G.R. No.

L-24193

June 28, 1968

MAURICIO AGAD, plaintiff-appellant,

vs.
SEVERINO MABATO and MABATO and AGAD
COMPANY, defendants-appellees.
Angeles, Maskarino and Associates for plaintiff-appellant.
Victorio S. Advincula for defendants-appellees.

the lower court had no jurisdiction over the subject matter of

the case, because it involves principally the determination of
rights over public lands. After due hearing, the court issued
the order appealed from, granting the motion to dismiss the
complaint for failure to state a cause of action. This conclusion
was predicated upon the theory that the contract of
partnership, Annex "A", is null and void, pursuant to Art. 1773
of our Civil Code, because an inventory of the fishpond
referred in said instrument had not been attached thereto. A
reconsideration of this order having been denied, Agad
brought the matter to us for review by record on appeal.

CONCEPCION, C.J.:
Articles 1771 and 1773 of said Code provide:
In this appeal, taken by plaintiff Mauricio Agad, from an order
of dismissal of the Court of First Instance of Davao, we are
called upon to determine the applicability of Article 1773 of
our Civil Code to the contract of partnership on which the
complaint herein is based.
Alleging that he and defendant Severino Mabato are
pursuant to a public instrument dated August 29, 1952, copy
of which is attached to the complaint as Annex "A" partners
in a fishpond business, to the capital of which Agad
contributed P1,000, with the right to receive 50% of the
profits; that from 1952 up to and including 1956, Mabato who
handled the partnership funds, had yearly rendered accounts
of the operations of the partnership; and that, despite
repeated demands, Mabato had failed and refused to render
accounts for the years 1957 to 1963, Agad prayed in his
complaint against Mabato and Mabato & Agad Company, filed
on June 9, 1964, that judgment be rendered sentencing
Mabato to pay him (Agad) the sum of P14,000, as his share in
the profits of the partnership for the period from 1957 to
1963, in addition to P1,000 as attorney's fees, and ordering
the dissolution of the partnership, as well as the winding up of
its affairs by a receiver to be appointed therefor.
In his answer, Mabato admitted the formal allegations of the
complaint and denied the existence of said partnership, upon
the ground that the contract therefor had not been perfected,
despite the execution of Annex "A", because Agad had
allegedly failed to give his P1,000 contribution to the
partnership capital. Mabato prayed, therefore, that the
complaint be dismissed; that Annex "A" be declared void ab
initio; and that Agad be sentenced to pay actual, moral and
exemplary damages, as well as attorney's fees.

Art. 1771. A partnership may be constituted in any

form, except where immovable property or real rights
are contributed thereto, in which case a public
instrument shall be necessary.
Art. 1773. A contract of partnership is void, whenever
immovable property is contributed thereto, if
inventory of said property is not made, signed by the
parties; and attached to the public instrument.
The issue before us hinges on whether or not "immovable
property or real rights" have been contributed to the
partnership under consideration. Mabato alleged and the
lower court held that the answer should be in the affirmative,
because "it is really inconceivable how a partnership engaged
in the fishpond business could exist without said fishpond
property (being) contributed to the partnership." It should be
noted, however, that, as stated in Annex "A" the partnership
was established "to operate a fishpond", not to "engage in a
fishpond business". Moreover, none of the partners
contributed either a fishpond or a real right to any fishpond.
Their contributions were limited to the sum of P1,000 each.
Indeed, Paragraph 4 of Annex "A" provides:
That the capital of the said partnership is Two
Thousand (P2,000.00) Pesos Philippine Currency, of
which One Thousand (P1,000.00) pesos has been
contributed by Severino Mabato and One Thousand
(P1,000.00) Pesos has been contributed by Mauricio
Agad.
xxx

Subsequently, Mabato filed a motion to dismiss, upon the

ground that the complaint states no cause of action and that

xxx

xxx

The operation of the fishpond mentioned in Annex "A" was the

purpose of the partnership. Neither said fishpond nor a real
right thereto was contributed to the partnership or became
part of the capital thereof, even if a fishpond or a real right
thereto could become part of its assets.
WHEREFORE, we find that said Article 1773 of the Civil Code is
not in point and that, the order appealed from should be, as it
is hereby set aside and the case remanded to the lower court
for further proceedings, with the costs of this instance against
defendant-appellee, Severino Mabato. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro,
Angeles and Fernando, JJ., concur.
[G.R. No. 134559. December 9, 1999]
ANTONIA TORRES, assisted by her husband, ANGELO
TORRES; and EMETERIA BARING, petitioners,
vs.
COURT
OF
APPEALS
and
MANUEL
TORRES, respondents.
DECISION
PANGANIBAN, J.:
Courts may not extricate parties from the necessary
consequences of their acts. That the terms of a contract turn
out to be financially disadvantageous to them will not relieve
them of their obligations therein. The lack of an inventory of
real property will not ipso facto release the contracting
partners
from
their
respective
obligations to
each
other arising from acts executed in accordance with their
agreement.
The Case

The Petition for Review on Certiorari before us assails the

March 5, 1998 Decision[1] Second Division of the Court of
Appeals[2] (CA) in CA-GR CV No. 42378 and its June 25, 1998
Resolution denying reconsideration. The assailed Decision
affirmed the ruling of the Regional Trial Court (RTC) of Cebu
City in Civil Case No. R-21208, which disposed as follows:
WHEREFORE, for all the foregoing considerations, the Court,
finding for the defendant and against the plaintiffs, orders the
dismissal of the plaintiffs complaint. The counterclaims of the

defendant are likewise ordered dismissed. No pronouncement

as to costs.[3]
The Facts

Sisters Antonia Torres and Emeteria Baring, herein

petitioners, entered into a "joint venture agreement" with
Respondent Manuel Torres for the development of a parcel of
land into a subdivision. Pursuant to the contract, they
executed a Deed of Sale covering the said parcel of land in
favor of respondent, who then had it registered in his
name. By mortgaging the property, respondent obtained from
Equitable Bank a loan of P40,000 which, under the Joint
Venture Agreement, was to be used for the development of
the subdivision.[4] All three of them also agreed to share the
proceeds from the sale of the subdivided lots.
The project did not push through, and the land was
subsequently foreclosed by the bank.
According to petitioners, the project failed because of
respondents lack of funds or means and skills. They add that
respondent used the loan not for the development of the
subdivision, but in furtherance of his own company, Universal
Umbrella Company.
On the other hand, respondent alleged that he used the
loan to implement the Agreement. With the said amount, he
was able to effect the survey and the subdivision of the
lots. He secured the Lapu Lapu City Councils approval of the
subdivision project which he advertised in a local
newspaper.He also caused the construction of roads, curbs
and gutters. Likewise, he entered into a contract with an
engineering firm for the building of sixty low-cost housing
units and actually even set up a model house on one of the
subdivision lots. He did all of these for a total expense
of P85,000.
Respondent claimed that the subdivision project failed,
however, because petitioners and their relatives had
separately caused the annotations of adverse claims on the
title to the land, which eventually scared away prospective
buyers. Despite his requests, petitioners refused to cause the
clearing of the claims, thereby forcing him to give up on the
project.[5]
Subsequently, petitioners filed a criminal case for estafa
against respondent and his wife, who were however

acquitted. Thereafter, they filed the present civil case which,

upon respondent's motion, was later dismissed by the trial
court in an Order dated September 6, 1982. On appeal,
however, the appellate court remanded the case for further
proceedings. Thereafter, the RTC issued its assailed Decision,
which, as earlier stated, was affirmed by the CA.
Hence, this Petition.[6]
Ruling of the Court of Appeals

In affirming the trial court, the Court of Appeals held that

petitioners and respondent had formed a partnership for the
development of the subdivision. Thus, they must bear the loss
suffered by the partnership in the same proportion as their
share in the profits stipulated in the contract.Disagreeing with
the trial courts pronouncement that losses as well as profits in
a joint venture should be distributed equally, [7] the CA invoked
Article 1797 of the Civil Code which provides:
Article 1797 - The losses and profits shall be distributed in
conformity with the agreement. If only the share of each
partner in the profits has been agreed upon, the share of each
in the losses shall be in the same proportion.
The CA elucidated further:
In the absence of stipulation, the share of each partner in the
profits and losses shall be in proportion to what he may have
contributed, but the industrial partner shall not be liable for
the losses. As for the profits, the industrial partner shall
receive such share as may be just and equitable under the
circumstances. If besides his services he has contributed
capital, he shall also receive a share in the profits in
proportion to his capital.
The Issue

Petitioners impute to the Court of Appeals the following

error:
x x x [The] Court of Appeals erred in concluding that the
transaction x x x between the petitioners and respondent was
that of a joint venture/partnership, ignoring outright the
provision of Article 1769, and other related provisions of the
Civil Code of the Philippines.[8]

The Courts Ruling

The Petition is bereft of merit.

Main Issue: Existence of a Partnership

Petitioners deny having formed a partnership with

respondent. They contend that the Joint Venture Agreement
and the earlier Deed of Sale, both of which were the bases of
the appellate courts finding of a partnership, were void.
In the same breath, however, they assert that under
those very same contracts, respondent is liable for his failure
to implement the project. Because the agreement entitled
them to receive 60 percent of the proceeds from the sale of
the subdivision lots, they pray that respondent pay them
damages equivalent to 60 percent of the value of the
property.[9]
The pertinent portions of the Joint Venture Agreement
read as follows:
KNOW ALL MEN BY THESE PRESENTS:
This AGREEMENT, is made and entered into at Cebu City,
Philippines, this 5th day of March, 1969, by and between MR.
MANUEL R. TORRES, x x x the FIRST PARTY, likewise, MRS.
ANTONIA B. TORRES, and MISS EMETERIA BARING, x x x the
SECOND PARTY:
W I T N E S S E T H:
That, whereas, the SECOND PARTY, voluntarily offered the
FIRST PARTY, this property located at Lapu-Lapu City, Island of
Mactan, under Lot No. 1368 covering TCT No. T-0184 with a
total area of 17,009 square meters, to be sub-divided by the
FIRST PARTY;
Whereas, the FIRST PARTY had given the SECOND PARTY, the
sum of: TWENTY THOUSAND (P20,000.00) Pesos, Philippine
Currency, upon the execution of this contract for the property
entrusted by the SECOND PARTY, for sub-division projects and
development purposes;
NOW THEREFORE, for and in consideration of the above
covenants and promises herein contained the respective
parties hereto do hereby stipulate and agree as follows:

ONE: That the SECOND PARTY signed an absolute Deed of

Sale x x x dated March 5, 1969, in the amount of TWENTY
FIVE THOUSAND FIVE HUNDRED THIRTEEN & FIFTY CTVS.
(P25,513.50) Philippine Currency, for 1,700 square meters at
ONE [PESO] & FIFTY CTVS. (P1.50) Philippine Currency, in
favor of the FIRST PARTY, but the SECOND PARTY did not
actually receive the payment.

That this AGREEMENT shall be binding and obligatory to the

parties who executed same freely and voluntarily for the uses
and purposes therein stated.[10]

SECOND: That the SECOND PARTY, had received from the

FIRST PARTY, the necessary amount of TWENTY THOUSAND
(P20,000.00) pesos, Philippine currency, for their personal
obligations and this particular amount will serve as an
advance payment from the FIRST PARTY for the property
mentioned to be sub-divided and to be deducted from the
sales.

ART. 1767. By the contract of partnership two or more persons

bind themselves to contribute money, property, or industry to
a common fund, with the intention of dividing the profits
among themselves.

THIRD: That the FIRST PARTY, will not collect from the
SECOND PARTY, the interest and the principal amount
involving the amount of TWENTY THOUSAND (P20,000.00)
Pesos, Philippine Currency, until the sub-division project is
terminated and ready for sale to any interested parties, and
the amount of TWENTY THOUSAND (P20,000.00) pesos,
Philippine currency, will be deducted accordingly.
FOURTH: That all general expense[s] and all cost[s] involved
in the sub-division project should be paid by the FIRST PARTY,
exclusively and all the expenses will not be deducted from the
sales after the development of the sub-division project.
FIFTH: That the sales of the sub-divided lots will be divided
into SIXTY PERCENTUM 60% for the SECOND PARTY and FORTY
PERCENTUM 40% for the FIRST PARTY, and additional profits or
whatever income deriving from the sales will be divided
equally according to the x x x percentage [agreed upon] by
both parties.
SIXTH: That the intended sub-division project of the property
involved will start the work and all improvements upon the
adjacent lots will be negotiated in both parties['] favor and all
sales shall [be] decided by both parties.
SEVENTH: That the SECOND PARTIES, should be given an
option to get back the property mentioned provided the
amount of TWENTY THOUSAND (P20,000.00) Pesos, Philippine
Currency, borrowed by the SECOND PARTY, will be paid in full
to the FIRST PARTY, including all necessary improvements
spent by the FIRST PARTY, and the FIRST PARTY will be given a
grace period to turnover the property mentioned above.

A reading of the terms embodied in the Agreement

indubitably shows the existence of a partnership pursuant to
Article 1767 of the Civil Code, which provides:

Under the above-quoted Agreement, petitioners would

contribute property to the partnership in the form of land
which was to be developed into a subdivision; while
respondent would give, in addition to his industry, the amount
needed for general expenses and other costs. Furthermore,
the income from the said project would be divided according
to the stipulated percentage. Clearly, the contract manifested
the intention of the parties to form a partnership.[11]
It should be stressed that the parties implemented the
contract. Thus, petitioners transferred the title to the land to
facilitate its use in the name of the respondent. On the other
hand, respondent caused the subject land to be mortgaged,
the proceeds of which were used for the survey and the
subdivision of the land. As noted earlier, he developed the
roads, the curbs and the gutters of the subdivision and
entered into a contract to construct low-cost housing units on
the property.
Respondents actions clearly belie petitioners contention
that he made no contribution to the partnership. Under Article
1767 of the Civil Code, a partner may contribute not only
money or property, but also industry.
Petitioners Bound by Terms of Contract

Under Article 1315 of the Civil Code, contracts bind the

parties not only to what has been expressly stipulated, but
also to all necessary consequences thereof, as follows:
ART. 1315. Contracts are perfected by mere consent, and from
that moment the parties are bound not only to the fulfillment
of what has been expressly stipulated but also to all the

consequences which, according to their nature, may be in

keeping with good faith, usage and law.
It is undisputed that petitioners are educated and are
thus presumed to have understood the terms of the contract
they voluntarily signed. If it was not in consonance with their
expectations, they should have objected to it and insisted on
the provisions they wanted.
Courts are not authorized to extricate parties from the
necessary consequences of their acts, and the fact that the
contractual stipulations may turn out to be financially
disadvantageous will not relieve parties thereto of their
obligations. They cannot now disavow the relationship formed
from such agreement due to their supposed misunderstanding
of its terms.
Alleged Nullity of the Partnership Agreement

Petitioners argue that the Joint Venture Agreement is

void under Article 1773 of the Civil Code, which provides:
ART. 1773. A contract of partnership is void, whenever
immovable property is contributed thereto, if an inventory of
said property is not made, signed by the parties, and attached
to the public instrument.
They contend that since the parties did not make, sign or
attach to the public instrument an inventory of the real
property contributed, the partnership is void.
We clarify. First, Article 1773 was intended primarily to
protect third persons. Thus, the eminent Arturo M. Tolentino
states that under the aforecited provision which is a
complement of Article 1771,[12] the execution of a public
instrument would be useless if there is no inventory of the
property contributed, because without its designation and
description, they cannot be subject to inscription in the
Registry of Property, and their contribution cannot prejudice
third persons. This will result in fraud to those who contract
with the partnership in the belief [in] the efficacy of the
guaranty in which the immovables may consist. Thus, the
contract is declared void by the law when no such inventory is
made. The case at bar does not involve third parties who may
be prejudiced.

Second, petitioners themselves invoke the allegedly void

contract as basis for their claim that respondent should pay
them 60 percent of the value of the property. [13] They cannot
in one breath deny the contract and in another recognize it,
depending on what momentarily suits their purpose. Parties
cannot adopt inconsistent positions in regard to a contract
and courts will not tolerate, much less approve, such practice.
In short, the alleged nullity of the partnership will not
prevent courts from considering the Joint Venture Agreement
an ordinary contract from which the parties rights and
obligations to each other may be inferred and enforced.
Partnership Agreement Not the Result of an Earlier Illegal Contract

Petitioners also contend that the Joint Venture

Agreement is void under Article 1422[14] of the Civil Code,
because it is the direct result of an earlier illegal contract,
which was for the sale of the land without valid consideration.
This argument is puerile. The Joint Venture Agreement
clearly states that the consideration for the sale was the
expectation of profits from the subdivision project. Its first
stipulation states that petitioners did not actually receive
payment
for
the
parcel
of
land
sold
to
respondent. Consideration,
more
properly
denominated
as cause, can take different forms, such as the prestation or
promise of a thing or service by another.[15]
In this case, the cause of the contract of sale consisted
not in the stated peso value of the land, but in the expectation
of profits from the subdivision project, for which the land was
intended to be used. As explained by the trial court, the land
was in effect given to the partnership as [petitioners]
participation therein. x x x There was therefore a
consideration for the sale, the [petitioners] acting in the
expectation that, should the venture come into fruition, they
[would] get sixty percent of the net profits.
Liability of the Parties

Claiming that respondent was solely responsible for the

failure of the subdivision project, petitioners maintain that he
should be made to pay damages equivalent to 60 percent of
the value of the property, which was their share in the profits
under the Joint Venture Agreement.

We are not persuaded. True, the Court of Appeals held

that petitioners acts were not the cause of the failure of the
project.[16] But it also ruled that neither was respondent
responsible therefor.[17] In imputing the blame solely to him,
petitioners failed to give any reason why we should disregard
the factual findings of the appellate court relieving him of
fault. Verily, factual issues cannot be resolved in a petition for
review under Rule 45, as in this case. Petitioners have not
alleged, not to say shown, that their Petition constitutes one
of the exceptions to this doctrine.[18] Accordingly, we find no
reversible error in the CA's ruling that petitioners are not
entitled to damages.

Before us is a petition for review on certiorari under Rule 45 of

the Rules of Court of the Decision[1] of the Court of Appeals
dated January 31, 2000 in the case entitled Lamberto T. Chua
vs.

WHEREFORE, the Petition is hereby DENIED and the

challenged Decision AFFIRMED. Costs against petitioners.

On June 22, 1992, Lamberto T. Chua (hereafter

respondent) filed a complaint against Lilibeth Sunga Chan
(hereafter petitioner Lilibeth) and Cecilia Sunga (hereafter
petitioner Cecilia), daughter and wife, respectively of the
deceased Jacinto L. Sunga (hereafter Jacinto), for Winding Up
of Partnership Affairs, Accounting, Appraisal and Recovery of
Shares and Damages with Writ of Preliminary Attachment with
the Regional Trial Court, Branch 11, Sindangan, Zamboanga
del Norte.

SO ORDERED.

Lilibeth Sunga Chan and Cecilia Sunga and of the

Resolution dated May 23, 2000 denying the motion for
reconsideration of herein petitioners Lilibeth Sunga Chan and
Cecilia Sunga (hereafter collectively referred to as
petitioners).
The pertinent facts of this case are as follows:

Respondent alleged that in 1977, he verbally entered

into a partnership with Jacinto in the distribution of Shellane
Liquefied Petroleum Gas (LPG) in Manila. For business
convenience, respondent and Jacinto allegedly agreed to
register the business name of their partnership, SHELLITE GAS
APPLIANCE CENTER (hereafter Shellite), under the name of
Jacinto as a sole proprietorship. Respondent allegedly
delivered his initial capital contribution of P100,000.00 to
Jacinto while the latter in turn produced P100,000.00 as his
counterpart contribution, with the intention that the profits
would be equally divided between them. The partnership
allegedly had Jacinto as manager, assisted by Josephine Sy
(hereafter Josephine), a sister of the wife of respondent,
Erlinda Sy. As compensation, Jacinto would receive a
managers fee or remuneration of 10% of the gross profit and
Josephine would receive 10% of the net profits, in addition to
her wages and other remuneration from the business.

[G.R. No. 143340. August 15, 2001] LILIBETH SUNGACHAN and CECILIA SUNGA, petitioners, vs. LAMBERTO
T. CHUA, respondent.

Allegedly, from the time that Shellite opened for

business on July 8, 1977, its business operation went quite
well and was profitable. Respondent claimed that he could
attest to the success of their business because of the volume
of orders and deliveries of filled Shellane cylinder tanks
supplied by Pilipinas Shell Petroleum Corporation. While
Jacinto
furnished
respondent
with
the
merchandise
inventories, balance sheets and net worth of Shellite from

1977 to 1989, respondent however suspected that the

amount indicated in these documents were understated and
undervalued by Jacinto and Josephine for their own selfish
reasons and for tax avoidance.
Upon Jacintos death in the later part of 1989, his
surviving wife, petitioner Cecilia and particularly his daughter,
petitioner Lilibeth, took over the operations, control, custody,
disposition and management of Shellite without respondents
consent.
Despite respondents repeated demands upon petitioners
for accounting, inventory, appraisal, winding up and
restitution of his net shares in the partnership, petitioners
failed to comply. Petitioner Lilibeth allegedly continued the
operations of Shellite, converting to her own use and
advantage its properties.
On March 31, 1991, respondent claimed that after
petitioner Lilibeth ran out of alibis and reasons to evade
respondents demands, she disbursed out of the partnership
funds the amount of P200,000.00 and partially paid the same
to
respondent. Petitioner
Lilibeth
allegedly
informed
respondent that the P200,000.00 represented partial payment
of the latters share in the partnership, with a promise that the
former would make the complete inventory and winding up of
the properties of the business establishment. Despite such
commitment, petitioners allegedly failed to comply with their
duty to account, and continued to benefit from the assets and
income of Shellite to the damage and prejudice of respondent.
On December 19, 1992, petitioners filed a Motion to
Dismiss on the ground that the Securities and Exchange
Commission (SEC) in Manila, not the Regional Trial Court in
Zambaonga
del
Norte
had
jurisdiction
over
the
action. Respondent opposed the motion to dismiss.
On January 12, 1993, the trial court finding the complaint
sufficient in form and substance denied the motion to dismiss.
On January 30, 1993, petitioners filed their Answer with
Compulsory Counterclaims, contending that they are not
liable for partnership shares, unreceived income/profits,
interests, damages and attorneys fees, that respondent does
not have a cause of action against them, and that the trial
court has no jurisdiction over the nature of the action, the SEC
being the agency that has original and exclusive jurisdiction

over the case. As counterclaim, petitioner sought attorneys

fees and expenses of litigation.
On August 2, 1993, petitioner filed a second Motion to
Dismiss this time on the ground that the claim for winding up
of partnership affairs, accounting and recovery of shares in
partnership affairs, accounting and recovery of shares
in partnership assets /properties should be dismissed and
prosecuted against the estate of deceased Jacinto in a probate
or intestate proceeding.
On August 16, 1993, the trial court denied the second
motion to dismiss for lack of merit.
On November 26, 1993, petitioners filed their Petition for
Certiorari, Prohibition and Mandamus with the Court of
Appeals docketed as CA-G.R. SP No. 32499 questioning the
denial of the motion to dismiss.
On November 29, 1993, petitioners filed with the trial
court a Motion to Suspend Pre-trial Conference.
On December 13, 1993, the trial court granted the
motion to suspend pre-trial conference.
On November 15, 1994, the Court of Appeals denied the
petition for lack of merit.
On January 16, 1995, this Court denied the petition for
review on certiorari filed by petitioner, as petitioners failed to
show that a reversible error was committed by the appellate
court."[2]
On February 20, 1995, entry of judgment was made by
the Clerk of Court and the case was remanded to the trial
court on April 26, 1995.
On September 25, 1995, the trial court terminated the
pre-trial conference and set the hearing of the case on
January 17, 1996. Respondent presented his evidence while
petitioners were considered to have waived their right to
present evidence for their failure to attend the scheduled date
for reception of evidence despite notice.
On October 7, 1997, the trial court rendered its Decision
ruling for respondent. The dispositive portion of the Decision
reads:

WHEREFORE, judgment is hereby rendered in favor of the

plaintiff and against the defendants, as follows:
(1) DIRECTING them to render an accounting in acceptable
form under accounting procedures and standards of the
properties, assets, income and profits of the Shellite Gas
Appliance Center since the time of death of Jacinto L. Sunga,
from whom they continued the business operations including
all businesses derived from the Shellite Gas Appliance Center;
submit an inventory, and appraisal of all these properties,
assets, income, profits, etc. to the Court and to plaintiff for
approval or disapproval;
(2) ORDERING them to return and restitute to the partnership
any and all properties, assets, income and profits they
misapplied and converted to their own use and advantage
that legally pertain to the plaintiff and account for the
properties mentioned in pars. A and B on pages 4-5 of this
petition as basis;
(3) DIRECTING them to restitute and pay to the plaintiff shares
and interest of the plaintiff in the partnership of the listed
properties, assets and good will (sic) in schedules A, B and C,
on pages 4-5 of the petition;
(4) ORDERING them to pay the plaintiff earned but unreceived
income and profits from the partnership from 1988 to may 30,
1992, when the plaintiff learned of the closure of the store the
sum of P35,000.00 per month, with legal rate of interest until
fully paid;
(5) ORDERING them to wind up the affairs of the partnership
and terminate its business activities pursuant to law, after
delivering to the plaintiff all the interest, shares, participation
and equity in the partnership, or the value thereof in money
or moneys worth, if the properties are not physically divisible;
(6) FINDING them especially Lilibeth Sunga-Chan guilty of
breach of trust and in bad faith and hold them liable to the
plaintiff the sum of P50,000.00 as moral and exemplary
damages; and,
(7) DIRECTING them to reimburse and pay the sum
of P25,000.00 as attorneys (sic) and P25,00.00 as litigation
expenses.
NO special pronouncements as to COSTS. SO ORDERED.[3]

On October 28, 1997, petitioners filed a Notice of Appeal

with the trial court, appealing the case to the Court of
Appeals.
On January 31, 2000, the Court of Appeals dismissed the
appeal. The dispositive portion of the Decision reads:
WHEREFORE, the instant appeal is dismissed. The appealed
decision is AFFIRMED in all respects.[4]
On May 23, 2000, the Court of Appeals denied the
motion for reconsideration filed by petitioner.
Hence, this petition wherein petitioner relies upon the
following grounds:
1. The Court of Appeals erred in making a legal
conclusion that there existed a partnership
between respondent Lamberto T. Chua and the
late Jacinto L. Sunga upon the latters invitation
and offer and that upon his death the
partnership assets and business were taken
over by petitioners.
2. The Court of Appeals erred in making the legal
conclusion that laches and/or prescription did
not apply in the instant case.
3. The Court of Appeals erred in making the legal
conclusion that there was competent and
credible evidence to warrant the finding of a
partnership,
and
assuming arguendo that
indeed there was a partnership, the finding of
highly exaggerated amounts or values in the
partnership assets and profits.[5]
Petitioners question the correctness of the finding of the
trial court and the Court of Appeals that a partnership existed
between respondent and Jacinto from 1977 until Jacintos
death. In the absence of any written document to show such
partnership between respondent and Jacinto, petitioners
argue that these courts were proscribed from hearing the
testimonies of respondent and his witness, Josephine, to prove
the alleged partnership three years after Jacintos death. To
support this argument, petitioners invoke the Dead Mans
Statute or Survivorship Rule under Section 23, Rule 130 of the
Rules of Court that provides: SEC. 23. Disqualification by

reason of death or insanity of adverse party.-- Parties or

assignors of parties to a case, or persons in whose behalf a
case is prosecuted, against an executor or administrator or
other representative of a deceased person, or against a
person of unsound mind, upon a claim or demand against the
estate of such deceased person, or against such person of
unsound mind, cannot testify as to any matter of fact
occurring before the death of such deceased person or before
such person became of unsound mind.
Petitioners thus implore this Court to rule that the testimonies
of respondent and his alter ego, Josephine, should not have
been admitted to prove certain claims against a deceased
person (Jacinto), now represented by petitioners.
We are not persuaded.
A partnership may be constituted in any form, except
where immovable property or real rights are contributed
thereto, in which case a public instrument shall be necessary.
[6]
Hence, based on the intention of the parties, as gathered
from the facts and ascertained from their language and
conduct, a verbal contract of partnership may arise. [7] The
essential points that must be proven to show that a
partnership was agreed upon are (1) mutual contribution to a
common stock, and (2) a joint interest in the profits.
[8]
Understandably so, in view of the absence of a written
contract of partnership between respondent and Jacinto,
respondent resorted to the introduction of documentary and
testimonial evidence to prove said partnership. The crucial
issue to settle then is whether or not the Dead Mans Statute
applies to this case so as to render inadmissible respondents
testimony and that of his witness, Josephine.
The Dead Mans Statute provides that if one party to the
alleged transaction is precluded from testifying by death,
insanity, or other mental disabilities, the surviving party is not
entitled to the undue advantage of giving his own
uncontradicted and unexplained account of the transaction.
[9]
But before this rule can be successfully invoked to bar the
introduction of testimonial evidence, it is necessary that:
1. The witness is a party or assignor of a party to a
case or persons in whose behalf a case is
prosecuted.

