B.
OBLIGATIONS OF THE PARTNERS AMONG
THEMSELVES (Articles 1784-1809)
CASE #1 FEDERICO JARANTILLA, JR. V. ANTONIETA
JARANTILLA, ET AL.
651 PHIL. 13, GR 154486, DECEMBER 01, 2010
Facts: Antonieta Jarantilla filed complaint against
Buenaventura and Cynthia Remotigue and the Jarantillas -
Federico Jr., Doroteo and Tomas for the accounting of
assets and income of the co-ownership, for partition,
delivery of her share of 8% with damages.
She claims that in 1946, she entered into agreement with
Conchita and Buenaventura Remotigue, Rafael Jarantilla
and Rosita and Vivencio Deocampo to engage in business.
Antonieta here alleges that the initial contribution of
property and of money came from the heirs’ inheritance.
She claimed co-ownership of certain properties in the name
of the defendants since the only way they could have
purchased such properties were through the partnership as
they had no other choice of income.
She finds support in a 1957 document called
Acknowledgment of Participating Capital where the Sps.
Remotigue acknowledged that while registered only in
Buenaventura’s name, they were not the only owners of the
capital of the businesses. They stated the participating
capital of Antonieta was P8,000 and Federico, Jr was
P5,000.
The respondents here did not deny the existence and
validity of the Acknowledgment of Participating Capital but
they denied having a partnership with her for she was in no
position at that time for the proceeds of the land partitioned
as devoted to Antonieta’s studies. They averred that while
she may have helped, she was paid her due salary. They
also deny using the partnership income to purchase the
subject real properties. Later on, Federico, Jr supported
Antonieta’s claims and asserted that he too was entitled to
6% of the supposed partnership in the same manner
Antonieta was.
RTC found that an unregistered partnership existed since
1946 which was affirmed in the Acknowledgment and was
used as basis for giving Antonieta the 8% share of the
business listed in it as well as in other business and real
properties the respondents allegedly had acquired through
such funds. [6% of Federico, was not ruled] CA while it
agreed to the 8% share in the three business listed in the
Acknowledgment, but not as to her share in other
properties for the Acknowledgment was specific as to its
coverage. And since the claim of Federico, Jr was same as
Antonieta, the CA also ruled that his 6% share is limited to
those listed in the Acknowledgment.
Both Federico and Antonieta characterize their relationship
with the respondent as (1) co-ownership, but in the same
breath, assert that a (2) verbal partnership was formed in
1946 affirmed by the 1957 Acknowledgment.
Issue: Whether the shares of Federico and Antonieta
should be limited to those stated in the
Acknowledgment.
Ruling: Yes.
Elements of Partnership. - There are two essential
elements in a contract of partnership: (a) an agreement
to contribute money, property or industry to a common
fund; and (b) intent to divide the profits among the
contracting parties.
The first element is undoubtedly present in the case at
bar, for, admittedly, all the parties in this case have agreed
to, and did, contribute money and property to a common
fund. Hence, the issue narrows down to their intent in
acting as they did.
It is not denied that all the parties in this case have agreed
to contribute capital to a common fund to be able to later on
share its profits. They have admitted this fact, agreed to its
veracity, and even submitted one common documentary
evidence to prove such partnership - Acknowledgement of
Participating Capital.
The Acknowledgement of Participating Capital is a duly
notarized document voluntarily executed by Conchita
Jarantilla-Remotigue and Buenaventura Remotigue in
1957. Petitioner does not dispute its contents and is
actually relying on it to prove his participation in the
partnership.
Article 1797 provides that losses and profits shall be
distributed in conformity with the agreement. - It is
clear from the foregoing that a partner is entitled only
to his share as agreed upon, or in the absence of any
such stipulations, then to his share in proportion to his
contribution to the partnership. The petitioner himself
claims his share to be 6%, as stated in the
Acknowledgement of Participating Capital.
However, petitioner fails to realize that this document
specifically enumerated the businesses covered by the
partnership: Manila Athletic Supply, Remotigue Trading in
Iloilo City and Remotigue Trading in Cotabato City. Since
there was a clear agreement that the capital the partners
contributed went to the three businesses, then there is no
reason to deviate from such agreement and go beyond the
stipulations in the document. Therefore, the Court of
Appeals did not err in limiting petitioner's share to the
assets of the businesses enumerated in the
Acknowledgement of Participating Capital.
Relevant ruling – In Villareal v. Ramirez, the Court held
that since a partnership is a separate juridical entity, the
shares to be paid out to the partners is necessarily limited
only to its total resources, to wit:
Since it is the partnership, as a separate and distinct
entity that must refund the shares of the partners, the
amount to be refunded is necessarily limited to its total
resources. In other words, it can only pay out what it
has in its coffers, which consists of all its assets.
However, before the partners can be paid their shares,
the creditors of the partnership must first be
compensated. After all the creditors have been paid,
whatever is left of the partnership assets becomes
available for the payment of the partners’ shares.
CASE #2 – Lim Tong Lim v. Philippine Fishing Gear
Industries 376 Phil. 76, GR 136448, November 3, 1999
Facts: Antonio Chua and Peter Yao on behalf of Ocean
Quest Fishing Corporation entered into a Contract in 1990
for purchase of fishing nets of various sizes from Philippine
Fishing Gears. Chua and Yao claimed that they were
engaged in a business venture with Lim Tong Lim but was
not signatory to the agreement.
The buyers failed to pay for the net and the floats
prompting the respondent to file a collection suit against
Chua, Yao and Lim Tong Lim as general partners finding
Ocean Quest Fishing Corp. was a non-existent corporation
in a Certification from SEC. The lower court attached the
fishing nets in F/B Lourdes.
Chua admitted liability and requested reasonable time to
pay. Yao filed answer and waived his right to cross
examine and present evidence for failure to appear in
hearing. Lim filed an Answer and moved for lifting of the
attachment. But the court did not lift and ordered sale of the
nets at public auction where respondent won for P900K.
Trial Court ruled that there was a partnership based on the
testimonies of the witnesses and on a Compromise
Agreement that was executed by the three. It noted that
while it was silent as to the nature of obligation, that joint
liability could be presumed from the equal distribution of the
profit and loss.
CA affirmed that Lim was a partner and may thus be held
liable for the fishing net and floats purchased by and for
use of partnership.
Lim argues that he should not be held liable because CA
based on the Compromise Agreement alone and that he
did not have direct participation in negotiations. He further
argues that he was just a lessor not a partner of Chua and
Yao for the Contract of Lease showing that he only leased
to the two the fishing boat.
Issue: Whether or not there is a partnership?
Ruling: Yes. Contribution need not be in cash it could
be an intangible like credit or industry. - From the
factual findings of both lower courts, it is clear that Chua,
Yao and Lim had decided to engage in a fishing business,
which they started by buying boats worth P3.35 million,
financed by a loan secured from Jesus Lim who was
petitioner's brother.
In their Compromise Agreement, they subsequently
revealed their intention to pay the loan with the
proceeds of the sale of the boats, and to divide equally
among them the excess or loss. These boats, the
purchase and the repair of which were financed with
borrowed money, fell under the term "common fund"
under Article 1767.
The contribution to such fund need not be cash or fixed
assets; it could be an intangible like credit or industry. That
the parties agreed that any loss or profit from the sale and
operation of the boats would be divided equally among
them also shows that they had indeed formed a
partnership.
Moreover, it is clear that the partnership extended not only
to the purchase of the boat, but also to that of the nets and
the floats. The fishing nets and the floats, both essential to
fishing, were obviously acquired in furtherance of their
business.
It would have been inconceivable for Lim to involve himself
so much in buying the boat but not in the acquisition of the
aforesaid equipment, without which the business could not
have proceeded.
Given the preceding facts, it is clear that there was,
among petitioner, Chua and Yao, a partnership
engaged in the fishing business. They purchased the
boats, which constituted the main assets of the
partnership, and they agreed that the proceeds from
the sales and operations thereof would be divided
among them.
Compromise Agreement Not the Sole Basis of
Partnership. - The Agreement was but an embodiment of
the relationship extant among the parties prior to its
execution. A proper adjudication of claimants' rights
mandates that courts must review and thoroughly appraise
all relevant facts. Both lower courts have done so and
have found, correctly, a preexisting partnership among
the parties. In implying that the lower courts have decided
on the basis of one piece of document alone, petitioner fails
to appreciate that the CA and the RTC delved into the
history of the document and explored all the possible
consequential combinations in harmony with law, logic and
fairness.
Partner not Lessor. –The sale of the boats, as well as the
division among the three of the balance remaining after the
payment of their loans, proves beyond cavil that F/B
Lourdes, though registered in his name, was not his own
property but an asset of the partnership. It is not
uncommon to register the properties acquired from a loan
in the name of the person the lender trusts, who in this
case is the petitioner himself. After all, he is the brother of
the creditor, Jesus Lim.
It is unreasonable - indeed, it is absurd -- for petitioner to
sell his property to pay a debt he did not incur, if the
relationship among the three of them was merely that of
lessor-lessee, instead of partners. Thus, it was properly
ruled by the CA that Lim Tong Lim was a partner and
thus can be made liable.
Relevant ruling – the doctrine of corporation by
estoppel may apply to the alleged corporation and to a
third party. In the first instance, an unincorporated
association, which represented itself to be a corporation,
will be estopped from denying its corporate capacity in a
suit against it by a third person who relied in good faith on
such representation. It cannot allege lack of personality to
be sued to evade its responsibility for a contract it entered
into and by virtue of which it received advantages and
benefits.
On the other hand, a third party who, knowing an
association to be unincorporated, nonetheless treated
it as a corporation and received benefits from it, may
be barred from denying its corporate existence in a suit
brought against the alleged corporation. In such case,
all those who benefited from the transaction made by the
ostensible corporation, despite knowledge of its legal
defects, may be held liable for contracts they impliedly
assented to or took advantage of.t
CASE #3 – EVANGELISTA & CO. v. ABAD SANTOS
G.R. No. L-31684; June 28, 1973
Facts: In 1954 a co-partnership was formed under the
name of "Evangelista & Co." In 1955, the Articles of Co-
partnership were amended so as to include herein
respondent, Estrella Abad Santos, as industrial partner,
with herein petitioners Domingo C. Evangelista, Jr.,
Leonarda Atienza Abad Santos and Conchita P. Navarro,
the original capitalist partners, remaining in that capacity,
with a contribution of P17,500 each
In 1963, herein respondent filed suit against the three other
partners, alleging that the partnership, which was also
made a party-defendant, had been paying dividends to the
partners except to her; and that notwithstanding her
demands the defendants had refused and continued to
refuse to let her examine the partnership books or to give
her information regarding the partnership affairs or to pay
her any share in the dividends declared by the partnership.
The defendants, in their answer, denied ever having
declared dividends or distributed profits of the partnership;
denied likewise that the plaintiff ever demanded that she be
allowed to examine the partnership books; and by way of
affirmative defense alleged that the amended Articles of
Co-partnership did not express the true agreement of the
parties, which was that the plaintiff was not an industrial
partner; that she did not in fact contribute industry to the
partnership.
Issue: Whether or not Abad Santos is entitled to see
the partnership books because she is an industrial
partner in the partnership
Ruling: Yes, Abad Santos is entitled to see the partnership
books.
The Supreme Court ruled that according to ART. 1299.
Any partner shall have the right to a formal account as
to partnership affairs:
(1) If he is wrongfully excluded from the partnership
business or possession of its property by his co-
partners; (2) If the right exists under the terms of any
agreement; (3) As provided by Article 1807; (4)
Whenever other circumstances render it just and
reasonable.
In the case at hand, the company is estopped from
denying Abad Santos as an industrial partner because
it has been 8 years and the company never corrected
their agreement in order to show their true intentions.
The company never bothered to correct those up until
Abad Santos filed a complaint.
CASE #4 – Pideli v. People, G.R. No. 163437, February
13, 2008, 568 PHIL 793-809
Facts: Placido Cancio (Placido) and Wilson Pideli (Wilson)
entered into a verbal partnership agreement to subcontract
a rip-rapping and spillway project at Benguet. Placido and
Wilson agreed to undertake the project in favor of ACL
Construction (ACL). The contractor awarded the
development project by the DPWH. Ernesto Pideli
(petitioner), brother to Wilson and neighbor and friend to
Placido, offered the duo the use of his credit line with the
Mt. Trail Farm Supply and Hardware (MTFSH).
ACL management informed Placido and Wilson that the
final payment for the work that they have done would be
withheld. It was learned that they failed to settle their
accountabilities with the MTFSH. Placido, Wilson and
petitioner made representations with the accountable ACL
personnel, a certain Boy Candido, to facilitate the release
of their payment.
Consequently, Placido, Wilson and petitioner computed
their expenses and arrived at a net income of P130,000.00.
Placido, as partner, claimed one-half (1/2) or P65,000.00 of
the net amount as his share in the project. Petitioner,
however, advised the two to first settle their accountabilities
for the construction materials taken from the hardware
store. Placido and Wilson did as told and entrusted the full
amount to petitioner, with express instructions to pay
MTFSH and deliver the remaining balance to them.
The following day, Placido attempted but failed to contact
petitioner. He had hoped to obtain his share of the
partnership income. Placido got hold of petitioner the next
morning. Unexpectedly, petitioner informed Placido that
nothing was left of the proceeds after paying off the
supplier. Despite repeated demands, petitioner refused to
give Placido his share in the net income of the contract.
Placido lodged a complaint for theft against petitioner
Ernesto Pideli.
Issue: WON the money was owned by the partnership.
Ruling: No. Appellant's argument that since the money
belonged to the partnership, hence, cannot be the object of
the crime of theft as between the partners, and that
appellant as their agent acted in good faith and without
intent to gain, holds no water. Parenthetically, this
argument is inconsistent with the assertion of the defense
witnesses that complainant had no participation at all in the
project, and, hence, had no right to a share in its payment.
In any case, appellant was not complainant's partner
but his brother. As for his alleged acting in good faith
and without intent of gain, it is jurisprudentially settled
that intent is a mental state, the existence of which is
made manifest by overt acts of the person. The intent
to gain is presumed from the taking of property
appertaining to another.
When appellant received the disbursement, he had
only physical custody of private complainant's money,
which was supposed to be applied to a particular
purpose, i.e. settle the account with the supplier.
Appellant's failure to do so or to return the money to
the private complainant renders him guilty of the crime
of theft. This is in line with the rulings of the Supreme
Court in the case of United States vs. de Vera, 43 Phil.
1000 (1929) that the delivery of money to another for a
particular purpose is a parting with its physical custody
only, and the failure of the accused to apply the money to
its specific purpose and converting it to his own use gives
rise to the crime of theft. The basic principles enunciated in
the de Vera case was reiterated in the recent case of
People vs. Tan, 323 SCRA 30, an Anti-Carnapping case,
where the High Court ruled that the unlawful taking or
deprivation may occur after the transfer of physical
possession and, in such a case, "the article (is considered
as being) taken away, not received, although at the
beginning the article was, in fact, given and received." We
agree with the Office of the Solicitor General (OSG) that
appellant had but the material/physical or de facto
possession of the money and his act of depriving private
complainant not only of the possession but also the
dominion (apoderamiento) of his share of the money such
that he (the appellant) could dispose of the money at will
constitutes the element of "taking" in the crime of theft.
CASE #5 – Lozana v. Depakakibo, G.R. No. L-13680,
April 27, 1960, 107 PHIL 728-733
Facts: Lozana and Depakakibo established a partnership
for the purpose of maintaining, operating, and distributing
electric light and power in the Municipality of Dumangas.
The partnership is capitalized at the sum of P30, 000.00
where Lozana agreed to furnish 60% while Depakakibo,
40%. However, the franchise for venture in favor of
Buenaflor was cancelled and revoked by the Public Service
Commission. Lozana thereafter sold Generator Buda,
Lozanas contribution to the partnership; no liquidation
made to Decolongon. When the decision was appealed, a
temporary certificate of public convenience was issued in
the name of Decolongon. Depakakibo sold one Crossly
Diesel Engine, Depakakibos contribution to the partnership,
to Spouses Jimenea and Harder. Lozana brought action
against Depakakibo alleging the latter wrongfully detained
the Generator Buda and wooden posts to which he is
entitled to the possession of. Lozano prayed the properties
be delivered back to him. CFI ordered sheriff to take
possession of the properties and the delivery thereof to
Lozano. Depakakibo alleged properties have been
contributed to the partnership and therefore he is not
unlawfully detaining them. In addition, Lozano sold his
contribution to partnership in violation of terms of their
agreement. CFI declared Lozano owner of and entitled to
the equipment. Depakakibo appealed decision to the
Supreme Court.
Issue: W/N partnership is void or the act of the
partnership in furnishing electric current to the
franchise holder without previous approval of Public
Service Commission render the partnership void
Ruling: Partnership is valid. The fact of furnishing the
current to the holder of the franchise alone, without the
previous approval of the Public Service Commission, does
not per se make the contract of partnership null and void
from the beginning and render the partnership entered into
by the parties for the purpose also void and non-existent.
Facts show that parties entered into the contract of
partnership, Lozana contributing the amount of P18,
000, and there has not been liquidation prior to the sale
of the contributed properties: Buda Diesel Engine and
70 posts. It necessarily follows that the Buda diesel
engine contributed by the plaintiff had become the
property of the partnership. As properties of the
partnership, the same could not be disposed of by the
party contributing the same without the consent or
approval of the partnership or of the other partner.
CASE #6 - G.R. No. L-33580; February 6, 1931
MAXIMILIANO SANCHO vs. SEVERIANO LIZARRAGA
FACTS: Plaintiff brought an action for the rescission of a
partnership contract between himself and the defendant,
entered into on October 15, 1920, the reimbursement by
the latter of his 50,000 peso investment therein, with
interest at 12 per cent per annum, and any other just and
equitable remedy against said defendant.
The defendant denies generally and specifically all the
allegations of the complain and asking for the dissolution of
the partnership, and the payment to him as its manager
and administrator.
The CFI found that the defendant had not contributed all
the capital he had bound himself to invest, and that the
plaintiff had demanded that the defendant liquidate the
partnership, declared it dissolved on account of the
expiration of the period for which it was constituted, and
ordered the defendant, as managing partner, to proceed
without delay to liquidate it, submitting to the court the
result of the liquidation together with the accounts and
vouchers within the period of thirty days from receipt of
notice of said judgment.
The plaintiff appealed from said decision praying for the
rescission of the partnership contract between him and the
defendant in accordance with Art. 1124.
ISSUE: Whether or not plaintiff acquired the right to
demand rescission of the partnership contract
according to Article 1124 of the Civil Code.
HELD: NO. The Supreme Court ruled that plaintiff has not
acquired the right to demand rescission of the partnership
contract according to Article 1124 of the Civil Code. The
Court ratiocinated that owing to the defendant’s failure
to pay to the partnership the whole amount which he
bound himself to pay, he became indebted to the
partnership for the remainder, with interest and any
damages occasioned thereby, but the plaintiff did not
thereby acquire the right to demand rescission of the
partnership contract according to article 1124 of the
Code. This article cannot be applied to the case in
question, because it refers to the resolution of obligations in
general, whereas article 1681 and 1682 specifically refer to
the contract of partnership in particular. And it is a well-
known principle that special provisions prevail over general
provisions.
CASE #7 - G.R. No. L-19819 October 26, 1977
WILLIAM UY vs. BARTOLOME PUZON, substituted by
FRANCO PUZON
FACTS: Puzon had a contract with the Republic of the
Philippines for the construction of a road and five bridges.
Finding difficulty in accomplishing both projects, Bartolome
Puzon sought the financial assistance of the plaintiff,
William Uy. As an inducement, Puzon proposed the
creation of a partnership between them which would be the
sub-contractor of the projects and the profits to be divided
equally between them, thus, resulting in the formation of
the "U.P. Construction Company"  the violation of the latter of the terms of their partnership
The partners agreed that the capital of the partnership
would be P100,000.00 of which each partner shall
contribute the amount of P50,000.00 in cash. However,
Puzon failed to pay but promised to contribute his share as
soon as his application of loan with the PNB shall be
approved. Uy gave Puzon the amount of P10,000.00 as
advance contribution of his share in the partnership which
amount will be used by Puzon to pay his obligations with
the Philippine National Bank to effect the release of his
mortgages with the said Bank.
Since Puzon was busy with his other projects, William Uy
was entrusted with the management of the projects and
whatever expense the latter might incur, would be
considered as part of his contribution. Upon approval of
Puzon’s loan with the PNB, he gave Uy P60, 000. Of this
amount, P40,000.00 was for the reimbursement of Uy's
contribution to the partnership, and the P20,000.00 as
Puzon's contribution to the partnership capital.  damages shall comprehend not only the value of the
To guarantee the payment of the loan, Puzon assigned to
PNB all payments to be received on account of the
contracts with the Bureau of Public Highways for the
construction; this was done without the knowledge and
consent of Uy.
The financial demands of the projects increased, thus, Uy
called on Puzon to place his capital contribution; Puzon
failed to do so. Uy thereafter sent letters of demand to
which Puzon replied that he’s not capable of putting
additional capital. Puzon wrote UP Construction Company
terminating their subcontract agreement. Thereafter, Uy
was not allowed to hold office in the U.P. Construction
Company and his authority behalf of the partnership was
revoked by Puzon.
Hence, he instituted an action against Puzon seeking the
dissolution of the partnership and payment of damages for
agreement.
The trial court found that the appellant failed to contribute
his share in the capital of the partnership. The court
ordered the dissolution of the partnership and Puzon to pay
Uy a certain sum and to pay the plaintiff the amount of P
200, 000.00 plaintiffs share in the unrealized profits of the
"U.P. Construction Company"  Puzon, during the pendency
of the appeal before the Court, died, and was substituted
by Franco Puzon.
ISSUE: Whether or not the award of P200,000.00 as
compensatory damages in favor of the appellee
because the appellant therein was remiss in his
obligations as a partner is proper.
HELD: The award of P200,000.00 as his share in the
unrealized profits of the partnership is proper. Under
Article 2200 of the Civil Code, indemnification for
loss suffered, but also that of the profits which the
obligee failed to obtain. In other words lucrum cessans
is also a basis for indemnification. There is no doubt Uy
failed to make profits because of Puzon's breach of
contract. The partnership showed some profits even though
the profit and loss statement showed net loss; it may be
due to error in accounting.
Had the appellant not been remiss in his obligations as
partner and as prime contractor of the construction projects
in question as he was bound to perform pursuant to the
partnership and subcontract agreements. The award,
therefore, made by the trial court of the amount of
P200,000.00, as compensatory damages, is not
speculative, but based on reasonable estimate.
CASE #8 - RAMNANI VS COURT OF APPEALS 196
SCRA 88
FACTS: Ishwar, Choithram and Navalrai, all surnamed
Jethmal Ramnani, are brothers of the full blood. Ishwar and
his spouse 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, appointing Navalrai and Choithram as attorneys-
in-fact, empowering them to manage and conduct their
business concern in the Philippines.
Choithram, in his capacity as aforesaid attorney-in-fact of
Ishwar, entered into two agreements for the purchase of
two parcels of land from Ortigas & Company, Ltd.
Partnership. Per agreement, Choithram paid the down
payment and installments on the lot with his personal
checks. A building was constructed thereon by Choithram
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.
Ishwar asked Choithram to account for the income and
expenses relative to these properties. Choithram failed and
refused to render such accounting. As a consequence,
Ishwar revoked the general power of attorney. Choithram
and Ortigas were duly notified of such revocation. Said
notice was also registered with the Securities and
Exchange Commission and was published in the issue
of The Manila Times for the information of the general
public.
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. Her husband
is Moti, son of Choithram. Upon complete payment of the
lots, Ortigas executed the corresponding deeds of sale in
favor of Nirmla.
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.
A decision was rendered by the trial court dismissing the
complaint and counterclaim. A motion for reconsideration
thereof, filed by spouses Ishwar was denied. An appeal
therefrom was interposed by spouses Ishwar to the Court
of Appeals wherein in due course a decision was
promulgated and rendered, a judgement reversing and
setting aside the appealed decision of the lower court.
Choithram, et al. thereafter filed a petition for review of said
judgment of the appellate court.
During trial on appeal, Plaintiff-appellant Ishwar Jethmal
Ramnani testifying in his own behalf, declared that, 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. The scenario is clear. Spouses Ishwar supplied
the capital of $150,000.00 for the business. 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.
ISSUE: Whether or not Ishwar can recover the entire
properties subject in the ligitation
Held: NO. The Supreme Court held that 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.
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 now.
Where two brothers engaged in a business venture. One
furnished the capital, the other contributed his industry and
talent. The Supreme Court ruled that “Justice and equity
dictate that the two share equally the fruit of their joint
investment and efforts” . because it was through the
“industry and geniuses” of the industrial partner that the
property of the venture was developed and improve into a
valuable asset. Perhaps this Solomonic solution may pave
the way towards their reconciliation. Both would stand to
gain. No one would end up the loser.
CASE #9 - G.R. No. L-59956 October 31, 1984
ISABELO MORAN, JR. vs. THE HON. COURT OF
APPEALS and MARIANO E. PECSON
FACTS: Pecson and Moran entered into an agreement
whereby both would contribute P15, 000 each for the
purpose of printing 95,000 posters, with Moran actually
supervising the work; that Pecson would receive a
commission of Pl,000 a month. Pecson gave Moran P10,
000 for which the latter issued a receipt. However, only
2,000 posters were printed. Moran executed in favor of
Pecson a promissory note in the amount of P20,000
payable in two equal installments.  The whole sum
becoming due upon default in the payment of the first
installment on the date due, complete with the costs of
collection.
Private respondent Pecson filed with the Court of First
Instance of Manila an action for the recovery of a sum of
money and for the payment of his share in the profits that
the partnership would have earned.
The CFI renders judgement ordering defendant Moran, Jr.
to return to plaintiff Pecson the sum of P17, 000.00, with
interest at the legal rate.
Both parties appealed to the respondent Court of Appeals.
The CA awarded P47, 500.00 to Pecson for his share in
unrealized profits and P8,000.00 commission. Thus, Moran
Jr. appealed that the award his highly speculative and
should be avoided and that the award of the commission
has no basis in law.
ISSUE: WON Moran is obliged to give Pecson the
amount of expected profits from their partnership.
HELD: NO. The rule is, when a partner who has
undertaken to contribute a sum of money fails to do so,
he becomes a debtor of the partnership for whatever
he may have promised to contribute (Art. 1786, Civil
Code) and for interests and damages from the time he
should have complied with his obligation (Art. 1788,
Civil Code).  establishing Sun Wah Panciteria. To bolster his contention
Article 1797 of the Civil Code provides:
The losses and profits shall be distributed in conformity with
the agreem ent. 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.
Being a contract of partnership, each partner must
share in the profits and losses of the venture. That is
the essence of a partnership.
A partner is entitled to receive only his share of the
profits actually realized by the venture. Even when an
assurance was made by a partner that they would earn a
huge amount of profits, in the absence of fraud, the other
party cannot claim a right to recover the profits promised
where the business was highly speculative and turned out
to be a failure. Hidden risk in any business venture have
to be considered.
CASE #10 G.R. No. 70926 January 31, 1989
DAN FUE LEUNG, petitioner, vs. HON. INTERMEDIATE
APPELLATE COURT and LEUNG YIU, respondents.
FACTS: The Sun Wah Panciteria, a restaurant, a single
proprietorship and its licenses and permits were issued to
and in favor of petitioner Dan Fue Leung as the sole
proprietor. About the time the Sun Wah Panciteria started
to become operational, the private respondent gave
P4,000.00 as his contribution to the partnership. This is
evidenced by a receipt wherein the petitioner
acknowledged his acceptance of the P4,000.00 by affixing
his signature thereto.
However, petitioner denied having received from the private
respondent the amount of P4,000.00. He contested and
impugned the genuineness of the receipt. He alleged that
he used his savings from his salaries as capital in
that he was the sole owner of the restaurant, the petitioner
presented various government licenses and permits
showing the Sun Wah Panciteria was and still is a single
proprietorship solely owned and operated by himself alone.
The private respondent's cause of action is premised upon
the failure of the petitioner to give him the agreed profits in
the operation of Sun Wah Panciteria. In effect the private
respondent was asking for an accounting of his interests in
the partnership.
As between the conflicting evidence of the parties, the trial
court gave credence to that of the plaintiffs. Hence, the
court ruled in favor of the private respondent. Ordering the
latter to deliver and pay to the former, the sum equivalent to
22% of the annual profit derived from the operation of Sun
Wah Panciteria. The private respondent filed a verified
motion for reconsideration.
Both the trial court and the appellate court found that the
private respondent is a partner of the petitioner in the
setting up and operations of the Panciteria.
ISSUE: Whether or not the right to demand an accounting
in an existing partnership prescribes.
HELD: NO. The obligation to account is one which rests
especially on the shoulder of a managing or active partner,
and is one of the special task of a liquidating or surviving
partner.  Articles 1806, 1807, and 1809 show that the right
to demand an accounting exists as long as the partnership
exists. Prescription begins to run only upon the dissolution
of the partnership when the final accounting is done.
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. (Article 1842 of the Civil Code)
CASE #11 G.R. No. L-47823             July 26, 1943
JOSE ORNUM and EMERENCIANA ORNUM vs
MARIANO, LASALA, et al., 
FACTS: Pedro Lasala, father of the respondents, and
Emerenciano Ornum formed a partnership, whereby the
former, as capitalist, delivered the sum of P1,000 to the
latter who, as industrial partner, was to conduct a business
at his place of residence in Romblon. When the assets of
the partnership consisted of outstanding accounts and old
stock of merchandise, Emerenciano Ornum, following the
wishes of his wife, asked for the dissolution of the Lasala,
Emerenciano Ornum looked for someone who could take
his place and he suggested the names of the petitioners
who accordingly became the new partners. Upon joining
the business, the petitioners, contributed P505.54 as their
capital with the result that in the new partnership Pedro
Lasala had a capital of P1,000, appraised value of the
assets of the former partnership, plus the said P505.54
invested by the petitioners.
After the death of Pedro Lasala, his children (the
respondents) succeeded to all his rights and interest in the
partnership. The partners never knew each other
personally. No formal partnership agreement was ever
executed.  the petitioners who has already performed their obligation.
After twenty years the business had grown to such an
extent that is total value, including profits, amounted to
P44,618.67. Statements of accounts were periodically
prepared by the petitioners and sent to the respondents
who invariably did not make any objection thereto. The last
and final statement of accounts, and prepared by the
petitioners after the respondents had announced their
desire to dissolve the partnership,
Pursuant to the request contained in this letter, the
petitioners remitted and paid to the respondents the total
amount corresponding to them under the above-quoted
statement of accounts which, however, was not signed by
the latter. Hereafter the complaint in this case was filed by
the respondents, praying for an accounting and final
liquidation of the assets of the partnership
The CFI held that the last and final statement of accounts
prepared by the petitioners was tacitly approved and
accepted by the respondents who, by virtue of the letter of
Father Mariano Lasala, lost their right to a further
accounting from the moment they received and accepted
their shares as itemized in said statement.  the purpose, entered into an agreement with the said
This judgment was reversed by the Court of Appeals
principally on the ground that as the final statement of
accounts remains unsigned by the respondents, the same
stands disapproved.
