1
G.R. No. 153788 November 27, 2009
ROGER V. NAVARRO, Petitioner,
vs.
HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch
37, Cagayan de Oro City, and KAREN T. GO, doing
business under the name KARGO
ENTERPRISES, Respondents.
DECISION
BRION, J.:
This is a petition for review on certiorari1 that seeks to set
aside the Court of Appeals (CA) Decision2 dated October
16, 2001 and Resolution3 dated May 29, 2002 in CA-G.R. SP.
No. 64701. These CA rulings affirmed the July 26,
20004 and March 7, 20015 orders of the Regional Trial
Court (RTC), Misamis Oriental, Cagayan de Oro City,
denying petitioner Roger V. Navarro’s (Navarro) motion to
dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two
complaints, docketed as Civil Case Nos. 98-599 (first
complaint)6 and 98-598 (second complaint),7 before the
RTC for replevin and/or sum of money with damages
against Navarro. In these complaints, Karen Go prayed that
the RTC issue writs of replevin for the seizure of two (2)
motor vehicles in Navarro’s possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal age,
married to GLENN O. GO, a resident of Cagayan de Oro City
and doing business under the trade name KARGO
ENTERPRISES, an entity duly registered and existing under
and by virtue of the laws of the Republic of the Philippines,
which has its business address at Bulua, Cagayan de Oro
City; that defendant ROGER NAVARRO is a Filipino, of legal
age, a resident of 62 Dolores Street, Nazareth, Cagayan de
Oro City, where he may be served with summons and other
processes of the Honorable Court; that defendant "JOHN
DOE" whose real name and address are at present unknown
to plaintiff is hereby joined as party defendant as he may
be the person in whose possession and custody the personal
property subject matter of this suit may be found if the
same is not in the possession of defendant ROGER
NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among
others, buying and selling motor vehicles, including hauling
trucks and other heavy equipment;
3. That for the cause of action against defendant ROGER
NAVARRO, it is hereby stated that on August 8, 1997, the
said defendant leased [from] plaintiff a certain motor
vehicle which is more particularly described as follows –
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
as evidenced by a LEASE AGREEMENT WITH OPTION TO
PURCHASE entered into by and between KARGO
ENTERPRISES, then represented by its Manager, the
aforementioned GLENN O. GO, and defendant ROGER
NAVARRO xxx; that in accordance with the provisions of the
above LEASE AGREEMENT WITH OPTION TO PURCHASE,
defendant ROGER NAVARRO delivered unto plaintiff six (6)
post-dated checks each in the amount of SIXTY-SIX
THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS
(P66,333.33) which were supposedly in payment of the
agreed rentals; that when the fifth and sixth checks, i.e.
PHILIPPINE BANK OF COMMUNICATIONS – CAGAYAN DE ORO
BRANCH CHECKS NOS. 017112 and 017113, respectively
dated January 8, 1998 and February 8, 1998, were
presented for payment and/or credit, the same were
dishonored and/or returned by the drawee bank for the
common reason that the current deposit account against
which the said checks were issued did not have sufficient
funds to cover the amounts thereof; that the total amount
of the two (2) checks, i.e. the sum of ONE HUNDRED
THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100
PESOS (P132,666.66) therefore represents the principal
liability of defendant ROGER NAVARRO unto plaintiff on the
basis of the provisions of the above LEASE AGREEMENT
WITH RIGHT TO PURCHASE; that demands, written and
oral, were made of defendant ROGER NAVARRO to pay the
amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX
HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to
return the subject motor vehicle as also provided for in the
LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said
demands were, and still are, in vain to the great damage
and injury of herein plaintiff; xxx
4. That the aforedescribed motor vehicle has not been the
subject of any tax assessment and/or fine pursuant to law,
or seized under an execution or an attachment as against
herein plaintiff;
xxx
8. That plaintiff hereby respectfully applies for an order of
the Honorable Court for the immediate delivery of the
above-described motor vehicle from defendants unto
plaintiff pending the final determination of this case on the
merits and, for that purpose, there is attached hereto an
affidavit duly executed and bond double the value of the
personal property subject matter hereof to answer for
damages and costs which defendants may suffer in the
event that the order for replevin prayed for may be found
out to having not been properly issued.
The second complaint contained essentially the same
allegations as the first complaint, except that the Lease
Agreement with Option to Purchase involved is dated
October 1, 1997 and the motor vehicle leased is described
as follows:
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered
three post-dated checks, each for the amount
ofP100,000.00, to Karen Go in payment of the agreed
rentals; however, the third check was dishonored when
presented for payment.8
On October 12, 19989 and October 14, 1998,10 the RTC
issued writs of replevin for both cases; as a result, the
Sheriff seized the two vehicles and delivered them to the
possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative
defense that the two complaints stated no cause of action,
since Karen Go was not a party to the Lease Agreements
with Option to Purchase (collectively, the lease
agreements) – the actionable documents on which the
complaints were based.
On Navarro’s motion, both cases were duly consolidated on
December 13, 1999.
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In its May 8, 2000 order, the RTC dismissed the case on the
ground that the complaints did not state a cause of action.
In response to the motion for reconsideration Karen Go
filed dated May 26, 2000,11 the RTC issued another order
dated July 26, 2000 setting aside the order of dismissal.
Acting on the presumption that Glenn Go’s leasing business
is a conjugal property, the RTC held that Karen Go had
sufficient interest in his leasing business to file the action
against Navarro. However, the RTC held that Karen Go
should have included her husband, Glenn Go, in the
complaint based on Section 4, Rule 3 of the Rules of Court
(Rules).12 Thus, the lower court ordered Karen Go to file a
motion for the inclusion of Glenn Go as co-
plaintiff.1avvphi1
When the RTC denied Navarro’s motion for reconsideration
on March 7, 2001, Navarro filed a petition for certiorari
with the CA, essentially contending that the RTC
committed grave abuse of discretion when it reconsidered
the dismissal of the case and directed Karen Go to amend
her complaints by including her husband Glenn Go as co-
plaintiff. According to Navarro, a complaint which failed to
state a cause of action could not be converted into one
with a cause of action by mere amendment or
supplemental pleading.
On October 16, 2001, the CA denied Navarro’s petition and
affirmed the RTC’s order.13 The CA also denied Navarro’s
motion for reconsideration in its resolution of May 29,
2002,14 leading to the filing of the present petition.
THE PETITION
Navarro alleges that even if the lease agreements were in
the name of Kargo Enterprises, since it did not have the
requisite juridical personality to sue, the actual parties to
the agreement are himself and Glenn Go. Since it was
Karen Go who filed the complaints and not Glenn Go, she
was not a real party-in-interest and the complaints failed
to state a cause of action.
Navarro posits that the RTC erred when it ordered the
amendment of the complaint to include Glenn Go as a co-
plaintiff, instead of dismissing the complaint outright
because a complaint which does not state a cause of action
cannot be converted into one with a cause of action by a
mere amendment or a supplemental pleading. In effect,
the lower court created a cause of action for Karen Go
when there was none at the time she filed the complaints.
Even worse, according to Navarro, the inclusion of Glenn
Go as co-plaintiff drastically changed the theory of the
complaints, to his great prejudice. Navarro claims that the
lower court gravely abused its discretion when it assumed
that the leased vehicles are part of the conjugal property
of Glenn and Karen Go. Since Karen Go is the registered
owner of Kargo Enterprises, the vehicles subject of the
complaint are her paraphernal properties and the RTC
gravely erred when it ordered the inclusion of Glenn Go as
a co-plaintiff.
Navarro likewise faults the lower court for setting the trial
of the case in the same order that required Karen Go to
amend her complaints, claiming that by issuing this order,
the trial court violated Rule 10 of the Rules.
Even assuming the complaints stated a cause of action
against him, Navarro maintains that the complaints were
premature because no prior demand was made on him to
comply with the provisions of the lease agreements before
the complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin
were issued based on flawed complaints, the vehicles were
illegally seized from his possession and should be returned
to him immediately.
Karen Go, on the other hand, claims that it is misleading
for Navarro to state that she has no real interest in the
subject of the complaint, even if the lease agreements
were signed only by her husband, Glenn Go; she is the
owner of Kargo Enterprises and Glenn Go signed the lease
agreements merely as the manager of Kargo Enterprises.
Moreover, Karen Go maintains that Navarro’s insistence
that Kargo Enterprises is Karen Go’s paraphernal property
is without basis. Based on the law and jurisprudence on the
matter, all property acquired during the marriage is
presumed to be conjugal property. Finally, Karen Go insists
that her complaints sufficiently established a cause of
action against Navarro. Thus, when the RTC ordered her to
include her husband as co-plaintiff, this was merely to
comply with the rule that spouses should sue jointly, and
was not meant to cure the complaints’ lack of cause of
action.
THE COURT’S RULING
We find the petition devoid of merit.
Karen Go is the real party-in-interest
The 1997 Rules of Civil Procedure requires that every
action must be prosecuted or defended in the name of the
real party-in-interest, i.e., the party who stands to be
benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.15
Interestingly, although Navarro admits that Karen Go is the
registered owner of the business name Kargo Enterprises,
he still insists that Karen Go is not a real party-in-interest
in the case. According to Navarro, while the lease contracts
were in Kargo Enterprises’ name, this was merely a trade
name without a juridical personality, so the actual parties
to the lease agreements were Navarro and Glenn Go, to the
exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with
grave abuse of discretion when it ordered the inclusion of
Glenn Go as co-plaintiff, since this in effect created a
cause of action for the complaints when in truth, there was
none.
We do not find Navarro’s arguments persuasive.
The central factor in appreciating the issues presented in
this case is the business name Kargo Enterprises. The name
appears in the title of the Complaint where the plaintiff
was identified as "KAREN T. GO doing business under the
name KARGO ENTERPRISES," and this identification was
repeated in the first paragraph of the Complaint.
Paragraph 2 defined the business KARGO ENTERPRISES
undertakes. Paragraph 3 continued with the allegation that
the defendant "leased from plaintiff a certain motor
vehicle" that was thereafter described. Significantly, the
Complaint specifies and attaches as its integral part the
Lease Agreement that underlies the transaction between
the plaintiff and the defendant. Again, the name KARGO
ENTERPRISES entered the picture as this Lease Agreement
provides:
This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office
address at xxx, herein referred to as the LESSOR-SELLER;
representing KARGO ENTERPRISES as its Manager,
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xxx
thus, expressly pointing to KARGO ENTERPRISES as the
principal that Glenn O. Go represented. In other words, by
the express terms of this Lease Agreement, Glenn Go did
sign the agreement only as the manager of Kargo
Enterprises and the latter is clearly the real party to the
lease agreements.
As Navarro correctly points out, Kargo Enterprises is a sole
proprietorship, which is neither a natural person, nor a
juridical person, as defined by Article 44 of the Civil Code:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public
interest or purpose, created by law; their personality
begins as soon as they have been constituted according to
law;
(3) Corporations, partnerships and associations for private
interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each
shareholder, partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo
Enterprises cannot be a party to a civil action. This legal
reality leads to the question: who then is the proper party
to file an action based on a contract in the name of Kargo
Enterprises?
We faced a similar question in Juasing Hardware v.
Mendoza,17 where we said:
Finally, there is no law authorizing sole proprietorships like
petitioner to bring suit in court. The law merely recognizes
the existence of a sole proprietorship as a form of business
organization conducted for profit by a single individual, and
requires the proprietor or owner thereof to secure licenses
and permits, register the business name, and pay taxes to
the national government. It does not vest juridical or legal
personality upon the sole proprietorship nor empower it to
file or defend an action in court.
Thus, the complaint in the court below should have been
filed in the name of the owner of Juasing Hardware. The
allegation in the body of the complaint would show that
the suit is brought by such person as proprietor or owner of
the business conducted under the name and style Juasing
Hardware. The descriptive words "doing business as Juasing
Hardware" may be added to the title of the case, as is
customarily done.18 [Emphasis supplied.]
This conclusion should be read in relation with Section 2,
Rule 3 of the Rules, which states:
SEC. 2. Parties in interest. – A real party in interest is the
party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of
the suit. Unless otherwise authorized by law or these Rules,
every action must be prosecuted or defended in the name
of the real party in interest.
As the registered owner of Kargo Enterprises, Karen Go is
the party who will directly benefit from or be injured by a
judgment in this case. Thus, contrary to Navarro’s
contention, Karen Go is the real party-in-interest, and it is
legally incorrect to say that her Complaint does not state a
cause of action because her name did not appear in the
Lease Agreement that her husband signed in behalf of
Kargo Enterprises. Whether Glenn Go can legally sign the
Lease Agreement in his capacity as a manager of Kargo
Enterprises, a sole proprietorship, is a question we do not
decide, as this is a matter for the trial court to consider in
a trial on the merits.
