MARSMAN INVESTMENTS LTD., ET AL., PLAINTIFFS AND APPELLANTS, VS. PHILIPPINE ABACA DEVELOPMENT CO., ET AL., DEFENDANTS AND APPELLEES.

Appeal on points of law from an
order of the Court of First Instance of Davao, in its
Civil Case No. 3513, granting a motion to dismiss the appellants’ complaint.

The record is to the effect that on
March 23, 1961, Marsman Investments, Ltd., a British
corporation but with offices in Makati, Rizal, filed suit in the Court of First Instance of Davao in its own behalf and in that of Marsman
& Co., Inc., of which it is a stockholder, and in behalf of any other
creditors similarly situated, against the Philippine Abaca Development Co., and
its controlling stockholder Mary A. Marsman, both
domiciled in Makati, Rizal.
Three causes of action are pleaded:

1.      That the Philippine
Abaca Development Co. (PADCO for short) ended its corporate existence on
December 31, 1959, leaving unpaid its debts of P275,898.44 to Marsman & Co. and of P1,276.67 to Marsman
Investments Ltd.

2.      That PADCO was the
owner of a 1023.9917-hectare tract of agricultural land in Kapalong,
Davao; that around June 12, 1958, PADCO mortgaged the
land to its co-defendant Mary A. Marsman, allegedly
for P293,334.58; that one year thereafter, on May 15,
1959, PADCO sold the land to the aforesaid Mary A. Marsman
for a stated consideration of P383,428.01, as the alleged accumulated
indebtedness of the vendor to the vendee, wherefore Davao
T.C.T. No. 3226 was issued to the transferee; that both mortgage and sale were
sham, false, simulated, and without consideration, made only to enable Mary A. Marsman, who was in control of PADCO, to acquire the land
at no cost or expense to her, and to the prejudice and in fraud of the other
creditors of PADCO.

3.      That as a result of
the fraudulent acts the defendants-plaintiffs incurred litigation expenses of
P5,000 and P50.000 attorneys’ fees.

Upon motion of defendants, the
lower court ordered the complaint dismissed, on the ground of wrong venue for
the first cause of action, which was for breach of a personal obligation, and
could not be joined with the second cause of action, “for lack of a common
venue”; that the second cause of action could not be prosecuted for lack
of capacity to sue, because the plaintiffs, as creditors of PADCO, had, on
April and May, 1959, released and waived their claims against PADCO, and
because of the subsequent repudiation of the suit by Marsman
& Co., Inc., as shown during the hearing of the motion to dismiss. The
third cause of action, being a consequence of the other two, was also held
untenable.

Plaintiffs then duly appealed to
this Court, where they assail the dismissal of their complaint as unfounded.

Plaintiffs-appellants first argue
that it was error for the court a quo to hold that there was improper joinder of the first and second causes of action. Indeed,
it would seem that the indebtedness of PADCO to the plaintiffs was pleaded
primarily to establish the latter’s personality to sue for the rescission and
setting aside of the transactions between PADCO and Mary A. Marsman.
Not being parties to either the mortgage or the conveyance, plaintiffs could
assail them only by reason of their credits being prejudiced thereby (Civil
Code of the Phil., Arts. 1381(3), 1382). This view is strengthened by the
allegations in paragraphs XI and XII of the complaint to the effect that when
the PADCO’s corporate existence ended, it had
P825.831.70 notes payable and other outstanding accounts amounting to P64,429.25, with no property available to its creditors for
seizure other than the land in question. So that the first
and second causes of action had to be combined to lay a proper basis for an
action for rescission.

We also agree with appellants that
it was naive of the court below to give effect to the repudiation of the
present action by Marsman & Co., Inc., when the
complaint expressly pleaded that defendant-appellee
Mary A. Marsman was “in absolute and complete
control of Marsman & Co., Inc.,” on account
of which Marsman Investments Ltd. was compelled to
file a derivative suit, as a stockholder in behalf of Marsman
& Co. Inc. If a majority of shareholders is allowed to repudiate the
derivative suit of the minority stockholders, no such action would ever
prosper.

Nevertheless, the duly accredited
waiver and release in 1959 (two years before the present action was filed) by Marsman Investments Ltd. and Marsman
& Co., Inc., 11 of the credits they held against defendant PADCO, and the
absence of any allegation or evidence of invalidity of these corporate
releases, operate to deprive the rescissory action of
any legal basis. Until and unless those releases are set aside, the plaintiff
corporations ceased to be creditors of the transferor PADCO as of 1959, and
were thereafter deprived of any interest in assailing the validity of the
transfer of its properties to appellee Mary A. Marsman; for under the Civil Code, only actual creditors
can ask for the rescission of the conveyances made by their debtors in favor of
strangers. So that with the proof of the release executed by the creditors,
plaintiffs appear to have no cause of action against
defendants-appellees.

Wherefore, the order of dismissal appealed
from is hereby affirmed, with costs against plaintiff, Marsman
Investments, Ltd.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.