Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-20214 March 17, 1923 G. C.

ARNOLD, plaintiff-appellant, vs. W LL TS ! PATTERSON, LTD., defendant-appellee. Fisher, DeWitt, Perkins and Brady for appellant. Ross and Lawrence for appellee. STATEMENT Fo a nu!be of "ea s p io to the ti!es alle#ed in the co!plaint, the plaintiff $as in the e!plo" of the %nte national Ban&in# Co po ation of Manila, and it is conceded that he is a co!petent and e'pe ienced business !an. (ul" )*, *+*,, C. -. .illits and %. /. Patte son $e e pa tne s doin# business in San F ancisco, Califo nia, unde the na!e of .illits 0 Patte son. The plaintiff $as then in San F ancisco, and as a esult of ne#otiations the plaintiff and the fi ! ente ed into a $ itten cont act, &no$n in the eco d as E'hibit A, b" $hich the plaintiff $as e!plo"ed as the a#ent of the fi ! in the Philippine %slands fo ce tain pu poses fo the pe iod of five "ea s at a !ini!u! sala " of 1233 pe !onth and t avellin# e'penses. The plaintiff etu ned to Manila and ente ed on the discha #e of his duties unde the cont act. As a esult of plaintiff4s e!plo"!ent and the $o ld $a conditions, the business of the fi ! in the Philippines ve " apidl" inc eased and # e$ be"ond the fondest hopes of eithe pa t". A dispute a ose bet$een the plaintiff and the fi ! as to the const uction of E'hibit A as to the a!ount $hich plaintiff should eceive fo his se vices. Mean$hile Patte son eti ed f o! the fi ! and .illits beca!e the sole o$ne of its assets. Fo convenience of ope ation and to se ve his o$n pu pose, .illits o #ani5ed a co po ation unde the la$s of Califo nia $ith its p incipal office at San F ancisco, in and b" $hich he subsc ibed fo , and beca!e the e'clusive o$ne of all the capital stoc& e'cept a fe$ sha es fo o #ani5ation pu poses onl", and the na!e of the fi ! $as used as the na!e of the co po ation. A sho t ti!e afte that .illits ca!e to Manila and o #ani5ed a co po ation he e &no$n as .illits 0 Patte son, /td., in and to $hich he a#ain subsc ibed fo all of the capital stoc& e'cept the no!inal sha es necessa " to 6ualif" the di ecto s. %n le#al effect, the San F ancisco co po ation too& ove and ac6ui ed all of the assets and liabilities of the Manila co po ation. At the ti!e that .illits $as in Manila and $hile to all intents and pu poses he $as the sole o$ne of the stoc& of co po ations, the e $as a confe ence bet$een hi! and the plaintiff ove the disputed const uction of E'hibit A. As a esult of $hich anothe inst u!ent, &no$n in the eco d as E'hibit B, $as p epa ed in the fo ! of a lette $hich the plaintiff add essed to .illits at Manila on Nove!be *3, *+*+, the pu pose of $hich $as to !o e clea l" define and specif" the co!pensation $hich the plaintiff $as to eceive fo his se vices. .illits eceived and confi !ed this lette b" si#nin# the na!e of .illits 0 Patte son, B" C.d. .illits. At the ti!e both co po ations $e e le#all" o #ani5ed, and the e is nothin# in the co po ate !inutes to sho$ that E'hibit B $as eve fo !all" atified o app oved b" eithe co po ation. Afte its o #ani5ation, the Manila co po ation e!plo"ed a e#ula accountant $hose dut" it $as to audit the accounts of the co!pan" and ende financial state!ents both fo the use of the local ban&s and the local and pa ent co po ations at San F ancisco. F o! ti!e to ti!e and in the o dina " cou se of business such state!ents of account $e e p epa ed b" the accountant and dul" fo $a ded to the ho!e office, and a!on# othe thin#s $as a state!ent of (ul" )*, *+2*, sho$in# that the e $as due and o$in# the plaintiff unde E'hibit B the su! of P*3,,277.83. A sho t ti!e p evious to that date, the San F ancisco co po ation beca!e involved in financial t ouble, and all of its assets $e e tu ned ove to a 9c edito s4 co!!ittee.9 .hen this state!ent $as eceived, the 9c edito s4 co!!ittee9 i!!ediatel" p otested its allo$ance. An atte!pt $as !ade $ithout success to ad:ust the !atte on a f iendl" basis and $ithout liti#ation. (anua " *3, *+22, the plaintiff b ou#ht this action to ecove

