cases during malolos consti

8/8/2019 Cases During Malolos Consti

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 413 February 2, 1903

JOSE FERNANDEZ, plaintiff-appellant,vs.FRANCISCO DE LA ROSA, defendant-appellee.

Vicente Miranda, for appellant.Simplicio del Rosario, for appellee.

LADD, J.:

The object of this action is to obtain from the court a declaration that apartnership exists between the parties, that the plaintiff has a consequentinterested in certain cascoes which are alleged to be partnership property, and

that the defendant is bound to render an account of his administration of thecascoes and the business carried on with them.

Judgment was rendered for the defendant in the court below and the plaintiffappealed.

The respective claims of the parties as to the facts, so far as it is necessary tostate them in order to indicate the point in dispute, may be briefly summarized.The plaintiff alleges that in January, 1900, he entered into a verbal agreementwith the defendant to form a partnership for the purchase of cascoes and thecarrying on of the business of letting the same for hire in Manila, the defendant tobuy the cascoes and each partner to furnish for that purpose such amount of

money as he could, the profits to be divided proportionately; that in the sameJanuary the plaintiff furnished the defendant 300 pesos to purchase a cascodesignated as No. 1515, which the defendant did purchase for 500 pesos ofDoa Isabel Vales, taking the title in his own name; that the plaintiff furnishedfurther sums aggregating about 300 pesos for repairs on this casco; that on thefifth of the following March he furnished the defendant 825 pesos to purchaseanother casco designated as No. 2089, which the defendant did purchase for1,000 pesos of Luis R. Yangco, taking the title to this casco also in his ownname; that in April the parties undertook to draw up articles of partnership for thepurpose of embodying the same in an authentic document, but that thedefendant having proposed a draft of such articles which differed materially fromthe terms of the earlier verbal agreement, and being unwillingly to include cascoNo. 2089 in the partnership, they were unable to come to any understanding and

no written agreement was executed; that the defendant having in the meantimehad the control and management of the two cascoes, the plaintiff made a

demand for an accounting upon him, which the defendant refused to render,denying the existence of the partnership altogether.

The defendant admits that the project of forming a partnership in the cascobusiness in which he was already engaged to some extent individually wasdiscussed between himself and the plaintiff in January, 1900, and earlier, oneMarcos Angulo, who was a partner of the plaintiff in a bakery business, beingalso a party to the negotiations, but he denies that any agreement was everconsummated. He denies that the plaintiff furnished any money in January, 1900,for the purchase of casco No. 1515, or for repairs on the same, but claims that heborrowed 300 pesos on his individual account in January from the bakery firm,consisting of the plaintiff, Marcos Angulo, and Antonio Angulo. The 825 pesos,which he admits he received from the plaintiff March 5, he claims was for thepurchase of casco No. 1515, which he alleged was bought March 12, and healleges that he never received anything from the defendant toward the purchaseof casco No. 2089. He claims to have paid, exclusive of repairs, 1,200 pesos forthe first casco and 2,000 pesos for the second one.

The case comes to this court under the old procedure, and it is thereforenecessary for us the review the evidence and pass upon the facts. Our generalconclusions may be stated as follows:

(1) Doa Isabel Vales, from whom the defendant bought casco No. 1515,testifies that the sale was made and the casco delivered in January, although thepublic document of sale was not executed till some time afterwards. This witnessis apparently disinterested, and we think it is safe to rely upon the truth of hertestimony, especially as the defendant, while asserting that the sale was inMarch, admits that he had the casco taken to the ways for repairs in January.

It is true that the public document of sale was executed March 10, and that thevendor declares therein that she is the owner of the casco, but such declarationdoes not exclude proof as to the actual date of the sale, at least as against theplaintiff, who was not a party to the instrument. (Civil Code, sec. 1218.) It often

happens, of course, in such cases, that the actual sale precedes by aconsiderable time the execution of the formal instrument of transfer, and this iswhat we think occurred here.

(2) The plaintiff presented in evidence the following receipt: "I have this dayreceived from D. Jose Fernandez eight hundred and twenty-five pesos for thecost of a casco which we are to purchase in company. Manila, March 5, 1900.Francisco de la Rosa." The authenticity of this receipt is admitted by thedefendant. If casco No. 1515 was bought, as we think it was, in January, thecasco referred to in the receipt which the parties "are to purchase in company"must be casco No. 2089, which was bought March 22. We find this to be the fact,and that the plaintiff furnished and the defendant received 825 pesos toward thepurchase of this casco, with the understanding that it was to be purchased on

joint account.


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(3) Antonio Fernandez testifies that in the early part of January, 1900, he sawAntonio Angulo give the defendant, in the name of the plaintiff, a sum of money,the amount of which he is unable to state, for the purchase of a casco to be usedin the plaintiff's and defendant's business. Antonio Angulo also testifies, but thedefendant claims that the fact that Angulo was a partner of the plaintiff renderedhim incompetent as a witness under the provisions of article 643 of the thenCode of Civil Procedure, and without deciding whether this point is well taken, wehave discarded his testimony altogether in considering the case. The defendantadmits the receipt of 300 pesos from Antonio Angulo in January, claiming, as has

been stated, that it was a loan from the firm. Yet he sets up the claim that the 825pesos which he received from the plaintiff in March were furnished toward thepurchase of casco No. 1515, thereby virtually admitting that casco waspurchased in company with the plaintiff. We discover nothing in the evidence tosupport the claim that the 300 pesos received in January was a loan, unless itmay be the fact that the defendant had on previous occasions borrowed moneyfrom the bakery firm. We think all the probabilities of the case point to the truth ofthe evidence of Antonio Fernandez as to this transaction, and we find the fact tobe that the sum in question was furnished by the plaintiff toward the purchase forjoint ownership of casco No. 1515, and that the defendant received it with theunderstanding that it was to be used for this purposed. We also find that theplaintiff furnished some further sums of money for the repair of casco.

(4) The balance of the purchase price of each of the two cascoes over and abovethe amount contributed by the plaintiff was furnished by the defendant.

(5) We are unable to find upon the evidence before us that there was any specificverbal agreement of partnership, except such as may be implied from the fact asto the purchase of the casco.

(6) Although the evidence is somewhat unsatisfactory upon this point, we think itmore probable than otherwise that no attempt was made to agree upon articlesof partnership till about the middle of the April following the purchase of thecascoes.

(7) At some time subsequently to the failure of the attempt to agree uponpartnership articles and after the defendant had been operating the cascoes forsome time, the defendant returned to the plaintiff 1,125 pesos, in two differentsums, one of 300 and one of 825 pesos. The only evidence in the record as tothe circumstances under which the plaintiff received these sums is contained inhis answer to the interrogatories proposed to him by the defendant, and thewhole of his statement on this point may properly be considered in determiningthe fact as being in the nature of an indivisible admission. He states that bothsums were received with an express reservation on his part of all his rights as apartner. We find this to be the fact.

Two questions of law are raised by the foregoing facts: (1) Did a partnership exist

between the parties? (2) If such partnership existed, was it terminated as a resultof the act of the defendant in receiving back the 1,125 pesos?

(1) "Partnership is a contract by which two or more persons bind themselves tocontribute money, property, or industry to a common fund, with the intention ofdividing the profits among themselves." (Civil Code, art. 1665.)

The essential points upon which the minds of the parties must meet in a contractof partnership are, therefore, (1) mutual contribution to a common stock, and (2)a joint interest in the profits. If the contract contains these two elements thepartnership relation results, and the law itself fixes the incidents of this relation ifthe parties fail to do so. (Civil Code, secs. 1689, 1695.)

We have found as a fact that money was furnished by the plaintiff and receivedby the defendant with the understanding that it was to be used for the purchaseof the cascoes in question. This establishes the first element of the contract,namely, mutual contribution to a common stock. The second element, namely,the intention to share profits, appears to be an unavoidable deduction from thefact of the purchase of the cascoes in common, in the absence of any otherexplanation of the object of the parties in making the purchase in that form, and,it may be added, in view of the admitted fact that prior to the purchase of the firstcasco the formation of a partnership had been a subject of negotiation betweenthem.

Under other circumstances the relation of joint ownership, a relation distinctthough perhaps not essentially different in its practical consequence from that ofpartnership, might have been the result of the joint purchase. If, for instance, itwere shown that the object of the parties in purchasing in company had been tomake a more favorable bargain for the two cascoes that they could have done bypurchasing them separately, and that they had no ulterior object except to effecta division of the common property when once they had acquired it, theaffectiosocietatis would be lacking and the parties would have become joint tenants only;but, as nothing of this sort appears in the case, we must assume that the objectof the purchase was active use and profit and not mere passive ownership incommon.

