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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 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., 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; 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. Defendants denied all the allegations of the amended complaint, except the formal allegations as to the parties, and as a special defense to the first cause of action alleged: 1. That the defendant corporation, Menzi & Co., Inc., has been engaged in the general merchandise business in the Philippine Islands since its
organization in October, 1921, including the importation and sale of all kinds of goods, wares, and merchandise, and especially simple fertilizer and fertilizer ingredients, and as a part of that business, it has been engaged since its organization in the manufacture and sale of prepared fertilizers for agricultural purposes, and has used for that purpose trademarks belonging to it; 2. That on or about November, 1921, the defendant, Menzi & CO., Inc., made and entered into an employment agreement with the plaintiff, who represented that he had had much experience in the mixing of fertilizers, 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, for a compensation of 50 per cent of the net profits which it might derive from the sale of the fertilizers prepared by him, and that said Francisco Bastida worked under said agreement until April 27, 1922, and received the compensation agreed upon for his services; that on the said 27th of April, 1922, the said Menzi & Co., Inc., and the said Francisco Bastida made and entered into the written agreement, which is marked Exhibit A, and made a part of the amended complaint in this case, whereby they mutually agreed that the employment of the said Francisco Bastida by the said Menzi & Co., Inc., in the capacity stated, should be for a definite period of five years from that date and under the other terms and conditions stated therein, 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, as provided in his former agreement; 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, and on or about the month of December, 1922, the defendant, Menzi & Inc., in order to make said business successful, was obliged to and actually did assume the full management and direction of said business;
3. That the accounts of the business of the said fertilizer department of Menzi & Co., Inc., were duly kept in the regular books of its general business, in the ordinary course thereof, up to June 30, 1923, and that after that time and during the remainder of the period of said agreement, for the purpose of convenience in determining the amount of compensation due to the plaintiff under his agreement, separate books of account for its said fertilizer business were duly, kept in the name of ‘Menzi & Co., Inc., Fertilizer’, and used exclusively for that purpose and it was mutually agreed between the said Francisco Bastida and the said Menzi & Co., Inc., 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, instead of June 30th, of each year, during the period of said agreement; that the accounts of the business of its said fertilizer department, as recorded in its said books, and the vouchers and records supporting the same, for each year of said business have been duly audited by Messrs. White, Page & Co., certified public accountants, of Manila, who, shortly after the close of business at the end of each year up to and including the year 1926, have prepared therefrom a manufacturing and profit and loss account and balance sheet, 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, had been prepared by the said auditors and certified by them, they were shown to and examined by the plaintiff, and duly accepted, and approved by him, with full knowledge of their contents, and as evidence of such approval, he signed his name on each of them, 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, which are attached to the record of this case, and which are hereby referred to and made a part of this amended answer, and in accordance therewith, 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; that
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. of Manila. the plaintiff and his accountants. or valued by the parties. undue interest. Menzi & Co. III. Inc. Inc. has been collecting the accounts receivable and disposing of the stocks on hand.M. Schlobohm. but on the contrary. that the plaintiff has been informed from time to time as to the status of the disposition of such properties. and there was guano... 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...C. Page & Co. ashes. and V of the first cause of action. 4.000. Menzi and P. the said plaintiff commenced this action. would not continue him in its service.. and after the termination of said agreement of April 27. Haskins & Sells.. the said Menzi & Co. Inc. including therein not only Menzi & Co. That prior to the termination of the said agreement. 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. II. Inc.000. 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. have been going over and examining said books and records for months and the defendant.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. and to pay to the plaintiff at that time his proportion of such profits on that basis. Inc.. said books and records have been subject to his inspection and examination at any time during business hours. the amount of which the plaintiff is unable to determine.... has been defrauded by the defendants by . which it has been unable to dispose of up to this time. never kept its own cash book.. before the net profits of said business for the period of the agreement could be determined. a copy of which was shown to and explained to the plaintiff. That from the examination of the partnership books as aforesaid. had the certified public accountants.. Inc. and even since the commencement of this action. SECOND CAUSE OF ACTION As a second cause of action plaintiff alleged: I. fine tobacco and other fertilizer ingredients on hand of over P75.. and being disgruntled because the said Menzi & Co. but that its funds were maliciously included in the private funds of the defendant entity. which the plaintiff refused to accept. Inc. the defendant. 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.000. II.. and especially. Messrs. but also it managers J. through its officers. Inc.. Menzi & Co. IV. 1927. Inc. That the plaintiff hereby reproduces paragraphs I.. the plaintiff estimates that the partnership between himself and the defendant Menzi & Co. White. neither was there a separate BANK ACCOUNT of the partnership. and there is still on hand old stock of approximately P25. that since that time the said Menzi & Co. as he has never had at his disposal the books and vouchers necessary for that purpose.. III. 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. wherein he knowingly make various false and malicious allegations against the defendants. Inc. that Menzi & Co. and he and his auditors have fully examined the books and records of said business in relation thereto. Exhibit A. 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. 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.
as it had been doing before the plaintiff was employed under the said agreement. Inc. Menzi & Co.. Schlobohm. III.551.. accepted and paid drafts drawn upon it under said letters of credit. That he hereby reproduces paragraphs I. Inc. on his on account and with his own money. belongs to the plaintiff exclusively. pay the salaries of a number of the employees of the defendant Menzi & Co. 3 and 4 of the special defense the first cause of action in this amended answer. That under this item of undue salaries the defendants have appropriated P43.M. that such drafts and loans naturally provided for interest at the banking rate from the dates thereof until paid. 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. the defendant.51.920 of the partnership funds. of which 35 per cent. of the special defense to the first cause of action in this amended answer. in the course of the said business of its fertilizer department. over P88. That they repeat and make a part of this special defense paragraphs 1.. not satisfied with collecting undue and excessive salaries for themselves. exclusively managed and conducted its said fertilizer business. Defendants alleged: 1. such business enterprises. and V of the first cause of action. Wherefore. Inc..M. loans and advances during the period of the said employment agreement constituted legitimate expenses of said business under said agreement. THIRD CAUSE OF ACTION As third cause of action. IV. III. having expended for their account.551..372 belongs exclusively to the plaintiff. Defendants alleged: 1. That the defendant. inasmuch as such services were compensated with the 65% of the net profits of the business constituting their share.C. 2. plaintiff alleged: I. with legal interest from the date of the filing of the original complaint until the date of payment. as is the case in all. Menzi and P. Menzi & Co. through its manager. 3 and 4. Exhibit A.C. 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. That they repeat and make a part of this special defense paragraphs 1. only undertook and agreed to facilitate financial aid in carrying on the said fertilizer business. Inc.372. 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. Menzi & Co. That under the terms of the contract Exhibit A. Inc. IV. II.. or any amount which may finally appear to be due and owing from the defendants to the plaintiff upon this ground. 2. That the plaintiff has. and that such payments of interest as were actually made on such drafts. Wherefore. of which 35 per cent. or P15. or P64. the plaintiff prays the court to render judgment ordering the defendants jointly and severally to pay him the sum of P64.000. nor the defendant Menzi & Co. That under the contract of employment. of the amended complaint.way of interest in an amount of approximately P184. Menzi and P.38.432. neither the defendants J.38. or the fertilizer business. 2. 2. during the period of the contract. V.. the plaintiff prays the court to render judgment ordering the defendants to pay jointly and severally to the plaintiff the amount of P15. II. paid all the employees he has placed in the service of the partnership. with legal interest from the filing of the original complaint until payment.. that the said defendant. That the defendants J. in which the plaintiff was to receive 35 percent of the net profits as compensation for this . opened letters of credit through the banks of Manila. Schlobohm.. have made the partnership.
1923..60. stationery and other incidentals. Defendants alleged: 1.000 without ever having made any claim for reimbursement against the partnership. in the same manner as was done in the other departments of its business. a just proportion of said overhead expenses were charged to said fertilizer departments and entered on the books thereof.services. with full knowledge of their contents..626. became very successful. through the defendant J. as hereinbefore alleged. inasmuch as it has always been understood among the partners that each of them would pay his own income tax. the plaintiff prays the court to order the defendants jointly and severally to pay the plaintiff the sum of P3... and actually consumed at least one-half of the time of the manager and certain employees of Menzi & Co. 3 and 4. Menzi and P. he was required to make his own return under the Income Tax Law and to pay his own income taxes. which reports were examined. instead of having them paid at the source. of the special defense to the first cause of action in this amended answer. etc.72 of which 35 per cent belongs exclusively to the plaintiff. that the said Menzi & Co. has paid. IV. for the same. and he is now estopped from saying that such taxes are not a legitimate expense of said business. C. thereby defrauding the partnership in the amount of P10. accepted and approved by the plaintiff. 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. for said business. from and after 1922. and had its employees perform the duties of cashiers. that the income taxes paid by the said Menzi & Co. Inc. furnished office space.362. .60. in carrying it on. amounting to P3. Schlobohm. as might be done under the law. pertaining to the business. Inc. was obliged to and did make return to the Government of the Philippine Islands each year during the period of the agreement... II. That the plaintiff has. that inasmuch as the agreement with the plaintiff was an employment agreement.361. That under the Income Tax Law Menzi & Co. 2. Wherefore. messengers. that the same method is followed in each of the several departments of the business of Menzi & Co. who received not only salaries but also a percentage of the net profits of such departments.. with legal interest from the date of the filing of the original complaint until its payment.. Inc... That the defendant Menzi & Co. that each and every year from and after 1922. Inc.. so that he would be entitled to the personal exemptions allowed by the law. including its fertilizer department. of the income of its whole business.. said business required great deal of time and attention. and owing to the large volume of business transacted. that its said fertilizer business. accountants. Inc. and for that reason the said Menzi & Co. which pertained to the fertilizer department. and included in the auditors’ reports. with the knowledge and consent of the plaintiff. II. the income tax due from said defendant entity for the fertilizer business. III. charged each year. 2. and V of the first cause of action. 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. after its manager took charge of it. were duly entered on the books of that department. with the funds of the partnership between the defendant entity and the plaintiff. and included in the auditors’ reports hereinbefore referred to. That they repeat and make a part of this special defense paragraphs 1. during the period of the contract. III. the plaintiff alleged: I. Inc. which were examined. Inc. Exhibit A. FOURTH CAUSE OF ACTION As fourth cause of action... when its other departments had special experienced Europeans in charge thereof. expending about P5. accepted and approved by him.. and he is now estopped from saying that such expenses were not legitimate and just expenses of said business. M. as expenses of said business. That he hereby reproduces paragraph I. 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. clerks..
and that said 5 per cent commission was not entered by the defendants in the books of the business. upon which the said Menzi & Co.. although the plaintiff believes and alleges that they do appear in the private books of the defendant Menzi & Co.. 2. and have no relation to the fertilizer business of which the plaintiff was to receive a share of the net profits for his services.. Exhibit A.52.. SIXTH CAUSE OF ACTION As sixth cause of action. and has now what is called a “Propaganda Agency Agreement” which the Deutsches Kalesyndikat. Inc. That the plaintiff has discovered that the defendants Menzi & Co. Exhibit A. as the agent of the said Menzi & Co. Inc. which were received from the United Supply Co. of San Francisco.FIFTH CAUSE OF ACTION As fifth cause of action. and consequently were not credited to that department..222. from foreign firms selling fertilizing material. did have during the period of said agreement. or even the approximate amount of the fraud thus suffered by the plaintiff cannot be determined. notwithstanding the demands made therefore by the auditors and the lawyers of the plaintiff. amounts to P127.375.581. of Berlin.77 of which 35 per cent belongs exclusively to the plaintiff.. that during the period of said agreement.51. That the defendant. and V of the first cause of action.. amounting in all to P2. That the exact amount. through C.M.. G. plaintiff alleged: I. after both parties have adduced their evidence upon the point. which through oversight. the plaintiff prays the court to order the defendants to pay jointly and severally to the plaintiff the amount of P44. 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. of the special defense to the first cause of action in this amended answer. which is a manufacturer of potash. Inc. 3....B. had been receiving. but to the credit of the defendant Menzi Co. Inc. Inc.... in the total of sum $66.. by virtue of which said Menzi & Co. which appropriated it to itself. That in going over the books of Menzi Co. Inc. the plaintiff estimates that this 5 per cent commission collected by the defendant Menzi Co. which the latter has refused to furnish. to the damage and prejudice of the plaintiff. IV. 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. because the entries referring to these items do not appear in the partnership books. III. That hereby reproduces paragraphs I. to the credit and benefit of the partnership constituted between the plaintiff and the defendant. Wherefore. that said commissioners were not in any sense discounts on the purchase price of said potash. Inc. or the exact amount owed upon this ground. 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. Inc. Inc. orders were sent to said concern for potash. but due allowance has now been given to the department for such item. II. of Hamburg. plaintiff alleged: . during the period of the contract Exhibit A. That they repeat and make a part of this special defense paragraph 1. Andre & Co.. received a 5 per cent commission. II. Inc... 3 and 4. IV.... III. were not credited on the books of the fertilizer department of Menzi & Co. Menzi & Co. 2.32 for the propaganda work which it did for said firm in the Philippine Islands. Defendants alleged: 1. it has been found that there are only two items of commissions..... Inc.
Exhibit A. and with the latter’s money.. That under the express terms of the employment agreement. Schlobohm. duty.M. 2. has tampered with the books of the business making fictitious transfers in favor of the defendant Menzi & Co. purchased from a several foreign firms various simple fertilizing material for the use of the partnership. for rebates upon freight. the defendant.. Inc. Menzi and P. That said defendant Menzi & Co. IV. to make a sworn statement as to all the profits received from the sale to third persons of the fertilizers pertaining to the partnership. thereby defrauding the plaintiff of 35 per cent of the value of such reductions.C. Inc. etc. plaintiff alleged: I. in collusion with and through the defendants J.. to third persons.M. of merchandise belonging to the partnership. That the total amount... Inc. Wherefore.I. which the latter has refused to permit notwithstanding the demand made for the purpose by the auditors and the lawyers of the plaintiff. etc. and deposited in its warehouses. through and in collusion with the defendants J. 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. III. some of which were not entirely thus spent and were later credited by the selling firms to the defendant Menzi & Co. thereby appropriating to itself the profits obtained from such resale. .... other amounts for freight. SEVENTH CAUSE OF ACTION As seventh cause of action. and V of the first cause of action. that the only materials imported by it and sold during the period of said agreement were simple fertilizer ingredients. insurance. charged in the invoice but not all expended. 3 and 4. II. That during the existence of the contract Exhibit A. That the defendant Menzi Co. ordering them jointly and severally to pay 35 per cent of the net amount.M. III. That in the paid invoices for such purchases there are charged.. II. and no basis of computation can be established.. of the first cause of action. and then sold by Menzi & Co. which had nothing whatever to do with the business of mixed fertilizers. the plaintiff prays the court to order the defendants J. Inc. purchased with the latter’s money. IV and V.. by merely examining the partnership books. 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. with legal interest from the filing of the original complaint until the payment thereof. Inc.. Menzi and P.. the defendant Menzi & Co. III. Menzi and P. IV. Inc. even approximately. That they repeat and make a part of this special defense paragraphs 1. II. insurance. for the account of the partnership constituted between itself and the plaintiff... V. of the special defense to the first cause of action in this amended answer: 2. or even the approximate amount of this fraud cannot be ascertained without an examination of the private books of Menzi & Co.. Menzi & Co.C. III. 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. Inc. did not enter them upon the books to the credit of the partnership constituted between the defendant and the plaintiff. but entered or had them entered to the credit on Menzi & Co. Defendant alleged: 1. of which the plaintiff was to receive a share of the net profits as a part of his compensation.. Inc. Schlobohm upon receipt of the credit notes remitted by the selling firms of fertilizing material.. Inc. II.C. duty. and the profits they have appropriated. to ascertain the extent of the fraud sustained by the plaintiff in this respect. besides the cost price of the merchandise. Schlobohm and their assistants. That he hereby reproduces paragraphs I.. That hereby reproduces paragraphs I.
and January. received by Menzi & Co. for which reason such proposed balance did not represent the true status of the business of the partnership on April 30. That the proposed balance submitted to the plaintiff with reference to the partnership operations during the last four months of its existence. II. at the rate of P111 per ton. notwithstanding the fact that this contract was negotiated during the existence of the partnership. Wherefore. 1927. March. which does not pertain to said business in the profits of which the plaintiff is interested. 1927 to April 27. 3 and 4. of the special defense to the first cause of action in this amended answer. was likewise incorrect.. 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. the defendants have not rendered a true accounting of the profits obtained by the business during the last four months thereof. That the said order for 3.000 tons of mixed fertilizer.C. 1927. That both the contract mentioned above and the benefits derived therefrom. was the manager thereof. That they repeat and make a part of this special defense paragraphs 1.. 1927. and to sentence them likewise to pay the plaintiff 35 per cent of the net profits. IV. of which 35 per cent. V.. of the special defense to the first cause of action in this amended answer: 2. but it has just recently been discovered that through error an additional sum of P216..M. That during the period of said employment agreement.. transportation equipment. Inc. from January 1.. from the Compañia General de Tabacos Filipinas on April 21. and . That notwithstanding the expiration of the partnership contract Exhibit A. in the total sum of P1. to make a sworn statement as to the total amount of such rebates. Bais. f.22 was credited to said department. Inc. belongs to the fertilizer business constituted between the plaintiff and the defendant. EIGHT CAUSE OF ACTION A eighth cause of action. and to sentence the defendants to pay the plaintiff jointly and severally 35 per cent of the net amount. the plaintiff prays the court to order the defendants J. as the purposed balance submitted to the plaintiff was incorrect with regard to the inventory of merchandise. 1928. III. before the expiration of the contract Exhibit A of the complaint. as they were delivered. Philippine currency. 2. that all of department as received. acting as manager of the fertilizer business constituted between said defendant and the plaintiff. IV and V of the first cause of action. 1927.500.. and April. on April 27. belongs to said plaintiff. Defendants alleged: 1. was taken by it in the regular course of its fertilizer business. 1″. received from its agent. o. during the months of November and December. and refuses to give the plaintiff his share consisting in 35 per cent of the profits produced thereby.Wherefore. e. certain credits pertaining to the fertilizer business in the profits of which the plaintiff was interested. Menzi and P. 3 and 4. the defendant. Andre & Co. or P31. plaintiff alleged: I.402. That the defendant entity now contends that the contract entered into with the Compañia General de Tabacos de Filipinas belongs to it exclusively. VI. Menzi & Co. C. of Hamburg. and while the defendant Menzi & Co.000. i. b. to be delivered. Defendants alleged: 1. 1927. February. that is. Schlobohm. Inc. by way of refunds of German Export Taxes. That on or about April 21. That he hereby reproduces paragraphs I. That they repeat and make a part of this special defense paragraphs 1. 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. 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. 2. Inc. Exhibit A. Oriental Negros. 1927. according to information received by the plaintiff. 2. the defendant Menzi & Co.54. II. which the plaintiff estimates at P90. III... and the value of the trade marks..
IX. Wherefore.. but said defendants has ignored such demands. the defendant continued to use for its own benefit the good-will and trade marks belonging to the partnership. Inc. Philippine currency. IV. VIII. by virtue of which the defendant is bound to pay the plaintiff 35 per cent of the value of said property. and he has not been in any way in the service of the defendant.C. which is 35 per cent of the value of the goodwill and the trade marks of the fertilizer business. That the damages sustained by the plaintiff. 2″. or. and he cannot possibly have any interest in the fertilizers manufactured and delivered by the said Menzi & Co. Menzi and P. IV. notwithstanding and in spite of the plaintiff’s insistent opposition. transportation equipment and machinery.000. To order the defendants J.000. as required by law. That he hereby reproduces paragraphs I. III. without having rendered a monthly account of the state of the liquidation. To order the defendants to pay the plaintiff jointly and severally the amount of P350.000. and this date. that the employment agreement of the plaintiff expired by its own terms on April 27.000. and “HOZ”. P350.000 which is 35 per cent of the value of the transportation equipment and machinery of the business. the partnership constituted thereby registered in the Bureau of Commerce and Industry the trade marks “CORONA NO. the defendant entity.000. 1927. the plaintiff prays the Honorable Court: 1. M. after the expiration of the partnership contract. VII. thereby indicating its intention to retain such good-will.M. To order the defendants to pay the costs of this trial. That at the time of the expiration of the contract Exhibit A. “ARADO”.. and may only be truly and correctly ascertained by compelling the defendants J. 1928. That after the contract Exhibit A had expired. That the true value of the transportation equipment and machinery employed in the preparation of the fertilizers amounts of P20. trade marks. that is. laboring jointly. CORONA NO. Defendants alleged: . NINTH CAUSE OF ACTION As ninth cause of action. from April 28. 35 per cent of which amount to P7. for the manufacture of fertilizers.000.. has assumed the charge of liquidating the fertilizing business. Inc. That during the period of the contract Exhibit A. 1″. 3. plaintiff alleged: I. 2. to grant any other remedy that this Honorable Court may deem just and equitable. the plaintiff and the defendant having by their efforts succeeded in making them favorably known in the market. since that time. VI. and 4. C. after the expiration of his contract for any service rendered to it. and further. so that the plaintiff does not. 1927. ordering all the defendants to pay the plaintiff jointly and severally 35 per cent of the net amount. and up to April.000. That the plaintiff and the defendant. 1927. until it is finished. Schlobohm to declare under oath and explain to the court in detail the sums obtained from the sale of the remaining merchandise. To order the defendants to pay the plaintiff jointly and severally the amount of P7. or what the status of it is at present. know whether the liquidation of the business has been finished. Menzi and P. V.000. and V of the first cause of action. of which sum 35 per cent belongs to the plaintiff. Menzi & Co. II. 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. amount to approximately P1. II. as well as its transportation equipment and other machinery. III.. Schlobohm to render a true and detailed account of the status of business in liquidation. 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. as well as the amount of his share in the remaining property of the plaintiff. thereby causing the plaintiff damages. That the value of the good will and the trade marks of a business of this nature amounts to at least P1.was to be manufactured and delivered in December.
evidenced by Exhibit A. 1926..578.. 2. Inc.. Inc....54 with legal interest from January 1.. Inc...410 for income tax. and whenever it has been used by the said Menzi & Co. Schlobohm. (l) Ordering the defendant corporation. (c) Ordering Menzi & Co. to pay the plaintiff the sum of P 60.709. upon the second ground of action.. in view of the plaintiff’s share of the profits of the business accruing from January 1. Inc.20 with legal interest from the date of the filing of the original complaint until paid. 1927 to December 31. Exhibits C to C-8. 1929. and any other sum charged for interest under the entry “Purchases”. in its fertilizer business from and since its organization.. Inc. upon the fourth cause of action.. 1928. (j ) Ordering Menzi & Co... upon the ninth cause of action to pay the plaintiff the sum of P196. pertains exclusively to it. the date of the liquidation of the fertilizer business. Inc. in its own business. to pay the plaintiff the sum of P6.. of the special defense to the first cause of action in this amended answer. C.67 with legal interest from the date of the filing of the original complaint until paid. (e) Ordering Menzi & Co.1. the industrial partner... Inc. That they repeat and make a part of this special defense paragraphs 1.. Inc. that the machinery pertaining to the said fertilizer business was destroyed by fire in October. 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. is not estopped from questioning the statements of the accounts therein contained.. had wrongfully charged to the fertilizer business in question the . (b) Holding the plaintiff. Menzi & Co. Inc. The trial court erred in finding and holding that the defendant. Menzi & Co. Menzi and P. belonged to and have been used by the said Menzi & Co. (f ) Dismissing the fifth cause of action. (k) Ordering the said defendant corporation. (g) Dismissing the sixth cause of action. to pay the plaintiff the sum of P17. that the trade-marks mentioned by the plaintiff in his amended complaint. upon the eighth cause of action. (h) Dismissing the seventh cause of action. and the plaintiff can have no rights to or interest therein under his said employment agreement.38 with legal interest from January 1. That the good-will. and (n) Menzi & Co. if any. Inc. The appellant makes the following assignment of error: I. Inc. and the costs thereof was not charged to the fertilizer department. and the plaintiff has been given credit for 35 per cent of that amount. 3 and 4. II. let judgment be entered: (a) Holding that the contract entered into by the parties. shall pay the costs of the trial. and the plaintiff can have no interest therein of any nature under his said employment agreement. Menzi & Co. and the value thereof in the sum of P20. as a part of such good-will. M. wherein Menzi & Co. that the transportation equipment pertains to the fertilizer department of Menzi & Co. with legal interest from the date of the filing of the original until paid. in connection with the final liquidation set in Exhibit 52 and 52-A. (m) Dismissing the case with reference to the other defendants.. as a contract of general regular commercial partnership.41. was constructed by it. J. by the mere fact of having signed and approved the balance sheets.. 1929.821. due and reasonable compensation for its use has been allowed to said business. (i) Ordering the defendant Menzi & Co. and the plaintiff..000 was collected from the Insurance Company. and the plaintiff. Inc. Inc. was the capitalist. and not a contract of employment.. after deducting the item of P2. of said fertilizer business of the defendant. 2... (d) Dismissing the third cause of action. to pay the plaintiff the sum of P3.385. Francisco Bastida. to pay the plaintiff 35 per cent of the net balance shown in Exhibits 51 and 51-A.463. until fully paid. The trial court erred in finding and holding that the contract Exhibit A constitutes a regular collective commercial copartnership between the defendant corporation. until paid.. The dispositive part of the decision of the trial court is as follows: Wherefore. that the present machinery used by Menzi & Co.
709.821.. Meyer & Co. and that the plaintiff is entitled to 35 per cent thereof. 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..38 received by the defendant.795. and the trade mark “CORONA” had been used in its other business. and in not approving the final liquidation of said business. VIII. 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. is entitled to 35 per cent of the net profits in the sum of P18. or the sum of P3.20. the date upon which the liquidation of said business was terminated. and (e) for the costs of the action. The trial court erred finding and holding that the defendant. Menzi & Co. with legal interest thereon from the date of filing his complaint. III. V. Francisco Bastida. “HOZ”. from its contract with the Compañia General de Tabacos de Filipinas..49.38.. for the sum of P60. It appears from the evidence that the defendants corporation was organized in 1921 for purpose of importing and selling general merchandise. Among the trade-marks thus acquired by the appellant were those known as the “ARADO”.918.. Inc. including fertilizers and fertilizer ingredients. Inc. had owned and carried on this fertilizer business from 1910 until that firm was taken over the Alien Property Custodian in 1917. with legal interest thereon from the date of filing the original complaint.312.578. Menzi & Co. The trial court erred in finding and holding that the value of the goodwill of the fertilizer business in question was P562. IV. or the sum of P196..sum of P10. 1927. with legal interest thereon from January 1.67. (b) on the fourth cause of action.41. with legal interest thereon from January 1. corresponds to the plaintiff...530.. with legal interest thereon from the date of filing the complaint. trademarks.918.410 charged as income tax in the liquidation in Exhibits 51 and 51 A for the period from January 1 to April 27. and that the accounts of said business were kept by the defendant. and (d) on the ninth cause of action.. 1925 and 1926. and in disallowing the item of P2. It appears through John Bordman and the Menzi-Bordman Co. VII. Behn. for the sum of P196. (c) on the eight cause of action. Meyer & Co. The “HOZ” trade-mark was used by John . for the sum of P3.41. 1929. Inc. (a) on the second cause of action.33 as income taxes for the years 1923. business. 1929. as true and correct.33 as income taxes partners’ balances. foreign drafts. the plaintiff is now estopped from raising any question as to the nature of said contract or the propriety of such charges. the good-will. and “CORONA”..709.385.. on that theory with the knowledge and consent of the plaintiff. Francisco Bastida. The trial court erred in finding and holding that the plaintiff. 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. VI.20.578. with legal interest thereon from the date of filing his complaint. and that the plaintiff. with the costs against the plaintiff. Meyer & Co. with legal interest thereon from the date of filing his complaint.358. was entitled to 35 per cent of such valuation. in the sale of its mixed fertilizers. The trade marks “ARADO” and “HOZ” had been used by Behn. Menzi & Co. or the sum of P60. including its fertilizer business with its stocks and trade-marks. The trial court erred in refusing to find and hold under the evidence in this case that the contract.67. had wrongfully charged to the fertilizer business in question the sum of P10. Menzi & Co. The trial court erred in rendering judgment in favor of the plaintiff and against defendant. Ltd. and that 35 per cent thereof.. local drafts. Exhibits 51 and 51-A and 52 and 52-A. for the sum of P6. and entering judgment against said defendant only for the amounts admitted therein as due the plaintiff with legal interest. and other assets of the old German firm of Behn. They were registered in the Bureau of Commerce and Industry in the name of Menzi & Co. 1924.. and on other credit balances in the sum of P172. The trial court erred in overruling the defendants’ motion for a new trial. Ltd.38. Ltd. and that each year said balance sheet and profit and loss statement were examined. or the sum of P6.821. with legal interest thereon from the date of filing the complaint. Inc.
and that he could obtain other contracts.. and the interest charges were taken into account in determining the net profits of each department. Pursuant to the aforementioned verbal agreement. Inc. Ltd.. the manager of the sundries department of Menzi & Co. and the other expenses of said business. each of which was in charge of a manager.. was divided into several different departments. but the he did not have the money to buy the ingredients to fill the order and carry on the on the business... Inc. The practice of the corporation was to debit or credit each department with interest at the bank rate on its daily balance. continued to carry on its fertilizer business under this arrangement with the plaintiff.. proportional part of warehouse rent and salaries and wages.. Inc. J. 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. in which the plaintiff was interested. certified public accountants... The mixed fertilizers were sold by Menzi & Co.. The fertilizer business of Menzi & Co. Menzi & Co. the plaintiff. which is the basis of the present action. and told him that he had a written contract with the Philippine Sugar Centrals Agency for 1.Bordman and the Menzi-Bordman Co. and the fees were paid by that company. and after that as a separate department.. in the continuation of the fertilizer business that had belonged to Behn. after deducting interest charges.. Inc. Inc.. bodegas. A fertilizer account was opened in the general ledger. the defendant corporation April 27.. and the total amount thereof was credited to this business in the final liquidation on April 27.M. They were not changed to the fertilizer business. advanced the plaintiff. The intervention of the plaintiff was limited to supervising the mixing of the fertilizers in Menzi & Co. It ordered ingredients from the United States and other countries.. The trade-marks used in the sale of the fertilizer were registered in the Bureau of Commerce & Industry in the name of Menzi & Co.. 1922 the defendant corporation at plaintiff’s request gave him the following letter... Inc. 1927. Inc. 1922 under its “CORONA” brand.250 tons of mixed fertilizers. who had had some experience in mixing and selling fertilizer. He offered to assign to Menzi & Co. Inc. after the execution of Exhibit A in practically the same manner as it was prior thereto. In November. Menzi. marked Exhibit A. paying the salaries of his employees. On May 3. The business of Menzi & Co. Inc. The corporation had to borrow money or obtain credits from time to time and to pay interest thereon. White. between January 19 and April 1.. Plaintiff supervised the mixing of the fertilizer. Inc. 1922 entered a written contract with the plaintiff. On or about April 24... to which the plaintiff assented. Menzi & Co. 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. including one from the Calamba Sugar Estates for 450 tons. 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. The amount paid for interest was charged against the department concerned.. 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. went to see Toehl... accepted plaintiff’s offer. might derive therefrom. his contract with the Sugar Centrals Agency. who received a fixed salary and a percentage of the profits.. Plaintiff assigned to Menzi & Co. audited the books of . Page & Co.. Inc.. The fertilizer business was carried on by Menzi & Co.. Only the fees for registering the formulas in the Bureau of Science were charged to the fertilizer business. Exhibit B: Menzi & Co. and other expenses in performing his contract... Inc. On January 10. 1924 the plaintiff made a contract with Menzi & Co. had only one bank account for its whole business.’s. This contract is rendered to in the record as the “Vastago Contract”. 1921. This was in accordance with appellant’s established practice. Exhibit B. Inc. 1922 the net profits of the business carried on under the oral agreement were determined by Menzi & Co. and the defendant corporation proceeded to fill the order. and the plaintiff was paid some twenty thousand pesos in full satisfaction of his share of the profits. Meyer & Co. Inc. was carried on in accordance with this practice under the “Sundries Department” until July. the general manager of Menzi & Co. confirmed by the letter. The fertilizer business had no separate capital.. 1923.
. but the plaintiff refused to accept it. . . The defendant corporation then applied to the trial court for an order for the sale of the remaining property at public auction. . Inc. .212. . . . 35. and after he had had an opportunity of verifying them he approved them without objection and returned them to Menzi & Co. . . We come now to a consideration of appellant’s assignment of error. There were claims outstanding and bills to pay. as his share or 35 per cent of the net profits of the fertilizer business the following amounts: 1922 . we are unanimously of the opinion that under the facts of this case the relationship established between Menzi & Co. .03 1926 . . . . . .. The old stocks were taken over by Menzi & Co. it was necessary to dispose of the materials and equipment. be sold at public or private sale. . Inc. had deducted the same items of expense which he now protests. whereby the plaintiff worked for the defendant corporation for one-half of the net profits derived by the corporation from certain fertilizer contracts. . . Plaintiff employed a certified public accountant. . Exhibit A. .. . Inc.665.. . 1927 as a basis of settlement. Inc. . . .92 To this amount must be added plaintiff’s share of the net profits from January 1 to April 27. which the defendant corporation had been unable to dispose of. . . . . 1927. . . Inc.766. . P196. . ... every month. for the whole period of the contract in question were reaudited by White. . . . . . collect the outstanding accounts for Menzi & Co. Inc. . Inc. . and accounts receivable amounting to P103. Plaintiff never made any objection to defendant’s manner of keeping the accounts or to the charges. After making the corrections they found the balance due the plaintiff to be P21. Thompson assumed the plaintiff and Menzi & Co.. 30. . the fertilizer department of Menzi & Co. The . . . . . Inc. .. . to examine the books and vouchers of Menzi & Co. These statements were delivered to the plaintiff for examination. . Inc. . . . .. . . Plaintiff was paid his share of the profits from those transactions after Menzi & Co. Inc. . . . . . Exhibit A. . amounting to P34. . . He naturally reached very different conclusions from those of the auditors of Menzi Co. was obliged to furnish free of charge all the capital the partnership should need.. . . .. ..633.87. . certain errors of bookkeeping were discovered by them.000. and the final liquidation of the fertilizer business was completed in December.56 1925 . was in effect a continuation of the verbal agreement between the parties.. . the manager of Menzi & Co.. . . and filed the present action.. . .874. .98 Total . . . . . Inc. in compensation for his services of supervising the mixing of the fertilizers.250. or divided between the parties. Page & Co. . In October. . . 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 copartnership..62 1924 ..Menzi & Co.73 1923 . P1. . 101. 1928 and a final balance sheet and a profit and loss statement were submitted to the plaintiff during the trial. . Prior to the expiration of the contract. .. . 1927. Inc.. . . . . After considering the evidence and the arguments of counsel. . .. . . then proceeded to liquidate fertilizer business in question. and at the end of each year they prepared a balance sheet and a profit and loss statement of the fertilizer business..649.081. 27. .. During the liquidation the books of Menzi & Co. . . and by the plaintiff was to receive 35 per cent of the net profits of the fertilizer business of Menzi & Co.. . and that Menzi & Co. Before the net profits could be finally determined. Plaintiff collected from Menzi Co. . .. .483. but apparently the court did not act on the petition. . . . as appears from the statement of facts. . . The plaintiff refused to agree to this.. . . . . . 1927 it proposed to the plaintiff that the old and damaged stocks on hand having a book value of P40. Menzi & Co. Inc. .. .. ..20. notified the plaintiff that the contract for his services would not be renewed.000. .000. . prepared a balance sheet and a profit and loss statement for the period from January 1 to April 27. Inc. . had on hand materials and ingredients and two Ford trucks of the book value of approximately P75. making a total of P231.79. . When plaintiff’s contract expired on April 27. . to be partners. Vernon Thompson.
On the contrary he approved and signed every year the balance sheet and the profit and loss statement. he was to receive 35 per cent of the net profits as compensation for his services. in order to obtain profit. sec. Inc. was to advanced him P300 a month on account of his participation in the profits. It is now well settled that the old rule that sharing profits as profits made one a partner is overthrown. which provides that articles of association by which two or more persons obligate themselves to place in a common fund any property. shall be commercial. 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. The trial court relied on article 116 of the Code of Commerce.. it does not in its common acceptation imply any partnership relation. industry.) In the second place. Inc.. the trial court was not authorized to take it into account. second edition. Inc. The business belonged to Menzi & Co. indicated that it regarded the contract. Instead of receiving a fixed salary or a fixed salary and a small percentage of the net profits. the complaint and answer having been superseded by the amended complaint and the answer thereto.. p.. and does not carry the meaning of “in partnership with”. 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. they were in our opinion proper charges and erroneously disallowed. the plaintiff clearly recognized Menzi & Co.) It is nowhere stated in Exhibit A that the parties were establishing a partnership or intended to become partners. Exhibit A. Inc. 273. Calupitan. The trial judge found that the defendant corporation had not always regarded the contract in question as an employment agreement. Although Menzi & Co.” (Jones on Evidence.. As to the various items of the expense rejected by the trial judge. 148... Inc.. Various other reasons for holding that the parties were not partners are advanced in appellant’s brief. in case there should be no net profits at the end of the year. Exhibit A. and the answer to the original complaint not having been presented in evidence as an exhibit.business was continued in the same manner under the written agreement. 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). Some of the contentions of the plaintiff and his expert witness Thompson are so obviously without merit as not to merit serious consideration. but in the case at bar there was no common fund. The fact is that en sociedad con as there used merely means en reunion con or in association with. and for four years the plaintiff never made any objection. as the owners of the fertilizer business in question. or any of these things. but in such case the original pleadings can have no effect.. 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. Lucido vs. to advance to him P300 a month on account of his share of 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. Exhibit A. We merely wish to add that in the Vastago contract. We do not deem it necessary to discuss them here. 8th. The 7th. a fund belonging to the parties as joint owners or partners. that is. “Where amended pleadings have been filed. meaning partner. and this would true even if the parties had been partners. unless formally offered in evidence. provided it has been established in accordance with the provisions of this Code. allegations in the original pleadings are held admissible. used by the defendant corporation. 89. as an agreement of copartnership. For . Menzi & Co. although the word “associated” may be related etymologically to the Spanish word “socio”. 27 Phil. agreed to furnish the necessary financial aid for the fertilizer business. Inc. and 9th paragraphs of Exhibit A. (Mechem.. In the first place. whereby the defendant corporation obligated itself to pay to the plaintiff 35 per cent of the net profits of the fertilizer business. The trial judge concluded that the phrase “associated with”. no matter what its class may be. It will be noted that no provision was made for reimbursing Menzi & Co. The plaintiff was working for Menzi & Co.
It was also urged. The trial court held that the plaintiff was entitled to P6.. five years. that the trade-marks used in the fertilizer business during the time that he was connected with it acquired great value. the defendant corporation should have enabled the fertilizer department to do business on a credit instead of a cash basis. The defendant corporation had a fertilizer business before it entered into any agreement with the plaintiff. that the defendant corporation should have furnished free of charge such financial assistance as would have made it unnecessary to discount customers’ notes. and in Menzi & Co. – Where one of the parties to a contract acquiesces in the interpretation placed by the other upon a provision of doubtful application. When this contract was filled. however. Inc. they objected to the interest charges on draft for materials purchased abroad. ID. and that the plaintiff was not prejudiced by the practice complained of.709. – In an action upon a contract containing a provision a doubtful application it appeared that under a similar prior contract the parties had. that the plaintiff and Menzi & Co.. ID... as being their own contemporaneous interpretation of its terms. A portion of the syllabus of that case reads as follows: 1. This finding in our opinion is not justified by the evidence. the party so acquiescing is bound by such interpretation.20. The charges now complained of. nevertheless proceeded. plaintiff had ceased to work for Menzi & Co. Held: That the party raising such question had acquiesced in the interpretation placed upon the contract by the other party and was bound thereby. as we have already stated. Vernon Thompson. ACQUIESCENCE. Plaintiff tried to get the Tabacalera contract for himself. That . thereby enabling the business to reap the interest. erroneously as we have seen. 4. – One of the parties to a contract. plaintiff’s agreement was for a fixed period.38 or 35 per cent of the net profits derived by Menzi & Co. shortly before plaintiff’s contract with the defendant corporation expired.C. ILLUSTRATION. and this seems to us the height of absurdity. CONTRACTS. from its contract for fertilizers with the Tabacalera. without raising any question upon the point. The decision of this court in the case of Kriedt vs. 474). ID. Plaintiff maintains. In reaching this conclusion the trial court unfortunately relied on the opinion of the accountant. INTERPRETATION. This contract was obtained by Menzi & Co. and he has no right to participate in the profits derived therefrom.’s warehouses and after the expiration of plaintiff’s contract Menzi & Co. the charges in question were acquiesced in by the plaintiff for years.. Inc. E. In other words. continued its fertilizer business. 2..578. and during that time the business was carried on in the name of Menzi & Co. Inc. CONTEMPORANEOUS ACTS OF PARTIES. ID. but even if they had been partners there would have been no good-will to dispose of.. (37 Phil. Upon the termination of the contract by mutual consent a question was raised as to the proper interpretation of the doubtful provision. are the same as those made under the verbal agreement..... ACTION OF PARTIES UNDER PRIOR CONTRACT. 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. – Acts done by the parties to a contract in the course of its performance are admissible in evidence upon the question of its meaning. Inc. to perform the services which he was bound to render under the contract. ID. upon the termination of said contract.. ID. There was really nothing to which any good-will could attach.. Inc. McCullough & Co. upon the termination of which the parties made a settlement... who assumed. were partners. 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. 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.. as it had a perfect right to do. and that the plaintiff was entitled to 35 per cent thereof or P196. 3. overlooking the fact that the interest was added to the cost price. Inc. and that they have been appropriated by the appellant to its own use. Their contention is that the corporation should have furnished the money to purchase these materials for cash. being aware at the time of the execution thereof that the other placed a certain interpretation upon a provision of doubtful application.instance. is in point.312. and it is now too late for him to contest them.
is P21..633. leaving as her sole heir their son Maximo Belisario. (5) That on August 25. (6) That on July 5. 1909. For the foregoing reasons. McClure vs. only the expense of registering the formulas in the Bureau of Science was charged to the business in which the plaintiff was interested. ADDISON. Belisario was married to Paula Ira when he took possession of the parcels which therefore probably were community property of the marriage. JJ. concur. W. under Act No. 1922 BASILIO BORJA. Inc. The parcels are situated in the barrio of San Francisco. H. . Villamor. (4) That after the death of the said Paula Ira.objectors-appellants. VITALIANA BELISARIO. municipality of Umingan. Maximo Belisario and Eulalio Belisario. The evidence established the following facts: (1) That one Eulalio Belisario acquired the two parcels of land in question through information posesoria proceedings. 1927. the lands in question were forfeited to and confiscated by the Government for the non-payment of taxes. and contain a total of over 326 hectares. 435 in the court of the justice of the peace of Dagupan. instituted in accordance with the provisions of articles 19-21 of the Royal Decree of February 13.seems to be the only basis of the alleged good-will. an order for attachment was issued against the lands described in certain land tax declarations of which tax Nos. and were registered in its name. the wife of Eulalio Belisario. (3) That Paula Ira. and of which tax No. 1913. 5437.20.R. and Aureno. Addison and Adelina Ferrer have appealed. C. No. According to the somewhat vague testimony of the witness Francisco Ira. At the trial of the case. 496. 1916.. They had been used by Behn. and the plaintiff had no interest therein on the expiration of his contract.marks were not new. of two parcels of land in the name of the petitioner Basilio Borja. 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. 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. and recorded under the provision of the Mortgage Law. 1894. G. petitioner-appellee. as appears from Exhibit 52. We are satisfied by the evidence that said balance is correct. 5352 refers to that land inscribed in the registry of deeds as finca No. ADELINA FERRER. and 5351 refer to parts of the land inscribed in the registry of deeds as finca No. These trade-marks remained the exclusive property of Menzi & Co.. The balance due the plaintiff. a large number of opponents presented themselves but only two of them. with legal interest thereon from the date of the filing of the complaint on June 17. P. Vitaliana. 334. 1913. the decision appealed from is modified and the defendant corporation is sentenced to pay the plaintiff twenty-one thousand. 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. L-18010 June 21. six hundred and thirty-three pesos and twenty centavos (P21. P. 5348. 335. W. Street. Eugenio. in its business for other goods and one of them for fertilizer. and Villa-Real. Eulalio Belisario conveyed the two parcels mentioned to one Jose Castillo. Meyer & Co. Justice Hull participated in this case. Eulalio and Maximo Belisario occupied and administered the two parcels of land in common. without a special finding as to costs. the trade. and upon certain dates subsequent thereto.20). in civil case No. Pangasinan. The latter appears for herself and her three children. (2) That on December 20. but this fact does not appear from the record of the informacion posesoria proceedings or from any other document presented in evidence. vs. to which a fabulous valuation was given. They belonged to Menzi & Co. died on February 13. and AURENO BELISARIO. This is an appeal from a decision of the Court of First Instance of Pangasinan ordering the registration.. EUGENIO BELISARIO. As we have seen.633.
1916. (14) That on January 26. was presented for record in the registry of deeds and was recorded on February 26. represented by Peter W. this entry being cancelled on April 4. McClure vs. interests and ownership which both of the defendants in execution. and interest which he had or might have therein.. 435. (10) That on September 19. pursuant to which. 1917. McClure vs. pursuant to a writ of execution issued upon final judgment in said civil case No. McClure vs. (9) That on October 14. the said deed of sale with right to repurchase was presented for record in the registry of deeds. but no entries appear to have been made in the book of the registry. 499 of the court of the justice of the peace of Dagupan. 435. title. Addison. 450. Addison. C. 1917. Addison. pursuant to which. title. mentioned in paragraph (10) hereof. 1916. Maximo Belisario and Eulalio Belisario. 1917. the deed of sale with right to repurchase executed by Eulalio Belisario in favor of Basilio Borja. had not been cancelled on the record. (13) That on January 19. belonging to Maximo Belisario. 1917. the statutory right of redemption belonging to Eulalio Belisario. in and to the two parcels of lands in question. 1917. 499. C. 454. belonging to Eulalio Belisario and upon all right. (12) That on January 11. an alias writ of execution was issued in civil case No. represented by P. (16) That on March 5. we sold to the judgment creditor C. 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. the judgment creditor C. H. an alias writ of execution was issued in the said civil case No. No record of this sale appears to have been made in the registry of deeds. but inscription was refused and the deed was returned on February 5. was entered upon the day-book of the register of deed for the first time. and recorded on the 14th of the same month. on November 14. (17) That on March 27. McClure. title. 1916. mentioned in paragraph (16) hereof. 1916. the aforesaid order and notice of attachment were served upon Maximo Belisario and Eulalio Belisario. H. as specified in paragraph (6) hereof . the deputy provincial sheriff presented the said order and notice of attachment to the register of deeds for record. interests. 1917. mentioned in paragraph (13) hereof. was sold by the sheriff at public auction to the judgment creditor C. and ownership which the defendant in execution had or might have in and to both of said parcels of land in their entirely. 1916.(7) That on July 31. in conformity with a decision of the Supreme Court of the Philippine Islands. Peter W. of the land sold under execution in said case No. H. This sale was duly presented for record in the registry of deed on March 1. and all rights. a writ of execution was issued upon final judgment of the court of the justice of the peace of Dagupan. 1916. H. the deed of resale from Jose Castillo to Eulalio Belisario. the undivided half of the two parcels of land in question. mentioned in paragraph (2) hereof. mentioned in paragraph (11) hereof. McClure. with an official communication from the register of deeds to the effect that it favor of Jose Castillo. Belisario (35 Phil. The sale was not recorded in the registry of deeds. levy was made upon all the remaining interest belonging to said defendants. Addison purchased at the sheriff's sale under the execution in civil case No. H. 1917. 1917. H. (11) That on December 13. 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. pursuant to which on February 10. 454. (18) That on March 30. and on August 5. levy was made upon the undivided half of the two parcels of land in question. C. W. (8) That on October 14. 1917. belonging to the said Eulalio Belisario. (15) That on February 13. the attached lands. 1917. Felix Belisario and Eulalio Belisario.500. in the case of the Castillo vs. reserving the right to repurchase the lands for the same price within the term of eighteen months from the date thereof. represented by Peter W. 1916. 1917. 89). 1917. pursuant to a writ of execution issued upon final judgment of the court of the justice of the peace of Dagupan. in civil case No. had or might have in and to both of the said parcels of land in their entirely . McClure. in civil case No. purchased at execution sale the undivided half of the two parcels of land in question. 1917. and all the rights. Eulalio Belisario. Eulalio Belisario executed in favor of Basilio Borja a deed of sale of the two parcels of land in question for P7. Maximo Belisario and Eulalio Belisario.