Glenn Go’s Role in the Case
We find it significant that the business name Kargo
Enterprises is in the name of Karen T. Go,19 who described
herself in the Complaints to be "a Filipino, of legal age,
married to GLENN O. GO, a resident of Cagayan de Oro
City, and doing business under the trade name KARGO
ENTERPRISES."20 That Glenn Go and Karen Go are married
to each other is a fact never brought in issue in the case.
Thus, the business name KARGO ENTERPRISES is registered
in the name of a married woman, a fact material to the
side issue of whether Kargo Enterprises and its properties
are paraphernal or conjugal properties. To restate the
parties’ positions, Navarro alleges that Kargo Enterprises is
Karen Go’s paraphernal property, emphasizing the fact that
the business is registered solely in Karen Go’s name. On the
other hand, Karen Go contends that while the business is
registered in her name, it is in fact part of their conjugal
property.
The registration of the trade name in the name of one
person – a woman – does not necessarily lead to the
conclusion that the trade name as a property is hers alone,
particularly when the woman is married. By law, all
property acquired during the marriage, whether the
acquisition appears to have been made, contracted or
registered in the name of one or both spouses, is presumed
to be conjugal unless the contrary is proved.21 Our
examination of the records of the case does not show any
proof that Kargo Enterprises and the properties or
contracts in its name are conjugal. If at all, only the bare
allegation of Navarro to this effect exists in the records of
the case. As we emphasized in Castro v. Miat:22
Petitioners also overlook Article 160 of the New Civil Code.
It provides that "all property of the marriage is presumed
to be conjugal partnership, unless it be prove[n] that it
pertains exclusively to the husband or to the wife." This
article does not require proof that the property was
acquired with funds of the partnership. The presumption
applies even when the manner in which the property was
acquired does not appear.23 [Emphasis supplied.]
Thus, for purposes solely of this case and of resolving the
issue of whether Kargo Enterprises as a sole proprietorship
is conjugal or paraphernal property, we hold that it is
conjugal property.
Article 124 of the Family Code, on the administration of
the conjugal property, provides:
Art. 124. The administration and enjoyment of the conjugal
partnership property shall belong to both spouses jointly. In
case of disagreement, the husband’s decision shall prevail,
subject to recourse to the court by the wife for proper
remedy, which must be availed of within five years from
the date of the contract implementing such decision.
xxx
This provision, by its terms, allows either Karen or Glenn
Go to speak and act with authority in managing their
conjugal property, i.e., Kargo Enterprises. No need exists,
therefore, for one to obtain the consent of the other
before performing an act of administration or any act that
does not dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal
partnership is governed by the rules on the contract of
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partnership in all that is not in conflict with what is
expressly determined in this Chapter or by the spouses in
their marriage settlements. In other words, the property
relations of the husband and wife shall be governed
primarily by Chapter 4 on Conjugal Partnership of Gains of
the Family Code and, suppletorily, by the spouses’
marriage settlement and by the rules on partnership under
the Civil Code. In the absence of any evidence of a
marriage settlement between the spouses Go, we look at
the Civil Code provision on partnership for guidance.
A rule on partnership applicable to the spouses’
circumstances is Article 1811 of the Civil Code, which
states:
Art. 1811. A partner is a co-owner with the other partners
of specific partnership property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to
any agreement between the partners, has an equal right
with his partners to possess specific partnership
property for partnership purposes; xxx
Under this provision, Glenn and Karen Go are effectively
co-owners of Kargo Enterprises and the properties
registered under this name; hence, both have an equal
right to seek possession of these properties. Applying
Article 484 of the Civil Code, which states that "in default
of contracts, or special provisions, co-ownership shall be
governed by the provisions of this Title," we find further
support in Article 487 of the Civil Code that allows any of
the co-owners to bring an action in ejectment with respect
to the co-owned property.
While ejectment is normally associated with actions
involving real property, we find that this rule can be
applied to the circumstances of the present case, following
our ruling in Carandang v. Heirs of De Guzman.24 In this
case, one spouse filed an action for the recovery of credit,
a personal property considered conjugal property, without
including the other spouse in the action. In resolving the
issue of whether the other spouse was required to be
included as a co-plaintiff in the action for the recovery of
the credit, we said:
Milagros de Guzman, being presumed to be a co-owner of
the credits allegedly extended to the spouses Carandang,
seems to be either an indispensable or a necessary party. If
she is an indispensable party, dismissal would be proper. If
she is merely a necessary party, dismissal is not warranted,
whether or not there was an order for her inclusion in the
complaint pursuant to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the
rules on the contract of partnership in all that is not in
conflict with what is expressly determined in this Chapter
or by the spouses in their marriage settlements.
This provision is practically the same as the Civil Code
provision it superseded:
Art. 147. The conjugal partnership shall be governed by the
rules on the contract of partnership in all that is not in
conflict with what is expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides
that "[a] partner is a co-owner with the other partners of
specific partnership property." Taken with the presumption
of the conjugal nature of the funds used to finance the four
checks used to pay for petitioners’ stock subscriptions, and
with the presumption that the credits themselves are part
of conjugal funds, Article 1811 makes Quirino and Milagros
de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros
de Guzman may separately bring an action for the recovery
thereof. In the fairly recent cases of Baloloy v.
Hular and Adlawan v. Adlawan, we held that, in a co-
ownership, co-owners may bring actions for the recovery of
co-owned property without the necessity of joining all the
other co-owners as co-plaintiffs because the suit is
presumed to have been filed for the benefit of his co-
owners. In the latter case and in that of De Guia v. Court of
Appeals, we also held that Article 487 of the Civil Code,
which provides that any of the co-owners may bring an
action for ejectment, covers all kinds of action for the
recovery of possession.
In sum, in suits to recover properties, all co-owners are
real parties in interest. However, pursuant to Article 487 of
the Civil Code and relevant jurisprudence, any one of them
may bring an action, any kind of action, for the recovery of
co-owned properties. Therefore, only one of the co-
owners, namely the co-owner who filed the suit for the
recovery of the co-owned property, is an indispensable
party thereto. The other co-owners are not indispensable
parties. They are not even necessary parties, for a
complete relief can be accorded in the suit even without
their participation, since the suit is presumed to have been
filed for the benefit of all co-owners.25[Emphasis
supplied.]
Under this ruling, either of the spouses Go may bring an
action against Navarro to recover possession of the Kargo
Enterprises-leased vehicles which they co-own. This
conclusion is consistent with Article 124 of the Family
Code, supporting as it does the position that either spouse
may act on behalf of the conjugal partnership, so long as
they do not dispose of or encumber the property in
question without the other spouse’s consent.
On this basis, we hold that since Glenn Go is not strictly an
indispensable party in the action to recover possession of
the leased vehicles, he only needs to be impleaded as a
pro-forma party to the suit, based on Section 4, Rule 4 of
the Rules, which states:
Section 4. Spouses as parties. – Husband and wife shall sue
or be sued jointly, except as provided by law.
Non-joinder of indispensable parties not ground to dismiss
action
Even assuming that Glenn Go is an indispensable party to
the action, we have held in a number of cases26 that the
misjoinder or non-joinder of indispensable parties in a
complaint is not a ground for dismissal of action. As we
stated in Macababbad v. Masirag:27
Rule 3, Section 11 of the Rules of Court provides that
neither misjoinder nor nonjoinder of parties is a ground for
the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither
misjoinder nor non-joinder of parties is ground for dismissal
of an action. Parties may be dropped or added by order of
the court on motion of any party or on its own initiative at
any stage of the action and on such terms as are just. Any
claim against a misjoined party may be severed and
proceeded with separately.
In Domingo v. Scheer, this Court held that the proper
remedy when a party is left out is to implead the
 5
indispensable party at any stage of the action. The court,
either motu proprio or upon the motion of a party, may
order the inclusion of the indispensable party or give the
plaintiff opportunity to amend his complaint in order to
include indispensable parties. If the plaintiff to whom the
order to include the indispensable party is directed refuses
to comply with the order of the court, the complaint may
be dismissed upon motion of the defendant or upon the
court's own motion. Only upon unjustified failure or refusal
to obey the order to include or to amend is the action
dismissed.
In these lights, the RTC Order of July 26, 2000 requiring
plaintiff Karen Go to join her husband as a party plaintiff is
fully in order.
Demand not required prior
to filing of replevin action
In arguing that prior demand is required before an action
for a writ of replevin is filed, Navarro apparently likens a
replevin action to an unlawful detainer.
For a writ of replevin to issue, all that the applicant must
do is to file an affidavit and bond, pursuant to Section 2,
Rule 60 of the Rules, which states:
Sec. 2. Affidavit and bond.
The applicant must show by his own affidavit or that of
some other person who personally knows the facts:
(a) That the applicant is the owner of the
property claimed, particularly describing it, or is entitled
to the possession thereof;
(b) That the property is wrongfully detained by the adverse
party, alleging the cause of detention thereof according to
the best of his knowledge, information, and belief;
(c) That the property has not been distrained or taken for a
tax assessment or a fine pursuant to law, or seized under a
writ of execution or preliminary attachment, or otherwise
placed under custodia legis, or if so seized, that it is
exempt from such seizure or custody; and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the
adverse party in double the value of the property as stated
in the affidavit aforementioned, for the return of the
property to the adverse party if such return be adjudged,
and for the payment to the adverse party of such sum as he
may recover from the applicant in the action.
We see nothing in these provisions which requires the
applicant to make a prior demand on the possessor of the
property before he can file an action for a writ of replevin.
Thus, prior demand is not a condition precedent to an
action for a writ of replevin.
More importantly, Navarro is no longer in the position to
claim that a prior demand is necessary, as he has already
admitted in his Answers that he had received the letters
that Karen Go sent him, demanding that he either pay his
unpaid obligations or return the leased motor vehicles.
Navarro’s position that a demand is necessary and has not
been made is therefore totally unmeritorious.
WHEREFORE, premises considered, we DENY the petition
for review for lack of merit. Costs against petitioner Roger
V. Navarro.
SO ORDERED.
G.R. No. L-45662 April 26, 1939
ENRIQUE CLEMENTE, plaintiff-appellee,
vs.
DIONISIO GALVAN, defendant-appellee.
JOSE ECHEVARRIA, intervenor-appellant.
Engracio F. Clemeña and Celedonio Bernardo for
appellant.
Vicente Bengson for defendant-appellee.
No appearance for other party.
DIAZ, J.:
The intervenor Jose Echevarria having lost in the Court of
First Instance of manila which rendered judgment against
him, the pertinent portion of which reads: "and with
respect to the complaint of the intervenor, the mortgage
executed in his favor by plaintiff is declared null and void,
and said complaint in intervention, as well as the
counterclaim filed by the defendant against the intervenor,
is dismissed, without pronouncement as to costs," he
appealed to this court on the ground that, according to
him, the lower court committed the errors assigned in his
brief as follows:
I. The court a quo erred in finding in the appealed decision
that plaintiff was unable to take possession of the
machines subject of the deed of mortgage Exhibit B either
before or after the execution thereof.
II. The court a quo likewise erred in deciding the present
case against the intervenor-appellant, on the ground,
among others, that "plaintiff has not adduced any evidence
nor has he testified to show that the machines mortgaged
by him to the intervenor have ever belonged to him,
notwithstanding that said intervenor is his close relative.".
III. The lower court also erred in declaring null and void the
mortgage executed by plaintiff in favor of the intervenor
and, thereby, dismissing the complaint in intervention.
IV. The lower court lastly erred in ordering the receiver J.
D. Mencarini to deliver to the defendant the aforesaid
machines upon petition of the plaintiff.
In order to have a clear idea of the question, it is proper to
state the facts bearing on the case as they appear in the
decision and judgment of the lower court and in the
documents which constitute all the evidence adduced by
the parties during the trial.
On June 6, 1931, plaintiff and defendant organized a civil
partnership which they named "Galvan y Compañia" to
engage in the manufacture and sale of paper and other
stationery. they agreed to invest therein a capital of
P100,000, but as a matter of fact they did not cover more
than one-fifth thereof, each contributing P10,000. Hardly a
year after such organization, the plaintiff commenced the
present case in the above-mentioned court to ask for the
dissolution of the partnership and to compel defendant to
whom the management thereof was entrusted to submit an
accounting of his administration and to deliver to him his
share as such partner. In his answer defendant expressed
his conformity to the dissolution of the partnership and the
liquidation of its affairs; but by way of counterclaim he
asked that, having covered a deficit incurred by the
partnership amounting to P4,000 with his own money,
plaintiff reimburse him of one-half of said sum. On petition
of the plaintiff a receiver and liquidator to take charge of
the properties and business for the partnership while the
 6
same was not yet definitely dissolved, was appointed, the
person chosen being Juan D. Mencarini. The latter was
already discharging the duties of his office when the court,
by virtue of a petition ex parte of the plaintiff, issued the
order of May 24, 1933, requiring said receiver to deliver to
him (plaintiff) certain machines which were then at Nos.
