UNIVERSAL FOOD CORPORATION VS. CA
de Guzman of UFC issued a
FACTS:
This is a petition for certiorari by the UFC against the CA decision of
February 13, 1968 declaring the BILL
OF ASSIGNMENT rescinded, ordering UFC to return to Magdalo
Francisco his Mafran sauce trademark and to pay his monthly salary
of P300.00 from Dec. 1, 1960 until the return to him of said trademark
and formula.
In 1938, plaintiff Magdalo V. Francisco, Sr. discovered a formula for
the manufacture of a food seasoning (sauce) derived from banana
fruits popularly known as MAFRAN sauce. It was used commercially
since 1942, and in the same year plaintiff registered his trademark in
his name as owner and inventor with the
Bureau of Patents. However, due to lack of sufficient capital to finance
the expansion of the business, in 1960, said plaintiff secured the
financial assistance of Tirso T. Reyes who, after a series of
negotiations, formed with others defendant Universal Food
Corporation eventually leading to the execution on May 11, 1960 of
the aforequoted "Bill of Assignment" (Exhibit A or 1).
On May 31, 1960, Magdalo Francisco entered into contract with UFC
stipulating among other things that he be the Chief Chemist and
Second Vice-President of UFC and shall have absolute control and
supervision over the laboratory assistants and personnel and in the
purchase and safekeeping of the chemicals used in the preparation of
said Mafran sauce and that said positions are permanent in nature.
In line with the terms and conditions of the Bill of Assignment,
Magdalo Francisco was appointed Chief Chemist with a salary of
P300.00 a month. Magdalo Francisco kept the formula of the Mafran
sauce secret to himself. Thereafter, however, due to the alleged
scarcity and high prices of raw materials, on November 28, 1960,
Secretary-Treasurer Ciriaco L.
Memorandum duly approved by the President and General Manager
Tirso T. Reyes that only Supervisor Ricardo Francisco should be
retained in the factory and that the salary of plaintiff Magdalo V.
Francisco, Sr., should be stopped for the time being until the
corporation should resume its operation. On December 3, 1960,
President and General Manager Tirso T. Reyes, issued a memorandum
to Victoriano Francisco ordering him to report to the factory and
produce "Mafran Sauce" at the rate of not less than 100 cases a day
so as to cope with the orders of the corporation's various distributors
and dealers, and with instructions to take only the necessary daily
employees without employing permanent employees. Again, on
December 6, 1961, another memorandum was issued by the same
President and General Manager instructing the Assistant Chief
Chemist Ricardo Francisco, to recall all daily employees who are
connected in the production of Mafran Sauce and also some
additional daily employees for the production of Porky Pops. On
December 29, 1960, another memorandum was issued by the
President and General Manager instructing Ricardo Francisco, as Chief
Chemist, and Porfirio Zarraga, as Acting Superintendent, to produce
Mafran Sauce and Porky Pops in full swing starting January 2, 1961
with further instructions to hire daily laborers in order to cope with
the full blast operation. Magdalo V. Francisco, Sr. received his salary
as Chief Chemist in the amount of P300.00 a month only until his
services were terminated on November 30, 1960. On January 9 and
16, 1961, UFC, acting thru its President and General Manager,
authorized Porfirio Zarraga and Paula
de Bacula to look for a buyer of the corporation including its
trademarks, formula and assets at a price of not less than
P300,000.00. Due to these successive memoranda, without plaintiff
Magdalo V. Francisco, Sr. being recalled back to work, he filed the
present action on February 14, 1961. Then in a letter dated March 20,
1961, UFC requested said plaintiff to report for duty, but the latter
declined the request because the present action was already filed in
court.
ISSUES:
1. Was the Bill of Assignment really one that involves transfer of the
formula for Mafran sauce itself?
2. Was petitioner’s contention that Magdalo Francisco is not entitled
to rescission valid?
RULING:
1. No. Certain provisions of the bill would lead one to believe that the
formula itself was transferred. To
quote, “the respondent patentee "assign, transfer and convey all its
property rights and interest over said
Mafran trademark and formula for MAFRAN SAUCE unto the Party of
the Second Part," and the last paragraph states that such "assignment,
transfer and conveyance is absolute and irrevocable (and) in no case
shall the PARTY OF THE First Part ask, demand or sue for the surrender
of its rights and interest over said MAFRAN trademark and mafran
formula."
“However, a perceptive analysis of the entire instrument and the
language employed therein would lead one to the conclusion that
what was actually ceded and transferred was only the use of the
Mafran sauce formula. This was the precise intention of the parties.”
The SC had the following reasons to back up the above conclusion.
