Partnership and Agency Digests

PARTNERSHIP Digests Atty.
Cochingyan
TAN SEN GUAN & CO. VS. PHILIPPINE TRUST
CO.
Facts: Plaintif Tan Sen Guan & Co. secured a
judgment for a sum of P21,426 against te !indoro
Sugar Co. of "ic te Pili##ine Trust is te trustee.
Te #laintif entered into an agreement "it te
defendant Pili##ine Trust Co. "erein te former
assigned, transferred, and sold to te latter te full
amount of said judgment against !indoro Sugar Co.
togeter "it all its rigts tereto and te latter
ofered satisfactor$ consideration tereto. Te
agreement furter sti#ulated tat u#on signing of te
agreement, Pil Trust sall #a$ Tan Sen te sum of
P%&&&' sould te !indoro Sugar (e sold or its
o"nersi# (e transferred, an additional P1&,&&&
#esos "ill (e #aid to Tan Sen u#on #erfection of te
sale' in case an$ oter creditor of !indoro Sugar
o(tains in te #a$ment of is credit a greater
#ro#ortion tan te #rice #aid to Tan Sen, te Pil
Trust sall #a$ to te latter "ate)er sum ma$ (e
necessar$ to (e #ro#ortioned te claim of te
creditor. *o"e)er, if te !indoro Sugar is sold to an$
#erson "o does not #a$ an$ting to te creditors or
#a$ tem e+ual or less tan ,& #ercent of teir
claim, or sould te creditors o(tain from oter
sources te #a$ment of teir claim e+ual to or less
tan ,& #ercent, te Pil Trust "ill onl$ #a$ to Tan
Sente additional sum of P1&,&&& u#on te sale or
transfer of te !indoro Sugar as a(o)e stated. Te
#ro#erties of !indoro Sugar "ere later on sold at
#u(lic auction to te -oman Catolic .rc(iso# of
!anila and (ase on te agreement #laintif Tan Sen
(rougt suit against defendant Pil Trust for te sum
of P1&,&&&.
Deen!ant"s a#g$%ent: /nl$ a #ortion of te
!indoro Sugar0s #ro#erties "ere sold.
CFI: .(sol)ed te defendant on t"o grounds: 1a2 in
te contract, it "as onl$ (ound as a trustee and not
as an indi)idual' 1(2 tat it as not (een #ro)ed tat
all te #ro#erties of te !indoro Sugar ad (een
sold.
Iss$es&
112 345 te defendant is not #ersonall$
res#onsi(le for te claim of te #laintif
(ased on te deed of assignment (ecause
of a)ing e6ecuted te same in its ca#acit$
as trustee of te #ro#erties of te !indoro
Sugar.
122 345 all te #ro#erties of te !indoro Sugar
"ere sold at #u(lic auction to te -oman
Catolic .rc(iso# of !anila.
He'!: SC re)ersed C780s ruling.
112 Te Pil Trust Com#an$ in its indi)idual ca#acit$
is res#onsi(le for te contract as tere "as no
e6#ress sti#ulation tat te trust estate and not
te trustee sould (e eld lia(le on te contract
in +uestion. 5ot onl$ is tere no e6#ress
sti#ulation tat te trustee sould not (e eld
res#onsi(le (ut te 93erefore0 clause of te
contract states te judgment "as e6#ressl$
assigned in fa)or of Pil Trust Com#an$ and not
Pil Trust Com#an$, te trustee. 8t terefore
follo"s tat a##ellant ad a rigt to #roceed
directl$ against te Pil Trust on its contract and
as no claim against eiter !indoro Sugar or te
trust estate.
122 :6i(it ; 1te certi<cate of sale to -oman
Catolic .rc(iso#2 so"s tat all #ro#erties to
Pil Trust as Trustee "ere included in te sale.
Te onl$ ting reser)ed from te sale "as te
standing cro#s, and it is reasona(le to #resume
tat te$ ad also (een sold (et"een te date of
te sale and te institution of tis action. 3ere
te real estate, te #ersonal #ro#ert$ including
animals, and all te (ills recei)a(le are sold, it
"ould (e a forced construction of te contract of
agreement to old tat te assets of te !indoro
Sugar Com#an$ ad not (een sold.
PHIL. AIR LINES( INC. VS. HEALD LU)*ER CO.
Facts: =e#anto Consolidated !ines cartered a
elico#ter (elonging to #laintif Pil. .ir =ines to
ma>e a ?igt from its (ase at 5icols 7ield .ir#ort to
te former0s cam# at !an$a>an !ountain Pro)ince.
Te elico#ter, "it Ca#t. Ga(riel *ernande@ and =t.
-e6 8m#erial on (oard, failed to reac te destination
as it collided "it defendant0s tram"a$ steel ca(les
resulting in its destruction and deat of te oAcers.
Plaintif insured te elico#ters and te oAcers "o
#iloted te same for PB&,&&& and P2&,&&&
res#ecti)el$ and as a result of te cras, te
insurance com#anies #aid to te #laintif te total
indemnit$ of P12&,&&&. Plaintif sustained additional
damages totaling P1&C,C4,.B2 "ic "ere not
reco)ered ($ insurance. Te #laintif instituted tis
action against defendant *eald =um(er Com#an$ to
reco)er te sum #aid ($ te insurance com#an$ to
te #laintif and te additional damages "ic "as
not reco)ered from te insurance.
Deen!ant"s a#g$%ent: Plaintif as no cause of
action against defendant for if an$one sould due
defendant for its reco)er$, it "ill onl$ (e te
insurance com#anies.
P'ainti+"s a#g$%ent: 8t asserts tat te claim of
te said amount of P12&,&&& is on (ealf and for te
(ene<t of te insurers and sall (e eld ($ #laintif in
trust for te insurers. 8t is a##ellant0s teor$ tat,
inasmuc as te loss it as sustained e6ceeds te
amount of te insurance #aid to it ($ te insurers,
te rigt to reco)er te entire loss from te
"rongdoer remains "it te insured and so te
action must (e (rougt in its o"n name as real #art$
in interest. To te e6tent of te amount recei)ed ($ it
as indemnit$ from te insurers, #laintif "ould ten
(e acting as a trustee for tem. To su##ort tis
contention, a##ellant cites .merican autorities.
RTC"s R$'ing: Te court ordered te #laintif to
amend its com#laint to delete te <rst allegation tat
insurance com#anies a)e #aid a #ortion of te
#laintif0s damages, since te Court (elie)es tat te
real #arties in interest are te insurance com#anies
concerned or (ring in te insurance com#anies as
#arties #laintif. .nd a)ing manifested #laintif0s
decision not to amend te com#laint, suc mo)e of
#laintif amounts to a deletion of te #ortion o(jected
to and so te com#laint sould (e deemed limited to
te additional damages.
Iss$e&
Pa#tne#shi, & Agency - .* .//01.//2
PARTNERSHIP Digests Atty. Cochingyan
112 345 te #laintif is not te real #art$ in
interest res#ecting te claim for P12&,&&&.
He'!: SC aArmed te a##ealed judgment.
112 8n tis jurisdiction, "e a)e our o"n legal
#ro)ision "ic in su(stance difers from te
.merican la". .rt. 22&, of te 5CC #ro)ides
tat if a #ro#ert$ is insured and te o"ner
recei)es te indemnit$ from te insurer te
same is deemed su(rogated to te rigts of
te insured against te "rongdoer and if te
amount #aid ($ te insurer does not full$
co)er te loss, ten te aggrie)ed #art$ is te
one entitled to reco)er te de<cienc$. Dnder
tis legal #ro)ision, te real #art$ in interest
"it regard to te #ortion of te indemnit$
#aid is te insurer and not te insured.
122 Eefore a #erson can sue for te (ene<t of
anoter under a trusteesi#, e must (e 9a
trustee of an e6#ress trust.0 Te rigt does not
e6ist in cases of im#lied trust, tat is, a trust
"ic ma$ (e inferred merel$ from te acts of
te #arties or from oter circumstances. .lso,
to ado#t a contrar$ rule to "at is autori@ed
($ te .merican statues "ould (e s#litting a
cause of action or #romoting multi#licit$ of
suits "ic sould (e a)oided. Dnder our
rules, (ot te insurer and te insured ma$
join as #laintifs to #ress teir claims against
te "rongdoer "en te same arise out of te
same transaction or e)ent. Tis is autori@ed
($ section 6, rule C, of te -ules of Court.
CRISTO*AL VS. GO)E3
Facts: :#ifanio Gome@ o"ned a #ro#ert$ "ic "as
sold in a #acto de retro sale to =uis Fangco
redeema(le in % $ears, altoug te #eriod #assed
"itout redem#tion, te )endee conceded te
)endor te #ri)ilege of re#urcase. Gome@ a##l$ to a
>insman, Ei(iano EaGas, for assistance on a
condition tat e "ill let im a)e te mone$ if is
(roter !arcelino Gome@ and is sister Telesfora
Gome@ "ould ma>e temsel)es res#onsi(le for te
loan. Te si(lings agreed and EaGas ad)ance te
sum of P,&&& "ic "as used to re#urcase te
#ro#ert$ in te names of !arcelino and Telesfora.. .
9#ri)ate #artnersi# in #artici#ation0 "as created
(et"een !arcelino and Telesfora and terein agreed
tat te ca#ital of te #artnersi# sould consist of
P,&&& of "ic !arcelino "as to su##l$ te amount
of P1%&& and Telesora te sume of P%%&&. 8t "as
furter agreed tat te all te #ro#ert$ to (e
redeemed sall (e named to te t"o, tat !arcelino
sould (e its manager, tat all te income, rent,
#roduce of te #ro#ert$ sall (e a##lied e6clusi)el$
to te amorti@ation of te ca#ital em#lo$ed ($ te
t"o #arties "it its corres#onding interest and oter
incidental e6#enses and as soon as te ca#ital
em#lo$ed, "it its interest and oter incidental
e6#enses, sall a)e (een co)ered, said #ro#erties
sall (e returned to :#ifanio Gome@ or is legitimate
cildren. . $ear after :#ifanio0s deat, Telesfora
"anted to free erself from te res#onsi(ilit$ "ic
se ad assumed to EaGas and con)e$ed to
!arcelino er interest and sare in te tree
#ro#erties #re)iousl$ redeemed from Fangco and
(ot declared dissol)ed te #artnersi# te$ created.
3it !arcelino as te sole de(tor, EaGas re+uired
im to e6ecute a contract of sale of te tree #arcels
"it #acto de retro for te #ur#ose of securing te
inde(tedness. !arcelino later on #aid te sum in full
satisfaction of te entire claim and recei)ed from
EaGas a recon)e$ance of te tree #arcels. Te
"ido", Paulina Cristo(al, and te cildren of :#ifanio
Gome@ instituted an action for te reco)er$ of te
tree #arcels of land from !arcelino Gome@.
Deen!ant"s a#g$%ent: ;efendant ans"ered "it
a general denial and claimed to (e te o"ner in is
o"n rigt of all te #ro#ert$ "ic is te su(ject of
te action. *e furter claimed tat te trust
agreement "as >e#t secret from :#ifanio Gome@, and
tat, a)ing no >no"ledge of it, e could not a)e
acce#ted it (efore te sti#ulation "as re)o>ed. .nd
tat e as te (ene<t of #rescri#tion in is fa)or,
a)ing (een in #ossession of more tan 1& $ears
under te deed "ic e ac+uired te sole rigt from
is sister.
RTC"s #$'ing: ruled in fa)or of #laintifs and found
tat te #ro#ert$ in +uestion (elongs to te #laintifs,
as coHo"ners, and ordered te defendant to
surrender te #ro#ert$ to tem and e6ecute an
a##ro#riate deed of transfer as "ell as to #a$ te
cost of te #roceeding.
Iss$e: 112 345 te dissolution of #artnersi#
(et"een !arcelino and Telesfora destro$ed te
(ene<cial rigt of :#ifanio Gome@ in te #ro#ert$.
122 345 te #artnersi# agreement of !arcelino
and Telesfora "as a donation in fa)or of
:#ifanio or an e6#ress trust.
1C2 345 !arcelino Gome@ ac+uired te #ro#ert$
troug #rescri#tion.
He'!& SC declared o"nersi# in fa)or of #laintifs.
112 Te fact tat one of te t"o indi)iduals "o
a)e constituted temsel)es trustees for
te #ur#ose a(o)e indicated con)e$s is
interest in te #ro#ert$ to is cotrustee does
not relie)e te latter from te o(ligation to
com#l$ "it te trust.
122 . trust constituted (et"een t"o contracting
#arties for te (ene<t of a tird #erson is
not su(ject to te rules go)erning donations
of real #ro#ert$. Te (ene<ciar$ of te trust
ma$ demand #erformance of te o(ligation
"itout a)ing formall$ acce#ted te
(ene<t of te trust in a #u(lic document,
u#on mere ac+uiescence in te formation of
te trusts and acce#tance under te second
#ar. of article 12%, of te CC. !uc energ$
as (een e6#anded ($ te attorne$s for te
a##ellant in attem#ting to demonstrate
tat, if :#ifanio at an$ time ad an$ rigt in
te #ro#ert$ ($ )irtue of te #artnersi#
agreement (et"een !arcelino and Telesfora
suc rigt could (e deri)ed as a donation
and tat, inasmuc as te donation "as
ne)er acce#ted ($ :#ifanio in a #u(lic
document, is su##osed interest terein is
unenforcea(le. Te #artnersi# sould not
(e )ie"ed in ligt of an intended donation,
(ut as an e6#ress trust.
1C2 .s against te (ene<ciar$, #rescri#tion is
not efecti)e in fa)or of a #erson "o is
acting as a trustee of a continuing and
su(sisting trust. Terefore, !arcelino cannot
ac+uire o"nersi# o)er te #ro#ert$
troug #rescri#tion.
SALAO VS. SALAO
7acts: .fter te deat of Ialentina 8gnacio, er estate
"as administered ($ er daugter .m(rosia. 8t "as
#artitioned e6trajudicall$ and te deed "as signed ($
er four legal eirs namel$ er C cildren 1.lejandra,
Juan, and .m(rosia2 and Ialentin Salao, in
re#resentation of is deceased fater, Patricio. Te
Calunuran <s#ond is te #ro#ert$ in contention in
tis case. Prior to te deat of Ialentina 8gnacio, er
cildren Juan and .m(rosia secured a torrens title in
teir names a 4, a. <s#ond located at Sitio
Calunuran, =u(ao, Pam#anga. . decree "as also
issued in te names of Juan and .m(rosia for te
Pinanganacan <s#ond "ic adjoins te Calunuran
<s#ond. . $ear (efore .m(rosia0s deat, se
donated er oneHalf sare in te t"o <s#onds in
+uestion to er ne#e", Juan Salo Jr. *e "as alread$
te o"ner of te oter alf of te <s#onds a)ing
inerited it from is fater, Juan Salao Sr. .fter
.m(rosia died, te eirs of Ialentin Salao, Eenita
Salao and te cildren of Iictorina Salao, <led a
com#laint against Juan Salao Jr. for te
recon)e$ance to tem of te Canluran <s#ond as
Ialentin Salao0s su##osed one K tird sare in te
14% a. of <s#ond registered in te names of Juan
Salao Sr. and .m(rosia Salao.
Deen!ant"s a#g$%ent: Ialentin Salao did not
a)e an$ interest in te t"o <s#onds and tat te
sole o"ners tereof "ere is fater and is aunt
.m(rosia, as so"n in te Torrens titles and tat e
"as te donee of .m(rosia0s oneHalf sare.
P'ainti+"s a#g$%ent: Teir action is to enforce a
trust "ic defendant Juan Salao Jr. allegedl$
)iolated. Te e6istence of trust "as not de<nitel$
alleged in te #laintif0s com#laint (ut in teir
a##ellant0s (rief.
RTC"s R$'ing: Tere "as no communit$ of #ro#ert$
among Juan, .m(rosia and Ialentin "en te
Calunuran and te Pinanganacan lands "ere
ac+uired' tat co K o"nersi# o)er te real #ro#erties
of Ialentina 8gnacio e6isted among er eirs after
er deat in 1L14' tat te co K o"nersi# "as
administered ($ .m(rosia and tat it su(sisted u# to
1L1B "en er estate "as #artitioned among er
tree cildren and er grandson, Ialentin Salao. 8t
rationali@ed tat Ialentin0s omission during is
lifetime to assail te Torrens titles of Juan and
.m(rosia signi<ed tat e "as not a coHo"ner of te
<s#onds. 8t did not gi)e credence to te testimonies
of #laintifs0 "itnesses (ecause teir memories could
not (e trusted and (ecause no strong e)idence
su##orted te declarations. !oreo)er, te #arties
in)ol)ed in te alleged trust "ere alread$ dead.
Judgment a##ealed to C. (ut te amounts in)ol)ed
e6ceeded t"o undred tousand #esos, te C.
ele)ated te case to te SC.
Iss$e:
112 345 #laintifs0 massi)e oral e)idence
suAcient to #ro)e an im#lied trust, resulting
or constructi)e, regarding te t"o
<s#onds.
He'!: SC aArmed lo"er court0s decision.
112 Plaintif0s #leading and e)idence cannot (e
relied u#on to #ro)e an im#lied trust. Te
trial court0s <rm conclusion tat tere "as
no communit$ of #ro#ert$ during te
lifetime of Ialentina 8gnacio or (efore 1L14
is su(stantiated ($ defendant0s
documentar$ e)idence. Tere "as no
resulting trust in tis case (ecause tere
ne)er "as an$ intention on te #art of Juan,
.m(rosia and Ialentin to create an$ trust.
Tere "as no constructi)e trust (ecause te
registration of te 2 <s#onds in te names
of Juan and .m(rosia "as not )itiated ($
fraud or mista>e. Tis is not a case "ere to
satisf$ te demands of justice it is
necessar$ to consider te Calunuran
<s#ond as (eing eld in trust ($ te eirs
of Juan Salao Sr. for te eirs of Ialentin
Salao. .nd e)en assuming tat tere "as an
im#lied trust, #laintifs0 action is clearl$
(arred ($ #rescri#tion "en it <led an
action in 1L%2 or after te la#se of more
tan 4& $ears from te date of registration.
CARANTES VS. CA
Facts: . #roceeding for e6#ro#riation "as
commenced ($ te go)ernment for te construction
of te =oa>an .ir#ort and a #ortion of =ot 44, "ic
"as originall$ o"ned ($ !ateo Carantes, "as needed
for te landing <eld. Te lot "as su(di)ided into =ots
5os. 44Ha 1te #ortion "ic te go)ernment sougt
to e6#ro#riate2, 44H(, 44Hc, 44Hd and 44He.
5egotiations "ere also under "a$ for te #urcase
($ te go)ernment of lots 44H( and 44Hc. 3en
!ateo Carantes died, is son !a6imino Carantes "as
a##ointed administrator of te estate and <led a
#roject of #artition of te remaining #ortion of =ot 44
"erein e listed as te eirs of !ateo Carantes "o
"ere entitled to inerit te estate, imself and is
(roters and sisters. .n 9.ssignment of -igt to
8neritance0 "as e6ecuted ($ te cildren of !ateo
and te eirs of .#ung Carantes in fa)or of !a6imino
Carantes for a consideration of P1. !a6imino sold to
te go)ernment lots nos. 44H( and 44Hc and di)ided
te #roceeds of te sale among imself and te
oter eirs of !ateo. Te assignment of rigt to
ineritance "as registered ($ !a6imino and te TCT
in te names of te eirs "as cancelled and a ne"
one "as issued in te name of !a6imino Carantes as
te sole o"ner of te remaining #ortions of lot 44. .
com#laint "as instituted ($ te tree cildren of
!ateo and te eirs of .#ung Carantes against
!a6imino #ra$ing tat te deed of assignment (e
declared null and )oid and tat te remaining
#ortions of lot 44 (e ordered #artitioned into si6
e+ual sares and !a6imino (e accordingl$ ordered to
e6ecute te necessar$ deed of con)e$ance in fa)or
of te oter eirs.
P'ainti+s" a#g$%ent: Te$ e6ecuted te deed of
assignment onl$ (ecause te$ "ere made to (elie)e
($ !a6imino tat te said instrument em(odied te
understanding among #arties tat it merel$
autori@ed te defendant !a6imino to con)e$
#ortions of lot 44 to te go)ernment in teir (ealf to
minimi@e e6#enses and facilitate te transaction and
it "as onl$ "en te$ secured a co#$ of te deed
tat te$ came to >no" tat te same #ur#orted to
assign in fa)or of !a6imino teir rigts to ineritance
from !ateo Carantes.
Deen!ant"s a#g$%ent: 7iled a motion to dismiss.
Te #laintifs0 cause of action is (arred ($ te statute
of limitations (ecause te deed of assignment "as
recorded in te -egistr$ of Pro#ert$ and tat
o"nersi# o)er te #ro#ert$ (ecame )ested in im
($ ac+uisiti)e #rescri#tion ten $ears from its
registration in is name of 7e(. 21, 1L4,.
RTC"s #$'ing: -uled in fa)or of defendant !a6imino
Carantes stating tat since an action (ased on fraud
#rescri(es in four $ears from te disco)er$ of te
fraud, and in tis case te fraud allegedl$
#er#etrated ($ defendant must deemed to a)e
(een disco)ered on marc 16, 1L4& "en te deed
of assignment "as registered, te #laintif0s rigt of
action ad alread$ #rescri(ed "en te$ <led te
action in 1L%B. .nd e)en assuming coHo"nersi#
e6isted, te same "as com#letel$ re#udiated ($ te
said defendant ($ #erformance #f se)eral acts suc
as te e6ecution of deed of sale in fa)or of te
go)ernment in 1LCL, ence o"nersi# ad )ested in
te defendant ($ ac+uisiti)e #rescri#tion.
C. re)ersed.
Iss$e&
112 345 te deed of assignment is )oid a( initio
on te ground of fraud and te action to
annul it as #rescri(ed.
122 345 a constructi)e trust e6ist ma>ing an
action for recon)e$ance (ased on
constructi)e trust im#rescri#ta(le.
He'!: SC dismissed te com#laint and set aside C.0s
decision.
112 3en te consent to a contract "as
fraudulentl$ o(tained, te contract is
)oida(le. 7raud or deceit does not render a
contract )oid a( initio, and can onl$ (e a
ground for rendering te contract )oida(le
or annulla(le #ursuant to article 1CL& of te
5CC ($ a #ro#er action in court. Te #resent
action (eing one to annul a contract on te
ground of fraud, its #rescri#ti)e #eriod is 4
$ears from te time of disco)er$ of fraud.
