EN BANC

[G.R. No. L-7991. May 21, 1956.]
PAUL MACDONALD, ET AL., Petitioners, vs. THE NATIONAL CITY BANK OF
NEW YORK,Respondent.
DECISION
PARAS, J.:
This is an appeal by certiorari from the decision of the Court of Appeals from
which we are reproducing the following basic findings of
fact:chanroblesvirtuallawlibrary
“STASIKINOCEY is a partnership doing business at No. 58, Aurora Boulevard,
San Juan, Rizal, and formed by Alan W. Gorcey, Louis F. da Costa, Jr., William
Kusik and Emma Badong Gavino. This partnership was denied registration in
the Securities and Exchange Commission, and while it is confusing to see in this
case that the CARDINAL RATTAN, sometimes called the CARDINAL RATTAN
FACTORY, is treated as a copartnership, of which Defendants Gorcey and da
Costa are considered general partners, we are satisfied that, as alleged in
various instruments appearing of record, said Cardinal Rattan is merely the
business name or style used by the partnership Stasikinocey.
“Prior to June 3, 1949, Defendant Stasikinocey had an overdraft account with
The National City Bank of New York, a foreign banking association duly licensed
to do business in the Philippines. On June 3, 1949, the overdraft showed a
balance of P6,134.92 against theDefendant Stasikinocey or the Cardinal Rattan
(Exhibit D), which account, due to the failure of the partnership to make the
required payment, was converted into an ordinary loan for which the
corresponding promissory ‘joint note non-negotiable’ was executed on June 3,
1949, by Louis F. da Costa for and in the name of the Cardinal Rattan, Louis F. da
Costa and Alan Gorcey (Exhibit D). This promissory note was secured on June 7,
1949, by a chattel mortgage executed by Louis F. da Costa, Jr., General Partner
for and in the name of Stasikinocey, alleged to be a duly registered Philippine
partnership, doing business under the name and style of Cardinal Rattan, with
principal office at 69 Riverside, San Juan, Rizal (Exhibit A). The chattels
mortgaged were the following motor vehicles:chanroblesvirtuallawlibrary
“(a) Fargo truck with motor No. T-118-202839, Serial No. 81410206 and with
plate No. T-7333 (1949);
“(b) Plymouth Sedan automobile motor No. T-5638876, Serial No. 11872718
and with plate No. 10372; chan roblesvirtualawlibraryand
“(c) Fargo Pick-Up FKI-16, with motor No. T-112800032,
Serial No. 8869225 and with plate No. T-7222 (1949).

The mortgage deed was fully registered by the mortgagee on June 11, 1949, in
the Office of the Register of Deeds for the province of Rizal, at Pasig, (Exhibit A),
and
among
other
provisions
it
contained
the
following:chanroblesvirtuallawlibrary
“‘(a) That the mortgagor shall not sell or otherwise dispose of the said chattels
without the mortgagee’s written consent; chan roblesvirtualawlibraryand
“‘(b) That the mortgagee may foreclose the mortgage at any time, after breach
of any condition thereof, the mortgagor waiving the 30- day notice of
foreclosure.’
“On June 7, 1949, the same day of the execution of the chattel mortgage
aforementioned, Gorcey and Da Costa executed an agreement purporting to
convey and transfer all their rights, title and participation
in Defendant partnership to Shaeffer, allegedly in consideration of the
cancellation of an indebtedness of P25,000 owed by them
and Defendant partnership to the latter (Exhibit J), which transaction is said to
be in violation of the Bulk Sales Law (Act No. 3952 of the Philippine
Legislature).
“While the said loan was still unpaid and the chattel mortgage
subsisting, Defendantpartnership, through Defendants Gorcey and Da Costa
transferred to Defendant McDonald the Fargo truck and Plymouth sedan on June
24, 1949 (Exhibit L). The Fargo pickup was also sold on June 28, 1949, by
William Shaeffer to Paul McDonald.
“On or about July 19, 1944, Paul Mcdonald, notwithstanding Plaintiff’s existing
mortgage lien, in turn transferred the Fargo truck and the Plymouth sedan to
Benjamin Gonzales.”
The National City Bank of New York, Respondent herein, upon learning of the
transfers made by the partnership Stasikinocey to William Shaeffer, from the
latter to Paul McDonald, and from Paul McDonald to Benjamin Gonzales, of the
vehicles previously pledged by Stasikinocey to the Respondent, filed an action
against Stasikinocey and its alleged partners Gorcey and Da Costa, as well as
Paul McDonald and Benjamin Gonzales, to recover its credit and to foreclose the
corresponding chattel mortgage. McDonald and Gonzales were
made Defendants because they claimed to have a better right over the pledged
vehicle.
After trial the Court of First Instance of Manila rendered judgment in favor of
the Respondent, annulling the sale of the vehicles in question to Benjamin
Gonzales; chan roblesvirtualawlibrarysentencing Da Costa and Gorcey to pay to
the Respondent jointly and severally the sum of P6,134.92, with legal interest
from
the
debt
of
the
promissory
note
involved; chan
roblesvirtualawlibrarysentencing the Petitioner Gonzales to deliver the vehicles
in question to the Respondent for sale at public auction if Da Costa and Gorcey
should fail to pay the money judgment; chan roblesvirtualawlibraryand

sentencing Da Costa, Gorcey and Shaeffers to pay to the Respondent jointly and
severally any deficiency that may remain unpaid should the proceeds of the sale
not be sufficient; chan roblesvirtualawlibraryand sentencing Gorcey, Da Costa,
McDonald and Shaeffer to pay the costs. Only Paul McDonald and Benjamin
Gonzales appealed to the Court of Appeals which rendered a decision the
dispositive part of which reads as follows:chanroblesvirtuallawlibrary

INNOCENT PURCHASERS FOR VALUE; chan roblesvirtualawlibraryAND, AS A
CONSEQUENCE THEREOF, IN NOT MAKING ANY FINDING OF FACT AS TO
WHERE THE DEED WAS IN FACT EXECUTED, DESPITEAPPELLANTS’ RAISING
THAT QUESTION PROPERLY BEFORE IT AND EXPRESSLY REQUESTING A
RULING THEREON.
“IV

“WHEREFORE, the decision appealed from is hereby modified,
relieving Appellant William Shaeffer of the obligation of paying, jointly and
severally, together with Alan W. Gorcey and Louis F. da Costa, Jr., any deficiency
that may remain unpaid after applying the proceeds of the sale of the said motor
vehicles which shall be undertaken upon the lapse of 90 days from the date this
decision becomes final, if by then Defendants Louis F. da Costa, Jr., and Alan W.
Gorcey had not paid the amount of the judgment debt. With this modification
the decision appealed from is in all other respects affirmed, with costs
against Appellants. This decision is without prejudice to whatever action Louis
F. da Costa, Jr., and Alan W. Gorcey may take against their co-partners in the
Stasikinocey unregistered partnership.”

“IN RULING THAT A LETTER AUTHORIZING ONE MEMBER OF AN
UNREGISTERED COMMERCIAL CO-PARTNERSHIP ‘TO MAKE ALL OFFICIAL
AND BUSINESS ARRANGEMENTS .. WITH THE NATIONAL CITY BANK OF NEW
YORK IN ORDER TO SIMPLIFY ALL MATTERS RELATIVE TO LCS CABLE
TRANSFERS, DRAFTS, OR OTHER BANKING MEDIUMS,’ WAS SUFFICIENT
AUTHORITY FOR THE SAID MEMBER TO EXECUTE A CHATTEL MORTGAGE IN
ORDER TO GIVE THE BANK SECURITY FOR A PRE-EXISTING OVERDRAFT,
GRANTED WITHOUT SECURITY. WHICH THE BANK HAD CONVERTED INTO A
DEMAND LOAN UPON FAILURE TO PAY SAME AND BEFORE THE CHATTEL
MORTGAGE WAS EXECUTED.’

This appeal by certiorari was taken by Paul McDonald and Benjamin
Gonzales, Petitionersherein,
who
have
assigned
the
following
errors:chanroblesvirtuallawlibrary

This
is
the
first
question
propounded
by
the Petitioners:chanroblesvirtuallawlibrary “Since an unregistered commercial
partnership unquestionably has no juridical personality, can it have a domicile
so that the registration of a chattel mortgage therein is notice to the world?”.

“I
“IN RULING THAT AN UNREGISTERED COMMERCIAL CO-PARTNERSHIP
WHICH HAS NO INDEPENDENT JURIDICAL PERSONALITY CAN HAVE A
‘DOMICILE SO THAT A CHATTEL MORTGAGE REGISTERED IN THAT
‘DOMICILE’ WOULD BIND THIRD PERSONS WHO ARE INNOCENT PURCHASERS
FOR VALUE.
“II
“IN RULING THAT WHEN A CHATTEL MORTGAGE IS EXECUTED BY ONE OF
THE MEMBERS OF AN UNREGISTERED COMMERCIAL CO-PARTNERSHIP
WITHOUT JURIDICAL PERSONALITY INDEPENDENT OF ITS MEMBERS, IT
NEED NOT BE REGISTERED IN THE ACTUAL RESIDENCE OF THE MEMBERS
WHO EXECUTED SAME; chan roblesvirtualawlibraryAND, AS A CONSEQUENCE
THEREOF, IN NOT MAKING ANY FINDING OF FACT AS TO THE ACTUAL
RESIDENCE OF SAID CHATTEL MORTGAGOR, DESPITEAPPELLANTS’ RAISING
THAT QUESTION PROPERLY BEFORE IT AND REQUESTING A RULING
THEREON.
“III
IN NOT RULING THAT, WHEN A CHATTEL MORTGAGOR EXECUTES AN
AFFIDAVIT OF GOOD FAITH BEFORE A NOTARY PUBLIC OUTSIDE OF THE
TERRITORIAL JURISDICTION OF THE LATTER, THE AFFIDAVIT IS VOID AND
THE CHATTEL MORTGAGE IS NOT BINDING ON THIRD PERSONS WHO ARE

While an unregistered commercial partnership has no juridical personality,
nevertheless, where two or more persons attempt to create a partnership failing
to comply with all the legal formalities, the law considers them as partners and
the association is a partnership in so far as it is a favorable to third persons, by
reason of the equitable principle of estoppel. In Jo Chung Chang vs. Pacific
Commercial Co., 45 Phil., 145, it was held “that although the partnership with
the firm name of ‘Teck Seing and Co. Ltd.,’ could not be regarded as a
partnership de jure, yet with respect to third persons it will be considered a
partnership with all the consequent obligations for the purpose of enforcing the
rights of such third persons.” Da Costa and Gorcey cannot deny that they are
partners of the partnership Stasikinocey, because in all their transactions with
the Respondent they represented themselves as such. Petitioner McDonald
cannot disclaim knowledge of the partnership Stasikinocey because he dealt
with said entity in purchasing two of the vehicles in question through Gorcey
and Da Costa. As was held in Behn Meyer & Co. vs. Rosatzin, 5 Phil., 660, where a
partnership not duly organized has been recognized as such in its dealings with
certain persons, it shall be considered as “partnership by estoppel” and the
persons dealing with it are estopped from denying its partnership existence.
The sale of the vehicles in question being void as to Petitioner McDonald, the
transfer from the latter to Petitioner Benjamin Gonzales is also void, as the
buyer cannot have a better right than the seller.
It results that if the law recognizes a defectively organized partnership as de
facto as far as third persons are concerned, for purposes of its de facto existence

it should have such attribute of a partnership as domicile. In Hung-Man Yoc vs.
Kieng-Chiong-Seng, 6 Phil., 498, it was held that although “it has no legal
standing, it is a partnership de facto and the general provisions of the Code
applicable to all partnerships apply to it.” The registration of the chattel
mortgage in question with the Office of the Register of Deeds of Rizal, the
residence or place of business of the partnership Stasikinocey being San Juan,
Rizal, was therefore in accordance with section 4 of the Chattel Mortgage Law.
The
second
question
propounded
by
the Petitioners is:chanroblesvirtuallawlibrary “If not, is a chattel mortgage
executed by only one of the ‘partners’ of an unregistered commercial
partnership validly registered so as to constitute notice to the world if it is not
registered at the place where the aforesaid ‘partner’ actually resides but only in
the place where the deed states that he resides, which is not his real residence?”
And the third question is as follows:chanroblesvirtuallawlibrary “If the actual
residence of the chattel mortgagor — not the residence stated in the deed of
chattel mortgage — is controlling, may the Court of Appeals refuse to make a
finding of fact as to where the mortgagor resided despite your Petitioners’
having properly raised that question before it and expressly requested a ruling
thereon?”
These two questions have become academic by reason of the answer to the first
question, namely, that as a de facto partnership, Stasikinocey had its domicile in
San Juan, Rizal.
The
fourth
question
asked
by
the Petitioners is
as
follows:chanroblesvirtuallawlibrary “Is a chattel mortgage executed by only one
of the ‘partners’ of an unregistered commercial partnership valid as to third
persons when that ‘partner’ executed the affidavit of good faith in Quezon City
before a notary public whose appointment is only for the City of Manila? If not,
may the Court of Appeals refuse to make a finding of fact as to where the deed
was executed, despite yourPetitioners’ having properly raised that issue before
it and expressly requested a ruling thereon?”
It is noteworthy that the chattel mortgage in question is in the form required by
law, and there is therefore the presumption of its due execution which cannot
be easily destroyed by the biased testimony of the one who executed it. The
interested version of Da Costa that the affidavit of good faith appearing in the
chattel mortgage was executed in Quezon City before a notary public for and in
the City of Manila was correctly rejected by the trial court and the Court of
Appeals. Indeed, cumbersome legal formalities are imposed to prevent fraud. As
aptly pointed out in El Hogar Filipino vs. Olviga, 60 Phil., 17, “If the biased and
interested testimony of a grantor and the vague and uncertain testimony of his
son are deemed sufficient to overcome a public instrument drawn up with all
the formalities prescribed by the law then there will have been established a
very dangerous doctrine which would throw wide open the doors to fraud.”

The
last
question
raised
by
the Petitioners is
as
follows:chanroblesvirtuallawlibrary “Does only one of several ‘partners’ of an
unregistered commercial partnership have authority, by himself alone, to
execute a valid chattel mortgage over property owned by the unregistered
commercial partnership in order to guarantee a pre-existing overdraft
previously granted, without guaranty, by the bank?”
In view of the conclusion that Stasikinocey is a de facto partnership, and Da
Costa appears as a co-manager in the letter of Gorcey to the Respondent and in
the promissory note executed by Da Costa, and that even the partners
considered him as such, as stated in the affidavit of April 21, 1948, to the effect
that “That we as the majority partners hereby agree to appoint Louis da Costa
co-managing partner of Alan W. Gorcey, duly approved managing partner of the
said firm,” the “partner” who executed the chattel mortgage in question must be
deemed to be so fully authorized. Section 6 of the Chattel Mortgage Law
provides that when a partnership is a party to the mortgage, the affidavit may
be made and subscribed by one member thereof. In this case the affidavit was
executed and subscribed by Da Costa, not only as a partner but as a managing
partner.
There is no merit in Petitioners’ pretense that the motor vehicles in question are
the common property of Da Costa and Gorcey. Petitioners invoke article 24 of
the Code of Commerce in arguing that an unregistered commercial partnership
has no juridical personality and cannot execute any act that would adversely
affect innocent third persons. Petitioners forget that theRespondent is a third
person with respect to the partnership, and the chattel mortgage executed by
Da Costa cannot therefore be impugned by Gorcey on the ground that there is
no partnership between them and that the vehicles in question belonged to
them in common. As a matter of fact, the Respondent and the Petitioners are all
third
persons
as
regards
the
partnership
Stasikinocey; chan
roblesvirtualawlibraryand even assuming that the Petitioners are purchasers in
good faith and for value, the Respondent having transacted with Stasikinocey
earlier than thePetitioners, it should enjoy and be given priority.
Wherefore, the appealed decision of the Court of Appeals is affirmed with costs
against thePetitioners.
Bengzon, Montemayor, Reyes, A., Jugo, Bautista Angelo Labrador,
Concepcion, Reyes, J.B.L., and Endencia, JJ., concur.

currency. The defendant moved for a new trial, which was denied, and he has
G.R. No. 2715, Behn, Meyer and Co. v. Rosatzin, 5 Phil. 660

brought the case here by bill of exceptions.

Republic of the Philippines
SUPREME COURT

Objection was made in the court below to the admission of some of the books of

Manila

the partnership in evidence on the ground that they were not kept as required

EN BANC

by the Code of Commerce. We do not find it necessary to decide this question.
The ledger which contained the account above mentioned in the handwriting of

February 27, 1906

the defendant was certainly properly received in evidence, being an admission
by him of this indebtedness. The fact that the book was not kept in accordance

G.R. No. 2715

with the provisions of the Code of Commerce could not detract from the force of

BEHN, MEYER & CO., plaintiffs-appellees,

this admission. This book alone was sufficient evidence to prove the cause of

vs.

action, and the reception in evidence of the other books, if it were error, was

F. ROSATZIN, defendant-appellant.

error without prejudice.

Hartigan, Marple, Rohde and Gutierrez for appellant.
Pillsbury and Sutro for appellees.

It was proved that the defendant continued in the employ of the partnership

WILLARD, J.:

during the years 1902 and 1903, and was paid for those years his regular

The defendant and appellant was employed by the partnership of Behn, Meyer

monthly salary, and it is claimed by the appellant that this indicates that he

& Co. as a bookkeeper during the years 1901, 1902, and 1903. He left their

must have paid the balance due from him for the year 1901. This contention can

employ in the last-named year, and the partnership brought this action to

not be sustained.

recover a balance of 686.24 pesos claimed to be due it from the defendant. The
ledger for the partnership for the year 1901 contained a page devoted to the

The plaintiff offered no evidence to show that this balance had not been paid,

account-current of the defendant with the partnership. That account for that

and it is claimed by the appellant that the judgment must be reversed for that

year showed a balance in favor of the partnership and against the defendant of

reason. The plaintiff having proved the existence of the obligation, the burden of

686.24 pesos. This account was kept by the defendant himself, and all the

proof was upon the defendant to show that it had been discharged. This was the

entries therein are in his handwriting. The defendant introduced no evidence in

law in force during the Spanish domination. (Art. 1214, Civil Code.) This rule has

relation to the account or its payment, and judgment was entered against him

not been changed by section 297 of the present Code of Procedure, which

for P571.87 in Philippine currency, the equivalent of 686.24 pesos in Mexican

section is as follows:

Party must prove his affirmative allegations. — Each party must prove his own

entered in accordance herewith and the case remanded to the lower court for

affirmative allegations. Evidence need not be given in support of a negative

execution thereof. So ordered.

allegation except when such negative allegation is an essential part of the
statement of the right or title on which the cause of action of defense is founded,

Torres, Mapa, Johnson, and Carson, JJ., concur.

nor even in such case when the allegation is a denial of the existence of a
document, the custody of which belongs to the opposite party.
It is also claimed by the appellant that the existence of the plaintiff partnership

G.R. No. 5236, Martinez v. Ong Pong Co and Ong Lay

was not proved — that is, that there was no proof to show that the partnership

Republic

had been organized in accordance with the Code of Commerce. There was

SUPREME

evidence presented by the defendant in the case that a partnership known as

Manila

Behn, Meyer & Co. existed in 1900. The defendant contracted with the

EN BANC

of

the

Philippines
COURT

partnership in 1901 and subsequent years, and is now estopped to say that it
was not a partnership.

January 10, 1910

The appellant also attempted to prove that there had been a change in the

G.R.

partners constituting the firm after 1901, and prior to the commencement of the

PEDRO

action, and that the partnership which brought this suit was not the partnership

vs.

with which the defendant contracted. He however, failed in his attempt, because

ONG

the witness whom he called to make the proof testified that the new partner,

ONG PONG CO., appellant.

Dittmar, become a member of the firm in 1900.

Fernando

No.

5236
MARTINEZ, plaintiff-appellee,

PONG

de

CO

la

and

Cantera

ONG

LAY, defendants.

for

appellant.

O'Brien and DeWitt for appellee.
It is finally claimed by the defendant that the court erred in entering judgment

ARELLANO, C.J.:

against him for the amount of the debt payable in Philippine currency. This

On the 12th of December, 1900, the plaintiff herein delivered P1,500 to the

contention has already been decided adversely to the appellant in the case

defendants who, in a private document, acknowledged that they had received

of Gaspar vs. Molina,[[1]] No. 2206, November 2, 1905 (3 Off. Gaz., 651).

the same with the agreement, as stated by them, "that we are to invest the

The judgment of the court below is affirmed, with the costs of this instance

amount in a store, the profits or losses of which we are to divide with the

against the appellant. After the expiration of twenty days let judgment be

former, in equal shares."

The plaintiff filed a complaint on April 25. in the absence of a special agreement vesting in one sole person the management of the business. together with Ong Lay. 1695 and 1720. he had received from the plaintiff. who was then deceased. (Arts. making a total of P840. like the court below.500. For not having considered the fact that there were losses.500 which. For holding that the capital ought to have yielded profits. with legal interest thereon at the rate of 6 per cent per annum. to which loss the plaintiff agreed. the fact that the store was closed by virtue of ejectment proceedings is of no importance for the effects of the suit. finds no evidence that the entire capital or any part thereof was 2. plus P90 as one-half of the profits. from the 12th of June. calculated at the rate of 12 per cent per annum for the six months that the store was supposed to have been open. For having applied article 1138 of the Civil Code. and .500 that he had given them for the said purpose. they. until the full payment thereof with costs. and that nothing had resulted therefrom save the loss of the capital of P1. and 6. It is no evidence of such loss to aver. was the one who had managed the business. and paying him everything they may have received by virtue of the mandatum. therefrom that the ejectment was due to the fact that no rents were paid. without proof. and assigned the losses referred to by Ong Pong Co. it could not be inferred 3. The whole action is based upon the fact that the defendants received certain capital from the plaintiff for the purpose of organizing a company. according to the agreement. The findings of the ejectment. they.) Neither of them has rendered such account nor proven the From this judgment Ong Pong Co appealed to this court. as such administrators they were the agent of the company and incurred the liabilities peculiar to every agent. he admitted the fact of the latter should be calculated 12 per cent per annum. For holding that there should have been profits. both sums in Philippine currency. and that the Co alone appeared to answer the complaint. they are therefore obliged to refund the following errors: money that they received for the purpose of establishing the said store — the object of the association. 7. among which is that of rendering account to the principal of their transactions. 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. but he alleged that Ong Lay. lost. or else to refund him the P1. to wit. when the business terminated and on which date he ought to have returned the said amount to the plaintiff. and agreement and the delivery to him and to Ong Lay of the P1. This was the principal pronouncement of the 1.500 for the purpose aforesaid. As to the first assignment of error. Even though this were proven. 1901. were to handle the said money and invest it in a store which was the object of the association. defendants to render him an accounting of the partnership as agreed to. For not having taken into consideration the fact that the reason for the closing judgment. this court. Civil Code. P750. that the effects of the store were ejected. Ong Pong 5. of the store was the ejectment from the premises occupied by it. in order to compel the 4. were the actual administrators thereof. 1907. With regard to the second and third assignments of error.