2. The action is against an executor or

administrator or other representative of a
deceased person or a person of unsound mind;
3. The subject-matter of the action is a claim or
demand against the estate of such deceased
person or against person of unsound mind;
4. His testimony refers to any matter of fact which
occurred before the death of such deceased
person or before such person became of
unsound mind.[10]
Two reasons forestall the application of the Dead Mans
Statute to this case.
First,
petitioners
filed
a
compulsory
counterclaim[11] against respondent in their answer before the
trial court, and with the filing of their counterclaim, petitioners
themselves effectively removed this case from the ambit of
the Dead Mans Statute.[12] Well entrenched is the rule that
when it is the executor or administrator or representatives of
the estate that sets up the counterclaim, the plaintiff, herein
respondent, may testify to occurrences before the death of
the deceased to defeat the counterclaim. [13] Moreover, as
defendant in the counterclaim, respondent is not disqualified
from testifying as to matters of fact occurring before the
death of the deceased, said action not having been brought
against but by the estate or representatives of the deceased.
[14]

Second, the testimony of Josephine is not covered by the

Dead Mans Statute for the simple reason that she is not a
party or assignor of a party to a case or persons in whose
behalf a case is prosecuted. Records show that respondent
offered the testimony of Josephine to establish the existence
of the partnership between respondent and Jacinto. Petitioners
insistence that Josephine is the alter ego of respondent does
not make her an assignor because the term assignor of a
party means assignor of a cause of action which has arisen,
and not the assignor of a right assigned before any cause of
action has arisen.[15] Plainly then, Josephine is merely a
witness of respondent, the latter being the party plaintiff.
We are not convinced by petitioners allegation that
Josephines testimony lacks probative value because she was
allegedly coerced by respondent, her brother-in-law, to testify
in his favor. Josephine merely declared in court that she was

requested by respondent to testify and that if she were not

requested to do so she would not have testified. We fail to see
how we can conclude from this candid admission that
Josephines testimony is involuntary when she did not in any
way categorically say that she was forced to be a witness of
respondent. Also, the fact that Josephine is the sister of the
wife of respondent does not diminish the value of her
testimony since relationship per se, without more, does not
affect the credibility of witnesses.[16]
Petitioners reliance alone on the Dead Mans Statute to
defeat respondents claim cannot prevail over the factual
findings of the trial court and the Court of Appeals that a
partnership was established between respondent and
Jacinto. Based not only on the testimonial evidence, but the
documentary evidence as well, the trial court and the Court of
Appeals considered the evidence for respondent as sufficient
to prove the formation of a partnership, albeit an informal
one.
Notably, petitioners did not present any evidence in their
favor during trial. By the weight of judicial precedents, a
factual matter like the finding of the existence of a
partnership between respondent and Jacinto cannot be
inquired into by this Court on review. [17] This Court can no
longer be tasked to go over the proofs presented by the
parties and analyze, assess and weigh them to ascertain if the
trial court and the appellate court were correct in according
superior credit to this or that piece of evidence of one party or
the other.[18] It must be also pointed out that petitioners failed
to
attend
the
presentation
of
evidence
of
respondent. Petitioners cannot now turn to this Court to
question the admissibility and authenticity of the
documentary evidence of respondent when petitioners failed
to object to the admissibility of the evidence at the time that
such evidence was offered.[19]
With regard to petitioners insistence that laches and/or
prescription should have extinguished respondents claim, we
agree with the trial court and the Court of Appeals that the
action for accounting filed by respondent three (3) years after
Jacintos death was well within the prescribed period. The Civil
Code provides that an action to enforce an oral contract
prescribes in six (6) years[20] while the right to demand an
accounting for a partners interest as against the person
continuing the business accrues at the date of dissolution, in
the absence of any contrary agreement. [21] Considering that
the death of a partner results in the dissolution of the
partnership[22], in this case, it was after Jacintos death that

respondent as the surviving partner had the right to an

account of his interest as against petitioners. It bears
stressing that while Jacintos death dissolved the partnership,
the dissolution did not immediately terminate the
partnership. The Civil Code[23] expressly provides that upon
dissolution, the partnership continues and its legal personality
is retained until the complete winding up of its business,
culminating in its termination.[24]
In a desperate bid to cast doubt on the validity of the
oral partnership between respondent and Jacinto, petitioners
maintain that said partnership that had an initial capital of
P200,000.00 should have been registered with the Securities
and Exchange Commission (SEC) since registration is
mandated by the Civil Code. True, Article 1772 of the Civil
Code requires that partnerships with a capital of P3,000.00 or
more must register with the SEC, however, this registration
requirement is not mandatory. Article 1768 of the Civil
Code[25] explicitly provides that the partnership retains its
juridical personality even if it fails to register. The failure to
register the contract of partnership does not invalidate the
same as among the partners, so long as the contract has the
essential requisites, because the main purpose of registration
is to give notice to third parties, and it can be assumed that
the members themselves knew of the contents of their
contract.[26] In the case at bar, non-compliance with this
directory provision of the law will not invalidate the
partnership considering that the totality of the evidence
proves that respondent and Jacinto indeed forged the
partnership in question.
WHEREFORE, in view of the foregoing, the petition is
DENIED and the appealed decision is AFFIRMED. SO
ORDERED.

HONGKONG BANK, Plaintiffs-Appellants, v. JURADO &

CO., Defendants-Appellees.
Gibbs & Kincaid for Appellants.
Hartigan, Marple & Solignac for Appellees.
SYLLABUS
1. PLEADING AND PRACTICE;. JOINDER OF PARTIES; PARTNER
AS CODEFENDANT WITH FIRM. In an action against a
partnership which is a juridical person, one partner is not
entitled to be made a party as an individual separate from the
firm.
2. ID.; SERVICE OF PROCESS AND NOTICES; PARTNERSHIP IN
LIQUIDATION; DEATH OF LIQUIDATOR. When upon the death
of the liquidator of a commercial partnership which is a
defendant in a suit the partners fail to appoint a new
liquidator, all necessary process and notices may be served
upon any member of the partnership found within the
jurisdiction of the court in which the case is pending.

DECISION

ON MOTION TO BE MADE A CODEFENDANT.

WILLARD, J. :

By the order of April 16, 1895, Don Ricardo Regidor was

expressly included in the bankruptcy as a general partner of
Jurado & Co. No order setting aside this order has been called
to the courts attention, except the order of December 12,
1898, dismissing the entire proceeding. The order of April 6,
1898, upon which Seor Regidor relies, simply decided that
his motion, in which he claimed that he was not properly
included in the bankruptcy, should come up for hearing in the
ordinary way. It expressly stated that the merits of said
motion were not passed upon. We have seen nothing in the
progress of this suit to show that this order of April 16, 1895,
was not correct. On the contrary, it appears from the records
of the court that, in the hearing on October 15, 1903, Seor
Regidor as one of such partners, in open court, appointed an
attorney to argue for the firm the motion then before this
court.

[G.R. No. 414. November 9, 1903. ]

As a partner of Jurado & Co. he is represented by the firm and

has no right to appear as an individual separate from the firm.
If he has this right, then every partner would have the same
right. We see nothing in the case to indicate that his rights will
not be protected by the lawyers whom the firm may see fit to
employ. His motion to be made a codefendant is denied.

Torres, Cooper, Mapa, McDonough and Jonhson, JJ., concur.

Arellano, C.J., did not sit in this case.
Separate Opinions
ON SUGGESTION OF DEATH OF LIQUIDATOR OF DEFENDANT
FIRM.
WILLARD, J. :

In this case the plaintiff, in April, 1903, made a motion that

the court assign a day for the hearing of the case. This motion
was resubmitted on the 15th day of October 1903, and is now
before us for decision.
The firm of Jurado & Co. being in liquidation, Don Basilio
Teodoro, said by the defendants to be the liquidator, died on
July 12, 1903. This fact can not interfere with the progress of
this suit. With the appointment of a new liquidator the court
has nothing to do. The defendants are Jurado & Co. and not
the liquidator. If they do not see fit to appoint a new
liquidator, or to select attorneys in place of those who it is
said were appointed only by the deceased liquidator, any
notices required to be served upon the defendants by the
plaintiff, or usually given by the clerk, can be served upon and
given to any partner of Jurado & Co. who may be found in the
Islands.
The court, on March 8, 1902, made an order providing the
procedure to be pursued in the case. If this order had been
followed by the parties, it would have resulted in a trial of the
case on its merits in August, 1902. It appears that the proofs,
pleadings, and brief of the plaintiffs have been filed, but no
proofs nor brief of the defendant have been presented. It is
ordered that the defendants deliver to the plaintiffs on or
before the 15th day of December, 1903, three copies of their
printed pleadings, proofs, and brief, and file ten copies thereof
in the clerks office on or before that date, and that this case
be placed on the calendar of the January term, 1904, for
hearing on its merits.
Torres, Cooper, Mapa, McDonough and Johnson, JJ., concur.
Arellano, C.J., did not sit in this case.

G.R. No. L-2888

October 23, 1906

HUNG-MAN-YOC, in the name of KWONG-WOSING, plaintiff-appellee,

vs.
KIENG-CHIONG-SENG, ET AL., defendants-appellants.
The court below entered judgment against each and all of the
defendants, Chua-Che-Co, Yu-Yec-Pin, and Ang-Chu-Keng for
the sum of 7,962.14 pesos, Mexican, equivalent to 7,372.75
pesos, Philippine currency, with interest at the rate 6 per cent
per annum from December 7, 1903, and costs.
Chua-Che-Co is the only one who appealed.
The court below found that Chu-Che-Co, Yu-Yec-Pin, and AngChu-Keng were partners of Kiong-Tiao-Eng, under the firm
name of Kieng-Chiong-Seng.
It has been not proved that Kieng-Chiong-Seng was the firm
name, but rather the designation of the partnership.
It can not be the firm name of a general partnership because
this should contain the names of all the partners, or some of
them, or at least one of them to be, followed in the two latter
cases by the words "and company" (art. 126 of the Code of
Commerce), whereas in this case none of the four names of
those it is alleged were members of the firm appear in the
firm name of the partnership. Neither can it be considered as
the firm name of a limited partnership for the reason that this
should contain the same requisites as the firm name of a
general partnership, and in addition thereto the word
"limited." (Art. 146.) The firm name in question has absolutely
none of these requisites.
Anonymous partnership (corporations) do not require a firm
name or signature; a designation adequate, for the object or
objects of the business to which it is dedicated, is sufficient.
(Art. 151 and 152.)

The fact is, as alleged by the plaintiff and appellee in his brief,
that "there is no doubt that the partnership of Kieng-ChiongSeng was a mercantile partnership organized for the purpose
of engaging in commercial pursuits, although such
organization was not evidenced by any public document as
required by article 119 of the Code of Commerce, nor was it
registered as required by article 17 of the said code" (p.5).

at all with the plaintiff, as clearly appears from the testimony

of the various witnesses, the agent of the partnership, Yu-YecPin, being the person who made all the contracts for the
partnership; also Kieng-Tiao-Eng according to two of the
witnesses. It is evident, therefore, that he has incurred no
liability and that he can not be held individually responsible
for the payment of plaintiff's claims as the court below found.

All these statements are correct.

We accordingly reverse the judgment of the court below and

acquit the defendant, Chua-Che-Co, without special
condemnation as to costs in both instances.

The partnership in question was a mercantile one, as it was

engaged in the importation of goods for sale here at a profit. It
was so testified to by its manager, Yu-Yec-Pin, and Kiong-TiaoEng. But its organization is not evidenced by any public
document. The agent Yu-Yec-Pin himself and some of his socalled partners have merely noted in the books of the
partnership, which by the way, were not introduced in
evidence, the capital which each had contributed. The agent
further testified that the partnership was not record in the
Mercantile Registry but in the Internal Revenue office.
All this being so, the alleged partnership never had any legal
existence nor has it acquired any judicial personality in the
acts and contracts executed and made by it. (Art. 116, par. 2.)
But as the said partnership was a partnership de facto,
although it had no legal standing, and contracted obligations
in favor of the plaintiff, the liability arising from such
obligations must enforcible against some one.lawphil.net
The partnership in question not being included in any of the
classes of partnership defined by the Code of Commerce there
should be applied to it the general provisions applicable to all
partnerships contained in article 120 of the Code of
Commerce, which reads as follows:
The persons in charge of the management of the
association who do not comply with the provisions of
the foregoing article (art. 119, which requires that
the articles of partnership be recorded in a public
instrument, and that the partnership be registered in
the Mercantile Register) shall be responsible together
with the persons not members of the association with
whom they may have transacted business in the
name of the same.
The defendant, Chua-Che-Co, was in charge of the
management of the association, nor did he make any contract

After the expiration of ten days from the date of final

judgment the record will be remanded to the Court of First
Instance for execution. So ordered.
Arellano, Mapa, Johnson, Carson, Willard and Tracey, JJ.,
concur.

G.R. No. 413

February 2, 1903

JOSE FERNANDEZ, plaintiff-appellant,

vs.
FRANCISCO DE LA ROSA, defendant-appellee.
Vicente Miranda, for appellant.
Simplicio del Rosario, for appellee.
LADD, J.:
The object of this action is to obtain from the court a
declaration that a partnership exists between the parties, that
the plaintiff has a consequent interested in certain cascoes
which are alleged to be partnership property, and that the
defendant is bound to render an account of his administration
of the cascoes and the business carried on with them.
Judgment was rendered for the defendant in the court below
and the plaintiff appealed.
The respective claims of the parties as to the facts, so far as it
is necessary to state them in order to indicate the point in
dispute, may be briefly summarized. The plaintiff alleges that
in January, 1900, he entered into a verbal agreement with the
defendant to form a partnership for the purchase of cascoes
and the carrying on of the business of letting the same for hire
in Manila, the defendant to buy the cascoes and each partner

to furnish for that purpose such amount of money as he could,

the profits to be divided proportionately; that in the same
January the plaintiff furnished the defendant 300 pesos to
purchase a casco designated as No. 1515, which the
defendant did purchase for 500 pesos of Doa Isabel Vales,
taking the title in his own name; that the plaintiff furnished
further sums aggregating about 300 pesos for repairs on this
casco; that on the fifth of the following March he furnished the
defendant 825 pesos to purchase another casco designated
as No. 2089, which the defendant did purchase for 1,000
pesos of Luis R. Yangco, taking the title to this casco also in
his own name; that in April the parties undertook to draw up
articles of partnership for the purpose of embodying the same
in an authentic document, but that the defendant having
proposed a draft of such articles which differed materially
from the terms of the earlier verbal agreement, and being
unwillingly to include casco No. 2089 in the partnership, they
were unable to come to any understanding and no written
agreement was executed; that the defendant having in the
meantime had the control and management of the two
cascoes, the plaintiff made a demand for an accounting upon
him, which the defendant refused to render, denying the
existence of the partnership altogether.
The defendant admits that the project of forming a
partnership in the casco business in which he was already
engaged to some extent individually was discussed between
himself and the plaintiff in January, 1900, and earlier, one
Marcos Angulo, who was a partner of the plaintiff in a bakery
business, being also a party to the negotiations, but he denies
that any agreement was ever consummated. He denies that
the plaintiff furnished any money in January, 1900, for the
purchase of casco No. 1515, or for repairs on the same, but
claims that he borrowed 300 pesos on his individual account
in January from the bakery firm, consisting of the plaintiff,
Marcos Angulo, and Antonio Angulo. The 825 pesos, which he
admits he received from the plaintiff March 5, he claims was
for the purchase of casco No. 1515, which he alleged was
bought March 12, and he alleges that he never received
anything from the defendant toward the purchase of casco
No. 2089. He claims to have paid, exclusive of repairs, 1,200
pesos for the first casco and 2,000 pesos for the second one.
The case comes to this court under the old procedure, and it is
therefore necessary for us the review the evidence and pass
upon the facts. Our general conclusions may be stated as
follows:
(1) Doa Isabel Vales, from whom the defendant bought casco
No. 1515, testifies that the sale was made and the casco
delivered in January, although the public document of sale
was not executed till some time afterwards. This witness is
apparently disinterested, and we think it is safe to rely upon
the truth of her testimony, especially as the defendant, while
asserting that the sale was in March, admits that he had the
casco taken to the ways for repairs in January.

It is true that the public document of sale was executed March

10, and that the vendor declares therein that she is the owner
of the casco, but such declaration does not exclude proof as
to the actual date of the sale, at least as against the plaintiff,
who was not a party to the instrument. (Civil Code, sec. 1218.)
It often happens, of course, in such cases, that the actual sale
precedes by a considerable time the execution of the formal
instrument of transfer, and this is what we think occurred
here.
(2) The plaintiff presented in evidence the following receipt: "I
have this day received from D. Jose Fernandez eight hundred
and twenty-five pesos for the cost of a casco which we are to
purchase in company. Manila, March 5, 1900. Francisco de la
Rosa." The authenticity of this receipt is admitted by the
defendant. If casco No. 1515 was bought, as we think it was,
in January, the casco referred to in the receipt which the
parties "are to purchase in company" must be casco No. 2089,
which was bought March 22. We find this to be the fact, and
that the plaintiff furnished and the defendant received 825
pesos toward the purchase of this casco, with the
understanding that it was to be purchased on joint account.
(3) Antonio Fernandez testifies that in the early part of
January, 1900, he saw Antonio Angulo give the defendant, in
the name of the plaintiff, a sum of money, the amount of
which he is unable to state, for the purchase of a casco to be
used in the plaintiff's and defendant's business. Antonio
Angulo also testifies, but the defendant claims that the fact
that Angulo was a partner of the plaintiff rendered him
incompetent as a witness under the provisions of article 643
of the then Code of Civil Procedure, and without deciding
whether this point is well taken, we have discarded his
testimony altogether in considering the case. The defendant
admits the receipt of 300 pesos from Antonio Angulo in
January, claiming, as has been stated, that it was a loan from
the firm. Yet he sets up the claim that the 825 pesos which he
received from the plaintiff in March were furnished toward the
purchase of casco No. 1515, thereby virtually admitting that
casco was purchased in company with the plaintiff. We
discover nothing in the evidence to support the claim that the
300 pesos received in January was a loan, unless it may be
the fact that the defendant had on previous occasions
borrowed money from the bakery firm. We think all the
probabilities of the case point to the truth of the evidence of
Antonio Fernandez as to this transaction, and we find the fact
to be that the sum in question was furnished by the plaintiff
toward the purchase for joint ownership of casco No. 1515,
and that the defendant received it with the understanding
that it was to be used for this purposed. We also find that the
plaintiff furnished some further sums of money for the repair
of casco.
(4) The balance of the purchase price of each of the two
cascoes over and above the amount contributed by the
plaintiff was furnished by the defendant.

(5) We are unable to find upon the evidence before us that

there was any specific verbal agreement of partnership,
except such as may be implied from the fact as to the
purchase of the casco.
(6) Although the evidence is somewhat unsatisfactory upon
this point, we think it more probable than otherwise that no
attempt was made to agree upon articles of partnership till
about the middle of the April following the purchase of the
cascoes.
(7) At some time subsequently to the failure of the attempt to
agree upon partnership articles and after the defendant had
been operating the cascoes for some time, the defendant
returned to the plaintiff 1,125 pesos, in two different sums,
one of 300 and one of 825 pesos. The only evidence in the
record as to the circumstances under which the plaintiff
received these sums is contained in his answer to the
interrogatories proposed to him by the defendant, and the
whole of his statement on this point may properly be
considered in determining the fact as being in the nature of an
indivisible admission. He states that both sums were received
with an express reservation on his part of all his rights as a
partner. We find this to be the fact.
Two questions of law are raised by the foregoing facts: (1) Did
a partnership exist between the parties? (2) If such
partnership existed, was it terminated as a result of the act of
the defendant in receiving back the 1,125 pesos?
(1) "Partnership is a contract by which two or more persons
bind themselves to contribute money, property, or industry to
a common fund, with the intention of dividing the profits
among themselves." (Civil Code, art. 1665.)
The essential points upon which the minds of the parties must
meet in a contract of partnership are, therefore, (1) mutual
contribution to a common stock, and (2) a joint interest in the
profits. If the contract contains these two elements the
partnership relation results, and the law itself fixes the
incidents of this relation if the parties fail to do so. (Civil Code,
secs. 1689, 1695.)
We have found as a fact that money was furnished by the
plaintiff and received by the defendant with the
understanding that it was to be used for the purchase of the
cascoes in question. This establishes the first element of the
contract, namely, mutual contribution to a common stock. The
second element, namely, the intention to share profits,
appears to be an unavoidable deduction from the fact of the
purchase of the cascoes in common, in the absence of any
other explanation of the object of the parties in making the
purchase in that form, and, it may be added, in view of the
admitted fact that prior to the purchase of the first casco the

formation of a partnership had been a subject of negotiation

between them.
Under other circumstances the relation of joint ownership, a
relation distinct though perhaps not essentially different in its
practical consequence from that of partnership, might have
been the result of the joint purchase. If, for instance, it were
shown that the object of the parties in purchasing in company
had been to make a more favorable bargain for the two
cascoes that they could have done by purchasing them
separately, and that they had no ulterior object except to
effect a division of the common property when once they had
acquired it, theaffectio societatis would be lacking and the
parties would have become joint tenants only; but, as nothing
of this sort appears in the case, we must assume that the
object of the purchase was active use and profit and not mere
passive ownership in common.
It is thus apparent that a complete and perfect contract of
partnership was entered into by the parties. This contract, it is
true, might have been subject to a suspensive condition,
postponing its operation until an agreement was reached as
to the respective participation of the partners in the profits,
the character of the partnership as collective or en comandita,
and other details, but although it is asserted by counsel for
the defendant that such was the case, there is little or nothing
in the record to support this claim, and that fact that the
defendant did actually go on and purchase the boat, as it
would seem, before any attempt had been made to formulate
partnership articles, strongly discountenances the theory.
The execution of a written agreement was not necessary in
order to give efficacy to the verbal contract of partnership as
a civil contract, the contributions of the partners not having
been in the form of immovables or rights in immovables. (Civil
Code, art. 1667.) The special provision cited, requiring the
execution of a public writing in the single case mentioned and
dispensing with all formal requirements in other cases,
renders inapplicable to this species of contract the general
provisions of article 1280 of the Civil Code.
(2) The remaining question is as to the legal effect of the
acceptance by the plaintiff of the money returned to him by
the defendant after the definitive failure of the attempt to
agree upon partnership articles. The amount returned fell
short, in our view of the facts, of that which the plaintiff had
contributed to the capital of the partnership, since it did not
include the sum which he had furnished for the repairs of
casco No. 1515. Moreover, it is quite possible, as claimed by
the plaintiff, that a profit may have been realized from the
business during the period in which the defendant have been
administering it prior to the return of the money, and if so he
still retained that sum in his hands. For these reasons the
acceptance of the money by the plaintiff did not have the
effect of terminating the legal existence of the partnership by

converting it into a societas leonina, as claimed by counsel for

the defendant.

ON MOTION FOR A REHEARING.

MAPA, J.:

Did the defendant waive his right to such interest as remained

to him in the partnership property by receiving the money?
Did he by so doing waive his right to an accounting of the
profits already realized, if any, and a participation in them in
proportion to the amount he had originally contributed to the
common fund? Was the partnership dissolved by the "will or
withdrawal of one of the partners" under article 1705 of the
Civil Code? We think these questions must be answered in the
negative.
There was no intention on the part of the plaintiff in accepting
the money to relinquish his rights as a partner, nor is there
any evidence that by anything that he said or by anything
that he omitted to say he gave the defendant any ground
whatever to believe that he intended to relinquish them. On
the contrary he notified the defendant that he waived none of
his rights in the partnership. Nor was the acceptance of the
money an act which was in itself inconsistent with the
continuance of the partnership relation, as would have been
the case had the plaintiff withdrawn his entire interest in the
partnership. There is, therefore, nothing upon which a waiver,
either express or implied, can be predicated. The defendant
might have himself terminated the partnership relation at any
time, if he had chosen to do so, by recognizing the plaintiff's
right in the partnership property and in the profits. Having
failed to do this he can not be permitted to force a dissolution
upon his co-partner upon terms which the latter is unwilling to
accept. We see nothing in the case which can give the
transaction in question any other aspect than that of the
withdrawal by one partner with the consent of the other of a
portion of the common capital.
The result is that we hold and declare that a partnership was
formed between the parties in January, 1900, the existence of
which the defendant is bound to recognize; that cascoes No.
1515 and 2089 constitute partnership property, and that the
plaintiff is entitled to an accounting of the defendant's
administration of such property, and of the profits derived
therefrom. This declaration does not involve an adjudication
as to any disputed items of the partnership account.
The judgment of the court below will be reversed without
costs, and the record returned for the execution of the
judgment now rendered. So ordered.
Arellano, C.J., Torres, Cooper, and Mapa, JJ., concur.
Willard, J., dissenting.

This case has been decided on appeal in favor of the plaintiff,

and the defendant has moved for a rehearing upon the
following grounds:
1. Because that part of the decision which refers to the
existence of the partnership which is the object of the
complaint is not based upon clear and decisive legal grounds;
and
2. Because, upon the supposition of the existence of the
partnership, the decision does not clearly determine whether
the juridical relation between the partners suffered any
modification in consequence of the withdrawal by the plaintiff
of the sum of 1,125 pesos from the funds of the partnership,
or if it continued as before, the parties being thereby
deprived, he alleges, of one of the principal bases for
determining with exactness the amount due to each.
With respect to the first point, the appellant cites the fifth
conclusion of the decision, which is as follows: "We are unable
to find from the evidence before us that there was any
specific verbal agreement of partnership, except such as may
be implied from the facts as to the purchase of the cascoes."
Discussing this part of the decision, the defendant says that,
in the judgment of the court, if on the one hand there is no
direct evidence of a contract, on the other its existence can
only be inferred from certain facts, and the defendant adds
that the possibility of an inference is not sufficient ground
upon which to consider as existing what may be inferred to
exist, and still less as sufficient ground for declaring its
efficacy to produce legal effects.
This reasoning rests upon a false basis. We have not taken
into consideration the mere possibility of an inference, as the
appellant gratuitously stated, for the purpose of arriving at a
conclusion that a contract of partnership was entered into
between him and the plaintiff, but have considered the proof
which is derived from the facts connected with the purchase
of the cascoes. It is stated in the decision that with the
exception of this evidence we find no other which shows the
making of the contract. But this does not mean (for it says
exactly the contrary) that this fact is not absolutely proven, as
the defendant erroneously appears to think. From this data we
infer a fact which to our mind is certain and positive, and not
a mere possibility; we infer not that it is possible that the
contract may have existed, but that it actually did exist. The
proofs constituted by the facts referred to, although it is the
only evidence, and in spite of the fact that it is not direct, we
consider, however, sufficient to produce such a conviction,

which may certainly be founded upon any of the various

classes of evidence which the law admits. There is all the
more reason for its being so in this case, because a civil
partnership may be constituted in any form, according to
article 1667 of the Civil Code, unless real property or real
rights are contributed to it the only case of exception in
which it is necessary that the agreement be recorded in a
public instrument.
It is of no importance that the parties have failed to reach an
agreement with respect to the minor details of contract. These
details pertain to the accidental and not to the essential part
of the contract. We have already stated in the opinion what
are the essential requisites of a contract of partnership,
according to the definition of article 1665. Considering as a
whole the probatory facts which appears from the record, we
have reached the conclusion that the plaintiff and the
defendant agreed to the essential parts of that contract, and
did in fact constitute a partnership, with the funds of which
were purchased the cascoes with which this litigation deals,
although it is true that they did not take the precaution to
precisely establish and determine from the beginning the
conditions with respect to the participation of each partner in
the profits or losses of the partnership. The disagreements
subsequently arising between them, when endeavoring to fix
these conditions, should not and can not produce the effect of
destroying that which has been done, to the prejudice of one
of the partners, nor could it divest his rights under the
partnership which had accrued by the actual contribution of
capital which followed the agreement to enter into a
partnership, together with the transactions effected with
partnership funds. The law has foreseen the possibility of the
constitution of a partnership without an express stipulation by
the partners upon those conditions, and has established rules
which may serve as a basis for the distribution of profits and
losses among the partners. (Art. 1689 of the Civil Code. ) We
consider that the partnership entered into by the plaintiff and
the defendant falls within the provisions of this article.
With respect to the second point, it is obvious that upon
declaring the existence of a partnership and the right of the
plaintiff to demand from the defendant an itemized
accounting of his management thereof, it was impossible at
the same time to determine the effects which might have
been produced with respect to the interest of the partnership
by the withdrawal by the plaintiff of the sum of 1,125 pesos.
This could only be determined after a liquidation of the
partnership. Then, and only then, can it be known if this sum
is to be charged to the capital contributed by the plaintiff, or
to his share of the profits, or to both. It might well be that the
partnership has earned profits, and that the plaintiff's
participation therein is equivalent to or exceeds the sum
mentioned. In this case it is evident that, notwithstanding that
payment, his interest in the partnership would still continue.
This is one case. It would be easy to imagine many others, as
the possible results of a liquidation are innumerable. The

liquidation will finally determine the condition of the legal

relations of the partners inter se at the time of the withdrawal
of the sum mentioned. It was not, nor is it possible to
determine this status a priori without prejudging the result, as
yet unknown, of the litigation. Therefore it is that in the
decision no direct statement has been made upon this point.
It is for the same reason that it was expressly stated in the
decision that it "does not involve an adjudication as to any
disputed item of the partnership account."
The contentions advanced by the moving party are so
evidently unfounded that we can not see the necessity or
convenience of granting the rehearing prayed for, and the
motion is therefore denied.
Arellano, C.J., Torres, Cooper, and Ladd, JJ., concur.
Willard and McDonough, JJ., did not sit in this case.