Te "eigt og autorities is te efect tat
te registration of an instrument in te
/Ace of te -egister of ;eeds constitutes a
constructi)e notice to te "ole "orld, and,
terefore, disco)er$ of fraud is deemed to
a)e ta>en #lace at te time of te
registration. 8n tis case, te deed of
assignment "as registered on !arc 16,
1L4&. Te 4 $ears #eriod "itin "ic te
#ri)ate res#ondents could a)e <led te
#resent action conse+uentl$ commenced on
marc 16, 1L4&, and since te$ <led it onl$
in Se#tem(er 4, 1L%B, it follo"s tat te
same is (arred ($ te statute of limitations.
122 5o e6#ress trust "as created in fa)or of te
#ri)ate res#ondents. 8f trust tere "as, it
could onl$ (e a constructi)e trust, "ic is
im#osed ($ la". 8n constructi)e trusts tere
is neiter #romise nor <duciar$ relation' te
so called trustee does not recogni@e an$
trust and as no intent to old te #ro#ert$
for te (ene<ciar$. .n action for
recon)e$ance (ased on im#lied or
constructi)e trust is #rescri#ta(le and
#rescri(es in 1& $ears. 8n tis case, te ten K
$ear #rescri#ti)e #eriod (egan on marc 16,
1L4&, "en te #etitioner registered te
deed of assignment and secured te
cancellation of te certi<cate of title in te
joint names of te eirs of !ateo Carantes
and, in lieu tereof, te issuance of a ne"
title e6clusi)el$ in is name. Since te
#resent action "as commenced onl$ on
Se#tem(er 4, 1L%B, te same in (arred ($
e6tincti)e #rescri#tion.
)UNICIPALIT4 OF VICTORIAS VS. CA
Facts& 5orma =euen(erger, res#ondent, inerited a
#arcel of land from er grandmoter, Simeona Ida.
de ;itcing in 1L41. 8n 1L6C, se disco)ered tat a
#art of te #arcel of land "as (eing used ($
#etitioner !unici#alit$ of Iictorias as a cemeter$. E$
reason of te disco)er$, res#ondent "rote a letter to
te !a$or of Iictorias demanding #a$ment of #ast
rentals o)er te land used a cemeter$ and
re+uesting deli)er$ of te illegall$ occu#ied land ($
te #etitioner. Te !a$or re#lied tat te
munici#alit$ (ougt te land (ut o"e)er refused to
so" te #a#ers concerning te sale. .##arentl$, te
munici#alit$ failed to register te ;eed of Sale of te
lot in dis#ute.
-es#ondent <led a com#laint in te Court of
7irst 8nstance of 5egros /ccidental for reco)er$ of
#ossession of te #arcel of land occu#ied ($ te
munici#al cemeter$. 8n its ans"er, #etitioner
!unici#alit$ alleged o"nersi# of te lot a)ing
(ougt it from Simeona Ida. de ;itcing sometime in
1LC4. Te lo"er court decided in fa)or of te
#etitioner munici#alit$.
/n a##eal, #etitioner #resented an entr$ in
te notarial register form te Eureau of -ecords
!anagement in !anila of a notar$ #u(lic of a sale
#ur#orting to (e tat of te dis#uted #arcel of land.
8ncluded "itin it are te #arties to te sale, Ida. de
;itcing, as te )endor and te !unici#al !a$or of
Iictorias in 1LC4, as )endee. Te Court of .##eals
o"e)er claimed tat tis e)idence is not a suAcient
;eed of Sale. 8t terefore re)ersed te ruling of te
C78 and ordered te #etitioner to deli)er te
#ossession of te land in +uestion to res#ondents.
Iss$e& 345 te notar$ #u(lic of sale is suAcient to
su(stantiate te munici#alit$0s claim tat it ac+uired
te dis#uted land ($ means of a ;eed of Sale. Fes.
He'!& Te fact tat te notar$ #u(lic of sale so"ed
te nature of te instrument, te su(ject of te sale,
te #arties of te contract, te consideration and te
date of sale, te Court eld tat it "as a suAcient
e)idence of te ;eed of Sale.
Tus, "en 5orma inerited te land from
er grandmoter, a #ortion of it as alread$ (een
sold ($ te latter to te !unici#alit$ of Iictorias in
1LC4. *er registration of te #arcel of land did not
terefore transfer o"nersi# (ut merel$ con<rmed it.
.s te ci)il code #ro)ides, "ere te land is decreed
in te name of a #erson troug fraud or mista>e,
suc #erson is ($ o#eration of la" considered a
trustee of an im#lied trust for te (ene<t of te
#ersons from "om te #ro#ert$ comes.
Conse+uentl$, se onl$ eld te land in dis#ute in
trust for te #etitioner ence #ri)ate res#ondent is in
e+uit$ (ound to recon)e$ te su(ject land to te
cestui que trust, te !unici#alit$ of Iictorias.
)ARIANO VS. DE VEGA
Facts& S#ouses Dr(ano and Pangani(an o"ned as
conjugal #ro#ert$ 2L unregistered #arcels of land
during teir lifetime. 3en Dr(ano died, is
com#ulsor$ eirs "ere te cildren of Gaudencia, is
cild "it Pangani(an, "o are #etitioners in tis
case, and t"o oter legitimate cildren, is cildren
"it is second "ife, "o are te #ri)ate
res#ondents in tis case.
Petitioners <led a ci)il case in te C78 for
#artition and deli)er$ of #ossession of certain sares
in te conjugal assets. Te$ contended tat #ri)ate
res#ondents a)e e6cluded tem from ta>ing
#ossession of te "ole conjugal #ro#ert$ and tat
te latter a##ro#riated to temsel)es te #roducts
coming from te #arcels of land. Te court ruled in
fa)or of te #ri)ate res#ondents claiming tat te
action of te #etitioners as alread$ #rescri(ed for
te reason tat an im#lied or constructi)e trust
#rescri(es in ten $ears.
Iss$e& 345 tere is an im#lied or constructi)e trust
granted ($ te #etitioners in fa)or of te
res#ondents. 5o.
He'!& Te Court ruled tat te #resent case does not
fall under te rules of im#lied trust. Considering te
fact tat te #arties in tis case inerited te land
from te same ancestor, Dr(ano, (ot #arties are
clearl$ coHo"ners of te dis#uted #ro#erties. Tis
case is terefore go)erned ($ te rules on coH
o"nersi#. Dnder te ci)il code, #rescri#tion does
not run against a coHo"ner or a coHeir so long as e
e6#ressl$ or im#liedl$ recogni@es te coHo"nersi#.
8n )ie" of teir lac> of a clear re#udiation of
te coHo"nersi#, #ri)ate res#ondents cannot
ac+uire te sare of te #etitioners ($ #rescri#tion.
HEIRS OF CANDELARIA VS. RO)ERO
Facts& Parties to tis case are te eirs of :milio
Candelaria as #laintif and =uisa -omero, and te
eirs of =ucas as defendants.
:milio and =ucas Candelaria (ougt a lot on
an installment (asis. =ucas #aid te <rst t"o
installments (ut (ecause of sic>ness "ic caused
im to (e (edridden, e sold is sare to is (roter
:milio "o continued to #a$ te #urcase #rice until
te o(ligation to #a$ ad (een full$ satis<ed. Te
TCT "as o"e)er issued under te name of =ucas.
5e)erteless, =ucas ac>no"ledges tat e merel$
eld te title in trust for is (roter "it te
understanding tat Mte necessar$ documents of
transfer "ill (e made laterN and tis fact "as >no"n
not onl$ to im (ut also to te defendants. *o"e)er
u#on is deat, is eirs refused to recon)e$ te lot
to #laintif des#ite re#eated demands.
Plaintif (rougt an action in te C78 for a
com#laint for recon)e$ance of real #ro#ert$. Te
lo"er court o"e)er dismissed te case on te
ground tat an e6#ress trust, and not an im#lied
trust, "as created and tat te action ad alread$
#rescri(ed.
Iss$e& 3at >ind of trust "as createdO :6#ress or
im#lied trustO 8m#lied trust.
He'!& 3ere te grantee ta>es te #ro#ert$ under
an agreement to con)e$ to anoter on certain
conditions, a trust results for te (ene<t of suc
oter or is eirs. 8t is also te rule tat tere is an
im#lied trust "en a #erson #urcases land "it is
o"n mone$ and ta>es con)e$ance tereof in te
name of anoter. 8n suc a case, te #ro#ert$ is eld
on a resulting trust in fa)or of te one furnising te
consideration for te transfer. Tis >ind of trust is
from e+uit$ and arises ($ im#lication or o#eration of
la".
8n te #resent case, it is a##arent tat
:milio furnised te consideration intending to o(tain
a (ene<cial interest in te #ro#ert$ in +uestion.
*a)ing su##lied te mone$, it is #resumed tat e
intended to #urcase te lot for is o"n (ene<t.
!oreo)er, ($ entering into an agreement "it :milio
tat Mte necessar$ documents of transfer "ill (e
made later,N =ucas ac>no"ledged te e merel$ eld
te #ro#ert$ in trust for is (roter "it te
understanding tat it "ill e)entuall$ (e con)e$ed to
te #laintif0s #redecessor in interest. =astl$, ($
ac>no"ledging te #resence of trust, te #laintif0s
action cannot (e said to a)e (een (arred ($ la#se
of time. Te case is terefore remanded for furter
#roceedings.
LAUREANO VS. STEVENSON
Facts& 8n 1L12, 7eli6 =aureano sold to :ugenio
Pila$co a #iece of #ro#ert$ situated in te Cit$ of
8loilo, and suc land "as ten registered in te
latter0s name. .djoining suc #ro#ert$ "as anoter
#ro#ert$ (elonging to =aureano.
3en te cadastral sur)e$ "as initiated in 8loilo in
1L14, Pila$co made #ro#er re#resentations to
con<rm te title to is #ro#ert$. Tereafter, title "as
issued to im, (ut later, for some un>no"n reason,
te certi<cate "as ordered cancelled and a ne" one
"as issued. Ten, #resuma(l$ ($ mista>e, te title
"as made to include not onl$ Pila$co0s #ro#ert$ (ut
#ro#ert$ (elonging to is neig(or, =aureano. Te
<nal decree to is efect "as issued in 1L16.
Creditors of Pila$co, (ecoming a"are of te
e6istence of te title to te #ro#ert$, instituted
actions and o(tained "rits of e6ecution in !a$ 1L22.
Te sale of te #ro#ert$ "as set for /cto(er 1L22. .ll
te "ile, =aureano ad done noting to #rotect is
interests in te #ro#ert$. *o"e)er, e claims to a)e
(een a(sent in S#ain at te time of te earing in te
cadastral case and to a)e >no"n noting of it.
/n June 1L22, =aureano <led a case against Pila$co
to o(tain a judgment, declaring im to (e te o"ner
of te #arcels of land mista>enl$ included in te
latter0s title, and ordering te cancellation of te
certi<cate of title teretofore issued in te name of
Pila$co.
Iss$e& 3en #ro#ert$ is ac+uired troug mista>e,
can te real o"ner reco)er suc #ro#ert$ ($ )irtue of
im#lied trustO
T#ia' Co$#t& Since te creditors "ere not #arties to
te action, te cancellation of te annotations on te
certi<cate of title in fa)or of te creditors of Pila$co
cannot (e sustained.
He'!& 8t is #ro#er to issue te injunction sougt ($
te #etitioners to sto# te sale of te #ro#ert$ at
#u(lic auction, to annul te le)ies made on te
#ro#ert$, to o(tain te cancellation in te registr$ of
#ro#ert$ of te annotations made, and to secure a
ne" title for te #etitioner "itout tese
encum(rances.
8t is im#ortant to note tat:
1. Pila$co ne)er laid a claim to te #ro#ert$'
2. Te t"o lots co)ered ($ te certi<cate "ere
mista>enl$ registered in te name of
Pila$co' and
C. Te court did not a)e jurisdiction to
con<rm te title of te t"o lots for te
reason tat no #etition for title "as <led, no
trial "as eld, no e)idence "as #resented,
and no judgment "as rendered regarding
tese t"o lots in te land registration
#roceedings.
Pila$co "as, in efect, merel$ olding te title of te
#ro#ert$ in trust of =aureano. Te creditors of
Pila$co could ac+uire no iger or (etter rigt tan
Pila$co ad in te #ro#ert$, "ic, in tis case, "as
noting. *ence, =aureano can rigtfull$ reco)er te
t"o #arcels of land included in te title of Pila$co
troug mista>e.
GON3ALES 5. IAC
Facts& Te land in dis#ute is registered in te name
of 7austo So$. 8n 1L41, 7austo sold 2%C s+. m. to
7rancisco =andingin. 8n 1L%4, #ursuant to a ;eed of
;onation e6ecuted ($ 7austo, .ntonio So$ 1son of
7austo2 and Gregoria !iranda 1"ife2 sold 24& s+. m.
to Juanito Gon@ales and Coronacion Ganaden. 8n
Januar$ 1L6&, 7austo sold anoter 24& s+. m. to
Gon@ales and Ganaden and t"o da$s later, a TCT "as
issued in fa)or of Gon@ales, indicating is sare as
coHo"ner of 4B& s+. m. and 7austo So$, 24& s+. m. 8n
1L6%, 7austo sold anoter 14& s+. m. to te Gon@ales
and Ganaden.
.#ril 1L6%, -es#ondents -osita =o#e@, Ga)ino
Ca$a($a(, .gueda and 7eli#a D(ando, Pedro Soriano,
Teosidia =o#e@ and 7ederico Eallesteros 1nieces and
ne#e"s of 7austo2 <led te instant com#laint for
#artition against 7austo So$. /n te same da$ te$
<led a notice of lis #endens and ad it annotated on
te /CT. 7austo ans"ered and contested #laintifs
claims, asserting e6clusi)e title in is name. 7austo
countered tat te +uestioned land "as ne)er
registered in te names of is #arents :ugenio and
.m(rosia, and tat e ad (een te registered o"ner
of te #remises since 1LC2.
/n te (asis of e)idence adduced e6H#arte, te Trial
Court eld tat res#ondents and 7austo "ere coH
o"ners of te lot and ordered te #artition tereof.
Parties "ere enjoined to #artition amongst
temsel)es and "ere to su(mit te same to te
lo"er court for con<rmation. D#on e6ecution, te
serif "as una(le to efect a##ortionment due to a
C
rd
#art$ claim of Juanito and Coronacion Gon@ales,
stating tat te$ "ere registered o"ners of 4B& s+.
m. of te dis#uted land. Te serif noted te )arious
im#ro)ements #etitioners ad introduced
1a#artment, residential ouse and #igger$2. Trial
court allo"ed #etitioners to inter)ene as
indis#ensa(le #arties, )acating its #re)ious judgment
and granting a ne" trial.
T#ia' Co$#t: Tere is no #roof to so" tat
#etitioners are coHo"ners of te #ro#ert$ in +uestion
(ecause te land as long (een co)ered ($ an /CT
since 1LC2 in te name of teir #redecessor in
interest, 7austo So$.
CA: -esol)ed in fa)or of res#ondents, declaring tat
te sale to inter)enorH#etitioners did not terminate
te trust relationsi# (et"een te a##ellants and te
a##ellees. Te sale in fa)or of #etitioners sall (e
enforced against te Q sare of res#ondents as eirs
of 7austo.
8ssue: 3as te dis#uted land eld in trust ($ 7austo
So$ for is sisters, :milia, Cornelia and .nastacia
1moters of erein res#ondents2O
R$'ing: C. decision re)ersed, order for #artition
dismissed.
7austo, (eing #redecessorHinHinterest, ad a##eared
to (e te registered o"ner of te lot for more tan C&
$ears and is dominical rigts can no longer (e
callenged. .n$ insinuation as to te e6istence of an
im#lied or constructi)e trust sould not (e allo"ed.
:)en assuming tere "as an im#lied trust,
res#ondents attem#t at recon)e$ance is (arred ($
#rescri#tion, "ic in tis case is 1& $ears, te
#eriod rec>oned from te issuance of te ad)erse
title to te #ro#ert$ "ic o#erates as a constructi)e
notice.
Te assertion of ad)erse title, "ic "as an e6#licit
indication of re#udiation of te trust for te #ur#ose
of te statute of limitations, too> #lace "en te /CT
"as issued in te name of 7austo So$ in 1LC2, to te
e6clusion of is C sisters.
:)en if tere "ere no re#udiation, te rule is tat an
action to enforce an im#lied trust ma$ (e
circumscri(ed not onl$ ($ #rescri#tion (ut also ($
lacesRin "ic case, re#udiation is not re+uired.
-es#ondents ad literall$ sle#t on teir rigts
#resuming te$ ad an$ and can no longer dis#ute
te conclusi)e and incontro)erti(le caracter of
7austo0s title as te$ are deemed to a)e ac+uiesced
terein.
ADA3A V. CA
Facts: 8n 1L%C, Iictor .da@a Sr. e6ecuted a ;eed of
;onation, co)ering te dis#uted land in tis case,
located in Sinono>, Sam(oanga del 5orte in fa)or of
-es#ondent Iioleta. Te land (eing dis#osa(le #u(lic
land ad (een eld and culti)ated ($ Iictor, Sr. 3it
te el# of er (roter, *oracio, Iioleta <led a
omestead a##lication o)er te land and a free
#atent "as issued in 1L%6. .n /CT "as issued in
1L6&. 8n 1L62, Iioleta and us(and, =ino o(tained a
loan from P5E ($ e6ecuting a mortgage on te land,
"ile *omero .da@a, (roter of Iioleta remained
administrator of te same.
8n 1L,1, *oracio in)ited is (roters and sisters for a
famil$ gatering "ere e as>ed Iioleta to sign a
;eed of 3ai)er "it res#ect to te #ro#ert$ in
Sinono>. Te ;eed stated tat te land "as o"ned in
common ($ Iioleta and *oracio e)en toug te
/CT "as in er name onl$. Te ;eed also #ro)ided
for te "ai)er, transfer and con)e$ance of Iioleta to
*oracio of T of te #ro#ert$ and its im#ro)ements.
Iioleta and *oracio signed te ;eed "it *omero as
a "itness.
. fe" monts later, Iioleta and us(and =ino <led a
com#laint for annulment of te ;eed of "ai)er and
for damages against *oracio and "ife 7elisa. Te
com#laint alleged tat 112 se "as a(solute o"ner of
te land ($ )irtue of an unconditional donation
e6ecuted ($ er fater in er fa)or' 122 se "as
registered o"ner' 1C2 se signed te ;eed of "ai)er
(ecause of fraud, misre#resentation and undue
in?uence' and 142 (ecause of suc malicious acts,
se is entitled to damages from *oracio.
T#ia' Co$#t: ;eclared ;eed of 3ai)er as )alid and
(inding u#on Iioleta, tat *oracio "as coHo"ner of
T of te land, and odering Iioleta to #a$ *oracion
te #roceeds of is sare.
CA: -e)ersed Trial court decision, declaring tat
toug te deed "as signed )oluntaril$, suc ;eed
"as "itout consideration or cause (ecause te land
ad (een unconditionall$ donated to Iioleta alone.
Iss$e: 3o o"ns te dis#uted #arcel of landO
R$'ing& Petition granted.
;eed of donation ad a crossedHout #ro)ision: Tat
te donee sall sare T of te entire #ro#ert$ "it
one of er (roters and sisters after te deat of te
donor.
Te record is (ereft of an$ indication of an$ e)il
intent or malice on te #art of *omero, Iictor, Jr. and
Teresita 1si(lings of Iioleta2 tat "ould suggest
deli(erate collusion against Iioleta. Teir fater ad
e6ecuted te ;eed of ;onation "it te
understanding tat te same "ould (e di)ided
(et"een *oracio and Iioleta and tat Iioleta ad
signed te ;eed of 3ai)er freel$ and )oluntaril$.
Iictor .da@a, Sr. left 4 #arcels of land di)ided among
te 6 cildren troug te #ractice of a)ing te
lands ac+uired ($ im titled to te name of one of is
cildren.
Te #ro#ert$ in)ol)ed in te instant case is o"ned in
common ($ Iioleta and (roter, *oracio e)en toug
te /CT "as onl$ in er name. Se eld alf of te
land in trust for #etitioner *oracioRim#lied trust
(ased on .rticle 144L of te Ci)il Code:
Tere is also an im#lied trust "en a donation is
made to #erson (ut 8t a##ears tat altoug te
legal estate is transmitted to te donee, e
ne)erteless is eiter to a)e no (ene<cial interest
of onl$ a #art tereof.
Te doctrine of laces is not to (e a##lied
mecanicall$ as (et"een near relati)es.
AR)A)ENTO V. GUERRERO
Facts& Tis case in)ol)es an action for recon)e$ance
or for te declaration of an im#lied trust on =ot 5o.
L,4 and for damages.
Te dis#uted land "as te su(ject of 2 Patent
.##lications: 112 7ree #atent <led ($ ;efendant on
.ug 1 1L%B, issued Jul 1L61, /CT issued 7e( 1L62
and 122 *omestead Patent <led ($ Plaintif on Jul ,
1L%L, a##ro)ed Jan 1L64.
Plaintif .rmamento alleges tat e is te #ossessorH
actual occu#ant of and *omestead a##licant o)er te
dis#uted lot. D#on follo"ing u# is a##lication, e
"as soc>ed to disco)er tat ;efendant Guerrero,
troug fraud and misre#resentation o(tained a 7ree
Patent o)er te same land, ($ falsel$ stating tat e
ad continuousl$ #ossessed te lot since Jul$ 1L4% or
#rior tereto, "en in trut defendant "as ne)er in
#ossession.
8n is .ns"er, Guerrero denies tat e "as not in
#ossession claiming tat e ad (een in occu#ation
of said lot and e)en autori@ed a certain !acario
Caanga$ to administer te same "ile e "as
term#oraril$ a"a$ for missionar$ "or> in Caga$an de
/ro.
T#ia' Co$#t& ;ismissed te case on te follo"ing
grounds: 6a7 Plaintif as no ,e#sona'ity to <le te
action for recon)e$anceRte #ro#er #art$ (eing te
-e#u(lic of te Pili##ines' 687 Plaintif as no ca$se
o action in te a(sence of #ri)it$ of contract
(et"een #arties' 6c7 defendant0s tit'e has 8eco%e
in!eeasi8'e and cannot (e cancelled' and 6!7 e)en
if (ased on fraud, te action as ,#esc#i8e!.
Iss$es: 8s #laintif0s action for recon)e$ance
justi<edO 3as tere a trust createdO
R$'ing: .fter te la#se of one $ear, a decree of
registration is no longer o#en to re)ie" or attac>,
altoug its issuance is attended "it fraud.
*o"e)er, an action for recon)e$ance is still a)aila(le
for te aggrie)ed #art$ if te #ro#ert$ as not $et
#assed to an innocent #urcaser for )alue. Tis is
e6actl$ "at #laintif as done.