) We do not consider that article 1688 is applicable in this case. SUCH PARTNER IS GUILTY OF ESTAFA. WHEN MONEY OR PROPERTY HAVE BEEN RECEIVED BY A PARTNER FOR A SPECIFIC PURPOSE. v. JJ. 1108 and 1100. This being an obligation to pay in cash." This court. by a violation of the provisions of the law. provided. the other errors assigned have not enterprise. or of false pretenses of fraudulent acts. concur. that the defendant Ong Pong Co shall only pay the plaintiff the sum of some profits. ID." for the reason that no other money than that contributed as is involved. Civil Code. 1997. and the costs. 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. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES. With regard to the possible profits. responsible only for the losses which. article 1138 of the Civil Code has been invoked. and it is essential that there be a fiduciary relation between them either in the form of a trust. to the effect that "there were however. ELEMENTS THEREOF. Torres. ID. SYLLABUS 1. — Estafa is a crime committed by a person who defrauds another causing him to suffer damages. Petitioner. 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 [G. So ordered. as follows: (1) that the accused defrauded another by abuse of confidence or deceit. but not large ones. by means of unfaithfulness or abuse of confidence. the statements of the defendant Ong Pong Co. been committed. THE HON. 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 Efren No.R.] for Petitioner. ID. — Even assuming that a contract of . nor deem it possible to estimate them to be a the time of the filing of the complaint. represented by the Solicitor General. 114398. he incurred.. REVISED PENAL CODE. hence. there are no other losses than the legal interest. October Liwanag 24. (Arts. As in the partnership there were two administrators or agents liable for the above-named amount. L. however. 2. from the filing of the complaint. The Solicitor General for Respondents. for which he has rendered no accounting. it can not admit the estimate. such agent is CARMEN LIWANAG. does not find that the P750 with the legal interest thereon at the rate of 6 per cent per annum from amount thereof has been proven. Respondents. without special ruling as to certain sum.. commission or administration. the costs of this instance. From the foregoing. AND HE LATER MISAPPROPRIATED IT. which interest is not due except from the time of the judicial demand. or.. and (2) that damage or prejudice capable of pecuniary estimation is caused to the offended party or third party. CRIMINAL LAW.that the rent was not paid on account of the loss of the capital belonging to the received from their principal. given purpose. Johnson. the finding of the court below are based on In view of the foregoing judgment appealed from is hereby affirmed. this latter deals with debts of a partnership where the obligation is not a joint one. the elements of estafa are present. made in the judgment. and Moreland. ESTAFA. of 12 per cent per annum for the period of six months. Therefore. Carson. and for a given period of time.. in the present case.

the said accused. The dispositive portion of the decision reads thus:jgc:chanrobles. for the purchase of cigarettes.ph "WHEREFORE. Branch 93. DECISION ROMERO. in view of the foregoing. AND TO PAY THE COSTS. however. willfully.00. with unfaithfulness. SO ORDERED. CONTRARY TO LAW. the decretal portion of which reads:jgc:chanrobles."cralaw virtua1aw library Said decision was affirmed with modification by the Court of Appeals in a decision dated November 29. such partner is guilty of estafa. and all efforts by Rosales to obtain information regarding their business proved futile. suddenly stopped.00. par. despite repeated demands made upon her. J. and abuse of confidence. The accused is likewise ordered to reimburse complainant the sum of P526. and therefore. with a corresponding 40% commission to her if the goods are sold. 1993. Quezon City. After trial on the merits. the Court holds. Carmen Liwanag. Rosales would give the money needed to buy the cigarettes while Liwanag and Tabligan would act as her agents. unlawfully and feloniously defraud one ISIDORA ROSALES. said accused received in trust from the offended party cash money amounting to P536.com. Rosales filed a case of estafa against Liwanag.650. beyond reasonable doubt. 1988 and August.com. Accused failed and refused and still fails and refuses to deliver and/or return the same to the damage and prejudice of the said ISIDORA ROSALES. far from complying her aforesaid obligation. Under their agreement. In the instant petition. LOANS. 315. THE TRANSACTION IN THE CASE AT BAR CANNOT BE CONSIDERED A LOAN. misappropriated and converted the same to her personal use and benefit. did then and there. the borrower can dispose of it for whatever purpose he may deem proper. with intent of gain.650. Philippines and within the jurisdiction of this Honorable Court. 1988 in Quezon City.ph "WHEREFORE. Since in this case there was no transfer of ownership of the money delivered. that the prosecution has established the guilt of the accused.ph "That on or between the month of May 19. The visits. with the express obligation involving the duty to act as complainant’s agent in purchasing local cigarettes (Philip Morris and Marlboro cigarettes). in the aforementioned amount and in such other amount as may be awarded under the provision of the Civil Code. and once in possession thereof. to wit: on the date and in the place aforementioned."cralaw virtua1aw library The antecedent facts are as follows:chanrob1es virtual 1aw library Petitioner Carmen Liwanag (Liwanag) and a certain Thelma Tabligan went to the house of complainant Isidora Rosales (Rosales) and asked her to join them in the business of buying and selling cigarettes. an Indeterminate Penalty of SIX (6) YEARS. the judgment appealed from is hereby affirmed with the correction of the nomenclature of the penalty which should be: SIX (6) YEARS. in case of insolvency. Rosales readily agreed. to give her commission corresponding to 40% of the profits. ownership over the same is transferred. we have ruled that when money or property have been received by a partner for a specific purpose (such as that obtaining in the instant case) and he later misappropriated it.com. and to return the aforesaid amount of offended party. otherwise the money would be returned to Rosales.650. 1991. however. Alarmed by this development and believing that the amounts she advanced were being misappropriated. EIGHT (8) MONTHS AND TWENTY ONE (21) DAYS OF PRISION CORRECCIONAL TO FOURTEEN (14) YEARS AND EIGHT (8) MONTHS OF PRISION MAYOR AS MAXIMUM. namely. Liwanag is liable for conversion under Art. but said accused.: Petitioner was charged with the crime of estafa before the Regional Trial Court (RTC). the trial court rendered a decision dated January 9.partnership was indeed entered into by and between the parties. finding Liwanag guilty as charged. CIVIL LAW. in the following manner. 1 (b) of the Revised Penal Code. EIGHT (8) MONTHS and TWENTY ONE (21) DAYS of prision . since in a contract of loan once the money is received by a debtor. SINCE IN A CONTRACT OF LOAN ONCE THE MONEY IS RECEIVED BY THE DEBTOR. Philippine Currency. without subsidiary imprisonment. it is evident that Liwanag could not dispose of the money as she pleased because it was only delivered to her for a single purpose. and if this was not possible then to return the money to Rosales.00. to resell them to several stores. misapplied. Liwanag and Tabligan made periodic visits to Rosales to report on the progress of the transactions.chanroblesvirtuallawlibrary:red During the first two months. Rosales gave several cash advances to Liwanag and Tabligan amounting to P633. imposes upon the accused. OWNERSHIP OVER THE SAME IS TRANSFERRED. Consequently. 3. — Neither can the transaction be considered a loan. Convinced of the feasibility of the venture. Being the owner. in an information which reads as follows:jgc:chanrobles.

as minimum. as follows: (1) that the accused defrauded another by abuse of confidence or deceit. 1994. 8 Being the owner. Isidora P. Rosales the sum of FIVE HUNDRED TWENTY SIX THOUSAND AND SIX HUNDRED FIFTY PESOS (P526. In the event the said cigarrets (sic) are not sold. even assuming that a contract of partnership was indeed entered into by and between the parties. wherein Rosales would contribute the funds while she would buy and sell the cigarettes. 7chanroblesvirtualawlibrary Neither can the transaction be considered a loan. 5 and it is essential that there be a fiduciary relation between them either in the form of a trust.ph . for the purchase of cigarettes.com. with Rosales lending to her the amount stated on an installment basis. the proceeds of the sale or the said products (shall) be returned to said Mrs. Quezon (Sgd) City in the Illegible presence (Sgd) of:chanrob1es Doming virtual Z. submitting the following assignment of errors:jgc:chanrobles. WHEN CLEARLY THE CONTRACT THAT EXIST (sic) BETWEEN THE ACCUSEDPETITIONER AND COMPLAINANT IS EITHER THAT OF A SIMPLE LOAN OR THAT OF A PARTNERSHIP OR JOINT VENTURE HENCE THE NON RETURN OF THE MONEY OF THE COMPLAINANT IS PURELY CIVIL IN NATURE AND NOT CRIMINAL. SO ORDERED. While factual findings of the Court of Appeals are conclusive on the parties and not reviewable by the Supreme Court. It indicates that the money delivered to Liwanag was for a specific purpose. in view of the foregoing.00 or the said items on or before August 30.ph "May 19.650. par. the elements of estafa are present. however. since in a contract of loan once the money is received by the debtor. the borrower can dispose of it for whatever purpose he may deem proper. 1988. namely. and (2) that damage or prejudice capable of pecuniary estimation is caused to the offended party or third party. to purchase cigarrets (sic) (Philip & Marlboro) to be sold to customers.00) Philippine Currency. The Court of Appeals correctly rejected these pretenses. Kaliraya St. to FOURTEEN (14) YEARS and EIGHT (8) MONTHS of reclusion temporal. such partner is guilty of estafa. 315. and carry more weight when these affirm the factual findings of the trial court. or of false pretenses or fraudulent acts. and in the event the cigarettes cannot be sold. From the foregoing. RESPONDENT APPELLATE COURT GRAVELY ERRED IN NOT ACQUITTING THE ACCUSED-PETITIONER ON GROUNDS OF REASONABLE DOUBT BY APPLYING THE ‘EQUIPOISE RULE’. 1988 Quezon City Received from Mrs. the money must be returned to Rosales. commission or administration. 3 we deem it more expedient to resolve the instant petition on its merits. 6 In the instant petition. as maximum.com. The WHEREFORE. Liwanag filed the instant petition. In all other respects. Rosales the said amount of P526."cralaw virtua1aw library Her motion for reconsideration having been denied in the resolution of March 16."cralaw virtua1aw library Signed Liwanag advances the theory that the intention of the parties was to enter into a contract of partnership. ownership over the same is transferred. and if this was not possible then to return the money to Rosales. that is. 1 She also argues that the transaction can also be interpreted as a simple loan. Isidora P. Since in this case there was no transfer of ownership of the money delivered. for the purchase of cigarettes. "1. Estafa is a crime committed by a person who defrauds another causing him to suffer damages. 2 The language of the receipt could not be any clearer. the decision is AFFIRMED. RESPONDENT APPELLATE COURT GRAVELY ERRED IN AFFIRMING THE CONVICTION OF THE ACCUSED-PETITIONER FOR THE CRIME OF ESTAFA.mayor. we have ruled that when money or property have been received by a partner for a specific purpose (such as that obtaining in the instant case) and he later misappropriated it. 1aw library Baligad" Thus.650. by means of unfaithfulness or abuse of confidence. it is evident that Liwanag could not dispose of the money as she pleased because it was only delivered to her for a single purpose. (SGD 2. and later divide the profits between them. 4 & Thumbedmarked) (sic) CARMEN LIWANAG 26 H. Liwanag is liable for conversion under Art. 1(b) of the Revised Penal Code. the appealed decision of the Court of receipt signed by Liwanag states thus:jgc:chanrobles.

On appeal to the Court of Appeals. however.000 shares respectively — total 17. No. it was neither published in the newspapers nor stated in the commercial registry that the partnership Hill & Ceron had been dissolved.) CARLOS CERON of the Philippines COURT EN BANC G. Litton filed a complaint in the Court of First Instance of Manila against the said defendants for the recovery of the said balance.. as we cannot but accept. 1934. during the partnership. that on the date of the transaction.: This is a petition to review on certiorari the decision of the Court of Appeals in a case originating from the Court of First Instance of Manila wherein the herein petitioner George Litton was the plaintiff and the respondents Hill & Ceron. on leave.150 leaving an unpaid balance of P720. the latter affirmed the decision of the court on May 29. but what importance can be attached to said advice if the partnership was not in fact dissolved on February 14th. HILL & CERON. Francisco and Panganiban. the date when the transaction with Ceron took place? . we reach the conclusion that the transaction made by Ceron with the plaintiff should be understood in law as effected by Hill & Ceron and binding upon it. Costs against petitioner. Hill & Ceron sold shares of the Big Wedge. who is one of the managing partners of Hill & Ceron. the partnership between Hill and Ceron was in existence. 1934 Received from Mr. respondents-appellees. ordered Carlos Ceron personally to pay the amount claimed and absolved the partnership Hill & Ceron. namely. SO ORDERED. L-45624 shares of Big Wedge Mining Company. The court. Robert Hill and the Visayan Surety & Insurance Corporation.. C. 4429 and 6699 for 5. CONCEPCION. having reached the conclusion that Ceron did not intend to represent and did not act for the firm Hill & Ceron in the transaction involved in this litigation. and when the transaction was entered into with Litton. vs. of certain undisputed facts and of certain regulations and provisions of the Code of Commerce. the plaintiff sold and delivered to Carlos Ceron. ET AL. but in view. Narvasa. appellees. 1934. 1939 GEORGE LITTON. J. which we have sold at P0.000 and 7. JJ. it is an admitted fact by Robert Hill when he testified at the trial that he and Ceron.J. 14.000.R. In the first place. The facts are as follows: On February 14. April 25. Reich Roy and De Guzman Espeleta. is AFFIRMED. for for appellant. that in said partnership Hill as well as Ceron made the transaction as partners in equal parts. and by virtue of said transaction. Accepting. 1937. 4428. 1993. After this date.11 (eleven centavos) per share or P1.000 Ceron paid to the plaintiff the sum or P1. had the same power to buy and sell. 5. George E. the defendant Carlos Ceron delivered to the plaintiff a document reading as follows: Feb.00 less 1/2 per cent brokerage. petitioner-appellant. that Ceron individually entered into the transaction with the plaintiff. Robert Hill. the conclusion arrived at by the Court of Appeals as to the question of fact just mentioned. February 14. Hill testified that a few days before February 14th he had a conversation with the plaintiff in the course of which he advised the latter not to deliver shares for sale or on commission to Ceron because the partnership was about to be dissolved. Carlos Ceron and Visayan Surety & Insurance Corporation were defendants.Appeals dated November 29. a certain number of mining claims.870. Quijano and Liwag for appellee Hill. and unable to collect this sum either from Hill & Ceron or from its surety Visayan Surety & Insurance Corporation. George Litton share certificates Nos. concur. or on February 19th.. Melo. after trial. Republic SUPREME Manila HILL & CERON By: (Sgd.

engage in a transaction similar to that in which the partnership is engaged without binding the latter. shall jointly open a current account or any other kind of account in any bank or banks. a written contract of the firm can only be signed by one of the partners if the other partner consented. is enough that it is contracting with the partnership which is represented by one of the managing partners.Under article 226 of the Code of Commerce. [Law. The respondent argues in its brief that even admitting that one of the partners could not. shall not be allowed. broker or brokerage firm. Third persons. in his individual capacity. We do not find this alleged corroboration because the only finding of fact made . 391. may legally engage in the business of brokerage in general as stock brokers. transactions and activities of the copartnership. According to the articles of copartnership of 'Hill & Ceron.) 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. shall jointly sign all checks for the withdrawal of funds and shall jointly or singly sign. the other cannot bind the firm by a written contract. . like the plaintiff. Riggle. shipping brokers. 112 Pac. security brokers and other activities pertaining to the business of the partnership. 1933. and as such. 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. (See also Cardell vs.' filed in the Bureau of Commerce. . does not prejudice third persons. with the consent of the other partner. is corroborated by the Court of Appeals.]. The public need not make inquires as to the agreements had between the partners. to ascertain whether or not this partner with whom the transaction is made has the consent of the other partner. the order of the Bureau of Commerce of December 7. as it happens in the present case. but as a managing partner of Hill & Ceron. and this argument. irrespective of whether the purchase or sale is made from or to a private individual. 7 U. In its decision the Court of Appeals states: But there is a stronger objection to the plaintiff's attempt to make the firm responsible to him. Now. 1885. . nevertheless there is no law which prohibits a partner in the stock brokerage business for engaging in other transactions different from those of the partnership. Its knowledge. ed. (Le Roy vs. . That the management of the business affairs of the copartnership shall be entrusted to both copartners who shall jointly administer the business affairs. real brokers. prohibits brokers from buying and selling shares on their own account.) Aside from the aforecited legal provisions. but we dissent from the view of the Court of Appeals that for one of the partners to bind the partnership the consent of the other is necessary. are not bound in entering into a contract with any of the two partners.. Said order reads: The stock and/or bond broker is. (Mills vs. . 617. none of the two partners. merely an agent or an intermediary. . Under this stipulation. It follows from the sixth paragraph of the articles of partnership of Hill &n Ceron above quoted that the management of the business of the partnership has been entrusted to both partners thereof. therefore. Mañeru. and other activities pertaining to the business of brokers in general. because the transaction made by Ceron is a mere personal loan. in the latter case. (Opinion of March 23. 368.. so it is said. Ceron. the latter has failed to prove that Hill had consented to such contract. (c) To buy or to sell shares of stock or bonds on his own account for purposes of speculation and/or for manipulating the market. 14 Phil. therefore.) The Supreme Court of Spain held that the dissolution of a partnership by the will of the partners which is not registered in the commercial registry. S. assuming for the moment that Ceron attempted to represent the firm in this contract with the plaintiff (the plaintiff conceded that the firm name was not mentioned at that time). investment security brokers. could not have entered into the contract of sale of shares with Litton as a private individual. Without the consent of one partner.Johnson. such as stock and bond brokers. Sixth. under article 130 of the Code of Commerce. The kind of business in which the partnership Hill & Ceron is to engage being thus determined.) The second paragraph of the articles of partnership of Hill & Ceron reads in part: Second: That the purpose or object for which this copartnership is organized is to engage in the business of brokerage in general. the dissolution of a commercial association shall not cause any prejudice to third parties until it has been recorded in the commercial registry.

According to this. namely. Wherefore. the movant. the sum of P720. There is nothing in the case at bar which destroys this presumption. and Moran. but in the present case. and that the latter with knowledge thereof entered into said contract. one of the defendants sentenced in our decision to pay to the plaintiff the amount claimed in his complaint. JJ.) . and that the law has been obeyed (No. Although this question has already been considered and settled in our decision. is acting in accordance therewith. C. minus the commission of one-half per cent (½%) from the original price of P1. for it means that one of the two partners should have the consent of the other to contract for the partnership. the plaintiff. that he had the consent of Hill. And here we have to hold once again that it is not the plaintiff who. have the management of the business of the partnership. that one of the partners did not consent to his copartner entering into a contract with a third person. from the date of the filing of the complaint. as it must be in fact. It is argued that. in the ordinary and natural course of business. 18. only partners of the firm Hill & Ceron. as managers. section 334). it being stipulated in the articles of partnership that Hill and Ceron. which is different. jointly and severally. Imperial. but he may nevertheless consent to the realization thereof by his copartner in reliance upon his skill and ability or otherwise. So ordered. Neither is it necessary for the third person to ascertain if the managing partner with whom he contracts has previously obtained the consent of the other. A third person may and has a right to presume that the partner with whom he contracts has. this alone would not annul the contract judging from the provisions of article 130 of the Code of Commerce reading as follows: No new obligation shall be contracted against the will of one of the managing partners. however. the appellant could not ignore the fact that the consent of the movant was necessary for the validity of the contract which he had with the other partner and defendant.. and that either may contract and sign for the partnership with the consent of the other. had Ceron in any way stated to the appellant at the time of the execution of the contract. Laurel. And this finds support in the legal presumption that the ordinary course of business has been followed (No. While the said presumption stands. a procedural failure. another of the defendants. would. so it is said. Ceron. it seems that the Court of Appeals is of the opinion that the two partners should give their consent to the contract and that the plaintiff should prove it. J. we nevertheless take cognizance of the motion in order to enlarge upon our views on the matter. it is a third person. or if it could be inferred by his conduct. the only thing appearing in he findings of fact of the Court of Appeals is that the plaintiff "has failed to prove that Hill had consented to such contract". should he have expressly stated it. the parties of partnership having been. J. the plaintiff has nothing to prove. which consists in asking the other's consent before contracting for the partnership. unless the contrary is shown. The stipulation in the articles of partnership that any of the two managing partners may contract and sign in the name of the partnership with the consent of the other. (Emphasis supplied. with the costs to the respondents. undoubtedly creates an obligation between the two partners. Ceron. Diaz. Code of Civil Procedure). to enter with the appellant into the contract whose breach gave rise to the complaint. concur. and shall have its effects without prejudice to the liability of the partner or partners who contracted it to reimburse the firm for any loss occasioned by reason thereof. Passing now to another aspect of the case. but if. 1939 CONCEPCION. This obligation of course is not imposed upon a third person who contracts with the partnership. but the latter's partner. The clause of the articles of partnership should not be thus understood. The appealed decision is reversed and the defendants are ordered to pay to the plaintiff. RESOLUTION July 13.. This last presumption is equally applicable to contracts which have the force of law between the parties.by the Court of Appeals is to the effect that the transaction made by Ceron with the plaintiff was in his individual capacity.870. It is asked that we reconsider our decision. the said defendant insisting that the appellant had not established that Carlos Ceron. recorded in the commercial registry. who asks for it. with legal interest. and there being no evidence that said consent had been obtained. it should be contracted it shall not be annulled for this reason. on the contrary.: A motion has been presented in this case by Robert Hill. the aforesaid presumption with all its force and legal effects should be taken into account. the complaint to compel compliance with the said contract had to be. had the consent of his copartner. The third person would naturally not presume that the partner with whom he enters into the transaction is violating the articles of partnership but. because it is possible that one of the partners may not see any prospect in a transaction. should he file a complaint against the partnership for compliance with the contract. and should it turn out later that he did not have such consent. 31. should obtain and prove the consent of Hill. Villa-Real. section 334. the consent of his copartner. under the articles of partnership. for otherwise he would not enter into the contract. Avanceña.

J. 1963 ANTONIO C. in favor of the buyers Washington Sycip and Betty Lee for the following consideration: Cash paid P37. as in the present case. Norberto J.04 Republic SUPREME Manila of the Philippines COURT Three things must be always held in mind in the discussion of this motion to reconsider. Kong Chai Pin. not only without the consent but against the will of any of the managing partners. Jose C. in similar cases. which is practically casting upon him the obligation to get such consent. insist that. ET AL. wherein we have upheld the validity of the sale of the lands owned by the partnership Goquiolay & Tan Sin An. J. and that.13 Avanceña. Laurel.. vs. GOQUIOLAY. Villa-Real.. No. contrary to our holding.00 Debts assumed by purchaser: To Yutivo 62. TOTAL P153. and this aspect to the case was expressly reserved in the main decision of 26 July 1960. plaintiffs-appellants. in any event. made in 1949 by the widow of the managing partner.415. 54.000. Imperial. concur.. If we are to interpret the articles of partnership in question by holding that it is the obligation of the third person to inquire whether the managing copartner of the one with whom he contracts has given his consent to said contract.L.: The matter now pending is the appellant's motion for reconsideration of our main decision.91 In view of the foregoing. C. to a stranger.B. when. SYCIP. J. and sustaining the other views expressed in the decision. the sale should be set aside because it was executed with the intent to defraud appellant of his share in the properties sold. a thing not desirable and contrary to the nature of business which requires promptness and dispatch one the basis of good faith and honesty which are always presumed. Calayco for plaintiffs-appellants. The reason or purpose behind these legal provisions is no other than to protect a third person who contracts with one of the managing partners of the partnership..310. the motion is denied. To Sing Yee Cuan & Co.Under the aforequoted provisions.. acting in behalf of the firm. Salazar and Associates for defendantsappellees. WASHINGTON Z. incapacitated by law to manage the affairs of partnership. a contract is entered into with a third person who acts in good faith. and Moran. December 10. Quisumbing and Sycip.. ET AL. being basic and beyond controversy: EN BANC G.R. thus avoiding fraud and deceit to which he may easily fall a victim without this protection which the Code of Commerce wisely provides. There is no question between partners inter se. and the transaction is of the kind of business in which the partnership is engaged. (a) That we are dealing here with the transfer of partnership property by one partner. Diaz. that the testimony of her witness Young and Lim belies that she took over the administration of the partnership property. So ordered. this interpretation would. widow of the deceased partner Tan Sin An. JJ. said contract shall not be annulled. RESOLUTION REYES.. in his motion for reconsideration. L-11840 Appellant Goquiolay. defendants-appellees. operate to hinder effectively the transactions.726. never became more than a limited partner. Tan Sin An (Executed in her dual capacity as Administratrix of the husband's estate and as partner in lieu of the husband). . without prejudice to the liability of the guilty partner.

Yu Eng Lai was few months after 1945? A — In the year 1945. to which witness gave the following answer: I saw the properties in Mamay still undeveloped. p. Of course they never paid any money to Tan Sin An or his family. Mrs. It is first averred that there is "not one iota of evidence" that Kong Chai Pin managed and retained possession of the partnership properties. And also — What can you say as to the development of these other properties of the partnership which you saw during the occupation? (Dep. Yu Eng Lai that the widow "could just do it" (i. either by buying and selling real estates. (c) That the properties sold were not part of the contributed capital (which was in cash) but land precisely acquired to be sold. and of course they are receiving quiet a lot benefit from the plantation. (Emphasis supplied). that the witness found the properties "abandoned and undeveloped". continue to manage the properties). Q — And this conversation which you had with Mrs.. Lim.. Witnesses Lim and Young referred . Yu Eng Lai asked me if I can just let Mrs. omits to mention that said part of the testimony started with the question: Now. With these points firmly in mind. both Young and Lim's testimonies do not belie. p. although subject to a mortgage in favor of the original owners. Emphasis supplied). 13-14. to subdivide real estates into lots for the purpose of leasing and selling them.(b) That partnership was expressly organized: "to engage in real estate business. Mr. The place was occupied by the Japanese Army. Did you meet Mrs.. was given in answer to the question: According to Mr. Sin An.. 8). When I went there with Hernando Youngwe saw all the abaca destroyed. Moreover. I allowed her to take care of the properties in order to help her and because I believe in God and — wanted to help her.. Kong Chai Pin. Then I said. The object and purpose of the copartnership are as follows: 1.e. you said that about 1942 or 1943 you returned to Davao. or contradict. in fact. during the Japanese occupation Tan Sin an and his family lived on the plantation of the partnership and derived their subsistence from that plantation. to the effect that the properties of the partnership were undeveloped. either by buying and selling real estate". and the family of the widow (Kong Chai Pin) did not receive any income from the partnership properties. Goquiolay. Suffice it to point out that appellant Goquiolay himself admitted that — . They planted camotes and vegetables to feed the Japanese Army. wherein he stated: that plantation was being occupied at that time by the widow. The third property which is in Tigato is about eleven (11) hectares and planted with abaca seedlings planted by Mr. she could just do it and besides I am not interested in agricultural lands. Emphasis supplied). having been made against the party's own interest. Kong Chai Pin there in Davao at that time? Similarly. The Articles of copartnership. 19 July 1956. because I wanted to help Mrs. What can you say to that? (Dep. pp. from whom the partnership had acquired them. The appellant subsequently ratified this testimony in his deposition of 30 June 1956. Tan Sin An. expressly provided that: IV. Kong Chai Pin continue to manage the properties (as) she had no other means of income. let us turn to the points insisted upon by appellant. Q — So the answer to my question is you did not take any steps? A — I did not. Discarding the self-serving expressions. Goquiolay's admission that he told Mr. the appellant's reference to the testimony of Hernando Young. 13. To engage in real estate business. the testimony of Rufino Lim. (Dep. these admissions of Goquiolay are certainly entitled to greater weight than those of Hernando Young and Rufino Lim. Plainly. pages 8-9.

a general partner right at the start. with all the rights and privileges of one. as we pointed out in our main decision. And in the latter event. it does not legitimately follow that they may not voluntarily choose to become general partners. Besides. The heir never was a limited partner. That Kong Chai Pin carried out no acts of management during the Japanese occupation (1942-1944) does not mean that she did not do so from 1945 to 1949. and that it did not include the power to alienate. strangers . because she had become a partner upon her husband's death. at least since 1945. Goquiolay recognized her as such partner. can not be compelled to become general partners against their wishes. appellant could not empower the widow... It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only to manage the property. Goquiolay's authorization to manage the partnership property was proof that he considered and recognized her as general partner. because he would normally prefer to avoid any liability in excess of the value of the estate inherited so as not to jeopardize his personal assets. even as a mere agent: Limited partners may not perform any act of administration with respect to the interests of the copartnership. the latter may disregard it and instead elect to become a collective or general partner.to the period of Japanese occupation. But because they are not so compellable. the widow only became a limited partner. Whether or not she complied with this authority is a question between her and the appellant. It must never be overlooked that this case involved the rights acquired by strangers. since no conversion of status is involved. Of course. since the difference between the two kinds of associations is fundamental. The Articles did not provide that the heirs of the deceased would be merely limited partners. given to the widow in 1945. and became. Articles of Co-Partnership). with authority to administer and alienate partnership property. and the articles of co-partnership expressly contemplated the admission of the partner's heirs into the partnership. in fact. the disputed sale by the widow took place in 1949. as expressly provided by the articles of copartnership. and specially because the conversion into a limited association would have the heirs of the deceased partner without a share in the management. in other words. But the authority was given. Even more. because it was never revoked. By seeking authority to manage partnership property. Tan Sin An. if she were only a limited partner. Now. citing Article 1713 of the Civil Code of 1889. it is pointless to discuss the legality of any conversion of a limited partner into a general one. This choice pertains exclusively to the heir. The reason is plain: Under the law (Article 148. The issues between the partners inter sewere expressly reserved in our main decision. and is now in estoppel to deny her position as a general partner. to administer the properties of the firm. granting that by succession to her husband. It certainly could not be continued if it were to be converted from a general partnership into a limited partnership. will have to be continued" with the heirs or assigns. they expressly stipulated that in case of death of either partner "the co-partnership . and answering for the debts of the firm not only with the inheritance but also with the heir's personal fortune. he actually manifested his willingness that the widow should manage the partnership properties. What this argument overlooks is that the widow was not a mere agent. the stipulation would not bind the heirs of the deceased partner should they refuse to assume personal and unlimited responsibility for the obligations of the firm. Tan Sin An's widow showed that she desired to be considered a general partner. on the contrary. and does not deal with the rights existing between partners Goquiolay and the widow of Tan Sin An. (Emphasis supplied). Code of Commerce). but chose to be. but Goquiolay's authority was. the heir ordinarily (and we did not say "necessarily") becomes a limited partner for his own protection. By authorizing the widow to manage partnership property (which a limited partner could not be authorized to do). waiving the protective mantle of the general laws of succession. in determining what kind of partner the widow of partner Tan Sin an Had elected to become. not even in the capacity of agents of the managing partners. The heirs. and she did have it when she made the questioned sale. But this statutory limitation of responsibility being designed to protect the heir. and does not require the assent of the surviving partner. Again. Hence. We thus find that Goquiolay did not merely rely on reports from Lim and Young. the contractual stipulation does actually contemplate that the heirs would becomegeneral partners rather than limited ones. It must be remember that the articles of co-partnership here involved expressly stipulated that: In the event of the death of any of the partners at any time before the expiration of said term. It is immaterial that the heir's name was not included in the firm name. the co-partnership shall not be dissolved but will have to be continued and the deceased partner shall be represented by his heirs or assigns in said co-partnership (Art. last paragraph. and is not here involved. XII.after the occupation.