f o! the defendant the su! of P*3,,277.83 $ith le#al inte est and costs, and $ itten inst u!ents &no$n in the eco d as E'hibits A and B $e e attached to, and !ade a pa t of, the co!plaint. Fo ans$e , the defendant ad!its the fo !al pa ts of the co!plaint, the e'ecution of E'hibit A and denies each and eve " othe alle#ation, e'cept as specificall" ad!itted, and alle#es that $hat is &no$n as E'hibit B $as si#ned b" .illits $ithout the autho it" of the defendant co po ation o the fi ! of .illits 0 Patte son, and that it is not an a# ee!ent $hich $as eve ente ed into $ith the plaintiff b" the defendant o the fi !, and, as a sepa ate defense and counte clai!, it alle#es that on the )3th of (une, *+23, the e $as a balance due and o$in# the plaintiff f o! the defendant unde the cont act E'hibit A of the su! of P;,7<*.38. That his sala " f o! (une )3, *+23, to (ul" )*, *+2*, unde E'hibit A $as 1<33 pe !onth, o a total of P*3,<33. That about (ul" ,, *+2*, the plaintiff $ on#full" too& P)3,333 f o! the assets of the fi !, and that he is no$ indebted to the fi ! in the su! of P*3,;8;.+8, $ith inte est and costs, f o! $hich it p a"s :ud#e!ent. The plaintiff ad!its that he $ithd e$ the P)3,333, but alle#es that it $as $ith the consent and autho it" of the defendant, and denies all othe ne$ !atte in the ans$e . =pon such issues a t ial $as had, and the lo$e cou t ende ed :ud#!ent in favo of the defendant as p a"ed fo in its counte clai!, f o! $hich the plaintiff appeals, contendin# that the t ial cou t e ed in not holdin# that the cont act bet$een the pa ties is that $hich is e!bodied in E'hibits A and B, and that the defendant assu!ed all pa tne ship obli#ations, and in failin# to ende :ud#!ent fo the plaintiff, as p a"ed fo , and in dis!issin# his co!plaint, and den"in# plaintiff4s !otion fo a ne$ t ial. "O#NS, J.: %n thei espective b iefs opposin# counsel a# ee that the i!po tant 6uestions involved a e 9$hat $as the cont act unde $hich the plaintiff ende ed se vices fo five "ea s endin# (ul" )*, *+2*,9 and 9$hat is due the plaintiff unde that cont act.9 Plaintiff contends that his se vices $e e pe fo !ed unde E'hibits A and B, and that the defendant assu!ed all of the obli#ations of the o i#inal pa tne ship unde E'hibit A, and is no$ see&in# to den" its liabilit" unde , and epudiate, E'hibit B. The defendant ad!its that E'hibit A $as the o i#inal cont act bet$een A nold and the fi ! of .illits 0 Patte son b" $hich he ca!e to the Philippine %slands, and that it $as the ein a# eed that he $as to be e!plo"ed fo a pe iod of five "ea s as the a#ent of .illits 0 Patte son in the Philippine %slands to ope ate a ce tain oil !ill, and to do such othe business as !i#ht be dee!ed advisable fo $hich he $as to eceive, fi st, the t avellin# e'penses of his $ife and self f o! San F ancisco to Manila, second, the !ini!u! sala " of 1233 pe !onth, thi d, a b o&e a#e of * pe cent upon all pu chases and sales of !e chandise, e'cept fo the account of the coconut oil !ill, fou th, one-half of the p ofits on an" t ansaction in the na!e of the fi ! o hi!self not p ovided fo in the a# ee!ent. That the a# ee!ent also p ovided that if it be found that the business $as ope ated at a loss, A nold should eceive a !onthl" sala " of 1<33 du in# such pe iod. That the business $as ope ated at a loss f o! (une )3, *+23, to (ul" )*, *+2*, and that fo such eason, he $as entitled to nothin# !o e than a sala " of 1<33 pe !onth, o fo that pe iod P*3,<33. Addin# this a!ount to the P;,7<*.38, $hich the defendant ad!its he o$ed A nold on (une )3, *+23, !a&es a total of P*+,*<*.38, leavin# a balance due the defendant as set out in the counte clai!. %n othe $o ds, that the plaintiff4s co!pensation $as !easu ed b", and li!ited to, the above specified p ovisions in the cont act E'hibit A, and that the defendant co po ation is not bound b" the te !s o p ovisions of E'hibit B, $hich is as follo$s> .%//%TS 0 PATTERS?N, /T-. MAN%/A, P. %., Nov. 10, 1 1 . C@AS. -. .%//%TS, Es6., Present.

