[PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
G.R. No. 124293             January 31, 2005
J.G. SUMMIT HOLDINGS, INC., petitioner,
vs.
COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its
Chairman and Members; ASSET PRIVATIZATION TRUST; and
PHILYARDS HOLDINGS, INC., respondents.
RESOLUTION
PUNO, J.:
For resolution before this Court are two motions filed by the petitioner,
J.G. Summit Holdings, Inc. for reconsideration of our Resolution dated
September 24, 2003 and to elevate this case to the Court En Banc.
The petitioner questions the Resolution which reversed our Decision
of November 20, 2000, which in turn reversed and set aside a
Decision of the Court of Appeals promulgated on July 18, 1995.
I. Facts
The undisputed facts of the case, as set forth in our Resolution of
September 24, 2003, are as follows:
On January 27, 1997, the National Investment and Development
Corporation (NIDC), a government corporation, entered into a Joint
Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of
Kobe, Japan (KAWASAKI) for the construction, operation and
management of the Subic National Shipyard, Inc. (SNS) which
subsequently became the Philippine Shipyard and Engineering
Corporation (PHILSECO). Under the JVA, the NIDC and KAWASAKI
will contribute ₱330 million for the capitalization of PHILSECO in the
proportion of 60%-40% respectively. One of its salient features is the
grant to the parties of the right of first refusal should either of them
decide to sell, assign or transfer its interest in the joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its
interest in SNS [PHILSECO] to any third party without giving the other
under the same terms the right of first refusal. This provision shall not
apply if the transferee is a corporation owned or controlled by the
GOVERNMENT or by a KAWASAKI affiliate.
On November 25, 1986, NIDC transferred all its rights, title and
interest in PHILSECO to the Philippine National Bank (PNB). Such
interests were subsequently transferred to the National Government
pursuant to Administrative Order No. 14. On December 8, 1986,
President Corazon C. Aquino issued Proclamation No. 50 establishing
the Committee on Privatization (COP) and the Asset Privatization
1
Trust (APT) to take title to, and possession of, conserve, manage and
dispose of non-performing assets of the National Government.
Thereafter, on February 27, 1987, a trust agreement was entered into
between the National Government and the APT wherein the latter was
named the trustee of the National Government's share in PHILSECO.
In 1989, as a result of a quasi-reorganization of PHILSECO to settle
its huge obligations to PNB, the National Government's shareholdings
in PHILSECO increased to 97.41% thereby reducing KAWASAKI's
shareholdings to 2.59%.
In the interest of the national economy and the government, the COP
and the APT deemed it best to sell the National Government's share
in PHILSECO to private entities. After a series of negotiations
between the APT and KAWASAKI, they agreed that the latter's right of
first refusal under the JVA be "exchanged" for the right to top by five
percent (5%) the highest bid for the said shares. They further agreed
that KAWASAKI would be entitled to name a company in which it was
a stockholder, which could exercise the right to top. On September 7,
1990, KAWASAKI informed APT that Philyards Holdings, Inc.
(PHI)1 would exercise its right to top.
At the pre-bidding conference held on September 18, 1993, interested
bidders were given copies of the JVA between NIDC and KAWASAKI,
and of the Asset Specific Bidding Rules (ASBR) drafted for the
National Government's 87.6% equity share in PHILSECO. The
provisions of the ASBR were explained to the interested bidders who
were notified that the bidding would be held on December 2, 1993. A
portion of the ASBR reads:
1.0 The subject of this Asset Privatization Trust (APT) sale through
public bidding is the National Government's equity in PHILSECO
consisting of 896,869,942 shares of stock (representing 87.67% of
PHILSECO's outstanding capital stock), which will be sold as a whole
block in accordance with the rules herein enumerated.
xxx xxx xxx
2.0 The highest bid, as well as the buyer, shall be subject to the final
approval of both the APT Board of Trustees and the Committee on
Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all
bids.
3.0 This public bidding shall be on an Indicative Price Bidding basis.
The Indicative price set for the National Government's 87.67% equity
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
in PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION
(₱1,300,000,000.00).
xxx xxx xxx
6.0 The highest qualified bid will be submitted to the APT Board of
Trustees at its regular meeting following the bidding, for the purpose
of determining whether or not it should be endorsed by the APT Board
of Trustees to the COP, and the latter approves the same. The APT
shall advise Kawasaki Heavy Industries, Inc. and/or its nominee,
[PHILYARDS] Holdings, Inc., that the highest bid is acceptable to the
National Government. Kawasaki Heavy Industries, Inc. and/or
[PHILYARDS] Holdings, Inc. shall then have a period of thirty (30)
calendar days from the date of receipt of such advice from APT within
which to exercise their "Option to Top the Highest Bid" by offering a
bid equivalent to the highest bid plus five (5%) percent thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS]
Holdings, Inc. exercise their "Option to Top the Highest Bid," they
shall so notify the APT about such exercise of their option and deposit
with APT the amount equivalent to ten percent (10%) of the highest
bid plus five percent (5%) thereof within the thirty (30)-day period
mentioned in paragraph 6.0 above. APT will then serve notice upon
Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc.
declaring them as the preferred bidder and they shall have a period of
ninety (90) days from the receipt of the APT's notice within which to
pay the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS]
Holdings, Inc. fail to exercise their "Option to Top the Highest Bid"
within the thirty (30)-day period, APT will declare the highest bidder as
the winning bidder.
xxx xxx xxx
12.0 The bidder shall be solely responsible for examining with
appropriate care these rules, the official bid forms, including any
addenda or amendments thereto issued during the bidding period.
The bidder shall likewise be responsible for informing itself with
respect to any and all conditions concerning the PHILSECO Shares
which may, in any manner, affect the bidder's proposal. Failure on the
part of the bidder to so examine and inform itself shall be its sole risk
and no relief for error or omission will be given by APT or COP. . . .
At the public bidding on the said date, petitioner J.G. Summit
Holdings, Inc.2 submitted a bid of Two Billion and Thirty Million Pesos
2
(₱2,030,000,000.00) with an acknowledgment of
KAWASAKI/[PHILYARDS'] right to top, viz:
4. I/We understand that the Committee on Privatization (COP) has up
to thirty (30) days to act on APT's recommendation based on the
result of this bidding. Should the COP approve the highest bid, APT
shall advise Kawasaki Heavy Industries, Inc. and/or its nominee,
[PHILYARDS] Holdings, Inc. that the highest bid is acceptable to the
National Government. Kawasaki Heavy Industries, Inc. and/or
[PHILYARDS] Holdings, Inc. shall then have a period of thirty (30)
calendar days from the date of receipt of such advice from APT within
which to exercise their "Option to Top the Highest Bid" by offering a
bid equivalent to the highest bid plus five (5%) percent thereof.
As petitioner was declared the highest bidder, the COP approved the
sale on December 3, 1993 "subject to the right of Kawasaki Heavy
Industries, Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5%
as specified in the bidding rules."
On December 29, 1993, petitioner informed APT that it was protesting
the offer of PHI to top its bid on the grounds that: (a) the
KAWASAKI/PHI consortium composed of KAWASAKI, [PHILYARDS],
Mitsui, Keppel, SM Group, ICTSI and Insular Life violated the ASBR
because the last four (4) companies were the losing bidders thereby
circumventing the law and prejudicing the weak winning bidder; (b)
only KAWASAKI could exercise the right to top; (c) giving the same
option to top to PHI constituted unwarranted benefit to a third party;
(d) no right of first refusal can be exercised in a public bidding or
auction sale; and (e) the JG Summit consortium was not estopped
from questioning the proceedings.
On February 2, 1994, petitioner was notified that PHI had fully paid
the balance of the purchase price of the subject bidding. On February
7, 1994, the APT notified petitioner that PHI had exercised its option
to top the highest bid and that the COP had approved the same on
January 6, 1994. On February 24, 1994, the APT and PHI executed a
Stock Purchase Agreement. Consequently, petitioner filed with this
Court a Petition for Mandamus under G.R. No. 114057. On May 11,
1994, said petition was referred to the Court of Appeals. On July 18,
1995, the Court of Appeals denied the same for lack of merit. It ruled
that the petition for mandamus was not the proper remedy to question
the constitutionality or legality of the right of first refusal and the right
to top that was exercised by KAWASAKI/PHI, and that the matter
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
must be brought "by the proper party in the proper forum at the proper
time and threshed out in a full blown trial." The Court of Appeals
further ruled that the right of first refusal and the right to top are prima
facie legal and that the petitioner, "by participating in the public
bidding, with full knowledge of the right to top granted to
KAWASAKI/[PHILYARDS] is…estopped from questioning the validity
of the award given to [PHILYARDS] after the latter exercised the right
to top and had paid in full the purchase price of the subject shares,
pursuant to the ASBR." Petitioner filed a Motion for Reconsideration of
said Decision which was denied on March 15, 1996. Petitioner thus
filed a Petition for Certiorari with this Court alleging grave abuse of
discretion on the part of the appellate court.
On November 20, 2000, this Court rendered x x x [a] Decision ruling
among others that the Court of Appeals erred when it dismissed the
petition on the sole ground of the impropriety of the special civil action
of mandamus because the petition was also one of certiorari. It further
ruled that a shipyard like PHILSECO is a public utility whose
capitalization must be sixty percent (60%) Filipino-owned.
Consequently, the right to top granted to KAWASAKI under the Asset
Specific Bidding Rules (ASBR) drafted for the sale of the 87.67%
equity of the National Government in PHILSECO is illegal — not only
because it violates the rules on competitive bidding — but more so,
because it allows foreign corporations to own more than 40% equity in
the shipyard. It also held that "although the petitioner had the
opportunity to examine the ASBR before it participated in the bidding,
it cannot be estopped from questioning the unconstitutional, illegal
and inequitable provisions thereof." Thus, this Court voided the
transfer of the national government's 87.67% share in PHILSECO to
Philyard[s] Holdings, Inc., and upheld the right of JG Summit, as the
highest bidder, to take title to the said shares, viz:
WHEREFORE, the instant petition for review on certiorari is
GRANTED. The assailed Decision and Resolution of the Court of
Appeals are REVERSED and SET ASIDE. Petitioner is ordered to pay
to APT its bid price of Two Billion Thirty Million Pesos
(₱2,030,000,000.00), less its bid deposit plus interests upon the
finality of this Decision. In turn, APT is ordered to:
(a) accept the said amount of ₱2,030,000,000.00 less bid deposit and
interests from petitioner;
(b) execute a Stock Purchase Agreement with petitioner;
3
(c) cause the issuance in favor of petitioner of the certificates of
stocks representing 87.6% of PHILSECO's total capitalization;
(d) return to private respondent PHGI the amount of Two Billion One
Hundred Thirty-One Million Five Hundred Thousand Pesos
(₱2,131,500,000.00); and
(e) cause the cancellation of the stock certificates issued to PHI.
SO ORDERED.
In separate Motions for Reconsideration, respondents submit[ted]
three basic issues for x x x resolution: (1) Whether PHILSECO is a
public utility; (2) Whether under the 1977 JVA, KAWASAKI can
exercise its right of first refusal only up to 40% of the total
capitalization of PHILSECO; and (3) Whether the right to top granted
to KAWASAKI violates the principles of competitive bidding.3 (citations
omitted)
In a Resolution dated September 24, 2003, this Court ruled in favor of
the respondents. On the first issue, we held that Philippine Shipyard
and Engineering Corporation (PHILSECO) is not a public utility, as by
nature, a shipyard is not a public utility4 and that no law declares a
shipyard to be a public utility.5 On the second issue, we found nothing
in the 1977 Joint Venture Agreement (JVA) which prevents Kawasaki
Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) from acquiring
more than 40% of PHILSECO’s total capitalization.6 On the final issue,
we held that the right to top granted to KAWASAKI in exchange for its
right of first refusal did not violate the principles of competitive
bidding.7
On October 20, 2003, the petitioner filed a Motion for
Reconsideration8 and a Motion to Elevate This Case to the Court En
Banc.9 Public respondents Committee on Privatization (COP) and
Asset Privatization Trust (APT), and private respondent Philyards
Holdings, Inc. (PHILYARDS) filed their Comments on J.G. Summit
Holdings, Inc.’s (JG Summit’s) Motion for Reconsideration and Motion
to Elevate This Case to the Court En Banc on January 29, 2004 and
February 3, 2004, respectively.
II. Issues
Based on the foregoing, the relevant issues to resolve to end this
litigation are the following:
1. Whether there are sufficient bases to elevate the case at bar to the
Court en banc.
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
2. Whether the motion for reconsideration raises any new matter or
cogent reason to warrant a reconsideration of this Court’s Resolution
of September 24, 2003.
Motion to Elevate this Case to the
Court En Banc
The petitioner prays for the elevation of the case to the Court en
banc on the following grounds:
1. The main issue of the propriety of the bidding process involved in
the present case has been confused with the policy issue of the
supposed fate of the shipping industry which has never been an issue
that is determinative of this case.10
2. The present case may be considered under the Supreme Court
Resolution dated February 23, 1984 which included among en
banc cases those involving a novel question of law and those where a
doctrine or principle laid down by the Court en banc or in division may
be modified or reversed.11
3. There was clear executive interference in the judicial functions of
the Court when the Honorable Jose Isidro Camacho, Secretary of
Finance, forwarded to Chief Justice Davide, a memorandum dated
November 5, 2001, attaching a copy of the Foreign Chambers Report
dated October 17, 2001, which matter was placed in the agenda of
the Court and noted by it in a formal resolution dated November 28,
2001.12
Opposing J.G. Summit’s motion to elevate the case en banc,
PHILYARDS points out the petitioner’s inconsistency in
previously opposing PHILYARDS’ Motion to Refer the Case to the
Court En Banc. PHILYARDS contends that J.G. Summit should now
be estopped from asking that the case be referred to the Court en
banc. PHILYARDS further contends that the Supreme Court en
banc is not an appellate court to which decisions or resolutions of its
divisions may be appealed citing Supreme Court Circular No. 2-89
dated February 7, 1989.13 PHILYARDS also alleges that there is no
novel question of law involved in the present case as the assailed
Resolution was based on well-settled jurisprudence. Likewise,
PHILYARDS stresses that the Resolution was merely an outcome of
the motions for reconsideration filed by it and the COP and APT and
is "consistent with the inherent power of courts to ‘amend and control
its process and orders so as to make them conformable to law and
justice.’ (Rule 135, sec. 5)"14 Private respondent belittles the
4
petitioner’s allegations regarding the change in ponente and the
alleged executive interference as shown by former Secretary of
Finance Jose Isidro Camacho’s memorandum dated November 5,
2001 arguing that these do not justify a referral of the present case to
the Court en banc.
In insisting that its Motion to Elevate This Case to the Court En
Banc should be granted, J.G. Summit further argued that: its
Opposition to the Office of the Solicitor General’s Motion to Refer is
different from its own Motion to Elevate; different grounds are invoked
by the two motions; there was unwarranted "executive interference";
and the change in ponente is merely noted in asserting that this case
should be decided by the Court en banc.15
We find no merit in petitioner’s contention that the propriety of the
bidding process involved in the present case has been confused with
the policy issue of the fate of the shipping industry which, petitioner
maintains, has never been an issue that is determinative of this case.
The Court’s Resolution of September 24, 2003 reveals a clear and
definitive ruling on the propriety of the bidding process. In discussing
whether the right to top granted to KAWASAKI in exchange for its
right of first refusal violates the principles of competitive bidding, we
made an exhaustive discourse on the rules and principles of public
bidding and whether they were complied with in the case at bar.16 This
Court categorically ruled on the petitioner’s argument that PHILSECO,
as a shipyard, is a public utility which should maintain a 60%-40%
Filipino-foreign equity ratio, as it was a pivotal issue. In doing so, we
recognized the impact of our ruling on the shipbuilding industry which
was beyond avoidance.17
We reject petitioner’s argument that the present case may be
considered under the Supreme Court Resolution dated February 23,
1984 which included among en banc cases those involving a novel
question of law and those where a doctrine or principle laid down by
the court en banc or in division may be modified or reversed. The
case was resolved based on basic principles of the right of first refusal
in commercial law and estoppel in civil law. Contractual obligations
arising from rights of first refusal are not new in this jurisdiction and
have been recognized in numerous cases.18 Estoppel is too known a
civil law concept to require an elongated discussion. Fundamental
principles on public bidding were likewise used to resolve the issues
raised by the petitioner. To be sure, petitioner leans on the right to top
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
in a public bidding in arguing that the case at bar involves a novel
issue. We are not swayed. The right to top was merely a condition or
a reservation made in the bidding rules which was fully disclosed to all
bidding parties. In Bureau Veritas, represented by Theodor H.
Hunermann v. Office of the President, et al., 19 we dealt with this
conditionality, viz:
x x x It must be stressed, as held in the case of A.C. Esguerra & Sons
v. Aytona, et al., (L-18751, 28 April 1962, 4 SCRA 1245), that in an
"invitation to bid, there is a condition imposed upon the bidders to
the effect that the bidding shall be subject to the right of the
government to reject any and all bids subject to its discretion. In
the case at bar, the government has made its choice and unless
an unfairness or injustice is shown, the losing bidders have no
cause to complain nor right to dispute that choice. This is a well-
settled doctrine in this jurisdiction and elsewhere."
The discretion to accept or reject a bid and award contracts is vested
in the Government agencies entrusted with that function. The
discretion given to the authorities on this matter is of such wide
latitude that the Courts will not interfere therewith, unless it is
apparent that it is used as a shield to a fraudulent award (Jalandoni v.
NARRA, 108 Phil. 486 [1960]). x x x The exercise of this discretion is
a policy decision that necessitates prior inquiry, investigation,
comparison, evaluation, and deliberation. This task can best be
discharged by the Government agencies concerned, not by the
Courts. The role of the Courts is to ascertain whether a branch or
instrumentality of the Government has transgressed its constitutional
boundaries. But the Courts will not interfere with executive or
legislative discretion exercised within those boundaries. Otherwise, it
strays into the realm of policy decision-making.
It is only upon a clear showing of grave abuse of discretion that the
Courts will set aside the award of a contract made by a government
entity. Grave abuse of discretion implies a capricious, arbitrary and
whimsical exercise of power (Filinvest Credit Corp. v. Intermediate
Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155).
The abuse of discretion must be so patent and gross as to amount to
an evasion of positive duty or to a virtual refusal to perform a duty
enjoined by law, as to act at all in contemplation of law, where the
power is exercised in an arbitrary and despotic manner by reason of
5
passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L-
40867, 26 July 1988, 163 SCRA 489).
The facts in this case do not indicate any such grave abuse of
discretion on the part of public respondents when they awarded the
CISS contract to Respondent SGS. In the "Invitation to Prequalify and
Bid" (Annex "C," supra), the CISS Committee made an express
reservation of the right of the Government to "reject any or all
bids or any part thereof or waive any defects contained thereon
and accept an offer most advantageous to the Government." It is
a well-settled rule that where such reservation is made in an
Invitation to Bid, the highest or lowest bidder, as the case may
be, is not entitled to an award as a matter of right (C & C
Commercial Corp. v. Menor, L-28360, 27 January 1983, 120 SCRA
112). Even the lowest Bid or any Bid may be rejected or, in the
exercise of sound discretion, the award may be made to another than
the lowest bidder (A.C. Esguerra & Sons v. Aytona, supra, citing 43
Am. Jur., 788). (emphases supplied)1awphi1.nét
Like the condition in the Bureau Veritas case, the right to top was a
condition imposed by the government in the bidding rules which was
made known to all parties. It was a condition imposed on all
bidders equally, based on the APT’s exercise of its discretion in
deciding on how best to privatize the government’s shares in
PHILSECO. It was not a whimsical or arbitrary condition plucked from
the ether and inserted in the bidding rules but a condition which the
APT approved as the best way the government could comply with its
contractual obligations to KAWASAKI under the JVA and its mandate
of getting the most advantageous deal for the government. The right
to top had its history in the mutual right of first refusal in the JVA and
was reached by agreement of the government and KAWASAKI.
Further, there is no "executive interference" in the functions of this
Court by the mere filing of a memorandum by Secretary of Finance
Jose Isidro Camacho. The memorandum was merely "noted" to
acknowledge its filing. It had no further legal significance. Notably
too, the assailed Resolution dated September 24, 2003 was
decided unanimously by the Special First Division in favor of the
respondents.
Again, we emphasize that a decision or resolution of a Division is that
of the Supreme Court20 and the Court en banc is not an appellate
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
court to which decisions or resolutions of a Division may be
appealed.21
For all the foregoing reasons, we find no basis to elevate this case to
the Court en banc.
Motion for Reconsideration
Three principal arguments were raised in the petitioner’s Motion for
Reconsideration. First, that a fair resolution of the case should be
based on contract law, not on policy considerations; the contracts do
not authorize the right to top to be derived from the right of first
refusal.22 Second, that neither the right of first refusal nor the right to
top can be legally exercised by the consortium which is not the proper
party granted such right under either the JVA or the Asset Specific
Bidding Rules (ASBR).23 Third, that the maintenance of the 60%-40%
relationship between the National Investment and Development
Corporation (NIDC) and KAWASAKI arises from contract and from the
Constitution because PHILSECO is a landholding corporation and
need not be a public utility to be bound by the 60%-40% constitutional
limitation.24
On the other hand, private respondent PHILYARDS asserts that J.G.