the consent of his copartner. one partner has ample power. it was held: a partnership to deal in real estate may be created and either partner has the legal right to sell the firm real estate. The stipulation in the articles of partnership that any of the two managing partners may contract and sign in the name of the partnership with the consent of the other. was shared even by the probate court that approved the sale by the widow of the real property standing in the partnership name. Supp. or modify. and. to cancel.. hence within the ordinary powers of the partner. p. for otherwise he would not enter into the contract. et al. 1. A third person may and has a right to presume that the partner with whom he contracts has. the immovables thus acquired by the firm from part of its stock-in-trade. in negotiating with her as such a partner. This last presumption is equally applicable to contracts which have the force of law between the parties. This argument is lamentably superficial because it fails to differentiate between real estate acquired and held as stock-in-tradeand real estate held merely as business site (Vivante's "taller o banco social") for the partnership. 67 Phil. Where the partnership business is to deal in merchandise and goods. and he did not even take steps to pay. movable property.e. 18. 92 Ala. 9 South 182. section 334).Ocurrira una cosa parecida cuando el objeto de la Sociedad fuese la compra y venta de inmuebles. (Litton vs. or at least ascertain how its affairs stood.Y. et al. Hill and Ceron. undoubtedly creates on obligation between the two partners. even as a partner. 13 Am. and the sale thereof is in pursuance of partnership purposes. Rep. Rep. having authority to act for. Knowing that by law a limited partner is barred from managing the partnership business or property. 25 Am. In Rosen vs. third parties (like the purchasers) who found the widow possessing and managing the firm property with the acquiescence (or at least without apparent opposition) of the surviving partners were perfectly justified in assuming that she had become a general partner. 406. authority to manage and deal with the firm's properties apart from the presumption that a general partner dealing with partnership property has to requisite authority from his co-partners (Litton vs. Dickerson. 522. Hill & Ceron. For seven years Goquiolay could have asserted his alleged rights.. be it noted. therefore. This distinction is supported by the opinion of Gay de Montella1 . to enter into an executory contract for the sale of real estate. and by suitable notice in the commercial registry could have warned strangers that they must deal with him alone. the provisions of the partnership articles that he (Goquiolay) would have no intervention in the management of the partnership. 405. 83: If the several partners engaged in the business of buying and selling real estate can not bind the firm by purchases or sales of such property . viene limitada a los objetos de comercio o a los productos de la fabrica para explotacion de los cuales se ha constituido la Sociedad. Pero esta facultad de enajenar limitada a las ventas conforme a los fines sociales. St. And in Revelsky vs. 54 N. and that the law has been obeyed (No. 513. Note that for seven long years. Y.had to be guided by her conduct and actuations and those of appellant Goquiolay. But he did nothing of the sort. This laches certainly contributed to confirm the view that the widow of Tan Sin An had. cuando es conforme a los fines sociales. Code of Civil Procedure). 67 Phil. or was given. The same rule obtains in American law. This obligation of course is not imposed upon a third person who contracts with the partnership. 516). Brown. This belief. the sale of its real property (immovables) is not within the ordinary powers of a partner. when the partnership business is to deal in real estate. section 334. but on the contrary is acting in accordance therewith. Rosen. 550: And hence. because it is not in line with the normal business of the firm.. i. in the very passage quoted in the appellant's motion for reconsideration: La enajenacion puede entrar en las facultades del gerante. as sole general partner. (Emphasis supplied. 31. And this finds support in the legal presumption that the ordinary course of business has been followed (No. Neither it is necessary for the third person to ascertain if the managing partner with whom he contracts has previously obtained the consent of the other. 409.) It is next urged that the widow. quoted in our main decision. in the ordinary and natural course of business. as a general agent of the firm. 11). which consists in asking the other's consent before contracting for the partnership. after Tan Sin An died. The third person would naturally not presume that the partner with whom he enters into the transaction is violating the articles of partnership. and in behalf of the firm. there was more than ample time for Goquiolay to take up the management of these properties. (Montella) (Emphasis supplied). had no authority to sell the real estate of the firm. because he was not interested (supra). 212 N. He did not even take steps. That belief was fostered by the very inaction of appellant Goquiolay. from partner Tan Sin An's death in 1942 to the sale in 1949. or settle the firm debts that were overdue since before the outbreak of the last war. But where the express and avowed purpose of the partnership is to buy and sell real estate (as in the present case). In Chester vs. en cuyo caso el gerente estaria facultado para otorgar las ventas que fuere necesario.

insolvent. Emphasis supplied).13 to Sing Ye Cuan & Co. which cover all the tangible property then belonging to the firm. the lands sold were those acquired to be sold. We will now turn to the question of fraud. and for some time had been. including the counters. Clearly. The mortgages appear to be without a sufficient condition of defiance. but a several agency. a firm. later to the Banco Hipotecario) plus accrued interests and taxes.00. the sale included even the fixtures used in the business. this evidence certainly does not show such "gross inadequacy" as to justify recission of the sale. a small part of one of them. and contain a stipulation authorizing the mortgagees to take immediate possession of the property. and used in carrying on.) are not questioned. the partnership received nothing beyond the discharge of its debts. the said Cowen & McGrath.. In the McGrath case. Owen McGrath. this property was actually sold for a total of P153. . but the latter paid. and the fact that the sale in question was practically a forced sale because the partnership had no other means to pay its legitimate debts.415.. Taking into account the continued rise of real estate values since liberation. and their claims had been approved by the probate court for payment. in the sense that its property was insufficient to pay its debts. redeemed by the two creditors-claimants. 1 Articles of Copartnership). and that they were not within the powers of McGrath as a partner. the creditors had been unpaid for more than seven years. and other furnishings and fixtures necessary for." At the same time. Surviving partner of Cowen & McGrath.00 in cash to the widow. the plaintiff had prepared.04. its business. In the McGrath case. have hereunto set their hands. in addition. The claims were. the petitionfor the dissolution of the partnership and appointment of a receiver which he subsequently filed. the plaintiff caused to be prepared. of which P37. "to engage . the creditors of the partnership.made in the regular course of business. (Cas cit. had already warned him four years before (1945) that the creditors wanted their money back. Cowen. not only were its debts assumed by the buyers. six years after the sale in question. it may be. But the facts of that case are vastly different from the one before us.. and the relationship between the buyers.00 was in cash. they were placed in the hands of the mortgagees.91 to Yutivo. To show that the price was inadquate. even if the creditor's representative. In the McGrath case. who is 1955.04 was really low. in our case.000. and Owen McGrath. p. the Court expressly found that: The firm was then.. asserted that the land was worth P312. 343. the four chattel mortgages in question.. Considerable stress is laid by appellant in the ruling of the Supreme Court of Ohio in McGrath. If at the time of the sale (1949) the price of P153.000. The avowed purposes of the plaintiff... No direct evidence of it exists. P37.E. as hereinafter stated. which was the first intimation to them that there was any intention to make them. and possession delivered by them to the receiver appointed upon the filing of the petition. At the timenone of the claims secured by the mortgages were due. Owen McGrath. was to terminate the partnership.726. Cowen & Mcgrath. as they were justly entitled to? It is argued that the land could have been mortgaged to raise the sum needed to discharge the debts. Was it reasonable to expect that other persons would loan money to the . in our case. appellant relies on the testimony of the realtor Mata. the McGrath ruling is not applicable. which they did as soon as the mortgages were filed through the attorney who then represented them. how is it that appellant was not able to raise the amount. 338. as indicia thereof.. and P54. in fact. to the profit of the partnership. Since the sale by the widow was in conformity with the express objective of the partnership. 1893. and had been mortgaged since 1940. On that day. shelving. In the McGrath case. and its approval is now final. in the course pursued by him. in buying and selling real estate" (Art.000. First.310.. 49 N. or were pressing for the payment of their debts. A. et al. IV. ready for execution. except.. the allegedly low price paid for the property. place its properly beyond the control of the firm. and the stores were at once closed.. but appellant point out. and the widow of Tan Sin An.726. as to the price: As already noted. et al. by Owen McGrath. On the day the mortgages were signed. in the present case. then they are incapable of exercising the essential rights and powers of general partners and their association is not really a partnership at all. surviving partner. though it still had good credit. it can not be maintained that the sale was made in excess of her power as general partner. vs. These debts (62. and was actively engaged in the prosecution of its business. none of the creditors were pressing for payment. they were approved by the court.D. But there is no similarity between those acts and the sale by the widow of Tan Sin An. . which was Saturday. and Owen McCrath. this 20th day of May. for the balance on the original purchase price of the land sold (sue first to La Urbana. andnone of the creditors to whom the mortgages were made had requested security. It is natural that form these facts the Supreme Court of Ohio should draw the conclusion that the conveyances were made with intent to terminate the partnership. individually. ready for filing. and signed the same in this form: "In witness whereof. But the lands were already mortgaged. Yu Khe Thai. all of which was known to them at the time. and then to the Banco Hipotecario. as well as the plaintiff. and the rest in partnership debts assumed by the purchaser. No. first to La Urbana. of said firm. and insure the preference of the mortgagees.

Gaz. until 1949. Article 1860.00 of which Goquiolay contributed P18. If he was such a victim. The business of the partnership was to engage in buying real estate properties for subdivision. 21 Phil. these buyers did not have a record of inveterate defaults like the partnership "Tan Sin An & Goquiolay". dissenting: This is an appeal from a decision of the Court of First Instance of Davao dismissing the complaint filed by Antonio C. 1960 we affirmed this decision although on grounds different from those on which the latter is predicted. Were it true that the conspiracy to defraud him arose (as he claims) because of his refusal to sell the lands when in 1945 Yu Khe Thai asked him to do so. Regala. suffice it to say that the Supreme Court has ruled that relationship alone is not a badge of fraud (Oria Hnos. Is he entitled now to cry fraud after the debts were discharged with no help from him. he could have easily defeated the conspirators by raising money and paying off the firm's debts between 1945 and 1949... were without independent means to purchase the property. it can not be instituted except when the party suffering damage has no other legal means to obtain reparation for the same".000.. Code of 1889.J. and Rule 87.e. that Goquiolay can not obtain reparation from the widow and heirs of Tan Sin An.. or evidence. Barrera and Dizon. Padilla. and the interest on the principal since 1940? If it had been possible to find lenders willing to take a chance on such a bad financial record. and among the conditions agreed upon in the partnership agreement which are material to this case are: (1) that Tan Sin An would be the . all of which increased the risk that the supposed fraud should be detected. But no proof is adduced. resale and lease. it can only be a fraud of creditorsthat gives rise to a rescission of the offending contract. would not Goquiolay have taken advantage of it? But the fact is clear on the record that since liberation until 1949 Goquiolay never lifted a finger to discharge the debts of the partnership. at the very least. Sycip and Betty Y. Art. Appellant seeks to create the impression that he was the victim of a conspiracy between the Yutivo firm and their component members. C.00 representing 40%. Goquiolay executed in Davao City a commercial partnership for a period of ten years with a capital of P30. There is no evidence that the original buyers. section 6 is the effect that: Where the obligation of the decedent is joint and several with another debtor. is neither illegal nor immoral. Article 1383. Washington Sycip and Betty Lee. without prejudice to the right of the estate to recover contribution from the other debtor. On May 29. not being deceit or dolus in contrahendo). PREMISES CONSIDERED. the claim shall be filed against the decedent as if he were the only debtor. Tan Sin An and the partnership "Tan Sin An & Goquiolay" were solidary (Joint and several)debtors (Exhibits "N". to have the sale effected by the widow of Tan Sin An. Separate Opinions BAUTISTA ANGELO. the motion for reconsideration is denied. 2089).000. but he did not. 40 Off. Lee on the ground that it was executed without proper authority and under fraudulent circumstances. Since there is no allegation. Tan Sin An and Antonio C. The case is once more before us on a motion for reconsideration filed by appellants raising both questions of fact and of law. Neither was there any anomaly in the filing of the claims of Yutivo and Sing Yee Cuan & Co. 1940. Concepcion. took no part. concur. it is certainly strange that the conspirators should wait 4 years. Bengzon.. J. With regard to the relationship between the parties. vs.000. seeking to annul the sale made Z.00 representing 60% while Tan Sin An P12. The partnership was duly registered. mortgage to the Banco Hipotecario). 1685). This for two reasons: First. But by express provision of law (Article 1294. the solidary obligation was guaranteed by a mortgage on the properties of the partnership and those of Tan Sim An personally. (as subrogees of the Banco Hipotecario) in proceedings for the settlement of the estate of Tan Sin An.. even if the fraud charged actually did exist. Nombre de Jesus vs. (Emphasis supplied). Secondly. In a decision rendered on July 26. if there is fraud at al. the present suit to rescind the sale in question is not maintainable. McMicking. A final and conclusive consideration: The fraud charged not being one used to obtain a party's consent to a contract (i.. New Civil Code) "the action for rescission is subsidiary. and a mortgage is indivisible. New Civil Code. also Hermandad del Smo.partnership when it was unable even to pay the taxes on the property. in the sense that each and every parcel under mortgage answers for the totality of the debt (Civ.. J. Sanchez. JJ. and that the sale should have been routed through the probate court taking cognizance of Tan Sin An's estate. Goquiolay. et al. and not to appellant. 243. Civil Code of 1889. That the Yutivos should be willing to extend credit to them. he did not even care to look for a purchaser of the partnership assets.

1947. It should be noted that these transactions took place without the knowledge of Goquiolay and it is admitted that Betty Lee and Washington Z. The court granted the petition. Lee and Washington Z. Inc. on the other hand. Yu Khe Thai. The admission was predicted on the ground that she and the creditors were closely related by blood.000. Inc. filed in November. in her capacity as administratrix. On March 29. Inc. 1949 in the intestate proceedings a petition to set aside the order of the court approving the sale. Inc. admitted later without qualification the two claims in an amended answer she filed on February 28. Goquiolay executed a general power of attorney in favor of Tan Sin An appointing the latter manager of the partnership and conferring upon him the usual powers of management. payable in ten years.. 1946 a claim each in the intestate proceedings of Tan Sin An for the sum of P84. all of whom are minors of tender age. 1940. Inc. Lee and Washington Z. Kong Chai Pin. In due course. affinity and business ties. financing the balance of the purchase price with a mortgage in favor of "La Urbana Sociedad Mutua de Construccion Prestamos" in the amount of P25. Sycip in consideration of the payment to Kong Chai Pin of the sum of P37. these two mortgage obligations were consolidated and transferred to the Banco Hipotecario de Filipinas and as a result Tan Sin An. and the partnership bound themselves to pay jointly and severally the total amount of P52.282. the widow. 1944. 1942 and was survived by his widow. Following approval by the court of the petition for authority to sell.. Yee and Cuan Co. and (2) in the event of the death of any of the partners the partnership would continue..116. as administratrix. and Sing. Kong Chai Pin. with 8% annual interest thereon within a period of eight years mortgaging in favor of said entity the 3 parcels of land belonging to the partnership and the 46 parcels of land belonging individually to Tan Sin An. Upon learning of the sale of the partnership properties. in his individual capacity. Dominador Zuño. with money given by the latter.48 and P66. In the meantime.00. Sing. Goquiolay filed the present case on January 15. Goquiolay refused both to sell his interest in the partnership as well as to execute the power of attorney. Yee and Cuan Co. 441 and 521 of the cadastral survey of Davao. Atty. the only assets of the partnership.91. After first denying any knowledge of the claims. 1949. 526.705. On May 29. On May 31. and presuming to act as managing partner of the partnership.75 in Japanese currency. Inc. While the order was pending appeal in the Supreme Court. 1940. Kong Chai Pin. Defendants. Goquiolay filed on July 25. On September 25. the deceased to be represented by his heirs.00. 1940.00. the Insular Development Company. defended the validity of the sale on the theory that she succeeded to all the rights and prerogatives of Tan Sin an as managing partner.. called for Goquiolay and the two had a conference in the office of the former during which he offered to buy the interest of Goquiolay in the partnership. Yee and Cuan Co. after the liberation of Manila. Tan Sin An died on June 26. was appointed administratrix of the intestate estate of Tan Sin An.. the partnership acquired three parcels of land known as Lots Nos.000.. and Sing. Yutivo Sons Hardware Co. in his individual capacity. Kong Chai Pin. The trial court sustained the validity of the sale on the ground that under the provisions of the articles of partnership allowing the heirs of the deceased partner to represent him in the partnership after his death Kong Chai Pin became a managing partner. and four children. executed on April 4. respectively. and the assumption by the buyers of the claims filed by Yutivo & Sons Hardware Co.exclusive managing partner. sent her counsel. Zycip subsequently executed a deed of sale of the same properties in favor of their co-defendant Insular Development Company. acquired 46 parcels of land executing a mortgage thereon in favor of the same company for the sum of P35. more than two years after the approval of the claims. this being the capacity held by Tan Sin an when he died. On March 18.529. The plaintiffs in their complaint challenged the authority of Kong Chai Pin to sell the partnership properties on the ground that she had no authority to sell because even granting that she became a partner upon the death of Tan Sin An the power of attorney granted in favor of the latter expired after his death. Tan Sin An. Yee and Cuan Co. Betty Y. In 1948. the Supreme Court remanded the original case to the probate court for rehearing due to lack of necessary parties. defendant Kong Chai Pin. alleging that they represent obligations of both Tan Sin An and the partnership. And on the same date. Sometimes in 1945. 1949 a deed of sale of the properties owned by Tan Sin An and by the partnership in favor of Betty Y. to ask Goquiolay to execute in her favor a power of attorney. Having failed to get Goquiolay to sell his share in the partnership.000. Kong Chai Pin filed a petition in the probate court to sell all the properties of the partnership as well as some of the conjugal properties left by Tan Sin An for the purpose of paying the claims. Sycip bought the properties on behalf of the ultimate buyer. in whose favor the buyers executed a mortgage on the properties purchased. On the same date.80. these two claims were approved by the court. president and general manager of Yutivo Sons Hardware Co. . 1953 seeking to nullify the sale as stated in the early part of this decision. paid to the Banco Hipotecario the remaining unpaid balance of the mortgage obligation of the partnership amounting to P46. and Sing. with the capital orginally invested.

Considering that some of the above findings of fact and conclusions of law are without legal or factual basis. and insisted no less than six times during his testimony that he was not in Manila in 1945. and (5) the sale being necessary to pay the obligations of the partnership properties without the consent of Goquiolay under the principle of estoppel the buyers having the right to rely on her acts of management and to believe her to be in fact the managing partner. The alleged acts of management were denied and repudiated by the very witnesses presented by the defendants themselves. (3) even if Kong Chai Pin acted as general manager she had no authority to sell the partnership properties as to make it legal and valid. it is enough that we lay stress on the following points: (1) there is no sufficient factual basis to conclude that Kong Chai Pin executed acts of management to give her the character of general manager of the partnership. They did not rely on the alleged acts of management — they believed (this was the opinion of their lawyers) that Kong Chai Pin succeeded her husband as a managing partner and it was on this theory alone that they submitted the case in the lower court. 1. In support of said motion. it becomes necessary that we analyze the evidence of record. If the conclusion of the Court is that heirs as a general rule enter the partnership as limited partners only. because under Article 148 of the Code of Commerce a limited partner cannot intervene in the management of the partnership. appellants have in due course filed a motion for reconsideration which because of the importance of the issues therein raised has been the subject of mature deliberation. This point is pivotal for if Kong Chai Pin did not execute the acts of management imputed to her our ruling cannot be sustained. and the family of Kong Chai Pin did not receive my income . however. 1960. 2. the same person referred to by Goquiolay. Appellants. or to serve as basis for estoppel that may benefit the purchasers of the partnership properties. it is intimated. who must necessarily have entered the partnership as a limited partner originally. and with reason. have emphasized the fact. (92) the alleged acts of management. members of the law firm which handles the Yutivo interests and handled the papers of sale. even if given a power of attorney by the general partners. the rest. who was a close friend of the family of Kong Chai Pin. The arguments advanced by appellants are in our opinion well-taken and furnish sufficient to reconsider our decision if we want to do justice to Antonio C.In the decision rendered by this Court on July 26. the heirs of a deceased general partner come into the partnership in the capacity only of limited partners. however. we affirmed this decision but on different grounds. became a general partner because she exercised certain alleged acts of management. among which the salient points are: (1) the power of attorney given by Goquiloay to Tan Sin An as manager of the partnership expired after his death." He went on to say by way of remark that she could continue doing this because he wanted to help her. also testified that he had seen the partnership properties and corroborated the testimony of Hernando Young in all respects: "the properties in Mamay were underdeveloped. could have not chosen to be a general partner by exercising the alleged acts of management. Goquiolay. The buyers were not strangers to Kong Chai Pin. (2) his widow Kong Chai Pin did not inherit the management of the partnership. Plaintiff Goquiolay. and (4) Kong Chai Pin had no necessity to sell the properties to pay the obligation of the partnership and if she did so it was merely to favor the purchasers who were close relatives to the prejudice of Goquiolay. He testified further that he had visited the partnership properties during the period covered by the alleged information given by him to Goquiolay and that he found them "abandoned and underdeveloped. stating that he arrived in Manila for the first time in 1947. Young testified that in 1945 he was still in Davao. the year when he allegedly gave the information to Goquiolay. therefore Kong Chai Pin. And to justify this conclusion." and that Kong Chai Pin was not deriving any income from them. (3) as a general rule. testified on cross-examination that he had a conversation with one Hernando Young in Manila in the year 1945 who informed him that Kong Chai Pin "was attending to the properties and deriving some income therefrom and she had no other means of livelihood except those properties and some rentals derived from the properties. could not give Kong Chai Pin the character of general manager for the same contrary to law and well-known authorities. defendants presented Hernando Young. To have a clear view of this factual situation. for the purpose of denying the testimony of Goquiolay. The other witness for the defendants. the shacks were destroyed in Tigato. even if proven. In making our aforesaid ruling we apparently gave particular importance to the fact that it was Goquiolay himself who tried to prove the acts of management. (4) Kong Chai Pin. the appellees themselves are the ones who denied and refuted the so-called acts of management imputed to Kong Chai Pin. 3." On the other hand. it being a personal right. Rufino Lim. all of them being members of the Yu (Yutivo) family. An Act prohibited by law cannot given rise to any right and is void under the express provisions of the Civil Code. One point that he emphasized was that he was "no interested in agricultural lands. appellants advanced the following arguments: 1.

because the alleged acts of management have not been clearly proven. it should also be stated. And here Kong Chai Pin did not make such declaration.. otherwise he should be deemed as having succeeded as limited partner by the mere acceptance of the inheritance. 1955). according to the information given him by Hernando Young. in his deposition given on June 30. and stated that the "family never actually lived in the properties of the partnership even before the war or after the war.. A careful analysis of the substance of Goquiolay's testimony will show that he merely had no objection to allowing Kong Chai Pin to continue attending to the properties in order to give her some means of livelihood. 1956 that Kong Chai Pin and her family were living in the partnership properties. Yu Eng Lai told me that he brought with him Atty. Kong Chai Pin had already got that plantation for agricultural purposes. only refer to management of the properties and not to management of the partnership. Thus. Kong Chai Pin had no other means of livelihood. The most that we can say is that the alleged acts are doubtful more so when they are disputed by the defendants themselves who later became the purchasers of the properties. Being then a limited partner upon the death of Tan Sin An by operation of law. which he assumed to be true. or the buyers. is clearly of the opinion that mere acceptance of the inheritance does not maked the heir of a general partner a general partner himself. I said for agricultural purposes she can use that plantation . Hearing on May 5. Hernando Young — he stressed this point twice. Zuño. if at all. The alleged acts of management. first. But certainly he made it very clear that he did not allow her to manage the partnership when he explained his reason for refusing to sign a general power of attorney for Kong Chai Pin which her counsel." rely on the acts of management. upon entering the partnership.S. could such acts give as we have concluded in our decision? . could Kong Chai Pin be deemed to have declared her intention to become a general partner by exercising acts of management? We believe not. Atty. the peremptory prohibition contained in Article 1482 of the Code of Commerce became binding upon her and as a result she could not change her status by violating its provisions not only under the general principle that prohibited acts cannot produce any legal effect. for. Kong Chai Pin when Mrs. Atty. could she sell the partnership properties without authority from the other partners? Our answer is also in the negative in the light of the provisions of the articles of partnership and the pertinent provisions of the Code of Commerce and the Civil Code. 9. It must be noted that in his testimony Goquiolay was categorically stating his opposition to the management of the partnership by Kong Chai Pin and carefully made the distinction that his conformity was for her to attend to the partnership properties in order to give her merely a means of livelihood. second. we may conclude that the sale of the partnership properties by Kong Chai Pin cannot be upheld on the ground of estoppel.from the partnership properties. which are two different things." He specifically rebutted the testimony of Goquiolay. Now. a well-known commentator. It should be stated that the period covered by the testimony refers to the period of occupation when living condition was difficult and precarious.1 But here Tan Sin An died intestate. Kong Chai Pin. because the defendants are themselves estopped to invoke a defense which they tried to dispute and repudiate. Then I told Atty. He said: 2. He emphasized that heir must declare that he is entering the partnership as a general partner unless the deceased partner has made it an express condition in his will that the heir accepts the condition of entering the partnership as a prerequisite of inheritance. Article 129 of the Code of Commerce says: — .. it is obvious that the heirs. must make a declaration of his characters. (T. In resume. because the record clearly shows that the defendants. but also because under the provisions of Article 1473 of the same Code she was precluded from acquiring more rights than those pertaining to her as a limited partner. It is unquestionable that Goquiolay was merely repeating an information given to him by a third person. p. brought with him to his house in 1948. Assuming arguendo that the acts of management imputed to Kong Chai Pin are true. Then Mr. because. Zuño what is the use of executing a general power of attorney for Mrs. did not give Kong Chai Pin the character of general manager to authorized her to bind the partnership. and yet these alleged acts. but instead they acted solely on the opinion of their counsel. therefore. Garrigues. and third.N. Zuño and he asked me if I could execute a general power of attorney for Mrs. It can therefore be seen that the question as to whether Kong Chai Pin exercised certain acts of management of the partnership properties is highly controverted. were not misled nor did they Our answer is in the negative because it is contrary to law and precedents. Zuño. did not deny the statement of Goquiolay. to the effect that she succeeded her husband in the partnership as managing partner by operation of law.. And Atty. in which case acceptance of the inheritance is enough. Quisumbing. Assuming also arguendo that the alleged acts of management imputed to Kong Chai Pin gave her the character of a general partner. in consonance with our ruling that as a general rule the heirs of a deceased partner succeed as limited partners only by operation of law.