ISSUE: Whether or not respondent is entitled to further
liquidation.
HELD: NO. After such shares had been paid by the
petitioners and accepted by the respondents without any
reservation, the approval of the statement of accounts was
virtually confirmed and its signing thereby became a mere
formality to be complied with by the respondents
exclusively. Their refusal to sign, after receiving their
shares, amounted to a waiver to that formality in favor of
This approval precludes any right on the part of the
respondents to a further liquidation, unless the latter can
show that there was fraud, deceit, error or mistake in said
approval.
The Court is reversing the appealed decision on the legal
ground that the petitioners' final statement of accounts had
been approved by the respondents and no justifiable
reason (fraud, deceit, error or mistake) has been positively
and unmistakably found by the Court of Appeals so as to
warrant the liquidations sought by the respondents.
CASE #12 G.R. No. L-5953             February 24, 1912
ANTONIO M. PABALAN, plaintiff-appellant, vs.
FELICIANO VELEZ, defendant-appellee.
Facts: Plaintiff, Antonio M. Pabalan, was the owner in fee
simple of a rural estate consisting of an hacienda known by
the name of "Pantayani," which was devoted to agricultural
purposes.  the plaintiff, desiring to make use of the two
properties described, and lacking the required means for
Walter A. Fitton whereby they formed a regular mercantile
partnership for the development of the said properties and
for the manufacture and sale of their products and other
business pertinent theret0.
that the sum of 9,000 pesos Mexican currency was fixed as
the amount of the capital stock of the partnership, of which
3,000 pesos, in cash, were to be contributed by the plaintiff
and 6,000 pesos, in real property, by the said Fitton; that,
for the purpose of obtaining the said 3,000 pesos, the
plaintiff sold his two aforementioned real properties to
Walter A. Fitton. The latter, bound himself to pay into the
funds of the said partnership, as the plaintiff's capital, the
remaining 3,000 pesos of the selling price; that it was
furthermore agreed that the two said real properties should
constitute the capital of Walter A. Fitton in the partnership,
which would be known by the name of "A. M. Pabalan and
Company". All the foregoing facts were recorded in the
instrument of sale and organization of the partnership,
executed before the notary public.
When the partner Fitton died, the latter failed to pay into the
partnership funds the said 3,000 pesos, the remainder of
the price of the properties purchased by him, or any part
thereof, and did not pay the said sum or any part of the
same to the plaintiff;
Owing to the failure of Fitton to comply with his obligation,
the properties in question had been entirely unproductive
and losses and damages had been occasioned to the
plaintiff in the sum of 2,000 pesos Philippine currency.
Plaintiff, therefore, prayed for the rescission of the contract
entered into, by himself, and Walter A. Fitton, the
dissolution of the partnership "A. M. Pabalan and
Company," and the annulment of the sale of the said
properties, by returning to the defendant a sum in
Philippine currency equivalent to the 3,000 pesos in
Mexican currency received from Walter A. Fitton, and that
the defendant be sentenced to pay to the plaintiff, as losses
and damages, the sum of 2,000 pesos, and to the payment
of the cost of the suit, in addition to the other remedies
sought.
ISSUE: Whether or not plaintiff may for the rescission of
the contract.
Held: YES, In case one of the parties to a contract does
not fulfill his obligation as stipulated therein, the other
contracting party, is entitled to demand the rescission of the
contract, as such obligations are mutual, and the court
must order the rescission demanded. Thus, Article 1124
provides among others:
The right to rescind the obligations is considered as implied
in mutual ones, in case one of the obligated persons does
not comply with what is incumbent upon him.
The person prejudiced may choose between exacting the
fulfillment of the obligation or its rescission, with indemnity
for damages and the payment of interest in either case. He
may also demand the rescission, even after having
requested its fulfillment, should the latter appear
impossible.
It was duly proved, that the partner Walter A. Fitton failed to
observe the stipulations of the two aforesaid contracts; hat
he did not pay any part of the price of the sale of the two
parcels of land which he had purchased from his partner,
Antonio M. Pabalan, and, consequently, did not turn into
the company funds, as capital of the said Pabalan, the sum
of which the said price consisted; it is therefore
unquestionable that he did not comply with his two principal
obligations.
CASE #13 Dela Rosa vs. Go-Cotay G.R. No. 28611.
January 30, 1929
Facts: Ildefonso de la Rosa, in his capacity as
administrator of the estate of the deceased Go Lio, brought
an action in the Court of First Instance of Nueva Ecija
against one Enrique Go Cotay for the liquidation and
partition of a partnership alleged to have been formed by
Go Lio and the also deceased Go Cosing, the father of Go
Cotay. After the death of the original partners, Go Cotay
took possession of the property of the partnership and
assumed the management of its affairs. Go Cotay denied
the existence of the partnership, but the CFI rendered a
decision that the business relations were that of a true
partnership and held that the estate of Go Lio was entitled
to one-half of the net assets of said partnership. The court
further ordered the liquidation of the partnership for the
purpose of distributing its assets.
The parties executed an agreement whereby the defendant
will remain in possession of the property as receiver upon
giving of a bond. Go Cotay continued as a common law
receiver, and on December 13, 1924, the Court of First
Instance issued an order in which it was recited that all of
the property of the partnership had disappeared, due to
losses sustained during the period from 1918 until 1922
and that, therefore, the plaintiff could recover nothing from
the defendant.
Issue: Whether or not defendant, as surety of the bond
executed by Go-Cotay, may be held liable for the loss
incurred by the partnership.
Ruling: Yes. From the evidence it appears that the
partnership capital was P4,779.39, and the net profits until
the year 1915 amounted to P5,551.40. Because some
books of account had been destroyed by white ants, 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.
From August 3, 1918, defendant assumed complete
responsibility for the business by becoming a receiver 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. 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 may have sustained. 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.
NOTES (wala siya nakasulat sa actual full text, more on
receivership man gud ang case. pero mao ni ang related sa
partnership na topic):
PARTNERSHIPS; LIQUIDATION OF THEIR BUSINESS;
DETERMINING PROFITS — When in liquidating a
partnership the profits for a given period of time cannot be
exactly determined for lack of evidence, but the profits for
certain periods prior and subsequent thereto are known,
the profits corresponding to the said given time may be
determined by finding the average of those profits already
known and multiplying it by the length of the time included
between said periods.
CASE #14 Soncuya vs. De Luna G.R. No. L-45464
April 28, 1939
Facts: On September 11, 1936, plaintiff Josue Soncuya
filed with the Court of First Instance of Manila an amended
complaint against Carmen de Luna in her own name and
as co-administratrix of the intestate estate of Librada
Avelino, in which, upon the facts therein alleged, he prayed
that defendant be sentenced to pay him the sum
of P700,432 as damages and costs.
Such damages were allegedly due to Carmen De Luna’s
administration, said to be fraudulent, of the partnership,
"Centro Escolar de Senoritas", of which plaintiff, defendant
and the deceased Librada Avelino were members. 
Issue: Whether or not plaintiff is entitled to damages.
Ruling: No. For the purpose of adjudicating to plaintiff
damages which he alleges to have suffered as a partner by
reason of the supposed fraudulent management of the
partnership referred to, it is first necessary that a liquidation
of the business thereof be made to the end that the profits
and losses may be known and the causes of the latter and
the responsibility of the defendant as well as the damages
which each partner may have suffered, may be
determined.  It is not alleged in the complaint that such a
liquidation has been effected nor is it prayed that it be
made.  Consequently, there is no reason or cause for
plaintiff to institute the action for damages which he claims
from the managing partner Carmen de Luna (Po Yeng
Cheo vs. Lim Ka Yam, 44 Phil., 172).
Having reached the conclusion that the facts alleged in the
complaint are not sufficient to constitute a cause of action
on the part of plaintiff as member of the partnership "Centro
Escolar de Senoritas" to collect damages from defendant
as managing partner thereof, without a previous liquidation,
we do not deem it necessary to discuss the remaining
question of whether or not the complaint is ambiguous,
unintelligible and vague.
CASE #15 Goquiolay vs. Sycip G.R. No. L-11840             claims filed by Yutivo Sons and Sing Yee.
July 26, 1960
Facts: Tan Sin An and Antonio C. Goquiolay" entered into
a general commercial partnership under the partnership
name "Tan Sin An and Antonio C. Goquiolay", for the
purpose of dealing in real state. The partnership had a
capital of P30,000.00, P18,000.00 of which was contributed
by Goquiolay and P12,000.00 by Tan Sin An. The
agreement lodged upon Tan Sin An the sole management
of the partnership affairs. It was also agreed that the
partnership was fixed at 10 years, it was stipulated that in
the event of death of any of the partners before the
expiration of the term, the partnership will not be dissolved
but will be continued by the heirs or assigns of the
deceased partner.  as such partner, and is now in estoppel to deny her position
The partnership purchased three (3) parcels of land,
assuming the payment of a mortgage obligation payable to
"La Urbana Sociedad Mutua de Construccion y
Prestamos". Another 46 parcels were purchased by Tan
Sin An in his individual capacity, and he assumed payment
of a mortgage debt thereon. The downpayment and the
amortization were advanced by Yutivo and Co., for the
account of the purchasers. The two separate obligations
were consolidated in an instrument executed by the
partnership and Tan Sin An, whereby the entire 49 lots
were mortgaged in favor of the "Banco Hipotecario de
Filipinas" (as successor to "La Urbana").
Tan Sin An died, leaving as surviving heirs his widow, Kong
Chai Pin, and 4 minor children. Defendant Kong Chai Pin
was appointed administratrix of the intestate estate of her
deceased husband. On the other hand, repeated demands
were made by Banco Hipotecario on the partnership and
Tan Sin An. Defendant Sing Yee, upon request of
defendant Yutivo Sons, paid the remaining balance of the
mortgage debt. Yutivo Sons and Sing Yee filed their claim
in the intestate proceedings of Tan Sin An for advances,
interest and taxes paid in amortizing and discharging their
obligations to “Banco Hipotecario.” Kong Chai Pin filed a
petition with the probate court for authority to sell all the 49
parcels of land and sold it to Sycip and Lee in consideration
of P37,000 and of the vendees assuming payment of the
When Goquiolay learned about the sale, he filed a petition
to set aside the order approving the sale in so far as his
interest over the parcels of land sold was concerned.
Probate court annulled the sale executed by the
administratrix with respect to Goquiolay’s interest thereon.
Issue: Whether or not Kong Chai Pin became a general
partner.
Ruling: Yes. By seeking authority to manage partnership
property, Tan Sin An's widow showed that she desired to
be considered a general partner. By authorizing the widow
to manage partnership property (which a limited partner
could not be authorized to do), Goquiolay recognized her
as a general partner, with authority to administer and
alienate partnership property.
Besides, as we pointed out in our main decision, the
heir ordinarily (and we did not say "necessarily") becomes
a limited partner for his own protection, because he would
normally prefer to avoid any liability in excess of the value
of the estate inherited so as not to jeopardize his personal
assets. But this statutory limitation of responsibility being
designed to protect the heir, the latter may disregard it and
instead elect to become a collective or general partner, with
all the rights and privileges of one.
The Articles did not provide that the heirs of the deceased
would be merely limited partner; on the contrary they
expressly stipulated that in case of death of either partner
"the co-partnership ... will have to be continued" with the
heirs or assigns. It certainly could not be continued if it
were to be converted from a general partnership into a
limited partnership, since the difference between the two
kinds of associations is fundamental; and specially because
the conversion into a limited association would leave the
heirs of the deceased partner without a share in the
management. Hence, the contractual stipulation does
actually contemplate that the heirs would become general
partners rather than limited ones.
Of course, the stipulation would not bind the heirs of the
deceased partner should they refuse to assume personal
and unlimited responsibility for the obligations of the firm.
The heirs, in other words, cannot be compelled to become
general partners against their wishes. But because they are
not so compellable, it does not legitimately follow that they
may not voluntarily choose to become general partners,
waiving the protective mantle of the general laws of
succession. And in the latter event, it is pointless to discuss
the legality of any conversion of a limited partner into a
general one. The heir never was a limited partner, but
chose to be, and became, a general partner right at the
start.
CASE #16 Buenaventura vs. David G.R. No. 12151,
January 19, 1918
Facts: A partnership was formed by David and
Buenaventura for the conduct of the business of real estate
brokers under the firm name of "Abelido & 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. Only
two profitable transactions were ever accomplished by the
firm during its existence. These produced a total income of
P42. It was agreed in the articles that the partnership
should be liquidated upon April 20, 1907 but upon February
1,1908, it was agreed in writing that the partnership should
not be liquidated until the sale of "Hacienda de Guitan" in
which the firm had become interested should be effected
with profit.
Long before the firm had come into existence David had
been the creditor of the owners. They agreed to convey the
Hacienda de Guitan to Abelido and Buenaventura to settle
the debt to David. The conveyance was executed and the
grantee named in the deed was David; and no reference
was made in this instrument to the firm of Abelido & Co., or
to Buenaventura as a partner therein. It further appears that
David proceeded to procure the registration of the hacienda
in his own name and a Torrens title was in due course
issued to him.
Allegedly, the property was sold to David for 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. A further statement was added to the effect
that Buenaventura should have the option to advance half
of the sum paid out by David in the event Buenaventura
should desire to have a half interest in the property in his
own name. 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.
Issue: Whether or not Buenaventura is entitled to his share
in Hacienda de Guitan by virtue of the partnership.
Ruling: No.  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 was rightly rejected by the court.
Furthermore it appears that the firm of Abelido & 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.
The situation then, as regards the title to the hacienda is
this: David, who suppied 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.
CASE #17 Emnace vs. CA G.R. No. 126334
November 23, 2001
Facts: 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 Divinagracia's withdrawal from the partnership.
Among the assets to be distributed were five (5) fishing
boats, six (6) vehicles, two (2) parcels of land located at
Sto. Niño 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 Tabanao's untimely demise in 1994, petitioner
failed to submit to Tabanao's heirs any statement of assets
and liabilities of the partnership, and to render an
accounting of the partnership's finances. Petitioner also
reneged on his promise to turn over to Tabanao's heirs the
deceased's 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.
Consequently, Tabanao' s heirs, respondents herein, filed
against petitioner an action for accounting, payment of
shares, division of assets and damages. Among the
defenses raised by petitioner was that prescription has
already set.
Issue: (1) Whether or not Vicente Tabanao’s spouse had a
legal capacity to sue; (2) Whether or not the action is
barred by prescription.
Ruling: (1) Yes. 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. Moreover, respondents became owners of
their respective hereditary shares from the moment Vicente
Tabanao died.
(2) No. 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.
For as long as the partnership exists, any of the partners
may demand an accounting of the partnership’s business.
Prescription of the said right starts to run only upon the
dissolution of the partnership when the final accounting is
done.
Contrary to petitioner’s 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:
virtual 1aw library
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 partnership’s business and assets.
Hence, the said action is not barred by prescription.
CASE #18 G.R. No. 159333 July 31, 2006
ARSENIO T. MENDIOLA, petitioner, vs. COURT OF
APPEALS, NATIONAL LABOR RELATIONS
COMMISSION, PACIFIC FOREST RESOURCES, PHILS.,
INC. and/or CELLMARK AB, respondents.
FACTS: Private respondent Pacfor is a corporation
organized and existing under the laws of California, USA.
Petitioner Mendiola (ATM) entered into a Side Agreement
with Pacfor (USA) who will set up arepresentative office in
the Philippines. They named said office as Pacfor Phils in
which petitioner is president. In the agreement, petitioner’s
base salary and the company’s overhead expenditures
shall be borne by the representative office and shall be
funded by Pacfor/ATM being equally owned on 50-50
equity by ATM and Pacfor-USA. The Side Agreement was
later amended through a Revised Operating and Profit-
Sharing Agreement where petitioner’s salary was
increased. However, both agreements show that the
operational expenses will be borne by the representative
office and funded by all parties “as equal partners,” while
the profits and commissions will be shared among them.
Years later, petitioner wrote Pacfor’s VP for Asia seeking
confirmation of his 50% equity of Pacfor Phils to which
Pacfor’s President replied that petitioner is not a part-
owner, his office being just a representative office, a
“theoretical company with the purpose of dividing the
income 50-50.” He even stressed that the petitioner knew
of this arrangement from beginning, having been the one to
propose to them the setting up of a representative office,
instead of a branch office, to save on taxes.
ISSUE: Whether an employer-employee relationship exists
between petitioner and private respondent Pacfor
Petitioner argues that he is an industrial partner of the
partnership he formed with private respondent Pacfor, and
also an employee of the partnership. Petitioner insists that
an industrial partner may at the same time be an employee
of the partnership, provided there is such an agreement,
which, in this case, is the "Side Agreement" and the
"Revised Operating and Profit-Sharing Agreement."
RULING: Petitioner is an employee of private respondent
Pacfor and that no partnership or co-ownership exists
between the parties. In a partnership, the members
become co-owners of what is contributed to the firm capital
and of all property that may be acquired thereby and
through the efforts of the members. The property or stock
of the partnership forms a community of goods, a common
fund, in which each party has a proprietary interest. In fact,
the New Civil Code regards a partner as a co-owner of
specific partnership property. Each partner possesses a
joint interest in the whole of partnership property. If the
relation does not have this feature, it is not one of
partnership. This essential element, the community of
interest, or co-ownership of, or joint interest in partnership
property is absent in the relations between petitioner and
private respondent Pacfor. Petitioner is not a part-owner of
Pacfor Phils. William Gleason, private respondent Pacfor's
President established this fact when he said that Pacfor
Phils. is simply a "theoretical company" for the purpose of
dividing the income 50-50. He stressed that petitioner knew
of this arrangement from the very start, having been the
one to propose to private respondent Pacfor the setting up
of a representative office, and "not a branch office" in the
Philippines to save on taxes. Thus, the parties in this case,
merely shared profits. This alone does not make a
partnership.
Besides, a corporation cannot become a member of a
partnership in the absence of express authorization by
statute or charter. This doctrine is based on the following
considerations: (1) that the mutual agency between the
partners, whereby the corporation would be bound by the
acts of persons who are not its duly appointed and
authorized agents and officers, would be inconsistent with
the policy of the law that the corporation shall manage its
own affairs separately and exclusively; and, (2) that such
an arrangement would improperly allow corporate property
to become subject to risks not contemplated by the
stockholders when they originally invested in the
corporation. No such authorization has been proved in the
case at bar.
CASE #19 G.R. No. 3186 March 7, 1907
THE GREAT COUNCIL OF THE UNITED STATES OF
THE IMPROVED ORDER OF RED MEN, plaintiff-
appellee, vs. THE VETERAN ARMY OF THE
PHILIPPINES, defendant-appellant.
FACTS: Pursuant to the Constitution of the Veteran Army
of the Phils, several posts were organized. Among the
posts thus organized is the General Henry W. Lawton Post,
No. 1. On the 1st day of March, 1903, a contract of lease of
parts of a certain buildings in the city of Manila was signed
by W.W. Lewis, E.C. Stovall, and V.O., Hayes, as trustees
of the Apache Tribe, No. 1, Improved Order of Red Men, as
lessors, and Albert E. McCabe, citing for and on behalf of
Lawton Post, Veteran Army of the Philippines as lessee.
The lease was for the term of two years commencing
February 1, 903, and ending February 28, 1905. The
Lawton Post occupied the premises in controversy for
thirteen months, and paid the rent for that time. It them
abandoned them and this action was commenced to
recover the rent for the unexpired term. Judgment was
rendered also against the Veteran Army of the Philippines
for P1,738.50, and the costs. From this judgment, the last
named defendant has appealed.
It is claimed by the appellant that the action can not be
maintained by the plaintiff, The Great Council of the United
States of the Improved Order of Red Men, as this
organization did not make the contract of lease.  signature thereto. F
It is also claimed that the action can not be maintained
against the Veteran Army of the Philippines because it
never contradicted, either with the plaintiff or with Apach
Tribe, No. 1, and never authorized anyone to so contract in
its name.
ISSUE: WON there was a partnership created by a contract
RULING: The view most favorable to the appellee is the
one that makes the appellant a civil partnership. Assuming
that is such, and is covered by the provisions of title 8, book
4 of the Civil Code, it is necessary for the appellee to prove
that the contract in question was executed by some
authorized to so by the Veteran Army of the Philippines.
Article 1695 of the Civil Code provides as follows:  having issued to the private respondent the receipt and the
Should no agreement have been made with regard to the
form of management, the following rules shall be
observed:  ISSUE: WON Private respondent is a partner of the
1 All the partners shall be considered as agents, and
whatever any one of them may do by himself shall bind the
partnership; but each one may oppose the act of the others
before they may have produced any legal effect.
One partner, therefore, is empowered to contract in the
name of the partnership only when the articles of
partnership make no provision for the management of the
partnership business. In the case at bar we think that the
articles of the Veteran Army of the Philippines do so
provide. 
hey declare what the duties of the several officers are. In
these various provisions there is nothing said about the
power of making contracts, and that faculty is not expressly
given to any officer. We think that it was, therefore,
reserved to the department as a whole; that is, that in any
case not covered expressly by the rules prescribing the
duties of the officers, the department were present. It is
hardly conceivable that the members who formed this
organization should have had the intention of giving to any
one of the sixteen or more persons who composed the
department the power to make any contract relating to the
society which that particular officer saw fit to make, or that
a contract when so made without consultation with, or
knowledge of the other members of the department should
bind it.
CASE #20 G.R. No. 70926 January 31, 1989
DAN FUE LEUNG, petitioner, vs. HON. INTERMEDIATE
APPELLATE COURT and LEUNG YIU, respondents.
FACTS: This case originated from a complaint filed by
respondent Leung Yiu with the then Court of First Instance
of Manila, Branch II to recover the sum equivalent to
twenty-two percent (22%) of the annual profits derived from
the operation of Sun Wah Panciteria since October, 1955
from petitioner Dan Fue Leung.
The Sun Wah Panciteria, a restaurant, located at Florentino
Torres Street, Sta. Cruz, Manila, was established sometime
in October, 1955. It was registered as a single
proprietorship and its licenses and permits were issued to
and in favor of petitioner Dan Fue Leung as the sole
proprietor. Respondent Leung Yiu adduced evidence
during the trial of the case to show that Sun Wah Panciteria
was actually a partnership and that he was one of the
partners having contributed P4,000.00 to its initial
establishment.
The private respondents evidence is summarized as
follows:
About the time the Sun Wah Panciteria started to become
operational,
1) Leung Yiu gave P4,000.00 as his contribution to
the partnership. This is evidenced by a receipt
wherein the petitioner acknowledged his
acceptance of the P4,000.00 by affixing his
2) Leung Yiu received from the petitioner the amount
of P12,000.00 covered by the latter's Equitable
Banking Corporation Check from the profits of the
operation of the restaurant
Dan Fue Leung denied having received from the private
respondent the amount of P4,000.00 and alleged that did
not receive any contribution at the time he started the Sun
Wah Panciteria. He used his savings from his salaries as
an employee at Camp Stotsenberg in Clark Field and later
as waiter at the Toho Restaurant amounting to a little more
than P2,000.00 as capital in establishing Sun Wah
Panciteria. Petitioner presented various government
licenses and permits showing the Sun Wah Panciteria was
and still is a single proprietorship solely owned and
operated by himself alone. Fue Leung also flatly denied
Equitable Banking Corporation's Check No. 13389470 B in
the amount of P12,000.00
petitioner in Sun Wah Panciteria?
HELD: The private respondent is a partner of the petitioner
in Sun Wah Panciteria. The requisites of a partnership
which are —
1) two or more persons bind themselves to contribute
money, property, or industry to a common fund; and
2) intention on the part of the partners to divide the profits
among themselves (Article 1767, Civil Code) have been
established.
As stated by the respondent, a partner shares not only in
profits but also in the losses of the firm. If excellent
relations exist among the partners at the start of business
and all the partners are more interested in seeing the firm
grow rather than get immediate returns, a deferment of
sharing in the profits is perfectly plausible. It would be
incorrect to state that if a partner does not assert his rights
anytime within ten years from the start of operations, such
rights are irretrievably lost. The private respondent's cause
of action is premised upon the failure of the petitioner to
give him the agreed profits in the operation of Sun Wah
Panciteria. In effect the private respondent was asking for
an accounting of his interests in the partnership.
TOPIC: Rights and Obligations of a Partner
It is Article 1842 of the Civil Code in conjunction with
Articles 1144 and 1155 which is applicable. Article 1842
states:
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 or any agreement to the
contrary.
Regarding the prescriptive period within which the private
respondent may demand an accounting, Articles 1806,
1807, and 1809 show that the right to demand an
accounting exists as long as the partnership exists.
Prescription begins to run only upon the dissolution of the
partnership when the final accounting is done.
Considering the facts of this case, the Court may decree a
dissolution of the partnership under Article 1831 of the Civil
Code which, in part, provides:
Art. 1831. On application by or for a partner the court shall
decree a dissolution whenever:
xxx xxx xxx
(3) A partner has been guilty of such conduct as tends to
affect prejudicially the carrying on of the business;
(4) A partner willfully or persistently commits a breach of
the partnership agreement, or otherwise so conducts
himself in matters relating to the partnership business that it
is not reasonably practicable to carry on the business in
partnership with him; xxx xxx xxx
(6) Other circumstances render a dissolution equitable.
There shall be a liquidation and winding up of partnership
affairs, return of capital, and other incidents of dissolution
because the continuation of the partnership has become
inequitable.
CASE #21
CASE #22 G.R. No. 160347; November 29, 2006
ARCADIO and MARIA LUISA CARANDANG, Petitioners,
vs. HEIRS OF QUIRINO A. DE GUZMAN, namely:
MILAGROS DE GUZMAN, VICTOR DE GUZMAN,
REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and
QUIRINO DE GUZMAN, JR., Respondents.
FACTS: Spouses Carandang and the decedent Quirino de
Guzman were stockholders and corporate officers of
Mabuhay Broadcasting System (MBS). The Carandangs
have equities at 54 % while Quirino has 46%.
When the capital stock of MBS was increased on
November 26, 1983, the Carandangs subscribed P345,000
from it, P293,250 from the said amount was loaned by
Quirino to the Carandangs. In the subsequent increase in
MBS’ capital stock on March 3, 1989, the Carandangs
subscribed again to the increase in the amount of P93,750.
But, P43,125 out of the mentioned amount was again
loaned by Quirino.
When Quirino sent a demand letter to the Carandangs for
the payment of the loan, the Carandangs refused to pay.
They contend that a pre-incorporation agreement was
executed between Arcadio Carandang and Quirino,
whereby Quirino promised to pay for the stock
subscriptions of the Arcadio without cost, in consideration
for Arcadio’s technical expertise, his newly purchased
equipment, and his skill in repairing and upgrading
radio/communication equipment therefore, there is no
indebtedness on the part of the Carandangs.
Spouses Carandang alleged that three of the four checks
used to pay their stock subscriptions were issued in the
name of Milagros de Guzman, the decedent’s wife. Thus,
Milagros should be considered as an indispensable party in
the complaint. Being such, the failure to join Milagros as a
party in the case should cause the dismissal of the action
by reason of a jurisprudence stating that: “(i)f a suit is not
brought in the name of or against the real party in interest,
a motion to dismiss may be filed on the ground that the
complaint states no cause of action."
ISSUE: WON Milagros de Guzman is a co-owner hence
should be impleaded
RULING: Assuming that the four checks created a debt for
which the spouses Carandang are liable, such credits are
presumed to be conjugal property. There being no
evidence to the contrary, such presumption subsists. As
such, Quirino de Guzman, being a co-owner of specific
partnership property, is certainly a real party in interest.
Dismissal on the ground of failure to state a cause of
action, by reason that the suit was allegedly not brought by
a real party in interest, is therefore unwarranted.
In this connection, Article 1811 of the Civil Code provides
that "[a] partner is a co-owner with the other partners of
specific partnership property." Taken with the presumption
of the conjugal nature of the funds used to finance the four
checks used to pay for petitioners’ stock subscriptions, and
with the presumption that the credits themselves are part of
conjugal funds, Article 1811 makes Quirino and Milagros de
Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros
de Guzman may separately bring an action for the recovery
thereof. In the fairly recent cases of Baloloy v. Hular28 and
Adlawan v. Adlawan, we held that, in a co-ownership, co-
owners may bring actions for the recovery of co-owned
property without the necessity of joining all the other co-
owners as co-plaintiffs because the suit is presumed to
have been filed for the benefit of his co-owners. In the latter
case and in that of De Guia v. Court of Appeals, we also
held that Article 487 of the Civil Code, which provides that
any of the co-owners may bring an action for ejectment,
covers all kinds of action for the recovery of possession
CASE #23 G.R. No. L-14832 January 28, 1961
NG CHO CIO ET AL., Plaintiffs-Appellants, vs. NG
DIONG, Defendant-Appellant. C. N. HODGES, ET
AL., Defendants-Appellees.
FACTS: Ng Diong et. al entered into a contract of general
co-partnership under the name NG CHIN BENG
HERMANOS. The partnership was to exist for a period of
10 years from May 23, 1925 and Ng Diong was named as
managing partner. On May 10, 1935, the articles of co-
partnership were amended by extending its life to 16 years
more to be counted from May 23, 1925, or up to May 2
When partnership was declared insolvent upon petition of
its creditors, Crispino Melocoton was elected as assignee.
As a consequence, the titles to the seven parcels of land
abovementioned were issued in his name as assignee. In
due time, the creditors filed their claims in said proceeding
which totalled P192,901.12.chan\
The partners of the insolvent firm and Julian Go, who
acquired most of the claims of the creditors, filed a petition
with the insolvency court praying at the insolvency
proceedings be closed or terminated cause the composition
agreement the creditors had submitted relative to the
settlement of the claims. The court, acting favorably on the
petition, ordered, closure of the proceedings directing the
assignee to turn and reconvey all the properties of the
partnership back to the latter as required by law.  CASE #25 REPUBLIC OF THE PHILIPPINES, plaintiff-
The indebtedness of the partnership to C. N. Hodges which
was the subject of the foreclosure proceedings in a
separate case. In order to pay off the same and raise
necessary funds to pay the other obligations of the
partnership, it was deemed proper and wise by Ng Diong,
who continued to be the manager of the partnership, to sell
all its properties mortgaged to Hodges in order that the
excess may be applied to the Payment of said other
obligations, and to that effect Ng Diong executed on a deed
of sale thereof in favor of Hodges.