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. the affidavit of C. Addison. Addison. the provincial sheriff of Pangasinan signed final deeds of sale for the property and interest. 1918. (31) That on March 12. Addison presented the certificate for the property and interest acquired at execution sale in civil case No. McClure for the consolidacion de dominio in civil case No. (27) That on July 12. mentioned in paragraphs (8). (21) That on January 23. 1918. the Director of Lands authorized Peter W. 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. 1917. H. were entered on the day-book of the registry of deeds. Peter W. and the quit-claim deed executed by C. (28) That on July 31. in his own representation and that of C. (20) That on November 12. H. (9). McClure in favor of Peter W. 499. Vitaliana. H. (23) That on February 16. in favor of C. (25) The on June 25. McClure. 1919. 1918. Addison to repurchase the lands in question. 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. Addison. 499 was entered upon the day-book in the registry of deeds. H. 1917. 1918. and inscribed in the registry on February 19. he was represented by the opponent Peter W. Eulalio Belisario not having exercised his right of repurchase reserved in the sale of Basilio Borja mentioned in paragraph (13) hereof. 1918. Addison for the consolidacion de dominio in civil case No. 926. and interest that he had in the two parcels of land in question. and recorded in the registry on March 11.(19) That on April 4. (24) That on June 24. 454 and 499. possession was delivered by the provincial sheriff of Pangasinan to Peter W. title. for record in the registry of deed. the opponent Adelina Ferrer and three minor children. 454 and 499. Addison. 454 was presented for record in the registry of deeds. and 450. (30) That on June 4. 1917. pursuant to which the said lands were reassessed for taxation in his name. the document being recorded on April 18. 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. (26) That on July 3. H. H. 1918. Addison. and Aureno Belisario as his only heirs. was reinstated in the day-book and recorded in the registry of deems. 454. as mentioned in the preceding paragraph. for the confiscated lands mentioned in the preceding paragraph. mentioned in paragraph (12) and (18) hereof. for all right. the respective purchasers at execution sales in civil cases Nos. McClure in civil cases No. and (18) hereof. McClure executed a quit-claim deed to Peter W. Addison. the provincial treasurer of Pangasinan issued a certificate of repurchase to Peter W. the deeds of sale executed by the provincial sheriff of Pangasinan. 1791 and was not purchased with the formalities required for the sale of public lands by Act No. 435. in which C. (22) That on February 11. C. (32) The Maximo Belisario left a widow. 1918. McClure and Peter W. H. as mentioned in paragraph (5) hereof This repurchase was made under the last proviso of section 19 of Act No. 1919. 499. Eugenio. mentioned in paragraph (12) hereof. McClure appears as the judgment creditor. and inscribed in the registry on March 10. 1918. 1919. which had been forfeited to an confiscated by the Government. 1919. 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. (29) That on January 21. (33) That in the execution and sales thereunder. . in conformity with instructions received from the Judge of the Fourth Sala of the Court of First Instance of the City of Manila. 454. of the two parcels of land in question. as mentioned in paragraph (25) hereof. sold under execution in civil cases Nos. 1919. the affidavit of Peter W. 1919. in favor of C.
as follows: 1. In cases Nos. 808).30 in the afternoon. supra. The sheriff's sales under the execution mentioned are fatally defective for what of sufficient publication of the notice of sale. for twenty days in three public places of the municipality or city where the property is situated. there were also only two publications. 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. the first publication was made on October 7th and the second and last on October 14th. The newspaper is a weekly periodical published every Saturday afternoon. 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. In all of the cases the notices of the sale were prepared by the judgment creditor or his agent. we find that in cases Nos. The provisions of Act No. Before the sale of property on execution. 450. 435 and 450 the sales took place on October 14. 435. (38 Phil.. the date was changed to October 14th. we think. The conveyance or reconveyance of the land from the Director of Lands is equally invalid. 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: . In case No. * * * * * * * 3. the sale is absolutely void and not title passes. 454. If there are newspaper published in the province in both the Spanish and English languages. Section 454 of the Code of civil Procedure reads in part as follows: SEC. 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. who also took charged of the publication of such notices. and also where the property is to be sold. notice thereof must be given. the first of which was made thirteen days before the sale. the date of the sale itself. Comparing the requirements of section 454. This must now be regarded as the settled doctrine in this jurisdiction whatever the rule may be elsewhere. and in one published in the English language: Provided. then a like publication for a like period shall be made in one newspaper published in the Spanish language. In the last case the sale was advertised for the hours of from 8:30 in the morning until 4:30 in the afternoon. by posing written notice of the time and place of the sale in three public places of the municipality or city where the sale is to take place. 1916. As will be seen from the foregoing statement of facts. 1791. he rest his title (1) on the sales under the executions issued in cases Nos. 4.The claims of the opponent-appellant Addison have been very fully and ably argued by his counsel but may. 2. the first publication being made only fourteen days before the date of the sale. if there be one. and publishing a copy thereof once a week. In the case of Campomanes vs. 454 there were only two publications of the notice in a newspaper. 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. with what was actually done. In cases of real property. In case of perishable property. but upon discovering that October 15th was a Sunday. for the same period. however. * * * * * * * Examining the record. The correct notice was published twice in a local newspaper. the notice first published gave the date of the sale as October 15th. considering the character and condition of the property. in some newspaper published or having general circulation in the province. In case No. by posting a similar notice particularly describing the property. 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. 454. That such publication in a newspaper will not be required when the assessed valuation of the property does not exceed four hundred pesos. Bartolome and Germann & Co. for such time as may be reasonable. 499. be disposed of in comparatively few words. 435 and 450 the hours advertised were from 9:00 in the morning until 4. in violation of section 457 of the Code of Civil Procedure. the sales must be held invalid.
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. 855). 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.. at any time before a sale or contract of sale has been made by the director of Lands to a third party. That the original owner. . 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 acquired no rights under these sales. therefore. are valid and effective. but has acquired no title through the redemption.. either real or personal. entered into the joint administration of the property with his father. with interest. 713) and Manuel and Laxamana vs. made by a husband-administrator clothed with the insignia of ownership and in whose name the property is held. Maximo Belisario. . the only son and heir of the spouses. that the special rights of the surviving husband as liquidator of the community property of the marriage thereupon also terminated. . As we have seen. 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. between the heirs and the surviving husband might be formed without a written agreement. that "in the absence of fraud and collusion. Nable Jose (41 Phil. This court held in the cases of Nable Jose vs. that. had any notice of the fact that Maximo Belisario participated in the administration of the property or claimed any rights or ownership therein. . by paying therefore the whole sum due thereon at the time of ejectment together with a penalty of ten per centum . 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. at least. The opposition of Adelina Ferrer must also be overruled. void sheriff's or execution sales cannot be validated through inscription in the Mortgage Law registry. 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. in the absence of the formalities prescribed by the Code of Commerce or by articles 1667 and 1668 of the Civil Code. 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. In case such redemption be not made within the time above specified the Government of the Philippine Islands shall have an absolute. 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. Losano(41 Phil. after the death of his spouse. the surviving husband had not right to sell or otherwise dispose of more than his own undivided share of such community property and that. indefeasible title to said real property. But. the provincial treasurer shall immediately notify the Director of Lands of the forfeiture and furnish him with a description of the property. or rather community of property. 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.. if redemption be not made. 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. he is entitled to reimbursement for the money paid for the redemption of the land. knowledge of the existence of the new partnership or community of property must. or his legal representative. . Basilio Borja. consequently. Upon the expiration of the said ninety days." Though this rule is. will probably not be greatly modified by future decisions of this court. . . 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. 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. shall have the right to repurchase the entire amount of his said real property. . perhaps. The case. . therefore. but from our point of view is of no importance. not in harmony with the views of various commentators upon the Civil Code. 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.
Oscar C. They were to share and share alike in the property. Sabert. S. S. ESTATE OF P. 2. 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. P. S. Frank R. 1919. The registration of the land will be made subject to the lien of P. KIEL. John C. S. Sabert the sum of P20. In this same period. situated in the municipality of Parang. organized the Nituan Plantation Company. Albert F. Errors 1. may be made in the following manner: In 1907. Beyersdorfer. plaintiff-appellee. So these proceedings against the estate of Sabert. (7) In rendering judgment for the plaintiff herein. with a subscribed capital of P40. Kiel along with William Milfeil commenced to work on certain public lands situated in the municipality of Parang. to the Nituan Plantation Company. and ultimately the subject-matter of the appeal taken to this court. defendant-appellant. in consideration of the sum of P1. Kiel being a German citizen and not deemed eligible to acquire public lands in the Philippines. including P. Lasage. During the World War. In effect. relating to resulting trusts . and the record. Sabert was to furnish the capital to run the plantation and Kiel was to manage it. Butler and Stephen Jurika with reference to alleged statements and declarations of the deceased P. 1048. Sabert wrote Kiel that he had offered "to sell all property that I have for P40. On August 16. and 3. (3) In finding a resulting trust in land had been established by the evidence in the case. then on appeal to the Court of First Instance allowed. S. Addison for the sums of money expended for the redemption of the land from the forfeiture for nonpayment of taxes. from 1910 to 1917. Sabert transferred all of his rights in two parcels of land (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. It seems that this partnership was formed so that the land could be acquired in the name of Sabert. So ordered. At least in a letter dated June 6. to take up the K. 1918. & S. Kiel subsequently took over the interest of Milfeil. 21045 and his purchase application No. In 1910. five persons. Kiel and P. he was deported from the Philippines. Kiel to secure from the estate of P. This action relates to the legal right of Albert F. Kiel appears to have tried to secure a settlement from Sabert. Kiel worked upon and developed the plantation. known as Parang Plantation Company. In this court." But Sabert's death came before any amicable arrangement could be reached and before an action by Kiel against Sabert could be decided. (4) In admitting the testimony of the plaintiff herein. as will . By virtue of the agreement. Sabert. A skeletonized statement of the case and the facts based on the complaint. 1922. on a claim first presented to the commissioners and disallowed. — These three errors discussing the same subject may be resolved together.000. vs. S. (6) In finding any copartnership existed between plaintiff and the deceased Sabert. On April 10. ALBERT F. SABERT.000 or take in a partner who is willing to develop the plantation. Province of Cotabato. W. Province of Cotabato.The decision appealed from is affirmed without costs. embraced within his homestead application No. the findings of the trial judge.000. (5) In admitting the testimony of William Milfeil. debt no matter which way I will straiten out with you. Sabert entered into an agreement to develop the Parang Plantation Company.
. L. for the purpose of evading the law prohibiting one from taking or holding real property. not made in the presence of his copartner. 65.. 114." (See Leonardo vs. N. No partnership agreement in writing was entered into by Kiel and Sabert. — Not well taken. 53. is admissible as evidence to that extent against his successor in interest. we are not unaware of the rule of partnership that the declarations of one partner. The Code of Civil Procedure in section 383. leaves the firm impression with us that Kiel and Sabert did enter into a partnership. misled somewhat by the decision of the Supreme Court of California in the city ofMyers vs. and that the existence of a partnership cannot be established by general reputation. Applying the tests as to the existence of partnership. 1214-1222. relating to the testimony of five witnesses with reference to alleged statements and declarations of the deceased P. No. 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. 132 Ala. relating to the existence of a copartnership between Kiel and Sabert. upon a claim against the estate of the latter. or pretend to establish a resulting trust in land. Y. 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. By section 298. properly received for whatever they might be worth. is squarely on all fours with the case at bar. It was there held that "A party to an action against an executor or administrator of a deceased person." But the trial judge." Error 5. 5 Paige. Tabotabo (. and that they were to share equally. he takes a conveyance thereof in the name of a third person. that a trust will not be created when. In reality. and that a ruling on the same is not needed. 390)." Here this is exactly the situation which confronts us. Dec. 20 R. or hearsay. — Not well taken. The case of Maxilom vs. evidence may be given up a trial of the following facts: ". By section 282 of the Code of Civil Procedure. Dubois . It is conceivable. of the same Code. (Mechem on Partnership. which discussed the subject of resulting trusts. the act or declaration of a deceased person. In performing this task. No.. But the complaint as framed asks for a straight money judgment against an estate. C. S. done or made against his interest in respect to his real property. relating to the admission of testimony of the plaintiff herein . Bliss . 67 Cal. 89). are not competent to prove the existence of a partnership between them as against such other partner. Error 6. That the plaintiff did not care to press such an action is demonstrated by the relation of the fact of alienage with the rule. 253. names as incompetent witnesses. 7. permitted this testimony to go in. that the facts in this case could have been so presented to the court by means of allegations in the complaint. Santiago . The question consequently is whether or not the alleged verbal copartnership formed by Kiel and Sabert has been proved. Sabert . sec. 28 Am. therefore. C.. Even more primary than any of the rules of partnership above announced. it would have been noted that "the action was not on a claim or demand against the estate of Reinstein. rumor.. Reinstein (. 9 Phil.soon appear. is the injunction to seek out the intention . (26 R. sec.. 7 Phil. who "cannot testify as to any matter of fact occuring before the death of such deceased person. all that the trial judge did was to ground one point of his decision on an authority coming from the Supreme Court of California. against his pecuniary interest. Error 4. claim any interest in land. if we eliminate the testimony of Kiel and only consider the relevant testimony of other witnesses.. L. as to disclose characteristics of a resulting trust. 401.) The testimony of the plaintiff's witnesses. 4. or omission of a deceased person having sufficient knowledge of the subject. . Leggett vs. together with the documentary evidence.) The testimony of these witnesses with reference to the acts or declarations of Sabert was. we reach the conclusion that both parties were in error in devoting so much time to the elaboration of these questions. act. In no part of the complaint did plaintiff allege any interest in land. whereas if the decision had been read more carefully. .. Owensboro Wagon Company vs. the declaration.) The parties are wrong in assuming that the trial judge found that this was an action to establish a resulting trust in land. 413. — Well taken. we feel that competent evidence exists establishing the partnership.
m. including improvements thereon from the sum of P100. however. Sabert.00. S. what part of the P40. and FRANCISCA EVANGELISTA. Josefa Oppus 21 parcels of land with an aggregate area of 3. implements. and 3.1400. S. if he so desires. 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. 2. this property has an assessed value of P57. In resume. 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.255. including improvements . Josefina Florentino a lot with an area of 3. as well as outstanding collectible credits. 263 U. although this fact was not proven. 1944 they purchased from Mrs.000. That on April 28. respondents. As we have already intimated. 1943.of the parties. m. — Well taken in part.40 sq.878. a lot of 4.000.. and other constructions. 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. cattle and other animals. Without costs. presumably on the assumption that Sabert having sold by property to the Nituan Plantation Company for P40. Vette .00 as of 1948. for review of a decision of the Court of Tax Appeals.353 sq. we find well taken. may proceed further to prove his claim against the estate of P. and then to give this intention effect. and other plantings. The judgment appealed from is set aside and the record is returned to the lower court where the plaintiff. fences. it will be remembered. MANUELA EVANGELISTA. So ordered. the dispositive part of which reads: FOR ALL THE FOREGOING.) Error 7.00 as of 1948. we hold that the petitioners are liable for the income tax. That on April 3. and we find not well taken.34. errors 4 and 7.000. 553. which is hereby affirmed and the petition for review filed by petitioner is hereby dismissed with costs against petitioners. real estate dealer's tax and the residence tax for the years 1945 to 1949.00. including improvements thereon for P130. It appears from the stipulation submitted by the parties: 1. errors 5 and 6. we do not think that Kiel is entitled to any share in the land itself. (Giles vs.713. or P20.718. The judgment handed down. we disregard errors 1. belonging to the partnership. There is. they bought from Mrs. vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS. That the petitioners borrowed from their father the sum of P59. Kiel should have one-half of the same. 2.000. inclusive. permitted the plaintiff to recover from the estate the full amount claimed. This is a petition filed by Eufemia Evangelista. if any..000.. petitioners. this property has an assessed value of P82. coconut palms. Such improvements and personal property include buildings.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. extant in the record absolutely no evidence as to the precise amount received by Sabert from the sale of this particular land.517.40 sq. 4. 1944 they purchased from the Insular Investments Inc. as gathered from the facts and as ascertained from their language and conduct.00 which amount together with their personal monies was used by them for the purpose of buying real properties. relating to the judgment rendered for the plaintiff. EUFEMIA EVANGELISTA. m. 3. If it is true that Sabert sold all his land to the Nituan Plantation Company for P40. That on February 2. in accordance with the respondent's assessment for the same in the total amount of P6. Manuela Evangelista and Francisca Evangelista.
.140.75 38.575. etc.50 150.33. That in a document dated August 16.75 38. That in 1948.615.00 thereby leaving them a net rental income of P5. thereby leaving them a net rental income of P12.27 for expenses thereby leaving them a net rental income of P7. to sign all letters. they appointed their brother Simeon Evangelista to 'manage their properties with full power to lease.84 1. Valentina Afable a lot of 8. 10.234. 1944 they bought form Mrs.498. That on April 28.3 4. contracts.288.00 RESIDENCE TAXES OF CORPORATION 1945 1946 1947 1948 1949 Total including surcharge TOTAL TAXES DUE P38.650. 1945.34 1.65 as expenses. real estate dealer's fixed tax and corporation residence tax for the years 1945-1949. Said letter of demand and corresponding assessments were delivered to petitioners on December 3. to issue receipts therefor.13. for and in their behalf.71 10. 8. 7. 6.00 P527. and to endorse and deposit all notes and checks for them.599. 1945 up to an including December.983. to collect and receive rents. It further appears that on September 24. This property has an assessed value of P4.00 as of 1948.878.75 38. in default of such payment. m. out of which amount was deducted in the sum of P16.371 sq. they realized a gross rental income of P17. 1954.00. That after having bought the above-mentioned real properties the petitioners had the same rented or leases to various tenants. to bring suits against the defaulting tenants.75 P193. 9.30. the total amount collected as rents on their real properties was P9.00 while the expenses amounted to P3. computed.948. as follows: INCOME TAXES 1945 1946 1947 1948 1949 Total including surcharge and compromise 14. according to assessment made by said officer.00 150.35. they realized a gross rental income of in the sum of P24. 1945.453.90 P6. whereupon they instituted the present .837. 5.00 as of 1948.75 38.825.912.157.786.144.thereon for P108.00 150. including improvements thereon for P237.0 9 REAL ESTATE DEALER'S FIXED TAX 1946 1947 1948 1949 Total including penalty P37. 1954 respondent Collector of Internal Revenue demanded the payment of income tax on corporations.00 out of the which amount was deducted the sum of P4. That on 1946.34.75 P6. That from the month of March.30 1. This property has an assessed value of P59.
or industry to a common fund. With respect to the tax on corporations. The properties were leased separately to several persons.00. as well as to the residence tax for corporations and the real estate dealers fixed tax. Pursuant to the article. 84 (b). with the intention of dividing the profits among themselves. 1945. Since August. The first element is undoubtedly present in the case at bar. we are fully satisfied that their purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves. 1944. as well as the brief interregnum between each. one cannot but perceive a character of habitually peculiar to business transactions engaged in the purpose of gain. 466. the properties have been under the management of one person. The aforesaid lots were not devoted to residential purposes. 1944. namely: (a) an agreement to contribute money. Thus. to bring suits. for petitioners do not even suggest that there has been any change in the utilization thereof. namely Simeon Evangelista. and that they be absolved from the payment of the taxes in question. 1944). with costs against the respondent. with full power to lease. (compañias colectivas). SEC. for. contribute money and property to a common fund. the essential elements of a partnership are two. who. but in a series of transactions." as used in section 24 and 84 of said Code. and a petition for reconsideration and new trial having been subsequently denied. petitioners have agreed to. otherwise known as the National Internal Revenue Code. with a prayer that "the decision of the respondent contained in his letter of demand dated September 24. the pertinent parts of which read: SEC. no matter how created or organized. It was not property inherited by them pro indiviso. They invested the same. The issue in this case whether petitioners are subject to the tax on corporations provided for in section 24 of Commonwealth Act. Upon consideration of all the facts and circumstances surrounding the case. 4. 1943. Five (5) days later (April 28. admittedly. What is more they jointly borrowed a substantial portion thereof in order to establish said common fund.14. assessed. they purchased 21 lots for P18. the case is now before Us for review at the instance of the petitioners. property or industry to a common fund. joint-stock companies. because: 1.00.—There shall be levied. to issue receipts.000. and (b) intent to divide the profits among the contracting parties. In other words. associations or insurance companies. On April 3.00.30 by way of rentals. a tax upon such income equal to the sum of the following: . joint accounts (cuentas en participacion). Article 1767 of the Civil Code of the Philippines provides: By the contract of partnership two or more persons bind themselves to contribute money. . Seemingly. On February 2. to collect rents. and to indorse and deposit notes and checks. 1943.825. . and did. paid the total sum of P70. the issue narrows down to their intent in acting as they did. This was soon followed on April 23. Rate of tax on corporations.000. to sign letters and contracts. by the acquisition of another real estate for P108. Said common fund was not something they found already in existence.068. the issue hinges on the meaning of the terms "corporation" and "partnership. they got a fourth lot for P237. collected. 2. no matter how created or organized but not including duly registered general co-partnerships ( compañias colectivas). 3. but does not include duly registered general copartnerships. the Court of Tax Appeals the abovementioned decision for the respondent. not merely not merely in one transaction. 24. from 1945 to 1948 inclusive. they bought a lot for P100.case in the Court of Tax Appeals. or existing under the laws of the Philippines. the lots are still being so let.234. After appropriate proceedings. The number of lots (24) acquired and transactions undertaken. No. 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. and paid annually upon the total net income received in the preceding taxable year from all sources by every corporation organized in. They created it purposely. The term 'corporation' includes partnerships. 1954" be reversed. Hence. of petitioners herein. particularly the last three purchases. or to other personal uses. properly. the affairs relative to said properties have been .
5. In fact. in any narrow or technical sense. they might not suffice to establish the intent necessary to constitute a partnership. since the first property was acquired. To begin with. . acting in a representative capacity. which. the collective effect of these circumstances is such as to leave no room for doubt on the existence of said intent in petitioners herein. . the lawmaker could not have regarded that personality as a condition essential to the existence of the partnerships therein referred to. a trust or an estate. and over twelve (12) years. and the affairs of which. under the management of one person — even if true. taken singly. Again. among other. for instance. It includes a voluntary association. however. "the term corporation includes partnerships. are distinct and different from "partnerships". a joint-stock corporation or company. It includes any organization. which like a corporation. for. as above stated. Similarly. created for the transaction of designed affairs. Under the Internal Revenue Laws of the United States. and 'investment' trust (whether of the fixed or the management type). When our Internal Revenue Code includes "partnerships" among the entities subject to the tax on "corporations". or. (cuentas en participation)" and "associations. therefore. p. It is immaterial whether such organization is created by an agreement. or on the causes for its continued existence. Petitioners insist. The foregoing conditions have existed for more than ten (10) years. that they are mere co-owners. the term "corporation" includes. are conducted by a single individual. a board. since Simeon Evangelista became the manager. a committee. strictly speaking. as defined in section 84(b) of said Code. Petitioners have not testified or introduced any evidence. "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. or some other group.). over fifteen (15) years. hence. or in conformity with the usual requirements of the law on partnerships. and some of the characteristics of partnerships are lacking in the case at bar. an additional argument in favor of the imposition of said tax on corporations. not copartners. By specific provisions of said laws. . . and. on which we express no opinion — tends to increase the similarity between the nature of their venture and that corporations. no matter how created or organized. such "corporations" include "associations. Thus." none of which has a legal personality of its own. or a partnership. said Code must allude. or otherwise. or the attainment of some object. emphasis supplied. (7A Mertens Law of Federal Income Taxation. joint-stock companies and insurance companies. a statute. a legal entity. and any other type of organization (by whatever name known) which is not. They did not even try to offer an explanation therefor. 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. in the technical sense of the term. the American Law. Only one or two of the aforementioned circumstances were present in the cases cited by petitioners herein. a declaration of trust. independent of that of its members ." However. a 'business' trusts a 'Massachusetts' trust.handled as if the same belonged to a corporation or business and enterprise operated for profit. the tax in question is one imposed upon "corporations". did not come into existence. 788. therefore. pursuant to said section 84(b). to be exact. This pretense was correctly rejected by the Court of Tax Appeals. Likewise. "corporations" are taxed differently from "partnerships". continues notwithstanding that its members or participants change. in consequence of the acts performed by them. those cases are not in point. a partnership association. within the meaning of the Code." This qualifying expression clearly indicates that a joint venture need not be undertaken in any of the standard forms. like corporate affairs. a 'common law' trust. 6. the term "association" is not used in the aforementioned laws. to organizations which are not necessarily "partnerships". and is. an interinsuarance exchange operating through an attorney in fact. either on their purpose in creating the set up already adverted to. Although. joint accounts. in order that one could be deemed constituted for purposes of the tax on corporations. Accordingly. with a personality independent of that of its members.
599 to P17. and which is not. association or insurance company.. pool. no matter how created or organized. under the term 'partnership 'it includes not only a partnership as known at common law but. financial operation. to the residence tax for corporations. 466). or venture. as well. . group. whether domestic or resident foreign. . 465 provides in part: Entities liable to residence tax. . provides its own concept of a partnership. the appealed decision of the Court of Tax appeals is hereby affirmed with costs against the petitioners herein.453. 465 (June 14. ." inasmuch as. shall exceed one thousand pesos. pursuant to section 194 (s) thereof: 'Real estate dealer' includes any person engaged in the business of buying. within the meaning of the Code. a syndicate. (emphasis supplied. pool. (emphasis supplied. joint venture or other unincorporated organizations which carries on any business financial operation. therefore. 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. no matter how created or organized. 789. it is apparent that the terms "corporation" and "partnership" are used in both statutes with substantially the same meaning. p. . or a corporation. or venture is carried on . insofar as said Code is concerned and are subject to the income tax for corporations. emphasis supplied. for "real estate dealers.." It is. 1939). our National Internal Revenue Code. 562 Note 63. It is so ordered. a trust. p.-Every corporation. exchanging. joint venture or other unincorporated organization. . in accordance with the following schedule: . . the day immediately after the approval of said Commonwealth Act No. clear to our mind that petitioners herein constitute a partnership. For purposes of the tax on corporations. Lastly. . . As regards the residence of tax for corporations. the records show that petitioners have habitually engaged in leasing the properties above mentioned for a period of over twelve years. partnership. (7A Merten's Law of Federal Income taxation. selling.) 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. section 2 of Commonwealth Act No. 1939. group. and that the latter was approved on June 15.) The term 'partnership' includes a syndicate. Thus. The term 'corporation' as used in this Act includes joint-stock company. includes these partnerships — with the exception only of duly registered general copartnerships — within the purview of the term "corporation. ( 8 Merten's Law of Federal Income Taxation. also. 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. . . they are subject to the tax provided in section 193 (q) of our National Internal Revenue Code. estate. through or by means of which any business. emphasis supplied.) . Consequently. joint account (cuentas en participacion). and that the yearly gross rentals of said properties from June 1945 to 1948 ranged from P9. leasing. . petitioners are subject.) Wherefore.
SALCEDO. BITO. and more particularly. on 18 April 1972 to SALCEDO. SELPH and CARRASCOSO was duly registered in the Mercantile Registry on 4 January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. Misa and Lozada. as senior partners with respondents-appellees Gregorio F. On February 17. 24638 and No. DEL ROSARIO. including the assistant attorneys. MISA & LOZADA. I would like to have this resolved soon because it has to do with my own plans. MISA & LOZADA.R." On 19 February 1988. Lozada associated themselves together. ORTEGA. "I trust that the accountants will be instructed to make the proper liquidation of my participation in the firm. COURT OF APPEALS. The instant petition seeks a review of the decision rendered by the Court of Appeals. DEL ROSARIO. Not only have they refused to give meaningful increases to the employees. del Castillo. MISA & LOZADA.. are hereunder restated. my interest in the two floors of this building. LAWRENCE. petitioner-appellant wrote respondents-appellees another letter stating: "Further to my letter to you today. 1995 GREGORIO F." G. BITO. SP No. The antecedents of the controversy. DEL ROSARIO. Ortega.. 24648 affirming in toto that of the Securities and Exchange Commission ("SEC") in SEC AC 254. BACORRO. dated 26 February 1993. and Benjamin Bacorro. in CA-G. [Joaquin L.ROSARIO. 1988. vs. DEL CASTILLO. HON. to change the firm [name] to ROSS. Tomas O. The result of such policies is the formation of the union. petitioner-appellant wrote the respondentsappellees a letter stating: I am withdrawing and retiring from the firm of Bito. on 7 June 1977 to BITO. The law firm of ROSS. Misa] appellees Jesus B.R. Jr. are dressed down publicly in a loud voice in a manner that deprived them of their self-respect. . on 11 March 1977 to DEL . to ROSS." On the same day. 109248 July 3. SELPH. No. SELPH and CARRASCOSO. The SEC records show that there were several subsequent amendments to the articles of partnership on 18 September 1958. SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. . I would like to have a meeting with all of you with regard to the mechanics of liquidation. petitioners. MISA & LOZADA. effective at the end of this month. petitioner-appellant wrote respondentsappellees another letter stating: "The partnership has ceased to be mutually satisfactory because of the working conditions of our employees including the assistant attorneys. on 4 December 1972 to SALCEDO. on 6 July 1965 . Bito and Mariano M. All my efforts to ameliorate the below subsistence level of the pay scale of our employees have been thwarted by the other partners. BITO. MISA.respondents. summarized by respondent Commission and quoted at length by the appellate court in its decision. even attorneys. JR. BITO & MISA. TOMAS O. on 19 December 1980. and BENJAMIN T. as junior partners.
petitioner filed his Reply to the Opposition. The death of the two partners. SP No. checks and pleadings and to pay petitioners damages for the use thereof despite the dissolution of the partnership in the amount of at least P50. Misa & Lozada has not been dissolved. Misa & Lozada did not dissolve the said law partnership. Order respondents jointly and severally to pay petitioner attorney's fees and expense of litigation in such amounts as maybe proven during the trial and which the Commission may deem just and equitable under the premises but in no case less than ten (10%) per cent of the value of the shares of petitioner or P100. "4. since no partner can be forced to continue in the partnership against his will. During the pendency of the case with the Court of Appeals. the law firm could be dissolved by any partner at anytime.R. respondents-appellees filed their opposition to the petition. Decree the formal dissolution and order the immediate liquidation of (the partnership of) Bito. docketed as SEC Case No.000. Misa & Lozada in any of their correspondence. such as by his withdrawal therefrom. "5. petitioner filed with this Commission's Securities Investigation and Clearing Department (SICD) a petition for dissolution and liquidation of partnership.00 and exemplary damages in the amount of P200. the hearing officer rendered a decision ruling that: "[P]etitioner's withdrawal from the law firm Bito. "3. Misa & Lozada. SP No. premises considered the appealed order of 31 March 1989 is hereby REVERSED insofar as it concludes that the partnership of Bito.000. rent or interest attributable to the use of his right in the assets of the dissolved partnership. Enjoin respondents from using the firm name of Bito.000.00. 24638 and CA-G. being a partnership at will. dated 17 January 1990. Accordingly. SP No. On 4 April 1991. 3384 praying that the Commission: "1. On 31 March 1989. the SEC held: WHEREFORE. regardless of good faith or bad faith. Order the respondents to pay petitioner moral damages with the amount of P500. . as well as rejecting the petition for receivership.On 30 June 1988.R. in the law firm prompted Attorney Misa to renew his application for receivership (in CA G." The Commission ruled that. respondent SEC issued an order denying reconsideration. "Petitioner likewise prayed for such other and further reliefs that the Commission may deem just and equitable under the premises. asked for an appointment of a receiver to take over the assets of the dissolved partnership and to take charge of the winding up of its affairs. 2 The parties sought a reconsideration of the above decision. as well as the admission of new partners. 24648). The case is hereby REMANDED to the Hearing Officer for determination of the respective rights and obligations of the parties. 05 September 1991 and 21 December 1991. respectively. Misa & Lozada. and reiterating the remand of the case to the Hearing Officer. the SEC en banc reversed the decision of the Hearing Officer and held that the withdrawal of Attorney Joaquin L.R.000." On 13 July 1988." 1 On appeal. Attorney Misa. Attorney Jesus Bito and Attorney Mariano Lozada both died on.00. Misa had dissolved the partnership of "Bito. Order the respondents to deliver or pay for petitioner's share in the partnership assets plus the profits. "2. The parties filed with the appellate court separate appeals (docketed CAG. the petitioner and respondents are hereby enjoined to abide by the provisions of the Agreement relative to the matter governing the liquidation of the shares of any retiring or withdrawing partner in the partnership interest. in addition. In its decision. On 13 July 1988.00.
and the absence of a cause for dissolution provided by the law itself. That the law firm "Bito. finding no reversible error on the part of respondent Commission. Whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent dissolved the partnership regardless of his good or bad faith. Misa & Lozada. shall be continued by the surviving partners. firm and corporation engaged in commercial. He must. Ortega and Castillo. Whether or not the Court of Appeals has erred in holding that private respondent's demand for the dissolution of the partnership so that he can get a physical partition of partnership was not made in bad faith. He expressed concern over the need to preserve and care for the partnership assets. The partnership shall continue so long as mutually satisfactory and upon the death or legal incapacity of one of the partners. with approval. is a specific undertaking or "project" which has a definite or definable period of completion. along with each partner's capability to give it. Whether or not the Court of Appeals has erred in holding that the partnership of Bito. DURATION. Its continued existence is. AFFIRMED in toto the SEC decision and order appealed from.24648)." The hearing officer however opined that the partnership is one for a specific undertaking and hence not a partnership at will. In this petition for review under Rule 45 of the Rules of Court. any one of the partners may. Verily. likewise limit ourselves. to counsel and advise such persons and entities with respect to their legal and other affairs. removed or materially impaired. at his sole pleasure." The "purpose" of the partnership is not the specific undertaking referred to in the law. Apparently what the law contemplates. Purpose. Otherwise." is indeed such a partnership need not be unduly belabored. Misa & Lozada (now Bito. the findings and disquisition of respondent SEC on this matter." and now "Bito. and elsewhere when legally authorized to do so. however. In fine. and to appear for and represent their principals and client in all courts of justice and government departments and offices in the Philippines. Ortega & Castillo) is a partnership at will. . viz: The partnership agreement (amended articles of 19 August 1948) does not provide for a specified period or undertaking. The Court of Appeals. the appellate court held. Lozada. The other partners opposed the prayer. to which matters we shall. petitioners confine themselves to the following issues: 1. There would therefore be no need to provide for articles on partnership at will as none would so exist. (c) that the liquidation should be to the extent of Attorney Misa's interest or participation in the partnership which could be computed and paid in the manner stipulated in the partnership agreement. would all be considered as partnerships for a definite undertaking. Misa's withdrawal from the partnership had changed the relation of the parties and inevitably caused the dissolution of the partnership. dependent on the constancy of that mutual resolve. industrial or other lawful businesses and occupations. We quote. all partnerships. citing paragraph 2 of the Amended Articles of Partnership (19 August 1948): "2. 2. in turn. and (e) that the appointment of a receiver was unnecessary as no sufficient proof had been shown to indicate that the partnership assets were in any such danger of being lost. 3 The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. Lozada. is to act as legal adviser and representative of any individual. per its decision of 26 February 1993. (b) that such withdrawal was not in bad faith. dictate a dissolution of the partnership at will. and 3. (d) that the case should be remanded to the SEC Hearing Officer for the corresponding determination of the value of Attorney Misa's share in the partnership assets. like did the appellate court. act in good faith. The purpose for which the partnership is formed. The "DURATION" clause simply states: "5. (a) that Atty. A partnership that does not fix its term is a partnership at will. which necessarily must have a purpose. accordingly. The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership.
respondents. that Attorney Misa did not act in bad faith. 7 mutual agency arises and the doctrine of delectus personae allows them to have the power. 1966. is no different from its normal concept of a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity. 12Indeed. their true value at the time of such death or retirement shall be determined by two (2) independent appraisers. On the third and final issue. as might be distinguished from the winding up of. to let any of the partners remain in the partnership under such an atmosphere of animosity. Bad faith. the partnership continues and its legal personality is retained until the complete winding up of its business culminating in its termination. and on May 28. WHEREFORE. however. The distinction between co-ownership and an unregistered partnership or joint venture for income tax purposes is the issue in this petition.. as we so hold. provided. 1988 MARIANO P. as the case may be. from the partnership that thereby dissolves it. The share of the retiring or deceased partner in the aforementioned two (2) floor office condominium shall be determined upon the basis of the valuation above mentioned which shall be paid monthly within the first ten (10) days of every month in installments of not less than P20. we accord due respect to the appellate court and respondent Commission on their common factual finding. bad faith cannot be said to characterize the act.R. THE COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS. for as long as the reason for withdrawal of a partner is not contrary to the dictates of justice and fairness. 78133 October 18. 11 The term "retirement" must have been used in the articles.000. Salcedo Village. 5 In passing. his interest in the partnership shall be liquidated and paid in accordance with the existing agreements and his partnership participation shall revert to the Senior Partners for allocation as the Senior Partners may determine. Public respondents viewed his withdrawal to have been spurred by "interpersonal conflict" among the partners. . although not necessarily theright. inclusive of resignation or withdrawal. in a generic sense to mean the dissociation by a partner.000. In the event of the death or retirement of any partner. to dissolve the partnership. vs. On June 22. nor for the purpose of unduly visiting harm and damage upon the partnership. like any other contract. i. 140 Alfaro Street. that with respect to the two (2) floors of office condominium which the partnership is now acquiring. Metro Manila. 9 The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the Civil Code. petitioners bought two (2) parcels of land from Santiago Bernardino. et al. The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be associated in the carrying on. we agree. No. In the event of any disagreement between the said appraisers a third appraiser will be appointed by them whose decision shall be final. SO ORDERED G. the business. certainly. one to be appointed (by the partnership and the other by the) retiring partner or the heirs of a deceased partner. 10 however. the decision appealed from is AFFIRMED. an agreement of the partners. 8 Upon its dissolution.e. An unjustified dissolution by the partner can subject him to a possible action for damages. 1965.00 in the case of the new Junior Partner. not against their will. Makati. We here take note of paragraph 8 of the "Amendment to Articles of Partnership" reading thusly: . is binding among them and normally takes precedence to the extent applicable over the Code's general provisions. 6 Among partners. petitioners. they bought another three (3) .00 in the case of two (2) existing Junior Partners and P5.00 for the Senior Partners.not that the attendance of bad faith can prevent the dissolution of the partnership 4 but that it can result in a liability for damages. DRAGON. P10. neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation prevent the dissolution of any partnership by an act or will of a partner. in the context here used. No pronouncement on costs. consisting of the 5th and the 6th floors of the Alpap Building. PASCUAL and RENATO P.000. It would not be right. .
issue receipts. 1979 asserting that they had availed of tax amnesties way back in 1974.101. IN HOLDING AS PRESUMPTIVELY CORRECT THE DETERMINATION OF THE RESPONDENT COMMISSIONER.1970. etc. 1979 of then Acting BIR Commissioner Efren I. 23. Associate Judge Constante Roaquin stated that considering the circumstances of this case. However. They had the real properties rented or leased to various tenants for several years and they .parcels of land from Juan Roque.70 as alleged deficiency corporate income taxes for the years 1968 and 1970. SOLELY ON THE BASIS OF ISOLATED SALE TRANSACTIONS. It ruled that on the basis of the principle enunciated in Evangelista 3 an unregistered partnership was in fact formed by petitioners which like a corporation was subject to corporate income tax distinct from that imposed on the partners. 12-13. petitioners were assessed and required to pay a total amount of P107. the petitioners were required to pay the deficiency income tax assessed. In due course. while the three parcels of land were sold by petitioners to Erlinda Reyes and Maria Samson on March 19. In a separate dissenting opinion. They appointed their brother to manage their properties with full power to lease. while they realized a net profit of P60.70. In a reply of August 22. collect. the respondent court by a majority decision of March 30. D. although there might in fact be a co-ownership between the petitioners. and that the availment of tax amnesty under P. rent. both of the National Internal Revenue Code 1 that the unregistered partnership was subject to corporate income tax as distinguished from profits derived from the partnership by them which is subject to individual income tax. Plana. this petition wherein petitioners invoke as basis thereof the following alleged errors of the respondent court: A. THAT AN UNREGISTERED PARTNERSHIP EXISTED THUS IGNORING THE REQUIREMENTS LAID DOWN BY LAW THAT WOULD WARRANT THE PRESUMPTION/CONCLUSION THAT A PARTNERSHIP EXISTS. AND THAT THE BURDEN OF OFFERING EVIDENCE IN OPPOSITION THERETO RESTS UPON THE PETITIONERS. respondent Commissioner informed petitioners that in the years 1968 and 1970. Hence. Petitioners realized a net profit in the sale made in 1968 in the amount of P165. petitioners as co-owners in the real estate transactions formed an unregistered partnership or joint venture taxable as a corporation under Section 20(b) and its income was subject to the taxes prescribed under Section 24. by petitioners relieved petitioners of their individual income tax liabilities but did not relieve them from the tax liability of the unregistered partnership. 4 In the said case. The first two parcels of land were sold by petitioners in 1968 toMarenir Development Corporation. TO THE EFFECT THAT PETITIONERS FORMED AN UNREGISTERED PARTNERSHIP SUBJECT TO CORPORATE INCOME TAX.D.) The petition is meritorious. 2 affirmed the decision and action taken by respondent commissioner with costs against petitioners. Rollo. C. The basis of the subject decision of the respondent court is the ruling of this Court in Evangelista.224. 3045. Hence. B. IN RULING THAT THE TAX AMNESTY DID NOT RELIEVE THE PETITIONERS FROM PAYMENT OF OTHER TAXES FOR THE PERIOD COVERED BY SUCH AMNESTY.00 in the sale made in 1970. in a letter dated March 31.000. No. 1979. Petitioners protested the said assessment in a letter of June 26. IN FINDING THAT THE INSTANT CASE IS SIMILAR TO THE EVANGELISTA CASE AND THEREFORE SHOULD BE DECIDED ALONGSIDE THE EVANGELISTA CASE. (pp. as amended. Petitioners filed a petition for review with the respondent Court of Tax Appeals docketed as CTA Case No. there was no adequate basis for the conclusion that they thereby formed an unregistered partnership which made "hem liable for corporate income tax under the Tax Code. 1987. The corresponding capital gains taxes were paid by petitioners in 1973 and 1974 by availing of the tax amnesties granted in the said years. petitioners borrowed a sum of money from their father which together with their own personal funds they used in buying several real properties. IN MAKING A FINDING.
one cannot but perceive a character of habituality peculiar to business transactions engaged in for purposes of gain. the issue hinges on the meaning of the terms corporation and partnership as used in sections 24 and 84 of said Code. on April 23. but in a series of transactions . 24.00. namely: (a) an agreement to contribute money. but does not include duly registered general co-partnerships (companies colectivas). Said common fund was not something they found already in existence. 1943. 1944. or industry to a common fund. . property or industry to a common fund. property. The term "corporation" includes partnerships. The first element is undoubtedly present in the case at bar. no matter how created or organized. joint-stock companies. among others. not merely in one transaction. the issue narrows down to their intent in acting as they did . 84(b). Seemingly.000. or existing under the laws of the Philippines. from them. who.30 by way of rentals. 2. Article 1767 of the Civil Code of the Philippines provides: By the contract of partnership two or more persons bind themselves to contribute money.068. this Court held as follows: The issue in this case is whether petitioners are subject to the tax on corporations provided for in section 24 of Commonwealth Act No. with the intention of dividing the profits among themselves.14. 3. as well as the brief interregnum between each. The properties were leased separately to several persons. no matter how created or organized but not including duly registered general copartnerships (companies collectives). With respect to the tax on corporations. Hence. 1944.—There shall be levied. 1943. 466. admittedly. of petitioners herein . What is more they jointly borrowed a substantial portion thereof in order to establish said common fund. by the acquisition of another real estate for P108.234. because: 1. otherwise known as the National Internal Revenue Code. from 1945 to 1948 inclusive. they bought a lot for P100. the lots are still being so let. associations or insurance companies. In resolving the issue.. The number of lots (24) acquired and transcations undertaken. they got a fourth lot for P237. and (b) intent to divide the profits among the contracting parties . They created it purposely. the pertinent parts of which read: Sec. On April 3. contribute money and property to a common fund. This was soon followed. joint accounts (cuentas en participation). They invested the same. It was not a property inherited by them pro indiviso. The aforesaid lots were not devoted to residential purposes or to other personal uses. a tax upon such income equal to the sum of the following: .00. assessed. and paid annually upon the total net income received in the preceding taxable year from all sources by every corporation organized in. as well as to the residence tax for corporations and the real estate dealers' fixed tax. 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 petitioners in February. collected. Thus. In other words.00. the essential elements of a partnership are two. they purchased 21 lots for P18. Pursuant to this article.. we are fully satisfied that their purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves . the Collector of Internal Revenue demanded the payment of income tax on a corporation.825. paid the total sum of P70. petitioners have agreed to. Five (5) days later (April 28.gained net profits from the rental income. particularly the last three purchases.000. and did. Sec. 1944). Rate of the tax on corporations. for petitioners do not even suggest that there has been any change in the utilization thereof. Upon consideration of all the facts and circumstances surrounding the case. On February 2. for.
and to indorse and deposit notes and checks. aside from the circumstance of profit. The character of habituality peculiar to business transactions engaged in for the purpose of gain was present . They did not even try to offer an explanation therefor. It was only 1968 when they sold the two (2) parcels of land after which they did not make any additional or new purchase. such as the clear intent to form a partnership. In Evangelista. This only means that. the properties were leased out to tenants for several years. Simeon Evangelists. (2) Co-ownership or co-possession does not itself establish a partnership. since Simeon Evangelists became the manager. whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived. 6. In Evangelists.ownership share or do not share any profits made by the use of the property held in common does not convert their venture into a partnership. whether such co-owners or co-possessors do or do not share any profits made by the use of the property. The character of habituality peculiar to business transactions for the purpose of gain was not present. and that they intended to divide the profits among themselves. they bought another three (3) parcels of land from one seller. They did not sell the same nor make any improvements thereon. or on the causes for its continued existence. The business was under the management of one of the partners. there is no evidence that petitioners entered into an agreement to contribute money. or. there was a series of transactions where petitioners purchased twenty-four (24) lots showing that the purpose was not limited to the conservation or preservation of the common fund or even the properties acquired by them. Thus. Although. None of the circumstances are present in the case at bar. From the above it appears that the fact that those who agree to form a co. namely. Thus. either on their purpose in creating the set up already adverted to. Petitioners have not testified or introduced any evidence. over fifteen (15) years. 5. The remaining three (3) parcels were sold by them in 1970. property or industry to a common fund. hence. 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. Justice Angelo Bautista in Evangelista he said: I wish however 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. Since August. they might not suffice to establish the intent necessary to constitute a partnership. 5 In the present case. 1945.4. those cases are not in point. (3) The sharing of gross returns does not of itself establish a partnership. in the concurring opinion of Mr. Said article paragraphs 2 and 3. the collective effect of these circumstances is such as to leave no room for doubt on the existence of said intent in petitioners herein. to sign letters and contracts. to collect rents. the affairs relative to said properties have been handled as if the same belonged to a corporation or business enterprise operated for profit. the existence of a . Only one or two of the aforementioned circumstances were present in the cases cited by petitioners herein. to bring suits. The transactions were isolated. provides. In the instant case. Such condition existed for over fifteen (15) years. the presence of other elements constituting partnership is necessary. since the first property was acquired. to be exact. with full power to lease. Respondent commissioner and/ or his representative just assumed these conditions to be present on the basis of the fact that petitioners purchased certain parcels of land and became co-owners thereof. and. and over twelve (12) years. the properties have been under the management of one person. to issue receipts. The co-ownership started only in 1965 and ended in 1970. The foregoing conditions have existed for more than ten (10) years. In 1966. taken singly. petitioners bought two (2) parcels of land in 1965.
are not thereby rendered partners.. (Clark vs. Under the circumstances. App. section 83. agree among themselves as to the management. as the respondent commissioner proposes. and the freedom to transfer or assign any interest in the property by one with the consent of the others (Padilla. Herring 150 P. (Spurlock vs. 673. 74. (c) and such a community of interest.12 Ct. 35 L. and the freedom of each party to transfer or assign the whole property. 341. as petitioners have availed of the benefits of tax amnesty as individual taxpayers in these transactions. Magee 123 N. and another agreed to become owners of a single tract of realty. manage the business. p. and use of such property and the application of the proceeds therefrom. the petition is hereby GRANTED and the decision of the respondent Court of Tax Appeals of March 30. but who severally retain the title to their respective contribution. holding as tenants in common. the brother and the other not being entitled to share in plaintiffs commission. vs. they cannot be considered to have formed an unregistered partnership which is thereby liable for corporate income tax. 682. In the present case. without becoming partners. And even assuming for the sake of argument that such unregistered partnership appears to have been formed. as far as third persons are concerned as enables each party to make contract.E. 50 III 470. (Magee vs. 1953 ed. I. They shared in the gross profits as co. 1157.W. then petitioners can be held individually liable as partners for this unpaid obligation of the partnership p. does not constitute a copartnership in respect thereto. whatever their relation may have been as to third parties. There must be a clear intent to form a partnership. 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. 1067.) A joint purchase of land. There is no adequate basis to support the proposition that they thereby formed an unregistered partnership.S. though they may use it for the purpose of making gains.) In order to constitute a partnership inter sese there must be: (a) An intent to form the same. the existence of a juridical personality different from the individual partners. and they may. his brother. and no community of interest as principal proprietors in the business itself which the proceeds derived. WHEREFROM. there is clear evidence of co-ownership between the petitioners. nor does an agreement to share the profits and losses on the sale of land create a partnership. Sideway.) Where plaintiff. (Elements of the Law of Partnership by Flord D. Ed.owners and paid their capital gains taxes on their net profits and availed of the tax amnesty thereby. and dispose of the whole property. They have no common stock or capital. 14. (b) generally participating in both profits and losses. they are thereby relieved of any further tax liability arising therefrom.. 635-636) 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. Civil Code of the Philippines Annotated.juridical personality different from that of the individual partners. 142 U. no partnership existed as between the three parties. by two.. the parties are only tenants in common.160 No. and to divide the profits of disposing of it. 142 S. Wilson. Vol.) 6 The sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have a joint or common right or interest in the property. 233 Mass.) The common ownership of property does not itself create a partnership between the owners. 7 However. 327. The two isolated transactions whereby they purchased properties and sold the same a few years thereafter did not thereby make them partners. since there is no such existing unregistered partnership with a distinct personality nor with assets that can be held liable for said deficiency corporate income tax. 1987 is hereby REVERSED and SET ASIDE and another decision is hereby rendered relieving . Mechem 2nd Ed.-Municipal Paving Co. 363. pp.
