Shaffer v. Palma

Shaffer vs.
Palma (1968)
Topic: Form of Convenience
PARTIES:
 Petitioners: Eufemia V. Shaffer
 Respondents: Virginia G. Palma and Bonifacio Palma
FACTS:
 April 25, 1964, Eufemia V. Shaffer filed a complaint against Virginia and Bonifacio
Palma to recover certain sums of money and shares of stock, alleging, among others:
that Shaffer is the widow of the late Nicolas Lynevitche, the Managing Director of the
British American Engineering Corporation, who had himself insured for P300K with
the Great American Insurance Company against accidental death; and designating
the British American Corporation as beneficiary.
 While Lynevitche and Shaffer were living as husband and wife they received from the
Palma’s advances and loans totaling P32K and to secure payment thereof, Lynevitche
delivered to them as his 175 shares of stock of the British American Engineering
Corporation.
 When Lynevitche was made to understand by the Palma’s that the shares pledged by
him were insufficient to secure the payment of the loans and advances given by
them, Lynevitche in his capacity as managing director, executed a Deed of
Assignment transferring the right of said corporation as beneficiary in his insurance
policy in favor of Eufemia and Virginia Palma.
 The Deed of Assignment was subsequently ratified and confirmed by the
corporations board of directors. The Palma’s were aware that Shaffer was included
as one of the assignees of the insurance policy so that they would have additional
security for the loans and advances given by them. Lynevitce died in an accident in
Japan in 1962.
 The Great American Insurance Company paid P300K to Shaffer and Palma as
assignees of the insurance policy. The proceeds of the insurance policy was
deposited in the name of Shaffer with the HSBC.
 Immediately after depositing the said proceeds, Bonifacio Palma asked Shaffer to
issue a check of P150K in favor of his wife, Virginia with the understanding that after
proper accounting and adjustments of the loans and advances previously obtained
by Shaffer and Lynevitche from Palma the excess would be returned to Shaffer.
 Shaffer later asked the Palmas to render an accounting of the loans and advances
and to return to her the balance of P150K after deducting the payment of said loans
and advances, and the 175 shares that were given as security, but the Palmas
refused to do so.
 Shaffer prayed that judgment be rendered ordering the Palmas, in solidum, to pay
the amount. The defendants argued that the plaintiff had no cause of action and
capacity to sue.
 The lower court dismissed the complaint, ruling that the Deed of Assignment and the
corporate resolution do not express the true intent of the assignor British American
Engineering Corporation.
 Ultimately, the lower court ruled that the alleged agreement involves the amount of
P118K and unless in writing is unenforceable (Art. 1358, last paragraph).
ISSUES/HELD: W/N the agreement between Eufemia and Virgina regarding the return of
the excess to the P150K check issued by the former to the latter, after deducting the
amount of the subject loan, is unenforceable, considering that such agreement was not in
writing. (NO)
 In her amended complaint, the plaintiff is suing the defendants in the capacity of one
who has an interest to protect. She was suing for the return to her of the balance of
the amount of P150K which was stated in a check that she had issued in favor of
defendant Palma, pursuant to the understanding that out of that amount the loans
and advances which the plaintiff and the late Lynevitche had obtained from
defendants would be paid.
 No. The agreement between Eufemia and Virginia is valid and enforceable.
 The COFI of Manila, among other grounds, dismissed the amended complaint
because it held that the agreement between Eufemia and Virginia is unenforceable
because the same was not made in writing. However, the SC held that whether the
agreement is in writing or not is a question of evidence.
 According to Article 1356 of the Civil Code, contracts are binding upon the parties in
whatever form they may have been entered into unless the law requires otherwise.
While it is true that Article 1358 of the Civil Code further provides that contracts
involving an amount more than P500 must appear in writing, nothing in the said
provision required that placing the agreement in writing is for its validity or
enforceability. It has been held in the case of Thunga Chui vs. Que Bentac that the
writing required under
 Article 1358 is merely for convenience. Therefore, the agreement alleged in the
amended complaint in the present case can be enforced even if it may not be in
writing.
JUDGMENT: Judgment of the COFI was SET ASIDE.

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JUDGMENT: Judgment of the COFI was SET ASIDE.

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