Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-35840 March 31, 1933

defendant J.M. Menzi, his wife and daughter, together with the defendant P.C. Schlobohm and one Juan Seiboth, constitute the board of directors of the defendant, Menzi & Co., Inc.; II That on April 27, 1922, the defendant Menzi & Co., Inc. through its president and general manager, J.M. Menzi, under the authority of the board of directors, entered into a contract with the plaintiff to engage in the business of exploiting prepared fertilizers, as evidenced by the contract marked Exhibit A, attached to the original complaint as a part thereof, and likewise made a part of the amended complaint, as if it were here copied verbatim; III That in pursuance of said contract, plaintiff and defendant Menzi & Co., Inc., began to manufacture prepared fertilizers, the former superintending the work of actual preparation, and the latter, through defendants J.M. Menzi and P. C. Schlobohm, managing the business and opening an account entitled "FERTILIZERS" on the books of the defendant Menzi & Co., Inc., where all the accounts of the partnership business were supposed to be kept; the plaintiff had no participation in the making of these entries, which were wholly in the defendants' charge, under whose orders every entry was made; IV That according to paragraph 7 of the contract Exhibit A, the defendant Menzi & Co., Inc., was obliged to render annual balance sheets to be plaintiff upon the 30th day of June of each year; that the plaintiff had no intervention in the preparation of these yearly balances, nor was he permitted to have any access to the books of account; and when the balance sheets were shown him, he, believing in good faith that they contained the true statement of the partnership business, and relying upon the good faith of the defendants, Menzi & Co., Inc.,
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FRANCISCO BASTIDA, plaintiff-appellee, vs. MENZI & Co., INC., J.M. MENZI and P.C. SCHLOBOHM, defendants. MENZI & CO., appellant. Romualdez Brothers and Harvey and O'Brien for appellant. Jose M. Casal, Alberto Barretto and Gibbs and McDonough for appellee. VICKERS, J.: This is an appeal by Menzi & Co., Inc., one of the defendants, from a decision of the Court of First Instance of Manila. The case was tried on the amended complaint dated May 26, 1928 and defendants' amended answer thereto of September 1, 1928. For the sake of clearness, we shall incorporate herein the principal allegations of the parties. FIRST CAUSE OF ACTION Plaintiff alleged: I That the defendant J.M. Menzi, together with his wife and daughter, owns ninety-nine per cent (99%) of the capital stock of the defendant Menzi & Co., Inc., that the plaintiff has been informed and therefore believes that the

J.M. Menzi, and P.C. Schlobohm, accepted and signed them, the last balance sheet having been rendered in the year 1926; V That by reason of the foregoing facts and especially those set forth in the preceding paragraph, the plaintiff was kept in ignorance of the defendants' acts relating to the management of the partnership funds, and the keeping of accounts, until he was informed and so believes and alleges, that the defendants had conspired to conceal from him the true status of the business, and to his damage and prejudice made false entries in the books of account and in the yearly balance sheets, the exact nature and amount of which it is impossible to ascertain, even after the examination of the books of the business, due to the defendants' refusal to furnish all the books and data required for the purpose, and the constant obstacles they have placed in the way of the examination of the books of account and vouchers; VI That when the plaintiff received the information mentioned in the preceding paragraph, he demanded that the defendants permit him to examine the books and vouchers of the business, which were in their possession, in order to ascertain the truth of the alleged false entries in the books and balance sheets submitted for his approval, but the defendants refused, and did not consent to the examination until after the original complaint was filed in this case; but up to this time they have refused to furnish all the books, data, and vouchers necessary for a complete and accurate examination of all the partnership's accounts; and VII That as a result of the partial examination of the books of account of the business, the plaintiff has, through his accountants, discovered that the defendants, conspiring and confederating together, presented to the plaintiff

during the period covered by the partnership contract false and incorrect accounts, (a) For having included therein undue interest; (b) For having entered, as a charge to fertilizers, salaries and wages which should have been paid and were in fact paid by the defendant Menzi & Co., Inc.; (c) For having collected from the partnership the income tax which should have been paid for its own account by Menzi & Co., Inc.; (d) For having collected, to the damage and prejudice of the plaintiff, commissions on the purchase of materials for the manufacture of fertilizers; (e) For having appropriated, to the damage and prejudice of the plaintiff, the profits obtained from the sale of fertilizers belonging to the partnership and bought with its own funds; and (f) For having appropriated to themselves all rebates for freight insurance, taxes, etc., upon materials for fertilizer bought abroad, no entries of said rebates having been made on the books to the credit of the partnership. Upon the strength of the facts set out in this first cause of action, the plaintiff prays the court: 1. To prohibit the defendants, each and every one of them, from destroying and concealing the books and papers of the partnership constituted between the defendant Menzi & Co., Inc., and the plaintiff;

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2. To summon each and every defendant to appear and give a true account of all facts relating to the partnership between the plaintiff and the defendant Menzi & Co., Inc., and of each and every act and transaction connected with the business of said partnership from the beginning to April 27, 1927, and a true statement of all merchandise of whatever description, purchased for said partnership, and of all the expenditures and sale of every kind, together with the true amount thereof, besides the sums received by the partnership from every source together with their exact nature, and a true and complete account of the vouchers for all sums paid by the partnership, and of the salaries paid to its employees; 3. To declare null and void the yearly balances submitted by the defendants to the plaintiff from 1922 to 1926, both inclusive; 4. To order the defendants to give a true statement of all receipts and disbursements of the partnership during the period of its existence, besides granting the plaintiff any other remedy that the court may deem just and equitable. EXHIBIT A CONTRATO que se celebra entre los Sres. Menzi y Compañia, de Manila, como Primera Parte, y D. Francisco Bastada, tambien de Manila, como Segunda Parte, bajo las siguientes CONDICIONES 1.ª El objeto de este contrato es la explotacion del negocio de Abonos o Fertilizantes Preparados, para diversas aplicaciones agricolas;

2.ª La duracion de este contrato sera de cinco años, a contrar desde la fecha de su firma; 3.ª La Primera Parte se compromete a facilitar la ayuda financiera necesaria para el negocio; 4.ª La Segunda Parte se compromete a poner su entero tiempo y toda su experiencia a la disposicion del negocio; 5.ª La Segunda Parte no podra, directa o indirectamente, dedicarse por si sola ni en sociedad con otras personas, o de manera alguna que no sea con la Primera Parte, al negecio de Abonos, simples o preparados, o de materia alguna que se aplique comunmente a la fertilizacion de suelos y plantas, durante la vigencia de este contrato, a menos que obtenga autorizacion expresa de la Primera Parte para ello; 6.ª La Primera Parte no podra dedicarse, por si sola ni en sociedad o combinacion con otras personas o entidades, ni de otro modo que en sociedad con la Segunda Parte, al negocio de Abonos o Fertilizantes preparados, ya sean ellos importados, ya preparados en las Islas Fllipinas; tampoco podra dedicarse a la venta o negocio de materias o productos que tengan aplicacion como fertilizantes, o que se usen en la composicion de fertilizantes o abonos, si ellos son productos de suelo de la manufactura filipinos, pudiendo sin embargo vender o negociar en materim fertilizantes simples importados de los Estados Unidos o del Extranjero; 7.ª La Primera Parte se obliga a ceder y a hacer efectivo a la Segunda Parte el 35 por ciento (treinta y cinco por ciento) de las utilidades netas del negocio de abonos, liquidables el 30 de junio de cada año; 8.ª La Primera Parte facilitara la Segunda, mensualmente, la cantidad de P300 (trescientos pesos), a cuenta de su parte de beneficios.
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as provided in his former agreement. that on the said 27th of April. for the purpose of convenience in determining the amount of compensation due to the plaintiff under his agreement.. En testimonio de lo cual firmamos el presente en la Ciudad de Manila. should be for a definite period of five years from that date and under the other terms and conditions stated therein... 1923. and on or about the month of December. to superintend the mixing of the ingredients in the manufacture of prepared fertilizers in its fertilizer department and to obtain orders for such prepared fertilizers subject to its approval. but with the understanding and agreement that the said Francisco Bastida should receive as compensation for his said services only 35 per cent of the net profits derived from the sale of the fertilizers prepared by him during the period of the contract instead of 50 per cent of such profits.9. and the said Francisco Bastida made and entered into the written agreement. Inc. and as a special defense to the first cause of action alleged: 1. That the accounts of the business of the said fertilizer department of Menzi & Co. whereby they mutually agreed that the employment of the said Francisco Bastida by the said Menzi & Co. and merchandise. and received the compensation agreed upon for his services. Inc. and that said Francisco Bastida worked under said agreement until April 27. That on or about November. separate books of CASES – partnership Page 4 of 63 .) F. and that after that time and during the remainder of the period of said agreement. 1922. the said Menzi & Co. (Fdo. has been engaged in the general merchandise business in the Philippine Islands since its organization in October.) J. made and entered into an employment agreement with the plaintiff. the defendant.. and has used for that purpose trademarks belonging to it. MENZI & CO.. 1921. 2. in the ordinary course thereof.. INC. INC. Inc. except the formal allegations as to the parties. for a compensation of 50 per cent of the net profits which it might derive from the sale of the fertilizers prepared by him. was obliged to and actually did assume the full management and direction of said business.. Inc. wares.. Por (Fdo. a veintisiete de abril de 1922. including the importation and sale of all kinds of goods. 1922. Menzi & Co. who represented that he had had much experience in the mixing of fertilizers. which is marked Exhibit A. 3. the defendant.ª Durante el año 1923 la Parte concedera a la Segunda permiso para que este se ausente de Filipinas por un periodo de tiempo que no exceda de un año. That the defendant corporation. were duly kept in the regular books of its general business. Inc. I. and as a part of that business. Menzi & CO. it has been engaged since its organization in the manufacture and sale of prepared fertilizers for agricultural purposes. and especially simple fertilizer and fertilizer ingredients. in order to make said business successful. Menzi & Inc. and made a part of the amended complaint in this case.. that the said Francisco Bastida was found to be incompetent to do anything in relation to its said fertilizer business with the exception of over-seeing the mixing of the ingredients in the manufacture of the same. in the capacity stated. 1922. 1921..) MAX KAEGI Acting Secretary Defendants denied all the allegations of the amended complaint... sin menoscabo para derechos de la Segunda Parte con arreglo a este contrato.. MENZI General Manager Primera Parte (Fdo. up to June 30. F.. BASTIDA Segunda Parte MENZI & CO.

that Menzi & Co. Inc. and to pay to the plaintiff at that time his proportion of such profits on that basis. that at no time during the course of said fertilizer business and the liquidation thereof has the plaintiff been in any way denied access to the books and records pertaining thereto.. certified public accountants. Menzi & Co. Fertilizer'. showing the status of said business and the share of the net profits pertaining to the plaintiff as his compensation under said agreement. that after the said manufacturing and profit and the loss account and balance sheet for each year of the business of its said fertilizer department up to and including the year 1926. Menzi and P. duly notified the plaintiff that it would not under any conditions renew his said agreement or continue his said employment with it after its expiration. Page & Co. kept in the name of 'Menzi & Co.. Inc. he signed his name on each of them. the defendant.C. Inc. and duly accepted. have been going over and examining said books and records for months and the defendant. Inc. audit the accounts of the business of its said fertilizer department for the four months of 1927 covered by plaintiff's agreement and prepare a manufacturing and profit and loss account and balance sheet of said business showing the status of said business at the termination of said agreement. and in accordance therewith. for each year of said business have been duly audited by Messrs. have turned over to said plaintiff and his accountant the books and records of said business and even furnished them suitable accommodations in its own office to examine the same. Inc. instead of June 30th.. Menzi & Co.. of each year. and as evidence of such approval.. Inc. through its officers. That prior to the termination of the said agreement. would not continue him in its service. before the net profits of said business for the period of the agreement could be determined. wherein he knowingly make various false and malicious allegations against the defendants. which are attached to the record of this case.. who. Page & Co. which the plaintiff refused to accept. Haskins & Sells.... the said plaintiff has actually received the portion of the net profits of its said business for those years pertaining to him for his services under said agreement. and the vouchers and records supporting the same. White.M. ashes.account for its said fertilizer business were duly. has been collecting the accounts receivable and disposing of the stocks on hand.. which it CASES – partnership Page 5 of 63 . offered to take the face value of said accounts and the cost value of the other properties for the purpose of determining the profits of said business for that period. and which are hereby referred to and made a part of this amended answer. Inc. had the certified public accountants. the said plaintiff commenced this action. Inc. during the period of said agreement. a copy of which was shown to and explained to the plaintiff. Messrs.. Schlobohm. but on the contrary. as recorded in its said books. that at that time there were accounts receivable to be collected for business covered by said agreement of over P100. which had to be disposed of by Menzi & Co. that the accounts of the business of its said fertilizer department. had been prepared by the said auditors and certified by them. or valued by the parties.000. with full knowledge of their contents. and even since the commencement of this action. of Manila. and after the termination of said agreement of April 27.. Inc. the plaintiff and his accountants. the said Menzi & Co.. said books and records have been subject to his inspection and examination at any time during business hours.. have prepared therefrom a manufacturing and profit and loss account and balance sheet.000. and there is still on hand old stock of approximately P25. they were shown to and examined by the plaintiff.. 1927. and being disgruntled because the said Menzi & Co. Inc.000. that since that time the said Menzi & Co. White. of Manila.. and used exclusively for that purpose and it was mutually agreed between the said Francisco Bastida and the said Menzi & Co. fine tobacco and other fertilizer ingredients on hand of over P75.. Exhibit A.. as shown on the copies of said manufacturing and profit and loss account and balance sheet for each year up to and including the year 1926. shortly after the close of business at the end of each year up to and including the year 1926. and approved by him. but also it managers J. including therein not only Menzi & Co... 4. that the yearly balances for the determination of the net profits of said business due to the said plaintiff as compensation for his services under said agreement would be made as of December 31st. and there was guano.

. accepted and paid drafts drawn upon it under said letters of credit. THIRD CAUSE OF ACTION As third cause of action. the amount of which the plaintiff is unable to determine. the defendant. or P64... opened letters of credit through the banks of Manila. has been defrauded by the defendants by way of interest in an amount of approximately P184. as he has never had at his disposal the books and vouchers necessary for that purpose. IV. that such drafts and loans naturally provided for interest at the banking rate from the dates thereof until paid. neither was there a separate BANK ACCOUNT of the partnership. as is the case in all. III. the plaintiff estimates that the partnership between himself and the defendant Menzi & Co. that the said defendant. Inc. and that such payments of interest as were actually made on such drafts. That he hereby reproduces paragraphs I. Menzi & Co. of the special defense to the first cause of action in this amended answer. never kept its own cash book. with legal interest from the filing of the original complaint until payment. loans and advances during the period of the said employment agreement constituted legitimate expenses of said business under said agreement. or any amount which may finally appear to be due and owing from the defendants to the plaintiff upon this ground. owning to the fact that the partnership constituted between the plaintiff and the defendant Menzi & Co. such account being included in the defendant's bank account. the plaintiff prays the court to render judgment ordering the defendants jointly and severally to pay him the sum of P64. Inc. That they repeat and make a part of this special defense paragraphs 1. SECOND CAUSE OF ACTION As a second cause of action plaintiff alleged: I.38. That from the examination of the partnership books as aforesaid. and especially. Exhibit A. II. Defendants alleged: 1. 2. III. and V of the first cause of action. Menzi & Co.has been unable to dispose of up to this time. II. of which 35 per cent.. II. CASES – partnership Page 6 of 63 . but that its funds were maliciously included in the private funds of the defendant entity. Inc.. Wherefore..38. and he and his auditors have fully examined the books and records of said business in relation thereto.. 3 and 4. That the plaintiff hereby reproduces paragraphs I. as it had been doing before the plaintiff was employed under the said agreement. III. Inc. that as soon as possible a final liquidation and amounting of the net profits of the business covered by said agreement for the last four months thereof will be made and the share thereof appertaining to the plaintiff will be paid to him.51. such business enterprises.. only undertook and agreed to facilitate financial aid in carrying on the said fertilizer business. 2. undue interest. and V of the first cause of action. That under the contract of employment.551. IV. and obtained loans and advances of moneys for the purchase of materials to be used in mixing and manufacturing its fertilizers and in paying the expenses of said business. plaintiff alleged: I.551.432. belongs to the plaintiff exclusively. That the examination made by the plaintiff's auditors of some of the books of the partnership that were furnished by the defendants disclosed the fact that said defendants had charged to "purchases" of the business. of the amended complaint. that the plaintiff has been informed from time to time as to the status of the disposition of such properties. in the course of the said business of its fertilizer department.

and he is now estopped from saying that such expenses were not legitimate and just expenses of said business. Inc.372. accountants. have made the partnership. That under this item of undue salaries the defendants have appropriated P43. Schlobohm. Defendants alleged: 1.. when its other departments had special experienced Europeans in charge thereof. That the plaintiff has. 2. not satisfied with collecting undue and excessive salaries for themselves. through its manager. exclusively managed and conducted its said fertilizer business. a just proportion of said overhead expenses were charged to said fertilizer departments and entered on the books thereof. III. for said business. IV. after its manager took charge of it. and included in the auditors' reports.000. CASES – partnership Page 7 of 63 . in which the plaintiff was to receive 35 percent of the net profits as compensation for this services.. inasmuch as such services were compensated with the 65% of the net profits of the business constituting their share. who received not only salaries but also a percentage of the net profits of such departments. that the said Menzi & Co.. pay the salaries of a number of the employees of the defendant Menzi & Co. That he hereby reproduces paragraph I.. nor the defendant Menzi & Co. clerks.372 belongs exclusively to the plaintiff.M. Wherefore. had a right to collect for itself or themselves any amount whatsoever by way of salary for services rendered to the partnership between the plaintiff and the defendant.. that the same method is followed in each of the several departments of the business of Menzi & Co.M. over P88. III.920 of the partnership funds. paid all the employees he has placed in the service of the partnership. or the fertilizer business. or P15. of which 35 per cent. and actually consumed at least one-half of the time of the manager and certain employees of Menzi & Co. 1923.. as hereinbefore alleged.C. and had its employees perform the duties of cashiers. with the knowledge and consent of the plaintiff. became very successful. with legal interest from the date of the filing of the original complaint until the date of payment. That they repeat and make a part of this special defense paragraphs 1. Schlobohm. neither the defendants J.C. furnished office space. messengers. having expended for their account. which pertained to the fertilizer department. Inc. without ever having made any claim upon the defendants for this sum because it was included in the compensation of 35 per cent which he was to receive in accordance with the contract Exhibit A. that each and every year from and after 1922. on his on account and with his own money. which were examined. and owing to the large volume of business transacted.. That the defendant. and for that reason the said Menzi & Co. II. accepted and approved by him. in carrying it on. during the period of the contract. said business required great deal of time and attention. IV. the plaintiff alleged: I.. and V of the first cause of action. Inc.. That the defendants J. charged each year. Menzi and P. Inc. as expenses of said business.. Menzi and P. V. That under the terms of the contract Exhibit A. FOURTH CAUSE OF ACTION As fourth cause of action.. etc.II. 2. Inc. from on or about January 1. as certain amount as salaries and wages to cover the proportional part of the overhead expenses of Menzi & Co. stationery and other incidentals.. that its said fertilizer business... the plaintiff prays the court to render judgment ordering the defendants to pay jointly and severally to the plaintiff the amount of P15. from and after 1922. Inc. 3 and 4 of the special defense the first cause of action in this amended answer. Menzi & Co. Inc.. for the same.

and he is now estopped from saying that such taxes are not a legitimate expense of said business. paid with his own money the income tax corresponding to his share which consists in 35 per cent of the profits of the fertilizer business. Inc. III.72 of which 35 per cent belongs exclusively to the plaintiff. Inc.. because the entries referring to these items do not appear in the partnership books.. had been receiving. during the period of the contract Exhibit A..000 without ever having made any claim for reimbursement against the partnership. which reports were examined.. expending about P5. Menzi and P. That under the Income Tax Law Menzi & Co. during the period of the contract. a secret commission equivalent to 5 per cent of the total value of the purchases of fertilizing material made by the partnership constituted between the plaintiff and the defendant Menzi Co.362. that inasmuch as the agreement with the plaintiff was an employment agreement.60.. which the latter has refused to furnish. inasmuch as it has always been understood among the partners that each of them would pay his own income tax. IV.. so that he would be entitled to the personal exemptions allowed by the law. amounting to P3. That the plaintiff has discovered that the defendants Menzi & Co. 2. from foreign firms selling fertilizing material. notwithstanding the demands made therefore by the auditors and the lawyers of the plaintiff. was obliged to and did make return to the Government of the Philippine Islands each year during the period of the agreement. which appropriated it to itself.60.. Wherefore. C. III. accepted and approved by the plaintiff. Defendants alleged: 1. Exhibit A. Inc. but to the credit of the defendant Menzi Co. That hereby reproduces paragraphs I. FIFTH CAUSE OF ACTION As fifth cause of action. to the credit and benefit of the partnership constituted between the plaintiff and the defendant... That the defendant Menzi & Co. although the plaintiff believes and alleges that they do appear in the private books of the defendant Menzi & Co. Inc.. or even the approximate amount of the fraud thus suffered by the plaintiff cannot be determined. M. That the exact amount. and included in the auditors' reports hereinbefore referred to. that the proportional share of such income taxes found to be due on the business of the fertilizer department was charged as a proper and legitimate expense of that department. CASES – partnership Page 8 of 63 . Inc.. Schlobohm. pertaining to the business. were duly entered on the books of that department. plaintiff alleged: I. the income tax due from said defendant entity for the fertilizer business. III. with the funds of the partnership between the defendant entity and the plaintiff. through the defendant J. Inc. of the special defense to the first cause of action in this amended answer. in the same manner as was done in the other departments of its business. That they repeat and make a part of this special defense paragraphs 1. as might be done under the law..361.626. has paid. 2. with full knowledge of their contents. he was required to make his own return under the Income Tax Law and to pay his own income taxes.II. that the income taxes paid by the said Menzi & Co. thereby defrauding the partnership in the amount of P10.. II. 3 and 4. with legal interest from the date of the filing of the original complaint until its payment. of the income of its whole business. Inc. and V of the first cause of action. including its fertilizer department. and that said 5 per cent commission was not entered by the defendants in the books of the business. instead of having them paid at the source.. II. That the plaintiff has. the plaintiff prays the court to order the defendants jointly and severally to pay the plaintiff the sum of P3.

and no basis of computation can be established. Inc.. III.M.. Menzi & Co.. purchased with the latter's money. and deposited in its warehouses.B. to ascertain the extent of the fraud sustained by the plaintiff in this respect.. and consequently were not credited to that department.. and has now what is called a "Propaganda Agency Agreement" which the Deutsches Kalesyndikat. II...52. plaintiff alleged: I. of San Francisco. through C. Schlobohm.77 of which 35 per cent belongs exclusively to the plaintiff. the plaintiff prays the court to order the defendants to pay jointly and severally to the plaintiff the amount of P44. SIXTH CAUSE OF ACTION As sixth cause of action. G. that during the period of said agreement. That they repeat and make a part of this special defense paragraph 1.. Inc. and the CASES – partnership Page 9 of 63 .. That hereby reproduces paragraphs I.222. as the agent of the said Menzi & Co. which were received from the United Supply Co. Defendants alleged: 1. 3.IV. Inc. III. Exhibit A. orders were sent to said concern for potash. even approximately. Inc. of Berlin. Inc. Wherefore. 2.. upon which the said Menzi & Co.. which the latter has refused to permit notwithstanding the demand made for the purpose by the auditors and the lawyers of the plaintiff.C. but due allowance has now been given to the department for such item. amounts to P127..32 for the propaganda work which it did for said firm in the Philippine Islands. of Hamburg.. Inc. which through oversight. did have during the period of said agreement.. and then sold by Menzi & Co. the plaintiff estimates that this 5 per cent commission collected by the defendant Menzi Co.M. thereby appropriating to itself the profits obtained from such resale.. amounting in all to P2.C. Inc. Menzi and P. That the defendant Menzi Co. Inc.. in collusion with and through the defendants J. that said commissioners were not in any sense discounts on the purchase price of said potash. Inc.. to make a sworn statement as to all the profits received from the sale to third persons of the fertilizers pertaining to the partnership. in the total of sum $66. by virtue of which said Menzi & Co. II. That the defendant. That in going over the books of Menzi Co. after both parties have adduced their evidence upon the point. were not credited on the books of the fertilizer department of Menzi & Co..375. Wherefore. Schlobohm and their assistants. 3 and 4. of the first cause of action. to third persons. was to receive for its propaganda work in advertising and bringing about sales of its potash a commission of 5 per cent on all orders of potash received by it from the Philippine Islands. by merely examining the partnership books. Andre & Co. has tampered with the books of the business making fictitious transfers in favor of the defendant Menzi & Co. That taking as basis the amount of the purchases of some fertilizing material made by the partnership during the first four years of the contract Exhibit A. 2. which is a manufacturer of potash. Menzi and P. That it is impossible to ascertain the amount of the fraud suffered by the plaintiff in this respect as the real amount obtained from such sales can only be ascertained from the examination of the private books of the defendant entity.. received a 5 per cent commission.. Inc.. IV and V... of the special defense to the first cause of action in this amended answer. to the damage and prejudice of the plaintiff. it has been found that there are only two items of commissions.51. and have no relation to the fertilizer business of which the plaintiff was to receive a share of the net profits for his services. the plaintiff prays the court to order the defendants J.M. Exhibit A. or the exact amount owed upon this ground.581. of merchandise belonging to the partnership.