1923. leaving in his hands a single piece of property located at 616-618 Carried Street. On the eve of his departure Elser made a written statements showing that Lyons was. Lyons. plaintiff-appellant. Prior to his death on June 18. W. ROSENSTOCK.000. defendant-appellee. During the absence of Lyons two of the pieces of property above referred to were sold by Elser. L-35469 March 17. Upon hearing the cause the trial court absolved the defendant executor from the complaint. S. without pronouncement as to costs. together with the sum of about P125. Elser.. LYONS. In the spring of 1920 the attention of Elser was drawn to a piece of land. Lyons against C.. C. Pickering & Co. went on leave to the United States and was gone for nearly a year and a half. 1932 E. Ltd. S. half owner with Elser of three particular pieces of real property. by E. 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. This action was institute in the Court of First Instance of the City of Manila. Executor of the Estate of Henry W. W. No. of the Methodist Episcopal Church. in the City of Manila. to the mutual advantage of both. 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. and the plaintiff appealed. containing about 1. Lyons. representing the dividends which accrued on said stock prior to October 21. Elser. at that time. as executor of the estate of H. K. SO ORDERED. returning on September 21. and he discerned therein a fine opportunity for the promotion and development of . Rosenstock. W. vs. or missionary agent.R. selling. near the City of Manila. In April. In several ventures which he had made in buying and selling property of this kind the plaintiff. 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. 1920. E. The purpose of the action is to recover four hundred forty-six and two thirds shares of the stock of J. 1919. and administering real estate. with lawful interest. G. Henry W. containing about 282 square meters of land. had joined with him.000 square meters. whose regular vocation was that of a missionary.petitioners of the corporate income tax liability in this case. S. 1926. the profits being shared by the two in equal parts.500. deceased. with the improvements thereon. deceased.
K. 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. which will be herein referred to as the San Juan Estate. or at least strengthens the considerations involved in a feature of the case to be presently explained. This fact was dwelt upon in the letter above-mentioned. Accordingly. Elser purchased an option on this property for P5. On the same date he wrote Lyons a letter explaining some details of the purchase. When Elser was concluding the transaction for the purchase of the San Juan Estate. To afford a little time for maturing his plans. 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. K. been organized by Elser and three associates. meaning that he should resign his position with the mission board in New York. was offered by its owners for P570.290 shares. Pickering & Company was organized and stock issued. and when the J. 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.000.72. his book showed that he was indebted to Lyons to the extent of. the amounts thus paid should be credited as part of the first payment.669. and when the latter returned to the Philippine Islands. For the purpose of the further development of the property a limited partnership had.000. (Exhibit M-5. In the end he was able from his own means. Pickering & Company. One source of embarrassment which had operated on Lyson to bring him to the resolution to stay out of this venture. but also by the Fidelity & Surety Company. Elser cabled Lyons that he had bought the San Juan Estate and thought it advisable for Lyons to resign (Exhibit M-13). 1920. his portion amount in the beginning to 3.000.a suburban improvement. the two would be well fixed." In one or more communications prior to this. This loan was secured through Uy Cho Yee. This amount was finally obtained from a Chinese merchant of the city named Uy Siuliong. The money thus raised was delivered to Elser by Uy Siuliong on June 24. 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. . which had accrued to Lyons from profits and earnings derived from other properties. and some of Lyons' missionary associates had apparently been criticizing his independent commercial activities. he had passed up a good thing. possibly. with the understanding in both cases that. . he paid P15.000 advanced upon the option. and with the assistance which he obtained from others. eight days before the first option expired. and as Elser had available only about P120.000. In this connection it appears that on May 20. he accepted these shares and sold them for his own benefit. . While these negotiations were coming to a head. 1920. informing him that he had made an offer for a big subdivision and that. to acquire said estate. 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.000 more for an extension of the option. it was necessary to raise the remainder by obtaining a loan for P50. about this time. a son of the lender.000 in excess of the amount which Elser in fact owed to Lyons. 1920. 1920. and when the transfer of the property was effected the deed was made directly to this company. 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. The amounts paid for this option and its extension were supplied by Elser entirely from his own funds. 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.) On June 3. It will be noted that the par value of these 200 shares was more than P8. as he then believed that Lyons would be one of his associates in the deal. since the . Elser wrote Lyons a letter. P11. on June 21. under the name of J. Elser indorsed to Lyons 200 of the shares allocated to himself. This property. This view is manifestly untenable. including the P20. As Elser was the principal capitalist in the enterprise he received by far the greater number of the shares issued. if it should be acquired and Lyons would come in. and when this option was about to expire without his having been able to raise the necessary funds. No further efforts to this end were therefore made by Elser. was that the board of mission was averse to his engaging in business activities other than those in which the church was concerned. 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 case the option should be exercised. 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. 1920.000. 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. and found him averse from joining in the purchase of the San Juan Estate. The enthusiasm of Elser did not communicate itself in any marked degree to Lyons. The amount required for the first payment was P150. With this money and what he already had in bank Elser purchased the San Juan Estate on or about June 28.
The latter thereupon in turn executed a cancellation of the mortgage on the Carriedo property and delivered it to Elser. The explanation of this change of purpose is undoubtedly to be found in the fact that Lyons had arrived in Manila on September 21. the lender. Elser testified to the conversation in which Lyons used the words above quoted. with 1. Pickering & Company. on the note to be given for said loan. it is evident that the risk imposed upon Lyons was negligible. We now turn to the incident which supplies the main basis of this action. became. Elser executed in favor of the Fidelity & Surety Co. Pickering & Company which he had delivered to it. agreed to the proposition. K. and it . as it were. that the latter had determined not to come into this deal. Elser began to cast around for means to relieve the Carriedo property of the encumbrance which he had placed upon it. to said company. But when he learned from the letter from Lyons of July 21. This mortgage was executed on June 30. Elser returned the cancellation of the mortgage on the Carriedo property and took back from the Fidelity & Surety Co. he addressed a letter to the Fidelity & Surety Co. his qualification for this office being derived precisely from the ownership of these shares.. and no actual liability ever resulted therefrom. involuntarily the owner of an undivided interest in the property acquired partly by that money. K.000 in excess of the indebtedness which Elser had owed to Lyons upon statement of account.000 shares of J. the new mortgage on the M.000 upon the equity of redemption in the Carriedo property. the trial court was. This concession was not only reasonable under the circumstances. when Elser placed a mortgage for P50. For this purpose. 1920. del Pilar property. 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. 1920. del Pilar Street.000 to Uy Siuliong on January 18. insisted upon having security for the liability thus assumed by it. The case for the plaintiff supposes that. Mrs. and he could scarcely have failed to take account of the use he had made of the joint property of the two. 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. and as that conversation supplies the most reasonable explanation of Elser's recession from his purpose of relieving the Carriedo property. on September 9. 1920. thereafter. in view of the abundant solvency of Elser. in the course of a conversation with Elser told him to let the Carriedo mortgage remain on the property ("Let the Carriedo mortgage ride"). But before signing the note with Elser and his associates. What really happened was the Elser merely subjected the property to a contingent liability. But notwithstanding the fact that these documents were executed and delivered. but in view of the further fact that Elser had given to Lyons 200 shares of the stock of the J. and on September 15.000 to complete the amount needed for the first payment on the San Juan Estate. at which time Elser expected that Lyons would come in on the purchase of the San Juan Estate. together with the 1. 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. H. when Elser obtained the loan of P50. Pickering & Co.000 shares of the J. 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. the new mortgage and the release of the old were never registered. and shortly thereafter. K. apart from the modest financial participation of his three associates in the San Juan deal..000 shares of the J. Lyons. a new mortgage on the M. Uy Siuliong. As the development of the San Juan Estate was a success from the start. H. Pickering & Company.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. 1920. Pickering & Company. It will be remembered that. H. well justified in accepting as a proven fact the consent of Lyons for the mortgage to remain on the Carriedo property. K. as half owner of said property. the equity of redemption in the property owned by himself and Lyons on Carriedo Street. was the work of Elser accomplished entirely upon his own account. as security. 1921. and 1. del Pillar property and delivered the same. but the relations of the parties had been such that it was to be expected that Elser would be generous. having a value of nearly P8. Elser paid the note of P50. 1920. Whether the agreement was reached exactly upon this precise line of thought is of little moment. in lieu of the Carriedo property. 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. The financing of the purchase of the San Juan Estate. insisted that he should procure the signature of the Fidelity & Surety Co. The Fidelity & Surety Co. To meet this requirements Elser mortgaged to the Fidelity & Surety Co. 1920. and on September 25. Manila. K. in our opinion. asking it to permit him to substitute a property owned by himself at 644 M. the Fidelity & Surety Co.
Martinez. under article 1678 of the Civil Code. Elser's widow and one of his clerks testified that about June 15.: "I have mortgaged the property on Carriedo Street. Elser's estate would be liable for such damage. one of his first inquiries would have been. It doubtedless appeared so to him in the retrospect. can be quoted in which he uses this language: As stated in cablegram I have arranged for P50. its price had gone up. 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.. the purchase of a property referred to in the correspondence as the "Ronquillo property". only where money belonging to one person is used by another for the acquisition of property which should belong to both. Naturally. and after his arrival in Manila he consented for the mortgage to remain on the property until it was paid off. namely. but certain consideration show that he was inattentive to the contents of the quotation from the letter above given. upon the arrival of Lyons in September. Of course.000 loan on Carriedo property. and much emphasis is laid in the appellant's brief upon the relation of partnership which. if he did not know before. we think. since the proof shows that Lyons knew that the Carriedo mortgage had been executed. Will use part of the money for Ronquillo buy (P60. any error made by the trial court on this point was error without injury. the case might be difference. But there was clearly no general relation of partnership. It is clear that Elser. It may well be that Lyons did not at first clearly understand all the ramifications of the situation. although Elser was angling for the Ronquillo property. 1 Phil. but he knew enough. secured by my personal note. it is claimed. 641. He seems to have supposed that the Carried property had been mortgaged to aid in putting through another deal. thus introducing a doubt as to whether he could get it. The doctrines referred to operate. the position of the appellant is. 25 Phil.000) if the owner comes through.000 thus obtained would be used in this way.). existed. however. 647. as shortly occurred. In the purely legal aspect of the case. if an actual relation of partnership had existed in the money used. But it is evident that Lyons was not prejudice by that act. with the earnings thereon. and in this connection a letter of Elser of the latter part of May. 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. You are amply protected. and we concur in the conclusion of the trial court that Elser did not act in bad faith and was guilty of no fraud. K." Lyons says that no such cablegram was received by him. and we consider this point of fact of little moment. as claimed in his complaint. Pickering & Company. what was the status of the proposed trade for the Ronquillo property. 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. 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. While the admission of this testimony was of questionable propriety. I wish you to join me in the San Juan Subdivision. Borrow all money you can. Enriquez vs. Of course. He had already been informed that. he is entitled to the four hundred forty-six and two-thirds shares of J. 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.. and the law cannot be distorted into a proposition which would make Lyons a participant in this deal contrary to his express determination. to apprise him of the material factors in the situation. If Elser had used any money actually belonging to Lyons in this deal. untenable. be obligated to pay interest upon the money so applied to his own use. he would under article 1724 of the Civil Code and article 264 of the Code of Commerce. 1920. and the determination of the question is not . if the deal went through. in buying the San Juan Estate. in consideration of this fact.is insisted for him that. 1920. 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. 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. in our opinion. Elser cabled Lyons something to this effect. was not acting for any partnership composed of himself and Lyons. Other correspondence shows that Elser had apparently been trying to buy the Ronquillo property. and it takes but little discernment to see that the situation here involved is not one for the application of that doctrine. Olaguer. if any damage had been caused to Lyons by the placing of the mortgage upon the equity of redemption in the Carriedo property.
they spent their whole lives. elect Philippine citizenship” are citizens of the Philippines. Balgamelo did the same before Atty. The judgment appealed from will be affirmed. ASSOCIATE COMMISSIONER JOSE DL. No. in their capacities as Chairman and Members of the Board of Commissioners (Bureau of Immigration). they have not even traveled abroad. During their age of minority. of the 1935 Constitution. FERNANDEZ. CARONOÑGAN. JR. 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. however. respectively.R. Jr. CABOCHAN. have not set foot in Taiwan. Petitioners. the fact of which the latter attested to in his Affidavit of 7 March 2005. G. Gonzalez. Jr. Felix Cabiling Ma. and Isidro Ma (Isidro) are the children of Felix (Yao Kong) Ma. on 15 August 1969. and MAT G. and 1957. and it is so ordered. 183133 July 26. -versusCOMMISSIONER ALIPIO F. they secured from the Bureau of Immigration their Alien Certificates of Registration (ACRs). Filoteo. DELARMENTE AND ASSOCIATE COMMISSIONER FRANKLIN Z. Municipal Judge. upon reaching the age of majority. ASSOCIATE COMMISSIONER ARTHEL B. andVALERIANO CABILING MA. they do not speak nor understand the Chinese language. 2010 BALGAMELO CABILING MA. The Facts Balgamelo Cabiling Ma (Balgamelo). studied and received their primary and secondary education in the country.necessary to this decision. FELIX CABILING MA. Respondents. a Filipina. (Felix. Article IV. SurigaoCity.). Sering. . executed his affidavit of election of Philippine citizenship and took his oath of allegiance before then Judge Jose L. Patrocinio C. LITTAUA. Surigao del Norte.. which provides that “(t)hose whose mothers are citizens of the Philippines and. JR. They were all raised in the Philippines and have resided in this country for almost sixty (60) years. they claimed Philippine citizenship in accordance with Section 1(4). The resolution of these questions would significantly mark a difference in the lives of herein petitioners. Felix. but who failed to immediately file the documents of election with the nearest civil registry. and erase the years lived and spent as Filipinos.  On 14 January 1972.. City Court of Surigao City. Balgamelo and Valeriano were all born under aegis of the 1935 Philippine Constitution in the years 1948. Arceli Ma (Arceli). 1951. Records reveal that petitioners Felix. Lechi Ann Ma (Lechi Ann). We therefore pass the point without further discussion. Thus. a Taiwanese.  Immediately upon reaching the age of twenty-one. Notary Public. failed to have the necessary documents registered in the civil registry as required under Section 1 of Commonwealth Act No. In 1978. Jr.. who executed an affidavit of election of Philippine citizenship and took their oath of allegiance to the government upon reaching the age of majority. Jr. and do not know any relative of their father. Valeriano took his oath of allegiance before then Judge Salvador C. Surigao del Norte. Should children born under the 1935 Constitution of a Filipino mother and an alien father. the question is translated into the inquiry whether or not the omission negates their rights to Filipino citizenship as children of a Filipino mother. Valeriano Cabiling Ma (Valeriano). CATRAL. petitioners. Having taken their oath of allegiance as Philippine citizens. Surigao. with costs against the appellant. and they have already raised their respective families in the Philippines. ASSOCIATE COMMISSIONER TEODORO B. Nicolas Ma (Nicolas). and Dolores Sillona Cabiling.
Catral). 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 and continuously failed to present any valid document to show their respective status in the Philippines. hence. 625. 2. Surigao City. On 9 November 2004. Section 1 of Commonwealth Act No. It was only on 27 July 2005 or more than thirty (30) years after they elected Philippine citizenship that Balgamelo and Felix. They likewise failed to produce documents to show their election of Philippines (sic) citizenship. That respondents. Records further reveal that Lechi Ann and Arceli were born also in Surigao City in 1953 and 1959. aside from exercising their right of suffrage. and DOJ Guidelines. undocumented and overstaying foreign nationals in the country. Memorandum Order dated 18 August 1956 of the CID. 613. requiring the filing of a petition for the cancellation of their alien certificate of registration with the CID. 613. composed of the public respondents. otherwise known as the Philippine Immigration Act of 1940. 0015A since June 1997.  On the other hand. in part: That Respondents x x x. in view of their election of Philippine citizenship. and that records on previous registrations are no longer available because of the mandatory general registration every ten (10) years. no document exists that will provide information on the citizenship of Nicolas and Isidro. respectively. there is no showing that Valeriano complied with the registration requirement. Bureau of Immigration After Felix Ma and his seven (7) children were afforded the opportunity to refute the allegations. No.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). 182. detailing the procedural requirements in the registration of the election of Philippine citizenship. alleging that Felix (Yao Kong) Ma and his seven (7) children are undesirable and overstaying aliens. Sections 37(a)(7) and 45(e) in relation to BI Memorandum Order Nos. 19 August 1982. they were governed by the following rules and regulations: 1. Jr. however. The Charge Sheet docketed as BSI-D. 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. now Bureau of Immigration [BI]) Circular dated 12 April 1954.C. show that all of them are registered voters of Barangay Washington. Likewise. AFF-04-574 (OC-STF-04-09/23-1416) reads. Precinct No. 625. Catral. Moreover. misrepresent themselves as Philippine citizens in order to evade the requirements of the immigration laws. did not participate in the proceedings. However. 3. 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 filed with the nearest civil registry. the Bureau of Immigration received the Complaint-Affidavit of a certain Mat G. all Chinese nationals. rendered a Judgment dated 2 February 2005 finding that Felix Ma and his children violated Commonwealth Act No. Surigao City. requiring that the records of the . being aliens. 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 National and Local Elections. The Board ruled that since they elected Philippine citizenship after the enactment of Commonwealth Act No. Ruling of the Board of Commissioners. did so. Balgamelo is one of the incumbent Barangay Kagawadsin Barangay Washington. 27 March 1985. The Complaint On 16 February 2004. Department of Justice (DOJ) Opinion No.  and Commission of Immigration and Deportation (CID. Individual certifications all dated 3 January 2005 issued by the Office of the City Election Officer. ADD-01-031 and ADD-01-035 dated 6 and 22 August 2001. the Legal Department of the Bureau of Immigration charged them for violation of Sections 37(a)(7)  and 45(e)  of Commonwealth Act No. Catral (Mr. Commission on Elections. Mr. respectively. as amended. the Board of Commissioners (Board) of the Bureau of Immigration (BI). which was approved on 7 June 1941.
Arceli Ma and Isidro Ma under C. 613. Lechi Ann Ma. Nicolas Ma. Jr.A. (Emphasis supplied. on the other hand. ADD-01-031 and ADD01-035 dated 6 and 22 August 2001.. 1-93 of the Bureau of Immigration requires that ACR.) In its Resolution of 8 April 2005. For these reasons. Lechi Ann Ma. 613. as amended. be issued to foreign nationals who apply for initial registration. Lechi Ann Ma. Arceli Ma and Isidro Ma. No. Valeriano Ma. Balgamelo Ma. to wit: (1) the Judgment dated 2 February 2005.  Supposedly for failure to comply with the procedure to prove a valid claim to Philippine citizenship via election proceedings. Section 29(a)(15). Arceli. 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 Philippines either as aliens or as its nationals.  The dispositive portion of the Judgment of 2 February 2005 reads: 1. However. Arceli Ma and Isidro Ma in the Immigration Blacklist.. public respondents likewise deemed them undocumented and/or improperly documented aliens. and exclusion of the petitioners from the Philippines.. Nicolas Ma. it issued a Resolution denying the petitioners’ Motion for Reconsideration dated 20 September 2007.A.” On 29 May 2008. Jr. public respondents concluded that Felix. Valeriano and Lechi Ann are undocumented and/or improperly documented aliens. Subject to the submission of appropriate clearances. Section 13(g). Balgamelo. E-series. they denied the Motion for Reconsideration with respect to Felix Ma and the rest of his children.. Valeriano Ma.A. Inclusion of the names of Felix (Yao Kong) Ma. 4. under C. They were convinced that Arceli is an immigrant under Commonwealth Act No. Jr. . Balgamelo Ma. Issuance of a warrant of deportation against Felix (Yao Kong) Ma. Felix Ma.O. a person’s continued and uninterrupted stay in the Philippines. issuance of a warrant of deportation against them. finger printing and issuance of an ACR in accordance with the Alien Registration Act of 1950. Nicolas Ma. ordering the summary deportation of the petitioners. public respondents partially reconsidered their Judgment of 2 February 2005. No. Valeriano Ma. Lechi Ann Ma. Balgamelo Ma. 89532. which was docketed as CA-G. respectively. Jr. Nicolas Ma.  According to public respondents. Administrative Order No.R. Valeriano Ma. did not submit any document to support their claim that they are Philippine citizens.  Ruling of the Court of Appeals On 3 May 2005. and (2) the Resolution dated 8 April 2005.proceedings be forwarded to the Ministry (now the Department) of Justice for final determination and review. Balgamelo Ma. Section 37(a). denying the petitioners’ Motion for Reconsideration. Taiwanese [Chinese]. Nos. his being a registered voter or an elected public official cannot vest in him Philippine citizenship as the law specifically lays down the 2. As regards the documentation of aliens in the Philippines. Nicolas and Isidro. 613. Jr. and Exclusion from the Philippines of Felix (Yao Kong) Ma.. No. inclusion of their names in the Immigration Blacklist. SP No. Sections 37(a)(7). Neither did they present any evidence to show that they are properly documented aliens. and Valeriano filed the Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure before the Court of Appeals. 45(e) and 38 in relation to BI M. Felix. They sought the nullification of the issuances of the public respondents. To reiterate. summary deportation of Felix (Yao Kong) Ma. On 29 August 2007. 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 Registration Act of 1950. Felix Ma. 613. Felix Ma. only Balgamelo. Arceli Ma and Isidro Ma under C. 3. Felix Ma. Jr.
requirements for acquisition of Philippine citizenship by election. Philippine citizenship can never be treated like a commodity that can be claimed when needed and suppressed when convenient. he should avail of the right with fervor. and (3) registration of the statement of election and of the oath with the nearest civil registry. Article IV.  However. The phrase “reasonable time” has been interpreted to mean that the elections should be made within three (3) years from reaching the age of majority. Commonwealth Act No. We said: It is true that this clause has been construed to mean a reasonable time after reaching the age of majority. the proper period for electing Philippine citizenship was. We pronounced: x x x [T]he 1935 Constitution and C. we held in Cue[n]co vs. It laid down the manner of electing Philippine citizenship. In Re:Application for Admission to the Philippine Bar. and shall be filed with the nearest civil registry. The constitutional mandate concerning citizenship must be adhered to strictly. based on the pronouncements of the Department of State of the United States Government to the effect that the election should be made within a reasonable time after attaining the age of majority. Ching. Vicente D. file the same with the nearest civil registry. Secretary of Justice. which period may be extended under certain circumstances. The mandate states: Section 1. 625 was enacted. No.  that the three (3) year period is not an inflexible rule.” The age of majority then commenced upon reaching twenty-one (21) years.” Our references were the Civil Code of the Philippines. 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. The following are citizens of the Philippines: (1) xxx. xxxx (4) Those whose mothers are citizens of the Philippines and. In 1941. The 1935 Charter only provides that the election should be made “upon reaching the age of majority. this dilemma was resolved by basing the time period on the decisions of this Court prior to the effectivity of the 1935 Constitution. Section 1. elect Philippine citizenship. in turn. The said party shall accompany the aforesaid statement with the oath of allegiance to the Constitution and the Government of the Philippines. and the case of Cueco v. as when the person concerned has always considered himself a Filipino. thereafter. One who is privileged to elect Philippine citizenship has only an inchoate right to such citizenship. The statutory formalities of electing Philippine citizenship are: (1) a statement of election under oath. enthusiasm and promptitude. In these decisions. we determined the meaning of the period of election described by phrase “upon reaching the age of majority. All that is required of the elector is to execute an affidavit of election of Philippine citizenship and. 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. The option to elect Philippine citizenship in accordance with subsection (4). the opinions of the Secretary of Justice. 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. to wit: Section 1. The prescribed procedure in electing Philippine citizenship is certainly not a tedious and painstaking process. 625 did not prescribe a time period within which the election of Philippine citizenship should be made. As such. (2) an oath of allegiance to the Constitution and Government of the Philippines.A. .  In the opinions of the Secretary of Justice on cases involving the validity of election of Philippine citizenship. upon reaching the age of majority. Secretary of Justice.
and the delay of several years before their filing with the proper office was not satisfactorily explained. no other act would be necessary to confer on him the rights and privileges of a Filipino citizen. [which was decided on 1 October 1999]. a certificate of naturalization was issued to his father. Electoral Tribunal of the House of Representatives. whose citizenship was in question. Ramos. Ching offered no reason for the late election of Philippine citizenship. did not adopt the doctrine laid down in In Re: Florencio Mallare. was not appreciated because it was ruled that any election of Philippine citizenship on the part of Ong would have resulted in absurdity. in said case. the Court of Appeals found the petitioners’ argument of good faith and “informal election” unacceptable and held: Their reliance in the ruling contained in Re:Application for Admission to the Philippine Bar. such circumstance. Sr. Jr. pointing out that. the right to elect Philippine citizenship has not been lost and they should be allowed to complete the statutory requirements for such election. He became of age on February 16. contrary to the finding of the Court of Appeals. because the law itself had already elected Philippine citizenship for him  as. as he established his life here in the Philippines. we ruled against the petitioners because they belatedly complied with all the requirements. Vicente D.  and that Esteban was born in 1929 prior to the adoption of the 1935 Constitution and the enactment of Commonwealth Act No. hence. Vicente D. we cautioned in Cue[n]co that the extension of the option to elect Philippine citizenship is not indefinite. We rule that under the facts peculiar to the petitioners. it may be recalled that we denied his application for admission to the Philippine Bar because.  In the Co case. 1923. Such conclusion. Co v. said that the case cannot support herein petitioners’ cause. apparently.e. a case in which we adopted the findings of the appellate court that the father of the petitioner. while he was still a minor. petitioner was born on February 16. however. It was only the registration of the documents of election with the civil registry that was belatedly done. Jose Ong. and Re:Application for Admission to the Philippine Bar. In all. 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. is in line with our decisions in In Re:Florencio Mallare. failed to elect Philippine citizenship within the reasonable period of three (3) years upon reaching the age of majority. Ching .  We reiterated the above ruling in Go. It is clear that said election has not been made “upon reaching the age of majority. The Court of Appeals. i. On the contrary. his continuous and uninterrupted stay in the Philippines and his being a certified public accountant.”  In both cases. unlike petitioner. or over seven (7) years after he had reached the age of majority. 1944. 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. cannot vest in him Philippine citizenship as the law specifically lays . Esteban’s exercise of the right of suffrage when he came of age was deemed to be a positive act of election of Philippine citizenship. in his case. all the requirements. 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. the Supreme Court was emphatic in pronouncing that “the special circumstances invoked by Ching. did more than exercise his right of suffrage. Regardless of the foregoing. Petitioners complied with the first and second requirements upon reaching the age of majority. to wit: (1) a statement of election under oath.  In Mallare. His election of citizenship was made onMay 15. The instant case presents a different factual setting.. when he was over twenty-eight (28) years of age.However. Ching . 1951. Esteban is a natural child of a Filipina. (2) an oath of allegiance to the Constitution and Government of the Philippines. It bears emphasis that the Supreme Court. is obviously flawed. a registered voter and a former elected public official. In Ching. Again. 625. v. while similar to that of herein petitioners’.
What we now say is that where. Registration does not confer ownership. The non-registration of a deed of donation does not also affect its validity. it pertains to the entry made in the registry which records solemnly and permanently the right of ownership and other real rights .” As pertinent is the holding that registration “neither adds to its validity nor converts an invalid instrument into a valid one between the parties. and even the marginal notes. contract. consistently. The actual exercise of Philippine citizenship. Thus. It was commitment and fidelity to the state coupled with a pledge “to renounce absolutely and forever all allegiance” to any other state. and continuously been done. registration refers to any entry made in the books of the registry. that failure to register the contract does not affect the liability of the partnership and of the partners to third persons.” It lays emphasis on the validity of an unregistered document. registration is the confirmation of election as such election. including both registration in its ordinary and strict sense. In strict acceptation. In an analogous case involving an unrecorded deed of sale. 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.”  In general. for the effect of registration serves chiefly to bind third persons. We are not prepared to state that the mere exercise of suffrage. the petitioners timely took their oath of allegiance to the Philippines.down the requirements for acquisition of Philippine citizenship by election. An unregistered contract of partnership is valid as among the partners. to record formally and distinctly. we elucidated the principles of civil law on registration: To register is to record or annotate. Actual knowledge may even have the effect of registration as to the person who has knowledge thereof. as in petitioners’ case. the fact of marriage cannot be declared void solely because of the failure to have the marriage certificate registered with the designated government agency. American and Spanish authorities are unanimous on the meaning of the term “to register” as “to enter in a register. but only a means of confirming the fact of its existence with notice to the world at large. Registration. we said that the purpose of registration is to give notice to third parties. “[i]ts purpose is to give notice thereof to all persons (and it) operates as a notice of the deed. This was a serious undertaking. we reiterated the settled rule that registration is not a mode of acquiring ownership. This was unqualified acceptance . It is not a mode of acquiring dominion. Also. Indeed. is the confirmation of the existence of a fact. 625. and cancellation. In a contract of partnership. or instrument to others. the election of citizenship has in fact been done and documented within the constitutional and statutory timeframe. It is only a means of confirming the fact that citizenship has been claimed. Registration is not a requirement for the validity of the contract as between the parties. Notably. Thus. For what purpose is registration? In Pascua v. then. being elected public official. registration is made for the purpose of notification. for over half a century by the herein petitioners. Comparable jurisprudence may be consulted. Court of Appeals. to enter in a list.  Simply stated. It is not the registration of the act of election. because the main purpose of registration is to give notice to third parties. that will confer Philippine citizenship on the petitioners. and it can be assumed that the members themselves knew of the contents of their contract. is actual notice to the Philippine public which is equivalent to formal registration of the election of Philippine citizenship. and other similar acts showing exercise of Philippine citizenship can take the place of election of citizenship. although a valid requirement under Commonwealth Act No. In the instant case. so long as it has the essential requisites. annotation. the registration of the documents of election beyond the frame should be allowed if in the meanwhile positive acts of citizenship have publicly. to enroll. and that neither does such failure affect the partnership’s juridical personality. we even allow the late registration of the fact of birth and of marriage.  Likewise relevant is the pronouncement that registration is not a mode of acquiring a right. continuous and uninterrupted stay in the Philippines.
The failure to register as aliens is. while the 1935 Constitution requires that children of Filipino mothers elect Philippine citizenship upon reaching their age of majority. 2. the 1987 Constitution now classifies them as natural-born citizens upon election of Philippine citizenship. even. 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. Section 1 hereof shall be deemed natural-born citizens. xxxx xxx Why does the draft resolution adopt the provision of the 1973 Constitution and not that of the 1935?  xxxx . The 1973 provision reads: Section 1. MR. CONCEPCION. Article IV thereof provides: Section 2. Thus. xxxx x x x x As regards those born of Filipino mothers. The Committee seemingly proposes to further liberalize the policy of the 1935 Constitution by making those who became citizens of the Philippines through a declaration of intention to choose their mother’s citizenship upon reaching the majority age by declaring that such children are natural-born citizens of the Philippines.  upon the effectivity of the 1973 Constitution. Better than the relaxation of the requirement.of their identity as a Filipino and the complete disavowal of any other nationality. x x x. they automatically become Filipinos and need not elect Philippine citizenship upon reaching the age of majority. On the contrary. among others. (Emphasis supplied. consistent with petitioners’ election of Philippine citizenship. Corollary to this fact. The following are citizens of the Philippines: (1) xxx. if the father were an alien or unknown. apparently. 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.) The constitutional bias is reflected in the deliberations of the 1986 Constitutional Commission. obviously. children of mixed marriages involving an alien father and a Filipino mother are Filipino citizens. 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. Their present status having been formed by their past. I understand that the committee would further liberalize this provision of the 1935 Constitution. petitioners should not be expected to secure E-series ACR because it would be inconsistent with the election of citizenship and its constructive registration through their acts made public. under the 1973 Constitution. Sec. the 1935 Constitution merely gave them the option to choose Philippine citizenship upon reaching the age of majority. their exercise of suffrage. election as public official. and recognized positive acts of Philippine citizenship. and continued and uninterrupted stay in the Philippines since birth. 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. Thus. (2) Those whose fathers and mothers are citizens of the Philippines. Petitioners have passed decades of their lives in the Philippines as Filipinos. petitioners can no longer have any national identity except that which they chose upon reaching the age of reason. The favor that is given to such children is likewise evident in the evolution of the constitutional provision on Philippine citizenship. they are deemed not properly documented. Those who elect Philippine citizenship in accordance with paragraph (3). Upon the other hand.
by subsequently choosing Philippine citizenship. it would appear that his choice retroacted to the date of his birth so much so that under the Gentleman’s proposed amendment. the question on what citizenship the child would prefer arises. Having a Filipino mother is permanent. and the Resolution dated 29 May 2008 of the Court of Appeals in CA-G.R. the Bureau of Immigration. SP No. 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. I would. which the Committee is now planning to consider a natural-born citizen. RODRIGO. x x x Precisely. he would be a naturalborn citizen? FR. It is the basis of the right of the petitioners to elect Philippine citizenship. if any. paragraph 3 never had the chance to choose. With respect to a child who became a Filipino citizen by election.. very important because his election of Philippine citizenship makes him not only a Filipino citizen but a natural-born Filipino citizen. in this case.FR. The idea was that we should not penalize the mother of a child simply because she fell in love with a foreigner. The lacking requirements may still be complied with subject to the imposition of appropriate administrative penalties. The documents they submitted supporting their allegations that they have already registered with the civil registry. Petitioners elected Philippine citizenship in form and substance. the reason behind the modification of the 1935 rule on citizenship was a recognition of the fact that it reflected a certain male chauvinism. We are guided by this evolvement from election of Philippine citizenship upon reaching the age of majority under the 1935 Philippine Constitution todispensing 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 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. But the difference between him and the natural-born who lost his status is that the natural-born who lost his status. support the retention of the modification made in 1973 of the male chauvinistic rule of the 1935 Constitution. a child be made to choose. [T]his provision becomes very. No. WHEREFORE. Felix Cabiling Ma. this individual in the situation contemplated in Section 1. But I do not think we should penalize the child before he is even able to choose. and Valeriano Cabiling Ma. BERNAS. AFF-04574 OC-STF-04-09/23-1416 are herebySET ASIDE with respect to petitioners Balgamelo Cabiling Ma. he will be so the moment he opts for Philippine citizenship. the Decision dated 29 August 2007. 89532 affirming the Judgment dated 2 February 2005. then let him choose when he reaches the age of majority. But certainly it is within the jurisdiction of the Philippine government to require that [at] a certain point. and the Resolution dated 8 April 2005 of the Bureau of Immigration in BSI-D. We really have no way of guessing the preference of the infant. all he had was just an inchoate right to choose Philippine citizenship. should be examined for validation purposes by the appropriate agency. Did the Committee take into account the fact that at the time of birth.C. I think dual citizenship is just a reality imposed on us because we have no control of the laws on citizenship of other countries. entitling him to run for Congress. and yet. Petitioners are given ninety (90) days from notice within which to COMPLY with the requirements of the Bureau of Immigration xxxx MR. REGALADO. to be a Justice of the Supreme Court x x x. although belatedly. Jr. Now. We recognize a child of a Filipino mother. . lost it voluntarily. therefore. BERNAS.  xxxx [on the period within which to elect Philippine citizenship] MR. But whether or not she is considered a citizen of another country is something completely beyond our control. and it was for the purpose of remedying that this proposed provision was put in. whereas. But if we recognize the right of the child to choose.
plus moral and exemplary damages in the amount of P50. 84157 July 28.. No.00.. INC. plus 15% of the amount awarded to plaintiff as attorney's fees from July 2. petitioner. The subject matter of these consolidated petitions is the decision of the Court of Appeals in CA-G. until full payment is made. PIONEER INSURANCE AND SURETY CORPORATION. petitioner.74 with interest from the filing of the cross-complaints until the amount is fully paid. Lim requiring Lim to pay plaintiff the amount of P311. MAGLANA and JACOB S. if any. vs. FRANCISCO and MODESTO CERVANTES and CONSTANCIO MAGLANA.making a total of P184. BORDER MACHINERY and HEAVY EQUIPMENT CO. INC. Lim is further required to pay cross party plaintiff. BORDER MACHINERY & HEAVY . 84197) against all defendants (respondents in G. 66195 which modified the decision of the then Court of First Instance of Manila in Civil Case No. and ACT thereon in accordance with the decision of this Court.R. the Cervanteses one-half and Maglana the other half. judgment is rendered against defendant Jacob S.1966.. EQUIPMENT. THE HON. the amount of Pl84.74.000. LIM. respondents.02. SO ORDERED.R. Bormaheco.056.878. have been complied with subject to the imposition of appropriate administrative fines. plus moral and exemplary damages in the amount of P184. with interest at the rate of 12% per annum compounded monthly.respondents. Defendant Jacob S. 1989 JACOB S. The dispositive portion of the trial court's decision reads as follows: WHEREFORE.878. 84197) was dismissed but in all other respects the trial court's decision was affirmed.R.embodied in its Judgment of 2 February 2005.84 with interest from the filing of the cross-complaints until the amount is fully paid. G. REVIEW the documents submitted by the petitioners. COURT OF APPEALS. 66135.00 for each of the two Cervanteses.878. (BORMAHECO). No. vs. No. The Bureau of Immigration shallENSURE that all requirements. CV No. LIM. including the payment of their financial obligations to the state.000. COURT OF APPEALS.000. No. CONSTANCIO M.R. 1989 PIONEER INSURANCE & SURETY CORPORATION.00 moral and exemplary damages.R.. G. It is found in the records that the cross party plaintiffs incurred additional miscellaneous expenses aside from Pl51. 84197 July 28. plus P70. The plaintiffs complaint (petitioner in G.
On May 17. plaintiff is required to indemnify the defendants Bormaheco and the Cervanteses the amount of P20. One DC-3 Aircraft with Registry No.G. 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. PIC-718. 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. 84157) was engaged in the airline business as owner-operator of Southern Air Lines (SAL) a single proprietorship.. 15-16) In 1965. On June 10. 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. its successors and assigns. Japan.000. and another P20.21. Instead. is not an act of bad faith. No damage is decided against Malayan Insurance Company. per year from 1966 with legal rate of interest up to the time it is paid.00 to Bormaheco and the Cervanteses. the third-party defendant.00 as attorney's fees and the amount of P4.R. one signed by Maglana and the other jointly signed by Lim for SAL.00 to Constancio B. 84197) as surety executed and issued its Surety Bond No.00 as attorney's fees and costs. 6639 (Exhibit C) in favor of JDA.000. 1965. 24197. losses. 1965. arrived in Manila on June 7. pp. Maglana.000. Inc. It was stipulated therein that Lim transfer and convey to the surety the two aircrafts.Furthermore. and it was the court that ordered it. damages.R.R. The deed (Exhibit D) was duly registered with the Office of the Register of Deeds of the City . No further claim or counter-claim for or against anybody is declared by this Court. Jacob S. in behalf of its principal. They executed two (2) separate indemnity agreements (Exhibits D-1 and D-2) in favor of Pioneer. Maglana the amount of P20. On May 22. in view of all above. If an insurance company would be liable for damages in performing an act which is clearly within its power and which is the reason for its being. No. 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. xxx xxx xxx WHEREFORE. taxes. (Rollo . he is required to pay P20. The funds were supposed to be their contributions to a new corporation proposed by Lim to expand his airline business. Inc. in the exercise of its discretion. When a man tries to protect his rights. the plaintiff is required to pay Constancio B. 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. Maglana as attorney's fees. reimburse and make good to Pioneer. costs. then nobody would engage in the insurance business.379. 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.1965.000. Furthermore. at Tokyo. for it only secured the attachment prayed for by the plaintiff Pioneer. No.1965 while the other aircraft. It appears that Border Machinery and Heavy Equipment Company. arrived in Manila on July 18. for the balance price of the aircrafts and spare parts. (Bormaheco). the complaint of plaintiff Pioneer against defendants Bormaheco. the Cervanteses and Constancio B. he should not be saddled with moral or exemplary damages. Pioneer Insurance and Surety Corporation (Pioneer. 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. Furthermore. 1965. penalties. petitioner in G. the rights exercised were provided for in the Rules of Court. is dismissed.000. No moral or exemplary damages is awarded against plaintiff for this action was filed in good faith. No.00 to be paid in installments. Lim (petitioner in G. Lim. Bormaheco and the Cervanteses.
10) The petitioner questions the following findings of the appellate court: We find no merit in plaintiffs appeal..00. Flowers v. Weber v. 1 NW 2d 424. David.G.00 — the bulk of defendants' alleged obligation to Pioneer.000. In their Answers. Maglana. I.626. Comments on the Rules of Court. 131). Bormaheco and the Cervanteses filed crossclaims against Lim alleging that they were not privies to the contracts signed by Lim and. 97 P. Based on the foregoing premises. 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 FROM HEREIN PRIVATE RESPONDENTS AS DEFENDANTS IN THE TRIAL COURT. quoting 47 C. 84197. After trial on the merits.000. Plaintiff Pioneer's contention that it is representing the reinsurer to recover the amount from defendants. . 35). 67 Phil. No. a decision was rendered holding Lim liable to pay Pioneer but dismissed Pioneer's complaint against all other defendants. 1979 ed. subordinate or consequential interest (Garcia v. filed a third party claim alleging that they are coowners of the aircrafts. by way of counterclaim.R. 52 N.000.V. Pioneer paid a total sum of P298. 125. We first resolve G. however. respectively. By real party in interest is meant a present substantial interest as distinguished from a mere expectancy or a future. City of Cheye. 669. 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. Ltd. the appellate court modified the trial court's decision in that the plaintiffs complaint against all the defendants was dismissed. p. Defendants' alleged obligation to Pioneer amounts to P295. 2d 667.666. 414. Oglleaby v. 2d 1600. 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. hence. 776). 84197. the Cervanteses. The Cervanteses and Maglana.00.of Manila and with the Civil Aeronautics Administration pursuant to the Chattel Mortgage Law and the Civil Aeronautics Law (Republic Act No. 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. R. 27. To qualify a person to be a real party in interest in whose name an action must be prosecuted. authorized to institute an action for and in behalf of the latter. 88 Phil. 155). p. Bormaheco and Maglana.12. No.28 from defendants will no longer prosper. Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage before the Sheriff of Davao City. hence. As stated earlier. 385 III. he must appear to be the present real owner of the right sought to be enforced (Moran. 1966. plaintiff Pioneer cannot be considered as the real party in interest as it has already been paid by the reinsurer the sum of P295.E. 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. On July 19.. (Rollo .. contingent. In all other respects the trial court's decision was affirmed. Lim defaulted on his subsequent installment payments prompting JDA to request payments from the surety. Vol. Germans. it instituted the action is utterly devoid of merit. Plaintiff did not even present any evidence that it is the attorney-in-fact of the reinsurance company. plaintiffs instant action for the recovery of the amount of P298. Springfield Marine Bank. Warner Barnes & Co. Pioneer filed an action for judicial foreclosure with an application for a writ of preliminary attachment against Lim and respondents.
