Tuazon, Tuazon, Inc. vs.

Antonio Machuca
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-22177 December 2, 1924

TUASON, TUASON, INC., plaintiff-appellee,

vs.
ANTONIO MACHUCA, defendant-appellant.

Marcaida, Capili & Ocampo for appellant.

Antonio M. Opisso for appellee.

AVANCEÑA, J.:

By giving a bond in the sum of P9,663 executed by "Manila Compañia de Seguros," the
Universal Trading Company was allowed by the Insular Collector of Custom to withdraw
from the customhouse sundry goods imported by it and consigned through the bank of
the Philippine Islands. Subsequently, the Bank of the Philippine Islands claimed the
value of the goods, and the Insular Collector of Customs obligated the "Manila
Compañia de Seguros" to pay the sum of P9,663, the amount of the bond. Before paying
this amount to the Insular Collector of Customs, the "Manila Compañia de Seguros"
obtained from the Universal Trading Company and Tuason, Tuason & Co., a solidary
note for the sum of P9,663 executed by said companies in its favor. Before signing said
note, Tuason, Tuason & Co., in turn, caused the Universal Trading Company and its
president Antonio Machuca, personally, to sign a document (Exhibit B), wherein they
bound themselves solidarily to pay, reimburse, and refund to the company all such sums
or amounts of money as it, or its representative, may pay or become bound to pay, upon
its obligation with "Manila Compañia de Seguros," whether or not it shall have actually
paid such sum or sums or any part thereof. The Universal Trading Company having
been declared insolvent, "Manila Compañia de Seguros" brought an action in the lower
court against Tuason, Tuason & Co. to recover the value of the note for P9,663 and
obtained final judgment therein, which was affirmed by this court on appeal, for the
total sum of P12,197.27, which includes the value of the note with interest
thereon. 1 Subsequently, all the rights of Tuason, Tuason & Co. were transferred to the
plaintiff Tuason, Tuason, Inc.

Later on Tuason, Tuason, Inc., brought this action to recover of Antonio Machuca the
sum of P12,197.27 which it was sentenced to pay in the case filed against it by "Manila
Compañia de Seguros," plus P3,000 attorney's fees, and P155.92 court's costs and
sheriff's fees, that is, a total of P15,353.19, together with P1,180.46 as interest upon the
sum of P15,353.19 at the rate of 10 per cent per annum from October 8, 1922, to July 8,
1923, and interest on the sum of P16,535.65 at the rate of 10 per cent from July 8, 1923,
until this sum was paid, and, in addition the sum of P1,653.65 for attorney's fees in this
case. For its cause of action, the plaintiff alleges that it had paid "Manila Compañia de
Seguros" the sum of P12,197.27, the amount of the judgment against it. The dispositive
part of the judgment appealed from is as follows:

Judgment is rendered against the defendant Antonio Machuca, and he is hereby

ordered to pay the plaintiff company the sum of fifteen thousand three hundred
fifty-three pesos and nineteen centavos (15,353.19), with compound interest
thereon at the rate of ten per cent (10%) per annum, to be computed quarterly,
that is, one thousand one hundred eighty pesos and forty-six centavos (1,180.46),
which is ten per cent interest on the amount of fifteen thousand three hundred
fifty-three pesos and nineteen centavos (P15,353.19) from October 8, 1922, to
July 8, 1923, and ten per cent on the sum of sixteen thousand five hundred thirty-
three pesos and sixty-five centavos (P16,533.65) from July 8, 1923, until full
payment, to be computed quarterly, besides the sum of one thousand six hundred
fifty-three pesos and sixty-five centavos (P1,653.65), which is ten per cent (10%)
on the amount due and the interest thereon, which said defendant promised to
pay as penalty and attorney's fees in the event of a suit being necessary to recover
the debt, and the costs. So ordered.

