ABDULLAH, ESNAIRA A.
The defendant admits the receipt of 300 Pesos
Jose Fernandez, plaintiff-appellant vs. Francisco de la
Rosa, defendant-appellee
G. R. No. 413 February 2, 1903
Issue
Is there partnership existed between the
parties even there's no written agreement?
The object of this action is to obtain from the
Court a declaration that a partnership exists between
the parties, that the plaintiff has a consequent interest
in certain cascoes which are alleged to be partnership
property, and that the defendant is bound to render an
account of his administration of the cascoes and the
business carried on with them.
Arguments made and evidence filed by the defendant
The defendant admits that the project of
forming a partnership in the casco business in which he
was already engaged to some extent individually was
discussed between himself and the plaintiff in January,
1900, and earlier, one Marcos Angulo, who was a
partner of the plaintiff in a bakery business, being also
a party to the negotiations, but he denies that any
agreement was ever consummated.
He denies that the plaintiff furnished any
money in January, 1900, for the purchase of casco No.
1515, or for repairs on the same, but claims that he
borrowed 300 Pesos on his individual account in
January from the bakery firm, consisting of the
plaintiff, Marcos Angulo, and Antonio Angulo.
The 825 Pesos, which he admits he received
from the plaintiff March 5, he claims was for the
purchase of casco No. 1515.
Doña Isabel Vales, from whom the defendant
bought casco No. 1515, testifies that the sale was made
and the casco delivered in January, although the public
document of sale was not executed till some time
afterwards.
Antonio Angulo also testified, but the
defendant claims that the fact that Angulo was a
partner of the plaintiff rendered him incompetent as a
witness under the provisions of Article 643 of the then
Code of Civil Procedure, and without deciding whether
this point is well taken, we have discarded his
testimony altogether in considering the case.
from Antonio Angulo in January, claiming, as has been
stated, that it was a loan from the firm. Yet he sets up
the claim that the 825 Pesos which he received from
the plaintiff in March were furnished toward the
purchase of casco No. 1515, thereby virtually admitting
that casco was purchased in company with the
plaintiff.
ON MOTION FOR A REHEARING:
Defendant has moved for a rehearing because
that part of the decision which refers to the
existence of the partnership which is the object of the
complaint is not based upon clear and decisive legal
grounds.
Defendant has moved for a rehearing because,
upon the supposition of the existence of the
partnership, the decision does not clearly determine
whether the juridical relation between the partners
suffered any modification in consequence of the
withdrawal by the plaintiff of the sum of 1,125 Pesos
from the funds of the partnership, or if it continued as
before, the parties being thereby deprived, he alleges,
of one of the principal bases for determining with
exactness the amount due to each.
The defendant says that, in the judgment of
the Court, if on the one hand there is no direct
evidence of a contract, on the other its existence can
only be inferred from certain facts, and the defendant
adds that the possibility of an inference is not
sufficient ground upon which to consider as existing
what may be inferred to exist, and still less as
sufficient ground for declaring its efficacy to produce
legal effects.
Arguments made and evidence filed by the petitioner
The plaintiff presented in evidence the
following receipt: "I have this day received from D.
Jose Fernandez eight hundred and twenty-five pesos
for the cost of a casco which we are to purchase in
company. Manila, March 5, 1900. Francisco de la Rosa."
The authenticity of this receipt is admitted by the
defendant.
Antonio Fernandez testifies that in the early
part of January, 1900, he saw Antonio Angulo give the
defendant, in the name of the plaintiff, a sum of
money, the amount of which he is unable to state, for
the purchase of a casco to be used in the plaintiff's and
defendant's business.
 He states that both sums were received with an
express reservation on his part of all his rights as a
partner.
ON MOTION FOR A REHEARING:
With respect to the first point, the appellant
cites the fifth conclusion of the Decision, which is as
follows: "We are unable to find from the evidence
before us that there was any specific verbal agreement
of partnership, except such as may be implied from the
facts as to the purchase of the cascoes."
The appellant gratuitously states, for the
purpose of arriving at a conclusion that a contract of
partnership was entered into between him and the
plaintiff, but have considered the proof which is
derived from the facts connected with the purchase of
the cascoes. It is stated in the decision that with the
exception of this evidence we find no other which
shows the making of the contract. But this does not
mean [for it says exactly the contrary] that this fact is
not absolutely proven, as the defendant erroneously
appears to think.
Supreme Court Decision
There was no intention on the part of the
plaintiff in accepting the money to relinguish his rights
as a partner, nor is there any evidence that by anything
that he said or by anything that he omitted to say he
gave the defendant any ground whatever to believe
that he intended to relinquish them. On the contrary,
he notified the defendant that he waived none of his
rights in the partnership. Nor was the acceptance of
the money an act which was in itself inconsistent with
the continuance of the partnership relation, as would
have been the case had the plaintiff withdrawn his
entire interest in the partnership. There is, therefore,
nothing upon which a waiver, either express or implied,
can be predicated. The defendant might have himself
terminated the partnership relation at any time, if he
had chosen to do so, by recognizing the plaintiff's right
in the partnership property and in the profits. Having
failed to do this he can not be permitted to force a
dissolution upon his co-partner upon terms which the
latter is unwilling to accept. We see nothing in the case
which can give the transaction in question any other
aspect than that of the withdrawal by one partner with
the consent of the other of a portion of the common
capital.
The result is that we hold and declare that a
partnership was formed between the parties in
January, 1900, the existence of which the defendant is
bound to recognize; that cascoes Nos. 1515 and 2089
constitute partnership property, and that the plaintiff
is entitled to an accounting of the defendant's
administration of such property, and of the profits
derived therefrom. This declaration does not involve an
adjudication as to any disputed items of the
partnership account.
ON MOTION FOR A REHEARING:
The contentions advanced by the moving party
are so evidently unfounded that we can not see the
necessity or convenience of granting the rehearing
prayed for, and the motion is, therefore, denied.
Ali, Mhezreha D.
Pang Lim and Benito Galvez, plaintiffs-appellees, vs. Lo
Seng, defendant-appellant
G.R. No. L-16318 October 21, 1921
Issue
Whether Pang Lim, having been a participant in
the contract of lease now in question, is in a position to
terminate it and demand possession of land from the
defendant.
Arguments made and evidence filed by the defendant
Article 1549 of the Civil Code has been cited by
the attorneys for the appellant as supplying authority
for the proposition that the lease in question cannot be
terminated by one who, like Pang Lim, has taken part
in the contract.
The plaintiff has occupied a double role in the
transaction, first, as one of the lessees; and secondly,
as one of the purchasers now seeking to terminate the
lease. These two positions are essentially antagonistic
and incompatible.
Prior to the acquisition of this property, Pang
Lim had been partner with Lo Seng and Benito Galvez
an employee. Both therefore had been in relations of
confidence with Lo Seng and in that position had
acquired knowledge of the possibilities of the property
and possibly an experience which would have enabled
them, in case they had acquired possession, to exploit
the distillery with profit. On account of his status as
partner in the firm of Lo Seng and Co., Pang Lim knew
that the original lease had been extended for fifteen
years; and he knew the extent of valuable
improvements that had been made thereon.
While yet a partner in the firm of Lo Seng and
Co., Pang Lim participated in the creation of this lease,
and when he sold out his interest in that firm to Lo
Seng this operated as a transfer to Lo Seng of Pang
Lim's interest in the firm assets, including the lease;
and Pang Lim cannot now be permitted, in the guise of
a purchaser of the estate, to destroy an interest
derived from himself, and for which he has received
full value.
Arguments made and evidence filed by the petitioner
The case for the plaintiffs is rested exclusively
on the provisions of article 1571 of the Civil Code,
which reads in part as follows:
ART. 1571. The purchaser of a leased estate
shall be entitled to terminate any lease in force
at the time of making the sale, unless the
contrary is stipulated, and subject to the
provisions of the Mortgage Law.
The plaintiffs are undoubtedly supported,
prima facie, by the letter of article 1571 of the Civil
Code; and the position of the defendant derives no
assistance from the mere circumstance that the lease
was admittedly binding as between the parties thereto.
In considering the provision from the Mortgage
Law it may be premised that a contract of lease is
personally binding on all who participate in it
regardless of whether it is recorded or not, though of
course the unrecorded lease creates no real charge
upon the land to which it relates.
Although it is thus manifest that, under the
Mortgage Law, as regards the personal obligations
expressed therein, the lease in question was from the
beginning, and has remained, binding upon all the
parties thereto — among whom is to be numbered Pang
Lim, then a member of the firm of Lo Seng and Co.
Supreme Court Decision
Pang Lim, having been a participant in the
contract of lease now in question, is not in a position to
terminate it. Above all other persons in business
relations, partners are required to exhibit towards each
other the highest degree of good faith. In fact the
relation between partners is essentially fiduciary, each
being considered in law, as he is in fact, the
confidential agent of the other. It is therefore accepted
as fundamental in equity jurisprudence that one
partner cannot, to the detriment of another, apply
exclusively to his own benefit the results of the
knowledge and information gained in the character of
partner. (Art. 1807)
Thus, it has been held that if one partner
obtains in his own name and for his own benefit the
renewal of a lease on property used by the firm, to
commence at a date subsequent to the expiration of
the firm's lease, the partner obtaining the renewal is
held to be a constructive trustee of the firm as to such
lease. (20 R. C. L., 878-882.) And this rule has even
been applied to a renewal taken in the name of one
partner after the dissolution of the firm and pending its
liquidation. (16 R. C. L., 906; Knapp vs. Reed, 88 Neb.,
754; 32 L. R. A. [N. S.], 869; Mitchell vs. Reed 61 N. Y.,
123; 19 Am. Rep., 252.)
It follows that as Lo Seng is vested with the
possessory right as against Pang Lim, he cannot be
ousted either by Pang Lim or Benito Galvez. Having
lawful possession as against one cotenant, he is
entitled to retain it against both.
We have assumed in the course of the
preceding discussion that the deed of sale under which
the plaintiffs acquired the right of Lo Yao, the owner of
the fee, is competent proof in behalf of the plaintiffs.
It is, however, earnestly insisted by the attorney for Lo
Seng that this document, having never been recorded
in the property registry, cannot under article 389 of the
Mortgage Law, be used in court against him because as
to said instrument he is a third party.
The judgment appealed from will be reversed,
and the defendant will be absolved from the complaint.
It is so ordered, without express adjudication as to
costs.
ALIM, Sittie Hashaira K.
Sharruf & Co., known also as Sharruf & Eskenazi,
Salomon Sharruf and Elias Eskenazi, plaintiffs-
appellees, vs. Baloise Fire Insurance Co., Sun Insurance
Office, Ltd., and Springfield Insurance Co., defendants-
appellants
G.R. No. 44119 March 30, 1937
Issues
a. Whether the rights to insurance policies of a
firm are transmitted to a new one substituting
the former?
b. Whether the defendant companies are liable to
pay the insurance policies to the plaintiffs?
Arguments made and evidence filed by the defendants
On July 25 and August 15, 1933, the defendant
insurance companies issued insurance policies in the
total amount of ₱25,000 in the name of Sharruf & Co.,
issued an additional policy in the sum of ₱15,000 in
favor of the said firm, raising the total amount of the
insurance to ₱40,000.
On September 22, 1933, a fire broke out of the
plaintiff company’s storage building that caused the
loss of their merchandise. The defendants call
attention to the earthen pots, the first found by
Detective Manalo beside the railing of the stairways of
the upper floor and the second one found by detective
Irada on the first floor, both containing liquid, ashes
and other residues which smelled of petroleum; a red
rag found by detective Irada in front of the toilet;
partially burnt box; and the old can containing garbage.
It is alleged by them that the total value of the
textiles contained in cases deposited inside the building
when the partnership was formed was ₱12,000; that of
the only fancy jewelry with imitation stones from
₱15,000 to ₱17,000, and that of the kitchen tinsils and
tableware made of aluminium, bronze and glass
₱19,676.
As the plaintiffs claim, they had already sold
articles, mostly textiles, valued at ₱8,000, a small
quantity of cloth must have been left at the time the
fire occurred. However, in the defendants’ claim, the
textiles allegedly consumed by fire and damaged by
water assessed them at ₱12,000.
Of the kitchen utensils and tableware made of
aluminium, bronze and glass, of which according to the
plaintiffs, they had a stock valued at ₱10,676, there
were found after the fire articles worth only ₱1,248.80.
 The same may be said of the fancy jewels with
imitation stones, and others of which the fancy jewels
with imitation stones, and others of which the plaintiffs
claim to have had a stock worth from ₱15,000 to
₱17,000 at the time of the fire, of which only valued
at ₱3,471.16, were left after the fire.
According to the inventory made by White &
Page, adjusters of the insurance companies, the total
value thereof, aside from the articles not included in
the inventories, assessed at ₱744.50, amounts to only
₱8,077.35.
Arguments made and evidence filed by the petitioner
In June and July 1933, plaintiffs Salomon
Sharruf and Elias Eskenazi were doing business under
the firm name Sharruf & Co. They applied for insurance
of their merchandise at the defendant companies.
On June 26, 1933, the plaintiffs executed a
contract of partnership between themselves wherein
they substituted the name of their firm with Sharruf &
Eskenazi stating that Elias Eskenazi contributed to the
partnership, as his capital, goods valued at ₱26,299.94.
it was likewise stated in said contract that Salomon
Sharruf brought to said partnership, as his capital,
goods valued at ₱24,205.10. The total value of the
merchandise contributed by both partners amounted to
₱50,505.04.
The last time the plaintiffs were in the building
was on September 19, 1933 at 4 o’clock in the
afternoon. At about 12:41 on the morning of September
22, 1933, a fire broke out of the plaintiff company’s
storage building that caused the loss of their
merchandise. Plaintiffs filed insurance claims against
the defendant companies but the latter refused to pay
contending that the insurance policies were issued for
the firm name Sharruf & Co. and not for Sharruf &
Eskenazi.
The plaintiffs claim that when the fire took
place there where in the burnt building articles and
merchandise in the total amount of the insurance
policies and that the textiles and other damaged and
undamaged goods found in the building after the fire
were worth ₱40,000.
Supreme Court Decision
a. Yes, in Lim Cuay Sy v Northern Assurance Co., the
Supreme Court held that “ A policy insuring
merchandise against fire is not invalidated by the
fact that the name of the insured in the policy is
incorrectly written wherein the error was not due to
any fraudulent intent on the part of the insured.”
In the present case, while it is true that the
defendant companies issued the policies to the firm
name Sharruf & Co, changing the name to Sharruf &
Ezkenazi did not change the membership of the
partnership in question. The same and only
members of the former Salomon Sharruf and Elias
Eskenazi are also members of the latter. It did not
appear that in changing the name of the
partnership, there was intent in defrauding the
defendant companies. When the partners of a
general partnership doing business under the firm
name “Sharruf & Co.” obtained insurance policies
issued to said firms and the latter is afterwards
changed to “Sharruf & Eskenazi,” which are the
names of the said firm, continuing the same
business, the new firm acquires the rights of the
former under the same policies.
Therefore, the rights to the insurance claims of the
firms of the firm under the name “Sharruf & Co.”
are transferred to the substitute “Sharruf &
Eskenazi”.
b. No, it was found that the plaintiffs committed
“fraudulent claim” against the defendant companies
when the amount of articles that they claimed to
have been in the building before the fire had a great
difference with the amount shown by the vestige of
the fire to have been therein.
By the express agreement between the insurer and
the insured, “fraudulent claim” is a ground for
exemption of the insurers from civil liability.
Therefore, the defendant companies were absolved
from the complaint.
Abo, Rufaidah U.
Aniceto G. Saludo, Jr., petitioner, vs. Philippine
National Bank, Respondent.
G.R. No. 193138 August 20, 2018
Issue
a. Whether the CA erred in including SAFA Law
Office as defendant to PNB's counterclaim
despite its holding that SAFA Law Office is
neither an indispensable party nor a legal
entity;
b. Whether the CA went beyond the issues in the
petition for certiorari and prematurely dealt
with the merits of PNB's counterclaim; and
c. Whether the CA erred when it gave due course
to PNB's petition for certiorari to annul and set
aside the RTC's Omnibus Order dated January
11, 2007.
Arguments made and evidence file by the defendant
Records show that on June 11, 1998, SAFA Law
Office entered into a Contract of Lease with PNB,
whereby the latter agreed to lease 632 square meters
of the second floor of the PNB Financial Center Building
in Quezon City for a period of three years and for a
monthly rental fee of P189,600.00. The rental fee is
subject to a yearly escalation rate of 10%. SAFA Law
Office then occupied the leased premises and paid
advance rental fees and security deposit in the total
amount of P1,137,600.00.
On August 1, 2001, the Contract of Lease
expired. According to PNB, SAFA Law Office continued
to occupy the leased premises until February 2005, but
discontinued paying its monthly rental obligations after
December 2002. Consequently, PNB sent a demand
letter dated July 17, 2003 for SAFA Law Office to pay
its outstanding unpaid rents in the amount of
P4,648,086.34. PNB sent another letterdemanding the
payment of unpaid rents in the amount of
P5,856,803.53 which was received by SAFA Law Office
on November 10, 2003.
On October 4, 2006, PNB filed a motion to include an
indispensable party as plaintiff, praying that Saludo be
ordered to amend anew his complaint to include SAFA
Law Office as principal plaintiff. PNB argued that the
lessee in the Contract of Lease is not Saludo but SAFA
Law Office, and that Saludo merely signed the Contract
of Lease as the managing partner of the law firm. Thus,
SAFA Law Office must be joined as a plaintiff in the
complaint because it is considered an indispensable
party under Section 7, Rule 3 of the Rules ofCourt.
On October 13, 2006, PNB filed its answer. By
way of compulsory counterclaim, it sought payment
from SAFA Law Office in the sum of P25,587,838.09,
representing overdue rentals. PNB argued that as a
matter of right and equity, it can claim that amount
from SAFA Law Office in solidum with Saludo.
Article 1767 of the Civil Code provides that by a
contract of partnership, two or more persons bind
themselves to contribute money, property, or industry
to a common fund, with the intention of dividing the
profits among themselves. Two or more persons may
also form a partnership for the exercise of a
profession. Under Article 1771, a partnership may be
constituted in any form, except where immovable
property or real rights are contributed thereto, in
which case a public instrument shall be necessary.
Article 1784, on the other hand, provides that a
partnership begins from the moment of the execution
of the contract, unless it is otherwise stipulated.
Here, absent evidence of an earlier agreement,
SAFA Law Office was constituted as a partnership at the
time its partners signed the Articles of
Partnership wherein they bound themselves to establish
a partnership for the practice of law, contribute capital
and industry for the purpose, and receive compensation
and benefits in the course of its operation. The opening
paragraph of the Articles of Partnership reveals the
unequivocal intention of its signatories to form a
partnership, to wit:
WE, the undersigned ANICETO G. SALUDO, JR.,
RUBEN E. AGPALO, FILEMON L. FERNANDEZ, AND
AMADO D. AQUINO, all of legal age, Filipino citizens
and members of the Philippine Bar, have this day
voluntarily associated ourselves for the purpose of
forming a partnership engaged in the practice of law,
effective this date, under the terms and conditions
hereafter set forth, and subject to the provisions of
existing laws[.]
The subsequent registration of the Articles of
Partnership with the SEC, on the other hand, was made
in compliance with Article 1772 of the Civil Code, since
the initial capital of the partnership was
P500,000.00.Said provision states:
Art. 1772. Every contract of partnership having
a capital ofThree thousand pesos or more, in money or
property, shall appear in a public instrument, which
must be recorded in the Office of the Securities and
Exchange Commission.
