Republic of the Philippines

SUPREME COURT
Manila
EN BANC
A.M. No. 133-J May 31, 1982
BERNARDITA R. MACARIOLA, complainant,
vs.
HONORABLE ELIAS B. ASUNCION, Judge of the Court of First Instance of Leyte, respondent.

MAKASIAR, J:
In a verified complaint dated August 6, 1968 Bernardita R. Macariola charged respondent Judge
Elias B. Asuncion of the Court of First Instance of Leyte, now Associate Justice of the Court of
Appeals, with "acts unbecoming a judge."
The factual setting of the case is stated in the report dated May 27, 1971 of then Associate Justice
Cecilia Muñoz Palma of the Court of Appeals now retired Associate Justice of the Supreme Court, to
whom this case was referred on October 28, 1968 for investigation, thus:
Civil Case No. 3010 of the Court of First Instance of Leyte was a complaint for
partition filed by Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto
Reyes, Adela Reyes, and Priscilla Reyes, plaintiffs, against Bernardita R. Macariola,
defendant, concerning the properties left by the deceased Francisco Reyes, the
common father of the plaintiff and defendant.
In her defenses to the complaint for partition, Mrs. Macariola alleged among other
things that; a) plaintiff Sinforosa R. Bales was not a daughter of the deceased
Francisco Reyes; b) the only legal heirs of the deceased were defendant Macariola,
she being the only offspring of the first marriage of Francisco Reyes with Felisa
Espiras, and the remaining plaintiffs who were the children of the deceased by his
second marriage with Irene Ondez; c) the properties left by the deceased were all the
conjugal properties of the latter and his first wife, Felisa Espiras, and no properties
were acquired by the deceased during his second marriage; d) if there was any
partition to be made, those conjugal properties should first be partitioned into two
parts, and one part is to be adjudicated solely to defendant it being the share of the
latter's deceased mother, Felisa Espiras, and the other half which is the share of the
deceased Francisco Reyes was to be divided equally among his children by his two
marriages.
On June 8, 1963, a decision was rendered by respondent Judge Asuncion in Civil
Case 3010, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court, upon
a preponderance of evidence, finds and so holds, and hereby renders
judgment (1) Declaring the plaintiffs Luz R. Bakunawa, Anacorita
Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes as the only
children legitimated by the subsequent marriage of Francisco Reyes
Diaz to Irene Ondez; (2) Declaring the plaintiff Sinforosa R. Bales to
have been an illegitimate child of Francisco Reyes Diaz; (3) Declaring
Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506 and 1/4 of Lot
1145 as belonging to the conjugal partnership of the spouses
Francisco Reyes Diaz and Felisa Espiras; (4) Declaring Lot No. 2304
and 1/4 of Lot No. 3416 as belonging to the spouses Francisco
Reyes Diaz and Irene Ondez in common partnership; (5) Declaring
that 1/2 of Lot No. 1184 as belonging exclusively to the deceased
Francisco Reyes Diaz; (6) Declaring the defendant Bernardita R.
Macariola, being the only legal and forced heir of her mother Felisa
Espiras, as the exclusive owner of one-half of each of Lots Nos.
4474, 4475, 4892, 5265, 4803, 4581, 4506; and the remaining onehalf (1/2) of each of said Lots Nos. 4474, 4475, 4892, 5265, 4803,
4581, 4506 and one-half (1/2) of one-fourth (1/4) of Lot No. 1154 as
belonging to the estate of Francisco Reyes Diaz; (7) Declaring Irene
Ondez to be the exclusive owner of one-half (1/2) of Lot No. 2304
and one-half (1/2) of one-fourth (1/4) of Lot No. 3416; the remaining
one-half (1/2) of Lot 2304 and the remaining one-half (1/2) of onefourth (1/4) of Lot No. 3416 as belonging to the estate of Francisco
Reyes Diaz; (8) Directing the division or partition of the estate of
Francisco Reyes Diaz in such a manner as to give or grant to Irene
Ondez, as surviving widow of Francisco Reyes Diaz, a hereditary
share of. one-twelfth (1/12) of the whole estate of Francisco Reyes
Diaz (Art. 996 in relation to Art. 892, par 2, New Civil Code), and the
remaining portion of the estate to be divided among the plaintiffs
Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto
Reyes, Adela Reyes, Priscilla Reyes and defendant Bernardita R.
Macariola, in such a way that the extent of the total share of plaintiff
Sinforosa R. Bales in the hereditary estate shall not exceed the
equivalent of two-fifth (2/5) of the total share of any or each of the
other plaintiffs and the defendant (Art. 983, New Civil Code), each of
the latter to receive equal shares from the hereditary estate, (Ramirez
vs. Bautista, 14 Phil. 528; Diancin vs. Bishop of Jaro, O.G. [3rd Ed.]
p. 33); (9) Directing the parties, within thirty days after this judgment
shall have become final to submit to this court, for approval a project
of partition of the hereditary estate in the proportion above indicated,
and in such manner as the parties may, by agreement, deemed
convenient and equitable to them taking into consideration the
location, kind, quality, nature and value of the properties involved;
(10) Directing the plaintiff Sinforosa R. Bales and defendant
Bernardita R. Macariola to pay the costs of this suit, in the proportion
of one-third (1/3) by the first named and two-thirds (2/3) by the
second named; and (I 1) Dismissing all other claims of the parties [pp
27-29 of Exh. C].

The decision in civil case 3010 became final for lack of an appeal, and on October
16, 1963, a project of partition was submitted to Judge Asuncion which is marked
Exh. A. Notwithstanding the fact that the project of partition was not signed by the
parties themselves but only by the respective counsel of plaintiffs and defendant,
Judge Asuncion approved it in his Order dated October 23, 1963, which for
convenience is quoted hereunder in full:
The parties, through their respective counsels, presented to this
Court for approval the following project of partition:
COMES NOW, the plaintiffs and the defendant in the above-entitled
case, to this Honorable Court respectfully submit the following Project
of Partition:
l. The whole of Lots Nos. 1154, 2304 and 4506 shall belong
exclusively to Bernardita Reyes Macariola;
2. A portion of Lot No. 3416 consisting of 2,373.49 square meters
along the eastern part of the lot shall be awarded likewise to
Bernardita R. Macariola;
3. Lots Nos. 4803, 4892 and 5265 shall be awarded to Sinforosa
Reyes Bales;
4. A portion of Lot No. 3416 consisting of 1,834.55 square meters
along the western part of the lot shall likewise be awarded to
Sinforosa Reyes-Bales;
5. Lots Nos. 4474 and 4475 shall be divided equally among Luz
Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes
and Priscilla Reyes in equal shares;
6. Lot No. 1184 and the remaining portion of Lot No. 3416 after taking
the portions awarded under item (2) and (4) above shall be awarded
to Luz Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela
Reyes and Priscilla Reyes in equal shares, provided, however that
the remaining portion of Lot No. 3416 shall belong exclusively to
Priscilla Reyes.
WHEREFORE, it is respectfully prayed that the Project of Partition
indicated above which is made in accordance with the decision of the
Honorable Court be approved.
Tacloban City, October 16, 1963.
(SGD) BONIFACIO RAMO Atty. for the Defendant Tacloban City
(SGD) ZOTICO A. TOLETE Atty. for the Plaintiff Tacloban City

only for the purpose of giving authority to the Register of Deeds of the Province of Leyte to issue the corresponding transfer certificates of title to the respective adjudicatees in conformity with the project of partition (see Exh. Dr.quoted.306 sq. a stenographer in Judge Asuncion's court (Exhs. and to perform such other acts as are legal and necessary to effectuate the said Project of Partition. F.162. as above. meters was sold on July 31. was adjudicated in said project of partition to the plaintiffs Luz. upon assurance of both counsels of the respective parties to this Court that the Project of Partition. 1963. nevertheless. B. finding the above-quoted Project of Partition to be in accordance with law. while Lot 1184-E which had an area of 2. Arcadio Galapon (Exh. The above Order of October 23. 1963. 2) who was issued transfer certificate of title No. This lot. had been made after a conference and agreement of the plaintiffs and the defendant approving the above Project of Partition.While the Court thought it more desirable for all the parties to have signed this Project of Partition. and that both lawyers had represented to the Court that they are given full authority to sign by themselves the Project of Partition. and Priscilla all surnamed Reyes in equal shares. 2338 of the Register of Deeds of the city of Tacloban (Exh. 1964 to Dr. therefore. Lot 1184-D was conveyed to Enriqueta D. Anacorita Ruperto.5 sq. V). Anota. (SGD) ELIAS B. which according to the decision was the exclusive property of the deceased Francisco Reyes. 12). the Court. 11).172. this 23rd day of October. which particular portion was declared by the latter for taxation purposes (Exh. documents or instrument sufficient in form and substance for the vesting of the rights. F). therefore. 1965. Victoria S. meters. . 1963. The parties. Given in Tacloban City. meters to Judge Asuncion and his wife. F-1 and V-1). Arcadio Galapon and his wife Sold a portion of Lot 1184-E with an area of around 1. are directed to execute such papers. SO ORDERED. interests and participations which were adjudicated to the respective parties. ASUNCION Judge EXH. One of the properties mentioned in the project of partition was Lot 1184 or rather one-half thereof with an area of 15. U). Adela. hereby approves the same.5556 sq. and when the project of partition was approved by the trial court the adjudicatees caused Lot 1184 to be subdivided into five lots denominated as Lot 1184-A to 1184-E inclusive (Exh. On March 6. was amended on November 11. Asuncion (Exh. as outlined in the Project of Partition and the delivery of the respective properties adjudicated to each one in view of said Project of Partition.