-EAR MR. .%//%TS> M" unde standin# of the intent of !" a# ee!ent $ith .illits 0 Patte son is as unde > !o""issions. .illits 0 Patte son, San F ancisco, pa" !e a co!!ission of one pe cent on all pu chases !ade fo the! in the Philippines o sales !ade to the! b" Manila and one pe cent on all sales !ade fo the! in the Philippines, o pu chases !ade f o! the! b" Manila. %f such pu chases o sales a e on an f. o. b. basis the co!!ission is on the f. o. b. p iceA if on a c. i. f. basis the co!!ission is co!puted on the c. i. f. p ice These co!!issions a e c edited to !e in San F ancisco. % do not pa ticipate in an" p ofits on business t ansacted bet$een .illits 0 Patte son, San F ancisco, and .illits 0 Patte son, /td., Manila. Profits. ?n all business t ansacted bet$een .illits 0 Patte son, /td. and othe s than .illits 0 Patte son, San F ancisco, half the p ofits a e to be c edited to !" account and half to the P ofit 0 /oss account of .illits 0 Patte son, /td., Manila. ?n all othe business, such as the Coope ative Coconut P oducts Co. account, o an" othe business $e !a" unde ta&e as a#ents o !ana#e s, half the p ofits a e to be c edited to !" account and half to the P ofit 0 /oss account of .illits 0 Patte son, /td., Manila. .he e .illits 0 Patte son, San F ancisco, o .illits 0 Patte son, /td., Manila, have thei o$n funds invested in the capital stoc& o a co po ation, % of cou se do not pa ticipate in the ea nin#s of such stoc&, an" !o e than .illits 0 Patte son $ould pa ticipate in the ea nin#s of stoc& held b" !e on !" account. %f the fo e#oin# confo !s to "ou unde standin# of ou a# ee!ent, please confi ! belo$. Bou s faithfull", CS#d.D E. C. ARN?/Confi !ed> .%//%TS 0 PATTERS?N B" CS#d.D C@AS. -. .%//%TS The e is no dispute about an" of the follo$in# facts> That at the inception C.-. .illits and %. /. Patte son constituted the fi ! of .illits 0 Patte son doin# business in the Cit" of San F anciscoA that late Patte son eti ed f o! the fi !, and .illits ac6ui ed all of his inte ests and the eafte continued the business unde the na!e and st"le of .illits 0 Patte sonA that the o i#inal cont act E'hibit A $as !ade bet$een the plaintiff and the old fi ! at San F ancisco on (ul" )*, *+*,, to cove a pe iod of five "ea s f o! that dateA that plaintiff ente ed upon the discha #ed of his duties and continued his se vices in the Philippine %slands to so!eone fo the pe iod of five "ea sA that on Nove!be *3, *+*+, and as a esult of confe ences bet$een .illits and the plaintiff, E'hibit B $as add essed and si#ned in the !anne and fo ! above stated in the Cit" of Manila. A sho t ti!e p io

to that date .illits o #ani5ed a co po ation in San F ancisco, in the State of Califo nia, $hich too& ove and ac6ui ed all of the assets of the fi !4s business in Califo nia then bein# conducted unde the na!e and st"le of .illits 0 Patte sonA that he subsc ibed fo all of the capital stoc& of the co po ation, and that in t uth and in fact he $as the o$ne of all of its capital stoc&. Afte this $as done he caused a ne$ co po ation to be o #ani5ed unde the la$s of the Philippine %slands $ith p incipal office at Manila, $hich too& ove and ac6ui ed all the business and assets of the fi ! of .illits 0 Patte son in the Philippine %slands, in and to $hich, in le#al effect, he subsc ibed fo all of its capital stoc&, and $as the o$ne of all of its stoc&. Afte both co po ations $e e o #ani5ed the above lette $as d afted and si#ned. The plaintiff contends that the si#nin# of E'hibit B in the !anne and unde the conditions in $hich it $as si#ned, and th ou#h the subse6uent acts and conduct of the pa ties, $as atified and, in le#al effect, beca!e and is no$ bindin# upon the defendant. %t $ill be noted that E'hibit B $as e'ecuted in Manila, and that at the ti!e