G. R. No. L-2411. June 28, 1951
DAVID (DAVE) THOMAS, PLAINTIFF AND APPELLANT, VS. HERMOGENES S. PINEDA, DEFENDANT AND APPELLANT.
TUASON, J.:
to compel an accounting of the defendant’s operation of a saloon and
restaurant of which the plaintiff claims to have been the sole owner.
For a second cause of action the court was asked to enjoin the
defendant from using the name of that business, Silver Dollar Cafe. The
court below found for the defendant on the suit for accounting and for
the plaintiff on the suit for injunction.
On the first
cause of action it is alleged that the defendant managed the business
as plaintiff’s employee or trustee during the Japanese occupation of
the City of Manila and on a share of the profits basis after
liberation. Grounded on different relationships between the parties
before and after the occupation, this cause of action evolves two
different acts of evidence, which it may be well to take up separately
for the sake of clarity. We will set out the material facts in so far
as they are uncontroverted, leaving for later discussion those about
which the parties are in disagreement.
It appears that in 1931, the plaintiff bought the bar and restaurant
known as Silver Dollar Cafe located at Plaza Santa Cruz, Manila, from
one Dell Clark, paying P20,000 for its physical assets and good will.
Thereafter he employed the defendant, Clark’s former employee, as a
bar-tender with a salary of t60. In the course of time, the defendant
became successively cashier and manager of the business. The outbreak
of war found him holding the latter position with a monthly
compensation of P250.
To prevent the business and its property from falling into enemy hands,
the plaintiff being a citizen of the United States, David Thomas on or
about December 28, 1941, made a fictitious sale thereof to the
defendant; and to clothe the sale with a semblance of reality, the bill
of sale was antedated November 29, 1941.
Though this document was said to have been destroyed and no copy
thereof was available, the fictitiousness and lack of consideration of
the conveyance was expressly admitted in the answer. Besides this
admission, it is agreed that simultaneously with or soon after the
execution of the simulated sale, the plaintiff and the defendant signed
a private or secret document, identified as Exhibit “F”, which was kept
by the plaintiff. Because of its important bearing on the case, it is
convenient to copy this instrument in full.
“KNOW ALL MEN BY THESE PRESENTS THAT:
“On
November 29, 1941, a document which purported to be a deed of sale of
the bar and restaurant business known as the SILVER DOLLAR CAFE entered
into by and between David (Dave) Thomas and Hermogenes Pineda and
acknowledged before Julian Lim, a notary pubiic for and in the City of
Manila and entered in his notarial register as Document No. 127, Page
No. 27, Book I and Series of 1941, witnessed by the Misses Florence
Thomas and Esther Thomas.“The said document was prepared and executed only for the purpose of
avoiding the seizure of the said establishment if and when the enemy
forces entered the City of Manila.“Upon the restoration of peace and order and the absence of the danger
above mentioned, the said document automatically becomes null and void
and of no ettect, the consideration of Ten Thousand Pesos (P10,000),
Philippine Currency, mentioned therein, being fictitious and not paid
to the Vendor.“In witness whereof, we have hereunto set our hands in the City of Manila, Philippines, this 29th day of November, 1941.
Thomas
was interned at Santo Tomas during the greater part of the war, and his
business was operated by the defendant exclusively throughout that
period in accordance with the aforequoted stipulation. On February 3,
1945, the building was destroyed by fire but the defendant had been
able to remove some of its furniture, the cash register, the piano, the
safe, and a considerable quantity of stocks to a place of safety.
According to the defendant, all of these goods were accounted for and
turned over to the plaintiff after the City of Manila had been retaken
by the American Forces.
On May 8, 1945, a bar was opened
on Calle Bambang, district of Sta. Cruz, under the old name of Silver
Dollar Cafe. Housed in a makeshift structure, which was erected on a
lot belonging to the defendant, the Bambang shop was conducted for
about four months, i.e., until September of the same year, when it was
transferred to the original location of the Silver Dollar Cafe at No.
