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d. Existence of Business Enterprise: IRMA IDOS, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

DECISION QUISUMBING, J.: Before this Court is the petition for review of the Decision of respondent Court of Appeals[1] dismissing petitioner’s appeal in CA-G.R. CR No. 11960; and affirming her conviction as well as the sentence imposed on her by the Regional Trial Court of Malolos, Bulacan, in Criminal Case No. 1395-M-88[2] as follows: “WHEREFORE . . . the [c]ourt finds the accused Irma Idos guilty beyond reasonable doubt and is hereby sentenced to suffer the penalty of imprisonment of six (6) months and to pay a fine ofP135,000.00 and to pay private complainant Eddie Alarilla the amount of the check in question of P135,000.00 at 12% interest from the time of the filing of the [i]nformation (August 10, 1988) until said amount has been fully paid.” Elevated from the Third Division[3] of this Court, the case was accepted for resolution en banc on the initial impression that here, a constitutional question might be involved.[4] It was opined that petitioner’s sentence, particularly six months’ imprisonment, might be in violation of the constitutional guarantee against imprisonment for non-payment of a debt.[5] A careful consideration of the issues presented in the petition as well as the comments thereon and the findings of fact by the courts below in the light of applicable laws and precedents convinces us, however, that the constitutional dimension need not be reached in order to

resolve those issues adequately. For, as herein discussed, the merits of the petition could be determined without delving into aspects of the cited constitutional guarantee vis-à-vis provisions of the Bouncing Checks Law (Batas Pambansa Blg. 22). There being no necessity therefor, we lay aside discussions of the constitutional challenge to said law in deciding this petition. The petitioner herein, Irma L. Idos, is a businesswoman engaged in leather tanning. Her accuser for violation of B.P. 22 is her erstwhile supplier and business partner, the complainant below, Eddie Alarilla. As narrated by the Court of Appeals, the background of this case is as follows: “The complainant Eddie Alarilla supplied chemicals and rawhide to the accused-appellant Irma L. Idos for use in the latter’s business of manufacturing leather. In 1985, he joined the accused-appellant’s business and formed with her a partnership under the style ‘Tagumpay Manufacturing,’ with offices in Bulacan and Cebu City. However, the partnership was short lived. In January, 1986 the parties agreed to terminate their partnership. Upon liquidation of the business the partnership had as of May 1986 receivables and stocks worth P1,800,000.00. The complainant’s share of the assets was P900,000.00 to pay for which the accused-appellant issued the following postdated checks, all drawn against Metrobank Branch in Mandaue, Cebu: CHECK NO. DATE AMOUNT 1) 103110295 8-15-86 P135,828.87

2) 103110294 P135, 828.87 3) 103115490 9-30-86 P135,828.87 4) 103115491 10-30-86 P126,656.01 The complainant was able to encash the first, second, and fourth checks, but the third check (Exh. A) which is the subject of this case, was dishonored on October 14, 1986 for insufficiency of funds. The complainant demanded payment from the accused-appellant but the latter failed to pay. Accordingly, on December 18, 1986, through counsel, he made a formal demand for payment. (Exh. B) In a letter dated January 2, 1987, the accused-appellant denied liability. She claimed that the check had been given upon demand of complainant in May 1986 only as ‘assurance’ of his share in the assets of the partnership and that it was not supposed to be deposited until the stocks had been sold. Complainant then filed his complaint in the Office of the Provincial Fiscal of Bulacan which on August 22, 1988 filed an information for violation of BP Blg. 22 against accused-appellant. Complainant denied that the checks issued to him by accused-appellant were subject to the disposition of the stocks and the collection of receivables of the business. But the accused-appellant insisted that the complainant had known that the checks were to be funded from the proceeds of the sale of the stocks and the collection of receivables. She claimed that the complainant himself asked for the checks because he did not want to continue in the tannery

business and had no use for a share of the stocks. (TSN, p. 7, April 14, 1991; id., pp. 8-9, Nov. 13, 1989; id., pp. 12, 16, 20, Feb. 14, 1990; id., p. 14, June 4, 1990). On February 15, 1992, the trial court rendered judgment finding the accused-appellant guilty of the crime charged. The accused-appellant’s motion for annulment of the decision and for reconsideration was denied by the trial court in its order dated April 12, 1991.”[6] Herein respondent court thereafter affirmed on appeal the decision of the trial court. Petitioner timely moved for a reconsideration, but this was subsequently denied by respondent court in its Resolution[7]dated June 11, 1993. Petitioner has now appealed to us by way of a petition for certiorari under Rule 45 of the Rules of Court. During the pendency of this petition, this Court by a resolution[8] dated August 30, 1993, took note of the compromise agreement executed between the parties, regarding the civil aspect of the case, as manifested by petitioner in a Motion to Render Judgment based on Compromise Agreement [9]filed on August 5, 1993. After submission of the Comment [10] by the Solicitor General, and the Reply[11] by petitioner, this case was deemed submitted for decision. Contending that the Court of Appeals erred in its affirmance of the trial court’s decision, petitioner cites the following reasons to justify the review of her case: “1. The Honorable Court of Appeals has decided against the innocence of the accused based on mere probabilities which, on the contrary, should have warranted her acquittal on reasonable doubt. Even then, the conclusion of the trial court is contrary to the

evidence on record, including private complainant’s judicial admission that there was no consideration for the check. 2. The Honorable Court of Appeals has confused and merged into one the legal concepts of dissolution, liquidation and termination of a partnership and, on the basis of such misconception of the law, disregarded the fact of absence of consideration of the check and convicted the accused. 3. While this appeal was pending, the parties submitted for the approval of the Honorable Court a compromise agreement on the civil liability. The accused humbly submits that this supervening event, which by its terms puts to rest any doubt the Court of Appeals had entertained against the defense of lack of consideration, should have a legal effect favorable to the accused, considering that the dishonored check constitutes a private transaction between partners which does not involve the public interest, and considering further that the offense is not one involving moral turpitude. 4. The Honorable Court of Appeals failed to appreciate the fact that the accused had warned private complainant that the check was not sufficiently funded, which should have exonerated the accused pursuant to the ruling in the recent case of Magno vs. Court of Appeals, 210 SCRA 471, which calls for a more flexible and less rigid application of the Bouncing Checks law.”[12] For a thorough consideration of the merits of petitioner’s appeal, we find pertinent and decisive the following issues: 1. Whether respondent court erred in holding that the subject check was issued by petitioner to apply on account

or for value, that is, as part of the consideration of a “buyout” of said complainant’s interest in the partnership, and not merely as a commitment on petitioner’s part to return the investment share of complainant, along with any profit pertaining to said share, in the partnership. 2. Whether the respondent court erred in concluding that petitioner issued the subject check knowing at the time of issue that she did not have sufficient funds in or credit with the drawee bank and without communicating this fact of insufficiency of funds to the complainant. Both inquiries boil down into one ultimate issue: Did the respondent court err in affirming the trial court’s judgment that she violated Batas Pambansa Blg. 22? Considering that penal statutes are strictly construed against the state and liberally in favor of the accused, it bears stressing that for an act to be punishable under the B.P. 22, it “must come clearly within both the spirit and the letter of the statute.” [13] Otherwise, the act has to be declared outside the law’s ambit and a plea of innocence by the accused must be sustained. The relevant provisions of B.P. 22 state that: “SECTION 1. Checks without sufficient funds. – Any person who makes or draws and issues any check to apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount

in the amount of P135. whose funding was dependent on future sales of goods and receipts of payment of account receivables. company or entity. three of four checks were properly encashed by complainant. Evidence of knowledge of insufficient funds. Now.[15] Thus. In short. or at best. Where the check is drawn by a corporation. The same penalty shall be imposed upon any person who having sufficient funds in or credit with the drawee bank when he makes or draws and issues a check. they were still in the process of “winding up” the affairs of the partnership. she would give to private complainant the net amount due him representing his interest in the partnership.P. Firstly. . when the check in question was issued. and only when such collection and sale were realized. only one (the third) was not.87) to evidence only complainant’s share or interest in the partnership.” (Underscoring supplied) As decided by this Court. 103115490 dated October 30.828. such agreement did not automatically put an end to the partnership. the elements of the offense penalized under B. shall fail to keep sufficient funds or to maintain a credit or to cover the full amount of the check if presented within a period of ninety (90) days from the date appearing thereon. even private complainant admitted that there was no consideration whatsoever for the issuance of the check. when presented within ninety (90) days from the date of the check. SECTION 2. (2) the knowledge of the maker. drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank. evidence on record would show that the subject check was to be funded from receivables to be collected and goods to be sold by the partnership.of the check which fine shall in no case exceed Two hundred thousand pesos. ordered the bank to stop payment. 1986. drawer or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment. the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act. – The making. it could not be denied that though the parties – petitioners and complainant – had agreed to dissolve the partnership. drawing and issuance of any check to apply to account or for value. Two facts stand out. with regard to the first issue. or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee. 22. and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer. Secondly. are as follows: ‘(1) the making. or both such fine and imprisonment at the discretion of the court. without any valid cause. there is sufficient basis for the assertion that the petitioner issued the subject check (Metrobank Check No. It did not involve a debt of or any account due and payable by the petitioner.’[14] In the present case. for which reason it is dishonored by the drawee bank. shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon. since they still had to sell the goods on hand and collect the receivables from debtors. But eventually even this one was redeemed by petitioner. to show her commitment that when receivables are collected and goods are sold.

the three final stages of a partnership are (1) dissolution. as would a partner to another. It is that point of time the partners cease to carry on the business together. as the contracting with a demolition company for the demolition of the garage used in a ‘used car’ partnership. The alternative view that the check was in consideration of a “buy out” is but a theory. 1828). 1829. the partnership is not terminated. much less keeping.) (3) Termination Defined Termination is the point in time after all the partnership affairs have been wound up. and (3) termination. or to assure the latter that he would receive in time his due share therein. which were presented to the trial court. 1828.) These final stages in the life of a partnership are recognized under the Civil Code that explicitly declares that upon dissolution.”[16] [Citation omitted] (Underscoring supplied. the shares of the complainant.) The best evidence of the existence of the partnership. to wit: “Art. (NOTE: Examples of winding up: the paying of previous obligations. What is very clear therefrom is that the petitioner exerted her best efforts to sell the remaining goods and to collect the receivables of the partnership. (2) winding-up. we . were the unsold goods and uncollected receivables. the collecting of assets previously demandable. even new business if needed to wind up. one in favor of the accused. Since the partnership has not been terminated. These stages are distinguished. The more tenable view. To go by accepted custom of the trade.Under the Civil Code. to wit: “(1) Dissolution Defined Dissolution is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business (Art. in order to come up with the amount necessary to satisfy the value of complainant’s interest in the partnership at the dissolution thereof. is that the check was issued merely to evidence the complainant’s share in the partnership property. we are more inclined to the view that the subject check was issued merely to evidence complainant’s interest in the partnership. the petitioner and private complainant remained as co-partners. but lacking support in the record. favorable to the complainant. The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business. Thus. For there is nothing on record which even slightly suggests that petitioner ever became interested in acquiring. and not as payment from a debtor to a creditor. Art. On dissolution the partnership is not terminated. [Citation omitted] (2) Winding Up Defined Winding up is the process of settling business affairs after dissolution. which was not yet terminated (though in the winding up stage). The check was thus issued by the petitioner to complainant.” (Underscoring supplied. and must necessarily be discarded. but continues until the winding up of partnership affairs is completed.

