April 2, 1951

G.R. No. L-3404

ANGELA I. TUASON, plaintiff-appellant,
vs.
ANTONIO TUASON, JR., and GREGORIO ARANETA, INC., defendantsFACTS: In 1941 the sisters Angela I. Tuason and Nieves Tuason de Barreto and their brother Antonio Tuason
Jr., held a parcel of land with an area of 64,928.6 sq. m. covered by Certificate of Title No. 60911 in Sampaloc,
Manila, in common, each owning an undivided 1/3 portion
The share of Nieves was sold to Gregorio Araneta Inc., a domestic corporation, and a new Certificate of Title No.
61721 was issued in lieu of the old title No. 60911 covering the same property. The three co-owners agreed to
have the whole parcel subdivided into small lots and then sold, the proceeds of the sale to be later divided among
them.
Before, during and after the execution of this contract , Atty. J. Antonio Araneta was acting as the attorney-in-fact
and lawyer of the two co-owners, Angela I. Tuason and her brother Antonio Tuason Jr. At the same time he was a
member of the Board of Director of the third co-owner, Araneta, Inc.
On September 16, 1944, Angela I. Tuason revoked the powers conferred on her attorney-in-fact and lawyer, J.
Antonio Araneta because of alleged breach of the terms of the "Memorandum of Agreement" and abuse of
powers granted to it in the document, she had decided to rescind said contract and she asked that the property
held in common be partitioned. Later, Angela filed a complaint in the Court of First Instance of Manila asking
the court to order the partition of the property in question and that she be given 1/3 of the same including rents
collected during the time that the same including rents collected during the time that Araneta Inc., administered
said property.
The suit was administered principally against Araneta, Inc. Plaintiff's brother, Antonio Tuason Jr., one of the coowners evidently did not agree to the suit and its purpose, for he joined Araneta, Inc. as a co-defendant.however
the court dismissed the complaint without pronouncement as to costs. The plaintiff appealed from that decision.
Some of the reasons advanced by appellant to have the memorandum contract (Exh. 6) declared null and void or
rescinded are that she had been tricked into signing it; that she was given to understand by Antonio Araneta
acting as her attorney-in-fact and legal adviser that said contract would be similar to another contract of
subdivision of a parcel into lots and the sale thereof entered into by Gregorio Araneta Inc., that the defendant
company has violated the terms of the contract by not previously showing her the plans of the subdivision, the
schedule of prices and conditions of the sale, in not introducing the necessary improvements into the land and in
not delivering to her her share of the proceeds of the rents and sales.

ISSUE: Whether or not the contract should be declared null and void because its terms, particularly paragraphs
9, 11 and 15 which violate the provisions of Art. 400 of the Civil Code
RULING:
ART. 400. No co-owner shall be obliged to remain a party to the community. Each may, at any time, demand the
partition of the thing held in common.
Nevertheless, an agreement to keep the thing undivided for a specified length of time, not exceeding ten years,
shall be valid. This period may be a new agreement.
We agree with the trial court that the provisions of Art. 400 of the Civil Code are not applicable. The contract far
from violating the legal provision that forbids a co-owner being obliged to remain a party to the community,
precisely has for its purpose and object the dissolution of the co-ownership and of the community by selling the
parcel held in common and dividing the proceeds of the sale among the co-owners. The obligation imposed in
the contract to preserve the co-ownership until all the lots shall have been sold, is a mere incident to the main
object of dissolving the co-owners. By virtue of the document, the parties thereto practically and substantially
entered into a contract of partnership as the best and most expedient means of eventually dissolving the coownership, the life of said partnership to end when the object of its creation shall have been attained.
Looking at the case from a practical standpoint as did the trial court, we find no valid ground for the partition
insisted upon the appellant.
In view of the foregoing, the decision appealed from is hereby affirmed. There is no pronouncement as to costs.