Plaintif as not (een a(le to #ro)e fraud and
misre#resentation (ecause of te trial court
dismissal. 3ile #laintif is not te Mo"nerN of te
land, so tat, strictl$ s#ea>ing, e as no #ersonalit$
to <le tis a##lication, e #leads for e+uit$ and
in)o>es te doctrine of im#lied trust under A#t. 9:;<
of te Ci)il Code: If property is acquired through
mistake or fraud, the person obtaining it is, by force
of law, considered a trustee of an implied trust for
the beneft of the person from whom the property
comes.
Te doctrine of im#lied trust ma$ (e made to
o#erate in #laintif0s fa)or, assuming tat e can
#ro)e is allegation tat defendant ad ac+uired
legal title ($ fraud.
. constructi)e trust is a trust raised ($ construction
of la" or arising ($ o#eration of la". 8f a #erson
o(tains legal title to #ro#ert$ ($ fraud or
concealment, courts of e+uit$ "ill im#ress u#on te
title a soHcalled constructi)e trust in fa)or of te
defrauded #art.
.ction for recon)e$ance as not #rescri(edRte
#rescri#ti)e #eriod (eing 1& $ears. 1Title o(tained
1L62, Suit commenced 1L6,2
Case is remanded to C78 Coto(ato.
RA)OS 5 RA)OS
Facts: S#ouses !artin -amos and Candida "ere
sur)i)ed ($ tree legitimate cildren: Jose, .gustin
and Granada. !artin "as also sur)i)ed ($ , natural
cildren. . s#ecial #roceeding "as instituted for te
settlement of te estate of said s#ouses. -afael,
(roter of !artin "as a##ointed administrator. .
#roject of #artition "as su(mitted and te conjugal
ereditar$ estate "as a##raised at P,4,LB4.LC. 8t
consisted of 1B #arcels of land, some ead cattle and
ad)ances to te legitimate cildren. 8t "as agreed in
te #roject of #artition tat Jose and .gustin "ould
#a$ te cas adjudications to teir natural si(lings.
/nl$ te sum of P C,, 4L2.46 of te P,4>
re#resented te estate of !artin. 14C tereof "as te
free #ortion out of "ic te sares of te natural
cildren "ere to (e ta>en: eac "ould get P1,,B%.C%.
Te #roject of #artition as "ell as te inter)ention of
Timoteo as guardian of te <)e minor eirs "as
a##ro)ed ($ te court. =ater on, Judge 5e#omuceno
as>ed te administrator to su(mit a re#ort so"ing
tat te sares a)e (een deli)ered to te eirs as
re+uired "ic te si(lings ac>no"ledged in a
manifestation. Te *imala$an cadastre 1B lots2
in)ol)ed in tis case "ere registed in e+ual sares in
te names of Jose0s "ido", Gregoria and er
daugter Granada.
Te P'ainti+"s 1natural cildren2 contend tat "ile
te$ "ere gro"ing u#, te$ ad (een "ell su##orted
($ Jose and .gustin as te$ ad (een recei)ing teir
sares from te #roduce of te *aciendas in )aried
amounts o)er te $ears. :)en after te deat of Jose,
Gregoria ad continued gi)ing tem mone$ (ut ad
sto##ed in 1L%1 ($ reason tat lessee =acson "as
not a(le to #a$ te lease rental. 5o accounting ad
e)er (een made to tem ($ Jose nor Gregoria. D#on
te sur)e$ of te land, te$ did not inter)ene, as Jose
and .gustin #romised tat said lands sall (e
registered in te names of te eirs. Te$ did not
>no" tat te intestate #roceedings "ere instituted
for te distri(ution of te estate of teir fater.
5eiter did te$ a)e an$ >no"ledge tat a guardian
"as assigned to re#resent teir minor si(lings,
considering tat !odesto and !iguel "o "ere
claimed to (e suc "ere no longer minors at te time
of te #artition. Te$ ne)er recei)ed teir sare in
te estate of teir fater. Plaintifs later on
disco)ered tat te #ro#ert$ ad a Torrens title in te
name of Gregoria and er daugter "en !odesto0s
cildren ad in+uired from te -egister of ;eeds.
Petitioners no" (ring te #resent suit for te
recon)e$ance of te su(ject #arcels of land in teir
fa)or.
Petitioners claim tat in efect, Gregoria and
daugter are olding teir sares in trust "ic "as
denied ($ defendants. ;efendants alledge res
judicata and #rescri#tion.
LO=ER COURT& ;ismissed te com#laint on te
(asis of res judicata as teir sares "ere alread$
settled in te intestate #roceedings. 5o deed of trust
"as alledged and #ro)en.
Plaintif0s a##ealed sa$ing tat te$ "ere grie)ousl$
#rejudiced ($ te #artition and tus res judicata
sould not (ar teir action.
SC& Te #laintifs a)e not #ro)en an$ e6#ress trusts
neiter a)e te$ s#eci<ed te >ind of im#lied trust
contem#lated in teir action. :iter "a$, suc action
ma$ (e (arred ($ laces.
8n te cadastral #roceedings, Jose and "ife claimed
te B lots of te #laintifs. .fter te deat of Jose, te
said lots "ere adjudicated to is "ido" and daugter.
8n 1LC2 Gregoria leased te said lots to Fulo, "o in
1LC4 transferred is lease rigts o)er *acienda
Cala@ato to Eonin and /lmedo, us(and of #laintif
.tanacia. Eonin and /lmedo in 1LC% sold teir lease
rigts o)er *acienda Cala@a to Consing.
Tose transactions #ro)e tat te eirs of Jose ad
re#udiated an$ trust "ic "as su##osedl$
constituted o)er *acienda Cala@a in fa)or of te
#laintifs.
Te #eriod of e6tincti)e #rescri#tion is 1& $ears.
.tanacia, !odesto and !anuel, could a)e (rougt
te action to annul te #artition. !aria and :miliano
"ere (ot (orn in 1BL6. Te$ reaced te age of 21
in 1L1, and could a)e (rougt te action from tat
$ear.
Te instant action "as <led onl$ in 1L%,. .s to
.tanacia, !odesto and !anuel, te action "as <led
4C $ears after it accrued and, as to !aria and
:miliano, te action "as <led 4& $ears after it
accrued. Te dela$ "as ine6cusa(le. Te instant
action is un+uestiona(l$ (arred ($ #rescri#tion and
res judicata.
8t "as anomalous tat te manifestation sould
recite tat te$ recei)ed teir sares from teir
administrator, "en in te #roject of #artition it "as
indicated tat said sares sall (e recei)ed in cas
from (roters Jose and .gustin. Tus due to tis
irregularities as "ell as tose of te intestate
#roceedings, te #laintifs contend tat te #artition
"as not (inding on tem 1e6ce#t for Timoteo "o
considered imself (ound ($ te #artition2. Te$ as>
tat te case (e remanded to te lo"er court for te
determination and adjudication of teir rigtful
sares.
*o"e)er, due to te fact tat te #laintifs sle#t on
teir rigts, te courts can no longer aford tem
relief
VARSIT4 HILLS( INC 5 NAVARRO
Facts& Te #resent action (egan from a #re)ious ci)il
case "erein a #etition "as <led ($ erein
res#ondents !ejia as eirs of Uuintin !ejia and ($
:l#idio Ti(urcio as assignee of a #ortion of te estate
left ($ te latter as #laintif against #etitioners
Tuason et. al. Te com#laint alleged tat Uuintin
!ejia ad o(tained a S#anis title to te land and
tat e and is successors in interest ad occu#ied
te land "itout interru#tion until te$ "ere forci(l$
rejected terefrom and teir ouses demolised in
1LC4 troug a "rit of e6ecution. 8n 1L14, te
defendants Tuason ad o(tained a decree of
registration co)ering C%,4&C ectares and tat te$
ad fraudulentl$ and insidiousl$ included #laintif0s
land in te area co)ered ($ te Certi<cate of Transfer
($ inserting fa>e and false tecnical descri#tions. DP
et al. as su(se+uent ac+uirers "ose titles are
deri)ed from te original fraudulent certi<cates
sould li>e"ise (e annulled.
*erein Petitioners contend tat te decision in a ci)il
case "erein te -es#ondents "ere declared as
"itout title to te land and ejected ($ a "rit of
e6ecution "as aArmed ($ te Su#reme Court. Te
Petitioners contend in te #resent case tat te
causes of action a)erred ($ te -es#ondents "ere
(arred ($ te =-. and te statute of limitations o)er
%1 $ears a)ing ela#sed since te decree of
registration "as issued, (arred ($ laces as C2 $ears
a)e ela#sed since te ejectment and tat te court
ad no jurisdiction to re)ie" and re)ise te decree of
registration. Te$ also maintain as aArmati)e
defenses tat te$ ad in #ossession for o)er C&
$ears of te land tus ac+uiring title ($ ac+uisiti)e
#rescri#tion and tat claims for o"nersi# "ere
e6tinguised ($ te decree and tat te$ are
#urcasers for )alue and in good fait of te lands
standing in teir names. . motion to dismiss "as
<led $et "as denied ($ te lo"er court. Te
Petitioners resorted to te SC for a s#ecial
#roceeding for "rits of certiorari and #roi(ition tus
te trial court "as enjoined from #roceeding "it te
trial until furter orders.
!ejia and Ti(urcio claim tat a##eal in due time "as
te #ro#er remed$.
Iss$e& Can te #resent action #ros#er (ased on
claims of im#lied4constructi)e trustO
SC& Te court (elo" gra)el$ a(used its discretion in
den$ing #etitioners motion to dismiss (ased on teir
aArmati)e defenses. Te action ($ Ti(urcio and
!ejias "as alread$ (arred ($ res judicata and
e6tincti)e #rescri#tion. . #re)ious case "as decided
"erein Uuintin !ejia ad (een found "itout title
and tus ejected. Te action in te court (elo" "as
de<nitel$ (arred as "ile te #resent res#ondents
"ere not #arties to te cause "ic Uuintin !ejia
"as suc a #art$, te <nal judgment against im
concludes and (ars is #redecessors and #ri)ies as
"ell. Since te res#ondents failed to <le a #etition for
re)ie" of te decree "itin one $ear after te entr$
tereof des#ite claims tat tere "as fraud in te
inclusion of teir land in te title, te$ are (arred ($
te =-.. *o"e)er if te fraud ad (een committed
after te issuance of te decree, te$ sould a)e
#leaded "en Uuintin "as made a defendant in Ci)il
Case 442&. 5e)erteless, teir cause of action is
(arred ($ res judicata. 3it or "itout judgment
against Uuintin, thei# action ha! 8een
e>ting$ishe! 8y the 'a,se o ?/ yea#s #o% the
ti%e he @as eAecte! #o% the 'an! in B$estion.
An action to #eco5e# is a'so o#ec'ose! 8y the
stat$te o 'i%itations. Actions on i%,'ie! t#$sts
a#e e>ting$ishe! 8y 'aches o# ,#esc#i,tion o
9/ yea#s. -es#ondents a)e #resented no cause of
action. Te lo"er court ($ den$ing te motion to
dismiss constituted G.;=:J since te$ #rolonged a
litigation tat "as unmeritorious on its face.
GERONA 5 DE GU3)AN
Facts& Petitioner Gerona eirs are te legitimate
cildren of ;omingo Gerona and Placida de Gu@man.
Placida "as a legitimate daugter of !arcelo de
Gu@man and is <rst "ife Teodora de la Cru@. .fter
te deat of Teodora, !arcelo married Camila -amos.
Teir cildren are erein res#ondents de Gu@man
eirs. !arcelo died some time in Se#term(er 1L4%
and res#ondents e6ecuted a deed of e6traHjudicial
settlement of is estate. Te$ fraudulentl$ sti#ulated
terein tat te$ "ere te onl$ sur)i)ing eirs of
!arcelo altoug >no"ing tat #etitioners "ere also
is forced eirs. Te$ "ere a(le to cause te transfer
te certi<cates of , #arcels of land eac in teir
names. Te #etitioners disco)ered te fraud onl$ te
$ear (efore te institution of te case. Petitioners
see> to annul te e6traHjudicial settlement as "ell as
a)e teir sares in te said #ro#erties recon)e$ed
to tem.
Contentions& ;efendants argue tat Placida de
Gu@man "as not entitled to sare in te estate of
!arcelo as se "as an illegitimate cild and tat te
action of te Petitioners is (arred ($ te statute of
limitations.
R$'ings&
TRIAL COURT: Te trial court dismissed te case
after <nding tat Placida "as a legitimate cild of
!arcelo and tat te #ro#erties descri(ed erein
(elonged to te conjugal #artnersi# of !arcelo and
Camila. 8t also ruled tat Petitioners action ad
alread$ #rescri(ed.
CA: aArmed ruling of te trial court
Contentions& Petitioners assert tat since te$ are
coHeirs of !arcelo, te action for #artition is not
su(ject to te statue of limitations' tat if afected,
te #eriod of 4 $ears did not (egin to run until
disco)er$ of te fraud. Te$ claim tat te fraud
done ($ res#ondents too> #lace in 1L%6 or 1L%, and
tat it ad not #rescri(ed "en te #resent action
"as commenced.
SC: Te rule olds true onl$ "en te defendants do
not old te #ro#ert$ in +uestion under an ad)erse
title. Te statute of limitations o#erates from te
time te ad)erse title is asserted ($ te #ossessor of
te #ro#ert$.
Te defendants e6cluded te #etitioners from te
estate of !arcelo "en te$ e6ecuted te deed of
e6traHjudicial settlement claiming tat te$ are te
sole eirs tus setting u# an ad)erse title to te
estate.
.n action for recon)e$ance of real #ro#ert$ (ased
u#on a constructi)e or im#lied trust, resulting from
fraud ma$ (e (arred ($ te statute of limitations and
te action ma$ onl$ (e <led "itin 4 $ears from te
disco)er$ of te fraud. 8n te case at (ar, te
disco)er$ "as made on June 2%, 1L4B "en te deed
"as <led "it te -egister of ;eeds and ne"
certi<cates of title "ere issued in te names of te
res#ondents e6clusi)el$. Plaintif0s com#laint "as not
<led until 5o)em(er 4, 1L%B or more tan 1& $ears
after.
8gnacio Gerona as "ell as !aria Conce#cion attained
te age of majortit$ in 1L4B tus ad 4 $ears from
date of disco)er$ "itin "ic to <le an action.
7rancisco and ;el<n attained te age of majorit$ in
1L%2 and 1L%4, tus ad 2 $ears after remo)al of
Mlegal inca#acit$N "itin "ic to commence teir
action.
CALADIAO 5 VDA DE *LAS
7.CTS: Prudencio =im#in sold, ceded, and transferred
to Simeon Elas an unregistered <s#ond for te
P444& "it te rigt to re#urcase te #ro#ert$
"itin one $ear from Se#t. C&, 1LC2 and "it te
e6#ress sti#ulation tat te sale "ould automaticall$
(ecome a(solute and irre)oca(le if no re#urcase
"as made "itin te agreed #eriod. !a6ima Santos,
1Elas0 "ife2 too> o)er u#on te deat of Elas and
#aid ta6es until 1L%%. Te <s#ond togeter "it te
oter #ro#erties "as adjudicated to er ($ te court
in an estate #roceeding. ;es#ite suc, =im#in
o(tained a judicial registration of te <s#ond in
fa)or of is conjugal #artnersi# "it Caladiao and
secured a ne" title in teir names. . TCT "as issued
in te name of Caladiao "en =im#in died. Dna"are
of suc, Santos Ida de Elas a##lied for te
registration of te <s#ond "ic "as adjudicated to
er as it "as #ro)en tat =im#in sold te #ro#ert$ to
Elas and ad failed to re#urcase te same. 3ile
tis registration case "as #ending, Caladiao <led a
com#laint for te return of te <s#ond and te
annulment of te sale a retro e6ecuted ($ =im#in.
Tis "as o"e)er, dismissed. Te court ordered an
issuance of decree in fa)or of Ida de Elas (ut
su(se+uentl$ dismissed te #roceedings in <nding
tat te said <s#ond "as registered #re)iousl$ in
fa)or of =im#in. -osalina Santos su(stituted !a6ima
u#on deat.
C78: in fa)or of Santos, ordered recon)e$ance and
"as a"arded PC&&&.
C.: aArmed.
;efendants claim tat te action for recon)e$ance
ad #rescri(ed as it "as <led more tan 2& $ears
since =im#in ad ac+uired a CTC in teir name o)er
te <s#ond.
SC: Te e6istence of a decree of registration in fa)or
of one #art$ is no (ar to an action to com#el
recon)e$ance of te #ro#ert$ to te true o"ner,
"ic is an action in #ersonam, e)en if suc action
(e instituted after te $ear <6ed ($ Section CB of te
=-. as a limit to te re)ie" of te registration
decree, #ro)ided it is so"n tat te registration is
"rongful and te #ro#ert$ sougt to (e recon)e$ed
as not #assed to an innocent tird #art$ older for
)alue.
=im#in o(tained te decree of registration
fraudulentl$ and in utter (ad fait tus e and is
eirs ma$ (e com#elled to recon)e$ it to te true
o"ner. Te registration of te #ro#ert$ did not annul
te con)e$ance in fa)or of Elas and after te
registration, te =im#ins eld te #ro#ert$ in trust for
te true o"ners.
Te a##lication for registration "as in (ad fait, "it
te result tat te certi<cate of title issued to =im#in
in 1LC4 "as in la" issued to and eld ($ im in
(ealf and in trust for te (ene<t of Elas. Dnder te
old code of ci)il #rocedure, #rescri#tion does not
a##l$ to Mcontinuing and su(sisting trustsN' so tat
actions against a trustee to reco)er trust #ro#ert$
eld ($ im are im#rescri#ti(le. .ctions for te
recon)e$ance of #ro#ert$ "rongfull$ registered are
of tis categor$.
Te #ossession of te #ro#ert$ as (een "it Elas
and is successors since te sale tus, teir action
cannot (e deemed e6tinguised ($ #rescri#tion as
under te old ci)il #rocedure, an action ($ te
)endee of real #ro#ert$ in #ossession tereof to
o(tain te con)e$ance of it is not su(ject to
#rescri#tion.
DIA3( ET.AL. VS. GORRICHO AND AGUADO
Facts& S#ouses 7rancisco ;ia@ and !aria Se)illa
o"ned t"o #arcels of lots 1=ots 5os. 1L41 and C&,C2
in Ca(anatuan. Sometime later, 7rancisco died, and
te #ro#erties "ere left in te ands of er "ife and
tree cildren.
Sometime in 1LC%, te a##ellee Carmen Gorrico
<led an action against !aria Se)illa and in
connection tere"it, a "rit of attacment "as
issued u#on te sares of te latter in te t"o
#arcels of land. Since !aria Se)illa failed to redeem it
"itin one $ear, a <nal deed of sale in fa)or of
Carmen Gorrico "as issued. 8n te said deed,
o"e)er, te serif con)e$ed to Gorrico te "ole
of te t"o #arcels instead of onl$ te alfHinterest of
!aria Se)illa terein. Pursuant to te said deed,
Carmen Gorrico o(tained te titles of te t"o
#arcels of land in er name in te $ear 1LC,, and as
(een #ossessing te said lands as o"ner e)er since.
8n 1L%2, te cildren of !aria Se)illa 1"o died a
$ear (efore2 <led an action against te res#ondents
to com#el te latter to e6ecute in teir fa)or a deed
of recon)e$ance o)er an undi)ided oneHalf interest
of te lots in +uestion, "ic te res#ondents "ere
allegedl$ olding in trust for tem. Te res#ondents
raised te defense tat te #etitioners0 action as
long #rescri(ed.
Iss$e& ;o im#lied trust #rescri(e or ma$ te$ (e
defeated ($ lacesO
R$'ing o the CFI o N$e5a EciAa& 3ile a
constructi)e trust in #laintif0s fa)or arose "en
Gorrico too> ad)antage of te error of te #ro)incial
$e#+uestion and o(tained title in erself, te action
of te #laintif "as, o"e)er, (arred ($ laces and
#rescri#tion.
Petitione#s& Te dis#uted #ro#ert$ "as ac+uired ($
Gorrico troug an error of te #ro)incial serif'
tat a)ing (een ac+uired troug error, it "as
su(ject to an im#lied trust, as #ro)ided ($ .rticle
14%6 of te 5e" Ci)il Code' and terefore, since te
trust is continuing and su(sisting, te a##ellants ma$
com#el recon)e$ance of te #ro#ert$ des#ite te
la#se of time, s#eciall$ (ecause #rescri#tion does not
run against titles registered under .rticle 4L6.
He'!& Te #etitioners are in error in (elie)ing tat
li>e e6#ress trusts, suc constructi)e trusts ma$ not
(e (arred ($ la#se of time. Te .merican la" on
trusts as al"a$s maintained a distinction (et"een
e6#ress trusts created ($ intention of #arties, and
te im#lied4constructi)e trusts tat are e6clusi)el$
created ($ la", te later not (eing trusts in teir
tecnical sense. The e>,#ess t#$sts !isa8'e the
t#$stee #o% acB$i#ing o# his o@n 8eneCt the
,#o,e#ty co%%itte! to his %anage%ent o#
c$sto!y( at 'east @hi'e he !oes not o,en'y
#e,$!iate the t#$st( an! %aDes s$ch
#e,$!iation Dno@n to the 8eneCcia#y o# cestui
que trust.
.lso, in e6#ress trusts, te !e'ay o the 8eneCcia#y
is !i#ect'y att#i8$ta8'e to the t#$stee @ho
$n!e#taDes to ho'! the ,#o,e#ty o# the o#%e#(
o# @ho is 'inDe! to the 8eneCcia#y 8y
conC!entia' o# C!$cia#y #e'ations. Te trustee0s
#ossession is, terefore, not ad)erse to te
(ene<ciar$, until and unless te latter is made a"are
tat te trust as (een re#udiated.
Eut in constructi)e trusts, tere is neiter #romise
nor <duciar$ relation. Te so1ca''e! t#$stee !oes
not #ecogniEe any t#$st an! has no intent to
ho'! o# the 8eneCcia#yF the#eo#e( the 'atte# is
not A$stiCe! in !e'aying action to #eco5e# his
,#o,e#ty. It is his a$'t i he !e'aysF hence( he
%ay 8e esto,,e! 8y his o@n 'aches.
Tus, te judgment of dismissal (of the CI! should
be upheld, (ecause te #etitioners0 cause of action
to attac> te deed and cancel te transfer
certi<cates of title issued to te res#ondents accrued
from te $ear of issuance and recording, 1LC,, and
te #etitioners a)e allo"ed 1% $ears to ela#se
(efore ta>ing remedial action in 1L%2. Dnder te old
Code of Ci)il Procedure, in force at te time, te
longest #eriod of e6tincti)e #rescri#tion "as onl$ 1&
$ears.
EVANGELISTA( ET. AL. VS. COLLECTOR OF
INTERNAL REVENUE( ET. AL.
