Mendezona v. Philippine Sugar Estates Development Company, Ltd.

G.R. No. 13659, March 22, 1921

Facts:
The plaintiff alleges that he entered into that contract with the defendant
company which the name of Manuel de Garay was made to appear as the tenant on
shares for the sole purposes of satisfying the scruples of one of the directors of the
company, but with the understanding between the parties that the plaintiff was to be
the real tenant on shares; that by virtue of that mutual understanding, and in order to
carry it into effect, he entered with the defendant Manuel de Garay with the consent of
the representatives of the defendant company, into a contract in which the said
Manuel de Garay admitted that he was merely a subordinate of the plaintiff, with a
right to only 10 per cent of the plaintiff's share in the profits which as tenant he might
receive from the Hacienda de Bucal, which the defendant had in Calamba, Laguna;
and that, said defendant Manuel de Garay, conniving with the defendant company,
attempted to defraud him, claiming to be the true tenant, for which reason he lost his
right to the share otherwise accruing to him under said contract.

The defendant corporation denied Mendezona’s claims, alleging that the

defendant company had not entered into any rental contract on shares with the
plaintiff and that the latter intervened in the work of cultivation of the Hacienda de
Bucal as a mere attorney in fact of the defendant Manuel de Garay, who was
discharged from that place when the company learned that the plaintiff had entered it
in violation of the rental contract on shares which the defendant Manuel de Garay had
with the defendant company.

The plaintiff lays stress upon the alleged attitude of the president Miguel Garcia
Grande and of the manager Jose Ma. Suarez in consenting to the contract of
partnership executed between the plaintiff Mendezona and the defendant Manuel de
Garay, in which contract Manuel de Garay was recognized as a mere subordinate of
Secundino Mendezona.

Issue:
WON Mendezona was correct in alleging that contract of partnership entered
into between Mendezona and De Garay indicates that the latter is a
subordinate/fictitious tenant.
Ruling:
No. With respect to this, it should be noted, in the first place, that the contract
of partnership between Mendezona and De Garay contains no indication that said
Garay was a fictitious tenant; on the contrary, it is stated therein that in order to effect
the rental contract which De Garay had executed with the defendant corporation, he
and Mendezona associated themselves, and in order that Mendezona might supervise
the work on the field, De Garay gave him ample powers and recognized himself as a
subordinate of Mendezona. It here expressly appears that the real tenant was De
Garay, and that Mendezona was a mere subordinate. That De Garay recognized
Mendezona as technician is perfectly compatible with the proposition that De Garay
was the real tenant, for although Mendezona was the one to superintend the work in
the field, nevertheless, it appears in the same contract, that Mendezona was a mere
agent of De Garay and that the latter was the tenant. The fact that De Garay was the
subordinate of
Mendezona because of the nature of the work which each had to do does not prove
that De Garay was not the tenant; and the fact that the company permitted the
services of Mendezona on the hacienda does not prevent this conclusion, for it is
proved that said company, having no confidence that Mendezona would fulfill his
obligations to whom it would have to make advances in great sums, it did not like to
deal with him but with Manuel de Garay, who, according to its information, was a
person of responsibility.

In the second place, it is hard to believe that said officers of the corporation, if
they had any intervention in this contract between Mendezona and De Garay, should
have made it to be understood that the real tenant was Mendezona and not De Garay,
because the letter Exhibit L signed by president Garcia, addressed to manager Suarez,
read by Mendezona and approved by Manuel de Garay, clearly states that the
hacienda was to be delivered to Manuel de Garay as tenant. These two officers of the
corporation had full knowledge that the board of directors did not like to contract with
Mendezona and if it adjudicated the rental contract to De Garay, it was merely
because of the good information which the company received as to him which was
furnished by the manager himself, and which must have brought to their knowledge
the fact that the board of directors wanted to contract with De Garay and not with
Mendezona; and therefore it cannot be believed that, as they acted contrary to the will
of the board of directors, they had made it understood that Mendezona was the real,
and De Garay the fictitious, tenant. But supposing that they had acted against the will
of the board, then their conduct does not bind the corporation, because “The
declarations of an individual director relating to the affairs of the corporation, but not
made in the course of, or connected with, the performance of the authorized duties of
such director, are held not binding on the corporation. So, false statements made by a
single director, for the purpose of defrauding the creditors of the corporation,
including the corporation itself, could not affect or bind it. The general rule is that
officers of corporations acting within the scope of their authority may bind the
corporation in the same way and to the same extent as if they were the agents of
natural persons, unless the charter or by-laws otherwise provide: They cannot, in
general, bind the corporation by acts in excess of the authority with which they are
clothed unless such acts are ratified. . . .” (Article 1818?) Under these well-settled
principles of law, whatever be the nature of the acts performed by president Garcia
Grande and manager Suarez, they cannot prejudice the corporation in the sense that
it is estopped to deny that they ever contracted with Mendezona, because said officers,
in executing such acts, acted outside of their sphere of action and contrary to the
resolutions of the board of directors of the defendant corporation, the terms of which
are so clear and explicit as not to leave any doubt that they wanted to enter into a
contract with Manuel de Garay and not with Secundino Mendezona.
 Benguet Consolidated Mining Co. v. Pineda
G.R. No. L-7231, March 28, 1956

