Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 74306 March 16, 1992

ENRIQUE RAZON, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and VICENTE B. CHUIDIAN, in his capacity as Administrator of the Estate of the Deceased JUAN T. CHUIDIAN, respondents.

G.R. No. 74315 March 16, 1992

VICENTE B. CHUIDIAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, ENRIQUE RAZ0N, and E. RAZON, INC., respondents.

GUTIERREZ, JR., J.:

The main issue in these consolidated petitions centers on the ownership of 1,500 shares of stock in E. Razon, Inc. covered by Stock Certificate No. 003 issued on April 23, 1966 and registered under the name of Juan T. Chuidian in the books of the corporation. The then Court of First Instance of Manila, now Regional Trial Court of Manila, declared that Enrique Razon, the petitioner in G.R. No. 74306 is the owner of the said shares of stock. The then Intermediate Appellate Court, now Court of Appeals, however, reversed the trial court's decision and ruled that Juan T. Chuidian, the deceased father of petitioner Vicente B. Chuidian in G.R. No. 74315 is the owner of the shares of stock. Both parties filed separate motions for reconsideration. Enrique Razon wanted the appellate court's decision reversed and the trial court's decision affirmed while Vicente Chuidian asked that all cash and stock dividends and all the pre-emptive rights accruing to the 1,500 shares of stock be ordered delivered to him. The appellate court denied both motions. Hence, these petitions.

The relevant Antecedent facts are as follows:

In his complaint filed on June 29, 1971, and amended on November 16, 1971, Vicente B. Chuidian prayed that defendants Enrique B. Razon, E. Razon, Inc., Geronimo Velasco, Francisco de Borja, Jose Francisco, Alfredo B. de Leon, Jr., Gabriel Llamas and Luis M. de Razon be ordered to deliver certificates of stocks representing the shareholdings of the deceased Juan T. Chuidian in the E. Razon, Inc. with a prayer for an order to restrain the defendants from disposing of the said shares of stock, for a writ of preliminary attachment v. properties of defendants having possession of shares of stock and for receivership of the properties of defendant corporation . . .

xxx xxx xxx

In their answer filed on June 18, 1973, defendants alleged that all the shares of stock in the name of stockholders of record of the corporation were fully paid for by defendant, Razon; that said shares are subject to the agreement between defendants and incorporators; that the shares of stock were actually owned and remained in the possession of Razon. Appellees also alleged . . . that neither the late Juan T. Chuidian nor the appellant had paid any amount whatsoever for the 1,500 shares of stock in question . . .

xxx xxx xxx

The evidence of the plaintiff shown that he is the administrator of the intestate estate of Juan Telesforo Chuidian in Special Proceedings No. 71054, Court of First Instance of Manila.

Sometime in 1962, Enrique Razon organized the E. Razon, Inc. for the purpose of bidding for the arrastre services in South Harbor, Manila. The incorporators consisted of Enrique Razon, Enrique Valles, Luisa M. de Razon, Jose Tuason, Jr., Victor Lim, Jose F. Castro and Salvador Perez de Tagle.

On April 23, 1966, stock certificate No. 003 for 1,500 shares of stock of defendant corporation was issued in the name of Juan T. Chuidian.

On the basis of the 1,500 shares of stock, the late Juan T. Chuidian and after him, the plaintiff-appellant, were elected as directors of E. Razon, Inc. Both of them actually served and were paid compensation as directors of E. Razon, Inc.

From the time the certificate of stock was issued on April 1966 up to April 1971, Enrique Razon had not questioned the ownership by Juan T. Chuidian of the shares of stock in question and had not brought any action to have the certificate of stock over the said shares cancelled.

The certificate of stock was in the possession of defendant Razon who refused to deliver said shares to the plaintiff, until the same was surrendered by defendant Razon and deposited in a safety box in Philippine Bank of Commerce.

Defendants allege that after organizing the E. Razon, Inc., Enrique Razon distributed shares of stock previously placed in the names of the withdrawing nominal incorporators to some friends including Juan T. Chuidian

Stock Certificate No. 003 covering 1,500 shares of stock upon instruction of the late Chuidian on April 23, 1986 was personally delivered by Chuidian on July 1, 1966 to the Corporate Secretary of Attorney Silverio B. de Leon who was himself an associate of the Chuidian Law Office (Exhs. C & 11). Since then, Enrique Razon was in possession of said stock certificate even during the lifetime of the late Chuidian, from the time the late Chuidian delivered the said stock certificate to defendant Razon until the time (sic) of defendant Razon. By agreement of the parties (sic) delivered it for deposit with the bank under the joint custody of the parties as confirmed by the trial court in its order of August 7, 1971.

Thus, the 1,500 shares of stook under Stock Certificate No. 003 were delivered by the late Chuidian to Enrique because it was the latter who paid for all the subscription on the shares of stock in the defendant corporation and the understanding was that he (defendant Razon) was the owner of the said shares of stock and was to have possession thereof until such time as he was paid therefor by the other nominal incorporators/stockholders (TSN., pp. 4, 8, 10, 24-25, 25-26, 28-31, 31-32, 60, 66-68, July 22, 1980, Exhs. "C", "11", "13" "14"). (Ro11o — 74306, pp. 66-68)

In G.R. No. 74306, petitioner Enrique Razon assails the appellate court's decision on its alleged misapplication of the dead man's statute rule under Section 20(a) Rule 130 of the Rules of Court. According to him, the "dead man's statute" rule is not applicable to the instant case. Moreover, the private respondent, as plaintiff in the case did not object to his oral testimony regarding the oral agreement between him and the deceased Juan T. Chuidian that the ownership of the shares of stock was actually vested in the petitioner unless the deceased opted to pay the same; and that the petitioner was subjected to a rigid cross examination regarding such testimony.

Section 20(a) Rule 130 of the Rules of Court (Section 23 of the Revised Rules on Evidence) States:

Sec. 20. Disqualification by reason of interest or relationship — The following persons cannot testify as to matters in which they are interested directly or indirectly, as herein enumerated.

