G.R. No. L-24115. March 01, 1968
EUFEMIA V. SHAFFER, PLAINTIFF-APPELLANT, VS. VIRGINIA G. PALMA AND BONIFACIO PALMA, DEFENDANTS-APPELLEES.
ZALDIVAR, J.:
This is an appeal direct to this Court, on a question
of law, from the order of the Court of First
Instance of Manila, dated July
20, 1964, in its Civil Case No. 56876, granting defendants’ motion
to dismiss plaintiff’s amended complaint, as well as from a subsequent order,
dated September 17, 1964,
denying plaintiff’s motion for reconsideration.
On April 25, 1964, plaintiff Eufemia V.
Shaffer filed a
complaint against defendant spouses Virginia G. Palma and Bonifacio Palma to recover
certain sums of money and shares of stock, alleging, among others: that plaintiff is the widow of the late
Nicolas R. Lynevitche, the Managing Director of the
British American Engineering Corporation, who had himself insured for
P300,000.00 with the Great American Insurance Company against accidental death,
designating the British American Corporation as beneficiary (Policy No.
PA-0132); that while Lynevitche and plaintiff were
living as husband and wife they received from defendants advances and loans totalling P32,000.00, and to secure payment thereof Lynevitche
delivered to them his 175 shares of stock of the British American Enginnering Corporation; that when Lynevitche
was made to understand by defendants that the shares pledged by him were
insufficient to secure the payment of the loans and advances given by
defendants, Lynevitche, in his capacity as managing
director of the British American Engineering Corporation, executed, on April
17, 1962, a deed of assignment[1]
transferring the right of said corporation
as beneficiary in his insurance policy in favor of plaintiff and herein
defendant Virginia G. Palma; that the deed of assignment was subsequently ratified and
confirmed by the corporation’s board of directors in a resolution dated May 10,
1962;[2]
that defendants knew that defendant Virginia Palma was included as one of the
assignees of the insurance policy so that defendants would have additional
security for the loans and advances given by them to the insured and plaintiff;
that on May 26, 1962, Lynevitche died in an accident
in Tokyo, Japan, and so the Great American Insurance Company paid P300,000.00
to the plaintiff and defendant Virginia Palma as assignees of the insurance
policy; that the proceeds of the insurance policy was deposited in the name of
the plaintiff with the Hongkong & Shanghai
Banking Corporation on August 15, 1962; that immediately after depositing said
proceeds, defendant Bonifacio Palma asked plaintiff
to issue a check of P150,000.00 in favor of his wife, the defendant Virginia G.
Palma, with the understanding that after proper accounting and adjustments of
the loans and advances previously obtained by plaintiff and the late Lynevitche from defendants the excess would be returned to
the plaintiff; that plaintiff later asked defendants to render an accounting of
the loans and advances and to return to her the balance of the P150,000.00
after deducting the payment of said loans and advances, and the 175 shares that
were given as security for the loans
and advances, but the defendants refused to do so. Plaintiff prayed in her complaint that judgment
be rendered ordering the defendants, in solidum,
to pay plaintiff the sum of P118,000.00, with legal interest thereon
from the filing of the
complaint, to pay P10,000.00 as attorney’s fees, to return to plaintiff the 175
shares given as security, and to pay the costs.
On May 7, 1964,
defendants filed a motion to dismiss plaintiff’s complaint upon the grounds
that the complaint states no cause of action and that plaintiff has no
capacity to sue. This motion was opposed
by plaintiff, and after the filing by defendants of their reply, and plaintiff
her replica, the lower court, on May
25, 1964, issued an order dismissing the complaint, the pertinent
portions of which read as follows:
“Paragraphs 5 and 6 of plaintiff’s complaint in effect allege
that the Deed of Assignment (Annex A) and the corporate resolution (Annex B)
do not express the true intention of the assignor British American Engineering
Corporation. Assuming arguendo, that this is the truth, the British
American Engineering Corporation and not the plaintiff is the party that may
sue to enforce the true intention of the assignor and the assignees.
“Stated differently, plaintiff’s complaint states no cause of
action in favor of the plaintiff. Under
the allegations of the complaint a judgment may, if at all, be rendered in
favor of the British American Engineering Corporation, but not in favor of the
herein plaintiff.”