Facts& Te #etitioners (orro"ed from teir fater
PP%L,14&.&& "ic amount togeter "it teir
#ersonal monies "as used ($ tem for te #ur#ose
of (u$ing and selling real #ro#erties. 7rom 1L4C to
1L44, te$ (ougt 24 #arcels of land 1including te
im#ro)ements tereon2 on four diferent occasions.
8n 1L4%, te$ a##ointed teir (roter Simeon to
manage teir #ro#erties "it full #o"er to lease' to
collect and recei)e rents' to issue recei#ts terefore'
in default of suc #a$ment, to (ring suits against te
defaulting tenant' and to endorse and de#osit all
notes and cec>s for tem. 8n 1L4B, teir net rental
income amounted to PP12,61%.C%.
/n Se#tem(er 1L%4, te res#ondent Collector of
8nternal -e)enue demanded te #a$ment of 112
income ta6 on cor#orations, 122 real estate dealer0s
<6ed ta6, and 1C2 cor#oration residence ta6 for te
$ears 1L4%H1L4L, com#uted according to te
assessments made on teir #ro#erties.
Eecause of tis, te #etitioners <led a case against
te res#ondents in te Court of Ta6 .##eals, #ra$ing
tat te decision of te res#ondent contained in its
letter of demand (e re)ersed and tat te$ (e
a(sol)ed from te #a$ment of te ta6es in +uestion.
Iss$e& 3eter te #etitioners are su(ject to te
ta6 on cor#orations, real estate dealer0s <6ed ta6,
and cor#oration residence ta6.
Co$#t o Ta> A,,ea's& Te #etitioners are lia(le.
15o e6#lanation for suc in te case2
Petitione#s& Te$ are mere coHo"ners, not coH
#artners, for, in conse+uence of te acts #erformed
($ tem, a legal entit$, "it a #ersonalit$
inde#endent of tat of its mem(ers, did not come
into e6istence, and some of te caracteristics of
#artnersi#s are lac>ing in te case at (ar.
He'!& Te #etitioners are lia(le to #a$ te ta6 on
cor#orations #ro)ided for in Sec. 24 of te
Common"ealt .ct 5o. 466, oter"ise >no"n as te
5ational 8nternal -e)enue Code. .ccording to Sec.
B4 of te same statute, Mte term 9cor#oration0
includes #artnersi#s, no matter o" created or
organi@ed, jointHstoc> com#anies, joint accounts,
associations or insurance com#anies, (ut does not
include dul$ registered general coH#artnersi#s.N
.lso, .rticle 1,6, of te Ci)il Code #ro)ides:
ME$ te contract of #artnersi#, t"o or more #ersons
(ind temsel)es to contri(ute mone$, #ro#ert$, or
industr$ to a common fund, "it te intention of
di)iding te #ro<ts among temsel)es.N Pursuant to
tis article, the essentia' e'e%ents o a
,a#tne#shi, are t"o, namel$: 697 an agreement to
contri(ute mone$, #ro#ert$ or industr$ to a common
fund' and 122 intent to di)ide te #ro<ts among te
contracting #arties. Te <rst element is undou(tedl$
#resent in te case at (ar, for, admittedl$, te
#etitioners a)e agreed to, and did, contri(ute
mone$ and #ro#ert$ to a common fund. .lso, it can
(e said tat teir #ur#ose "as to engage in real
estate transactions for monetar$ gain and ten
di)ide te same among temsel)es (ecause: 112
te$ created te common fund #ur#osel$' 122 te$
in)ested te same, not merel$ in one transaction, (ut
in a series of transactions' 1C2 te #arcels of land tat
te$ (ougt "ere not de)oted to residential
#ur#oses, or to oter #ersonal uses of te #etitioners
(ut "ere leased se#aratel$ to se)eral #ersons' 142
te #ro#erties a)e (een under te management of
one #erson, namel$ Simeon :)angelista, ma>ing te
afairs relati)e to te said #ro#erties a##ear to a)e
(een andled as if te same (elonged to a
cor#oration or (usiness enter#rise o#erated for
#ro<t' and 1%2 te #etitioners a)e not testi<ed or
introduced an$ e)idence, eiter on teir #ur#ose in
creating te set u# alread$ ad)erted to, or on te
causes for its continued e6istence.
*ence, te #etitioners erein constitute a
#artnersi#, and in so far as te 5ational 8nternal
-e)enue Code is concerned, te$ are su(ject to te
income ta6 for cor#orations.
8. .s regards to te residence ta6 for
cor#orations #ro)ided Sec. 2 of
Common"ealt .ct 5o. 46%
1
, te terms
1
:ntities lia(le to residence ta6R:)er$
cor#oration, no matter o" created or
organi@ed, "eter domestic or resident
foreign, engaged in or doing (usiness in te
Pili##ines sall #a$ an annual residence ta6 of
<)e #esos and an annual additional ta6, "ic
in no case, sall e6ceed one tousand #esos,
in accordance "it te follo"ing scedule: V V V
Mcor#orationN and M#artnersi#N are used in
(ot statutes "it su(stantiall$ te same
meaning. Conse+uentl$, #etitioners are
su(ject, also, to te residence ta6 for
cor#orations.
88. =astl$, te records so" tat te #etitioners
a)e a(ituall$ engaged in leasing te
#ro#erties for a #eriod of 12 $ears, and tat
te $earl$ gross rentals of te said
#ro#erties from 1L4% to 1L4B ranged from
PPL,%LL.&& to PP 1,,4%C.&&. Tus, te$
are su(ject to te ta6 #ro)ided in Section
1LC 1+2 of our 5ational 8nternal -e)enue
Code, for Mreal estate dealers,N inasmuc as,
#ursuant to Section 1L4 1s2 tereof:
M-eal estate dealers include an$ #erson engaged
in te (usiness of (u$ing, selling, e6canging,
leasing, or renting #ro#ert$ of is o"n account as
#rinci#al and olding imself out as full ro #artHtime
dealer in real estate or as an o"ner of rental #ro#ert$
or #ro#erties rented or ofered to rent for an
aggregate amount of tree tousand #esos or more a
$ear. V V VN
4ULO V. 4ANG CHIAO SENG
Facts& Fang Ciao Seng #ro#osed to form a
#artnersi# "it -osario Fulo to run and o#erate a
teatre on te #remises occu#ied ($ Cine /ro, Pla@a
Sta. Cru@, !anila, te #rinci#al conditions of te ofer
(eing 112 Fang guarantees Fulo a montl$
#artici#ation of PC,&&& 122 #artnersi# sall (e for a
#eriod of 2 $ears and 6 monts "it te condition
tat if te land is e6#ro#riated, rendered
im#ractica(le for (usiness, o"ner constructs a
#ermanent (uilding, ten Fulo0s rigt to lease and
#artnersi# e)en if #eriod agreed u#on as not $et
e6#ired' 1C2 Fulo is autori@ed to #ersonall$ conduct
(usiness in te lo(($ of te (uilding' and 142 after
;ec C1, 1L4,, all im#ro)ements #laced ($
#artnersi# sall (elong to Fulo (ut if #artnersi# is
terminated (efore la#se of 1 and T $ears, Fang sall
a)e rigt to remo)e im#ro)ements. Parties
esta(lised, MFang and Co. =td.N, to e6ist from Jul$ 1,
1L4% K ;ec C1, 1L4,.
8n June 1L46, te$ e6ecuted a su##lementar$
agreement e6tending te #artnersi# for C $ears
(eginning Jan 1, 1L4B to ;ec C1, 1L%&.
Te land on "ic te teater "as constructed "as
leased ($ Fulo from o"ners, :milia Carrion and !aria
Carrion Santa !arina for an inde<nite #eriod (ut tat
after 1 $ear, suc lease ma$ (e cancelled ($ eiter
#art$ u#on L&Hda$ notice. 8n .#r 1L4L, te o"ners
noti<ed Fulo of teir desire to cancel te lease
contract come Jul$. Fulo and us(and (rougt a ci)il
action to declare te lease for a inde<nite #eriod.
/"ners (rougt teir o"n ci)il action for ejectment
u#on Fulo and Fang.
CFI: T"o cases "ere eard jointl$' Com#laint of Fulo
and Fang dismissed declaring contract of lease
terminated.
CA: .Armed te judgment.
8n 1L%&, Fulo demanded from Fang er sare in te
#ro<ts of te (usiness. Fang ans"ered sa$ing e ad
to sus#end #a$ment (ecause of #ending ejectment
suit.
Fulo <led #resent action in 1L%4, alleging te
e6istence of a #artnersi# (et"een tem and tat
Fang as refused to #a$ er sares.
Deen!ant"s Position: Te real agreement (et"een
#laintif and defendant "as one of lease and not of
#artnersi#' tat te #artnersi# "as ado#ted as a
su(terfuge to get around te #roi(ition contained in
te contract of lease (et"een te o"ners and te
#laintif against te su(lease of te #ro#ert$.
T#ia' Co$#t: ;ismissal. 8t is not true tat a
#artnersi# "as created (et"een tem (ecause
defendant as not actuall$ contri(uted te sum
mentioned in te .rticles of Partnersi# or an$ oter
amount. Te agreement is a lease (ecause #laintif
didn0t sare eiter in te #ro<ts or in te losses of
te (usiness as re+uired ($ .rt 1,6L 1CC2 and
(ecause #laintif "as granted a Mguaranteed
#artici#ationN in te #ro<ts (elies te su##osed
e6istence of a #artnersi#.
8ssue: 3as te agreement a contract a lease or a
#artnersi#O
-uling: ;ismissal. Te agreement "as a su(lease not
a #artnersi#. Te follo"ing are te #eB$isites o
,a#tne#shi,& 697 t"o or more #ersons "o 8in!
the%se'5es to cont#i8$te %oney, ,#o,e#ty o#
in!$st#y to a co%%on $n!' 6.7 te intention on
te #art of te #artners to !i5i!e the ,#oCts among
temsel)es 1.rticle 1,61, CC2
Plaintif did not furnis te su##osed P2&,&&& ca#ital
nor did se furnis an$ el# or inter)ention in te
management of te teatre. 5eiter as se
demanded from defendant an$ accounting of te
e6#enses and earnings of te (usiness. Se "as
a(solutel$ silent "it res#ect to an$ of te acts tat
a #artner sould a)e done' all se did "as to
recei)e er sare of PC,&&& a mont "ic cannot (e
inter#reted in an$ manner tan a #a$ment for te
use of #remises "ic se ad leased from te
o"ners.
ESTANISLAO( GR. VS. COURT OF APPEALS
Facts& Te #etitioner and #ri)ate res#ondents are
(roters and sisters "o are coHo"ners of certain lots
at te in Uue@on Cit$ "ic "ere ten (eing leased
to S*:==. Te$ agreed to o#en and o#erate a gas
station tereat to (e >no"n as :stanislao Sell
Ser)ice Station "it an initial in)estment of
PP1%,&&&.&& to (e ta>en from te ad)ance rentals
due to tem from S*:== for te occu#anc$ of te
said lots o"ned in common ($ tem. . joint aAda)it
"as e6ecuted ($ tem on .#ril 11, 1L66. Te
res#ondents agreed to el# teir (roter, #etitioner
terein, ($ allo"ing im to o#erate and manage te
gasoline ser)ice station of te famil$. 8n order not to
run counter to te com#an$0s #olic$ of a##ointing
onl$ one dealer, it "as agreed tat #etitioner "ould
a##l$ for te dealersi#. -es#ondent -emedios
el#ed in coHmanaging te (usiness "it #etitioner
from !a$ 1L66 u# to 7e(ruar$ 1L6,.
/n !a$ 1L66, te #arties entered into an .dditional
Cas Pledge .greement "it S*:== "erein it "as
reiterated tat te P1%,&&&.&& ad)ance rental sall
(e de#osited "it S*:== to co)er ad)ances of fuel to
#etitioner as dealer "it a #ro)iso tat said
agreement Mcancels and su#ersedes te Joint
.Ada)it.N
7or sometime, te #etitioner su(mitted <nancial
statement regarding te o#eration of te (usiness to
te #ri)ate res#ondents, (ut tereafter #etitioner
failed to render su(se+uent accounting. *ence , te
#ri)ate res#ondents <led a com#laint against te
#etitioner #ra$ing among oters tat te latter (e
ordered:
112 To e6ecute a #u(lic document em(od$ing all
te #ro)isions of te #artnersi# agreement
te$ entered into'
122 To render a formal accounting of te
(usiness o#eration )eering te #eriod from
!a$ 6, 1L66 u# to ;ecem(er 21, 1L6B, and
from Januar$ 1, 1L6L u# to te time te
order is issued and tat te same (e su(ject
to #ro#er audit'
1C2 To #a$ te #laintifs teir la"ful sares and
#artici#ation in te net #ro<ts of te
(usiness' and
142 To #a$ te #laintifs attorne$0s fees and
costs of te suit.
Iss$e& Can a #artnersi# e6ist (et"een mem(ers of
te same famil$ arising from teir joint o"nersi# of
certain #ro#ertiesO
T#ia' Co$#t& Te com#laint 1of te res#ondents2 "as
dismissed. Eut u#on a motion for reconsideration of
te decision, anoter decision "as rendered in fa)or
of te res#ondents.
CA& .Armed in toto
Petitione#& Te C. erred in inter#reting te legal
im#ort of te Joint .Ada)it )isHWH)is te .dditional
Cas Pledge .greement. Eecause of te sti#ulation
cancelling and su#erseding te Joint .Ada)it,
"ate)er #artnersi# agreement tere "as in said
#re)ious agreement ad tere($ (een a(rogated.
.lso, te C. erred in declaring tat a #artnersi# "as
esta(lised ($ and among te #etitioner and te
#ri)ate res#ondents as regards te o"nersi# and 4or
o#eration of te gasoline ser)ice station (usiness.
He'!& Tere is no merit in te #etitioner0s contention
tat (ecause of te sti#ulation cancelling and
su#erseding te #re)ious joint aAda)it, "ate)er
#artnersi# agreement tere "as in said #re)ious
agreement ad tere($ (een a(rogated. Said
cancelling #ro)ision "as necessar$ for te Joint
.Ada)it s#ea>s of P1%,&&&.&& ad)ance rental
starting !a$ 2%, 1L66 "ile te latter agreement
also refers to ad)ance rentals of te same amount
starting !a$ 24, 1L66. Tere is terefore a
du#lication of reference to te P1%,&&&.&& ence te
need to #ro)ide in te su(se+uent document tat it
Mcancels and su#ercedesN te #re)ious none.
8ndeed, it is true tat te latter document is silent as
to te statement in te Join .Ada)it tat te )alue
re#resents te Mca#ital in)estmentN of te #arties in
te (usiness and it s#ea>s of te #etitioner as te
sole dealer, (ut tis is as it sould (e for in te latter
document, S*:== "as a signator$ and it "ould (e
against teir #olic$ if in te agreement it sould (e
stated tat te (usiness is a #artnersi# "it #ri)ate
res#ondents and not a sole #ro#rietorsi# of te
#etitioner.
7urtermore, tere are oter e)idences in te record
"ic so" tat tere "as in fact suc #artnersi#
agreement (et"een #arties. Te #etitioner
su(mitted to te #ri)ate res#ondents #eriodic
accounting of te (usiness and ga)e a "ritten
autorit$ to te #ri)ate res#ondent -emedios
:stanislao to e6amine and audit te (oo>s of teir
Mcommon (usinessN 1aming negos$o2. Te
res#ondent -emedios, on te oter and, assisted in
te running of te (usiness. 8ndeed, te #arties
ereto formed a #artnersi# "en te$ (ound
temsel)es to contri(ute mone$ in a common fund
"it te intention of di)iding te #ro<ts among
temsel)es.
IN THE )ATTER OF THE PETITION FOR
AUTHORIT4 TO CONTINUE USE OF THE FIR)
NA)E HO3AETA( RO)ULO( ETC.
Facts& T"o #etitions "ere <led, one ($ te sur)i)ing
#artners of .tt$. *erminio /@aeta and te oter ($
te sur)i)ing #artners of .tt$. .le6ander S$ci#
#ra$ing tat te$ (e allo"ed to continue using te
names of #artners "o ad #assed a"a$ in teir <rm
names. Eot #etitions "ere consolidated.
Petitione#s A#g$%ents&
Dnder te la", a #artnersi# is not #roi(ited
from continuing its (usiness under a <rm name
"ic includes te name of a deceased
#artner. 8n fact, art. 1B4& of te ci)il code
e6#licitl$ sanctions te #ractice.
8n regulating oter #rofessions, suc as
accountanc$ and engineering, te legislature
as autori@ed te ado#tion of <rm names
"itout an$ restriction as to te use, in suc
<rm name, of te name of te deceased
#artner, te legislati)e autori@ation gi)en to
tose engaged in te #ractice of accountanc$ K
a #rofession re+uiring te same degree of trust
and con<dence in res#ect of clients as tat
im#licit in te relationsi# of attorne$ and
client K to ac+uire and use a trade name,
strongl$ indicates tat tere us no fundamental
#olic$ tat is ofended ($ te continued use ($
a <rm of #rofessionals of a <rm name "ic
included te name of a deceased #artner, at
least "ere suc <rm name as ac+uired te
caracteristics of a 9trade name0
Te Canon of Professional :tics are not
transgressed ($ te continued use of te name
of a deceased #artner in te <rm name of a la"
#artnersi# as declared ($ Canon CC ado#ted
($ .merican Ear .ssociation declaring tat
9Te continued use of te name of a deceased
or former #artner "en #ermissi(le ($ local
custom, is not unetical, (ut care sould (e
ta>en tat no im#osition or dece#tion is
#racticed troug tis use.0
Tere is no #ossi(ilit$ of im#osition or
dece#tion (ecause te deats of teir
res#ecti)e deceased #artners "ere "ell K
#u(lici@ed in all ne"s#a#ers of general
circulation for se)eral da$s.
5o local custom #roi(its te continued use of
a deceased #artner0s name in a #rofessional
<rm name' and
Te continued use of a deceased #artner0s
name in te <rm name of la" #artnersi#s as
(een consistentl$ allo"ed ($ D.S. Courts and is
an acce#ted #ractice in legal #rofession of
most countries in te "orld.
Iss$e& 3eter or not a <rm name engaged in te
legal #rofession sould continue using te name of
#artners "o ad #assed a"a$.
SC #$'ing& 5o.
Te use in #artnersi# names of te names of
deceased #artners "ill run counter to .rticle
1B2% of te CC "ic #ro)ides tat names in a
<rm name of a #artnersi# must eiter (e tose
of li)ing #artners and, in te case of non K
#artners, sould (e li)ing #ersons "o can (e
su(jected to lia(ilit$. 8n fact, art. 1B2% #roi(its a
tird #erson from including is name in te <rm
name under #ain of assuming te lia(ilit$ of a
#artner. Te eirs of a deceased #artner in a la"
<rm cannot (e eld lia(le as te old mem(ers to
te creditors of a <rm #articularl$ "ere te$
are nonHla"$ers. 3it regard to art. 1B4&, it
treats more of a commercial #artnersi# "it a
good "ill to #rotect rater tan a #rofessional
#artnersi#, "it no salea(le good "ill (ut
"ose re#utation de#ends on te #ersonal
+uali<cations of its indi)idual mem(ers. Tus, it
as (een eld tat a salea(le good"ill can e6ist
onl$ in a commercial #artnersi# and cannot
arise in a #rofessional #artnersi# consisting of
la"$ers.
. #artnersi# for te #ractice of la" cannot (e
li>ened to #artnersi#s formed ($ oter
#rofessionals or for (usiness. 7or one ting, te
la" on accountanc$ s#eci<call$ allo"s te use of
a trade name in connection "it te #ractice of
accountanc$. 9. #artnersi# for te #ractice of
la" is not a legal entit$. 8t is a mere relationsi#
or association for a #articular #ur#ose.0 8t is not a
#artnersi# formed for te #ur#ose of carr$ing in
a trade or (usiness or of olding #ro#ert$. Tus,
it as (een stated tat te used of an assumed
or trade name in la" #ractice is im#ro#er.
Te rigt to #ractice la" is not a natural or
constitutional rigt (ut is in te nature of a
#ri)ilege or francise. 8t is limited to #ersons of
good moral caracter "it s#ecial +uali<cations
dul$ ascertained and certi<ed. Te rigt does
not onl$ #resu##ose in its #ossessor integrit$,
legal standing and attainment (ut also te
e6ercise of a s#ecial #ri)ilege, highly personal
and partaking of the nature of a public trust.
Te continued use of a deceased or former
#artner0s name in te <rm names of la"
#artnersi#s not sanctioned ($ local custom due
to te #ossi(ilit$ of dece#tion u#on te #u(lic
"ere te name of a deceased #artner continues
to (e used. Te #ossi(ilit$ of dece#tion u#on te
#u(lic, real or conse+uential, "ere te name of
a deceased #artner continues to (e used cannot
(e ruled out. . #erson in searc of legal counsel
migt (e guided ($ te familiar ring of a
distinguised name a##earing in a <rm title. 8n
addition, tere0s no local custom "itin our
jurisdiction tat sanctions te #ractice of
continued use of a deceased #artner0s name.
Courts ta>e no judicial notice of custom. . local
custom as a source of rigt cannot (e
considered ($ a court of justice unless suc
custom is #ro#erl$ esta(lised ($ com#etent
e)idence li>e an$ oter fact. !erel$ (ecause
someting is done as a matter of #ractice does
not mean tat Courts can rel$ on te same for
#ur#oses of adjudication as a juridical custom.
Juridical custom must (e diferentiated from
social custom. Te former can su##lement
statutor$ la" or (e a##lied in te a(sence of
suc statute. 5ot so "it te latter.
*ASTIDA VS. )EN3I CO.
Facts& !en@i Co. "as organi@ed in 1L21 for te
#ur#ose of im#orting and selling general
mercandise, including fertili@ers and fertili@er
ingredients. Sometime in 5o)em(er of tat $ear, te
#laintif, "o ad ad some e6#erience in mi6ing and
selling fertili@er, "ent to see Toel, te manager of
te sundries de#artment of !en@i & Co. 1troug
"ic te fertili@er (usiness "as carried out2 and told
im tat e ad a "ritten contract "it te Pili##ine
Sugar Centrals .genc$ for 1,2%& tons of mi6ed
fertili@ers, and tat e could o(tain oter contracts,
including one from Calam(a Sugar :states for 4%&
tons, (ut tat e did not a)e te mone$ to (u$ te
ingredients to <ll te order and carr$ on te (usiness.
*e ofered to assign to !en@i & Co. is contract "it
Pil Sugar Centrals .genc$ and to su#er)ise te
mi6ing of te fertili@er and to o(tain oter orders for
%& X of te net #ro<t tat !en@i & Co., 8nc., migt
deri)e terefrom. J. !. !en@i 1gen. manager of !en@i
& Co.2 acce#ted te ofer. Te agreement (et"een
te #arties "as )er(al and "as con<rmed ($ te
letter of !en@i to te #laintif on Januar$ 1&, 1L22.