705-707 Ylaya Street, Manila but authorizing him to charge
their value of P4,500 against the portion which may
eventually be due to said plaintiff. To comply with said
order, the receiver delivered to plaintiff the keys to the
place where the machines were found, which was the same
place where defendant had his home; but before he could
take actual possession of said machines, upon the strong
opposition of defendant, the court, on motion of the latter,
suspended the effects of its order of May 24, 1933. In the
meantime the judgments rendered in cases Nos. 42794 and
43070 entitled "Philippine Education Co., Inc. vs. Enrique
Clemente" for the recovery of a sum of money, and "Jose
Echevarria vs. Enrique Clemente", also for the recovery of a
sum of money, respectively, were made executory; and in
order to avoid the attachment and subsequent sale of the
machines by the sheriff for the satisfaction from the
proceeds thereof of the judgments rendered in the two
cases aforecited, plaintiff agreed with the intervenor, who
is his nephew, to execute, as he in fact executed in favor
of the latter, a deed of mortgage Exhibit B encumbering
the machines described in said deed in which it is stated
that "they are situated on Singalong Street No. 1163",
which is a place entirely different from the house Nos. 705
and 707 on Ylaya Street hereinbefore mentioned. The one
year agreed upon in the deed of mortgage for the
fulfillment by the plaintiff of the obligation he had
contracted with the intervenor, having expired, the latter
commenced case No. 49629 to collect his mortgage credit.
The intervenor, as plaintiff in the said case, obtained
judgment in his favor because the defendant did not
interpose any defense or objection, and, moreover,
admitted being really indebted to the intervenor in the
amount set forth in the deed of mortgage Exhibit B. The
machines which the intervenor said were mortgaged to him
were then in fact in custodia legis, as they were under the
control of the receiver and liquidator Juan D. Mencarini. It
was, therefore, useless for the intervenor to attach the
same in view of the receiver's opposition; and the question
having been brought to court, it decided that nothing could
be done because the receiver was not a party to the case
which the intervenor instituted to collect his aforesaid
credit. (Civil case No. 49629.) The question ended thus
because the intervenor did not take any other step until he
thought of joining in this case as intervenor.
1. From the foregoing facts, it is clear that plaintiff could
not obtain possession of the machines in question. The
constructive possession deducible from the fact that he had
the keys to the place where the machines were found
(Ylaya Street Nos. 705-707), as they had been delivered to
him by the receiver, does not help him any because the
lower court suspended the effects of the other whereby the
keys were delivered to him a few days after its issuance;
and thereafter revoked it entirely in the appealed decision.
Furthermore, when he attempted to take actual possession
of the machines, the defendant did not allow him to do so.
Consequently, if he did not have actual possession of the
machines, he could not in any manner mortgage them, for
while it is true that the oft-mentioned deed of mortgage
Exhibit B was annotated in the registry of property, it is no
less true the machines to which it refers are not the same
as those in question because the latter are on Ylaya Street
Nos. 705-707 and the former are on Singalong Street No.
1163. It can not be said that Exhibit B-1, allegedly a
supplementary contract between the plaintiff and the
intervenor, shows that the machines referred to in the
deed of mortgage are the same as those in dispute and
which are found on Ylaya Street because said exhibit being
merely a private document, the same cannot vary or alter
the terms of a public document which is Exhibit B or the
deed of mortgage.
2. The second error attributed to the lower court is
baseless. The evidence of record shows that the machines
in contention originally belonged to the defendant and
from him were transferred to the partnership Galvan y
Compania. This being the case, said machines belong to the
partnership and not to him, and shall belong to it until
partition is effected according to the result thereof after
the liquidation.
3. The last two errors attributed by the appellant to the
lower court have already been disposed of by the
considerations above set forth. they are as baseless as the
previous ones.
In view of all the foregoing, the judgment appealed from is
affirmed, with costs against the appellant. So ordered.
Avanceña, C. J., Villa-Real, Imperial, Laurel, Concepcion,
and Moran, JJ., concur.
[G.R. No. 144214. July 14, 2003]
LUZVIMINDA J. VILLAREAL, DIOGENES VILLAREAL and
CARMELITO JOSE, petitioners, vs. DONALDO
EFREN C. RAMIREZ and Spouses CESAR G.
RAMIREZ JR. and CARMELITA C.
RAMIREZ, respondents.
DECISION
PANGANIBAN, J.:
A share in a partnership can be returned only after
the completion of the latters dissolution, liquidation and
winding up of the business.
The Case
The Petition for Review on Certiorari before us
challenges the March 23, 2000 Decision[1] and the July 26,
2000 Resolution[2] of the Court of Appeals[3] (CA) in CA-GR
CV No. 41026.The assailed Decision disposed as follows:
WHEREFORE, foregoing premises considered, the Decision
dated July 21, 1992 rendered by the Regional Trial Court,
Branch 148, Makati City is hereby SET ASIDE and NULLIFIED
and in lieu thereof a new decision is rendered ordering the
[petitioners] jointly and severally to pay and reimburse to
[respondents] the amount of P253,114.00. No
pronouncement as to costs.[4]
Reconsideration was denied in the impugned
Resolution.
The Facts
On July 25, 1984, Luzviminda J. Villareal, Carmelito
Jose and Jesus Jose formed a partnership with a capital
of P750,000 for the operation of a restaurant and catering
business under the name Aquarius Food House and Catering
Services.[5] Villareal was appointed general manager and
Carmelito Jose, operations manager.
 7
Respondent Donaldo Efren C. Ramirez joined as a
partner in the business on September 5, 1984. His capital
contribution of P250,000 was paid by his parents,
Respondents Cesar and Carmelita Ramirez.[6]
After Jesus Jose withdrew from the partnership in
January 1987, his capital contribution of P250,000 was
refunded to him in cash by agreement of the partners.[7]
In the same month, without prior knowledge of
respondents, petitioners closed down the restaurant,
allegedly because of increased rental. The restaurant
furniture and equipment were deposited in the respondents
house for storage.[8]
On March 1, 1987, respondent spouses wrote
petitioners, saying that they were no longer interested in
continuing their partnership or in reopening the restaurant,
and that they were accepting the latters offer to return
their capital contribution.[9]
On October 13, 1987, Carmelita Ramirez wrote
another letter informing petitioners of the deterioration of
the restaurant furniture and equipment stored in their
house. She also reiterated the request for the return of
their one-third share in the equity of the partnership. The
repeated oral and written requests were, however, left
unheeded.[10]
Before the Regional Trial Court (RTC) of Makati,
Branch 59, respondents subsequently filed a
Complaint[11] dated November 10, 1987, for the collection
of a sum of money from petitioners.
In their Answer, petitioners contended that
respondents had expressed a desire to withdraw from the
partnership and had called for its dissolution under Articles
1830 and 1831 of the Civil Code; that respondents had been
paid, upon the turnover to them of furniture and
equipment worth over P400,000; and that the latter had no
right to demand a return of their equity because their
share, together with the rest of the capital of the
partnership, had been spent as a result of irreversible
business losses.[12]
In their Reply, respondents alleged that they did not
know of any loan encumbrance on the
restaurant. According to them, if such allegation were
true, then the loans incurred by petitioners should be
regarded as purely personal and, as such, not chargeable to
the partnership. The former further averred that they had
not received any regular report or accounting from the
latter, who had solely managed the business. Respondents
also alleged that they expected the equipment and the
furniture stored in their house to be removed by petitioners
as soon as the latter found a better location for the
restaurant.[13]
Respondents filed an Urgent Motion for Leave to Sell
or Otherwise Dispose of Restaurant Furniture and
Equipment[14] on July 8, 1988. The furniture and the
equipment stored in their house were inventoried and
appraised at P29,000.[15] The display freezer was sold
for P5,000 and the proceeds were paid to them.[16]
After trial, the RTC[17] ruled that the parties had
voluntarily entered into a partnership, which could be
dissolved at any time. Petitioners clearly intended to
dissolve it when they stopped operating the
restaurant. Hence, the trial court, in its July 21, 1992
Decision, held them liable as follows:[18]
WHEREFORE, judgment is hereby rendered in favor of
[respondents] and against the [petitioners] ordering the
[petitioners] to pay jointly and severally the following:
(a) Actual damages in the amount of P250,000.00
(b) Attorneys fee in the amount of P30,000.00
(c) Costs of suit.
The CA Ruling
The CA held that, although respondents had no right
to demand the return of their capital contribution, the
partnership was nonetheless dissolved when petitioners lost
interest in continuing the restaurant business with
them. Because petitioners never gave a proper accounting
of the partnership accounts for liquidation purposes, and
because no sufficient evidence was presented to show
financial losses, the CA computed their liability as follows:
Consequently, since what has been proven is only the
outstanding obligation of the partnership in the amount
of P240,658.00, although contracted by the partnership
before [respondents] have joined the partnership but in
accordance with Article 1826 of the New Civil Code, they
are liable which must have to be deducted from the
remaining capitalization of the said partnership which is in
the amount ofP1,000,000.00 resulting in the amount
of P759,342.00, and in order to get the share of
[respondents], this amount of P759,342.00 must be divided
into three (3) shares or in the amount of P253,114.00 for
each share and which is the only amount which [petitioner]
will return to [respondents] representing the contribution
to the partnership minus the outstanding debt thereof.[19]
Hence, this Petition.[20]
Issues
In their Memorandum,[21] petitioners submit the
following issues for our consideration:
9.1. Whether the Honorable Court of Appeals decision
ordering the distribution of the capital contribution,
instead of the net capital after the dissolution and
liquidation of a partnership, thereby treating the capital
contribution like a loan, is in accordance with law and
jurisprudence;
9.2. Whether the Honorable Court of Appeals decision
ordering the petitioners to jointly and severally pay and
reimburse the amount of [P]253,114.00 is supported by the
evidence on record; and
9.3. Whether the Honorable Court of Appeals was correct in
making [n]o pronouncement as to costs.[22]
On closer scrutiny, the issues are as follows: (1)
whether petitioners are liable to respondents for the
latters share in the partnership; (2) whether the CAs
computation of P253,114 as respondents share is correct;
and (3) whether the CA was likewise correct in not
assessing costs.
This Courts Ruling
The Petition has merit.
First Issue:
Share in Partnership
Both the trial and the appellate courts found that a
partnership had indeed existed, and that it was dissolved
on March 1, 1987. They found that the dissolution took
place when respondents informed petitioners of the
intention to discontinue it because of the formers
dissatisfaction with, and loss of trust in, the latters
management of the partnership affairs. These findings
were amply supported by the evidence on
record. Respondents consequently demanded from
 8
petitioners the return of their one-third equity in the
partnership.
We hold that respondents have no right to demand
from petitioners the return of their equity share. Except as
managers of the partnership, petitioners did not personally
hold its equity or assets. The partnership has a juridical
personality separate and distinct from that of each of the
partners.[23] Since the capital was contributed to the
partnership, not to petitioners, it is the partnership that
must refund the equity of the retiring partners.[24]
Second Issue:
What Must Be Returned?
Since it is the partnership, as a separate and distinct
entity, that must refund the shares of the partners, the
amount to be refunded is necessarily limited to its total
resources. In other words, it can only pay out what it has in
its coffers, which consists of all its assets. However, before
the partners can be paid their shares, the creditors of the
partnership must first be compensated.[25] After all the
creditors have been paid, whatever is left of the
partnership assets becomes available for the payment of
the partners shares.
Evidently, in the present case, the exact amount of
refund equivalent to respondents one-third share in the
partnership cannot be determined until all the partnership
assets will have been liquidated -- in other words, sold and
converted to cash -- and all partnership creditors, if any,
paid. The CAs computation of the amount to be refunded
to respondents as their share was thus erroneous.
First, it seems that the appellate court was under the
misapprehension that the total capital contribution was
equivalent to the gross assets to be distributed to the
partners at the time of the dissolution of the
partnership. We cannot sustain the underlying idea that the
capital contribution at the beginning of the partnership
remains intact, unimpaired and available for distribution or
return to the partners. Such idea is speculative,
conjectural and totally without factual or legal support.
Generally, in the pursuit of a partnership business, its
capital is either increased by profits earned or decreased
by losses sustained. It does not remain static and
unaffected by the changing fortunes of the business. In the
present case, the financial statements presented before
the trial court showed that the business had made meager
profits.[26] However, notable therefrom is the omission of
any provision for the depreciation [27] of the furniture and
the equipment. The amortization of the
goodwill[28] (initially valued at P500,000) is not reflected
either.Properly taking these non-cash items into account
will show that the partnership was actually sustaining
substantial losses, which consequently decreased the
capital of the partnership.Both the trial and the appellate
courts in fact recognized the decrease of the partnership
assets to almost nil, but the latter failed to recognize the
consequent corresponding decrease of the capital.