Inc. and V of the first cause of action. C. Inc. III.M.. Menzi & Co.. Inc. for rebates upon freight.. Exhibit A. Defendant alleged: 1. That during the period of said employment agreement... Inc. some of which were not entirely thus spent and were later credited by the selling firms to the defendant Menzi & Co. That they repeat and make a part of this special defense paragraphs 1. SEVENTH CAUSE OF ACTION As seventh cause of action. charged in the invoice but not all expended. III. besides the cost price of the merchandise. Inc. duty. of the special defense to the first cause of action in this amended answer: 2. V. through and in collusion with the defendants J. of Hamburg.C. IV. to make a sworn statement as to the total amount of such rebates. Wherefore. That said defendant Menzi & Co.. which the latter has refused to permit notwithstanding the demand to this effect made upon them by the auditors and the lawyers of the plaintiff. ordering them jointly and severally to pay 35 per cent of the net amount. That in the paid invoices for such purchases there are charged. of which the plaintiff was to receive a share of the net profits as a part of his compensation. Menzi and P. the defendant. Menzi & Co. 2. thereby defrauding the plaintiff of 35 per cent of the value of such reductions. insurance. by way of refunds of CASES – partnership Page 10 of 63 . Schlobohm.M. other amounts for freight. had the right to import into the Philippine Islands in the course of its fertilizer business and sell fro its exclusive account and benefit simple fertilizer ingredients. that the only materials imported by it and sold during the period of said agreement were simple fertilizer ingredients. which had nothing whatever to do with the business of mixed fertilizers. Schlobohm upon receipt of the credit notes remitted by the selling firms of fertilizing material. That the total amount. Exhibit A. Andre & Co. II. That during the existence of the contract Exhibit A. That under the express terms of the employment agreement. received from its agent. Defendants alleged: 1. II. Inc. That he hereby reproduces paragraphs I. but entered or had them entered to the credit on Menzi & Co. Inc.. the plaintiff prays the court to order the defendants J... insurance.. purchased from a several foreign firms various simple fertilizing material for the use of the partnership.. plaintiff alleged: I.C. with legal interest from the filing of the original complaint until the payment thereof. and with the latter's money. 2. the defendant Menzi & Co. for the account of the partnership constituted between itself and the plaintiff.profits they have appropriated. etc.. Menzi and P. IV. etc. and to sentence the defendants to pay the plaintiff jointly and severally 35 per cent of the net amount. 3 and 4.. That they repeat and make a part of this special defense paragraphs 1. certain credits pertaining to the fertilizer business in the profits of which the plaintiff was interested.. of the special defense to the first cause of action in this amended answer: 2. did not enter them upon the books to the credit of the partnership constituted between the defendant and the plaintiff... duty. 3 and 4. the defendant. or even the approximate amount of this fraud cannot be ascertained without an examination of the private books of Menzi & Co.

That the proposed balance submitted to the plaintiff with reference to the partnership operations during the last four months of its existence.. and was to be manufactured and delivered in December.54. at the rate of P111 per ton. of the special defense to the first cause of action in this amended answer. o. from January 1... the defendant Menzi & Co. 1927. 1927. from the Compañia General de Tabacos Filipinas on April 21. March. 1927 to April 27. i. received by Menzi & Co. Bais.22 was credited to said department. VI. acting as manager of the fertilizer business constituted between said defendant and the plaintiff. for which reason such proposed balance did not represent the true status of the business of the partnership on April 30. notwithstanding the fact that this contract was negotiated during the existence of the partnership. 1927. III. on April 27. before the expiration of the contract Exhibit A of the complaint. 1928.402. 2. Defendants alleged: 1. which the plaintiff estimates at P90. was the manager thereof. the defendants have not rendered a true accounting of the profits obtained by the business during the last four months thereof. 1927. belongs to the fertilizer business constituted between the plaintiff and the defendant. was likewise incorrect. according to information received by the plaintiff. in the total sum of P1. That the defendant entity now contends that the contract entered into with the Compañia General de Tabacos de Filipinas belongs to it exclusively. Inc. II.500. February. plaintiff alleged: I. Inc. 2. III. b. and while the defendant Menzi & Co. 1927. that all of department as received.000 tons of mixed fertilizer. II. to be delivered. V. e.. That both the contract mentioned above and the benefits derived therefrom. inasmuch as it did not include the profit realized or to be realized from the contract entered into with the Compañia General de Tabacos de Filipinas. was taken by it in the regular course of its fertilizer business. and to sentence them likewise to pay the plaintiff 35 per cent of the net profits. the plaintiff prays the honorable court to order the defendants to render a true and detailed account of the business during the last four months of the existence of the partnership. which does not pertain to said business in the profits of which the plaintiff is interested. Philippine currency. That notwithstanding the expiration of the partnership contract Exhibit A. IV. EIGHT CAUSE OF ACTION A eighth cause of action. f.German Export Taxes. that is. 3 and 4. and up to April.. That they repeat and make a part of this special defense paragraphs 1. 1927. and January.000.. That the said order for 3. IV and V of the first cause of action. Oriental Negros. but it has just recently been discovered that through error an additional sum of P216. that the employment agreement of the plaintiff CASES – partnership Page 11 of 63 . 1928. 1927. That on or about April 21. belongs to said plaintiff. entered into a contract with the Compañia General de Tabacos de Filipinas for the sale of said entity of three thousand tons of fertilizers of the trade mark "Corona No. Wherefore. transportation equipment. or P31.. 1". and April. and refuses to give the plaintiff his share consisting in 35 per cent of the profits produced thereby. as they were delivered. That he hereby reproduces paragraphs I. Inc. and the value of the trade marks. during the months of November and December. of which 35 per cent. as the purposed balance submitted to the plaintiff was incorrect with regard to the inventory of merchandise.

Menzi and P.000. 1". "ARADO". and he cannot possibly have any interest in the fertilizers manufactured and delivered by the said Menzi & Co. VI. without having rendered a monthly account of the state of the liquidation.C.000. That the true value of the transportation equipment and machinery employed in the preparation of the fertilizers amounts of P20. Philippine currency. the plaintiff prays the Honorable Court: 1. by virtue of which the defendant is bound to pay the plaintiff 35 per cent of the value of said property. after the expiration of his contract for any service rendered to it.000. CASES – partnership Page 12 of 63 . have succeeded in making the fertilizing business a prosperous concern to such an extent that the profits obtained from the business during the five years it has existed. That the plaintiff and the defendant.000. know whether the liquidation of the business has been finished. That the damages sustained by the plaintiff. as well as the amount of his share in the remaining property of the plaintiff. II.. the plaintiff and the defendant having by their efforts succeeded in making them favorably known in the market. transportation equipment and machinery. but said defendants has ignored such demands. To order the defendants J. Menzi and P. II. has assumed the charge of liquidating the fertilizing business. until it is finished. the partnership constituted thereby registered in the Bureau of Commerce and Industry the trade marks "CORONA NO.000. 1927. of which sum 35 per cent belongs to the plaintiff.. C. 35 per cent of which amount to P7. from April 28. so that the plaintiff does not. the defendant continued to use for its own benefit the good-will and trade marks belonging to the partnership. That after the contract Exhibit A had expired. ordering all the defendants to pay the plaintiff jointly and severally 35 per cent of the net amount. That during the period of the contract Exhibit A.000. III. plaintiff alleged: I. as required by law. Schlobohm to render a true and detailed account of the status of business in liquidation. IX. the defendant entity. that is. trademarks. thereby indicating its intention to retain such goodwill. Inc. after the expiration of the partnership contract. IV. and he has not been in any way in the service of the defendant. CORONA NO. VIII. That the plaintiff has repeatedly demanded that the defendant entity render a true and detailed account of the state of the liquidation of the partnership business. 1927.. and V of the first cause of action.M. and "HOZ". laboring jointly. Menzi & Co. IV. V. Inc. That the value of the good will and the trademarks of a business of this nature amounts to at least P1. 2". III. notwithstanding and in spite of the plaintiff's insistent opposition. P350.expired by its own terms on April 27. M. or. That he hereby reproduces paragraphs I. Schlobohm to declare under oath and explain to the court in detail the sums obtained from the sale of the remaining merchandise.. That at the time of the expiration of the contract Exhibit A. and this date.000. as well as its transportation equipment and other machinery. Wherefore. for the manufacture of fertilizers. and may only be truly and correctly ascertained by compelling the defendants J. VII. or what the status of it is at present. NINTH CAUSE OF ACTION As ninth cause of action. thereby causing the plaintiff damages. since that time. amount to approximately P1.

belonged to and have been used by the said Menzi & Co. to pay the plaintiff the sum of P6...821. (i) Ordering the defendant Menzi & Co. 2. evidenced by Exhibit A.. of the special defense to the first cause of action in this amended answer. 3 and 4.. Inc. was constructed by it. and the plaintiff can have no interest therein of any nature under his said employment agreement. That the good-will.578. let judgment be entered: (a) Holding that the contract entered into by the parties.41. upon the fourth cause of action... in its fertilizer business from and since its organization. that the trade-marks mentioned by the plaintiff in his amended complaint. as a contract of general regular commercial partnership. wherein Menzi & Co. the industrial partner. until paid. pertains exclusively to it. that the transportation equipment pertains to the fertilizer department of Menzi & Co. of said fertilizer business of the defendant. with legal interest from the date of the filing of the original until paid. 3.. and further.000 which is 35 per cent of the value of the transportation equipment and machinery of the business.. To order the defendants to pay the costs of this trial. Defendants alleged: 1....000 was collected from the Insurance Company. The dispositive part of the decision of the trial court is as follows: Wherefore. due and reasonable compensation for its use has been allowed to said business. 1929..000. to grant any other remedy that this Honorable Court may deem just and equitable.2. and the plaintiff can have no rights to or interest therein under his said employment agreement. 1926. (b) Holding the plaintiff. upon the eighth cause of action. as a part of such good-will. (f ) Dismissing the fifth cause of action. in its own business. and 4. Inc. is not estopped from questioning the statements of the accounts therein contained. and whenever it has been used by the said Menzi & Co. Inc. Inc. and the plaintiff has been given credit for 35 per cent of that amount.385. To order the defendants to pay the plaintiff jointly and severally the amount of P7..38 with legal interest from January 1.. To order the defendants to pay the plaintiff jointly and severally the amount of P350. 2. by the mere fact of having signed and approved the balance sheets.. (h) Dismissing the seventh cause of action... (c) Ordering Menzi & Co. Exhibits C to C-8. (g) Dismissing the sixth cause of action. to pay the plaintiff the sum of P 60. and the plaintiff has no right to have it taken into consideration in arriving at the net profits due to him under his said employment agreement. Inc. CASES – partnership Page 13 of 63 . Inc. was the capitalist. and the plaintiff. which is 35 per cent of the value of the goodwill and the trade marks of the fertilizer business. and the value thereof in the sum of P20. (e) Ordering Menzi & Co. That they repeat and make a part of this special defense paragraphs 1. if any. Menzi & Co. Inc. that the present machinery used by Menzi & Co. Inc.67 with legal interest from the date of the filing of the original complaint until paid. and the costs thereof was not charged to the fertilizer department. Inc. the date of the liquidation of the fertilizer business.. to pay the plaintiff the sum of P3. (d) Dismissing the third cause of action. that the machinery pertaining to the said fertilizer business was destroyed by fire in October. upon the second ground of action.

1927. and in disallowing the item of P2.918. was entitled to 35 per cent of such CASES – partnership Page 14 of 63 .. the plaintiff is now estopped from raising any question as to the nature of said contract or the propriety of such charges. C. Inc. corresponds to the plaintiff. Menzi and P. Schlobohm. Exhibit A was daring the whole period thereof considered by the parties and performed by them as a contract of employment in relation to the fertilizer business of the defendant. Menzi & Co. 1929. to pay the plaintiff 35 per cent of the net balance shown in Exhibits 51 and 51-A. or the sum of P3.. Menzi & Co. IV. Francisco Bastida. The trial court erred in finding and holding that the contract Exhibit A constitutes a regular collective commercial co-partnership between the defendant corporation. and (n) Menzi & Co. in connection with the final liquidation set in Exhibit 52 and 52-A. 1928.530. and that the plaintiff.. and that the accounts of said business were kept by the defendant.358. upon the ninth cause of action to pay the plaintiff the sum of P196. M. shall pay the costs of the trial. local drafts. (m) Dismissing the case with reference to the other defendants. until fully paid. and not a contract of employment. 1925 and 1926.20 with legal interest from the date of the filing of the original complaint until paid.795. or the sum of P60.. the date upon which the liquidation of said business was terminated. 1929. Menzi & Co. and that the plaintiff is entitled to 35 per cent thereof. (k) Ordering the said defendant corporation. and that 35 per cent thereof. III.(j ) Ordering Menzi & Co. is entitled to 35 per cent of the net profits in the sum of P18..463. on that theory with the knowledge and consent of the plaintiff. Inc. after deducting the item of P2. and that each year said balance sheet and profit and loss statement were examined. The trial court erred in refusing to find and hold under the evidence in this case that the contract.. VI. from its contract with the Compañia General de Tabacos de Filipinas. Inc. Inc. Francisco Bastida. had wrongfully charged to the fertilizer business in question the sum of P10. to pay the plaintiff the sum of P17.33 as income taxes for the years 1923.67. foreign drafts.. 1927 to December 31. J. Inc. Francisco Bastida.. The trial court erred in finding and holding that the value of the good-will of the fertilizer business in question was P562. 1924.38. II. with legal interest thereon from January 1.. with legal interest thereon from the date of filing his complaint. and the plaintiff. Inc.49. Inc.410 charged as income tax in the liquidation in Exhibits 51 and 51 A for the period from January 1 to April 27.821. approved and signed by said contract in accordance therewith with full knowledge of the manner in which said business was conducted and the charges for interest and income taxes made against the same and that by reason of such facts. The appellant makes the following assignment of error: I..33 as income taxes partners' balances. had wrongfully charged to the fertilizer business in question the sum of P10.41. with legal interest thereon from the date of filing his complaint. and on other credit balances in the sum of P172. The trial court erred finding and holding that the defendant. and any other sum charged for interest under the entry "Purchases". The trial court erred in finding and holding that the plaintiff. in view of the plaintiff's share of the profits of the business accruing from January 1.709.. The trial court erred in finding and holding that the defendant. or the sum of P6.54 with legal interest from January 1. Menzi & Co. and that at the end of each year for five years a balance sheet and profit and loss statement of said business were prepared from the books of account of said business on the same theory and submitted to the plaintiff.918... Menzi & Co. V.. (l) Ordering the defendant corporation.578.312.410 for income tax.38 received by the defendant.

Plaintiff assigned to Menzi & Co. Inc. his contract with the Sugar Centrals Agency. for the sum of P6... Inc. and in not approving the final liquidation of said business.M. who had had some experience in mixing and selling fertilizer. accepted plaintiff's offer. with legal interest thereon from the date of filing the complaint. with the costs against the plaintiff. The amount paid for interest was charged against the department concerned.. including fertilizers and fertilizer ingredients. and after that as a separate department. as true and correct.250 tons of mixed fertilizers. and told him that he had a written contract with the Philippine Sugar Centrals Agency for 1. or the sum of P196. his contract with the Philippine Sugar Centrals Agency and to supervise the mixing of the fertilizer and to obtain other orders for fifty per cent of the net profits that Menzi & Co.. had owned and carried on this fertilizer business from 1910 until that firm was taken over the Alien Property Custodian in 1917. (c) on the eight cause of action. and other assets of the old German firm of Behn..20. J. and the trade mark "CORONA" had been used in its other business. the good-will. and (e) for the costs of the action. Meyer & Co. (b) on the fourth cause of action... It appears from the evidence that the defendants corporation was organized in 1921 for purpose of importing and selling general merchandise. The trial court erred in rendering judgment in favor of the plaintiff and against defendant. and (d) on the ninth cause of action. Ltd. 10 de enero de 1922 CASES – partnership Page 15 of 63 . the plaintiff. for the sum of P60... with legal interest thereon from January 1. and that he could obtain other contracts. Meyer & Co. On January 10. Exhibits 51 and 51-A and 52 and 52-A...385. The business of Menzi & Co... Inc..709. 1923. It appears through John Bordman and the Menzi-Bordman Co. Inc. with legal interest thereon from the date of filing his complaint. Exhibit B: MANILA. The trial court erred in overruling the defendants' motion for a new trial. was divided into several different departments. Menzi & Co.38. each of which was in charge of a manager. and the defendant corporation proceeded to fill the order.. Behn. for the sum of P3. Ltd. with legal interest thereon from the date of filing the original complaint. Menzi.. in the continuation of the fertilizer business that had belonged to Behn. The practice of the corporation was to debit or credit each department with interest at the bank rate on its daily balance. Meyer & Co.valuation. "HOZ". including one from the Calamba Sugar Estates for 450 tons. The trade marks "ARADO" and "HOZ" had been used by Behn.20. 1929. in the sale of its mixed fertilizers. VII. Inc. The corporation had to borrow money or obtain credits from time to time and to pay interest thereon. The fertilizer business of Menzi & Co.. was carried on in accordance with this practice under the "Sundries Department" until July. Plaintiff supervised the mixing of the fertilizer. business. Inc. Meyer & Co. Among the trade-marks thus acquired by the appellant were those known as the "ARADO". with legal interest thereon from the date of filing the complaint. and the interest charges were taken into account in determining the net profits of each department.. 1921.41. In November. and entering judgment against said defendant only for the amounts admitted therein as due the plaintiff with legal interest. might derive therefrom..67. who received a fixed salary and a percentage of the profits. including its fertilizer business with its stocks and trade-marks. He offered to assign to Menzi & Co. but the he did not have the money to buy the ingredients to fill the order and carry on the on the business.. (a) on the second cause of action. VIII. the general manager of Menzi & Co.821. went to see Toehl. for the sum of P196.. trade-marks. 1922 the defendant corporation at plaintiff's request gave him the following letter.578. Ltd. and "CORONA". They were registered in the Bureau of Commerce and Industry in the name of Menzi & Co. the manager of the sundries department of Menzi & Co.709. Ltd. The "HOZ" trade-mark was used by John Bordman and the Menzi-Bordman Co.

paying the salaries of his employees. had only one bank account for its whole business. and interest at the rate charged by the Bank of the Philippine Islands was debited or credited to that account on the daily balances of the fertilizer business.. the defendant corporation April 27. TOEHL Menzi & Co. asi como de cuantos contratos se cierren con definitiva de nuestro contrato mutuo. Exhibit B. Menzi & Co.. Inc. which is the basis of the present action. advanced the plaintiff.. lo que hacemos para garantia y seguridad de Vd. Inc. NUESTRO: Interin formalizamos el contrato que.) y del contrato con la Calamba Sugar Estates. The intervention of the plaintiff was limited to supervising the mixing of the fertilizers in Menzi & Co. Inc. It ordered ingredients from the United States and other countries.. 1922 the net profits of the business carried on under the oral agreement were determined by Menzi & Co.. bodegas. These statements were delivered to the plaintiff for examination. to which the plaintiff assented. and other expenses in performing his contract. The fertilizer business was carried on by Menzi & Co. MENZI & CO. Menzi & Co. between January 19 and April 1... Inc. continued to carry on its fertilizer business under this arrangement with the plaintiff. 1922 under its "CORONA" brand. This contract is rendered to in the record as the "Vastago Contract". in which the plaintiff was interested. They were not changed to the fertilizer business. Inc.. confirmed by the letter.. por la presente venimos en confirmar su derecho de 50 por ciento de las untilidades que se deriven del contrato obtenido por Vd. after deducting interest charges. and the fees were paid by that company..'s. Inc. and the plaintiff was paid some twenty thousand pesos in full satisfaction of his share of the profits. Plaintiff collected from Menzi Co. Inc.. 1927. Inc. and the interest on the drafts for the purchase of these materials was changed to the business as a part of the cost of the materials. Inc. to furnish it all the stems and scraps to tobacco that it might need for its fertilizer business either in the Philippine Islands or for export to other countries. Pursuant to the aforementioned verbal agreement. 1922 entered a written contract with the plaintiff.... Inc. and the total amount thereof was credited to this business in the final liquidation on April 27. On May 3. This was in accordance with appellant's established practice. and after he had had an opportunity of verifying them he approved them without objection and returned them to Menzi & Co. The trade-marks used in the sale of the fertilizer were registered in the Bureau of Commerce & Industry in the name of Menzi & Co.) W... de la Philippine Sugar Centrals (por 1250 tonel. A fertilizer account was opened in the general ledger.. Inc.. certified public accountants. tenemos convenido para la explotacion del negocio de abono y fertilizantes. 1924 the plaintiff made a contract with Menzi & Co. as his share or 35 per cent of the net profits of the fertilizer business the following amounts: CASES – partnership Page 16 of 63 ... every month.. Inc. The mixed fertilizers were sold by Menzi & Co. On or about April 24. FRANCISCO BASTIDA Manila MUY SR. after the execution of Exhibit A in practically the same manner as it was prior thereto. Por (Fdo. Only the fees for registering the formulas in the Bureau of Science were charged to the fertilizer business. proportional part of warehouse rent and salaries and wages. Page & Co. The fertilizer business had no separate capital...Sr.. White. en principio. lo que formalizacion definitiva de nuestro contrato mutuo. and at the end of each year they prepared a balance sheet and a profit and loss statement of the fertilizer business. and the other expenses of said business. marked Exhibit A. audited the books of Menzi & Co.

. . . The old stocks were taken over by Menzi & Co. .20.. . 1927. . . Inc.. .62 1924 .483. . . He naturally reached very different conclusions from those of the auditors of Menzi Co.766. . . .. . . . . collect the outstanding accounts for Menzi & Co. Inc. P196. Plaintiff never made any objection to defendant's manner of keeping the accounts or to the charges. . . the fertilizer department of Menzi & Co. . . . the manager of Menzi & Co. . 1927.000. was obliged to furnish free of charge all the capital the partnership should need. . notified the plaintiff that the contract for his services would not be renewed. . 30. . . Vernon Thompson. There were claims outstanding and bills to pay. . prepared a balance sheet and a profit and loss statement for the period from January 1 to April 27. . .. Inc.212. . be sold at public or private sale. . but the plaintiff refused to accept it. The plaintiff refused to agree to this. ..874. . . Inc.. . After making the corrections they found the balance due the plaintiff to be P21.03 1926 . Plaintiff was paid his share of the profits from those transactions after Menzi & Co. . P1. Thompson assumed the plaintiff and Menzi & Co.. certain errors of bookkeeping were discovered by them. When plaintiff's contract expired on April 27. .92 applied to the trial court for an order for the sale of the remaining property at public auction. . . . Inc.. 1927 it proposed to the plaintiff that the old and damaged stocks on hand having a book value of P40. .73 1923 . we are unanimously of the opinion that under the facts of this case the relationship established between Menzi & Co. whereby the plaintiff worked for the defendant corporation for onehalf of the net profits derived by the corporation from certain fertilizer contracts. . . The defendant corporation then . . .. . it was necessary to dispose of the materials and equipment. . . . 27. Exhibit A. and by the plaintiff was to receive 35 per cent of the net profits of the fertilizer business of Menzi & Co. . as appears from the statement of facts. . . . .56 1925 . was in effect a continuation of the verbal agreement between the parties. . and the final liquidation of the fertilizer business was completed in December. Exhibit A. . . . . 101. .. . . . On the contrary he approved and signed every year the CASES – partnership Page 17 of 63 To this amount must be added plaintiff's share of the net profits from January 1 to April 27. ..000. Page & Co. . . had on hand materials and ingredients and two Ford trucks of the book value of approximately P75. 1927 as a basis of settlement. . . to be partners... . The business was continued in the same manner under the written agreement.081. . in compensation for his services of supervising the mixing of the fertilizers.250. Inc.. . amounting to P34.98 Total .. . .. In October. . Before the net profits could be finally determined. . Inc. . . 1928 and a final balance sheet and a profit and loss statement were submitted to the plaintiff during the trial. . or divided between the parties. Inc. . After considering the evidence and the arguments of counsel. Inc. . . and accounts receivable amounting to P103. . . to examine the books and vouchers of Menzi & Co. .000. had deducted the same items of expense which he now protests. . .649. . 35. We come now to a consideration of appellant's assignment of error. . . . . . . .. . .1922 .79. . and filed the present action.633. and that Menzi & Co. . which the defendant corporation had been unable to dispose of. .. Neither the provisions of the contract nor the conduct of the parties prior or subsequent to its execution justified the finding that it was a contract of co-partnership. then proceeded to liquidate fertilizer business in question.87.. Inc. . During the liquidation the books of Menzi & Co.665. Plaintiff employed a certified public accountant. .. . . . . Inc. . but apparently the court did not act on the petition. Prior to the expiration of the contract. Menzi & Co. . for the whole period of the contract in question were reaudited by White. . . . .. Exhibit A. . . . . . making a total of P231. and for four years the plaintiff never made any objection. .. .