Full text
PhilippineLaw.info Jurisprudence 1951 April
PhilippineLaw.info Jurisprudence Phil. Rep. Vol. 88

G.R. No. L-3404, Tuason v. Tuason and

Gregorio Araneta Inc., 88 Phil. 428
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
April 2, 1951
G.R. No. L-3404
ANGELA I. TUASON, plaintiff-appellant,
vs.
ANTONIO TUASON, JR., and GREGORIO ARANETA, INC., defendantsappellees.
Alcuaz & Eiguren for appellant.
Araneta & Araneta for appellees.
MONTEMAYOR, J.:
In 1941 the sisters Angela I. Tuason and Nieves Tuason de Barreto and their
brother Antonio Tuason Jr., held a parcel of land with an area of 64,928.6 sq. m.
covered by Certificate of Title No. 60911 in Sampaloc, Manila, in common, each
owning an undivided 1/3 portion. Nieves wanted and asked for a partition of the
common property, but failing in this, she offered to sell her 1/3 portion. The
share of Nieves was offered for sale to her sister and her brother but both
declined to buy it. The offer was later made to their mother but the old lady
also declined to buy, saying that if the property later increased in value, she
might be suspected of having taken advantage of her daughter. Finally, the
share of Nieves was sold to Gregorio Araneta Inc., a domestic corporation, and
a new Certificate of Title No. 61721 was issued in lieu of the old title No. 60911
covering the same property. The three co-owners agreed to have the whole
parcel subdivided into small lots and then sold, the proceeds of the sale to be
later divided among them. This agreement is embodied in a document (Exh. 6)
entitled "Memorandum of Agreement" consisting of ten pages, dated June 30,
1941.

Before, during and after the execution of this contract (Exh. 6), Atty. J. Antonio
Araneta was acting as the attorney-in-fact and lawyer of the two co-owners,
Angela I. Tuason and her brother Antonio Tuason Jr. At the same time he was a
member of the Board of Director of the third co-owner, Araneta, Inc.
The pertinent terms of the contract (Exh. 6) may be briefly stated as follows:
The three co-owners agreed to improve the property by filling it and
constructing roads and curbs on the same and then subdivide it into small lots
for sale. Araneta Inc. was to finance the whole development and subdivision; it
was prepare a schedule of prices and conditions of sale, subject to the subject
to the approval of the two other co-owners; it was invested with authority to
sell the lots into which the property was to be subdivided, and execute the
corresponding contracts and deeds of sale; it was also to pay the real estate
taxes due on the property or of any portion thereof that remained unsold, the
expenses of surveying, improvements, etc., all advertising expenses, salaries of
personnel, commissions, office and legal expenses, including expenses in
instituting all actions to eject all tenants or occupants on the property; and it
undertook the duty to furnish each of the two co-owners, Angela and Antonio
Tuason, copies of the subdivision plans and the monthly sales and rents and
collections made thereon. In return for all this undertaking and obligation
assumed by Araneta Inc., particularly the financial burden, it was to receive 50
per cent of the gross selling price of the lots, and any rents that may be
collected from the property, while in the process of sale, the remaining 50 per
cent to be divided in equal portions among the three co-owners so that each
will receive 16.33 per cent of the gross receipts.
Because of the importance of paragraphs 9, 11 and 15 of the contract (Exh. 6),
for purposes of reference we are reproducing them below:
(9) This contract shall remain in full force and effect during all the time that it
may be necessary for the PARTY OF THE SECOND PART to fully sell the said
property in small and subdivided lots and to fully collect the purchase prices
due thereon; it being understood and agreed that said lots may be rented while
there are no purchasers thereof;
(11) The PARTY OF THE SECOND PART (meaning Araneta Inc.) is hereby given
full power and authority to sign for and in behalf of all the said co-owners of
said property all contracts of sale and deeds of sale of the lots into which this

property might be subdivided; the powers herein vested to the PARTY OF THE
SECOND PART may, under its own responsibility and risk, delegate any of its
powers under this contract to any of its officers, employees or to third persons;
(15) No co-owner of the property subject-matter of this contract shall sell,
alienate or dispose of his ownership, interest or participation therein without
first giving preference to the other co-owners to purchase and acquire the same
under the same terms and conditions as those offered by any other prospective
purchaser. Should none of the co-owners of the property subject-matter of this
contract exercise the said preference to acquire or purchase the same, then
such sale to a third party shall be made subject to all the conditions, terms, and
dispositions of this contract; provided, the PARTIES OF THE FIRST PART
(meaning Angela and Antonio) shall be bound by this contract as long as the
PARTY OF THE SECOND PART, namely, the GREGORIO ARANETA, INC. is
controlled by the members of the Araneta family, who are stockholders of the
said corporation at the time of the signing of this contract and/or their lawful
heirs;
On September 16, 1944, Angela I. Tuason revoked the powers conferred on her
attorney-in-fact and lawyer, J. Antonio Araneta. Then in a letter dated October
19, 1946, Angela notified Araneta, Inc. that because of alleged breach of the
terms of the "Memorandum of Agreement" (Exh. 6) and abuse of powers
granted to it in the document, she had decided to rescind said contract and she
asked that the property held in common be partitioned. Later, on November 20,
1946, Angela filed a complaint in the Court of First Instance of Manila asking the
court to order the partition of the property in question and that she be given
1/3 of the same including rents collected during the time that the same
including rents collected during the time that Araneta Inc., administered said
property.
The suit was administered principally against Araneta, Inc. Plaintiff's brother,
Antonio Tuason Jr., one of the co-owners evidently did not agree to the suit and
its purpose, for he evidently did not agree to the suit and its purpose, for he
joined Araneta, Inc. as a co-defendant. After hearing and after considering the
extensive evidence introduce, oral and documentary, the trial court presided
over by Judge Emilio Pea in a long and considered decision dismissed the
complaint without pronouncement as to costs. The plaintiff appealed from that