Summit has not been able to show compelling reasons to warrant a
reconsideration of the Decision of the Court.25 PHILYARDS denies
that the Decision is based mainly on policy considerations and points
out that it is premised on principles governing obligations and
contracts and corporate law such as the rule requiring respect for
contractual stipulations, upholding rights of first refusal, and
recognizing the assignable nature of contracts rights.26 Also, the ruling
that shipyards are not public utilities relies on established case law
and fundamental rules of statutory construction. PHILYARDS stresses
that KAWASAKI’s right of first refusal or even the right to top is not
limited to the 40% equity of the latter.27 On the landholding issue
raised by J.G. Summit, PHILYARDS emphasizes that this is a non-
issue and even involves a question of fact. Even assuming that this
Court can take cognizance of such question of fact even without the
benefit of a trial, PHILYARDS opines that landholding by PHILSECO
at the time of the bidding is irrelevant because what is essential is that
ultimately a qualified entity would eventually hold PHILSECO’s real
estate properties.28 Further, given the assignable nature of the right of
first refusal, any applicable nationality restrictions, including
landholding limitations, would not affect the right of first refusal itself,
6
but only the manner of its exercise.29 Also, PHILYARDS argues that if
this Court takes cognizance of J.G. Summit’s allegations of fact
regarding PHILSECO’s landholding, it must also recognize
PHILYARDS’ assertions that PHILSECO’s landholdings were sold to
another corporation.30 As regards the right of first refusal, private
respondent explains that KAWASAKI’s reduced shareholdings (from
40% to 2.59%) did not translate to a deprivation or loss of its
contractually granted right of first refusal.31 Also, the bidding was valid
because PHILYARDS exercised the right to top and it was of no
moment that losing bidders later joined PHILYARDS in raising the
purchase price.32
In cadence with the private respondent PHILYARDS, public
respondents COP and APT contend:
1. The conversion of the right of first refusal into a right to top by 5%
does not violate any provision in the JVA between NIDC and
KAWASAKI.
2. PHILSECO is not a public utility and therefore not governed by the
constitutional restriction on foreign ownership.
3. The petitioner is legally estopped from assailing the validity of the
proceedings of the public bidding as it voluntarily submitted itself to
the terms of the ASBR which included the provision on the right to top.
4. The right to top was exercised by PHILYARDS as the nominee of
KAWASAKI and the fact that PHILYARDS formed a consortium to
raise the required amount to exercise the right to top the highest bid
by 5% does not violate the JVA or the ASBR.
5. The 60%-40% Filipino-foreign constitutional requirement for the
acquisition of lands does not apply to PHILSECO because as
admitted by petitioner itself, PHILSECO no longer owns real property.
6. Petitioner’s motion to elevate the case to the Court en banc is
baseless and would only delay the termination of this case.33
In a Consolidated Comment dated March 8, 2004, J.G. Summit
countered the arguments of the public and private respondents in this
wise:
1. The award by the APT of 87.67% shares of PHILSECO to
PHILYARDS with losing bidders through the exercise of a right to top,
which is contrary to law and the constitution is null and void for being
violative of substantive due process and the abuse of right provision in
the Civil Code.
a. The bidders[’] right to top was actually exercised by losing bidders.
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
b. The right to top or the right of first refusal cannot co-exist with a
genuine competitive bidding.
c. The benefits derived from the right to top were unwarranted.
2. The landholding issue has been a legitimate issue since the start of
this case but is shamelessly ignored by the respondents.
a. The landholding issue is not a non-issue.
b. The landholding issue does not pose questions of fact.
c. That PHILSECO owned land at the time that the right of first refusal
was agreed upon and at the time of the bidding are most relevant.
d. Whether a shipyard is a public utility is not the core issue in this
case.
3. Fraud and bad faith attend the alleged conversion of an inexistent
right of first refusal to the right to top.
a. The history behind the birth of the right to top shows fraud and bad
faith.
b. The right of first refusal was, indeed, "effectively useless."
4. Petitioner is not legally estopped to challenge the right to top in this
case.
a. Estoppel is unavailing as it would stamp validity to an act that is
prohibited by law or against public policy.
b. Deception was patent; the right to top was an attractive nuisance.
c. The 10% bid deposit was placed in escrow.
J.G. Summit’s insistence that the right to top cannot be sourced from
the right of first refusal is not new and we have already ruled on the
issue in our Resolution of September 24, 2003. We upheld the mutual
right of first refusal in the JVA.34 We also ruled that nothing in the JVA
prevents KAWASAKI from acquiring more than 40% of PHILSECO’s
total capitalization.35 Likewise, nothing in the JVA or ASBR bars the
conversion of the right of first refusal to the right to top. In sum,
nothing new and of significance in the petitioner’s pleading warrants a
reconsideration of our ruling.
Likewise, we already disposed of the argument that neither the right of
first refusal nor the right to top can legally be exercised by the
consortium which is not the proper party granted such right under
either the JVA or the ASBR. Thus, we held:
The fact that the losing bidder, Keppel Consortium (composed of
Keppel, SM Group, Insular Life Assurance, Mitsui and ICTSI), has
joined PHILYARDS in the latter's effort to raise ₱2.131 billion
necessary in exercising the right to top is not contrary to law, public
7
policy or public morals. There is nothing in the ASBR that bars the
losing bidders from joining either the winning bidder (should the right
to top is not exercised) or KAWASAKI/PHI (should it exercise its right
to top as it did), to raise the purchase price. The petitioner did not
allege, nor was it shown by competent evidence, that the participation
of the losing bidders in the public bidding was done with fraudulent
intent. Absent any proof of fraud, the formation by [PHILYARDS] of a
consortium is legitimate in a free enterprise system. The appellate
court is thus correct in holding the petitioner estopped from
questioning the validity of the transfer of the National Government's
shares in PHILSECO to respondent.36
Further, we see no inherent illegality on PHILYARDS’ act in seeking
funding from parties who were losing bidders. This is a purely
commercial decision over which the State should not interfere absent
any legal infirmity. It is emphasized that the case at bar involves the
disposition of shares in a corporation which the government sought to
privatize. As such, the persons with whom PHILYARDS desired to
enter into business with in order to raise funds to purchase the shares
are basically its business. This is in contrast to a case involving a
contract for the operation of or construction of a government
infrastructure where the identity of the buyer/bidder or financier
constitutes an important consideration. In such cases, the government
would have to take utmost precaution to protect public interest by
ensuring that the parties with which it is contracting have the ability to
satisfactorily construct or operate the infrastructure.
On the landholding issue, J.G. Summit submits that since PHILSECO
is a landholding company, KAWASAKI could exercise its right of first
refusal only up to 40% of the shares of PHILSECO due to the
constitutional prohibition on landholding by corporations with more
than 40% foreign-owned equity. It further argues that since
KAWASAKI already held at least 40% equity in PHILSECO, the right
of first refusal was inutile and as such, could not subsequently be
converted into the right to top. 37 Petitioner also asserts that, at
present, PHILSECO continues to violate the constitutional provision
on landholdings as its shares are more than 40% foreign-
owned.38 PHILYARDS admits that it may have previously held land
but had already divested such landholdings.39 It contends, however,
that even if PHILSECO owned land, this would not affect the right of
first refusal but only the exercise thereof. If the land is retained, the
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
right of first refusal, being a property right, could be assigned to a
qualified party. In the alternative, the land could be divested before
the exercise of the right of first refusal. In the case at bar, respondents
assert that since the right of first refusal was validly converted into a
right to top, which was exercised not by KAWASAKI, but by
PHILYARDS which is a Filipino corporation (i.e., 60% of its shares are
owned by Filipinos), then there is no violation of the Constitution.40 At
first, it would seem that questions of fact beyond cognizance by this
Court were involved in the issue. However, the records show
that PHILYARDS admits it had owned land up until the time of the
bidding.41 Hence, the only issue is whether KAWASAKI had a
valid right of first refusal over PHILSECO shares under the JVA
considering that PHILSECO owned land until the time of the
bidding and KAWASAKI already held 40% of PHILSECO’s equity.
We uphold the validity of the mutual rights of first refusal under the
JVA between KAWASAKI and NIDC. First of all, the right of first
refusal is a property right of PHILSECO shareholders, KAWASAKI
and NIDC, under the terms of their JVA. This right allows them to
purchase the shares of their co-shareholder before they are offered to
a third party. The agreement of co-shareholders to mutually grant
this right to each other, by itself, does not constitute a violation
of the provisions of the Constitution limiting land ownership to
Filipinos and Filipino corporations. As PHILYARDS correctly puts
it, if PHILSECO still owns land, the right of first refusal can be validly
assigned to a qualified Filipino entity in order to maintain the 60%-
40% ratio. This transfer, by itself, does not amount to a violation of the
Anti-Dummy Laws, absent proof of any fraudulent intent. The transfer
could be made either to a nominee or such other party which the
holder of the right of first refusal feels it can comfortably do business
with. Alternatively, PHILSECO may divest of its landholdings, in which
case KAWASAKI, in exercising its right of first refusal, can exceed
40% of PHILSECO’s equity. In fact, it can even be said that if the
foreign shareholdings of a landholding corporation exceeds 40%,
it is not the foreign stockholders’ ownership of the shares which
is adversely affected but the capacity of the corporation to own
land – that is, the corporation becomes disqualified to own land. This
finds support under the basic corporate law principle that the
corporation and its stockholders are separate juridical entities. In this
vein, the right of first refusal over shares pertains to the shareholders
8
whereas the capacity to own land pertains to the corporation. Hence,
the fact that PHILSECO owns land cannot deprive stockholders of
their right of first refusal. No law disqualifies a person from
purchasing shares in a landholding corporation even if the latter
will exceed the allowed foreign equity, what the law disqualifies
is the corporation from owning land. This is the clear import of the
following provisions in the Constitution:
Section 2. All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural
lands, all other natural resources shall not be alienated. The
exploration, development, and utilization of natural resources shall be
under the full control and supervision of the State. The State may
directly undertake such activities, or it may enter into co-production,
joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least sixty per
centum of whose capital is owned by such citizens. Such
agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms
and conditions as may be provided by law. In cases of water rights for
irrigation, water supply, fisheries, or industrial uses other than the
development of water power, beneficial use may be the measure and
limit of the grant.
xxx xxx xxx
Section 7. Save in cases of hereditary succession, no private lands
shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold lands
of the public domain.42 (emphases supplied)
The petitioner further argues that "an option to buy land is void in itself
(Philippine Banking Corporation v. Lui She, 21 SCRA 52 [1967]). The
right of first refusal granted to KAWASAKI, a Japanese corporation, is
similarly void. Hence, the right to top, sourced from the right of first
refusal, is also void."43 Contrary to the contention of petitioner, the
case of Lui She did not that say "an option to buy land is void in
itself," for we ruled as follows:
x x x To be sure, a lease to an alien for a reasonable period is
valid. So is an option giving an alien the right to buy real
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
property on condition that he is granted Philippine citizenship.
As this Court said in Krivenko vs. Register of Deeds:
[A]liens are not completely excluded by the Constitution from the use
of lands for residential purposes. Since their residence in the
Philippines is temporary, they may be granted temporary rights such
as a lease contract which is not forbidden by the Constitution. Should
they desire to remain here forever and share our fortunes and
misfortunes, Filipino citizenship is not impossible to acquire.
But if an alien is given not only a lease of, but also an option to
buy, a piece of land, by virtue of which the Filipino owner cannot
sell or otherwise dispose of his property, this to last for 50 years,
then it becomes clear that the arrangement is a virtual transfer of
ownership whereby the owner divests himself in stages not only
of the right to enjoy the land (jus possidendi, jus utendi, jus
fruendi and jus abutendi) but also of the right to dispose of it (jus
disponendi) — rights the sum total of which make up ownership.
It is just as if today the possession is transferred, tomorrow, the
use, the next day, the disposition, and so on, until ultimately all
the rights of which ownership is made up are consolidated in an
alien. And yet this is just exactly what the parties in this case did
within this pace of one year, with the result that Justina Santos'[s]
ownership of her property was reduced to a hollow concept. If this can
be done, then the Constitutional ban against alien landholding in the
Philippines, as announced in Krivenko vs. Register of Deeds, is
indeed in grave peril.44 (emphases supplied; Citations omitted)
In Lui She, the option to buy was invalidated because it amounted to
a virtual transfer of ownership as the owner could not sell or dispose
of his properties. The contract in Lui She prohibited the owner of the
land from selling, donating, mortgaging, or encumbering the property
during the 50-year period of the option to buy. This is not so in the
case at bar where the mutual right of first refusal in favor of NIDC and
KAWASAKI does not amount to a virtual transfer of land to a non-
Filipino. In fact, the case at bar involves a right of first refusal over
shares of stock while the Lui She case involves an option to buy
the land itself. As discussed earlier, there is a distinction between the
shareholder’s ownership of shares and the corporation’s ownership of
land arising from the separate juridical personalities of the corporation
and its shareholders.
9
We note that in its Motion for Reconsideration, J.G. Summit alleges
that PHILSECO continues to violate the Constitution as its foreign
equity is above 40% and yet owns long-term leasehold rights
which are real rights.45 It cites Article 415 of the Civil Code which
includes in the definition of immovable property, "contracts for public
works, and servitudes and other real rights over immovable
property."46 Any existing landholding, however, is denied by
PHILYARDS citing its recent financial statements.47 First, these are
questions of fact, the veracity of which would require introduction of
evidence. The Court needs to validate these factual allegations based
on competent and reliable evidence. As such, the Court cannot
resolve the questions they pose. Second, J.G. Summit misreads the
provisions of the Constitution cited in its own pleadings, to wit:
29.2 Petitioner has consistently pointed out in the past that private
respondent is not a 60%-40% corporation, and this violates the
Constitution x x x The violation continues to this day because under
the law, it continues to own real property…
xxx xxx xxx
32. To review the constitutional provisions involved, Section 14,
Article XIV of the 1973 Constitution (the JVA was signed in 1977),
provided:
"Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain."
32.1 This provision is the same as Section 7, Article XII of the 1987
Constitution.
32.2 Under the Public Land Act, corporations qualified to acquire or
hold lands of the public domain are corporations at least 60% of
which is owned by Filipino citizens (Sec. 22, Commonwealth Act 141,
as amended). (emphases supplied)
As correctly observed by the public respondents, the prohibition in the
Constitution applies only to ownership of land.48 It does not extend to
immovable or real property as defined under Article 415 of the
Civil Code. Otherwise, we would have a strange situation where the
ownership of immovable property such as trees, plants and growing
fruit attached to the land49 would be limited to Filipinos and Filipino
corporations only.
III.
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
WHEREFORE, in view of the foregoing, the petitioner’s Motion for
Reconsideration is DENIED WITH FINALITY and the decision
appealed from is AFFIRMED. The Motion to Elevate This Case to the
Court En Banc is likewise DENIED for lack of merit.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Corona, and Tinga,
JJ., concur.

10
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
G.R. No. 127405               October 4, 2000
MARJORIE TOCAO and WILLIAM T. BELO, petitioners,
vs.
COURT OF APPEALS and NENITA A. ANAY, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review of the Decision of the Court of Appeals in
CA-G.R. CV No. 41616,1 affirming the Decision of the Regional Trial
Court of Makati, Branch 140, in Civil Case No. 88-509.2
Fresh from her stint as marketing adviser of Technolux in Bangkok,
Thailand, private respondent Nenita A. Anay met petitioner William T.
Belo, then the vice-president for operations of Ultra Clean Water
Purifier, through her former employer in Bangkok. Belo introduced
Anay to petitioner Marjorie Tocao, who conveyed her desire to enter
into a joint venture with her for the importation and local distribution of
kitchen cookwares. Belo volunteered to finance the joint venture and
assigned to Anay the job of marketing the product considering her
experience and established relationship with West Bend Company, a
manufacturer of kitchen wares in Wisconsin, U.S.A. Under the joint
venture, Belo acted as capitalist, Tocao as president and general
manager, and Anay as head of the marketing department and later,
vice-president for sales. Anay organized the administrative staff and
sales force while Tocao hired and fired employees, determined
commissions and/or salaries of the employees, and assigned them to
different branches. The parties agreed that Belo’s name should not
appear in any documents relating to their transactions with West Bend
Company. Instead, they agreed to use Anay’s name in securing
distributorship of cookware from that company. The parties agreed
further 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; and (4) two percent (2%) for her
demonstration services. The agreement was not reduced to writing on
the strength of Belo’s assurances that he was sincere, dependable
and honest when it came to financial commitments.
Anay having secured the distributorship of cookware products from
the West Bend Company and organized the administrative staff and
the sales force, the cookware business took off successfully. They
operated under the name of Geminesse Enterprise, a sole
11
proprietorship registered in Marjorie Tocao’s name, with office at 712
Rufino Building, Ayala Avenue, Makati City. Belo made good his
monetary commitments to Anay. Thereafter, Roger Muencheberg of
West Bend Company invited Anay to the distributor/dealer meeting in
West Bend, Wisconsin, U.S.A., from July 19 to 21, 1987 and to the
southwestern regional convention in Pismo Beach, California, U.S.A.,
from July 25-26, 1987. Anay accepted the invitation with the consent
of Marjorie Tocao who, as president and general manager of
Geminesse Enterprise, even wrote a letter to the Visa Section of the
U.S. Embassy in Manila on July 13, 1987. A portion of the letter
reads:
"Ms. Nenita D. Anay (sic), who has been patronizing and supporting
West Bend Co. for twenty (20) years now, acquired the distributorship
of Royal Queen cookware for Geminesse Enterprise, is the Vice
President Sales Marketing and a business partner of our company,
will attend in response to the invitation." (Italics supplied.)3
Anay arrived from the U.S.A. in mid-August 1987, and immediately
undertook the task of saving the business on account of the
unsatisfactory sales record in the Makati and Cubao offices. On
August 31, 1987, she received a plaque of appreciation from the
administrative and sales people through Marjorie Tocao4 for her
excellent job performance. On October 7, 1987, in the presence of
Anay, Belo signed a memo5 entitling her to a thirty-seven percent
(37%) commission for her personal sales "up Dec 31/87." Belo
explained to her that said commission was apart from her ten percent
(10%) share in the profits. On October 9, 1987, Anay learned that
Marjorie Tocao had signed a letter6 addressed to the Cubao sales
office to the effect that she was no longer the vice-president of
Geminesse Enterprise. The following day, October 10, she received a
note from Lina T. Cruz, marketing manager, that Marjorie Tocao had
barred her from holding office and conducting demonstrations in both
Makati and Cubao offices.7 Anay attempted to contact Belo. She wrote
him twice to demand her overriding commission for the period of
January 8, 1988 to February 5, 1988 and the audit of the company to
determine her share in the net profits. When her letters were not
answered, Anay consulted her lawyer, who, in turn, wrote Belo a
letter. Still, that letter was not answered.
Anay still received her five percent (5%) overriding commission up to
December 1987. The following year, 1988, she did not receive the
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
same commission although the company netted a gross sales of
P13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a
complaint for sum of money with damages8 against Marjorie D. Tocao
and William Belo before the Regional Trial Court of Makati, Branch
140.
In her complaint, Anay prayed that defendants be ordered to pay her,
jointly and severally, the following: (1) P32,00.00 as unpaid overriding
commission from January 8, 1988 to February 5, 1988; (2)
P100,000.00 as moral damages, and (3) P100,000.00 as exemplary
damages. The plaintiff also prayed for an audit of the finances of
Geminesse Enterprise from the inception of its business operation
until she was "illegally dismissed" to determine her ten percent (10%)
share in the net profits. She further prayed that she be paid the five
percent (5%) "overriding commission" on the remaining 150 West
Bend cookware sets before her "dismissal."
In their answer,9 Marjorie Tocao and Belo asserted that the "alleged
agreement" with Anay that was "neither reduced in writing, nor
ratified," was "either unenforceable or void or inexistent." As far as
Belo was concerned, his only role was to introduce Anay to Marjorie
Tocao. There could not have been a partnership because, as Anay
herself admitted, Geminesse Enterprise was the sole proprietorship of
Marjorie Tocao. Because Anay merely acted as marketing
demonstrator of Geminesse Enterprise for an agreed remuneration,
and her complaint referred to either her compensation or dismissal,
such complaint should have been lodged with the Department of
Labor and not with the regular court.
Petitioners (defendants therein) further alleged that Anay filed the
complaint on account of "ill-will and resentment" because Marjorie
Tocao did not allow her to "lord it over in the Geminesse Enterprise."
Anay had acted like she owned the enterprise because of her
experience and expertise. Hence, petitioners were the ones who
suffered actual damages "including 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." They also alleged that, to "vindicate their names," they
had to hire counsel for a fee of P23,000.00.
12
At the pre-trial conference, the issues were limited to: (a) whether or
not the plaintiff was an employee or partner of Marjorie Tocao and
Belo, and (b) whether or not the parties are entitled to damages.10
In their defense, Belo denied that Anay was supposed to receive a
share in the profit of the business. He, however, admitted that the two
had agreed that Anay would receive a three to four percent (3-4%)
share in the gross sales of the cookware. He denied contributing
capital to the business or receiving a share in its profits as he merely
served as a guarantor of Marjorie Tocao, who was new in the
business. He attended and/or presided over business meetings of the
venture in his capacity as a guarantor but he never participated in
decision-making. He claimed that he wrote the memo granting the
plaintiff thirty-seven percent (37%) commission upon her dismissal
from the business venture at the request of Tocao, because Anay had
no other income.
For her part, Marjorie Tocao denied having entered into an oral
partnership agreement with Anay. However, she admitted that Anay
was an expert in the cookware business and hence, they agreed to
grant her the following commissions: thirty-seven percent (37%) on
personal sales; five percent (5%) on gross sales; two percent (2%) on
product demonstrations, and two percent (2%) for recruitment of
personnel. Marjorie denied that they agreed on a ten percent (10%)
commission on the net profits. Marjorie claimed that she got the
capital for the business out of the sale of the sewing machines used in
her garments business and from Peter Lo, a Singaporean friend-
financier who loaned her the funds with interest. Because she treated
Anay as her "co-equal," Marjorie received the same amounts of
commissions as her. However, Anay failed to account for stocks
valued at P200,000.00.
On April 22, 1993, the trial court rendered a decision the dispositive
part of which is as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby
rendered:
1. Ordering defendants to submit to the Court a formal account as to
the partnership affairs for the years 1987 and 1988 pursuant to Art.
1809 of the Civil Code in order to determine the ten percent (10%)
share of plaintiff in the net profits of the cookware business;
2. Ordering defendants to pay five percent (5%) overriding
commission for the one hundred and fifty (150) cookware sets
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
available for disposition when plaintiff was wrongfully excluded from
the partnership by defendants;
3. Ordering defendants to pay plaintiff overriding commission on the
total production which for the period covering January 8, 1988 to
February 5, 1988 amounted to P32,000.00;
4. Ordering defendants to pay P100,000.00 as moral damages and
P100,000.00 as exemplary damages, and
5. Ordering defendants to pay P50,000.00 as attorney’s fees and
P20,000.00 as costs of suit.