Inc... but in such case the original pleadings can have no effect. Inc. shall be commercial. (Mechem. Inc. that is. sec. as the owners of the fertilizer business in question. We merely wish to add that in the Vastago contract. whereby the defendant corporation obligated itself to pay to the plaintiff 35 per cent of the net profits of the fertilizer business. Lucido vs. Various other reasons for holding that the parties were not partners are advanced in appellant's brief.) In the second place. it did not obligate itself to contribute any fixed sum as capital or to defray at its own expense the cost of securing the necessary credit. or any of these things. The trial judge concluded that the phrase "associated with". 27 Phil. It will be noted that no provision was made for reimbursing Menzi & Co.. to advance to him P300 a month on account of his share of the profits. in order to obtain profit. 273. The business belonged to Menzi & Co. The plaintiff was working for Menzi & Co. The 7th. "Where amended pleadings have been filed. and 9th paragraphs of Exhibit A. p. in case there should be no net profits at the end of the year. was to advanced him P300 a month on account of his participation in the profits. and to grant him permission during 1923 to absent himself from the Philippines for not more than one year are utterly incompatible with the claim that it was the intention of the parties to form a copartnership. unless formally offered in evidence. Calupitan. the complaint and answer having been superseded by the amended complaint and the answer thereto.. The trial court relied on article 116 of the Code of Commerce. As to the various items of the expense rejected by the trial judge. which provides that articles of association by which two or more persons obligate themselves to place in a common fund any property." (Jones on Evidence.. a fund belonging to the parties as joint owners or partners.. Inc. used by the defendant corporation. The fact is that en sociedad con as there used merely means en reunion con or in association with. no matter what its class may be.balance sheet and the profit and loss statement. he was to receive 35 per cent of the net profits as compensation for his services.. and the answer to the original complaint not having been presented in evidence as an exhibit. We do not deem it necessary to discuss them here. the trial court was not authorized to take it into account. although the word "associated" may be related etymologically to the Spanish word "socio". and this would true even if the parties had been partners. 148. Menzi & Co. Although Menzi & Co. allegations in the original pleadings are held admissible. and does not carry the meaning of "in partnership with". but in the case at bar there was no common fund. 89.. It is now well settled that the old rule that sharing profits as profits made one a partner is overthrown.. Some of the contentions of the plaintiff and his expert witness Thompson are so obviously without merit as not to merit serious CASES – partnership Page 18 of 63 . meaning partner. provided it has been established in accordance with the provisions of this Code.. Inc. The trial judge found that the defendant corporation had not always regarded the contract in question as an employment agreement. 8th. It was only when plaintiff's contract was about to expire and the defendant corporation had notified him that it would not renew it that the plaintiff began to make objections. Exhibit A. it does not in its common acceptation imply any partnership relation. they were in our opinion proper charges and erroneously disallowed.) It is nowhere stated in Exhibit A that the parties were establishing a partnership or intended to become partners. Great stress in laid by the trial judge and plaintiff's attorneys on the fact that in the sixth paragraph of Exhibit A the phrase "en sociedad con" is used in providing that defendant corporation not engage in the business of prepared fertilizers except in association with the plaintiff ( en sociedad con). because in its answer to the original complaint it stated that before the expiration of Exhibit A it notified the plaintiff that it would not continue associated with him in said business. as an agreement of co-partnership. the plaintiff clearly recognized Menzi & Co. second edition. Inc.. indicated that it regarded the contract. In the first place. Exhibit A. agreed to furnish the necessary financial aid for the fertilizer business. industry. Instead of receiving a fixed salary or a fixed salary and a small percentage of the net profits.

and that the plaintiff was not prejudiced by the practice complained of. ID.. Their contention is that the corporation should have furnished the money to purchase these materials for cash.. Inc. 2. ILLUSTRATION. being aware at the time of the execution thereof that the other placed a certain interpretation upon a provision of doubtful application. This finding in our opinion is not justified by the evidence.. ACQUIESCENCE.. and that the plaintiff was entitled to 35 per cent thereof or P196. without raising any question upon the point. — One of the parties to a contract. The decision of this court in the case of Kriedt vs. upon the termination of which the parties made a settlement.20. plaintiff had ceased to work for Menzi & Co. plaintiff's agreement was for a fixed period... In reaching this conclusion the trial court unfortunately relied on the opinion of the accountant. ID. ACTION OF PARTIES UNDER PRIOR CONTRACT. and in CASES – partnership Page 19 of 63 .709.C... that the defendant corporation should have furnished free of charge such financial assistance as would have made it unnecessary to discount customers' notes. the charges in question were acquiesced in by the plaintiff for years. shortly before plaintiff's contract with the defendant corporation expired. This contract was obtained by Menzi & Co. erroneously as we have seen.consideration. The trial court held that the plaintiff was entitled to P6. nevertheless proceeded. Inc. Held: That the party raising such question had acquiesced in the interpretation placed upon the contract by the other party and was bound thereby. 3. and he has no right to participate in the profits derived therefrom. CONTEMPORANEOUS ACTS OF PARTIES. It was also urged. ID. Held: That this action of the parties under the prior contract could properly be considered upon the question of the interpretation of the same clause in the later contract. upon the termination of said contract. Vernon Thompson. Plaintiff tried to get the Tabacalera contract for himself.. is in point. For instance. the defendant corporation should have enabled the fertilizer department to do business on a credit instead of a cash basis. as being their own contemporaneous interpretation of its terms. they objected to the interest charges on draft for materials purchased abroad. 4. Inc.. Upon the termination of the contract by mutual consent a question was raised as to the proper interpretation of the doubtful provision.312.. the party so acquiescing is bound by such interpretation. — Where one of the parties to a contract acquiesces in the interpretation placed by the other upon a provision of doubtful application. to perform the services which he was bound to render under the contract.. adjusted their rights and made a settlement in which the doubtful clause had been given effect in conformity with the interpretation placed thereon by one of the parties. that the plaintiff and Menzi & Co. (37 Phil. Inc. are the same as those made under the verbal agreement.. but even if they had been partners there would have been no good-will to dispose of. who assumed. A portion of the syllabus of that case reads as follows: 1.. CONTRACTS. The charges now complained of. 474). ID. ID. and it is now too late for him to contest them.578. from its contract for fertilizers with the Tabacalera. five years. as we have already stated. The defendant corporation had a fertilizer business before it entered into any agreement with the plaintiff.38 or 35 per cent of the net profits derived by Menzi & Co. and this seems to us the height of absurdity. In other words. were partners. E. ID.. and during that time the business was carried on in the name of Menzi & Co. Appellant's sixth assignment of error is that the trial court erred in finding the value of the good-will of the fertilizer business in question to be P562. thereby enabling the business to reap the interest. When this contract was filled. — Acts done by the parties to a contract in the course of its performance are admissible in evidence upon the question of its meaning. INTERPRETATION. — In an action upon a contract containing a provision a doubtful application it appeared that under a similar prior contract the parties had. Inc. McCullough & Co. overlooking the fact that the interest was added to the cost price.

Perkins and Kincaid. continued its fertilizer business.Arellano Law Foundation Republic of the Philippines SUPREME COURT Manila EN BANC G. — VILLAMOR.. six hundred and thirty-three pesos and twenty centavos (P21. the decision appealed from is modified and the defendant corporation is sentenced to pay the plaintiff twenty-one thousand. as it had a perfect right to do. but on account of his absence on leave at the time of the promulgation of the decision he authorized the undersigned to certify that he voted to modify the decision of the trial court as appears in the foregoing decision of this court. The Lawphil Project . These trade-marks remained the exclusive property of Menzi & Co. VITALIANA BELISARIO. Street.20. under Act No. OSTRAND. and were registered in its name. a large number of opponents presented themselves but only two of them. Justice Hull participated in this case. 1922 BASILIO BORJA. No.633.Menzi & Co. Alejo Mabanag for Adelina Ferrer and sons as appellants. That seems to be the only basis of the alleged good-will. The parcels are situated in the barrio of San Francisco. and C. Kincaid. Inc. however. ADELINA FERRER. L-18010 June 21.. petitioner-appellee.. We are satisfied by the evidence that said balance is correct.'s warehouses and after the expiration of plaintiff's contract Menzi & Co. For the foregoing reasons.20). Inc. At the trial of the case. Meyer & Co. Rheberg for Peter W. vs. P. They had been used by Behn. J. and Aureno. ADDISON. concur..: This is an appeal from a decision of the Court of First Instance of Pangasinan ordering the registration. Addison and Adelina Ferrer have appealed. and Villa-Real. Eugenio. Plaintiff maintains. the trade. P.marks were not new. 1927. The latter appears for herself and her three children. that the trade-marks used in the fertilizer business during the time that he was connected with it acquired great value. and that they have been appropriated by the appellant to its own use. Pangasinan. Villamor.R. Addison as appellant. only the expense of registering the formulas in the Bureau of Science was charged to the business in which the plaintiff was interested. with legal interest thereon from the date of the filing of the complaint on June 17. There was really nothing to which any good-will could attach. is P21. without a special finding as to costs. Turner. As we have seen. as appears from Exhibit 52. municipality of Umingan. instituted in accordance with the CASES – partnership Page 20 of 63 .. objectors-appellants. W. and AURENO BELISARIO. to which a fabulous valuation was given. The evidence established the following facts: (1) That one Eulalio Belisario acquired the two parcels of land in question through information posesoria proceedings. and contain a total of over 326 hectares. JJ. W. Vitaliana. G. They belonged to Menzi & Co. J.633. E.. Presiding.. of two parcels of land in the name of the petitioner Basilio Borja. and the plaintiff had no interest therein on the expiration of his contract. The balance due the plaintiff. W. EUGENIO BELISARIO. 496. in its business for other goods and one of them for fertilizer.

belonging to Eulalio Belisario and upon all right. was sold by the sheriff at public auction to the judgment creditor C. represented by P. 1916. the deputy provincial sheriff presented the said order and notice of attachment to the register of deeds for record. (4) That after the death of the said Paula Ira. the attached lands. reserving the right to repurchase the lands for the sum of P550 within the term of five months and two days from the date of the sale. H. McClure. H. Addison. in the case of the Castillo vs. mentioned in paragraph (10) hereof. 335. C. According to the somewhat vague testimony of the witness Francisco Ira. 1913. 5437. Maximo Belisario and Eulalio Belisario. 1916. pursuant to which. McClure. we sold to the judgment creditor C. (7) That on July 31. (6) That on July 5. Eulalio Belisario. 1913. H. in civil case No.provisions of articles 19-21 of the Royal Decree of February 13. 1917. C. on November 14. Belisario was married to Paula Ira when he took possession of the parcels which therefore probably were community property of the marriage. Eulalio Belisario conveyed the two parcels mentioned to one Jose Castillo. 1916. Addison. leaving as her sole heir their son Maximo Belisario. Felix Belisario and Eulalio Belisario. 5352 refers to that land inscribed in the registry of deeds as finca No. C. levy was made upon the undivided half of the two parcels of land in question. died on February 13. (10) That on September 19. an order for attachment was issued against the lands described in certain land tax declarations of which tax Nos. 454. (3) That Paula Ira. McClure vs. 89). the lands in question were forfeited to and confiscated by the Government for the non-payment of taxes. (8) That on October 14. Jose Castillo executed in favor of Eulalio Belisario a deed of resale of the two parcels of land conveyed in the sale with right to repurchase mentioned in paragraph (2) hereof. 1916. the statutory right of redemption belonging to Eulalio Belisario. but this fact does not appear from the record of the informacion posesoria proceedings or from any other document presented in evidence. and upon certain dates subsequent thereto. Belisario (35 Phil. 1894. of the land sold under execution in said case No. 1916. title. McClure. McClure vs. 1917. 1916. (2) That on December 20. No record of this sale appears to have been made in the registry of deeds. and recorded under the provision of the Mortgage Law. the judgment creditor C. 435 in the court of the justice of the peace of Dagupan. and interest which he had or might have therein. 1909. and of which tax No. (9) That on October 14. a writ of execution was issued upon final judgment of the court of the justice of the peace of Dagupan. pursuant to a writ of execution issued upon final judgment in said civil case No. (11) That on December 13. (12) That on January 11. the wife of Eulalio Belisario. pursuant to a writ of execution issued upon final judgment of the court of the justice of the peace of Dagupan. 5348. and on August 5. represented by Peter W. in civil case No. Eulalio and Maximo Belisario occupied and administered the two parcels of land in common. and 5351 refer to parts of the land inscribed in the registry of deeds as finca No. 450. 334. represented by Peter W. Addison. in conformity with a decision of the Supreme Court of the Philippine Islands. an alias writ of execution was issued in the said civil case No. in civil case No. pursuant to which on February 10. 435. H. H. 454. 1916. The sale was not recorded in the registry of deeds.. W. the aforesaid order and notice of attachment were served upon Maximo Belisario and Eulalio Belisario. purchased at execution sale the undivided half of the two parcels of CASES – partnership Page 21 of 63 . H. 1916. The record of the proceedings show that Belisario occupied and began to cultivate the smaller parcel of land in 1880 and the larger one in 1882. but no entries appear to have been made in the book of the registry. 435. McClure vs. as specified in paragraph (6) hereof . (5) That on August 25.

the affidavit of C. H. 1917. C. 1917. (13) That on January 19. Maximo Belisario and Eulalio Belisario. 1917. 1917. in conformity with instructions received from the Judge of the Fourth Sala of the Court of First Instance of the City of Manila. Eulalio Belisario executed in favor of Basilio Borja a deed of sale of the two parcels of land in question for P7. McClure vs. 1917. had or might have in and to both of the said parcels of land in their entirely (19) That on April 4. mentioned in paragraph (12) hereof. (23) That on February 16. belonging to Maximo Belisario. 1917. reserving the right to repurchase the lands for the same price within the term of eighteen months from the date thereof. Addison purchased at the sheriff's sale under the execution in civil case No. 499. levy was made upon all the remaining interest belonging to said defendants. mentioned in paragraphs (8). (18) That on March 30. Peter W. McClure for the consolidacion de dominio in civil case No. the deed of sale with right to repurchase executed by Eulalio Belisario in favor of Basilio Borja and mentioned in paragraphs (13) and (18) hereof. for record in the registry of deed. 454 was presented for record in the registry of deeds. 1919. was entered upon the day-book of the register of deed for the first time. but inscription was refused and the deed was returned on February 5. and all the rights. and 450. (17) That on March 27. 499.land in question. 499 of the court of the justice of the peace of Dagupan. with an official communication from the register of deeds to the effect that it favor of Jose Castillo. 1917. and inscribed in the registry on February 19. Peter W. the attorney for Basilio Borja transmitted to the provincial sheriff of Pangasinan the sum of P230 for the redemption of the property and interest sold under execution in civil case No. and ownership which the defendant in execution had or might have in and to both of said parcels of land in their entirely. H. Maximo Belisario and Eulalio Belisario. 454. (15) That on February 13. was reinstated in the day-book and recorded in the registry of deems. the deed of sale with right to repurchase executed by Eulalio Belisario in favor of Basilio Borja. (14) That on January 26. 1917. 1917. and (18) hereof. and all rights. this entry being cancelled on April 4. an alias writ of execution was issued in civil case No. (24) That on June 24. 1918. mentioned in paragraph (12) and (18) CASES – partnership Page 22 of 63 . 1917. This sale was duly presented for record in the registry of deed on March 1. and recorded on the 14th of the same month. 1918. interests and ownership which both of the defendants in execution. the said deed of sale with right to repurchase was presented for record in the registry of deeds. the provincial sheriff of Pangasinan signed final deeds of sale for the property and interest. 1917. was presented for record in the registry of deeds and was recorded on February 26. 499. Addison presented the certificate for the property and interest acquired at execution sale in civil case No. in and to the two parcels of lands in question. as specified in paragraph (19) and that notice of said levy was duly presented for record and entered upon the daybook of the register of deeds on March 7. (9). 1918. (22) That on February 11. 1918. pursuant to which. 1917. the deed of resale from Jose Castillo to Eulalio Belisario. 1917. 1917. the undivided half of the two parcels of land in question. had not been cancelled on the record. the document being recorded on April 18. mentioned in paragraph (2) hereof.500. 435. (20) That on November 12. mentioned in paragraph (11) hereof. title. title. (21) That on January 23. (16) That on March 5. mentioned in paragraph (13) hereof. interests. mentioned in paragraph (16) hereof. the attorney for Basilio Borja was informed by the said sheriff the redemption mentioned in the preceding paragraph would be allowed only upon the condition that the right of redemption be exercised in the execution sales in civil cases Nos. belonging to the said Eulalio Belisario.

(31) That on March 12. McClure and Peter W. H. the opponent Adelina Ferrer and three minor children. he rest his title (1) on the sales under the executions issued in cases Nos. of the two parcels of land in question. which had been forfeited to an confiscated by the Government. 450. the respective purchasers at execution sales in civil cases Nos. as mentioned in the preceding paragraph. (27) That on July 12. and recorded in the registry on March 11. 1919. in favor of C. The sheriff's sales under the execution mentioned are fatally defective for what of sufficient publication of the notice of sale. 926. 1919. H. Vitaliana. as follows: 1. and Aureno Belisario as his only heirs. be disposed of in comparatively few words. Addison for the consolidacion de dominio in civil case No. The claims of the opponent-appellant Addison have been very fully and ably argued by his counsel but may. and interest that he had in the two parcels of land in question. the affidavit of Peter W. H. for the confiscated lands mentioned in the preceding paragraph. and inscribed in the registry on March 10. the affidavit of Basilio Borja for the consolidacion de dominio was presented for record in the registry of deeds and recorded in the registry on the same date. sold under execution in civil cases Nos. he was represented by the opponent Peter W. title. C. the deeds of sale executed by the provincial sheriff of Pangasinan. in which C. McClure executed a quit-claim deed to Peter W. McClure in favor of Peter W. 454 and 499. 499 was entered upon the day-book in the registry of deeds. Addison. we think. McClure appears as the judgment creditor. in his own representation and that of C. (30) That on June 4. in favor of C. Section 454 of the Code of civil Procedure reads in part as follows: SEC. as mentioned in paragraph (5) hereof This repurchase was made under the last proviso of section 19 of Act No. 454 and 499. the provincial treasurer of Pangasinan issued a certificate of repurchase to Peter W.hereof. 454. (28) That on July 31. 1918. 435. Eugenio. were entered on the day-book of the registry of deeds. In case of perishable property. by posing written notice of the time and place of the sale in three public places of the municipality or city CASES – partnership Page 23 of 63 . As will be seen from the foregoing statement of facts. (29) That on January 21. (33) That in the execution and sales thereunder. (25) The on June 25. H. Before the sale of property on execution. the Director of Lands authorized Peter W. and 499 of the court of the justice of the peace of Dagupan with the priority of inscription of the last two sales in the registry of deeds. Addison. for all right. 1919. 1918. Addison. 1919. McClure in civil cases No. who prepared and had charge of publication of the notices of the various sales and that in none of the sales was the notice published more than twice in a newspaper. notice thereof must be given. possession was delivered by the provincial sheriff of Pangasinan to Peter W. McClure. pursuant to which the said lands were reassessed for taxation in his name. 454. H. 1918. as mentioned in paragraph (25) hereof. (32) The Maximo Belisario left a widow. Addison. Addison to repurchase the lands in question. H. and (2) on a purchase from the Director of Lands after the land in question had been forfeited to the Government for non-payment of taxes under Act No. Eulalio Belisario not having exercised his right of repurchase reserved in the sale of Basilio Borja mentioned in paragraph (13) hereof. 1918. 1791. 1919. Addison. Addison. 454. (26) That on July 3. and the quit-claim deed executed by C. 1791 and was not purchased with the formalities required for the sale of public lands by Act No.

454 there were only two publications of the notice in a newspaper. 808). the notice first published gave the date of the sale as October 15th. who also took charged of the publication of such notices. Bartolome and Germann & Co. for such time as may be reasonable.. in violation of section 457 of the Code of Civil Procedure. or his legal representative. In the last case the sale was advertised for the hours of from 8:30 in the morning until 4:30 in the afternoon. the first of which was made thirteen days before the sale. supra. . That the original owner. at CASES – partnership Page 24 of 63 . the date of the sale itself. 499. The conveyance or reconveyance of the land from the Director of Lands is equally invalid. there were also only two publications. however. Comparing the requirements of section 454. 1916. the sales must be held invalid. the provincial treasurer shall immediately notify the Director of Lands of the forfeiture and furnish him with a description of the property. 1791 pertinent to the purchase or repurchase of land confiscated for non-payment of taxes are found in section 19 of the Act and read: . considering the character and condition of the property. indefeasible title to said real property. 2. the date was changed to October 14th. the first publication being made only fourteen days before the date of the sale. . but upon discovering that October 15th was a Sunday. This must now be regarded as the settled doctrine in this jurisdiction whatever the rule may be elsewhere. The provisions of Act No. 4. for the same period. Upon the expiration of the said ninety days. the first publication was made on October 7th and the second and last on October 14th. we find that in cases Nos. it is self-evident that notices of the sales mentioned were not given as prescribed by the statute and taking into consideration that in connection with these sales the appellant Addison was either the judgment creditor or else occupied a position analogous to that of a judgment creditor. this court held that if a sheriff sells without the notice prescribe by the Code of Civil Procedure induced thereto by the judgment creditor and the purchaser at the sale is the judgment creditor. for twenty days in three public places of the municipality or city where the property is situated. if there be one. In cases of real property. 435 and 450 the hours advertised were from 9:00 in the morning until 4. by posting a similar notice particularly describing the property. In all of the cases the notices of the sale were prepared by the judgment creditor or his agent. * * * * * * * Examining the record. 435 and 450 the sales took place on October 14. In case No. and said Director of Lands shall have full control and custody thereof to lease or sell the same or any portion thereof in the same manner as other public lands are leased or sold: Provided. with what was actually done. then a like publication for a like period shall be made in one newspaper published in the Spanish language. The newspaper is a weekly periodical published every Saturday afternoon. and also where the property is to be sold. and publishing a copy thereof once a week. and in one published in the English language: Provided. In case such redemption be not made within the time above specified the Government of the Philippine Islands shall have an absolute. In the case of Campomanes vs. It appears affirmatively from the evidence in the present case that there is a newspaper published in the province where the sale in question took place and that the assessed valuation of the property disposed of at each sale exceeded P400. If there are newspaper published in the province in both the Spanish and English languages.30 in the afternoon. in some newspaper published or having general circulation in the province. shall have the right to repurchase the entire amount of his said real property. That such publication in a newspaper will not be required when the assessed valuation of the property does not exceed four hundred pesos.where the sale is to take place. In cases Nos. * * * * * * * 3. In case No. (38 Phil. The correct notice was published twice in a local newspaper. the sale is absolutely void and not title passes. if redemption be not made.

made by a husband-administrator clothed with the insignia of ownership and in whose name the property is held. the purchaser being entitled to presume that such sales or mortgages are executed for the purpose of securing money to pay community debts and that the vendor has authority to dispose of the property thus administered by him and held in his name. after the death of his spouse. the only son and heir of the spouses. it is the main supported by a line of decisions of the supreme court of Spain and until the pertinent provisions of the Civil Code are amended. not in harmony with the views of various commentators upon the Civil Code. But. 713) and Manuel and Laxamana vs. or rather community of property. therefore. are valid and effective. be brought home to third persons dealing with the surviving husband in regard to community real property in order to bind them by the community agreement. was therefore not the successor of the original owner and could only have obtained a valid conveyance of such titles as the Government might have by following the procedure prescribed by the Public Land Act for the sale of public lands. the right Maximo Belisario as the sole heir of his mother to one-half of the community property was unaffected by the sale made by his father to the petitioner Borja. 855). the surviving husband had not right to sell or otherwise dispose of more than his own undivided share of such community property and that. . in the absence of the formalities prescribed by the Code of Commerce or by articles 1667 and 1668 of the Civil Code. he acquired no rights under these sales. Maximo Belisario. There is no reason in a law why the heirs of the deceased wife may not form a partnership with the surviving husband for the management and control of the community property of the marriage and conceivably such a partnership. Nable Jose (41 Phil. either real or personal. but from our point of view is of no importance. perhaps. that this joint administration was equivalent to the formation of a new community of property between father and son and that it succeeded and extinguished the preexisting community of property between the spouses. void sheriff's or execution sales cannot be validated through inscription in the Mortgage Law registry. . knowledge of the existence of the new partnership or community of property must. The appellant Addison repurchased under the final proviso of the section quoted and was allowed to do so as the successor in interest of the original owner under the execution sale above discussed." Though this rule is. Losano (41 Phil. . As we have seen. that. She maintained that the land in question was community property of the marriage of Eulalio Belisario and Paula Ira: that upon the death of Paula Ira in 1913. sales or mortgages of community property. In the present case the land was recorded in the real property register in the name of Eulalio Belisario and there is not a scintilla of evidence to show that the petitioner herein.any time before a sale or contract of sale has been made by the director of Lands to a third party. with interest. Basilio Borja. The opposition of Adelina Ferrer must also be overruled. entered into the joint administration of the property with his father. will probably not be greatly modified by future decisions of this court. falls squarely within the rule laid down in the cases above cited and the deed from Eulalio Belisario to Basilio Borja must be held to have conveyed to the latter the whole fee of the land in question. between the heirs and the surviving husband might be formed without a written agreement. therefore. CASES – partnership Page 25 of 63 . but has acquired no title through the redemption. The case. . at least. that the special rights of the surviving husband as liquidator of the community property of the marriage thereupon also terminated.. The question of the priority of the record of the sheriff's sales over that of the sale from Belisario to Borja is extensively argued in the briefs. .. he is entitled to reimbursement for the money paid for the redemption of the land. . by paying therefore the whole sum due thereon at the time of ejectment together with a penalty of ten per centum . This court held in the cases of Nable Jose vs. had any notice of the fact that Maximo Belisario participated in the administration of the property or claimed any rights or ownership therein. that "in the absence of fraud and collusion. consequently.

