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42. G.R. No. 6252, Dietrich v. Freeman, Pierce and Whitcomb, 18 Phil.

341,January 28,
1. GEORGE O. DIETRICH, plaintiff-appellee employee of Manila Steam Laundry, business of
herein defendants.
2. BURTON WHITCOMB appellant defendant of this case. A subsequent partner of
freeman after the former obtained the right, title, and interest of Pierce.
3. O.K. FREEMAN and JAMES PIERCE co-defendants/partner of herein appellant.
4. TRENT, J ponente
An action for recovery of P952 was instituted by herein plaintiff for the services he
rendered from 1907-1908 to the laundry shop.
When the plaintiff was first employed on 1907, this steam laundry was owned and
operated by Freeman and Pierce.
Pierce, on the same year, sold all of his right, title, and interest in the said laundry to
Whitcomb, who, together with Freeman, then became the owners of this laundry and
continued to operate the same as long as the plaintiff was employed.
Judgment was rendered in favor of the plaintiff and against Freeman and Whitcomb, jointly
and severally, for the sum of P752, with interest.
Defense of Apellant:
He never knew the plaintiff.
The contract of plaintiff was between him and Freeman.
Pierce continued to look after Whitcomb's interest by authority of the latter.
Issue: Whether or not Whitcomb solidary liability with the other defendants. NO.
Ruling: Absent registration of their undertakings and agreements contained in a public
instrument I compliance with Art. 17 and 119 of the Code of Commerce, no formal partnership
was ever entered into by them, notwithstanding the fact that they were engaged in the operation
of this laundry. The purpose for which this partnership was entered into by Freeman and
Whitcomb show clearly that such partnership was not a commercial one; hence the provisions of
the Civil Code and not the Code of Commerce must govern in determining the liability of the
In a partnership of cuentas en participacion, under the provisions of article 242 of the
Code of Commerce, those contract with the person in whose name the business of such a
partnership was conducted shall have only the right of action against such person and not
against other persons interested. So this case is easily distinguished from the case at bar, in that
the one did not have the corporate name while the other was known as the Manila Steam
The plaintiff was employed by and performed services for the Manila Steam Laundry and
was not employed by nor did he perform services for Freeman alone. The public did not deal with
Freeman and Whitcomb personally, but with the Manila Steam Laundry. These two partners were
doing business under this name and, as we have said, it was not a commercial partnership.
Therefore, by the express provisions of articles 1698 and 1137 of the Civil Code the partners are
not liable individually for the entire amount due the plaintiff. The liability is pro rata and in this
case the appellant is responsible to the plaintiff for only one-half of the debt.
NO RELATION TO THE CASE but entered herein:
A motion was filed on the 22nd of August, 1910, by O'Brien and De Witt, asking this court to
strike from the record certain allegations in the printed brief of counsel for the appellee. These
allegations are as follows: "Does the receipt bear the earmarks of newly discovered evidence? Or
of newly manufactured evidence?" These questions were directed against O'Brien, one of the
counsel for appellant in this case, and were intended to have the court believe that O'Brien had
manufactured the receipt referred to. There is nothing in this record which shows that O'Brien did
falsify or manufacture the receipt. These questions are clearly impertinent. It is our duty to keep