Facts:
Petitioner Benguet Consolidated Mining Co. (Benguet), was organized in 1903
as a sociedad anonima under the Spanish Code of Commerce, then in force in the
Philippines. Under its articles of association, Benguet was organized for a term of fifty
(50) years. In 1906, Act 1459 or the Corporation Law was enacted, establishing the
American type of juridical entities known as Corporation. The evident purpose of such
enactment was to introduce the American corporation into the Philippine Islands as
the standard commercial entity and to hasten the day when the sociedad anonima of
the Spanish Law would be obsolete.
Under Section 75 of the Corporation Law, existing sociedad anonimas were
given the option to either continue its business as such, or to reform and reorganize
under the said law. Further, Section 191 of the same law provided that existing
corporations or sociedades anonimas which elect to continue as such instead of
reforming and reorganizing under said law, shall continue to be governed by the laws
that were in force prior to the passage of the Act in relation to their organization and
method of transacting business and to the rights of their members as among
themselves, but their relations to the public and public officials shall be governed by
the provisions of the Corporation Law.
In 1946, when the expiration of its original 50-year term approached, petitioner
amended its articles of association in order to extend its business life for another 50
years. However, the same was denied by the SEC. In the present appeal, Benguet
contends that its right to extend its existence as a sociedad anonimas under the
Spanish Code of Commerce is still operative, since it is “in relation to their
organization and method of transacting business and to the rights of their members as
among themselves”, pursuant to the aforestated Section 191 of the Corporation Law.

Issue:
WON a sociedad anonima may still extend its corporate existence as such,
notwithstanding the enactment of Act No. 1459 or the Corporation Law.

Ruling:
No. The prohibition contained in section 18 of Act No. 1459, against extending
the period of corporate existence by amendment of the original articles, was intended
to apply, and does apply, to sociedades anonimas, already formed, organized and
existing at the time of the effectivity of the Corporation Law (Act 1459) in 1906.
 The term of existence of association (partnership or sociedad anonima) is
coterminous with their possession of an independent legal personality, distinct from
that of their component members. When the period expires, the sociedad anonima
loses the power to deal and enter into further legal relations with other persons. By
the same token, its officers and agents can no longer represent it after the expiration
of the life term prescribed, save for settling its business. Necessarily, therefore, third
persons or strangers have an interest in knowing the duration of the juridical
personality of the sociedad anonima, since the latter cannot be dealt with after that
period; wherefore its prolongation or cessation is a matter directly involving the
company's relations to the public at large. The State and its officers also have an
obvious interest in the term of life of associations, since the conferment of juridical
capacity upon them during such period is a privilefe that is derived from statute.

Furthermore, the Court interpreted the prohibition under Section 18 of the

Corporation Law against extension of corporate life by amendment of the original
articles was designed and intended to apply to existing “compañias anonimas”. This
conclusion is consistent with the policy of the law to hasten the day when compañias
anonimas would be extinct, and replace them with the American type of corporation
(Harden vs. Benguet Consolidated Mining Co.), for the indefinite prorogation of the
corporate life of sociedades anonimas would maintain the unnecessary duality of
organizational types, instead of reducing them into a single one. To conclude otherwise
would give these sociedades anonimas, whose obsolescence was sought, the
advantageous privilege of perpetual existence that the new corporations could not
possess. Therefore, the Court affirmed the order of the SEC denying the extension of
the existence of Benguet as a sociedad anonimas.
 Ormachea Tin-Congco v. Trillana
G.R. No. 4776, March 18, 1909

Facts:
Plaintiff Manuel Ormachea Tin-Congco and Luis Vizmanos Ong Queco were engaged in
business in Hagonoy, Malolos. Defendant Santiago Trillana purchased from them
merchandise amounting to P4,000. The partnership was later on dissolved and the
business was divided up between the partners and all the accounts and debts
belonging to defendant were allotted to plaintiff.