It is thus apparent that a complete and perfect contract of partnership wasentered into by the parties. This contract, it is true, might have been subject to asuspensive condition, postponing its operation until an agreement was reachedas to the respective participation of the partners in the profits, the character of thepartnership as collective oren comandita, and other details, but although it isasserted by counsel for the defendant that such was the case, there is little ornothing in the record to support this claim, and that fact that the defendant didactually go on and purchase the boat, as it would seem, before any attempt hadbeen made to formulate partnership articles, strongly discountenances thetheory.

The execution of a written agreement was not necessary in order to give efficacyto the verbal contract of partnership as a civil contract, the contributions of the

partners not having been in the form of immovables or rights in immovables.(Civil Code, art. 1667.) The special provision cited, requiring the execution of a


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public writing in the single case mentioned and dispensing with all formalrequirements in other cases, renders inapplicable to this species of contract thegeneral provisions of article 1280 of the Civil Code.

(2) The remaining question is as to the legal effect of the acceptance by theplaintiff of the money returned to him by the defendant after the definitive failureof the attempt to agree upon partnership articles. The amount returned fell short,in our view of the facts, of that which the plaintiff had contributed to the capital ofthe partnership, since it did not include the sum which he had furnished for therepairs of casco No. 1515. Moreover, it is quite possible, as claimed by theplaintiff, that a profit may have been realized from the business during the periodin which the defendant have been administering it prior to the return of themoney, and if so he still retained that sum in his hands. For these reasons theacceptance of the money by the plaintiff did not have the effect of terminating thelegal existence of the partnership by converting it into a societas leonina, asclaimed by counsel for the defendant.

Did the defendant waive his right to such interest as remained to him in thepartnership property by receiving the money? Did he by so doing waive his rightto an accounting of the profits already realized, if any, and a participation in themin proportion to the amount he had originally contributed to the common fund?

Was the partnership dissolved by the "will or withdrawal of one of the partners"under article 1705 of the Civil Code? We think these questions must beanswered in the negative.

There was no intention on the part of the plaintiff in accepting the money torelinquish his rights as a partner, nor is there any evidence that by anything thathe said or by anything that he omitted to say he gave the defendant any groundwhatever to believe that he intended to relinquish them. On the contrary henotified the defendant that he waived none of his rights in the partnership. Norwas the acceptance of the money an act which was in itself inconsistent with thecontinuance of the partnership relation, as would have been the case had theplaintiff withdrawn his entire interest in the partnership. There is, therefore,nothing upon which a waiver, either express or implied, can be predicated. Thedefendant might have himself terminated the partnership relation at any time, ifhe had chosen to do so, by recognizing the plaintiff's right in the partnershipproperty and in the profits. Having failed to do this he can not be permitted toforce a dissolution upon his co-partner upon terms which the latter is unwilling toaccept. We see nothing in the case which can give the transaction in questionany other aspect than that of the withdrawal by one partner with the consent ofthe other of a portion of the common capital.

The result is that we hold and declare that a partnership was formed between theparties in January, 1900, the existence of which the defendant is bound torecognize; that cascoes No. 1515 and 2089 constitute partnership property, andthat the plaintiff is entitled to an accounting of the defendant's administration of

such property, and of the profits derived therefrom. This declaration does notinvolve an adjudication as to any disputed items of the partnership account.

The judgment of the court below will be reversed without costs, and the recordreturned for the execution of the judgment now rendered. So ordered.

Arellano, C.J., Torres, Cooper, and Mapa, JJ., concur.Willard, J., dissenting.

ON MOTION FOR A REHEARING.

MAPA, J.:

This case has been decided on appeal in favor of the plaintiff, and the defendanthas moved for a rehearing upon the following grounds:

1. Because that part of the decision which refers to the existence of thepartnership which is the object of the complaint is not based upon clear anddecisive legal grounds; and

2. Because, upon the supposition of the existence of the partnership, thedecision does not clearly determine whether the juridical relation between thepartners suffered any modification in consequence of the withdrawal by theplaintiff of the sum of 1,125 pesos from the funds of the partnership, or if itcontinued as before, the parties being thereby deprived, he alleges, of one of theprincipal bases for determining with exactness the amount due to each.

With respect to the first point, the appellant cites the fifth conclusion of thedecision, which is as follows: "We are unable to find from the evidence before usthat there was any specific verbal agreement of partnership, except such as maybe implied from the facts as to the purchase of the cascoes."

Discussing this part of the decision, the defendant says that, in the judgment ofthe court, if on the one hand there is no direct evidence of a contract, on theother its existence can only be inferred from certain facts, and the defendantadds that the possibility of an inference is not sufficient ground upon which toconsider as existing what may be inferred to exist, and still less as sufficientground for declaring its efficacy to produce legal effects.

This reasoning rests upon a false basis. We have not taken into considerationthe mere possibility of an inference, as the appellant gratuitously stated, for thepurpose of arriving at a conclusion that a contract of partnership was entered intobetween him and the plaintiff, but have considered the proof which is derivedfrom the facts connected with the purchase of the cascoes. It is stated in thedecision that with the exception of this evidence we find no other which shows

the making of the contract. But this does not mean (for it says exactly thecontrary) that this fact is not absolutely proven, as the defendant erroneously


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appears to think. From this data we infer a fact which to our mind is certain andpositive, and not a mere possibility; we infer not that it is possible that thecontract may have existed, but that it actually did exist. The proofs constituted bythe facts referred to, although it is the only evidence, and in spite of the fact that itis not direct, we consider, however, sufficient to produce such a conviction, whichmay certainly be founded upon any of the various classes of evidence which thelaw admits. There is all the more reason for its being so in this case, because acivil partnership may be constituted in any form, according to article 1667 of theCivil Code, unless real property or real rights are contributed to it the only

case of exception in which it is necessary that the agreement be recorded in apublic instrument.

It is of no importance that the parties have failed to reach an agreement withrespect to the minor details of contract. These details pertain to the accidentaland not to the essential part of the contract. We have already stated in theopinion what are the essential requisites of a contract of partnership, according tothe definition of article 1665. Considering as a whole the probatory facts whichappears from the record, we have reached the conclusion that the plaintiff andthe defendant agreed to the essential parts of that contract, and did in factconstitute a partnership, with the funds of which were purchased the cascoeswith which this litigation deals, although it is true that they did not take the

precaution to precisely establish and determine from the beginning the conditionswith respect to the participation of each partner in the profits or losses of thepartnership. The disagreements subsequently arising between them, whenendeavoring to fix these conditions, should not and can not produce the effect ofdestroying that which has been done, to the prejudice of one of the partners, norcould it divest his rights under the partnership which had accrued by the actualcontribution of capital which followed the agreement to enter into a partnership,together with the transactions effected with partnership funds. The law hasforeseen the possibility of the constitution of a partnership without an expressstipulation by the partners upon those conditions, and has established ruleswhich may serve as a basis for the distribution of profits and losses among thepartners. (Art. 1689 of the Civil Code. ) We consider that the partnership enteredinto by the plaintiff and the defendant falls within the provisions of this article.

With respect to the second point, it is obvious that upon declaring the existenceof a partnership and the right of the plaintiff to demand from the defendant anitemized accounting of his management thereof, it was impossible at the sametime to determine the effects which might have been produced with respect to theinterest of the partnership by the withdrawal by the plaintiff of the sum of 1,125pesos. This could only be determined after a liquidation of the partnership. Then,and only then, can it be known if this sum is to be charged to the capitalcontributed by the plaintiff, or to his share of the profits, or to both. It might wellbe that the partnership has earned profits, and that the plaintiff's participationtherein is equivalent to or exceeds the sum mentioned. In this case it is evidentthat, notwithstanding that payment, his interest in the partnership would stillcontinue. This is one case. It would be easy to imagine many others, as thepossible results of a liquidation are innumerable. The liquidation will finally

determine the condition of the legal relations of the partners inter se at the time ofthe withdrawal of the sum mentioned. It was not, nor is it possible to determinethis status a prioriwithout prejudging the result, as yet unknown, of the litigation.Therefore it is that in the decision no direct statement has been made upon thispoint. It is for the same reason that it was expressly stated in the decision thatit "does not involve an adjudication as to any disputed item of the partnershipaccount."

The contentions advanced by the moving party are so evidently unfounded thatwe can not see the necessity or convenience of granting the rehearing prayedfor, and the motion is therefore denied.

Arellano, C.J., Torres, Cooper, and Ladd, JJ., concur.Willard and McDonough, JJ., did not sit in this case.


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Manila

EN BANC

G.R. No. 1786 August 12, 1905

MATTIE E. LEVY, administratrix of the estate of SAMUEL J. LEVY, plaintiff-appellant,vs.L. M. JOHNSON, W. A. WHALEY, PAUL BLUM, and HENRYBLUM, defendants-appellees.

Gibbs and Tutherly for appellant.Chas. C. Cohn for appellees.