It appears from the evidence that what the plaintiff alleged to be a payment made to
"Manila Compañia de Seguros", for the satisfaction of the judgment rendered in favor of
the latter is the execution by Albina Tuason of a document Exhibit D in favor of "Manila
Compañia de Seguros." In this document Albina Tuason declares that she assumes and
makes hers the obligation to pay the amount of said judgment to "Manila Compañia de
Seguros" within one year and mortgages a property described in the document as
security for this obligation. This obligation of Albina Tuason was accepted by the
"Manila Compañia de Seguros," in the following terms: "I accept the foregoing security
executed by Miss Albina Tuason in favor of `Manila Compañia de Seguros.'" It, thus,
appears that the plaintiff has not in fact paid the amount of the judgment to "Manila
Compañia de Seguros." The action brought by the plaintiff is that which surety, who
pays the debt of the debtor, is entitled to bring to recover the amount thus paid (art.
1823, Civil Code). It is evidence that such a payment not having been made the alleged
cause of action does not exist.

The plaintiff company argues that, at all events, it is entitled to bring this action under
article 1843 of the Civil Code, which provides that the surety may, even before making
payment, bring action against the principal debtor. This contention of the plaintiff is
untenable. The present action, according to the terms of the complaint, is clearly based
on the fact of payment. It is true that, under article 1843, an action lies against the
principal debtor even before the surety pays the debt, but it clearly appears in the
complaint that this is not the action brought by the plaintiff. Moreover this article 1843
provided several cumulative remedies in favor of the surety, at his election, and the
surety who brings an action under this article must choose the remedy and apply for it
specifically. At any rate this article does not provide for the reimbursement of any
amount, as is sought by the plaintiff.

But although the plaintiff has not as yet paid "Manila Compañia de Seguros" the amount
of the judgment against it, and even considering that this action cannot be held to come
under article 1843 of the Civil Code, yet the plaintiff is entitled to the relief sought in
view of the facts established by the evidence. The plaintiff became bound, by virtue of a
final judgment, to pay the value of the note executed by it in favor of "Manila Compañia
de Seguros." According to the document executed solidarily by the defendant and the
Universal Trading Company, the defendant bound himself to pay the plaintiff as soon as
the latter may have become bound and liable, whether or not it shall have actually paid.
It is indisputable that the plaintiff became bound and liable by a final judgment to pay
the value of the note to "Manila Compañia de Seguros."

The defendant also contends that the document executed by Albina Tuason in favor of
"Manila Compañia de Seguros" assuming and making hers the obligation of Tuason,
Tuason & Co., was a novation of the contract by substitution of the debtor, and relieved
Tuason, Tuason & Co. from all obligation in favor of "Manila Compañia de Seguros." As
to this, it is enough to say that if this was what Albina Tuason contemplated in signing
the document, evidently it was not what "Manila Compañia de Seguros" accepted. As
above stated, "Manila Compañia de Seguros" accepted this document only as additional
security for its credit and not as a novation of the contract.

Our conclusion is that the plaintiff has the right to recover of the defendant the sum of
P9,663, the value of the note executed by the plaintiff in favor of "Manila Compañia de
Seguros" which the plaintiff is under obligation to pay by virtue of final judgment. We
do not believe, however, that the defendant must pay the plaintiff the expenses incurred
by it in the litigation between it and "Manila Compañia de Seguros." That litigation was
originated by the plaintiff having failed to fulfill its obligation with "Manila Compañia de
Seguros," and it cannot charge the defendant with expenses which it was compelled to
make by reason of its own fault. It is entitled, however, to the expenses incurred by it in
this action brought against the defendant, which are fixed at P1,653.65 as attorney's
fees.

The judgment appealed from is modified, and the defendant is sentenced to pay the
plaintiff the sum of P9,663, with interest thereon at the rate of 10 per cent per annum
from July 19, 1923, when the complaint was filed until full payment thereof, plus the
sum of P1,653.65 for attorney's fees, without special pronouncement as to costs. So
ordered.

Johnson, Street, Malcolm, Villamor, Ostrand and Romualdez, JJ., concur.