decision, and because the property is valued at more than P50,000, the appeal
came directly to this Court.
Some of the reasons advanced by appellant to have the memorandum contract
(Exh. 6) declared null and void or rescinded are that she had been tricked into
signing it; that she was given to understand by Antonio Araneta acting as her
attorney-in-fact and legal adviser that said contract would be similar to another
contract of subdivision of a parcel into lots and the sale thereof entered into by
Gregorio Araneta Inc., and the heirs of D. Tuason, Exhibit "L", but it turned out
that the two contracts widely differed from each other, the terms of contract
Exh. "L" being relatively much more favorable to the owners therein the less
favorable to Araneta Inc.; that Atty. Antonio Araneta was more or less
disqualified to act as her legal adviser as he did because he was one of the
officials of Araneta Inc., and finally, that the defendant company has violated
the terms of the contract (Exh. 6) by not previously showing her the plans of
the subdivision, the schedule of prices and conditions of the sale, in not
introducing the necessary improvements into the land and in not delivering to
her her share of the proceeds of the rents and sales.
We have examined Exh. "L" and compared the same with the contract (Exh. 6)
and we agree with the trial court that in the main the terms of both contracts
are similar and practically the same. Moreover, as correctly found by the trial
court, the copies of both contracts were shown to the plaintiff Angela and her
husband, a broker, and both had every opportunity to go over and compare
them and decide on the advisability of or disadvantage in entering into the
contract (Exh. 6); that although Atty. Antonio Araneta was an official of the
Araneta Inc.; being a member of the Board of Directors of the Company at the
time that Exhibit "6" was executed, he was not the party with which Angela
contracted, and that he committed no breach of trust. According to the
evidence Araneta, the pertinent papers, and sent to her checks covering her
receive the same; and that as a matter of fact, at the time of the trial, Araneta
Inc., had spent about P117,000 in improvement and had received as proceeds
on the sale of the lots the respectable sum of P1,265,538.48. We quote with
approval that portion of the decision appealed from on these points:
The evidence in this case points to the fact that the actuations of J. Antonio
Araneta in connection with the execution of exhibit 6 by the parties, are above

board. He committed nothing that is violative of the fiduciary relationship

existing between him and the plaintiff. The act of J. Antonio Araneta in giving
the plaintiff a copy of exhibit 6 before the same was executed, constitutes a full
disclosure of the facts, for said copy contains all that appears now in exhibit 6.
Plaintiff charges the defendant Gregorio Araneta, Inc. with infringing the terms
of the contract in that the defendant corporation has failed (1) to make the
necessary improvements on the property as required by paragraphs 1 and 3 of
the contract; (2) to submit to the plaintiff from time to time schedule of prices
and conditions under which the subdivided lots are to be sold; and to furnish
the plaintiff a copy of the subdivision plans, a copy of the monthly gross
collections from the sale of the property.
The Court finds from the evidence that he defendant Gregorio Araneta,
Incorporated has substantially complied with obligation imposed by the
contract exhibit 6 in its paragraph 1, and that for improvements alone, it has
disbursed the amount of P117,167.09. It has likewise paid taxes, commissions
and other expenses incidental to its obligations as denied in the agreement.
With respect to the charged that Gregorio Araneta, Incorporated has failed to
submit to plaintiff a copy of the subdivision plains, list of prices and the
conditions governing the sale of subdivided lots, and monthly statement of
collections form the sale of the lots, the Court is of the opinion that it has no
basis. The evidence shows that the defendant corporation submitted to the
plaintiff periodically all the data relative to prices and conditions of the sale of
the subdivided lots, together with the amount corresponding to her. But without
any justifiable reason, she refused to accept them. With the indifferent attitude
adopted by the plaintiff, it was thought useless for Gregorio Araneta,
Incorporated to continue sending her statement of accounts, checks and other
things. She had shown on various occasions that she did not want to have any
further dealings with the said corporation. So, if the defendant corporation
proceeded with the sale of the subdivided lots without the approval of the
plaintiff, it was because it was under the correct impression that under the
contract exhibit 6 the decision of the majority co-owners is binding upon all the
three.
The Court feels that recission of the contract exhibit 6 is not minor violations of
the terms of the agreement, the general rule is that "recission will not be