15 Plaza Sta. Cruz.
It is asserted and denied that the plaintiff as well as the defendant
took a more or less active part in the management of the
post-liberation business until about the middle of September of the
following year, when, it is also alleged, the plaintiff brought a
certified public : accountant to the establishment in Sta. Cruz for the
purpose of examining the books of the business and the defendant
threatened the plaintiff and his companion with a gun if they persisted
in their purpose. As a result of that incident, the plaintiff forthwith
filed the present action, and set up a separate business1 under the
same tradename, Silver Dollar Cafe, on Echague Street. The defendant
remained with the Silver Dollar Cafe at Plaza Sta. Cruz, which was
burned down on December 15, 1946.
In the face of Exhibit “F” before transcribed, there is no denying that
throughout the Japanese military regime the Silver Dollar Cafe belonged
exclusively to the plaintiff and that the defendant had charge of it
merely as plaintiff’s employee, trustee, or manager. There is no
pretense that the defendant invested in the business within that period
any capital of his own in the form of cash or merchandise.
The controversy lies in the nature and scope of the defendant’s
obligation toward the plaintiff in relation to the business. It will be
noticed that Exhibit “F” is silent on this point. The defendant
endeavored to prove that there was a third, verbal, agreement, the
import of which was that he was to operate the business with no
liability other than to turn it over to the plaintiff as the plaintiff
would find it after the war.
Little or no weight can be attached to this assertion if by it the
defendant means, as he apparently does, that he was relieved of any
duty to make an accounting. Such understanding as the defendant says
existed would be at war with the care and precaution which the
plaintiff took to insure his rights in the business and its assets,
which had an inventory value of P60,000, according to the plaintiff. As
the property consisted mostly of perishable and expendible goods to be
constantly disposed of and replenished as long as the business lasted,
the plaintiff could not, by any stretch of the imagination, have agreed
to be content with what the defendant would deign to give him when
normalcy was restored. For that was what the defendant’s version of the
alleged verbal agreement would amount to and what the court below
found. As sole manager with full power to do as his fancies dictated,
the defendant could strip the business naked of all its stocks, leaving
the plaintiff holding the bag, as it were, when the defendant’s
management was terminated. Unless Thomas was willing to give away his
property and its profits, no man in his right senses would have given
his manager an outright license such as the defendant claims to have
gotten from his employer.
Not only did the plaintiff see to the execution of a counter agreement
but he stated that his elder daughter “had it (Exhibit “F”) kept in her
possession;” that “there were many efforts by Mr. Pineda to get hold of
this document during the first two weeks of the Japanese occupation,”
and he was “surprised;” that he “did not know what was in the future”
and he “wanted my children to have something more than an empty
possession.” Referring to the defendant’s attempts to take Exhibit “F”
away from himThomas said that the defendant sent to the hospital
where he (plaintiff) was confined, defendant’s friend, an attorney by
the name of Swartzcoff of whom he had heard “things”, “to recover that
document”, and he, plaintiff, became more determined not to part with
it; that as Swartzcoff kept on coming, he gave the document to his
children to keep up to the end of the war. This testimony has all the
stamps of veracity and vehemence and refutes the defendant’s allegation.
The conclusion thus seems clear that the defendant owes the plaintiff
an accounting of his management of the plaintiff’s business during the
occupation. The exact legal character of the defendant’s relation to
the plaintiff mattersnot a bit. It was enough to show, and it had been
shown, that he had been entrusted with the possession and management of
the plaintiff’s business and property for the owner’s benefit and had
not made an accounting.
Neither did the defendant’s sweeping statement at the trial—that all
the proceeds from the business had been used to support the plaintiff
and his daughters and to entertain or bribe Japanese officers and
civilians—dispense with defendant’s duty to account. It was a clear
error for the court below to declare at this stage of the proceeding,
on the basis of defendant’s incomplete and indefinite evidence, that
there were no surplus profits, and to call matters even.
Under the pleadings and the evidence the court’s inquiry ought to have
been confined to the determination of the plaintiff’s right to secure
an accounting; and that right having been established, the appropriate
judgment should have been a preliminary or interlocutory one—that the
defendant do account. The court was not called upon to decide, and
should not have decided, anything beyond that.