WILLARD, J.:

Prior to October 21, 1898, Thomas E. Evans and Walter Jackson were the

owners of an establishment known as "The Alhambra" situated in the Escolta,Manila, consisting of a stock of goods, furniture, and fixtures, and a lease for aterm of years of the building in which the business was conducted. They carriedon there a drinking saloon and later the place was used also for a theater. Theywere heavily in debt, and Evans attempted to secure a loan from the defendantPaul Blum of 32,443.35 pesos. Blum agreed to make him the loan on thecondition that he (Evans) should buy the interest of his copartner, Jackson,should convey to the defendant Whaley an undivided half of the property, andshould allow Whaley to manage the business as he (Whaley) saw fit. Evansaccepted these terms, acquired the interest of Jackson in the property, and onOctober 21, 1898, conveyed to the defendant Whaley an undivided half of theproperty, for the expressed consideration of $1. Whether this consideration of $1was paid by Blum or Whaley we consider of no importance. It was not shown that

the business was worth more than the debt against it, and the evidence indicatesthat it was not.

On the same day Evans and Whaley executed to the defendant Paul Blum a billof sale of the entire property for the expressed consideration of 32,443.35 pesos.On the same day Evans and Whaley on the one part and Paul Blum on the otherpart executed an agreement in which it was recited that the Alhambra had beenmortgaged to Blum to secure the payment of 32,443.35 pesos, it being furtherprovided in this agreement that Evans and Whaley should be equal partners inthe business, which Whaley should manage, and that the net receipts should beduly deposited with the American Commercial Company. The copy of thisagreement in the bill of exceptions bears the date of the 2d of October, 1898, but

for the reason stated in the judgment of the Court of First Instance in the case ofJackson vs. Blum, hereinafter referred to, we think the correct date was the 21st.

No question is made in the case but that Paul Blum actually advanced at thistime the 32,443.35 pesos in cash, all of which was received by Evans, and noneof it by Whaley.

The business was apparently carried on under the terms of this agreement up tothe 4th of December, 1899, when the defendant Henry Blum, acting for thedefendant Paul Blum and the American Commercial Company, notified Evansand Whaley in writing that the amount then due upon the date aforesaid was28,927.97 pesos, and that if this amount was not paid at the first of the ensuingyear they should take steps to collect it. Nothing was done by Evans on the 4thday of January, 1900, Paul Blum took possession of the establishment under theaforesaid two documents of the 21st of October, 1898. Whaley, who was inpossession at that time, surrendered the property to him in payment andsatisfaction of the debt, and then delivered the keys into his possession. On thenext day Whaley notified Evans in writing that Paul Blum, on the day before, hadmade demand on him for the payment of the debt, but he was unable to pay it,and that he had turned over the property to Blum in satisfaction thereof, and haddelivered him the keys.

Blum left Whaley in control and management of the business, and there was nooutward change in the appearance thereof. It is shown, however, that the keys

were delivered to Blum every night. This condition of things continued until the26th of January, 1900. On that day four documents were executed and delivered.One of them was a deed of the entire property by Paul Blum to Whaley; anotherwas a deed of an undivided half of the property by Whaley to the defendantJohnson; a third was a mortgage by Whaley to Paul Blum of his undivided half ofthe property, to secure 19,00 pesos; a fourth was a contract of partnershipbetween Whaley and Johnson for carrying on the said business, by the terms ofwhich it was provided that Whaley should continue to act as the manager of thebusiness, and exercise full control over it until the mortgage made by him to Blumfor 19,000 pesos had been paid.

In payment of the undivided half of the property conveyed by Whaley to Johnson,Johnson paid to Whaley 15,000 pesos, and this money was paid to Paul Blum asa part of the purchase price of the whole property conveyed to him by Blum onthe same day. The 15,000 pesos paid by Johnson for this undivided half was themoney of the deceased Samuel L. Levy. Fourteen thousand pesos of it had beensent by Levy from Shanghai to Johnson at Manila some time prior to the 26th ofJanuary, 1900, to be invested in the purchase of an interest in the Alhambra.Some time prior to January 26, 1900, Levy himself arrived in Manila and paid toJohnson 1,000 pesos more, which made up the sum of 15,000 pesos paid byJohnson to Whaley and by Whaley to Blum.

Whaley and Johnson at once took possession of the property, and continued inthe management of it until the month of July, 1901. The business was thenclosed by reason of a law of the Commission passed at that time prohibiting the

sale of liquor on the Escolta.


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On the 22nd of March, 1900, Johnson being about to leave for Australia for thepurpose of securing attractions of the theater, Levy suggested to him that he(Levy) should have some document in writing from Johnson showing his (Levy's)interest in the Alhambra. Thereupon Levy drew up and Johnson promised toconvey, on January 26, 1901, to Levy, all his right and interest in an undividedhalf of the property. Levy died in July, 1900 and the plaintiff was appointedadministratrix of his estate.

In August, 1900, Jackson commenced an action against Johnson, Whaley, Paul

Blum, and Henry Blum, in which he alleged that he had acquired the interest ofEvans in the property; that he was the owner, therefore, of an undivided half of it,subject to the payment of the amount still due on the mortgage of 32,000 pesos,made by Evans and Whaley to Blum. He asked for an accounting as to theamount due on the mortgage, and a judgment that he was the owner of anundivided half, subject to such balance. The defendants made a joint answer inthe case, and it was tried in the Court of First Instance of Manila, and decided onthe 11th of February, 1901, in favor of the plaintiff Jackson, the court declaringthat the attempted foreclosure of the pledge or mortgage made by Paul Blum onJanuary 4, 1900, was invalid; that it did not destroy the interest of Evans in theproperty, and that his assignee, Jackson, was the owner of one-half of it, subjectto the amount due on the mortgage. The defendants appealed from this

judgment to the Supreme Court, and this court, on the 28th of August, 1901,affirmed the judgment in all its parts. At the time this final judgment in theSupreme Court was rendered, the place had been closed, as before stated, anda receiver was appointed in that suit, to take possession of what assets therewere left belonging to the establishment, and dispose of them. This he did,showing a net balance of 6,000 pesos. What disposition was made of this 6,000pesos does not appear from the evidence.

On November 2, 1900, one of the present counsel for the plaintiff, acting for her,notified the American Commercial Company in writing that she was the owner ofJohnson's half interest in the Alhambra, and that they should not permit the saleor other disposition of the leasehold estate thereon to the prejudice of plaintiff'sinterest.

On January 26, 1901, the same attorney, acting for the plaintiff, made a demandupon Johnson for the possession of his half of the property, pursuant to theagreement made between Levy and Johnson on the 22d of March, 1900, underwhich Johnson had agreed to turn the property over to Levy on that date(January 26, 1901). Johnson refused to make such delivery.

In December, 1901, plaintiff commenced this action against Johnson, Whaley,Paul Blum, and Henry Blum. Three amended complaints were filed. In the lastcomplaint plaintiff seeks to recover the 15,000 pesos upon the ground thatdefendants, in January, 1900, entered into a fraudulent conspiracy to cheat anddefraud Levy out of 15,000 pesos and for that purpose concocted this sale on the

26th of January, 1900, to Whaley by Blum, and the subsequent sale of one-halfby Whaley to Johnson, plaintiff alleging that at that time Blum did not own the

property, or at least only one-half of it, and that Johnson acquired nothing at allby his deed from Whaley. Judgment was rendered in the Court of First Instanceon the 25th of July, 1903, in favor of the plaintiff and against the defendantsJohnson and Henry Blum and against the plaintiff. From the judgment, so far as itheld Paul Blum and Henry Blum not responsible to the plaintiff, plaintiff hasappealed.

Considerable time was devoted in the trial below in showing the relationsbetween Paul Blum and Henry Blum on the one part and the American

Commercial Company on the other. It appeared that Paul Blum was director andmanger of the American Commercial Company, which was engaged in sellingwines, liquors, and beers in Manila, and that Henry Blum was also interested inthe same enterprise, but we do not think it is of any importance to determineexactly what their relations were. It is enough to say that all the documentsrelating to this property were made in the name of Paul Blum, and that if theplaintiff has any right of action against anyone connected with the company shehas it against him, and that if she has no right of action against him she has noright of action against the company.

The claim of the plaintiff, reduced to its lowest terms, is that Johnson, by his deedfrom Whaley of an undivided half of the property, acquired no interest whatever

therein, and that contract was made by the fraud of the defendants Paul andHenry Blum. There is no evidence in the case that either Paul and Henry Blummade any representations whatever, either to Johnson or Levy, as to the value ofthe property or its condition. It appears affirmatively that Johnson knew the exactcondition of the title to the property prior to the 4th of January, 1900, and knewthat the only interest which Paul Blum had at that time was the interest which hederived by virtue of this bill of sale and pledge, and he was waiting fort theforeclosure by Paul Blum of his claims in order to make the purchase in behalf ofLevy. There is no doubt, under the evidence, but that Johnson had full authorityfrom Levy to invest the 15,000 pesos in this business, and there is nothing toshow that he had not the right to invest it on such terms and conditions as hesaw fit, and in any event there is no evidence to show that Paul or Henry Blumknew of any limitations upon his authority in this respect. A great deal of time was

spent in the court below in attempting to show that Paul and Henry Blum knewthat the 15,000 pesos paid by Johnson was furnished by Levy, but we considerthis a matter of no importance. Under the evidence in the case the rights of theparties are exactly the same whether they knew or did not know of this fact.

