FIRST DIVISION (1) P336,375.

00 representing [the spouses Carandang's] loan to

de Guzman;
[G.R. No. 160347. November 29, 2006.] (2) interest on the preceding amount at the rate of twelve
percent (12%) per annum from June 5, 1992 when this complaint was led
ARCADIO and MARIA LUISA CARANDANG , petitioners, vs . HEIRS OF until the principal amount shall have been fully paid;
QUIRINO A. DE GUZMAN, namely: MILAGROS DE GUZMAN, VICTOR
(3) P20,000.00 as attorney's fees;
DE GUZMAN, REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and
QUIRINO DE GUZMAN, JR. , respondents. (4) Costs of suit. DTcASE

The spouses Carandang appealed the RTC Decision to the Court of Appeals,
DECISION which affirmed the same in the 22 April 2003 assailed Decision:
WHEREFORE, in view of all the foregoing the assailed Decision is hereby
AFFIRMED. No costs. 2
CHICO-NAZARIO , J : p

The Motion for Reconsideration led by the spouses Carandang was similarly
This is a Petition for Review on Certiorari assailing the Court of Appeals Decision denied by the Court of Appeals in the 6 October 2003 assailed Resolution:
1 and Resolution a rming the Regional Trial Court (RTC) Decision rendering herein
WHEREFORE, in view thereof, the motion for reconsideration is hereby
petitioners Arcadio and Luisa Carandang [hereinafter referred to as spouses
DENIED and our Decision of April 22, 2003, which is based on applicable law and
Carandang] jointly and severally liable for their loan to Quirino A. de Guzman. jurisprudence on the matter is hereby AFFIRMED and REITERATED. 3
The Court of Appeals summarized the facts as follows:
The spouses Carandang then led before this Court the instant Petition for
[Quirino de Guzman] and [the Spouses Carandang] are stockholders as Review on Certiorari, bringing forth the following issues:
well as corporate o cers of Mabuhay Broadcasting System (MBS for brevity),
with equities at fifty four percent (54%) and forty six percent (46%) respectively. I.

On November 26, 1983, the capital stock of MBS was increased, from WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
P500,000 to P1.5 million and P345,000 of this increase was subscribed by [the MANIFEST ERROR IN FAILING TO STRICTLY COMPLY WITH SECTION 16, RULE 3
spouses Carandang]. Thereafter, on March 3, 1989, MBS again increased its OF THE 1997 RULES OF CIVIL PROCEDURE.
capital stock, from P1.5 million to P3 million, [the spouses Carandang] yet again
II.
subscribed to the increase. They subscribed to P93,750 worth of newly issued
capital stock. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
ITS FINDING THAT THERE IS AN ALLEGED LOAN FOR WHICH PETITIONERS ARE
[De Guzman] claims that, part of the payment for these subscriptions were
LIABLE, CONTRARY TO EXPRESS PROVISIONS OF BOOK IV, TITLE XI, OF THE
paid by him, P293,250 for the November 26, 1983 capital stock increase and
NEW CIVIL CODE PERTAINING TO LOANS.
P43,125 for the March 3, 1989 Capital Stock increase or a total of P336,375.
Thus, on March 31, 1992, [de Guzman] sent a demand letter to [the spouses III.
Carandang] for the payment of said total amount.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
[The spouses Carandang] refused to pay the amount, contending that a FINDING THAT THE RESPONDENTS WERE ABLE TO DISCHARGE THEIR BURDEN
pre-incorporation agreement was executed between [Arcadio Carandang] and [de OF PROOF, IN COMPLETE DISREGARD OF THE REVISED RULES ON EVIDENCE.
Guzman], whereby the latter promised to pay for the stock subscriptions of the
former without cost, in consideration for [Arcadio Carandang's] technical IV.
expertise, his newly purchased equipment, and his skill in repairing and upgrading
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
radio/communication equipment therefore, there is no indebtedness on their part
REVERSIBLE ERROR WHEN IT FAILED TO APPLY SECTIONS 2 AND 7, RULE 3 OF
[sic].
THE 1997 RULES OF CIVIL PROCEDURE.
On June 5, 1992, [de Guzman] led his complaint, seeking to recover the
V.
P336,375 together with damages. After trial on the merits, the trial court disposed
of the case in this wise: WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
FINDING THAT THE PURPORTED LIABILITY OF PETITIONERS ARE JOINT AND
"WHEREFORE, premises considered, judgment is hereby rendered in
SOLIDARY, IN VIOLATION OF ARTICLE 1207 OF THE NEW CIVIL CODE. 4
favor of [de Guzman]. Accordingly, [the spouses Carandang] are ordered to
jointly and severally pay [de Guzman], to wit: Whether or not the RTC Decision is void
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 for failing to comply with Section 16, Rule In the cases cited by the spouses Carandang, we held that there had been no
3 of the Rules of Court valid substitution by the heirs of the deceased party, and therefore the judgment cannot
The spouses Carandang claims that the Decision of the RTC, having been be made binding upon them. In the case at bar, not only do the heirs of de Guzman
rendered after the death of Quirino de Guzman, is void for failing to comply with Section interpose no objection to the jurisdiction of the court over their persons; they are
16, Rule 3 of the Rules of Court, which provides: actually claiming and embracing such jurisdiction. In doing so, their waiver is not even
merely implied (by their participation in the appeal of said Decision), but express (by
SEC. 16. Death of party; duty of counsel. — Whenever a party to a their explicit espousal of such view in both the Court of Appeals and in this Court). The
pending action dies, and the claim is not thereby extinguished, it shall be the duty heirs of de Guzman had no objection to being bound by the Decision of the RTC. DaScHC