[G.R. No. 114398. October 24, 1997]

CARMEN LIWANAG, petitioner, vs. THE HON. COURT OF
APPEALS and THE PEOPLE OF THE PHILIPPINES,
represented
by
the
Solicitor
General, respondents.
DECISION
ROMERO, J.:

Petitioner was charged with the crime of estafa before

the Regional Trial Court (RTC), Branch 93, Quezon City, in an
information which reads as follows:
That on or between the month of May 19, 1988 and August,
1988 in Quezon City, Philippines and within the jurisdiction of
this Honorable Court, the said accused, with intent of gain,
with unfaithfulness, and abuse of confidence, did then and
there, willfully, unlawfully and feloniously defraud one
ISIDORA ROSALES, in the following manner, to wit: on the date
and in the place aforementioned, said accused received in
trust from the offended party cash money amounting
to P536,650.00, Philippine Currency, with the express
obligation involving the duty to act as complainants agent in
purchasing local cigarettes (Philip Morris and Marlboro
cigarettes), to resell them to several stores, to give her
commission corresponding to 40% of the profits; and to return
the aforesaid amount of offended party, but said accused, far
from complying her aforesaid obligation, and once in
possession thereof, misapplied, misappropriated and
converted the same to her personal use and benefit, despite
repeated demands made upon her, accused failed and
refused and still fails and refuses to deliver and/or return the
same to the damage and prejudice of the said ISIDORA
ROSALES, in the aforementioned amount and in such other
amount as may be awarded under the provision of the Civil
Code.
CONTRARY TO LAW.

efforts by Rosales to obtain information regarding their

business proved futile.
Alarmed by this development and believing that the
amounts she advanced were being misappropriated, Rosales
filed a case of estafa against Liwanag.
After trial on the merits, the trial court rendered a
decision dated January 9, 1991, finding Liwanag guilty as
charged. The dispositive portion of the decision reads thus:
WHEREFORE, the Court holds, that the prosecution has
established the guilt of the accused, beyond reasonable
doubt, and therefore, imposes upon the accused, Carmen
Liwanag, an Indeterminate Penalty of SIX (6) YEARS, EIGHT (8)
MONTHS AND TWENTY ONE (21) DAYS OF PRISION
CORRECCIONAL TO FOURTEEN (14) YEARS AND EIGHT (8)
MONTHS OF PRISION MAYOR AS MAXIMUM, AND TO PAY THE
COSTS.
The accused is likewise ordered to reimburse the private
complainant the sum of P526,650.00, without subsidiary
imprisonment, in case of insolvency.
SO ORDERED.
Said decision was affirmed with modification by the
Court of Appeals in a decision dated November 29, 1993, the
decretal portion of which reads:

The antecedent facts are as follows:

Petitioner Carmen Liwanag (Liwanag) and a certain
Thelma Tabligan went to the house of complainant Isidora
Rosales (Rosales) and asked her to join them in the business
of buying and selling cigarettes. Convinced of the feasibility of
the venture, Rosales readily agreed. Under their agreement,
Rosales would give the money needed to buy the cigarettes
while Liwanag and Tabligan would act as her agents, with a
corresponding 40% commission to her if the goods are sold;
otherwise
the
money
would
be
returned
to
Rosales.Consequently, Rosales gave several cash advances to
Liwanag and Tabligan amounting to P633,650.00.
During the first two months, Liwanag and Tabligan made
periodic visits to Rosales to report on the progress of the
transactions. The visits, however, suddenly stopped, and all

WHEREFORE, in view of the foregoing, the judgment appealed

from is hereby affirmed with the correction of the
nomenclature of the penalty which should be: SIX (6) YEARS,
EIGHT (8) MONTHS and TWENTY ONE (21) DAYS of prision
mayor, as minimum, to FOURTEEN (14) YEARS and EIGHT (8)
MONTHS of reclusion temporal, as maximum. In all other
respects, the decision is AFFIRMED.
SO ORDERED.
Her motion for reconsideration having been denied in
the resolution of March 16, 1994, Liwanag filed the instant
petition, submitting the following assignment of errors:
1. RESPONDENT APPELLATE COURT GRAVELY ERRED IN
AFFIRMING THE CONVICTION OF THE ACCUSED-PETITIONER
FOR THE CRIME OF ESTAFA, WHEN CLEARLY THE CONTRACT

THAT EXIST (sic) BETWEEN THE ACCUSED-PETITIONER AND

COMPLAINANT IS EITHER THAT OF A SIMPLE LOAN OR THAT OF
A PARTNERSHIP OR JOINT VENTURE HENCE THE NON RETURN
OF THE MONEY OF THE COMPLAINANT IS PURELY CIVIL IN
NATURE AND NOT CRIMINAL.

the event the said cigarrets (sic) are not sold, the proceeds of
the sale or the said products (shall) be returned to said Mrs.
Isidora P. Rosales the said amount of P526,650.00 or the said
items on or before August 30, 1988.
(SGD & Thumbedmarked) (sic)

2. RESPONDENT APPELLATE COURT GRAVELY ERRED IN NOT

ACQUITTING THE ACCUSED-PETITIONER ON GROUNDS OF
REASONABLE DOUBT BY APPLYING THE EQUIPOISE RULE.
Liwanag advances the theory that the intention of the
parties was to enter into a contract of partnership, wherein
Rosales would contribute the funds while she would buy and
sell the cigarettes, and later divide the profits between them.
[1]
She also argues that the transaction can also be interpreted
as a simple loan, with Rosales lending to her the amount
stated on an installment basis.[2]
The Court of Appeals correctly rejected these pretenses.
While factual findings of the Court of Appeals are
conclusive on the parties and not reviewable by the Supreme
Court, and carry more weight when these affirm the factual
findings of the trial court,[3] we deem it more expedient to
resolve the instant petition on its merits.
Estafa is a crime committed by a person who defrauds
another causing him to suffer damages, by means of
unfaithfulness or abuse of confidence, or of false pretenses of
fraudulent acts.[4]
From the foregoing, the elements of estafa are present,
as follows: (1) that the accused defrauded another by abuse
of confidence or deceit; and (2) that damage or prejudice
capable of pecuniary estimation is caused to the offended
party or third party,[5] and it is essential that there be a
fiduciary relation between them either in the form of a trust,
commission or administration.[6]
The receipt signed by Liwanag states thus:
May 19, 1988 Quezon City
Received from Mrs. Isidora P. Rosales the sum of FIVE
HUNDRED TWENTY SIX THOUSAND AND SIX HUNDRED FIFTY
PESOS (P526,650.00) Philippine Currency, to purchase
cigarrets (sic) (Philip & Marlboro) to be sold to customers. In

CARMEN LIWANAG
26 H. Kaliraya St.
Quezon City
Signed in the presence of:
(Sgd) Illegible (Sgd) Doming Z. Baligad
The language of the receipt could not be any clearer. It
indicates that the money delivered to Liwanag was for a
specific purpose, that is, for the purchase of cigarettes, and in
the event the cigarettes cannot be sold, the money must be
returned to Rosales.
Thus, even assuming that a contract of partnership was
indeed entered into by and between the parties, we have
ruled that when money or property have been received by a
partner for a specific purpose (such as that obtaining in the
instant case) and he later misappropriated it, such partner is
guilty of estafa.[7]
Neither can the transaction be considered a loan, since
in a contract of loan once the money is received by the
debtor, ownership over the same is transferred. [8] Being the
owner, the borrower can dispose of it for whatever purpose he
may deem proper.
In the instant petition, however, it is evident that
Liwanag could not dispose of the money as she pleased
because it was only delivered to her for a single purpose,
namely, for the purchase of cigarettes, and if this was not
possible then to return the money to Rosales. Since in this
case there was no transfer of ownership of the money
delivered, Liwanag is liable for conversion under Art. 315, par.
1(b) of the Revised Penal Code.

WHEREFORE, in view of the foregoing, the appealed

decision of the Court of Appeals dated November 29, 1993, is
AFFIRMED.Costs against petitioner.

TABANAO,
VICENTE
WILLIAM
TABANAO,
JANETTE TABANAO DEPOSOY, VICENTA MAY
TABANAO VARELA, ROSELA TABANAO and
VINCENT TABANAO, respondents.

SO ORDERED.
DECISION
YNARES-SANTIAGO, J.:
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto
Divinagracia were partners in a business concern known as
Ma. Nelma Fishing Industry.Sometime in January of 1986, they
decided to dissolve their partnership and executed an
agreement of partition and distribution of the partnership
properties among them, consequent to Jacinto Divinagracias
withdrawal from the partnership.[1] Among the assets to be
distributed were five (5) fishing boats, six (6) vehicles, two (2)
parcels of land located at Sto. Nio and Talisay, Negros
Occidental, and cash deposits in the local branches of the
Bank of the Philippine Islands and Prudential Bank.
Throughout the existence of the partnership, and even
after Vicente Tabanaos untimely demise in 1994, petitioner
failed to submit to Tabanaos heirs any statement of assets
and liabilities of the partnership, and to render an accounting
of the partnerships finances. Petitioner also reneged on his
promise to turn over to Tabanaos heirs the deceaseds 1/3
share in the total assets of the partnership, amounting to
P30,000,000.00, or the sum of P10,000,000.00, despite formal
demand for payment thereof.[2]
Consequently, Tabanaos heirs, respondents herein, filed
against petitioner an action for accounting, payment of
shares, division of assets and damages.[3] In their complaint,
respondents prayed as follows:
1. Defendant be ordered to render the proper accounting of all
the assets and liabilities of the partnership at bar; and
2. After due notice and hearing defendant be ordered to
pay/remit/deliver/surrender/yield to the plaintiffs the
following:
[G.R. No. 126334. November 23, 2001]
EMILIO EMNACE, petitioner, vs. COURT OF APPEALS,
ESTATE OF VICENTE TABANAO, SHERWIN

A. No less than One Third (1/3) of the assets, properties,

dividends, cash, land(s), fishing vessels, trucks, motor
vehicles, and other forms and substance of treasures which

belong and/or should belong, had accrued and/or must accrue

to the partnership;
B. No less than Two Hundred Thousand Pesos (P200,000.00)
as moral damages;
C. Attorneys fees equivalent to Thirty Percent (30%) of the
entire share/amount/award which the Honorable Court may
resolve the plaintiffs as entitled to plus P1,000.00 for every
appearance in court.[4]
Petitioner filed a motion to dismiss the complaint on the
grounds of improper venue, lack of jurisdiction over the nature
of the action or suit, and lack of capacity of the estate of
Tabanao to sue.[5] On August 30, 1994, the trial court denied
the motion to dismiss. It held that venue was properly laid
because, while realties were involved, the action was directed
against a particular person on the basis of his personal
liability; hence, the action is not only a personal action but
also an action in personam. As regards petitioners argument
of lack of jurisdiction over the action because the prescribed
docket fee was not paid considering the huge amount
involved in the claim, the trial court noted that a request for
accounting was made in order that the exact value of the
partnership may be ascertained and, thus, the correct docket
fee may be paid. Finally, the trial court held that the heirs of
Tabanao had a right to sue in their own names, in view of the
provision of Article 777 of the Civil Code, which states that the
rights to the succession are transmitted from the moment of
the death of the decedent.[6]
The following day, respondents filed an amended
complaint,[7] incorporating the additional prayer that petitioner
be ordered to sell all (the partnerships) assets and thereafter
pay/remit/deliver/surrender/yield to the plaintiffs their
corresponding share in the proceeds thereof. In due time,
petitioner filed a manifestation and motion to dismiss,
[8]
arguing that the trial court did not acquire jurisdiction over
the case due to the plaintiffs failure to pay the proper docket
fees. Further, in a supplement to his motion to dismiss,
[9]
petitioner also raised prescription as an additional ground
warranting the outright dismissal of the complaint.
On June 15, 1995, the trial court issued an Order,
denying the motion to dismiss inasmuch as the grounds
raised therein were basically the same as the earlier motion to
dismiss which has been denied. Anent the issue of
prescription, the trial court ruled that prescription begins to

run only upon the dissolution of the partnership when the final
accounting is done. Hence, prescription has not set in the
absence of a final accounting.Moreover, an action based on a
written contract prescribes in ten years from the time the
right of action accrues.
Petitioner filed a petition for certiorari before the Court of
Appeals,[11] raising the following issues:
I. Whether or not respondent Judge acted without
jurisdiction or with grave abuse of discretion in
taking cognizance of a case despite the failure
to pay the required docket fee;
II. Whether or not respondent Judge acted without
jurisdiction or with grave abuse of discretion in
insisting to try the case which involve (sic) a
parcel of land situated outside of its territorial
jurisdiction;
III. Whether or not respondent Judge acted without
jurisdiction or with grave abuse of discretion in
allowing the estate of the deceased to appear
as party plaintiff, when there is no intestate
case and filed by one who was never appointed
by the court as administratrix of the estates;
and
IV. Whether or not respondent Judge acted without
jurisdiction or with grave abuse of discretion in
not dismissing the case on the ground of
prescription.
On August 8, 1996, the Court of Appeals rendered the
assailed decision,[12] dismissing the petition for certiorari, upon
a finding that no grave abuse of discretion amounting to lack
or excess of jurisdiction was committed by the trial court in
issuing the questioned orders denying petitioners motions to
dismiss.
Not satisfied, petitioner filed the instant petition for
review, raising the same issues resolved by the Court of
Appeals, namely:

[10]

I. Failure to pay the proper docket fee;

II. Parcel of land subject of the case pending before

the trial court is outside the said courts
territorial jurisdiction;
III. Lack of capacity to sue on the part of plaintiff
heirs of Vicente Tabanao; and
IV. Prescription of the plaintiff heirs cause of action.
It can be readily seen that respondents primary and
ultimate objective in instituting the action below was to
recover the decedents 1/3 share in the partnerships
assets. While they ask for an accounting of the partnerships
assets and finances, what they are actually asking is for the
trial court to compel petitioner to pay and turn over their
share, or the equivalent value thereof, from the proceeds of
the sale of the partnership assets. They also assert that until
and unless a proper accounting is done, the exact value of the
partnerships assets, as well as their corresponding share
therein, cannot be ascertained. Consequently, they feel
justified in not having paid the commensurate docket fee as
required by the Rules of Court.
We do not agree. The trial court does not have to employ
guesswork in ascertaining the estimated value of the
partnerships assets, for respondents themselves voluntarily
pegged the worth thereof at Thirty Million Pesos
(P30,000,000.00). Hence, this case is one which is really not
beyond pecuniary estimation, but rather partakes of the
nature of a simple collection case where the value of the
subject assets or amount demanded is pecuniarily
determinable.[13] While it is true that the exact value of the
partnerships total assets cannot be shown with certainty at
the time of filing, respondents can and must ascertain,
through informed and practical estimation, the amount they
expect to collect from the partnership, particularly from
petitioner, in order to determine the proper amount of docket
and other fees.[14] It is thus imperative for respondents to pay
the corresponding docket fees in order that the trial court may
acquire jurisdiction over the action.[15]
Nevertheless, unlike in the case of Manchester
Development Corp. v. Court of Appeals,[16] where there was
clearly an effort to defraud the government in avoiding to pay
the correct docket fees, we see no attempt to cheat the courts
on the part of respondents. In fact, the lower courts have
noted their expressed desire to remit to the court any payable
balance or lien on whatever award which the Honorable Court

may grant them in this case should there be any deficiency in

the payment of the docket fees to be computed by the Clerk
of Court.[17] There is evident willingness to pay, and the fact
that the docket fee paid so far is inadequate is not an
indication that they are trying to avoid paying the required
amount, but may simply be due to an inability to pay at the
time of filing. This consideration may have moved the trial
court and the Court of Appeals to declare that the unpaid
docket fees shall be considered a lien on the judgment award.
Petitioner, however, argues that the trial court and the
Court of Appeals erred in condoning the non-payment of the
proper legal fees and in allowing the same to become a lien
on the monetary or property judgment that may be rendered
in favor of respondents. There is merit in petitioners
assertion. The third paragraph of Section 16, Rule 141 of the
Rules of Court states that:
The legal fees shall be a lien on the monetary or property
judgment in favor of the pauper-litigant.
Respondents cannot invoke the above provision in their
favor
because
it
specifically
applies
to
pauperlitigants. Nowhere in the records does it appear that
respondents are litigating as paupers, and as such are
exempted from the payment of court fees.[18]
The rule applicable to the case at bar is Section 5(a) of
Rule 141 of the Rules of Court, which defines the two kinds of
claims as: (1) those which are immediately ascertainable; and
(2) those which cannot be immediately ascertained as to the
exact amount. This second class of claims, where the exact
amount still has to be finally determined by the courts based
on evidence presented, falls squarely under the third
paragraph of said Section 5(a), which provides:
In case the value of the property or estate or the sum claimed
is less or more in accordance with the appraisal of the court,
the difference of fee shall be refunded or paid as the case
may be. (Underscoring ours)
In Pilipinas Shell Petroleum Corporation v. Court of
Appeals,[19] this Court pronounced that the above-quoted
provision clearly contemplates an initial payment of the filing
fees corresponding to the estimated amount of the claim
subject to adjustment as to what later may be proved.
[20]
Moreover, we reiterated therein the principle that the
payment of filing fees cannot be made contingent or

dependent on the result of the case. Thus, an initial payment

of the docket fees based on an estimated amount must be
paid simultaneous with the filing of the complaint. Otherwise,
the court would stand to lose the filing fees should the
judgment later turn out to be adverse to any claim of the
respondent heirs.
The matter of payment of docket fees is not a mere
triviality. These fees are necessary to defray court expenses in
the handling of cases.Consequently, in order to avoid
tremendous losses to the judiciary, and to the government as
well, the payment of docket fees cannot be made dependent
on the outcome of the case, except when the claimant is a
pauper-litigant.
Applied to the instant case, respondents have a specific
claim 1/3 of the value of all the partnership assets but they
did not allege a specific amount. They did, however, estimate
the partnerships total assets to be worth Thirty Million Pesos
(P30,000,000.00),
in
a
letter[21] addressed
to
petitioner. Respondents cannot now say that they are unable
to make an estimate, for the said letter and the admissions
therein form part of the records of this case. They cannot
avoid paying the initial docket fees by conveniently omitting
the said amount in their amended complaint. This estimate
can be made the basis for the initial docket fees that
respondents should pay. Even if it were later established that
the amount proved was less or more than the amount alleged
or estimated, Rule 141, Section 5(a) of the Rules of Court
specifically provides that the court may refund the excess or
exact additional fees should the initial payment be
insufficient. It is clear that it is only the difference between
the amount finally awarded and the fees paid upon filing of
this complaint that is subject to adjustment and which may be
subjected to a lien.
In the oft-quoted case of Sun Insurance Office, Ltd. v.
Hon. Maximiano Asuncion,[22] this Court held that when the
specific claim has been left for the determination by the court,
the additional filing fee therefor shall constitute a lien on the
judgment and it shall be the responsibility of the Clerk of
Court or his duly authorized deputy to enforce said lien and
assess and collect the additional fee. Clearly, the rules and
jurisprudence contemplate the initial payment of filing and
docket fees based on the estimated claims of the plaintiff, and
it is only when there is a deficiency that a lien may be
constituted on the judgment award until such additional fee is
collected.

Based on the foregoing, the trial court erred in not

dismissing the complaint outright despite their failure to pay
the proper docket fees.Nevertheless, as in other procedural
rules, it may be liberally construed in certain cases if only to
secure a just and speedy disposition of an action.While the
rule is that the payment of the docket fee in the proper
amount should be adhered to, there are certain exceptions
which must be strictly construed.[23]
In recent rulings, this Court has relaxed the strict
adherence to the Manchester doctrine, allowing the plaintiff to
pay the proper docket fees within a reasonable time before
the expiration of the applicable prescriptive or reglementary
period.[24]
In the recent case of National Steel Corp. v. Court of
Appeals,[25] this Court held that:
The court acquires jurisdiction over the action if the filing of
the initiatory pleading is accompanied by the payment of the
requisite fees, or, if the fees are not paid at the time of the
filing of the pleading, as of the time of full payment of the fees
within such reasonable time as the court may grant, unless, of
course, prescription has set in the meantime.
It does not follow, however, that the trial court should have
dismissed the complaint for failure of private respondent to
pay the correct amount of docket fees. Although the payment
of the proper docket fees is a jurisdictional requirement, the
trial court may allow the plaintiff in an action to pay the same
within a reasonable time before the expiration of the
applicable prescriptive or reglementary period. If the plaintiff
fails to comply within this requirement, the defendant should
timely raise the issue of jurisdiction or else he would be
considered in estoppel. In the latter case, the balance
between the appropriate docket fees and the amount actually
paid by the plaintiff will be considered a lien or any award he
may obtain in his favor.(Underscoring ours)
Accordingly, the trial court in the case at bar should
determine the proper docket fee based on the estimated
amount that respondents seek to collect from petitioner, and
direct them to pay the same within a reasonable time,
provided the applicable prescriptive or reglementary period
has not yet expired. Failure to comply therewith, and upon
motion by petitioner, the immediate dismissal of the
complaint shall issue on jurisdictional grounds.

On the matter of improper venue, we find no error on the

part of the trial court and the Court of Appeals in holding that
the case below is a personal action which, under the Rules,
may be commenced and tried where the defendant resides or
may be found, or where the plaintiffs reside, at the election of
the latter.[26]
Petitioner, however, insists that venue was improperly
laid since the action is a real action involving a parcel of land
that is located outside the territorial jurisdiction of the court a
quo. This contention is not well-taken. The records indubitably
show that respondents are asking that the assets of the
partnership be accounted for, sold and distributed according
to the agreement of the partners. The fact that two of the
assets of the partnership are parcels of land does not
materially change the nature of the action. It is an action in
personam because it is an action against a person, namely,
petitioner, on the basis of his personal liability. It is not an
action in rem where the action is against the thing itself
instead of against the person. [27]Furthermore, there is no
showing that the parcels of land involved in this case are
being disputed. In fact, it is only incidental that part of the
assets of the partnership under liquidation happen to be
parcels of land.

[28]

The time-tested case of Claridades v. Mercader, et al.,

settled this issue thus:

The fact that plaintiff prays for the sale of the assets of the
partnership, including the fishpond in question, did not
change the nature or character of the action, such sale being
merely a necessary incident of the liquidation of the
partnership, which should precede and/or is part of its process
of dissolution.
The action filed by respondents not only seeks redress
against petitioner. It also seeks the enforcement of, and
petitioners compliance with, the contract that the partners
executed to formalize the partnerships dissolution, as well as
to implement the liquidation and partition of the partnerships
assets. Clearly, it is a personal action that, in effect, claims a
debt from petitioner and seeks the performance of a personal
duty on his part.[29] In fine, respondents complaint seeking the
liquidation and partition of the assets of the partnership with
damages is a personal action which may be filed in the proper
court where any of the parties reside. [30] Besides, venue has
nothing to do with jurisdiction for venue touches more upon
the substance or merits of the case. [31] As it is, venue in this
case was properly laid and the trial court correctly ruled so.

On the third issue, petitioner asserts that the surviving

spouse of Vicente Tabanao has no legal capacity to sue since
she was never appointed as administratrix or executrix of his
estate. Petitioners objection in this regard is misplaced. The
surviving spouse does not need to be appointed as executrix
or administratrix of the estate before she can file the
action. She and her children are complainants in their own
right as successors of Vicente Tabanao. From the very moment
of Vicente Tabanaos death, his rights insofar as the
partnership was concerned were transmitted to his heirs, for
rights to the succession are transmitted from the moment of
death of the decedent.[32]
Whatever claims and rights Vicente Tabanao had against
the partnership and petitioner were transmitted to
respondents by operation of law, more particularly by
succession, which is a mode of acquisition by virtue of which
the property, rights and obligations to the extent of the value
of the inheritance of a person are transmitted. [33] Moreover,
respondents became owners of their respective hereditary
shares from the moment Vicente Tabanao died.[34]
A prior settlement of the estate, or even the
appointment of Salvacion Tabanao as executrix or
administratrix, is not necessary for any of the heirs to acquire
legal capacity to sue. As successors who stepped into the
shoes of their decedent upon his death, they can commence
any action originally pertaining to the decedent. [35] From the
moment of his death, his rights as a partner and to demand
fulfillment of petitioners obligations as outlined in their
dissolution agreement were transmitted to respondents. They,
therefore, had the capacity to sue and seek the courts
intervention to compel petitioner to fulfill his obligations.
Finally, petitioner contends that the trial court should
have dismissed the complaint on the ground of prescription,
arguing that respondents action prescribed four (4) years after
it accrued in 1986. The trial court and the Court of Appeals
gave scant consideration to petitioners hollow arguments, and
rightly so.
The three (3) final stages of a partnership are: (1)
dissolution; (2) winding-up; and (3) termination. [36] The
partnership, although dissolved, continues to exist and its
legal personality is retained, at which time it completes the
winding up of its affairs, including the partitioning and
distribution of the net partnership assets to the partners.
[37]
For as long as the partnership exists, any of the partners
may
demand
an
accounting
of
the
partnerships

business. Prescription of the said right starts to run only upon

the dissolution of the partnership when the final accounting is
done.[38]

Costs against petitioner.

SO ORDERED.

Contrary to petitioners protestations that respondents

right to inquire into the business affairs of the partnership
accrued in 1986, prescribing four (4) years thereafter,
prescription had not even begun to run in the absence of a
final accounting. Article 1842 of the Civil Code provides:
The right to an account of his interest shall accrue to any
partner, or his legal representative as against the winding up
partners or the surviving partners or the person or partnership
continuing the business, at the date of dissolution, in the
absence of any agreement to the contrary.
Applied in relation to Articles 1807 and 1809, which also
deal with the duty to account, the above-cited provision states
that the right to demand an accounting accrues at the date of
dissolution in the absence of any agreement to the
contrary. When a final accounting is made, it is only then that
prescription begins to run. In the case at bar, no final
accounting has been made, and that is precisely what
respondents are seeking in their action before the trial court,
since petitioner has failed or refused to render an accounting
of the partnerships business and assets. Hence, the said
action is not barred by prescription.
In fine, the trial court neither erred nor abused its
discretion
when
it
denied
petitioners
motions
to
dismiss. Likewise, the Court of Appeals did not commit
reversible error in upholding the trial courts orders. Precious
time has been lost just to settle this preliminary issue, with
petitioner resurrecting the very same arguments from the trial
court all the way up to the Supreme Court. The litigation of
the merits and substantial issues of this controversy is now
long overdue and must proceed without further delay.
WHEREFORE, in view of all the foregoing, the instant
petition is DENIED for lack of merit, and the case is
REMANDED to the Regional Trial Court of Cadiz City, Branch
60, which is ORDERED to determine the proper docket fee
based on the estimated amount that plaintiffs therein seek to
collect, and direct said plaintiffs to pay the same within a
reasonable time, provided the applicable prescriptive or
reglementary period has not yet expired. Thereafter, the trial
court is ORDERED to conduct the appropriate proceedings in
Civil Case No. 416-C.