Of course. Emphasis supplied). The affairs of the co-partnership shall be managed exclusively by the managing partner or by his authorized agent. under Article 2 of the same Code. the relationship between a managing partner and the partnership is substantially the same as that of the agent and his principal. And since.. Los poderes de los Administradores no tienen ante el silencio del contrato otros limites que los señalados por el objeto de la Sociedad y. fundir a la Sociedad en otro. renunciar definitivamente el ejercicio de uno de otro ramo comercio que se les haya confiado yenajenar o pignorar el taller o el banco social. upon such terms as regards compensation as he may deem proper. siendo actos de disposicion.If the management of the general partnership has not been limited by special agreement to any of the members.. pp. the object and effect of which is to immediately terminate the . there is authority to the effect that a managing partner. y por tanto. o a los productos de la fabrica para explotacion de los cauale se ha constituido la Sociedad. the law says that an agency created in general terms includes only acts of administrations. 1a. 223-224. And. place and stead to do anything for it or on his behalf which he as such managing partner might do or cause to be done. and it is expressly stipulated that the managing partner may delegate the entire management of the affairs of the co-partnership by irrevocable power of attorney to any person. If all that can be said of it was that it was convenient.5 Here Kong Chai Pin did not have such power when she sold the properties of the partnership. En todos estas casos. Ocurrira una cosa parecida cuando el objeto de la Sociedad fuese la compra y venta de inmuebles. must be necessary for the carrying one of its business. Record on Appeal). as the agent of the co-partnership and in his name. Partn. ed. an express power of attorney is required. que forman parte de la explotacion social. Emphasis supplied). etc. Sec. pp. and the members present shall come to an agreement for all contracts or obligations which may concern the association. vehiculos de transporte. it. the sale was affected to pay an obligation of the partnership by selling its real properties which Kong Chai Pin could not do without express authority. even without express power of attorney may perform acts affecting ownership if the same are necessary to promote or accomplish a declared object of the partnership. by way of mortgage or otherwise. estable de sus capitales. equalmente que sisse tratase de la venta de una marca o procedimiento mecanico o quimico. will necessity itself be sufficient if it be an extraordinary necessity. ni las maquinarias. make a valid sale or pledge. Lindl. Gay de Montella. in the usual and ordinary course of its business. of all or part of its effects intended for sale. Pero esta facultad de enajenar limitada a las ventas conforme a los fines sociales. The authorities supporting this view are overwhelming. sell mortgage. and other acts of strict ownership. without the consent of the other members of the firm. 124-125. therefore. on this point.4the extent of the power of Kong Chai Pin must. Pero no podran ejecutar los actos que esten en contradiccion con la explotacion que les fue confiada. or that it facilitated the transaction of the business of the firm. 126. in the absence of evidence of sanction by other partners. but with regard to the power to compromise. but here the transaction is not for this purpose. el uso de la firma social a otro. tomar en arriendo almacenes y tiendas. within this rule. avalarlas. incluso cambiando repetidas veces los propios acuerdos segun el interest convenido de la Sociedad. The act of one partner. II. Tratado de Derecho Mercantil. that is not sufficient. a situation which. el domicilio. etc. What is necessary for carrying on the business of the firm under ordinary circumstances and in the usual way. (R. While. (Page 23. renders applicable herein the provisions of the Civil Code. ceder la accion. viene limitada a los objetos de comercio. girarlas. It was effected not to promote any avowed object of the partnership. It would thus be seen that the powers of the managing partner are not defined either under the provisions of the Code of Commerce or in the articles of partnership. Por el contrario el generente no tiene attribuciones para vender las instalaciones del comercio. to a bona fidepurchaser of mortgagee. no podran cambiar el objeto. be determined under the general principles governing agency. including those employed as the means of carrying on its business. Pueden contratar y despedir a los empleados. La enajenacion puede entrar en las facultades del gerente. (Cesar Vivante. and vest in such person. one member of a partnership may. en cuyo caso el gerente estaria facultado para otorgar las ventas que fuere necesario.6 Rather. it is not within the scope of his implied authority to make a final disposition of al of its effects. la razon social. Nor. And the pertinent portions of the articles of partnership provides: VII. dar en prenda o en hipoteca los bienes de la sociedad y adquirir inmuebles destinados a su explotacion o al empleo. according to wellknown authorities. to bind the firm. all shall have the power to take part in the direction and management of the common business. seria necesario contar con la conformidad expresa de todos los socios. ni la fabrica. firm or corporation full power and authority. expedir cambiales. id. cuando es conforme a los fines sociales. excepto que la venta o pignoracion tengan por el objeto procurar los medios necesarios para la continuacion de la empresa social. pueden llevar a cabo todas las operaciones que sirven para aquel ejercicio.. is the test. por consiguiente. Vol. firm or corporation he may select. seems.

.. founder of the defendant Yutivo Sons Hardware Co. 343. also of the Yutivo family. Lillian Yu. of which the sum of P46. and this is evident from the following sequence of events. or 2. (b) Considering the area of the properties Kong Chai Pin had no valid reason to sell them if her purpose was only to pay the partnership obligation. YEE & CUAN CO. Dalton Chen. which subsequently bought the properties of the partnership and assumed the obligation of the latter in favor of the creditors of the partnership. the other original buyer is also a daughter of Yu Khe Thai.00 which was paid for the properties of the deceased and the partnership. Emphasis supplied). the lawyers who studied the papers of the sale and have been counsel for the Yutivo interests. According to realtor Mata.. YUTIVO SONS HARDWARE CO. YU KHE THAI is a grandson of the same Jose P. The creditors studied ways and means of liquidating the obligation of the partnership. 338. a brother-in-law of Yu Khe Thai and an executive of Sing. is married to Ana Yu. even since Tan Sin An died in 1942 the creditors. only the paltry sum of P66. Republic SUPREME Manila of FIRST DIVISION G.000. Yutivo Sons Hardware and Sing.91 was paid as a consideration therefor. one of the original buyers.000 square meters. are owned by the heirs of Jose P. Lee. 4.. who testified in court. was a grandaughter of Jose P. leading to the formation of the defendant Insular Development Co.000. Yutivo. (c) Lastly. JJ.R. The INSULAR DEVELOPMENT CO.partnership. 1985 the Philippines COURT . (McGrath. UPON THE STRENGTH OF THE FOREGOING CONSIDERATIONS. and SING. Yee & Cuan Co. instead of being within the scope of the partnership business. and contrary to the presumed intention of the partnership in its formation. Such a disposition. Labrador. as may be seen from the following relationship of their pedigree: KONG CHAI PIN.net Tan Sin An died in 1942 and intestate proceedings were opened in 1944. No. aside from the sum of P37. He is the acknowledged head of the Yu families. the creditors of the partnership filed their claim against the partnership in the intestate proceedings. alleged creditors. since the date of sale no improvement was ever made thereon precisely because of this litigation.529. an executive of Yutivo Sons Hardware. is necessarily subversive of the object of the partnership. have already conceived the idea of possessing the lands for purposes of subdivision.75 was even paid in Japanese currency. or in the usual and ordinary way of carrying it on. INC. and president of the two alleged creditors.. the administratrix. for said properties. L-39780 November 11.E.lawphil. these properties could command at the time he testified a value of not less than P312. Since Kong Chai Pin sold the partnership properties not in line with the business of the partnership but to pay its obligation without first obtaining the consent of the other partners the sale is invalid in excess of her authority. and place its property beyond its control. was organized for the specific purpose of buying the partnership properties.116. I vote to grant the motion for reconsideration. Yee & Cuan. Yutivo. Its incorporators were: Ana Yu and Betty Y. Paredes. The buyers took time to study the commercial potentialities of the partnership properties and their lawyers carefully studied the document and other papers involved in the transaction. daughter of Yu Eng Poh. Cowen. Yutivo (Sing. a trusted employee of the Yutivos. and Makalintal. but preferred to sell them even at such low price because of her close relationship with the purchasers and creditors who conveniently organized a partnership to exploit them. All these steps led finally to the sale of the three partnership properties. LEE. Yee & Cuan are the three children of Jose). et al.. and Simeon Daguiwag. et al.00. a daughter of Yu Khe Thai. WASHINGTON Z. the ultimate buyer. manager of the firm which took over the administration.000. 49 N. and according to Dalton Chen. BETTY Y. Quisumbing and Salazar. These properties were purchased by the partnership for purposes of subdivision. excluding Goquilolay from their plan. Finally. In 1946. concur. the sale under consideration was effected in a suspicious manner as may be gleaned from the following circumstances: (a) The properties subject of the instant sale which consist of three parcels of land situated in the City of Davao have an area of 200 hectares more or less. SYCIP. vs. who were close relatives of Kong Chai Pin. Attys. And yet.. composed of members of the Yutivo family and the counsel of record of the defendants. She could have negotiated a loan if she wanted to pay it by placing the properties as security.

COURT OF APPEALS.00 not to the plaintiff but to a stranger to the contract.229. 1967 deadline.00.00 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. Paterno P.00 received by Galan. Tropical Commercial. 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.000.000. The petitioner wants to be excluded from the liabilities of the partnership.00 every fifteen (15) days during the construction to make a total sum of P25. that on January 26. (2) absolving the defendants Tropical Commercial Company and Ramon Pons from any liability. the dispositive portion of which states: IN VIEW WHEREOF. Natinga for Intervenor Blue Diamond Glass Palace. J. the payment of which should have been made from the P13..CELESTINO GALAN COMPANY and RAMON PONS. Astete for respondent C. Galan. Judgment is hereby rendered: (1) ordering plaintiff Muñasque and defendant Galan to pay jointly and severally the intervenors Cebu and Southern Hardware Company and Blue Diamond Glass Palace the amount of P6. and (2) Whether or not there existed a justifiable cause on the part of respondent Tropical to disburse money to respondent Galan. Galan. Tropical and/or Pons delivered a check for P7. MUÑASQUE. who succeeded in getting petitioner's indorsement on the same check persuading the latter that the same be deposited in a joint account. Pons.000.: In this petition for certiorari. 1967 when the second check for P6. After trial. the amount of P6. (Tropical) and Ramon Pons. under the terms of the contract. The respondents answered the complaint by denying some and admitting some of the material averments and setting up counterclaims. petitioner. Borromeo for petitioner.51. the court rendered judgment.213. Inc. 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 Muñasque.000. Viu Montecillo for respondent Tropical. agreed to give petitioner the amount of P7. .000. During the pre-trial conference.respondents. that on January 9. Juan D. petitioner refused to indorse said cheek presented to him by Galan but through later manipulations.34 and P2.ELMO vs. Galan would receive some kind of compensation in the form of some percentages or commission. Co. The business firms Cebu Southern Hardware Company and Blue Diamond Glass Palace were allowed to intervene. JR. TROPICAL COMMERCIAL John T. 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. respondent Pons succeeded in changing the payee's name from Elmo Muñasque to Galan and Associates. Celestino Galan and holding both of them liable to the two intervenors which extended credit to their partnership. No damages awarded whatsoever. Paul Gornes for respondent R.000.. that petitioner undertook the construction at his own expense completing it prior to the March 16. 1967. Petitioner Elmo Muñasque filed a complaint for payment of sum of money and damages against respondents Celestino Galan.000. that by virtue of his having introduced the petitioner to the employing company (Tropical).00 soon after the construction began and thereafter. respectively. GUTTIERREZ. both having legal interest in the matter in litigation. that Tropical. 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 because of the unauthorized disbursement by respondents Tropical and Pons of the sum of P13.00 was due.

00 was to be paid under the contract for the entire services of the Contractor. Since Galan informed the Cebu branch of Tropical that there was a"misunderstanding" between him and petitioner. Mr. This enabled Galan to encash the second check. 197 1. the petitioner filed a complaint for payment of sum of money and damages against the respondents. as alleged by the petitioner.37 out of the P7. 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 Muñasque and defendant Galan to pay jointly and severally the intervenors Cebu Southern Hardware Company and Blue Diamond Glass Palace the amount of P6. The check was withheld from the petitioner. (2) Assuming that there was such a partnership.00 because of the failure of Galan to pay what was partly due the laborers and partly due for the materials.000.000.00 for his personal use so that when the second check in the amount of P6.000. A total amount of P25. and attorney's fees. On appeal. 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. He stated that he borrowed some P12.00 came and Galan asked the petitioner to indorse it again. (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. (3) ordering plaintiff and defendant Galan to pay P500. the petitioner refused. the construction continued through his sole efforts.229. Meanwhile. Tan Siu filed motions for reconsideration.00.seeking to recover the following: the amounts covered by the first and second checks which fell into the hands of respondent Galan.Petitioner. Petitioner alleged that Galan spent P6.The petitioner and intervenor Cebu Southern Company and its proprietor.229." Not satisfied. Muñasque filed this petition. each in the amount of P6. Espina and although the expenses had reached the amount of P29. from any liability but they also held the petitioner together with respondent Galan. moral and exemplary damages. On January 15. the construction work was finished ahead of schedule with the total expenditure reaching P34.00 from his friend. No damages awarded whatsoever. whether or not the court erred in not finding Galan guilty of .183. respectively.213. the additional expenses that the petitioner incurred in the construction. Both the trial and appellate courts not only absolved respondents Tropical and its Cebu Manager. however. Mr.000. As stated earlier. The two remaining checks. The present controversy began when petitioner Muñasque in behalf of the partnership of "Galan and Muñasque" as Contractor entered into a written contract with respondent Tropical for remodelling the respondent's Cebu branch building.51.34 and P2. respondent Tropical changed the name of the payee in the second check from Muñasque 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.were subsequently given to the petitioner alone with the last check being given pursuant to a court order. 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.000.000. 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 (P6.34 until the amount is fully paid.000.000.00) every fifteen (15) working days.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. Pons. The first payment made by respondent Tropical was in the form of a check for P7.000.00. 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.00 in the name of the petitioner.

112 Pan. he indorsed the check in favor of Galan.000. alleged the same in his amended complaint which was. The payments made to the partnership were. Johnson. (Law. 513. that person who gave occasion for the damages to be caused must bear the consequences. (Mills vs. In the case of George Litton v. Inc. 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. Since the two were partners when the debts were incurred.. such does not convert the partnership into a sham organization. .malversing the P13. it was only for the purpose of impleading Ramon Pons in his personal capacity. Riggle. 7 U.In the case at bar. v. duly admitted by the court. Such an order controls the subsequent course of the action.).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 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. therefore. Teodoro.. (67 Phil. Hill and Ceron. (Le Roy vs. When the petitioner amended his complaint. he. Isabela Sawmill (88 SCRA 643).00 with a check made out in his name. nevertheless. 391.. are also both liable to third persons who extended credit to their partnership. these were the same allegations in his original complaint. Respondent Tropical therefore. we ruled: xxx xxx xxx . when Muñasque received the first payment of Tropical in the amount of P7. 514). they. persons must suffer.. had every right to presume that the petitioner and Galan were true partners. should be bound by the delimitation of the issues during the pre-trial because he himself agreed to the same. (26 SCRA 336). then he has only himself to blame for making the relationship appear otherwise. Where one of two innocent 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.000.) 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. The contentions are without merit. 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. the truth being that Galan was a sham and a perfidious partner who misappropriated the amount of P13. Inc." 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 Muñasque hereinafter called the Contractor. In the case of Singsong v.00 covered by the first and second checks and therefore. the appellees also acted in good faith in extending credit to the partnership. et al. not only to Tropical but to their other creditors as well. valid payments.00 due to the petitioner.. He adds that although this was not one of the issues agreed upon by the parties during the pretrial. " Petitioner contends that the appellate court erred in holding that he and respondent Galan were partners. modification of . The petitioner. Although the petitioner made allegations as to the alleged malversations of Galan. Likewise.we ruled: Although it may be presumed that Margarita G. In Permanent Concrete Products. If there was a falling out or misunderstanding between the partners. 617). hereinafter called the owner do hereby for and in consideration agree on the following: . and Tropical Commercial Co. unless modified before trial to prevent manifest injustice. 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. If they were not partners as petitioner claims. 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 Muñasque. 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.000. therefore. There is nothing in the records to indicate that the partner-ship organized by the two men was not a genuine one. accountable to the petitioner for the said amount.. ed.S. Saldajeno had acted in good faith.

because the law protects him. Plana. however. We note that the petitioner is not solely burdened by the obligations of their illstarred partnership. for the contracts which may be entered into the name and fm the account cd the partnership. 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 between the partners Muñasque and Galan. the partnership is liable therefor to the same extent as the partner so acting or omitting to act. the issue raised in this petition is the contention of Muñasque that the amounts payable to the intervenors should be shouldered exclusively by Galan. The records show that there is an existing judgment against respondent Galan. who in good faith relied upon the authority of a partner. J. WHEREFORE. 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.. as well as the legal entity which is the partnership. Teehankee (Chairman).. 1822. Galan was a true partner with real authority to transact on behalf of the partnership with which it was dealing. including industrial ones. The obligation is solidary. of the Civil Code. while the liability of the partners are merely joint in transactions entered into by the partnership. are solidarily liable. 1816.."All partners. Melencio-Herrera. holding him liable for the total amount of P7. to the above intervenors. 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. Where. Thus. 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 co-partners.the pre-trial order was never sought at the instance of any party. is on leave. Relova.. whether such authority is real or apparent. 00 he already paid to Universal Lumber.". Petitioner may recover from respondent Galan any amount that he pays. as it was satisfactorily established that Galan acted in bad faith in his dealings with Muñasque as a partner. loss or injury is caused to any person. shall be liable prorate with all their property and after all the partnership assets have been exhausted. 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. 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. 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. JJ. in his capacity as a partner. concur. At any rate. 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. .. SO ORDERED.justice also dictates that Muñasque be reimbursed by Galan for the payments made by the former representing the liability of their partnership to herein intervenors. 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. Articles 1822 and 1823 of the Civil Code provide: Art. not being a partner in the partnership or any penalty is incurred.00 in favor of Eden Hardware which extended credit to the partnership aside from the P2. De la Fuente and Patajo. J. We. under its signature and by a person authorized to act for the partner-ship.000. took no part. Art. whether innocent or guilty. While it is true that under Article 1816 of the Civil Code. as he vehemently denied the existence of the partnership. 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." In short. That is why under Article 1824 of the Civil Code all partners. . 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. 1823. 000.

From this judgment the plaintiff appealed. Francisco Muñoz & Sons. but did not assign any specific salary to an industrial partner during that time. It rather should be said that he excluded himself from such management. No. vs. it would result that. but would not have affected in any way the partnership nor have produced the effect of relieving him from liability as a partner. the defendants Francisco Muñoz. either in property. The Compania Maritima (3 Phil. In the case of Reyes vs. 1907 LA COMPAÑIA MARITIMA. If it should be held that the contract made in this case did not create an ordinary. an ordinary. or industry. Rosado. If the contention of the appellees were sound. money.. because no yearly or monthly salary was assigned to Emilio Muñoz. as stated in the fourth paragraph of the articles.30. 519) the articles of association provided that the . It can not be said. he would not be a member of the partnership. with interest and costs. Haussermann. Rep. WILLARD. L-3704 December 12. This right is recognized also in article 132. is a purely mercantile one and all the requirements of the Code of Commerce in reference to such partnership were complied with. In the articles of partnership signed by the partners it is expressly stated that they have agreed to form. The argument of the appellees seems to be that. On the 31st day of March. can not be sustained. He contributed as much as did the other industrial partner.500. The claim of the appellees that Emilio Muñoz contributed nothing to the partnership. therefore.Republic SUPREME Manila of the Philippines COURT EN BANC G. J. Francisco Muñoz was a capitalist partner and Emilio Muñoz and Rafael Naval were industrial partners. and Rafael Naval to recover the sum of P26. Rafael Naval.30 with interest at the rate of 8 per cent per annum from the 31st day of March. for appellant. general mercantile partnership we do not see how one could be created. Emilio Muñoz. for appellees. Such a change would have deprived him of the salary P2. and in favor of the plaintiff and against the defendant partnership. The object of the partnership. but that from the article it does not appear to be such a partnership. and do form. defendants-appellees. general commercial partnership. agree to contribute their work to the partnership and article 138 of the Code of Commerce prohibits them from engaging in other work except by the express consent of the partnership.828. admits of no doubt. general mercantile partnership. the difference between the two being that Rafael Naval was entitled by the articles of agreement to a fixed salary of P2. ET AL. 1905. section 1683 of the Civil Code relates to the same manner. It is also said in the brief of the appellees that Emilio Muñoz was entirely excluded from the management of the business. 1905. Sanz and Opisso. general mercantile partnership.500 as long as he was in charge of the branch office established at Ligao. and Francisco Muñoz de Bustillo form the sum of P26. and costs. Cohn and Williams. The fact that the receipt of this money was postponed for five years is not important. for he signed the articles of partnership by the terms of which the management was expressly conferred by him and the others upon the persons therein named. he contributed nothing to the partnership and received nothing from it. The articles of partnership were recorded in the mercantile registry in the Province of Albay. Judgment was rendered in the court below acquitting Emilio Muñoz de Bustillo and Rafael Naval of the complaint. and against Francisco Muñoz de Bustillo. Article 125 of the Code of Commerce requires them to state the partners to whom the management is intrusted. Emilio Muñoz de Bustillo. by signing the articles. FRANCISCO MUÑOZ. In the brief of the appellees it is also claimed that it is not an ordinary. If he had left that branch office soon after the partnership was organized. plaintiff-appellant. It is said in the decision of the court below that in the articles of partnership it was called an ordinary. We see nothing in the case to support either the statement of the court below in its decision or the claim of the appellees in their brief. Industrial partners.828. he would have been in the same condition then that Emilio Muñoz was from the beginning. That partners in their articles can do this. By the articles themselves he was to receive at the end of five years one-eighth of the profits. that he received nothing from the partnership. and Rafael Naval formed on ordinary general mercantile partnership under the name of Francisco Muñoz & Sons for the purpose of carrying on the mercantile business in the Province of Albay which had formerly been carried on by Francisco Muñoz. With reference to civil partnerships.: The plaintiff brought this action in the Court of First Instance of Manila against the partnership of Franciso Muñoz & Sons.R. where the articles of partnership provided for a distribution of profits at the end of each year..

Does this mean that the capitalist partners are the only ones who have that right. either because he is an industrial partner or because he was so relieved by the express terms of the articles of partnership. Losses shall be charged in the same proportion among the partners who have contributed capital. The fact that some may be industrial and some capitalist partners does not make the members of either of these classes alone such general partners. in the following manner: Three-fourths thereof for the capitalist partner Francisco Muñoz de Bustillo and one-eighth thereof for the industrial partner Emilio Muñoz de Bustillo y Carpiso. or whether he relieved from such liability. Articles 140 and 141 of the Code of Commerce are as follows: ART. without including those who have not. he is liable to third persons for the obligations contracted by the partnership. without either of the two industrial partners participating in such losses. 140. or does it include also industrial partners? Article 132 provides that. or is it limited to capitalist partners. he can not be deprived of such management. when in the articles of partnership the management has been intrusted to a particular person. Should there not have been stated in the articles of copartnership the portion of the profits to be received by each partner. ART. Under this article are the capitalist partners the only ones who have such right? Article 135 provides that the partners can not use the firm name in their private business. under the signature of the latter. and the question may be reduced to the very simple one namely. general mercantile partnership liable to third persons for the debts and obligations contracted by the partnership? In limited partnership the Code of Commerce recognizes a difference between general and special partners. therefore. receiving in the distribution the same amount as the partner who contributed the smallest capital. and do industrial partners have no right to participate in the selection of the comanager? Article 133 provides that all the partners shall have the right to examine the books of the partnership. This court not only held that such provision was valid but also held that those directors could not be removed from office during the eight years. said profits shall be divided pro rata. 141. but. if the management of the partnership has not been limited by special act to one of the partners. as such general partner. losses should result in the winding up of the partnership. If. even by a majority vote of all the stockholders of the company. partners who have not contributed any capital. a general partner. nor is there anything which says that the capitalist partners shall be the only general partners. Does this phrase "all the partners" include industrial partners. Would such a partnership continue if all the industrial partners should die? Article 229 provides that upon a dissolution of a general partnership it shall be liquidated by the former managers.all the members are general partners. as well as such as may be obtained from the sale of property and other assets which constitute the corporate capital. Does the phrase "remaining partners" include industrial partners. be they or be they not managing partners of the same. which shall determine to whom the settlement of the affairs shall be intrusted. All profits arising from mercantile transactions carried on. Does this limitation apply only to capitalist partners or does it extend also to industrial partners? Article 222 provides that a general partnership shall be dissolve by the death of one of the general partners unless it is otherwise provided in the articles. in accordance with the interest each one has on the copartnership. A comparison of these articles with the twelfth paragraph above quoted will show that the latter is simply a statement of the rule laid down in the former. In article 129 it is said that. therefore. but that in certain cases the remaining partners may appoint a comanager.directors for the first eight years should be certain persons named therein. but giving their services. and the important question in the case is whether. shall be distributed. all shall have the right to participate in the management. Do the words "all the partners" found in this article include industrial partners? The same expression is found in other articles of the code. Is an industrial partner in an ordinary. a general meeting shall be called. Article 127 of the Code of Commerce is as follows: All the members of the general copartnership. if all the partners do not agree to this. change the rights of the industrial partners as they are declared by the code. and the remaining one-eighth thereof for the partner Rafael Naval y Garcia. or are the capitalist partners the only ones who . on completion of the term of five years agreed to for the continuation of the partnership. the same shall be for the sole and exclusive account of the capitalist partner Francisco Muñoz de Bustillo. Emilio Muñoz was. There is nothing in the code which says that the industrial partners shall be the only general partners. unless by special agreement the latter have been constituted as participants therein. and by a person authorized to make use thereof. but in a general partnership there is no such distinction-. Paragraph 12 of the articles of partnership is as follows: Twelfth. The article do not. in lieu of profits. are liable personally and in solidum with all their property for the results of the transactions made in the name and for the account of the partnership.