The other provisions of the Articles of
Partnership also positively identify SAFA Law Office as
a partnership. It constantly used the words "partners"
and "partnership." It designated petitioner Saludo as
managing partner,48 and Attys. Ruben E. Agpalo,
Filemon L. Fernandez, and Amado D. Aquino as
industrial partners.49 It also provided for the term of
the partnership,50 distribution of net profits and losses,
and management of the firm in which "the partners
shall have equal interest in the conduct of [its]
affairs."51 Moreover, it provided for the cause and
manner of dissolution of the partnership.52 These
provisions would not have been necessary if what had
been established was a sole proprietorship. Indeed, it
may only be concluded from the circumstances that,
for all intents and purposes, SAFA Law Office is a
partnership created and organized in accordance with
the Civil Code provisions on partnership.
Saludo asserts that SAFA Law Office is a sole
proprietorship on the basis of the MOU executed by the
partners of the firm. The MOU states in full:53
MEMORANDUM OF UNDERSTANDING
WHEREAS, the undersigned executed and filed with the
SEC the Articles of Incorporation of SALUDO, AGPALO,
FERNANDEZ and AQUINO on March 13, 1997;
WHEREAS, among the provisions of said Articles of
Incorporation are the following:
1. That partners R. E. Agpalo, F. L. Fernandez and A.
D. Aquino shall be industrial partners, and they shall
not contribute capital to the partnership and shall not
in any way be liable for any loss or liability that may
be incurred by the law firm in the course of its
operation.
2. That the partnership shall be dissolved by
agreement of the partners or for any cause as and in
accordance with the manner provided by law, in which
event the Articles of Dissolution of said partnership
shall be filed with the Securities and Exchange
Commission. All remaining assets upon dissolution shall
accrue exclusively to A. G. Saludo, Jr. and all
liabilities shall be solely for his account.
WHEREAS, the SEC has not approved the registration of
the Articles of Incorporation and its Examiner required
that the phrase "shall not in any way be liable for any
loss or liability that may be incurred by the law firm in
the course of its operation" in Article VII be deleted;
WHEREAS, the SEC Examiner likewise required that the
sentence "All remaining assets upon dissolution shall
accrue exclusively to A. G. Saludo, Jr. and all
liabilities shall be solely for his account" in Article X be
likewise deleted;
WHEREAS, in order to meet the objections of said
Examiner, the objectionable provisions have been
deleted and new Articles of Incorporation deleting said
objectionable provisions have been executed by the
parties and filed with the SEC.
NOW, THEREFORE, for and in consideration of the
premises and the mutual covenant of the parties, the
parties hereby agree as follows:
1. Notwithstanding the deletion of the portions
objected to by the said Examiner, by reason of which
entirely new Articles of Incorporation have been
executed by the parties removing the objected
portions, the actual and real intent of the parties is
still as originally envisioned, namely:
a) That partners R. E. Agpalo, F. L. Fernandez and A.
D. Aquino shall not in any way be liable for any loss or
liability that may be incurred by the law firm in the
course of its operation;
b) That all remaining assets upon dissolution shall
accrue exclusively to A. G. Saludo, Jr. and all
liabilities shall be solely for his account.
2. That the parties hereof hereby bind and obligate
themselves to adhere and observe the real intent of
the parties as above-stated, any provisions in the
Articles of Incorporation as filed to meet the
objections of the SEC Examiner to the contrary
notwithstanding.
IN WITNESS WHEREOF, we have set our hands
this _____ day of May, 1997 at Makati City,
Philippines.
[Sgd.]
A.G. SALUDO, JR.
[Sgd.]
[Sgd.]
[Sgd.]
RUBEN E. AGPALO
FILEMON L. FERNANDEZ
AMADO D. AQUINO
The foregoing evinces the parties' intention to
entirely shift any liability that may be incurred by SAFA
Law Office in the course of its operation to Saludo, who
shall also receive all the remaining assets of the firm
upon its dissolution. This MOU, however, does not serve
to convert SAFA Law Office into a sole proprietorship.
As discussed, SAFA Law Office was manifestly
established as a partnership based on the Articles of
Partnership. The MOU, from its tenor, reinforces this
fact. It did not change the nature of the organization of
SAFA Law Office but only excused the industrial
partners from liability.
The law, in its wisdom, recognized the
possibility that partners in a partnership may decide to
place a limit on their individual accountability.
Consequently, to protect third persons dealing with the
partnership, the law provides a rule, embodied in
Article 1816 of the Civil Code, which states:
Art. 1816. All partners, including industrial
ones, shall be liable pro rata with all their property and
after all the partnership assets have been exhausted,
for the contract which may be entered into in the name
and for the account of the partnership, under its
signature and by a person authorized to act for the
partnership. However, any partner may enter into a
separate obligation to perform a partnership contract.
The foregoing provision does not prevent partners from
agreeing to limit their liability, but such agreement
may only be valid as among them. Thus, Article 1817 of
the Civil Code provides:
Art. 1817. Any stipulation against the liability
laid down in the preceding article shall be void, except
as among the partners.
The MOU is an agreement forged under the foregoing
provision. Consequently, the sole liability being
undertaken by Saludo serves to bind only the parties to
the MOU, but never third persons like PNB.
Considering that the MOU is sanctioned by the
law on partnership, it cannot change the nature of a
duly-constituted partnership. Hence, we cannot sustain
Saludo's position that SAFA Law Office is a sole
proprietorship.
Arguments made and evidence file by the petitioner
In this petition, we emphasize that a
partnership for the practice of law, constituted in
accordance with the Civil Code provisions on
partnership, acquires juridical personality by operation
of law. Having a juridical personality distinct and
separate from its partners, such partnership is the real
party-in-interest in a suit brought in connection with a
contract entered into in its name and by a person
authorized to act on its behalf.
Petitioner Aniceto G. Saludo, Jr. (Saludo) filed
this petition for review on certiorari assailing the
February 8, 2010 Decision and August 2, 2010
Resolution issued by the Court of Appeals (CA) in CA-
G.R. SP No. 98898. The CA affirmed with modification
the January 11, 2007 Omnibus Order issued by Branch
58 of the Regional Trial Court (RTC) of Makati City in
Civil Case No. 06-678, and ruled that respondent
Philippine National Bank's (PNB) counterclaims against
Saludo and the Saludo Agpalo Fernandez and Aquino
Law Office (SAFA Law Office) should be reinstated in its
answer.
In a letter to PNB dated June 9, 2004, SAFA
Law Office expressed its intention to negotiate. It
claimed that it was enticed by the former management
of PNB into renting the leased premises by promising
to: (1) give it a special rate due to the large area of the
place; (2) endorse PNB's cases to the firm with rents to
be paid out of attorney's fees; and (3) retain the firm as
one of PNB's external counsels. When new management
took over, it allegedly agreed to uphold this agreement
to facilitate rental payments. However, not a single
case of significance was referred to the firm. SAFA Law
Office then asked PNB to review and discuss its billings,
evaluate the improvements in the area and agree on a
compensatory sum to be applied to the unpaid rents,
make good its commitment to endorse or refer cases to
SAFA Law Office under the intended terms and
conditions, and book the rental payments due as
receivables payable every time attorney's fees are due
from the bank on the cases it referred. The firm also
asked PNB to give a 50% discount on its unpaid rents,
noting that while it was waiting for case referrals, it
had paid a total amount of P13,457,622.56 from
January 1999 to December 2002, which included the
accelerated rates of 10% per annum beginning August
1999 until July 2003.
In February 2005, SAFA Law Office vacated the
leased premises. PNB sent a demand letter dated July
7, 2005 requiring the firm to pay its rental arrears in
the total amount of P10,951,948.32. In response, SAFA
Law Office sent a letter dated June 8, 2006, proposing
a settlement by providing a range of suggested
computations of its outstanding rental obligations, with
deductions for the value of improvements it introduced
in the premises, professional fees due from Macroasia
Corporation, and the 50% discount allegedly promised
by Dr. Lucio Tan. PNB, however, declined the
settlement proposal in a letter dated July 17, 2006,
stating that it was not amenable to the settlement's
terms. Besides, PNB also claimed that it cannot assume
the liabilities of Macroasia Corporation to SAFA Law
Office as Macroasia Corporation has a personality
distinct and separate from the bank. PNB then made a
final demand for SAFA Law Office to pay its outstanding
rental obligations in the amount of P25,587,838.09.
On September 1, 2006, Saludo, in his capacity
as managing partner of SAFA Law Office, filed an
amended complaint for accounting and/or
recomputation of unpaid rentals and damages against
PNB in relation to the Contract of Lease.
On October 23, 2006, Saludo filed his motion to
dismiss counterclaims,23 mainly arguing that SAFA Law
Office is neither a legal entity nor party litigant. As it is
only a relationship or association of lawyers in the
practice of law and a single proprietorship which may
only be sued through its owner or proprietor, no valid
counterclaims may be asserted against it.
Supreme Court Decision
On January 11, 2007, the RTC issued an
Omnibus Order denying PNB's motion to include an
indispensable party as plaintiff and granting Saludo's
motion to dismiss counterclaims in this wise:
The Court DENIES the motion of PNB to include
the SAFA Law Offices. Plaintiff has shown by documents
attached to his pleadings that indeed SAFA Law Offices
is a mere single proprietorship and not a commercial
and business partnership. More importantly, plaintiff
has admitted and shown sole responsibility in the
affairs entered into by the SAFA Law Office. PNB has
even admitted that the SAFA Law Office, being a
partnership in the practice of law, is a non-legal entity.
Being a non-legal entity, it cannot be a proper party,
and therefore, it cannot sue or be sued.
Consequently, plaintiff's Motion to Dismiss
Counterclaims (claimed by defendant PNB) should be
GRANTED. The counterclaims prayed for to the effect
that the SAFA Law Offices be made to pay in solidum
with plaintiff the amounts stated in defendant's Answer
is disallowed since no counterclaims can be raised
against a non-legal entity.
PNB filed its motion for reconsideration dated
February 5, 2007, alleging that SAFA Law Office should
be included as a co-plaintiff because it is the principal
party to the contract of lease, the one that occupied
the leased premises, and paid the monthly rentals and
security deposit. In other words, it was the main actor
and direct beneficiary of the contract. Hence, it is the
real party-in-interest. The RTC, however, denied the
motion for reconsideration in an Order dated March 8,
2007.
Consequently, PNB filed a petition
for certiorari with the CA. On February 8, 2010, the CA
rendered its assailed Decision, the dispositive portion
of which reads:
WHEREFORE, the petition is PARTIALLY
GRANTED. The assailed Omnibus Order dated 11
January 2007 and Order dated 8 March 2007, issued by
respondent Court in Civil Case No. 06-678, respectively,
are AFFIRMED with MODIFICATION in that petitioner's
counterclaims should be reinstated in its Answer.
SO ORDERED.
The CA ruled that an order granting Saludo's
motion to dismiss counterclaim, being interlocutory in
nature, is not appealable until after judgment shall
have been rendered on Saludo's complaint. Since the
Omnibus Order is interlocutory, and there was an
allegation of grave abuse of discretion, a petition
for certiorari is the proper remedy.
On the merits, the CA held that Saludo is
estopped from claiming that SAFA Law Office is his
single proprietorship. Under the doctrine of estoppel,
an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or
disproved as against the person relying thereon. Here,
SAFA Law Office was the one that entered into the
lease contract and not Saludo. In fact, the latter signed
the contract as the firm's managing partner. The
alleged Memorandum of Understanding (MOU) executed
by the partners of SAFA Law Office, .which states,
among others, that Saludo alone would be liable for the
firm's losses and liabilities, and the letter of Saludo to
PNB confirming that SAFA Law Office is his single
proprietorship did not convert the firm to a single
proprietorship. Moreover, SAFA Law Office sent a letter
to PNB regarding its unpaid rentals which Saludo signed
as a managing partner. The firm is also registered as a
partnership with the Securities and Exchange
Commission (SEC).
On the question of whether SAFA Law Office is
an indispensable party, the CA held that it is not. As a
partnership, it may sue or be sued in its name or by its
duly authorized representative. Saludo, as managing
partner, may execute all acts of administration,
including the right to sue. Furthermore, the CA found
that SAFA Law Office is not a legal entity. A partnership
for the practice of law is not a legal entity but a mere
relationship or association for a particular purpose.
Thus, SAFA Law Office cannot file an action in court.
Based on these premises, the CA held that the RTC did
not gravely abuse its discretion in denying PNB's motion
to include an indispensable party as plaintiff.
Nonetheless, the CA ruled that PNB's
counterclaims against SAFA Law Office should not be
dismissed. While SAFA Law Office is not a legal entity,
it can still be sued under Section 15, Rule 3 of the
Rules of Court considering that it entered into the
Contract of Lease with PNB.
The CA further ruled that while it is true that
SAFA Law Office's liability is not in solidum with Saludo
as PNB asserts, it does not necessarily follow that both
of them cannot be made parties to PNB's
counterclaims. Neither should the counterclaims be
dismissed on the ground that the nature of the alleged
liability is solidary. According to the CA, the presence
ofSAFA Law Office is required for the granting of
complete relief in the determination of PNB's
counterclaim. The court must, therefore, order it to be
brought in as defendant since jurisdiction over it can be
obtained pursuant to Section 12, Rule 6 of the Rules of
Court.
Finally, the CA emphasized that PNB's
counterclaims are compulsory, as they arose from the
filing of Saludo's complaint. It cannot be made subject
of a separate action but should be asserted in the same
suit involving the same transaction. Thus, the Presiding
Judge of the RTC gravely abused his discretion in
dismissing PNB's counterclaims as the latter may
forever be barred from collecting overdue rental fees if
its counterclaims were not allowed.
Saludo and PNB filed their respective motions
for partial reconsideration dated February 25, 2010 and
February 26, 2010. In a Resolution dated August 2,
2010, the CA denied both motions on the ground that
no new or substantial matters had been raised therein.
Nonetheless, the CA addressed the issue on the joining
of SAFA Law Office as a defendant in PNB's compulsory
counterclaim. Pertinent portions of the CA Resolution
read:
The Private Respondent claims that a
compulsory counterclaim is one directed against an
opposing party. The SAFA Law Office is not a party to
the case below and to require it to be brought in as a
defendant to the compulsory counterclaim would entail
making it a co-plaintiff. Otherwise, the compulsory
counterclaim would be changed into a third-party
complaint. The Private Respondent also argues that
Section 15, Rule 3 of the Rules of Court (on entities
without juridical personality) is only applicable to
initiatory pleadings and not to compulsory
counterclaims. Lastly, it is claimed that since the
alleged obligations of the SAFA Law Office is solidary
with the Private Respondent, there is no need to make
the former a defendant to the counterclaim.
We disagree with the reasoning of the Private
Respondent. That a compulsory counterclaim can only
be brought against an opposing party is belied by
considering one of the requisites of a compulsory
counterclaim it does not require for its adjudication
the presence of third parties of whom the court cannot
acquire jurisdiction. This shows that non-parties to a
suit may be brought in as defendants to such a
counterclaim.
Having settled that SAFA Law Office is a
juridical person, we hold that it is also the real party-
in-interest in the case filed by Saludo against PNB.
Section 2, Rule 3 of the Rules of Court defines a
real party-in-interest as the one "who stands to be
benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit." In Lee v.
Romillo, Jr., we held that the "real [party-in-interest]-
plaintiffis one who has a legal right[,] while a
real [party-in-interest]-defendant is one who has a
correlative legal obligation whose act or omission
violates the legal rights of the former."
SAFA Law Office is the party that would be
benefited or injured by the judgment in the suit before
the RTC. Particularly, it is the party interested in the
accounting and/or recomputation of unpaid rentals and
damages in relation to the contract of lease. It is also
the party that would be liable for payment to PNB of
overdue rentals, if that claim would be proven. This is
because it is the one that entered into the contract of
lease with PNB. As an entity possessed of a juridical
personality, it has concomitant rights and obligations
with respect to the transactions it enters into. Equally
important, the general rule under Article 1816 of the
Civil Code is that partnership assets are primarily liable
for the contracts entered into in the name of the
partnership and by a person authorized to act on its
behalf. All partners, including industrial ones, are only
liable pro rata with all their property after all the
partnership assets have been exhausted.
In Guy v. Gacott, we held that under Article
1816 of the Civil Code, the partners' obligation with
respect to the partnership liabilities is subsidiary in
nature. It is merely secondary and only arises if the one
primarily liable fails to sufficiently satisfy the
obligation. Resort to the properties of a partner may be
made only after efforts in exhausting partnership assets
have failed or if such partnership assets are insufficient
to cover the entire obligation. Consequently,
considering that SAFA Law Office is primarily liable
under the contract of lease, it is the real party-in-
interest that should be joined as plaintiff in the RTC
case.
Section 2, Rule 3 of the Rules of Court requires
that every action must be prosecuted or defended in
the name of the real party-in-interest. As the one
primarily affected by the outcome of the suit, SAFA
Law Office should have filed the complaint with the
RTC and should be made to respond to any
counterclaims that may be brought in the course of the
proceeding.
In Aguila, Jr. v. Court of Appeals, a case for
declaration of nullity of a deed of sale was filed against
a partner of A.C. Aguila & Sons, Co. We dismissed the
complaint and held that it was the partnership, not its
partners, which should be impleaded for a cause of
action against the partnership itself. Moreover, the
partners could not be held liable for the obligations of
the partnership unless it was shown that the legal
fiction of a different juridical personality was being
used for fraudulent, unfair, or illegal purposes. We
held:
Rule 3, §2 of the Rules of Court of 1964, under
which the complaint in this case was filed, provided
that "every action must be prosecuted and defended in
the name of the real party in interest." A real party in
interest is one who would be benefited or injured by
the judgment, or who is entitled to the avails of the
suit. This ruling is now embodied in Rule 3, §2 of the
1997 Revised Rules of Civil Procedure. Any decision
rendered against a person who is not a real party in
interest in the case cannot be executed. Hence, a
complaint filed against such a person should be
dismissed for failure to state a cause of action.
Under Art. 1768 of the Civil Code, a partnership
"has a juridical personality separate and distinct from
that of each of the partners." The partners cannot be
held liable for the obligations of the partnership unless
it is shown that the legal fiction of a different juridical
personality is being used for fraudulent, unfair, or
illegal purposes. In this case, private respondent has
not shown that A.C. Aguila & Sons, Co., as a separate
juridical entity, is being used for fraudulent, unfair, or
illegal purposes. Moreover, the title to the subject
property is in the name of A.C. Aguila & Sons, Co. and
the Memorandum of Agreement was executed between
private respondent, with the consent of her late
husband, and A.C. Aguila & Sons, Co., represented by
petitioner. Hence, it is the partnership, not its officers
or agents, which should be impleaded in any litigation
involving property registered in its name. A violation of
this rule will result in the dismissal of the complaint
In this case, there is likewise no showing that
SAFA Law Office, as a separate juridical entity, is being
used for fraudulent, unfair, or illegal purposes. Hence,
its partners cannot be held primarily liable for the
obligations of the partnership. As it was SAFA Law
Office that entered into a contract of lease with
respondent PNB, it should also be impleaded in any
litigation concerning that contract.
Accordingly, the complaint filed by Saludo
should be amended to include SAFA Law Office as
plaintiff. Section 11, Rule 3 of the Rules of Court gives
power to the court to add a party to the case on its
own initiative at any stage of the action and on such
tenns as are just. We have also held in several cases
that the court has full powers, apart from that power
and authority which are inherent, to amend processes,
pleadings, proceedings, and decisions by substituting as
party-plaintiff the real party-in-interest.
In view of the above discussion, we find it
unnecessary to discuss the other issues raised in the
petition. It is unfortunate that the case has dragged on
for more than 10 years even if it involves an issue that
may be resolved by a simple application of Civil Code
provisions on partnership. It is time for trial to proceed
so that the parties' substantial rights may be
adjudicated without further unnecessary delay.
WHEREFORE, the petition is DENIED. Petitioner
is hereby ordered to amend his complaint to include
SAFA Law Office as plaintiff in Civil Case No. 06-678
pending before Branch 58 of the Regional Trial Court of
Makati City, it being the real party-in-interest.
