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

L-13680 April 27, 1960

MAURO LOZANA, plaintiff-appellee, vs. SERAFIN DEPAKAKIBO, defendant-appellant. Antonio T. Lozada for appellee. Agustin T. Misola and Tomas D. Dominado for appellant. LABRADOR, J.: This is an appeal from a judgment of the Court of First Instance of Iloilo, certified to us by the Court of Appeals, for the reason that only questions of law are involved in said appeal. The record discloses that on November 16, 1954 plaintiff Mauro Lozana entered into a contract with defendant Serafin Depakakibo wherein they established a partnership capitalized at the sum of P30,000, plaintiff furnishing 60% thereof and the defendant, 40%, for the purpose of maintaining, operating and distributing electric light and power in the Municipality of Dumangas, Province of Iloilo, under a franchise issued to Mrs. Piadosa Buenaflor. However, the franchise or certificate of public necessity and convenience in favor of the said Mrs. Piadosa Buenaflor was cancelled and revoked by the Public Service Commission on May 15, 1955. But the decision of the Public Service Commission was appealed to Us on October 21, 1955. A temporary certificate of public convenience was issued in the name of Olimpia D. Decolongon on December 22, 1955 (Exh. "B"). Evidently because of the cancellation of the franchise in the name of Mrs. Piadosa Buenaflor, plaintiff herein Mauro Lozana sold a generator, Buda (diesel), 75 hp. 30 KVA capacity, Serial No. 479, to the new grantee Olimpia D. Decolongon, by a deed dated October 30, 1955 (Exhibit "C"). Defendant Serafin Depakakibo, on the other hand, sold one Crossly Diesel Engine, 25 h. p., Serial No. 141758, to the spouses Felix Jimenea and Felina Harder, by a deed dated July 10, 1956. On November 15, 1955, plaintiff Mauro Lozana brought an action against the defendant, alleging that he is the owner of the Generator Buda (Diesel), valued at P8,000 and 70 wooden posts with the wires connecting the generator to the different houses supplied by electric current in the Municipality of Dumangas, and that he is entitled to the possession thereof, but that the defendant has wrongfully detained them as a consequence of which plaintiff suffered damages. Plaintiff prayed that said properties be delivered back to him. Three days after the filing of the complaint, that is on November 18, 1955, Judge Pantaleon A. Pelayo issued an order in said case authorizing the sheriff to take possession of the generator and 70 wooden posts, upon plaintiff's filing of a bond in the amount of P16,000 in favor of the defendant (for subsequent delivery to the plaintiff). On December 5, 1955, defendant filed an answer, denying that the generator and the equipment mentioned in the complaint belong to the plaintiff and alleging that the same had been contributed by the plaintiff to the partnership entered into between them in the same manner that defendant had contributed equipments also, and therefore that he is not unlawfully detaining them. By way of counterclaim, defendant alleged that under the partnership agreement the parties were to contribute equipments, plaintiff contributing the generator and the defendant, the wires for the purpose of installing the main and delivery lines; that the plaintiff sold his contribution to the partnership, in violation of the terms of their agreement. He, therefore, prayed that the complaint against him be dismissed; that plaintiff be adjudged guilty of violating the partnership contract and be ordered to pay the defendant the sum of P3,000, as actual damages, P600.00 as attorney's fees and P2,600 annually as actual damages; that the court order dissolution of the partnership, after the accounting and liquidation of the same.

On September 27, 1956, the defendant filed a motion to declare plaintiff in default on his counterclaim, but this was denied by the court. Hearings on the case were conducted on October 25, 1956 and November 5, 1956, and on the latter date the judge entered a decision declaring plaintiff owner of the equipment and entitled to the possession thereof, with costs against defendant. It is against this judgment that the defendant has appealed. The above judgment of the court was rendered on a stipulation of facts, which is as follows: 1. That on November 16, 1954, in the City of Iloilo, the aforementioned plaintiff, and the defendant entered into a contract of Partnership, a copy of which is attached as Annex "A" of defendant's answer and counterclaim, for the purpose set forth therein and under the national franchise granted to Mrs. Piadosa Buenaflor; 2. That according to the aforementioned Partnership Contract, the plaintiff Mr. Mauro Lozana, contributed the amount of Eighteen Thousand Pesos (P18,000.00); said contributions of both parties being the appraised values of their respective properties brought into the partnership; 3. That the said Certificate of Public Convenience and Necessity was revoked and cancelled by order of the Public Service Commission dated March 15, 1955, promulgated in case No. 58188, entitled, "Piadosa Buenaflor, applicant", which order has been appealed to the Supreme Court by Mrs. Buenaflor; 4. That on October 30, 1955, the plaintiff sold properties brought into by him to the said partnership in favor of Olimpia Decolongon in the amount of P10,000.00 as per Deed of Sale dated October 30, 1955 executed and ratified before Notary Public, Delfin Demaisip, in and for the Municipality of Dumangas, Iloilo and entered in his Notarial Registry as Doc. No. 832; Page No. 6; Book No. XIII; and Series of 1955, a copy thereof is made as Annex "B" of defendant's answer and counterclaim; 5. That there was no liquidation of partnership and that at the time of said Sale on October 30, 1955, defendant was the manager thereof; 6. That by virtue of the Order of this Honorable Court dated November 18, 1955, those properties sold were taken by the Provincial Sheriff on November 20, 1955 and delivered to the plaintiff on November 25, 1955 upon the latter posting the required bond executed by himself and the Luzon Surety Co., dated November 17, 1955 and ratified before the Notary Public, Eleuterio del Rosario in and for the province of Iloilo known as Doc. No. 200; Page 90; Book No. VII; and Series of 1955; of said Notary Public; 7. That the said properties sold are now in the possession of Olimpia Decolongon, the purchaser, who is presently operating an electric light plant in Dumangas, Iloilo; 8. That the defendant sold certain properties in favor of the spouses, Felix Jimenea and Felisa Harder contributed by him to the partnership for P3,500.00 as per Deed of Sale executed and ratified before the Notary Public Rodrigo J. Harder in and for the Province of Iloilo, known as Doc. No. 76; Page 94; Book No. V; and Series of 1955, a certified copy of which is hereto attached marked as Annex "A", and made an integral part hereof; (pp, 27-29 ROA). As it appears from the above stipulation of facts that the plaintiff and the defendant entered into the contract of partnership, plaintiff contributing the amount of P18,000, and as it is not stated therein that there bas been a liquidation of the partnership assets at the time plaintiff sold the Buda Diesel Engine on October 15, 1955, and since the court below had found that the plaintiff had actually contributed one engine and 70 posts to the partnership, it necessarily follows that the Buda diesel engine contributed by the plaintiff had become the property of the partnership. As properties of the partnership, the same could not be disposed of

by the party contributing the same without the consent or approval of the partnership or of the other partner. (Clemente vs. Galvan, 67 Phil., 565). The lower court declared that the contract of partnership was null and void, because by the contract of partnership, the parties thereto have become dummies of the owner of the franchise. The reason for this holding was the admission by defendant when being cross-examined by the court that he and the plaintiff are dummies. We find that this admission by the defendant is an error of law, not a statement of a fact. The Anti-Dummy law has not been violated as parties plaintiff and defendant are not aliens but Filipinos. The Anti-Dummy law refers to aliens only (Commonwealth Act 108 as amended). Upon examining the contract of partnership, especially the provision thereon wherein the parties agreed to maintain, operate and distribute electric light and power under the franchise belonging to Mrs. Buenaflor, we do not find the agreement to be illegal, or contrary to law and public policy such as to make the contract of partnership, null and void ab initio. The agreement could have been submitted to the Public Service Commission if the rules of the latter require them to be so presented. But the fact of furnishing the current to the holder of the franchise alone, without the previous approval of the Public Service Commission, does not per se make the contract of partnership null and void from the beginning and render the partnership entered into by the parties for the purpose also void and non-existent. Under the circumstances, therefore, the court erred in declaring that the contract was illegal from the beginning and that parties to the partnership are not bound therefor, such that the contribution of the plaintiff to the partnership did not pass to it as its property. It also follows that the claim of the defendant in his counterclaim that the partnership be dissolved and its assets liquidated is the proper remedy, not for each contributing partner to claim back what he had contributed. For the foregoing considerations, the judgment appealed from as well as the order of the court for the taking of the property into custody by the sheriff must be, as they hereby are set aside and the case remanded to the court below for further proceedings in accordance with law. Paras, C.J., Bengzon, Montemayor, Bautista Angelo, Concepcion, Endencia, Barrera and Gutierrez David, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 30286 September 12, 1929

M. TEAGUE, plaintiff-appellant, vs. H. MARTIN, J. T. MADDY and L.H. GOLUCKE, defendants-appellees. Abad Santos, Camu and Delgado, for appellant. J.W. Ferrier for appellees. STATEMENT Plaintiff alleges that about December 23, 1926, he and the defendants formed a partnership for the operation of a fish business and similar commercial transactions, which by mutual contest was called "Malangpaya Fish Co," with a capital of P35,000, of which plaintiff paid P25,000, the defendant Martin P5,000, P2,500, and Golucke P2,500. That as such partnership, they agreed to share in the profits and losses of the business in proportion to the amount of capital which each contributed. That the plaintiff was named the general manager to take charge of the business, with full power to do and perform all acts necessary to carry out of the purposes of the partnership. That there was no agreement as to the duration of the partnership. That plaintiff wants to dissolve it, but that the defendants refused to do so. A statement marked Exhibit A, which purports to be a cash book, is made a part of the complaint. That the partnership purchased and now owns a lighter called Lapu-Lapu, and a motorship called Barracuda, and other properties. That the lighter and the motorship are in the possession of the defendants who are making use of them, to the damage and prejudice of the plaintiff, for any damage which plaintiff may sustain. That it is for the best interest of the parties to have a receiver appointed pending this litigation, to take possession of the properties, and he prays that the Philippine Trust Company be appointed receiver, and for judgment dissolving the partnership, with costs. Each of the defendants filed a separate answer, but the same nature, in which they admit that about December 10, 1926, the plaintiff and the defendants formed a partnership for the purpose of the equipment of the Manila Fish Co., Inc., and the conduct of a fish business. That the terms of the partnership were never evidenced by a truth and in fact, the partnership was formed under a written plan, of which each member received a copy and to which all agreed. That by its terms the amount of the capital was P45,000, of which the plaintiff agreed to contribute P35,000. That P20,000 of the capital was to be used for the purchase of the equipment of the Manila Fish Co., Inc. and the balance placed to the checking account o the new company. It is then alleged that "the new owners agree to duties as follows: Capt. Maddy will have charger of the Barracuda and the navigating of the same. Salary P300 per month. Mr. Martin will have charge of the southern station, cold stores, commissary and procuring fish. Salary P300 per month. Mr. Teague will have charge of selling fish in Manila and purchasing supplies. No salary until business is on paying basis, then the same as Maddy or Martin.

The principal office shall be in Manila, each party doing any business shall keep books showing plainly all transactions, the books shall be available at all time for inspections of any member of the partnership. If Mr. Martin or Mr. Maddy wishes at some future time to repurchase a larger share in the business Teague agrees to sell part of his shares to each on the basis double the amount originally invested by each or ten thousand to Martin and five thousand to Maddy. This offer will expire after two years. That no charge was ever made in the terms of said agreement of copartnership as set forth above except that it was later agreed among the partners that the business of the partnership should be conducted under the trade name "Malangpaya Fish Company." That as shown by the foregoing quoted agreement the agreed capital of the copartnership was P45,000 and not P35,000 as stated in the third paragraph of plaintiff's amended complaint, and the plaintiff herein, M. Teague, bound himself and agreed to contribute to the said copartnership the sum of P35,000 and not the sum of P25,000 as stated in the third paragraph of his said amended complaint. Defendant Martin specificaly denies the "plaintiff was named general manager of the partnership," and alleged "that all the duties and powers of the said plaintiff were specifically set forth in the above quoted written agreement and that no further or additional powers were ever given the said plaintiff." But he admits the purchase of the motorship Barracuda, by the partnership. He denies that Exhibit A is a true or correct statement of the cash received and paid out by or on behalf of the partnership, or that the partnership over purchased or that it now owns the lighter Lapu-Lapu, "And/ or any other properties" as mentioned in said ninth paragraph, except such motorship and a smoke in the house," or that the defendants are making use of any of the properties of the partnership, to the damage and prejudice of the plaintiff, or that they do not have any visible means to answer for any damages, and alleges that at the time of the filing of the complaint, partnership in cold storage, of the value of P6,000, for which he has never accounted on the books of the partnership or mentioned in the complaint, and defendant prays that plaintiff's complaint be dismissed, and that he be ordered and required to render an accounting , and to pay to partnership the balance of his unpaid subscription amounting to P10,000. In his answer the defendant Maddy claimed and asserted that there is due and owing him from the plaintiff P1,385.53, with legal interest, and in his amended answer, the defendant Martin prays for judgment for P615.49. To all which the plaintiff made a general and specific denial. Upon such issues the lower court on April 30, 1928, rendered the following judgment: In view of the foregoing considerations, the court decrees: That the partnership, existing among the parties in this suit, is hereby declared dissolved; that all the existing properties of the said partnership are ordered to be sold at public auction; and that all the proceeds and other unexpended funds of the partnership be used, first, to pay he P529.48 tax to the Government of the Philippine Islands; second, to pay debts owing to third persons; third, to reimburse the partners for their advances and salaries due; and lastly, to return to the partners the amounts they contributed to the capital of the association and any other remaining such to be distributed proportionately among them as profits:

That the plaintiff immediately render a true and proper account of all the money due to and received by him for the partnership. That the barge Lapu-Lapu as well as the Ford truck No. T-3019 and adding machine belong exclusively to the plaintiff, M. Teague, but the said plaintiff must return to and reimburse the partnership the sum of P14,032.26 taken from its funds for the purchase and equipment of the said barge Lapu-Lapu; and also to return the sum of P1,230 and P228 used for buying the Ford truck and adding machine, respectively: That the sum of P,1512.03 be paid to the defendant, J. T. Maddy, and the sum of P615.49 be paid to defendant, H. Martin, for their advances and their unpaid salaries, with legal interest from October 27, 1927, until paid; that the plaintiff pay the costs of this action. So ordered. May 16, 1928, plaintiff filed a motion praying for an order "directing the court's stenographic notes taken by them of the evidence presented in the present case, as soon as possible." This motion was denied on May 19th, and on May 16th, the court denied the plaintiff's motion for reconsideration. To all of which exceptions were duly taken. June 7, 1928, plaintiff filed a petition praying, for the reasons therein stated, that the decision of the court in the case be set aside, and that the parties be permitted to again present their testimony and to have the case decided upon its merits. To which objections were duly made, and on June 28, 1928, the court denied plaintiff's motion for a new trial. To which exceptions were duly taken, and on July 10, 1928, the plaintiff filed a motion in which he prayed that the period for the appeal interposed by the plaintiff be suspended, and that the order of June 28, 1928, be set aside, "and that another be entered ordering the re-taking of the evidence in this case." To which objections were also filed and later overruled, from all of which the plaintiff appealed and assigns the following errors: I. The trial court erred in not having confined itself, in the determination of this case, to the question as to whether or not it is proper to dissolve the partnership and to liquidate its assets, for all other issues raised by appellees are incidental with the process of liquidation provided for by law. II. The trial court erred in not resolving the primary and most important question at issue in his case, namely, whether or not the appellant M. Teague was the manager of the unregistered partnership Malangpaya Fish Company. III. The trial court erred in holding that the appellant had no authority to buy the Lapu-Lapu, the Ford truck and the adding machine without the consent of his copartners, for in accordance with article 131 of the Code of Commerce the managing partner of a partnership can make purchases for the partnership without the knowledge and/or consent of his copartners. IV. The trial court erred in holding that the Lapu-Lapu, the Ford truck and the adding machine purchased by appellant, as manager of the Malangpaya Fish Company, for and with funds of the partnership, do not form part of the assets of the partnership. V. The trial court erred in requiring the appellant to pay to the partnership the sum of P14,032.26, purchase price, cost of repairs and equipment of the barge Lapu-Lapu; P1,230 purchase price of the adding machine, for these properties were purchased for and they form part of the assets of the partnership.

VI. The trial court erred in disapproving appellant's claim for salary and expenses incurred by him for and in connection with the partnership's business. VII. The trial court erred in approving the claims of appellees J.T. Maddy and H. Martin and in requiring the appellant to pay them the sum of P1,512.03 and P615.49 respectively. VIII. The trial court erred in not taking cognizance of appellant's claim for reimbursement for advances made by him for the partnerships, as shown in the statement attached to the complaint marked Exhibit A, in which there is a balance in his favor and against the partnership amounting to over P16,000. X. Lastly, considering the irregularities committed, the disappearance of the stenographic notes for a considerable length of time, during which time changes in the testimonies of the witnesses could have been made and the impossibility of having an accurate and complete transcript of the stenographic notes, the trial court erred in denying appellant's petition for the retaking of the evidence in this case.

JOHNS, J.: By their respective pleadings, all parties agreed that there was a partnership between them, which appears at one time to have done a good business. In legal effect, plaintiff asked for its dissolution and the appointment of a receiver pendente lite. The defendants did not object to the dissolution of the partnership, but prayed for an accounting with the plaintiff. It was upon such issues that the evidence was taken and the case tried. Hence, there is no merit in the first in the first assignment of error. Complaint is made that the lower court did not specifically decide as to whether or not the plaintiff was the manager of the unregistered partnership. But upon that question the lower court, in legal effect, followed and approved the contention of the defendants that the duties of each partners were specified and defined in the "plans for formation of a limited partnership," in which it is stated that Captain Maddy would have charge of the Barracuda and its navigation, with a salary of P300 per month, and that Martin would have charge of the southern station, cold stores, commisary and procuring fish, with a salary of P300 per month, and that the plaintiff would have charge of selling fish in Manila and purchasing supplies, without salary until such time as the business is placed on a paying basis, when his salary would be the same as that of Maddy and Martin, and that the principal office of the partnership "shall keep books showing plainly all transactions," which shall be available at all time for inspection of any of the members. It will thus be noted that the powers and duties of Maddy Martin, and the plaintiff are specifically defined, and that each of them was more or less the general manager in his particular part of the business. That is to say, that Maddy's power and duties are confined and limited to the charge of the Barracuda and its navigation, and Martin's to the southern station, cold stores, commissary and procuring fish, and that plaintiff's powers and duties are confined and limited to "selling fish in Manila and the purchase of supplies." In the selling of fish, plaintiff received a substantial amount of money which he deposited to the credit of the company signed by him as manager, but it appears that was a requirement which the bank made in the ordinary course of business, as to who was authorized to sign checks for the partnership; otherwise, it would not cash the checks. In the final analysis, the important question in this case is the ownership of the Lapu-Lapu, the Ford truck, and the adding machine. The proof is conclusive that they were purchased by the plaintiff and paid for him from and out of the money of the partnership. That at the time of their purchase, the Lapu-Lapu was purchased in the name of the plaintiff, and that he personally had it registered in the customs house in his own name, for which he made an affidavit that he was its owner. After the purchase, he also had the Ford truck registered in his won name. His contention that this was done as a matter of convenience is not

tenable. The record shows that when the partnership purchased the Barracuda, it was registered in the customs house in the name of the partnership, and that it was a very simple process to have it so registered. Without making a detailed analysis of the evidence, we agree with the trial court that the Lapu-Lapu, the Ford truck, and the adding machine were purchased by the plaintiff and paid for out of the funds of the partnership, and that by his own actions and conduct, and the taking of the title in his own name, he is now estopped to claim or assert that they are not his property or that they are the property of the company. Again, under his powers and duties as specified in the tentative, unsigned written agreement, his authority was confined and limited to the "selling of fish in Manila and the purchase of supplies." It must be conceded that, standing alone, the power to sell fish and purchase supplies does not carry with it or imply the authority to purchase the Lapu-Lapu, or the Ford truck, or the adding machine. From which it must follow that he had no authority to purchase the lighter Lapu-Lapu, the Ford truck, or the adding machine, as neither of them can be construed as supplies for the partnership business. While it is true that the tentative agreement was never personally signed by any member of the firm, the trial court found as a fact, and that finding is sustained by the evidence, that this unsigned agreement was acted upon and accepted by all parties as the basis of the partnership. It was upon that theory that the lower court allowed the defendant s Maddy and Martin a salary of P300 per month and the money which each of them paid out and advanced in the discharged of their respective duties, and denied any salary to the plaintiff, for the simple reason that the business was never on a paying basis. Much could be said about this division of powers, and that Maddy and Martin's duties were confined and limited to the catching and procuring of fish, which were then shipped to the plaintiff who sold them on the Manila market and received the proceeds of the sales. In other words, Maddy and Martin were supplying the fish to plaintiff who sold them under an agreement that he would account for the money. Upon the question of accounting, his testimony as to the entries which he made and how he kept the books of the partnership is very interesting: Q. Then this salary does not take into consideration the fact that you claim the company is very badly in debt? A. Q. A. Q. A. Well, I put the salary in there. I am asking you if that is true? I do not think I will decide that, I think it will be decided by the court. I will ask you to answer the question? You asked me my opinion and I said that I am entitled to it. xxx xxx xxx

I am not on trial as a bookkeeper; if my lawyers won't object to the question I will object myself; I am not on trial as a bookkeeper; I keep my books any way I want to, put in what I want to, and I leave out anything I don't choose to put in, xxx Q. xxx xxx

You have your own bookkeeping?

A. Well, I run my business to suit myself, I put in the books what I want to, and I leave out what I want to, and I have a quarter of a million pesos to show for it,

xxx

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Q. Did you not say that you paid yourself a salary in August because you made a profit? A. Yes. This profit was made counting the stock on hand and equipment on hand, but as far as cash to pay this balance, I did not have it. when I wanted a salary I just took it. I ran things to suit myself. xxx xxx xxx

Q. In other words in going against these partners you are going to tax them for the services of your attorney? A. You are mistaken; I am not against them. I paid this out for filing this complaint and if the honorable court strikes it out, all right. I think it was a just charge. When I want to sue them the Company can pay for my suit. Q. Would you have any objection to their asking for their attorney's fees from the company as partners also in the business? A. Yes.

Q. You would object to your partners having their attorney's fees here paid out of the copartnership like you have had yours paid? A. Yes, that is the way I do my business.

To say the least, this kind of evidence does not appeal to the court. This case has been bitterly contested, and there is much feeling between the parties and even their respective attorneys. Be that as it may, we are clearly of the opinion that the findings of the lower court upon questions of fact are well sustained by the evidence. Plaintiff's case was tried on the theory that the partnership was the owner of the property in question, and no claim was made for the use of the Lapu-Lapu, and it appears that P14,032.26 of the partnership money was used in its purchase, overhauling, expenses and repairs. That in truth and in fact the partnership had the use and benefit of the Lapu-Lapu in its business from sometime in May until the receiver was appointed on November 11, 1927, or a period of about six months, and that the partnership has never paid anything for its use. it is true that there is no testimony as to the value of such use, but the cost of the Lapu-Lapu and the time of its use and the purpose for which it was used, all appear in the record. For such reason, in the interest of justice, plaintiff should be compensated for the reasonable value of the time which the partnership made use of the Lapu-Lapu. All things considered, we are of the opinion that P2,000 is a reasonable, amount which the plaintiff should receive for its use. In all things and respects, the judgment of the lower court as to the merits is affirmed, with the modification only that P2,000 shall be deducted from the amount of the judgment which was awarded against the plaintiff, such deduction to be made for and on account of such use of the Lapu-Lapu by the partnership, with costs against the appellant. So ordered. Avancea, C.J., Street, Villamor, Romualdez and Villa-Real, JJ. concur. Johnson, J., reserves his vote.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 5840 September 17, 1910

THE UNITED STATES, plaintiff-appellee, vs. EUSEBIO CLARIN, defendant-appellant. Francisco Dominguez, for appellant. Attorney-General Villamor, for appellee. ARELLANO, C.J.: Pedro Larin delivered to Pedro Tarug P172, in order that the latter, in company with Eusebio Clarin and Carlos de Guzman, might buy and sell mangoes, and, believing that he could make some money in this business, the said Larin made an agreement with the three men by which the profits were to be divided equally between him and them. Pedro Tarug, Eusebio Clarin, and Carlos de Guzman did in fact trade in mangoes and obtained P203 from the business, but did not comply with the terms of the contract by delivering to Larin his half of the profits; neither did they render him any account of the capital. Larin charged them with the crime of estafa, 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, amounting to P15.50. Pedro Tarug and Carlos de Guzman appeared in the case as witnesses and assumed that the facts presented concerned the defendant and themselves together. The trial court, that of First Instance of Pampanga, sentenced the defendant, Eusebio Clarin, to six months' arresto mayor, to suffer the accessory penalties, and to return to Pedro Larin P172, besides P30.50 as his share of the profits, or to subsidiary imprisonment in case of insolvency, and to pay the costs. The defendant appealed, and in deciding his appeal we arrive at the following conclusions: When two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves, a contract is formed which is called partnership. (Art. 1665, Civil Code.) When Larin put the P172 into the partnership which he formed with Tarug, Clarin, and Guzman, he invested his capital in the risks or benefits of the business of the purchase and sale of mangoes, and, even though he had reserved the capital and conveyed only the usufruct of his money, it would not devolve upon of his three partners to return his capital to him, but upon the partnership of which he himself formed part, or if it were to be done by one of the three specifically, it would be Tarug, who, according to the evidence, was the person who received the money directly from Larin. The P172 having been received by the partnership, the business commenced and profits accrued, the action that lies with the partner who furnished the capital for the recovery of his money is not a criminal action for estafa, 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.