It is not disputed by the appellees that by the terms of article 127 each one of the capitalist partners is liable for all of the debts. If industrial partners in commercial partnerships are not responsible to third persons for the debts of the firm. when the affairs of the partnership are liquidated — that is. it is not considered sufficient. regardless of the amount of his contribution.have a voice in the selection of a manager during a period of liquidation? Article 237 provides that the private property of the general partners shall not be taken in payment of the obligations of the partnership until its property has been exhausted. section 2. uses the phrase las obligaciones y perdidas. Article 141 says nothing about third persons and nothing about the obligations of the partnership. It can not have been intended that. If this article says that industrial partners are not liable for the debts of the concern. and if it results that there is not enough property in the partnership to pay him. but the construction which they put upon article 141 makes such capitalist partners liable for only a proportionate part of the debts. Does the phrase "the general partners" include industrial partners? In all of these articles the industrial partners must be included. yet in other articles of the code. They have a voice in the management of the business. But it is said that article 141 expressly declares to the contrary. This article simply declares how the losses shall be divided among the partners. then the capitalist partners must pay him. when given this construction. P500. or that they have no voice in the liquidation of the business after dissolution. Articles 1689 and 1691 contain. If it does. but the word "obligations" is added. perhaps. shall pay such losses — that is. It is to be noticed that these articles are found in section 1 of Chapter II [Title VIII] of Book IV. namely. it also says that the capitalist partners shall be only liable for such debts in proportion to the amount of the money which they have contributed to the partnership. pay them to the industrial partners if they have been compelled to disburse their own money in payment of the debts of the partnership. if no manager has been named in the articles. in substance. relating to anonymous partnership. say. that if there are only two capitalist partners." The claim of the appellees is that this article 141 fixes the liability of the industrial partners to third persons for the obligations of the company. that is to say. they share in the profits and as to third persons it is no more than right that they should share in the obligations. It is apparent that. To give a person who contributed no more than. when its affairs are settled he is entitled to credit for the amount so paid.000. that they might use the firm name in their private business. would be discriminate unfairly against industrial partners. that each one of the industrial partners is liable to third persons for the debts of the firm. The use of the words se imputaran is significant. It is to be noticed in the first place that this article does not say that they shall not be liable for losses. Francisco Muñoz. There it is stated that if. That section treats of the obligations of the partners between themselves. infinitely more than P500. There is no injustice in imposing this liability upon the industrial partners. article 141 is directly in conflict with article 127. that if he has paid such debts out of his private property during the life of the partnership. at the end of five years — it turns out that there had been losses instead of gains. the provisions of articles 140 and 141 of the Code of Commerce. in such a partnership as the one in question. The liability of the partners as to third persons is treated in a distinct section. the industrial partners should have no voice in the management of the business when the articles of partnership were silent on that subject. worth. While this is a commercial partnership and must be governed therefore by the rules of the Code of Commerce. that when the manager appointed mismanages the business the industrial partners should have no right to appoint a comanager. above quoted. that they should have no right to examine the books. these rights and to take them away from a person who contributed his services. then article 127 must include them and they are liable by the terms thereof for the debts of the firm. It is admitted that if in this case there had been a capitalist partner who had contributed only P100 he would be liable for this entire debt of P26. comprising articles from 1697 to 1699. If the phrase "all the partners" as found in the articles other than article 127 includes industrial partners. In this particular case that view is strengthened by the provisions of article 12. then the capitalist partner. The verb means abonar una partida a alguno en su cuenta o deducirla de su debito. where it is clearly intended to impose the liability to third persons. While in this section the word "losses" stand's alone. Thus article 148. Our construction of the article is that it relates exclusively to the settlement of the partnership affairs among the partners themselves and has nothing to do with the liability of the partners to third persons. where there were two industrial and only one capitalist partner. the latter is liable to a creditor of the company for only one-third of the debt and the former for only two-thirds. Article 140 declares how the profits shall be divided amongthe partners. In article 237 the word "obligations" is used and not the word "losses. then it also fixes the liability of the capitalist partners to the same persons for the same obligations. in speaking of the liability of limited partners. There is the same use of the two same words in article 153. yet an examination of the provisions of the Civil Code in reference to partnerships may throw some light upon the question here to be resolved. one of whom has contributed two-thirds of the capital and the other one-third. then industrial partners in civil partnerships .

therefore. It may be said in passing that his views can not apply to this case because the articles of partnership directly state that it is an ordinary partnership and do not state that it is an irregular one. The irregular partnership are those which include one or more industrial partners. (p. . or goods. and whose position must also be determined in the articles of copartnership. or the exercise of a profession or art. the usufruct only passing to the partnership. therefor. there would be no personal responsibility whatever for the debts of the partnership. their use of profits. 11.) And again: lawphil. should not include their names in that of the firm. and we have been able to find none which refers in any way to this question. 127. and that their private property is not. (p. whose profits are to be equally divided among themselves. The author. . It might very easily happen. according to the claim of the appellees. . p. liable for its debts. not being jointly liable for the obligations of the copartnership. (p. It might very well happen in partnership of this kind that no one of the partners would have any private property and that if they did the usufruct thereof would be inconsiderable. 129. therefore. credits. upon the bankruptcy of the latter.) As a logical result of his theory he says that an industrial partner has no right to participate in the administration of the partnership and that his name can not appear in the firm name. Personal or real property which each of the partners may possess at the time of the celebration of the agreement shall continue to be their private property. it was alleged in the complaint. No judgment of the supreme court of Spain has been called to our attention. Waiving the question as to whether there can be a commercial partnership composed entirely of industrial partners. Article 1675 of the Civil Code is as follows: General partnership of profits include all that the partners may acquire by their by their industry or work during the continuation of the partnership. In a work published by Lorenzo Benito in 1889 (Lecciones de derecho mercantil) it is said that industrial partners are not liable for debts. it seems clear that there can be such civil partnership. 1 just decided by this court. that construction of the law should be avoided which would enable two persons.are not. no authority from the tribunal for saying that an industrial partner is not liable to third persons for the debts of the partnership. but it has not been very fortunate in sketching the characters of a regular collective partnership (since it says nothing conclusive in reference to the irregular partnership) . who says (Commentaries on the Spanish Civil Code. In the case of Agustin vs. But little light is thrown upon this question by the authorities. which partners generally participate in the profits but not in the losses. There is. In this .) And again: This article would not need to be commented upon were it not because the writer entirely overlooked the fact that there might exist industrial partners who did not contribute with capital in money. which in the case of a partnership organized for the practice of any art or profession would be practically nothing. and admitted by the answer — That is partnership has been formed without articles of association or capital other than the personal work of each one of the partners. If it were. He says: . to say to its creditors that they contributed no capital to the company but only their services. . for article 1678 of the Civil Code provides as follows: A particular partnership has for its object specified things only. that a civil partnership could be composed entirely of industrial partners. at page 127. Creditors could rely only upon the property which the partnership had. 128. divides general partnership into ordinary and irregular. to form and carry on a partnership and. . vol.net The only defect that can be pointed out in this article is the fact that it has been forgotten that in collective partnerships there are industrial partners who. 330): It only remains to us to state that a partner who contributes his industry to the concern can also confer upon it the name or the corporate name under which such industry should be carried on. Having in mind these different cases which may arise in the practice. each with a large amount of private property. or a specified undertaking. In this last respect his view is opposed to that of Manresa. Inocencio. But his view of the law seems to be derived from something other than the Code of Commerce now in force.

Article 269 of the Code of Commerce of 1829 relates to this subject and apparently provides that such partners shall not be liable for debts. and for the cost of this action. Gutirrez Hermanos (6 Phil. it can enjoy the credit. Repertoire de Droit Francais. giving him in place of a fixed salary a proportionate part of the profits of the business. Instituciones de Derecho Mercantil (vol. 510. but we do not understand that he commits himself to the doctrines therein laid down. It has thus been decided by the French court of cassation in a decision dated June 6. so long as the copartnership lasts.lawphil. nor is there anything found in any one of these commentaries which in any way indicates that an industrial partner is not liable to third persons for the debts of the partnership. 1-99). he is not. it should be said that there are three kinds of partners. 186) that according to Dr... vol. and he alone is entitled to use it. In speaking of limited partnerships Benito says (p. the industrial partner. and of Blanco's Mercantile Law. Rep. we find nothing which recognizes the existence of these irregular general partnerships. 1859. another with limited responsibility. one with unlimited responsibility. 3. 144) that here are found two kinds of partners. this claim being based upon the provisions of article 237 of the Code of Commerce which provides that the private property of the partners shall not be taken until the partnership property has been exhausted. Benito the irregular general partner originated from the desire of the partnership to associate with itself some old clerk or employee as a reward for his services and the interest which he had shown in the affairs of the partnership. of course. An examination of the works of Manresa and Sanchez Roman on the Civil Code. and would set aside the general law. and upon recovering his work or his industry he also recovers his name or the style under which he exercised his activity. because such a name or style is an accessory to the work of industrial partner. one with unlimited responsibility and the other with limited responsibility. Torres. dissenting: I consider that the judgment appealed from is entirely in accordance with the law. Benito. it can be so no longer. Johnson and Tracey. An action can be maintained against the partnership and partners. JJ. by express provision of the law he can not be held to be liable. . He says in his latter work (p. J. No costs will be allowed to their party in this court. (Fuzier-Herman. 100) that a mere agreement of that kind does not make the employee a partner. But this article furnishes to argument in support of the appellee's claim. concur. for it does not appear in the present code. in his former treatise. and 512. Execution of such judgment shall not issue against the private property of the defendants Francisco Muñoz. but upon dissolution thereof the aforesaid name or corporate name pertains to the partner who contributed the same. 256. 1905. In fact. So ordered. Benito's view. but adopting his view as to industrial partners. and agreement to the contrary. but the judgment should recognize the rights of the individual partners which are secured by said article 237.828. 361.net The question set up in the majority decision. We held in the case of Fortis vs. "In a regular collective commercial company. Separate Opinions ARELLANO. is an industrial partner liable as to third persons by reason of the debts and obligations contracted by the copartnership?" I decide in a negative sense. or Rafael Naval until the property of the defendant Francisco Muñoz & Sons is exhausted. An examination of the French law will also show that no distinction of that kind is therein anywhere made and nothing can be found therein which indicates that the industrial partners are not liable for the debts of the partnership. with interest thereon at the rate of 8 per cent per annum since the 31st day of March. C. It is apparently claimed by the appellee in his brief that one action can not be maintained against the partnership and the individual partners. which in such case would be a special law. reputation.case. and the third.. In Estasen's recent publication on mercantile partnerships (Tratado de las Sociedades Mercantiles) he quotes from the work of Benito. or the exemption from the liability to third persons of the industrial partners. pp. with no responsibility at all. and name or corporate name under which such industry is carried on.) Our conclusion is upon this branch of the case that neither on principle nor on authority can the industrial partner be relieved from liability to third persons for the debts of the partnership. If this article was the basis for Dr.30. will shows that no one of these mentions in any way the irregular general partnership spoken of by Dr. save. Emilio Muñoz. pp.net The judgment of the court below is reversed and judgment is ordered against all of the defendants for the sum of P26. 34.lawphil.

) However. 153. The above three classes of partnership agree in that property must in each of them be contributed. 151. by contributing with their industry. can hardly be made to apply. with the amount contributed.) Now. which is common with the three classes of partnership defined by the code. then. ." (Art. Therefore. simply denoted the extent of the ulterior or subsidiary responsibility. and even at the expiration of the copartnership they run the risk of having the one-eighth of the profits earned in former years absorbed by a total . 148. (Art. have no longer to think of any ulterior subsidiary responsibility. either within or without the copartnership. in the case at bar. among other things. But they form the collective partnership in the manner in which our laws allows the same to be formed — that is. 145. "The articles of general copartnership must state . in the collective.) "The same statements shall be included in articles of limited copartnerships (compañias en comandita) which are required for those of general copartnerships" — that is. the corporate capital. 140). and the number of shares into which the corporate capital is divided and represented. or quota in the corporate capital does he or can he respond for the obligations of the collective partnership? Evidently with none whatever. or a collective company respond with their capital for the obligations of the association. as regards profits. with their constituted capital. the word all. . had counted upon.) "The articles of incorporation (of corporations) must include . not cash. In order to complete such reasoning the following premise will be sufficient: That the industrial partners from the collective partnership.) "The liability of special partners for the obligations and losses of the copartnership shall be limited to the funds which they contributed or bound themselves to contribute to the limited copartnership. did not primarily respond with his corporate capital. stating the value at which property. but extends to all the property which partners may own within or without the copartnership. in the limited class. . and corporation (anonima). the capital which each partner contributes in cash. can only receive in the distribution the same amount as the partner who contributed the smallest amount of capital (art. a limited. with their shares. share. And the word all. which is the purpose of the provision in the above-quoted article. shall subsidiary respond with such property as he may have outside of the company. to wit. oneeighth goes to each of the two industrial partners. 3. in a collective partnership the liability is not limited to the funds or property contributed. Now. while a capitalist partner. which does not materially exist. this is elemental. three-fourths being for the capitalist. Neither do the partners of a limited company.The basis for the contrary opinion and decision is article 127 of the Code of Commerce: All the members of the general copartnership. in the joint stock concerns. the capital which each partner contributes. and with which nobody. collective." (Art. otherwise he would be subject to serious consequences (art. since both inside and outside of the company his industry or work only had been reckoned with." (Art. beyond the value of their stock. . and third persons can not recover the amount of the obligations of the company from the corporate capital. and by a person authorized to ake use thereof. as a rule. Collective partners have to respond not only with their corporate capital but also with the whole of their property outside of the association. par. 138). gives the rule for such personal and joint liability. are personally and in solidum liable with all their property for the results of the transactions made in the name and for the account of the partnership. "The liability of the members of a corporation for the obligations and losses of the same shall be limited to the funds they contributed or bound themselves to contribute to the corporate capital. (Art. in reference to property. contributed has been appraised. In either case the partners are only liable to the extent of their corporate capital. in a collective copartnership. and that which does not appear. or the basis on which the appraisal is to be made. with the exception of the sense mentioned in article 147" — that is. stating the value given the latter or the basis on which their appraisal is to be made. because he had none. with what principal sum. An industrial partner can not engage in transactions of any class whatever. And it is desired that the industrial partner who. do the words "all the members" found in this article include the industrial partners? At first it would appear that they do. credits. the extreme case of losses incurred by the company arises. limited copartnership (comanditaria). Shareholders in the case of a joint stock company. 125. If the capital of the association is exhausted. The members of a joint stock. if any of them include his name or permit its conclusion in the firm name. therefore the industrial partners are personally and jointly liable with all their property for the results of the transactions made in the name and for account of the partnership. not with property. be they or be they not managing partners of the same. under the signature of the latter. because the latter is sufficient to recover them. An industrial partner. an industrial partner. 134 and 136). or property. may so engage without extending profits or liabilities to the company (arts. In every mercantile copartnership it is the corporate capital that responds for the obligations of the same. of article 127 cited above.

it is not a matter of striking a balance from time to time. In the aforesaid article 237 the corroboration of the word all of article 127 may be found: "The private property of the general partners which is not included in the assets of the copartnership. shall be under the sameobligations as regards obligations because he is a collective partner? This seems neither just nor logical. shall be subject to the results of the transactions of the copartnership. And it is not so. Article 141 reads:lawphil. in this case such obligations constitute the extreme losses in the liquidation of the company. An industrial partner has not contributed any property whatever." "And irregular. that the collective company is the rule. without including" the industrial partners (since they have not the same rights). and the difference is either in favor of or against the concern. and it is claimed that such industrial partner. "regular are those wherein. though not contributing toward the company with anything but their industry. 2. he not having contributed anything which the company may lose when the losses of the copartnership are considered. not property of any class whatever? It seems very anomalous that one who has not obligated himself in the least should be responsible or the greater part. either among the partners thereof or with regard to third persons. he therefore offers no subject for the principal and direct seizure when the assets of the copartnership are attached. Muñoz & Sons" and the terms of the articles of association prove it so beyond all doubt. since he only contributed to the company his industry and work. How is it possible to conceive any ulterior. those wherein one or more members who. That the defendant company is really a collective one such as is described in the Code of Commerce." And such condition is stated in the majority decision. in this order. because precisely the collective name and the corporate name are applicable to both the collective and the limited companies. and the collective copartnership having a member of said class is also sometimes called an association of capital and industry. that he who is not comprehended within the explicit terms should be included by implication. and they should not be included therein nor in the corporation of the partner who contributed the smallest capital. and ordinarily do not share in the losses which the copartnership may sustain. There need be no distinction made between obligations and losses. that such a distinguished professor of law as Doctor Lorenzo de Benito should have established in his "Lessons on Mercantile Law" a difference between the regular collective associations and irregular collective companies. As to the nature of the defendant company in this action.loss incurred during the last year of the contract of copartnership. I take it to be:lawphil. the firm of "F. for such obligations in favor of third persons? Article 141 expressly states that he shall not. the one combining all the effects which are consequent upon this form of convention." differing from such as were included. as article 122 reads. simply for the reason that the industrial partner has nothing to lose. because the matter under discussion refers only to his private property. and the limited and the joint-stock companies are the exception. who has not the same rights. As long as there is property belonging to the company. as employed in the Code of Commerce. all the members in a collective name and under a firm name bind themselves to participate in the proportion which they may establish with the same rights and obligations. the standard in all commercial associations. such as were included. but it has not been very fortunate in sketching the characters of a regular collective partnership (since in conclusion it says nothing in reference to the irregular partnership). so much delayed with regard to profits. the question arises when the assets of the company are exhausted and it becomes necessary to appeal to the ulterior or subsidiary liability of the private property of the partners. 3. has defined the collective company. according to article 127.net "Losses shall be charged in the same proportion among the partners who have contributed capital. That it is not irrelevant in view of the manner in which the present Code of Commerce. after such attachment all the assets. . which has nothing to do with the company nor with losses in liquidating the same. obligations in favor of third persons are covered by the primary and direct responsibility of the company. the word regular means. indirect responsibility over the property which it was not even thought to be included. like the former one of 1829. can not seized for the payment of obligations contracted by the copartnership. Article 127 is affected by article 237: "The private property of the general partners which is not included in the assets of the copartnership when it is established can not be seized for the payment of the obligations contracted by the copartnership until after the common assets have been attached. in connection with the question submitted. This is what the law says (he continues).net 1. Such members are called industrial partners. As to the industrial partner. participate in the profits in the manner agreed to in the articles of association or as determined by law. but one of the final adjustment of assets and liabilities. That it is a regular collective company. and this is neither permitted where the law does not make them nor would they lead to anything after all. In order to state the contrary it would be necessary to appeal to discriminations in the wording of said article. until after the common assets have been attached. and that he who pledge nothing should be held to respond with his property. The case at bar could only thus be set forth: Should an industrial partner be responsible for such losses. During the existence of a company the gains or the losses are set off the one against the other. subsidiary. and those that were not included.

an industrial partner can not lose except what he has actually contributed thereto for a limited or an unlimited purpose. 138. That code contains article 454. Nevertheless. What characterizes this partnership is that all the members. In the absence of such declaration. must specify the obligations of the industrial partner or partners and the share in the profits to which they are entitled in the apportionment. has offered no remarks to the original text of said work which establish as an elemental doctrine that "When the copartnership is purely a collective one. besides the element property. the code of the Argentine Republic dealing with this class of association of capital and industry separately from the only three defined in our code. as our code would state) for the results of the transactions made in the name and for account of the partnership. whether under one system or another. Manuel Duran y Bas. the industrial partner shall draw from the profits a share equal to those of the partner who furnished the smallest capital. all of them of capital only or essentially of partners who furnish capital. as said code has an article almost literally identical with article 127 of our code. besides the requirements contained in article 395. according to the system of the code. therefore. and that. according to the last of the codes cited. unless there be an express covenant to the contrary. From the general rule which we have just set up the industrial partners who contract no obligation to secure the liabilities of the company should be excepted. To the question. shall respond in solidum. 439." it is because. the provisions and the principles being identical. among those which regulate collective partnerships. 319 of the code of 1829. whether managing the corporate funds or not. called collective. to wit. by reason of the nature thereof. 141 of the code now in force. a different classification would have been made of the association of capital and industry which. . by means of three articles. That the code in force.) . 140. Habilitacion or association of capital and industry is the name given to the partnership formed on the one part by one or more persons who furnish funds for a general business. . are obligated in solidum (with all their property. which is so generally and specially consulted in that eminently commercial and industrial city." etc. there is no difference except in the system. And it would not suffice to say that the above article of the code of the Argentine Republic. there can be no question as to the words "all the members. the conclusions can not otherwise than identical." involves no section which may refer to industrial partners. this is all that law and logic may demand of him. nothing else has been the subject of his consent and obligation. which reads: "All those who form a collective commercial company. "on collective copartnership. . and the Argentine Republic been followed. this is inherent to all partnerships without distinction as to class. if besides his industry he should contribute some capital toward the company either in money or thing of value." (Art. and as the result of the obligations thereunder. has involved this association of capital and industry. or for some particular commercial transaction. but may be demanded of him by reason of his express covenant. each of its members is jointly obligated for the result of the transactions which should be charged to the copartnership ." are jointly responsible and with all their property for the corporate obligations. in his addition to the work of Marti de Eixala. 4. and extends beyond the capital contributed by them to the concern. and the industrial partner. is properly characterized by means of the following articles: 435. common or generic to the three aforesaid classes. subject ultimately to company or personal obligations. "with the exception of the industrial partners. the association shall then be considered as a collective one. 440. An industrial partner can not contract on behalf of the partnership nor is he obligated with his own property toward the creditors of the company. Had the system adopted by the codes of Portugal. there appears this one. identical with art. In my opinion it can not be denied that there is no substantial difference between the three articles of our code and those transcribed from that of the Argentine Republic as regards the rights and obligations of industrial partners in conjunction with partners who furnish capital. and on the other part by one or more individuals who join the copartnership with their industry alone.and as to the covenant entered into by the partners to participate in the proportion which they may establish with the same rights and obligations. anything else would not come under the law. namely. 438. this question can not possibly arise in that country. and 141. The articles of association. The obligation of the partners who furnished capital is in solidum. industry. a special features only in collective partnerships. whatever might have been stipulated. whence irregularity necessarily arises. the irregularity of such an irregular system is that in a collective partnership wherein. Brazil. Therefore. Do the words "all the partners" found in said article include the industrial partners? undoubtedly the answer would be no. a former professor of the University of Barcelona. In a copartnership. because he has consented to something beyond the character and the effects of the contract of partnership of capital and industry entered into by him.

On April 22. 4Hence. this appeal.. Daco. the trial court authorized the plaintiff to present its evidence ex-parte 3 .: This is an appeal interposed by the defendant Benjamin C. Sim and Augusto Palisoc are sentenced to pay the plaintiff in this case with the understanding that the judgment against these individual defendants shall be enforced only if the defendant company has no more leviable properties with which to satisfy the judgment against it.63. 50682. the first installment payable on or before May 22.119. Noel C.00) and costs. 1 Subsequently. and Augusto Palisoc were included as co-defendants in their capacity as general partners of the defendant company. Daniel A. Grey. J. CONCEPCION JR.defendant-appellant. Jr. Daniel A. DACO. Lumauig is concerned. or the bar. Republic SUPREME Manila of the Philippines COURT SECOND DIVISION G. Branch XVI. BENJAMIN C. Badoy. The individual defendants shall also pay the costs. plus attorney's fees which the Court fixes in the sum of Eight Hundred Pesos (P800.119. Guizona. Anacleto D.07. . the defendants and their counsels failed to appear notwithstanding the notices sent to them. Guizona failed to file an answer and was consequently declared in default. The defendants Benjamin C. which I do not admit. the press. the defendant company.440. as already shown. the dispositive portion of which reads: WHEREFORE.00. INC. Daniel A. such as absorb the assets of the company. The defendants Benjamin C. Consequently. Daco. Noel C. 1961. on the suppositions. in Civil Case No. the joint and subsidiary liability of each partner should not exceed one-fifth ( 1/ 5 ) of the obligations of the defendant company. Having failed to receive the installment due on July 22. UNITED PIONEERS GENERAL CONSTRUCTION COMPANY. so long as there are company assets. that it may be possible to discriminate between losses and obligations in connection with an industrial partner. Sim moved to reconsider the decision claiming that since there are five (5) general partners. AL defendants. plaintiff-appellee. which can not be otherwise than outstanding obligations in favor of third parties inasmuch as. Sim. on motion of the plaintiff.During almost half a century no obligation has been raised by the professors of law. for whom there are none but the final losses. the complaint was dismissed insofar as the defendant Romulo B. But the trial court denied the said motion notwithstanding the conformity of the plaintiff to limit the liability of the defendants Daco and Sim to only one-fifth ( 1/ 5 ) of the obligations of the defendant company. Benjamin C. 1961 and the subsequent installments on the 22nd day of every month thereafter. purchased from the plaintiff a motor vehicle on the installment basis and for this purpose executed a promissory note for P9. Romulo B. no recourse can be held to the private property of any partner. Daco and Noel C. 1975 ISLAND SALES. Lumauig. the Court sentences defendant United Pioneer General Construction Company to pay plaintiff the sum of P7. for defendant-appellant. not merely with respect to losses but to company obligations of the industrial partner. Guizona. Daco from the decision of the Court of First Instance of Manila. vs. Buenaventura and Santiago for plaintiff-appellee.07 with interest at the rate of 12% per annum until it is fully paid. the plaintiff sued the defendant company for the unpaid balance amounting to P7. after which the trial court rendered the decision appealed from. L-22493 July 31.R. payable in twelve (12) equal monthly installments of P786. . to this doctrine regarding the exemption. a general partnership duly registered under the laws of the Philippines. with the condition that failure to pay any of said installments as they fall due would render the whole unpaid balance immediately due and demandable. 2 When the case was called for hearing.. until fully paid. No. ET. 1961.

