order to correct this inaccuracy of description, this case must be