Compilation of Case Digests - Doguiles, Aaron

Doguiles, Aaron John R.
22-00382 Agency, Trust and Partnership
LIST OF CASES
Express Trust: Obligations of the Partners Among Themselves:

1. Rizal Surety & Insurance Co. vs. Court of Appeals, 1. Rojas vs. Maglana, December 10, 1990
August 28, 1996 2. Evangelista & Co. vs. Santos, June 28, 1973
2. DBP vs. Commission on Audit, February 11, 2004 3. Guy vs. Gacott, January 13, 2016
3. Mindanao Development Authority vs. Court of 4. Moran, Jr. vs. Court of Appeals, October 31, 1984
Appeals, April 5, 1982
4. Julio vs. Dalandan, October 30, 1967 Property Rights of a Partner:
5. Cañezo vs. Rojas, November 23, 2007 1. Clemente vs. Galvan, April 26, 1939
6. Peñalber vs. Ramos, January 30, 2009 2. Leyte-Samar Sales Co & R. Tomassi vs. S. Cea and
7. Go vs. Estate of De Buenaventura, July 22, 2015 O. Lastrilla, May 20, 1953
8. Heirs of Tranquilino Labiste vs. Heirs of Jose Labiste, 3. Litonjua, Jr. vs. Litonjua, Sr., December 13, 2005
May 8, 2009 4. Jarantilla vs. Jarantilla, December 1, 2010.
5. Kimteng vs. Atty. Walter Young, August 5, 2015
Implied Trust: 6. Realubit vs. Jaso, September 21, 2011
1. Juan vs. Yap, Sr., March 30, 2011
2. Heirs of Narvasa, Sr. vs. Imbornal, August 6, 2014 Obligations of the Partner with Regard to Third
3. Salao vs. Salao, March 16, 1976 Persons:
4. Ty vs. Ty, April 30, 2008 1. PNB vs. Lo, October 5, 1927
5. PNB vs. Aznar, May 30, 2011 2. Co-Pitco vs. Yulo, September 14, 1907
6. Sime Darby Pilipinas, Inc. vs. Mendoza, June 19, 3. Island Sales, Inc. vs. United Pioneers Gen.
2013 Construction Co., July 31, 1975
7. Gabutan vs. Nacalaban, June 9, 2016 4. La Compania Maritima vs. Muñoz, December 12,
8. Home Guaranty Corp. vs. La Savoie Development 1907
Corp., January 28, 2015 5. Dietrich vs. Freeman, January 28, 1911
6. Santiago Syjuco, Inc. vs. Castro, July 7, 1989
Rules on Prescription: 7. Liwanag & Reyes vs. Workmen’s Compensation
1. Diaz vs. Gorricho and Aguado, March 29, 1958 Commission, May 22, 1959
2. Lopez vs. Court of Appeals, December 16, 2008 8. Pioneer Insurance & Security Corp. vs. Court of
3. Cavile vs. Litania-Hong, March 13, 2009 Appeals, July 28, 1989
4. Torbela vs. Rosario, December 7, 2011 9. Vda. De Chan vs. Pen, October 24, 1928
5. Tong vs. Go Tiat Kun, April 21, 2014 10. Mendoza vs. Paule, February 13, 2009
11. Guy vs. Gacott, January 13, 2016
Partnership: General Provisions: 12. Bendecio vs. Bautista, December 7, 2021
1. Estanislao, Jr. vs. Court of Appeals, April 27, 1988
2. Oña vs. Commissioner of Internal Revenue, May 25, Dissolution and Winding up:
1972 1. Magdusa vs. Albaran, June 30, 1962
3. Pascual vs. Commissioner of Internal Revenue, 2. Yu vs. NLRC, June 30, 1993
October 18, 1988 3. Rojas vs. Maglana, December 10, 1990
4. Anton vs. Sps. Oliva, April 11, 2011 4. Idos vs. Court of Appeals, September 25, 1998
5. Litonjua, Jr. vs. Litonjua, Sr., December 13, 2005 5. Tocao vs. Court of Appeals, October 4, 2000
6. Heirs of Tan Eng Kee vs. Court of Appeals, October 6. Emnace vs. Court of Appeals, November 23, 2001
3, 2000 7. Villareal vs. Ramirez, July 14, 2003
7. Rojas vs. Maglana, December 10, 1990
8. Torres vs. Court of Appeals, December 9, 1999 Limited Partnership:
9. Angeles vs. Secretary of Justice, July 29, 2005 1. CIR vs. Suter, February 28, 1969
2. Teck Seeing & Co., Ltd. vs. Pacific Commercial Co.,
September 6, 1923
3. Goquiolay vs. Sycip, July 26, 1960; December 10,
1963
Rizal Surety & Insurance Co. vs. Court of Appeals, G.R. No. 96727, August 28, 1996
Doguiles, Aaron John R. 22-00382 Agency, Trust and Partnership
Facts:
 Reparations Commission (REPACOM) sold the vessel 'M/V TRANSOCEAN SHIPPER' to Transocean
Transport Corporation.
 On June 22, 1974, the vessel was insured with Rizal Surety & Insurance Company (petitioner) for
US$3,500,000.00.
 The vessel was lost in the Mediterranean Sea in February 1975.
 A partial compromise agreement was entered into between REPACOM and Transocean regarding the insurance
proceeds.
 Central Bank (CB) authorized petitioner to receive and deposit the dollar insurance proceeds in a non-interest
bearing account, jointly in the names of Transocean and REPACOM.
 Petitioner informed that the insurance proceeds had been deposited with Prudential Bank, Escolta Branch,
Manila, in a non-interest bearing account.
 On January 29, 1976, Transocean and REPACOM entered into a partial compromise agreement.
 Transocean and REPACOM requested petitioner to remit the dollar balance to the Philippine National Bank,
Escolta Branch for their joint account.
 Petitioner indicated that it would remit the balance when both Transocean and REPACOM execute the Loss and
Subrogation Receipt.
 On March 15, 1976, CB authorized Transocean and REPACOM to transfer the balance of the insurance proceeds
into an interest-bearing special dollar account.
 Transocean and REPACOM requested petitioner to remit the balance to the Philippine National Bank.
 Petitioner rejected the demand for interest and asserted that there was no trust relationship and that the CB
authorization was given to REPACOM.
 On February 27, 1978, a final compromise agreement was entered into between Transocean and REPACOM.
 On April 14, 1978, a demand letter for interest on the dollar balance was sent to petitioner.
 On August 15, 1979, Transocean filed a complaint for collection of unearned interest on the dollar balance.
RTC Ruling:
The trial court ruled in favor of Transocean, finding the existence of a trust relationship between the petitioner and the
beneficiaries (REPACOM and Transocean). The court ordered the petitioner to pay interest on the dollar balance of
the insurance proceeds and awarded attorney's fees. The court held that the Loss and Subrogation Receipt did not
release the petitioner from its liability for accrued interest.
CA Ruling:
The Court of Appeals upheld the trial court's judgment, emphasizing the existence of a trust relationship and ruling
that the Loss and Subrogation Receipt did not absolve the petitioner of its liability for accrued interest. The court
modified the period for interest computation.
Issues
Whether there was establishment of a trust relationship between the petitioner, Rizal Surety & Insurance Company,
and the beneficiaries (REPACOM and Transocean) concerning the insurance proceeds.
Ruling:
SC denied the petition for review. Affirmed the Court of Appeals' decision.
The Loss and Subrogation Receipt did not absolve petitioner from liability for accrued interest, as it only released
petitioner from liabilities under the insurance policies, not the accrued interest. Ordered petitioner to pay interest
computed from April 21, 1976, up to January 10, 1978. Deleted the award of attorney's fees.
The central issue in this case revolves around the establishment of a trust relationship between the petitioner and the
private respondent, as well as REPACOM. The Court of Appeals found that a trust relationship existed between the
parties due to the following facts:
Petitioner, RIZAL, had requested the Central Bank's authorization to deposit the dollar insurance proceeds in its name
"for the joint account of the Reparations Commission and Transocean Transport Corporation."
The Central Bank granted this request, allowing the funds to be deposited under the name of "Rizal Surety &
Insurance Company for the joint account of Transocean Transport Corporation and Reparations Commission."
RIZAL's letter to REPACOM and the private corporation confirmed that the insurance proceeds were deposited with
Prudential Bank, recorded under RIZAL's name for the joint account of Transocean Transport Corporation and
REPACOM.
A partial compromise agreement was reached between the insureds, stating that the disputed portion of the insurance
proceeds would be kept in trust for the benefit of REPACOM and Transocean Transport Corporation.
Based on these pieces of evidence, the Court of Appeals concluded that the parties intended to create a trust
relationship, with RIZAL acting as the trustee for the benefit of REPACOM and the private corporation.
The Court upheld this conclusion, highlighting that trust relationships can be inferred from surrounding factual
circumstances, as long as the evidence is clear, satisfactory, and convincing. Petitioner's argument that it merely
requested authorization to protect its interests was rejected. The Court emphasized that RIZAL recognized its
fiduciary relationship with REPACOM and the private corporation by holding on to the insurance proceeds as trustee.
This established the essence of the trust, as the funds were held for the benefit of the beneficiaries.
The Court addressed the Loss and Subrogation Receipt signed by the insured parties, which absolved RIZAL from its
liabilities arising from the insurance policies. The Court ruled that this receipt did not exculpate RIZAL from its
liability for accrued interest. It stated that the release in the receipt applied to liabilities under the insurance policies,
not interest accrued due to RIZAL's unjustified refusal to deposit the funds in an interest-bearing account.
The Court further emphasized that the receipt served as a condition before RIZAL could be compelled to release the
entire insurance proceeds. Therefore, RIZAL's liability for accrued interest was distinct from its liability under the
insurance policies.
The Court rejected RIZAL's arguments that it did not inform the insured parties of its inability to comply with their
request to transfer the funds into an interest-bearing account. The Court emphasized that RIZAL's silence and inaction
misled the trustors (the insured parties) into thinking that RIZAL was complying with their instructions, preventing
them from taking action to protect their interests. RIZAL's breach of its duty as a trustee led to the loss of interest
income on the funds, causing prejudice to the trustors.
The Court also considered the issue of undue enrichment, noting that leaving a substantial sum of money in a non-
interest-bearing account benefited RIZAL or its sister company, Prudential Bank, which likely earned income without
paying any interest on the deposit. The Court found such an outcome unfair and unjust, leading to a breach of trust.
Doctrine:
REQUIREMENTS THAT MUST EXIST BEFORE AN EXPRESS TRUST WILL BE RECOGNIZED. — In
Mindanao Development Authority vs. Court of Appeals, (113 SCRA 429, 436-437, April 5, 1982) this Court held:
". . . It is fundamental in the law of trusts that certain requirements must exist before an express trust will be
recognized. Basically, these elements include a competent trustor and trustee, an ascertainable trust res, and
sufficiently certain beneficiaries. Stilted formalities are unnecessary, but nevertheless each of the above elements is
required to be established, and, if any one of them is missing, it is fatal to the trusts (sic). Furthermore, there must be a
present and complete disposition of the trust property, notwithstanding that the enjoyment in the beneficiary will take
place in the future. It is essential, too, that the purpose be an active one to prevent trust from being executed into a
legal estate or interest, and one that is not in contravention of some prohibition of statute or rule of public policy.
There must also be some power of administration other than a mere duty to perform a contract although the contract is
for a third-party beneficiary. A declaration of terms is essential, and these must be stated with reasonable certainty in
order that the trustee may administer, and that the court, if called upon so to do, may enforce, the trust."
DBP vs. Commission on Audit, G.R. No. 144516, February 11, 2004
Facts:
 Development Bank of the Philippines (DBP) is a government financial institution with an original charter.
 The Commission on Audit (COA) is a constitutional body responsible for auditing government instrumentalities
and public funds.
 In 1980, DBP's Board of Governors created the DBP Gratuity Plan and established a retirement fund to cover
benefits for retiring officials and employees under Commonwealth Act No. 186, as amended.
 A Trust Indenture was entered into between DBP and the Board of Trustees of the Gratuity Plan Fund, giving
control and administration of the Fund to the latter.
 In 1983, DBP established a Special Loan Program (SLP) funded by placements from the Gratuity Plan Fund.
 Under the SLP, retiring employees could take a portion of their "outstanding equity" in the gratuity fund as a loan
to invest elsewhere, with earnings being used to pay the gratuity loan and excess distributed to investor-members.
 COA disallowed payments under the SLP, stating that it constituted the use of public funds for private purposes,
which was prohibited by law.
 DBP appealed, arguing that the Fund had a separate legal personality and the income was not that of DBP.
 COA upheld the disallowance, considering the SLP a systematic investment mix and supplementary retirement
benefit.
 Ruling of the Commission on Audit:
 COA affirmed the disallowance, concluding that the SLP was a supplementary retirement benefit, and the income
of the Fund should be considered income of DBP.
Issues:
Whether the income of the Fund is the income of DBP.
Ruling:
No, the income of the Gratuity Plan Fund is held in trust for the benefit of DBP employees eligible to retire under RA
1616, and it should not be recorded in DBP's books of account as the income of DBP. The Agreement created an
express trust, transferring legal title over the Fund to its trustees. The income and principal of the Fund are for the
exclusive benefit of eligible employees, and COA's directive to record the income of the Fund as miscellaneous
income of DBP was deemed a grave abuse of discretion.
The Special Loan Program (SLP) was disallowed by COA, and this disallowance is upheld by the Court. While DBP
attempted to justify the SLP as a means to address concerns about the devaluation of retirement benefits, it effectively
allowed employees to utilize and earn from their retirement gratuities even before they retired. This partial release of
retirement benefits was found to be contrary to RA 1616 and the Gratuity Plan, which only allow the release of
gratuities upon retirement.
The Court acknowledges the DBP's intention to protect the value of gratuity benefits for its employees but reminds
that equity cannot supplant or contravene the law. DBP and COA are encouraged to work together to establish
equitable terms and a sufficient repayment period for affected employees who received dividends under the SLP. The
refunds may be deducted from their retirement benefits, particularly for those who have not yet received their
retirement benefits.
Also, DBP has the standing to file a petition for certiorari against the decisions of the COA en banc. The argument put
forth by the OSG that DBP, being a government instrumentality, should accept COA's ruling and leave any challenges
to concerned investor-members is not persuasive. Government instrumentalities have the right to question decisions of
the COA through the legal process, as provided for in the Constitution, laws, and Rules of Court.
Doctrine:
The Corpus or the Res Where DBP establishes a pension trust for its officers and employees and appoints trustees for
the fund whereby the trust agreement transferred legal title over the income and properties of the fund, then the
principal and the income of the fund together constitute the res or subject matter of the trust. Since the trust agreement
established the fund precisely so that it would eventually be sufficient to pay for the retirement benefits of DBP
officers and employees, then the income and profits thereof cannot be booked by DBP as its own, and DBP cannot be
directed by COA to treat such income as its own. (DBP v. COA, 422 SCRA 459, 2004)
Mindanao Development Authority vs. Court of Appeals, G.R. No. L-49087, April 5, 1982
Facts:
1. Francisco Ang Bansing owned a large tract of land in Barrio Panacan, Davao City, measuring approximately
300,000 sq.m.