it $as si#ned b" .illits, he $as to all intents and pu poses the le#al o$ne of all the stoc& in both co po ations. %t also appea s f o! the evidence that the pa ent co po ation at San F ancisco too& ove and ac6ui ed all of the assets and liabilities of the local co po ation at Manila. That afte it $as o #ani5ed the Manila co po ation &ept sepa ate eco ds and account boo&s of its o$n, and that f o! ti!e to ti!e financial state!ents $e e !ade and fo $a ded to the ho!e office, f o! $hich it conclusivel" appea s that plaintiff $as basin# his clai! fo se vices upon E'hibit A, as it $as !odified b" E'hibit B. That at no ti!e afte E'hibit B $as si#ned $as the e eve an" dispute bet$een plaintiff and .illits as to the co!pensation fo plaintiff4s se vices. That is to sa", as bet$een the plaintiff and .illits, E'hibit B $as app oved, follo$ed and at all ti!es in fo ce and effect, afte it $as si#ned Nove!be *3, *+*+. %t appea s f o! an anal"sis of E'hibit B that it $as fo the !utual inte est of both pa ties. F o! a s!all be#innin#, the business $as then in a ve " flou ishin# conditions and # o$in# fast, and the p ofits $e e ve " la #e and $e e unnin# into bi# !one". A!on# othe thin#s, E'hibit A p ovided> 9CaD That the net p ofits f o! said coconut oil business shall be divided in e6ual sha es bet$een the said pa ties he etoA C #D that A nold should eceive a b o&e a#e of * pe cent f o! all pu chases and sales of !e chandise, e'cept fo the account of the coconut !illsA CcD that the net p ofits f o! all othe business should be divided in e6ual half sha es bet$een the pa ties he eto.9 =nde the above p ovisions, the plaintiff !i#ht $ell contend that he $as entitled to one-half of all the p ofits and a b o&e a#e of * pe cent f o! all pu chases and sales, e'cept those fo the account of the coconut oil !ills, $hich unde the volu!e of business then e'istin# $ould un into a ve " la #e su! of !one". %t $as fo such eason and afte pe sonal confe ences bet$een the!, and to settle all disputed 6uestions, that E'hibit B $as p epa ed and si#ned. The eco d ecites that 9the defendant ad!its that f o! (ul" )*, *+*, to (ul" )*, *+2*, the plaintiff faithfull" pe fo !ed all the duties incu!bent upon hi! unde his cont act of e!plo"!ent, it bein# unde stood, ho$eve , that this ad!ission does not include an ad!ission that the plaintiff placed a p ope inte p etation upon his i#ht to e!une ation unde said cont act of e!plo"!ent.9 %t bein# ad!itted that the plaintiff $o &ed 9unde his cont act of e!plo"!ent9 fo the pe iod of five "ea s, the 6uestion natu all" a ises, fo $ho! $as he $o &in#F @is cont act $as !ade $ith the o i#inal fi ! of .illits 0 Patte son, and that fi ! $as dissolved and it ceased to e'ist, and all of its assets $e e !e #ed in, and ta&en ove b", the pa ent co po ation at San F ancisco. %n the ve " natu e of thin#s, afte the co po ation $as fo !ed, the plaintiff could not and did not continue to $o & fo the fi !, and, "et, he continued his e!plo"!ent fo the full pe iod of five "ea s. Fo $ho! did he $o & afte the pa tne ship $as !e #ed in the co po ation and ceased to e'istF %t is ve " appa ent that, unde the conditions then e'istin#, the si#nin# of E'hibit B $as fo the !utual inte ests of both pa ties, and that if the cont act E'hibit A $as to be enfo ced acco din# to its te !s, that A nold !i#ht $ell contend fo a !uch la #e su! of !one" fo his se vices. %n t uth and in fact .illits and both co po ations eco#ni5ed his e!plo"!ent and accepted the benefits of his