Johns. J. J. Araullo.: The appellant in a motion for reconsideration ask that the court make an express pronouncement upon the question of law and fact involved in the sale of the lands in dispute made by Eulalio Belisario to Basilio Borja with special reference to the effect thereupon of the provisions of article 1927 of the Civil Code.000. SABERT. defendant-appellant. J. 1922. provided such action is commenced with the period prescribed by section 49 of the Code of Civil Procedure. 21639 September 25. plaintiff-appellee. It may be observed that such sales are not void and that until set aside in a rescissory action they are legally effective. 1924 ALBERT F.The decision appealed from is affirmed without costs. Villamor. and cannot be attacked collaterally upon the aforementioned ground in a land registration proceeding. 1917. and promulgated on June 21.. C. Sabert the sum of P20. Addison for the sums of money expended for the redemption of the land from the forfeiture for nonpayment of taxes. As so amended. It is therefore ordered that the decision herein rendered.R. the following paragraph: Let it be noted in the final decreed that the title is subject to the reservation of such right of action as P.. The registration of the land will be made subject to the lien of P. RESOLUTION September 9. Araullo. So ordered. vs. S. In justice to the appellant it may. JJ. Villamor. Yeager for appellant. Johns. and Romualdez. W. Malcolm. concur. OSTRAND. F. Alano for appellee. Addison may have to set aside the sale made by Eulalio Belisario to Basilio Borja on January 19. convey title. the decision mentioned will stand as the final judgment of this court. KIEL.Arellano Law Foundation Republic of the Philippines SUPREME COURT Manila EN BANC G. inasmuch as when the sale was made the appellant was a judgment creditor of the vendor and the sale therefore would be presumed fraudulent. J. Avanceña. The Lawphil Project . Avanceña. ESTATE OF P. concur. No. C.: This action relates to the legal right of Albert F. J. Kiel to secure from the estate of P. and Romualdez. JJ. J.. on a claim first presented to the commissioners CASES – partnership Page 26 of 63 . of the land herein described.. 1922. W. Malcolm. MALCOLM. S. however. be advisable to expressly reserve such right of a rescissory action as he may have and to have the reservation noted upon the certificate of title. S. be amended by inserting immediately after the penultimate paragraph of said section.

the findings of the trial judge. that a trust will not be created when. — These three errors discussing the same subject may be resolved together. L. Kiel subsequently took over the interest of Milfeil. Kiel worked upon and developed the plantation. Butler and Stephen Jurika with reference to alleged statements and declarations of the deceased P. (3) In finding a resulting trust in land had been established by the evidence in the case. 21045 and his purchase application No. as will soon appear. that the facts in this case could have been so presented to the court by means of allegations in the complaint. They were to share and share alike in the property. On April 10.and disallowed. (2) In finding a resulting trust in land could have been established in public lands in favor of plaintiff herein who was an alien subject at the same time said alleged resulting trust was created. claim any interest in land. By virtue of the agreement. and the record. Kiel and P. Errors 1. 5 Paige. 1918. in consideration of the sum of P1. Y. Kiel along with William Milfeil commenced to work on certain public lands situated in the municipality of Parang. with a subscribed capital of P40. including P. (6) In finding any co-partnership existed between plaintiff and the deceased Sabert. for the purpose of evading the law prohibiting one from taking or holding real property. known as Parang Plantation Company. S. Frank R. five persons. On August 16. It is conceivable. Dubois [1835]. P. to the Nituan Plantation Company. & S. Kiel appears to have tried to secure a settlement from Sabert. It seems that this partnership was formed so that the land could be acquired in the name of Sabert. At least in a letter dated June 6. In no part of the complaint did plaintiff allege any interest in land. 114. Sabert wrote Kiel that he had offered "to sell all property that I have for P40. 413. That the plaintiff did not care to press such an action is demonstrated by the relation of the fact of alienage with the rule. C.000 or take in a partner who is willing to develop the plantation.. 28 Am. 1048. Province of Cotabato. Kiel being a German citizen and not deemed eligible to acquire public lands in the Philippines. In effect. 1214-1222.. Dec. and 3. or pretend to establish a resulting trust in land. Province of Cotabato. Sabert. he was deported from the Philippines.. may be made in the following manner: In 1907. Albert F. John C. organized the Nituan Plantation Company. S. (26 R. the defendant-appellant assigns the following errors: The lower court erred — (1) In finding this was an action to establish a resulting trust in land. debt no matter which way I will straiten out with you. N. (4) In admitting the testimony of the plaintiff herein. Sabert. In this court.) CASES – partnership Page 27 of 63 . Leggett vs. embraced within his homestead application No. we reach the conclusion that both parties were in error in devoting so much time to the elaboration of these questions. In 1910. 1919. Sabert entered into an agreement to develop the Parang Plantation Company. 1922. So these proceedings against the estate of Sabert." But Sabert's death came before any amicable arrangement could be reached and before an action by Kiel against Sabert could be decided. to take up the K. then on appeal to the Court of First Instance allowed. In this same period. as to disclose characteristics of a resulting trust. (7) In rendering judgment for the plaintiff herein. relating to resulting trusts. he takes a conveyance thereof in the name of a third person. from 1910 to 1917. But the complaint as framed asks for a straight money judgment against an estate. and ultimately the subject-matter of the appeal taken to this court. A skeletonized statement of the case and the facts based on the complaint.000. (5) In admitting the testimony of William Milfeil. 2. Beyersdorfer. Sabert transferred all of his rights in two parcels of land situated in the municipality of Parang. S. S. Lasage. and that a ruling on the same is not needed. Oscar C. Sabert was to furnish the capital to run the plantation and Kiel was to manage it. During the World War.

sec. leaves the firm impression with us that Kiel and Sabert did enter into a partnership. relating to the judgment rendered for the plaintiff.. whereas if the decision had been read more carefully. it will be remembered.. who "cannot testify as to any matter of fact occurring before the death of such deceased person. 401. 7. Even more primary than any of the rules of partnership above announced. of the same Code. 253. Santiago [1907]. is absolutely prohibited by law from giving testimony concerning such claim or demand as to anything that occurred before the death of the person against whose estate the action is prosecuted. 53." (See Leonardo vs. the act or declaration of a deceased person. 20 R. done or made against his interest in respect to his real property.) The testimony of these witnesses with reference to the acts or declarations of Sabert was. . parties to an action or proceeding against an executor or administrator of a deceased person upon a claim or demand against the estate of such deceased person. No. all that the trial judge did was to ground one point of his decision on an authority coming from the Supreme Court of California. relating to the existence of a copartnership between Kiel and Sabert.. upon a claim against the estate of the latter. is admissible as evidence to that extent against his successor in interest. . Applying the tests as to the existence of partnership. — Not well taken. L. — Not well taken." But the trial judge. S. sec. In reality..) The testimony of the plaintiff's witnesses. — Well taken. S. Vette [1924]. No partnership agreement in writing was entered into by Kiel and Sabert. 89). or omission of a deceased person having sufficient knowledge of the subject. and that they were to share equally. In performing this task.. Bliss [1901]. 7 Phil. are not competent to prove the existence of a partnership between them as against such other partner. 4. and that the existence of a partnership cannot be established by general reputation. evidence may be given up a trial of the following facts: ". C. permitted this testimony to go in. Error 4. 67 Cal. is squarely on all fours with the case at bar. is the injunction to seek out the intention of the parties. 132 Ala. Error 6. 390). we are not unaware of the rule of partnership that the declarations of one partner. No. properly received for whatever they might be worth." Error 5. relating to the testimony of five witnesses with reference to alleged statements and declarations of the deceased P. 553. (Mechem on Partnership. names as incompetent witnesses. the declaration.. as gathered from the facts and as ascertained from their language and conduct. which discussed the subject of resulting trusts.The parties are wrong in assuming that the trial judge found that this was an action to establish a resulting trust in land. if we eliminate the testimony of Kiel and only consider the relevant testimony of other witnesses. it would have been noted that "the action was not on a claim or demand against the estate of Reinstein. — Well taken in part. permitted the plaintiff to recover from the estate the full amount claimed. against his pecuniary interest. relating to the admission of testimony of the plaintiff herein. and then to give this intention effect. or hearsay. Reinstein ([1885]. 9 Phil. It was there held that "A party to an action against an executor or administrator of a deceased person. not made in the presence of his co-partner. Tabotabo ([1907]. The judgment handed down. presumably on the assumption that Sabert having sold by property to the Nituan Plantation Company for CASES – partnership Page 28 of 63 . misled somewhat by the decision of the Supreme Court of California in the city of Myers vs. we feel that competent evidence exists establishing the partnership. (Giles vs. By section 298. 65." Here this is exactly the situation which confronts us. The case of Maxilom vs. The Code of Civil Procedure in section 383. Sabert. rumor. therefore. 263 U. The question consequently is whether or not the alleged verbal co-partnership formed by Kiel and Sabert has been proved. together with the documentary evidence. By section 282 of the Code of Civil Procedure. Owensboro Wagon Company vs. act.) Error 7.

Jr. respondents. petitioners. if any. what part of the P40. fences.R. S.. belonging to the partnership. Office of the Solicitor General Ambrosio Padilla. cattle and other animals. or P20.34. 2. Alidio and Angel S. we disregard errors 1. we hold that the petitioners are liable for the income tax. If it is true that Sabert sold all his land to the Nituan Plantation Company for P40. So ordered. his only legal right is to ask for what is in effect an accounting with reference to its improvements and income as of 1917 when Sabert became the trustee of the estate on behalf of Kiel. 1957 EUFEMIA EVANGELISTA.000. and we find not well taken. Manuela Evangelista and Francisca Evangelista. JJ. Johnson. vs. The Lawphil Project . L-9996 October 15. Rosete for Respondents. the dispositive part of which reads: FOR ALL THE FOREGOING. It appears from the stipulation submitted by the parties: CASES – partnership Page 29 of 63 .Arellano Law Foundation Republic of the Philippines SUPREME COURT Manila EN BANC G. we do not think that Kiel is entitled to any share in the land itself. Sabert. Kiel should have one-half of the same. and other constructions. which is hereby affirmed and the petition for review filed by petitioner is hereby dismissed with costs against petitioners. Dakila.P40.: This is a petition filed by Eufemia Evangelista. and FRANCISCA EVANGELISTA. if he so desires. The judgment appealed from is set aside and the record is returned to the lower court where the plaintiff. but we are of the opinion that he has clearly shown his right to one-half of the value of the improvements and personal property on the land as to the date upon which he left the plantation.878. In resume. implements.000 would correspond to the property which belonged to Kiel and Sabert under their partnership agreement? It impresses us further that Kiel under the facts had no standing in court to ask for any part of the land and in fact he does not do so. Street. There is. and 3. although this fact was not proven. Villamor. may proceed further to prove his claim against the estate of P. The value of these improvements and of the personal property cannot be ascertained from the record and the case must therefore be remanded for further proceedings. CONCEPCION. errors 4 and 7. we find well taken. inclusive. as well as outstanding collectible credits. As we have already intimated. and other plantings. Assistant Solicitor General Esmeraldo Umali and Solicitor Felicisimo R. errors 5 and 6. coconut palms.000. real estate dealer's tax and the residence tax for the years 1945 to 1949..000. for review of a decision of the Court of Tax Appeals. however. in accordance with the respondent's assessment for the same in the total amount of P6. for petitioner. Ostrand and Romualdez. J. concur. Without costs. Such improvements and personal property include buildings. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS. extant in the record absolutely no evidence as to the precise amount received by Sabert from the sale of this particular land. Avanceña. No. Santiago F. MANUELA EVANGELISTA.

00 as of 1948. Valentina Afable a lot of 8. 1943.35.288.84 1. computed.000. That from the month of March.498.1400. Josefa Oppus 21 parcels of land with an aggregate area of 3.. m.1.983.00 as of 1948. 1945. Josefina Florentino a lot with an area of 3.00 as of 1948. to bring suits against the defaulting tenants. to sign all letters. That on April 28.00 out of the which amount was deducted the sum of P4. thereby leaving them a net rental income of P12. That in a document dated August 16. including improvements thereon for P130.00 as of 1948. a lot of 4.000.00 150..371 sq. this property has an assessed value of P82. That on February 2.09 . 9. 10. including improvements thereon for P108. m.00. That on April 28.837. 2.13. including improvements thereon from the sum of P100.912.00 CASES – partnership Page 30 of 63 14. That on April 3. contracts.786. out of which amount was deducted in the sum of P16. to collect and receive rents.00 while the expenses amounted to P3. etc. 7. 1944 they purchased from the Insular Investments Inc. m. 1954 respondent Collector of Internal Revenue demanded the payment of income tax on corporations. and to endorse and deposit all notes and checks for them. 6.575. they bought from Mrs.27 for expenses thereby leaving them a net rental income of P7. including improvements thereon for P237.40 sq.33. 5. That after having bought the above-mentioned real properties the petitioners had the same rented or leases to various tenants.140. That on 1946.00. 1945.453. according to assessment made by said officer. in default of such payment.650.34. the total amount collected as rents on their real properties was P9.30.718. That the petitioners borrowed from their father the sum of P59.615.00.00 which amount together with their personal monies was used by them for the purpose of buying real properties.599. m.34 1. this property has an assessed value of P57.40 sq. they appointed their brother Simeon Evangelista to 'manage their properties with full power to lease. This property has an assessed value of P59. they realized a gross rental income of P17. It further appears that on September 24. 3. 4.948.50 150. to issue receipts therefor.30 1. for and in their behalf.517.144.90 P6. 1944 they bought form Mrs. as follows: INCOME TAXES 1945 1946 1947 1948 1949 Total including surcharge and compromise REAL ESTATE DEALER'S FIXED TAX 1946 1947 1948 P37. they realized a gross rental income of in the sum of P24. 8.353 sq.71 10.157.234. real estate dealer's fixed tax and corporation residence tax for the years 1945-1949.. That in 1948.65 as expenses.00 thereby leaving them a net rental income of P5.713.255. This property has an assessed value of P4.825. 1944 they purchased from Mrs. 1945 up to an including December.

property or industry to a common fund. joint accounts (cuentas en participacion). (compañias colectivas). . no matter how created or organized but not including duly registered general co-partnerships (compañias colectivas). but does not include duly registered general copartnerships.00 P527. with the intention of dividing the profits among themselves." as used in section 24 and 84 of said Code. the pertinent parts of which read: SEC. and that they be absolved from the payment of the taxes in question. SEC. Pursuant to the article. the essential elements of a partnership are two. 84 (b). Said common fund was not something they found already in existence. properly. otherwise known as the National Internal Revenue Code. collected.1949 Total including penalty RESIDENCE TAXES OF CORPORATION 1945 1946 1947 1948 1949 Total including surcharge TOTAL TAXES DUE 150. the issue narrows down to their intent in acting as they did. for. No. the issue hinges on the . . What is more they jointly borrowed a substantial portion thereof in order to establish said common fund. After appropriate proceedings. no matter how created or organized. as well as to the residence tax for corporations and the real estate dealers fixed tax. and paid annually upon the total net income received in the preceding taxable year from all sources by every corporation organized in. or existing under the laws of the Philippines. the case is now before Us for review at the instance of the petitioners. They created it purposely. Rate of tax on corporations. or industry to a common fund.75 38. 24. the Court of Tax Appeals the above-mentioned decision for the respondent. Upon consideration of all the facts and circumstances surrounding the case. petitioners have agreed to. The issue in this case whether petitioners are subject to the tax on corporations provided for in section 24 of Commonwealth Act. 1954. with costs against the respondent. with a prayer that "the decision of the respondent contained in his letter of demand dated September 24. namely: (a) an agreement to contribute money.75 38. With respect to the tax on corporations.00 meaning of the terms "corporation" and "partnership. joint-stock companies. Hence. 466. whereupon they instituted the present case in the Court of Tax Appeals.75 38. 1954" be reversed. because: 1. assessed.75 P6. Said letter of demand and corresponding assessments were delivered to petitioners on December 3. contribute money and property to a common fund.75 P193. and a petition for reconsideration and new trial having been subsequently denied. associations or insurance companies. and did. a tax upon such income equal to the sum of the following: . admittedly.878. The first element is undoubtedly present in the case at bar. Article 1767 of the Civil Code of the Philippines provides: By the contract of partnership two or more persons bind themselves to contribute money.—There shall be levied. we are fully satisfied that their purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves. and (b) intent to divide the profits among the contracting parties. The term 'corporation' includes partnerships.34. It was not property inherited by them pro indiviso.75 38. CASES – partnership Page 31 of 63 P38.

"duly registered general copartnerships" — which are possessed of the aforementioned personality — have been expressly excluded by law (sections 24 and 84 [b] from the connotation of the term "corporation" It may not be amiss to add that petitioners' allegation to the effect that their liability in connection with the leasing of the lots above referred to. and some of the characteristics of partnerships are lacking in the case at bar. in the technical sense of the term. The properties were leased separately to several persons. section 24 of said Code exempts from the aforementioned tax "duly registered general partnerships which constitute precisely one of the most typical forms of partnerships in this jurisdiction. To begin with. among other. 1943. or to other personal uses. under the management of one person — even if true. as above stated. independent of that of its members. Accordingly. one cannot but perceive a character of habitually peculiar to business transactions engaged in the purpose of gain. a legal entity. the lots are still being so let.00. This was soon followed on April 23. did not come into existence. Petitioners have not testified or introduced any evidence. as well as the brief interregnum between each. to be exact. Thus. or in conformity with the usual requirements of the law on partnerships. those cases are not in point.234. to organizations which are not necessarily "partnerships". "the term corporation includes partnerships. and to indorse and deposit notes and checks. (cuentas en participation)" and "associations. by the acquisition of another real estate for P108. on which we express no opinion — tends to increase the similarity between the nature of their venture CASES – partnership Page 32 of 63 . 5. that they are mere co-owners. but in a series of transactions. with a personality independent of that of its members. They did not even try to offer an explanation therefor. Five (5) days later (April 28. The aforesaid lots were not devoted to residential purposes. for petitioners do not even suggest that there has been any change in the utilization thereof. In other words. either on their purpose in creating the set up already adverted to. no matter how created or organized. they purchased 21 lots for P18. the affairs relative to said properties have been handled as if the same belonged to a corporation or business and enterprise operated for profit. for instance. pursuant to said section 84(b). 6. to issue receipts. 1945. the collective effect of these circumstances is such as to leave no room for doubt on the existence of said intent in petitioners herein. since the first property was acquired. Only one or two of the aforementioned circumstances were present in the cases cited by petitioners herein. They invested the same. The number of lots (24) acquired and transactions undertaken. hence. in consequence of the acts performed by them.00.2. This pretense was correctly rejected by the Court of Tax Appeals. Since August. from 1945 to 1948 inclusive. Likewise.068. not merely not merely in one transaction.14. they bought a lot for P100. who. particularly the last three purchases. 4. for. joint accounts. over fifteen (15) years. which. 3. On April 3. Seemingly." This qualifying expression clearly indicates that a joint venture need not be undertaken in any of the standard forms. or on the causes for its continued existence. paid the total sum of P70. Thus.00. namely Simeon Evangelista. in order that one could be deemed constituted for purposes of the tax on corporations. taken singly. the tax in question is one imposed upon "corporations".30 by way of rentals.000. is strongly indicative of a pattern or common design that was not limited to the conservation and preservation of the aforementioned common fund or even of the property acquired by the petitioners in February. not copartners. Again. When our Internal Revenue Code includes "partnerships" among the entities subject to the tax on "corporations". however. to sign letters and contracts. strictly speaking. the properties have been under the management of one person. The foregoing conditions have existed for more than ten (10) years. since Simeon Evangelista became the manager. of petitioners herein. with full power to lease. to bring suits. or. they might not suffice to establish the intent necessary to constitute a partnership.000. and over twelve (12) years." none of which has a legal personality of its own. are distinct and different from "partnerships". Petitioners insist.825. 1944. said Code must allude. as defined in section 84(b) of said Code. the lawmaker could not have regarded that personality as a condition essential to the existence of the partnerships therein referred to. On February 2. 1944. 1944). they got a fourth lot for P237. therefore. Although. to collect rents. In fact. and. the term "corporation" includes. 1943.

. in any narrow or technical sense. pool. emphasis supplied. 562 Note 63. insofar as said Code is concerned and are subject to the income tax for corporations. . provides its own concept of a partnership. 466).599 to P17.. joint venture or other unincorporated organizations which carries on any business financial operation. like corporate affairs. and is. our National Internal Revenue Code. . group. created for the transaction of designed affairs. It includes a voluntary association. exchanging. or a corporation. the American Law. acting in a representative capacity. leasing. By specific provisions of said laws." It is. a committee. the day immediately after the approval of said Commonwealth Act No. whether domestic or resident foreign. section 2 of Commonwealth Act No. . estate. p. or venture. 465 (June 14. clear to our mind that petitioners herein constitute a partnership. therefore. ( 8 Merten's Law of Federal Income Taxation. For purposes of the tax on corporations. (emphasis supplied. . through or by means of which any business. 465 provides in part: Entities liable to residence tax. .). in accordance with the following schedule: . partnership. no matter how created or organized. emphasis supplied. joint-stock companies and insurance companies. therefore. It is immaterial whether such organization is created by an agreement. . includes these partnerships — with the exception only of duly registered general copartnerships — within the purview of the term "corporation. engaged in or doing business in the Philippines shall pay an annual residence tax of five pesos and an annual additional tax which in no case. a 'business' trusts a 'Massachusetts' trust. (7A Mertens Law of Federal Income Taxation.and that corporations. a partnership association." inasmuch as. "corporations" are taxed differently from "partnerships". joint venture or other unincorporated organization. or renting property or his own account as principal and holding himself out as a full or part time dealer in real estate or as an owner of rental property or properties rented or offered to rent for an aggregate amount of three thousand pesos or more a year. an additional argument in favor of the imposition of said tax on corporations. as well. and that the latter was approved on June 15. . emphasis supplied. and the affairs of which. The term 'corporation' as used in this Act includes joint-stock company. the term "association" is not used in the aforementioned laws.) . p. also. such "corporations" include "associations. pool. and that the yearly gross rentals of said properties from June 1945 to 1948 ranged from P9. 789. 1939). or venture is carried on.) CASES – partnership Page 33 of 63 . a declaration of trust. It includes any organization. group. pursuant to section 194 (s) thereof: 'Real estate dealer' includes any person engaged in the business of buying. which like a corporation. (7A Merten's Law of Federal Income taxation. a statute. 1939. . or a partnership. an interinsuarance exchange operating through an attorney in fact. a 'common law' trust. are conducted by a single individual. under the term 'partnership 'it includes not only a partnership as known at common law but. no matter how created or organized.) Similarly. Lastly. continues notwithstanding that its members or participants change. As regards the residence of tax for corporations. . petitioners are subject. shall exceed one thousand pesos. they are subject to the tax provided in section 193 (q) of our National Internal Revenue Code. Considering that the pertinent part of this provision is analogous to that of section 24 and 84 (b) of our National Internal Revenue Code (commonwealth Act No. it is apparent that the terms "corporation" and "partnership" are used in both statutes with substantially the same meaning. p. 788. . the records show that petitioners have habitually engaged in leasing the properties above mentioned for a period of over twelve years. (emphasis supplied. to the residence tax for corporations. . selling. and any other type of organization (by whatever name known) which is not. .) The term 'partnership' includes a syndicate. or some other group. financial operation. and which is not. a trust. joint account (cuentas en participacion). a board. and 'investment' trust (whether of the fixed or the management type). Under the Internal Revenue Laws of the United States." However.-Every corporation. a joint-stock corporation or company. within the meaning of the Code.453. for "real estate dealers. or the attainment of some object. within the meaning of the Code. a syndicate. or otherwise. . Thus. Consequently. . a trust or an estate. association or insurance company.

p. 142 U. Civil Code of the Philippines Annotated. Reyes. 1944. Endencia and Felix. his brother. I. JJ. pp. Or the sharing of the gross returns does not of itself establish a partnership whether or not the persons sharing therein have a joint or common right or interest in the property. 1944). is strongly indicative of a pattern or common design that was not limited to the conservation and preservation of the aforementioned common fund or even of the property acquired by the petitioner in February. 1157. They invested the same. whether or not the person sharing them have a joint or common right or interest in any property from which the returns are derived. but who severally retain the title to their respective contribution. (3) The sharing of gross returns does not of itself establish partnership. They have no common stock or capital. and no community of interest as principal proprietors in the business itself which the proceeds derived. Five (5) days later (April 28. Persons who contribute property or funds for a common enterprise and agree to share the gross returns of that enterprise in proportion to their contribution. not merely in one transaction. and another agreed to become owners of a single tract of reality. This appears in the following portion of the decision: 2. A. holding as tenants in common. we cannot but perceive a character of habitually peculiar to business transactions engaged in for purposes of gain. It is evident that an isolated transaction whereby two or more persons contribute funds to buy certain real estate for profit in the absence of other circumstances showing a contrary intention cannot be considered a partnership. provides: (2) Co-ownership or co-possession does not of itself establish a partnership. by two. (Clark vs.14.000. nor does not agreement to share the profits and loses on the sale of land create a partnership. but in a series of transactions. 12 S Ct.. The series of transactions which they had undertaken attest to this. 1943.) Where plaintiff. section 83. does not constitute a copartnership in respect thereto. they bought a lot for P100. Paras. Ed.. Said article paragraphs 2 and 3. 327. 1944. as well as the brief interregnum between each. Padilla. From the above it appears that the fact that those who agree to form a co-ownership shared or do not share any profits made by the use of property held in common does not convert their venture into a partnership.. and the freedom to transfer or assign any interest in the property by one with the consent of the others (Padilla. 1943. I wish however to make to make the following observation: Article 1769 of the new Civil Code lays down the rule for determining when a transaction should be deemed a partnership or a co-ownership.. Sideway. This was soon followed on April 23. 682.. such as the clear intent to form a partnership. particularly the last three purchases. (Elements of the law of Partnership by Floyd R. Vol. Bengzon. concur. Mechem. the appealed decision of the Court of Tax appeals is hereby affirmed with costs against the petitioners herein.000..234.B. the parties are only tenants in common.Wherefore.636). are not thereby rendered partners. J. On February 2. The number of lots (24) acquired and transactions undertaken. the presence of other elements constituting partnership is necessary. C.825. 74. In other words.) A joint venture purchase of land. by the acquisition of another real state for P108. It is so ordered. the existence of a judicial personality different from that of the individual partners. On April 3. 635. 1953 ed.. and to divide the profits of CASES – partnership Page 34 of 63 .. aside from the circumstance of profit.S. BAUTISTA ANGELO. whether such co-owners or co-possessors do or do not share any profits made by the use of the property. J. 2n Ed. they got a fourth lot for P237. This only means that. they purchase 21 lots for P18.L. concurring: I agree with the opinion that petitioners have actually contributed money to a common fund with express purpose of engaging in real estate business for profit. 35 L. Reyes.J.