2. On February 25, 1939, Ang Bansing sold a portion of this land, about 5 hectares, to Juan Cruz Yap Chuy.
3. The sales contract stipulated that Ang Bansing would bear the expenses for the titling of his entire land, while the
expenses for titling the portion sold to Juan Cruz would be covered by Juan Cruz.
4. The land was surveyed and designated as Lot 664-B Psd-1638, which was further subdivided into multiple lots. The
portion sold to Juan Cruz was designated as Lot 1846-C of the Davao Cadastre.
5. On December 23, 1939, Juan Cruz sold Lot 1846-C to the Commonwealth of the Philippines for P6,347.50, and a
surety bond was executed to guarantee the vendor's absolute title over the land.
6. On July 10, 1940, the cadastral survey plan was approved, and on March 7, 1941, Original Certificate of Title No.
26 was issued in the names of Victoriana Ang Bansing, Orfelina Ang Bansing, and Francisco Ang Bansing as
claimants of the land.
7. On March 31, 1941, Ang Bansing sold Lot 1846-A to Juan Cruz, and the corresponding title transfers took place.
8. Various other transfers and title issuances followed, but the disputed Lot 1846-C remained with Ang Bansing.
9. On February 25, 1965, the President of the Philippines issued Proclamation No. 459, transferring ownership of
several parcels of land, including Lot 1846-C, to the Mindanao Development Authority.
10. On March 31, 1969, the Mindanao Development Authority requested Ang Bansing to surrender the Owner's
duplicate copy of TCT No. 2601 for Lot 1846-C, but he refused.
11. As a result, on April 11, 1969, the Mindanao Development Authority filed a complaint against Francisco Ang
Bansing, seeking reconveyance of the title to Lot 1846-C.
Ruling of the Court of First Instance:

The Court of First Instance of Davao City found that an express trust had been established between Ang Bansing and
Juan Cruz. It ordered the reconveyance of the title to Lot 1846-C to the Mindanao Development Authority. The court
reasoned that the stipulations in the deed of sale between Ang Bansing and Juan Cruz, along with the affidavit
executed by Ang Bansing, indicated the existence of an express trust.
Ruling of the Court of Appeals:

The Court of Appeals reversed the decision of the trial court. It concluded that no express trust had been created
between Ang Bansing and Juan Cruz. The court reasoned that the stipulation in the deed of sale did not clearly
establish an obligation on Ang Bansing to hold the property in trust for Juan Cruz. It further noted that Juan Cruz's
conduct was inconsistent with the existence of a trust since he never sought the transfer of the title to Lot 1846-C in
his name.
Issue:
Whether an express trust was established between Ang Bansing and Juan Cruz regarding Lot 1846-C.
Ruling:
The Supreme Court upheld the decision of the Court of Appeals, ruling that no express trust had been created. The
stipulations in the deed of sale and the affidavit executed by Ang Bansing did not unequivocally establish an
obligation on Ang Bansing to hold the property in trust for Juan Cruz. Even if an express trust had existed, it would
have been repudiated by Ang Bansing, and the petitioner, Mindanao Development Authority, took action after an
unreasonable delay. Additionally, the enforcement of a possible constructive trust was barred by laches.
The case hinged on the existence of an express trust between Francisco Ang Bansing and Juan Cruz regarding a
parcel of land, Lot 1846-C. The Court ultimately ruled that the stipulations in the sales contract and the subsequent
conduct of the parties did not constitute a clear and unequivocal establishment of an express trust.
The Court also considered the possibility of a constructive trust, but this was subject to a 10-year prescriptive period,
which had expired. Moreover, the Court held that the petitioner's action was barred by laches due to its inaction for an
extended period of over 28 years.
Doctrine:
EXPRESS TRUST; ELEMENTS. — It is fundamental in the law of trusts that certain requirements must exist before
an express trust will be recognized. Basically, these elements include a competent trustor and trustee, an ascertainable
trust res. and sufficiently certain beneficiaries. Stilted formalities are unnecessary, but nevertheless each of the above
elements is required to be established, and, if anyone of them is missing, it is fatal to the trusts. Furthermore, there
must be a present and complete disposition of the trust property, notwithstanding that the enjoyment in the beneficiary
will take place in the future. It is essential, too, that the purpose be an active one to prevent trust from being executed
into a legal estate or interest, and one that is not in contravention of some prohibition of statute or rule of public
policy. There must also be some power of administration other than a mere duty to perform a contract although the
contract is for a third-party beneficiary. A declaration of terms is essential, and these must be stated with reasonable
certainty in order that the trustee may administer, and that the court, if called upon to do so, may enforce, the trust.
There is no express trust where the stipulation in the deed of sale executed by Ang Bansing in favor of Juan Cruz is a
mere condition that Ang Bansing shall pay the expenses for the registration of his land and for Juan Cruz to shoulder
the expenses for the registration of the land sold to him. The stipulation does not categorically create an obligation on
the part of Ang Bansing to hold the property in trust for Juan Cruz. It is essential to the creation of an express trust that
the settler presently and unequivocally make a disposition of property and make himself the trustee of the property for
the benefit of another.
CLEAR AND UNEQUIVOCAL LANGUAGE NECESSARY TO CREATE TRUST. — Clear and unequivocal
language is necessary to create a trust and mere precatory language and statements of ambiguous nature, are not
sufficient to establish a trust. As the Court stated in De Leon vs. Packson, 11 Phil. 1267, a trust must he proven by
clear, satisfactory and convincing evidence; it cannot rest on vague and uncertain evidence or on loose, equivocal or
indefinite declarations.
Julio vs. Dalandan, G.R. No. L-19012, October 30, 1967
Facts:
Clemente Dalandan executed an affidavit ("SALAYSAY") due to an acknowledged obligation. He acknowledged that
a four-hectare piece of riceland located in Las Piñas, Rizal, belonged to Victoriana Dalandan, who had no other heir
but Victoria Julio. This riceland was used as security for an obligation that Clemente assumed but failed to fulfill,
resulting in the foreclosure of Victoriana's land.
Key provisions of the affidavit ("SALAYSAY") included:

An agreement by Clemente to replace the foreclosed land with a farm of more than four hectares.
A clause stating that Clemente's children, Emiliano and Maria Dalandan, could not be forced to give up the harvest of
the farm, and the exchange of land could not be immediately demanded.
Victoria Julio, the sole heir of Victoriana Dalandan, attested to the truth of Clemente's statement.
After Clemente Dalandan's death, Victoria Julio requested that Emiliano and Maria Dalandan, who succeeded to the
possession of the land conveyed in the affidavit, deliver it to her. However, Emiliano and Maria Dalandan insisted that
they could not be forced to immediately relinquish the land or its fruits, based on the agreement. Victoria Julio agreed
to this contention. Subsequently, Victoria Julio demanded that a specific period for delivery of the land be fixed, but
Emiliano and Maria Dalandan refused.
In her complaint, Victoria Julio averred that while the affidavit did not specify the boundaries of the land, the
document referred to the land that was "the only land owned by Clemente Dalandan at the time of the execution of the
document." This land was described in small parcels with a total area of barely two hectares.
In the complaint, Victoria Julio prayed for the following judgments against Emiliano and Maria Dalandan:
Adjudging her as the owner of the land described in the affidavit.

Fixing a time within which Emiliano and Maria Dalandan should deliver the parcels of land to her along with the
fruits.
Adjudging that upon the expiration of the set time, Emiliano and Maria Dalandan must convey and deliver the parcels
of land and the fruits to Victoria Julio.
Ordering Emiliano and Maria Dalandan to pay Victoria Julio the sum of P2,000.00 as attorney's fees.
Ordering Emiliano and Maria Dalandan to pay the costs of the suit.
Emiliano and Maria Dalandan moved to dismiss the complaint, raising the following grounds:
 l Prescription of the action.
 l Pendency of another suit between the same parties for the same cause.
 l Release and/or abandonment of the claim set forth in Victoria Julio's complaint.
RTC Ruling:
The lower court ruled in favor of Emiliano and Maria Dalandan, stating that Victoria Julio's action had prescribed due
to the 10-year period from the date of the affidavit having elapsed. The court did not address the other grounds for
dismissal.
Issue
Whether the document ("SALAYSAY") created an express trust.
Ruling:
The document created an express trust. The key provisions of the document indicated that the naked ownership of the
land was transferred to Victoria Julio, and the Dalandan children were usufructuaries for an undetermined length of
time.
Discussion:
Elements of Express Trust: The case established that for an express trust to exist, certain elements must be met,
including a competent trustor and trustee, an ascertainable trust property, and sufficiently certain beneficiaries. Clear
and unequivocal language is necessary to create a trust, and it must be proven by clear, satisfactory, and convincing
evidence.
The Court interpreted the document as implying that Clemente Dalandan held the property in trust for Victoria Julio.
While the document did not explicitly use the terms "trust" or "trustee," it imposed a duty on the defendants to turn
over both the fruits and the possession of the property to Victoria Julio when the proper time came.
Even if the defendants had not been constituted as trustees under the document, Victoria Julio's action was not barred
by prescription. Her claim for ownership and possession of the land was not subject to the statute of limitations, as she
was protected by Article 1141 of the Civil Code, which prescribes real actions over immovables after thirty years.
The Court clarified that there were no pending actions between the parties concerning the registration of the land. The
failure to object to the registration of a larger portion of the land did not indicate a release or abandonment of the
claim, and the defendants could still be declared as trustees if the averments of the complaint were found to be true.
Doctrine:
NO PARTICULAR WORDS REQUIRED TO CREATE EXPRESS TRUSTS. — While the deed did not in definitive
words institute the transferor's children as trustees, a duty is therein imposed upon them, when the proper time comes,
to turn over both the fruits and the possession of the property to the transferee. By Article 1444 of the Civil Code no
particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended,
Technical or particular forms of words or phrases such as "trust" or "trustee", or the absence thereof, are not essential
to a determination of the intention to create a trust, nor whether the trustor knows that the relationship he intends to
create is called a trust, or whether he knows the precise characteristics of trusts.
EFFECTIVE IN FAVOR OF BENEFICIARY WHO ACCEPTED IT. — Trust is effective against the trustees and in
favor of the beneficiary thereof, who accepted it in the document itself. Article 1446, Civil Code.||| (Julio v. Dalandan,
G.R. No. L-19012, [October 30, 1967], 128 PHIL 578-590)
IDENTITY OF LAND DETERMINED FROM SETTING OF WRITINGS; PAROL EVIDENCE ADMISSIBLE TO

MAKE CLEAR TERMS OF WRITTEN TRUST. — Insofar as the identity of land involved in a trust is concerned,
the writings, in being considered for the purpose of satisfying the statute of frauds, are to be considered in their
setting, and parol evidence is admissible to make clear the terms of a trust the existence of which is established by a
writing.||| (Julio v. Dalandan, G.R. No. L-19012, [October 30, 1967], 128 PHIL 578-590)
Cañezo vs. Rojas, G.R. No. 148788, November 23, 2007
Facts:
Soledad Cañezo filed a complaint in 1997 against Concepcion Rojas for the recovery of real property (an unregistered
land) situated in Biliran.
Cañezo claimed that she had acquired the property in 1939 from Crisogono Limpiado, but this transaction was not
documented. After leaving the area, she entrusted the land to her father, Crispulo Rojas. Later, she discovered that
Concepcion Rojas was in possession of the property and that the tax declaration was in the name of Crispulo Rojas.
Concepcion Rojas countered that Crispulo Rojas had acquired the property in 1948 from Crisogono Limpiado, and she
had subsequently possessed and cultivated it. Crispulo Rojas passed away in 1978, and the property was included in
his estate.
The Municipal Trial Court (MTC) initially ruled in favor of Soledad Cañezo, but the Regional Trial Court (RTC)
reversed the decision on the grounds of prescription and acquisitive prescription.
However, the RTC later amended its decision, stating that the action had not yet prescribed because the prescriptive
period begins to run only when the trustee repudiates the trust. No evidence showed that Crispulo Rojas had
repudiated the trust.
The Court of Appeals (CA) reversed the RTC's amended decision, dismissing the case based on laches, prescription,
and the absence of a trust relationship.
Issue:
Whether there is an existence of a trust relationship between the petitioner and her father.
Ruling of the Supreme Court:
SC stated that to establish the existence of a trust, the burden of proof is on the party asserting it, and the proof must
be clear and satisfactory. For express trusts concerning real property, they must be proven by written documentation,
not parol evidence (oral testimony). The court noted that the petitioner's self-serving testimony alone was insufficient
to establish the existence of a trust.
The court also highlighted that what distinguishes a trust is the separation of legal title and equitable ownership of the
property, meaning the legal title is vested in the fiduciary (trustee), while the equitable ownership belongs to the
beneficiary (cestui que trust). In this case, the petitioner had raised concerns about the tax declaration of the land being
transferred to her father's name without her consent. If there were indeed a trust relationship, such issues would not
have arisen because the legal title would be vested in the trustee.
The court concluded that there was no express or resulting trust established between the petitioner and her father due
to the lack of clear and convincing evidence. Therefore, the respondent's uninterrupted possession of the property for
49 years, along with acts of ownership such as paying property taxes, ripened into ownership through acquisitive
prescription.
The court further explained that even if the petitioner had established a trust relationship, it would have terminated
upon the death of her father in 1978. The petitioner was estopped from asserting ownership because she failed to
protest the inclusion of the property in her father's estate during probate proceedings, even participating in the division
of the estate. The action was also barred by laches, as the petitioner waited for 17 years before filing the action.
Finally, the court addressed the failure to implead other indispensable parties in the suit, but this issue became moot
given the other findings.
In conclusion, the court denied the petitioner's claims, upholding the lower court's decision. The ruling emphasized the
importance of clear and convincing evidence to establish trust relationships and the legal principles governing the
termination of such relationships upon a trustee's death. It also underscored the principles of prescription, estoppel,
and laches in property disputes.
Doctrine:
An express trust is created by direct and positive acts of the parties, often through a written document or deed,
indicating an intention to establish a trust relationship. In this case, the Supreme Court ruled that the alleged express
trust lacked clear documentation and evidence.
A resulting trust is an implied trust that arises by operation of law when property is purchased in the name of one
person but is implied to be held for the benefit of another. In this case, the Court found no evidence to establish a
resulting trust.
A constructive trust is imposed by law to correct a situation where someone, through fraud or abuse of confidence,
holds legal title to property that they should not, in equity, hold. The Court indicated that constructive trust could be
appropriate when there's an absence of clear trust relations.
The case discussed the prescriptive periods for actions concerning property ownership. The Court differentiated
between the prescription of actions in express trusts, where the trustee must repudiate the trust, and constructive trusts,
which may be subject to prescription.
The principle of laches implies that a party has been negligent in asserting their rights within a reasonable time, and
the delay prejudices the other party. The Court found that laches applied in this case due to the long delay between the
discovery of adverse possession and the filing of the complaint.
The Court emphasized that in actions for reconveyance, all co-owners or heirs of the property must be impleaded.