se vices. @e continued his e!plo"!ent and ende ed his se vices afte the co po ation $e e o #ani5ed and E'hibit B $as si#ned :ust the sa!e as he did befo e, and both co po ations eco#ni5ed and accepted his se vices. Althou#h the plaintiff $as p esident of the local co po ation, the testi!on" is conclusive that both of the! $e e $hat is &no$n as a one !an co po ation, and .illits, as the o$ne of all of the stoc&, $as the fo ce and do!inant po$e $hich cont olled the!. Afte E'hibit B $as si#ned it $as eco#ni5ed b" .illits that the plaintiff4s se vices $e e to be pe fo !ed and !easu ed b" its te ! and p ovisions, and the e neve $as an" dispute bet$een plaintiff and .illits upon that 6uestion. The cont ove s" fi st a ose afte the co po ation $as in financial t ouble and the appoint!ent of $hat is &no$n in the eco d as a 9c edito s4 co!!ittee.9 The e is no clai! o p etense that the e $as an" f aud o collusion bet$een plaintiff and .illits, and it is ve " appa ent that E'hibit B $as to the !utual inte est of both pa ties. %t is ele!enta " la$ that if E'hibit B is a bindin# cont act bet$een the plaintiff and .illits and the co po ations, it is e6uall" bindin# upon the c edito s4 co!!ittee. %t $ould not have an" hi#he o bette le#al i#ht than the co po ation itself, and could not !a&e an" defense $hich it could not !a&e. %t is ve " si#nificant that the clai! o defense $hich is no$ inte posed b" the c edito s4 co!!ittee $as neve !ade o asse ted at an" p evious ti!e b" the defendant, and that it neve $as !ade b" .illits, and it is ve " appa ent that if he had e!ained in cont ol of the co po ation, it $ould neve have !ade the defense $hich is no$ !ade b" the c edito s4 co!!ittee. The eco d is conclusive that at the ti!e he si#ned E'hibit B, .illits $as, in le#al effect, the o$ne and holde of all the stoc& in both co po ations, and that he app oved it in thei inte est, and to p otect the! f o! the plaintiff havin# and !a&in# a !uch la #e clai! unde E'hibit A. As a !atte of fact, it appea s f o! the state!ent of M . /a &in, the accountant, in the eco d that if plaintiff4s cause of action $as no$ founded upon E'hibit A, he $ould have a clai! fo !o e than P*,3,333. Tho!pson on Co po ations, 2d ed., vol. %, section *3, sa"s> The p oposition that a co po ation has an e'istence sepa ate and distinct f o! its !e!be ship has its li!itations. %t !ust be noted that this sepa ate e'istence is fo pa ticula pu poses. %t !ust also be e!e!be ed that the e can be no co po ate e'istence $ithout pe sons to co!pose itA the e can be no association $ithout associates. This sepa ate e'istence is to a ce tain e'tent a le#al fiction. .heneve necessa " fo the inte ests of the public o fo the p otection o enfo ce!ent of the i#hts of the !e!be ship, cou ts $ill dis e#a d this le#al fiction and ope ate upon both the co po ation and the pe sons co!posin# it. %n the sa!e section, the autho 6uotes f o! a decision in <+ ?hio State, *)7 *A *8 /. R. A., *<8, in $hich the Sup e!e Cou t of ?hio sa"s> 9So lon# as a p ope use is !ade of the fiction that a co po ation is an entit" apa t f o! its sha eholde s, it is ha !less, and, because convenient, should not be called in 6uestionA but $he e it is u #ed to an end subve sive of its polic", o such is the issue, the fiction !ust be i#no ed, and the 6uestion dete !ined $hethe the act in 6uestion, thou#h done b" sha eholde s, G that is to sa", b" the pe sons unitin# in one bod", G $as done si!pl" as individuals, and $ith espect to thei individual inte est as sha eholde s, o $as done ostensibl" as such, but, as a !atte of fact, to cont ol the co po ation, and affect the t ansaction of its business, in the sa!e !anne as if the act had been clothed $ith all the fo !alities of a co po ate act. This !ust be so, because, the stoc&holde s havin# a dual capacit", and capable of actin# in eithe , and a possible inte est to conceal thei cha acte $hen actin# in thei co po ate capacit", the absence of the fo !al evidence of the cha acte of the act cannot p eclude :udicial in6ui " on the sub:ect. %f it $e e othe $ise, then in that depa t!ent of the la$ f aud $ould en:o" an i!!unit" a$a ded to it in no othe .9 .he e the stoc& of a co po ation is o$ned b" one pe son $he eb" the co po ation functions onl" fo the benefit of such individual o$ne , the co po ation and the individual should be