22. In the case of Nieva v. there is only a prima facie presumption which did not preclude the presentation of contrary evidence. this matter could not be all that simple.[22] it was held that the subsequent dishonor of the subject check issued by accused merely engendered the prima facie presumption that she knew of the insufficiency of funds.[23] “The prosecution has a duty to prove all the elements of the crime. Noteworthy for the defense. if such knowledge of insufficiency of funds is proven to be actually absent or non-existent.P. The prima facie presumption arising from the fact of drawing.P.P.”[18] Again. In the instant case. including the acts that give rise to the prima facie presumption. moreover.”[19] this presumption is rebuttable.P. not sufficient proof of guilt by the issuer. For while “the maker’s knowledge of the insufficiency of funds is legally presumed from the dishonor of his checks for insufficiency of funds. issuing or making a check. “Malice or intent in issuing the worthless check is immaterial. the payment of which was subsequently refused for insufficiency of funds is. 22. drawing and issuance of any check to apply on account or for value”. the accused should not be held liable for the offense defined under the first paragraph of Section 1 of B. it would be absurd to hold the drawer liable under B. But of course this could not be an absolute proposition without descending to absurdity. then petitioner is liable for violation of B. Court of Appeals. As to the second issue. the elements of deceit and damage are not essential or required to constitute a violation thereof. rather it should be deemed as having been drawn without consideration at the time of issue. and (2) lack of adequate notice of dishonor. if the check is dishonored and unpaid.[20] In fact. petitioner. the only essential element is the knowledge on the part of the maker or drawer of the check of the insufficiency of his/her funds at the time of the issuance of said check. the offense beingmalum prohibitum. but did not render the accused automatically guilty under B. knowledge of insufficiency of funds or credit in the drawee bank for the payment of a check upon its presentment is an essential element of the offense. Although the offense charged is a malum prohibitum. 22.are persuaded that the check was not intended to apply on account or for value. has a right to rebut the prima faciepresumption.”[17] so goes the argument for the public respondents. the Solicitor General contends that under the Bouncing Checks Law. Absent the first element of the offense penalized under B. petitioner’s issuance of the subject check was not an act contemplated in nor made punishable by said statute. In his view. The Bouncing Checks Law makes the mere act of issuing a bad or worthless check a special offense punishable by law. 22. which is “the making.[21] It must be proved. Public respondents further contend that “since petitioner issued the check in favor of complainant Alarilla and when notified that it was returned for insufficiency of funds. such contrary evidence on two points could be gleaned from the record concerning (1) lack of actual knowledge of insufficiency of funds. Therefore. the prosecution is not . on the other hand. For if a check were issued by a kidnap victim to a kidnapper for ransom. particularly where the prima facie presumption of the existence of this element has been rebutted. 22.P. failed to make good the check. That would go against public policy and common sense.

22 specifically requires that the person in making.P. drawing or issuing the check. effectively invalidates the allegation of failure to pay or to make arrangement for the payment of the check in full. it was later made good by petitioner. thus precluding any finding of prima facie evidence of knowledge of insufficiency of funds. we find that the prosecution also failed to prove adequate notice of dishonor of the subject check on petitioner’s part. 22 when one was not honored right away.thereby excused from its responsibility of proving beyond reasonable doubt all the elements of the offense. while the subject check initially bounced. But in fact. This condition must be satisfied or complied with before the complainant can actually “encash” the check. Since petitioner issued these four checks without actual knowledge of the insufficiency of funds. For it is basic doctrine that penal statutes such as B.” Section 1 of B. as earlier discussed.P. as of yet. This situation would hold true until after the winding up. In the case at bar. demand his proportionate share in the business. Payment of that share in the partnership was conditioned on the subsequent realization of profits from the unsold goods and collection of the receivables of the firm. one of which is knowledge of the insufficiency of funds. For it was uncertain at the time of issuance of the checks whether the unsold goods would have been sold. petitioner could not be held criminally liable under that law. the record is bereft of evidence to the contrary. Complainant did not present any evidence that petitioner signed and issued four checks actually knowing that funds therefor would be insufficient at the time complainant would present them to the drawee bank. Further. On this point.P. Thus. The reason for the condition is that petitioner has no independent means to satisfy or discharge the complainant’s share. 22 “must be construed with such strictness as to carefully safeguard the rights of the defendant x x x. said compromise agreement constitutes an arrangement for the payment in full of the subject check. Moreover. that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment. There is no proof that notice of dishonor was actually sent by the complainant or by the drawee bank to the petitioner. the remaining one was settled only later on. For only then. the complainant could not. when the goods were already sold and receivables paid that cash money could be availed of by the erstwhile partners. petitioner issued the check merely to evidence the proportionate share of complainant in the partnership assets upon its dissolution. In addition. entered into during the pendency of this case. the terms of the parties’ compromise agreement. she could not be held liable under B. As it turned out. be shown that he knows at the time of issue.”[24] The element of knowledge of insufficiency of funds has to be proved by the prosecution. . and subsequent termination of the partnership. absent said proof. the presumption of prima facie knowledge of such insufficiency in this case was actually rebutted by petitioner’s evidence. or whether the receivables would have been collected by the time the checks would be encashed. Verily. prior to the selling of the goods and collecting of the receivables. three were fully funded when presented to the bank. other than by the future sale and collection of the partnership assets.

Joey Gomez. As Magno had well observed: “For all intents and purposes. As held by this Court in prior cases: “Because no notice of dishonor was actually sent to and received by the petitioner.P.The absence of notice of dishonor is crucial in the present case.] “The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a criminal prosecution. petitioner intimated to private complainant the possibility that funds might be insufficient to cover the subject check. it behooves upon a court of law that in applying the punishment imposed upon the accused. which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason x x x’ is inversely applied in this case. Least should it be used also as a means of jeopardizing honest-to-goodness transactions with some color of ‘get-rich’ scheme to the prejudice of well-meaning businessmen who are the pillars of society. such maker or drawer failed to pay the holder of the check the amount due thereon or to make arrangement for its payment in full by the drawee of such check. Teng. Court of Appeals: “Furthermore. procedural due process clearly enjoins that a notice of dishonor be actually served on petitioner. 22 clearly provides that this presumption arises not from the mere fact of drawing. due to the fact that the partnership’s goods were yet to be sold and receivables yet to be collected. Instructive is the following pronouncement of this Court in Magno v. the prima facie presumption that she knew about the insufficiency of funds cannot apply.S. what militates strongly against public respondents’ stand is the fact that petitioner repeatedly notified the complainant of the insufficiency of funds. within five banking days from receipt of the notice of dishonor. In the instant case. making and issuing a bum check. should be directed against the ‘actual and potential wrongdoers’. Section 2 of B. there must also be a showing that. the law was devised to safeguard the interest of the banking system and the legitimate public checking account user.”[27] In the instant case.”[25] [Underscoring supplied. he openly intimated this to the vital conduit of the transaction. Finance Management.” x x x “Thus. It would have been different if this predicament was not communicated to all the parties he dealt with regarding the lease agreement the financing of which was covered by L. to whom petitioner was introduced by Mrs. there is no doubt that petitioner’s four (4) checks were used to collateralize an accommodation.P. Accordingly. It did not intend to shelter or favor nor encourage users of the system to enrich themselves through manipulations and circumvention of the noble purpose and objective of the law. the objective of retribution of a wronged society. and not to cover the receipt of an actual ‘account or credit for value’ as this was absent. and therefore petitioner should not be . From the very beginning. Petitioner has a right to demand – and the basic postulates of fairness require – that the notice of dishonor be actually sent to and received by her to afford her the opportunity to avert prosecution under B. petitioner never hid the fact that he did not have the funds with which to put up the warranty deposit and as a matter of fact. the element of ‘knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment.”[26] Further. 22.