of his counsel to inform the court within thirty (30) days after such death of the
Thus, lack of jurisdiction over the person, being subject to waiver, is a personal
fact thereof, and to give the name and address of his legal representative or
representatives. Failure of counsel to comply with this duty shall be a ground for
defense which can only be asserted by the party who can thereby waive it by silence.
disciplinary action. It also pays to look into the spirit behind the general rule requiring a formal
substitution of heirs. The underlying principle therefor is not really because substitution
The heirs of the deceased may be allowed to be substituted for the
of heirs is a jurisdictional requirement, but because non-compliance therewith results in
deceased, without requiring the appointment of an executor or administrator and
the undeniable violation of the right to due process of those who, though not duly
the court may appoint a guardian ad litem for the minor heirs.
noti ed of the proceedings, are substantially affected by the decision rendered therein.
The court shall forthwith order the legal representative or representatives to 1 2 Such violation of due process can only be asserted by the persons whose rights are
appear and be substituted within a period of thirty (30) days from notice. claimed to have been violated, namely the heirs to whom the adverse judgment is
sought to be enforced.
If no legal representative is named by the counsel for the deceased party,
or if the one so named shall fail to appear within the speci ed period, the court Care should, however, be taken in applying the foregoing conclusions. In People
may order the opposing party, within a speci ed time, to procure the appointment v. Florendo , 1 3 where we likewise held that the proceedings that took place after the
of an executor or administrator for the estate of the deceased and the latter shall death of the party are void, we gave another reason for such nullity: "the attorneys for
immediately appear for and on behalf of the deceased. The court charges in the offended party ceased to be the attorneys for the deceased upon the death of the
procuring such appointment, if defrayed by the opposing party, may be recovered latter, the principal . . . ." Nevertheless, the case at bar had already been submitted for
as costs. decision before the RTC on 4 June 1998, several months before the passing away of de
Guzman on 19 February 1999. Hence, no further proceedings requiring the appearance
The spouses Carandang posits that such failure to comply with the above rule
of de Guzman's counsel were conducted before the promulgation of the RTC Decision.
renders void the decision of the RTC, in adherence to the following pronouncements in
Consequently, de Guzman's counsel cannot be said to have no authority to appear in
Vda. de Haberer v. Court of Appeals 5 and Ferreria v. Vda. de Gonzales 6 :
trial, as trial had already ceased upon the death of de Guzman.
Thus, it has been held that when a party dies in an action that survives and In sum, the RTC Decision is valid despite the failure to comply with Section 16,
no order is issued by the court for the appearance of the legal representative or of Rule 3 of the Rules of Court, because of the express waiver of the heirs to the
the heirs of the deceased in substitution of the deceased, and as a matter of fact jurisdiction over their persons, and because there had been, before the promulgation of
no substitution has ever been effected, the trial held by the court without such the RTC Decision, no further proceedings requiring the appearance of de Guzman's
legal representatives or heirs and the judgment rendered after such trial are null
counsel.
and void because the court acquired no jurisdiction over the persons of the legal
representatives or of the heirs upon whom the trial and judgment would be Before proceeding with the substantive aspects of the case, however, there is
binding. 7 still one more procedural issue to tackle, the fourth issue presented by the spouses
Carandang on the non-inclusion in the complaint of an indispensable party.
In the present case, there had been no court order for the legal
representative of the deceased to appear, nor had any such legal representative Whether or not the RTC should have
appeared in court to be substituted for the deceased; neither had the complainant dismissed the case for failure to state a
ever procured the appointment of such legal representative of the deceased, cause of action, considering that Milagros
including appellant, ever asked to be substituted for the deceased. As a result, no de Guzman, allegedly an indispensable
valid substitution was effected, consequently, the court never acquired jurisdiction party, was not included as a party-
over appellant for the purpose of making her a party to the case and making the plaintiff
decision binding upon her, either personally or as a representative of the estate of
her deceased mother. 8
The spouses Carandang claim that, since three of the four checks used to pay
their stock subscriptions were issued in the name of Milagros de Guzman, the latter
However, unlike jurisdiction over the subject matter which is conferred by law should be considered an indispensable party. Being such, the spouses Carandang
and is not subject to the discretion of the parties, 9 jurisdiction over the person of the claim, the failure to join Mrs. de Guzman as a party-plaintiff should cause the dismissal
parties to the case may be waived either expressly or impliedly. 1 0 Implied waiver of the action because "(i)f a suit is not brought in the name of or against the real party in
comes in the form of either voluntary appearance or a failure to object. 1 1 interest, a motion to dismiss may be led on the ground that the complaint states no
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 cause of action." 1 4 There being no evidence to the contrary, such presumption subsists. As such, Quirino
The Court of Appeals held: de Guzman, being a co-owner of speci c partnership property, 2 2 is certainly a real
party in interest. Dismissal on the ground of failure to state a cause of action, by reason
We disagree. The joint account of spouses Quirino A de Guzman and that the suit was allegedly not brought by a real party in interest, is therefore
Milagros de Guzman from which the four (4) checks were drawn is part of their unwarranted.
conjugal property and under both the Civil Code and the Family Code the husband
So now we come to the discussion concerning indispensable and necessary
alone may institute an action for the recovery or protection of the spouses'
conjugal property.
parties. When an indispensable party is not before the court, the action should likewise
be dismissed. 2 3 The absence of an indispensable party renders all subsequent
Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held that actuations of the court void, for want of authority to act, not only as to the absent
". . . Under the New Civil Code, the husband is the administrator of the conjugal parties but even as to those present. 2 4 On the other hand, the non-joinder of necessary
partnership. In fact, he is the sole administrator, and the wife is not entitled as a parties do not result in the dismissal of the case. Instead, Section 9, Rule 3 of the Rules
matter of right to join him in this endeavor. The husband may defend the conjugal of Court provides for the consequences of such non-joinder:
partnership in a suit or action without being joined by the wife. . . . Under the
Family Code, the administration of the conjugal property belongs to the husband Sec. 9. Non-joinder of necessary parties to be pleaded. — Whenever in
and the wife jointly. However, unlike an act of alienation or encumbrance where any pleading in which a claim is asserted a necessary party is not joined, the
the consent of both spouses is required, joint management or administration does pleader shall set forth his name, if known, and shall state why he is omitted.
not require that the husband and wife always act together. Each spouse may Should the court nd the reason for the omission unmeritorious, it may order the
validly exercise full power of management alone, subject to the intervention of the inclusion of the omitted necessary party if jurisdiction over his person may be
court in proper cases as provided under Article 124 of the Family Code. . . . ." obtained.