First, royalty was paid by UFC to Magdalo Francisco. Second, the
formula of said Mafran sauce was never disclosed to anybody else.
Third, the Bill acknowledged the fact that upon dissolution of said
Corporation, the patentee rights and interests of said trademark shall
automatically revert back to Magdalo Francisco. Fourth, paragraph 3
of the Bill declared only the transfer of the use of the Mafran sauce
and not the formula itself which was admitted by UFC in its answer.
Fifth, the facts of the case undeniably show that what was transferred
was only the use. Finally, our Civil Code allows only “the least
transmission of right, hence, what better way is there to show the
least transmission of right of the transfer of the use of the transfer of
the formula itself.”
2. No. Petitioner’s contention that Magdalo Francisco’s petition for
rescission should be denied because under Article 1383 of the Civil
Code of the Philippines rescission can not be demanded except when
the party suffering damage has no other legal means to obtain
reparation, was of no merit because “it is predicated on a failure to
distinguish between a rescission for breach of contract under Article
1191 of the Civil Code and a rescission by reason of lesion or economic
prejudice, under Article 1381, et seq.” This was a case of reciprocal
obligation. Article 1191 may be scanned without disclosing anywhere
that the action for rescission thereunder was subordinated to
anything other than the culpable breach of his obligations by the
defendant. Hence, the reparation of damages for the breach was
purely secondary. Simply put, unlike Art. 1383, Art. 1191 allows both
the rescission and the payment for damages. Rescission is not given
to the party as a last resort, hence, it is not subsidiary in nature.
Oria v McMicking
Facts: Gutierrez Hermanos filed an action for recovery of a sum of
money against Oria Hermanos & Co. and herein plaintiff filed an action
for recovery also for the same defendant. Before the institution of the
suits, members of the Company dissolved their relations and entered
into a liquidation. Tomas Oria y Balbas acting in behalf of his co-
owners entered into a contract with the herein plaintiff for the
purpose of transferring and selling all the property which the Oria
Hermanos & Co. owned and among the goods stated on that
instrument was the steamship Serpantes and which the subject of this
litigation. When the Trail Court resolved the action for recovery filed
by Gutierrez Hermanos and jugdment was in his favor, The sheriff
demanded to Tomas Oria y Balbas to make payment but the latter said
there were no funds to pay the same. The sheriff then levied on the
steamer, took possession of the same and announced it for public
auction. Herein plaintiff claimed that he is the owner of the steamer
by virtue of the selling of all the properties of the said Company.
Issue(s): 1. Whether or not there was a valid sale between Oria
Hermanos & Co. to Manuel Oria y Gonzales as against the creditors of
the company.
2. Whether or not the sale was fraudulent.
Held: At the time of said sale the value of the assets of Oria Hermanos
& Co., as stated by the partners themselves, was P274,000. The
vendee of said sale was a son of Tomas Oria y Balbas and a nephew of
the other two persons heretofore mentioned which said three
brothers together constituted all of the members of said
company.The plaintiff is a young man of 25 years old and has no
property before the said selling. The court had laid down the rules in
determining whether a there has been fraud prejudicing creditors: 1)
consideration of conveyance is fictitious; 2) transfer was made while
the suit against him (Tomas Oria y Balbas) was pending; 3) sale by
insolvent debtor; 4) evidence of insolvency; 5) transfer of all
properties; 6) the sale was made between father and son; 7) and the
failure of the vendee to take exclusive possession of the property. The
case at bar shows every one of the badges of fraud.
Siguan v Lim
Facts:
A criminal case was filed against LIM with RTC-Cebu city for issuing 2
bouncing checks in the amounts of P300,000 and P241,668,
respectively to Siguan. Meanwhile, on 2 July 1991, a Deed of Donation
conveying the following parcels of land and purportedly executed by
LIM on 10August 1989 in favor of her children, Linde, Ingrid and Neil,
was registered with the Office of the Register of Deeds of Cebu City.
New transfer certificates of title were thereafter issued in the names
of the donees. On 23 June 1993, petitioner filed an
accion pauliana
against LIM and her children before RTC-Cebu City to rescind the
questioned Deed of Donation and to declare as null and void the new
transfer certificates of title issued for the lots covered by the
questioned Deed.
Petitioner’s contention: claimed therein that sometime in July 1991,
LIM, through a Deed of Donation, fraudulently transferred all her real
property to her children in bad faith and in fraud of creditors, including
her; that LIM conspired and confederated with her children in
antedating the questioned Deed of Donation, to petitioner's and other
creditors' prejudice; and that LIM, at the time of the fraudulent
conveyance, left no sufficient properties to pay her obligations.