SO ORDERED.
Peralta,*(Acting Chairperson), Del Castillo,
Tijam, and Gesmundo,**JJ., concur.
ATTESTATION
I attest that the conclusions in the above
Decision had been reached in consultation before the
cases were assigned to the writer of the opinion of the
Court's Division.
(SGD)
DIOSDADO M. PERALTA
Associate Justice
Acting Chairperson, First Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the
Constitution, and the Division Acting Chairperson's
attestation, it is hereby certified that the conclusions
in the above Decision had been reached in consultation
before the cases were assigned to the writer of the
opinion of the Court's Division.
(SGD)
ANTONIO T. CARPIO
Senior Associate Justice***
ALIM, Sittie Hashaira K.
Sharruf & Co., known also as Sharruf & Eskenazi,
Salomon Sharruf and Elias Eskenazi, plaintiffs-
appellees, vs. Baloise Fire Insurance Co., Sun Insurance
Office, Ltd., and Springfield Insurance Co., defendants-
appellants
G.R. No. 44119 March 30, 1937
Issues
 c. Whether the rights to insurance policies of a
firm are transmitted to a new one substituting
the former?
d. Whether the defendant companies are liable to
pay the insurance policies to the plaintiffs?
Arguments made and evidence filed by the defendants
On July 25 and August 15, 1933, the defendant
insurance companies issued insurance policies in the
total amount of ₱25,000 in the name of Sharruf & Co.,
issued an additional policy in the sum of ₱15,000 in
favor of the said firm, raising the total amount of the
insurance to ₱40,000.
On September 22, 1933, a fire broke out of the
plaintiff company’s storage building that caused the
loss of their merchandise. The defendants call
attention to the earthen pots, the first found by
Detective Manalo beside the railing of the stairways of
the upper floor and the second one found by detective
Irada on the first floor, both containing liquid, ashes
and other residues which smelled of petroleum; a red
rag found by detective Irada in front of the toilet;
partially burnt box; and the old can containing garbage.
It is alleged by them that the total value of the
textiles contained in cases deposited inside the building
when the partnership was formed was ₱12,000; that of
the only fancy jewelry with imitation stones from
₱15,000 to ₱17,000, and that of the kitchen tinsils and
tableware made of aluminium, bronze and glass
₱19,676.
As the plaintiffs claim, they had already sold
articles, mostly textiles, valued at ₱8,000, a small
quantity of cloth must have been left at the time the
fire occurred. However, in the defendants’ claim, the
textiles allegedly consumed by fire and damaged by
water assessed them at ₱12,000.
Of the kitchen utensils and tableware made of
aluminium, bronze and glass, of which according to the
plaintiffs, they had a stock valued at ₱10,676, there
were found after the fire articles worth only ₱1,248.80.
The same may be said of the fancy jewels with
imitation stones, and others of which the fancy jewels
with imitation stones, and others of which the plaintiffs
claim to have had a stock worth from ₱15,000 to
₱17,000 at the time of the fire, of which only valued
at ₱3,471.16, were left after the fire.
According to the inventory made by White &
Page, adjusters of the insurance companies, the total
value thereof, aside from the articles not included in
the inventories, assessed at ₱744.50, amounts to only
₱8,077.35.
Arguments made and evidence filed by the petitioner
In June and July 1933, plaintiffs Salomon
Sharruf and Elias Eskenazi were doing business under
the firm name Sharruf & Co. They applied for insurance
of their merchandise at the defendant companies.
On June 26, 1933, the plaintiffs executed a
contract of partnership between themselves wherein
they substituted the name of their firm with Sharruf &
Eskenazi stating that Elias Eskenazi contributed to the
partnership, as his capital, goods valued at ₱26,299.94.
it was likewise stated in said contract that Salomon
Sharruf brought to said partnership, as his capital,
goods valued at ₱24,205.10. The total value of the
merchandise contributed by both partners amounted to
₱50,505.04.
The last time the plaintiffs were in the building
was on September 19, 1933 at 4 o’clock in the
afternoon. At about 12:41 on the morning of September
22, 1933, a fire broke out of the plaintiff company’s
storage building that caused the loss of their
merchandise. Plaintiffs filed insurance claims against
the defendant companies but the latter refused to pay
contending that the insurance policies were issued for
the firm name Sharruf & Co. and not for Sharruf &
Eskenazi.
The plaintiffs claim that when the fire took
place there where in the burnt building articles and
merchandise in the total amount of the insurance
policies and that the textiles and other damaged and
undamaged goods found in the building after the fire
were worth ₱40,000.
Supreme Court Decision
c. Yes, in Lim Cuay Sy v Northern Assurance Co., the
Supreme Court held that “ A policy insuring
merchandise against fire is not invalidated by the
fact that the name of the insured in the policy is
incorrectly written wherein the error was not due to
any fraudulent intent on the part of the insured.”
In the present case, while it is true that the
defendant companies issued the policies to the firm
name Sharruf & Co, changing the name to Sharruf &
Ezkenazi did not change the membership of the
partnership in question. The same and only
members of the former Salomon Sharruf and Elias
Eskenazi are also members of the latter. It did not
appear that in changing the name of the
partnership, there was intent in defrauding the
defendant companies. When the partners of a
general partnership doing business under the firm
name “Sharruf & Co.” obtained insurance policies
issued to said firms and the latter is afterwards
changed to “Sharruf & Eskenazi,” which are the
names of the said firm, continuing the same
business, the new firm acquires the rights of the
former under the same policies.
Therefore, the rights to the insurance claims of the
firms of the firm under the name “Sharruf & Co.”
are transferred to the substitute “Sharruf &
Eskenazi”.
d. No, it was found that the plaintiffs committed
“fraudulent claim” against the defendant companies
when the amount of articles that they claimed to
have been in the building before the fire had a great
difference with the amount shown by the vestige of
the fire to have been therein.
 By the express agreement between the insurer and
the insured, “fraudulent claim” is a ground for
exemption of the insurers from civil liability.
Therefore, the defendant companies were absolved
from the complaint.
Andongan, Lica Krisha L.
Vicente Sy, Trinidad Paulino, 6B’s Trucking
Corporation, and SBT Trucking Corporation, petitioners,
vs. Hon. Court of Appeals and Jaime Sahot, respondents
G.R. No. 142293 February 27, 2003
Issue
Whether Sahot is an industrial partner
Arguments made and evidence filed by the defendant
Sometime in 1958, private respondent Jaime
Sahot started working as a truck helper for petitioners’
family-owned trucking business named Vicente Sy
Trucking. In 1965, he became a truck driver of the
same family business, renamed T. Paulino Trucking
Service, later 6B’s Trucking Corporation in 1985, and
thereafter known as SBT Trucking Corporation since
1994. Throughout all these changes in names and for 36
years, private respondent continuously served the
trucking business of petitioners. In April 1994, Sahot
was already 59 years old. He had been incurring
absences as he was suffering from various ailments.
Particularly causing him pain was his left thigh, which
greatly affected the performance of his task as a
driver. He inquired about his medical and retirement
benefits with the Social Security System (SSS) on April
25, 1994, but discovered that his premium payments
had not been remitted by his employer. Sahot had filed
a week-long leave sometime in May 1994. On May 27th,
he was medically examined and treated for EOR,
presleyopia, hypertensive retinopathy G II (Annexes "G-
5" and "G-3", pp. 48, 104, respectively),6 HPM, UTI,
Osteoarthritis (Annex "G-4", p. 105),7 and heart
enlargement (Annex G, p. 107). On said grounds, Belen
Paulino of the SBT Trucking Service management told
him to file a formal request for extension of his leave.
At the end of his week-long absence, Sahot applied for
extension of his leave for the whole month of June,
1994. It was at this time when petitioners allegedly
threatened to terminate his employment should he
refuse to go back to work. At this point, Sahot found
himself in a dilemma. He was facing dismissal if he
refused to work, But he could not retire on pension
because petitioners never paid his correct SSS
premiums. The fact remained he could no longer work
as his left thigh hurt abominably. Petitioners ended his
dilemma. They carried out their threat and dismissed
him from work, effective June 30, 1994. He ended up
sick, jobless and penniless. On September 13, 1994,
Sahot filed with the NLRC NCR Arbitration Branch, a
complaint for illegal dismissal, docketed as NLRC NCR
Case No. 00-09-06717-94. He prayed for the recovery of
separation pay and attorneys fees against Vicente Sy
and Trinidad Paulino-Sy, Belen Paulino, Vicente Sy
Trucking, T. Paulino Trucking Service, 6B’s Trucking
and SBT Trucking, herein petitioners.
Arguments made and evidence filed by the petitioners
For their part, petitioners admitted they had a
trucking business in the 1950s but denied employing
helpers and drivers. They contend that private
respondent was not illegally dismissed as a driver
because he was in fact petitioner’s industrial partner.
They add that it was not until the year 1994, when SBT
Trucking Corporation was established, and only then
did respondent Sahot become an employee of the
company, with a monthly salary that reached P4,160.00
at the time of his separation. Petitioners further
claimed that sometime prior to June 1, 1994, Sahot
went on leave and was not able to report for work for
almost seven days. On June 1, 1994, Sahot asked
permission to extend his leave of absence until June
30, 1994. It appeared that from the expiration of his
leave, private respondent never reported back to work
nor did he file an extension of his leave. Instead, he
filed the complaint for illegal dismissal against the
trucking company and its owners. Petitioners add that
due to Sahot’s refusal to work after the expiration of
his authorized leave of absence, he should be deemed
to have voluntarily resigned from his work. They
contended that Sahot had all the time to extend his
leave or at least inform petitioners of his health
condition. Lastly, they cited NLRC Case No. RE-4997-76,
entitled "Manuelito Jimenez et al. vs. T. Paulino
Trucking Service," as a defense in view of the alleged
similarity in the factual milieu and issues of said case
to that of Sahot’s, hence they are in pari material and
Sahot’s complaint ought also to be dismissed.
Supreme Court Decision:
No. Article 1767 of the Civil Code states that in
a contract of partnership two or more persons bind
themselves to contribute money, property or industry
to a common fund, with the intention of dividing the
profits among themselves. Not one of these
circumstances is present in this case. No written
agreement exists to prove the partnership between the
parties. Private respondent did not contribute money,
property or industry for the purpose of engaging in the
supposed business. There is no proof that he was
receiving a share in the profits as a matter of course,
during the period when the trucking business was under
operation. Neither is there any proof that he had
actively participated in the management,
administration and adoption of policies of the business.
Thus, the NLRC and the CA did not err in reversing the
finding of the Labor Arbiter that private respondent
was an industrial partner from 1958 to 1994. On this
point, the Court affirmed the findings of the appellate
court and the NLRC. Private respondent Jaime Sahot
was not an industrial partner but an employee of
petitioners from 1958 to 1994. The existence of an
employer-employee relationship is ultimately a
question of fact and the findings thereon by the NLRC,
as affirmed by the Court of Appeals, deserve not only
respect but finality when supported by substantial
evidence. Substantial evidence is such amount of
relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion.
 From the records, it clearly appears that
procedural due process was not observed in the
separation of private respondent by the management of
the trucking company. On the last issue, as held by the
Court of Appeals, respondent Jaime Sahot is entitled to
separation pay. The law is clear on the matter. An
employee who is terminated because of disease is
entitled to "separation pay equivalent to at least one
month salary or to one-half month salary for every year
of service, whichever is greater.
WHEREFORE, the petition is DENIED and the
decision of the Court of Appeals dated February 29,
2000 is AFFIRMED. Petitioners must pay private
respondent Jaime Sahot his separation pay for 36 years
of service at the rate of one-half monthly pay for every
year of service, amounting to P74,880.00, with interest
of six per centum (6%) per annum from finality of this
decision until fully paid.
Costs against petitioners.
SO ORDERED. Bellosillo, (Chairman), Mendoza,
and Callejo, Sr., JJ., concur. Austria-Martinez, J., no
part.
Biruar, Bai Majalliah B.
Title: G.R. No. L- 4811 July 31, 1953
Charles F. Woodhouse, plaintiff-appellant, vs.
Fortunato F. Halili, defendant-appellant.
Issue
Is the agreement of the both parties null or
void? And the execution of a contract of partnership be
enforced?
Arguments made and evidence filed by the defendant
Defendant's consent to the agreement, Exhibit
A, was secured by the representation of plaintiff that
he was the owner, or was about to become owner of an
exclusive bottling franchise, which representation was
false, and plaintiff did not secure the franchise, but
was given to defendant himself.
The defendant, as appellant, insists that
plaintiff did represent to the defendant that he had an
exclusive franchise, when as a matter of fact, at the
time of its execution, he no longer had it as the same
had expired, and that, therefore, the consent of the
defendant to the contract was vitiated by fraud and it
is, consequently, null and void.
That defendant did not fail to carry out his
undertakings, but that it was plaintiff who failed.
That plaintiff agreed to contribute the
exclusive franchise to the partnership, but plaintiff
failed to do so.
He also presented a counter-claim for P200,000
as damages.
Arguments made and evidence filed by the petitioners
Plaintiff had informed the Mission Dry
Corporation of Los Angeles, California, that he had an
interested a prominent financier.
He then requested that in order to close a deal
with him, the right to bottle and distribute be granted
for him a limited time under the condition that it will
finally be transferred to the corporation.
The plaintiff argues, that plaintiff only
undertook in the agreement "to secure the Mission Dry
franchise for and in behalf of the proposed
partnership.”
Plaintiff asks for the execution of the contract
of partnership, an accounting of the profits, and a
share thereof of 30 percent, as well as damages in the
amount of P200,000.
Supreme Court Decision
As the trial court correctly concluded, the
defendant may not be compelled against his will to
carry out the agreement nor execute the partnership
papers. Under the Spanish Civil Code, the defendant
has an obligation to do, not to give. The law recognizes
the individual's freedom or liberty to do an act he has
promised to do, or not to do it, as he pleases. It falls
within what Spanish commentators call a very
personal act (acto personalismo), of which courts may
not compel compliance, as it is considered an act of
violence to do so.
Bulosan, Reggie Nicole C.
Isabelo Moran, Jr., petitioner, vs. The Hon. Court of
Appeals and Mariano E. Pecson, respondents
G.R. No. L-59956 October 31, 1984
Issue
Is Moran obliged to give Pecson the amount of
expected profits from their partnership?
Arguments made and evidence filed by the defendant
By virtue of the partnership agreement entered
into by the parties-plaintiff and defendant the
defendant did contribute P10, 000.00, and another sum
of P7,000.00 for the Voice of the Veteran or Delegate
Magazine.
Of the expected 95,000 copies of the posters,
the defendant was able to print 2,000 copies only
authorized of which, however, were sold at P5.00 each.
The petitioner did not comply with the
contribution agreement where he contributed nothing
at all.
Arguments and evidence by the petitioner
The petitioner contends that the respondent
Court of Appeals decided questions of substance in a
way not in accord with law and with Supreme Court
decisions when it committed the following errors
mentioned below.
The honorable court of appeals grievously erred
in holding petitioner isabelo c. Moran, jr. Liable to
respondent mariano e. Pecson in the sum of p47,500 as
the supposed expected profits due him. . The
petitioner contends that the award is highly
speculative. The petitioner maintains that the
respondent court did not take into account the great
risks involved in the business undertaking.
The honorable court of appeals grievously erred
in holding petitioner isabelo c. Moran, jr. Liable to
respondent mariano e. Pecson in the sum of p8, 000, as
supposed commission in the partnership arising out of
pecson's investment. The petitioner submits that the
award of P8,000.00 as Pecson's supposed commission
has no justifiable basis in law.
The partnership agreement stipulated that the
petitioner would give the private respondent a monthly
commission of Pl, 000.00 from April 15, 1971 to
December 15, 1971 for a total of eight (8) monthly
commissions. The agreement does not state the basis of
the commission. The payment of the commission could
only have been predicated on relatively extravagant
profits. The parties could not have intended the giving
of a commission in spite of loss or failure of the
venture. Since the venture was a failure, the private
respondent is not entitled to the P8, 000.00
commissions.
The honorable court of appeals grievously erred
in holding petitioner isabelo c. Moran, jr. Liable to
respondent mariano e. Pecson in the sum of p7,000 as a
supposed return of investment in a magazine venture.
Assuming without admitting that petitioner is
at all liable for any amount, the honorable court of
appeals did not even offset payments admittedly
received by pecson from moran.
The honorable court of appeals grievously erred
in not granting the petitioner's compulsory
counterclaim for damages.
Supreme Court Decision
The petition is GRANTED. The decision of the
respondent Court of Appeals (now Intermediate
Appellate Court) is hereby SET ASIDE and a new one is
rendered ordering the petitioner Isabelo Moran, Jr., to
pay private respondent Mariano Pecson SIX THOUSAND
(P6,000.00) PESOS representing the amount of the
private respondent's contribution to the partnership but
which remained unused; and THREE THOUSAND
(P3,000.00) PESOS representing one half (1/2) of the
net profits gained by the partnership in the sale of the
two thousand (2,000) copies of the posters, with
interests at the legal rate on both amounts from the
date the complaint was filed until full payment is
made.
Caralde, Louie F.
Prautch, Scholes & Co., plaintiffs-appellees, vs. Dolores
Hernandez De Goyenechea, defendant-appellant
G.R. No. 910 February 10, 1903
Issue
This partnership was engaged in the business of
buying and selling cows, woods, bricks, and the
products of the country. The proofs show that it never
attempted to comply with any of the requirements of
the Code of Commerce. If it had complied with that
Code it would have been a judicial person. (Article
116.) Assuming, without deciding, that civil
partnerships are also juridical persons, did Prautch and
Scholes not having complied with the Code of
Commerce nevertheless become a civil partnership and
thus acquire a personality of its own?
Arguments made and Evidence filed by the Defendant
Article 35 of the Civil Code provides that the
following are juridical persons:
1. The corporations, associations, and institutions
of public interest recognized by law. Their
personality begins from the very instant in
which, in accordance with law, they are validly
established.
2. The associations of private interest, be they
civil, commercial, or industrial, to which the
law may grant proper personality, independent
of each member thereof.
Moreover, Article 36 also states that the
associations referred to in No. 2 of the foregoing
article, shall be governed by the provisions of their
articles of associations, according to the nature of the
latter. It becomes necessary to know what partnerships
are civil and what ones are mercantile in order to know
in a particular case by what provisions of law the
partnership there in question is governed. The Code of
Commerce of 1829 distinctly provided that those
partnerships were mercantile which had for their
object an operation of commerce (Art. 264). The
present Code has not in our opinion made any radical
change in this respect. Article 123 provides that
mercantile partnerships may be of any class provided
that their agreements are lawful and their object
industry or commerce.
It is not necessary in this case to attempt to
define an industrial partnership or to distinguish
between it and a civil partnership on one hand and a
commercial partnership on the other. The partnership
of Prautch, Scholes & Co. was a typical commercial
partnership buying personal property with the purpose
of reselling it in the same form at a profit.
Article 1697 of the Italian Civil Code is
substantially the same as article 1665 of our Civil Code.
Supino in his commentaries on the Commercial Law of
Italy, referring to article 1697, says: "These definitions
are in general applicable even to mercantile
partnerships which are those which are established
with the view to effecting one or more commercial
operations. (Art. 76). It is therefore the purpose which
determines the character of a partnership as civil or
mercantile. The mercantile form assumed by a
partnership whose purposes are of a civil nature is not
sufficient to give it the character of a mercantile
partnership; it will be governed by the provisions of the
Code of Commerce, except with respect to bankruptcy
and jurisdiction (Art. 229). (Mercantile Law, p. 168)."
We hold then on principle and authority that
the contract of partnership between Prautch and
Scholes was in its nature commercial; that under article
36 of Civil Code said partnership was governed by the
provisions of the Code of Commerce; that its failure to
comply with the requirements of that Code did not
make it a civil partnership, and thus give it legal
personality, which we have assumed such partnerships
have.