representing the dividends which accrued on said stock prior to October 21. 123 N. ROSENSTOCK. plaintiff-appellant. STREET. Concurrently with this act Lyons execute in favor of Elser a general power of attorney empowering him to manage and dispose of said properties at will and to represent Lyons fully and amply. Republic of the Philippines SUPREME COURT Manila EN BANC G. selling. (c) and such a community of interest. In several ventures which he had made in buying and selling property of this kind the plaintiff. Lyons against C. W. J. Harvey & O'Brien for appellant. together with the sum of about P125. and they may. LYONS. manage the business. consequent upon the taking of an appeal by the executor from the allowance of the claim sued upon by the committee on claims in said estate. no partnership existed as between the parties. Elser had been a resident of the City of Manila where he was engaged during the years with which we are here concerned in buying. leaving in his hands a single piece of property located at 616-618 Carried Street. 1067. On the eve of his departure Elser made a written statement showing that Lyons was. containing about 282 square meters of land. (b) generally a participating in both profits and losses. the brother and the other not being entitled to share in plaintiff's commissions. deceased. Pickering & Co. with lawful interest.000. DeWitt. No. 14. defendant-appellee. 1920." The Lawphil Project . and the plaintiff appealed.. 1919. whose regular vocation was that of a missionary. with the improvements thereon. L-35469 March 17. 160 No.. had joined with him. 150 P. at that time. Executor of the Estate of Henry W.) The common ownership of property does not itself create a partnership between the owners. the collective effect of these circumstances (referring to the series of transactions) such as to leave no room for doubt on the existence of said intent in petitioners herein. in the City of Manila. During the absence of Lyons two of the pieces of property above referred to were sold by Elser. returning on September 21. whatever relation may have been as to third parties. vs Herring.disposing of it. W. Magee. and dispose of the whole property. 233 Mass. W. Ltd. by E. (Spurlock vs. went on leave to the United States and was gone for nearly a year and a half. as far as third persons are concerned as enables each party to make contract. they might not suffice to establish the intent necessary to constitute a partnership. 1932 E.) This is impliedly recognized in the following portion of the decision: "Although. as executor of the estate of H. CASES – partnership Page 35 of 63 . App. S. taken singly. to the mutual advantage of both. Prior to his death on June 18. 341. E. and administering real estate. deceased.Arellano Law Foundation C. K.: This action was institute in the Court of First Instance of the City of Manila. 1926. In April. Henry W. or missionary agent. without becoming partners.R. 50 Ill. Wilson. S. Upon hearing the cause the trial court absolved the defendant executor from the complaint. E. 363. 142 S. Lyons. Elser. agree among themselves as to the management and use of such property and the application of the proceeds therefrom. half owner with Elser of three particular pieces of real property. S. (Municipal Paving Co. the profits being shared by the two in equal parts.) In order to constitute a partnership inter sese there must be: (a) An intent to form the same. Elser. Rosenstock. 1923. of the Methodist Episcopal Church. Perkins & Brandy for appellee. The purpose of the action is to recover four hundred forty-six and two thirds shares of the stock of J. (Magee vs. 6763. vs. 470. W. Lyons. though they may use it for purpose of making gains.

the two would be well fixed. It will be noted that the par value of these 200 shares was more than CASES – partnership Page 36 of 63 . The amount required for the first payment was P150. No further efforts to this end were therefore made by Elser. Pickering & Company was organized and stock issued. near the City of Manila. Pickering & Company. Elser purchased an option on this property for P5. his book showed that he was indebted to Lyons to the extent of. Elser wrote Lyons a letter. 1920. meaning that he should resign his position with the mission board in New York. and when the J. he had passed up a good thing. With this money and what he already had in bank Elser purchased the San Juan Estate on or about June 28. as he then believed that Lyons would be one of his associates in the deal. 1920. and when the transfer of the property was effected the deed was made directly to this company. including the P20. On the same date he wrote Lyons a letter explaining some details of the purchase. and found him averse from joining in the purchase of the San Juan Estate. and he discerned therein a fine opportunity for the promotion and development of a suburban improvement. There is plenty of business for us all now and I believe we have started something that will keep us going for some time." In one or more communications prior to this. 1920.290 shares. eight days before the first option expired. In this connection it appears that on May 20. Upon receipt of this letter Elser was of course informed that it would be out of the question to expect assistance from Lyons in carrying out the San Juan project. and it was only in the summer of 1920 that the board of missions of his church prevailed upon him to return to Manila and resume his position as managing treasurer and one of its trustees.500. if it should be acquired and Lyons would come in. Elser had sought to impress Lyons with the idea that he should raise all the money he could for the purpose of giving the necessary assistance in future deals in real estate. When Elser was concluding the transaction for the purchase of the San Juan Estate. and added "have advised in my cable that you resign and I hope you can do so immediately and will come and join me on the lines we have so often spoken about. In the end he was able from his own means. Elser indorsed to Lyons 200 of the shares allocated to himself. For the purpose of the further development of the property a limited partnership had. in case the option should be exercised. and when this option was about to expire without his having been able to raise the necessary funds. his portion amount in the beginning to 3. This loan was secured through Uy Cho Yee. but also by the Fidelity & Surety Company. and with the assistance which he obtained from others. The money thus raised was delivered to Elser by Uy Siuliong on June 24. informing him that he had made an offer for a big subdivision and that. it was necessary to raise the remainder by obtaining a loan for P50. been organized by Elser and three associates. K. under the name of J. 1920. This amount was finally obtained from a Chinese merchant of the city named Uy Siuliong. and some of Lyons' missionary associates had apparently been criticizing his independent commercial activities. .000 square meters. Lyons wrote a letter from New York thanking Elser for his offer to take Lyons into his new project and adding that from the standpoint of making money. 1920. In fact upon this visit of Lyons to the United States a grave doubt had arisen as to whether he would ever return to Manila. Elser contemplated and hoped that Lyons might be induced to come in with him and supply part of the means necessary to carry the enterprise through. K. This fact was dwelt upon in the letter above-mentioned.000. . was offered by its owners for P570. containing about 1. . To afford a little time for maturing his plans. and in order to get the money it was necessary for Elser not only to give a personal note signed by himself and his two associates in the projected enterprise. (Exhibit M-5. The enthusiasm of Elser did not communicate itself in any marked degree to Lyons.000. which will be herein referred to as the San Juan Estate. As Elser was the principal capitalist in the enterprise he received by far the greater number of the shares issued.669.000.000 more for an extension of the option.000. with the understanding in both cases that. This property. P11. possibly. While these negotiations were coming to a head. to acquire said estate. about this time.72. the amounts thus paid should be credited as part of the first payment. One source of embarrassment which had operated on Lyson to bring him to the resolution to stay out of this venture. was that the board of mission was averse to his engaging in business activities other than those in which the church was concerned. a son of the lender. Accordingly. Elser cabled Lyons that he had bought the San Juan Estate and thought it advisable for Lyons to resign (Exhibit M-13).000 advanced upon the option. on June 21.) On June 3. and as Elser had available only about P120.000. The amounts paid for this option and its extension were supplied by Elser entirely from his own funds. he paid P15. which had accrued to Lyons from profits and earnings derived from other properties.In the spring of 1920 the attention of Elser was drawn to a piece of land.

Elser paid the note of P50.000 shares of J. that the latter had determined not to come into this deal. The latter thereupon in turn executed a cancellation of the mortgage on the Carriedo property and delivered it to Elser. Elser returned the cancellation of the mortgage on the Carriedo property and took back from the Fidelity & Surety Co. It seems to be supposed in the appellant's brief that the transfer of these shares to Lyons by Elser supplies some sort of basis for the present action. It will be remembered that. Pickering & Company.. the lender.000 to complete the amount needed for the first payment on the San Juan Estate. del Pilar Street. But when he learned from the letter from Lyons of July 21. well justified in accepting as a proven fact the consent of Lyons for the mortgage to remain on the Carriedo property. But before signing the note with Elser and his associates. and he could scarcely have failed to take account of the use he had made of the joint property of the two. the equity of redemption in the property owned by himself and Lyons on Carriedo Street. 1920. but the relations of the parties had been such that it was to be expected that Elser would be generous. This mortgage was executed on June 30.000 shares of the J. What really happened was the Elser merely subjected the property to a contingent liability. H. It is also plain that no money actually deriving from this mortgage was ever applied to the purchase of the San Juan Estate. although it was not due until more than five months later.000 to Uy Siuliong on January 18. the trial court was.000 in excess of the indebtedness which Elser had owed to Lyons upon statement of account. This concession was not only reasonable under the circumstances. having a value of nearly P8. We now turn to the incident which supplies the main basis of this action. and 1. in our opinion. We should perhaps add that after Lyons' return to the Philippine Islands he acted for a time as one of the members of the board of directors of the J. del Pillar property and delivered the same. he addressed a letter to the Fidelity & Surety Co. It will thus be seen that the mortgaging of the Carriedo property never resulted in damage to Lyons to the extent of a single cent. the new mortgage on the M. 1920. Elser testified to the conversation in which Lyons used the words above quoted. Manila. and on September 15. in lieu of the Carriedo property. together with the 1. in view of the abundant solvency of Elser. and although the court refused to allow the defendant to prove the Elser was solvent at this time in an amount much greater than the entire encumbrance placed upon the property. Uy Siuliong. This view is manifestly untenable. H. Pickering & Company. Pickering & Co. with 1. a new mortgage on the M. as security. K. insisted that he should procure the signature of the Fidelity & Surety Co. at which time Elser expected that Lyons would come in on the purchase of the San Juan Estate. K. agreed to the proposition. and when the latter returned to the Philippine Islands. on September 9. 1920. 1920. asking it to permit him to substitute a property owned by himself at 644 M. the Fidelity & Surety Co.. and no actual CASES – partnership Page 37 of 63 . But notwithstanding the fact that these documents were executed and delivered.000 in excess of the amount which Elser in fact owed to Lyons. del Pilar property. and shortly thereafter. he accepted these shares and sold them for his own benefit. and on September 25. 1920. The trial court found in effect that the excess value of these shares over Elser's actual indebtedness was conceded by Elser to Lyons in consideration of the assistance that had been derived from the mortgage placed upon Lyon's interest in the Carriedo property. it is evident that the risk imposed upon Lyons was negligible. The explanation of this change of purpose is undoubtedly to be found in the fact that Lyons had arrived in Manila on September 21. Pickering & Company. K. Elser began to cast around for means to relieve the Carriedo property of the encumbrance which he had placed upon it. thereafter. the new mortgage and the release of the old were never registered. Elser executed in favor of the Fidelity & Surety Co. 1921. insisted upon having security for the liability thus assumed by it. his qualification for this office being derived precisely from the ownership of these shares. To meet this requirement Elser mortgaged to the Fidelity & Surety Co. For this purpose. when Elser obtained the loan of P50. and as that conversation supplies the most reasonable explanation of Elser's recession from his purpose of relieving the Carriedo property. K. since the ratification of the transaction by Lyons and the appropriation by him of the shares which were issued to him leaves no ground whatever for treating the transaction as a source of further equitable rights in Lyons.P8. but in view of the further fact that Elser had given to Lyons 200 shares of the stock of the J. As the development of the San Juan Estate was a success from the start. H.000 shares of the J. K. to said company. The Fidelity & Surety Co. on the note to be given for said loan. 1920. in the course of a conversation with Elser told him to let the Carriedo mortgage remain on the property ("Let the Carriedo mortgage ride"). or at least strengthens the considerations involved in a feature of the case to be presently explained. Pickering & Company which he had delivered to it. Whether the agreement was reached exactly upon this precise line of thought is of little moment. Mrs.

Lyons. the case might be difference. was the work of Elser accomplished entirely upon his own account. It doubtedless appeared so to him in the retrospect." Lyons says that no such cablegram was received by him. we think. if an actual relation of partnership had existed in the money used. with the earnings thereon. The case for the plaintiff supposes that. it is claimed. when Elser placed a mortgage for P50. Pickering & Company. in buying the San Juan Estate. and much emphasis is laid in the appellant's brief upon the relation of partnership which. It is clear that Elser. in our opinion. became. 641. under article 1678 of the Civil Code. and it takes but little discernment to see that the CASES – partnership Page 38 of 63 . Martinez. and we concur in the conclusion of the trial court that Elser did not act in bad faith and was guilty of no fraud.000) if the owner comes through. if he did not know before. It seems to be supposed that the doctrines of equity worked out in the jurisprudence of England and the United States with reference to trust supply a basis for this action. and in this connection a letter of Elser of the latter part of May. Naturally. to apprise him of the material factors in the situation. the position of the appellant is. and after his arrival in Manila he consented for the mortgage to remain on the property until it was paid off. namely. upon the arrival of Lyons in September. Elser's widow and one of his clerks testified that about June 15. and Lyons leads us to infer that he thought that the money obtained by mortgaging the Carriedo property had been used in the purchase of this property. You are amply protected. K. 1920. and it is insisted for him that. He had already been informed that.000 upon the equity of redemption in the Carriedo property. But there was clearly no general relation of partnership. was not acting for any partnership composed of himself and Lyons. the purchase of a property referred to in the correspondence as the "Ronquillo property". thus introducing a doubt as to whether he could get it. as it were. The financing of the purchase of the San Juan Estate. in consideration of this fact. Other correspondence shows that Elser had apparently been trying to buy the Ronquillo property.. since the proof shows that Lyons knew that the Carriedo mortgage had been executed. and the quotation above given shows that the intended use of the money obtained by mortgaging the Carriedo property was that only part of the P50. one of his first inquiries would have been. Of course. if the deal went through. be obligated to pay interest upon the money so applied to his own use.000 thus obtained would be used in this way. as half owner of said property. untenable. 647. The doctrines referred to operate. If Elser had used any money actually belonging to Lyons in this deal. what was the status of the proposed trade for the Ronquillo property. It may well be that Lyons did not at first clearly understand all the ramifications of the situation.). but he knew enough. involuntarily the owner of an undivided interest in the property acquired partly by that money. He seems to have supposed that the Carried property had been mortgaged to aid in putting through another deal.000 loan on Carriedo property. but certain consideration show that he was inattentive to the contents of the quotation from the letter above given. Enriquez vs. existed. 1920. Under the law prevailing in this jurisdiction a trust does not ordinarily attach with respect to property acquired by a person who uses money belonging to another (Martinez vs. Olaguer. and the law cannot be distorted into a proposition which would make Lyons a participant in this deal contrary to his express determination. 1920. its price had gone up. only where money belonging to one person is used by another for the acquisition of property which should belong to both. as shortly occurred. he would under article 1724 of the Civil Code and article 264 of the Code of Commerce. Borrow all money you can. Will use part of the money for Ronquillo buy (P60. I wish you to join me in the San Juan Subdivision. 1 Phil. can be quoted in which he uses this language: As stated in cablegram I have arranged for P50. Lyons tells us that he did not know until after Elser's death that the money obtained from Uy Siuliong in the manner already explained had been used to held finance the purchase of the San Juan Estate. apart from the modest financial participation of his three associates in the San Juan deal. In the purely legal aspect of the case. although Elser was angling for the Ronquillo property.. he is entitled to the four hundred fortysix and two-thirds shares of J.liability ever resulted therefrom. and we consider this point of fact of little moment. secured by my personal note. Elser cabled Lyons something to this effect. as claimed in his complaint. however. 25 Phil.: "I have mortgaged the property on Carriedo Street.

he is entitled to the four hundred fortysix and two-thirds shares of J. While the admission of this testimony was of questionable propriety. Of course.Arellano Law Foundation The attention of Elser was drawn to a piece of land. Concurrently with this act Lyons execute in favor of Elser a general power of attorney empowering him to manage and dispose of said properties at will and to represent Lyons fully and amply. We therefore pass the point without further discussion. 25 Phil. existed. Martinez. It is clear that Elser. K. as half owner of said property. it is claimed..). with the earnings thereon. Johnson. S. under article 1678 of the Civil Code. and it is so ordered. and much emphasis is laid in the appellant's brief upon the relation of partnership which. went on leave to the United States and was gone for nearly a year and a half. S. as claimed in his complaint. in consideration of this fact. The case for the plaintiff supposes that. JJ. Elser. Under the law prevailing in this jurisdiction a trust does not ordinarily attach with respect to property acquired by a person who uses money belonging to another (Martinez vs. G. if an actual relation of partnership had existed in the money used. The judgment appealed from will be affirmed. at that time. when Elser placed a mortgage for P50. Elser was engaged in buying. L-35469 March 17.J.. in buying the San Juan Estate. Villamor. The lender insisted that he should procure the signature of the Fidelity & Surety Co. Elser made written statements showing that Lyons was. be obligated to pay interest upon the money so applied to his own use. No. half owner with Elser of three particular pieces of real property. the profits being shared by the two in equal parts. concur. any error made by the trial court on this point was error without injury. referred to as the San Juan Estate. Of course. C. as it were. the case might be different. became.000 upon the equity of redemption in the Carriedo property. Elser mortgaged to the Fidelity & Surety Co. Pickering & Company. in our opinion. Lyons. Enriquez vs. 1 Phil. on the note to be given for said loan. Elser's estate would be liable for such damage. he would under article 1724 of the Civil Code and article 264 of the Code of Commerce. LYONS vs. and the law cannot be distorted into a proposition which would make Lyons a participant in this deal contrary to his express determination. ROSENSTOCK. 647. Lyons. selling. for no money belonging to Lyons or any partnership composed of Elser and Lyons was in fact used by Elser in the purchase of the San Juan Estate. 1932 E. untenable. and administering real estate. whose regular vocation was that of a missionary. was not acting for any partnership composed of himself and Lyons.situation here involved is not one for the application of that doctrine. Olaguer. Villa-Real and Imperial. of the Methodist Episcopal Church. But there was clearly no general relation of partnership. involuntarily the owner of an undivided interest in the property acquired partly by that money.. NO RULING: The position of the appellant is. Executor of the Estate of Henry W. ISSUE: Whether there was a general relation of partnership. Malcolm. to the mutual advantage of both. The appellee insist that the trial court committed error in admitting the testimony of Lyons upon matters that passed between him and Elser while the latter was still alive. Avanceña. if any damage had been caused to Lyons by the placing of the mortgage upon the equity of redemption in the Carriedo property. or missionary agent.. But it is evident that Lyons was not prejudice by that act. deceased FACTS: Henry W. If Elser had used any money actually belonging to Lyons in this deal. and the determination of the question is not necessary to this decision.000 to complete the amount needed for the first payment on the San Juan Estate. He obtained the loan of P50. the equity of redemption in the property owned by himself and Lyons on Carriedo Street to secure the liability thus assumed by it. E. with costs against the appellant. 641. W.R. The Lawphil Project . Lyons joined with him. and it is insisted for him that. C. CASES – partnership Page 39 of 63 .

and Isidro Ma (Isidro) are the children of Felix (Yao Kong) Ma. CABOCHAN. JR. During their age of minority. The resolution of these questions would significantly mark a difference in the lives of herein petitioners. DECISION PEREZ. Article IV. have not set foot in Taiwan. 183133 July 26. Felix Cabiling Ma. Of course. ASSOCIATE COMMISSIONER TEODORO B. they do not speak nor understand the Chinese language. Petitioners. Jr. They were all raised in the Philippines and have resided in this country for almost sixty (60) years. only where money belonging to one person is used by another for the acquisition of property which should belong to both. Jr. which provides that "(t)hose whose mothers are citizens of the Philippines and. CARONOÑGAN. 2010 took their oath of allegiance to the government upon reaching the age of majority. respectively. and they have 4 already raised their respective families in the Philippines. but who failed to immediately file the documents of election with the nearest civil registry. Lechi Ann Ma (Lechi Ann). who executed an affidavit of election of Philippine citizenship and . they have not even traveled abroad. and do not know any relative of their father. The Facts Balgamelo Cabiling Ma (Balgamelo). of the 1935 Constitution. AND VALERIANO CABILING MA. a 2 Taiwanese. Immediately upon reaching the age of twenty-one. if any damage had been caused to Lyons by the placing of the mortgage upon the equity of redemption in the Carriedo property. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. they spent their whole lives. Arceli Ma (Arceli). be considered foreign nationals subject to deportation as undocumented aliens for failure to obtain alien certificates of registration? Positioned upon the facts of this case. But it is evident that Lyons was not prejudice by that act.It seems to be supposed that the doctrines of equity worked out in the jurisprudence of England and the United States with reference to trust supply a basis for this action. and MAT G. Nicolas 1 Ma (Nicolas). DELARMENTE AND ASSOCIATE COMMISSIONER FRANKLIN Z. Elser's estate would be liable for such damage.: Should children born under the 1935 Constitution of a Filipino mother and an alien father.). a Filipina. and it takes but little discernment to see that the situation here involved is not one for the application of that doctrine. the question is translated into the inquiry whether or not the omission negates their rights to Filipino citizenship as children of a Filipino mother. Records reveal that petitioners Felix. they secured from the Bureau of Immigration their 5 Alien Certificates of Registration (ACRs).. and erase the years lived and spent as Filipinos. CATRAL. Balgamelo and Valeriano were all born under aegis of the 1935 Philippine Constitution in the years 1948.R. ASSOCIATE COMMISSIONER ARTHEL B. LITTAUA. for no money belonging to Lyons or any partnership composed of Elser and Lyons was in fact used by Elser in the purchase of the San Juan Estate.. in their capacities as Chairman and Members of the Board of Commissioners (Bureau of Immigration). Respondents. ASSOCIATE COMMISSIONER JOSE DL. J. and 3 1957. studied and received their primary and secondary education in the country. COMMISSIONER ALIPIO F. 1951. (Felix. No. FERNANDEZ. Valeriano Cabiling Ma (Valeriano). FELIX CABILING MA. JR. however. and Dolores Sillona Cabiling. CASES – partnership Page 40 of 63 BALGAMELO CABILING MA. vs. they claimed Philippine citizenship in accordance with Section 1(4).. The doctrines referred to operate. Jr.

7 Surigao City. Surigao. Likewise. aside from exercising their right of suffrage. Notary Public. Surigao City. however. Commission on Elections. Thus. The Office of the City Civil Registrar issued a Certification to the effect that the documents showing that Arceli elected Philippine citizenship on 27 January 1986 were registered in its Office on 4 February 1986. rendered a Judgment dated 2 February 2005 finding that Felix Ma and his children violated Commonwealth Act No. Sering. City Court of Surigao City. respectively. On 9 November 2004. the Bureau of Immigration received the Complaint14 Affidavit of a certain Mat G. composed of the public respondents. Mr. Moreover. Filoteo. elect Philippine citizenship" are citizens of the Philippines. Balgamelo is one of the incumbent 11 Barangay Kagawads in Barangay Washington. Catral (Mr. 0015A since June 1997. The Charge Sheet docketed as BSI-D. Jr. misrepresent themselves as Philippine citizens in order to evade the requirements of the immigration laws. Individual certifications all dated 3 January 2005 issued by the Office of the City Election Officer. petitioners. the fact of 8 which the latter attested to in his Affidavit of 7 March 2005. executed his affidavit of election of Philippine citizenship and took his oath of allegiance before then Judge Jose 6 L. undocumented and overstaying foreign nationals in the country. ADD-01-031 and ADD-01-035 dated 6 and 22 August 19 2001. Catral). Gonzalez. Patrocinio C. 613. In 1978. That respondents. Sections 37(a)(7) and 45(e) in relation to BI Memorandum Order Nos. as 18 amended. They likewise failed to produce documents to show their election of Philippines (sic) citizenship. all Chinese nationals.upon reaching the age of majority. Surigao del Norte.C. Having taken their oath of allegiance as Philippine citizens. 625. and the Ma family could not but believe that the complaint against them was politically motivated because they strongly supported a candidate in Surigao City in the 2004 15 National and Local Elections. otherwise known as the Philippine Immigration Act of 1940. Bureau of Immigration After Felix Ma and his seven (7) children were afforded the opportunity to refute the allegations. the Board of Commissioners (Board) of the Bureau of Immigration (BI). no other supporting documents appear to show that Lechi Ann initially obtained an ACR nor that she subsequently elected Philippine citizenship upon reaching the age of majority. failed to have the necessary documents registered in the civil registry as required under Section 1 of Commonwealth Act No. alleging that Felix (Yao Kong) Ma and his seven (7) children are undesirable and overstaying aliens. 613. Surigao City. however. being aliens. did not participate in the proceedings. they were governed by the following rules and regulations: CASES – partnership Page 41 of 63 . Municipal Judge. Ruling of the Board of Commissioners. Records further reveal that Lechi Ann and Arceli were born also in Surigao City 12 13 in 1953 and 1959. 625 (An Act Providing the Manner in which the Option to Elect Philippine Citizenship shall be Declared by a Person whose Mother is a Filipino Citizen). no document exists that will provide information on the citizenship of Nicolas and Isidro. However. respectively. The Board ruled that since they elected Philippine citizenship after the enactment of Commonwealth Act No. and that records on previous registrations are no longer available because of the mandatory general registration every ten (10) years. failed and continuously failed to present any valid document to show their respective status in the Philippines. On the other hand. The Complaint 10 On 16 February 2004. there is no showing that Valeriano complied with the registration requirement. show that all of them are registered voters of Barangay Washington. on 15 August 1969. Precinct No. Valeriano took his oath of allegiance before then Judge Salvador C. in part: That Respondents x x x. Felix. Surigao del Norte. Balgamelo did the same before Atty. AFF-04-574 (OC-STF04-09/23-1416) reads. No. Jr. Catral. It was only on 27 July 2005 or more than thirty (30) years after they elected Philippine citizenship that 9 Balgamelo and Felix. did so. which was approved on 7 June 1941. the Legal Department of the Bureau of Immigration 16 17 charged them for violation of Sections 37(a)(7) and 45(e) of Commonwealth Act No. On 14 January 1972. hence.