our records clean and free from such unwarranted statements. It is, therefore, ordered that the
same be stricken from the record. So ordered.
43. G.R. No. 70403, Santiago Syjuco., Inc. vs Castro, July 7, 1989
1. Santiago Syjuco., Inc. petitioner, mortgagee. Seeks for the enforcement of the
foreclosure order of the RTC as affirmed by the CA and SC in an action decided beforehand
by the SC.
2. Jose Castro judge of RTC QC Branch 85. Issued an order ex-parte of petitioner declaring
the mortgage as null and void.
3. THE PARTNERSHIP OF THE HEIRS OF HUGO LIM a partnership formed and owned
exclusively by herein respondent Lims. Contends that it did not give its consent for the
mortgage property which it claims to be contributed to it before the mortgage was
instituted in favor of petitioner.
4. Siblings Eugenio, Aramis, Mario, Paulino, Lorenzo, & Nila Lim executed a real mortgage
over properties they inherited from their father in favor to petitioner.
5. Atty. Paterno Canlas lawyer of herein private respondents who insinuated cases after
cases to delay the foreclosure of the properties.
The Lims, borrowed from petitioner Santiago Syjuco, Inc. (hereinafter, Syjuco only) an
aggregate amount of P2,460,000 secured by properties they inherited as owners in
There is no dispute about these facts, nor about the additional circumstance that as
stipulated in the mortgage deed the obligation matured on November 8, 1967; that the
Lims failed to pay it despite demands therefor; that Syjuco consequently caused extrajudicial proceedings for the foreclosure of the mortgage to be commenced by the Sheriff of
Manila; and that the latter scheduled the auction sale of the mortgaged property on
December 27, 1968. 1 The attempt to foreclose triggered off a legal battle that has
dragged on for more than twenty years now, fought through five (5) cases in the trial
courts, 2 two (2) in the Court of Appeals, 3 and three (3) more in this Court, 4 with the end
only now in sight.
What is relevant to our subject from the different cases filed and discussed herein are as follows:
They caused the filing with the Regional Trial Court of Quezon City of still another action,
the third, also designed, like the first two, to preclude enforcement of the mortgage held
by Syjuco.
This time the complaint was presented, not in their individual names, but in the name of a
partnership of which they themselves were the only partners: "Heirs of Hugo Lim."
The complaint advocated the theory that the mortgage which they, together with their
mother, had individually constituted (and thereafter amended during the period from 1964
to 1967) over lands standing in their names in the Property Registry as owners pro
indiviso, in fact no longer belonged to them at that time, having been earlier deeded over
by them to the partnership, "Heirs of Hugo Lim", more precisely, on March 30, 1959,
hence, said mortgage was void because executed by them without authority from the
Issue: Whether or not the partnership has claims over the mortgaged property. NONE.
Ruling: The record shows that the respondent partnership is composed exclusively of the
individual Lims in whose name all the cases herein referred to, with the sole exception of Civil
Case No. Q-36485, were brought and prosecuted, their contribution to the partnership consisting
chiefly, if not solely, of the property subject of the Syjuco mortgage. It is also a fact that despite
its having been contributed to the partnership, allegedly on March 30, 1959, the property was