It has also been declared that although under
the provisions of article 284 of the Code of Commerce
all contracts of commercial partnerships must be
evidenced by public instrument executed with all the
legal formalities, and although the failure to comply
with this requirement results in the nullity of the
contract and makes it unenforceable for the purposes
of bringing action under the general provisions of
article 236 of the same Code, nevertheless persons
who, conjointly and under a firm name or without it,
but without being organized with the formalities
required, have entered into contracts with third
persons they may in their individual capacity bring suit
upon actions resulting from such contracts. (3 Estasen,
Mercantile Law, 36, 37.)
No motion for a new trial was made in the
court below, and it is therefore said that article 497 of
the Code of Civil Procedure prevents us from examining
the evidence.Except in the three cases therein
specified this court can not be examine or retry
questions of fact. But it can examine and decide any
question of law that is properly presented by the
record.
Whether there is any evidence in the case to
support a finding of fact is always a question of law.
And whenever it is claimed that there is no evidence to
support a particular finding we have a right to examine
the record, and if we find no evidence at all upon
which as a matter of law such finding could be based it
is our duty to so declare and to reverse the judgment
for error of law. If, on the contrary, we should find
some evidence to support it and a large amount of
evidence against it we could not disturb it though we
might be convinced that the court below had erred in
estimating the weight of the testimony.
In all cases it must appear either expressly by
the certificate of the judge or impliedly from the bill of
exceptions that it contains all of the evidence in the
case having any bearing upon the point at issue. We
must have before us all that the judge below had
before him when he made the finding in question. If we
do not we can not say that there was no evidence to
support it.It sufficiently appears from the bill of
exceptions in this case that it contains all of the
evidence except the contract between the defendant
and Poizart, a letter from Prautch to Poizart, and one
from Poizart to Prautch. None of these could have any
bearing at all upon this question of personality.
We have stated that the plaintiff is Prautch,
Scholes & Co., but even on the Assumption that the
plaintiff is Prautch and not for the firm of Prautch,
Scholes & Co., the judgment can not be sustained.
TheThe court finds that Prautch succeeded to all the
rights of the firm. There is no evidence to support this
finding. The only testimony on this point is the
following by Prautch: "Who succeeded to the firm name
and signature? I." This statement is insufficient as a
matter of law to show that Prautch had acquired by
assignment the interest of Scholes in this contract of
lease. It is entirely consistent with the idea that
Scholes still retained his rights in the assets of the
extinct partnership.
On the supposition that Prautch might recover
the whole of the claim for the benefit of the firm the
judgment would have to be reversed, for it allows a
recovery in the name of the firm for the sole benefit of
Prautch.
Of the points made by the plaintiff in its brief,
Nos. 1, 2, and 8 refer to the question of personality.
The proposition (1) that Prautch and Scholes brought
with them from the United States the law there in
force relating to partnership and should be governed by
it here does not meet with our assent.
The claim (2) that the defendant is stopped
from alleging this want of personality because she has
dealt with the partnership is not borne out of the
record. The only contract which she made with them
was the lease. That was signed by them as individuals
and not with any firm name. Prautch in his testimony
gives this as a reason for not notifying the defendant of
the dissolution.
The claim (8) that the decision in this case
takes away from Prautch and Scholes rights which they
now have can not be sustained. We simply hold that
they can not exercise such rights by an action in the
name of Prautch, Scholes & Co.
Arguments made and Evidence Filed by the Petitioners
By the express provisions of section 497 of the
Code of Civil Procedure, 1901, in hearings of bills of
exceptions in civil actions and special proceedings, it is
provided that the Supreme Court shall not review the
evidence taken in the court below, nor retry the
questions of fact, except as in this section provided.
These exceptions are:
(1) When assessors sat with the judge in the hearing in
the court below, and both the assessors were of the
opinion that the findings of fact and judgment in the
action are wrong and have certified in writing their
dissent therefrom.
(2) On the grounds of newly discovered evidence.
(3) Where the excepting party filed a motion in the
Court of First Instance for a new trial upon the ground
that the findings of fact were plainly and manifestly
against the weight of evidence, and the judge
overruled said motion and due exception was taken to
his overruling the same.
There was no motion for a new trial made in
the court below, nor does the case fall within either of
the other exceptions. The statute is mandatory and
should be followed.The additional exception ingrafted
upon the statute that where there is no evidence to
sustain the findings of facts by the court that in such
case it is a question of law, and that this court will in
such case review the evidence taken in the court below
and retry the questions of fact, is in contravention both
of the letter and of the spirit of the statute.
An examination of the evidence discloses that
there was some proof that Prautch succeeded to all the
rights of the firm of Prautch, Scholes & Co. Prautch in
his testimony states that he succeeded the name and
signature of the firm, which was equivalent to saying
that he had acquired the interest of Scholes in the
contract of lease.
There was no objection taken in the court
below by demurrer or answer to the legal capacity of
the plaintiff to sue, or that there was a defect or
misjoinder of parties. By the provisions of section 93, if
no objection is taken to the complaint either by
demurrer or answer, the defendant shall be deemed to
have waived the objection that plaintiff has not the
legal capacity to sue, or that there was a defect or
misjoinder of parties, plaintiff or defendant.
Supreme Court Decision
The judgment is reversed and a new trial
granted with costs of the second instance against the
appellee. So ordered.
Datumanguda, Fatima Erica I.
Heirs of Tan Eng Kee, petitioners, vs. Court of
Appeals and Benguet Lumber Company, represented
by its President Tan Eng Lay, respondents.
G.R. No. 126881 October 3, 2000
Issue
Whether or not Tan Eng Kee is a partner.
Arguments made and Evidence filed by the Defendant
Tan Eng Lay denied that there was a
partnership between him and his brother. He said
that Tan Eng Kee was merely an employee of
Benguet Lumber. He showed evidence consisting of
Tan Eng Kee’s payroll; his SSS as an employee and
Benguet Lumber being the employee. In fact, Tan
Eng Lay was able to show evidence that Benguet
Lumber is a sole proprietorship. He registered the
same as such in 1954; that Kee was just an
employee based on the latter’s payroll and SSS
coverage, and other records indicating Tan Eng Lay
as the proprietor. Also, the business definitely
amounted to more than P3,000.00 hence if there
was a partnership, it should have been made in a
public instrument.
Arguments made and Evidence filed by the Petitioners
Benguet Lumber has been around even
before World War II but during the war, its stocks
were confiscated by the Japanese. After the war,
the brothers Tan Eng Lay and Tan Eng Kee pooled
their resources in order to revive the business. In
1981, Tan Eng Lay caused the conversion of
Benguet Lumber into a corporation called Benguet
Lumber and Hardware Company, with him and his
family as the incorporators. In 1983, Tan Eng Kee
died. Thereafter, the heirs of Tan Eng Kee
demanded for an accounting and the liquidation of
the partnership. As a result of the defendant's
presentation of evidence, the heirs of Tan Eng
Kee filed a criminal case against Tan Eng Lay for
the lack of evidence and allegedly fabricating such.
Supreme Court Decision
The Supreme Court held that there was no
certificate of partnership between the brothers. The
heirs were not able to show what was the
agreement between the brothers as to the sharing
of profits. All they presented were circumstantial
evidence which in no way proved partnership.
Except for a firm name, there was no firm
account, no firm letterheads submitted as evidence,
no certificate of partnership, no agreement as to
profits and losses, and no time fixed for the
duration of the partnership. There was even no
attempt to submit an accounting corresponding to
the period after the war until Kee’s death in
1984. It had no business book, no written account
nor any memorandum for that matter and no
license mentioning the existence of a partnership.
But the business was started after the war
in 1945 prior to the publication of the New Civil
Code in 1950? Even so, nothing prevented the parties
from complying with this requirement. Also, the
Supreme Court emphasized that for 40 years, Tan
Eng Kee never asked for an accounting. The
essence of a partnership is that the partners share
in the profits and losses. Each has the right to
demand an accounting as long as the partnership
exists. Even if it can be speculated that a scenario
wherein “if excellent relations exist among the
partners at the start of the business and all the
partners are more interested in seeing the firm
grow rather than get immediate returns, a
deferment of sharing in the profits is perfectly
plausible.” But in the situation in the case at bar,
the deferment, if any, had gone on too long to be
plausible. A person is presumed to take ordinary
care of his concerns. A demand for periodic
accounting is evidence of a partnership which Kee
never did.
The Supreme Court also noted: In
determining whether a partnership exists, these
rules shall apply:
(1) Except as provided by Article 1825, persons
who are not partners as to each other are not
partners as to third persons; (2) Co-ownership or
co-possession does not of itself establish a
partnership, whether such co-owners or co-
possessors do or do not share any profits made by
the use of the property; (3) The sharing of gross
returns does not of itself establish a partnership,
whether or not the persons sharing them have a
joint or common right or interest in any property
which the returns are derived; (4) The receipt by a
person of a share of the profits of a business is
prima facie evidence that he is a partner in the
business, but no such inference shall be drawn if
such profits were received in payment: (a) As a
debt by installment or otherwise; (b) As wages of
an employee or rent to a landlord; (c) As an
annuity to a widow or representative of a
deceased partner; (d) As interest on a loan, though
the amount of payment vary with the profits of
the business; (e) As the consideration for the sale
of a goodwill of a business or other property by
installments or otherwise.
Escolano, Mary Levie A.
Mauro Lozana, plaintiff-appellee, vs. Serafin
Depakakibo, defendant-appellant.
G.R. No. L-13680 April 27, 1960
Issue
a. Whether or not the partnership is void or the
act of the partnership in furnishing electric
current to franchise holder without previous
approval of Public Service Commission render
the partnership void.
b. Whether or not disposal of contribution of
parties is allowed.
Arguments made and evidence file by the defendant
On December 5, 1955, Depakakibo, the
defendant filed an answer denying that the generator
and equipment allegedly owned by Lozana was
contributed to the partnership in the same manner that
the defendant had contributed equipments also
therefore he is not unlawfully detaining them.
By way of counterclaim, defendant alleged that
under the partnership agreement the parties were to
contribute equipments, plaintiff contributing the
generator and the defendant, the wires for the purpose
of installing the main and delivery lines. He prayed that
the complaint against him be dismissed, that he
plaintiff be adjudged guilty of violating the partnership
contract and ordered to pay for damages.
On September 27, 1956, the defendant filed a
motion to declare plaintiff in default on his
counterclaim, but this was denied by the court.
Arguments made and evidence file by the petitioner
On November 15, 1955, Lozana, the plaintiff
brought an action against Depakakibo, the defendant
that he is the owner of the Generator Buda (diesel) on
the amount of P8,000 and 70 wooden posts with the
wires that are connected to the generator and to the
franchise area of Municipality of Dumangas.
Three days after the filing of the complaint,
that is on November 18, 1955, Judge Pantaleon A.
Pelayo issued an order in said case authorizing the
sheriff to take possession of the generator and 70
wooden posts, upon plaintiff's filing of a bond in the
amount of P16,000 in favor of the defendant (for
subsequent delivery to the plaintiff). The defendant
was alleged to be wrongfully detaining the said
properties of which plaintiff suffered damages. Plaintiff
prayed that the properties be delivered back to him.
Hearings on the case were conducted on
October 25, 1956 and November 5, 1956, and on the
latter date the judge entered a decision declaring
plaintiff owner of the equipment and entitled to the
possession thereof, with costs against defendant. It is
against this judgment that the defendant has appealed.
Supreme Court Decision
Validity of the Partnership. Partnership is
Valid. The court does not find the agreement between
the parties to be illegal, or contrary to law and public
policy such as to make the contract of partnership, null
and void ab initio. The fact of furnishing the current to
the holder of the franchise alone, without the previous
approval of the Public Service Commission, does not
per se make the contract of partnership null and void
from the beginning and render the partnership entered
into by the parties for the purpose also void and non-
existent.
Disposal of Contribution. Based on the facts,
the plaintiff Mr. Mauro Lozana, contributed the amount
of Eighteen Thousand Pesos (P18,000.00) and that there
was no liquidation of partnership prior to the sale. And
since the court below had found that the plaintiff had
actually contributed one engine and 70 posts to the
partnership, it necessarily follows that the Buda diesel
engine contributed by the plaintiff had become the
property of the partnership. As properties of the
partnership, the same could not be disposed of by the
party contributing the same without the consent or
approval of the partnership or of the other partner.
(Clemente vs. Galvan, 67 Phil., 565).
Gampong, Shaira M.
Commissioner of Internal Revenue, petitioner, vs.
William J. Suter and The Court of Tax Appeals,
respondents.
GR No. L-25532. February 28, 1969
Issue
Whether or not the partnership was dissolved
after the marriage of the partners, William J. Suter and
Julia Spirig Suter, and the subsequent sale to them by
Gustay Carlson of his participation consequently
disregarding the juridical personality of the partnership
for tax purposes
Arguments made and Evidence file by the defendant
On 30 September 1947, a limited partnership
named “William J. Suter “Morcoin” Co. Ltd was formed
by William Suter, as the general partner, and Julia
Spirig and Gustay Carlson, as limited partners. The
parties contributed, respectively Php 20,000, Php
18,000 and Php 2,000 to the partnership. The firm
engaged in the importation, marketing, distribution and
operation of automatic phonographs, radios, television
sets and amusement machines, their parts and
accessories.
Suter and Spirig got married in 1948. On 18
December 1948 sold his share in the partnership to
Suter and his wife which was duly recorded with the
SEC.The limited partnership had been filing its income
tax returns as corporation, without objection by CIR. In
1959, CIR assessed the consolidated income of the firm
and the individual incomes of the partners-spouses and
determined a deficiency income tax in the amount of
Php 2678.06 and Php 4567.00 for 1955.
Respondent Suter protested the assessment,
and requested its cancellation and withdrawal, as not
in accordance with law, but his request was denied.
Unable to secure a reconsideration, he appealed to the
Court of Tax Appeals, which court, after trial, rendered
a decision, on 11 November 1965, reversing that of the
Commissioner of Internal Revenue.
Suter maintains, as the Court of Tax Appeals
held, that his marriage with limited partner Spirig and
their acquisition of Carlson's interests in the
partnership in 1948 is not a ground for dissolution of
the partnership, either in the Code of Commerce or in
the New Civil Code, and that since its juridical
personality had not been affected and since, as a
limited partnership, as contra distinguished from a duly
registered general partnership, it is taxable on its
income similarly with corporations, Suter was not
bound to include in his individual return the income of
the limited partnership.
Arguments made and evidence file by the petitioner
The theory of the petitioner, Commissioner of
Internal Revenue, is that the marriage of Suter and
Spirig and their subsequent acquisition of the interests
of remaining partner Carlson in the partnership
dissolved the limited partnership, and if they did not,
the fiction of juridical personality of the partnership
should be disregarded for income tax purposes because
the spouses have exclusive ownership and control of
the business; consequently the income tax return of
respondent Suter for the years in question should have
included his and his wife's individual incomes and that
of the limited partnership.
Appellant upon the opinion of now Senator
Tolentino in Commentaries and Jurisprudence on
Commercial Laws of the Philippines, Vol. 1, 4th Ed.,
page 58, that reads as follows:
"A husband and a wife may not enter into a contract of
general co-partnership, because under the Civil Code,
which applies in the absence of express provision in
the Code of Commerce, persons prohibited from
making donations to each other are prohibited from
entering into universal partnerships. (2 Echaverri 196)
It follows that the marriage of partners necessarily
brings about the dissolution of a pre-existing
partnership. (1 Guy de Montella 58)"
Supreme Court Decision
No. The partnership was not dissolved. The
petitioner-appellant has evidently failed to observe the
fact that William J. Suter "Morcoin" Co., Ltd. was not a
universal partnership, but a particular one. As appears
from Articles 1674 and 1675 of the Spanish Civil Code,
of 1889 (which was the law in force when the subject
firm was organized in 1947), a universal partnership
requires either that the object of the association be all
the present property of the partners, as contributed by
them to the common fund, or else "all that the partners
may acquire by their industry or work during the
existence of the partnership". William J. Suter
"Morcoin" Co., Ltd. was not such a universal
partnership, since the contributions of the partners
were fixed sums of money, P20,000.00 by William Suter
and P18,000.00 by Julia Spirig and neither one of them
was an industrial partner. It follows that William J.
Suter "Morcoin" Co., Ltd. was not a partnership that
spouses were forbidden to enter by Article 1677 of the
Civil Code of 1889.
Glang, Jameel Mujahid O.
Florencio Reyes and Angel Reyes, petitioners, vs.
Commissioner of Internal Revenue and Hon. Court of
Tax Appeals, respondents.
G.R. Nos. L-24020-21 July 29, 1968
Issue
Whether or not petitioners indeed formed a
partnership as contemplated by law.
Arguments made and Evidence file by the defendant
The facts as found by respondent Court of Tax
Appeals, which being supported by substantial
evidence, must be respected follow: "On October 31,
1950, petitioners, father and son, purchased a lot and
building, known as the Gibbs Building, situated at 671
Dasmariñas Street, Manila, for P835,000.00, of which
they paid the sum of P375,000.00, leaving a balance of
P460,000.00, representing the mortgage obligation of
the vendors with the China Banking Corporation, which
mortgage obligations were assumed by the vendees.
The initial payment of P375,000.00 was shared equally
by petitioners. At the time of the purchase, the
building was leased to various tenants, whose rights
under the lease contracts with the original owners, the
purchasers, petitioners herein, agreed to respect. The
administration of the building was entrusted to an
administrator who collected the rents; kept its books
and records and rendered statements of accounts to
the owners; negotiated leases; made necessary repairs
and disbursed payments, whenever necessary, after
approval by the owners; and performed such other
functions necessary for the conservation and
preservation of the building. Petitioners divided equally
the income of operation and maintenance. The gross
income from rentals of the building amounted to about
P90,000.00 annually."
From the above facts, the respondent Court of Tax
Appeals applying the appropriate provisions of the
National Internal Revenue Code, the first of which
imposes an income tax on corporations "organized in, or
existing under the laws of the Philippines, no matter
how created or organized but not including duly
registered general co-partnerships (companias
colectivas), ...," a term, which according to the second
provision cited, includes partnerships "no matter how
created or organized, ...," and applying the leading
case of Evangelista v. Collector of Internal
Revenue, sustained the action of respondent
Commissioner of Internal Revenue, but reduced the tax
liability of petitioners, as previously noted.
As noted in the opinion of the Court, penned by
the present Chief Justice, the issue was whether
petitioners are subject to the tax on corporations
provided for in section 24 of Commonwealth Act No.
466, otherwise known as the National Internal Revenue
Code, ...". After referring to another section of the
National Internal Revenue Code, which explicitly
provides that the term corporation "includes
partnerships" and then to Article 1767 of the Civil Code
of the Philippines, defining what a contract of
partnership is, the opinion goes on to state that "the
essential elements of a partnership are two, namely:
(a) an agreement to contribute money, property or
industry to a common fund; and (b) intent to divide the
profits among the contracting parties. The first
element is undoubtedly present in the case at bar, for,
admittedly, petitioners have agreed to and did,
contribute money and property to a common fund.
Hence, the issue narrows down to their intent in acting
as they did. Upon consideration of all the facts and
circumstances surrounding the case, we are fully
satisfied that their purpose was to engage in real estate
transactions for monetary gain and then divide the
same among themselves, ...".
In support of the above conclusion, reference was
made to the following circumstances, namely, the
common fund being created purposely not something
already found in existence, the investment of the same
not merely in one transaction but in a series of
transactions; the lots thus acquired not being devoted
to residential purposes or to other personal uses of
petitioners in that case; such properties having been
under the management of one person with full power
to lease, to collect rents, to issue receipts, to bring
suits, to sign letters and contracts and to endorse notes
and checks; the above conditions having existed for
more than 10 years since the acquisition of the above
properties; and no testimony having been introduced as
to the purpose "in creating the set up already adverted
to, or on the causes for its continued existence.". The
conclusion that emerged had all the imprint of
inevitability. Thus: "Although, taken singly, they might
not suffice to establish the intent necessary to
constitute a partnership, the collective effect of these
circumstances is such as to leave no room for doubt on
the existence of said intent in petitioners herein.".
