Tax 2 Case Digest: De Guzman v. De Guzman

G.R. No. L-29276 May 18, 1978

Laws Applicable: Sec. 3, Rule 84, Secs. 1 and 7, Rule 85, Rules of Court

Lessons Applicable: allowable administration expenses

FACTS:

• The late Felix J. de Guzman was survived by 8 children.  Letters of administration were issued to his son, Doctor Victorino G. de Guzman.  One of the properties left by the decedent was a residential house located in the poblacion of which 8 children were given a 1/8 proindiviso share in the project of partition.  3 heirs Crispina de Guzmans-Carillo Honorata de Guzman-Mendiola and Arsenio de Guzman interposed objections to the administrator's disbursements in the total sum of P13,610.48.

o    Expense for the improvement and renovation of the decedent's residential house

o    Living expenses of Librada de Guzman while occupying the family home without paying rent

o    Other expenses: Lawyer's subsistence, Gratuity pay in lieu of medical fee, stenographic notes, decedent's first death anniversary, representation expenses

o    Irrigation fee

• Lower court: allowed the expenses

ISSUE: W/N they were allowable administration expenses

Held: Some yes and some no.  Affirmed with modification.

• An executor or administrator is allowed the necessary expenses in the care, management, and settlement of the estate. He is entitled to possess and manage the decedent's real and personal estate as long as it is necessary for the payment of the debts and the expenses of administration. He is accountable for the whole decedent's estate which has come into his possession, with all the interest, profit, and income thereof, and with the proceeds of so much of such estate as is sold by him, at the price at which it was sold (Sec. 3, Rule 84; Secs. 1 and 7, Rule 85, Rules of Court).
• One of the Conditions of the administrator's bond is that he should render a true and just account of his administration to the court
• A hearing is usually held before an administrator's account is approved, especially if an interested Party raises objections to certain items in the accounting report
• Expenses:

o    Expense for the improvement and renovation of the decedent's residential house – allowable

§  5 out of 8 co-owners consented to the use of the funds of the estate for repair and improvement of the family home. It is obvious that the expenses in question were incurred to preserve the family home and to maintain the family's social standing in the community.

o    Living expenses of Librada de Guzman while occupying the family home without paying rent – disallowed

o    Other expenses:

§  Lawyer's subsistence – allowable

§  Gratuity pay in lieu of medical fee – allowable

§  stenographic notes – disallowed

§  decedent's first death anniversary - disallowed

§  representation expenses - unexplained = disallowed

• Irrigation fee – allowable since unquestioned though duplicate

Jurisprudence: G.R. No. L-29276 May 18, 1978

SECOND DIVISION

G.R. No. L-29276 May 18, 1978

Testate Estate of the Late Felix J. de Guzman. VICTORINO G. DE GUZMAN, administrator-appellee,

vs.

CRISPINA DE GUZMAN-CARILLO, ARSENIO DE GUZMAN and HONORATA DE GUZMAN-MENDIOLA, oppositors-appellants.

Emiliano Samson & R. Balderama-Samson for appellants.

Cezar Paralejo for appellee.

AQUINO, J.:

This case is about the propriety of allowing as administration expenses certain disbursements made by the administrator of the testate estate of the late Felix J. de Guzman of Gapan, Nueva Ecija.

The deceased testator was survived by eight children named Victorino, Librada, Severino, Margarita, Josefina, Honorata, Arsenio and Crispina. His will was duly probated. Letters of administration were issued to his son, Doctor Victorino G. de Guzman, pursuant to the order dated September 17, 1964 of the Court of First Instance of Nueva Ecija in Special Proceeding No. 1431.

One of the properties left by the decedent was a residential house located in the poblacion. In conformity with his last will, that house and the lot on which it stands were adjudicated to his eight children, each being given a one-eighth proindiviso share in the project of partition dated March 19, 1966, which was signed by the eight heirs and which was approved in the lower court's order of April 14, 1967 but without prejudice to the final outcome of the accounting.

The administrator submitted four accounting reports for the period from June 16, 1964 to September, 1967. Three heirs Crispina de Guzmans-Carillo Honorata de Guzman-Mendiola and Arsenio de Guzman interposed objections to the administrator's disbursements in the total sum of P13,610.48, broken down as follows:

I. Expense for the improvement and renovation of the decedent's residential house.

1. Construction of fence — P3,082.07

2. Renovation of bathroom — P1,389.52

3. Repair of terrace and

interior of house — P5,928.00 — P10,399.59

II. Living expenses of Librada de Guzman while occupying the family home without paying rent:

1. For house helper — P1,170.00

2. Light bills — 227.41

3. Water bills — 150.80

4. Gas oil, floor wax

and switch nail — 54.90 — P 1,603.11

III. Other expenses:

1. Lawyer's subsistence — P 19.30

2. Gratuity pay in lieu

of medical fee — 144.00

3. For stenographic notes — 100.00

4. For food served on

decedent's first

death anniversary — 166.65

5. Cost of publication of

death anniversary

of decedent — 102.00

6. Representation

expenses — 26.25 — P558.20

IV. Irrigation fee P1.049.58

TOTAL P13,610.48

It should be noted that the probate court in its order of August 29, 1966 directed the administrator "to refrain from spending the assets of the estate for reconstructing and remodeling the house of the deceased and to stop spending (sic) any asset of the estate without first during authority of the court to do so" (pp. 26-27, Record on Appeal).