G.R. No. L-12371

March 23, 1918

LEOPOLDO CRIADO, plaintiff-appellant,

vs.
GUTIERREZ HERMANOS, defendant-appellant.
Eduardo Gutierrez Repide and Felix Socias for plaintiffappellant.
C. W. O'Brien for defendant-appellant.
TORRES, J.:
In the ordinary proceedings prosecuted in the Court of First
Instance of Manila by counsel for Leopoldo Criado against the
firm of Gutierrez Hermanos for the recovery of a sum of
money, on September 11, 1916, judgment was handed down
whereby said firm was ordered to pay, in addition to other
amounts therein specified, P54,292.62 with interest thereon at
the rate of 6 per cent per annum from May 25, 1912, and
whereby it was held that plaintiff was entitled to a share of .
34064 per cent on P818,260.70, the total amount of the
unpaid bills, subject to the liability of 10 per cent contracted
toward the defendant in respect to said bills or to such part
thereof as should be found to be uncollectible, with the costs
against the defendant. Both parties excepted from this
judgment and moved for a new trial, which motion was denied
by an order of September 25th of the same year, to which
both parties excepted. Plaintiff and defendant by mutual
consent have filed but a single bill of exceptions and the same
was approved, certified and forwarded to the clerk of this
court, together with the oral and documentary evidence of
record.
The original complaint was filed in the Court of First Instance
on May 25, 1912, and after being twice amended was finally
filed on January 15, 1913. Upon answering it, defendant
interposed a cross-complaint. After full trial, judgment was

rendered on July 8, 1913, by which, dismissing plaintiff's first,

second, third, and fourth causes of action and the crosscomplaint of the defendant of the court sentenced the
defendant, the firm of Gutierrez Hermanos, to pay the several
sums specified in the fifth, sixth, seventh, eighth, ninth, and
tenth causes of action, with legal interest thereon from May
25, 1912, and ordered same further to render accounts to the
plaintiff for the reason therein stated, and to pay the costs.
From this judgment defendant appealed and moved for a trial.
The motion was denied and defendant excepted and filed the
proper bill of exceptions which was forwarded to this court.
Upon hearing, a decision was rendered on March 24, 1915,
whereby, for the reasons therein given, the judgment
appealed from was set aside and the record remanded to the
court of origin for the proper proceedings.
The proceedings in the Court of First Instance having been
reopened upon petition by plaintiff, on May 24, 1915, the
judge ordered the defendant Gutierrez Hermanos to render
within a period of twenty days a detailed account, supported
by vouchers, of the share which the plaintiff might have in the
capital stock of said firm up to that date. In compliance with
this order, defendant presented an account (record, pp. 103124) certified by the bookkeeper of the firm of Gutierrez
Hermanos to on June 3 of the same year.
In view of the fact that the defendant firm had not complied
with the order of the court in respect to the account
presented, counsel for plaintiff moved in writing that the clerk
of court, McMicking, be appointed so that, in his presence and
in that of the parties, G. B. Wicks might proceed to make true
liquidation of plaintiff's said share of the capital stock of the
firm of Gutierrez Hermanos, since he began his connection
therewith, on January 1, 1900, until his separation therefrom,
on December 31, 1911. Said motion was accompanied by an
affidavit in which the plaintiff Leopoldo Criado declared under
oath that he had examined the accounts presented by the
defendant referring to his capital in that firm and that said
accounts were based upon a false debit balance of P26,349.13
a balance which had been previously impeached by the
affiant as well as the accounts from which said sum is sought
to be derived. Wherefore he gain assailed them in their
totality on the grounds that some of the entries thereof were
improper, other fraudulent, and still other false. Therefore
plaintiff's counsel moved that defendant be ordered to place
immediately at the disposal of Commissioner Wicks all the
books, accounts, bills, vouchers, and other documents that
might be necessary, in order that said liquidation might be
made by defendants counsel, by an order of September 2,

1915, the court ruled in conformity therewith, authorizing

defendant to appoint another expert accountant who,
together with the one already designated. Wicks, might
examine the books and documents aforementioned. On
motion by plaintiff, and notwithstanding the arguments made
by the defendant firm, it was provided by another order of the
court that said firm should comply with what the court had
previously ordered, to wit, to place said books and documents
at the disposal of the commissioner for his examination in the
office of the clerk of court, on the three specified days of the
week, from 2.30 o'clock up every afternoon.
After a rehearing of the case and an examination of George B.
Wicks was made regarding the contents of the report that he
submitted after studying for that purpose the books and other
documents placed at his disposal by the defendant to which
report he attached several documents in proof or
substantiation of the different items mentioned in said report
(Exhibit Z-3) in view of the result and the evidence adduced
by the parties, and by the said commissioner's report duly
supported by vouchers, the court rendered the judgment
aforementioned, on September 11, 1916. This motion was
denied, exception was taken, and, upon receipt of the proper
bill of exceptions, both appeals were forwarded in the in the
usual manner.
Counsel for the defendant-appellant assails in general the
judgment appealed from because the trial court did not
determine the issues raised in the first, second, third, fourth,
sixth, seventh, eighth, ninth, and tenth causes of action, and
in defendant's cross-complaint; and inasmuch as in the
judgment the contrary appears with the exception of the first
cause of action, the court will now proceed to examine each of
the causes of action referred to in the cross-complaint filed by
the latter in its answer.
The first cause of action consists in the obligation assumed by
Miguel Alonso, formerly one of the general partners and
manager of the firm of Gutierrez Hermanos, to pay to the
plaintiff Leopoldo Criado, and sum P1,100 by reason of the
contract of loan prevent plaintiff from suing for the recovery of
that debt an action against the testate or intestate estate of
the debtor who died without having paid his debt; the other
partner Miguel Gutierrez de Celis, manager of the firm,
succeeded in persuading the plaintiff by promising to return
said sum to Criado this not being a strange obligation, for
at the time of his death the deceased debtor Miguel Alfonso,
was a partner in the firm of Gutierrez Hermanos and had a
share in the firm's assets. But the fact is that from 1898, when

Alfonso died, until 1912, the date the complaint was filed,
such settlement had already been made of the decedent's
said share and in spite of the attempts to collect made by the
creditor he was unable to recover the loan.
Even on the supposition that at the time of his death the
debtor Miguel Alfonso certainly and positively left this debt
and that in order to avoid judicial proceedings on the part of
the creditor, Miguel Gutierrez de Celis subrogated and put
himself in the place of the debtor, binding himself to pay said
amount to plaintiff, yet, in view of the fact that said, loan was
made as an independent private act, unconnected with the
mercantile operations of the firm of Gutierrez Hermanos, and
that the record does not duly show that this firm, though its
manager assumed the obligation to reimbursed the sum,
there is no provision of law to warrant us in holding that the
firm of Gutierrez Hermanos is obliged to pay the amount
claimed by the plaintiff as the subject-matter of his first cause
of action.
In the second cause of action plaintiff demands the payment
of P43,410.86, and alleges that, pursuant to a notarial
instrument of March 29, 1900, he became a partner of the
firm of Gutierrez Hermanos; and that said document
stipulated that the partnership should last for four years from
January 1, 1900, and, among other conditions, it contained
the following:
Second. Therefore the partnership is organized
among the parties to this instrument, Don Placido
Gutierrez de Celis, Don Miguel Gutierrez de Celis,
Don Miguel Alonso y Gutierrez, Don Daniel Perez y
Alberto, and Don Leopoldo Criado y Garcia, the first
three as capitalist partners, and the last two as
industrial partners.
Eighth. All earnings or profits that may be obtained
shall be distributed among the partners in the
following proportion: 37 per cent shall go to Don
Placido Gutierrez de Celis; 37 per cent to Don Miguel
Gutierrez de Celis; 16 per cent to Don Miguel Alfonso
y Gutierrez; 5 per cent, to Don Daniel Perez y Alberto;
and 5 per cent to Don Leopoldo Criado y Garcia. In
the same proportion above established for the profits
the capitalist partners shall be liable for all losses or
damages that may be sustained.

A copy of said instrument was presented as Exhibit A and

made an integral part of the complaint.
Plaintiff also alleged that, according to the books of the
defendant firm, his capital was P56,796.25 in 1902 and,
according to the balance had on December 31, 1903, the
profits obtained amounted to P256,025.31, 5 per cent of
which, or P12,801.26, belonged to him, according to the eight
clause of the articles of partnership, although the manager
Miguel Gutierrez de Celis, by means of false and erroneous
entries in the books, succeeded in concealing such profits,
thereby injuring him in said amount of P43,410.86. Plaintiff
testified that as soon as he learned of such entries, he at once
protested, but that said manager assured him that as soon as
the probate proceedings concerning the estate of the
decedent Miguel Alfonso should be determined said amount
would be refunded although in spite of his efforts said promise
has not been fulfilled.
In its answer the defendant firm admitted that plaintiff Criado
was an industrial partner entitled to 5 per cent of the profits,
but denied all the other averments of the complaint. In special
defense it alleged that on December 31, 1903, there was
made a liquidation and balance of the business of the firm
operations which were approved by all the partners with no
protest made by the plaintiff before or after said liquidation,
but contrary, he gave his assent thereto and without reserve
whatsoever he executed a new partnership contract,
inasmuch as the sum shown by said liquidation and balance of
the business of the firm at the end of December, 1903,
formed the basis of the capital mentioned in the articles of
partnership executed before a notary on May 9, 1904. Finally,
the defendant alleged that, in accordance with the provisions
of section 43 of the Code of Civil Procedure, this second cause
of action had already prescribed, inasmuch as its object, the
recovery of personal property, prescribed after four years, just
as an action for damages by reason of fraud.
The purpose of the second cause of action exercised by
plaintiff's counsel is to obtain from the defendant the share of
the profits earned by the firm from 1900 to December 31,
1903, belonging to plaintiff, by reason of the partnership
contract a contract that produced reciprocal rights and
obligation between the partners and if the record shows as
duly proven that there were profits, the obligation on the part
of the defendant firm to pay to plaintiff his share of said
profits at the rate of 5 per cent is inevitable, there appearing
no just and legal reason in the record for exempting the
defendant from the fulfillment of said obligation. It is therefore

no proper to assert that the action brought by the plaintiff has

for its object the recovery of personal property, or demand
damages for fraud, and therefore the period for prescription is
not the four years fixed by section 43, paragraph 1 of the
Code of Civil Procedure, but that of ten years, as provided in
paragraph 1 of said section, in as much as the action brought
is founded on a contract in writing and demand is thereby
made for the payment of a certain net sum, entered in the
books of the firm of Gutierrez Hermanos, for the prescription
of which the lapse of ten years is required a period which
certainly has not elapsed since the last balance was made of
the business of the firm of which Leopoldo Criado was a
partner.
In order to determine whether besides the sum of
P25,129.09 which constituted the capital brought by the
plaintiff Leopoldo Criado, as capitalist, during the second
period of the firm newly organized in 1904 plaintiff still has
a right to demand the sum that is the subject of his complaint
in the second cause of action, or any other sum that might be
found to be a remainder of the salary owing him in his
capacity of industrial partner during the first period of the firm
organized for four years from January, 1900, it becomes
necessary first too decide whether in fact the plaintiff is in
estoppel and unable to oppose any valid objection against
said liquidation and balance; inasmuch as, according to the
inventory of the firm's business, made on December 31, 1903,
which was signed by Leopoldo Criado, Miguel Gutierrez de
Celis and Daniel Perez de Celis, plaintiff Criado's capital on
that date was only P25,129.09, the sum recorded as his
capital in the articles of partnership, Exhibit O, which were in
force during the second period from January, 1904, although
this contract was executed on May 9 of that year. From clause
7 of said contract, and according to said inventory of
December 31, 1903, it appears that the firm's capital stock
amounted to P1,605,497.30, of which the sum of P25,129.09
belonged to Leopoldo Criado.
In an affidavit plaintiff stated that when he learned of the
contents of the firm's books, he protested against the entries
therein, but that the manager Guiterrez de Celis assured him
that he would lose nothing by those entries made in
connection with a serious matter then pending; that
afterwards he learned that said entries had been made in the
books through fear that Jose Fortiz, a creditor of 5 per cent of
the profits, should claim his share of the profits pertaining to
the years 1902 and 1903; that in fact Fortiz did bring suit
against Gutierrez Hermanos and obtained a favorable
judgment not only in the Court of First Instance but also in the

Supreme Court which affirmed the judgment of the lower

court (record, p. 381); that another reason why said false and
erroneous entries were made in the firm's books by Gutierrez
de Celis was to show the family of the deceased Miguel Alonso
that the losses reported in his letter received during his
lifetime from Gutierrez de Celis were due to his poor
management of the firm's business (record, pp. 381 and 382);
that as, in spite of repeated steps taken by plaintiff, said
Gutierrez de Celis did not fulfill his promise to pay the sums
which had been unduly withheld by means of those improper
entries, plaintiff therefore finally refused to sign the balance
sheet for the business of 1909, but did sign the previous one
containing the record of a loss of P110,000 and also the
partnership contract of 1904, showing his capital to be
P25,129.09 as he believed that Miguel Gutierrez de Celis
would reimburse him, as he had promised, his share of the
sums which had been entered as losses in the firm's books.
In Exhibit 10 (record, p. 205) there appears an entry which
reads thus:
P501,513.57, amount of the bills cancelled in the
books in this date which should have been cancelled
in previous years on account of difficulty in their
collection, some of these bills being of such a nature
that they should be charged to the account of the
management as they are contrary to the provisions
of the 5th and 10th clauses of the partnership
contract . . . but, in view of the fact that the author of
these irregularities is not living so that compliance
with the contract may be demanded of him, we have
distributed the losses equally among the three
principal partners . . . and 5 per cent against each of
the industrial partners, Leopoldo Criado's share of
the losses being P25,080.68.
Without doubt this entry was made for the purpose of showing
that Miguel Alonso, former manger of the partnership, was to
blame for these losses. It is to be noted that, according to the
contract, plaintiff as an industrial partner is not liable for said
losses; therefore in this distribution said sum was unduly
deducted from his share of the assets.
In order to prove the certainty of the protest made by plaintiff
and the repeated promises of payment by Miguel Gutierrez de
Celis, Attorney Eduardo Gutierrez Repide was called as
witness and testified that, as a consequence to the complaint
made by the plaintiff to the attorney Marple, one of the
members of the Hartigan law firm, against the acts of the

manager of the firm of Gutierrez Hermanos a proceeding

which, as plaintiff stated produced the effect of continually
reducing his assets in the firm by order of the said Marple
he, witness, went to confer with said manager Guiterrez de
Celis who after learning of plaintiff's complaint stated to
witness that there was then good and sufficient reason for
making it appear in the firm's books that the industrial partner
Leopoldo Criado had less assets in the firm than in reality he
had, but that he should not worry further as later on the firm
would pay him the reduced amount of the forty-three
thousand and odd pesos which made up the reduction, and
that, sometime afterwards, witness having been called as a
friend, and not as an attorney, by said manager of the firm, on
meeting the latter, he learned that just then Leopoldo Criado
was refusing to sign the instrument setting forth the new
articles of partnership for a new period because said manager
had not fulfilled his promise to return to plaintiff the aforesaid
sum deducted from the capital stock, on which occasion the
notary Barrera was there waiting; that then Guiterrez de Celis
directed the witness to tell plaintiff not to worry, and that said
sum would be returned to him; that therefore witness, trusting
in these words of the manger, advised plaintiff to sign the
instrument, just as he did; and that witness afterwards
learned that these promises had not been fulfilled.
In view of the evidence adduced by plaintiff, not rebutted by
counsel for the defendant, it cannot be held that plaintiff was
in estoppel immediately after having signed the partnership
contract of May 9, 1904, in which it appears that he brought
into the new firm, as capital of his own, P25129.09, nor may it
be said that he was not entitled to claim the rest of his assets
in the firm during the first period from 1900 to 1903, to wit,
the difference between the sum of P56,793.25, plaintiff
Criado's capital as an industrial partner and said P25,129.09,
the capital brought into the new firm, inasmuch as it was not
the plaintiff, but the manager of the firm, Miguel Gutierrez de
Celis, who intentionally and deliberately induced Leopoldo
Criado to sign said partnership contract of May, 1904, in
which plaintiff appeared as capitalist partner for the last
mentioned sum brought into the general assets of the firm
under the repeated promise that he would afterwards be paid
the rest of the assets due him up to the aforestated sum of
P56,793.25, the amount of capital standing to his credit at the
time of the termination of the previous partnership on
December 31, 1903.
As aforesaid, plaintiff signed the instrument of 1904 in the
belief that the manager of the firm of Gutierrez Hermanos
would fulfill the promise he had made not only to the plaintiff

but also to the attorney Gutierrez Repide; wherefore, it is

evident that the defendant cannot set up estoppel against the
plaintiff, who relied upon said repeated promise (Act No. 190,
sec. 333), inasmuch as the defendant was aware that plaintiff,
as an industrial partner, was entitled to collect a greater sum
as a part of his capital than that brought into the new
partnership and he had an indisputable right to contradict and
adduce oral evidence against the contents of said instrument
of May 9, 1904 (Act No. 190, sec. 285), in case the exception
of the plaintiff which the defendant denied were based on the
contents of that instrument, and likewise against the
liquidation and balance made at the expiration of the term of
the first partnership, causing to appear in said balance and in
the books of the firm, among other entries, that
aforementioned sum of P501,513.57, certified to in the
document Exhibit 10, this amount is sufficiently large when
distributed among the partners, as losses when plaintiff
Criado, as one of the industrial partners is not liable for the
losses which the firm may have sustained according to the
eighth clause of the notarial instrument of May 29, 1900. The
allotment to the industrial partner Leopoldo Criado of the
amount of P25,080.68 as losses suffered by the firm in its
business during the years 1900 to 1903 was notoriously
illegal, inasmuch as he, being merely an industrial partner,
was not liable for any loss whatever.
Plaintiff assails several entries made in the books of the firm
consisting of losses in hemp, merchandise, depreciation of
steamers, and reduction in capital stock belonging to the
partners, all amounting to P793,199.24, as well as the net loss
estimated at P110,578.38. But it suffices our purpose to
mention the reduction as losses, distributed among the
partners, of P501,613.57, P25,080.68 of which was charged
against the plaintiff as his proportionate loss of the capital, in
order to show the propriety of plaintiff's averments that
without any good reason or ground whatever he sustained a
loss by the decrease of his capital.
For the practical application and the fulfillment of the
stipulations made by the partners, in the second and eighth
clauses of said articles of partnership of March 29, 1900, it
should be understood that, for the purpose of determining the
profits that correspond to an industrial partner who shares in
the profits from the different transactions carried on by the
firm must be added together from which sum must be
subtracted that of the losses sustained in its business, and in
the difference which represents the net profits if these are
greater than the losses the industrial partner shares, i. e.,
in the sum total of the profits. But if, on the contrary, the

losses are greater and exceed the profits in said difference the
industrial partner should not be liable, for this constitutes a
real loss to the firm.
Wherefore, having examined the documents presented at the
trial, among them Exhibits C, F, H, P, 2 and 8 as well as the
report of the commissioner, Wicks, Exhibit Z-3, together with
the documents attached by him to his report, and taking into
account that only sixty-seven thousand and odd pesos could
be collected from the credits considered as uncollectible, and
that the plaintiff, as an industrial partner, should not be liable
for the losses, according to the articles of partnership, it
follows that, at the termination of the partnership in 1903,
plaintiff's assets were P56,793.25, and his liabilities
P1,054.56, there being in his favor consequently a balance of
P55,738.69; but as in the instrument of May, 1904, he was
credited with only P25,129.09, as capital brought into the new
company, the plaintiff is entitled to demand that the firm of
Gutierrez Hermanos pay him in the sum of P30,609.60.
Furthermore, in the instrument of May 9, 1904, it is not stated
that the amount brought in the plaintiff was the balance and
sole asset that he had as an industrial partner in the extinct
firm in 1903, nor that he condoned and renounced any other
assets he might have therein; consequently, he has not lost
his right to collect the rest of his capital by having signed said
instrument, and it is not fair that his copartners should benefit
with no just reason and to his prejudice.
The commissioner, Wicks, awarded plaintiff P32,875.46, as a
part of his capital which he was entitled to collect (Exhibit Z3). Plaintiff accepts this sum, though he demanded more in
his complaint; but this court can not accept the
commissioner's conclusion in this particular, inasmuch as
plaintiff admitted that his capital, on December 31, 1902, was
the sum aforementioned which appears in the defendant's
books, and in 1903 the firm of Gutierrez Hermanos netted no
profits from its business; because, as a result of the
commissioner's examination if the books and papers of the
defendant firm, he unduly awarded plaintiff P6,205.25, as a
part of his capital, which the defendant had failed to pay him
in the years 1900 to 1902, and P1,660.91, as a part of his
assets unduly excluded by the defendant firm from his
account of invested capital in 1903, both amount aggregating
P7,866.17. It is to be observed that plaintiff agrees that his
capital in 1903, according to the defendant firm's books
amounts to P56,793.25, without the debt of P1,054.56.

On pages 8 to 12 of Exhibit Z-3 the commissioner Wicks also

unduly charged plaintiff 5 per cent of the interests on certain
personal accounts that were canceled in the books, and on
certain sums which appeared on the firm's books as losses
pertaining to the years 1904 to 1911, as being related to
certain other accounts that originated during the period 1900
to 1903. These charges were improper because the interests
on the accounts stricken from the books are, like the principal
debts, also losses for which, according to the articles of
partnership, the industrial partner should not be held liable.
The amount thus unduly charged against plaintiff on account
of the said 5 per cent interest aggregates P5,600.32, which
sum, subtracted from said P7,866.17, an amount also unduly
paid, leaves a difference of P2,265.85 likewise unduly credited
to the plaintiff and which apparently increases his assets. This
latter sum, subtracted from that awarded by the
commissioner, shows that plaintiff is entitled only to the sum
of P30,609.60, a sum which, with the sole difference of one
centavo through inaccuracy in the calculations, we deem to
be mathematically correct, lawful, just, and in conformity with
the stipulations made by and among the partners in said
instrument; and therefore the defendant should be ordered to
pay the same, together with the legal interest thereon from
the date of the filing of the complaint.
As regards the third cause of action in the previous judgment
which was set aside, the complaint, in so far as this cause of
action was concerned, was dismissed and upon a reopening of
the case, in the subsequent judgment rendered therein on
September 11, 1916, the court abstained from granting the
petition made in connection with said third cause of action;
notwithstanding, the plaintiff-appellant in his brief made no
assignment of error with respect to this matter, nor did he
request the court to make any ruling on the petition submitted
in connection with said cause of action. Therefore,
notwithstanding the agreement contained in the document
Exhibit 50, and in view of the fact that plaintiff tacitly waived
any right he might have had to enforce this claim, judging
from his conduct in the matter of the collection of the sum of
P406.99, also mentioned by the commissioner in his report
Exhibit Z-3, this court dismisses the complaint in so far as said
third cause of action is concerned.
In the judgment appealed from, the trial court holds that the
item relative to the shares of stock in the Bataan mines
pertained to the losses suffered in 1906 and should have been
charged to the account of profits and losses as, according to
the 8th clause of the articles of partnership, plaintiff had
suffered a loss not only of 5 but 10 per cent. The plaintiff-

appellant likewise makes no assignment of error against this

judicial declaration. Therefore the complaint is also dismissed
with respect to the fourth cause of action. By the fifth cause of
action counsel for plaintiff demands payment of the sum of
P88,245.93, and the trial court, for the reason stated in the
judgment, held that the defendant firm was obliged to pay to
plaintiff the sum of P51,296.62, with legal interest thereon
from May 25, 1912, the date of the filing of the complaint.
This finding has not been assailed, nor has any error been
assigned against it by the plaintiff-appellant in his brief, but
the defendant-appellant, ordered in the judgment to pay that
sum, made an assignment of errors based on the reason set
forth in its brief.
The plaintiff having impliedly acquiesced in the finding of the
trial court with respect to the fifth cause of action, we shall
now proceed merely to inquire whether that court actually
committed the errors assigned to the judgment by the
defendant-appellant.
According to the document Exhibit 7, presented by the
defendant, which appears to be a copy of plaintiff's stock
account, certified as authentic by the defendant's bookkeeper,
the capital stock of the plaintiff Leopoldo Criado, prior to
December 29, 1911, was P73,147.87, an amount which also
appears in the document (Exhibit P) and tends to prove that
on December 31, 1911, plaintiff's capital was the amount
stated, before the annotation of the entries assailed as false
and fraudulent by plaintiff.
The eighth and sixteenth clauses of the articles of
partnership, Exhibit O (record, p. 82), executed in May, 1904,
which ratified and approved the transactions of the firm of
Gutierrez Hermanos from January of that year state the
following:
Eighth. The earnings or profits which may be
obtained shall be distributed among the partners in
the following proportion:
Forty per cent to D. Placido Gutierrez de Celis;
Forty per cent to D. Miguel Gutierrez de Celis;
Ten per cent to D. Daniel Perez Albertos; and
Ten per cent to D. Leopoldo Criado Garcia.
In the same proportion provided for the profits, the
partners shall be liable for the losses that may be
incurred.

Sixteenth. In case the partnership business should

incur such losses as to prevent a continuance of the
business or to make a dissolution of the partnership
advisable, same shall be liquidated, each capitalist
partner bearing such loss in a pro rata proportion to
the capital he represents, the expenses necessary for
the prosecution of the business being chargeable to
the firm as a whole. Notwithstanding these provisions
the partners Don Placido and Don Miguel as principal
capitalist partners may liquidate the partnership or
alienate its rights whenever they deem proper so to
do.
By a notarial instrument of January 2, 1908, the life of the
partnership was extended to another term of four years, upon
the same bases and conditions (Exh. X, p. 100).
From the two preinstated clauses of the partnership contract it
is deduced that the partners should be liable for all the losses
incurred by the partnership in the proportion fixed in the 8th
clause; but that, in case such losses should be of so great
importance as to prevent a continuation of the partnership
business, or to make advisable the dissolution of the
partnership, then due action should be taken in conformity
with the provisions of said clause 16, and the partners should
be liable from the losses in a proportion pro rata to their share
in the partnership assets; in consequence whereof, plaintiff
should be liable at the rate of 10 per cent of the losses
sustained.
The trial judge held that, according to the balance sheet
(Exhibit P) admitted by the defendant (sten. notes, p. 45), the
profits in 1911 were P120,986.34; but a mere reading of this
balance sheet shows that the profits were not so much as the
plaintiff claims, even by adding thereto the sum of P30,000,
nor did they amount to the sum fixed by the court, for the
reason that same document shows losses of P21,963.38 for
general expenses and of P22,569.41 for the account on its
face, which accounts bear debit balances.
In order to determine the exact amount of the profits and
losses during the year 1911, it becomes necessary to examine
the 1910 inventory, not discussed by the litigants, and to
make a comparison between its contents and those of the
1911 inventory. Having examined various documents stating
accounts of several kinds relating to the business of the firm
of Gutierrez Hermanos, as those of the merchandise, various
debtors, furnitures, shares, consignments, vessels, cash
operations of provincial business, and rural and urban

properties, it appears that the active capital of the partnership

was, on December 31, 1911, P2,685,096.40.
According to the inventory Exhibit 51 (record, p. 172), the
liabilities of the partnership were P789,228.65 in 1911.
The unpaid accounts aggregate a total of P148,965.66. In his
report (Exhibit Z-3) the commissioner classified these credits
as uncollectible, doubtful and slow collection, a classification
we find very just, since entry No. 1657, Exhibit T, admits that
a part of such credits, without being uncollectible or doubtful,
is of slow collection. According to said commissioner's report,
the uncollectible credits amount to P33,746.58, an amount
which may, in justice, be considered as lost; those doubtful
amount to P39,864.49, and those of slow collection to
P75,354.59, making a total of P118,219.08.
We cannot consider as lost the credits of slow collection nor
even the doubtful ones, as there is the hope that they may be
collected in the future; therefore the sum of the doubtful
credits and those of slow collection should be deducted, as
unpaid accounts from the liabilities which, consequently, are
reduced to P671,019.57, an amount that still must be reduced
to P662,337 because in 1912 the balance of P8,682.57,
Ramon Madarieta's debt, was collected as the commissioner
states in his report. According to the entry No. 1658, Exhibit
U, the active capital was reduced on account of the difference
in the price of hemp, by the sum of P110,091.19. Therefore,
deducting from the liabilities the excess of P102,534.27, it
appears that, on December 31, 1911, the liabilities were only
P2,125,293.67, and this sum, compared with the capital that
the defendant firm had on December 31, 1910, which
according to Exhibit Z (record, p. 120) was P2,182,010.04,
shows a loss of P56,716.57. Consequently, there should be
deducted from plaintiff's capital 10 per cent of this sum or
P5,671.64 as his share of the loss.
The capital which the plaintiff had in the firm in 1911,
according to Exhibit 7 (record, p. 197), amounts to
P76,141.08, a balance which constituted his capital on
December 31, 1910, and adding thereto the sum of the
amounts collected, P605.50, the result is that plaintiff's true
assets, in his account of capital stock, must be P76,746.58.
Deducting from this sum that of P2,570.98 which is charged
as a debit against plaintiff, there appears a net balance in his
favor of P74,175.60 and, deducting from this sum 10 per cent
of the P56,716.37 or P5,671.64 as losses, there results the
difference of P68,503.97, the sum which he was entitled to
collect from the defendant by this fifth cause of action

although the amount was reduced to P51,296.62 as fixed in

the judgment the payment of which the defendant is
obliged in the manner stipulated in the 19th clause of the
articles of partnership, in proportion to the total net capital,
the date is, at the rate of 3.22 per cent with legal interest
from the date of the filing of the complaint.
By the sixth cause of action plaintiff claims the sum of P2,000,
alleging that same was unduly charged against his private
account when, in truth and in fact, in consequence of a
compromise made by advice of the attorneys of the
defendant, the former firm of Del Pan and Ortigas, he, as
manager of the defendant firm, paid said sum to Leopoldo
who for this reason, in spite of his better right, desisted from
claiming P8,000 from Tirso Nery against whom the defendant
then had an action pending.
The trial court rendered judgment in favor of the plaintiff for
P2,000, with legal interest thereon, at the first hearing of this
case, and at the second hearing held that plaintiff should be
paid P1,800, considering the remaining P200 as plaintiff's
share in the loss suffered by the firm on account of said
compromise.
The defendant alleged that its manager's statement shows
that this sum of P2,000 was paid by Guiterrez Hermanos on
the account of Leopoldo Criado, as there was no need of
buying this credit of Leopoldo Ferrer against Tirso Nery, and
that while acting as manager plaintiff took advantage of the
opportunity to buy said credit for 25 per cent of its nominal
value.
Plaintiff testified that Miguel Gutierrez de Celis read the
complaint of Leopoldo Ferrer and believed that it was
advisable to pay this creditor's claim; that therefore De Celis
himself drew the check for the payment of Ferrer's claim and
ordered plaintiff to go to court in company with the attorney
to stipulate a compromise about the matter.
The manager, Miguel Gutierrez de Celis, testified that he had
no knowledge of that complaint and of that compromise; but
the court, who saw and observed these witnesses while they
were testifying, gave credence to the plaintiff's testimony, and
we see no reason whatever for modifying his judgment in this
matter, for the evidence as a whole tends to prove that
plaintiff told the truth.

So therefore plaintiff is entitled to recover from the defendant

the sum of P1,800 but must suffer the loss of the remaining
P200 as his share of the loss of the credit.

defendant should pay plaintiff a compensation proportionate

to the profits that might be obtained from the business of the
firm.

In the seventh cause of action plaintiff claims compensation

for the services rendered the defendant firm at the instance of
Miguel Gutierrez de Celis, and alleged that a just and
reasonable compensation from December 31, 1911, when he
left the firm, until March 30, 1912, is P1,000 per month, such
services being rendered at the request of Miguel Gutierrez de
Celis, with the promise that compensation would be in
accordance with the profits obtained; that this value of
services, P1,000 per month, was estimated on the basis of the
work done by him and the profits obtained; that he therefore
demanded of Miguel Gutierrez de Celis the payment of said
compensation, but that the latter refused to pay anything
(record, p. 427).

With respect to the amount of that compensation, counsel for

the defendant say on the aforecited page of their brief, that
plaintiff testified that his salary ought to be in accordance with
the profits that might be obtained but that he did not prove
how much he could have earned elsewhere.