The Court of Appeals is correct. Petitioners erroneously interchange the terms The failure to comply with the order for his inclusion, without justi able
"real party in interest" and "indispensable party." A real party in interest is the party cause, shall be deemed a waiver of the claim against such party.
who stands to be bene ted or injured by the judgment of the suit, or the party entitled The non-inclusion of a necessary party does not prevent the court from
to the avails of the suit. 1 5 On the other hand, an indispensable party is a party in proceeding in the action, and the judgment rendered therein shall be without
interest without whom no final determination can be had of an action, 1 6 in contrast to a prejudice to the rights of such necessary party.
necessary party , which is one who is not indispensable but who ought to be joined as
a party if complete relief is to be accorded as to those already parties, or for a Non-compliance with the order for the inclusion of a necessary party would not
complete determination or settlement of the claim subject of the action. 1 7 warrant the dismissal of the complaint. This is an exception to Section 3, Rule 17 which
allows the dismissal of the complaint for failure to comply with an order of the court, as
The spouses Carandang are indeed correct that "(i)f a suit is not brought in the
Section 9, Rule 3 speci cally provides for the effect of such non-inclusion: it shall not
name of or against the real party in interest, a motion to dismiss may be led on the
prevent the court from proceeding in the action, and the judgment rendered therein
ground that the complaint states no cause of action." 1 8 However, what dismissal on
shall be without prejudice to the rights of such necessary party. Section 11, Rule 3
this ground entails is an examination of whether the parties presently pleaded are
likewise provides that the non-joinder of parties is not a ground for the dismissal of the
interested in the outcome of the litigation, and not whether all persons interested in
action.
such outcome are actually pleaded. The latter query is relevant in discussions
concerning indispensable and necessary parties, but not in discussions concerning real Other than the indispensable and necessary parties, there is a third set of parties:
parties in interest. Both indispensable and necessary parties are considered as real the pro-forma parties , which are those who are required to be joined as co-parties in
parties in interest, since both classes of parties stand to be bene ted or injured by the suits by or against another party as may be provided by the applicable substantive law
judgment of the suit. or procedural rule. 2 5 An example is provided by Section 4, Rule 3 of the Rules of Court:
Quirino and Milagros de Guzman were married before the effectivity of the Family Sec. 4. Spouses as parties. — Husband and wife shall sue or be sued
Code on 3 August 1988. As they did not execute any marriage settlement, the regime of jointly, except as provided by law.
conjugal partnership of gains govern their property relations. 1 9
Pro-forma parties can either be indispensable, necessary or neither
All property acquired during the marriage, whether the acquisition appears to indispensable nor necessary. The third case occurs if, for example, a husband les an
have been made, contracted or registered in the name of one or both spouses, is action to recover a property which he claims to be part of his exclusive property. The
presumed to be conjugal unless the contrary is proved. 2 0 Credits are personal wife may have no legal interest in such property, but the rules nevertheless require that
properties, 2 1 acquired during the time the loan or other credit transaction was she be joined as a party.
executed. Therefore, credits loaned during the time of the marriage are presumed to be
conjugal property. DTIACH
In cases of pro-forma parties who are neither indispensable nor necessary, the
general rule under Section 11, Rule 3 must be followed: such non-joinder is not a ground
Consequently, assuming that the four checks created a debt for which the for dismissal. Hence, in a case concerning an action to recover a sum of money, we held
spouses Carandang are liable, such credits are presumed to be conjugal property. that the failure to join the spouse in that case was not a jurisdictional defect. 2 6 The
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 non-joinder of a spouse does not warrant dismissal as it is merely a formal requirement Whether or not respondents were able
which may be cured by amendment. 2 7 to prove the loan sought to be collected from
Conversely, in the instances that the pro-forma parties are also indispensable or petitioners
necessary parties, the rules concerning indispensable or necessary parties, as the case In the second and third issues presented by the spouses Carandang, they claim
may be, should be applied. Thus, dismissal is warranted only if the pro-forma party not that the de Guzmans failed to prove the alleged loan for which the spouses Carandang
joined in the complaint is an indispensable party. were held liable. As previously stated, spouses Quirino and Milagros de Guzman paid
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly for the stock subscriptions of the spouses Carandang, amounting to P336,375.00. The
extended to the spouses Carandang, seems to be either an indispensable or a de Guzmans claim that these payments were in the form of loans and/or advances and
necessary party. If she is an indispensable party, dismissal would be proper. If she is it was agreed upon between the late Quirino de Guzman, Sr. and the spouses
merely a necessary party, dismissal is not warranted, whether or not there was an order Carandang that the latter would repay him. Petitioners, on the other hand, argue that
for her inclusion in the complaint pursuant to Section 9, Rule 3. there was an oral pre-incorporation agreement wherein it was agreed that Arcardio
Carandang would always maintain his 46% equity participation in the corporation even if
