Facts:
At about 1:30 a.m. on November 15, 1975, private respondent Leonardo Dionisio was on his way home from cocktails and dinner meeting with his boss. He was proceeding down General Lacuna Street when he saw a Ford dump truck parked askew, partly blocking the way of oncoming traffic, with no lights or early warning reflector devices. The truck was driven earlier by Armando Carbonel, a regular driver of the petitioner company. Dionisio tried to swerve his car to the left, but it was too late. He suffered some physical injuries and nervous breakdown. Dionision filed an action for damages against Carbonel and Phoenix Insurance. Petitioners countered the claim by imputing the accident to respondent’s own negligence in driving at high speed without curfew pass and headlights, and while intoxicated. The trial court and the Court of Appeals ruled in favor of private respondent.

Issue:
Whether the collision was brought about by the way the truck was parked, or by respondent’s own negligence

Held:
We find that private respondent Dionisio was unable to prove possession of a valid curfew pass during the night of the accident and that the preponderance of evidence shows that he did not have such a pass during that night. It is the petitioners' contention that Dionisio purposely shut off his headlights even before he reached the intersection so as not to be detected by the police in the police precinct which he (being a resident in the area) knew was not far away from the intersection. We believe that the petitioners' theory is a more credible explanation than that offered by private respondent Dionisio, i.e., that he had his headlights on but that, at the crucial moment, these had in some mysterious if convenient way malfunctioned and gone off, although he succeeded in switching his lights on again at "bright" split seconds before contact with the dump truck. We do not believe that this evidence is sufficient to show that Dionisio was so heavily under the influence of liquor as to constitute his driving a motor vehicle per se an act of reckless imprudence. The conclusion we draw from the factual circumstances outlined above is that private respondent Dionisio was negligent the night of the accident. He was hurrying home that night and driving faster than he should have been. Worse, he extinguished his headlights at or near the intersection of General Lacuna and General Santos Streets and thus did not see the dump truck that was parked askew and sticking out onto the road lane.

Nonetheless, we agree with the Court of First Instance and the Intermediate Appellate Court that the legal and proximate cause of the accident and of Dionisio's injuries was the wrongful or negligent manner in which the dump truck was parked in other words, the negligence of petitioner Carbonel. The collision of Dionisio's car with the dump truck was a natural and foreseeable consequence of the truck driver's negligence.

The distinctions between "cause" and "condition" which the 'petitioners would have us adopt have already been "almost entirely discredited. If the defendant has created only a passive static condition which made the damage possible, the defendant is said not to be liable. But so far as the fact of causation is concerned, in the sense of necessary antecedents which have played an important part in producing the result it is quite impossible to distinguish between active forces and passive situations, particularly since, as is invariably the case, the latter are the result of other active forces which have gone before. Even the lapse of a considerable time during which the "condition" remains static will not necessarily affect liability. "Cause" and "condition" still find occasional mention in the decisions; but the distinction is now almost entirely discredited. So far as it has any validity at all, it must refer to the type of case where the forces set in operation by the defendant have come to rest in a position of apparent safety, and some new force intervenes. But even in such cases, it is not the distinction between "cause" and "condition" which is important but the nature of the risk and the character of the intervening cause.
We believe, secondly, that the truck driver's negligence far from being a "passive and static condition" was rather an indispensable and efficient cause. The improper parking of the dump truck created an unreasonable risk of injury for anyone driving down General Lacuna Street and for having so created this risk, the truck driver must be held responsible. In our view, Dionisio's negligence, although later in point of time than the truck driver's negligence and therefore closer to the accident, was not an efficient intervening or independent cause.

The defendant cannot be relieved from liability by the fact that the risk or a substantial and important part of the risk, to which the defendant has subjected the plaintiff has indeed come to pass. Foreseeable intervening forces are within the scope original risk, and hence of the defendant's negligence. The courts are quite generally agreed that intervening causes which fall fairly in this category will not supersede the defendant's responsibility. Thus, a defendant who blocks the sidewalk and forces the plaintiff to walk in a street where the plaintiff will be exposed to the risks of heavy traffic becomes liable when the plaintiff is run down by a car, even though the car is negligently driven; and one who parks an automobile on the highway without lights at night is not relieved of responsibility when another negligently drives into it. We hold that private respondent Dionisio's negligence was "only contributory," that the "immediate and proximate cause" of the injury remained the truck driver's "lack of due care" and that consequently respondent Dionisio may recover damages though such damages are subject to mitigation by the courts.
Petitioners also ask us to apply what they refer to as the "last clear chance" doctrine. The common law notion of last clear chance permitted courts to grant recovery to a plaintiff who had also been negligent provided that the defendant had the last clear chance to avoid the casualty and failed to do so. Accordingly, it is difficult to see what role, if any, the common law last clear chance doctrine has to play in a jurisdiction where the common law concept of contributory negligence as an absolute bar to recovery by the plaintiff, has itself been rejected, as it has been in Article 2179 of the Civil Code of the Philippines. Under Article 2179, the task of a court, in technical terms, is to determine whose negligence - the plaintiff's or the defendant's - was the legal or proximate cause of the injury. The relative location in the continuum of time of the plaintiff's and the defendant's negligent acts or omissions, is only one of the relevant factors that may be taken into account. Of more fundamental importance are the nature of the negligent act or omission of each party and the character and gravity of the risks created by such act or omission for the rest of the community. Our law on quasi-delicts seeks to reduce the risks and burdens of living in society and to allocate them among the members of society. To accept the petitioners' pro-position must tend to weaken the very bonds of society.
​
We believe that the demands of substantial justice are satisfied by allocating most of the damages on a 20-80 ratio. Thus, 20% of the damages awarded by the respondent appellate court, except the award of P10,000.00 as exemplary damages and P4,500.00 as attorney's fees and costs, shall be borne by private respondent Dionisio; only the balance of 80% needs to be paid by petitioners Carbonel and Phoenix who shall be solidarity liable therefor to the former. The award of exemplary damages and attorney's fees and costs shall be borne exclusively by the petitioners. Phoenix is of course entitled to reimbursement from Carbonel.  We see no sufficient reason for disturbing the reduced award of damages made by the respondent appellate court.