!en@i & Co. continued to carr$ on its fertili@er
(usiness under tis arrangement "it te #laintif. 8t
ordered ingredients from te DS and oter countries,
and te interest on te drafts for te #urcase of
tese materials "as carged to te (usiness as a
#art of te cost of te materials. Te mi6ed
fertili@ers "ere sold ($ !en@i & Co. (et"een Januar$
1L and .#ril 1, 1L22 under its MCoronaN (rand.
Pursuant to te )er(al agreement, te defendant
cor#oration on .#ril 2,, 1L22 entered into a "ritten
contract "it te #laintif, mar>ed :6i(it ., "ic is
te (asis of te #resent action. Still, te fertili@er
(usiness as carried on in te same manner as it "as
#rior to te "ritten contract, (ut te net #ro<t tat
te #laintif erein sall get "ould onl$ (e C%X. Te
inter)ention of te #laintif "as limited to su#er)ising
te mi6ing of te fertili@ers in te (odegas of !en@i.
Te trademar>s used in te sale of te fertili@er "ere
registered in te Eureau of Commerce & 8ndustr$ in
te name of !en@i & Co., 8nc. and te fees "ere #aid
($ tat com#an$.
Prior to te e6#iration of te contract 1.#ril 2,,
1L2,2, te manager of !en@i noti<ed te #laintif
tat te contract for is ser)ices "ould not (e
rene"ed. Su(se+uentl$, "en te contract e6#ired,
!en@i #roceeded to li+uidate te fertili@er (usiness in
+uestion. Te #laintif refused to agree to tis. 8t
argued, among oters, tat te "ritten contract
entered into ($ te #arties is a contract of general
regular commercial #artnersi#, "erein !en@i "as
te ca#italist and te #laintif te industrial #artner.
Iss$e& 8s te relationsi# (et"een te #etitioner and
!en@i tat of #artnersO
He'!& Te relationsi# esta(lised (et"een te
#arties "as not tat of #artners, (ut tat of em#lo$er
and em#lo$ee, "ere($ te #laintif "as to recei)e
C%X of te net #ro<ts of te fertili@er (usiness of
!en@i in com#ensation for is ser)ices for
su#er)ising te mi6ing of te fertili@ers. 5eiter te
#ro)isions of te contract nor te conduct of te
#arties #rior or su(se+uent to its e6ecution justi<ed
te <nding tat it "as a contract of coH#artnersi#.
Te "ritten contract "as, in fact, a continuation of
te )er(al agreement (et"een te #arties, "ere($
te #laintif "or>ed for te defendant cor#oration for
oneHalf of te net #ro<ts deri)ed ($ te cor#oration
form certain fertili@er contracts.
.ccording to .rt. 116 of te Code of Commerce,
articles of association ($ "ic t"o or more #ersons
o(ligate temsel)es to #lace in a common fund an$
#ro#ert$, industr$, or an$ of tese tings, in order to
o(tain #ro<t, sall (e commercial, no matter "at it
class ma$ (e, #ro)ided it as (een esta(lised in
accordance "it te #ro)isions of te Code.
*o"e)er in tis case, tere "as no common fund.
Te (usiness (elonged to !en@i & Co. Te #laintif
"as "or>ing for !en@i, and instead of recei)ing a
<6ed salar$, e "as to recei)e C%X of te net #ro<ts
as com#ensation for is ser)ices. Te #rase in te
"ritten contract Men sociedad conN, "ic is used as
a (asis of te #laintif to #ro)e #artnersi# in tis
case, merel$ means Men reunion conN or in
association "it.
8t is also im#ortant to note tat altoug !en@i
agreed to furnis te necessar$ <nancial aid for te
fertili@er (usiness, it did not o(ligate itself to
contri(ute an$ <6ed sum as ca#ital or to defra$ at its
o"n e6#ense te cost of securing te necessar$
credit.
OIA VS. CO))SSIONER OF INTERNAL REVENUE
Facts& =oren@o /Ga and is <)e cildren are te
sur)i)ing eirs of Julia EuGales. =oren@o, te
sur)i)ing s#ouse "as a##ointed administrator of
Julia0s estate. *e su(mitted te #roject of #artition
"ic "as a##ro)ed ($ te court and since C of te %
cildren "ere still minors, e "as a##ointed ($ te
court as guardian of said minors. ;es#ite te
a##ro)al of te #roject of #artition, no attem#t "as
made to di)ide te #ro#erties terein listed and
remained under te management of =oren@o "o
used said #ro#erties in (usiness ($ leasing or selling
tem and in)esting te income deri)ed terefrom
and #roceeds form te sales tereof in real
#ro#erties and securities. -es#ondent C8- decided
tat #etitioners formed an 9unregistered #artnersi#0
and terefore su(ject to cor#orate ta6 #ursuant to
Sec. 24 of te Ta6 Code. .ccordingl$ e assessed
against te #etitioners te amounts of PB,&L2.&& and
P1C.BLL.&& as cor#orate income ta6es for 1L%% and
1L%6 res#ecti)el$. Petitioners #rotested against te
assessment and as>ed for reconsideration "ic "as
denied.
Petitione#s" A#g$%ent& Petitioners are considered
as co K o"ners of te #ro#erties inerited ($ tem
from te deceased Julia EuGales and te #ro<ts
deri)ed from transactions in)ol)ing te same, te$
cannot (e considered as an unregistered #artnersi#
and cannot (e su(ject to cor#orate ta6.
Iss$e& 345 #etitioners are deemed to a)e formed
an unregistered #artnersi# su(ject to ta6 under
sections 24 and B41(2 of te 5ational 8nternal
-e)enue code.
R$'ing& F:S
7or ta6 #ur#oses, te co K o"nersi# of
inerited #ro#erties is automaticall$ con)erted
into unregistered #artnersi# te moment te
said common #ro#erties and4or incomes
deri)ed terefrom are use as a common fund
"it te intent to #roduce #ro<ts for te eirs
in #ro#ortion to teir res#ecti)e sares in te
ineritance as determined in a #roject
#artition. Tis is (ecause from te moment of
suc #artition, te eirs are entitled alread$ to
teir res#ecti)e de<nite sares of estate and
te incomes tereof, for eac of tem to
manage and dis#ose of as e6clusi)el$ is o"n
"itout te inter)ention of te oter eirs and
accordingl$ e (ecomes lia(le indi)iduall$ for
all ta6es in connection tere"it. 8f after suc
#artition, e allo"s is sare to (e eld in
common "it is co K eirs under a single
management to (e used "it te intent of
ma>ing #ro<t tere($ in #ro#ortion to is
sare, tere can (e no dou(t tat e)en if no
document or instrument "ere e6ecuted for te
#ur#ose, for ta6 #ur#oses at least, an
unregistered #artnersi# is formed.
Te income deri)ed from inerited #ro#erties
ma$ (e considered as indi)idual income of te
res#ecti)e eirs onl$ so long as te ineritance
or estate is not distri(uted or, at least,
#artitioned, (ut te moment teir res#ecti)e
>no" sares are used as #art of te common
assets of te eirs to (e used in ma>ing #ro<ts,
it is (ut #ro#er tat te income of suc sares
sould (e considered as #art of te ta6a(le
income of an unregistered #artnersi#.
7or #ur#oses of te ta6 on cor#orations, te
5ational 8nternal -e)enue Code, includes
#artnersi#s "it te e6ce#tion onl$ of dul$
registered general coH#artnersi#s "itin te
#ur)ie" of te term 9cor#oration.0
L4ONS VS. ROSENSTOCJ
Facts& ;uring is lifetime, *enr$ :lser got engaged
in te real estate (usiness. Petitioner =$ons, on te
oter and, joined :lser in some of is )entures and
te$ e+uall$ di)ided #ro<ts gained from tese. 8n
1L1L, =$ons needed to go (ac> to te Dnited States
for a $ear and a alf and ($ reason of "ic e
e6ecuted a general #o"er of attorne$ in fa)or of
:lser, em#o"ering te latter to manage and dis#ose
te #ro#erties o"ned ($ tem.
8n 1L2&, :lser "as dra"n to a #iece of land,
te San Juan :state, and e #ercei)ed an o##ortunit$
to de)elo# it into a su(ur(an communit$. Te :state
"as ofered ($ its o"ners for P%,&,&&& "it an initial
#a$ment of P1%&,&&&. 8n !a$ 1L2&, :lser "rote a
letter to =$ons inducing te latter to join im in tis
)enture and to li>e"ise su##l$ te means necessar$
for te ful<llment of tis #roject. 8n te meantime,
:lser raised P12&,&&& from is o"n funds and loaned
P%&,&&& from D$ Siolong to #a$ for te initial
#a$ment. *o"e)er in order to o(tain te loan e ad
to gi)e a #ersonal note signed ($ imself, ($ is
oter associates and ($ te 7idelit$ and Suret$
Com#an$. Ten again, in order to o(tain te
signature of te 7idelit$ and Suret$ Com#an$ :lser
ad to e6ecute a mortgage on one of te #ro#erties
o"ned ($ im and =$ons on Carriedo Street.
=$ons re#lied to te letter of :lser onl$ in
Jul$ 1L2& and e e6#ressed in it is un"illingness to
join te latter in tis )enture. Eecause of tis :lser
relie)ed te Carriedo #ro#ert$ of te encum(rance
"ic e ad #laced u#on it and re+uested te
7idelit$ and Suret$ Com#an$ to allo" im to
su(stitute anoter #ro#ert$ for it. *o"e)er te
release of te old mortgage and te recording of te
ne" "ere ne)er registered (ecause in Se#tem(er
1L2&, "en =$ons returned to !anila, e allo"ed te
mortgage to remain on te Carriedo #ro#ert$. Eut in
Januar$ 1L21, :lser "as a(le to #a$ te note
e6ecuted ($ im to D$ Siolong "ic ena(led te
release of te Carriedo Pro#ert$.
Iss$e& 345 =$ons, as alf o"ner of te Carriedo
#ro#ert$, in)oluntaril$ (ecame te o"ner or a coH
#artner of an undi)ided interest in te San Juan
:state, "ic "as ac+uired #artl$ ($ te mone$
o(tained troug an encum(rance #laced on te
Carriedo #ro#ert$. 5o.
He'!& Dnder our la", a trust does not necessaril$
attac "it res#ect to #ro#ert$ ac+uired ($ a #erson
"o uses mone$ (elonging to anoter. 8n te case at
(ar, tere "as clearl$ no general relation of
#artnersi# (et"een =$ons and :lser and te most
tat can (e said is tat te$ ad (een coH#artici#ants
in )arious transactions in)ol)ing real estate. 8t is
clear te :lser, in (u$ing te San Juan :state, "as
not acting for an$ #artnersi# com#osed for imself
and =$ons, es#eciall$ tat te latter e6#ressl$
communicated is desire not to #artici#ate in tis
)enture. =astl$, it sould (e noted tat no mone$
(elonging to =$ons or an$ #artnersi# com#osed ($
=$ons and :lser "as in fact used ($ te latter in te
#urcase of te San Juan :state.
FERNANDE3 VS. DE LA ROSA
Facts& /n te #art of #laintif 7ernande@, e claims
tat e entered into a )er(al agreement "it
defendant ;e la -osa to form a #artnersi# for te
#urcase of cascoes "it te underta>ing tat te
defendant "ill (u$ te cascoes and tat eac #artner
"ill furnis suc amount as e could, "ile te #ro<ts
"ill (e di)ided #ro#ortionatel$. Plaintif furnised
PC&& for casco 5o. 1%1% and PB2% for casco 5o.
2&BL, (ot of "ic "ere #laced under te name of
te defendant onl$. 8n .#ril 1L&&, te #arties
undertoo> to dra" u# articles of teir #artnersi# for
te #ur#ose of em(od$ing it in an autentic
document. Te agreement o"e)er did not
materiali@e (ecause defendant #ro#osed articles
"ic "ere materiall$ diferent from teir )er(al
agreement, and e "as also un"illing to include
casco 5o. 2&BL in te #artnersi#. Eecause te
cascoes "ere under te management of te
defendant, te #laintif demanded an accounting
o)er it to "ic te defendant refused claiming tat
no #artnersi# e6isted (et"een tem.
;e la -osa, on te oter and, admits tat
e desired to form a #artnersi# "it te #laintif (ut
denies tat an$ agreement "as e)er consummated.
!oreo)er, e denied recei)ing an$ mone$ furnised
($ #laintif for casco 5o. 1%1%, (ut claims tat e
merel$ (orro"ed te PC&& on is indi)idual account
from te (a>er$ (usiness in "ic #laintif "as a coH
#artner. .nd as for te PB2% furnised ($ te
#laintif, te defendant claims tat it "as actuall$ for
casco 5o. 1%1% and not for casco 5o. 2&BL. *e also
added tat te re#airs made on te t"o cascoes
"ere e6clusi)el$ (orne ($ im, and tat e returned
a sum of P1,12% to #laintif "it an e6#ress
reser)ation on is #art of all is rigts as a #artner.
Iss$e& a2 345 a #artnersi# e6isted (et"een te
#arties. Fes.
(2 345 te #artnersi# "as terminated "en te
defendant returned te P1,12% to #laintif. 5o.
He'!& a2 Te essential #oints u#on "ic te minds
of te #arties must meet in a contract of #artnersi#
are 12 mutual contri(ution and 22 joint interest in te
#ro<ts.
Te fact tat te defendant recei)ed mone$
furnised ($ te #laintif for te #ur#ose of using it to
#urcase te cascoes esta(lises te <rst element of
te #artnersi#, mutual contri(ution to a common
stoc>. 7or te second element, te fact tat te
formation of #artnersi# ad (een a su(ject of
negotiation (et"een tem, e)en (efore te #urcase
of te <rst casco, and tat (ot #arties intended to
#urcase te cascoes in common satis<es te
re+uirement tat tere sould (e an intention on te
#art of (ot #arties to sare te #ro<ts. 3it tese, a
com#lete and #erfect contract of #artnersi# "as
entered into ($ te #arties.
8t must (e noted o"e)er tat tis
#artnersi# "as su(ject to a sus#ensi)e condition
"ic is te e6ecution of a "ritten agreement
regarding te distri(ution of #ro<ts, caracter of
#artnersi#, etc. Eut since te defendant actuall$
#urcased te cascoes, it "ould seem tat te
#artnersi# alread$ e6isted. .nd as furtermore
#ro)ided ($ te Ci)il Code, a "ritten agreement "as
not necessar$ in order to gi)e eAcac$ to te )er(al
agreement of te #artnersi# (ecause te
contri(utions of te #artners to te #artnersi# "ere
not in te form of immo)a(les.
(2 ;uring trial, te court "as a(le to #ro)e tat
#laintif actuall$ furnised some amount for te
re#air of te cascoes and tat it "as #resumed tat a
#ro<t as (een o(tained ($ te defendant #rior to
te return of te mone$. 3it tese, te return of te
P1,12% fell sort of te amount "ic te #laintif as
actuall$ contri(uted to te #artnersi#. 7or tese
reasons, te acce#tance ($ te #laintif of te
amount returned ($ te defendant did not a)e te
efect of terminating te legal e6istence of te
#artnersi# ($ con)erting it into a societas leonina.
Te court also #ro)ed tat tere "as no
intention on te #art of te #laintif, in acce#ting te
mone$, to relin+uis is rigts as a #artner. /n te
contrar$ e noti<ed defendant tat e "ai)ed none
of is rigts in te #artnersi#. .lso te lac> of
recognition on te #art of te defendant of te
#laintif0s rigt in te #artnersi# #ro#ert$ and in te
#ro<ts does not gi)e te former te rigt to force a
dissolution u#on te later u#on te terms "ic te
#laintif is un"illing to acce#t. . #artnersi#
terefore e6isted (et"een te t"o and cascoes 5o.
1%1% and 2&BL are #artnersi# #ro#erties.
=OODHOUSE VS. HALILI
Facts& ;efendant *alili informed 3oodouse,
#laintif, of is desire to in)est alf a million dollars in
te (ottling and distri(ution of !ission Soft ;rin>s.
3oodouse ten rela$ed tis message to !ission ;r$
Cor#oration of =os .ngeles, DS.. !ission ;r$
Cor#oration ten ga)e #laintif a tirt$ da$ o#tion on
e6clusi)e (ottling and distri(ution rigts in te
Pili##ines 1:6i(it J2.
Tereafter, #laintif and defendant entered
into a "ritten agreement "it te f. #ertinent
#ro)isions: 12 te$ sall organi@e a #artnersi# for
te (ottling and distri(uting of !ission soft drin>s,
"it #laintif, 3oodouse, as industrial #artner or
manager, and defendant, *alili, as ca#italist'
22defendant "as to decide matters of general #olic$
regarding te (usiness, "ile #laintif "as to attend
te o#eration and de)elo#ment of te (ottling #lant'
C2 #laintif "as to secure !ission soft drin>s francise
for and in (ealf of te #ro#osed #artnersi#' and 42
#laintif "as to recei)e C& #ercent of te net #ro<ts
of te (usiness. Tis contract "as signed and te
#arties to tis case ten "ent to te Dnited States to
<nali@e te francising agreement. !ission ;r$
Cor#oration ten granted te defendant te
e6clusi)e rigt, license, and autorit$ to #roduce,
(ottle, distri(ute and sell !ission (e)erages in te
Pili##ines.
3en (ot #arties "ent (ac> to te
Pili##ines, te (ottling #lant (egan its o#eration. .t
<rst, #laintif "as gi)en ad)ances, on account of te
#ro<ts, and allo"ances "ic o"e)er ceased after
t"o monts. !oreo)er, "en #laintif demanded tat
te #artnersi# #a#ers (e e6ecuted, defendant
refused to do so and instead suggested tat te$ just
enter into a settlement. .s no settlement "as
reaced, te #laintif <led a com#laint in te C78.
8n te C78, #laintif as>s for e6ecution of te
contract of #artnersi#, accounting of te #ro<ts and
a sare tereof of C& #ercent. ;efendant on is
defense claims tat #laintif misre#resented imself
tat e "as a(out to (ecome te o"ner of an
e6clusi)e (ottling francise "en in fact francise
"as e6clusi)el$ gi)en to defendant, and tat te
#laintif failed to contri(ute to te e6clusi)e francise
of te #artnersi#. C78 ordered defendant to render
an accounting of te #ro<ts of te (usiness and to
#a$ #laintif 1% #ercent tereof. Eut it eld tat te
e6ecution of te contract could not (e enforced and
te defense of fraud "as not #ro)ed. Dnsatis<ed "it
tis ruling, (ot #arties a##ealed to te SC.
8ssue: a2 345 #laintif falsel$ re#resented tat e ad
an e6clusi)e francise to (ottle !ission (e)erages.
Fes. (2 345 tis false re#resentation amounts to
fraud and ma$ annul te agreement to form a
#artnersi#
*eld: a2 .s found ($ te SC, :6i(it J "as used ($
#laintif as an instrument "it "ic to (argain "it
te defendant and to close a deal "it im, (ecause
if #laintif claimed tat all e ad "as an o#tion to
e6clusi)el$ (ottle and distri(ute !ission soft drin>s in
te Pili##ines, e "ould a)e #ro(a(l$ lost te deal
itself. Tis is furter su##orted ($ te fact tat "en
defendant learned tat #laintif did not a)e an
e6clusi)e francise, e reduced #laintif0s
#artici#ation in te #ro<t to 1% #ercent, to "ic te
#laintif agreed.
(2 .rticle 12,& of te S#anis Ci)il Code
distinguised t"o >inds of fraud, causal fraud, "ic
ma$ (e a ground for te annulment of a contract,
and te incidental fraud, "ic onl$ renders te
#art$ "o em#lo$s it lia(le for damages.
.s founded ($ te SC te misre#resentation
of #laintif does not amount to causal fraud (ecause
it "as not te #rinci#al inducement tat led te
#laintif to enter into te #artnersi# agreement. .s
it "as alread$ noted, (ot #arties e6#ressl$ agreed
tat te$ sall form a #artnersi#.
=astl$, te SC u#eld te ruling of te trial
court tat te defendant ma$ not (e com#elled
against is "ill to carr$ out te #artnersi#. Te la"
recogni@es te indi)idual0s freedom or li(ert$ to do
an act e as #romised to do or not to do it as e
#leases.
ROGAS VS. )AGLANA
FACTS& !aglana and -ojas e6ecuted teir .rticles of
CoH#artnersi# called M:astcoast ;e)elo#ment
:nter#isesN "ic ad an inde<nite term of e6istence
and "as registered "it te S:C and ad a Tim(er
=icense. /ne of te :;:0s #ur#oses "as to a##l$ or
secure tim(er and4or #ri)ate forest lands and to
o#erate, de)elo# and #romote suc forests rigts
and concessions. ! sall manage te (usiness afairs
"ile - sall (e te logging su#erintendent. .ll
#ro<ts and losses sall (e di)ided sare and sare
ali>e (et"een tem.
=ater on, te t"o a)ailed te ser)ices of Paamotang
as industrial #artner and e6ecuted anoter articles of
coH#artnersi# "it te latter. Te #ur#ose of tis
second #artnersi# "as to old and secure rene"al
of tim(er license and te term of "ic "as <6ed to
C& $ears.
Still later on, te tree e6ecuted a conditional sale of
interest in te #artnersi# "erein ! and - sall
#urcase te interest, sare and #artici#ation in te
#artnersi# of P. 8t "as also agreed tat after
#a$ment of suc including amount of loan secured ($
P in fa)or of te #artnersi#, te t"o sall (ecome
o"ners of all e+ui#ment contri(uted ($ P. .fter tis,
te t"o continued te #artnersi# "itout an$
"ritten agreement or reconstitution of teir articles
of #artnersi#.
Su(se+uentl$, - entered into a management
contract "it C!S :state 8nc. ! "rote im re: is
contri(ution to te ca#ital in)estments as "ell as is
duties as logging su#erintendent. - re#lied tat e
"ill not (e a(le to com#l$ "it (ot. ! ten told -
tat te latter0s sare "ill just (e 2&X of te net
#ro<ts. Suc "as te saring from 1L%, to 1L%L
"itout com#laint or dis#ute. - too> funds from te
#artnersi# more tan is contri(ution. ! noti<ed -
tat e dissol)ed te #artnersi#. - <led an action
against ! for te reco)er$ of #ro#erties and
accounting of te #artnersi# and damages.
CFI& te #artnersi# of ! and - is after P retired is
one of de facto and at "ill' te saring of #ro<ts and
losses is on te (asis of actual contri(utions' tere is
no e)idence tese #ro#erties "ere ac+uired ($ te
#artnersi# funds tus it sould not (elong to it'
neiter is entitled to damages' te letter of ! in
efect dissol)ed te #artnersi#' sale of forest
concession is )alid and (inding and sould (e
considered as !0s contri(ution' - must #a$ or turn
o)er to te #artnersi# te #ro<ts e recei)ed from
C!S and #a$ is #ersonal account to te #artnersi#'
! must (e #aid B%> "ic e sould0)e recei)ed (ut
"as not #aid to im and must (e considered as is
contri(ution.