SO ORDERED."
The trial court held that there was indeed an "oral partnership
agreement between the plaintiff and the defendants," based on the
following: (a) there was an intention to create a partnership; (b) a
common fund was established through contributions consisting of
money and industry, and (c) there was a joint interest in the profits.
The testimony of Elizabeth Bantilan, Anay’s cousin and the
administrative officer of Geminesse Enterprise from August 21, 1986
until it was absorbed by Royal International, Inc., buttressed the fact
that a partnership existed between the parties. The letter of Roger
Muencheberg of West Bend Company stating that he awarded the
distributorship to Anay and Marjorie Tocao because he was convinced
that with Marjorie’s financial contribution and Anay’s experience, the
combination of the two would be invaluable to the partnership, also
supported that conclusion. Belo’s claim that he was merely a
"guarantor" has no basis since there was no written evidence thereof
as required by Article 2055 of the Civil Code. Moreover, his acts of
attending and/or presiding over meetings of Geminesse Enterprise
plus his issuance of a memo giving Anay 37% commission on
personal sales belied this. On the contrary, it demonstrated his
involvement as a partner in the business.
The trial court further held that the payment of commissions did not
preclude the existence of the partnership inasmuch as such practice
is often resorted to in business circles as an impetus to bigger sales
volume. It did not matter that the agreement was not in writing
because Article 1771 of the Civil Code provides that a partnership
may be "constituted in any form." The fact that Geminesse Enterprise
was registered in Marjorie Tocao’s name is not determinative of
whether or not the business was managed and operated by a sole
proprietor or a partnership. What was registered with the Bureau of
13
Domestic Trade was merely the business name or style of Geminesse
Enterprise.
The trial court finally held that a partner who is excluded wrongfully
from a partnership is an innocent partner. Hence, the guilty partner
must give him his due upon the dissolution of the partnership as well
as damages or share in the profits "realized from the appropriation of
the partnership business and goodwill." An innocent partner thus
possesses "pecuniary interest in every existing contract that was
incomplete and in the trade name of the co-partnership and assets at
the time he was wrongfully expelled."
Petitioners’ appeal to the Court of Appeals11 was dismissed, but the
amount of damages awarded by the trial court were reduced to
P50,000.00 for moral damages and P50,000.00 as exemplary
damages. Their Motion for Reconsideration was denied by the Court
of Appeals for lack of merit.12 Petitioners Belo and Marjorie Tocao are
now before this Court on a petition for review on certiorari, asserting
that there was no business partnership between them and herein
private respondent Nenita A. Anay who is, therefore, not entitled to
the damages awarded to her by the Court of Appeals.
Petitioners Tocao and Belo contend that the Court of Appeals
erroneously held that a partnership existed between them and private
respondent Anay because Geminesse Enterprise "came into being"
exactly a year before the "alleged partnership" was formed, and that it
was very unlikely that petitioner Belo would invest the sum of
P2,500,000.00 with petitioner Tocao contributing nothing, without any
"memorandum whatsoever regarding the alleged partnership."13
The issue of whether or not a partnership exists is a factual matter
which are within the exclusive domain of both the trial and appellate
courts. This Court cannot set aside factual findings of such courts
absent any showing that there is no evidence to support the
conclusion drawn by the court a quo.14 In this case, both the trial court
and the Court of Appeals are one in ruling that petitioners and private
respondent established a business partnership. This Court finds no
reason to rule otherwise.
To be considered a juridical personality, a partnership must fulfill
these requisites: (1) two or more persons bind themselves to
contribute money, property or industry to a common fund; and (2)
intention on the part of the partners to divide the profits among
themselves.15 It may be constituted in any form; a public instrument is
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
necessary only where immovable property or real rights are
contributed thereto.16 This implies that since a contract of partnership
is consensual, an oral contract of partnership is as good as a written
one. Where no immovable property or real rights are involved, what
matters is that the parties have complied with the requisites of a
partnership. The fact that there appears to be no record in the
Securities and Exchange Commission of a public instrument
embodying the partnership agreement pursuant to Article 1772 of the
Civil Code17 did not cause the nullification of the partnership. The
pertinent provision of the Civil Code on the matter states:
Art. 1768. The partnership has a juridical personality separate and
distinct from that of each of the partners, even in case of failure to
comply with the requirements of article 1772, first paragraph.
Petitioners admit that private respondent had the expertise to engage
in the business of distributorship of cookware. Private respondent
contributed such expertise to the partnership and hence, under the
law, she was the industrial or managing partner. It was through her
reputation with the West Bend Company that the partnership was able
to open the business of distributorship of that company’s cookware
products; it was through the same efforts that the business was
propelled to financial success. Petitioner Tocao herself admitted
private respondent’s indispensable role in putting up the business
when, upon being asked if private respondent held the positions of
marketing manager and vice-president for sales, she testified thus:
"A: No, sir at the start she was the marketing manager because there
were no one to sell yet, it’s only me there then her and then two (2)
people, so about four (4). Now, after that when she recruited already
Oscar Abella and Lina Torda-Cruz these two (2) people were given
the designation of marketing managers of which definitely Nita as
superior to them would be the Vice President."18
By the set-up of the business, third persons were made to believe that
a partnership had indeed been forged between petitioners and private
respondents. Thus, the communication dated June 4, 1986 of Missy
Jagler of West Bend Company to Roger Muencheberg of the same
company states:
"Marge Tocao is president of Geminesse Enterprises. Geminesse will
finance the operations. Marge does not have cookware experience.
Nita Anay has started to gather former managers, Lina Torda and
Dory Vista. She has also gathered former demonstrators, Betty
14
Bantilan, Eloisa Lamela, Menchu Javier. They will continue to gather
other key people and build up the organization. All they need is the
finance and the products to sell."19
On the other hand, petitioner Belo’s denial that he financed the
partnership rings hollow in the face of the established fact that he
presided over meetings regarding matters affecting the operation of
the business. Moreover, his having authorized in writing on October 7,
1987, on a stationery of his own business firm, Wilcon Builders
Supply, that private respondent should receive thirty-seven (37%) of
the proceeds of her personal sales, could not be interpreted otherwise
than that he had a proprietary interest in the business. His claim that
he was merely a guarantor is belied by that personal act of
proprietorship in the business. Moreover, if he was indeed a guarantor
of future debts of petitioner Tocao under Article 2053 of the Civil
Code,20 he should have presented documentary evidence therefor.
While Article 2055 of the Civil Code simply provides that guaranty
must be "express," Article 1403, the Statute of Frauds, requires that "a
special promise to answer for the debt, default or miscarriage of
another" be in writing.21
Petitioner Tocao, a former ramp model,22 was also a capitalist in the
partnership. She claimed that she herself financed the business. Her
and petitioner Belo’s roles as both capitalists to the partnership with
private respondent are buttressed by petitioner Tocao’s admissions
that petitioner Belo was her boyfriend and that the partnership was not
their only business venture together. They also established a firm that
they called "Wiji," the combination of petitioner Belo’s first name,
William, and her nickname, Jiji.23 The special relationship between
them dovetails with petitioner Belo’s claim that he was acting in behalf
of petitioner Tocao. Significantly, in the early stage of the business
operation, petitioners requested West Bend Company to allow them to
"utilize their banking and trading facilities in Singapore" in the matter
of importation and payment of the cookware products.24 The inevitable
conclusion, therefore, was that petitioners merged their respective
capital and infused the amount into the partnership of distributing
cookware with private respondent as the managing partner.
The business venture operated under Geminesse Enterprise did not
result in an employer-employee relationship between petitioners and
private respondent. While it is true that the receipt of a percentage of
net profits constitutes only prima facie evidence that the recipient is a
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
25 
partner in the business, the evidence in the case at bar controverts
an employer-employee relationship between the parties. In the first
place, private respondent had a voice in the management of the
affairs of the cookware distributorship,26 including selection of people
who would constitute the administrative staff and the sales force.
Secondly, petitioner Tocao’s admissions militate against an employer-
employee relationship. She admitted that, like her who owned
Geminesse Enterprise,27 private respondent received only
commissions and transportation and representation allowances28 and
not a fixed salary.29 Petitioner Tocao testified:
"Q: Of course. Now, I am showing to you certain documents already
marked as Exhs. ‘X’ and ‘Y.’ Please go over this. Exh. ‘Y’ is
denominated `Cubao overrides’ 8-21-87 with ending August 21, 1987,
will you please go over this and tell the Honorable Court whether you
ever came across this document and know of your own knowledge
the amount ---
A: Yes, sir this is what I am talking about earlier. That’s the one I am
telling you earlier a certain percentage for promotions, advertising,
incentive.
Q: I see. Now, this promotion, advertising, incentive, there is a figure
here and words which I quote: ‘Overrides Marjorie Ann Tocao
P21,410.50’ this means that you have received this amount?
A: Oh yes, sir.
Q: I see. And, by way of amplification this is what you are saying as
one representing commission, representation, advertising and
promotion?
A: Yes, sir.
Q: I see. Below your name is the words and figure and I quote ‘Nita D.
Anay P21,410.50’, what is this?
A: That’s her overriding commission.
Q: Overriding commission, I see. Of course, you are telling this
Honorable Court that there being the same P21,410.50 is merely by
coincidence?
A: No, sir, I made it a point that we were equal because the way I look
at her kasi, you know in a sense because of her expertise in the
business she is vital to my business. So, as part of the incentive I
offer her the same thing.
15
Q: So, in short you are saying that this you have shared together, I
mean having gotten from the company P21,140.50 is your way of
indicating that you were treating her as an equal?
A: As an equal.
Q: As an equal, I see. You were treating her as an equal?
A: Yes, sir.
Q: I am calling again your attention to Exh. ‘Y’ ‘Overrides Makati the
other one is ---
A: That is the same thing, sir.
Q: With ending August 21, words and figure ‘Overrides Marjorie Ann
Tocao P15,314.25’ the amount there you will acknowledge you have
received that?
A: Yes, sir.
Q: Again in concept of commission, representation, promotion, etc.?
A: Yes, sir.
Q: Okey. Below your name is the name of Nita Anay P15,314.25 that
is also an indication that she received the same amount?
A: Yes, sir.
Q: And, as in your previous statement it is not by coincidence that
these two (2) are the same?
A: No, sir.
Q: It is again in concept of you treating Miss Anay as your equal?
A: Yes, sir." (Italics supplied.)30
If indeed petitioner Tocao was private respondent’s employer, it is
difficult to believe that they shall receive the same income in the
business. In a partnership, each partner must share in the profits and
losses of the venture, except that the industrial partner shall not be
liable for the losses.31 As an industrial partner, private respondent had
the right to demand for a formal accounting of the business and to
receive her share in the net profit.32
The fact that the cookware distributorship was operated under the
name of Geminesse Enterprise, a sole proprietorship, is of no
moment. What was registered with the Bureau of Domestic Trade on
August 19, 1987 was merely the name of that enterprise.33 While it is
true that in her undated application for renewal of registration of that
firm name, petitioner Tocao indicated that it would be engaged in
retail of "kitchenwares, cookwares, utensils, skillet,"34 she also
admitted that the enterprise was only "60% to 70% for the cookware
business," while 20% to 30% of its business activity was devoted to
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
35 
the sale of water sterilizer or purifier. Indubitably then, the business
name Geminesse Enterprise was used only for practical reasons - it
was utilized as the common name for petitioner Tocao’s various
business activities, which included the distributorship of cookware.
Petitioners underscore the fact that the Court of Appeals did not return
the "unaccounted and unremitted stocks of Geminesse Enterprise
amounting to P208,250.00."36 Obviously a ploy to offset the damages
awarded to private respondent, that claim, more than anything else,
proves the existence of a partnership between them. In Idos v. Court
of Appeals, this Court said:
"The best evidence of the existence of the partnership, which was not
yet terminated (though in the winding up stage), were the unsold
goods and uncollected receivables, which were presented to the trial
court. Since the partnership has not been terminated, the petitioner
and private complainant remained as co-partners. x x x."37
It is not surprising then that, even after private respondent had been
unceremoniously booted out of the partnership in October 1987, she
still received her overriding commission until December 1987.
Undoubtedly, petitioner Tocao unilaterally excluded private
respondent from the partnership to reap for herself and/or for
petitioner Belo financial gains resulting from private respondent’s
efforts to make the business venture a success. Thus, as petitioner
Tocao became adept in the business operation, she started to assert
herself to the extent that she would even shout at private respondent
in front of other people.38 Her instruction to Lina Torda Cruz, marketing
manager, not to allow private respondent to hold office in both the
Makati and Cubao sales offices concretely spoke of her perception
that private respondent was no longer necessary in the business
operation,39 and resulted in a falling out between the two. However, a
mere falling out or misunderstanding between partners does not
convert the partnership into a sham organization.40 The partnership
exists until dissolved under the law. Since the partnership created by
petitioners and private respondent has no fixed term and is therefore
a partnership at will predicated on their mutual desire and consent, it
may be dissolved by the will of a partner. Thus:
"x x x. The right to choose with whom a person wishes to associate
himself is the very foundation and essence of that partnership. Its
continued existence is, in turn, dependent on the constancy of that
mutual resolve, along with each partner’s capability to give it, and the
16
absence of cause for dissolution provided by the law itself. Verily, any
one of the partners may, at his sole pleasure, dictate a dissolution of
the partnership at will. He must, however, act in good faith, not that
the attendance of bad faith can prevent the dissolution of the
partnership but that it can result in a liability for damages."41
An unjustified dissolution by a partner can subject him to action for
damages because by the mutual agency that arises in a partnership,
the doctrine of delectus personae allows the partners to have
the power, although not necessarily the right to dissolve the
partnership.42
In this case, petitioner Tocao’s unilateral exclusion of private
respondent from the partnership is shown by her memo to the Cubao
office plainly stating that private respondent was, as of October 9,
1987, no longer the vice-president for sales of Geminesse
Enterprise.43 By that memo, petitioner Tocao effected her own
withdrawal from the partnership and considered herself as having
ceased to be associated with the partnership in the carrying on of the
business. Nevertheless, the partnership was not terminated thereby; it
continues until the winding up of the business.44
The winding up of partnership affairs has not yet been undertaken by
the partnership.1âwphi1 This is manifest in petitioners’ claim for
stocks that had been entrusted to private respondent in the pursuit of
the partnership business.
The determination of the amount of damages commensurate with the
factual findings upon which it is based is primarily the task of the trial
court.45 The Court of Appeals may modify that amount only when its
factual findings are diametrically opposed to that of the lower
court,46 or the award is palpably or scandalously and unreasonably
excessive.47 However, exemplary damages that are awarded "by way
of example or correction for the public good,"48 should be reduced to
P50,000.00, the amount correctly awarded by the Court of Appeals.
Concomitantly, the award of moral damages of P100,000.00 was
excessive and should be likewise reduced to P50,000.00. Similarly,
attorney’s fees that should be granted on account of the award of
exemplary damages and petitioners’ evident bad faith in refusing to
satisfy private respondent’s plainly valid, just and demandable
claims,49 appear to have been excessively granted by the trial court
and should therefore be reduced to P25,000.00.
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
WHEREFORE, the instant petition for review on certiorari is DENIED.
The partnership among petitioners and 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. This case is remanded to the Regional Trial Court for
proper proceedings relative to 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.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.

17
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
G.R. No. L-5236 January 10, 1910
PEDRO MARTINEZ, Plaintiff-Appellee, vs. ONG PONG CO and ONG
LAY, defendants.
ONG PONG CO., Appellant.
Fernando de la Cantera for appellant.
O'Brien and DeWitt for appellee.
ARELLANO, C.J.: chanrobles virtual law library
On the 12th of December, 1900, the plaintiff herein delivered P1,500
to the defendants who, in a private document, acknowledged that they
had received the same with the agreement, as stated by them, "that
we are to invest the amount in a store, the profits or losses of which
we are to divide with the former, in equal shares." chanrobles virtual
law library
The plaintiff filed a complaint on April 25, 1907, in order to compel the
defendants to render him an accounting of the partnership as agreed
to, or else to refund him the P1,500 that he had given them for the
said purpose. Ong Pong Co alone appeared to answer the complaint;
he admitted the fact of the agreement and the delivery to him and to
Ong Lay of the P1,500 for the purpose aforesaid, but he alleged that
Ong Lay, who was then deceased, was the one who had managed
the business, and that nothing had resulted therefrom save the loss of
the capital of P1,500, to which loss the plaintiff
agreed.chanroblesvirtualawlibrary chanrobles virtual law library
The judge of the Court of First Instance of the city of Manila who tried
the case ordered Ong Pong Co to return to the plaintiff one-half of the
said capital of P1,500 which, together with Ong Lay, he had received
from the plaintiff, to wit, P750, plus P90 as one-half of the profits,
calculated at the rate of 12 per cent per annum for the six months that
the store was supposed to have been open, both sums in Philippine
currency, making a total of P840, with legal interest thereon at the rate
of 6 per cent per annum, from the 12th of June, 1901, when the
business terminated and on which date he ought to have returned the
said amount to the plaintiff, until the full payment thereof with
costs.chanroblesvirtualawlibrary chanrobles virtual law library
From this judgment Ong Pong Co appealed to this court, and
assigned the following errors:
1. For not having taken into consideration the fact that the reason for
the closing of the store was the ejectment from the premises occupied
by it.chanroblesvirtualawlibrary chanrobles virtual law library
18
2. For not having considered the fact that there were
losses.chanroblesvirtualawlibrary chanrobles virtual law library
3. For holding that there should have been
profits.chanroblesvirtualawlibrary chanrobles virtual law library
4. For having applied article 1138 of the Civil
Code.chanroblesvirtualawlibrary chanrobles virtual law library
5. and 6. For holding that the capital ought to have yielded profits, and
that the latter should be calculated 12 per cent per annum;
and chanrobles virtual law library
7. The findings of the ejectment.
As to the first assignment of error, the fact that the store was closed
by virtue of ejectment proceedings is of no importance for the effects
of the suit. The whole action is based upon the fact that the
defendants received certain capital from the plaintiff for the purpose of
organizing a company; they, according to the agreement, were to
handle the said money and invest it in a store which was the object of
the association; they, in the absence of a special agreement vesting in
one sole person the management of the business, were the actual
administrators thereof; as such administrators they were the agent of
the company and incurred the liabilities peculiar to every agent,
among which is that of rendering account to the principal of their
transactions, and paying him everything they may have received by
virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.) Neither of
them has rendered such account nor proven the losses referred to by
Ong Pong Co; they are therefore obliged to refund the money that
they received for the purpose of establishing the said store - the
object of the association. This was the principal pronouncement of the
judgment.chanroblesvirtualawlibrary chanrobles virtual law library
With regard to the second and third assignments of error, this court,
like the court below, finds no evidence that the entire capital or any
part thereof was lost. It is no evidence of such loss to aver, without
proof, that the effects of the store were ejected. Even though this were
proven, it could not be inferred therefrom that the ejectment was due
to the fact that no rents were paid, and that the rent was not paid on
account of the loss of the capital belonging to the
enterprise.chanroblesvirtualawlibrary chanrobles virtual law library
With regard to the possible profits, the finding of the court below are
based on the statements of the defendant Ong Pong Co, to the effect
that "there were some profits, but not large ones." This court,
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
however, does not find that the amount thereof has been proven, nor
deem it possible to estimate them to be a certain sum, and for a given
period of time; hence, it can not admit the estimate, made in the
judgment, of 12 per cent per annum for the period of six
months.chanroblesvirtualawlibrary chanrobles virtual law library
Inasmuch as in this case nothing appears other than the failure to
fulfill an obligation on the part of a partner who acted as agent in
receiving money for a given purpose, for which he has rendered no
accounting, such agent is responsible only for the losses which, by a
violation of the provisions of the law, he incurred. This being an
obligation to pay in cash, there are no other losses than the legal
interest, which interest is not due except from the time of the judicial
demand, or, in the present case, from the filing of the complaint. (Arts.
1108 and 1100, Civil Code.) We do not consider that article 1688 is
applicable in this case, in so far as it provides "that the partnership is
liable to every partner for the amounts he may have disbursed on
account of the same and for the proper interest," for the reason that
no other money than that contributed as is
involved.chanroblesvirtualawlibrary chanrobles virtual law library
As in the partnership there were two administrators or agents liable for
the above-named amount, article 1138 of the Civil Code has been
invoked; this latter deals with debts of a partnership where the
obligation is not a joint one, as is likewise provided by article 1723 of
said code with respect to the liability of two or more agents with
respect to the return of the money that they received from their
principal. Therefore, the other errors assigned have not been
committed.chanroblesvirtualawlibrary chanrobles virtual law library
In view of the foregoing judgment appealed from is hereby affirmed,
provided, however, that the defendant Ong Pong Co shall only pay
the plaintiff the sum of P750 with the legal interest thereon at the rate
of 6 per cent per annum from the time of the filing of the complaint,
and the costs, without special ruling as to the costs of this instance.
So ordered.
Torres, Johnson, Carson, and Moreland, JJ., concur.

19
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
G.R. No. 85494             May 7, 1991
CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V. RAMNANI
and MOTI G. RAMNANI, petitioners,
vs.
COURT OF APPEALS, SPOUSES ISHWAR JETHMAL RAMNANI,
SONYA JETHMAL RAMNANI and OVERSEAS HOLDING CO.,
LTD., respondents.
G.R. No. 85496             May 7, 1991
SPOUSES ISHWAR JETHMAL RAMNANI AND SONYA JET
RAMNANI, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ORTIGAS & CO., LTD.
PARTNERSHIP, and OVERSEAS HOLDING CO.,
LTD., respondents.
Quasha, Asperilla Ancheta, Peña and Nolasco for petitioners Ishwar
Jethmal Ramnani & Sonya Ramnani.