1968 (pp. Catalina Cabus. 481. rec. Inc. rec. 3010 and the two orders issued by respondent Judge approving the same." which was docketed as Civil Case No. Jaime Arigpa Tan. Likewise. 477.. of R." (Exit 15 & 16). Section 12. Humilia Jalandoni Tan. For one. Ramento. to wit: [1] that respondent Judge Asuncion violated Article 1491. 1967 (Exh. In Our resolution of October 28. 4234 was filed. 1968 alleging four causes of action. the cases against defendants Serafin P. After hearing. 1966 to the Traders Manufacturing and Fishing industries.). having already conveyed on March 6. Asuncion as the secretary (Exhs. 1184-E which was one of those properties involved in Civil Case No. Bales. Similarly. however. It appears. respondent should be warned in case of a finding that he is prohibited under the law to engage in business.A. entitled "Bernardita R. Arcadio Galapon was dismissed because he was no longer a real party in interest when Civil Case No. Rule XVIII of the Civil Service Rules. [3] that respondent was guilty of coddling an impostor and acted in disregard of judicial decorum by closely fraternizing with a certain Dominador Arigpa Tan who openly and publicly advertised himself as a practising attorney when in truth and in fact his name does not appear in the Rolls of Attorneys and is not a member of the Philippine Bar. 3010 decided by him. with Judge Asuncion as the President and Mrs. 4234 was filed as the portion of Lot 1184 acquired by her and respondent Judge from Dr. of the New Civil Code in acquiring by purchase a portion of Lot No. Macariola filed on August 9. On the third and fourth causes of action. that some defendants were dropped from the civil case. [2] that he likewise violated Article 14. paragraphs I and 5 of the Code of Commerce. as well as the partition of the estate and the subsequent conveyances with damages. 1965 a portion of lot 1184-E to respondent Judge and on August 31. otherwise known as the Anti-Graft and Corrupt Practices Act. 1971 recommending that respondent Judge should be reprimanded or warned in connection with the first cause of action alleged in the complaint. The records also reveal that on or about November 9 or 11. paragraph 5. versus Sinforosa R. 1966 the remainder was sold to the Traders Manufacturing and Fishing Industries. Inc. 1968. 1966. spouses Asuncion and spouses Galapon conveyed their respective shares and interest in Lot 1184-E to "The Traders Manufacturing and Fishing Industries Inc. We referred this case to then Justice Cecilia Muñoz Palma of the Court of Appeals. 4235. as a stockholder and a ranking officer while he was a judge of the Court of First Instance of Leyte. Respondent Judge Asuncion filed on September 24. the said Investigating Justice submitted her report dated May 27. Arcadio Galapon was already sold on August 31.. Inc. 1968 by herein complainant. and for the second cause of action. rec. report and recommendation. plaintiff. .). paragraph H. complainant herein instituted an action before the Court of First Instance of Leyte.]. E-4 to E-7).On August 31. Complainant Bernardita R. Jesus Perez. and Canon 25 of the Canons of Judicial Ethics. Asuncion. E) [pp. seeking the annulment of the project of partition made pursuant to the decision in Civil Case No. Victoria S. 1968 the instant complaint dated August 6. Section 3. Justice Palma recommended that respondent Judge be exonerated. by associating himself with the Traders Manufacturing and Fishing Industries. 1-7. et al. and [4] that there was a culpable defiance of the law and utter disregard for ethics by respondent Judge (pp. 1968 his answer to which a reply was filed on October 16. 378-385." which we shall henceforth refer to as "TRADERS" were registered with the Securities and Exchange Commission only on January 9. Judge Asuncion. The Articles of Incorporation of "The Traders Manufacturing and Fishing Industries. Inc. At the time of said sale the stockholders of the corporation were Dominador Arigpa Tan. defendants. for investigation. the case against defendant Victoria Asuncion was dismissed on the ground that she was no longer a real party in interest at the time the aforesaid Civil Case No. Ben Barraza Go. 3019. and the latter's wife. the case against Dr. Macariola.

plaintiff therein. IN THE CASE AGAINST THE DEFENDANT SINFOROSA R. (2) Directing the plaintiff to pay the defendants Mariquita Villasin and the heirs of Gerardo Villasin the cost of the suit. Asuncion. Nepomuceno of the Court of First Instance of Leyte. 1970. and her counsel. (a) the sum of FOUR HUNDRED THOUSAND PESOS [P400. Judge Jose D.00] for moral damages. C. FOR HERSELF AND FOR THE HEIRS OF THE DECEASED GERARDO VILLASIN — (1) Dismissing the complaint against the defendants Mariquita Villasin and the heirs of the deceased Gerardo Villasin. 3010 — . Mrs. Alfredo R.000. Inc. Tolete were dismissed with the conformity of complainant herein.001 for exemplary damages. On November 2. Zotico A. Celestial. IN THE CASE AGAINST JUDGE ELIAS B.00] for Attorney's Fees. ET AL. (3) adjudging the plaintiff.000. WHO WERE PLAINTIFFS IN CIVIL CASE NO.. 1969 by the then Secretary (now Minister) of Justice and now Minister of National Defense Juan Ponce Enrile to hear and decide Civil Case No. Asuncion. who was directed and authorized on June 2.000. Leopoldo Petilla and Remedios Petilla. the dispositive portion of which reads as follows: A. B. IN THE CASE AGAINST THE DEFENDANT MARIQUITA VILLASIN.3"] approving the partition. (c) the sum of FIFTY THOUSAND PESOS [P50. rendered a decision. (b) the sum of TWO HUNDRED THOUSAND PESOS [P200. (2) dismissing the complaint against Judge Elias B. Celestial and Pilar P.000. Macariola to pay defendant Judge Elias B..Traders Manufacturing and Fishing Industries. 4234. Salvador Anota and Enriqueta Anota and Atty. and (d) he sum of TEN THOUSAND PESOS [PI0.00] for nominal damages. BALES. Bernardita R. ASUNCION (1) declaring that only Branch IV of the Court of First Instance of Leyte has jurisdiction to take cognizance of the issue of the legality and validity of the Project of Partition [Exhibit "B"] and the two Orders [Exhibits "C" and "C.

clerks of superior and inferior courts. under her first cause of action. of the New Civil Code in acquiring by purchase a portion of Lot No. 3010 which he rendered on June 8.(1) Dismissing the complaint against defendants Sinforosa R. WE have already ruled that ". IN THE CASE AGAINST DEFENDANT BONIFACIO RAMO — (1) Dismissing the complaint against Bonifacio Ramo.. when the respondent Judge purchased on March 6. . 531-533. Priscilla R. The following persons cannot acquire by purchase.] It is further disclosed by the record that the aforesaid decision was elevated to the Court of Appeals upon perfection of the appeal on February 22. with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession [emphasis supplied]. Asuncion violated Article 1491. 3010. Bales. the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions. 1963 approving the October 16. Solis. I WE find that there is no merit in the contention of complainant Bernardita R.. paragraph 5. judges. 1963 and the amended order dated November 11. either in person or through the mediation of another: xxx xxx xxx (5) Justices. 646 [1978]). for the prohibition to operate. 1963 decision. The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the subject of litigation to the persons disqualified therein. 1963 project of partition made pursuant to the June 8. Bakunawa. rec. the lot in question was no longer subject of the litigation. 'That Article provides: Article 1491. 1963 was already final because none of the parties therein filed an appeal within the reglementary period. Reyes. that respondent Judge Elias B. Ababa et al. (2) Directing the plaintiff to pay the defendant Bonifacio Ramo the cost of the suit. prosecuting attorneys. de Laig vs. 1971. 1184-E which was one of those properties involved in Civil Case No. 1965 a portion of Lot 1184-E. Herrer. Eng and Ruperto O. Rosario vda. Moreover. Luz R. 519 [1979]. Court of Appeals. Adela R. had long become final for there was no appeal from said orders. 88 SCRA 513. Anacorita R. SO ORDERED [pp. Macariola. at the time of the sale on March 6. In the case at bar. 1965. this prohibition includes the act of acquiring by assignment and shall apply to lawyers.. even at a public or judicial action. D. 86 SCRA 641. the decision in Civil Case No. the sale or assignment of the property must take place during the pendency of the litigation involving the property" (The Director of Lands vs. respondent's order dated October 23. and other officers and employees connected with the administration of justice. hence.

respondent Judge did not buy the lot in question on March 6. Galapon for which he was issued TCT No. was intimately related to the Order of respondent approving the project of partition. 3010 and his two questioned orders dated October 23. Luz Bakunawa. the property was no longer subject of litigation.. and not during the pendency of the litigation. 3010. 4234 can no longer alter. 4234. 1965 he sold a portion of said lot to respondent Judge and his wife who declared the same for taxation purposes only. Respondent vehemently denies any interest or participation in the transactions between the Reyeses and the Galapons concerning Lot 1184-E. 2338 by the Register of Deeds of Tacloban City. 1964 to Dr. as well as the partition of the estate and the subsequent conveyances. In this connection. Adela Reyes. The subsequent sale on August 31.Furthermore. The fact remains that respondent Judge purchased on March 6. 1964 Lot 1184-E from three of the plaintiffs. Consequently. in which respondent was the president and his wife was the secretary. 1966 by spouses Asuncion and spouses Galapon of their respective shares and interest in said Lot 1184-E to the Traders Manufacturing and Fishing Industries. 1968 of Civil Case No. or 11. and he insists that . namely. Lot 1184-E was sold on July 31. 1965 a portion of Lot 1184-E from Dr. the sale of a portion of Lot 1184-E to respondent Judge having taken place over one year after the finality of the decision in Civil Case No. 1963 in Civil Case No. 1964 of Lot 1184-E to Dr. 1965 directly from the plaintiffs in Civil Case No. Priscilla Reyes. Ruperto Reyes and Anacorita Reyes in the project of partition. Adela Reyes. is of no moment. now Court of Appeals Justice. Adela Reyes and Luz R. and on March 6. We agree with the findings of the Investigating Justice thus: And so we are now confronted with this all-important question whether or not the acquisition by respondent of a portion of Lot 1184-E and the subsequent transfer of the whole lot to "TRADERS" of which respondent was the President and his wife the Secretary. Article 1491 of the New Civil Code. 1963. and Luz R. change or affect the aforesaid facts — that the questioned sale to respondent Judge. A. 1963 and November 11. the same. As aforestated. While it appears that complainant herein filed on or about November 9 or 11. there was no violation of paragraph 5. and the same was subdivided into five lots denominated as Lot 1184-A to 1184-E. after the finality of the decision which he rendered on June 8. however. Bakunawa was only a mere scheme to conceal the illegal and unethical transfer of said lot to respondent Judge as a consideration for the approval of the project of partition. 3010 and of the subsequent two aforesaid orders therein approving the project of partition. was effected and consummated long after the finality of the aforesaid decision or orders. hence. 3010 as well as the two orders approving the project of partition. Arcadio Galapon who earlier purchased on July 31. Arcadio Galapon by Priscilla Reyes. Bakunawa after the finality of the decision in Civil Case No. The subsequent filing on November 9. 1968 an action before the Court of First Instance of Leyte docketed as Civil Case No. took place long after the finality of the decision in Civil Case No. It may be recalled that Lot 1184 or more specifically one-half thereof was adjudicated in equal shares to Priscilla Reyes. It is also argued by complainant herein that the sale on July 31. Exh. Arcadio Galapon. Therefore. Inc. seeking to annul the project of partition and the two orders approving the same. 3010 but from Dr.