ISSUE& "at is te nature of te #artnersi# and
legal relationsi# of !H- after P retired from te
second #artnersi#O !a$ ! unilaterall$ dissol)e te
#artnersi#O
SC& Tere "as no intention to dissol)e te <rst
#artnersi# u#on te constitution of te second as
e)er$ting else "as te same e6ce#t for te fact tat
te$ too> in an industrial #artner: te$ #ursued te
same #ur#oses, te ca#ital contri(utions call for te
same amounts, all su(se+uent rene"als of Tim(er
=icense "ere secured in fa)or of te <rst #artnersi#,
all (usinesses "ere carried out under te registered
articles.
! and - agreed to #urcase te interest, sare and
#artici#ation of P and after, te$ (ecame o"ners of
te e+ui#ment contri(uted ($ P. Eot considered
temsel)es as #artners as #er teir letters. 8t is not a
#artnersi# de facto or at "ill as it "as e6isting and
dul$ registered. Te letter of ! dissol)ing te
#artnersi# is in efect a notice of "itdra"al and
ma$ (e done ($ e6#ressl$ "itdra"ing e)en (efore
e6#iration of te #eriod "it or "itout justi<a(le
cause. .s to te li+uidation of te #artnersi# it sall
(e di)ided Msare and sare ali>eN after an
accounting as (een made.
- is not entitled to an$ #ro<ts as e failed to gi)e te
amount e ad underta>en to contri(ute tus, ad
(ecome a de(tor of te #artnersi#.
! cannot (e lia(le for damages as - a(andoned te
#artnersi# tru is acts and also too> funds in an
amount more tan is contri(ution.
ORTEGA VS CA
FACTS& Te la" <rm of -,=,S and C "as dul$
registered in te !ercantile -egistr$ and
reconstituted "it te S:C. Tere "ere se)eral
amendments to its articles of #artnersi#.
-es#ondentH.##ellees senior and junior #artners
associated temsel)es togeter. /rtega informed
tem troug a letter tat e is retiring from te <rm
of Eito, !isa and =o@ada regarding te li+uidation of
is #artici#ation in it. *e later on <led "it te S8C; a
#etition for dissolution and li+uidation of #artnersi#.
Hea#ing OKce#: said "itdra"al of / did not
dissol)e te la" #artnersi# and (ot #arties to te
case are enjoined to a(ide ($ te #ro)isions of te
.greement re: te li+uidation of te sares of an$
retiring or "itdra"ing #artner.
SEC: re)ersed te decision ruling tat te "itdra"al
ad in fact dissol)ed te #artnersi# of E!= as a
#artnersi# at "ill, te la" <rm can (e dissol)ed ($
an$ #artner at an$time ($ is "itdra"al regardless
of good fait or (ad fait. -emanded te case to te
*/ to determine rigts and o(ligations of #arties.
CA& aArmed in toto te S:C decision and tat tere
is no need for te a##ointment of a recei)er as no
suAcient #roof ad (een so"n to indicate tat te
#artnersi# assets "ere in an$ suc danger of (eing
lost, remo)ed or materiall$ im#aired.
ISSUES& "eter it "as a #artnersi# at "ill'
"eter !0s "itdra"al dissol)ed te #artnersi#'
"eter suc "itdra"al "as made in (ad fait.
SC: 8t "as a #artnersi# at "ill as it ad not <6ed a
s#eci<ed #eriod for its underta>ing.
8t ma$ (e dissol)ed at "ill ($ an$ of te #artners (ut
if it "as done in (ad fait, suc #artner sall (e lia(le
for damages. D#on dissolution, te #artnersi#
continues and its legal #ersonalit$ is retained until
te com#lete "inding u# of its (usiness culminating
in its termination. Te li+uidation of assets is
go)erned ($ te CC (ut an agreement (et"een
#arties is (inding u#on tem.
8t "as not done out of (ad fait as it "as s#urred ($
an inter#ersonal con?ict among te #artners.
ANGELES VS SEC o GUSTICE
Facts& .ngeles s#ouses <led a criminal com#laint of
estafa against !ercado as te$ claim tat !
con)inced tem to enter into a contract of anticresis
co)ering B #arcels of land. Said contract "as to last
for % $ears "it P*P21&> as consideration. 8t "as
agreed tat ! "as to administer te lands and
com#lete te #a#er"or>. .fter C $ears, te . s#ouses
as>ed for an accounting. ! e6#lained tat te land
earned P*P46> Y in 1LLC, trees (ore no fruit in 1LL4
and ad not gi)en and accounting in 1LL%. /nl$ after
tis demand ad te$ disco)ered tat ! ad #ut te
contract of anticresis o)er te land under is and
is s#ouse0s names.
! insists tat tere e6ists an industrial #artnersi#
(et"een im and is s#ouse as industrial #artners
and te . s#ouses as <nanciers. Tis ad e6isted
since 1LL1 (efore te contract of anticresis o)er te
land. ! used is earnings as #art of te (usiness
ca#ital "ic e entered into, under is name, in
(ealf of te . s#ouses. ! attaced (an> recei#ts
so"ing de#osits in (ealf of :. .ngeles and
contracts under is name for te . s#ouses. /.
.ngeles stated tat tere "as a "ritten industrial
#artnersi# agreement "erein ca#ital "ould come
from . s#ouses "ile #ro<t "ould (e di)ided e)enl$
(et"een ! and te . s#ouses.
PROVINCIAL PROSECUTION& dismissed estafa
com#laint
/n a##eal to te S/J, te . s#ouses insist tat te
document e)idencing te contract of anticresis "as
e6ecuted in te name of te ! s#ouses instead of te
. s#ouses. Tis document alone #ro)es !0s
misa##ro#riation of teir P*P21&>.
SOG& ;ismissed a##eal. . s#ouses failed to so"
suAcient #roof tat ! deli(eratel$ decei)ed tem in
te anticresis transaction. Te document alone in
te name of te ! s#ouses failed to con)ince te S/J
tat tere "as deceit of false re#resentation on te
#art of ! to induce te . s#ouses to #art "it teir
mone$. Z. #artnersi# trul$ e6isted and it is clear
from te fact tat te$ contri(uted mone$ to a
common fund and di)ided te #ro<ts among
temsel)es. ! "as a(le to ma>e de#osits for te
account of . s#ouses, tese re#resented teir sare
in te #ro<ts of teir (usiness )enture. ;uring te
(aranga$ conciliation . s#ouses ac>no"ledged teir
joint (usiness )entures "it !.[ Tere is no estafa
"en mone$ is deli)ered ($ a #artner to is coH
#artner on te re#resentation tat suc sall (e
a##lied to te (usiness of teir #artnersi#.
ISSUES& "eter a #artnersi# e6isted e)en "itout
documentar$ #roof' "eter tere "as a
misa##ro#riation ($ ! of te #roceeds' "eter a
<ling information of estafa sould (e ordered.
SC& Te . s#ouses contri(uted mone$ to te
#artnersi# and not to te land. !ere failure to
register te contract of #artnersi# "it S:C does
not in)alidate it as long as it as te essential
re+uisites of a contract. -egistration is mere notice to
tird #arties. . s#ouses admit to facts tat #ro)e
e6istence of a #artnersi#: a contract so"ing an
industrial #artnersi#, contri(ution of mone$ and
industr$ to a common fund, and di)ision of #ro<ts
(et"een . s#ouses and !.
! satisfactoril$ e6#lained tat te documents "ere in
is name as te . s#ouses do not "ant to (e
re)ealed as <nanciers. . s#ouses "ere not a(le to
#ro)e tat tere "as deceit or false re#resentation
on is #art for tem to #art "it teir mone$.
.ccounting of #roceeds not #ro#er su(ject in tis
case. S/J did not a(use is discretion in dismissing
te a##eal of te . s#ouses.
TORRES VS. COURT OF APPEALS
Facts& Petitioners .ntonia Torres and :meteria
Earing entered into a Joint Ienture .greement 1JI.2
"it res#ondent !anuel Torres for te de)elo#ment
of a #arcel of land into a su(di)ision. Te e6ecuted a
;eed of Sale in fa)or of res#ondent, "o ad it
registered in is name. -es#ondent mortgaged te
#ro#ert$ to :+uita(le and o(tained a P4&,&&& loan to
(e used for te su(di)ision de)0t. Petitioners and
-es#ondent agreed to sare te #roceeds form te
sale of te su(di)ided lots. Te #roject did not #us
troug and te land "as foreclosed. Petioners <led
a criminal case of estafa against res#ondent and is
"ife, alleging tat te #roject failed (ecause of
res#ondent0s lac> of funds or means and s>ills and
(ecause res#ondent used te loan to fund is
com#an$, Dni)ersal Dm(rella Co. -es#ondent alleged
tat tat e used te loan to efect a sur)e$ o)er te
lots, secure cit$ council a##ro)al, construct cur(s,
roads and gutters and enter in to a contract "it an
engineering <rm to (uild ouses all at an e6#ense of
PB%,&&&. -es#ondents "ere ac+uitted from te
criminal case and #etitioners <led te #resent ci)il
case. Te trial court dismissed te case, (ut te
same, on a##eal, "as remanded for furter
#roceedings.
CA& Petitioners and -es#ondents ad formed a
#artnersi# for te su(di)ision de)0t. Te$ must (ear
te loss sufered ($ te #artnersi# in te same
#ro#ortion as teir sare in te #ro<ts sti#ulated in
te contract 1.rt. 1,L,2. 8n te a(sence of sti#ulation
te sare of eac #artner in #ro<ts and losses sall
(e in #ro#ortion to "at e ma$ a)e contri(uted
EDT te industrial #artner sall not (e lia(le for
losses. .s for #ro<ts, te industrial #artner sall
recei)e suc sare as ma$ (e just and e+uita(le. 8f
(esides is ser)ices e contri(uted ca#ital, e sall
also recei)e a sare in te #ro<ts #ro#ortionate to is
ca#ital.
Petitione#s& GVA an! ,a#tne#shi, is 5oi! $n!e#
A#t 9LL?, (ecause te #arties didn0t ma>e, sign or
attac to te #u(lic instrument and in)entor$ of te
real #ro#ert$. GVA is 5oi! $n!e# A#t 9:.. (ecause
it is te direct result of an earlier illegal contract
"ic "as for te sale of te land "itout )alid
consideration. -es#ondent is lia(le for failure to
im#lement te #roject.
ISSUE: Sould te #artnersi# (e declared )oidO
SC: Petition ;enied. C. .Armed.
Te .greement indu(ita(l$ so"s te e6istence of a
#artnersi# #ursuant to .rt. 1,6,. Petitioners "ould
contri(ute land, res#ondents "ould #ro)ide te
industr$ and e6#enses and te income "ould (e
di)ided.
Contracts (ind te #arties to te sti#ulations and
necessar$ conse+uences. Courts are not autori@ed
te e6tricate #arties from te conse+uences of teir
acts sould te sti#ulations turn out to (e <nanciall$
disad)antageous.
.rt 1,,C "as intended #rimaril$ to #rotect C
rd

#ersons "o ma$ (e defrauded "en contracting
"it te #artnersi#. Te case at (ar does not
in)ol)e C
rd
#arties "o ma$ (e #rejudiced.
Petitioners in)o>e te allegedl$ )oid contract to claim
for 6&X of te )alue of te #ro#ert$ tus te$ can0t
den$ te contract in one (reat and in anoter
recogni@e it. Te courts ma$ consider te JI. as an
ordinar$ contract from "ic te #arties0 rigts and
o(ligations ma$ (e inferred and enforced.
JI. is not )oid under .rt 1422. Te consideration for
te sale "as te e6#ectation of #ro<ts from te
#rojectR6&X of "ic "ould go to #etitioners.
PIONEER INSURANCE & SURET4 CORP VS. CA
Facts& Petitioner Jaco( =im, o"nerHo#erator of
Soutern .irlines 1S.=2 entered in to a contract "it
Ja#an ;omestic .irlines 1J;.2 for te sale and
#urcase of 2 aircrafts and 1 set of s#are #arts for
\1&L> to (e #aid in installments. Pioneer 8nsurance
as suret$ e6ecuted and issued its suret$ (ond in
fa)or of J;. on (ealf of its #rinci#al =im for te
(alance. Eorder !aciner$ and *ea)$ :+ui#. Co.
1Eor!a*eCo2, 7rancisco and !odesto Cer)antes and
!aglana ga)e some funds used in te #urcase or
aircrafts and s#are #arts as contri(ution to ne"
cor#oration #ro#osed ($ =im to e6#and is airline
(usiness. Te$ e6ecuted 2 indemnit$ agreements
sti#ulating tat te indemnitors #rinci#all$ agree and
(ind temsel)es solidaril$ to indemnif$, old and
sa)e Pioneer from damages, losses, costs, ta6es,
#enalties, etc. "ic Pioneer ma$ incur from
(ecoming suret$. =im, 1acting under S.=2, e6ecuted
in fa)or of #ioneer a deed of cattel mortgage as
securit$, sti#ulating tat =im "as to transfer and
con)e$ to te suret$ te 2 aircrafts. =im defaulted on
installment #a$ments and J;. as>ed Pioneer to #a$,
"ic Pioneer did in te amount of P2LB>. Pioneer
<led for e6trajudicial foreclosure of cattel mortgage
1to "ic Cer)anteses and !aglana <led a C
rd
#art$
claim alleging coHo"nersi# o)er aircrafts2 and
judicial foreclosure "it "rit of #relim attacment
against =im, Cer)anteses, Eormaeco and !aglana.
Trial Court eld tat =im "as lia(le and dismissed
Pioneer0s claim against all oter defendants.
CA: Pioneer reinsured its ris> of lia(ilit$ under te
suret$ (ond in fa)or of J;. and collected #roceeds of
suc reinsurance. Pioneer is no longer real #art$ in
interest to institute action as it does not stand to (e
(ene<ted.
ISSUES: 8S Pioneer a real #art$ in interestO
3as tere a de facto #artnersi# created among
Cer)antes, !aglana and =im as a result of teir
failure to incor#orateO
SC: Petitioner is not te real #art$ in interest and as
no cause of action against res#ondents. Pioneer,
a)ing foreclosed te cattel mortgage on te #lanes
and s#are #arts no longer as an$ furter action
against defendants as indemnitors to reco)er an$
un#aid (alance of te #rice.
Persons "o attem#t (ut fail to form a cor#oration
and "o carr$ on (usiness under te cor#orate name
occu#$ te #osition of #artners inter se. */3:I:-,
suc relation does not necessaril$ e6ist, for
ordinaril$, #ersons cannot (e made to assume te
relation of #artners as (et"een temsel)es "en
teir #ur#ose is tat no #artnersi# sall e6ist. 8n te
instant case, it is clear tat =im ne)er intended to
form a cor#oration "it res#ondents des#ite is
re#resentations to tem, gi)ing credence to te
crossHclaims of res#ondents sa$ing tat te$ "ere
induced and lured to ma>e contri(utions to a
#ro#osed cor#oration "ic "as ne)er formed
(ecause #etitioner reneged on teir agreement.
5o de facto #artnersi# "as created among te
#arties "ic "ould entitle te #etitioner to a
reim(ursement of te su##osed losses of te
#ro#osed cor#oration. Petitioner "as acting on is
o"n and not in (ealf of is oter "ould (e
incor#orators in transacting te sale of aircrafts and
s#are #arts.
LI) TONG LI) VS. PHILIPPINE FISHING GEAR
INDUSTRIES INC
FACTS: /n (ealf of M/cean Uuest 7ising Cor#N
.ntonio Cua and Peter Fao entered into a contract
"it Pil. 7ising Gear 1P7G82 for te #urcase of
<sing nets. Te$ claimed te$ "ere engaged in a
(usiness )enture "it #etitioner =im "o "as not a
signator$ to te agreement. Cua and Fao failed to
#a$ for te nets and ?oats. P7G8 <led a collection suit
against Cua, Fao and =im as general #artners
alleging tat /cean Uuest "as none6istent. Cua
<led a !anifestation admitting lia(ilit$ and
re+uesting reasona(le time to #a$. Fao <led an
ans"er "ai)ing is rigt to crossHe6 and #resent
e)idence. =im <led an ans"er "it counterclaim and
crossclaim. Trial Court ordered sale of nets at auction
"ic "ere (ougt ($ P7G8. Trial Court ruled tat a
#artnersi# e6isted (et"een =im, Cua and Fao
(ased on testimonies, Com#romise .greement,
declaration of o"nersi# of <sing (oats.
C.: =im "as a #artner of Cua and Fao in a <sing
(usiness and ma$ (e lia(le for te <sing nets and
?oats #urcased for #artnersi#0s use.
ISSUE& 3eter ($ teir acts, =im Cua and Fao
could (e deemed to a)e entered into a #artnersi#
SC: Petition denied. C. aArmed.
Tere e6isted a #artnersi# (et"een Cua, Fao and
=im #ursuant to .rt 1,6, (ased on factual <ndings of
te lo"er courts "ic esta(lised tat te$ ad
decided to engage in a <sing (usiness for "ic
te$ (ougt (oats "ort PC.C%! <nanced ($ a loan
from Jesus =im, =im0s (roter. 8n te Com#romise
.greement, te$ "ere to #a$ te loan "it te
#roceeds of te sales of te (oats and losses or
e6cess "ere to (e di)ided e+uall$. Te (oats,
#urcase and re#air <nanced ($ (orro"ed mone$ fell
under Mcommon fundN. Cont#i8$tion to s$ch $n!
nee! not 8e cash o# C>e! assetsMit co$'! 8e an
intangi8'e 'iDe c#e!it o# in!$st#y. Te
#artnersi# e6tended not onl$ to #urcase of te
(oat (ut also to te nets and ?oats.
Te Com#omise .greement "as not te sole (asis of
te #artnersi#. 8t "as (ut an em(odiment of te
relationsi# e6tant among te #arties #rior to
e6ecution. Petitioner "as a #artner and not merel$ a
lessor as e entered into a (usiness agreement "it
Cua and Fao in "ic de(ts "ere underta>en to
<nance te ac+uisition and u#grading of )essels to
(e used in teir <sing (usiness. Te (oat, 74E
=ourdes, toug registered in =im0s name "as an
asset of te of te #artnersi#.
Petitioner (ene<ted from te use of te nets found
inside te (oat. Tose acting on (ealf of a
cor#oration and tose (ene<ted ($ it, >no"ing it to
(e "itout )alid e6istence are eld lia(le as general
#artners. Tecnicall$, =im did not act on (ealf of a
cor#oration. *o"e)er, a)ing rea#ed te (ene<ts of
te contract entered into ($ #ersons "om e
#re)iousl$ ad an e6isting relationsi#, e is
deemed #art of te association and co)ered ($ te
sco#e of te doctrine of cor#oration ($ esto##el.
. C
rd
#art$ "o >no"ing an association to (e
uinincor#orated, noneteless treated it as a
cor#oration and recei)ed (ene<ts from it, ma$ (e
(arred from den$ing its cor#orate e6istence in a suit
(rougt against te cor#oration.
CA)POS RUEDA & CO. VS. PACIFIC
CO))ERCIAL CO. ET. AL.
Facts& Tis case in)ol)es te a##lication ($ te
#etitioner for a judicial decree adjudging itself
insol)ent. Te limited #artnersi# of Cam#os -ueda
& Co. "as, and is, inde(ted to Paci<c Commercial
Co., te .siatic Petroleum Co. and te 8nternational
Ean>ing Cor#oration in )arious sums amounting to
not less tan P#1&&&.&&, #a$a(le in te Pili##ines,
"ic "ere not #aid more tan tirt$ da$s #rior to
te date of teir <ling of te a##lication for
in)oluntar$ insol)enc$. Te lo"er court denied te
#etition (ecause it "as not #ro)en, nor alleged, tat
te mem(ers of te aforesaid <rm "ere insol)ent at
te time of te a##lication "as <led' and tat as said
#artners are #ersonall$ and solidaril$ lia(le for te
conse+uences of te transaction of #artnersi#, it
cannot (e adjudged insol)ent so long as te #artners
are not alleged and #ro)en to (e insol)ent. 7rom tis
judgment, te #etitioners a##eal to te Su#reme
Court.
Iss$e& 3eter or not a limited #artnersi#, suc as
te #etitioner, "ic as failed to #a$ its o(ligations
"it tree creditors for more tan tirt$ da$s, ma$
(e eld to a)e committed an act of insol)enc$, and
tere($ (e adjudged insol)ent against its "ill.
He'!& 8n te Pili##ines, a limited #artnersi# dul$
organi@ed in accordance "it la" as a #ersonalit$
distinct from tat of its mem(ers. 8f it commits an
act of (an>ru#tc$, suc as tat of failing for more
tan C& da$s to #a$ de(ts amounting to
PP1&&&.&&& or more, it ma$ (e adjudged insol)ent
on te #etition of tree of its creditors altoug its
mem(ers ma$ not (e insol)ent. Dnder our
8nsol)enc$ =a", one of te acts of (an>ru#tc$ u#on
"ic an adjudication of in)oluntar$ insol)enc$ is
#redicated is te failure of a #artnersi# to #a$ its
o(ligations "it tree creditors for a #eriod of more
tan C& da$s.
/n te contrar$, some courts of te Dnited States
a)e eld tat a #artnersi# ma$ not (e adjudged
insol)ent in an in)oluntar$ insol)enc$ #roceeding
unless all of its mem(ers are insol)ent, "ile oters
a)e maintained a contrar$ )ie". 5e)erteless, it
must (e (orne in mind tat under .merican common
la", #artnersi#s a)e no juridical #ersonalit$
inde#endent from tat of its mem(ers.
Terefore, it a)ing (een #ro)en tat te #artnersi#
Cam#os -ueda & Co. failed for more tan C& da$s to
#a$ its o(ligations to te erein res#ondents, te
#artnersi# a)e te rigt to a judicial decree
declaring te in)oluntar$ insol)enc$ of said
#artnersi#.
AGUILA( GR. VS. CA
Facts& Te #etitioner erein is te manager of ..C.
.guila & Sons, Co., a #artnersi# engaged in lending
acti)ities, "ile te #ri)ate res#ondent and er late
us(and "ere te registered o"ners of a ouse and
lot, co)ered ($ a transfer certi<cate of title.
Sometime in 1LL1, te #ri)ate res#ondent and ..C.
.guila & Sons, Co., re#resented ($ te #etitioner,
entered into a !emorandum of .greement. 8n tis
agreement, a deed of a(solute sale sall (e e6ecuted
($ te #ri)ate res#ondent in fa)or of ..C. .guila &
Sons, Co., gi)ing te former an o#tion to re#urcase
and o(liging te same to deli)er #eacefull$ te
#ossession of te #ro#ert$ to ..C. .guila & Sons, Co.,
"itin 1% da$s after te e6#iration of te said L&
da$s grace #eriod.