It further appears that Levy arrived here between the 1st and 15th of January,1900; that he lived with Whaley and Johnson, and that he investigated the wholematter and saw some if not all of the papers that were made. Immediately afterthe purchase by Whaley and Johnson, Levy went into the business as cashierand bookkeeper. He and his wife, the plaintiff, lived in the upper story of thebuilding occupied by the Alhambra for some time, and until his death, in July.

We see no evidence anywhere in the case showing any fraud whatever on thepart of Paul or Henry Blum. On the 4th of January, 1900, Blum held an absolute


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deed of the property, given to him by the owners of it. For this deed he had paidmore than 28,000 pesos, for which he had not been reimbursed. Acting upon theadvice of counsel, and accompanied by counsel and witnesses, he went to theestablishment and formally demanded possession thereof under this document.Whaley, one of the owners of the property, and the person who, under the termsof the partnership between him and Evans, had the absolute control of it, beingunable to pay the debt, surrendered the property to Blum in satisfaction thereof.Blum then took possession and retained possession. That he had a valid claimagainst the property for over 28,000 pesos, which had not been paid; that he

acted in good faith in taking possession and in receiving the property insatisfaction of the debt, and that he, on the 26th of January, 1900, believed thathe had good title to the property, is, we think, abundantly established by theevidence. Whether or not he did thus acquire title to the property dependedaltogether upon the decision of the Supreme Court. If that decision had been theother way, and if this court had decided that the proceedings taken by Blum onthe 4th of January, 1900, were sufficient to vest him with the title to the property,this case, of course, would never have been heard of. There would have been noclaim of conspiracy, or fraud, because Johnson would in any event have gottenby his deed from Whaley what he paid for. That the legal question involved inthat suit of Jackson vs. Blum was not free from doubt, and that Blum was justifiedin believing that his proceedings were sufficient to transfer the title to him, isshown by an examination of the authorities presented by the appellants in the

argument of that case in this court, and in the petition for reargument. It is difficultto maintain an action for fraud, when the question as to the existence ornonexistence of the fraud depends on a decision by a court of a doubtfulquestion of law.

To our minds the case involved, if anything, nothing more than a breach ofwarranty of title under articles 1461, 1474, and the following articles of the CivilCode. In her brief of 131 pages in this court the appellant devotes less than twopages to the discussion of this phase of the case, giving some reasons why shedid not commence such an action. it is not, of course, necessary to decidewhether, if she had commenced such an action, she could have prevailed or not.It is said repeatedly in appellant's brief that Johnson got absolutely nothing by his

deed from Whaley of the undivided half, because the particular half which wasconveyed by Whaley was Jackson's half, which Blum did not own, and theappellant assumes that the half which Blum did own went to Whaley, and was byhim mortgaged back to Blum. We see no ground whatever for this contention.Blum conveyed the entire property to Whaley, without any distinction of parts,claiming that the interest of Jackson, Evans, and Whaley had been extinguished.Whaley conveyed an undivided half of the property to Johnson. This half was notin any way identified. The title to an undivided half of the property having failed,and it resulting that Johnson had an apparent title to one-half, and Blum, throughhis mortgage, had an apparent title to the other half, and Blum being theguarantor of the title to the whole, it would seem that his half would be the halfthat was lost, and that Johnson would be protected in his half; but, as we havesaid, there is no necessity for deciding that question, for, notwithstanding the

claim made by the appellant in her reply brief, this is not an action to recover on awarranty, but an action for fraud, and such fraud has not been proved. Nor is

there anything in the other points made by the appellant in her reply brief. Asimple failure of title to property conveyed gives rise to an action under articles1461 and 1474 of the Civil Code, but does not make a case of error under article1265, nor a case of want of cause under article 1275. Moreover, there was nowant of cause in the contracts. Blum conveyed to Whaley and Whaley conveyedto Johnson, and each promised to guarantee the title. This was sufficient. (Art.1274.) Under these conveyance Johnson went into a remained in possessionnearly a year and a half.

The appellant devotes some attention to another transaction occurring at the timeof the sale on the 26th of January, 1900, which we think is of no importance. Itappears that when Blum on that day transferred the property to Whaley he gaveto Whaley a check of 30,000 pesos. Whaley, in payment for the property, gave toBlum a check for 28,878.27 pesos, and some time after that (February 6) Whaleygave to Blum another check for 1,121,73 pesos the exact difference betweenBlum's check for 30,000 pesos and Whaley's check for the purchase of theproperty, 28,878.27 pesos. This shows that the transaction connected with this30,000 pesos check was a mere form, and did not in any way affect the rights ofany of the parties. Why this course was pursued does not appear, although Blumtestifies that it was done under the advice of counsel. It will have been noticedthat when Whaley mortgaged his half to Blum on January 26, 1900, the mortgagewas made for 19,000 pesos, and not for one-half of the purchase price of28,878.27 pesos, and a good deal of time was spent in trying to ascertain howthe difference was made up. We consider this a matter of no importance.Johnson had no interest whatever in Whaley's one-half. Whaley was entitled toencumber that in any way he saw it, and to any amount which would besatisfactory to Blum. That the mortgage was for 19,000 pesos and not for 13,000pesos did not any way prejudice the interests of Johnson, upon whose half thismortgage, no matter what it was, was not a lien.

A great deal of space in the appellant's brief is devoted to the discussion of amortgage made by Whaley to Blum on May 12, 1900, which was satisfied anddischarged on August 28, 1900. The original mortgage was not produced inevidence, but the satisfaction was. The appellant claims that Whaley and Blum

committed a criminal offense in executing this instrument, in view of the factclaimed by the appellant to exist, that Whaley in the mortgage representedhimself to be the owner of the entire property. As this mortgage was afterwardssatisfied, we do not see how it has any bearing upon the case; and moreover, itappears from the evidence, and is not disputed, that this mortgage was madepractically at the request of Johnson, who at that time was in Australia onbusiness of the company, and that from the proceeds of the mortgage (5,000pesos) Whaley sent to Johnson in Australia 4,557.37 pesos. This was sent in twoamounts, and the entries therefor were made by Levy himself in the books of thecompany. The statement in the appellant's brief that this mortgage was madewithout Levy's knowledge or consent is not supported by the evidence. It will benoticed, moreover, that under the terms of the partnership agreement betweenJohnson and Whaley, Whaley had authority to mortgage the whole of the

property for the purposes of the partnership. Considerable fault was found by the


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appellant with this provision of the articles of partnership, but we do not see howthat has any bearing upon the question of fraud. Blum had a right to sell theproperty upon such terms as he saw fit. He had a right to insist at this time, as hehad insisted in his dealings with Evans, that Whaley should be the manager ofthe business. Johnson, as has been said, had authority to invest this money ofLevy's on such terms as he (Johnson) saw fit, and Levy, according to theevidence, was thoroughly informed as to the whole transaction.

It is said repeatedly in the appellant's brief that in the Jackson suit the defendants

Paul and Henry Blum made a joint answer for all the defendants, in which theydenied that Johnson and Whaley had any interest in the property, and that duringthe trial of the case they concealed that fact, and that the Court of First Instancerendered the judgment declaring that Blum was the sole owner of an undividedhalf of the property, and Jackson of the other half. We find no evidence in therecord to sustain any one of these claims. Only a small part of the answer madein that case appears in this record, and an examination of that part does notsupport the contention of the appellant. It appears, moreover, from the decisionof the Court of First Instance in the Jackson case, that Johnson testified in thatcase that when the summons was served upon him he was acting as a partner ofWhaley in the Alhambra, and Whaley testified in the same trial that during theyear 1900 he and Johnson announced themselves as proprietors of theestablishment. It is also to be noticed that the judgment of the court orders, notthat Blum should account to Jackson, but that all the defendants, Paul Blum,Henry Blum, Whaley, and Johnson, should account, and that they should pay toJackson the value of his interest in the property, which was one-half. Thedecision says nothing about the ownership of the other half.