Salonga, Andres, Hernandez & Allado for Choithram Jethmal
Ramnani, Nirmla Ramnani & Moti Ramnani.
Rama Law Office for private respondents in collaboration with
Salonga, Andres, Hernandez & Allado.
Eulogio R. Rodriguez for Ortigas & Co., Ltd.
GANCAYCO, J.:
This case involves the bitter quarrel of two brothers over two (2)
parcels of land and its improvements now worth a fortune. The bone
of contention is the apparently conflicting factual findings of the trial
court and the appellate court, the resolution of which will materially
affect the result of the contest.
The following facts are not disputed.
Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are
brothers of the full blood. Ishwar and his spouse Sonya had their main
business based in New York. Realizing the difficulty of managing their
investments in the Philippines they executed a general power of
attorney on January 24, 1966 appointing Navalrai and Choithram as
attorneys-in-fact, empowering them to manage and conduct their
business concern in the Philippines.1
On February 1, 1966 and on May 16, 1966, Choithram, in his capacity
as aforesaid attorney-in-fact of Ishwar, entered into two agreements
20
for the purchase of two parcels of land located in Barrio Ugong, Pasig,
Rizal, from Ortigas & Company, Ltd. Partnership (Ortigas for short)
with a total area of approximately 10,048 square meters.2 Per
agreement, Choithram paid the down payment and installments on
the lot with his personal checks. A building was constructed thereon
by Choithram in 1966 and this was occupied and rented by Jethmal
Industries and a wardrobe shop called Eppie's Creation. Three other
buildings were built thereon by Choithram through a loan of
P100,000.00 obtained from the Merchants Bank as well as the income
derived from the first building. The buildings were leased out by
Choithram as attorney-in-fact of Ishwar. Two of these buildings were
later burned.
Sometime in 1970 Ishwar asked Choithram to account for the income
and expenses relative to these properties during the period 1967 to
1970. Choithram failed and refused to render such accounting. As a
consequence, on February 4, 1971, Ishwar revoked the general
power of attorney. Choithram and Ortigas were duly notified of such
revocation on April 1, 1971 and May 24, 1971, respectively.3 Said
notice was also registered with the Securities and Exchange
Commission on March 29, 19714 and was published in the April 2,
1971 issue of The Manila Times for the information of the general
public.5
Nevertheless, Choithram as such attorney-in-fact of Ishwar,
transferred all rights and interests of Ishwar and Sonya in favor of his
daughter-in-law, Nirmla Ramnani, on February 19, 1973. Her husband
is Moti, son of Choithram. Upon complete payment of the lots, Ortigas
executed the corresponding deeds of sale in favor of Nirmla.6 Transfer
Certificates of Title Nos. 403150 and 403152 of the Register of Deeds
of Rizal were issued in her favor.
Thus, on October 6, 1982, Ishwar and Sonya (spouses Ishwar for
short) filed a complaint in the Court of First Instance of Rizal against
Choithram and/or spouses Nirmla and Moti (Choithram et al. for
brevity) and Ortigas for reconveyance of said properties or payment of
its value and damages. An amended complaint for damages was
thereafter filed by said spouses.
After the issues were joined and the trial on the merits, a decision was
rendered by the trial court on December 3, 1985 dismissing the
complaint and counterclaim. A motion for reconsideration thereof filed
by spouses Ishwar was denied on March 3, 1986.
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
An appeal therefrom was interposed by spouses Ishwar to the Court
of Appeals wherein in due course a decision was promulgated on
March 14, 1988, the dispositive part of which reads as follows:
WHEREFORE, judgment is hereby rendered reversing and setting
aside the appealed decision of the lower court dated December 3,
1985 and the Order dated March 3, 1986 which denied plaintiffs-
appellants' Motion for Reconsideration from aforesaid decision. A new
decision is hereby rendered sentencing defendants- appellees
Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti C. Ramnani,
and Ortigas and Company Limited Partnership to pay, jointly and
severally, plaintiffs-appellants the following:
1. Actual or compensatory damages to the extent of the fair market
value of the properties in question and all improvements thereon
covered by Transfer Certificate of Title No. 403150 and Transfer
Certificate of Title No. 403152 of the Registry of Deeds of Rizal,
prevailing at the time of the satisfaction of the judgment but in no case
shall such damages be less than the value of said properties as
appraised by Asian Appraisal, Inc. in its Appraisal Report dated
August 1985 (Exhibits T to T-14, inclusive).
2. All rental incomes paid or ought to be paid for the use and
occupancy of the properties in question and all improvements thereon
consisting of buildings, and to be computed as follows:
a) On Building C occupied by Eppie's Creation and Jethmal Industries
from 1967 to 1973, inclusive, based on the 1967 to 1973 monthly
rentals paid by Eppie's Creation;
b) Also on Building C above, occupied by Jethmal Industries and
Lavine from 1974 to 1978, the rental incomes based on then rates
prevailing as shown under Exhibit "P"; and from 1979 to 1981, based
on then prevailing rates as indicated under Exhibit "Q";
c) On Building A occupied by Transworld Knitting Mills from 1972 to
1978, the rental incomes based upon then prevailing rates shown
under Exhibit "P", and from 1979 to 1981, based on prevailing rates
per Exhibit "Q";
d) On the two Bays Buildings occupied by Sigma-Mariwasa from 1972
to 1978, the rentals based on the Lease Contract, Exhibit "P", and
from 1979 to 1980, the rentals based on the Lease Contract, Exhibit
"Q",
and thereafter commencing 1982, to account for and turn over the
rental incomes paid or ought to be paid for the use and occupancy of
21
the properties and all improvements totalling 10,048 sq. m based on
the rate per square meter prevailing in 1981 as indicated annually
cumulative up to 1984. Then, commencing 1985 and up to the
satisfaction of the judgment, rentals shall be computed at ten percent
(10%) annually of the fair market values of the properties as
appraised by the Asian Appraisal, Inc. in August 1985 (Exhibits T to T-
14, inclusive.)
3. Moral damages in the sum of P200,000.00;
4. Exemplary damages in the sum of P100,000.00;
5. Attorney's fees equivalent to 10% of the award herein made;
6. Legal interest on the total amount awarded computed from first
demand in 1967 and until the full amount is paid and satisfied; and
7. The cost of suit.7
Acting on a motion for reconsideration filed by Choithram, et al. and
Ortigas, the appellate court promulgated an amended decision on
October 17, 1988 granting the motion for reconsideration of Ortigas by
affirming the dismissal of the case by the lower court as against
Ortigas but denying the motion for reconsideration of Choithram, et
al.8
Choithram, et al. thereafter filed a petition for review of said judgment
of the appellate court alleging the following grounds:
1. The Court of Appeals gravely abused its discretion in making a
factual finding not supported by and contrary, to the evidence
presented at the Trial Court.
2. The Court of Appeals acted in excess of jurisdiction in awarding
damages based on the value of the real properties in question where
the cause of action of private respondents is recovery of a sum of
money.
ARGUMENTS
I
THE COURT OF APPEALS ACTED IN GRAVE ABUSE OF ITS
DISCRETION IN MAKING A FACTUAL FINDING THAT PRIVATE
RESPONDENT ISHWAR REMITTED THE AMOUNT OF US
$150,000.00 TO PETITIONER CHOITHRAM IN THE ABSENCE OF
PROOF OF SUCH REMITTANCE.
II
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AND MANIFEST PARTIALITY IN DISREGARDING
THE TRIAL COURTS FINDINGS BASED ON THE DIRECT
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
DOCUMENTARY AND TESTIMONIAL EVIDENCE PRESENTED BY
CHOITHRAM IN THE TRIAL COURT ESTABLISHING THAT THE
PROPERTIES WERE PURCHASED WITH PERSONAL FUNDS OF
PETITIONER CHOITHRAM AND NOT WITH MONEY ALLEGEDLY
REMITTED BY RESPONDENT ISHWAR.
III
THE COURT OF APPEALS ACTED IN EXCESS OF JURISDICTION
IN AWARDING DAMAGES BASED ON THE VALUE OF THE
PROPERTIES AND THE FRUITS OF THE IMPROVEMENTS
THEREON.9
Similarly, spouses Ishwar filed a petition for review of said amended
decision of the appellate court exculpating Ortigas of liability based on
the following assigned errors
I (EXH. H);
THE RESPONDENT HONORABLE COURT OF APPEALS
COMMITTED GRAVE ERROR AND HAS DECIDED A QUESTION
OF SUBSTANCE NOT IN ACCORD WITH LAW AND/OR WITH
APPLICABLE DECISIONS OF THIS HONORABLE COURT—
A) IN PROMULGATING THE QUESTIONED AMENDED DECISION
(ANNEX "A") RELIEVING RESPONDENT ORTIGAS FROM
LIABILITY AND DISMISSING PETITIONERS' AMENDED
COMPLAINT IN CIVIL CASE NO. 534-P, AS AGAINST SAID
RESPONDENT ORTIGAS;
B) IN HOLDING IN SAID AMENDED DECISION THAT AT ANY RATE
NO ONE EVER TESTIFIED THAT ORTIGAS WAS A SUBSCRIBER
TO THE MANILA TIMES PUBLICATION OR THAT ANY OF ITS
OFFICERS READ THE NOTICE AS PUBLISHED IN THE MANILA
TIMES, THEREBY ERRONEOUSLY CONCLUDING THAT FOR
RESPONDENT ORTIGAS TO BE CONSTRUCTIVELY BOUND BY
THE PUBLISHED NOTICE OF REVOCATION, ORTIGAS AND/OR
ANY OF ITS OFFICERS MUST BE A SUBSCRIBER AND/OR THAT
ANY OF ITS OFFICERS SHOULD READ THE NOTICE AS
ACTUALLY PUBLISHED;
C) IN HOLDING IN SAID AMENDED DECISION THAT ORTIGAS
COULD NOT BE HELD LIABLE JOINTLY AND SEVERALLY WITH
THE DEFENDANTS-APPELLEES CHOITHRAM, MOTI AND NIRMLA
RAMNANI, AS ORTIGAS RELIED ON THE WORD OF CHOITHRAM
THAT ALL ALONG HE WAS ACTING FOR AND IN BEHALF OF HIS
22
BROTHER ISHWAR WHEN IT TRANSFERRED THE RIGHTS OF
THE LATTER TO NIRMLA V. RAMNANI;
D) IN IGNORING THE EVIDENCE DULY PRESENTED AND
ADMITTED DURING THE TRIAL THAT ORTIGAS WAS PROPERLY
NOTIFIED OF THE NOTICE OF REVOCATION OF THE GENERAL
POWER OF ATTORNEY GIVEN TO CHOITHRAM, EVIDENCED BY
THE PUBLICATION IN THE MANILA TIMES ISSUE OF APRIL 2,
1971 (EXH. F) WHICH CONSTITUTES NOTICE TO THE WHOLE
WORLD; THE RECEIPT OF THE NOTICE OF SUCH REVOCATION
WHICH WAS SENT TO ORTIGAS ON MAY 22, 1971 BY ATTY.
MARIANO P. MARCOS AND RECEIVED BY ORTIGAS ON MAY 24,
1971 (EXH. G) AND THE FILING OF THE NOTICE WITH THE
SECURITIES AND EXCHANGE COMMISSION ON MARCH 29,1971
E) IN DISCARDING ITS FINDINGS CONTAINED IN ITS DECISION
OF 14 MARCH 1988 (ANNEX B) THAT ORTIGAS WAS DULY
NOTIFIED OF THE REVOCATION OF THE POWER OF ATTORNEY
OF CHOITHRAM, HENCE ORTIGAS ACTED IN BAD FAITH IN
EXECUTING THE DEED OF SALE TO THE PROPERTIES IN
QUESTION IN FAVOR OF NIRMLA V. RAMNANI;
F) IN SUSTAINING RESPONDENT ORTIGAS VACUOUS
REHASHED ARGUMENTS IN ITS MOTION FOR
RECONSIDERATION THAT IT WOULD NOT GAIN ONE CENTAVO
MORE FROM CHOITHRAM FOR THE SALE OF SAID LOTS AND
THE SUBSEQUENT TRANSFER OF THE SAME TO THE MATTER'S
DAUGHTER-IN-LAW, AND THAT IT WAS IN GOOD FAITH WHEN IT
TRANSFERRED ISHWAR'S RIGHTS TO THE LOTS IN QUESTION.
II
THE RESPONDENT HONORABLE COURT OF APPEALS HAS SO
FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE
OF JUDICIAL PROCEEDING WHEN IT HELD IN THE QUESTIONED
AMENDED DECISION OF 17 NOVEMBER 1988 (ANNEX A) THAT
RESPONDENT ORTIGAS & CO., LTD., IS NOT JOINTLY AND
SEVERALLY LIABLE WITH DEFENDANTS-APPELLEES
CHOITHRAM, MOTI AND NIRMLA RAMNANI IN SPITE OF ITS
ORIGINAL DECISION OF 14 MARCH 1988 THAT ORTIGAS WAS
DULY NOTIFIED OF THE REVOCATION OF THE POWER OF
ATTORNEY OF CHOITHRAM RAMNANI.10
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
The center of controversy is the testimony of Ishwar that during the
latter part of 1965, he sent the amount of US $150,000.00 to
Choithram in two bank drafts of US$65,000.00 and US$85,000.00 for
the purpose of investing the same in real estate in the Philippines.
The trial court considered this lone testimony unworthy of faith and
credit. On the other hand, the appellate court found that the trial court
misapprehended the facts in complete disregard of the evidence,
documentary and testimonial.
Another crucial issue is the claim of Choithram that because he was
then a British citizen, as a temporary arrangement, he arranged the
purchase of the properties in the name of Ishwar who was an
American citizen and who was then qualified to purchase property in
the Philippines under the then Parity Amendment. The trial court
believed this account but it was debunked by the appellate court.
As to the issue of whether of not spouses Ishwar actually sent
US$150,000.00 to Choithram precisely to be used in the real estate
business, the trial court made the following disquisition —
After a careful, considered and conscientious examination of the
evidence adduced in the case at bar, plaintiff Ishwar Jethmal
Ramanani's main evidence, which centers on the alleged payment by
sending through registered mail from New York two (2) US$ drafts of
$85,000.00 and $65,000.00 in the latter part of 1965 (TSN 28 Feb.
1984, p. 10-11). The sending of these moneys were before the
execution of that General Power of Attorney, which was dated in New
York, on January 24, 1966. Because of these alleged remittances of
US $150,000.00 and the subsequent acquisition of the properties in
question, plaintiffs averred that they constituted a trust in favor of
defendant Choithram Jethmal Ramnani. This Court can be in full
agreement if the plaintiffs were only able to prove preponderantly
these remittances. The entire record of this case is bereft of even a
shred of proof to that effect. It is completely barren. His
uncorroborated testimony that he remitted these amounts in the "later
part of 1965" does not engender enough faith and credence.
Inadequacy of details of such remittance on the two (2) US dollar
drafts in such big amounts is completely not positive, credible,
probable and entirely not in accord with human experience. This is a
classic situation, plaintiffs not exhibiting any commercial document or
any document and/or paper as regard to these alleged remittances.
Plaintiff Ishwar Ramnani is not an ordinary businessman in the strict
23
sense of the word. Remember his main business is based in New
York, and he should know better how to send these alleged
remittances. Worst, plaintiffs did not present even a scum of proof,
that defendant Choithram Ramnani received the alleged two US dollar
drafts. Significantly, he does not know even the bank where these two
(2) US dollar drafts were purchased. Indeed, plaintiff Ishwar
Ramnani's lone testimony is unworthy of faith and credit and,
therefore, deserves scant consideration, and since the plaintiffs'
theory is built or based on such testimony, their cause of action
collapses or falls with it.
Further, the rate of exchange that time in 1966 was P4.00 to $1.00.
The alleged two US dollar drafts amounted to $150,000.00 or about
P600,000.00. Assuming the cash price of the two (2) lots was only
P530,000.00 (ALTHOUGH he said: "Based on my knowledge I have
no evidence," when asked if he even knows the cash price of the two
lots). If he were really the true and bonafide investor and purchaser
for profit as he asserted, he could have paid the price in full in cash
directly and obtained the title in his name and not thru "Contracts To
Sell" in installments paying interest and thru an attorney-in fact (TSN
of May 2, 1984, pp. 10-11) and, again, plaintiff Ishwar Ramnani told
this Court that he does not know whether or not his late father-in-law
borrowed the two US dollar drafts from the Swiss Bank or whether or
not his late father-in-law had any debit memo from the Swiss
Bank (TSN of May 2, 1984, pp. 9-10).11
On the other hand, the appellate court, in giving credence to the
version of Ishwar, had this to say —
While it is true, that generally the findings of fact of the trial court are
binding upon the appellate courts, said rule admits of exceptions such
as when (1) the conclusion is a finding grounded entirely on
speculations, surmises and conjectures; (2) when the inferences
made is manifestly mistaken, absurd and impossible; (3) when there
is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts and when the court, in making its findings,
went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee (Ramos vs. Court of
Appeals, 63 SCRA 33; Philippine American Life Assurance Co. vs.
Santamaria, 31 SCRA 798; Aldaba vs. Court of Appeals, 24 SCRA
189).
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
The evidence on record shows that the t court acted under a
misapprehension of facts and the inferences made on the evidence
palpably a mistake.
The trial court's observation that "the entire records of the case is
bereft of even a shred of proof" that plaintiff-appellants have remitted
to defendant-appellee Choithram Ramnani the amount of US $
150,000.00 for investment in real estate in the Philippines, is not
borne by the evidence on record and shows the trial court's
misapprehension of the facts if not a complete disregard of the
evidence, both documentary and testimonial.
Plaintiff-appellant Ishwar Jethmal Ramnani testifying in his own
behalf, declared that during the latter part of 1965, he sent the amount
of US $150,000.00 to his brother Choithram in two bank drafts of US
$65,000.00 and US $85,000.00 for the purpose of investing the same
in real estate in the Philippines. His testimony is as follows:
ATTY. MARAPAO:
Mr. Witness, you said that your attorney-in-fact paid in your behalf.
Can you tell this Honorable Court where your attorney-in-fact got the
money to pay this property?
ATTY. CRUZ:
Wait. It is now clear it becomes incompetent or hearsay.
COURT:
Witness can answer.
A I paid through my attorney-in-fact. I am the one who gave him the
money.
ATTY. MARAPAO:
Q You gave him the money?
A That's right.
Q How much money did you give him?
A US $ 150,000.00.
Q How was it given then?
A Through Bank drafts. US $65,000.00 and US $85,000.00 bank
drafts. The total amount which is $ 150,000.00 (TSN, 28 February
1984, p. 10; Emphasis supplied.)
x x x           x x x          x x x
ATTY. CRUZ:
Q The two bank drafts which you sent I assume you bought that from
some banks in New York?
A No, sir.
24
Q But there is no question those two bank drafts were for the purpose
of paying down payment and installment of the two parcels of land?
A Down payment, installment and to put up the building.
Q I thought you said that the buildings were constructed . . . subject to
our continuing objection from rentals of first building?
ATTY. MARAPAO:
Your Honor, that is misleading.
COURT;
Witness (may) answer.
A Yes, the first building was immediately put up after the purchase of
the two parcels of land that was in 1966 and the finds were used for
the construction of the building from the US $150,000.00 (TSN, 7
March 1984, page 14; Emphasis supplied.)
x x x           x x x          x x x
Q These two bank drafts which you mentioned and the use for it you
sent them by registered mail, did you send them from New Your?
A That is right.
Q And the two bank drafts which were put in the registered mail, the
registered mail was addressed to whom?
A Choithram Ramnani. (TSN, 7 March 1984, pp. 14-15).
On cross-examination, the witness reiterated the remittance of the
money to his brother Choithram, which was sent to him by his father-
in-law, Rochiram L. Mulchandoni from Switzerland, a man of immense
wealth, which even defendants-appellees' witness Navalrai Ramnani
admits to be so (tsn., p. 16, S. Oct. 13, 1985). Thus, on cross-
examination, Ishwar testified as follows:
Q How did you receive these two bank drafts from the bank the name
of which you cannot remember?
A I got it from my father-in-law.
Q From where did your father- in-law sent these two bank drafts?
A From Switzerland.
Q He was in Switzerland.
A Probably, they sent out these two drafts from Switzerland.
(TSN, 7 March 1984, pp. 16-17; Emphasis supplied.)
This positive and affirmative testimony of plaintiff-appellant that he
sent the two (2) bank drafts totalling US $ 150,000.00 to his brother, is
proof of said remittance. Such positive testimony has greater
probative force than defendant-appellee's denial of receipt of said
bank drafts, for a witness who testifies affirmatively that something did
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
happen should be believed for it is unlikely that a witness will
remember what never happened (Underhill's Cr. Guidance, 5th Ed.,
Vol. 1, pp. 10-11).
That is not all. Shortly thereafter, plaintiff-appellant Ishwar Ramnani
executed a General Power of Attorney (Exhibit "A") dated January 24,
1966 appointing his brothers, defendants-appellees Navalrai and
Choithram as attorney-in-fact empowering the latter to conduct and
manage plaintiffs-appellants' business affairs in the Philippines and
specifically—
No. 14. To acquire, purchase for us, real estates and improvements
for the purpose of real estate business anywhere in the Philippines
and to develop, subdivide, improve and to resell to buying public
(individual, firm or corporation); to enter in any contract of sale in oar
behalf and to enter mortgages between the vendees and the herein
grantors that may be needed to finance the real estate business being
undertaken.
Pursuant thereto, on February 1, 1966 and May 16, 1966, Choithram
Jethmal Ramnani entered into Agreements (Exhibits "B' and "C") with
the other defendant. Ortigas and Company, Ltd., for the purchase of
two (2) parcels of land situated at Barrio Ugong, Pasig, Rizal, with
said defendant-appellee signing the Agreements in his capacity as
Attorney-in-fact of Ishwar Jethmal Ramnani.
Again, on January 5, 1972, almost seven (7) years after Ishwar sent
the US $ 150,000.00 in 1965, Choithram Ramnani, as attorney-in fact
of Ishwar entered into a Contract of Lease with Sigma-Mariwasa
(Exhibit "P") thereby re-affirming the ownership of Ishwar over the
disputed property and the trust relationship between the latter as
principal and Choithram as attorney-in-fact of Ishwar.