The case is now before us for review on certiorari. from the date of the filing of the complaint until paid. All partners including industrial ones. L-21438 September 28. Philippine Air Lines. Jaime Palacios. Fernando (Chairman). without pronouncement as to costs. the defendant.00 for attorneys' fees. had left the country cannot increase the liability of Pedro Yulo. a civil engineer. On appeal. was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes on March 30. 1958. In so moving to dismiss the complaint. and the HONORABLE Lichauco.000. through its authorized agent. for the contracts which may be entered into in the name and for the account of the partnership. respondents.10. are: WHEREFORE. Lumauig was dismissed.. The facts declared by the Court of Appeals as " fully supported by the evidence of record". In the case of Co-Pitco vs.000. Being a civil partnership. therefore. No.The only issue for resolution is whether or not the dismissal of the complaint to favor one of the general partners of a partnership increases the joint and subsidiary liability of each of the remaining partners for the obligations of the partnership. 544) this Court held: The partnership of Yulo and Palacios was engaged in the operation of a sugar estate in Negros. petitioner. the liability of the appellant Benjamin C. shall be liable pro rata with all their property and after all the partnership assets have been exhausted.: The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael Carrascoso P25. with costs against petitioner. FRANCE. the appealed decision as thus clarified is hereby AFFIRMED.000.. Yulo (8 Phil. Carrascoso. Plaintiff. The fact that the complaint against the defendant Romulo B.2 the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket from P393. there were five (5) general partners when the promissory note in question was executed for and in behalf of the partnership. The fact that the other partner. However. concur. It was. and the costs of suit. G. does not unmake the said Lumauig as a general partner in the defendant company. COURT OF petitioner. these various amounts with interest at the legal rate. The liability is pro rata and in this case Pedro Yulo is responsible to plaintiff for only one-half of the debt. the plaintiff merely condoned Lumauig's individual liability to the plaintiff. the partners are not liable each for the whole debt of the partnership. C. and voted to affirm the appealed decision "in all other respects". Barredo and Aquino.J.20 to P383. a civil partnership as distinguished from a mercantile partnership. SANCHEZ. J. Inc. Since the liability of the partners is pro rata.R. plus P3. JJ. Air France. Article 1816 of the Civil Code provides: Makalintal. issued to plaintiff a "first class" round . On March 28.00 as exemplary damages. In the instant case.. by the express provisions of articles l698 and 1137 of the Civil Code. RAFAEL CARRASCOSO APPEALS. SO ORDERED. any partner may enter into a separate obligation to perform a partnership contract. 1966 AIR vs. Daco shall be limited to only one-fifth ( 1/ 5 ) of the obligations of the defendant company. Picazo and Agcaoili for Bengzon Villegas and Zarraga for respondent R. upon motion of the plaintiff. 1958. P393. 1816. P10.20 representing the difference in fare between first class and tourist class for the portion of the trip Bangkok-Rome.00 by way of moral damages. Republic SUPREME Manila of the Philippines COURT EN BANC Art. under its signature and by a person authorized to act for the partnership.

3 1. and a right to. the plaintiff. 1958 he paid to and received from petitioner a first class ticket. 16They consist of the court's "conclusions" with respect to the determinative facts in issue". 17 A question of law. had a "better right" to the seat. Coming into focus is the constitutional mandate that "No decision shall be rendered by any court of record without expressing therein clearly and distinctly the facts and the law on which it is based". it does not mean that the court has overlooked such testimony or such item of evidence. that. Was Carrascoso entitled to the first class seat he claims? It is conceded in all quarters that on March 28. Carrascoso was having a hot discussion with the white man [manager]. we now face the problem of whether the findings of fact of the Court of Appeals support its judgment. which reads: "The trial court erred in finding that plaintiff had confirmed reservations for. and essential to support the decision and judgment rendered thereon". or each item of evidence presented by. It is in this setting that in Manigque. as was to be expected. and then. Because as this Court well observed. first class seats on the "definite" segments of his journey. "many of the Filipino passengers got nervous in the tourist class. the Court of Appeals disposed of this contention thus: . A decision is not to be so clogged with details such that prolixity. they came all across to Mr. accordingly. Cuento. may result..trip airplane ticket from Manila to Rome. It is open to direct attack. would not vitiate the judgment. if not confusion. p. to overturn the appellate court's decision. it is no error for said court to withhold therefrom "any specific finding of facts with respect to the evidence for the defense". the issuance of a first class ticket was no guarantee that he would have a first class ride. 13 If the court did not recite in the decision the testimony of each witness for. 3. When asked to vacate his "first class" seat. but at Bangkok. These are matters which petitioner has thoroughly presented and discussed in its brief before the Court of Appeals under its third assignment of error. 7 A decision with absolutely nothing to support it is a nullity. and. 19 That judgment is conclusive as to the facts. and told defendant's Manager that his seat would be taken over his dead body. 5 This is echoed in the statutory demand that a judgment determining the merits of the case shall state "clearly and distinctly the facts and the law on which it is based". "the mere failure to specify (in the decision) the contentions of the appellant and the reasons for refusing to believe them is not sufficient to hold the same contrary to the requirements of the provisions of law and the Constitution". 15 Findings of fact. Neither is it to be burdened with the obligation "to specify in the sentence the facts"which a party "considered as proved". particularly that from Saigon to Beirut". Petitioner charges that respondent court failed to make complete findings of fact on all the issues properly laid before it. We are asked to consider facts favorable to petitioner.. the Manager alleged. which the Court of Appeals is required to make. Cuento. Hearing of May 26. although he had tourist class protection. solely insists that a decision state the "essential ultimate facts" upon which the court's conclusion is drawn. So long as the decision of the Court of Appeals contains the necessary facts to warrant its conclusions. By statute. 11 This is but a part of the mental process from which the Court draws the essential ultimate facts. a commotion ensued. Carrascoso to give his seat to the white man" (Transcript. the Manager of the defendant airline forced plaintiff to vacate the "first class" seat that he was occupying because. 21 And. From Manila to Bangkok. 8 The law. but that such would depend upon the availability of first class seats. when they found out that Mr. It is not appropriately the business of this Court to alter the facts or to review the questions of fact. 12 Indeed. and that all the matters within an issue in a case were laid before the court and passed upon by it. it was held that the mere fact that the findings "were based entirely on the evidence for the prosecution without taking into consideration or even mentioning the appellant's side in the controversy as shown by his own testimony". plaintiff travelled in "first class". The trust of the relief petitioner now seeks is that we review "all the findings" 4 of respondent Court of Appeals. 14 At any rate. 20 With these guideposts. there was a "white man". But petitioner asserts that said ticket did not represent the true and complete intent and agreement of the parties. according to said Ernesto G. and plaintiff reluctantly gave his "first class" seat in the plane. the legal presumptions are that official duty has been regularly performed. 9 A court of justice is not hidebound to write in its decision every bit and piece of evidence 10 presented by one party and the other upon the issues raised. who. "There is no law that so requires". refused. 12. 6 and that "Every decision of the Court of Appeals shall contain complete findings of fact on all issues properly raised before it". has been declared as "one which does not call for an examination of the probative value of the evidence presented by the parties. maybe defined as "the written statement of the ultimate facts as found by the court . "only questions of law may be raised" in an appeal by certiorari from a judgment of the Court of Appeals. in the words of the witness Ernesto G. Carrascoso and pacified Mr. however. the defeated party. upon the other hand. that said respondent knew that he did not have confirmed reservations for first class on any specific flight. 1959)." 18 2.

what does this OK mean? A. "B-1. It is more in keeping with the ordinary course of business that the company should know whether or riot the tickets it issues are to be honored or not. The court cannot give credit to the testimony of said witnesses. 23 We have heretofore adverted to the fact that except for a slight difference of a few pesos in the amount refunded on Carrascoso's ticket.K. 25 We reached this policy construction because nothing in the decision of the Court of Appeals on this point would suggest that its findings of fact are in any way at war with those of the trial court. which is a stopover in the Saigon to Beirut leg of the flight. What security then can a passenger have? It will always be an easy matter for an airline aided by its employees. as petitioner states. If only to achieve stability in the relations between passenger and air carrier. see plaintiff's Exhibits "A". if he had no seat? Or. 30 Why. and clearly show that the plaintiff was issued. and paid for. there can be no question. was he allowed to take a first class seat in the plane at Bangkok. a first class ticket without any reservation whatever. as hereinabove shown." From what you know. 27 We perceive no "welter of distortions by the Court of Appeals of petitioner's statement of its position".22 Not that the Court of Appeals is alone. "A-1". Apart from his testimony. "B". for as in the case of plaintiff he had yet to make arrangements upon arrival at every station for the necessary first-class reservation. So also. that spoken word could be notoriously unreliable. "A-l". The foregoing are the considerations which point to the conclusion that there are facts upon which the Court of Appeals predicated the finding that respondent Carrascoso had a first class ticket and was entitled to a first class seat at Bangkok. and defendant's own witness. and was issued a "First class" ticket. adherence to the ticket so issued is desirable. a first-class-ticket holder is not entitled to a first class seat. as petitioner underscores. and say that there was a verbal agreement to the contrary. The lower courts refused to believe the oral evidence intended to defeat the covenants in the ticket." "B-2". In these tickets there are marks "O. We cannot understand how a reputable firm like defendant airplane company could have the indiscretion to give out tickets it never meant to honor at all. That the space is confirmed. as charged by petitioner. "B". Yes. and was issued a "first class" airplane ticket. 29 And this because. It received the corresponding amount in payment of first-class tickets and yet it allowed the passenger to be at the mercy of its employees. The trial court similarly disposed of petitioner's contention. "first class". would be accommodated in the first-class compartment. a written document speaks a uniform language. "C" and "C-1". the ticket was subject to confirmation in Hongkong. and plaintiff's Exhibits "A". the decision of the Court of First Instance was affirmed by the Court of Appeals in all other respects. Nor was said affirmance by the Court of Appeals upon a ground or grounds different from those which were made the basis of the conclusions of the trial court. We hold the view that such a judgment of affirmance has merged the judgment of the lower court. Carrascoso went to see the Manager at his office in Bangkok "to confirm my seat and because from Saigon I was told again to see the Manager". then. Confirmed for first class? A. 169) xxx xxx xxx Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga that although plaintiff paid for. to strike out the very stipulations in the ticket. We are not impressed by such a reasoning. the judgment affirmed "must be regarded as free from all error". Furthermore. Oral evidence cannot prevail over written evidence. What if the passenger had a schedule to fulfill? We have long learned that. Such is the case here. defendant's own witness Rafael Altonaga testified that the reservation for a "first class" accommodation for the plaintiff was confirmed. if another had a better right to the seat? . 26 If.Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no guarantee that the passenger to whom the same had been issued. The court cannot believe that after such confirmation defendant had a verbal understanding with plaintiff that the "first class" ticket issued to him by defendant would be subject to confirmation in Hongkong. then an air passenger is placed in the hollow of the hands of an airline. as a rule. notwithstanding the fact that seat availability in specific flights is therein confirmed. 28 Nor do we subscribe to petitioner's accusation that respondent Carrascoso "surreptitiously took a first class seat to provoke an issue". "B-l". p. 24Implicit in that affirmance is a determination by the Court of Appeals that the proceeding in the Court of First Instance was free from prejudicial error and "all questions raised by the assignments of error and all questions that might have been raised are to be regarded as finally adjudicated against the appellant". (Transcript. thus: On the fact that plaintiff paid for. Rafael Altonaga. confirmed plaintiff's testimony and testified as follows: Q. Q. "C" and "C-1" belie the testimony of said witnesses.

Quite apart from the foregoing is that (a) right the start of the trial. the plaintiff has been compelled by defendant's employees to leave the First Class accommodation berths at Bangkok after he was already seated. 34 The contract was averred to establish the relation between the parties. and that the captain refused to intervene".00. and Third. that to authorize an award for moral damages there must be an averment of fraud or bad faith. if any. 35 and (b) evidence of bad faith in the fulfillment of the contract was presented without objection on the part of the petitioner. it may be drawn from the facts and circumstances set forth therein. But the stress of the action is put on wrongful expulsion. Cuento. That there was a contract to furnish plaintiff a first class passage covering. 6. unnecessary to inquire as to whether or not there is sufficient averment in the complaint to justify an award for moral damages. . resulting in moral damages in the amount of P30. by reason of which he suffered inconvenience. That. during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok. Ernesto G. 37 The Court of appeals further stated — . 4.31 and that the decision of the Court of Appeals fails to make a finding of bad faith. thereby causing plaintiff mental anguish.. seated" and to take a seat in the tourist class.000. amongst others. That said contract was breached when petitioner failed to furnish first class transportation at Bangkok. But.. defendant failed to provide First Class passage. 36 On the question of bad faith. social humiliation. and by the testimony of an eye-witness. under which said contract. and was transferred to the tourist class not only without his consent but against his will. 33 xxx xxx xxx The foregoing. corroborated by the corresponding entry made by the purser of the plane in his notebook which notation reads as follows: "First-class passenger was forced to go to the tourist class against his will. That consequently. as defendant agreed to furnish plaintiff. the latter acting as general agents for and in behalf of the defendant.32 xxx xxx xxx 2.. Second. wounded feelings and social humiliation. the BangkokTeheran leg. therefore. or yet to secure his disposition. the inference of bad faith is there. desiring no repetition of the inconvenience and embarrassments brought by defendant's breach of contract was forced to take a Pan American World Airways plane on his return trip from Madrid to Manila. plaintiff suffered inconveniences. substantially aver: First. and the like injury. but instead furnished plaintiff only TouristClass accommodations from Bangkok to Teheran and/or Casablanca. the Court of Appeals declared: That the plaintiff was forced out of his seat in the first class compartment of the plane belonging to the defendant Air France while at Bangkok. 5. respondent's counsel placed petitioner on guard on what Carrascoso intended to prove: That while sitting in the plane in Bangkok. An amendment thereof to conform to the evidence is not even required. The captain of the plane who was asked by the manager of defendant company at Bangkok to intervene even refused to do so. arguments and/or insistence were made by the plaintiff with defendant's employees. embarrassments. It is true that there is no specific mention of the term bad faith in the complaint. who was a co-passenger. It is. in our opinion. First Class passage on defendant's plane during the entire duration of plaintiff's tour of Europe with Hongkong as starting point up to and until plaintiff's return trip to Manila. defendant furnished to the plaintiff First Class accommodation but only after protestations. . serious anxiety. resulting in moral damages. Carrascoso was oustedby petitioner's manager who gave his seat to a white man. the plaintiff. It could have been easy for defendant to present its manager at Bangkok to testify at the trial of the case. The pivotal allegations in the complaint bearing on this issue are: 3. plaintiff entered into a contract of air carriage with the Philippine Air Lines for a valuable consideration.4. that there was bad faith when petitioner's employee compelled Carrascoso to leave his first class accommodation berth "after he was already. but defendant did neither. It is noteworthy that no one on behalf of defendant ever contradicted or denied this evidence for the plaintiff. Petitioner's trenchant claim is that Carrascoso's action is planted upon breach of contract. was cured by the evidence. That likewise. That . has been sufficiently established by plaintiff in his testimony before the court. Petitioner assails respondent court's award of moral damages. serious anxiety. . plaintiff was entitled to. thereby causing him mental anguish.... embarrassments and humiliations. wounded feelings. as a result of defendant's failure to furnish First Class accommodations aforesaid. and humiliations. Deficiency in the complaint. That finally.

40 5. Hence. testified as follows: "Q How does the person in the ticket-issuing office know what reservation the passenger has arranged with you? A They call us up by phone and ask for the confirmation.s. with the aggravating circumstances that defendant's Manager in Bangkok went to the extent of threatening the plaintiff in the presence of many passengers to have him thrown out of the airplane to give the "first class" seat that he was occupying to. under the circumstances. using the words of the witness Ernesto G. when asked to explain the meaning of the letters "O.just to give way to another passenger whose right thereto has not been established. who was the chief of the Reservation Office of defendant.. and for which the corresponding "first class" ticket was issued by the defendant to him. bad faith has assumed a meaning different from what is understood in law. we held that upon the provisions of Article 2219 (10). he imposed his arbitrary will.Neither is there evidence as to whether or not a prior reservation was made by the white man. but defendant did not do so. p. The responsibility of an employer for the tortious act of its employees need not be essayed. the Court is constrained to find. said "that the space is confirmed for first class." appearing on the tickets of plaintiff. Instead of explaining to the white man the improvidence committed by defendant's employees. this is bad faith. he forcibly ejected him from his seat. The defendant airline did not prove "any better". Cuento. the presumption is that evidence willfully suppressed would be adverse if produced [Sec. must answer. If there was a justified reason for the action of the defendant's Manager in Bangkok. 247. Cuento. Cuento. Certainly. that the Manager of the defendant airline in Bangkok not merely asked but threatened the plaintiff to throw him out of the plane if he did not give up his "first class" seat because the said Manager wanted to accommodate. moral damages are recoverable. another witness for defendant. 41 For the willful malevolent act of petitioner's manager. Zenaida Faustino. "white man" have a "better right" to the seat occupied by Mr. surely the plaintiff should not have been picked out as the one to suffer the consequences and to be subjected to the humiliation and indignity of being ejected from his seat in the presence of others. as it does find. and. In parallel circumstances. if the employees of the defendant at Bangkok sold a first-class ticket to him when all the seats had already been taken. we applied the foregoing legal precept. Any person who willfully causes loss or injury to another in a manner that is contrary to morals. Article 21 of the Civil Code says: ART. nay. of course.n. duly paid for." (t. par (e). any right on the part of the "white man" to the "First class" seat that the plaintiff was occupying and for which he paid and was issued a corresponding "first class" ticket. Unless. Civil Code. 1959) In this connection. the defendant could have easily proven it by having taken the testimony of the said Manager by deposition. June 19. 42 . using the words of witness Ernesto G. made him suffer the humiliation of having to go to the tourist class compartment . good customs or public policy shall compensate the latter for the damage. worse.K. 21. the manager adopted the more drastic step of ousting the plaintiff who was then safely ensconsced in his rightful seat. Rules of Court]. we quote with approval what the trial Judge has said on this point: Why did the. It is well settled in law." 39 And if the foregoing were not yet sufficient. thus: The evidence shows that the defendant violated its contract of transportation with plaintiff in bad faith. Carrascoso? The record is silent. by the testimony of defendant's witness Rafael Altonaga who. petitioner. We are strengthened in our belief that this probably was what happened there. Likewise. his employer. "bad faith" contemplates a "state of mind affirmatively operating with furtive design or with some motive of selfinterest or will or for ulterior purpose. and. and the defendant has not proven that this "white man" had any "better right" to occupy the "first class" seat that the plaintiff was occupying. again using the words of the witness Ernesto G. a "white man" whom he (defendant's Manager) wished to accommodate. there is the express finding of bad faith in the judgment of the Court of First Instance. 69. For. But can it be doubted that the recital of facts therein points to bad faith? The manager not only prevented Carrascoso from enjoying his right to a first class seat.38 It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the term "bad faith". the "white man".

It invites people to avail of the comforts and advantages it offers. Its trustworthiness has been guaranteed. respect. they grow "out of the nervous excitement and mental and physical condition of the declarant". "We will note that you transferred to the tourist class". Such testimony is admissible. The subject of inquiry is not the entry. because I did not give my ticket. I stood up and I went to the pantry that was next to me and the purser was there. I said. from a reading of the transcript just quoted. thus — Q You mentioned about an attendant." 48 and the Supreme Court of South Carolina there held the carrier liable for the mental suffering of said passenger. 47 And in another case. The contract of air carriage.1awphîl. in this environment. indignities and abuses from such employees. 51 The utterance of the purser regarding his entry in the notebook was spontaneous. because of the relation which an aircarrier sustains with the public. It forms part of the res gestae. The excitement had not as yet died down. that any rule or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier. Petitioner draws our attention to respondent Carrascoso's testimony. We do not think so.nèt Petitioner's contract with Carrascoso is one attended with public duty. Passengers do not contract merely for transportation. naturally. it was a breach of contract and a tort. and that the captain refused to intervene. This is a violation of public duty by the petitioner air carrier — a case of quasi-delict. Who is that attendant and purser? A When we left already — that was already in the trip — I could not help it. VALTE — I move to strike out the last part of the testimony of the witness because the best evidence would be the notes. Neglect or malfeasance of the carrier's employees." And I also said. when the dialogue happened. but the ouster incident. What for? and she said. 7. "Nothing of that kind." 46 And this." Mr. are admissible as part of the res gestae. Your Honor. although the relation of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that breaks the contract may be also a tort". because. "Where a passenger on a railroad train. Damages are proper. "Where a steamship company 45 had accepted a passenger's check. there was nothing in the conduct of the passenger which justified the conductor in using insulting language to him. and that the captain refused to intervene" is predicated upon evidence [Carrascoso's testimony above] which is incompetent. could give ground for an action for damages. A contract to transport passengers is quite different in kind and degree from any other contractual relation. That is tantamount to accepting my transfer. Q Was she able to note it? A No. the seats there are so close that you feel uncomfortable and you don't have enough leg room. as by calling him a lunatic. generates a relation attended with a public duty. So one of the flight attendants approached me and requested from me my ticket and I said. So it is. Testimony on the entry does not come within the proscription of the best evidence rule. giving a right of action for its agent in the presence of third persons to falsely notify her that the check was worthless and demand payment under threat of ejection. injurious language. "I have recorded the incident in my notebook. courtesy and due consideration. He told me. when the conductor came to collect his fare tendered him the cash fare to a point where the train was scheduled not to stop. 50 For. the impact of the startling occurrence was still fresh and continued to be felt. 52 It thus escapes the operation of the hearsay rule.6. "You are not going to note anything there because I am protesting to this transfer". therefore. They are entitled to be protected against personal misconduct. 44 Thus. and related to the circumstances of the ouster incident. Its business is mainly with the travelling public. though the language used was not insulting and she was not ejected. 49a Besides. 43And this. The stress of Carrascoso's action as we have said. 49 Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his notebook reading "First class passenger was forced to go to the tourist class against his will. COURT — I will allow that as part of his testimony. . is placed upon his wrongful expulsion. They have a right to be treated by the carrier's employees with kindness. Statements then. Q About that purser? A Well. and told him that as soon as the train reached such point he would pay the cash fare from that point to destination." He read it and translated it to me — because it was recorded in French — "First class passenger was forced to go to the tourist class against his will.

as it is hereby. In appealing the case to this Tribunal. The dictates of good sense suggest that we give our imprimatur thereto. 1. hold that the transcribed testimony of Carrascoso is admissible in evidence. The only condition is that defendant should have "acted in a wanton. for appellants. The right to attorney's fees is fully established. J.000. therefore. Concepcion. It would have been an easy matter for petitioner to have contradicted Carrascoso's testimony. but the law governing the liability of partners is not applicable to the case at bar wherein a claim for compensation by dependents of an employee who died in line of duty is involved. we say that the judgment of the Court of Appeals does not suffer from reversible error. His widow Ciriaca Vda.. respondents-appellees. And this.R.57 On balance. 10. Bayot for appellees.: 8. Zaldivar and Castro. J. all surnamed Balderama. No. Bengzon.000. the entry was made outside the Philippines.54 9.00 as moral damages.00 (including P5. The grant of exemplary damages justifies a similar judgment for attorneys' fees. C. pursuant to Section 55 of the Act. The Civil Code gives the court ample power to grant exemplary damages — in contracts and quasi.L. The least that can be said is that the courts below felt that it is but just and equitable that attorneys' fees be given. And although the Workmen's Compensation Act does not contain any provision expressly declaring solidary obligation of business partners like the ." 53 The manner of ejectment of respondent Carrascoso from his first class seat fits into this legal precept. and that. de Balderama and minor children Genara. They argue that there is nothing in the compensation Act which provides that the obligation of an employer arising from compensable injury or death of an employee should be solidary obligation. the order of the referee under consideration should be. P10. by way of exemplary damages. took no part.J.contracts. If it were really true that no such entry was made. Reyes. Dizon. L-12164 May 22. We accordingly vote to affirm the same. So ordered.B. in addition to moral damages. thus: P25.494. ENDENCIA. Makalintal. Because.00 as attorneys' fees.. affirmed and respondents Benito Liwanag and Maria Liwanag Reyes. reckless. the same should have been specifically provided. a commercial guard who while in line of duty. At first blush appellants' contention would seem to be well. 1959 the Philippines COURT Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners of Liwanag Auto Supply.. J.. de Guia Estanislao R. fraudulent.000. appellants do not question the right of appellees to compensation nor the amount awarded. the deposition of the purser could have cleared up the matter. concur. J. and To pay to the Workmen's Compensation Funds the sum of P4. Barrera. oppressive. We. JJ. in absence of such clear provision. under the Workmen's Compensation Act. Questioned as excessive are the amounts decreed by both the trial court and the Court of Appeals. hence the commission erred in ordering appellants to pay jointly and severally the amount awarded. ET AL. BENITO LIWANAG and MARIA LIWANAG REYES. ordered. 56 The Court of Appeals did not interfere with the same. J. the compensation is divisible.. the facts and circumstances point to the reasonableness thereof. the liability of the partners in a partnership is not solidary. the responsibility of appellants should not be solidary but merely joint. and P3.P. in due time filed a claim for compensation with the Workmen's Compensation Commission. Costs against petitioner. vs.00 for this review) as fees. was skilled by criminal hands. 55 We do not intend to break faith with the tradition that discretion well exercised — as it was here — should not be disturbed.40) Pesos to the claimants in lump sum.00.. or malevolent manner. petitioners-appellants. Regala. Exemplary damages are well awarded. Carlos and Leogardo. The task of fixing these amounts is primarily with the trial court. They only claim that. which was granted in an award worded as follows: WHEREFORE. by an employee of petitioner. WORKMEN'S COMPENSATION COMMISSION. And. for ordinarily. Republic SUPREME Manila of EN BANC G. To pay jointly and severally the amount of three thousand Four Hundred Ninety Four and 40/100 (P3.At all events.

otherwise. Paras. . Bautista Angelo. Owners of enterprises and other employers are obliged to pay compensation for the death of or injuries to their laborers. Art. and one of them happens to be insolvent. if the death or personal injury arose out of and in the course of the employment. If the death or injury is due to the negligence of a fellowworker. Bengzon. . Labrador. . there are other provisions of law from which it could be gathered that their liability must be solidary. Since the Workmen's Compensation Act was enacted to give full protection to the employee. therefore. 485 and 1815.. . . 1711. ART. or when the law or the nature of the obligation requires solidarity. dissenting: Whether the defendants herein be regarded as co-partners or as mere coowners. Republic SUPREME Manila EN BANC of the Philippines COURT . The injustice of the rule sought to be established in the majority opinion may readily be made obvious with an example. . the liability of business partners. C. Arts. the purpose of the law could not be attained. And section 2 of the Workmen's Compensation Act. without prejudice to the right of the employer to proceed against the negligence party. the present controversy should be decided in favor of the appellees. even though the event may have been purely accidental or entirely due to a fortuitous cause. Suppose that one of two co-partners or co-owners owns 99 percent of the business while his co-partner or coowners own only 1 percent. The right to compensation as provided in this Act shall not be defeated or impaired on the ground that the death. the same is hereby affirmed. If the responsibility of appellants were to be merely joint and solidary. finding no error in the award appealed from. There is solidary liability only when the obligation expressly so states. For the foregoing reasons. J. . Montemayor. Wherefore. 1711 and 1712 of the new Civil Code provide: ART. the right of the employee may be defeated. Accordingly. A.herein appellants. as amended reads in part as follows: . Padilla. mechanics or other employees. . to declare that under the said Act the defendants herein are liable solidarily is to play the role of legislator. J.. . otherwise. I have no choice but to dissent. the amount awarded to the appellees would only be partially satisfied. . their liability for the indemnity due their deceased employee would not be solidary but only pro rata (Arts. and that it should be interpreted to promote its purpose. 1207 of the new Civil Code provides: . with costs against appellants. and Concepcion.. 1712. reasonably indicate that in compensation cases. .. workmen. is to read into the Act something that is not there. . or at least crippled. new Civil Code). In the previous cases we have already held that the Workmen's Compensation Act should be construed fairly. like appellants. Moreover. the latter and the employer shall be solidarily liable for compensation. which is evidently contrary to the intent and purposes of the Act. To hold that it does. . should be solidary. that all doubts as to the right of compensation resolved in his favor. The provisions of the new Civil Code above quoted taken together with those of Section 2 of the Workmen's Compensation Act. JJ. injury or disease was due to the negligence of a fellow servant or employee. should be solidary. reasonably and liberally in favor of and for the benefit of the employee and his dependents. The Workmen's Compensation Act does not change the nature of that liability either expressly or by intendment. To hold that in such case the latter's liability may run up to 100 percent although his interest is only 1 percent would not only be illogical but also inequitable. For this Court. reason demands that the nature of the obligation of the employers to pay compensation to the heirs of their employee who died in line of duty. Separate Opinions REYES. concur.