Article 108 of the Family Code provides: the capital structures were increased, and that Quirino de Guzman would personally pay
Art. 108. The conjugal partnership shall be governed by the rules on
the equity shares/stock subscriptions of Arcardio Carandang with no cost to the latter.
the contract of partnership in all that is not in con ict with what is expressly On this main issue, the Court of Appeals held:
determined in this Chapter or by the spouses in their marriage settlements.
[The spouses Carandang] aver in its ninth assigned error that [the de
This provision is practically the same as the Civil Code provision it superceded: Guzmans] failed to prove by preponderance of evidence, either the existence of
the purported loan or the non-payment thereof.
Art. 147. The conjugal partnership shall be governed by the rules on
the contract of partnership in all that is not in con ict with what is expressly Simply put, preponderance of evidence means that the evidence as a
determined in this Chapter. whole adduced by one side is superior to that of the other. The concept of
preponderance of evidence refers to evidence that is of greater weight, or more
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co- convincing, than that which is offered in opposition to it; it means probability of
owner with the other partners of speci c partnership property." Taken with the truth.
presumption of the conjugal nature of the funds used to nance the four checks used
to pay for petitioners' stock subscriptions, and with the presumption that the credits [The spouses Carandang] admitted that it was indeed [the de Guzmans]
themselves are part of conjugal funds, Article 1811 makes Quirino and Milagros de who paid their stock subscriptions and their reason for not reimbursing the latter
Guzman co-owners of the alleged credit. ECTSDa
is the alleged pre-incorporation agreement, to which they offer no clear proof as to
its existence.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may
separately bring an action for the recovery thereof. In the fairly recent cases of Baloloy It is a basic rule in evidence that each party must prove his a rmative
v. Hular 2 8 and Adlawan v. Adlawan , 2 9 we held that, in a co-ownership, co-owners may allegation. Thus, the plaintiff or complainant has to prove his a rmative
bring actions for the recovery of co-owned property without the necessity of joining all allegations in the complaints and the defendant or respondent has to prove the
the other co-owners as co-plaintiffs because the suit is presumed to have been led for affirmative allegations in his affirmative defenses and counterclaims. 3 3
the bene t of his co-owners. In the latter case and in that of De Guia v. Court of The spouses Carandang, however, insist that the de Guzmans have not proven
Appeals, 3 0 we also held that Article 487 of the Civil Code, which provides that any of the loan itself, having presented evidence only of the payment in favor of the
the co-owners may bring an action for ejectment, covers all kinds of action for the Carandangs. They claim:
recovery of possession. 3 1
It is an undeniable fact that payment is not equivalent to a loan. For
In sum, in suits to recover properties, all co-owners are real parties in interest.
instance, if Mr. "A" decides to pay for Mr. "B's" obligation, that payment by Mr. "A"
However, pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one
cannot, by any stretch of imagination, possibly mean that there is now a loan by
of them may bring an action, any kind of action, for the recovery of co-owned Mr. "B" to Mr. "A". There is a possibility that such payment by Mr. "A" is purely out
properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit of generosity or that there is a mutual agreement between them. As applied to the
for the recovery of the co-owned property, is an indispensable party thereto. The other instant case, that mutual agreement is the pre-incorporation agreement (supra)
co-owners are not indispensable parties. They are not even necessary parties, for a existing between Mr. de Guzman and the petitioners — to the effect that the
complete relief can be accorded in the suit even without their participation, since the former shall be responsible for paying stock subscriptions of the latter. Thus,
suit is presumed to have been filed for the benefit of all co-owners. 3 2 when Mr. de Guzman paid for the stock subscriptions of the petitioners, there was
We therefore hold that Milagros de Guzman is not an indispensable party in the no loan to speak of, but only a compliance with the pre-incorporation agreement.
34
action for the recovery of the allegedly loaned money to the spouses Carandang. As
such, she need not have been impleaded in said suit, and dismissal of the suit is not The spouses Carandang are mistaken. If indeed a Mr. "A" decides to pay for a Mr.
warranted by her not being a party thereto. "B's" obligation, the presumption is that Mr. "B" is indebted to Mr. "A" for such amount
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 that has been paid. This is pursuant to Articles 1236 and 1237 of the Civil Code, which agreement excusing themselves from paying Mr. de Guzman the amounts he advanced
provide: or loaned to them. This basic and irrefutable fact can be gleaned from their testimonies
which the private respondents are quoting for easy reference:
Art. 1236. The creditor is not bound to accept payment or performance
by a third person who has no interest in the ful llment of the obligation, unless a. With respect to the testimony of Ma. Luisa Carandang
there is a stipulation to the contrary.
Q: Now, can you tell this Honorable Court how do you feel with respect to the
Whoever pays for another may demand from the debtor what he Complaint of the plaintiff in this case charging you that you paid for this
has paid , except that if he paid without the knowledge or against the will of the year and asking enough to paid (sic) your tax?
debtor, he can recover only insofar as the payment has been bene cial to the
debtor. A: We have paid already, so, we are not liable for anything payment (sic). 4 1