The lower court in its order of April 29, 1968 allowed the d items as legitimate expenses of administration. From that order, the three oppositors appealed to this Court. Their contention is that the probate court erred in approving the utilization of the income of the estate (from rice harvests) to defray those expenditures which allegedly are not allowable under the Rules of Court.

An executor or administrator is allowed the necessary expenses in the care, management, and settlement of the estate. He is entitled to possess and manage the decedent's real and personal estate as long as it is necessary for the payment of the debts and the expenses of administration. He is accountable for the whole decedent's estate which has come into his possession, with all the interest, profit, and income thereof, and with the proceeds of so much of such estate as is sold by him, at the price at which it was sold (Sec. 3, Rule 84; Secs. 1 and 7, Rule 85, Rules of Court).

One of the Conditions of the administrator's bond is that he should render a true and just account of his administration to the court. The court may examine him upon oath With respect to every matter relating to his accounting 't and shall so examine him as to the correctness of his account before the same is allowed, except when no objection is made to the allowance of the account and its correctness is satisfactorily established by competent proof. The heirs, legatees, distributes, and creditors of the estate shall have the same privilege as the executor or administrator of being examined on oath on any matter relating to an administration account." (Sec. 1[c] Rule 81 and secs. 8 and 9, Rule 85, Rules of Court).

A hearing is usually held before an administrator's account is approved, especially if an interested Party raises objections to certain items in the accounting report (Sec. 10, Rule 85).

At that hearing, the practice is for the administrator to take the witness stand, testify under oath on his accounts and Identify the receipts, vouchers and documents evidencing his disbursements which are offered as exhibits. He may be interrogated by the court and crossed by the oppositors's counsel. The oppositors may present proofs to rebut the ad. administrator's evidence in support of his accounts.

I. Expenses for the renovation and improvement of the family residence — P10,399.59. — As already shown above, these expenses consisted of disbursements for the repair of the terrace and interior of the family home, the renovation of the bathroom, and the construction of a fence. The probate court allowed those expenses because an administrator has the duty to "maintain in tenantable repair the houses and other structures and fences belonging to the estate, and deliver the same in such repair to the heirs or devises" when directed to do so by the court (Sec. 2, Rule 84, Rules of Court).

On the other hand, the oppositors-appellants contend that the trial court erred in allowing those expenses because the same did not come within the category of necessary expenses of administration which are understood to be the reasonable and necessary expenses of caring for the property and managing it until the debts are paid and the estate is partitioned and distributed among the heirs (Lizarraga Hermanos vs. Abada, 40 Phil. 124).

As clarified in the Lizarraga case, administration expenses should be those which are necessary for the management of the estate, for protecting it against destruction or deterioration, and, possibly, for the production of fruits. They are expenses entailed for the preservation and productivity of the estate and its management for purposes of liquidation, payment of debts, and distribution of the residue among the persons entitled thereto.

It should be noted that the family residence was partitioned proindiviso among the decedent's eight children. Each one of them was given a one-eighth share in conformity with the testator's will. Five of the eight co-owners consented to the use of the funds of the estate for repair and improvement of the family home. It is obvious that the expenses in question were incurred to preserve the family home and to maintain the family's social standing in the community.

Obviously, those expenses redounded to the benefit of an the co- owners. They were necessary for the preservation and use of the family residence. As a result of those expenses, the co-owners, including the three oppositors, would be able to use the family home in comfort, convenience and security.

We hold that the probate court did not err in approving the use of the income of the estate to defray those ex

II.  Expenses incurred by Librada de Guzman as occupant of the family residence without paying rent — P1 603.11 — The probate court allowed the income of the estate to be used for those expenses on the theory that the occupancy of the house by one heir did not deprive the other seven heirs from living in it. Those expenses consist of the salaries of the house helper, light and water bills, and the cost of gas, oil floor wax and switch nail

We are of the opinion that those expenses were personal expenses of Librada de Guzman, inuring to her benefit. Those expenses, not being reasonable administration expenses incurred by the administrator, should not be charged against the income of the estate.

Librada de Guzman, as an heir, is entitled to share in the net income of the estate. She occupied the house without paying rent. She should use her income for her living expenses while occupying the family residence.

The trial court erred in approving those expenses in the administrator's accounts. They should be, as they are hereby, disallowed (See 33 C.J.S 1239-40).

III. Other expenses — P558.20. — Among these expenses is the sum of P100 for stenographic notes which, as admitted by the administrator on page 24 of his brief, should be disallowed. Another item, "representation expenses" in the sum of P26.25 (2nd accounting), was not explained. it should likewise be disallowed.

The probate court erred in allowing as expenses of administration the sum of P268.65 which was incurred during the celebration of the first death anniversary of the deceased. Those expenses are disallowed because they have no connection with the care, management and settlement of the decedent's estate (Nicolas vs. Nicolas 63 Phil 332).

The other expenses, namely, P19.30 for the lawyer's subsistence and P144 as the cost of the gift to the physician who attended to the testator during his last are allowable expenses.

IV. Irrigation fee — P1,049.58. —The appellants question the deductibility of that expense on the ground that it seems to be a duplication of the item of P1,320 as irrigation fee for the same 1966-67 crop-year.

The administrator in his comment filed on February 28, 1978 explained that the item of P1,320 represented the "allotments" for irrigation fees to eight tenants who cultivated the Intan crop, which allotments were treated as "assumed expenses" deducted as farming expenses from the value of the net harvests.