e. the investments of complainant in the partnership. HON. or violating public policy To recapitulate. Puno. COURT OF APPEALS and JAIME SAHOT.”[28] Under the circumstances obtaining in this case. affirming with modification the decision[3]of the National Labor Relations Commission promulgated on June 20.’ whose operation could be a menace to society. at the time of issue of the check. concur. DECISION QUISUMBING. SO ORDERED. Melo.J. we find the petition impressed with merit.. Bellosillo. and Purisima. and finding the petition meritorious. Evidently. no part. 52671. petitioner issued the check with benign considerations in mind. in petitioner’s stead the ‘potential wrongdoer. thereby depriving her of the opportunity to pay or make arrangements for the payment of the check. Vitug. and (3) there was no notice of dishonor of said check actually served on petitioner. Doctrine of “ Attributes of Proprietorship” SECOND DIVISION [G. (2) there is no sufficient basis to conclude that petitioner. and SBT[1] TRUCKING CORPORATION. Kapunan.. private respondent Jaime [5] Sahot started working as a truck helper for petitioners’ family-owned trucking business named Vicente Sy .R. Having resolved the foregoing principal issues.. NO COSTS. in CA-G. 1395-M-88 is hereby SET ASIDE. February 27. 2000.R. Regalado. The Decision of the respondent Court of Appeals in CA-G.punished for mere issuance of the checks in question.: This petition for review seeks the reversal of the decision[2] of the Court of Appeals dated February 29. J. TRINIDAD PAULINO. 22 for the following reasons: (1) the subject check was not made.P. 142293. deceit. had actual knowledge of the insufficiency of funds. J. we no longer need to pass upon the validity and legality or necessity of the purported compromise agreement on civil liability between the petitioner and the complainant. with every intention of abiding by her commitment to return. Romero. petitioners. should not be glorified by convicting the petitioner. being ponente of appealed decision. vs. No. Panganiban. Petitioners also pray for the reinstatement of the decision[4] of the Labor Arbiter in NLRC NCR Case No. Petitioner may not be held liable for violation of B. 6B’S TRUCKING CORPORATION. C. the instant petition is hereby GRANTED AND THE PETITIONER ACQUITTED. we find the petitioner to have issued the check in good faith. WHEREFORE. CR No. respondents. 1996 in NLRC NCR CA No.. Jr. drawn and issued by petitioner in exchange for value received as to qualify it as a check on account or for value. Martinez.R. Culled from the records are the following facts of this case: Sometime in 1958. Davide. 00-0906717-94. Narvasa. Following the aforecited theory. 01052696. as soon as able. 2003] VICENTE SY. and not for the purpose of committing fraud. JJ. to avoid criminal prosecution. Mendoza. 11960 is hereby REVERSED and the Decision of Regional Trial Court in Criminal Case No. SP No.

and thereafter known as SBT Trucking Corporation since 1994. he should be deemed to have voluntarily resigned from his work. The fact remained he could no longer work as his left thigh hurt abominably. Vicente Sy Trucking. They contended that Sahot had all the time to extend his leave or at least inform petitioners of his health condition.00 at the time of his separation. docketed as NLRC NCR Case No. He ended up sick. On May 27th. when SBT Trucking Corporation was established. In April 1994. Paulino Trucking Service. Petitioners further claimed that sometime prior to June 1. renamed T. RE-4997-76. 00-09-06717-94. Instead. private respondent never reported back to work nor did he file an extension of his leave. p. Belen Paulino. Sahot found himself in a dilemma. They carried out their threat and dismissed him from work. For their part. But he could not retire on pension because petitioners never paid his correct SSS premiums. Lastly. 1994. he was medically examined and treated for EOR. Sahot was already 59 years old. jobless and penniless. pp. Throughout all these changes in names and for 36 years. he became a truck driver of the same family business. In 1965. but discovered that his premium payments had not been remitted by his employer. He was facing dismissal if he refused to work. 6B’s Trucking and SBT Trucking. with a monthly salary that reached P4.Trucking. 104. he filed the complaint for illegal dismissal against the trucking company and its owners. They contend that private respondent was not illegally dismissed as a driver because he was in fact petitioner’s industrial partner. and only then did respondent Sahot become an employee of the company. At the end of his week-long absence. On June 1. presleyopia. hypertensive retinopathy G II (Annexes “G-5” and “G-3”. UTI. . herein petitioners. 1994. p. T. 1994. Sahot had filed a week-long leave sometime in May 1994. Belen Paulino of the SBT Trucking Service management told him to file a formal request for extension of his leave. private respondent continuously served the trucking business of petitioners. 1994. At this point. Petitioners ended his dilemma.160. Particularly causing him pain was his left thigh. They add that it was not until the year 1994. Sahot filed with the NLRC NCR Arbitration Branch. respectively). 105). later 6B’s Trucking Corporation in 1985. which greatly affected the performance of his task as a driver. He had been incurring absences as he was suffering from various ailments. He inquired about his medical and retirement benefits with the Social Security System (SSS) on April 25. [6] HPM. petitioners admitted they had a trucking business in the 1950s but denied employing helpers and drivers. It appeared that from the expiration of his leave. 1994. Sahot applied for extension of his leave for the whole month of June. 1994. Osteoarthritis (Annex “G-4”. effective June 30. Sahot went on leave and was not able to report for work for almost seven days. 48.[8] On said grounds. 107).[7] and heart enlargement (Annex G. Sahot asked permission to extend his leave of absence until June 30. Paulino Trucking Service. 1994. a complaint for illegal dismissal. Petitioners add that due to Sahot’s refusal to work after the expiration of his authorized leave of absence. they cited NLRC Case No. It was at this time when petitioners allegedly threatened to terminate his employment should he refuse to go back to work. He prayed for the recovery of separation pay and attorneys fees against Vicente Sy and Trinidad Paulino-Sy. On September 13.

the assailed decision is hereby AFFIRMED with MODIFICATION. Petitioners assailed the decision of the NLRC before the Court of Appeals.[12] III PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT TRUCKING CORPORATION. the NLRC ordered petitioners to pay private respondent separation pay in the amount of P60.00. SB Trucking Corporation is hereby directed to pay complainant Jaime Sahot the sum of SEVENTY-FOUR THOUSAND EIGHT HUNDRED EIGHTY (P74. 2000.entitled “Manuelito Jimenez et al. It decreed: WHEREFORE.880. at the rate of P2. In its decision dated February 29.880. Before a case for illegal dismissal can .[10] Hence. On appeal. It also increased the amount of separation pay awarded to private respondent to P74. said the Labor Arbiter. the National Labor Relations Commission modified the judgment of the Labor Arbiter.00 per year for 29 years of service. the appellate court affirmed with modification the judgment of the NLRC. and (3) Whether or not respondent Sahot is entitled to separation pay. computed at the rate of P2. Private respondent had failed to report to work. through Labor Arbiter Ariel Cadiente Santos. hence they are in pari material and Sahot’s complaint ought also to be dismissed.00) PESOS as and for his separation pay.080. pursuant to Article 284 [9] of the Labor Code. since the start. petitioners and private respondent were industrial partners before January 1994. Moreover. Private respondent Sahot did not abandon his job but his employment was terminated on account of his illness. ruled that there was no illegal dismissal in Sahot’s case.” as a defense in view of the alleged similarity in the factual milieu and issues of said case to that of Sahot’s. not an industrial partner. It held that private respondent was indeed an employee of petitioners since 1958. The NLRC NCR Arbitration Branch.320. Accordingly. [13] Three issues are to be resolved: (1) Whether or not an employer-employee relationship existed between petitioners and respondent Sahot.080 per year for 36 years of service from 1958 to 1994. The Labor Arbiter concluded by ordering petitioners to pay “financial assistance” of P15. Paulino Trucking Service.000 to Sahot for having served the company as a regular employee since January 1994 only. It declared that private respondent was an employee. T. vs. [11] II RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION IS BOUND BY THE FACTUAL FINDINGS OF THE LABOR ARBITER AS THE LATTER WAS IN A BETTER POSITION TO OBSERVE THE DEMEANOR AND DEPORTMENT OF THE WITNESSES IN THE CASE OF ASSOCIATION OF INDEPENDENT UNIONS IN THE PHILIPPINES VERSUS NATIONAL CAPITAL REGION (305 SCRA 233). Crucial to the resolution of this case is the determination of the first issue. (2) Whether or not there was valid dismissal. the instant petition anchored on the following contentions: I RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED] DECISION AFFIRMING WITH MODIFICATION THE DECISION OF NATIONAL LABOR RELATIONS COMMISSION DECIDED NOT IN ACCORD WITH LAW AND PUT AT NAUGHT ARTICLE 402 OF THE CIVIL CODE.

petitioners aver that the appellate court’s decision gives an “imprimatur” to the “illegal” finding and conclusion of the NLRC.[18] The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee.[15] It is contended that it was the Labor Arbiter who heard the case and had the opportunity to observe the demeanor and deportment of the parties.prosper.[19] As found by the appellate court. There was no written agreement.[17] Because the Court of Appeals also found that an employer-employee relationship existed. (b) the payment of wages. petitioners owned and operated a trucking business since the 1950s and by their own allegations. and (d) the employer’s power to control the employee’s conduct. denies that he was ever an industrial partner of petitioners. (c) the power of dismissal. Neither is there any proof that he had actively . not a partner of respondents from the time complainant started working for respondent. said the CA. property or industry to a common fund. Private respondent did not contribute money.[14] Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos which found that respondent Sahot was not an employee but was in fact. for his part. private respondent had worked as a truck helper and driver of petitioners not for his own pleasure but under the latter’s control. How can we entertain in our mind that a twenty-three (23) year old man. what he would do. nor was there anything to show he had any participation with respect to the running of the business. No written agreement exists to prove the partnership between the parties. no proof that he received a share in petitioners’ profits. and how he would do it. as long as he was paid his wages. an employer-employee relationship must first be established. There is no proof that he was receiving a share in the profits as a matter of course. A computation of the age of complainant shows that he was only twentythree (23) years when he started working with respondent as truck helper. they determined private respondent’s wages and rest day. During the entire course of his employment he did not have the freedom to determine where he would go. Private respondent. Article 1767[21] of the Civil Code states that in a contract of partnership two or more persons bind themselves to contribute money. Hence we rule that complainant was only an employee. He merely followed instructions of petitioners and was content to do so. with the intention of dividing the profits among themselves. property or industry for the purpose of engaging in the supposed business. The same conclusion. [22] Not one of these circumstances is present in this case. The most important element is the employer’s control of the employee’s conduct.[16] Moreover. not only as to the result of the work to be done. it is argued that the findings of fact of the Labor Arbiter was wrongly overturned by the NLRC when the latter made the following pronouncement: We agree with complainant that there was error committed by the Labor Arbiter when he concluded that complainant was an industrial partner prior to 1994. aver petitioners. but also as to the means and methods to accomplish it. is supported by substantial evidence. during the period when the trucking business was under operation. [20] Records of the case show that private respondent actually engaged in work as an employee. be considered an industrial partner. petitioners’ industrial partner. working as a truck helper. Indeed.