The appellant attempted to show at the trial that when Johnson, on the 26th ofJanuary, 1901, refused to deliver possession to the plaintiff of her half of theproperty, his action was advised by the defendants Blum, or by their counsel.The evidence does not show such advice, and if it did we do not see how that inany way could affect the defendants Paul and Henry Blum. Johnson's refusal todeliver in accordance with the terms of his contract of March 22, 19009, withLevy, might have made him liable to some action on the part of Levy's

administratrix, but we do not see how it had any tendency to prove any fraud onthe part of Henry or Paul Blum. It is further to be noticed that such delivery byJohnson might be claimed to be in violation of the contract between Johnson andWhaley on the one part and Blum on the other, entered into on the 26th ofJanuary, 1900, by the terms of which the property was not to be disposed byeither Whaley or Johnson until the mortgage of 19,000 pesos had been paid.There is no evidence in the case that this sum ever has been paid. The appellantadmits that the evidence does not show whether the Alhambra made money orlost money during the time that Johnson was connected with it, but it must beapparent that when the place was closed by the operation of the Manila liquorlaw of July, 1900, a great loss much have been suffered.

It is claimed repeatedly by the appellant in her brief that the business wasconducted in exactly the dame way after the 26th of January, 1900, as it was

before. There is no evidence to support this claim. On the contrary, the evidenceis conclusive that after January 26, 1900, the daily receipts of the business werenot paid either to the American Commercial Company or to the Blums, but thatthe American Commercial Company submitted bills once a month formerchandise sold to Whaley and Johnson, and these bills were some of thempaid. It also appears from the evidence, and is not contradicted, that neither ofthe Blums nor the American Commercial Company, after the 26th of January,1900, had any interest whatever in the theatrical part of the establishment.

That the question of liability on the part of Paul and Henry Blum rested entirely, inthe opinion of counsel for the appellant, upon the result of the Jackson suit, isshown by his conduct of the affairs of the administratrix. In November, 1900, hegave notice to the Amercial Commercial Company that the Levy estate was theowner of one-half of the property. He did not at that time take any action lookingto a rescission of the contract of the 26th of January, 1900, either on the groundof fraud or any other ground. On the 26th of January, 1901, when he made thedemand for the possession of the property, he gave no indication of adisaffirmance in any way of the contracts made between Johnson and Whaley forthe benefit of Levy. He testified at the trial that he knew of the case betweenJackson and Blum just before judgment was rendered in the Court of FirstInstance, and that he knew from Judge Rohde, counsel for the defendant in thatcase, that he had obtained a judgment, but he took no action looking to therescission of the contract from the time of the decision in the Court of FirstInstance, in February, until the decision of the Supreme Court in August. Hetestified that he first knew of the relations between Levy and Johnson when hediscovered the document of March 22, 1900, which was some time before Mrs.Levy was appointed administratrix.

The citation by the appellant of the cases relating to following trust funds in thehands of third persons has no bearing upon this case. There was nomisapplication by Johnson of the 15,000 pesos in his possession. He applied it tothe very purpose for which it was given to him, viz, the purchase of an interest inthe Alhambra, and this application was made with the knowledge and consent ofLevy, and practically in his presence. The fact that the title to a part of the

property thus purchase may have failed does not make the case one ofmisapplication of trust funds.

The appellant, in her brief, in speaking of the claim of the defendant Paul Blum tothe effect that he believed that at the time of executing these papers on the 26thof January, 1900, he was the sole owner of the property and acted in good faith,says that the evidence overwhelmingly discredits this statement. We do notagree with this assertion. The evidence not only supports it but there is in ouropinion no evidence to show the contrary. Johnson, who was thoroughlyinformed of the whole transaction, testified that he believed that Blum or theCommercial Company was the owner.

The claim made on page 129 of the appellant's brief to the effect that Johnsonnever took possession of the property purported to be conveyed to him by his


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deed from Whaley, finds no evidence in the record to support it. The evidence isconclusive that Johnson did take possession on the 26th of January, 1900, withWhaley, and that he remained in such possession until the place was closed inJuly, 1901. The judgment, so far as it relates to Paul Blum and Henry Blum, isaffirmed, with costs of this instance against the appellant, and after the expirationof twenty days judgment will be entered in accordance herewith and the casereturned to the lower court for execution. So ordered.

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


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Manila

EN BANC

G.R. No. 873 February 10, 1903

THE UNITED STATES, complainant-appellant,vs.SECUNDINO MENDEZONA, defendant-appellee.

Office of the Solicitor-General Araneta, for appellant.Francisco Ortigas and Jose Robles Lahesa, for private prosecutor.Alfredo Chicote, for appellee.

TORRES, J.:

On the 14th of January, 1902, counsel for the bank (Spanish-Philippine Bank)filed a complaint charging Don Secundino Mendezona with the crime

ofestafa upon the ground that he, as manager of the firm of Mendezona & Co.,on the 5th day of January, 1900, received from said Spanish-Philippine Bank thesum of $300,000, offering as security among other property the building knownas the procuration house of the Franciscan Friars, this offer being contained in aletter addressed to the management of the bank; that on the 19th of Februaryfollowing, of the same year, Mendezona by another letter asked and obtained afurther credit of $300,000 as an extension of the former credit, offering assecurity the same property, that demand having been made upon the accusedfor the execution of the corresponding mortgage deed which he had verballyundertaken to execute, he stated that the notary public, Mr. Barrera, had the titledeeds or papers of the property, and thus fraudulently succeeded in putting offthe execution of the mortgage deed up to the 6th day of August, 1902, on whichdate Mendezona as such manager sold the said procuration building for the sum

of $400,000, subject to the right of redemption, to Messrs. Juan MartinezYbaes, Manuel Ybeas, Felipe Garcia, and Jorge Romanillos, the vendor havingdeclared in the deed of sale that the property was free from all charges andincumbrances, these acts having been committed against the form of the statutemade and provided and to the damage of the bank in the sum of at least$150,000.

The complaint was admitted and the Court of First Instance conducted thecorresponding preliminary investigation. The proof taken discloses that on the22nd of November, 1899, a verbal contract of sale was entered into between therepresentatives of the Franciscan Friars and Don Secundino Mendezona,manager of the firm of Mendezona & Co., concerning the said city property

situated on Isla de Romero Street and known as the procuration building. Theconsideration was $190,000, which sum, as a result of a subsequent agreement,

was to be left on deposit with the firm of Mendezona & Co., drawing interest at 8per cent per annum, the purchaser being authorized to take immediatepossession of the property and to make such alterations therein as he mightdeem necessary. This verbal contract appears to have been confirmed by letter.(Record, p. 12.)

It also appears from the record of the preliminary investigation that toward theend of November, 1899, Don Secundino Mendezona took possession of theproperty sold, and commenced the work of making alterations in the same, and

that on the 21st of July, 1900, the corresponding deed of conveyance of the saidproperty was drawn.

It also appears that this procuration building stands on the books of Mendezona& Co. as an asset valued at $250,000, and that the books show as a liability adebit of $190,000 in favor of the Franciscan Friars on the 1st of January, 1900.

It also appears that several demands were made on the accused Mendezonaafter the month of March of that year for the execution by him of a public deed ofmortgage but that this was not done, he simply replying that the papers or titledeeds of the property were being prepared for the purpose of delivering them tothe notary, Barrera. The contract of sale agreed upon in November, 1899, was

not formally executed before Sr. Barrera until the 21st of July, 1900. The notarytestifies under oath that the documents connected with the procuration buildingwere delivered to him by the father provincial of the Franciscan Friars on thesecond or third month before the date of the execution of the deed of sale of thesaid building, and that the father provincial also delivered to him the draft of theinstrument which stipulated that the consideration for the sale of the procurationbuilding to Mendezona & Co. was to remain in the possession of the firm as adeposit.

From the text of the complaint upon which this preliminary investigation wascommenced, and which was finally terminated by the appealed order, it is evidentthat the charge ofestafa brought against Mendezona consists in the allegation

that he, acting fraudulently and in bad faith, delayed the performance of the offermade by him to the Spanish-Philippine Bank to securing the two sums receivedby him from the latter as a loan on the 5th of January and the 19th February,1900, by eluding the execution of the mortgage of the so-called procurationbuilding of the Franciscans up to the 6th of August, 1900, on which day he soldthe same to the Augustinian Fathers for the sum of $400,000, having declared inthe instrument of conveyance executed to that effect that this property was freefrom all incumbrance or gravamen.

So that the facts set forth in the complaint and alleged to constitute the crimeofestafa are two: (1) That of having failed to perform the promise to give amortgage on the said procuration building for the purpose of securing thepayment of the $600,000 received from the bank, he availing himself of

subterfuge and deceitful means to avoid the execution of the mortgage deed, and(2) that of having declared in the deed of sale to the Augustinian Fathers that the


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said building was free from all incumbrance or gravamen, when as a matter offact it had been offered in mortgage, and that these facts constituted a violationof the Penal Law.

The complaint uses the generic terms ofestafa as the classification of the crimeswith which the accused is charged but without determining the species of fraudcommitted, or citing the article of the Penal Code violated, although this wassubsequently done in the printed briefs filed by the complainant, asking thatarticles 535, section 1, and 537, and 541 of the Penal Code be applied.