Facts:
On January 20, 1915, Jose Cangco was riding the train of Manila Railroad Co (MRC). He was an employee of the latter and he was given a pass so that he could ride the train for free. When he was nearing his destination at about 7pm, he arose from his seat even though the train was not at full stop. When he was about to alight from the train (which was still slightly moving) he accidentally stepped on a sack of watermelons which he failed to notice due to the fact that it was dim. This caused him to lose his balance at the door and he fell and his arm was crushed by the train and he suffered other serious injuries. He was dragged a few meters more as the train slowed down.
It was established that the employees of MRC were negligent in piling the sacks of watermelons. MRC raised as a defense the fact that Jose Cangco was also negligent as he failed to exercise diligence in alighting from the train as he did not wait for it to stop.

ISSUE: 
Whether or not Manila Railroad Co is liable for damages.

HELD: 
Yes. Alighting from a moving train while it is slowing down is a common practice and a lot of people are doing so every day without suffering injury. Jose Cangco has the vigor and agility of young manhood, and it was by no means so risky for him to get off while the train was still moving as the same act would have been in an aged or feeble person. He was also ignorant of the fact that sacks of watermelons were there as there were no appropriate warnings, and the place was dimly lit.
The Court also elucidated on the distinction between the liability of employers under Article 2180 and their liability for breach of contract [of carriage].

 

Facts:
Petitioner Hedy Gan was driving along North Bay Boulevard on July 4, 1972. There were 2 vehicles parked on the right side of the road. As the petitioner approached the place where the vehicles were parked, a vehicle from the opposite direction tried to overtake another vehicle and encroached the lane of her car. To avoid collision, the petitioner swerved to the right and hit a pedestrian. The pedestrian was pinned to the rear of the parked jeepney and died on arrival to the hospital. Petitioner was found guilty of homicide through reckless imprudence by the trial court. The Corut of Appeals modified the decision and found her guilty of homicide through simple imprudence.
​
Issue:
Whether the petitioner is negligent as to hold her guilty for the death of the pedestrian.

Held:
No, SC reverse.
The test for determining whether or not a person is negligent in doing an act whereby injury or damage results to the person or property of another is this: Would a prudent man in the position of the person to whom negligence is attributed foresee harm to the person injured as a reasonable consequence of the course about to be pursued? If so, the law imposes the duty oil the doer to take precaution against its mischievous results and the failure to do so constitutes negligence. A corollary rule is what is known in the law as the emergency rule. "Under that rule, one who suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence, if he fails to adopt what subsequently and upon reflection may appear to have been a better method, unless the emergency in which he finds himself is brought about by his own negligence." Applying the above test to the case at bar, we find the petitioner not guilty of the crime of Simple Imprudence resulting in Homicide.
The course of action suggested by the appellate court would seem reasonable were it not for the fact that such suggestion did not take into account the amount of time afforded petitioner to react to the situation she was in. For it is undeniable that the suggested course of action presupposes sufficient time for appellant to analyze the situation confronting her and to ponder on which of the different courses of action would result in the least possible harm to herself and to others. The appellate court is asking too much from a mere mortal like the petitioner who in the blink of an eye had to exercise her best judgment to extricate herself from a difficult and dangerous situation caused by the driver of the overtaking vehicle. Petitioner certainly could not be expected to act with all the coolness of a person under normal conditions. The danger confronting petitioner was real and imminent, threatening her very existence. She had no opportunity for rational thinking but only enough time to heed the very powerful instinct of self-preservation.

Facts:
On November 2, 1911, defendant Segundo Barias, a motorman for the Manila Electric Railroad and Light Company, was driving his car along Rizal Avenue and stopped at an intersection to take on some passengers. He looked backward, presumably to be sure that all passengers were aboard, and then started the car. At that moment, Fermina Jose, a 3-year-old child, walked or ran in front of the car. She was knocked down and dragged at some distance to death. Defendant knew nothing of this until his return when he was informed of what happened. He was charged and found guilty of homicide resulting from reckless negligence.
​
Issue:
Whether the evidence shows such carelessness or want of ordinary care on the part of the defendant as to amount to reckless negligence

Held:
Negligence is want of the care required by the circumstances. It is a relative or comparative, not an absolute, term and its application depends upon the situation of the parties and the degree of care and vigilance which the circumstances reasonably require. Where the danger is great, a high degree of care is necessary, and the failure to observe it is a want of ordinary care under the circumstances.
The evidence shows that the thoroughfare on which the incident occurred was a public street in a densely populated section of the city. The hour was six in the morning, or about the time when the residents of such streets begin to move about. Under such conditions a motorman of an electric street car was clearly charged with a high degree of diligence in the performance of his duties. He was bound to know and to recognize that any negligence on his part in observing the track over which he was running his car might result in fatal accidents. He had no right to assume that the track before his car was clear. It was his duty to satisfy himself of that fact by keeping a sharp lookout, and to do everything in his power to avoid the danger which is necessarily incident to the operation of heavy street cars on public thoroughfares in populous sections of the city. At times, it might be highly proper and prudent for him to glance back before again setting his car in motion, to satisfy himself that he understood correctly a signal to go forward or that all the passengers had safely alighted or gotten on board. But we do insist that before setting his car again in motion, it was his duty to satisfy himself that the track was clear, and, for that purpose, to look and to see the track just in front of his car. This the defendant did not do, and the result of his negligence was the death of the child.
We hold that the reasons of public policy which impose upon street car companies and their employees the duty of exercising the utmost degree of diligence in securing the safety of passengers, apply with equal force to the duty of avoiding the infliction of injuries upon pedestrians and others on the public streets and thoroughfares over which these companies are authorized to run their cars. And while, in a criminal case, the courts will require proof of the guilt of the company or its employees beyond a reasonable doubt, nevertheless the care or diligence required of the company and its employees is the same in both cases, and the only question to be determined is whether the proofs shows beyond a reasonable doubt that the failure to exercise such care or diligence was the cause of the accident, and that the defendant was guilty thereof.
Standing erect, at the position he would ordinarily assume while the car is in motion, the eye of the average motorman might just miss seeing the top of the head of a child, about three years old, standing or walking close up to the front of the car. But it is also very evident that by inclining the head and shoulders forward very slightly, and glancing in front of the car, a person in the position of a motorman could not fail to see a child on the track immediately in front of his car; and we hold that it is the manifest duty of a motorman, who is about to start his car on a public thoroughfare in a thickly-settled district, to satisfy himself that the track is clear immediately in front of his car, and to incline his body slightly forward, if that be necessary, in order to bring the whole track within his line of vision. Of course, this may not be, and usually is not necessary when the car is in motion, but we think that it is required by the dictates of the most ordinary prudence in starting from a standstill.