The explanation is not quite clear but it was not disputed by the appellants. The fact is that the said sum of P1,049.58 was paid by the administrator to the Penaranda Irrigation System as shown in Official Receipt No. 3596378 dated April 28, 1967. It was included in his accounting as part of the farming expenses. The amount was properly allowed as a legitimate expense of administration.

WHEREFORE, the lower court's order of April 29, 1968 is affirmed with the modifications that the sum of (a) P1,603.11 as the living expenses of Librada de Guzman. (b) P100 for stenographic notes, (c) P26.25 as representation expenses, and (d) P268.65 as expenses for the celebration of the first anniversary of the decedent's death are disallowed in the administrator's accounts. No costs.

SO ORDERED.

Fernando (Chairman), Barredo, Antonio, Concepcion, Jr., and Santos, JJ., concur.

Jurisprudence: G.R. No. L-27155 May 18, 1978

SECOND DIVISION

G.R. No. L-27155 May 18, 1978

PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE COURT OF APPEALS, RITA GUECO TAPNIO, CECILIO GUECO and THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., respondents.

Medina, Locsin, Coruña, & Sumbillo for petitioner.

Manuel Lim & Associates for private respondents.



ANTONIO, J.:

Certiorari to review the decision of the Court of Appeals which affirmed the judgment of the Court of First Instance of Manila in Civil Case No. 34185, ordering petitioner, as third-party defendant, to pay respondent Rita Gueco Tapnio, as third-party plaintiff, the sum of P2,379.71, plus 12% interest per annum from September 19, 1957 until the same is fully paid, P200.00 attorney's fees and costs, the same amounts which Rita Gueco Tapnio was ordered to pay the Philippine American General Insurance Co., Inc., to be paid directly to the Philippine American General Insurance Co., Inc. in full satisfaction of the judgment rendered against Rita Gueco Tapnio in favor of the former; plus P500.00 attorney's fees for Rita Gueco Tapnio and costs. The basic action is the complaint filed by Philamgen (Philippine American General Insurance Co., Inc.) as surety against Rita Gueco Tapnio and Cecilio Gueco, for the recovery of the sum of P2,379.71 paid by Philamgen to the Philippine National Bank on behalf of respondents Tapnio and Gueco, pursuant to an indemnity agreement. Petitioner Bank was made third-party defendant by Tapnio and Gueco on the theory that their failure to pay the debt was due to the fault or negligence of petitioner.

The facts as found by the respondent Court of Appeals, in affirming the decision of the Court of First Instance of Manila, are quoted hereunder:

Plaintiff executed its Bond, Exh. A, with defendant Rita Gueco Tapnio as principal, in favor of the Philippine National Bank Branch at San Fernando, Pampanga, to guarantee the payment of defendant Rita Gueco Tapnio's account with said Bank. In turn, to guarantee the payment of whatever amount the bonding company would pay to the Philippine National Bank, both defendants executed the indemnity agreement, Exh. B. Under the terms and conditions of this indemnity agreement, whatever amount the plaintiff would pay would earn interest at the rate of 12% per annum, plus attorney's fees in the amount of 15 % of the whole amount due in case of court litigation.

The original amount of the bond was for P4,000.00; but the amount was later reduced to P2,000.00.

It is not disputed that defendant Rita Gueco Tapnio was indebted to the bank in the sum of P2,000.00, plus accumulated interests unpaid, which she failed to pay despite demands. The Bank wrote a letter of demand to plaintiff, as per Exh. C; whereupon, plaintiff paid the bank on September 18, 1957, the full amount due and owing in the sum of P2,379.91, for and on account of defendant Rita Gueco's obligation (Exhs. D and D-1).

Plaintiff, in turn, made several demands, both verbal and written, upon defendants (Exhs. E and F), but to no avail.

Defendant Rita Gueco Tapnio admitted all the foregoing facts. She claims, however, when demand was made upon her by plaintiff for her to pay her debt to the Bank, that she told the Plaintiff that she did not consider herself to be indebted to the Bank at all because she had an agreement with one Jacobo-Nazon whereby she had leased to the latter her unused export sugar quota for the 1956-1957 agricultural year, consisting of 1,000 piculs at the rate of P2.80 per picul, or for a total of P2,800.00, which was already in excess of her obligation guaranteed by plaintiff's bond, Exh. A. This lease agreement, according to her, was with the knowledge of the bank. But the Bank has placed obstacles to the consummation of the lease, and the delay caused by said obstacles forced 'Nazon to rescind the lease contract. Thus, Rita Gueco Tapnio filed her third-party complaint against the Bank to recover from the latter any and all sums of money which may be adjudged against her and in favor of the plaitiff plus moral damages, attorney's fees and costs.

Insofar as the contentions of the parties herein are concerned, we quote with approval the following findings of the lower court based on the evidence presented at the trial of the case:

It has been established during the trial that Mrs. Tapnio had an export sugar quota of 1,000 piculs for the agricultural year 1956-1957 which she did not need. She agreed to allow Mr. Jacobo C. Tuazon to use said quota for the consideration of P2,500.00 (Exh. "4"-Gueco). This agreement was called a contract of lease of sugar allotment.

At the time of the agreement, Mrs. Tapnio was indebted to the Philippine National Bank at San Fernando, Pampanga. Her indebtedness was known as a crop loan and was secured by a mortgage on her standing crop including her sugar quota allocation for the agricultural year corresponding to said standing crop. This arrangement was necessary in order that when Mrs. Tapnio harvests, the P.N.B., having a lien on the crop, may effectively enforce collection against her. Her sugar cannot be exported without sugar quota allotment Sometimes, however, a planter harvest less sugar than her quota, so her excess quota is utilized by another who pays her for its use. This is the arrangement entered into between Mrs. Tapnio and Mr. Tuazon regarding the former's excess quota for 1956-1957 (Exh. "4"-Gueco).