Second, the CAs finding that the partnership had an
outstanding obligation in the amount of P240,658 was not
supported by evidence. We sustain the contrary finding of
the RTC, which had rejected the contention that the
obligation belonged to the partnership for the following
reason:
x x x [E]vidence on record failed to show the exact loan
owed by the partnership to its creditors. The balance sheet
(Exh. 4) does not reveal the total loan. The Agreement
(Exh. A) par. 6 shows an outstanding obligation
of P240,055.00 which the partnership owes to different
creditors, while the Certification issued by Mercator
Finance (Exh. 8) shows that it was Sps. Diogenes P.
Villareal and Luzviminda J. Villareal, the former being the
nominal party defendant in the instant case, who obtained
a loan of P355,000.00 on Oct. 1983, when the original
partnership was not yet formed.
Third, the CA failed to reduce the capitalization
by P250,000, which was the amount paid by the partnership
to Jesus Jose when he withdrew from the partnership.
Because of the above-mentioned transactions, the
partnership capital was actually reduced. When petitioners
and respondents ventured into business together, they
should have prepared for the fact that their investment
would either grow or shrink. In the present case, the
investment of respondents substantially dwindled. The
original amount of P250,000 which they had invested could
no longer be returned to them, because one third of the
partnership properties at the time of dissolution did not
amount to that much.
It is a long established doctrine that the law does not
relieve parties from the effects of unwise, foolish or
disastrous contracts they have entered into with all the
required formalities and with full awareness of what they
were doing. Courts have no power to relieve them from
obligations they have voluntarily assumed, simply because
their contracts turn out to be disastrous deals or unwise
investments.[29]
Petitioners further argue that respondents acted
negligently by permitting the partnership assets in their
custody to deteriorate to the point of being almost
worthless. Supposedly, the latter should have liquidated
these sole tangible assets of the partnership and considered
the proceeds as payment of their net capital. Hence,
petitioners argue that the turnover of the remaining
partnership assets to respondents was precisely the manner
of liquidating the partnership and fully settling the latters
share in the partnership.
We disagree. The delivery of the store furniture and
equipment to private respondents was for the purpose of
storage. They were unaware that the restaurant would no
longer be reopened by petitioners. Hence, the former
cannot be faulted for not disposing of the stored items to
recover their capital investment.
Third Issue:
Costs
Section 1, Rule 142, provides:
SECTION 1. Costs ordinarily follow results of suit. Unless
otherwise provided in these rules, costs shall be allowed to
the prevailing party as a matter of course, but the court
shall have power, for special reasons, to adjudge that
either party shall pay the costs of an action, or that the
same be divided, as may be equitable. No costs shall be
allowed against the Republic of the Philippines unless
otherwise provided by law.
Although, as a rule, costs are adjudged against the
losing party, courts have discretion, for special reasons, to
decree otherwise. When a lower court is reversed, the
higher court normally does not award costs, because the
losing party relied on the lower courts judgment which is
presumed to have been issued in good faith, even if found
later on to be erroneous.Unless shown to be patently
capricious, the award shall not be disturbed by a reviewing
tribunal.
WHEREFORE, the Petition is GRANTED, and the
assailed Decision and Resolution SET ASIDE. This disposition
is without prejudice to proper proceedings for the
accounting, the liquidation and the distribution of the
remaining partnership assets, if any. No pronouncement as
to costs.
SO ORDERED.
G.R. No. 178782 September 21, 2011
 9
JOSEFINA P. REALUBIT, Petitioner,
vs.
PROSENCIO D. JASO and EDEN G. JASO, Respondents.
DECISION
PEREZ, J.:
The validity as well as the consequences of an assignment
of rights in a joint venture are at issue in this petition for
review filed pursuant to Rule 45 of the 1997 Rules of Civil
Procedure,1 assailing the 30 April 2007 Decision2rendered
by the Court of Appeals’ (CA) then Twelfth Division in CA-
G.R. CV No. 73861,3 the dispositive portion of which states:
WHEREFORE, the Decision appealed from is SET ASIDE and
we order the dissolution of the joint venture between
defendant-appellant Josefina Realubit and Francis Eric
Amaury Biondo and the subsequent conduct of accounting,
liquidation of assets and division of shares of the joint
venture business.
Let a copy hereof and the records of the case be remanded
to the trial court for appropriate proceedings.4
The Facts
On 17 March 1994, petitioner Josefina Realubit (Josefina)
entered into a Joint Venture Agreement with Francis Eric
Amaury Biondo (Biondo), a French national, for the
operation of an ice manufacturing business. With Josefina
as the industrial partner and Biondo as the capitalist
partner, the parties agreed that they would each receive
40% of the net profit, with the remaining 20% to be used for
the payment of the ice making machine which was
purchased for the business.5 For and in consideration of the
sum of P500,000.00, however, Biondo subsequently
executed a Deed of Assignment dated 27 June 1997,
transferring all his rights and interests in the business in
favor of respondent Eden Jaso (Eden), the wife of
respondent Prosencio Jaso.6 With Biondo’s eventual
departure from the country, the Spouses Jaso caused their
lawyer to send Josefina a letter dated 19 February 1998,
apprising her of their acquisition of said Frenchman’s share
in the business and formally demanding an accounting and
inventory thereof as well as the remittance of their portion
of its profits.7
Faulting Josefina with unjustified failure to heed their
demand, the Spouses Jaso commenced the instant suit with
the filing of their 3 August 1998 Complaint against Josefina,
her husband, Ike Realubit (Ike), and their alleged dummies,
for specific performance, accounting, examination, audit
and inventory of assets and properties, dissolution of the
joint venture, appointment of a receiver and damages.
Docketed as Civil Case No. 98-0331 before respondent
Branch 257 of the Regional Trial Court (RTC) of Parañaque
City, said complaint alleged, among other matters, that the
Spouses Realubit had no gainful occupation or business
prior to their joint venture with Biondo; that with the
income of the business which earned not less
than P3,000.00 per day, they were, however, able to
acquire the two-storey building as well as the land on
which the joint venture’s ice plant stands, another building
which they used as their office and/or residence and six (6)
delivery vans; and, that aside from appropriating for
themselves the income of the business, the Spouses
Realubit have fraudulently concealed the funds and assets
thereof thru their relatives, associates or dummies.8
Served with summons, the Spouses Realubit filed their
Answer dated 21 October 1998, specifically denying the
material allegations of the foregoing complaint. Claiming
that they have been engaged in the tube ice trading
business under a single proprietorship even before their
dealings with Biondo, the Spouses Realubit, in turn,
averred that their said business partner had left the
country in May 1997 and could not have executed the Deed
of Assignment which bears a signature markedly different
from that which he affixed on their Joint Venture
Agreement; that they refused the Spouses Jaso’s demand in
view of the dubious circumstances surrounding their
acquisition of Biondo’s share in the business which was
established at Don Antonio Heights, Commonwealth
Avenue, Quezon City; that said business had already
stopped operations on 13 January 1996 when its plant shut
down after its power supply was disconnected by MERALCO
for non-payment of utility bills; and, that it was their own
tube ice trading business which had been moved to 66-C
Cenacle Drive, Sanville Subdivision, Project 6, Quezon City
that the Spouses Jaso mistook for the ice manufacturing
business established in partnership with Biondo.9
The issues thus joined and the mandatory pre-trial
conference subsequently terminated, the RTC went on to
try the case on its merits and, thereafter, to render its
Decision dated 17 September 2001, discounting the
existence of sufficient evidence from which the income,
assets and the supposed dissolution of the joint venture can
be adequately reckoned. Upon the finding, however, that
the Spouses Jaso had been nevertheless subrogated to
Biondo’s rights in the business in view of their valid
acquisition of the latter’s share as capitalist partner,10 the
RTC disposed of the case in the following wise:
WHEREFORE, defendants are ordered to submit to plaintiffs
a complete accounting and inventory of the assets and
liabilities of the joint venture from its inception to the
present, to allow plaintiffs access to the books and
accounting records of the joint venture, to deliver to
plaintiffs their share in the profits, if any, and to pay the
plaintiffs the amount of P20,000. for moral damages. The
claims for exemplary damages and attorney’s fees are
denied for lack of basis.11
On appeal before the CA, the foregoing decision was set
aside in the herein assailed Decision dated 30 April 2007,
upon the following findings and conclusions: (a) the
Spouses Jaso validly acquired Biondo’s share in the business
which had been transferred to and continued its operations
at 66-C Cenacle Drive, Sanville Subdivision, Project 6,
Quezon City and not dissolved as claimed by the Spouses
Realubit; (b) absent showing of Josefina’s knowledge and
consent to the transfer of Biondo’s share, Eden cannot be
considered as a partner in the business, pursuant to Article
1813 of the Civil Code of the Philippines; (c) while entitled
to Biondo’s share in the profits of the business, Eden
cannot, however, interfere with the management of the
partnership, require information or account of its
transactions and inspect its books; (d) the partnership
should first be dissolved before Eden can seek an
accounting of its transactions and demand Biondo’s share in
the business; and, (e) the evidence adduced before the
RTC do not support the award of moral damages in favor of
the Spouses Jaso.12
The Spouses Realubit’s motion for reconsideration of the
foregoing decision was denied for lack of merit in the CA’s
28 June 2007 Resolution,13 hence, this petition.
The Issues
The Spouses Realubit urge the reversal of the assailed
decision upon the negative of the following issues, to wit:
A. WHETHER OR NOT THERE WAS A VALID
ASSIGNMENT OF RIGHTS TO THE JOINT VENTURE.
B. WHETHER THE COURT MAY ORDER PETITIONER
[JOSEFINA REALUBIT] AS PARTNER IN THE JOINT
VENTURE TO RENDER [A]N ACCOUNTING TO ONE
WHO IS NOT A PARTNER IN SAID JOINT VENTURE.
C. WHETHER PRIVATE RESPONDENTS [SPOUSES
JASO] HAVE ANY RIGHT IN THE JOINT VENTURE
AND IN THE SEPARATE ICE BUSINESS OF
PETITIONER[S].14
 10
The Court’s Ruling
We find the petition bereft of merit.
The Spouses Realubit argue that, in upholding its validity,
both the RTC and the CA inordinately gave premium to the
notarization of the 27 June 1997 Deed of Assignment
executed by Biondo in favor of the Spouses Jaso. Calling
attention to the latter’s failure to present before the RTC
said assignor or, at the very least, the witnesses to said
document, the Spouses Realubit maintain that the
testimony of Rolando Diaz, the Notary Public before whom
the same was acknowledged, did not suffice to establish its
authenticity and/or validity. They insist that notarization
did not automatically and conclusively confer validity on
said deed, since it is still entirely possible that Biondo did
not execute said deed or, for that matter, appear before
said notary public.15 The dearth of merit in the Spouses
Realubit’s position is, however, immediately evident from
the settled rule that documents acknowledged before
notaries public are public documents which are admissible
in evidence without necessity of preliminary proof as to
their authenticity and due execution.16
It cannot be gainsaid that, as a public document, the Deed
of Assignment Biondo executed in favor of Eden not only
enjoys a presumption of regularity17 but is also considered
prima facie evidence of the facts therein stated.18A party
assailing the authenticity and due execution of a notarized
document is, consequently, required to present evidence
that is clear, convincing and more than merely
preponderant.19 In view of the Spouses Realubit’s failure to
discharge this onus, we find that both the RTC and the CA
correctly upheld the authenticity and validity of said Deed
of Assignment upon the combined strength of the above-
discussed disputable presumptions and the testimonies
elicited from Eden20 and Notary Public Rolando Diaz.21 As
for the Spouses’ Realubit’s bare assertion that Biondo’s
signature on the same document appears to be forged,
suffice it to say that, like fraud,22 forgery is never
presumed and must likewise be proved by clear and
convincing evidence by the party alleging the same.23Aside
from not being borne out by a comparison of Biondo’s
signatures on the Joint Venture Agreement24 and the Deed
of Assignment,25 said forgery is, moreover debunked by
Biondo’s duly authenticated certification dated 17
November 1998, confirming the transfer of his interest in
the business in favor of Eden.26
Generally understood to mean an organization formed for
some temporary purpose, a joint venture is likened to a
particular partnership or one which "has for its object
determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or
vocation."27 The rule is settled that joint ventures are
governed by the law on partnerships28 which are, in turn,
based on mutual agency or delectus personae.29 Insofar as a
partner’s conveyance of the entirety of his interest in the
partnership is concerned, Article 1813 of the Civil Code
provides as follows:
Art. 1813. A conveyance by a partner of his whole interest
in the partnership does not itself dissolve the partnership,
or, as against the other partners in the absence of
agreement, entitle the assignee, during the continuance of
the partnership, to interfere in the management or
administration of the partnership business or affairs, or to
require any information or account of partnership
transactions, or to inspect the partnership books; but it
merely entitles the assignee to receive in accordance with
his contracts the profits to which the assigning partners
would otherwise be entitled. However, in case of fraud in
the management of the partnership, the assignee may avail
himself of the usual remedies.