No. 5 of article 535 of the Penal Code, according to which those are guilty of estafa "who, to the prejudice of another, shall appropriate or misapply any money, goods, 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," (as, for example, in commodatum, precarium, and other unilateral contracts which require the return of the same thing received) does not include money received for a partnership; otherwise the result would be that, if the partnership, instead of obtaining profits, suffered losses, 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, it would have to answer to the charge of estafa, for which it would be sufficient to argue that the partnership had received the money under obligation to return it. We therefore freely acquit Eusebio Clarin, with the costs de oficio. The complaint for estafa is dismissed without prejudice to the institution of a civil action. Torres, Johnson, Moreland and Trent, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-5236 January 10, 1910

PEDRO MARTINEZ, plaintiff-appellee, vs. ONG PONG CO and ONG LAY, defendants. ONG PONG CO., appellant. Fernando de la Cantera for appellant. O'Brien and DeWitt for appellee. ARELLANO, C.J.: On the 12th of December, 1900, the plaintiff herein delivered P1,500 to the defendants who, in a private document, acknowledged that they had received the same with the agreement, as stated by them, "that we are to invest the amount in a store, the profits or losses of which we are to divide with the former, in equal shares." The plaintiff filed a complaint on April 25, 1907, in order to compel the defendants to render him an accounting of the partnership as agreed to, or else to refund him the P1,500 that he had given them for the said purpose. Ong Pong Co alone appeared to answer the complaint; he admitted the fact of the agreement and the delivery to him and to Ong Lay of the P1,500 for the purpose aforesaid, but he alleged that Ong Lay, who was then deceased, was the one who had managed the business, and that nothing had resulted therefrom save the loss of the capital of P1,500, to which loss the plaintiff agreed. The judge of the Court of First Instance of the city of Manila who tried the case ordered Ong Pong Co to return to the plaintiff one-half of the said capital of P1,500 which, together with Ong Lay, he had received from the plaintiff, to wit, P750, plus P90 as one-half of the profits, calculated at the rate of 12 per cent per annum for the six months that the store was supposed to have been open, both sums in Philippine currency, making a total of P840, with legal interest thereon at the rate of 6 per cent per annum, from the 12th of June, 1901, when the business terminated and on which date he ought to have returned the said amount to the plaintiff, until the full payment thereof with costs. From this judgment Ong Pong Co appealed to this court, and assigned the following errors: 1. For not having taken into consideration the fact that the reason for the closing of the store was the ejectment from the premises occupied by it. 2. For not having considered the fact that there were losses. 3. For holding that there should have been profits. 4. For having applied article 1138 of the Civil Code. 5. and 6. For holding that the capital ought to have yielded profits, and that the latter should be calculated 12 per cent per annum; and 7. The findings of the ejectment.

As to the first assignment of error, the fact that the store was closed by virtue of ejectment proceedings is of no importance for the effects of the suit. The whole action is based upon the fact that the defendants received certain capital from the plaintiff for the purpose of organizing a company; they, according to the agreement, were to handle the said money and invest it in a store which was the object of the association; they, in the absence of a special agreement vesting in one sole person the management of the business, were the actual administrators thereof; as such administrators they were the agent of the company and incurred the liabilities peculiar to every agent, among which is that of rendering account to the principal of their transactions, and paying him everything they may have received by virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.) Neither of them has rendered such account nor proven the losses referred to by Ong Pong Co; they are therefore obliged to refund the money that they received for the purpose of establishing the said store the object of the association. This was the principal pronouncement of the judgment. With regard to the second and third assignments of error, this court, like the court below, finds no evidence that the entire capital or any part thereof was lost. It is no evidence of such loss to aver, without proof, that the effects of the store were ejected. Even though this were proven, it could not be inferred therefrom that the ejectment was due to the fact that no rents were paid, and that the rent was not paid on account of the loss of the capital belonging to the enterprise. With regard to the possible profits, the finding of the court below are based on the statements of the defendant Ong Pong Co, to the effect that "there were some profits, but not large ones." This court, however, does not find that the amount thereof has been proven, nor deem it possible to estimate them to be a certain sum, and for a given period of time; hence, it can not admit the estimate, made in the judgment, of 12 per cent per annum for the period of six months. Inasmuch as in this case nothing appears other than the failure to fulfill an obligation on the part of a partner who acted as agent in receiving money for a given purpose, for which he has rendered no accounting, such agent is responsible only for the losses which, by a violation of the provisions of the law, he incurred. This being an obligation to pay in cash, there are no other losses than the legal interest, which interest is not due except from the time of the judicial demand, or, in the present case, from the filing of the complaint. (Arts. 1108 and 1100, Civil Code.) We do not consider that article 1688 is applicable in this case, in so far as it provides "that the partnership is liable to every partner for the amounts he may have disbursed on account of the same and for the proper interest," for the reason that no other money than that contributed as is involved. As in the partnership there were two administrators or agents liable for the above-named amount, article 1138 of the Civil Code has been invoked; this latter deals with debts of a partnership where the obligation is not a joint one, as is likewise provided by article 1723 of said code with respect to the liability of two or more agents with respect to the return of the money that they received from their principal. Therefore, the other errors assigned have not been committed. In view of the foregoing judgment appealed from is hereby affirmed, provided, however, that the defendant Ong Pong Co shall only pay the plaintiff the sum of P750 with the legal interest thereon at the rate of 6 per cent per annum from the time of the filing of the complaint, and the costs, without special ruling as to the costs of this instance. So ordered. Torres, Johnson, Carson, and Moreland, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC

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. Leonardo Abola for petitioners. Baisas, Alberto & Associates for respondent.

MAKALINTAL, J.: 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 comaker 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 Co-partnership," 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 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, 1955, until the mortgage loan of P30,000.00 to be obtained from the RFC shall have been fully paid. This version, however, is discredited not only by the aforesaid documentary evidence brought forward by the appellee, but also by the fact that from June 7, 1955 up to the filing of their answer to the complaint on February 8, 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". It is thus reasonable to suppose that, had appellee not filed the present action, appellants would not have advanced this obvious afterthought that Exhibit "A" does not express the true intent and agreement of the parties thereto. At pages 32-33 of appellants' brief, they also make much of the argument that 'there is an overriding fact which proves that the parties to the Amended Articles of Partnership, Exhibit "A", did not contemplate to make the appellee Estrella

Abad Santos, an industrial partner of Evangelista & Co. It is an admitted fact that since before the execution of the amended articles of partnership, Exhibit "A", the appellee Estrella Abad Santos has been, and up to the present time still is, one of the judges of the City Court of Manila, devoting all her time to the performance of the duties of her public office. This fact proves beyond peradventure that it was never contemplated between the parties, for she could not lawfully contribute her full time and industry which is the obligation of an industrial partner pursuant to Art. 1789 of the Civil Code. The Court of Appeals then proceeded to consider appellee's testimony on this point, quoting it in the decision, and then concluded as follows: One cannot read appellee's testimony just quoted without gaining the very definite impression that, even as she was and still is a Judge of the City Court of Manila, 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. Article 1767 of the New Civil Code which provides that "By contract of partnership two or more persons bind themselves, to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves, 'does not specify the kind of industry that a partner may thus contribute, 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. 1789. An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so; and if he should do so, 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, with a right to damages in either case.' It is not disputed that the provision against the industrial partner engaging in business for himself seeks to prevent any conflict of interest between the industrial partner and the partnership, and to insure faithful compliance by said partner with this prestation. There is no pretense, however, even on the part of the appellee is engaged in any business antagonistic to that of appellant company, since being a Judge of one of the branches of the City Court of Manila can hardly be characterized as a business. 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, 1964 or after around nine (9) years from June 7, 1955 subsequent to the filing of defendants' answer to the complaint, defendants reached an agreement whereby the herein plaintiff been excluded from, and deprived of, her alleged share, interests or participation, as an alleged industrial partner, in the defendant partnership and/or in its net profits or income, on the ground plaintiff has never contributed her industry to the partnership, instead she has been and still is a judge of the City Court (formerly Municipal Court) of the City of Manila, devoting her time to performance of her duties as such judge and enjoying the privilege and emoluments appertaining to the said office, aside from teaching in law school in Manila, without the express consent of the herein defendants' (Record On Appeal, pp. 24-25). Having always knows as a appellee as a City judge even before she joined appellant company on June 7, 1955 as an industrial partner, 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, 1955, until the mortgage of P30,000.00 obtained from the Rehabilitation Finance Corporal shall have been fully paid." (Appellants Brief, p. 38). What has gone before persuades us to hold with the lower Court that appellee is an industrial partner of appellant company, 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, which right appellants take exception under their second assigned error. Our said holding is based on the following article of the New Civil Code: 'ART. 1899. Any partner shall have the right to a formal account as to partnership affairs: (1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners; (2) If the right exists under the terms of any agreement; (3) As provided by article 1807; (4) Whenever other circumstance render it just and reasonable. 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, accepting as conclusive the factual findings of the lower court upon its own assessment of the evidence. The judgment appealed from is affirmed, with costs. Zaldivar, Castro, Fernando, Teehankee, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-45464 April 28, 1939

JOSUE SONCUYA, plaintiff-appellant, vs. CARMEN DE LUNA, defendant-appellee. Josue Soncuya in his own behalf. Conrado V. Sanchez and Jesus de Veyra for appellee. VILLA-REAL, J.: On September 11, 1936, plaintiff Josue Soncuya filed with the Court of First Instance of Manila and amended complaint against Carmen de Luna in her own name and as co-administratrix of the intestate estate, of Librada Avelino, in which, upon the facts therein alleged, he prayed that defendant be sentenced to pay him the sum of P700,432 as damages and costs. To the aforesaid amended complaint defendant Carmen de Luna interposed a demurrer based on the following grounds: (1) That the complaint does not contain facts sufficient to constitute a cause of action; and (2) that the complaint is ambiguous, unintelligible and vague. Trial on the demurrer having been held and the parties heard, the court found the same well-founded and sustained it, ordering the plaintiff to amend his complaint within a period of ten days from receipt of notice of the order. Plaintiff having manifested that he would prefer not to amend his amended complaint, the attorney for the defendant, Carmen de Luna, filed a motion praying that the amended complaint be dismissed with costs against the plaintiff. Said motion was granted by The Court of First Instance of Manila which ordered the dismissal of the aforesaid amended complaint, with costs against the plaintiff. From this order of dismissal, the appellant took an appeal, assigning twenty alleged errors committed by the lower court in its order referred to. The demurrer interposed by defendant to the amended complaint filed by plaintiff having been sustained on the grounds that the facts alleged in said complaint are not sufficient to constitute a cause of action and that the complaint is ambiguous, unintelligible and vague, the only questions which may be raised and considered in the present appeal are those which refer to said grounds. In the amended complaint it is prayed that defendant Carmen de Luna be sentenced to pay plaintiff damages in the sum of P700,432 as a result of the administration, said to be fraudulent, of he partnership, "Centro Escolar de Seoritas", of which plaintiff, defendant and the deceased Librada Avelino were members. For the purpose of adjudicating to plaintiff damages which he alleges to have suffered as a partner by reason of the supposed fraudulent management of he partnership referred to, it is first necessary that a liquidation of the business thereof be made to the end that the profits and losses may be known and the causes of the latter and the responsibility of the defendant as well as the damages which each partner may have suffered, may be determined. It is not alleged in the complaint that such a liquidation has been effected nor is it prayed that it be made. Consequently, there is no reason or cause for plaintiff to institute

the action for damages which he claims from the managing partner Carmen de Luna (Po Yeng Cheo vs. Lim Ka Yam, 44 Phil., 172). Having reached the conclusion that the facts alleged in the complaint are not sufficient to constitute a cause of action on the part of plaintiff as member of the partnership "Centro Escolar de Seoritas" to collect damages from defendant as managing partner thereof, without a previous liquidation, we do not deem it necessary to discuss the remaining question of whether or not the complaint is ambiguous, unintelligible and vague. In view of the foregoing considerations, we are of the opinion and so hold that for a partner to be able to claim from another partner who manages the general copartnership, damages allegedly suffered by him by reason of the fraudulent administration of the latter, a previous liquidation of said partnership is necessary. Wherefore, finding no error in the order appealed from the same is affirmed in all its parts, with costs against the appellant. So ordered. Avancea, C. J., Imperial, Diaz, Laurel, Concepcion, and Moran, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 85494 May 7, 1991 CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V. RAMNANI and MOTI G. RAMNANI, petitioners, vs. COURT OF APPEALS, SPOUSES ISHWAR JETHMAL RAMNANI, SONYA JETHMAL RAMNANI and OVERSEAS HOLDING CO., LTD., respondents. G.R. No. 85496 May 7, 1991 SPOUSES ISHWAR JETHMAL RAMNANI AND SONYA JET RAMNANI, petitioners, vs. THE HONORABLE COURT OF APPEALS, ORTIGAS & CO., LTD. PARTNERSHIP, and OVERSEAS HOLDING CO., LTD., respondents. Quasha, Asperilla Ancheta, Pea and Nolasco for petitioners Ishwar Jethmal Ramnani & Sonya Ramnani. Salonga, Andres, Hernandez & Allado for Choithram Jethmal Ramnani, Nirmla Ramnani & Moti Ramnani. Rama Law Office for private respondents in collaboration with Salonga, Andres, Hernandez & Allado. Eulogio R. Rodriguez for Ortigas & Co., Ltd.

GANCAYCO, J.:p This case involves the bitter quarrel of two brothers over two (2) parcels of land and its improvements now worth a fortune. The bone of contention is the apparently conflicting factual findings of the trial court and the appellate court, the resolution of which will materially affect the result of the contest. The following facts are not disputed. Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of the full blood. Ishwar and his spouse Sonya had their main business based in New York. Realizing the difficulty of managing their investments in the Philippines they executed a general power of attorney on January 24, 1966 appointing Navalrai and Choithram as attorneys-in-fact, empowering them to 1 manage and conduct their business concern in the Philippines. On February 1, 1966 and on May 16, 1966, Choithram, in his capacity as aforesaid attorney-infact of Ishwar, entered into two agreements for the purchase of two parcels of land located in

Barrio Ugong, Pasig, Rizal, from Ortigas & Company, Ltd. Partnership (Ortigas for short) with a 2 total area of approximately 10,048 square meters. Per agreement, Choithram paid the down payment and installments on the lot with his personal checks. A building was constructed thereon by Choithram in 1966 and this was occupied and rented by Jethmal Industries and a wardrobe shop called Eppie's Creation. Three other buildings were built thereon by Choithram through a loan of P100,000.00 obtained from the Merchants Bank as well as the income derived from the first building. The buildings were leased out by Choithram as attorney-in-fact of Ishwar. Two of these buildings were later burned. Sometime in 1970 Ishwar asked Choithram to account for the income and expenses relative to these properties during the period 1967 to 1970. Choithram failed and refused to render such accounting. As a consequence, on February 4, 1971, Ishwar revoked the general power of attorney. Choithram and Ortigas were duly notified of such revocation on April 1, 1971 and May 3 24, 1971, respectively. Said notice was also registered with the Securities and Exchange 4 Commission on March 29, 1971 and was published in the April 2, 1971 issue of The Manila 5 Times for the information of the general public. Nevertheless, Choithram as such attorney-in-fact of Ishwar, transferred all rights and interests of Ishwar and Sonya in favor of his daughter-in-law, Nirmla Ramnani, on February 19, 1973. Her husband is Moti, son of Choithram. Upon complete payment of the lots, Ortigas executed the 6 corresponding deeds of sale in favor of Nirmla. Transfer Certificates of Title Nos. 403150 and 403152 of the Register of Deeds of Rizal were issued in her favor. Thus, on October 6, 1982, Ishwar and Sonya (spouses Ishwar for short) filed a complaint in the Court of First Instance of Rizal against Choithram and/or spouses Nirmla and Moti (Choithram et al. for brevity) and Ortigas for reconveyance of said properties or payment of its value and damages. An amended complaint for damages was thereafter filed by said spouses. After the issues were joined and the trial on the merits, a decision was rendered by the trial court on December 3, 1985 dismissing the complaint and counterclaim. A motion for reconsideration thereof filed by spouses Ishwar was denied on March 3, 1986. An appeal therefrom was interposed by spouses Ishwar to the Court of Appeals wherein in due course a decision was promulgated on March 14, 1988, the dispositive part of which reads as follows: WHEREFORE, judgment is hereby rendered reversing and setting aside the appealed decision of the lower court dated December 3, 1985 and the Order dated March 3, 1986 which denied plaintiffs-appellants' Motion for Reconsideration from aforesaid decision. A new decision is hereby rendered sentencing defendants- appellees Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti C. Ramnani, and Ortigas and Company Limited Partnership to pay, jointly and severally, plaintiffs-appellants the following: 1. Actual or compensatory damages to the extent of the fair market value of the properties in question and all improvements thereon covered by Transfer Certificate of Title No. 403150 and Transfer Certificate of Title No. 403152 of the Registry of Deeds of Rizal, prevailing at the time of the satisfaction of the judgment but in no case shall such damages be less than the value of said properties as appraised by Asian Appraisal, Inc. in its Appraisal Report dated August 1985 (Exhibits T to T-14, inclusive).

2. All rental incomes paid or ought to be paid for the use and occupancy of the properties in question and all improvements thereon consisting of buildings, and to be computed as follows: a) On Building C occupied by Eppie's Creation and Jethmal Industries from 1967 to 1973, inclusive, based on the 1967 to 1973 monthly rentals paid by Eppie's Creation; b) Also on Building C above, occupied by Jethmal Industries and Lavine from 1974 to 1978, the rental incomes based on then rates prevailing as shown under Exhibit "P"; and from 1979 to 1981, based on then prevailing rates as indicated under Exhibit "Q"; c) On Building A occupied by Transworld Knitting Mills from 1972 to 1978, the rental incomes based upon then prevailing rates shown under Exhibit "P", and from 1979 to 1981, based on prevailing rates per Exhibit "Q"; d) On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to 1978, the rentals based on the Lease Contract, Exhibit "P", and from 1979 to 1980, the rentals based on the Lease Contract, Exhibit "Q", and thereafter commencing 1982, to account for and turn over the rental incomes paid or ought to be paid for the use and occupancy of the properties and all improvements totalling 10,048 sq. m based on the rate per square meter prevailing in 1981 as indicated annually cumulative up to 1984. Then, commencing 1985 and up to the satisfaction of the judgment, rentals shall be computed at ten percent (10%) annually of the fair market values of the properties as appraised by the Asian Appraisal, Inc. in August 1985 (Exhibits T to T-14, inclusive.) 3. Moral damages in the sum of P200,000.00; 4. Exemplary damages in the sum of P100,000.00; 5. Attorney's fees equivalent to 10% of the award herein made; 6. Legal interest on the total amount awarded computed from first demand in 1967 and until the full amount is paid and satisfied; and 7. The cost of suit.
7

Acting on a motion for reconsideration filed by Choithram, et al. and Ortigas, the appellate court promulgated an amended decision on October 17, 1988 granting the motion for reconsideration of Ortigas by affirming the dismissal of the case by the lower court as against Ortigas but denying 8 the motion for reconsideration of Choithram, et al. Choithram, et al. thereafter filed a petition for review of said judgment of the appellate court alleging the following grounds:

1. The Court of Appeals gravely abused its discretion in making a factual finding not supported by and contrary, to the evidence presented at the Trial Court. 2. The Court of Appeals acted in excess of jurisdiction in awarding damages based on the value of the real properties in question where the cause of action of private respondents is recovery of a sum of money. ARGUMENTS I THE COURT OF APPEALS ACTED IN GRAVE ABUSE OF ITS DISCRETION IN MAKING A FACTUAL FINDING THAT PRIVATE RESPONDENT ISHWAR REMITTED THE AMOUNT OF US $150,000.00 TO PETITIONER CHOITHRAM IN THE ABSENCE OF PROOF OF SUCH REMITTANCE. II THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND MANIFEST PARTIALITY IN DISREGARDING THE TRIAL COURTS FINDINGS BASED ON THE DIRECT DOCUMENTARY AND TESTIMONIAL EVIDENCE PRESENTED BY CHOITHRAM IN THE TRIAL COURT ESTABLISHING THAT THE PROPERTIES WERE PURCHASED WITH PERSONAL FUNDS OF PETITIONER CHOITHRAM AND NOT WITH MONEY ALLEGEDLY REMITTED BY RESPONDENT ISHWAR. III THE COURT OF APPEALS ACTED IN EXCESS OF JURISDICTION IN AWARDING DAMAGES BASED ON THE VALUE OF THE PROPERTIES AND 9 THE FRUITS OF THE IMPROVEMENTS THEREON. Similarly, spouses Ishwar filed a petition for review of said amended decision of the appellate court exculpating Ortigas of liability based on the following assigned errors I THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR AND HAS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND/OR WITH APPLICABLE DECISIONS OF THIS HONORABLE COURT A) IN PROMULGATING THE QUESTIONED AMENDED DECISION (ANNEX "A") RELIEVING RESPONDENT ORTIGAS FROM LIABILITY AND DISMISSING PETITIONERS' AMENDED COMPLAINT IN CIVIL CASE NO. 534-P, AS AGAINST SAID RESPONDENT ORTIGAS; B) IN HOLDING IN SAID AMENDED DECISION THAT AT ANY RATE NO ONE EVER TESTIFIED THAT ORTIGAS WAS A SUBSCRIBER TO THE MANILA TIMES PUBLICATION OR THAT ANY OF ITS OFFICERS READ THE NOTICE AS PUBLISHED IN THE MANILA TIMES, THEREBY

ERRONEOUSLY CONCLUDING THAT FOR RESPONDENT ORTIGAS TO BE CONSTRUCTIVELY BOUND BY THE PUBLISHED NOTICE OF REVOCATION, ORTIGAS AND/OR ANY OF ITS OFFICERS MUST BE A SUBSCRIBER AND/OR THAT ANY OF ITS OFFICERS SHOULD READ THE NOTICE AS ACTUALLY PUBLISHED; C) IN HOLDING IN SAID AMENDED DECISION THAT ORTIGAS COULD NOT BE HELD LIABLE JOINTLY AND SEVERALLY WITH THE DEFENDANTS-APPELLEES CHOITHRAM, MOTI AND NIRMLA RAMNANI, AS ORTIGAS RELIED ON THE WORD OF CHOITHRAM THAT ALL ALONG HE WAS ACTING FOR AND IN BEHALF OF HIS BROTHER ISHWAR WHEN IT TRANSFERRED THE RIGHTS OF THE LATTER TO NIRMLA V. RAMNANI; D) IN IGNORING THE EVIDENCE DULY PRESENTED AND ADMITTED DURING THE TRIAL THAT ORTIGAS WAS PROPERLY NOTIFIED OF THE NOTICE OF REVOCATION OF THE GENERAL POWER OF ATTORNEY GIVEN TO CHOITHRAM, EVIDENCED BY THE PUBLICATION IN THE MANILA TIMES ISSUE OF APRIL 2, 1971 (EXH. F) WHICH CONSTITUTES NOTICE TO THE WHOLE WORLD; THE RECEIPT OF THE NOTICE OF SUCH REVOCATION WHICH WAS SENT TO ORTIGAS ON MAY 22, 1971 BY ATTY. MARIANO P. MARCOS AND RECEIVED BY ORTIGAS ON MAY 24, 1971 (EXH. G) AND THE FILING OF THE NOTICE WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29,1971 (EXH. H); E) IN DISCARDING ITS FINDINGS CONTAINED IN ITS DECISION OF 14 MARCH 1988 (ANNEX B) THAT ORTIGAS WAS DULY NOTIFIED OF THE REVOCATION OF THE POWER OF ATTORNEY OF CHOITHRAM, HENCE ORTIGAS ACTED IN BAD FAITH IN EXECUTING THE DEED OF SALE TO THE PROPERTIES IN QUESTION IN FAVOR OF NIRMLA V. RAMNANI; F) IN SUSTAINING RESPONDENT ORTIGAS VACUOUS REHASHED ARGUMENTS IN ITS MOTION FOR RECONSIDERATION THAT IT WOULD NOT GAIN ONE CENTAVO MORE FROM CHOITHRAM FOR THE SALE OF SAID LOTS AND THE SUBSEQUENT TRANSFER OF THE SAME TO THE MATTER'S DAUGHTER-IN-LAW, AND THAT IT WAS IN GOOD FAITH WHEN IT TRANSFERRED ISHWAR'S RIGHTS TO THE LOTS IN QUESTION. II THE RESPONDENT HONORABLE COURT OF APPEALS HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDING WHEN IT HELD IN THE QUESTIONED AMENDED DECISION OF 17 NOVEMBER 1988 (ANNEX A) THAT RESPONDENT ORTIGAS & CO., LTD., IS NOT JOINTLY AND SEVERALLY LIABLE WITH DEFENDANTSAPPELLEES CHOITHRAM, MOTI AND NIRMLA RAMNANI IN SPITE OF ITS