On June 27, 1964,
plaintiff filed a motion to admit an
amended complaint, which was attached to said motion. The amended complaint contained new
allegations which were intended to specify or clarify certain points that were alleged in the original complaint
– and precisely for the purpose of curing the defects of the original
complaint as pointed out in the order of the court dismissing said original
complaint. On July 1, 1964, plaintiff also filed a motion for
reconsideration of the order of May
25, 1964 so as to give way to the admission of the amended
complaint. The defendants filed an opposition
to the motion for reconsideration and an alternative motion to dismiss the
amended complaint. The motion to dismiss the amended complaint was based on the same grounds as those alleged in the motion to
dismiss the original complaint – that the amended complaint states no cause of
action, and that the plaintiff has no capacity to sue. On July 20, 1964, the lower court issued an order granting plaintiff’s motion for reconsideration
and admitting the amended complaint, but at the same time granting defendants’
motion to dismiss the amended complaint.
Pertinent portion of the order reads:
“This Court agrees with defendants’ counsel that the amended
complaint is substantially the same as the original one. Paragraphs 5 and 7 of the amended complaint,
like the corresponding paragraphs 5 and 6 of the original complaint, in effect
allege that the Deed of Assignment (Annex A), and the corporate resolution
(Annex B), do not express the true intention of the assignor British American
Engineering Corporation. However, the
said assignment speaks for itself and may, if at all, be ordered reformed to express the true intention of the assignor
by action of the assignor for reformation of said deed of assignment (Art.
1359, New Civil Code).
“As to the 175 shares of British American Engineering
Corporation, the amended complaint fails to allege facts showing plaintiff’s
right to said shares.”
On August 25, 1964,
plaintiff filed her motion for reconsideration of the order of July 20, 1964. On September
17, 1964, the lower court issued an order denying plaintiff’s
motion for reconsideration, which order reads as follows:
“Paragraphs 7, 9, 10 and 12 of the Amended Complaint, which
according to the plaintiff must be deemed admitted for the purpose of the
motion to dismiss, cannot be allowed as amendments to the original complaint,
as they substantially alter the causes of action alleged in the original
complaint. Thus, par. 7 of the amended
complaint alleges, among others that
‘the defendants have acknowledged and agreed with the plaintiff that the defendant
Virginia G. Palma’s interest as co-assignee … was
up to the extent of the total amount of the loans and advances made
by the defendants to N. R. Lynevitche‘, but par. 6 of the original complaint did not allege any acknowledgment or agreement
of the defendants
to this effect. Again par. 9 of
the amended complaint alleges agreement in this regard, but par. 8 of the
original complaint, its counterpart, does not so allege. Similarly, par. 12
of the amended complaint alleges that the 175 shares were indorsed to the
plaintiff prior to Lynevitche’s death, but par. 10
of the original complaint mentioned no such prior indorsement. This Court, therefore, agrees with the
defendants that these decisive amendments cannot legally be allowed as they
radically change or alter the original causes of action or theory of the plaintiff
(see last 6 lines, page 3,
defendants’ rejoinder, found on page 48, Records).
“At any rate, the alleged agreement to this effect involves
the amount of P118, 000.00 (pars. 13 and 14, Amended Answer), and, unless in
writing is unenforcible (last paragraph, Art. 1358,
New Civil Code). If the defendants were
entitled to only P32,000.00, it is odd that instead of drawing a check in
their favor for only P32, 000.00, the plaintiff issued to them a check for
P150,000.00. This case must be dismissed
on this additional ground (Sec. 1(i), Rule 16, Revised Rules of Court.)”
In the present appeal,
plaintiff contends that the lower court erred:
(1) in dismissing the amended complaint, by its order of July 20,
1964; and (2) in declaring, in its order of September 17, 1964 when it resolved
plaintiff’s motion for reconsideration, that the amendments in the amended complaint can not be admitted and, therefore, the amended complaint
should be dismissed.
There is merit in this
appeal.
In its order of July 20,
1964, the lower court reconsidered its previous order of May 25, 1964 dismissing the original
complaint and then admitted the amended complaint. The amended complaint had thereby superseded
the original complaint. The defendants
filed a motion to dismiss the
amended complaint upon the grounds that it does not state a cause of action and
that the plaintiff has no capacity to sue –
the same grounds upon which the motion to dismiss the original complaint
was based. In the very same order of July 20, 1964 which admitted the
amended complaint, the lower court dismissed said amended complaint – for the
same reasons that it dismissed the original
complaint, namely, that the plaintiff has no capacity to sue and that the
complaint states no cause of action.