 
 

​JULIAN SINGSON vs. BANK OF THE PHILIPPINE ISLANDS

Facts:
 Appeal by plaintiffs from a decision of the Court of First Instance(CFI) Manila dismissing their complaint against defendants.
On May 8, 1963, the Singsong commenced the present action against the Bank and its president, Freixas, for damages in consequence of said illegal freezing of plaintiffs' account.


After appropriate proceedings, the CFI Manila rendered judgment dismissing the complaint upon the ground that plaintiffs cannot recover from the defendants upon the basis of a quasi-delict, because the relation between the parties is contractual in nature.

Issue:
Whether or not the existence of a contractual relation between the parties bar recovery of damages.

Ruling:
The judgment appealed from is reversed holding defendant BPI to pay to the plaintiff’s nominal damages, and attorney's fees, apart from the costs. The Supreme Court have repeatedly held that the existence of a contract between the parties does not bar the commission of a tort by the one against the order and the consequent recovery of damages therefore.

In view, of the facts obtaining in the case at bar, and considering, particularly, the circumstance, that the wrong done to the plaintiff was remedied as soon as the President of the bank realized the mistake they had committed, the Court finds that an award of nominal damages the amount of which need not be proven in the sum of P1,000, in addition to attorney's fees in the sum of P500, would suffice to vindicate plaintiff's rights.

Facts:
A vehicular accident occurred on August 5, 1979, when Martin Belmonte, while driving a cargo truck belonging to petitioner Vicente Vergara, rammed the store-residence of private respondent Amadeo Azarcon, causing damage assessed at P53,024.22. The trial court rendered decision in favor of private respondent, ordering the petitioner to pay, jointly and severally with Traveller’s Insurance and Surety Corporation, the following: (a) P53,024.22 as actual damages; (b) P10,000.00 as moral damages; (c) P10,000.00 as exemplary damages; and (d) the sum of P5,000.00 for attorney's fees and the costs. The insurance company was sentenced to pay to the petitioner the following: (a) P50,000.00 for third party liability under its comprehensive accident insurance policy; and (b) P3,000.00 for and as attorney's fees. The Court of Appeals affirmed the decision in toto; hence, this instant petition for certiorari.
Issue:
Whether the petitioner is guilty of quasi-delict
Held:
It was established by competent evidence that the requisites of a quasi-delict are present in the case at bar. These requisites are: (1) damages to the plaintiff; (2) negligence, by act or omission, of which defendant, or some person for whose acts he must respond, was guilty; and (3) the connection of cause and effect between such negligence and the damages. The fact of negligence may be deduced from the surrounding circumstances thereof. According to the police report, "the cargo truck was travelling on the right side of the road going to Manila and then it crossed to the center line and went to the left side of the highway; it then bumped a tricycle; and then another bicycle; and then said cargo truck rammed the store warehouse of the plaintiff." According to the driver of the cargo truck, he applied the brakes, but the latter did not work due to mechanical defect. Contrary to the claim of the petitioner, a mishap caused by defective brakes cannot be considered as fortuitous in character. Certainly, the defects were curable and the accident preventable.
 

AMADO PICART vs. FRANK SMITH, JR.
(37 Phil 809) G.R. No. L-12219, March 15, 1918
 
Facts:
Amado Picart was riding on his pony over Carlatan Bridge in San Fernando, La Union When Frank Smith approached from the opposite direction in an automobile with rate of speed of about ten or twelve miles per hour. As the Smith neared the bridge, he saw a horseman on it and blew his horn to give warning of his approach. He continued his course and after he had taken the bridge he gave two more successive blasts, as it appeared to him that the man on horseback before him was not observing the rule of the road.
Picart saw the automobile and heard the warning signals. Being perturbed by the rapid approach of the vehicle, he pulled the pony closely up against the railing on the right side of the bridge instead of going to the left. The bridge is about 75 meters and a width of only 4.80 meters. The vehicle approached without slowing down. Smith quickly turned his car sufficiently to the right to escape hitting the horse alongside of the railing where it as then standing; but due to the automobile’s proximity to the animal, the animal became frightened and turned its body across the bridge with its head toward the railing. In so doing, it has struck on the hock of the left hind leg by the flange of the car and the limb was broken.
The horse fell and its rider was thrown off. As a result of its injuries the horse died. The plaintiff received contusions which caused temporary unconsciousness and required medical attention for several days.

ISSUE:
Whether Smith was guilty of negligence and liable for civil obligations

HELD:
Yes. The control of the situation had then passed entirely to the defendant; and it was his duty either to bring his car to an immediate stop or, seeing that there were no other persons on the bridge, to take the other side and pass sufficiently far away from the horse to avoid the danger of collision. Instead of doing this, the defendant ran straight on until he was almost upon the horse.
A prudent man, placed in the position of the defendant, would in our opinion, have recognized that the course which he was pursuing was fraught with risk, and would therefore have foreseen harm to the horse and the rider as reasonable consequence of that course. Under these circumstances the law imposed on the defendant the duty to guard against the threatened harm.
It goes without saying that the plaintiff himself was not free from fault, for he was guilty of antecedent negligence in planting himself on the wrong side of the road. But as we have already stated, the defendant was also negligent; and in such case the problem always is to discover which agent is immediately and directly responsible. Under these circumstances the law is that the person who has the last clear chance to avoid the impending harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of the other party.

Test of Negligence:
Did the defendant in doing the alleged negligent act use that person would have used in the same situation? If not, then he is guilty of negligence.
​
“Last clear chance” rule is applicable. In other words, when a traveler has reached a point where he cannot extricate himself and vigilance on his part will not avert the injury, his negligence in reaching that position becomes the condition and not the proximate cause of the injury and will not preclude a recovery. 

Facts:
 From the fourth to the twelfth paragraph of the complaint, the plaintiff set forth that, prior to December 1, 1898, Warner, Barnes and Co. were conducting a business in Albay. The principal object of the business was the purchase of hemp in the pueblos of Legaspi and Tobacco for the purpose of bringing it to Manila to sell if for exportation. On the same date, the plaintiff company became interested in the business of Warner, Barnes and Co. in Albay and formed therewith a joint-account partnership in which Aldecoa and Co. were to share equally in the gains and losses of the business.
 
 The defendant is the successor to all the rights and obligations of Warner, Barnes and Co., among which is that of being manager of the joint-account partnership with Aldecoa and Co., It is a recognized fact, and one admitted by both parties that the partnership herein concerned concluded its transactions on December 31, 1903. Wherefore the firm of Warner, Barnes & Co. Ltd., the manager of the partnership, in declaring the latter's transactions concluded and in rendering duly verified accounts of its results, owes the duty to include therein the property and effects belonging to the partnership in common.
 