ISSUE: WON the sale of Ng Diong to CN Hodges was valid
RULING: Since then partnership became, restored to its
status quo. It again reacquired its personality as such with
Ng Diong as its general manager. From that date on its
properties ceased to be in custodia legis. Such being the
case, it is obvious that when Ng Diong as manager of the
partnership sold the seven parcels of land to C. N. Hodges
on by virtue of a deed of sale, the properties were already
was at liberty to do what it may deem convenient and
proper to protect its interest. And acting accordingly, Ng
Diong made the sale in the exercise of the power granted
to him by the partnership in its articles of co-partnership.
We do not, therefore, find anything irregular in this
actuation of Ng Diong.
Since at the time of the sale the life of the partnership had
already expired, the question may be fixed: Who shall wind
up it business affairs? May its manager still execute the
sale of its properties to C. N. Hodges as was done by Ng
Diong? The answer to this question cannot but be in the
affirmative because Ng Diong was still the managing
partner of the partnership and he had the necessary
authority to liquidate its affairs under its articles of co-
partnership. 
CASE #24 G.R. No. L-23712 April 29, 1968
appellee vs. RAMONA RUIZ, DOMINGO PINTO,
BONIFACIO PINTO, VICTORIA PINTO, MARIA PINTO,
ET AL., defendants-appellants.
FACTS: On May 28, 1937 the registered owner of the
subject parcel of land, Cayetano Pinto sold a portion of 3
hectares of land in favor of Jacobo Pinto, married to
Herminia Tinonas, for the sum of P500.00. The Deed of
Sale executed by the deceased Cayetano Pinto in favor of
Jacobo Pinto who died sometime in 1950, was never
registered in the Office of the Register of Deeds of Isabela.
Ramona Ruiz and her children executed an extrajudicial
partition of the entire land on October 12, 1951 which was
registered for which a Transfer Certificate of Title was
issued thereto. On June 29, 1956, the widow Herminia
Tinonas and heirs of the late Jacobo Pinto filed an action
against the widow Ramona Ruiz and heirs of the late
Cayetano Pinto for the conveyance of the portion of 3
hectares, sold and conveyed by the late Cayetano Pinto in
favor of the late Jacobo Pinto. The Court of First Instance
of Isabel rendered a decision declaring that the Deed of
Sale null and void ab initio, for being in violation of Section
116 of the Public Land Law.
The plaintiffs appealed to the Supreme Court which was
dismissed, thereby terminating Civil Case No. Br. II-90 of
the Second Branch of the Court of First Instance of Isabela.
The appealed decision became final and executory.
Defendants interposed the present appeal, raising as main
issue the alleged lack of cause of action of the complaint. It
is now claimed that (1) the document executed by
Cayetano Pinto was not a consummated contract of sale,
but a mere unilateral promise to sell without consideration
and, consequently, was unenforceable and without effect;
(2) assuming the contract to be one of sale within the
prohibited 5-year period and, therefore, null and void, then
under Article 1409 of the Civil Code, said contract is
inexistent and without effect and Cayetano Pinto cannot be
considered to have committed any violation of the Public
Land law at all; (3) to order the reversion of the land to the
government would render nugatory the policy of the State
to promote the spread of small land-ownership and
preserve land grants in the hands of the underprivileged;
(4) the violation of Commonwealth Act 141 by Cayetano
Pinto, if there was any, cannot affect the rights of his heirs,
particularly of his widow, who allegedly owned 1/2 of the
land; (5) the Original Certificate of Title No. I-1600 in the
name of Cayetano Pinto having been cancelled and
substituted by Transfer Certificate of Title No. T-7196,
issued in the names of his widow and heirs on February 2,
1956, to order their cancellation and the reversion of the
property to the government would be contrary to the
principle underlying the Torrens System and (6) the
prohibition under Section 118 of Commonwealth Act 141
contemplates of the alienation or encumbrance of the entire
land grant and not merely of a portion thereof like the one
in the present case.
ISSUE: Whether or not the deed of sale was null and void
RULING: Yes. express provision of Section 118 of
Commonwealth Act 141, any transfer or alienation of a
homestead grant within five years from the issuance of the
patent is forbidden, making said alienation null and void,
and constituting a cause for reversion of the homestead to
the State. In other words, it was the transgression of the
law that nullifies and renders the deed of conveyance null
and void and without effect; not vice-versa. Inexistence in
law merely signifies that the act cannot be taken into
account as source of rights or obligations for parties as well
as strangers; as if it had never existed. Certainly, the law
cannot destroy or wipe out physical existence, and it has
never attempted to do so. It may likewise be stated that
while the prohibition against the alienation of the land grant
is designed to preserve it within the family of the
homesteader and to promote small land ownership in this
country it is equally true that this policy of the State cannot
be invoked to condone a violation of the Public Land Act
and withhold enforcement of the provision directing the
reversion of the property to the grantor in case of such
violation. For, the prohibitory provision against any
alienation or encumbrance of the land grant is not only
mandatory, but is considered a condition attached to the
approval of every application.
CASE #26 [G.R. No. L-29785. January 28, 1971.]
MANILA STEVEDORING & GENERAL WORKERS
UNION (PTG-WO), Petitioner, v. HON. GREGORIO T.
LANTIN, Judge of the Court of First Instance of Manila;
BENITO G. NAVARRO; NATIONAL WORKERS &
STEVEDORING UNION; PHILIPPINE STEAM
NAVIGATION COMPANY, and EMILIANO ROMEO,
Respondents.
FACTS: Benito Navarro and Emiliano Romeo were, prior to
June 20, 1967, partners in an enterprise known as the
"Romeo and Navarro Stevedoring Service." As far back as
1948, the two were engaged in general stevedoring work at
the north harbor of the Port of Manila and were servicing
the vessels of the respondent Company docking thereat.
On June 20, 1967, however, the partnership broke up and
both Navarro and Romeo formed their respective separate
work gangs. Following this event, the stevedores and
workers under Navarro joined the National Union while, at
about the same time, those of Romeo joined the Manila
Union.
Subsequently the Manila Union presented to the Company
demands for union recognition, privileges and fringe
benefits, and the execution of a collective bargaining
agreement. These demands were, however, rejected by the
Company, the reason given being the absence of
employer-employee relationship with the members of the
Manila Union. On May 17, 1968 the latter union filed an
unfair labor practice charge against the Company with the
Court of Industrial Relations. The Company enter into a
return-to-work agreement with the Manila Union. This
agreement, in substance, bound the Company, in
consideration of the lifting of the strike, "to enter into a
contract with a CONTRACTOR to be chosen by the Union."
According to Navarro and the National Union, following the
execution of the return-to-work agreement mentioned
above, they found themselves effectively prevented by
members of the Manila Union from doing their share of the
stevedoring work on the Company. Navarro and National
Union resorted to a civil suit in the Court of First Instance of
Manila against the Manila Union, the Company and
Emiliano Romeo for breach of contract and for damages.
On June 13, 1968 the Manila Union sought the dismissal of
the case on the ground that it involved a labor dispute and
was therefore outside the jurisdiction of the Court of First
Instance, averring that the Court of Industrial Relations had
earlier taken cognizance of the same issues raised in the
complaint filed by Navarro and the National Union. After
hearing had on the motion to dismiss, the respondent court,
presided by Judge Gregorio Lantin, issued a resolution
denying the motion. A subsequent motion for
reconsideration did not fare any better. Hence, this petition.
ISSUE: Whether or not the respondent Court of First
Instance has jurisdiction over the case
RULING: Yes. The subject-matter of the complaint, thus
understood, clearly falls within the jurisdiction of the Court
of First Instance. The actionable wrong sought to be
redressed consists in the exclusion, by means of violence
and intimidation, of an independent contractor and his men
from work which properly belongs to them, by another
contractor and the latter’s followers under the guise of
legitimate unionism. Damages in the sum of P15,000.00
are additionally claimed.
While the complaint charges the Manila Union as having
acted concertedly after failing to obtain its demand for
"recognition privileges and other fringe benefits" and "the
execution of a collective bargaining contract," this does not
form the substance of the plaintiff’s causes of action. The
rights which Navarro and the National Union claim derive,
not from any aspect of employer-employee relationship, but
rather primarily from Navarro’s stevedoring contract with
the Company. The Manila Union’s allegedly coercive
interference with this contract is the mischief sought to be
removed. Parenthetically, the petitioner’s charge that the
entire controversy among the parties to this case boils
down to a labor dispute cognizable by the Court of
Industrial Relations, short of proof, "does not suffice to oust
the jurisdiction of the court of first instance any more than a
simple averment that ‘no labor dispute exists’ would suffice
to confer it."
CASE #27 G.R. No. L-28967 July 22, 1975
AMELIA G. TIBLE, petitioner-administratrix, vs. JOSE
C. AQUINO, respondent-claimant.
FACTS: Petitioner was appointed administratrix of the
Intestate Estate of the late Congressman Emilio M. Tible
who died on August 14, 1957. Private respondent-claimant
Jose C. Aquino filed with the probate court a claim against
the estate for P30,000.00 on February 6, 1959, or almost
eleven months after the date of the first publication of the
notice to creditors.
The two conflicting versions can be simplified thus —
private respondent Aquino claims that Tible borrowed from
him P50,000.00 and then bought from him 2,000 hectares
of his timberland in Agusan for P107,000.00; that Tible still
owed him a balance of P30,000.00 representing the unpaid
balance of the consideration of the sale of the timberland at
the time of Tible's death. On the other hand, petitioner
claims that the consideration for the sale of the timberland
of Aquino to Tible was only P50,000.00 which was already
paid; that on April 9, 1955, Aquino and Tible agreed on an
increase of the sale price of the timberland from
P50,000.00 to P80,000.00, so Tible executed promissory
notes in favor of Aquino for the balance of P30,000.00
subject to the condition that payment of those promissory
notes would depend upon the operation by Tible of the
timberland; that after the foregoing transaction, Aquino
borrowed several amounts from Tible (total P50,000.00) but
payment of said loans was subject to the condition that if
Aquino cannot pay the loans to Tible, the latter would be
made a partner by Aquino in the operation of the remaining
2,000 hectares of timberland controlled by Aquino. It is very
clear that Aquino's version speaks of two transactions —
loan of P50,000.00 to Tible and sale of 2,000 hectares of
timberland to Tible for P107,000.00. Petitioner's version
speaks of three transactions sale of 2,000 hectares of
Aquino's timberland to Tible for P50,000.00; novation of the
contract of sale by increasing the consideration from
P50,000.00 to P80,000.00, payment of the balance of
P30,000.00 subject to the condition that payment would
depend upon Tible's operation of the timberland; and the
supposed loans (total P50,000.00) given by Tible to
Aquino, which if not paid by Aquino would render it
obligatory upon the latter to make Tible a partner in the
operation of his remaining timberland. The trial court
rendered judgment in favor of the petitioner-administratrix
and ordered him to pay to the estate of Tible the amount of
P50,000.00 as his indebtedness to the deceased. This
decision was reversed by the respondent appellate court.
ISSUE: Whether or not the CA erred in resolving the case
in favor of respondent Aquino
RULING: We find it difficult to dispute private respondent's
argument that the real solution of this case hinges on
findings based on an evaluation of evidence as to the true
nature of the transaction that transpired between Tible and
Aquino. The crucial issue of whether or not Tible borrowed
from Aquino P50,000.00 before the former bought from
Aquino 2,000 hectares of timberland for P107,000.00 was
resolved by the respondent Appellate Court in favor of
respondent Aquino in its aforequoted discussion on the
basis of the evidence presented by both the petitioner and
private respondent. Here, evidence of a nature that
approaches the approximation of moral certainty, and not
merely preponderance of evidence, indicates the real
transaction that took place between Aquino and Tible was
that Tible borrowed P50,000.00 from Aquino before Tible
bought 2,000 hectares of timberland from Aquino for an
agreed consideration of P107,000.00. Respondent
Appellate Court's ruling relative to the four promissory
notes as executed by Tible in favor of Aquino to pay the
balance of the agreed consideration of the sale, that "the
subsequent agreement between Aquino and Tible as to
another mode of payment by giving the latter more time to
pay does not necessarily constitute novation as
contemplated in Article 1291 of the New Civil Code on the
well settled principle on novation that a "mere extension of
payment and the addition of another obligation not
incompatible with the old one is not a novation thereof", is
well-buttressed by the evidence. Neither do We see any
reason to disagree with respondent Appellate Court's ruling
that "the condition that payment of amounts embodied in
the promissory notes shall be dependent upon Tible's
operation of the forest concession he acquired from Aquino
is undoubtedly a void conditional obligation since its
fulfillment is made to depend upon the exclusive will of the
debtor, Tible (Art. 1115, Civil Code)". The payment of the
remaining balance of the purchase price of the 2,000
hectares of timberland cannot be made to depend on the
exclusive will of the debtor, Tible, whether or not he will
operate the timber concession.
CASE #28 G.R. No. L-59956 October 31, 1984
ISABELO MORAN, JR., petitioner vs. THE HON. COURT
OF APPEALS and MARIANO E. PECSON, respondents.
FACTS: Pecson and Moran entered into an agreement
whereby both would contribute:
• P15,000 each for the purpose of printing 95,000
posters, with Moran actually supervising the work;
• that Pecson would receive a commission of P l,000
a month starting on April 15, 1971 up to December 15,
1971;
• that on December 15, 1971, a liquidation of the
accounts in the distribution and printing of the 95,000
posters would be made
Only a few posters were printed and thus, Moran executed
in favor of Pecson a promissory note in the amount of
P20,000 payable in two equal installments, the whole sum
becoming due upon default in the payment of the first
installment on the date due, complete with the costs of
collection.
Private respondent Pecson filed with the Court of First
Instance of Manila an action for the recovery of a sum of
money and alleged in his complaint three (3) causes of
action, namely: (1) on the alleged partnership agreement,
the return of his contribution of P10,000.00, payment of his
share in the profits that the partnership would have earned,
and, payment of unpaid commission; (2) on the alleged
promissory note, payment of the sum of P20,000.00; and,
(3) moral and exemplary damages and attorney's fees.
The CFI rendered a decision ordering defendant Moran, Jr.
to return to plaintiff Pecson the sum of P17,000.00, with
interest. Parties appealed to the CA which rendered a
decision against the petitioner to pay, among other,
P47,500 amount that could have accrued to Pecson under
their agreement.
ISSUE/S: Whether or not CA grievously erred in holding
petitioner liable to respondent in the sum of P47,500 as the
supposed expected profits due him
RULING: Yes, the CA erred in holding petitioner liable to
respondent in the sum of P47,500 as the supposed
expected profits due him. The rule is, when a partner who
has undertaken to contribute a sum of money fails to do so,
he becomes a debtor of the partnership for whatever he
may have promised to contribute and for interests and
damages from the time he should have complied with his
obligation.
Thus in Uy v. Puzon (79 SCRA 598), we allowed a total of
P200,000.00 compensatory damages in favor of the
appellee because the appellant therein was remiss in his
obligations as a partner and as prime contractor of the
construction projects in question. This case was decided on
a particular set of facts. We awarded compensatory
damages in the Uy case because there was a finding that
the constructing business is a profitable one. Besides, there
was evidence to show that the partnership made some
profits. The profits on two government contracts worth were
not speculative. In the instant case, there is no evidence
whatsoever that the partnership between the petitioner and
the private respondent would have been a profitable
venture. There is therefore no basis for the award of
speculative damages in favor of the private respondent.
Furthermore, in the Uy case, only Puzon failed to give his
full contribution while Uy contributed much more than what
was expected of him. In this case, however, there was
mutual breach. Private respondent failed to give his entire
contribution in the amount of P15,000.00. He contributed
only P10,000.00. The petitioner likewise failed to give any
of the amount expected of him. He further failed to comply
with the agreement to print 95,000 copies of the posters.
Instead, he printed only 2,000 copies.
Being a contract of partnership, each partner must share in
the profits and losses of the venture. That is the essence of
a partnership. And even with an assurance made by one of
the partners that they would earn a huge amount of profits,
in the absence of fraud, the other partner cannot claim a
right to recover the highly speculative profits.
CASE #29 G.R. No. 77656 August 31, 1987
ROBERTO ANTONIO, DIONISIO BENSION, CONRADA
CHAN, MARINO CUMLAT, VICENTE DIMACUHA,
PROCOPIO ESPEJON, RODRIGO FORBES, MANITO
FUENTES, ET AL., petitioner vs. CA
FACTS: The petitioners are lessees of an apartment
building located foreclosed by the Government Service
Insurance System (GSIS) after its original owner failed to
pay back his loan.
After due notice to the petitioners and all others concerned,
the property was sold to the private respondent at a public
bidding held on July 29, 1982. The petitioners deliberately
did not participate in the said bidding because they
believed that, as tenants therein, they have priority in law to
acquire the property. After the sale, the possession and
administration were awarded to private respondent. A
conditional deed of sale was executed in favor of private
respondent by the GSIS stating that for all intents and
purposes, the private respondent is the owner of the
property. The GSIS advised the petitioners that they should
now pay their rent and arrearages to the private
respondent. But despite repeated written demands, the
petitioners failed and refused to settle their accounts. The
private respondent filed a complaint for ejectment against
the petitioners with the Metropolitan Trial Court in that
locality. Said court rendered judgment ordering the
petitioners to vacate the premises occupied by them. Upon
appeal, the respondent Regional Trial Court affirmed in toto
the judgment of the Metropolitan Trial Court. The
petitioners then filed a petition for review on certiorari with
the respondent Court of Appeals which rendered a decision
dismissing the petition for review. The judgment became
final and executory
On February 23, 1987, the petitioners, through their new
counsel, filed an "Appearance And Motion For Leave To
Admit Motion For Reconsideration, together with the Motion
For Reconsideration With Prayer For Issuance Of
Temporary Restraining Order," with the respondent Court
of Appeals. They moved that the respondent Court of
Appeals admit their motion for reconsideration, which was
obviously filed beyond the reglementary period for filing the
same, alleging that their counsel of record abandoned them
and migrated to the United States without at least informing
them that a decision was rendered against them. The
petitioners' motion was denied. Thus, in an attempt to belie
the preceding observation, the petitioners submitted to this
Court another affidavit executed by Mr. Obligar dated
March 17, 1987. This affidavit stated that the law firm of
Funelas, Perez and Associates was actually composed of
only Atty. Funelas; that Atty. Perez was only a partner in
name, never handled any case of the law office, and did not
actually report in said office; that there were no associates
of Atty. Funelas; and that said law firm was dissolved in
August, 1986.
ISSUE: Whether or not said affidavit may be given
evidentiary value before the Court
RULING: This affidavit has no evidentiary value. It was
executed and submitted after the questioned resolution was
already promulgated. Hence, it could not have affected or
influenced the adjudication of the said resolution.
It is safe to presume that a law firm which registered and
represented itself as such, with at least two named
partners, is composed of at least two lawyers. And if it is
true that this law office was earlier dissolved, the winding
up process is presumed to have been performed in a
regular manner, with all the obligations properly accounted
for. Very concrete evidence must be presented in order that
these presumptions may be rebutted. At most, the affidavit
must be classified as a mere afterthought and a futile
attempt to contradict the findings of the respondent Court of
Appeals. When a party appears by attorney in an action or
proceeding all court, all notices required to be given therein
must be given to their attorney and not to the client. Hence,
a notice given to the client and not to his attorney is not a
notice in law. The rule in this jurisdiction is that the client is
bound by the negligence or failings of counsel.
CASE #30 [G.R. No. 91622. April 6, 1993.]
P.T. CERNA CORPORATION, Petitioner, v. COURT OF
APPEALS, PETER SCHEIDER and JUAN BUNYI,
Respondents.
FACTS: petitioner and private respondent Scheider, claim
ownership over the three jaw crushers. Petitioner anchored
its claim of ownership of the first rock crusher on the
"Customer’s Copy" of Invoice No. 43984, issued in the
name of the corporation by Bormaheco., Inc. for
P165,000.00. As to the other two crushers, it presented
Invoice No. 601-A. All of these purchases were purportedly
paid through the corporation checks duly signed by Noe de
la Cerna and Edwin Tiu, its President and Vice-President,
respectively.
Petitioner’s president alleged further an agreement was
entered into by private respondent Scheider to quarry
stones and crush them for sale to the public; that he was
able to find a suitable land for the quarry and had
negotiated for its lease. Private respondent Scheider, was
supposed to be the technical man, and was thus in
possession of said machineries for a complete check-up.
However, allegedly, private respondents Scheider and
Bunyi took advantage of their possession and proceeded to
organize their own company, together with Scheider’s in-
laws and other private persons, to engage in the quarrying
of stones and rocks and without the knowledge of the
corporation, using the litigated rock crushers for said
purpose.
Private respondent Scheider, on the other hand, claimed
that the three rock crushers were actually purchased by
him and in reality, are owned by him. Private respondent
Scheider, however, admitted that the purchase price of the
crushers was paid for by petitioner, but only to set off
outstanding obligations of the same to him due to various
spare parts sold to petitioner, prior to the dispute,
amounting to over P500,000.00.
ISSUE: Who, as between the claimants, is the rightful
owner?
RULING: Petitioner Schneider is the rightful owner. It has
been held time and again that the issuance of a sales
invoice does not prove transfer of ownership of the thing
sold to the buyer. An invoice is nothing more than a
detailed statement of the nature, quantity and cost of the
thing sold and has been considered not a bill of sale.
Thus, petitioner’s contention that the issuance of the
invoices in its name occurred much earlier than the
execution of the Deeds of Sale between private respondent
Scheider and the vendor corporations, becomes
inconsequential. Inasmuch as petitioner’s invoices are
mere statements regarding the thing sold, as opposed to
private respondent Scheider’s Deeds of Sale which are
public documents, petitioner’s claim of ownership cannot
prosper The Deeds of Sale, being notarial documents, are
evidence of the facts in clear, unequivocal manner therein
expressed. As such, they have in their favor, the
presumption of regularity.
With regard to petitioner’s attempt to discredit the sale of
the equipment to private respondent Scheider by alleging
fraud employed by private respondents Scheider and
Bunyi, who purportedly reneged on their obligations with
respect to an alleged joint venture. The latter undertaking,
as professed by petitioner, was entered into by herein
claimant parties, with private respondents as the technical
partners. However, petitioner failed to substantiate this
claim. No sufficient evidence, as held by the trial court, was
adduced to even prove the existence of said agreement. To
prove fraud, it has been held that full and convincing
evidence is required. This again, petitioner was not able to
accomplish.
In civil cases, the burden of proof rests upon the party who,
as determined by the pleadings or the nature of the case,
asserts the affirmative of an issue. In this case, the burden
lies on the petitioner, who is duty bound to prove the
allegations in its complaint.
C. PROPERTY RIGHTS OF A PARTNER ARTICLES
1810-1814
CASE #1 CLEMENTE vs. GALVAN G.R. No. L-45662
April 26, 1939
FACTS: Plaintiff (P) and Defendant (D) organized a civil
partnership to engage in the manufacture and sale of paper
and other stationery. They contributed equal amounts of
money. D was entrusted with management. In less than a
year, P asked for the dissolution of the partnership. D
agreed, with a condition that P reimburse him for half the
amount of a deficit incurred by the partnership which he
had covered with his own money. Before final liquidation of
its affairs, P filed a petition asking the court to order the
delivery of certain machines to him and to charge their
value against his portion in the partnership. This was
granted by the court. However, before P could take actual
possession of said machines, and upon strong opposition
of D, the court suspended the effects of its previous order.
In the meantime, judgments for money- recovery cases
against the partnership were rendered. To avoid the
attachment and subsequent sale of the machines by the
sheriff for the satisfaction of said judgments, P mortgaged
the machines to his nephew. When the terms in the
mortgage expired, P’s nephew commenced a case to
collect his mortgage credit.
Legal Issue: Can either of the partners claim ownership
over property belonging to the partnership before
liquidation?
HELD: No. (Article 1811) The machines in contention
originally belonged to the defendant and from him were
transferred to the partnership. This being the case, said
machines belong to the partnership and not to him, and
shall belong to any partner until partition is effected
according to the result thereof after the liquidation.
CASE #2 Moran v. Court of Appeals G.R. No. L-59956
October 31, 1984
FACTS: Moran Jr. and Pecson entered into a partnership
agreement for the distribution of colored posters of the
Constitutional Commission wherein each would contribute
P15,000.00 as capital, and that Moran Jr. will print colored
posters in the amount of 95,000. Moreover, Pecson will
receive a commission of P1,000 a month starting April 15,
1971, up to December 15, 1971 (8 months). Ultimately,
Pecson contributed only P10,000.00 of the P15,000.00
promised, with Moran Jr. failing to contribute any amount at
all and only printing 2,000 copies of the 95,000.
After the liquidation of accounts, Pecson filed for an action
to recover the payment of his share in the profits that the
partnership would have earned and payment of unpaid
commission.
ISSUES:
1. Is the amount of the award for unrealized profits
proper?
2. Is the amount of Pecson’s commission proper?
HELD: 1. No. The Court held that while Pecson does
indeed deserve an award for unrealized profits, the Court
agreed that the amount is highly speculative. There was a
mutual breach of the agreement since Pecson merely paid
P10,000.00 of the P15,000, the COMELEC failed to
proclaim all 320 Constitutional Commission candidates on
time and he existence of hidden risks as with any business
venture.  respect to appellants is clearly shown by the fact that it was
The Court further applied Art. 1797 and that each partner
must share in the profits and the losses of the venture.
Moreover, even with the assurance made by one of the
partners that they would earn a huge amount of profits, in
the absence of fraud, a partner cannot recover highly
speculative profits. Nevertheless, the partnership earned
P6,000.00 as net profit should be divided between Pecson
and Moran, Jr. And since opnly P4,000.00 was undesirable
by the petitioner in printing the 2,000 copies, the remaining
P6,000.00 should be returned to Pecson.
CASE #3 EVANGELISTA & CO v. ABAD SANTOS
G.R. No. 31684 June 28, 1973
FACTS: A co-partnership was formed under the name of
"Evangelista & Co wherein respondent Estrella Abad
Santos was an industrial partner, with herein petitioners
Domingo C. Evangelista, Jr., Leonardo Atienza Abad
Santos and Conchita P.Navarro, the originalcapitalist
partners, remaining in that capacity, with a contribution of
P17,500 each.
The agreement provided that the profits and losses shall be
divided and distributed among the partners ... in the
proportion of 70% for the first three partners, herein
petitioners, to be divided among them equally and 30% for
the fourth partner Estrella Abad Santos.
On December 17, 1963 herein respondent filed suit against
the three other partners alleging that dividends were pait to
the partners except her; and that notwithstanding her
demands the defendants had refused and continued to
refuse and let her examine the partnership books or to
giveher information regarding the partnership affairs.
ISSUE: Whether or not Abad Santos is an industrial partner
and is entitled to the shares of the partnership?
HELD: Yes. It is not disputed that the provision against the
industrial partner engaging in business for himself seeks to
prevent any conflict of interest between the industrial
partner and the partnership, and to insure faithful
compliance by said partner with this prestation. That
appellee has faithfully complied with her prestation with
only after filing of the complaint in this case and the answer
thereto appellants exercised their right of exclusion under
the codal art just mentioned by alleging in their
Supplemental Answer, subsequent to the filing of
defendants' answer to the complaint.
CASE #4 Woodhouse v. Halili G.R. No. L-4811; July 31,
1953
FACTS: The plaintiff and the defendant entered into a
written agreement that, in the future, they shall organize a
partnership for the bottling and distribution of Mission soft
drinks with the plaintiff to act as industrial partner or
manager, and the defendant as capitalist.
The agreement was entered into after the plaintiff intimated
to the defendant that he had an exclusive franchise that of
the bottling and distribution of the said soft drinks and that it
would be transferred to the partnership or the plaintiff after
they go to Mission’s main base of operations in California.
Unfortunately, upon arrival, the defendant has come to
know that the exclusive rights for the plaintiff had not yet
been secured and was only about to be secured.
Thus, the defendant refused to go further with the
agreement. The plaintiff then filed a complaint for the
execution of a contract of partnership and a share of 30%
in the profits.
ISSUES: May the execution of a contract of partnership be
enforced?
HELD: No. The Court held that the plaintiff’s consent to
enter into the contract of partnership as stipulated in the
agreement is an obligation to do, which cannot be forced by
the Courts for being unconstitutional. The contract itself
indicated that they shall enter into a partnership – in the
future – and not that the partnership was to be in force after
the conditions are fulfilled.
CASE #5 THE LEARNING CHILD, INC. and SPS. FELIPE
AND MARY ANNE ALFONSO vs. AYALA ALABANG
VILLAGE ASSOCIATION
G.R. No. 134269 July 7, 2010
FACTS: Sometime in 1984, subdivision developer Ayala
Land, Inc. (ALI) sold a parcel of land to the spouses Jose
and Cristina Yuson. In 1987, the spouses Yuson sold the
same to the spouses Felipe and Mary Anne Alfonso. A
Deed of Restrictions was annotated in TCT No. 149166
issued to the spouses Alfonso, as had been required by
ALI. The Deed of Restrictions indicated thatthe property
shall be used exclusively for the establishment and
maintenance thereon of a preparatory (nursery and
kindergarten) school.
ALI turned over the right and power to enforce the
restrictions on the properties in the Ayala Alabang Village,
including the above restrictions on TCT, to the association
of homeowners therein, the Ayala Alabang Village
Association (AAVA).
In 1989, the spouses Alfonso opened on the same lot The
Learning Child Center Pre-school (TLC), a preparatory
school which initially consisted of nursery and kindergarten
classes. In 1991, TLC was expanded to include a grade
school program, the School of the Holy Cross, which
provided additional grade levels as the pupils who initially
enrolled advanced.
AAVA wrote several letters to TLC and the spouses
Alfonso, essentially (1) protesting the TLC’s and the
spouses Alfonso’s violation of the Deed of Restrictions, (2)
requesting them to comply with the same, and (3) ordering
them to desist from operating the grade school and from
operating the nursery and kindergarten classes in excess of
the two classrooms allowed by the ordinance.
ISSUE: Whether or not Ayala Corporation is jointly
interested with AAVA in an action to
HELD: YES. It appears that Ayala Corporation is jointly
interested with AAVA in an action to enforce the Deed of
Restrictions, and is therefore covered under the following
exception to the res inter alios acta rule:
Sec. 29. Admission by copartner or agent. -- The act or
declaration of a partner or agent of the party within the
scope of his authority and during the existence of the
partnership or agency, may be given in evidence against
such party after the partnership or agency is shown by
evidence other than such act or declaration. The same rule
applies to the act or declaration of a joint owner, joint
debtor, or other person jointly interested with the party.
CASE #6 EMILIA ALZUA and IGNACIO ARNALOT V E.