All of these facts indicate that if plaintiff-appellant Ishwar had not
earlier sent the US $ 150,000.00 to his brother, Choithram, there
would be no purpose for him to execute a power of attorney
appointing his brothers as s attorney-in-fact in buying real estate in
the Philippines.
As against Choithram's denial that he did not receive the US
$150,000.00 remitted by Ishwar and that the Power of Attorney, as
well as the Agreements entered into with Ortigas & Co., were only
temporary arrangements, Ishwar's testimony that he did send the
bank drafts to Choithram and was received by the latter, is the more
credible version since it is natural, reasonable and probable. It is in
25
accord with the common experience, knowledge and observation of
ordinary men (Gardner vs. Wentors 18 Iowa 533). And in determining
where the superior weight of the evidence on the issues involved lies,
the court may consider the probability or improbability of the testimony
of the witness (Sec. 1, Rule 133, Rules of Court).
Contrary, therefore, to the trial court's sweeping observation that 'the
entire records of the case is bereft of even a shred of proof that
Choithram received the alleged bank drafts amounting to US $
150,000.00, we have not only testimonial evidence but also
documentary and circumstantial evidence proving said remittance of
the money and the fiduciary relationship between the former and
Ishwar.12
The Court agrees. The environmental circumstances of this case
buttress the claim of Ishwar that he did entrust the amount of US $
150,000.00 to his brother, Choithram, which the latter invested in the
real property business subject of this litigation in his capacity as
attorney-in-fact of Ishwar.
True it is that there is no receipt whatever in the possession of Ishwar
to evidence the same, but it is not unusual among brothers and close
family members to entrust money and valuables to each other without
any formalities or receipt due to the special relationship of trust
between them.
And another proof thereof is the fact that Ishwar, out of frustration
when Choithram failed to account for the realty business despite his
demands, revoked the general power of attorney he extended to
Choithram and Navalrai. Thereafter, Choithram wrote a letter to
Ishwar pleading that the power of attorney be renewed or another
authority to the same effect be extended, which reads as follows:
June 25,1971
MR. ISHWAR JETHMAL
NEW YORK
(1) Send power of Atty. immediately, because the case has been
postponed for two weeks. The same way as it has been send before
in favor of both names. Send it immediately otherwise everything will
be lost unnecessarily, and then it will take us in litigation. Now that we
have gone ahead with a case and would like to end it immediately
otherwise squatters will take the entire land. Therefore, send it
immediately.
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
(2) Ortigas also has sued us because we are holding the installments,
because they have refused to give a rebate of P5.00 per meter which
they have to give us as per contract. They have filed the law suit that
since we have not paid the installment they should get back the land.
The hearing of this case is in the month of July. Therefore, please
send the power immediately. In one case DADA (Elder Brother) will
represent and in another one, I shall.
(3) In case if you do not want to give power then make one letter in
favor of Dada and the other one in my favor showing that in any
litigation we can represent you and your wife, and whatever the court
decide it will be acceptable by me. You can ask any lawyer, he will be
able to prepare these letters. After that you can have these letters
ratify before P.I. Consulate. It should be dated April 15, 1971.
(4) Try to send the power because it will be more useful. Make it in
any manner whatever way you have confident in it. But please send it
immediately.
You have cancelled the power. Therefore, you have lost your
reputation everywhere. What can I further write you about it. I have
told everybody that due to certain reasons I have written you to do this
that is why you have done this. This way your reputation have been
kept intact. Otherwise if I want to do something about it, I can show
you that inspite of the power you have cancelled you can not do
anything. You can keep this letter because my conscience is clear. I
do not have anything in my mind.
I should not be writing you this, but because my conscience is clear
do you know that if I had predated papers what could you have
done? Or do you know that I have many paper signed by you and if
had done anything or do then what can you do about it? It is not
necessary to write further about this. It does not matter if you have
cancelled the power. At that time if I had predated and done
something about it what could you have done? You do not know me. I
am not after money. I can earn money anytime. It has been ten
months since I have not received a single penny for expenses from
Dada (elder brother). Why there are no expenses? We can not draw a
single penny from knitting (factory). Well I am not going to write you
further, nor there is any need for it. This much I am writing you
because of the way you have conducted yourself. But remember,
whenever I hale the money I will not keep it myself Right now I have
not got anything at all.
26
I am not going to write any further.
Keep your business clean with Naru. Otherwise he will discontinue
because he likes to keep his business very clean.13
The said letter was in Sindhi language. It was translated to English by
the First Secretary of the Embassy of Pakistan, which translation was
verified correct by the Chairman, Department of Sindhi, University of
Karachi.14
From the foregoing letter what could be gleaned is that—
1. Choithram asked for the issuance of another power of attorney in
their favor so they can continue to represent Ishwar as Ortigas has
sued them for unpaid installments. It also appears therefrom that
Ortigas learned of the revocation of the power of attorney so the
request to issue another.
2. Choithram reassured Ishwar to have confidence in him as he was
not after money, and that he was not interested in Ishwar's money.
3. To demonstrate that he can be relied upon, he said that he could
have ante-dated the sales agreement of the Ortigas lots before the
issuance of the powers of attorney and acquired the same in his
name, if he wanted to, but he did not do so.
4. He said he had not received a single penny for expenses from
Dada (their elder brother Navalrai). Thus, confirming that if he was not
given money by Ishwar to buy the Ortigas lots, he could not have
consummated the sale.
5. It is important to note that in said letter Choithram never claimed
ownership of the property in question. He affirmed the fact that he
bought the same as mere agent and in behalf of Ishwar. Neither did
he mention the alleged temporary arrangement whereby Ishwar,
being an American citizen, shall appear to be the buyer of the said
property, but that after Choithram acquires Philippine citizenship, its
ownership shall be transferred to Choithram.
This brings us to this temporary arrangement theory of Choithram.
The appellate court disposed of this matter in this wise
Choithram's claim that he purchased the two parcels of land for
himself in 1966 but placed it in the name of his younger brother,
Ishwar, who is an American citizen, as a temporary arrangement,'
because as a British subject he is disqualified under the 1935
Constitution to acquire real property in the Philippines, which is not so
with respect to American citizens in view of the Ordinance Appended
to the Constitution granting them parity rights, there is nothing in the
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
records showing that Ishwar ever agreed to such a temporary
arrangement.
During the entire period from 1965, when the US $ 150,000. 00 was
transmitted to Choithram, and until Ishwar filed a complaint against
him in 1982, or over 16 years, Choithram never mentioned of a
temporary arrangement nor can he present any memorandum or
writing evidencing such temporary arrangement, prompting plaintiff-
appellant to observe:
The properties in question which are located in a prime industrial site
in Ugong, Pasig, Metro Manila have a present fair market value of no
less than P22,364,000.00 (Exhibits T to T-14, inclusive), and yet for
such valuable pieces of property, Choithram who now belatedly that
he purchased the same for himself did not document in writing or in a
memorandum the alleged temporary arrangement with Ishwar' (pp. 4-
41, Appellant's Brief).
Such verbal allegation of a temporary arrangement is simply
improbable and inconsistent. It has repeatedly been held that
important contracts made without evidence are highly improbable.
The improbability of such temporary arrangement is brought to fore
when we consider that Choithram has a son (Haresh Jethmal
Ramnani) who is an American citizen under whose name the
properties in question could be registered, both during the time the
contracts to sell were executed and at the time absolute title over the
same was to be delivered. At the time the Agreements were entered
into with defendant Ortigas & Co. in 1966, Haresh, was already 18
years old and consequently, Choithram could have executed the
deeds in trust for his minor son. But, he did not do this. Three (3)
years, thereafter, or in 1968 after Haresh had attained the age of 21,
Choithram should have terminated the temporary arrangement with
Ishwar, which according to him would be effective only pending the
acquisition of citizenship papers. Again, he did not do anything.
Evidence to be believed, said Vice Chancellor Van Fleet of New
Jersey, must not only proceed from the mouth of a credible witness,
but it must be credible in itself—such as the common experience and
observation of mankind can approve as probable under the
circumstances. We have no test of the truth of human testimony,
except its conformity to our knowledge, observation and experience.
Whatever is repugnant to these belongs to the miraculous and is
27
outside of judicial cognizance. (Daggers vs. Van Dyek 37 M.J. Eq.
130, 132).
Another factor that can be counted against the temporary
arrangement excuse is that upon the revocation on February 4, 1971
of the Power of attorney dated January 24, 1966 in favor of Navalrai
and Choithram by Ishwar, Choithram wrote (tsn, p. 21, S. July 19,
1985) a letter dated June 25, 1971 (Exhibits R, R-1, R-2 and R-3)
imploring Ishwar to execute a new power of attorney in their favor.
That if he did not want to give power, then Ishwar could make a letter
in favor of Dada and another in his favor so that in any litigation
involving the properties in question, both of them could represent
Ishwar and his wife. Choithram tried to convince Ishwar to issue the
power of attorney in whatever manner he may want. In said letter no
mention was made at all of any temporary arrangement.
On the contrary, said letter recognize(s) the existence of principal and
attorney-in-fact relationship between Ishwar and himself. Choithram
wrote: . . . do you know that if I had predated papers what could you
have done? Or do you know that I have many papers signed by you
and if I had done anything or do then what can you do about it?'
Choithram was saying that he could have repudiated the trust and ran
away with the properties of Ishwar by predating documents and
Ishwar would be entirely helpless. He was bitter as a result of Ishwar's
revocation of the power of attorney but no mention was made of any
temporary arrangement or a claim of ownership over the properties in
question nor was he able to present any memorandum or document
to prove the existence of such temporary arrangement.
Choithram is also estopped in pais or by deed from claiming an
interest over the properties in question adverse to that of
Ishwar. Section 3(a) of Rule 131 of the Rules of Court states that
whenever a party has, by his own declaration, act, or omission
intentionally and deliberately led another to believe a particular thing
true and act upon such belief, he cannot in any litigation arising out of
such declaration, act or omission be permitted to falsify it.' While
estoppel by deed is a bar which precludes a party to a deed and his
privies from asserting as against the other and his privies any right of
title in derogation of the deed, or from denying the truth of any
material fact asserted in it (31 C.J.S. 195; 19 Am. Jur. 603).
Thus, defendants-appellees are not permitted to repudiate their
admissions and representations or to assert any right or title in
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
derogation of the deeds or from denying the truth of any material fact
asserted in the (1) power of attorney dated January 24, 1966 (Exhibit
A); (2) the Agreements of February 1, 1966 and May 16, 1966
(Exhibits B and C); and (3) the Contract of Lease dated January 5,
1972 (Exhibit P).
. . . The doctrine of estoppel is based upon the grounds of public
policy, fair dealing, good faith and justice, and its purpose is to forbid
one to speak against his own act, representations, or commitments to
the injury of one to whom they were directed and who reasonably
relied thereon. The doctrine of estoppel springs from equitable
principles and the equities in the case. It is designed to aid the law in
the administration of justice where without its aid injustice might result.
It has been applied by court wherever and whenever special
circumstances of a case so demands' (Philippine National Bank vs.
Court of Appeals, 94 SCRA 357, 368 [1979]).
It was only after the services of counsel has been obtained that
Choithram alleged for the first time in his Answer that the General
Power of attorney (Annex A) with the Contracts to Sell (Annexes B
and C) were made only for the sole purpose of assuring defendants'
acquisition and ownership of the lots described thereon in due time
under the law; that said instruments do not reflect the true intention of
the parties (par. 2, Answer dated May 30, 1983), seventeen (17) long
years from the time he received the money transmitted to him by his
brother, Ishwar.
Moreover, Choithram's 'temporary arrangement,' by which he claimed
purchasing the two (2) parcels in question in 1966 and placing them in
the name of Ishwar who is an American citizen, to circumvent the
disqualification provision of aliens acquiring real properties in the
Philippines under the 1935 Philippine Constitution, as Choithram was
then a British subject, show a palpable disregard of the law of the land
and to sustain the supposed "temporary arrangement" with Ishwar
would be sanctioning the perpetration of an illegal act and culpable
violation of the Constitution.
Defendants-appellees likewise violated the Anti-Dummy Law
(Commonwealth Act 108, as amended), which provides in Section 1
thereof that:
In all cases in which any constitutional or legal provision requires
Philippine or any other specific citizenship as a requisite for the
exercise or enjoyment of a right, franchise or privilege, . . . any alien
28
or foreigner profiting thereby, shall be punished . . . by
imprisonment . . . and of a fine of not less than the value of the right,
franchise or privileges, which is enjoyed or acquired in violation of the
provisions hereof . . .
Having come to court with unclean hands, Choithram must not be
permitted foist his 'temporary arrangement' scheme as a defense
before this court. Being in delicto, he does not have any right
whatsoever being shielded from his own wrong-doing, which is not so
with respect to Ishwar, who was not a party to such an arrangement.
The falsity of Choithram's defense is further aggravated by the
material inconsistencies and contradictions in his testimony. While on
January 23, 1985 he testified that he purchased the land in question
on his own behalf (tsn, p. 4, S. Jan. 23, 1985), in the July 18, 1985
hearing, forgetting probably what he stated before, Choithram testified
that he was only an attorney-in-fact of Ishwar (tsn, p. 5, S. July 18,
1985). Also in the hearing of January 23, 1985, Choithram declared
that nobody rented the building that was constructed on the parcels of
land in question (tsn, pp. 5 and 6), only to admit in the hearing of
October 30, 1985, that he was in fact renting the building for P12,000.
00 per annum (tsn, p. 3). Again, in the hearing of July 19, 1985,
Choithram testified that he had no knowledge of the revocation of the
Power of Attorney (tsn, pp. 20- 21), only to backtrack when confronted
with the letter of June 25, 1971 (Exhibits R to R-3), which he admitted
to be in "his own writing," indicating knowledge of the revocation of the
Power of Attorney.
These inconsistencies are not minor but go into the entire credibility of
the testimony of Choithram and the rule is that contradictions on a
very crucial point by a witness, renders s testimony incredible People
vs. Rafallo, 80 Phil. 22). Not only this the doctrine of falsus in uno,
falsus in omnibus is fully applicable as far as the testimony of
Choithram is concerned. The cardinal rule, which has served in all
ages, and has been applied to all conditions of men, is that a witness
willfully falsifying the truth in one particular, when upon oath, ought
never to be believed upon the strength of his own testimony, whatever
he may assert (U.S. vs. Osgood 27 Feb. Case No. 15971-a, p. 364);
Gonzales vs. Mauricio, 52 Phil, 728), for what ground of judicial relief
can there be left when the party has shown such gross insensibility to
the difference between right and wrong, between truth and falsehood?
(The Santisima Trinidad, 7 Wheat, 283, 5 U.S. [L. ed.] 454).
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
True, that Choithram's testimony finds corroboration from the
testimony of his brother, Navalrai, but the same would not be of much
help to Choithram. Not only is Navalrai an interested and biased
witness, having admitted his close relationship with Choithram and
that whenever he or Choithram had problems, they ran to each other
(tsn, pp. 17-18, S. Sept. 20, 1985), Navalrai has a pecuniary interest
in the success of Choithram in the case in question. Both he and
Choithram are business partners in Jethmal and Sons and/or Jethmal
Industries, wherein he owns 60% of the company and Choithram,
40% (p. 62, Appellant's Brief). Since the acquisition of the properties
in question in 1966, Navalrai was occupying 1,200 square meters
thereof as a factory site plus the fact that his son (Navalrais) was
occupying the apartment on top of the factory with his family rent free
except the amount of P l,000.00 a month to pay for taxes on said
properties (tsn, p. 17, S. Oct. 3, 1985).
Inherent contradictions also marked Navalrai testimony. "While the
latter was very meticulous in keeping a receipt for the P 10,000.00
that he paid Ishwar as settlement in Jethmal Industries, yet in the
alleged payment of P 100,000.00 to Ishwar, no receipt or voucher was
ever issued by him (tsn, p. 17, S. Oct. 3, 1983).15
We concur.
The foregoing findings of facts of the Court of Appeals which are
supported by the evidence is conclusive on this Court. The Court finds
that Ishwar entrusted US$150,000.00 to Choithram in 1965 for
investment in the realty business. Soon thereafter, a general power of
attorney was executed by Ishwar in favor of both Navalrai and
Choithram. If it is true that the purpose only is to enable Choithram to
purchase realty temporarily in the name of Ishwar, why the inclusion
of their elder brother Navalrai as an attorney-in-fact?
Then, acting as attorney-in-fact of Ishwar, Choithram purchased two
parcels of land located in Barrio Ugong Pasig, Rizal, from Ortigas in
1966. With the balance of the money of Ishwar, Choithram erected a
building on said lot. Subsequently, with a loan obtained from a bank
and the income of the said property, Choithram constructed three
other buildings thereon. He managed the business and collected the
rentals. Due to their relationship of confidence it was only in 1970
when Ishwar demanded for an accounting from Choithram. And even
as Ishwar revoked the general power of attorney on February 4, 1971,
of which Choithram was duly notified, Choithram wrote to Ishwar on
29
June 25, 1971 requesting that he execute a new power of attorney in
their favor.16 When Ishwar did not respond thereto, Choithram
nevertheless proceeded as such attorney-in-fact to assign all the
rights and interest of Ishwar to his daughter-in-law Nirmla in 1973
without the knowledge and consent of Ishwar. Ortigas in turn
executed the corresponding deeds of sale in favor of Nirmla after full
payment of the purchase accomplice of the lots.
In the prefatory statement of their petition, Choithram pictured Ishwar
to be so motivated by greed and ungratefulness, who squandered the
family business in New York, who had to turn to his wife for support,
accustomed to living in ostentation and who resorted to blackmail in
filing several criminal and civil suits against them. These statements
find no support and should be stricken from the records. Indeed, they
are irrelevant to the proceeding.
Moreover, assuming Ishwar is of such a low character as Choithram
proposes to make this Court to believe, why is it that of all persons,
under his temporary arrangement theory, Choithram opted to entrust
the purchase of valuable real estate and built four buildings thereon all
in the name of Ishwar? Is it not an unconscious emergence of the
truth that this otherwise wayward brother of theirs was on the contrary
able to raise enough capital through the generosity of his father-in-law
for the purchase of the very properties in question? As the appellate
court aptly observed if truly this temporary arrangement story is the
only motivation, why Ishwar of all people? Why not the own son of
Choithram, Haresh who is also an American citizen and who was
already 18 years old at the time of purchase in 1966? The Court
agrees with the observation that this theory is an afterthought which
surfaced only when Choithram, Nirmla and Moti filed their answer.
When Ishwar asked for an accounting in 1970 and revoked the
general power of attorney in 1971, Choithram had a total change of
heart. He decided to claim the property as his. He caused the transfer
of the rights and interest of Ishwar to Nirmla. On his representation,
Ortigas executed the deeds of sale of the properties in favor of Nirmla.
Choithram obviously surmised Ishwar cannot stake a valid claim over
the property by so doing.
Clearly, this transfer to Nirmla is fictitious and, as admitted by
Choithram, was intended only to place the property in her name until
Choithram acquires Philippine citizenship.17 What appears certain is
that it appears to be a scheme of Choithram to place the property
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
beyond the reach of Ishwar should he successfully claim the same.
Thus, it must be struck down.
Worse still, on September 27, 1990 spouses Ishwar filed an urgent
motion for the issuance of a writ of preliminary attachment and to
require Choithram, et al. to submit certain documents, inviting the
attention of this Court to the following:
a) Donation by Choithram of his 2,500 shares of stock in General
Garments Corporation in favor of his children on December 29,
1989;18
b) Sale on August 2, 1990 by Choithram of his 100 shares in Biflex
(Phils.), Inc., in favor of his children;19 and
c) Mortgage on June 20, 1989 by Nirmla through her attorney-in-fact,
Choithram, of the properties subject of this litigation, for the amount of
$3 Million in favor of Overseas Holding, Co. Ltd., (Overseas for
brevity), a corporation which appears to be organized and existing
under and by virtue of the laws of Cayman Islands, with a capital of
only $100.00 divided into 100 shares of $1.00 each, and with address
at P.O. Box 1790, Grand Cayman, Cayman Islands.20
An opposition thereto was filed by Choithram, et al. but no documents
were produced. A manifestation and reply to the opposition was filed
by spouses Ishwar.
All these acts of Choithram, et al. appear to be fraudulent attempts to
remove these properties to the detriment of spouses Ishwar should
the latter prevail in this litigation.
On December 10, 1990 the court issued a resolution that substantially
reads as follows:
Considering the allegations of petitioners Ishwar Jethmal Ramnani
and Sonya Ramnani that respondents Choithram Jethmal Ramnani,
Nirmla Ramnani and Moti G. Ramnani have fraudulently executed a
simulated mortgage of the properties subject of this litigation dated
June 20, 1989, in favor of Overseas Holding Co., Ltd. which appears
to be a corporation organized in Cayman Islands, for the amount of $
3,000,000.00, which is much more than the value of the properties in
litigation; that said alleged mortgagee appears to be a "shell"
corporation with a capital of only $100.00; and that this alleged
transaction appears to be intended to defraud petitioners Ishwar and
Sonya Jethmal Ramnani of any favorable judgment that this Court
may render in this case;
30
Wherefore the Court Resolved to issue a writ of preliminary injunction
enjoining and prohibiting said respondents Choithram Jethmal
Ramnani, Nirmla V. Ramnani, Moti G. Ramnani and the Overseas
Holding Co., Ltd. from encumbering, selling or otherwise disposing of
the properties and improvements subject of this litigation until further
orders of the Court. Petitioners Ishwar and Sonya Jethmal Ramnani
are hereby required to post a bond of P 100,000.00 to answer for any
damages d respondents may suffer by way of this injunction if the
Court finally decides the said petitioners are not entitled thereto.