Monies and foodstuffs which the defendant said he had supplied the
plaintiff and his daughters during the war are appropriate items to be
considered on taking account. Receipts and expenses involving thousands
of pesos, covering a great length of time, and consisting of
complicated items are, on their face, so complex and intricate as to
necessitate being threshed out in an appropriate proceeding where
objections could be made and alleged misappropriations by the defendant
substantiated. By the defendant’s admission, the business made good
profits during the war, and there are charges that he amassed a fortune
out of the trusteeship. True or false, those allegations and many
others which it was the plaintiff’s right to prove, if he could, should
not have been dismissed summarily. Not technicalities but substantial
rights, equity, and justice clearly demanded adherence to the normal
course of practice and procedure. The employment of auditors might be
necessary.
The defendant denied that the plaintiff had any proprietary interest in
the saloon in Bambang and at Plaza Sta. Cruz after liberation. Thomas’
evidence on this phase of the litigation is to the effect that, upon
his release from the internment camp, he immediately took steps to
rehabilitate his business. He declared that he borrowed P2,000 from a
friend by the name of Bill Drummond, and with that amount he
constructed a temporary building in Bambang and with the stocks saved
by the defendant opened the business there. He said that, as before,
the defendant now worked as manager, with the difference that under the
new arrangement he was to get one-half of the net profits.
The defendant, on the other hand, undertook to show that he himself put
up the Bambang business, furnishing the construction materials, paying
for the labor, and purchasing the needed merchandise. And when the
business was to be moved to Plaza Sta. Cruz, he said, he called on Mrs.
Angela Butte, was able to rent the Plaza Sta, Cruz premises from her
for Fl,200, and told the lessor when he handed her the rent, “This is
my money.” He went on to say that Thomas told him to do whatever he
pleased with the premises, only requesting him to negotiate the sale of
or a loan on plaintiff’s mining shares so that the plaintiff could join
him as partner or “buy him out” by December. But, according to the
defendant, the plaintiff was not able to raise funds, so his desire to
acquire interest in or buy the business did not materialize. The
plaintiff did not invest a centavo in the new business because he had
no money to invest, the defendant concluded.
Leaving aside the evidence which depends entirely on the credibility of
the witnesses, the following undisputed or well-established
circumstances are, in our judgment, decisive:
- The defendant corroborated the plaintiff when he practically
declared that upon the plaintiff’s release from the internment camp,
Thomas lost no time in looking for a site to open a saloon. That the
plaintiff then had the means to do that, was a fact brought out by the
defendant’s own evidence as well as by the plaintiff’s testimony. There
were several cases of whiskey, rum, gin and other kinds of liquor which
the defendant admitted he had carted away and delivered to the
plaintiff after liberation. What the latter did or could have done with
those goods, if not to start a business with, there was no plausible
explanation, Granting that ten cases of the liquor were confiscated by
the MP—the plaintiff said they were soon returned—the confiscation
could not have stopped the plaintiff from continuing with the business,
which was riding in the crest of a boom. Significantly, the defendant
said that the day following the alleged confiscation he handed the
plaintiff P2,000 in cash. If he had nothing else, this was an amount
which ought to have been enough to enable the plaintiff to keep the
business going, which needed no large capital. That this payment was
“in full and complete liquidation of the Silver Dollar Cafe,” as the
defendant asserted, was, under the circumstances, highly improbable, to
put it mildly. - It is also an admitted fact that the bar in Bambang was called
Silver Dollar Cafe, Branch No. 1. The use of the old name suggested
that the business was in fact an extension and continuation of the
Silver Dollar Cafe which the defendant had operated for the plaintiff
during the enemy occupation, and precluded any thought of the business
having been established by the defendant as his own. It should be
remembered that the defendant had not yet appropriated the trade-name
Silver Dollar Cafe for himself. This—the subject of the second cause of
action— he did on September 27, 1945. - Despite statements to the contrary, it was the plaintiff who, in
September, 1945, before the reopening of the bar at Plaza Sta. Cruz,
entered into a written contract of lease (Exhibit A) with Mrs. Angela
Butte for the Sta. Cruz location; Thomas was named in the contract as
the lessee. The contract also reveals that it was the plaintiff who
personally paid Mrs. Butte the advanced rent (Pl,200) for the period
August 31-September 30, 1945, the first month of the lease. And
thereafter, all the rental receipts were made out in Thomas’ name,
except those for the months of October, November and December, which
were put in the name of the defendant. Apropos of this temporary
substitution, Jose V. Kamirez, owner of the land and administrator of
the building, testified that the Bureau of Internal Revenue had
licensed and taxed the business in the name of Hermogenes Pineda and so
thought it necessary that for those three months the defendant’s name
should be put in the receipts. Ramirez added that Mrs. Butte agreed to
the Internal Revenue Bureau’s requirement on the assurance that
beginning January, 1946, the receipts would be issued again in favor of
Thomas. Mrs. Butte testified to the same effect.