00. collected the proceeds of such reinsurance in the sum of P295. Annex B of G. the petitioner is entitled to recover from respondents Bormaheco and Maglana. . it is plain that on this score it no longer has any right to collect to the extent of the said amount. it is patent that plaintiff has been overpaid in the amount of P33. and most important of all. has Pioneer still any claim against defendants. 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? 2. To allow plaintiff Pioneer to recover from defendants the amount in excess of P298..In addition to the said proceeds of the reinsurance received by plaintiff Pioneer from its reinsurer. 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.72 considering that the total amount it had paid to JDA totals to only P298.050. to the proceeds of the reinsurance amounting to P295. 24-25). 359. 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. the former was able to foreclose extra-judicially one of the subject airplanes and its spare engine. instead of the reinsurance (sic).00 from the sale of the mortgaged chattels. . p. Lastly.050. 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.00. If the answer to the preceding question is in the negative. notwithstanding that the cause of action pertains to the latter. On the question of why it is Pioneer. there is not the slightest indication in the complaint that Pioneer is suing as attorney-in.000.666.000.' In other words.666.fact of the reinsurers for any amount.383. realizing the total amount of P37. Well settled is the rule that no person should unjustly enrich himself at the expense of another (Article 22. 11) (2) even assuming hypothetically that it was paid by its reinsurer. 84157). p. (3) pursuant to the indemnity agreements. Pioneer Insurance & Surety Corporation is representing the reinsurers to recover the amount. In resolving these issues. 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. 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. that is suing defendants for the amount paid to it by the reinsurers. insofar as the amount paid to it by the reinsurers Pioneer is suing defendants as their attorney-in-fact. New Civil Code). No. and paid with the said amount the bulk of its alleged liability to JDA under the said surety bond. Pioneer says: The reinsurers opted instead that the Pioneer Insurance & Surety Corporation shall pursue alone the case. . considering the amount it has realized from the sale of the mortgaged properties? (Record on Appeal.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 vis-a-vis defendant Lim's liability to JDA. Adding the sum of P37. and this is so even where the name of the principal is disclosed in the complaint. (Rollo.R. (Rollo-84197. 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. But in the first place. A cursory reading of the trial court's lengthy decision shows that two of the issues threshed out were: xxx xxx xxx 1. Pioneer has no right to institute and maintain in its own name an action for the benefit of the reinsurers. . pp.28. The records belie the petitioner's contention that the issue on the reinsurance money was never raised by the parties.
(Record on Appeal. Con. Rep. If the amount paid by the insurance company does not fully cover the injury or loss. In general a reinsurer.666. or P3. 1134). pp.. 710-714. the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.000. Court of Appeals(154 SCRA 650 ): Note that if a property is insured and the owner receives the indemnity from the insurer. Heald Lumber Co. Pennsylvania Fire Ins. San Diego G. . therefore.A. 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. 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. 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. Co. the uninsured portion of what it paid to JDA is the difference between the two amounts. assuming that the indemnity agreement is still valid and effective.22347. 46 F 2nd 925). Rep. Limjuco and Gonzalo.' This provision is mandatory. has no cause of action against the respondents. 1031 ) which we subsequently applied in Manila Mahogany Manufacturing Corporation v.00 for one of the airplanes and P2. 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.050. Filipinos Industrial Corporation v. (101 Phil. (Delaware. v. then the aggrieved party is the one entitled to recover the deficiency. 23 SCRA 706.R.C. Considering this admitted payment. or a total of P37.. to wit: Art. Therefore.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.E. 2207. Granada and Gentero. 330. 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. that there is no law permitting an action to be brought by an attorney-in-fact. 484. It is clear from the records that Pioneer sued in its own name and not as an attorney-in-fact of the reinsurer. 360-363). Old Time Molasses Co.72.29.00 for a spare engine. v. the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. This is the amount for which Pioneer may sue defendants. The rules of practice in actions on original insurance policies are in general applicable to actions or contracts of reinsurance. 380.1968. 7 Ann. (Emphasis supplied). C. Since Pioneer has collected P295. under this legal provision. Luchauco v. Ins. Co.28. Interpreting the aforesaid provision. No. This Court has held in various cases that an attorney-in-fact is not a real party in interest. 55 S. Pioneer is still overpaid by P33.000.00. Evidently. v. Co. Hence the applicable law is Article 2207 of the new Civil Code.00 from the reinsurers. we ruled in the case of Phil. But since the amount realized from the sale of the mortgaged chattels are P35. Accordingly. the real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured.383. 12.050. the only issue that cropped up was the effect of payment made by the reinsurers to the petitioner. Inc. 18 Phil. If the plaintiffs property has been insured.126 GA. The payment to the petitioner made by the reinsurers was not disputed in the appellate court. L. La. The total amount paid by Pioneer to JDA is P299. Therefore.666. 19 Phil. Arroyo v. Pioneer has no more claim against defendants. 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. Air Lines.
which necessarily means that the indemnity agreement had ceased to have any force and effect at the time this action was instituted. Universal Motors Corporation. 23 SCRA 791. The trial court stated: Apart from the foregoing proposition. Pioneer exercised the remedy of foreclosure of the chattel mortgage both by extrajudicial foreclosure and the instant suit. Testimonies of defendants Francisco Cervantes and Modesto Cervantes. These defendants. 12.Nevertheless. It does not.24772. they would be mortgaged to Pioneer Insurance to cover the bond. Filipinas Investment & Finance Corp. having subrogated it in such rights. Revised Rules of Court. but this was not possible because the planes were still in Japan and could not be mortgaged here in the Philippines. As soon as the aircrafts were brought to the Philippines. knowing the value of the aircrafts and the spare parts involved. The reason is that Pioneer is actually exercising the rights of JDA as vendor. cite any grounds except its allegation that respondent "Maglanas defense and evidence are certainly incredible" (p. May 27.27862. and this indemnity agreement would be cancelled. Prescinding from the foregoing. Pascual. L. 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. Articles 2067 and 2080 of the New Civil Code of the Philippines. 61 SCRA 124. 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. agreed to issue the bond provided that the same would be mortgaged to it. G. Pioneer.' Cruz. however. 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. no longer has any further action against the defendants as indemnitors to recover any unpaid balance of the price. Rollo) to back up its contention. . No. L. Such being the case. v. SAL or Lim.R. v. known as the Recto Law. would be entitled to be subrogated to the right of Pioneer should they make payments to the latter. No. Pioneer shall have no further action against the purchaser to recover any unpaid balance and any agreement to the contrary is void.1974. On the other hand. 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. et al. 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. 7956. 20. the indemnity agreement ceased to be valid and effective after the execution of the chattel mortgage. having foreclosed the chattel mortgage on the planes and spare parts. as provided by the aforementioned provisions. 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.1968. The operation of the foregoing provision cannot be escaped from through the contention that Pioneer is not the vendor but JDA. The indemnity agreement was ipso jure extinguished upon the foreclosure of the chattel mortgage. Pioneer Insurance. 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. Rule 129. as indemnitors. et al. Sec 2. the alternative remedies open to Pioneer were as provided in Article 1484 of the New Civil Code. Nov.
Pacheco. 55 Phil. 4th ed. 45 Phil.. Pioneer is not entitled to exact reimbursement from these defendants thru the indemnity. 1318. there would have been the corresponding documents in the form of a written notice to as well as written conformity of these defendants. what it has paid to JDA. 553. and the case of Asiatic Petroleum Co.. and there are no such document. 12. These restructuring of the obligations with regard to their maturity dates. that of the last installment being July 15. M. Climacom et al. Pioneer's liability as surety to JDA had already prescribed when Pioneer paid the same.. But if that were so. or SAL extinguish the original obligations thru novations thus discharging the indemnitors. were done without the knowledge.) 36 O. v. 316-317. VI. Pioneer produced a memorandum executed by SAL or Lim and JDA. Art. The change of the maturity dates of the obligations of Lim.. Ltd. 562-563. the 15th of each succeeding three months. of each succeeding months and the last of which shall be due and payable 4th June 1967.. . 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.. 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. Applicable by analogy are the rulings of the Supreme Court in the case of Kabankalan Sugar Co. Vol. 1571. 532. Art. shall be due and payable on the 26th day x x x of each succeeding three months and the last of which shall be due and payable 26th May 1967.. However. Consequently. The principal hereof shall be paid in eight equal successive three months interval installments. at the trial of this case. Vol. 563. (C.A. Stevenson & Co. as supposed indemnitors. 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. v.The restructuring of the obligations of SAL or Lim. 1967. the first of which shall be due and payable 25 August 1965. thru the change of their maturity dates discharged these defendants from any liability as alleged indemnitors. 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. (New Civil Code). the failure of JDA to present its claim to Pioneer within ten days from default of Lim or SAL on every installment. the due date of the first installment appears as October 15. much less. Not only that. 538. 1965. Pioneer has no more cause of action to recover from these defendants. released Pioneer from liability from the claim. modifying the maturity dates of the obligations. Hizon David.' Manresa. By virtue of an express stipulation in the surety bond. the remainder of which .F. would have it believed that these defendants Maglana (sic). Payment by a solidary debtor shall not entitle him to reimbursement from his codebtors if such payment is made after the obligation has prescribed or became illegal. and those of the rest of the installments. pp. 2079. shall be due and payable on the 4th day . pp. v. the remainder of which .. effected twice.. Pioneer also produced eight purported promissory notes bearing maturity dates different from that fixed in the aforesaid memorandum.G.
it was treated as a trustee for the associates in an action between them for an accounting. but fail. questions the appellate court's findings ordering him to reimburse certain amounts given by the respondents to the petitioner as their contributions to the intended corporation. and no stock was ever issued in the corporation. to form a corporation and who carry on business under the corporate name occupy the position of partners inter se (Lynch v.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. 56 Cal. they become in legal effect partners inter se. 119 P. such a relation does not necessarily exist. In addition. No. 555. 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. S. 84157). 615. and two of them contracted to pay a third the difference in the proportionate value of the land conveyed by him. What legal rules govern the relationship among coinvestors 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'). defendant Lim should be held liable to pay his codefendants' cross-claims in the total amount of P184..74 as correctly found by the trial court. We now discuss the merits of G. Spouses Cervantes.R. sold. 84 A.R. However. where certain persons associated themselves as a corporation for the development of land for irrigation purposes. No. 84157. and its capital stock was treated as partnership assets. it is ordinarily held that persons who attempt. These questions are premised on the petitioner's theory that as a result of the failure of respondents Bormaheco. The petitioner.878. where persons associate themselves together under articles to purchase property to carry on a business. We first state the principles. (Rollo. Rollo of G. Cas.' (Record on Appeal. for ordinarily persons cannot be made to assume the relation of partners.109 Me. Ann. The instant action is clearly unfounded insofar as plaintiff drags these defendants and defendant Maglana. 446). 363-369. 29 Okl.000. Brush Electric Co. Beaudry. hence. 29 Mich. 84197 is not meritorious. Hence. Schoodoc Pond Packing Co. 96 Md. pp. and their organization is so defective as to come short of creating a corporation within the statute. the total sum of P 184. Whipple v. 229. to wit: However. Constancio Maglana and petitioner Lim to incorporate.00 from defendants Bormaheco and Maglana representing the latter's participation in the ownership of the subject airplanes and spare parts (Exhibit 58).74. 6). 1913A 1065). Lim poses the following issues: l. the cross-party plaintiffs incurred additional expenses. Thus. therefore. and their rights as members of the company to the property acquired by the company will be recognized (Smith v. Perryman. It is established in the records that defendant Lim had duly received the amount of Pl51.. with interest from the filing of the cross-complaints until the amount is fully paid. 584). Parker. as between . We find no cogent reason to reverse or modify these findings.R. Defendant Lim should pay one-half of the said amount to Bormaheco and the Cervanteses and the other one-half to defendant Maglana. So. 268. Petitioner Jacob S. 446. p. and each conveyed land to the corporation. 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. 54 A.R. a de facto partnership among them was created. 94 Am. 121. No. it is our conclusion that the petition in G.878. 369). and the proceeds distributed among them in proportion to the value of the property contributed by each (Shorb v.
W. In his answer. 210. will not be implied in the absence of an agreement. found through Exhibit 58. however.. 79 Iowa 23). 6 S.Ct. Down payments were advanced by defendants Bormaheco and the Cervanteses and Constancio Maglana (Exh. 341-342).000. 44 N. Vol. pp.00 representing the participation of Bormaheco and Atty. The record shows that defendant Maglana gave P75. likewise.000. Notwithstanding repeated oral demands made by defendants Bormaheco and Cervanteses. 68. 24). 688). that the petitioner received the amount of P151. failed and still refuses to set up the corporation or return the money of Maglana. The trial court and the appellate court. Maglana in the ownership of the subject airplanes and spare parts. cross-claim and third party complaint: Sometime in April 1965. Maglana sometime in May 1965.1). 461.. so as to make the former liable to contribute for payment of debts illegally contracted by the latter (Heald v. gave Cervantes his share of P75. Applying therefore the principles of law earlier cited to the facts of the case.00 to petitioner Jacob Lim thru the Cervanteses. (Corpus Juris Secundum. one who takes no part except to subscribe for stock in a proposed corporation which is never legally formed does not become a partner with other subscribers who engage in business under the name of the pretended corporation. 337-338). 116 U. that sometime in early 1965. counterclaim. (Record on Appeal. the latter ignored. Corp. while respondents Bormaheco and the Cervanteses alleged in their answer. Maglana alleged in his cross-claim: .997. 442. omitted and refused to comply with them. Arrangements and negotiations were undertaken by defendant Lim. Contrary to the agreement among the defendants. Owen. thus. It is therefore clear that the petitioner never had the intention to form a corporation with the respondents despite his representations to them. Constancio B. The answering defendants learned for the first time of this trickery and misrepresentation of the other. Lim has refused. In the instant case. Drennen.themselves. Cervantes. (Italics supplied). Jacob Lim proposed to Francisco Cervantes and Maglana to expand his airline business. so as to be liable as such in an action for settlement of the alleged partnership and contribution (Ward v. Jacob Lim. to defendant Lim. p. Since then up to the filing of this answer. 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. delivered his share of the undertaking. 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.S. promised to incorporate his airline in accordance with their agreement and proceeded to acquire the planes on his own account.000. v. thereby forcing them to file an adverse claim in the form of third party claim. and it should be implied only when necessary to do justice between the parties. when their purpose is that no partnership shall exist (London Assur. 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. 29 L.Ed. 127 Mass.. Minn. pp. E. 472. signed and executed the alleged chattel mortgage and surety bond agreement in his personal capacity as the alleged proprietor of the SAL. Brigham. necessarily. who were also directors. 464). defendant Lim in connivance with the plaintiff.1965. when the herein plaintiff chattel mortgage (sic) allegedly executed by defendant Lim. it is to be noted that the petitioner was declared nonsuited for his failure to appear during the pretrial despite notification. the Cervanteses and Maglana. 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.00 for delivery to Lim which Cervantes did and Lim acknowledged receipt thereof. no de facto partnership was created among the parties . A partnership relation between certain stockholders and other stockholders. (Record on Appeal. the petitioner denied having received any amount from respondents Bormaheco. Lim in an undertaking sometime on or about August 9.14 as evidenced by a statement of accounts.
ROJAS. Plaintiff-Appellant. CONSTANCIO B. Defendant-Appellee. The questioned decision of the Court of Appeals is AFFIRMED. vs. 1990. WHEREFORE.which would entitle the petitioner to a reimbursement of the supposed losses of the proposed corporation. 30616 : December 10. the instant petitions are DISMISSED.] EUFRACIO D. 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. [G. MAGLANA. No. .R. SO ORDERED.
Rojas and Maglana decided to avail of the services of Pahamotang as industrial partner. After the withdrawal of Pahamotang. either in cash or in equipment. Pahamotang was paid in fun on August 31. the partnership was continued by Maglana and Rojas without the benefit of any written agreement or reconstitution of their written Articles of Partnership (Decision. Because of the difficulties encountered. The equipment withdrawn were his supposed contributions to the first partnership and was transferred to CMS Estate.12 to Pahamotang including the amount of loan secured by Pahamotang in favor of the partnership. EASTCOAST DEVELOPMENT ENTERPRISE" (Exhibits "C" and "D") agreeing among themselves that Maglana and Rojas shall purchase the interest. p. 948). 1956. 114). be dissolved. the name also given to the second partnership. 1957.A. R. and was able to ship logs and realize profits. 1956. 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. develop and promote such forests rights and concessions. Davao with the Bureau of Forestry which was approved and Timber License No. dismissing appellant's complaint. On March 4. Rojas withdrew his equipment from the partnership for use in the newly acquired area (Decision. 1955 with the Securities and Exchange Commission. Maglana then told Rojas that the latter's share will just be 20% of the net profits. Pahamotang and Rojas started operation on May 1.This is a direct appeal to this Court from a decision ** of the then Court of First Instance of Davao.12. Maglana and Rojas executed a document entitled "CONDITIONAL SALE OF INTEREST IN THE PARTNERSHIP. 1957. R. 3518. It is also provided in the said articles of co-partnership that all profits and losses of the partnership shall be divided share and share alike between the partners. R. 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. everything else is the same.501. Such was the sharing from 1957 to 1959 without complaint or dispute (Decision. 949). Under the said Articles of Co-Partnership. On February 4. The partnership EDE with an indefinite term of existence was duly registered on January 21. Maglana and Rojas executed their Articles of CoPartnership (Exhibit "A") called Eastcoast Development Enterprises (EDE) with only the two of them as partners. 919). 947). 1956. Inc. The partnership formed by Maglana. 1957.633. R. Branch III. R. by way of chattel mortgage (Decision.07 (Decision. while appellant Rojas shall be the logging superintendent and shall manage the logging operations of the partnership. Pahamotang.A. 1957. On October 25. share and participation in the Partnership of Pahamotang assessed in the amount of P31. During the period from January 14.] p.A. On March 17.A. 921). 948).501. 1955 to April 30. 1957. On January 28. Rojas and Agustin Pahamotang executed their Articles of Co-Partnership (Exhibit "B" and Exhibit "C") under the firm name EASTCOAST DEVELOPMENT ENTERPRISES (EDE).A. including marketing and handling of cash and is authorized to sign all papers and instruments relating to the partnership. He left and abandoned the partnership (Decision. No other rights and obligations accrued in the name of the second partnership (R." (Rollo. An income was derived from the proceeds of the logs in the sum of P643. 1956. in Civil Case No.: nad . Maglana wrote Rojas reminding the latter of his obligation to contribute. the CMS Estate. the two (Maglana and Rojas) shall become the owners of all equipment contributed by Pahamotang and the EASTCOAST DEVELOPMENT ENTERPRISES. 948). Rojas entered into a management contract with another logging enterprise. 946). to the capital investments of the partnership as well as his obligation to perform his duties as logging superintendent. Seventh Judicial District. Inc.A. 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. the antecedent facts of the case are as follows: On January 14. As found by the trial court. there was no operation of said partnership (Record on Appeal [R. p. Two weeks after March 17. It was also agreed in the said instrument that after payment of the sum of P31.A. appellee Maglana shall manage the business affairs of the partnership. Maglana. Rojas told Maglana that he will not be able to comply with the promised contributions and he will not work as logging superintendent. 35-56 was duly issued and became the basis of subsequent renewals made for and in behalf of the duly registered partnership EDE.A. R. 1955.
A mandatory pre-trial was conducted on September 8 and 9. that is. 1961. 102-114) was denied by Judge Romero for want of merit (Ibid. The motion to dismiss the complaint filed by Maglana on June 21. 446-451). The nature of the partnership and the legal relations of Maglana and Rojas after Pahamotang retired from the second partnership.. the commissioners started examining the records and supporting papers of the partnership as well as the information furnished them by the parties. "3. accounting.. 337). pp. the above facts and issues duly considered. . which was granted on May 22. 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. Rojas filed his motion for reconsideration of the order dated May 27. pp. the sharing is on the basis of 80% for the defendant and 20% for the plaintiff of the profits. which were compiled in three (3) volumes. 1968. On September 19.A. 1957. Rojas' petition for appointment of a receiver was denied (R. 1964. Reyes approved the submitted Commissioners' Report (Ibid. considering his indebtedness to the partnership. R. Judge M. 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. Rojas took funds from the partnership more than his contribution. 894-895). 894). "2. pp. Upon motion of Rojas on May 23. Judge Romero appointed commissioners to examine the long and voluminous accounts of the Eastcoast Development Enterprises (Ibid. "4... 336). receivership and damages. 1961 (Exhibit "10") Maglana notified Rojas that he dissolved the partnership (R. 1964 (Ibid. 3518 (Record on Appeal. that from 1957 to 1959. in a letter dated February 21.. Maglana filed his motion for leave of court to amend his answer with counterclaim. Whether the sharing of partnership profits should be on the basis of computation. if so. docketed as Civil Case No. 1-26). 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.. appellant's motion for reconsideration was denied (Ibid. pp. and (e) The legal effect of the letter dated February 23.nad After trial. 1964. Accordingly.Meanwhile.. 1961. 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. 1961 (Ibid. Rojas filed an action before the Court of First Instance of Davao against Maglana for the recovery of properties.A. how much. attaching thereto the amended answer (Ibid. On June 29.A. the plaintiff is not entitled to any share in the profits of the said partnership.G. As to whether damages were suffered and. 1964. the lower court rendered its decision on March 11. 1961. 26-336). (d) The damages suffered and who should be liable for them. that is the ratio and proportion of their respective contributions. 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. 1965. (c) The ownership of properties bought by Maglana in his wife's name. when Pahamotang was finally paid his share — the partnership of the defendant and the plaintiff is one of a de facto and at will. 895-896).. On April 7. 1964 approving the report of the commissioners which was opposed by the appellee. after August 31. Judge Romero also required the inclusion of the entire year 1961 in the report to be submitted by the commissioners (Ibid. and therefore the same should not belong to the partnership. 125). the plaintiff's share will be on the basis of his actual contribution and. pp. 949). On May 11. 1961 of Maglana dissolving the partnership (Decision. judgment is hereby rendered by the Court declaring that: "1. pp. the dispositive portion of which reads as follows: "WHEREFORE. p. On May 27. p. 138-143). p. (b) Their sharing basis: whether in proportion to their contribution or share and share alike. Thus. pp. February 23. but from 1960 to the date of dissolution.
so that when the second partnership was dissolved there was no written contract of co-partnership. the First Articles of Partnership were only amended. "10. Hence. After a careful study of the records as against the conflicting claims of Rojas and Maglana. Rather. pp. The claim that plaintiff Rojas should be ordered to pay the further sum of P85.000. 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. Further. expressly or impliedly (Decision. 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. "6. — the COURT DECLARES THE SAME AS NOT BELONGING TO THE PARTNERSHIP. "9. appellee Maglana and Agustin Pahamotang.000.00 the profits he received from the CMS Estate.: rd "SO ORDERED. Rojas and Pahamotang partnership contract. The Court also credits the defendant the amount of P85. the terms and stipulations of said registered Articles of Co-Partnership (Exhibit "A") should govern the relations between him and Maglana. being in contravention of the partnership agreement agreed upon and stipulated in their Articles of Co-Partnership (Exhibit "A"). Upon withdrawal of Agustin Pahamotang from the unregistered partnership (Exhibit "C"). 1961. R. 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. The lower court is of the view that the second partnership superseded the first. Rojas interposed the instant appeal. supplies. the letter of appellee Maglana dated February 23. superseded and/or dissolved by the unregistered articles of co-partnership among appellant Rojas. EASTCOAST DEVELOPMENT ENTERPRISES.A. . 1961. Hence.988. "8. they adopted the same name. no period was fixed. Thus. operated by him. That the alleged sale of forest concession Exhibit 9-B. did it dissolve the partnership or not — the Court declares that the letter of the defendant to the plaintiff dated February 23. and "12. is hereby denied considering that it has not yet been actually received. 1955 (Exhibit "A") has not been novated. the Court orders and directs plaintiff Rojas to pay or turn over to the partnership the amount of P69. they pursued the same purposes and the capital contributions of Rojas and Maglana as stipulated in both partnerships call for the same amounts. and other merchandise to the laborers and employees of the Eastcoast Development Enterprises. in effect dissolved the partnership. 962-963). which sells foodstuffs. 24-25). To all intents and purposes therefore. "7. It was considered as a partnership at will because there was no term. Inc. Except for the fact that they took in one industrial partner. p. did not legally dissolve the registered partnership between them. 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. As to what is the legal effect of the letter of defendant to the plaintiff dated February 23. Just as important is the fact that all subsequent renewals of Timber License No. The complaint is hereby dismissed with costs against the plaintiff. the Court relative to the canteen." Decision. Further. 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. in the form of Supplementary Articles of Co-Partnership (Exhibit "C") which was never registered (Brief for Plaintiff-Appellant. On the other hand. there was no reconstitution as provided for in the Maglana. upon the constitution of the second one. dated March 4. gave him an equal share in the profits and fixed the term of the second partnership to thirty (30) years. 5)."5. The Court also directs and orders plaintiff Rojas to pay the sum of P62. Inc. pp.00 which according to him he is still entitled to receive from the CMS Estate. everything else was the same.19 his personal account to the partnership. and which was not paid to him. 35-36 were secured in favor of the First Partnership.000. which they unmistakably called an "Additional Agreement" (Exhibit "9-B") (Brief for Defendant-Appellee. and further the receipt is merely based upon an expectancy and/or still speculative. express or implied. 985-989). 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"). "11. pp. and this should be considered as part of Maglana's contribution likewise to the partnership. 1956 (Exhibit "C") and accordingly. Record on Appeal. 1961.00 the amount he should have received as logging superintendent. it appears evident that it was not the intention of the partners to dissolve the first partnership. the original licensee.
00. And in whatever way he may view the situation. contributed P267. he will be liable for P52. 976). pp. as stipulated in their partnership agreement. 95). On the basis of the Commissioners' Report. a company engaged in the same business as the partnership. is the fact that Maglana on March 17. to the capital investment of the partnership as well as his obligation to perform his duties as logging superintendent. Significantly. 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.. on 80-20%.. it is an admitted fact that even up to now. 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. he becomes a debtor of the partnership for whatever he may have promised to contribute (Article 1786. Even more convincing. v.Otherwise stated. Thus. share and participation in the second partnership of Pahamotang and that thereafter. the CMS Estate. Under Article 1830. 133 SCRA 94 ).092. R..00 while Maglana who should have contributed P160. Consequently. Rojas replied that he will not be able to comply with the promised contributions and he will not work as logging superintendent.: nad As to whether Maglana is liable for damages because of such withdrawal. the two (Maglana and Rojas) became the owners of equipment contributed by Pahamotang. nor a Partnership at Will. the dissolution. duly registered. As to the question of whether or not Maglana can unilaterally dissolve the partnership in the case at bar. there are still subsisting obligations and contracts of the latter (Decision. Inc. they showed that on 50-50% basis. even if there is a specified term. there is no dispute that the second partnership was dissolved by common consent. Court of Appeals. one partner can cause its dissolution by expressly withdrawing even before the expiration of the period. Maglana and Rojas agreed to purchase the interest. as there are only two parties when Maglana notified Rojas that he dissolved the partnership. Jr. the answer is in the affirmative. no plausible reason could be found to disturb the findings and conclusions of the trial court. Being a contract of partnership. Of course. Rojas is not entitled to any profits. Said dissolution did not affect the first partnership which continued to exist. all business transactions were carried out under the duly registered articles. the withdrawing partner is liable for damages but in no case can he be compelled to remain in the firm. 2 of the Civil Code. par. for as stressed.984.31. 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.00. p.158. As earlier stated.541. On the other hand. it will be recalled that after the withdrawal of Pahamotang. Hence. Civil Code) and for interests and damages from the time he should have complied with his obligation (Article 1788. 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.A. reminding the latter of his obligation to contribute either in cash or in equipment. 950-957).44 (Decision.A.040.750. it is in effect a notice of withdrawal. the relationship of Rojas and Maglana after the withdrawal of Pahamotang can neither be considered as a De Facto Partnership. This reminder cannot refer to any other but to the provisions of the duly registered Articles of Co-Partnership. With his withdrawal. As found by the trial court. In their voluminous reports which was approved by the trial court.00. all profits and losses of the partnership shall be divided "share and share alike" between the partners. 1957. there is an existing partnership. Under the circumstances. p. the corresponding contribution of the partners from 1956-1961 are as follows: Eufracio Rojas who should have contributed P158. with or without justifiable cause. Civil Code) (Moran. The records . R. pp.166. that is. he will be liable for P40. the number of members is decreased. It is a settled rule that when a partner who has undertaken to contribute a sum of money fails to do so. By such statements.A. 919-921). That is the essence of a partnership (Ibid. 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. hence. refused to contribute either in cash or in equipment to the capital investment and to perform his duties as logging superintendent. even during the existence of the second partnership. R. Rojas will be liable in the amount of P131. He withdrew his equipment. Rojas entered into a management contract with another logging enterprise. if the cause is not justified or no cause was given.96 and finally on the basis of actual capital contribution. contributed only P18. wrote Rojas. each partner must share in the profits and losses of the venture. as reported in the Commissioners' Report.
in accordance with the computation of the commissioners. so far as the existence of the copartnership to September 1. is concerned. Perhaps I will have them ready tomorrow morning. The plaintiff-appellant claimed that he. vs. is plainly and manifestly against the evidence. We have examined the evidence and are of the opinion that said finding.A. G. when we will have funds. These demands the defendant answered with the following letter: MY DEAR BOY: I am working at these accounts. p. the assailed decision of the Court of First Instance of Davao. It is not contradicted that the plaintiff demanded by letter of the defendant a settlement of their accounts. which was denied. FLORENTINO RALLOS.also show that Rojas not only abandoned the partnership but also took funds in an amount more than his contribution (Decision. defendant-appellee. Spitz comes on one of these boats. FLORENTINO RALLOS. To this order and the judgment he excepted and has brought here the evidence on which the court below based its finding. We reach this conclusion chiefly from the documents written by the defendant and sent to the plaintiff. April 13.: nad SO ORDERED. 1901. Branch III. The plaintiff moved for a new trial.. Yours. 1903 ESCOLASTICO DUTERTE Y ROSALES. PREMISES CONSIDERED. We also hereby AFFIRM the decision of the trial court in all other respects. 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. and one Castro were partners in the management of a cockpit. unless Mr. In the given situation Maglana cannot be said to be in bad faith nor can he be liable for damages. R. the defendant. The defendant denied this. No. plaintiff-appellant. 1902. On May 7 the defendant wrote another letter to the plaintiff which is in part as follows: . 949). But I have no money. The court found that no such partnership existed and ordered judgment for the defendant.R. L-1147 September 24.
Señores Duterte and Castro. I did not have an agreement with them. They are in legal effect the same. As a private individual. and this money was what obtained on the preceding Sunday in the cockpit. as follows: The profits were divided. I did not receive money monthly. I paid them for my pleasure. advanced for your former market contract.873 31. and a witness for the defendant. Señor Rallos began to send me money from 20 to 30 pesos. Castro. he had no duty to perform. as I have said.000 140. I have not any conversation with Señor Rallos with reference to I am not a servant .673 30. In the preceding year. testified. and I will frankly refresh your memory. The one for July is as follows: Receipts of the cockpit of this city during the entire month of July Expenses — Cuotas Rent. 00 60. but not as partners. May 7. denied that he was such a partner. Señor Don Escolastico Duterte. I am not aware that they. 15. but his testimony is in part as follows: I do not remember what the profit was.000 45. the defendant sent to the plaintiff statements of the business for the months of June. the other supposed partner. A portion was given to Señor Duterte solely because he was a friend who aided and encouraged the cockpit. as the only manner in which I might collect what you owe me.00 20. The defendant. reflect whether you have reason to write me in the manner you do. and August. July. but on Mondays Señor Rallos would send me some money.CEBU. You are indebted to me clearly one thousand pesos.200 $520. Señor Rallos sent me $20 or $30.00 380. I am not a servant or employee of the cockpit. If I have not called you an embezzler or something worse on account of all that you have done and are doing with me. I did not keep any account. I have done you a favor in admitting you into the cockpit partnership. rendered other services.673 That the plaintiff rendered services in the management of the cockpit. 6 days Present to Biloy $300. among other things. as friends. DEAR BOY: In your letter which I received this afternoon.622 ====== == One-third Ticoy owes for seats 46. and that the defendant paid him money on account of the cockpit. you designate me as a little less than embezzler. I think Señor Rallos sent it to me as a present for the reason that he could not be present at the cockpit. I think you have made a mistake. after denying that the plaintiff was his partner. or either of them. A portion was given to two friends. Duterte had no legal interest. but.622 Ticoy's net share Ticoy stands for the plaintiff. this function was exercised solely by Señor Isabelo Alburo. is undisputed. 1902. since I gave Señor Duterte a portion only as a friend. I did not tell them the reason why I gave them a share. I have in my possession the money of no one but myself. except when he had to preside at the cockpit. Señor Duterte had not authority to employ any person in the cockpit.
in the opinion of the court below. which provides that. He sent it to me by a messenger. Yes. We have. No second or other suit will be necessary. with the costs of this instance against the appellee. The judgment of the court below is reversed and the case remanded for a new trial. at least. In this conversation Señor Rallos said nothing to me about money. the plaintiff will be entitled to an accounting. I have not the business. The partnership did not become the owner of the cockpit. was plainly and manifestly against the evidence. No real estate was contributed by any member. But even omitting this testimony. The plaintiff testified that the profits and losses were to be shared equally. 1968 ." No demurrer was interposed on this or in any other ground. then. if the evidence is the same as upon the first trial. by omitting to demur on this ground the defendant waived the objection which he now makes. and for such further term as the proof upon the new trial shows. in the absence of agreement as to the losses. Señor Rallos asked me to go to the cockpit. 1901. they shall be shared as the gains are. uncontradicted evidence that he performed services in connection with it. L-21906 December 24. Neither can the judgment be sustained on the ground stated by the court in its decision and relied upon by counsel for the appellee here.R. 1901. that there was no partnership. The letter of the defendant. G. The reason which the defendant gives for paying the plaintiff money is not credible. namely. When Señor Rallos sent me that money he sent me no letter. 1901. and for that reason a new trial of this case must be had. and the case is returned to the court below for compliance therewith. We see no way of explaining the accounts submitted by the defendant to plaintiff on any theory other than that there was a partnership between them up to September 1. It is not true. in which he says that he admitted the plaintiff into the partnership. that the defendant paid him the money on account thereof and sent him accounts for three months showing his interest to be one-third of the profits in addition to the $5 each day. That there was an agreement to share the profits is clearly proved by the accounts submitted. that Castro should have been joined as a party to the suit.or employee of the cockpit. the testimony of the plaintiff that he made a verbal contract of partnership with the defendant for this business. I have had a conversation with Señor Rallos. The finding of fact by the court below. that accounting can be had in this suit and a final judgment rendered for the plaintiff if any balance appears in his favor. It is undisputed that this was owned by the defendant and that the partnership paid him ten dollars a day for the use of it. as I went to the cockpit only to do him a favor. the case is covered by article 1689 of the Civil Code. that the partnership existed. at least to September 1. and by the terms of section 93 of the same Code. can be explained on no other theory. One of the grounds for demurrer mentioned in section 91 of the Code of Civil Procedure is "that there is a defect or misjoinder of parties plaintiff or defendants. Señor Rallos asked me to go to the cockpit to aid the president. No. In this new trial. at least to September 1. and wrote him a letter in which he said that he admitted the plaintiff into the partnership in order to collect what the plaintiff owed him on another transaction. I think that Señor Rallos sent me that money because I went to the cockpit and helped the president on account of the former. and after the expiration of twenty days. reckoned from the date of this decision. judgment shall be rendered accordingly. Article 1668 of the Civil Code is not applicable to the case.
1946 his fishpond application 762 over a portion of the land applied for by Casteel. NICANOR CASTEEL. No. Alejandro Cacam. No." However. Leoncio Aradillos. 1717). despite the finding made in the investigation of the above administrative cases that Casteel had already introduced improvements on portions of the area applied for by him in the form of dikes. the Director of Fisheries nevertheless rejected Casteel's application on October 25.. No. 1946 Leoncio Aradillos filed his fishpond application 1202 covering 10 hectares of land found inside the area applied for by Casteel. defendant-appellant. etc. Permit No. A. Hence on May 13. Consequently. Carpio. and ordered that the land be leased through public auction. He filed a motion for reconsideration. But lacking financial resources at that time. required him to remove all the improvements which he had introduced on the land. Nicanor Casteel. and damages resulting from an alleged breach of contract. 1948 Felipe Deluao filed his own fishpond application for the area covered by Casteel's application. some more incidents occurred. No action was taken thereon by the authorities concerned. Because of the threat poised upon his position by the above applicants who entered upon and spread themselves within the area. Municipality of Padada. Failing to secure a favorable resolution of his motion for reconsideration of the Director's order. a wide productive fishpond was built. it was discovered that the area applied for was still needed for firewood production. the decision of May 4. . upon certification of the Bureau of Forestry that the area was likewise available for fishpond purposes. NICANOR CASTEEL and JUAN DEPRA. On December 12. Fp. 1956 and the order of May 21. Ap. 1947 with the issuance to him of fishpond permit F-539-C to develop 30 hectares of land comprising a portion of the area applied for by Casteel. unless he filed a new application for the area concerned. Moreover. it was not acted upon either. While this motion was pending resolution.000 with which to finance the needed improvements on the fishpond. Meanwhile. all of the Court of First Instance of Davao. During the Japanese occupation. 1945 he filed a third fishpond application for the same area. he filed another fishpond application for the same area. Casteel appealed to the Secretary of Agriculture and Natural Resources. 1956. clearings. Hence. 539-C. 1717). On May 20. but because of the conditions then prevailing. Permittees-Respondents. applicant-appellant versus Fp. A. Upon investigation conducted by a representative of the Bureau of Forestry. 289-C. Casteel did not lose interest. Carpio filed on August 8. two administrative cases ensued involving the area in question. Alejandro Cacam's fishpond application 1276. Permit No. vs. 661 (now Fp. applicant-appellant". and DANR Case 353-B. several applications were submitted by other persons for portions of the area covered by Casteel's application. The basic action is for specific performance. applicant-protestant versus Fp. filed on December 26. No. A. which. in order to prevent old and new squatters from usurping the land. 1946 this third application was disapproved. 661 (now Fp. On November 17. To avoid repetition. 1946. Davao. Nicanor Casteel. So he filed on May 27. Casteel immediately filed the corresponding protests. entitled "Fp. Despite the said rejection. Victor D. he sought financial aid from his uncle Felipe Deluao who then extended loans totalling more or less P27. upon learning that portions of the area applied for by him were already occupied by rival applicants. Victorio D. 1956. No. 763. was found to contain 178. This is an appeal from the order of May 2.76 hectares. they will be taken up in our discussion of the appellant's third assignment of error.3 hectares certified as available for fishpond purposes by the Bureau of Forestry. defendants. 1949. in civil case 629. In the interregnum. was given due course on December 9. fishpond gates. Casteel realized the urgent necessity of expanding his occupation thereof by constructing dikes and cultivating marketable fishes. A.INOCENCIA DELUAO and FELIPE DELUAO plaintiffs-appellees. after a survey. to wit: DANR Case 353. he was advised by the district forester of Davao City that no further action would be taken on his motion. entitled "Fp. he was later granted fishpond permit F-289-C covering 9. In 1940 Nicanor Casteel filed a fishpond application for a big tract of swampy land in the then Sitio of Malalag (now the Municipality of Malalag). 1947 his fishpond application 1717.
and to supervise. Nicanor Casteel is required to pay the improvements introduced thereon by said permittees in accordance with the terms and dispositions contained elsewhere in this decision. the dispositive portion of which reads as follows: In view of all the foregoing considerations. Province of Davao. However. the same official issued a decision in DANR Case 353B. That the Party of the First Part will be the administrator of the same she having financed the construction and improvement of said fishpond. demand. which has been applied for fishpond permit by Nicanor Casteel. Inocencia Deluao executed a special power of attorney in favor of Jesus Donesa. F-289-C of Leoncio Aradillos and Fishpond Permit No. and Fp. A. as they are hereby cancelled and revoked. Philippines. Deluao reiterated his claim over the same area in the two administrative cases (DANR Cases 353 and 353-B) and asked for reinvestigation of the application of Nicanor Casteel over the subject fishpond.00). executed a contract — denominated a "contract of service" — the salient provisions of which are as follows: That the Party of the First Part in consideration of the mutual covenants and agreements made herein to the Party of the Second Part.. Fishpond Permit No. Unfazed by this rejection.. as hereby it is. they alleged.. No. Deluao withdrew his petition for reinvestigation. and ejected the latter's representative (encargado). from the premises. should be. Jesus Donesa. 1950 the Secretary of Agriculture and Natural Resources issued a decision in DANR Case 353. (a) that Casteel be ordered to respect and abide by the terms and conditions of said contract and that Inocencia Deluao be allowed to continue administering the said fishpond and collecting the proceeds from the sale of the fishes caught from time to . whereby the Party of the First Part hires and employs the Party of the Second Part on the following terms and conditions. No. Municipality of Padada.. 1950 sent to the Secretary of Commerce and Agriculture and Natural Resources (now Secretary of Agriculture and Natural Resources).. No. the dispositive portion stating as follows: WHEREFORE. Carpio shall remain rejected. Municipality of Padada. reinstated and given due course for the area indicated in the sketch drawn at the back of the last page hereof. On the same date. Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further administering the fishpond. by letter dated March 15.000. On the same date the above contract was entered into. On September 15. F-539-C of Alejandro Cacam.. receive. Philippine Currency. Alleging violation of the contract of service (exhibit A) entered into between Inocencia Deluao and Nicanor Casteel. with all the above-mentioned conditions enumerated. 1949 the Director of Fisheries rejected the application filed by Felipe Deluao on November 17. Felipe Deluao and Inocencia Deluao on April 3. 1717) of Nicanor Casteel should be.On November 25. but rejected by the Bureau of Fisheries. praying inter alia. and collect the value of the fish that is being periodically realized from it. That the Party of the Second Part will be the Manager and sole buyer of all the produce of the fish that will be produced from said fishpond. A. 661 (now Fp. A. 1951 filed an action in the Court of First Instance of Davao for specific performance and damages against Nicanor Casteel and Juan Depra (who. 762 of Victorio D. 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part. to the Party of the Second Part who renders only his services for the construction and improvements of a fishpond at Barrio Malalag. Fp. 1948. . to wit: That the Party of the First Part will finance as she has hereby financed the sum of TWENTY SEVEN THOUSAND PESOS (P27.. hereby enter into a contract of service. extending to the latter the authority "To represent me in the administration of the fishpond at Malalag. That this contract was the result of a verbal agreement entered into between the Parties sometime in the month of November. and Nicanor Casteel as party of the second part. 1947. Province of Davao.." On November 29. Philippines. instigated Casteel to violate his contract).
1951 the plaintiffs filed an ex parte motion for the issuance of a preliminary injunction. a preliminary injunction be issued to restrain Casteel from doing the acts complained of. Fernandez. 1956 at 8:30 o'clock in the morning. 1952. presided by Judge Enrique A. The motion. the court will take the necessary steps for the final determination of this case. 1951. 1951 to dismiss the complaint as to him. that he was the owner. usted. opposed by the plaintiffs on October 12. and that various incidents have already been considered and resolved by Judge Fernandez on various occasions. the lower court (Branch II. 1951 Casteel filed a motion to dissolve the injunction. that during the pendency of the case and upon their filling the requisite bond as may be fixed by the court. queda usted ordenado que. Then came a series of postponements. Presiding Judge of Branch No. on April 26. The lower court (Branch I. se prohibe a dicho demandado Nicanor Casteel a desahuciar mediante fuerza al encargado de los demandantes llamado Jesus Donesa de la pesqueria objeto de la demanda de autos. (emphasis supplied) On April 25. mandatarios y demas personas que obren en su ayuda. issued by the office of the Clerk of Court (thru the special deputy Clerk of Court) of the Court of First Instance of Davao. 1951 the plaintiffs opposed his motion.time. 1951. 1956 an order in open court. This motion.000 in damages. asimismo. The last order issued by Judge Fernandez on this case was issued on March 21. two days later. After the issues were joined. On June 4. The defendants on May 14. A reply to the defendants' amended answer was filed by the plaintiffs on January 31. was denied for lack of merit by the lower court in its order of October 22. 1956. The defendants filed on October 3. since September 24. and. reading as follows: . and (b) that the defendants be ordered to pay jointly and severally to plaintiffs the sum of P20. 1956. 1953. Fernandez) finally issued on March 21. lawful applicant and occupant of the fishpond in question. y que. it issued a preliminary mandatory injunction addressed to Casteel. opposed by the plaintiffs on June 15. thru counsel. 1951 granted the motion. 1956 filed a motion for postponement. praying among other things. 1951 and under any circumstance this Court will not entertain any other transfer of hearing of this case and if the parties will not be ready on that day set for hearing. On May 10. el demandado y todos usu abogados. On April 18. alleging among others. the hearing of this case is hereby transferred to May 2 and 3. 1951. hasta nueva orden. This case was filed on April 3. 1951. wherein he definitely states that the Court will not entertain any further postponement of the hearing of this case. The lower court on April 26. quoted as follows: This is a motion for postponement of the hearing of this case set for May 2 and 3. the dispositive portion of which reads as follows: POR EL PRESENTE. Upon petition of plaintiffs. the case was set for trial. The defendant Juan Depra moved on May 22. 1951 filed their answer with counterclaim. The motion is filed by the counsel for the defendants and has the conformity of the counsel for the plaintiffs. 1951 suffered the same fate when it was likewise denied by the lower court in its order of November 12. agentes. amended on January 8. denying the material averments of the plaintiffs' complaint. An examination of the records of this case shows that this case was initiated as early as April 1951 and that the same has been under advisement of the Honorable Enrique A. 1956. setting the hearing of the case for May 2 and 3. desista de impedir a la demandante Inocencia R. without any objection on the part of defendants. 1952. presided by Judge Gomez) issued an order dated April 27. 1951 a joint motion to dismiss on the ground that the plaintiffs' complaint failed to state a claim upon which relief may be granted. was denied by the lower court in its order of June 26. 1956 the defendants' counsel received a notice of hearing dated April 21. I. The defendants. and that after trial the said injunction be made permanent. Deluao que continue administrando personalmente la pesqueria objeto de esta causa y que la misma continue recibiendo los productos de la venta de los pescados provenientes de dicha pesqueria. 1961. 1956. The defendants' motion for reconsideration filed on October 31. . 1956 before Judge Amador Gomez of Branch II. Acting on this motion.
the Court will take necessary steps for the final disposition of this case. the Court will not accede to any transfer of this case and the duty of Atty. the pertinent portion of which reads as follows: The duty of Atty. 1956. (i) Con las costas contra del demandado. the Court believes that the consideration and termination of any incident referring to this case should be referred back to Branch I. en concepto de honorarios. however. In view of the order above-quoted. (b) Ordena al demandado entregue la demandante la posesion y administracion de la mitad (½) del "fishpond" en cuestion con todas las mejoras existentes dentro de la misma.00. (h) Ordena el sobreseimiento de la reconvencion de los demandados por falta de pruebas. but to inquire from the presiding Judge. issued an order reiterating its previous order handed down in open court on March 21. the hearing of this case is hereby transferred to May 2 and 3. with Judge Fernandez presiding). Ruiz. The petition. 1956. Ruiz knows the nature of the order of this Court dated March 21. and if the parties will not be ready on the day set for hearing. 1956.00. 1956 the dispositive portion of which reads as follows: EN SU VIRTUD. the lower court (Branch I.000. that is. This case was filed on April 3. (f) Condena al demandado a pagar a la demandante. la suma de P2. en tanto en cuanto se refiere al demandado Juan Depra.00 mensualmente en concepto de danos a contar de la fecha de la expiracion de los 30 dias de la promulgacion de esta decision hasta que entregue la posesion y administracion de la porcion del "fishpond" en conflicto. there being no appearance on the part of the defendants or their counsel. 1951. when informed about the defendants' motion for postponement filed on April 26. on May 2. 1956. a decision was rendered on May 4. 1956. On the basis of the plaintiffs' evidence. at 8:30 o'clock in the morning.CONSIDERING ALL THE FOREGOING. On the scheduled date of hearing. was not to inquire from the Clerk of Court whether the trial of this case has been transferred or not. (d) Condena al demandado a pagar a la demandante la suma de P2. particularly because his motion asking the transfer of this case was not set for hearing and was not also acted upon. inter alia. (c) Condena al demandado a pagar a la demandante la suma de P200. The defendant Casteel filed a petition for relief from the foregoing decision. (e) Condena al demandado a pagar a la demandante la suma de P2. 1956. 1956 and directing the plaintiffs to introduce their evidence ex parte.000. alleging. and under any circumstance this Court will not entertain any other transfer of the hearing of this case. (g) Ordena el sobreseimiento de esta demanda. Casteel. so that the same may be disposed of therein. lack of knowledge of the order of the court a quo setting the case for trial. Ruiz is no other than to be present in the Sala of this Court and to call the attention of the same to the existence of his motion for transfer. . por insuficiencia de pruebas. el Juzgado dicta de decision a favor de los demandantes y en contra del demandado Nicanor Casteel: (a) Declara permanente el interdicto prohibitorio expedido contra el demandado.000. por gastos incurridos por aquella durante la pendencia de esta causa. Atty. (emphasis supplied) A copy of the abovequoted order was served on the defendants' counsel on May 4. which reads as follows: Upon petition of the plaintiff without any objection on the part of the defendants. mas los intereses legales de la fecha de la incoacion de la demanda de autos hasta el completo pago de la obligacion principal.00 valor de los pescado beneficiados. was denied by the lower court in its order of May 21.