certain actuations of Mrs. 1963 (Exh. 3010 (Exh. 391. his affidavit being the only one that was presented as respondent's Exh. Galapon appeared to this investigator as a respectable citizen. Bonifacio Ramo. as follows: 1. 1963. 1963. January 20. Arcadio Galapon acted as a mere "dummy" of respondent in acquiring Lot 1184-E from the Reyeses. (Exh. 2) Exh. and that she gave her conformity thereto. A. 19520 covering Lot 1154 of the Tacloban Cadastral Survey in which the deceased Francisco Reyes holds a "1/4 share" (Exh. (See Exh. the counsel of record of Mrs.394. 1969). U) approving the project of partition was duly entered and registered on November 26. 9-e). was not presented by respondent in evidence. B and tsn p. 7-A). whatever error was committed by respondent in that respect was done in good faith as according to Judge Asuncion he was assured by Atty. 7 — Certified copy of a deed of absolute sale executed by Bernardita Reyes Macariola onOctober 22. 9-a). nor did Atty. xxx xxx xxx On this point. however. in the purchase of Lot 1184-E. 14 of Respondent's Memorandum). credible and sincere. Macariola on the project of partition submitted to him for approval. 9 — Certified true copy of OCT No. In connection with the abovementioned documents it is to be noted that in the project of partition dated October 16.). followed by an amending Order on November 11. Galapon had acted. 1963. I agree with respondent that there is no evidence in the record showing that Dr. or previous understanding with Judge Asuncion (pp. the same having been adjudicated to her as her share in the estate of her father Francisco Reyes Diaz as per decision of the Court of First Instance of Leyte under case No. Hector Decena the one-fourth share of the late Francisco Reyes-Diaz in Lot 1154. 1963 (see Exh.there is no evidence whatsoever to show that Dr. I refer to the following documents: 1) Exh. rec. Ramo appear to corroborate the statement of respondent. which was approved by respondent on October 23. That he was authorized by his client to submit said project of partition. On tills certificate of title the Order dated November 11. in mediation for him and his wife. 1963. While it is true that such written authority if there was any. I agree with complainant that respondent should have required the signature of the parties more particularly that of Mrs. Macariola lead this investigator to believe that she knew the contents of the project of partition. 24. 10. Exh. It is this 1/4 share in Lot 1154 which . Macariola. Lot 1154 or rather 1/4 thereof was adjudicated to Mrs. conveying to Dr. Dr. and I believe him when he testified that he bought Lot 1184-E in good faith and for valuable consideration from the Reyeses without any intervention of. 1963. 9-D). In this deed of sale the vendee stated that she was the absolute owner of said one-fourth share. Macariola. The deed of sale was duly registered and annotated at the back of OCT 19520 on December 3. (See p. On the contention of complainant herein that respondent Judge acted illegally in approving the project of partition although it was not signed by the parties. We quote with approval the findings of the Investigating Justice.

it was. Exh. Exh. Counsel for complainant stresses the view. Macariola admitted during the cross-examination that she went to Tacloban City in connection with the sale of Lot 1154 to Dr. did not present any direct and positive evidence to prove the alleged gross inequalities in the choice and distribution of the real properties when she could have easily done so by presenting evidence on the area. Complainant also assails the project of partition because according to her the properties adjudicated to her were insignificant lots and the least valuable. however. not only upon the bench and in the performance of judicial duties.fourth of Lot 1154 belonged to the estate of Francisco Reyes Diaz while the other half of said one-fourth was the share of complainant's mother. Such contention is absurd because from the decision. 1968) from which we can deduce that she could not have been kept ignorant of the proceedings in civil case 3010 relative to the project of partition. to avoid possible suspicion that his acquisition was related in one way or another to his official actuations in civil case 3010. the assessed and market value of said properties. however. It is also significant at this point to state that Mrs. 1963. but his actuations must be such as not give cause for doubt and mistrust in the uprightness of his administration of justice. kind. Decena on October 22. Decena (tsn p. the lawyers . in other words. He should be reminded of Canon 3 of the Canons of Judicial Ethics which requires that: "A judge's official conduct should be free from the appearance of impropriety. Without such evidence there is nothing in the record to show that there were inequalities in the distribution of the properties of complainant's father (pp. Complainant.. several days after the preparation of the project of partition. Even if respondent honestly believed that Lot 1184-E was no longer in litigation in his court and that he was purchasing it from a third person and not from the parties to the litigation. A. but also in his everyday life. he should nonetheless have refrained from buying it for himself and transferring it to a corporation in which he and his wife were financially involved.. Felisa Espiras. 386389. November 28. it was for no other reason than that she was wen aware of the distribution of the properties of her deceased father as per Exhs. Complainant became the owner of the entire one-fourth of Lot 1154 only by means of the project of partition. and his personal behavior. it was unwise and indiscreet on the part of respondent to have purchased or acquired a portion of a piece of property that was or had been in litigation in his court and caused it to be transferred to a corporation of which he and his wife were ranking officers at the time of such transfer. One who occupies an exalted position in the judiciary has the duty and responsibility of maintaining the faith and trust of the citizenry in the courts of justice.). should be beyond reproach. however. the decision did not adjudicate the whole of the one-fourth of Lot 1154 to the herein complainant (see Exhs. 92. improper for him to have acquired the same.complainant sold to Dr. In this particular case of respondent." And as aptly observed by the Investigating Justice: ". Macariola sold Lot 1154 on October 22. if Mrs. rec. 1963. Therefore. The conduct of respondent gave cause for the litigants in civil case 3010. C. true that respondent Judge did not violate paragraph 5. Exh. Article 1491 of the New Civil Code in acquiring by purchase a portion of Lot 1184-E which was in litigation in his court. so that not only must he be truly honest and just. while it is. A and B. location. that the latter sold her onefourth share in Lot 1154 by virtue of the decision in Civil Case 3010 and not because of the project of partition. it is clear that one-half of one. Finally. C-3 & C-4). he cannot deny that the transactions over Lot 1184-E are damaging and render his actuations open to suspicion and distrust. A.

law of public corporations." which was extended to the Philippines by the Royal Decree of August 6. 395396. Perfecto. It may be recalled that political law embraces constitutional law. like justices and judges. municipal judges. This provision shall not be applicable to mayors. and the public in general to doubt the honesty and fairness of his actuations and the integrity of our courts of justice" (pp. Upon the transfer of sovereignty from Spain to the United States and later on from the United States to the Republic of the Philippines. . 887. are automatically abrogated. Article 14 of the Code of Commerce when he associated himself with the Traders Manufacturing and Fishing Industries. the complainant alleged that respondent Judge violated paragraphs 1 and 5. either in person or by proxy. the political laws of the former sovereign. Inc. political in essence. Said Article provides that: Article 14 — The following cannot engage in commerce. or towns in which they discharge their duties: 1. 1888. rec. II With respect to the second cause of action. as a stockholder and a ranking officer. 897 [1922]). or financial intervention in commercial or industrial companies within the limits of the districts. however. Article 14 of this Code of Commerce must be deemed to have been abrogated because where there is change of sovereignty. unless they are expressly re-enacted by affirmative act of the new sovereign. administrative law including the law on public officers and elections. Those who by virtue of laws or special provisions may not engage in commerce in a determinate territory. with some modifications made by the "Commission de Codificacion de las Provincias de Ultramar. it. xxx xxx xxx 5. said corporation having been organized to engage in business. administrative. Article 14 of the Code of Commerce partakes more of the nature of an administrative law because it regulates the conduct of certain public officers and employees with respect to engaging in business: hence. and municipal prosecuting attorneys nor to those who by chance are temporarily discharging the functions of judge or prosecuting attorney. Justices of the Supreme Court. 1888. Specifically. whether compatible or not with those of the new sovereign. Political Law has been defined as that branch of public law which deals with the organization and operation of the governmental organs of the State and define the relations of the state with the inhabitants of its territory (People vs. partakes of the nature of a political law as it regulates the relationship between the government and certain public officers and employees. nor can they hold any office or have any direct. provinces.practising in his court.). 43 Phil. judges and officials of the department of public prosecution in active service. It is significant to note that the present Code of Commerce is the Spanish Code of Commerce of 1885. and took effect as law in this jurisdiction on December 1. It is Our considered view that although the aforestated provision is incorporated in the Code of Commerce which is part of the commercial laws of the Philippines.

. chap. Gen. then Judge of the Court of First Instance. 330. 897 [1922]). the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful: xxx xxx xxx .created power of the State. either following a conquest or otherwise. or by Congress in time of peace. 34. While municipal laws of the newly acquired territory not in conflict with the. Ed. 315. July 10. 542. Likewise. 311 [1912]) that: By well-settled public law..Thus. The same act which transfers their country. although that which regulates the intercourse and general conduct of individuals. par.S. Corrupt practices of public officers. It is also argued by complainant herein that respondent Judge violated paragraph H. such political laws of the prior sovereignty as are not in conflict with the constitution or institutions of the new sovereign. the political laws do not. it has never been held that the relations of the inhabitants with each other undergo any change. otherwise known as the Anti-Graft and Corrupt Practices Act. Section 3 of Republic Act No. (Ely's Administrator vs. 7 L. now Associate Justice of the Court of Appeals. in People vs. transfers the allegiance of those who remain in it. United States. 242).. However. 1899). " There appears no enabling or affirmative act that continued the effectivity of the aforestated provision of the Code of Commerce after the change of sovereignty from Spain to the United States and then to the Republic of the Philippines. this Court stated that: "It is a general principle of the public law that on acquisition of territory the previous political relations of the ceded region are totally abrogated. Perfecto (43 Phil. is necessarily changed. which provides that: Sec. 142). (Halleck's Int. 356 Bales of Cotton (1 Pet. and the law which may be denominated political. We held in Roa vs. laws of the new sovereign continue in force without the express assent or affirmative act of the conqueror. may be continued in force if the conqueror shall so declare by affirmative act of the commander-in-chief during the war. and new relations are created between them and the government which has acquired their territory. [26 U. remains in force. — In addition to acts or omissions of public officers already penalized by existing law. (Opinion. 43 L. until altered by the newly. Ed. . Collector of Customs (23 Phil. 171 U. Cos. Chief Justice Marshall said: On such transfer (by cession) of territory. In the case of American and Ocean Ins. Article 14 of the Code of Commerce has no legal and binding effect and cannot apply to the respondent.] 511.S. Their relations with their former sovereign are dissolved. vs. 887. 220. Law. 14). Atty. 3019. Consequently. upon the cession of territory by one nation to another. 3. those laws which are political in their nature and pertain to the prerogatives of the former government immediately cease upon the transfer of sovereignty.