Since the quota was mortgaged to the P.N.B., the contract of lease had to be approved by said Bank, The same was submitted to the branch manager at San Fernando, Pampanga. The latter required the parties to raise the consideration of P2.80 per picul or a total of P2,800.00 (Exh. "2-Gueco") informing them that "the minimum lease rental acceptable to the Bank, is P2.80 per picul." In a letter addressed to the branch manager on August 10, 1956, Mr. Tuazon informed the manager that he was agreeable to raising the consideration to P2.80 per picul. He further informed the manager that he was ready to pay said amount as the funds were in his folder which was kept in the bank.

Explaining the meaning of Tuazon's statement as to the funds, it was stated by him that he had an approved loan from the bank but he had not yet utilized it as he was intending to use it to pay for the quota. Hence, when he said the amount needed to pay Mrs. Tapnio was in his folder which was in the bank, he meant and the manager understood and knew he had an approved loan available to be used in payment of the quota. In said Exh. "6-Gueco", Tuazon also informed the manager that he would want for a notice from the manager as to the time when the bank needed the money so that Tuazon could sign the corresponding promissory note.

Further Consideration of the evidence discloses that when the branch manager of the Philippine National Bank at San Fernando recommended the approval of the contract of lease at the price of P2.80 per picul (Exh. 1 1-Bank), whose recommendation was concurred in by the Vice-president of said Bank, J. V. Buenaventura, the board of directors required that the amount be raised to 13.00 per picul. This act of the board of directors was communicated to Tuazon, who in turn asked for a reconsideration thereof. On November 19, 1956, the branch manager submitted Tuazon's request for reconsideration to the board of directors with another recommendation for the approval of the lease at P2.80 per picul, but the board returned the recommendation unacted upon, considering that the current price prevailing at the time was P3.00 per picul (Exh. 9-Bank).

The parties were notified of the refusal on the part of the board of directors of the Bank to grant the motion for reconsideration. The matter stood as it was until February 22, 1957, when Tuazon wrote a letter (Exh. 10-Bank informing the Bank that he was no longer interested to continue the deal, referring to the lease of sugar quota allotment in favor of defendant Rita Gueco Tapnio. The result is that the latter lost the sum of P2,800.00 which she should have received from Tuazon and which she could have paid the Bank to cancel off her indebtedness,

The court below held, and in this holding we concur that failure of the negotiation for the lease of the sugar quota allocation of Rita Gueco Tapnio to Tuazon was due to the fault of the directors of the Philippine National Bank, The refusal on the part of the bank to approve the lease at the rate of P2.80 per picul which, as stated above, would have enabled Rita Gueco Tapnio to realize the amount of P2,800.00 which was more than sufficient to pay off her indebtedness to the Bank, and its insistence on the rental price of P3.00 per picul thus unnecessarily increasing the value by only a difference of P200.00. inevitably brought about the rescission of the lease contract to the damage and prejudice of Rita Gueco Tapnio in the aforesaid sum of P2,800.00. The unreasonableness of the position adopted by the board of directors of the Philippine National Bank in refusing to approve the lease at the rate of P2.80 per picul and insisting on the rate of P3.00 per picul, if only to increase the retail value by only P200.00 is shown by the fact that all the accounts of Rita Gueco Tapnio with the Bank were secured by chattel mortgage on standing crops, assignment of leasehold rights and interests on her properties, and surety bonds, aside from the fact that from Exh. 8-Bank, it appears that she was offering to execute a real estate mortgage in favor of the Bank to replace the surety bond This statement is further bolstered by the fact that Rita Gueco Tapnio apparently had the means to pay her obligation fact that she has been granted several value of almost P80,000.00 for the agricultural years from 1952 to 56. 1

Its motion for the reconsideration of the decision of the Court of Appeals having been denied, petitioner filed the present petition.

The petitioner contends that the Court of Appeals erred:

(1) In finding that the rescission of the lease contract of the 1,000 piculs of sugar quota allocation of respondent Rita Gueco Tapnio by Jacobo C. Tuazon was due to the unjustified refusal of petitioner to approve said lease contract, and its unreasonable insistence on the rental price of P3.00 instead of P2.80 per picul; and

(2) In not holding that based on the statistics of sugar price and prices of sugar quota in the possession of the petitioner, the latter's Board of Directors correctly fixed the rental of price per picul of 1,000 piculs of sugar quota leased by respondent Rita Gueco Tapnio to Jacobo C. Tuazon at P3.00 per picul.

Petitioner argued that as an assignee of the sugar quota of Tapnio, it has the right, both under its own Charter and under the Corporation Law, to safeguard and protect its rights and interests under the deed of assignment, which include the right to approve or disapprove the said lease of sugar quota and in the exercise of that authority, its

Board of Directors necessarily had authority to determine and fix the rental price per picul of the sugar quota subject of the lease between private respondents and Jacobo C. Tuazon. It argued further that both under its Charter and the Corporation Law, petitioner, acting thru its Board of Directors, has the perfect right to adopt a policy with respect to fixing of rental prices of export sugar quota allocations, and in fixing the rentals at P3.00 per picul, it did not act arbitrarily since the said Board was guided by statistics of sugar price and prices of sugar quotas prevailing at the time. Since the fixing of the rental of the sugar quota is a function lodged with petitioner's Board of Directors and is a matter of policy, the respondent Court of Appeals could not substitute its own judgment for that of said Board of Directors, which acted in good faith, making as its basis therefore the prevailing market price as shown by statistics which were then in their possession.