A. the latter represented by M.000 contributed by said partners. that "Tai Sing & Co.26 to July 29. obtained a credit of P20.00 ========= This total is the sum claimed in the complaint. In the articles of copartnership. the appellants Severo Eugenio Lo and Ng Khey Ling." on July 26. and the debit balance of this account. he mortgaged certain personal property of "Tai Sing & Co. Defendant Eugenio Lo sets up.) According to this mortgage contract. On April 20.) with us on June 30. general manager A. 1917. SEVERIO EUGENIO LO. This mortgage was again renewed on April 16. for the sum of P16. products. A..14 daily interest on the principal. and obtained a loan of P8. (Exhibit E.. under the article of copartnership. (2) Said defendants are ordered jointly and severally to pay the Philippine National Bank the sum of P22. Vito for appellants. On June 4. as attorney-in-fact of "Tai Sing & Co. Jose Lopez Roman Lacson for appellee. as attorney-infact of "Tai Sing & Co. As security for said loan. 1921. 1922 P16. 1916.74 until September 9..000 from plaintiff bank on January 7. it appears that the partnership was to last for five years from after the date of its organization. 1922.000 in favor of plaintiff bank. nor was the person who subscribed said contract authorized to make the same. answered the complaint denying each and every one of the allegations contained therein. 1919.86 Total 20. L-26937 October 5. Y. J. defendants. O. 1922 to December 31.74 up to August 31.74 Interest on same from June 30. executed a chattel mortgage in favor of plaintiff bank as security for a loan of P20. After the hearing.720.000 loan was to earn 9 per cent interest per annum. and . To your outstanding account (C.000 with interest (Exhibit D). The other defendants. Say Lian Ping executed a power of attorney (Exhibit C-1) in favor of A. with the powers specified in said articles of copartnership. Kelam. (Exhibit C).. Say Lian Ping. Y.) This credit was renew several times and on March 25. together with J.1924. 1926. and that the commercial credit in current account which "Tai Sing & Co. 1921. plaintiff-appellee. P4. with a daily interest of P4. D. On Yem Ke Lam and Co Sieng Peng formed a commercial partnership under the name of "Tai Sing and Co. NG KHEY LING and YEP SENG.R. at 9 per cent per annum from January 1. 1924. 1918.727. 1926. authorizing him to act in his stead as manager and administrator of "Tai Sing & Co. One of the partners. from the year 1918. Ko Tiao Hun.G. No. with interest to December 31.. obtained from the plaintiff bank had not been authorized by the board of directors of the company. or in any other part of the Philippine Islands the partners might desire. as a general defense. Sieng Peng indebted to plaintiff Philippine National Bank in sum of P22. 239. J. under the name of "Tai Sing & Co. Defendants had been using this commercial credit in a current account with the plaintiff bank. the court found: (1) That defendants Eugenio Lo. Yap Sing and Ng Khey Ling. executed a power of attorney in favor of Sy Tit by virtue of which Sy Tit.. ET AL.518. executed another chattel mortgage for the said sum of P20. Kelam. 1927 PHILIPPINE NATIONAL BANK. and native. for." with a capital of P40. A. VILLAMOR. Province of Iloilo. Y. to May 22. Yap Seng. and that its purpose was to do business in the City of Iloilo. Y. A. Exhibit A.74 debt. Say Lian Ping was appointed general manager of the partnership. with the appointed general manager of the partnership. together with interest on the P16. and to carry on such business and speculations as they might consider profitable. Pineda Tayenko.000 in current account from the plaintiff bank. 1925 until fully paid.595. as well as Chinese and Japanese. at 9 per cent per annum 3. 1920.. the P20. representing "Tai Sing & Co..518.: On September 29. is as follows: TAI SING & CO. with the costs of the trial. appellants. vs. 1920 and A.14 on the balance on account of the partnership "Tai Sing & Co. goods. and from the date. executing a chattel mortgage on certain personal property belonging to "Tai Sing & Co. Severo Eugenio Lo. was not a general partnership. Ng Khey Ling and Yap Seng Co..518. (Exhibit C." for the purchase and sale of merchandise. SEVERO EUGENIO LO. Kelam and Ng Khey Ling. Kelam.

Appellants admit.595. 142).. A.14 on the sum of P16. and that the action brought by plaintiff is a manifest violation of article 237 of the present Code of Commerce. III. with the costs of the action. Say Lian Ping cannot extinguish the defendants' obligation to the plaintiff bank. Sai Lian Ping's death in China in November. the mercantile register of the Province of Iloilo. The trial court erred in finding that article 126 of the Code of Commerce at present in force is not mandatory. under the name of Kwong-Wo-Sing vs. The only anomaly noted in its organization is that instead of adopting for their firm name the names of all of the partners. by the words "and to be followed in the last two cases. of several of them. The trial court erred in finding that the current account of "Tai Sing & Co. The trial court erred in denying the motion for a new trial filed by defendants-appellants. The trial court erred in finding that the partnership agreement of "Tai Sing & Co. This partnership was registered in Appellants allege that such of their property as is not included in the partnership assets cannot-be seized for the payment of the debts contracted by the partnership until after the partnership property has been exhausted. cited by appellants. Therefore." as the firm name. (Exhibit A). And the Supreme Court so held in the case of Jo Chung Cang vs. as a proven fact. though not in law due to the fact that it was not recorded in the register. amount to P16. A. (45 Phil. The anomalous adoption of the firm name above noted does not affect the liability of the general partners to third parties under article 127 of the Code of Commerce. or only one of them. As to the alleged death of the manager of the company. The trial court erred in finding that the death of J. this court held that.net Defendants appealed. in which it said that the object of article 126 of the Code of Commerce in requiring a general partnership to transact business under the name of all its members. but not in the sense of depriving innocent parties of their rights who may have dealt with the offenders in ignorance of the latter having violated the law. is in accordance with the requirements of article 125 of the Code of Commerce for the organization of a regular partnership.. for they formed a partnership which was registered in the mercantile register. 1926. the defendants cannot invoke in their defense the anomaly in the firm name which they themselves adopted. Say Lian Ping. was that evidence by Exhibit F.518. of several of them. IV. and that the provision of said article 126 is for the protection of the creditors rather than of the partners themselves. and he obtained from the plaintiff bank the credit in current account. which in addition to interest at 9 per cent per annum from July 29. the debit balance of which is sought to be recovered in this action. VI. The trial court erred in ordering the defendants appellants to pay jointly and severally to the Philippine National Bank the sum of P22. VIII. The VII.74 from that date until fully paid. appointed Sy Tit as manager.1awph!l. . by the words "and company" the partners agreed upon "Tai Sing & Co. The trial court erred in not admitting J. and it appears from the context of Exhibit A.74.26. to be followed in the last two cases. for two reasons at least: (1) Because Ou Yong Kelam was a partner who contracted in the name of the partnership. given as security therefor through its own fault and negligence. But even supposing that the court had erred.518. Pacific Commercial Co. and (2) because it appears in the record that the appellant-partners Severo Eugenio Lo. making the following assignments of error: I. And consequently the doctrine was enunciated that the law must be unlawful and unenforceable only as between the partners and at the instance of the violating party..(3) The defendants are furthermore ordered to pay the costs of the action. and having operated and contracted debts in favor of the plaintiff. KiengChiong-Seng. This applies more strongly to the obligations contracted by the defendants. that the defendant association formed by the defendants is a general partnership..74. Ng Khey Ling and Yap Seng. and that contracts entered into by commercial associations defectively organized are valid when voluntarily executed by the parties. as the company formed by defendants had existed in fact. is to protect the public from imposition and fraud. without any objection of the other partners. V. D and E. such an error would not justify the reversal of the judgment. 1926. In the case of Hung-Man-Yoc. and interest on P16. and carried on business contracting debts with the plaintiff bank. signed by Sy Tit as attorney-infact of the members of "Tai Sing & Co. as defined in article 126 of the Code Commerce. with a daily interest of P4.727. The trial court erred in not finding that plaintiff bank was not able to collect its credit from the goods of "Tai Sing & Co.. the trial court did not find this fact proven at the hearing. 1917. and the only question is whether or not they complied with the agreement.518.. the same must be paid by someone. II. because the last debt incurred by the commercial partnership "Tai Sing & Co. before the attorney-in-fact Ou Yong Kelam executed Exhibits C. with plaintiff bank shows a debit balance of P16.74 up to August 31. or of one only. by virtue of Exhibit G.

represented by the attorney-in-fact Sy Tit. rendered judgment ordering the defendant. deceased. the sums claimed with 9 per cent interest on P16. all accounts and debts of the defendant were alloted to the plaintiff.500 pesos with costs. Malcolm.R. Street. The documents of indebtedness are inserted in the complaint and duly numbered. setting forth: That he admitted the first statement of the complaint. The defendant filed a written answer on November 15. as is customary in Hagonoy. 1904. that as a special defense. that he did not admit the same. L. J. be paid in kind and not in money as the plaintiff claims in his complaint. under the signature of the latter. Manuel Ormachea Tin-Congco. he therefore asked the court below to enter judgment absolving the defendant of the complaint. and became the individual property of Ormachea Tin-Congco. and T. TORRES. and must therefore be. E.518. They aggregate 135 documents. namely 9 per cent per annum. Malolos. a little more or less. Santiago Trillana.74. the plaintiff prays that judgment be entered ordering the defendant. The judgment against the appellants is in accordance with article 127 of the Code of Commerce which provides that all the members of a general partnership. Exhibit E. and by a person authorized to use it. The credit was renewed in January. and should be paid at the time and under the circumstances which.court found that the partnership property described in the mortgage Exhibit F no loner existed at the time of the filing of the herein complaint nor has its existence been proven. the indebtedness is proven by the documents signed by the defendant or his agents in favor of Ormachea or of Vizmanos Ong Queco or their agent named Lawa in charge of the business. yet from that executed on April 16. it appears that the P20. the trial judge. local currency. SANTIAGO TRILLANA. nor was it offered to the plaintiff for sale. owing from them. by means of periodical payments in tuba or the liquor of the nipa palm. We find no just reason to reverse this conclusion of the trial court. 1920. 1907. a Chinaman. No. and that if any accounts are still pending. executed by "Tai Sing & Co. There can be no doubt that the parties agreed upon the rate of interest fixed in the document Exhibit E.000 would earn 9 per cent interest per annum. Johnson.: On the 15th of January. Johns and Romualdez. it appears that this security is for the payment of the sums received by the partnership. invoked by the appellant. defendant-appellant. Appellants also assign error to the action of the trial court in ordering them to pay plaintiff. 1921.. presented an amended complaint against Santiago Trillana. Republic SUPREME Manila of EN BANC G. to pay the said 5. So ordered. Velarde. 1909 the Philippines COURT MANUEL ORMACHEA TIN-CONGCO.J. but had no knowledge as to the second as it appears therein.500 pesos. The judgment appealed from is in accordance with the law.. plaintiff-appellee.000 pesos. C. jointly and severally. JJ. and in the deed of pledge. be they managing partners thereof or not. After hearing the evidence presented by the parties.000 credit would earn 8 per cent interest annually. on February 27. that two years prior to that date. Paguia for appellant.. as it is hereby. that the legal interest on the said 4.000 with interest and collection fees. for the results of the transactions made in the name and for the account of the partnership. not to exceed P20. and the same has not been paid by the defendant. shall be personally and solidarily liable with all their property. vs. to pay .000 pesos is 1. 1904. Avanceña. the partnership was dissolved and the business was divided up between the partners. and that in the course thereof the defendant purchased from them merchandise to the value of 4. owing to their character and the manner in which they were constituted. As to the amount of the interest suffice it to remember that the credit in current account sued on in this case as been renewed by the parties in such a way that while it appears in the mortgage Exhibit D executed on March 25. with the costs against the plaintiff. L-4776 March 18. and this being so. McGirr for appellee. concur. and other places in the Province of Bulacan. some of which are written in Tagalog with corresponding translations. judicial administrator of his estate. such class of obligations are settled. Santiago Trillana. alleging that the plaintiff Ormachea and Luis Vizmanos Ong Queco were engaged in business in the pueblos of Hagonoy. can in no way have any application here. it follows that article 237 of the Code of Commerce. the defendant alleges that he had already settled his accounts and obligations contracted in the business to which the complaint refers. A. the same should. represented by the Chinaman Tiu Tusay. Exhibit F. affirmed with costs against the appellants. Therefore. nor the other allegations in the complaint in the sense in which they are set out. 1919 by the attorney-in-fact Ou Yong Kelam that the P20.500 pesos which makes the total debt amount to 5.

clearly express on whose account they were issued. notwithstanding said liquidation. he owed the former for amounts in cash and in goods which he took from the creditor and his partner. that the vales Nos. As Manuel Ormachea Tin-Congco claimed from Santiago Trillana the payment of the sum which. those that stood against Santiago Trillana as evidenced by the said 135 vales. 112. that if the debt is payable in tuba. 98 are invalidated by the note of general liquidation between the creditor Manuel Ormachea. under the same conditions stipulated between the debtor and the copartnership for the working of the distillery of Luis Vizmanos and the late Chinaman Manuel Ormachea. and can not stand as evidence against him. 63. the said vales are reputed as unpaid. Lopez Lawa himself. 115. died. It has also been fully proven that. and Florentino Tiu Tusay was appointed administrator of his estate. and No. not to the manager. 87.832. It should be noted that. 12. municipality of Hagonoy. that the vales Nos. and to order a new trial as the evidence adduced at the hearing was not sufficient to justify said decision. having gone to Manuel Ormachea Tin-Congco. nor between said person and the successor of the said entity. by Jose R.to the Chinaman Florentino Tiu Tusay. they divided between them the credits that they held against third persons. amounted only to P2. Bulacan. therefore. 104. 98 in Chinese characters and explained by the witness Jose R. the sum of P2. This is affirmed by Luis Vizmanos Ong Queco. Santiago Trillana. The record shows that the amounts advanced to the debtor. Ormachea Tin-Congco. 94. and. that vale No. that is to say. 1907. the motion for a new trial was denied. 44. 109. and finally. were delivered by the said Lopez Lawa who. that vales numbered 31. Lopez Lawa. 113 is made out as a mere recommendation of the defendant. Syo Bunchad. 105. when in June or July. and owned in partnership by Ormachea and Vizmanos. from the years 1894 or by 1895 to 1901. but that. and announced his intention to appeal by means of a bill of exceptions. and to the others by means of the said vales. 113. whatever might be the cause. after deducting the said P173. and for said reason its value can not be demanded from him. and on the 12th of November the court below held that. because the vale No. that vale No. when approving the bill of exceptions. 132. he should be obliged to pay his debt in cash. 91. 116. 6. 48. therefore he should not be ordered to do so. 40.22 4/8. and 15 by themselves do not prove. the aforesaid Ormachea Tin-Congco and Vizmanos Ong Queco withdrew from the business. because it does not appear that there was ever a lawful transfer. the court below. Luis Vizmanos Ong Queco. aggregating P173. the plaintiff. The defendant requested a decision in his motion for a new trial in which he contended that the evidence was not sufficient to justify the judgment of February 27. but the money furnished by the manager to Trillana and to the others on account of the tuba or liquor of the nipapalm which the defendant had engaged to supply to said distillery belonged to the two owners of the same. as capital and interest thereon. 41. by Tiu Langco.832. 135 bears no date at all. and the debtor Santiago Trillana written on the back of the said vale No. Manuel Ormachea. as shown by the 135 vales which are attached to the complaint and which were admitted as authentic by the defendant. The defendant excepted to the foregoing decision and presented the corresponding amended bill of exceptions. 1 does not state the year. unless it is shown and it does not so appear that the defendant refused to pay it in that manner or has failed to comply with his obligations. 96. Lawa ceased to act as manager of the distillery. At the hearing. much less to pay the costs. cession or indorsement made between the person in whose favor they are made out and the so-called creditor. he prayed the lower court to revoke or amend its former decision of the 27th of February. 1901. and some to other persons. 7. the trial judge. as stipulated between the parties. nor can they prove that the amount of money which they represent should form part of the defendant's debt. in tuba. that the vales which are date previously to vale No. and. and 133 offered by the plaintiff in evidence and signed by the defendant. 93.000. if said term should expire without such payment. the representative of the plaintiff. and for account of a third person. and 97 are in the same condition. 33. The representative of the defendant excepted to the above judgment. overruled the motion to modify his former decision as far as it referred to the amount of the indebtedness found against the defendant and the said judgment was modified by adding the provision that the defendant should make payment in tuba which he should deliver at the plaintiff's distillery in the town of Hagonoy within the term of six months. 127. the court below ordered the suspension of the execution providing that the defendant furnish bond in the sum of P4. and by a writing dated March 22. 54. and most of which were addressed to Lopez Lawa. 88 is subscribed by another person who is not the defendant. was the manager of the distillery situated in the barrio of San Sebastian. by its order of May 7. Santiago Trillana. letters of . and for said reason the obligations contained in said vales are not those of the defendant. they do not constitute sufficient proof to justify the condemnatory judgment with respect to the amount which they represent because the time when said respective obligations were contracted is not determined. found that the debt which could be claimed from the defendant. with the exception of eight of them signed by the other persons. on the 7th of May.22. and then. a Chinaman who was at the time employed as mixer in said distillery. the judicial administrator of the estate of the deceased plaintiff. and said denial was reproduced as explanation of the ruling of May 7. there is no reason to compel him to pay. 35. 118. with costs. among other things that belonged to the two partners. in view of the evidence. last. Jose Lopez Lawa. 5. while this litigation was pending. 1907. 32.

he introduced the following document marked "A" which appears at folio 248: I. (Arts. In evidence of this. it was not his intention to annul and set aside the vales which represented the indebtedness of the defendant. it should be paid not in money but in tuba. the right to recover the debts of the defendant still belonged to Ormachea when the business was dissolved. as representative of the owners thereof. and were in the possession of the creditor. 1905. 334. par. If the business jointly carried on by Ormachea and Vizmanos was dissolved. to the prejudice of the real creditor. and its transactions ceased in 1901 Jose Lopez Lawa. and alleged that. requesting him to settle his account with Lawa. although. extinguished. also ceased to act as such manager in said year. the said vales should have been returned to him by Lawa. the only person entitled to condone a debt in the event of waiving the right to recover the same. upon being informed of its contents. do hereby declare that D. and under Lawa's direction the debtor wrote out the document. If the document marked "A" had been issued by Jose Lopez Lawa while still at the head of the business of the distillery. and stated: That in November. the plaintiff's attorney. The debtor explained how and in what manner he obtained the foregoing document from Lawa. and the obligation contracted by Santiago Trillana. Lopez. When drawing up the preinserted document. Code of Civil Procedure. Lawa replied that he no longer owed anything. as shown by the vales which appear in the record. — Jose R.) As has been seen. and as long as he is able to comply with these stipulations within a reasonable time. as agreed upon by them. with the further circumstance of its being written in Spanish. November 19. when the business no longer existed. when the owners had entirely withdrawn from it. without a previous payment of the amounts secured on the said vales. for which reason he called on the latter and asked him whether he still owed him anything on account of the distillery in San Sebastian. a Christian Chinese. it is not proper nor lawful to admit the said document as possessing a force and effect that would fully exempt the defendant from the payment of his obligation. 1903. because the latter was indebted to him but to Manuel Ormachea. which in past times was under my management. (Folio 56. that is to say. 8. or to another authorized to receive it in his name. The amounts stated in the valeswere advanced under the . but. prior to their withdrawal from business. Lopez Lawa affirms that he gave the said document marked as Exhibit A" to the debtor. he received a letter from Mr. and with greater reason if it is considered that it has not been shown that Lawa was authorized to liquidate accounts. and after Lawa had ceased for two years to act in the administration and management thereof. while testifying under oath. Santiago Trillana himself. 1903.) Article 1162 of said code reads: Payment must be made to the person in whose favor an obligation is constituted. who managed the distillery on behalf of the owners of the same. Santiago Trillana has no outstanding debt whatever with the distillery situated in the barrio of San Sebastian in this town. the defendant can not be compelled to pay his debt in cash. the defendant stated that he had already paid his accounts and obligations contracted in favor of the said Ormachea and Vizmanos by means of periodical deliveries of tuba or liquor of the nipa palm. which he issued to the debtor on the 19th of November. or issue an acquittance releasing the debtor from the payment of his debt. and when Lawa. Trillana. and for said reason the document Exhibit A. as Lawa was not authorized by Ormachea to deliver to the debtor an acquittance releasing him from the obligations that he had contracted. can not serve to relieve the debtor from paying what he owed by virtue of the documents or vales that he had issued in order to obtain money from the owners of the said distillery. McGirr. thereupon the requested Lawa to issue the said document. Jose R. by which the credit of Ormachea should be considered as settled. the aforesaid Ormachea and Vizmanos.administration in favor of the latter were issued on the 9th of October. Since the vales existed. Lopez (Lawa). if any amount was still pending payment. if such was the case. it was because the amounts they called for had not presumed to have been fulfilled when the proofs of its existence have been returned to the debtor. a language with which the Chinaman who signed it was probably not well acquainted and the fact that it was written by the defendant. signed it. Civil Code. 1714 and 1719. 1903. — Hagonoy. perhaps it might have served as a foundation for the debtor to allege that his obligations evidenced by said vales had been settled." made out by the debtor. or by the owners of the distillery. However. for said reason the witness believed that he no longer owed anything. What I have stated is the truth.) Seeing that the amounts stated in the vales acknowledged by the debtor were advanced to him in part payment of the price of certain quantities of tuba or liquor of the nipa palm which he had contracted to deliver at the distillery. and the former. After the close of the business of the distillery owned by Ormachea and Vizmanos. he was not authorized to sign the document marked "A. (Sec. had no express authority to issue such a document. at such time and under such circumstances as are customary in the town of Hagonoy. as the document was made out and issued two years afterwards. two years after ceasing to be manager. Santiago Trillana. who then acted as manager of the distillery. to whom the credits standing against Trillana were transferred when Ormachea withdrew from the above-mentioned partnership with Vizmanos Ong Queco.

Respondent Leung Yiu adduced evidence during the trial of the case to show that Sun Wah Panciteria was actually a partnership and that he was one of the partners having contributed P4. Arellano. It was registered as a single proprietorship and its licenses and permits were issued to and in favor of petitioner Dan Fue Leung as the sole proprietor.condition that the same would be paid or satisfied with the value of the tuba received by the distillery. J. Sta. In view of the forgoing.. a restaurant. with the addition made in the order of May 7 of the same year. Witnesses So Sia and Antonio Ah Heng corroborated the private respondents testimony to the effect that they were both present when the receipt (Exhibit "A") was signed by the petitioner. the Equitable Banking Corporation. So Sia further testified that he himself received from the petitioner a similar receipt (Exhibit D) evidencing delivery of his own investment in another amount of P4. Florence Yap to translate its contents into English. with the costs against the appellant. H-1 to H-24) showed that the signatures in the two receipts were indeed the signatures of the petitioner. Sundiam for private respondent. and we hereby affirm it.000. The Sun Wah Panciteria. Manila. Branch II to recover the sum equivalent About the time the Sun Wah Panciteria started to become operational. No. The private respondents evidence is summarized as follows: Republic SUPREME Manila of the Philippines COURT THIRD DIVISION G. and Willard. The signatures in Exhibits "A" and 'D' when compared to the signature of the petitioner appearing in the pay envelopes of employees of the restaurant. which moreover appears to have been acquiesced in by the appellee for the reason that it was undoubtedly so stipulated. 70926 January 31. John L. Carson.00 to its initial establishment. Branch II in Civil Case No. Chief of the Savings Department of the China Banking Corporation testified that said check (Exhibit B) was deposited by and duly credited to the private respondents savings account with the bank after it was cleared by the drawee bank. 1955 from petitioner Dan Fue Leung. JR. Johnson. Witness Teodulo Diaz. This is evidenced by a receipt identified as Exhibit "A" wherein the petitioner acknowledged his acceptance of the P4. J.000.00 covered by the latter's Equitable Banking Corporation Check No. the decision of the court below. Civil Code. vs. Mapa. 1989 DAN FUE LEUNG.) to twenty-two percent (22%) of the annual profits derived from the operation of Sun Wah Panciteria since October. Another witness Elvira Rana of the Equitable Banking Corporation testified that the check in question was in fact and in truth drawn by the petitioner and debited against his own account in said bank. 13389470-B from the profits of the operation of the restaurant for the year 1974. respondents. Cruz.R. HON. This case originated from a complaint filed by respondent Leung Yiu with the then Court of First Instance of Manila.000. therefore. No. and accepting the conclusions contained in the judgment of February 27. The receipt was written in Chinese characters so that the trial court commissioned an interpreter in the person of Ms. 1955. was established sometime in October. So ordered. INTERMEDIATE APPELLATE COURT and LEUNG YIU.00 as his contribution to the partnership. appealed from.. Florence Yap issued a certification and testified that the translation to the best of her knowledge and belief was correct. (Art. the private respondent gave P4. This fact was clearly shown and indicated . The private respondent identified the signature on the receipt as that of the petitioner (Exhibit A-3) because it was affixed by the latter in his (private respondents') presence. Uy for petitioner. JJ.000. C. 116725 declaring private respondent Leung Yiu a partner of petitioner Dan Fue Leung in the business of Sun Wah Panciteria and ordering the petitioner to pay to the private respondent his share in the annual profits of the said restaurant.00 by affixing his signature thereto. 1278. GUTIERREZ.000. located at Florentino Torres Street..R.00 An examination was conducted by the PC Crime Laboratory on orders of the trial court granting the private respondents motion for examination of certain documentary exhibits. petitioner. Edgardo F.: The petitioner asks for the reversal of the decision of the then Intermediate Appellate Court in AC-G. it is our opinion that the same should be affirmed. the private respondent received from the petitioner the amount of P12. namely Ah Heng and Maria Wong (Exhibits H. is in accordance with the law. Furthermore. 1907. CV-00881 which affirmed the decision of the then Court of First Instance of Manila. concur.