5 For indeed. Ruiz in behalf of the defendant. or of the other lawyers of record. 1956. unless he was legally inhibited to try the case — and he was not. 1953 until the trial held on May 2. was a superfluity. His duty as such clerk of court. the former's order was the one legally binding. the case was under the advisement of Judge Fernandez who presided over Branch I. and in not dismissing appellees' complaint. And this duty devolved upon the clerk of court and not upon the "special deputy clerk of court" who purportedly signed the notice of hearing. There was. given in open court. It is of no moment that the motion for postponement had the conformity of the appellees' counsel. This is because the incidents of postponements and adjournments are controlled by the court and not by the clerk of court. none of whom had ever withdrawn as counsel. Dissatisfied with the said ruling. The record indisputably shows that in the order given in open court on March 21. 3. as between the order of March 21. was a valid notice to the parties. pursuant to section 4. 1951. thru Judge Fernandez. 1956 or one month thereafter.Petition for relief from judgment filed by Atty. Notice to Atty. Much less had the clerk of court the authority to interfere with the order of the court or to transfer the cage from one sala to another without authority or order from the court where the case originated and was being tried. The postponement of hearings does not depend upon agreement of the parties. This is a well-settled rule in our jurisdiction. no necessity to "re-assign" the same to Branch II because Judge Fernandez had exclusive control of said case. to appear before Judge Fernandez on the scheduled dates of hearing Parties and their lawyers have no right to presume that their motions for postponement will be granted. 1956 in accordance with Rule 38. Casteel raises the following issues: (1) Whether the lower court committed gross abuse of discretion when it ordered reception of the appellees' evidence in the absence of the appellant at the trial on May 2. An order given in open court is presumed received by the parties on the very date and time of promulgation.4 It was the duty of Atty. 1956 at 8:30 o'clock in the morning and empathically stated that.2 The order of March 21. and (3) Whether the lower court erred in ordering the issuance ex parte of a writ of preliminary injunction against defendant-appellant.1 and amounts to a legal notification for all legal purposes. in so far as the incident in question was concerned. duly promulgated by the lower court. Moreover. Ruiz. was sufficient notice to all the appellant's eleven other counsel of record. 1956. 1956 intransferably setting the case for hearing for May 2 and 3. 1956. (2) Whether the lower court committed grave abuse of discretion when it denied the verified petition for relief from judgment filed by the appellant on May 11. was simply to prepare the trial calendar. The first and second issues must be resolved against the appellant. Rule 22) of the Rules of Court. not well taken. 1956. and the notice of hearing dated April 21. but upon the court's discretion. Ruiz of the order dated March 21. it would not entertain any further motion for transfer of the scheduled hearing. There is truth in the appellant's contention that it is the duty of the clerk of court — not of the Court — to prepare the trial calendar. He had neither the duty nor prerogative to re-assign the trial of the case to a different branch of the same court. since the case had been pending since April 3. thus depriving the appellant of his day in court and of his property without due process of law. 3 The record further discloses that Casteel was represented by a total of 12 lawyers. 1956. the same is hereby denied. not excluding the appellant himself. Casteel appealed to the Court of Appeals which certified the case to us for final determination on the ground that it involves only questions of law. the lower court set the case for hearing on May 2 and 3. therefore. Rule 31 (now sec. and the notice of hearing signed by a "special deputy clerk of court" setting the hearing in another branch of the same court. But the assignment or reassignment of cases already pending in one sala to . the appellant and his 12 lawyers cannot pretend ignorance of the recorded fact that since September 24. Rules of Court. 1. 1956.
He cannot argue that. 1956 before Branch I.7 Verily. refiled by Deluao and later on withdrawn by him by letter dated March 15. The appellant after all admits that on May 2. But be that as it may. 1949. 1956. If the appellant and his counsel had exercised due diligence. divided into two parts — namely. Unlike the case at bar. 1949. 1956 that the case was definitely and intransferably set for hearing on May 2 and 3. the appellant contends that the lower court incurred an error in ordering the issuance ex parte of a writ of preliminary injunction against him. 1956 his counsel went to the office of the clerk of court. there were two pending applications over the fishpond. there had already been a series of postponements. And since they were aware of the said laws. The first is valid. the defendant (appellant) was given an opportunity to be heard.6 his counsel was entitled to a timely notice of the denial of his motion for postponement. they had one month and ten days to do so. In effect.another sala. The appellant's statement that parties as a matter of right are entitled to notice of trial. We find this contention meritorious. In the cited case the motion for postponement was the first one filed by the defendant. pursuant to the doctrine in Siochi vs. Finally. the constitutional requirements of due process have been fulfilled in this case: the lower court is a competent court. we shall be compelled to declare altogether the nullity of the contract. in the case at bar. Felipe Deluao was the holder of a fishpond permit over the area. the Siochi case was not intransferably set for hearing. 1949. it lawfully acquired jurisdiction over the person of the defendant (appellant) and the subject matter of the action. It must be assumed. 1950 to the Secretary of Agriculture and Natural Resources. Were we to admit the establishment of a co-ownership violative of the prohibitory laws which will hereafter be discussed. This view must perforce negate the appellees' allegation that exhibit A created a contract of co-ownership between the parties over the disputed fishpond. This would certainly not serve the cause of equity and justice. it must likewise be assumed — in fairness to the parties — that they did not intend to violate them. there was no impediment to their going upstairs to the second storey of the Court of First Instance building in Davao on May 2. they were not however precluded from exploiting the fishpond pending resolution of Casteel's appeal or the . We shall therefore construe the contract as one of partnership. the case at bar was only finally and intransferably set for hearing on March 21. fall within the exclusive control of the presiding judge. and judgment was rendered upon lawful hearing. Finally. is correct. 1956 and checking if the case was scheduled for hearing in the said sala. a contract of partnership to exploit the fishpond pending its award to either Felipe Deluao or Nicanor Casteel. The pretension of the appellant and his 12 counsel of record that they lacked ample time to prepare for trial is unacceptable because between March 21. He was notified in open court on March 21. 1956. Tirona. The appellant does not deny the appellees' claim that on May 2 and 3. 1956 and May 2. the appellant had waived his right to appear at the trial and therefore he cannot be heard to complain that he has been deprived of his property without due process of law. conformably to such rule. the office of the clerk of court of the Court of First Instance of Davao was located directly below Branch I. 1951. Clearly. But he was properly accorded this right. although the fishpond was then in the possession of Casteel. neither he nor. whereas the cited case did not spend for a long time. considering that rights and obligations have already arisen between the parties. that the parties entered into the so-called "contract of service" cognizant of the mandatory and prohibitory laws governing the filing of applications for fishpond permits. and in not dismissing the appellee's complaint. 8 2. It is well to note that when the appellee Inocencia Deluao and the appellant entered into the so-called "contract of service" on November 25. and a contract of partnership to divide the fishpond between them after such award. 1956 — after almost five years had elapsed from the filing of the complaint on April 3. One was Casteel's which was appealed by him to the Secretary of Agriculture and Natural Resources after it was disallowed by the Director of Fisheries on October 25. the court a quo relied on exhibit A — the so-called "contract of service" — and the appellees' contention that it created a contract of coownership and partnership between Inocencia Deluao and the appellant over the fishpond in question. Apparently. The other was Felipe Deluao's application over the same area which was likewise rejected by the Director of Fisheries on November 29. and the setting of the date of trial after the trial calendar has been prepared. Too well-settled to require any citation of authority is the rule that everyone is conclusively presumed to know the law. the second illegal.
The evidence preponderates in favor of the view that the initial intention of the parties was not to form a co-ownership but to establish a partnership — Inocencia Deluao as capitalist partner and Casteel as industrial partner — the ultimate undertaking of which was to divide into two equal parts such portion of the fishpond as might have been developed by the amount extended by the plaintiffs-appellees. but stated however that he wanted his interest to be protected and his capital to be reimbursed by the highest bidder. 1950 addressed to the Secretary of Agriculture and Natural Resources. . This can be gleaned. and offered to pay the Deluaos a yearly installment of P3.11 Further exchanges of letters between the parties reveal the continuing intent to divide the fishpond. among others. while the truth is that we are partners ." was actually the memorandum of their partnership agreement. he was so entitled — this being one of the conditions he specified for the execution of the document of partnership. but in the midst of my poverty it never occurred to me to be unfair to you. with the further provision that Casteel should reimburse the expenses incurred by the appellees over one-half of the fishpond that would pertain to him. Thus by letter14 dated March 15. the appellant suggested that they divide the fishpond and the remaining capital. but it was you "Tatay" Eping the one who wanted that we be partners and it so happened that we became partners because I am poor . rule or regulation prohibited them from doing so. any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership." The approval of the appellant's fishpond application by the decisions in DANR Cases 353 and 353-B brought to the fore several provisions of law which made the continuation of the partnership unlawful and therefore caused its ipso facto dissolution. 1949. but it does not mean that you will treat me as one of your "Bantay" (caretaker) on wage basis but not earning wages at all. his right must be divided between them. Two days later. That it was not a contract of the services of the appellant.000 — presumably as reimbursement for the expenses of the appellees for the development and improvement of the one-half that would pertain to the appellant.. This development. No law. 1950. Moreover. by itself. let us have a document prepared to the effect that we are partners in the fishpond that we caused to be made here in Balasinon. was admitted by the appellees themselves in their letter10 to Casteel dated December 19. brought about the dissolution of the partnership. although exhibit A did not specify any wage or share appertaining to the appellant as industrial partner. (emphasis supplied)9 Pursuant to the foregoing suggestion of the appellant that a document be drawn evidencing their partnership.. ". 1830(3) of the Civil Code enumerates. inter alia: . 1949 wherein they stated that they did not employ him in his (Casteel's) claim but because he used their money in developing and improving the fishpond. from the letter of Casteel to Felipe Deluao on November 15. then they would divide the area. In the event that you are not amenable to my proposition and consider me as "Bantay" (caretaker) instead.. the appellee Inocencia Deluao and the appellant executed exhibit A which. In a letter. same will redound to your benefit because you are the ones interested in half of the work we have done so far. which states. 13expressing his concurrence in the appellant's suggestion and advising the latter to ask for a reconsideration of the order of the Director of Fisheries disapproving his (appellant's) application. Of course. subsequent events likewise reveal the intent of both parties to terminate the partnership because each refused to share the fishpond with the other. Therefore so that each of us may be secured. although denominated a "contract of service. The arrangement under the so-called "contract of service" continued until the decisions both dated September 15. Thus. the appellee Felipe Deluao replied. the appellee Felipe Deluao saw no further need to maintain his petition for the reinvestigation of Casteel's application. besides I did not insist on our being partners in my fishpond permit. Art. do not blame me if I withdraw all my cases and be left without even a little and you likewise. as one of the causes for the dissolution of a partnership.. so that if a favorable decision was secured.approval of Deluao's application over the same area — whichever event happened first. rather than let the fishpond remain idle they cultivated it. he withdrew his petition on the alleged ground that he was no longer interested in the area. Apparently relying on the partnership agreement. [W]ith respect to your allowing me to use your money. 1950 were issued by the Secretary of Agriculture and Natural Resources in DANR Cases 353 and 353-B. 12dated March 24.
prohibits the holder of a fishpond permit (the permittee) from transferring or subletting the fishpond granted to him. . encumbrance. we must observe that in DANR Case 353-B. 14 of the Secretary of Agriculture and Natural Resources issued in August 1937. or subletting of lands leased under this Act. Provided. as provided in subsection (r) of Sec. the permit granted to one of the parties therein. 33 of this Order. 15 To the same effect is Condition No. the Secretary of Agriculture and Natural Resources likewise recognized and/or confirmed their property right to one-half of the fishpond by virtue of the contract of service. expressing his desire to divide the fishpond so that he could administer his own share. or subletting for purposes of speculation shall not be permitted in any case: Provided. argue that in approving the appellant's application. it was ascertained thru the admission of Aradillos himself that due to lack of capital. assuming in gratia argumenti that the approval of Casteel's application. and therefore it envisaged the unauthorized transfer of one-half thereof to parties other than the applicant Casteel. That assignment. Thus. encumbrance. 1950 Casteel wrote17 the appellee Inocencia Deluao. further. otherwise it shall be null and void. Leoncio Aradillos. A transfer not previously approved or reported shall be considered sufficient cause for the cancellation of the permit or lease and forfeiture of the bond and for granting the area to a qualified applicant or bidder. encumber. otherwise known as the Public Land Act. it states: When a transfer or sub-lease of area and improvement may be allowed. The approval was an event which made it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership. — A sub-lease or transfer shall only be valid when first approved by the Director under such terms and conditions as may be prescribed. The appellees. However. such division to be subject to the approval of the Secretary of Agriculture and Natural Resources. to persons." Parenthetically. 40 of Commonwealth Act 141. prohibits a transfer or sublease unless first approved by the Director of Lands and under such terms and conditions as he may prescribe. Finally. held the permit or lease and actually operated and made improvements on the area for at least one year. But the untenability of this argument would readily surface if one were to consider that the Secretary of Agriculture and Natural Resources did not do so for the simple reason that he does not possess the authority to violate the aforementioned prohibitory laws nor to exempt anyone from their operation. he/she may request permission to sub-lease or transfer the area and improvements under certain conditions. or under any previous Act.Act 4003. however. upon investigation. he allowed one Lino Estepa to develop with the latter's capital the area covered by his fishpond permit F-289-C with the understanding that he (Aradillos) would be given a share in the produce thereof.16 Sec. corporations. 3 of the fishpond permit which states that "The permittee shall not transfer or sublet all or any area herein granted or any rights acquired therein without the previous consent and approval of this Office. section 37 of Administrative Order No. and the violation of this condition shall avoid the contract. coupled with the foregoing prohibitory laws. By letter dated December 29. exhibit A. On December 27. or sublet his rights without the consent of the Secretary of Agriculture and Commerce. but also because. succeeding events reveal the intent of both parties to terminate the partnership by refusing to share the fishpond with the other. (a) Transfer subject to approval. was cancelled not solely for the reason that his permit covered a portion of the area included in the appellant's prior fishpond application. known as the Fisheries Act. was not enough to cause the dissolution ipso facto of their partnership. it was dissolved by the approval of his application and the award to him of the fishpond. or associations which under this Act. — If the permittee or lessee had. without the previous consent or approval of the Secretary of Agriculture and Natural Resources. likewise provides that The lessee shall not assign. Since the partnership had for its object the division into two equal parts of the fishpond between the appellees and the appellant after it shall have been awarded to the latter. unless otherwise specifically provided. are not authorized to lease public lands. That nothing contained in this section shall be understood or construed to permit the assignment.
Felipe Deluao wrote a letter20 dated January 5.. that dissolution is caused "by the express will of any partner at any time. lease. the Secretary of Agriculture and Natural Resources possesses executive and administrative powers with regard to the survey. the appellant forbade Felipe Deluao from sending the couple's encargado. In reply thereto. the Secretary of Agriculture and Natural Resources gave due course to the appellant's fishpond application 1717 and awarded to him the possession of the area in question. we can do no less than respect and maintain unfettered his official acts in the premises. In view of the finality of the Secretary's decision in DANR Cases 353 and 353-B. L-5750. with regard to the grant or withholding of licenses.. or deciding conflicting applications. any action we may privately take may not meet the procedure of legal order. In the same letter. worse. or acted with arbitrariness and in disregard of his duty. sale or any other form of concession or disposition and management of the lands of the public domain.22 Therefore. are all executive and administrative in nature. thereby causing its dissolution pursuant to art. and even assuming that the injunction was properly issued because present all the requisite grounds for its issuance. hence. 1830(2) of the Civil Code which provides. . 558-559) Findings of fact by an administrative board or official. (54 Am. permits.21. courts cannot superimpose their discretion on that of the land department and compel the latter to do an act which involves the exercise of judgment and discretion. 1960). the conflict over the fishpond had not been finally resolved. It is a well-recognized principle that purely administrative and discretionary functions may not be interfered with by the courts (Coloso v. permits. to the fishpond. stating as a ground his belief "that only the competent agencies of the government are in a better position to render any equitable arrangement relative to the present case. G. It is a salutary rule that the judicial department should not dictate to the executive department what to do with regard to the administration and disposition of the public domain which the law has entrusted to its care and administration. Ago. Indeed.1950. 1966).. March 31. 1953). (emphasis supplied) In the case at bar. leases. Jur. inter alia. After the Secretary of Agriculture and Natural Resources approved the appellant's application. exercised unconstitutional powers or clearly acted arbitrarily and without regard to his duty or with grave abuse of discretion. Board of Accountancy. courts have no supervising power over the proceedings and action of the administrative departments of the government. its declaration as permanent. and. April 20. moreover. classification. June 30. its continuation. No. Thus. et al. (L-21167. or cancelling applications. that . Secretary of Agriculture and Natural Resources. (L-15414. he became to all intents and purposes the legal permittee of the area with the corresponding right to possess. following a hearing.18 the appellee Felipe Deluao demurred to Casteel's proposition because there were allegedly no appropriate grounds to support the same and. we held in Pajo. more specifically. and contracts. et al. leases and contracts over portions of the public domain to be utilized as fishponds. reinstating. et al. 1951 in which he reiterated his refusal to grant the administration of the fishpond to the appellant. or with grave abuse of discretion. vs. The appellant wrote on January 4." In this jurisdiction. or approving.R. Jesus Donesa. exercised unconstitutional powers. and considering the absence of any proof that the said official exceeded his statutory authority. occupy and enjoy the same. In general. rejecting.. 1951 a last letter 19 to the appellee Felipe Deluao wherein the former expressed his determination to administer the fishpond himself because the decision of the Government was in his favor and the only reason why administration had been granted to the Deluaos was because he was indebted to them. This is generally true with respect to acts involving the exercise of judgment or discretion. and findings of fact." Inasmuch as the erstwhile partners articulated in the aforecited letters their respective resolutions not to share the fishpond with each other — in direct violation of the undertaking for which they have established their partnership — each must be deemed to have expressly withdrawn from the partnership. was improper in the face of the knowledge later acquired by the lower court that it was the appellant's application over the fishpond which was given due course. are binding upon the courts and will not be disturbed except where the board or official has gone beyond his statutory authority. with the view that we take of this case. and. and reiterated in Ganitano vs. [T]he powers granted to the Secretary of Agriculture and Commerce (Natural Resources) by law regarding the disposition of public lands such as granting of licenses.
plus 6% interest thereon per annum. In this appeal. she did so no longer in the concept of a capitalist partner but merely as creditor of the appellant. and (d) whether the amounts totalling about P27. and therefore. the lower court erred in issuing the preliminary mandatory injunction. that from 1952 up to and including 1956. in addition to P1. ACCORDINGLY. defendantsappellees.000 (or whatever amounts have been advanced to Casteel). (b) the share (in the profits) of Casteel as industrial partner. copy of which is attached to the complaint as Annex "A" — partners in a fishpond business. Mabato had failed and refused to render accounts for the years 1957 to 1963. Alleging that he and defendant Severino Mabato are — pursuant to a public instrument dated August 29.23 However.000 as attorney's fees.000. 1950. The appellant's counterclaim is dismissed. filed on June 9. 1950 until Casteel shall have been finally given the possession and enjoyment of the same. and ordering the dissolution of the partnership. that judgment be rendered sentencing Mabato to pay him (Agad) the sum of P14.Consequently. as well as the winding up of its affairs by a receiver to be appointed therefor. despite repeated demands. (2) placing the latter back in possession of the fishpond in litigation. Mabato who handled the partnership funds. as his share in the profits of the partnership for the period from 1957 to 1963. Agad prayed in his complaint against Mabato and Mabato & Agad Company. pursuant to our holding that there was a partnership between the parties for the exploitation of the fishpond before it was awarded to Casteel. and that. at the termination of which the court shall render judgment accordingly. 1968 MAURICIO AGAD. in order for the court to determine (a) the profits realized by the partnership. since the appellee Inocencia Deluao continued in possession and enjoyment of the fishpond even after it was awarded to Casteel. to the capital of which Agad contributed P1. 1964. she must likewise submit in the lower court an accounting of the proceeds of the sales of all the fishes harvested from the fishpond from September 16. Besides. No. SEVERINO MABATO and MABATO and AGAD COMPANY.R. had yearly rendered accounts of the operations of the partnership. No pronouncement as to costs. from an order of dismissal of the Court of First Instance of Davao. We cannot overemphasize that an injunction should not be granted to take property out of the possession and control of one party and place it in the hands of another whose title has not been clearly established by law. we are called upon to determine the applicability of Article 1773 of our Civil Code to the contract of partnership on which the complaint herein is based. L-24193 June 28. then she should reimburse the excess to the appellant. G. this case should be remanded to the lower court for the reception of evidence relative to an accounting from November 25. (e) the share (in the profits) of Deluao as capitalist partner. and (3) remanding this case to the court of origin for the reception of evidence relative to the accounting that the parties must perforce render in the premises. plaintiff-appellant.000 advanced by Deluao to Casteel for the development and improvement of the fishpond have already been liquidated. the judgment of the lower court is set aside. 1949 to September 15. vs. with the right to receive 50% of the profits. . Another judgment is hereby rendered: (1) dissolving the injunction issued against the appellant.000. In the event that the appellee Deluao has received more than her lawful credit of P27. taken by plaintiff Mauricio Agad. 1952.
WHEREFORE. therefore.00) Pesos Philippine Currency. even if a fishpond or a real right thereto could become part of its assets. thereafter the proceeds of the sale shall be divided equally according to their respective interests.00) pesos has been contributed by Severino Mabato and One Thousand (P1. moral and exemplary damages.000. Mabato admitted the formal allegations of the complaint and denied the existence of said partnership. as stated in Annex "A" the partnership was established "to operate a fishpond". This conclusion was predicated upon the theory that the contract of partnership.In his answer. Their contributions were limited to the sum of P1. none of the partners contributed either a fishpond or a real right to any fishpond. A contract of partnership is void.00) Pesos has been contributed by Mauricio Agad. upon the ground that the contract therefor had not been perfected. despite the execution of Annex "A".000. because "it is really inconceivable how a partnership engaged in the fishpond business could exist without said fishpond property (being) contributed to the partnership. Moreover. Mabato prayed. with the costs of this instance against defendant-appellee. that. and that Agad be sentenced to pay actual. that Annex "A" be declared void ab initio. as well as attorney's fees. that the complaint be dismissed. because Agad had allegedly failed to give his P1. Mabato alleged and the lower court held that the answer should be in the affirmative. pursuant to Art. 1773 of our Civil Code." It should be noted. Annex "A". the order appealed from should be.000 contribution to the partnership capital. upon the ground that the complaint states no cause of action and that the lower court had no jurisdiction over the subject matter of the case. 1771. Mabato filed a motion to dismiss. Articles 1771 and 1773 of said Code provide: Art. however. A reconsideration of this order having been denied. of which One Thousand (P1. FACTS: . because an inventory of the fishpond referred in said instrument had not been attached thereto. Indeed. signed by the parties. as it is hereby set aside and the case remanded to the lower court for further proceedings. CA. Severino Mabato. A partnership may be constituted in any form. Paragraph 4 of Annex "A" provides: That the capital of the said partnership is Two Thousand (P2. granting the motion to dismiss the complaint for failure to state a cause of action. the court issued the order appealed from. Neither said fishpond nor a real right thereto was contributed to the partnership or became part of the capital thereof. After due hearing. except where immovable property or real rights are contributed thereto. whenever immovable property is contributed thereto. if inventory of said property is not made. we find that said Article 1773 of the Civil Code is not in point and that. AGUILAR V. Art. xxx xxx xxx The operation of the fishpond mentioned in Annex "A" was the purpose of the partnership. is null and void.000. in which case a public instrument shall be necessary. and attached to the public instrument. 1773. Subsequently. Agad brought the matter to us for review by record on appeal. The issue before us hinges on whether or not "immovable property or real rights" have been contributed to the partnership under consideration.CO-OWNERSHIP Any of the Co-owners may demand the sale of the house and lot at any time and the other cannot object to such demand. It is so ordered. not to "engage in a fishpond business". because it involves principally the determination of rights over public lands.000 each.
ISSUE: A) W/N CA erred (1) in holding that the motion of respondent through counsel to cancel the pre-trial was dilatory in character and (2) in remanding the case to the trial court for pre-trial and trial? ISSUE RELEVANT TO PROPERTY: B) W/N trial court was correct with regards to the sale and rent? SC held that ½ of the proceeds should go to the petitioner and the remainder to the respondent (1. SC found that the reason for the cancelation of the pre-trial was insufficient and that the trial court was not in grave abuse of discretion when they denied it.200 each. It is the discretion of the court to grant the motion if it sees that the reason for the cancelation of the same would be reasonable. Petitioner and respondents are co-owners of subject house and lot in equal shares. the case was then remanded to the trial court. Art. CFI denied the motion. The respondents did not appear thus they were declared in default.) Also rent was awarded 1. for the use and enjoyment of the other half of RULING: A) YES. either one of them may demand the sale of the house and lot at any time and the other cannot object to such demand. Hence this appeal. The law is clear that the appearance of parties at the pretrial is mandatory. BASIS: Article 494 of the Civil Code provides that no co-owner shall be obliged to remain in the co-ownership. . A party who fails to appear at a pre-trial conference may be non-suited or considered as in default. in addition respondent was made to pay rent from the time the action was filed. After their father’s death petitioner demanded from private respondent that the latter vacate the house and that the property be sold and proceeds thereof divided among them but the latter refused. Petitioner then filed to compel the sale of the property. B) YES. Respondents appealed this and the decision was reversed by the CA saying that the TC erred in declaring respondents in default. but later they agreed on equal shares. The trial went on ex parte without the respondent and held that the property should be sold to a third party and that the proceeds be distributed to the parties. it shall be sold and its proceeds accordingly distributed. They initially agreed that Vergilio will get 2/3 and Senen will get 1/3. thereafter the proceeds of the sale shall be divided equally according to their respective interests. Corollary to this rule. CA erred in granting the respondents motion and remanding the case. and the pre-trial proceeded on the scheduled date. Respondent filed a motion to cancel Pre-trial since the counsel had to accompany his wife in Dumaguete City where she would be a principal sponsor in a wedding. Senen was left in the said lot to take care of their father since Vergilio’s family was in Cebu.200 pesos per month with legal interest from the time the trial court ordered the respondent to vacate.Petitioner Vergilio and respondent Senen bought a house and lot in Paraňaque where their father could spend and enjoy his remaining years in a peaceful neighborhood. and that each co-owner may demand at any time partition of the thing owned in common insofar as his share is concerned. with a few modification. 498 of the Code states that whenever the thing is essentially indivisible and the co-owners cannot agree that it be allotted to one of them who shall indemnify the others. The chunk of the issue tackled by the courts was regarding the pre-trial.
the property. BASIS: When petitioner filed an action to compel the sale of the property and the trial court granted the petition and ordered the ejectment of respondent, the co-ownership was deemed terminated and the right to enjoy the possession jointly also ceased.
G.R. No. L-31684 June 28, 1973
EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR., CONCHITA B. NAVARRO and LEONARDA ATIENZA ABAD SABTOS, petitioners, vs. ESTRELLA ABAD SANTOS, respondent. On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co." On June 7, 1955 the Articles of Co-partnership was amended as to include herein respondent, Estrella Abad Santos, as industrial partner, with herein petitioners Domingo C. Evangelista, Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the original capitalist partners, remaining in that capacity, with a contribution of P17,500 each. The amended Articles provided, inter alia, that "the contribution of Estrella Abad Santos consists of her industry being an industrial partner", and that the profits and losses "shall be divided and distributed among the partners ... in the proportion of 70% for the first three partners, Domingo C. Evangelista, Jr., Conchita P. Navarro and Leonardo Atienza Abad Santos to be divided among them equally; and 30% for the fourth partner Estrella Abad Santos." On December 17, 1963 herein respondent filed suit against the three other partners in the Court of First Instance of Manila, alleging that the partnership, which was also made a party-defendant, had been paying dividends to the partners except to her; and that notwithstanding her demands the defendants had refused and continued to refuse and let her examine the partnership books or to give her information regarding the partnership affairs to pay her any share in the dividends declared by the partnership. She therefore prayed that the defendants be ordered to render accounting to her of the partnership business and to pay her corresponding share in the partnership profits after such accounting, plus attorney's fees and costs. The defendants, in their answer, denied ever having declared dividends or distributed profits of the partnership; denied likewise that the plaintiff ever demanded that she be allowed to examine the partnership books; and byway of affirmative defense alleged that the amended Articles of Copartnership did not express the true agreement of the parties, which was that the plaintiff was not an industrial partner; that she did not in fact contribute industry to the partnership; and that her share of 30% was to be based on the profits which might be realized by the partnership only until full payment of the loan which it had obtained in December, 1955 from the Rehabilitation Finance Corporation in the sum of P30,000, for
which the plaintiff had signed a promisory note as co-maker and mortgaged her property as security. The parties are in agreement that the main issue in this case is "whether the plaintiff-appellee (respondent here) is an industrial partner as claimed by her or merely a profit sharer entitled to 30% of the net profits that may be realized by the partnership from June 7, 1955 until the mortgage loan from the Rehabilitation Finance Corporation shall be fully paid, as claimed by appellants (herein petitioners)." On that issue the Court of First Instance found for the plaintiff and rendered judgement "declaring her an industrial partner of Evangelista & Co.; ordering the defendants to render an accounting of the business operations of the (said) partnership ... from June 7, 1955; to pay the plaintiff such amounts as may be due as her share in the partnership profits and/or dividends after such an accounting has been properly made; to pay plaintiff attorney's fees in the sum of P2,000.00 and the costs of this suit." The defendants appealed to the Court of Appeals, which thereafter affirmed judgments of the court a quo. In the petition before Us the petitioners have assigned the following errors: I. The Court of Appeals erred in the finding that the respondent is an industrial partner of Evangelista & Co., notwithstanding the admitted fact that since 1954 and until after promulgation of the decision of the appellate court the said respondent was one of the judges of the City Court of Manila, and despite its findings that respondent had been paid for services allegedly contributed by her to the partnership. In this connection the Court of Appeals erred: (A) In finding that the "amended Articles of Copartnership," Exhibit "A" is conclusive evidence that respondent was in fact made an industrial partner of Evangelista & Co. (B) In not finding that a portion of respondent's testimony quoted in the decision proves that said respondent did not bind herself to contribute her industry, and she could not, and
in fact did not, because she was one of the judges of the City Court of Manila since 1954. (C) In finding that respondent did not in fact contribute her industry, despite the appellate court's own finding that she has been paid for the services allegedly rendered by her, as well as for the loans of money made by her to the partnership. II. The lower court erred in not finding that in any event the respondent was lawfully excluded from, and deprived of, her alleged share, interests and participation, as an alleged industrial partner, in the partnership Evangelista & Co., and its profits or net income. III. The Court of Appeals erred in affirming in toto the decision of the trial court whereby respondent was declared an industrial partner of the petitioner, and petitioners were ordered to render an accounting of the business operation of the partnership from June 7, 1955, and to pay the respondent her alleged share in the net profits of the partnership plus the sum of P2,000.00 as attorney's fees and the costs of the suit, instead of dismissing respondent's complaint, with costs, against the respondent. It is quite obvious that the questions raised in the first assigned errors refer to the facts as found by the Court of Appeals. The evidence presented by the parties as the trial in support of their respective positions on the issue of whether or not the respondent was an industrial partner was thoroughly analyzed by the Court of Appeals on its decision, to the extent of reproducing verbatim therein the lengthy testimony of the witnesses. It is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been commited by the lower court. It should be observed, in this regard, that the Court of Appeals did not hold that the Articles of Co-partnership, identified in the record as Exhibit "A", was conclusive evidence that the respondent was an industrial partner of the said company, but considered it together with other factors, consisting of
both testimonial and documentary evidences, in arriving at the factual conclusion expressed in the decision. The findings of the Court of Appeals on the various points raised in the first assignment of error are hereunder reproduced if only to demonstrate that the same were made after a through analysis of then evidence, and hence are beyond this Court's power of review. The aforequoted findings of the lower Court are assailed under Appellants' first assigned error, wherein it is pointed out that "Appellee's documentary evidence does not conclusively prove that appellee was in fact admitted by appellants as industrial partner of Evangelista & Co." and that "The grounds relied upon by the lower Court are untenable" (Pages 21 and 26, Appellant's Brief). The first point refers to Exhibit A, B, C, K, K-1, J, N and S, appellants' complaint being that "In finding that the appellee is an industrial partner of appellant Evangelista & Co., herein referred to as the partnership — the lower court relied mainly on the appellee's documentary evidence, entirely disregarding facts and circumstances established by appellants" evidence which contradict the said finding' (Page 21, Appellants' Brief). The lower court could not have done otherwise but rely on the exhibits just mentioned, first, because appellants have admitted their genuineness and due execution, hence they were admitted without objection by the lower court when appellee rested her case and, secondly the said exhibits indubitably show the appellee is an industrial partner of appellant company. Appellants are virtually estopped from attempting to detract from the probative force of the said exhibits because they all bear the imprint of their knowledge and consent, and there is no credible showing that they ever protested against or opposed their contents prior of the filing of their answer to appellee's complaint. As a matter of fact, all the appellant Evangelista, Jr., would have us believe — as against the cumulative force of appellee's aforesaid documentary evidence — is the appellee's Exhibit "A", as confirmed and corroborated by the other exhibits already mentioned, does not express the true intent and agreement of the parties thereto, the real
An industrial partner cannot engage in business for himself. At pages 32-33 of appellants' brief. instead she has been and still is a judge of the City Court (formerly . That appellee has faithfully complied with her prestation with respect to appellants is clearly shown by the fact that it was only after filing of the complaint in this case and the answer thereto appellants exercised their right of exclusion under the codal art just mentioned by alleging in their Supplemental Answer dated June 29. her alleged share. Exhibit "A". interests or participation. The Court of Appeals then proceeded to consider appellee's testimony on this point. with the intention of dividing the profits among themselves. 1955 — subsequent to the filing of defendants' answer to the complaint. they also make much of the argument that 'there is an overriding fact which proves that the parties to the Amended Articles of Partnership. property. in the defendant partnership and/or in its net profits or income. Article 1767 of the New Civil Code which provides that "By contract of partnership two or more persons bind themselves. 1789 of the Civil Code. quoting it in the decision. devoting all her time to the performance of the duties of her public office. 1964 — or a period of over eight (8) years — appellants did nothing to correct the alleged false agreement of the parties contained in Exhibit "A". defendants reached an agreement whereby the herein plaintiff been excluded from. It is an admitted fact that since before the execution of the amended articles of partnership. the appellee Estrella Abad Santos has been. to contribute money. and if he should do so. 1955. This version. Exhibit "A". 1789. appellants would not have advanced this obvious afterthought that Exhibit "A" does not express the true intent and agreement of the parties thereto. she has rendered services for appellants without which they would not have had the wherewithal to operate the business for which appellant company was organized. even as she was and still is a Judge of the City Court of Manila. is discredited not only by the aforesaid documentary evidence brought forward by the appellee.00 to be obtained from the RFC shall have been fully paid. unless the partnership expressly permits him to do so. and then concluded as follows: One cannot read appellee's testimony just quoted without gaining the very definite impression that. as an alleged industrial partner. with a right to damages in either case. and deprived of. 'does not specify the kind of industry that a partner may thus contribute. had appellee not filed the present action. on the ground plaintiff has never contributed her industry to the partnership. There is no pretense. This fact proves beyond peradventure that it was never contemplated between the parties. hence the said services may legitimately be considered as appellee's contribution to the common fund. Another article of the same Code relied upon appellants reads: 'ART.understanding between them being the appellee would be merely a profit sharer entitled to 30% of the net profits that may be realized between the partners from June 7. the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have obtained in violation of this provision. but also by the fact that from June 7. even on the part of the appellee is engaged in any business antagonistic to that of appellant company. however. It is thus reasonable to suppose that. and to insure faithful compliance by said partner with this prestation. 1964 — or after around nine (9) years from June 7. did not contemplate to make the appellee Estrella Abad Santos. however. and up to the present time still is. until the mortgage loan of P30.000. an industrial partner of Evangelista & Co. for she could not lawfully contribute her full time and industry which is the obligation of an industrial partner pursuant to Art. one of the judges of the City Court of Manila. or industry to a common fund.' It is not disputed that the provision against the industrial partner engaging in business for himself seeks to prevent any conflict of interest between the industrial partner and the partnership. 1955 up to the filing of their answer to the complaint on February 8. since being a Judge of one of the branches of the City Court of Manila can hardly be characterized as a business.
4428. petitioner-appellant. with costs. Robert Hill. 14. 1955. which right appellants take exception under their second assigned error. George Litton share certificates Nos." (Appellants Brief. HILL & CERON. 1934. ET AL. 5. with the right to demand for a formal accounting and to receive her share in the net profit that may result from such an accounting. 1899.00 obtained from the Rehabilitation Finance Corporal shall have been fully paid. 1934 Received from Mr. This is a petition to review on certiorari the decision of the Court of Appeals in a case originating from the Court of First Instance of Manila wherein the herein petitioner George Litton was the plaintiff and the respondents Hill & Ceron. We find no reason in this case to depart from the rule which limits this Court's appellate jurisdiction to reviewing only errors of law. until the mortgage of P30. which we have sold . a certain number of mining claims. p. Any partner shall have the right to a formal account as to partnership affairs: (1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners. 38). The judgment appealed from is affirmed. 24-25). who is one of the managing partners of Hill & Ceron.. respondents-appellees. Our said holding is based on the following article of the New Civil Code: 'ART. vs. No. What has gone before persuades us to hold with the lower Court that appellee is an industrial partner of appellant company. G.Municipal Court) of the City of Manila. Having always knows as a appellee as a City judge even before she joined appellant company on June 7. (2) If the right exists under the terms of any agreement.000 shares respectively — total 17. 1955 as an industrial partner. 4429 and 6699 for 5. 1939 GEORGE LITTON. the plaintiff sold and delivered to Carlos Ceron. Carlos Ceron and Visayan Surety & Insurance Corporation were defendants. pp.R. aside from teaching in law school in Manila. without the express consent of the herein defendants' (Record On Appeal.000 and 7. accepting as conclusive the factual findings of the lower court upon its own assessment of the evidence. why did it take appellants many yearn before excluding her from said company as aforequoted allegations? And how can they reconcile such exclusive with their main theory that appellee has never been such a partner because "The real agreement evidenced by Exhibit "A" was to grant the appellee a share of 30% of the net profits which the appellant partnership may realize from June 7. devoting her time to performance of her duties as such judge and enjoying the privilege and emoluments appertaining to the said office. L-45624 April 25.000 shares of Big Wedge Mining Company. (4) Whenever other circumstance render it just and reasonable. The facts are as follows: On February 14. the defendant Carlos Ceron delivered to the plaintiff a document reading as follows: Feb.000.000. (3) As provided by article 1807. and by virtue of said transaction.
and when the transaction was entered into with Litton. Sixth. that on the date of the transaction. Hill testified that a few days before February 14th he had a conversation with the plaintiff in the course of which he advised the latter not to deliver shares for sale or on commission to Ceron because the partnership was about to be dissolved. 1937. . of certain undisputed facts and of certain regulations and provisions of the Code of Commerce. According to the articles of copartnership of 'Hill & Ceron. but what importance can be attached to said advice if the partnership was not in fact dissolved on February 14th. Robert Hill and the Visayan Surety & Insurance Corporation. after trial.at P0. but in view. Mañeru. The court. a written contract of the firm can only be signed by one of the partners if the other partner consented.) Aside from the aforecited legal provisions. in the latter case. and as such. After this date.11 (eleven centavos) per share or P1. That the management of the business affairs of the copartnership shall be entrusted to both copartners who shall jointly administer the business affairs. Under this stipulation. shall not be allowed. February 14. the partnership between Hill and Ceron was in existence. . the order of the Bureau of Commerce of December 7. during the partnership. the latter affirmed the decision of the court on May 29. Said order reads: The stock and/or bond broker is.150 leaving an unpaid balance of P720. therefore. Without the consent of one partner. we reach the conclusion that the transaction made by Ceron with the plaintiff should be understood in law as effected by Hill & Ceron and binding upon it. HILL & CERON By: (Sgd.' filed in the Bureau of Commerce. with the consent of the other partner. however. Hill & Ceron sold shares of the Big Wedge. the other cannot bind the firm . 1933.00 less 1/2 per cent brokerage. it is an admitted fact by Robert Hill when he testified at the trial that he and Ceron. Accepting. 14 Phil. . (See also Cardell vs. had the same power to buy and sell. as we cannot but accept. broker or brokerage firm. 1885. In its decision the Court of Appeals states: But there is a stronger objection to the plaintiff's attempt to make the firm responsible to him. In the first place. the date when the transaction with Ceron took place? Under article 226 of the Code of Commerce. or on February 19th. that in said partnership Hill as well as Ceron made the transaction as partners in equal parts.. and unable to collect this sum either from Hill & Ceron or from its surety Visayan Surety & Insurance Corporation. that Ceron individually entered into the transaction with the plaintiff. . . namely. it was neither published in the newspapers nor stated in the commercial registry that the partnership Hill & Ceron had been dissolved.) The Supreme Court of Spain held that the dissolution of a partnership by the will of the partners which is not registered in the commercial registry. Litton filed a complaint in the Court of First Instance of Manila against the said defendants for the recovery of the said balance. On appeal to the Court of Appeals. 368. (Opinion of March 23. .) CARLOS CERON Ceron paid to the plaintiff the sum or P1. ordered Carlos Ceron personally to pay the amount claimed and absolved the partnership Hill & Ceron. shall jointly sign all checks for the withdrawal of funds and shall jointly or singly sign. 1934. irrespective of whether the purchase or sale is made from or to a private individual. merely an agent or an intermediary. having reached the conclusion that Ceron did not intend to represent and did not act for the firm Hill & Ceron in the transaction involved in this litigation. does not prejudice third persons. the conclusion arrived at by the Court of Appeals as to the question of fact just mentioned. (c) To buy or to sell shares of stock or bonds on his own account for purposes of speculation and/or for manipulating the market.870. transactions and activities of the copartnership. the dissolution of a commercial association shall not cause any prejudice to third parties until it has been recorded in the commercial registry. shall jointly open a current account or any other kind of account in any bank or banks. prohibits brokers from buying and selling shares on their own account.
870. may legally engage in the business of brokerage in general as stock brokers. Ceron. and other activities pertaining to the business of brokers in general. none of the two partners. but as a managing partner of Hill & Ceron. shipping brokers. . is corroborated by the Court of Appeals. with legal interest. Its knowledge. engage in a transaction similar to that in which the partnership is engaged without binding the latter. under article 130 of the Code of Commerce. S. The kind of business in which the partnership Hill & Ceron is to engage being thus determined. The public need not make inquires as to the agreements had between the partners. jointly and severally. as it happens in the present case. like the plaintiff. real brokers. So ordered. (Le Roy vs. such as stock and bond brokers. assuming for the moment that Ceron attempted to represent the firm in this contract with the plaintiff (the plaintiff conceded that the firm name was not mentioned at that time). and this argument. Third persons.]. therefore. in his individual capacity.) The second paragraph of the articles of partnership of Hill & Ceron reads in part: Second: That the purpose or object for which this copartnership is organized is to engage in the business of brokerage in general. [Law. but we dissent from the view of the Court of Appeals that for one of the partners to bind the partnership the consent of the other is necessary. ed. It follows from the sixth paragraph of the articles of partnership of Hill &n Ceron above quoted that the management of the business of the partnership has been entrusted to both partners thereof. from the date of the filing of the complaint.by a written contract. 112 Pac. are not bound in entering into a contract with any of the two partners. security brokers and other activities pertaining to the business of the partnership. investment security brokers.) The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one of members of the firm acting apparently in its behalf and within the scope of his authority.Johnson. 617. so it is said. Now. Riggle. The appealed decision is reversed and the defendants are ordered to pay to the plaintiff. minus the commission of onehalf per cent (½%) from the original price of P1. to ascertain whether or not this partner with whom the transaction is made has the consent of the other partner. There is a general presumption that each individual partner is an authorized agent for the firm and that he has authority to bind the firm in carrying on the partnership transactions. because the transaction made by Ceron is a mere personal loan. nevertheless there is no law which prohibits a partner in the stock brokerage business for engaging in other transactions different from those of the partnership. could not have entered into the contract of sale of shares with Litton as a private individual. with the costs to the respondents. The respondent argues in its brief that even admitting that one of the partners could not. the latter has failed to prove that Hill had consented to such contract. is enough that it is contracting with the partnership which is represented by one of the managing partners. (Mills vs. We do not find this alleged corroboration because the only finding of fact made by the Court of Appeals is to the effect that the transaction made by Ceron with the plaintiff was in his individual capacity. 7 U. the sum of P720.. 391.