ORIGINAL DECISION OF 14 MARCH 1988 THAT ORTIGAS WAS DULY NOTIFIED OF THE REVOCATION OF THE POWER OF ATTORNEY OF 10 CHOITHRAM RAMNANI. The center of controversy is the testimony of Ishwar that during the latter part of 1965, he sent the amount of US $150,000.00 to Choithram in two bank drafts of US$65,000.00 and US$85,000.00 for the purpose of investing the same in real estate in the Philippines. The trial court considered this lone testimony unworthy of faith and credit. On the other hand, the appellate court found that the trial court misapprehended the facts in complete disregard of the evidence, documentary and testimonial. Another crucial issue is the claim of Choithram that because he was then a British citizen, as a temporary arrangement, he arranged the purchase of the properties in the name of Ishwar who was an American citizen and who was then qualified to purchase property in the Philippines under the then Parity Amendment. The trial court believed this account but it was debunked by the appellate court. As to the issue of whether of not spouses Ishwar actually sent US$150,000.00 to Choithram precisely to be used in the real estate business, the trial court made the following disquisition After a careful, considered and conscientious examination of the evidence adduced in the case at bar, plaintiff Ishwar Jethmal Ramanani's main evidence, which centers on the alleged payment by sending through registered mail from New York two (2) US$ drafts of $85,000.00 and $65,000.00 in the latter part of 1965 (TSN 28 Feb. 1984, p. 10-11). The sending of these moneys were before the execution of that General Power of Attorney, which was dated in New York, on January 24, 1966. Because of these alleged remittances of US $150,000.00 and the subsequent acquisition of the properties in question, plaintiffs averred that they constituted a trust in favor of defendant Choithram Jethmal Ramnani. This Court can be in full agreement if the plaintiffs were only able to prove preponderantly these remittances. The entire record of this case is bereft of even a shred of proof to that effect. It is completely barren. His uncorroborated testimony that he remitted these amounts in the "later part of 1965" does not engender enough faith and credence. Inadequacy of details of such remittance on the two (2) US dollar drafts in such big amounts is completely not positive, credible, probable and entirely not in accord with human experience. This is a classic situation, plaintiffs not exhibiting any commercial document or any document and/or paper as regard to these alleged remittances. Plaintiff Ishwar Ramnani is not an ordinary businessman in the strict sense of the word. Remember his main business is based in New York, and he should know better how to send these alleged remittances. Worst, plaintiffs did not present even a scum of proof, that defendant Choithram Ramnani received the alleged two US dollar drafts. Significantly, he does not know even the bank where these two (2) US dollar drafts were purchased. Indeed, plaintiff Ishwar Ramnani's lone testimony is unworthy of faith and credit and, therefore, deserves scant consideration, and since the plaintiffs' theory is built or based on such testimony, their cause of action collapses or falls with it. Further, the rate of exchange that time in 1966 was P4.00 to $1.00. The alleged two US dollar drafts amounted to $150,000.00 or about P600,000.00. Assuming the cash price of the two (2) lots was only P530,000.00 (ALTHOUGH he said: "Based on my knowledge I have no evidence," when asked if he even knows the cash price of the two lots). If he were really the true and bonafide investor and purchaser for profit as he asserted, he could have paid the price in full in cash directly and obtained the title in his name and not thru "Contracts To Sell" in

installments paying interest and thru an attorney-in fact (TSN of May 2, 1984, pp. 10-11) and, again, plaintiff Ishwar Ramnani told this Court that he does not know whether or not his late father-in-law borrowed the two US dollar drafts from the Swiss Bank or whether or not his late father-in-law had any debit memo from the 11 Swiss Bank (TSN of May 2, 1984, pp. 9-10). On the other hand, the appellate court, in giving credence to the version of Ishwar, had this to say While it is true, that generally the findings of fact of the trial court are binding upon the appellate courts, said rule admits of exceptions such as when (1) the conclusion is a finding grounded entirely on speculations, surmises and conjectures; (2) when the inferences made is manifestly mistaken, absurd and impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts and when the court, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee (Ramos vs. Court of Appeals, 63 SCRA 33; Philippine American Life Assurance Co. vs. Santamaria, 31 SCRA 798; Aldaba vs. Court of Appeals, 24 SCRA 189). The evidence on record shows that the t court acted under a misapprehension of facts and the inferences made on the evidence palpably a mistake. The trial court's observation that "the entire records of the case is bereft of even a shred of proof" that plaintiff-appellants have remitted to defendant-appellee Choithram Ramnani the amount of US $ 150,000.00 for investment in real estate in the Philippines, is not borne by the evidence on record and shows the trial court's misapprehension of the facts if not a complete disregard of the evidence , both documentary and testimonial. Plaintiff-appellant Ishwar Jethmal Ramnani testifying in his own behalf, declared that during the latter part of 1965, he sent the amount of US $150,000.00 to his brother Choithram in two bank drafts of US $65,000.00 and US $85,000.00 for the purpose of investing the same in real estate in the Philippines. His testimony is as follows: ATTY. MARAPAO: Mr. Witness, you said that your attorney-in-fact paid in your behalf. Can you tell this Honorable Court where your attorney-infact got the money to pay this property? ATTY. CRUZ: Wait. It is now clear it becomes incompetent or hearsay. COURT: Witness can answer. A I paid through my attorney-in-fact. I am the one who gave him the money.

ATTY. MARAPAO: Q You gave him the money? A That's right. Q How much money did you give him? A US $ 150,000.00. Q How was it given then? A Through Bank drafts. US $65,000.00 and US $85,000.00 bank drafts. The total amount which is $ 150,000.00 (TSN, 28 February 1984, p. 10; Emphasis supplied.) xxx xxx xxx ATTY. CRUZ: Q The two bank drafts which you sent I assume you bought that from some banks in New York? A No, sir. Q But there is no question those two bank drafts were for the purpose of paying down payment and installment of the two parcels of land? A Down payment, installment and to put up the building. Q I thought you said that the buildings were constructed . . . subject to our continuing objection from rentals of first building? ATTY. MARAPAO: Your Honor, that is misleading. COURT; Witness (may) answer. A Yes, the first building was immediately put up after the purchase of the two parcels of land that was in 1966 and the finds were used for the construction of the building from the US $150,000.00 (TSN, 7 March 1984, page 14; Emphasis supplied.) xxx xxx xxx Q These two bank drafts which you mentioned and the use for it you sent them by registered mail, did you send them from New Your?

A That is right. Q And the two bank drafts which were put in the registered mail, the registered mail was addressed to whom? A Choithram Ramnani. (TSN, 7 March 1984, pp. 14-15). On cross-examination, the witness reiterated the remittance of the money to his brother Choithram, which was sent to him by his father-in-law, Rochiram L. Mulchandoni from Switzerland, a man of immense wealth, which even defendants-appellees' witness Navalrai Ramnani admits to be so (tsn., p. 16, S. Oct. 13, 1985). Thus, on cross-examination, Ishwar testified as follows: Q How did you receive these two bank drafts from the bank the name of which you cannot remember? A I got it from my father-in-law. Q From where did your father- in-law sent these two bank drafts? A From Switzerland. Q He was in Switzerland. A Probably, they sent out these two drafts from Switzerland. (TSN, 7 March 1984, pp. 16-17; Emphasis supplied.) This positive and affirmative testimony of plaintiff-appellant that he sent the two (2) bank drafts totalling US $ 150,000.00 to his brother, is proof of said remittance. Such positive testimony has greater probative force than defendantappellee's denial of receipt of said bank drafts, for a witness who testifies affirmatively that something did happen should be believed for it is unlikely that a witness will remember what never happened (Underhill's Cr. Guidance, 5th Ed., Vol. 1, pp. 10-11). That is not all. Shortly thereafter, plaintiff-appellant Ishwar Ramnani executed a General Power of Attorney (Exhibit "A") dated January 24, 1966 appointing his brothers, defendants-appellees Navalrai and Choithram as attorney-in-fact empowering the latter to conduct and manage plaintiffs-appellants' business affairs in the Philippines and specifically No. 14. To acquire, purchase for us, real estates and improvements for the purpose of real estate business anywhere in the Philippines and to develop, subdivide, improve and to resell to buying public (individual, firm or corporation); to enter in any contract of sale in oar behalf and to enter mortgages between the vendees and the herein grantors that may be needed to finance the real estate business being undertaken. Pursuant thereto, on February 1, 1966 and May 16, 1966, Choithram Jethmal Ramnani entered into Agreements (Exhibits "B' and "C") with the other defendant. Ortigas and Company, Ltd., for the purchase of two (2) parcels of land

situated at Barrio Ugong, Pasig, Rizal, with said defendant-appellee signing the Agreements in his capacity as Attorney-in-fact of Ishwar Jethmal Ramnani. Again, on January 5, 1972, almost seven (7) years after Ishwar sent the US $ 150,000.00 in 1965, Choithram Ramnani, as attorney-in fact of Ishwar entered into a Contract of Lease with Sigma-Mariwasa (Exhibit "P") thereby re-affirming the ownership of Ishwar over the disputed property and the trust relationship between the latter as principal and Choithram as attorney-in-fact of Ishwar. All of these facts indicate that if plaintiff-appellant Ishwar had not earlier sent the US $ 150,000.00 to his brother, Choithram, there would be no purpose for him to execute a power of attorney appointing his brothers as s attorney-in-fact in buying real estate in the Philippines. As against Choithram's denial that he did not receive the US $150,000.00 remitted by Ishwar and that the Power of Attorney, as well as the Agreements entered into with Ortigas & Co., were only temporary arrangements, Ishwar's testimony that he did send the bank drafts to Choithram and was received by the latter, is the more credible version since it is natural, reasonable and probable. It is in accord with the common experience, knowledge and observation of ordinary men (Gardner vs. Wentors 18 Iowa 533). And in determining where the superior weight of the evidence on the issues involved lies, the court may consider the probability or improbability of the testimony of the witness (Sec. 1, Rule 133, Rules of Court). Contrary, therefore, to the trial court's sweeping observation that 'the entire records of the case is bereft of even a shred of proof that Choithram received the alleged bank drafts amounting to US $ 150,000.00, we have not only testimonial evidence but also documentary and circumstantial evidence proving said remittance of the money and the fiduciary relationship between the former and 12 Ishwar. The Court agrees. The environmental circumstances of this case buttress the claim of Ishwar that he did entrust the amount of US $ 150,000.00 to his brother, Choithram, which the latter invested in the real property business subject of this litigation in his capacity as attorney-in-fact of Ishwar. True it is that there is no receipt whatever in the possession of Ishwar to evidence the same, but it is not unusual among brothers and close family members to entrust money and valuables to each other without any formalities or receipt due to the special relationship of trust between them. And another proof thereof is the fact that Ishwar, out of frustration when Choithram failed to account for the realty business despite his demands, revoked the general power of attorney he extended to Choithram and Navalrai. Thereafter, Choithram wrote a letter to Ishwar pleading that the power of attorney be renewed or another authority to the same effect be extended, which reads as follows: J u n e 2 5 ,

1 9 7 1 MR. ISHWAR JETHMAL NEW YORK (1) Send power of Atty. immediately, because the case has been postponed for two weeks. The same way as it has been send before in favor of both names. Send it immediately otherwise everything will be lost unnecessarily, and then it will take us in litigation. Now that we have gone ahead with a case and would like to end it immediately otherwise squatters will take the entire land. Therefore, send it immediately. (2) Ortigas also has sued us because we are holding the installments, because they have refused to give a rebate of P5.00 per meter which they have to give us as per contract. They have filed the law suit that since we have not paid the installment they should get back the land. The hearing of this case is in the month of July. Therefore, please send the power immediately. In one case DADA (Elder Brother) will represent and in another one, I shall. (3) In case if you do not want to give power then make one letter in favor of Dada and the other one in my favor showing that in any litigation we can represent you and your wife, and whatever the court decide it will be acceptable by me. You can ask any lawyer, he will be able to prepare these letters. After that you can have these letters ratify before P.I. Consulate. It should be dated April 15, 1971. (4) Try to send the power because it will be more useful. Make it in any manner whatever way you have confident in it. But please send it immediately. You have cancelled the power. Therefore, you have lost your reputation everywhere. What can I further write you about it. I have told everybody that due to certain reasons I have written you to do this that is why you have done this. This way your reputation have been kept intact. Otherwise if I want to do something about it, I can show you that inspite of the power you have cancelled you can not do anything. You can keep this letter because my conscience is clear. I do not have anything in my mind. I should not be writing you this, but because my conscience is clear do you know that if I had predated papers what could you have done? Or do you know that I have many paper signed by you and if had done anything or do then what can you do about it? It is not necessary to write further about this. It does not matter if you have cancelled the power. At that time if I had predated and done something about it what could you have done? You do not know me. I am not after money. I can earn money anytime. It has been ten months since I have not received a single penny for expenses from Dada (elder brother). Why there are no expenses? We can not draw a single penny from knitting (factory). Well I am not going to write you further, nor there is any need for it. This much I am writing you because of the way you have conducted yourself. But remember, whenever I hale the money I will not keep it myself Right now I have not got anything at all . I am not going to write any further.

Keep your business clean with Naru. Otherwise he will discontinue because he 13 likes to keep his business very clean. The said letter was in Sindhi language. It was translated to English by the First Secretary of the Embassy of Pakistan, which translation was verified correct by the Chairman, Department of 14 Sindhi, University of Karachi. From the foregoing letter what could be gleaned is that 1. Choithram asked for the issuance of another power of attorney in their favor so they can continue to represent Ishwar as Ortigas has sued them for unpaid installments. It also appears therefrom that Ortigas learned of the revocation of the power of attorney so the request to issue another. 2. Choithram reassured Ishwar to have confidence in him as he was not after money, and that he was not interested in Ishwar's money. 3. To demonstrate that he can be relied upon, he said that he could have ante-dated the sales agreement of the Ortigas lots before the issuance of the powers of attorney and acquired the same in his name, if he wanted to, but he did not do so. 4. He said he had not received a single penny for expenses from Dada (their elder brother Navalrai). Thus, confirming that if he was not given money by Ishwar to buy the Ortigas lots, he could not have consummated the sale. 5. It is important to note that in said letter Choithram never claimed ownership of the property in question. He affirmed the fact that he bought the same as mere agent and in behalf of Ishwar. Neither did he mention the alleged temporary arrangement whereby Ishwar, being an American citizen, shall appear to be the buyer of the said property, but that after Choithram acquires Philippine citizenship, its ownership shall be transferred to Choithram. This brings us to this temporary arrangement theory of Choithram. The appellate court disposed of this matter in this wise Choithram's claim that he purchased the two parcels of land for himself in 1966 but placed it in the name of his younger brother, Ishwar, who is an American citizen, as a temporary arrangement,' because as a British subject he is disqualified under the 1935 Constitution to acquire real property in the Philippines, which is not so with respect to American citizens in view of the Ordinance Appended to the Constitution granting them parity rights, there is nothing in the records showing that Ishwar ever agreed to such a temporary arrangement. During the entire period from 1965, when the US $ 150,000. 00 was transmitted to Choithram, and until Ishwar filed a complaint against him in 1982, or over 16 years, Choithram never mentioned of a temporary arrangement nor can he present any memorandum or writing evidencing such temporary arrangement , prompting plaintiff-appellant to observe: The properties in question which are located in a prime industrial site in Ugong, Pasig, Metro Manila have a present fair market value of no less than P22,364,000.00 (Exhibits T to T-14,

inclusive), and yet for such valuable pieces of property, Choithram who now belatedly that he purchased the same for himself did not document in writing or in a memorandum the alleged temporary arrangement with Ishwar' (pp. 4-41, Appellant's Brief). Such verbal allegation of a temporary arrangement is simply improbable and inconsistent. It has repeatedly been held that important contracts made without evidence are highly improbable. The improbability of such temporary arrangement is brought to fore when we consider that Choithram has a son (Haresh Jethmal Ramnani) who is an American citizen under whose name the properties in question could be registered, both during the time the contracts to sell were executed and at the time absolute title over the same was to be delivered. At the time the Agreements were entered into with defendant Ortigas & Co. in 1966, Haresh, was already 18 years old and consequently, Choithram could have executed the deeds in trust for his minor son. But, he did not do this. Three (3) years, thereafter, or in 1968 after Haresh had attained the age of 21, Choithram should have terminated the temporary arrangement with Ishwar, which according to him would be effective only pending the acquisition of citizenship papers. Again, he did not do anything. Evidence to be believed, said Vice Chancellor Van Fleet of New Jersey, must not only proceed from the mouth of a credible witness, but it must be credible in itselfsuch as the common experience and observation of mankind can approve as probable under the circumstances. We have no test of the truth of human testimony, except its conformity to our knowledge, observation and experience. Whatever is repugnant to these belongs to the miraculous and is outside of judicial cognizance. (Daggers vs. Van Dyek 37 M.J. Eq. 130, 132). Another factor that can be counted against the temporary arrangement excuse is that upon the revocation on February 4, 1971 of the Power of attorney dated January 24, 1966 in favor of Navalrai and Choithram by Ishwar, Choithram wrote (tsn, p. 21, S. July 19, 1985) a letter dated June 25, 1971 (Exhibits R, R-1, R-2 and R-3) imploring Ishwar to execute a new power of attorney in their favor . That if he did not want to give power, then Ishwar could make a letter in favor of Dada and another in his favor so that in any litigation involving the properties in question, both of them could represent Ishwar and his wife. Choithram tried to convince Ishwar to issue the power of attorney in whatever manner he may want . In said letter no mention was made at all of any temporary arrangement . On the contrary, said letter recognize(s) the existence of principal and attorneyin-fact relationship between Ishwar and himself. Choithram wrote: . . . do you know that if I had predated papers what could you have done? Or do you know that I have many papers signed by you and if I had done anything or do then what can you do about it?' Choithram was saying that he could have repudiated the trust and ran away with the properties of Ishwar by predating documents and Ishwar would be entirely helpless. He was bitter as a result of Ishwar's revocation of the power of attorney but no mention was made of any temporary arrangement or a claim of ownership over the properties in question nor was he able to present any memorandum or document to prove the existence of such temporary arrangement.

Choithram is also estopped in pais or by deed from claiming an interest over the properties in question adverse to that of Ishwar. Section 3(a) of Rule 131 of the Rules of Court states that whenever a party has, by his own declaration, act, or omission intentionally and deliberately led another to believe a particular thing true and act upon such belief, he cannot in any litigation arising out of such declaration, act or omission be permitted to falsify it.' While estoppel by deed is a bar which precludes a party to a deed and his privies from asserting as against the other and his privies any right of title in derogation of the deed, or from denying the truth of any material fact asserted in it (31 C.J.S. 195; 19 Am. Jur. 603). Thus, defendants-appellees are not permitted to repudiate their admissions and representations or to assert any right or title in derogation of the deeds or from denying the truth of any material fact asserted in the (1) power of attorney dated January 24, 1966 (Exhibit A); (2) the Agreements of February 1, 1966 and May 16, 1966 (Exhibits B and C); and (3) the Contract of Lease dated January 5, 1972 (Exhibit P). . . . The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against his own act, representations, or commitments to the injury of one to whom they were directed and who reasonably relied thereon. The doctrine of estoppel springs from equitable principles and the equities in the case. It is designed to aid the law in the administration of justice where without its aid injustice might result. It has been applied by court wherever and whenever special circumstances of a case so demands' (Philippine National Bank vs. Court of Appeals, 94 SCRA 357, 368 [1979]). It was only after the services of counsel has been obtained that Choithram alleged for the first time in his Answer that the General Power of attorney (Annex A) with the Contracts to Sell (Annexes B and C) were made only for the sole purpose of assuring defendants' acquisition and ownership of the lots described thereon in due time under the law; that said instruments do not reflect the true intention of the parties (par. 2, Answer dated May 30, 1983), seventeen (17) long years from the time he received the money transmitted to him by his brother , Ishwar. Moreover, Choithram's 'temporary arrangement,' by which he claimed purchasing the two (2) parcels in question in 1966 and placing them in the name of Ishwar who is an American citizen, to circumvent the disqualification provision of aliens acquiring real properties in the Philippines under the 1935 Philippine Constitution, as Choithram was then a British subject, show a palpable disregard of the law of the land and to sustain the supposed "temporary arrangement" with Ishwar would be sanctioning the perpetration of an illegal act and culpable violation of the Constitution. Defendants-appellees likewise violated the Anti-Dummy Law (Commonwealth Act 108, as amended), which provides in Section 1 thereof that: In all cases in which any constitutional or legal provision requires Philippine or any other specific citizenship as a requisite for the exercise or enjoyment of a right, franchise or privilege, . . . any alien or foreigner profiting thereby, shall be punished . . . by

imprisonment . . . and of a fine of not less than the value of the right, franchise or privileges, which is enjoyed or acquired in violation of the provisions hereof . . . Having come to court with unclean hands, Choithram must not be permitted foist his 'temporary arrangement' scheme as a defense before this court. Being in delicto, he does not have any right whatsoever being shielded from his own wrong-doing, which is not so with respect to Ishwar, who was not a party to such an arrangement. The falsity of Choithram's defense is further aggravated by the material inconsistencies and contradictions in his testimony . While on January 23, 1985 he testified that he purchased the land in question on his own behalf (tsn, p. 4, S. Jan. 23, 1985), in the July 18, 1985 hearing, forgetting probably what he stated before, Choithram testified that he was only an attorney-in-fact of Ishwar (tsn, p. 5, S. July 18, 1985). Also in the hearing of January 23, 1985, Choithram declared that nobody rented the building that was constructed on the parcels of land in question (tsn, pp. 5 and 6), only to admit in the hearing of October 30, 1985, that he was in fact renting the building for P12,000. 00 per annum (tsn, p. 3). Again, in the hearing of July 19, 1985, Choithram testified that he had no knowledge of the revocation of the Power of Attorney (tsn, pp. 20- 21), only to backtrack when confronted with the letter of June 25, 1971 (Exhibits R to R-3), which he admitted to be in "his own writing," indicating knowledge of the revocation of the Power of Attorney. These inconsistencies are not minor but go into the entire credibility of the testimony of Choithram and the rule is that contradictions on a very crucial point by a witness, renders s testimony incredible People vs. Rafallo, 80 Phil. 22). Not only this the doctrine of falsus in uno, falsus in omnibus is fully applicable as far as the testimony of Choithram is concerned. The cardinal rule, which has served in all ages, and has been applied to all conditions of men, is that a witness willfully falsifying the truth in one particular, when upon oath, ought never to be believed upon the strength of his own testimony, whatever he may assert (U.S. vs. Osgood 27 Feb. Case No. 15971-a, p. 364); Gonzales vs. Mauricio, 52 Phil, 728), for what ground of judicial relief can there be left when the party has shown such gross insensibility to the difference between right and wrong, between truth and falsehood? (The Santisima Trinidad, 7 Wheat, 283, 5 U.S. [L. ed.] 454). True, that Choithram's testimony finds corroboration from the testimony of his brother, Navalrai, but the same would not be of much help to Choithram. Not only is Navalrai an interested and biased witness, having admitted his close relationship with Choithram and that whenever he or Choithram had problems, they ran to each other (tsn, pp. 17-18, S. Sept. 20, 1985), Navalrai has a pecuniary interest in the success of Choithram in the case in question. Both he and Choithram are business partners in Jethmal and Sons and/or Jethmal Industries, wherein he owns 60% of the company and Choithram, 40% (p. 62, Appellant's Brief). Since the acquisition of the properties in question in 1966, Navalrai was occupying 1,200 square meters thereof as a factory site plus the fact that his son (Navalrais) was occupying the apartment on top of the factory with his family rent free except the amount of P l,000.00 a month to pay for taxes on said properties (tsn, p. 17, S. Oct. 3, 1985). Inherent contradictions also marked Navalrai testimony. "While the latter was very meticulous in keeping a receipt for the P 10,000.00 that he paid Ishwar as settlement in Jethmal Industries, yet in the alleged payment of P 100,000.00 to

Ishwar, no receipt or voucher was ever issued by him (tsn, p. 17, S. Oct. 3, 15 1983). We concur. The foregoing findings of facts of the Court of Appeals which are supported by the evidence is conclusive on this Court. The Court finds that Ishwar entrusted US$150,000.00 to Choithram in 1965 for investment in the realty business. Soon thereafter, a general power of attorney was executed by Ishwar in favor of both Navalrai and Choithram. If it is true that the purpose only is to enable Choithram to purchase realty temporarily in the name of Ishwar, why the inclusion of their elder brother Navalrai as an attorney-in-fact? Then, acting as attorney-in-fact of Ishwar, Choithram purchased two parcels of land located in Barrio Ugong Pasig, Rizal, from Ortigas in 1966. With the balance of the money of Ishwar, Choithram erected a building on said lot. Subsequently, with a loan obtained from a bank and the income of the said property, Choithram constructed three other buildings thereon. He managed the business and collected the rentals. Due to their relationship of confidence it was only in 1970 when Ishwar demanded for an accounting from Choithram. And even as Ishwar revoked the general power of attorney on February 4, 1971, of which Choithram was duly notified, Choithram wrote to Ishwar on June 25, 1971 requesting that he execute a new power of attorney in their 16 favor. When Ishwar did not respond thereto, Choithram nevertheless proceeded as such attorney-in-fact to assign all the rights and interest of Ishwar to his daughter-in-law Nirmla in 1973 without the knowledge and consent of Ishwar. Ortigas in turn executed the corresponding deeds of sale in favor of Nirmla after full payment of the purchase accomplice of the lots. In the prefatory statement of their petition, Choithram pictured Ishwar to be so motivated by greed and ungratefulness, who squandered the family business in New York, who had to turn to his wife for support, accustomed to living in ostentation and who resorted to blackmail in filing several criminal and civil suits against them. These statements find no support and should be stricken from the records. Indeed, they are irrelevant to the proceeding. Moreover, assuming Ishwar is of such a low character as Choithram proposes to make this Court to believe, why is it that of all persons, under his temporary arrangement theory, Choithram opted to entrust the purchase of valuable real estate and built four buildings thereon all in the name of Ishwar? Is it not an unconscious emergence of the truth that this otherwise wayward brother of theirs was on the contrary able to raise enough capital through the generosity of his father-in-law for the purchase of the very properties in question? As the appellate court aptly observed if truly this temporary arrangement story is the only motivation, why Ishwar of all people? Why not the own son of Choithram, Haresh who is also an American citizen and who was already 18 years old at the time of purchase in 1966? The Court agrees with the observation that this theory is an afterthought which surfaced only when Choithram, Nirmla and Moti filed their answer. When Ishwar asked for an accounting in 1970 and revoked the general power of attorney in 1971, Choithram had a total change of heart. He decided to claim the property as his. He caused the transfer of the rights and interest of Ishwar to Nirmla. On his representation, Ortigas executed the deeds of sale of the properties in favor of Nirmla. Choithram obviously surmised Ishwar cannot stake a valid claim over the property by so doing. Clearly, this transfer to Nirmla is fictitious and, as admitted by Choithram, was intended only to 17 place the property in her name until Choithram acquires Philippine citizenship. What appears certain is that it appears to be a scheme of Choithram to place the property beyond the reach of Ishwar should he successfully claim the same. Thus, it must be struck down.