Failure to include indispensable parties can lead to the dismissal of the case.
Peñalber vs. Ramos, G.R. No. 178645, January 30, 2009
Facts:
Petitioner, Lina Peñalber, filed a complaint for Declaration of Nullity of Deeds and Titles, Reconveyance, Damages,
and an Application for a Writ of Preliminary Prohibitory Injunction against respondents, including her daughter
Leticia and son-in-law Quirino Ramos, and respondent corporation Bartex, Inc.
The dispute involves two properties: Ugac properties and Bonifacio property.
In her first cause of action, petitioner claimed ownership of the Ugac properties, which were allegedly donated to
respondent spouses Ramos, and later sold to respondent corporation Bartex, Inc.
In her second cause of action, petitioner asserted ownership of the Bonifacio property, where she had operated a
hardware store. She alleged that she entered into a verbal agreement with respondent spouses Ramos for them to buy
the property on her behalf, using the store's earnings.
RTC Ruling:
The Regional Trial Court (RTC) found petitioner's denial of the donation of Ugac properties insufficient to support her
first cause of action. The court stated that the burden of proof was on petitioner to show that her signature on the Deed
of Donation was a forgery, and she failed to provide clear and convincing evidence. Regarding the second cause of
action, the RTC found in favor of petitioner, declaring her the owner of the Bonifacio property and ordering
respondent spouses Ramos to reconvey it to her.
CA Ruling:
The Court of Appeals reversed the RTC's decision on the second cause of action, stating that the alleged trust
agreement could not be proven by parol evidence. It noted that the evidence provided was insufficient to establish the
trust. The court also emphasized that the Family Code's requirement for the exertion of earnest efforts towards an
amicable settlement did not apply to this case, as it involved parties outside the scope of "family relations."
Issue:
Whether the the express trust regarding the Bonifacio property is enforceable.
Ruling:
The Court affirms the decision of the Court of Appeals, denying the petitioner's claim and finding that the evidence
presented was insufficient to prove the existence of the verbal trust agreement. The Court emphasizes the importance
of the burden of proof in civil cases and the need for evidence to meet a preponderance of evidence standard. The
ruling underscores the significance of the requirement for a written trust agreement concerning immovable property
and the consequences of not objecting to the admission of parol evidence during trial
The Court begins by emphasizing that the burden of proving the cause of action lies with the petitioner. In civil cases,
the burden of proof requires a party to present evidence to establish their claim by a preponderance of evidence.
Preponderance of evidence means that the weight and value of the aggregate evidence on either side must be more
convincing to the court as worthy of belief. The party asserting the affirmative of the issue carries the burden of proof.
In this case, the petitioner, who claimed the existence of an express trust agreement, bears the burden of proving its
existence.
The respondent spouses Ramos argued that the alleged verbal trust agreement concerning an immovable property is
unenforceable because it was not in writing. The Court concurs with the trial court's decision that failure to object to
the admission of parol evidence during the trial resulted in a waiver of this objection. Article 1443 of the Civil Code
requires that express trusts concerning immovable properties should be in writing for purposes of proof but not for the
validity of the trust agreement. The provision operates as a statute of frauds, regulating the formalities of contracts
necessary for their enforceability.
The petitioner presented her testimony, supported by her son Johnson's testimony, to establish the existence of the
alleged express trust agreement. The Court acknowledges that these testimonies were rendered admissible because the
respondent spouses Ramos did not timely object to their admission.
While the testimonies were admitted as evidence, the Court is tasked with evaluating their weight and probative value.
The Court finds that the testimonies, which were the primary pieces of evidence supporting the existence of the trust
agreement, carried little weight.
The Court notes that the mere fact that there was a significant difference in the inventory of the hardware store's stocks
before and after the management was transferred to the respondent spouses Ramos (approximately P116,946.15) does
not conclusively prove that this amount was used to pay the purchase price of the Bonifacio property. The Court
deems such a conclusion as speculative and non sequitur.
The Court highlights that it is the petitioner's responsibility to prove the existence of the alleged express trust
agreement. The petitioner's argument that the respondent spouses Ramos never denied the P116,946.15 difference or
failed to present proof that the amount was used to pay other obligations is insufficient to discharge the petitioner's
burden of proof.
Doctrine:
In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to the beneficial enjoyment of
property, the legal title to which is vested in another; but the word "trust" is frequently employed to indicate duties,
relations, responsibilities which are not strictly technical trusts.
In accordance with Article 1443, when an express trust concerns an immovable property or any interest therein, the
same may not be proved by parol or oral evidence. However, when the oppositors failed to timely object when the
petitioner tried to prove by parol evidence the existence of an express trust over immovable, there is deemed to be a
waiver since Article 1443 "is in the nature of a statute of frauds. The term statute of frauds is descriptive of statutes
which require certain classes of contracts in writing. The statute does not deprive the parties of the right to contract
with respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it
enforceable. The effect of non-compliance is simply that no action can be proved unless the requirement is complied
with. Oral evidence of the contract will be excluded upon timely objection. But if the parties to the action, during the
trial, make no objection to the admissibility of the oral evidence to support the contract covered by the statute, and
thereby permit such contract to be proved orally, it will be just as binding upon the parties as if it had been reduced to
writing."
Go vs. Estate of De Buenaventura, G.R. Nos. 211972 & 212045, July 22, 2015
Facts:
- In 1959, Felisa Tamio de Buenaventura purchased a parcel of land in Quezon City and constructed a three-storey
building called D'Lourds Building on it.
- In 1960, Felisa purportedly sold the property to her daughter Bella Guerrero, Bella's husband Delfin Guerrero, Sr.,
and Felimon Buenaventura, Sr.
- After Felisa's death in 1994, a disputed last will and testament emerged, in which she bequeathed half of the property
to another daughter, Resurrecion, and her daughters Rhea and Regina.
- Bella was declared as the administrator of Felisa's estate.
- In 1997, Bella, Felimon, Jr., and Lester sold the property to Wilson and Peter. The sale was unknown to the Bihis
Family.
- Legal actions followed, with Bella's group asserting ownership and Wilson and Peter claiming to be purchasers in
good faith.
RTC Ruling:
- The RTC concluded that an implied trust existed between Felisa, Bella, Delfin, Sr., and Felimon, Sr.
- It found that the property was entrusted to Bella, Delfin, Sr., and Felimon, Sr. solely for the purpose of securing a
loan from the GSIS.
- The RTC also ruled that reconveyance was no longer possible since the property had been transferred to Wilson and
Peter, whom it considered purchasers in good faith.
- It ordered Bella's group to pay the Bihis Family compensation.
CA Ruling:
- The CA upheld the RTC's finding of an implied trust based on the September 21, 1970 letter by Felisa.
- It ruled that Bella's group was unjustly enriched, nullified the sale to Wilson and Peter, ordered reconveyance to the
estate of Felisa, and canceled the title in Wilson and Peter's names.
- The CA further ruled that prescription did not apply since the Bihis Family had been in actual possession of the
property.
- Wilson and Peter were not considered purchasers in good faith because they failed to make necessary inquiries about
the property's validity.
Issue:
- Whether Felisa's sale of the property to Bella, Delfin, Sr., and Felimon, Sr. created a trust relationship, with the
property being entrusted solely for the purpose of securing a GSIS loan.
- Additionally, the case touched on matters of prescription for actions for reconveyance based on implied trust and the
good faith status of Wilson and Peter as purchasers.
Ruling:
SC affirmed the existence of an express trust between Felisa and her family members and rejected the claim of
prescription. Additionally, it concluded that Wilson and Peter were not purchasers in good faith due to their
knowledge of the property's situation and the annotation on the title.
Existence of Express Trust: The Court found that an express trust was established between Felisa and her daughter
Bella, Bella's husband Delfin, Sr., and Felimon, Sr. The trust was created when Felisa transferred the title of the
subject property to Bella and the others to help them secure a loan from the GSIS. While an implied trust was initially
formed, the execution of a letter by Felisa in 1970 unequivocally declared her intention to retain ownership and divide
the property equally among her heirs, confirming the existence of an express trust.
The action for reconveyance brought by the Bihis Family was held not to have prescribed. Express trusts prescribe in
ten years from the time the trust is repudiated. In this case, the repudiation occurred when Bella sold the property to
Wilson and Peter on January 23, 1997, and the action was filed in October 1997, well within the prescriptive period.
Wilson and Peter were not considered purchasers in good faith. They were aware of an annotation on the title and the
occupation of the property by individuals other than the sellers, which negated the presumption of good faith. A buyer
is expected to make reasonable inquiries when dealing with real property. Ignoring significant facts that create
suspicion would not qualify one as an innocent purchaser for value.
The case distinguishes between express trusts and implied trusts. An express trust is one that is created by the direct
and positive acts of the parties, often involving a written document or explicit intention to create a trust. Implied trusts,
on the other hand, are created by operation of law and may arise from circumstances that indicate the existence of a
trust relationship.
The case clarifies that an express trust can be created without the use of specific legal terms such as "trust" or
"trustee." What matters is whether the trustor manifested an intention to create a trust relationship. Express trusts can
be created through clear and unequivocal expressions of intent.
The case reaffirms the principle that an action for reconveyance based on an express trust prescribes in ten (10) years
from the time the trust is repudiated. Repudiation refers to acts or events that clearly indicate an intention to disavow
or deny the trust. In this case, the repudiation occurred when one of the trustees sold the property to third parties.
The case emphasizes that the mere issuance of a certificate of title in the name of a person does not foreclose the
possibility of the property being under co-ownership with other parties or that the registrant may be a trustee.
Registration of title is evidence of ownership but does not necessarily prove absolute ownership, especially when there
are competing claims and trust relationships involved.
Doctrine:
An express trust can be established even without the use of specific legal terminology or formal trust instruments. The
intention to create a trust is the determining factor, and the mere use of certain words (or lack thereof) does not
preclude the formation of a trust.
In this case, the Supreme Court recognized that an express trust existed between Felisa and her daughter Bella, Bella's
husband Delfin, Sr., and Felimon, Sr., despite the absence of formal trust documents or specific legal terms like "trust"
or "trustee." The decisive factor was Felisa's clear intention, as expressed in a letter, to retain ownership of the
property and use it to secure a loan, with the expectation of eventually dividing the property among her heirs. This
case reinforces the principle that express trusts can be formed based on the parties' actual intentions, regardless of the
use of particular words or the absence of formal trust instruments.
An action for reconveyance based on an express trust prescribes in ten (10) years from the time the trust is repudiated.
In the context of this case, the Supreme Court held that the action for reconveyance, which was brought by the
beneficiaries of the express trust (the Bihis Family) against the trustees and the subsequent buyers (Wilson and Peter),
had not yet prescribed. The repudiation of the express trust occurred when one of the trustees (Bella) sold the property
to the subsequent buyers (Wilson and Peter) on January 23, 1997. Since the complaint for reconveyance was filed on
October 17, 1997, it was within the ten-year prescriptive period, and the action was deemed timely.
This doctrine reinforces the principle that actions for reconveyance based on express trusts are subject to a ten-year
prescriptive period from the time of trust repudiation. The key point is that the prescriptive period commences upon
the occurrence of acts or events that clearly indicate the intention to repudiate the trust.
Heirs of Tranquilino Labiste vs. Heirs of Jose Labiste, G.R. No. 162033, May 8, 2009
Facts:
- In 1919, Epifanio Labiste purchased Lot No. 1054 of the Banilad Friar Lands Estate for P36.00 on behalf of his
brothers and sisters, who were the heirs of Jose Labiste.
- An Affidavit executed in 1923 affirmed that Epifanio and his uncle, Tranquilino Labiste, co-owned Lot No. 1054.
- Lot No. 1054 was subsequently subdivided into two lots, Lot No. 1054-A for Tranquilino and Lot No. 1054-B for
Epifanio.
- In 1939, the heirs of Tranquilino purchased the half-interest of the heirs of Jose in Lot No. 1054.
- After World War II, the heirs of Tranquilino found the property occupied by squatters.
- In 1993, one of the respondents filed a petition for reconstitution of title over Lot No. 1054.
- A compromise agreement was reached in 1994 between the parties, allowing the reconstitution process, but
respondents did not honor the agreement.
- Petitioners filed a complaint in 1995 for the annulment of the title and reconveyance of property.
- The RTC ruled in favor of petitioners, but the Court of Appeals reversed the decision based on prescription and
laches.
RTC Ruling:
- The RTC ruled in favor of the petitioners, finding that the Affidavit of Epifanio and the Calig-onan sa Panagpalit
were genuine, valid, and enforceable documents.
- The RTC held that the action had not prescribed because it was filed about a year after the reconstitution of the title
by respondents. The judicial reconstitution was even opposed by petitioners until a compromise agreement was
reached.
- The RTC also held that the reconstituted title did not give any more right to respondents than what their
predecessors-in-interest actually had.
CA Ruling:
- The Court of Appeals affirmed petitioners' right to the property but reversed the RTC's decision on the grounds of
prescription and laches.
- It cited Article 1144 of the Civil Code and held that petitioners' cause of action had prescribed.
- The lapse of time to file the action was considered neglect on petitioners' part, and laches was applied.
Issue about Express Trust:
The main issue is whether the cause of action had prescribed or lapsed due to the application of the rules on
prescription and the principle of laches.
Ruling:
The Court held that the Court of Appeals erred in applying the rules on prescription and the principle of laches
because the case involves an express trust. An express trust is created by direct and positive acts of the parties and
may be created by written contracts or documents. The cause of action does not prescribe until there is a clear
repudiation of the trust, communicated to the beneficiary. Since respondents' only act that could be construed as
repudiation was when they filed a petition for reconstitution, and petitioners filed their complaint promptly after that,
their cause of action had not yet prescribed. Additionally, the equitable remedy of laches was not applicable in this
case.
Doctrine:
The case highlights the distinction between express trusts and implied trusts. Express trusts are created by direct and
positive acts of the parties and are often established through written contracts or documents. Implied trusts, on the
other hand, come into being by operation of law.
The case clarifies that the rules of prescription do not apply to an action involving an express trust until there is a clear
repudiation of the trust communicated to the beneficiary. In this case, the action had not prescribed because there was
no clear repudiation until the filing of the reconstitution petition. The case emphasizes that the equitable principle of
laches should not be used to prevent the rightful owners of a property from recovering what has been fraudulently
registered in the name of another. Laches is inapplicable when the action involves the enforcement of an express trust.
Juan vs. Yap, Sr., G.R. No. 182177, March 30, 2011
Facts:
- On July 31, 1995, the Cañeda spouses mortgaged two parcels of land in Talisay, Cebu to petitioner Richard Juan to
secure a loan of P1.68 million, payable within one year.
- On June 30, 1998, petitioner sought extrajudicial foreclosure of the mortgage and acquired the properties through
auction with the highest bid of P2.2 million.
- On February 15, 1999, a memorandum of agreement (MOA) was executed by respondent Gabriel Yap, Sr., the
Cañeda spouses, and petitioner. The MOA acknowledged respondent as the "real mortgagee-creditor" and petitioner
as a trustee of respondent. It also allowed the Cañeda spouses to redeem the properties for P1.2 million and
contemplated legal action for annulment or reformation of the contract.