EUSEBIO CLARIN. that of First Instance of Pampanga. but a civil one arising from the partnership contract for a liquidation of the partnership and a levy on its assets if there should be any. Pedro Tarug.G. for which it would be sufficient to argue that the partnership had received the money under obligation to return it. or if it were to be done by one of the three specifically. defendant-appellant. even though he had reserved the capital and conveyed only the usufruct of his money. was the person who received the money directly from Larin. No. in commodatum. amounting to P15. but did not comply with the terms of the contract by delivering to Larin his half of the profits. and Guzman. The complaint for estafa is dismissed without prejudice to the institution of a civil action. it would have to answer to the charge of estafa. for example. and to pay the costs. and other unilateral contracts which require the return of the same thing received) does not include money received for a partnership. sentenced the defendant. according to the evidence. and. to six months' arresto mayor. plaintiff-appellee. besides P30. 5 of article 535 of the Penal Code. might buy and sell mangoes. shall appropriate or misapply any money. Larin charged them with the crime of estafa. 1665. (Art.) When Larin put the P172 into the partnership which he formed with Tarug. the said Larin made an agreement with the three men by which the profits were to be divided equally between him and them. with the intention of dividing the profits among themselves. he invested his capital in the risks or benefits of the business of the purchase and sale of mangoes. as it could not be held liable civilly for the share of the capitalist partner who reserved the ownership of the money brought in by him. 5840 September 17. . to suffer the accessory penalties. according to which those are guilty of estafa "who. to the prejudice of another. if the partnership. instead of obtaining profits. or any kind of personal property which they may have received as a deposit on commission for administration or in any other character producing the obligation to deliver or return the same. Clarin. Eusebio Clarin.R. in company with Eusebio Clarin and Carlos de Guzman. vs. goods. or industry to a common fund. believing that he could make some money in this business. in order that the latter. otherwise the result would be that. We therefore freely acquit Eusebio Clarin. precarium. Pedro Larin delivered to Pedro Tarug P172. Pedro Tarug and Carlos de Guzman appeared in the case as witnesses and assumed that the facts presented concerned the defendant and themselves together. and Carlos de Guzman did in fact trade in mangoes and obtained P203 from the business. The P172 having been received by the partnership. suffered losses. a contract is formed which is called partnership. Civil Code.50 as his share of the profits. but the provincial fiscal filed an information only against Eusebio Clarin in which he accused him of appropriating to himself not only the P172 but also the share of the profits that belonged to Larin. with the costs de oficio. Eusebio Clarin. No. or to subsidiary imprisonment in case of insolvency. and. who. it would not devolve upon of his three partners to return his capital to him. 1910 THE UNITED STATES. The trial court." (as. and to return to Pedro Larin P172. The defendant appealed.50. neither did they render him any account of the capital. it would be Tarug. property. the action that lies with the partner who furnished the capital for the recovery of his money is not a criminal action for estafa. and in deciding his appeal we arrive at the following conclusions: When two or more persons bind themselves to contribute money. but upon the partnership of which he himself formed part. the business commenced and profits accrued.
with the express obligation involving the duty to act as complainant’s agent in purchasing local cigarettes (Philip Morris and Marlboro cigarettes). with intent of gain. unlawfully and feloniously defraud one ISIDORA ROSALES. 1988 and August. accused failed and refused and still fails and refuses to deliver and/or return the same to the damage . and abuse of confidence. in case of insolvency. Rosales gave several cash advances to Liwanag and Tabligan amounting to P633. misapplied.00. The visits.650. that the prosecution has established the guilt of the accused. The dispositive portion of the decision reads thus: “WHEREFORE. and once in possession thereof. finding Liwanag guilty as charged. 1997] CARMEN LIWANAG. Rosales filed a case of estafa against Liwanag. respondents. did then and there. Alarmed by this development and believing that the amounts she advanced were being misappropriated.650. Petitioner was charged with the crime of estafa before the Regional Trial Court (RTC). represented by the Solicitor General. to wit: on the date and in the place aforementioned. 1988 in Quezon City. Rosales would give the money needed to buy the cigarettes while Liwanag and Tabligan would act as her agents. Under their agreement. but said accused. the trial court rendered a decision dated January 9. petitioner. During the first two months. beyond reasonable doubt. Philippine Currency. in an information which reads as follows: “That on or between the month of May 19. said accused received in trust from the offended party cash money amounting to P536.00.650. Liwanag and Tabligan made periodic visits to Rosales to report on the progress of the transactions.” The antecedent facts are as follows: Petitioner Carmen Liwanag (Liwanag) and a certain Thelma Tabligan went to the house of complainant Isidora Rosales (Rosales) and asked her to join them in the business of buying and selling cigarettes. the Court holds. in the following manner. 1991. and all efforts by Rosales to obtain information regarding their business proved futile. After trial on the merits. an Indeterminate Penalty of SIX (6) YEARS. AND TO PAY THE COSTS. willfully. and therefore. EIGHT (8) MONTHS AND TWENTY ONE (21) DAYS OF PRISION CORRECCIONAL TO FOURTEEN (14) YEARS AND EIGHT (8) MONTHS OF PRISION MAYOR AS MAXIMUM. Consequently. the said accused. vs. CONTRARY TO LAW. in the aforementioned amount and in such other amount as may be awarded under the provision of the Civil Code. despite repeated demands made upon her.00. 114398. Philippines and within the jurisdiction of this Honorable Court. misappropriated and converted the same to her personal use and benefit. Convinced of the feasibility of the venture. Branch 93. to resell them to several stores.and prejudice of the said ISIDORA ROSALES. with unfaithfulness. October 24. No. Carmen Liwanag.” [G.R. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES. otherwise the money would be returned to Rosales. THE HON. imposes upon the accused. Rosales readily agreed. suddenly stopped. SO ORDERED. far from complying her aforesaid obligation. The accused is likewise ordered to reimburse the private complainant the sum of P526. without subsidiary imprisonment. and to return the aforesaid amount of offended party. Quezon City. with a corresponding 40% commission to her if the goods are sold. to give her commission corresponding to 40% of the profits. however.
1993. as follows: (1) that the accused defrauded another by abuse of confidence or deceit. that is. Isidora P. While factual findings of the Court of Appeals are conclusive on the parties and not reviewable by the Supreme Court. the decision is AFFIRMED. we have ruled that when money or property have been received by a partner for a specific purpose (such as that obtaining in the instant case) and he later misappropriated it. or of false pretenses of fraudulent acts. Baligad” The language of the receipt could not be any clearer. In all other respects. commission or administration. (SGD & Thumbedmarked) (sic) CARMEN LIWANAG 26 H.Said decision was affirmed with modification by the Court of Appeals in a decision dated November 29.” Estafa is a crime committed by a person who defrauds another causing him to suffer damages.00 or the said items on or before August 30. in view of the foregoing. to purchase cigarrets (sic) (Philip & Marlboro) to be sold to customers. Kaliraya St. Rosales the sum of FIVE HUNDRED TWENTY SIX THOUSAND AND SIX HUNDRED FIFTY PESOS (P526.650. and (2) that damage or prejudice capable of pecuniary estimation is caused to the offended party or third party. 2. 1988 Quezon City Her motion for reconsideration having been denied in the resolution of March 16.650. Received from Mrs. wherein Rosales would contribute the funds while she would buy and sell the cigarettes. She also argues that the transaction can also be interpreted as a simple loan. WHEN CLEARLY THE CONTRACT THAT EXIST (sic) BETWEEN THE ACCUSED-PETITIONER AND COMPLAINANT IS EITHER THAT OF A SIMPLE LOAN OR THAT OF A PARTNERSHIP OR JOINT VENTURE HENCE THE NON RETURN OF THE MONEY OF THE COMPLAINANT IS PURELY CIVIL IN NATURE AND NOT CRIMINAL. SO ORDERED. Quezon City Signed in the presence of: (Sgd) Illegible (Sgd) Doming Z. EIGHT (8) MONTHS and TWENTY ONE (21) DAYS of prision mayor.  From the foregoing. such partner is guilty of estafa. Isidora P. RESPONDENT APPELLATE COURT GRAVELY ERRED IN AFFIRMING THE CONVICTION OF THE ACCUSED-PETITIONER FOR THE CRIME OF ESTAFA.” Liwanag advances the theory that the intention of the parties was to enter into a contract of partnership. the elements of estafa are present. by means of unfaithfulness or abuse of confidence. The Court of Appeals correctly rejected these pretenses. and in the event the cigarettes cannot be sold. submitting the following assignment of errors: “1. The receipt signed by Liwanag states thus: “May 19. In the event the said cigarrets (sic) are not sold. the judgment appealed from is hereby affirmed with the correction of the nomenclature of the penalty which should be: SIX (6) YEARS. and carry more weight when these affirm the factual findings of the trial court. Thus. 1988. 1994. Liwanag filed the instant petition. .00) Philippine Currency.  we deem it more expedient to resolve the instant petition on its merits. for the purchase of cigarettes. RESPONDENT APPELLATE COURT GRAVELY ERRED IN NOT ACQUITTING THE ACCUSED-PETITIONER ON GROUNDS OF REASONABLE DOUBT BY APPLYING THE ‘EQUIPOISE RULE’. and later divide the profits between them. as minimum.  and it is essential that there be a fiduciary relation between them either in the form of a trust. even assuming that a contract of partnership was indeed entered into by and between the parties. the decretal portion of which reads: “WHEREFORE. the money must be returned to Rosales. as maximum. with Rosales lending to her the amount stated on an installment basis. Rosales the said amount of P526. It indicates that the money delivered to Liwanag was for a specific purpose. the proceeds of the sale or the said products (shall) be returned to said Mrs. to FOURTEEN (14) YEARS and EIGHT (8) MONTHS of reclusion temporal.
the appealed decision of the Court of Appeals dated November 29. namely. the sale should be set aside because it was executed with the intent to defraud appellant of his share in the properties sold. Liwanag is liable for conversion under Art. ET AL. Costs against petitioner. Being the owner.000. to a stranger. WHEREFORE. The matter now pending is the appellant's motion for reconsideration of our main decision. in fact. (b) That partnership was expressly organized: "to engage in real estate business. never became more than a limited partner. in favor of the buyers Washington Sycip and Betty Lee for the following consideration: Cash paid Debts assumed by purchaser: To Yutivo To Sing Yee Cuan & Co. that the testimony of her witness Young and Lim belies that she took over the administration of the partnership property. made in 1949 by the widow of the managing partner. in view of the foregoing. expressly provided that: G.13 P153. SYCIP.0 0 Appellant Goquiolay. Three things must be always held in mind in the discussion of this motion to reconsider. There is no question between partners inter se.R. .. ET AL. acting in behalf of the firm.Neither can the transaction be considered a loan. insist that. Since in this case there was no transfer of ownership of the money delivered. 1963 ANTONIO C. and if this was not possible then to return the money to Rosales. and that. the borrower can dispose of it for whatever purpose he may deem proper. SO ORDERED.91 54. WASHINGTON Z.. in his motion for reconsideration. ownership over the same is transferred. plaintiffs-appellants. widow of the deceased partner Tan Sin An. incapacitated by law to manage the affairs of partnership. In the instant petition. either by buying and selling real estate". wherein we have upheld the validity of the sale of the lands owned by the partnership Goquiolay & Tan Sin An.726. par.. however. is AFFIRMED. defendants-appellees. being basic and beyond controversy: (a) That we are dealing here with the transfer of partnership property by one partner.415. in any event. 04 P37. it is evident that Liwanag could not dispose of the money as she pleased because it was only delivered to her for a single purpose. The Articles of copartnership. GOQUIOLAY. L-11840 December 10.310. 1993. 315. TOTAL 62. Tan Sin An (Executed in her dual capacity as Administratrix of the husband's estate and as partner in lieu of the husband). 1(b) of the Revised Penal Code. vs. and this aspect to the case was expressly reserved in the main decision of 26 July 1960. since in a contract of loan once the money is received by the debtor. Kong Chai Pin. No. for the purchase of cigarettes. contrary to our holding.
e. The object and purpose of the copartnership are as follows: 1. continue to manage the properties). p. was given in answer to the question: According to Mr. With these points firmly in mind. Plainly. Emphasis supplied). she could just do it and besides I am not interested in agricultural lands. (c) That the properties sold were not part of the contributed capital (which was in cash) but land precisely acquired to be sold. (Emphasis supplied).IV. Discarding the self-serving expressions. Witnesses Lim and . I allowed her to take care of the properties in order to help her and because I believe in God and — wanted to help her. Goquiolay. 13. It is first averred that there is "not one iota of evidence" that Kong Chai Pin managed and retained possession of the partnership properties. either by buying and selling real estates. Moreover. Mrs. Kong Chai Pin. When I went there with Hernando Youngwe saw all the abaca destroyed. that the witness found the properties "abandoned and undeveloped". The third property which is in Tigato is about eleven (11) hectares and planted with abaca seedlings planted by Mr. omits to mention that said part of the testimony started with the question: Now. To engage in real estate business. the appellant's reference to the testimony of Hernando Young. Sin An. both Young and Lim's testimonies do not belie. having been made against the party's own interest. Did you meet Mrs. you said that about 1942 or 1943 you returned to Davao. Kong Chai Pin there in Davao at that time? Similarly. 13-14. 19 July 1956. The appellant subsequently ratified this testimony in his deposition of 30 June 1956. and the family of the widow (Kong Chai Pin) did not receive any income from the partnership properties. And also — What can you say as to the development of these other properties of the partnership which you saw during the occupation? (Dep. p. Q — So the answer to my question is you did not take any steps? A — I did not. pp. Emphasis supplied). Then I said. Lim. The place was occupied by the Japanese Army.. and of course they are receiving quiet a lot benefit from the plantation. Tan Sin An. 8). (Dep. or contradict. from whom the partnership had acquired them. let us turn to the points insisted upon by appellant. although subject to a mortgage in favor of the original owners. wherein he stated: that plantation was being occupied at that time by the widow. to which witness gave the following answer: I saw the properties in Mamay still undeveloped. Goquiolay's admission that he told Mr. these admissions of Goquiolay are certainly entitled to greater weight than those of Hernando Young and Rufino Lim. Yu Eng Lai asked me if I can just let Mrs. to subdivide real estates into lots for the purpose of leasing and selling them. What can you say to that? (Dep.. Of course they never paid any money to Tan Sin An or his family.. Q — And this conversation which you had with Mrs. Yu Eng Lai was few months after 1945? A — In the year 1945. because I wanted to help Mrs. the testimony of Rufino Lim. Suffice it to point out that appellant Goquiolay himself admitted that — . Yu Eng Lai that the widow "could just do it" (i.. Kong Chai Pin continue to manage the properties (as) she had no other means of income. to the effect that the properties of the partnership were undeveloped. pages 8-9. during the Japanese occupation Tan Sin an and his family lived on the plantation of the partnership and derived their subsistence from that plantation.. Mr. They planted camotes and vegetables to feed the Japanese Army.
even as a mere agent: Limited partners may not perform any act of administration with respect to the interests of the copartnership. will have to be continued" with the heirs or assigns. It certainly could not be continued if it were to be converted from a general partnership into a limited partnership. Whether or not she complied with this authority is a question between her and the appellant. the heir ordinarily (and we did not say "necessarily") becomes a limited partner for his own protection. the latter may disregard it and instead elect to become a collective or general partner. a general partner right at the start. and specially because the conversion into a limited association would have the heirs of the deceased partner without a share in the management. By authorizing the widow to manage partnership property (which a limited partner could not be authorized to do). It must be remember that the articles of co-partnership here involved expressly stipulated that: In the event of the death of any of the partners at any time before the expiration of said term. Tan Sin An's widow showed that she desired to be considered a general partner. Of course.. because it was never revoked. We thus find that Goquiolay did not merely rely on reports from Lim and Young. It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only to manage the property. and is not here involved. By seeking authority to manage partnership property. Goquiolay recognized her as such partner. Goquiolay's authorization to manage the partnership property was proof that he considered and recognized her as general partner . Tan Sin An. but Goquiolay's authority was. because she had become a partner upon her husband's death. appellant could not empower the widow. The reason is plain: Under the law (Article 148. on the contrary. What this argument overlooks is that the widow was not a mere agent.Young referred to the period of Japanese occupation. since the difference between the two kinds of associations is fundamental. he actually manifested his willingness that the widow should manage the partnership properties. Hence. as expressly provided by the articles of copartnership. given to the widow in 1945. the widow only became a limited partner. The heirs. last paragraph. in fact. This choice pertains exclusively to the heir. after the occupation. and that it did not include the power to alienate. Even more. But this statutory limitation of responsibility being designed to protect the heir. Besides. the contractual stipulation does actually contemplate that the heirs would become general partners rather than limited ones.. (Emphasis supplied). can not be compelled to become general partners against their wishes. they expressly stipulated that in case of death of either partner "the co-partnership . But because they are not so compellable. waiving the protective mantle of the general laws of succession. but chose to be. And in the latter event. in other words. Code of Commerce). the co-partnership shall not be dissolved but will have to be continued and the deceased partner shall be represented by his heirs or assigns in said co-partnership (Art. . and does not require the assent of the surviving partner. not even in the capacity of agents of the managing partners. But the authority was given. and answering for the debts of the firm not only with the inheritance but also with the heir's personal fortune. The Articles did not provide that the heirs of the deceased would be merely limited partners. That Kong Chai Pin carried out no acts of management during the Japanese occupation (1942-1944) does not mean that she did not do so from 1945 to 1949. citing Article 1713 of the Civil Code of 1889. it does not legitimately follow that they may not voluntarily choose to become general partners. because he would normally prefer to avoid any liability in excess of the value of the estate inherited so as not to jeopardize his personal assets. and became. granting that by succession to her husband. XII. with authority to administer and alienate partnership property. to administer the properties of the firm. as we pointed out in our main decision. the stipulation would not bind the heirs of the deceased partner should they refuse to assume personal and unlimited responsibility for the obligations of the firm. it is pointless to discuss the legality of any conversion of a limited partner into a general one. and she did have it when she made the questioned sale. Again. Articles of Co-Partnership). at least since 1945. The heir never was a limited partner. if she were only a limited partner. the disputed sale by the widow took place in 1949. and is now in estoppel to deny her position as a general partner. with all the rights and privileges of one.
He did not even take steps. and. cuando es conforme a los fines sociales. the immovables thus acquired by the firm from part of its stock-in-trade. 67 Phil. section 334). in determining what kind of partner the widow of partner Tan Sin an Had elected to become. (Emphasis supplied. Hill and Ceron.. or at least ascertain how its affairs stood. having authority to act for. Note that for seven long years. 513. Knowing that by law a limited partner is barred from managing the partnership business or property. That belief was fostered by the very inaction of appellant Goquiolay. because it is not in line with the normal business of the firm. the provisions of the partnership articles that he (Goquiolay) would have no intervention in the management of the partnership. as sole general partner.It is immaterial that the heir's name was not included in the firm name. The stipulation in the articles of partnership that any of the two managing partners may contract and sign in the name of the partnership with the consent of the other. Where the partnership business is to deal in merchandise and goods. section 334. and in behalf of the firm. i. be it noted. Now. 516). there was more than ample time for Goquiolay to take up the management of these properties. because he was not interested (supra). from partner Tan Sin An's death in 1942 to the sale in 1949. 409. quoted in our main decision. et al. and that the law has been obeyed (No.) It is next urged that the widow. Pero esta facultad de enajenar limitada a las ventas conforme a los fines sociales. et al. in the ordinary and natural course of business. undoubtedly creates on obligation between the two partners. 31. in the very passage quoted in the appellant's motion for reconsideration: La enajenacion puede entrar en las facultades del gerante.. or modify. This laches certainly contributed to confirm the view that the widow of Tan Sin An had. since no conversion of status is involved. Code of Civil Procedure). or settle the firm debts that were overdue since before the outbreak of the last war. and by suitable notice in the commercial registry could have warned strangers that they must deal with him alone. was shared even by the probate court that approved the sale by the widow of the real property standing in the partnership name. authority to manage and deal with the firm's properties apart from the presumption that a general partner dealing with partnership property has to requisite authority from his copartners (Litton vs. viene limitada a los objetos de comercio o a los productos de la fabrica para explotacion de los cuales se ha constituido la Sociedad. hence within the ordinary powers of the partner. This obligation of course is not imposed upon a third person who contracts with the partnership. 67 Phil. which consists in asking the other's consent before contracting for the partnership. in negotiating with her as such a partner. 18. for otherwise he would not enter into the contract. For seven years Goquiolay could have asserted his alleged rights. and the sale thereof is in pursuance of partnership purposes. movable property. A third person may and has a right to presume that the partner with whom he contracts has. the sale of its real property (immovables) is not within the ordinary powers of a partner. The third person would naturally not presume that the partner with whom he enters into the transaction is violating the articles of partnership. This argument is lamentably superficial because it fails to differentiate between real estate acquired and held as stock-in-tradeand real estate held merely as business site (Vivante's "taller o banco social") for the partnership. It must never be overlooked that this case involved the rights acquired by strangers. and the articles of copartnership expressly contemplated the admission of the partner's heirs into the partnership. 11). Hill & Ceron. but on the contrary is acting in accordance therewith. or was given.. even as a partner. And this finds support in the legal presumption that the ordinary course of business has been followed (No. (Litton vs. and he did not even take steps to pay. the consent of his copartner. Neither it is necessary for the third person to ascertain if the managing partner with whom he contracts has previously obtained the consent of the other. and does not deal with the rights existing between partners Goquiolay and the widow of Tan Sin An. after Tan Sin An died. to cancel. had no authority to sell the real estate of the firm.e. p. This distinction is supported by the opinion of Gay de Montella1 . The issues between the partners inter sewere expressly reserved in our main decision. But where the express and avowed purpose of the partnership is to buy and sell real estate (as in the present case). third parties (like the purchasers) who found the widow possessing and managing the firm property with the acquiescence (or at least without apparent opposition) of the surviving partners were perfectly justified in assuming that she had become a general partner. This last presumption is equally applicable to contracts which have the force of law between the parties. But he did nothing of the sort. This belief. therefore. strangers had to be guided by her conduct and actuations and those of appellant Goquiolay. Ocurrira una cosa parecida cuando el objeto de la Sociedad fuese la compra y .
though it still had good credit. in the course pursued by him. none of the creditors were pressing for payment. On the day the mortgages were signed. On that day. as well as the plaintiff. the plaintiff had prepared. its business . and was actively engaged in the prosecution of its business. Since the sale by the widow was in conformity with the express objective of the partnership. The avowed purposes of the plaintiff. except.. It is natural that form these facts the Supreme Court of Ohio should draw the conclusion that the conveyances were made with intent to terminate the partnership. or were pressing for the payment of their debts. individually.. it may be. of said firm. which they did as soon as the mortgages were filed through the attorney who then represented them. and signed the same in this form: "In witness whereof. The mortgages appear to be without a sufficient condition of defiance.. this 20th day of May. insolvent. but a several agency. In Rosen vs. and that they were not within the powers of McGrath as a partner. in our case. Emphasis supplied).. the plaintiff caused to be prepared. And in Revelsky vs. But there is no similarity between those acts and the sale by the widow of Tan Sin An. Y. which was the first intimation to them that there was any intention to make them. the four chattel mortgages in question. (Montella) (Emphasis supplied). At the timenone of the claims secured by the mortgages were due. the partnership received nothing beyond the discharge of its debts. and the stores were at once closed. Cowen.Y. A. The same rule obtains in American law... it can not be maintained that the sale was made in excess of her power as general partner. .. one partner has ample power. 1893. they were placed in the hands of the mortgagees. 92 Ala. including the counters. and for some time had been. 406. surviving partner. the lands sold were those acquired to be sold. Rosen. a firm. 9 South 182. Owen McGrath. In the McGrath case. vs. 343. as hereinafter stated.E. et al. and none of the creditors to whom the mortgages were made had requested security. the Court expressly found that: The firm was then. 212 N. ready for filing. In the McGrath case. which was Saturday. In the McGrath case.. No. the petitionfor the dissolution of the partnership and appointment of a receiver which he subsequently filed. 54 N. ready for execution. Cowen & Mcgrath. have hereunto set their hands. and contain a stipulation authorizing the mortgagees to take immediate possession of the property. as a general agent of the firm. the sale included even the fixtures used in the business. Rep. Surviving partner of Cowen & McGrath. and Owen McGrath. p. and used in carrying on. 405. by Owen McGrath. the creditors had been unpaid for more than seven years. IV. Supp. 25 Am. and possession delivered by them to the receiver appointed upon the filing of the petition. and other furnishings and fixtures necessary for. Rep. in our case. Considerable stress is laid by appellant in the ruling of the Supreme Court of Ohio in McGrath. and their claims had been approved by the probate court for payment. which cover all the tangible property then belonging to the firm. 338. et al. In Chester vs. was to terminate the partnership. a small part of one of them. and Owen McCrath. 83: If the several partners engaged in the business of buying and selling real estate can not bind the firm by purchases or sales of such property made in the regular course of business. But the facts of that case are vastly different from the one before us. In the McGrath case. not only were its . 550: And hence. 1." At the same time. when the partnership business is to deal in real estate.. (Cas cit. and insure the preference of the mortgagees . in the sense that its property was insufficient to pay its debts. . "to engage . Owen McGrath. the said Cowen & McGrath.. shelving. Brown. it was held: a partnership to deal in real estate may be created and either partner has the legal right to sell the firm real estate.venta de inmuebles. then they are incapable of exercising the essential rights and powers of general partners and their association is not really a partnership at all. all of which was known to them at the time. en cuyo caso el gerente estaria facultado para otorgar las ventas que fuere necesario . 522. 49 N. to enter into an executory contract for the sale of real estate.. St. place its properly beyond the control of the firm.D. 13 Am. in buying and selling real estate" (Art. 1 Articles of Copartnership). Dickerson. in the present case.
section 6 is the effect that: Where the obligation of the decedent is joint and several with another debtor. and its approval is now final. and then to the Banco Hipotecario. is neither illegal nor immoral. Code of 1889. in the sense that each and every parcel under mortgage answers for the totality of the debt (Civ. (Emphasis supplied).04 was really low. for the balance on the original purchase price of the land sold (sue first to La Urbana. were without independent means to purchase the property.415. as to the price: As already noted. These debts (62. to the profit of the partnership. Yu Khe Thai. redeemed by the two creditors-claimants. Tan Sin An and the partnership "Tan Sin An & Goquiolay" were solidary (Joint and several)debtors (Exhibits "N".. appellant relies on the testimony of the realtor Mata. they were approved by the court. 40 Off. but he did not. Secondly. McMicking. If at the time of the sale (1949) the price of P153.000. these buyers did not have a record of inveterate defaults like the partnership "Tan Sin An & Goquiolay". to have the sale effected by the widow of Tan Sin An. New Civil Code. The claims were. This for two reasons: First. If he was such a victim. as they were justly entitled to? It is argued that the land could have been mortgaged to raise the sum needed to discharge the debts. Washington Sycip and Betty Lee. who is 1955.debts assumed by the buyers. all of which increased the risk that the supposed fraud should be detected. later to the Banco Hipotecario) plus accrued interests and taxes. this evidence certainly does not show such "gross inadequacy" as to justify recission of the sale.000. in fact. Gaz. Clearly.) are not questioned. this property was actually sold for a total of P153. the McGrath ruling is not applicable.00. but the latter paid. at the very least. Appellant seeks to create the impression that he was the victim of a conspiracy between the Yutivo firm and their component members. first to La Urbana. There is no evidence that the original buyers. and the relationship between the buyers. had already warned him four years before (1945) that the creditors wanted their money back. it is certainly strange that the conspirators should wait 4 years. and that the sale should have been routed through the probate court taking cognizance of Tan Sin An's estate. and the fact that the sale in question was practically a forced sale because the partnership had no other means to pay its legitimate debts. he could have easily defeated the conspirators by raising money and paying off the firm's debts between 1945 and 1949. Art. the creditors of the partnership. 2089). without prejudice to the right of the estate to recover contribution from the other debtor. But the lands were already mortgaged. and had been mortgaged since 1940. To show that the price was inadquate. Sanchez. until 1949.726. how is it that appellant was not able to raise the amount. and a mortgage is indivisible. and Rule 87. 243. and P54. Nombre de Jesus vs. P37. That the Yutivos should be willing to extend credit to them. as indicia thereof. . First. of which P37. and not to appellant. Neither was there any anomaly in the filing of the claims of Yutivo and Sing Yee Cuan & Co. No direct evidence of it exists. suffice it to say that the Supreme Court has ruled that relationship alone is not a badge of fraud (Oria Hnos.00 was in cash. in addition. the allegedly low price paid for the property. and the rest in partnership debts assumed by the purchaser. mortgage to the Banco Hipotecario).13 to Sing Ye Cuan & Co..04. he did not even care to look for a purchaser of the partnership assets. Were it true that the conspiracy to defraud him arose (as he claims) because of his refusal to sell the lands when in 1945 Yu Khe Thai asked him to do so. Was it reasonable to expect that other persons would loan money to the partnership when it was unable even to pay the taxes on the property. vs. the claim shall be filed against the decedent as if he were the only debtor. but appellant point out. also Hermandad del Smo.91 to Yutivo.310. would not Goquiolay have taken advantage of it? But the fact is clear on the record that since liberation until 1949 Goquiolay never lifted a finger to discharge the debts of the partnership. and the interest on the principal since 1940? If it had been possible to find lenders willing to take a chance on such a bad financial record.00 in cash to the widow. even if the creditor's representative. But no proof is adduced. Article 1860. 21 Phil.726. the solidary obligation was guaranteed by a mortgage on the properties of the partnership and those of Tan Sim An personally. asserted that the land was worth P312.000. and the widow of Tan Sin An. 1685). We will now turn to the question of fraud. Taking into account the continued rise of real estate values since liberation. With regard to the relationship between the parties. (as subrogees of the Banco Hipotecario) in proceedings for the settlement of the estate of Tan Sin An. Is he entitled now to cry fraud after the debts were discharged with no help from him. six years after the sale in question.
and. (2) on the alleged promissory note. THE HON. a liquidation of the accounts in the distribution and printing of the 95.00 each. On the other hand.00. that on or about May 28. if there is fraud at al. Nothing more was done after this and it can be said that the venture did not really get off the ground. the Court of First Instance held that: têñ.000 payable on or before June 15.000. that Goquiolay can not obtain reparation from the widow and heirs of Tan Sin An. payment of his share in the profits that the partnership would have earned.00. L-59956 October 31. payment of the sum of P20. 1971.000 copies of the posters. however. on February 22.000 payable on or before June 30.000. No. 1971.. it can not be instituted except when the party suffering damage has no other legal means to obtain reparation for the same". JR. G. that only a few posters were printed. namely: (1) on the alleged partnership agreement. 1984 After the trial.000. were sold at P5. PECSON.£îhqwâ£ From the evidence presented it is clear in the mind of the court that by virtue of the partnership agreement entered into by the parties-plaintiff and defendant the plaintiff did contribute P10. Private respondent Pecson filed with the Court of First Instance of Manila an action for the recovery of a sum of money and alleged in his complaint three (3) causes of action. Moran executed in favor of Pecson a promissory note in the amount of P20. or evidence. xxx xxx xxx .00. the motion for reconsideration is denied. even if the fraud charged actually did exist. with Moran actually supervising the work.e. vs. This is a petition for review on certiorari of the decision of the respondent Court of Appeals which ordered petitioner Isabelo Moran. COURT OF APPEALS and MARIANO E.R. not being deceit or dolus in contrahendo). and another sum of P7..000 each for the purpose of printing 95. 1971 Pecson and Moran entered into an agreement whereby both would contribute P15.000 posters (featuring the delegates to the 1971 Constitutional Convention). Jr. As found by the respondent Court of Appeals. that on December 15. the return of his contribution of P10.000 payable in two equal installments (P10. the plaintiff failed to give his full contribution of . 1971).£îhqwâ£ ISABELO MORAN. it can only be a fraud of creditorsthat gives rise to a rescission of the offending contract. the undisputed facts indicate that: têñ. respondents. to pay damages to respondent Mariano E. payment of unpaid commission.000. the defendant was able to print 2. Pecson.000 for which the latter issued a receipt.000 posters would be made. New Civil Code) "the action for rescission is subsidiary..000 copies only authorized of which. PREMISES CONSIDERED. and. 1971. 1971 and P10. that Pecson gave Moran P10.A final and conclusive consideration: The fraud charged not being one used to obtain a party's consent to a contract (i. that Pecson would receive a commission of P l.000 a month starting on April 15. complete with the costs of collection. But by express provision of law (Article 1294. Article 1383. 1971 up to December 15. (3) moral and exemplary damages and attorney's fees. the whole sum becoming due upon default in the payment of the first installment on the date due. petitioner. Of the expected 95. the present suit to rescind the sale in question is not maintainable.00 for the Voice of the Veteran or Delegate Magazine. Since there is no allegation.. Civil Code of 1889.
For insufficiency of evidence. LIABLE TO RESPONDENT MARIANO E. PECSON IN THE SUM OF P47. and the costs of the suit. MORAN.000). ordering defendant-appellant Isabelo C.. II THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING PETITIONER ISABELO C. the counterclaim is hereby dismissed. (the commission for eight months).000) (as a return of Pecson's investment for the Veteran's Project).£îhqwâ£ PREMISES CONSIDERED. III THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING PETITIONER ISABELO C.P15. The petitioner contends that the award is highly speculative. JR. MORAN. Moran.000 AS A SUPPOSED RETURN OF INVESTMENT IN A MAGAZINE VENTURE. both parties appealed to the respondent Court of Appeals. .500 AS THE SUPPOSED EXPECTED PROFITS DUE HIM. (d) Legal interest on (a). AS SUPPOSED COMMISSION IN THE PARTNERSHIP ARISING OUT OF PECSON'S INVESTMENT.00. MORAN. JR. We agree with the petitioner that the award of speculative damages has no basis in fact and law. LIABLE TO RESPONDENT MARIANO E. V THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT GRANTING THE PETITIONER'S COMPULSORY COUNTERCLAIM FOR DAMAGES.500) (the amount that could have accrued to Pecson under their agreement). to return to plaintiff Mariano E. The first question raised in this petition refers to the award of P47. WHEREFORE. From this decision. Jr.00.000. the decision appealed from is hereby SET ASIDE. Pecson the sum of P17.. and a new one is hereby rendered. The latter likewise rendered a decision against the petitioner.500. to pay plaintiff. IV ASSUMING WITHOUT ADMITTING THAT PETITIONER IS AT ALL LIABLE FOR ANY AMOUNT. Moran. PECSON IN THE SUM OF P8. The dispositive portion of the decision reads: têñ. (b) and (c) from the date the complaint was filed (up to the time payment is made) The petitioner contends that the respondent Court of Appeals decided questions of substance in a way not in accord with law and with Supreme Court decisions when it committed the following errors: I THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING PETITIONER ISABELO C.00 as the private respondent's share in the unrealized profits of the partnership. Jr. the court hereby renders judgment ordering defendant Isabelo C.appellant Mariano E. each party is entitled to rescind the contract which right is implied in reciprocal obligations under Article 1385 of the Civil Code whereunder 'rescission creates the obligation to return the things which were the object of the contract . The petitioner maintains that the respondent court did not take into account the great risks involved in the business undertaking. JR. PECSON IN THE SUM OF P7. THE HONORABLE COURT OF APPEALS DID NOT EVEN OFFSET PAYMENTS ADMITTEDLY RECEIVED BY PECSON FROM MORAN.000. 1972. Pecson: (a) Forty-seven thousand five hundred (P47. LIABLE TO RESPONDENT MARIANO E. (c) Seven thousand (P7. Thus.000. (b) Eight thousand (P8. with interest at the legal rate from the filing of the complaint on June 19.
he printed only 2.000.335. on an investment of P15.000 copies. That is the essence of a partnership.000 posters shall be made. the share of each in the losses shall be in the same proportion.There is no dispute over the nature of the agreement between the petitioner and the private respondent. 3.00 a month for eight months and around P142. Furthermore.000 copies of the posters.00 each. In the instant case.000. And even with an assurance made by one of the partners that they would earn a huge amount of profits.£îhqwâ£ The losses and profits shall be distributed in conformity with the agreement.327. It is a contract of partnership. however. 1788.00.00) a month starting April 15. .000) copies of the said posters.000 posters costing P2. 4. 1957 and from January 1.76 were not speculative. 1786. The petitioner on the other hand admitted in his answer the existence of the partnership. in the Uy case. in the absence of fraud. The profits on two government contracts worth P2. That plaintiff will receive a commission of One Thousand Pesos (P1. Hidden risks in any business venture have to be considered.00) each. there was mutual breach. 1971 up to December 15. 1956 to December 31. Article 1797 of the Civil Code provides: têñ.00 on 95.00. If only the share of each partner in the profits has been agreed upon. 2200 of the Civil Code of the Philippines. We have to take various factors into account.000. The petitioner likewise failed to give any of the amount expected of him.00 compensatory damages in favor of the appellee because the appellant therein was remiss in his obligations as a partner and as prime contractor of the construction projects in question. He contributed only P10.00 each but 2. That they will invest the amount of Fifteen Thousand Pesos (P15. There is therefore no basis for the award of speculative damages in favor of the private respondent. Thus in Uy v. This case was decided on a particular set of facts. In this case. It is a rare business venture guaranteed to give 100% profits.£îhqwâ£ 1. 1959. each partner must share in the profits and losses of the venture.000 copies of the posters.00.500. 1971. 1971. That they will print Ninety Five Thousand (95. there is no evidence whatsoever that the partnership between the petitioner and the private respondent would have been a profitable venture. Civil Code) and for interests and damages from the time he should have complied with his obligation (Art. In fact. The petitioner undesirable his best business judgment and felt that it would be a losing venture to go on with the printing of the agreed 95. which interpreted Art. when a partner who has undertaken to contribute a sum of money fails to do so. there was evidence to show that the partnership made some profits during the periods from July 2. The rule is. only Puzon failed to give his full contribution while Uy contributed much more than what was expected of him. 5.000. 2. the respondent was supposed to earn a guaranteed P1.000 of which were sold at P5. Puzon (79 SCRA 598). Being a contract of partnership. The latter in his complaint alleged that he was induced by the petitioner to enter into a partnership with him under the following terms and conditions: têñ.000. He further failed to comply with the agreement to print 95. Civil Code). The failure of the Commission on Elections to proclaim all the 320 candidates of the Constitutional Convention on time was a major factor.000. we allowed a total of P200. The fantastic nature of expected profits is obvious. Private respondent failed to give his entire contribution in the amount of P15. That upon the termination of the partnership on December 15. he becomes a debtor of the partnership for whatever he may have promised to contribute (Art. We awarded compensatory damages in the Uy case because there was a finding that the constructing business is a profitable one and that the UP construction company derived some profits from its contractors in the construction of roads and bridges despite its deficient capital. the other partner cannot claim a right to recover the highly speculative profits. 1958 up to September 30. a liquidation of the account pertaining to the distribution and printing of the said 95. That the partnership will print colored posters of the delegates to the Constitutional Convention.000." Besides. it was a failure doomed from the start. In this case. Instead.
and (5) when the court.00 per poster or a total printing cost of P4. (b) P10.000.00 to the private respondent as his supposed return of investment in the "Voice of the Veterans" magazine venture.000 was assigned by Moran to cover the following: têñ. The gross income therefore was P10. May.£îhqwâ£ (a) P 7.000.000 in favor of Pecson.000.. the respondent court ruled that: têñ. (4) when the judgment is based on a misapprehension of facts. Again. the findings of facts of the Court of Appeals are final and conclusive and cannot be reviewed on appeal to this Court ( Amigo v.00 each.000.00 from the gross income of P10. CMS Stock Brokerage. we agree with the petitioner.. Since the venture was a failure. Teves. in making its findings.000.. in Carolina Industries Inc. 252).000 posters at a cost of P2. 92 SCRA 332). the petitioner submits that the award of P8. The payment of the commission could only have been predicated on relatively extravagant profits. Thus.00 was undesirable by the petitioner in printing the 2.000. Inc. v..000..000 copies. Relative to the second alleged error. (3) where there is grave abuse of discretion. (2) when the inference made is manifestly mistaken absurd and impossible. Deducting the printing costs of P4. went beyond the issues of the case and the same are contrary to the admissions of both the appellant and the appellee. However.00 as Pecson's supposed commission has no justifiable basis in law.£îhqwâ£ xxx xxx xxx .000. Moran does not question the due execution of said note. The parties could not have intended the giving of a commission inspite of loss or failure of the venture.000.00. Moran admittedly signed the promissory note of P20.000 — to cover the return of Pecson's contribution in the project of the Posters. the private respondent is not entitled to the P8. Court of Appeals. 1971). The records further show that the 2.000 — the amount of the PNB check given by Pecson to Moran representing Pecson's investment in Moran's other project (the publication and printing of the 'Voice of the Veterans'). In awarding P7.000.000 (as a return of Pecson's investment for the Veterans' project.000. 1971 for a total of eight (8) monthly commissions.00. surmises and conjectures.000. The records show that the private respondent gave P10.It does not follow however that the private respondent is not entitled to recover any amount from the petitioner.00 should be divided between the petitioner and the private respondent.00 and with no evidence on the cost of distribution. the petitioner maintains that the respondent Court of Appeals erred in holding him liable to the private respondent in the sum of P7. (c) P3. the net profits amount to only P6.00 from April 15. (97 SCRA 734).000.00 to the petitioner. The agreement does not state the basis of the commission. 96 Phil. et al. This net profit of P6. this rule admits of certain exceptions. The partnership agreement stipulated that the petitioner would give the private respondent a monthly commission of Pl.000? The evidence indicates that the P20. June. Must Moran therefore pay the amount of P20.000 Moran has to pay P7.00 as a supposed return of investment in a magazine venture. Anent the third assigned error. we held that this Court retains the power to review and rectify the findings of fact of the Court of Appeals when (1) the conclusion is a finding grounded entirely on speculation.00. And since only P4. Of said P20. for this project never left the ground) . 1971 to December 15.00 should therefore be returned to the private respondent. . the remaining P6.000.00 commission. provided they are borne out by the record or are based on substantial evidence (Alsua-Betts v. The latter used this amount for the printing of 2..000 — representing Pecson's commission for three months (April.000 copies were sold at P5. As a rule.
1971 marked by defendant as Exhibit 2 (t.00.s.n.n. 1972). pp.000 promissory note.000 (Exh.s.000.000 representing full return of the capital investment and P1. This document is being offered for the purpose of further showing the transaction as explained in connection with Exhibits E and L. 29.n. This exhibit is being offered for the purpose of showing plaintiff's capital investment in the printing of the "Voice of the Veterans" for which he was promised a fixed profit of P8. being presented to show the consideration for the P20. .In this case.000 balance of the promised profit was made part consideration of the P20. With the balance of P3. and N above..000.00 investment thereby proportionately reducing the promised profit to P4. The remaining P4. Nov. This is also defendant's Exhibit 4. Of this P7. M. and it is being presented to show the consideration for the P20.000 in favor of defendant.00 and the promised profit of P8. The authenticity of the check and his receipt of the proceeds thereof were admitted by the defendant (t.00. there is misapprehension of facts.00 which has been marked as Exhibit 2. 29. Nov.000 promissory note (t.n. xxx xxx xxx L-Book entitled "Voice of the Veterans" which is being offered for the purpose of showing the subject matter of the other partnership agreement and in which plaintiff invested the P6. 29. 1972). 1971 for the return of his P3. 3-4. 1971. F — Xerox copy of PNB Manager's check dated May 29.£îhqwâ£ Q During the pre-trial of this case. Exhibit P). This investment of P6. The evidence of the private respondent himself shows that his investment in the "Voice of Veterans" project amounted to only P3.n.000 dated March 31. of the P20.000 balance of the promised profit was later made part consideration of the P20.000. defendant paid P4. pp. L.000 is part consideration.000 made up for the consideration of the P14.00 was the amount of profit that the private respondent expected to receive.000 (capital) and P4.000 marked Exhibit 3 for the defendant and Exhibit M for plaintiff. xxx xxx xxx P-Promissory note for P14.000 are covered by defendant's promissory note for P14. It is being offered for the purpose of showing the transaction as explained in connection with Exhibits E. defendant signed and executed the promissory note for P7. This document is being offered in support of plaintiff's explanation in connection with Exhibits E.000. As explained in connection with Exhibit E.000 promissory note (t.. The records show the following exhibits. 1972). the P3. P). and in cash. Defendant admitted the authenticity of this check and of his receipt of the proceeds thereof (t. E) in the P14. This is also defendant's Exhibit E. therefore. It is. Mr. and by plaintiff as Exhibit P. Pecson. 29. sir.000. 20-21.000.000 dated March 30.00 of the P6.£îhqwâ£ E — Xerox copy of PNB Manager's Check No. Nov.000 (Exhibit E) which.000 partial payment of the promised profit. This P 7. 2. 234265 dated March 22.000. Explaining the above-quoted exhibits. 1971 in favor of defendant. p.000 note and the existence and validity of the obligation.000. 1972). pp. 29.. 25. 1971 for P7.s. The P3. 3-4.têñ. defendant returned P3. together with the promised profit of P8.000 promissory note.s. the defendant presented a promissory note in the amount of P14. respondent Pecson testified that: têñ.000 (promised profit).. 22-24.s. Later.000.000 promissory note (Exh. M-Promissory note for P7. pp.. N-Receipt of plaintiff dated March 30.000 out of his capital investment of P6. and M to show the transaction mentioned therein. Nov. Nov.000 promissory note (Exhibit 2. L. Do you know this promissory note? A Yes.000. 1972). This is also defendant's Exhibit 2.
000.00 in favor of Mr. I show you Exhibit E. in connection with your transaction with the defendant? A This promissory note is for the printing of the "Voice of the Veterans".S.000.00. . sir.000. Pecson? A It is a book.00 indicated in the promissory note.000. sir. 19. pp.000. Moran? . p. Moran in connection with the Balance of P3. as evidenced by the Philippine National Bank Manager's check and the P8. Moran. Mr.000.000.00 is covered by.000. 29. Moran which I will derive from the printing of this "Voice of the Veterans" book. Q You said that the P6.00? A It was reduced to one-half (1/2) which is P4. Pecson? A Mr. Q Was there any document executed by Mr. 20-22. Mr. is this the Manager's check that mentioned? A Yes. Nov.000. Q Was there a receipt issued by you covering this payment of P4. Moran of one-half (1/2) of the P6. represent? A It represents the P6.00 out of the P7..00 capital you gave to him.têñ.00 cash which I gave to Mr. Q What happened to this promissory note of P14.00 of this P14. (T. Q (continuing) is this the promissory note which you said was executed by Mr.00 of your investment and P8. Moran.000.Q What is this promissory note. 1971 which for purposes of Identification I request the same to be marked as Exhibit M. sir.N.000. he executed a promissory note.N.00 as shown by the promissory note. Q What happened to this promissory note executed by Mr.00 of your capital investment and the P4.000. a Manager's check. Moran paid me P4. Q As a consequence of the return by Mr. 1972) Q And what does the amount of P14..000.00 capital I gave to him. what happened to the promised profit of P8.000. Moran in connection with your transaction regarding the printing of the "Voice of the Veterans"? A Yes. . Q What is this "Voice of the Veterans".00 which you said represented P6. 29.000. Moran returned to me P3.00 profit assured me by Mr. Court têñ. Mr. Nov.00 which represented one-half (1/2) of the P6.00 promised profits? A Yes.000.S. Exhibit 2. 1972).00 dated March 30.000.£îhqwâ£ (T.£îhqwâ£ Mark it as Exhibit M. Q I show you a promissory note in the amount of P7.000.000.00 promised profits? A Latter.