Plaintiff filed a complaint against defendant praying that he be ordered to pay

the amount plus interest which makes the total debt to P5,500. The indebtedness was
proven by documents signed by defendant and his agents in favor of the partnership
or their agent named Lawa.

Defendant contended that he had already settled his obligations by means of

periodical payments in tuba or the liquor of nipa palm. Defendant used as evidence
the document execute by Jose R. Lopez (Lawa), who used to be the manager of the
partnership, declaring that defendant has no outstanding debt with the distillery
which used to be under his management. Lawa admitted that he executed the
document but because the latter was not indebted to him but to Manuel Ormachea, to
whom the credits standing against Trillana was transferred.

Issue:
WON Trillana’s liability to the partnership was terminated because of the
concurrence of its manager that the former has no outstanding debt with the distillery.

Ruling: Article 1820

No. After the close of the business, the management of which was entrusted to
a certain person, and after expiration of two years from the date of his withdrawal, he
could not legally issue a document of warrant which would fatally exempt the debtor
from the payment of the debt existing in favor of the partner to whom the credit
claimed to have been extinguished may belong, because he has no authority for such
an act. Therefore, an admission made by a partner who was no longer a partner at the
time of the declaration is not admissible in evidence against the partnership.
 Cristobal v. Gomez
G.R. No. 27014, October 5, 1927

Facts:
Epifanio Gomez owns two parcels of land located in the Jabay, Municipality of
Bacoor, Cavite and a lot located in town of Bacoor, Cavite. He sold the property with
pacto de retro to Luis Yangco, redeemable in five years. The period to redeem expired
but Yangco extended it. Gomez approached Bibiano Bañas, a relative, to secure a loan.
The latter only agreed if Gomez’s brother Marcelino and sister Telesfora would also be
responsible for the loan.
Marcelino and Telesfora entered into a “private partnership in participation” for
the purpose of redeeming the property from Yangco. Epifanio was present when said
agreement was discussed and assented to. The capital consisted of ₱7000, of which
₱1500 came from Marcelino, and ₱5500 from Telesfora. The agreement provided that
the property redeemed will be placed in the name of Marcelino and Telesfora, the
income, rent, and produce of the property would go to the two and that the property
shall be returned to their brother as soon as the capital employed have been covered.
Subsequently, Epifanio Gomez died, leaving Paulina Cristobal and their four
children. Marcelino Gomez continued to possess the property, improved it, and earned
income from it. He acquired exclusive rights over it when Telesfora conveyed her
interest to him. He sold the property with pacto de retro to Bañas, redeemable within
five years. He was able to redeem such property.
Thereafter, Paulina and children filed action to recover property from Marcelino.
They claimed that the capital had been covered by the property’s income, hence, the
same should be returned to them. The lower court granted their petition. Marcelino
appealed. Hence the present case.

Issue:
WON the Heirs of Epifanio entitled to recover the property.
Ruling:
Yes. person who redeems property belonging to another which has been sold
under contract with pacto de retro, with the understanding that the income of the
property shall be applied to the reimbursement of the capital, with interest, and other
expenses incidental to the administration of the property, until the whole shall be
liquidated, whereupon the property shall be restored to the owner, occupies the
position of trustee; and when the purpose of such a trust has been accomplished, the
trustee is bound to surrender the property to the owner or his successors.

A trust constituted between two contracting parties for the benefit of a third
person is not subject to the rules governing donations of real property. The beneficiary
of a trust may demand performance of the obligation without having formally accepted
the benefit of the trust in a public document, upon mere acquiescence in the
formation of the trust and under the second paragraph of article 1257 of the Civil
Code.
 Sison v. David
G.R. No. L-11268, January 28, 1961
(Sorry di ko masyado ma-gets ang case kasi about privileged communications
yung case.)

Facts:
Margarita David executed a will constituting several legacies in favor of specified
persons and naming her grandnieces Narcisa de la Fuente de Teodoro and her sister
Priscilla de la Fuente de Sison — hereafter referred to as Mrs. Teodoro and Mrs. Sison,
respectively — as heirs of the residue of her estate, subject, however, to the condition
that, if Mrs. Teodoro and Mrs. Sison should die leaving no descendants, the properties
inherited by these sisters shall pass one-half to the heirs of the father of the testatrix
and the other half to the heirs of her mother. Herein defendant Gonzalo D. David is
one of such heirs of the parents of Margarita David. Subseuqently, Mrs. Teodoro and
Mrs. Sison were legally adopted by Margarita David as her children. Soon later,
Margarita David, donated to said sisters practically the same properties bequeathed to
them in her aforementioned will. Upon the demise of Margarita David, a special
proceeding was instituted for the settlement of her estate, and Jose Teodoro, Sr., was
originally appointed executor of the aforementioned will, whereas Gonzalo D. David,
who is a member of the Bar, acted as his counsel. Subsequently, Mr. Teodoro and
Mrs. Sison extrajudicially partitioned among themselves the properties bequeathed
and donated to them by Margarita David. Plaintiff herein, Carlos Moran Sison, is the
husband of Mrs. Sison.