At any rate, the
issuance of three of the receipts ip defendant’s name was far from
implying that he was the proprietor or part owner of the Silver Dollar
Cafe. Appropriately, as manager he could make disbursement and get
receipts therefor in his name. What would have been strange was the
issuance of receipts, let alone the execution of the lease contract, in
the name of David Thomas if Thomas had had nothing to do with the
business, as the defendant would have the court believe.
The defendant
testified, and the lower court believed, that he consented to the
issuance of the three receipts and the execution of the contract of
lease in the plaintiff’s name because it was expected that the
plaintiff would buy the business or “chip in” as partner. How the mere
possibility, by no means certain, of the plaintiff becoming the owner
of the saloon or defendant’s partner on some future date could have
induced the defendant to let the plaintiff figure unqualifiedly as
owner of the business in receipts and leases that had nothing to do
with the contemplated deal, and why the plaintiff would want to pose as
owner while he was yet a complete stranger to the enterprise, is
utterly beyond comprehension.
For the rest, the plaintiff’s testimony
is as convincing and as well supported by the natural course of things
as the defendant’s explanation is unreasonable. It can not be disputed
that Thomas had accumulated money from the business in Bambang which,
it has also been proved to the point of certainty, he operated with the
goods retrieved by the defendant from the pre-war Silver Dollar Cafe.
Conducting saloons having been the plaintiff’s only means of support
before the war, and the calling in which he had acquired plenty of
experience, it is inconceivable that he would have remained idle at a
time when the trade was most lucrative and he had been impoverished by
the war. That the plaintiff established a bar behind the Great Eastern
Hotel on Echague Street, a hidden place, immediately or very soon after
he and the defendant had a falling out, is mute testimony to his
eagerness to take advantage of the current boom.
- That the defendant was only a manager is also made evident by two
sets of business cards of the Silver Dollar Cafe which he himself
caused to be printed. On the first set, of which 500 prints were made,
David Thomas was held out as the propietor and Hennogenes Pineda, the
defendant, as manager. On the second set, which were ordered later, the
defendant was not even mentioned as manager, but one Bill Magner, while
David Thomas’ name was retained as the proprietor.
Customers of the place testified that copies of these cards were handed
to them for distribution to their friends by the defendant himself. The
defendant swore that he put away the cards in a small drawer under some
books and denied they had been distributed. He gave to understand that
he was at a loss to know how the plaintiff and his witnesses got hold
of some of said cards, though, he said, he suspected that Thomas went
upstairs and grabbed some copies while the witnesses found other copies
scattered after the fire which burned the establishment for the second
time in 1946.
However the case may be, whether the defendant distributed the cards or
not, the important point is why he, in the first place, ordered the
cards in the form in which they were printed. He did not give cogent
reasons. His explanation was that Hugo Santiago, the printer’s agent,
“gave me a hint that Mr. Thomas was going to open the Silver Dollar
Cafe in Plaza Sta. Cruz.” This explanation fails to forge any sensible
link between the printing of Thomas’ name in the cards and Thomas’ plan
to join him in the business. Incidentally, the defendant did not tell
the truth when he declared that the cards were ordered when the shop
was still in Bambang; the cards gave the location of the Silver Dollar
Cafe as No. 15 Plaza Sta. Cruz, and, besides, Santiago, who testified
for both sides, was positive that the cards were delivered to the
defendant in September, 1945.