(a) Parties or assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an executor or administrator or other representative of a deceased person, or against a person of unsound mind, upon a claim or demand against the estate of such deceased person or against such person of unsound mind, cannot testify as to any matter of fact accruing before the death of such deceased person or before such person became of unsound mind." (Emphasis supplied)

xxx xxx xxx

The purpose of the rule has been explained by this Court in this wise:

The reason for the rule is that if persons having a claim against the estate of the deceased or his properties were allowed to testify as to the supposed statements made by him (deceased person), many would be tempted to falsely impute statements to deceased persons as the latter can no longer deny or refute them, thus unjustly subjecting their properties or rights to false or unscrupulous claims or demands. The purpose of the law is to "guard against the temptation to give false testimony in regard to the transaction in question on the part of the surviving party." (Tongco v. Vianzon, 50 Phil. 698; Go Chi Gun, et al. v. Co Cho, et al., 622 [1955])

The rule, however, delimits the prohibition it contemplates in that it is applicable to a case against the administrator or its representative of an estate upon a claim against the estate of the deceased person. (See Tongco v. Vianzon, 50 Phil. 698 [1927])

In the instant case, the testimony excluded by the appellate court is that of the defendant (petitioner herein) to the affect that the late Juan Chuidian, (the father of private respondent Vicente Chuidian, the administrator of the estate of Juan Chuidian) and the defendant agreed in the lifetime of Juan Chuidian that the 1,500 shares of stock in E. Razon, Inc. are actually owned by the defendant unless the deceased Juan Chuidian opted to pay the same which never happened. The case was filed by the administrator of the estate of the late Juan Chuidian to recover shares of stock in E. Razon, Inc. allegedly owned by the late Juan T. Chuidian.

It is clear, therefore, that the testimony of the petitioner is not within the prohibition of the rule. The case was not filed against the administrator of the estate, nor was it filed upon claims against the estate.

Furthermore, the records show that the private respondent never objected to the testimony of the petitioner as regards the true nature of his transaction with the late elder Chuidian. The petitioner's testimony was subject to cross-examination by the private respondent's counsel. Hence, granting that the petitioner's testimony is within the prohibition of Section 20(a), Rule 130 of the Rules of Court, the private respondent is deemed to have waived the rule. We ruled in the case of Cruz v. Court of Appeals (192 SCRA 209 [1990]):

It is also settled that the court cannot disregard evidence which would ordinarily be incompetent under the rules but has been rendered admissible by the failure of a party to object thereto. Thus:

. . . The acceptance of an incompetent witness to testify in a civil suit, as well as the allowance of improper questions that may be put to him while on the stand is a matter resting in the discretion of the litigant. He may assert his right by timely objection or he may waive it, expressly or by silence. In any case the option rests with him. Once admitted, the testimony is in the case for what it is worth and the judge has no power to disregard it for the sole reason that it could have been excluded, if it had been objected to, nor to strike it out on its own motion (Emphasis supplied). (Marella v. Reyes, 12 Phil. 1.)

The issue as to whether or not the petitioner's testimony is admissible having been settled, we now proceed to discuss the fundamental issue on the ownership of the 1,500 shares of stock in E. Razon, Inc.

E. Razon, Inc. was organized in 1962 by petitioner Enrique Razon for the purpose of participating in the bidding for the arrastre services in South Harbor, Manila. The incorporators were Enrique Razon, Enrique Valles, Luisa M. de Razon, Jose Tuazon, Jr., Victor L. Lim, Jose F. Castro and Salvador Perez de Tagle. The business, however, did not start operations until 1966. According to the petitioner, some of the incorporators withdrew from the said corporation. The petitioner then distributed the stocks previously placed in the names of the withdrawing nominal incorporators to some friends, among them the late Juan T. Chuidian to whom he gave 1,500 shares of stock. The shares of stock were registered in the name of Chuidian only as nominal stockholder and with the agreement that the said shares of stock were owned and held by the petitioner but Chuidian was given the option to buy the same. In view of this arrangement, Chuidian in 1966 delivered to the petitioner the stock certificate covering the 1,500 shares of stock of E. Razon, Inc. Since then, the Petitioner had in his possession the certificate of stock until the time, he delivered it for deposit with the Philippine Bank of Commerce under the parties' joint custody pursuant to their agreement as embodied in the trial court's order.

The petitioner maintains that his aforesaid oral testimony as regards the true nature of his agreement with the late Juan Chuidian on the 1,500 shares of stock of E. Razon, Inc. is sufficient to prove his ownership over the said 1,500 shares of stock.

The petitioner's contention is not correct.

In the case of Embassy Farms, Inc. v. Court of Appeals (188 SCRA 492 [1990]) we ruled:

. . . For an effective, transfer of shares of stock the mode and manner of transfer as prescribed by law must be followed (Navea v. Peers Marketing Corp., 74 SCRA 65). As provided under Section 3 of Batas Pambansa Bilang, 68 otherwise known as the Corporation Code of the Philippines, shares of stock may be transferred by delivery to the transferee of the certificate properly indorsed. Title may be vested in the transferee by the delivery of the duly indorsed certificate of stock (18 C.J.S. 928, cited in Rivera v. Florendo, 144 SCRA 643). However, no transfer shall be valid, except as between the parties until the transfer is properly recorded in the books of the corporation (Sec. 63, Corporation Code of the Philippines; Section 35 of the Corporation Law)

In the instant case, there is no dispute that the questioned 1,500 shares of stock of E. Razon, Inc. are in the name of the late Juan Chuidian in the books of the corporation. Moreover, the records show that during his lifetime Chuidian was ellected member of the Board of Directors of the corporation which clearly shows that he was a stockholder of the corporation. (See Section 30, Corporation Code) From the point of view of the corporation, therefore, Chuidian was the owner of the 1,500 shares of stock. In such a case, the petitioner who claims ownership over the questioned shares of stock must show that the same were transferred to him by proving that all the requirements for the effective transfer of shares of stock in accordance with the corporation's by laws, if any, were followed (See Nava v. Peers Marketing Corporation, 74 SCRA 65 [1976]) or in accordance with the provisions of law.

The petitioner failed in both instances. The petitioner did not present any by-laws which could show that the 1,500 shares of stock were effectively transferred to him. In the absence of the corporation's by-laws or rules governing effective transfer of shares of stock, the provisions of the Corporation Law are made applicable to the instant case.

The law is clear that in order for a transfer of stock certificate to be effective, the certificate must be properly indorsed and that title to such certificate of stock is vested in the transferee by the delivery of the duly indorsed certificate of stock. (Section 35, Corporation Code) Since the certificate of stock covering the questioned 1,500 shares of stock registered in the name of the late Juan Chuidian was never indorsed to the petitioner, the inevitable conclusion is that the questioned shares of stock belong to Chuidian. The petitioner's asseveration that he did not require an indorsement of the certificate of stock in view of his intimate friendship with the late Juan Chuidian can not overcome the failure to follow the procedure required by law or the proper conduct of business even among friends. To reiterate, indorsement of the certificate of stock is a mandatory requirement of law for an effective transfer of a certificate of stock.