The manager Miguel Gutierrez de Celis testified that Leopoldo

Criado lodged and boarded in the house of Gutierrez
Hermanos during the months of January, February, and March,
1912; that his work consisted solely in being there and seeing
that things were accomplished; that he intervened in the
preparation of the balance sheets; and that consequently his
services were of no value.
Upon the foregoing evidence the lower court rendered
judgment in favor of the plaintiff for the amount claimed and
fixed by himself, and basing judgment on the nature of his
work and on what he had earned previously as a partner.
In trying to prove that the trial court erred in its award in favor
of plaintiff for this cause of action, counsel for the defendant
says, on page 33 of the Spanish brief, No. 9300, that plaintiff
could not establish his right under this cause of action; that,
according to the testimony of the defendant's manager, the
sole reason why plaintiff continued in the firm after December
31, 1911, was to make the final balance sheets; and that
therefore he can recover nothing for his services because the
rule established in various American cases cited is that a
liquidator-partner is not entitled to any compensation for his
services as such, unless there are special stipulations in the
matter of circumstances from which such contractual
stipulations may be deducted.
Assuming that the rule cited were applicable in this country,
the same rule favors the plaintiff for, in the present case,
there was not only an implied but an express contract that the

It is undeniable that plaintiff did render services to the

defendant firm when he was not obliged to do so gratuitously,
for, neither in the partnership contract (Exhibit O), nor in the
law, is there any provision whatever to the effect that plaintiff
as a partner was obliged to liquidate the business without
compensation, since among the partner's obligations as
prescribed by articles 170 to 174 of the Code of Commerce,
such an obligation does not appear, but on the contrary,
articles 228 and 229 of the said Code provide that in general
or limited partnerships, should there be no objection on the
part of any of the partners, the persons who managed the
common funds shall continue in charge of the liquidation.
Plaintiff, without being obliged, rendered service to the
defendant at the manager's request, with the understanding
that his compensation should be in proportion to the profits
that might be obtained, and, therefore, it is just and
reasonable that such services should be remunerated.
As regards the amount of the compensation we do not find
satisfactory rebuttal of plaintiff's testimony in this matter, as
the manager merely said that plaintiff's services were worth
nothing, a statement that falls by its own weight, for, however
insignificant may be the work one person does on behalf of
another, it is always worth something. There is no estimate of
his compensation were not received nor do we find his
estimate exaggerated. Nor does there appear any reason
whatever for modifying the judgment of the trial court in
respect to this point.
Therefore the defendant ought in justice pay to the plaintiff
the amount claimed in this seventh cause of action.
In the eighth cause of action plaintiff claims the sum of P52 as
his 10 per cent share of the P520 which La Germinal paid the
defendant as dividend obtained in 1911 and corresponding to
the shares of stock the defendant held in that company,
alleging that, notwithstanding the fact that the defendant

collected said amount, it failed to credit him with P52, the

sum to which he was entitled.
In its answer defendant admitted that it collected the dividend
mentioned, and that plaintiff was entitled to the payment of
P52.
Plaintiff testified (record, p. 429) that the books do not show
that the sum of P520 was divided among the partners.
Counsel for the defendant admitted that they had no evidence
to present in respect to this cause of action.
Therefore plaintiff has an unquestionable right to collect from
the defendant the sum of P52, as held by the trial court.
By the ninth cause of action plaintiff claims the payment of
P1,171.11 as his 10 per cent share of the P11,711.16 which
the insurers of several of the defendant's steamers paid on
account of certain damages suffered by these vessels said
repairs were paid proportionately by all the partners and
that, notwithstanding the collection of this sum, defendant did
not pay him his share thereof.
Defendant denied that is received P11,711.16, but admitted
that it did receive P9,032.92, and that this sum plaintiff should
be credited with P953.92.
The court below rendered in favor of plaintiff judgment for
P953.90, from which judgment he did not appeal, nor did the
defendant make any assignment of error in respect thereto.
We see no reason whatever for changing or modifying this
finding, for the defendant admitted, as aforesaid, that plaintiff
was entitled to the amount awarded him in the judgment. We
therefore affirm this part of the judgment.
By the tenth cause of action plaintiff asks judgment for
P3,000. alleging that in 1911, after he had ceased to be a
partner of Gutierrez Hermanos, the defendant firm charged to
the account of "Items pending collection" and credited in
favor of Movellan and Angulo, of Paris, insurers of the
defendant's steamers for the year 1912, thereby diminishing
the partners' capital; and that of said P35,334.09, he is
entitled P3,000 which the defendant's manager failed to pay
plaintiff, notwithstanding the demand made upon him so to
do.

The defendant alleges that the premium pertaining to the

year 1912 amount to only P958.97, of which P95.89 belongs
to plaintiff, and admits that said sum should be credited to
plaintiff's account.
The lower court rendered judgment in favor of plaintiff for
P1,001.22, from which judgment he did not appeal, and
although the defendant appealed he from this award of the
judgment, it was not included in its assignment of errors. Nor
do we find anything in the record to show that the trial court
erred; on the contrary, we see that the dates and premiums of
the insurance policies mentioned in the judgment, for which
plaintiff should not be held liable, agree with those given in
Exhibit 45 (record, p. 297) which is a copy of the insurance
policies of the steamers Montaez, Dos Hermanos, and
Magallanes, certified to by the bookkeeper of the defendant
firm, no policies of other steamers having been presented,
while the report of the commissioner (record, p. 77), schedule
28 of Exhibit Z-3, differs very much from Exhibit 45. Therefore
said award of the trial court should likewise be affirmed.
DEFENDANT'S CROSS-COMPLAINT.
The defendant asks therein that plaintiff be ordered to pay
any amount proved due the partnership, and alleges that
during the time that plaintiff acted as the official in charge
and the manager of the defendant firm's business, to wit,
during the period between May 1 and December 10, 1903, he,
knowingly and in contravention of the stipulations contained
in the articles of partnership, sold and delivered various
merchandise and other effects to several debtors, such as
Antonio de la Riva, whose debt had then reached the amount
of P88,617.96, and Gerena and Co. whose account showed a
debit balance of P39,417.16, without having the security
required by the articles of partnership; that therefore plaintiff
alone is responsible for losses occasioned through such
procedure; and that, upon making the balance sheet on
December 31, 1911, a loss was found whereby plaintiff owed
the defendant more than P26,000.
The clause to which this cross-complaint refers and which was
violated by plaintiff is the fifth of the instrument of March 16,
1900, presented as Exhibit A (record, p. 58), and is of the
following tenor:
The purpose of the partnership shall be the
transaction of business in the purchase and sale of
groceries and beverages from Europe and America,

and domestic merchandise; and in the advancement

of funds on goods under security to companies or to
private parties, the credit allowed thereon not to
exceed thirty thousand pesos and granted only on
the approval of the principal capitalist partners.
The trial court dismissed this cross-complaint, for the reason
that the transactions, the responsibility for which the
defendant claims to hold plaintiff liable, were ratified by
Miguel Gutierrez de Celis upon his arrival in the Philippines.
The cross-complaint raises two questions, to wit: (First.) Is
plaintiff liable for the debts of Antonio de la Riva and of
Gerena and Co.? (Second.) Is plaintiff in debt to the defendant
in the sum of twenty-six thousand and odd pesos?
With respect to the second question we have already shown in
discussing the fifth cause of action, that, as disclosed by the
record, the defendant is indebted to plaintiff. This question
should therefore be determined in the negative.
As regards the first question, even supposing that plaintiff has
violated the stipulations of articles of partnership by giving
credit to various persons without taking the security required
in the fifth clause of said articles, yet in the cross-complaint
no other reasons are alleged by virtue of which he should be
held liable for said breach of contract.
Article 144 of the Code of Commerce makes a partner liable
for the damages suffered by the partnership, by reason of his
malice, abuse of powers, or serious negligence, and requires
him to indemnify the partnership should the other partners so
require, provided an express or verbal approval or ratification
of the act on which the claim is based can not be deduced in
any manner whatsoever. According to this legal provision, in
order that the partner at fault may be compelled to pay an
indemnity, it is indispensable, in the first, place, that his
conduct shall have caused some damage to the partnership,
and, in the second place, that his conduct should not have
been expressly or impliedly ratified by the other partners or
the manager of the partnership.
In the cross-complaint the allegation is made that plaintiff,
violating said fifth clause of the articles of partnership, sold
and delivered merchandise and other effects to various
debtors, such as Antonio de la Riva and Gerena and Co.,
without the security required in said articles; and that,
because of the large sums which said debtors owe to the

partnership, plaintiff is liable for all the damage and harm

caused, amounting to P128,035.12.
Plaintiff Leopoldo Criado testified, with respect to Gerena and
Co., that subsequent to his arrival in this country, Miguel
Gutierrez de Celis continued to maintain commercial relations
with said debtor firm, whose debt would have been collected
had Gutierrez de Celis followed his (plaintiff's) advice and that
of the attorneys of the firm of Gutierrez Hermanos aside
from the fact that the firm of Genera and Co. was solvent and
could pay its debt; so it is that the manager Miguel Gutierrez
de Celis continuing said business ratified plaintiff's procedure
during the three months and several days that he acted
temporarily, in 1903, as manager of the partnership; and for
said reason there is no ground upon which plaintiff may be
held liable for the harm occasioned by the non-payment of the
debt of Gerena and Co.; and that rather did the liability for
such harm fall upon the manager Gutierrez de Celis who
conscientiously never believed that plaintiff was solely liable
for the loss, for the Entry No. 1889 (Exhibit 10, aforecited)
contains the statement that the author of such losses no
longer exists, the fault being attributed to the deceased
Miguel Alfonso, although Miguel Gutierrez de Celis testified
(record, p. 557) that he gave his approval to what had been
done, without knowing what it was, and that the plaintiff who
gave the money to Gerena and Co. This testimony is in direct
contradiction to the evidence contained in the entry
aforementioned, written on December 31, 1903, and
notwithstanding that error was discovered by Gutierrez de
Celis, as he stated, the truth is that the amount of the loss
was not charged to Leopoldo Criado, neither was a similar
charge made in respect to the amount paid to Leopoldo Ferrer
of which mention has previously been made herein above. So
said Entry No. 1889 of the document Exhibit 10 remained
intact.
With respect to the account of Antonio de la Riva which
shows, as of December 31, 1903, a debit balance of P91,000
and odd pesos, plaintiff testified (record, p. 590) that as
security for this debt De la Riva had delivered to the firm of
Gutierrez Hermanos a lot of hemp worth P33,218.06, a power
of attorney to collect P26,000 from the store "Isla de Cuba" in
monthly installments of P2,000, and the insurance policy of
the launch Concha, which represented P34,000; whereby the
debt was reduced to P12,000, on December 31, 1903.
This testimony appears other corroborated documents and
other evidence of record for, with respect to the power of
attorney to collect the sum mentioned from the "Isla de

Cuba," the same exhibit, No. 5, which is the account of

Antonio de la Riva, certified to by the defendant's bookkeeper,
shows that on July 3, August 5, and September 5, 1903, the
account of Antonio de la Riva's indebtedness to the
partnership was credited with various sums collected from the
"Isla de Cuba." With respect to the hemp referred to by
witness, the manager himself Miguel Gutierrez de Celis
testified (record, p. 565) that upon his arrival in the
Philippines, he allowed an increase in De la Riva's debt, by
reason of the security of the hemp which this debtor was
sending to the firm. With reference to the insurance of the
launch Concha, there is no evidence of record in contradiction
of the facts, except the testimony of Miguel Gutierrez de Celis
in which the latter claims that the launch was purchased by
plaintiff in his own name with money belonging to the firm, in
order afterwards to sell it to Antonio de la Riva (record, p.
567). The manager De Celis does not deny that the
partnership held said insurance policy on the launch as
security, nor that De la Riva was the owner of the boat, for, if
the launch were sold to De la Riva and the proceeds from the
sale were charged to the latter's account, together with the
expenses occasioned by the trips made by that boat (Exhibit
5), it is obvious that Antonio de la Riva was the owner of the
launch, although he was a debtor to the firm of Gutierrez
Hermanos for its price and the expenses incurred.
Consequently it is indisputable and beyond all doubt that
when plaintiff turned over to Miguel Gutierrez de Celis the
management and administration of the business of the firm,
this business was in very good condition, and if afterwards
losses had been sustained same were due to the fault of
Gutierrez de Celis himself; so it is that, in canceling in the
books the account of Antonio de la Riva, he divided the
amount thereof among all the partners, in the belief that it
was a loss that affected them all.
Starting from the fact that the record shows that the
defendant owes plaintiff various sums of greater or lesser
importance, as stated in the findings on the majority of the
causes of action prosecuted by plaintiff, it is logical that this
court should not find any well-founded or legal reason by
virtue of which judgment may be rendered against plaintiff for
whatever amount he may be owing the defendant firm,
inasmuch as the latter is shown to be his debtor. Therefore
plaintiff should be absolved from the cross-complaint filed by
the defendant.
As regards the amount of the collectible accounts and of
unpaid credits which total sum is stated in the part of this

decision relative to the fifth cause of action, it is undeniable

that the plaintiff Leopoldo Criado, as capitalist partner of the
partnership organized in May, 1904, is entitled to receive 10
per cent of every sum collected from the date on which he
ceased to belong to the firm, January, 1912, and of whatever
sum that in the future may be collected from said collectible
accounts or unpaid credits, and it is so held, without any
liability on his part in relation to the bad or uncollectible
credits. Therefore, in view of section 126 of Act No. 190, we
reverse that part of the judgment of the court below whereby
such liability for 10 per cent is imposed upon the plaintiff.
The last error assigned by the defendant to the judgment of
the court below relates to the order of September 2, 1915, in
which it is held that the accounts presented by the defendant
are not in accord with the orders given by the Supreme Court
in its previous decision, in so far as it was directed that the
firm of Gutierrez Hermanos should render a new account
supported by vouchers to determine exactly plaintiff's share in
the firm's assets. In fact the defendant was ordered
immediately to present to the court all its books, vouchers
and other documents that might be necessary for the
settlement of the assets pertaining to plaintiff during the
years 1900 to 1911, and to place the same at the disposal of
the expert, G. B. Wicks, and was authorized to appoint
another expert who, with said Wicks, might examine the
books and papers of the firm of Gutierrez Hermanos. This
order is perfectly legal and just. It is an interlocutory order of
mere procedure, issued in compliance with and in
consequence of the decision of this court, to end that, with
the result of the liquidation of the accounts made by the
expert appointed, without the defendant having wished to
appoint another in use of its right so to do, this court may
decide this suit equitably, in accordance with its true merits
and in conformity with the law.
For the foregoing reasons, whereby the errors assigned to the
judgment appealed from with respect to the parts thereof
discussed in this decision have been refuted, the defendant
should be, as it hereby is absolved from the complaint by the
first cause of action. By the second cause of action the firm of
Gutierrez Hermanos, the defendant, should be, as it hereby is
ordered to pay to the plaintiff Leopoldo Criado the sum of
P30,609.60, with legal interest thereon from May 25, 1912,
the date of the filing of the complaint. In so far as it is based
on the third and the fourth causes of action, said complaint is
dismissed. In accordance with the fifth cause of action, the
defendant should be, as it hereby is, ordered to pay to plaintiff
the sum of P51,296.62 fixed in the judgment appealed from,

with legal interest thereon from the date when the original
complaint was filed, May, 1912, and the plaintiff must pay
said sum in the manner prescribed in the 19th clause of the
articles of partnership of 1904. By the sixth cause of action,
the defendant is likewise ordered to pay P1,800; by the
seventh, P3,000; by the eighth, P52; by the ninth, P953.90;
and by the tenth, P1,001.22. That part of the judgment
relating to the plaintiff's liability for 10 per cent of the
outstanding and the uncollectible bills is reversed, and he is
reserved his right in the sums collected or which may be
collected from same. The plaintiff Leopoldo Criado is absolved
from the cross-complaint filed by the defendant Gutierrez
Hermanos.
The plaintiff shall pay one-third, and the defendant two thirds,
of the costs of both instances. The judgment appealed from is
thus affirmed in so far as it is in accord with this decision, and
is reversed in so far as it is not. So ordered.
Arellano, C.J., Johnson, Araullo, Street, Avancea and Fisher,
JJ., concur.

Sonya had their main business based in New York. Realizing

the difficulty of managing their investments in the Philippines
they executed a general power of attorney on January 24,
1966 appointing Navalrai and Choithram as attorneys-in-fact,
empowering them to manage and conduct their business
concern in the Philippines. 1

G.R. No. 85494

May 7, 1991

CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V.

RAMNANI and MOTI G. RAMNANI, petitioners,
vs.
COURT OF APPEALS, SPOUSES ISHWAR JETHMAL
RAMNANI, SONYA JETHMAL RAMNANI and OVERSEAS
HOLDING CO., LTD., respondents.
G.R. No. 85496

May 7, 1991

SPOUSES ISHWAR JETHMAL RAMNANI AND SONYA JET

RAMNANI, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ORTIGAS & CO.,
LTD. PARTNERSHIP, and OVERSEAS HOLDING CO.,
LTD., respondents.
Quasha, Asperilla Ancheta, Pea and Nolasco for petitioners
Ishwar Jethmal Ramnani & Sonya Ramnani.
Salonga, Andres, Hernandez & Allado for Choithram Jethmal
Ramnani, Nirmla Ramnani & Moti Ramnani.
Rama Law Office for private respondents in collaboration with
Salonga, Andres, Hernandez & Allado.
Eulogio R. Rodriguez for Ortigas & Co., Ltd.

GANCAYCO, J.:
This case involves the bitter quarrel of two brothers over two
(2) parcels of land and its improvements now worth a fortune.
The bone of contention is the apparently conflicting factual
findings of the trial court and the appellate court, the
resolution of which will materially affect the result of the
contest.
The following facts are not disputed.
Ishwar, Choithram and Navalrai, all surnamed Jethmal
Ramnani, are brothers of the full blood. Ishwar and his spouse

On February 1, 1966 and on May 16, 1966, Choithram, in his

capacity as aforesaid attorney-in-fact of Ishwar, entered into
two agreements for the purchase of two parcels of land
located in Barrio Ugong, Pasig, Rizal, from Ortigas & Company,
Ltd. Partnership (Ortigas for short) with a total area of
approximately 10,048 square meters. 2Per agreement,
Choithram paid the down payment and installments on the lot
with his personal checks. A building was constructed thereon
by Choithram in 1966 and this was occupied and rented by
Jethmal Industries and a wardrobe shop called Eppie's
Creation. Three other buildings were built thereon by
Choithram through a loan of P100,000.00 obtained from the
Merchants Bank as well as the income derived from the first
building. The buildings were leased out by Choithram as
attorney-in-fact of Ishwar. Two of these buildings were later
burned.
Sometime in 1970 Ishwar asked Choithram to account for the
income and expenses relative to these properties during the
period 1967 to 1970. Choithram failed and refused to render
such accounting. As a consequence, on February 4, 1971,
Ishwar revoked the general power of attorney. Choithram and
Ortigas were duly notified of such revocation on April 1, 1971
and May 24, 1971, respectively. 3 Said notice was also
registered with the Securities and Exchange Commission on
March 29, 1971 4 and was published in the April 2, 1971 issue
of The Manila Times for the information of the general public. 5
Nevertheless, Choithram as such attorney-in-fact of Ishwar,
transferred all rights and interests of Ishwar and Sonya in
favor of his daughter-in-law, Nirmla Ramnani, on February 19,
1973. Her husband is Moti, son of Choithram. Upon complete
payment of the lots, Ortigas executed the corresponding
deeds of sale in favor of Nirmla. 6 Transfer Certificates of Title
Nos. 403150 and 403152 of the Register of Deeds of Rizal
were issued in her favor.
Thus, on October 6, 1982, Ishwar and Sonya (spouses Ishwar
for short) filed a complaint in the Court of First Instance of
Rizal against Choithram and/or spouses Nirmla and Moti
(Choithram et al. for brevity) and Ortigas for reconveyance of
said properties or payment of its value and damages. An
amended complaint for damages was thereafter filed by said
spouses.
After the issues were joined and the trial on the merits, a
decision was rendered by the trial court on December 3, 1985
dismissing the complaint and counterclaim. A motion for

reconsideration thereof filed by spouses Ishwar was denied on

March 3, 1986.

1981, based on prevailing rates per Exhibit

"Q";

An appeal therefrom was interposed by spouses Ishwar to the

Court of Appeals wherein in due course a decision was
promulgated on March 14, 1988, the dispositive part of which
reads as follows:

d) On the two Bays Buildings occupied by

Sigma-Mariwasa from 1972 to 1978, the
rentals based on the Lease Contract, Exhibit
"P", and from 1979 to 1980, the rentals
based on the Lease Contract, Exhibit "Q",

WHEREFORE, judgment is hereby rendered reversing

and setting aside the appealed decision of the lower
court dated December 3, 1985 and the Order dated
March 3, 1986 which denied plaintiffs-appellants'
Motion for Reconsideration from aforesaid decision. A
new decision is hereby rendered sentencing
defendants- appellees Choithram Jethmal Ramnani,
Nirmla V. Ramnani, Moti C. Ramnani, and Ortigas and
Company Limited Partnership to pay, jointly and
severally, plaintiffs-appellants the following:
1. Actual or compensatory damages to the extent of
the fair market value of the properties in question
and all improvements thereon covered by Transfer
Certificate of Title No. 403150 and Transfer
Certificate of Title No. 403152 of the Registry of
Deeds of Rizal, prevailing at the time of the
satisfaction of the judgment but in no case shall such
damages be less than the value of said properties as
appraised by Asian Appraisal, Inc. in its Appraisal
Report dated August 1985 (Exhibits T to T-14,
inclusive).
2. All rental incomes paid or ought to be paid for the
use and occupancy of the properties in question and
all improvements thereon consisting of buildings, and
to be computed as follows:
a) On Building C occupied by Eppie's
Creation and Jethmal Industries from 1967
to 1973, inclusive, based on the 1967 to
1973 monthly rentals paid by Eppie's
Creation;
b) Also on Building C above, occupied by
Jethmal Industries and Lavine from 1974 to
1978, the rental incomes based on then
rates prevailing as shown under Exhibit "P";
and from 1979 to 1981, based on then
prevailing rates as indicated under Exhibit
"Q";
c) On Building A occupied by Transworld
Knitting Mills from 1972 to 1978, the rental
incomes based upon then prevailing rates
shown under Exhibit "P", and from 1979 to

and thereafter commencing 1982, to account for and

turn over the rental incomes paid or ought to be paid
for the use and occupancy of the properties and all
improvements totalling 10,048 sq. m based on the
rate per square meter prevailing in 1981 as indicated
annually cumulative up to 1984. Then, commencing
1985 and up to the satisfaction of the judgment,
rentals shall be computed at ten percent (10%)
annually of the fair market values of the properties
as appraised by the Asian Appraisal, Inc. in August
1985 (Exhibits T to T-14, inclusive.)
3. Moral damages in the sum of P200,000.00;
4. Exemplary damages in the sum of P100,000.00;
5. Attorney's fees equivalent to 10% of the award
herein made;
6. Legal interest on the total amount awarded
computed from first demand in 1967 and until the
full amount is paid and satisfied; and
7. The cost of suit.

Acting on a motion for reconsideration filed by Choithram, et

al. and Ortigas, the appellate court promulgated an amended
decision on October 17, 1988 granting the motion for
reconsideration of Ortigas by affirming the dismissal of the
case by the lower court as against Ortigas but denying the
motion for reconsideration of Choithram, et al. 8
Choithram, et al. thereafter filed a petition for review of said
judgment of the appellate court alleging the following
grounds:
1. The Court of Appeals gravely abused its discretion
in making a factual finding not supported by and
contrary, to the evidence presented at the Trial
Court.
2. The Court of Appeals acted in excess of jurisdiction
in awarding damages based on the value of the real

properties in question where the cause of action of

private respondents is recovery of a sum of money.
ARGUMENTS
I
THE COURT OF APPEALS ACTED IN GRAVE ABUSE OF
ITS DISCRETION IN MAKING A FACTUAL FINDING THAT
PRIVATE RESPONDENT ISHWAR REMITTED THE
AMOUNT OF US $150,000.00 TO PETITIONER
CHOITHRAM IN THE ABSENCE OF PROOF OF SUCH
REMITTANCE.
II
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE
OF DISCRETION AND MANIFEST PARTIALITY IN
DISREGARDING THE TRIAL COURTS FINDINGS BASED
ON THE DIRECT DOCUMENTARY AND TESTIMONIAL
EVIDENCE PRESENTED BY CHOITHRAM IN THE TRIAL
COURT ESTABLISHING THAT THE PROPERTIES WERE
PURCHASED WITH PERSONAL FUNDS OF PETITIONER
CHOITHRAM AND NOT WITH MONEY ALLEGEDLY
REMITTED BY RESPONDENT ISHWAR.
III
THE COURT OF APPEALS ACTED IN EXCESS OF
JURISDICTION IN AWARDING DAMAGES BASED ON
THE VALUE OF THE PROPERTIES AND THE FRUITS OF
THE IMPROVEMENTS THEREON. 9
Similarly, spouses Ishwar filed a petition for review of said
amended decision of the appellate court exculpating Ortigas
of liability based on the following assigned errors
I
THE RESPONDENT HONORABLE COURT OF APPEALS
COMMITTED GRAVE ERROR AND HAS DECIDED A
QUESTION OF SUBSTANCE NOT IN ACCORD WITH
LAW AND/OR WITH APPLICABLE DECISIONS OF THIS
HONORABLE COURT
A) IN PROMULGATING THE QUESTIONED
AMENDED DECISION (ANNEX "A") RELIEVING
RESPONDENT ORTIGAS FROM LIABILITY AND
DISMISSING PETITIONERS' AMENDED
COMPLAINT IN CIVIL CASE NO. 534-P, AS
AGAINST SAID RESPONDENT ORTIGAS;

B) IN HOLDING IN SAID AMENDED DECISION

THAT AT ANY RATE NO ONE EVER TESTIFIED
THAT ORTIGAS WAS A SUBSCRIBER TO THE
MANILA TIMES PUBLICATION OR THAT ANY
OF ITS OFFICERS READ THE NOTICE AS
PUBLISHED IN THE MANILA TIMES, THEREBY
ERRONEOUSLY CONCLUDING THAT FOR
RESPONDENT ORTIGAS TO BE
CONSTRUCTIVELY BOUND BY THE
PUBLISHED NOTICE OF REVOCATION,
ORTIGAS AND/OR ANY OF ITS OFFICERS
MUST BE A SUBSCRIBER AND/OR THAT ANY
OF ITS OFFICERS SHOULD READ THE NOTICE
AS ACTUALLY PUBLISHED;
C) IN HOLDING IN SAID AMENDED DECISION
THAT ORTIGAS COULD NOT BE HELD LIABLE
JOINTLY AND SEVERALLY WITH THE
DEFENDANTS-APPELLEES CHOITHRAM, MOTI
AND NIRMLA RAMNANI, AS ORTIGAS RELIED
ON THE WORD OF CHOITHRAM THAT ALL
ALONG HE WAS ACTING FOR AND IN BEHALF
OF HIS BROTHER ISHWAR WHEN IT
TRANSFERRED THE RIGHTS OF THE LATTER
TO NIRMLA V. RAMNANI;
D) IN IGNORING THE EVIDENCE DULY
PRESENTED AND ADMITTED DURING THE
TRIAL THAT ORTIGAS WAS PROPERLY
NOTIFIED OF THE NOTICE OF REVOCATION
OF THE GENERAL POWER OF ATTORNEY
GIVEN TO CHOITHRAM, EVIDENCED BY THE
PUBLICATION IN THE MANILA TIMES ISSUE
OF APRIL 2, 1971 (EXH. F) WHICH
CONSTITUTES NOTICE TO THE WHOLE
WORLD; THE RECEIPT OF THE NOTICE OF
SUCH REVOCATION WHICH WAS SENT TO
ORTIGAS ON MAY 22, 1971 BY ATTY.
MARIANO P. MARCOS AND RECEIVED BY
ORTIGAS ON MAY 24, 1971 (EXH. G) AND
THE FILING OF THE NOTICE WITH THE
SECURITIES AND EXCHANGE COMMISSION
ON MARCH 29,1971 (EXH. H);
E) IN DISCARDING ITS FINDINGS CONTAINED
IN ITS DECISION OF 14 MARCH 1988 (ANNEX
B) THAT ORTIGAS WAS DULY NOTIFIED OF
THE REVOCATION OF THE POWER OF
ATTORNEY OF CHOITHRAM, HENCE ORTIGAS
ACTED IN BAD FAITH IN EXECUTING THE
DEED OF SALE TO THE PROPERTIES IN
QUESTION IN FAVOR OF NIRMLA V.
RAMNANI;

F) IN SUSTAINING RESPONDENT ORTIGAS

VACUOUS REHASHED ARGUMENTS IN ITS
MOTION FOR RECONSIDERATION THAT IT
WOULD NOT GAIN ONE CENTAVO MORE
FROM CHOITHRAM FOR THE SALE OF SAID
LOTS AND THE SUBSEQUENT TRANSFER OF
THE SAME TO THE MATTER'S DAUGHTER-INLAW, AND THAT IT WAS IN GOOD FAITH
WHEN IT TRANSFERRED ISHWAR'S RIGHTS
TO THE LOTS IN QUESTION.
II
THE RESPONDENT HONORABLE COURT OF APPEALS
HAS SO FAR DEPARTED FROM THE ACCEPTED AND
USUAL COURSE OF JUDICIAL PROCEEDING WHEN IT
HELD IN THE QUESTIONED AMENDED DECISION OF
17 NOVEMBER 1988 (ANNEX A) THAT RESPONDENT
ORTIGAS & CO., LTD., IS NOT JOINTLY AND SEVERALLY
LIABLE WITH DEFENDANTS-APPELLEES CHOITHRAM,
MOTI AND NIRMLA RAMNANI IN SPITE OF ITS
ORIGINAL DECISION OF 14 MARCH 1988 THAT
ORTIGAS WAS DULY NOTIFIED OF THE REVOCATION
OF THE POWER OF ATTORNEY OF CHOITHRAM
RAMNANI. 10
The center of controversy is the testimony of Ishwar that
during the latter part of 1965, he sent the amount of US
$150,000.00 to Choithram in two bank drafts of US$65,000.00
and US$85,000.00 for the purpose of investing the same in
real estate in the Philippines. The trial court considered this
lone testimony unworthy of faith and credit. On the other
hand, the appellate court found that the trial court
misapprehended the facts in complete disregard of the
evidence, documentary and testimonial.
Another crucial issue is the claim of Choithram that because
he was then a British citizen, as a temporary arrangement, he
arranged the purchase of the properties in the name of Ishwar
who was an American citizen and who was then qualified to
purchase property in the Philippines under the then Parity
Amendment. The trial court believed this account but it was
debunked by the appellate court.
As to the issue of whether of not spouses Ishwar actually sent
US$150,000.00 to Choithram precisely to be used in the real
estate business, the trial court made the following disquisition

After a careful, considered and conscientious

examination of the evidence adduced in the case at
bar, plaintiff Ishwar Jethmal Ramanani's main
evidence, which centers on the alleged payment by
sending through registered mail from New York two

(2) US$ drafts of $85,000.00 and $65,000.00 in the

latter part of 1965 (TSN 28 Feb. 1984, p. 10-11). The
sending of these moneys were before the execution
of that General Power of Attorney, which was dated
in New York, on January 24, 1966. Because of these
alleged remittances of US $150,000.00 and the
subsequent acquisition of the properties in question,
plaintiffs averred that they constituted a trust in
favor of defendant Choithram Jethmal Ramnani. This
Court can be in full agreement if the plaintiffs were
only able to prove preponderantly these
remittances. The entire record of this case is bereft of
even a shred of proof to that effect. It is completely
barren. His uncorroborated testimony that he
remitted these amounts in the "later part of 1965"
does not engender enough faith and credence.
Inadequacy of details of such remittance on the two
(2) US dollar drafts in such big amounts is completely
not positive, credible, probable and entirely not in
accord with human experience. This is a classic
situation, plaintiffs not exhibiting any commercial
document or any document and/or paper as regard
to these alleged remittances. Plaintiff Ishwar
Ramnani is not an ordinary businessman in the strict
sense of the word. Remember his main business is
based in New York, and he should know better how to
send these alleged remittances. Worst, plaintiffs did
not present even a scum of proof, that defendant
Choithram Ramnani received the alleged two US
dollar drafts. Significantly, he does not know even
the bank where these two (2) US dollar drafts were
purchased. Indeed, plaintiff Ishwar Ramnani's lone
testimony is unworthy of faith and credit and,
therefore, deserves scant consideration, and since
the plaintiffs' theory is built or based on such
testimony, their cause of action collapses or falls with
it.
Further, the rate of exchange that time in 1966 was
P4.00 to $1.00. The alleged two US dollar drafts
amounted to $150,000.00 or about P600,000.00.
Assuming the cash price of the two (2) lots was only
P530,000.00 (ALTHOUGH he said: "Based on my
knowledge I have no evidence," when asked if he
even knows the cash price of the two lots). If he were
really the true and bonafide investor and purchaser
for profit as he asserted, he could have paid the price
in full in cash directly and obtained the title in his
name and not thru "Contracts To Sell" in installments
paying interest and thru an attorney-in fact (TSN of
May 2, 1984, pp. 10-11) and, again, plaintiff Ishwar
Ramnani told this Court that he does not know
whether or not his late father-in-law borrowed the
two US dollar drafts from the Swiss Bank or whether
or not his late father-in-law had any debit memo
from the Swiss Bank (TSN of May 2, 1984, pp. 910). 11

On the other hand, the appellate court, in giving credence to

the version of Ishwar, had this to say

COURT:
Witness can answer.