dee!ed to be the sa!e. C=. S. E"psu! Co. vs. Mac&a" .all Plaste Co., *++ Pac., 2<+.D Rulin# Case /a$, vol. 7, section ,,), sa"s> .hile of cou se a co po ation cannot atif" a cont act $hich is st ictl" $ltra vires, and $hich it in the fi st instance could not have !ade, it !a" b" atification ende bindin# on it a cont act, ente ed into on its behalf b" its office s o a#ents $ithout autho it". As a #ene al ule such atification need not be !anifested b" an" voted o fo !al esolution of the co po ation o be authenticated b" the co po ate sealA no hi#he de# ee of evidence is e6uisite in establishin# atification on the pa t of a co po ation, than is e6uisite in sho$in# an antecedent autho i5ation. ''' ''' ''' SEC. ,,,. The assent o app oval of a co po ation to acts done on its account !a" be infe ed in the sa!e !anne that the absent of a natu al pe son !a" be, and it is $ell settled that $he e a co po ation $ith full &no$led#e of the unautho i5ed act of its office o a#ents ac6uiesces in and consents to such acts, it the eb" atifies the!, especiall" $he e the ac6uiescence esults in p e:udice to a thi d pe son. ''' ''' ''' SEC. ,,+. So, $hen, in the usual cou se of business of a co po ation, an office has been allo$ed in his official capacit" to !ana#e its affai , his autho it" to ep esent the co po ation !a" be infe ed f o! the !anne in $hich he has been pe !itted b" the di ecto s to t ansact its business. SEC. ,8,. %n acco dance $ith a $ell-&no$n ule of the la$ of a#enc", notice to co po ate office s o a#ents $ithin the scope o appa ent scope of thei autho it" is att ibuted to the co po ation. SEC. ,,7. As a #ene al ule, if a co po ation $ith &no$led#e of its a#ents unautho i5ed act eceived and en:o"s the benefits the eof, it i!pliedl" atifies the unautho i5ed act if it is one capable of atification b" pa ol. %n its a ticle on co po ations, Co pus (u is, in section 22<* sa"s> Ratification b" a co po ation of a t ansaction not p eviousl" autho i5ed is !o e easil" infe ed $he e the co po ation eceives and etains p ope t" unde it, and as a #ene al ule $he e a co po ation, th ou#h its p ope office s o boa d, ta&es and etains the benefits of the unautho i5ed act o cont act of an office o a#ent, $ith full &no$led#e of all the !ate ial facts, it the eb" atifies and beco!es bound b" such act of cont act, to#ethe $ith all the liabilities and bu dens esultin# the ef o!, and in so!e :u isdiction this ule is, in effect, decla ed b" statute. Thus the co po ation is liable on the # ound of atification $he e, $ith &no$led#e of the facts, it accepts the benefit of se vices ende ed unde an unautho i5ed cont act of e!plo"!ent . . . . Appl"in# the la$ to the facts. M . /a &in, an e'pe ienced accountant, $as e!plo"ed b" the local co po ation, and f o! ti!e to ti!e and in the o dina " cou se of business !ade and p epa ed financial state!ents sho$in# its assets and liabilities, t ue copies of $hich $e e sent to the ho!e office in San F ancisco. %t appea s upon thei face that plaintiff4s co!pensation $as !ade and founded on E'hibit B, and that such state!ents $e e !ade and p epa ed b" the accountant on the assu!ption that E'hibit B $as in full fo ce and effect as bet$een the plaintiff and the defendant. %n the cou se of business in the ea l" pa t of *+23, plaintiff, as !ana#e of the defendant, sold 833 tons of oil fo futu e delive " at P7<3 pe ton. -ue to b ea& in the !a &et, plaintiff $as able to pu chase the oil at P);3 pe ton o a p ofit of P*;3,333. %t appea s f o! E'hibit B unde the headin# of 9P ofits9 that>