Moreover, the preponderance of evidence supports the appellate court's factual findings that the shares of stock were given to Juan T. Chuidian for value. Juan T. Chuidian was the legal counsel who handled the legal affairs of the corporation. We give credence to the testimony of the private respondent that the shares of stock were given to Juan T. Chuidian in payment of his legal services to the corporation. Petitioner Razon failed to overcome this testimony.

In G.R. No. 74315, petitioner Vicente B. Chuidian insists that the appellate court's decision declaring his deceased father Juan T. Chuidian as owner of the 1,500 shares of stock of E. Razon, Inc. should have included all cash and stock dividends and all the pre-emptive rights accruing to the said 1,500 shares of stock.

The petition is impressed with merit.

The cash and stock dividends and all the pre-emptive rights are all incidents of stock ownership.

The rights of stockholders are generally enumerated as follows:

xxx xxx xxx

. . . [F]irst, to have a certificate or other evidence of his status as stockholder issued to him; second, to vote at meetings of the corporation; third, to receive his proportionate share of the profits of the corporation; and lastly, to participate proportionately in the distribution of the corporate assets upon the dissolution or winding up. (Purdy's Beach on Private Corporations, sec. 554) (Pascual v. Del Saz Orozco, 19 Phil. 82, 87)

WHEREFORE, judgment is rendered as follows:

a) In G.R. No. 74306, the petition is DISMISSED. The questioned decision and resolution of the then Intermediate Appellate Court, now the Court of Appeals, are AFFIRMED. Costs against the petitioner.

b) In G.R. No. 74315, the petition is GRANTED. The questioned Resolution insofar as it denied the petitioner's motion to clarify the dispositive portion of the decision of the then Intermediate Appellate Court, now Court of Appeals is REVERSED and SET ASIDE. The decision of the appellate court is MODIFIED in that all cash and stock dividends as, well as all pre-emptive rights that have accrued and attached to the 1,500 shares in E. Razon, Inc., since 1966 are declared to belong to the estate of Juan T. Chuidian.

SO ORDERED.

Bidin, Davide, Jr. and Romero, JJ., concur.

Feliciano, J., is on leave.

Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 143340 August 15, 2001

LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners,
vs.
LAMBERTO T. CHUA, respondent.

GONZAGA-REYES, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court of the Decision¹ of the Court of Appeals dated January 31, 2000 in the case entitled "Lamberto T. Chua vs. Lilibeth Sunga Chan and Cecilia Sunga" and of the Resolution dated May 23, 2000 denying the motion for reconsideration of herein petitioners Lilibeth Sunga and Cecilia Sunga (hereafter collectively referred to as petitioners).

The pertinent facts of this case are as follows:

On June 22, 1992, Lamberto T. Chua (hereafter respondent) filed a complaint against Lilibeth Sunga Chan (hereafter petitioner Lilibeth) and Cecilia Sunga (hereafter petitioner Cecilia), daughter and wife, respectively of the deceased Jacinto L. Sunga (hereafter Jacinto), for "Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment" with the Regional Trial Court, Branch 11, Sindangan, Zamboanga del Norte.

Respondent alleged that in 1977, he verbally entered into a partnership with Jacinto in the distribution of Shellane Liquefied Petroleum Gas (LPG) in Manila. For business convenience, respondent and Jacinto allegedly agreed to register the business name of their partnership, SHELLITE GAS APPLIANCE CENTER (hereafter Shellite), under the name of Jacinto as a sole proprietorship. Respondent allegedly delivered his initial capital contribution of P100,000.00 to Jacinto while the latter in turn produced P100,000.00 as his counterpart contribution, with the intention that the profits would be equally divided between them. The partnership allegedly had Jacinto as manager, assisted by Josephine Sy (hereafter Josephine), a sister of the wife respondent, Erlinda Sy. As compensation, Jacinto would receive a manager's fee or remuneration of 10% of the gross profit and Josephine would receive 10% of the net profits, in addition to her wages and other remuneration from the business.

Allegedly, from the time that Shellite opened for business on July 8, 1977, its business operation went quite and was profitable. Respondent claimed that he could attest to success of their business because of the volume of orders and deliveries of filled Shellane cylinder tanks supplied by Pilipinas Shell Petroleum Corporation. While Jacinto furnished respondent with the merchandise inventories, balance sheets and net worth of Shellite from 1977 to 1989, respondent however suspected that the amount indicated in these documents were understated and undervalued by Jacinto and Josephine for their own selfish reasons and for tax avoidance.

Upon Jacinto's death in the later part of 1989, his surviving wife, petitioner Cecilia and particularly his daughter, petitioner Lilibeth, took over the operations, control, custody, disposition and management of Shellite without respondent's consent. Despite respondent's repeated demands upon petitioners for accounting, inventory, appraisal, winding up and restitution of his net shares in the partnership, petitioners failed to comply. Petitioner Lilibeth allegedly continued the operations of Shellite, converting to her own use and advantage its properties.

On March 31, 1991, respondent claimed that after petitioner Lilibeth ran out the alibis and reasons to evade respondent's demands, she disbursed out of the partnership funds the amount of P200,000.00 and partially paid the same to respondent. Petitioner Lilibeth allegedly informed respondent that the P200,000.00 represented partial payment of the latter's share in the partnership, with a promise that the former would make the complete inventory and winding up of the properties of the business establishment. Despite such commitment, petitioners allegedly failed to comply with their duty to account, and continued to benefit from the assets and income of Shellite to the damage and prejudice of respondent.

On December 19, 1992, petitioners filed a Motion to Dismiss on the ground that the Securities and Exchange Commission (SEC) in Manila, not the Regional Trial Court in Zamboanga del Norte had jurisdiction over the action. Respondent opposed the motion to dismiss.

On January 12, 1993, the trial court finding the complaint sufficient in from and substance denied the motion to dismiss.

On January 30, 1993, petitioners filed their Answer with Compulsory Counter-claims, contending that they are not liable for partnership shares, unreceived income/profits, interests, damages and attorney's fees, that respondent does not have a cause of action against them, and that the trial court has no jurisdiction over the nature of the action, the SEC being the agency that has original and exclusive jurisdiction over the case. As counterclaim, petitioner sought attorney's fees and expenses of litigation.

On August 2, 1993, petitioner filed a second Motion to Dismiss this time on the ground that the claim for winding up of partnership affairs, accounting and recovery of shares in partnership affairs, accounting and recovery of shares in partnership assets/properties should be dismissed and prosecuted against the estate of deceased Jacinto in a probate or intestate proceeding.