The first of these two facts charged in the complaint, if proven, would fall withinarticle 541 as constituting anestafa not penalized by the preceding articles whichdefine and punish such crimes.

The second of the facts charged, if proven, would fall under the sanction ofsection 2 of article 537 of the Code, because in such case the accused wouldhave disposed of the property, selling it as unencumbered, knowing at the timethat it was subject to a gravamen.

The mere fact of the nonperformance of the offer or promise to give a mortgageas agreed upon between the contracting parties does not constitute the crimeofestafa or any other crime, unless the party bound has acted fraudulently and inbad faith when contracting the principal obligation and when making the promiseto give security. Can it be concluded from an examination of the preliminaryinvestigation that when the two contracts of loan of $300,000 each were madebetween the manager of the bank, Seor Balbas, and the accused Mendezona,that the latter acted deceitfully and with the malicious intent to defraud the bank,and with the intent to break his promise to give the said procuration building,among other property, as security for the performance of the obligation? Theresult of an examination of the record is a negative answer.

Article 1862 of the Civil Code provides that the promise to mortgage or pledgeonly produces a personal action between the contracting parties, without

prejudice to the criminal liability incurred by him who defrauds another offering inpledge or mortgage, as unencumbered, things which he knew to be encumberedor pretending to be the owners of things which do not belong to him. It is evident,therefore, that the promisor may be compelled by the proper personal action toperform his promise; but the mere breach of the contract or non-performance ofthe promise does not result in a violation of the Penal Law.

The article cited provides that criminal liability attaches to the defrauder in thecases expressed, none of which are applicable to the accused because he hasnot offered things which he knew to be encumbered, nor has he pretended to bethe owner of property which did not belong to him. Mendezona had a perfect rightto offer this building as security, inasmuch as it was not the property of anothernor was it encumbered; and the subsequent disappearance of the promisedsecurity by the sale of the property to the Augustinian Friars does not constitute

the commission of the crime ofestafa because it does not appear that a deceitfulintent existed at the time that the loan was made and the security was offered.The obligations contracted were merely personal, subject to all the eventualitieswhich are common to those of its class, and which should be met by prudenceand foresight on the part of creditors.

The unusual facility with which the accused Mendezona obtained from themanagement of the bank two sums of $300,000 on two different occasions at aninterval of forty-five days is a circumstance which should be explained not only by

the person to whom the money was lent but also by the management of thebank.

In order to form a judgment as to the action of Mendezona with respect to theoffer of secure the money borrowed and in order to determine whether hedelayed the execution of the mortgage deed fraudulently and in bad faith, it isnecessary to hold in view that the deed of sale of the property was only executedby the vendors on the 21st of July, 1900, and it is self-evident that without thedeed of sale it would have been impossible to have executed the mortgage or tohave had it recorded in the Registry of Property. The record shows that the titledeeds to the procuration building sold were in the possession of the Franciscanfriars, the former owners, as it was the father superior of the latter who delivered

them to the notary, Barrera. This was two or three months prior to the date of thedeed of sale, July 21. Hence it is evident that the delay which occurred in thedrafting and execution of the deed is not chargeable to the accused. This delay,not imputable to him, can not be made to constitute evidence of fraudulent actscommitted by deceit on the part of the accused himself, who, according to histestimony in the record, had not even seen the title deeds to the property sold byhim. The delay, if any, was doubtless on the part on the provincial of theFranciscan friars and the notary, Barrera, who took two or three months to drawthe deed of sale of the property. The record contains no evidence whatsoever tocontrovert or overcome this result of the preliminary investigation, and as it doesnot appear that the Franciscan friars delivered the old title deeds of the buildingto the purchaser after the verbal sale stipulated in November, 1899, it is to bepresumed that Mendezona's affirmation was true even though it be a fact that

demand was made on him for the execution of the deed by the agents of thebank because in the ordinary course of events the vendor holds the title deeds ofthe property until the execution of the deed of conveyance, and no evidence tothe contrary has been offered in this case to overcome the presumption.

Sixteen days after the execution of the deed of sale of the procuration building tothe accused, the latter sold it in turn to the Augustinian friars for $400,000,subject to the right of redemption, and by this operation the accused put itabsolutely out of his power to secure the credit of the Spanish-Philippine Bank bya mortgage on the said property.

Was the crime ofestafa committed by this proceeding, by selling the property

which had been promised as security for the large amount loaned? We think not,because the accused when he offered the property as security for the loan was in


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possession thereof as owner, and therefore when he contracted the personalobligation he did not act in bad faith nor did he practice deceit. The merenonperformance of this obligation does not constitute the crime ofestafa. Thedeceit, in cases of fraud, must be antecedent to the obligation in which itoriginates, and be the cause of the latter and not supervenient thereto. This is thedoctrine established by the supreme court of Spain in its judgments of the 7th ofJanuary, 14th of March, and 23rd of June, 1888, and the 18th of December,1889, which we think proper to cite in the interpretation and application of theprecepts of the Penal Code of Spanish origin.

With reference to the status of the property sold it is unquestionable that it wasunencumbered on the 6th of August, 1900, and can not be regarded as havingbeen encumbered or mortgaged merely by its having been offered or promisedas security for the money loaned. The promise made by a borrower to give amortgage upon his property does not result in the attachment of the mortgageoffered.

In order that a mortgage may be regarded as existing and productive of legaleffects it is indispensable that the formalities prescribed by articles 1857 and1874 et seq. of the Civil Code, and articles 105 et seq. of the Mortgage Law,applicable to the case, be complied with.

The doctrine established by the supreme court of Spain with respect to theinterpretation and proper application of article 550 of the Penal Code of Spain,which is the equivalent of article 537 of the Code now in force in these Islands,confirms the doctrine above laid down and is not overruled by any subsequentjudgment. The judgment of October 29, 1888, among other things holds that thesimple promise to constitute a mortgage does not fall within any of the preceptsof article 550 of the Spanish Code the equivalent of article 537 of the Code ofthe Philippines because it is not the same thing to make a promise as toperform the act promised. The decisions of January 7, and March 14, 1888,above cited among other things established the doctrine that for the applicationof the provisions of the above-cited article of the Penal Code it is necessary thatthe gravamen imposed on the property be legally constituted by means of the

essential formalities prescribed by the law, as otherwise the promise isproductive of nothing more than a mere personal obligation. Consequently,unless real property is mortgaged by a public instrument recorded in the PropertyRegister in accordance with the prevailing law and gravamen referred to byarticle 537 of the Penal Code for the purposes of the application of its preceptscan not be considered as existant. (Arts. 1875 and 1880 of the Civil Code.)

These rulings are directly applicable to the fact alleged by counsel for theSpanish-Philippine Bank. In order to bring the case within paragraph 1 of article537, or paragraph 1 of article 535 of the Penal Code it must appear by the record(1) that Mendezona pretending to be owner of the property without being suchowner had offered it as security for the credit of the bank and had subsequently

sold in to the Augustinian friars, or (2) that Mendezona defrauded the bank by

pretending to be solvent in a higher degree and to own property which he did nothave for the purpose of obtaining the loan of the $600,000.

The preliminary investigation does not show that the accused when offering thisproperty to the bank as security and when selling it to the Augustinian friars wasnot the owner thereof, or that he was without the right to dispose of it. On thecontrary, it appears fully therefrom that Mendezona when he offered theprocuration house of the Franciscans as security for the money received from thebank, had purchased it more than a month before, was in possession of the

premises, and the consideration paid therefor was in the hands of Mendezona &Co. as a deposit, drawing interest at the rate of 8 per cent in favor of the vendorfriars; and although the corresponding instrument was not drawn until six monthsafterwards it is nevertheless true that the accused was in possession of thehouse as owner by virtue of a perfectly valid verbal contract from which rightsand obligations of unquestionable legality doubtless arose, and therefore theaccused was in a position to transfer his right of ownership in the property to theAugustinian friars, who, on their part, have not made any complaint whatsoever.(Arts. 1450 and 1451 of the Civil Code and others applicable.)

Nor does it appear from the record of the preliminary investigation that thesecond of the indicated acts has been committed so as to fall within the

provisions of article 535, No. 1, of the Penal Code that is to say, thatMendezona has defrauded the bank by pretending to be possessed of greatermeans than he really had at his disposal at the dates of the loans.

Furthermore, it must not be forgotten that in a criminal prosecution theinvestigation and proof is limited to the facts alleged, that is, to the acts oromissions with which the accused is charged, as he is entitled to be informed ofthe nature and cause of the accusation. (Arts. 6 and 15, G.O., 58.)

The two facts falling within the scope of article 535, No. 1, and article 537, No. 1,of the Penal Code, and set up by the complainant in its brief are not alleged inthe complaint, and although they are designated in the criminal law as

constituting the crime ofestafa they have not been properly charged, and thecomplaint has not been amended so as to include them.