- The Cañeda spouses, together with respondent, filed a lawsuit against petitioner to declare respondent as the trustee
of petitioner, annul petitioner's bid for the foreclosed properties, declare the Contract "superseded or novated" by the
MOA, and claim damages.
- The trial court ruled in favor of petitioner as the "true and real" mortgagee but allowed the Cañeda spouses to redeem
the property. It also awarded moral damages and attorney's fees to petitioner and required respondent to deliver the
titles to petitioner.
- Respondent appealed to the Court of Appeals (CA), which reversed the trial court's decision, declared respondent as
the mortgagee, and ordered petitioner to pay damages and attorney's fees.
The CA granted respondent's appeal, declared him as the mortgagee under the Contract, directed the trial court to
release the redemption payment to respondent, and ordered petitioner to pay damages and attorney's fees. The CA
found that parol evidence, including the MOA and the circumstances of the loan, supported respondent's claim to be
the true mortgagee. It held that the Contract should be reformed to reflect the parties' true intent.
Issues:
1. Whether an implied trust arose between petitioner and respondent, binding petitioner to hold the beneficial title over
the mortgaged properties in trust for respondent.
2. Whether respondent is entitled to collect damages.
Ruling:
The Supreme Court affirmed the CA's ruling.
The case addressed the concept of implied trusts arising from mortgage contracts. Implied trusts may be recognized
when the circumstances of property acquisition make it unconscionable for the holder of a property right to enjoy it.
These trusts are remedies against unjust enrichment, and the primary issue is whether there is a wrongful holding of
property that could lead to unjust enrichment. In this case, the Court recognized that a mortgage contract could give
rise to an implied trust.
The Court discussed the use of parol evidence in implied trust cases. When there is a conflict between formal
documentation (such as a contract) and parol evidence, the latter may be considered to prove the existence of an
implied trust. The Court cited the importance of equitable principles to determine the existence of an implied trust.
The Court also addressed the award of damages, particularly moral and exemplary damages. It affirmed the CA's
award of damages to respondent. The interest of deterring breaches of trusts justifies the award of exemplary damages,
while moral damages were granted based on respondent's substantiated claim.
Heirs of Narvasa, Sr. vs. Imbornal, G.R. No. 182908, August 6, 2014
Facts:
- Basilia Imbornal owned a parcel of land in San Fabian, Pangasinan, known as the Sabangan property, which she
conveyed to her three daughters Balbina, Alejandra, and Catalina (Imbornal sisters) in 1920.
- Catalina's husband, Ciriaco Abrio, acquired a homestead patent over a riparian land (Motherland) near the Cayanga
River in San Fabian. This land was later awarded to Ciriaco's heirs through Transfer Certificate of Title (TCT) No.
101495.
- The Heirs of Ciriaco and respondents occupied the northern and southern portions of the Motherland, respectively.
- In 1949, the First Accretion, approximately 59,772 sq.m. in area, formed adjacent to the southern portion of the
Motherland, with OCT No. P-318 issued in the name of respondent Victoriano.
- In 1971, the Second Accretion, approximately 32,307 sq.m., abutted the First Accretion, and OCT No. 21481 was
issued in the names of all the respondents.
- The Heirs of Ciriaco eventually sold the Motherland to Gregorio de Vera, who was not a party in this case.
- Francisco, Pedro, and Petra (children of Alejandra and Balbina) filed an Amended Complaint for reconveyance,
partition, and damages against the respondents, claiming rights to the Motherland and both accretions based on an
alleged implied trust.
RTC Ruling:
- The RTC ruled in favor of Francisco, et al., directing the respondents to reconvey their portions in the Motherland
and accretions or pay their pecuniary equivalent. The RTC found an implied trust between Ciriaco and the Imbornal
sisters regarding the Motherland. It also ruled that the accretions belonged to the owner of the Motherland.
CA Ruling:
- The CA reversed the RTC's decision, declaring that Ciriaco's heirs were the exclusive owners of the Motherland and
that respondents exclusively owned both accretions.
- The CA rejected the claim of an implied trust and found that respondents acquired the accretions through
prescription, becoming their riparian owners. The court ruled that the action was barred by prescription.
Issue
Whether an implied trust existed between the Imbornal sisters and Ciriaco concerning the Motherland.
Ruling
- The Supreme Court upheld the CA's decision, stating that the claim of an implied trust was not proven. An implied
trust can arise due to fraud or mistake, but the evidence did not sufficiently demonstrate that the Motherland's
registration in Ciriaco's name was fraudulent or mistaken.
- The Court emphasized that Ciriaco's homestead patent required strict compliance with the law's conditions. The
claim of an implied trust was implausible, given the implied regularity of the land registration process.
- The Amended Complaint was dismissed due to prescription. The action for reconveyance of the Motherland and
First Accretion was time-barred, as it was filed beyond the 10-year prescriptive period.
- The case discusses the principles of implied trust, as provided in Article 1456 of the Civil Code, which states that
property acquired through fraud becomes a trustee for the benefit of the true owner.
- It also highlights the rules of prescription in reconveyance actions based on an implied trust, with a 10-year
prescriptive period from the date of registration of the deed or certificate of title if the claimant is not in possession of
the property.
- The case reaffirms the principle of riparian rights, where the owners of lands adjacent to rivers are entitled to
accretions formed by the action of the water, with such accretions compensating for land loss due to water
encroachments. It emphasizes the importance of possession and proper land registration in such cases.
- Additionally, the case underscores the need for strong and reliable evidence to establish the existence of an implied
trust. Oral testimony must be trustworthy and received with caution, especially when dealing with events from many
decades prior.
Salao vs. Salao, G.R. No. L-26699, March 16, 1976
Facts:
- The case revolves around a forty-seven-hectare fishpond located at Sitio Calunuran, Hermosa, Bataan, involving
issues of trusts and prescription.
- Manuel Salao and Valentina Ignacio had four children: Patricio, Alejandra, Juan (Banli), and Ambrosia. After their
deaths, their estate was partitioned in 1919.
- Valentin Salao, Patricio's only child, received a significant share of the estate, including a fishpond at Calunuran.
- The dispute centers on the ownership and acquisition of the Calunuran fishpond, with plaintiffs claiming it was part
of a joint venture.
RTC Ruling:
- The trial court found that there was no co-ownership or joint venture involving the Calunuran fishpond or other
properties in 1905, as plaintiffs claimed.
- It concluded that there was co-ownership from 1914 to 1918 when the estate was partitioned but saw no evidence of
a joint venture in the acquisition of the Calunuran fishpond.
- The trial court dismissed the plaintiffs' claim, finding their witnesses' testimonies unreliable and lacking strong
documentary evidence.
CA Ruling:
- Both parties appealed to the Court of Appeals, which referred the case to the Supreme Court due to the significant
amount involved.
- The Court of Appeals' ruling is not detailed in the provided information but likely upheld the trial court's decision.
Issue a
Whether the alleged trust over the Calunuran fishpond. Plaintiffs claimed an implied trust based on a joint venture in
the acquisition of the fishpond.
Ruling:
The court ruled in favor of the defendants (Juan S. Salao, Jr. and Benita Salao) and affirmed the trial court's decision,
which dismissed the plaintiffs' (Alfredo Salao and his co-plaintiffs) complaint. The plaintiffs' action for the
reconveyance of the Calunuran fishpond was denied. The court found that the plaintiffs did not have a valid legal
claim for the enforcement of a trust over the Calunuran fishpond. The court determined that there was no resulting
trust, constructive trust, or any implied trust regarding the Calunuran fishpond in favor of the plaintiffs or Valentin
Salao.
The court held that the plaintiffs failed to provide clear, satisfactory, and convincing evidence to prove the existence
of a trust. The plaintiffs' action was also barred by prescription due to their long delay in asserting their rights. The
court did not award attorney's fees, litigation expenses, or moral damages to the defendants because the plaintiffs'
action was found to be pursued in good faith.
Doctrine:
- The case highlights the distinction between an express trust and an implied trust concerning real property.
- It emphasizes the peremptory and unmistakable terms of Article 1443 of the Civil Code, which prohibit the use of
purely parol evidence to prove an express trust concerning realty.
- In contrast, Article 1457 of the Civil Code allows an implied trust to be proven by oral evidence, provided that such
evidence is trustworthy to prevent fabrication.
The court begins by defining trusts in legal terms, stating that a trust is "the right, enforceable solely in equity, to the
beneficial enjoyment of property, the legal title to which is vested in another." Trusts involve three main parties: the
trustor (the one who creates the trust), the trustee (who holds legal title to the property), and the beneficiary (the one
for whose benefit the trust is created).
The court distinguishes between express trusts and implied trusts. Express trusts are created by the intention of the
parties and can be established through written instruments, while implied trusts arise either by operation of law or
through the nature of a transaction. Implied trusts can be further categorized into resulting and constructive trusts.
Express trusts are created by direct and positive acts of the parties. There is no need for specific words; the key is to
establish that a trust is clearly intended. Implied trusts are created by operation of law and can be either resulting or
constructive trusts. A resulting trust is a trust that is presumed to have been contemplated by the parties based on the
nature of their transaction. It typically arises in situations where property is acquired through mistake or fraud.
Constructive trusts are created by law to satisfy the demands of justice, often in cases of fraud or wrongdoing. These
trusts are not based on the direct intention of the parties but rather arise by operation of law. To establish a trust, the
court requires clear, satisfactory, and convincing evidence. Trusts cannot be proven based on vague, uncertain, or
loose declarations.
Ty vs. Ty, G.R. No. 165696, April 30, 2008
Facts:
Alexander Ty passed away, and his wife Sylvia, as administratrix, was responsible for distributing his estate.
In the Philippines, Sylvia submitted an inventory of the assets of Alexander's estate, including several properties
(EDSA Property, Meridien, and Wack-Wack), and requested permission to sell or mortgage these properties to pay
additional estate tax. However, Alexander's father, Alejandro, filed a complaint for recovery of these properties,
alleging that he had purchased them and registered them under his son's name with the understanding that they were
held in trust for Alexander's siblings. Alejandro claimed that at the time of purchase, his son was financially incapable,
and presented income tax returns to support his case.
Issue:
Whether an express or implied trust was established by Alejandro in favor of his late son, Alexander.
Ruling:
The court determined that there was no express trust established for the subject properties. An express trust over real
property cannot be created without written evidence. Alejandro based his claim on Article 1448 of the Civil Code,
which deals with implied trusts. However, the court held that to establish an implied trust, Alejandro needed to
provide clear and satisfactory evidence categorized as "sufficiently strong" and "trustworthy." He failed to meet this
burden, as oral evidence could easily be fabricated, and his evidence did not meet these criteria.
The EDSA Property: Article 1448 of the Civil Code was cited to affirm that when a property's title is conveyed to a
child, and the price is paid by another (as in this case), no trust is implied by law. Instead, there is a disputable
presumption of a donation in favor of the child. The Court found that Sylvia was obliged to collate the EDSA property
into the estate of Alejandro in the event of his death, to the extent that Sylvia provided a portion of its purchase price.
The Meridien Condominium and the Wack-Wack Property: The Court noted that the evidence showed that Alexander
Ty had the means to purchase these properties. There was no implied trust because Alejandro failed to demonstrate
that part of the purchase price was paid by him. The court upheld the findings of the Court of Appeals in this regard.
The petitioner claimed that the EDSA property, registered in the name of his son, Alexander Ty, should be considered
as an implied trust in his favor under Article 1448 of the Civil Code. This argument was based on the fact that he had
paid for the property's purchase price with the intention of having the beneficial interest in it. However, the Court,
while acknowledging that part of the purchase price came from the petitioner, rejected the claim of an implied trust
due to the specific provision in Article 1448. It states that when a person pays for a property, and the title is conveyed
to another, there's no implied trust if the recipient is a child of the one who paid, as it's presumed to be a gift to the
child. The Court affirmed the lower court's decision and stated that the outcome was in line with the law.
The petitioner also contested the Court of Appeals (CA) finding that he failed to prove that he had provided the funds
for the purchase of the Meridien Condominium and the Wack-Wack property. The CA had conducted a thorough
review of the records and found that Alexander Ty had the means to pay for these properties due to his nine years of
work, his involvement in various family corporations, and other sources of income. The Court agreed with the CA's
findings, considering them to be factual and well-supported. Thus, there was no implied trust in the case of these
properties.
In conclusion, the Court partly granted the petitioner's appeal, affirming the CA's decision regarding the Meridien
Condominium and the Wack-Wack property. However, it modified the ruling by stating that the EDSA property
should be collated into the petitioner's estate in the event of his death as an advance of Alexander Ty's share, to the
extent that the petitioner had contributed to its purchase price.
PNB vs. Aznar, G.R. Nos. 171805 & 172021, May 30, 2011
Facts:
- In 1958, RISCO ceased operations due to business difficulties.
- Plaintiffs, Aznar, et al., contributed a total of P212,720.00 to rehabilitate RISCO.
- This contribution was used to purchase three parcels of land in Cebu.
- The contributions constituted liens on these properties, and this was annotated in the property titles.
- There were subsequent annotations on the titles, including a Notice of Attachment and Writ of Execution in favor of
PNB.
- PNB eventually acquired these properties through a Certificate of Sale.
- Aznar, et al., filed a complaint seeking the quieting of their supposed title to the subject properties, declaratory relief,
cancellation of property titles, and reconveyance.
- PNB argued that Aznar, et al., had no right of action for quieting of title and that their only recourse was
reimbursement of their contributions.
RTC Ruling:
- The trial court ruled in favor of Aznar, et al., declaring that there was an express trust created over the subject
properties, with RISCO as the trustee and Aznar, et al., as the beneficiaries.
- It declared all subsequent annotations on the titles null and void.
- The court directed the Register of Deeds to cancel these annotations, annul the property titles in favor of RISCO, and
reconvey the properties to Aznar, et al.
CA Ruling:
- The Court of Appeals agreed that a judgment on the pleadings was proper.
- However, it disagreed with the trial court's characterization of the contributions as an express trust.
- Instead, it considered the contributions as a loan secured by a lien on the properties.
- The Court of Appeals directed PNB to pay Aznar, et al., the amount of their contributions plus legal interest.
Issue:
Whether the Court of Appeals erred in concluding that the contributions made by the stockholders of RISCO were a
loan secured by a lien over the properties, subject to reimbursement or refund, rather than an express trust.
Ruling:
In their petition, Aznar, et al., contended that the contributions should be interpreted as the creation of an express trust.
They argued that the use of the term "lien" in the Minutes was not sufficient to categorize the contributions solely as a
loan, and that the document's language indicated a trust relationship.
The Supreme Court ultimately sided with the Court of Appeals in determining that the Minutes indeed established a
loan agreement secured by liens, not an express trust. They emphasized the need for clear and unequivocal language in
establishing an express trust and pointed out that the use of the term "lien" in the Minutes indicated a loan secured by
property. The court ruled that the Minutes of the Special Meeting of the Board of Directors did not create an express
trust. Instead, it was considered a written contract for a loan. The court also held that the right to claim repayment or
reimbursement of contributions was already barred by the statute of limitations. As a result, the court dismissed the
claim for quieting of title over the properties.