We do not agree with the lower court. We
have examined the allegations of the amended complaint, and We find
that the plaintiff has the legal capacity to sue and that the amended complaint states a cause of action. Substantially, it is alleged in the amended complaint: that the plaintiff and the late Nicolas Lynevitche lived as
husband and wife; that on March 27, 1962, Nicolas Lynevitche
had himself insured for P300,000.00 with the Great American Insurance Company
of New York against accidental death, designating the British American
Engineering Corporation, in which he was the managing director, as the beneficiary; that the plaintiff and
Nicolas Lynevitche had obtained loans and advances
from the defendants, totalling P32, 000.00; that to
secure the payment of the loans and advances obtained by plaintiff and Nicolas
Lynevitche from the defendants, Nicolas Lynevitche
delivered to the defendants 175 shares of stock of the British American
Engineering Corporation; that on April 17, 1962, Nicolas Lynevitche,
as managing director of the British American Engineering Corporation, executed
a deed of assignment of the corporation’s right as beneficiary in his life insurance policy in favor of plaintiff Eufemia
V. Shaffer and the defendant Virginia G. Palma, which deed of assignment was ratified and confirmed by the board of
directors of the British American Engineering Corporation on May 10, 1962; that the defendants
acknowledged and agreed with the
plaintiff that the interest of defendant Virginia G. Palma as co-assignee of the proceeds of the insurance
policy of Nicolas Lynevitche was to the extent of the
total amount of the loans and advances made by the defendants to Nicolas Lynevitche and the plaintiff during the lifetime of said
Nicolas Lynevitche; that on May 26, 1962, Nicolas Lynevitche
died in Tokyo, Japan, in an accident, and by reason thereof the Great American
Insurance Company, on August 15, 1962, issued a check for P300,000.00
in favor of Eufemia
V. Shaffer and Virginia G. Palma as assignees
of the proceeds of the insurance policy of Nicolas Lynevitche; that confirming the agreement that the interest
of defendant Virginia Plama in the proceeds of the insurance policy was to the extent of the
amount of the loans and advances which the defendants had given to Nicolas Lynevitche and the plaintiff, the defendant Virginia Palma
endorsed along with the plaintiff the check for P300,000.00 and the plaintiff deposited the whole amount with the Hongkong and Shanghai Banking Corporation in her name and
credit, to await adjustment and determination of the exact amount of the loans
and advances which were obtained from the defendants by Nicolas Lynevitche and the plaintiff which was payable out of the
proceeds of the insurance; that defendants, availing of the plaintiff’s feeling of gratitude towards them and
manifesting their need for funds, prevailed upon plaintiff to issue a check for P150,000.00 in favor
of defendant Virginia G. Palma, upon the condition that after the adjustment
and accounting of the above-mentioned advances and loans the excess of the amount stated in the
check over the amount of the loans and advances would be refunded to the
plaintiff; that pursuant to said representation of the defendants, plaintiff issued a check in favor of defendant
Virginia G. Palma, and the latter endorsed the check to her husband who in turn
cashed the same; that thereafter plaintiff requested the defendants to make
adjustment and full accounting of the loans and advances and to return to her
the balance of the P150,000.00 and the 175 shares that were given as security, which Mares had been
endorsed to plaintiff prior to the death of Nicolas Lynevitche;
that the plaintiff made repeated demands on the defendants to return the sun
of P118,000.00 which represented the excess over the loans and advances and
also the 175 shares, but the defendants refused to do so. The plaintiff, in her amended complaint,
therefore, prayed that the defendants be ordered to pay her, in solidum, the sum of P118,000.00 with legal interest from the date of tiling of the
complaint and to return to her the 175 shares that were pledged to secure the
payment of the loans and advances, and also to pay P10,000.00 as attorney’s
fees, plus the costs of the suit.
It can thus be
seen that in her amended complaint the plaintiff is suing the defendants in the
capacity of one who has an interest to protect.
She was suing for the return to her of the balance of the amount of P150,000.00 which was stated in a
check that she had issued in favor
of defendant Virginia G. Palma, pursuant to the understanding that out of that
amount the loans and advances which the plaintiff and the late Nicolas Lynevitche had obtained from the defendants would be paid,
it being alleged in the complaint that the plaintiff and defendant Virginia
Palma were made assignees of the proceeds of the insurance policy of Nicolas Lynevitche under
the agreement that the interest of defendant Virginia G. Palma as co-assignee of
the proceeds of the insurance policy was only to the extent of the total amount
of the loans and advances obtained by Nicolas Lynevitche
and the plaintiff from the
defendants. It can easily be understood
from the allegations of the amended complaint that the plaintiff was claiming for herself the entire
amount of the proceeds of the insurance policy of Nicolas Lynevitche
after deducting therefrom the amount of P32,000.00 to pay for the loans and
advances that had been obtained by plaintiff and Nicolas Lynevitche
from the defendants, so much so that the entire proceeds of P300,000.00 was
deposited in her name alone with the Hongkong &
Shanghai Banking Corporation. The
plaintiff alleges in the amended
complaint that she issued her own check for P150,000.00 in favor of defendant
Virginia G. Palma upon representation by
the defendants that they needed funds, but that adjustment and accounting would
be made of the loans and advances and they would return to her whatever would be the excess of that amount of P150,000.00
over the amount of the loans and advances.