Art. 1237. Whoever pays on behalf of the debtor without the b. With respect to the testimony of Arcadio Carandang
knowledge or against the will of the latter, cannot compel the creditor to
"Q: How much?
subrogate him in his rights, such as those arising from a mortgage, guarantee, or
penalty. SaHcAC A: P40,000.00 to P50,000.00 per month.
Articles 1236 and 1237 are clear that, even in cases where the debtor has no Q: The plaintiff also claimed thru witness Edgar Ragasa, that there were
knowledge of payment by a third person, and even in cases where the third person paid receipts issued for the payment of your shares; which receipts were marked
against the will of the debtor, such payment would produce a debt in favor of the paying as Exhibits "G" to "L" (Plaintiff).
third person. In fact, the only consequences for the failure to inform or get the consent
I'm showing to you these receipts so marked by the plaintiff as their
of the debtor are the following: (1) the third person can recover only insofar as the
exhibits which were issued in the name of Ma. Luisa Carandang, your wife;
payment has been bene cial to the debtor; and (2) the third person is not subrogated
and also, Arcadio M. Carandang. Will you please go over this O cial
to the rights of the creditor, such as those arising from a mortgage, guarantee or Receipt and state for the records, who made for the payment stated in
penalty. 3 5 these receipts in your name?
We say, however, that this is merely a presumption. By virtue of the parties'
A: I paid for those shares." 4 2
freedom to contract, the parties could stipulate otherwise and thus, as suggested by
the spouses Carandang, there is indeed a possibility that such payment by Mr. "A" was There being no testimony or documentary evidence proving the existence of the
purely out of generosity or that there was a mutual agreement between them. But such pre-incorporation agreement, the spouses Carandang are forced to rely upon an alleged
mutual agreement, being an exception to presumed course of events as laid down by admission by the original plaintiff of the existence of the pre-incorporation agreement.
Articles 1236 and 1237, must be adequately proven.
Petitioners claim that the late Quirino A. de Guzman, Sr. had admitted the
The de Guzmans have successfully proven their payment of the spouses existence of the pre-incorporation agreement by virtue of paragraphs 13 and 14 of their
Carandang's stock subscriptions. These payments were, in fact, admitted by the Answer and paragraph 4 of private respondents' Reply.
spouses Carandang. Consequently, it is now up to the spouses Carandang to prove the
existence of the pre-incorporation agreement that was their defense to the purported Paragraphs 13 and 14 of petitioners' Answer dated 7 July 1992 state in full:
loan. 13. Sometime in November, 1973 or thereabout, herein plaintiff invited
Unfortunately for the spouses Carandang, the only testimony which touched on defendant Arcadio M. Carandang to a joint venture by pooling together
the existence and substance of the pre-incorporation agreement, that of petitioner their technical expertise, equipments, nancial resources and franchise.
Arcardio Carandang, was stricken off the record because he did not submit himself to a Plaintiff proposed to defendant and mutually agreed on the following:
cross-examination of the opposing party. On the other hand, the testimonies of Romeo 1. That they would organize a corporation known as Mabuhay
Saavedra, 3 6 Roberto S. Carandang, 3 7 Gertrudes Z. Esteban, 3 8 Ceferino Basilio, 3 9 and Broadcasting Systems, Inc. ASCTac