Footnotes

1 R. G. No. 18101, promulgated July 10, 1922, not reported.

 Government of the Philippine Islands vs.
Anastasia Abadilla, et al.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-21334 December 10, 1924

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, petitioner,

vs.
ANASTASIA ABADILLA, ET AL., claimants.
THE MUNICIPALITY OF TAYABAS, ET AL., claimants-appellees,
MARIA PALAD, ET AL., claimants-appellants.

Domingo Lopez, Ramon Diokno and Gabriel N. Trinidad for appellants.

Attorney-General Villa-Real for municipality as appellee.
No appearance for the other appellees.

OSTRAND, J.:

This is an appeal from a judgment in cadastral and land registration case No. 3 of the
Court of First Instance of Tayabas (G. L. R. O. Record No. 213) in which case lots Nos.
3464, 3469, and 3470 are claimed by the municipality of Tayabas and the governor of
the province on one side, and by Maria, Eufemio, Eugenia, Felix, Caridad, Segunda, and
Emilia Palad on the other. Lot No. 3470 is also claimed by Dorotea Lopez. The court
below ordered the registration of the three lots in the name of the governor of the
Province of Tayabas in trust for a secondary school to be established in the municipality
of Tayabas. The claimants Palad and Dorotea Lopez appealed.

It appears from the evidence that the lands in question were originally owned by one
Luis Palad, a school teacher, who obtained titled to the land by composicion gratuita in
1894. On January 25, 1892, Palad executed a holographic will party in Spanish and
partly in Tagalog. Palad died on December 3, 1896, without descendants, but leaving a
widow, the appellant Dorotea Lopez, to whom he had been married since October 4,
1885. On July 27, 1987, the Court of First Instance of Tayabas ordered the
protocolization of the will over the opposition of Leopoldo and Policarpio Palad,
collateral heirs of the deceased and of whom the appellants Palad are descendants.

The will contained a clause in Tagalog which, translated into English, reads:

That the cocoanut land in Colongcolong, which I have put under cultivation, be
used by my wife after my death during her life or until she marries, which
property is referred to in the inventory under No. 5, but from this cocoanut land
shall be taken what is to be lent to the persons who are to plant cocoanut trees
and that which is to be paid to them as their share of the crop if any should
remain; and that she try to earn with the product of the cocoanut trees of which
those bearing fruit are annually increasing; and if the times aforementioned
should arrive, I prepare and donate it to secondary college to be erected in the
capital of Tayabas; so this will be delivered by my wife and the executors to
the Ayuntamiento of this town, should there be any, and if not, to the civil
governor of this province in order to cause the manager thereof to comply with
my wishes for the good of many and the welfare of the town.

After the death of Luis Palad the widow Dorotea Lopez remained in possession of the
land and in the year 1900 married one Calixto Dolendo. On April 20, 1903, the aforesaid
collateral heirs of Luis Palad brought an action against the widow for the partition of the
lands here in question on the ground that she, by reason of her second marriage, had
lost the right to their exclusive use and possession. In the same action the municipality
of Tayabas intervened claiming the land under the clause of the Palad will above quoted.
During the pendency of the action an agreement was arrived at by the parties under
which the land which now constitutes lots Nos. 3464 and 3469 were turned over to the
municipality as its share of the inheritance under the will, and the remaining portion of
the land in controversy and which now forms lot No. 3470 was left in the possession of
Dorotea Lopez. On the strength of the agreement the action was dismissed on November
9, 1904, upon motion by the counsel for the municipality and concurred in by all the
parties, reserving to the collateral heirs the right to bring another action. The
municipality of Tayabas has been in possession of said lots Nos. 3464 and 3469 ever
since and Dorotea Lopez has likewise held uninterrupted possession of lot No. 3470.