Worse still, on September 27, 1990 spouses Ishwar filed an urgent motion for the issuance of a writ of preliminary attachment and to require Choithram, et al. to submit certain documents, inviting the attention of this Court to the following: a) Donation by Choithram of his 2,500 shares of stock in General Garments 18 Corporation in favor of his children on December 29, 1989; b) Sale on August 2, 1990 by Choithram of his 100 shares in Biflex (Phils.), Inc., 19 in favor of his children; and c) Mortgage on June 20, 1989 by Nirmla through her attorney-in-fact, Choithram, of the properties subject of this litigation, for the amount of $3 Million in favor of Overseas Holding, Co. Ltd., (Overseas for brevity), a corporation which appears to be organized and existing under and by virtue of the laws of Cayman Islands, with a capital of only $100.00 divided into 100 shares of $1.00 each, and with 20 address at P.O. Box 1790, Grand Cayman, Cayman Islands. An opposition thereto was filed by Choithram, et al. but no documents were produced. A manifestation and reply to the opposition was filed by spouses Ishwar. All these acts of Choithram, et al. appear to be fraudulent attempts to remove these properties to the detriment of spouses Ishwar should the latter prevail in this litigation. On December 10, 1990 the court issued a resolution that substantially reads as follows: Considering the allegations of petitioners Ishwar Jethmal Ramnani and Sonya Ramnani that respondents Choithram Jethmal Ramnani, Nirmla Ramnani and Moti G. Ramnani have fraudulently executed a simulated mortgage of the properties subject of this litigation dated June 20, 1989, in favor of Overseas Holding Co., Ltd. which appears to be a corporation organized in Cayman Islands, for the amount of $ 3,000,000.00, which is much more than the value of the properties in litigation; that said alleged mortgagee appears to be a "shell" corporation with a capital of only $100.00; and that this alleged transaction appears to be intended to defraud petitioners Ishwar and Sonya Jethmal Ramnani of any favorable judgment that this Court may render in this case; Wherefore the Court Resolved to issue a writ of preliminary injunction enjoining and prohibiting said respondents Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti G. Ramnani and the Overseas Holding Co., Ltd. from encumbering, selling or otherwise disposing of the properties and improvements subject of this litigation until further orders of the Court. Petitioners Ishwar and Sonya Jethmal Ramnani are hereby required to post a bond of P 100,000.00 to answer for any damages d respondents may suffer by way of this injunction if the Court finally decides the said petitioners are not entitled thereto. The Overseas Holding Co., Ltd. with address at P.O. Box 1790 Grand Cayman, Cayman Islands, is hereby IMPLEADED as a respondent in these cases, and is hereby required to SUBMIT its comment on the Urgent Motion for the Issuance of a Writ of Preliminary Attachment and Motion for Production of Documents, the Manifestation and the Reply to the Opposition filed by said petitioners, within Sixty (60) days after service by publication on it in accordance with the provisions of Section 17, Rule 14 of the Rules of Court, at the expense of petitioners Ishwar and Sonya Jethmal Ramnani.

Let copies of this resolution be served on the Register of Deeds of Pasig, Rizal, and the Provincial Assessor of Pasig, Rizal, both in Metro Manila, for its annotation on the transfer Certificates of Titles Nos. 403150 and 403152 registered in the name of respondent Nirmla V. Ramnani, and on the tax declarations of the said properties and its improvements subject of this litigation.
21

The required injunction bond in the amount of P 100,000.00 was filed by the spouses Ishwar which was approved by the Court. The above resolution of the Court was published in the Manila 22 Bulletin issue of December 17, 1990 at the expense of said spouses. On December 19, 1990 the said resolution and petition for review with annexes in G.R. Nos. 85494 and 85496 were transmitted to respondent Overseas, Grand Cayman Islands at its address c/o Cayman Overseas 23 Trust Co. Ltd., through the United Parcel Services Bill of Lading and it was actually delivered to 24 said company on January 23, 1991. On January 22, 1991, Choithram, et al., filed a motion to dissolve the writ of preliminary injunction alleging that there is no basis therefor as in the amended complaint what is sought is actual damages and not a reconveyance of the property, that there is no reason for its issuance, and that acts already executed cannot be enjoined. They also offered to file a counterbond to dissolve the writ. A comment/opposition thereto was filed by spouses Ishwar that there is basis for the injunction as the alleged mortgage of the property is simulated and the other donations of the shares of Choithram to his children are fraudulent schemes to negate any judgment the Court may render for petitioners. No comment or answer was filed by Overseas despite due notice, thus it is and must be considered to be in default and to have lost the right to contest the representations of spouses Ishwar to declare the aforesaid alleged mortgage nun and void. This purported mortgage of the subject properties in litigation appears to be fraudulent and simulated. The stated amount of $3 Million for which it was mortgaged is much more than the value of the mortgaged properties and its improvements. The alleged mortgagee-company (Overseas) was organized only on June 26,1989 but the mortgage was executed much earlier, on June 20, 1989, that is six (6) days before Overseas was organized. Overseas is a "shelf" 25 company worth only $100.00. In the manifestation of spouses Ishwar dated April 1, 1991, the Court was informed that this matter was brought to the attention of the Central Bank (CB) for investigation, and that in a letter of March 20, 1991, the CB informed counsel for spouses Ishwar that said alleged foreign loan of Choithram, et al. from Overseas has not been previously 26 approved/registered with the CB. Obviously, this is another ploy of Choithram, et al. to place these properties beyond the reach of spouses Ishwar should they obtain a favorable judgment in this case. The Court finds and so declares that this alleged mortgage should be as it is hereby declared null and void. All these contemporaneous and subsequent acts of Choithram, et al., betray the weakness of their cause so they had to take an steps, even as the case was already pending in Court, to render ineffective any judgment that may be rendered against them. The problem is compounded in that respondent Ortigas is caught in the web of this bitter fight. It had all the time been dealing with Choithram as attorney-in-fact of Ishwar. However, evidence had been adduced that notice in writing had been served not only on Choithram, but also on Ortigas, of the revocation of Choithram's power of attorney by Ishwar's lawyer, on May 24, 1971. 27 A publication of said notice was made in the April 2, 1971 issue of The Manila Times for the

information of the general public. Such notice of revocation in a newspaper of general 29 circulation is sufficient warning to third persons including Ortigas. A notice of revocation was 30 also registered with the Securities and Exchange Commission on March 29, 1 971. Indeed in the letter of Choithram to Ishwar of June 25, 1971, Choithram was pleading that Ishwar execute another power of attorney to be shown to Ortigas who apparently learned of the 31 revocation of Choithram's power of attorney. Despite said notices, Ortigas nevertheless acceded to the representation of Choithram, as alleged attorney-in-fact of Ishwar, to assign the rights of petitioner Ishwar to Nirmla. While the primary blame should be laid at the doorstep of Choithram, Ortigas is not entirely without fault. It should have required Choithram to secure another power of attorney from Ishwar. For recklessly believing the pretension of Choithram that his power of attorney was still good, it must, therefore, share in the latter's liability to Ishwar. In the original complaint, the spouses Ishwar asked for a reconveyance of the properties and/or 32 payment of its present value and damages. In the amended complaint they asked, among others, for actual damages of not less than the present value of the real properties in litigation, moral and exemplary damages, attorneys fees, costs of the suit and further prayed for "such 33 other reliefs as may be deemed just and equitable in the premises . The amended complaint contain the following positive allegations: 7. Defendant Choithram Ramnani, in evident bad faith and despite due notice of the revocation of the General Power of Attorney, Annex 'D" hereof, caused the transfer of the rights over the said parcels of land to his daughter-in-law, defendant Nirmla Ramnani in connivance with defendant Ortigas & Co., the latter having agreed to the said transfer despite receiving a letter from plaintiffs' lawyer informing them of the said revocation; copy of the letter is hereto attached and made an integral part hereof as Annex "H"; 8. Defendant Nirmla Ramnani having acquired the aforesaid property by fraud is , by force of law, considered a trustee of an implied trust for the benefit of plaintiff and is obliged to return the same to the latter: 9. Several efforts were made to settle the matter within the family but defendants (Choithram Ramnani, Nirmla Ramnani and Moti Ramnani) refused and up to now fail and still refuse to cooperate and respond to the same; thus, the present case; 10. In addition to having been deprived of their rights over the properties (described in par. 3 hereof), plaintiffs, by reason of defendants' fraudulent act, suffered actual damages by way of lost rental on the property which defendants (Choithram Ramnani, Nirmla Ramnani and Moti Ramnani have collected for 34 themselves; In said amended complaint, spouses Ishwar, among others, pray for payment of actual damages in an amount no less than the value of the properties in litigation instead of a reconveyance as sought in the original complaint. Apparently they opted not to insist on a reconveyance as they are American citizens as alleged in the amended complaint. The allegations of the amended complaint above reproduced clearly spelled out that the transfer of the property to Nirmla was fraudulent and that it should be considered to be held in trust by Nirmla for spouses Ishwar. As above-discussed, this allegation is well-taken and the transfer of the property to Nirmla should be considered to have created an implied trust by Nirmla as trustee 35 of the property for the benefit of spouses Ishwar.

28

The motion to dissolve the writ of preliminary injunction filed by Choithram, et al. should be denied. Its issuance by this Court is proper and warranted under the circumstances of the case. Under Section 3(c) Rule 58 of the Rules of Court, a writ of preliminary injunction may be granted at any time after commencement of the action and before judgment when it is established: (c) that the defendant is doing, threatens, or is about to do, or is procuring or suffering to be done, some act probably in violation of plaintiffs's rights respecting the subject of the action, and tending to render the judgment ineffectual. As above extensively discussed, Choithram, et al. have committed and threaten to commit further acts of disposition of the properties in litigation as well as the other assets of Choithram, apparently designed to render ineffective any judgment the Court may render favorable to spouses Ishwar. The purpose of the provisional remedy of preliminary injunction is to preserve the status quo of the things subject of the litigation and to protect the rights of the spouses Ishwar respecting the 36 subject of the action during the pendency of the Suit and not to obstruct the administration of 37 justice or prejudice the adverse party. In this case for damages, should Choithram, et al. continue to commit acts of disposition of the properties subject of the litigation, an award of 38 damages to spouses Ishwar would thereby be rendered ineffectual and meaningless. Consequently, if only to protect the interest of spouses Ishwar, the Court hereby finds and holds that the motion for the issuance of a writ of preliminary attachment filed by spouses Ishwar should be granted covering the properties subject of this litigation. Section 1, Rule 57 of the Rules of Court provides that at the commencement of an action or at any time thereafter, the plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered, in, among others, the following cases: (d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought; (e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors; . . . Verily, the acts of Choithram, et al. of disposing the properties subject of the litigation disclose a scheme to defraud spouses Ishwar so they may not be able to recover at all given a judgment in their favor, the requiring the issuance of the writ of attachment in this instance. Nevertheless, under the peculiar circumstances of this case and despite the fact that Choithram, et al., have committed acts which demonstrate their bad faith and scheme to defraud spouses Ishwar and Sonya of their rightful share in the properties in litigation, the Court cannot ignore the fact that Choithram must have been motivated by a strong conviction that as the industrial partner in the acquisition of said assets he has as much claim to said properties as Ishwar, the capitalist partner in the joint venture. The scenario is clear. Spouses Ishwar supplied the capital of $150,000.00 for the business. They entrusted the money to Choithram to invest in a profitable business venture in the Philippines. For this purpose they appointed Choithram as their attorney-in-fact.

Choithram in turn decided to invest in the real estate business. He bought the two (2) parcels of land in question from Ortigas as attorney-in-fact of Ishwar- Instead of paying for the lots in cash, he paid in installments and used the balance of the capital entrusted to him, plus a loan, to build two buildings. Although the buildings were burned later, Choithram was able to build two other buildings on the property. He rented them out and collected the rentals. Through the industry and genius of Choithram, Ishwar's property was developed and improved into what it is nowa valuable asset worth millions of pesos. As of the last estimate in 1985, while the case was pending before the trial court, the market value of the properties is no less than P22,304,000.00. 39 It should be worth much more today. We have a situation where two brothers engaged in a business venture. One furnished the capital, the other contributed his industry and talent. Justice and equity dictate that the two share equally the fruit of their joint investment and efforts. Perhaps this Solomonic solution may pave the way towards their reconciliation. Both would stand to gain. No one would end up the loser. After all, blood is thicker than water. However, the Court cannot just close its eyes to the devious machinations and schemes that Choithram employed in attempting to dispose of, if not dissipate, the properties to deprive spouses Ishwar of any possible means to recover any award the Court may grant in their favor. Since Choithram, et al. acted with evident bad faith and malice, they should pay moral and exemplary damages as well as attorney's fees to spouses Ishwar. WHEREFORE, the petition in G.R. No. 85494 is DENIED, while the petition in G.R. No. 85496 is hereby given due course and GRANTED. The judgment of the Court of Appeals dated October 18, 1988 is hereby modified as follows: 1. Dividing equally between respondents spouses Ishwar, on the one hand, and petitioner Choithram Ramnani, on the other, (in G.R. No. 85494) the two parcels of land subject of this litigation, including all the improvements thereon, presently covered by transfer Certificates of Title Nos. 403150 and 403152 of the Registry of Deeds, as well as the rental income of the property from 1967 to the present. 2. Petitioner Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti C. Ramnani and respondent Ortigas and Company, Limited Partnership (in G.R. No. 85496) are ordered solidarily to pay in cash the value of said one-half (1/2) share in the said land and improvements pertaining to respondents spouses Ishwar and Sonya at their fair market value at the time of the satisfaction of this judgment but in no case less than their value as appraised by the Asian Appraisal, Inc. in its Appraisal Report dated August 1985 (Exhibits T to T-14, inclusive). 3. Petitioners Choithram, Nirmla and Moti Ramnani and respondent Ortigas & Co., Ltd. Partnership shall also be jointly and severally liable to pay to said respondents spouses Ishwar and Sonya Ramnani one-half (1/2) of the total rental income of said properties and improvements from 1967 up to the date of satisfaction of the judgment to be computed as follows: a. On Building C occupied by Eppie's Creation and Jethmal Industries from 1967 to 1973, inclusive, based on the 1967 to 1973 monthly rentals paid by Eppie's Creation; b. Also on Building C above, occupied by Jethmal Industries and Lavine from 1974 to 1978, the rental incomes based on then rates prevailing as shown under Exhibit "P"; and from 1979 to 1981, based on then prevailing rates as indicated under Exhibit "Q";

c. On Building A occupied by Transworld Knitting Mills from 1972 to 1978, the rental incomes based upon then prevailing rates shown under Exhibit "P", and from 1979 to 1981, based on prevailing rates per Exhibit "Q"; d. On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to 1978, the rentals based on the Lease Contract, Exhibit "P", and from 1979 to 1980, the rentals based on the Lease Contract, Exhibit "Q". and thereafter commencing 1982, to account for and turn over the rental incomes paid or ought to be paid for the use and occupancy of the properties and all improvements totalling 10,048 sq. m., based on the rate per square meter prevailing in 1981 as indicated annually cumulative up to 1984. Then, commencing 1985 and up to the satisfaction of the judgment, rentals shall be computed at ten percent (10%) annually of the fair market values of the properties as appraised by the Asian Appraisals, Inc. in August 1985. (Exhibits T to T-14, inclusive.) 4. To determine the market value of the properties at the time of the satisfaction of this judgment and the total rental incomes thereof, the trial court is hereby directed to hold a hearing with deliberate dispatch for this purpose only and to have the judgment immediately executed after such determination. 5. Petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, are also jointly and severally liable to pay respondents Ishwar and Sonya Ramnani the amount of P500,000.00 as moral damages, P200,000.00 as exemplary damages and attorney's fees equal to 10% of the total award. to said respondents spouses. 6. The motion to dissolve the writ of preliminary injunction dated December 10, 1990 filed by petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, is hereby DENIED and the said injunction is hereby made permanent. Let a writ of attachment be issued and levied against the properties and improvements subject of this litigation to secure the payment of the above awards to spouses Ishwar and Sonya. 7. The mortgage constituted on the subject property dated June 20, 1989 by petitioners Choithram and Nirmla, both surnamed Ramnani in favor of respondent Overseas Holding, Co. Ltd. (in G.R. No. 85496) for the amount of $3-M is hereby declared null and void. The Register of Deeds of Pasig, Rizal, is directed to cancel the annotation of d mortgage on the titles of the properties in question. 8. Should respondent Ortigas Co., Ltd. Partnership pay the awards to Ishwar and Sonya Ramnani under this judgment, it shall be entitled to reimbursement from petitioners Choithram, Nirmla and Moti, all surnamed Ramnani. 9. The above awards shag bear legal rate of interest of six percent (6%) per annum from the time this judgment becomes final until they are fully paid by petitioners Choithram Ramnani, Nirmla V. Ramnani, Moti C. Ramnani and Ortigas, Co., Ltd. Partnership. Said petitioners Choithram, et al. and respondent Ortigas shall also pay the costs. SO ORDERED. Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-55397 February 29, 1988 TAI TONG CHUACHE & CO., petitioner, vs. THE INSURANCE COMMISSION and TRAVELLERS MULTI-INDEMNITY CORPORATION, respondents.

GANCAYCO, J.: This petition for review on certiorari seeks the reversal of the decision of the Insurance 1 2 Commission in IC Case #367 dismissing the complaint for recovery of the alleged unpaid balance of the proceeds of the Fire Insurance Policies issued by herein respondent insurance company in favor of petitioner-intervenor. The facts of the case as found by respondent Insurance Commission are as follows: Complainants acquired from a certain Rolando Gonzales a parcel of land and a building located at San Rafael Village, Davao City. Complainants assumed the mortgage of the building in favor of S.S.S., which building was insured with respondent S.S.S. Accredited Group of Insurers for P25,000.00. On April 19, 1975, Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000.00. To secure the payment of the loan, a mortgage was executed over the land and the building in favor of Tai Tong Chuache & Co. (Exhibit "1" and "1-A"). On April 25, 1975, Arsenio Chua, representative of Thai Tong Chuache & Co. insured the latter's interest with Travellers Multi-Indemnity Corporation for P100,000.00 (P70,000.00 for the building and P30,000.00 for the contents thereof) (Exhibit "A-a," contents thereof) (Exhibit "A-a"). On June 11, 1975, Pedro Palomo secured a Fire Insurance Policy No. F- 02500 (Exhibit "A"), covering the building for P50,000.00 with respondent Zenith Insurance Corporation. On July 16, 1975, another Fire Insurance Policy No. 8459 (Exhibit "B") was procured from respondent Philippine British Assurance Company, covering the same building for P50,000.00 and the contents thereof for P70,000.00. On July 31, 1975, the building and the contents were totally razed by fire. Adjustment Standard Corporation submitted a report as follow xxx xxx xxx ... Thus the apportioned share of each company is as follows:

Policy No.. MIRO F02500

Company

Risk

Insures

Zenith Insurance

Building

P50,000

Corp. F84590 Phil. Household 70,000

British Assco. Co. Inc. Policy No. FIC15381 Company FFF & F5 Risk 50,000 Insures

SSSAccre

dited Group of Insurers Building P25,000

Totals

P195,000

We are showing hereunder another apportionment of the loss which includes the Travellers Multi-Indemnity policy for reference purposes.
Policy No. MIRO/ F02500 Company Risk Injures

Zenith Insurance

Corp. F84590 Phil.

Building

P50,000

British Assco. Co. I-Building 70,000

IIBuilding FFF & PE PVC15181 SSS Accredited 50,000

Group of Insurers F-599 DV Insurers Building I-Ref 25,000 30,000

Multi

II-Building Totals

70,000 P295.000

Based on the computation of the loss, including the Travellers Multi- Indemnity, respondents, Zenith Insurance, Phil. British Assurance and S.S.S. Accredited Group of Insurers, paid their corresponding shares of the loss. Complainants were paid the following: P41,546.79 by Philippine British Assurance Co., P11,877.14 by Zenith Insurance Corporation, and P5,936.57 by S.S.S. Group of Accredited Insurers (Par. 6. Amended Complaint). Demand was made from respondent Travellers Multi-Indemnity for its share in the loss but the same was refused. Hence, complainants demanded from the other three (3) respondents the balance of each share in the loss based on the computation of the Adjustment Standards Report excluding Travellers Multi-Indemnity in the amount of P30,894.31 (P5,732.79-Zenith Insurance: P22,294.62, Phil. British: and P2,866.90, SSS Accredited) but the same was refused, hence, this action. In their answers, Philippine British Assurance and Zenith Insurance Corporation admitted the material allegations in the complaint, but denied liability on the ground that the claim of the complainants had already been waived, extinguished or paid. Both companies set up counterclaim in the total amount of P 91,546.79. Instead of filing an answer, SSS Accredited Group of Insurers informed the Commission in its letter of July 22, 1977 that the herein claim of complainants for the balance had been paid in the amount of P 5,938.57 in full, based on the Adjustment Standards Corporation Report of September 22, 1975. Travellers Insurance, on its part, admitted the issuance of the Policy No. 599 DV and alleged as its special and affirmative defenses the following, to wit: that Fire Policy No. 599 DV, covering the furniture and building of complainants was secured by a certain Arsenio Chua, mortgage creditor, for the purpose of protecting his mortgage credit against the complainants; that the said policy was issued in the name of Azucena Palomo, only to indicate that she owns the insured premises; that the policy contains an endorsement in favor of Arsenio Chua as his mortgage interest may appear to indicate that insured was Arsenio Chua and the complainants; that the premium due on said fire policy was paid by Arsenio Chua; that respondent Travellers is not liable to pay complainants.

On May 31, 1977, Tai Tong Chuache & Co. filed a complaint in intervention claiming the proceeds of the fire Insurance Policy No. F-559 DV, issued by respondent Travellers Multi-Indemnity. Travellers Insurance, in answer to the complaint in intervention, alleged that the Intervenor is not entitled to indemnity under its Fire Insurance Policy for lack of insurable interest before the loss of the insured premises and that the complainants, spouses Pedro and Azucena Palomo, had already paid in full their 3 mortgage indebtedness to the intervenor. As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint on the ground that the insurance policy subject of the complaint was taken out by Tai Tong Chuache & Company, petitioner herein, for its own interest only as mortgagee of the insured property and thus complainant as mortgagors of the insured property have no right of action against herein respondent. It likewise dismissed petitioner's complaint in intervention in the following words: We move on the issue of liability of respondent Travellers Multi-Indemnity to the Intervenor-mortgagee. The complainant testified that she was still indebted to Intervenor in the amount of P100,000.00. Such allegation has not however, been sufficiently proven by documentary evidence. The certification (Exhibit 'E-e') issued by the Court of First Instance of Davao, Branch 11, indicate that the 4 complainant was Antonio Lopez Chua and not Tai Tong Chuache & Company. From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but it was likewise denied hence, the present petition. It is the contention of the petitioner that respondent Insurance Commission decided an issue not raised in the pleadings of the parties in that it ruled that a certain Arsenio Lopez Chua is the one entitled to the insurance proceeds and not Tai Tong Chuache & Company. This Court cannot fault petitioner for the above erroneous interpretation of the decision appealed 5 from considering the manner it was written. As correctly pointed out by respondent insurance commission in their comment, the decision did not pronounce that it was Arsenio Lopez Chua who has insurable interest over the insured property. Perusal of the decision reveals however that it readily absolved respondent insurance company from liability on the basis of the commissioner's conclusion that at the time of the occurrence of the peril insured against petitioner as mortgagee had no more insurable interest over the insured property. It was based on the inference that the credit secured by the mortgaged property was already paid by the Palomos before the said property was gutted down by fire. The foregoing conclusion was arrived at on the basis of the certification issued by the then Court of First Instance of Davao, Branch II that in a certain civil action against the Palomos, Antonio Lopez Chua stands as the complainant and not petitioner Tai Tong Chuache & Company. We find the petition to be impressed with merit. It is a well known postulate that the case of a 6 party is constituted by his own affirmative allegations. Under Section 1, Rule 131 each party must prove his own affirmative allegations by the amount of evidence required by law which in civil cases as in the present case is preponderance of evidence. The party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of presenting at the trial such 7 amount of evidence as required by law to obtain favorable judgment. Thus, petitioner who is claiming a right over the insurance must prove its case. Likewise, respondent insurance company to avoid liability under the policy by setting up an affirmative defense of lack of insurable interest on the part of the petitioner must prove its own affirmative allegations.