never registered with the Register of Deeds in the name of the partnership, but to this date
remains registered in the names of the Lims as owners in common. The original mortgage deed
of November 14,1964 was executed by the Lims as such owners, as were all subsequent
amendments of the mortgage. There can be no dispute that in those circumstances, the
respondent partnership was chargeable with knowledge of the mortgage from the moment of its
execution. The legal fiction of a separate juridical personality and existence will not shield it from
the conclusion of having such knowledge which naturally and irresistibly flows from the undenied
facts. It would violate all precepts of reason, ordinary experience and common sense to propose
that a partnership, as commonly known to all the partners or of acts in which all of the latter,
without exception, have taken part, where such matters or acts affect property claimed as its
own by said partnership.
What was done by the Lims or by the partnership of which they were the only memberswas to split their cause of action in violation of the well known rule that only one suit may be
instituted for a single cause of action. 44 The right sought to be enforced by them in all their
actions was, at bottom, to strike down the mortgage constituted in favor of Syjuco, a right which,
in their view, resulted from several circumstances, namely that the mortgage was constituted
over property belonging to the partnership without the latter's authority; that the principal
obligation thereby secured was usurious; that the publication of the notice of foreclosure sale
was fatally defective, circumstances which had already taken place at the time of the institution
of the actions. They instituted four (4) actions for the same purpose on one ground or the other,
making each ground the subject of a separate action. Upon these premises, application of the
sanction indicated by law is caned for, i.e., the judgment on the merits in any one is available as
a bar in the others. 45
The first judgment-rendered in Civil Case No. 75180 and affirmed by both the Court of
Appeals (CA-G.R. No. 51752) and this Court (G.R. No. L-45752) should therefore have barred all
the others, all the requisites of res judicata being present.
The principles of equitable estoppel, sometimes called estoppel in pais - . This
doctrine rests on the principle that if one maintains silence, when in conscience he
ought to speak, equity will debar him from speaking when in conscience he ought to
remain silent. He who remains silent when he ought to speak cannot be heard to
speak when he should be silent.
44. G.R. No. L-12164, Liwanag and Reyes v. Workmen's Compensation Commission et
al., 105 Phil. 741
May 22, 1959
1. Benito Liwanag and Maria Liwanag Reyes appellants. co-owners of Liwanag Auto Supply
2. Ciriaca Vda. de Balderama and minor children Genara, Carlos and Leogardo, all surnamed
Balderama, - heirs of appellants auto supply shop commercial guard who died in line of
3. WORKMEN'S COMPENSATION COMMISSION declared herein appellants solidary liable for
the compensation entitled to the heirs.
4. ENDENCIA, J. ponente
Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners of Liwanag Auto
A commercial guard who while in line of duty, was killed by criminal hands.
Heirs, in due time filed a claim for compensation with the Workmen's Compensation

The Commission granted in an award in favor of the heirs ordering appellants To pay
jointly and severally the amount of three thousand Four Hundred Ninety Four and 40/100
(P3,494.40) Pesos to the claimants in lump sum and cost.

Appellants defense: 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 same should have been specifically provided, and that, in
absence of such clear provision, the responsibility of appellants should not be solidary but merely
Issue: Whether or not appellants are solidarily liable. YES.
Ruling: At first blush appellants' contention would seem to be well, for ordinarily, the liability of
the partners in a partnership is not solidary; 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. And although the Workmen's Compensation Act does not
contain any provision expressly declaring solidary obligation of business partners like the herein
appellants, there are other provisions of law from which it could be gathered that their liability
must be solidary. Arts. 1711 and 1712 of the new Civil Code provide:
ART. 1711. Owners of enterprises and other employers are obliged to pay compensation
for the death of or injuries to their laborers, workmen, mechanics or other employees, even
though the event may have been purely accidental or entirely due to a fortuitous cause, if the
death or personal injury arose out of and in the course of the employment. . . .
ART. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and
the employer shall be solidarily liable for compensation. . . .
45. McDonald vs National City Bank of New York [G.R. No. L-7991. May 21, 1956.]
1. STASIKINOCEY is a partnership doing business at No. 58, Aurora Boulevard, San Juan, Rizal.
SEC denied its registration as a partnershiphaving a business name of CARDINAL RATTAN
FACTORY as founded by the courts
2. Alan W. Gorcey, Louis F. da Costa, Jr., William Kusik and Emma Badong Gavino partners
3. PAUL MACDONALD purchaser of mortgaged properties of the partnership and then later
sold it again to another person
4. Benjamin Gonzales purchaser of the properties bought by Macdonald from the
5. National City Bank of New York accepted the promissory note of herein partnership
joined by herein partners for the payment of bank overdrafts from the said bank.
6. William Shaeffer creditor of the partnership
7. Paras, J - ponente
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. (Violation of Anti-Bulk sales Law)
While the said loan was still unpaid and the chattel mortgage subsisting, Defendant
partnership, 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 Plaintiffs 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 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.
CIF of Manila rendered a judgment against petitioners holding them solidarily liable.
Upon appeal to CA brought by Macdonald and Gonzales, RTC decision was affirmed with
modification, relieving Shaeffer from his obligations

Issue: Whether or not petitioners can be held solidarily liable. YES.

Ruling: 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; and 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.
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.