A Yes. . which seems to be true in this case.000.S.00 under the promissory note. Jr.000. Moran paid the amount of P4.S. 29.00 which he has returned of my P6. Nov. 23. 23-24. there is no reason to pass upon the fourth and fifth assignments of errors raised by the petitioner.000. to pay private respondent Mariano Pecson SIX THOUSAND (P6. Nov. sir. specially if the latter exercised his best business judgment. In view of the foregoing. 1972). We likewise find no valid basis for the grant of the counterclaim..000.00 represents the P3.000. 1972)..000) copies of the posters. (T.000.00 covered by the promissory note.000.000.. Q And what happened to the balance of P3. there are risks in any business venture and the failure of the undertaking cannot entirely be blamed on the managing partner alone. The respondent court erred when it concluded that the project never left the ground because the project did take place.00) PESOS representing one half (1/2) of the net profits gained by the partnership in the sale of the two thousand (2.00 profit that was promised to me by Mr. Q You stated that Mr. Exhibit M? A The balance of P3. p. Therefore.N. Moran.00. SO ORDERED.00 capital investment and the P1.00 and the rest of the profit was applied as part of the consideration of the promissory note of P20.N. (T.000. it would be error to state that the project never took place and on this basis decree the return of the private respondent's investment.000. WHEREFORE.00) PESOS representing the amount of the private respondent's contribution to the partnership but which remained unused. What does this P4.00 on account of the P7. the petition is GRANTED. It was the private respondent himself who presented a copy of the book entitled "Voice of the Veterans" in the lower court as Exhibit "L".00 covered by Exhibit N represent? A This P4. and THREE THOUSAND (P3. Only it failed. pp. with interests at the legal rate on both amounts from the date the complaint was filed until full payment is made.00 represents partial payment of the P4. As already mentioned.000. The decision of the respondent Court of Appeals (now Intermediate Appellate Court) is hereby SET ASIDE and a new one is rendered ordering the petitioner Isabelo Moran. 29.000.000. Exhibit M.
petitioners.000. Lim Teck Chuan. 1975 ANTONIO LIM TANHU. 12328. ALFONSO LEONARDO NG SUA and CO OYO. respondents.. HON. who had alleged a compulsory counterclaim against plaintiff . JOSE R. in default and while the trial as against the two defendants not declared in default was in progress.00. Branch III. Alfonso Leonardo Ng Sua. and the municipalities of Talisay and Minglanilla. an action for accounting of properties and money totalling allegedly about P15 million pesos filed with a common cause of action against six defendants. and (2) prohibition to enjoin further proceedings relative to the motion for immediate execution of the said judgment. but defendants kept on promising to liquidate said properties and just told plaintiff to G. respondent Tan alleged that she "is the widow of Tee Hoon Lim Po Chuan.in their joint answer. defendants managed to use the funds of the partnership to purchase lands and building's in the cities of Cebu. without liquidation continued the business of Glory Commercial Company by purportedly organizing a corporation known as the Glory Commercial Company. Originally.R. the defendants. said court granted plaintiff's motion to dismiss the case in so far as the non-defaulted defendants were concerned and thereafter proceeded to hear ex-parte the rest of the plaintiffs evidence and subsequently rendered judgment by default against the defaulted defendants. and the judgment so rendered granted reliefs not prayed for in the complaint. some of which were hidden. but the description of those already discovered were as follows: (list of properties) . has asked defendants of the above-mentioned properties and for the liquidation of the business of the defunct partnership. their son Lim Teck Chuan and the other spousespetitioners Alfonso Leonardo Ng Sua and Co Oyo and their son Eng Chong Leonardo were included as defendants." and that: 13.. (P)laintiff. including investments on real estate in Hong Kong. RAMOLETE as Presiding Judge. which money and other assets of the said Glory Commercial Company. Lapulapu. Incorporated. 1972. took actual and active management of the partnership and although Tee Hoon Lim Po Chuan was the manager of Glory Commercial Company.. L-40098 August 29. Incorporated are actually the assets of the defunct Glory Commercial Company partnership. 1971 by respondent Tan Put only against the spouses-petitioners Antonio Lim Tanhu and Dy Ochay. In said amended complaint. through fraud and machination.. in which after declaring four of the said defendants herein petitioners. this litigation was a complaint filed on February 9. 14. Subsequently. in an amended complaint dated September 26. Mandaue. and Eng Chong Leonardo. No. CFI. on several occasions after the death of her husband. with Antonio Lim Tanhu and Alfonso Ng Sua that "defendant Antonio Lim Tanhu. Petition for (1) certiorari to annul and set aside certain actuations of respondent Court of First Instance of Cebu Branch III in its Civil Case No. vs. (A)fter the death of Tee Hoon Lim Po Chuan. who was a partner in the commercial partnership. DY OCHAY. with the particularities that notice of the motion to dismiss was not duly served on any of the defendants. of which the plaintiff has a share equivalent to one third ( ¹/ 3) thereof. Cebu and TAN PUT. with paid up capital in the sum of P125. Glory Commercial Company ..
(Page 40. but respondent judge nevertheless allowed the amendment reasoning that: The present action is for accounting of real and personal properties as well as for the recovery of the same with damages. his legitimate wife was Ang Siok Tin still living and with whom he had four (4) legitimate children. Record. induce and convince the plaintiff to execute a quitclaim of all her rights and interests.) In a single answer with counterclaim.000. after the execution of said quitclaim. one third (¹/ 3) of the total value of all the properties which is approximately P5. (T)hereafter. a twin born in 1942. (Page 38. which properties are located in the Philippines and in Hong Kong. in the assets of the partnership of Glory Commercial Company.00 although no such amount was given and plaintiff was not even given a copy of said document. defendant Antonio Lim Tanhu offered to pay the plaintiff the amount P65. This Honorable Court is prayed for other remedies and reliefs consistent with law and equity and order the defendants to pay the costs.) The admission of said amended complaint was opposed by defendants upon the ground that there were material modifications of the causes of action previously alleged.000. 13 and 15 of the amended complaint pointed out by the defendants to sustain their opposition will show that the allegations of facts therein are merely to amplify material averments constituting the cause of action in the original complaint. over the signature of their common counsel. 36-37.000. c) Ordering the defendants to pay the attorney of the plaintiff the sum of Two Hundred Fifty Thousand Pesos (P250. (Pp. Considering that the amendments sought to be introduced do not change the main causes of action in the original complaint and the reliefs demanded and to allow amendments is the rule. (A)s a matter of fact. b) Ordering the defendants to deliver to the plaintiff after accounting.00 representing the just share of the plaintiff.000. An objective consideration of pars. defendants refused and stated that they would not give the share of the plaintiff.00) by way of attorney's fees and damages in the sum of One Million Pesos (P1. Record. the defendants who had earlier promised to liquidate the aforesaid properties and assets in favor among others of plaintiff and until the middle of the year 1970 when the plaintiff formally demanded from the defendants the accounting of real and personal properties of the Glory Commercial Company. for which plaintiff was made to sign a receipt for the amount of P65. 16.15. Antonio Lim Tanhu.000. defendants denied specifically not only the allegation that respondent Tan is the widow of Tee Hoon because. defendants.000. 1967. and two others born in 1949 and .000. it is most respectfully prayed that judgment be rendered: a) Ordering the defendants to render an accounting of the real and personal properties of the Glory Commercial Company including those registered in the names of the defendants and other persons. (S)ometime in the month of November.) She prayed as follows: WHEREFORE. executed through fraud and without any legal effect. 17. according to them. It likewise include necessary and indispensable defendants without whom no final determination can be had in the action and in order that complete relief is to be accorded as between those already parties.00 within a period of one (1) month. by means of fraud deceit and misrepresentations did then and there. Record. The original of said quitclaim is in the possession of the adverse party defendant Antonio Lim Tanhu. in the year 1968-69. which is null and void. and to refuse them the exception and in order that the real question between the parties may be properly and justly threshed out in a single proceeding to avoid multiplicity of actions.00).
Rule 16 of the Revised Rules of Court. Rule 16) and hence defendants pray that a preliminary hearing be made in connection therewith pursuant to Section 5 of the aforementioned rule. yet. the plaintiff was no longer his common law wife and even though she was not entitled to anything left by Tee Hoon Lim Po Chuan. Under Sec. of the same rule. and yet she deliberately suppressed this fact. to wit: Ching Siong Lim and Ching Hing Lim (twins) born on February 16. That Tee Hoon Lim Po Chuan was legally married to Ang Siok Tin and were blessed with the following children. . 1965 and presently residing in Hongkong. plaintiff was given a substantial amount evidenced by the 'quitclaim' (Annex 'A'). That plaintiff knew and was aware she was merely the common-law wife of Tee Hoon Lim Po Chuan and that the lawful and legal is still living. defendants hereby incorporate all facts averred and alleged in the answer. That in the event that plaintiff is filing the present complaint as an heir of Tee Hoon Lim Po Chuan. just as Tee Hoon Lim Po Chuan had acquired properties out of his personal fund and which are now in the possession of the widow and neither the defendants nor the partnership have anything to do about said properties. together with their children are still alive. (h). her claim or demand has been paid. all presently residing in Hongkong. 5. 1. 144 of the Civil Code. yet. who. then. 7. but also all the allegations of fraud and conversion quoted above. that proper liquidation had been regularly made of the business of the partnership and Tee Hoon used to receive his just share until his death. considering that the legitimate wife. by way of reference. That even before the death of Tee Hoon Lim Po Chuan. the ground cited is another ground for a motion to dismiss (Sec. 1. That despite the fact that plaintiff knew that she was no longer entitled to anything of the shares of the late Tee Hoon Lim Po Chuan. B. That plaintiff and Tee Hoon Lim Po Chuan were not blessed with children who would have been lawfully entitled to succeed to the properties left by the latter together with the widow and legitimate children. That the defendants hereby reproduced. 1949 and Lim Eng Lu born on June 25. according to them. lack of legal capacity to sue is one of the grounds for a motion to dismiss and so defendants prays that a preliminary hearing be conducted as provided for in Sec. she has no legal capacity to sue as such. all the allegations and foregoing averments as part of this counterclaim. namely: Ang Siok Tin. 5. That it would have been impossible to buy properties from funds belonging to the partnership without the other partners knowing about it considering that the amount taken allegedly is quite big and with such big amount withdrawn the partnership would have been insolvent. thus . and further most respectfully declare: 1. then. That the defendants have acquired properties out of their own personal fund and certainly not from the funds belonging to the partnership. That in the alternative case or event that plaintiff is filing the present case under Art. To quote the pertinent portions of said answer: AND BY WAY OF SPECIAL AND AFFIRMATIVE DEFENSES. (d). was inspiring to be monk and in fact he is now a monk. together with the legitimate children. 4. particularly Antonio Lain Tanhu. 8. this suit was filed against the defendant who have to interpose the following — COUNTERCLAIM A. Lim Shing Ping born on March 3. waived abandoned or otherwise extinguished as evidenced by the 'quitclaim' Annex 'A' hereof. 1942. out of the kindness and generosity on the part of the defendants. 6. as a result of which the partnership was dissolved and what corresponded to him were all given to his wife and children. 2.1965. the truth being. 3.
00 as attorney's fees. respondent court granted the prayer of the above motion thus: ORDER Acting on the motion of the plaintiff praying for the dismissal of the complaint as against defendants Lim Teck Chuan and Eng Chong Leonardo. was up for recross-examination.000.000. That by way of litigation expenses during the time that this case will be before this Honorable Court and until the same will be finally terminated and adjudicated. and as regards the defendants not declared in default. That plaintiff was aware and had knowledge about the 'quitclaim'. in due time. E. 1974 the following simple and unreasoned MOTION TO DROP DEFENDANTS LIM TECK CHUAN AND ENG CHONG LEONARDO COMES now plaintiff. and yet she falsely claimed that defendants refused even to see her and for filing this unfounded. both of the two defendants-spouses the Lim Tanhus and Ng Suas.00. the date set for the pre-trial. just as simply as plaintiff had couched her motion. obligating themselves to pay P500.000. then. (Page 50. did not appear. but the effort failed when the court denied it. 1974 infringed the three-day requirement of Section 4 of Rule 15. while Atty. plaintiff answered the same. 1973. defendants will have to spend at least P5. 1974.00. defendants were constrained to engage the services of the undersigned counsel. 1973. In the event that plaintiff is married to Tee Hoon Lim Po Chuan. her marriage is bigamous and should suffer the consequences thereof.) After unsuccessfully trying to show that this counterclaim is merely permissive and should be dismissed for non-payment of the corresponding filing fee. albeit unsuccessfully. Evidently without even verifying the notices of service. According to petitioners." They sought to hive this order lifted thru a motion for reconsideration. — . but at the stage thereof where the first witness of the plaintiff by the name of Antonio Nuñez who testified that he is her adopted son. (Pp. defendants suffered mental anguish and torture conservatively estimated to be not less than P3. since they had asked for the lifting of the order of default. inasmuch as Atty. it is most respectfully prayed of the Honorable Court to drop from the complaint the defendants Lim Teck Chuan and Eng Chong Leonardo and to dismiss the case against them without pronouncement as to costs. 1973. On February 3. WHEREFORE. baseless. denying its material allegations. however. 1974. Benjamin Alcudia of Eng Chong Leonardo was served by registered mail sent only on the same date. futile and puerile complaint. Record. said plaintiff unexpectedly filed on October 19. in an order of March 12.showing her bad faith and is therefore liable for exemplary damages in an amount which the Honorable Court may determine in the exercise of its sound judicial discretion. the setting of the hearing of said motion on October 21. Thereafter. Record. D. 44-47.) which she set for hearing on December 21. none of the defendants declared in default were notified of said motion. they were all "declared in DEFAULT as of February 3. even though she was not entitled to it. unto the Honorable Court most respectfully moves to drop from the complaint the defendants Lim Teck Chuan and Eng Chong Leonardo and to consider the case dismissed insofar as said defendants Lim Teck Chuan and Eng Chong Leonardo are concerned. through her undersigned counsel. the trial started. upon motion of plaintiff dated February 16. in violation of Section 9 of Rule 13. and after being overruled by the court. C. for which reason. Adelino Sitoy of Lim Teck Chuan was served with a copy of the motion personally only on October 19. 1973 when they failed to appear at the pre-trial. and also without any legal grounds stated. That in order to defend their rights in court.
) But. Manuel Zosa. SO ORDERED. The complaint as against defendant Lim Teck Chuan and Eng Chong Leonardo is hereby ordered DISMISSED without pronouncement as to costs. Dy Ochay. before the perfection of their appeal. together with her witnesses. the Court deputized the Branch Clerk of Court to receive the evidence of the plaintiff ex-parte to be made on November 20. filed with respondent court a manifestation dated February 14. Simultaneously. petitioners filed the present petition with this Court. (Page 52. And with the evident intent to make their procedural position clear. 1974. appeared in court and asked. the court issued the following selfexplanatory order: . they in effect abandoned their motion to quash the order of October 28. thru counsel. the Branch Clerk of Court is hereby authorized to receive immediately the evidence of the plaintiff ex-parte. It does not appear when the parties were served copies of this decision. filed their notice of appeal. to swear in witnesses and to submit her report within ten (10) days thereafter. petitioners herein. 1974. and on November 1. 1974. Cebu City. filed also his own motion for reconsideration and clarification of the same orders. Without waiting however for the resolution thereof. all the defendants. counsel for defendants. for defendants Lim Tanhu and Ng Suas. 1974. By resolution of January 24. the other defendants. on January 6. This holding was reiterated in the subsequent resolution of February 5. October 28. 1975. in connection with this last order. the defendant Lim Teck Cheng. Sitoy. respectively. thru counsel. But on February 7. filed a motion to quash the order of October 28. that she be allowed to present her evidence." and that similarly "when Antonio Lim Tanhu. on January 13. 1974. on October 28. 1974. appeal bond and motion for extension to file their record on appeal. Record. Acting favorably on the motion of the plaintiff dated October 18. 1975. Atty. they likewise abandoned their motion to quash. the scheduled ex-parte reception of evidence did not take place on November 20.The same is hereby GRANTED. Subsequently. respondent court rendered the impugned decision on December 20.. (Page 53. 1974. filed their petition for certiorari and prohibition .. 1975 stating that "when the nondefaulted defendants Eng Chong Leonardo and Lim Teck Chuan filed their petition in the Court of Appeals. 1974 and October 28. 1974 and decision of December 20. Considering the time and expenses incurred by the plaintiff in bringing her witnesses to the court. the plaintiff. October 21. the following order was also issued: Considering that defendants Antonio Lim Tanhu and his spouse Dy Ochay as well as defendants Alfonso Ng Sua and his spouse Co Oyo have been declared in default for failure to appear during the pre-trial and as to the other defendants the complaint had already been ordered dismissed as against them. which was granted.) Upon learning of these orders on October 23. thru counsel. on January 20. filed a motion for reconsideration thereof. Atty. upon verbal motion of plaintiff. Cebu City. 1974. On the other hand. 1974 was still unresolved by the trial court. 1974. defendant Eng Chong Leonardo. 1975. Meanwhile. the extension to expire after fifteen (15) days from January 26 and 27. 1975 denying the motion for reconsideration of the previous dismissal. at 8:30 A. Philippines. Record. These motions were denied in an order dated December 6. Let the hearing of the plaintiff's evidence ex-parte be set on November 20. 1974." This manifestation was acted . 1975. SO ORDERED. considering that the motion to quash the order of October 28. Lim Teck Chuan and Eng Chong Leonardo went to the Court of Appeals with a petition for certiorari seeking the annulment of the above-mentioned orders of October 21. holding that its filing was premature. Notify the plaintiff. 1974. the Court of Appeals dismissed said petition.M. 1974. 1974. Philippines. Alcudia. thru counsel Atty. before the Branch Clerk of Court who is deputized for the purpose. However. 1974. 1975. 1973. 1974 but received by the movants only on December 23. 1974. for on October 28. in the Supreme Court. Alfonso Leonardo Ng Sua and Co Oyo.
upon by respondent court together with plaintiffs motion for execution pending appeal in its order of the same date February 14, 1975 this wise: ORDER When these incidents, the motion to quash the order of October 28, 1974 and the motion for execution pending appeal were called for hearing today, counsel for the defendants-movants submitted their manifestation inviting the attention of this Court that by their filing for certiorari and prohibition with preliminary injunction in the Court of Appeals which was dismissed and later the defaulted defendants filed with the Supreme Court certiorari with prohibition they in effect abandoned their motion to quash. IN VIEW HEREOF, the motion to quash is ordered ABANDONED. The resolution of the motion for execution pending appeal shall be resolved after the petition for certiorari and prohibition shall have been resolved by the Supreme Court. SO ORDERED. Cebu City, Philippines, February 14, 1975. (Page 216, Record.) Upon these premises, it is the position of petitioners that respondent court acted illegally, in violation of the rules or with grave abuse of discretion in acting on respondent's motion to dismiss of October 18, 1974 without previously ascertaining whether or not due notice thereof had been served on the adverse parties, as, in fact, no such notice was timely served on the non-defaulted defendants Lim Teck Chuan and Eng Chong Leonardo and no notice at all was ever sent to the other defendants, herein petitioners, and more so, in actually ordering the dismissal of the case by its order of October 21, 1974 and at the same time setting the case for further hearing as against the defaulted defendants, herein petitioners, actually hearing the same ex-parte and thereafter rendering the decision of December 20, 1974 granting respondent Tan even reliefs not prayed for in the complaint. According to the petitioners, to begin with, there was compulsory counterclaim in the common answer of the defendants the nature of which is such that it cannot be decided in an
independent action and as to which the attention of respondent court was duly called in the motions for reconsideration. Besides, and more importantly, under Section 4 of Rule 18, respondent court had no authority to divide the case before it by dismissing the same as against the non-defaulted defendants and thereafter proceeding to hear it exparte and subsequently rendering judgment against the defaulted defendants, considering that in their view, under the said provision of the rules, when a common cause of action is alleged against several defendants, the default of any of them is a mere formality by which those defaulted are not allowed to take part in the proceedings, but otherwise, all the defendants, defaulted and not defaulted, are supposed to have but a common fate, win or lose. In other words, petitioners posit that in such a situation, there can only be one common judgment for or against all the defendant, the non-defaulted and the defaulted. Thus, petitioners contend that the order of dismissal of October 21, 1974 should be considered also as the final judgment insofar as they are concerned, or, in the alternative, it should be set aside together with all the proceedings and decision held and rendered subsequent thereto, and that the trial be resumed as of said date, with the defendants Lim Teck Chuan and Eng Chong Leonardo being allowed to defend the case for all the defendants. On the other hand, private respondent maintains the contrary view that inasmuch as petitioners had been properly declared in default, they have no personality nor interest to question the dismissal of the case as against their non-defaulted co-defendants and should suffer the consequences of their own default. Respondent further contends, and this is the only position discussed in the memorandum submitted by her counsel, that since petitioners have already made or at least started to make their appeal, as they are in fact entitled to appeal, this special civil action has no reason for being. Additionally, she invokes the point of prematurity upheld by the Court of Appeals in regard to the above-mentioned petition therein of the non-defaulted defendants Lim Teck Chuan and Eng Chong Leonardo. Finally, she argues that in any event, the errors attributed to respondent court are errors of judgment and may be reviewed only in an appeal. After careful scrutiny of all the above-related proceedings, in the court below and mature deliberation, the Court has arrived at the conclusion that petitioners should be granted relief, if only to stress emphatically once more that the rules of procedure may not be misused and abused as instruments for the denial of substantial justice. A review of the record of this case immediately discloses that here is another demonstrative
instance of how some members of the bar, availing of their proficiency in invoking the letter of the rules without regard to their real spirit and intent, succeed in inducing courts to act contrary to the dictates of justice and equity, and, in some instances, to wittingly or unwittingly abet unfair advantage by ironically camouflaging their actuations as earnest efforts to satisfy the public clamor for speedy disposition of litigations, forgetting all the while that the plain injunction of Section 2 of Rule 1 is that the "rules shall be liberally construed in order to promote their object and to assist the parties in obtaining not only 'speedy' but more imperatively, "just ... and inexpensive determination of every action and proceeding." We cannot simply pass over the impression that the procedural maneuvers and tactics revealed in the records of the case at bar were deliberately planned with the calculated end in view of depriving petitioners and their co-defendants below of every opportunity to properly defend themselves against a claim of more than substantial character, considering the millions of pesos worth of properties involved as found by respondent judge himself in the impugned decision, a claim that appears, in the light of the allegations of the answer and the documents already brought to the attention of the court at the pre-trial, to be rather dubious. What is most regrettable is that apparently, all of these alarming circumstances have escaped respondent judge who did not seem to have hesitated in acting favorably on the motions of the plaintiff conducive to the deplorable objective just mentioned, and which motions, at the very least, appeared to be 'of highly controversial' merit, considering that their obvious tendency and immediate result would be to convert the proceedings into a one-sided affair, a situation that should be readily condemnable and intolerable to any court of justice. Indeed, a seeming disposition on the part of respondent court to lean more on the contentions of private respondent may be discerned from the manner it resolved the attempts of defendants Dy Ochay and Antonio Lim Tanhu to have the earlier order of default against them lifted. Notwithstanding that Dy Ochay's motion of October 8, 1971, co-signed by her with their counsel, Atty. Jovencio Enjambre (Annex 2 of respondent answer herein) was over the jurat of the notary public before whom she took her oath, in the order of November 2, 1971, (Annex 3 id.) it was held that "the oath appearing at the bottom of the motion is not the one contemplated by the abovequoted pertinent provision (See. 3, Rule 18) of the rules. It is not even a verification. (See. 6, Rule 7.) What the rule requires as interpreted by the Supreme Court is that the motion must have to be accompanied by an affidavit of merits that the defendant has a meritorious defense, thereby ignoring the very simple legal point that the
ruling of the Supreme Court in Ong Peng vs. Custodio, 1 SCRA 781, relied upon by His Honor, under which a separate affidavit of merit is required refers obviously to instances where the motion is not over oath of the party concerned, considering that what the cited provision literally requires is no more than a "motion under oath." Stated otherwise, when a motion to lift an order of default contains the reasons for the failure to answer as well as the facts constituting the prospective defense of the defendant and it is sworn to by said defendant, neither a formal verification nor a separate affidavit of merit is necessary. What is worse, the same order further held that the motion to lift the order of default "is an admission that there was a valid service of summons" and that said motion could not amount to a challenge against the jurisdiction of the court over the person of the defendant. Such a rationalization is patently specious and reveals an evident failure to grasp the import of the legal concepts involved. A motion to lift an order of default on the ground that service of summons has not been made in accordance with the rules is in order and is in essence verily an attack against the jurisdiction of the court over the person of the defendant, no less than if it were worded in a manner specifically embodying such a direct challenge. And then, in the order of February 14, 1972 (Annex 6, id.) lifting at last the order of default as against defendant Lim Tanhu, His Honor posited that said defendant "has a defense (quitclaim) which renders the claim of the plaintiff contentious." We have read defendants' motion for reconsideration of November 25, 1971 (Annex 5, id.), but We cannot find in it any reference to a "quitclaim". Rather, the allegation of a quitclaim is in the amended complaint (Pars. 15-16, Annex B of the petition herein) in which plaintiff maintains that her signature thereto was secured through fraud and deceit. In truth, the motion for reconsideration just mentioned, Annex 5, merely reiterated the allegation in Dy Ochay's earlier motion of October 8, 1971, Annex 2, to set aside the order of default, that plaintiff Tan could be but the common law wife only of Tee Hoon, since his legitimate wife was still alive, which allegation, His Honor held in the order of November 2, 1971, Annex 3, to be "not good and meritorious defense". To top it all, whereas, as already stated, the order of February 19, 1972, Annex 6, lifted the default against Lim Tanhu because of the additional consideration that "he has a defense (quitclaim) which renders the claim of the plaintiff contentious," the default of Dy Ochay was maintained notwithstanding that exactly the same "contentions" defense as that of her husband was invoked by her.
Such tenuous, if not altogether erroneous reasonings and manifest inconsistency in the legal postures in the orders in question can hardly convince Us that the matters here in issue were accorded due and proper consideration by respondent court. In fact, under the circumstances herein obtaining, it seems appropriate to stress that, having in view the rather substantial value of the subject matter involved together with the obviously contentious character of plaintiff's claim, which is discernible even on the face of the complaint itself, utmost care should have been taken to avoid the slightest suspicion of improper motivations on the part of anyone concerned. Upon the considerations hereunder to follow, the Court expresses its grave concern that much has to be done to dispel the impression that herein petitioners and their co-defendants are being railroaded out of their rights and properties without due process of law, on the strength of procedural technicalities adroitly planned by counsel and seemingly unnoticed and undetected by respondent court, whose orders, gauged by their tenor and the citations of supposedly pertinent provisions and jurisprudence made therein, cannot be said to have proceeded from utter lack of juridical knowledgeability and competence. –1– The first thing that has struck the Court upon reviewing the record is the seeming alacrity with which the motion to dismiss the case against nondefaulted defendants Lim Teck Chuan and Eng Chong Leonardo was disposed of, which definitely ought not to have been the case. The trial was proceeding with the testimony of the first witness of plaintiff and he was still under re-cross-examination. Undoubtedly, the motion to dismiss at that stage and in the light of the declaration of default against the rest of the defendants was a well calculated surprise move, obviously designed to secure utmost advantage of the situation, regardless of its apparent unfairness. To say that it must have been entirely unexpected by all the defendants, defaulted and non-defaulted , is merely to rightly assume that the parties in a judicial proceeding can never be the victims of any procedural waylaying as long as lawyers and judges are imbued with the requisite sense of equity and justice. But the situation here was aggravated by the indisputable fact that the adverse parties who were entitled to be notified of such unanticipated dismissal motion did not get due notice thereof. Certainly, the nondefaulted defendants had the right to the three-day prior notice required by Section 4 of Rule 15. How could they have had such indispensable
notice when the motion was set for hearing on Monday, October 21, 1974, whereas the counsel for Lim Teck Chuan, Atty. Sitoy was personally served with the notice only on Saturday, October 19, 1974 and the counsel for Eng Chong Leonardo, Atty. Alcudia, was notified by registered mail which was posted only that same Saturday, October 19, 1974? According to Chief Justice Moran, "three days at least must intervene between the date of service of notice and the date set for the hearing, otherwise the court may not validly act on the motion." (Comments on the Rules of Court by Moran, Vol. 1, 1970 ed. p. 474.) Such is the correct construction of Section 4 of Rule 15. And in the instant case, there can be no question that the notices to the non-defaulted defendants were short of the requirement of said provision. We can understand the over-anxiety of counsel for plaintiff, but what is incomprehensible is the seeming inattention of respondent judge to the explicit mandate of the pertinent rule, not to speak of the imperatives of fairness, considering he should have realized the far-reaching implications, specially from the point of view he subsequently adopted, albeit erroneously, of his favorably acting on it. Actually, he was aware of said consequences, for simultaneously with his order of dismissal, he immediately set the case for the ex-parte hearing of the evidence against the defaulted defendants, which, incidentally, from the tenor of his order which We have quoted above, appears to have been done by him motu propio As a matter of fact, plaintiff's motion also quoted above did not pray for it. Withal, respondent court's twin actions of October 21, 1974 further ignores or is inconsistent with a number of known juridical principles concerning defaults, which We will here take occasion to reiterate and further elucidate on, if only to avoid a repetition of the unfortunate errors committed in this case. Perhaps some of these principles have not been amply projected and elaborated before, and such paucity of elucidation could be the reason why respondent judge must have acted as he did. Still, the Court cannot but express its vehement condemnation of any judicial actuation that unduly deprives any party of the right to be heard without clear and specific warrant under the terms of existing rules or binding jurisprudence. Extreme care must be the instant reaction of every judge when confronted with a situation involving risks that the proceedings may not be fair and square to all the parties concerned. Indeed, a keen sense of fairness, equity and justice that constantly looks for consistency between the letter of the adjective rules and these basic principles must be possessed by every judge, If substance is to prevail, as
(Moran. of the aforementioned order of dismissal of October 21.) The provision of the rules just cited specifically enjoins that "(i)f a counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiff's motion to dismiss. Undoubtedly. as such. through fraud. however. 1974. all the six defendants are charged with having actually taken part in a conspiracy to misappropriate. thereby virtually making unexplained and inexplicable 180-degree turnabout in that respect. that said counterclaim is compulsory needs no extended elaboration. and with respect to her pretended share in the capital and profits in the partnership. it is obvious that the same cannot "remain pending for independent adjudication by the court. that the material allegations thereof are false and baseless. There is another equally fundamental consideration why the motion to dismiss should not have been granted. 1974. with the assistance of able counsel. when it is conducive to unfair and undue advantage on the part of any litigant before it. for the sum of P25. In its order of December 6. And having filed her complaint knowing. is unworthy of any court of justice and equity. the action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for independent adjudication by the court. 352) but also because from its very nature. Literal observance of the rules.000 duly receipted by her. The non-defaulted defendants are alleged to be stockholders of the corporation and any decision depriving the same of all its assets cannot but prejudice the interests of said defendants. defaulted and non-defaulted. Such being the case. however. which quitclaim was. and even prescinding from the other reasons to be discussed anon it is clear that all the six defendants below. not only because the same evidence to sustain it will also refute the cause or causes of action alleged in plaintiff's complaint. predicated his motion on other grounds. with and founded on public policy deserve obedience in accord with their unequivocal language or words. with what they had illegally gotten from the partnership. as she ought to have known. whatever rights if any she had thereto in November. it arose out of or is necessarily connected with the occurrence that is the subject matter of the plaintiff's claim. Rule 17. conceal and convert to their own benefit the profits. Before proceeding to the discussion of the default aspects of this case. it is also defendants' posture that she had already quitclaimed. the Court deems it necessary for a full view of the outrageous procedural strategy conceived by respondent's counsel and sanctioned by respondent court to also make reference to the very evident fact that in ordering said dismissal respondent court disregarded completely the existence of defendant's counterclaim which it had itself earlier held if indirectly. the truth of which allegations all the defendants have denied. Respondents could do no less than grant that they are so on page 23 of their answer. As may be noted in the allegations hereof aforequoted. even as the counsel for the other defendant. to be compulsory in nature when it refused to dismiss the same on the ground alleged by respondent Tan that he docketing fees for the filing thereof had not been paid by defendants. Withal. Rule 9) namely. are indispensable parties.it must. but the record shows clearly that at least defendant Lim immediately brought the matter of their compulsory counterclaim to the attention of the trial court in his motion for reconsideration of October 23. (Section 4. the questioned order of dismissal . for she had in fact admitted her commonlaw relationship with said deceased in a document she had jointly executed with him by way of agreement to terminate their illegitimate relationship. 1974 of the case below as regards non-defaulted defendants Lim and Leonardo. apparent on the face of the record." (Section 2. she has caused them to suffer damages. Indeed. Inc. to demand accounting of and to receive the share of her alleged late husband as partner of defendants Antonio Lim Tanhu and Alfonso Leonardo Ng Sua in Glory Commercial Company. executed. over form in our courts. respondent court not only upheld the plaintiffs supposed absolute right to choose her adversaries but also held that the counterclaim is not compulsory. it should not be amiss to advert first to the patent incorrectness. While it is true that said defendants are not petitioners herein. according to respondent herself in her amended complaint. Glory Commercial Company. no judgment finding the existence of the alleged conspiracy or holding the capital of the corporation to be the money of the partnership is legally possible without the presence of all the defendants. properties and all other assets of the partnership Glory Commercial Company. however. for which she received P40." Defendants Lim and Leonardo had no opportunity to object to the motion to dismiss before the order granting the same was issued. only those rules and procedure informed. Defendants maintain in their counterclaim that plaintiff knew of the falsity of said allegations even before she filed her complaint.000 from the deceased. Upon such allegations. for the simple reason that they were not opportunity notified of the motion therefor. defendants' counterclaim is compulsory. Accordingly. Leonardo. As the plaintiff's complaint has been framed. to the extent that they have allegedly organized a corporation. upon these premises. according to defendants. plaintiff's allegedly being the widow of the deceased Tee Hoon entitled.. supra p. with such allegations. 1967.
Rule 17 of the Rules of Court. and the joinder of all indispensable parties under any and all conditions. parties may be dropped by the court upon motion of any party at any stage of the action. be forced to implead anyone who. it is the duty of the court to stop the trial and to order the inclusion of such party. plaintiff just decided to ask for it. for the "general rule with reference to the making of parties in a civil action requires the joinder of all necessary parties wherever possible. 327. at his own expense. for want of authority to act. hiring counsel and making corresponding expenses in the premises. (Pages 6263. p. His Honor has employed the same equivocal terminology as in plaintiff's motion of October 18. The rule presupposes that the original inclusion had been made in the honest conviction that it was proper and the subsequent dropping is requested because it has turned out that such inclusion was a mistake. without dictation or imposition by the court or the adverse party. the court in granting such a motion inquires for the reasons and in the appropriate instances directs the granting of some form of compensation for the trouble undergone by the defendant in answering the complaint. The plaintiff cannot be compelled to choose his defendants.) Noticeably. 106 Phil. No one is free to join anybody in a complaint in court only to drop him unceremoniously later at the pleasure of the plaintiff. Usually. their own parents. would certainly be unjust not only to the petitioners. Polistico. 271. hence "it is the absolute right prerogative of the plaintiff to choose—the parties he desires to sue. Record. at p. What it really contemplates is erroneous or mistaken non-joinder and misjoinder of parties. or the parties he desires to sue. 1. which resolved the motions for reconsideration of the dismissal order filed by the non-defaulted defendants. but also to Lim and Leonardo themselves who would naturally correspondingly suffer from the eventual judgment against their parents. The apparent idea is to rely on the theory that under Section 11 of Rule 3. 1974 was not predicated on Section 2 of Rule 17 but more on Section 11 of Rule 3. Lim and Leonardo.) The absence of an indispensable party renders all subsequent actuations of the court null and void. Francisco. Whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined. is to answer for defendant's liability. Rodriguez. without any relevant explanation at all. His Honor ought to have considered that the outright dropping of the non-defaulted defendants Lim and Leonardo. Annotated & Commented by Senator Vicente J. or in that of the parties against whom he seeks to enforce it. under the adverse party's theory. 95 Phil.) This being the rule this court cannot compel the plaintiff to continue prosecuting her cause of action against the defendants-movants if in the course of the trial she believes she can enforce it against the remaining defendants subject only to the limitation provided in Section 2. The motion of October 18. the latter rule does not comprehend whimsical and irrational dropping or adding of parties in a complaint.. See also Cortez vs. 705. Avila. His Honor rationalized his position thus: It is the rule that it is the absolute prerogative of the plaintiff to choose. 325. To start with. the presence of those latter being a sine qua non of the exercise of judicial power. From all appearances. And this is the reason why the rule ordains that the dropping be "on such terms as are just" — just to all the other parties. that is his own concern as he alone suffers therefrom. Neither may the Court compel him to furnish the means by which defendant may avoid or mitigate their liability. what respondent court did here was exactly the reverse of what the law ordains — it eliminated those who by law should precisely be joined. He may not. there is nothing in the record to legally justify the dropping of the non-defaulted defendants. If he makes a mistake in the choice of his right of action. Respondent court paid no heed at all to the mandate that such dropping must be on . 101 Phil. over their objection at that. appears in the order in question. Vol. 1973 ed. 1974 cites none. who would in consequence be entirely defenseless. 1974 by referring to the action he had taken as being "dismissal of the complaint against them or their being dropped therefrom". In the case at bar." In other words..) Such an order is unavoidable. .is exactly the opposite of what ought to have been done. Nothing of these. 47 Phil. preparing for or proceeding partially to trial. Most importantly. 347. As may he noted from the order of respondent court quoted earlier. 495-496. Alo." (People v." (Borlasa vs. without perceiving that the reason for the evidently intentional ambiguity is transparent.) It is precisely " when an indispensable party is not before the court (that) the action should be dismissed. not only as to the absent parties but even as to those present. without dictation or imposition by the court or the adverse party. (The Revised Rules of Court. the theory upon which he predicates his right of action. But the truth is that nothing can be more incorrect. (Vaño vs. 345. In short. the ambivalent pose is suggested that plaintiff's motion of October 18. at p.
contrary to the immediate notion that can be drawn from their language. 1974. being deceptive and lacking in candor. where there is only one defendant in the action and he fails to answer on time. they do not readily convey the full import of what they contemplate. 1975 in G. Section 1 of the rule provides that upon "proof of such failure.such terms as are just" — meaning to all concerned with its legal and factual effects. why should they insist on being defendants when plaintiff herself has already release from her claims? On the other hand. it is quite plain that respondent court erred in issuing its order of dismissal of October 21. which relate to said decision of the Court of Appeals and which have the clear tendency to make it appear to the Court that the appeals court had upheld the legality and validity of the actuations of the trial court being questioned. As We make this ruling. The Rules of Court contain a separate rule on the subject of default. We are not oblivious of the circumstance that defendants Lim and Leonardo are not parties herein. Thus. if We are to decide the case of herein petitioners properly and fairly. if only because the order of ex-parte hearing of October 21. instead of being merely taken for granted as being that of a simple expedient of not allowing the offending party to take part in the proceedings. 1974 denying reconsideration of such dismissal. But said rule is concerned solely with default resulting from failure of the defendant or defendants to answer within the reglementary period. has no place in any court. SP-03066 dismissing the petition for certiorari of non-defaulted defendants Lim and Leonardo impugning the order of dismissal of October 21. that is. The Court must and does admonish counsel that such manner of pleading. On the one hand. it may also be stated that the decision of the Court of Appeals of January 24. It is time indeed that the concept of this procedural device were fully understood by the bench and bar. To begin with. But such consideration is inconsequential. almost always they only betray the inherent weakness of the cause of the party resorting to them. 1974 which directly affects and prejudices said petitioners is predicated thereon. it is quite apparent that the impugned orders must have proceeded from inadequate apprehension of the fundamental precepts governing such procedure under the Rules of Court. therefore. therefore. but principally because herein petitioners were not parties in that proceeding and cannot." Unequivocal. No. Necessarily. Moreover. But similar conduct on his part in the future will definitely be dealt with more severely. Parties and counsel would be well advised to avoid such attempts to befuddle the issues as invariably then will be exposed for what they are. it is due only to the fact that this is counsel's first offense. 1974 praying that said disputed order be quashed. We deem it warranted to draw the attention of private respondent's counsel to his allegations in paragraphs XI to XIV of his answer. Thereupon the court shall proceed to receive the plaintiff's evidence and render judgment granting him such relief as the complaint and the facts proven may warrant. they must have realized that they (their parents) could even be benefited by such dismissal because they could question whether or not plaintiff can still prosecute her case against them after she had secured the order of dismissal in question. with hardly any chance of said judgment being reversed or modified." This last clause is clarified by Section 5 which says that "a judgment entered against a party in default shall not exceed the amount or be different in kind from that prayed for. and if We are adopting a passive attitude in the premises. We have to pass on the legality of said order. Referring to the simplest form of default. The fate of the case of petitioners is inseparably tied up with said order of dismissal. so that after his adversary shall have presented his evidence. has no bearing at all in this case. R. as far as their respective parents-co-defendants are concerned. be bound by its result. as these provisions are. the dismissal of the petition was based solely and exclusively on its being premature without in any manner delving into its merits. And it is in connection with this last point that the true and correct concept of default becomes relevant. (the court shall) declare the defendant in default. In particular. much less in the Supreme Court. –2– Coming now to the matter itself of default. . not only because that dismissal was premised by the appellate court on its holding that the said petition was premature inasmuch as the trial court had not yet resolved the motion of the defendants of October 28. in the literal sense. 1974 as well as its order of December 6. Rule 18. The attitude of the non-defaulted defendants of no longer pursuing further their questioning of the dismissal is from another point of view understandable. when as a matter of indisputable fact. At this juncture. certainly unethical and degrading to the dignity of the law profession. judgment may be rendered in favor of such opponent.
supra. are declared in default. The proceedings are held in his forced absence. the complaint must be dismissed. Co. presented in his absence. Thus. v. as was done by His Honor in this case. 449450. v. particularly in reference to the power of the . nor to take part in the trial.) The expression. in which event he shall be entitled to notice of all further proceedings regardless of whether the order of default is set aside or not. which only the judge himself can provide. When a defendant allows himself to be declared in default. 41 Ark. a party declared in default shall not be entitled to notice of subsequent proceedings. The foregoing observations. The evidence to support the plaintiff's cause is. Ken v. The clerk of court would not be in a position much less have the authority to act in the premises in the manner demanded by the rules of fair play and as contemplated in the law. Santos. in such instances. Mayden v. of course. it cannot exceed in amount or be different in kind from what is prayed for in the complaint. He has a right to presume that the law and the rules will still be observed. 253." That provision referred to reads: "No service of papers other than substantially amended pleadings and final orders or judgments shall be necessary on a party in default unless he files a motion to set aside the order of default. only legal evidence should be considered against him. The gain in time and dispatch should the court immediately try the case on the very day of or shortly after the declaration of default is far outweighed by the inconvenience and complications involved in having to undo everything already done in the event the defendant should justify his omission to answer on time.". A. 446. the default of the defendant is no excuse for the court to renounce the opportunity to closely observe the demeanor and conduct of the witnesses of the plaintiff. 59 Ga. there is need for more attention from the court.these provisions are not to be understood as meaning that default or the failure of the defendant to answer should be "interpreted as an admission by the said defendant that the plaintiff's cause of action find support in the law or that plaintiff is entitled to the relief prayed for. According to Section 2." And pursuant to Section 2 of Rule 41. "A judgment by default may amount to a positive and considerable injustice to the defendant. a defaulted defendant is not actually thrown out of court. 535 citing Macondary & Co. 328. etc. Such a Practice is wrong in principle and orientation. 24 Phil. Electric R. 64 Phil. elementary justice requires that. 42. 163. 105. McFadden. There are additional rules embodying more considerations of justice and equity in cases where there are several defendants against whom a common cause of action is averred and not all of them answer opportunely or are in default. Johnson v. refer to instances where the only defendant or all the defendants. Another matter of practice worthy of mention at this point is that it is preferable to leave enough opportunity open for possible lifting of the order of default before proceeding with the reception of the plaintiff's evidence and the rendition of the decision. citing Coombs vs. supra p. therefore. there being several.) Being declared in default does not constitute a waiver of rights except that of being heard and of presenting evidence in the trial court. Leopold 21 111. he relies on the faith that the court would take care that his rights are not unduly prejudiced. 292 111. the practice should be discontinued. Chicago. considering his comparably limited area of discretion and his presumably inferior preparation for the functions of a judge. We therefore declare as a matter of judicial policy that there being no imperative reason for judges to do otherwise. citing with approval Chaffin v. in Section 1 of Rule 18 aforequoted which says that "thereupon the court shall proceed to receive the plaintiff's evidence etc. and the possibility of such serious consequences necessitates a careful and liberal examination of the grounds upon which the defendant may seek to set it aside. p. Johnson. "a party who has been declared in default may likewise appeal from the judgment rendered against him as contrary to the evidence or to the law. 599. If the evidence presented should not be sufficient to justify a judgment for the plaintiff. Krempel 116 111. the rules see to it that any judgment against him must be in accordance with law. In other words. the better to appreciate their truthfulness and credibility. 466. Although the defendant would not be in a position to object. 534. Besides. and it is but fair that the plaintiff should not be allowed to take advantage of the situation to win by foul or illegal means or with inherently incompetent evidence. but the court is not supposed to admit that which is basically incompetent. While in a sense it may be said that by defaulting he leaves himself at the mercy of the court. "except as provided in Section 9 of Rule 13. And if an unfavorable judgment should be justifiable." (Moran. 12 Ark. It has no basis in any rule. Eustaquio. Incidentally. even if no petition for relief to set aside the order of default has been presented by him in accordance with Rule 38." is not to be taken literally. Pierce. as may be noted. A. of delegating to their clerks of court the reception of the plaintiff's evidence when the defendant is in default." (Moran. these considerations argue against the present widespread practice of trial judges. People v. Rust.
