G.R. No. L-24115 March 1, 1968
EUFEMIA V. SHAFFER, plaintiff-appellant, vs. VIRGINIA G. PALMA and BONIFACIO PALMA, defendants-appellees.

FACTS

Plaintiff Eufemia V. Shaffer, widow of the late Nicolas R. Lynevitche, filed a complaint against defendant spouses Virginia G. and Bonifacio Palma. She alleged that she and Lynevitche, while living as husband and wife, obtained loans totaling P32,000 from the defendants. To secure payment, Lynevitche delivered 175 shares of British American Engineering Corporation stock to them. Lynevitche, as Managing Director of said corporation, had an accidental death insurance policy for P300,000 with the corporation as beneficiary. To provide additional security for the loans, Lynevitche executed a deed of assignment transferring the corporation’s right as beneficiary to plaintiff and defendant Virginia G. Palma, which the corporation’s board later ratified. After Lynevitche’s death, the insurance proceeds were paid to both assignees and deposited in plaintiff’s name. Upon defendant Bonifacio Palma’s request, plaintiff issued a check for P150,000 to Virginia G. Palma, allegedly with the understanding that after accounting for the P32,000 debt, the excess would be returned to plaintiff and the shares returned. Defendants refused to account or return the balance and shares. The trial court dismissed the original complaint, stating it stated no cause of action for plaintiff, as any action to reform the deed of assignment should be by the assignor corporation. Plaintiff filed an amended complaint with new allegations, including that defendants acknowledged Virginia Palma’s interest as co-assignee was limited to the loan amount and that the shares were endorsed to plaintiff before Lynevitche’s death. The trial court admitted the amended complaint but simultaneously dismissed it, ruling the amendments substantially altered the original causes of action and that the alleged agreement involved P118,000 and, unless in writing, was unenforceable under Article 1358 of the Civil Code.

ISSUE

Whether the trial court erred in dismissing the amended complaint on the grounds that it stated no cause of action, that the plaintiff had no capacity to sue, and that the amendments were not allowable.

RULING

Yes. The Supreme Court set aside the appealed orders and remanded the case. The Court held that the amended complaint sufficiently alleged a cause of action and that plaintiff had the legal capacity to sue. The allegations, taken as true for purposes of the motion to dismiss, showed plaintiff’s right to seek recovery of the excess insurance proceeds and the shares based on an agreement with the defendants. The amendments were allowable as they did not introduce a new cause of action but merely specified or amplified the facts alleged in the original complaint to cure its defects. The Court also ruled that the lower court’s additional ground for dismissal—that the agreement was unenforceable for not being in writing—was erroneous. Article 1358 of the Civil Code, which requires certain contracts to appear in writing, is for convenience only and does not affect the validity or enforceability of an oral agreement. Whether the agreement was in writing is a question of evidence.