The Overseas Holding Co., Ltd. with address at P.O. Box 1790 Grand
Cayman, Cayman Islands, is hereby IMPLEADED as a respondent in
these cases, and is hereby required to SUBMIT its comment on the
Urgent Motion for the Issuance of a Writ of Preliminary Attachment
and Motion for Production of Documents, the Manifestation and the
Reply to the Opposition filed by said petitioners, within Sixty (60) days
after service by publication on it in accordance with the provisions of
Section 17, Rule 14 of the Rules of Court, at the expense of
petitioners Ishwar and Sonya Jethmal Ramnani.
Let copies of this resolution be served on the Register of Deeds of
Pasig, Rizal, and the Provincial Assessor of Pasig, Rizal, both in
Metro Manila, for its annotation on the transfer Certificates of Titles
Nos. 403150 and 403152 registered in the name of respondent Nirmla
V. Ramnani, and on the tax declarations of the said properties and its
improvements subject of this litigation.21
The required injunction bond in the amount of P 100,000.00 was filed
by the spouses Ishwar which was approved by the Court. The above
resolution of the Court was published in the Manila Bulletin issue of
December 17, 1990 at the expense of said spouses.22 On December
19, 1990 the said resolution and petition for review with annexes in
G.R. Nos. 85494 and 85496 were transmitted to respondent
Overseas, Grand Cayman Islands at its address c/o Cayman
Overseas Trust Co. Ltd., through the United Parcel Services Bill of
Lading23 and it was actually delivered to said company on January 23,
1991.24
On January 22, 1991, Choithram, et al., filed a motion to dissolve the
writ of preliminary injunction alleging that there is no basis therefor as
in the amended complaint what is sought is actual damages and not a
reconveyance of the property, that there is no reason for its issuance,
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
and that acts already executed cannot be enjoined. They also offered
to file a counterbond to dissolve the writ.
A comment/opposition thereto was filed by spouses Ishwar that there
is basis for the injunction as the alleged mortgage of the property is
simulated and the other donations of the shares of Choithram to his
children are fraudulent schemes to negate any judgment the Court
may render for petitioners.
No comment or answer was filed by Overseas despite due notice,
thus it is and must be considered to be in default and to have lost the
right to contest the representations of spouses Ishwar to declare the
aforesaid alleged mortgage nun and void.
This purported mortgage of the subject properties in litigation appears
to be fraudulent and simulated. The stated amount of $3 Million for
which it was mortgaged is much more than the value of the
mortgaged properties and its improvements. The alleged mortgagee-
company (Overseas) was organized only on June 26,1989 but the
mortgage was executed much earlier, on June 20, 1989, that is six (6)
days before Overseas was organized. Overseas is a "shelf" company
worth only $100.00.25 In the manifestation of spouses Ishwar dated
April 1, 1991, the Court was informed that this matter was brought to
the attention of the Central Bank (CB) for investigation, and that in a
letter of March 20, 1991, the CB informed counsel for spouses Ishwar
that said alleged foreign loan of Choithram, et al. from Overseas has
not been previously approved/registered with the CB.26
Obviously, this is another ploy of Choithram, et al. to place these
properties beyond the reach of spouses Ishwar should they obtain a
favorable judgment in this case. The Court finds and so declares that
this alleged mortgage should be as it is hereby declared null and void.
All these contemporaneous and subsequent acts of Choithram, et al.,
betray the weakness of their cause so they had to take an steps, even
as the case was already pending in Court, to render ineffective any
judgment that may be rendered against them.
The problem is compounded in that respondent Ortigas is caught in
the web of this bitter fight. It had all the time been dealing with
Choithram as attorney-in-fact of Ishwar. However, evidence had been
adduced that notice in writing had been served not only on Choithram,
but also on Ortigas, of the revocation of Choithram's power of attorney
by Ishwar's lawyer, on May 24, 1971.27 A publication of said notice
was made in the April 2, 1971 issue of The Manila Times for the
31
information of the general public.28 Such notice of revocation in a
newspaper of general circulation is sufficient warning to third persons
including Ortigas.29 A notice of revocation was also registered with the
Securities and Exchange Commission on March 29, 1 971.30
Indeed in the letter of Choithram to Ishwar of June 25, 1971,
Choithram was pleading that Ishwar execute another power of
attorney to be shown to Ortigas who apparently learned of the
revocation of Choithram's power of attorney.31 Despite said notices,
Ortigas nevertheless acceded to the representation of Choithram, as
alleged attorney-in-fact of Ishwar, to assign the rights of petitioner
Ishwar to Nirmla. While the primary blame should be laid at the
doorstep of Choithram, Ortigas is not entirely without fault. It should
have required Choithram to secure another power of attorney from
Ishwar. For recklessly believing the pretension of Choithram that his
power of attorney was still good, it must, therefore, share in the latter's
liability to Ishwar.
In the original complaint, the spouses Ishwar asked for a
reconveyance of the properties and/or payment of its present value
and damages.32 In the amended complaint they asked, among others,
for actual damages of not less than the present value of the real
properties in litigation, moral and exemplary damages, attorneys fees,
costs of the suit and further prayed for "such other reliefs as may be
deemed just and equitable in the premises .33 The amended complaint
contain the following positive allegations:
7. Defendant Choithram Ramnani, in evident bad faith and despite
due notice of the revocation of the General Power of Attorney, Annex
'D" hereof, caused the transfer of the rights over the said parcels of
land to his daughter-in-law, defendant Nirmla Ramnani in connivance
with defendant Ortigas & Co., the latter having agreed to the said
transfer despite receiving a letter from plaintiffs' lawyer informing them
of the said revocation; copy of the letter is hereto attached and made
an integral part hereof as Annex "H";
8. Defendant Nirmla Ramnani having acquired the aforesaid property
by fraud is, by force of law, considered a trustee of an implied trust for
the benefit of plaintiff and is obliged to return the same to the latter:
9. Several efforts were made to settle the matter within the family but
defendants (Choithram Ramnani, Nirmla Ramnani and Moti Ramnani)
refused and up to now fail and still refuse to cooperate and respond to
the same; thus, the present case;
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
10. In addition to having been deprived of their rights over the
properties (described in par. 3 hereof), plaintiffs, by reason of
defendants' fraudulent act, suffered actual damages by way of lost
rental on the property which defendants (Choithram Ramnani, Nirmla
Ramnani and Moti Ramnani have collected for themselves;34
In said amended complaint, spouses Ishwar, among others, pray for
payment of actual damages in an amount no less than the value of
the properties in litigation instead of a reconveyance as sought in the
original complaint. Apparently they opted not to insist on a
reconveyance as they are American citizens as alleged in the
amended complaint.
The allegations of the amended complaint above reproduced clearly
spelled out that the transfer of the property to Nirmla was fraudulent
and that it should be considered to be held in trust by Nirmla for
spouses Ishwar. As above-discussed, this allegation is well-taken and
the transfer of the property to Nirmla should be considered to have
created an implied trust by Nirmla as trustee of the property for the
benefit of spouses Ishwar.35
The motion to dissolve the writ of preliminary injunction filed by
Choithram, et al. should be denied. Its issuance by this Court is
proper and warranted under the circumstances of the case. Under
Section 3(c) Rule 58 of the Rules of Court, a writ of preliminary
injunction may be granted at any time after commencement of the
action and before judgment when it is established:
(c) that the defendant is doing, threatens, or is about to do, or is
procuring or suffering to be done, some act probably in violation of
plaintiffs's rights respecting the subject of the action, and tending to
render the judgment ineffectual.
As above extensively discussed, Choithram, et al. have committed
and threaten to commit further acts of disposition of the properties in
litigation as well as the other assets of Choithram, apparently
designed to render ineffective any judgment the Court may render
favorable to spouses Ishwar.
The purpose of the provisional remedy of preliminary injunction is to
preserve the status quo of the things subject of the litigation and to
protect the rights of the spouses Ishwar respecting the subject of the
action during the pendency of the Suit36 and not to obstruct the
administration of justice or prejudice the adverse party.37 In this case
for damages, should Choithram, et al. continue to commit acts of
32
disposition of the properties subject of the litigation, an award of
damages to spouses Ishwar would thereby be rendered ineffectual
and meaningless.38
Consequently, if only to protect the interest of spouses Ishwar, the
Court hereby finds and holds that the motion for the issuance of a writ
of preliminary attachment filed by spouses Ishwar should be granted
covering the properties subject of this litigation.
Section 1, Rule 57 of the Rules of Court provides that at the
commencement of an action or at any time thereafter, the plaintiff or
any proper party may have the property of the adverse party attached
as security for the satisfaction of any judgment that may be recovered,
in, among others, the following cases:
(d) In an action against a party who has been guilty of a fraud in
contracting the debt or incurring the obligation upon which the action
is brought, or in concealing or disposing of the property for the taking,
detention or conversion of which the action is brought;
(e) In an action against a party who has removed or disposed of his
property, or is about to do so, with intent to defraud his creditors; . . .
Verily, the acts of Choithram, et al. of disposing the properties subject
of the litigation disclose a scheme to defraud spouses Ishwar so they
may not be able to recover at all given a judgment in their favor, the
requiring the issuance of the writ of attachment in this instance.
Nevertheless, under the peculiar circumstances of this case and
despite the fact that Choithram, et al., have committed acts which
demonstrate their bad faith and scheme to defraud spouses Ishwar
and Sonya of their rightful share in the properties in litigation, the
Court cannot ignore the fact that Choithram must have been
motivated by a strong conviction that as the industrial partner in the
acquisition of said assets he has as much claim to said properties as
Ishwar, the capitalist partner in the joint venture.
The scenario is clear. Spouses Ishwar supplied the capital of
$150,000.00 for the business.1âwphi1 They entrusted the money to
Choithram to invest in a profitable business venture in the Philippines.
For this purpose they appointed Choithram as their attorney-in-fact.
Choithram in turn decided to invest in the real estate business. He
bought the two (2) parcels of land in question from Ortigas as
attorney-in-fact of Ishwar- Instead of paying for the lots in cash, he
paid in installments and used the balance of the capital entrusted to
him, plus a loan, to build two buildings. Although the buildings were
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
burned later, Choithram was able to build two other buildings on the
property. He rented them out and collected the rentals. Through the
industry and genius of Choithram, Ishwar's property was developed
and improved into what it is now—a valuable asset worth millions of
pesos. As of the last estimate in 1985, while the case was pending
before the trial court, the market value of the properties is no less than
P22,304,000.00.39 It should be worth much more today.
We have a situation where two brothers engaged in a business
venture. One furnished the capital, the other contributed his industry
and talent. Justice and equity dictate that the two share equally the
fruit of their joint investment and efforts. Perhaps this Solomonic
solution may pave the way towards their reconciliation. Both would
stand to gain. No one would end up the loser. After all, blood is thicker
than water.
However, the Court cannot just close its eyes to the devious
machinations and schemes that Choithram employed in attempting to
dispose of, if not dissipate, the properties to deprive spouses Ishwar
of any possible means to recover any award the Court may grant in
their favor. Since Choithram, et al. acted with evident bad faith and
malice, they should pay moral and exemplary damages as well as
attorney's fees to spouses Ishwar.
WHEREFORE, the petition in G.R. No. 85494 is DENIED, while the
petition in G.R. No. 85496 is hereby given due course and
GRANTED. The judgment of the Court of Appeals dated October 18,
1988 is hereby modified as follows:
1. Dividing equally between respondents spouses Ishwar, on the one
hand, and petitioner Choithram Ramnani, on the other, (in G.R. No.
85494) the two parcels of land subject of this litigation, including all
the improvements thereon, presently covered by transfer Certificates
of Title Nos. 403150 and 403152 of the Registry of Deeds, as well as
the rental income of the property from 1967 to the present.
2. Petitioner Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti C.
Ramnani and respondent Ortigas and Company, Limited Partnership
(in G.R. No. 85496) are ordered solidarily to pay in cash the value of
said one-half (1/2) share in the said land and improvements pertaining
to respondents spouses Ishwar and Sonya at their fair market value at
the time of the satisfaction of this judgment but in no case less than
their value as appraised by the Asian Appraisal, Inc. in its Appraisal
Report dated August 1985 (Exhibits T to T-14, inclusive).
33
3. Petitioners Choithram, Nirmla and Moti Ramnani and respondent
Ortigas & Co., Ltd. Partnership shall also be jointly and severally liable
to pay to said respondents spouses Ishwar and Sonya Ramnani one-
half (1/2) of the total rental income of said properties and
improvements from 1967 up to the date of satisfaction of the judgment
to be computed as follows:
a. On Building C occupied by Eppie's Creation and Jethmal Industries
from 1967 to 1973, inclusive, based on the 1967 to 1973 monthly
rentals paid by Eppie's Creation;
b. Also on Building C above, occupied by Jethmal Industries and
Lavine from 1974 to 1978, the rental incomes based on then rates
prevailing as shown under Exhibit "P"; and from 1979 to 1981, based
on then prevailing rates as indicated under Exhibit "Q";
c. On Building A occupied by Transworld Knitting Mills from 1972 to
1978, the rental incomes based upon then prevailing rates shown
under Exhibit "P", and from 1979 to 1981, based on prevailing rates
per Exhibit "Q";
d. On the two Bays Buildings occupied by Sigma-Mariwasa from 1972
to 1978, the rentals based on the Lease Contract, Exhibit "P", and
from 1979 to 1980, the rentals based on the Lease Contract, Exhibit
"Q".
and thereafter commencing 1982, to account for and turn over the
rental incomes paid or ought to be paid for the use and occupancy of
the properties and all improvements totalling 10,048 sq. m., based on
the rate per square meter prevailing in 1981 as indicated annually
cumulative up to 1984. Then, commencing 1985 and up to the
satisfaction of the judgment, rentals shall be computed at ten percent
(10%) annually of the fair market values of the properties as
appraised by the Asian Appraisals, Inc. in August 1985. (Exhibits T to
T-14, inclusive.)
4. To determine the market value of the properties at the time of the
satisfaction of this judgment and the total rental incomes thereof, the
trial court is hereby directed to hold a hearing with deliberate dispatch
for this purpose only and to have the judgment immediately executed
after such determination.
5. Petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, are
also jointly and severally liable to pay respondents Ishwar and Sonya
Ramnani the amount of P500,000.00 as moral damages, P200,000.00
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
as exemplary damages and attorney's fees equal to 10% of the total
award. to said respondents spouses.
6. The motion to dissolve the writ of preliminary injunction dated
December 10, 1990 filed by petitioners Choithram, Nirmla and Moti,
all surnamed Ramnani, is hereby DENIED and the said injunction is
hereby made permanent. Let a writ of attachment be issued and
levied against the properties and improvements subject of this
litigation to secure the payment of the above awards to spouses
Ishwar and Sonya.
7. The mortgage constituted on the subject property dated June 20,
1989 by petitioners Choithram and Nirmla, both surnamed Ramnani in
favor of respondent Overseas Holding, Co. Ltd. (in G.R. No. 85496)
for the amount of $3-M is hereby declared null and void. The Register
of Deeds of Pasig, Rizal, is directed to cancel the annotation of d
mortgage on the titles of the properties in question.
8. Should respondent Ortigas Co., Ltd. Partnership pay the awards to
Ishwar and Sonya Ramnani under this judgment, it shall be entitled to
reimbursement from petitioners Choithram, Nirmla and Moti, all
surnamed Ramnani.
9. The above awards shag bear legal rate of interest of six percent
(6%) per annum from the time this judgment becomes final until they
are fully paid by petitioners Choithram Ramnani, Nirmla V. Ramnani,
Moti C. Ramnani and Ortigas, Co., Ltd. Partnership. Said petitioners
Choithram, et al. and respondent Ortigas shall also pay the costs.
SO ORDERED.
Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

34
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
G.R. No. L-59956 October 31, 1984
ISABELO MORAN, JR., petitioner,
vs.
THE HON. COURT OF APPEALS and MARIANO E.
PECSON, respondents.
GUTIERREZ, JR., J.:ñé+.£ªwph!1
This is a petition for review on certiorari of the decision of the
respondent Court of Appeals which ordered petitioner Isabelo Moran,
Jr. to pay damages to respondent Mariano E, Pecson.
As found by the respondent Court of Appeals, the undisputed facts
indicate that: têñ.£îhqwâ£
xxx xxx xxx
... on February 22, 1971 Pecson and Moran entered into an
agreement whereby both would contribute P15,000 each for the
purpose of printing 95,000 posters (featuring the delegates to the
1971 Constitutional Convention), with Moran actually supervising the
work; that Pecson would receive a commission of P l,000 a month
starting on April 15, 1971 up to December 15, 1971; that on
December 15, 1971, a liquidation of the accounts in the distribution
and printing of the 95,000 posters would be made, that Pecson gave
Moran P10,000 for which the latter issued a receipt; that only a few
posters were printed; that on or about May 28, 1971, Moran executed
in favor of Pecson a promissory note in the amount of P20,000
payable in two equal installments (P10,000 payable on or before June
15, 1971 and P10,000 payable on or before June 30, 1971), the whole
sum becoming due upon default in the payment of the first installment
on the date due, complete with the costs of collection.
Private respondent Pecson filed with the Court of First Instance of
Manila an action for the recovery of a sum of money and alleged in his
complaint three (3) causes of action, namely: (1) on the alleged
partnership agreement, the return of his contribution of P10,000.00,
payment of his share in the profits that the partnership would have
earned, and, payment of unpaid commission; (2) on the alleged
promissory note, payment of the sum of P20,000.00; and, (3) moral
and exemplary damages and attorney's fees.
After the trial, the Court of First Instance held that: têñ.£îhqwâ£
From the evidence presented it is clear in the mind of the court that by
virtue of the partnership agreement entered into by the parties-plaintiff
35
and defendant the plaintiff 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. Nothing more was done after this and it can be said that
the venture did not really get off the ground. On the other hand, the
plaintiff failed to give his full contribution of P15,000.00. Thus, each
party is entitled to rescind the contract which right is implied in
reciprocal obligations under Article 1385 of the Civil Code whereunder
'rescission creates the obligation to return the things which were the
object of the contract ...
WHEREFORE, the court hereby renders judgment ordering defendant
Isabelo C. Moran, Jr. to return to plaintiff Mariano E. Pecson the sum
of P17,000.00, with interest at the legal rate from the filing of the
complaint on June 19, 1972, and the costs of the suit.
For insufficiency of evidence, the counterclaim is hereby dismissed.
From this decision, both parties appealed to the respondent Court of
Appeals. The latter likewise rendered a decision against the petitioner.
The dispositive portion of the decision reads: têñ.£îhqwâ£
PREMISES CONSIDERED, the decision appealed from is hereby
SET ASIDE, and a new one is hereby rendered, ordering defendant-
appellant Isabelo C. Moran, Jr. to pay plaintiff- appellant Mariano E.
Pecson:
(a) Forty-seven thousand five hundred (P47,500) (the amount that
could have accrued to Pecson under their agreement);
(b) Eight thousand (P8,000), (the commission for eight months);
(c) Seven thousand (P7,000) (as a return of Pecson's investment for
the Veteran's Project);
(d) Legal interest on (a), (b) and (c) from the date the complaint was
filed (up to the time payment is made)
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:
I
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.
II
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
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.
III
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.
IV
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.
V construction projects in question. This case was decided on a
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN
NOT GRANTING THE PETITIONER'S COMPULSORY
COUNTERCLAIM FOR DAMAGES.
The first question raised in this petition refers to the award of
P47,500.00 as the private respondent's share in the unrealized profits
of the partnership. 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.
We agree with the petitioner that the award of speculative damages
has no basis in fact and law.
There is no dispute over the nature of the agreement between the
petitioner and the private respondent. It is a contract of partnership.
The latter in his complaint alleged that he was induced by the
petitioner to enter into a partnership with him under the following
terms and conditions: têñ.£îhqwâ£
1. That the partnership will print colored posters of the delegates to
the Constitutional Convention;
2. That they will invest the amount of Fifteen Thousand Pesos
(P15,000.00) each;
3. That they will print Ninety Five Thousand (95,000) copies of the
said posters;
36
4. That plaintiff will receive a commission of One Thousand Pesos
(P1,000.00) a month starting April 15, 1971 up to December 15, 1971;
5. That upon the termination of the partnership on December 15,
1971, a liquidation of the account pertaining to the distribution and
printing of the said 95,000 posters shall be made.
The petitioner on the other hand admitted in his answer the existence
of the partnership.
The rule is, when a partner who has undertaken to contribute a sum of
money fails to do so, he becomes a debtor of the partnership for
whatever he may have promised to contribute (Art. 1786, Civil Code)
and for interests and damages from the time he should have complied
with his obligation (Art. 1788, Civil Code). Thus in Uy v. Puzon (79
SCRA 598), which interpreted Art. 2200 of the Civil Code of the
Philippines, we allowed a total of P200,000.00 compensatory
damages in favor of the appellee because the appellant therein was
remiss in his obligations as a partner and as prime contractor of the
particular set of facts. We awarded compensatory damages in
the Uy case because there was a finding that the constructing
business is a profitable one and that the UP construction company
derived some profits from its contractors in the construction of roads
and bridges despite its deficient capital." Besides, there was evidence
to show that the partnership made some profits during the periods
from July 2, 1956 to December 31, 1957 and from January 1, 1958 up
to September 30, 1959. The profits on two government contracts
worth P2,327,335.76 were not speculative. In the instant case, there
is no evidence whatsoever that the partnership between the petitioner
and the private respondent would have been a profitable venture. In
fact, it was a failure doomed from the start. There is therefore no basis
for the award of speculative damages in favor of the private
respondent.
Furthermore, in the Uy case, only Puzon failed to give his full
contribution while Uy contributed much more than what was expected
of him. In this case, however, there was mutual breach. Private
respondent failed to give his entire contribution in the amount of
P15,000.00. He contributed only P10,000.00. The petitioner likewise
failed to give any of the amount expected of him. He further failed to
comply with the agreement to print 95,000 copies of the posters.
Instead, he printed only 2,000 copies.
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
Article 1797 of the Civil Code provides: têñ.£îhqwâ£
The losses and profits shall be distributed in conformity with the
agreement. If only the share of each partner in the profits has been
agreed upon, the share of each in the losses shall be in the same
proportion.