Ma. Luisa Carandang 4 0 touched on matters other than the existence and substance of
the pre-incorporation agreement. So aside from the fact that these witnesses had no 2. Considering the technical expertise and talent of defendant Arcadio
personal knowledge as to the alleged existence of the pre-incorporation agreement, the M. Carandang and his new equipments he bought, and his skill in
testimonies of these witnesses did not even mention the existence of a pre- repairing and modifying radio/communication equipments into high
incorporation agreement. pro ciency, said defendant would have an equity participation in
the corporation of 46%, and plaintiff 54% because of his nancial
Worse, the testimonies of petitioners Arcadio Carandang and Ma. Luisa resources and franchise.
Carandang even contradicted the existence of a pre-incorporation agreement because
when they were asked by their counsel regarding the matter of the check payments 3. That defendant would always maintain his 46% equity participation
made by the late Quirino A. de Guzman, Sr. in their behalf, they said that they had already in the corporation even if the capital structures are increased, and
paid for it thereby negating their own defense that there was a pre-incorporation that plaintiff would personally pay the equity shares/stock
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 subscriptions of defendant with no cost to the latter. All the foregoing considered, we hold that Quirino de Guzman had not admitted
the alleged pre-incorporation agreement. As there was no admission, and as the
4. That because of defendant's expertise in the trade including the
testimony of Arcardio Carandang was stricken off the record, we are constrained to
marketing aspects, he would be the President and General Manager,
rule that there was no pre-incorporation agreement rendering Quirino de Guzman liable
and plaintiff the Chairman of the Board.
for the spouses Carandang's stock subscription. The payment by the spouses de
5. That considering their past and trustworthy relations, they would Guzman of the stock subscriptions of the spouses Carandang are therefore by way of
maintain such relations in the joint venture without any mental loan which the spouses Carandang are liable to pay.
reservation for their common benefit and success of the business.
Whether or not the liability of the spouses
14. Having mutually agreed on the above arrangements, the single Carandang is joint and solidary
proprietorship of plaintiff was immediately spun-off into a corporation now Finally, the Court of Appeals also upheld the RTC Decision insofar as it decreed a
known as Mabuhay Broadcasting System, Inc. The incorporators are solidary liability. According to the Court of Appeals:
plaintiff and his family members/nominees controlling jointly 54% of the
stocks and defendant Arcadio M. Carandang controlling singly 46% as With regards (sic) the tenth assigned error, [the spouses Carandang]
previously agreed. 4 3 contend that:

Meanwhile, paragraphs 3 and 4 of private respondents' Reply dated 29 July 1992 "There is absolutely no evidence, testimonial or documentary, showing that
state in full: the purported obligation of [the spouses Carandang] is joint and solidary. . . .

3. Plaintiffs admits the allegation in paragraph 13.1 of the Answer "Furthermore, the purported obligation of [the spouses Carandang] does
only insofar the plaintiff and defendant Arcadio M. Carandang organized a not at all qualify as one of the obligations required by law to be solidary . . . ."
corporation known as Mabuhay Broadcasting Systems, Inc. Plaintiff speci cally
denies the other allegations in paragraph 13 of the Answer, the same being It is apparent from the facts of the case that [the spouses Carandang] were
devoid of any legal or factual bases. The truth of the matter is that defendant married way before the effectivity of the Family Code hence; their property regime
Arcadio M. Carandang was not able to pay plaintiff the agreed amount of the is conjugal partnership under the Civil Code.
lease for a number of months forcing the plaintiff to terminate lease. Additionally, It must be noted that for marriages governed by the rules of conjugal
the records would show that it was the defendant Arcadio M. Carandang who partnership of gains, an obligation entered into by the husband and wife is
proposed a joint venture with the plaintiff. chargeable against their conjugal partnership and it is the partnership, which is
It appears that plaintiff agreed to the formation of the corporation primarily bound for its repayment. Thus, when the spouses are sued for the
principally because of a directive of then President Marcos indicating the need to enforcement of the obligation entered into by them, they are being impleaded in
broaden the ownership of radio broadcasting stations. The plaintiff owned the their capacity as representatives of the conjugal partnership and not as
franchise, the radio transmitter, the antenna tower, the building containing the independent debtors, such that the concept of joint and solidary liability, as
radio transmitter and other equipment. Verily, he would be placed in a great between them, does not apply. 4 7
disadvantage if he would still have to personally pay for the shares of defendant The Court of Appeals is correct insofar as it held that when the spouses are sued
Arcadio M. Carandang. for the enforcement of the obligation entered into by them, they are being impleaded in
4. Plaintiff admits the allegations in paragraph 14 of the Answer. 4 4 their capacity as representatives of the conjugal partnership and not as independent
debtors. Hence, either of them may be sued for the whole amount, similar to that of a
In effect, the spouses Carandang are relying on the fact that Quirino de Guzman solidary liability, although the amount is chargeable against their conjugal partnership
stated that he admitted paragraph 14 of the Answer, which incidentally contained the property. Thus, in the case cited by the Court of Appeals, Alipio v. Court of Appeals , 4 8
opening clause "(h)aving mutually agreed on the above arrangements, . . . ." the two sets of defendant-spouses therein were held liable for P25,300.00 each,
Admissions, however, should be clear and unambiguous. This purported chargeable to their respective conjugal partnerships. ECDAcS