administration and adoption of policies of the business. held that: While it was very obvious that complainant did not have any intention to report back to work due to his illness which incapacitated him to perform his job. Instead. The decision of the Labor Arbiter pointed out that during the conciliation proceedings. Private respondent since the beginning was an employee of. and instead he demanded separation pay.[26] But dealing the Labor Arbiter a reversal on this score the NLRC. concurred in by the Court of Appeals. Sahot declined that suggestion. The existence of an employeremployee relationship is ultimately a question of fact[23] and the findings thereon by the NLRC. Complainant was already fiftynine (59) when the complaint was filed and suffering from various illness triggered by his work and age.[24] Time and again this Court has said that “if doubt exists between the evidence presented by the employer and the employee.”[25] Here. Thus. we entertain no doubt. there is no direct evidence that will prove that complainant’s illness prevents or incapacitates him from performing the function of a driver. The fact remains that complainant suddenly stopped working due to boredom or otherwise when he refused to work as a checker which certainly is a much less strenuous job than a driver. The insistence of respondent in making complainant work did not change the scenario. Private respondent Jaime Sahot was not an industrial partner but an employee of petitioners from 1958 to 1994. Complainant started working with respondent as truck helper at age twenty-three (23). petitioners requested respondent Sahot to report back for work. deserve not only respect but finality when supported by substantial evidence. However. It is worthy to note that respondent is engaged in the trucking business where physical strength is of utmost requirement (sic). On this point. we affirm the findings of the appellate court and the NLRC. then as truck driver since 1965. in the same proceedings. In his decision. such intention cannot be construed to be an abandonment. the NLRC and the CA did not err in reversing the finding of the Labor Arbiter that private respondent was an industrial partner from 1958 to 1994.participated in the management. the same should have been considered as one of those falling under the just causes of terminating an employment. Based on the foregoing recitals. such as working as a checker. was private respondent validly dismissed by petitioners? Petitioners contend that it was private respondent who refused to go back to work. not an industrial partner in. Petitioners then retorted that if Sahot did not like to work as a driver anymore. then he could be given a job that was less strenuous. However. the scales of justice must be tilted in favor of the latter. the trucking business. Substantial evidence is such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. petitioners assert that it is clear that Sahot was not dismissed but it was of his own volition that he did not report for work anymore. the Labor Arbiter concluded that: While it may be true that respondents insisted that complainant continue working with respondents despite his alleged illness. x x x[27] . as affirmed by the Court of Appeals. Coming now to the second issue. Sahot stated that he was no longer fit to continue working.

I. . the employer shall not terminate his employment unless there is a certification by competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within the period. In the same case of Sevillana vs. [28] Article 277(b) of the Labor Code puts the burden of proving that the dismissal of an employee was for a valid or authorized cause on the employer.T.[29] For an employee’s dismissal to be valid. Disease as a ground for dismissal. the burden is upon the employer to show by substantial evidence that the termination was for lawful cause and validly made. 8. the employer shall not terminate the employee but shall ask the employee to take a leave. this Court has ruled against the validity of the employee’s dismissal. the dismissal would be unjustified. It is therefore incumbent upon the private respondents to prove by the quantum of evidence required by law that petitioner was not dismissed. As this Court stated in Triple Eight integrated Services. (a) the dismissal must be for a valid cause and (b) the employee must be afforded due process. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health.[32] In addition. the employer clearly did not comply with the medical certificate requirement before Sahot’s dismissal was effected. it clearly appears that procedural due process was not observed in the separation of private respondent by the management of the trucking company. without distinction whether the employer admits or does not admit the dismissal. (Italics supplied). otherwise. [30] Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease. 284. NLRC.Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees. the latter should likewise bear the burden of showing that the requisites for a valid dismissal due to a disease have been complied with. (International) Corp. Book VI. Section 8 of the Omnibus Implementing Rules of the Labor Code requires: Sec. Rule I. viz: Art. we must likewise determine if the procedural aspect of due process had been complied with by the employer. the evidence must be substantial and not arbitrary and must be founded on clearly established facts sufficient to warrant his separation from work. In the case at bar. vs. or if dismissed. From the records. This Court will not sanction a dismissal premised on mere conjectures and suspicions.[31] the requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with. we ruled: Since the burden of proving the validity of the dismissal of the employee rests on the employer.An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or prejudicial to his health as well as the health of his co-employees: xxx However. it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employee’s illness and thus defeat the public policy in the protection of labor. In the absence of the required certification by a competent public health authority.. Disease as a ground for termination.In termination cases. that the dismissal was not illegal. in order to validly terminate employment on this ground. otherwise. Inc.

What management did was to threaten the employee with dismissal. for any delay. even only for record purposes. J.00 so that one-half thereof is P2. VILLAMOR. Mendoza. Unlawful Subject Matter 1.880. The first one was when the same plaintiffs appeared from the order .00. Sahot’s dismissal is tainted with invalidity. JJ. plaintiffs-appellees. six percent (6%) interest per annum should be charged thereon.: This is an action to bring about liquidation of the funds and property of the association called “Turnuhan Polistico & Co.080.. directors and secretary of said association. SO ORDERED. To avoid further delay in the payment due the separated worker. Otherwise. J. ET AL.880. and (2) the notice informing the employee of his dismissal. It is well to remember that this case is now brought before the consideration of this court for the second time. respondent Jaime Sahot is entitled to separation pay. the petition is DENIED and the decision of the Court of Appeals dated February 29. WHEREFORE.[33] These. Finding no reversible error nor grave abuse of discretion on the part of appellate court. this decision is immediately executory. Sr. both the substantive and procedural aspects of due process were violated. after noting that his last monthly salary was P4. pursuant to provisions of the Civil Code. Clearly. (Chairman). An employee who is terminated because of disease is entitled to “separation pay equivalent to at least one month salary or to one-half month salary for every year of service. to be issued after the employee has been given reasonable opportunity to answer and to be heard on his defense.160. We agree with the computation. whichever is greater [34] xxx. Austria-Martinez. Sumulong & Lavides for appellees. Costs against petitioners. we are constrained to sustain its decision. On the last issue. 284 of the Labor Code.R. and the defendants were designated as president-treasurer. No. and Callejo. Petitioners must pay private respondent Jaime Sahot his separation pay for 36 years of service at the rate of onehalf monthly pay for every year of service. his separation pay was computed by the appellate court at P2. f.” The plaintiffs were members or shareholders. no part.The employer is required to furnish an employee with two written notices before the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is sought.00. defendants-appellants. 1929 G.. vs. with interest of six per centum (6%) per annum from finality of this decision until fully paid.. as held by the Court of Appeals. then actually implement the threat when the occasion presented itself because of private respondent’s painful left thigh. whose claim was filed way back in 1994. Bellosillo. therefore.080 times 36 years (1958 to 1994) or P74. the petitioners failed to do. amounting to P74. ADRIANO ARBES. 31057 Marcelino Lontok and Manuel dela Rosa for appellants. The law is clear on the matter. concur. VICENTE POLISTICO. which is the equivalent of a charge. 2000 is AFFIRMED. All told... ET AL.” Following the formula set in Art. September 7.

(Borlasa vs. accepting and adopting the findings of fact contained in said report. to wit: (1) That not all persons having an interest in this association are included as plaintiffs or defendants. and to the rest of the members of the said association represented by said plaintiffs.00 P109.. as well as the documents showing the uncollected credits of the association. but we believe they can all be reduced to two points. and by agreement of the parties.10 85. holding that the association “Turnuhan Polistico & Co. the conclusion reached by the court below. The commissioner rendered his report. the court appointed Amadeo R. and accounts of “Turnuhan Polistico & Co.146.90 Cash on hand 24.00 Loans on promissory notes 4. both parties amend.” either as plaintiffs or as a defendants. and requiring the former to amend their complaint within a period. with costs against the defendants.012. 516).263. As to the first point. but the trial court.80. Polistico. having examined the reasons for the objection. The defendants assigned several errors as grounds for their appeal. respectively.70 Expenses: Premiums to members 68. commissioner to examine all the books. rendered judgment. we are of opinion that. and accepting it.891.25 Loans on real-estate9. so as to include all the members of “Turnuhan Polistico & Co. 345.70 Credits paid 6. 47 Phil. despite the praiseworthy efforts of the attorney of the defendants. In Tan Dianseng Tan Siu Pic vs..827.55 Interest received 4.45 Miscellaneous 1. Quintos. the decision on the case of Borlasa vs.258.55 Salaries 1. as findings made by the judge .607.095. Polistico.196. supra. With regard to the second point.80 The defendants objected to the commissioner’s report.607. must be followed. their complaint and their answer. the trial court having examined all the evidence touching the grounds for the objection and having found that they had been explained away in the commissioner’s report. and sentencing the defendants jointly and severally to return the amount of P24. found the same sufficiently explained in the report and the evidence.” is unlawful. This court held then that in an action against the officers of a voluntary association to wind up its affairs and enforce an accounting for money and property in their possessions. should not be disturbed. it is not necessary that all members of the association be made parties to the action.” and to receive whatever evidence the parties might desire to present.00 Miscellaneous 1.620.) The case having been remanded to the court of origin. it was held that the findings of facts made by a referee appointed under the provisions of section 135 of the Code of Civil Procedure stand upon the same basis. Echauz Tan Siuco (5 Phil. of the Insular Auditor’s Office.686. documents. when approved by the Court. with the following resume: Income: Member’s shares 97.569. (2) that the objection to the commissioner’s report should have been admitted by the court below. to the plaintiffs in this case. and especially those referring to the disposition of the association’s money.of the court below sustaining the defendant’s demurrer. which is attached to the record.