Being a contract of partnership, each partner must share in the profits
and losses of the venture. That is the essence of a partnership. And
even with an assurance made by one of the partners that they would
earn a huge amount of profits, in the absence of fraud, the other
partner cannot claim a right to recover the highly speculative profits. It
is a rare business venture guaranteed to give 100% profits. In this
case, on an investment of P15,000.00, the respondent was supposed
to earn a guaranteed P1,000.00 a month for eight months and around
P142,500.00 on 95,000 posters costing P2.00 each but 2,000 of
which were sold at P5.00 each. The fantastic nature of expected
profits is obvious. We have to take various factors into account. The
failure of the Commission on Elections to proclaim all the 320
candidates of the Constitutional Convention on time was a major
factor. The petitioner undesirable his best business judgment and felt
that it would be a losing venture to go on with the printing of the
agreed 95,000 copies of the posters. Hidden risks in any business
venture have to be considered.
It does not follow however that the private respondent is not entitled to
recover any amount from the petitioner. The records show that the
private respondent gave P10,000.00 to the petitioner. The latter used
this amount for the printing of 2,000 posters at a cost of P2.00 per
poster or a total printing cost of P4,000.00. The records further show
that the 2,000 copies were sold at P5.00 each. The gross income
therefore was P10,000.00. Deducting the printing costs of P4,000.00
from the gross income of P10,000.00 and with no evidence on the
cost of distribution, the net profits amount to only P6,000.00. This net
profit of P6,000.00 should be divided between the petitioner and the
private respondent. And since only P4,000.00 was undesirable by the
petitioner in printing the 2,000 copies, the remaining P6,000.00 should
therefore be returned to the private respondent.
Relative to the second alleged error, the petitioner submits that the
award of P8,000.00 as Pecson's supposed commission has no
justifiable basis in law.
Again, we agree with the petitioner.
37
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 inspite of loss or failure of
the venture. Since the venture was a failure, the private respondent is
not entitled to the P8,000.00 commission.
Anent the third assigned error, the petitioner maintains that the
respondent Court of Appeals erred in holding him liable to the private
respondent in the sum of P7,000.00 as a supposed return of
investment in a magazine venture.
In awarding P7,000.00 to the private respondent as his supposed
return of investment in the "Voice of the Veterans" magazine venture,
the respondent court ruled that: têñ.£îhqwâ£
xxx xxx xxx
... Moran admittedly signed the promissory note of P20,000 in favor of
Pecson. Moran does not question the due execution of said note.
Must Moran therefore pay the amount of P20,000? The evidence
indicates that the P20,000 was assigned by Moran to cover the
following: têñ.£îhqwâ£
(a) P 7,000 — the amount of the PNB check given by Pecson to
Moran representing Pecson's investment in Moran's other project (the
publication and printing of the 'Voice of the Veterans');
(b) P10,000 — to cover the return of Pecson's contribution in the
project of the Posters;
(c) P3,000 — representing Pecson's commission for three months
(April, May, June, 1971).
Of said P20,000 Moran has to pay P7,000 (as a return of Pecson's
investment for the Veterans' project, for this project never left the
ground) ...
As a rule, the findings of facts of the Court of Appeals are final and
conclusive and cannot be reviewed on appeal to this Court (Amigo v.
Teves, 96 Phil. 252), provided they are borne out by the record or are
based on substantial evidence (Alsua-Betts v. Court of Appeals, 92
SCRA 332). However, this rule admits of certain exceptions. Thus,
in Carolina Industries Inc. v. CMS Stock Brokerage, Inc., et al., (97
SCRA 734), we held that this Court retains the power to review and
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
rectify the findings of fact of the Court of Appeals when (1) the
conclusion is a finding grounded entirely on speculation, surmises and
conjectures; (2) when the inference made is manifestly mistaken
absurd and impossible; (3) where there is grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts; and
(5) when the court, in making its findings, went beyond the issues of
the case and the same are contrary to the admissions of both the
appellant and the appellee.
In this case, there is misapprehension of facts. The evidence of the
private respondent himself shows that his investment in the "Voice of
Veterans" project amounted to only P3,000.00. The remaining
P4,000.00 was the amount of profit that the private respondent
expected to receive.
The records show the following exhibits- têñ.£îhqwâ£
E — Xerox copy of PNB Manager's Check No. 234265 dated March
22, 1971 in favor of defendant. Defendant admitted the authenticity of
this check and of his receipt of the proceeds thereof (t.s.n., pp. 3-4,
Nov. 29, 1972). This exhibit is being offered for the purpose of
showing plaintiff's capital investment in the printing of the "Voice of the
Veterans" for which he was promised a fixed profit of P8,000. This
investment of P6,000.00 and the promised profit of P8,000 are
covered by defendant's promissory note for P14,000 dated March 31,
1971 marked by defendant as Exhibit 2 (t.s.n., pp. 20-21, Nov. 29,
1972), and by plaintiff as Exhibit P. Later, defendant returned
P3,000.00 of the P6,000.00 investment thereby proportionately
reducing the promised profit to P4,000. With the balance of P3,000
(capital) and P4,000 (promised profit), defendant signed and executed
the promissory note for P7,000 marked Exhibit 3 for the defendant
and Exhibit M for plaintiff. Of this P7,000, defendant paid P4,000
representing full return of the capital investment and P1,000 partial
payment of the promised profit. The P3,000 balance of the promised
profit was made part consideration of the P20,000 promissory note
(t.s.n., pp. 22-24, Nov. 29, 1972). It is, therefore, being presented to
show the consideration for the P20,000 promissory note.
F — Xerox copy of PNB Manager's check dated May 29, 1971 for
P7,000 in favor of defendant. The authenticity of the check and his
receipt of the proceeds thereof were admitted by the defendant (t.s.n.,
pp. 3-4, Nov. 29, 1972). This P 7,000 is part consideration, and in
cash, of the P20,000 promissory note (t.s.n., p. 25, Nov. 29, 1972),
38
and it is being presented to show the consideration for the P20,000
note and the existence and validity of the obligation.
xxx xxx xxx
L-Book entitled "Voice of the Veterans" which is being offered for the
purpose of showing the subject matter of the other partnership
agreement and in which plaintiff invested the P6,000 (Exhibit E)
which, together with the promised profit of P8,000 made up for the
consideration of the P14,000 promissory note (Exhibit 2; Exhibit P).
As explained in connection with Exhibit E. the P3,000 balance of the
promised profit was later made part consideration of the P20,000
promissory note.
M-Promissory note for P7,000 dated March 30, 1971. This is also
defendant's Exhibit E. This document is being offered for the purpose
of further showing the transaction as explained in connection with
Exhibits E and L.
N-Receipt of plaintiff dated March 30, 1971 for the return of his
P3,000 out of his capital investment of P6,000 (Exh. E) in the P14,000
promissory note (Exh. 2; P). This is also defendant's Exhibit 4. This
document is being offered in support of plaintiff's explanation in
connection with Exhibits E, L, and M to show the transaction
mentioned therein.
xxx xxx xxx
P-Promissory note for P14,000.00. This is also defendant's Exhibit 2.
It is being offered for the purpose of showing the transaction as
explained in connection with Exhibits E, L, M, and N above.
Explaining the above-quoted exhibits, respondent Pecson testified
that: têñ.£îhqwâ£
Q During the pre-trial of this case, Mr. Pecson, the defendant
presented a promissory note in the amount of P14,000.00 which has
been marked as Exhibit 2. Do you know this promissory note?
A Yes, sir.
Q What is this promissory note, in connection with your transaction
with the defendant?
A This promissory note is for the printing of the "Voice of the
Veterans".
Q What is this "Voice of the Veterans", Mr. Pecson?
A It is a book.têñ.£îhqwâ£
(T.S.N., p. 19, Nov. 29, 1972)
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
Q And what does the amount of P14,000.00 indicated in the
promissory note, Exhibit 2, represent?
A It represents the P6,000.00 cash which I gave to Mr. Moran, as
evidenced by the Philippine National Bank Manager's check and the
P8,000.00 profit assured me by Mr. Moran which I will derive from the
printing of this "Voice of the Veterans" book.
Q You said that the P6,000.00 of this P14,000.00 is covered by, a
Manager's check. I show you Exhibit E, is this the Manager's check
that mentioned?
A Yes, sir.
Q What happened to this promissory note of P14,000.00 which you
said represented P6,000.00 of your investment and P8,000.00
promised profits?
A Latter, Mr. Moran returned to me P3,000.00 which represented one-
half (1/2) of the P6,000.00 capital I gave to him.
Q As a consequence of the return by Mr. Moran of one-half (1/2) of
the P6,000.00 capital you gave to him, what happened to the
promised profit of P8,000.00?
A It was reduced to one-half (1/2) which is P4,000.00.
Q Was there any document executed by Mr. Moran in connection with
the Balance of P3,000.00 of your capital investment and the
P4,000.00 promised profits?
A Yes, sir, he executed a promissory note.
Q I show you a promissory note in the amount of P7,000.00 dated
March 30, 1971 which for purposes of Identification I request the
same to be marked as Exhibit M. . .
Court têñ.£îhqwâ£
Mark it as Exhibit M.
Q (continuing) is this the promissory note which you said was
executed by Mr. Moran in connection with your transaction regarding
the printing of the "Voice of the Veterans"?
A Yes, sir. (T.S.N., pp. 20-22, Nov. 29, 1972).
Q What happened to this promissory note executed by Mr. Moran, Mr.
Pecson?
A Mr. Moran paid me P4,000.00 out of the P7,000.00 as shown by the
promissory note.
Q Was there a receipt issued by you covering this payment of
P4,000.00 in favor of Mr. Moran?
A Yes, sir.
39
(T.S.N., p. 23, Nov. 29, 1972).
Q You stated that Mr. Moran paid the amount of P4,000.00 on
account of the P7,000.00 covered by the promissory note, Exhibit M.
What does this P4,000.00 covered by Exhibit N represent?
A This P4,000.00 represents the P3,000.00 which he has returned of
my P6,000.00 capital investment and the P1,000.00 represents partial
payment of the P4,000.00 profit that was promised to me by Mr.
Moran.
Q And what happened to the balance of P3,000.00 under the
promissory note, Exhibit M?
A The balance of P3,000.00 and the rest of the profit was applied as
part of the consideration of the promissory note of P20,000.00.
(T.S.N., pp. 23-24, Nov. 29, 1972).
The respondent court erred when it concluded that the project never
left the ground because the project did take place. Only it failed. It was
the private respondent himself who presented a copy of the book
entitled "Voice of the Veterans" in the lower court as Exhibit "L".
Therefore, it would be error to state that the project never took place
and on this basis decree the return of the private respondent's
investment.
As already mentioned, there are risks in any business venture and the
failure of the undertaking cannot entirely be blamed on the managing
partner alone, specially if the latter exercised his best business
judgment, which seems to be true in this case. In view of the
foregoing, there is no reason to pass upon the fourth and fifth
assignments of errors raised by the petitioner. We likewise find no
valid basis for the grant of the counterclaim.
WHEREFORE, 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.
SO ORDERED.1äwphï1.ñët
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
Teehankee (Chairman), Melencio-Herrera, Plana and Relova, JJ.,
concur.
De la Fuente J., took no part.

40
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
Ng Ya vs. Sugbu Commercial Co., [C.A.] 50 O.G. 4913
(CAN’T FIND FULL CASE ONLINE)
FACTS:
Ng Ya, a Chinese merchant based in Surigao, Surigao ordered from
Sugbu Commercial (based in Cebu) 1,000 galvanized iron and
aluminium sheets. It was agreed that the goods would be
delivered in a week’s time, or on or before January 5, 1950. The
amount of these goods is P5,400, which appears to have been paid
by Ng Ya in full.
* However, the said goods were not delivered on the said date. And
as Ng Ya kept on inquiring from Sugbu Commercial Co. about the
status of the goods, the latter failed to deliver the same but kept
promising that the said goods would be delivered at some future time.
* Sugbu Commercial later found out that Ng Ya is also in need of
cigarettes that she will sell on resale in Surigao. The former then
offered the latter cigarettes. Ng Ya was enticed
by the offer and then entered into another contract of sale with
Sugbu.
* She paid the amount of the cigarettes worth P4,000 with the help of
Lana Bakery, with whom she had an understanding of splitting the
profits she hoped to realize from the
buy and sell of cigarettes.
* However, after a couple of months, in July, neither the cigarettes nor
the galvanized iron and aluminium sheets reached Ng Ya.
Consequently, Tan Chun Pia of Lana Bakery, from whom she
obtained the P4,000 got angry with her and, for this reason, Ng Ya
was forced to reimburse him of the amount.
* She then kept coming back to Sugbu to demand either the delivery
of the goods she ordered or the payment of P 9,400. Unfortunately,
every time she dropped there, poor Ng Ya was challenged by Shih
Tiong Chu to file a complaint, and she had to seek the help of the
Chinese Chamber of Commerce for the settlement of her claim.
* Ng Ya finally filed a complaint with the CFI Cebu.
* Sugbu Commercial then filed a 3rd-party complaint against Pow Sun
Gee, alleging that the latter received the amounts of P5,400 and
P4,000 in his capacity as manager of Sugbu Commercial when he
was not authorized to issue official receipts and that only his co-
partner Shih Tiong Chu, who was most of the time in Manila, could do
so. In this regard, Sugbu Commercial prayed that Pow Sun gee be
41
ordered to indemnify Sugbu Commercial for whatever is adjudged
against the latter in favor of plaintiff Ng Ya.
* TC decided in favor of Ng Ya and sentenced Sugbu to pay plaintiff
the sum of P9,400 and condemning Pow Sun Gee to reimburse
Sugbu Commercial Company.
* Sugbu Commercial appealed.
Issues: W/N Sugbu Commercial should not be held liable because
Pow Sun Gee, as the one who received the payments and issued
receipts to Ng Ya, is not authorized to do so.
Holding:
A manager of a partnership is presumed to have all the incidental
powers to carry out the object of the partnership in the transaction of
the business. There is of course an exception to the general rule:
when the powers of a manager are specifically restricted, he could not
exercise the powers expressly limited of him. But when the articles of
association do not specify the powers of the manager, it is admitted
on principle that a manager has the powers of a general agent, and
even more. When the object of the company is determined, the
manager has all the powers necessary for the attainment of such
object.
Reasoning
Sugbu Commercial was not able to present articles of co-partnership
that would show any limitation upon the powers of the manager – an
indication that there was none. For this reason, we hold and declare
that the minor power of issuing official receipt is included in the
general powers of the manager.
Indeed, it would be quite queer that the manager of any juridical entity
would not be authorized to issue official receipts for amounts
delivered to that entity through said manager, and that only his co-
partner Shih Tiong Chu, who was most of the time in Manila, could do
so. This is not in keeping with the present day business dealings, for it
is slow and inconvenient to those who transact with the company.
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
G.R. No. L-11624            January 21, 1918
E. M. BACHRACH, plaintiff-appellee,
vs.
"LA PROTECTORA", ET AL., defendants-appellants.
Vicente Foz for appellants.
A. J. Burke for appellee.
STREET, J.:
In the year 1913, the individuals named as defendants in this action
formed a civil partnership, called "La Protectora," for the purpose of
engaging in the business of transporting passengers and freight at
Laoag, Ilocos Norte. In order to provide the enterprise with means of
transportation, Marcelo Barba, acting as manager, came to Manila
and upon June 23, 1913, negotiated the purchase of two automobile
trucks from the plaintiff, E. M. Bachrach, for the agree price of
P16,500. He paid the sum of 3,000 in cash, and for the balance
executed promissory notes representing the deferred payments.
These notes provided for the payment of interest from June 23, 1913,
the date of the notes, at the rate of 10 per cent per annum. Provision
was also made in the notes for the payment of 25 per cent of the
amount due if it should be necessary to place the notes in the hands
of an attorney for collection. Three of these notes, for the sum of
P3,375 each, have been made the subject of the present action, and
there are exhibited with the complaint in the cause. One was signed
by Marcelo Barba in the following manner:
P. P. La Protectora
By Marcelo Barba
Marcelo Barba.
The other two notes are signed in the same way with the word "By"
omitted before the name of Marcelo Barba in the second line of the
signature. It is obvious that in thus signing the notes Marcelo Barba
intended to bind both the partnership and himself. In the body of the
note the word "I" (yo) instead of "we" (nosotros) is used before the
words "promise to pay" (prometemos) used in the printed form. It is
plain that the singular pronoun here has all the force of the plural.
As preliminary to the purchase of these trucks, the defendants Nicolas
Segundo, Antonio Adiarte, Ignacio Flores, and Modesto Serrano,
upon June 12, 1913, executed in due form a document in which they
declared that they were members of the firm "La Protectora" and that
they had granted to its president full authority "in the name and
42
representation of said partnership to contract for the purchase of two
automobiles" (en nombre y representacion de la mencionada
sociedad contratante la compra de dos automoviles). This document
was apparently executed in obedience to the requirements of
subsection 2 of article 1697 of the Civil Code, for the purpose of
evidencing the authority of Marcelo Barba to bind the partnership by
the purchase. The document in question was delivered by him to
Bachrach at the time the automobiles were purchased.
From time to time after this purchase was made, Marcelo Barba
purchased of the plaintiff various automobile effects and accessories
to be used in the business of "La Protectora." Upon May 21, 1914, the
indebtedness resulting from these additional purchases amounted to
the sum of P2,916.57
In May, 1914, the plaintiff foreclosed a chattel mortgage which he had
retained on the trucks in order to secure the purchase price. The
amount realized from this sale was P1,000. This was credited unpaid.
To recover this balance, together with the sum due for additional
purchases, the present action was instituted in the Court of First
Instance of the city of Manila, upon May 29, 1914, against "La
Protectora" and the five individuals Marcelo Barba, Nicolas Segundo,
Antonio Adiarte, Ignacio Flores, and Modesto Serrano. No question
has been made as to the propriety of impleading "La Protectora" as if
it were a legal entity. At the hearing, judgment was rendered against
all of the defendants. From this judgment no appeal was taken in
behalf either of "La Protectora" or Marcelo Barba; and their liability is
not here under consideration. The four individuals who signed the
document to which reference has been made, authorizing Barba to
purchase the two trucks have, however, appealed and assigned
errors. The question here to be determined is whether or not these
individuals are liable for the firm debts and if so to what extent.
The amount of indebtedness owing to the plaintiff is not in dispute, as
the principal of the debt is agreed to be P7,037. Of this amount it must
now be assumed, in view of the finding of the trial court, from which
no appeal has been taken by the plaintiff, that the unpaid balance of
the notes amounts to P4,121, while the remainder (P2,916)
represents the amount due for automobile supplies and accessories.
The business conducted under the name of "La Protectora" was
evidently that of a civil partnership; and the liability of the partners to
this association must be determined under the provisions of the Civil
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
Code. The authority of Marcelo Barba to bind the partnership, in the
purchase of the trucks, is fully established by the document executed
by the four appellants upon June 12, 1913. The transaction by which
Barba secured these trucks was in conformity with the tenor of this
document. The promissory notes constitute the obligation exclusively
of "La Protectora" and of Marcelo Barba; and they do not in any sense
constitute an obligation directly binding on the four appellants. Their
liability is based on the fact that they are members of the civil
partnership and as such are liable for its debts. It is true that article
1698 of the Civil Code declares that a member of a civil partnership is
not liable in solidum (solidariamente) with his fellows for its entire
indebtedness; but it results from this article, in connection with article
1137 of the Civil Code, that each is liable with the others
(mancomunadamente) for his aliquot part of such indebtedness. And
so it has been held by this court. (Co-Pitco vs. Yulo, 8 Phil. Rep.,
544.)
The Court of First Instance seems to have founded its judgment
against the appellants in part upon the idea that the document
executed by them constituted an authority for Marcelo Barba to bind
them personally, as contemplated in the second clause of article 1698
of the Civil Code. That cause says that no member of the partnership
can bind the others by a personal act if they have not given him
authority to do so. We think that the document referred to was
intended merely as an authority to enable Barba to bind the
partnership and that the parties to that instrument did not intend
thereby to confer upon Barba an authority to bind them personally. It
is obvious that the contract which Barba in fact executed in pursuance
of that authority did not by its terms profess to bind the appellants
personally at all, but only the partnership and himself. It follows that
the four appellants cannot be held to have been personally obligated
by that instrument; but, as we have already seen, their liability rests
upon the general principles underlying partnership liability.
As to so much of the indebtedness as is based upon the claim for
automobile supplies and accessories, it is obvious that the document
of June 12, 1913, affords no authority for holding the appellants liable.
Their liability upon this account is, however, no less obvious than
upon the debt incurred by the purchase of the trucks; and such liability
is derived from the fact that the debt was lawfully incurred in the
prosecution of the partnership enterprise.
43
There is no proof in the record showing what the agreement, if any,
was made with regard to the form of management. Under these
circumstances it is declared in article 1695 of the Civil Code that all
the partners are considered agents of the partnership. Barba therefore
must be held to have had authority to incur these expenses. But in
addition to this he is shown to have been in fact the president or
manager, and there can be no doubt that he had actual authority to
incur this obligation.
From what has been said it results that the appellants are severally
liable for their respective shares of the entire indebtedness found to
be due; and the Court of First Instance committed no error in giving
judgment against them. The amount for which judgment should be
entered is P7,037, to which shall be added (1) interest at 10 per cent
per annum from June 23, 1913, to be calculated upon the sum of
P4.121; (2) interest at 6 per cent per annum from July 21, 1915, to be
calculated upon the sum of P2,961; (3) the further sum of P1,030.25,
this being the amount stipulated to be paid by way of attorney's fees.
However, it should be noted that any property pertaining to "La
Protectora" should first be applied to this indebtedness pursuant to the
judgment already entered in this case in the court below; and each of
the four appellants shall be liable only for the one-fifth part of the
remainder unpaid.
Let judgment be entered accordingly, without any express finding of
costs of this instance. So ordered.
Arellano, C.J., Torres, Araullo, Malcolm, and Avanceña, JJ., concur.