On August 16, 1993, the trial denied the second motion to dismiss for lack of merit.

On November 26, 1993, petitioners filed their Petition for Certiorari, Prohibition and Mandamus with the Court of Appeals docketed as CA-G.R. SP No. 32499 questioning the denial of the motion to dismiss.

On November 29, 1993, petitioners filed with the trial court a Motion to Suspend Pre-trial Conference.

On December 13, 1993, the trial court granted the motion to suspend pre-trial conference.

On November 15, 1994, the Court of Appeals denied the petition for lack of merit.

On January 16, 1995, this Court denied the petition for review on certiorari filed by petitioner, "as petitioners failed to show that a reversible error was committed by the appellate court."²

On February 20, 1995, entry of judgment was made by the Clerk of Court and the case was remanded to the trial court on April 26, 1995.

On September 25, 1995, the trial court terminated the pre-trial conference and set the hearing of the case of January 17, 1996. Respondent presented his evidence while petitioners were considered to have waived their right to present evidence for their failure to attend the scheduled date for reception of evidence despite notice.

On October 7, 1997, the trial court rendered its Decision ruling for respondent. The dispositive of the Decision reads:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, as follows:

(1) DIRECTING them to render an accounting in acceptable form under accounting procedures and standards of the properties, assets, income and profits of the Shellite Gas Appliance Center Since the time of death of Jacinto L. Sunga, from whom they continued the business operations including all businesses derived from Shellite Gas Appliance Center, submit an inventory, and appraisal of all these properties, assets, income, profits etc. to the Court and to plaintiff for approval or disapproval;

(2) ORDERING them to return and restitute to the partnership any and all properties, assets, income and profits they misapplied and converted to their own use and advantage the legally pertain to the plaintiff and account for the properties mentioned in pars. A and B on pages 4-5 of this petition as basis;

(3) DIRECTING them to restitute and pay to the plaintiff ½ shares and interest of the plaintiff in the partnership of the listed properties, assets and good will (sic) in schedules A, B and C, on pages 4-5 of the petition;

(4) ORDERING them to pay the plaintiff earned but unreceived income and profits from the partnership from 1988 to May 30, 1992, when the plaintiff learned of the closure of the store the sum of P35,000.00 per month, with legal rate of interest until fully paid;

(5) ORDERING them to wind up the affairs of the partnership and terminate its business activities pursuant to law, after delivering to the plaintiff all the ½ interest, shares, participation and equity in the partnership, or the value thereof in money or money's worth, if the properties are not physically divisible;

(6) FINDING them especially Lilibeth Sunga-Chan guilty of breach of trust and in bad faith and hold them liable to the plaintiff the sum of P50,000.00 as moral and exemplary damages; and,

(7) DIRECTING them to reimburse and pay the sum of P25,000.00 as attorney's (sic) and P25,000.00 as litigation expenses.

NO special pronouncements as to COSTS.

SO ORDERED."³

On October 28, 1997, petitioners filed a Notice of Appeal with the trial court, appealing the case to the Court of Appeals.

On January 31, 2000, the Court of Appeals dismissed the appeal. The dispositive portion of the Decision reads:

"WHEREFORE, the instant appeal is dismissed. The appealed decision is AFFIRMED in all respects."⁴

On May 23, 2000, the Court of Appeals denied the motion for reconsideration filed by petitioner.

Hence, this petition wherein petitioner relies upon following grounds:

"1. The Court of Appeals erred in making a legal conclusion that there existed a partnership between respondent Lamberto T. Chua and the late Jacinto L. Sunga upon the latter'' invitation and offer and that upon his death the partnership assets and business were taken over by petitioners.

2. The Court of Appeals erred in making the legal conclusion that laches and/or prescription did not apply in the instant case.

3. The Court of Appeals erred in making the legal conclusion that there was competent and credible evidence to warrant the finding of a partnership, and assuming arguendo that indeed there was a partnership, the finding of highly exaggerated amounts or values in the partnership assets and profits."⁵

Petitioners question the correctness of the finding of the trial court and the Court of Appeals that a partnership existed between respondent and Jacinto from 1977 until Jacinto's death. In the absence of any written document to show such partnership between respondent and Jacinto, petitioners argues that these courts were proscribes from hearing the testimonies of respondent and his witness, Josephine, to prove the alleged partnership three years after Jacinto's death. To support this argument, petitioners invoke the "Dead Man's Statute' or "Survivorship Rule" under Section 23, Rule 130 of the Rules of Court that provides:

"SEC. 23. Disqualification by reason of death or insanity of adverse party. – Parties or assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an executor or administrator or other representative of a deceased person, or against a person of unsound mind, upon a claim or demand against the estate of such deceased person, or against such person of unsound mind, cannot testify as to any matter of fact occurring before the death of such deceased person or before such person became of unsound mind."

Petitioners thus implore this Court to rule that the testimonies of respondent and his alter ego, Josephine, should not have been admitted to prove certain claims against a deceased person (Jacinto), now represented by petitioners.

We are not persuaded.

A partnership may be constituted in any form, except where immovable property of real rights are contributed thereto, in which case a public instrument shall necessary.⁶ Hence, based on the intention of the parties, as gathered from the facts and ascertained from their language and conduct, a verbal contract of partnership may arise.⁷ The essential profits that must be proven to that a partnership was agreed upon are (1) mutual contribution to a common stock, and (2) a joint interest in the profits.⁸ Understandably so, in view of the absence of the written contract of partnership between respondent and Jacinto, respondent resorted to the introduction of documentary and testimonial evidence to prove said partnership. The crucial issue to settle then is to whether or not the "Dead Man's Statute" applies to this case so as to render inadmissible respondent's testimony and that of his witness, Josephine.

The "Dead Man's Statute" provides that if one party to the alleged transaction is precluded from testifying by death, insanity, or other mental disabilities, the surviving party is not entitled to the undue advantage of giving his own uncontradicted and unexplained account of the transaction.⁹ But before this rule can be successfully invoked to bar the introduction of testimonial evidence, it is necessary that:

"1. The witness is a party or assignor of a party to case or persons in whose behalf a case in prosecuted.

2. The action is against an executor or administrator or other representative of a deceased person or a person of unsound mind;

3. The subject-matter of the action is a claim or demand against the estate of such deceased person or against person of unsound mind;

4. His testimony refers to any matter of fact of which occurred before the death of such deceased person or before such person became of unsound mind."¹⁰

Two reasons forestall the application of the "Dead Man's Statute" to this case.