While it is true, that generally the findings of fact of

the trial court are binding upon the appellate courts,
said rule admits of exceptions such as when (1) the
conclusion is a finding grounded entirely on
speculations, surmises and conjectures; (2) when the
inferences made is manifestly mistaken, absurd and
impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a
misapprehension of facts and when the court, in
making its findings, went beyond the issues of the
case and the same are contrary to the admissions of
both appellant and appellee (Ramos vs. Court of
Appeals, 63 SCRA 33; Philippine American Life
Assurance Co. vs. Santamaria, 31 SCRA 798; Aldaba
vs. Court of Appeals, 24 SCRA 189).
The evidence on record shows that the t court acted
under a misapprehension of facts and the inferences
made on the evidence palpably a mistake.
The trial court's observation that "the entire records
of the case is bereft of even a shred of proof" that
plaintiff-appellants have remitted to defendantappellee Choithram Ramnani the amount of US $
150,000.00 for investment in real estate in the
Philippines, is not borne by the evidence on record
and shows the trial court's misapprehension of the
facts if not a complete disregard of the evidence,
both documentary and testimonial.
Plaintiff-appellant Ishwar Jethmal Ramnani testifying
in his own behalf, declared that during the latter part
of 1965, he sent the amount of US $150,000.00 to
his brother Choithram in two bank drafts of US
$65,000.00 and US $85,000.00 for the purpose of
investing the same in real estate in the Philippines.
His testimony is as follows:
ATTY. MARAPAO:
Mr. Witness, you said that your attorney-infact paid in your behalf. Can you tell this
Honorable Court where your attorney-in-fact
got the money to pay this property?
ATTY. CRUZ:
Wait. It is now clear it becomes incompetent
or hearsay.

A I paid through my attorney-in-fact. I am

the one who gave him the money.
ATTY. MARAPAO:
Q You gave him the money?
A That's right.
Q How much money did you give him?
A US $ 150,000.00.
Q How was it given then?
A Through Bank drafts. US $65,000.00 and
US $85,000.00 bank drafts. The total
amount which is $ 150,000.00 (TSN, 28
February 1984, p. 10; Emphasis supplied.)
xxx

xxx

xxx

ATTY. CRUZ:
Q The two bank drafts which you sent I
assume you bought that from some banks in
New York?
A No, sir.
Q But there is no question those two bank
drafts were for the purpose of paying down
payment and installment of the two parcels
of land?
A Down payment, installment and to put up
the building.
Q I thought you said that the buildings were
constructed . . . subject to our continuing
objection from rentals of first building?
ATTY. MARAPAO:

Your Honor, that is misleading.

A Probably, they sent out these two drafts

from Switzerland.

COURT;
(TSN, 7 March 1984, pp. 16-17; Emphasis supplied.)
Witness (may) answer.
A Yes, the first building was immediately put
up after the purchase of the two parcels of
land that was in 1966 and the finds were
used for the construction of the building
from the US $150,000.00 (TSN, 7 March
1984, page 14; Emphasis supplied.)
xxx

xxx

xxx

Q These two bank drafts which you

mentioned and the use for it you sent them
by registered mail, did you send them from
New Your?
A That is right.
Q And the two bank drafts which were put in
the registered mail, the registered mail was
addressed to whom?
A Choithram Ramnani. (TSN, 7 March 1984,
pp. 14-15).
On cross-examination, the witness reiterated the
remittance of the money to his brother Choithram,
which was sent to him by his father-in-law, Rochiram
L. Mulchandoni from Switzerland, a man of immense
wealth, which even defendants-appellees' witness
Navalrai Ramnani admits to be so (tsn., p. 16, S. Oct.
13, 1985). Thus, on cross-examination, Ishwar
testified as follows:
Q How did you receive these two bank
drafts from the bank the name of which you
cannot remember?
A I got it from my father-in-law.
Q From where did your father- in-law sent
these two bank drafts?
A From Switzerland.
Q He was in Switzerland.

This positive and affirmative testimony of plaintiffappellant that he sent the two (2) bank drafts
totalling US $ 150,000.00 to his brother, is proof of
said remittance. Such positive testimony has greater
probative force than defendant-appellee's denial of
receipt of said bank drafts, for a witness who testifies
affirmatively that something did happen should be
believed for it is unlikely that a witness will
remember what never happened (Underhill's Cr.
Guidance, 5th Ed., Vol. 1, pp. 10-11).
That is not all. Shortly thereafter, plaintiff-appellant
Ishwar Ramnani executed a General Power of
Attorney (Exhibit "A") dated January 24, 1966
appointing his brothers, defendants-appellees
Navalrai and Choithram as attorney-in-fact
empowering the latter to conduct and manage
plaintiffs-appellants' business affairs in the
Philippines and specifically
No. 14. To acquire, purchase for us, real
estates and improvements for the purpose
of real estate business anywhere in the
Philippines and to develop, subdivide,
improve and to resell to buying public
(individual, firm or corporation); to enter in
any contract of sale in oar behalf and to
enter mortgages between the vendees and
the herein grantors that may be needed to
finance the real estate business being
undertaken.
Pursuant thereto, on February 1, 1966 and May 16,
1966, Choithram Jethmal Ramnani entered into
Agreements (Exhibits "B' and "C") with the other
defendant. Ortigas and Company, Ltd., for the
purchase of two (2) parcels of land situated at Barrio
Ugong, Pasig, Rizal, with said defendant-appellee
signing the Agreements in his capacity as Attorneyin-fact of Ishwar Jethmal Ramnani.
Again, on January 5, 1972, almost seven (7) years
after Ishwar sent the US $ 150,000.00 in 1965,
Choithram Ramnani, as attorney-in fact of Ishwar
entered into a Contract of Lease with SigmaMariwasa (Exhibit "P") thereby re-affirming the
ownership of Ishwar over the disputed property and
the trust relationship between the latter as principal
and Choithram as attorney-in-fact of Ishwar.

All of these facts indicate that if plaintiff-appellant

Ishwar had not earlier sent the US $ 150,000.00 to
his brother, Choithram, there would be no purpose
for him to execute a power of attorney appointing his
brothers as s attorney-in-fact in buying real estate in
the Philippines.
As against Choithram's denial that he did not receive
the US $150,000.00 remitted by Ishwar and that the
Power of Attorney, as well as the Agreements
entered into with Ortigas & Co., were only temporary
arrangements, Ishwar's testimony that he did send
the bank drafts to Choithram and was received by
the latter, is the more credible version since it is
natural, reasonable and probable. It is in accord with
the common experience, knowledge and observation
of ordinary men (Gardner vs. Wentors 18 Iowa 533).
And in determining where the superior weight of the
evidence on the issues involved lies, the court may
consider the probability or improbability of the
testimony of the witness (Sec. 1, Rule 133, Rules of
Court).
Contrary, therefore, to the trial court's sweeping
observation that 'the entire records of the case is
bereft of even a shred of proof that Choithram
received the alleged bank drafts amounting to US $
150,000.00, we have not only testimonial evidence
but also documentary and circumstantial evidence
proving said remittance of the money and the
fiduciary relationship between the former and
Ishwar.12
The Court agrees. The environmental circumstances of this
case buttress the claim of Ishwar that he did entrust the
amount of US $ 150,000.00 to his brother, Choithram, which
the latter invested in the real property business subject of this
litigation in his capacity as attorney-in-fact of Ishwar.
True it is that there is no receipt whatever in the possession of
Ishwar to evidence the same, but it is not unusual among
brothers and close family members to entrust money and
valuables to each other without any formalities or receipt due
to the special relationship of trust between them.
And another proof thereof is the fact that Ishwar, out of
frustration when Choithram failed to account for the realty
business despite his demands, revoked the general power of
attorney he extended to Choithram and Navalrai. Thereafter,
Choithram wrote a letter to Ishwar pleading that the power of
attorney be renewed or another authority to the same effect
be extended, which reads as follows:
June 25,1971

MR. ISHWAR JETHMAL

NEW YORK
(1) Send power of Atty. immediately,
because the case has been postponed for
two weeks. The same way as it has been
send before in favor of both names. Send it
immediately otherwise everything will be
lost unnecessarily, and then it will take us in
litigation. Now that we have gone ahead
with a case and would like to end it
immediately otherwise squatters will take
the entire land. Therefore, send it
immediately.
(2) Ortigas also has sued us because we are
holding the installments, because they have
refused to give a rebate of P5.00 per meter
which they have to give us as per contract.
They have filed the law suit that since we
have not paid the installment they should
get back the land. The hearing of this case
is in the month of July. Therefore, please
send the power immediately. In one case
DADA (Elder Brother) will represent and in
another one, I shall.
(3) In case if you do not want to give power
then make one letter in favor of Dada and
the other one in my favor showing that in
any litigation we can represent you and your
wife, and whatever the court decide it will
be acceptable by me. You can ask any
lawyer, he will be able to prepare these
letters. After that you can have these letters
ratify before P.I. Consulate. It should be
dated April 15, 1971.
(4) Try to send the power because it will be
more useful. Make it in any manner
whatever way you have confident in it. But
please send it immediately.
You have cancelled the power. Therefore, you have lost your
reputation everywhere. What can I further write you about it. I
have told everybody that due to certain reasons I have written
you to do this that is why you have done this. This way your
reputation have been kept intact. Otherwise if I want to do
something about it, I can show you that inspite of the power
you have cancelled you can not do anything. You can keep
this letter because my conscience is clear. I do not have
anything in my mind.

I should not be writing you this, but because my conscience is

clear do you know that if I had predated papers what could
you have done? Or do you know that I have many paper
signed by you and if had done anything or do then what can
you do about it? It is not necessary to write further about this.
It does not matter if you have cancelled the power. At that
time if I had predated and done something about it what
could you have done? You do not know me. I am not after
money. I can earn money anytime. It has been ten months
since I have not received a single penny for expenses from
Dada (elder brother). Why there are no expenses? We can not
draw a single penny from knitting (factory). Well I am not
going to write you further, nor there is any need for it. This
much I am writing you because of the way you have
conducted yourself. But remember, whenever I hale the
money I will not keep it myself Right now I have not got
anything at all.
I am not going to write any further.
Keep your business clean with Naru. Otherwise he will
discontinue because he likes to keep his business very
clean. 13
The said letter was in Sindhi language. It was translated to
English by the First Secretary of the Embassy of Pakistan,
which translation was verified correct by the Chairman,
Department of Sindhi, University of Karachi. 14
From the foregoing letter what could be gleaned is that
1. Choithram asked for the issuance of another
power of attorney in their favor so they can continue
to represent Ishwar as Ortigas has sued them for
unpaid installments. It also appears therefrom that
Ortigas learned of the revocation of the power of
attorney so the request to issue another.
2. Choithram reassured Ishwar to have confidence in
him as he was not after money, and that he was not
interested in Ishwar's money.
3. To demonstrate that he can be relied upon, he said
that he could have ante-dated the sales agreement
of the Ortigas lots before the issuance of the powers
of attorney and acquired the same in his name, if he
wanted to, but he did not do so.
4. He said he had not received a single penny for
expenses from Dada (their elder brother Navalrai).
Thus, confirming that if he was not given money by
Ishwar to buy the Ortigas lots, he could not have
consummated the sale.

5. It is important to note that in said letter Choithram

never claimed ownership of the property in question.
He affirmed the fact that he bought the same as
mere agent and in behalf of Ishwar. Neither did he
mention the alleged temporary arrangement
whereby Ishwar, being an American citizen, shall
appear to be the buyer of the said property, but that
after Choithram acquires Philippine citizenship, its
ownership shall be transferred to Choithram.
This brings us to this temporary arrangement theory of
Choithram.
The appellate court disposed of this matter in this wise
Choithram's claim that he purchased the two parcels
of land for himself in 1966 but placed it in the name
of his younger brother, Ishwar, who is an American
citizen, as a temporary arrangement,' because as a
British subject he is disqualified under the 1935
Constitution to acquire real property in the
Philippines, which is not so with respect to American
citizens in view of the Ordinance Appended to the
Constitution granting them parity rights, there is
nothing in the records showing that Ishwar ever
agreed to such a temporary arrangement.
During the entire period from 1965, when the US $
150,000. 00 was transmitted to Choithram, and until
Ishwar filed a complaint against him in 1982, or over
16 years, Choithram never mentioned of a temporary
arrangement nor can he present any memorandum
or writing evidencing such temporary arrangement,
prompting plaintiff-appellant to observe:
The properties in question which are located
in a prime industrial site in Ugong, Pasig,
Metro Manila have a present fair market
value of no less than P22,364,000.00
(Exhibits T to T-14, inclusive), and yet for
such valuable pieces of property, Choithram
who now belatedly that he purchased the
same for himself did not document in
writing or in a memorandum the alleged
temporary arrangement with Ishwar' (pp. 441, Appellant's Brief).
Such verbal allegation of a temporary arrangement is
simply improbable and inconsistent. It has repeatedly
been held that important contracts made without
evidence are highly improbable.
The improbability of such temporary arrangement is
brought to fore when we consider that Choithram

has a son (Haresh Jethmal Ramnani) who is an

American citizen under whose name the properties in
question could be registered, both during the time
the contracts to sell were executed and at the time
absolute title over the same was to be delivered. At
the time the Agreements were entered into with
defendant Ortigas & Co. in 1966, Haresh, was already
18 years old and consequently, Choithram could
have executed the deeds in trust for his minor son.
But, he did not do this. Three (3) years, thereafter, or
in 1968 after Haresh had attained the age of 21,
Choithram should have terminated the temporary
arrangement with Ishwar, which according to him
would be effective only pending the acquisition of
citizenship papers. Again, he did not do anything.
Evidence to be believed, said Vice
Chancellor Van Fleet of New Jersey, must
not only proceed from the mouth of a
credible witness, but it must be credible in
itselfsuch as the common experience and
observation of mankind can approve as
probable under the circumstances. We have
no test of the truth of human testimony,
except its conformity to our knowledge,
observation and experience. Whatever is
repugnant to these belongs to the
miraculous and is outside of judicial
cognizance. (Daggers vs. Van Dyek 37 M.J.
Eq. 130, 132).
Another factor that can be counted against the
temporary arrangement excuse is that upon the
revocation on February 4, 1971 of the Power of
attorney dated January 24, 1966 in favor of Navalrai
and Choithram by Ishwar, Choithram wrote (tsn, p.
21, S. July 19, 1985) a letter dated June 25, 1971
(Exhibits R, R-1, R-2 and R-3) imploring Ishwar to
execute a new power of attorney in their favor. That
if he did not want to give power, then Ishwar could
make a letter in favor of Dada and another in his
favor so that in any litigation involving the properties
in question, both of them could represent Ishwar and
his wife. Choithram tried to convince Ishwar to issue
the power of attorney in whatever manner he may
want. In said letter no mention was made at all of
any temporary arrangement.
On the contrary, said letter recognize(s) the
existence of principal and attorney-in-fact
relationship between Ishwar and himself. Choithram
wrote: . . . do you know that if I had predated papers
what could you have done? Or do you know that I
have many papers signed by you and if I had done
anything or do then what can you do about it?'
Choithram was saying that he could have repudiated

the trust and ran away with the properties of Ishwar

by predating documents and Ishwar would be
entirely helpless. He was bitter as a result of Ishwar's
revocation of the power of attorney but no mention
was made of any temporary arrangement or a claim
of ownership over the properties in question nor was
he able to present any memorandum or document to
prove the existence of such temporary arrangement.
Choithram is also estopped in pais or by deed from
claiming an interest over the properties in question
adverse to that of Ishwar. Section 3(a) of Rule 131 of
the Rules of Court states that whenever a party has,
by his own declaration, act, or omission intentionally
and deliberately led another to believe a particular
thing true and act upon such belief, he cannot in any
litigation arising out of such declaration, act or
omission be permitted to falsify it.' While estoppel by
deed is a bar which precludes a party to a deed and
his privies from asserting as against the other and his
privies any right of title in derogation of the deed,
orfrom denying the truth of any material fact
asserted in it (31 C.J.S. 195; 19 Am. Jur. 603).
Thus, defendants-appellees are not permitted to
repudiate their admissions and representations or to
assert any right or title in derogation of the deeds or
from denying the truth of any material fact asserted
in the (1) power of attorney dated January 24, 1966
(Exhibit A); (2) the Agreements of February 1, 1966
and May 16, 1966 (Exhibits B and C); and (3) the
Contract of Lease dated January 5, 1972 (Exhibit P).
. . . The doctrine of estoppel is based upon
the grounds of public policy, fair dealing,
good faith and justice, and its purpose is to
forbid one to speak against his own act,
representations, or commitments to the
injury of one to whom they were directed
and who reasonably relied thereon. The
doctrine of estoppel springs from equitable
principles and the equities in the case. It is
designed to aid the law in the administration
of justice where without its aid injustice
might result. It has been applied by court
wherever and whenever special
circumstances of a case so demands'
(Philippine National Bank vs. Court of
Appeals, 94 SCRA 357, 368 [1979]).
It was only after the services of counsel has been
obtained that Choithram alleged for the first time in
his Answer that the General Power of attorney
(Annex A) with the Contracts to Sell (Annexes B and
C) were made only for the sole purpose of assuring

defendants' acquisition and ownership of the lots

described thereon in due time under the law; that
said instruments do not reflect the true intention of
the parties (par. 2, Answer dated May 30, 1983),
seventeen (17) long years from the time he received
the money transmitted to him by his brother, Ishwar.
Moreover, Choithram's 'temporary arrangement,' by
which he claimed purchasing the two (2) parcels in
question in 1966 and placing them in the name of
Ishwar who is an American citizen, to circumvent the
disqualification provision of aliens acquiring real
properties in the Philippines under the 1935
Philippine Constitution, as Choithram was then a
British subject, show a palpable disregard of the law
of the land and to sustain the supposed "temporary
arrangement" with Ishwar would be sanctioning the
perpetration of an illegal act and culpable violation of
the Constitution.
Defendants-appellees likewise violated the AntiDummy Law (Commonwealth Act 108, as amended),
which provides in Section 1 thereof that:
In all cases in which any constitutional or
legal provision requires Philippine or any
other specific citizenship as a requisite for
the exercise or enjoyment of a right,
franchise or privilege, . . . any alien or
foreigner profiting thereby, shall be
punished . . . by imprisonment . . . and of a
fine of not less than the value of the right,
franchise or privileges, which is enjoyed or
acquired in violation of the provisions hereof
...
Having come to court with unclean hands, Choithram
must not be permitted foist his 'temporary
arrangement' scheme as a defense before this court.
Being in delicto, he does not have any right
whatsoever being shielded from his own wrongdoing, which is not so with respect to Ishwar, who
was not a party to such an arrangement.
The falsity of Choithram's defense is further
aggravated by the material inconsistencies and
contradictions in his testimony. While on January 23,
1985 he testified that he purchased the land in
question on his own behalf (tsn, p. 4, S. Jan. 23,
1985), in the July 18, 1985 hearing, forgetting
probably what he stated before, Choithram testified
that he was only an attorney-in-fact of Ishwar (tsn, p.
5, S. July 18, 1985). Also in the hearing of January 23,
1985, Choithram declared that nobody rented the
building that was constructed on the parcels of land

in question (tsn, pp. 5 and 6), only to admit in the

hearing of October 30, 1985, that he was in fact
renting the building for P12,000. 00 per annum (tsn,
p. 3). Again, in the hearing of July 19, 1985,
Choithram testified that he had no knowledge of the
revocation of the Power of Attorney (tsn, pp. 20- 21),
only to backtrack when confronted with the letter of
June 25, 1971 (Exhibits R to R-3), which he admitted
to be in "his own writing," indicating knowledge of
the revocation of the Power of Attorney.
These inconsistencies are not minor but go into the
entire credibility of the testimony of Choithram and
the rule is that contradictions on a very crucial point
by a witness, renders s testimony incredible People
vs. Rafallo, 80 Phil. 22). Not only this the doctrine
of falsus in uno, falsus in omnibus is fully applicable
as far as the testimony of Choithram is concerned.
The cardinal rule, which has served in all ages, and
has been applied to all conditions of men, is that a
witness willfully falsifying the truth in one particular,
when upon oath, ought never to be believed upon
the strength of his own testimony, whatever he may
assert (U.S. vs. Osgood 27 Feb. Case No. 15971-a, p.
364); Gonzales vs. Mauricio, 52 Phil, 728), for what
ground of judicial relief can there be left when the
party has shown such gross insensibility to the
difference between right and wrong, between truth
and falsehood? (The Santisima Trinidad, 7 Wheat,
283, 5 U.S. [L. ed.] 454).
True, that Choithram's testimony finds corroboration
from the testimony of his brother, Navalrai, but the
same would not be of much help to Choithram. Not
only is Navalrai an interested and biased witness,
having admitted his close relationship with
Choithram and that whenever he or Choithram had
problems, they ran to each other (tsn, pp. 17-18, S.
Sept. 20, 1985), Navalrai has a pecuniary interest in
the success of Choithram in the case in question.
Both he and Choithram are business partners in
Jethmal and Sons and/or Jethmal Industries, wherein
he owns 60% of the company and Choithram, 40%
(p. 62, Appellant's Brief). Since the acquisition of the
properties in question in 1966, Navalrai was
occupying 1,200 square meters thereof as a factory
site plus the fact that his son (Navalrais) was
occupying the apartment on top of the factory with
his family rent free except the amount of P l,000.00 a
month to pay for taxes on said properties (tsn, p. 17,
S. Oct. 3, 1985).
Inherent contradictions also marked Navalrai
testimony. "While the latter was very meticulous in
keeping a receipt for the P 10,000.00 that he paid
Ishwar as settlement in Jethmal Industries, yet in the

alleged payment of P 100,000.00 to Ishwar, no

receipt or voucher was ever issued by him (tsn, p.
17, S. Oct. 3, 1983). 15
We concur.
The foregoing findings of facts of the Court of Appeals which
are supported by the evidence is conclusive on this Court. The
Court finds that Ishwar entrusted US$150,000.00 to
Choithram in 1965 for investment in the realty business. Soon
thereafter, a general power of attorney was executed by
Ishwar in favor of both Navalrai and Choithram. If it is true
that the purpose only is to enable Choithram to purchase
realty temporarily in the name of Ishwar, why the inclusion of
their elder brother Navalrai as an attorney-in-fact?
Then, acting as attorney-in-fact of Ishwar, Choithram
purchased two parcels of land located in Barrio Ugong Pasig,
Rizal, from Ortigas in 1966. With the balance of the money of
Ishwar, Choithram erected a building on said lot.
Subsequently, with a loan obtained from a bank and the
income of the said property, Choithram constructed three
other buildings thereon. He managed the business and
collected the rentals. Due to their relationship of confidence it
was only in 1970 when Ishwar demanded for an accounting
from Choithram. And even as Ishwar revoked the general
power of attorney on February 4, 1971, of which Choithram
was duly notified, Choithram wrote to Ishwar on June 25, 1971
requesting that he execute a new power of attorney in their
favor. 16 When Ishwar did not respond thereto, Choithram
nevertheless proceeded as such attorney-in-fact to assign all
the rights and interest of Ishwar to his daughter-in-law Nirmla
in 1973 without the knowledge and consent of Ishwar. Ortigas
in turn executed the corresponding deeds of sale in favor of
Nirmla after full payment of the purchase accomplice of the
lots.
In the prefatory statement of their petition, Choithram
pictured Ishwar to be so motivated by greed and
ungratefulness, who squandered the family business in New
York, who had to turn to his wife for support, accustomed to
living in ostentation and who resorted to blackmail in filing
several criminal and civil suits against them. These
statements find no support and should be stricken from the
records. Indeed, they are irrelevant to the proceeding.
Moreover, assuming Ishwar is of such a low character as
Choithram proposes to make this Court to believe, why is it
that of all persons, under his temporary arrangement theory,
Choithram opted to entrust the purchase of valuable real
estate and built four buildings thereon all in the name of
Ishwar? Is it not an unconscious emergence of the truth that
this otherwise wayward brother of theirs was on the contrary
able to raise enough capital through the generosity of his
father-in-law for the purchase of the very properties in
question? As the appellate court aptly observed if truly this

temporary arrangement story is the only motivation, why

Ishwar of all people? Why not the own son of Choithram,
Haresh who is also an American citizen and who was already
18 years old at the time of purchase in 1966? The Court
agrees with the observation that this theory is an afterthought
which surfaced only when Choithram, Nirmla and Moti filed
their answer.
When Ishwar asked for an accounting in 1970 and revoked the
general power of attorney in 1971, Choithram had a total
change of heart. He decided to claim the property as his. He
caused the transfer of the rights and interest of Ishwar to
Nirmla. On his representation, Ortigas executed the deeds of
sale of the properties in favor of Nirmla. Choithram obviously
surmised Ishwar cannot stake a valid claim over the property
by so doing.
Clearly, this transfer to Nirmla is fictitious and, as admitted by
Choithram, was intended only to place the property in her
name until Choithram acquires Philippine citizenship. 17 What
appears certain is that it appears to be a scheme of
Choithram to place the property beyond the reach of Ishwar
should he successfully claim the same. Thus, it must be struck
down.
Worse still, on September 27, 1990 spouses Ishwar filed an
urgent motion for the issuance of a writ of preliminary
attachment and to require Choithram, et al. to submit certain
documents, inviting the attention of this Court to the
following:
a) Donation by Choithram of his 2,500 shares of
stock in General Garments Corporation in favor of his
children on December 29, 1989; 18
b) Sale on August 2, 1990 by Choithram of his 100
shares in Biflex (Phils.), Inc., in favor of his
children; 19and
c) Mortgage on June 20, 1989 by Nirmla through her
attorney-in-fact, Choithram, of the properties subject
of this litigation, for the amount of $3 Million in favor
of Overseas Holding, Co. Ltd., (Overseas for brevity),
a corporation which appears to be organized and
existing under and by virtue of the laws of Cayman
Islands, with a capital of only $100.00 divided into
100 shares of $1.00 each, and with address at P.O.
Box 1790, Grand Cayman, Cayman Islands. 20
An opposition thereto was filed by Choithram, et al. but no
documents were produced. A manifestation and reply to the
opposition was filed by spouses Ishwar.

