EN BANC

[G.R. No. 42465. November 19, 1936.]

INTERNATIONAL FILMS (CHINA), LTD. , plaintiff-appellant, vs . THE

LYRIC FILM EXCHANGE, INC. , defendant-appellee.

J.W. Ferrier for appellant.

Juan T. Santos and Arsenio Solidum for appellee.

SYLLABUS

1. ALLEGATIONS; AMENDMENTS TO PLEADINGS; LACK OF PERSONALITY

OF PLAINTIFF. — The court a quo acted within its discretionary power in allowing the
defendant company to amend its answer by pleading the special defense of the
plaintiff company's lack of personality to bring the action, after both parties had already
rested their respective cases.
2. MANDATE; LIABILITY OF SUBAGENT. — The defendant company, as
subagent of the plaintiff in the exhibition of the lm "Monte Carlo Madness", was not
obliged to insure it against re, not having received any express mandate to that effect,
and it is not liable for the accidental destruction thereof by fire.

DECISION

VILLA-REAL , J : p

This is an appeal taken by the plaintiff company International Films (China), Ltd.
from the judgment of the Court of First Instance of Manila dismissing the complaint
led by it against the defendant company the Lyric Film Exchange, Inc., with costs to
said plaintiff.
In support of its appeal, the appellant assigns six alleged errors as committed by
the court a quo in its said judgment, which will be discussed in the course of this
decision.
The record shows that Bernard Gabelman was the Philippine agent of the
plaintiff company International Films (China), Ltd. by virtue of a power of attorney
executed in his favor on April 5, 1933 (Exhibit 1). On June 2, 1933, the International
Films (China), Ltd., through its said agent, leased the lm entitled "Monte Carlo
Madness" to the defendant company, the Lyric Film Exchange, Inc., to be shown in
Cavite for two consecutive days, that is, on June 1 and 2, 1933, for 30 per cent of the
receipts; in the Cuartel de España for one day, or on June 6, 1933, for P45; in the
University Theater for two consecutive days, or on June 8 and 9, 1933, for 30 per cent
of the receipts; in Stotsenburg for two consecutive days, or on June 18 and 19, 1933,
for 30 per cent of the receipts; and in the Paz Theater for two consecutive days, or on
June 21 and 22, 1933, for 30 per cent of the receipts (Exhibit C). One of the conditions
of the contract was that the defendant company would answer for the loss of the lm
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 in question whatever the cause. On June 23, 1933, following the last showing of the lm
in question in the Paz Theater, Vicente Albo, then chief of the lm department of the
Lyric Film Exchange, Inc., telephoned said agent of the plaintiff company informing him
that the showing of said lm had already been nished and asked, at the same time,
where he wished to have the lm returned to him. In answer, Bernard Gabelman
informed Albo that he wished to see him personally in the latter's o ce. At about 11
o'clock the next morning, Gabelman went to Vicente Albo's o ce and asked whether he
could deposit the lm in question in the vault of the Lyric Film Exchange, Inc., as the
International Films (China) Ltd. did not yet have a safety vault, as required by the
regulations of the re department. After the case had been referred to O'Malley, Vicente
Albo's chief, the former answered that the deposit could not be made inasmuch as the
lm in question would not be covered by the insurance carried by the Lyric Film
Exchange, Inc. Bernard Gabelman then requested Vicente Albo to permit him to deposit
said lm in the vault of the Lyric Film Exchange, Inc., under Gabelman's own
responsibility. As there was a verbal contract between Gabelman and the Lyric Film
Exchange, Inc., whereby the lm "Monte Carlo Madness" would be shown elsewhere,
O'Malley agreed and the lm was deposited in the vault of the defendant company
under Bernard Gabelman's responsibility.
About July 27, 1933, Bernard Gabelman served his connection with the plaintiff
company, being succeeded by Lazarus Joseph. Bernard Gabelman, upon turning over
the agency to the new agent, informed the latter of the deposit of the lm "Monte Carlo
Madness" in the vault of the defendant company as well as of the verbal contract
entered into between him and the Lyric Film Exchange, Inc., whereby the latter would act
as a subagent of the plaintiff company, International Films (China) Ltd., with authority to
show the film "Monte Carlo Madness" in any theater where said defendant company, the
Lyric Film Exchange, Inc., might wish to show it after the expiration of the contract
Exhibit C. As soon as Lazarus Joseph had taken possession of the Philippine agency of
the International Films (China) Ltd., he went to the o ce of the Lyric Film Exchange, Inc.,
to ask for the return not only of the lm "Monte Carlo Madness" but also of the lms
"White Devils" and "Congress Dances". On August 13 and 19, 1933, the Lyric Film
Exchange, Inc., returned the lms entitled "Congress Dances" and "White Devils" to
Lazarus Joseph, but not the lm "Monte Carlo Madness" because it was to be shown in
Cebu on August 29 and 30, 1933. Inasmuch as the plaintiff would pro t by the showing
of the lm "Monte Carlo Madness", Lazarus Joseph agreed to said exhibition. It