First, petitioners filed a compulsory counterclaim¹¹ against respondents in their answer before the trial court, and with the filing of their counterclaim, petitioners themselves effectively removed this case from the ambit of the "Dead Man's Statute".¹² Well entrenched is the rule that when it is the executor or administrator or representatives of the estates that sets up the counterclaim, the plaintiff, herein respondent, may testify to occurrences before the death of the deceased to defeat the counterclaim.¹³ Moreover, as defendant in the counterclaim, respondent is not disqualified from testifying as to matters of facts occurring before the death of the deceased, said action not having been brought against but by the estate or representatives of the deceased.¹⁴

Second, the testimony of Josephine is not covered by the "Dead Man's Statute" for the simple reason that she is not "a party or assignor of a party to a case or persons in whose behalf a case is prosecuted." Records show that respondent offered the testimony of Josephine to establish the existence of the partnership between respondent and Jacinto. Petitioners' insistence that Josephine is the alter ego of respondent does not make her an assignor because the term "assignor" of a party means "assignor of a cause of action which has arisen, and not the assignor of a right assigned before any cause of action has arisen."¹⁵ Plainly then, Josephine is merely a witness of respondent, the latter being the party plaintiff.

We are not convinced by petitioners' allegation that Josephine's testimony lacks probative value because she was allegedly coerced coerced by respondent, her brother-in-law, to testify in his favor, Josephine merely declared in court that she was requested by respondent to testify and that if she were not requested to do so she would not have testified. We fail to see how we can conclude from this candid admission that Josephine's testimony is involuntary when she did not in any way categorically say that she was forced to be a witness of respondent.

Also, the fact that Josephine is the sister of the wife of respondent does not diminish the value of her testimony since relationship per se, without more, does not affect the credibility of witnesses.¹⁶

Petitioners' reliance alone on the "Dead Man's Statute" to defeat respondent's claim cannot prevail over the factual findings of the trial court and the Court of Appeals that a partnership was established between respondent and Jacinto. Based not only on the testimonial evidence, but the documentary evidence as well, the trial court and the Court of Appeals considered the evidence for respondent as sufficient to prove the formation of partnership, albeit an informal one.

Notably, petitioners did not present any evidence in their favor during trial. By the weight of judicial precedents, a factual matter like the finding of the existence of a partnership between respondent and Jacinto cannot be inquired into by this Court on review.¹⁷ This Court can no longer be tasked to go over the proofs presented by the parties and analyze, assess and weigh them to ascertain if the trial court and the appellate court were correct in according superior credit to this or that piece of evidence of one party or the other.¹⁸ It must be also pointed out that petitioners failed to attend the presentation of evidence of respondent. Petitioners cannot now turn to this Court to question the admissibility and authenticity of the documentary evidence of respondent when petitioners failed to object to the admissibility of the evidence at the time that such evidence was offered.¹⁹

With regard to petitioners' insistence that laches and/or prescription should have extinguished respondent's claim, we agree with the trial court and the Court of Appeals that the action for accounting filed by respondents three (3) years after Jacinto's death was well within the prescribed period. The Civil Code provides that an action to enforce an oral contract prescribes in six (6) years²⁰ while the right to demand an accounting for a partner's interest as against the person continuing the business accrues at the date of dissolution, in the absence of any contrary agreement.²¹ Considering that the death of a partner results in the dissolution of the partnership²², in this case, it was Jacinto's death that respondent as the surviving partner had the right to an account of his interest as against petitioners. It bears stressing that while Jacinto's death dissolved the partnership, the dissolution did not immediately terminate the partnership. The Civil Code²³ expressly provides that upon dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business, culminating in its termination.²⁴

In a desperate bid to cast doubt on the validity of the oral partnership between respondent and Jacinto, petitioners maintain that said partnership that had initial capital of P200,000.00 should have been registered with the Securities and Exchange Commission (SEC) since registration is mandated by the Civil Code, True, Article 1772 of the Civil Code requires that partnerships with a capital of P3,000.00 or more must register with the SEC, however, this registration requirement is not mandatory. Article 1768 of the Civil Code²⁵ explicitly provides that the partnership retains its juridical personality even if it fails to register. The failure to register the contract of partnership does not invalidate the same as among the partners, so long as the contract has the essential requisites, because the main purpose of registration is to give notice to third parties, and it can be assumed that the members themselves knew of the contents of their contract.²⁶ In the case at bar, non-compliance with this directory provision of the law will not invalidate the partnership considering that the totality of the evidence proves that respondent and Jacinto indeed forged the partnership in question.

WHEREFORE, in view of the foregoing, the petition is DENIED and the appealed decision is AFFIRMED.

SO ORDERED.1âwphi1.nêt

Melo, Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.

Footnotes:

¹ Per Associate Justice Delilah Vidallon-Magtolis and concurred in by Associate Justices Bernardo P. Abesamis and Mercedes Gozo-Dadole, Court of Appeals, Fourteenth Division.

² Rollo, p. 185.

³ Records, pp. 75-76; Decision, pp. 25-26.

⁴ Rollo, p. 46; Decision, p. 11.

⁵ Rollo, pp. 13-14; Petition, pp. 6-7.

⁶ JOSE C. VITUG, COMPENDIUM OF CIVIL LAW AND JURISPRUDENCE, REV. ED. (1993), p. 712.

⁷ RAMON C. AQUINO AND CAROLINA C. GRIÑO-AQUINO, THE CIVIL CODE OF THE PHILIPPINES, VOL. 3 (1990), p. 295.

⁸ ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES, VOLUME 5 (1997), p. 320.

⁹ Tan vs. Court of Appeals, 295 SCRA 247 (1998), p. 258.

¹⁰ OSCAR M. HERRERA, REMEDIAL LAW, REVISED RULES ON EVIDENCE, VOL. V (1999), pp. 308-309.

¹¹ Records, pp. 47-51.

¹² See Goni vs. Court of Appeals, 144 SCRA 222 (1986).

¹³ HERRERA, supra, p. 310.

¹⁴ Goni vs. Court of Appeals, supra, p. 233.

¹⁵ RICARDO J. FRANCISCO, EVIDENCE, THIRD EDITION (1996), p. 135.

¹⁶ People vs. Nang, 289 SCRA 16 (1998), p. 32.

¹⁷ Alicbusan vs. Court of Appeals, 269 SCRA 336, p. 341.

¹⁸ Ibid.

¹⁹ See Chua vs. Court of Appeals, 301 SCRA 356 (1999).