In the case of a dissolution of the partnership, the assignee
is entitled to receive his assignor’s interest and may
require an account from the date only of the last account
agreed to by all the partners.
From the foregoing provision, it is evident that "(t)he
transfer by a partner of his partnership interest does not
make the assignee of such interest a partner of the firm,
nor entitle the assignee to interfere in the management of
the partnership business or to receive anything except the
assignee’s profits. The assignment does not purport to
transfer an interest in the partnership, but only a future
contingent right to a portion of the ultimate residue as the
assignor may become entitled to receive by virtue of his
proportionate interest in the capital."30 Since a partner’s
interest in the partnership includes his share in the
profits,31 we find that the CA committed no reversible error
in ruling that the Spouses Jaso are entitled to Biondo’s
share in the profits, despite Juanita’s lack of consent to
the assignment of said Frenchman’s interest in the joint
venture. Although Eden did not, moreover, become a
partner as a consequence of the assignment and/or acquire
the right to require an accounting of the partnership
business, the CA correctly granted her prayer for
dissolution of the joint venture conformably with the right
granted to the purchaser of a partner’s interest under
Article 1831 of the Civil Code.32 1âwphi1
Considering that they involve questions of fact, neither are
we inclined to hospitably entertain the Spouses Realubit’s
insistence on the supposed fact that Josefina’s joint
venture with Biondo had already been dissolved and that
the ice manufacturing business at 66-C Cenacle Drive,
Sanville Subdivision, Project 6, Quezon City was merely a
continuation of the same business they previously operated
under a single proprietorship. It is well-entrenched
doctrine that questions of fact are not proper subjects of
appeal by certiorari under Rule 45 of the Rules of Court as
this mode of appeal is confined to questions of law. 33 Upon
the principle that this Court is not a trier of facts, we are
not duty bound to examine the evidence introduced by the
parties below to determine if the trial and the appellate
courts correctly assessed and evaluated the evidence on
record.34 Absent showing that the factual findings
complained of are devoid of support by the evidence on
record or the assailed judgment is based on
misapprehension of facts, the Court will limit itself to
reviewing only errors of law.35
Based on the evidence on record, moreover, both the
RTC36 and the CA37 ruled out the dissolution of the joint
venture and concluded that the ice manufacturing business
at the aforesaid address was the same one established by
Juanita and Biondo. As a rule, findings of fact of the CA are
binding and conclusive upon this Court,38 and will not be
reviewed or disturbed on appeal39 unless the case falls
under any of the following recognized exceptions: (1) when
the conclusion is a finding grounded entirely on
speculation, surmises and conjectures; (2) when the
inference made is manifestly mistaken, absurd or
impossible; (3) where there is a grave abuse of discretion;
(4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6)
when the CA, in making its findings, went beyond the issues
of the case and the same is contrary to the admissions of
both appellant and appellee; (7) when the findings are
contrary to those of the trial court; (8) when the findings of
fact are conclusions without citation of specific evidence
on which they are based; (9) when the facts set forth in the
petition as well as in the petitioners' main and reply briefs
are not disputed by the respondents; and, (10) when the
findings of fact of the CA are premised on the supposed
absence of evidence and contradicted by the evidence on
record.40 Unfortunately for the Spouses Realubit’s cause,
not one of the foregoing exceptions applies to the case.
WHEREFORE, the petition is DENIED for lack of merit and
the assailed CA Decision dated 30 April 2007 is,
accordingly, AFFIRMED in toto.
SO ORDERED.
July 30, 1979
 11
PETITION FOR AUTHORITY TO CONTINUE USE OF THE
FIRM NAME "SYCIP, SALAZAR, FELICIANO, HERNANDEZ &
CASTILLO." LUCIANO E. SALAZAR, FLORENTINO P.
FELICIANO, BENILDO G. HERNANDEZ. GREGORIO R.
CASTILLO. ALBERTO P. SAN JUAN, JUAN C. REYES. JR.,
ANDRES G. GATMAITAN, JUSTINO H. CACANINDIN, NOEL
A. LAMAN, ETHELWOLDO E. FERNANDEZ, ANGELITO C.
IMPERIO, EDUARDO R. CENIZA, TRISTAN A. CATINDIG,
ANCHETA K. TAN, and ALICE V. PESIGAN,petitioners.
IN THE MATTER OF THE PETITION FOR AUTHORITY TO
CONTINUE USE OF THE FIRM NAME "OZAETA, ROMULO, DE
LEON, MABANTA & REYES." RICARDO J. ROMULO,
BENJAMIN M. DE LEON, ROMAN MABANTA, JR., JOSE MA,
REYES, JESUS S. J. SAYOC, EDUARDO DE LOS ANGELES,
and JOSE F. BUENAVENTURA, petitioners.
RESOLUTION
MELENCIO-HERRERA, J.:ñé+.£ªwph!1
Two separate Petitions were filed before this Court 1) by
the surviving partners of Atty. Alexander Sycip, who died
on May 5, 1975, and 2) by the surviving partners of Atty.
Herminio Ozaeta, who died on February 14, 1976, praying
that they be allowed to continue using, in the names of
their firms, the names of partners who had passed away. In
the Court's Resolution of September 2, 1976, both Petitions
were ordered consolidated.
Petitioners base their petitions on the following arguments:
1. Under the law, a partnership is not prohibited from
continuing its business under a firm name which includes
the name of a deceased partner; in fact, Article 1840 of
the Civil Code explicitly sanctions the practice when it
provides in the last paragraph that: têñ.£îhqwâ£
The use by the person or partnership
continuing the business of the partnership
name, or the name of a deceased partner
as part thereof, shall not of itself make
the individual property of the deceased
partner liable for any debts contracted by
such person or partnership. 1
2. In regulating other professions, such as accountancy and
engineering, the legislature has authorized the adoption of
firm names without any restriction as to the use, in such
firm name, of the name of a deceased partner; 2 the
legislative authorization given to those engaged in the
practice of accountancy — a profession requiring the same
degree of trust and confidence in respect of clients as that
implicit in the relationship of attorney and client — to
acquire and use a trade name, strongly indicates that there
is no fundamental policy that is offended by the continued
use by a firm of professionals of a firm name which
includes the name of a deceased partner, at least where
such firm name has acquired the characteristics of a "trade
name." 3
3. The Canons of Professional Ethics are not transgressed by
the continued use of the name of a deceased partner in the
firm name of a law partnership because Canon 33 of the
Canons of Professional Ethics adopted by the American Bar
Association declares that: têñ.£îhqwâ£
... The continued use of the name of a
deceased or former partner when
permissible by local custom, is not
unethical but care should be taken that
no imposition or deception is practiced
through this use. ... 4
4. There is no possibility of imposition or deception
because the deaths of their respective deceased partners
were well-publicized in all newspapers of general
circulation for several days; the stationeries now being
used by them carry new letterheads indicating the years
when their respective deceased partners were connected
with the firm; petitioners will notify all leading national
and international law directories of the fact of their
respective deceased partners' deaths. 5
5. No local custom prohibits the continued use of a
deceased partner's name in a professional firm's
name; 6 there is no custom or usage in the Philippines, or
at least in the Greater Manila Area, which recognizes that
the name of a law firm necessarily Identifies the individual
members of the firm. 7
6. The continued use of a deceased partner's name in the
firm name of law partnerships has been consistently
allowed by U.S. Courts and is an accepted practice in the
legal profession of most countries in the world. 8
The question involved in these Petitions first came under
consideration by this Court in 1953 when a law firm in Cebu
(the Deen case) continued its practice of including in its
firm name that of a deceased partner, C.D. Johnston. The
matter was resolved with this Court advising the firm to
desist from including in their firm designation the name of
C. D. Johnston, who has long been dead."
The same issue was raised before this Court in 1958 as an
incident in G. R. No. L-11964, entitled Register of Deeds of
Manila vs. China Banking Corporation. The law firm of
Perkins & Ponce Enrile moved to intervene asamicus
curiae. Before acting thereon, the Court, in a Resolution of
April 15, 1957, stated that it "would like to be informed
why the name of Perkins is still being used although Atty.
E. A. Perkins is already dead." In a Manifestation dated May
21, 1957, the law firm of Perkins and Ponce Enrile, raising
substantially the same arguments as those now being
raised by petitioners, prayed that the continued use of the
firm name "Perkins & Ponce Enrile" be held proper.
On June 16, 1958, this Court resolved: têñ.£îhqwâ£
After carefully considering the reasons
given by Attorneys Alfonso Ponce Enrile
and Associates for their continued use of
the name of the deceased E. G. Perkins,
the Court found no reason to depart from
the policy it adopted in June 1953 when
it required Attorneys Alfred P. Deen and
Eddy A. Deen of Cebu City to desist from
including in their firm designation, the
name of C. D. Johnston, deceased. The
Court believes that, in view of the
personal and confidential nature of the
relations between attorney and client,
and the high standards demanded in the
canons of professional ethics, no practice
should be allowed which even in a remote
degree could give rise to the possibility of
deception. Said attorneys are accordingly
advised to drop the name "PERKINS" from
their firm name.
Petitioners herein now seek a re-examination of the policy
thus far enunciated by the Court.
The Court finds no sufficient reason to depart from the
rulings thus laid down.
A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and
Castillo" and "Ozaeta, Romulo, De Leon, Mabanta and
Reyes" are partnerships, the use in their partnership names
of the names of deceased partners will run counter to
Article 1815 of the Civil Code which provides: têñ.£îhqwâ£
Art. 1815. Every partnership shall operate
under a firm name, which may or may not
include the name of one or more of the
partners.
 12
Those who, not being members of the
partnership, include their names in the
firm name, shall be subject to the
liability, of a partner.
It is clearly tacit in the above provision that names in a
firm name of a partnership must either be those of living
partners and. in the case of non-partners, should be living
persons who can be subjected to liability. In fact, Article
1825 of the Civil Code prohibits a third person from
including his name in the firm name under pain of assuming
the liability of a partner. The heirs of a deceased partner in
a law firm cannot be held liable as the old members to the
creditors of a firm particularly where they are non-lawyers.
Thus, Canon 34 of the Canons of Professional Ethics
"prohibits an agreement for the payment to the widow and
heirs of a deceased lawyer of a percentage, either gross or
net, of the fees received from the future business of the
deceased lawyer's clients, both because the recipients of
such division are not lawyers and because such payments
will not represent service or responsibility on the part of
the recipient. " Accordingly, neither the widow nor the
heirs can be held liable for transactions entered into after
the death of their lawyer-predecessor. There being no
benefits accruing, there ran be no corresponding liability.
Prescinding the law, there could be practical objections to
allowing the use by law firms of the names of deceased
partners. The public relations value of the use of an old
firm name can tend to create undue advantages and
disadvantages in the practice of the profession. An able
lawyer without connections will have to make a name for
himself starting from scratch. Another able lawyer, who
can join an old firm, can initially ride on that old firm's
reputation established by deceased partners.
B. In regards to the last paragraph of Article 1840 of the
Civil Code cited by petitioners, supra, the first factor to
consider is that it is within Chapter 3 of Title IX of the Code
entitled "Dissolution and Winding Up." The Article primarily
deals with the exemption from liability in cases of a
dissolved partnership, of the individual property of the
deceased partner for debts contracted by the person or
partnership which continues the business using the
partnership name or the name of the deceased partner as
part thereof. What the law contemplates therein is a hold-
over situation preparatory to formal reorganization.
Secondly, Article 1840 treats more of
a commercial partnership with a good will to protect rather
than of aprofessional partnership, with no saleable good
will but whose reputation depends on the personal
qualifications of its individual members. Thus, it has been
held that a saleable goodwill can exist only in a commercial
partnership and cannot arise in a professional partnership
consisting of lawyers. 9têñ.£îhqwâ£
As a general rule, upon the dissolution of
a commercial partnership the succeeding
partners or parties have the right to carry
on the business under the old name, in
the absence of a stipulation forbidding it,
(s)ince the name of a commercial
partnership is a partnership asset
inseparable from the good will of the
firm. ... (60 Am Jur 2d, s 204, p. 115)
(Emphasis supplied)
On the other hand, têñ.£îhqwâ£
... a professional partnership the
reputation of which depends or; the
individual skill of the members, such as
partnerships of attorneys or physicians,
has no good win to be distributed as a
firm asset on its dissolution, however
intrinsically valuable such skill and
reputation may be, especially where
there is no provision in the partnership
agreement relating to good will as an
asset. ... (ibid, s 203, p. 115) (Emphasis
supplied)
C. A partnership for the practice of law cannot be likened
to partnerships formed by other professionals or for
business. For one thing, the law on accountancy specifically
allows the use of a trade name in connection with the
practice of accountancy. 10 têñ.£îhqwâ£
A partnership for the practice of law is
not a legal entity. It is a mere
relationship or association for a particular
purpose. ... It is not a partnership formed
for the purpose of carrying on trade or
business or of holding property." 11 Thus,
it has been stated that "the use of a nom
de plume, assumed or trade name in law
practice is improper. 12
The usual reason given for different
standards of conduct being applicable to
the practice of law from those pertaining
to business is that the law is a profession.