3en te #ri)ate res#ondent failed to redeem te
#ro#ert$ "itin te grace #eriod, te #etitioner
caused te cancellation of te transfer certi<cate of
title under te #ri)ate res#ondent0s name and te
issuance of a ne" certi<cate of title in te name of
..C. .guila & Sons, Co. Su(se+uentl$, te #ri)ate
res#ondent "as as>ed to )acate te #remises,
o"e)er se refused. Eecause of tis refusal, ..C.
.guila & Sons, Co. <led an ejectment case against
er.
Te !TC ruled in fa)or of ..C. .guila & Sons, Co., on
te ground tat te #ri)ate res#ondent did not
redeem te su(ject #ro#ert$ (efore te e6#iration of
te L&Hda$ #eriod #ro)ided in te !/.. Se <led an
a##eal (efore te -TC, (ut failed again. Ten, se
<led a #etition for declaration of nullit$ of a deed of
sale "it te -TC. Se alleged tat te signature of
er us(and on te deed of sale "as a forger$
(ecause e "as alread$ to (e dead "en te deed
"as su##osed to a)e (een e6ecuted. 8t a##ears
o"e)er tat te se <led a criminal com#laint for
falsi<cation against te #etitioner.
RTC& ;:58:;. Te #laintif ne)er +uestioned
recei)ing from ..C. .guila & Sons, Co. te sum of
P2&&,&&&.&& re#resenting er loan from te
defendant. Common sense dictates tat an
esta(lised lending and realt$ <rm li>e .guila "ould
not #art "it P#2&&,&&&.&& to te s#ouses, "o are
)irtual strangers to it, "itout simultaneous
accom#lisment and signing of all te re+uired
documents, more #articularl$ te ;eed of .(solute
Salem to #rotect its interest.
CA& -:I:-S:;. Te transaction (et"een te #arties
is indu(ita(l$ an e+uita(le mortgage. Considering
tat te #ri)ate res#ondent 1)endor2 "as #aid te
#rice "ic is unusuall$ inade+uate 124& s+. m.
su(di)ision lot for onl$ P#2&&,&&&.&& in te $ear
1LL12, as retained #ossession of te #ro#ert$ and
as continued #a$ing real ta6es o)er te su(ject
#ro#ert$.
Petitioner:
1. *e is not te real #art$ in interest (ut ..C.
.guila & Sons, Co.'
2. Te judgment in te ejectment case is a (ar
to te <ling of te com#laint for declaration
of nullit$ of a deed of sale in tis case' and
C. Te contract (et"een te #arties is a #acto
de retro sale and not an e+uita(le
mortgage.
He'!& Te #etition is meritorious. . real #art$ in
interest is one "o "ould (e (ene<ted or injured ($
te judgment, or "o is entitled to te a)ails of te
suit. !oreo)er, under .rticle 1,6B of te 5e" Ci)il
Code, a #artnersi# Mas a juridical #ersonalit$
se#arate and distinct from tat of eac of te
#artners.N Te #artners cannot (e eld lia(le for te
o(ligations of te #artnersi# unless it is so"n tat
te legal <ction of a diferent juridical #ersonalit$ is
(eing used for fraudulent, unfair, or illegal #ur#oses.
8n tis case, te #ri)ate res#ondent as not so"n
tat ..C. .guila & Sons, Co., as a se#arate juridical
entit$, is (eing used for fraudulent, unfair or illegal
#ur#oses. !oreo)er, te title to te su(ject #ro#ert$
is in te name of ..C. .guila & Sons, Co. and te
!/. "as e6ecuted (et"een te #ri)ate res#ondent,
"it te consent of er us(and, and ..C. .guila &
Sons, Co., re#resented ($ te #etitioner. *ence, it is
te #artnersi#, not its oAcers or agents, "ic
sould (e im#leaded in an$ litigation in)ol)ing
#ro#ert$ registered in its name.
3e cannot understand "$ (ot te -TC and te C.
sideste##ed tis issue "en it "as s+uarel$ raised
(efore tem ($ te #etitioner. Te court0s conclusion
is tat te #etitioner is not te real #art$ in interest
against "om tis action sould (e #rosecuted. 8t is
unnecessar$ to discuss te oter issues raised ($
im in is a##eal.
Unite! States 5s. C'a#in
Facts& Pedro =arin ad an agreement to form a
#artnersi# and te di)ide te #ro<ts e+uall$ to
Pedro Tarug, :use(ia Clarin, and Carlos ;e Gu@man.
=arin deli)ered to Tarug P1,2, as is contri(ution to
te #artnersi#, to (u$ and sell mangoes. Tarug,
Clarin, and ;e Gu@man "ere a(le to o(tain P2&C
from te (usiness of (u$ing and selling mangoes (ut
te tree did not com#l$ "it te terms of te
contract of deli)ering to =arin is alf of te #ro<ts
neiter did te$ render im an$ account of te
ca#ital. =arin carged tem "it te crime of estafa
(ut te #ro)incial <scal <led an information onl$
against :use(io Clarin in "ic te trial court
sentenced te defendant to si6 monts arresto
ma$or and return Pedro =arin P1,2 and PC&.%& "ic
is is sare of te #ro<ts. Te defendant a##ealed.
Iss$e& 345 a #artner in a #artnersi# ma$ (e
carged "it estafa. K 5/.
He'!& Te failure on te #art of te industrial
#artners to return to te ca#italist #artner te ca#ital
(rougt into te #artnersi# ($ te latter is not an
act constituting te crime of estafa as de<ned in te
-PC.
3en =arin #ut te P1,2 into te
#artnersi# "ic er formed "it Tarug et. al., e
in)ested is ca#ital in te ris>s or (ene<ts of te
(usiness of te #urcase and sale of mangoes, and,
e)en toug e ad reser)ed te ca#ital and
con)e$ed onl$ te usufruct of is mone$, it would
not de"ol"e upon one of his three partners to return
the his capital to him, but upon the partnership of
which he himself formed part, or if it were to be done
by one of the three specifcally, it would be #arug,
who according to the e"idence was the person who
recei"ed the money directly from $arin.
Te P1,2 a)ing (een recei)ed ($ te
#artnersi#, te (usiness commenced and #ro<ts
accrued, the action that lies with the partner who
furnishes the capital for the reco"ery of his money is
not a criminal action for estafa, but a ci"il one arising
from the partnership contract for a liquidation of the
partnership and a le"y on its assets if there should
be any.
Vi''a#ea' 5s. Ra%i#eE
Facts& Petitioners =u@)iminda Iillareal, Carmelito
Jose and Jesus Jose formed a #artnersi# for te
o#eration of a restaurant and catering (usiness
under te name .+uarius 7ood *ouse and Catering
Ser)ices. Iillareal "as a##ointed general manager
"ile Carmelito Jose "as te o#erations manager.
-es#ondent ;onaldo -amire@ joined as #artner later
on, is ca#ital contri(ution of P2%&,&&& "as #aid ($
is #arents, res#ondents Cesar and Carmelita
-amire@. Jesus Jose decided to "itdre" from te
#artnersi# and is ca#ital contri(ution of P2%&,&&&
"as refunded to im in cas ($ agreement of te
#artners. 3itout #rior >no"ledge of res#ondents,
#etitioners closed do"n te restaurant due to
increased rental and de#osited te restaurant0s
furniture and e+ui#ments to res#ondents0 ouse for
storage. Te res#ondent s#ouses "rote te
#etitioners tat te$ no longer "ant to continue teir
#artnersi# or in reo#ening te restaurant and tat
te$ "ere acce#ting te latter0s ofer to return teir
ca#ital contri(ution. Se)eral demand letters "ere
sent (ut te same "ere left uneeded. Te s#ouses
-amire@0 <led a com#laint for a collection of sum of
mone$ from #etitioners.
RTC"s R$'ing& -uled tat #arties ad )oluntaril$
entered into a #artnersi# "ic could (e dissol)ed
at an$ time. Petitioners clearl$ intended to dissol)e it
"en te$ sto##ed o#erating te restaurant and eld
tem lia(le to #a$ res#ondent is ca#ital contri(ution
of P2%&,&&&, attorne$0s fee and cost of suit.
CA R$'ing& .ltoug res#ondents ad no rigt to
demand te return of teir ca#ital contri(ution, te
#artnersi# "as noneteless dissol)ed "en
#etitioners lost interest in continuing te restaurant
(usiness "it tem. Eecause #etitioners ne)er ga)e
a #ro#er accounting of te #artnersi# accounts for
li+uidation #ur#oses, and (ecause no suAcient
e)idence "as #resented to so" <nancial losses, te
C. com#uted teir lia(ilities, #etitioners "ere made
lia(le to res#ondents in te amount of P2%C,114.&&.
Iss$e& 345 #etitioners are lia(le to res#ondents for
te latter0s sare in te #artnersi# and 345 te C.0s
com#utation as to te res#ondents0 sare is correct.
He'!& 3e old tat res#ondents a)e no rigt to
demand from #etitioners te return of teir e+uit$
sare. :6ce#t as managers of te #artnersi#,
#etitioners did not #ersonall$ old its e+uit$ or
assets. 9Te #artnersi# as a juridical #ersonalit$
se#arate and distinct from tat of eac of te
#artners.0 Since te ca#ital "as contri(uted to te
#artnersi#, not te #etitioners, it is te #artnersi#
tat must refund te e+uit$ of te retiring #artners.
.nd since it is te #artnersi#, as a se#arate
and distinct entit$, tat must refund te sares of te
#artners, the amount to be refunded is necessarily
limited to its total resources. In other words, it can
only pay out what it has which consists of all its
assets. %owe"er, before the partners can be paid
their shares, the creditors of the partnership must
frst be compensated. &fter all the creditors ha"e
been paid, whate"er is left of the partnership assets
becomes a"ailable for the payment of the partners'
shares.
C.0s com#utation of te amount to (e
refunded to res#ondents as teir sare "as
erroneous as te e6act amount of refund e+ui)alent
to res#ondents0 sare in te #artnersi# cannot (e
determined until all te #artnersi# assets "ill a)e
(een li+uidated, sold and con)erted to cas, and all
#artnersi# creditors, if an$, #aid. 5o li+uidation of
assets is made.
EVANGELISTA & CO. VS. A*AD SANTOS
Facts& . co H #artnersi# "as formed under te
name of 9:)angelista & Co.0 8ts articles of coH
#artnersi# "as later on amended to include :strella
.(ad Santos 1a judge in a Cit$ Court in !anila2 as an
industrial #artner. Se su(se+uentl$ <led a suit
against te #artnersi# to #a$ er te sare of te
#ro<ts o"ing to er. Se alleged tat te #artnersi#
is #a$ing di)idends to te #artners e6ce#t er. Te
#artners denied tat .(ad Santos "as an industrial
#artner and tat te articles of co K #artnersi# do
not e6#ress te true agreement of te #arties and
tat .(ad Santos "as a mere #ro<t sarer, not a
#artner.
Iss$e& 345 .(ad Santos is a #artner.
He'!& Fes, .(ad Santos is a #artner.
Te #artners are esto##ed from den$ing te
articles of #artnersi# (ecause te$ admitted its
genuiness and due e6ecution. :)en if it "ere
erroneous, te$ failed to assail it for B $ears. Suc
failure so"s teir assent to te said articles.
8n addition, te #artners alleged tat (eing
a judge, se cannot (e an industrial #artner since
industrial #artners are not allo"ed to engage in
anoter (usiness or #rofession. Te SC eld tat
suc allegation as no merit (ecause .(ad Santos
com#lied "it er o(ligation to te #artnersi#. Te
#artners also failed to e6ercise teir rigt of
e6clusion for L $ears. Tis so"s tat te argument
of engaging in anoter #rofession is a mere
aftertougt and tat te #artnersi# actuall$
allo"ed .(ad Santos to e6ercise er #rofession.
1Please ta>e note of A#t. 9L02 o Ci5i' Co!e& .n
industrial #artner cannot engage in (usiness for
imself, unless te #artnersi# e6#ressl$ #ermits im
to do so' and if e sould do so, te ca#italist
#artners ma$ eiter e6clude im from te <rm or
a)ail temsel)es of te (ene<ts "ic e ma$ a)e
o(tained in )iolation of tis #ro)ision, "it a rigt to
damages in eiter case.2
LITTON VS. HILL
Facts& =itton sold to Ceron, a #artner in a
#artnersi# called 9*ill & Ceron,0 lum(er mining
claims for P1B,& less alf #ercent #roliferage. =itton
recei)ed onl$ P,2& lea)ing a (alance of P11%&. *e
ten sued te #artnersi#. Te #artnersi# no"
contends tat it is not (ound ($ Ceron0s acts (ecause
te oter #artners did not consent to suc sale. 8t
"as stated in te articles of co K #artnersi# tat a
contract can (e signed ($ onl$ one #artner, #ro)ided
tat oter #artners consented to it.
Iss$e& 345 te #artnersi# is (ound ($ Ceron0s actsO
He'!& Fes. 8t is true tat Ceron needs consent of te
#artners to (ind te #artnersi#. Eut suc agreement
(et"een #artners does not afect tird #ersons "o,
acting in good fait, ad no >no"ledge of it. Te SC
eld tat a tird #erson as no dut$ to in+uire te
autorit$ of a #erson eld out in #u(lic to (e a
#artner ($ a #artnersi#. . contrar$ inter#retation to
te contrar$ "ill cause indrance in transactions.
1Note A#t. 9090 N,a#.9O& :)er$ #artner is an agent
of te #artnersi# for te #ur#ose of its (usiness,
and te act of e)er$ #artner, including te e6ecution
in te #artnersi# name of an$ instrument, for
a##arentl$ carr$ing on in te usual "a$ te (usiness
of te #artnersi# of "ic e is a mem(er (inds te
#artnersi#, unless te #artner so acting as in fact
no autorit$ to act for te #artnersi# in te
#articular matter, and te #erson "it "om e is
dealing as >no"ledge of te fact tat e as no
suc autorit$.2
GOPUIOLA4( ET. AL. VS. S4CIP( ET. AL.
Facts& Tan Sin .n and .ntonio Go+uiola$ entered
into a general commercial #artnersi# "ic "as to
last for 1& $ears for te #ur#ose of dealing in real
estate. Te agreement lodged u#on Tan Sin .n te
sole management of te #artnersi# afairs and is
co K #artner, Go+uiola$, as no )oice or #artici#ation
in te management of te afairs of te co K
#artnersi#. Te$ furter agreed u#on tat in te
e)ent of te deat of an$ of te #artners at an$ time
(efore te e6#iration of te term, te co K
#artnersi# sall not (e dissol)ed (ut "ill a)e to (e
continued and te deceased #artner sall (e
re#resented ($ is eirs or assigns in te said co K
#artnersi#. . general #o"er of attorne$ 1GP.2 "as
e6ecuted ($ Go+uiola$ in fa)or of Tan Sin .n "ic
included (u$, sell, alienate and con)e$ #ro#erties of
te #artnersi# as "ell as o(tain loans as e ma$
deem ad)isa(le for te (est interest of te co K
#artnersi#. 3it te autorit$ of te GP., te
#artnersi# troug Tan Sin .n #urcased C #arcels
of land "ic "as mortgaged to =a Dr(ana Sociedad
and anoter 46 #arcels of land "ic "ic "ere
#urcased ($ Tan Sin .n in is indi)idual ca#acit$,
and assumed mortgaged de(t tereon. Te
do"n#a$ment for te 46 #arcels of land "as
ad)anced ($ Futi)o and Co. Te t"o se#arate
o(ligations "ere consolidated in an instrument
e6ecuted ($ te #artnersi# and Tan Sin .n, "ere($
te entire 4L lots "ere mortgaged in fa)or of te
Eanco *i#otecario de 7ili#inas 1as successor to =a
Dr(ana2. 3en Tan Sin .n died, is "ife Pong Cia
Pin "as a##ointed administrati6 of te intestate
estate of er deceased us(and. -e#eated demands
for #a$ment "ere made ($ Eanco *i#otecario on te
#artnersi# and on Tan Sin .n "ic "as initiall$ #aid
($ Futi)o and Co. and Sing Fee Cuan and Co. 1at te
re+uest of Futi)o and Co.2 Te mortgage "as
e)entuall$ cancelled. 5o" Futi)o and Sing Fee Cuan
Com#an$ <led teir claims in te intestate
#roceedings of Tan Sin .n. Pong Cai Pin <led a
#etition "it te #ro(ate court for autorit$ to sell all
te 4L #arcels of land to 3asington S$ci# and Eett$
=ee for te #ur#ose #rimaril$ of settling te aforesaid
de(ts of er us(and and te #artnersi#. Te court
ordered te e6ecution of deed of sale in fa)or of
S$ci# and =ee in consideration of PC,,&&&.&& and
assuming #a$ment of te claims <led ($ Futi)o & Co.
and Sing Fee Co. =ater, S$ci# and =ee e6ecuted in
fa)or of te 8nsular ;e)0t. Co. a deed of transfer
co)ering said 4L #arcels of land.
D#on learning te sale, te sur)i)ing
#artner Go+uiola$ <led a #etition to set aside te
decision of te #ro(ate court and annul te sale of
te #arcels of land ($ Pong Cai Pin in fa)or of S$ci#
and =ee and teir su(se+uent con)e$ance in fa)or of
8nsular ;e)t. Co. in so far as te C lots o"ned ($ te
#artnersi# is concerned. Pong Cai Pin a)erred te
)alidit$ of te sale as successor #artner, in lieu of te
late Tan Sin .n. Te com#laint "as dismissed ($ te
lo"er court and a##eal "as directl$ ta>en to te SC
($ Go+uiola$.
Iss$e& 1. 345 Pong Cai Pin ac+uired te managerial
rigts of er late us(and Tan Sin .n K 5/.
2. 345 tere "as a )alid sale of #ro#ert$ to S$ci# and
=ee K F:S.
C. 345 te consent of te oter #artner "as
necessar$ to #erfect te sale of te #artnersi#
#ro#erties to S$ci# and Eett$ K 5/.
He'!& 1. Te rigt of e6clusi)e management
conferred u#on Tan Sin .n, (eing #remised u#on
trust and con<dence, "as a mere #ersonal rigt tat
terminated u#on Tan0s demise. Te #ro)ision in te
articles of #artnersi# stating tat te deceased
#artner sall (e re#resented ($ is eirs could not
a)e referred to te managerial rigts gi)en to Tan
Sin .n (ut it more a##ro#riatel$ relates to te
succession in te #ro#riet$ interest of eac #artner
1eir (ecomes limited #artner onl$2.
2. *o"e)er, consonant "it te articles of co K
#artnersi# #ro)iding for te continuation of te <rm
not"itstanding te deat of one of te #artners, te
eir of te deceased, ($ ne)er re#udiating or
refusing to (e (ound under said #ro)ision, (ecame
indi)idual #artner "it Go+uiola$ u#on Tan0s demise.
E$ allo"ing Pong Cai Pin to retain control of te
#artnersi# #ro#erties from 1L42 to 1L4L, Go+uiola$
is esto##ed from den$ing er legal re#resentation of
te #artnersi#, "it te #o"er to (ind it "it #ro#er
contracts. E$ autori@ing te "ido" of te managing
#artner to manage #artnersi# #ro#ert$ 1"ic a
limited #artner could not (e autori@ed to do2, te
oter general #artner recogni@ed er as a general
#artner, and is no" in esto##el to den$ er #osition
as a general #artner, "it autorit$ to administer
and alienate #artnersi# #ro#ert$.
C. Strangers dealing "it a #artnersi# a)e te
rigt to assume, in te a(sence of restricti)e clauses
in te co K #artnersi# agreement, tat e)er$ general
#artner as te #o"er to (ind te #artnersi# and
as te re+uisite autorit$ from is co K #artners.
IDOS VS. CA
7acts:
8rma 8dos, #etitioner, formed a sortHli)ed
#artnersi# "it :ddie .larilla, res#ondent, for a
leater tanning (usiness. D#on te (usiness0
li+uidation, it ad recei)a(les and stoc>s "ort
P1,B&&,&&&. 7or te sare of .larilla, 8dos issued four
#ostHdated cec>s of "ic onl$ tree out of four
cec>s "ere encased. Tis im#elled .larilla to <le
for a EP 22 case against 8dos "en te latter refused
to #a$ te )alue of te cec> after te former as
demanded for it.
/n er defense, 8dos claimed tat te cec>
ser)ed onl$ as an MassuranceN of .larilla0s sare in
te #artnersi# and tat it "as not su##osed to (e
de#osited until te stoc>s a)e (een sold. Tis "as
refuted ($ .larilla and su(se+uentl$ 8dos "as
con)icted ($ te trial court of te ofense carged.
Te C. aArmed te decision of te trial court.
8ssue: 345 8dos )iolated EP 22O 5o
*eld: /ne of te elements of te ofense #enali@ed
under EP 22 is Mte ma>ing, dra"ing and issuance of
an$ cec> to a##l$ for an$ account or for )alue.N 8n
tis case 8dos so"ed enoug e)idence tat te
cec> "as to (e funded from recei)a(les to (e
collected and goods to (e sold ($ te #artnersi#.
7irst, onl$ one of te fours cec> "ere not encased
and second, e)en .larilla imself admitted tat tere
"as no consideration for te issuance of te cec>.
*ence te cec> in +uestion "as not issued for an$
de(t of or an$ account due and #a$a(le ($ te
#etitioner.
!oreo)er, 8dos and .larilla "ere still in te
M"inding u#N of te afairs of te #artnersi# en te
cec> "as issued as e)idenced ($ te fact tat te$
still ad to sell te goods on and and collect te
recei)a(les from de(tors. .s #ro)ided ($ te Ci)il
Code: "indingHu# is te #rocess of settling (usiness
afairs after dissolution, i.e. collecting of assets
#re)iousl$ demanda(le' termination is te #oint in
time after all te #artnersi# afairs a)e (een
"ound u#. Tus, since tat #artnersi# as not (een
terminated, te #etitioner and #ri)ate com#lainant
remained as coH#artners. Te cec> "as tus issued
($ te #etitioner to com#lainant as "ould a #artner
to anoter and not as #a$ment from a de(tor to a
creditor. 8dos did not )iolate EP 22.
VILLAREAL VS. RA)IRE3
7acts:
8n 1LB4, Iillareal, Carmelito Jose and Jesus
Jose formed a #artnersi# "it a ca#ital of P,%&,&&&
for te o#eration of a restaurant and catering
(usiness. -es#ondent -amire@ joined as a #artner in
te (usiness "it te ca#ital contri(ution of
P2%&,&&&. 8n 1LB,, Jesus Jose "itdre" from te
#artnersi# and "itin te same time, Iillareal and
Carmelito Jose, #etitioners closed te (usiness
"itout #rior >no"ledge of res#ondents.