Issue:
Whether or not this litigation concerns the rendering of accounts pertaining to the management of the business of a joint-account partnership formed between the two litigants companies.
 
Held:
It is a rule of law generally observed that he who takes charge of the management of another's property is bound immediately thereafter to render accounts covering his transactions; and that it is always to be understood that all accounts rendered must be duly substantiated by vouchers. It is one of the duties of the manager of a joint-account partnership, to liquidate the assets that form the common property, and to state the result obtained therefrom in the final rendering of the accounts which he is to present at the conclusion of the partnership.
 
 
It is a general rule of law that he who takes charge of the management of another's property is bound immediately thereafter to render accounts of his transactions; and that it is always to be understood that all accounts must be duly supported by proofs.
 
The acceptance and approval of any account rendered from a certain date does not excuse nor relieve the manager of a joint-account partnership from complying with the unquestionable duty of rendering accounts covering a period of time prior to the said date. They must be rendered from the time the partnership was formed and its business actually commenced.
 

​
Facts:  
The National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and management of the Subic National Shipyard Inc., (SNS) which subsequently became the Philippine Shipyard and Engineering Corporation (PHILSECO).
 
Under the JVA, the NDC and KAWASAKI will contribute P330M for the capitalization of PHILSECO in the proportion of 60%-40% respectively.  One of its salient features is the grant to the parties of the right of first refusal should either of them decide to sell, assign or transfer its interest in the joint venture.
NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank (PNB). Such interests were subsequently transferred to the National Government pursuant to an Administrative Order.
When the former President Aquino issued Proclamation No. 50 establishing the Committee on Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and possession of, conserve, manage and dispose of non-performing assets of the National Government, a trust agreement was entered into between the National Government and the APT wherein the latter was named the trustee of the National Government’s share in PHILSECO.
 
In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National Government’s share in PHILSECO to private entities.  After a series of negotiations between the APT and KAWASAKI , they agreed that the latter’s right of first refusal under the JVA be “exchanged” for the right to top by 5%, the highest bid for the said shares.  They further agreed that KAWASAKI woul.d be entitled to name a company in which it was a stockholder, which could exercise the right to top.  KAWASAKI then informed APT that Philyards Holdings, Inc. (PHI) would exercise its right to top.
 
At the public bidding, petitioner J.G. Summit Holdings Inc. submitted a bid of Two Billion and Thirty Million Pesos (Php2,030,000,000.00) with an acknowledgement of KAWASAKI/PHILYARDS right to top.
As petitioner was declared the highest bidder, the COP approved the sale “subject to the right of Kawasaki Heavy Industries, Inc. / PHILYARDS Holdings Inc. to top JG’s bid by 5% as specified in the bidding rules.”
On the other hand, the respondent by virtue of right to top by 5%, the highest bid for the said shares timely exercised the same.
 
Petitioners, in their motion for reconsideration, raised, inter alia, the issue on the maintenance of the 60%-40% relationship between the NIDC and KAWASAKI arising from the Constitution because PHILSECO is a landholding corporation and need not be a public utility to be bound by the 60%-40% constitutional limitation.
 
Issue: 
Whether under the 1977 Joint Venture Agreement, KAWASAKI can purchase only a maximum of 40% of PHILSECO’s total capitalization.
 
The right of first refusal is meant to protect the original or remaining joint ventures or shareholder(s) from the entry of third persons who are not acceptable to it as co-venturer(s) or co-shareholder(s). The joint venture between the Philippine Government and KAWASAKI is in the nature of a partnership36 which, unlike an ordinary corporation, is based on delectus personae.37 No one can become a member of the partnership association without the consent of all the other associates. The right of first refusal thus ensures that the parties are given control over who may become a new partner in substitution of or in addition to the original partners. Should the selling partner decide to dispose all its shares, the non-selling partner may acquire all these shares and terminate the partnership. No person or corporation can be compelled to remain or to continue the partnership. Of course, this presupposes that there are no other restrictions in the maximum allowable share that the non-selling partner may acquire such as the constitutional restriction on foreign ownership in public utility. The theory that KAWASAKI can acquire, as a maximum, only 40% of PHILSECO’s shares is correct only if a shipyard is a public utility. In such instance, the non-selling partner who is an alien can acquire only a maximum of 40% of the total capitalization of a public utility despite the grant of first refusal. The partners cannot, by mere agreement, avoid the constitutional proscription. But as afore-discussed, PHILSECO is not a public utility, and no other restriction is present that would limit the right of KAWASAKI to purchase the Government’s share to 40% of Philseco’s total capitalization.
Furthermore, the phrase “under the same terms” in section 1.4 cannot be given an interpretation that would limit the right of KAWASAKI to purchase PHILSECO shares only to the extent of its original proportionate contribution of 40% to the total capitalization of the PHILSECO. Taken together with the whole of section 1.4, the phrase “under the same terms” means that a partner to the joint venture that decides to sell its shares to a third party shall make a similar offer to the non-selling partner. The selling partner cannot make a different or a more onerous offer to the non-selling partner.
The exercise of first refusal presupposes that the non-selling partner is aware of the terms of the conditions attendant to the sale for it to have a guided choice. While the right of first refusal protects the non-selling partner from the entry of third persons, it cannot also deprive the other partner the right to sell its shares to third persons if, under the same offer, it does not buy the shares.
Apart from the right of first refusal, the parties also have preemptive rights under section 1.5 in the unissued shares of Philseco. Unlike the former, this situation does not contemplate transfer of a partner’s shares to third parties but the issuance of new Philseco shares. The grant of preemptive rights preserves the proportionate shares of the original partners so as not to dilute their respective interests with the issuance of the new shares. Unlike the right of first refusal, a preemptive right gives a partner a preferential right over the newly issued shares only to the extent that it retains its original proportionate share in the joint venture.
The case at bar does not concern the issuance of new shares but the transfer of a partner’s share in the joint venture. Verily, the operative protective mechanism is the right of first refusal which does not impose any limitation in the maximum shares that the non-selling partner may acquire.
 
Held:
The court upheld the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC.
 