It can also be readily seen in the
amended complaint that the plaintiff is suing for the return of the 175 shares,
which were pledged to the defendants for the security of the loans and
advances, in her capacity as the owner of those shares, it being alleged that those shares had been
endorsed to her prior to the death of Nicolas Lynevitche.
It is the settled
rule that in a motion to dismiss an
action upon the ground that the complaint states no cause of
action, the movant is deemed to admit, at
least hypothetically, the facts alleged
in the complaint or counterclaim, as the case may be.[3] It is our considered view that based on the facts alleged in the amended complaint, now in
question, the plaintiff has a cause of action against the defendants, and that
the plaintiff has the legal capacity to sue.
In its order of September 17, 1964, denying plaintiff’s motion
for reconsideration of the order dismissing the amended complaint, the lower
court, however, added as further grounds in dismissing the amended complaint
that the amendments embodied in the amended complaint are not admissible
because said amendments have radically changed or altered the original causes
of action or theory of the plaintiff; and that the agreement alleged in the
amended complaint, involving as it does the amount of P118,000. 00, cannot be
enforced because it is not in writing. We also do
not agree with the lower court.
In determining whether a different cause of action is introduced
by amendments to the complaint, what is to be ascertained is whether the defendant shall be
required to answer for a liability or legal obligation wholly different from
that which was stated in the original complaint. An amendment will not be considered as
stating a new cause of action if the facts alleged in the amended complaint
show substantially the same wrong with respect to the same transaction, or if what are
alleged refer to the same matter but are more fully and differently stated, or
where averments which were implied are made in expressed terms, and the subject
of the controversy or the liability sought to be enforced remains the same.[4] In the instant case, a comparison between the
allegations appearing in the original complaint and in the amended complaint
will readily show that the action of the plaintiff is the same -that is, for the
return of the sum of P118,000.00, and the return of the 175 shares of stock
which had been given to the defendants as security for the payment of the loans and
advances obtained from them by the plaintiff and the late Nicolas Lynevitche. In other
words, what is being enforced against the defendants, both in the original
complaint and in the amended complaint, is the obligation to refund to the
plaintiff the sum of P118,000.00 and to return to the plaintiff the 175 shares
after the loans sought to be secured by those shares had been paid out of the proceeds of the
insurance policy of the late Nicolas Lynevitche. We have examined carefully the allegations in
both the original complaint and the amended complaint, and We find that the
amended complaint simply made clearer the basis of the claim of the plaintiff against the defendants in the original complaint.
Thus, it is alleged in
the original complaint that in making the defendant Virginia G. Palma a
co-assignee of the proceeds of the insurance policy of Nicolas Lynevitche, the “defendants knew that Virginia G. Palma who was not a relative of the insured was included as one of the
assignees in the deed of assignment because she was the wife and partner of defendant Bonifacio Palma to whom the insured and plaintiff were
obligated, so that defendants may have additional
security thereto and to collect out of the insurance money only the
loans and advances they have made to the insured and his wife, plaintiff
herein.”[5] In
other words, in the original complaint, plaintiff had made it understood that
the only reason for including the defendant Virginia G. Palma as co-assignee of
the proceeds of the insurance policy of Nicolas Lynevitche
was to provide for an additional security for the payment of the loans and
advances that the defendants had given to the plaintiff and the late Nicolas Lynevitche. In the
amended complaint, the plaintiff made her claim clearer by alleging that
“the defendants have acknowledged and agreed with the plaintiff that
herein defendant Virginia G. Palma’s interest as a co-assignee on the proceeds
of the said insurance policy was
up to the extent of the total amount of the
loans and advances made by defendants
herein to N. R. Lynevitche
and plaintiff herein during the lifetime of N. R. Lynevitche.”[6] In other words, both in
the original and in the amended complaints, the plaintiff asserted that
out of the proceeds of the insurance policy of Nicolas Lynevitche
defendant Virginia G. Palma was
not entitled to more than the amount that was necessary to pay for the loans
and advances. Likewise, in the original
complaint the plaintiff was demanding from the defendants the return of the
175 shares of stock, and in the amended complaint she made her claim for the
return of those shares of stock clearer by alleging that those shares of stock
had been endorsed to her prior to the death of Nicolas Lynevitche. There is,
therefore, no introduction of a new cause of action, contrary to the
finding of the lower court. At most the
amendments were introduced in order to have a more accurate statement,
an amplification,
or clarification of the averments
in the original complaint, or to specifically
express in the amended complaint what is implied in the original. What is clearly implied in the pleading is as much a part of the pleading as what is expressed.