Inc. Aquino. Revised Penal Code. 1968 and decided on November 2. does not contain any prohibition to that effect. cannot apply to respondent Judge because the sale of the lot in question to him took place after the finality of his decision in Civil Case No. C. Respondent Judge cannot be held liable under the aforestated paragraph because there is no showing that respondent participated or intervened in his official capacity in the business or transactions of the Traders Manufacturing and Fishing Industries. The business of said corporation is not that kind where respondent intervenes or takes part in his capacity as Judge of the Court of First Instance. As was held in one case involving the application of Article 216 of the Revised Penal Code which has a similar prohibition on public officers against directly or indirectly becoming interested in any contract or business in which it is his official duty to intervene. also known as the Judiciary Act of 1948. as amended. Likewise. versus Sinforosa O. and. Nepomuceno when respondent Judge was no longer connected with the corporation. plaintiff.. 134. the prohibition in paragraph 5. the official who intervenes in contracts or transactions which have no relation to his office cannot commit this crime. 40 O. 4234 was filed only on November 9 or 11. municipal judges may engage in teaching or other vocation not involving the practice of law after office hours but with the permission of the district judge concerned. under Section 77 of said law. 4234 entitled "Bernardita R. Article 1491 of the New Civil Code against the purchase by judges of a property in litigation before the court within whose jurisdiction they perform their duties. having disposed of his interest therein on January 31. It must be noted. As a matter of fact. Vol. contract or transaction in connection with which he intervenes or takes part in his official capacity.A. Article 14 of the Code of Commerce which prohibits judges from engaging in commerce is. the property was no longer subject of litigation. that Civil Case No. p. It is undisputed that there was no case filed in the different branches of the Court of First Instance of Leyte in which the corporation was either party plaintiff or defendant except Civil Case No. hence." wherein the complainant herein sought to recover Lot 1184-E from the aforesaid corporation. et al. Meneses. deemed abrogated automatically upon the transfer of sovereignty from Spain to America. cited by Justice Ramon C. 11th Supp. Bales. It does not appear also from the records that the aforesaid corporation gained any undue advantage in its business operations by reason of respondent's financial involvement in it. or that the corporation benefited in one way or another in any case filed by or against it in court. Moreover. 11 [1976]). "(I)t is not enough to be a public official to be subject to this crime. as heretofore stated. 1970 by CFI Judge Jose D. It may be pointed out that Republic Act No. 1174. . hence. nor is there an existing law expressly prohibiting members of the Judiciary from engaging or having interest in any lawful business. Macariola.G. however. the business of the corporation in which respondent participated has obviously no relation or connection with his judicial office. or in which he is prohibited by the Constitution or by any Iaw from having any interest. Furthermore.' (People vs. because it is political in nature. it is necessary that by reason of his office. In the case at bar. 3010 as well as his two orders approving the project of partition. 296.(h) Directly or indirectly having financial or pecuniary interest in any business. 1967. respondent is not liable under the same paragraph because there is no provision in both the 1935 and 1973 Constitutions of the Philippines. he has to intervene in said contracts or transactions.

1. remove any subordinate officer or employee from the service. do not apply to the members of the Judiciary. engaging in private business without a written permission from the Department Head may not constitute graft and corrupt practice as defined by law. Rule XVIII of the Civil Service Rules. However. the power to remove or dismiss judges was then vested in the President of the Philippines. Article X. demote him in rank. Under Section 67 of said law. and only on two grounds. R. judges cannot be considered as subordinate civil service officers or employees subject to the disciplinary authority of the Commissioner of Civil Service. vocation. 20. Rule XVIII cannot be considered as a ground for disciplinary action against judges because to recognize the same as applicable to them. serious misconduct and inefficiency. and upon the recommendation of the Supreme Court. is covered by Republic Act No. which alone is authorized. suspend him for not more than one year without pay or fine him in an amount not exceeding six months' salary. 1973 Constitution. otherwise known as the Judiciary Act of 1948 and by Section 7. agricultural or industrial undertaking without a written permission from the head of department. Article X of the 1973 Constitution. Besides. credit. Rule XVIII of the Civil Service Rules made pursuant to the Civil Service Act of 1959 prohibits an officer or employee in the civil service from engaging in any private business. X. that is. being a member of the Judiciary. for. the Judiciary is the only other or second branch of the government (Sec. The Revised Administrative Code (Section 89) and the Civil Service Law itself state that the Chief Justice is the department head of the Supreme Court (Sec." It must be emphasized at the outset that respondent. a violation of Section 12 of Rule XVIII is a ground for disciplinary action against civil service officers and employees. for . the aforesaid section defines the grounds and prescribes the special procedure for the discipline of judges. or profession or be connected with any commercial. We hold that the Civil Service Act of 1959 (R. No. may not fall within the purview of paragraph h..A. Under said Section 12: "No officer or employee shall engage directly in any private business. And under Sections 5. upon its own motion." Thus.. Section 3 of the Anti-Graft and Corrupt Practices Act because the last portion of said paragraph speaks of a prohibition by the Constitution or law on any public officer from having any interest in any business and not by a mere administrative rule or regulation. 1973 Constitution). would be adding another ground for the discipline of judges and. On the contention of complainant that respondent Judge violated Section 12. as amended. the Commissioner is not the head of the Judicial Department to which they belong.. the same. . or upon information of the Secretary (now Minister) of Justice to conduct the corresponding investigation. Thus.In addition. Section 67 of the Judiciary Act recognizes only two grounds for their removal. agricultural or industrial undertaking without a written permission from the Head of Department . although Section 12.A. 2260) [1959]). Art. a violation of Section 12. 2260) and the Civil Service Rules promulgated thereunder. and under the 1973 Constitution. credit. certainly. 6 and 7. 296. namely. No. namely. or profession or be connected with any commercial. vocation. however. as aforestated.. only the Supreme Court can discipline judges of inferior courts as well as other personnel of the Judiciary. Clearly. not in the Commissioner of Civil Service. It is true that under Section 33 of the Civil Service Act of 1959: "The Commissioner may. or in the interest of the service. a violation of the aforesaid rule by any officer or employee in the civil service. particularly Section 12 of Rule XVIII. violation of the existing Civil Service Law and rules or of reasonable office regulations. serious misconduct and inefficiency.

and. after his accession to the bench. complainant alleged that respondent was guilty of coddling an impostor and acted in disregard of judicial decorum. so far as reasonably possible. with the recommendation of the Investigating Justice that respondent Judge be exonerated because the aforesaid causes of action are groundless. however. under Section 16(i) of the Civil Service Act of 1959.. however. all administrative cases against permanent officers and employees in the competitive service. separation. as a stockholder and a ranking officer. refrain from all relations which would normally tend to arouse the suspicion that such relations warp or bias his judgment. and that there was culpable defiance of the law and utter disregard for ethics. and suspension and upon all matters relating to the conduct. it is the Commissioner of Civil Service who has original and exclusive jurisdiction "(T)o decide. discipline. except as provided by law. to have final authority to pass upon their removal. 2260. It is desirable that he should.713 [1965]. 1966.. and efficiency of such officers and employees. is not violative of the provissions of Article 14 of the Code of Commerce and Section 3(h) of the Anti-Graft and Corrupt Practices Act as well as Section 12. we emphasized that only permanent officers and employees who belong to the classified service come under the exclusive jurisdiction of the Commissioner of Civil Service" (Villaluz vs. guidelines and regulations governing the administration of discipline" (emphasis supplied). Such disposal or sale by respondent and his wife of their shares in the corporation only 22 days after the incorporation of the corporation. indicates that respondent realized that early that their interest in the corporation contravenes the aforesaid Canon 25. 1967. Ang-Angco vs. WE agree. Respondent Judge and his wife therefore deserve the commendation for their immediate withdrawal from the firm after its incorporation and before it became involved in any court litigation III With respect to the third and fourth causes of action. the impropriety of the same is clearly unquestionable because Canon 25 of the Canons of Judicial Ethics expressly declares that: A judge should abstain from making personal investments in enterprises which are apt to be involved in litigation in his court. he should not retain such investments previously made. 15 SCRA 710. or prevent his impartial attitude of mind in the administration of his judicial duties. and. 1967 from the aforesaid corporation and sold their respective shares to third parties.. . after submission to it. Zaldivar. Inc. Castillo.. and the eventual withdrawal of respondent on January 31. WE have already ruled that ". within one hundred twenty days. WE are not. and it appears also that the aforesaid corporation did not in anyway benefit in any case filed by or against it in court as there was no case filed in the different branches of the Court of First Instance of Leyte from the time of the drafting of the Articles of Incorporation of the corporation on March 12. up to its incorporation on January 9. in interpreting Section 16(i) of Republic Act No. and WE quote the pertinent portion of her report which reads as follows: . and prescribe standards. 1967 from said corporation.Moreover. Although the actuation of respondent Judge in engaging in private business by joining the Traders Manufacturing and Fishing Industries. unmindful of the fact that respondent Judge and his wife had withdrawn on January 31. 9 SCRA 619 [1963]). There is no question that a judge belong to the non-competitive or unclassified service of the government as a Presidential appointee and is therefore not covered by the aforesaid provision. longer than a period sufficient to enable him to dispose of them without serious loss. Rule XVIII of the Civil Service Rules promulgated pursuant to the Civil Service Act of 1959.