In regard to lots Nos. 3464 and 3469, claimed by the appellants Palad and the appellees,
the case presents several problems not directly covered by statutory provisions or by
Spanish or local precedents and, for the solution of which, we must resort to the
underlying principles of the law on the subject. As it is doubtful whether the possession
of the municipality of Tayabas can be considered adverse within the meaning of section
41 of the Code of Civil Procedure, the case as to these lots turns upon the construction
and validity of the clause quoted from the will of Luis Palad, rather than upon the
question of prescription of title.
The clause is very unskillfully drawn; its language is ungrammatical and at first blush
seems somewhat obscure, but on closer examination it sufficiently reveals the purpose
of the testator. And if its provisions are not in contravention of some established rule of
law or public policy, they must be respected and given effect. It may be observed that the
question as to the sufficiency of the form of the will must be regarded as settled by the
protocolization proceedings had in the year 1897.

It is a well-known rule that testamentary dispositions must be liberally construed so as

to give effect to the intention of the testator as revealed by the will itself. Applying this
rule of construction it seems evident that by the clause in question the testator proposed
to create a trust for the benefit of a secondary school to be established in the town of
Tayabas, naming as trustee the ayuntamiento of the town or if there be
no ayuntamiento, then the civil governor of the Province of Tayabas.

As the law of trusts has been much more frequently applied in England and in the
United Stated than it has in Spain, we may draw freely upon American precedents in
determining the effect of the testamentary trust here under consideration, especially so
as the trusts known to American and English equity jurisprudence are derived from
the fidei commissa of the Roman law and are based entirely upon Civil Law principles.

In order that a trust may become effective there must, of course, be a trustee and
a cestui que trust, and counsel for the appellants Palad argues that we here have neither;
that there is no ayuntamiento, no Gobernador Civil of the province, and no secondary
school in the town of Tayabas.

An ayuntamiento corresponds to what in English is termed a municipal corporation and

it may be conceded that the ordinary municipal government in these Island falls short of
being such a corporation. But we have provincial governors who like their predecessors,
the civil governors, are the chief executives of their respective provinces. It is true that in
a few details the function and power of the two offices may vary somewhat, but it cannot
be successfully disputed that one office is the legal successor of the other. It might as
well be contended that when under the present regime the title of the chief executive of
the Philippine was changed from Civil Governor to that of Governor-General, the latter
was not the legal successor of the former. There can therefore be but very little doubt
that the governor of the Province of Tayabas, as the successor of the civil governor of the
province under the Spanish regime, may acts as trustee in the present case.

In regard to private trust it is not always necessary that the cestui que trustshould be
named, or even be in esse at the time the trust is created in his favor. (Flint on Trusts
and Trustees, section 25; citing Frazier vs. Frazier, 2 Hill Ch., 305; Ashurt vs. Given, 5
Watts & S., 329; Carson vs. Carson, 1 Wins. [N. C.] 24.) Thus a devise to a father in trust
for accumulation for his children lawfully begotten at the time of his death has been held
to be good although the father had no children at the time of the vesting of the funds in
him as trustees. In charitable trust such as the one here under discussion, the rule is still
further relaxed. (Perry on Trusts, 5th ed., section 66.)

This principle is in harmony with article 788 of the Civil Code which reads as follows:
 Any disposition which imposes upon an heirs the obligation of periodically
investing specified sums in charitable works, such as dowries for poor maidens or
scholarships for students, or in favor of the poor, or any charitable public
educational institution, shall be valid under the following conditions:

If the charge is imposed on real property and is temporary, the heir or heirs may
dispose of the encumbered estate, but the lien shall continue until the record
thereof is canceled.

If the charge is perpetual, the heir may capitalize it and invest the capital at
interest, fully secured by first mortgage.

The capitalization and investment of the principal shall be made with the
intervention of the civil governor of the province after hearing the opinion of the
prosecuting officer.

In any case, if the testator should not have laid down any rules for the
management and application of the charitable legacy, it shall be done by the
executive authorities upon whom this duty devolves by law.