Arguments made and Evidence file by the petitioner
Petitioners maintain the view that the Evangelista
ruling does not apply; for them, the situation is
dissimilar. Consequently they allege that the reliance
by respondent Court of Tax Appeals was unwarranted
and the decision should be set aside. If their
interpretation of the authoritative doctrine therein set
forth commands assent, then clearly what respondent
Court of Tax Appeals did fails to find shelter in the law.
That is the crux of the matter. A perusal of the
Evangelista decision is therefore unavoidable.
Supreme Court Decision
Yes. The essential elements of partnerships are
present in this case, namely; (a) an agreement to
contribute money, property, or industry to a common
fund; and (b) intent to divide the profits among the
contracting parties. The first was already admitted and
therefore it boils down to their intent in acting as they
did. Upon consideration of the circumstances
surrounding the case, it was found out that the
petitioner’s purpose was to engage in real estate
transactions for monetary gain and then divide the
same among themselves. In the case at bar, there was
a common fund used in a series of transactions; the
property thus acquired was not used for residential or
other purposes other than leasing. Such properties
having been under management by one person with full
power to lease and such condition existed for 10 years
already. The collective effect of these circumstances is
such as to leave no room for doubt on the existence of
said intent in the petitioners herein.
Linso, Hazraphine S.
Rocha & Co., Sociedad en Comandita, plaintiff, vs. A.
S. Crossfield, Judge of the Court of First Instance of
Manila, and Francisco T. Figueras, defendants
G.R. No. L-3430 August 7, 1906
Issue
It is apparent that the real controversy
between the parties is over the right of Figueras to
receive his proportionate part of the reserve fund and
of the sinking fund.
Arguments made and evidence filed by the defendant:
On the 25th of January, 1906 Francisco T.
Figueras, one of the defendants, commenced in the
Court of First Instance of Manila an action against
Rocha & Co. in which he alleged, among other things,
that in 1898 a limited partnership had been formed
under the name of "Carman & Co.;" that he and two
others were general partners and that there were
various special partners; that in accordance with the
terms of the articles of partnership any one of the
partners had the right to withdrawn from the
partnership upon six months' notice; that upon giving
the said notice his participation in the profits of the
partnership should cease but that his capital should
draw interest at the market rate until it was returned,
and that it should be returned in four installments, one
part upon giving notice, the second part six months
after the notice, the third part twelve months after the
notice, and the fourth part eighteen months after the
notice. He further alleged that on the withdraw from
the partnership and waived his right to receive at the
time the fourth part of his capital and consented that
the fourth part should be paid at the end of six months.
It was further alleged that on the 15th day of February,
1904, the partnership of Carman & Co., was
reorganized under the name of Rocha & Co., which
latter company assumed all the debts and liabilities of
Carman & Co., and took possession of all its assets.
Arguments made and evidence filed by the petitioner:
The complaint alleged that the plaintiff's
participation in the business consisted (1) of the capital
which he had paid in, P12,000 (2) his proportionate
part of a reserve fund, and (3) his proportionate part of
a sinking fund, and that he was entitled to receive from
the partnership the sum of P51,484.17; that the
partnership alleged that his interest did not exceed
P34,218.22, and on the 2d day of August, 1904, the
partnership paid, and the plaintiff received, one-fourth
of the amount which the partnership admitted that the
plaintiff was entitled to. library
The prayer of the complaint is as follows:
Therefore the plaintiff prays that judgment be
granted in his favor in the amount of P43,574.95, with
interest at 6 per cent per annum from August 2, 1904,
and costs of this action.
There was no allegation in the complaint that
the partnership of Carman & Co., was dissolved by the
withdrawal of Figueras, nor was there any allegation
that after that withdrawal he was the owner of an
undivided or of any interest in the physical property
which belonged to the partnership and which consisted
of lorchas, launches, and cascos, nor was there any
allegation that he had any lien upon any of this
property. virtual law library
Notwithstanding the want of these allegations,
Figueras, after the presentation complaint and after
the defendants had demurred thereto, made an
application to the court below for the appointment of a
receiver of the property of Rocha & Co. A receiver was
appointed who afterwards took possession of the entire
property of Rocha & Co., and thereupon Rocha & Co.,
commenced this original action of certiorari in this
court, asking that the proceedings in reference to the
appointment of a receiver be certified of this court and
that after such certification they be examined and that
the order appointing the receiver be declared void
because the court making it had no jurisdiction to
appoint such receiver. A preliminary injunction was
granted by one of the justices of this court restraining
the receiver and the defendants in this action from
taking further proceedings in the matter during the
pendency thereof.
Supreme Court Decision:
The defendants, having been cited, appeared
and answered the complaint, admitting practically all
of the facts alleged therein, a hearing was had upon
said complaint and answer, and order was made by this
court requiring the court below to send to it all of the
proceedings in the case relating to the appointment of
the receiver. Those proceedings have been remitted, a
hearing has been had thereon, and the case is now
before us for final disposition.
Section 174 of the Code of Civil Procedure is as
follows:
SEC. 174. When a receiver may be appointed. -
A receiver may be appointed in the following cases:
virtual law library
(1) When a corporation has been dissolved, or is
insolvent, or is in imminent danger of insolvency, or has
forfeited its corporate rights.
(2) Where it is made to appear by the
complaint or answer, and by such other proof as the
judge may require, that the party making the
application for the appointment of receiver has an
interest in the property or fund which is the subject of
the action and it shown that the property or fund is in
danger of being lost, removed, or materially injured
unless a receiver shall be appointed to guard and
preserve it. law library
(3) In an action by the mortgagee for the
foreclosure of a mortgaged where it appears that the
property is in danger of being wasted or materially
injured and that its value is probably insufficient to
discharge the mortgage debt.
(4) Whenever in other cases it shall be made to
appear to the court that the appointment of a receiver
is the most convenient and feasible means of
preserving and administering the property which is the
subject of litigation during the pendency of the action.
The case at bar does not fall within any of the
provisions of this section. There is no allegation in the
complaint, as has been before stated, that the plaintiff
is the owner of any of the property of Rocha & Co., nor
is there any allegation that he has any lien thereon, nor
are there any facts alleged in the complaint from which
it could be inferred that he was owner of such property
or had any lien thereon. On the contrary, from the
facts that are alleged in the complaint it would seem
that his separation from the partnership of Carman &
Co., left that partnership as a going concern and did
not dissolve it. The effect of the provisions of the
articles of partnership which are referred to in the
complaint is that after the withdrawal of any partner
the remaining partners became the owners of all the
assets of the partnership and he became a general
creditor of the partnership. law library
After this action had been commenced in this
court, and after a preliminary injunction had been
issued as aforesaid, Figueras applied to the court below
for leave to amend his complaint in the action therein
opening and such leave was granted. This amendment,
having been made after the action was commenced in
this court and after a receiver was appointed, can not
be considered. virtual law library
In one of the orders made by the court below
relating to the receiver, its authority for making it was
based on paragraphs 2 and 4 of section 174 of the Code
of Civil Procedure above quoted. In a subsequent order
this ground was abandoned and the appointment was
based on paragraph 1 of said section, the court holding
that a special partnership was corporation within the
meaning of said section 174. This claim can not be
sustained and, in fact, it was not urged in the argument
of this case in this court. law library
The case not being one in which a receiver
could be appointed, the order making such
appointment was void and was beyond the jurisdiction
of the court, although that court had jurisdiction of the
main action has been settled adversely to the
defendants in this suit by the case of Bonaplata vs.
Ambler (2 Phil. Rep., 392). (See also Encarnacion vs.
Ambler, 1 2 Off Gaz., 490; Findlay & Co., vs.
Ambler, 2 2 Off. Gaz., 491).
That certiorari is the proper remedy in such a
case was decided in the case of Blanco vs. Ambler 3 (2
Off. Gaz., 281, 492.) law library
 In the argument in this court it was claimed
that this extraordinary remedy would not lie because
the plaintiff, Rocha & Co., had a right to appeal from
the order appointing a receiver, although that appeal
could not be taken until a final judgment had been
entered in the case. That argument is answered by
what is said in the case of Yangco vs. Rohde (Phil. Rep.,
404).
The order of the court below appointing a
receiver in this case was illegal and void, and it all
proceedings taken therein are hereby annulled. Let
judgment be entered to that effect in favor of the
plaintiff in this action and against the defendants, and
with costs against the defendant, Figueras. At the
expiration of ten days let judgment be entered in
accordance herewith. So ordered. library
Arellano C.J., Torres, Mapa, Carson and
Tracey, JJ., concur.
Lucero, Kessa Thea G.
Alfredo N. Aguila, Jr., petitioner, vs. Honorable Court
of Appeals and Felicidad S. Vda. D\de Abrogar,
respondents
G.R. No. 127347 November 25, 1999
Issue
Whether or not the civil case (for nullity of
deed of sale) was filed against the real party in
interest.
Arguments made and Evidence filed by the defendant
Private respondent Felicidad Abrogar and her
late husband, Ruben M. Abrogar, were the registered
owners of a house and lot, in Marikina. The spouses
Ruben and Felicidad Abrogar entered into a loan
agreement with a lending firm called A.C. Aguila &
Sons, Co., a partnership. The loan was for P200k. To
secure the loan, the spouses mortgaged their house and
lot located in a subdivision. The terms of the loan
further stipulates that in case of non-payment, the
property shall be automatically appropriated to the
partnership and a deed of sale be readily executed in
favor of the partnership. She does have a 90 day
redemption period. When his husband died, she failed
to make payments, refused to turn over the property
and so the firm filed an ejectment case against her
(wherein she lost). She also failed to redeem the
property within the period stipulated. She then filed a
civil case against Alfredo Aguila, manager of the firm,
seeking for the declaration of nullity of the deed of
sale. She alleged that the signature of her husband on
the deed of sale was a forgery because he was already
dead when the deed was supposed to have been
executed on June 11, 1991.
Arguments made and Evidence file by the petitioner
Petitioner is the manager of A.C. Aguila & Sons,
Co., a partnership engaged in lending activities. On
April 18, 1991, Felicidad Abrogar (with consent of her
husband) and A.C. Aguila & Sons, Co entered into a
Memorandum of Agreement and Deed of Absolute Sale,
as follows:
 A.C. Aguila & Sons, Co. shall buy the property
of the spouses (house and lot in Marikina) in
consideration of sum of Php 200,000. The deed
of absolute sale is with the option to
repurchase with a period of 90 days for Php
230, 000.
 Should the spouses fail to exercise their right to
repurchase, they are obliged to deliver to A.C.
Aguila & Sons, Co. the possession of the
property, within 25 days from expiration of 90
days repurchase period.
 The parties likewise executed a deed of
absolute sale, dated June 11, 1991, wherein
private respondent, with the consent of her
late husband, sold the subject property to A.C.
Aguila & Sons, Co., represented by petitioner,
for P200,000. In a special power of attorney
private respondent authorized petitioner to
cause the cancellation of TCT No. 195101 and
the issuance of a new certificate of title in the
name of A.C. Aguila and Sons, Co., in the event
she failed to redeem the subject property as
provided in the Memorandum of Agreement.
Private respondent failed to redeem the property,
hence, pursuant to the SPA, petitioner caused the
cancellation and the issuance of a new certificate of
title in the name of A.C. Aguila and Sons, Co.
Subsequently, private respondent were demanded to
vacate the premises. Upon the refusal of private
respondent to vacate the subject premises, A.C. Aguila
& Sons, Co. filed an ejectment case against her in the
MTC Marikina. Said court ruled in favor of A.C. Aguila &
Sons, Co. He also said that he Special Power of
Attorney, and the Deed of Absolute Sale were all signed
by the parties on the same date on April 18, 1991
(death of husband 08 May 1991).
Supreme Court Decision
No. Unfortunately, the civil case was filed not
against the real party in interest. As pointed out by
Aguila, he is not the real party in interest but rather it
was the partnership A.C. Aguila & Sons, Co. The Rules
of Court provide that “every action must be prosecuted
and defended in the name of the real party in
interest.” A real party in interest is one who would be
benefited or injured by the judgment, or who is
entitled to the avails of the suit. Any decision rendered
against a person who is not a real party in interest in
the case cannot be executed. Hence, a complaint filed
against such a person should be dismissed for failure to
state a cause of action, as in the case at bar. Under
Art. 1768 of the Civil Code, a partnership “has a
juridical personality separate and distinct from that of
each of the partners.” The partners cannot be held
liable for the obligations of the partnership unless it is
shown that the legal fiction of a different juridical
personality is being used for fraudulent, unfair, or
illegal purposes. In this case, Felicidad has not shown
that A.C. Aguila & Sons, Co., as a separate juridical
entity, is being used for fraudulent, unfair, or illegal
purposes. Moreover, the title to the subject property is
in the name of A.C. Aguila & Sons, Co. It is the
partnership, not its officers or agents, which should be
impleaded in any litigation involving property
registered in its name. A violation of this rule will
result in the dismissal of the complaint.
Macalawan, Jonnel Aleah M.
Ramon Chaves, plaintiff-appellee, vs. Ramon Nery
Linan, defendant-appellant
G.R. No. 955, March 7, 1903,
Issue
Whether the sum of $18,712.08 3/4
representing the credits and property of the property,
should be included from the liquidation.
Arguments made and evidence filed by the defendant
On page 8 of the bill of exceptions it appears
that the defendant made a motion for a new trial, upon
the grounds therein stated (that the appellee should be
allowed to file his brief in reply to the brief of the
appellant, which brief, with the bill of exceptions and
assignment of errors, had been duly served upon him),
which motion was overruled, and that he then
presented to the judge the corresponding bill of
exceptions.
If no notice of the motion which was overruled
by the court below was served upon the plaintiff, no
prejudice has been suffered by him, and for this reason
the judge considered it proper to deny the motion
without service of notice upon the adverse party, in
accordance with the provisions of section 146 of the
Code of Civil Procedure.
By order of the 29th of October last the motion
of the defendant for the dismissal of the bill of
exceptions was overruled. The defendant now moves
the court to issue an order to the clerk of the court of
Misamis, directing him to send to this court the original
record of the case, to the end that the court may do
complete justice, upon the ground that the bill of
exceptions is incomplete and was prepared without the
knowledge or participation of the moving party or of his
attorney.
The appellant, who for the purpose of his
defense might really be interested in presenting to this
court the original record, opposes the motion of the
appellee. The appellee has not indicated in detail the
deficiencies of the bill of exceptions presented, and
has not stated in what the incompleteness of this bill
consists. The attorney for the party which has
presented the bill in defense of his rights alleges that it
is not incomplete.
Arguments made and evidence filed by the petitioner
The bill of exceptions, brief, and assignment of
errors were filed in this case on the 21st of August,
1902. The parties stipulated in writing, under date of
September 17 following, that the appellee should be
allowed to file his brief in reply to the brief of the
appellant, which brief, with the bill of exceptions and
assignment of errors, had been duly served upon him.
A motion was subsequently made by counsel for
the appellee for the dismissal of the bill of exceptions
brought up by the appellant, on the ground, first, that
neither the said appellee nor his attorneys had been
notified of the motion of the appellant in the Court of
First Instance for a new trial under article 146 of the
Code of Civil Procedure; second, that the said motion
was decided by the judge below without the knowledge
or presence of the appellee;
Third, that the said bill of exceptions does not
show that the appellant has taken any exceptions in
the course of the trial in the court below; and fourth,
that neither the appellee nor his attorney had received
notice of the presentation to the judge of the said bill
of exceptions, or of the allowance of the same, and
that therefore the appellee had no opportunity to make
objections or offer amendments thereto, and that the
same is incomplete and incorrect.
Supreme Court Decision
The judgment impugned in the aforesaid bill of
exceptions, presented by defendant, orders among
other things the exclusion from the liquidations therein
admitted of the sum of $18,712.08 3/4 representing the
credits and property mentioned by plaintiff in the
liquidation contained in his complaint. No legal reason
is given for such an exclusion. The credits and property
in question pertained to the extinguished partnership,
hence the interest that each partner has therein is
unquestionable. Therefore it is not possible to consider
the liquidation as finally settled and ended or
determine which of the partners is the true debtor
according, thereto; consequently the judgment
excepted to cannot be sustained, as it does not
definitely decide or determine the question pending as
to the mere exclusion or omission of the sum referred
to. This item, having been acknowledged by both
parties, should necessarily be included in the final
settlement of the affairs of the partnership, and must
be taken into account in the liquidation and
determination of the suit pending between the parties.
The profit and loss of the partnership must be
divided in the manner stipulated, and if the agreement
should only refer to the participation of each partner in
the profits then their corresponding share of the losses
shall be in the same ratio. In the absence of an
agreement the share of each partner in the profits and
losses shall be in proportion to what he may have
contributed. The partner who contributes his services
only shall receive a share equal to the one who has
contributed the least. If besides his services he should
have contributed capital, he shall also receive the
proportional share which may pertain to him for his
capital. (Art. 1689 of the Civil Code.) The judgment
rendered below and brought before us on exception
should have decided the issues in accordance with
these legal principles and the provisions contained in
the Civil Code with respect to the division of estates
among heirs. Without the inclusion of the amount
referred to as having been omitted in the liquidation
and final settlement of the business engaged in by the
partnership existing between the parties, there would
be no legal means of fixing definitely in the final
liquidation and decision of the case the amount of
profits and losses had by the partnership. For this
reason the judgment appealed cannot be sustained.
Therefore, in view of the provisions of article
496 of the Code of Civil Procedure and for the
foregoing reasons, this court deems it proper that the
final judgment excepted to by defendant, Nery Linan,
be set aside and a new trial had upon the issues raised
by the parties, the judge to proceed in accordance with
law, with no special order as to the costs of this
instance. It is so ordered.
Magsayo, Karen Joy T.
Cesar C. Lirio, doing business under the name and style
of Celkor ad Sonicmix, petitioner,
vs. Wilmer D. Genovia, respondent
G.R. No. 169757 November 3, 2011
Issue
Whether or not the relationship between Lirio
and Genovia was an informal partnership.
Arguments made and Evidence file by the defendant
Respondent Genovia was hired as studio
manager by petitioner Lirio, owner of Celkor Ad
Sonicmix Recording Studio (Celkor) particularly, to
manage and operate Celkor and to promote and sell the
recording studio's services to music enthusiasts and
other prospective clients. He was to receive a monthly
salary of P7,000 and an additional commission of
P100.00 per hour as recording technician. His work was
from Monday to Friday, 9am-6pm. A few days after he
started working as a studio manager, petitioner
approached him and told him about his project to
produce an album for his 15-year-old daughter, Celine
Mei Lirio, a former talent of ABS-CBN Star Records.
Petitioner asked respondent to compose and arrange
songs for Celine and promised that he (Lirio) would
draft a contract to assure respondent of his
compensation for such services. The album was
completed and the carrier single Genovia composed
and arranged was finally aired but he was denied his
compensation by Lirio despite several demands. Lirio
told Genovia that: a. He was practically a nobody and
had proven nothing yet in the music industry,
respondent did not deserve a high compensation, and
he should be thankful that he was given a job to feed
his family. b. Genovia was entitled only to 20% of the
net profit, and not of the gross sales of the album, and
that the salaries he received and would continue to
receive as studio manager of Celkor would be deducted
from the said 20% net profit share Lirio then verbally
dismissed Genovia from work. Genovia filed a
complaint for illegal dismissal and prayed for his
reinstatement without loss of seniority rights, or, in the
alternative, that he be paid separation pay, backwages
and overtime pay; and that he be awarded unpaid
commission in the amount of P2,000.00 for services
rendered as a studio technician as well as moral and
exemplary damages.