In view, therefore, of the negative result of the preliminary investigation we holdthat the appealed order must be affirmed inasmuch as it does not appear fromthe record that the accused has committed the acts charged as constituting thecrime ofestafa. The ruling of the court below is sustained and in accordance withsection 13 and 14 of General Orders, No. 58, the appealed order is herebyaffirmed with the costs of both instances de oficio. So ordered.

Arellano, C.J., Cooper, Willard, and Mapa, JJ., concur.Ladd, J., disqualified.


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Manila

EN BANC

G.R. No. L-1458 March 29, 1906

MAX L. FORNOW, plaintiff-appellant,vs.J. C. HOFFMEISTER, defendant-appellee.

Del-Pan and Ortigas, for appellant.Joaquin R. Serra, for appellee.

ARELLANO, C.J.:

On the 27th of August, 1902, the plaintiff brought this action in the Court of FirstInstance of Manila to recover from the defendant for the breach of a certaincontract, (a) the penalty of 10,000 marks provided for in said contract, or its

equivalent in Mexican currency; (b) the legal interest due upon this sum from thetime of the filing of the complaint until fully paid; (c) 363 pesos, Mexican currency,which was refunded to him at Singapore by Behn, Meyer & Co., the said amountrepresenting the cost of transportation from Singapore to Genoa; (d) 35 pesospaid to him for transportation from Genoa to Berlin; (e) 138.89 pesos paid to himfor traveling expenses; and (f) the costs of the proceedings. The plaintiff attemptsto recover the penalty of 10,000 marks on the ground that the defendant hadagreed to render his personal services to the plaintiff and that upon thetermination or rescission of the contract he would not enter the service of anyother firm in the Philippine Islands during the three years immediately thereafter,either as a clerk or as a partner, and that he would not engage in business forhimself or conduct any business house or factory, and in case of any breach ofthis agreement to pay to the plaintiff the stipulated penalty of 10,000 marks,

without prejudice to the right of the plaintiff to bring an action for damagesagainst him. But the defendant, upon his arrival at Singapore on his return home,the plaintiff having paid his entire traveling expenses, secured a refund to thepurchase price of his ticket and returned to this city under a new contract withanother firm doing business in the city of Manila, and for which he was working atthe time the complaint in this case was filed. The other amounts which theplaintiff seeks to recover, as above stated, and which make a total of 611.89pesos, Mexican currency, are the sums delivered to him by the plaintiff for his tripto Europe from Manila to Singapore, from Singapore to Genoa, and fromthence to Berlin under the terms of the aforesaid contract, and on conditionthat the defendant should return to his country and not come back to the Islandsfor a period of three years.

The contract upon which the complaint is based, and which appears on pages 8,9, and 10 of the bill of exceptions, contains at the bottom thereof the followingstatement: "This contract was executed in Manila on the 24th day of January,1901, and signed in the presence of the German consul of this city, who certifiedas to the authenticity of the signatures in the presence of two witnesses."

The defendant filed his answer on the 20th of November, 1902, denyingabsolutely all the allegations contained in the complaint, except those whichrelated to the execution of the contract and the penalty clause above referred to;

but at the trial of this case on the 23rd of June, 1903, he admitted each and all ofthe allegations of the complaint and the authenticity of the documents filedtherewith. The plaintiff therefore waived his right to present further proof. (Page4, bill of exceptions.) The statements made by counsel in open court, whichappear on page 7 of the record, are as follows: "Present: Rafael Del-Pan,attorney for plaintiff and Joaquin R. Serra, attorney for defendant. Attorney Del-Pan insists upon the allegations of the complaint and offer to introduce evidence,parol as well as documentary, in support thereof. Attorney Serra states that if thedefendant admitted all the allegations of the complaint. Attorney Del-Pan thenstated to the court that if the defendant admitted all the allegations of thecomplaint, he would withhold the evidence which he intended to introduce at thetrial, but that he wished to file the documents numbered 1, 2, 3, 4, 5, 6, 7, 8 and9. Attorney Serra stated that he had no objection to the admission of thesedocuments. The court then ordered that the said documents presented bycounsel for the plaintiff be admitted in evidence. Attorney Serra then stated thatthe defendant did not admit that the contract in question could be enforced forthe reason that it was not drawn in accordance with the labor laws."

This is all that appears of record.

The court below entered judgment in favor of the defendant, dismissing thecomplaint, with the costs of the proceedings.

The plaintiff was notified of this judgment on the 21st of the following July. On thesame day, he excepted to the judgment and presented a motion for a new trial.The case has been submitted to this court, therefore, upon the said exception tothe judgment.

The complaint was dismissed by the court below on the ground that at the timethe contract in question was entered into between the plaintiff and the defendantthe contract-labor laws of the United States of America were in full force andeffect in the Philippine Islands; that the said contract was void ab initio, accordingto the said law, and that the plaintiff could not recover any damages for breachthereof.

It is true that on the 6th of June, 1899, it was ordered that there be enforced inthe Philippine Islands the laws then existing in the United States in regard tocontract labor.


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The plaintiff assigns as the first error the finding of the court below to the effectthat "both parties agreed upon the following facts, to wit: That the plaintiff, aresident of the Philippines, and the defendant, a resident of Europe, entered intoa contract on the 1st day of July, 1900, which was subsequently ratified inManila, Philippine Island, on the 24th of July, 1901 . . . ."

The plaintiff in his brief says: "An examination of the record, that is to say, of thebill of exceptions, which contains all the essential facts of the case, will clearlyshow (a) that there was no such stipulation as to the facts between the parties;

and (b) that the essential fact, which the court below presumes to have beenagreed upon by the parties, is not true." The stipulation had between the partiesappears on page 7 of the bill of exceptions with the stenographer's certificateattached thereto. That stipulation was merely that the defendant "admitted all theallegations of the complaint of the complaint." And since it was alleged inparagraph 1 of the complaint, and was admitted in paragraph 1 of the answer,that the contract was executed in Manila, it is evident that the finding of the courtbelow as to this point is erroneous.

We have been unable to find in the record brought to this court any evidence ofsuch agreement between the parties. Nor have we been able to find any proof ofthe fact that the plaintiff, a resident of the Philippine Islands, and the defendant, a

resident of Europe, had entered into a contract on the 1st July, 1900, andsubsequently ratified the same in Manila on the 24th day of January, 1901. Allthat we have been able to find is the contract executed on the 24th day ofJanuary, 1901, above referred to.

The conclusion which may be drawn from the terms of the contract executed onthe 24th of January, 1901, is that the said contract was in full force and effectfrom the 1st of July, 1900, since it is so stated in paragraph 10 of the same, andbecause, under the sixth clause thereof, the defendant was to receive in paymentfor his services, beginning with 1st day of July, 1900, the sum of 3,000 pesos,Philippine currency, per annum, and 5 per cent of the net profits of the cigarfactory "Helios" from the 1st of January, 1900.

It might be inferred, however, that the parties, in order to avoid the prohibitioncontained in the Contract Labor Law, entered into another contract prior to the24th day of January, 1901, in Manila, under which the defendant could enter theIslands, but there is nothing in the record which would authorize a finding as tothe existence of any other contract which may possibly have been entered intobetween the parties. They might have entered into such a contract prior to the 1stof July, 1900, at any time prior to that date.

There is nothing upon which to base a finding to the effect that prior to the dateupon which the Alien Contract Labor Laws of the United States went into effect inthe Philippine Islands the plaintiff and the defendant had made a contract on acertain and specific date and place and under certain specified circumstances, of

which the one executed on the 24th of January, 1901, was a reproduction andratification.

Therefore it can not be held that the contract executed by the parties in Manila onthe 24th day of January, 1901, and by them admitted to the true and genuine,should be considered as entered into in violation of the Act of Congress ofJanuary 23, 1885, the "Contract Labor Law," which was extended to thePhilippines on the 6th of June, 1899.

And if the contract in question is not defective, as alleged, it can not be declarednull and void. On the contrary, it appears to be a perfect and valid contract. Itcontains all of the necessary elements required by law and could properly be

admitted in evidence. The defendant did not question its authenticity, butadmitted the same in its entirely.

Therefore, the petition of the plaintiff which has for its object the enforcement ofthe penalty stipulated in the contract in case of the breach thereof should begranted.

The plaintiff, however, can not recover the money paid by him for the travelingexpenses of the defendant under another clause of the contract. The defendantwas entitled to this allowance without condition precedent of subsequent. Theplaintiff voluntarily complied with this obligation imposed upon him by the termsof the contract. The plaintiff, when he parted with money paid to the defendant for

his expenses, did so irrevocably. It would amount to a revocation of suchpayment if the plaintiff were allowed to recover the money as unduly paid,particularly when it has not been proved why such payment was improperlymade.