Finally, petitioner emphasized that under the appealed judgment, it shall suffer a great injustice because as a creditor, it shall be deprived of a just claim against its debtor (respondent Rita Gueco Tapnio) as it would be required to return to respondent Philamgen the sum of P2,379.71, plus interest, which amount had been previously paid to petitioner by said insurance company in behalf of the principal debtor, herein respondent Rita Gueco Tapnio, and without recourse against respondent Rita Gueco Tapnio.

We must advert to the rule that this Court's appellate jurisdiction in proceedings of this nature is limited to reviewing only errors of law, accepting as conclusive the factual fin dings of the Court of Appeals upon its own assessment of the evidence. 2

The contract of lease of sugar quota allotment at P2.50 per picul between Rita Gueco Tapnio and Jacobo C. Tuazon was executed on April 17, 1956. This contract was submitted to the Branch Manager of the Philippine National Bank at San Fernando, Pampanga. This arrangement was necessary because Tapnio's indebtedness to petitioner was secured by a mortgage on her standing crop including her sugar quota allocation for the agricultural year corresponding to said standing crop. The latter required the parties to raise the consideration to P2.80 per picul, the minimum lease rental acceptable to the Bank, or a total of P2,800.00. Tuazon informed the Branch Manager, thru a letter dated August 10, 1956, that he was agreeable to raising the consideration to P2.80 per picul. He further informed the manager that he was ready to pay the said sum of P2,800.00 as the funds were in his folder which was kept in the said Bank. This referred to the approved loan of Tuazon from the Bank which he intended to use in paying for the use of the sugar quota. The Branch Manager submitted the contract of lease of sugar quota allocation to the Head Office on September 7, 1956, with a recommendation for approval, which recommendation was concurred in by the Vice-President of the Bank, Mr. J. V. Buenaventura. This notwithstanding, the Board of Directors of petitioner required that the consideration be raised to P3.00 per picul.

Tuazon, after being informed of the action of the Board of Directors, asked for a reconsideration thereof. On November 19, 1956, the Branch Manager submitted the request for reconsideration and again recommended the approval of the lease at P2.80 per picul, but the Board returned the recommendation unacted, stating that the current price prevailing at that time was P3.00 per picul.

On February 22, 1957, Tuazon wrote a letter, informing the Bank that he was no longer interested in continuing the lease of sugar quota allotment. The crop year 1956-1957 ended and Mrs. Tapnio failed to utilize her sugar quota, resulting in her loss in the sum of P2,800.00 which she should have received had the lease in favor of Tuazon been implemented.

It has been clearly shown that when the Branch Manager of petitioner required the parties to raise the consideration of the lease from P2.50 to P2.80 per picul, or a total of P2,800-00, they readily agreed. Hence, in his letter to the Branch Manager of the Bank on August 10, 1956, Tuazon informed him that the minimum lease rental of P2.80 per picul was acceptable to him and that he even offered to use the loan secured by him from petitioner to pay in full the sum of P2,800.00 which was the total consideration of the lease. This arrangement was not only satisfactory to the Branch Manager but it was also approves by Vice-President J. V. Buenaventura of the PNB. Under that arrangement, Rita Gueco Tapnio could have realized the amount of P2,800.00, which was more than enough to pay the balance of her indebtedness to the Bank which was secured by the bond of Philamgen.

There is no question that Tapnio's failure to utilize her sugar quota for the crop year 1956-1957 was due to the disapproval of the lease by the Board of Directors of petitioner. The issue, therefore, is whether or not petitioner is liable for the damage caused.

As observed by the trial court, time is of the essence in the approval of the lease of sugar quota allotments, since the same must be utilized during the milling season, because any allotment which is not filled during such milling season may be reallocated by the Sugar Quota Administration to other holders of allotments. 3 There was no proof that there was any other person at that time willing to lease the sugar quota allotment of private respondents for a price higher than P2.80 per picul. "The fact that there were isolated transactions wherein the consideration for the lease was P3.00 a picul", according to the trial court, "does not necessarily mean that there are always ready takers of said price. " The unreasonableness of the position adopted by the petitioner's Board of Directors is shown by the fact that the difference between the amount of P2.80 per picul offered by Tuazon and the P3.00 per picul demanded by the Board amounted only to a total sum of P200.00. Considering that all the accounts of Rita Gueco Tapnio with the Bank were secured by chattel mortgage on standing crops, assignment of leasehold rights and interests on her properties, and surety bonds and that she had apparently "the means to pay her obligation to the Bank, as shown by the fact that she has been granted several sugar crop loans of the total value of almost P80,000.00 for the agricultural years from 1952 to 1956", there was no reasonable basis for the Board of Directors of petitioner to have rejected the lease agreement because of a measly sum of P200.00.

