G. R. No. 43045. August 17, 1937
VICENTE SABALVARO, PLAINTIFF AND APPELLANT, VS. ERLANGER & GALINGER, INC., WM. H. ANDERSON, S. FELDSTEIN, H. N. SALET, WM. WOLFF, F. C. HAGEDGRN, AND W. H. RENNOLDS, DEFENDANTS …
DIAZ, J.:
First Instance of Manila, the plaintiff appealed from the judgment
rendered against him, alleging that the trial judge committed the five
errors assigned by him in his brief. By means of said alleged errors he
raises the following three questions, to wit:
(1) Is the defendant corporation or its officers, who are the
other defendants, under obligation or not to purchase from the
plaintiff his ten shares of stock in the corporation, which had been
assigned to him upon partial payments with the same dividends earned by
said shares of stock and which are those stated in certificates of
stock Nos. 30, 43 and 48, for 1, 7 and 2 shares, respectively,
according to Exhibits C, A and B, after the plaintiff’s separation from
said defendant corporation?
(2) Is the defendant corporation under obligation or not to pay to
the plaintiff an amount equivalent to 7 per cent of the value of his
said ten shares of stock, as interest during the year 1932, under the
terms of Exhibit A?
(3) Is the defendant corporation under obligation or not to pay to
the plaintiff the value of his alleged accrued leave of 12 months and
25 days, for his 12 years and 10 months of service rendered thereto,
after his separation from the service?
To understand the questions raised it is necessary to know the
pertinent facts of the case proven at the trial, which are as follows:
The defendant corporation accepted the services of the plaintiff,
as its employee, on April 16, 1920. A few months after the plaintiff
had entered said defendant’s service— the record is silent as to the
date—the defendant Feldstein, who was the vice-president thereof,
offered to sell him the share which had originally been issued in the
name of Serapio Estabaya and transferred by the latter to the
corporation, for economic reasons. In view of the fact that the
plaintiff had no money available to pay for the value of the share
offered to him, which was P500, he by agreement with Feldstein signed a
promissory note for said amount, with the understanding that it would
be paid piecemeal with bonus thereafter to be given him monthly as
dividends by the corporation, which was so done although not completed.
In January, 1923, the defendant corporation was kind enough to
raise the salaries of its employees, but instead of giving the
plaintiff a raise, the defendant Feldstein made him a present of said
share formerly belonging to Serapio Estabaya, informing him in his
letter of the 14th of said month and year that with said arrangement
his promissory note would be cancelled and returned to him on the
following Monday (Exhibit C).
On January 1, 1924, the defendants Win. H. Anderson and S.
Feldstein, who were the holders of the majority stock of the defendant
corporation, on their own account, granted the plaintiff an option to
acquire the 7 shares stated in certificate No. 43, which are the ones
referred to in Exhibit A, expressly informing him in the latter
document which, by the way, is also signed by the defendant corporation
and by the plaintiff himself, among other things, as follows:
“1. You are entitled to purchase seven shares of
the capital stock at par, which is P500 a share. This privilege is
nontransferable.“2. Until the shares are fully paid for by you, they shall remain in our name and we shall vote them.
“3. You will pay the purchase price of said shares out of the earnings of the stock.
“4. You shall not sell the shares acquired by you except to the
officers of the corporation unless the Board of Directors of the
corporation approve the sale.“5. After you have fully paid for the aforesaid shares, then and then
only the purchase price paid by you shall draw interest at 7 per cent a
year in addition to drawing such dividends as the Board of Directors
may authorize.“6. Should you become separated from the
Company’s employment through any cause—except sickness or death— before
fully paying for your shares, you forfeit all earnings on the stock and
you forfeit all your rights to acquire the shares. Should, however,
your separation from the Company’s employment be by reason of sickness
or death, before fully paying for your shares, you or your estate will
be entitled to receive only the earning of such shares as shown by the
last balance sheet prior to your separation but all your rights to
acquire such shares shall be and stand forfeited. This clause is
inserted as expressing the intention of the parties hereto that the
offer to acquire shares is in the nature of a special bonus for long,
faithful and continuous service.“This agreement is also signed by Erlanger & Galinger, Inc. so as to be binding as to clauses 4 and 5 hereof.”