- At different times from May 8 to December 15, 1945, the defendant
handed the plaintiff diverse amounts totalling P24,100 without so much
as asking Thomas1 to sign a receipts for any of them.
The defendant testified that these amounts were simple loans secured by
plaintiff’s mining shares of stock. The plaintiff countered that they
were advances chargeable to his share of the net profits. While he
admitted that he owned some Baguio Consolidated and Baguio Gold shares,
he denied that he had given them to the defendant as collaterals or in
any other concept. He swore that he kept those securities in his own
safe and removed them in plain sight of Pineda when he became
suspicious of the latter.
It is difficult to understand how the payment of the amounts in
question to the plaintiff could have been for any purpose other than
that affirmed by him. The lack of any receipt is incompatible with the
hypothesis of loans. The defendant’s possession of the plaintiff’s
mining shares, granting that the defendant held them, was no reason for
dispensing with the necessity of getting from the plaintiff some form
of acknowledgment that the said amounts were personal debts, if that
was the case. Without such acknowledgment, which could have been made
in a matter of minutes and required no expert to make, the shares of
stock did not afford the creditor much if any protection, as an
experienced and intelligent man that the defendant is must have
realized.
These amounts were the subject of a counterclaim and the court
sustained the defendant’s theory and gave him judgment for them. In the
light of what has just been said and of the evidence previously
discussed, there is no escaping the conclusion that the plaintiff was
the sole owner of the postwar Silver Dollar bar and restaurant, that
the defendant was only an industrial partner, and that the said amounts
were withdrawals on account of the profits, which appear from portions
of the defendant’s entries in the books to have been considerable.
On the second cause of action, which relates to the ownership of the
Silver Dollar Cafe trade-name, it appears that the defendant on
September 27, 1945, registered the business and its name as his own.
The defendant contends that in 1940, the plaintiff’s right to use this
trade-name expired and by abandonment or nonuse the plaintiff ceased to
have any title thereto. The alleged abandonment or nonuse is predicated
on the testimony that the plaintiff expressly allowed the defendant to
appropriate the trade-name in dispute.
The parties’ actions negative all motions of abandonment by the
plaintiff. In the fictitious bill of sale executed on December 29,
1941, the plaintiff asserted and the defendant acknowledged Thomas’
ownership of the business It is manifest from Exhibits “C” and “D”,
samples of the business cards which were printed at the instance of the
defendant himself, that the plaintiff continued to display the name
Silver Dollar Cafe after liberation. And when the plaintiff set up a
new saloon on Echague Street after he broke with the defendant, he gave
the establishment the same appellation—Silver Dollar Cafe.
The most that can be said in favor of the defendant, which is the view
taken by the trial Judge, is that the plaintiff instructed Pineda to
renew the registration of the trade-name and the defendant understood
the instruction as a permission to make the registration in his favor.
It is to be doubted whether even honest mistakes were possible under
the circumstances of the case. It is an understatement to say that
indications pointed to bad faith in the registration. The application
for registration contained brazen untruths.
The plaintiff’s nonuse of his trade name in 1945, granting that to have
been the case, did not work as a forfeiture of his exclusive right to
the name, name which he and the man from whom he bought the business
had used for over forty years without interruption. Under the
provisions of Commerce Administrative Order No. 1, issued on January
11, 1946, by the Secretary of Commerce and Agriculture, the rights of
pre-war registrants of business names, the records of which had been
destroyed or lost during the war, were expressly protected. This
administrative order was later amended by Administrative Order No. 1-1,
dated October 29, 1946, but the amendment referred only to the
procedure for authentication of the documents to be submitted. On the
other hand, the amendatory order extended the filing of applications
for recon* stitution up to as late as December 31, 1946, that is,
ninety days after plaintiff commenced the present action.