Jr. Taiwanese [Chinese]. 625. Nicolas and Isidro. According to public respondents. and CASES – partnership Page 42 of 63 30 . under C. (Emphasis supplied. Lechi Ann Ma.A. and Commission of Immigration and Deportation (CID. 89532. Nos.. Arceli Ma and Isidro Ma under C. to wit: (1) the Judgment dated 2 February 2005. Valeriano Ma. Felix Ma. Felix Ma. and exclusion of the petitioners from the Philippines. ordering the summary deportation of the petitioners. inclusion of their names in the Immigration Blacklist. Balgamelo Ma. No. Arceli. they denied the Motion for Reconsideration with respect to Felix Ma and the rest of his 32 children. Lechi Ann Ma. requiring that the records of the proceedings be forwarded to the Ministry (now the Department) of 23 Justice for final determination and review. No.. summary deportation of Felix (Yao Kong) Ma. Memorandum Order dated 18 August 1956 of the CID. Section 13(g). and 4. Arceli Ma and Isidro Ma in the Immigration Blacklist.R. in view of their election of Philippine citizenship. Balgamelo Ma. However. Sections 37(a)(7). Section 37(a). Nicolas Ma. Felix Ma. 2. Inclusion of the names of Felix (Yao Kong) Ma.. 3. 182. Jr. which was docketed as CA-G. now Bureau of Immigration [BI]) Circular dated 12 21 April 1954. 27 March 1985. 22 The dispositive portion 29 of the Judgment of 2 February 2005 reads: 1. ADD-01-031 and ADD-01-035 dated 6 and 22 August 2001. as amended. public respondents likewise deemed them undocumented and/or improperly 28 documented aliens. Neither did they present any evidence to show that they are properly documented aliens. Jr.) In its Resolution of 8 April 2005. Exclusion from the Philippines of Felix (Yao Kong) Ma. Lechi Ann Ma. public respondents partially reconsidered their Judgment of 2 February 2005. E-series. Issuance of a warrant of deportation against Felix (Yao Kong) Ma. Jr. requiring the filing of a petition for the cancellation of their alien certificate of registration with the CID. 3. 613.A. did not submit any document to support their claim that they are Philippine citizens. Jr. They were convinced that Arceli is an immigrant 31 under Commonwealth Act No. finger printing and issuance 25 of an ACR in accordance with the Alien Registration Act of 1950. Ruling of the Court of Appeals On 3 May 2005. Supposedly for failure to comply with the procedure to prove a valid claim to Philippine citizenship via election proceedings.1. 1-93 of the Bureau of Immigration requires that ACR. Arceli Ma and Isidro Ma under C. be issued to foreign nationals who apply for initial registration. For these reasons. Lechi Ann Ma. Nicolas Ma. Nicolas Ma. respectively. and DOJ Guidelines. They sought the nullification of the issuances of the public respondents. issuance of a warrant of deportation against them.. Felix. any foreign national found in possession of an ACR other than the E-series shall be considered improperly documented aliens and may be proceeded against in accordance with the Immigration Act of 1940 or the Alien 26 Registration Act of 1950. Valeriano Ma. providing that the election of Philippine citizenship embodied in a statement sworn before any officer authorized to administer oaths and the oath of allegiance shall be 20 filed with the nearest civil registry. 19 August 1982. Nicolas Ma. As regards the documentation of aliens in the Philippines. Arceli Ma and Isidro Ma. Valeriano Ma.. Department of Justice (DOJ) Opinion No. and Valeriano filed the Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure before the Court of Appeals. 613. No.A. 2. SP No. 613. Section 1 of Commonwealth Act No. Valeriano and Lechi Ann are undocumented 27 and/or improperly documented aliens. Valeriano Ma. on the other hand. Jr. public respondents concluded that Felix.O. Felix Ma. only Balgamelo. 45(e) and 38 in relation to BI M. Administrative Order 24 No. detailing the procedural requirements in the registration of the election of Philippine citizenship. Balgamelo. 613. Balgamelo Ma. Subject to the submission of appropriate clearances. Section 29(a)(15). Balgamelo Ma.

xxxx 35 33 (4) Those whose mothers are citizens of the Philippines and. the Court of Appeals dismissed the petition after finding that the petitioners "failed to comply with the exacting standards of the law providing for the procedure and conditions for their continued stay in the 34 Philippines either as aliens or as its nationals. 37 upon reaching the age of majority. On 29 August 2007. All that is required of the elector is to execute an affidavit of election of Philippine citizenship and. 625 was enacted. and shall be filed with the nearest civil registry. The said party shall accompany the aforesaid statement with the oath of allegiance to the Constitution and the Government of the Philippines." Our references were the Civil Code of the Philippines. his being a registered voter or an elected public official cannot vest in him Philippine citizenship as the law specifically lays down the requirements for acquisition of Philippine citizenship by election. we determined the meaning of the period of election described by phrase "upon reaching the age of majority. Section 1. 39 Secretary of Justice. elect Philippine citizenship. the proper period for electing Philippine citizenship was. It laid down the manner of electing Philippine citizenship. However. thereafter. based on the pronouncements of the Department of State of the United States Government to the effect that the election should be 41 made within a reasonable time after attaining the age of majority. 625 did not prescribe a time period within which the election of Philippine citizenship should be made. Article IV. The option to elect Philippine citizenship in accordance with subsection (4). Vicente D." On 29 May 2008. One who is privileged to elect Philippine citizenship has only an inchoate right to such citizenship. The mandate states: Section 1. to wit: Section 1. he 36 should avail of the right with fervor. The phrase "reasonable time" has been interpreted to mean that the elections should be 42 made within three (3) years from reaching the age of majority. No. denying the petitioners’ Motion for Reconsideration. In Re:Application for Admission to the Philippine Bar. the opinions of the Secretary of Justice. We pronounced: x x x [T]he 1935 Constitution and C. The statutory formalities of electing Philippine citizenship are: (1) a statement of election under oath. it issued a Resolution denying the petitioners’ Motion for Reconsideration dated 20 September 2007.A. we CASES – partnership Page 43 of 63 38 . As such. The 1935 Charter only provides that the election should be made "upon reaching the age of majority. a person’s continued and uninterrupted stay in the Philippines. The prescribed procedure in electing Philippine citizenship is certainly not a tedious and painstaking process. Ching.(2) the Resolution dated 8 April 2005. Our Ruling The 1935 Constitution declares as citizens of the Philippines those whose mothers are citizens of the Philippines and elect Philippine citizenship upon reaching the age of majority. The following are citizens of the Philippines: (1) xxx. in turn. of the Constitution shall be expressed in a statement to be signed and sworn to by the party concerned before any officer authorized to administer oaths. and (3) registration of the statement of election and of the oath with the nearest civil registry. enthusiasm and promptitude. In 1941. In the opinions of the Secretary of Justice on cases involving the validity of election of Philippine citizenship. this dilemma was resolved by basing the time period on the decisions of this Court prior to the effectivity of the 1935 Constitution. Commonwealth Act No." The age of majority then commenced upon reaching twenty-one 40 (21) years. (2) an oath of allegiance to the Constitution and Government of the Philippines. file the same with the nearest civil registry. To reiterate. Philippine citizenship can never be treated like a commodity that can be claimed when needed and suppressed when convenient. The constitutional mandate concerning citizenship must be adhered to strictly. In these decisions. and the case of Cueco v.

Ramos. Jose Ong. which period may be extended under certain circumstances. It was only the registration of the documents of election with the civil registry that was belatedly done. the Court of Appeals found the petitioners’ argument of good faith and "informal election" unacceptable and held: It is true that this clause has been construed to mean a reasonable time after reaching the age of majority. to wit: (1) a statement of election under oath. we cautioned in Cue[n]co that the extension of the option to elect Philippine citizenship is not indefinite. an inflexible rule. the right to elect Philippine citizenship has not been lost and they should be allowed to complete the statutory requirements for such election. We said: 43 that the three (3) year period is not We rule that under the facts peculiar to the petitioners. because the law itself had already elected Philippine citizenship for 55 him as. and that the Secretary of Justice has ruled that three (3) years is the reasonable time to elect Philippine citizenship under the constitutional provision adverted to above. contrary to the finding of the Court of Appeals. a case in which we adopted the findings of the appellate court that the father of the petitioner. and the delay of several years before their 46 filing with the proper office was not satisfactorily explained. such circumstance. 1951." In both cases. Ching offered no reason for the 57 late election of Philippine citizenship. or over seven (7) years after he had reached the age of majority. unlike petitioner. 1944. failed to elect Philippine citizenship within the reasonable period of three (3) years upon reaching the age of majority. did more than exercise his right of suffrage. In all. We reiterated the above ruling in Go. and Re:Application for Admission to the Philippine Bar. Secretary of Justice. it may be recalled that we denied his application for admission to the Philippine Bar because. Regardless of the foregoing. In Ching. 49 Vicente D. Ching. while he was still a minor. petitioner was born on February 16. (2) an oath of allegiance to the Constitution and Government of the Philippines. as he 54 established his life here in the Philippines. 625. 1923. a certificate of naturalization was 56 issued to his father. It is clear that said election 44 has not been made "upon reaching the age of majority. In Mallare. Sr. apparently. Co v. Esteban’s exercise of the right of suffrage when he came of age was 50 deemed to be a positive act of election of Philippine citizenship. while similar to that of herein petitioners’. when he was over twenty-eight (28) years of age. Jr. and that "the belated submission to the local civil registry of the affidavit of election and oath of allegiance x x x was defective because the affidavit of election was executed after the oath of allegiance. Electoral Tribunal of the House 48 of Representatives. was not appreciated because it was ruled that any election of Philippine citizenship on the part of Ong would have resulted in absurdity. no other act would be necessary to confer on him the rights and privileges of a 51 52 Filipino citizen. However. is in line with 47 our decisions in In Re:Florencio Mallare. pointing out that. Again. and (3) registration of the statement of election and of the oath with the nearest civil registry were complied with only fourteen (14) years after he reached the age of majority. The acts of election and their registration with the nearest civil registry were all done beyond the reasonable period of three years upon reaching the age of majority. as when the person concerned has always considered himself a Filipino. hence. The Court of Appeals. in his case. whose citizenship was in question. The instant case presents a different factual setting.held in Cue[n]co vs. In the Co case. said that the case cannot support herein petitioners’ cause. all the requirements. Esteban is a natural child of a Filipina. His election of citizenship was made on May 15. however. 45 CASES – partnership Page 44 of 63 . v. Such conclusion. and that Esteban was born in 1929 prior to the adoption of the 53 1935 Constitution and the enactment of Commonwealth Act No. we ruled against the petitioners because they belatedly complied with all the requirements. Petitioners complied with the first and second requirements upon reaching the age of majority. He became of age on February 16.

Registration does not confer ownership. In the instant case. consistently. cannot vest in him Philippine citizenship as the law specifically lays down the requirements for acquisition of Philippine citizenship 58 by election. American and Spanish authorities are unanimous on the meaning of the term "to register" as "to enter in a register. because the main purpose of registration is to give notice to third parties. Court of Appeals. or instrument to 63 others. We are not prepared to state that the mere exercise of suffrage. In a contract of partnership. we said that the purpose of registration is to give notice to third parties. registration is the confirmation of election as such election. For what purpose is registration? In Pascua v.Their reliance in the ruling contained in Re:Application for Admission to the Philippine Bar. contract. and it can be assumed that the members themselves knew of the 66 contents of their contract. Ching. including both registration in its ordinary and strict sense. is obviously flawed. did not adopt the doctrine laid down in In Re: Florencio Mallare. and that neither 65 does such failure affect the partnership’s juridical personality. CASES – partnership Page 45 of 63 ." As pertinent is the holding that registration "neither adds to its validity 64 nor converts an invalid instrument into a valid one between the parties. What we now say is that where. being elected public official. is the confirmation of the existence of a fact. to enroll. Simply stated. Comparable jurisprudence may be consulted. that failure to register the contract does not affect the liability of the partnership and of the partners to third persons. Registration is not a requirement for the validity of the contract as between the parties. In strict acceptation. a registered voter and a former elected public official." In general. registration: 59 Actual knowledge may even have the effect of registration as to the person who has knowledge thereof. The actual exercise of Philippine citizenship.. his continuous and uninterrupted stay in the Philippines and his being a certified public accountant. the election of citizenship has in fact been done and documented within the constitutional and statutory timeframe. in said case. and other similar acts showing exercise of Philippine citizenship can take the place of election of citizenship. to 60 record formally and distinctly. that will confer Philippine citizenship on the petitioners. The non-registration of a deed of donation does not also affect its validity. registration refers to any entry made in the books of the registry. In an analogous case involving an unrecorded deed of sale. It bears emphasis that the Supreme Court. Likewise relevant is the pronouncement that registration is not a mode of acquiring a right. we elucidated the principles of civil law on To register is to record or annotate. "[i]ts purpose is to give notice thereof to all persons (and it) operates as a notice of the deed. we reiterated the settled rule that registration is not a mode of acquiring ownership. Registration. to enter in a list. registration is made for the purpose of notification. and even the marginal notes. the registration of the documents of election beyond the frame should be allowed if in the meanwhile positive acts of citizenship have publicly." It lays emphasis on the validity of an unregistered document. i. for the effect of registration serves chiefly to 67 bind third persons. although a valid requirement under Commonwealth Act No. [which was decided on 1 October 1999]. Vicente D. and cancellation. annotation. It is not the registration of the act of election. and continuously been done. It is not a mode of acquiring dominion. then. Thus. it pertains to the entry made in the registry which records solemnly and permanently the right of ownership and other real 61 62 rights. is actual notice to the Philippine public which is equivalent to formal registration of the election of Philippine citizenship. It is only a means of confirming the fact that citizenship has been claimed. An unregistered contract of partnership is valid as among the partners. 625. continuous and uninterrupted stay in the Philippines. for over half a century by the herein petitioners. the Supreme Court was emphatic in pronouncing that "the special circumstances invoked by Ching. as in petitioners’ case.e. On the contrary. so long as it has the essential requisites. but only a means of confirming the fact of its existence with notice to the world at 68 large.

their exercise of suffrage.) The constitutional bias is reflected in the deliberations of the 1986 Constitutional Commission. petitioners should not be expected to secure Eseries ACR because it would be inconsistent with the election of citizenship and its constructive registration through their acts made public. the petitioners timely took their oath of allegiance to the Philippines. under the 1973 Constitution. has it been admitted through existing rules that the late registration of the fact of birth of a child does not erase the fact of birth. children of mixed marriages involving an alien father and a Filipino mother are Filipino citizens. they are deemed not properly 70 documented. The following are citizens of the Philippines: (1) xxx.Indeed. they automatically become Filipinos and need not elect Philippine citizenship upon reaching the age of majority. apparently. obviously. Thus. Thus. Sec. x x x. Petitioners have passed decades of their lives in the Philippines as Filipinos. xxxx x x x x As regards those born of Filipino mothers. petitioners can no longer have any national identity except that which they chose upon reaching the age of reason. among others. the fact of marriage cannot be declared void solely because of the failure to have the marriage certificate registered with the designated government agency. Those who elect Philippine citizenship in accordance with paragraph 74 (3). Thus. CONCEPCION. we cannot agree with the view of the Court of Appeals that since the ACR presented by the petitioners are no longer valid on account of the new requirement to present an E-series ACR. Upon the other hand. thus liberalizing the counterpart provision in the 1935 Constitution by dispensing with the need to make a declaration of intention upon reaching the age of majority. election as public official. On the contrary. Section 1 hereof shall be deemed natural-born citizens. 2. Also. Notably. upon the effectivity of . This was a serious undertaking. Article IV thereof provides: Section 2. 73 (2) Those whose fathers and mothers are citizens of the Philippines. the 1935 Constitution merely gave them the option to choose Philippine citizenship upon reaching the age of majority. MR. This was unqualified acceptance of their identity as a Filipino and the complete disavowal of any other nationality. Their present status having been formed by their past. It was commitment and fidelity to the state coupled with a pledge "to renounce absolutely and forever all allegiance" to any other state. consistent with petitioners’ election of Philippine citizenship. Better than the relaxation of the requirement. Natural-born citizens are those who are citizens of the Philippines from birth without having to perform any act to acquire or perfect their Philippine citizenship. even. we even allow the late registration of the fact of birth and of marriage. while the 1935 Constitution requires that children of Filipino mothers elect 71 Philippine citizenship upon reaching their age of majority. (Emphasis supplied. The failure to register as aliens is. and continued and uninterrupted stay in the Philippines since birth. if the father were an alien or unknown. the 1987 Constitution now classifies them as natural-born citizens upon election of Philippine citizenship. The 1973 provision reads: Section 1. The leanings towards recognition of the citizenship of children of Filipino mothers have been indicated not alone by the jurisprudence that liberalized the requirement on time of election. I understand that the committee would further liberalize this provision of the 1935 Constitution. and recognized positive acts of Philippine citizenship. 69 the 1973 Constitution. The Committee seemingly proposes to further liberalize the policy of the 1935 Constitution by making those who became citizens of the Philippines CASES – partnership Page 46 of 63 72 Corollary to this fact. The favor that is given to such children is likewise evident in the evolution of the constitutional provision on Philippine citizenship.

[T]his provision becomes very. I would. a child be made to choose. the question on what citizenship the child would prefer arises. x x x Precisely. the Bureau of Immigration.through a declaration of intention to choose their mother’s citizenship upon reaching the majority age by declaring that such children are natural-born 75 citizens of the Philippines. although belatedly. But certainly it is within the jurisdiction of the Philippine government to require that [at] a certain point. in this case. by subsequently choosing Philippine citizenship. xxxx FR. lost it voluntarily. this individual in the situation contemplated in Section 1. which the Committee is now planning to consider a natural-born citizen. The failure to register the election in the civil registry should not defeat the election and resultingly negate the permanent fact that they have a Filipino mother. RODRIGO. it would appear that his choice retroacted to the date of his birth so much so that under the Gentleman’s proposed amendment. whereas. to be a Justice of 80 the Supreme Court x x x. paragraph 3 never had the 79 chance to choose. all he had was just an inchoate right to choose Philippine citizenship. very important because his election of Philippine citizenship makes him not only a Filipino citizen but a natural-born Filipino citizen. if any. But whether or not she is considered a citizen of another country is something completely beyond our control. Did the Committee take into account the fact that at the time of birth. 1avvphi1 Having a Filipino mother is permanent. But I do not think we should penalize the child before he is even able to choose. We are guided by this evolvement from election of Philippine citizenship upon reaching the age of majority under the 1935 Philippine Constitution to dispensing with the election requirement under the 1973 Philippine Constitution to express classification of these children as natural-born citizens under the 1987 Constitution towards the conclusion that the omission of the 1941 statutory requirement of registration of the documents of election should not result in the obliteration of the right to Philippine citizenship. The idea was that we should not penalize the mother of a child simply because she fell in love with a foreigner. he 78 would be a natural-born citizen? [on the period within which to elect Philippine citizenship] MR. It is the basis of the right of the petitioners to elect Philippine citizenship. The lacking requirements may still be complied with subject to the imposition of appropriate administrative penalties. xxxx xxx Why does the draft resolution adopt the provision of the 1973 Constitution 76 and not that of the 1935? xxxx FR. and the Resolution dated 29 May 2008 of the Court of Appeals in CA-G. BERNAS. WHEREFORE. then let him choose when he reaches the age of majority. xxxx MR. We recognize a child of a Filipino mother. We really have no way of guessing the preference of the infant. he will be so the moment he opts for Philippine citizenship. 89532 affirming the CASES – partnership Page 47 of 63 .R. SP No. support the retention of the modification made in 77 1973 of the male chauvinistic rule of the 1935 Constitution. The documents they submitted supporting their allegations that they have already registered with the civil registry. should be examined for validation purposes by the appropriate agency. the Decision dated 29 August 2007. REGALADO. But if we recognize the right of the child to choose. BERNAS. entitling him to run for Congress. therefore. But the difference between him and the natural-born who lost his status is that the natural-born who lost his status. Other requirements embodied in the administrative orders and other issuances of the Bureau of Immigration and the Department of Justice shall be complied with within a reasonable time. Petitioners elected Philippine citizenship in form and substance. and yet. Now. With respect to a child who became a Filipino citizen by election. the reason behind the modification of the 1935 rule on citizenship was a recognition of the fact that it reflected a certain male chauvinism. and it was for the purpose of remedying that this proposed provision was put in. I think dual citizenship is just a reality imposed on us because we have no control of the laws on citizenship of other countries.

Judgment dated 2 February 2005, and the Resolution dated 8 April 2005 of the Bureau of Immigration in BSI-D.C. No. AFF-04-574 OC-STF-04-09/23-1416 are hereby SET ASIDE with respect to petitioners Balgamelo Cabiling Ma, Felix Cabiling Ma, Jr., and Valeriano Cabiling Ma. Petitioners are given ninety (90) days from notice within which to COMPLY with the requirements of the Bureau of Immigration embodied in its Judgment of 2 February 2005. The Bureau of Immigration shall ENSURE that all requirements, including the payment of their financial obligations to the state, if any, have been complied with subject to the imposition of appropriate administrative fines; REVIEW the documents submitted by the petitioners; and ACT thereon in accordance with the decision of this Court. SO ORDERED. JOSE PORTUGAL PEREZ Associate Justice WE CONCUR: RENATO C. CORONA Chief Justice Chairperson ANTONIO EDUARDO B. PRESBITERO J. VELASCO, JR. * NACHURA Associate Justice Associate Justice

RENATO C. CORONA Chief Justice

Footnotes
*

TERESITA J. LEONARDO-DE CASTRO Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

Per raffle dated 5 October 2009, Associate Justice Antonio Eduardo B. Nachura is designated as additional member in place of Associate Justice Mariano C. Del Castillo. 1 Deceased. CA rollo, p. 70. 2 Rollo, p. 18. 3 CA rollo, pp. 56, 61, and 66. 4 Rollo, p. 41. 5 CA rollo, pp. 99-101. 6 Id. at 57-59. 7 Id. at 62-64. 8 Id. at 71. 9 Rollo, pp. 85-86. 10 CA rollo, pp. 72 and 76. 11 Rollo, p. 220. 12 Id. at 226. 13 Id. at 119. 14 CA rollo, back of pp. 37-38. 15 Rollo, p. 42. 16 Sec. 37. (a) The following aliens shall be arrested upon the warrant of the Commissioner of Immigration or any other officer designated by him for the purpose and deported upon the warrant of the Commissioner of Immigration after a determination by the Board of Commissioners of the existence of the ground for deportation as charged against the alien: (1) xxx xxxx (7) Any alien who remains in the Philippines in violation of any limitation or condition under which he was admitted as a non-immigrant. 17 Sec. 45. Any individual who: (a) xxx xxxx (e) Being an alien shall, for any fraudulent purpose, represent himself to be a Philippine citizen in order to evade any requirement of the immigration laws. 18 CA rollo, pp. 39-40. CASES – partnership Page 48 of 63

19 20

Id. at 29-33. Id. at 31. 21 Ronaldo P. Ledesma, An Outline of Philippine Immigration and Citizenship Laws, 1999, Rex Printing Company, Inc., p. 360. 22 CA rollo, p. 31. 23 Id. 24 Id. at 32. 25 The Bureau of Immigration Official Website, www.immigration.gov.ph. 26 CA rollo, p. 32. 27 Id. 28 Id. 29 Id. at 32-33. 30 Id. at 34-37. 31 Id. at 35. 32 Id. 33 Penned by Associate Justice Josefina Guevara-Salonga with Associate Justices Mariano C. del Castillo (now a member of this Court) and Fernanda Lampas-Peralta, concurring. Rollo, pp. 10-23. 34 Id. at 22. 35 Id. at 25-26. 36 Id. 37 Section 1(4), Article IV, 1935 Philippine Constitution. 38 374 Phil. 342, 354 (1999). 39 115 Phil. 90 (1962). 40 Re: Application for Admission to the Philippine Bar, Vicente D. Ching, supra note 38 at 350 citing Art. 402, Civil Code. 41 Id. 42 Id. 43 Id. citing Cueco, supra note 39. 44 Id. 45 G.R. No. 167569, 4 September 2009, 598 SCRA 266. 46 Id. at 280. 47 158 Phil. 50 (1974). 48 G.R. Nos. 92191-92, 30 July 1991, 199 SCRA 692. 49 Supra note 38. 50 In Re: Florencio Mallare, supra note 47 at 58. 51 Id. at 57-58. 52 Id. at 53. 53 Rollo, p. 20. 54 Co v. Electoral Tribunal of the House of Representatives, supra note 48 at 708. 55 Id. at 709.