While petitioner had the ultimate authority of approving or disapproving the proposed lease since the quota was mortgaged to the Bank, the latter certainly cannot escape its responsibility of observing, for the protection of the interest of private respondents, that degree of care, precaution and vigilance which the circumstances justly demand in approving or disapproving the lease of said sugar quota. The law makes it imperative that every person "must in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith, 4 This petitioner failed to do. Certainly, it knew that the agricultural year was about to expire, that by its disapproval of the lease private respondents would be unable to utilize the sugar quota in question. In failing to observe the reasonable degree of care and vigilance which the surrounding circumstances reasonably impose, petitioner is consequently liable for the damages caused on private respondents. Under Article 21 of the New Civil Code, "any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." The afore-cited provisions on human relations were intended to expand the concept of torts in this jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to specifically provide in the statutes. 5

A corporation is civilly liable in the same manner as natural persons for torts, because "generally speaking, the rules governing the liability of a principal or master for a tort committed by an agent or servant are the same whether the principal or master be a natural person or a corporation, and whether the servant or agent be a natural or artificial person. All of the authorities agree that a principal or master is liable for every tort which he expressly directs or authorizes, and this is just as true of a corporation as of a natural person, A corporation is liable, therefore, whenever a tortious act is committed by an officer or agent under express direction or authority from the stockholders or members acting as a body, or, generally, from the directors as the governing body." 6

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is hereby AFFIRMED.

Fernando, Aquino, Concepcion, Jr., and Santos, JJ., concur.





Separate Opinions



BARREDO, J., concurring:

concurs on the basis of Article 19 of the Civil Code, or at least, of equity. He reserves his opinion on the matter of torts relied upon in the main opinion.





Separate Opinions

BARREDO, J., concurring:

concurs on the basis of Article 19 of the Civil Code, or at least, of equity. He reserves his opinion on the matter of torts relied upon in the main opinion.

Jurisprudence: G.R. No. L-3497

EN BANC

G.R. No. L-3497             May 18, 1951

THE MATTER OF THE PROBATE OF THE LAST WILL AND TESTAMENT OF JOSE VENZON. VALENTINA CUEVAS, petitioner-appellee,

vs.

PILAR ACHACOSO, oppositor-appellant.

Juan R. Arbizo and Antonio Gonzales for petitioner-appellee.

Mariano Trinidad and Luis J. Nepomuceno for oppositor-appellant.

BAUTISTA ANGELO, J.:

This is an appeal from an order of the Court of First Instance of Zambales admitting to probate the last will and testament of the late Jose Venzon.

On January 19, 1946, Jose Venzon died in Iba, Zambales, leaving a will. In said will the deceased instituted as his heirs, Valentina Cuevas, his widow and Rosario Asera Venzon, his daughter. He named therein his widow as executrix of the will. On February 1, 1946, Valentina Cuevas filed a petition for the probate of said will.

On May 10, 1946, one Pilar Achacoso filed an alternative petition for the probate of a previous will executed by the deceased praying therein that, if the will submitted by the widow be rejected, the other will be admitted to probate in lieu thereof. In the previous will there are other heirs instituted, among them petitioner Pilar Achacoso. Pilar Achacoso objected to the probate of the second will executed by the deceased on October 10, 1945. After due hearing, the court found that the latter will was executed in accordance with law and ordered that it be admitted to probate. Pilar Achacoso took the case to the Court of Appeals, but the latter certified it to this Court on the ground that it involves purely questions of law.

The main error assigned refers to the alleged lack of attestation clause in the will under consideration, or to the fact that, if there is such attestation clause, the same has not been signed by the instrumental witnesses, but by the testator himself, and it is claimed that this defect has the effect of invalidating the will.

The will in question, after reciting in separate paragraphs, and under correlative numbers, the provisions of the will, winds up with the following clause:

IN WITNESS WHEREOF, I sign this testament or last will in the municipality of Iba, Zambales, Philippines, this 10th day of October, 1945, in the presence of the three witnesses, namely Dr. Nestorio Trinidad, Don Baldomero Achacoso, and Mr. Proceso Cabal as instrumental witnesses to my signing; this testament is written in three (3) sheets marked by letter "A", "B" and "C" consecutively on top of each sheet and upon my request and in my presence and also in the presence of each of the aforesaid instrumental witnesses, they also signed this testament already reffered to.

I hereby manifest that every sheet of the aforesaid testament, on the left-hand margin as well as the testament itself have been signed by me as also each of the witnesses has also signed in my presence and in the presence of each other.

(Sgd.) JOSE VENZON

Witnesses:

(Sgd.) NESTORIO TRINIDAD

(Sgd.) BALDOMERO L. ACHACOSO

(Sgd.) PROCESO CABAL.

The clause above quoted is the attestation clause reffered to in the law which, in our opinion, substantially complies with its requirements. The only apparent anomaly we find is that it appears to be an attestation made by the testator himself more than by the instrumental witnesses. This apparent anomaly, as to affect the validity of the will, it appearing that right under the signature of the testator, there appear the signatures of the three instrumental witnesses.

"Instrumental witness, as define by Escriche in his Diccionario Razonado de Legislacion y Jurisprudencia, Vol. 4, p. 1115, is one who takes part in the execution of an instrument or writing" (In re will of Tan Diuco, 45 Phil., 807, 809). An instrumental witness, therefore, does not merely attest to the signature of the testator but also to the proper execution of the will. The fact that the three instrumental witnesses have signed the will immediately under the signature of the testator, shows that they have in fact attested not only to the genuineness of his signature but also to the due execution of the will as embodied in the attestation clause.

The attestation clause in question bears close similarity with the attestation clause in the will involved in Aldaba vs. Roque, (43 Phil., 378). In that case, the attestation claused formed part of the body of the will and its recital was made by the testratrix himself and was signed by her and by the three instrumental witnesses. In upholding the validity of the will, the court said:

In reality it appears that it is the testratrix who makes the declaration about the points in the last paragraph of the will; however as the witnesses together with the testratrix, have signed the said declaration, we are of the opinion and so hold that the words above quoted of the testament constitute a sufficient compliance with the requirements of Act No. 2645.