FINLEY JOHNSON
G.R. No. L-7317 January 31, 1912
FACTS: Alzua, a judgment creditor of a certain business
association or partnership, by filing an indemnity bond in
favor of the sheriff, induced the sheriff to sell the property of
the partners and turn over all the proceeds, some P12,000,
to her that she induced the sheriff so to do over the formal
and vigorous protest and opposition of two minor children,
the heirs of a deceased Spaniards (who will hereafter be
referred to as "the minors"); that this court held that these
minor children had a preferred credit for some P12,000
against the property thus sold; and that the alleged
erroneous judgment was, i effect, a declaration by this court
that Alzua and her bondsmen should pay over to the
minors this sum of P12,000, which they induced the sheriff
to turn over to her, but which the court was of opinion
should have bee turned over to the minors. Alzua's claim to
the partnership funds in the lands of the sheriff rested on a
judgment entered September 7, 1905, which expressly
based upon a document dated April 15, 1903, whereby the
partners acknowledge the receipt from Alzua of the amount
for which judgment was rendered.
The claim of the minors rested upon the express provisions
of article 7 of the articles of partnership of the mercantile
association known as "Viuda de Soler y J. Riu," a public
document, executed by the partners, and duly inscribed in
the mercantile registry of the city of Manila on the 30th of
June, 1902, which this court construed to be
acknowledgment of indebtedness by the partnership to the
minors in the sum of 9,868.29 pesos Mexican currency.
ISSUE: Whether or not the minors have a right to a
preferred claim in the proceeds of the sheriff's sale of the
partnership property?
HELD: YES. It is very clear that upon the undisputed facts
in the records, the minors were entitled to a preference
over Alzua in the distribution of the proceeds of the sale of
the partnership goods, if this court properly construed the
provisions of article 7 of the duly registered articles of
partnership as an admission of indebtedness to the minors.
The adjudication of this question present some difficulty,
but we adhere to our former holding that the articles of
partnership expressly admit and recognize the existence of
this obligation.
This seventh clause of the articles of partnership is as
follows:
Seventh. Mrs. Martinez states that her sons Don Manuel
and Don Enrique Soler y Martinez, both minors, have an
interest in the capital supplied by her amounting to nine
thousand eight hundred and sixty-eight pesos and twenty-
nine cents, which is the sum which went to them according
to the instrument of adjudication of the property left by their
father, Don Manuel Soler y Cendra, executed before the
notary of the city, Don Antonio Costa y Fabrega, on the
twenty-second of March last; but that this participation by
no means ever can affect the partner Mr. Riu, because all
the questions which by virtue of such participation may
arise will be on account and risk of the said Mrs. Martinez
with full and complete indemnity of the company formed by
the present instrument.
It will be seen that this clause of the articles expressly
admits that, of the capital brought into the partnership,
some nine thousand and odd pesos belonged to the
minors, who (as is agreed on all sides and especially
insisted upon by Alzua) were not partners. Taken by itself,
and without any further restrictive provisions in the articles,
we think that this admission must be taken to be an
admission and an express recognition of indebtedness is
modified by those causes of the article which undertake to
limit and restrict the liability of the partnership and of one of
the partners in regard thereto.
CASE #7 G.R. No. 21639           September 25, 1924
ALBERT F. KIEL, plaintiff-appellee, vs. ESTATE OF P.
S. SABERT, defendant-appellant.
This action relates to the legal right of Albert F. Kiel to
secure from the estate of P. S. Sabert the sum of P20,000,
on a claim first presented to the commissioners and
disallowed, then on appeal to the Court of First Instance
allowed, and ultimately the subject-matter of the appeal
taken to this court.
Facts: Albert F. Kiel along with William Milfeil commenced
to work on certain public lands situated in the municipality
of Parang, Province of Cotabato, known as Parang
Plantation Company. Kiel subsequently took over the
interest of Milfeil. In 1910, Kiel and P. S. Sabert entered
into an agreement to develop the Parang Plantation
Company. Sabert was to furnish the capital to run the
plantation and Kiel was to manage it. They were to share
and share alike in the property. It seems that this
partnership was formed so that the land could be acquired
in the name of Sabert, Kiel being a German citizen and not
deemed eligible to acquire public lands in the Philippines.
On August 16, 1919, five persons, including P. S. Sabert,
organized the Nituan Plantation Company, with a
subscribed capital of P40,000. On April 10, 1922, P. S.
Sabert transferred all of his rights in two parcels of land
situated in the municipality of Parang, Province of
Cotabato, embraced within his homestead application No.
21045 and his purchase application No. 1048, in
consideration of the sum of P1, to the Nituan Plantation
Company.
In this same period, Kiel appears to have tried to secure a
settlement from Sabert. Sabert wrote Kiel that he had
offered "to sell all property that I have for P40,000 or take in
a partner who is willing to develop the plantation, to take up
the K. & S. debt no matter which way I will straiten out with
you." But Sabert's death came before any amicable
arrangement could be reached and before an action by Kiel
against Sabert could be decided. So these proceedings
against the estate of Sabert.
No partnership agreement in writing was entered into by
Kiel and Sabert.
Issue: WON alleged verbal co-partnership was formed by
Kiel and Sabert.
HELD: Yes. The testimony of the plaintiff's witnesses,
together with the documentary evidence, leaves the firm
impression with us that Kiel and Sabert did enter into a
partnership, and that they were to share equally. Applying
the tests as to the existence of partnership, we feel that
competent evidence exists establishing the partnership.
Even more primary than any of the rules of partnership
above announced, is the injunction to seek out the intention
of the parties, as gathered from the facts and as
ascertained from their language and conduct, and then to
give this intention effect
As we have already intimated, we do not think that Kiel is
entitled to any share in the land itself, but we are of the
opinion that he has clearly shown his right to one-half of the
value of the improvements and personal property on the
land as to the date upon which he left the plantation. Such
improvements and personal property include buildings,
coconut palms, and other plantings, cattle and other
animals, implements, fences, and other constructions, as
well as outstanding collectible credits, if any, belonging to
the partnership. The value of these improvements and of
the personal property cannot be ascertained from the
record and the case must therefore be remanded for further
proceedings.
The judgment appealed from is set aside and the record is
returned to the lower court where the plaintiff, if he so
desires, may proceed further to prove his claim against the
estate of P. S. Sabert. Without costs. So ordered.
CASE #8 Robert Peyer vs Felix Martinez
G.R. No. L-3500. January 12, 1951
FACTS: On March 30, 1949, Teresa Fanlo Peyer brought
an action in the said court of first instance against the
Hongkong and Shanghai Banking Corporation (1) to
compel that Bank to cancel a real state mortgage executed
in its favor by Robert C. Peyer over the conjugal house at
150 V. Mapa, Manila, and (2) upon payment of the
outstanding mortgage debt in the sum of P15,000, to
surrender to the plaintiff the Torrens certificate of title to
that house, Manufacturer’s Life Insurance policy No.
683258, and certain shares of stock or corporate securities,
all of which admittedly are owned in common by the
spouses.
It was explained that although the aforesaid house,
insurance policy, and shares of stock or securities were
conjugal assets, yet she was bringing the action as a feme
sole (a) because the plaintiff had been living at said house
separate and apart from her husband since June, 1945, for
the reason that, as above stated, the latter had abandoned
and deserted her in order to live with another woman not
his wife, which led to the filing of a criminal complaint for
concubinage against him and Grace Ryle; (b) because
Robert C. Peyer was a fugitive from justice having fled from
the Philippines on April 1, 1948 together with Grace Ryle
without any intention of returning in order to avoid trial and
punishment for said crime; (c) because in thus leaving the
Philippines Robert C. Peyer had rendered himself
absolutely disqualified to discharge the duties incumbent
upon him as manager of the conjugal properties and
exposed these to lose and damage; (d) because in order to
defraud and further prejudice the interest of the plaintiff in
the community property, Robert C. Peyer on September 12,
1946 changed the beneficiary of his various insurance
policies, including the Manufacturer’s Life Insurance policy,
the premiums on which had been paid out of the conjugal
funds, and substituted for the plaintiff as beneficiary,
without her consent, the name of Lula G. Ryle; (e) because
the plaintiff was without any means to support herself and
her daughter, who had been placed under her legal
custody, as Robert C. Peyer had failed to send her monthly
allowances in violation of a court order in civil case No.
70172, an order which was affirmed by the Supreme Court
in G. R. No. L-145, on September 7, 1946. 1 The complaint
was subsequently amended, with the court’s approval
previously had, so as to include a prayer for authority "to
dispose of or sell said shares and/or securities and have
the complete power of disposition over the conjugal house
and Manufacturer’s Life Insurance policy No. 683258."
The court rendered judgment on Teresa’s favor, but on
August 11, the law firm of Gibbs, Gibbs, Chuidian and
Quasha, as attorneys for Robert C. Peyer filed a motion to
intervene, to reopen the case and to set aside the
judgment. The questions raised is whether Robert C. Peyer
is an indispensable or necessary party to the action.
ISSUE: WON the Husband, who is a conjugal partner of the
assets, is a indispensable party to this case.
HELD: NO. Section 4 of Rule 3 provides:
"SEC. 4. Married woman. — A married woman may not
sue or be sued alone without joining her husband, except in
the following instances:
(a) When the action concerns her paraphernal property;
(b) When the action is between herself and her husband;
(c) When she is living separately and apart from her
husband for just cause."
Subparagraph (c) of this section fits into the facts of the
present case. Not only are the plaintiff and her husband
living apart but he has deserted and abandoned his wife
and child. More than that, the suit, it is to be kept in mind, is
not one against the husband but one, in the eyes of the law
at least, to preserve the property in which he and the
plaintiff have a common interest, and to use it to meet
common responsibilities. From both viewpoints and from
the very nature of the situation, the wife must necessarily
sue alone to protect her natural right and manage the
property during her husband’s absence. The husband can
not expect to be made a party when it is precisely from his
inability to act and from the exigencies of the case that the
wife derives her cause of action. To include him and require
that he be served with process by publication or any other
mode would, to a large measure, be a contradiction and
defeat the law’s purpose.
CASE #9 RUGA VS NLRC, GR NO. L-72654-61
FACTS: Petitioners were the fishermen-crew members of
7/B Sandyman II, one of several fishing vessels owned and
operated by private respondent De Guzman Fishing
Enterprises which is primarily engaged in the fishing
business.They were paid in percentage commission basis
in cash by one Mrs. Pilar de Guzman, cashier of private
respondent, 13% of the proceeds of the sale of the fish-
catch if the total proceeds exceeded the cost of crude oil
consumed during the fishing trip, otherwise, 10% of the
total proceeds of the sale.
After some time, they were dismissed alleging that they
sold some of their fish-catch at midsea to the prejudice of
private respondent. Consequently, they filed illegal
dismissal case to the DOLE Arbitration Branch. De
Guzman said that there was no employer-employee
relationship between them; rather it was a joint venture.
After the parties failed to reach an amicable settlement, the
Labor Arbiter heard the case and dismissed the cases filed
by the petitioners on finding that it was really a joint
venture. NLRC affirmed.
ISSUE: WON the fishermen-crew are employees or co-
ventures of De Guzman.
RULING: EMPLOYEES. From the four (4) elements of
employer-employee relationship, the Court has generally
relied on the so-called right-of-control test where the person
for whom the services are performed reserves a right to
control not only the end to be achieved but also the means
to be used in reaching such end. According to the
testimony of Alipio Ruga, they are under the control and
supervision of private respondent’s operations manager.
Matters dealing on the fixing of the schedule of the fishing
trip and the time to return to the fishing port were shown to
be the prerogative of private respondent. While performing
the fishing operations, petitioners received instructions via
a single-side band radio from private respondent’s
operations manager who called the patron/pilot in the
morning.
Even on the assumption that petitioners indeed sold the
fish-catch at mid sea the act of private respondent virtually
resulting in their dismissal evidently contradicts private
respondent’s theory of “joint fishing venture” between the
parties herein. A joint venture, including partnership,
presupposes generally a parity of standing between the
joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property
contributed and where each party exercises equal lights in
the conduct of the business. It would be inconsistent with
the principle of parity of standing between the joint co-
ventures as regards the conduct of business, if private
respondent would out rightly exclude petitioners from the
conduct of the business without first resorting to other
measures consistent with the nature of a joint venture
undertaking, Instead of arbitrary unilateral action, private
respondent should have discussed with an open mind the
advantages and disadvantages of petitioners’ action with its
joint co-venturers if indeed there is a “joint fishing venture”
between the parties.
CASE #10 PASTOR VS GASPAR, 2 Phil. 592, 1903
FACTS: On November 1900, Macario Nicasio and the
defendant Gaspar entered into contract of partnership
under the nme “Nicasio and Gaspar.” (N and G)
The partnership owned the steam launch Luisa, and its
only business was relating to this launch. On November 24,
1990, with the desire to enlarge their business, a contract
was made between the frim of N and G on the one side,
and on the other side the plaintiff and 4 others from whom
N and G secured a sum of P28,000 in order to finance the
purchase of 6 addition lorchas (boat or vessel).
In the contract, N and G undetqakes to return the amount
loanded to the plaintiff within a period of ten years from the
date of the instrument and to guarantee the fulfillment of
the said payment they pledge to the same parties the 6
lorchas.
Barely 7 months after the execution of the contract, it was
terminated and was sold by mutual consent. The plaintiff
brought action alleging that the contract was one of
partnership, and that the consent of his agent to terminate
the contract and the sale of the lorchas was obtained by
fraud and the dissolution of the partnership was null and
void.
ISSUE: WON the transaction between the parties a LOAN
or a contract of partnership.
HELD: It was a Loan.
It appears from this contract that when Nicasio and Gaspar
enlarged their business they could devote themselves not
only to the launch Luisa and the six lorchas in question but
also to other craft. With such other business the plaintiff
would have nothing to do. The most that he can claim is not
that he was a partner in the firm of Nicasio and Gaspar, but
that he and his associates, in connection with that firm, had
formed another partnership to manage these lorchas. The
fact that the plaintiff was to share in the profits and losses
of the business and that Nicasio and Gaspar should answer
for the payment of the debt only with the lorchas, and not
with their own property, indicates that the plaintiff was a
partner. But these provisions are not conclusive. This is a
suit between the parties to the contract. The rights of third
persons are not concerned. Whether the plaintiff would be
a partner as to such third persons is not to be determined.
As between themselves the parties could make any
contract that pleased them, provided that it was not illegal
(art. 1255, Civil Code). They could, in making this contract,
if they chose, take some provision from the law of
partnership and others from the law of loans. Loans with a
right to receive a part of the profits in lieu of interest are not
uncommon. As between the parties, such contract is not
one of partnership.
CASE #11 DELUAO v. CASTEEL G.R. No. L-21906;
December 24, 1968
FACTS: In 1940 Nicanor Casteel unsuccessfully registered
a fishpond in a big tract of swampy land, 178.76 hectares,
in the then sitio of Malalag, municipality of Padada, Davao
for 3 consecutive times because the Bureau of Fisheries
did not act upon his previous applications.
Despite the said rejection, Casteel did not lose interest.
Because of the threat poised upon his position by the other
applicants who entered upon and spread themselves within
the area, Casteel realized the urgent necessity of
expanding his occupation thereof by constructing dikes and
cultivating marketable fishes. But lacking financial
resources at that time, he sought financial aid from his
uncle Felipe Deluao.
Moreover, upon learning that portions of the area applied
for by him were already occupied by rival applicants,
Casteel immediately filed a protest. Consequently, two
administrative cases ensued involving the area in question.
However, despite the finding made in the investigation of
the above administrative cases, the Director of Fisheries
nevertheless rejected Casteel's application on October 25,
1949, required him to remove all the improvements which
he had introduced on the land, and ordered that the land be
leased through public auction.
On November 25, 1949 Inocencia Deluao (wife of Felipe
Deluao) as party of the first part, and Nicanor Casteel as
party of the second part, executed a contract —
denominated a "contract of service". On the same date the
above contract was entered into, Inocencia Deluao
executed a special power of attorney in favor of Jesus
Donesa
On November 29, 1949 the Director of Fisheries rejected
the application filed by Felipe Deluao on November 17,
1948. Unfazed by this rejection, Deluao reiterated his claim
over the same area in the two administrative cases and
asked for reinvestigation of the application of Nicanor
Casteel over the subject fishpond.
The Secretary of Agriculture and Natural Resources
rendered a decision ordering Casteel to be reinstated in the
area and that he shall pay for the improvement made
thereupon.
Sometime in January 1951 Nicanor Casteel forbade
Inocencia Deluao from further administering the fishpond,
and ejected the latter's representative (encargado), Jesus
Donesa, from the premises.
ISSUE: WON the reinstatement of Casteel over the subject
land constitute a dissolution of the partnership between him
and Deluao
HELD: Yes, the reinstatement of Casteel dissolved his
partnership with Deluao.
The Supreme Court ruled that the arrangement under the
so-called "contract of service" continued until the decision
both dated Sept. 15, 1950 were issued by the Secretary of
Agriculture and Natural Resources in DANR Cases 353
and 353-B.
This development, by itself, brought about the dissolution of
the partnership. Since the partnership had for its object the
division into two equal parts of the fishpond between the
appellees and the appellant after it shall have been
awarded to the latter, and therefore it envisaged the
unauthorized transfer of one half thereof to parties other
than the applicant Casteel, it was dissolved by the approval
of his application and the award to him of the fishpond.
The approval was an event which made it unlawful for the
members to carry it on in partnership. Moreover,
subsequent events likewise reveal the intent of both parties
to terminate the partnership because each refused to share
the fishpond with the other.
CASE #12 G.R. No. L-30526 November 29, 1971
BATAMA FARMER'S COOPERATIVE MARKETING
ASSOCIATION INC. vs.
HONORABLE INOCENCIO ROSAL
FACTS: On December 11, 1968, respondent Antonio
Villegas filed a complaint in the CFI of Negros for injunction
against petitioners. He claims that since he already
resigned as a member of petitioner BATAMA Farmers'
Cooperative Marketing Association, Inc. as of July 10,
1968, and by virtue of the "Marketing Agreement and
Power of Attorney" executed in favor of the cooperative,
they should be enjoined from continuing the authority of
the 1967-1968 "Marketing Agreement and Power of
Attorney," in the management, production, milling, and
marketing of his sugar cane and sugar cane products for
the crop year 1968-1969 and succeeding crop years, or
from doing or performing any act or acts thereunder.
Petitioners filed their Answer denying the material
averments of the complaint and as asserting affirmative
defenses and counterclaims.
On January 6, 1969, respondent Juan Teves, claiming to
have a legal interest in the subject matter of respondent
Antonio Villegas' complaint or in the success of the latter
because "he has a common cause of action with the
plaintiff i.e., the lack of authority of defendant association to
act on the strength of the already-expired 'Marketing
Agreement and Power of Attorney'," filed, thru the same
course of respondent Antonio Villegas, an urgent motion for
intervention. Attached to said motion was his proposed
complaint-in-intervention, in which he averred, among
others that as a sugar cane planter, he joined defendant
association as a member and in 1967, signed with the
association a "Marketing Agreement and Power of
Attorney" similar in substance as to terms and conditions to
the "Marketing Agreement and Power of Attorney" of
plaintiff Antonio Villegas with said association.
On January 21, 1969, petitioners filed their opposition to
urgent motion for intervention, alleging that Juan Teves
"Marketing Agreement and Power of Attorney" with
defendant BATAMA Farmers' Cooperative Marketing
Association Inc., is entirely distinct and separate from the
Marketing Agreement and Power of Attorney" of plaintiff
Antonio Villegas; that accordingly, a breach or grievances
arising out of one agreement, no matter how similar it may
be to a breach or grievance arising out of another or
agreement with another person, both in the manner of the
infliction and in the remedy for the redress thereof, does not
and cannot give rise to a so-called "common cause of
action" that will justify intervention, or stated differently, that
the rights of movant Juan Teves under his "Marketing
Agreement and Power of Attorney" with defendant
association are so entirely distinct and separate from the
rights of plaintiff Antonio Villegas under the latter's separate
"Marketing Agreement and Power of Attorney" with same
defendant association, that their enforcement cannot be
joined in one action or complaint; and that the proposed
intervenor's rights are not of such nature that may not be
fully protected in a separate proceeding.
Respondent Judge issued an order admitting the complaint
for intervention on the ground that “is in due form and
substance and that it has, been shown that he has a legal
interest in the matter in litigation, or in the success of the
plaintiff.
On March 27, 1969, petitioners filed a motion for
reconsideration of the last-mentioned order on the ground
that said order is contrary to the facts and the law of the
case. This motion for reconsideration was denied by
respondent judge "for lack of sufficient merits".
On May 12, 1969, petitioners filed an ex parte motion for
extension of time to plead to respondent Juan Teves'
complaint-in-intervention.
On May 14, 1969, petitioners filed an urgent motion for
suspension of proceedings on the complaint-in-intervention
of Teves and respondent judge ordered that the proceeding
therein be suspended.
Hence, this petition for certiorari with preliminary injunction
before this Court. The latter issued a writ of injunction
ordering Respondent Judge from taking any action on
Respondent Teves’ complaint in intervention.
Issue: Whether or not Respondent Teves’ complaint in
intervention is proper.
Ruling: No. Under Section 2 of Rule 12 of the Rules of
Court, to be permitted to intervene in a pending action, the
party must have a legal interest in the matter in litigation, in
the success of either of the parties or an interest against
both, or he must be so situated as to be adversely affected
by a distribution or other disposition if the property in the
custody of the court or an officer thereof.
The legal interest must be actual and material, direct and
immediate, and not simply contingent and expectant. If the
party who has no true interest in the subject matter of the
action would be allowed to intervene, the proceedings will
become unnecessarily complicated, expensive and
interminable, which contravenes the policies of the law.
Herein private respondent Juan Teves signed a separate
independent contract with herein petitioner Association.
Nobody else, much less herein private respondent Villegas,
signed the said contract with him. Herein private
respondent Villegas has likewise a separate independent
contract with herein petitioner Association, which he alone
signed, without any intervention on the part of herein
private respondent Teves. Consequently, private
respondent Teves has no legal interest in the subject
matter of the contract signed by herein private respondent
Villegas with petitioner Association. The fact that their
respective separate, distinct and independent contracts
with herein petitioner Association contain the same
identical terms and conditions with respect to the
management, production, milling and marketing of their
sugar cane, milled sugar and the by-products thereof, does
not create in favor of private respondent Teves a legal
interest in the contract of private respondent Villegas or
vice versa. Whatever may happen to the sugar cane, milled
sugar, and its by-products belonging to private respondent
Villegas which are the subject matter of the contract
between him and herein petitioner Association, or any
breach of the terms of said agreement, is no concern of
herein private respondent Juan Teves. Consequently, any
decision that may be rendered in the case filed by herein
private respondent Villegas against herein petitioner
Association on the basis of Villegas' contract with petitioner
Association, will not affect one way or the other the interest
of herein private respondent Juan Teves under his own
contract with herein petitioner Association. Respondent
Teves is a total stranger to, and therefore has no legal
interest in, the contract of respondent Villegas with
petitioner Association. A mere collateral interest in the
subject matter of the litigation cannot justify intervention.
The interest of herein private respondent Juan Teves in the
contract between herein private respondent Villegas and
herein petitioner Association, cannot be likened to the
interest of: xxx
(13) an alleged partner of the deceased to intervene in the
approval of the accounts of the said deceased on the
allegations that he and the deceased during his lifetime had
formed a partnership which was dissolved upon the death
of one of the partners; 18 or Xxx
CASE #13 G.R. No. 84197 July 28, 1989
PIONEER INSURANCE & SURETY CORPORATION,
petitioner, vs. THE HON. COURT OF APPEALS,
BORDER MACHINERY & HEAVY EQUIPMENT, INC.,
(BORMAHECO), CONSTANCIO M. MAGLANA and
JACOB S. LIM, respondents.
Facts:
Jacob S. Lim was engaged in the airline business as
owner-operator of Southern Air Lines (SAL) a single
proprietorship.
On May 17, 1965, at Tokyo, Japan, Japan Domestic
Airlines (JDA) and Lim entered into and executed a sales
contract for the sale and purchase of two (2) DC-3A Type
aircrafts and one (1) set of necessary spare parts for the
total agreed price of US $109,000.00 to be paid in
installments.
On May 22, 1965, Pioneer Insurance and Surety
Corporation as surety executed and issued its Surety Bond
No. 6639 (Exhibit C) in favor of JDA, in behalf of its
principal, Lim, for the balance price of the aircrafts and
spare parts.
It appears that Border Machinery and Heavy Equipment
Company, Inc. (Bormaheco), Francisco and Modesto
Cervantes (Cervanteses) and Constancio Maglana
contributed some funds used in the purchase of the above
aircrafts and spare parts. The funds were supposed to be
their contributions to a new corporation proposed by Lim to
expand his airline business.
They executed two (2) separate indemnity agreements
(Exhibits D-1 and D-2) in favor of Pioneer, one signed by
Maglana and the other jointly signed by Lim for SAL,
Bormaheco and the Cervanteses. The indemnity
agreements stipulated that the indemnitors principally
agree and bind themselves jointly and severally to
indemnify and hold and save harmless Pioneer from and
against any/all damages, losses, costs, damages, taxes,
penalties, charges and expenses of whatever kind and
nature. On June 10, 1965, Lim doing business under the
name and style of SAL executed in favor of Pioneer as
deed of chattel mortgage as security for the latter's
suretyship in favor of the former. It was stipulated therein
that Lim transfer and convey to the surety the two aircrafts.
Lim defaulted on his subsequent installment payments
prompting JDA to request payments from the surety.
Pioneer paid a total sum of P298,626. Pioneer then filed a
petition for the extrajudicial foreclosure of the said chattel
mortgage before the Sheriff of Davao City. The
Cervanteses and Maglana, however, filed a third party
claim alleging that they are co-owners of the aircrafts,
In their Answers, Maglana, Bormaheco and the
Cervanteses filed cross-claims against Lim alleging that
they were not privies to the contracts signed by Lim.
The petitioner argues that that as a result of the failure of
respondents Bormaheco, Spouses Cervantes, Constancio
Maglana and petitioner Lim to incorporate, a de facto
partnership among them was created, and that as a
consequence of such relationship all must share in the
losses and/or gains of the venture in proportion to their
contribution.
Issue: What legal rules govern the relationship among
co-investors whose agreement was to do business
through the corporate vehicle but who failed to
incorporate the entity in which they had chosen to
invest?
Held:
While it has been held that as between themselves the
rights of the stockholders in a defectively incorporated
association should be governed by the supposed charter
and the laws of the state relating thereto and not by the
rules governing partners, it is ordinarily held that persons
who attempt, but fail, to form a corporation and who carry
on business under the corporate name occupy the position
of partners inter se. Thus, where persons associate
themselves together under articles to purchase property to
carry on a business, and their organization is so defective
as to come short of creating a corporation within the
statute, they become in legal effect partners inter se, and
their rights as members of the company to the property
acquired by the company will be recognized.
However, such a relation does not necessarily exist, for
ordinarily persons cannot be made to assume the relation
of partners, as between themselves, when their purpose is
that no partnership shall exist, and it should be implied only
when necessary to do justice between the parties; thus,
one who takes no part except to subscribe for stock in a
proposed corporation which is never legally formed does
not become a partner with other subscribers who engage in
business under the name of the pretended corporation, so
as to be liable as such in an action for settlement of the
alleged partnership and contribution. A partnership relation
between certain stockholders and other stockholders, who
were also directors, will not be implied in the absence of an
agreement, so as to make the former liable to contribute for
payment of debts illegally contracted by the latter.
In the instant case, it is to be noted that the petitioner was
declared non-suited for his failure to appear during the
pretrial despite notification. In his answer, the petitioner
denied having received any amount from respondents
Bormaheco, the Cervanteses and Maglana. The trial court
and the appellate court, however, found through Exchibit
58, that the petitioner received the amount of P151,000.00
representing the participation of Bormaheco and Atty.
Constancio B. Maglana in the ownership of the subject
airplanes and spare parts. The record shows that
defendant Maglana gave P75,000.00 to petitioner Jacob
Lim thru the Cervanteses.
It is therefore clear that the petitioner never had the
intention to form a corporation with the respondents despite
his representations to them.
Applying therefore the principles of law earlier cited to the
facts of the case, necessarily, no de facto partnership was
created among the parties which would entitle the petitioner
to a reimbursement of the supposed losses of the proposed
corporation.
CASE #14
G.R. No. 152154 July 15, 2003
REPUBLIC OF THE PHILIPPINES, petitioner, vs.
HONORABLE SANDIGANBAYAN (SPECIAL FIRST
DIVISION), FERDINAND E. MARCOS (REPRESENTED
BY HIS ESTATE/HEIRS: IMELDA R. MARCOS, MARIA
IMELDA [IMEE] MARCOS-MANOTOC, FERDINAND R.
MARCOS, JR. AND IRENE MARCOS-ARANETA) AND
IMELDA ROMUALDEZ MARCOS
Facts:
petitioner sought the declaration of the aggregate amount
of US$356 million (now estimated to be more than US$658
million inclusive of interest) deposited in escrow in the PNB,
as ill-gotten wealth. The funds were previously held by the
following five account groups, using various foreign
foundations in certain Swiss banks. In addition, the petition
sought the forfeiture of US$25 million and US$5 million in
treasury notes which exceeded the Marcos couple's
salaries, other lawful income as well as income from
legitimately acquired property. The treasury notes are
frozen at the Central Bank of the Philippines, now Bangko
Sentral ng Pilipinas, by virtue of the freeze order issued by
the PCGG.
In her Manifestation dated May 26, 1998, respondent
Imelda Marcos revealed that she owned 90% of the subject
matter of the entitled case (swiss account) and only 10% of
the subject matter in the above-entitled case belongs to the
estate of the late President Ferdinand E. Marcos.
Moreover, in her Constancia dated May 6, 1999, Imelda
Marcos prayed for the approval of the Compromise
Agreement and the subsequent release and transfer of the
$150 million to the rightful owner.
And Lastly, the Undertaking entered into by the PCGG, the
PNB and the Marcos foundations on February 10, 1999
which stated:
WHEREAS, the Republic of the Philippines sympathizes with the plight of
the human rights victims-plaintiffs in the aforementioned litigation through
the Second Party, desires to assist in the satisfaction of the judgment
awards of said human rights victims-plaintiffs, by releasing, assigning and
or waiving US$150 million of the funds held in escrow under the Escrow
Agreements dated August 14, 1995, although the Republic is not
obligated to do so under final judgments of the Swiss courts dated
December 10 and 19, 1997, and January 8, 1998;
WHEREAS, the Third Party is likewise willing to release, assign and/or
waive all its rights and interests over said US$150 million to the
aforementioned human rights victims-plaintiffs.
Issue:
WON there was an admission of ownership over the
swiss accounts?
Held:
There is no doubt in our mind that respondent Marcoses
admitted ownership of the Swiss bank deposits.
We have always adhered to the familiar doctrine that an
admission made in the pleadings cannot be controverted by
the party making such admission and becomes conclusive
on him, and that all proofs submitted by him contrary
thereto or inconsistent therewith should be ignored,
whether an objection is interposed by the adverse party or
not. This doctrine is embodied in Section 4, Rule 129 of the
Rules of Court:
SEC. 4. Judicial admissions. ─ An admission, verbal or written, made by a
party in the course of the proceedings in the same case, does not require
proof. The admission may be contradicted only by showing that it was
made through palpable mistake or that no such admission was made.