Canons of Judicial Ethics).The basis for complainant's third cause of action is the claim that respondent associated and closely fraternized with Dominador Arigpa Tan who openly and publicly advertised himself as a practising attorney (see Exhs. did not violate any law in acquiring by purchase a parcel of land which was in litigation in his court and in engaging in business by joining a private corporation during his incumbency as judge of the Court of First Instance of Leyte. while respondent Judge Asuncion. WHEREFORE. Tan and family did not influence his official actuations as a judge where said persons were concerned. that in itself would not constitute a ground for disciplinary action unless it be clearly shown that his social relations be clouded his official actuations with bias and partiality in favor of his friends (pp.). In conclusion. 2000 . 30. The "respondent denies knowing that Dominador Arigpa Tan was an "impostor" and claims that all the time he believed that the latter was a bona fide member of the bar. Republic of the Philippines SUPREME COURT SECOND DIVISION G. because his conduct as a member of the Judiciary must not only be characterized with propriety but must always be above suspicion. he should be reminded to be more discreet in his private and business activities. There is no tangible convincing proof that herein respondent gave any undue privileges in his court to Dominador Arigpa Tan or that the latter benefitted in his practice of law from his personal relations with respondent. M & M-1). now Associate Justice of the Court of Appeals. rec. "Now with respect to the allegation of complainant that respondent is guilty of fraternizing with Dominador Arigpa Tan to the extent of permitting his wife to be a godmother of Mr. 403-405. It has been shown by complainant that Dominador Arigpa Tan represented himself publicly as an attorneyat-law to the extent of putting up a signboard with his name and the words "Attorneyat Law" (Exh.R. I see no reason for disbelieving this assertion of respondent. Tan's child at baptism (Exh. that fact even if true did not render respondent guilty of violating any canon of judicial ethics as long as his friendly relations with Dominador A. or that he used his influence. and it was but natural for respondent and any person for that matter to have accepted that statement on its face value. No. I. but if a Judge does have social relations. Of course it is highly desirable for a member of the judiciary to refrain as much as possible from maintaining close friendly relations with practising attorneys and litigants in his court so as to avoid suspicion 'that his social or business relations or friendship constitute an element in determining his judicial course" (par. I and 1. 126881 October 3. K.1) to indicate his office. THE RESPONDENT ASSOCIATE JUSTICE OF THE COURT OF APPEALS IS HEREBY REMINDED TO BE MORE DISCREET IN HIS PRIVATE AND BUSINESS ACTIVITIES. on the Judges of the other branches of the Court to favor said Dominador Tan. I-1 and J) when in truth and in fact said Dominador Arigpa Tan does not appear in the Roll of Attorneys and is not a member of the Philippine Bar as certified to in Exh. if he had any.

1984. CV No. the common-law spouse of the decedent. pooling their resources and industry together. 1996 of the former Fifth Division2 of the Court of Appeals in CA-G. the dispositive portion of which states: THE FOREGOING CONSIDERED.3 docketed as Civil Case No. They named their enterprise "Benguet Lumber" which they jointly managed until Tan Eng Kee's death. The complaint. 1995.. DE LEON. and the equal division of the net assets of Benguet Lumber. The facts are: Following the death of Tan Eng Kee on September 13. entered into a partnership engaged in the business of selling lumber and hardware and construction supplies. represented by its President TAN ENG LAY. collectively known as herein petitioners HEIRS OF TAN ENG KEE." The incorporation was purportedly a ruse to deprive Tan Eng Kee and his heirs of their rightful participation in the profits of the business. JR. Branch 7 rendered judgment 6 on April 12. However. 47937.R.5 The amended complaint principally alleged that after the second World War. Nena. winding up and liquidation thereof. petitioners pray for the reversal of the Decision 1 dated March 13. Petitioners herein averred that the business prospered due to the hard work and thrift of the alleged partners. vs. The amended complaint was admitted by the trial court in its Order dated May 3. filed suit against the decedent's brother TAN ENG LAY on February 19.HEIRS OF TAN ENG KEE. Petitioners prayed for accounting of the partnership assets. . and the complaint dismissed.: In this petition for review on certiorari. b) Declaring that the deceased Tan Eng Kee and Tan Eng Lay are joint adventurers and/or partners in a business venture and/or particular partnership called Benguet Lumber and as such should share in the profits and/or losses of the business venture or particular partnership. COURT OF APPEALS and BENGUET LUMBER COMPANY. 1990. the petitioners filed an amended complaint4 impleading private respondent herein BENGUET LUMBER COMPANY. Regional Trial Court of Baguio City. 1991. petitioners. Carlos. Tan Eng Kee and Tan Eng Lay. Clarita. liquidation and winding up of the alleged partnership formed after World War II between Tan Eng Kee and Tan Eng Lay. the appealed decision is hereby set aside. they claimed that in 1981. Matilde Abubo.respondents. Tan Eng Lay and his children caused the conversion of the partnership "Benguet Lumber" into a corporation called "Benguet Lumber Company. judgment is hereby rendered: a) Declaring that Benguet Lumber is a joint venture which is akin to a particular partnership. 1983-R in the Regional Trial Court of Baguio City was for accounting. 1991. to wit: WHEREFORE. On March 18. After trial. Corazon and Elpidio. as represented by Tan Eng Lay. in view of all the foregoing. and the dissolution. J. joined by their children Teresita.

all surnamed Tan. Willie. for alleged falsification of commercial documents by a private individual. Private respondent sought relief before the Court of Appeals which. rendered the assailed decision reversing the judgment of the trial court. (C) THERE WAS NO CERTIFICATE OF . Jean. wherein the charges were filed. f) Ordering the appointment of a receiver to preserve and/or administer the assets of Benguet Lumber Company. Wilfredo. d) Declaring that all the rights and obligations of Tan Eng Kee as joint adventurer and/or as partner in a particular partnership have descended to the plaintiffs who are his legal heirs. They also filed Criminal Cases Nos. h) Dismissing the counter-claim of the defendant for lack of merit. Hence. Inc. In their assignment of errors.c) Declaring that the assets of Benguet Lumber are the same assets turned over to Benguet Lumber Co. 78857-78870 against Gloria. e) Ordering the defendant Tan Eng Lay and/or the President and/or General Manager of Benguet Lumber Company Inc. Petitioners complained that Exhibits "4" to "4-U" offered by the defendants before the trial court. so the plaintiffs know their proper share in the business. (B) THERE WAS NO FIRM LETTERHEADS SUBMITTED AS EVIDENCE. the present petition. the Municipal Trial Court of Baguio City. On March 20. on March 13. Branch 1. petitioners filed Criminal Case No. to render an accounting of all the assets of Benguet Lumber Company. 1996. rendered judgment 9 dismissing the cases for insufficiency of evidence. Julia. g) Denying the award of damages to the plaintiffs for lack of proof except the expenses in filing the instant case. As a side-bar to the proceedings. 78856 against Tan Eng Lay and Wilborn Tan for the use of allegedly falsified documents in a judicial proceeding. 1999. Inc. petitioners claim that: I THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP BETWEEN THE LATE TAN ENG KEE AND HIS BROTHER TAN ENG LAY BECAUSE: (A) THERE WAS NO FIRM ACCOUNT. Petitioners' motion for reconsideration7 was denied by the Court of Appeals in a Resolution8 dated October 11. Mary and Willy. based on the discrepancy in the signatures of Tan Eng Kee. SO ORDERED. Juliano. 1996. and as such the heirs or legal representatives of the deceased Tan Eng Kee have a legal right to share in said assets. consisting of payrolls indicating that Tan Eng Kee was a mere employee of Benguet Lumber. were fake. until such time that said corporation is finally liquidated are directed to submit the name of any person they want to be appointed as receiver failing in which this Court will appoint the Branch Clerk of Court or another one who is qualified to act as such. Inc.

ADMITTED THAT THEY DO NOT KNOW WHEN THE ESTABLISHMENT KNOWN IN BAGUIO CITY AS BENGUET LUMBER WAS STARTED AS A PARTNERSHIP (PAGE 16-17. b.PARTNERSHIP. THAT BOTH TAN ENG KEE AND TAN ENG LAY WERE SUPERVISING THE EMPLOYEES THEREIN. AND (E) THERE WAS NO TIME FIXED FOR THE DURATION OF THE PARTNERSHIP (PAGE 13. THAT TAN ENG KEE AND TAN ENG LAY WERE THE ONES DETERMINING THE PRICES OF STOCKS TO BE SOLD TO THE PUBLIC. DECISION). c. THAT BOTH TAN ENG LAY AND TAN ENG KEE WERE COMMANDING THE EMPLOYEES OF BENGUET LUMBER. DECISION). IV THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP JUST BECAUSE THE CHILDREN OF THE LATE TAN ENG KEE: ELPIDIO TAN AND VERONICA CHOI. (D) THERE WAS NO AGREEMENT AS TO PROFITS AND LOSSES. V THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP BETWEEN THE LATE TAN ENG KEE AND HIS BROTHER TAN ENG LAY BECAUSE THE PRESENT CAPITAL OR ASSETS OF BENGUET LUMBER IS DEFINITELY . TOGETHER WITH THEIR WITNESS BEATRIZ TANDOC. III THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE FOLLOWING FACTS WHICH WERE DULY SUPPORTED BY EVIDENCE OF BOTH PARTIES DO NOT SUPPORT THE EXISTENCE OF A PARTNERSHIP JUST BECAUSE THERE WAS NO ARTICLES OF PARTNERSHIP DULY RECORDED BEFORE THE SECURITIES AND EXCHANGE COMMISSION: a. AND e. THAT TAN ENG LAY AND TAN ENG KEE WERE THE ONES MAKING ORDERS TO THE SUPPLIERS (PAGE 18. DECISION). THAT THE FAMILIES OF TAN ENG KEE AND TAN ENG LAY WERE ALL LIVING AT THE BENGUET LUMBER COMPOUND. d. II THE HONORABLE COURT OF APPEALS ERRED IN RELYING SOLELY ON THE SELFSERVING TESTIMONY OF RESPONDENT TAN ENG LAY THAT BENGUET LUMBER WAS A SOLE PROPRIETORSHIP AND THAT TAN ENG KEE WAS ONLY AN EMPLOYEE THEREOF.

or conjectures. will justify a different conclusion. the Sandiganbayan. Thus: Filing of petition with Supreme Court. Review of factual issues is therefore warranted: (1) when the factual findings of the Court of Appeals and the trial court are contradictory. and such findings are contrary to the admissions of both appellant and appellee. may file with the Supreme Court a verified petition for review on certiorari. (6) when the judgment of the Court of Appeals is premised on a misapprehension of facts. (2) when the findings are grounded entirely on speculation. (8) when the findings of fact are themselves conflicting. surmises. in making its findings. As a premise. (9) when the findings of fact are conclusions without citation of the specific evidence on which they are based. (7) when the Court of Appeals fails to notice certain relevant facts which.10 Our jurisdiction. and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings are contradicted by the evidence on record. if properly considered. the Regional Trial Court or other courts whenever authorized by law. may compel us to analyze the evidentiary basis on which the lower court rendered judgment. we reiterate the oft-repeated rule that findings of facts of the Court of Appeals will not be disturbed on appeal if such are supported by the evidence. 12 In reversing the trial court. The petition shall raise only questions of law which must be distinctly set forth.11 [emphasis supplied] Admitted exceptions have been recognized. (4) when there is grave abuse of discretion in the appreciation of facts. (3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken. the Court in turn went beyond that by justifying the existence of a joint venture. the Court of Appeals ruled.000. to wit: We note that the Court a quo over extended the issue because while the plaintiffs mentioned only the existence of a partnership. (5) when the appellate court. DECISION). — A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals. goes beyond the issues of the case. absurd. it must be emphasized. or impossible. . and when present. though.MORE THAN P3. does not include review of factual issues.00 AND AS SUCH THE EXECUTION OF A PUBLIC INSTRUMENT CREATING A PARTNERSHIP SHOULD HAVE BEEN MADE AND NO SUCH PUBLIC INSTRUMENT ESTABLISHED BY THE APPELLEES (PAGE 17.