LIM’s contention:
As regards the questioned Deed of Donation, LIM maintained that it
was not antedated but was made in good faith at a time when she had
sufficient property. Finally, she alleged that the Deed of Donation was
registered only on 2 July 1991because she was seriously ill.
Issue:
Whether the Deed of Donation executed by Rosa Lim (LIM) in favor of
her children be rescinded for being in fraud of petitioner Maria
Antonia Siguan?
Ruling:
Even assuming arguendo that petitioner became a creditor of LIM
prior to the celebration of the contract of donation, still her action for
rescission would not fare well because the third requisite was not met.
Under Article 1381 of the Civil Code, contracts entered into in fraud
of creditors may be rescinded only when the creditors cannot in any
manner collect the claims due them. Also, Article1383 of the same
Code provides that the action for rescission is but a subsidiary remedy
which cannot be instituted except when the party suffering damage
has no other legal means to obtain reparation for the same.
The term "subsidiary remedy" has been defined as "the exhaustion of
all remedies by the prejudiced creditor to collect claims due him
before rescission is resorted to." It is therefore, "essential that the
party asking for rescission prove that he has exhausted all other legal
means to obtain satisfaction of his claim.
Petitioner neither alleged nor proved that she did so. On this score,
her action for the rescission of the questioned deed is not
maintainable even if the fraud charged actually did exist.
" - CA ruled the same. BUT it then reversed itself upon petition and said
Suntay v CA
FACTS
- Federico Suntay is a wealthy land owner and rice miller from Bulacan.
He owned a 5,118 square-meter land in Bulacan. On it was a rica mill,
a warehouse and other improvements.
- Federico applied as a miller-contractor of the then National Rice and
Com Corporation (NARIC). His application was prepared by his
nephew lawyer Rafael Suntay. But it was disapproved because at that
time he was tied up w/ several unpaid loans.
- For purposes of circumvention, he had thought of allowing Rafael to
make the application for him. Rafael prepared an absolute deed of
sale whereby Federico, for and in consideration of P20, 000.00
conveyed to Rafael said parcel of land with all its existing structures.
- Federico claims that the sale was merely fictitious/simulated and has
been executed only for purposes of accommodation.
- Less than three months after this conveyance, Rafael sold it back to
Federico for the same amount of P20,000. It was notarized by Atty.
Herminio V. Flores.
- However, the said document was not the said deed of sale but a
certain "real estate mortgage of a parcel of land to secure a loan of
P3,500.00 in favor of the Hagonoy Rural Bank. It could not be found in
the notarial register as well
- Federico through his new counsel requested that Rafael have TCT
No. T-36714 so that he can have the counter deed of sale in favor
registered in his. But the request was turned down.
- So Federico’s counsel filed a case in the CFI. The trial court upheld
the validity and genuineness of the deed of sale executed by Federico
in favor of Rafael, but it ruled that the counter-deed, executed by
Rafael in favor of Federico, was simulated and without consideration,
hence, null and void ab initio. (it was not dated, not notarized and
above all it has no consideration because plaintiff did not pay
defendant the consideration of the sale in the sum of P20,000.00)
that the first Deed of Sale was a mere accommodation arrangement
executed without any consideration and therefore a simulated
contract of sale. Considering the ff. circumstances:
> The 2 instruments were executed closely one after the other
> The close relationship between the parties
>the value and location of the property purportedly sold. (P20, 000)
> Rafael also never assumed ownership nor did he gather any benefit.
- Rafael Suntay on the other hand insists that the transaction was a
veritable sale.
ISSUE
WON the deed of sale executed in favor of Rafael Suntay was valid
HELD
NO
Reasoning The history and relationship of trust, interdependence and
intimacy between the late Rafael and Federico is an unmistakable
token of simulation. It has been observed that fraud is generally
accompanied by trust.
- The late Rafael insisted that the sale to him of his uncle's property
was in fact a "dacion en pago" in satisfaction of Federico's unpaid
attorney's fees. But such claim cannot prosper. He did not even tell
Federico that he considered such to be his fee. Federico was also
liquid enough to pay him.
- All circumstances point to the conclusion that such was simulated
transaction.
Ratio A contract of purchase and sale is void and produces no effect
whatsoever where the same is without cause or consideration in that
the purchase price, which appears thereon as paid, has in fact never
been paid by the purchaser to the vendor two veritable legal
presumptions: first, that there was sufficient consideration for the
contract and, second, that it was the result of a fair and regular private
transaction. These presumptions if shown to hold, infer prima facie
the transaction’s validity, except that it must yield to the evidence
adduced.
Disposition WHEREFORE, the Amended Decision promulgated by the
Court of Appeals on December 15, 1993 in CA-G.R. CV No. 08179 is
hereby AFFIRMED IN TOTO.