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
G.R. No. 70926 January 31, 1989
DAN FUE LEUNG, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and LEUNG
YIU, respondents.
John L. Uy for petitioner.
Edgardo F. Sundiam for private respondent.
GUTIERREZ, JR., J.:
The petitioner asks for the reversal of the decision of the then
Intermediate Appellate Court in AC-G.R. No. CV-00881 which
affirmed the decision of the then Court of First Instance of Manila,
Branch II in Civil Case No. 116725 declaring private respondent
Leung Yiu a partner of petitioner Dan Fue Leung in the business of
Sun Wah Panciteria and ordering the petitioner to pay to the private
respondent his share in the annual profits of the said restaurant.
This case originated from a complaint filed by respondent Leung Yiu
with the then Court of First Instance of Manila, Branch II to recover the
sum equivalent to twenty-two percent (22%) of the annual profits
derived from the operation of Sun Wah Panciteria since October,
1955 from petitioner Dan Fue Leung.
The Sun Wah Panciteria, a restaurant, located at Florentino Torres
Street, Sta. Cruz, Manila, was established sometime in October,
1955. It was registered as a single proprietorship and its licenses and
permits were issued to and in favor of petitioner Dan Fue Leung as
the sole proprietor. Respondent Leung Yiu adduced evidence during
the trial of the case to show that Sun Wah Panciteria was actually a
partnership and that he was one of the partners having contributed
P4,000.00 to its initial establishment.
The private respondents evidence is summarized as follows:
About the time the Sun Wah Panciteria started to become operational,
the private respondent gave P4,000.00 as his contribution to the
partnership. This is evidenced by a receipt identified as Exhibit "A"
wherein the petitioner acknowledged his acceptance of the P4,000.00
by affixing his signature thereto. The receipt was written in Chinese
characters so that the trial court commissioned an interpreter in the
person of Ms. Florence Yap to translate its contents into English.
Florence Yap issued a certification and testified that the translation to
the best of her knowledge and belief was correct. The private
44
respondent identified the signature on the receipt as that of the
petitioner (Exhibit A-3) because it was affixed by the latter in his
(private respondents') presence. Witnesses So Sia and Antonio Ah
Heng corroborated the private respondents testimony to the effect that
they were both present when the receipt (Exhibit "A") was signed by
the petitioner. So Sia further testified that he himself received from the
petitioner a similar receipt (Exhibit D) evidencing delivery of his own
investment in another amount of P4,000.00 An examination was
conducted by the PC Crime Laboratory on orders of the trial court
granting the private respondents motion for examination of certain
documentary exhibits. The signatures in Exhibits "A" and 'D' when
compared to the signature of the petitioner appearing in the pay
envelopes of employees of the restaurant, namely Ah Heng and Maria
Wong (Exhibits H, H-1 to H-24) showed that the signatures in the two
receipts were indeed the signatures of the petitioner.
Furthermore, the private respondent received from the petitioner the
amount of P12,000.00 covered by the latter's Equitable Banking
Corporation Check No. 13389470-B from the profits of the operation
of the restaurant for the year 1974. Witness Teodulo Diaz, Chief of the
Savings Department of the China Banking Corporation testified that
said check (Exhibit B) was deposited by and duly credited to the
private respondents savings account with the bank after it was cleared
by the drawee bank, the Equitable Banking Corporation. Another
witness Elvira Rana of the Equitable Banking Corporation testified that
the check in question was in fact and in truth drawn by the petitioner
and debited against his own account in said bank. This fact was
clearly shown and indicated in the petitioner's statement of account
after the check (Exhibit B) was duly cleared. Rana further testified that
upon clearance of the check and pursuant to normal banking
procedure, said check was returned to the petitioner as the maker
thereof.
The petitioner denied having received from the private respondent the
amount of P4,000.00. He contested and impugned the genuineness of
the receipt (Exhibit D). His evidence is summarized as follows:
The petitioner did not receive any contribution at the time he started
the Sun Wah Panciteria. He used his savings from his salaries as an
employee at Camp Stotsenberg in Clark Field and later as waiter at
the Toho Restaurant amounting to a little more than P2,000.00 as
capital in establishing Sun Wah Panciteria. To bolster his contention
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
that he was the sole owner of the restaurant, the petitioner presented
various government licenses and permits showing the Sun Wah
Panciteria was and still is a single proprietorship solely owned and
operated by himself alone. Fue Leung also flatly denied having issued
to the private respondent the receipt (Exhibit G) and the Equitable
Banking Corporation's Check No. 13389470 B in the amount of
P12,000.00 (Exhibit B).
As between the conflicting evidence of the parties, the trial court gave
credence to that of the plaintiffs. Hence, the court ruled in favor of the
private respondent. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff
and against the defendant, ordering the latter to deliver and pay to the
former, the sum equivalent to 22% of the annual profit derived from
the operation of Sun Wah Panciteria from October, 1955, until fully
paid, and attorney's fees in the amount of P5,000.00 and cost of suit.
(p. 125, Rollo)
The private respondent filed a verified motion for reconsideration in
the nature of a motion for new trial and, as supplement to the said
motion, he requested that the decision rendered should include the
net profit of the Sun Wah Panciteria which was not specified in the
decision, and allow private respondent to adduce evidence so that the
said decision will be comprehensively adequate and thus put an end
to further litigation.
The motion was granted over the objections of the petitioner. After
hearing the trial court rendered an amended decision, the dispositive
portion of which reads:
FOR ALL THE FOREGOING CONSIDERATIONS, the motion for
reconsideration filed by the plaintiff, which was granted earlier by the
Court, is hereby reiterated and the decision rendered by this Court on
September 30, 1980, is hereby amended. The dispositive portion of
said decision should read now as follows:
WHEREFORE, judgment is hereby rendered, ordering the plaintiff
(sic) and against the defendant, ordering the latter to pay the former
the sum equivalent to 22% of the net profit of P8,000.00 per day from
the time of judicial demand, until fully paid, plus the sum of P5,000.00
as and for attorney's fees and costs of suit. (p. 150, Rollo)
The petitioner appealed the trial court's amended decision to the then
Intermediate Appellate Court. The questioned decision was further
45
modified by the appellate court. The dispositive portion of the
appellate court's decision reads:
WHEREFORE, the decision appealed from is modified, the dispositive
portion thereof reading as follows:
1. Ordering the defendant to pay the plaintiff by way of temperate
damages 22% of the net profit of P2,000.00 a day from judicial
demand to May 15, 1971;
2. Similarly, the sum equivalent to 22% of the net profit of P8,000.00 a
day from May 16, 1971 to August 30, 1975;
3. And thereafter until fully paid the sum equivalent to 22% of the net
profit of P8,000.00 a day.
Except as modified, the decision of the court a quo is affirmed in all
other respects. (p. 102, Rollo)
Later, the appellate court, in a resolution, modified its decision and
affirmed the lower court's decision. The dispositive portion of the
resolution reads:
WHEREFORE, the dispositive portion of the amended judgment of
the court a quo reading as follows:
WHEREFORE, judgment is rendered in favor of the plaintiff and
against the defendant, ordering the latter to pay to the former the sum
equivalent to 22% of the net profit of P8,000.00 per day from the time
of judicial demand, until fully paid, plus the sum of P5,000.00 as and
for attorney's fees and costs of suit.
is hereby retained in full and affirmed in toto it being understood that
the date of judicial demand is July 13, 1978. (pp. 105-106, Rollo).
In the same resolution, the motion for reconsideration filed by
petitioner was denied.
Both the trial court and the appellate court found that the private
respondent is a partner of the petitioner in the setting up and
operations of the panciteria. While the dispositive portions merely
ordered the payment of the respondents share, there is no question
from the factual findings that the respondent invested in the business
as a partner. Hence, the two courts declared that the private petitioner
is entitled to a share of the annual profits of the restaurant. The
petitioner, however, claims that this factual finding is erroneous. Thus,
the petitioner argues: "The complaint avers that private respondent
extended 'financial assistance' to herein petitioner at the time of the
establishment of the Sun Wah Panciteria, in return of which private
respondent allegedly will receive a share in the profits of the
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
restaurant. The same complaint did not claim that private respondent
is a partner of the business. It was, therefore, a serious error for the
lower court and the Hon. Intermediate Appellate Court to grant a relief
not called for by the complaint. It was also error for the Hon.
Intermediate Appellate Court to interpret or construe 'financial
assistance' to mean the contribution of capital by a partner to a
partnership;" (p. 75, Rollo)
The pertinent portions of the complaint state:
xxx xxx xxx
2. That on or about the latter (sic) of September, 1955, defendant
sought the financial assistance of plaintiff in operating the defendant's
eatery known as Sun Wah Panciteria, located in the given address of
defendant; as a return for such financial assistance. plaintiff would be
entitled to twenty-two percentum (22%) of the annual profit derived
from the operation of the said panciteria;
3. That on October 1, 1955, plaintiff delivered to the defendant the
sum of four thousand pesos (P4,000.00), Philippine Currency, of
which copy for the receipt of such amount, duly acknowledged by the
defendant is attached hereto as Annex "A", and form an integral part
hereof; (p. 11, Rollo)
In essence, the private respondent alleged that when Sun Wah
Panciteria was established, he gave P4,000.00 to the petitioner with
the understanding that he would be entitled to twenty-two percent
(22%) of the annual profit derived from the operation of the said
panciteria. These allegations, which were proved, make the private
respondent and the petitioner partners in the establishment of Sun
Wah Panciteria because Article 1767 of the Civil Code provides that
"By the contract of partnership two or more persons bind themselves
to contribute money, property or industry to a common fund, with the
intention of dividing the profits among themselves".
Therefore, the lower courts did not err in construing the complaint as
one wherein the private respondent asserted his rights as partner of
the petitioner in the establishment of the Sun Wah Panciteria,
notwithstanding the use of the term financial assistance therein. We
agree with the appellate court's observation to the effect that "... given
its ordinary meaning, financial assistance is the giving out of money to
another without the expectation of any returns therefrom'. It connotes
an ex gratia dole out in favor of someone driven into a state of
destitution. But this circumstance under which the P4,000.00 was
46
given to the petitioner does not obtain in this case.' (p. 99, Rollo) The
complaint explicitly stated that "as a return for such financial
assistance, plaintiff (private respondent) would be entitled to twenty-
two percentum (22%) of the annual profit derived from the operation
of the said panciteria.' (p. 107, Rollo) The well-settled doctrine is that
the '"... nature of the action filed in court is determined by the facts
alleged in the complaint as constituting the cause of action." (De
Tavera v. Philippine Tuberculosis Society, Inc., 113 SCRA 243; Alger
Electric, Inc. v. Court of Appeals, 135 SCRA 37).
The appellate court did not err in declaring that the main issue in the
instant case was whether or not the private respondent is a partner of
the petitioner in the establishment of Sun Wah Panciteria.
The petitioner also contends that the respondent court gravely erred
in giving probative value to the PC Crime Laboratory Report (Exhibit
"J") on the ground that the alleged standards or specimens used by
the PC Crime Laboratory in arriving at the conclusion were
never testified to by any witness nor has any witness identified the
handwriting in the standards or specimens belonging to the petitioner.
The supposed standards or specimens of handwriting were marked
as Exhibits "H" "H-1" to "H-24" and admitted as evidence for the
private respondent over the vigorous objection of the petitioner's
counsel.
The records show that the PC Crime Laboratory upon orders of the
lower court examined the signatures in the two receipts issued
separately by the petitioner to the private respondent and So Sia
(Exhibits "A" and "D") and compared the signatures on them with the
signatures of the petitioner on the various pay envelopes (Exhibits
"H", "H-1" to 'H-24") of Antonio Ah Heng and Maria Wong, employees
of the restaurant. After the usual examination conducted on the
questioned documents, the PC Crime Laboratory submitted its
findings (Exhibit J) attesting that the signatures appearing in both
receipts (Exhibits "A" and "D") were the signatures of the petitioner.
The records also show that when the pay envelopes (Exhibits "H", "H-
1" to "H-24") were presented by the private respondent for marking as
exhibits, the petitioner did not interpose any objection. Neither did the
petitioner file an opposition to the motion of the private respondent to
have these exhibits together with the two receipts examined by the
PC Crime Laboratory despite due notice to him. Likewise, no
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
explanation has been offered for his silence nor was any hint of
objection registered for that purpose.
Under these circumstances, we find no reason why Exhibit "J" should
be rejected or ignored. The records sufficiently establish that there
was a partnership.
The petitioner raises the issue of prescription. He argues: The Hon.
Respondent Intermediate Appellate Court gravely erred in not
resolving the issue of prescription in favor of petitioner. The alleged
receipt is dated October 1, 1955 and the complaint was filed only on
July 13, 1978 or after the lapse of twenty-two (22) years, nine (9)
months and twelve (12) days. From October 1, 1955 to July 13,
1978, no written demands were ever made by private respondent.
The petitioner's argument is based on Article 1144 of the Civil Code
which provides:
Art. 1144. The following actions must be brought within ten years from
the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
in relation to Article 1155 thereof which provides:
Art. 1155. The prescription of actions is interrupted when they are filed
before the court, when there is a written extra-judicial demand by the
creditor, and when there is any written acknowledgment of the debt by
the debtor.'
The argument is not well-taken.
The private respondent is a partner of the petitioner in Sun Wah
Panciteria. The requisites of a partnership which are — 1) two or more
persons bind themselves to contribute money, property, or industry to
a common fund; and 2) intention on the part of the partners to divide
the profits among themselves (Article 1767, Civil Code; Yulo v. Yang
Chiao Cheng, 106 Phil. 110)-have been established. As stated by the
respondent, a partner shares not only in profits but also in the losses
of the firm. If excellent relations exist among the partners at the start
of business and all the partners are more interested in seeing the firm
grow rather than get immediate returns, a deferment of sharing in the
profits is perfectly plausible. It would be incorrect to state that if a
partner does not assert his rights anytime within ten years from the
start of operations, such rights are irretrievably lost. The private
respondent's cause of action is premised upon the failure of the
47
petitioner to give him the agreed profits in the operation of Sun Wah
Panciteria. In effect the private respondent was asking for an
accounting of his interests in the partnership.
It is Article 1842 of the Civil Code in conjunction with Articles 1144
and 1155 which is applicable. Article 1842 states:
The right to an account of his interest shall accrue to any partner, or
his legal representative as against the winding up partners or the
surviving partners or the person or partnership continuing the
business, at the date of dissolution, in the absence or any agreement
to the contrary.
Regarding the prescriptive period within which the private respondent
may demand an accounting, Articles 1806, 1807, and 1809 show that
the right to demand an accounting exists as long as the partnership
exists. Prescription begins to run only upon the dissolution of the
partnership when the final accounting is done.
Finally, the petitioner assails the appellate court's monetary awards in
favor of the private respondent for being excessive and
unconscionable and above the claim of private respondent as
embodied in his complaint and testimonial evidence presented by said
private respondent to support his claim in the complaint.
Apart from his own testimony and allegations, the private respondent
presented the cashier of Sun Wah Panciteria, a certain Mrs. Sarah L.
Licup, to testify on the income of the restaurant.
Mrs. Licup stated:
ATTY. HIPOLITO (direct examination to Mrs. Licup).
Q Mrs. Witness, you stated that among your duties was that you were
in charge of the custody of the cashier's box, of the money, being the
cashier, is that correct?
A Yes, sir.
Q So that every time there is a customer who pays, you were the one
who accepted the money and you gave the change, if any, is that
correct?
A Yes.
Q Now, after 11:30 (P.M.) which is the closing time as you said, what
do you do with the money?
A We balance it with the manager, Mr. Dan Fue Leung.
ATTY. HIPOLITO:
I see.
Q So, in other words, after your job, you huddle or confer together?
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
A Yes, count it all. I total it. We sum it up.
Q Now, Mrs. Witness, in an average day, more or less, will you please
tell us, how much is the gross income of the restaurant?
A For regular days, I received around P7,000.00 a day during my shift
alone and during pay days I receive more than P10,000.00. That is
excluding the catering outside the place.
Q What about the catering service, will you please tell the Honorable
Court how many times a week were there catering services?
A Sometimes three times a month; sometimes two times a month or
more.
xxx xxx xxx
Q Now more or less, do you know the cost of the catering service?
A Yes, because I am the one who receives the payment also of the
catering.
Q How much is that?
A That ranges from two thousand to six thousand pesos, sir.
Q Per service?
A Per service, Per catering.
Q So in other words, Mrs. witness, for your shift alone in a single day
from 3:30 P.M. to 11:30 P.M. in the evening the restaurant grosses an
income of P7,000.00 in a regular day?
A Yes.
Q And ten thousand pesos during pay day.?
A Yes.
(TSN, pp. 53 to 59, inclusive, November 15,1978)
xxx xxx xxx
COURT:
Any cross?
ATTY. UY (counsel for defendant):
No cross-examination, Your Honor. (T.S.N. p. 65, November 15,
1978). (Rollo, pp. 127-128)
The statements of the cashier were not rebutted. Not only did the
petitioner's counsel waive the cross-examination on the matter of
income but he failed to comply with his promise to produce pertinent
records. When a subpoena duces tecum was issued to the petitioner
for the production of their records of sale, his counsel voluntarily
offered to bring them to court. He asked for sufficient time prompting
the court to cancel all hearings for January, 1981 and reset them to
48
the later part of the following month. The petitioner's counsel never
produced any books, prompting the trial court to state:
Counsel for the defendant admitted that the sales of Sun Wah were
registered or recorded in the daily sales book. ledgers, journals and
for this purpose, employed a bookkeeper. This inspired the Court to
ask counsel for the defendant to bring said records and counsel for
the defendant promised to bring those that were available. Seemingly,
that was the reason why this case dragged for quite sometime. To
bemuddle the issue, defendant instead of presenting the books where
the same, etc. were recorded, presented witnesses who claimed to
have supplied chicken, meat, shrimps, egg and other poultry products
which, however, did not show the gross sales nor does it prove that
the same is the best evidence. This Court gave warning to the
defendant's counsel that if he failed to produce the books, the same
will be considered a waiver on the part of the defendant to produce
the said books inimitably showing decisive records on the income of
the eatery pursuant to the Rules of Court (Sec. 5(e) Rule 131).
"Evidence willfully suppressed would be adverse if produced." (Rollo,
p. 145)
The records show that the trial court went out of its way to accord due
process to the petitioner.
The defendant was given all the chance to present all conceivable
witnesses, after the plaintiff has rested his case on February 25, 1981,
however, after presenting several witnesses, counsel for defendant
promised that he will present the defendant as his last witness.
Notably there were several postponement asked by counsel for the
defendant and the last one was on October 1, 1981 when he asked
that this case be postponed for 45 days because said defendant was
then in Hongkong and he (defendant) will be back after said period.
The Court acting with great concern and understanding reset the
hearing to November 17, 1981. On said date, the counsel for the
defendant who again failed to present the defendant asked for
another postponement, this time to November 24, 1981 in order to
give said defendant another judicial magnanimity and substantial due
process. It was however a condition in the order granting the
postponement to said date that if the defendant cannot be presented,
counsel is deemed to have waived the presentation of said witness
and will submit his case for decision.
 [PARTNERSHIP, AGENCY AND TRUST – PART II CASES]
On November 24, 1981, there being a typhoon prevailing in Manila
said date was declared a partial non-working holiday, so much so, the
hearing was reset to December 7 and 22, 1981. On December 7,
1981, on motion of defendant's counsel, the same was again reset to
December 22, 1981 as previously scheduled which hearing was
understood as intransferable in character. Again on December 22,
1981, the defendant's counsel asked for postponement on the ground
that the defendant was sick. the Court, after much tolerance and
judicial magnanimity, denied said motion and ordered that the case be
submitted for resolution based on the evidence on record and gave
the parties 30 days from December 23, 1981, within which to file their
simultaneous memoranda. (Rollo, pp. 148-150)
The restaurant is located at No. 747 Florentino Torres, Sta. Cruz,
Manila in front of the Republic Supermarket. It is near the corner of
Claro M. Recto Street. According to the trial court, it is in the heart of
Chinatown where people who buy and sell jewelries, businessmen,
brokers, manager, bank employees, and people from all walks of life
converge and patronize Sun Wah.
There is more than substantial evidence to support the factual findings
of the trial court and the appellate court. If the respondent court
awarded damages only from judicial demand in 1978 and not from the
opening of the restaurant in 1955, it is because of the petitioner's
contentions that all profits were being plowed back into the expansion
of the business. There is no basis in the records to sustain the
petitioners contention that the damages awarded are excessive. Even
if the Court is minded to modify the factual findings of both the trial
court and the appellate court, it cannot refer to any portion of the
records for such modification. There is no basis in the records for this
Court to change or set aside the factual findings of the trial court and
the appellate court. The petitioner was given every opportunity to
refute or rebut the respondent's submissions but, after promising to do
so, it deliberately failed to present its books and other evidence.
The resolution of the Intermediate Appellate Court ordering the
payment of the petitioner's obligation shows that the same continues
until fully paid. The question now arises as to whether or not the
payment of a share of profits shall continue into the future with no
fixed ending date.
Considering the facts of this case, the Court may decree a dissolution
of the partnership under Article 1831 of the Civil Code which, in part,
provides:
Art. 1831. On application by or for a partner the court shall decree a
dissolution whenever:
xxx xxx xxx
(3) A partner has been guilty of such conduct as tends to affect
prejudicially the carrying on of the business;
(4) A partner willfully or persistently commits a breach of the
partnership agreement, or otherwise so conducts himself in matters
relating to the partnership business that it is not reasonably
practicable to carry on the business in partnership with him;
xxx xxx xxx
(6) Other circumstances render a dissolution equitable.
There shall be a liquidation and winding up of partnership affairs,
return of capital, and other incidents of dissolution because the
continuation of the partnership has become inequitable.
WHEREFORE, the petition for review is hereby DISMISSED for lack
of merit. The decision of the respondent court is AFFIRMED with a
MODIFICATION that as indicated above, the partnership of the
parties is ordered dissolved.
SO ORDERED.
Fernan, C.J., (Chairman), Feliciano, Bidin and Cortes, JJ., concur.

49