It will be recalled that respondent insurance company did not assail the validity of the insurance policy taken out by petitioner over the mortgaged property. Neither did it deny that the said property was totally razed by fire within the period covered by the insurance. Respondent, as mentioned earlier advanced an affirmative defense of lack of insurable interest on the part of the petitioner that before the occurrence of the peril insured against the Palomos had already paid their credit due the petitioner. Respondent having admitted the material allegations in the complaint, has the burden of proof to show that petitioner has no insurable interest over the insured property at the time the contingency took place. Upon that point, there is a failure of proof. Respondent, it will be noted, exerted no effort to present any evidence to substantiate its claim, while petitioner did. For said respondent's failure, the decision must be adverse to it. However, as adverted to earlier, respondent Insurance Commission absolved respondent insurance company from liability on the basis of the certification issued by the then Court of First Instance of Davao, Branch II, that in a certain civil action against the Palomos, Arsenio Lopez Chua stands as the complainant and not Tai Tong Chuache. From said evidence respondent commission inferred that the credit extended by herein petitioner to the Palomos secured by the insured property must have been paid. Such is a glaring error which this Court cannot sanction. Respondent Commission's findings are based upon a mere inference. The record of the case shows that the petitioner to support its claim for the insurance proceeds offered as evidence the contract of mortgage (Exh. 1) which has not been cancelled nor released. It has been held in a long line of cases that when the creditor is in possession of the document of 8 credit, he need not prove non-payment for it is presumed. The validity of the insurance policy taken b petitioner was not assailed by private respondent. Moreover, petitioner's claim that the loan extended to the Palomos has not yet been paid was corroborated by Azucena Palomo who 9 testified that they are still indebted to herein petitioner. Public respondent argues however, that if the civil case really stemmed from the loan granted to Azucena Palomo by petitioner the same should have been brought by Tai Tong Chuache or by its representative in its own behalf. From the above premise respondent concluded that the obligation secured by the insured property must have been paid. The premise is correct but the conclusion is wrong. Citing Rule 3, Sec. 2 respondent pointed out that the action must be brought in the name of the real party in interest. We agree. However, it should be borne in mind that petitioner being a partnership may sue and be sued in its name or by its duly authorized representative. The fact that Arsenio Lopez Chua is the representative of petitioner is not questioned. Petitioner's declaration that Arsenio Lopez Chua acts as the 11 managing partner of the partnership was corroborated by respondent insurance company. 12 Thus Chua as the managing partner of the partnership may execute all acts of administration including the right to sue debtors of the partnership in case of their failure to pay their obligations when it became due and demandable. Or at the very least, Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an agent, it is understood that 13 he acted for and in behalf of the firm. Public respondent's allegation that the civil case flied by Arsenio Chua was in his capacity as personal creditor of spouses Palomo has no basis. The respondent insurance company having issued a policy in favor of herein petitioner which policy was of legal force and effect at the time of the fire, it is bound by its terms and conditions. Upon its failure to prove the allegation of lack of insurable interest on the part of the petitioner, respondent insurance company is and must be held liable. IN VIEW OF THE FOREGOING, the decision appealed from is hereby SET ASIDE and ANOTHER judgment is rendered order private respondent Travellers Multi-Indemnity Corporation to pay petitioner the face value of Insurance Policy No. 599-DV in the amount of P100,000.00. Costs against said private respondent.
10

SO ORDERED. Teehankee, C.J., Narvasa, Cruz and Grio-Aquino, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 15574 September 17, 1919

SMITH, BELL & COMPANY (LTD.), petitioner, vs. JOAQUIN NATIVIDAD, Collector of Customs of the port of Cebu, respondent. Ross and Lawrence for petitioner. Attorney-General Paredes for respondent. MALCOLM, J.: A writ of mandamus is prayed for by Smith, Bell & Co. (Ltd.), against Joaquin Natividad, Collector of Customs of the port of Cebu, Philippine Islands, to compel him to issue a certificate of Philippine registry to the petitioner for its motor vessel Bato. The Attorney-General, acting as counsel for respondent, demurs to the petition on the general ground that it does not state facts sufficient to constitute a cause of action. While the facts are thus admitted, and while, moreover, the pertinent provisions of law are clear and understandable, and interpretative American jurisprudence is found in abundance, yet the issue submitted is not lightly to be resolved. The question, flatly presented, is, whether Act. No. 2761 of the Philippine Legislature is valid or, more directly stated, whether the Government of the Philippine Islands, through its Legislature, can deny the registry of vessels in its coastwise trade to corporations having alien stockholders. FACTS. Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the Philippine Islands. A majority of its stockholders are British subjects. It is the owner of a motor vessel known as the Bato built for it in the Philippine Islands in 1916, of more than fifteen tons gross The Bato was brought to Cebu in the present year for the purpose of transporting plaintiff's merchandise between ports in the Islands. Application was made at Cebu, the home port of the vessel, to the Collector of Customs for a certificate of Philippine registry. The Collector refused to issue the certificate, giving as his reason that all the stockholders of Smith, Bell & Co., Ltd., were not citizens either of the United States or of the Philippine Islands. The instant action is the result. LAW. The Act of Congress of April 29, 1908, repealing the Shipping Act of April 30, 1906 but reenacting a portion of section 3 of this Law, and still in force, provides in its section 1: That until Congress shall have authorized the registry as vessels of the United States of vessels owned in the Philippine Islands, the Government of the Philippine Islands is hereby authorized to adopt, from time to time, and enforce regulations governing the transportation of merchandise and passengers between ports or places in the Philippine Archipelago. (35 Stat. at L., 70; Section 3912, U. S. Comp Stat. [1916]; 7 Pub. Laws, 364.) The Act of Congress of August 29, 1916, commonly known as the Jones Law, still in force, provides in section 3, (first paragraph, first sentence), 6, 7, 8, 10, and 31, as follows.

SEC. 3. That no law shall be enacted in said Islands which shall deprive any person of life, liberty, or property without due process of law, or deny to any person therein the equal protection of the laws. . . . SEC. 6. That the laws now in force in the Philippines shall continue in force and effect, except as altered, amended, or modified herein, until altered, amended, or repealed by the legislative authority herein provided or by Act of Congress of the United States. SEC. 7. That the legislative authority herein provided shall have power, when not inconsistent with this Act, by due enactment to amend, alter modify, or repeal any law, civil or criminal, continued in force by this Act as it may from time to time see fit This power shall specifically extend with the limitation herein provided as to the tariff to all laws relating to revenue provided as to the tariff to all laws relating to revenue and taxation in effect in the Philippines. SEC. 8. That general legislative power, except as otherwise herein provided, is hereby granted to the Philippine Legislature, authorized by this Act. SEC. 10. That while this Act provides that the Philippine government shall have the authority to enact a tariff law the trade relations between the islands and the United States shall continue to be governed exclusively by laws of the Congress of the United States: Provided, That tariff acts or acts amendatory to the tariff of the Philippine Islands shall not become law until they shall receive the approval of the President of the United States, nor shall any act of the Philippine Legislature affecting immigration or the currency or coinage laws of the Philippines become a law until it has been approved by the President of the United States: Provided further, That the President shall approve or disapprove any act mentioned in the foregoing proviso within six months from and after its enactment and submission for his approval, and if not disapproved within such time it shall become a law the same as if it had been specifically approved. SEC. 31. That all laws or parts of laws applicable to the Philippines not in conflict with any of the provisions of this Act are hereby continued in force and effect." (39 Stat at L., 546.) On February 23, 1918, the Philippine Legislature enacted Act No. 2761. The first section of this law amended section 1172 of the Administrative Code to read as follows: SEC. 1172. Certificate of Philippine register. Upon registration of a vessel of domestic ownership, and of more than fifteen tons gross, a certificate of Philippine register shall be issued for it. If the vessel is of domestic ownership and of fifteen tons gross or less, the taking of the certificate of Philippine register shall be optional with the owner. "Domestic ownership," as used in this section, means ownership vested in some one or more of the following classes of persons: ( a) Citizens or native inhabitants of the Philippine Islands; (b) citizens of the United States residing in the Philippine Islands; ( c) any corporation or company composed wholly of citizens of the Philippine Islands or of the United States or of both , created under the laws of the United States, or of any State thereof, or of thereof, or the managing agent or master of the vessel resides in the Philippine Islands Any vessel of more than fifteen gross tons which on February eighth, nineteen hundred and eighteen, had a certificate of Philippine register under existing law, shall likewise be deemed a vessel of domestic ownership so long as there shall not be any change in the ownership thereof nor any transfer of stock of the companies or corporations owning such vessel to person not included under the last preceding paragraph.

Sections 2 and 3 of Act No. 2761 amended sections 1176 and 1202 of the Administrative Code to read as follows: SEC. 1176. Investigation into character of vessel. No application for a certificate of Philippine register shall be approved until the collector of customs is satisfied from an inspection of the vessel that it is engaged or destined to be engaged in legitimate trade and that it is of domestic ownership as such ownership is defined in section eleven hundred and seventy-two of this Code. The collector of customs may at any time inspect a vessel or examine its owner, master, crew, or passengers in order to ascertain whether the vessel is engaged in legitimate trade and is entitled to have or retain the certificate of Philippine register. SEC. 1202. Limiting number of foreign officers and engineers on board vessels. No Philippine vessel operating in the coastwise trade or on the high seas shall be permitted to have on board more than one master or one mate and one engineer who are not citizens of the United States or of the Philippine Islands, even if they hold licenses under section one thousand one hundred and ninety-nine hereof. No other person who is not a citizen of the United States or of the Philippine Islands shall be an officer or a member of the crew of such vessel. Any such vessel which fails to comply with the terms of this section shall be required to pay an additional tonnage tax of fifty centavos per net ton per month during the continuance of said failure. ISSUES. Predicated on these facts and provisions of law, the issues as above stated recur, namely, whether Act No 2761 of the Philippine Legislature is valid in whole or in part whether the Government of the Philippine Islands, through its Legislature, can deny the registry of vessel in its coastwise trade to corporations having alien stockholders . OPINION. 1. Considered from a positive standpoint, there can exist no measure of doubt as to the power of the Philippine Legislature to enact Act No. 2761. The Act of Congress of April 29, 1908, with its specific delegation of authority to the Government of the Philippine Islands to regulate the transportation of merchandise and passengers between ports or places therein, the liberal construction given to the provisions of the Philippine Bill, the Act of Congress of July 1, 1902, by the courts, and the grant by the Act of Congress of August 29, 1916, of general legislative power to the Philippine Legislature, are certainly superabundant authority for such a law. While the Act of the local legislature may in a way be inconsistent with the Act of Congress regulating the coasting trade of the Continental United States, yet the general rule that only such laws of the United States have force in the Philippines as are expressly extended thereto, and the abnegation of power by Congress in favor of the Philippine Islands would leave no starting point for convincing argument. As a matter of fact, counsel for petitioner does not assail legislative action from this direction (See U. S. vs. Bull [1910], 15 Phil., 7; Sinnot vs. Davenport [1859] 22 How., 227.) 2. It is from the negative, prohibitory standpoint that counsel argues against the constitutionality of Act No. 2761. The first paragraph of the Philippine Bill of Rights of the Philippine Bill, repeated again in the first paragraph of the Philippine Bill of Rights as set forth in the Jones Law, provides "That no law shall be enacted in said Islands which shall deprive any person of life, liberty, or property without due process of law, or deny to any person therein the equal protection of the laws." Counsel says that Act No. 2761 denies to Smith, Bell & Co., Ltd., the equal protection of the laws because it, in effect, prohibits the corporation from owning vessels, and because classification of corporations based on the citizenship of one or more of their stockholders is capricious, and that Act No. 2761 deprives the corporation of its properly without due process of law because by the passage of the law company was automatically deprived of every beneficial attribute of ownership in the Bato and left with the naked title to a boat it could not use .

The guaranties extended by the Congress of the United States to the Philippine Islands have been used in the same sense as like provisions found in the United States Constitution. While the "due process of law and equal protection of the laws" clause of the Philippine Bill of Rights is couched in slightly different words than the corresponding clause of the Fourteenth Amendment to the United States Constitution, the first should be interpreted and given the same force and effect as the latter. (Kepner vs. U.S. [1904], 195 U. S., 100; Sierra vs. Mortiga [1907], 204 U. S.,.470; U. S. vs. Bull [1910], 15 Phil., 7.) The meaning of the Fourteenth Amendment has been announced in classic decisions of the United States Supreme Court. Even at the expense of restating what is so well known, these basic principles must again be set down in order to serve as the basis of this decision. The guaranties of the Fourteenth Amendment and so of the first paragraph of the Philippine Bill of Rights, are universal in their application to all person within the territorial jurisdiction, without regard to any differences of race, color, or nationality. The word "person" includes aliens. (Yick Wo vs. Hopkins [1886], 118 U. S., 356; Truax vs. Raich [1915], 239 U. S., 33.) Private corporations, likewise, are "persons" within the scope of the guaranties in so far as their property is concerned. (Santa Clara County vs. Southern Pac. R. R. Co. [1886], 118.U. S., 394; Pembina Mining Co. vs. Pennsylvania [1888],.125 U. S., 181 Covington & L. Turnpike Road Co. vs. Sandford [1896], 164 U. S., 578.) Classification with the end in view of providing diversity of treatment may be made among corporations, but must be based upon some reasonable ground and not be a mere arbitrary selection (Gulf, Colorado & Santa Fe Railway Co. vs. Ellis [1897],.165 U. S., 150.) Examples of laws held unconstitutional because of unlawful discrimination against aliens could be cited. Generally, these decisions relate to statutes which had attempted arbitrarily to forbid aliens to engage in ordinary kinds of business to earn their living. (State vs. Montgomery [1900], 94 Maine, 192, peddling but see. Commonwealth vs. Hana [1907], 195 Mass., 262; Templar vs. Board of Examiners of Barbers [1902], 131 Mich., 254, barbers; Yick Wo vs. Hopkins [1886], 118 U. S.,.356, discrimination against Chinese; Truax vs. Raich [1915], 239 U. S., 33; In re Parrott [1880], 1 Fed , 481; Fraser vs. McConway & Torley Co. [1897], 82 Fed , 257; Juniata Limestone Co. vs. Fagley [1898], 187 Penn., 193, all relating to the employment of aliens by private corporations.) A literal application of general principles to the facts before us would, of course, cause the inevitable deduction that Act No. 2761 is unconstitutional by reason of its denial to a corporation, some of whole members are foreigners, of the equal protection of the laws. Like all beneficient propositions, deeper research discloses provisos. Examples of a denial of rights to aliens notwithstanding the provisions of the Fourteenth Amendment could be cited. (Tragesser vs. Gray [1890], 73 Md., 250, licenses to sell spirituous liquors denied to persons not citizens of the United States; Commonwealth vs. Hana [1907], 195 Mass , 262, excluding aliens from the right to peddle; Patsone vs. Commonwealth of Pennsylvania [1914], 232 U. S. , 138, prohibiting the killing of any wild bird or animal by any unnaturalized foreign-born resident; Ex parte Gilleti [1915], 70 Fla., 442, discriminating in favor of citizens with reference to the taking for private use of the common property in fish and oysters found in the public waters of the State; Heim vs. McCall [1915], 239 U. S.,.175, and Crane vs. New York [1915], 239 U. S., 195, limiting employment on public works by, or for, the State or a municipality to citizens of the United States.) One of the exceptions to the general rule, most persistent and far reaching in influence is, that neither the Fourteenth Amendment to the United States Constitution, broad and comprehensive as it is, nor any other amendment, "was designed to interfere with the power of the State, sometimes termed its `police power,' to prescribe regulations to promote the health, peace, morals, education, and good order of the people, and legislate so as to increase the industries of the State, develop its resources and add to its wealth and prosperity. From the very necessities of society, legislation of a special character, having these objects in view, must often be had in certain districts." (Barbier vs. Connolly [1884], 113 U.S., 27; New Orleans Gas Co. vs. Lousiana Light Co. [1885], 115 U.S., 650.) This is the same police power which the United States Supreme Court say "extends to so dealing with the conditions which exist in the state as to bring out of them the greatest welfare in of its people." (Bacon vs. Walker [1907], 204 U.S., 311.) For quite similar reasons, none of the provision of the Philippine Organic Law could could have had the effect of denying to the Government of the Philippine Islands, acting through its Legislature, the right to exercise that most essential, insistent, and illimitable of powers, the sovereign police power, in the promotion of the general welfare and the public interest. (U. S. vs. Toribio [1910], 15 Phil., 85; Churchill and Tait vs. Rafferty

[1915], 32 Phil., 580; Rubi vs. Provincial Board of Mindoro [1919], 39 Phil., 660.) Another notable exception permits of the regulation or distribution of the public domain or the common property or resources of the people of the State, so that use may be limited to its citizens. ( Ex parte Gilleti [1915], 70 Fla., 442; McCready vs. Virginia [1876], 94 U. S., 391; Patsone vs. Commonwealth of Pennsylvania [1914], 232U. S., 138.) Still another exception permits of the limitation of employment in the construction of public works by, or for, the State or a municipality to citizens of the United States or of the State. (Atkin vs. Kansas [1903],191 U. S., 207; Heim vs. McCall [1915], 239 U.S., 175; Crane vs. New York [1915], 239 U. S., 195.) Even as to classification, it is admitted that a State may classify with reference to the evil to be prevented; the question is a practical one, dependent upon experience. (Patsone vs. Commonwealth of Pennsylvania [1914], 232 U. S., 138.) To justify that portion of Act no. 2761 which permits corporations or companies to obtain a certificate of Philippine registry only on condition that they be composed wholly of citizens of the Philippine Islands or of the United States or both, as not infringing Philippine Organic Law, it must be done under some one of the exceptions here mentioned This must be done, moreover, having particularly in mind what is so often of controlling effect in this jurisdiction our local experience and our peculiar local conditions. To recall a few facts in geography, within the confines of Philippine jurisdictional limits are found more than three thousand islands. Literally, and absolutely, steamship lines are, for an Insular territory thus situated, the arteries of commerce. If one be severed, the life-blood of the nation is lost. If on the other hand these arteries are protected, then the security of the country and the promotion of the general welfare is sustained. Time and again, with such conditions confronting it, has the executive branch of the Government of the Philippine Islands, always later with the sanction of the judicial branch, taken a firm stand with reference to the presence of undesirable foreigners. The Government has thus assumed to act for the allsufficient and primitive reason of the benefit and protection of its own citizens and of the self-preservation and integrity of its dominion. (In re Patterson [1902], 1 Phil., 93; Forbes vs. Chuoco, Tiaco and Crossfield [1910], 16 Phil., 534;.228 U.S., 549; In re McCulloch Dick [1918], 38 Phil., 41.) Boats owned by foreigners, particularly by such solid and reputable firms as the instant claimant, might indeed traverse the waters of the Philippines for ages without doing any particular harm. Again, some evilminded foreigner might very easily take advantage of such lavish hospitality to chart Philippine waters, to obtain valuable information for unfriendly foreign powers, to stir up insurrection, or to prejudice Filipino or American commerce. Moreover, under the Spanish portion of Philippine law, the waters within the domestic jurisdiction are deemed part of the national domain, open to public use. (Book II, Tit. IV, Ch. I, Civil Code; Spanish Law of Waters of August 3, 1866, arts 1, 2, 3.) Common carriers which in the Philippines as in the United States and other countries are, as Lord Hale said, "affected with a public interest," can only be permitted to use these public waters as a privilege and under such conditions as to the representatives of the people may seem wise. (See De Villata vs. Stanley [1915], 32 Phil., 541.) In Patsone vs. Commonwealth of Pennsylvania ([1913], 232 U.S., 138), a case herein before mentioned, Justice Holmes delivering the opinion of the United States Supreme Court said: This statute makes it unlawful for any unnaturalized foreign-born resident to kill any wild bird or animal except in defense of person or property, and `to that end' makes it unlawful for such foreign-born person to own or be possessed of a shotgun or rifle; with a penalty of $25 and a forfeiture of the gun or guns. The plaintiff in error was found guilty and was sentenced to pay the abovementioned fine. The judgment was affirmed on successive appeals. (231 Pa., 46; 79 Atl., 928.) He brings the case to this court on the ground that the statute is contrary to the 14th Amendment and also is in contravention of the treaty between the United States and Italy, to which latter country the plaintiff in error belongs . Under the 14th Amendment the objection is twofold; unjustifiably depriving the alien of property, and discrimination against such aliens as a class. But the former really depends upon the latter, since it hardly can be disputed that if the lawful object, the protection of wild life (Geer vs. Connecticut, 161 U.S., 519; 40 L. ed., 793; 16 Sup. Ct. Rep., 600), warrants the discrimination, the, means adopted for making it effective also might be adopted. . . .

The discrimination undoubtedly presents a more difficult question. But we start with reference to the evil to be prevented, and that if the class discriminated against is or reasonably might be considered to define those from whom the evil mainly is to be feared, it properly may be picked out. A lack of abstract symmetry does not matter. The question is a practical one, dependent upon experience. . . . The question therefore narrows itself to whether this court can say that the legislature of Pennsylvania was not warranted in assuming as its premise for the law that resident unnaturalized aliens were the peculiar source of the evil that it desired to prevent. (Barrett vs. Indiana,. 229 U.S., 26, 29; 57 L. ed., 1050, 1052; 33 Sup. Ct. Rep., 692.) Obviously the question, so stated, is one of local experience, on which this court ought to be very slow to declare that the state legislature was wrong in its facts (Adams vs. Milwaukee, 228 U.S., 572, 583; 57 L. ed., 971,.977; 33 Sup. Ct. Rep., 610.) If we might trust popular speech in some states it was right; but it is enough that this court has no such knowledge of local conditions as to be able to say that it was manifestly wrong. . . . Judgment affirmed. We are inclined to the view that while Smith, Bell & Co. Ltd., a corporation having alien stockholders, is entitled to the protection afforded by the due-process of law and equal protection of the laws clause of the Philippine Bill of Rights, nevertheless, Act No. 2761 of the Philippine Legislature, in denying to corporations such as Smith, Bell &. Co. Ltd., the right to register vessels in the Philippines coastwise trade, does not belong to that vicious species of class legislation which must always be condemned, but does fall within authorized exceptions, notably, within the purview of the police power, and so does not offend against the constitutional provision. This opinion might well be brought to a close at this point. It occurs to us, however, that the legislative history of the United States and the Philippine Islands, and, probably, the legislative history of other countries, if we were to take the time to search it out, might disclose similar attempts at restriction on the right to enter the coastwise trade, and might thus furnish valuable aid by which to ascertain and, if possible, effectuate legislative intention. 3. The power to regulate commerce, expressly delegated to the Congress by the Constitution, includes the power to nationalize ships built and owned in the United States by registries and enrollments, and the recording of the muniments of title of American vessels. The Congress "may encourage or it may entirely prohibit such commerce, and it may regulate in any way it may see fit between these two extremes." (U.S. vs. Craig [1886], 28 Fed., 795; Gibbons vs. Ogden [1824], 9 Wheat., 1; The Passenger Cases [1849], 7 How., 283.) Acting within the purview of such power, the first Congress of the United States had not been long convened before it enacted on September 1, 1789, "An Act for Registering and Clearing Vessels, Regulating the Coasting Trade, and for other purposes." Section 1 of this law provided that for any ship or vessel to obtain the benefits of American registry, it must belong wholly to a citizen or citizens of the United States "and no other." (1 Stat. at L., 55.) That Act was shortly after repealed, but the same idea was carried into the Acts of Congress of December 31, 1792 and February 18, 1793. (1 Stat. at L., 287, 305.).Section 4 of the Act of 1792 provided that in order to obtain the registry of any vessel, an oath shall be taken and subscribed by the owner, or by one of the owners thereof, before the officer authorized to make such registry, declaring, "that there is no subject or citizen of any foreign prince or state, directly or indirectly, by way of trust, confidence, or otherwise, interested in such vessel, or in the profits or issues thereof." Section 32 of the Act of 1793 even went so far as to say "that if any licensed ship or vessel shall be transferred to any person who is not at the time of such transfer a citizen of and resident within the United States, ... every such vessel with her tackle, apparel, and furniture, and the cargo found on board her, shall be forefeited." In case of alienation to a foreigner, Chief Justice Marshall said that all the

privileges of an American bottom were ipso facto forfeited. (U.S. vs. Willings and Francis [1807], 4 Cranch, 48.) Even as late as 1873, the Attorney-General of the United States was of the opinion that under the provisions of the Act of December 31, 1792, no vessel in which a foreigner is directly or indirectly interested can lawfully be registered as a vessel of the United. States. (14 Op. Atty.-Gen. [U.S.], 340.) These laws continued in force without contest, although possibly the Act of March 3, 1825, may have affected them, until amended by the Act of May 28, 1896 (29 Stat. at L., 188) which extended the privileges of registry from vessels wholly owned by a citizen or citizens of the United States to corporations created under the laws of any of the states thereof. The law, as amended, made possible the deduction that a vessel belonging to a domestic corporation was entitled to registry or enrollment even though some stock of the company be owned by aliens. The right of ownership of stock in a corporation was thereafter distinct from the right to hold the property by the corporation (Humphreys vs. McKissock [1890], 140 U.S., 304; Queen vs. Arnaud [1846], 9 Q. B., 806; 29 Op. Atty.-Gen. [U.S.],188.) On American occupation of the Philippines, the new government found a substantive law in operation in the Islands with a civil law history which it wisely continued in force Article fifteen of the Spanish Code of Commerce permitted any foreigner to engage in Philippine trade if he had legal capacity to do so under the laws of his nation. When the Philippine Commission came to enact the Customs Administrative Act (No. 355) in 1902, it returned to the old American policy of limiting the protection and flag of the United States to vessels owned by citizens of the United States or by native inhabitants of the Philippine Islands (Sec. 117.) Two years later, the same body reverted to the existing Congressional law by permitting certification to be issued to a citizen of the United States or to a corporation or company created under the laws of the United States or of any state thereof or of the Philippine Islands (Act No. 1235, sec. 3.) The two administration codes repeated the same provisions with the necessary amplification of inclusion of citizens or native inhabitants of the Philippine Islands (Adm. Code of 1916, sec. 1345; Adm. Code of 1917, sec. 1172). And now Act No. 2761 has returned to the restrictive idea of the original Customs Administrative Act which in turn was merely a reflection of the statutory language of the first American Congress. Provisions such as those in Act No. 2761, which deny to foreigners the right to a certificate of Philippine registry, are thus found not to be as radical as a first reading would make them appear. Without any subterfuge, the apparent purpose of the Philippine Legislature is seen to be to enact an antialien shipping act. The ultimate purpose of the Legislature is to encourage Philippine ship-building. This, without doubt, has, likewise, been the intention of the United States Congress in passing navigation or tariff laws on different occasions. The object of such a law, the United States Supreme Court once said, was to encourage American trade, navigation, and ship-building by giving American ship-owners exclusive privileges. (Old Dominion Steamship Co. vs. Virginia [1905], 198 U.S., 299; Kent's Commentaries, Vol. 3, p. 139.) In the concurring opinion of Justice Johnson in Gibbons vs. Ogden ([1824], 9 Wheat., 1) is found the following: Licensing acts, in fact, in legislation, are universally restraining acts; as, for example, acts licensing gaming houses, retailers of spirituous liquors, etc. The act, in this instance, is distinctly of that character, and forms part of an extensive system, the object of which is to encourage American shipping, and place them on an equal footing with the shipping of other nations. Almost every commercial nation reserves to its own subjects a monopoly of its coasting trade; and a countervailing privilege in favor of American shipping is contemplated, in the whole legislation of the United States on this subject. It is not to give the vessel an American character, that the license is granted; that effect has been correctly attributed to the act of her enrollment. But it is to confer on her American privileges, as contradistinguished from foreign; and to preserve the. Government from fraud by foreigners, in surreptitiously intruding themselves into the American commercial marine, as well as frauds upon the revenue in the trade coastwise, that this whole system is projected.