We are of the opinion, therefore, that the judgment appealed from should bereversed, and that the defendant, Hoffmeister, should pay the stipulated penaltyof 10,000 marks, or its equivalent in Philippine currency, with legal interestthereon from the date of the filing of the complaint until fully paid, with the costsof the first instance. The plaintiff, however, is not entitled to the additional 611pesos, Mexican currency, or its equivalent in current money, which he seeks torecover. We make no special provision as to the costs of this instance. After theexpiration herewith. So ordered.

Torres, Mapa, Carson, Willard and Tracey, JJ., concur.


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Manila

EN BANC

G.R. No. L-1347 October 29, 1903

NICASIO VELOSO, plaintiff-appellee,vs.ANG SENG TENG, defendant-appellant.

Montagne and Dominguez for appellant.Oscar Sutro and Francisco Ortigas for appellee.

WILLARD, J.:

This is an action to recover possession of real estate brought under

section 80 of the Code of Civil Procedure, before a justice of the peace of Manilaon November 5, 1902. From a judgment against him in that court, the defendantappealed to the Court of First Instance. Judgment was there rendered againsthim and he was brought the case here.

1. The first assignment of error relates to the defendant's plea of formeradjudication. On February 8, 1902, the plaintiff commenced against thedefendant, before a justice of the peace of Manila, an action similar to thepresent one, for the recovery of the possession of the same real estate. In thataction the justice, on April 19, 1902, rendered judgment against the plaintiff. Theplaintiff appealed from the judgment, and after the case had been tried in theCourt of First Instance, but before judgment had been rendered therein, the

court, at the request of the plaintiff, on June 19, 1902, dismissed the actionwithout prejudice to the right of the plaintiff to commence another action for thesame cause. The court below held that these proceedings were no bar to thepresent suit. In this there was no error. The decision of June 19 terminated thatcase. It was the final judgment from which an appeal could have been taken. Itexpressly reserved to the plaintiff the right to commence the action again. Thecourt had jurisdiction of the parties and the subject-matter of that suit. It had thepower to make the order. Whether the right or wrong, it can not be attacked inthis case, the defendant not having appealed therefrom.

2. The second assignment of error finds no support in the record. Not only does itappear that any exception was taken to the order of the court allowing the plaintiffto amend his complaint, but if affirmatively appears that such amendment was

made by agreement of the parties. (Bill of exceptions, p. 13.)

3. The claim of the appellant that the court should have granted this motion for acontinuance made on February 2, 1903, can not be sustained. Section 141 of theCode of Civil Procedure is, in part, as follows: "Rulings of the court upon minormatters such as adjournments, postponements of trials, the extension of time forfiling pleadings and motions and other matters addressed to the discretion of thecourt in the performance of its duties, shall not subject to exception." This sectionwould ordinarily be a sufficient answer to the exception which the defendant tookthe order of the court refusing the continuance. It is claimed, however, by thedefendant that there was an abuse of discretion and that an exception lies in

such cases. Admitting, without deciding, that this can be done, yet we see noabuse of discretion in order. After trial had commenced on December 27, 1902,the defendant went to China, not to return until May 1, 1903. After his departure,the case was set for hearing on January 2, and five continuances wereafterwards obtained by the defendant, without and suggestion that the presenceof the defendant at the trial was necessary. For example: On January 27 SeorRodriguez, one of the attorneys for the defendant, filed a motion asking that thecase be not taken up that day, because he could not attend and that it be set forhearing any day the next week. He then said nothing about the necessity ofhaving the defendant present as a witness. The continuance was asked also onthe ground that two of the defendant's attorneys were parties to a proceeding inanother court, then being heard, and that the third could not try the case alone.The defendant had already obtained five continuances. The last were granted on

the understanding that the defendant would asked for no more. There was noabuse of discretion for refusing to continue the case on this ground.

The parties at the beginning of the trial had agreed that the case shouldtried in the English language. The failure of the defendant's attorneys to bepresent in court during parts of the trial did not nullify this stipulation.

4. The signing by the judge of findings and of a decision prepared by the attorneyof the plaintiff was not error of law.

5. The third finding of fact, to wit, that the reasonable value of the rent of thepremises during the time in question was 1,000 pesos a month, is fully sustained

by competent evidence.

6. The fourth finding of fact is as follows:

Fourth. That during the defendant's occupation from the 9th day ofJanuary, 1902, he has missed the houses, and has caused damage tothem in the sum of $4,000, money of the United States.

This finding is plainly and manifestly against the evidence. In fact, therewas no evidence in the case from which the court could say that any of thesedamages were caused after January 9, 1902. The property had been occupiedby the defendant as a cigar factory since 1899. Neither one of the two architects

who at the request of the plaintiff's agent examined the property stated when the


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damage was gone. The plaintiff's agent testified as to the condition of theproperty in 1899, when the plaintiff acquired title, as compared with its conditionat the time of the trial. But no witness testified to its condition on January 9, 1902,as compared to its present condition. The testimony of the witness Sim Kee Limonly came down to January, 1900. Considering the nature of the damages, it ismore than probable that they were largely caused prior to January 9, 1902. Theyconsisted principally of injuries done to the building by its used as a cigar factory.

But, in the view which we take of the case, it is immaterial whether these

damages were caused before or after the said 9th day of January. This summaryaction of forcible entry and detainer is defined in section 80 of the Code of CivilProcedure. By the first part of the section, a landlord, as against a tenant whoseright to the possession has terminated is entitled to recover the possession anddamages. Under the last part of the section which relates only a tenant who wasfailed to pay the rent for thirty days after notice, the landlord can recover thepossession, rent due, and damages. The case at bar falls under the first part andnot under the second, and the plaintiff in addition to the possession is entitled torecover "damages." What is meant by the word "damages?" It certainly can notrefer to damages caused to the property while the tenant was in the lawfulpossession of it. For such damages the landlord may have a right of action. Butsuch right of action must be exercised in an ordinary suit. It can not be made thesubject of a summary proceeding before a justice of the peace, under saidsection 80. Damages caused to the property, after the possession has becomeunlawful, stand upon a different footing. But event as to such damages we thinkthat there can be no recovery in this proceeding, in view of the provisions of ourlaw. While section 80, of it stood alone, might give rise to some doubt, this isremoved when section 84 is considered. This distinctly says that the judgmentshall be for "all arrears of rent or a reasonable compensation for the use andoccupation of the premises." This last clause is a definition of the word"damages" found in section 80, and indicates that they are the only thosedamages which are caused by loss of the use and occupation of the property.This action has to do only with the right to the possession. The ownership of theproperty is not necessarily involved. We should therefore not except to find anyprovision allowing a recovery of damages for substantial injuries to buildings of

which the plaintiff might not be the owner.

7. It is suggested by the appellant that the finding by the court below, that acertain document presented at the trial by the defendant was a forgery, was errorbecause the document was never offered in evidence. It is not claimed that thefinding itself was contrary to the evidence. This error, it if existed, could notpossibly have prejudiced the defendant.

We find no error in the record except as to the allowance of damages. 1awphil.net

By section 496 of the Code of Civil Procedure, we are authorized to modifythe judgment of the court below There is, therefore, no necessity for a new trial.

The judgment of the court below is modified by striking therefrom thefinding of fact above quoted as to the damages and that part thereof whichrequires the defendant to pay the plaintiff $4,000, in money of the United States.As so modified it is affirmed. This affirmance is without prejudice to the right ofthe plaintiff to maintain an ordinary action in a court of competent jurisdiction torecover such damages as he may show himself entitled to. Neither party isentitled to recover of the other any costs in this court. Judgment will be enteredaccordingly twenty days after the filing of this decision.

Arellano, C.J., Torres, Cooper, Mapa, and McDonough, JJ., concur.Johnson, J., did not sit in this case.

DECISION OF MOTION FOR REHEARING.

WILLARD, J.:

The appellant has moved for a reargument, on the ground that the tenantof the building was the cigar factory or its owner, and not the defendant; and thatthe factory or its owner, and not the defendant, is liable in this suit.

No such point as this was made in the court below nor in the brief of theappellant in this court; nor is it covered by any assignment of error. Theassignments of error 9 and 10 are too general to present this question. Thiswould be sufficient reason for denying the motion. It may be added, however,that the following facts appear:

The title which the appellant has seen fit to give to the case in his motion,now nowhere appears in any papers in the suit. The amended complaint namesAng Seng Teng as defendant. The answer is entitled "Ang Seng Teng, Gerentede la Fabrica Catalua, defendant," and admits that the defendant is inpossession, and has been in possession for three years, by virtue of a contract oflease executed by plaintiff to Palanca and duly assigned to the defendantbecause he was the successor of Palanca in the management of the factory.

The judgment and decision follows this answer and judgment is enteredagainst "Ang Seng Teng, Gerente de la Fabrica Catalua."

Arellano, C.J., Cooper, Mapa, McDonough, and Johnson, JJ., concur.

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