G. R. No. L-3691. November 21, 1951
JACINTO DEL SAZ OROZCO Y MORTERA AND MARIA PAZ ALCANTARA, PLAINTIFFS AND APPELLANTS, VS. SALVADOR ARANETA, FRANCISCO DEL SAZ OROZCO Y LOPEZ, AND THE MINORS FELISA, EUGENIO, ANTO…
JUGO, J.:
1922, leaving a will which he had executed on March 5, 1921, and was
afterwards duly admitted to probate. The pertinent clause of that will
provided that certain properties should be given in life usufruct to
his son Jacinto del Saz Orozco y Mortera, with the obligation on his
part to preserve said properties in favor of the other heirs who were
declared the naked owners thereof. Among these properties were 5,714
shares of stock of the Benguet Consolidated Mining Company and 94
shares of stock of the Manila Electric Company, according to the
project of partition executed pursuant to said will and duly approved
by the court.
On September 11, 1934, the Benguet Consolidated Mining Company
declared and distributed stock dividends out of its surplus profits,
the plaintiff receiving his proportionate portion of 11,428 shares. On
November 17, 1939, said Mining Company again declared stock dividends
out of Its surplus profits, of which the plaintiff received 17,142
shares, making a total of 28,570 shares.
The question at Issue is whether the stock dividend is part of the
capital which should be preserved In favor of the owners or an Income
or fruits of the capital which should be given to and enjoyed by the
life usufructuary, the plaintiff herein, as his own exclusive property.
The same question was raised in the Matter of the Testate Estate of Bail Maurice Bachrach,[*]
G. R. No. L-2659 the decision of which was promulgated on October 12,
1950. In that case, the question raised was stated as follows:
“Is a stock dividend fruit or income, which belongs
to the usufructuary, or is it capital or part of the corpus of the
estate, which pertains to the remainderman? That is the question raised
in this appeal.”
In said case, Evil Maurice Bachrach was the owner of 108,000 shares
of stock of the Atok Big Wedge Mining Co., Inc. He received 54,000
shares, representing 50% stock dividend on said original shares. On
June 10, 1948, Mary MacDonald Bachrach as life tenant or usufructuary
of the estate filed a motion asking the Court of First Instance to
authorize the Peoples Bank and Trust Company, as administrator of the
estate of Boil Maurice Bachrach, to transfer to her the said 54,000
shares of stock dividend by Indorsing and delivering to her the
corresponding certificates of stock, claiming that said dividend,
although paid out in the form of stock, was fruit or Income and,
therefore, belonged to her as a usufructuary. The other heirs of
Bachrach portion of 11,428 shares. On November 17, 1939, said Mining
Company again declared stock dividends oat of its surplus profits, of
whieh the plaintiff received 17,142 shares, making a total of 28,570
shares.
The question at issue is whether the stock dividend is part of the
capital which should be preserved in favor of the owners or an income
or fruits of the capital which should be given to and enjoyed by the
life usufructuary, the plaintiff herein, as his own exclusive property.
The same question was raised in the Matter of the Testate Estate of
Bull Maurice Bachrach, G. R. No. L-2659 the decision of which was
promulgated on October 12, 1950. In that case, the question raised was
stated as follewst
“Is a stock dividend fruit or income, which belongs
to the usufructuary, or is it capital or part of the corpus of the
estate, which pertains to the remainderman? That is the question raised
in this appeal.”
In said case, Boil Mauriee Bachrach was the owner of 108,000 shares
of stock of the Atok Big Wedge Mining Co., Inc. He received 54,000
shares, representing 50% stock dividend on said original shares. On
June 10, 1948, Mary MacDonald Bachrach as life tenant or usufructuary
of the estate filed a motion asking the Court of First Instance to
authorize the Peoples Bank and Trust Company, as administrator of the
estate of Emil Maurice Bachrach, to transfer to her the said 54,000
shares of stock dividend by indorsing and delivering to her the
corresponding certificates of stock, claiming that said dividend,
although paid out in the form of stock, was fruit or income and,
therefore, belonged to her as a usufructuary. The other heirs of
Bachrach opposed the notion on the ground that the stock dividend was
part of the capital or corpus of the estate and belonged to the
remainderman. The court granted the motion and the other heirs appealed.
Justice Ozaeta, with the unanimous concurrence of the other Members
of this Court, ruled that a dividend, whether in the form of cash or
stock-, is income and, consequently, should go to the usufructuary,
taking into consideration that a stock dividend as well as a cash
dividend can be declared only out of profits of the corporation, for if
it were declared out of the capital it would be a serious violation of
the law.
For the reasons sustaining the doctrine, we refer to that recent decision.
The appellees attempt to differentiate the present case from that
case, contending that, while the doctrine in that case effected a just
and equitable distribution, the application of it in the present case
would cause an injustice, for, quoting Justice Holmes, “abstract
prepositions do not decide concrete cases.” We have examined the two
cases carefully and we have not perceived any difference which would
justify a reversal or modification ef the doctrine in the Bachrach case.
One of the differences pointed out is that by the declaration of
stock dividends the voting power of the original shares of stock Is
considerably diminished, and, if the stock dividends are not given to
the remaindermen, the voting power of the latter would be greatly
impaired. Bearing in mind that the number of shares of stock of the
Benguet Consolidated company is so large, the diminution of the voting
power of the origiaal shares ff stock in tills ease cannot possibly
affect or influence the control of the policies of the corporation
which is vested in the owners of the great blocks of shares. This would
not lie a sufficient reason for modifying the doctrine jof the Bachrach
case. These remarks are made in answer to the argument of the appellees
in this particular case, but they do not imply that if the diminution
of the voting power were considerable the doctrine should be. modified.
With regard to the sum of P3,428.40 which is alleged to have been
received by the plaintiff from the Benguet Consolidated Hining Company,
as a result of the reduction of its capital in January, 1926, it
appears that it has net been proven, that the plaintiff has received
said sum; en the contrary, it was denied by him as soon as he arrived
in the Philippines from Spain, There is no ground, therefore, for
ordering the plaintiff to deliver such sum to the defendants.
In view of the foregoing, the judgment appealed from is reversed,
and it is declared that the stock dividends amounting to 28,570 shares,
above mentioned, belong to the plaintiffappellant Jacinto del Sax
Orozco y Hbrtera exclusively and in absolute ownership. Without costs.
It is so ordered.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Reyes and Bautista Angelo, JJ., concur.
[*] 48 Off. Gaz., 569; 87 Phil., 483.