The United States Congress in assuming its grave responsibility of legislating wisely for a new country did so imbued with a spirit of Americanism. Domestic navigation and trade, it decreed, could only be carried on by citizens of the United States. If the representatives of the American people acted in this patriotic manner to advance the national policy, and if their action was accepted without protest in the courts, who can say that they did not enact such beneficial laws under the all-pervading police power, with the prime motive of safeguarding the country and of promoting its prosperity? Quite similarly, the Philippine Legislature made up entirely of Filipinos, representing the mandate of the Filipino people and the guardian of their rights, acting under practically autonomous powers, and imbued with a strong sense of Philippinism, has desired for these Islands safety from foreign interlopers, the use of the common property exclusively by its citizens and the citizens of the United States, and protection for the common good of the people. Who can say, therefore, especially can a court, that with all the facts and circumstances affecting the Filipino people before it, the Philippine Legislature has erred in the enactment of Act No. 2761? Surely, the members of the judiciary are not expected to live apart from active life, in monastic seclusion amidst dusty tomes and ancient records, but, as keen spectators of passing events and alive to the dictates of the general the national welfare, can incline the scales of their decisions in favor of that solution which will most effectively promote the public policy. All the presumption is in favor of the constitutionally of the law and without good and strong reasons, courts should not attempt to nullify the action of the Legislature. "In construing a statute enacted by the Philippine Commission (Legislature), we deem it our duty not to give it a construction which would be repugnant to an Act of Congress, if the language of the statute is fairly susceptible of another construction not in conflict with the higher law." ( In re Guaria [1913], 24. Phil., 36; U.S. vs. Ten Yu [1912], 24 Phil., 1.) That is the true construction which will best carry legislative intention into effect. With full consciousness of the importance of the question, we nevertheless are clearly of the opinion that the limitation of domestic ownership for purposes of obtaining a certificate of Philippine registry in the coastwise trade to citizens of the Philippine Islands, and to citizens of the United States, does not violate the provisions of paragraph 1 of section 3 of the Act of Congress of August 29, 1916 No treaty right relied upon Act No. 2761 of the Philippine Legislature is held valid and constitutional . The petition for a writ of mandamus is denied, with costs against the petitioner. So ordered. Arellano, C.J., Torres, Johnson, Araullo, Street, Avancea and Moir, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-16318 October 21, 1921

PANG LIM and BENITO GALVEZ, plaintiffs-appellees, vs. LO SENG, defendant-appellant. Cohn, Fisher and DeWitt for appellant. No appearance for appellees.

STREET, J.: For several years prior to June 1, 1916, two of the litigating parties herein, namely, Lo Seng and Pang Lim, Chinese residents of the City of Manila, were partners, under the firm name of Lo Seng and Co., in the business of running a distillery, known as "El Progreso," in the Municipality of Paombong, in the Province of Bulacan. The land on which said distillery is located as well as the buildings and improvements originally used in the business were, at the time to which reference is now made, the property of another Chinaman, who resides in Hongkong, named Lo Yao, who, in September, 1911, leased the same to the firm of Lo Seng and Co. for the term of three years. Upon the expiration of this lease a new written contract, in the making of which Lo Yao was represented by one Lo Shui as attorney in fact, became effective whereby the lease was extended for fifteen years. The reason why the contract was made for so long a period of time appears to have been that the Bureau of Internal Revenue had required sundry expensive improvements to be made in the distillery, and it was agreed that these improvements should be effected at the expense of the lessees. In conformity with this understanding many thousands of pesos were expended by Lo Seng and Co., and later by Lo Seng alone, in enlarging and improving the plant. Among the provisions contained in said lease we note the following: Know all men by these presents: xxx xxx xxx

1. That I, Lo Shui, as attorney in fact in charge of the properties of Mr. Lo Yao of Hongkong, cede by way of lease for fifteen years more said distillery "El Progreso" to Messrs. Pang Lim and Lo Seng (doing business under the firm name of Lo Seng and Co.), after the termination of the previous contract, because of the fact that they are required, by the Bureau of Internal Revenue, to rearrange, alter and clean up the distillery. 2. That all the improvements and betterments which they may introduce, such as machinery, apparatus, tanks, pumps, boilers and buildings which the business may require, shall be, after the termination of the fifteen years of lease, for the benefit of Mr. Lo Yao, my principal, the buildings being considered as improvements.

3. That the monthly rent of said distillery is P200, as agreed upon in the previous contract of September 11, 1911, acknowledged before the notary public D. Vicente Santos; and all modifications and repairs which may be needed shall be paid for by Messrs. Pang Lim and Lo Seng. We, Pang Lim and Lo Seng, as partners in said distillery "El Progreso," which we are at present conducting, hereby accept this contract in each and all its parts, said contract to be effective upon the termination of the contract of September 11, 1911. Neither the original contract of lease nor the agreement extending the same was inscribed in the property registry, for the reason that the estate which is the subject of the lease has never at any time been so inscribed. On June 1, 1916, Pang Lim sold all his interest in the distillery to his partner Lo Seng, thus placing the latter in the position of sole owner; and on June 28, 1918, Lo Shui, again acting as attorney in fact of Lo Yao, executed and acknowledged before a notary public a deed purporting to convey to Pang Lim and another Chinaman named Benito Galvez, the entire distillery plant including the land used in connection therewith. As in case of the lease this document also was never recorded in the registry of property. Thereafter Pang Lim and Benito Galvez demanded possession from Lo Seng, but the latter refused to yield; and the present action of unlawful detainer was thereupon initiated by Pang Lim and Benito Galvez in the court of the justice of the peace of Paombong to recover possession of the premises. From the decision of the justice of the peace the case was appealed to the Court of First Instance, where judgment was rendered for the plaintiffs; and the defendant thereupon appealed to the Supreme Court. The case for the plaintiffs is rested exclusively on the provisions of article 1571 of the Civil Code, which reads in part as follows: ART. 1571. The purchaser of a leased estate shall be entitled to terminate any lease in force at the time of making the sale, unless the contrary is stipulated, and subject to the provisions of the Mortgage Law. In considering this provision it may be premised that a contract of lease is personally binding on all who participate in it regardless of whether it is recorded or not, though of course the unrecorded lease creates no real charge upon the land to which it relates. The Mortgage Law was devised for the protection of third parties, or those who have not participated in the contracts which are by that law required to be registered; and none of its provisions with reference to leases interpose any obstacle whatever to the giving of full effect to the personal obligations incident to such contracts, so far as concerns the immediate parties thereto. This is rudimentary, and the law appears to be so understood by all commentators, there being, so far as we are aware, no authority suggesting the contrary. Thus, in the commentaries of the authors Galindo and Escosura, on the Mortgage Law, we find the following pertinent observation: "The Mortgage Law is enacted in aid of and in respect to third persons only; it does not affect the relations between the contracting parties, nor their capacity to contract. Any question affecting the former will be determined by the dispositions of the special law [i.e., the Mortgage Law], while any question affecting the latter will be determined by the general law." (Galindo y Escosura, Comentarios a la Legislacion Hipotecaria , vol. I, p. 461.) Although it is thus manifest that, under the Mortgage Law, as regards the personal obligations expressed therein, the lease in question was from the beginning, and has remained, binding upon all the parties thereto among whom is to be numbered Pang Lim, then a member of the firm of Lo Seng and Co. this does not really solve the problem now before us, which is, whether the plaintiffs herein, as purchasers of the estate, are at liberty to terminate the lease, assuming that it was originally binding upon all parties participating in it.

Upon this point the plaintiffs are undoubtedly supported, prima facie, by the letter of article 1571 of the Civil Code; and the position of the defendant derives no assistance from the mere circumstance that the lease was admittedly binding as between the parties thereto. 1awph!l.net The words "subject to the provisions of the Mortgage Law," contained in article 1571, express a qualification which evidently has reference to the familiar proposition that recorded instruments are effective against third persons from the date of registration (Co-Tiongco vs. Co-Guia, 1 Phil., 210); from whence it follows that a recorded lease must be respected by any purchaser of the estate whomsoever. But there is nothing in the Mortgage Law which, so far as we now see, would prevent a purchaser from exercising the precise power conferred in article 1571 of the Civil Code, namely, of terminating any lease which is unrecorded; nothing in that law that can be considered as arresting the force of article 1571 as applied to the lease now before us. Article 1549 of the Civil Code has also been cited by the attorneys for the appellant as supplying authority for the proposition that the lease in question cannot be terminated by one who, like Pang Lim, has taken part in the contract. That provision is practically identical in terms with the first paragraph of article 23 of the Mortgage Law, being to the effect that unrecorded leases shall be of no effect as against third persons; and the same observation will suffice to dispose of it that was made by us above in discussing the Mortgage Law, namely, that while it recognizes the fact that an unrecorded lease is binding on all persons who participate therein, this does not determine the question whether, admitting the lease to be so binding, it can be terminated by the plaintiffs under article 1571. Having thus disposed of the considerations which arise in relation with the Mortgage Law, as well as article 1549 of the Civil Coded all of which, as we have seen, are undecisive we are brought to consider the aspect of the case which seems to us conclusive. This is found in the circumstance that the plaintiff Pang Lim has occupied a double role in the transactions which gave rise to this litigation, namely, first, as one of the lessees; and secondly, as one of the purchasers now seeking to terminate the lease. These two positions are essentially antagonistic and incompatible. Every competent person is by law bond to maintain in all good faith the integrity of his own obligations; and no less certainly is he bound to respect the rights of any person whom he has placed in his own shoes as regards any contract previously entered into by himself. While yet a partner in the firm of Lo Seng and Co., Pang Lim participated in the creation of this lease, and when he sold out his interest in that firm to Lo Seng this operated as a transfer to Lo Seng of Pang Lim's interest in the firm assets, including the lease; and Pang Lim cannot now be permitted, in the guise of a purchaser of the estate, to destroy an interest derived from himself, and for which he has received full value. The bad faith of the plaintiffs in seeking to deprive the defendant of this lease is strikingly revealed in the circumstance that prior to the acquisition of this property Pang Lim had been partner with Lo Seng and Benito Galvez an employee. Both therefore had been in relations of confidence with Lo Seng and in that position had acquired knowledge of the possibilities of the property and possibly an experience which would have enabled them, in case they had acquired possession, to exploit the distillery with profit. On account of his status as partner in the firm of Lo Seng and Co., Pang Lim knew that the original lease had been extended for fifteen years; and he knew the extent of valuable improvements that had been made thereon. Certainly, as observed in the appellant's brief, it would be shocking to the moral sense if the condition of the law were found to be such that Pang Lim, after profiting by the sale of his interest in a business, worthless without the lease, could intervene as purchaser of the property and confiscate for his own benefit the property which he had sold for a valuable consideration to Lo Seng. The sense of justice recoils before the mere possibility of such eventuality. Above all other persons in business relations, partners are required to exhibit towards each other the highest degree of good faith. In fact the relation between partners is essentially fiduciary, each being considered in law, as he is in fact, the confidential agent of the other. It is therefore accepted as fundamental in equity jurisprudence that one partner cannot, to the detriment of another, apply exclusively

to his own benefit the results of the knowledge and information gained in the character of partner. Thus, it has been held that if one partner obtains in his own name and for his own benefit the renewal of a lease on property used by the firm, to commence at a date subsequent to the expiration of the firm's lease, the partner obtaining the renewal is held to be a constructive trustee of the firm as to such lease. (20 R. C. L., 878-882.) And this rule has even been applied to a renewal taken in the name of one partner after the dissolution of the firm and pending its liquidation. (16 R. C. L., 906; Knapp vs. Reed, 88 Neb., 754; 32 L. R. A. [N. S.], 869; Mitchell vs. Reed 61 N. Y., 123; 19 Am. Rep., 252.) An additional consideration showing that the position of the plaintiff Pang Lim in this case is untenable is deducible from articles 1461 and 1474 of the Civil Code, which declare that every person who sells anything is bound to deliver and warrant the subject-matter of the sale and is responsible to the vendee for the legal and lawful possession of the thing sold. The pertinence of these provisions to the case now under consideration is undeniable, for among the assets of the partnership which Pang Lim transferred to Lo Seng, upon selling out his interest in the firm to the latter, was this very lease; and while it cannot be supposed that the obligation to warrant recognized in the articles cited would nullify article 1571, if the latter article had actually conferred on the plaintiffs the right to terminate this lease, nevertheless said articles (1461, 1474), in relation with other considerations, reveal the basis of an estoppel which in our opinion precludes Pang Lim from setting up his interest as purchaser of the estate to the detriment of Lo Seng. It will not escape observation that the doctrine thus applied is analogous to the doctrine recognized in courts of common law under the head of estoppel by deed, in accordance with which it is held that if a person, having no title to land, conveys the same to another by some one or another of the recognized modes of conveyance at common law, any title afterwards acquired by the vendor will pass to the purchaser; and the vendor is estopped as against such purchaser from asserting such after-acquired title. The indenture of lease, it may be further noted, was recognized as one of the modes of conveyance at common law which created this estoppel. (8 R. C. L., 1058, 1059.) From what has been said it is clear that Pang Lim, having been a participant in the contract of lease now in question, is not in a position to terminate it: and this is a fatal obstacle to the maintenance of the action of unlawful detainer by him. Moreover, it is fatal to the maintenance of the action brought jointly by Pang Lim and Benito Galvez. The reason is that in the action of unlawful detainer, under section 80 of the Code of Civil Procedure, the only question that can be adjudicated is the right to possession; and in order to maintain the action, in the form in which it is here presented, the proof must show that occupant's possession is unlawful, i. e., that he is unlawfully withholding possession after the determination of the right to hold possession. In the case before us quite the contrary appears; for, even admitting that Pang Lim and Benito Galvez have purchased the estate from Lo Yao, the original landlord, they are, as between themselves, in the position of tenants in common or owners pro indiviso, according to the proportion of their respective contribution to the purchase price. But it is well recognized that one tenant in common cannot maintain a possessory action against his cotenant, since one is as much entitled to have possession as the other. The remedy is ordinarily by an action for partition. (Cornista vs. Ticson, 27 Phil., 80.) It follows that as Lo Seng is vested with the possessory right as against Pang Lim, he cannot be ousted either by Pang Lim or Benito Galvez. Having lawful possession as against one cotenant, he is entitled to retain it against both. Furthermore, it is obvious that partition proceedings could not be maintained at the instance of Benito Galvez as against Lo Seng, since partition can only be effected where the partitioners are cotenants, that is, have an interest of an identical character as among themselves. (30 Cyc., 178-180.) The practical result is that both Pang Lim and Benito Galvez are bound to respect Lo Seng's lease, at least in so far as the present action is concerned. We have assumed in the course of the preceding discussion that the deed of sale under which the plaintiffs acquired the right of Lo Yao, the owner of the fee, is competent proof in behalf of the plaintiffs. It is, however, earnestly insisted by the attorney for Lo Seng that this document, having never been recorded in the property registry, cannot under article 389 of the Mortgage Law, be used in court against him because as to said instrument he is a third party. The important question thus raised is not absolutely necessary to the decision of this case, and we are inclined to pass it without decision, not only because the

question does not seem to have been ventilated in the Court of First Instance but for the further reason that we have not had the benefit of any written brief in this case in behalf of the appellees. The judgment appealed from will be reversed, and the defendant will be absolved from the complaint. It is so ordered, without express adjudication as to costs. Johnson, Araullo, Avancea and Villamor, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-14617 December 9, 1920 R. Y. HANLON, plaintiff-appellee, vs. JOHN W. HAUSSERMANN and A. W. BEAM, defendants-appellants. GEORGE C. SELLNER, intervener.1 Cohn and Fisher for appellants Thomas D. Aitken and Gibbs, McDonough & Johnson for appellee.

STREET, J.: We take occasion, from the presentation of a motion to rehear, to add a few words to an opinion already perhaps unduly extended. Directing attention again to the interpretation of clause ( d) of paragraph II of the profit sharing agreement, which is the central feature of the case, we note that the proponents of the motion reiterate their contention to the effect that the discharge contemplated in that clause is merely a discharge of the guaranty, so-called, to raise the capital which Sellner on the one part, and Haussermann and Beam on the other, had respectively agreed to raise on or before May 6, 1914; and that the discharge of Haussermann and Beam from this obligation left intact the broad obligation, expressed in paragraph I of the same contract, to do all in their power to promote the Hanlon project. Upon this point counsel say that not only the language but the punctuation of clause (d) shows conclusively that the antecedent of the word "obligation," twice employed therein, is the guaranty, or promise, to obtain the subscriptions within the period stated. This may possibly be true, but the statement is apparently barren of significance; for when the contract is carefully examined, it will be found that his promise (guaranty?) expresses exactly the principal thing that these parties had agreed to do towards realizing the projects. To be more specific: In one of the introductory clauses of the contract it is recited that the parties have agreed to cooperate and assist Hanlon in the flotation of the project for the rehabilitation of the Benguet Consolidated Mining Company; in paragraph I it is stipulated that each shall do all in his power to float said project and make the same a success; and in paragraph II it is agreed that said project shall be floated by the raising of capital in a certain manner and within a certain time. In other words, that which in the beginning is expressed in general terms as an undertaking to cooperate is finally reduced by a process of definition to the precise obligation indicated in the mutual promises of Sellner, Haussermann, and Beam, to raise the necessary capital within the period of six months. Of course nobody will be misled, by the use of the very guarantee in clause ( d), into supposing that the obligation there created is of a distinct type, different from that created by any ordinary and direct promise. In its ordinary significance the word "guarantee" implies the creation of a collateral obligation, but here it is evidently used for emphasis simply in the sense of promise. What has been said shows the impossibility of separating the duty of the three associates above-mentioned to assist in the promotion of the Hanlon project from the more specific duty to raise the necessary capital in the particular manner set forth in clause (d). When the one obligation was discharged the other was necessarily extinguished also.lawphi1.net A single observation will be made upon another point, which may be indicated in the following question: What are the conditions under which an attorney in fact is bound to exercise a power in behalf of and for

the benefit of his principal? Manifestly, before the attorney in fact can be held liable for the breach of duty towards his principal there must have existed a specific obligation on the part of the attorney in fact to act for the principal. Such obligation is sometimes discoverable from an examination of the power itself, but is more often discoverable by implication in the circumstances surrounding the parties and their special relations with reference to each other and the subject-matter of the power. In the present case the specific power of attorney executed by Hanlon in favor of Beam on November 10, 1913, prior to Hanlon's departure for the United States, clearly shows that it was executed in relation with the contract of November 5 and 6, and was to be used in carrying those contracts into effect. Those contracts, however, as we have shown in the principal opinion, failed and became inoperative without fault of the defendants on May 6, 1914; and so far as the record shows, there was no act which could have been done in furtherance of those contracts prior to that date which was neglected by Beam under that power. Burt it will be said that, even conceding that Beam was under no positive duty to act for Hanlon under the power of attorney in the matter of rehabilitating the mine after the sixth of May, nevertheless as he did afterwards in fact proceed in that matter under new and different auspices, he must now be held in equity to have been acting, in cooperation with Haussermann, for the benefit of the old joint enterprise. The difficulty here is and this we consider to be one of the fundamental fallacies underlying the case that the plaintiff is attempting to enforce an equitable obligation inconsistent with the specific contract. It is a well-known rule that no implied obligation, either legal or equitable, is ever created or imposed by law in respect to a matter which has been made the subject of express contract. Likewise, no implied duty can ever spring from the same solid where an express contract has existed and has been discharged. It follows that the discharge of Haussermann and Beam under the express provisions of clause ( d), paragraph I, of the profit-sharing agreement, is a fatal obstacle to the creation of any implied duty, legal or equitable, derived from that contract or from the relation of the parties as incident thereto. the rights of the parties must be determined by the contract. And this applied not only with reference to the extent of the contractual obligation but to the conditions under which the obligation was extinguished. itc-alf The motion to rehear is denied. So ordered. Mapa, C.J., Araullo, Malcolm, Avancea and Villamor, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-5963 May 20, 1953

THE LEYTE-SAMAR SALES CO., and RAYMUNDO TOMASSI, petitioners, vs. SULPICIO V. CEA, in his capacity as Judge of the Court of First Instance of Leyte and OLEGARIO LASTRILLA, respondents. Filomeno Montejo for petitioners. Sulpicio V. Cea in his own behalf. Olegario Lastrilla in his own behalf. BENGZON, J.: Labaled "Certiorari and Prohibition with preliminary Injunction" this petition prays for the additional writ of mandamus to compel the respondent judge to give due course to petitioners' appeal from his order taxing costs. However, inasmuch as according to the answer, petitioners through their attorney withdrew their cash appeal bond of P60 after the record on appeal bond of P60 after the record on appeal had been rejected, the matter of mandamus may be summarily be dropped without further comment. From the pleadings it appears that, In civil case No. 193 of the Court of First Instance of Leyte, which is a suit for damages by the LeyteSamar Sales Co. (hereinafter called LESSCO) and Raymond Tomassi against the Far Eastern Lumber & Commercial Co. (unregistered commercial partnership hereinafter called FELCO), Arnold Hall, Fred Brown and Jean Roxas, judgment against defendants jointly and severally for the amount of P31,589.14 plus costs was rendered on October 29, 1948. The Court of Appeals confirmed the award in November 1950, minus P2,000 representing attorney's fees mistakenly included. The decision having become final, the sheriff sold at auction on June 9, 1951 to Robert Dorfe and Pepito Asturias "all the rights, interests, titles and participation" of the defendants in certain buildings and properties described in the certificate, for a total price of eight thousand and one hundred pesos. But on June 4, 1951 Olegario Lastrilla filed in the case a motion, wherein he claimed to be the owner by purchase on September 29, 1949, of all the "shares and interests" of defendant Fred Brown in the FELCO, and requested "under the law of preference of credits" that the sheriff be required to retain in his possession so much of the deeds of the auction sale as may be necessary "to pay his right". Over the plaintiffs' objection the judge in his order of June 13, 1951, granted Lastrilla's motion by requiring the sheriff to retain 17 per cent of the money "for delivery to the assignee, administrator or receiver" of the FELCO. And on motion of Lastrilla, the court on August 14, 1951, modified its order of delivery and merely declared that Lastrilla was entitled to 17 per cent of the properties sold, saying in part: . . . el Juzgado ha encontrado que no se han respetado los derechos del Sr. Lastrilla en lo que se refiere a su adquiscicion de las acciones de C. Arnold Hall (Fred Brown) en la Far Eastern Lumber & Lumber Commercial C. porque la mismas han sido incluidas en la subasta. Es vedad que las acciones adquiridas por el Sr. Lastilla representan el 17 por ciento del capital de la sociedad "Far Eastern Lumber & Commercial Co., Inc., et al." pero esto no quiere decir que su vlor no esta sujeto a las fluctuaciones del negocio donde las invirtio.