Dean Pound, in his recently published
contribution to the Survey of the Legal
Profession, (The Lawyer from Antiquity
to Modern Times, p. 5) defines a
profession as "a group of men pursuing a
learned art as a common calling in the
spirit of public service, — no less a public
service because it may incidentally be a
means of livelihood."
xxx xxx xxx
Primary characteristics which distinguish
the legal profession from business are:
1. A duty of public service, of which the
emolument is a byproduct, and in which
one may attain the highest eminence
without making much money.
2. A relation as an "officer of court" to
the administration of justice involving
thorough sincerity, integrity, and
reliability.
3. A relation to clients in the highest
degree fiduciary.
4. A relation to colleagues at the bar
characterized by candor, fairness, and
unwillingness to resort to current business
methods of advertising and encroachment
on their practice, or dealing directly with
their clients. 13
"The right to practice law is not a natural or constitutional
right but is in the nature of a privilege or franchise. 14 It is
limited to persons of good moral character with special
qualifications duly ascertained and certified. 15 The right
does not only presuppose in its possessor integrity, legal
standing and attainment, but also the exercise of a special
privilege, highly personal and partaking of the nature of a
public trust." 16
D. Petitioners cited Canon 33 of the Canons of Professional
Ethics of the American Bar Association" in support of their
petitions.
It is true that Canon 33 does not consider as unethical the
continued use of the name of a deceased or former partner
in the firm name of a law partnership when such a practice
is permissible by local custom but the Canon warns that
care should be taken that no imposition or deception is
practiced through this use.
 13
It must be conceded that in the Philippines, no local
custom permits or allows the continued use of a deceased
or former partner's name in the firm names of law
partnerships. Firm names, under our custom, Identify the
more active and/or more senior members or partners of
the law firm. A glimpse at the history of the firms of
petitioners and of other law firms in this country would
show how their firm names have evolved and changed from
time to time as the composition of the partnership
changed. têñ.£îhqwâ£
The continued use of a firm name after
the death of one or more of the partners
designated by it is proper only where
sustained by local custom and not where
by custom this purports to Identify the
active members. ...
There would seem to be a question,
under the working of the Canon, as to the
propriety of adding the name of a new
partner and at the same time retaining
that of a deceased partner who was never
a partner with the new one. (H.S.
Drinker, op. cit., supra, at pp. 207208)
(Emphasis supplied).
The possibility of deception upon the public, real or
consequential, where the name of a deceased partner
continues to be used cannot be ruled out. A person in
search of legal counsel might be guided by the familiar ring
of a distinguished name appearing in a firm title.
E. Petitioners argue that U.S. Courts have consistently
allowed the continued use of a deceased partner's name in
the firm name of law partnerships. But that is so because it
is sanctioned by custom.
In the case of Mendelsohn v. Equitable Life Assurance
Society (33 N.Y.S. 2d 733) which petitioners Salazar, et al.
quoted in their memorandum, the New York Supreme Court
sustained the use of the firm name Alexander & Green even
if none of the present ten partners of the firm bears either
name because the practice was sanctioned by custom and
did not offend any statutory provision or legislative policy
and was adopted by agreement of the parties. The Court
stated therein: têñ.£îhqwâ£
The practice sought to be proscribed has
the sanction of custom and offends no
statutory provision or legislative policy.
Canon 33 of the Canons of Professional
Ethics of both the American Bar
Association and the New York State Bar
Association provides in part as follows:
"The continued use of the name of a
deceased or former partner, when
permissible by local custom is not
unethical, but care should be taken that
no imposition or deception is practiced
through this use." There is no question as
to local custom. Many firms in the city
use the names of deceased members with
the approval of other attorneys, bar
associations and the courts. The
Appellate Division of the First Department
has considered the matter and reached
The conclusion that such practice should
not be prohibited. (Emphasis supplied)
xxx xxx xxx
Neither the Partnership Law nor the Penal
Law prohibits the practice in question.
The use of the firm name herein is also
sustainable by reason of agreement
between the partners. 18
Not so in this jurisdiction where there is no local custom
that sanctions the practice. Custom has been defined as a
rule of conduct formed by repetition of acts, uniformly
observed (practiced) as a social rule, legally binding and
obligatory. 19 Courts take no judicial notice of custom. A
custom must be proved as a fact, according to the rules of
evidence. 20 A local custom as a source of right cannot be
considered by a court of justice unless such custom is
properly established by competent evidence like any other
fact. 21 We find such proof of the existence of a local
custom, and of the elements requisite to constitute the
same, wanting herein. Merely because something is done as
a matter of practice does not mean that Courts can rely on
the same for purposes of adjudication as a juridical
custom. Juridical custom must be differentiated from
social custom. The former can supplement statutory law or
be applied in the absence of such statute. Not so with the
latter.
Moreover, judicial decisions applying or interpreting the
laws form part of the legal system. 22 When the Supreme
Court in the Deen and Perkins cases issued its Resolutions
directing lawyers to desist from including the names of
deceased partners in their firm designation, it laid down a
legal rule against which no custom or practice to the
contrary, even if proven, can prevail. This is not to speak
of our civil law which clearly ordains that a partnership is
dissolved by the death of any partner. 23 Custom which are
contrary to law, public order or public policy shall not be
countenanced. 24
The practice of law is intimately and peculiarly related to
the administration of justice and should not be considered
like an ordinary "money-making trade." têñ.£îhqwâ£
... It is of the essence of a profession that
it is practiced in a spirit of public service.
A trade ... aims primarily at personal
gain; a profession at the exercise of
powers beneficial to mankind. If, as in
the era of wide free opportunity, we
think of free competitive self assertion as
the highest good, lawyer and grocer and
farmer may seem to be freely competing
with their fellows in their calling in order
each to acquire as much of the world's
good as he may within the allowed him by
law. But the member of a profession does
not regard himself as in competition with
his professional brethren. He is not
bartering his services as is the artisan nor
exchanging the products of his skill and
learning as the farmer sells wheat or
corn. There should be no such thing as a
lawyers' or physicians' strike. The best
service of the professional man is often
rendered for no equivalent or for a
trifling equivalent and it is his pride to do
what he does in a way worthy of his
profession even if done with no
expectation of reward, This spirit of
public service in which the profession of
law is and ought to be exercised is a
prerequisite of sound administration of
justice according to law. The other two
elements of a profession, namely,
organization and pursuit of a learned art
have their justification in that they
secure and maintain that spirit. 25
In fine, petitioners' desire to preserve the Identity of their
firms in the eyes of the public must bow to legal and
ethical impediment.
ACCORDINGLY, the petitions filed herein are denied and
petitioners advised to drop the names "SYCIP" and "OZAETA"
from their respective firm names. Those names may,
however, be included in the listing of individuals who have
been partners in their firms indicating the years during
which they served as such.
 14
SO ORDERED.
Teehankee, Concepcion, Jr., Santos, Fernandez, Guerrero
and De Castro, JJ., concur
Fernando, C.J. and Abad Santos, J., took no part.
Separate Opinions
FERNANDO, C.J., concurring:
The petitions are denied, as there are only four votes for
granting them, seven of the Justices being of the contrary
view, as explained in the plurality opinion of Justice
Ameurfina Melencio-Herrera. It is out of delicadeza that
the undersigned did not participate in the disposition of
these petitions, as the law office of Sycip, Salazar,
Feliciano, Hernandez and Castillo started with the
partnership of Quisumbing, Sycip, and Quisumbing, the
senior partner, the late Ramon Quisumbing, being the
father-in-law of the undersigned, and the most junior
partner then, Norberto J. Quisumbing, being his brother-
in-law. For the record, the undersigned wishes to invite the
attention of all concerned, and not only of petitioners, to
the last sentence of the opinion of Justice Ameurfina
Melencio-Herrera: 'Those names [Sycip and Ozaeta] may,
however, be included in the listing of individuals wtes
AQUINO, J., dissenting:
I dissent. The fourteen members of the law firm, Sycip,
Salazar, Feliciano, Hernandez & Castillo, in their petition
of June 10, 1975, prayed for authority to continue the use
of that firm name, notwithstanding the death of Attorney
Alexander Sycip on May 5, 1975 (May he rest in peace). He
was the founder of the firm which was originally known as
the Sycip Law Office.
On the other hand, the seven surviving partners of the law
firm, Ozaeta, Romulo, De Leon, Mabanta & Reyes, in their
petition of August 13, 1976, prayed that they be allowed to
continue using the said firm name notwithstanding the
death of two partners, former Justice Roman Ozaeta and
his son, Herminio, on May 1, 1972 and February 14, 1976,
respectively.
They alleged that the said law firm was a continuation of
the Ozaeta Law Office which was established in 1957 by
Justice Ozaeta and his son and that, as to the said law
firm, the name Ozaeta has acquired an institutional and
secondary connotation.
Article 1840 of the Civil Code, which speaks of the use by
the partnership of the name of a deceased partner as part
of the partnership name, is cited to justify the petitions.
Also invoked is the canon that the continued use by a law
firm of the name of a deceased partner, "when permissible
by local custom, is not unethical" as long as "no imposition
or deception is practised through this use" (Canon 33 of the
Canons of Legal Ethics).
I am of the opinion that the petition may be granted with
the condition that it be indicated in the letterheads of the
two firms (as the case may be) that Alexander Sycip,
former Justice Ozaeta and Herminio Ozaeta are dead or the
period when they served as partners should be stated
therein.
Obviously, the purpose of the two firms in continuing the
use of the names of their deceased founders is to retain the
clients who had customarily sought the legal services of
Attorneys Sycip and Ozaeta and to benefit from the
goodwill attached to the names of those respected and
esteemed law practitioners. That is a legitimate
motivation.
The retention of their names is not illegal per se. That
practice was followed before the war by the law firm of
James Ross. Notwithstanding the death of Judge Ross the
founder of the law firm of Ross, Lawrence, Selph and
Carrascoso, his name was retained in the firm name with
an indication of the year when he died. No one complained
that the retention of the name of Judge Ross in the firm
name was illegal or unethical.
# Separate Opinions
FERNANDO, C.J., concurring:
The petitions are denied, as there are only four votes for
granting them, seven of the Justices being of the contrary
view, as explained in the plurality opinion of Justice
Ameurfina Melencio-Herrera. It is out of delicadeza that
the undersigned did not participate in the disposition of
these petitions, as the law office of Sycip, Salazar,
Feliciano, Hernandez and Castillo started with the
partnership of Quisumbing, Sycip, and Quisumbing, the
senior partner, the late Ramon Quisumbing, being the
father-in-law of the undersigned, and the most junior
partner then, Norberto J. Quisumbing, being his brother-
in-law. For the record, the undersigned wishes to invite the
attention of all concerned, and not only of petitioners, to
the last sentence of the opinion of Justice Ameurfina
Melencio-Herrera: 'Those names [Sycip and Ozaeta] may,
however, be included in the listing of individuals wtes
AQUINO, J., dissenting:
I dissent. The fourteen members of the law firm, Sycip,
Salazar, Feliciano, Hernandez & Castillo, in their petition
of June 10, 1975, prayed for authority to continue the use
of that firm name, notwithstanding the death of Attorney
Alexander Sycip on May 5, 1975 (May he rest in peace). He
was the founder of the firm which was originally known as
the Sycip Law Office.
On the other hand, the seven surviving partners of the law
firm, Ozaeta, Romulo, De Leon, Mabanta & Reyes, in their
petition of August 13, 1976, prayed that they be allowed to
continue using the said firm name notwithstanding the
death of two partners, former Justice Roman Ozaeta and
his son, Herminio, on May 1, 1972 and February 14, 1976,
respectively.
They alleged that the said law firm was a continuation of
the Ozaeta Law Office which was established in 1957 by
Justice Ozaeta and his son and that, as to the said law
firm, the name Ozaeta has acquired an institutional and
secondary connotation.
Article 1840 of the Civil Code, which speaks of the use by
the partnership of the name of a deceased partner as part
of the partnership name, is cited to justify the petitions.
Also invoked is the canon that the continued use by a law
firm of the name of a deceased partner, "when permissible
by local custom, is not unethical" as long as "no imposition
or deception is practised through this use" (Canon 33 of the
Canons of Legal Ethics).