56 57

Id. Supra note 38 at 354. 58 Rollo, pp. 19-20. 59 401 Phil. 350, 366-367 (2000). 60 Id. citing Po Sun Tun v. Prize and Provincial Government of Leyte, 54 Phil. 192, 195 (1929). 61 Id. 62 Id. citing Paras, Civil Code of the Philippines, Vol. II, 1989 ed., p. 653 citing Bautista v. Dy Bun Chin, 49 Official Gazette 179, 183 (1952). 63 Id. 64 Id. 65 Angeles, v. The Hon. Secretary of Justice, G.R. No. 142612, 29 July 2005, 465 SCRA 106, 115. 66 Sunga-Chan v. Chua, 415 Phil. 477, 491 (2001). 67 Gutierrez v. Mendoza-Plaza, G.R. No. 185477, 4 December 2009, 607 SCRA 807, 817. 68 Bollozos v. Yu Tieng Su, 239 Phil. 475, 485 (1987) citing Bautista v. Dy Bun Chin, supra note 62. 69 Delayed Registration – Birth, Death, and Marriage x x x. http://www.census.gov.ph/data/civilreg/delayedreg_primer.html. 70 Rollo, pp. 21-22. 71 Section 1(4), Article IV, 1935 Philippine Constitution. 72 Records of the 1986 Constitutional Commission, Volume 1, p. 185. 73 Article IV, 1973 Constitution of the Philippines. 74 Section 1. The following are citizens of the Philippines: (1) xxx; xxxx (3) Those born before January 17, 1973, of Filipino mothers, who elect Philippine citizenship upon reaching the age of majority. 75 Records of the 1986 Constitutional Commission, Volume 1, 23 June 1986, p. 202. 76 Id. 77 Id. at 203. 78 Id. at 206. 79 Id. 80 Records of the 1986 Constitutional Commission, Volume 1, 25 June 1986, p. 231.
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CASES – partnership Page 49 of 63

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 84197 July 28, 1989 PIONEER INSURANCE & SURETY CORPORATION, petitioner, vs. THE HON. COURT OF APPEALS, BORDER MACHINERY & HEAVY EQUIPMENT, INC., (BORMAHECO), CONSTANCIO M. MAGLANA and JACOB S. LIM, respondents. G.R. No. 84157 July 28, 1989 JACOB S. LIM, petitioner, vs. COURT OF APPEALS, PIONEER INSURANCE AND SURETY CORPORATION, BORDER MACHINERY and HEAVY EQUIPMENT CO., INC,, FRANCISCO and MODESTO CERVANTES and CONSTANCIO MAGLANA, respondents. Eriberto D. Ignacio for Pioneer Insurance & Surety Corporation. Sycip, Salazar, Hernandez & Gatmaitan for Jacob S. Lim. Renato J. Robles for BORMAHECO, Inc. and Cervanteses. Leonardo B. Lucena for Constancio Maglana. GUTIERREZ, JR., J.: The subject matter of these consolidated petitions is the decision of the Court of Appeals in CA-G.R. CV No. 66195 which modified the decision of the then Court of First Instance of Manila in Civil Case No. 66135. The plaintiffs complaint (petitioner in G.R. No. 84197) against all defendants (respondents in G.R. No. 84197) was dismissed but in all other respects the trial court's decision was affirmed. The dispositive portion of the trial court's decision reads as follows:

WHEREFORE, judgment is rendered against defendant Jacob S. Lim requiring Lim to pay plaintiff the amount of P311,056.02, with interest at the rate of 12% per annum compounded monthly; plus 15% of the amount awarded to plaintiff as attorney's fees from July 2,1966, until full payment is made; plus P70,000.00 moral and exemplary damages. It is found in the records that the cross party plaintiffs incurred additional miscellaneous expenses aside from Pl51,000.00,,making a total of P184,878.74. Defendant Jacob S. Lim is further required to pay cross party plaintiff, Bormaheco, the Cervanteses one-half and Maglana the other half, the amount of Pl84,878.74 with interest from the filing of the cross-complaints until the amount is fully paid; plus moral and exemplary damages in the amount of P184,878.84 with interest from the filing of the cross-complaints until the amount is fully paid; plus moral and exemplary damages in the amount of P50,000.00 for each of the two Cervanteses. Furthermore, he is required to pay P20,000.00 to Bormaheco and the Cervanteses, and another P20,000.00 to Constancio B. Maglana as attorney's fees. xxx xxx xxx WHEREFORE, in view of all above, the complaint of plaintiff Pioneer against defendants Bormaheco, the Cervanteses and Constancio B. Maglana, is dismissed. Instead, plaintiff is required to indemnify the defendants Bormaheco and the Cervanteses the amount of P20,000.00 as attorney's fees and the amount of P4,379.21, per year from 1966 with legal rate of interest up to the time it is paid. Furthermore, the plaintiff is required to pay Constancio B. Maglana the amount of P20,000.00 as attorney's fees and costs. No moral or exemplary damages are awarded against plaintiff for this action was filed in good faith. The fact that the properties of the Bormaheco and the Cervanteses were attached and that they were required to file a counterbond in order to dissolve the attachment, is not an act of bad faith. When a man tries to protect his rights, he should not be saddled with moral or exemplary damages. Furthermore, the rights exercised were provided for in the Rules of Court, and it was the court that ordered it, in the exercise of its discretion. No damage is decided against Malayan Insurance Company, Inc., the third-party defendant, for it only secured the attachment prayed for by the plaintiff Pioneer. If an insurance company would be liable for damages in performing an act which CASES – partnership Page 50 of 63

Lim. The Cervanteses and Maglana. One DC-3 Aircraft with Registry No.626. As stated earlier. PIC-718. all sums and amounts of money which it or its representatives should or may pay or cause to be paid or become liable to pay on them of whatever kind and nature. (Bormaheco). No. No. damages. The deed (Exhibit D) was duly registered with the Office of the Register of Deeds of the City of Manila and with the Civil Aeronautics Administration pursuant to the Chattel Mortgage Law and the Civil Aeronautics Law (Republic Act No. No. 84197) as surety executed and issued its Surety Bond No. the appellate court modified the trial court's decision in that the plaintiffs complaint against all the defendants was dismissed.12. reimburse and make good to Pioneer. They executed two (2) separate indemnity agreements (Exhibits D-1 and D-2) in favor of Pioneer. It was stipulated therein that Lim transfer and convey to the surety the two aircrafts. at Tokyo. 24197. We first resolve G.R. 1966. 1965. petitioner in G.1965 while the other aircraft. Japan Domestic Airlines (JDA) and Lim entered into and executed a sales contract (Exhibit A) for the sale and purchase of two (2) DC-3A Type aircrafts and one (1) set of necessary spare parts for the total agreed price of US $109.R. arrived in Manila on June 7. Lim doing business under the name and style of SAL executed in favor of Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former. in behalf of its principal. by way of counterclaim. charges and expenses of whatever kind and nature which Pioneer may incur in consequence of having become surety upon the bond/note and to pay. No. a decision was rendered holding Lim liable to pay Pioneer but dismissed Pioneer's complaint against all other defendants. No further claim or counter-claim for or against anybody is declared by this Court. penalties. (Rollo .1965.is clearly within its power and which is the reason for its being.R. Lim defaulted on his subsequent installment payments prompting JDA to request payments from the surety. pp. Maglana. Pioneer Insurance and Surety Corporation (Pioneer. 776).00 to be paid in installments.000. On July 19. respectively. In their Answers. 84197. Petitioner Pioneer Insurance and Surety Corporation avers that: RESPONDENT COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT DISMISSED THE APPEAL OF PETITIONER ON THE SOLE GROUND THAT PETITIONER HAD ALREADY COLLECTED THE PROCEEDS OF THE REINSURANCE ON ITS BOND IN FAVOR OF THE JDA AND THAT IT CANNOT REPRESENT A REINSURER TO RECOVER THE AMOUNT CASES – partnership Page 51 of 63 . After trial on the merits. 15-16) In 1965. filed a third party claim alleging that they are co-owners of the aircrafts. the Cervanteses. taxes. It appears that Border Machinery and Heavy Equipment Company. Bormaheco and the Cervanteses. Japan. losses. Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage before the Sheriff of Davao City. for the balance price of the aircrafts and spare parts. then nobody would engage in the insurance business. arrived in Manila on July 18.R. Francisco and Modesto Cervantes (Cervanteses) and Constancio Maglana (respondents in both petitions) contributed some funds used in the purchase of the above aircrafts and spare parts. Jacob S. 1965. 1965. costs. sought for damages for being exposed to litigation and for recovery of the sums of money they advanced to Lim for the purchase of the aircrafts in question. Pioneer filed an action for judicial foreclosure with an application for a writ of preliminary attachment against Lim and respondents. Inc. In all other respects the trial court's decision was affirmed. however. Bormaheco and Maglana. 84157) was engaged in the airline business as owner-operator of Southern Air Lines (SAL) a single proprietorship. The indemnity agreements stipulated that the indemnitors principally agree and bind themselves jointly and severally to indemnify and hold and save harmless Pioneer from and against any/all damages. Bormaheco and the Cervanteses filed cross-claims against Lim alleging that they were not privies to the contracts signed by Lim and. Pioneer paid a total sum of P298.G. 6639 (Exhibit C) in favor of JDA. On May 17. On May 22. The funds were supposed to be their contributions to a new corporation proposed by Lim to expand his airline business. its successors and assigns. On June 10. one signed by Maglana and the other jointly signed by Lim for SAL. Lim (petitioner in G.

414. he must appear to be the present real owner of the right sought to be enforced (Moran. Warner Barnes & Co. Plaintiff did not even present any evidence that it is the attorney-in-fact of the reinsurance company. considering the amount it has realized from the sale of the mortgaged properties? (Record on Appeal.28 from defendants will no longer prosper. the petitioner is entitled to recover from respondents Bormaheco and Maglana. I. and paid with the said amount the bulk of its alleged liability to JDA under the said surety bond. 1 NW 2d 424. (Rollo. p. 84197. 97 P. 2d 1600. 1979 ed.00 from the sale of the mortgaged chattels. hence.000. Based on the foregoing premises. 155). the former was able to foreclose extra-judicially one of the subject airplanes and its spare engine. still none of the respondents had any interest in the matter since the reinsurance is strictly between the petitioner and the re-insurer pursuant to section 91 of the Insurance Code.28. Oglleaby v. (Rollo .000.28 would be tantamount to unjust enrichment as it has already been paid by the reinsurance company of the amount plaintiff has paid to JDA as surety of defendant Lim visa-vis defendant Lim's liability to JDA.666. Plaintiff Pioneer is not the real party in interest to institute the instant action as it does not stand to be benefited or injured by the judgment. To allow plaintiff Pioneer to recover from defendants the amount in excess of P298.666. to the proceeds of the reinsurance amounting to P295. 24-25). hence. The records belie the petitioner's contention that the issue on the reinsurance money was never raised by the parties. 84157). 669. it instituted the action is utterly devoid of merit. R.72 considering that the total amount it had paid to JDA totals to only P298. Flowers v. as this matter has never been raised by any of the parties herein both in their answers in the court below and in their respective briefs with respondent court. plaintiffs instant action for the recovery of the amount of P298. To qualify a person to be a real party in interest in whose name an action must be prosecuted.00.050. Plaintiff Pioneer's contention that it is representing the reinsurer to recover the amount from defendants. Springfield Marine Bank. has Pioneer still any claim against defendants. p.000. 27. 11) (2) even assuming hypothetically that it was paid by its reinsurer. the trial court made the following findings: It appearing that Pioneer reinsured its risk of liability under the surety bond it had executed in favor of JDA. 88 Phil. Has Pioneer a cause of action against defendants with respect to so much of its obligations to JDA as has been paid with reinsurance money? If the answer to the preceding question is in the negative. p. The petitioner contends that-(1) it is at a loss where respondent court based its finding that petitioner was paid by its reinsurer in the aforesaid amount.FROM HEREIN PRIVATE RESPONDENTS AS DEFENDANTS IN THE TRIAL COURT. plaintiff Pioneer cannot be considered as the real party in interest as it has already been paid by the reinsurer the sum of P295. it is patent that plaintiff has been overpaid in the amount of P33. contingent. and (4) the principle of unjust enrichment is not applicable considering that whatever amount he would recover from the co-indemnitor will be paid to the reinsurer. Annex B of G. New Civil Code).000.E. CASES – partnership Page 52 of 63 . 131).R. it is plain that on this score it no longer has any right to collect to the extent of the said amount. 52 N. realizing the total amount of P37.00 — the bulk of defendants' alleged obligation to Pioneer. Ltd. In resolving these issues. A cursory reading of the trial court's lengthy decision shows that two of the issues threshed out were: xxx xxx xxx 1. 35). Weber v. 67 Phil.00. (3) pursuant to the indemnity agreements. pp. p. collected the proceeds of such reinsurance in the sum of P295. 10) The petitioner questions the following findings of the appellate court: We find no merit in plaintiffs appeal. No. (Rollo-84197. No. 125. David. City of Cheye. 2.V. Vol. Comments on the Rules of Court. subordinate or consequential interest (Garcia v. 2d 667. It has been held that the real party in interest is the party who would be benefited or injured by the judgment or the party entitled to the avails of the suit (Salonga v. By real party in interest is meant a present substantial interest as distinguished from a mere expectancy or a future.000. Well settled is the rule that no person should unjustly enrich himself at the expense of another (Article 22..00. authorized to institute an action for and in behalf of the latter. 359. 385 III. quoting 47 C. In addition to the said proceeds of the reinsurance received by plaintiff Pioneer from its reinsurer.G...666.050. Germans.00. Defendants' alleged obligation to Pioneer amounts to P295. It is undisputed that plaintiff Pioneer had reinsured its risk of liability under the surety bond in favor of JDA and subsequently collected the proceeds of such reinsurance in the sum of P295. Adding the sum of P37.383.

Con. Pioneer has no right to institute and maintain in its own name an action for the benefit of the reinsurers. that there is no law permitting an action to be brought by an attorney-in-fact. The real party in interest is the party who would be benefitted or injured by the judgment or is the party entitled to the avails of the suit.383. the petitioner's argument that the respondents had no interest in the reinsurance contract as this is strictly between the petitioner as insured and the reinsuring company pursuant to Section 91 (should be Section 98) of the Insurance Code has no basis. 484. Interpreting the aforesaid provision. Air Lines.126 GA. we ruled in the case of Phil.00 for a spare engine. 2207.. Considering this admitted payment. The total amount paid by Pioneer to JDA is P299. This is the amount for which Pioneer may sue defendants. under this legal provision. then the aggrieved party is the one entitled to recover the deficiency. If the plaintiffs property has been insured. 19 Phil. 1134). 330. No.050. v. v. Filipinos Industrial Corporation v.On the question of why it is Pioneer. Co. But in the first place. notwithstanding that the cause of action pertains to the latter. Heald Lumber Co. CASES – partnership Page 53 of 63 . Pioneer is still overpaid by P33. the only issue that cropped up was the effect of payment made by the reinsurers to the petitioner. In general a reinsurer. If the amount paid by the insurance company does not fully cover the injury or loss. The payment to the petitioner made by the reinsurers was not disputed in the appellate court. the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. Limjuco and Gonzalo. Pioneer has no more claim against defendants.666. 18 Phil. Evidently. v. Granada and Gentero.A. the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. L. there is not the slightest indication in the complaint that Pioneer is suing as attorney-in. Inc.C. Co. insofar as the amount paid to it by the reinsurers Pioneer is suing defendants as their attorney-in-fact. Rep.' In other words. 710-714. (Emphasis supplied). It is well-settled that an action brought by an attorney-in-fact in his own name instead of that of the principal will not prosper.28. Court of Appeals (154 SCRA 650 [1987]): Note that if a property is insured and the owner receives the indemnity from the insurer. Pioneer Insurance & Surety Corporation is representing the reinsurers to recover the amount. Since Pioneer has collected P295..000. Pioneer says: The reinsurers opted instead that the Pioneer Insurance & Surety Corporation shall pursue alone the case. . the uninsured portion of what it paid to JDA is the difference between the two amounts. It is clear from the records that Pioneer sued in its own name and not as an attorney-in-fact of the reinsurer. Luchauco v.000.72. Pennsylvania Fire Ins.00 for one of the airplanes and P2. Hence the applicable law is Article 2207 of the new Civil Code. C. and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of. . Section 2 of Rule 3 of the Old Rules of Court provides that 'Every action must be prosecuted in the name of the real party in interest. or a total of P37.00. and this is so even where the name of the principal is disclosed in the complaint. instead of the reinsurance (sic). Therefore. 1031 [1957]) which we subsequently applied in Manila Mahogany Manufacturing Corporation v.1968. .666. 12.E. San Diego G. Rep. pp. 7 Ann. But since the amount realized from the sale of the mortgaged chattels are P35. Co. 46 F 2nd 925). Lastly.' This provision is mandatory. and most important of all. The rules of practice in actions on original insurance policies are in general applicable to actions or contracts of reinsurance. Ins. 55 S.22347. Old Time Molasses Co. (101 Phil. La.fact of the reinsurers for any amount.R. the real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured. assuming that the indemnity agreement is still valid and effective. (Record on Appeal. Therefore. it is provided in said article that the insurer is deemed subrogated to the rights of the insured against the wrongdoer and if the amount paid by the insurer does not fully cover the loss. Arroyo v. or P3. 380. This Court has held in various cases that an attorney-in-fact is not a real party in interest..29. that is suing defendants for the amount paid to it by the reinsurers. to wit: Art. 360-363).050. (Delaware. on payment of a loss acquires the same rights by subrogation as are acquired in similar cases where the original insurer pays a loss (Universal Ins.00 from the reinsurers. 23 SCRA 706.

Such being the case. the alternative remedies open to Pioneer were as provided in Article 1484 of the New Civil Code. Rollo) to back up its contention. Nor may the application of the provision be validly opposed on the ground that these defendants and defendant Maglana are not the vendee but indemnitors. Sec 2. or SAL extinguish the original obligations thru novations thus discharging the indemnitors. Prescinding from the foregoing. The indemnity agreement was ipso jure extinguished upon the foreclosure of the chattel mortgage. Universal Motors Corporation. This is judicial admission and aside from the chattel mortgage there is no other security for the claim sought to be enforced by this action.' Cruz. cite any grounds except its allegation that respondent "Maglanas defense and evidence are certainly incredible" (p. thru the change of their maturity dates discharged these defendants from any liability as alleged indemnitors. the petitioner argues that the appeal as regards the counter indemnitors should not have been dismissed on the premise that the evidence on record shows that it is entitled to recover from the counter indemnitors. no longer has any further action against the defendants as indemnitors to recover any unpaid balance of the price. Filipinas Investment & Finance Corp. 61 SCRA 124. would be entitled to be subrogated to the right of Pioneer should they make payments to the latter. we find the trial court's findings on the matter replete with evidence to substantiate its finding that the counter-indemnitors are not liable to the petitioner. It does not. The trial court stated: Apart from the foregoing proposition. v.24772. L. but this was not possible because the planes were still in Japan and could not be mortgaged here in the Philippines. known as the Recto Law. as provided by the aforementioned provisions.R. Pioneer. SAL or Lim.1968. Testimonies of defendants Francisco Cervantes and Modesto Cervantes. 23 SCRA 791. 12. the indemnity agreement ceased to be valid and effective after the execution of the chattel mortgage. the appellate court did not commit a reversible error in dismissing the petitioner's complaint as against the respondents for the reason that the petitioner was not the real party in interest in the complaint and. Pioneer Insurance. therefore. May 27. has no cause of action against the respondents. agreed to issue the bond provided that the same would be mortgaged to it. The operation of the foregoing provision cannot be escaped from through the contention that Pioneer is not the vendor but JDA. as indemnitors. Nevertheless. The restructuring of the obligations of SAL or Lim. The principal hereof shall be paid in eight equal successive three months interval installments. however. the remainder of which . The change of the maturity dates of the obligations of Lim. which necessarily means that the indemnity agreement had ceased to have any force and effect at the time this action was instituted. having foreclosed the chattel mortgage on the planes and spare parts. Nov.. Pioneer exercised the remedy of foreclosure of the chattel mortgage both by extrajudicial foreclosure and the instant suit. On the other hand. 20. No. shall be due and payable on CASES – partnership Page 54 of 63 . knowing the value of the aircrafts and the spare parts involved. Revised Rules of Court. G.27862. having failed to pay the second to the eight and last installments to JDA and Pioneer as surety having made of the payments to JDA. The reason is that Pioneer is actually exercising the rights of JDA as vendor. Independently of the preceding proposition Pioneer's election of the remedy of foreclosure precludes any further action to recover any unpaid balance of the price. As soon as the aircrafts were brought to the Philippines. No. et al. 795-6. et al. and this indemnity agreement would be cancelled. These defendants. The following is averred under oath by Pioneer in the original complaint: The various conflicting claims over the mortgaged properties have impaired and rendered insufficient the security under the chattel mortgage and there is thus no other sufficient security for the claim sought to be enforced by this action. Pascual. Pioneer shall have no further action against the purchaser to recover any unpaid balance and any agreement to the contrary is void. the first of which shall be due and payable 25 August 1965. Articles 2067 and 2080 of the New Civil Code of the Philippines. they would be mortgaged to Pioneer Insurance to cover the bond..Accordingly.1974. v. having subrogated it in such rights. L. Rule 129.

Lim poses the following issues: l. An extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the guaranty The mere failure on the part of the creditor to demand payment after the debt has become due does not of itself constitute any extension time referred to herein. pp. 538.R.. Pioneer has no more cause of action to These questions are premised on the petitioner's theory that as a result of the failure of respondents Bormaheco. Pioneer is not entitled to exact reimbursement from these defendants thru the indemnity. were done without the knowledge. a de facto partnership among them was created.. Art. questions the appellate court's findings ordering him to CASES – partnership Page 55 of 63 . 1571. 1965. Spouses Cervantes. We find no cogent reason to reverse or modify these findings. (Rollo. of each succeeding months and the last of which shall be due and payable 4th June 1967. 55 Phil. much less. 45 Phil. No. and those of the rest of the installments. The instant action is clearly unfounded insofar as plaintiff drags these defendants and defendant Maglana. Manresa.. p. However. 84157).. the 15th of each succeeding three months.) 36 O. Rollo of G. Vol. These restructuring of the obligations with regard to their maturity dates. and that as a consequence of such relationship all must share in the losses and/or gains of the venture in proportion to their contribution. But if that were so. (New Civil Code).. No. v. it is our conclusion that the petition in G. Climacom et al.R. Pioneer produced a memorandum executed by SAL or Lim and JDA. 563. Ltd. 316-317. 1967. Therefore. The consequence of this was the extinguishment of the obligations and of the surety bond secured by the indemnity agreement which was thereby also extinguished. 6). as supposed indemnitors. pp. These defendants are entitled to recover damages and attorney's fees from Pioneer and its surety by reason of the filing of the instant case against them and the attachment and garnishment of their properties. Petitioner Jacob S. therefore. Vol. modifying the maturity dates of the obligations. M. as follows: The principal hereof shall be paid in eight equal successive three month interval installments the first of which shall be due and payable 4 September 1965.' recover from these defendants. effected twice. and the case of Asiatic Petroleum Co. what it has paid to JDA. shall be due and payable on the 4th day . the remainder of which . 363-369. 562-563. 4th ed.' (Record on Appeal. Hizon David. Stevenson & Co. 84157. 532.the 26th day x x x of each succeeding three months and the last of which shall be due and payable 26th May 1967. Consequently. 2079.R. and there is no such document. 553. Pioneer's official Numeriano Carbonel would have it believed that these defendants and defendant Maglana knew of and consented to the modification of the obligations. the due date of the first installment appears as October 15. v. the failure of JDA to present its claim to Pioneer within ten days from default of Lim or SAL on every installment. would have it believed that these defendants Maglana (sic). Pioneer's liability as surety to JDA had already prescribed when Pioneer paid the same. No.. 84197 is not meritorious. The petitioner.A. By virtue of an express stipulation in the surety bond. Pacheco. Hence. released Pioneer from liability from the claim. there would have been the corresponding documents in the form of a written notice to as well as written conformity of these defendants. pp. What legal rules govern the relationship among co-investors whose agreement was to do business through the corporate vehicle but who failed to incorporate the entity in which they had chosen to invest? How are the losses to be treated in situations where their contributions to the intended 'corporation' were invested not through the corporate form? This Petition presents these fundamental questions which we believe were resolved erroneously by the Court of Appeals ('CA'). that of the last installment being July 15. Pioneer also produced eight purported promissory notes bearing maturity dates different from that fixed in the aforesaid memorandum.. at the trial of this case. (C. VI. Art. Constancio Maglana and petitioner Lim to incorporate. Applicable by analogy are the rulings of the Supreme Court in the case of Kabankalan Sugar Co. 1318.G. We now discuss the merits of G. Not only that. 12. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if such payment is made after the obligation has prescribed or became illegal. v.F.

