TICKLER Participation in Losses

G.R. No. L-16318

LINK G.R. No. L-16318 (lawphil.net)
CASE Pang Lim v Lo Seng
DATE October 21, 1921
PONENTE STREET
DOCTRINE Above all other persons in business relations, partners are required to exhibit towards each
other the highest degree of good faith. In fact the relation between partners is essentially
fiduciary, each being considered in law, as he is in fact, the confidential agent of the other.
It is therefore accepted as fundamental in equity jurisprudence that one partner cannot, to
the detriment of another, apply exclusively to his own benefit the results of the knowledge
and information gained in the character of partner.

CASE NATURE Appeal on CFI decision (Unlawful detainer suit)

FACTS Lo Seng and Pang Lim were partners, under the firm name of Lo Seng and Co., in the
business of running a distillery, known as "El Progreso,." The land on which said distillery is
located were in the property of Lo Yao, who leased the same to the firm of Lo Seng and Co.
for three years.

Upon the expiration of this lease, the lease was extended for fifteen years, reason being the
BIR requiring expensive improvements to the distillery, at the expense of the lessees. In
conformity with this understanding many thousands of pesos were expended by Lo Seng
and Co., and later by Lo Seng alone, in enlarging and improving the plant.

Neither the original contract of lease nor the agreement extending the same was inscribed
in the property registry. Pang Lim eventually sold all his interest in the distillery to his partner;
Lo Shui executed a deed purporting to convey to Pang Lim and another Chinaman named
Benito Galvez, the entire distillery plant. The lease was also never recorded in the registry
of property. Thereafter Pang Lim and Benito Galvez demanded possession from Lo Seng,
but the latter refused to yield; and the present action of unlawful detainer was thereupon
initiated by Pang Lim and Benito Galvez in the court of the justice of the peace of Paombong
to recover possession of the premises.
LOWER COURT Justice of Peace favored Lim and Galvez. CFI upheld
DECISIONS

ISSUE Whether or not plaintiff Pang Lim is in the position to terminate the contract of lease in which
he participated.
HELD The Court held no. Plaintiff Pang Lim is NOT in the position to terminate the contract of lease
in which he participated.
LEGAL BASIS Jurisprudence ruled that in business relations, partners are required to exhibit towards each
other the highest degree of good faith. Since the relation between partners is essentially
fiduciary, they each are considered confidential agent of the other. It is accepted as
fundamental in equity jurisprudence thatone partner cannot, to the detriment of another,
apply exclusively to his own benefit the results of the knowledge and information gained in
the character of partner.
APPLICATION In the present case, plaintiffs Pang Lim and Galvez had been in relations of confidence with
defendant having been a partner and employee of the firm, respectively. They were in the
position to acquire knowledge of the possibilities of the property and possibly an experience
which would have enabled them to exploit the distillery with profit in case they had acquired
possession (which they did). Pang Lim even participated in the creation of the lease and
knew that the original lease had been extended for 15 years. He also knew the extent of the
valuable improvements made in the distillery which will be worthless without the lease. As
such, he cannot be permitted, in the guise of a purchaser of the estate, to destroy an interest
derived from himself and for which he has received full value. It would be shocking to the
moral sense if the condition of the law were found to be such that Pang Lim can confiscate
for his own benefit the property which he had sold for a valuable consideration to defendant.

CONCLUSION Judgment appealed reversed. Defendant absolved from the complaint.