The documentary evidence presented by
respondent to prove that he was an employee of
petitioner are as follows: (a) a document denominated
as "payroll" (dated July 31, 2001 to March 15, 2002)
certified correct by petitioner, which showed that
respondent received a monthly salary of ₱7,000.00
(₱3,500.00 every 15th of the month and another
₱3,500.00 every 30th of the month) with the
corresponding deductions due to absences incurred by
respondent; and (2) copies of petty cash
vouchers, showing the amounts he received and signed
for in the payrolls.
Arguments made and Evidence file by the petitioner
Respondent could not have been hired as a
studio manager, since the recording studio has no
personnel except petitioner. Respondent verbally
agreed with petitioner to co-produce the album based
on the following terms and conditions: (1) petitioner
shall provide all the financing, equipment and
recording studio; (2) Celine Mei Lirio shall sing all the
songs; (3) respondent shall act as composer and
arranger of all the lyrics and the music of the five songs
he already composed and the revival songs; (4)
petitioner shall have exclusive right to market the
album; (5) petitioner was entitled to 60% of the net
profit, while respondent and Celine Mei Lirio were each
entitled to 20% of the net profit; and (6) respondent
shall be entitled to draw advances of P7,000.00 a
month, which shall be deductible from his share of the
net profits and only until such time that the album has
been produced
Supreme Court Decision
No. It was not partnership but an employer-
employee relationship. CA decision affirmed.
It is a well-settled doctrine, that if doubts exist
between the evidence presented by the employer and
the employee, the scales of justice must be tilted in
favor of the latter. It is a time-honored rule that in
controversies between a laborer and his master, doubts
reasonably arising from the evidence, or in the
interpretation of agreements and writing should be
resolved in the former’s favor. The policy is to extend
the doctrine to a greater number of employees who can
avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give
maximum aid and protection of labor. This rule should
be applied in the case at bar, especially since the
evidence presented by the private respondent company
is not convincing.
Based on the foregoing, the Court agrees with
the Court of Appeals that the evidence presented by
the parties showed that an employer-employee
relationship existed between petitioner and
respondent.
In termination cases, the burden is upon the
employer to show by substantial evidence that the
termination was for lawful cause and validly
made. Article 277 (b) of the Labor Code puts the
burden of proving that the dismissal of an employee
was for a valid or authorized cause on the employer,
without distinction whether the employer admits or
does not admit the dismissal. For an employee’s
dismissal to be valid, (a) the dismissal must be for a
valid cause, and (b) the employee must be afforded
due process. Procedural due process requires the
employer to furnish an employee with two written
notices before the latter is dismissed: (1) the notice to
apprise the employee of the particular acts or
omissions for which his dismissal is sought, which is the
equivalent of a charge; and (2) the notice informing the
employee of his dismissal, to be issued after the
employee has been given reasonable opportunity to
answer and to be heard on his defense. Petitioner
failed to comply with these legal requirements; hence,
the Court of Appeals correctly affirmed the Labor
Arbiter’s finding that respondent was illegally
dismissed, and entitled to the payment of backwages,
and separation pay in lieu of reinstatement.
Martin, Freya Rica N.
Island Sales Inc., plaintiff-appellee, vs. United Pioneers
General Construction Company, defendant-appellant
GR No. L-22493, July 31, 1975
Issue
Whether or not the dismissal of the complaint
to favor one of the general partners of a partnership
increases the joint and subsidiary liability of each of
the remaining partners for the obligations of the
partnership.
Arguments made and evidence filed by the defendant
United Pioneers General Construction Company
is a general partnership formed by Benjamin Daco,
Daniel Guizona, Noel Sim, Augusto Palisoc and Romulo
Lumauig. In 1961, United Pioneers purchased by
installment a motor vehicle from Island Sales, Inc.
United Pioneers defaulted in its payment hence it was
sued and the 5 partners were impleaded as co-
defendants. Upon motion of Island Sales, Lumauig was
removed as a defendant.
United Pioneers lost the civil case and the trial
court rendered judgment ordering United Pioneers to
pay the outstanding balance plus interest and costs. It
further decreed that the remaining 4 co-defendants
shall pay Island Sales in case United Pioneers’ property
will not be enough to satisfy its indebtedness to Island
Sales.
The defendants Benjamin C. Daco and Noel C.
Sim moved to reconsider the decision claiming that
since there are five (5) general partners, the joint and
subsidiary liability of each partner should not exceed
one-fifth ( 1/ 5) of the obligations of the defendant
company. But the trial court denied the said motion
notwithstanding the conformity of the plaintiff to limit
the liability of the defendants Daco and Sim to only
one-fifth ( 1/ 5) of the obligations of the defendant
company.
Arguments made and evidence filed by the petitioner
On April 22,1961, the defendant company, a
general partnership duly registered under the laws of
the Philippines, purchased from the plaintiff a motor
vehicle on the installment basis and for this purpose
executed a promissory note for P9,440.00, payable in
twelve (12) equal monthly installments of P786.63, the
first installment payable on or before May 22, 1961 and
the subsequent installments on the 22nd day of every
month thereafter, until fully paid, with the condition
that failure to pay any of said installments as they fall
due would render the whole unpaid balance
immediately due and demandable.
Having failed to receive the installment due on
July 22, 1961, the plaintiff sued the defendant
company for the unpaid balance amounting to
P7,119.07. Benjamin C. Daco, Daniel A. Guizona, Noel
C. Sim, Romulo B. Lumauig, and Augusto Palisoc were
included as co-defendants in their capacity as general
partners of the defendant company.
Subsequently, on motion of the plaintiff, the
complaint was dismissed insofar as the defendant
Romulo B. Lumauig is concerned.
When the case was called for hearing, the
defendants and their counsels failed to appear
notwithstanding the notices sent to them.
Consequently, the trial court authorized the plaintiff to
present its evidence ex-parte[3] after which the trial
court rendered the decision appealed from.
Supreme Court Decision
This is an appeal interposed by the defendant
Benjamin C. Daco from the decision of the Court of
First Instance of Manila, Branch XVI, in Civil Case No.
50682, the dispositive portion of which reads:
WHEREFORE, the Court sentences defendant
United Pioneer General Construction Company to pay
plaintiff the sum of P7,119.07 with interest at the rate
of 12% per annum until it is fully paid, plus attorney's
fees which the Court fixes in the sum of Eight Hundred
Pesos (P800.00) and costs.
The defendants Benjamin C. Daco, Daniel A.
Guizona, Noel C. Sim and Augusto Palisoc are
sentenced to pay the plaintiff in this case with the
understanding that the judgment against these
individual defendants shall be enforced only if the
defendant company has no more leviable properties
with which to satisfy the judgment against it. The
individual defendants shall also pay the costs.
Article 1816 of the Civil Code provides: “All
partners including industrial ones, shall be liable pro
rata with all their property and after all the
partnership assets have been exhausted, for the
contracts which may be entered into in the name and
for the account of the partnership, under its signature
and by a person authorized to act for the partnership.
However, any partner may enter into a separate
obligation to perform a partnership contract."
There were five (5) general partners when the
promissory note in question was executed for and in
behalf of the partnership. Since the liability of the
partners is pro rata, the liability of the appellant
Benjamin C. Daco shall be limited to only one-fifth
(1/5) ofthe obligations ofthe defendant company. The
fact that the complaint against the defendant Romulo
B. Lumauig was dismissed, upon motion ofthe plaintiff,
does not unmake the said Lumauig as a general partner
in the defendant company. In so moving to dismiss the
complaint, the plaintiff merely condoned Lumauig's
individual liability to the plaintiff.
WHEREFORE, the appealed decision as thus
clarified is hereby AFFIRMED, without pronouncement
as to costs. SO ORDERED.
Mastura, Mikhail Ayman B.
Marjorie Tocao and William T. Belo, petitioners vs.
Court of Appeals and Nenita A. Anay, respondents
G.R. No. 127405 October 4, 2000
Issue
Whether or not the parties formed a business
partnership.
Arguments made and evidence filed by the defendant
William T. Belo met Nenita A. Anay and
introduced her to Marjorie Tocao who conveyed that
they establish a joint venture for the importation and
local distribution of kitchen cookwares. The parties
operated under the name of Geminesse Enterprise, a
sole proprietorship in Tocao's name. Belo was the
capitalist, Tocao was the president and general
manager, and Anay was the head of the marketing
department and later, vice-president for sales.
Furthermore, the parties agreed, without
writing, that Anay would be entitled to:
1. Ten percent (10%) of the annual net profits of
the business
2. Overriding commission of six percent (6%) of
the overall weekly production
3. Thirty percent (30%) of the sales she would
make
4. Two percent (2%) for her demonstration
services
On October 9, 1987, Anay learned that she was
no longer vice-president of Geminesse Enterprise. The
following day, she learned that Tocao barred her from
holding office and conducting demonstrations in their
offices.
Anay, along with her lawyer, wrote letters to
Belo demanding that she be given her commission for
the period of January 8, 1988 to February 5, 1988.
On April 5, 1988, Anay filed Civil Case No. 88-
509, a complaint for sum of money with damages
against Tocao and Belo before the Regional Trial Court
of Makati, Branch 140.
Anay prayed that Tocao and Belo be ordered to
pay her, jointly and severally, the following:
1. P32,000.00 as unpaid overriding commission
from January 8, 1988 to February 5, 1988
2. P100,000.00 as moral damages
3. P100,000.00 as exemplary damages
Anay prayed for an audit of the finances of
Geminesse Enterprise from the start of its business
operation until she was illegally dismissed so that her
ten percent (10%) share in the net profits can be
determined.
Anay further prayed that she be paid the five
percent (5%) overriding commission on the remaining
150 cookware sets before her dismissal.
Arguments made and evidence filed by the petitioners
Tocao and Belo asserted that the agreement
was either unenforceable or void or inexistent. Belo's
only role was to introduce Anay to Tocao for the joint
venture. There was no evidence of a partnership since
Geminesse Enterprise was the sole proprietorship of
Tocao.
Tocao and Belo further alleged that Anay filed
the complaint due to ill-will and resentment because
Tocao did not allow her to act like she owned the
enterprise. Tocao and Belo then told that they were
the ones who suffered damages such as unreturned and
unaccounted stocks of Geminesse Enterprise and
serious anxiety, besmirched reputation in the business
world, and various damages not less than P500,000.00.
Belo denied that Anay was supposed to receive
a share in the profit of the business. He denied
contributing capital to the business or receiving a share
in the profits as he was merely a guarantor of Tocao.
He attended and/or presided over business meetings
but never participated in decision-making.
Tocao denied having entered into an oral
partnership agreement with Anay. Tocao claimed that
she got the capital for the business out of the sale of
sewing machines used in her garments business and
from Peter Lo, a Singaporean friend who loaned her
funds with interest.
The Regional Trial Court held that there was an
oral partnership agreement between the three persons
involved. There was an intention to create a
partnership, a common fund was established, and there
was a joint interest in the profits.
Tocao and Belo then appealed for a Motion for
Reconsideration to the Court of Appeals.
When the motion was denied, Tocao and Belo
went to the Supreme Court on a petition for review on
certiorari, asserting that there was no business
partnership between them and Anay.
Tocao and Belo contend that there was no
partnership that existed since Geminesse Enterprise
came into being a year before the alleged partnership
was formed. It was also very unlikely that Belo would
invest P2,500,000.00 with Tocao contributing nothing.
Supreme Court Decision
The Supreme Court held that the parties
involved in this case formed a partnership among
themselves.
The petition for review on certiorari is denied.
The partnership among petitioners and the private
respondent is ordered dissolved, and the parties are
ordered to effect the winding up and liquidation of the
partnership pursuant to the pertinent provisions of the
Civil Code. The case is remanded to the Regional Trial
Court for proper proceedings relative to the said
dissolution. The appealed decisions of the Regional
Trial Court and the Court of Appeals are affirmed with
modifications, as follows:
1. Petitioners are ordered to submit to the
Regional Trial Court a formal account of the
partnership affairs for the years 1987 and 1988,
pursuant to Article 1809 of the Civil Code, in
order to determine private respondent's ten
percent (10%) share in the net profits of the
partnership
2. Petitioners are ordered, jointly and severally,
to pay private respondent five percent (5%)
overriding commission for the one hundred and
fifty (150) cookware sets available for
disposition since the time private respondent
was wrongfully excluded from the partnership
by petitioners;
3. Petitioners are ordered, jointly and severally,
to pay private respondent overriding
commission on the total production which, for
the period covering January 8, 1988 to
February 5, 1988, amounted to P32,000.00
4. Petitioners are ordered, jointly and severally,
to pay private respondent moral damages in the
amount of P50,000.00, exemplary damages in
the amount of P50,000.00 and attorney's fees in
the amount of P25,000.00.
Matabalao, Fherdawzia N.
Emilio Emnace, petitioner, vs. Court of Appeals, Estate
of Vicente Tabanao, Sherwin Tabanao, Vicente William,
Tabanao, Janette Tabanao Deposoy, Vicenta May
Tabanao Varela, Rosela Tabanao and Vincent Tabanao,
defendants
G.R. No. 126334 November 23, 2001
Issue
a. Whether the venue was improperly laid since
the action is a real action involving a parcel of
land that is located outside the territorial
jurisdiction of the court a quo.
b. Whether the surviving spouse of Vicente
Tabanao has legal capacity to sue since she was
never appointed as administratrix or executrix
of his estate.
Arguments made and evidence filed by the defendants
Tabanao' s heirs, respondents, argued that
petitioner Emilio Emnace, Vicente Tabanao and Jacinto
Divinagracia were partners in a business concern known
as Ma. Nelma Fishing Industry. Sometime in January of
1986, they decided to dissolve their partnership and
executed an agreement of partition and distribution of
the partnership properties among them, consequent to
Jacinto Divinagracia's withdrawal from the
partnership. Among the assets to be distributed were 5
fishing boats, 6 vehicles, 2 parcels of land located at
Sto. Niño and Talisay, Negros Occidental, and cash
deposits in the local branches of the Bank of the
Philippine Islands and Prudential Bank. Throughout the
existence of the partnership, and even after Vicente
Tabanao's untimely demise, petitioner failed to submit
to Tabanao's heirs any statement of assets and
liabilities of the partnership, and to render an
accounting of the partnership's finances. Consequently,
the respondents, excluding the Court of Appeals, filed
against petitioner an action for accounting, payment of
shares, division of assets and damages.
When the petitioner filed certiorari before the
Court of Appeals, the Court of Appeals rendered the
assailed decision, dismissing the petition for certiorari,
upon a finding that no grave abuse of discretion
amounting to lack or excess of jurisdiction was
committed by the trial court in issuing the questioned
orders denying petitioner’s motions to dismiss.
The trial court and Court of Appeals gave scant
consideration to petitioner’s argument about dismissing
the complaint due to prescription. Accordingly, three
(3) final stages of a partnership are: (1) dissolution; (2)
winding-up; and (3) termination. The partnership,
although dissolved, continues to exist and its legal
personality is retained, at which time it completes the
winding up of its affairs, including the partitioning and
distribution of the net partnership assets to the
partners. For as long as the partnership exists, any of
the partners may demand an accounting of the
partnership’s business. Prescription of the said right
starts to run only upon the dissolution of the
partnership when the final accounting is done which is
contrary to petitioner’s protestations that respondents’
right to inquire into the business affairs of the
partnership accrued in 1986, prescribing four (4) years
thereafter, prescription had not even begun to run in
the absence of a final accounting.
Arguments made and evidence filed by the petitioner
Petitioner filed a motion to dismiss the
complaint on the grounds of improper venue, lack of
jurisdiction over the nature of the action or suit, and
lack of capacity of the estate of Tabanao to sue which
was dismissed by the trial court and held that venue
was properly laid because, while realties were
involved, the action was directed against a particular
person on the basis of his personal liability, and that
the heirs of Tabanao had a right to sue in their own
names, in view of the provision of Article 777 of the
Civil Code, which states that the rights to the
succession are transmitted from the moment of the
death of the decedent.
The petitioner then filed certiorari before the
court of appeals raising aforementioned issues.
 The petitioner also contends that the trial
court should have dismissed the complaint on the
ground of prescription, arguing that respondents’
action prescribed four (4) years after it accrued in
1986.
Supreme Court Decision
a. No. The records indubitably show that
respondents are asking that the assets of the
partnership be accounted for, sold and
distributed according to the agreement of the
partners. The fact that two of the assets of the
partnership are parcels of land does not
materially change the nature of the action. It is
an action in personam because it is an action
against a person, namely, petitioner, on the
basis of his personal liability and not an
action in rem where the action is against the
thing itself instead of against the person. In
fact, it is only incidental that part of the assets
of the partnership under liquidation happen to
be parcels of land.
It also seeks the enforcement of, and
petitioner's compliance with, the contract that
the partners executed to formalize the
partnership's dissolution, as well as to
implement the liquidation and partition of the
partnership's assets. Clearly, it is a personal
action that, in effect, claims a debt from
petitioner and seeks the performance of a
personal duty on his part. In fine, respondents'
complaint seeking the liquidation and partition
of the assets of the partnership with damages is
a personal action which may be filed in the
proper court where any of the parties
reside. As it is, venue in this case was properly
laid and the trial court correctly ruled so.
b. Yes. The surviving spouse does not need to be
appointed as executrix or administratrix of the
estate before she can file the action. She and
her children are complainants in their own right
as successors of Vicente Tabanao. From the
very moment of Vicente Tabanao's death, his
rights insofar as the partnership was concerned
were transmitted to his heirs, for rights to the
succession are transmitted from the moment of
death of the decedent. Whatever claims and
rights Vicente Tabanao had against the
partnership and petitioner were transmitted to
respondents by operation of law, more
particularly by succession, which is a mode of
acquisition by virtue of which the property,
rights and obligations to the extent of the value
of the inheritance of a person are
transmitted. Moreover, respondents became
owners of their respective hereditary shares
from the moment Vicente Tabanao died.
Mato, Norjanah I.
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.
G. R. No. 144214 - July 14, 2003
Issues
a. Whether petitioners are liable to respondents for
the latter's share in the partnership.
b. Whether the CA's computation of P253,114 as
respondents' share is correct.
c. Whether the CA was likewise correct in not
assessing costs.
Arguments made and evidence filed by the respondents
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.
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 latter's
offer to return their capital contribution.
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.
Before the Regional Trial Court (RTC) of Makati,
Branch 59, respondents subsequently filed a Complaint
dated November 10, 1987, for the collection of a sum
of money from petitioners.
Arguments made and evidence filed by the petitioners
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." Villareal
was appointed general manager and Carmelito Jose,
operations manager.
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.
Supreme Court Decision
1. 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 former's dissatisfaction with, and loss of trust in,
the latter's management of the partnership affairs.
These findings were amply supported by the evidence
on record. Respondents consequently demanded from
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”. Since
the capital was contributed to the partnership, not to
petitioners, it is the partnership that must refund the
equity of the retiring partners.
2. 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. 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 CA's
computation of the amount to be refunded to
respondents as their share was thus erroneous.
3.Third Issue: Cost
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
court's 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.
Matura, Mary Edylainne O.
Antonio C. Goquiolay and the partnership Tan Sin An
And Antonio C. Goquiolay, plaintiffs-appellants, vs.
Washington Z. Sycip, et al., defendants-appellees
G.R. NO. L-11840 December 10, 1963
Issue
Does the decedent’s widow, Mrs. Kong Chai
Pin, become a general partner or only a limited
partner? Did the lower court err in holding that the Mrs.
Kong Chai Pin succeeded her husband Tan Sin An in the
sole management of the partnership upon Tan’s death?
Is there a question in the validity of the sale of
partnership properties? Is it necessary for Mrs. Kong
Chai Pin to acquire the consent of the other partners to
perfect the sale of the partnership properties to Sycip
and Lee? Did the buyers of the partnership property
acted in good faith?