As was said in one case, "the object of the solemnities surrounding the execution of the wills is to close the door against bad faith and fraud, to avoid substitution of wills and testaments and to guarantee their truth and authenticity. Therefore the laws on this subject should be intrepreted in such a way as to attain this premordial ends. But on the other hand, also one must not lose sight of the fact that it is not the object of the law to restrain and curtail the exercise of the right to make a will. So when an interpretation already given assures such ends, any other interpretation whatsoever, that adds nothing but demands more requisites entirely unnecessary, useless and frustrative of the testator's will, must be disregarded." (In re will of Tan Diuco, supra, p. 811.) (Emphasis supplied.)

Expressive of this liberal view of interpretation, are also the following rules embodied in the new Civil Code. These provisions, although not directly applicable, are however, significant because they project the point of view of our legislature when it adopted them having in view the existing law and jurisprudence on the matter.

. 788. If a testamentary disposition admits of different interpretations, in case of doubt, that interpretation by which the disposition is to be operative shall be preferred.

Art. 791. The words of a will are to receive an interpretation which will give to every expressions inoperative; and of two modes of interpreting a will, that is to be preferred which will prevent intestacy.

Wherefore, the order appealed from is hereby affirmed, with costs against the appellant.

Paras, C.J., Feria and Tuason, JJ., concur.

Separate Opinions

JUGO, J., concurring:

I concur in the result.

MONTEMAYOR, J., dissenting:

Bengzon and Padilla, JJ., concurring and dissenting:.

The facts in this case are correctly related in the learned majority decision penned by Mr. Justice Bautista Angelo. The main issue involved is well stated in that portion of the majority decision which for purposes of reference quote below:

The main error assigned refers to the alleged lack of attestation clause in the will under consideration, or to the fact that, If there is such attestation clause, the same has not been signed by the testator himself, and it is claimed that this defect has the effect of invalidating the will.

The will in question, after reciting in seperate paragraphs, and under correlative numbers, the provisions of the will, winds up with the following clause:

In witness whereof, I sign this testament or last will in the municipality of Iba, Zambales, Philippines, the 10th day of October, 1945, in the presence of the three witnesses, namely Dr. Nestorio Trinidad, Don Baldomero Achacoso, and Mr. Proceso Cabal as instrumental witnesses to my signing; this testament is written in three (3) sheets marked by letter "A", "B" and "C" consecutively on top of each sheet and upon my request and in my presence and also in the presence of each of the afforesaid instrumental witnesses, they also signed this testament already referred to.

I hereby manifest that every sheet of the aforesaid testament, on the left-hand margin as well as the testament itself have been signed by me as also each of the witnesses has also signed in my presence and in the presence of each other.

(Sgd.) JOSE VENZON

Witnesses:

(Sgd) NESTOR TRINIDAD

(Sgd) BALDOMERO L. ACHACOSO

(Sgd) PROCESO CABAL

The majority opinion correctly states that the clause of the will above-quoted "appears to be an attestation made by the testator himself more than by the instrumental witnesses." I go further and say that it is an attestation by the only, and not by the witnesses. The three witnesses — Trinidad, Achacoso and Cabal — signed under the signature of Jose Venzon under the word "witnesses." Nothing can be more clear than that they merely witnessed the signature of the testator, nothing more.

In an ordinary attestation clause to a will, as may be seen or verified from any legal form, the attestation clause invariably contains a certification, affirmation or solemn statement made by the witnesses and signed by them, to the effect that the testator signed the will and every page thereof, in their presence, and that they also signed in the same manner and in the presence of each other. In other words, it is they (witnesses) who speak and certify and attest. They are the ones who assures all persons interested, including the probate court that the attestation clause signed by them contains a true and faithful certificate or guarantee of the signing of the will by the testator and by themselves as required by law, and that they were in a position to do so because they signed last.

Now, let us examined the clause of the will above-quoted. As the majority opinion states, it is the testator that speak and not the attesting witnesses He certifies that not only he signed the will and every page thereof in the presence of three witnesses, but that said three witness also signed in his presence and in the presence of each other. Then he signed said clause and the will, and thereafter, the three witnesses signed under the word "witnesses", evidently giving us to understand that they saw him sign, nothing more.

From our everyday experience and observation, in ordinary written contracts or deeds, the witnesses who signed at the foot of the instrument and after the signatures of the parties to the contract or deed merely witness the signatures of said parties, nothing beyond that. The law does not require, and they do not certify that they signed in the presence of each other much less, that the instrument or deed has been executed according to legal requirements. They have nothing to do or to say about the truth or falsity of the statements contained in the body of the document. For all they know the vendor may not be the owner of the land he is selling, and the vendee may not in fact have paid the amount stated as received by the vendor. All that they know and impliedly affirm and attest is that they saw the parties sign the deed. And that is exactly what took place in the execution of the will in question. The witnesses signed merely as witnesses to the signature of the testator. They neither expressly nor the impliedly affirmed or certified that the assertions about the signing of the will and every page thereof, contained in the so-called attestation clause, are true for the obvious reason that said clause is not their own, neither have they signed it.