I am of the opinion that the petition may be granted with
the condition that it be indicated in the letterheads of the
two firms (as the case may be) that Alexander Sycip,
former Justice Ozaeta and Herminio Ozaeta are dead or the
period when they served as partners should be stated
therein.
Obviously, the purpose of the two firms in continuing the
use of the names of their deceased founders is to retain the
clients who had customarily sought the legal services of
 15
Attorneys Sycip and Ozaeta and to benefit from the
goodwill attached to the names of those respected and
esteemed law practitioners. That is a legitimate
motivation.
The retention of their names is not illegal per se. That
practice was followed before the war by the law firm of
James Ross. Notwithstanding the death of Judge Ross the
founder of the law firm of Ross, Lawrence, Selph and
Carrascoso, his name was retained in the firm name with
an indication of the year when he died. No one complained
that the retention of the name of Judge Ross in the firm
name was illegal or unethical.
G.R. No. 19892 September 6, 1923
TECK SEING AND CO., LTD., petitioner-appellee.
SANTIAGO JO CHUNG, ET AL., partners,
vs.
PACIFIC COMMERCIAL COMPANY, ET AL., creditors-
appellants.
Del Rosario & Del Rosario and Block, Johnston and
Greenbaum for appellants.
F. V. Arias for appellants Jo Ibec and Go Tayco.
No appearance for petitioner and appellee.
Jose A. Espiritu and Felipe Ysmael as amici curiae.
MALCOLM, J.:
Following the presentation of an application to be
adjudged an insolvent by the "Sociedad Mercantil, Teck
Seing & Co., Ltd.," the creditors, the Pacific Commercial
Company, Piñol & Company, Riu Hermanos, and W. H.
Anderson & Company, filed a motion in which the Court
was prayed to enter an order: "(A) Declaring the individual
partners as described in paragraph 5 parties to this
proceeding; (B) to require each of said partners to file an
inventory of his property in the manner required by section
51 of Act No. 1956; and (C) that each of said partners be
adjudicated insolvent debtors in this proceeding." The trial
judge first granted the motion, but, subsequently, on
opposition being renewed, denied it. It is from this last
order that an appeal was taken in accordance with section
82 of the Insolvency Law.
There has been laid before us for consideration and
decision a question of some importance and of some
intricacy. The issue in the case relates to a determination
of the nature of the mercantile establishment which
operated under the name of Teck Seing & co., Ltd., and
this issue requires us to look into, and analyze, the
document constituting Teck Seing & Co., Ltd. It reads:
ESCRITURA DE SOCIEDAD MERCANTIL LIMITADA
Sepan todos por la presente:
Que nosotros, Santiago Jo Chung Cang, mayor de
edad comerciante, vecino y residente del
municipio de Tabogon Provincia de Cebu, Islas
Filipinas, Go Tayco, mayor de edad, comerciante,
vecino y residente del municipio de Cebu Provincia
de Cebu, Islas Filipinas, Yap Gueco, mayor de
edad, comerciante, vecino y residente del
municipio y Provincia de Cebu, Islas Filipinas, Lim
Yogsing, mayor de edad comerciante, vecino y
residente del municipio de Cebu, Provincia de
Cebu, Islas Filipinas, y Jo Ybec, mayor de edad,
comerciante, vecino y residente del municipio de
Jagna, Provincia de Bohol, Islas Filipinas, hacemos
constar por la presente, que constituimos y
formamos una sociedad mercantil limitada, bajo
las leyes vigentes en las Islas Filipinas y para ser
registrada de acuerdo con los reglamentos
vigentes del Codigo de Comercio en Filipinas.
Que la razon social se denominara "Teck Seing &
Co., Ltd." y tendra su domicilio principal en la
Calle Magallanes No. 94, de la Ciudad de Cebu,
Provincia de Cebu, Islas Filipinas.
Que el capital social sera de treinta mil pesos
(P30,000) moneda legal de las Islas Filipinas,
dividido en cinco acciones de a P6,000 como sigue:
Santiago Jo Chung Cang . . . . . . . . . . . . .
Go Tayco . . . . . . . . . . . . . . . . . . . . . . . . . .
Yap Gueco . . . . . . . . . . . . . . . . . . . . . . . .
Jo Ybec . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lim Yogsing . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
Que la duracion de la sociedad sera la de seis
años, a contar de la fecha de esta escritura,
pudiendo prorrogarse este tiempo a discrecion
unanime de todos los accionistas.
El objeto de la sociedad sera la compra y venta de
mercaderias en general.
El administrador o administradores de la sociedad
podran, previa conformidad de los accionistas,
establecer cuantas sucursales o establecimientos
considere necesarios para facilitar sus negocios y
el mayor desarrollo del comercio a que se dedica
la sociedad, verificando todas las operaciones que
crean convenientes para el fomento de su capital.
Las ganancias o perdidas que resultaren durante
cada año comercial, se distribuiran
proporcionalmente entre los accionistas, de
acuerdo con el capital aportado por cada uno de
los mismos.
Las ganancias que resultaren en cada año
comercial, si resultaren algunas ganancias, no
podran ser retiradas pors los accionistas hasta
dentro del termino de tres años a contar de la
fecha del primer balance anual del negocio,
quedadno por tanto estas ganancias en reserva,
para ampliar el capital aportado opor los
accionistas y ampliar por tanto la esfera de accion
emprendida por la misma sociedad. Al pasar o
expirar el termino de tres años, cada accionista
podra retirar o depositar en poder de la sociedad,
las ganancias que le debiera corresponder durante
dicho termino de tres años.
Que los accionistas no podran extraer ni disponer
en ningun tiempo cualesquiera cantidad o
cantidades de la sociedad, que haya sido aportado
por los mismos, para atender sus gastos
particulares ni aun pagando redito alguno sobre la
cantidad que intenen disponer o extraer de dicha
sociedad.
El accionista Sr. Lim Yogsing tendra a su cargo, en
union del Sr. Vicente Jocson Jo, la administracion
de la Compañia, quienes podran usar
indistintamente la firma social, quedando por
consiguiente autorizados amobs para hacer en
nombre de ella toda calse de operaciones,
negocios y especulaciones mercantiles,
practicando judicial y extra-judicialment cuantos
actos se requieran para el bien de la sociedad,
nombrar procuradores o abogados para
reclamaciones y cobro de creditos y proponer ante
los tribunales las demandas, convenios,
transacciones y excepciones procdentes. En caso
 16
de ausencia, enfermedad o cualquier otro
impedimento del accionista administrador Sr. Lim
Yogsing, este podra conferir poder general o
especial al accionista que crea conveniente para
que en union del administrador auxiliar Sr. Vicente
Jocson Jo, pudieran ambos administrar
convenientemente los negocios de la sociedad.
Que los administradores podran tener los
empleados necesarios para el mejor que debieran
percibir dichos empleados por servicios rendidos a
la sociedad.
Que ambos administradores podran disponer
de mil discientos pesos (P1,200) moneda filipina,
anualmente, para sus gastos particulares, siendo
dicha cantidad de P1,200 la que corresponde a
cada uno de dichos administradores, como
emolumentos o salarios que se les asigna a cas
uno, por sus trabajos en la administracion de la
sociedad. Entendiendose, que, los accionistas
podran disponer cada fin de añola gratificacion
quese concedera a cada administrador, si los
negocios del año fueran boyantes y justifiquen la
concesion de una gratificacion especial, aparte del
salario aqui dispuesto y especificado.
Que pasado el termino de seis años, y es de la
conveniencia de los accionistas la continuacion del
negocio de esta sociedad, dicho termino sera
prorrogado por igual numero de años, sin
necesidas del otorgamiento de ulteriores
escrituras, quedando la presente en vigor hasta el
termino dispuesto por todos los accionistas.
Que las diferencias que pudieran suscitarse entre
los accionistas, bien sea por razon de lo estipulado
en esta en ella comprendidos, se procurara
arreglar entre los mismos amistosa y
extrajudicialmente, y si no se consiguiere un
arreglo de este modo, dichos accionistas
nombraran un arbitro, cuya resolucion estan todos
obligados y por la presente se comprometen y se
obligan a acatarla en todas sus partes,
renunciando ulteriores recursos.
En cuyos terminos dejamos formalizada esta
escritura de sociedad mercantillimitada, y
prometemos cumplirla fiel y estrictamente segun
los pactos que hemos establecido.
En testimonio de todo lo cual, firmamos en la
Ciudad de Cebu, Provincia de Cebu, Islas Filipinas,
hoy 31 de octubre de mil novecientos diez y
nueve.
(Fdos.) "LIM YOGSING
"Jo YBec por Ho Seng Sian
"SANTIAGO JO CHUNG CANG
"GO TAYCO
"YAP GUECO
Firnando en presencia de:
(Fdos.) "ATILANO LEYSON
"JULIO DIAZ
"ESTADOS UNIDOS DE AMERCA
"ISLAS FILIPINAS
"PROVINCIA DE CEBU
En el Municipio de Cebu, de la Provincia antes
mencionada, I.F., hoy 31 de octubre de 1919,
A.D., ante mi, Notario Publico que subscribe,
comprecieron personalmente Santiago Jo Chung
Cang, Go Tayco, Yap Gueco, Lim Yogsing y Jo
Ybec, representado este ultimo por Ho Seng Sian,
segun autorizacion hecha en telegrama de fecha
27 de septiembre de 1919 que se me ha
presentado en este mismo acto, de quienes doy fe
de que les conozco por ser las mismas personas
que otorgaron el preinserto documento,
ratificando ant emi su contenido y manifestando
ser el mismo un acto de su libre y voluntario
otorgamiento. El Sr. Santiago Jo Chung Cang me
exhibio su cedula personal expedida en Cebu,
Cebu, I.F. el dia 19 de septiembre de 1919 bajo el
No. H77742, Go Tayco tambien me exhibio la suya
expedida en Cebu, Cebu, I.F., el dia 9 de octubre
de 1919 bajo el No. G2042490, Yap Gueco tambien
me exhibio la suya expedida en Cebu, Cebu, I.F. el
dia 20 de enero de 1919 bajo el No. F1452296, Lim
Yogsing tambien me exhibio la suya expedida en
Cebu, Cebu, I.F., el dia 26 de febrero de 1919
bajo el No. F1455662, y Ho Seng Sian
representante de Jo Ybec, me exhibio su cedula
personal expedida en Cebu, Cebu, I.f. el dia 4 de
febrero de 1919 bajo el No. F1453733.
Ante mi,
(Fdo.) "F.V.ARIAS
"Notario Publico
"Hasta el 1.º de enero de 1920
"Asiento No. 157
Pagina No. 95 de mi
Registro Notarial
Serie 1919
Libro 2.º
Presentado a las diez y cuarenta y tres minutos de
la mañana de hoy, segun el asiento No. 125,
pagina 9 del Tomo 1.º del Libro Diario. Cebu, 11
de febrero de 1920.
(Fdo.) "QUIRICO ABETO
[SELLO] "Registrador Mercantil Ex-Officio"
Inscrito el documento que preced al folio 84 hoja
No. 188, inscripcion 1.a del Tomo 3.º del Libro
Registro de Sociedades Mercantiles. Cebu, 11 de
febrero de 1920. Honorarios treinta pesos con
cincuenta centavos. Art. 197, Ley No. 2711,
Codigo Administrativo.
(Fdo.) "QUIRICO ABETO
[SELLO] "Registrador Mercantil Ex-Officio"
Proceeding by process of elimination, it is self-evident that
Teck Seing & Co., Ltd., is not a corporation. Neither is it
contended by any one that Teck Seing & Co., Ltd., is
accidental partnership denominated cuenta en
participacion (joint account association).
Counsel for the petitioner and appellee described his client
in once place in his opposition to the motion of the
creditors as "una verdadera sociedad anonima" (a
true sociedad anonima). The provisions of the Code of
Commerce relating to sociedades anonimas were, however,
repealed by section 191 of the Corporation Law (Act No.
1459), with the exceptions the sociedades
anonimas lawfully organized at the time of the passage of
the Corporation Law were recognized, which is not our
case.
The document providing for the partnership contract
purported to form "una sociedad mercantil limitada," and
counsel for the petitioner's first contention was that Teck
Seing & Co., Ltd., was not "una sociedad regular colectiva,
ni siquiera comanditaria, sino una sociedad mercantil
limitada." Let us see if the partnership contract created a
"sociedad en comandita," or, as it is known in English, and
will hereafter be spoken of, "a limited partnership."
 17
To establish a limited partnership there must be, at least,
one general partner and the name of the least one of the
general partners must appear in the firm name. (Code of
Commerce, arts. 122 [2], 146, 148.) But neither of these
requirements have been fulfilled. The general rule is, that
those who seek to avail themselves of the protection of
laws permitting the creation of limited partnerships must
show a substantially full compliance with such laws. A
limited partnership that has not complied with the law of
its creation is not considered a limited partnership at all,
but a general partnership in which all the members are
liable. (Mechem, Elements of Partnership, p. 412; Gilmore,
Partnership, pp. 499, 595; 20 R C. L. 1064.)