The right of first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA.  This right allows them to purchase the shares of their co-shareholder before they are offered to a third party.  The agreement of co-shareholders to mutually grant this right to each other, by itself, does not constitute a violation of the provisions of the Constitution limiting land ownership to Filipinos and Filipino corporations.  As PHILYARDS correctly puts it, if PHILSECO still owns the land, the right of first refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40% ration.  This transfer by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any fraudulent intent.  The transfer could be made either to a nominee or such other party which the holder of the right of first refusal feels it can comfortably do business with.
Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI, in exercising its right of first refusal, can exceed 40% of PHILSECO’s equity.  In fact, in can even be said that if the foreign shareholdings of a landholding corporation exceeds 40%, it is not the foreign stockholders’ ownership of the shares which is adversely affected but the capacity of the corporation to own land—that is, the corporation becomes disqualified to own land.
 
This finds support under the basic corporate law principle that the corporation and its stockholders are separate judicial entities.  In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land.
 
 

Facts:
Private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations of Ultra Clean Water Purifier, through her former employer in Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who conveyed her desire to enter into a joint venture with her for the importation and local distribution of kitchen cookwares.
 
Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and Anay as head of the marketing department and later, vice-president for sales
 
The parties agreed that Belo's name should not appear in any documents relating to their transactions with West Bend Company. Anay having secured the distributorship of cookware products from the West Bend Company and organized the administrative staff and the sales force, the cookware business took off successfully. They operated under the name of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocao's name.


The parties agreed further that Anay would be entitled to: 
(1) ten percent (10%) of the annual net profits of the business; 
(2) overriding commission of six percent (6%) of the overall weekly production; 
(3) thirty percent (30%) of the sales she would make; and 
(4) two percent (2%) for her demonstration services. The agreement was not reduced to writing on the strength of Belo's assurances that he was sincere, dependable and honest when it came to financial commitments.
 
On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to the Cubao sales office to the effect that she was no longer the vice-president of Geminesse Enterprise.
 
Anay attempted to contact Belo. She wrote him twice to demand her overriding commission for the period of January 8, 1988 to February 5, 1988 and the audit of the company to determine her share in the net profits.

Anay still received her five percent (5%) overriding commission up to December 1987. The following year, 1988, she did not receive the same commission although the company netted a gross sales of P 13,300,360.00.
 
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with damages against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch 140
 
The trial court held that there was indeed an "oral partnership agreement between the plaintiff and the defendants. The Court of Appeals affirmed the lower court’s decision.
 
Issue:
          Whether the parties formed a partnership
 
Held:
 Yes, the parties involved in this case formed a partnership
The Supreme Court held that to be considered a juridical personality, a partnership must fulfill these requisites:
(1) two or more persons bind themselves to contribute money, property or industry to a common fund; and
(2) intention on the part of the partners to divide the profits among themselves. It may be constituted in any form; a public instrument is necessary only where immovable property or real rights are contributed thereto. 
This implies that since a contract of partnership is consensual, an oral contract of partnership is as good as a written one.
In the case at hand, Belo acted as capitalist while Tocao as president and general manager, and Anay as head of the marketing department and later, vice-president for sales. Furthermore, Anay was entitled to a percentage of the net profits of the business.
 
Therefore, the parties formed a partnership.
 
 

Facts:
 
Private respondent Olivia V. Yanson and Petitioner Lourdes Navarro were engaged in the business of Air Freight Service Agency. Pursuant to the Agreement which they entered, they agreed to operate the said Agency; It is the Private Respondent Olivia Yanson who supplies the necessary equipment and money used in the operation of the agency. Her brother in the person of Atty. Rodolfo Villaflores was the manager thereof while petitioner Lourdes Navarro was the Cashier; In compliance to her obligation as stated in their agreement, private respondent brought into their business certain chattels or movables or personal properties. However, those personal properties remain to be registered in her name; Among the provisions stipulated in their agreement is the equal sharing of whatever proceeds realized from their business; However, sometime on July 23, 1976, private respondent Olivia V. Yanson, in order for her to recovery the above mentioned personal properties which she brought into their business, filed a complaint against petitioner Lourdes Navarro for "Delivery of Personal Properties With Damages and with an application for a writ of replevin. Private respondents' application for a writ of replevin was later approved/granted by the trial court. For her defense, petitioner Navarro argue that she and private respondent Yanson actually formed a verbal partnership which was engaged in the business of Air Freight Service Agency. She contended that the decision sustaining the writ of replevin is void since the properties belonging to the partnership do not actually belong to any of the parties until the final disposition and winding up of the partnership.
 
Issue:

1. Whether or not there was a partnership that existed between the parties.
2. Whether the properties that were commonly used in the operation of Allied Air Freight belonged to the alleged partnership business.  

Held:
 
Article 1767 of the New Civil Code defines the contract of partnership: Art. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the proceeds among themselves. A cursory examination of the evidence presented no proof that a partnership, whether oral or written had been constituted. In fact, those movables brought by the plaintiff for the use in the operation of the business remain registered in her name. While there may have been co-ownership or co-possession of some items and/or any sharing of proceeds by way of advances received by both plaintiff and the defendant, these are not indicative and supportive of the existence of any partnership between them. Art. 1769 par. 2 provides: Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made using the property” Besides, the alleged profit was a difference found after evaluating the assets and not arising from the real operation of the business. In accounting procedures, strictly, this could not be profit but a net worth.

Facts:
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry on 4 January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. The SEC records show that there were several subsequent amendments to the articles of partnership to change the firm name. On 19 December 1980, Joaquin L. Misa, Jesus B. Bito, and Mariano M. Lozada associated themselves together, as senior partners with Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners. On February 17, 1988, petitioner-appellant wrote the respondents-appellees a letter stating his withdrawal and retirement from the firm of Bito, Misa and Lozada and requested to make proper liquidation including his interest to the two floors of the building.

The petitioner led with this Commission's Securities Investigation and Clearing Department (SICD) a petition for dissolution and liquidation of partnership which resulted to respondents-appellees filing their opposition. The Hearing Officer held that the withdrawal of Atty. Misa had dissolved the partnership of Bito, Misa and Lozada. A Motion for Reconsideration was sought but during the pendency of the case in the CA, Bito and Lozada died which prompted Misa to renew his application for receivership.

Issues:
Whether or not CA has erred in holding that the partnership of Bito, Misa & Lozada is a partnership at will;

Whether or not CA has erred in holding that the withdrawal of private respondent dissolved the partnership regardless of his good or bad faith

Held:
The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of that mutual resolve, along with each partner's capability to give it, and the absence of a cause for dissolution provided by the law itself. Any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will.

Neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation prevent the dissolution of any partnership by an act or will of a partner. Among partners, mutual agency arises and the doctrine of delectus personae allows them to have the power, although not necessarily the right, to dissolve the partnership.


The Court we accord to the CA and the respondent Commission on their common factual finding, that Attorney Misa did not act in bad faith. Public respondents viewed his withdrawal to have been spurred by "interpersonal conflict" among the partners. It would not be right to let any of the partners remain in the partnership under such an atmosphere of animosity; certainly, not against their will. For as long as the reason for withdrawal of a partner is not contrary to the dictates of justice and fairness, nor for the purpose of unduly visiting harm and damage upon the partnership, bad faith cannot be said to characterize the act.

​Facts:
 
This is a petition for review on certiorari assailing CA decision which affirmed the RTC decision. Santos and Nieves Reyes verbally agreed that Santos would act as financier while Nieves and Meliton Zabat would act as solicitors for membership and collectors of loan payment. 70% of the profits would go to Santos while Nieves and Zabat would get 15% each. 
It was a lending venture business.
 
Nieves introduced Gragera of Monte Maria Corp, who obtained short term loans for the partnership in consideration of commissions. In 1986, Nieves and Zabat executed an agreement which formalized their earlier verbal agreement. But Santis and Nieves later discovered that Zabat engaged in the same lending business. Hence, Zabat was expelled from the partnership. In June 1987, Santos filed a complaint for recovery of sum of money and damages against the respondents, alleging them as employees who misappropriated the funds. Respondents assert they were partners and not mere employees. Santos claimed that after discovery of Zabat's activities, he ceased infusing funds thereby extinguishing the partnership. 
 
Issue:
Whether or not the parties' relationship was one of partnership or of employer-employee
 
Held:
Yes, they were partners. By the contract of partnership, two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.  The "Articles of Agreement" stipulated that the signatories shall share the profits of the business in a 70-15-15 manner, with petitioner getting the lion's share.  This stipulation clearly proved the establishment of a partnership.
 
 
Indeed, the partnership was established to engage in a money-lending business, despite the fact that it was formalized only after the Memorandum of Agreement had been signed by petitioner and Gragera. 
 

Facts:
Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26, 1880, respectively. They were survived by their 3 children. Moreover, Martin was survived by his 7 natural children. In December 1906, a special proceeding for the settlement of the intestate estate of said spouses was conducted. Rafael Ramos, a brother of Martin, administered the estate for more than 6 years. Eventually, a partition project was submitted which was signed by the 3 legitimate children and 2 of the 7 natural children. A certain Timoteo Zayco signed in representation of the other 5 natural children who were minors. The partition was sworn to before a justice of peace. The conjugal hereditary estate was appraised at P74,984.93, consisting of 18 parcels of land, some head of cattle and the advances to the legitimate children. ½ thereof represented the estate of Martin. 1/3 thereof was the free portion or P12,497.98. The shares of the 7 natural children were to be taken from that 1/3 free portion. Indeed, the partition was made in accordance with the Old Civil code. Thereafter, Judge Richard Campbell approved the partition project. The court declared that the proceeding will be considered closed, and the record should be archived as soon as proof was submitted that each he3ir had received the portion adjudicated to him. On February 3, 1914, Judge Nepumoceno asked the administrator to submit a report showing that the shares of the heirs had been delivered to them as required by the previous decision. Nevertheless, the manifestation was not in strict conformity with the terms of the judge’s order and with the partition project itself. 8 lots of the Himamaylan Cadastre were registered in equal shares in the names of Gregoria (widow of Jose Ramos) and her daughter, when in fact the administrator was supposed to pay the cash adjudications to each of them as enshrined in the partition project. Plaintiffs were then constrained to bring the suit before the court seeking for the reconveyance in their favor their corresponding participations in said parcels of land in accordance with Article 840 of the old Civil Code. Note that 1/6 of the subject lots represents the 1/3 free portion of martin’s shares which will eventually redound to the shares of his 7 legally acknowledged natural children. The petitioners’ action was predicated on the theory that their shares were merely held in trust by defendants. Nonetheless, no Deed of Trust was alleged and proven. Ultimately, the lower court dismissed the complaint on the grounds of res judicata, prescription and laches.

 Issue:
Whether or not the plaintiffs’ action was barred by prescription, laches, and res judicata to the effect that they were denied of their right to share in their father’s estate.
​
 Held:
Yes, there was inexcusable delay thereby making the plaintiffs’ action unquestionably barred by prescription and laches and also by res judicata. Inextricably interwoven with the questions of prescription and res judicata is the question on the existence of a trust. It is noteworthy that the main thrust of plaintiffs’ action is the alleged holding of their shares in trust by defendants. Emanating from such, the Supreme Court elucidated on the nature of trusts and the availability of prescription and laches to bar the action for reconveyance of property allegedly held in trust. It is said that trust is the right, enforceable solely in equity to the beneficial enjoyment of property, the legal title to which is vested in another. It may either be express or implied. The latter ids further subdivided into resulting and constructive trusts. Applying it now to the case at bar, the plaintiffs did not prove any express trust. Neither did they specify the kind of implied trust contemplated in their action. Therefore, its enforcement maybe barred by laches and prescription whether they contemplate a resulting or a constructive trust.

Facts:
Petitioner acquired 10 checks from a certain Antonio Ramirez. The said checks were deposited by the petitioner to the respondent bank. The Respondent bank temporarily credited the said checks to the account of the petitioner. After 3 months, the checks were found out to be forged. The respondent bank debited the account of the petitioner. The petitioner filed a collection of sums of money against the respondent. The CFI and the Court of Appeals dismissed the said complaint, hence this case.

Issue:
Whether the respondent is liable to return the amount debited from the account of the Petitioner.
​
Held:
No, the respondent acted within legal bounds when it debited the petitioner’s account. When the petitioner deposited the checks with the respondent, the nature of the relationship created at that stage was one of agency, that is, the bank was to collect from the drawees of the checks the corresponding proceeds. It is true that the respondent had already collected the proceeds of the checks when it debited the petitioner’s account. Section 23 of the Negotiable Instruments Law states that “When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.”
 