²⁰ "The following actions must be commenced within six years:

(1) Upon an oral contract; and

(2) Upon a quasi-contract."

²¹ Art. 1842, Civil Code:

"The right to an account of his interest shall accrue to any partner, or his legal representative as against the winding up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence of any agreement to the contrary."

²² Article 1830, Civil Code.

²³ Art. 1828. The dissolution of a partnership is the change in the relation of the partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business.

Art. 1829. On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed.

²⁴ Sy vs. Court of Appeals, 313 SCRA 328 (1999), p. 347.

²⁵ "The partnership has a juridical personality separate and distinct from that of each of the partners, even in case of failure to comply with the requirements of article 1772, first paragraph."

²⁶ TOLENTINO, supra, p. 325.

Result of Evidence Prelim Exam

Tome ;miguel 38/50

Tenorio 37

Adorable 36

Zulueta ;mayormita; manlangit; lumanta 35

Legaspi 33

Aliman 31

Ozoa 30

Flores 29

Barbaso ;lacaya; nieves;dionglay 28

Estologa 27 brasileño

Jumanquin 26

=============================cut off score

Dimpas 24

Garcia 23

Limen 22

Campomanes 20

Ebillo 18

FIRST DIVISION

[G.R. No. 80505 : December 4, 1990.]

192 SCRA 28

THE PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, vs. MARIO TANDOY y LIM, Defendant-Appellant.

D E C I S I O N

CRUZ, J.:

The decision of the Regional Trial Court of Makati, Branch 133 dated October 13, 1987, convicting Mario Tandoy of the crime of violation of Art. II, Sec. 4 of Rep. Act No. 6425 known as the Dangerous Drugs Act of 1972, is before us on appeal.

The information against the accused-appellant read as follows:

That on or about the 27th day of May 1986, in the Municipality of Makati, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused without being authorized by law, did then and there willfully, unlawfully and feloniously sell eight (8) pieces of dried marijuana flowering tops, two (2) pieces of dried marijuana flowering tops and crushed dried marijuana flowering tops, which are prohibited drug, for and in consideration of P20.00.

Upon arraignment, Tandoy entered a plea of not guilty. After trial, Judge Buenaventura J. Guerrero rendered a decision the dispositive portion of which declared:

WHEREFORE, the Court finds Mario Tandoy y Lim guilty beyond reasonable doubt of violation of Sec. 4, Art. II, Rep. Act No. 6425, as amended, and is hereby sentenced to life imprisonment and to pay a fine of P20,000.00 and cost.: nad

The marijuana confiscated in this case is declared confiscated and forfeited and ordered turned over to the Dangerous Drugs Board for proper disposal.

SO ORDERED.

The accused-appellant raises the following assignment of errors in this appeal:

1. The Court a quo erred in finding accused guilty beyond reasonable doubt of the crime charged despite lack of evidence to prove that he sold marijuana to the poseur-buyer.

2. The Court a quo erred in admitting in evidence against the accused Exh. "E-2-A" which is merely a xerox copy of the P10.00 bill allegedly used as buy-bust money.

The evidence of the prosecution may be summarized as follows:

On May 27, 1986, at about 3:30 p.m. Lt. Salido, Jr. of the Makati Police Station dispatched Pfc. Herino de la Cruz, and Detectives Pablo R. Singayan, Nicanor Candolesas, Luisito de la Cruz, Estanislao Dalumpines, Antonio Manalastas and Virgilio Padua to conduct a buy-bust operation at Solchuaga St., Barangay Singkamas, Makati.

The target area was a store along the said street, and Singayan was to pose as the buyer. He stood alone near the store waiting for any pusher to approach. The other members of the team strategically positioned themselves. Soon, three men approached Singayan. One of them was the accused-appellant, who said without preamble: "Pare, gusto mo bang umiskor?" Singayan said yes. The exchange was made then and there — two rolls/pieces of marijuana for one P10.00 and two P5.00 bills marked ANU (meaning Anti-Narcotics Unit).

The team then moved in and arrested Tandoy. Manalastas and Candolesas made a body search of the accused-appellant and took from him the marked money, as well as eight more rolls/foils of marijuana and crushed leaves.: nad

The arresting officers brought Tandoy to the Office of the Anti-Narcotics Unit, Makati Police Station, for investigation by Detective Marvin Pajilan. The accused-appellant chose to remain silent after having been informed of his constitutional rights.

These events were narrated under oath by De la Cruz, Singayan and Pajilan. 1 Microscopic, chemical and chromotographic examination was performed on the confiscated marijuana by Raquel P. Angeles, forensic chemist of the National Bureau of Investigation, who later testified that the findings were positive. The marijuana was offered as an exhibit. 2

As might be expected, the accused-appellant had a different story. His testimony was that from 1:30 to 4:00 p.m. of the day in question, he was playing "cara y cruz" with 15 other persons along Solchuaga St. when somebody suddenly said that policemen were making arrests. The players grabbed the bet money and scampered. However, he and a certain Danny (another "cara y cruz" player) were caught and taken to the Narcotics Command headquarters in Makati. There they were mauled and warned that if they did not point to their fellow pushers, they would rot in jail. The accused-appellant denied he had sold marijuana to Singayan and insisted the bills taken from him were the bet money he had grabbed at the "cara y cruz" game. 3

The trial court, which had the opportunity to observe the demeanor of the witnesses and to listen to their respective testimonies, gave more credence to the statements of the arresting officers. Applying the presumption that they had performed their duties in a regular manner, it rejected Tandoy's uncorroborated allegation that he had been manhandled and framed. Tandoy had not submitted sufficient evidence of his charges, let alone his admission that he had no quarrel with the peace officers whom he had met only on the day of his arrest.

In People v. Patog, 4 this Court held:

When there is no evidence and nothing to indicate the principal witness for the prosecution was actuated by improper motives, the presumption is that he was not so actuated and his testimony is entitled to full faith and credit.

Tandoy submits that "one will not sell this prohibited drug to another who is a total stranger until the seller is certain of the identity of the buyer."

The conjecture must be rejected.: nad

In People v. Paco, 5 this Court observed:

Drug-pushing when done on a small level as in this case belongs to that class of crimes that may be committed at anytime and at any place. After the offer to buy is accepted and the exchange is made, the illegal transaction is completed in a few minutes. The fact that the parties are in a public place and in the presence of other people may not always discourage them from pursuing their illegal trade as these factors may even serve to camouflage the same. Hence, the Court has sustained the conviction of drug pushers caught selling illegal drugs in a billiard hall (People v. Rubio, G.R. No. 66875, June 19, 1986, 142 SCRA 329; People v. Sarmiento, G.R. No. 72141, January 12, 1987, 147 SCRA 252), in front of a store (People vs. Khan, supra) along a street at 1:45 p.m. (People v. Toledo, G.R. No. 67609, November 22, 1985, 140 SCRA 259), and in front of a house (People v. Policarpio, G.R. No. 69844, February 23, 1988).