permitted for a slight or casual breach of the contract, but only for such
breaches as are so substantial and fundamental as to defeat the object of the
parties in making the agreement" (Song Fo & Co. vs. Hawaiian-Philippine Co.,
47 Phil. 821).
As regards improvements, the evidence shows that during the Japanese
occupation from 1942 and up to 1946, the Araneta Inc. although willing to fill
the land, was unable to obtain the equipment and gasoline necessary for filling
the low places within the parcel. As to sales, the evidence shows that Araneta
Inc. purposely stopped selling the lots during the Japanese occupantion,
knowing that the purchase price would be paid in Japanese military notes; and
Atty. Araneta claims that for this, plaintiff should be thankfull because otherwise
she would have received these notes as her share of the receipts, which
currency later became valueles.
But the main contention of the appellant is that the contract (Exh. 6) should be
declared null and void because its terms, particularly paragraphs 9, 11 and 15
which we have reproduced, violate the provisions of Art. 400 of the Civil Code,
which for the purposes of reference we quote below:
ART. 400. No co-owner shall be obliged to remain a party to the community.
Each may, at any time, demand the partition of the thing held in common.
Nevertheless, an agreement to keep the thing undivided for a specified length
of time, not exceeding ten years, shall be valid. This period may be a new
agreement.
We agree with the trial court that the provisions of Art. 400 of the Civil Code are
not applicable. The contract (Exh., 6) far from violating the legal provision that
forbids a co-owner being obliged to remain a party to the community, precisely
has for its purpose and object the dissolution of the co-ownership and of the
community by selling the parcel held in common and dividing the proceeds of
the sale among the co-owners. The obligation imposed in the contract to
preserve the co-ownership until all the lots shall have been sold, is a mere
incident to the main object of dissolving the co-owners. By virtue of the
document Exh. 6, the parties thereto practically and substantially entered into a
contract of partnership as the best and most expedient means of eventually
dissolving the co-ownership, the life of said partnership to end when the object
of its creation shall have been attained.

This aspect of the contract is very similar to and was perhaps based on the
other agreement or contract (Exh. "L") referred to by appellant where the
parties thereto in express terms entered into partnership, although this object is
not expressed in so many words in Exh. 6. We repeat that we see no violation of
Art. 400 of the Civil Code in the parties entering into the contract (Exh. 6) for
the very reason that Art. 400 is not applicable.
Looking at the case from a practical standpoint as did the trial court, we find no
valid ground for the partition insisted upon the appellant. We find from the
evidence as was done by the trial court that of the 64,928.6 sq. m. which is the
total area of the parcel held in common, only 1,600 sq. m. or 2.5 per cent of the
entire area remained unsold at the time of the trial in the year 1947, while the
great bulk of 97.5 per cent had already been sold. As well observed by the
court below, the partnership is in the process of being dissolved and is about to
be dissolved, and even assuming that Art. 400 of the Civil Code were
applicable, under which the parties by agreement may agree to keep the thing
undivided for a period not exceeding 10 years, there should be no fear that the
remaining 1,600 sq. m. could not be disposed of within the four years left of the
ten-years period fixed by Art. 400.
We deem it unnecessary to discuss and pass upon the other points raised in the
appeal and which counsel for appellant has extensively and ably discussed,
citing numerous authorities. As we have already said, we have viewed the case
from a practical standpoint, brushing aside technicalities and disregarding any
minor violations of the contract, and in deciding the case as we do, we are fully
convinced that the trial court and this Tribunal are carrying out in a practical
and expeditious way the intentions and the agreement of the parties contained
in the contract (Exh. 6), namely, to dissolve the community and co-ownership,
in a manner most profitable to the said parties.
In view of the foregoing, the decision appealed from is hereby affirmed. There is
no pronouncement as to costs.
So ordered.