Se vendieron propiedades de la corporacion "Far Eastern Lumber & Co. Inc.," y de la venta solamente se obtuvo la cantidad de P8,100. "En su virtud, se declara que el 17 por ciento de las propiedades vendidas en publica subasta pretenece al Sr. O Lastrilla y este tiene derecho a dicha porcion pero con la obligacion de pagar el 17 por ciento de los gastos for la conservacion de dichas propriedades por parte del Sheriff; . . . . (Annex K) It is from this declaration and the subsequent orders to enforce it 1 that the petitioners seek relief by certiorari, their position being the such orders were null and void for lack of jurisdiction. At their request a writ of preliminary injunction was issued here. The record is not very clear, but there are indications, and we shall assume for the moment, that Fred Brown (like Arnold Hall and Jean Roxas) was a partner of the FELCO, was defendant in Civil Case No. 193 as such partner, and that the properties sold at auction actually belonged to the FELCO partnership and the partners. We shall also assume that the sale made to Lastrilla on September 29, 1949, of all the shares of Fred Brown in the FELCO was valid. (Remember that judgment in this case was entered in the court of first instance a year before.) The result then, is that on June 9, 1951 when the sale was effected of the properties of FELCO to Roberto Dorfe and Pepito Asturias, Lastilla was already a partner of FELCO. Now, does Lastrilla have any proper claim to the proceeds of the sale? If he was a creditor of the FELCO, perhaps or maybe. But he was no. The partner of a partnership is not a creditor of such partnership for the amount of his shares. That is too elementary to need elaboration. Lastrilla's theory, and the lower court's seems to be: inasmuch as Lastrilla had acquired the shares of Brown is September, 1949, i.e., before the auction sale and he was not a party to the litigation, such shares could not have been transferred to Dorfe and Austrilla. Granting arguendo that the auction sale and not included the interest or portion of the FELCO properties corresponding to the shares of Lastrilla in the same partnership (17%), the resulting situation would be at most that the purchasers Dorfe and Austrias will have to recognized dominion of Lastrillas over 17 per cent of the properties awarded to them.2 So Lastrilla acquired no right to demand any part of the money paid by Dorfe and Austrias to he sheriff any part of the money paid by Dorfe and Austrias to the sheriff for the benefit of FELCO and Tomassi, the plaintiffs in that case, for the reason that, as he says, his shares (acquired from Brown) could not have been and were not auctioned off to Dorfe and Austrias. Supposing however that Lastrillas shares have been actually (but unlawfully) sold by the sheriff (at the instance of plaintiffs) to Dorfe and Austrias, what is his remedy? Section 15, Rule 39 furnishes the answer. Precisely, respondents argue, Lastrilla vindicated his claim by proper action, i.e., motion in the case. We ruled once that "action" in this section means action as defined in section 1, Rule 2. 3 Anyway his remedy is to claim "the property", not the proceeds of the sale, which the sheriff is directed by section 14, Rule 39 to deliver unto the judgment creditors. In other words, the owner of property wrongfully sold may not voluntarily come to court, and insist, "I approve the sale, therefore give me the proceeds because I am the owner". The reason is that the sale was made for the judgment creditor (who paid for the fees and notices), and not for anybody else. On this score the respondent judge's action on Lastrilla's motion should be declared as in excess of jurisdiction, which even amounted to want of jurisdiction, which even amounted to want of jurisdiction,

considering specially that Dorfe and Austrias, and the defendants themselves, had undoubtedly the right to be heardbut they were not notified.4 Why was it necessary to hear them on the merits of Lastrilla's motion? Because Dorfe and Austrillas might be unwilling to recognized the validity of Lastrilla's purchase, or, if valid, they may want him not to forsake the partnership that might have some obligations in connection with the partnership properties. And what is more important, if the motion is granted, when the time for redemptioner seventeen per cent (178%) less than amount they had paid for the same properties. The defendants Arnold Hall and Jean Roxas, eyeing Lastrilla's financial assets, might also oppose the substitution by Lastrilla of Fred Brown, the judgment against them being joint and several. They might entertain misgivings about Brown's slipping out of their common predicament through the disposal of his shares. Lastly, all the defendants would have reasonable motives to object to the delivery of 17 per cent of the proceeds to Lustrial, because it is so much money deducted, and for which the plaintiffs might as another levy on their other holdings or resources. Supposing of course, there was no fraudulent collusion among them. Now, these varied interest of necessity make Dorfe, Asturias and the defendants indispensable parties to the motion of Lastrilla granting it was step allowable under our regulations on execution. Yet these parties were not notified, and obviously took no part in the proceedings on the motion. A valid judgment cannot be rendered where there is a want of necessary parties, and a court cannot properly adjudicate matters involved in a suit when necessary and indispensable parties to the proceedings are not before it. (49 C.J.S., 67.) Indispensable parties are those without whom the action cannot be finally determined. In a case for recovery of real property, the defendant alleged in his answer that he was occupying the property as a tenant of a third person. This third person is an indispensable party, for, without him, any judgment which the plaintiff might obtain against the tenant would have no effectiveness, for it would not be binding upon, and cannot be executed against, the defendant's landlord, against whom the plaintiff has to file another action if he desires to recover the property effectively. In an action for partition of property, each co-owner is an indispensable party. (Moran, Comments, 1952 ed. Vol. I, p. 56.) (Emphasis supplied.) Wherefore, the orders of the court recognizing Lastrilla's right and ordering payment to him of a part of the proceeds were patently erroneous, because promulgated in excess or outside of its jurisdiction. For this reason the respondents' argument resting on plaintiffs' failure to appeal from the orders on time, although ordinarily decisive, carries no persuasive force in this instance. For as the former Chief Justice Dr. Moran has summarized in his Comments, 1952 ed. Vol. II, p. 168 . . . And in those instances wherein the lower court has acted without jurisdiction over the subjectmatter, or where the order or judgment complained of is a patent nullity, courts have gone even as far as to disregard completely the questions of petitioner's fault, the reason being, undoubtedly, that acts performed with absolute want of jurisdiction over the subject-matter are void ab initio and cannot be validated by consent, express or implied, of the parties. Thus, the Supreme Court granted a petition for certiorari and set aside an order reopening a cadastral case five years after the judgment rendered therein had become final. In another case, the Court set aside an order amending a judgment acquired a definitive character. And still in another case, an order granting a review of a decree of registration issued more than a year ago had been declared null void. In all these case the existence of the right to appeal has been recitals was rendered without any trial or

hearing, and the Supreme Court, in granting certiorari, said that the judgment was by its own recitals a patent nullity, which should be set aside though an appeal was available but was not availed of. . . . Invoking our ruling in Melocotones vs. Court of First Instance, (57 Phil., 144), wherein we applied the theory of laches to petitioners' 3-years delay in requesting certiorari, respondents point out that whereas the orders complained of herein were issued in June 13, 1951 and August 14, 1951 this special civil action was not filed until August 1952. It should be observed that the order of June 13 was superseded by that of August 14, 1951. The last order merely declared "que el 17 por ciento de la propiedades vendidas en publica subasta pertenece at Sr. Lastrilla y este tiene derecho a dicha porcion." This does not necessarily mean that 17 per cent of the money had to be delivered to him. It could mean, as hereinbefore indicated, that the purchasers of the property (Dorfe and Asturias) had to recognize Lastrilla's ownership. It was only on April 16, 1952 (Annex N) that the court issued an order directing the sheriff "to tun over" to Lastrilla "17 per cent of the total proceeds of the auction sale". There is the order that actually prejudiced the petitioners herein, and they fought it until the last order of July 10,. 1952 (Annex Q). Surely a month's delay may not be regarded as laches. In view of the foregoing, it is our opinion, and we so hold, that all orders of the respondents judge requiring delivery of 17 per cent of the proceeds of the auction sale to respondent Olegario Lastrilla are null and void; and the costs of this suit shall be taxed against the latter. The preliminary injunction heretofore issued is made permanent. So ordered. Paras, C.J., Feria, Pablo, Tuason, Montemayor, Reyes, Jugo, Bautista Angelo and Labrador, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 44119 March 30, 1937

SHARRUF & CO., known also as SHARRUF & ESKENAZI, SALOMON SHARRUF and ELIAS ESKENAZI, plaintiffs-appellees, vs. BALOISE FIRE INSURANCE CO., SUN INSURANCE OFFICE, LTD., and SPRINGFIELD INSURANCE CO., represented by KUENZLE & STREIFF, INC., defendants-appellants. Carlos A. Sobral for appellants. Ramon Diokno for appellee. VILLA-REAL, J.: This is an appeal taken by the defendant companies Baloise Fire Insurance Co., Sun Insurance Office Ltd., and Springfield Insurance Co., represented by Kuenzle & Streiff, Inc., from the judgment of the Court of First instance of Manila, the dispositive part of which reads as follows: Wherefore, judgment is rendered ordering the defendant insurance companies to pay to the plantiffs Salomon Sharruf and Elias Eskenazi the total amount of P40,000 plus interest thereon at 8 per cent per annum from the date of the filing of the complaint, with the costs of the trial. The defendants shall pay this judgment jointly in proportion to the respective policies issued by them. The plaintiffs Salomon Sharruf and Elias Eskenazi shall recover the judgment share and share alike, deducting from the portion of the plaintiff Elias Eskenazi the sum of P3,000 which belongs and shall turned over to the intervenor E. Awad & Co., Inc. It is so ordered. In support of their appeal the appellants assign the following alleged errors as committed by the court a quo in its decision in question, to wit: 1. the lower court erred in holding, that Salomon Sharruf and Elias Eskenazi had personality to sue, either as a partnership or individually, and therefore, an insurable interest. 2. The lower court erred in holding, that the fire that broke out in the premises at Nos. 299-301 Muelle de la Industria of this city, occupied by the alleged plaintiffs, was not of incendiary origin. 3. The lower court erred in holding, that the "idea of using petroleum in the fire in question, surged after the fire for the purpose of making it appear as a part of the evidence." 4. The lower court erred in holding, that the claim of loss filed by the alleged plaintiffs was not fraudulent, but merely inaccurate, due to the peculiar circumstances of the case, such as the loss of invoices and sales-slips. 5. The lower court erred in sentencing the defendants to pay jointly to the alleged plaintiffs the sum of P40,000, with interest thereon at the rate of 8 per cent year and costs. 6. The lower court erred in overruling defendants' motion for new trial and in failing to dismiss the case altogether, with costs against the alleged plaintiffs.

The preponderance of the evidence shows the existence of the following facts:. In the months of June and July 1933, the plaintiffs Salomon Sharruf and Elias Eskenazi were doing business under the firm name of Sharruf & Co. As they had applied to the defendant companies for insurance of the merchandise they had in stock, the latter sent their representative P. E. Schiess to examine and asses it. On July 25, 1933, the defendant insurance companies issued insurance policies Exhibits D, E, and F in the total amount of P25,000 in the name of Sharruf & Co. issued an additional policy (Exhibit G) in the sum of P15,000 in favor of said firm Sharruf & Co., raising the total amount of the insurance on said merchandise to P40,000. On August 26, 1933, the plaintiffs executed a contract of partnership between themselves (Exhibit A) wherein they substituted the name of Sharruf & Co. with the Sharruf & Eskenazi, stating that Elias Eskenazi contributed to the partnership, as his capital, goods valued at P26,299.94 listed in an inventory Exhibit B. It was likewise stated in said contract that Salomon Sharruf brought to said partnership, as his capital, goods valued at P24,205.10, appearing in the inventories Exhibit C and C-1. The total value of the merchandise contributed by both partners amounted to P50,505.04. Part of said merchandise, most of which were textiles, was sold for P8,000, leaving goods worth P43,000. In all there were from 60 to 70 bolts of silk. All the goods, most of which were aluminum kitchen utensils, various porcelain and glass wares, and other articles of stucco, were contained in about 39 or 40 cases. The last time the plaintiffs were in the building was on September 19, 1933, at 4 o'clock in the afternoon. Up to the month of September 1933, about 30 or 40 cases of merchandise belonging to the plaintiffs were in Robles' garage at No. 1012 Mabini Street. At about 12.41 o'clock on the morning of September 22, 1933, the fire alarm bell rang in the different fire stations of the city. The firemen of the San Nicolas Fire Station, headed by Captain Charles A. Baker, were the first to arrive at the scene of the fire, followed by Captain Thomas F. McIntyre of the Santa Cruz Fire Station, who arrived at 12.44 o'clock. Having found the door at No. 301, Muelle de la Industria Street, where the building was in flames, locked, the firemen pumped water on the upper part of the building and later broke open the door through which they an entered the premises. They then saw an inflamed liquid flowing towards the sidewalk, the flames thereon blazing more intensely every time water fell on them. The liquid apparently came from under the staircase of said floor. They likewise noted that the entire space occupied by the staircase was in flames except the adjoining room. After the fire had been extinguished, an earthen pot (Exhibit 15) containing ashes and the residue of a certain substance, all of which smelled of petroleum, was found by detective Manalo near the railing of the stairway of the second floor. At about 8.30 o'clock that same morning, detective Irada found nother earthen pot (Exhibit 16), one-fourth full of water smelled of petroleum, under the staircase of the first floor; straw and excelsior, that also smelled of petroleum, around said pot, a red rag (Exhibit 18) in front of the toilet, and a towel which also smelled of petroleum can, Exhibit 21. On the following day, September 23, 1933, photographs were taken of the condition of the different parts of the building and of the goods found therein. Said photographs are: Exhibit 1, showing the interior of the first floor partially burned, with the staircase, the doorway, the wooden partition wall and pieces of wood scattered on the floor supposed to be from the door that was demolished; Exhibit 2, showing about 8 or 9 scorched cases, some closed and others open; Exhibit 3, showing the space or hall of the upper floor partially damaged by the fire at the place occupied by the staircase, with chairs piled up and unburnt, pieces of wood and debris apparently from the cement partition wall beside the staircase and the attic; Exhibit 4, showing the same space taken from another angle, with the partition wall of cement and stone and some broken railings of the stairways; Exhibit 5, showing a room with partially burnt partition wall, with a wardrobe and a table in the background, another table in the center, a showcase near the wall with porcelain and iron articles on top thereof and fallen and burnt window shutters on the floor; Exhibit 6, showing an open unburnt showcase containing necklaces with limitation stones and other jewelry; Exhibit 7, showing piled up chairs and boxes and the burned and destroyed upper part of the partition wall and attic; Exhibit 8, presenting a showcase with a burnt top, containing kitchen utensils, tableware, dinner pails and other articles; Exhibit 9, presenting a half-open trunk with protruding ends of cloth, other pieces of cloth scattered on the floor, a step of the staircase and a bench; Exhibit 10, showing the partially destroyed attic and wires wound around the beams; Exhibit 11, presenting another view of the same attic from another angle. On the 27th of said month and year, the following photographs were taken: Exhibit 12, presenting a close-up of the beams and electric wiring on September 25, 1933, was of the opinion that the wires wound around the beam and a nail might have caused the fire, but he could not

assure whether any of the wires was burned due to an electrical discharge the passed through it, or whether or not the fire started from the lighting system. In the burned building the plaintiffs kept petroleum used for cleaning the floor. The first question to be decided in the present appeal, which is raised in the first assignment of alleged error, is whether or not Salomon Sharruf and Elias Eskenazi had juridical personality to bring this action, either individually or collectively, and whether or not they had insurable interest. As already seen, Salomon Sharruf and Elias Eskenazi were doing business under the firm name of Sharruf & Co. in whose name the insurance policies were issued, Elias Eskenazi having paid the corresponding premiums. In the case of Lim Cuan Sy vs. Northern Assurance Co. (55 Phil., 248), this court said: A policy insuring merchandise against fire is not invalidated by the fact that the name of the insured in the policy is incorrectly written "Lim Cuan Sy" instead of "Lim Cuan Sy & Co.", the latter being the proper legal designation of the firm, where it appears that the designation "Lim Cuan Sy" was commonly used as the name of the firm in its business dealings and that the error in the designation of the insured in the policy was not due to any fraudulent intent on the part of the latter and did not mislead the insurer as to the extent of the liability assumed. In the present case, while it is true that at the beginning the plaintiffs had been doing business in said name of "Sharruf & Co.", insuring their business in said name, and upon executing the contract of partnership (exhibit A) on August 26, 1933, they changed the title thereof to "Sharruf & Eskenazi," the membership of the partnership in question remained unchanged, the same and only members of the former, Salomon Sharruf and Elias Eskenazi, being the ones composing the latter, and it does not appear that in changing the title of the partnership they had the intention of defrauding the herein defendant insurance companies. Therefore, under the above-cited doctrine the responsibility of said defendants to the plaintiffs by virtue of the respective insurance policies has not been altered. If this is true, the plaintiffs have juridical personality to bring this action. The second question to be decided is that raised in the second assignment of alleged error, which consists in whether or not the fire which broke out in the building at Nos. 299-301 Muelle de la Industria, occupied by the plaintiffs, is of incentiary origin. In maintaining the affirmative, the appellants call attention to the earthen pots Exhibits 15 and 16, the first found by detective Manalo beside the railing of the stairways of the upper floor and the second found by detective Irada on the first floor, both containing liquid, ashes and other residues which smelled of petroleum; a red rag (Exhibit 18) found by detective Irada in front of the toilet; the partially burnt box (Exhibit 20); and the old can (Exhibit 21) containing garbage. The fact that the liquid found by the detectives in the earthen jars smelled of petroleum, does not constitute conclusive evidence that they had been used as containers for petroleum to burn the house. Said smell could have very well come the strips of China wood of which boxes from abroad are made, the resin of which smells of petroleum, or from the rags found therein which might have been used to clean the floor by saturating them with petroleum. There being petroleum for cleaning the floor in the building, it is not strange that when the house caught fire the petroleum also caught fire, the flames floating on the water coming out from under the door from the pumps. There is neither direct nor strong circumstantial evidence that the plaintiffs personally or through their agents placed petroleum in the building in order to burn it, because it was locked on the outside and nobody was staying therein. As it cannot be assumed that the petroleum might have burned by itself, it is probable that the fire might have originated from the electric wiring, although electrical engineer Mora stated that he could not assure whether any of the wires was burned due to an electric discharge passing through it, or whether or not the fire was caused by the lighting system.

Upon consideration of all the evidence and circumstances surrounding the fire, this court finds no evidence sufficient to warrant a finding that the plaintiffs are responsible for the fire. With respect to the question whether or not the claim of loss filed by the plaintiffs is fraudulent, it is alleged by them that the total value of the textiles contained in cases deposited inside the building when the partnership Sharruf & Eskenazi was formed was P12,000; that of the fancy jewelry with imitation stones from P15,000 to P17,000, and that of the kitchen utensils and tableware made of aluminum, bronze and glass P10,676 (Exhibits B, C, and C-1). If, as said plaintiffs claim, they had already sold articles, mostly textiles, valued at P8,000, a small quantity of cloth must have been left at the time the fire occured. In their claim, however, the textiles allegedly consumed by fire and damaged by water are assessed by them at P12,000. The claim of P12,000 is certainly not attributable to a mere mistake in estimate and counting because if they had textiles worth only P12,000 before the fire and they sold goods, mostly textiles, worth P8,000, surely textiles in the same amount of P12,000 could not have been burned and damaged after the fire. Of the kitchen utensils and tableware made of aluminum, bronze and glass, of which, according to the evidence for the plaintiffs, they had a stock valued at P10,676 (Exhibit B), there were found after the fire articles worth only P1,248.80 (Exhibit K). Therefore, utensils valued at P9,427.20 were lacking. A considerable amount of kitchen utensils made of noninflammable and fire-proof material could not, by the very nature of things have been totally consumed by the fire. At most, said articles would have been damaged, as the rest, and would have left traces of their existence. The same may be said of the fancy jewels with imitation stones, and others of which the fancy jewels with imitation stones, and others of which the plaintiffs claim to have had a stock worth from P15,000 to P17,000 at the time of the fire, of which only a few valued at P3,471.16, were left after the fire (Exhibit K). According to said plaintiffs, all the articles, for the alleged loss of which indemnity is sought, were contained in about 40 showcases and wardrobes. According to the testimony of the fire station chiefs, corrobarated by the photographs of record, the flames caused more damage in the upper part of the rooms than in the lower part thereof; since, of the ten or eleven cases found inside the building after the fire, only a few were partially burned and others scorched judging from their appearance, the goods were damaged more by water than by fire. According to the inventory made by White & Page, adjusters of the insurance companies, in the presence of the plaintiffs themselves and according to data supplied by the latter, the total value thereof, aside, from the articles not included in the inventories Exhibits B, C, and C-1, assessed at P744.50, amounts to only P8,077.35. If the plaintiffs' claim that at time of the fire there were about 40 cases inside the burnt building were true, a ten or eleven of them were found after the fire, traces of the thirty or twenty-nine cases allegedly burnt would be found, since experience has shown that during the burning of a building all the cases deposited therein are not so reduced to ashes that the least vestige thereof cannot be found. In the case of Go Lu vs. Yorkshire Insurance Co. (43 Phil., 633), this court laid down the following doctrine: This court will legally presume that in an ordinary fire fifty bales or boxes of bolt goods of cloth cannot be wholly consumed or totally destroyed, and that in the very nature of things some trace or evidence will be left remaining of their loss or destruction. The plaintiffs, upon whom devolve the legal obligation to prove the existence, at the time of the fire, of the articles and merchandise for the destruction of which they claim indemnity from the defendant companies, have not complied with their duty because they have failed to prove by a preponderance of evidence that when the fire took place there where in the burnt building articles and merchandise in the total amount of the insurance policies or that the textiles and other damaged and undamaged goods found in the building after the fire were worth P40,000. On the contrary, their own witness, Robles, testified that up to the month of September, 1933, there were about 39 or 40 cases belonging to the plaintiffs in his garage on Mabini Street, indicating thereby that the cases of merchandise examined by the agent of the insurance companies on July 25 and August 15, 1933, and for which the insurance policies were issued, were taken from the burned building where they were found. So great is the difference between the amount of articles insured, which the plaintiffs claim to have been in the building before the fire, and the amount thereof shown by the vestige of the fire to have been therein, that the most liberal human judgment can not attribute such difference to a mere innocent error in estimate or counting but to a deliberate intent to demand of the insurance companies payment of an indemnity for goods not existing at the time of the fire, thereby

constituting the so-called "fraudulent claim" which, by express agreement between the insurers and the insured, is a ground for exemption of the insurers from civil liability. Therefore, as the herein plaintiffs-appellees have acted in bad faith in presenting a fraudulent claim, they are not entitled to the indemnity claimed by them by virtue of the insurance policies issued by the defendant-appellant companies in their favor. For the foregoing considerations, this court is of the opinion and so holds: (1) that when the partners of a general partnership doing business under the firm name of "Sharruf & Co." obtain insurance policies issued to said firm and the latter is afterwards changed to "Sharruf & Eskenazi", which are the names of the same and only partners of said firm "Sharruf & Co.", continuing the same business, the new firm acquires the rights of the former under the same policies; (2) that when the evidence relative to the cause of a fire and the author thereof is so vague and doubtful, the insured cannot be attributed incendiary intervention therein for the mere fact that he had the keys to the unoccupied building in his possession; (3) that a person who presents a claim for damages caused by fire to articles and goods not existing at the time of the fire does so fradulently and his claim is fraudulent, and (4) that when immediately after a fire that broke out inside a completely locked building, lasting scarcely 27 minutes, only about ten or eleven partly burned and scorched cases, some containing textiles and wrapping paper and others, statutes of saints, have been found without any trace of the destruction of other cases by said fire, it can neither logically nor reasonably be inferred that 40 of said cases were inside the building when the fire broke out. Wherefore, the appealed judgment is reversed, and the defendant companies are absolved from the complaint which is dismissed, with costs to the appellees. So ordered. Avancea, C.J., Abad Santos, Imperial, Diaz, Laurel and Concepcion, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-25007 March 2, 1926