As the Court has also held, "What matters is not an existing familiarity between the buyer and the seller but their agreement and the acts constituting the sale and delivery of the marijuana leaves." 6

Under the second assigned error, the accused-appellant invokes the best evidence rule and questions the admission by the trial court of the xerox copy only of the marked P10.00 bill.

The Solicitor General, in his Comment, correctly refuted that contention thus:

This assigned error centers on the trial court's admission of the P10.00 bill marked money (Exh. E-2-A) which, according to the appellant, is excluded under the best evidence rule for being a mere xerox copy. Apparently, appellant erroneously thinks that said marked money is an ordinary document falling under Sec. 2, Rule 130 of the Revised Rules of Court which excludes the introduction of secondary evidence except in the five (5) instances mentioned therein.:-cralaw

The best evidence rule applies only when the contents of the document are the subject of inquiry. Where the issue is only as to whether or not such document was actually executed, or exists, or in the circumstances relevant to or surrounding its execution, the best evidence rule does not apply and testimonial evidence is admissible. (Cf. Moran, op. cit., pp. 76-77; 4 Martin, op. cit., p. 78.)

Since the aforesaid marked money was presented by the prosecution solely for the purpose of establishing its existence and not its contents, other substitutionary evidence, like a xerox copy thereof, is therefore admissible without the need of accounting for the original.

Moreover, the presentation at the trial of the "buy-bust money" was not indispensable to the conviction of the accused-appellant because the sale of the marijuana had been adequately proved by the testimony of the police officers. So long as the marijuana actually sold by the accused-appellant had been submitted as an exhibit, the failure to produce the marked money itself would not constitute a fatal omission.

We are convinced from the evidence on record that the prosecution has overcome the constitutional presumption of innocence in favor of the accused-appellant with proof beyond reasonable doubt of his guilt. He must therefore suffer the penalty prescribed by law for those who would visit the scourge of drug addiction upon our people.

WHEREFORE, the appeal is DISMISSED and the challenged decision AFFIRMED in toto, with costs against the accused-appellant.: nad

SO ORDERED

Narvasa (Chairman), Gancayco, Griño-Aquino and Medialdea, JJ., concur.

Endnotes

1. TSN, October 1, 1986; TSN, November 19, 1986; TSN, January 7, 1987.

2. Exhibit "D."

3. TSN, February 16, 1987, p. 6; Exhibit "E."

4. 144 SCRA 429.

5. 170 SCRA 681.

6. People v. Rodriguez y Teves, 172 SCRA 742.

Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 107606 June 20, 1996

MERCEDES N. ABELLA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and CONRADO COLARINA, respondents.

R E S O L U T I O N

FRANCISCO, J.:p

On May 26, 1987, petitioner Mercedes N. Abella, as lessor, and private respondent Conrado Colarina, as lessee, signed a contract of lease ¹ of a portion of Juanabel Building situated at Elias Angeles Street, Naga City. The duration of the contract is from "July 1, 1987 until July 1, 1991" ² or for a term of four (4) years ³ with a stipulated monthly rental of Three Thousand Pesos (P3,000.00). ⁴ Upon the signing of the contract, Colarina paid an amount of Forty Thousand Pesos (P40,000.00) to Abella which the latter acknowledged by issuing the corresponding receipt. ⁵ Intending to use the premises for his pawnshop business, Colarina introduced thereon certain improvements ⁶ for which he spent Sixty Eight Thousand Pesos (P68,000.00). Colarina paid the monthly rental on a regular basis but discontinued payment from November 1987 to April 1988. ⁷ Thereafter, Abella then made repeated demands to pay with notice of extrajudicial rescission pursuant to paragraph thirteen (13) ⁸ of the lease contract which were all unheeded. Thus, Abella took possession of the premises on May 1, 1988, with the assistance of the Naga City PNP and some Barangay officials ⁹ who made an inventory ¹⁰ of all the items found therein.

On May 5, 1988, Colarina filed an action for "enforcement of contract of lease with preliminary mandatory injunction and damages" ¹¹ against Abella before the Regional Trial Court (RTC) of Naga. After trial, the lower court among others ordered: (1) Abella to return the amount of Forty Thousand Pesos (P40,000.00) less Eighteen Thousand Pesos (P18,000.00) representing unpaid rental from November-December, 1987, to April, 1988 or for a period of six (6) months, or the sum of TWENTY TWO THOUSAND Pesos (P22,000.00) to Colarina together with the destroyed and removed materials and improvements introduced by him in the premises leased; and (2) the dismissal of the case for lack of merit. ¹²

On appeal, the respondent Court of Appeals reversed the decision of the trial court and ordered petitioner Abella: (1) to restore to Colarina the possession of the leased premises under the same terms and conditions stated in the contract of lease; (2) to restore in the premises the improvements introduced by Colarina which were demolished or removed by Abella or to pay the value thereof in the sum of P68,000.00, with interest until fully paid; and (3) to pay the costs of the Suit. ¹³ Aggrieved, Abella filed this petition for review on certiorari faulting the respondent Court of Appeals with five assigned errors which basically dwell on the following issues, to wit: (1) whether or not respondent Colarina violated the contract of lease warranting its extrajudicial rescission; and (2) whether or not possession of the premises may properly be restored to Colarina.

Anent the first issue. It is not disputed that petitioner received the sum of forty thousand pesos (P40,000.00) from Colarina. ¹⁴ Petitioner and Colarina, however, are at loggerheads with respect to the purpose of such payment. The trial court agreed with the petitioner that the amount represents only a "goodwill money" given to the latter by Colarina in payment for the privilege to occupy the vacant portion of Juanabel Building. ¹⁵ On the other hand, the respondent Court of Appeals sided with Colarina and held that the same is an "advance deposit to answer for any rental which Colarina may fail to pay." ¹⁶ We uphold the findings of the respondent Court of Appeals.