and in . the charitable institution of the domicile of the partnership. There is no question that “Turnuhan Polistico & Co. the contract entered into can have no legal effect. And in Kriedt vs.himself. which is to annul and without legal existence by reason of its unlawful object. the profits cannot inure to the benefit of the partners. those of the province are not necessary parties in this case. We deem in pertinent to quote Manresa’s commentaries on article 1666 at length. Commenting on said article Manresa. no charitable institution is a necessary party in the present case of determination of the rights of the parties.” is an unlawful partnership (U.” The appellants stated the grounds for their objection. and it is not necessary for the said parties to base their action to the existence of the partnership. 39 Phil. The article cited above permits no action for the purpose of obtaining the earnings made by the unlawful partnership. Baguio. is that for the recovery of the amounts paid by the member from those in charge of the administration of said partnership. vs. or. as a clear explanation of the scope and spirit of the provision of the Civil Code which we are concerned.(37 Phil. and accepted the findings of fact made in the report.S. as a party defendant. C. 962). if it is considered juridically non-existent. E. and employed by the latter in transactions consistent with the purposes of the partnership may the former demand the return of the reimbursement thereof from the manager or administrator withholding them? Apropos of this. The appellants refer to article 1666 of the Civil Code. but the appellants allege that because it is so. When the dissolution of an unlawful partnership is decreed. the court held: “Under section 140 of the Code of Civil Procedure it is made the duty of the court to render judgment in accordance with the report of the referee unless the court shall unless for cause shown set aside the report or recommit it to the referee. Appellant’s contention on this point is untenable. the partner will have to base his action upon the partnership contract. in the case of unlawful partnership. it is asserted: If the partnership has no valid existence. paragraph 2 of the same article provides that when the dissolution of the unlawful partnership is decreed. as Manresa remarks. We find no convincing arguments on the appellant’s brief to justify a reversal of the trial court’s conclusion admitting the commissioner’s findings. during its existence as result of the business in which it was engaged. and it is self evident that what does not exist cannot be a cause of action. This provision places upon the litigant parties of the duty of discovering and exhibiting to the court any error that may be contained therein. 474). but must be given to some charitable institution. And hence. because for the purpose. The trial examined the evidence and the commissioner’s report. which provides: A partnership must have a lawful object. and must be established for the common benefit of the partners. Hence. According to said article. The action which may arise from said article. should be included. in default of such. McCullogh & Co. the profits shall be given to charitable institutions of the domicile of the partnership. and in the default thereof. but on the fact that of having contributed some money to the partnership capital. some charitable institution to whom the partnership funds may be ordered to be turned over. to those of the province. among other things says: When the subscriptions of the members have been paid to the management of the partnership.

Wherefore considering this contract as non-existent. and therefor. but the fact that said contributions are not included in the disposal prescribed profits. upon the dissolution of the unlawful partnership. This is a new rule. The profits are so applied. XI. and the administrator of the partnership holding said contribution retains what belongs to others. shows that in consequences of said exclusion. for depriving the partner of the portion of the capital that he contributed. the purpose from which the contribution was made has not come into existence. to those of the province. Any other solution is immoral. in such a case. or in other words. providing that the profits obtained by unlawful means shall not enrich the partners. unprecedented by our law. but Ricci decides the matter quite clearly. be given to the charitable institutions of the domicile of the partnership. because they do not constitute or represent the partner’s contribution but are the result of the industry. Hence the distinction made in the second paragraph of this article of this Code. Commentaries on the Spanish Civil Code. there is no reason. and hence the partners should reimburse the amount of their respective contributions. the partner would have to base his action on the contract which is null and void. in order to demand the proportional part of the said profits. He holds that the partner who limits himself to demanding only the amount contributed by him need not resort to the partnership contract on which to base his action. because it only deals with the disposition of the profits.that case. how can it give rise to an action in favor of the partners to judicially demand from the manager or the administrator of the partnership capital. but shall upon the dissolution of the partnership. it would be immoral and unjust for the law to permit a profit from an industry prohibited by it. by reason of its illicit object. vol. pp. without any consideration. nor state what to be done with them. which must be the basis of the judicial complaint. each one’s contribution? The authors discuss this point at great length. (Manresa. to breathe the breath of life into a partnership contract with an objection forbidden by law. the general law must be followed. Furthermore. the amounts contributed are to be returned by the partners. And he adds in explanation that the partner makes his contribution. and the law will not consent to the latter remaining in the possession of the manager or administrator who has refused to return them. in default of such. which passes to the managing partner for the purpose of carrying on the business or industry which is the object of the partnership. by denying to the partners the action to demand them. because this would be an excessive and unjust sanction for. the circumstances of the two cases being entirely different. and not the contributions. as we have seen. for which reason he is not bound to return it and he who has paid in his share is entitled to recover it. And as said contrast does not exist in the eyes of the law. 262-264) . introduced to supply an obvious deficiency of the former law. dispelling all doubts thereon. Our Code does not state whether. which did not describe the purpose to which those profits denied the partners were to be applied. or. since this partition or distribution of the profits is one of the juridical effects thereof. business or speculation which is the object of the partnership. But this is not the case with regard to profits earned in the course of the partnership. it cannot give rise to the necessary action.

J. he was advised by the district forester of Davao City that no further action would be taken on his motion. being in accordance with law. Ruiz Law Offices for defendant-appellant. should be. C. the decision of May 4. after a survey. and damages resulting from an alleged breach of contract. further. upon being duly identified in the manner that it may deem proper. NICANOR CASTEEL. in civil case 629. 1947 his fishpond application 1717. and Villa-Real. as it is hereby. and provided. that the defendants shall deposit this sum of money and other documents evidencing uncollected credits in the office of the clerk of the trial court. he was later granted fishpond permit F-289-C covering 9. affirmed with costs against the appellants. 2. G. all of the Court of First Instance of Davao. NICANOR CASTEEL and JUAN DEPRA.3 hectares certified as available for fishpond purposes by the Bureau of Forestry. So he filed on May 27. 1956.: This is an appeal from the order of May 2. Upon investigation conducted by a representative of the Bureau of Forestry. unless he filed a new application for the area concerned. Victor D. Street. 1956 and the order of May 21. defendant-appellant. it was discovered that the area applied for was still needed for firewood production. but because of the conditions then prevailing. The basic action is for specific performance. So ordered. Davao. L-21906 December 24. concur. 1946 Leoncio Aradillos filed his fishpond application 1202 covering 10 hectares of land found inside the area applied for by Casteel. however. On May 20. defendants. the defendants shall pay the legal interest on the sum of P24.76 hectares. Johnson. Romualdez. Alejandro Cacam's fishpond application 1276. he filed another fishpond application for the same area. upon certification of the Bureau of Forestry that the area was likewise available for fishpond . No action was taken thereon by the authorities concerned. Despite the said rejection. vs. 1946. Jalandoni and Jamir plaintiffs-appellees. 1947 with the issuance to him of fishpond permit F-539-C to develop 30 hectares of land comprising a portion of the area applied for by Casteel.The judgment appealed from. 1956. Avanceña.. CASTRO. During the Japanese occupation. Johns. While this motion was pending resolution.80 from the date of the decision of the court. No. filed on December 26. 1945 he filed a third fishpond application for the same area. 1968 INOCENCIA DELUAO and FELIPE DELUAO plaintiffsappellees.R.. Carpio filed on August 8. was found to contain 178.607. Meanwhile. 1946 his fishpond application 762 over a portion of the land applied for by Casteel. provided. He filed a motion for reconsideration. several applications were submitted by other persons for portions of the area covered by Casteel's application. Aportadera and Palabrica and Pelaez.J. Casteel did not lose interest. 1946 this third application was disapproved. Municipality of Padada. which. it was not acted upon either. in order that said court may distribute them among the members of said association. JJ. On December 12. was given due course on December 9. Hence on May 13. In 1940 Nicanor Casteel filed a fishpond application for a big tract of swampy land in the then Sitio of Malalag (now the Municipality of Malalag).

Nicanor Casteel. hereby enter into a contract of service. . That the Party of the Second Part will be the Manager and sole buyer of all the produce of the fish that will be produced from said fishpond. applicant-protestant versus Fp. A. whereby the Party of the First Part hires and employs the Party of the Second Part on the following terms and conditions. Alejandro Cacam. and ordered that the land be leased through public auction. Philippine Currency. Carpio. Leoncio Aradillos. No. fishpond gates. 661 (now Fp. Permittees-Respondents. Victorio D. etc. Consequently. Casteel appealed to the Secretary of Agriculture and Natural Resources. a wide productive fishpond was built. executed a contract — denominated a "contract of service" — the salient provisions of which are as follows: That the Party of the First Part in consideration of the mutual covenants and agreements made herein to the Party of the Second Part. Province of Davao. Because of the threat poised upon his position by the above applicants who entered upon and spread themselves within the area. he sought financial aid from his uncle Felipe Deluao who then extended loans totalling more or less P27. to wit: DANR Case 353. No. Fp. Permit No. 661 (now Fp. A. That the Party of the First Part will be the administrator of the same she having financed the construction and improvement of said fishpond. Ap. Casteel immediately filed the corresponding protests. to wit: That the Party of the First Part will finance as she has hereby financed the sum of TWENTY SEVEN THOUSAND PESOS (P27. In the interregnum. 1717). No. On November 25. Failing to secure a favorable resolution of his motion for reconsideration of the Director's order. they will be taken up in our discussion of the appellant's third assignment of error. some more incidents occurred. But lacking financial resources at that time. 1948 Felipe Deluao filed his own fishpond application for the area covered by Casteel's application. entitled "Fp.purposes. Permit No. A. Hence. Nicanor Casteel. Moreover. Municipality of Padada. applicant-appellant". To avoid repetition. Philippines. 289-C. to the Party of the Second Part who renders only his services for the construction and improvements of a fishpond at Barrio Malalag. 1717).000." However. 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part. two administrative cases ensued involving the area in question. required him to remove all the improvements which he had introduced on the land. clearings. despite the finding made in the investigation of the above administrative cases that Casteel had already introduced improvements on portions of the area applied for by him in the form of dikes. No. 763. 539-C. 1949.00). A. On November 17. No. in order to prevent old and new squatters from usurping the land. applicant-appellant versus Fp. upon learning that portions of the area applied for by him were already occupied by rival applicants.000 with which to finance the needed improvements on the fishpond.. and DANR Case 353-B. entitled "Fp. Casteel realized the urgent necessity of expanding his occupation thereof by constructing dikes and cultivating marketable fishes. the Director of Fisheries nevertheless rejected Casteel's application on October 25. and Nicanor Casteel as party of the second part.