Doctrine:
- The court may render a judgment on the pleadings if the defendant's answer fails to tender an issue or admits the
material allegations of the plaintiff's pleading.
- This judgment is based solely on the allegations in the pleadings without considering evidence outside of them.
- However, when not all material allegations of the complaint are admitted, and special defenses are raised by the
defendant that could negate the plaintiff's main cause of action, judgment on the pleadings is not appropriate.
- Express trusts are intentionally created by the direct and positive acts of the settlor or trustor, often through a
written contract, deed, or will.
- Implied trusts come into existence by operation of law and are not created by the clear and direct intent of the
parties.
- Implied trusts are usually based on equitable principles and may arise from the conduct of the parties.
Sime Darby Pilipinas, Inc. vs. Mendoza, G.R. No. 202247, June 19, 2013
Facts:
- Sime Darby Pilipinas, Inc. (Sime Darby) employed Jesus B. Mendoza as a sales manager.
- In 1987, Sime Darby purchased a Class "A" club share in Alabang Country Club (ACC) from Margarita de Araneta.
ACC's by-laws prohibited corporations from owning club shares, so the share was registered in Mendoza's name in
trust for Sime Darby.
- Mendoza endorsed the Club Share Certificate in blank and executed a blank Deed of Assignment, handing these
documents to Sime Darby. Sime Darby paid for monthly dues and assessments on the club share.
- In 1995, when Mendoza retired, Sime Darby fully paid him more than P3,000,000 as separation pay.
- In 2004, Sime Darby found an interested buyer for the club share. However, Mendoza refused to sign an
authorization to sell, claiming P300,000 as unpaid separation benefits.
- Sime Darby filed a complaint for damages and a writ of preliminary injunction against Mendoza, seeking to prevent
Mendoza from using ACC facilities and privileges.
- Mendoza claimed ownership of the club share and denied the right to sell it without his authorization.
RTC Ruling:
- The Regional Trial Court (RTC) denied Sime Darby's request for a restraining order and preliminary injunction.
- The RTC reasoned that Sime Darby had a clear and unmistakable right over the club share, and Mendoza's actions
posed a threat to this right. Thus, an injunction was warranted.
CA Ruling:
- The Court of Appeals reversed the RTC's decision, dismissing Sime Darby's complaint.
- The Court of Appeals held that Sime Darby failed to prove its clear and unmistakable right over the club share.
Issue
Whether Sime Darby had a valid claim over the club share or if Mendoza was the rightful owner.
Ruling:
- The Supreme Court ruled in favor of Sime Darby, affirming the RTC's decision.
- Sime Darby successfully demonstrated its right over the club share. Although the share was registered in Mendoza's
name, Sime Darby had paid for the purchase and held the beneficial interest in it. A trust arrangement existed between
the parties.
- Mendoza's claim that he had signed the assignment of rights in blank merely for the right of first refusal was
considered self-serving and unsupported by evidence. The circumstances pointed to the existence of a trust, as Sime
Darby did not intend to relinquish its beneficial interest or right over the share. Sime Darby's continued payment of
monthly dues also reinforced this conclusion.
- Mendoza's refusal to allow the sale of the club share without additional payment constituted a violation of Sime
Darby's rights.
- The Court emphasized that Sime Darby was entitled to injunctive relief to prevent further damage and prejudice.
- The Court awarded Sime Darby P100,000 in temperate damages and P250,000 as attorney's fees and litigation
expenses.
Doctrine:
- A trust relationship arises when one pays for a property in another's name, with the presumption that the payer
intends a beneficial interest. This results in a resulting trust, with the burden of proof shifting to the transferee.
- The right of first refusal can imply a trust if it aligns with the circumstances, but self-serving claims without
supporting evidence are insufficient to negate a resulting trust.
- A trust may exist even if property is registered in the name of another if there is evidence of beneficial interest.
- Injunctions may be granted when the applicant has a clear and unmistakable right, a violation of that right has
occurred, and there is an urgent and paramount necessity to prevent serious damage.
Gabutan vs. Nacalaban, G.R. Nos. 185857-58 & 194314-15, June 9, 2016
Facts:
1. Godofredo Nacalaban purchased an 800-square meter parcel of land in Cagayan de Oro City in 1957.
2. The property's title was in Godofredo's name. He built a house on the land.
3. Godofredo passed away in 1974, survived by his wife, Baldomera, and their children.
4. In 1979, Baldomera issued a Certification allowing her mother, Melecia, to build and occupy a house on the
property. Melecia's name was used for tax purposes.
5. Baldomera died in 1994. In 1996, her children executed an Extrajudicial Settlement of Estate of Deceased Person
with Sale, selling the property to the College. The College obtained the property's title.
6. Melecia died in 1997, survived by her children, including the heirs who occupied the house on the property.
7. The College demanded the heirs of Melecia to vacate the property in 1997.
8. The heirs of Melecia filed a Complaint against Nacalaban and the College, claiming that the property was actually
owned by Melecia and that Godofredo and Baldomera were trustees. They sought reconveyance and alleged that the
College was a buyer in bad faith.
9. Separately, the College filed an Unlawful Detainer case against the heirs of Melecia.
10. The Municipal Trial Court in Cities (MTCC) ruled in favor of the College in the Unlawful Detainer case.
11. The Regional Trial Court (RTC) ruled in favor of the heirs of Melecia in the reconveyance case, declaring a trust
over the property.
12. Both parties appealed the RTC decisions, and the Court of Appeals (CA) consolidated the appeals.
13. The CA affirmed the RTC's decisions in favor of the College in the Unlawful Detainer case and the heirs of
Melecia in the reconveyance case.
RTC Ruling:
In the Unlawful Detainer case, the MTCC ruled in favor of the College, ordering the heirs of Melecia to vacate the
property and pay use compensation, attorney's fees, and litigation expenses.
In the reconveyance case, the RTC ruled in favor of the heirs of Melecia, declaring that the property was held in trust
by Godofredo and Baldomera for Melecia, and later passed to Melecia's heirs by operation of law. The RTC nullified
the Extrajudicial Settlement with Sale executed by Godofredo and Baldomera's children. It declared the College as a
buyer in good faith and ordered it to inform the court of the purchase price and for the children of Godofredo and
Baldomera to deliver the heirs of Melecia's share of the sale proceeds.
CA Ruling:
The CA affirmed the MTCC's decision in the Unlawful Detainer case and the RTC's decision in the reconveyance
case.
Issues
Whether the property was actually owned by Melecia, and whether Godofredo and Baldomera were trustees for her.
Ruling:
The petition for certiorari of Nacalaban, et al. is a wrong remedy:
The court first addresses the issue of the appropriate legal remedy chosen by the petitioners, Nacalaban, et al. The
court states that the proper remedy to challenge a judgment on the merits, final order, or resolution is an appeal, as
provided in Section 1, Rule 45 of the Rules of Court. The court points out that the Resolution of the Court of Appeals
(CA) dated August 17, 2010, which affirmed its Decision dated December 11, 2008, was a final resolution disposing
of the appeal, and an appeal should have been filed. Rule 65, a special civil action, is an extraordinary remedy
available only when there is no appeal or other adequate remedies.
The court further emphasizes that a petition for certiorari is not a substitute for an available appeal when it has been
lost through fault or negligence. In this case, the petition was filed beyond the 15-day period for filing an appeal, and
no compelling reasons existed to relax the rules.
An implied resulting trust was created between Melecia and Godofredo: The court discusses the concept of implied
resulting trust and states that it occurs when a property is sold with the legal estate granted to one party but the
purchase price is paid by another, intending to have the beneficial interest in the property. In this case, the evidence
presented supports the creation of an implied trust between Melecia and Godofredo. The court highlights the
testimonies of witnesses and the transfer of money and property.
The action for reconveyance is imprescriptible because the plaintiffs are in possession of the property: The court
explains that actions for reconveyance based on implied or constructive trust generally have a prescriptive period of
10 years from the alleged fraudulent registration. However, this prescriptive period does not apply if the plaintiffs are
in actual possession of the property. In this case, the Heirs of Melecia were in possession of the property, making the
action for reconveyance imprescriptible.
The Extrajudicial Settlement with Sale executed between Nacalaban, et al., and the College is void: The court finds
that the extrajudicial settlement and sale executed between Godofredo's heirs (Nacalaban, et al.) and the College is
void. Since Melecia was still alive when this transaction occurred, Nacalaban, et al. did not have the right or authority
to sell the property. The College is a buyer in bad faith: The court rules that the College cannot be considered a buyer
in good faith, as it did not meet the required conditions. Notably, Nacalaban, et al. were not the registered owners of
the property, the College was aware of other persons' possession of the land (Melecia and her heirs), and it relied
solely on the representations of the sellers without conducting a proper investigation.
The court emphasizes that the seller's title in a registered land does not automatically make the buyer a purchaser in
good faith. When the property is in the possession of someone other than the seller, the buyer must exercise a higher
degree of diligence.
Home Guaranty Corp. vs. La Savoie Development Corp., G.R. No. 168616, January 28, 2015
Facts:
La Savoie Development Corporation, a real estate development company, faced financial difficulties and filed for
corporate rehabilitation.
Home Guaranty Corporation (HIGC) opposed the rehabilitation plan, claiming ownership of properties as collateral
for loans.
The Trust Agreement stipulated that HIGC would provide guaranty coverage for La Savoie's certificates.
A "Stay Order" was issued by the Regional Trial Court to halt the enforcement of claims against La Savoie during
rehabilitation proceedings.
The Court of Appeals reversed the trial court's order, allowing La Savoie's rehabilitation plan to proceed.
During the appeal process, HIGC had already paid La Savoie's creditors and received an assignment of the Asset Pool.
RTC Ruling:
The trial court ruled in favor of HIGC, upholding its claim to ownership of the Asset Pool. The court deemed the
transfer valid as it occurred during the stay order, which was immediately executory and not restrained by an appellate
court.
CA Ruling:
The Court of Appeals reversed the trial court's decision, upholding La Savoie's rehabilitation plan. They found that the
transfer of the Asset Pool to HIGC was valid.
Issue:
Whether the transfer of assets (the Asset Pool) from La Savoie to Home Guaranty Corporation was alleged to be in
violation of the pactum commissorium rule, and the court needed to determine if an implied trust was created as a
result.
Ruling:
The Supreme Court found that the transfer of assets to HIGC was invalid due to the presence of a pactum
commissorium, which is an illegal agreement where the creditor appropriates the mortgaged property in case of non-
payment. Consequently, the ownership of the assets was not transferred to HIGC.
Instead, a constructive trust was created, and the assets were held in trust by HIGC for the benefit of La Savoie.
Doctrine:
Implied trusts are deduced from the nature of a transaction or are superinduced by operation of law without the parties
explicitly stating their intention to create a trust. Constructive trusts are created by equity to prevent unjust enrichment
when someone, often due to fraud, holds the legal title to property they ought not to possess.
Pactum commissorium refers to an illegal agreement where the creditor automatically appropriates mortgaged
property in case of non-payment. Such agreements are null and void.
Diaz vs. Gorricho and Aguado, G.R. No. L-11229, March 29, 1958
Facts:
- Lots Nos. 1941 and 3073 in Cabanatuan were originally owned by the conjugal partnership of Francisco Diaz and
Maria Sevilla.
- In 1935, Carmen J. Gorricho filed a lawsuit against Maria Sevilla, leading to the attachment of Maria Sevilla's
shares in the mentioned lots and their subsequent purchase by Gorricho at a public auction.
- The provincial sheriff mistakenly conveyed the entire lots to Gorricho instead of only Maria Sevilla's share.
- Gorricho obtained title to these lots and possessed them since 1937.
- In 1951, Maria Sevilla died, and in 1952, her children, Manuel Diaz, Constancia Diaz, and Sor Petra Diaz (Lolita
Diaz), filed an action against Gorricho and her husband, Francisco Aguado, seeking a reconveyance of their father's
undivided one-half interest in the lots.
RTC Ruling:
- The trial court held that a constructive trust existed due to the error by the provincial sheriff in conveying the entire
lots to Gorricho.
- However, the court ruled in favor of Gorricho, stating that the action was barred by laches and prescription because
it was filed fifteen years after the conveyance (1937-1952). The court also considered that all appellants had reached
the age of majority in this period.
Issue:
Whether the action of the appellants to compel the reconveyance of their father's share, allegedly conveyed in error, is
barred by prescription.
Ruling:
- The Supreme Court ruled that the action was barred by prescription. The Court referred to Article 1456 of the new
Civil Code, stating that constructive trusts, though created by law, may still be barred by laches and prescription.
- In constructive trusts, there is no promise or fiduciary relationship, and the "trustee" does not recognize any trust.
Therefore, the beneficiary cannot justify delaying action. It is their fault if they do so, and they may be estopped by
their own laches.
- The equitable doctrine of estoppel by laches requires that the party invoking it must demonstrate that unjustified
inaction would result in unfair injury. In this case, the appellees (Gorricho) did not meet this requirement. Still, the
Court upheld the judgment of dismissal due to the long delay (fifteen years) in taking remedial action.
Doctrine:
- The case invokes the legal doctrine of a constructive trust, which is imposed by law rather than established through
an express agreement. Constructive trusts arise when there is a breach of faith in a fiduciary or confidential
relationship, when the purchase price has been paid but the legal title is in the name of another, or when the holder of
a legal title is estopped from denying the beneficial interest of another person. In this case, it arises from an error in
the conveyance by the provincial sheriff.
- The case distinguishes between constructive and express trusts. In the former, laches and prescription can bar an
action to enforce the trust. While the beneficiary of an express trust can rely on the fidelity of the trustee and is not
barred by laches until the trustee openly repudiates the trust or breaches it, this does not apply to constructive trusts.
- The Court also recognizes that the equitable doctrine of estoppel by laches requires the party invoking it to show
that unjustified inaction would result in unfair injury unless the action is held barred.
The decision reinforces the importance of timely action in cases of constructive trusts and highlights that unjustified
delay, even in cases of continuing trusts, may lead to the action being barred by prescription or laches.
Doctrine: In express trusts, the delay of the beneficiary is directly attributable to the trustee who undertakes to hold the
property for the former, or who is linked to the beneficiary by confidential or fiduciary relations. The trustee's
possession is, therefore, not adverse to the beneficiary, until and unless the latter is made aware that the trust has been
repudiated. But in constructive trusts (that are imposed by law) there is neither promise nor fiduciary relation; the so-
called trustee does not recognize any trust and has no intent to hold for the beneficiary; therefore, the latter is not
justified in delaying action to recover his property. It is his fault if he delays; hence, he may be estopped by his own
laches.
Lopez vs. Court of Appeals, G.R. No. 157784, December 16, 2008
Facts:
- Petitioner, Richard B. Lopez, as trustee of Juliana Lopez Manzano's estate, filed an action for reconveyance to
recover land allegedly belonging to the trust estate of Juliana.
- Juliana was married to Jose Lopez Manzano, and they did not have children.
- Juliana owned various properties, including several large tracts of land in Batangas.