happened, however, that the bodega of the Lyric Film Exchange, Inc., was burned on
August 19, 1933, together with the film "Monte Carlo Madness" which was not insured.
The rst question to be decided in this appeal, which is raised in the rst
assignment of alleged error, is whether or not the court a quo erred in allowing the
defendant company to amend its answer after both parties had already rested their
respective cases.
In Torres Viuda de Nery vs. Tomacruz (49 Phil., 913, 915), this court, through
Justice Malcolm, said:
"Sections 109 and 110 of the Philippine Code of Civil Procedure, relating to
the subjects of Variance and Amendments in General, should be equitably applied
to the end that cases may be favorably and fairly presented upon their merits, and
that equal and exact justice may be done between the parties. Under code
practice, amendments to pleadings are favored, and should be liberally allowed in
furtherance of justice. this liberality, it has been said, is greatest in the early
stages of a lawsuit, decreases as it progresses, and changes at times to a
strictness amounting to a prohibition. The granting of leave to le amended
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 pleadings is a matter peculiarly within the sound discretion of the trial court. This
discretion will not be disturbed on appeal, except in case of an evident abuse
thereof. But the rule allowing amendments to pleadings is subject to the general
but not in exible limitation that the cause of action or defense shall not be
substantially changed, or that the theory of the case shall not be altered. (21
R.C.L., pp. 572 et seq.; 3 Kerr's Cyc. Codes of California, sections 469, 470, and
473; Ramirez vs. Murray [1855], 5 Cal., 222; Hayden vs. Hayden [1873], 46 Cal.,
332; Hackett vs. Bank of California [1881], 57 Cal., 335; Hancock vs. Board of
Education of City of Santa Barbara [1903], 140 Cal., 554; Dunphy vs. Dunphy
[1911], 161 Cal., 87; 38 L.R.A. [N.S.], 818.)"
In the case of Gould vs. Stafford (101 Cal., 32, 34), the Supreme Court of
California, interpreting section 473 of the Code of Civil Procedure of said State, from
which section 110 of our Code was taken, stated as follows:
"The rule is that courts will be liberal in allowing an amendment to a
pleading when it does not seriously impair the rights of the opposite party — and
particularly an amendment to an answer. A defendant can generally set up as
many defenses as he may have. Appellant contends that the a davits upon
which the motion to amend was made shwo that it was based mainly on a
mistake of law made by respondent's attorney; but, assuming that to be so, still
the power of a court to allow an amendment is not limited by the character of the
mistake which calls forth its exercise. The general rule that a party cannot be
relieved from an ordinary contract which is in its nature nal, on account of a
mistake of law, does not apply to proceedings in an action at law while it is
pending and undetermined. Pleadings are not necessarily nal until after
judgment. Section 473 of the Code of Civil Procedure provides that the court may
allow an amendment to a pleading to correct certain enumerated mistakes or 'a
mistake in any other respect,' and 'in other particulars.' The true rule is well stated
in Ward vs. Clay (82 Cal., 502). In the case at bar evidence of the lease was given
at the rst trial; and we cannot see that the amendment before the second trial
put plaintiff in a position any different from that which he would have occupied if
the amendment had been made before the first trial."
In the case of Ward vs. Clay (82 Cal., 502, 510), the Supreme Court of said State
stated:
"The principal purpose of vesting the court with this discretionary power is
to enable it 'to mold and direct its proceedings so as to dispose of cases upon
their substantial merits,' when it can be done without injustice to either party,
whether the obstruction to such a disposition of cases be a mistake of fact or a
mistake as to the law; although it may be that the court should require a stronger
showing to justify relief from the effect of a mistake in law than in case of a
mistake as to matter of fact. The exercise of the power conferred by section 473
of the code, however, should appear to have been 'in furtherance of justice,' and
the relief, if any, should be granted upon just terms."
Lastly, in the case of Simpson vs. Miller (94 Pac., 253), the said Supreme Court of
California said:
"In an action to recover property which had vested in plaintiff's trustee in
bankruptcy prior to the suit, an amendment to the answer, made after both parties
had rested, but before the cause was submitted, pleading plaintiff's bankruptcy in
bar to the action, was properly allowed in the discretion of the court."
Under the above-cited doctrines, it is discretionary in the court which has
cognizance of a case to allow or not the amendment of an answer for the purpose of
questioning the personality of the plaintiff to bring the action, even after the parties had
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 rested their cases, as it causes no injustice to any of the parties, and this court will not