The contention of the creditors and appellants is that the
partnership contract established a general partnership.
Article 125 of the Code of Commerce provides that the
articles of general copartnership must estate the names,
surnames, and domiciles of the partners; the firm name;
the names, and surnames of the partners to whom the
management of the firm and the use of its signature is
instrusted; the capital which each partner contributes in
cash, credits, or property, stating the value given the latter
or the basis on which their appraisement is to be made; the
duration of the copartnership; and the amounts which, in a
proper case, are to be given to each managing partner
annually for his private expenses, while the succeeding
article of the Code provides that the general copartnership
must transact business under the name of all its members,
of several of them, or of one only. Turning to the document
before us, it will be noted that all of the requirements of
the Code have been met, with the sole exception of that
relating to the composition of the firm name. We leave
consideration of this phase of the case for later discussion.
The remaining possibility is the revised contention of
counsel for the petitioners to the effect that Teck Seing &
Co., Ltd., is "una sociedad mercantil "de facto"
solamente" (only a de facto commercial association), and
that the decision of the Supreme court in the case of Hung-
Man-Yoc vs. Kieng-Chiong-Seng [1906], 6 Phil., 498), is
controlling. It was this argument which convinced the trial
judge, who gave effect to his understanding of the case
last cited and which here must be given serious attention.
The decision in Hung-Man-Yoc vs. Kieng-Chiong-
Seng, supra, discloses that the firm Kieng-Chiong-Seng was
not organized by means of any public document; that the
partnership had not been recorded in the mercantile
registry; and that Kieng-Chiong-Seng was not proven to be
the firm name, but rather the designation of the
partnership. The conclusion then was, that the partnership
in question was merely de facto and that, therefore, giving
effect to the provisions of article 120 of the Code of
Commerce, the right of action was against the persons in
charge of the management of the association.
Laying the facts of the case of Hung-Man-Yoc vs. Kieng-
Chiong-Seng, supra, side by side with the facts before us, a
marked difference is at once disclosed. In the cited case,
the organization of the partnership was not evidenced by
any public document; here, it is by a public document. In
the cited case, the partnership naturally could not present
a public instrument for record in the mercantile registry;
here, the contract of partnership has been duly registered.
But the two cases are similar in that the firm name failed
to include the name of any of the partners.
We come then to the ultimate question, which is, whether
we should follow the decision in Hung-Man-Yoc vs. Kieng-
Chiong-Seng, supra, or whether we should differentiate the
two cases, holding Teck Seing & Co., Ltd., a general
copartnership, notwithstanding the failure of the firm
name to include the name of one of the partners. Let us
now notice this decisive point in the case.
Article 119 of the Code of Commerce requires every
commercial association before beginning its business to
state its article, agreements, and conditions in a public
instrument, which shall be presented for record in the
mercantile registry. Article 120, next following, provides
that the persons in charge of the management of the
association who violate the provisions of the foregoing
article shall be responsible in solidum to the persons not
members of the association with whom they may have
transacted business in the name of the association. Applied
to the facts before us, it would seem that Teck Seing &
Co., Ltd. has fulfilled the provisions of article 119.
Moreover, to permit the creditors only to look to the
person in charge of the management of the association, the
partner Lim Yogsing, would not prove very helpful to them.
What is said in article 126 of the Code of Commerce
relating to the general copartnership transacting business
under the name of all its members or of several of them or
of one only, is wisely included in our commercial law. It
would appear, however, that this provision was inserted
more for the protection of the creditors than of the
partners themselves. A distinction could well be drawn
between the right of the alleged partnership to institute
action when failing to live up to the provisions of the law,
or even the rights of the partners as among themselves,
and the right of a third person to hold responsible a general
copartnership which merely lacks a legal firm name in
order to make it a partnership de jure.
The civil law and the common law alike seem to point to a
difference between the rights of the partners who have
failed to comply with the law and the rights of third
persons who have dealt with the partnership.
The supreme court of Spain has repeatedly held that
notwithstanding the obligation of the members to register
the articles of association in the commercial registry,
agreements containing all the essential requisites are valid
as between the contracting parties, whatever the form
adopted, and that, while the failure to register in the
commercial registry necessarily precludes the members
from enforcing rights acquired by them against third
persons, such failure cannot prejudice the rights of third
persons. (See decisions of December 6, 1887, January 25,
1888, November 10, 1890, and January 26, 1900.) The same
reasoning would be applicable to the less formal requisite
pertaining to the firm name.
The common law is to the same effect. The State of
Michigan had a statute prohibiting the transaction of
business under an assumed name or any other than the real
name of the individual conducting the same, unless such
person shall file with the county clerk a certificate setting
forth the name under which the business is to be conducted
and the real name of each of the partners, with their
residences and post-office addresses, and making a
violation thereof a misdemeanor. The supreme Court of
Michigan said:
The one object of the act is manifestly to protect
the public against imposition and fraud,
prohibiting persons from concealing their identity
by doing business under an assumed name, making
it unlawful to use other than their real names in
transacting business without a public record of
who they are, available for use in courts, and to
punish those who violate the prohibition. The
object of this act is not limited to facilitating the
collection of debts, or the protection of those
giving credit to persons doing business under an
assumed name. It is not unilateral in its
application. It applies to debtor and creditor,
contractor and contractee, alike. Parties doing
business with those acting under an assumed
name, whether they buy or sell, have a right,
under the law, to know who they are, and who to
hold responsible, in case the question of damages
for failure to perform or breach of warranty should
arise.
The general rule is well settled that, where
statutes enacted to protect the public against
 18
fraud or imposition, or to safeguard the public
health or morals, contain a prohibition and impose
a penalty, all contracts in violation thereof are
void. . . .
As this act involves purely business transactions,
and affects only money interests, we think it
should be construed as rendering contracts made
in violation of it unlawful and unforceable at the
instance of the offending party only, but not as
designed to take away the rights of innocent
parties who may have dealt with the offenders in
ignorance of their having violated the statute.
(Cashin vs. Pliter [1912], 168 Mich., 386; Ann. Cas.
[1913-C, 697.)
The early decision of our Supreme Court in the case of
Prautch Scholes & Co. vs. Hernandez [1903], 1 Phil., 705),
contains the following pertinent observations:
Another case may be supposed. A partnership is
organized for commercial purposes. It fails to
comply with the requirements of article 119. A
creditor sues the partnership for a debt contracted
by it, claiming to hold the partners severally. They
answer that their failure to comply with the Code
of Commerce makes them a civil partnership and
that they are in accordance with article 1698 of
the Civil Code only liable jointly. To allow such
liberty of action would be to permit the parties by
a violation of the Code to escape a liability which
the law has seen fit to impose upon persons who
organized commercial partnership; "Because it
would be contrary to all legal principles that the
nonperformance of a duty should redound to the
benefit of the person in default either intentional
or unintentional." (Mercantile Law, Eixala, fourth
ed., p. 145.)" (See also Lichauco vs. Lichauco
[1916], 33 Phil., 350, 360.)
Dr. Jose de Echavarri y Vivanco, in his Codigo de Comercio,
includes the following comment after articles 121 and 126
of the Code:
From the decisions cited in this and in the previous
comments, the following is deduced: 1st. Defects
in the organization cannot affect relations with
third persons. 2d. Members who contract with
other persons before the association is lawfully
organized are liable to these persons. 3d. The
intention to form an association is necessary, so
that if the intention of mutual participation in the
profits and losses in a particular business is
proved, and there are no articles of association,
there is no association. 4th. An association, the
articles of which have not been registered, is valid
in favor of third persons. 5th. The private pact or
agreement to form a commercial association is
governed not by the commercial law but by the
civil law. 6th. Secret stipulations expressed in a
public instrument, but not inserted in the articles
of association, do not affect third persons, but are
binding on the parties themselves. 7th. An
agreement made in a public instrument, other
than the articles of association, by means of which
one of the partners guarantees to another certain
profits or secures him from losses, is valid
between them, without affecting the association.
8th. Contracts entered into by commercial
associations defectively organized are valid when
they are voluntarily executed by the parties, if
the only controversy relates to whether or not
they complied with the agreement.
xxx xxx xxx
The name of the collective merchant is called firm
name. By this name, the new being is
distinguished from others, its sphere of action
fixed, and the juridical personality better
determined, without constituting an exclusive
character of the general partnership to such an
extent as to serve the purpose of giving a
definition of said kind of a mercantile partnership,
as is the case in our Code.
Having in mind that these partnerships are
prevailingly of a personal character, article 126
says that they must transact business under the
name of all its members, of some of them, or of
one only, the words "and company" to be added in
the latter two cases.
It is rendered impossible for the general
partnership to adopt a firm name appropriate to
its commercial object; the law wants to link, and
does link, the solidary and unlimited responsibility
of the members of this partnership with the
formation of its name, and imposes a limitation
upon personal liberty in its selection, not only by
prescribing the requisites, but also by prohibiting
persons not members of the company from
including their names in its firm name under
penalty of civil solidary responsibility.
Of course, the form required by the Code for the
adoption of the firm name does not prevent the
addition thereto of any other title connected with
the commercial purpose of the association. The
reader may see our commentaries on the
mercantile registry about the business names and
firm names of associations, but it is proper to
establish here that, while the business name may
be alienated by any of the means admitted by the
law, it seems impossible to separate the firm
names of general partnerships from the juridical
entity for the creation of which it was formed.
(Vol. 2, pp. 197, 213.)
On the question of whether the fact that the firm name
"Teck Seing & Co., Ltd." does not contain the name of all or
any of the partners as prescribed by the Code of Commerce
prevents the creation of a general partnership, Professor
Jose A. Espiritu, as amicus curiæ, states:
My opinion is that such a fact alone cannot and
will not be a sufficient cause of preventing the
formation of a general partnership, especially if
the other requisites are present and the requisite
regarding registration of the articles of association
in the Commercial Registry has been complied
with, as in the present case. I do not believe that
the adoption of a wrong name is a material fact to
be taken into consideration in this case; first,
because the mere fact that a person uses a name
not his own does not prevent him from being
bound in a contract or an obligation he voluntarily
entered into; second, because such a requirement
of the law is merely a formal and not necessarily
an essential one to the existence of the
partnership, and as long as the name adopted
sufficiently identity the firm or partnership
intended to use it, the acts and contracts done
and entered into under such a name bind the firm
to third persons; and third, because the failure of
the partners herein to adopt the correct name
prescribed by law cannot shield them from their
personal liabilities, as neither law nor equity will
permit them to utilize their own mistake in order
to put the blame on third persons, and much less,
on the firm creditors in order to avoid their
personal possibility.
The legal intention deducible from the acts of the parties
controls in determining the existence of a partnership. If
they intend to do a thing which in law constitutes a
partnership, they are partners, although their purpose was
to avoid the creation of such relation. Here, the intention
of the persons making up Teck Seing & co., Ltd. was to
establish a partnership which they erroneously
 19

denominated a limited partnership. If this was their

purpose, all subterfuges resorted to in order to evade
liability for possible losses, while assuming their enjoyment
of the advantages to be derived from the relation, must be
disregarded. The partners who have disguised their identity
under a designation distinct from that of any of the
members of the firm should be penalized, and not the
creditors who presumably have dealt with the partnership
in good faith.

Articles 127 and 237 of the Code of Commerce make all the
members of the general copartnership liable personally
and in solidum with all their property for the results of the
transactions made in the name and for the account of the
partnership. Section 51 of the Insolvency Law, likewise,
makes all the property of the partnership and also all the
separate property of each of the partners liable. In other
words, if a firm be insolvent, but one or more partners
thereof are solvent, the creditors may proceed both against
the firm and against the solvent partner or partners, first
exhausting the assets of the firm before seizing the
property of the partners. (Brandenburg of Bankcruptcy,
sec. 108; De los Reyes vs. Lukban and Borja [1916], 35
Phil., 757; Involuntary Insolvency of Campos Rueda &
Co. vs. Pacific Commercial Co. [1922], 44 Phil., 916).

We reach the conclusion that the contract of partnership

found in the document hereinbefore quoted established a
general partnership or, to be more exact, a partnership as
this word is used in the Insolvency Law.

Wherefore, the order appealed from is reversed, and the

record shall be returned to the court of origin for further
proceedings pursuant to the motion presented by the
creditors, in conformity with the provisions of the
Insolvency Law. Without special findings as to the costs in
this instance, it is ordered.

Araullo, C.J., Johnson, Street, Avanceña, Villamor, Johns

and Romualdez, JJ., concur.