- Juliana executed a notarial will in 1968, establishing a trust fund called "Fideicomiso de Juliana Lopez Manzano"
to be administered by her husband, Jose, and later by her nephew, Enrique Lopez.
- Juliana initiated probate proceedings for her will, but she passed away before the hearing.
- The probate court admitted the will to probate and issued letters testamentary to Jose, who submitted an inventory
of Juliana's real properties.
- Jose offered a project of partition, specifying that one-half of Juliana's paraphernal properties be constituted into
the Fideicomiso, while the other half would go to Jose.
- The probate court approved this project of partition.

- Jose, as executor, received titles to the disputed properties, indicating these were his sole heir.
- The Fideicomiso was constituted, excluding the disputed lands, and the certificates of title were issued to Jose.
- Jose died, and a holographic will disposed of the disputed properties to respondents, which was probated.
- The court ordered the transfer of the disputed properties to respondents.
- Petitioner, Enrique Lopez, assumed the trusteeship of Juliana's estate.
- He filed an action for reconveyance, claiming that Jose wrongfully registered the disputed properties in his name
and held them in trust for Juliana's estate.
Issue
Whether the action for reconveyance based on an implied trust over the disputed properties has prescribed.
Ruling:
- The Supreme Court held that an implied trust, not an express trust, was established over the disputed properties.
- While Juliana's testamentary intent was to create an express trust, the probate court excluded the disputed
properties from the Fideicomiso, and this exclusion was unopposed and approved by the probate court.
- The registration of the disputed properties in Jose's name was a result of a court order, and the mistake, if any, in
this adjudication was not rectified.
- As a result, only a constructive trust of the disputed variety was formed in favor of the beneficiaries of the
Fideicomiso.
- The prescriptive period for an action for reconveyance based on an implied trust is 10 years, starting from the
issuance of the original or transfer certificates of title.
- The ten-year period began when the disputed properties were registered in Jose's name, charging petitioner with
constructive notice of the situation.
- The Court also noted that Jose had initially indicated that the disputed properties were conjugal, not part of the
Fideicomiso, which could be considered as a repudiation of the trust.
- In constructive implied trusts, unlike express and resulting implied trusts, repudiation is not required for the
running of the prescriptive period.
Doctrine:
- The case distinguishes between express trusts, resulting implied trusts, and constructive implied trusts. Express
trusts involve a clear intent to create a trust, while resulting implied trusts arise by operation of law or circumstance.
Constructive implied trusts are established to satisfy the demands of justice and prevent unjust enrichment when
someone holds legal title but should not retain it.
- The case cites Article 1456 of the Civil Code, which deals with implied trusts created through mistake or fraud.
- It clarifies that prescription for actions related to implied trusts varies depending on the nature of the implied trust.
While repudiation is a condition precedent for the running of the prescriptive period in express and resulting implied
trusts, constructive implied trusts may be subject to prescription without repudiation.
- The decision underscores the importance of recognizing the nature of the trust involved in a case to determine the
applicable prescription period.
Cavile vs. Litania-Hong, G.R. No. 179540, March 13, 2009
Facts:
1. In 1937, a Deed of Partition was executed by the heirs of the spouses Bernardo Cavile and Tranquilina Galon,
dividing several parcels of land in Negros Oriental.
2. The Deed of Partition included Tax Declarations No. 7421 and No. 7956, which became the subject of the dispute.
3. Later, a Confirmation of Extrajudicial Partition was executed in 1960, in which Castor Cavile recognized Susana
Cavile's ownership of the subject lots covered by Tax Declarations No. 7421 and No. 7956.
4. In 1974, respondents, the daughters of Susana, filed a Complaint for Reconveyance and Recovery of Property with
Damages against petitioner spouses Perfecta Cavile and Jose de la Cruz, claiming ownership of the subject lots.
5. The petitioner spouses asserted that the Confirmation of Extrajudicial Partition was a simulated contract and that the
subject lots were never owned nor adjudicated in favor of Susana.
6. The RTC ruled in favor of petitioner spouses, declaring them as the absolute owners of the subject lots.
7. The Court of Appeals reversed the RTC's decision and ordered the reconveyance of the subject lots to respondents,
plus damages.
RTC Ruling:
The RTC ruled in favor of petitioner spouses, declaring them as the absolute owners of the subject lots. The RTC
found that petitioner spouses' evidence was more credible and that the Confirmation of Extrajudicial Partition was a
simulated contract. It also noted the long delay before respondents took legal action to assert their rights over the
subject lots.
CA Ruling:
The Court of Appeals reversed the RTC's decision and ordered the reconveyance of the subject lots to respondents.
The Court of Appeals found that the Confirmation of Extrajudicial Partition was not a simulated document and
constituted evidence of the highest probative value against the declarant, Castor. The Court of Appeals also
highlighted the fact that Susana and her children had been paying real estate taxes on the subject lots since 1937.
Issue:
Whether the Confirmation of Extrajudicial Partition and the ownership of the subject lots is valid.
Ruling:
The fundamental issue in this case is determining the rightful ownership of certain lots, specifically Tax Declarations
No. 07408 and No. 07409, which are the same as those covered by Tax Declarations No. 7956 and No. 7421, as well
as Tax Declarations No. 2040 and No. 2039, subject to a Confirmation of Extrajudicial Partition. Respondents claim
ownership based on the Confirmation of Extrajudicial Partition, while petitioner spouses assert their ownership
through the Deed of Partition executed in 1937 and the subsequent issuance of Torrens titles.
The Court recognizes the Confirmation of Extrajudicial Partition as an admission against Castor's proprietary interest,
allowing it to be admitted as evidence against him and petitioner spouses. However, this document alone does not
conclusively establish respondents' ownership.
In evaluating the evidence, the Court emphasizes that the party with the burden of proof must establish its case by a
preponderance of evidence. This means that the weight and credibility of all the evidence are considered, and the
evidence must establish the facts as more likely true than not.
The Court finds that the evidence presented by petitioner spouses preponderates over that of respondents. The Deed of
Partition from 1937 explains how Castor acquired ownership of the subject lots. While the Confirmation of
Extrajudicial Partition confirmed Susana's ownership, it did not clarify why the lots solely belonged to her when there
were other heirs.
Additionally, tax declarations, even in the name of Susana and respondents, are insufficient to prove ownership. Tax
declarations are merely indicia of possession and do not conclusively establish ownership.
Crucially, the Torrens titles issued in petitioner Perfecta's name in 1962 significantly affect the case. According to
Section 101 of Commonwealth Act No. 141, actions for reversion to the government of public lands shall be instituted
by the Solicitor General in the name of the Republic of the Philippines. Since respondents' Complaint was filed in
1974, it was already barred, even if the action for reconveyance was the correct remedy.
Furthermore, respondents failed to prove that they were in possession of the subject lots before the grant of free
patents and Torrens titles in petitioner Perfecta's name. The evidence of possession provided by petitioner spouses,
including cultivation and payment of real estate taxes, was convincing and uncontested. The allegations of fraud in the
free patent application and the assertion that the subject lots were private lands are speculative without sufficient
proof.
Torbela vs. Rosario, G.R. No. 140528 and 140553, December 7, 2011
Facts:
1. The case involves two consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court, both
challenging the Decision and Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 39770.
2. Petitioners in G.R. No. 140528 are siblings named Maria Torbela, Pedro Torbela, Eufrosina Torbela Rosario,
Leonila Torbela Tamin, Fernando Torbela, Dolores Torbela Tablada, Leonora Torbela Agustin, and Severina Torbela
Ildefonso (Torbela siblings).
3. The petitioner in G.R. No. 140553 is Lena Duque-Rosario, who was married to, but now legally separated from, Dr.
Andres T. Rosario.
4. The dispute involves a parcel of land known as Lot No. 356-A in Urdaneta City, Pangasinan. It was originally part
of a larger parcel known as Lot No. 356, covered by Original Certificate of Title (OCT) No. 16676, owned by
Valeriano Semilla.
5. Valeriano transferred Lot No. 356-A to his sister Marta Semilla, married to Eugenio Torbela, and after their deaths,
it was divided equally among their children, the Torbela siblings, by a Deed of Extrajudicial Partition dated December
3, 1962.
6. On December 12, 1964, the Torbela siblings executed a Deed of Absolute Quitclaim over Lot No. 356-A in favor of
Dr. Rosario for the sum of P9.00.
7. Dr. Rosario later executed another Deed of Absolute Quitclaim on December 28, 1964, acknowledging that he had
borrowed Lot No. 356-A and was returning it to the Torbela siblings for P1.00.
8. Dr. Rosario obtained a loan from the Development Bank of the Philippines (DBP) on February 21, 1965, securing it
with a mortgage on Lot No. 356-A. The mortgage was annotated on Transfer Certificate of Title (TCT) No. 52751 on
September 21, 1965.
9. Cornelio T. Tosino executed an Affidavit of Adverse Claim on May 16, 1967, on behalf of the Torbela siblings,
stating that Dr. Rosario had quitclaimed his rights to them.
10. On May 17, 1967, the Torbela siblings had Cornelio's Affidavit of Adverse Claim and Dr. Rosario's Deed of
Absolute Quitclaim annotated on TCT No. 52751.
11. Dr. Rosario obtained another loan from the Philippine National Bank (PNB) in 1979-1981, securing it with
mortgages on several properties, including Lot No. 356-A.
12. The Torbela siblings filed a Complaint for recovery of ownership and possession of Lot No. 356-A in 1986.
13. Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A, and it was sold at public auction to
Banco Filipino.
14. The Torbela siblings tried to redeem Lot No. 356-A from Banco Filipino but were unsuccessful, and the property
was eventually consolidated in favor of Banco Filipino.
RTC Ruling:
The RTC issued a Decision dated January 15, 1992, which stated:
1. Declaring the real estate mortgage over Lot 356-A executed by Spouses Andres Rosario in favor of Banco Filipino
as legal and valid.
2. Declaring the sheriff's sale dated April 2, 1987, and subsequent final Deed of Sale dated May 14, 1988, over Lot
356-A legal and valid.
3. Declaring Banco Filipino as the owner of Lot 356-A.
4. Ordering Banco Filipino to be given a writ of possession over Lot 356-A.

5. Ordering the Torbela siblings to render an accounting to Banco Filipino for the rental they received from the tenants
of the Rose Inn Building.
6. Ordering the Torbela siblings to pay Banco Filipino P20,000.00 as attorney's fees.
7. Ordering Banco Filipino to give the Torbela siblings the right of first refusal over Lot 356-A.
8. Ordering Dr. Rosario to reimburse the Torbela siblings the market value of Lot 356-A as of December 1964 minus
payments made by him.
9. Dismissing the complaints of the Torbela siblings against Banco Filipino, Pedro Habon, and Rufino Moreno.
The RTC also issued an Amended Decision on January 29, 1992, which added a paragraph declaring Banco Filipino
entitled to a writ of possession over another property.
CA Ruling:
The Court of Appeals, in its Decision dated June 29, 1999, affirmed the RTC's decision with modifications. It deleted
Items 6 and 7 of the RTC's decision and modified Item 8, requiring Dr. Rosario to pay the Torbela siblings
P1,200,000.00 in actual damages with interest, as well as additional amounts for moral and exemplary damages and
attorney's fees.
The Court of Appeals, in its Resolution dated October 22, 1999, denied the separate Motions for Reconsideration filed
by the Torbela siblings and Dr. Rosario.
Ruling:
The court established that there was an express trust between the Torbela siblings and Dr. Rosario. An express trust is
a fiduciary relationship in which one party (the trustee) holds and manages property for the benefit of another party
(the beneficiary). The trust in this case was created when the Torbela siblings executed a Deed of Absolute Quitclaim,
transferring Lot No. 356-A to Dr. Rosario for a nominal amount. However, this transfer was explained as an
accommodation to facilitate the registration of the property and secure a loan.
The court determined that the 10-year prescriptive period for the enforcement of the express trust had not expired. The
prescriptive period began when Dr. Rosario repudiated the trust, which occurred on March 6, 1981, when he increased
a mortgage loan secured by Lot No. 356-A without the knowledge or consent of the Torbela siblings. The Torbela
siblings filed their case on February 13, 1986, within the prescriptive period. The court discussed the doctrine of
mortgagee in good faith, which protects mortgagees who rely on the title of the mortgagor. Despite the Torbela
siblings' adverse claim and the Deed of Absolute Quitclaim annotated on TCT No. 52751, Banco Filipino claimed to
be a mortgagee in good faith. They argued that the Torbela siblings' adverse claim had lapsed and that Entry Nos.
274471-274472 were canceled.
The court did not make a definitive ruling on whether Banco Filipino was a mortgagee in good faith. Instead, it
provided an analysis of the entries and annotations on the title, suggesting that the validity of Banco Filipino's
mortgage should be further scrutinized in a lower court. The court emphasized the importance of entries and
annotations on a Torrens Certificate of Title (TCT). In this case, the lapsed adverse claim and canceled entries could
have an impact on Banco Filipino's claim as a mortgagee in good faith.
The court's decision did not conclusively determine the status of Banco Filipino as a mortgagee in good faith. Instead,
it directed that the validity of Banco Filipino's mortgage and its status as a mortgagee in good faith should be further
examined in a lower court.
As to the adverse claim in this legal case revolves around the ownership and rights to a specific property, particularly
Lot No. 356-A. The adverse claim was raised by the Torbela siblings, who argued that they had a legitimate interest in
the property and had a right to assert a claim over it.
Dr. Rosario, on the other hand, disputed the validity of the Torbela siblings' adverse claim. He claimed that he held the
property in trust for them but subsequently mortgaged it to financial institutions like PNB and Banco Filipino without
their consent. Dr. Rosario argued that the adverse claim should not be recognized or was improperly executed.
In essence, the adverse claim is a central point of contention between the Torbela siblings and Dr. Rosario,
determining who has the rightful claim to the property, and whether the adverse claim executed by the Torbela
siblings is legally valid or not. The court's decision ultimately resolved this dispute in favor of the Torbela siblings.
Tong vs. Go Tiat Kun, G.R. No. 196023, April 21, 2014
Facts:
- The petitioners, who are nine of the ten children of Spouses Juan Tong, claim ownership of a parcel of land known
as Lot 998-A.
- Juan Tong originally purchased Lot 998 to be used for the family's lumber business. However, due to his Chinese
citizenship, the property was registered in the name of his eldest son, Luis, Sr., who was a Filipino citizen.
- After the deaths of Juan Tong, Sy Un, and Luis, Sr., the respondents (surviving heirs of Luis, Sr.) claimed ownership
of Lot 998, alleging that it was purchased by Luis, Sr.
- The respondents executed a Deed of Extra-Judicial Settlement of Estate, adjudicating Lot 998 unto themselves and
securing a new title.
RTC Ruling:
- The trial court ruled in favor of the petitioners, finding that there was an implied resulting trust over Lot 998.
- The trial court held that any right the respondents may have is derived from Luis, Sr., who was a mere trustee and
not the owner of Lot 998.
- It declared the titles issued to the respondents null and void and ordered the respondents to pay moral damages and
litigation expenses.
CA Ruling:
- The Court of Appeals reversed the trial court's decision.