The-plaintiff succeeded in paying piecemeal the value of the 7
shares in question with the dividends earned by the same during the
years 1924, 1925 and 1926 (Exhibit H).
The defendant Feldstein again gave the plaintiff other 2 shares
under the same conditions for payment as those granted him for the
acquisition of the 7 shares stated in certificate No. 43, so as to
permit him, as he stated in his letter of January 24, 1928 (Exhibit B),
“to become permanently identified with this company”, referring to the
defendant corporation. Feldstein, however, imposed upon him the
following condition:
“These stock certificates must not be sold without
the approval of the Board of Directors whose authority must first be
obtained and they will automatically revert to me in case you leave the
employ of the company. If for any reason whatsoever, you leave the
employ of the company you will not be entitled to any earnings on this
stock.“Effective Jan. 1, 1928.”
As promised him in paragraph 5 of Exhibit A, the stipulated
interest of 7 per cent per annum, from 1926 to the month of December,
1931, was paid to the plaintiff. In December, 1932, however, the
officers of the defendant corporation, to wit: Wm. H. Anderson, S.
Feldstein, H. N. Salet, Wm. Wolff, F. C. Hagedorn, and W. H. Rennolds,
together with the plaintiff and the other stockholders thereof, agreed
to discontinue payment of said interest from January 1, 1932, executing
to that effect the document marked in the record as Exhibit P, which
literally reads as follows:
“This indenture, executed this * * * day of
December, 1932 by the parties undersigned, all of whom are of age and
residing in the places set opposite their signature,
“WITNESSETH—THAT:
“For and in consideration of the sum of one peso
(P1) and other valuable considerations, receipt whereof is hereby
acknowledged, the parties undersigned, for themselves, their heirs,
successors, executors, administrators and assigns, have waived,
renounced and quit-claimed, freely and voluntarily, any and all rights
in and to the credit or interest of seven per centum (7%) per annum
heretofore paid, and now due, owing and/or payable or which may
hereafter accrue, become due, owing and/or payable upon or account of
the divers shares of stock to all and each of them appertaining, or by
them owned and held, in the capital stock of ‘Erlanger & Galinger,
Inc.’, a corporation organized under and by virtue of the laws of the
Philippine Islands, with main offices therein in the City of Manila;
this waiver, renunciation and quit-claim to inure to the benefit of the
said corporation ‘Erlanger & Galinger, Inc.’, its successors and
assigns, from and after December 15,1932, including interest accrued
during the year 1932.“In witness whereof, the Parties have executed these presents, in Manila, P. I, the day and year first written above.
“Maj. Wm. H. Anderson………. “Mr. S. Feldstein …………………. “Mr. Wm. H. Rennolds ………. “Mr. H. N. Salet…………………… “Mr. Wm. Wolff…………………. “Mr. K. L. Morrison ……………. “Mr. B. W. Guysi…………………… “Mr. J. Tremblay …………………. “Mr. V. Sabalvaro……………….. “Mr. R. Munos ……………………… “Mr. P. C. Hagedorn ………….. “Mr. N. Dominguez ……………… “Mr. E. Mascunana……………….. “Mr. B. H. Silen…………………… ____________
Prior to and even during the time the plaintiff was in the service
of the defendant corporation, the latter had been granting accrued
leave privileges at the rate of one month a year, with pay, to its
American and European employees who had rendered it services for more
than 4 years. In addition to these privileges, it generously granted
them free transportation expenses to and from their respective
countries. The privileges were later extended by it to some employees
residing in the Philippines.