It is true that minor distinctions may possibly be drawn between the case before us and
that presupposed in the article quoted, but the general principle is the same in both
cases. Here the trustee, who holds the legal title, as distinguished from the beneficial
title resting in the cestui que trust, must be considered the heirs. The devise under
consideration does not in terms require periodical investments of specified sums, but it
is difficult to see how this can affect the general principle involved, and unless the devise
contravenes some other provision of the Code it must be upheld.

We have been unable to find any such provision. There is no violation of any rule against
perpetuities: the devise does not prohibit the alienation of the land devised. It does not
violate article 670 of the Code: the making of the will and the continuance or quantity of
the estate of the heir are not left in the discretion of the third party. The devisee is not
uncertain and the devise is therefore are repugnant to article 750 of the Civil Code. The
provincial governor can hardly be regarded as a public establishment within the
meaning of article 748 and may therefore receive the inheritance without the previous
approval of the Government.

But counsel argues that assuming all this to be true the collateral heirs of the deceased
would nevertheless be entitled to the income of the land until the cestui que trust is
actually in esse. We do not think so. If the trustee holds the legal title and the devise is
valid, the natural heirs of the deceased have no remaining interest in the land except
their right to the reversion in the event the devise for some reason should fail, an event
which has not as yet taken place. From a reading of the testamentary clause under
discussion it seems quite evident that the intention of the testator was to have income of
the property accumulate for the benefit of the proposed school until the same should be
established.
From what has been said it follows that the judgment appealed from must be affirmed in
regard to lots Nos. 3464 and 3469.

As to lot No. 3470 little need be said. It may be noted that though the Statute of
Limitation does not run as between trustee and cestui que trustas long as the trust
relations subsist, it may run as between the trust and third persons. Contending that the
Colongcolong land was community property of her marriage with Luis Palad and that lot
No. 3470 represented her share thereof, Dorotea Lopez has held possession of said lot,
adverse to all other claimants, since the year 1904 and has now acquired title by
prescription.

The judgment appealed from is affirmed in regard to lots Nos. 3464 and 3469 and is
reversed as to lot No. 3470, and it is ordered that said lot No. 3470 be registered in the
name of the claimant Dorotea Lopez. No costs will be allowed. So ordered.

Street, Avanceña, Villamor and Romualdez, JJ., concur.

Separate Opinions

MALCOLM, J., concurring and dissenting:

I concur in regard to lots Nos. 3464 and 3469 and dissent in regard to lot No. 3470. As
to the last mentioned lot, it will be recalled that title to it is adjudicated to Dorotea
Lopez, the widow of Luis Palad who, in his will, transmitted the usufructuary rights to
the land to his widow "during her life or until she marries," after which the property was
to be delivered to the ayuntamiento of Tayabas, Tayabas, or if there should not be any,
to the civil governor of the Province of Tayabas, for the benefit of a secondary college.
Dorotea Lopez having remarried, the property should have been turned over to the
municipality of Tayabas. The alleged agreement of 1904 cannot alter there basic and
controlling facts. The possession of Dorotea Lopez has been in contravention of the
terms of the trust and in bad faith.

Whatever may be the rule elsewhere, in civil law jurisdictions including the Philippines,
it is settled that to perfect title by adverse possession, such possession must have been
held in good faith on the part of the claimant. (Arriola vs. Gomez de la Serna [1909], 14
Phil., 627; Santiago vs.Cruz [1911], 19 Phil., 145; Cuaycong vs. Benedicto [1918], 37 Phil.,
781; Tolentino vs. Vitug [1918], 39 Phil., 126; Ochoa vs. Hernandez [1913], 230 U. S.,
139; Kennedy vs. Townsley [1849], 16 Ala., 239; Abshire vs. Lege [1913], 133 La., 254; 2
C. J., 199.) The doctrines announced in the Tolentino vs. Vitug, supra, are particularly
applicable to the facts.

For these reason, I would prefer to see the judgment appealed from affirmed in all
respects.