a preliminary injunction be issued to restrain Casteel from doing the acts complained of. On the same date the above contract was entered into. as they are hereby cancelled and revoked. instigated Casteel to violate his contract).. Philippines. Carpio shall remain rejected. Felipe Deluao and Inocencia Deluao on April 3. praying inter alia. Deluao reiterated his claim over the same area in the two administrative cases (DANR Cases 353 and 353-B) and asked for reinvestigation of the application of Nicanor Casteel over the subject fishpond. Municipality of Padada.. Nicanor Casteel is required to pay the improvements introduced thereon by said permittees in accordance with the terms and dispositions contained elsewhere in this decision. and collect the value of the fish that is being periodically realized from it. from the premises. should be. receive. 661 (now Fp.That this contract was the result of a verbal agreement entered into between the Parties sometime in the month of November. praying among other things. F-289-C of Leoncio Aradillos and Fishpond Permit No. . Fishpond Permit No. No. 1950 the Secretary of Agriculture and Natural Resources issued a decision in DANR Case 353. On April 18. which has been applied for fishpond permit by Nicanor Casteel. but rejected by the Bureau of Fisheries. Province of Davao. with all the abovementioned conditions enumerated. 1948. 1951 filed an action in the Court of First Instance of Davao for specific performance and damages against Nicanor Casteel and Juan Depra (who. On September 15. 1947. the dispositive portion of which reads as follows: In view of all the foregoing considerations. as hereby it is. the same official issued a decision in DANR Case 353-B. extending to the latter the authority "To represent me in the administration of the fishpond at Malalag.. On the same date. 1949 the Director of Fisheries rejected the application filed by Felipe Deluao on November 17. (a) that Casteel be ordered to respect and abide by the terms and conditions of said contract and that Inocencia Deluao be allowed to continue administering the said fishpond and collecting the proceeds from the sale of the fishes caught from time to time. and (b) that the defendants be ordered to pay jointly and severally to plaintiffs the sum of P20.. 1951 the plaintiffs filed an ex parte motion for the issuance of a preliminary injunction. F-539-C of Alejandro Cacam. A. Alleging violation of the contract of service (exhibit A) entered into between Inocencia Deluao and Nicanor Casteel. Fp. and Fp. No.. by letter dated March 15. Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further administering the fishpond. and ejected the latter's representative (encargado). Deluao withdrew his petition for reinvestigation. 762 of Victorio D. demand. they alleged.. Jesus Donesa.. and to supervise. Unfazed by this rejection." On November 29. No. A. that during the pendency of the case and upon their filling the requisite bond as may be fixed by the court. 1950 sent to the Secretary of Commerce and Agriculture and Natural Resources (now Secretary of Agriculture and Natural Resources).. However. 1717) of Nicanor Casteel should be. A. the dispositive portion stating as follows: WHEREFORE. Inocencia Deluao executed a special power of attorney in favor of Jesus Donesa.000 in damages. reinstated and given due course for the area indicated in the sketch drawn at the back of the last page hereof. and that after trial the .

The defendants filed on October 3.said injunction be made permanent. 1951 filed their answer with counterclaim. se prohibe a dicho demandado Nicanor Casteel a desahuciar mediante fuerza al encargado de los demandantes llamado Jesus Donesa de la pesqueria objeto de la demanda de autos. on April 26. . 1952. 1951 to dismiss the complaint as to him. the lower court (Branch II. presided by Judge Enrique A. reading as follows: . and. 1951. 1951 suffered the same fate when it was likewise denied by the lower court in its order of November 12. the hearing of this case is hereby transferred to May 2 and 3. two days later. that he was the owner. issued by the office of the Clerk of Court (thru the special deputy Clerk of Court) of the Court of First Instance of Davao. 1956 before Judge Amador Gomez of Branch II. 1951 Casteel filed a motion to dissolve the injunction. 1956 at 8:30 o'clock in the morning. 1951 granted the motion. 1951. 1951 a joint motion to dismiss on the ground that the plaintiffs' complaint failed to state a claim upon which relief may be granted. hasta nueva orden. The lower court on April 26. without any objection on the part of defendants. opposed by the plaintiffs on June 15. The motion. The motion is filed by the counsel for the defendants and has the conformity of the counsel for the plaintiffs. 1951. 1956 filed a motion for postponement. On May 10. the case was set for trial. 1956. agentes. On June 4. was denied for lack of merit by the lower court in its order of October 22. Acting on this motion. The defendant Juan Depra moved on May 22. The defendants on May 14. The defendants. was denied by the lower court in its order of June 26. 1956 an order in open court. 1951. el demandado y todos usu abogados. The lower court (Branch I. quoted as follows: This is a motion for postponement of the hearing of this case set for May 2 and 3. queda usted ordenado que. After the issues were joined. 1956. denying the material averments of the plaintiffs' complaint. the court will take the necessary steps for the final determination of this case. setting the hearing of the case for May 2 and 3. desista de impedir a la demandante Inocencia R. 1951 the plaintiffs opposed his motion. lawful applicant and occupant of the fishpond in question. opposed by the plaintiffs on October 12. Fernandez) finally issued on March 21. This case was filed on April 3. it issued a preliminary mandatory injunction addressed to Casteel. presided by Judge Gomez) issued an order dated April 27. Upon petition of plaintiffs. 1956. alleging among others. asimismo. 1961. usted. Deluao que continue administrando personalmente la pesqueria objeto de esta causa y que la misma continue recibiendo los productos de la venta de los pescados provenientes de dicha pesqueria. the dispositive portion of which reads as follows: POR EL PRESENTE. This motion. mandatarios y demas personas que obren en su ayuda. 1952. A reply to the defendants' amended answer was filed by the plaintiffs on January 31. Then came a series of postponements. thru counsel. The defendants' motion for reconsideration filed on October 31. 1956 the defendants' counsel received a notice of hearing dated April 21. y que. 1951 and under any circumstance this Court will not entertain any other transfer of hearing of this case and if the parties will not be ready on that day set for hearing. (emphasis supplied) On April 25. amended on January 8.

the lower court (Branch I. (i) Con las costas contra del demandado. 1956. (h) Ordena el sobreseimiento de la reconvencion de los demandados por falta de pruebas. alleging. (b) Ordena al demandado entregue la demandante la posesion y administracion de la mitad (½) del "fishpond" en cuestion con todas las mejoras existentes dentro de la misma. (d) Condena al demandado a pagar a la demandante la suma de P2. when informed about the defendants' motion for postponement filed on April 26. a decision was rendered on May 4.00. was denied by the lower court in its order of May 21. 1953. lack of knowledge of the order of the court a quo setting the case for trial.An examination of the records of this case shows that this case was initiated as early as April 1951 and that the same has been under advisement of the Honorable Enrique A. there being no appearance on the part of the defendants or their counsel.00.00 valor de los pescado beneficiados. wherein he definitely states that the Court will not entertain any further postponement of the hearing of this case.000. 1956. (c) Condena al demandado a pagar a la demandante la suma de P200. the Court believes that the consideration and termination of any incident referring to this case should be referred back to Branch I. Casteel. On the scheduled date of hearing. On the basis of the plaintiffs' evidence. issued an order reiterating its previous order handed down in open court on March 21. en tanto en cuanto se refiere al demandado Juan Depra. with Judge Fernandez presiding).00 mensualmente en concepto de danos a contar de la fecha de la expiracion de los 30 dias de la promulgacion de esta decision hasta que entregue la posesion y administracion de la porcion del "fishpond" en conflicto. 1956 and directing the plaintiffs to introduce their evidence ex parte. since September 24. The defendant Casteel filed a petition for relief from the foregoing decision. Fernandez.000. la suma de P2. (emphasis supplied) A copy of the abovequoted order was served on the defendants' counsel on May 4. (f) Condena al demandado a pagar a la demandante. I. so that the same may be disposed of therein. en concepto de honorarios. however. mas los intereses legales de la fecha de la incoacion de la demanda de autos hasta el completo pago de la obligacion principal. inter alia.000. 1956. The petition. Presiding Judge of Branch No. The last order issued by Judge Fernandez on this case was issued on March 21. on May 2. the pertinent portion of which reads as follows: . CONSIDERING ALL THE FOREGOING. el Juzgado dicta de decision a favor de los demandantes y en contra del demandado Nicanor Casteel: (a) Declara permanente el interdicto prohibitorio expedido contra el demandado. 1956 the dispositive portion of which reads as follows: EN SU VIRTUD. por insuficiencia de pruebas. por gastos incurridos por aquella durante la pendencia de esta causa. (e) Condena al demandado a pagar a la demandante la suma de P2. (g) Ordena el sobreseimiento de esta demanda. 1956. 1956. and that various incidents have already been considered and resolved by Judge Fernandez on various occasions. that is.