When the plaintiff voluntarily separated from the service of the
defendant corporation on February 17,1933, he asked the latter and the
officers thereof to purchase his 10 shares in question as they
previously purchased those of other employees. He likewise asked them
to pay him 7 per cent of the value of his said shares, as interest,
during the year 1932. He finally requested them to commute his accrued
leave by paying him the value thereof, as they previously did to other
employees of the corporation. He was granted nothing, however, except
authority to sell to whomsoever he wished, 7 of said 10 shares which he
had in the corporation (Exhibit 3).
- From the foregoing facts it is clear that the three shares
referred to in certificates Nos. 48 and 30 and Exhibits B and C are not
in the same conditions as the seven shares stated in certificate No. 43
and in Exhibit A. The assignment of the same to the plaintiff took
place under other circumstances and entirely different conditions. Such
assignment has not been subject to the stipulations appearing in
paragraphs 4, 5 and 6 of Exhibit A. It is evident that in no contract
may a contracting party be obligated to more than what he has really
bound himself and that the contract should not be construed as
including things and cases different from those with respect to which
the persons interested intended to contract (art. 1283, Civil Code). If
this is true in the case of the defendant corporation and in that of
the defendants Wm. H. Anderson, H. N. Salet, Wm. Wolff, F. C. Hagedorn
and W. H. Rennolds who did not even intervene in any manner in the
execution of the documents Exhibits B and C which imply at most a
contract between the defendant S. Feldstein and the plaintiff, it is no
less true in the case of the plaintiff with respect to the share
referred to in Exhibit C. The assignment of said share to him (Exhibit
C), was made through mere liberality, as a present, according to said
document, without being subject to any condition and without any
obligation on the part of Feldstein to purchase it from him, either
during his stay in the service, of the defendant corporation or after
his separation therefrom.
The second paragraph of Exhibit B which imposes upon the plaintiff
the condition not to sell the two shares stated therein without first
obtaining authority from the defendant corporation, and that the same
must revert to the defendantFeldstein in case said plaintiff should
leave the employ of the corporation, does not mean that there is
obligation on the part of said corporation, its officers or Feldstein
himself to purchase from him the two shares in question. It should be
borne in mind that said shares were not purchased by the plaintiff with
his own money but with the dividends or profits earned by the same. It
may therefore be stated that the plaintiff loses nothing if the clause
of Exhibit B, providing for the reversion of said shares to Feldstein,
is carried into effect, inasmuch as such reversion may take-place as
soon as the plaintiff leaves the employ of the defendant corporation.
In other words, if he remains in the service, he obtains the benefit of
earnring the dividends of the shares in question which really did not
cost him anything, and he certainly received such dividends from the
time the certificates covering said shares were issued to him until his
separation from the service. He cannot claim that he was led into error
because he had before him Exhibit B, which is clear enough, and it is
to be presumed that he read and considered it with the necessary mature
reflection, before giving his consent to the transaction proposed to
him therein (section S34, No. 4, Act No. 190).
The same reasons stated with regard to the shares referred to in
certificates Nos. 48 and 30 and in Exhibits B and C resolve the
question relative to the 7 shares of the plaintitff stated in
certificate No. 43 and in Exhibit A, By reading the entire text of the
latter document, it will clearly appear that the only thing to which
the defendant corporation bound itself upon affixing its signature
thereto (Nos. 4 and 5 and paragraph next to No. 6 of Exhibit A) was to
approve or disapprove the transfer or transfers which the plaintiff
might wish to make of his 7 shares in favor of persons not connected
with the corporation (par. 4), and to pay him interest at 7 per cent
per annum on the purchase price thereof plus such dividends as the
board of directors might authorize (par. 5), the former obligation
having been performed by it by means of its resolution of February 23,
1933 (Exhibit 3). There is nothing in Exhibit A to indicate, that the
defendant corporation or the officers thereof, that is, the other
defendants, or its employees, are under obligation to purchase the
shares of the plaintiff after his separation from the service. The only
thing provided for therein is the case of the plaintiff’s separation
from the service of the defendant corporation before the value of the
seven shares in question has been fully paid with the same dividends
thereafter to be earned by them. If there is anything provided for
therein relative to what would be done with his shares fully paid for
in the manner above-stated, after his separation from the service of
the corporation, it is that he must first obtain authority from said
corporation in the event he should choose to sell them to persons not
connected with it. The fact that on previous occasions the defendant
corporation voluntarily and spontaneously purchased the shares of some
other officers and stockholders thereof, who had separated from its
service, does not permit the inference that the understanding had
between it and the plaintiff was that it would purchase the latter’s
shares as soon as he left its service. The clear terms of a contract
should never be the subject matter of interpretation. Their true
meaning must be enforced as it is to be presumed that the contracting
parties know their scope and effects. Construction and interpretation
should not be resorted to where it is unnecessary and where it is
possible to apply the terms of a contract, because to do so would
result in making precisely a new contract between the parties (Lambert
vs. Fox [1914], 26 Phil, 588).