In the absence of a compelling reason to the contrary,
respondents' judicial admission of ownership of the Swiss
deposits is definitely binding on them.
The individual and separate admissions of each respondent
bind all of them pursuant to Sections 29 and 31, Rule 130
of the Rules of Court:
SEC. 29. Admission by co-partner or agent. ─ The act or
declaration of a partner or agent of the party within the scope of
his authority and during the existence of the partnership or
agency, may be given in evidence against such party after the
partnership or agency is shown by evidence other than such act
or declaration. The same rule applies to the act or declaration of a
joint owner, joint debtor, or other person jointly interested with the
party.
SEC. 31. Admission by privies. ─ Where one derives title to
property from another, the act, declaration, or omission of the
latter, while holding the title, in relation to the property, is
evidence against the former.
The declarations of a person are admissible against a party
whenever a "privity of estate" exists between the declarant
and the party, the term "privity of estate" generally denoting
a succession in rights. Consequently, an admission of one
in privity with a party to the record is competent.109
Without doubt, privity exists among the respondents in this
case. And where several co-parties to the record are jointly
interested in the subject matter of the controversy, the
admission of one is competent against all.
D. OBLIGATIONS OF THE PARTNERS ON THIRD
PARTIES ARTICLES 1815-1827
CASE #1 G.R. No. L-26937 October 5, 1927
PHILIPPINE NATIONAL BANK vs. SEVERO EUGENIO
LO, ET AL., defendants. SEVERIO EUGENIO LO, NG
KHEY LING and YEP SENG
Facts: On September 29, 1916, the appellants Severo
Eugenio Lo and Ng Khey Ling, together with J. A. Say Lian
Ping, Ko Tiao Hun, On Yem Ke Lam and Co Sieng Peng
formed a commercial partnership under the name of "Tai
Sing and Co.," with a capital of P40,000 contributed by said
partners.
In the articles of partnership, the said partneship was to last
for five years from the date of organization and to do
business in Iloilo for the purchase and sale of merchandise,
goods, and native, as well as Chinese and Japanese,
products, and to carry on such business and speculations
as they might consider profitable.
J. A. Say Lian Ping was appointed general manager of the
partnership, with the appointed general manager of the
partnership, with the powers specified in said articles of
copartnership.
A. Say Lian Ping executed in A.Y. Kelam’s favor a special
power of attorney authorizing him to obtain a loan of 8,000
pesos from the plaintiff bank and as security, personal
property of the partnership was mortgaged. This credit
before the petitioner bank was renewed several times. On
April 20, 1920, Yap, Severo, A.Y., and Ng executed in favor
of Sy Tit a special power of attorney to obtain loan from the
petitioner bank for the sum of 20K.
Defendants had been using this credit from 1918 up to
1921. Petitioner bank now wants to claim payment of a total
of 20,518 plus interest of 16,518 at 9 % per annum until
fully paid.
In their defense, defendants contended that Tai Sing & Co.
was not a general partnership and that the loan obtained
was not authorized by the board of directors. However, the
court found them liable therefor jointly and severally for the
said amount.
Defendant argues that it was an error on the part of the trial
court in finding that Tai Sing & Co. was a general
partnership and for finding them liable jointly and severally
to the petitioner bank.
Issue: WON the defendant’s contention is valid?
Held: The partnership is a General Partnerhip.
Appellants admit, and it appears from the context of Exhibit
A, that the defendant association formed by the defendants
is a general partnership, as defined in article 126 of the
Code Commerce. This partnership was registered in the
mercantile register of the Province of Iloilo. The only
anomaly noted in its organization is that instead of adopting
for their firm name the names of all of the partners, of
several of them, or only one of them, to be followed in the
last two cases, by the words "and to be followed in the last
two cases, by the words "and company" the partners
agreed upon "Tai Sing & Co." as the firm name.
In Kwong-Wo-Sing vs. Kieng-Chiong-Seng, the company
formed by defendants had existed in fact, though not in law
due to the fact that it was not recorded in the register, and
having operated and contracted debts in favor of the
plaintiff, the same must be paid by someone. This applies
more strongly to the obligations contracted by the
defendants, for they formed a partnership which was
registered in the mercantile register, and carried on
business contracting debts with the plaintiff bank. The
anomalous adoption of the firm name above noted does not
affect the liability of the general partners to third parties
under article 127 of the Code of Commerce.
In Jo Chung Cang vs. Pacific Commercial Co., (45 Phil.,
142) the object of article 126 of the Code of Commerce in
requiring a general partnership to transact business under
the name of all its members, of several of them, or of one
only, is to protect the public from imposition and fraud; and
that the provision of said article 126 is for the protection of
the creditors rather than of the partners themselves. And
consequently the doctrine was enunciated that the law
must be unlawful and unenforceable only as between the
partners and at the instance of the violating party, but not in
the sense of depriving innocent parties of their rights who
may have dealt with the offenders in ignorance of the latter
having violated the law; and that contracts entered into by
commercial associations defectively organized are valid
when voluntarily executed by the parties, and the only
question is whether or not they complied with the
agreement. Therefore, the defendants cannot invoke in
their defense the anomaly in the firm name which they
themselves adopted.
Joint and several liability
Appellants also assign error to the action of the trial court in
ordering them to pay plaintiff, jointly and severally, the
sums claimed with 9 per cent interest on P16,518.74, owing
from them.
The judgment against the appellants is in accordance with
article 127 of the Code of Commerce which provides that
all the members of a general partnership, be they
managing partners thereof or not, shall be personally and
solidarily liable with all their property, for the results of the
transactions made in the name and for the account of the
partnership, under the signature of the latter, and by a
person authorized to use it.
CASE #2 G.R. No. L-3146 September 14, 1907
NICOLAS CO-PITCO, plaintiff-appellee, vs. PEDRO
YULO
Facts: Florencio Yulo and Jaime Palacios were partners in
the operation of a sugar estate in Victorias, Island of
Negros, and had commercial dealings with a Chinaman
named Dy-Sianco, who furnished them with money and
goods, and used to buy their crop of sugar. In February,
1903, the defendant, Pedro Yulo, father of the said
Florencio, took charge of the latter's interest in the above-
mentioned partnership, and he became a general partner
with the said Jaime Palacios in the same business, and he
continued as such partner until about the end of 1904,
dealing with Dy-Sianco in the same manner as the old
partnership had dealt with the latter.
The court found that the balance due from the firm of Pedro
Yulo and Jaime Palacios was 1,638.40 pesos. and orders
judgment against the defendant, Pedro Yulo, for the entire
amount, with interest.
Issue: WON the partnership of Yulo and Palacios was a
Civil Partnership? If yes, what is the parties respective
liabilities?
Held: The partnership of Yulo and Palacios was engaged
in the operation of a sugar estate in Negros. It was,
therefore a civil partnership, as distinguished from a
mercantile partnership. Being a civil partnership, by the
express provisions of articles 1698 and 1137 of the Civil
Code, the partners are not liable each for the whole debt of
the partnership. The liability is pro rata and in this case
Pedro Yulo is responsible to plaintiff for only one-half of the
debt. The fact that the other partner, Jaime Palacios, had
left the country can not increase the liability of Pedro Yulo.
The judgment of the court below is reversed and judgment
is ordered in favor of the plaintiff and against the defendant,
Pedro Yulo, for the sum of P819.20 pesos.
CASE #3 - G.R. No. L-3704 December 12, 1907
LA COMPAÑIA MARITIMA vs. FRANCISCO MUÑOZ, ET
AL.
Facts: The plaintiff brought this action in the CFI against
the partnership of Franciso Muñoz & Sons, and against
Francisco Muñoz de Bustillo, Emilio Muñoz de Bustillo, and
Rafael Naval to recover the sum of P26,828.30, with
interest and costs. In 1905, the defendants Francisco
Muñoz, Emilio Muñoz, and Rafael Naval formed on
ordinary general mercantile partnership under the name of
Francisco Muñoz & Sons for the purpose of carrying on the
mercantile business in the Province of Albay which had
formerly been carried on by Francisco Muñoz. Francisco
Muñoz was a capitalist partner and Emilio Muñoz and
Rafael Naval were industrial partners.
Appellees claimed that it is not an ordinary, general
commercial partnership. In the articles of partnership
signed by the partners it is expressly stated that they have
agreed to form, and do form, an ordinary, general
mercantile partnership. The object of the partnership, as
stated in the articles, is a purely mercantile one and all the
requirements of the Code of Commerce in reference to
such partnership were complied with. The articles of
partnership were recorded in the mercantile registry in the
Province of Albay. If it should be held that the contract
made in this case did not create an ordinary, general
mercantile partnership we (CFI) do not see how one could
be created.
The claim of the appellees that Emilio Muñoz contributed
nothing to the partnership, either in property, money, or
industry, cannot be sustained. He contributed as much as
did the other industrial partner, Rafael Naval, the difference
between the two being that Rafael Naval was entitled by
the articles of agreement to a fixed salary of P2,500 as long
as he was in charge of the branch office established at
Ligao. The argument of the appellees seems to be that,
because no yearly or monthly salary was assigned to
Emilio Muñoz, he contributed nothing to the partnership
and received nothing from it. By the articles themselves he
was to receive at the end of five years one-eighth of the
profits. It cannot be said, therefore, that he received nothing
from the partnership. The fact that the receipt of this money
was postponed for five years is not important. Industrial
partners, by signing the articles, agree to contribute their
work to the partnership and article 138 of the Code of
Commerce prohibits them from engaging in other work
except by the express consent of the partnership. With
reference to civil partnerships, section 1683 of the Civil
Code relates to the same manner.
It is also said in the brief of the appellees that Emilio Muñoz
was entirely excluded from the management of the
business. It rather should be said that he excluded himself
from such management, for he signed the articles of
partnership by the terms of which the management was
expressly conferred by him and the others upon the
persons therein named. Article 125 of the Code of
Commerce requires them to state the partners to whom the
management is intrusted. This right is recognized also in
article 132. In the case of Reyes vs. The Compania
Maritima (3 Phil. Rep., 519) the articles of association
provided that the directors for the first eight years should be
certain persons named therein. This court not only held that
such provision was valid but also held that those directors
could not be removed from office during the eight years,
even by a majority vote of all the stockholders of the
company. Emilio Muñoz was, therefore, a general partner.
Issue: WON Emilio Munoz is liable to third persons for
the obligations contracted by the partnership or
whether he relieved from such liability, either because
he is an industrial partner or because he was so
relieved by the express terms of the articles of
partnership.
Whether or not an industrial partner in an ordinary,
general mercantile partnership liable to third persons
for the debts and obligations contracted by the
partnership.
Held: No. The article under consideration is Article 127 of
the Code of Commerce is as follows:
All the members of the general co-partnership, be they
or be they not managing partners of the same, are liable
personally and in solidum with all their property for the
results of the transactions made in the name and for the
account of the partnership, under the signature of the latter,
and by a person authorized to make use thereof.
Our construction of the article is that it relates
exclusively to the settlement of the partnership affairs
among the partners themselves and has nothing to do
with the liability of the partners to third persons; that
each one of the industrial partners is liable to third
persons for the debts of the firm; that if he has paid
such debts out of his private property during the life of
the partnership, when its affairs are settled he is
entitled to credit for the amount so paid, and if it
results that there is not enough property in the
partnership to pay him, then the capitalist partners
must pay him. In this particular case that view is
strengthened by the provisions of article 12, There it is
stated that if, when the affairs of the partnership are
liquidated — that is, at the end of five years — it turns out
that there had been losses instead of gains, then the
capitalist partner, Francisco Muñoz, shall pay such losses
— that is, pay them to the industrial partners if they have
been compelled to disburse their own money in payment of
the debts of the partnership.
The court criticized the work of one Lorenzo Benito in 1889
(Lecciones de derecho mercantil) wherein he said that
industrial partners are not liable for debts. If industrial
partners in commercial partnerships are not responsible to
third persons for the debts of the firm, then industrial
partners in civil partnerships are not. Waiving the question
as to whether there can be a commercial partnership
composed entirely of industrial partners, it seems clear that
there can be such civil partnership, for article 1678 of the
Civil Code provides as follows:
A particular partnership has for its object specified things
only, their use of profits, or a specified undertaking, or the
exercise of a profession or art.
It might very easily happen, therefore, that a civil
partnership could be composed entirely of industrial
partners. If it were, according to the claim of the appellees,
there would be no personal responsibility whatever for the
debts of the partnership. Creditors could rely only upon the
property which the partnership had, which in the case of a
partnership organized for the practice of any art or
profession would be practically nothing.
An examination of the works of Manresa and Sanchez
Roman on the Civil Code, and of Blanco's Mercantile Law,
will shows that no one of these mentions in any way the
irregular general partnership spoken of by Dr. Benito, nor is
there anything found in any one of these commentaries
which in any way indicates that an industrial partner is
not liable to third persons for the debts of the
partnership. An examination of the French law will also
show that no distinction of that kind is therein anywhere
made and nothing can be found therein which
indicates that the industrial partners are not liable for
the debts of the partnership. (Fuzier-Herman, Repertoire
de Droit Francais, vol. 34, pp. 256, 361, 510, and 512.)
Our conclusion is upon this branch of the case that
neither on principle nor on authority can the industrial
partner be relieved from liability to third persons for
the debts of the partnership.
CASE #4 - G.R. No. L-55397 February 29, 1988
TAI TONG CHUACHE & CO. vs. THE INSURANCE
COMMISSION and TRAVELLERS MULTI-INDEMNITY
CORPORATION
Facts: On April 19, 1975, Azucena Palomo obtained a loan
from Tai Tong Chuache Inc. in the amount of P100,000.00.
To secure the payment of the loan, a mortgage was
executed over the land and the building in favor of Tai Tong
Chuache & Co.
On April 25, 1975, Arsenio Chua, representative of Thai
Tong Chuache & Co. insured the latter's interest with
Travellers Multi-Indemnity Corporation for P100,000.00
(P70,000.00 for the building and P30,000.00 for the
contents thereof).
On June 11, 1975, Pedro Palomo secured a Fire Insurance
Policy No. F- 02500, covering the building for P50,000.00
with respondent Zenith Insurance Corporation. On July 16,
1975, another Fire Insurance Policy No. 8459 was procured
from respondent Philippine British Assurance Company,
covering the same building for P50,000.00 and the contents
thereof for P70,000.00.
On July 31, 1975, the building and the contents were totally
razed by fire.
Complainants were paid the following: P41,546.79 by
Philippine British Assurance Co., P11,877.14 by Zenith
Insurance Corporation, and P5,936.57 by S.S.S. Group of
Accredited Insurers. Demand was made from respondent
Travellers Multi-Indemnity for its share in the loss but the
same was refused. Hence, complainants demanded from
the other three (3) respondents the balance of each share
in the loss based on the computation of the Adjustment
Standards Report excluding Travellers Multi-Indemnity in
the amount of P30,894.31 (P5,732.79-Zenith Insurance:
P22,294.62, Phil. British: and P2,866.90, SSS Accredited)
but the same was refused, hence, this action.
Travellers Insurance, on its part, admitted the issuance of
the Policy No. 599 DV and alleged as its special and
affirmative defenses the following, to wit: that Fire Policy
No. 599 DV, covering the furniture and building of
complainants was secured by a certain Arsenio Chua,
mortgage creditor, for the purpose of protecting his
mortgage credit against the complainants; that the said
policy was issued in the name of Azucena Palomo, only to
indicate that she owns the insured premises; that the policy
contains an endorsement in favor of Arsenio Chua as his
mortgage interest may appear to indicate that insured was
Arsenio Chua and the complainants; that the premium due
on said fire policy was paid by Arsenio Chua; that
respondent Travellers is not liable to pay complainants.
On May 31, 1977, Tai Tong Chuache & Co. filed a
complaint in intervention claiming the proceeds of the fire
Insurance Policy No. F-559 DV, issued by respondent
Travellers Multi-Indemnity. Travellers Insurance, in answer
to the complaint in intervention, alleged that the Intervenor
is not entitled to indemnity under its Fire Insurance Policy
for lack of insurable interest before the loss of the insured
premises and that the complainants, spouses Pedro and
Azucena Palomo, had already paid in full their mortgage
indebtedness to the intervenor. Furthermore, it alleged that
the action must be brought in the name of the real party in
interest.
Issue: Whether or not the contention of Travellers
Multi-Indemnity correct that Tai Tong Chuache is not
entitled to indemnity and that Chua was not a real party
in interest
Held: No. Respondent insurance company has the burden
of proof to show that petitioner has no insurable interest
over the insured property at the time the contingency took
place. However, as adverted to earlier, respondent
Insurance Commission absolved respondent insurance
company from liability on the basis of the certification
issued by the then CFI of Davao, Branch II, that in a certain
civil action against the Palomos, Arsenio Lopez Chua
stands as the complainant and not Tai Tong Chuache.
From said evidence respondent commission inferred that
the credit extended by herein petitioner to the Palomos
secured by the insured property must have been paid.
Such is a glaring error which this Court cannot sanction.
Respondent Commission's findings are based upon a mere
inference.

Public respondent argues however, that if the civil case
really stemmed from the loan granted to Azucena Palomo
by petitioner the same should have been brought by Tai
Tong Chuache or by its representative in its own behalf.
From the above premise respondent concluded that the
obligation secured by the insured property must have been
paid.
The premise is correct but the conclusion is wrong. Citing
Rule 3, Sec. 2 10 respondent pointed out that the action
must be brought in the name of the real party in interest.
We agree. However, it should be borne in mind that
petitioner being a partnership may sue and be sued in
its name or by its duly authorized representative. The
fact that Arsenio Lopez Chua is the representative of
petitioner is not questioned. Petitioner's declaration that
Arsenio Lopez Chua acts as the managing partner of the
partnership was corroborated by respondent insurance
company. Thus, Chua as the managing partner of the
partnership may execute all acts of administration
including the right to sue debtors of the partnership in
case of their failure to pay their obligations when it
became due and demandable. Or at the very least, Chua
being a partner of petitioner Tai Tong Chuache & Company
is an agent of the partnership. Being an agent, it is
understood that he acted for and in behalf of the firm.
Public respondent's allegation that the civil case filed by
Arsenio Chua was in his capacity as personal creditor of
spouses Palomo has no basis.
CASE #5 - G.R. No. 1184; April 22, 1904
THE COMPAÑIA AGRICOLA DE ULTRAMAR v.
ANACLETO REYES, ET AL.
*dili main issue ang liability sa third person diri ata. Kay
segway lang ang topic about didto.
Facts: In 1902, the representative of the plaintiff, a
partnership legally organized in Madrid, Spain, domiciled in
the city of Manila, presented a complaint in the justice’s
court of the town of Quingua, Province of Bulacan, against
Anacleto Reyes and others, setting forth that the
defendants were tenants of the estate called Tabang, San
Marcos, and Dampol, the property of the plaintiff company,
located in the said town, each one of whom were occupying
the land without having paid the rent for the years 1899,
1900, and 1901, notwithstanding the fact that said payment
had been demanded several times at the end of each year.
Therefore the plaintiff company prayed that judgment be
rendered against said defendants, ordering them to vacate
the lands occupied by them and to restore the possession
thereof to the plaintiff.
Upon notice, the defendants appeared, with the exception
of the Chinaman Mariano Yniguez. The justice of the
peace, on the supposition that said plaintiff--company as a
commercial partnership, and subject to the provisions of the
Code of Commerce, and had not registered in the
commercial registry, denied the petition of the plaintiff.
On appeal, CFI of Bulacan rendered judgment confirming
the decision of the justice’s court of Quingua, and declared
the Compañia Agricola de Ultramar a commercial
partnership, and therefore that its registry in the commercial
register was necessary in order to appear in an action.
Plaintiff company prayed that the decision before
mentioned should be annulled. The judge declared that the
Compañia Agricola dle Ultramar was a civil partnership, to
which are applicable the provisions of the Code of
Commerce in conformity with article 1670 of the Civil Code,
and that said partnership should be registered in the
commercial registry before it could appear in an action
against the defendants. The plaintiff excepted to this
judgment.
In the bill of exceptions appears the articles of incorporation
executed on the 6th of February, 1893, before a notary in
the court of Madrid, Spain, by various residents of the same
place, organizing a partnership, entitled Compañia Agricola
de Ultramar, which expressed the organization of the
partnership and its statutes, that the parties therein
organized a special civil partnership to exploit the
agricultural industry in the Philippine Islands and other
Spanish colonies, in accordance with the present Civil
Code.
In the bill of exceptions presented to this court by the
Compañia Agricola de Ultramar, it appears that the
principal object is to obtain a judicial declaration that the
plaintiff herein is a civil partnership, and is not therefore
under the obligation of registering in the commercial
registry in order to have juridical personality with the power
to appear in an action against the defendants.
We must therefore decide whether this plaintiff was a
mercantile or a civil corporation by the purposes declared in
its articles of association, and the law governing in such
cases. Mercantile associations, purely, are governed by the
mercantile code. Civil associations are governed by the
Civil Code.
The Commercial Code for the Philippines does not attempt
anywhere, as some other codes do, to define what are
commercial transactions. In the absence of proof to the
contrary, therefore, we must be governed as to the
purposes of the association by the form adopted by its
organization and the purposes declared in its articles of
association.
Issue: Whether or not an association is mercantile or civil
simply by the form of its organization.
Ruling: No. The Commercial Code provides how
mercantile associations shall be organized. Article 116
defines a commercial association and provides that —
"Articles of association by which two or more persons
obligate themselves to place in a common fund any
property, industry, or any of these things, in order to obtain
profit, shall be commercial, no matter what its nature may
be, provided it has been established in accordance with the
provisions of this code.
"After a commercial association has been established, it
shall have the right to operate as a juristic person in all its
acts and contracts."
Article 122 provides that commercial associations may
become a general or limited co-partnership or a
corporation, according to the particular form of the
organization which it may adopt.
Article 1665 defines a partnership as follows:
"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.” virtua1aw library
Article 1666 provides that such partnerships must have
lawful objects, and be established for the common interest
of all their members.
Article 1667 provides that such partnerships may be
established in any form whatever, except when real
property or property rights are contributed, in which case a
public instrument shall be necessary.
In the present case, the property was contributed and a
public instrument was duly executed before Manuel de
Bofarull, one of the most famous notaries of all Europe.
Article 1670 provides that civil partnerships, on account of
the objects to which they are devoted, may adopt all the
forms recognized by the Commercial Code. In such cases
its (Commercial Code) provisions shall be applicable in so
far as they do not conflict with the provisions of this code.
It will be seen from this provision that whether or not
partnerships shall adopt the forms provided for by the Civil
or Commercial Codes is left entirely to their discretion. And
furthermore, that such civil partnerships shall only be
governed by the forms and provisions of the Commercial
Code when they expressly adopt them, and then only in so
far as they (rules of the Commercial Code) do not conflict
with the provisions of the Civil Code. In this provision the
legislature expressly indicates that there may exist two
classes of commercial associations, depending not upon
the business in which they are engaged but upon the
particular form adopted in their organization. The definition
of the partnership found in article 1665 clearly includes
associations organized for the purpose of gain growing out
of commercial transactions.
Articles 1671-1678 provide for general and particular
partnerships, and give the rules governing the division of
the profits.
It will be seen from these provisions of the codes that
the Civil Code has expressly provided for the existence
of commercial associations, giving them juristic
personality and certain rights and privileges. In these
provisions no reference is made to the provisions of
the Commercial Code. It is contended that
notwithstanding this fact, such associations are
nevertheless governed by the provisions of the latter
code. The Commercial Code was enacted and went into
effect on the 1st day of December, 1888. The Civil Code
was enacted and took effect on the 31st day of July,
1889. Had it been the intention of the legislature to
provide that all commercial associations, of whatever
class, should be governed by the provisions of the
Commercial Code, it certainly would not have provided,
at a later date, other rules, rights, privileges, and
regulations. It is our opinion that associations
organized under the different codes are governed by
the provisions of the respective codes.
From the articles of association it will be seen that the
plaintiff company was organized expressly under the
provisions of the Civil Code, on the 6th day of
February, 1893.
From the petition of the plaintiff and the bill of exceptions it
appears that the defendants failed and refused to pay the
rent for the years 1899, 1900, and 1901. It does not appear
whether or not the defendants had failed or refused to pay
the rent for any of the years previous to 1899. Assuming,
without finding it to be a fact, that the defendants had paid
the rent for previous years, then they thereby recognized
the plaintiff company as an entity and are thereby now
estopped from setting up the contrary.
While conditions precedent must always be performed,
in order that a corporation may have a legal existence,
it does not by any means follow that objection to the
existence of a corporation on this ground alone can be
raised by any and every person, and in every
proceeding. This objection can always, with few
exceptions, be raised by the State. (Attorney-General v.
Hanchett, 42 Mich., 436; People v. Water Co., 97 Cal.,
276.)
Persons who assume to form a corporation or
business association, and exercise corporate
functions, and enter into business relations with third
persons, are estopped from denying that they
constitute a corporation. So also are the third persons
who deal with such a de facto association or
corporation, recognizing it as such and thereby
incurring liabilities, estopped, when an action is
brought on such obligations, from denying the juristic
personality of such corporations or associations.
(Scheufler v. Grand Lodge, 45 Minn., 256; Farmers’ Loan
and Trust Co. v. Ann Arbor Ry. Co., 67 Fed. Rep., 49.)
Where there is a corporation de facto, with no want of
legislative power to its due and legal existence, when it is
proceeding in the performance of a corporate function, and
third persons are dealing with it on the supposition that it is
what it professes to be, and the questions are only whether
the law has been strictly followed in its organization, it is
plainly a dictate alike of justice and public policy, that in
controversies between the de facto corporation and those
who have entered into contractual relations with it, as
corporations or otherwise, such questions should not be
suffered to be raised. (Swarthout v. Michigan, etc., Ry. Co.,
224 Mich., 390.)
Where a shareholder of an association is called upon
to respond to a liability as such, and where a party has
contracted with a corporation and issued upon the
contract, neither is permitted to deny the existence or
the legal validity of such corporation. To hold
otherwise would be contrary to the plainest principles
of reason and good faith. Parties must take the
consequences of the position they assume. (Casey v.
Galli, 94 U. S., 673; Bliss on Code Pleading, secs. 252-
254.)
From the foregoing considerations, the provisions of the
articles of association of the plaintiff company, and the
quoted provisions of the Civil and Commercial Codes, we
are justified in reaching the following
conclusions:chanrob1es virtual 1aw library
First. That the plaintiff company had statutory authority to
organize under the Civil Code for the purposes indicated in
its articles of association.
Second. That it did effect its organization under the Civil
Code in force in these Islands.
Third. The defendants having recognized the existence of
the plaintiff as an entity capable of dealing with private
persons, they are thereby estopped from denying that
fact.
Fourth. That the plaintiff company, having complied with the
forms required for the organization of associations of its
class under the Civil Code, is a juristic person recognized
by law, and has capacity to maintain the present action.
CASE #6 - Mendezona v. Philippine Sugar Estates
Development Company, Ltd.
G.R. No. 13659, March 22, 1921
Facts: The plaintiff alleges that he entered into that
contract with the defendant company which the name of
Manuel de Garay was made to appear as the tenant on
shares for the sole purposes of satisfying the scruples of
one of the directors of the company, but with the
understanding between the parties that the plaintiff was to
be the real tenant on shares; that by virtue of that mutual
understanding, and in order to carry it into effect, he
entered with the defendant Manuel de Garay with the
consent of the representatives of the defendant company,
into a contract in which the said Manuel de Garay admitted
that he was merely a subordinate of the plaintiff, with a right
to only 10 per cent of the plaintiff's share in the profits
which as tenant he might receive from the Hacienda de
Bucal, which the defendant had in Calamba, Laguna; and
that, said defendant Manuel de Garay, conniving with the
defendant company, attempted to defraud him, claiming to
be the true tenant, for which reason he lost his right to the
share otherwise accruing to him under said contract.
The defendant corporation denied Mendezona’s claims,
alleging that the defendant company had not entered into
any rental contract on shares with the plaintiff and that the
latter intervened in the work of cultivation of the Hacienda
de Bucal as a mere attorney in fact of the defendant
Manuel de Garay, who was discharged from that place
when the company learned that the plaintiff had entered it
in violation of the rental contract on shares which the
defendant Manuel de Garay had with the defendant
company.
The plaintiff lays stress upon the alleged attitude of the
president Miguel Garcia Grande and of the manager Jose
Ma. Suarez in consenting to the contract of partnership
executed between the plaintiff Mendezona and the
defendant Manuel de Garay, in which contract Manuel de
Garay was recognized as a mere subordinate of Secundino
Mendezona.
Issue: WON Mendezona was correct in alleging that
contract of partnership entered into between
Mendezona and De Garay indicates that the latter is a
subordinate/fictitious tenant.
Ruling: No. With respect to this, it should be noted, in the
first place, that the contract of partnership between
Mendezona and De Garay contains no indication that
said Garay was a fictitious tenant; on the contrary, it is
stated therein that in order to effect the rental contract
which De Garay had executed with the defendant
corporation, he and Mendezona associated themselves,
and in order that Mendezona might supervise the work on
the field, De Garay gave him ample powers and recognized
himself as a subordinate of Mendezona. It here expressly
appears that the real tenant was De Garay, and that
Mendezona was a mere subordinate. That De Garay
recognized Mendezona as technician is perfectly
compatible with the proposition that De Garay was the real
tenant, for although Mendezona was the one to
superintend the work in the field, nevertheless, it
appears in the same contract, that Mendezona was a
mere agent of De Garay and that the latter was the
tenant. The fact that De Garay was the subordinate of
Mendezona because of the nature of the work which each
had to do does not prove that De Garay was not the tenant;
and the fact that the company permitted the services of
Mendezona on the hacienda does not prevent this
conclusion, for it is proved that said company, having no
confidence that Mendezona would fulfill his obligations to
whom it would have to make advances in great sums, it did
not like to deal with him but with Manuel de Garay, who,
according to its information, was a person of responsibility.