Let us apply a simple a simple test. Supposing that the statements contained in the so-called attestation clause in this case contained a false narration of facts. Can and may said three witnesses or anyone of them be properly and justly accused of falsification? I seriously doubt it. They can truthfully and correctly say in their defense that they made no certificate, statement or narration, Whether false or true. The certificate and attestation was made only by the testator himself and not by them (witnesses). As admitted and stated in the majority opinion, it was he (testator) who spoke, not they(witnesses). It may be that the testator, as it were took the very words out of their mouths, but the utterance and the affirmation were his not theirs. He erroneously assumed their role as attesting witnesses. But that is far from from fulfilling the requisites of the law that demands such utterance, assurance and affirmation from three witness and from no one else.

Incidentally, it may be stated that what the testator states in said clause could not have been all true. He says and certifies that the three witnesses signed the will in his presence and in the presence of each other. Then he signed said certificate or statement or clause. How could he truthfully and correctly say all this when at the time that he was making the statement or certificate and at the very instant that he signed the same the three witnesses had not yet signed (in his presence and in the presence of each other), for the simple reason that they signed last, and, naturally, after the testator had made and signed his premature and untrue statement and affirmation. The sequence is obviously wrong. In other words, the testator was basing his statement and certificate upon a mere future presumption and expectation.

The majority bolster its stand by citing the case of Aldaba vs. Roque, 43 Phil., 378, where a similar attestation clause was signed by the testatrix herself and this Court held that inasmuch as the witnesses signed with the testatrix, it was a sufficient compliance with the requirements of the law on wills. I am afraid of the doctrine laid down in that case of Aldaba vs. Roque, supra, constitutes a wide departure from the well established rule about due execution of wills and, for the guidance of prospective testators the bench and the bar, it is about time that we revised said doctrine. We should strictly comply with requirements of the law about the execution of wills so as to effectively close the door to fraud, deceit, and duress. When the law requires that the attesting witnesses make the attestation and formal declaration, we should insist that they and not someone else, even the testator, assume that role. Of what value can the statement or attestation or certificate about the signatures on the will, made by the testator be? Absolutely none. It will be remembered in the sense that it comes to life and goes into effect only after the death of the testator, not before. Naturally, in the probate of a will, the testator can never be a witness to established and support the truth of the statement contained in his certificate or attestation. In other words, in a contested will where evidence is required to prove the due execution of the statement, a certificate or affirmation made by the testator himself, besides being unnecessary and not required by law, becomes an empty and ineffective attestation because the attestator himself is no longer available to support it by his declaration under oath in court. That is why the law requires as attesting witnesses, three other persons who might be expected to be yet alive and available when the will is presented for probate. And when the will is contested the law further requires all the said three witnesses to appear in court and testify and ratify the statement clause.

So in the case of In Re Will of Tan Diuco, 45 Phil. 807, this court speaking attesting witnesses said that the three witnesses should sign the attestation clause "inasmuch as they alone can certify the facts to be stated in said clause, for having taken a direct part therein, as they saw the testator sign the will, or the person requested by him to sign all the will, or the person requested by him to sign all the sheets of the will, that is, the document constituting his last will and testament, and affirmed that it was signed under his express direction in the presence said witnesses and that all the sheets thereof had also been signed by them in the presence of said testator and of each of them, . . . ."

To consider the words and statements contained in the so-called attestation clause in the presence case, as made and uttered by the three witnesses just because they signed their names under the testators signature, as witnesses to his signing the document, is to ascribed and impute to them as their act and declaration an act clearly not their own, and to put into their mouth's words and statements never uttered or spoken by them; it is to give to the clause and the signatures under it, a significance and meaning and effect not warranted by normal and reasonable understanding and interpretation.

Under the interpretation given to the clause in question by the majority opinion as well as the interpretation given by this Court to a similar clause in the case of Aldaba vs. Roque, supra, in a case where a testator makes and signs a similar attestation clause, any three persons who may happen to have been in the same room where the testator was, and have seen him or where in a position to have seen him affix his signature to his intended last will and testament, may afterwards leave the room and go to their respective homes, towns and provinces; and subsequently, indeed, even after the death of the testator, when the persons or persons who prepared the will came to realize the necessity of attesting witnesses, they could send the document to said witnesses, in the places where they may be found, one after the other and request said three persons to sign as attesting witnesses; and each of said three persons may honestly, truthfully and without any mental reservation, sign his name to the document as a witness for the reason that he had actually witnesses the signature of the testator, for after all, that is all that he impliedly certifies by his signature as a witness, and, yet, such signatures of the witnesses under such circumstances would not only be without the contemplation of law but would also expressly and openly violate its requirements, for the law provides that the attesting witnesses must certify and attest that they signed as witnesses in the presence of the testator and in the presence of each other, facts which are absolutely and completely wanting in the example given.

The foregoing are the reasons why i am of the opinion that the interpretation given by the majority to the called attestation clause in the present case, as well as the interpretation given by the majority to the so-called attestation clause in the case, as well the interpretation given by this Court to a similar attestation clause in the case of Aldaba vs. Roque, supra, are not exactly correct and warranted.

In the possibility that the testator in the present case, or the person or persons who prepared the will had relied upon the ruling laid down in the case of Aldaba vs. Roque, supra, and that it would now be unfair to reject the present will when in its preparation a ruling by this Court has been followed, I am willing to admit said will to probate and I concur in the result of the majority opinion; but I dissent insofar as it holds out and regards the interpretation given by it of the clause in question, as a doctrine that may be followed in future cases, especially from now on. I also believe and hold that for the reasons stated in this occurring and dissenting opinion, the doctrine laid down in the case of Aldaba vs. Roque, supra, should be abandoned.