interfere in the exercise of said discretion unless there is an evident abuse thereof,
which does not exist in this case.
The second question to be decided is whether or not the defendant company, the
Lyric Film Exchange, Inc., is responsible to the plaintiff, International Films (China) Ltd.,
for the destruction by fire of the film in question, entitled "Monte Carlo Madness".
The plaintiff company claims that the defendant's failure to return the film "Monte
Carlo Madness" to the former was due to the fact that the period for the delivery
thereof, which expired on June 22, 1933, had been extended in order that it might be
shown in Cebu on August 29 and 30, 1933, in accordance with an understanding had
between Lazarus Joseph, the new agent of the plaintiff company, and the defendant.
The defendant company, on the other hand, claims that when it wanted to return the
lm "Monte Carlo Madness" to Bernard Gabelman, the former agent of the plaintiff
company, because of the arrival of the date of the return thereof, under the contract
Exhibit C, said agent, not having a safety vault, requested Vicente Albo, chief of the lm
department of the defendant company, to keep said lm in the latter's vault under
Gabelman's own responsibility, verbally stipulating at the same time that the defendant
company, as subagent of the International Films (China) Ltd., might show the lm in
question in its theaters.
It does not appear su ciently proven that the understanding had between
Lazarus Joseph, second agent of the plaintiff company, and Vicente Albo, chief of the
lm department of the defendant company, was that the defendant company would
continue showing said lm under the same contract Exhibit C. The preponderance of
evidence shows that the verbal agreement had between Bernard Gabelman, the former
agent of the plaintiff company, and Vicente Albo, chief of the lm department of the
defendant company, was that the said lm "Monte Carlo Madness" would remain
deposited in the safety vault of the defendant company under the responsibility of said
former agent and that the defendant company, as his subagent, could show it in its
theaters, the plaintiff company receiving 5 per cent of the receipts up to a certain
amount, and 15 per cent thereof in excess of said amount.
If, as it has been su ciently proven in our opinion, the verbal contract had
between Bernard Gabelman, the former agent of the plaintiff company, and Vicente
Albo, chief of the lm department of the defendant company, was a subagency or a
submandate, the defendant company is not civilly liable for the destruction by fire of the
lm in question because, as a mere submandatary or subagent, it was not obliged to
ful ll more than the contents of the mandate and to answer for the damages caused to
the principal by his failure to do so (art. 1718, Civil Code). The fact that the lm was not
insured against re does not constitute fraud or negligence on the part of the
defendant company, the Lyric Film Exchange, Inc., because as a subagent, it received no
instruction to that effect from its principal and the insurance of the film does not form a
part of the obligation imposed upon it by law.
As to the question whether or not the defendant company having collected the
entire proceeds of the re insurance policy of its lms deposited in its vault, should pay
the part corresponding to the lm in question which was deposited therein, the
evidence shows that the lm "Monte Carlo Madness" under consideration was not
included in the insurance of the defendant company's lms, as this was one of the
reasons why O'Malley at rst refused to receive said lm for deposit and he consented
thereto only when Bernard Gabelman, the former agent of the plaintiff company,
insisted upon his request, assuming all responsibility. Furthermore, the defendant
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 company did not collect from the insurance company an amount greater than that for
which its lms were insured, notwithstanding the fact that the lm in question was
included in its vault, and it would have collected the same amount even if said lm had
not been deposited in its safety vault. Inasmuch as the defendant company, The Lyric
Film Exchange, Inc., had not been enriched by the destruction by re for the plaintiff
company's film, it is not liable to the latter.
For the foregoing consideration, we are of the opinion and so hold: (1) That the
court a quo acted within its discretionary power in allowing the defendant company to
amend its answer by pleading the special defense of the plaintiff company's lack of
personality to bring the action, after both parties had already rested their respective
cases; (2) that the defendant company, as subagent of the plaintiff in the exhibition of
the lm "Monte Carlo Madness", was not obliged to insure it against re, not having
received any express mandate to that effect, and it is not liable for the accidental
destruction thereof by fire.
Wherefore, and although on a different ground, the appealed judgment is
affirmed, with the costs to the appellant. So ordered.
Avanceña, C.J., Abad Santos, Imperial, Diaz, Laurel and Concepcion, JJ., concur.

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