1980. in a resolution. Rollo) Later.000. . The dispositive portion of said decision should read now as follows: WHEREFORE.00 and cost of suit. 125. After hearing the trial court rendered an amended decision.000. the trial court gave credence to that of the plaintiffs.000. the appellate court.000. Fue Leung also flatly denied having issued to the private respondent the receipt (Exhibit G) and the Equitable Banking Corporation's Check No.00 per day from the time of judicial demand. judgment is rendered in favor of the plaintiff and against the defendant. is hereby reiterated and the decision rendered by this Court on September 30. ordering the latter to pay the former the sum equivalent to 22% of the net profit of P8. the sum equivalent to 22% of the annual profit derived from the operation of Sun Wah Panciteria from October. As between the conflicting evidence of the parties.00 (Exhibit B). Ordering the defendant to pay the plaintiff by way of temperate damages 22% of the net profit of P2.00 a day from judicial demand to May 15. he requested that the decision rendered should include the net profit of the Sun Wah Panciteria which was not specified in the decision. Rollo) The private respondent filed a verified motion for reconsideration in the nature of a motion for new trial and.000.00 a day from May 16. 150. (p. 102. 1975.00 as and for attorney's fees and costs of suit. He contested and impugned the genuineness of the receipt (Exhibit D). the dispositive portion thereof reading as follows: 1. the decision of the court a quo is affirmed in all other respects. until fully paid.000. until fully paid. which was granted earlier by the Court. His evidence is summarized as follows: The petitioner did not receive any contribution at the time he started the Sun Wah Panciteria. the decision appealed from is modified.00 as capital in establishing Sun Wah Panciteria.000. ordering the latter to deliver and pay to the former. The dispositive portion of the appellate court's decision reads: WHEREFORE. the court ruled in favor of the private respondent.000. He used his savings from his salaries as an employee at Camp Stotsenberg in Clark Field and later as waiter at the Toho Restaurant amounting to a little more than P2.in the petitioner's statement of account after the check (Exhibit B) was duly cleared.00 per day from the time of judicial demand. 2. (p. 1971. plus the sum of P5. 13389470 B in the amount of P12. the petitioner presented various government licenses and permits showing the Sun Wah Panciteria was and still is a single proprietorship solely owned and operated by himself alone.000. 1971 to August 30. Hence. the sum equivalent to 22% of the net profit of P8. Similarly. The questioned decision was further modified by the appellate court.00. ordering the plaintiff (sic) and against the defendant. Rollo) The petitioner appealed the trial court's amended decision to the then Intermediate Appellate Court. judgment is hereby rendered.000.00 as and for attorney's fees and costs of suit. modified its decision and affirmed the lower court's decision. (p. 3. 1955. plus the sum of P5. ordering the latter to pay to the former the sum equivalent to 22% of the net profit of P8. And thereafter until fully paid the sum equivalent to 22% of the net profit of P8. The dispositive portion of the resolution reads: WHEREFORE.000. Rana further testified that upon clearance of the check and pursuant to normal banking procedure. the dispositive portion of which reads: FOR ALL THE FOREGOING CONSIDERATIONS. The dispositive portion of the decision reads: WHEREFORE. the dispositive portion of the amended judgment of the court a quo reading as follows: WHEREFORE. Except as modified. judgment is hereby rendered in favor of the plaintiff and against the defendant. and allow private respondent to adduce evidence so that the said decision will be comprehensively adequate and thus put an end to further litigation. until fully paid. is hereby amended. and attorney's fees in the amount of P5. said check was returned to the petitioner as the maker thereof. The motion was granted over the objections of the petitioner. the motion for reconsideration filed by the plaintiff. The petitioner denied having received from the private respondent the amount of P4. as supplement to the said motion. To bolster his contention that he was the sole owner of the restaurant.00 a day.

and form an integral part hereof.. 113 SCRA 243.000. Rollo) In essence. plaintiff (private respondent) would be entitled to twenty-two percentum (22%) of the annual profit derived from the operation of the said panciteria. These allegations. It was. Rollo) The pertinent portions of the complaint state: xxx xxx xxx 2. Therefore. Philippine Currency. In the same resolution. The records show that the PC Crime Laboratory upon orders of the lower court examined the signatures in the two receipts issued separately by the petitioner to the private respondent and So Sia (Exhibits "A" and "D") and compared the signatures on them with the signatures of the petitioner on the various pay envelopes (Exhibits "H". It connotes an ex gratia dole out in favor of someone driven into a state of destitution. nature of the action filed in court is determined by the facts alleged in the complaint as constituting the cause of action. "H-1" to 'H-24") of Antonio Ah Heng and Maria Wong. in return of which private respondent allegedly will receive a share in the profits of the restaurant. duly acknowledged by the defendant is attached hereto as Annex "A". plaintiff delivered to the defendant the sum of four thousand pesos (P4. Hence. Court of Appeals.' (p. the lower courts did not err in construing the complaint as one wherein the private respondent asserted his rights as partner of the petitioner in the establishment of the Sun Wah Panciteria. with the intention of dividing the profits among themselves". 1955. the private respondent alleged that when Sun Wah Panciteria was established.00). financial assistance is the giving out of money to another without the expectation of any returns therefrom'. Thus. Rollo). The supposed standards or specimens of handwriting were marked as Exhibits "H" "H-1" to "H-24" and admitted as evidence for the private respondent over the vigorous objection of the petitioner's counsel. notwithstanding the use of the term financial assistance therein. there is no question from the factual findings that the respondent invested in the business as a partner. as a return for such financial assistance. make the private respondent and the petitioner partners in the establishment of Sun Wah Panciteria because Article 1767 of the Civil Code provides that "By the contract of partnership two or more persons bind themselves to contribute money. Inc. v. 105-106. the PC Crime Laboratory submitted its findings (Exhibit . 3." (De Tavera v.00 was given to the petitioner does not obtain in this case. a serious error for the lower court and the Hon. It was also error for the Hon. 11. But this circumstance under which the P4.. Philippine Tuberculosis Society. claims that this factual finding is erroneous. he gave P4. 75.. 135 SCRA 37). Both the trial court and the appellate court found that the private respondent is a partner of the petitioner in the setting up and operations of the panciteria. (pp. While the dispositive portions merely ordered the payment of the respondents share. After the usual examination conducted on the questioned documents. however. employees of the restaurant. the two courts declared that the private petitioner is entitled to a share of the annual profits of the restaurant. Rollo) The complaint explicitly stated that "as a return for such financial assistance. 107. The petitioner also contends that the respondent court gravely erred in giving probative value to the PC Crime Laboratory Report (Exhibit "J") on the ground that the alleged standards or specimens used by the PC Crime Laboratory in arriving at the conclusion were never testified to by any witness nor has any witness identified the handwriting in the standards or specimens belonging to the petitioner.. Intermediate Appellate Court to interpret or construe 'financial assistance' to mean the contribution of capital by a partner to a partnership. 1955. The same complaint did not claim that private respondent is a partner of the business." (p. (p. the petitioner argues: "The complaint avers that private respondent extended 'financial assistance' to herein petitioner at the time of the establishment of the Sun Wah Panciteria. Intermediate Appellate Court to grant a relief not called for by the complaint. given its ordinary meaning. 1978. plaintiff would be entitled to twentytwo percentum (22%) of the annual profit derived from the operation of the said panciteria. of which copy for the receipt of such amount.000. The petitioner. the motion for reconsideration filed by petitioner was denied.. therefore.00 to the petitioner with the understanding that he would be entitled to twenty-two percent (22%) of the annual profit derived from the operation of the said panciteria. That on October 1. That on or about the latter (sic) of September.000. property or industry to a common fund. Rollo) The well-settled doctrine is that the '". The appellate court did not err in declaring that the main issue in the instant case was whether or not the private respondent is a partner of the petitioner in the establishment of Sun Wah Panciteria. 99. Alger Electric. defendant sought the financial assistance of plaintiff in operating the defendant's eatery known as Sun Wah Panciteria. located in the given address of defendant.is hereby retained in full and affirmed in toto it being understood that the date of judicial demand is July 13. We agree with the appellate court's observation to the effect that ".' (p. Inc. which were proved.

Yulo v. the petitioner did not interpose any objection. The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract. 1955 to July 13. The petitioner raises the issue of prescription. Finally. 1978. Mrs. 1807. Neither did the petitioner file an opposition to the motion of the private respondent to have these exhibits together with the two receipts examined by the PC Crime Laboratory despite due notice to him. 106 Phil. As stated by the respondent. to testify on the income of the restaurant. 1144. Civil Code. The requisites of a partnership which are — 1) two or more persons bind themselves to contribute money. It would be incorrect to state that if a partner does not assert his rights anytime within ten years from the start of operations. property. The private respondent is a partner of the petitioner in Sun Wah Panciteria. a partner shares not only in profits but also in the losses of the firm. Articles 1806. The records also show that when the pay envelopes (Exhibits "H". in relation to Article 1155 thereof which provides: Art.' The argument is not well-taken. 1155. in the absence or any agreement to the contrary. a deferment of sharing in the profits is perfectly plausible. The alleged receipt is dated October 1. The prescription of actions is interrupted when they are filed before the court. From October 1. "H-1" to "H24") were presented by the private respondent for marking as exhibits. and 2) intention on the part of the partners to divide the profits among themselves (Article 1767. Under these circumstances. nine (9) months and twelve (12) days. when there is a written extra-judicial demand by the creditor. It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 which is applicable. (3) Upon a judgment. we find no reason why Exhibit "J" should be rejected or ignored. Article 1842 states: The right to an account of his interest shall accrue to any partner. a certain Mrs. Apart from his own testimony and allegations. The records sufficiently establish that there was a partnership. He argues: The Hon. or industry to a common fund. or his legal representative as against the winding up partners or the surviving partners or the person or partnership continuing the business. Licup. 1978 or after the lapse of twentytwo (22) years. The private respondent's cause of action is premised upon the failure of the petitioner to give him the agreed profits in the operation of Sun Wah Panciteria. Respondent Intermediate Appellate Court gravely erred in not resolving the issue of prescription in favor of petitioner. Sarah L. Licup stated: . The petitioner's argument is based on Article 1144 of the Civil Code which provides: Art. If excellent relations exist among the partners at the start of business and all the partners are more interested in seeing the firm grow rather than get immediate returns. and 1809 show that the right to demand an accounting exists as long as the partnership exists. In effect the private respondent was asking for an accounting of his interests in the partnership. Prescription begins to run only upon the dissolution of the partnership when the final accounting is done. at the date of dissolution. the private respondent presented the cashier of Sun Wah Panciteria. the petitioner assails the appellate court's monetary awards in favor of the private respondent for being excessive and unconscionable and above the claim of private respondent as embodied in his complaint and testimonial evidence presented by said private respondent to support his claim in the complaint. (2) Upon an obligation created by law. Yang Chiao Cheng. no written demands were ever made by private respondent. and when there is any written acknowledgment of the debt by the debtor. no explanation has been offered for his silence nor was any hint of objection registered for that purpose. Regarding the prescriptive period within which the private respondent may demand an accounting.J) attesting that the signatures appearing in both receipts (Exhibits "A" and "D") were the signatures of the petitioner. Likewise. such rights are irretrievably lost. 110)-have been established. 1955 and the complaint was filed only on July 13.

Q Now more or less.1978) xxx xxx xxx COURT: .M.M. ATTY. Mr. Q And ten thousand pesos during pay day. A Yes. sir. you huddle or confer together? A Yes. to 11:30 P.000. of the money. I received around P7. because I am the one who receives the payment also of the catering. Q Per service? A We balance it with the manager. November 15. after your job. if any. what do you do with the money? A That ranges from two thousand to six thousand pesos. after 11:30 (P. for your shift alone in a single day from 3:30 P.000. you were the one who accepted the money and you gave the change.M. is that correct? A Sometimes three times a month. is that correct? A Yes. A Yes. (TSN.? Q Now. I total it. Q How much is that? Q Now. in the evening the restaurant grosses an income of P7. in other words. you stated that among your duties was that you were in charge of the custody of the cashier's box. Mrs. more or less.000. do you know the cost of the catering service? Q So that every time there is a customer who pays. Licup). inclusive. A Per service. We sum it up. Q So.00. will you please tell us. witness.ATTY. count it all. how much is the gross income of the restaurant? A For regular days. 53 to 59. Per catering.00 a day during my shift alone and during pay days I receive more than P10. pp. in an average day. being the cashier. Mrs. xxx xxx xxx A Yes. That is excluding the catering outside the place. will you please tell the Honorable Court how many times a week were there catering services? Q Mrs. Witness. sir. A Yes.) which is the closing time as you said. Dan Fue Leung. Witness. Q What about the catering service.00 in a regular day? I see. HIPOLITO: Q So in other words. sometimes two times a month or more. HIPOLITO (direct examination to Mrs.

and people from all walks of life converge and patronize Sun Wah. There is more than substantial evidence to support the factual findings of the trial court and the appellate court. bank employees. Your Honor. The Court acting with great concern and understanding reset the hearing to November 17. denied said motion and ordered that the case be submitted for resolution based on the evidence on record and gave the parties 30 days from December 23. 1981 and reset them to the later part of the following month. When a subpoenaduces tecum was issued to the petitioner for the production of their records of sale.Any cross? ATTY. the Court. prompting the trial court to state: Counsel for the defendant admitted that the sales of Sun Wah were registered or recorded in the daily sales book. On November 24. The defendant was given all the chance to present all conceivable witnesses. This inspired the Court to ask counsel for the defendant to bring said records and counsel for the defendant promised to bring those that were available. Even if the Court is minded to modify the factual findings of both the trial court and the appellate court. Seemingly. presented witnesses who claimed to have supplied chicken. within which to file their simultaneous memoranda. brokers. defendant instead of presenting the books where the same. it is in the heart of Chinatown where people who buy and sell jewelries. 65. so much so. This Court gave warning to the defendant's counsel that if he failed to produce the books. his counsel voluntarily offered to bring them to court. businessmen. after presenting several witnesses. etc. There is no basis in the records to sustain the petitioners contention that the damages awarded are excessive. p. 127-128) The statements of the cashier were not rebutted. 747 Florentino Torres. It was however a condition in the order granting the postponement to said date that if the defendant cannot be presented. the hearing was reset to December 7 and 22. "Evidence willfully suppressed would be adverse if produced. after much tolerance and judicial magnanimity. counsel for defendant promised that he will present the defendant as his last witness. Again on December 22. 1981 when he asked that this case be postponed for 45 days because said defendant was then in Hongkong and he (defendant) will be back after said period. (T. 145) The records show that the trial court went out of its way to accord due process to the petitioner. The . 1981. p. 5(e) Rule 131). Notably there were several postponement asked by counsel for the defendant and the last one was on October 1. (Rollo. it cannot refer to any portion of the records for such modification. On December 7. 148-150) The restaurant is located at No. egg and other poultry products which. On said date. that was the reason why this case dragged for quite sometime. meat. counsel is deemed to have waived the presentation of said witness and will submit his case for decision. were recorded. 1981. on motion of defendant's counsel. ledgers. According to the trial court. however. the defendant's counsel asked for postponement on the ground that the defendant was sick. journals and for this purpose. 1981 in order to give said defendant another judicial magnanimity and substantial due process. 1981. The petitioner's counsel never produced any books. 1981. 1978). 1981. manager. the counsel for the defendant who again failed to present the defendant asked for another postponement. pp. shrimps.S. 1981 as previously scheduled which hearing was understood as intransferable in character. If the respondent court awarded damages only from judicial demand in 1978 and not from the opening of the restaurant in 1955. however. It is near the corner of Claro M. He asked for sufficient time prompting the court to cancel all hearings for January. 1981. There is no basis in the records for this Court to change or set aside the factual findings of the trial court and the appellate court. after the plaintiff has rested his case on February 25. November 15. Manila in front of the Republic Supermarket. employed a bookkeeper. the same was again reset to December 22. 1981. To bemuddle the issue. Not only did the petitioner's counsel waive the cross-examination on the matter of income but he failed to comply with his promise to produce pertinent records. it is because of the petitioner's contentions that all profits were being plowed back into the expansion of the business. (Rollo. pp." (Rollo. this time to November 24. Sta. did not show the gross sales nor does it prove that the same is the best evidence. UY (counsel for defendant): No cross-examination. Recto Street. Cruz. the same will be considered a waiver on the part of the defendant to produce the said books inimitably showing decisive records on the income of the eatery pursuant to the Rules of Court (Sec.N. there being a typhoon prevailing in Manila said date was declared a partial non-working holiday.

the matter ofmandamus may be summarily be dropped without further comment. Cea Olegario Lastrilla in his own behalf. 1951 Olegario Lastrilla filed in the case a motion. judgment against defendants jointly and severally for the amount of P31. or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him. granted Lastrilla's motion by requiring the sheriff to retain 17 per cent of the money "for delivery to the assignee. 1951.000 representing attorney's fees mistakenly included. SULPICIO V. the partnership of the parties is ordered dissolved. 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". 1831.petitioner was given every opportunity to refute or rebut the respondent's submissions but. vs. BENGZON.14 plus costs was rendered on October 29. 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. interests. petitioners. There shall be a liquidation and winding up of partnership affairs. Art. and other incidents of dissolution because the continuation of the partnership has become inequitable. CEA.: Labaled "Certiorari and Prohibition with preliminary Injunction" this petition prays for the additional writ ofmandamus to compel the respondent judge to give due course to petitioners' appeal from his order taxing costs. The decision having become final. after promising to do so. in part. Over the plaintiffs' objection the judge in his order of June 13. the sheriff sold at auction on June 9. 1951 to Robert Dorfe and Pepito Asturias "all the rights. in his capacity as Judge of the Court of First Instance of Leyte and OLEGARIO LASTRILLA. Arnold Hall. the Court may decree a dissolution of the partnership under Article 1831 of the Civil Code which. Considering the facts of this case. and RAYMUNDO TOMASSI. of all the "shares and interests" of defendant Fred Brown in the FELCO. 1949. (unregistered commercial partnership hereinafter called FELCO). the petition for review is hereby DISMISSED for lack of merit. titles and participation" of the defendants in certain buildings and properties described in the certificate. (4) A partner willfully or persistently commits a breach of the partnership agreement. In civil case No. respondents. J. xxx xxx xxx (6) Other circumstances render a dissolution equitable. SO ORDERED. The decision of the respondent court is AFFIRMED with a MODIFICATION that as indicated above. The Court of Appeals confirmed the award in November 1950. . 193 of the Court of First Instance of Leyte. L-5963 May 20. minus P2. WHEREFORE. Fred Brown and Jean Roxas. EN BANC The resolution of the Intermediate Appellate Court ordering the payment of the petitioner's obligation shows that the same continues until fully paid.R. inasmuch as according to the answer. 1953 in for his own petitioners. it deliberately failed to present its books and other evidence. THE LEYTE-SAMAR SALES CO. behalf. (hereinafter called LESSCO) and Raymond Tomassi against the Far Eastern Lumber & Commercial Co. for a total price of eight thousand and one hundred pesos. wherein he claimed to be the owner by purchase on September 29. Republic SUPREME Manila of the Philippines COURT G. 1948. On application by or for a partner the court shall decree a dissolution whenever: xxx xxx xxx (3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business.. provides: Filomeno Montejo Sulpicio V. However. No. The question now arises as to whether or not the payment of a share of profits shall continue into the future with no fixed ending date. which is a suit for damages by the Leyte-Samar Sales Co.589. return of capital. But on June 4. From the pleadings it appears that.

as he says. that Fred Brown (like Arnold Hall and Jean Roxas) was a partner of the FELCO. if valid. And what is more important.e. Inc. Rule 39 to deliver unto the judgment creditors. se declara que el 17 por ciento de las propiedades vendidas en publica subasta pretenece al Sr. and not for anybody else. The reason is that the sale was made for the judgment creditor (who paid for the fees and notices). That is too elementary to need elaboration. The partner of a partnership is not a creditor of such partnership for the amount of his shares. Lastilla was already a partner of FELCO.) The result then.and that the properties sold at auction actually belonged to the FELCO partnership and the partners. On this score the respondent judge's action on Lastrilla's motion should be declared as in excess of jurisdiction. porque la mismas han sido incluidas en la subasta. does Lastrilla have any proper claim to the proceeds of the sale? If he was a creditor of the FELCO. el Juzgado ha encontrado que no se han respetado los derechos del Sr. 193 as such partner. which the sheriff is directed by section 14. they may want him not to forsake the partnership that might have some obligations in connection with the partnership properties." pero esto no quiere decir que su vlor no esta sujeto a las fluctuaciones del negocio donde las invirtio. or. the plaintiffs in that case. Se vendieron propiedades de la corporacion "Far Eastern Lumber & Co. et al. therefore give me the proceeds because I am the owner". Rule 2. (Remember that judgment in this case was entered in the court of first instance a year before. and the defendants themselves. saying in part: . their position being the such orders were null and void for lack of jurisdiction.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.administrator or receiver" of the FELCO. Now. considering specially that Dorfe and Austrias. 1949. "En su virtud. . which even amounted to want of jurisdiction. i. And on motion of Lastrilla. 1951. what is his remedy? Section 15. which even amounted to want of jurisdiction. Arnold Hall (Fred Brown) en la Far Eastern Lumber & Lumber Commercial C. before the auction sale and he was not a party to the litigation.. not the proceeds of the sale. 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%).. . 1951 when the sale was effected of the properties of FELCO to Roberto Dorfe and Pepito Asturias. . Lastrilla vindicated his claim by proper action. . We ruled once that "action" in this section means action as defined in section 1. Lastilla representan el 17 por ciento del capital de la sociedad "Far Eastern Lumber & Commercial Co.e. is that on June 9.. such shares could not have been transferred to Dorfe and Austrilla. and the lower court's seems to be: inasmuch as Lastrilla had acquired the shares of Brown is September. But he was no. and we shall assume for the moment. Precisely.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.100. Es vedad que las acciones adquiridas por el Sr. i." y de la venta solamente se obtuvo la cantidad de P8. Supposing however that Lastrillas shares have been actually (but unlawfully) sold by the sheriff (at the instance of plaintiffs) to Dorfe and Austrias. and insist. respondents argue. . for the reason that. Lastrilla en lo que se refiere a su adquiscicion de las acciones de C. 1949. 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. The record is not very clear. the court on August 14. . At their request a writ of preliminary injunction was issued here. had undoubtedly the right to be heard—but they were not notified. of all the shares of Fred Brown in the FELCO was valid. "I approve the sale.. 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. . (Annex K) It is from this declaration and the subsequent orders to enforce it 1 that the petitioners seek relief by certiorari. Rule 39 furnishes the answer. modified its order of delivery and merely declared that Lastrilla was entitled to 17 per cent of the properties sold. Inc.. was defendant in Civil Case No. but there are indications. We shall also assume that the sale made to Lastrilla on September 29. if the motion is granted. In other words. the owner of property wrongfully sold may not voluntarily come to court. motion in the case. perhaps or maybe. his shares (acquired from Brown) could not have been and were not auctioned off to Dorfe and Austrias. Lastrilla's theory.3 Anyway his remedy is to claim "the property".

any judgment which the plaintiff might obtain against the tenant would have no effectiveness.. 1951 and August 14. p. all the defendants would have reasonable motives to object to the delivery of 17 per cent of the proceeds to Lustrial. For as the former Chief Justice Dr. and they fought it until the last order of July 10. 56. So ordered. In view of the foregoing. and the Supreme Court. The last order merely declared "que el 17 por ciento de la propiedades vendidas en publica subasta pertenece at Sr. the defendant alleged in his answer that he was occupying the property as a tenant of a third person.) Indispensable parties are those without whom the action cannot be finally determined. It could mean. for. This third person is an indispensable party. Lastrilla y este tiene derecho a dicha porcion. Invoking our ruling in Melocotones vs. carries no persuasive force in this instance.) (Emphasis supplied. Moran has summarized in his Comments. (49 C.J. Thus. and the costs of this suit shall be taxed against the latter. 1952 ed. which should be set aside though an appeal was available but was not availed of. Comments. the Court set aside an order amending a judgment acquired a definitive character. each coowner is an indispensable party. might also oppose the substitution by Lastrilla of Fred Brown. and cannot be executed against. (Moran. and we so hold. Court of First Instance.S. 1952 (Annex Q). express or implied. 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". 67. It was only on April 16. courts have gone even as far as to disregard completely the questions of petitioner's fault. because it is so much money deducted. I. In all these case the existence of the right to appeal has been recitals was rendered without any trial or hearing. wherein we applied the theory of laches to petitioners' 3-years delay in requesting certiorari. undoubtedly. for it would not be binding upon. although ordinarily decisive. 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. In another case. Surely a month's delay may not be regarded as laches. without him. said that the judgment was by its own recitals a patent nullity. It should be observed that the order of June 13 was superseded by that of August 14. and a court cannot properly adjudicate matters involved in a suit when necessary and indispensable parties to the proceedings are not before it. . For this reason the respondents' argument resting on plaintiffs' failure to appeal from the orders on time. these varied interest of necessity make Dorfe. 1952 ed. of the parties. .. because promulgated in excess or outside of its jurisdiction. In a case for recovery of real property. There is the order that actually prejudiced the petitioners herein. . the judgment against them being joint and several. And in those instances wherein the lower court has acted without jurisdiction over the subject-matter. They might entertain misgivings about Brown's slipping out of their common predicament through the disposal of his shares. against whom the plaintiff has to file another action if he desires to recover the property effectively.. the orders of the court recognizing Lastrilla's right and ordering payment to him of a part of the proceeds were patently erroneous. 144). and obviously took no part in the proceedings on the motion. eyeing Lastrilla's financial assets. an order granting a review of a decree of registration issued more than a year ago had been declared null void.when the time for redemptioner seventeen per cent (178%) less than amount they had paid for the same properties. Lastly. (57 Phil. The preliminary injunction heretofore issued is made permanent. . II. 1951 this special civil action was not filed until August 1952. 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. Supposing of course. respondents point out that whereas the orders complained of herein were issued in June 13. 168 — The defendants Arnold Hall and Jean Roxas. that acts performed with absolute want of jurisdiction over the subject-matter are void ab initio and cannot be validated by consent. and for which the plaintiffs might as another levy on their other holdings or resources. In an action for partition of property. p. Now. 1951. it is our opinion. Asturias and the defendants indispensable parties to the motion of Lastrilla — granting it was step allowable under our regulations on execution.) Wherefore. that the purchasers of the property (Dorfe and Asturias) had to recognize Lastrilla's ownership. in granting certiorari. And still in another case. . as hereinbefore indicated." This does not necessarily mean that 17 per cent of the money had to be delivered to him. the reason being. the defendant's landlord. . A valid judgment cannot be rendered where there is a want of necessary parties. . Vol. Vol. there was no fraudulent collusion among them. Yet these parties were not notified. or where the order or judgment complained of is a patent nullity.

Reyes. Pablo. Montemayor..J. Jugo.Paras. C. Bautista Angelo and Labrador. concur. . Feria. Tuason. JJ..