46. Pioneer Insurance & Security Corporation vs CA, G.R. No. 84197 July 28, 1989
1. PIONEER INSURANCE & SURETY CORPORATION insurer of Jacob Lim for payment of 2
aircrafts and spare parts he purchased.
2. Jacob Lim owner/ operator Southern Air Lines (SAL) petitioner in G.R. 84157
3. Border Machinery and Heavy Equipment (BORMAHECO), Francisco and Modesto Cervantes,
Constancio Magalana respondents
in both consolidated cases. They claim that they
are entitled for reimbursement from Lim
4. Gutierrez, J Ponente
This is a consolidated case with GR #s 84197 and 84517 having claims, counter-claims and
G.R. 84197, Pioneer as the petitioner, is a foreclosure proceeding against the chattel mortgage
that Lim instituted over the aircrafts and spare parts he purchased. Such purchase was insured
for payment by herein petitioner as a surety. Upon default, and Pioneer paying the said
obligation, the latter sought the foreclosure of the property. It was alleged however that Pioneer
has no cause of action since it was already paid by a reinsurer that it is only acting on behalf of
the said reinsurer. The RTC and CA dismissed the claims of Pioneer. Affirmed by the SC.
GR 84517 Jacob S. Lim as petitioner:

On May 17, 1965, at Tokyo, Japan, Japan Domestic Airlines (JDA) and Lim entered into and
executed a sales contract for the sale and purchase of two aircrafts and one (1) set of
necessary spare parts.
On May 22, 1965, Pioneer issued a surety bond to assure payment of Lim over the said
It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco),
Francisco and Modesto Cervantes (Cervanteses) and Constancio Maglana (respondents in
both petitions) contributed some funds used in the purchase of the above aircrafts and
spare parts.
The funds were supposed to be their contributions to a new corporation proposed by Lim
to expand his airline business.
They executed two (2) separate indemnity agreements in favor of Pioneer, one signed by
Maglana and the other jointly signed by Lim for SAL, Bormaheco and the Cervanteses
binding them jointly and severally to indemnify and hold and save harmless Pioneer in any
damages, loss, cost it may incur.
Lim defaulted and Pioneer instituted a foreclosure proceeding over the properties
mortgage to it by Lim.
The Cervanteses and Maglana, however, filed a third party claim alleging that they are coowners of the aircrafts.
RTC ruled that Lim is liable against Pioneer and ordered Pioneer to indemnify the
defendants for their overpayment as reinsurer to Pioneer.
CA dismissed all claims of Pioneer and upheld the claims of the defendants and ordered
Lim to reimburse the defendants of the contributions they gave amounting to P150, 000.

Issue: Whether or not the defendants formed a corporation with Lim. No.
Ruling: Doctrine: Where persons associate themselves together under articles to purchase
property to carry on a business, and their organization is so defective as to come short of
creating a corporation within the statute, they become in legal effect partners inter se, and their
rights as members of the company to the property acquired by the company will be recognized.
However, such a relation does not necessarily exist, for ordinarily persons cannot be made to
assume the relation of partners, as between themselves, when their purpose is that no
partnership shall exist, and it should be implied only when necessary to do justice between the
parties; thus, one who takes no part except to subscribe for stock in a proposed corporation
which is never legally formed does not become a partner with other subscribers who engage in
business under the name of the pretended corporation, so as to be liable as such in an action for
settlement of the alleged partnership and contribution.
In his answer, the petitioner denied having received any amount from respondents
Bormaheco, the Cervanteses and Maglana. The trial court and the appellate court, however,
found through Exhibit 58, that the petitioner received the amount of P151,000.00 representing
the participation of Bormaheco and Atty. Constancio B. Maglana in the ownership of the subject
airplanes and spare parts. The record shows that defendant Maglana gave P75,000.00 to
petitioner Jacob Lim thru the Cervanteses.
It is therefore clear that the petitioner never had the intention to form a corporation with the
respondents despite his representations to them. This gives credence to the cross-claims of the
respondents to the effect that they were induced and lured by the petitioner to make
contributions to a proposed corporation which was never formed because the petitioner reneged
on their agreement.
47. Viuda de Chan vs Pen, G.R. No. L-29182

October 24, 1928

1. LEONCIA VIUDA DE CHAN DIACO (alias LAO LIONG NAW) appellee. owner of a
grocery store who is being subjected for insolvency proceedings.