Casteel appealed to the Court of Appeals which certified the case to us for final determination on the ground that it involves only questions of law. and the notice of hearing dated April 21. the lower court set the case for hearing on May 2 and 3. Ruiz is no other than to be present in the Sala of this Court and to call the attention of the same to the existence of his motion for transfer. 1956. thru Judge Fernandez. Casteel raises the following issues: (1) Whether the lower court committed gross abuse of discretion when it ordered reception of the appellees' evidence in the absence of the appellant at the trial on May 2. In view of the order above-quoted. 1. the same is hereby denied. but to inquire from the presiding Judge. was a superfluity. was a valid notice to the parties. Moreover.1 and amounts to a legal notification for all legal purposes. which reads as follows: Upon petition of the plaintiff without any objection on the part of the defendants.2 The order of March 21. and in not dismissing appellees' complaint. The record indisputably shows that in the order given in open court on March 21. since the case had been pending since April 3. as between the order of March 21. (2) Whether the lower court committed grave abuse of discretion when it denied the verified petition for relief from judgment filed by the appellant on May 11. Ruiz knows the nature of the order of this Court dated March 21. 1951. 1956. 1956 or one month thereafter.The duty of Atty. and if the parties will not be ready on the day set for hearing. Dissatisfied with the said ruling. not well taken. it would not entertain any further motion for transfer of the scheduled hearing. Ruiz. Petition for relief from judgment filed by Atty. 1956. 1956. duly promulgated by the lower court. was not to inquire from the Clerk of Court whether the trial of this case has been transferred or not. This case was filed on April 3. This is because the incidents of postponements and adjournments are controlled by the court and not by the . 1956 in accordance with Rule 38. An order given in open court is presumed received by the parties on the very date and time of promulgation. 1951. Ruiz in behalf of the defendant. at 8:30 o'clock in the morning. the former's order was the one legally binding. the Court will not accede to any transfer of this case and the duty of Atty. and (3) Whether the lower court erred in ordering the issuance ex parte of a writ of preliminary injunction against defendant-appellant. The first and second issues must be resolved against the appellant. given in open court. 1956 at 8:30 o'clock in the morning and empathically stated that. 1956. and the notice of hearing signed by a "special deputy clerk of court" setting the hearing in another branch of the same court. Atty. 1956. particularly because his motion asking the transfer of this case was not set for hearing and was not also acted upon. the Court will take necessary steps for the final disposition of this case. Rules of Court. and under any circumstance this Court will not entertain any other transfer of the hearing of this case. the hearing of this case is hereby transferred to May 2 and 3. thus depriving the appellant of his day in court and of his property without due process of law.

He cannot argue that. fall within the exclusive control of the presiding judge. to appear before Judge Fernandez on the scheduled dates of hearing Parties and their lawyers have no right to presume that their motions for postponement will be granted. But the assignment or reassignment of cases already pending in one sala to another sala. The appellant after all admits that on May 2. there was no impediment to their going upstairs to the second storey of the Court of First Instance building in Davao on May 2. the office of the clerk of court of the Court of First Instance of Davao was located directly below Branch I.3 The record further discloses that Casteel was represented by a total of 12 lawyers. 1956. Rule 31 (now sec. and the setting of the date of trial after the trial calendar has been prepared. in the case at bar. therefore. but upon the court's discretion. the appellant and his 12 lawyers cannot pretend ignorance of the recorded fact that since September 24.6 his counsel was entitled to a timely notice of the denial of his motion for postponement. unless he was legally inhibited to try the case — and he was not. Notice to Atty. If the appellant and his counsel had exercised due diligence. His duty as such clerk of court. no necessity to "reassign" the same to Branch II because Judge Fernandez had exclusive control of said case.clerk of court. 1956 before Branch I. 3. This is a well-settled rule in our jurisdiction. . 1956. is correct. The postponement of hearings does not depend upon agreement of the parties. Unlike the case at bar. He was notified in open court on March 21. There was. 1956. none of whom had ever withdrawn as counsel. pursuant to the doctrine in Siochi vs. And this duty devolved upon the clerk of court and not upon the "special deputy clerk of court" who purportedly signed the notice of hearing. 1956 and checking if the case was scheduled for hearing in the said sala. He had neither the duty nor prerogative to re-assign the trial of the case to a different branch of the same court. was simply to prepare the trial calendar. 1953 until the trial held on May 2. 1956 intransferably setting the case for hearing for May 2 and 3. 1956 his counsel went to the office of the clerk of court. not excluding the appellant himself. Ruiz of the order dated March 21. the case was under the advisement of Judge Fernandez who presided over Branch I. there had already been a series of postponements.5 For indeed. 1956 that the case was definitely and intransferably set for hearing on May 2 and 3. or of the other lawyers of record. The appellant's statement that parties as a matter of right are entitled to notice of trial. Much less had the clerk of court the authority to interfere with the order of the court or to transfer the cage from one sala to another without authority or order from the court where the case originated and was being tried. It is of no moment that the motion for postponement had the conformity of the appellees' counsel. In the cited case the motion for postponement was the first one filed by the defendant. the Siochi case was not intransferably set for hearing.4 It was the duty of Atty. Ruiz. Rule 22) of the Rules of Court. was sufficient notice to all the appellant's eleven other counsel of record. Tirona. But he was properly accorded this right. The appellant does not deny the appellees' claim that on May 2 and 3. pursuant to section 4. in so far as the incident in question was concerned. There is truth in the appellant's contention that it is the duty of the clerk of court — not of the Court — to prepare the trial calendar.

1956. 1950 to the Secretary of Agriculture and Natural Resources. 8 2. The other was Felipe Deluao's application over the same area which was likewise rejected by the Director of Fisheries on November 29. The pretension of the appellant and his 12 counsel of record that they lacked ample time to prepare for trial is unacceptable because between March 21. 1949. conformably to such rule. although the fishpond was then in the possession of Casteel. divided into two parts — namely. the defendant (appellant) was given an opportunity to be heard. the constitutional requirements of due process have been fulfilled in this case: the lower court is a competent court.7 Verily. the second illegal. considering that rights and obligations have already arisen between the parties. And since they were aware of the said laws. 1949. This would certainly not serve the cause of equity and justice. We find this contention meritorious. it must likewise be assumed — in fairness to the parties — that they did not intend to violate them. a contract of partnership to exploit the fishpond pending its award to either Felipe Deluao or Nicanor Casteel. Too well-settled to require any citation of authority is the rule that everyone is conclusively presumed to know the law. Apparently. that the parties entered into the so-called "contract of service" cognizant of the mandatory and prohibitory laws governing the filing of applications for fishpond permits. whereas the cited case did not spend for a long time. This view must perforce negate the appellees' allegation that exhibit A created a contract of coownership between the parties over the disputed fishpond. 1951. One was Casteel's which was appealed by him to the Secretary of Agriculture and Natural Resources after it was disallowed by the Director of Fisheries on October 25. It is well to note that when the appellee Inocencia Deluao and the appellant entered into the so-called "contract of service" on November 25. Felipe Deluao was the holder of a fishpond permit over the area. Clearly. But be that as it may. It must be assumed. and in not dismissing the appellee's complaint. the appellant had waived his right to appear at the trial and therefore he cannot be heard to complain that he has been deprived of his property without due process of law. 1956 and May 2. it lawfully acquired jurisdiction over the person of the defendant (appellant) and the subject matter of the action. Were we to admit the establishment of a co-ownership violative of the prohibitory laws which will hereafter be discussed. neither he nor. Finally. the appellant contends that the lower court incurred an error in ordering the issuance ex parte of a writ of preliminary injunction against him. the case at bar was only finally and intransferably set for hearing on March 21. they were not however precluded from . the court a quo relied on exhibit A — the socalled "contract of service" — and the appellees' contention that it created a contract of co-ownership and partnership between Inocencia Deluao and the appellant over the fishpond in question. The first is valid.Finally. We shall therefore construe the contract as one of partnership. and a contract of partnership to divide the fishpond between them after such award. refiled by Deluao and later on withdrawn by him by letter dated March 15. we shall be compelled to declare altogether the nullity of the contract. 1956 — after almost five years had elapsed from the filing of the complaint on April 3. and judgment was rendered upon lawful hearing. In effect. 1949. they had one month and ten days to do so. there were two pending applications over the fishpond.

000 — presumably as reimbursement for the expenses of the appellees for the development and improvement of the one-half that would pertain to the appellant. but it was you "Tatay" Eping the one who wanted that we be partners and it so happened that we became partners because I am poor. from the letter of Casteel to Felipe Deluao on November 15. That it was not a contract of the services of the appellant. rule or regulation prohibited them from doing so. while the truth is that we are partners. he was so entitled — this being one of the conditions he specified for the execution of the document of partnership. No law. rather than let the fishpond remain idle they cultivated it. same will redound to your benefit because you are the ones interested in half of the work we have done so far. Therefore so that each of us may be secured. do not blame me if I withdraw all my cases and be left without even a little and you likewise. This can be gleaned. 1950. his right must be divided between them. besides I did not insist on our being partners in my fishpond permit. 1949. although exhibit A did not specify any wage or share appertaining to the appellant as industrial partner.13expressing his concurrence in the appellant's suggestion and advising the latter to ask for a reconsideration of the order of the Director of Fisheries . The evidence preponderates in favor of the view that the initial intention of the parties was not to form a coownership but to establish a partnership — Inocencia Deluao as capitalist partner and Casteel as industrial partner — the ultimate undertaking of which was to divide into two equal parts such portion of the fishpond as might have been developed by the amount extended by the plaintiffs-appellees.12dated March 24. which states. was admitted by the appellees themselves in their letter10 to Casteel dated December 19. but it does not mean that you will treat me as one of your "Bantay" (caretaker) on wage basis but not earning wages at all. Thus. but in the midst of my poverty it never occurred to me to be unfair to you.. [W]ith respect to your allowing me to use your money. Of course. and offered to pay the Deluaos a yearly installment of P3. the appellee Felipe Deluao replied. with the further provision that Casteel should reimburse the expenses incurred by the appellees over one-half of the fishpond that would pertain to him. although denominated a "contract of service. Two days later. let us have a document prepared to the effect that we are partners in the fishpond that we caused to be made here in Balasinon. In a letter..exploiting the fishpond pending resolution of Casteel's appeal or the approval of Deluao's application over the same area — whichever event happened first. among others. inter alia: .11 Further exchanges of letters between the parties reveal the continuing intent to divide the fishpond." was actually the memorandum of their partnership agreement. (emphasis supplied)9 Pursuant to the foregoing suggestion of the appellant that a document be drawn evidencing their partnership. the appellee Inocencia Deluao and the appellant executed exhibit A which. 1949 wherein they stated that they did not employ him in his (Casteel's) claim but because he used their money in developing and improving the fishpond. In the event that you are not amenable to my proposition and consider me as "Bantay" (caretaker) instead. the appellant suggested that they divide the fishpond and the remaining capital.