Arguments made and Evidence filed by the defendants
The defendants attacked the plaintiff’s first
argument, the question of the widow’s being general
partner, by providing that the agreement stipulates
that the co-partnership shall be composed of Tan as
sole managing partner and Goquiolay as co-partner.
The lifetime of the partnership was fixed at 10 years
and that in the event of the death of any of the
partners before the expiration of the term, the co-
partnership shall not be dissolved but will have to be
continued and the deceased partner shall be
represented by his heir of his assigns. Although
ordinarily, the new members’ liability in the
partnership is limited merely to the value of the share
meaning they become no more than a limited partner,
this is not the case since Kong Chai Pin by his
affirmative actions manifested her intent to be bound
by the partnership agreement not only as a limited
partner but as a general partner. By executing the deed
of sale of the parcel of land in dispute in the name of
the partnership, she was acting no less than as a
managing partner.
Goquiolay himself also admitted that—“Mr. Yu
Eng Lai asked me if I can just let Mrs. Kong Chai Pin
continue to manage the business the properties (as) she
had no other means of income. Then I said, because I
wanted to help Mrs. Kong Chai Pin, she could just do it
and besides I am not interested in agricultural lands. I
allowed her to take care of the properties in order to
help her and because I believe in God and I wanted to
help her.”
On the second argument, every partner has the
right to act as an agent of the partnership in absence
on the stipulation regarding the assigning of the
managing partner. This means that third persons have
the right to assume that the general partner they are
contracting with are consented by the other partners.
They are not bound to ascertain whether the partner
they are contracting with have to consent of the other
partners.
The records also failed to disclose that the
appellant made any opposition to the sale of the
partnership property; on the contrary, it appears that
the plaintiff only objected after the deed of
conveyance was executed and approved by the probate
court.
Regarding the correctness of the amount paid
for the sale of partnership property, Washington Sycip
and Betty Lee assumed, as part consideration of the
purchase, the full claims of the two creditors, Sing Yee
and Cuan Co., Inc. and Yutivo Sons Hardware Co. There
is no legal proof that the price for which the properties
were sold was unreasonably low, since appellants
presented no evidence of the market value of the lots
as of the time of their sale.
Lastly, there was no fraudulent acts proven
since, as creditors, Sing Yee and Cuan Co., Inc. and
Yutivo Sons Hardware Co. had every right to file their
claims in the intestate proceedings. The denial of the
claims at first by Kong Chai Pin negatives any
conspiracy on her part in the alleged fraudulent
schemes.
Arguments made and Evidence filed by the plaintiff
The first argument made by Goquiolay, the
appellant, impugns the fact that Mrs. Kong Chai Pin
becomes a succeeding general partner upon the death
of Mr. Tan Sin An the general managing partner and
urges that the widow is merely a limited partner. That
being said, the widow cannot manage the affairs of the
business and do other acts or rights granted to the
general partner.
Second, the plaintiff further argues that there
is invalidity in the sale of partnership property to Sycip
and Lee. Since he holds that Mrs. Kong Chai Pin is
unauthorized to manage the affairs of the partnership
business, the sale made by the widow to the said
buyers are invalid. He then assails the correctness of
the amounts paid for the account of the partnership as
found by the trial court. He also holds that the said
buyers acted in bad faith and pushes an issue of
conspiracy against him (Goquiolay). This was backed by
the plaintiff’s statements that way back in 1945, when
Yu Khe Thai sounded out Antonio Goquiolay on the
possibility of selling his share in the partnership; and
upon his refusal to sell was followed by the filing of the
claims of Yutivo Sons Hardware Co. and Sing Yee Cuan
Co., Inc. in the intestate estate proceedings of Tan Sin
An. He also assigns as error that the lower court erred
in holding that the sale was not only necessary but
beneficial to the partnership. He pursued that the sale
threw the partnership into dissolution, which requires
consent of all the partners.
Supreme Court Decision
The Supreme Court held that widow of the Tan
Sin An, Kong Chai Pin becomes a general partner. The
widow showed that she desired to be considered a
general partner by seeking authority to manage
partnership property. Since the appellant authorized
the widow to manage partnership property (which a
limited partner could not be authorized to do),
Goquiolay recognized her as such partner, and is now in
estoppel to deny her position as a general partner, with
authority to administer and alienate partnership
property.
The articles of partnership and power of
attorney did not provide that the heirs of the deceased
would be merely limited partners; on the contrary,
they expressly stipulated that in case of death of either
partner, “the co partnership will have to be continued”
with the heirs or assignees. It certainly could not be
continued if it were to be converted from a general
partnership into a limited partnership since the
difference between the two kinds of associations is
fundamental, and especially because the conversion
into a limited association would leave the heirs of the
deceased partner without a share in the management.
Hence, the contractual stipulation actually
contemplated that the heirs would become general
partners rather than limited ones.
As to the price, this property was actually sold
for a total of P 153,726.04 of which P37,000 was in
cash, and the rest in partnership debts assumed by the
purchaser. These debts are not questioned, they were
approved by the Court, and its approval is now final.
There was neither any anomaly in the filing of
the claims of Yutivo and Sing Yee Cuan & Co., in
proceedings for the settlement of the estate of Tan Sin
An. No proof is adduced in the alleged conspiracy
between the creditors and their component members.
The trial court sustained the validity of the sale on the
ground that under the provisions of the articles of
partnership allowing the heirs of the deceased partner
to represent him in the partnership after his death
Kong Chai Pin became a managing partner, this being
the capacity held by Tan Sin An when he died.
Premises considered, the motion for
reconsideration is denied.
Maugin, Ma. Erika U.
Heirs of Jose Lim, Represented By Elenito Lim
(Petitioners) Vs. Juliet Villa Lim (Respondent) G.R.
No. 172690; March 3, 2010
Issue
Whether or not is Elfledo a partner in the
business?
Arguments Made and Evidenced Filed by Defendant
Respondent traversed petitioners' allegations
and claimed that Elfledo was himself a partner of
Norberto and Jimmy. Respondent also stressed that
Jose left no properties that Elfledo could have held in
trust. Respondent maintained that all the properties
involved in this case were purchased and acquired
through her and her husband's joint efforts and hard
work, and without any participation or contribution
from petitioners or from Jose. Respondent submitted
that these are conjugal partnership properties; and
thus, she had the right to refuse to render an
accounting for the income or profits of their own
business.
The following circumstances tend to prove that
Elfledo was himself the partner of Jimmy and Norberto:
1) Cresencia testified that Jose gave Elfledo
P50,000.00, as share in the partnership, on a date that
coincided with the payment of the initial capital in the
partnership; (2) Elfledo ran the affairs of the
partnership, wielding absolute control, power and
authority, without any intervention or opposition
whatsoever from any of petitioners herein; (3) all of
the properties, particularly the nine trucks of the
partnership, were registered in the name of Elfledo; (4)
Jimmy testified that Elfledo did not receive wages or
salaries from the partnership, indicating that what he
actually received were shares of the profits of the
business; and (5) none of the petitioners, as heirs of
Jose, the alleged partner, demanded periodic
accounting from Elfledo during his lifetime.
Arguments Made and Evidenced by Petitioners
Petitioners are the heirs of the late Jose Lim
(Jose). Jose's widow Cresencia Palad (Cresencia); and
their children Elenito, Evelia, Imelda, Edelyna and
Edison, who filed a Complaint for Partition, Accounting
and Damages against respondent Juliet Villa Lim
(respondent),widow of the late Elfledo Lim (Elfledo),
who was the eldest son of Jose and Cresencia.
Petitioners alleged that Jose, together with his friends
Jimmy Yu and Norberto Uy, formed a partnership to
engage in the trucking business. Jose managed the
operations of this trucking business until his death.
Thereafter, Jose's heirs, including Elfledo, and partners
agreed to continue the business under the management
of Elfledo. Petitioners also alleged that Elfledo was
never a partner or an investor in the business and
merely supervised the purchase of additional trucks
using the income from the trucking business of the
partners. Elfledo died, leaving respondent as his sole
surviving heir. Petitioners claimed that respondent took
over the administration of the aforementioned
properties, which belonged to the estate of Jose,
without their consent and approval.
RTC rendered its decision in favor of petitioners
to submit an accounting of all incomes, profits and
rentals received by her from said properties
Aggrieved, respondent appealed to the CA. The
CA reversed and set aside the RTC's decision, dismissing
petitioners' complaint for lack of merit.
Petitioners argue that according to the
testimony of Jimmy, the sole surviving partner, Elfledo
was not a partner; and that he and Norberto entered
into a partnership with Jose.
Supreme Court Decision
The Court held that Elfledo was indeed a
partner in the business. The Court had the view that
the sole testimony of Jimmy Yu that Elfledo was a not a
partner cannot establish such fact in the absence of
any other evidence.
The Court must apply the rule on
preponderance of evidence (Rule 133, Section 1) and
Art. 1769 of the NCC. The Court agreed with all of the
facts raised by Elfledo in establishing that he is a
partner. Furthermore, the Court maintains that
demand for periodic accounting is evidence of
partnership.
Pantia, Patrik Oliver E.
Collector of Internal Revenue, petitioner, vs. Juan
Isasi, M. Salustiana Aldecoa, Claudio Zuloaga, Miren
Zuloaga, Hugo P. Rodriguez, and the Court of Tax
Appeals, respondents
G.R. No. L-9186, April 29, 1957
Issue
Whether the term duly registered general co-
partnership (sociedades colectivas) used in sections 24
and 26 of the Tax Code includes both the commercial
civil ones, and whether the partnership Aldecoa,
Zuloaga e Isasi falls within said classification and hence
entitled to the benefit (which is tax exemption)
granted therein.
Arguments made and evidence filed by the defendant
The records show that for the tax years 1948
and 1949, the firm Aldecoa, Zuloaga e Isasi filed its
income tax returns and the Collector of Internal
Revenue assessed the sum of P26, 873.66 against said
partnership which the latter paid and that the members
of the partnership filed their individual income tax
returns for the years 1948, 1949, 1950 and 1951, in
which returns they indicated the shares of the profit or
dividends that they allege to have received from the
partnership. On June 30, 1951, the partners agreed to
dissolve the partnership and the agreement of
dissolution was duly recorded in the Securities and
Exchange Commission on October 25, 1951, wherein
plaintiff Hugo P. Rodriguez was appointed as liquidator.
Believing that the partnership "Aldecoa,
Zuloaga e Isasi" was a duly registered general co-
partnership (sociedad colectiva) and therefore not
subject to income tax under Section 24 of the National
Internal Revenue Code, plaintiffs filed with defendant
on July 16, 1951, a claim for the refund of P26,873.66
which the partnership had paid as income tax. The
claim for refund not having been acted upon by
defendant, a complaint was filed with the Court of First
Instance of Negros Occidental on August 4, 1951,
praying the defendant be ordered to return to plaintiffs
the aforementioned sum with costs, and for such other
remedies as may be just and equitable in the premises.
After the parties had filed their respective
memoranda, the of Tax Appeals which took the case
rendered a decision ordering defendant to refund the
sum of P26,873.66, without costs, and making the some
pronouncements.
Arguments made and evidence filed by the plaintiff
From this decision, defendant filed with this
Court a petition to review the said decision.
The dispute arose from a divergence of opinion
as to the proper interpretation and application of
sections 24 and 26 of the National Revenue Code.
There is no dispute that the partnership
agreement entered into by the respondent partners was
styled "Escritura de Constitucion de la Sociedad
Agricola Limitada Aldecoa, Zuloaga e Isasi", thereby
giving said partnership is a limited one. On the other
hand, said agreement specifies that the primary
purpose for which the partnership was organized was
the exploitation of the two haciendas "Manucao" and
"Conchita", as stated in paragraph 3 thereof and
petitioner contends, that this clause clearly indicates
that respondents' partnership was a civil partnership
which justifies petitioner's stand in collecting the taxes
in question. In passing upon this point, we must take
into consideration the provision of the old Civil Code
which states that:
Art. 1670. Partnerships which on account of the
purpose to which they devoted are civil may adopt any
of the forms recognized by the Code of Commerce. In
such cases its provisions shall be applicable to them in
so far they do no conflict with those of this Code, and
Chief Justice Arellano saw fit to apply this particular
provision in his concurring opinion in the case of
Compañia Agricola de Ultramar vs. Reyes, 4 Phil., 2.
Supreme Court Decision
Even a casual scrutiny of the partnership
agreement executed by the respondent partners would
reveal that they followed the pattern set for the
pattern set for the regular co-partnership (Arts. 122,
No. 2, 125, 126, 131, 133 and 136 of the Code of
Commerce). They have a firm name — Aldecoa, Zuloaga
e Isasi; that firm name was composed of all the
surnames of the partners — to which the words "and
company" (to indicate the limited partnership — Art.
146 of the Code of Commerce) is not added; the
management of the firm was entrusted to a partner,
Don Juan Isasi; the contribution of all the partners was
expressly provided therein — there being no person
Contributing a specific amount of capital to a common
fund to become liable for the business transactions of
the firm executed exclusively by others under a
collective name, as is the case in limited partnerships
(Art. 122, No. 2, Code of Commerce); the duration of
the partnership was made to last until June 30, 1952;
and it allowed its manager, Don Juan Isasi to engage in
the same kind of undertaking. It is unmistakable,
notwithstanding the title of the partnership agreement
(Escritura de Constitucion de la Sociedad Agricola
Limitada Aldecoa, Zuloaga e Isasi), that the partners
intended to organize a general partnership under the
Code of Commerce. For this reason, we agree with the
Court of Tax Appeals when it states:
To establish a limited partnership there must
be at least one general partner and the name of at
least one of the general partners must appear in the
firm name. (Articles 122(2), 146, 148, Code of
Commerce). If these requisites are not complied with,
the partnership, notwithstanding the fact that the
articles of association are entitled "limited partnership"
(Jo Chung Cang vs. Pacific Commercial Co., 45 Phil.
142). An examination of the firm name of the
partnership "Aldecoa, Zuloaga e Isasi" will readily show
that neither of this requirements have been fulfilled;
instead it operated under the name of all its members
of some of them, or of only one (without necessarily
adding to the name of names stated in last two cases,
the words "and company" (par. 1, Art. 126, Code of
Commerce). 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 (Hechen, Elements
of Partnership, p. 412; Gilmore, Partnership, p. 499; 20
R.C.L. 1064). Moreover, a limited partnership cannot
perform any act in the management of the partner
interests and cannot even examine the condition and
state of partnership administration except at stated
times. (Articles 122 (2), 148 and 150, Code of
Commerce), unlike the partnership Aldecoa, Zuloaga e
Isasi, wherein all the partners exercised powers of
management and administration.
We, therefore, declare that the Partnership
"Aldecoa, Zuloaga e Isasi" was a duly registered general
co-partnership (sociedad colectiva) within the meaning
and contemplation of sections 24 and 26 of the National
Internal Revenue Code.
Wherefore, the decision appealed from is
hereby affirmed, without pronouncement as to costs. It
is so ordered.
Pasaol, Devvie Mae A.
M. Teague, plaintiff-appellant, vs. H. Martin, J. T.
Maddy and L.H. Golucke, defendants-appellees
G.R. No. 30286 September 12, 1929
Issue
Whether or not the plaintiff was the general
manager of the unregistered partnership.
Arguments made and Evidence filed by the defendants
That the terms of the partnership were never
evidenced by a truth and in fact, the partnership was
formed under a written plan, of which each member
received a copy and to which all agreed. That by its
terms the amount of the capital was P45,000, of which
the plaintiff agreed to contribute P35,000. That
P20,000 of the capital was to be used for the purchase
of the equipment of the Manila Fish Co., Inc. and the
balance placed to the checking account o the new
company.
Defendant Martin specifically denies the
"plaintiff was named general manager of the
partnership," and alleged "that all the duties and
powers of the said plaintiff were specifically set forth
in the above quoted written agreement and that no
further or additional powers were ever given the said
plaintiff." But he admits the purchase of the motorship
Barracuda, by the partnership.
Defendant Martin denies that Exhibit A is a true
or correct statement of the cash received and paid out
by or on behalf of the partnership, or that the
partnership over purchased or that it now owns the
lighter Lapu-Lapu, "And/ or any other properties"
except such motorship and a smoke in the house," or
that the defendants are making use of any of the
properties of the partnership, to the damage and
prejudice of the plaintiff, or that they do not have any
visible means to answer for any damages, and alleges
that at the time of the filing of the complaint,
partnership in cold storage, of the value of P6,000, for
which he has never accounted on the books of the
partnership or mentioned in the complaint, and
defendant prays that plaintiff's complaint be dismissed,
and that he be ordered and required to render an
accounting , and to pay to partnership the balance of
his unpaid subscription amounting to P10,000.
In his answer the defendant Maddy claimed and
asserted that there is due and owing him from the
plaintiff P1,385.53, with legal interest, and in his
amended answer, the defendant Martin prays for
judgment for P615.49.
Arguments made and Evidence filed by the petitioner
The trial court erred in not having confined
itself, in the determination of this case, to the question
as to whether or not it is proper to dissolve the
partnership and to liquidate its assets, for all other
issues raised by appellees are incidental with the
process of liquidation provided for by law.
The trial court erred in not resolving the
primary and most important question at issue in his
case, namely, whether or not the appellant M. Teague
was the manager of the unregistered partnership
Malangpaya Fish Company.
The trial court erred in holding that the
appellant had no authority to buy the Lapu-Lapu, the
Ford truck and the adding machine without the consent
of his copartners, for in accordance with article 131 of
the Code of Commerce the managing partner of a
partnership can make purchases for the partnership
without the knowledge and/or consent of his
copartners.
The trial court erred in holding that the Lapu-
Lapu, the Ford truck and the adding machine purchased
by appellant, as manager of the Malangpaya Fish
Company, for and with funds of the partnership, do not
form part of the assets of the partnership.
The trial court erred in holding that the Lapu-
Lapu, the Ford truck and the adding machine purchased
by appellant, as manager of the Malangpaya Fish
Company, for and with funds of the partnership, do not
form part of the assets of the partnership.
The trial court erred in disapproving appellant's
claim for salary and expenses incurred by him for and
in connection with the partnership's business.
The trial court erred in approving the claims of
appellees J.T. Maddy and H. Martin and in requiring the
appellant to pay them the sum of P1,512.03 and
P615.49 respectively.
The trial court erred in not taking cognizance
of appellant's claim for reimbursement for advances
made by him for the partnerships, as shown in the
statement attached to the complaint marked Exhibit A,
in which there is a balance in his favor and against the
partnership amounting to over P16,000.
Lastly, considering the irregularities
committed, the disappearance of the stenographic
notes for a considerable length of time, during which
time changes in the testimonies of the witnesses could
have been made and the impossibility of having an
accurate and complete transcript of the stenographic
notes, the trial court erred in denying appellant's
petition for the retaking of the evidence in this case.
Supreme Court Decision
To say the least, this kind of evidence does not
appeal to the court. This case has been bitterly
contested, and there is much feeling between the
parties and even their respective attorneys. Be that as
it may, we are clearly of the opinion that the findings
of the lower court upon questions of fact are well
sustained by the evidence. Plaintiff's case was tried on
the theory that the partnership was the owner of the
property in question, and no claim was made for the
use of the Lapu-Lapu, and it appears that P14,032.26 of
the partnership money was used in its purchase,
overhauling, expenses and repairs. That in truth and in
fact the partnership had the use and benefit of the
Lapu-Lapu in its business from sometime in May until
the receiver was appointed on November 11, 1927, or a
period of about six months, and that the partnership
has never paid anything for its use. it is true that there
is no testimony as to the value of such use, but the cost
of the Lapu-Lapu and the time of its use and the
purpose for which it was used, all appear in the record.