The appellees however argued that (Rollo. effective 1954. 771 and 772. equal proprietary interest and the exercise by the parties equally of the conduct of the business. that a partner [sic] may be constituted in any form. p. for the years 1982 to 1983. Kee. Exhibit "3". was even testified to by witnesses. Also. After the war. jointly. is obvious from the fact that: (1) they conducted the affairs of the business during Kee's lifetime. In the Payrolls. 6) this is because during the war. 104. Exhibit "5". was merely an employee of the Benguet Lumber Company. no written account nor any memorandum for that matter and no license mentioning the existence of a partnership [citation omitted]. both in the lumber and hardware business. Brief. Exhibit "2". p. The deceased. Because of the pooling of resources. Except for a firm name. no certificate of partnership. the incorporation). on the basis of his SSS coverage effective 1958. and no time fixed for the duration of the partnership. Lay was mentioned also as the proprietor. 5 & 9. and (5) all their children were employed in the business in different capacities. (3) they were the ones preparing orders from the suppliers. thus: xxx xxx xxx We have the admission that the father of the plaintiffs was not a partner of the Benguet Lumber before the war. and which is to be recorded with the Securities and Exchange Commission. It had no business book. That Lay and Kee actually established the Benguet Lumber in Baguio City. precisely. on the other hand. The certification dated March 4. NCC. prospered (pars.000. it would presuppose parity of standing between the parties. His application for registration. This is equally true if the capitalization exceeds P3.When mention is made of a joint venture. Lay and Kee pooled the proceeds of their individual businesses earned from buying and selling military supplies. the entire stocks of the pre-war Benguet Lumber were confiscated if not burned by the Japanese. the exhibits support the establishment of only a proprietorship. (2) they were the ones giving orders to the employees. no firm letterheads submitted as evidence. . 1971. Kee was similarly listed only as an employee. mentioned co-defendant Lay as the only registered owner of the Benguet Lumber and Hardware. inclusive. (4) their families stayed together at the Benguet Lumber compound. In this case at bar. which from the language of the appellees. the execution of a public instrument becomes necessary. because of the absence of capital to start a lumber and hardware business.00. but when an immovable is constituted. we can easily assume that the business establishment. in fact mentioned that his business started in 1945 until 1985 (thereafter. xxx xxx xxx It is obvious that there was no partnership whatsoever. Exhibits "4" to "4-U". xxx xxx xxx We would like to refer to Arts. so that the common fund would be enough to form a partnership. no agreement as to profits and losses. the post-war Benguet Lumber was eventually established. That the father of the plaintiffs and Lay were partners. In the Termination Notice. There was even no attempt to submit an accounting corresponding to the period after the war until Kee's death in 1984. there was no firm account. he was on the payroll listing. in which case a public instrument is also necessary.

7 and 8 of the complaint. We cannot see these elements from the testimonial evidence of the appellees. and 4) that Dionisio Peralta was supposedly being told by Kee that the proceeds of the 80 pieces of the G. contrary to the allegations in pars. on the other hand. The primordial issue here is whether Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber. sheets were added to the business. or industry to a common fund. in order to constitute a partnership. Two or more persons may also form a partnership for the exercise of a profession. with the intention of dividing the profits among themselves.000. The intention to join in the business venture for the purpose of obtaining profits thereafter to be divided.000. 2) the capacity of the parties to execute the contract.00. . mentioning equality of the partners or one having a proportionate share in the benefits. assuming them to be in existence. and 5) intention to divide the profits. 2) that both Lay and Kee were seated on a table and were "commanding people" as testified to by the son. However. two or more persons bind themselves to contribute money. 4) community of funds and interest. must be established. 14 Thus. and (2) they intend to divide the profits among themselves. were maliciously assigned or transferred by Lay. in addition to the accumulation of real properties and to the fact that it is now a compound. In this connection. it must be established that (1) two or more persons bound themselves to contribute money. As can be seen. supposedly to the corporation and since then have been treated as a part of the latter's capital assets. the execution of a contract is necessary. as testified to by Victoria Choi. Partnership presupposes the following elements [citation omitted]: 1) a contract. as testified to by Tandoc. perforce we must examine the record to determine if the reversal was justified. 3) money property or industry contribution. if it involves real property or where the capital is P3. 16 and (2) when the . 3) that both were supervising the laborers. property. being the true test of the partnership.15 The agreement need not be formally reduced into writing. the business was incorporated and the incorporators were only Lay and the members of his family. consequently. and then in a room in the bunk house in Trinidad. 6. the appellate court disputed and differed from the trial court which had adjudged that TAN ENG KEE and TAN ENG LAY had allegedly entered into a joint venture. And then in 1981.I.13 Inasmuch as the Court of Appeals and the trial court had reached conflicting conclusions. A contract of partnership is defined by law as one where: . we cannot entertain inquiries relative to the correctness of the assessment of the evidence by the court a quo. save in two instances: (1) when immovable property or real rights are contributed. There is no proof either that the capital assets of the partnership.Complaint). since the appeal is brought to us under Rule 45. we have held that whether a partnership exists is a factual matter. . definitely exceeded P3.00 or more. since statute allows the oral constitution of a partnership. was never established by the appellees. Elpidio Tan. either oral or written. The execution of a public instrument. but within the compound of the lumber establishment. or industry to a common fund. These are not evidences supporting the existence of a partnership: 1) That Kee was living in a bunk house just across the lumber store. property.

(Tufts v. Gates v. Tuazon v. 74 [1947]. petitioners point out that the New Civil Code was not yet in effect when the partnership was . Mann. Martin. 2d. In addition. although the business of pursuing to a successful termination may continue for a number of years. though. a joint venture is a form of partnership and should thus be governed by the law of partnerships. McDermott. but it has been generally understood to mean an organization formed for some temporary purpose. in Aurbach. a partnership may be particular or universal. 1783. (Gates v. 95 P. which it said is akin to a particular partnership. or the articles of partnership but there is none. 266 Fed. In a joint account. since under the Civil Code. the best evidence would have been the contract of partnership itself. The main distinction cited by most opinions in common law jurisdiction is that the partnership contemplates a general business with some degree of continuity. 71 NE 2d. The alleged partnership. 183. 116 Cal. Harmon v.17 In both cases. 2d. Bolaños. 170. et. thus: The legal concept of a joint venture is of common law origin. 95 Phil. Peterson. 2d. while the joint venture is formed for the execution of a single transaction. and where each party exercises equal rights in the conduct of the business.2d.19 The trial court determined that Tan Eng Kee and Tan Eng Lay had entered into a joint venture. with no firm name and no legal personality. (b) Usually.20 A particular partnership is distinguished from a joint adventure. Megargel. (At p. it may however engage in a joint venture with others. et. 811 [1920]) It is hardly distinguishable from the partnership. 288 P. 45 Cal. Notes and Selected Cases. 12 289 P. 12.2d. and can be individually liable therefor. in which each party has an equal proprietary interest in the capital or property contributed. since their elements are similar — community of interest in the business. a partnership generally relates to a continuing business of various transactions of a certain kind. This observation is not entirely accurate in this jurisdiction. Chadwick. and is thus of a temporary nature. sharing of profits and losses. 811 [1920]). 595. but not necessarily a joint adventure is limited to a SINGLE TRANSACTION. (Blackner v. It would seem therefore that under Philippine law. Civil Code). Buckley v. 2 P.21 A joint venture "presupposes generally a parity of standing between the joint co-ventures or partners. Megargel 266 Fed. to wit: (a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal partnership. 395 Ill.2d. 1043 [1939]. and a mutual right of control. The Supreme Court has however recognized a distinction between these two business forms. was never formally organized..18 An inventory to be signed by the parties and attached to the public instrument is also indispensable to the validity of the partnership whenever immovable property is contributed to the partnership." 22 Nonetheless. and a particular partnership may have for its object a specific undertaking. 176 F. al. 500 [1931]. [1949]. Carboneau v.partnership has a capital of three thousand pesos or more. 906 [1954]) (Campos and Lopez-Campos Comments. Corporation Code 1981). a public instrument is required. App. v. al. Undoubtedly. Sanitary Wares Manufacturing Corporation. the participating merchants can transact business under their own name. 242 [1955]). 498. (Art.. It has no precise legal definition. and has held that although a corporation cannot enter into a partnership contract.23 we expressed the view that a joint venture may be likened to a particular partnership.