Facts: 
A fire broke out at the Caltex service station at the corner of Antipolo street and Rizal Avenue, Manila. It started while gasoline was being hosed from a tank truck into the underground storage, right at the opening of the receiving tank where the nozzle of the hose was inserted (a lighted matchstick was thrown by a stranger near the opening, causing the fire). The fire spread to and burned several neighboring houses. Their owners, among them petitioners here, sued respondents Caltex (Phil.), Inc. and Boquiren, the first as alleged owner of the station and the second as its agent in charge of operation. Negligence on the part of both of them was attributed as the cause of the fire.
The trial court and the CA found that petitioners failed to prove negligence and that respondents had exercised due care in the premises and with respect to the supervision of their employees. Hence this petition.
 
Issue:
Whether or not without proof as to the cause and origin of the fire, the doctrine of res ipsa loquitur should apply so as to presume negligence on the part of appellees
 
Held:
The decision appealed from is reversed and respondents-appellees are held liable solidarily to appellants,
Both the trial court and the appellate court refused to apply the doctrine in the instant case on the grounds that “as to (its) applicability … in the Philippines, there seems to be nothing definite,” and that while the rules do not prohibit its adoption in appropriate cases, “in the case at bar, however, we find no practical use for such doctrine.”
The question deserves more than such summary dismissal. The doctrine has actually been applied in this jurisdiction, in the case of Espiritu vs. Philippine Power and Development Co
The principle enunciated in the aforequoted case applies with equal force here. The gasoline station, with all its appliances, equipment and employees, was under the control of appellees. A fire occurred therein and spread to and burned the neighboring houses. The persons who knew or could have known how the fire started were appellees and their employees, but they gave no explanation thereof whatsoever. It is a fair and reasonable inference that the incident happened because of want of care.
Even then the fire possibly would not have spread to the neighboring houses were it not for another negligent omission on the part of defendants, namely, their failure to provide a concrete wall high enough to prevent the flames from leaping over it. Defendants’ negligence, therefore, was not only with respect to the cause of the fire but also with respect to the spread thereof to the neighboring houses.
There is an admission on the part of Boquiren in his amended answer to the second amended complaint that “the fire was caused through the acts of a stranger who, without authority, or permission of answering defendant, passed through the gasoline station and negligently threw a lighted match in the premises.” No evidence on this point was adduced, but assuming the allegation to be true — certainly any unfavorable inference from the admission may be taken against Boquiren — it does not extenuate his negligence. A decision of the Supreme Court of Texas, upon facts analogous to those of the present case, states the rule which we find acceptable here. “It is the rule that those who distribute a dangerous article or agent, owe a degree of protection to the public proportionate to and commensurate with a danger involved … we think it is the generally accepted rule as applied to torts that ‘if the effects of the actor’s negligent conduct actively and continuously operate to bring about harm to another, the fact that the active and substantially simultaneous operation of the effects of a third person’s innocent, tortious or criminal act is also a substantial factor in bringing about the harm, does not protect the actor from liability.’ Stated in another way, “The intention of an unforeseen and unexpected cause, is not sufficient to relieve a wrongdoer from consequences of negligence, if such negligence directly and proximately cooperates with the independent cause in the resulting injury.”
 

Facts:  
Respondent Sison owned a Plymouth car, which was brought to petitioner company's gasoline and service station for washing, greasing, and spraying, in which such services were undertaken by Profirio De La Fuente (agent of petitioner) through his two employees. - Nearly finishing the services, the crew positioned carefully the car for a final greasing, but it accidentally fell off, damaging the said car. - Car of respondent Sison was repaired and after the investigation made by the car's insurance companies, both the insurance companies and the owner of the car brought an action in the CFI Manila against petitioner Shell and de la Fuente - RTC dismissed complaint, but CA reversed and sentenced petitioner to pay respondents

Issue:
Whether or not Petitioner Shell Phil is bound to the acts of his agent de la Fuente.
​
Held:
Yes, As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the breach of the undertaking by the agent is one for which the principal is answerable. - the finding of the Court of Appeals that the operator De la Fuente was an agent of the company and not an independent contractor should not be disturbed, in which, the servicing job on Appellant Sison's automobile was accepted by De la Fuente in the normal and ordinary conduct of his business as operator of his co-appellee's service station, and that the jerking and swaying of the hydraulic lift which caused the fall of the subject car were due to its defective condition, resulting in its faulty operation. - Court of Appeals found, Company's mechanic failed to make a thorough check up of the hydraulic lifter, check-up was "merely routine" by raising "the lifter once or twice, after observing that the operator was satisfactory, he (the mechanic) left the place. The latter was negligent, and the company must answer for the negligent act of its mechanic which was the cause of the fall of the car from the hydraulic lifter.

Facts:
Petitioner Domingo Dela Cruz,  was hired as a special guard of Northern Theatrical Enterprises. July 4, 1941, Benjamin Martin wanted to crash the gate or entrance of the cinema. The latter then attacked petitioner with a bolo and petitioner defended himself resulting to Martin’s death.
Dela Cruz was then charged with homicide by the court of first instance of Ilocos-Norte. A re-investigation was conducted acquitting petitioner of the criminal charges.
Dela Cruz then demanded reimbursement of expenses from his former employer after which he filed an action against the respondent together with 3 board of directors to recover not only the amounts, he paid his lawyer but as well as moral damages amounting to P15,000.00

Issue:
Whether or not Northern Theatrical enterprises is liable for the reimbursement expenses
​
Held:
No. The relationship between Dela Cruz and Northern Theatrical Enterprises because Dela Cruz was not the principal and agent, the principle of representation was in no way involved. Dela Cruz was not employed to represent the defendant corporation in its dealings with third parties. he was a mere employee hired to perform a certain duty or task.
All laws and principles of law found refer to cases of physical injuries/ death suffered in the line of duty or in the course of the performance of duties. but the Court is not prepared to say and to hold that giving of said legal assistance to its employees is a legal obligation. Viewed from another angle, it may be said that the damage suffered by Dela Cruz, that is, the expenses incurred by him in remunerating his lawyer, is not caused by his shooting the gate crasher but rather the filing of charge. had no criminal charges filed against him, no expenses would have incurred so the damage caused by Dela Cruz was the the improper filing of criminal charge. if despite the innocence and despite the absence of criminal responsibility, he was accused of homicide. The responsibility for the improper accusation may be laid at the door of the heirs of the deceased and the state. and so, theoretically, they are the parties that may be held for damages

Facts:
            On January 30, 1937, the parties have entered into an operating agreement wherein Nielson & Co. would operate and manage the mining properties owned by Lepanto Consolidated Mining Co. for a period of five years. Before the lapse of the five-year period, the parties have renewed the contract for another five years with modifications made by Lepanto on the management fee.
On its modified contract Nielson will receive
(1) 10% of the dividends declared and paid, when and as paid during the period of the contract and at the end of each year,
(2) 10% of any depletion reserve that may set up, and
(3) 10% of any amount expended during the year out of surplus earnings for capital account.