For such reason, in the interest of justice, plaintiff
should be compensated for the reasonable value of the
time which the partnership made use of the Lapu-Lapu.
In all things and respects, the judgment of the
lower court as to the merits is affirmed, with the
modification only that P2,000 shall be deducted from
the amount of the judgment which was awarded
against the plaintiff, such deduction to be made for
and on account of such use of the Lapu-Lapu by the
partnership, with costs against the appellant.
Saglayan, Jannefah Irish H.
MANUEL ORMACHEA TIN-CONGCO, deceased,
represented by the Chinaman Tiu Tusay, judicial
administrator of his estate, plaintiff-appellee, vs.
SANTIAGO TRILLANA, defendant-appellant
G.R. No. L-4776. March 18, 1909.
Issue
Whether or not the manager of a business is still
authorized to release debtors after a definite
dissolution of partnership.
Arguments made and evidence file by the defendant
The defendant filed a written answer setting forth
that he had already paid his accounts and obligations
contracted in favor of the said Ormachea and Vizmanos
by means of periodical deliveries of tuba or liquor of
the nipa palm, and alleged that, if any amount was still
pending payment, it should be paid not in money but in
tuba, at such time and under such circumstances as are
customary in the town of Hagonoy. In evidence of this,
while testifying under oath, he introduced the
following document marked "A" which appears at folio
248:
I, Jose R. Lopez (Lawa), a Christian Chinese, do
hereby declare that D. Santiago
Trillana has no outstanding debt whatever with
the distillery situated in the barrio of
San Sebastian in this town, which in past times
was under my management. What I
have stated is the truth. — Hagonoy, November
19, 1903. — Jose R. Lopez.
Arguments made and evidence file by the petitioner
In 1902, the plaintiff Manuel Ormachea Tin-Congco
and Luis Vizmanos Ong Queco were engaged in business
in the pueblos in the Province of Bulacan, and that in
the course thereof the defendant purchased from them
merchandise to the value of 4,000 pesos. However, the
partnership was dissolved and the business was divided
up between the partners; all accounts and debts of the
defendant were allotted to the plaintiff, and became
the individual property of Ormachea Tin-Congco. Tin-
Congco filed a complaint against Santiago Trillana,
praying that the indebtedness of P5,500.00, as proven
by the documents signed by the defendant or his agents
in favor of Ormachea or of Vizmanos Ong Queco or their
agent named Lawa in charge of the business, be paid.
Supreme Court Decision
No. If the business jointly carried on by Ormachea
and Vizmanos was dissolved, and its transactions
ceased in 1901, Jose Lopez Lawa, who managed the
distillery on behalf of the owners of the same, also
ceased to act as such manager in said year, and for said
reason the document Exhibit A, which he issued to the
debtor on the 19th of November, 1903, two years after
ceasing to be manager, can not serve to relieve the
debtor from paying what he owed by virtue of the
documents or vales that he had issued in order to
obtain money from the owners of the said distillery;
that is to say, as agreed upon by them, the right to
recover the debts of the defendant still belonged to
Ormachea when the business was dissolved, as Lawa
was not authorized by Ormachea to deliver to the
debtor an acquittance releasing him from the
obligations that he had contracted, to the prejudice of
the real creditor, the only person entitled to condone a
debt in the event of waiving the right to recover the
same.
Hence, as the document was made out and issued
two years afterwards, without a previous payment of
the amounts secured on the said vales, when the
business no longer existed, when the owners had
entirely withdrawn from it, and when Lawa, who then
acted as manager of the distillery, had no express
authority to issue such a document, it is not proper nor
lawful to admit the said document as possessing a force
and effect that would fully exempt the defendant from
the payment of his obligation.
Salipada, Junaizah U.
La Compañia Maritima, plaintiff-appellant, Vs.
Francisco Muñoz, et al., defendants-appellees
G.R. No. L-3704 December 12, 1907
Issue
Is an industrial partner, Emilio Muñoz, in an
ordinary general mercantile partnership liable to third
persons for debts and obligations contracted by the
partnership?
Arguments made and evidence filed by the defendant
On the 31st day of March, 1905, the defendants
Francisco Muñoz, Emilio Muñoz, and Rafael Naval
formed on ordinary general mercantile partnership
under the name of Francisco Muñoz & Sons for the
purpose of carrying on the mercantile business in the
Province of Albay which had formerly been carried on
by Francisco Muñoz. Francisco Muñoz was a capitalist
partner and Emilio Muñoz and Rafael Naval were
industrial partners.
 In the articles of partnership signed by the
partners it is expressly stated that they have agreed to
form, and do form, an ordinary, general mercantile
partnership. The object of the partnership, as stated in
the fourth paragraph of the articles, is a purely
mercantile one and all the requirements of the Code of
Commerce in reference to such partnership were
complied with. The articles of partnership were
recorded in the mercantile registry in the Province of
Albay.
Appellees also claimed that Muñoz is not a
partner because 1) he contributed nothing to the
partnership, 2) he has no salary and 3) he is excluded
from the management.
Arguments made and evidence filed by the petitioner
The plaintiff, La Compañia Maritima, brought
this action in the Court of First Instance of Manila
against the partnership of Franciso Muñoz & Sons, and
against Francisco Muñoz de Bustillo, Emilio Muñoz de
Bustillo, and Rafael Naval to recover the sum of
P26,828.30, with interest and costs.
It is said in the decision of the court that in the
articles of partnership it was called an ordinary,
general mercantile partnership, but that from the
article it does not appear to be such a partnership. In
the brief of the appellees it is also claimed that it is
not an ordinary, general commercial partnership.
The Supreme court in upholding that Muñoz is a
partner stated that 1) he contributed as much as other
industrial partner, 2) he receives a salary, the only
difference between him and Naval is that the latter
was entitled to a fixed salary while he is not and 3)
that the partners can validly do the exclusion from
management in accordance with the provision of
Art.125 of the Code of Commerce.
Supreme Court Rulings
Yes. In an ordinary general partnership an
industrial partner is liable to third parties for debts and
obligations of partnership. The construction of the law
should be avoided which would enable two persons,
each with a large amount of private property, to form
and carryon a partnership and, upon the bankruptcy of
the latter, to say to its creditors that they contributed
no capital to the company but only their services, and
that their private property is not, therefore, liable for
its debts.
The construction of the article is that it relates
exclusively to the settlement of the partnership affairs
among the partners themselves and has nothing to do
with the liability of the partners to third persons; that
each one of the industrial partners is liable to third
persons for he debt out of his private property during
the life of the partnership, when its affairs are settled
he is entitled to credit for the amount so paid, and if it
results that there is not enough property in the
partnership to pay him, then the capitalist partners
must pay him
It should be noted, however, that the
execution of the judgment should not issue against the
private property of the partners until the property of
the partnership is exhausted. These conclude upon this
branch of the case that neither on principle nor an
authority can the industrial partner be relieved from
liability to third persons for the debts of the
partnership.
Talusan, Norhana C.
Priscilla Z. Obre, petitioner, vs. Leonora O. Marial,
respondent
G.R. No. 217777 August 16, 2017
Issue
a. Whether the Court of Appeals committed
reversible error in ruling that the RTC
committed grave abuse of discretion amounting
to lack or excess of jurisdiction;
b. Whether the Court of Appeals committed
reversible error in reversing and setting aside
the 27 August 2013 and 7 January 2014 Orders
of the RTC, and in directing the issuance of an
Order for the Withdrawal of the Information for
estafa against respondent and Anne Kristine;
and
c. Whether the action for estafa penalized under
Article 315 2(a) of the Revised Penal Code has
been barred by prescription.
Arguments made and Evidence filed by the defendant
Respondent and Anne Kristine denied
petitioner's complaint for estafa and claimed, among
others, that the partnership agreement they entered
into rules out a successful prosecution for estafa. They
also claimed that the action had already prescribed
since the complaint was filed 15 years after the
agreement. They contended that it was petitioner who
owed them the amount of Two Hundred Seven
Thousand Eighty-Seven Pesos and Sixty-Five Centavos
(₱207,087.65) because she issued several checks in the
name of respondent and Anne Kristine. Lastly, they
alleged that Anne Kristine could not be held liable
because she was merely acting under her mother's
direction, and it was the respondent who convinced
petitioner to pay for the plane tickets of respondent,
her daughter Anne Kristine, and her granddaughter Ara
amounting to Two Thousand Seventy One Dollars
(US$2,071.00) with a promise to pay petitioner once
they arrive in the United States.
After OCP of Quezon City issued a Resolution,
respondent and Anne Kristine filed a Motion for
Reconsideration with Motion for Inhibition dated 27
January 2012, on the ground that petitioner failed to
establish the elements of the crime charged.
Subsequently, they filed a Motion to Suspend
Proceedings and to Lift/Recall Warrant of Arrest on 14
February 2012. Accordingly, the City Prosecutor filed
with the RTC a Motion to Withdraw Information. On 27
August 2013, the RTC issued an Order denying the
Motion to Withdraw Information, and directing the
arraignment of respondent and Anne Kristine.
Respondent and Anne Kristine has again moved for the
reconsideration on 14 October 2013 but it was denied
by the RTC in its Order dated 7 January 2014.
Furthermore, respondent filed with the Court
of Appeals a Petition for Certiorari on 25 March 2014
under Rule 65 of the Rules of Court, assailing the
Orders of the RTC dated 27 August 2013 and 7 January
2014. In its Decision dated 24 September 2014, the
Court of Appeals granted the petition, and reversed
and set aside the assailed Orders of the RTC. It further
directed the RTC to issue an order for the withdrawal
of the Information for estafa against respondent and
Anne Kristine. Petitioner filed a Motion for
Reconsideration dated 18 October 2014 which was
denied by the Court of Appeals on 24 March 2015.
Arguments made and Evidence filed by the petitioner
Upon arrival, respondent issued three checks
drawn in a bank in the United States as payment but
one of the checks was dishonored. After the petitioner
discovered that there was no exportation of garments
to the United States or any other transactions in the
United States that took place, in which according to
the partnership agreement, both partners shall invest
₱250,000.00 each in cash or goods into a buying and
selling of stock lots of garments to be exported to the
United States particularly in Los Angeles, California,
petitioner demanded from respondent and Anne
Kristine the total payment of Two Hundred Three
Thousand Nine Hundred Ninety-Nine Pesos
(₱203,999.00) and One Thousand Dollars (US$1,000.00).
The first amount refers to the initial and subsequent
investment of the petitioner while the second amount
refers to the unpaid debt of the respondent. Despite
demands, respondent and Anne Kristine failed to return
the money.
On 7 February 2011, petitioner filed a
complaint for estafa against respondent and Anne
Kristine before the Office of the City Prosecutor (OCP)
of Quezon City. Petitioner claimed that the twenty-four
(24) checks amounting to Two Hundred Seven Thousand
Eighty-Seven Pesos and Sixty-Five Centavos
(₱207,087.65) were only borrowed from her as an
accommodation party, and that it was respondent who
ordered her to close her account with the Republic
Planters Bank. The OCP of Quezon City issued a
Resolution which states that the attached Information
for Estafa under Article 315, paragraph 2(a) of the
Revised Penal Code be filed against respondents
Leonora O. Miaral and Anne Kristine O. Miaral.
Supreme Court Decision
1. The Court of Appeals erred in overturning the
Orders of the RTC and in ruling that the RTC
gravely abused its discretion when it denied the
Motion to Withdraw Information.
The general rule is that in the conduct of a
preliminary investigation, the prosecutor is given wide
latitude of discretion to determine what constitutes
sufficient evidence as will establish probable cause.
However, when the respondent establishes that the
prosecutor committed grave abuse of discretion
amounting to lack or excess of jurisdiction in
determining whether there is probable cause, the
courts may interfere. Under the doctrine of separation
of powers, the courts have no right to decide matters
where full discretionary authority has been delegated
to the Executive Branch, or to substitute their own
judgments for that of the Executive Branch, in the
absence of grave abuse of discretion. The abuse of
discretion must be "so patent and gross as to amount to
an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law or to act at all in
contemplation of law, such as where the power is
exercised in an arbitrary or despotic manner by reason
of passion or hostility."
2. We disagree with the ruling of the Court of
Appeals when it sustained the OCP on the issue
of whether there is probable cause to file
Information. The OCP was in the best position
to determine whether or not there was
probable cause that the crime of estafa was
committed.
The OCP erred gravely, amounting to grave
abuse of discretion, when it applied United States vs.
Clarin as basis for dismissing the complaint for lack of
probable cause. In Clarin, four individuals entered into
a contract of partnership for the business of buying and
selling mangoes. When one of the partners demanded
from the other three the return of his monetary
contribution, this Court ruled that "the action that lies
with the [capitalist] partner x x x for the recovery of
his money is not a criminal action for estafa, but a civil
one arising from the partnership contract for a
liquidation of the partnership and a levy on its assets, if
there should be any." Simply put, if a partner demands
his money back, the duty to return the contribution
does not devolve on the other partners; the duty now
belongs to the partnership itself as a separate and
distinct personality.
Furthermore, the RTC made its own
independent assessment whether or not probable cause
exists that the crime was committed by respondent and
Anne Kristine. When the RTC is confronted with a
Motion to Withdraw Information on the ground of lack
of probable cause, its duty is to make an independent
assessment of the totality of the evidence presented by
both parties, including affidavits, counter-affidavits,
evidence appended to the complaint, and records
produced by the OCP on court order. "Independent
assessment" does not mean mere approval or
disapproval of the prosecution's stand; it also means
that the RTC must itself be convinced that indeed there
is or there is no sufficient evidence against the
accused. Both the 27 August 2013 and 7 January 2014
Orders of the RTC were based on facts and allegations
of both parties.
On the other hand, the OCP found that no probable
cause existed against respondent and Anne Kristine for
the commission of the crime of estafa. In its Resolution
dated 10 August 2012, relying mainly on the case of
United States v. Clarin, the OCP found that there was a
partnership agreement between the parties, thus
resolving that the failure of a partner to account for
partnership funds may only give rise to a civil
obligation, not a criminal case for estafa. Such being
the case, estafa either by means of deceit or
misappropriation will not lie against respondents,
because "partners are not liable for estafa of money or
property received for the partnership when the
business commenced and profits accrued." (U.S. vs.
Clarin, Phil. 85).
3. The action for estafa penalized under
paragraph 2(a), Article 315 of the Revised Penal
Code has not yet been barred by prescription.
The fifteen-year prescriptive period
commenced in April 1996 when the petitioner
discovered that one of the checks that respondent
issued as payment was dishonored for having been
drawn against insufficient funds. At around that time,
petitioner likewise discovered that there was no
buying, selling and exportation of garments or any
other transactions that took place in the United States.
The fifteen-year period was interrupted on 7 February
2011 when petitioner filed a complaint for estafa
against respondent and Anne Kristine before the OCP of
Quezon City. In People v. Olarte, "the filing of the
complaint, even if it be merely for purposes of
preliminary examination or investigation, should and
does interrupt the period of prescription of the criminal
responsibility, even if the court where the complaint or
information is filed cannot try the case on its merits."
As of the filing of the complaint on 7 February 2011,
the prescriptive period had run for fourteen (14) years
and ten (10) months. Thus, the fifteen-year period has
not yet prescribed.
Ugokan, Sittie Farisha B.
Josue Soncuya, plaintiff-appellant, vs. Carmen de Luna,
defendant-appellee
GR No. L-45464 April 28, 1939
Issue
Whether the petitioner is entitled to damages
due to alleged fraudulent act of managing partner.
Arguments made and Evidence filed by the defendant
Carmen de Luna, defendant, interposed an
objection based on the following grounds: that the
complaint does not contain facts sufficient to
constitute a cause of action; and that the complaint is
ambiguous, unintelligible and vague. Trial on the
demurrer having been held and the parties heard, the
court found the same well-founded and sustained it,
ordering the plaintiff to amend his complaint within a
period of ten dais from receipt of notice of the order.
As the plaintiff manifested that he would not prefer to
amend his complaint, the lawyer of Carmen de Luna
filed a motion that the amended complaint be
dismissed with costs against the plaintiff. Said motion
was granted by the Court of First Instance of Manila
which ordered the dismissal of the aforesaid amended
complaint, with costs against the plaintiff.
As Soncuya appealed in the order of dismissal,
de Luna argued that there is no reason or cause for
plaintiff to institute the action for damages which he
claims from the managing partner herself. The
demurrer interposed by defendant to the amended
complaint filed by plaintiff having been sustained on
the grounds that the facts alleged in said complaint are
not sufficient to constitute a cause of action and that
the complaint is ambiguous, unintelligible and vague,
the only questions which may be raised and considered
in the present appeal are those which refer to said
grounds. It is first necessary that a liquidation of the
business thereof be made to the end that the profits
and losses may be known and the causes of the latter
and the responsibility of the defendant as well as the
damages which each partner may have suffered, may
be determined. However, it is not alleged in the
complaint that such a liquidation has been effected nor
is it prayed that it be made. Consequently, there is no
reason or cause for plaintiff to institute the action for
damages which he claims from the managing partner,
Carmen de Luna.
Arguments made and Evidence filed by the petitioner
On September 11, 1936, Josue Soncuya filed
with the Court of First Instance of Manila and amended
complaint against Carmen de Luna in her own name
and as co-administratrix of the intestate estate, of
Librada Avelino, in which, upon the facts therein
alleged, he asked that the defendant be sentenced to
pay him the sum of P700,432.00 as damages and costs.
As the Court of First Instance of Manila ordered the
dismissal of the aforesaid amended complaint, the
appellant took an appeal, assigning twenty alleged
errors committed by the lower court in its order
referred to.
In the amended complaint, it is stated that
defendant Carmen de Luna be sentenced to pay
plaintiff damages in the sum of P700,432.00 as a result
of the administration, said to be fraudulent, of the
partnership "Centro Escolar de Señoritas", of which
plaintiff, defendant and the deceased Librada Avelino
were members. However, there are no evidences
presented to support the alleged fraudulent act
committed by defendant.
Supreme Court Decision
The Supreme Court so hold that for a partner to
be able to claim from another partner who manages
the general co-partnership, damages allegedly suffered
by petitioner by reason of the fraudulent
administration of the defendant, a previous liquidation
of Centro Escolar de Señoritas partnership is necessary.
It is concluded that the facts alleged in the complaint
are not sufficient to constitute a cause of action on the
part of plaintiff to collect damages from defendant.
Wherefore, finding no error in the order appealed from
the same is affirmed in all its parts, with costs against
the appellant.
Usman, Norolhaya T.
Josefina P. Realubit, petitioner vs. Prosencio D. Jaso
and Eden G. Jaso, respondents
G.R. No. 178782, 21 September 2011
Issues
a. Whether or not there was a valid assignment or
rights to the joint venture.
b. Whether the joint venture is a contract of
partnership.
c. Whether private respondents (spouses Jaso)
acquired the title of being a partner based on
the Deed of Assignment.
Arguments made and evidence file by the defendant
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. For and in consideration of the sum of
₱500,000.00, 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. 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.
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.
It is also said that with the income of the
business which earned not less than ₱3,000.00 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.
Moreover, 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.
Arguments made and evidence file by the petitioner
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 evens 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.
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.
Furthermore, the 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.
Spouses Jaso are entitled to Biondos share in
the profits, despite Josefina’s lack of consent
to the assignment of said Frenchmans 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.

Supreme Court Decisions

1. Yes. As a public document, the Deed of
Assignment Biondo executed in favor
of Eden not only enjoys a presumption of
regularity but is also considered prima
facie evidence of the facts therein stated. A
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. In view of the Spouses Realubits
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 Eden and Notary
Public Rolando Diaz.
2. Yes. 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. The rule is settled that
joint ventures are governed by the law on
partnerships which are, in turn, based on
mutual agency or delectus personae.
3. No. It is evident that the 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 assignees
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. Since a
partner’s interest in the partnership includes
his share in the profits, we find that the CA
committed no reversible error in ruling that the