2. JOSE S. Y. PENG assignee-appellant during the insolvency proceedings.

3. Ricardo Summers clerk of court designated as referee referee, authorizing him
to take further evidence in regard to the questions of fact
4. San Miguel Brewery, Porta Pueco & Co., and Ruiz & Rementaria S. creditors
who instituted the insolvency proceedings
5. Judge Simplicio del Rosario and Judge Francisco Zandueta judges who take
cognizance of the case, the latter replacing the former during the formers
6. Lao Liong Naw & Co. alleged partnership of the appellee
7. OSTRAND, J. ponente
This is an appeal from a decision of the Court of First Instance of Manila dismissing an
insolvency proceeding.
In their petition for the declaration of the insolvency, the above-mentioned firms alleged,
among other things, that Leoncia was indebted to them in the sum of P26,234.47, which
debt was incurred within thirty days prior to the filing of said petition. It further appears
that other creditors have filed claims against the estate to the amount of P50,000.
Judge Simplicio del Rosario, in an order dated September 12, 11925, appointed Ricardo
Summers, the clerk of the Court of First Instance of Manila, referee.
A report was rendered by the referee and was approved by the said Judge.
The report contained that there are other assets left with the assignee amounting to
P100,000 more or less and books of accounts and that Leoncia delivered merchandise
worth P20,000 and cash amounting to P5,000. These merchants were ordered to show
cause why they should not return the said assets delivered to them.
Attorney for the insolvent filed a motion asking the court to dismiss the proceedings
against her on the ground that they should have been brought against the partnership
"Lao Liong Naw & Co.," of which she was only a member.
The referee rendered a second report, in which he found as facts that the alleged
partnership between the insolvent and some of her relatives and employees was only a
fictitious organization created for the purpose of deceiving the Bureau of Customs and
enable some of the aforesaid relatives, who were mere coolies, to come to the Philippines
under the status of merchants.
The report was assigned for hearing on May 21, 1927. Judge Del Rosario was then absent
on leave and the matter was, therefore, submitted to Judge Francisco Zandueta, who had
been temporarily assigned to take the place of Judge Del Rosario, and on June 6, 1927, a
decision was rendered disapproving the report of the referee. Thereby dismissing the
insolvency proceedings.
Issue: Whether or not the insolvency should be dismissed based on the claim of
appellee that she is just a partner. NO.
Ruling: It is to be observed that conceding for the sake of the argument that the debts in
question were incurred by the alleged partnership, it clearly appears from the record that said
partnership, as such, has no visible assets that, therefore, the partners individually must, jointly
and severally, respond for its debts (Code of Commerce, art. 127). As the appellee is one of the
partners and admits that she is insolvent, we can see no reason for the dismissal of the
proceedings against her. It is further to be noted that both the partnership and the separate
partners thereof may be joined in the same action, though the private property of the latter
cannot be taken in payment of the partnership debts until the common property of the concern is
exhausted and, under this rule, it seems clear that the alleged partnership here in question may,
if necessary, be included in the case by amendments to the insolvency petition.
We also call attention to the fact that the evidence clearly shows that the business,
alleged to have been that of the partnership, was carried on under the name "Leoncia Vda. de
Chan Diaco" or "La Vda. de G. G. Chan Diaco," both of which are names of the appellee, and we

think it can be safely held that a partnership may be adjudged bankrupt in the name of an
ostensible partner, when such name is the name under which the partnership did business.