1950 addressed to the Secretary of Agriculture and Natural Resources. Apparently relying on the partnership agreement. was cancelled not solely for the reason that his permit covered a portion of the area included in the appellant's prior fishpond application. prohibits the holder of a fishpond permit (the permittee) from transferring or subletting the fishpond granted to him. known as the Fisheries Act. he withdrew his petition on the alleged ground that he was no longer interested in the area. ". brought about the dissolution of the partnership. 3 of the fishpond permit which states that "The permittee shall not transfer or sublet all or any area herein granted or any rights acquired therein without the previous consent and approval of this Office. or sublet his rights without the consent of the Secretary of Agriculture and Commerce." Parenthetically. prohibits a transfer or sublease unless first . corporations. and the violation of this condition shall avoid the contract. Provided. it was ascertained thru the admission of Aradillos himself that due to lack of capital. upon investigation. or subletting for purposes of speculation shall not be permitted in any case:Provided. as one of the causes for the dissolution of a partnership. then they would divide the area. 40 of Commonwealth Act 141. 14 of the Secretary of Agriculture and Natural Resources issued in August 1937. Act 4003. but also because. section 37 of Administrative Order No. encumber. are not authorized to lease public lands. encumbrance. encumbrance. so that if a favorable decision was secured. to persons.15 To the same effect is Condition No. likewise provides that The lessee shall not assign.16 Sec. further. 1950 were issued by the Secretary of Agriculture and Natural Resources in DANR Cases 353 and 353-B. That nothing contained in this section shall be understood or construed to permit the assignment. without the previous consent or approval of the Secretary of Agriculture and Natural Resources. but stated however that he wanted his interest to be protected and his capital to be reimbursed by the highest bidder. the permit granted to one of the parties therein. Leoncio Aradillos. That assignment. otherwise known as the Public Land Act. Moreover.. any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership. The arrangement under the so-called "contract of service" continued until the decisions both dated September 15. subsequent events likewise reveal the intent of both parties to terminate the partnership because each refused to share the fishpond with the other. he allowed one Lino Estepa to develop with the latter's capital the area covered by his fishpond permit F-289-C with the understanding that he (Aradillos) would be given a share in the produce thereof. or under any previous Act. the appellee Felipe Deluao saw no further need to maintain his petition for the reinvestigation of Casteel's application. This development.disapproving his (appellant's) application. Art. Finally. 1830(3) of the Civil Code enumerates. or associations which under this Act. by itself. or subletting of lands leased under this Act. we must observe that in DANR Case 353-B. Thus by letter14 dated March 15." The approval of the appellant's fishpond application by the decisions in DANR Cases 353 and 353-B brought to the fore several provisions of law which made the continuation of the partnership unlawful and therefore caused its ipso facto dissolution..

Thus. The appellees. the appellant forbade Felipe Deluao from sending the couple's encargado. unless otherwise specifically provided. was not enough to cause the dissolution ipso facto of their partnership. held the permit or lease and actually operated and made improvements on the area for at least one year. In the same letter. A transfer not previously approved or reported shall be considered sufficient cause for the cancellation of the permit or lease and forfeiture of the bond and for granting the area to a qualified applicant or bidder. 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. The appellant wrote on January 4.18 the appellee Felipe Deluao demurred to Casteel's proposition because there were allegedly no appropriate grounds to support the same and. (a) Transfer subject to approval. otherwise it shall be null and void. — A sub-lease or transfer shall only be valid when first approved by the Director under such terms and conditions as may be prescribed. The approval was an event which made it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership. expressing his desire to divide the fishpond so that he could administer his own share. exhibit A. Jesus Donesa. he/she may request permission to sub-lease or transfer the area and improvements under certain conditions. the Secretary of Agriculture and Natural Resources likewise recognized and/or confirmed their property right to one-half of the fishpond by virtue of the contract of service. By letter dated December 29.approved by the Director of Lands and under such terms and conditions as he may prescribe. it states: When a transfer or sub-lease of area and improvement may be allowed. 1950. Felipe Deluao wrote a letter20 dated January 5. 1951 a last letter19 to the appellee Felipe Deluao wherein the former expressed his determination to administer the fishpond himself because the decision of the Government was in his favor and the only reason why administration had been granted to the Deluaos was because he was indebted to them. On December 27. however. and therefore it envisaged the unauthorized transfer of one-half thereof to parties other than the applicant Casteel. 33 of this Order. 1950 Casteel wrote17 the appellee Inocencia Deluao. stating as a ground his belief "that only the . it was dissolved by the approval of his application and the award to him of the fishpond. succeeding events reveal the intent of both parties to terminate the partnership by refusing to share the fishpond with the other. But the untenability of this argument would readily surface if one were to consider that the Secretary of Agriculture and Natural Resources did not do so for the simple reason that he does not possess the authority to violate the aforementioned prohibitory laws nor to exempt anyone from their operation. moreover. — If the permittee or lessee had. argue that in approving the appellant's application. such division to be subject to the approval of the Secretary of Agriculture and Natural Resources. In reply thereto. to the fishpond. assuming in gratia argumenti that the approval of Casteel's application. However. 1951 in which he reiterated his refusal to grant the administration of the fishpond to the appellant. the conflict over the fishpond had not been finally resolved. coupled with the foregoing prohibitory laws. as provided in subsection (r) of Sec.

sale or any other form of concession or disposition and management of the lands of the public domain. L5750. permits. courts have no supervising power over the proceedings and action of the administrative departments of the government. vs. It is a wellrecognized principle that purely administrative and discretionary functions may not be interfered with by the courts (Coloso v. G. 558-559) Findings of fact by an administrative board or official." In this jurisdiction.. 1953). (L-15414. leases.. or deciding conflicting applications. et al. we held in Pajo. or approving.. (L-21167. Secretary of Agriculture and Natural Resources. June 30. exercised unconstitutional powers. the Secretary of Agriculture and Natural Resources gave due course to the appellant's fishpond application 1717 and awarded to him the possession of the area in question. we can do no less than respect and maintain unfettered his official acts in the premises. Indeed. that dissolution is caused "by the express will of any partner at any time. This is generally true with respect to acts involving the exercise of judgment or discretion. Ago. or cancelling applications. April 20. classification. lease. and findings of fact. It is a salutary rule that the judicial department should not dictate to the executive department what to do with regard to the administration and disposition of the public domain which the law has entrusted to its care and administration. that .. Thus. et al. the Secretary of Agriculture and Natural Resources possesses executive and administrative powers with regard to the survey. permits. 1830(2) of the Civil Code which provides. reinstating. or acted with arbitrariness and in disregard of his duty. (54 Am. In view of the finality of the Secretary's decision in DANR Cases 353 and 353-B. are all executive and administrative in nature. are binding upon the courts and will not be disturbed except where the board or official has gone beyond his statutory authority. inter alia. thereby causing its dissolution pursuant to art. [T]he powers granted to the Secretary of Agriculture and Commerce (Natural Resources) by law regarding the disposition of public lands such as granting of licenses. et al. and reiterated in Ganitano vs. Jur. with regard to the grant or withholding of licenses. any action we may privately take may not meet the procedure of legal order. and considering the absence of any proof that the said official exceeded his statutory authority. leases and contracts over portions of the public domain to be utilized as fishponds. No. 1960)." Inasmuch as the erstwhile partners articulated in the aforecited letters their respective resolutions not to share the fishpond with each other — in direct violation of the undertaking for which they have established their partnership — each must be deemed to have expressly withdrawn from the partnership. March 31. more specifically. Board of Accountancy. and contracts. rejecting. 1966). (emphasis supplied) In the case at bar. courts cannot superimpose their discretion on that of the land department and compel the latter to do an act which involves the exercise of judgment and discretion. exercised unconstitutional powers or clearly acted arbitrarily and without regard to his duty or with grave abuse of discretion. hence.R.22 . following a hearing.competent agencies of the government are in a better position to render any equitable arrangement relative to the present case. and. or with grave abuse of discretion.21. In general.

the judgment of the lower court is set aside. 1949 to September 15. and (3) remanding this case to the court of origin for the reception of evidence relative to the accounting that the parties must perforce render in the premises. and therefore. at the termination of which the court shall render judgment accordingly. occupy and enjoy the same. its declaration as permanent.. . The appellant's counterclaim is dismissed. since the appellee Inocencia Deluao continued in possession and enjoyment of the fishpond even after it was awarded to Casteel.B. We cannot overemphasize that an injunction should not be granted to take property out of the possession and control of one party and place it in the hands of another whose title has not been clearly established by law.000 (or whatever amounts have been advanced to Casteel). she did so no longer in the concept of a capitalist partner but merely as creditor of the appellant.23 However. she must likewise submit in the lower court an accounting of the proceeds of the sales of all the fishes harvested from the fishpond from September 16. plus 6% interest thereon per annum. Reyes.. with the view that we take of this case. was improper in the face of the knowledge later acquired by the lower court that it was the appellant's application over the fishpond which was given due course. then she should reimburse the excess to the appellant. Zaldivar. (2) placing the latter back in possession of the fishpond in litigation. the lower court erred in issuing the preliminary mandatory injunction.J. pursuant to our holding that there was a partnership between the parties for the exploitation of the fishpond before it was awarded to Casteel. this case should be remanded to the lower court for the reception of evidence relative to an accounting from November 25. 1950 until Casteel shall have been finally given the possession and enjoyment of the same.L. concur. (e) the share (in the profits) of Deluao as capitalist partner. he became to all intents and purposes the legal permittee of the area with the corresponding right to possess. Concepcion. J. In the event that the appellee Deluao has received more than her lawful credit of P27.000 advanced by Deluao to Casteel for the development and improvement of the fishpond have already been liquidated. C. and. After the Secretary of Agriculture and Natural Resources approved the appellant's application. Dizon. (b) the share (in the profits) of Casteel as industrial partner.Therefore. ACCORDINGLY. Fernando and Capistrano. Sanchez. worse. No pronouncement as to costs. Makalintal. JJ. and even assuming that the injunction was properly issued because present all the requisite grounds for its issuance.. in order for the court to determine (a) the profits realized by the partnership. Another judgment is hereby rendered: (1) dissolving the injunction issued against the appellant. Besides. Consequently. its continuation. and (d) whether the amounts totalling about P27. 1950.

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