Since the amendments introduced
by plaintiff were not inconsistent with the allegations in her original
complaint, and did not in any way change or alter plaintiff’s cause of action,
the amended complaint should not have been dismissed.[7]
“There it no introduction of a new
cause of action where the amendment is
merely a more accurate statement, an amplification, or an enlargement of the
cause of action originally alleged. The
original statement of the cause of action may be narrowed, enlarged, or fortified in varying forms to meet the different
aspects in which the pleader may
anticipate its disclosure by the evidence.
x x x Allegations may be changed and others added, and averments which are implied may be made in express terms, provided the identity of the
cause of action is preserved.” (41 Am. Jur., 501)
The
Rules of Court provide that pleadings may be amended by adding or striking out an allegation or by correcting a mistaken or
inadequate allegation, so that
the actual merits of the controversy may speedily be determined, without
regard to technicalities, and in the most expeditious and inexpensive manner;[8] and that all pleadings shall be liberally
construed so as to do substantial justice.[9] The
courts should be liberal in allowing amendments to pleadings to avoid multiplicity
of suits and in order that the real controversies between the parties are
presented, their rights determined and the
case decided on the merits without unnecessary delay. Hence it is a reversible error on the part of
the trial court to disallow an
amendment to a pleading when said disallowance would result in injustice to the
moving party, or where the amendment would not prejudice the adverse party or
place him at disadvantage and he has all the time allowed by law to answer the
amended pleading and to prepare for
trial.[10]
With respect to the other
additional ground given by the lower court in dismissing the amended complaint,
that the action is based on an agreement which involves the amount of
P118,000.00 and that unless the agreement is in writing it is unenforceable, suffice it to state that nowhere in the
amended complaint is it alleged that the agreement is not in writing. Whether the agreement is in writing or not is
a question of evidence. Nevertheless,
even granting that the agreement is not in writing, this circumstance does not
militate against the validity or enforceability of said agreement, because contracts
are binding upon the parties in whatever form they may have been entered into
unless the law requires otherwise.[11] It is true that Article 1358 of the Civil Code
provides that contracts involving more than P500.00 must appear in writing, but
nothing is
said therein that such
requirement is necessary for their validity or enforce ability. It has been held that the writing required under
Article 1358 is merely for convenience,[12] and so the agreement alleged in the amended
complaint in the present case can be enforced even if it may not be in
writing.
WHEREFORE, the orders appealed from are set aside, and
the case is remanded to the lower court for further proceedings on the basis of
plaintiff-appellant’s amended complaint dated June 26, 1964.
Costs against defendants-appellees.
IT IS SO ORDERED.
Concepcion, C.J., on official leave.
Reyes, Dizon, Makalintal,
Bengzon, Sanchez, Ruiz Castro, Angeles, and Fernando, JJ., concur.
[1]
Annex A to the complaint.
[2]
Annex B to the complaint.
[3]
Salazar, et al. v. Ortizano, G.R. No. L-20480,
April 29, 1966; Garcon v.
Redemptorist Fathers, G.R. No. L-23510, May 30, 1966; Republic Bank v.
Cuaderno, et al., G.R. No. L-22399, March
30, 1967.
[4]
See “The Revised Rules of
Court in the Philippines”
by Vicente J. Francisco, Vol. 1, p. 452.
[5]
Page 3, Amended Record on Appeal.
[6]
Page 29, Amended Record on Appeal.
[7]
Guirao v. Ver, G.R.
No. L-18570, April 29, 1966.
[8]
Rule 10, Section 1.
[9]
Rule 6, Section 5.
[10]
Larracas v. Del Rio,
37 O.G., 287.
[11]
Article 1356, Civil Code; Lopez v. The Auditor General, et al., G.R. No.
L-25859, July 13, 1967; Pilar Gil Vda. de Murciano v. The Auditor General, et al., 103 Phil.,
907.
[12]
Thunga Chui v. Que Bentec, 2 Phil., 561; Ng Hoc v. Tong Ho, 52 O.G.,
4396.