Peña. cross-claim and third-party claim. Vol. the Supreme Court of the United States adopted as ground for its own decision the following ruling of the New York Court of Errors in Clason vs. cited as authority in Velez vs. and enter into trial. this Court elaborated on the construction of the same rule when it sanctioned the execution. 15 Wal. the court shall try the case against all upon the answer thus filed and render judgment upon the evidence presented. upon motion and for the benefit of the defendant in default. — When a complaint states a common cause of action against several defendant some of whom answer. and the others fail to do so. June 27. in the case of Clason vs. 23 SCRA 1151. all of the defendants must be absolved. Did she have a right to be such. 4. Go Fay. 1968. (21 Law. Judgment when some defendants answer. and one of them makes default. 2. where the court is satisfied from the proofs offered by the other. 40 Phil.) (Moran. sec. The complaint stating a common cause of action against several defendants. Emilia Matanguihan. Peña. 80 Phil. Section 4 restricts the authority of the court in rendering judgment in the situations just mentioned as follows: Sec. the New York Court of Errors in effect held that in such a case if the plaintiff is not entitled to a decree. Rules of Court. Very aptly does Chief Justice Moran elucidate on this provision and the controlling jurisprudence explanatory thereof this wise: Where a complaint states a common cause of action against several defendants and some appear to defend the case on the merits while others make default.) In other words the judgment will affect the defaulting defendants either favorably or adversely. 524: It would be unreasonable to hold that because one defendant had made default. Ortiz. de la Vega. 488. that in fact the plaintiff is not entitled to a decree. (Castro v. as against all the defendant's although one or some make default and the other or others appear. Frow v. 80 Phil.21 L. The same proceeding applies when a common cause of action is pleaded in a counterclaim. 60. also was a movant in the petition for execution Annex 1.) The proper mode of proceeding where a complaint states a common cause of action against several defendants. one of the numerous cases cited by Moran. (Castro v. join issue. 488. even those who have not seasonably filed their answer. he not being entitled to the service of notice in the cause. (Velez v. For instance. in addition to the limitation of Section 5 that the judgment by default should not be more in amount nor different in kind from the reliefs specifically sought by plaintiff in his complaint. and if the court finds that a good defense has been made. by her counsel. In other words. 80 Phil. Ramas. 787-792. of a judgment which was adverse to the plaintiff. Ed. a final decree is then entered against all the defendants. The Court held: As above stated. Thus. (Lim Toco v. he will not be entitled to it. 1. (Bueno v.) In Castro vs. ed.. and other make difficult. L-22978. Ramas.. 10 Jons. and not different. nor to appear in the suit in any way. The defaulting defendant merely loses his standing in court. but if the suit should be decided against the plaintiff. is simply to enter a formal default order against him. not only as against the defendant appearing . the defense interposed by those who appear to litigate the case inures to the benefit of those who fail to appear. 61. pp. and proceed with the cause upon the answers of the others. Morris above cited.supra. nor can he be heard at the final hearing. De la Vega.) The reason is simple: justice has to be consistent. 538-539. the answer filed by one or some of the defendants inures to the benefit of all the others. the plaintiff should have a decree even against him. (Rule 41.court to render judgment in such situations.) although he may appeal the judgment rendered against him on the merits. the complainant's rights — or lack of them — in the controversy have to be the same. He cannot adduce evidence. having been declared in default? In Frow vs. 166. supra. supra.) Defaulting defendant may ask execution if judgment is in his favor.) If the case is finally decided in the plaintiff's favor. Morris. 552. the action will be dismissed as to all the defendants alike. Peña.
the PC was merely executing an order of the Director of Forestry and acting as his agent. the PC was in default. to the answering defendants. Emilia Matanguihan. the Director of Forestry. by counsel. Morris. and the other defendants in Civil Case No. Paraphrasing the New York Court of Errors. The Court of First Instance in its judgment found and held upon the evidence adduced by the plaintiff and the defendant mayor that as between said plaintiff and defendant Matanguihan the latter was the one legally entitled to occupy the stalls. De la Vega. will prejudice the defaulting defendants no less than those who answer. In the case at bar. if the judgment should happen to be favorable. of the Rules of Court. participated in the petition for execution Annex 1. 1318 should not be held also to have inured to the benefit of the defaulting defendant Matanguihan and the doctrine in said three cases plainly implies that there is nothing in the law governing default which would prohibit the court from rendering judgment favorable to the defaulting defendant in such cases. legally entitled to the occupancy of the stalls. the Court applied the provision under discussion in the following words: In answer to the charge that respondent Judge had committed a grave abuse of discretion in rendering a default judgment against the PC. some of whom answer. Frow vs. the court shall try the case against all upon the answer thus filed (by some) and render judgment upon the evidence presented.' In other words. 23 SCRA 1151. that the same plaintiff was not entitled to such occupancy that it peremptorily ordered her to vacate the stalls. and the judgment. and the trial is held upon the answer filed by the former. the District Forester of Agusan. . the cause of action in the plaintiff's complaint was common against the Mayor of Manila. Agusan. for it would not be a benefit if the supposed beneficiary were barred from claiming it. 1318 of the lower court. even those who have not seasonably filed their answer. It provides that when a complaint states a common cause of action against several defendants. the answer filed by one or some of the defendants inures to the benefit of all the others. Section 4. namely. among other things. and the others make default. respondents allege that. the said plaintiff should be declared. supra. 'when a complaint states a common cause of action against several defendants some of whom answer and the others fail to do so. By the same token. if adverse. and the Secretary of Agriculture and Natural Resources. If it inured to her benefit. and Velez vs. Pursuant to Rule 18. it would be unreasonable to hold now that because Matanguihan had made default. In Bueno vs. In other words. and by all rules of equity and fair play. as against her. If in the cases of Clason vs. 'the court shall try the case against all upon the answer thus filed and render judgment upon the evidence presented by the parties in court'. and it decreed. however. not having filed its answer within the reglementary period. there is no reason why that entered in said case No.and resisting his action but also as against the one who made default. It is obvious that under this provision the case is tried jointly not only against the defendants answering but also against those defaulting. that in entering the area in question and seeking to prevent Patanao from continuing his logging operations therein. that said plaintiff immediately vacate them. so that it was proper for Patanao to forthwith present his evidence and for respondent Judge to render said judgment. Ortiz. Ramas. for it would not be just to let the judgment produce effects as to the defaulting defendants only when adverse to them and not when favorable. the Forest Officer of Bayugan. or to remain therein. from the proofs offered by the other defendant. although the Court of First Instance was so firmly satisfied. totally or partially. Patanao's cause of action against the other respondents in Case No. 190. she must be possessed of the right to ask for the execution thereof as she did when she. and if the benefit necessitated the execution of the decree. supra the decrees entered inured to the benefit of the defaulting defendants. supra. Section 7 of Rule 35 would seem to afford a solid support to the above considerations. it stands to reason that she had a right to claim that benefit. it must correspondingly benefit the defaulting ones. It should be noted. the defaulting defendants are held bound by the answer filed by their codefendants and by the judgment which the court may render against all of them.
Indeed, since the petition in Case No. 190 sets forth a common cause of action against all of the respondents therein, a decision in favor of one of them would necessarily favor the others. In fact, the main issue, in said case, is whether Patanao has a timber license to undertake logging operations in the disputed area. It is not possible to decide such issue in the negative, insofar as the Director of Forestry, and to settle it otherwise, as regards the PC, which is merely acting as agent of the Director of Forestry, and is, therefore, his alter ego, with respect to the disputed forest area. Stated differently, in all instances where a common cause of action is alleged against several defendants, some of whom answer and the others do not, the latter or those in default acquire a vested right not only to own the defense interposed in the answer of their co- defendant or codefendants not in default but also to expect a result of the litigation totally common with them in kind and in amount whether favorable or unfavorable. The substantive unity of the plaintiff's cause against all the defendants is carried through to its adjective phase as ineluctably demanded by the homogeneity and indivisibility of justice itself. Indeed, since the singleness of the cause of action also inevitably implies that all the defendants are indispensable parties, the court's power to act is integral and cannot be split such that it cannot relieve any of them and at the same time render judgment against the rest. Considering the tenor of the section in question, it is to be assumed that when any defendant allows himself to be declared in default knowing that his defendant has already answered, he does so trusting in the assurance implicit in the rule that his default is in essence a mere formality that deprives him of no more than the right to take part in the trial and that the court would deem anything done by or for the answering defendant as done by or for him. The presumption is that otherwise he would not -have seen to that he would not be in default. Of course, he has to suffer the consequences of whatever the answering defendant may do or fail to do, regardless of possible adverse consequences, but if the complaint has to be dismissed in so far as the answering defendant is concerned it becomes his inalienable right that the same be dismissed also as to him. It does not matter that the dismissal is upon the evidence presented by the plaintiff or upon the latter's mere desistance, for in both contingencies, the lack of sufficient legal basis must be the cause. The integrity of the common cause of action against all the defendants and the indispensability of all of them in the proceedings do not permit any possibility of waiver of the plaintiff's right only as to one or some of them, without including all of
them, and so, as a rule, withdrawal must be deemed to be a confession of weakness as to all. This is not only elementary justice; it also precludes the concomitant hazard that plaintiff might resort to the kind of procedural strategem practiced by private respondent herein that resulted in totally depriving petitioners of every opportunity to defend themselves against her claims which, after all, as will be seen later in this opinion, the record does not show to be invulnerable, both in their factual and legal aspects, taking into consideration the tenor of the pleadings and the probative value of the competent evidence which were before the trial court when it rendered its assailed decision where all the defendants are indispensable parties, for which reason the absence of any of them in the case would result in the court losing its competency to act validly, any compromise that the plaintiff might wish to make with any of them must, as a matter of correct procedure, have to await until after the rendition of the judgment, at which stage the plaintiff may then treat the matter of its execution and the satisfaction of his claim as variably as he might please. Accordingly, in the case now before Us together with the dismissal of the complaint against the non-defaulted defendants, the court should have ordered also the dismissal thereof as to petitioners. Indeed, there is more reason to apply here the principle of unity and indivisibility of the action just discussed because all the defendants here have already joined genuine issues with plaintiff. Their default was only at the pre-trial. And as to such absence of petitioners at the pre-trial, the same could be attributed to the fact that they might not have considered it necessary anymore to be present, since their respective children Lim and Leonardo, with whom they have common defenses, could take care of their defenses as well. Anything that might have had to be done by them at such pre-trial could have been done for them by their children, at least initially, specially because in the light of the pleadings before the court, the prospects of a compromise must have appeared to be rather remote. Such attitude of petitioners is neither uncommon nor totally unjustified. Under the circumstances, to declare them immediately and irrevocably in default was not an absolute necessity. Practical considerations and reasons of equity should have moved respondent court to be more understanding in dealing with the situation. After all, declaring them in default as respondent court did not impair their right to a common fate with their children. –3–
Another issue to be resolved in this case is the question of whether or not herein petitioners were entitled to notice of plaintiff's motion to drop their co-defendants Lim and Leonardo, considering that petitioners had been previously declared in default. In this connection, the decisive consideration is that according to the applicable rule, Section 9, Rule 13, already quoted above, (1) even after a defendant has been declared in default, provided he "files a motion to set aside the order of default, — he shall be entitled to notice of all further proceedings regardless of whether the order of default is set aside or not" and (2) a party in default who has not filed such a motion to set aside must still be served with all "substantially amended or supplemented pleadings." In the instant case, it cannot be denied that petitioners had all filed their motion for reconsideration of the order declaring them in default. Respondents' own answer to the petition therein makes reference to the order of April 3, 1973, Annex 8 of said answer, which denied said motion for reconsideration. On page 3 of petitioners' memorandum herein this motion is referred to as "a motion to set aside the order of default." But as We have not been favored by the parties with a copy of the said motion, We do not even know the excuse given for petitioners' failure to appear at the pre-trial, and We cannot, therefore, determine whether or not the motion complied with the requirements of Section 3 of Rule 18 which We have held to be controlling in cases of default for failure to answer on time. (The Philippine-British Co. Inc. etc. et al. vs. The Hon. Walfrido de los Angeles etc. et al., 63 SCRA 50.) We do not, however, have here, as earlier noted, a case of default for failure to answer but one for failure to appear at the pre-trial. We reiterate, in the situation now before Us, issues have already been joined. In fact, evidence had been partially offered already at the pre-trial and more of it at the actual trial which had already begun with the first witness of the plaintiff undergoing re-cross-examination. With these facts in mind and considering that issues had already been joined even as regards the defaulted defendants, it would be requiring the obvious to pretend that there was still need for an oath or a verification as to the merits of the defense of the defaulted defendants in their motion to reconsider their default. Inasmuch as none of the parties had asked for a summary judgment there can be no question that the issues joined were genuine, and consequently, the reason for requiring such oath or verification no longer holds. Besides, it may also be reiterated that being the parents of the non-defaulted defendants, petitioners must have assumed that their presence was superfluous, particularly because the cause of action against them as well as their own defenses are common. Under these
circumstances, the form of the motion by which the default was sought to be lifted is secondary and the requirements of Section 3 of Rule 18 need not be strictly complied with, unlike in cases of default for failure to answer. We can thus hold as We do hold for the purposes of the revival of their right to notice under Section 9 of Rule 13, that petitioner's motion for reconsideration was in substance legally adequate regardless of whether or not it was under oath. In any event, the dropping of the defendants Lim and Leonardo from plaintiff's amended complaint was virtually a second amendment of plaintiffs complaint. And there can be no doubt that such amendment was substantial, for with the elimination thereby of two defendants allegedly solidarily liable with their co-defendants, herein petitioners, it had the effect of increasing proportionally what each of the remaining defendants, the said petitioners, would have to answer for jointly and severally. Accordingly, notice to petitioners of the plaintiff's motion of October 18, 1974 was legally indispensable under the rule above-quoted. Consequently, respondent court had no authority to act on the motion, to dismiss, pursuant to Section 6 of Rule 15, for according to Senator Francisco, "(t) he Rules of Court clearly provide that no motion shall be acted upon by the Court without the proof of service of notice thereof, together with a copy of the motion and other papers accompanying it, to all parties concerned at least three days before the hearing thereof, stating the time and place for the hearing of the motion. (Rule 26, section 4, 5 and 6, Rules of Court (now Sec. 15, new Rules). When the motion does not comply with this requirement, it is not a motion. It presents no question which the court could decide. And the Court acquires no jurisdiction to consider it. (Roman Catholic Bishop of Lipa vs. Municipality of Unisan 44 Phil., 866; Manakil vs. Revilla, 42 Phil., 81.) (Laserna vs. Javier, et al., CA-G.R. No. 7885, April 22, 1955; 21 L.J. 36, citing Roman Catholic Bishop of Lipa vs. Municipality of Unisan 44 Phil., 866; Manakil vs. Revilla, 42 Phil., 81.) (Francisco. The Revised Rules of Court in the Philippines, pp. 861-862.) Thus, We see again, from a different angle, why respondent court's order of dismissal of October 21, 1974 is fatally ineffective. –4– The foregoing considerations notwithstanding, it is respondents' position that certiorari is not the proper remedy of petitioners. It is contended that inasmuch as said petitioners have in fact made their appeal already by
filing the required notice of appeal and appeal bond and a motion for extension to file their record on appeal, which motion was granted by respondent court, their only recourse is to prosecute that appeal. Additionally, it is also maintained that since petitioners have expressly withdrawn their motion to quash of January 4, 1975 impugning the order of October 28, 1974, they have lost their right to assail by certiorari the actuations of respondent court now being questioned, respondent court not having been given the opportunity to correct any possible error it might have committed. We do not agree. As already shown in the foregoing discussion, the proceedings in the court below have gone so far out of hand that prompt action is needed to restore order in the entangled situation created by the series of plainly illegal orders it had issued. The essential purpose of certiorari is to keep the proceedings in lower judicial courts and tribunals within legal bounds, so that due process and the rule of law may prevail at all times and arbitrariness, whimsicality and unfairness which justice abhors may immediately be stamped out before graver injury, juridical and otherwise, ensues. While generally these objectives may well be attained in an ordinary appeal, it is undoubtedly the better rule to allow the special remedy of certiorari at the option of the party adversely affected, when the irregularity committed by the trial court is so grave and so far reaching in its consequences that the long and cumbersome procedure of appeal will only further aggravate the situation of the aggrieved party because other untoward actuations are likely to materialize as natural consequences of those already perpetrated. If the law were otherwise, certiorari would have no reason at all for being. No elaborate discussion is needed to show the urgent need for corrective measures in the case at bar. Verily, this is one case that calls for the exercise of the Supreme Court's inherent power of supervision over all kinds of judicial actions of lower courts. Private respondent's procedural technique designed to disable petitioners to defend themselves against her claim which appears on the face of the record itself to be at least highly controversial seems to have so fascinated respondent court that none would be surprised should her pending motion for immediate execution of the impugned judgment receive similar ready sanction as her previous motions which turned the proceedings into a one-sided affair. The stakes here are high. Not only is the subject matter considerably substantial; there is the more important aspect that not only the spirit and intent of the rules but even the basic rudiments of fair play have been disregarded. For the Court to leave unrestrained the obvious tendency of
the proceedings below would be nothing short of wittingly condoning inequity and injustice resulting from erroneous construction and unwarranted application of procedural rules. –5– The sum and total of all the foregoing disquisitions is that the decision here in question is legally anomalous. It is predicated on two fatal malactuations of respondent court namely (1) the dismissal of the complaint against the non-defaulted defendants Lim and Leonardo and (2) the ex-parte reception of the evidence of the plaintiff by the clerk of court, the subsequent using of the same as basis for its judgment and the rendition of such judgment. For at least three reasons which We have already fully discussed above, the order of dismissal of October 21, 1974 is unworthy of Our sanction: (1) there was no timely notice of the motion therefor to the non-defaulted defendants, aside from there being no notice at all to herein petitioners; (2) the common answer of the defendants, including the non-defaulted, contained a compulsory counterclaim incapable of being determined in an independent action; and (3) the immediate effect of such dismissal was the removal of the two non-defaulted defendants as parties, and inasmuch as they are both indispensable parties in the case, the court consequently lost the" sine qua non of the exercise of judicial power", per Borlasa vs. Polistico, supra. This is not to mention anymore the irregular delegation to the clerk of court of the function of receiving plaintiff's evidence. And as regards the ex-parte reception of plaintiff's evidence and subsequent rendition of the judgment by default based thereon, We have seen that it was violative of the right of the petitioners, under the applicable rules and principles on default, to a common and single fate with their non-defaulted co-defendants. And We are not yet referring, as We shall do this anon to the numerous reversible errors in the decision itself. It is to be noted, however, that the above-indicated two fundamental flaws in respondent court's actuations do not call for a common corrective remedy. We cannot simply rule that all the impugned proceedings are null and void and should be set aside, without being faced with the insurmountable obstacle that by so doing We would be reviewing the case as against the two non-defaulted defendants who are not before Us not being parties hereto. Upon the other hand, for Us to hold that the order of
More importantly. 2. whichever of the two apparent remedies the Court chooses. are adverse to them. 1974 is in law a dismissal of the whole case of the plaintiff. Consequently. the findings of respondent court based thereon which. But one thing is certain — this difficult situations has been brought about by none other than private respondent who has quite cynically resorted to procedural maneuvers without realizing that the technicalities of the adjective law. (2) against dismissal of actions on motion of plaintiff when there is a compulsory counterclaim. the Court has arrived at the conclusion that as between the two possible alternatives just stated. It is only fair that she should not be allowed to benefit from her own frustrated objective of securing a one-sided decision. We are confronted with a legal para-dilemma. What is more. This conclusion is fully justified by the following considerations of equity: 1. 1974 are illegal and should be set aside. particularly when the propriety of reliance thereon is not beyond controversy. even when apparently accurate from the literal point of view. the very considerations contained therein reveal convincingly the . Rule 18. after careful and mature deliberation. After all. On the other hand. 3. to annul the dismissal would inevitably prejudice the rights of the non-defaulted defendants whom We have not heard and who even respondents would not wish to have anything anymore to do with the case. We are at a loss as to why His Honor failed to see through counsel's inequitous strategy. without considering that all of them are indispensable parties to a common cause of action to which they have countered with a common defense readily connotes an intent to secure a one-sided decision. not only because the period for its finality has long passed but also because allegedly. We cannot directly or indirectly give Our assent to the commission of unfairness and inequity in the application of the rules of procedure. The theories of remedial law pursued by private respondents. it would necessarily entail some kind of possible juridical imperfection. Rule 17. are so plain and the jurisprudence declaratory of their intent and proper construction are so readily comprehensible that any error as to their application would be unusual in any competent trial court. cannot prevail over the imperatives of the substantive law and of equity that always underlie them and which have to be inevitably considered in the construction of the pertinent procedural rules. all proceedings held by respondent court subsequent thereto including and principally its decision of December 20. including as to petitioners herein. Section 4. It was characterized by that which every principle of law and equity disdains — taking unfair advantage of the rules of procedure in order to unduly deprive the other party of full opportunity to defend his cause. We do not hesitate to hold that on the basis of its own recitals. (3) against permitting the absence of indispensable parties. it would only be fair. of course. The idea of "dropping" the non-defaulted defendants with the end in view of completely incapacitating their co-defendants from making any defense. to include petitioners in the dismissal would naturally set at naught every effort private respondent has made to establish or prove her case thru means sanctioned by respondent court. albeit not very accurately. as the assailed decision shows. (4) on service of papers upon defendants in default when there are substantial amendments to pleadings. run counter to such basic principles in the rules on default and such elementary rules on dismissal of actions and notice of motions that no trial court should be unaware of or should be mistaken in applying. And when. complain that she is being made to unjustifiably suffer the consequences of what We have found to be erroneous orders of respondent court. all the malactuations of respondent court are traceable to the initiative of private respondent and/or her counsel. In other words. therefore.dismissal should be allowed to stand. Section 4 of Rule 15. All things considered. Section 2. Speaking of their respective practical or pragmatic effects. Section 7. Rule 3. It is very clear to Us that the procedural maneuver resorted to by private respondent in securing the decision in her favor was ill-conceived. even improperly. one easily understands why such tactics had to be availed of. the decision in question cannot stand close scrutiny. when the provisions (1) on the three-day rule on notice of motions. and (5) on the unity and integrity of the fate of defendants in default with those not in default where the cause of action against them and their own defenses are common. In other words. Rule 13. She cannot. In short. said 'non-defaulted defendants unsuccessfully tried to have it set aside by the Court of Appeals whose decision on their petition is also already final. equitable and proper to uphold the position of petitioners. as contended by respondents themselves who insist that the same is already final. 4. in this connection. the obvious weakness of plaintiff's evidence is taken into account. We rule that the order of dismissal of October 21. although approved by His Honor. We would have to disregard whatever evidence had been presented by the plaintiff against them and. Section 9.
00 which amount she gave to her husband in the presence of defendant Lim Tanhu and was invested in the partnership Glory Commercial Co. that prior to the marriage of the plaintiff to Po Chuan the latter was already managing the partnership Glory Commercial Co. for short) and Alfonso Leonardo Ng Sua (Ng Sua. That the herein plaintiff Tan Put and her late husband Po Chuan married at the Philippine Independent Church of Cebu City on December. then engaged in a little business in hardware at Manalili St.000. that the plaintiff and the late Po Chuan were childless but the former has a foster son Antonio Nuñez whom she has reared since his birth with whom she lives up to the present. 1974.. 1966. It is apparent therein that no effort has been made to avoid glaring inconsistencies. he was the one who made the final decisions and approved the appointments of new personnel who were taken in by the partnership. upon the suggestion of Po Chuan the plaintiff sold her drugstore for P125. not to speak of their codefendants who have already been exonerated by respondent herself thru her motion to dismiss: 1. there is enough basis here and now for Us to rule out the claim of the plaintiff. private respondent would still be able to make out any case against petitioners. that defendants Lim Tanhu and Ng Sua are both naturalized Filipino citizens whereas the late Po Chuan until the time of his death was a Chinese citizen. that . We feel confident that by and large. the following features of the decision make it highly improbable that if We took another course of action.inherent weakness of the cause of the plaintiff. both factual and legal. sometime in 1950. but upon closer study of the pleadings and the decision and other circumstances extant in the record before Us. in the latter part of the decision. It hardly commends itself as a deliberate and consciencious adjudication of a litigation which. Where references are made to codal provisions and jurisprudence. with all its attendant difficulties on account of its adverse effects on parties who have not been heard. Cebu City. inaccuracy and inapplicability are at once manifest. Even a mere superficial reading of the decision would immediately reveal that it is littered on its face with deficiencies and imperfections which would have had no reason for being were there less haste and more circumspection in rendering the same. Anyway. is at once evident in its findings relative precisely to the main bases themselves of the reliefs granted. Inter alia. calls for greater attention and skill than the general run of cases would. that not long after her marriage. the latter two (2) being the elder brothers of the former. that the three (3) brothers were partners in the Glory Commercial Co. but Po Chuan was practically the owner of the partnership having the controlling interest. that Po Chuan died on March 11. that after the investment of the above-stated amount in the partnership its business flourished and it embarked in the import business and also engaged in the wholesale and retail trade of cement and GI sheets and under huge profits. 1966 she is entitled to share not only in the capital and profits of the partnership but also in the other assets. 1949. considering the substantial value of the subject matter it involves and the unprecedented procedure that was followed by respondent's counsel. According to His Honor's own statement of plaintiff's case. both real and personal. Recklessness in jumping to unwarranted conclusions. 20. that the late Po Chuan and defendants Lim Tanhu and Ng Sua are brothers. for short) who was then one of the partners in the commercial partnership. that prior to and just after the marriage of the plaintiff to Po Chuan she was engaged in the drugstore business. for short) as co-partners. We have been giving serious thought to the idea of merely returning this case for a resumption of trial by setting aside the order of dismissal of October 21. We are now persuaded that such a course of action would only lead to more legal complications incident to attempts on the part of the parties concerned to desperately squeeze themselves out of a bad situation. with defendants Antonio Lim Tanhu (Lim Tanhu. acquired by the partnership with funds of the latter during its lifetime. "she is the widow of the late Tee Hoon Po Chuan (Po Chuan. To be sure. xxx xxx xxx That the late Po Chuan was the one who actively managed the business of the partnership Glory Commercial Co. the findings are to the following effect: ." Relatedly. Glory Commercial Co. that after the death of her husband on March 11.
the absence of the contract must first be satisfactorily explained. It is more likely. as well as whatever might have been placed before it or brought to its attention during the pre-trial. While a marriage may also be proved by other competent evidence. indeed. Uy supposed to have been born on March 23. father. the year of her alleged marriage to Po Chuan. If for this reason alone. in the portion of the testimony of Nuñez copied in Annex C of petitioner's memorandum. the primary evidence of a marriage must be an authentic copy of the marriage contract. Misamis Occidental. The fundamental purpose of pre-trial.trial serves to put the judge on notice of their respective basic positions. Besides. and Tan Put. Incidentally. Now. . the same is hearsay. is not. it will be observed that the court's conclusion about the supposed marriage of plaintiff to the deceased Tee Hoon Lim Po Chuan is contrary to the weight of the evidence brought before it during the trial and the pretrial. mother. 89-91. the certification of the person who allegedly solemnized a marriage is not admissible evidence of such marriage unless proof of loss of the contract or of any other satisfactory reason for its non-production is first presented to the court.defendants Lim Tanhu and Ng Sua were partners in name but they were mere employees of Po Chuan . and hence.. 1937 at Centro Misamis. therefore. the declaration of the contracting parties that they take each other as husband and wife "shall be set forth in an instrument" signed by the parties as well as by their witnesses and the person solemnizing the marriage. therefore. expressed or implied. in the pleadings. the purported certification issued by a Mons. Cebu City. In brief. that the witness is really the son of plaintiff by her husband Uy Kim Beng. is for the court to be apprised of the unsettled issues between the parties and of their respective evidence relative thereto. 1942. and even then.. respondents have not made any adverse comment on this document. if necessary in the interest of justice and a more accurate determination of the facts. before finally resolving any issue of fact or of law. applying these postulates to the findings of respondent court just quoted.) How did His Honor arrive at these conclusions? To start with. Record. it was incumbent upon the court to consider not only the evidence formally offered at the trial but also the admissions. But she testified she was childless. if any was issued pursuant to Section 4 of Rule 20. Under Article 55 of the Civil Code. In the case at bar. Indeed. Jose M. make inquiries about or require clarifications of matters taken up at the pre-trial. In other words whatever is said or done by the parties or their counsel at the pre. thereby making him the real party in interest here and. in order that in appropriate cases he may. Besides. it is not clear in the decision whether or not in making its findings of fact the court took into account the allegations in the pleadings of the parties and whatever might have transpired at the pre-trial. another Annex C of the same memorandum purports to be the certificate of birth of one Antonio T. As regards the testimony of plaintiff herself on the same point and that of her witness Antonio Nuñez. the real essence of compulsory pre-trial would be insignificant and worthless. if on the strength of this document. it is to be regretted that none of the parties has thought it proper to give Us an idea of what took place at the pre-trial of the present case and what are contained in the pre-trial order. there being absolutely no showing as to unavailability of the marriage contract and. it having been disclosed at the trial that plaintiff has already assigned all her rights in this case to said Nuñez. Surely. to the end that it may take corresponding measures that would abbreviate the trial as much as possible and the judge may be able to ascertain the facts with the least observance of technical rules. it is extremely doubtful if he could have been sufficiently aware of such event as to be competent to testify about it. Bishop. he would have been but 13 years old in 1949. Recoleto. the son of one Uy Bien. it appears admitted that he was born only on March 25.. Otherwise. Philippine Independent Church. the pre-trial constitutes part and parcel of the proceedings. since it is not part of the functions of his office. Accordingly. Nuñez is actually the legitimate son of Tan Put and not her adopted son. the jurat allegedly signed by a second assistant provincial fiscal not being authorized by law. there can be no question that they are both self-serving and of very little evidentiary value. aside from affording the parties every opportunity to compromise or settle their differences. So which is which? In any event. inasmuch as the bishop did not testify. therefore. naturally as biased as herself. which means that he was less than eight years old at the supposed time of the alleged marriage. Significantly. All that We can gather in this respect is that references are made therein to pre-trial exhibits and to Annex A of the answer of the defendants to plaintiff's amended complaint. as to the authenticity of the signature of said certifier. (Pp. matters dealt with therein may not be disregarded in the process of decision making. competent evidence. In this connection.
not only does this document prove that plaintiff's relation to the deceased was that of a common-law wife but that they had settled their property interests with the payment to her of P40. (SGD) TAN KI ENG Verified from the records. Answer) where they gave plaintiff the amount of P25. have lived with Mr. Stated differently. between Tan Put and Tee Hoon Lim Po Chuan to the following effect: CONSULATE OF THE REPUBLIC OF CHINA Cebu City. not to the clerk of court. it is to be observed that His Honor found that "defendants Lim Tanhu and Ng Sua had the plaintiff execute a quitclaim on November 29.considering such age. Record. But it is evidence offered to the judge himself. Cebu City.000. Now.00) has been given to me by Mr. a written agreement executed in Chinese. his testimony in regard thereto would still be suspect. that their respective official records corresponding to December 1949 to December 1950 do not show any marriage between Tee Hoon Lim Po Chuan and Tan Put.) Indeed. the court had before it. as against such flimsy evidence of plaintiff. 1967 (Annex "A". Withal. Lim Po Chuan alias TeeHoon since 1949 but it recently occurs that we are incompatible with each other and are not in the position to keep living together permanently.000 as her share in the capital and profits of the business of Glory Commercial Co. two documents of great weight belying the pretended marriage. Philippines TRANSLATION This is to certify that 1. thereby indicating either that no evidence to prove that allegation of the plaintiff had been presented by her or that whatever evidence was actually offered did not produce persuasion upon the court. Miss Tan Ki Eng Alias Tan Put. With the mutual concurrence. there is still another document. that she had already renounced for valuable consideration whatever claim she might have relative to the partnership Glory Commercial Co. And when it is borne in mind that in addition to all these considerations. it stands to reason that plaintiff's claim of marriage is really unfounded. Witnesses: Mr. Exhibit LL is what might be termed as pre-trial evidence. Niño. Surely. Annex A of the answer. And in regard to the quitclaim containing the admission of a common-law relationship only. The Forty Thousand Pesos (P40. We find no alternative but to hold that plaintiff Tan Put's allegation that she is the widow of Tee Hoon Lim Po . we decided to terminate the existing relationship of common law-marriage and promised not to interfere each other's affairs from now on. the court should have held that plaintiff was bound by her admission therein that she was the common-law wife only of Po Chuan and what is more. but purportedly translated into English by the Chinese Consul of Cebu. the income tax return of the deceased Tee Hoon Lim Po Chuan indicating that the name of his wife was Ang Sick Tin and (2) the quitclaim.000. 283-284. wherein plaintiff Tan Put stated that she had been living with the deceased without benefit of marriage and that she was his "common-law wife". Of course. Huang Sing Se Signed on the 10 day of the 7th month of the 54th year of the Republic of China (corresponding to the year 1965). Po Chuan. We refer to (1) Exhibit LL. which was engaged in the hardware business". since the existence of the quitclaim has been duly established without any circumstance to detract from its legal import. Lim Po Chuan for my subsistence. In the light of all these circumstances. also mentioned and discussed in the same memorandum and unimpugned by respondents. these two documents are far more reliable than all the evidence of the plaintiff put together. Parish of Sto. without making mention of any evidence of fraud and misrepresentation in its execution. neither of which certifications have been impugned by respondent until now. Lim Beng Guan Mr. there are mentioned and discussed in the memorandum of petitioners (1) the certification of the Local Civil Registrar of Cebu City and (2) a similar certification of the Apostolic Prefect of the Philippine Independent Church. JORGE TABAR (Pp. and should have at least moved him to ask plaintiff to explain if not rebut it before jumping to the conclusion regarding her alleged marriage to the deceased.
its business flourished and it embarked in the import business and also engaged in the wholesale and retail trade of cement and GI sheets and under (sic) huge profits. In fact. plaintiff repeatedly alleged that as widow of Po Chuan she is entitled to ¹/ 3 share of the assets and properties of the partnership. His Honor's statement of the case as well as his findings and judgment are all to that same effect. hence. But inasmuch as it was the clerk of court who received the evidence. among others. 27. But the evidence as to the actual participation of the defendants Lim Tanhu and Ng Sua in the operation of the business that could have enabled them to make the extractions of funds alleged by plaintiff is at best confusing and at certain points manifestly inconsistent. at another point mere employees and then elsewhere as partnersemployees.000 which amount she gave to her husband in the presence of Tanhu and was invested in the partnership Glory Commercial Co. she was actually the owner of everything. as We have seen." (pp. it is clear that not an iota of reliable proof exists of such alleged misdeeds. Attys. the trial court was confused as to the participation of defendants Lim Tanhu and Ng Sua in Glory Commercial Co.. and converted its properties to themselves is even more dismal. We take judicial notice of the fact that the respective counsel who assisted the parties in the quitclaim.. on the other hand. that not long after her marriage. a newly found concept. under the management of the late Po Chuan except their salaries therefrom. In her amended complaint. and inasmuch as what was being rendered was a judgment by default.id. such theory should not have been allowed to be the subject of any evidence. her prayer in said complaint is. to be sure.Chuan has not been satisfactorily established and that. plaintiff had shown that she had money of her own when she "married" Po Chuan and "that prior to and just after the marriage of the plaintiff to Po Chuan. that after the investment of the above-stated amount in the partnership. she was engaged in the drugstore business. upon the suggestion of Po Chuan. Of course. Hermosisima and Natalio Castillo. are members in good standing of the Philippine Bar. they were deemed partners. .) To begin with. Annex L. particularly because His Honor also found "that defendants Lim Tanhu and Ng Sua were partners in the name but they were employees of Po Chuan that defendants Lim Tanhu and Ng Sua had no means of livelihood at the time of their employment with the Glory Commercial Co. for the delivery to her of such ¹/ 3 share. the plaintiff sold her drugstore for P125. 2. And the confusion is worse comfounded in the judgment which allows these "partners in name" and "partners-employees" or employees who . that all her claims against the company and its surviving partners as well as those against the estate of the deceased have already been settled and paid. this theory of her having contributed of P125. absent any credible proof that they had allowed themselves to be parties to a fraudulent document His Honor did right in recognizing its existence. it is actually admitted impliedly in defendants' affirmative defense that Po Chuan's share had already been duly settled with and paid to both the plaintiff and his legitimate family. why would she claim to be entitled to only to ¹/ 3 of its assets and profits? Under her theory found proven by respondent court. as may be noted from the decision itself. 25-26.) Why then does she claim only ¹/ 3 share? Is this an indication of her generosity towards defendants or of a concocted cause of action existing only in her confused imagination engendered by the death of her common-law husband with whom she had settled her common-law claim for recompense of her services as common law wife for less than what she must have known would go to his legitimate wife and children? Actually. it is understandable that he failed to observe the rule. on the contrary. Then. in the law on partnership." (p.parte hearing? According to the decision. the existence of the partnership has not been denied. plaintiff's evidence of her alleged status as legitimate wife of Po Chuan is not only unconvincing but has been actually overcome by the more competent and weighty evidence in favor of the defendants. the evidence on record convincingly shows that her relation with said deceased was that of a common-law wife and furthermore. H. her attempt to substantiate her main cause of action that defendants Lim Tanhu and Ng Sua have defrauded the partnership Glory Commercial Co. sometime in 1950.000 to the capital of the partnership by reason of which the business flourished and amassed all the millions referred to in the decision has not been alleged in the complaint. If. petition. with the particularity that the latter has been a member of the Cabinet and of the House of Representatives of the Philippines. But what did she actually try to prove at the ex. albeit erring in not giving due legal significance to its contents. At one point. From the very evidence summarized by His Honor in the decision in question. if it was her capital that made the partnership flourish.
His Honor confirmed the same by finding and holding that "it is likewise clear that real properties together with the improvements in the names of defendants Lim Tanhu and Ng Sua were acquired with partnership funds as these defendants were only partnersemployees of deceased Po Chuan in the Glory Commercial Co. it must have been with the knowledge and consent of Po Chuan. p. "as Po Chuan was practically the owner of the partnership having the controlling interest". until the time of his death on March 11. In this connection. Lim Teck Chuan and Eng Chong Leonardo. 1966. however. who was Chinese. Incidentally..000 given to him by plaintiff and from which capital the business allegedly "flourished. (Par. the latter to (2) being the elder brothers of the former. that defendants Lim Tanhu and Ng Sua were partners in name but they were mere employees of Po Chuan. Beam. most if not all of the properties supposed to have been acquired by the defendants Lim Tanhu and Ng Sua with funds of the partnership appear to have been transferred to their names only in 1969 or later. through fraud and machination. as these are summarized in the decision. it is very significant that according to the very tax declarations and land titles listed in the decision. who naturally did not know any better." (p. how could the defendants have defrauded him of such huge amounts as plaintiff had made his Honor believe? Upon the other hand." Anent the allegation of plaintiff that the properties shown by her exhibits to be in the names of defendants Lim Tanhu and Ng Sua were bought by them with partnership funds. for which reason no accounting could be demanded from them therefor. that this conclusion of His Honor is based on nothing but pure unwarranted conjecture. the more logical inference is that if defendants had obtained any portion of the funds of the partnership for themselves. that is. (Pp. but Po Chuan was practically the owner of the partnership having the controlling interest. Neither in the testimony of Nuñez nor in that of plaintiff. he was the one who made the final decisions and approved the appointments of new Personnel who were taken in by the partnership. and We reiterate: xxx xxx xxx That the late Po Chuan was the one who actively managed the business of the partnership Glory Commercial Co. id. Accordingly. do not necessarily prove that Po Chuan had not gotten his share of the profits of the business or that the properties in the names of the defendants were bought with money of the partnership. but of the defendants who are Filipinos. took actual and active management of the partnership and although Tee Hoon Lim Po Chuan was the manager of Glory Commercial Co.. respondent court found very explicitly that. Record. Moreover. Alfonso Leonardo Ng Sua.. that the late Po Chuan and defendants Lim Tanhu and Ng Sua are brothers. defendants have no obligation to account to anyone for such acquisitions in the absence of clear proof that they had violated the trust of Po Chuan during the existence of the partnership. can there be found any single act of extraction of partnership funds committed by any of said defendants. it may be observed at this juncture that the decision has made Po Chuan play the inconsistent role of being "practically the owner" but at the same time getting his capital from the P125. . 90-91. since Po Chuan was in control of the affairs of the partnership. considering that Article 1807 of the Civil Code refers only to what is taken by a partner without the consent of the other partner or partners. Incidentally again. 30. Annex B of petition) and should not have been permitted to be proven by the hearing officer. that the three (3) brothers were partners in the Glory Commercial Co. that defendants Lim Tanhu and Ng Sua are both naturalized Filipino citizens whereas the late Po Chuan until the time of his death was a Chinese citizen. Nowhere is it shown in the decision how said defendants could have extracted money from the partnership in the fraudulent and illegal manner pretended by plaintiff.) . That the partnership might have grown into a multi-million enterprise and that the properties described in the exhibits enumerated in the decision are not in the names of Po Chuan..) If Po Chuan was in control of the affairs and the running of the partnership. ¹/ 3 each of the huge assets and profits of the partnership. 796. (See Hanlon vs. defendants managed to use the funds of the partnership to purchase lands and buildings etc.had no means of livelihood and who must not have contributed any capital in the business. Hansserman and.) It Is Our considered view. this theory about Po Chuan having been actively managing the partnership up to his death is a substantial deviation from the allegation in the amended complaint to the effect that "defendants Antonio Lim Tanhu. it is decisively important to consider that on the basis of the concordant and mutually cumulative testimonies of plaintiff and Nuñez. 4. 40 Phil. 2 of amended complaint. long after the partnership had been automatically dissolved as a result of the death of Po Chuan.
the decision itself states that according to Exhibit NN-Pre trial.64" ( id. Since according to Exhibit LL. On the other hand.512. particularly when it can be very clearly seen in Exhibits 11-4.000 for which be paid a tax of P3. had accounts payable as of December 31. according to His Honor. How could Nuñez have been only 13 years old then as claimed by him to have been his age in those photographs when according to his "birth certificate".) The decision is rather emphatic in that Lim Tanhu and Ng Sua had no known income except their salaries. We note that the decision has not made any finding regarding the allegation in the amended complaint that a corporation denominated Glory Commercial Co. was P584. Additionally. ( id. in 1949 when he must have been barely six or seven years old? It should not have escaped His Honor's attention that the photographs showing the premises of Philippine Metal Industries after its organization "a year or two after the establishment of Cebu Can Factory in 1957 or 1958" must have been taken after 1959. 1965.800 as salary from Philippine Metal Industries alone and had a total assess sable net income of P23. shows he was born in March. the supposed Book of Account. respectively. We do not hesitate to make the observation that His Honor. and yet. however.182.38. id. Annex the decision. 1942." (p. We note also that there is absolutely no finding made as to how the defendants Dy Ochay and Co Oyo could in any way be accountable to plaintiff. without risk of erring and committing an injustice. 11-5 and 11-6-Pre-trial.223. the baptismal certificate produced by the same witness as his birth certificate. We further note that while His Honor has ordered defendants to deliver or pay jointly and severally to the plaintiff P4. he was born in 1942? His Honor should not have overlooked that according to the same witness.920. in the same breath. "the value of inventoried merchandise.182. per Exhibit XX-Pre-trial.18 or ¹/ 3 of the P12. showed that the total value of goods available as of the same date was P11. both local and imported". which testimonies are veritably exculpatory as to Ng Sua and hearsay as to Lim Teck Chuan. Annex L.40.034. there is no comprehensible explanation in the decision of the conclusion of His Honor that there were P12.223.) And per Exhibit GG-Pretrial in the year.62. the supposed balance sheet of the company for 1966. of the company showed its "cash analysis" was P12. "Lim Tanhu was employed by her husband although he did not go there always being a mere employee of Glory Commercial Co. which seemingly are the very properties allegedly purchased from the funds of the partnership which would naturally include the . 1966.394.656.17. 1965 in the amount of P4. was hardly qualified to read such exhibits and draw any definite conclusions therefrom.A. with respect to Lim Tanhu.321.. Then. Nuñez testified that "for about 18 years he was in charge of the GI sheets and sometimes attended to the imported items of the business of Glory Commercial Co.050.074. Neither should His Honor have failed to note that according to plaintiff herself. in the supposed income tax return of Lim Tanhu for 1964.) From what then did his Honor gather the conclusion that all the properties registered in his name have come from funds malversed from the partnership? It is rather unusual that His Honor delved into financial statements and books of Glory Commercial Co. On the other hand. Exhibit TT-Pre-trial. per Exhibit VV-Pre-trial.) As early as 1962. (p. "his fishing business in Madridejos Cebu was making money. In any event.There are other particulars which should have caused His Honor to readily disbelieve plaintiffs' pretensions. This must be the reason why there are apparent inconsistencies and inaccuracies in the conclusions His Honor made out of them.00. they have also been sentenced to partition and give ¹/ 3 share of the properties enumerated in the dispositive portion of the decision. unless he is a certified public accountant. was organized after the death of Po Chuan with capital from the funds of the partnership. as found by His Honor.182. In Exhibit SS-Pre-trial. 15. per Exhibit II-3Pre-trial. id. he had an income of P4. Glory Commercial Co. the value of the company's goods available for sale was P5. Again. from what evidence such conclusion was derived in so far as Ng Sua is concerned.801.166. (p. just because they happen to be the wives of Lim Tanhu and Ng Sua. Actually. the supposed cash belonging to the partnership as of December 31.55. 14. it is not stated. the reported total assets of the company amounted to P2. and he reported "a net gain from operation (in) the amount of P865.223..27 as of December.328. 22. he had a net income of P32.460.327. 1965.87.55 cash money defendants have to account for. defendant Ng Sua was living in Bantayan until he was directed to return to Cebu after the fishing business thereat floundered. whereas all that the witness knew about defendant Lim Teck Chuan's arrival from Hongkong and the expenditure of partnership money for him were only told to him allegedly by Po Chuan. how could he have started managing Glory Commercial Co.524. We are not prepared to permit anyone to predicate any claim or right from respondent court's unaided exercise of accounting knowledge." Counting 18 years back from 1965 or 1966 would take Us to 1947 or 1948.55.77 that year for which he paid a tax of P4.) Under the circumstances. per Exhibit YY and YY-Pre-trial. as of December 31. Inc. 11-4. without the aid of any accountant or without the same being explained by any witness who had prepared them or who has knowledge of the entries therein. whatever that is.
All proceedings held in respondent court in its Civil Case No. assuming there has not yet been any liquidation of the partnership. and before this is finished. that plaintiff is liable on defendants' counterclaims. if any. Besides. contrary to the allegation of the defendants. would have the status of a partnership in liquidation and the only right plaintiff could have would be to what might result after such liquidation to belong to the deceased partner.P12. only time and the fear that this decision would be much more extended than it is already prevent us from further pointing out the inexplicable deficiencies and imperfections of the decision in question. no specific amounts or properties may be adjudicated to the heir or legal representative of the deceased partner without the liquidation being first terminated. Costs against private respondent. Respondent court is hereby ordered to enter an order extending the effects of its order of dismissal of the action dated October 21. it is impossible to determine. 1974.182. Indeed. Alfonso Leonardo Ng Sua and Co Oyo. particularly the ex-parte proceedings against petitioners and the decision on December 20. And respondent court is hereby permanently enjoined from taking any further action in said civil case gave and except as herein indicated. . were it not seemingly futile and productive of other legal complications. the deceased had (Bearneza vs. Resolution of the other issues raised by the parties albeit important and perhaps pivotal has likewise become superfluous. and. then Glory Commercial Co. Dequilla 43 Phil. what rights or interests. what have been discussed should be more than sufficient to support Our conclusion that not only must said decision be set aside but also that the action of the plaintiff must be totally dismissed. Dy Ochay.55 defendants have to account for. In other words. the petition is granted. 237). 12328 subsequent to the order of dismissal of October 21. 1974 are hereby annulled and set aside. IN VIEW OF ALL THE FOREGOING. After all.223. 1974 to herein petitioners Antonio Lim Tanhu.
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