All these acts of Choithram, et al. appear to be fraudulent

attempts to remove these properties to the detriment of
spouses Ishwar should the latter prevail in this litigation.
On December 10, 1990 the court issued a resolution that
substantially reads as follows:
Considering the allegations of petitioners Ishwar
Jethmal Ramnani and Sonya Ramnani that
respondents Choithram Jethmal Ramnani, Nirmla
Ramnani and Moti G. Ramnani have fraudulently
executed a simulated mortgage of the properties
subject of this litigation dated June 20, 1989, in favor
of Overseas Holding Co., Ltd. which appears to be a
corporation organized in Cayman Islands, for the
amount of $ 3,000,000.00, which is much more than
the value of the properties in litigation; that said
alleged mortgagee appears to be a "shell"
corporation with a capital of only $100.00; and that
this alleged transaction appears to be intended to
defraud petitioners Ishwar and Sonya Jethmal
Ramnani of any favorable judgment that this Court
may render in this case;
Wherefore the Court Resolved to issue a writ of
preliminary injunction enjoining and prohibiting said
respondents Choithram Jethmal Ramnani, Nirmla V.
Ramnani, Moti G. Ramnani and the Overseas Holding
Co., Ltd. from encumbering, selling or otherwise
disposing of the properties and improvements
subject of this litigation until further orders of the
Court. Petitioners Ishwar and Sonya Jethmal Ramnani
are hereby required to post a bond of P 100,000.00
to answer for any damages d respondents may suffer
by way of this injunction if the Court finally decides
the said petitioners are not entitled thereto.
The Overseas Holding Co., Ltd. with address at P.O.
Box 1790 Grand Cayman, Cayman Islands, is hereby
IMPLEADED as a respondent in these cases, and is
hereby required to SUBMIT its comment on the
Urgent Motion for the Issuance of a Writ of
Preliminary Attachment and Motion for Production of
Documents, the Manifestation and the Reply to the
Opposition filed by said petitioners, within Sixty (60)
days after service by publication on it in accordance
with the provisions of Section 17, Rule 14 of the
Rules of Court, at the expense of petitioners Ishwar
and Sonya Jethmal Ramnani.
Let copies of this resolution be served on the
Register of Deeds of Pasig, Rizal, and the Provincial
Assessor of Pasig, Rizal, both in Metro Manila, for its
annotation on the transfer Certificates of Titles Nos.
403150 and 403152 registered in the name of

respondent Nirmla V. Ramnani, and on the tax

declarations of the said properties and its
improvements subject of this litigation. 21
The required injunction bond in the amount of P 100,000.00
was filed by the spouses Ishwar which was approved by the
Court. The above resolution of the Court was published in the
Manila Bulletin issue of December 17, 1990 at the expense of
said spouses. 22 On December 19, 1990 the said resolution
and petition for review with annexes in G.R. Nos. 85494 and
85496 were transmitted to respondent Overseas, Grand
Cayman Islands at its address c/o Cayman Overseas Trust Co.
Ltd., through the United Parcel Services Bill of Lading 23 and it
was actually delivered to said company on January 23,
1991. 24
On January 22, 1991, Choithram, et al., filed a motion to
dissolve the writ of preliminary injunction alleging that there is
no basis therefor as in the amended complaint what is sought
is actual damages and not a reconveyance of the property,
that there is no reason for its issuance, and that acts already
executed cannot be enjoined. They also offered to file a
counterbond to dissolve the writ.
A comment/opposition thereto was filed by spouses Ishwar
that there is basis for the injunction as the alleged mortgage
of the property is simulated and the other donations of the
shares of Choithram to his children are fraudulent schemes to
negate any judgment the Court may render for petitioners.
No comment or answer was filed by Overseas despite due
notice, thus it is and must be considered to be in default and
to have lost the right to contest the representations of
spouses Ishwar to declare the aforesaid alleged mortgage nun
and void.
This purported mortgage of the subject properties in litigation
appears to be fraudulent and simulated. The stated amount of
$3 Million for which it was mortgaged is much more than the
value of the mortgaged properties and its improvements. The
alleged mortgagee-company (Overseas) was organized only
on June 26,1989 but the mortgage was executed much earlier,
on June 20, 1989, that is six (6) days before Overseas was
organized. Overseas is a "shelf" company worth only
$100.00. 25 In the manifestation of spouses Ishwar dated April
1, 1991, the Court was informed that this matter was brought
to the attention of the Central Bank (CB) for investigation, and
that in a letter of March 20, 1991, the CB informed counsel for
spouses Ishwar that said alleged foreign loan of Choithram, et
al. from Overseas has not been previously
approved/registered with the CB. 26
Obviously, this is another ploy of Choithram, et al. to place
these properties beyond the reach of spouses Ishwar should

they obtain a favorable judgment in this case. The Court finds

and so declares that this alleged mortgage should be as it is
hereby declared null and void.

letter from plaintiffs' lawyer informing them of the

said revocation; copy of the letter is hereto attached
and made an integral part hereof as Annex "H";

All these contemporaneous and subsequent acts of

Choithram, et al., betray the weakness of their cause so they
had to take an steps, even as the case was already pending in
Court, to render ineffective any judgment that may be
rendered against them.

8. Defendant Nirmla Ramnani having acquired the

aforesaid property by fraud is, by force of law,
considered a trustee of an implied trust for the
benefit of plaintiff and is obliged to return the same
to the latter:

The problem is compounded in that respondent Ortigas is

caught in the web of this bitter fight. It had all the time been
dealing with Choithram as attorney-in-fact of Ishwar. However,
evidence had been adduced that notice in writing had been
served not only on Choithram, but also on Ortigas, of the
revocation of Choithram's power of attorney by Ishwar's
lawyer, on May 24, 1971. 27 A publication of said notice was
made in the April 2, 1971 issue of The Manila Times for the
information of the general public. 28 Such notice of revocation
in a newspaper of general circulation is sufficient warning to
third persons including Ortigas. 29 A notice of revocation was
also registered with the Securities and Exchange Commission
on March 29, 1 971. 30

9. Several efforts were made to settle the matter

within the family but defendants (Choithram
Ramnani, Nirmla Ramnani and Moti Ramnani) refused
and up to now fail and still refuse to cooperate and
respond to the same; thus, the present case;

Indeed in the letter of Choithram to Ishwar of June 25, 1971,

Choithram was pleading that Ishwar execute another power of
attorney to be shown to Ortigas who apparently learned of the
revocation of Choithram's power of attorney. 31 Despite said
notices, Ortigas nevertheless acceded to the representation of
Choithram, as alleged attorney-in-fact of Ishwar, to assign the
rights of petitioner Ishwar to Nirmla. While the primary blame
should be laid at the doorstep of Choithram, Ortigas is not
entirely without fault. It should have required Choithram to
secure another power of attorney from Ishwar. For recklessly
believing the pretension of Choithram that his power of
attorney was still good, it must, therefore, share in the latter's
liability to Ishwar.
In the original complaint, the spouses Ishwar asked for a
reconveyance of the properties and/or payment of its present
value and damages. 32 In the amended complaint they asked,
among others, for actual damages of not less than the present
value of the real properties in litigation, moral and exemplary
damages, attorneys fees, costs of the suit and further prayed
for "such other reliefs as may be deemed just and equitable in
the premises .33 The amended complaint contain the following
positive allegations:
7. Defendant Choithram Ramnani, in evident bad
faith and despite due notice of the revocation of the
General Power of Attorney, Annex 'D" hereof, caused
the transfer of the rights over the said parcels of land
to his daughter-in-law, defendant Nirmla Ramnani in
connivance with defendant Ortigas & Co., the latter
having agreed to the said transfer despite receiving a

10. In addition to having been deprived of their rights

over the properties (described in par. 3 hereof),
plaintiffs, by reason of defendants' fraudulent act,
suffered actual damages by way of lost rental on the
property which defendants (Choithram Ramnani,
Nirmla Ramnani and Moti Ramnani have collected for
themselves; 34
In said amended complaint, spouses Ishwar, among others,
pray for payment of actual damages in an amount no less
than the value of the properties in litigation instead of a
reconveyance as sought in the original complaint. Apparently
they opted not to insist on a reconveyance as they are
American citizens as alleged in the amended complaint.
The allegations of the amended complaint above reproduced
clearly spelled out that the transfer of the property to Nirmla
was fraudulent and that it should be considered to be held in
trust by Nirmla for spouses Ishwar. As above-discussed, this
allegation is well-taken and the transfer of the property to
Nirmla should be considered to have created an implied trust
by Nirmla as trustee of the property for the benefit of spouses
Ishwar. 35
The motion to dissolve the writ of preliminary injunction filed
by Choithram, et al. should be denied. Its issuance by this
Court is proper and warranted under the circumstances of the
case. Under Section 3(c) Rule 58 of the Rules of Court, a writ
of preliminary injunction may be granted at any time after
commencement of the action and before judgment when it is
established:
(c) that the defendant is doing, threatens, or is about
to do, or is procuring or suffering to be done, some
act probably in violation of plaintiffs's rights
respecting the subject of the action, and tending to
render the judgment ineffectual.

As above extensively discussed, Choithram, et al. have

committed and threaten to commit further acts of disposition
of the properties in litigation as well as the other assets of
Choithram, apparently designed to render ineffective any
judgment the Court may render favorable to spouses Ishwar.
The purpose of the provisional remedy of preliminary
injunction is to preserve the status quo of the things subject of
the litigation and to protect the rights of the spouses Ishwar
respecting the subject of the action during the pendency of
the Suit 36 and not to obstruct the administration of justice or
prejudice the adverse party. 37 In this case for damages,
should Choithram, et al. continue to commit acts of
disposition of the properties subject of the litigation, an award
of damages to spouses Ishwar would thereby be rendered
ineffectual and meaningless. 38
Consequently, if only to protect the interest of spouses Ishwar,
the Court hereby finds and holds that the motion for the
issuance of a writ of preliminary attachment filed by spouses
Ishwar should be granted covering the properties subject of
this litigation.
Section 1, Rule 57 of the Rules of Court provides that at the
commencement of an action or at any time thereafter, the
plaintiff or any proper party may have the property of the
adverse party attached as security for the satisfaction of any
judgment that may be recovered, in, among others, the
following cases:
(d) In an action against a party who has been guilty
of a fraud in contracting the debt or incurring the
obligation upon which the action is brought, or in
concealing or disposing of the property for the
taking, detention or conversion of which the action is
brought;
(e) In an action against a party who has removed or
disposed of his property, or is about to do so, with
intent to defraud his creditors; . . .
Verily, the acts of Choithram, et al. of disposing the properties
subject of the litigation disclose a scheme to defraud spouses
Ishwar so they may not be able to recover at all given a
judgment in their favor, the requiring the issuance of the writ
of attachment in this instance.
Nevertheless, under the peculiar circumstances of this case
and despite the fact that Choithram, et al., have committed
acts which demonstrate their bad faith and scheme to defraud
spouses Ishwar and Sonya of their rightful share in the
properties in litigation, the Court cannot ignore the fact that
Choithram must have been motivated by a strong conviction
that as the industrial partner in the acquisition of said assets

he has as much claim to said properties as Ishwar, the

capitalist partner in the joint venture.
The scenario is clear. Spouses Ishwar supplied the capital of
$150,000.00 for the business.1wphi1 They entrusted the
money to Choithram to invest in a profitable business venture
in the Philippines. For this purpose they appointed Choithram
as their attorney-in-fact.
Choithram in turn decided to invest in the real estate
business. He bought the two (2) parcels of land in question
from Ortigas as attorney-in-fact of Ishwar- Instead of paying
for the lots in cash, he paid in installments and used the
balance of the capital entrusted to him, plus a loan, to build
two buildings. Although the buildings were burned later,
Choithram was able to build two other buildings on the
property. He rented them out and collected the rentals.
Through the industry and genius of Choithram, Ishwar's
property was developed and improved into what it is nowa
valuable asset worth millions of pesos. As of the last estimate
in 1985, while the case was pending before the trial court, the
market value of the properties is no less than
P22,304,000.00. 39 It should be worth much more today.
We have a situation where two brothers engaged in a business
venture. One furnished the capital, the other contributed his
industry and talent. Justice and equity dictate that the two
share equally the fruit of their joint investment and efforts.
Perhaps this Solomonic solution may pave the way towards
their reconciliation. Both would stand to gain. No one would
end up the loser. After all, blood is thicker than water.
However, the Court cannot just close its eyes to the devious
machinations and schemes that Choithram employed in
attempting to dispose of, if not dissipate, the properties to
deprive spouses Ishwar of any possible means to recover any
award the Court may grant in their favor. Since Choithram, et
al. acted with evident bad faith and malice, they should pay
moral and exemplary damages as well as attorney's fees to
spouses Ishwar.
WHEREFORE, the petition in G.R. No. 85494 is DENIED, while
the petition in G.R. No. 85496 is hereby given due course and
GRANTED. The judgment of the Court of Appeals dated
October 18, 1988 is hereby modified as follows:
1. Dividing equally between respondents spouses Ishwar, on
the one hand, and petitioner Choithram Ramnani, on the
other, (in G.R. No. 85494) the two parcels of land subject of
this litigation, including all the improvements thereon,
presently covered by transfer Certificates of Title Nos. 403150
and 403152 of the Registry of Deeds, as well as the rental
income of the property from 1967 to the present.

2. Petitioner Choithram Jethmal Ramnani, Nirmla V. Ramnani,

Moti C. Ramnani and respondent Ortigas and Company,
Limited Partnership (in G.R. No. 85496) are ordered solidarily
to pay in cash the value of said one-half (1/2) share in the said
land and improvements pertaining to respondents spouses
Ishwar and Sonya at their fair market value at the time of the
satisfaction of this judgment but in no case less than their
value as appraised by the Asian Appraisal, Inc. in its Appraisal
Report dated August 1985 (Exhibits T to T-14, inclusive).
3. Petitioners Choithram, Nirmla and Moti Ramnani and
respondent Ortigas & Co., Ltd. Partnership shall also be jointly
and severally liable to pay to said respondents spouses Ishwar
and Sonya Ramnani one-half (1/2) of the total rental income of
said properties and improvements from 1967 up to the date of
satisfaction of the judgment to be computed as follows:
a. On Building C occupied by Eppie's
Creation and Jethmal Industries from 1967
to 1973, inclusive, based on the 1967 to
1973 monthly rentals paid by Eppie's
Creation;
b. Also on Building C above, occupied by
Jethmal Industries and Lavine from 1974 to
1978, the rental incomes based on then
rates prevailing as shown under Exhibit "P";
and from 1979 to 1981, based on then
prevailing rates as indicated under Exhibit
"Q";
c. On Building A occupied by Transworld
Knitting Mills from 1972 to 1978, the rental
incomes based upon then prevailing rates
shown under Exhibit "P", and from 1979 to
1981, based on prevailing rates per Exhibit
"Q";
d. On the two Bays Buildings occupied by
Sigma-Mariwasa from 1972 to 1978, the
rentals based on the Lease Contract, Exhibit
"P", and from 1979 to 1980, the rentals
based on the Lease Contract, Exhibit "Q".
and thereafter commencing 1982, to account for and turn
over the rental incomes paid or ought to be paid for the use
and occupancy of the properties and all improvements
totalling 10,048 sq. m., based on the rate per square meter
prevailing in 1981 as indicated annually cumulative up to
1984. Then, commencing 1985 and up to the satisfaction of
the judgment, rentals shall be computed at ten percent (10%)
annually of the fair market values of the properties as
appraised by the Asian Appraisals, Inc. in August 1985.
(Exhibits T to T-14, inclusive.)

4. To determine the market value of the properties at the time

of the satisfaction of this judgment and the total rental
incomes thereof, the trial court is hereby directed to hold a
hearing with deliberate dispatch for this purpose only and to
have the judgment immediately executed after such
determination.
5. Petitioners Choithram, Nirmla and Moti, all surnamed
Ramnani, are also jointly and severally liable to pay
respondents Ishwar and Sonya Ramnani the amount of
P500,000.00 as moral damages, P200,000.00 as exemplary
damages and attorney's fees equal to 10% of the total award.
to said respondents spouses.
6. The motion to dissolve the writ of preliminary injunction
dated December 10, 1990 filed by petitioners Choithram,
Nirmla and Moti, all surnamed Ramnani, is hereby DENIED and
the said injunction is hereby made permanent. Let a writ of
attachment be issued and levied against the properties and
improvements subject of this litigation to secure the payment
of the above awards to spouses Ishwar and Sonya.
7. The mortgage constituted on the subject property dated
June 20, 1989 by petitioners Choithram and Nirmla, both
surnamed Ramnani in favor of respondent Overseas Holding,
Co. Ltd. (in G.R. No. 85496) for the amount of $3-M is hereby
declared null and void. The Register of Deeds of Pasig, Rizal, is
directed to cancel the annotation of d mortgage on the titles
of the properties in question.
8. Should respondent Ortigas Co., Ltd. Partnership pay the
awards to Ishwar and Sonya Ramnani under this judgment, it
shall be entitled to reimbursement from petitioners
Choithram, Nirmla and Moti, all surnamed Ramnani.
9. The above awards shag bear legal rate of interest of six
percent (6%) per annum from the time this judgment
becomes final until they are fully paid by petitioners
Choithram Ramnani, Nirmla V. Ramnani, Moti C. Ramnani and
Ortigas, Co., Ltd. Partnership. Said petitioners Choithram, et
al. and respondent Ortigas shall also pay the costs.
SO ORDERED.

G.R. No. L-24243

January 15, 1926

ILDEFONSO DE LA ROSA, administrator of the intestate

estate of the deceased Go-Lio, plaintiff-appellant,
vs.
ENRIQUE ORTEGA GO-COTAY, defendant-appellant.

Crispin Oben for palintiff-appellant.

Paredes, Buencamino and Yulo for defendant-appellant.
VILLA-REAL, J.:
During the Spanish regime the Chinamen Go-Lio and Vicente
Go-Sengco formed a society for the purchase and sale of
articles of commerce, and for this purpose they opened a
store in the town of San Isidro, Nueva Ecija. Later Go-Lio went
to China. Vicenyte Go-Sengco died and his son Enrique Ortega
Go-Cotay took charge of the businesses. Go-Lio died in China
in October, 1916, leaving a widow and three children, one of
whom came to the Philippines and filed a petition for the
appointment of Ildefonso de la Rosa as administrator of the
intestate estate of his deceased father, which petition was
granted by the Court of First Instance of Nueva Ecija. Ildefonso
de la Rosa, in his capacity as administrator of the intestate
estate of the deceased Go-Lio, requested Enrique Go-Cotay to
wind up the business and to deliver to him the portion
corresponding to the deceased Go-Lio. Enrique Ortega GoCotay denied the petition, alleging that the business was his
exclusively. In view of this denial, Ildefonso de la Rosa, as
administratorm, on July 2, 1918, filed with the Court of First
Instance of Nueva Ecija a complaint against Enrique Ortega
Co-Cotay in which he prayed that the defendant be sentenced
to deliver to the plaintiff one-half of all the property of the
partnership formed by Go-lIo and Vicente Go-Sengco, with
costs against the defendant, and that the said plaintiff be
appointed receiver for the property of the said partnership.
Defendant, in answering the complaint, denied each and
every allegation thereof, and as a special defense alleged that
more than ten years had elapsed before the filing of the
complaint, and prayed that he be absolved therefrom, with
costs against the plaintiff.
On August 3, 1918, the Court of First Instance of Nueva Ecija
appointed Justo Cabo-Chan, Francisco T. Tantengco and GoTiao, as commissioners to make an inventory, liquidate and
determine the one-half belonging to the plaintiff of all the
property of the store in question.
On August 9, 1918, in order to prevent Justo Cabo-Chan from
assuming the office of receiver, pursuant to the order of the
court dated August 3, 1918, the defendant filed a bond in the
sum of P10,000.
Under the date of November 15, 1920, the said
commissioners submitted to the court their report, showing
the net profits of the business between the period from 1913
to 1917, which amounted to the total sum of P25,038.70 and
consisted of the following items:

Profits for the year 1913........................

P2,979.00

Profits for the year 1914........................

3,046.94

Profits for the year 1915........................

4,103.07

Profits for the year 1916........................

4,735.00

10,174.69 1917, is equivalent to the sum of twenty-seven thousand

seven hundred fifty-five pesos and forty-seven centavos
Total...........................................................
25.038.70 (P27,755.47). Philippine currency, plus an annual quota of at
least two thousand five hundred three pesos and eighty-seven
centavos (P2,503.87), Philippime currency, as his portion of
the profits since the beginning of 1918 until the delivery to
In view of the appeal taken by defendant the parties on
the palintiff of his share in the partnership; (5) the court below
December 7, 1921, entered into an agreement whereby they
erred in not ordering the prosecuting attorney to commence
agreed to suspend the liquidation ordered by the court until
an investigation as to the falsified books of accounts that the
the appeal to the Supreme Court was decided, and whereby
defendant had exhibited for proper criminal proceeding.
the defenadnt was authorized to continue in the possession of
the property in litigation, upon the giving of a bond in the
amount of P25,000, and cancelling the former bond for
From the evidence it appears that the partnership capital was
P10,000.
P4,779.39, and the net profits until the year 1915 amounted
Profits for the year 1917........................

This court in deciding case R. G. No. 18919, on October 5,

1922, 1 held that the appeal was premature and ordered that
the record be remanded to the court of origin with instruction
to enter a final order in accordance with the liquidation made
by the commissioners.
The record having been remanded and two of the
commissioners having filed their resignations, the copurt
below appointed again Justo Cabo-Chan suggested by the
defendant and Cua POco suggested by the plaintiff, as
commissioners, who submitted two reports, one prepared by
commissioners Tantengco and Cua Poco, and the other by
commissioners Justo Cabo-Chan. The former stated in their
report that they had examined the books for the years 1919
to 1922, for the reason, they said, that they appeared "to
have been prepared by some person in a careful way at a
certain time." The later commissioner examined all books and
stated in his report that the business had suffered a net loss
amounting to the sum of P89,099.22.
After trial and the parties having introduced all their evidence,
the lower court, by order of December 13, 1924, disapproved
the report of the commissioners Tantengco and Cua Poco, but
approved, with slight modifications, the report of
commissioner Cabo-Chan, holding that the result of the
liquidation showed liabilities to the amiount of P89,690.45 in
view of which plaintiff had nothing to recover from defendant,
as there was no profit to divide.
From this decision the plaintiff has appealed in due time and
form making the following assignment of errors: (1) The lower
court erred in holding that the books were authentic, and in
not holding that they were false books exhibited by the
defendant about alleged operations in the years 1918 et seq.
which show enormous debts and imaginary losses of the
business; (2) the lower court erred in giving full credit to the
testimony of commissioner Justo Cabo-Chan; (3) the lower
court erred in holding that the partnership had incurred debts
and suffered losses, as shown in the report of Justo Cabo-Cahn
from 1918 on; (4) the lower court erred in not holding that the
share of the plaintiff, as his capital and profits until the end of

to P5,551.40. Because some books of account had been

destroyed by white ants (anay), the liquidation of the business
of the partnership for the period from 1906 to 1912 could not
be made. But knowing the net profit for the period between
1904 and 1905, which is P5,551.40, and findng the average of
the profits for each of these years, which is P2,775.70; and
knowing the net profit for the year 1913, which is P2,979, we
can find the average between the net profit for 1905, namely,
P2,979. Said average is the sum of P2,877.35, which may be
considered as the average of the net annual profits for the
period between 1906 an 1912, which in seven years make a
total of P20,141.45. The assets of the partnership, as well as
the value of its property, could not be determined when
making the liquidation because there was no inventory and
for this reason it was not possible to determine the capital of
the partnership. The plaintiff, however, seems to be agreeable
to considering the initial partnership capital as the capital at
the time of the winding up of the business.
August 3, 1918, defendant assumed complete responsibility
for the business by objecting to the appointment of a receiver
as prayed for by plaintiff, and giving a bond therefor. Until that
date his acts were those of a managing partner, binding
against the partnership; but thereafter his acts were those of
a receiver whose authority is contained in section 175 of the
Code of Civil Procedure.
A receiver has no right to carry on and conduct a business
unless he is authorized or directed by the court to do some,
and such authority is not derived from an order of
appointment to take and preserve the property (34 Cyc., 283;
23 R. C. L., 73). It does not appear that the defendant as a
receiver was authorized by the court to continue the business
of the partnership in liquidation. This being so, he is
personally liable for the losses that the business amy have
sustained. (34 Cyc., 296.) The partnership must not, therefore,
be liable for the acts of the defendant in connection with the
management of the business until August 3, 1918, the date
when he ceased to be a member and manager in order to
become receiver.

As to the first semester of 1918, during which time the

defendant had seen managing the business of the partnership
as a member and manager, taking into account that the
profits had been on the increase, said profits having reached
the amount of P10,174.69 in the year 1917, it would not be an
exaggeration to estimate that the profits for 1918 would have
been at least the same as the profits of 1917; so that for the
first half of 1918, the profit would be P5,087.34.

ZENAIDA G. MENDOZA, G.R. No. 175885

Petitioner,
Present:
Ynares-Santiago, J. (Chairperson),
- versus - Austria-Martinez,
hicoNazario,

In conclusion we have the following profits of the business of

this partnership now in liquidation, to wit:
Capital of partnership...........................

Profits 1906-1912................................
Profits 1913-1917................................
Profits first semester 1918...............
Total.......................................................

achura,
and

P4,779.39

Profits until 1905..................................

5,551.40
20,141.45 ENGR. EDUARDO PAULE,
ENGR. ALEXANDER COLOMA
25,038.70 and NATIONAL IRRIGATION
ADMINISTRATION (NIA
5,087.34 MUOZ, NUEVA ECIJA),
Respondents.
60,598.28
x ------------------------------------------------------ x

eralta, JJ
.

One-half of this total, that is, P30,299.14 pertains to the

plaintiff as administrator of the intestate estate of Go-Lio.

MANUEL DELA CRUZ, G.R. No. 176271

Petitioner,

In view of the foregoing, we are of the opinion that the case

must be, as is hereby, decided by the reversing the judgment
appealed from, and sentencing the defendant to pay the
plaintiff the sum of P30,299.14 with legal interest at the rate
of 6 per cent per annum from July 1, 1918, until fully paid,
with costs. So ordered.

- versus ENGR. EDUARDO M. PAULE,

ENGR. ALEXANDER COLOMA
and NATIONAL IRRIGATION Promulgated:
ADMINISTRATION (NIA
MUOZ, NUEVA ECIJA),
Respondents. February 13, 2009

Avancea, C. J., Johnson, Street, Malcolm, Villamor, Ostrand,

Johns, and Romualdez, JJ., concur.

x
---------------------------------------------------------------------------------------x

DECISION
YNARES-SANTIAGO, J.:

These consolidated petitions assail the August 28,

2006 Decision[1] of the Court of Appeals in CA-G.R. CV No.
80819 dismissing the complaint in Civil Case No. 18-SD

(2000),[2] and its December 11, 2006 Resolution[3] denying the

Packages A-10 and B-11 of the NIA-CMIPP Schedule A. On

herein petitioners motion for reconsideration.

November 16, 1999, MENDOZA received the Notice of Award

which

Engineer Eduardo M. Paule (PAULE) is the proprietor

was

(COLOMA),

signed
then

by

Engineer

Acting

Project

Alexander
Manager

M.

for

Coloma
the

NIA-

of E.M. Paule Construction and Trading (EMPCT). On May 24,

CMIPP. Packages A-10 and B-11 involved the construction of a

1999, PAULE executed a special power of attorney (SPA)

road system, canal structures and drainage box culverts with

authorizing Zenaida G. Mendoza (MENDOZA) to participate in

a project cost of P5,613,591.69.

the pre-qualification and bidding of a National Irrigation

Administration (NIA) project and to represent him in all
transactions related thereto, to wit:

When Manuel de la Cruz (CRUZ) learned that

MENDOZA is in need of heavy equipment for use in the NIA
project, he met up with MENDOZA in Bayuga, Muoz, Nueva

1. To represent E.M. PAULE CONSTRUCTION

& TRADING of which I (PAULE) am
the General Manager in all my
business transactions with National
Irrigation Authority, Muoz, Nueva
Ecija.
2. To participate in the bidding, to secure bid
bonds and other documents prerequisite in the bidding of Casicnan
Multi-Purpose Irrigation and Power
Plant (CMIPPL 04-99), National
Irrigation Authority, Muoz, Nueva
Ecija.
3. To receive and collect payment in check
in
behalf
of
E.M.
PAULE
CONSTRUCTION & TRADING.
4. To do and perform such acts and things
that may be necessary and/or
required to make the herein
authority effective.[4]

Ecija, in an apartment where the latter was holding office

under an EMPCT signboard. A series of meetings followed in
said EMPCT office among CRUZ, MENDOZA and PAULE.

On December 2 and 20, 1999, MENDOZA and CRUZ

signed two Job Orders/Agreements[5] for the lease of the
latters heavy equipment (dump trucks for hauling purposes)
to EMPCT.

On April 27, 2000, PAULE revoked[6] the SPA he

previously issued in favor of MENDOZA; consequently, NIA

On September 29, 1999, EMPCT, through MENDOZA,

participated in the bidding of the NIA-Casecnan Multi-Purpose
Irrigation and Power Project (NIA-CMIPP) and was awarded

refused to make payment to MENDOZA on her billings. CRUZ,

therefore,

could

not

be

paid

for

the

rent

of

the

equipment. Upon advice of MENDOZA, CRUZ addressed his

demands for payment of lease rentals directly to NIA but the

upon; and that her reputation was destroyed, thus entitling

latter refused to acknowledge the same and informed CRUZ

her to actual and moral damages in the respective amounts of

that it would be remitting payment only to EMPCT as the

P3 million and P1 million.

winning contractor for the project.