29 L.W..74. to wit: However. and their organization is so defective as to come short of creating a corporation within the statute. who were also directors. and no stock was ever issued in the corporation. the petitioner denied having received any amount from respondents Bormaheco. 584). Since then up to the filing of this answer. and each conveyed land to the corporation. It is therefore clear that the petitioner never had the intention to form a corporation with the respondents despite his representations to them. Perryman. 461. that sometime in early 1965. Whipple v. when their purpose is that no partnership shall exist (London Assur. Lim has refused. (Record on Appeal. 446. will not be implied in the absence of an agreement. Minn.. the cross-party plaintiffs incurred additional expenses. 442. with interest from the filing of the cross-complaints until the amount is fully paid. Lim was to procure two DC-3's from Japan and secure the necessary certificates of public convenience and necessity as well as the required permits for the operation thereof. In addition. Ann. v.. It is established in the records that defendant Lim had duly received the amount of Pl51. counterclaim. 615.109 Me. hence. where certain persons associated themselves as a corporation for the development of land for irrigation purposes. Parker. 44 N. Jacob Lim proposed to Francisco Cervantes and Maglana to expand his airline business. 127 Mass. likewise. Defendant Lim should pay one-half of the said amount to Bormaheco and the Cervanteses and the other one-half to defendant Maglana. 29 Okl. 29 Mich. 472.00 to petitioner Jacob Lim thru the Cervanteses. Schoodoc Pond Packing Co. where persons associate themselves together under articles to purchase property to carry on a business.878. 337-338). 369). Maglana alleged in his cross-claim: . it was treated as a trustee for the associates in an action between them for an accounting. Drennen. The record shows that defendant Maglana gave P75.00 for delivery to Lim which Cervantes did and Lim acknowledged receipt thereof. failed and still refuses to set up the corporation or return the money of Maglana. thus. cross-claim and third party complaint: CASES – partnership Page 56 of 63 . Cas. 54 A. p. 96 Md. the total sum of P 184. 268. to form a corporation and who carry on business under the corporate name occupy the position of partners inter se (Lynch v. Constancio B. such a relation does not necessarily exist. defendant Lim should be held liable to pay his co-defendants' crossclaims in the total amount of P184.878. and their rights as members of the company to the property acquired by the company will be recognized (Smith v.reimburse certain amounts given by the respondents to the petitioner as their contributions to the intended corporation.74 as correctly found by the trial court.1965. A partnership relation between certain stockholders and other stockholders. Maglana in the ownership of the subject airplanes and spare parts. Owen. found through Exhibit 58. 121. and it should be implied only when necessary to do justice between the parties. 688). so as to be liable as such in an action for settlement of the alleged partnership and contribution (Ward v. 464).. Vol.00 from defendants Bormaheco and Maglana representing the latter's participation in the ownership of the subject airplanes and spare parts (Exhibit 58). Maglana sometime in May 1965. (Corpus Juris Secundum. Brigham. 94 Am.Ed. 24). but fail. it is ordinarily held that persons who attempt. however. to subscribe for stock in a proposed corporation which is never legally formed does not become a partner with other subscribers who engage in business under the name of the pretended corporation. 79 Iowa 23). delivered his share of the undertaking. pp.R. 446). 84 A. However. it is to be noted that the petitioner was declared non-suited for his failure to appear during the pre-trial despite notification.. and two of them contracted to pay a third the difference in the proportionate value of the land conveyed by him. Lim in an undertaking sometime on or about August 9. that the petitioner received the amount of P151. one who takes no part except In the instant case. gave Cervantes his share of P75. sold. 68. 56 Cal. While it has been held that as between themselves the rights of the stockholders in a defectively incorporated association should be governed by the supposed charter and the laws of the state relating thereto and not by the rules governing partners (Cannon v. while respondents Bormaheco and the Cervanteses alleged in their answer. The trial court and the appellate court.S. 6 S.000.000. 119 P. promised to incorporate his airline in accordance with their agreement and proceeded to acquire the planes on his own account. the Cervanteses and Maglana. and its capital stock was treated as partnership assets. We first state the principles. 210. Corp. 116 U. This gives credence to the cross-claims of the respondents to the effect that they were induced and lured by the petitioner to make contributions to a proposed corporation which was never formed because the petitioner reneged on their agreement. (Italics supplied). Beaudry. In his answer.000. they become in legal effect partners inter se.00 representing the participation of Bormaheco and Atty. as between themselves. Cervantes. so as to make the former liable to contribute for payment of debts illegally contracted by the latter (Heald v. S. 229. Brush Electric Co. 1913A 1065). and the proceeds distributed among them in proportion to the value of the property contributed by each (Shorb v. Thus. for ordinarily persons cannot be made to assume the relation of partners.000.Ct. So. 555.

The Lawphil Project .1). defendant Lim lured and induced the answering defendants to purchase two airplanes and spare parts from Japan which the latter considered as their lawful contribution and participation in the proposed corporation to be known as SAL. The record shows that the petitioner was acting on his own and not in behalf of his other would-be incorporators in transacting the sale of the airplanes and spare parts.R.Sometime in April 1965. as surety executed its surety bond in favor of JDA on behalf of its principal Lim  Border Machinery and Heavy Equipment Co.. Fernan. (Record on Appeal. does NOT result in at least a partnership absent intent to form one (Corporate Law) FACTS:  1965: Jacob S. 84197 July 28. Lim is an owner-operator of Southern Airlines (SAL). to surrender the possession of the two planes and their accessories and or return the amount advanced by the former amounting to an aggregate sum of P 178. E. to defendant Lim. Notwithstanding repeated oral demands made by defendants Bormaheco and Cervanteses. 341-342). omitted and refused to comply with them. The answering defendants learned for the first time of this trickery and misrepresentation of the other. Feliciano.. SO ORDERED. JJ. Down payments were advanced by defendants Bormaheco and the Cervanteses and Constancio Maglana (Exh. Bidin and Cortes. no de facto partnership was created among the parties which would entitle the petitioner to a reimbursement of the supposed losses of the proposed corporation. thereby forcing them to file an adverse claim in the form of third party claim. concur. when their purpose is that no partnership shall exists  Should be implied only when necessary to do justice bet. a single proprietorship  May 17 1965: Japan Domestic Airlines (JDA) and Lim entered into a sales contract regarding: o 2 DC-#A type aircrafts o 1 set of necessary spare parts o Total: $ 190.. G. HELD: NO. defendant Lim in connivance with the plaintiff. Contrary to the agreement among the defendants. Pioneer paid for him and filed a petition for the foreclosure of chattel mortgage as security  CA affirmed Trial of Merits: Only Lim is liable to pay ISSUE: W/N failure of respondents to incorporate = de facto partnership. when the herein plaintiff chattel mortgage (sic) allegedly executed by defendant Lim. Inc. the instant petitions are DISMISSED.997. .Arellano Law Foundation . CA affirmed. Francisco and Modesto Cervantes and Constancio Maglana contributed funds for the transaction based on the misrepresentation of Lim that they will form a new corp. Jacob Lim.14 as evidenced by a statement of accounts.J.e. No. The questioned decision of the Court of Appeals is AFFIRMED. only pretend to make others liable) CASES – partnership Page 57 of 63 Applying therefore the principles of law earlier cited to the facts of the case. Arrangements and negotiations were undertaken by defendant Lim.000 in installments  May 22 1965: Pioneer Insurance and Surety Corp. the latter ignored. the parties (i. 1989 Lessons Applicable: Defective attempt to form a corp. to expand his business  Jun 10 1965: Lim as SAL executed in favor of Pioneer a deed of chattel mortgage as security o Restructuring of obligation to change the maturity was done 2x w/o the knowledge of other defendants  made the surety of JDA prescribed so not entitled to reimbursement o Upon default on the 2/8 payments. for ordinarily CANNOT be made to assume the relation of partners as between themselves.  Partnership inter se does NOT necessarily exist. J.. WHEREFORE. took no part. (Chairman). pp. C. signed and executed the alleged chattel mortgage and surety bond agreement in his personal capacity as the alleged proprietor of the SAL. necessarily.

It is also provided in the said articles of copartnership that all profits and losses of the partnership shall be divided share and share alike between the partners. 946). Pahamotang and Rojas started operation on May 1.] 192 SCRA 110 EUFRACIO D. On March 4. R.A. vs. Davao with the Bureau of Forestry which was approved and Timber License No. SECOND DIVISION [G. develop and promote such forests rights and concessions. everything else is the same. As found by the trial court. 919). p. Lim never intended to form a corp. One of the purposes of the duly-registered partnership was to "apply or secure timber and/or minor forests products licenses and concessions over public and/or private forest lands and to operate.07 (Decision. dismissing appellant's complaint. During the period from January 14. Maglana and Rojas executed their Articles of Co-Partnership (Exhibit "A") called Eastcoast Development Enterprises (EDE) with only the two of them as partners. Maglana and Rojas executed a document entitled "CONDITIONAL SALE OF INTEREST IN THE PARTNERSHIP.R. while appellant Rojas shall be the logging superintendent and shall manage the logging operations of the partnership.633. 114). On October 25. CONSTANCIO B. 1956. No. Aside from the slight difference in the purpose of the second partnership which is to hold and secure renewal of timber license instead of to secure the license as in the first partnership and the term of the second partnership is fixed to thirty (30) years. DECISION PARAS. EASTCOAST DEVELOPMENT ENTERPRISE" (Exhibits "C" CASES – partnership Page 58 of 63 . Pahamotang. including marketing and handling of cash and is authorized to sign all papers and instruments relating to the partnership. J. 30616 : December 10. The partnership EDE with an indefinite term of existence was duly registered on January 21. 3518. 1955 to April 30. A duly registered Articles of Co-Partnership was filed together with an application for a timber concession covering the area located at Cateel and Baganga. Maglana. and was able to ship logs and realize profits. appellee Maglana shall manage the business affairs of the partnership. The partnership formed by Maglana. Under the said Articles of Co-Partnership. the antecedent facts of the case are as follows: On January 14." (Rollo.A. Seventh Judicial District. An income was derived from the proceeds of the logs in the sum of P643. 35-56 was duly issued and became the basis of subsequent renewals made for and in behalf of the duly registered partnership EDE. ROJAS. Defendant-Appellee.: This is a direct appeal to this Court from a decision ** of the then Court of First Instance of Davao.] p. 1955. Branch III. Plaintiff-Appellant. 1956. 1956. Rojas and Agustin Pahamotang executed their Articles of Co-Partnership (Exhibit "B" and Exhibit "C") under the firm name EASTCOAST DEVELOPMENT ENTERPRISES (EDE). MAGLANA. 1956. 1955 with the Securities and Exchange Commission. there was no operation of said partnership (Record on Appeal [R. Because of the difficulties encountered. 1990. Rojas and Maglana decided to avail of the services of Pahamotang as industrial partner. in Civil Case No.

. p. 1957. to the capital investments of the partnership as well as his obligation to perform his duties as logging superintendent.A. which were compiled in three (3) volumes. 138-143).. which was granted on May 22. appellant's motion for reconsideration was denied (Ibid.A.12 to Pahamotang including the amount of loan secured by Pahamotang in favor of the partnership. R. Accordingly. 1957. Rojas filed an action before the Court of First Instance of Davao against Maglana for the recovery of properties. On June 29. 1964 (Ibid. pp. 1961 (Ibid. 894). R. either in cash or in equipment.. 1964. 1964 approving the report of the commissioners which was opposed by the appellee. receivership and damages.12.and "D") agreeing among themselves that Maglana and Rojas shall purchase the interest. docketed as Civil Case No. the name also given to the second partnership. He left and abandoned the partnership (Decision. 26-336). p. 948). 1961 (Exhibit "10") Maglana notified Rojas that he dissolved the partnership (R. It was also agreed in the said instrument that after payment of the sum of P31. pp..A. by way of chattel mortgage (Decision. Rojas filed his motion for reconsideration of the order dated May 27. Upon motion of Rojas on May 23.. 1-26). On April 7. 1957. pp.. Rojas' petition for appointment of a receiver was denied (R.A. attaching thereto the amended answer (Ibid. be dissolved. the two (Maglana and Rojas) shall become the owners of all equipment contributed by Pahamotang and the EASTCOAST DEVELOPMENT ENTERPRISES. p. p. Inc. CASES – partnership Page 59 of 63 . 894-895). Judge Romero also required the inclusion of the entire year 1961 in the report to be submitted by the commissioners (Ibid.. 337). On May 27. On March 17. 446-451). pp. 948).A. 336). pp. in a letter dated February 21. 125). Judge Romero appointed commissioners to examine the long and voluminous accounts of the Eastcoast Development Enterprises (Ibid. share and participation in the Partnership of Pahamotang assessed in the amount of P31.A. Rojas took funds from the partnership more than his contribution. 1961. On January 28. : nad Meanwhile. 1957. On May 11. 948). Maglana then told Rojas that the latter's share will just be 20% of the net profits. On February 4. Judge M. Inc. The motion to dismiss the complaint filed by Maglana on June 21. Thus. the partnership was continued by Maglana and Rojas without the benefit of any written agreement or reconstitution of their written Articles of Partnership (Decision. 1965.A.501. On September 19. After the withdrawal of Pahamotang. 1964. Pahamotang was paid in fun on August 31. the commissioners started examining the records and supporting papers of the partnership as well as the information furnished them by the parties. 1964. Reyes approved the submitted Commissioners' Report (Ibid. Rojas withdrew his equipment from the partnership for use in the newly acquired area (Decision. 1961. the CMS Estate. accounting.. Rojas entered into a management contract with another logging enterprise. pp. Rojas told Maglana that he will not be able to comply with the promised contributions and he will not work as logging superintendent. Such was the sharing from 1957 to 1959 without complaint or dispute (Decision.A. 1957. 3518 (Record on Appeal. 949).501.G. R. 949). No other rights and obligations accrued in the name of the second partnership (R. Maglana wrote Rojas reminding the latter of his obligation to contribute. 947). R. Two weeks after March 17. 921). 102-114) was denied by Judge Romero for want of merit (Ibid. R. Maglana filed his motion for leave of court to amend his answer with counterclaim. The equipment withdrawn were his supposed contributions to the first partnership and was transferred to CMS Estate.

That the alleged sale of forest concession Exhibit 9-B. As to whether the properties which were bought by the defendant and placed in his or in his wife's name were acquired with partnership funds or with funds of the defendant and — the Court declares that there is no evidence that these properties were acquired by the partnership funds. executed by Pablo Angeles David — is VALID AND BINDING UPON THE PARTIES AND SHOULD BE CONSIDERED AS PART OF MAGLANA'S CONTRIBUTION TO THE PARTNERSHIP. R. (b) Their sharing basis: whether in proportion to their contribution or share and share alike. that from 1957 to 1959. "6. that the sharing of profits and losses is on the basis of actual contributions. and who caused them and who should be liable for them — the Court declares that neither parties is entitled to damages. when Pahamotang was finally paid his share — the partnership of the defendant and the plaintiff is one of a de facto and at will. "7. 895896). which sells foodstuffs. and therefore the same should not belong to the partnership. the dispositive portion of which reads as follows: "WHEREFORE. The nature of the partnership and the legal relations of Maglana and Rojas after Pahamotang retired from the second partnership. or on the basis of share and share alike — this covered by actual contributions of the plaintiff and the defendant and by their verbal agreement. 1957. judgment is hereby rendered by the Court declaring that: "1. CASES – partnership Page 60 of 63 After trial. As to what is the legal effect of the letter of defendant to the plaintiff dated February 23. 1968. "3. 1961.A. but from 1960 to the date of dissolution. the plaintiff's share will be on the basis of his actual contribution and. (d) The damages suffered and who should be liable for them. the sharing is on the basis of 80% for the . 1964 and the following issues were agreed upon to be submitted to the trial court: (a) The nature of partnership and the legal relations of Maglana and Rojas after the dissolution of the second partnership. considering his indebtedness to the partnership. pp.nad defendant and 20% for the plaintiff of the profits. in effect dissolved the partnership.A mandatory pre-trial was conducted on September 8 and 9. that is the ratio and proportion of their respective contributions. that is. As to whether damages were suffered and. (c) The ownership of properties bought by Maglana in his wife's name. the lower court rendered its decision on March 11. "5. February 23. for as already stated above it is not a wise policy to place a price on the right of a person to litigate and/or to come to Court for the assertion of the rights they believe they are entitled to. did it dissolve the partnership or not — the Court declares that the letter of the defendant to the plaintiff dated February 23. 1961 of Maglana dissolving the partnership (Decision. and other merchandise to the laborers and employees of the Eastcoast Development Enterprises. and (e) The legal effect of the letter dated February 23. if so. Whether the sharing of partnership profits should be on the basis of computation. "2. the Court relative to the canteen. supplies. — the COURT DECLARES THE SAME AS NOT BELONGING TO THE PARTNERSHIP. "4. 1961. how much. the plaintiff is not entitled to any share in the profits of the said partnership. . the above facts and issues duly considered. after August 31. 1961. Further.

Hence. "10. and further the receipt is merely based upon an expectancy and/or still speculative. expressly or impliedly (Decision. R. Rojas insists that the registered partnership under the firm name of Eastcoast Development Enterprises (EDE) evidenced by the Articles of Co-Partnership dated January 14. Inc. Inc.00 the profits he received from the CMS Estate. and which was not paid to him. It was considered as a partnership at will because there was no term. The Court also directs and orders plaintiff Rojas to pay the sum of P62. The Court also credits the defendant the amount of P85. did not legally dissolve the registered partnership between them. To all intents and CASES – partnership Page 61 of 63 . and "12. The lower court is of the view that the second partnership superseded the first. the legally constituted partnership EDE (Exhibit "A") continues to govern the relations between them and it was legal error to consider a de facto partnership between said two partners or a partnership at will. Thus. 24-25).00 which according to him he is still entitled to receive from the CMS Estate. the original licensee. the terms and stipulations of said registered Articles of Co-Partnership (Exhibit "A") should govern the relations between him and Maglana. they pursued the same purposes and the capital contributions of Rojas and Maglana as stipulated in both partnerships call for the same amounts. Rojas and Pahamotang partnership contract. pp. Further. it appears evident that it was not the intention of the partners to dissolve the first partnership. operated by him. pp. Upon withdrawal of Agustin Pahamotang from the unregistered partnership (Exhibit "C"). 35-36 were secured in favor of the First Partnership. 1956 (Exhibit "C") and accordingly. so that when the second partnership was dissolved there was no written contract of co-partnership. The main issue in this case is the nature of the partnership and legal relationship of the Maglana-Rojas after Pahamotang retired from the second partnership. appellant is entitled to the rights enumerated in Article 1837 of the Civil Code and to the sharing profits between them of "share and share alike" as stipulated in the registered Articles of Co-Partnership (Exhibit "A"). express or implied. appellee Maglana and Agustin Pahamotang. After a careful study of the records as against the conflicting claims of Rojas and Maglana. no period was fixed. pp. EASTCOAST DEVELOPMENT ENTERPRISES. the letter of appellee Maglana dated February 23. is hereby denied considering that it has not yet been actually received. gave him an equal share in the profits and fixed the term of the second partnership to thirty (30) years." Decision. "9. The claim that plaintiff Rojas should be ordered to pay the further sum of P85. which they unmistakably called an "Additional Agreement" (Exhibit "9-B") (Brief for Defendant-Appellee. 962-963).000. dated March 4. being in contravention of the partnership agreement agreed upon and stipulated in their Articles of Co-Partnership (Exhibit "A"). 985-989).A. Just as important is the fact that all subsequent renewals of Timber License No. Except for the fact that they took in one industrial partner. the partnership which was carried on by Rojas and Maglana after the dissolution of the second partnership was a de facto partnership and at will. Rojas interposed the instant appeal. Hence. On the other hand. they adopted the same name.988. superseded and/or dissolved by the unregistered articles of co-partnership among appellant Rojas. Record on Appeal. 1955 (Exhibit "A") has not been novated. everything else was the same.00 the amount he should have received as logging superintendent. The complaint is hereby dismissed with costs against the plaintiff.19 his personal account to the partnership. : rd "SO ORDERED. Rather. and this should be considered as part of Maglana's contribution likewise to the partnership. 1961.000. upon the constitution of the second one."8. there was no reconstitution as provided for in the Maglana. the Court orders and directs plaintiff Rojas to pay or turn over to the partnership the amount of P69.000. "11.

as there are only two parties when Maglana notified Rojas that he dissolved the partnership. the answer is in the affirmative. is the fact that Maglana on March 17. if the cause is not justified or no cause was given. there are still subsisting obligations and contracts of the latter (Decision. hence.158. As found by the trial court. he becomes a debtor of the partnership for whatever he may have promised to contribute (Article 1786. On the basis of the Commissioners' Report..541. the conclusion is inevitable that Rojas and Maglana shall be guided in the liquidation of the partnership by the provisions of its duly registered Articles of Co-Partnership. the withdrawing partner is liable for damages but in no case can he be compelled to remain in the firm. all profits and losses of the partnership shall be divided "share and share alike" between the partners. nor a Partnership at Will. duly registered. No rights and obligations accrued in the name of the second partnership except in favor of Pahamotang which was fully paid by the duly registered partnership (Decision. Court of Appeals. 1957.purposes therefore. with or without justifiable cause.A. all business transactions were carried out under the duly registered articles. v. As earlier stated. Under the circumstances. Rojas replied that he will not be able to comply with the promised contributions and he will not work as logging superintendent. R. even if there is a specified term. By such statements. Maglana and Rojas agreed to purchase the interest. in the form of Supplementary Articles of Co-Partnership (Exhibit "C") which was never registered (Brief for Plaintiff-Appellant. the two (Maglana and Rojas) became the owners of equipment contributed by Pahamotang. Hence. the corresponding contribution of the partners from 1956-1961 are as follows: Eufracio Rojas who should have contributed P158. R. Being a contract of partnership. contributed only P18. 5). As to the question of whether or not Maglana can unilaterally dissolve the partnership in the case at bar. contributed P267.984.750. 950-957). With his withdrawal. each partner must share in the profits and losses of the venture. that is. par. it is in effect a notice of withdrawal. Under Article 1830. 2 of the Civil Code.00 while Maglana who should have contributed P160. Of course. it is obvious that Roxas understood what Maglana was referring to and left no room for doubt that both considered themselves governed by the articles of the duly registered partnership. CASES – partnership Page 62 of 63 .. for as stressed. And in whatever way he may view the situation. Otherwise stated. there is an existing partnership. wrote Rojas. Said dissolution did not affect the first partnership which continued to exist. p. it is an admitted fact that even up to now. Even more convincing. Jr. 95). pp. Civil Code) and for interests and damages from the time he should have complied with his obligation (Article 1788. This reminder cannot refer to any other but to the provisions of the duly registered Articles of Co-Partnership. there is no dispute that the second partnership was dissolved by common consent. Significantly.00. pp. 133 SCRA 94 [1984]). p.00. It is a settled rule that when a partner who has undertaken to contribute a sum of money fails to do so.A. one partner can cause its dissolution by expressly withdrawing even before the expiration of the period. the relationship of Rojas and Maglana after the withdrawal of Pahamotang can neither be considered as a De Facto Partnership. 976). R. reminding the latter of his obligation to contribute either in cash or in equipment. 919-921). the dissolution. the number of members is decreased. That is the essence of a partnership (Ibid. share and participation in the second partnership of Pahamotang and that thereafter. even during the existence of the second partnership. But an accounting must first be made and which in fact was ordered by the trial court and accomplished by the commissioners appointed for the purpose. Civil Code) (Moran. to the capital investment of the partnership as well as his obligation to perform his duties as logging superintendent. p. the First Articles of Partnership were only amended.44 (Decision.A. On the other hand.

166. JJ. Rojas entered into a management contract with another logging enterprise.00. they showed that on 50-50% basis. concur..092. Branch III. : na d SO ORDERED. a company engaged in the same business as the partnership. took no part. except as to the legal relationship of the partners after the withdrawal of Pahamotang which is unquestionably a continuation of the duly registered partnership and the sharing of profits and losses which should be on the basis of share and share alike as provided for in the duly registered Articles of Co-Partnership. Rojas will be liable in the amount of P131. the assailed decision of the Court of First Instance of Davao. as stipulated in their partnership agreement.Thus. Inc. on 80-20%. he will be liable for P52.. Consequently. p. He withdrew his equipment. R. refused to contribute either in cash or in equipment to the capital investment and to perform his duties as logging superintendent. Melencio-Herrera. PREMISES CONSIDERED. the CMS Estate.31. in accordance with the computation of the commissioners. no plausible reason could be found to disturb the findings and conclusions of the trial court.. he will be liable for P40. We also hereby AFFIRM the decision of the trial court in all other respects.. The records also show that Rojas not only abandoned the partnership but also took funds in an amount more than his contribution (Decision. it will be recalled that after the withdrawal of Pahamotang. 949). J. is hereby MODIFIED in the sense that the duly registered partnership of Eastcoast Development Enterprises continued to exist until liquidated and that the sharing basis of the partners should be on share and share alike as provided for in its Articles of Partnership. In the given situation Maglana cannot be said to be in bad faith nor can he be liable for damages. as reported in the Commissioners' Report.A.040. In their voluminous reports which was approved by the trial court.96 and finally on the basis of actual capital contribution. Sarmiento and Regalado. As to whether Maglana is liable for damages because of such withdrawal. Padilla. : nad CASES – partnership Page 63 of 63 . Rojas is not entitled to any profits.

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