Our careful review of the record reveals that Colarina did not violate the subject contract of lease with respect to his rental obligation in view of his payment of forty thousand pesos. Reproduced hereunder are the contents of the receipt acknowledging the acceptance by the petitioner of the said amount of forty thousand pesos:

RECEIVED FROM MR. CONRADO O. COLARINA THE SUM OF FORTY THOUSAND PESOS (P40,000.00) AS ADVANCE DEPOSIT, TO ANSWER FOR ANY RENTAL WHICH MR. CONRADO COLARINA MAY FAIL TO PAY DURING THE TERM OF THE LEASE AS PER CONTRACT, DATED 26TH DAY OF MAY, 1987 NOTARIZED BEFORE NOTARY PUBLIC OSCAR VILLAMORA, DOC. NO. 398; PAGE NO. 80; BOOK NO. 9, SERIES OF 1987, THIS 26TH DAY OF MAY, 1987, AT NAGA CITY. (Emphasis supplied.)

(Sgd.) MERCEDES N. ABELLA ¹7

It is a cardinal rule in the interpretation of contracts that "if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control". ¹⁸ The above-quoted receipt is clear and unequivocal that the disputed amount is an advance deposit which will answer for any rental that Colarina may fail to pay. No amount of extrinsic aids are required and no further extraneous sources are necessary
in order to ascertain the parties' intent, determinable as it is, from the receipt itself. ¹⁹

We are, thus, more convinced that the receipt expresses truly the parties' intent on the purpose of said payment as against the oral testimony of the petitioner that said amount is but only a "goodwill money". Without any doubt, oral testimony as to a certain fact, depending as it does exclusively on human memory, is not as reliable as written or documentary evidence. ²⁰ "I would sooner trust the smallest slip of paper for truth", said Judge Limpkin of Georgia, "than the strongest and most retentive memory ever bestowed on mortal man." ²¹ This is especially true in this case where such oral testimony is given by the petitioner himself, a party to the case who has an interest in its outcome, and by Jesus Hipolito, a witness who claimed to have received a commission from the petitioner. ²² In addition, the trial court itself has found that this receipt is genuine when it brushed aside the petitioner's claim that her signature appearing thereon was a forgery. ²³ The authenticity of the receipt further enhances its probative value as against the oral testimony of the petitioner and of her witness.

We also find unmeritorious petitioner's contention that the receipt failed to reflect her true intention warranting a reformation thereof. Petitioner, being of age and a businesswoman, is presumed to have acted with due care and to have signed the receipt in question with full knowledge of its contents and import. ²⁴ Equally unmeritorious is petitioner's insistence that Colarina procured her signature "thru fraud and any other deceitful means", ²⁵ an issue which was never raised below. It is a settled rule that an issue which was not threshed out below may not be raised for the first time on appeal. Moreover, no iota of evidence was ever adduced at the trial to support her allegation of fraud. The reformation of said receipt simply lacks basis.

Hence, we rule that respondent Colarina was not yet in arrears with his rental payment when petitioner took possession of the leased premises on May 1, 1988. Accordingly, petitioner's rescission of the subject contract of lease was improper.

The second issue, however, has been rendered moot and academic by the timely expiration of the term of the subject contract of lease on July 1, 1991. ²⁶ Colarina, therefore, has no more right to be restored to the possession of the leased premises, said right being coterminous with the term of the contract.

WHEREFORE, the decision of the Court of Appeals is MODIFIED. Petitioner Mercedes N. Abella is hereby ordered to:

1. return to private respondent Conrado Colarina the amount of Forty Thousand Pesos (P40,000.00) less Eighteen Thousand Pesos (P18,000.00) (unpaid rental from November, 1987 to April, 1988 or for a period of six (6) months), or the sum of TWENTY TWO THOUSAND Pesos (P22,000.00);

2. pay private respondent Colarina the sum of Sixty Eight Thousand Pesos (P68,000.00), representing the value of the improvements demolished, with legal interest reckoned from May 1, 1988, the date when petitioner took possession of the premises, until fully paid.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Panganiban, JJ., concur.

Footnotes

1 Annex "A-1", Rollo, pp. 40-42.

2 Id., p. 40.

3 Both the RTC-Naga and the Court of Appeals' decisions stated five (5) years.

4 Annex "A-1", supra, at p. 40.

5 Annex "A-2"; Rollo, p. 43.

6 Construction of mezzanine, toilet, installation of telephone lines and electric lights: Rollo, p. 77.

7 Id; Rollo, p. 77.

8 13. That violation of LESSEE and/or their agents and employees of any terms and conditions, rules and regulations in this contract or promulgated by the LESSOR shall automatically cancel this contract without the need for any previous demand or notice or any court action for rescission or ejectment, and the LESSOR and/or her agents and employees shall have the right to enter, take immediate possession of, secure and/or padlock the premises leased and to exclude LESSEE, their agents and employees, etc. therefrom, and to retain the contents thereof, including furnitures, equipments, utensils, goods, stocks, personal belongings, appliances, . . . .

9 Petition, p. 5, Rollo, p. 11.

10 Exhibit 9.

11 Annex "A"; Rollo, pp. 36-39.

12 Decision dated April 1, 1991, RTC-Naga Branch 25, Presided by Judge Jose D. Pajarillo, p. 8; Rollo, p. 65.

13 Decision promulgated on September 30, 1992, Court of Appeals, First Division, penned by Associate Justice Jainal D. Rasul with Justices Emeterio C. Cui and Segundino G. Chua, concurring p. 6-7; Rollo, p. 80-81.

14 Pre-trial Order dated August 31, 1989, p. 1; Rollo, p. 56.

15 RTC Decision, supra, at p. 63; Petition, supra, at p. 16.

16 Court of Appeals Decision, supra, at p. 79.

17 Annex "A-2"; Rollo, p. 43.

18 Article 1370, Civil Code of the Philippines; Syquia v. Court of Appeals, 217 SCRA 624 (1993); Lufthansa German Airlines vs. Court of Appeals, 208 SCRA 708 (1992); Cachola, Jr. v. Court of Appeals, 208 SCRA 496 (1992).

19 Honrado, Jr. v. Court of Appeals, 198 SCRA 326 (1991).

20 See De Leon v. Court of Appeals, 205 SCRA 612 (1992).

21 Miller v. Cotten, 5 Ga. 341, 349.

22 Petition, supra, at p. 19.

23 RTC Decision, supra, at p. 64.

24 See BA Finance Corporation v. Intermediate Appellate Court, 217 SCRA 261 (1993); Sierra v. Court of Appeals, 211 SCRA 785 (1992); Tan Tua Sia v. Yu Biao Santua, 56 Phil. 707 (1932).

25 Memorandum for the Petitioner, p. 15; Rollo, p. 127.

26 Annex "A-1", supra, at p. 40.