8n !arc 1LB,, res#ondents "rote a letter to
#etitioners stating tat te$ "ere no longer
interested in continuing te #artnersi# and tat
te$ "ere acce#ting te latter0s ofer to return teir
ca#ital contri(ution. Tis "as left uneeded ($ te
#etitioners, and ($ reason of "ic res#ondents <led
a com#laint in te -TC.
-TC ruled tat te #arties ad )oluntaril$
entered into a #artnersi#, "ic could (e dissol)ed
at an$ time, and tis dissoution "as so"ed ($ te
fact tat #etitioners sto##ed o#erating te
restaurant.
/n a##eal, C. u#eld -TC0s decision tat
te #artnersi# "as dissol)ed and it added tat
res#ondents ad no rigt to demand te return of
teir ca#ital contri(ution. *o"e)er since #etitioners
did not gi)e te #ro#er accounting for te li+uidation
of te #artnersi#, te C. too> it u#on itself to
com#ute teir lia(ilities and te amount tat is
#ro#er to te res#ondent. Te com#utation of "ic
"as:
1ca#ital of te #artnersi# K outstanding
o(ligation2 4 remaining #artners ]
amount due to #ri)ate res#ondent
8ssue: 345 #etitioners are lia(le to res#ondents for
te latter0s sare in te #artnersi#O 5o#e.
*eld: -es#ondents a)e no rigt to demand from
#etitioner te return of teir e+uit$ sare. .s found
($ te court #etitioners did not #ersonall$ old its
e+uit$ or assets. MTe #artnersi# as a juridical
#ersonalit$ se#arate and distinct from tat of eac of
te #artners.N Since te ca#ital "as contri(uted to
te #artnersi#, not to #etitioners, it is te
#artnersi# tat must refund te e+uit$ of te
retiring #artners. *o"e)er, (efore te #artners can
(e #aid teir sares, te creditors of te #artnersi#
must <rst (e com#ensated. Terefore, te e6act
amount of refund e+ui)alent to res#ondents0 oneH
tird sare in te #artnersi# cannot (e determined
until all te #artnersi# assets "ill a)e (een
li+uidated and all #artnersi# creditors a)e (een
#aid.
C.0s com#utation of te amount to (e
refunded to res#ondents as teir sare "as tus
erroneous.
CLAUDIO VS. 3ANDUETA
Facts& Petitioners Claudio, Go$ena and 7lores
organi@ed te MCota(ato & Caga$an !ining
.ssociationN 1.ssociation2 togeter "it te
res#ondents 5eufer, !e$er, S>iles, .raneta and
Co"#er. Te res#ondents in tis case <led in C78 a
ci)il case no. %1%1& for te dissolution of te
.ssociation. /ne of teir #ra$ers "as for te court to
a##oint a recei)er to ta>e carge of te #ro#erties of
te association after its dissolution. Te court trug
Judge Sandueta granted te #ra$er of te
res#ondents in ci)il case %1%1& and a##ointed J.C.
Co"#er as a recei)er e)en if te latter "as not made
a #art$ to te case.
Iss$e& 3eter or not Judge Sandueta e6ceeded is
jurisdiction and a(used is discretion "en e
a##ointed te recei)er in ci)il case %1%1&O 5o.
He'!& 8n order tat a recei)er ma$ (e a##ointed in a
case, an a##lication under oat must (e <led,
alleging all te facts necessar$ to con)ince te court
to grant te same, for te #ur#ose of #reser)ing te
#ro#ert$ "ic is te su(ject of litigation and
#rotecting tere($ te rigts of all te #arties
interested terein. !oreo)er te conse+uences or
efects of suc a##ointment sould (e considered in
order to a)oid causing irre#ara(le injustice or injur$.
8n te com#laint for te a##lication of te
a##ointment of te recei)er, it "as e)ident tat te
#laintif did not include te 2,L mem(ers of te
.ssociation nor did te$ so" tat te$ "ere acting
on (ealf of te interest of te .ssociation. Terefore
te judge e6ceeded is jurisdiction and a(used is
discretion (ecause e sould a)e re+uired te
inclusion terein of te necessar$ mem(ers of te
.ssociation. !oreo)er, e sould a)e also
considered te fact tat in te res#ondents0
#leadings, te$ did not (ring te action for
temsel)es and in te name of te .ssociation, or for
te (ene<t of te oter mem(ers, or for te #ersons
"o migt (e afected ($ te remed$ a##lied for.
SINGSONG 5 ISA*ELLA SA=)ILL
Facts& ;efendants Gari(a$, !argarita Saldajeno and
Tu(ung(anua entered into a contract of #artnersi#
under te <rm name 98sa(ela Sa"mill0. Said
#artnersi# o"ed un#aid (alances to #laintifs.
. ci)il case for te dissolution "as <led ($ te
s#ouses Saldajeno against 8sa(ela Sa"mill, Gari(a$
and Tu(ung(anua. =ater on said #arties entered into
a memorandum agreement "erein Gari(a$ and
Tu(ung(anua a)e (ound temsel)es to ans"er for
an$ and all o(ligations of te defunct #artnersi# to
its creditors and tird #ersons. ;efendants Gari(a$
and Tu(ung(anua did not di)ide te assets and
#ro#erties of te M8sa(ella Sa"millN (et"een tem,
(ut te$ continued te (usiness of said #artnersi#
under te same <rm name.
Te remaining #artners e6ecuted an M.ssignment of
-igts "it Cattel !ortgageN in fa)or of Saldajeno
in order to secure te #erformance of teir
o(ligations. *o"e)er, since te$ defaulted in teir
#a$ment a judgment "as rendered in fa)or of
Saldejano "ic caused te foreclosure of te C!.
Te Pro)incial Serif #u(lised notices tat e "ould
sell at a #u(lic auction certain #ro#erties 1of te
#artnersi#2 mortgaged ($ Gari(a$ and
Tu(ung(anua in fa)or of Saldejano and later on
e6ecuted a sale in te latter0s fa)or, selling for CBP
te assets of te #artnersi#. Saldejano in turn sold
to Pan /riental lum(er com#an$ for 4%P #art of te
said #ro#erties se ad (ougt at te #u(lic auction.
Te #laintifs, in a ci)il action, sougt to restrain te
Serif from #roceeding "it te sales and to a)e
te cattel mortgage declared null and )oid in fraud
of creditors. ;efendant !. Saldajeno claims tat all
te #laintifs sa)e for /##an are creditors of Gari(a$
and Tu(ung(anua and not of te defunct #artnersi#
and tat said creditors ad >no"ledge and notice
tat te former #artnersi# ad (een dissol)ed.
Te trial court ruled in fa)or of te #laintifs tus, te
erein defendants a##ealed. Te court ruled tat
tere "as no C! o)er te #ro#erties as suc "ere
o"ned ($ te #artnersi# and tat te #laintifs a)e
a #referred rigt o)er it as against Saldejano. .s
suc, te latter must #a$ te #laintifs te res#ecti)e
amounts for "ic te #artnersi# is inde(ted to
tem. Gari(a$ and Tu(ung(anua are also lia(le to
#a$ to te #laintifs "ate)er amount tat te$ ma$
not collect from Saldajeno. Te defendants a##ealed
to te C. (ut te latter transferred te records of te
case to te SC.
SC& Te remaining #artners did not terminate te
(usiness of te #artnersi#. 8t is e6#ressl$ sti#ulated
in te memorandum agreement tat te remaining
#artners ad constituted temsel)es as te
#artnersi# entit$, te M8sa(ella Sa"millN. Tere "as
no li+uidation of te assets of te #artnersi#. Te
remaining #artners continued doing (usiness of te
#artnersi# in te name of M8sa(ella Sa"millN. Te$
used te #ro#erties of te #artnersi#. Te
#ro#erties mortgaged to !. Saldajeno ($ te
remaining #artners (elonged to te #artnersi#. 8t
does not a##ear tat te "itdra"al of !. Saldajeno
"as #u(lised in te ne"s#a#ers. Te a##ellees and
te #u(lic in general ad a rigt to e6#ect tat
"ate)er credit te$ e6tended to te remaining
#artners doing (usiness in te name of M8sa(ela
sa"millN could (e enforced against te #ro#erties of
said #artnersi#. Te judicial foreclosure e6ecuted in
fa)or of Saldajeno did not relie)e er from lia(ilit$ to
te creditors of te #artnersi#. Tecnicall$ s#ea>ing
te #artnersi# "as dissol)ed ($ te "itdra"al of
Saldajeno (ut not terminated and it continued doing
(usiness troug te t"o remaining #artners.
Te #laintifs "ere #rejudiced in teir rigts ($ te
e6ecution of te cattel mortgage o)er te
#ro#erties of te #artnersi# in fa)or of Saldajeno ($
te remaining #artners and te$ ad a rigt to <le
te action to nullif$ te cattel mortgage in +uestion.
Te s#ouses Saldejano a)e a rigt to (e reim(ursed
"ate)er amounts te$ sall #a$ te a##ellees ($
teir Gari(a$ and Tu(ung(anua as in te
memorandum agreement, te$ undertoo> to release
Saldejano from an$ o(ligation of te #artnersi# to
tird #ersons.
4U VS. NLRC
Facts& Fu "as formerl$ te .ssistant General
!anager of a registered #artnersi#, Jade !ountain.
Te #artnersi# "as originall$ com#osed of Eendal
si(lings as general #artners and oters "o "ere
limited #artners. Te #artnersi# (usiness consisted
of e6#loiting mar(le de#osit found on te land of te
Cru@ s#ouses ($ )irtue of a memorandum
agreement. Fu "as ired ($ )irtue of a Partnersi#
-esolution as .ssistant General !anager "it a
montl$ salar$. *e, o"e)er, onl$ recei)ed alf of is
montl$ salar$ since e ad acce#ted te #romise of
te #artners tat te (alance "ould (e #aid "en
te <rm sall a)e secured additional o#erating
funds from a(road. Fu managed te o#erations and
<nances of te (usiness, ad o)erall su#er)ision of
te "or>ers at te mar(le +uarr$ and too> carge of
te #re#aration of #a#ers relation to te e6#ortation
of te <rm0s #roducts.
3itout >no"ledge of Fu, te general #artners
transferred teir interests "ile some of te limited
#artners sold and transferred teir interests in te
#artnersi# to res#ondents Co and Sa#anta.
-es#ondents continued to use te old <rm name (ut
mo)ed te <rm0s main oAce. . su##lement to te
memorandum agreement relating to te o#eration of
te mar(le +uarr$ "as entered into "it te Cru@
s#ouses. Te actual o#erations of te (usiness
continued as (efore. .ll te em#lo$ees continued
"or>ing in te (usiness. Fu, o"e)er, "as informed
($ Co tat e ad (ougt te (usiness from te
original #artners and tat it "as u# to im to decide
"eter or not e "as res#onsi(le for te o(ligations
of te old #artnersi# including Fu0s salar$. Fu "as no
longer allo"ed to "or> for te (usiness and is
salar$ remained un#aid.
Fu <led a com#laint for illegal dismissal and reco)er$
of un#aid salar$ against te #artnersi#, Co and
oter #artners. ;efendants contended tat te ne"
#artnersi# ne)er ired Fu as an em#lo$ee. Te la(or
ar(iter found in fa)or of Fu and decreed is
reinstatement and #a$ment of un#aid salaries as "ell
as (ac>"ages. Te 5=-C re)ersed te decision,
ruling tat te ne" #artnersi# ad not retained Fu in
is original #osition and tere "as no la" re+uiring
te ne" #artnersi# to a(sor( te em#lo$ees of te
old #artnersi#. Te claim for un#aid "ages must (e
asserted against te old #artners (ut te$ a)e not
(een ser)ed "it summons.
Iss$es& 3eter te old #artnersi# ad (een
e6tinguised and re#laced ($ a ne" #artnersi#. 8f a
ne" #artnersi# "as created could Fu assert is
rigts under is em#lo$ment contract as against itO
SC& Te ac+uisition ($ te ne" #artners of B2X of
te #artnersi# interest "as enoug to constitute a
ne" #artnersi#. *o"e)er, dissolution does not
automaticall$ result in te termination of te legal
#ersonalit$ of te old #artnersi#. Te legal
#ersonalit$ of te e6#iring #artnersi# #ersists for
te limited #ur#ose of "inding u# and closing of te
afairs of te #artnersi#. Te ne" #artnersi#
sim#l$ too> o)er te (usiness enter#rise o"ned ($
te #receding #artnersi# and continued using te
old name "itout "inding u# te (usiness afairs of
te latter, #a$ing of its de(ts, li+uidating and
distri(uting its assets and te reHassem(ling te
assets and o#ening a ne" (usiness enter#rise.
Terefore, not onl$ te retiring #artners (ut also te
ne" #artnersi# itself "ic continued te (usiness
of te old, dissol)ed one are lia(le for te de(ts of
te #receding #artnersi#. Te creditors of te old
#artnersi# are also te creditors of te ne". Fu is
entitled to enforce is claim for un#aid salaries, as
"ell as oter claims relating to is em#lo$ment "it
te #re)ious #artnersi#, against te ne" one.
Te nonHretention of Fu did not constitute unla"ful or
unjust termination as te ne" #artnersi# is entitled
to ire ne" managers. Te ne" #artnersi# ad Co
as its o"n ne" manager and te (asis for Fu0s
termination "as redundanc$.
Fu is entitled to is un#aid "ages and se#aration #a$.
A)ES V. DO=NING 6N.4. S$##. Cit.7
NTAJEN FRO) CLV *LOGO (autista quoted from
the )ew *ork decision in &mes ". +owning, , (rad.
().*. -urr. Cit.! ./,,
012
to describe the origin and
de"elopment of limited partnerships, thus 33
Te s$stem of limited #artnersi#, "ic "as
introduced ($ statute into tis state, and
su(se+uentl$ )er$ generall$ ado#ted in man$ oter
states of te Dnion, "as (orro"ed from te 7renc
Code. 1C Pent. C6' Code de Commerce, 12, 2C, 24.2
Dnder te name of la societe en commandite, it as
e6isted in 7rance from most autentic commercial
records, and in te earl$ mercantile regulations of
!aseilles and !ont#elier. 8n te )ulgar latinit$ of te
middle ages it "as st$led commanda, and in 8tal$
accomenda. 8n te states of Pisa and 7lorence, it is
recogni@ed so far (ac> as te $ear 1166' also in te
ordinance of =ouiseHle *utin, of 1C1%' te statutes of
!arseilles, 12%C' of Gene)a, of 1%BB. 8n te middle
ages it "as one of te most fre+uent com(inations of
trade, and "as te (asis of te acti)e and "idel$
e6tended commerce of te o#ulent maritime cities of
8tal$. 8t contri(uted largel$ to te su##ort of te great
and #ros#erous trade carried on along te sores of
te !editerranean, "as >no"n in =aguedoc,
Pro)ence, and =om(ard$, entered into most of te
industrial occu#ations and #ursuits of te age, and
e)en tra)eled under te #rotection of te arms of te
Crusaders to te cit$ of Jerusalem. .t a #eriod "en
ca#ital "as in te ands of no(les and clerg$, "o,
from #ride of caste, or cannonical regulations, could
not engage directl$ in trade, it aforded te means of
secretl$ em(ar>ing in commercial enter#rises, and
rea#ing te #ro<ts of suc lucrati)e #ursuits, "itout
#ersonal ris>' and tus te )ast "ealt, "ic
oter"ise could a)e lain dormant in te cofers of
te ric, (ecame te foundation, ($ means of tis
ingenious idea, of te great commerce "ic made
#rinces of te mercants, ele)ated to te trading
class, and (rougt te Commons into #osition as an
in?uential estate in te Common"ealt. 8nde#endent
of te interest naturall$ attacing to te istor$ of a
mercantile contract, of suc ancient origin, (ut so
recentl$ introduced "ere te general #artnersi#,
>no"n to te common la" as iterto e6isted alone,
8 a)e (een led to refer to te facts just stated, for
te #ur#ose of so"ing tat te s#ecial #artnersi#
is, in fact, no no)elt$, (ut an institution of
considera(le anti+uit$, "ell >no"n, understood and
regulated. ;ucange de<nes it to (e: ^-ocietas
mercatorem qua uni sociorum tota negotiationis cura
commendatur, certis conditionibus.4 8t "as al"a$s
considered a #ro#er #artnersi#, societas, "it
certain reser)es and restrictions' and in te
ordinance of =ouis _8I., of 1,LC, it is ran>ed as a
regular #artnersi#. 8n te Code of Commerce it is
classed in te same manner. 8 ma$ add, as an
im#ortant fact, for te e6#lanation of te distinction
to "ic 8 sall sortl$ ad)ert, tat te 7renc Code
#ermits a s#ecial #artnersi#, of "ic te ca#ital
ma$ (e di)ided into sares, or stoc>, transmissi(le
from and to and. 8n suc a case, te deat of te
s#ecial #artner does not dissol)e te <rm, te
creation of transmissi(le sares (eing a #roof tat
te association is formed respectu negotii, and not
respectu peronsarum' (ut e)en in suc a #artnersi#
te deat of te general #artner efects a dissolution,
unless it is e6#ressl$ sti#ulated oter"ise. Eut, sa$s
!. Tro#long, in "ould (e "rong to e6tend te rule
tat a #artnersi#, of "ic te ca#ital is di)ided into
transmissi(le sares, is not dissol)ed ($ te deat of
a stoc>older, to a s#ecial #artnersi#, te ca#ital of
"ic is not so di)ided. Te statute of 5e" For>
recogni@es onl$ te latter >ind of #artnersi#, te
names of te #arties (eing re+uired to (e registered,
and an$ cange in te name "or>ing a dissolution,
and turning te <rm into a general #artnersi#. Suc
a #artnersi# as al"a$s (een eld to (e dissol)ed
($ te deat of te s#ecial #artner. VVV Te
#artnersi# remains under te dominion of te
common la". 8t as created (et"een te s#ecial and
general #artner a tie, "ic is not su(jected to te
ca#rice of unforseen canges' it as #roduced
mutual relations of con<dence, "ic te general
#artner cannot (e forced to e6tend to strangers.
CO))ISSIONER OF INTERNAL REVENUE VS.
SUTER
Facts& 8n 1L4,( . limited #artnersi#, M3illiam J.
Suter 9!orcoin0 Co., =td.N, "as formed "it 3illiam
Suter as general #artner, Julia S#irig and Gusta)
Carlson as limited #artners, eac contri(uting to te
#artnersi#. 8n 1L4B, Suter married S#irig and
tereafter, Carlson sold is sare in te #artnersi#
to Suter and is "ife. Te limited #artnersi# ad
(een <ling its income ta6 returns 18T-s2 as a
cor#oration "4o o(jection from te C8-. =ater in an
assessment, te C8- consolidated te income of te
<rm and te indi)idual incomes of #artnerHs#ouses
resulting in a determination of a de<cienc$ income
ta6 against Suter. Suter #rotested and re+uested
cancellation and "itdra"al (ut "as denied ($ te
C8-. Suter a##ealed to te Court of Ta6 .##eals "4c
re)ersed C8-0s decision.
Iss$es&
112 Sould te cor#orate #ersonalit$ of te
#artnersi# (e disregarded for income ta6 #ur#oses
since #artnerHs#ouses form a single ta6a(le unitO
1223as te #artnersi# dissol)ed after te marriage
of #artnerHs#uses and su(se+uent sale of Carlson of
is #artici#ation in te #artnersi#O
He'!& C#& decision a5rmed. Te limited #artnersi#
"as not a uni)ersal #artnersi# (ut a #articular one.
. uni)ersal #artnersi# re+uires eiter tat te
o(ject of te association (e all te #resent #ro#ert$
of te #artners, as contri(uted ($ tem to te
common fund, or else Mall tat te #artners ma$
ac+uire ($ teir industr$ or "or> during te
e6istence of te #artnersi#N. 8n te instant case, all
of te contri(utions "ere <6ed sums of mone$ and
neiter of tem "ere industrial #artners. Tus it "as
not a #artnersi# tat s#ouses "ere for(idden to
enter under te 1BBL Ci)il Code.
Te ca#ital contri(utions of #artnerHs#ouses "ere
se#aratel$ o"ned and contri(uted ($ tem (efore
teir marriage' and after te$ "ere joined in
"edloc>, suc contri(utions remained teir
res#ecti)e se#arate #ro#ert$ under te S#anis Ci)il
Code. Tus, te indi)idual interest of eac did not
(ecome common #ro#ert$ of (ot after teir
marriage.
8n tis case te limited #artnersi# is not a mere
(usiness conduit of te #artnerHs#ouses' it "as
organi@ed for legitimate (usiness #ur#oses, Te
cange in its mem(ersi# (rougt a(out ($ te
marriage is not a ground for "itdra"ing te
#artnersi# from co)erage under `24 of te ta6 code
re+uiring it to #a$ income ta6. 3at is ta6a(le is te
income of (ot s#ouses in teir indi)idual ca#acities.

GO CHUNG CANG 5s. PACIFIC CO))ERCIAL Co.
Facts& 8n an insol)enc$ #roceedings of #etitionerH
esta(lisment, MSociedad !ercantil, Tec> Seing &
Co., =td.N, creditors, Paci<c Commercial and oters
<led a motion "it te Court to declare te indi)idual
#artners #arties to te #roceeding, for eac to <le an
in)entor$, and for eac to (e adjudicated as
insol)ent de(tors.
Iss$e& 3at is te nature of te mercantile
esta(lisment, Tec> Seing & Co., =td.O
He'!: Te contract of #artnersi# esta(lised a
general #artnersi#.
E$ #rocess of elimination, Tec> Seing & Co., =td. 8s
not a cor#oration nor an accidental #artnersi# 1joint
account association2.
To esta(lis a limited #artnersi#, tere must (e, at
least, one general #artner and te name of at least
one of te general #artners must a##ear in te <rm
name. Tis re+uirement as not (een ful<lled. Tose
"o see> to a)ail temsel)es of te #rotection of
la"s #ermitting te creation of limited #artnersi#s
must te so" a su(stantiall$ full com#liance "it
suc la"s. 8t must (e noted tat all te re+uirements
of te Code a)e (een met "4 te sole e6ce#tion of
tat relating to te com#osition of te <rm name.
Te legal intention deduci(le from te acts of te
#arties controls in determining te e6istence of a
#artnersi#. 8f te$ intend to do a ting "4c in la"
constitutes a #artnersi#, te$ are #artners altoug
teir )er$ #ur#ose "as to a)oid te creation of suc
relation. *ere te intention of te #ersons ma>ing u#,
Tec> Seing & Co., =td. 3as to esta(lis #artnersi#
"4c te$ erroneousl$ denominated as a limited
#artnersi#.

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