?n all the business t ansacted bet$een .illits 0 Patte son, /td. and othe s than .illits 0 Patte son, San F ancisco, half the p ofit a e to be c edited to !a" account and half to the P ofit 0 /oss account .illits 0 Patte son, /td., Manila. The pu chase s paid P*38,333 on the cont acts and #ave thei notes fo P78,333, and it $as a# eed that all of the oil pu chased should be held as secu it" fo the full pa"!ent of the pu chase p ice. As a esult, the defendant itself eceived the P*38,333 in cash, P78,333 in notes, and still holds the 833 tons of oil as secu it" fo the balance of the pu chase p ice. This t ansaction $as sho$n in the se!iannual financial state!ent fo the pe iod endin# -ece!be )*, *+23. That is to sa", the business $as t ansacted b" and th ou#h the plaintiff, and the defendant eceived and accepted all of the p ofits on the deal, and the state!ent $hich $as ende ed #ave hi! a c edit fo P+3,7)7.;;, o half the p ofit as p ovided in the cont act E'hibit B, $ith inte est. Althou#h the p evious financial state!ents sho$ upon thei face that the account of plaintiff $as c edit $ith seve al s!all ite!s on the sa!e basis, it $as not until the 2)d of Ma ch, *+2*, that an" ob:ection $as eve !ade b" an"one, and ob:ection $as !ade fo the fi st ti!e b" the c edito s4 co!!ittee in a cable of that date. As $e anal"5e the facts E'hibit B $as, in le#al effect, atified and app oved and is no$ bindin# upon the defendant co po ation, and the plaintiff is entitled to ecove fo his se vices on that $ itin# as it !odified the o i#inal cont act E'hibit A. %t appea s f o! the state!ent p epa ed b" accountant /a &in founded upon E'hibit B that the plaintiff is entitled to ecove P*3,,277.83. %t is ve " appa ent that his state!ent $as based upon the assu!ption that the e $as a net p ofit of P*;3,333 on the 833 tons of oil, of $hich the plaintiff $as entitled to one-half. %n the absence of an" othe p oof, $e have the i#ht to assu!e that the 833 tons of oil $as $o th the a!ount $hich the defendant paid fo the! at the ti!e of the pu chase o P);3 pe ton, and the eco d sho$s that the defendant too& and no$ has the possession of all of the oil secu e the pa"!ent of the p ice at $hich it $as sold. @ence, the p ofit on the deal to the defendant at the ti!e of the sale $ould a!ount to the diffe ence bet$een $hat the defendant paid fo the oil and the a!ount $hich it eceived fo the oil at the ti!e it sold the oil. %t appea s that at the ti!e of the sale the defendant onl" eceived P*38,333 in cash, and that it too& and accepted the p o!isso " notes of C u5 0 Tan Chon# Sa", the pu chase s, fo P78,333 !o e $hich have been collected and !a" neve be. @ence, it !ust follo$ that the a!ount evidence b" the notes cannot no$ be dee!ed o t eated as p ofits on the deal and cannot be until such ti!es as the notes a e paid. The :ud#!ent of the lo$e cou t is eve sed, and a !one" :ud#!ent $ill be ente ed he e in favo of the plaintiff and a#ainst the defendant fo the su! of P,;,827.83, $ith the eon at the ate of , pe cent pe annu! f o! the *3th da" of (anua ", *+22. %n addition the eto, :ud#!ent $ill be ende ed a#ainst the defendant in substance and to the effect that the plaintiff is the o$ne of an undivided one-half inte est in the p o!isso " notes fo P78,333 $hich $e e e'ecuted b" C u5 0 Tan Chon# Sa", as a pa t of the pu chase p ice of the oil, and that he is entitled to have and eceive one-half of all the p oceeds f o! the notes o eithe of the!, and that also he have :ud#!ent a#ainst the defendant fo costs. So o de ed. %ra$llo, !. &., 'treet, (alcol", %vance)a, *strand, and Ro"$alde+, &&., conc$r. $oo%&o%'(
*State

e, rel. vs. Standa d ?il Co.

The /a$phil P o:ect - A ellano /a$ Foundation