admission by Quirino de Guzman reeks of ambiguity, as the clause "(h)aving mutually WHEREFORE, the Decision of the Court of Appeals, a rming the judgment
agreed on the above arrangements," seems to be a mere introduction to the statement rendered against the spouses Carandang, is hereby AFFIRMED with the following
that the single proprietorship of Quirino de Guzman had been converted into a MODIFICATION: The spouses Carandang are ORDERED to pay the following amounts
corporation. If Quirino de Guzman had meant to admit paragraph 13.3, he could have from their conjugal partnership properties:
easily said so, as he did the other paragraphs he categorically admitted. Instead,
Quirino de Guzman expressly stated the opposite: that "(p)laintiff specifically denies the (1) P336,375.00 representing the spouses Carandang's loan to Quirino
other allegations of paragraph 13 of the Answer." 4 5 The Reply furthermore states that de Guzman; and
the only portion of paragraph 13 which Quirino de Guzman had admitted is paragraph
(2) Interest on the preceding amount at the rate of twelve percent (12%)
13.1, and only insofar as it said that Quirino de Guzman and Arcardio Carandang
per annum from 5 June 1992 when the complaint was led until the
organized Mabuhay Broadcasting Systems, Inc. 4 6
principal amount can be fully paid; and
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 (3) P20,000.00 as attorney's fees.
No costs.
SO ORDERED.
Panganiban, C.J., Ynares-Santiago, Austria-Martinez and Callejo, Sr., JJ., concur.

Footnotes

1. Penned by Associate Justice Jose L. Sabio, Jr. with Associate Justices B.A. Adefuin-de
la Cruz and Hakim S. Abdulwahid, concurring; rollo, pp. 46-56.
2. Rollo, p. 55
3. Id. at 57-58.
4. Id. at 360-361.
5. G.R. Nos. L-42699 & L-42709, 26 May 1981, 104 SCRA 534.
6. 104 Phil. 143 (1958).
7. Vda. de Haberer v. Court of Appeals, supra note 5 at 542.
8. Ferreria v. Vda. De Gonzales, supra note 6 at 149.
9. Zamora v. Court of Appeals, G.R. No. 78206, 19 March 1990, 183 SCRA 279, 283-284.
10. Salic v. COMELEC, G.R. Nos. 157007 & 157015, 17 March 2004, 425 SCRA 735, 754.
11. See Manila Railroad Co. v. Attorney-General, 20 Phil. 523, 535 (1911).
12. Vda. De Salazar v. Court of Appeals, 320 Phil. 373, 377 (1995).
13. 77 Phil. 16 (1946).

14. Travel Wide Associated Sales (Phils.), Inc. v. Court of Appeals, G.R. No. 77356, 15 July
1991, 199 SCRA 205.
15. RULES OF COURT, Rule 3, Section 2.

16. Id., Section 7.

17. RULES OF COURT, Rule 3, Section 8.

18. Travel Wide Associated Sales (Phils.), Inc. v. Court of Appeals, supra note 14.
19. CIVIL CODE, Article 118.
20. FAMILY CODE, Article 116; CIVIL CODE, Article 160.

21. CIVIL CODE, Article 417 provides:

"The following are also considered as personal property:

(1) Obligations and actions which have for their object movables and
demandable sums, and
(2) Shares of stock of agricultural, commercial and industrial entities, although
they may have real estate."
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