This court is of the opinion that the doctrine laid down in the
case of Padgett vs. Babcock & Templeton, Inc. and Babcock ([1933],
59 Phil., 232), is applicable to the case at bar. In the absence of a
contract, either express or implied, providing for the acquisition by a
corporation or its officers of the shares of the stockholders thereof,
they should not and cannot be obliged to acquire them. Therefore the
answer to be given to the first question raised by the plaintiff must
be in the negative.
- With respect to the second question, suffice it
to state that the plaintiff, as it clearly appears in Exhibit P which,
by the way, was executed in December, 1932, expressly and formally
renounced the stipulated interest of 7 per cent per annum corresponding
to said year, that is, from January 1st to December 31st, thereby
relieving the defendant corporation of the obligation to pay it to him.
It is true that during the hearing the plaintiff testified that if he
subscribed the document in question it was in deference to the wishes
of the defendant Wm. H. Anderson who was the president of the defendant
corporation, but it is no less true that he was contradicted on this
point by H. N. Salet, the vice-president of said corporation, saying
that it was he and not Wm. H. Anderson who had intervened in the
transaction; that the plaintiff signed said document with absolute
freedom and as voluntarily as did the others who signed it; that no
threat or pressure of any kind on the part of anybody intervened in the
execution thereof, and that the payment of interest ceased due to the
fact that the economic conditions of the defendant corporation no
longer permitted it (t. s. n., p. 28). The argument that the plaintiff
signed the document in question for fear of being dismissed from the
corporation, which fear was unfounded because it does not appear that
he has been intimidated by somebody, does not prove that his consent
was obtained by means of intimidation; and if he were to allege that it
was for fear of incurring the displeasure of his employers that he
signed the document in question, the answer would be the provision of
article 1267 of the Civil Code that: “Fear of displeasing persons to
whom obedience and respect are due shall not annul a contract.” For
these reasons the question under consideration should be decided in the
negative. - The third question should not
even be discussed because the plaintiff himself admits that it was and
is discretionary on the part of the defendant corporation to grant or
not accrued leave privileges to its officers and employees. On the
other hand, the preponderance of evidence establishes that the accrued
leave privileges were limited by the defendant corporation to its
employees of foreign residence. The plaintiff attempted to prove by
means of his testimony that commutation had been made of the accrued
leave of the employees named W. H. Gray, Ernest Loewinsohn and F. C.
Hagedorn who permanently resided in this country. Granting this to be
true, although it does not seem to be so because the names given sound
like they were names of foreigners and because there is the evidence
presented by the defendant corporation to the effect that the accrued
leave privileges were extended only to its employees of foreign
residence, it does not follow that it is obliged to grant accrued leave
to the plaintiff and have it commuted for him, because the
discretionary character of said act would be destroyed. The performance
of a discretionary act is not enforceable by action. In view of the
foregoing reasons, the third question must also necessarily be decided
in the negative.
This court holds that the lower court committed none of the errors
assigned by the plaintiff and hereby affirms the appealed judgment in
all its parts, with costs to the plaintiff. So ordered.
Avancena, C. J., Villa-Real, Abad Santos, Imperial, and Concepcion, JJ., concur.