            In January 1942 operation of the mining properties was disrupted on account of the war. The Japanese forces thereafter occupied the mining properties, operated the mines during the continuance of the war, and who were ousted from the mining properties only in August of 1945.
            After the mining properties were liberated from the Japanese forces, Lepanto took possession thereof and embarked in rebuilding and reconstructing the mines and mill. The restoration lasted for nearly three years and the mines have resumed its operation under the exclusive management of Lepanto.
            Shortly after the mines were liberated from the Japanese invaders in 1945, a disagreement arose between NIELSON and LEPANTO over the status of the operating contract in question which as renewed expired in 1947.

Issue:
Whether or not Nielson is entitled to his share in the stock dividends.
​
Held:
            Stock dividends cannot be issued to a person who is not a stockholder in payment of services rendered.
Section 16 of the Corporation Law, in part, provides a follow:
            No corporation organized under this Act shall create or issue bills, notes or other evidence of debt, for circulation as money, and no corporation shall issue stock or bonds except in exchange for actual cash paid to the corporation or for: (1) property actually received by it at a fair valuation equal to the par or issued value of the stock or bonds so issued; and in case of disagreement as to their value, the same shall be presumed to be the assessed value or the value appearing in invoices or other commercial documents, as the case may be; and the burden or proof that the real present value of the property is greater than the assessed value or value appearing in invoices or other commercial documents, as the case may be, shall be upon the corporation, or for (2) profits earned by it but not distributed among its stockholders or members; Provided, however, That no stock or bond dividend shall be issued without the approval of stockholders representing not less than two-thirds of all stock then outstanding and entitled to vote at a general meeting of the corporation or at a special meeting duly called for the purpose.
            In the case at bar Nielson cannot be paid in shares of stock which form part of the stock dividends of Lepanto for services it rendered under the management contract. We sustain the contention of Lepanto that the understanding between Lepanto and Nielson was simply to make the cash value of the stock dividends declared as the basis for determining the amount of compensation that should be paid to Nielson, in the proportion of 10% of the cash value of the stock dividends declared. In other words, Nielson must still be paid his 10% fee using as the basis for computation the cash value of the stock dividends declared.
            Moreover, from the above-quoted provision of Section 16 of the Corporation Law, the consideration for which shares of stock may be issued are: (1) cash; (2) property; and (3) undistributed profits. Shares of stock are given the special name “stock dividends” only if they are issued in lieu of undistributed profits. If shares of stocks are issued in exchange of cash or property then those shares do not fall under the category of “stock dividends”. A corporation may legally issue shares of stock in consideration of services rendered to it by a person not a stockholder, or in payment of its indebtedness. A share of stock issued to pay for services rendered is equivalent to a stock issued in exchange of property, because services is equivalent to property. Likewise a share of stock issued in payment of indebtedness is equivalent to issuing a stock in exchange for cash. But a share of stock thus issued should be part of the original capital stock of the corporation upon its organization, or part of the stocks issued when the increase of the capitalization of a corporation is properly authorized. In other words, it is the shares of stock that are originally issued by the corporation and forming part of the capital that can be exchanged for cash or services rendered, or property; that is, if the corporation has original shares of stock unsold or unsubscribed, either coming from the original capitalization or from the increased capitalization. Those shares of stock may be issued to a person who is not a stockholder, or to a person already a stockholder in exchange for services rendered or for cash or property. But a share of stock coming from stock dividends declared cannot be issued to one who is not a stockholder of a corporation.
            A “stock dividend” is any dividend payable in shares of stock of the corporation declaring or authorizing such dividend.
            So, a stock dividend is actually two things: (1) a dividend, and (2) the enforced use of the dividend money to purchase additional shares of stock at par.16 When a corporation issues stock dividends, it shows that the corporation’s accumulated profits have been capitalized instead of distributed to the stockholders or retained as surplus available for distribution, in money or kind, should opportunity offer. Far from being a realization of profits for the stockholder, it tends rather to postpone said realization, in that the fund represented by the new stock has been transferred from surplus to assets and no longer available for actual distribution.  Thus, it is apparent that stock dividends are issued only to stockholders. This is so because only stockholders are entitled to dividends. They are the only ones who have a right to a proportional share in that part of the surplus which is declared as dividends. A stock dividend really adds nothing to the interest of the stockholder; the proportional interest of each stockholder remains the same. If a stockholder is deprived of his stock dividends – and this happens if the shares of stock forming part of the stock dividends are issued to a non-stockholder — then the proportion of the stockholder’s interest changes radically. Stock dividends are civil fruits of the original investment, and to the owners of the shares belong the civil fruits.

Facts:    
 On November 28, 1922, the Court of First Instance of Pampanga probated as the last will and testament of Dolores Coronel (testatrix) who named as her sole heir Lorenzo Pecson, the husband of her niece. The relatives of testatrix by consanguinity questioned the genuineness of the will on the following grounds: First, that it was improbable and exceptional that Dolores Coronel should dispose of her estate by excluding her blood relatives; and second, that if such will was not expressed in fact, it was due to extraneous illegal influence.

Issue:       
Whether the decedent can exclude her blood relatives in the disposition of her estate.
​
Held: 
Yes. It is true that the ties of relationship in the Philippines are very strong, but we understand that cases of preterition of relatives from the inheritance are not rare. The liberty to dispose of one’s estate by will when there are no forced/compulsory heirs is rendered sacred by the Civil Code in force in the Philippines since 1989.
The Supreme Court held that nothing is strange in the preterition made by Dolores Coronel of her blood relatives, nor in the designation of Lorenzo Pecson(husband of her niece) as her sole beneficiary. Furthermore, although the institution of the beneficiary here would not seem the most usual and customary, still this would not be null per se.
“In the absence of any statutory restriction every person possesses absolute dominion over his property and may bestow it upon whomsoever he pleases without regard to natural or legal claim upon his bounty. If the testator possesses the requisite capacity to make a will, and the disposition of his property is not affected by fraud or undue influence, the will is not rendered invalid by the fact that it is unnatural, unreasonable, or unjust. Nothing can prevent the testator from making a will as eccentric, as injudicious, or as unjust as caprice, frivolity, or revenge can dictate.