In the second place, it is hard to believe that said officers of
the corporation, if they had any intervention in this contract
between Mendezona and De Garay, should have made it to
be understood that the real tenant was Mendezona and not
De Garay, because the letter signed by president
Garcia, addressed to manager Suarez, read by
Mendezona and approved by Manuel de Garay, clearly
states that the hacienda was to be delivered to Manuel
de Garay as tenant. These two officers of the corporation
had full knowledge that the board of directors did not like to
contract with Mendezona and if it adjudicated the rental
contract to De Garay, it was merely because of the good
information which the company received as to him which
was furnished by the manager himself, and which must
have brought to their knowledge the fact that the board of
directors wanted to contract with De Garay and not with
Mendezona; and therefore it cannot be believed that, as
they acted contrary to the will of the board of directors, they
had made it understood that Mendezona was the real, and
De Garay the fictitious, tenant. But supposing that they
had acted against the will of the board, then their
conduct does not bind the corporation, because “The
declarations of an individual director relating to the
affairs of the corporation, but not made in the course
of, or connected with, the performance of the
authorized duties of such director, are held not binding
on the corporation. So, false statements made by a
single director, for the purpose of defrauding the
creditors of the corporation, including the corporation
itself, could not affect or bind it. The general rule is that
officers of corporations acting within the scope of their
authority may bind the corporation in the same way
and to the same extent as if they were the agents of
natural persons, unless the charter or by-laws
otherwise provide: They cannot, in general, bind the
corporation by acts in excess of the authority with
which they are clothed unless such acts are
ratified. . . .” (Article 1818?) Under these well-settled
principles of law, whatever be the nature of the acts
performed by president Garcia Grande and manager
Suarez, they cannot prejudice the corporation in the
sense that it is estopped to deny that they ever
contracted with Mendezona, because said officers, in
executing such acts, acted outside of their sphere of
action and contrary to the resolutions of the board of
directors of the defendant corporation, the terms of
which are so clear and explicit as not to leave any doubt
that they wanted to enter into a contract with Manuel de
Garay and not with Secundino Mendezona.
 CASE #7 - Benguet Consolidated Mining Co. v. Pineda
G.R. No. L-7231, March 28, 1956
Facts: Petitioner was organized in 1903 as a sociedad
anonima under the Spanish Code of Commerce, then in
force in the Philippines. Under its articles of association,
Benguet was organized for a term of fifty (50) years. In
1906, Act 1459 or the Corporation Law was enacted,
establishing the American type of juridical entities known as
Corporation. The evident purpose of such enactment was
to introduce the American corporation into the Philippine
Islands as the standard commercial entity and to hasten the
day when the sociedad anonima of the Spanish Law would
be obsolete.
Under Section 75 of the Corporation Law, existing
sociedad anonimas were given the option to either
continue its business as such, or to reform and
reorganize under the said law. Further, Section 191 of
the same law provided that existing corporations or
sociedades anonimas which elect to continue as such
instead of reforming and reorganizing under said law,
shall continue to be governed by the laws that were in
force prior to the passage of the Act in relation to their
organization and method of transacting business and
to the rights of their members as among themselves,
but their relations to the public and public officials
shall be governed by the provisions of the Corporation
Law.
In 1946, when the expiration of its original 50-year term
approached, petitioner amended its articles of association
in order to extend its business life for another 50 years.
However, the same was denied by the SEC upon advice of
the Secretary of Justice that such extension was contrary to
law. In the present appeal, Benguet contends that its right
to extend its existence as a sociedad anonimas under the
Spanish Code of Commerce is still operative, since it is “in
relation to their organization and method of transacting
business and to the rights of their members as among
themselves”, pursuant to the aforestated Section 191 of the
Corporation Law.
Issue: WON a sociedad anonima may still extend its
corporate existence as such, notwithstanding the
enactment of Act No. 1459 or the Corporation Law.
WON the period of corporate life relates to its
organization and the rights of its members inter se, and
not to its relations to the public or public official.
Ruling: No. The prohibition contained in section 18 of Act
No. 1459, against extending the period of corporate
existence by amendment of the original articles, was
intended to apply, and does apply, to sociedades
anonimas, already formed, organized and existing at the
time of the effectivity of the Corporation Law (Act 1459) in
1906.
The term of existence of association (partnership or
sociedad anonima) is coterminous with their
possession of an independent legal personality,
distinct from that of their component members. When
the period expires, the sociedad anonima loses the
power to deal and enter into further legal relations with
other persons. By the same token, its officers and
agents can no longer represent it after the expiration of
the life term prescribed, save for settling its business.
Necessarily, therefore, third persons or strangers have
an interest in knowing the duration of the juridical
personality of the sociedad anonima, since the latter
cannot be dealt with after that period; wherefore its
prolongation or cessation is a matter directly involving
the company's relations to the public at large. The State
and its officers also have an obvious interest in the term of
life of associations, since the conferment of juridical
capacity upon them during such period is a privilege that is
derived from statute.
Furthermore, the Court interpreted the prohibition under
Section 18 of the Corporation Law against extension of
corporate life by amendment of the original articles was
designed and intended to apply to existing “compañias
anonimas”. This conclusion is consistent with the policy of
the law to hasten the day when compañias anonimas would
be extinct, and replace them with the American type of
corporation (Harden vs. Benguet Consolidated Mining Co.),
for the indefinite prorogation of the corporate life of
sociedades anonimas would maintain the unnecessary
duality of organizational types, instead of reducing them
into a single one. To conclude otherwise would give
these sociedades anonimas, whose obsolescence was
sought, the advantageous privilege of perpetual
existence that the new corporations could not possess.
Therefore, the Court affirmed the order of the SEC
denying the extension of the existence of Benguet as a
sociedad anonimas.
CASE #8 - Ormachea Tin-Congco v. Trillana
G.R. No. 4776, March 18, 1909
Facts: Plaintiff Manuel Ormachea Tin-Congco and Luis
Vizmanos Ong Queco were engaged in business in
Hagonoy, Malolos. Defendant Santiago Trillana purchased
from them merchandise amounting to P4,000. The
partnership was later on dissolved and the business was
divided up between the partners and all the accounts and
debts belonging to defendant were allotted to plaintiff.
Plaintiff filed a complaint against defendant praying that he
be ordered to pay the amount plus interest which makes
the total debt to P5,500. The indebtedness was proven by
documents signed by defendant and his agents in favor of
the partnership or their agent named Lawa.
Defendant contended that he had already settled his
obligations by means of periodical payments in tuba or the
liquor of nipa palm. Defendant used as evidence the
document execute by Jose R. Lopez (Lawa), who used to
be the manager of the partnership, declaring that defendant
has no outstanding debt with the distillery which used to be
under his management. Lawa admitted that he executed
the document but because the latter was not indebted to
him but to Manuel Ormachea, to whom the credits standing
against Trillana was transferred.

After hearing the evidence presented by the parties, the
trial judge rendered judgment ordering the defendant,
Santiago Trillana, to pay to the Chinaman Florentino Tiu
Tusay, the judicial administrator of the estate of the
deceased plaintiff, Ormachea Tin-Congco, the sum of
P2,832.22, in tuba, under the same conditions stipulated
between the debtor and the co-partnership for the working
of the distillery of Luis Vizmanos and the late Chinaman
Manuel Ormachea.
Issue: WON Trillana’s liability to the partnership was
terminated because of the concurrence of its manager that
the former has no outstanding debt with the distillery.
Ruling: Article 1820. No. After the close of the business,
the management of which was entrusted to a certain
person, and after expiration of two years from the date of
his withdrawal, he could not legally issue a document of
warrant which would fatally exempt the debtor from the
payment of the debt existing in favor of the partner to
whom the credit claimed to have been extinguished
may belong, because he has no authority for such an
act. Therefore, an admission made by a partner who
was no longer a partner at the time of the declaration is
not admissible in evidence against the partnership.
CASE #9 - Cristobal v. Gomez
G.R. No. 27014, October 5, 1927
Facts: This action was instituted in the CFI of the Province
of Cavite by Paulina Cristobal, Luis Gomez, Josefa Gomez,
Paciencia Gomez and Jose Gomez, for the purpose of
recovering from Marcelino Gomez two parcels of land
located in the sitio of Jabay, municipality of Bacoor,
Province of Cavite, and lot located in the town of Bacoor,
Cavite and for the purpose of compelling the defendant to
pay to the plaintiffs the income received by him from said
property since 1918. Upon hearing the cause the trial
court found that the property in question belongs to the
plaintiffs, as co-owners, and he therefore ordered the
defendant to surrender the property to them and execute
an appropriate deed of transfer as well as to pay the costs
of the proceeding. From this judgment the defendant
appealed.
Epifanio Gomez owns two parcels of land located in the
Jabay, Municipality of Bacoor, Cavite and a lot located in
town of Bacoor, Cavite. He sold the property with pacto de
retro to Luis Yangco, redeemable in five years. The period
to redeem expired but Yangco extended it. Gomez
approached Bibiano Bañas, a relative, to secure a loan.
The latter only agreed if Gomez’s brother Marcelino and
sister Telesfora would also be responsible for the loan.
Marcelino and Telesfora entered into a “private partnership
in participation” for the purpose of redeeming the property
from Yangco. Epifanio was present when said agreement
was discussed and assented to. The capital consisted of
₱7000, of which ₱1500 came from Marcelino, and ₱5500
from Telesfora. The agreement provided that the property
redeemed will be placed in the name of Marcelino and
Telesfora, the income, rent, and produce of the property
would go to the two and that the property shall be returned
to their brother as soon as the capital employed have been
covered.
Subsequently, Epifanio Gomez died, leaving Paulina
Cristobal and their four children. Marcelino Gomez
continued to possess the property, improved it, and earned
income from it. He acquired exclusive rights over it when
Telesfora conveyed her interest to him. He sold the
property with pacto de retro to Bañas, redeemable within
five years. He was able to redeem such property.
Thereafter, Paulina and children filed action to recover
property from Marcelino. They claimed that the capital had
been covered by the property’s income, hence, the same
should be returned to them. The lower court granted their
petition. Marcelino appealed. Hence the present case.
Issue: WON the Heirs of Epifanio entitled to recover
the property.
Ruling: Yes. person who redeems property belonging
to another which has been sold under contract with
pacto de retro, with the understanding that the income
of the property shall be applied to the reimbursement
of the capital, with interest, and other expenses
incidental to the administration of the property, until
the whole shall be liquidated, whereupon the property
shall be restored to the owner, occupies the position of
trustee; and when the purpose of such a trust has been
accomplished, the trustee is bound to surrender the
property to the owner or his successors.
A trust constituted between two contracting parties for
the benefit of a third person is not subject to the rules
governing donations of real property. The beneficiary
of a trust may demand performance of the obligation
without having formally accepted the benefit of the
trust in a public document, upon mere acquiescence in
the formation of the trust and under the second
paragraph of article 1257 of the Civil Code.
CASE #10 - Sison v. David
G.R. No. L-11268, January 28, 1961
Facts: Margarita David executed a will constituting several
legacies in favor of specified persons and naming her
grandnieces Narcisa de la Fuente de Teodoro and her
sister Priscilla de la Fuente de Sison — hereafter referred
to as Mrs. Teodoro and Mrs. Sison, respectively — as heirs
of the residue of her estate, subject, however, to the
condition that, if Mrs. Teodoro and Mrs. Sison should die
leaving no descendants, the properties inherited by these
sisters shall pass one-half to the heirs of the father of the
testatrix and the other half to the heirs of her mother.
Herein defendant Gonzalo D. David is one of such heirs of
the parents of Margarita David. Subseuqently, Mrs.
Teodoro and Mrs. Sison were legally adopted by Margarita
David as her children. Soon later, Margarita David, donated
to said sisters practically the same properties bequeathed
to them in her aforementioned will. Upon the demise of
Margarita David, a special proceeding was instituted for the
settlement of her estate, and Jose Teodoro, Sr., was
originally appointed executor of the aforementioned will,
whereas Gonzalo D. David, who is a member of the Bar,
acted as his counsel. Subsequently, Mr. Teodoro and Mrs.
Sison extrajudicially partitioned among themselves the
properties bequeathed and donated to them by Margarita
David. Plaintiff herein, Carlos Moran Sison, is the husband
of Mrs. Sison.
It turned, however, that said properties were assigned by
Mrs. Sison to Priscila Estate, Inc. — a corporation
organized on that date by her and plaintiff herein, aside —
in exchange for shares of stock thereof. Hence, said
corporation filed an "Urgent Petition Ex-Parte" to lift
defendant's adverse claim, insofar as one of the
abovementioned properties upon the ground that said
property belonged already to the corporation which wanted
to sell it, and that there were other properties of the estate
of Margarita David which sufficed to answer for said
adverse claim. The motion was granted. Thereafter,
defendant herein filed in said cadastral proceedings, on his
behalf and that of Jose Teodoro, Sr., a "Petition for Bond",
praying that the sale of the property at Sto. Cristo street be
disapproved "and/or a bond of P12,000 be forthwith
furnished" by the Priscila Estate, Inc. In support of this
petition. Movants herein object to the urgent petition ex
parte on the ground that the property to be sold herein is
one of the few properties inherited from Da. Margarita
David which is not encumbered, because practically all of
the properties of the heiress Priscila F. de Sison are
mortgaged, and the Priscila Estate, Inc., is operating on an
overdraft, which is the reason why these properties are to
be sold; and that the reason there is an overdraft is that
new buildings or improvements have been made as
conjugal properties of Carlos Sison and Priscila de la
Fuente, and now, the paraphernal properties inherited from
Da. Margarita David is being sold to pay for the obligations
of these conjugal properties”
Plaintiff alleged that the averment was made with malice
and evident intent to put him in ridicule, for defendant knew
him (plaintiff) to be the president of Priscila Estate, Inc. and,
by the statements contained in said paragraph, the
defendant, "in effect, implied with clear malevolence and
malignity that plaintiff is incompetent and unfit to manage
the affairs of the Priscila Estate, Inc.
Issue: WON defendant’s allegations is without merit.
Ruling: No. At any rate, the allegations in question in
defendant's petition for bond were neither malicious nor
unfounded. Thus, it is a fact that most, or at least, several
of the most valuable properties transmitted by Margarita
David to Mrs. Sison were mortgaged. Those subsequently
assigned by Mrs. Sison to Priscila Estate, Inc. were
encumbered altogether for P397,717.00. In order to
construct the Priscila Building No. 3 on a paraphernal land
of Mrs. Sison, it had been necessary to borrow ONE
MILLION PESOS (P1,000,000.00) from the RFC. The
Priscila Estate, Inc., of which plaintiff is the president,
began its operations with an overdraft line of P236,517.00.
Most of the paraphernal properties of Mrs. Sison were
transferred to said corporation. In fact, the same asked that
the annotation, on the certificate of title of one of those
properties, of the adverse claims of the defendant and Jose
Teodoro Sr., be cancelled, upon the ground that said
property now belongs to the corporation, not to Mrs. Sison.
What is more, plaintiff and his wife organized a corporation,
entitled CMS Estate, Inc., to which some properties of
Priscila Estate, Inc. (most of which had been originally
inherited by Mrs. Sison from Margarita David) were
transferred. The CMS Estate, Inc. had a capital stock of
one million pesos (P1,000,000.00), divided into 1,000
shares of the par value of P1,000 each, of which 950 non-
voting preferred shares, and 50 are common voting shares.
All of these common voting shares, in addition to 50 non-
voting preferred shares, were subscribed by the plaintiff,
whereas his wife had 96 non-voting preferred shares and
no common shares. Four (4) other persons had each a
nominal holding of one (1) non-voting preferred share. As
the sole holder of all the voting common shares,
plaintiff had absolute, exclusive and permanent control
over the management of this new corporation. In fact,
the letters "CMS", which are the initials of his name,
Carlos Moran Sison, appear in the corporate name
"CMS Estate, Inc.," for the seeming purpose of
representing to the public that plaintiff was, for all
intents and purposes, the corporation itself.
CASE #11 - G.R. No. 118585 September 14, 1995
AJAX MARKETING & DEVELOPMENT CORPORATION,
ANTONIO TAN, ELISA TAN, TAN YEE, and SPS.
MARCIAL SEE and LILIAN TAN, petitioners, vs. HON.
COURT OF APPEALS, METROPOLITAN BANK AND
TRUST COMPANY, and THE SHERIFF OF
MANILA, respondents.
FACTS: Public respondent CA affirmed the trial court's
judgment upholding the validity of the extra-judicial
foreclosure of the real estate property of petitioners —
spouses Marcial See and Lilian Tan, located at Paco
District, Manila by private respondent Metrobank.
The partnership (Ajax Marketing Company) which was later
on converted into a corporation denominated as Ajax
Marketing and Development Corporation, with the original
partners (Angelita Rodriguez and Antonio Tan) as
incorporators and three (3) additional incorporators,
namely, Elisa Tan, the wife of Antonio Tan, and Jose San
Diego and Tessie San Diego. Ajax Marketing and
Development Corporation obtained from Metropolitan Bank
and Trust Company a loan of P600,000.00 and two other
loans, the payment of which was secured by a real estate
mortgage executed by spouses Marcial See and Lilian Tan
in favor of said bank over the same realty located in the
District of Paco, Manila. The real estate mortgage was
annotated at the back of TCT No. 105233.
In December 1980, the three (3) loans with an aggregate
amount of P1,000,000.00 were re-structured and
consolidated into one (1) loan and Ajax Marketing and
Development Corporation, represented by Antonio Tan as
Board Chairman/President and in his personal capacity as
solidary co-obligor, and Elisa Tan as Vice-
President/Treasurer and in her personal capacity as
solidary co-obligor, executed a Promissory Note (PN) No.
BDS-3605.
Petitioners argue that a novation occurred when there was
a change, or substitution in the persons of either the
creditor (Metrobank) or more specifically the debtors
(petitioners) upon the consolidation of the loans in PN No.
BDS 3605 and upon the conversion from a partnership to a
corporation.
ISSUE: Whether or not the obligation is extinguished
by novation?
RULING: No, the obligation is not extinguished because
there was no novation that occurred.
Novation is the extinguishment of an obligation by the
substitution or change of the obligation by a
subsequent one which extinguishes or modifies the
first, either by changing the object or principal
conditions, or by substituting another in place of the
debtor, or by subrogating a third person in the rights of
the creditor. Novation, unlike other modes of extinction of
obligations, is a juridical act with a dual function, namely, it
extinguishes an obligation and creates a new one in lieu of
the old. It can be objective, subjective, or mixed. Objective
novation occurs when there is a change of the object or
principal conditions of an existing obligation while
subjective novation occurs when there is a change of
either the person of the debtor, or of the creditor in an
existing obligation. When the change of the object or
principal conditions of an obligation occurs at the
same time with the change of either in the person of
the debtor or creditor a mixed novation occurs.
The well settled rule is that novation is never
presumed. Novation will not be allowed unless it is
clearly shown by express agreement, or by acts of
equal import. Thus, to effect an objective novation it is
imperative that the new obligation expressly declare that
the old obligation is thereby extinguished, or that the new
obligation be on every point incompatible with the new one.
Neither can it be validly contended that there was a
change, or substitution in the persons of either the
creditor (Metrobank) or more specifically the debtors
(petitioners) upon the consolidation of the loans in PN
No. BDS 3605. The bare fact of petitioners' conversion
from a partnership to a corporation, without sufficient
evidence, either testimonial or documentary, that they RTC dismissed Saban’s complaint. Saban appealed to the
were expressly released from their obligations, did not CA. The appellate court reversed the trial court’s ruling. It
make petitioner AJAX, with its new corporate held that Saban was entitled to his commission. The CA
ruled that Ybañez’s revocation of his contract of agency
personality, a third person or new debtor within the
with Saban was invalid because the agency was coupled
context of a subjective novation. If at all, petitioner AJAX with an interest and Ybañez effected the revocation in bad
only became a co-debtor or surety. Without express faith in order to deprive Saban of his commission and to
release of the debtor from the obligation, any third keep the profits for himself.
party who may thereafter assume the obligation shall
be considered merely as co-debtor or surety. Novation Issue: Whether or not Saban is entitled to receive his
arising from a purported change in the person of the debtor commission from the sale; and, assuming that Saban
must be clear and express because, to repeat, it is never is entitled thereto, whether or not it is Lim who is liable
to pay Saban his sales commission.
presumed. Clearly then, from the aforediscussed points,
neither objective nor subjective novation occurred here.
Ruling: Yes. The agency was not revoked since Ybañez
requested that Lim make stop payment orders for the
CASE #12 - G.R. No. 163720             December 16, 2004
checks payable to Saban only after the consummation of
GENEVIEVE LIM, petitioner, vs. FLORENCIO
SABAN, respondents. the sale. At that time, Saban had already performed his
obligation as Ybañez’s agent when, through his efforts,
Ybañez executed the Deed of Absolute Sale of the lot with
Facts: The late Ybañez, owner of a lot in Cebu City,
Lim and the Spouses Lim. To deprive Saban of his
entered into an Agency Agreement with respondent in
commission subsequent to the sale which was
1994. Under the Agreement, Ybañez authorized Saban to
consummated through his efforts would be a breach of his
look for a buyer of the lot and to mark up the selling price to
contract of agency with Ybañez which expressly states that
include the amounts needed for payment of taxes, transfer
Saban would be entitled to any excess in the purchase
of title and other expenses incident to the sale, as well as
price.
Saban’s commission for the sale.
In Macondray & Co. v. Sellner, the Court held that it
Through Saban’s efforts, the lot was sold to the petitioner
would be in the height of injustice to permit the
and the spouses Lim in 1994. After the sale, Lim remitted to
principal to terminate the contract of agency to the
Saban the amounts for payment of taxes due on the
prejudice of the broker when he had already reaped the
transaction as well as broker’s commission.  Lim also issued
benefits of the broker’s efforts. In Infante v. Cunanan,
in the name of Saban four post-dated checks. In a letter,
et al., the Court ruled that the seller’s withdrawal in bad
Ybañez asked Lim to cancel all the checks issued by her in
faith of the brokers’ authority cannot unjustly deprive
Saban’s favor and to "extend another partial payment" for
the brokers of their commissions as the seller’s duly
the lot in his favor.
constituted agents.
After the four checks in his favor were dishonored upon
Applying to the present case, Saban had completely
presentment, Saban filed a Complaint for collection of sum
performed his obligations under his contract of agency with
of money and damages against Ybañez and Lim. In
Ybañez by finding a suitable buyer to preparing the Deed of
his Answer, Ybañez claimed that Saban was not entitled to
Absolute Sale between Ybañez and Lim and her co-
any commission because he concealed the actual selling
vendees. Moreover, the contract of agency very clearly
price from him and because he was not a licensed real
states that Saban is entitled to the excess of the mark-up of
estate broker.
the price of the lot after deducting Ybañez’s share and the
taxes and other incidental expenses of the sale.
Saban’s right to receive compensation for negotiating
as broker for Ybañez arises from the Agency
Agreement between them. Lim is not a party to the
contract. However, the record reveals that she had
knowledge of the fact that Ybañez set the price of the lot
at P200,000.00 and that the P600,000.00—the price
agreed upon by her and Saban—was more than the
amount set by Ybañez because it included the amount for
payment of taxes and for Saban’s commission as broker for
Ybañez.
Lim’s act of issuing the four checks amounting in Saban’s
favor belies her claim that she and her co-vendees did not
agree to purchase the lot at P600,000.00. The only logical
conclusion is that Lim changed her mind about agreeing to
purchase the lot at P600,000.00 after talking to Ybañez and
ultimately realizing that Saban’s commission is even more
than what Ybañez received as his share of the purchase
price as vendor. Obviously, this change of mind resulted to
the prejudice of Saban whose efforts led to the completion
of the sale between the latter, and Lim and her co-vendees.
This the Court cannot countenance.
The appellate court therefore had sufficient basis for
concluding that Ybañez and Lim connived to deprive Saban
of his commission by dealing with each other directly and
reducing the purchase price of the lot and leaving nothing
to compensate Saban for his efforts. Considering the
circumstances surrounding the case, and the undisputed
fact that Lim had not yet paid the balance of the purchase
price, it is just and proper for her to pay Saban the balance
of P200,000.00.
CASE #13 - G.R. No. 213054, June 15, 2016
TERESITA TAN, Petitioner, v. JOVENCIO F. CINCO,
SIMON LORI HOLDINGS, INC., PENTACAPITAL
INVESTMENT CORPORATION, FORTUNATO G. PE,
RAYMUNDO G. PE, JOSE REVILLA REYES, JR., AND
DEPUTY SHERIFF ROMMEL IGNACIO, Respondents.
Facts: In 2001, respondents extended a loan to one Dante
Tan in the amount of P50,000,000.00. The loan was
facilitated by PentaCapital Investment Corporation and was
secured by Dante's shares in Best World Resources
Corporation. When Dante failed to pay the loan upon
maturity, he proposed to settle the same by selling his
shares in BWRC and assigning the proceeds to SLHI, the
individual lenders, and PentaCapital.
Dante disappeared, leaving his obligations unpaid. Hence,
respondents filed an action for sum of money against him.
Makati RTC ordered Dante to pay respondents the sum of
P100,100,000.00. Deputy Sheriff Ignacio levied on a
property registered in Dante's name. An auction sale was
then conducted. Consequently, Dante sought the quashal
of the writ by presenting an affidavit executed by his wife,
herein petitioner attesting to the conjugal nature of the
subject property. Meanwhile, the period to redeem the
subject property lapsed without redemption having been
made.
Dante filed an Omnibus Motion alleging that the subject
property was a family home and therefore, exempt from
execution, and that being a conjugal property, it cannot be
made to answer for his personal obligations without any
showing that it had redounded to the benefit of the family.
The Makati RTC denied the Motion, ruling that Dante had
belatedly raised the issues respecting the conjugal nature
of the subject property. Moreover, he had contracted the
obligation while engaged in his business; hence, it can be
presumed that the conjugal partnership was benefited.
Dante's MR was denied.
In 2007, petitioner filed before the Parañaque RTC a
complaint against respondents, Sheriff Ignacio, and the
Register of Deeds of Parañaque City, for the nullification of
the auction sale and the cancellation of the certificate of
sale issued in favor of respondents.
Parañaque RTC initially dismissed the nullification
case. However, upon Teresita's MR, the Parañaque RTC
reversed its initial disposition and instead, nullified the
auction sale, the certificate of sale, and the Final Deed of
Sale in favor of respondents. It held that Teresita was
considered a third party in the collection case before the
Makati RTC, not having been impleaded therein together
with her husband Dante, and that the submission of her
Affidavit before the Makati RTC did not make her a party to
the said case.
Respondents' MR was denied. Aggrieved, respondents
filed a petition for certiorari before the CA. CA granted the
petition and directed the Parañaque RTC to allow
respondents' Notice of Appeal. 
Issue: Whether or not the Parañaque RTC violated the
doctrine of judicial stability when it took cognizance of
the nullification case filed by Teresita and declared as
null and void the auction sale, the certificate of sale,
and the Final Deed of Sale in favor of respondents.
Ruling: Yes. The doctrine of judicial stability or non-
interference in the regular orders or judgments of a co-
equal court is an elementary principle in the administration
of justice: no court can interfere by injunction with the
judgments or orders of another court of concurrent
jurisdiction having the power to grant the relief sought by
the injunction. The rationale for the rule is founded on the
concept of jurisdiction: a court that acquires jurisdiction
over the case and renders judgment therein has
jurisdiction over its judgment, to the exclusion of all
other coordinate courts, for its execution and over all
its incidents, and to control, in furtherance of justice,
the conduct of ministerial officers acting in connection
with this judgment.
In this case, Court finds that the Parañaque RTC violated
the doctrine of judicial stability when it took cognizance of
Teresita's nullification case despite the fact that the
collection case from which it emanated falls within the
jurisdiction of the Makati RTC. Verily, the nullification case
ought to have been dismissed at the outset for lack of
jurisdiction, as the Parañaque RTC is bereft of authority to
nullify the levy and sale of the subject property that was
legitimately ordered by the Makati RTC, a coordinate and
co-equal court. In fact, the Parañaque RTC was already on
the right track when it initially dismissed the nullification
case. However, it changed its stance and reconsidered its
disposition upon Teresita's MR, thereby committing
reversible error. To reiterate, the determination of
whether or not the levy and sale of a property in the
execution of a judgment was valid properly falls within
the jurisdiction of the court that rendered the judgment
and issued the writ of execution.
Thus, Teresita's nullification case filed before the
Parañaque RTC was improper and in glaring violation of
the doctrine of judicial stability. The judgment rendered by
the Makati RTC in the collection case, as well as the
execution thereof, and all other incidents arising therefrom,
may not be interfered with by the Parañaque RTC.
A judgment rendered by a court without jurisdiction is
null and void and may be attacked anytime. It creates
no rights and produces no effect. It remains a basic
fact in law that the choice of the proper forum is
crucial, as the decision of a court or tribunal without
jurisdiction is a total nullity. A void judgment for want
of jurisdiction is no judgment at all. All acts performed
pursuant to it and all claims emanating from it have no
legal effect.
CASE #14 - G.R. No. 1133. March 29, 1904.
RAFAEL REYES ET AL., Plaintiffs-Appellees, v. THE
COMPAÑIA MARITIMA, a corporation, Defendant-
Appellant.
Facts: In 1895, in the city of Manila, there were five
steamship companies, represented respectively by Messrs.
Aldecoa & Co., and Francisco L. Roxas, and by the
plaintiffs, Don Rafael Reyes and Don Francisco Reyes.
These companies owned among others the steamships.
The partners or stockholders of these firms having received
to pool their respective interests in the said steamers for
the purpose of forming an anonymous partnership or
corporation under the name of "Compañia Maritima,", they
executed a public instrument by which they organized the
said company for a term of twenty years, with a capital of
2,500,000 pesos, divided into 5,000 nominal shares of the
par value of 500 pesos each. Part of this capital, up to the
sum of 1,508,000 pesos, represented the estimated value
of the said steamers which the parties to the agreement in
question contributed to the new company, transferring to it
the ownership of the vessels to the extent of their
respective participation therein and receiving in payment
therefor 3,600 shares of the 5,000 which represented the
entire capital stock. The plaintiffs were among the founders
of the Compania Maritima. Don Rafael Reyes contributed
the steamers Luzon and Salvadora, and steamer España.
Don Francisco Reyes contributed his interest in the
steamers Castellano, Nuestra Señora del Rosario, Nuestra
Señora del Carmen, and España. The company was
organized subject to the terms and conditions included in
its articles of incorporation, By virtue of this appointment
made in the fifth transitory provision, the plaintiffs at once
became directors of the Compania Maritima, together with
the three other gentlemen named therein.
In a general meeting of shareholders, it was resolved to
add one more director to the five already in office, and to
confer upon him the powers of the general administrator of
the company. Mr. Macleod was appointed to this office.
Another general meeting of shareholders was held. In this
meeting it was resolved (1) to reduce to five the number of
directors, one of them to act as administrator or manger of
the company; (2) to reduce to 1 per cent of the total
receipts the compensation to be paid the board of directors,
the sum to be divided among the five directors in equal
parts; (3) to eliminate all the transitory provisions inserted
at the end of the general articles of the company; and (4) to
immediately remove from office the gentlemen who at that
time composed the board of directors of the company.
This resolution was passed by a majority vote. The plaintiffs
voted against it, and the minutes show a protest made by
Don Rafael Reyes to the effect that he would not assume
any of the responsibility which might devolve upon the
company by reason of the said resolution.