PACIFIC COMMERCIAL COMPANY, plaintiff-appellee, vs. ABOITIZ & MARTINEZ, ET AL., defendants. JOSE MARTINEZ, defendant-appellant. Espina & Espina for appellant. Block, Johnston & Greenbaum for appellee. OSTRAND, J.: In April, 1919 Arnaldo F. de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a "regular, collective, merchantile partnership" with a capital of P40,000 of which each of the partners Aboitiz and De Silva furnished one-third. The partner Jose Martinez was an industrial partner and furnished no capital; it was provided in the partnership article that he was to receive 30 per cent of the profits and that his responsibility for losses should not exceed the amount of the profits received by him. On April 27, 1922, the partnership, through its duly authorized representative, Guillermo Aboitiz, executed a promissory note in favor of the plaintiff the Pacific Commercial Company for the sum of P23,168.71, with interest at 12 per cent per annum until fully paid as additional sum of 10 per cent as attorney's fees and costs of collection in the event it became necessary to resort to judicial proceedings. As security for the payment of the note, the partnership executed a chattel mortgage in favor of the plaintiff on certain personal property therein described. For failure of the partnership to pay the debt the chattel mortgage was foreclosed the mortgages property sold and the proceeds of the sale, P2,000 was paid over to the plaintiff on December 28, 1923. No further payment on the note appears to have been made and January 4, 1924, the present action was brought for the recovery of the unpaid balance with interest. Upon trial the court below rendered judgment in favor of the plaintiff and against the partnership for the sum of P27,951.68 and for the payment of interest on the capital of P21,168.71 at the rate of 10 per cent per annum from the 31st October, 1924, until paid, together with 10 per cent on the amount due for fees for collection in accordance with the terms of the aforesaid note. The judgment further provided that execution should first issue against the property of the partnership should first issue against the insolvency of the partnership, it might issue against the property of the partners De Silva and Aboitiz and in the event of their insolvency, then against the property of the industrial partner Jose Martinez. From this judgment Martinez appealed to this court and here maintains that under article 141 of the Code of Commerce he, as a mere industrial partner, cannot be held responsible for the partnership's debt. The case is practically identical with that of the Compania Maritima vs. Munoz (9 Phil., 326), in which this court held the industrial partners secondarily liable for the debts of the partnership but on the strength of the vigorous dissenting opinion of Chief Justice Arellano in that case, that appellant argues that the decision therein was erroneous and should now be overruled. With all due respect for the legal acumen of the first Chief Justice of this Court, we are still of the opinion that the case was correctly decided. Article 127 of the Code of Commerce reads as follows: All the members of the general copartnership, be they or be they not managing partners of the same are liable personally and in solidum with all their property for the results of the transaction

made in the name and for the account of the partnership, under the signature of the later, and by a person authorized to make use thereof. The language of this article is clear and specific that all the members of a general copartnership are liable with all their property for the results of the duly authorized transactions made in the name and for the account of the partnership. On the other hand, article 141, upon which the appellants relies and which provides that "losses shall be computed in the same proportion among the capitalist partners without including the industrial partners, unless by special agreement the latter have been constituted as participants therein," is susceptible of two different interpretations of which that given it in the Compania Maritima case, supra, i. e., that it relates merely to the distribution of losses among the partners themselves in the settlement of the partnership affairs and has no reference to partnership obligations to third parties, appears to us to be the more logical. There is a marked distinction between a liability and a loss and the inability of a partnership to pay a debt to a third party at a particular time does not necessarily mean that the partnership business as a whole, has been operated at a loss. The partnership may have outstanding credits which for the moment may have be unavailable for the payment of debts, but which eventually may be realized upon and yield profits more than sufficient to cover all losses. Bearing this in mind it will be found that there in reality is no conflict between the two articles quoted; one speaks of liabilities, the other of losses. The judgment appealed from is affirmed with the costs against the appellant. So ordered. Avancea, C. J., Street, Malcolm, Villamor, Johns, Romualdez, and Villa-Real, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-39780 November 11, 1985 ELMO MUASQUE, petitioner, vs. COURT OF APPEALS,CELESTINO GALAN TROPICAL COMMERCIAL COMPANY and RAMON PONS, respondents. John T. Borromeo for petitioner. Juan D. Astete for respondent C. Galan. Paul Gornes for respondent R. Pons. Viu Montecillo for respondent Tropical. Paterno P. Natinga for Intervenor Blue Diamond Glass Palace.

GUTTIERREZ, JR., J.: In this petition for certiorari, the petitioner seeks to annul and set added the decision of the Court of Appeals affirming the existence of a partnership between petitioner and one of the respondents, Celestino Galan and holding both of them liable to the two intervenors which extended credit to their partnership. The petitioner wants to be excluded from the liabilities of the partnership. Petitioner Elmo Muasque filed a complaint for payment of sum of money and damages against respondents Celestino Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner entered into a contract with respondent Tropical through its Cebu Branch Manager Pons for remodelling a portion of its building without exchanging or expecting any consideration from Galan although the latter was casually named as partner in the contract; that by virtue of his having introduced the petitioner to the employing company (Tropical). Galan would receive some kind of compensation in the form of some percentages or commission; that Tropical, under the terms of the contract, agreed to give petitioner the amount of P7,000.00 soon after the construction began and thereafter, the amount of P6,000.00 every fifteen (15) days during the construction to make a total sum of P25,000.00; that on January 9, 1967, Tropical and/or Pons delivered a check for P7,000.00 not to the plaintiff but to a stranger to the contract, Galan, who succeeded in getting petitioner's indorsement on the same check persuading the latter that the same be deposited in a joint account; that on January 26, 1967 when the second check for P6,000.00 was due, petitioner refused to indorse said cheek presented to him by Galan but through later manipulations, respondent Pons succeeded in changing the payee's name from Elmo Muasque to Galan and Associates, thus enabling Galan to cash the same at the Cebu Branch of the Philippine Commercial and Industrial Bank (PCIB) placing the petitioner in great financial difficulty in his construction business and subjecting him to demands of creditors to pay' for construction materials, the payment of which should have been made from the P13,000.00 received by Galan; that petitioner undertook the construction at his own expense completing it

prior to the March 16, 1967 deadline;that because of the unauthorized disbursement by respondents Tropical and Pons of the sum of P13,000.00 to Galan petitioner demanded that said amount be paid to him by respondents under the terms of the written contract between the petitioner and respondent company. The respondents answered the complaint by denying some and admitting some of the material averments and setting up counterclaims. During the pre-trial conference, the petitioners and respondents agreed that the issues to be resolved are: (1) Whether or not there existed a partners between Celestino Galan and Elmo Muasque; and (2) Whether or not there existed a justifiable cause on the part of respondent Tropical to disburse money to respondent Galan. The business firms Cebu Southern Hardware Company and Blue Diamond Glass Palace were allowed to intervene, both having legal interest in the matter in litigation. After trial, the court rendered judgment, the dispositive portion of which states: IN VIEW WHEREOF, Judgment is hereby rendered: (1) ordering plaintiff Muasque and defendant Galan to pay jointly and severally the intervenors Cebu and Southern Hardware Company and Blue Diamond Glass Palace the amount of P6,229.34 and P2,213.51, respectively; (2) absolving the defendants Tropical Commercial Company and Ramon Pons from any liability, No damages awarded whatsoever. The petitioner and intervenor Cebu Southern Company and its proprietor, Tan Siu filed motions for reconsideration. On January 15, 197 1, the trial court issued 'another order amending its judgment to make it read as follows: IN VIEW WHEREOF, Judgment is hereby rendered: (1) ordering plaintiff Muasque and defendant Galan to pay jointly and severally the intervenors Cebu Southern Hardware Company and Blue Diamond Glass Palace the amount of P6,229.34 and P2,213.51, respectively, (2) ordering plaintiff and defendant Galan to pay Intervenor Cebu Southern Hardware Company and Tan Siu jointly and severally interest at 12% per annum of the sum of P6,229.34 until the amount is fully paid; (3) ordering plaintiff and defendant Galan to pay P500.00 representing attorney's fees jointly and severally to Intervenor Cebu Southern Hardware Company:

(4) absolving the defendants Tropical Commercial Company and Ramon Pons from any liability, No damages awarded whatsoever. On appeal, the Court of Appeals affirmed the judgment of the trial court with the sole modification that the liability imposed in the dispositive part of the decision on the credit of Cebu Southern Hardware and Blue Diamond Glass Palace was changed from "jointly and severally" to "jointly." Not satisfied, Mr. Muasque filed this petition. The present controversy began when petitioner Muasque in behalf of the partnership of "Galan and Muasque" as Contractor entered into a written contract with respondent Tropical for remodelling the respondent's Cebu branch building. A total amount of P25,000.00 was to be paid under the contract for the entire services of the Contractor. The terms of payment were as follows: thirty percent (30%) of the whole amount upon the signing of the contract and the balance thereof divided into three equal installments at the lute of Six Thousand Pesos (P6,000.00) every fifteen (15) working days. The first payment made by respondent Tropical was in the form of a check for P7,000.00 in the name of the petitioner.Petitioner, however, indorsed the check in favor of respondent Galan to enable the latter to deposit it in the bank and pay for the materials and labor used in the project. Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00 for his personal use so that when the second check in the amount of P6,000.00 came and Galan asked the petitioner to indorse it again, the petitioner refused. The check was withheld from the petitioner. Since Galan informed the Cebu branch of Tropical that there was a"misunderstanding" between him and petitioner, respondent Tropical changed the name of the payee in the second check from Muasque to "Galan and Associates" which was the duly registered name of the partnership between Galan and petitioner and under which name a permit to do construction business was issued by the mayor of Cebu City. This enabled Galan to encash the second check. Meanwhile, as alleged by the petitioner, the construction continued through his sole efforts. He stated that he borrowed some P12,000.00 from his friend, Mr. Espina and although the expenses had reached the amount of P29,000.00 because of the failure of Galan to pay what was partly due the laborers and partly due for the materials, the construction work was finished ahead of schedule with the total expenditure reaching P34,000.00. The two remaining checks, each in the amount of P6,000.00,were subsequently given to the petitioner alone with the last check being given pursuant to a court order. As stated earlier, the petitioner filed a complaint for payment of sum of money and damages against the respondents,seeking to recover the following: the amounts covered by the first and second checks which fell into the hands of respondent Galan, the additional expenses that the petitioner incurred in the construction, moral and exemplary damages, and attorney's fees. Both the trial and appellate courts not only absolved respondents Tropical and its Cebu Manager, Pons, from any liability but they also held the petitioner together with respondent Galan, hable to the intervenors Cebu Southern Hardware Company and Blue Diamond Glass Palace for the credit which the intervenors extended to the partnership of petitioner and Galan

In this petition the legal questions raised by the petitioner are as follows: (1) Whether or not the appellate court erred in holding that a partnership existed between petitioner and respondent Galan. (2) Assuming that there was such a partnership, whether or not the court erred in not finding Galan guilty of malversing the P13,000.00 covered by the first and second checks and therefore, accountable to the petitioner for the said amount; and (3) Whether or not the court committed grave abuse of discretion in holding that the payment made by Tropical through its manager Pons to Galan was "good payment, " Petitioner contends that the appellate court erred in holding that he and respondent Galan were partners, the truth being that Galan was a sham and a perfidious partner who misappropriated the amount of P13,000.00 due to the petitioner.Petitioner also contends that the appellate court committed grave abuse of discretion in holding that the payment made by Tropical to Galan was "good" payment when the same gave occasion for the latter to misappropriate the proceeds of such payment. The contentions are without merit. The records will show that the petitioner entered into a con-tract with Tropical for the renovation of the latter's building on behalf of the partnership of "Galan and Muasque." This is readily seen in the first paragraph of the contract where it states: This agreement made this 20th day of December in the year 1966 by Galan and Muasque hereinafter called the Contractor, and Tropical Commercial Co., Inc., hereinafter called the owner do hereby for and in consideration agree on the following: ... . There is nothing in the records to indicate that the partner-ship organized by the two men was not a genuine one. If there was a falling out or misunderstanding between the partners, such does not convert the partnership into a sham organization. Likewise, when Muasque received the first payment of Tropical in the amount of P7,000.00 with a check made out in his name, he indorsed the check in favor of Galan. Respondent Tropical therefore, had every right to presume that the petitioner and Galan were true partners. If they were not partners as petitioner claims, then he has only himself to blame for making the relationship appear otherwise, not only to Tropical but to their other creditors as well. The payments made to the partnership were, therefore, valid payments. In the case of Singsong v. Isabela Sawmill (88 SCRA 643),we ruled: Although it may be presumed that Margarita G. Saldajeno had acted in good faith, the appellees also acted in good faith in extending credit to the partnership. Where one of two innocent persons must suffer, that person who gave occasion for the damages to be caused must bear the consequences. No error was committed by the appellate court in holding that the payment made by Tropical to Galan was a good payment which binds both Galan and the petitioner. Since the two were partners when the debts were incurred, they, are also both liable to third persons who extended credit to their partnership. In the case of George Litton v. Hill and Ceron, et al, (67 Phil. 513, 514), we ruled: 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. (Mills vs. Riggle,112 Pan, 617).

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. (Le Roy vs. Johnson, 7 U.S. (Law. ed.), 391.) Petitioner also maintains that the appellate court committed grave abuse of discretion in not holding Galan liable for the amounts which he "malversed" to the prejudice of the petitioner. He adds that although this was not one of the issues agreed upon by the parties during the pretrial, he, nevertheless, alleged the same in his amended complaint which was, duly admitted by the court. When the petitioner amended his complaint, it was only for the purpose of impleading Ramon Pons in his personal capacity. Although the petitioner made allegations as to the alleged malversations of Galan, these were the same allegations in his original complaint. The malversation by one partner was not an issue actually raised in the amended complaint but the alleged connivance of Pons with Galan as a means to serve the latter's personal purposes. The petitioner, therefore, should be bound by the delimitation of the issues during the pre-trial because he himself agreed to the same. In Permanent Concrete Products, Inc. v. Teodoro , (26 SCRA 336), we ruled: xxx xxx xxx ... The appellant is bound by the delimitation of the issues contained in the trial court's order issued on the very day the pre-trial conference was held. Such an order controls the subsequent course of the action, unless modified before trial to prevent manifest injustice.In the case at bar, modification of the pre-trial order was never sought at the instance of any party. Petitioner could have asked at least for a modification of the issues if he really wanted to include the determination of Galan's personal liability to their partnership but he chose not to do so, as he vehemently denied the existence of the partnership. At any rate, the issue raised in this petition is the contention of Muasque that the amounts payable to the intervenors should be shouldered exclusively by Galan. We note that the petitioner is not solely burdened by the obligations of their illstarred partnership. The records show that there is an existing judgment against respondent Galan, holding him liable for the total amount of P7,000.00 in favor of Eden Hardware which extended credit to the partnership aside from the P2, 000. 00 he already paid to Universal Lumber. We, however, take exception to the ruling of the appellate court that the trial court's ordering petitioner and Galan to pay the credits of Blue Diamond and Cebu Southern Hardware"jointly and severally" is plain error since the liability of partners under the law to third persons for contracts executed inconnection with partnership business is only pro rata under Art. 1816, of the Civil Code. While it is true that under Article 1816 of the Civil Code,"All partners, including industrial ones, shall be liable prorate with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into the name and fm the account cd the partnership, under its signature and by a person authorized to act for the partner-ship. ...". this provision should be construed together with Article 1824 which provides that: "All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and 1823." In short, while the liability of the partners are merely joint in transactions entered into by the partnership, a third person who transacted with said partnership can hold the partners

solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823. Articles 1822 and 1823 of the Civil Code provide: Art. 1822. Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partner-ship or with the authority of his copartners, loss or injury is caused to any person, not being a partner in the partnership or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act. Art. 1823. The partnership is bound to make good: (1) Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; and (2) Where the partnership in the course of its business receives money or property of a third person and t he money or property so received is misapplied by any partner while it is in the custody of the partnership. The obligation is solidary, because the law protects him, who in good faith relied upon the authority of a partner, whether such authority is real or apparent. That is why under Article 1824 of the Civil Code all partners, whether innocent or guilty, as well as the legal entity which is the partnership, are solidarily liable. In the case at bar the respondent Tropical had every reason to believe that a partnership existed between the petitioner and Galan and no fault or error can be imputed against it for making payments to "Galan and Associates" and delivering the same to Galan because as far as it was concerned, Galan was a true partner with real authority to transact on behalf of the partnership with which it was dealing. This is even more true in the cases of Cebu Southern Hardware and Blue Diamond Glass Palace who supplied materials on credit to the partnership. Thus, it is but fair that the consequences of any wrongful act committed by any of the partners therein should be answered solidarily by all the partners and the partnership as a whole However. as between the partners Muasque and Galan,justice also dictates that Muasque be reimbursed by Galan for the payments made by the former representing the liability of their partnership to herein intervenors, as it was satisfactorily established that Galan acted in bad faith in his dealings with Muasque as a partner. WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that the liability of petitioner and respondent Galan to intervenors Blue Diamond Glass and Cebu Southern Hardware is declared to be joint and solidary. Petitioner may recover from respondent Galan any amount that he pays, in his capacity as a partner, to the above intervenors, SO ORDERED. Teehankee (Chairman), Melencio-Herrera, De la Fuente and Patajo, JJ., concur. Plana, J., took no part. Relova, J., is on leave.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-13680 April 27, 1960

MAURO LOZANA, plaintiff-appellee, vs. SERAFIN DEPAKAKIBO, defendant-appellant. Antonio T. Lozada for appellee. Agustin T. Misola and Tomas D. Dominado for appellant. LABRADOR, J.: This is an appeal from a judgment of the Court of First Instance of Iloilo, certified to us by the Court of Appeals, for the reason that only questions of law are involved in said appeal. The record discloses that on November 16, 1954 plaintiff Mauro Lozana entered into a contract with defendant Serafin Depakakibo wherein they established a partnership capitalized at the sum of P30,000, plaintiff furnishing 60% thereof and the defendant, 40%, for the purpose of maintaining, operating and distributing electric light and power in the Municipality of Dumangas, Province of Iloilo, under a franchise issued to Mrs. Piadosa Buenaflor. However, the franchise or certificate of public necessity and convenience in favor of the said Mrs. Piadosa Buenaflor was cancelled and revoked by the Public Service Commission on May 15, 1955. But the decision of the Public Service Commission was appealed to Us on October 21, 1955. A temporary certificate of public convenience was issued in the name of Olimpia D. Decolongon on December 22, 1955 (Exh. "B"). Evidently because of the cancellation of the franchise in the name of Mrs. Piadosa Buenaflor, plaintiff herein Mauro Lozana sold a generator, Buda (diesel), 75 hp. 30 KVA capacity, Serial No. 479, to the new grantee Olimpia D. Decolongon, by a deed dated October 30, 1955 (Exhibit "C"). Defendant Serafin Depakakibo, on the other hand, sold one Crossly Diesel Engine, 25 h. p., Serial No. 141758, to the spouses Felix Jimenea and Felina Harder, by a deed dated July 10, 1956. On November 15, 1955, plaintiff Mauro Lozana brought an action against the defendant, alleging that he is the owner of the Generator Buda (Diesel), valued at P8,000 and 70 wooden posts with the wires connecting the generator to the different houses supplied by electric current in the Municipality of Dumangas, and that he is entitled to the possession thereof, but that the defendant has wrongfully detained them as a consequence of which plaintiff suffered damages. Plaintiff prayed that said properties be delivered back to him. Three days after the filing of the complaint, that is on November 18, 1955, Judge Pantaleon A. Pelayo issued an order in said case authorizing the sheriff to take possession of the generator and 70 wooden posts, upon plaintiff's filing of a bond in the amount of P16,000 in favor of the defendant (for subsequent delivery to the plaintiff). On December 5, 1955, defendant filed an answer, denying that the generator and the equipment mentioned in the complaint belong to the plaintiff and alleging that the same had been contributed by the plaintiff to the partnership entered into between them in the same manner that defendant had contributed equipments also, and therefore that he is not unlawfully detaining them. By way of counterclaim, defendant alleged that under the partnership agreement the parties were to

contribute equipments, plaintiff contributing the generator and the defendant, the wires for the purpose of installing the main and delivery lines; that the plaintiff sold his contribution to the partnership, in violation of the terms of their agreement. He, therefore, prayed that the complaint against him be dismissed; that plaintiff be adjudged guilty of violating the partnership contract and be ordered to pay the defendant the sum of P3,000, as actual damages, P600.00 as attorney's fees and P2,600 annually as actual damages; that the court order dissolution of the partnership, after the accounting and liquidation of the same. On September 27, 1956, the defendant filed a motion to declare plaintiff in default on his counterclaim, but this was denied by the court. Hearings on the case were conducted on October 25, 1956 and November 5, 1956, and on the latter date the judge entered a decision declaring plaintiff owner of the equipment and entitled to the possession thereof, with costs against defendant. It is against this judgment that the defendant has appealed. The above judgment of the court was rendered on a stipulation of facts, which is as follows: 1. That on November 16, 1954, in the City of Iloilo, the aforementioned plaintiff, and the defendant entered into a contract of Partnership, a copy of which is attached as Annex "A" of defendant's answer and counterclaim, for the purpose set forth therein and under the national franchise granted to Mrs. Piadosa Buenaflor; 2. That according to the aforementioned Partnership Contract, the plaintiff Mr. Mauro Lozana, contributed the amount of Eighteen Thousand Pesos (P18,000.00); said contributions of both parties being the appraised values of their respective properties brought into the partnership; 3. That the said Certificate of Public Convenience and Necessity was revoked and cancelled by order of the Public Service Commission dated March 15, 1955, promulgated in case No. 58188, entitled, "Piadosa Buenaflor, applicant", which order has been appealed to the Supreme Court by Mrs. Buenaflor; 4. That on October 30, 1955, the plaintiff sold properties brought into by him to the said partnership in favor of Olimpia Decolongon in the amount of P10,000.00 as per Deed of Sale dated October 30, 1955 executed and ratified before Notary Public, Delfin Demaisip, in and for the Municipality of Dumangas, Iloilo and entered in his Notarial Registry as Doc. No. 832; Page No. 6; Book No. XIII; and Series of 1955, a copy thereof is made as Annex "B" of defendant's answer and counterclaim; 5. That there was no liquidation of partnership and that at the time of said Sale on October 30, 1955, defendant was the manager thereof; 6. That by virtue of the Order of this Honorable Court dated November 18, 1955, those properties sold were taken by the Provincial Sheriff on November 20, 1955 and delivered to the plaintiff on November 25, 1955 upon the latter posting the required bond executed by himself and the Luzon Surety Co., dated November 17, 1955 and ratified before the Notary Public, Eleuterio del Rosario in and for the province of Iloilo known as Doc. No. 200; Page 90; Book No. VII; and Series of 1955; of said Notary Public; 7. That the said properties sold are now in the possession of Olimpia Decolongon, the purchaser, who is presently operating an electric light plant in Dumangas, Iloilo;

8. That the defendant sold certain properties in favor of the spouses, Felix Jimenea and Felisa Harder contributed by him to the partnership for P3,500.00 as per Deed of Sale executed and ratified before the Notary Public Rodrigo J. Harder in and for the Province of Iloilo, known as Doc. No. 76; Page 94; Book No. V; and Series of 1955, a certified copy of which is hereto attached marked as Annex "A", and made an integral part hereof; (pp, 27-29 ROA). As it appears from the above stipulation of facts that the plaintiff and the defendant entered into the contract of partnership, plaintiff contributing the amount of P18,000, and as it is not stated therein that there bas been a liquidation of the partnership assets at the time plaintiff sold the Buda Diesel Engine on October 15, 1955, and since the court below had found that the plaintiff had actually contributed one engine and 70 posts to the partnership, it necessarily follows that the Buda diesel engine contributed by the plaintiff had become the property of the partnership. As properties of the partnership, the same could not be disposed of by the party contributing the same without the consent or approval of the partnership or of the other partner. (Clemente vs. Galvan, 67 Phil., 565). The lower court declared that the contract of partnership was null and void, because by the contract of partnership, the parties thereto have become dummies of the owner of the franchise. The reason for this holding was the admission by defendant when being crossexamined by the court that he and the plaintiff are dummies. We find that this admission by the defendant is an error of law, not a statement of a fact. The Anti-Dummy law has not been violated as parties plaintiff and defendant are not aliens but Filipinos. The Anti-Dummy law refers to aliens only (Commonwealth Act 108 as amended). Upon examining the contract of partnership, especially the provision thereon wherein the parties agreed to maintain, operate and distribute electric light and power under the franchise belonging to Mrs. Buenaflor, we do not find the agreement to be illegal, or contrary to law and public policy such as to make the contract of partnership, null and void ab initio. The agreement could have been submitted to the Public Service Commission if the rules of the latter require them to be so presented. But the fact of furnishing the current to the holder of the franchise alone, without the previous approval of the Public Service Commission, does not per se make the contract of partnership null and void from the beginning and render the partnership entered into by the parties for the purpose also void and non-existent. Under the circumstances, therefore, the court erred in declaring that the contract was illegal from the beginning and that parties to the partnership are not bound therefor, such that the contribution of the plaintiff to the partnership did not pass to it as its property. It also follows that the claim of the defendant in his counterclaim that the partnership be dissolved and its assets liquidated is the proper remedy, not for each contributing partner to claim back what he had contributed. For the foregoing considerations, the judgment appealed from as well as the order of the court for the taking of the property into custody by the sheriff must be, as they hereby are set aside and the case remanded to the court below for further proceedings in accordance with law. Paras, C.J., Bengzon, Montemayor, Bautista Angelo, Concepcion, Endencia, Barrera and Gutierrez David, JJ.,concur.