- The CA ruled that an express trust was created, and this should be proven by a writing or deed, not parol evidence.
- Even if there was an implied resulting trust, it was barred by prescription after the death of Luis, Sr.
- The CA presumed a donation under Article 1448 of the Civil Code, and the petitioners were barred by estoppel and
laches.
Issue:
Whether the action by the petitioners to claim ownership of Lot 998-A is barred by prescription, as the respondents
argue that the resulting trust was converted into a constructive trust and thus subject to a ten-year prescriptive period
from the issuance of the Torrens title, which they claim has already expired.
Ruling:
In this case, the Court ruled in favor of the petitioners, reversing the decision of the Court of Appeals (CA) and
reinstating the decision of the Regional Trial Court (RTC) of Iloilo City. The jurisdiction of the Supreme Court in
cases brought before it from the CA is typically limited to reviewing and revising errors of law. However, in this case,
the Court justified its review due to the conflicting rulings by the lower courts.
The Court found that an implied resulting trust existed regarding Lot 998-A. This trust was based on the
circumstances surrounding the acquisition of the property and the mutual intention of the parties, even though the
property was registered in the name of Luis, Sr. There were elements of intention to create a trust, valuable
consideration provided by Juan Tong, and the petitioners' possession of the property. The Court disagreed with the
appellate court's ruling that parol evidence couldn't be used to establish the implied resulting trust. It held that the
intention to create a trust is a crucial element, and parol evidence was permissible to demonstrate such intention.
The Court explained the difference between a resulting trust and a constructive trust. Resulting trusts arise from the
nature of the consideration involved in a transaction and are presumed to have been contemplated by the parties.
Constructive trusts, on the other hand, are created by equity to prevent unjust enrichment and may result from fraud or
abuse of confidence. The Court stated that implied resulting trusts do not prescribe except when the trustee repudiates
the trust. Since the title to the property was still registered in the name of Luis, Sr., it had not yet passed into the estate.
Therefore, the action for reconveyance was not barred by prescription.
The Court rejected the claim of laches, estoppel, and prescription against the petitioners. It clarified that laches is not
strictly applied between near relatives, and the fact that parties are connected by blood or marriage can excuse an
otherwise unreasonable delay. The Court addressed the disputable presumption of donation under Article 1448 of the
Civil Code. It stated that this presumption was clearly disputed by the petitioners and was not supported by the
evidence on record.
1. Estanislao, Jr. vs. Court of Appeals, G.R. No. L-49982, April 27, 1988
SUMMARY: The petitioner and private respondents were brothers and sisters. They co-owned parcels of land which
were then being leased to the Shell company. The family wanted to open and operate a SHELL gas station and they
decided that the petitioner will be the one named in their application for franchise. They executed an agreement with
SHELL asking for advance rentals which would then be used as capital for the franchise agreement. They executed
another agreement stating that the P15,000 advance rentals should be applied to the account of petitioner with SHELL
to increase his credit limit from 10,000 to 25,000. Also included in the agreement is a proviso that said agreement
cancels and supersedes the original agreement executed by the co-owners. Their agreement ran smoothly and the
petitioner was able to manage the station smoothly with the help of one of his sisters. After some time, the petitioner
failed to render accounts due to his siblings. A demand letter was then sent by his siblings asking him to give them
their shares. Petitioner did not heed to their request. His siblings sued him and won in the lower court. Petitioner said
that the second agreement effectively cancelled the first thereby cancelling the partnership. ISSUE: Whether or not a
partnership was formed when members of the same family bind themselves to contribute money to a common fund
with the intention of dividing the profits among themselves. RULING: The Court ruled in favor of respondents saying
that there was a partnership formed as evidenced by the first agreement. The Joint Affidavit of April 11, 1966 (Exhibit
A), clearly stipulated by the members of the same family that the P15,000.00 advance rental due to them from SHELL
shall augment their "capital investment" in the operation of the gasoline station. Other pieces of evidence, periodic
accounting of the business, written authority to private respondent Remedios Estanislao, his sister, to examine and
audit the books of their "common business" (aming negosyo), and also respondent Remedios assisted in the running of
the business.Al these pointed out that the petitioner recognized the agreement when he initially gave his
siblings their shares in the profits.
DOCTRINE: A Partnership is formed when persons agreed to bind themselves to contribute money to a common
fund with the intention of dividing the profits among themselves
FACTS: Petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the corner of
Annapolis and Aurora Blvd., Quezon City which were then being leased to the Shell Company of the Philippines
Limited (SHELL). They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service
Station with an initial investment of P15,000.00 to be taken from the advance rentals due to them from SHELL for the
occupancy of the said lots owned in common by them.
They agreed to help their brother, petitioner herein, by allowing him to operate and manage the gasoline service
station of the family. They negotiated with SHELL. For practical purposes and in order not to run counter to the
company's policy of appointing only one dealer, it was agreed that petitioner would apply for the dealership.
Respondent Remedios helped in co-managing the business with the petitioner from May 3, 1966 up to February 16,
1967.
On May 26, 1966, the parties herein entered into an Additional Agreement with a proviso that said agreement cancels
and supersedes the original agreement executed by the co-owners. For some time, the petitioner submitted financial
statements regarding the operation of the business to private respondents, but thereafter the petitioner failed to render
subsequent accounting. A demand was made on petitioner to render an accounting of the profits, to execute a public
document embodying all the provisions of the partnership agreement, and to pay the plaintiffs their lawful shares and
participation in the net profits of the business.
ISSUE: Whether or not a partnership was formed when members of the same family bind themselves to contribute
money to a common fund with the intention of dividing the profits among themselves.
RULING: YES. The Joint Affidavit of April 11, 1966 (Exhibit A), clearly stipulated by the members of the same
family that the P15,000.00 advance rental due to them from SHELL shall augment their "capital investment" in the
operation of the gasoline station. Said cancelling provision was necessary for the Joint Affidavit speaks of P15,000.00
advance rentals starting May 25, 1966 while the latter agreement also refers to advance rentals of the same amount
starting May 24, 1966. There is, therefore, a duplication of reference to the P15,000.00 hence the need to provide in
the subsequent document that it "cancels and supersedes" the previous one. True it is that in the latter document, it is
silent as to the statement in the Joint Affidavit that the P15,000.00 represents the "capital investment" of the parties in
the gasoline station business and it speaks of petitioner as the sole dealer, but this is as it should be for in the latter
document SHELL was a signatory and it would be against its policy if in the agreement it should be stated that the
business is a partnership with private respondents and not a sole proprietorship of petitioner. Other evidence in the
record also showed that petitioner submitted to private respondents periodic accounting of the business. Petitioner
gave a written authority to private respondent Remedios Estanislao, his sister, to examine and audit the books of their
"common business" (aming negosyo). Respondent Remedios assisted in the running of the business.
2. Oña vs. Commissioner of Internal Revenue, G.R. No. L-19342, May 25, 1972
Short:
Julia Buñales died on March 23, 1944, leaving as heirs her surviving spouse, Lorenzo T. Oña and her five children. A
case was filed for the settlement of her estate. Later, Lorenzo T. Oña, the surviving spouse was appointed
administrator of the estate. Oña then submitted the project of partition, which was approved by the Court. The Court
appointed Oña to be guardian of the persons and property of the 3 minor children. No attempt was made to divide the
properties which remained under the management of Oña who used said properties in business by leasing or selling
them and investing the income derived from them. As a result, petitioners' properties and investments gradually
increased. The children usually come back to Oña to pay the taxes. Respondent CIR decided that the petitioners
formed an unregistered partnership and therefore, subject to the corporate income tax and was assessed. Petitioners
protested against the assessment and asked for reconsideration which was denied. They then filed a Petition for review
of the decision of the Court of Tax Appeals.
FACTS: Julia Buñales died leaving as heirs her surviving spouse, Lorenzo T. Oña and her five children. A civil case
was instituted in the CFI of Manila for the settlement of her estate. Oña, the surviving spouse, was appointed
administrator of the estate of said deceased. He submitted the project of partition, which was approved by the Court.
Because three of the heirs, namely, Luz, Virginia and Lorenzo, Jr, all surnamed Oña, were still minors when the
project of partition was approved, Lorenzo Oña, their father and administrator of the estate filed a petition with the
CFI of Manila for the appointment as guardian of said minors. The Court appointed him guardian of the persons and
property of the aforenamed minors. The heirs have undivided ½ interest in 10 parcels of land, 6 houses and money
from the War Damage Commission.
Although the project of partition was approved by the Court, no attempt was made to divide the properties and the
properties remained under the management of Lorenzo Oña who used said properties in business by leasing or selling
them and investing the income derived therefrom and proceeds from the sales thereof in real properties and securities.
CIR decided that petitioners formed an unregistered partnership and therefore, subject to the corporate income tax,
pursuant to Section 24, in relation to Section 84(b), of the Tax Code. Accordingly, he assessed against the petitioner's
corporate income taxes for 1955 and 1956. Petitioners protested against the assessment and asked for reconsideration
of the ruling of respondent that they have formed an unregistered partnership. Finding no merit in the petitioners'
request, CIR denied it.
ISSUE: Whether or not the petitioners formed an unregistered partnership and thus subject to corporate taxes.
RULING: Yes. The petitioners formed an unregistered partnership. The project of partition was approved in 1949 yet,
the properties remained under the management of Oña who used said properties in business by leasing or selling them
and investing the income derived from it which increased the value of the properties. The corporate tax law states that
in cases of inheritance, there should be a period when the heirs can be considered as co-owners rather than
unregistered co-partners. For tax purposes, the co-ownership of inherited properties is automatically converted into an
unregistered partnership the moment the said common properties and/or the incomes derived therefrom are used as a
common fund with intent to produce profits for the heirs in proportion to their respective shares in the inheritance as
determined in a project partition either duly executed in an extrajudicial settlement or approved by the court in the
corresponding testate or intestate proceeding. From the moment of such partition, the heirs are entitled already to their
respective definite shares of the estate and the incomes thereof, for each of them to manage and dispose of as
exclusively his own without the intervention of the other heirs, therefore he becomes liable individually for all taxes in
connection with his share. If after such partition, he allows his share to be held in common with his co-heirs under a
single management to be used with the intent of making profit, even if no document or instrument were executed for
that purpose, an unregistered partnership is formed.
—
FACTS: Julia Buñales died on March 23, 1944, leaving as heirs her surviving spouse, Lorenzo T. Oña and her five
children. In 1948, Civil Case No. 4519 was instituted in the Court of First Instance of Manila for the settlement of her
estate. Later, Lorenzo T. Oña, the surviving spouse was appointed administrator of the estate of said deceased. On
April 14, 1949, the administrator submitted the project of partition, which was approved by the Court on May 16,
1949. Because three of the heirs, namely Luz, Virginia and Lorenzo, Jr., all surnamed Oña, were still minors when the
project of partition was approved, Lorenzo T. Oña, their father and administrator of the estate, filed a petition in Civil
Case No. 9637 of the Court of First Instance of Manila for appointment as guardian of said minors. On November 14,
1949, the Court appointed him guardian of the persons and property of the aforenamed minors.
The project of partition shows that the heirs have undivided one-half (1/2) interest in ten parcels of land with a total
assessed value of P87,860.00, six houses with a total assessed value of P17,590.00 and an undetermined amount to be
collected from the War Damage Commission. Later, they received from the Commission the amount of P50,000.00,
more or less. This amount was not divided among them but was used in the rehabilitation of properties owned by them
in common. Of the ten parcels of land aforementioned, two were acquired after the death of the decedent with money
borrowed from the Philippine Trust Company in the amount of P72,173.00.
The project of partition also shows that the estate shares equally with Lorenzo T. Oña, the administrator thereof, in the
obligation of P94,973.00, consisting of loans contracted by the latter with the approval of the Court.
Although the project of partition was approved by the Court on May 16, 1949, no attempt was made to divide the
properties therein listed. Instead, the properties remained under the management of Lorenzo T. Oña who used said
properties in business by leasing or selling them and investing the income derived therefrom and the proceeds from
the sales thereof in real properties and securities. As a result, petitioners’ properties and investments gradually
increased from P105,450.00 in 1949 to P480,005.20 in 1956 as can be gleaned from the following year-end balances.
From said investments and properties petitioners derived such incomes as profits from installment sales of subdivided
lots, profits from sales of stocks, dividends, rentals and interests. The said incomes are recorded in the books of
account kept by Lorenzo T. Oña where the corresponding shares of the petitioners in the net income for the year are
also known. Every year, petitioners returned for income tax purposes their shares in the net income derived from said
properties and securities and/or from transactions involving them. However, petitioners did not actually receive their
shares in the yearly income. The income was always left in the hands of Lorenzo T. Oña who, as heretofore pointed
out, invested them in real properties and securities.
On the basis of the foregoing facts, respondent (Commissioner of Internal Revenue) decided that petitioners formed an
unregistered partnership and therefore, subject to the corporate income tax, pursuant to Section 24, in relation to
Section 84(b), of the Tax Code. Accordingly, he assessed against the petitioners the amounts of P8,092.00 and
P13,899.00 as corporate income taxes for 1955 and 1956, respectively. Petitioners protested against the assessment
and asked for reconsideration of the ruling of respondent that they have formed an unregistered partnership. Finding
no merit in the petitioners' request, the respondent denied it.
ISSUE: Whether the petitioners formed an unregistered partnership and thus subject to corporate income tax.
RULING: YES. For tax purposes, the co-ownership of inherited properties is automatically converted into an
unregistered partnership the moment the said common properties and/or the incomes derived therefrom are used as a
common fund with intent to produce profits for the heirs in proportion to their respective shares in the inheritance as
determined in a project partition either duly executed in an extrajudicial settlement or approved by the court in the
corresponding testate or intestate proceeding. The reason for this is simple. From the moment of such partition, the
heirs are entitled already to their respective definite shares of the estate and the incomes thereof, for each of them to
manage and dispose of as exclusively his own without the intervention of the other heirs, and, accordingly he becomes
liable individually for all taxes in connection therewith. If after such partition, he allows his share to be held in
common with his co-heirs under a single management to be used with the intent of making profit thereby in proportion
to his share, there can be no doubt that, even if no document or instrument were executed for the purpose, for tax
purposes, at least, an unregistered partnership is formed. This is exactly what happened to petitioners in this case.
The term “partnership” includes a syndicate, group, pool, joint venture or other unincorporated organization, through
or by means of which any business, financial operation, or venture is carried on. … . (8 Merten’s Law of Federal
Income Taxation, p. 562 Note 63; emphasis ours.)
For purposes of the tax on corporations, our National Internal Revenue Code includes these partnerships — with the
exception only of duly registered general copartnerships — within the purview of the term “corporation.” It is,
therefore, clear to our mind that petitioners herein constitute a partnership, insofar as said Code is concerned, and are
subject to the income tax for corporations.