In consequence of the resolution to remove the gentlemen
who at the time composed the board of directors, a vote
was immediately taken for the election of those who were
to succeed them in the office. The vote resulted in the
appointment as directors of Messrs. Aldecoa & Co.,
Macleod & Co. Echeita & Portuonado, Ynchausti & Co.,
and Don Juan T. Macleod, the latter to be also the manager
of the company. The result was that two years and a month
after the plaintiffs had been appointed to the office of
directors of the company, which office they were to hold for
a term of eight years, they were removed therefrom.
The plaintiffs brought this action in the CFI. The court
considered that the principal question at issue was whether
the plaintiffs were entitled to compel the company to
respect and maintain their appointments during the said
period of time in conformity with the terms of the transitory
provisions. The court decided in favor of the plaintiffs and
rendered judgment against the Compania Maritima for the
payment of the amount demanded in the complaint, and the
cost of suit.
The court based his decision in part upon the conclusion
that the transitory provisions referred to constituted a lawful
and binding agreement between the parties who executed
the articles of incorporation of the Compania Maritima, and
also between the plaintiffs and the company, and that they
could not therefore be altered without the consent of all
concerned.
The appellant company contends that the judgment of the
court below is contrary to the provisions of articles 117 and
122, paragraph 3, and article 151 of the Code of
Commerce in force in the Philippines.
Article 117 reads as follows: "The contract of a mercantile
partnership, entered into with the essential legal requisites,
shall be valid and binding upon the parties thereto,
whatever may be the form, conditions, and lawful and
honest combinations subject to which the contract is
entered into, provided they are not expressly prohibited in
this code."
Issue: Whether or not the plaintiffs were entitled to
compel the company to respect and maintain their
appointments during the said period of time in
conformity with the terms of the transitory provisions
Ruling: No. It does not disregard the validity of the contract
of partnership by which the Compania Maritima was
created. On the contrary, the judgment is based upon the
assumption that it was a valid and binding contract, and
declares that the transitory provisions included in the
articles of incorporation of the company are valid and
binding upon those who took part in the execution of that
contract, and upon the defendant company itself. Nor is the
judgment contrary to the provisions of paragraph 3 of article
122. According to this theory the removal of a director is an
act which is wholly discretionary and which may be
performed at any time by the company by which he may
have been appointed.
The removability of managers and anonymous
partnerships or corporations is not a new principle in
the law merchant. Article 265 of this code provided that
such administrators might be removed "at the will of
the partners." Notwithstanding the breadth of the
wording of the law — which by the way has been
stricken from the text of article 122 of the present code
— it has never been considered that the partners could
remove the administrators at their caprice, whenever
they might see fit do so; it has always been considered
necessary that there should be some lawful cause
justifying the removal.
"As provided in article 265 of the Code of Commerce
(of 1829), the administrators of the anonymous stock
companies are removable at the will of the partners
when there are just and legal grounds for removal, or
in accordance with whatever may have been agreed
upon in this respect in the articles of the company."
This provision, which to a certain extent was an explanation
of the true legal meaning of the removability of the
administrators of anonymous partnerships or corporations,
is in itself sufficient to show that the power vested in the
shareholders to remove such administrators from office is
not and should not be considered as being omnipotent and
arbitrary, but limited solely to cases in which some cause
for removal exists.
Article 283 of the Code of Commerce is explicit upon this
point. "The manager," it says, "of a manufacturing
establishment or commercial concern, authorized to
manage it and to make contracts connected therewith with
such limited or extended powers as the owner may have
seen fit to confer upon him [and this is unquestionably the
status of the directors or administrators of anonymous
partnerships] shall be regarded in law as a factor, and shall
be subject to the provisions contained in this section."
In accordance with the provisions of articles 299 to 302,
inclusive, contained in the section above cited, a factor
whose contract with his principal has been made for a
fixed period cannot without just cause be discharged
before the expiration of the term agreed upon, under
penalty, in case of wrongful discharged, of payment by
the principal to him of such damage as he may have
suffered thereby. For the reasons which we have stated
we consider this provision applicable to managing directors
of anonymous partnerships or corporations, and
consequently we hold that they can ot be removed before
the expiration of the period for which they appointed without
just cause therefor. There is no reason for considering such
administrators as less advantageously situated them are
factors, in view of the analogy existing between them,
which we have demonstrated.
The Compañia Maritima, as appears from its answer
passed a resolution which resulted in the removal of the
plaintiffs from the offices as directors of the company
before the expiration of the agreed period of eight years.
There is no proof of any other ground which might have
justified the removal, nor is it even alleged. The only reason
was one of convenience. It is very obvious that the mere
convenience of one of the contracting parties is not
and cannot be a just cause for the rescission of the
contractual obligations assumed in favor of the other,
and the premature removal of the plaintiffs from their
office was in effect a rescission of the contract.
Nor is the judgment appealed in conflict with article 151 of
the Code of Commerce. The submission of the vote of the
majority of the stockholders in general meeting provided by
that article is limited solely to such matters as may be
proper for the deliberation of that meeting, and the
limitation is expressly stated in the article cited.
The defendant company alleges that the removal of the
plaintiffs was merely a consequence of the modification of
the articles of the company resolved by the general
meeting of shareholders. Assuming the existence of this
power, We cannot assent to this interpretation. The
shareholders of an anonymous company or
corporation could not, for example, resolve by a
majority vote that it should be changed into a general
partnership and bind the minority to submit to such a
resolution which, by making them general partners,
would necessarily result in increasing their liability for
the company debts. Nor could such a majority, against
the will of the minority, change the principal purpose
for which the company was formed, as, for instance, by
investing in mining operations the capital of the
company, which, according to the second of the
articles of incorporation in this case, was to be used
exclusively for purchasing and chartering vessels, in
writing marine insurance, and entering into other
contracts and business operations proper to maritime
commerce.
The reason for this is that in every contracts of
partnership there is always something fundamental
and unalterable which is beyond the power of the
majority, and which, constituting the rule controlling
their resolutions, prevents the will of the greater
number from becoming the absolute arbiter of the
interests of the minority. Without this necessary limitation
the power of members in anonymous partnerships, which
to a certain extent it may be said that numbers are
everything, would be absolute and irresistible, and might
easily degenerate into an arbitrary tyranny. The minority
would be completely wiped out and their rights would be
wholly at the mercy of the abuses of the majority, for they
would have no means whatever of defending themselves
against its impositions if the resolutions of the majority, as
contended for by the appellant, were in every case to be
binding, even though manifestly unjust and injurious to the
interests of the minority. This rule, which must be observed,
this limit which cannot be passed by the mere will of the
majority and upon which it acts as a veto, is to be found in
the essential compacts of the partnership which have
served as a basis upon which the members have united
and without which it is not probable that they would have
entered the association.
The judgment of the supreme court of Spain of June 30,
1888, cited by the court in its decision, fully confirms the
doctrine expressed by declaring that in order that
"resolutions passed by a general meeting of
stockholders be valid and binding upon dissenting
members, it is an indispensable requisite that they
conform absolutely to the compacts and conditions of
the articles of association, which are to be strictly
construed."
As the court below correctly stated: "It is to be supposed
that the defendants contributed their vessels in
consideration of the benefits conceded to them by the
articles of association, and that without these benefits they
would not have become partners, nor would they have
contributed their vessels to the enterprise. No one can
complain of the appointment of administrators during the
first period of eight years, for this was the agreement
between the founders of the company, which was assented
to by those who subsequently became interested therein."
From this it follows that the judgment below is not in conflict
with the articles of association of the Compania Maritima,
or of it articles or resolutions legally passed, as alleged by
the appellant, in the second assignment of error.
CASE #15 - G.R. No. 70403 July 7, 1989
SANTIAGO SYJUCO, INC., petitioner, vs. HON. JOSE P.
CASTRO, AS PRESIDING JUDGE OF THE REGIONAL
TRIAL COURT OF THE NATIONAL CAPITAL JUDICIAL
REGION, BRANCH LXXXV, QUEZON CITY et.
al, respondents.
Facts: In 1964, Eugenio Lim, the widow Maria Moreno
(now deceased) and together with his other brothers, and
his sister, all hereinafter collectively called the Lim’s,
borrowed from petitioner the sum of P800,000.00. The loan
was given on the security of a first mortgage on property
registered in the names of said borrowers as owners in
common. Thereafter additional loans on the same security
were obtained by the Lim’s from Syjuco.
Lim’s failed to pay it despite demands therefore; that
Syjuco consequently caused extra-judicial proceedings for
the foreclosure of the mortgage. To stop the foreclosure,
the Lim’s filed in the CFI of Manila. They alleged that their
mortgage was void. An order restraining the auction sale
was issued two days later. CFI rendered judgment finding
that usury tainted the mortgage without, however, rendering
it void, declaring the amount due to be only Pl,136,235.00
and allowing the foreclosure to proceed for satisfaction of
the obligation.
Thereafter, and on the basis of the additional evidence
adduced by Syjuco, the Trial Court reversing its previous
holding that usury had flawed the Lims' loan obligation.
Syjuco then resumed its efforts to proceed with the
foreclosure. It caused the auction sale of the mortgaged
property, only to be frustrated again by another action filed
by the Lims.
That very same claim — that there had been no
republication of the notice of sale, which was the foundation
of the Lims' action, the judgement authorizing the
foreclosure had been affirmed by both the Court of
Appeals and this Court, and had become final and
executory. And that motion sought exactly the same
remedy prayed, i.e., the prevention of the auction sale. The
decision consequently decreed that the Sheriff of Manila
should proceed with the mortgage sale, there being no
further impediment thereto. Notice of the decision was
served on the Lims. MR was filed, but the same was
denied.
The Lims caused the filing with the RTC of Quezon City of
still another action to preclude enforcement of the mortgage
held by Syjuco. This time the complaint was presented, not
in their individual names, but in the name of a partnership
of which they themselves were the only partners: "Heirs of
Hugo Lim." The complaint advocated the theory that the
mortgage which they, together with their mother, had
individually constituted over lands standing in their names
in the Property Registry as owners pro indiviso, in fact no
longer belonged to them at that time, having been earlier
deeded over by them to the partnership, "Heirs of Hugo
Lim", hence, said mortgage was void because executed by
them without authority from the partnership.
Atty. Canlas filed an ex-parte motion to declare Syjuco in
default. Judgment by default was rendered, declaring void
the mortgage in question because executed by the Lims
without authority from the partnership which was and had
been since March 30,1959 the exclusive owner of the
mortgaged property, and making permanent an injunction
against the foreclosure sale that had issued on January
14,1983. Unaccountably, when the motion to declare
defendant Syjuco in default was filed-the case was
afterwards allowed by Atty. Canlas to remain dormant for
seventeen (17) months. He made no effort to have the
judgment executed, or to avail of it in other actions
instituted by him against Syjuco.
While the Lims, through their partnership ("Heirs of Hugo
Lim"), were prosecuting their action in the sala of Judge
Castro, Syjuco once again tried to proceed with the
foreclosure after entry of judgment had been made. It
scheduled the auction sale on. But once again it was
frustrated. Another obstacle was put up by the Lims and
their counsel, Atty. Canlas.
Syjuco once more resumed its efforts to effect the
mortgage sale which had already been stymied for more
than fifteen (15) years. At its instance, the sheriff once
again set a date for the auction sale. But on the date of the
sale, a letter of Atty. Canlas was handed to the sheriff
drawing attention to the permanent injunction of the sale.
Judge Castro had on July 16, 1984 granted Atty. Canlas'
motion to declare cancelled the titles to the Lims'
mortgaged properties and as nun and void the annotation
of the mortgage and its amendments on said titles, and to
direct the Register of Deeds of Manila to issue new titles, in
lieu of the old, in the name of the partnership, "Heirs of
Hugo Lim." 
Respondent Judge Castro also filed a comment disclaiming
knowledge of previous controversies regarding the
mortgaged property. He asserted that Syjuco had been
properly declared in default for having failed to answer the
complaint despite service of summons upon it, and that his
decision in said case which was also properly served on
Syjuco became final when it was not timely appealed, after
which he lost jurisdiction to entertain the motion for
reconsideration and motion to dismiss.
Unwilling, however, to concede defeat, the Lims moved to
stop the foreclosure sale on the ground of lack of
republication. At about this time, Syjuco republished the
notice of sale in order, as it was later to manifest, to end all
further dispute. The Lims managed to persuade the judge.
This gave the Lims a convenient excuse for further
suspension of the foreclosure sale by introducing a new
wrinkle into their contentions-that the bond superseded the
mortgage which should, they claimed, therefore be
discharged instead of foreclosed.
Issue: Whether or not the mortgaged property had
been contributed to the respondent partnership and
was already property of said partnership when the
individual Lims unauthorizedly mortgaged it to Syjuco,
is of no better stripe, and this, too, is clear from the
undisputed facts and the legal conclusions to be drawn
therefrom
Ruling: Yes. The record shows that the respondent
partnership is composed exclusively of the individual Lims
in whose name all the cases herein referred to, were
brought and prosecuted, their contribution to the
partnership consisting chiefly, if not solely, of the property
subject of the Syjuco mortgage. It is also a fact that despite
its having been contributed to the partnership, the property
was never registered with the Register of Deeds in the
name of the partnership, but to this date remains registered
in the names of the Lims as owners in common. The
original mortgage deed was executed by the Lims as such
owners, as were all subsequent amendments of the
mortgage. There can be no dispute that in those
circumstances, the respondent partnership was
chargeable with knowledge of the mortgage from the
moment of its execution. The legal fiction of a separate
juridical personality and existence will not shield it
from the conclusion of having such knowledge which
naturally and irresistibly flows from the undenied facts.
It would violate all precepts of reason, ordinary
experience and common sense to propose that a
partnership, as commonly known to all the partners or
of acts in which all of the latter, without exception,
have taken part, where such matters or acts affect
property claimed as its own by said partnership.
If, therefore, the respondent partnership was
inescapably chargeable with knowledge of the
mortgage executed by all the partners thereof, its
silence and failure to impugn said mortgage within a
reasonable time, let alone a space of more than
seventeen years, brought into play the doctrine of
estoppel to preclude any attempt to avoid the mortgage
as allegedly unauthorized.
The right subsumed in that cause is the negation of the
mortgage, postulated on the claim that the parcels of land
mortgaged by the Lims to Syjuco did not in truth belong to
them but to the partnership. Assuming this to be so, the
right could have been asserted at the time that the Lims
instituted their first action, or when they filed their
subsequent actions. The claim could have been set up by
the Lims, as members composing the partnership, "Heirs of
Hugo Lim." It could very well have been put forth by the
partnership itself, as co-plaintiff in the corresponding
complaints, considering that the actions involved property
supposedly belonging to it and were being prosecuted by
the entire membership of the partnership, and therefore,
the partnership was in actuality, the real party in interest.
There is thus no reason to distinguish between the
Lims, as individuals, and the partnership itself, since
the former constituted the entire membership of the
latter. In other words, despite the concealment of the
existence of the partnership, for all intents and
purposes and consistently with the Lims' own theory, it
was that partnership which was the real party in
interest in all the actions; it was actually represented in
said actions by all the individual members thereof, and
consequently, those members' acts, declarations and
omissions cannot be deemed to be simply the
individual acts of said members, but in fact and in law,
those of the partnership.
What was done by the Lims — or by the partnership of
which they were the only members-was to split their cause
of action in violation of the well known rule that only one
suit may be instituted for a single cause of action.  The right
sought to be enforced by them in all their actions was, at
bottom, to strike down the mortgage constituted in favor of
Syjuco, a right which, in their view, resulted from several
circumstances, namely that the mortgage was constituted
over property belonging to the partnership without the
latter's authority; that the principal obligation thereby
secured was usurious; that the publication of the notice of
foreclosure sale was fatally defective, circumstances which
had already taken place at the time of the institution of the
actions.
The undenied and undisputable facts make it perfectly
clear that the claim to the mortgaged property
belatedly and in apparent bad faith pressed by the
respondent partnership is foreclosed by both law and
equity.
The Lims and their partnership acted in bad faith and with
intent to defraud is manifest in the record of their
actuations, presenting as they did, piecemeal and in one
case after another, defenses to the foreclosure or claims in
derogation thereof that were available to them from the
very beginning — actuations that were to stave off the
liquidation of an undenied debt for more than twenty years
and culminated in the clandestine filing and prosecution of
the action subject of the present petition.
CASE #16 - G.R. No. L-12164; May 22, 1959
BENITO LIWANAG and MARIA LIWANAG
REYES, petitioners-appellants, vs. WORKMEN'S
COMPENSATION COMMISSION, ET AL., respondents-
appellees.
Facts: Petitioners are co-owners of Liwanag Auto Supply,
a commercial guard who while in line of duty, was skilled by
criminal hands. His widow Vda. de Balderama and minor
children, in due time filed a claim for compensation with the
Workmen's Compensation Commission which was granted.
In appealing the case to this Tribunal, appellants do not
question the right of appellees to compensation nor the
amount awarded. They only claim that, under the
Workmen's Compensation Act, the compensation is
divisible, hence the commission erred in ordering
appellants to pay jointly and severally the amount awarded.
They argue that there is nothing in the compensation Act
which provides that the obligation of an employer arising
from compensable injury or death of an employee should
be solidary obligation, the same should have been
specifically provided, and that, in absence of such clear
provision, the responsibility of appellants should not be
solidary but merely joint.
Issue: Whether or not petitioners can be held jointly
and severally liable for the claim of defendants
Ruling: Yes. Arts. 1711 and 1712 of the new Civil Code
provide:
ART. 1711. Owners of enterprises and other
employers are obliged to pay compensation for the
death of or injuries to their laborers, workmen,
 mechanics or other employees, even though the
event may have been purely accidental or entirely
due to a fortuitous cause, if the death or personal
injury arose out of and in the course of the
employment. . . . .
ART. 1712. If the death or injury is due to the
negligence of a fellow-worker, the latter and the
employer shall be solidarily liable for
compensation. . . . .
And section 2 of the Workmen's Compensation Act, as
amended reads in part as follows:
. . . The right to compensation as provided in this
Act shall not be defeated or impaired on the ground
that the death, injury or disease was due to the
negligence of a fellow servant or employee, without
prejudice to the right of the employer to proceed
against the negligence party.
The provisions of the new Civil Code above quoted
taken together with those of Section 2 of the
Workmen's Compensation Act, reasonably indicate
that in compensation cases, the liability of business
partners, like appellants, should be solidary; otherwise,
the right of the employee may be defeated, or at least
crippled. If the responsibility of appellants were to be
merely joint and solidary, and one of them happens to
be insolvent, the amount awarded to the appellees
would only be partially satisfied, which is evidently
contrary to the intent and purposes of the Act.
Since the Workmen's Compensation Act was enacted to
give full protection to the employee, reason demands that
the nature of the obligation of the employers to pay
compensation to the heirs of their employee who died in
line of duty, should be solidary; otherwise, the purpose of
the law could not be attained
Case # 17 - G.R. No. 84197 July 28, 1989
PIONEER INSURANCE & SURETY
CORPORATION, petitioner, vs. THE HON. COURT OF
APPEALS, BORDER MACHINERY & HEAVY
EQUIPMENT, INC., (BORMAHECO), CONSTANCIO M.
MAGLANA and JACOB S. LIM, respondents.
FACTS: In 1965, Jacob S. Lim was engaged in the airline
business as owner-operator of Southern Air Lines (SAL), a
single proprietorship. On May 17, 1965, Japan Domestic
Airlines (JDA) and Lim entered into and executed a sales
contract for the sale and purchase of two aircrafts and one
set of necessary spare parts for the total agreed price of
US $109,000.00 to be paid in installments. On May 22,
1965, Pioneer Insurance and Surety Corporation as surety
executed and issued its Surety Bond No. 6639in favor of
JDA, in behalf of its principal, Lim, for the balance price of
the aircrafts and spare parts.
It appears that Border Machinery and Heavy Equipment
Company, Inc. (Bormaheco), Francisco and Modesto
Cervantes (Cervanteses) and Constancio Maglana
contributed some funds used in the purchase of the above
aircrafts and spare parts. The funds were supposed to be
their contributions to a new corporation proposed by Lim to
expand his airline business. On June 10, 1965, Lim doing
business under the name and style of SAL executed in
favor of Pioneer as deed of chattel mortgage as security for
the latter's suretyship in favor of the former. It was
stipulated therein that Lim transfer and convey to the surety
the two aircrafts.
However, Lim defaulted on his subsequent installment
payments prompting JDA to request payments from the
surety. Hence, Pioneer paid a total sum of P298,626.12.
Pioneer then filed a petition for the extrajudicial foreclosure
of the said chattel mortgage. On July 19, 1966, Pioneer
filed an action for judicial foreclosure with an application for
a writ of preliminary attachment against Lim and
respondents, the Cervanteses, Bormaheco and Maglana.
In the instant case, it is to be noted that the petitioner was
declared non-suited for his failure to appear during the
pretrial despite notification. In his answer, the petitioner
denied having received any amount from respondents
Bormaheco, the Cervanteses and Maglana. The trial court
and the appellate court, however, found through Exhibit 58,
that the petitioner received the amount of P151,000.00
representing the participation of Bormaheco and Atty.
Constancio B. Maglana in the ownership of the subject
airplanes and spare parts. The record shows that
defendant Maglana gave P75,000.00 to petitioner Jacob
Lim thru the Cervanteses.
RTC held Lim liable to pay Pioneer but dismissed Pioneer's
complaint against Maglana, Bormaheco and the
Cervanteses. On appeal, the CA reversed the lower court’s
decision. Lim contends that as a result of the failure of
respondents Bormaheco, Spouses Cervantes, Constancio
Maglana and petitioner Lim to incorporate, a de facto
partnership among them was created, and that as a
consequence of such relationship all must share in the
losses and/or gains of the venture in proportion to their
contribution.
ISSUE: Whether or not Maglana, Bormaheco and the
Cervanteses must share in the loss of the venture in
proportion to their contribution.
RULING: No. Maglana, Bormaheco and the Cervanteses
will not share in the loss of the venture in proportion to their
contribution because there’s no de facto partnership.
Ordinarily, when co-investors agreed to do business
through a corporation but failed to incorporate, a de
facto partnership would have been formed, and as
such, all must share in the losses and/or gains of the
venture in proportion to their contribution. Thus, where
persons associate themselves together under articles
to purchase property to carry on a business, and their
organization is so defective as to come short of
creating a corporation within the statute, they become
in legal effect partners inter se, and their rights as
members of the company to the property acquired by
the company will be recognized
However, such a relation does not necessarily exist, for
ordinarily persons cannot be made to assume the
relation of partners, as between themselves, when their
purpose is that no partnership shall exist.
It is therefore clear that the petitioner never had the
intention to form a corporation with the respondents despite
his representations to them. This gives credence to the
cross-claims of the respondents to the effect that they were
induced and lured by the petitioner to make contributions to
a proposed corporation which was never formed because
the petitioner reneged on their agreement.
Necessarily, no de facto partnership was created among
the parties which would entitle the petitioner to a
reimbursement of the supposed losses of the proposed
corporation. The record shows that the petitioner was
acting on his own and not in behalf of his other would-be
incorporators in transacting the sale of the airplanes and
spare parts.
Case # 18 - G.R. No. 29182. October 24, 1928.
LEONCIA VIUDA DE CHAN DIACO (alias LAO LIONG
NAW), Appellee, v. JOSE S. Y. PENG,
assignee, Appellant.
FACTS: This is an appeal from a decision of the Court of
First Instance of Manila dismissing an insolvency
proceeding.
On June 13, 1925, the San Miguel Brewery, Porta Pueco &
Co., and Ruiz& Rementaria S. en C. instituted insolvency
proceedings against Leoncia Vda.de Chan Diaco (alias Lao
Liong Naw), alleged to be the owner of a grocery store on
Calle Nueva, Binondo, known as the store of "La Viuda de
G. G. Chan Diaco." The above-mentioned firms alleged,
among other things, that Leoncia was indebted to them in
the sum of P26,234.47.
On August 4, 1926, Leoncia Vda. de Chan Diaco, the
appellee, filed a motion asking the court to dismiss the
proceedings against her on the ground that they should
have been brought against the partnership "Lao Liong Naw
&Co.," of which she was only a member.
ISSUE: WON the creditor is entitled to collect
individually from the partners the amount of the debt of
the insolvent partnership
RULING: Yes, “all the members of the general co-
partnership, be they or be they not managing partners
of the same, are personally and severally liable with all
their properties for the results of the transactions made
in the name and for the account of the partnership,
under the signature of the latter, and by the person
authorized to make use thereof."
It is further to be noted that both the partnership and
the separate partners thereof may be joined in the
same action, though the private property of the latter
cannot be taken in payment of the partnership debts
until the common property of the concern is
exhausted.
Key Notes:
1. PARTNERSHIPS; INSOLVENCY; LIABILITY OF THE
PARTNERS. — Where a partnership, as such, has no
visible assets, the partners individually must, jointly and
severally, respond for its debts (Code of Commerce, art.
127).
2. ID.; ID.; ID.; PARTNERSHIP AND SEPARATE
PARTNERS JOINED IN THE SAME ACTION. — Both the
partnership and the separate partners thereof may be
joined in the same action, though the private property of the
partners cannot be taken in payment of the partnership
debts until the common property of the concern is
exhausted.
Case # 19 - G.R. No. X92-1. July 30, 1979.
PETITION FOR AUTHORITY TO CONTINUE USE OF
THE FIRM NAME "SYCIP, SALAZAR, FELICIANO,
HERNANDEZ & CASTILLO." LUCIANO E. SALAZAR,
FLORENTINO P, FELICIANO, BENILDO G.
HERNANDEZ. GREGORIO R. CASTILLO. ALBERTO P.
SAN JUAN, JUAN C. REYES, JR., ANDRES G.
GATMAITAN, JUSTINO H. CACANINDIN, NOEL A.
LAMAN, ETHELWOLDO E. FERNANDEZ, ANGELITO C.
IMPERIO, EDUARDO R. CENIZA, TRISTAN A.
CATINDIG, ANCHETA K. TAN, and ALICE V. PESIGAN,
petitioners.
IN THE MATTER OF THE PETITION FOR AUTHORITY
TO CONTINUE USE OF THE FIRM NAME "OZAETA,
ROMULO, DE LEON, MABANTA & REYES." RICARDO
J. ROMULO, BENJAMIN M. DE LEON, ROMAN
MABANTA, JR., JOSE MA. REYES, JESUS S. J.
SAYOC, EDUARDO DE LOS ANGELES, and JOSE F.
BUENAVENTURA, petitioners.
FACTS: These are 2 petitions regarding the two law firms
mentioned in the title praying that they may retain the
names of their former partners “Sycip” and “Ozaeta” who
both passed away.
Petitioners base their petitions that Uunder the law, a
partnership is not prohibited from continuing its business
under a firm name which includes the name of a deceased
partner; in fact, Article 1840 of the Civil Code explicitly
sanctions the practice when it provides in the last
paragraph that:
"The use by the person or partnership continuing the
business of the partnership name, or the name of a
deceased partner as part thereof, shall not of itself make
the individual property of the deceased partner liable for
any debts contracted by such person or partnership." 
ISSUE: Whether or not the two law firms may retain the
names of their deceased partners.
RULING: The Court found no reason to depart from the
policy it adopted in June 1953 when it required Attorneys
Alfred P. Deen and Eddy A. Deen of Cebu City to desist
from including in their firm designation, the name of C. D.
Johnston, deceased. The Court believes that, in view of the
personal and confidential nature of the relations between
attorney and client and the high standards demanded in the
canons of professional ethics, no practice should be
allowed which even in a remote degree could give rise to
the possibility of deception. Said attorneys are accordingly
advised to drop the name "PERKINS" from their firm
name."
Art 1815 of the Civil Code which states: Art. 1815.
Every partnership shall operate under a firm name,
which may or may not include the name of one ormore
of the partners. Those who, not being members of the
partnership, include their names in the firm name, shall
be subject to theliability, of a partner.
It is clearly tacit in the above provision that names in a
firm name of a partnership must either be those of
living partners and, in the case of non-partners, should
be living persons who can be subjected to liability. In
fact, Article 1825 of the Civil Code prohibits a third
person from including his name in the firm name under
pain of assuming the liability of a partner. The heirs of
a deceased partner in a law firm cannot be held liable
as the old members to the creditors of a firm
particularly where they are non-lawyers. Thus, Canon
34 of the Canons of Professional Ethics "prohibits all
agreement for the payment to the widow and heirs of a
deceased lawyer of a percentage, either gross or net, of the
fees received from the future business of the deceased
lawyer’s clients, both because the recipients of such
division are not lawyers and because such payments will
not represent service or responsibility on the part of the
recipient." Accordingly, neither the widow nor the heirs can
be held liable for transactions entered into after the death of
their lawyer-predecessor. There being no benefits accruing,
there can be no corresponding liability.
OTHER ISSUE: Whether or not a partnership for the
practice of law can be likened to partnership for
business?
Ruling: NO. It cannot be likened to partnerships formed by
other professionals or for business. For one thing, the law
on accountancy specifically allows the use of a trade name
in connection with the practice of accountancy.
"A partnership for the practice of law is not a legal
entity. It is a mere relationship or association for a
particular purpose. . . . It is not a partnership formed
for the purpose of carrying on trade or business or of
holding property." 11 Thus, it has been stated that "the
use of a nom de plume, assumed or trade name in law
practice is improper."
Law is a profession, not a business. A professional
partnership rides on the individual skill of the
members. Profession - a group of men pursuing a learned
art as a common calling in the spirit of public service (def.
by Dean Pound).
Case #20 - 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.
FACTS: 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.
Alarmed by this development and believing that the
amounts she advanced were being misappropriated,
Rosales filed a case of estafa against Liwanag.
Both the lower court and the ca found the accused guilty
of estafa.
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. 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.
ISSUE:
1. Whether or not accused is guilty of estafa?
2. Can a partner in a contract of partnership be
guilty of estafaby misappropriating the money
received for a specific purpose?
RULING:
1. Yes, accused is guilty of estafa. 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.
The receipt states: 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 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.
2. Yes, a partner in a contract of partnership can
be guilty of estafa. 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 therefore, his vehicle could not be attached. a person cannot be prejudiced by a ruling rendered in an
estafa. action or proceeding in which he has not been made a
RTC issued an order denying Guy's motion. It explained party conforms to the constitutional guarantee of due
CASE #21 - G.R. No. 206147, January 13, 2016 that considering QSC was not a corporation, but a process of law.