of the G. 33 [emphasis supplied] A demand for periodic accounting is evidence of a partnership. A person is presumed to take ordinary care of his concerns. had gone on too long to be plausible. we cannot accept as an established fact that Tan Eng Kee allegedly contributed his resources to a common fund for the purpose of establishing a partnership. Were she really a partner. if not unnatural. although the contrary may well be argued that nothing prevented the parties from complying with the provisions of the New Civil Code when it took effect on August 30. plaintiff had always acted in accordance with the original letter of defendant of June 17. etc. all that she did was to receive her share of P3. Be that as it may. that it was only later on that his said brother. .000. A review of the record persuades us that the Court of Appeals correctly reversed the decision of the trial court. Tan Eng Kee appeared never to have made any such demand for accounting from his brother. 26 Tan Eng Lay. the latter asked the former to accompany him to get 80 pieces of G. "A"). She was absolutely silent with respect to any of the acts that a partner should have done. In the third place.27 Tan Eng Lay consistently testified that he had his business and his brother had his. 1945 (Exh. which cannot be interpreted in any manner than a payment for the use of the premises which she had leased from the owners. The testimonies to that effect of petitioners' witnesses is directly controverted by Tan Eng Lay. The evidence presented by petitioners falls short of the quantum of proof required to establish a partnership. however. None of petitioners' witnesses could suitably account for the beginnings of Benguet Lumber Company.00 a month. Unfortunately for petitioners. The net effect. a deferment of sharing in the profits is perfectly plausible. however.00 capital. sheets) is not an indicium of the existence of a partnership. Tan Eng Kee has passed away. coownership or co-possession (specifically here. if any.32 As we explained in another case: In the first place.allegedly formed sometime in 1945. whether the expenses were legitimate. But all that is in the past. Only he. It should be noted that it is not with the number of witnesses wherein preponderance lies. 1950. Tang Eng Lay. plaintiff did not furnish the supposed P20. Clearly. came to work for him. is that we are asked to determine whether a partnership existed based purely on circumstantial evidence. In the absence of evidence. In the second place. her first concern should have been to find out how the business was progressing. that despite the forty years the partnership was allegedly in existence. sheets supposedly owned by both brothers. could have expounded on the precise nature of the business relationship between them." 31 But in the situation in the case at bar. it is indeed odd.28 Besides. except perhaps for Dionisio Peralta whose deceased wife was related to Matilde Abubo.24 the quality of their testimonies is to be considered. which shows that both parties considered this offer as the real contract between them.000. The essence of a partnership is that the partners share in the profits and losses. Tan Eng Kee never asked for an accounting. aside from Tan Eng Lay. she did not furnish any help or intervention in the management of the theatre.30 We have allowed a scenario wherein "[i]f excellent relations exist among the partners at the start of the business and all the partners are more interested in seeing the firm grow rather than get immediate returns. whether the earnings were correct. denied knowledge of this meeting or of the conversation between Peralta and his brother.34 During his lifetime. it does not appear that she has even demanded from defendant any accounting of the expenses and earnings of the business.25 He stated that when he met Tan Eng Kee after the liberation. Tan Eng Kee. the deferment.I.29 Each has the right to demand an accounting as long as the partnership exists.I.

petitioners would still be back to square one. Petitioners failed to show how much their father. In the light of the aforequoted legal provision. Tan Eng Kee. In connection therewith. Even if the payrolls as evidence were discarded. Article 1769 of the Civil Code provides: In determining whether a partnership exists. but no such inference shall be drawn if such profits were received in payment: (a) As a debt by installment or otherwise. received. these rules shall apply: (1) Except as provided by Article 1825. so to speak. they failed to prove that Tan Eng Kee and Tan Eng Lay intended to divide the profits of the business between themselves. (2) Co-ownership or co-possession does not of itself establish a partnership. if any. Exhibits "4" to "4-U" in fact shows that Tan Eng Kee received sums as wages of an employee. whether or not the persons sharing them have a joint or common right or interest in any property which the returns are derived. (c) As an annuity to a widow or representative of a deceased partner. that both were supervising the employees. (e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise. we conclude that Tan Eng Kee was only an employee. which is one of the essential features of a partnership. not a partner. that both were the ones who determined the .This brings us to the matter of Exhibits "4" to "4-U" for private respondents. consisting of payrolls purporting to show that Tan Eng Kee was an ordinary employee of Benguet Lumber. (4) The receipt by a person of a share of the profits of a business is a prima facie evidence that he is a partner in the business. since they did not present and offer evidence that would show that Tan Eng Kee received amounts of money allegedly representing his share in the profits of the enterprise. (3) The sharing of gross returns does not of itself establish a partnership. as his share in the profits of Benguet Lumber Company for any particular period. As aforesaid. persons who are not partners as to each other are not partners as to third persons. to the extent that they filed criminal charges against Tan Eng Lay and his wife and children. the criminal cases were dismissed for insufficiency of evidence. though the amount of payment vary with the profits of the business. petitioners would still want us to infer or believe the alleged existence of a partnership from this set of circumstances: that Tan Eng Lay and Tan Eng Kee were commanding the employees. Nevertheless. Hence. (d) As interest on a loan. (b) As wages of an employee or rent to a landlord. whether such co-owners or co-possessors do or do not share any profits made by the use of the property. The authenticity of these documents was questioned by petitioners. as it was then called.

private respondent counters that: Petitioners seem to have missed the point in asserting that the above enumerated powers and privileges granted in favor of Tan Eng Kee. the circumstances proffered by petitioners do not provide a logical nexus to the conclusion desired. a privilege not extended to its ordinary employees. these are not inconsistent with the powers and duties of a manager. the undisputed fact remains that Tan Eng Kee is the brother of Tan Eng Lay. therefore. not an indication that Tan Eng Kee was a partner. It may even be that among his duties is to place orders with suppliers. it is not unusual that he orders around those lower in rank. (iv) and even if it is assumed that Tan Eng Kee was quarreling with Tan Eng Lay in connection with the pricing of stocks. such as his residence in the Benguet Lumber Company compound. However. (iii) although Tan Eng Kee. even a partner does not necessarily have to perform this particular task. were indicative of his being a partner in Benguet Lumber for the following reasons: (i) even a mere supervisor in a company. only proves the kindness and generosity of Tan Eng Lay towards a blood relative. over whom confidence is reposed by the owner. He would have moral. Naturally. in the case at bench. he occupied a niche above the rank-and-file employees. factory or store gives orders and directions to his subordinates. superiority over his fellow employees. we find private respondent's arguments to be well-taken. even in a business organized and run as informally as Benguet Lumber Company.price at which the stocks were to be sold. but in what capacity is unclear. We cannot discount the likelihood that as a member of the family.35 In the instant case. together with his family. lived in the lumber compound and this privilege was not accorded to other employees. nevertheless. . thereby entitling him to exercise powers of supervision. Even highly confidential employees and the owners of a company sometimes argue with respect to certain matters which. Furthermore. this does not adequately prove the existence of a partnership relation between them. that an employee's position is higher in rank. They only tend to show that Tan Eng Kee was involved in the operations of Benguet Lumber. It is. and which were not given the other employees. can order materials from suppliers for and in behalf of Benguet Lumber. Again. thus. (ii) even a messenger or other trusted employee. So long. He would have enjoyed liberties otherwise unavailable were he not kin. in no way indicates that they are partners as to each other. Whatever privileges Tan Eng Lay gave his brother. if not actual. the collective effect of these circumstances may be such as to support a finding of the existence of the parties' intent. even the aforesaid circumstances when taken together are not persuasive indicia of a partnership. and that both placed orders to the suppliers of the Benguet Lumber Company. Where circumstances taken singly may be inadequate to prove the intent to form a partnership. They also point out that the families of the brothers Tan Eng Kee and Tan Eng Lay lived at the Benguet Lumber Company compound. close personal relations existed between them.36 Yet.

petitioner Collector of Internal Revenue interposed the present petition for review. JOSE COJUANGCO. The material facts may be briefly stated as follows: At a public bidding held by the Surplus Property Commission on April 22. petitioner. winding up or liquidation to speak of.B. Sumulong and Associates for respondent. he invited Cojuangco to provide said funds. vs.. it follows that there is no dissolution. respondent. and its terms and conditions were set forth in SPC-Invoice No. 1955. 689017. REYES. and the appealed decision of the Court of Appeals is herebyAFFIRMED in toto.500. WHEREFORE. C. 1948.00..L. 74) reversing his decision of January 27. Limcaoco and Atty.There being no partnership. Solicitor C. Republic of the Philippines SUPREME COURT Manila EN BANC G. The award of the bid was duly approved by the Government Enterprise Control Committee. SO ORDERED. priced at P94. Bellosillo. Villa-Abrille deposited the amount of P10. the petition is hereby denied. the petition must fail. was issued.: From the judgment of the Court of Tax Appeals (in CTA Case No. JJ . Hence. 7770. which holds respondent Jose Cojuangco liable for deficiency sales taxes. Guiuan. dated April 22. as annexes. Samar Naval Base. concur. 13040 (Philippine Bank of Commerce) to cover the required deposit of 5% of the purchase price. Not having the necessary funds to cover the balance of the purchase price. Quisumbing and Buena. the 5% compensating tax and the necessary expenses for labor and materials for the reconditioning of said goods for use or sale. he and Villa-Abrille entered into an agreement (Annex B). certain records of the Bureau of Internal Revenue. No pronouncement as to costs. Office of the Solicitor General Edilberto Barot. Samar. J. 1948 (Annex D). J. 1948. Mendoza. No. (Annex A). dated May 28.000 under Manager's Check No. The latter accepted the offer and on May 28. 1960 COLLECTOR OF INTERNAL REVENUE. The case was submitted for decision of the Tax court on the basis of a "Stipulation of Facts" which incorporated.L. L-13255 September 29.R. which reads: AGREEMENT . F. for which Official Receipt No. Kierulf for petitioner. Fernando VillaAbrille was the successful bidder for the purchase of all movable goods (except some items specified) found at CMD-3 Area.T. 1948.

00) plus (5%) compensating tax. the parties hereto have agreed as follows: 1. and with postal address at 1959 Roberts. That the First Part acknowledges.00) in full payment of the surplus properties situated in the base hereinbefore mentioned. Tarlac. and the further sum of Fifteen Thousand Four Hundred and Fifty (P15. 1948. married to Demetria S. the receipts from the Second Part of the sum of SEVENTY ONE THOUSAND FOUR HUNDRED SIXTY-SEVEN PESOS AND FIFTY CENTAVOS (P71. the First Part is in need of capital as he can only furnish Thirty-Eight Thousand Four Hundred Eighty-two and Fifty Centavos (P38. WHEREAS.467.50).482. Philippines.482. NOW THEREFORE. single. or a total of Ninety Four Thousand Five Hundred Pesos (P94. Philippines. the total sum of Ninety FOUR THOUSAND FIVE HUNDRED PESOS (94.467. — and — JOSE COJUANGCO. the First Part will also spend as a starting capital in repairing and putting to good condition all the surplus properties in the mentioned area.50) as the Second Part's capital contribution to this particular business. Philippines. Manila.00) before sales could be made from the same. Filipino. Rizal City. 3. Guiuan. 2. after the signing of these presents. hereinafter to be known as the SECOND PART. the Second Part has agreed to the offer of the First Part. VILLA-ABRILLE.450. WITNESSETH: WHEREAS. WHEREAS. the First Part has invited the Second Part to furnish sixty-five percent (65%) of the total capital required or the sum of Seventy-One Thousand Four Hundred Sixty-Seven Pesos and Fifty Centavos (P71.THIS AGREEMENT.500.50). That the First Part. Filipino of legal age. . That the First Part manifests by the signing of these presents the payment by him of his capital contribution which is in the sum of THIRTY-EIGHT THOUSAND HUNDRED EIGHTY-TWO PESOS AND FIFTY CENTAVOS (P38. by and between: FERNANDO F. undertakes to pay to the Surplus Property Commission.50) or thirty-five (35%) percent of the purchase price plus the 5% compensating tax. for and in consideration of the premises.00) as starting expenses of operations.500. the First Part has been awarded the bid for the purchase of all the surplus properties situated at CMD-3 Area.450. and a resident of and with postal address at Tarlac. Samar Naval Base. of legal age. made and entered into at the City of Manila. by signing of these presents. and a resident of.00). WHEREAS. in the sum of Ninety Thousand Pesos (P90. in the estimated sum of Fifteen Thousand Four Hundred and Fifty Pesos (P15.000. this 28th day of May. Samar. Cojuangco. WHEREAS. hereinafter to be known as the FIRST PART.