As a legal proposition and in good conscience, the defendant’s
registration of the trade-name Silver Dollar Cafe must be deemed to
have been effected for the benefit of its owner of whom he was a mere
trustee or employee. “The relations of an agent to his principal are
fiduciary and it is an elementary and very old rule that in regard to
property forming the subject matter of the agency, he is estopped from
acquiring or asserting a title adverse to that of the principal. His
position is analogous to that of a trustee and he cannot consistently,
with the principles of good faith, be allowed to create in himself an
interest in opposition to that of his principal or cestui que trust. A
receiver, trustee, attorney, agent, or any other person occupying
fiduciary relations respecting property or persons, is utterly disabled
from acquiring for his own benefit the property committed to his
custody for management. This rule is entirely independent of the fact
whether any fraud has intervened. No fraud in fact need be shown, and
no excuse will be heard from the trustee. It is to avoid the necessity
of any such inquiry that the rule takes so general a form. The rule
stands on the moral obligation to refrain from placing one’s self in
positions which ordinarily excite conflicts between self-interest and
integrity. It seeks to remove the temptation that might arise out of
such a relation to serve one’s self-interest at the expense of one’s
integrity and duty to another, by making it impossible to profit by
yielding to temptation.” (Barretto vs. Tuason, 50 Phil. 888; Severino
vs. Severino, 44 Phil., 343.)
To recapitulate, we find from what we believe is conclusive evidence,
both direct and circumstantial, that the plaintiff was the owner of the
Silver Dollar Cafe at Plaza Sta. Cruz during the enemy occupation and
is of right entitled to have an accounting of its administration by the
defendant. Exhibit “F” does not state the remuneration the defendant
was to be paid for managing the plaintiff’s business. The natural
presumption under normal circumstances would be that his pre-war
compensation was to continue. But conditions during the occupation
being different from what they were before the war, the defendant’s
remuneration may and should be increased if so warranted by the changed
circumstances. This matter should be left for consideration in the
accounting, having in mind the nature and extent of the services
rendered, the volumes of business transacted, the profits obtained and
the losses incurred, the personal risks run by the defendant, and other
factors related to the success or failure of the defendant’s management.
We have it from the plaintiff that he promised to give the defendant
one-half of the net profits of the business established in Bambang and
later at Plaza Sta. Cruz after liberation. This offer was reasonable,
even liberal, and no unforeseen circumstances having supervened to
warrant its alteration, the same will not be disturbed and will serve
as basis of liquidation. The other bases of liquidation of the post-war
business are that the plaintiff was the exclusive owner of its stocks
and other assets from May 8, 1945, when it was reestablished in
Bambang, to December 15 1946, when the business was levelled to the
ground at Plaza Sta. Cruz.
For the reasons hereinbefore stated, the various sums of money
aggregating P24,100 and received or taken by the plaintiff were, and
they hereby are declared to be, advances on account of the profits, to
be deducted in the accounting from the defendant’s share of said
profits if there be any.
We also find that the trade-name Silver Dollar Cafe belongs to the
plaintiff and that the defendant should be and he is perpetually
enjoined from using it or any essential part thereof.
In all other respects, especially in connection with the demand for
accounting, this case is remanded to the court of origin for further
proceedings in accordance with law and the tenor of this decision and
for a final judgment on the balance that may be found due from either
party.
The defendant will pay the costs of this appeal.
Feria, Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo and Bautista Angelo, JJ., concur.
PARAS, C. J.:
I concur in the majority opinion except in so far as it requires the
defendant to render an accounting of the business Silver Dollar Cafe
during the Japanese occupation. The proof shows that the defendant was
to hold the enterprise and pretend to be its owner during the war in
order to save it from being surely seized by the Japanese as American
property, and that the defendant not only succeeded in doing so but,
with all honesty, used the proceeds of the business for the support of
the defendant and his daughters. The arrangement cannot be said to have
been a regular business proposition undertaken by the parties under
normal conditions in virtue of which the defendant was made a mere
manager; and even if the defendant had in fact derived personal
advantages, its justification necessarily follows from the
accomplishment of the mission entrusted by the plaintiff. Morever, the
business during the occupation was carried on in Japanese currency
which is now worthless.