It turned, however, that said properties were assigned by Mrs. Sison to Priscila
Estate, Inc. — a corporation organized on that date by her and plaintiff herein, aside
— in exchange for shares of stock thereof. Hence, said corporation filed an "Urgent
Petition Ex-Parte" to lift defendant's adverse claim, insofar as one of the
abovementioned properties upon the ground that said property belonged already to the
corporation which wanted to sell it, and that there were other properties of the estate
of Margarita David which sufficed to answer for said adverse claim. The motion was
granted. Thereafter, defendant herein filed in said cadastral proceedings, on his behalf
and that of Jose Teodoro, Sr., a "Petition for Bond", praying that the sale of the
property at Sto. Cristo street be disapproved "and/or a bond of P12,000 be forthwith
furnished" by the Priscila Estate, Inc. In support of this petition. Defendant alleged
among other that “2. That the movants herein object to the urgent petition ex parte on
the ground that the property to be sold herein is one of the few properties inherited
from Da. Margarita David which is not encumbered, because practically all of the
properties of the heiress Priscila F. de Sison are mortgaged, and the Priscila Estate,
Inc., is operating on an overdraft, which is the reason why these properties are to be
sold; and "3. That the reason there is an overdraft is that new buildings or
improvements have been made as conjugal properties of Carlos Sison and Priscila de
la Fuente, and now, the paraphernal properties inherited from Da. Margarita David is
being sold to pay for the obligations of these conjugal properties”
 Plaintiff alleged that the averment in the above-quoted paragraph 2 was made
with malice and evident intent to put him in ridicule, for defendant knew him
(plaintiff) to be the president of Priscila Estate, Inc. and, by the statements contained
in said paragraph, the defendant, "in effect, implied with clear malevolence and
malignity that plaintiff is incompetent and unfit to manage the affairs of the Priscila
Estate, Inc.";

Issue:
WON defendant’s allegations is without merit.

Ruling:
No. At any rate, the allegations in question in defendant's petition for bond were
neither malicious nor unfounded. Thus, it is a fact that most, or at least, several of the
most valuable properties transmitted by Margarita David to Mrs. Sison were
mortgaged. Those subsequently assigned by Mrs. Sison to Priscila Estate, Inc. were
encumbered altogether for P397,717.00. In order to construct the Priscila Building No.
3 on a paraphernal land of Mrs. Sison, it had been necessary to borrow ONE MILLION
PESOS (P1,000,000.00) from the RFC. The Priscila Estate, Inc., of which plaintiff is the
president, began its operations with an overdraft line of P236,517.00. Most of the
paraphernal properties of Mrs. Sison were transferred to said corporation. In fact, the
same asked that the annotation, on the certificate of title of one of those properties, of
the adverse claims of the defendant and Jose Teodoro Sr., be cancelled, upon the
ground that said property now belongs to the corporation, not to Mrs. Sison.

What is more, plaintiff and his wife organized a corporation, entitled CMS
Estate, Inc., to which some properties of Priscila Estate, Inc. (most of which had been
originally inherited by Mrs. Sison from Margarita David) were transferred. The CMS
Estate, Inc. had a capital stock of one million pesos (P1,000,000.00), divided into
1,000 shares of the par value of P1,000 each, of which 950 non- voting preferred
shares, and 50 are common voting shares. All of these common voting shares, in
addition to 50 non-voting preferred shares, were subscribed by the plaintiff, whereas
his wife had 96 non-voting preferred shares and no common shares. Four (4) other
persons had each a nominal holding of one (1) non-voting preferred share. As the sole
holder of all the voting common shares, plaintiff had absolute, exclusive and
permanent control over the management of this new corporation. In fact, the letters
"CMS", which are the initials of his name, Carlos Moran Sison, appear in the corporate
name "CMS Estate, Inc.," for the seeming purpose of representing to the public that
plaintiff was, for all intents and purposes, the corporation itself.