6. That the First Part or any of his representatives or associates. 8. reserving.450. the parties hereto have signed these presents at the place and on the date first hereinabove written. the latter paid to the Surplus Property Commission the unpaid balance of the purchase price of the surplus goods in the amount . and in case of conflict. 10.Abrille. which expenses shall be paid from the sum of P15. countersigned by Jose Cojuangco and/or Demetria S. Villa-Abrille. Cojuangco. however. all the surplus properties in the area and to sell them for profit at the best prevailing market price. 5. IN WITNESS WHEREOF. That the First Part promises and undertakes to use his best prudence in economizing expenses and in securing the best selling price possible with a view to realizing the greatest profit in the business. Cojuangco.00 hereinabove set aside. That the First Part is authorized to engage employees and laborers in prosecuting the business herein mentioned.00. as soon as practicable. 12. the salaries and wages of whom shall also be taken from the mentioned sum of P15. by the First Part a complete and full inventory of the surplus properties found to be existing in the base at the time of the transfer of possession from the Surplus Property Commission to the First Part. shall not be paid any salaries but will only be reimbursed the actual cost of transportation from Manila to Guiuan. as well as any funds that will not require immediate disbursements shall be deposited immediately thereafter with the Philippine Bank of Commerce in an account to be known as Fernando F. 11. as well as all expenses of board and lodging while in Samar. to himself the right to act on anything whenever necessary.4. That the Second Part shall be furnished. The First Part undertakes to repair and recondition at the earliest possible date. the decision of the Second Part shall prevail. That in view of the confidence that the Second Part has with the First Part. That the proceeds of the sale. That out of the net profit that will be realized from the business herein mentioned. The First Part is likewise authorized to buy spare parts necessary to replace worn out parts of any of the properties bought from the Surplus Property Commission. the First Part shall receive fifty percent (50%) and the Second Part the remaining fifty percent (50%). 13. 7. the Second Part has agreed to give the First Part full authority to act on the premises. de VillaAbrille and/or Jose Cojuangco and/or Demetria S. and withdrawals from the said account can be made only under the signatures of Fernando F. and from Samar to Manila.450. That the First Part and the Second Part shall be in frequent consultation regarding the selling price to be set for any of the properties bought from the Surplus Property Commission. Samar. 9. After the above agreement was signed by respondent and Villa. if any.

. which was later amended.. on the basis of which report........ Subsequently.......23 300..... P375......000...................653...... 1949 ... 1950 to March. Cojuangco filed with the Court of Tax Appeals a petition...................42 .........000......500. A-690575 dated May 28.......... 1948 .. 23.. and the rest to Ellin and Co.I. P37........ and deposited in the name of petitioner...................... dated May 28.00 29........ in the name of Fernando F....... 1952 (with invoices) Sales with deed of sales....... Compromise penalty for violation of the Bookkeeping Regulations ...........10 Total tax liability still due ............. payment thereof being evidenced by Official Receipt No.... Due to the deficiency tax assessment (to be described later) made by the petitioner on respondent.252.................... 1950 (with invoices) Sales with deed of sales.33 Total taxes due ...........00.....00 under Special Account and/or Trust Account..033.42 P8..033. 1955........33 ............. to cover the sale in question.........000.. de Villa-Abrille and/or Jose Cojuangco..................... on February 2........... Cojuangco.......785.... the disposition of which was made dependent on the final decision of the case.... Bernardo. on June 7.500.......... SPC-Invoice No.... and/or Demetria S..... P160.........102 7..655......... Based on the facts ......................00 As a consequence...... Feb................ Less: Compensating Tax paid under O.....531.... 5% on P160..... 1955: Total sales subject to 5% Sales from August........ 1953..... issued in the name of Villa-Abrille... 7% on P375...................... 1948 to Sept.032... 1949.... 1951 to June 1952 ...........033.... who.. 531. the amount of P37...... In accordance with the provision of Paragraph 12 of the aforequoted agreement........ submitted his report (Annex E) to petitioner.....33 P300.........446.....38 was....00 which includes the compensating tax in the amount of P4.. P34................33 P26... 1951 and may 28...............400..... 1952................ To this petition................. P133......................... Villa-Abrille sold a portion of the surplus goods to Hume Pipe and Asbestos Co........77 Total sales subject to 7% Sales from Sept..... against respondent on January 27.00 Total . Villa-Abrille deposited with the Philippine Bank of Commerce the amount of P145.....R....42 27............. 6.. praying that the Collector be ordered to cancel said assessment......of P84......00 Total .........33 P4. segregated from said account. 1awphîl.......285.. No..... 7770 (Annex C) was issued in the name of VillaAbrille. P75......... 1948 (Annex B)...... petitioner made the following assessment............. 655. 25% . on August 11.. 1955..... Accordingly................................... on April 1................................. petitioner herein (respondent in the Tax Court) filed his answer on July 2........ A-690575.nèt The aforementioned purchase of the surplus goods from the Surplus Property Commission by VillaAbrille was subsequently investigated by Provincial Revenue Agent H............. Tax still due .

12) 2691 . and to sell them for profit at the best prevailing market price". vs. Manila. and the one liable for sales taxes thereon (V. clearly implying that Cojuangco acquired no title to or direct interest in the goods themselves. we have already held in Co Cheng Tee vs. and Cojuangco undertook no obligation in connection therewith. . Meer. 87 Phil.Abrille) . It is not denied that the bid of Villa-Abrille was accepted (and the contract of sale in his favor thereby perfected) on April 22.nèt The legal issues in the case may be boiled down to the following: (1) Whether or not liability for the percentage (sales) taxes under Section 186 of the National Internal Revenue Code arose on account of the sale made to Villa-Abrille of the surplus goods in question by the Surplus Property Commission. Aldecoa and Co. all the surplus properties . The business was only Villa-Abrille's. on theory that only Villa-Abrille could be held liable for the deficiency percentage taxes. Warner Barnes and Co. the total sum of P94. and only VillaAbrille was intended to deal with third persons in connection with the acquisition and disposition of said goods. dated October 30. Gaz. No. As such importer. 1957. These facts support the conclusion of the Tax Court that. Anent the first issue. undertakes to pay the Surplus Property Commission. so that only Villa-Abrille became in law the buyer.. We find no reversible error in the decision appealed from. Not agreeable with the decision. 47 Off. Note that the express stipulation is that Villa-Abrille is to repair and sell the same. and thus be held accountable for the percentage taxes. that a purchaser of certain commodities from the Surplus Property Commission and the Foreign Liquidation Office is an importer within the purview of the Tax Code. In this instance. depending on whether the things bought were acquired exclusively for personal use or for mercantile or commercial purposes. and that in SPC Invoice No. the purchaser may be held liable either for compensating taxes or percentage (sales) taxes under Section 183 (B) of the Revised Internal Revenue Code in connection with Section 186 of the same code. 18. while Cojuangco maintains that it was Villa-Abrille solely who caused the same. Cojuangco was a mere contributor to a joint enterprise with Villa-Abrille.. 1948. In the first case. paragraphs 3 and 4 of the agreement with Cojuangco stipulate that "the First Part (Villa. The Collector urges that the importation of the surplus goods was made for and in behalf of the association between Jose Cojuangco and Villa-Abrille.Abrille (which is the sole reliance of the collector) that indicates any joint interest in the acquisition of the goods from the Surplus Property Commission. There is no provision in the agreement between Cojuangco and Villa. and seller of the goods. so that anyone of the members thereof may be held liable for the tax. more than one month before the contract with Cojuangco. This fact is not seriously disputed by the parties in this appeal. 1awphîl. the tax liability is for percentage taxes. 1770 wherein the conditions of the sale appear. only Villa-Abrille's name mentioned. The resolution of the second issue hinges principally on the question of who should be considered as the importer. and (2) whether or not respondent Jose Cojuangco could be held liable by the Collector for the payment of said taxes. and in the second. considering that the acquisition of the surplus goods in question was for commercial purposes or resale. and that "the First Part undertakes to repair and recondition . importer. the Collector of Internal Revenue brought this petition for review. 30 Phil. Coincidentally. (Supp. he is liable for percentage or sales tax.. and that the business remained exclusively the latter's. 153). should the same be held assessable.already stated.00 in full payment of the surplus properties". the importer is liable for compensating taxes. at the most. The respondent's position was sustained by the Court of Tax Appeals. reversing the Collector's stand.500. the lower court rendered judgment.

that he was to be furnished an inventory of the of the goods acquired. Padilla. but they do not establish that he had any joint interest in the surplus properties themselves. 11). Paredes and Dizon. No such fraud is shown in this case.J. Gutierrez David.. appear to be mere measures designed to protect the investment of Cojuangco and secure proper payment of his fifty per cent of the net profit. No costs. Labrador. and. therefore.. that the proceeds of the sale were to be deposited in a joint "and/or" bank account.The Collector calls attention to the agreement's provisions that "in case of conflict the decision of the Second Part (Cojuangco) shall prevail" (paragraph 9). and to be withdrawn by checks under joint signature (p. Bengzon. These conditions. Bautista Angelo. JJ. when considered with paragraphs 3 and 4. affirm the decision under appeal. Barrera. . Paras. and was to be consulted "regarding the sales price" (p. Concepcion. The Collector warns that agreements of this sort could be used to defraud the government of taxes due it. nor in the purchase. reconditioning or sale thereof. heretofore quoted. concur. whether Cojuangco's right to half of the net profit involves prior deduction of all taxes as part of the costs of operation is not in issue at present and need not be decided. and the desire to forestall future deceit does not justify the imposition of a tax on the wrong person.12). There is no showing that the taxes sought to be recovered can not be collected from Villa-Abrille. C. We agree with the Tax Court that respondent Jose Cojuangco is not personally liable for the sales taxes now sought to be recovered. On the other hand.