Meanwhile,
In a letter dated April 5, 2000, CRUZ demanded from

on

August

23,

2000,

PAULE

again

constituted MENDOZA as his attorney-in-fact

MENDOZA and/or EMPCT payment of the outstanding rentals

which amounted to P726,000.00 as of March 31, 2000.

On June 30, 2000, CRUZ filed Civil Case No. 18-SD

(2000) with Branch 37 of the Regional Trial Court of Nueva
Ecija, for collection of sum of money with damages and a
prayer for the issuance of a writ of preliminary injunction
against PAULE, COLOMA and the NIA. PAULE in turn filed a
third-party complaint against MENDOZA, who filed her answer
thereto, with a cross-claim against PAULE.

1. To represent me (PAULE), in my
capacity as General Manager of the E.M.
PAULE CONSTRUCTION AND TRADING, in all
meetings, conferences and transactions
exclusively for the construction of the
projects known as Package A-10 of Schedule
A and Package No. B-11 Schedule B, which
are 38.61% and 63.18% finished as of June
21, 2000, per attached Accomplishment
Reports x x x;
2. To
implement,
execute,
administer and supervise the said projects
in whatever stage they are in as of to date,
to collect checks and other payments due
on said projects and act as the Project
Manager for E.M. PAULE CONSTRUCTION
AND TRADING;
3. To do and perform such acts and
things that may be necessary and required
to make the herein power and authority
effective.[7]

MENDOZA alleged in her cross-claim that because of

PAULEs whimsical revocation of the SPA, she was barred from
collecting payments from NIA, thus resulting in her inability to
fund her checks which she had issued to suppliers of
materials, equipment and labor for the project. She claimed
that estafa and B.P. Blg. 22 cases were filed against her; that
she could no longer finance her childrens education; that she
was evicted from her home; that her vehicle was foreclosed

At the pre-trial conference, the other parties were

declared as in default and CRUZ was allowed to present his
evidence ex parte. Among the witnesses he presented was
MENDOZA, who was impleaded as defendant in PAULEs thirdparty complaint.

On March 6, 2003, MENDOZA filed a motion to

of the NIA project and that MENDOZA validly contracted with

declare third-party plaintiff PAULE non-suited with prayer that

CRUZ for the rental of heavy equipment that was to be used

she be allowed to present her evidence ex parte.

therefor. It found unavailing PAULEs assertion that MENDOZA

merely borrowed and used his contractors license in exchange

However, without resolving MENDOZAs motion to

for a consideration of 3% of the aggregate amount of the

declare PAULE non-suited, and without granting her the

project. The trial court held that through the SPAs he

opportunity to present her evidence ex parte, the trial court

executed, PAULE clothed MENDOZA with apparent authority

rendered its decision dated August 7, 2003, the dispositive

and held her out to the public as his agent; as principal, PAULE

portion of which states, as follows:

must comply with the obligations which MENDOZA contracted

within

WHEREFORE, judgment is hereby

rendered in favor of the plaintiff as follows:
1. Ordering defendant Paule to pay
the plaintiff the sum of P726,000.00 by way
of actual damages or compensation for the
services rendered by him;

the

scope

of

her

authority

and

for

his

benefit. Furthermore, PAULE knew of the transactions which

MENDOZA entered into since at various times when she and
CRUZ met at the EMPCT office, PAULE was present and offered

2. Ordering defendant Paule to pay

plaintiff the sum of P500,000.00 by way of
moral damages;

no objections. The trial court declared that it would be unfair

3. Ordering defendant Paule to pay

plaintiff the sum of P50,000.00 by way of
reasonable attorneys fees;

expense of CRUZ.

4. Ordering defendant Paule to pay

the costs of suit; and
5. Ordering
defendant
National
Irrigation Administration (NIA) to withhold
the balance still due from it to defendant
Paule/E.M. Paule Construction and Trading
under NIA-CMIPP Contract Package A-10 and
to pay plaintiff therefrom to the extent of
defendant Paules liability herein adjudged.
SO ORDERED.[8]

to allow PAULE to enrich himself and disown his acts at the

PAULE and MENDOZA both appealed the trial courts

decision to the Court of Appeals.

PAULE claimed that he did not receive a copy of the

order of default; that it was improper for MENDOZA, as thirdparty defendant, to have taken the stand as plaintiff CRUZs
witness; and that the trial court erred in finding that an

In holding PAULE liable, the trial court found that

MENDOZA was duly constituted as EMPCTs agent for purposes

agency was created between him and MENDOZA, and that he

was liable as principal thereunder.

As for CRUZ, the Court of Appeals held that he knew

the limits of MENDOZAs authority under the SPAs yet he still
transacted with her. Citing Manila Memorial Park Cemetery,

On the other hand, MENDOZA argued that the trial

Inc. v. Linsangan,[9] the appellate court declared that the

court erred in deciding the case without affording her the

principal (PAULE) may not be bound by the acts of the agent

opportunity to present evidence on her cross-claim against

(MENDOZA) where the third person (CRUZ) transacting with

PAULE; that, as a result, her cross-claim against PAULE was

the agent knew that the latter was acting beyond the scope of

not resolved, leaving her unable to collect the amounts of

her power or authority under the agency.

P3,018,864.04, P500,000.00, and P839,450.88 which allegedly

represent the unpaid costs of the project and the amount
PAULE received in excess of payments made by NIA.

With respect to MENDOZAs appeal, the Court of

Appeals held that when the trial court rendered judgment, not
only did it rule on the plaintiffs complaint; in effect, it resolved

On August 28, 2006, the Court of Appeals rendered

the third-party complaint as well; [10] that the trial court

the assailed Decision which dismissed CRUZs complaint, as

correctly dismissed the cross-claim and did not unduly ignore

well as MENDOZAs appeal. The appellate court held that the

or disregard it; that MENDOZA may not claim, on appeal, the

SPAs issued in MENDOZAs favor did not grant the latter the

amounts of P3,018,864.04, P500,000.00, and P839,450.88

authority to enter into contract with CRUZ for hauling

which allegedly represent the unpaid costs of the project and

services; the SPAs limit MENDOZAs authority to only represent

the amount PAULE received in excess of payments made by

EMPCT in its business transactions with NIA, to participate in

NIA, as these are not covered by her cross-claim in the court a

the bidding of the project, to receive and collect payment in

quo, which seeks reimbursement only of the amounts of P3

behalf of EMPCT, and to perform such acts as may be

million and P1 million, respectively, for actual damages (debts

necessary and/or

the said authority

to suppliers, laborers, lessors of heavy equipment, lost

effective. Thus, the engagement of CRUZs hauling services

personal property) and moral damages she claims she

was done beyond the scope of MENDOZAs authority.

suffered as a result of PAULEs revocation of the SPAs; and that

required

to

make

the revocation of the SPAs is a prerogative that is allowed to

PAULE under Article 1920[11] of the Civil Code.

CRUZ argues that MENDOZA was acting within the

scope of her authority when she hired his services as hauler of
debris because the NIA project (both Packages A-10 and B-11

CRUZ and MENDOZAs motions for reconsideration

were denied; hence, these consolidated petitions:

of

the

NIA-CMIPP)

consisted

of

construction

of

canal

structures, which involved the clearing and disposal of waste,

acts that are necessary and incidental to PAULEs obligation
under the NIA project; and that the decision in a civil case

G.R. No. 175885 (MENDOZA PETITION)

a) The Court of Appeals erred in
sustaining the trial courts failure to resolve
her motion praying that PAULE be declared
non-suited on his third-party complaint, as
well as her motion seeking that she be
allowed to present evidence ex parte on her
cross-claim;

involving the same SPAs, where PAULE was found liable as

MENDOZAs principal already became final and executory; that
in Civil Case No. 90-SD filed by MENDOZA against PAULE,
[12]

the latter was adjudged liable to the former for unpaid

b) The Court of Appeals erred when

it sanctioned the trial courts failure to
resolve her cross-claim against PAULE; and,

rentals of heavy equipment and for construction materials

c) The Court of Appeals erred in its

application of Article 1920 of the Civil Code,
and in adjudging that MENDOZA had no
right to claim actual damages from PAULE
for debts incurred on account of the SPAs
issued to her.

project. On September 15, 2003, judgment was rendered in

G.R. No. 176271 (CRUZ PETITION)

CRUZ argues that the decision of
the Court of Appeals is contrary to the
provisions of law on agency, and conflicts
with the Resolution of the Court in G.R. No.
173275, which affirmed the Court of Appeals
decision in CA-G.R. CV No. 81175, finding
the existence of an agency relation and
where PAULE was declared as MENDOZAs
principal under the subject SPAs and, thus,
liable for obligations (unpaid construction
materials, fuel and heavy equipment
rentals) incurred by the latter for the
purpose of implementing and carrying out
the NIA project awarded to EMPCT.

which

MENDOZA

obtained

for use in

the subject NIA

said civil case against PAULE, to wit:

WHEREFORE, judgment is hereby

rendered in favor of the plaintiff (MENDOZA)
and against the defendant (PAULE) as
follows:
1. Ordering defendant Paule to pay
plaintiff
the
sum
of
P138,304.00
representing the obligation incurred by the
plaintiff with LGH Construction;
2. Ordering defendant Paule to pay
plaintiff
the
sum
of
P200,000.00
representing the balance of the obligation
incurred by the plaintiff with Artemio
Alejandrino;
3. Ordering defendant Paule to pay
plaintiff the sum of P520,000.00 by way of
moral damages, and further sum of
P100,000.00 by way of exemplary damages;

4. Ordering defendant Paule to pay

plaintiff the sum of P25,000.00 as for
attorneys fees; and
5. To pay the cost of suit.[13]

MENDOZA, for her part, claims that she has a right to

be heard on her cause of action as stated in her cross-claim

PAULE appealed[14] the above decision, but it was

dismissed by the Court of Appeals in a Decision [15] which

against PAULE; that the trial courts failure to resolve the crossclaim was a violation of her constitutional right to be apprised
of the facts or the law on which the trial courts decision is

reads, in part:

based; that PAULE may not revoke her appointment as

As to the finding of the trial court
that the principle of agency is applicable in
this case, this Court agrees therewith. It
must be emphasized that appellant (PAULE)
authorized appellee (MENDOZA) to perform
any and all acts necessary to make the
business transaction of EMPCT with NIA
effective. Needless to state, said business
transaction pertained to the construction of
canal structures which necessitated the
utilization of construction materials and
equipments. Having given said authority,
appellant cannot be allowed to turn its back
on the transactions entered into by appellee
in behalf of EMPCT.
The amount of moral damages and
attorneys fees awarded by the trial court
being justifiable and commensurate to the
damage suffered by appellee, this Court
shall not disturb the same. It is well-settled
that the award of damages as well as
attorneys fees lies upon the discretion of the
court in the context of the facts and
circumstances of each case.
WHEREFORE,
the
appeal
is
DISMISSED and the appealed Decision is
AFFIRMED.
SO ORDERED.[16]

attorney-in-fact for and in behalf of EMPCT because, as

manager of their partnership in the NIA project, she was
obligated to collect from NIA the funds to be used for the
payment of suppliers and contractors with whom she had
earlier contracted for labor, materials and equipment.

PAULE, on the other hand, argues in his Comment

that MENDOZAs authority under the SPAs was for the limited
purpose of securing the NIA project; that MENDOZA was not
authorized to contract with other parties with regard to the
works and services required for the project, such as CRUZs
hauling services; that MENDOZA acted beyond her authority
in contracting with CRUZ, and PAULE, as principal, should not
be made civilly liable to CRUZ under the SPAs; and that
MENDOZA has no cause of action against him for actual and

PAULE filed a petition to this Court docketed as G.R.

No. 173275 but it was denied with finality on September 13,
2006.

moral damages since the latter exceeded her authority under

the agency.

We grant the consolidated petitions.

originally agreed upon, as to division of labor and delineation

of functions within their partnership. Under the Civil Code,

Records show that PAULE (or, more appropriately,

every partner is an agent of the partnership for the purpose of

EMPCT) and MENDOZA had entered into a partnership in

its business;[18] each one may separately execute all acts of

regard to the NIA project. PAULEs contribution thereto is his

administration, unless a specification of their respective duties

contractors license and expertise, while MENDOZA would

has been agreed upon, or else it is stipulated that any one of

provide and secure the needed funds for labor, materials and

them shall not act without the consent of all the others. [19] At

services; deal with the suppliers and sub-contractors; and in

any rate, PAULE does not have any valid cause for opposition

general and together with PAULE, oversee the effective

because his only role in the partnership is to provide his

implementation of the project. For this, PAULE would receive

contractors license and expertise, while the sourcing of funds,

as his share three per cent(3%) of the project cost while the

materials, labor and equipment has been relegated to

rest of the profits shall go to MENDOZA. PAULE admits to this

MENDOZA.

arrangement in all his pleadings.[17]

Moreover, it does not speak well for PAULE that he
Although the SPAs limit MENDOZAs authority to such

reinstated MENDOZA as his attorney-in-fact, this time with

acts as representing EMPCT in its business transactions with

broader powers to implement, execute, administer and

NIA, participating in the bidding of the project, receiving and

supervise the NIA project, to collect checks and other

collecting payment in behalf of EMPCT, and performing other

payments due on said project, and act as the Project Manager

acts in furtherance thereof, the evidence shows that when

for

MENDOZA and CRUZ met and discussed (at the EMPCT office

complaint. Despite knowledge that he was already being sued

in Bayuga, Muoz, Nueva Ecija) the lease of the latters heavy

on the SPAs, he proceeded to execute another in MENDOZAs

equipment for use in the project, PAULE was present and

favor, and even granted her broader powers of administration

interposed no objection to MENDOZAs actuations. In his

than in those being sued upon. If he truly believed that

pleadings, PAULE does not even deny this. Quite the contrary,

MENDOZA exceeded her authority with respect to the initial

MENDOZAs actions were in accord with what she and PAULE

SPA, then he would not have issued another SPA. If he thought

EMPCT,

even

after

CRUZ

has

already

filed

his

that his trust had been violated, then he should not have
executed another SPA in favor of MENDOZA, much less grant
her broader authority.

There was no valid reason for PAULE to revoke

MENDOZAs SPAs. Since MENDOZA took care of the funding
and sourcing of labor, materials and equipment for the

Given the present factual milieu, CRUZ has a cause

project, it is only logical that she controls the finances, which

of action against PAULE and MENDOZA. Thus, the Court of

means that the SPAs issued to her were necessary for the

Appeals erred in dismissing CRUZs complaint on a finding of

proper performance of her role in the partnership, and to

exceeded agency. Besides, that PAULE could be held liable

discharge the obligations she had already contracted prior to

under the SPAs for transactions entered into by MENDOZA

revocation. Without the SPAs, she could not collect from NIA,

with laborers, suppliers of materials and services for use in

because as far as it is concerned, EMPCT and not the PAULE-

the NIA project, has been settled with finality in G.R. No.

MENDOZA

173275. What has been adjudged in said case as regards the

with. Without these payments from NIA, there would be no

SPAs should be made to apply to the instant case. Although

source of funds to complete the project and to pay off

the said case involves different parties and transactions, it

obligations

finally disposed of the matter regarding the SPAs specifically

agency cannot be revoked if a bilateral contract depends upon

their effect as among PAULE, MENDOZA and third parties with

it, or if it is the means of fulfilling an obligation already

whom MENDOZA had contracted with by virtue of the SPAs a

contracted, or if a partner is appointed manager of a

disposition that should apply to CRUZ as well. If a particular

partnership in the contract of partnership and his removal

point or question is in issue in the second action, and the

from the management is unjustifiable.[21]

partnership

incurred. As

is

the

entity

MENDOZA

it

had

correctly

contracted

argues,

an

judgment will depend on the determination of that particular

point or question, a former judgment between the same

PAULEs revocation of the SPAs was done in evident

parties or their privies will be final and conclusive in the

bad faith. Admitting all throughout that his only entitlement in

second if that same point or question was in issue and

the partnership with MENDOZA is his 3% royalty for the use of

adjudicated in the first suit. Identity of cause of action is not

his contractors license, he knew that the rest of the amounts

required but merely identity of issues.[20]

collected from NIA was owing to MENDOZA and suppliers of

materials and services, as well as the laborers. Yet, he

partnership

agreement. Thus,

the

trial

court

erred

in

deliberately revoked MENDOZAs authority such that the latter

disregarding and dismissing MENDOZAs cross-claim which is

could no longer collect from NIA the amounts necessary to

properly a counterclaim, since it is a claim made by her as

proceed with the project and settle outstanding obligations.

defendant in a third-party complaint against PAULE, just as

the appellate court erred in sustaining it on the justification

From

the

way

he

conducted

himself,

PAULE

committed a willful and deliberate breach of his contractual

that PAULEs revocation of the SPAs was within the bounds of

his discretion under Article 1920 of the Civil Code.

duty to his partner and those with whom the partnership had

Where the defendant has interposed a counterclaim

contracted. Thus, PAULE should be made liable for moral

(whether compulsory or permissive) or is seeking affirmative

damages.

relief by a cross-complaint, the plaintiff cannot dismiss the

action so as to affect the right of the defendant in his

Bad faith does not simply connote

bad judgment or negligence; it imputes a
dishonest purpose or some moral obliquity
and conscious doing of a wrong; a breach of
a sworn duty through some motive or intent
or ill-will; it partakes of the nature of fraud
(Spiegel v. Beacon Participation, 8 NE 2nd
Series, 895, 1007). It contemplates a state
of mind affirmatively operating with furtive
design or some motive of self-interest or ill
will for ulterior purposes (Air France v.
Carrascoso, 18 SCRA 155, 166-167). Evident
bad faith connotes a manifest deliberate
intent on the part of the accused to do
wrong or cause damage.[22]
Moreover, PAULE should be made civilly liable for
abandoning the partnership, leaving MENDOZA to fend for her
own, and for unduly revoking her authority to collect
payments from NIA, payments which were necessary for the
settlement of obligations contracted for and already owing to
laborers and suppliers of materials and equipment like CRUZ,
not to mention the agreed profits to be derived from the
venture that are owing to MENDOZA by reason of their

counterclaim or prayer for affirmative relief. The reason for

that

exception

is

clear. When

the

answer

sets

up

an

independent action against the plaintiff, it then becomes an

action by the defendant against the plaintiff, and, of course,
the plaintiff has no right to ask for a dismissal of the
defendants action. The present rule embodied in Sections 2
and 3 of Rule 17 of the 1997 Rules of Civil Procedure ordains a
more equitable disposition of the counterclaims by ensuring
that any judgment thereon is based on the merit of the
counterclaim itself and not on the survival of the main
complaint. Certainly, if the counterclaim is palpably without
merit or suffers jurisdictional flaws which stand independent
of the complaint, the trial court is not precluded from
dismissing it under the amended rules, provided that the

judgment or order dismissing the counterclaim is premised on

those defects. At the same time, if the counterclaim is
justified, the amended rules now unequivocally protect such
counterclaim from peremptory dismissal by reason of the

Notwithstanding the immutable character of PAULEs

liability to MENDOZA, however, the exact amount thereof is
yet to be determined by the trial court, after receiving
evidence for and in behalf of MENDOZA on her counterclaim,
which must be considered pending and unresolved.
the

petitions

are GRANTED. The

August 28, 2006 Decision of the Court of Appeals in CA-G.R.

CV No. 80819 dismissing the complaint in Civil Case No. 18-SD
(2000) and its December 11, 2006 Resolution denying the
motion

for

reconsideration

are REVERSED

and

SET

ASIDE. The August 7, 2003 Decision of the Regional Trial

Court of Nueva Ecija, Branch 37 in Civil Case No. 18-SD (2000)
finding

PAULE

liable

the MODIFICATION that

the

is REINSTATED,
trial

court

with

is ORDERED to

receive evidence on the counterclaim of petitioner Zenaida G.

Mendoza.

SO ORDERED.

G.R. No. L-12151

Thos. D. Aitken for appellant.

Alfonso E. Mendoza for appellee.
STREET, J.:

dismissal of the complaint.[23]

WHEREFORE,

ADRIANO BUENAVENTURA Y DEZOLLIER, palintiffappellant,

vs.
ANTONIO DAVID y ABELIDO, defendant-appellee.

January 19, 1918

By an agreement effective from April 20, 1906, a partnership

was formed by Antonio David y Abelido and Adriano
Buenaventura y Dezollier for the conduct of the business of
real estate brokers in the city of Manila, under the firm name
"Abelido and Co." The first named party was the capitalist
member of the firm and its manager., while the last named
was the industrial member and bookkeeper. The firm
maintained a feeble external existence for a few months,
during which period the capitalist associate placed P209.86 in
the enterprise. This was consumed in office rent and other
incidental expenses. Only two profitable transactions were
ever accomplished by the firm of Abelido and Co. during its
existence. These produced a total income of P42, which sum
was noted on the credit side of the company's ledger.
It was agreed in the articles that the partnership should be
liquidated upon April 20, 1907, in the absence of any
agreement for the extension of its life; but upon February 1,
1908, it was agreed in writing that the partnership should not
be liquidated until the sale of a piece of real estate in which
the firm had become interested should be effected with profit.
The property to which reference was thus made consisted of a
farm in the municipality of Murcia, in the Province of Tarlac,
known as the "Hacienda de Guitan."
This farm had been formerly owned by the spouses Loni
Diangco and Epifania Torres; and long before the firm of
Abelido and Co. had come into existence Antonio David y
Abelido had been their creditor by reason of certain sums of
money from time to time loaned them. After the death of Lino
Diangco in 1890 still other sums of money were advanced by
David to the widow, Epifania Torres, in behalf of herself and
her minor son Pablo Diangco. Upon July 10, 1906, Epifania
agreed to convey the Hacienda de Guitan to Abelido and
Buenaventura for a consideration stated at P2,050 (Exhibit C).
The purpose of the transaction was to settle the debt of
several thousand pesos owing by her and her son to Antonio
David y Abelido. The conveyance by which this contract was

finally carried into effect was executed upon January 30, 1908.
The grantee named in the deed was Antonio David y Abelido;
and no reference was made in this instrument to the firm of
Abelido and Co., or to Buenaventura as a partner therein.
Buenaventura was present at the time of the execution of this
deed and signed as a subscribing witness. The total
consideration for the conveyance was P7,170, of which the
sum of P5,870 was consumed in satisfying the old
indebtedness due to David. The balance (according to the
recitals of the deed) was paid by him to Epifania Torres. It
further appears that Antonio David y Abelido proceeded to
procure the registration of the hacienda in his own name and
a Torrens title was in due course issued to him.
Upon the same day that the above-mentioned deed was
executed by Epifania Torres to Antonio David, a declaration
was drawn up and ratified by Antonio David and Adiano
Buenaventura in which it was stated that Epifania Torres had
sold the estate above mentioned to Antonio David for the sum
of P7,170 and that of this amount the sum of P3,370 had been
advanced by Abelido & Co., while P3,800 had been paid by
David individually. It was then said that the firm thereby
became the owner of the property in the proportion of the
value satisfied by it; and this was followed by an obscure
clause meaning, probably, that the right of the firm to acquire
this participation was dependent on the reimbursement of
David for the outlay made by him with respect to such share.
A further statement was added to the effect that
Buenaventura should have the option to advance half of the
sum paid out by Antonio David y Abelido, to wit, the sum of
P1,900, in the event Buenaventura should desire to have a
half interest in the property in his own name.
From the date of the conveyance above mentioned David
exercised all the rights of an owner over the property. Upon
one occasion he mortgaged it for the sum of P5,000 and
Buenaventura was paid P300 for assisting in the securing of
this loan. At another time David mortgaged the property for
the sum of P15,000 and applied the money thus secured to
his own use.
Upon February 18, 1915, or more than seven years after the
day upon which the deed to the property had been executed
to David, Buenaventura filed the complaint in this action. In
this proceeding he seeks relief embracing the following
features: (1) a dissolution of the partnership of Abelido and
Co.; (2) judgment for a balance of some P2,344.85. alleged to
be due as arrears upon salary account; (3) a transfer of the
title of the Hacienda de Guitan to Abelido and Co.; (4) and

accounting for, and division of all money, property and other

effects of the firm; and especially an accounting for profits
alleged to have been made by the defendant David from
investments of money derived from the hacienda, which
profits were alleged to amount to the sum of P5,190; (5) a
judgment for damages in the sum of P10,000; (6) such and
further relief as might seem to the court just and equitable.
At the hearing the court entered a judgment declaring that
the partnership of Abelido and Co. was dissolved and denying
all other relief sought in the complaint. From this judgment
the plaintiff Buenaventura has appealed.
As regards the Hacienda de Guitan, it is in our opinion clear
upon the oral testimony and other proof adduced in the cause
that every cent of the consideration for the purchase of this
property was supplied by David; and it consisted, as we have
seen, mostly of money previously loaned. Buenaventura had
no resources, and it was evidently quite beyond his power to
raise the funds necessary to participate in a business
transaction of the size of that in question. His pretension that
he supplied P1,025 or half of the consideration named in the
original contract (Exhibit C) was rightly rejected by the court.
Furthermore it appears that the firm of Abelido and Co., as
distinguished from the individual David Abelido, never in fact
advanced a single peso in the transaction, although the
"declaration" of January 30, 1908, states that the firm
advanced P3,370. That declaration constitutes an admission
which entitles it to weight but its recital as to the money paid
or received may be explained and even contradicted, as in
case of a simple receipt. David's explanation is that the
plaintiff, as bookkeeper, had made it appear in the firm books
that the firm was debtor to David in the amount of P3,370 in
respect to this transaction and that the plaintiff had requested
David to sign the declaration showing the firm to be a
participant. Throughout this affair David exhibited
considerable complaisance in signing papers at
Buenaventura's request. He apparently considered
Buenaventura an amiable old friend and was willing to indulge
the latter's fancy with the idea that he was party to an
important transaction, well knowing that he could never put
up the necessary money to enable him to share in the deal.
Whatever may be the explanation of David's imprudence in
allowing himself to be thus drawn into an admission showing
that the firm participated in the deal, it is quite clear that he
supplied all the money for the purchase in question.
The situation then, as regards the title to the hacienda is this:
David, who supplied all the funds, has obtained the legal title

in his own individual name. This was accomplished with

knowledge on the part of Buenaventura. Furthermore he has
registered his title by means of legal proceedings which were
probably known to Buenaventura. Still later, the latter is seen
acting as broker for David in securing a loan on the hacienda
and receives a fee for his services. Meanwhile the original
partnership enterprise is abandoned. Finally more than seven
years after the day when Buenaventura stood by and signed
as a witness the deed conveying the property to David, he
comes into court and seeks to reach this property through the
ghost of the firm of Abelido and Co. and bring the defendant
to account for the profits which he has obtained from the
investments of its proceeds in various enterprises.
The purpose of the action is to impress a trust on the property
in favor of Abelido and Co., to divest the title out of the
present owner, and to have it, or its proceeds, liquidated and
administered as firm assets. We are of the opinion that there
is no merit in the plaintiff's contention. It is true that a court
will not hesitate, under certain circumstances, to divest a title
out of the holder and impress a trust upon it in favor of
another, or to require the holder of the title to administer the
property for the true owner (Uy Aloc vs. Cho Jan Ling, 19 Phil.
Rep., 202); yet this will not be done in the absence of a
sufficient contract, an express trust, or other strong equitable
circumstances requiring the intervention of equity. No such
relief can be granted, upon purely equitable grounds, against
a party who has himself paid the entire purchase price in
favor of one who advanced nothing. But the declaration of
January 30, 1908, is relied upon as evidence of a contract
establishing the right of Abelido and Co. The reply is that by
the terms of that instrument Buenaventura's personal right
was dependent upon the advancement of money by him
which was in fact never supplied, and as to the statement
contained in that declaration that Abelido and Co. had
advanced a certain sum, it clearly appears that this is not
true; and we hold that the defendant is not precluded, or
estopped, by that admission from showing the actual facts.
Furthermore, it is evident that the plaintiff's case is adversely
affected by his long delay in bringing this action. Undue delay

in the enforcement of a right is strongly persuasive of a lack

of merit in the claim, since it is human nature for a person to
assert his rights most strongly when they are threatened or
invaded. It is hard to believe that, if the plaintiff had been
convinced of the justice of his contention, he would have
failed to assert his right to a division at the time when the
defendant was pocketing the proceeds of the loans obtained
upon the security of the Hacienda de Guitan. The probabilities
are that Buenaventura realized at the time that his hopes of
sharing in this investment were doomed to disappointment
and that with full knowledge of all the facts he decided to
abandon the claim, or not assert it. However, the documents
which appear on their face to establish his right to a
participation in this property remained in existence; and in
course of time said claim was made the basis of this action.
The assertion of doubtful claims, after long delay, can not be
favored by the courts. Time inevitably tends to obliterate
occurrences from the memory of witnesses, and even where
the recollection appears to be entirely clear, the true clue to
the solution of a case may be hopelessly lost. These
consideration constitute one of the pillars of the doctrine long
familiar in equity jurisprudence to the effect that laches or
unreasonable delay on the part of a plaintiff in seeking to
enforce a right is not only persuasive of a want of merit but
may, according to the circumstances, be destructive of the
right itself. Vigilantibus non dormientibus equitas subvenit.
The decision of the main issue relative to the hacienda
renders unnecessary any discussion of other features of the
case presented in the appellant's brief. Upon the whole it is
our opinion that there was no error prejudicial to the plaintiff
in the action of the court below and the judgment is therefore
affirmed, with costs against the appellant.
Arellano, C.J., Torres, Carson, Araullo, and Malcolm, JJ., concur.