MICHAEL C. GUY, Petitioner, v. ATTY. GLENN C. registered partnership, Guy should be treated as a general
GACOTT, Respondent. partner pursuant to Section 21 of the Corporation Code, In Muñoz v. Yabut, Jr., the Court declared that a person not
and he may be held jointly and severally liable with QSC impleaded and given the opportunity to take part in the
and Medestomas. proceedings was not bound by the decision declaring as
FACTS: On March 3, 1997, Atty. Gacott purchased two (2)
null and void the title from which his title to the property had
brand new transreceivers from Quantech Systems
Not satisfied, Guy moved for reconsideration of the denial been derived. The effect of a judgment could not be
Corporation (QSC) in Manila through its employee Rey
of his motion. He argued that under Article 1824 of the Civil extended to non-parties by simply issuing an alias writ of
Medestomas (Medestomas). On May 10, 1997, due to
Code, the partners were only solidarily liable for the execution against them, for no man should be prejudiced
major defects, Gacott personally returned the
partnership liability under exceptional circumstances; and by any proceeding to which he was a stranger.
transreceivers to QSC and requested that they be replaced.
that in order for a partner to be liable for the debts of the
Medestomas received the returned transreceivers and
partnership, it must be shown that all partnership assets In Aguila v. Court of Appeals the complainant had a cause
promised to send him the replacement units within two (2)
had first been exhausted. RTC denied his motion. of action against the partnership. Nevertheless, it was the
weeks from May 10, 1997.
partners themselves that were impleaded in the complaint.
CA rendered the assailed decision dismissing Guy's appeal The Court dismissed the complaint and held that it was the
Time passed and Gacott did not receive the replacement
for the same reasons given by the trial court. The CA partnership, not its partners, officers or agents, which
units as promised. QSC informed him that there were no
stressed that Guy, being a partner in QSC, was bound by should be impleaded for a cause of action against the
available units and that it could not refund the purchased
the summons served upon QSC based on Article 1821 of partnership itself. The Court added that the partners could
price. Despite several demands, both oral and written,
the Civil Code. The CA further opined that the law did not not be held liable for the obligations of the partnership
Gacott was never given a replacement or a refund. The
require a partner to be actually involved in a suit in order for unless it was shown that the legal fiction of a different
demands caused Gacott to incur expenses. Thus, Gacott
him to be made liable. He remained "solidarity liable juridical personality was being used for fraudulent, unfair, or
filed a complaint for damages. In a Decision, the RTC
whether he participated or not, whether he ratified it or not, illegal purposes.
found that the two (2) transreceivers were defective and
or whether he had knowledge of the act or omission." 19
that QSC and Medestomas failed to replace the same or
Here, Guy was never made a party to the case. He did not
return Gacott's money. The decision became final as QSC
ISSUE: Whether or not the CA erred in holding that the have any participation in the entire proceeding until his
and Medestomas did not interpose an appeal.
petitioner Guy is solidarily liable with the partnership vehicle was levied upon and he suddenly became QSC's
for damages arising from the breach of the contract of "co-defendant debtor" during the judgment execution stage.
During the execution stage, Gacott learned that QSC was
sale with respondent Gacott It is a basic principle of law that money judgments are
not a corporation, but was in fact a general partnership
enforceable only against the property incontrovertibly
registered with the SEC. In the articles of partnership, Guy
RULING: No. Although a partnership is based belonging to the judgment debtor. Indeed, the power of
was appointed as General Manager of QSC.
on delectus personae or mutual agency, whereby any the court in executing judgments extends only to
partner can generally represent the partnership in its properties unquestionably belonging to the judgment
To execute the judgment, Branch Sheriff Ronnie L.
business affairs, it is non sequitur that a suit against debtor alone. An execution can be issued only against
Felizarte (Sheriff Felizarte) went to the main office of the
the partnership is necessarily a suit impleading each a party and not against one who did not have his day in
Department of Transportation and Communications, Land
and every partner. It must be remembered that a court. The duty of the sheriff is to levy the property of
Transportation Office (DOTC-LTO), Quezon City, and
partnership is a juridical entity that has a distinct and the judgment debtor not that of a third person. For, as
verified whether Medestomas, QSC and Guy had personal
separate personality from the persons composing it. the saying goes, one man's goods shall not be sold for
properties registered therein. Upon learning that Guy had
another man's debts.
vehicles registered in his name, Gacott instructed the
sheriff to proceed with the attachment of one of the motor In relation to the rules of civil procedure, decision rendered
on a complaint in a civil action or proceeding does not bind In the spirit of fair play, it is a better rule that a partner
vehicles of Guy. Sheriff Felizarte attached Guy's vehicle.
or prejudice a person not impleaded therein, for no person must first be impleaded before he could be prejudiced
shall be adversely affected by the outcome of a civil action by the judgment against the partnership.
Thereafter, Guy filed his Motion to Lift Attachment Upon
Personalty, arguing that he was not a judgment debtor and, or proceeding in which he is not a party. The principle that
Further, Article 1821 of the Civil Code does not state that
there is no need to implead a partner in order to be
bound by the partnership liability. It provides that:
Notice to any partner of any matter relating to
partnership affairs, and the knowledge of the partner
acting in the particular matter, acquired while a partner
or then present to his mind, and the knowledge of any other
partner who reasonably could and should have
communicated it to the acting partner, operate as notice
to or knowledge of the partnership, except in the case of
fraud on the partnership, committed by or with the consent
of that partner.
A careful reading of the provision shows that notice to any
partner, under certain circumstances, operates as
notice to or knowledge to the partnership only. Unless
there is an unequivocal law which states that a partner is
automatically charged in a complaint against the
partnership, the constitutional right to due process takes
precedence and a partner must first be impleaded before
he can be considered as a judgment debtor.
Granting that Guy was properly impleaded in the complaint,
the execution of judgment would be improper. Article 1816
of the Civil Code governs the liability of the partners to third
persons, which states that:
Article 1816. All partners, including industrial ones, shall be
liable pro rata with all their property and after all the
partnership assets have been exhausted, for the
contracts which may be entered into in the name and for
the account of the partnership, under its signature and by a
person authorized to act for the partnership. However, any
partner may enter into a separate obligation to perform a
partnership contract. [Emphasis supplied]
This provision clearly states that,  first, the partners'
obligation with respect to the partnership liabilities is
subsidiary in nature. It provides that the partners shall
only be liable with their property after all the
partnership assets have been exhausted. To say that
one's liability is subsidiary means that it merely
becomes secondary and only arises if the one primarily
liable fails to sufficiently satisfy the obligation. Resort
to the properties of a partner may be made only after
efforts in exhausting partnership assets have failed or
that such partnership assets are insufficient to cover
the entire obligation. The subsidiary nature of the
partners' liability with the partnership is one of the
valid defenses against a premature execution of
judgment directed to a partner.
In this case, had he been properly impleaded, Guy's
liability would only arise after the properties of QSC
would have been exhausted. The records, however,
miserably failed to show that the partnership's properties
were exhausted.
Clearly, no genuine efforts were made to locate the
properties of QSC that could have been attached to satisfy
the judgment - contrary to the clear mandate of Article
1816. Being subsidiarily liable, Guy could only be held
personally liable if properly impleaded and after all
partnership assets had been exhausted.
Second, Article 1816 provides that the partners' obligation
to third persons with respect to the partnership liability
is pro rata or joint. Liability is joint when a debtor is liable
only for the payment of only a proportionate part of the
debt. In contrast, a solidary liability makes a debtor liable
for the payment of the entire debt. In the same vein, Article
1207 does not presume solidary liability unless: 1)
the obligation expressly so states; or 2) the law or nature
requires solidarity. With regard to partnerships, ordinarily,
the liability of the partners is not solidary. The joint liability
of the partners is a defense that can be raised by a partner
impleaded in a complaint against the partnership. In other
words, only in exceptional circumstances shall the partners'
liability be solidary in nature. Articles 1822, 1823 and 1824
of the Civil Code provide for these exceptional conditions,
to wit:
Article 1822. Where, by any wrongful act or omission of any
partner acting in the ordinary course of the business of the
partnership or with the authority of his co-partners, loss or
injury is caused to any person, not being a partner in the
partnership, or any penalty is incurred, the partnership is
liable therefor to the same extent as the partner so acting
or omitting to act.
Article 1823. The partnership is bound to make good the
loss:
(1) Where one partner acting within the scope of his
apparent authority receives money or property of a third
person and misapplies it; and
(2) Where the partnership in the course of its business
receives money or property of a third person and the
money or property so received is misapplied by any partner
while it is in the custody of the partnership.
Article 1824. All partners are liable solidarity with the
partnership for everything chargeable to the
partnership under Articles 1822 and 1823. [Emphases
Supplied]
In essence, these provisions articulate that it is the act of a
partner which caused loss or injury to a third person that
makes all other partners solidarity liable with the
partnership because of the words "any wrongful act or
omission of any partner acting in the ordinary course of the
business, " "one partner  acting within the scope of his
apparent authority" and "misapplied by any partner while it
is in the custody of the partnership." The obligation is
solidary because the law protects the third person, who in
good faith relied upon the authority of a partner, whether
such authority is real or apparent.
In the case at bench, it was not shown that Guy or the other
partners did a wrongful act or misapplied the money or
property he or the partnership received from Gacott. A third
person who transacted with said partnership can hold the
partners solidarity liable for the whole obligation if the case
of the third person falls under Articles 1822 or 1823.
Gacott's claim stemmed from the alleged defective
transreceivers he bought from QSC, through the latter's
employee, Medestomas. It was for a breach of warranty in
a contractual obligation entered into in the name and for the
account of QSC, not due to the acts of any of the partners.
For said reason, it is the general rule under Article 1816
that governs the joint liability of such breach, and not
the exceptions under Articles 1822 to 1824. Thus, it
was improper to hold Guy solidarity liable for the
obligation of the partnership.
Finally, Section 21 of the Corporation Code, as invoked
by the RTC, cannot be applied to sustain Guy's liability.
The said provision states that a general partner shall be
liable for all debts, liabilities and damages incurred by an
ostensible corporation. It must be read, however, in
conjunction with Article 1816 of the Civil Code, which
governs the liabilities of partners against third persons.
Accordingly, whether QSC was an alleged ostensible
corporation or a duly registered partnership, the liability of
Guy, if any, would remain to be joint and subsidiary
because, as previously stated, all partners shall be
liable pro rata with all their property and after all the
partnership assets have been exhausted for the contracts
which may be entered into in the name and for the account
of the partnership.
CASE #22 - G.R. No. 216023, October 05, 2016
DR. RESTITUTO C. BUENVIAJE, Petitioner, v. SPOUSES
JOVITO R. AND LYDIA B. SALONGA, JEBSON
HOLDINGS CORPORATION AND FERDINAND JUAT
BAÑEZ, Respondent.
FACTS: In 1997, Jebson, an entity engaged in the real
estate business, through its Executive Vice President,
Bañez, entered into a JVA with Sps. Salonga. Under the
JVA, Sps. Salonga, who owned three (3) parcels of land
situated in Tagaytay City, agreed for Jebson to construct
thereon ten (10) high-end single detached residential units,
to be known as Brentwoods Tagaytay Villas (Brentwoods).
They likewise assumed to subdivide the property into
individual titles upon which Jebson shall assume the liability
to pay their mortgage loan with the Metropolitan Bank and
Trust Company. On the other hand, Jebson undertook to
construct the units at its own expense, secure the building
and development permits, and the license to sell from the
HLURB, as well as the other permits required. Out of the
ten (10) units, seven (7) units will belong to Jebson while
the remaining three (3) units will correspond to Sps.
Salonga's share. The units allocated to Sps. Salonga were
to be delivered within six (6) months after Jebson's receipt
of the down payment for the units allocated to it. Jebson
was also allowed to sell its allocated units under such terms
as it may deem fit, subject to the condition that the price
agreed upon was with the conformity of Sps. Salonga.
Jebson entered into a Contract to Sell with Buenviaje
without the conformity of Sps. Salonga. Out of the purchase
price, P7,800,000.00 was paid through a "swapping
arrangement," whereby Buenviaje conveyed to Jebson a
house and golf share, while the remaining balance was
paid periodically. An additional sum of P125,000.00 for the
retaining wall and air-conditioning system was likewise paid
for by Buenviaje.
However, despite full payment of the contract price, Jebson
was unable to complete Unit 5 in violation of its contractual
stipulation to finish the same within twelve (12) months
from the date of issuance of the building permit. Thus, in
April 1999, Buenviaje formally demanded the immediate
completion and delivery of Unit 5, to which Jebson cited the
1997 financial crisis as the reason for the delay.
Accordingly, Jebson asked to be given until the early part of
the year 2000 to complete the same but still failed to do so.
In 2002, Buenviaje filed before the HLURB Regional Field
Office IV (HLURB-RIV) a Complaint for Specific
Performance, against Jebson, Bañez, and Sps. Salonga
(respondents), praying for the (a) completion of Unit 5, (b)
partition and subdivision of the property, (c) delivery of the
title to Unit 5, and (d) payment of damages and attorney's
fees. In the alternative, he prayed for the rescission of the
subject CTS, and the return of all payments made
thereunder, with interest at 24% per annum (p.a.), as well
as the house and lot, and golf share pursuant to the
"swapping arrangement."
In their defense, Jebson and Bañez claimed that they were
ready to comply with all their contractual obligations but
were not able to secure the necessary government permits
because Sps. Salonga stubbornly refused to cause the
consolidation of the parcels of land, and their partition into
ten (10) individual lots.
For their part, Sps. Salonga averred that they were not
liable to the complainants since there was no privity of
contract between them, adding that the contracts to sell
were unenforceable against them as they were entered into
by Jebson without their conformity, in violation of the JVA.
They maintained that they were ready to cause the
subdivision and individual titling of the subject property.
HLURB-RIV found that respondents were not legally
authorized to sell Brentwoods as they have not secured the
necessary Registration Certificate and License to Sell.
Furthermore, they failed to complete the construction of the
units as well as to deliver the units to the complainants on
time, entitling the latter to the refund of their payments,
including interests. It further found Sps. Salonga solidarily
liable with Jebson and Bañez as joint venture partners
liable to the general buying public.
Aggrieved, Sps. Salonga appealed to the HLURB-BOC.
HLURB-BOC reversed and set aside the HLURB-RIV's
ruling and held that there was no substantial breach but
only a slight or casual one, which did not justify a rescission
of the contracts to sell. Considering the accomplishment
level of the work done on the said units. Nonetheless, it
invalidated the "swapping arrangements" in the respective
contracts to sell of Jebson with Buenviaje and Beliz Realty,
which allowed the use of non-cash assets as substantial
downpayment, leaving Jebson with insufficient funds to
complete their units, and to construct and deliver the units
allocated to Sps. Salonga who were prejudiced thereby.
It also found no basis to hold Sps. Salonga solidarily liable
with Jebson and Bañez under the subject CTS, considering
that: (a) the JVA does not provide for solidarity for any act
or omission of either party and, in fact, expressly provides
that Sps. Salonga shall be free of any liability from any third
party as regards non-compliance with HLURB Rules and
Regulations; (b) the legal obligation to procure the required
development, permit, license to sell, and certificate of
registration from the HLURB devolved entirely and
exclusively on Jebson and Bañez; (c) Sps. Salonga were
not the ones in control of the project, but Bañez; and (d)
even assuming Sps. Salonga directly or indirectly controlled
Jebson, Section 40 of PD 957 exempts from its rule of
solidary liability one who has acted in good faith and did not
directly or indirectly induce the act or acts constituting the
violation or cause of action.
Buenviaje and complainants moved for reconsideration but
the same were denied. Dissatisfied, Buenviaje elevated the
matter to the Office of the President (OP). OP affirmed the
ruling of the HLURB-BOC. CA affirmed the OP ruling.
ISSUE: Whether or not the CA correctly ruled that Sps.
Salonga are not solidarily liable with Jebson and Banez
to Buenviaje for the completion of the construction and
delivery of the unit.
RULING: Yes. In this case, the HLURB-BOC, the OP, and
the CA all pointed out that Buenviaje primarily prayed for
the remedy of specific performance - i.e., the completion of
Unit 5, the subdivision of Sps. Salonga's property into
individual lots per unit, and the tum-over of Unit 5 as well as
the subdivided lot portion allocated to such unit to him and
only prayed for the remedy of rescission as an alternative
remedy. Thus, it remains apparent that as between the two
remedies made available to him, Buenviaje, had, in fact,
chosen the remedy of specific performance and therefore,
ought to be bound by the choice he had made.
Relatedly, it is observed that Buenviaje's alternative prayer
for resolution is textually consistent with that portion of
Article 1191 of the Civil Code which states that an injured
party "may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible."
Nevertheless, the impossibility of fulfillment was not
sufficiently demonstrated in the proceedings conducted in
this case. As the HLURB BOC pointed out, "There is no
finding that specific performance has become impossible or
that there are insuperable legal obstacles to the completion
of the constructed units so as to justify resolution."
With these in mind, the CA therefore correctly upheld
the directive for Jebson to comply with its obligations
under the subject CTS with Buenviaje as prayed for by
the latter. Failing to show any cogent reason to hold
otherwise, Buenviaje can no longer recant his primary
choice of relief.
With the propriety of specific performance having been
decreed, Buenviaje's claim to be restituted the alleged
purchase price for which Sps. Salonga were claimed to be
solidarily liable - thus, holds no basis. As above-intimated,
mutual restitution is the proper consequence of the remedy
of resolution. It cannot arise - as it is, in fact, theoretically
incompatible - with the remedy of specific performance,
which is the relief prayed for and consequently, granted to
the injured party herein.
In this relation, it is fitting to clarify that the obligations to be
fulfilled, i.e., the completion of Unit 5, the subdivision of
Sps. Salonga's property into individual lots per unit, and the
tum-over of Unit 5, as well as the subdivided lot portion
allocated to such unit, are obligations of Jebson to
Buenviaje under the subject CTS.
In this case, it is undisputed that Sps. Salonga were not
parties to the above-mentioned contract. Under Article
1311 of the Civil Code, it is a basic principle in civil law
on relativity of contracts, that contracts can only bind
the parties who had entered into it and it cannot favor
or prejudice third persons. Contracts take effect only
between the parties, their successors in interest, heirs
and assigns. Thus, absent any privity of contract as to
them, there is no basis to hold Sps. Salonga liable for
any of the obligations stated under the said contract to
sell.
At this juncture, it should be further made clear that the
imputation of joint or solidary liability against a
particular person- such as that insistently claimed
against Sps. Salonga by Buenviaje first presupposes
the existence of that person's obligation. On the active
side, the joint or solidary nature of an obligation is an
aspect of demandability; it pertains to the extent of a
creditor's entitlement to demand fulfillment against any or
all of his debtors under one particular obligation. Based on
case law, a solidary obligation is one in which each of
the debtors is liable for the entire obligation, and each
of the creditors is entitled to demand the satisfaction of
the whole obligation from any or all of the debtors. On
the other hand, a joint obligation is one in which each
debtors is liable only for a proportionate part of the
debt, and the creditor is entitled to demand only a
proportionate part of the credit from each debtor.
As already mentioned, no source of obligation under the
subject CTS can be traced to Sps. Salonga as they were
clearly non-parties thereto. Therefore, without such extant
obligation, the possibility of holding them liable in
solidum with Jebson under the said contract is out of the
question.
Neither has Buenviaje persuasively argued that Sps.
Salonga may be held solidarily liable pursuant to law, which
is a distinct source of obligation. More particularly,
Buenviaje attempts to establish that Section 40 of PD 957
as well as Articles 1822 and 1824 of the Civil Code, are
legal provisions which render Sps. Salonga solidarity liable
together with Jebson:
Section 40 of PD 957 reads: Section 40. Liability of
controlling persons. Every person who directly or indirectly
controls any person liable under any provision of this
Decree or of any rule or regulation issued thereunder shall
be liable jointly and severally with and to the same extent
as such controlled person unless the controlling person
acted in good faith and did not directly or indirectly induce
the act or acts constituting the violation or cause of action.
In this case, records are bereft of any showing that Sps.
Salonga had direct or indirect control over Jebson
throughout the course of the entire Brentwoods
Project. In fact, even if it is assumed that they had some
sort of control over Jebson, it was not shown that they
acted in bad faith and had a hand in inducing Jebson's acts
from which Buenviaje's cause of action arose. As such, the
foregoing provision cannot be invoked to hold Sps. Salonga
solidarily liable with Jebson.
Similarly, there is no perceptible legal basis to hold them
solidarily liable under Articles 1822 and 1824 of the Civil
Code. These provisions, which are found under Section 3,
Chapter 2, Title IX, Book IV of the Civil Code on
Partnership, respectively state:
Article 1822. Where, by any wrongful act or omission of any
partner acting in the ordinary course of the business of the
partnership or with the authority of his co-partners, loss or
injury is caused to any person, not being a partner in the
partnership, or any penalty is incurred, the partnership is
liable therefor to the same extent as the partner so acting
or omitting to act.
Article 1824. All partners are liable solidarily with the
partnership for everything chargeable to the partnership
under Articles 1822 and 1823.

Evidently, the foregoing legal provisions pertain to the
obligations of a co-partner in the event that the partnership
to which he belongs is held liable. In this case, Buenviaje
never dealt with any partnership constituted by and
between Jebson and Sps. Salonga. As previously
mentioned, the subject CTS, which was the source of
the obligations relative to the completion and delivery
of Unit 5, solely devolved upon the person of Jebson.
As there was no partnership privy to any obligation to
which Buenviaje is a creditor, Articles 1822 and 1824 of
the Civil Code do not apply.
While Jebson, as developer, and Sps. Salonga, as land
owner, entered into a joint venture, which - based on case
law may be considered as a form of partnership,  the fact
remains that their joint venture was never privy to any
obligation with Buenviaje; hence, liability cannot be
imputed against the joint venture based on the same
principle of relativity as above mentioned. Besides, it
should be pointed out that the JVA between Jebson
and Sps. Salonga was limited to the construction of the
residential units under the Brentwoods Project and that
Jebson had the sole hand in marketing the units
allocated to it to third persons, such as Buenviaje.
CASE # 23 – Alfredo Aguila v. CA and Vda. de Abrogar
377 Phil. 257, GR 127347, November 25, 1999
Facts: Alfredo Aguilar is the manager of AC Aguila & Sons
Co., a partnership engaged in lending. Respondent
Felicidad Abrogar and her late husband were owners of a
house and lot in Marikina. Felicidad then entered into a
MOA with AC Aguila & Sons Co., where the property shall
be bought by the partnership for P200K with an option to
repurchase within 90 days from MOA for P230K.
On the same day April 18, 2001 they executed a DOAS
dated June 11, 1991 where the property was sold to the
partnership for P200K. An SPA was also made on the
same day, authorizing Alfredo to cancel the TCT and issue
new one in the name of the partnership in case she failed
to redeem the property. There was failure to redeem within
the 90-dau period and thus pursuant to the SPA, Alfredo
caused the cancellation and issuance of new TCT. She
was demanded to vacate but refused which prompted AC
Aguila to file for ejectment which ruled in its favor. Later,
she filed a petition for declaration of nullity of deed of sale
alleging that the signature of her husband was a forgery
because he was dead when the deed was supposed to be
executed on June 11, 1991.
It appears, however, that private respondent had filed a
criminal complaint for falsification against petitioner with the
Office of the Prosecutor of Quezon City which was
dismissed. RTC Marikina dismissed the action but CA
reversed find that the sale with repurchase was an
equitable mortgage and that it was in the nature of a
pactum commissorium which was void. Alfredo contends
he is not real party in interest but AC Aguila & Sons, Co.
against which the case should have been brought.
Issue: Whether or not there Alfredo was a real party in
interest?
Ruling: No. Every action must be prosecuted and
defended in the name of the real party in interest." A real
party in interest is one who would be benefited or
injured by the judgment, or who is entitled to the avails
of the suit. Any decision rendered against a person
who is not a real party in interest in the case cannot be
executed. Hence, a complaint filed against such a person
should be dismissed for failure to state a cause of action.
Under Art. 1768 of the Civil Code, a partnership "has a
juridical personality separate and distinct from that of each
of the partners." The partners cannot be held liable for the
obligations of the partnership unless it is shown that the
legal fiction of a different juridical personality is being used
for fraudulent, unfair, or illegal purposes.
In this case, private respondent has not shown that A.C.
Aguila & Sons, Co., as a separate juridical entity, is being
used for fraudulent, unfair, or illegal purposes. Moreover,
the title to the subject property is in the name of A.C. Aguila
& Sons, Co. and the Memorandum of Agreement was
executed between private respondent, with the consent of
her late husband, and A. C. Aguila & Sons, Co.,
represented by petitioner. Hence, it is the partnership, not
its officers or agents, which should be impleaded in any
litigation involving property registered in its name. A
violation of this rule will result in the dismissal of the
complaint. We cannot understand why both the Regional
Trial Court and the Court of Appeals sidestepped this issue
when it was squarely raised before them by petitioner. Our
conclusion that petitioner is not the real party in interest
against whom this action should be prosecuted makes it
unnecessary to discuss the other issues raised by him in
this appeal.
CASE #24 - G.R. No. 174149: September 08, 2010
J. TIOSEJO INVESTMENT CORP., PETITIONER, VS.
SPOUSES BENJAMIN AND ELEANOR ANG,
RESPONDENTS.
FACTS: In 1995, petitioner entered into a JVA with
Primetown Property Group, Inc. (PPGI) for the
development of a residential condominium project to be
known as The Meditel on the former's property along
Samat St., Highway Hills, Mandaluyong City. With
petitioner contributing the same property to the joint venture
and PPGI undertaking to develop the condominium, the
JVA provided, among other terms and conditions, that the
developed units shall be shared by the former and the latter
at a ratio of 17%-83%, respectively. While both parties
were allowed, at their own individual responsibility, to pre-
sell the units pertaining to them, PPGI further undertook to
use all proceeds from the pre-selling of its saleable units for
the completion of the Condominium Project."
In 1996, the HLURB issued License to Sell in favor of
petitioner and PPGI as project owners. By virtue of said
license, PPGI executed  Contract to Sell with Spouses
Benjamin and Eleanor Ang over the condominium unit and
over the parking space.
In 1999, respondents filed against petitioner and PPGI the
complaint for the rescission of the aforesaid Contracts to
Sell before the HLURB.  Contending that they were
assured by petitioner and PPGI that the subject
condominium unit and parking space would be available for
turn-over and occupancy in December 1998, respondents
averred that in view of the non-completion of the project
according to said representation, respondents instructed
petitioner and PPGI to stop depositing the post-dated
checks they issued and to cancel said Contracts to Sell;  Board committed no grave abuse of discretion in rendering
and, that despite several demands, petitioner and PPGI
have failed and refused to refund the P611,519.52 they
already paid under the circumstances.
PPGI filed its answer alleging that the delay in the
completion of the project was attributable to the economic
crisis which affected the country at the time; that the
unexpected and unforeseen inflation as well as increase in
interest rates and cost of building materials constitute force
majeure and were beyond its control; that aware of its
responsibilities, it offered several alternatives to its buyers
like respondents for a transfer of their investment to its
other feasible projects and for the amounts they already
paid to be considered as partial payment for the
replacement unit/s.  proceeding from contracts entered into by PPGI with
Petitioner also specifically denied the material
allegations calling attention to the fact that its
prestation under the JVA consisted in contributing the
property on which The Meditel was to be constructed,
that by the terms of the JVA, each party was
individually responsible for the marketing and sale of
the units pertaining to its share; that not being privy to
the Contracts to Sell executed by PPGI and
respondents, it did not receive any portion of the
payments made by the latter; and, that without any
contributory fault and negligence on its part, PPGI
breached its undertakings under the JVA by failing to
complete the condominium project.  the filing of a civil case for damages arising from the breach
Housing and Land Use (HLU) Arbiter Dunstan T. San
Vicente decided declaring the subject Contracts to Sell
cancelled and rescinded on account of the non-completion
of the condominium project.  On the ground that the JVA
created a partnership liability on their part, petitioner and
PPGI, as co-owners of the condominium project, were
ordered to pay respondents. HLURB Board of
Commissioners dismissed the petition for review of the
respondent Corporation.
Petitioner filed a Notice of Appeal before the Office of the
President (OP). OP rendered a decision dismissing
petitioner's appeal on the ground that the latter's appeal
memorandum was filed out of time and that the HLURB
the appealed decision. Aggrieved by the denial of its MR,
petitioner filed before the CA. CA disposed the former's
pending motion for extension as well as the petition itself
ISSUES: Whether or not the HLURB Arbiter and Board
correctly held petitioner liable alongside PPGI for
respondents' claims and the P10,000.00 administrative
fine imposed pursuant to Section 20 in relation to
Section 38 of P.D. 957.
RULING: Yes. By the express terms of the JVA, it appears
that petitioner not only retained ownership of the
property pending completion of the condominium
project but had also bound itself to answer liabilities
third parties. Article VIII, Section 1 of the JVA distinctly
provides as follows:
"Sec. 1. Rescission and damages. Non-performance by
either party of its obligations under this Agreement shall be
excused when the same is due to Force Majeure.  In such
cases, the defaulting party must exercise due diligence to
minimize the breach and to remedy the same at the
soonest possible time.  In the event that either party
defaults or breaches any of the provisions of this
Agreement other than by reason of Force Majeure, the
other party shall have the right to terminate this Agreement
by giving notice to the defaulting party, without prejudice to
of the defaulting party.
In the event that the Developer shall be rendered
unable to complete the Condominium Project, and
such failure is directly and solely attributable to the
Developer, the Owner shall send written notice to the
Developer to cause the completion of the
Condominium Project.  If the developer fails to comply
within One Hundred Eighty (180) days from such notice
or, within such time, indicates its incapacity to
complete the Project, the Owner shall have the right to
take over the construction and cause the completion
thereof.  If the Owner exercises its right to complete
the Condominium Project under these circumstances,
this Agreement shall be automatically rescinded upon
written notice to the Developer and the latter shall hold
the former free and harmless from any and all liabilities
to third persons arising from such rescission.  In any
case, the Owner shall respect and strictly comply with
any covenant entered into by the Developer and third
parties with respect to any of its units in the
Condominium Project.  To enable the owner to comply
with this contingent liability, the Developer shall
furnish the Owner with a copy of its contracts with the
said buyers on a month-to-month basis.  Finally, in
case the Owner would be constrained to assume the
obligations of the Developer to its own buyers, the
Developer shall lose its right to ask for indemnity for
whatever it may have spent in the Development of the
Project.
Nevertheless, with respect to the buyers of the
Developer for the First Phase, the area intended for the
Second Phase shall not be bound and/or subjected to
the said covenants and/or any other liability incurred
by the Developer in connection with the development
of the first phase." (Underscoring supplied)
Viewed in the light of the foregoing provision of the JVA,
petitioner cannot avoid liability by claiming that it was
not in any way privy to the Contracts to Sell executed
by PPGI and respondents.  As correctly argued by the
latter, moreover, a joint venture is considered in this
jurisdiction as a form of partnership and is, accordingly,
governed by the law of partnerships. Under Article 1824 of
the Civil Code of the Philippines, all partners are solidarily
liable with the partnership for everything chargeable to the
partnership, including loss or injury caused to a third person
or penalties incurred due to any wrongful act or omission of
any partner acting in the ordinary course of the business of
the partnership or with the authority of his co-partners.
Whether innocent or guilty, all the partners are solidarily
liable with the partnership itself.