As regards the second question raised by petitioners about the segregation, for the purposes of the corporate taxes in
question, of their inherited properties from those acquired by them subsequently, We consider as justified the
following ratiocination of the Tax Court in denying their motion for reconsideration:
In connection with the second ground, it is alleged that, if there was an unregistered partnership, the holding should be
limited to the business engaged in apart from the properties inherited by petitioners. In other words, the taxable
income of the partnership should be limited to the income derived from the acquisition and sale of real properties and
corporate securities and should not include the income derived from the inherited properties. It is admitted that the
inherited properties and the income derived therefrom were used in the business of buying and selling other real
properties and corporate securities. Accordingly, the partnership income must include not only the income derived
from the purchase and sale of other properties but also the income of the inherited properties.
Besides, as already observed earlier, the income derived from inherited properties may be considered as individual
income of the respective heirs only so long as the inheritance or estate is not distributed or, at least, partitioned, but the
moment their respective known shares are used as part of the common assets of the heirs to be used in making profits,
it is but proper that the income of such shares should be considered as the part of the taxable income of an
unregistered partnership. This, We hold, is the clear intent of the law.
3. Pascual vs. Commissioner of Internal Revenue, G.R. No. 78133, October 18, 1988
FACTS: Petitioners bought two (2) parcels of land on June 22, 1965 and bought another three (3) parcels of land on
May 28, 1966. Said lands were eventually sold in 1968 and 1970, respectively. The corresponding capital gains taxes
were paid by petitioners in 1973 and 1974 by availing of the tax amnesties granted in the said years. In a letter dated
March 31, 1979 of then Acting BIR Commissioner Efren I. Plana, petitioners were assessed and required to pay
an alleged deficiency of corporate income taxes for the years 1968 and 1970. Said Commissioner avers
that in said years, petitioners as co-owners in the real estate transactions formed an unregistered partnership or joint
venture taxable as a corporation under Section 20(b) and its income was subject to the taxes prescribed under
Section 24, both of the National Internal Revenue Code, that the unregistered partnership was subject to corporate
income tax as distinguished from profits derived from the partnership by them which is subject to individual income
tax; and that the availment of tax amnesty under P.D. No. 23, as amended, by petitioners relieved petitioners of their
individual income tax liabilities but did not relieve them from the tax liability of the unregistered partnership. In a
petition for review, the Court of Tax Appeals affirmed the decision and action taken by the respondent commissioner.
It ruled that on the basis of the principle enunciated in Evangelista v. Collector an unregistered partnership was in fact
formed by petitioners which like a corporation was subject to corporate income tax distinct from that imposed on the
partners
ISSUE: Whether there exists an unregistered partnership between petitioners such that the sale
transactions entered into by them is subject to corporate income tax. (NO)
RULING: In the present case, there is no evidence that petitioners entered into an agreement to contribute money,
property or industry to a common fund, and that they intended to divide the profits among themselves.
Respondentcommissioner and/ or his representative just assumed these conditions to be present on the basis of the fact
that petitioners purchased certain parcels of land and became co-owners thereof. In Evangelista, there was a series of
transactions where petitioners purchased twenty-four (24) lots showing that the purpose was not limited to the
conservation or preservation of the common fund or even the properties acquired by them. The character of
habituality peculiar to business transactions engaged in for the purpose of gain was present. In the present case
however, the transactions were isolated. The character of habituality peculiar to business transactions for the purpose
of gain was not present. Further, there is clear evidence of co-ownership between the petitioners. There is no adequate
basis to support the proposition that they thereby formed an unregistered partnership. The two isolated transactions
whereby they purchased properties and sold the same a few years thereafter did not thereby make them partners.They
shared in the gross profits as co- owners and paid their capital gains taxes on their net profits and availed of the tax
amnesty thereby. Under the circumstances, they cannot be considered to have formed an unregistered partnership
which is thereby liable for corporate income tax.
4. Anton vs. Sps. Oliva, G.R. No. 182563, April 11, 2011
FACTS: Respondents Ernesto and Corazon Oliva the Olivas filed an action for accounting and specific performance
with damages against petitioner spouses Jose Miguel and Gladys Miriam Anton (the Antons) before the RTC. The
Olivas alleged that they entered into MOA with Gladys Miriam, their daughter, and Jose Miguel, their son-inlaw,
setting up a business partnership covering three fast food stores, known as "Pinoy Toppings" that were to be
established at SM Megamall, SM Cubao, and SM Southmall. Under the MOAs, the Olivas were entitled to 30% share
of the net profits of the SM Megamall store and 20% in the cases of SM Cubao and SM Southmall stores.
The Olivas alleged that while the Antons gave them a total of P2,547,000.00 representing their monthly shares of the
net profits from the operations of the SM Megamall and SM Southmall stores, the Antons did not give them their
shares of the net profits from the store at SM Cubao. Further, Jose Miguel did not render to them an account of the
operations of the three stores. And, beginning November 1997, the Antons altogether stopped giving the Olivas their
share in the net profits of the three stores. The Olivas demanded an accounting of partnership funds but, in response,
Jose Miguel terminated their partnership agreements.
Jose Miguel alleged that he and his wife, Gladys Miriam, never partnered with the Olivas in the operations of the three
stores. The Antons merely borrowed money from the Olivas to finance the opening of those stores. Gladys Miriam,
who managed the operations of the business, remitted to the Olivas the amounts due them even after the loans had
been paid. If any accounting was needed, it should only be for the purpose of ascertaining the correctness of the
payments made. RTC held that no partnership relation existed between the Olivas and the Antons but Jose Miguel had
an obligation to render an accounting from the start of the business until the termination of their MOAs and,
thereafter, pay the Olivas their share of the net profits, if any, plus interests. 5. Petitioner Jose Miguel points out that
since the Olivas were not the Antons' partners in the stores, they were not entitled to receive percentage shares of the
net profits from the stores' operations.
ISSUE: : Whether there was a partnership established between the parties.
RULING: No. Although the MOA denominated the Olivas as “partners”, the amounts they gave did not appear to be
capital contributions to the establishment of the stores. The MOAs forbade the Olivas from interfering with the
running of the stores. At any rate, none of the parties has made an issue of the common finding of the courts below
respecting the nature of their relationship.
Although the Olivas were mere creditors, not partners, the Antons agreed to compensate them for the risks they had
taken. The Olivas gave the loans with no security and they were to be paid such loans only if the stores made profits.
Had the business suffered losses and could not pay what it owed, the Olivas would have ultimately assumed those
losses just by themselves. Still there was nothing illegal or immoral about this compensation scheme. Thus, unless the
MOAs are subsequently rescinded on valid grounds or the parties mutually terminate them, the same remain valid and
enforceable.
It did not matter that the Antons had already paid for two of the loans and their interests. Their obligation to share net
profits with the Olivas was not extinguished by such payment. The Antons paid the Olivas their share of the profits
from two stores although the loans corresponding to them had in the meantime been paid. Only after Jose Miguel's
marital relation with Gladys Miriam turned sour in November 1997 did he cease to pay the Olivas their shares of the
profits.
Since the Olivas were mere creditors, not partners, they had no right to demand that the Antons make an accounting of
the money loaned out to them. Still, the Olivas were entitled to know from the Antons how much net profits the three
stores were making annually since the Olivas were entitled to certain percentages of those profits. Indeed, the third
and second MOA directed the Antons to provide the Olivas with copies of the monthly sales reports from the
operations of the stores involved, apparently to enable them to know how much was due them. There is no reason why
the Antons should not furnish the Olivas copies of similar reports from the operations of the store at SM Megamall,
this merely being a consequence of the Antons' obligation to share with the Olivas the net profits from that store.
5. Litonjua, Jr. vs. Litonjua, Sr., G.R. Nos. 166299-300, December 13, 2005
Summary: On or about 22 June 1973, Aurelio and Eduardo entered into a joint venture/partnership for the
continuation of their family business and common family funds. This joint venture/partnership agreement was
contained in a memorandum addressed by Eduardo to his siblings, parents and other relatives. It was then agreed upon
between Aurelio and Eduardo that in consideration of Aurelio retaining his share in the remaining family businesses
(movie theater, shipping and land development) and contributing his industry to the continued operation of these
businesses, Aurelio will be given P1 Million or 10% equity in all these businesses and those to be subsequently
acquired by them whichever is greater. In a span of 28 years, Aurelio and Eduardo had accumulated in their joint
venture/partnership various assets including but not limited to the corporate defendants and their respective assets
consisting of real properties. But sometime in 1992, the relations between Aurelio and Eduardo became sour so
Aurelio requested for an accounting and liquidation of his share in the joint venture/partnership but these demands for
complete accounting and liquidation were not heeded. Aurelio filed a suit against his brother Eduardo and several
corporations for specific performance and accounting. Eduardo and the corporate respondents, as defendants a quo,
filed a joint ANSWER With Compulsory Counterclaim denying under oath the material allegations of the complaint,
more particularly that portion thereof depicting petitioner and Eduardo as having entered into a contract of
partnership. ISSUE: Whether or not the CA erred on its decision that there was no partnership created by the
actionable document because this was not a public instrument and immovable properties were contributed to the
partnership. RULING: No, the CA did not err on its decision. The Court ruled that no valid partnership existed
between Aurelio and Eduardo because the said "memorandum" is null and void for purposes of establishing the
existence of a valid contract of partnership. The memorandum on its face, contains typewritten entries, personal in
tone, but is unsigned and undated. As an unsigned document, there can be no quibbling that the said memorandum
does not meet the public instrumentation requirements exacted under Article 1771 of the Civil Code.
In context, the more important consideration is that real property was contributed, in which case an inventory of the
contributed property duly signed by the parties should be attached to the public instrument, or else there is legally no
partnership to speak of.
Indeed, because of the failure to comply with the essential formalities of a valid contract, the purported
"partnership/joint venture" is legally inexistent and it produces no effect whatsoever.
Necessarily, a void or legally inexistent contract cannot be the source of any contractual or legal right. Accordingly,
the allegations in the complaint, including the actionable document attached thereto, clearly demonstrates that
petitioner has NO valid contractual or legal right which could be violated by the respondent.
—
FACTS: Petitioner Aurelio K. Litonjua, Jr. and respondent Eduardo K. Litonjua, Sr. are brothers. Aurelio filed a
lawsuit against Eduardo. Since June 1973, Aurelio alleged that he and his brother are into a joint venture/partnership
to continue their family business and common family funds. Subsequently, Aurelio showed a memorandum for the
said partnership that was made. The memorandum state that in all these companies and those to be subsequently
acquired by them, Aurelio will be given P1 Million or 10 percent equity. In 1992, the relations between Aurelio and
Eduardo became resentful so that Aurelio asked for an accounting and liquidation of his share in the joint
venture/partnership. Petitioner's demand, as defined in the petitory portion of his complaint in the trial court, is for
delivery or payment to him, as Eduardo's and Yang's partner, of his partnership/joint venture share, after an
accounting has been duly conducted of what he deems to be partnership/joint venture property.
ISSUE: Whether a partnership between Aurelio and Eduardo exists or not
RULING: No. The petition lacks merit. There was no proof of partnership in the documentary evidence presented by
Aurelio. Eduardo's letter of 1973, on its face, contains typed entries, personal in tone, but unsigned and undated. As an
unsigned document, there can be no doubt that said letter does not meet the public instrumentation requirements
required under Article 1771 of the Civil Code. Moreover, the letter cannot be presented for notarization if it is
unsigned and certainly applies to a relationship involving more than P3,000.00 in money or land, let alone registered
with the Securities and Exchange Commission as called for under the Article 1772 of the Code. Because of the failure
to comply with the essentiality of a valid contract, the purported "partnership/joint venture" is legally inexistent.
6. Heirs of Tan Eng Kee vs. Court of Appeals, G.R. No. 126881, October 3, 2000
Summary: During the World War II, Tan Eng Kee and Tan Eng Lay, pooling their resources
and industry together, entered into a partnership engaged in the business of selling lumber and hardware and
construction supplies. They named their enterprise "Benguet Lumber" which they jointly managed until Tan Eng
Kee's death. However, petitioners claimed that Tan Eng Lay and his children caused the conversion of the partnership
"Benguet Lumber" into a corporation called "Benguet Lumber Company." The incorporation was purportedly a ruse to
deprive Tan Eng Kee and his heirs of their rightful participation in the profits of the business. Petitioners prayed for
accounting of the partnership assets, and the dissolution, winding up and liquidation thereof, and the equal division of
the net assets of Benguet Lumber. ISSUE: Whether or not Tan Eng Kee and Tan Eng Lay were partners in Benguet
Lumber. RULING: No, Tan Eng Kee and Tan Eng Lay were not partners in Benguet Lumber. The Court has
emphasized that in determining whether a partnership exists, these rules shall apply: that persons who are not partners
as to each other are not partners as to third persons; that Co-ownership or co-possession does not of itself establish a
partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property;
that sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a
joint or common right or interest in any property which the returns are derived; that the receipt by a person of a share
of the profits of a business is a prima facie evidence that he is a partner in the business. In the light of the legal
provision, the Court concluded that Tan Eng Kee was only an employee, not a partner. Petitioners failed to show how
much their father, Tan Eng Kee received, if any, as his share in the profits of Benguet Lumber Company for any
particular period. Hence, they failed to prove that Tan Eng Kee and Tan Eng Lay intended to divide the profits of the
business between themselves, which is one of the essential features of a partnership. Thus, there being no partnership,
it follows that there is no dissolution, winding up or liquidation to speak of.
—--
FACTS: After the Second World War, Tan EngKee and Tan Eng Lay, pooling their resources and industry together,
entered into a partnership engaged in the business of selling lumber and hardware and construction supplies. They
named their enterprise "Benguet Lumber'' which they jointly managed until Tan EngKee's death. Petitioners herein
averred that the business prospered due to the hard work and thrift of the alleged partners. However, they claimed that
in 1981, TanEng Lay and his children caused the conversion of the partnership "Benguet Lumber" into a corporation
called "Benguet Lumber Company." The incorporation was purportedly a ruse to deprive Tan EngKee and his heirs of
their rightful participation in the profits of the business.Petitioners prayed for accounting of the partnership assets, and
the dissolution, winding up and liquidation thereof, and the equal division of the net assets of Benguet Lumber. The
RTC ruled in favor of petitioners, declaring that Benguet Lumber is a joint venture which is akin to a particular
partnership. The Court of Appeals rendered the assailed decision reversing the judgment of the trial court.
ISSUE: Whether the deceased Tan EngKee and Tan Eng Lay are joint adventurers and/or partners in a business
venture and/or particular partnership called Benguet Lumber and as such should share in the profits and/or losses of
the business venture or particular partnership
RULING: There was no partnership whatsoever. Except for a firm name, there was no firm account,no firm
letterheads submitted as evidence, no certificate of partnership, no agreement as to profits and losses, and no time
fixed for the duration of the partnership. There was even no attempt to submit an accounting corresponding to the
period after the war until Kee's death in1984. It had no business book, no written account nor any memorandum for
that matter and no license mentioning the existence of a partnership. Also, the trial court determined that
TanEngKee and Tan Eng Lay had entered into a joint venture, which it said is akin to a particular partnership.
A particular partnership is distinguished from a joint adventure, to wit:
(a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal partnership, with no
firm name and no legal personality. In a joint account, the participating merchants can transact business under their
own name, and can be individually liable therefore.
(b) Usually, but not necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the business of
pursuing a successful termination may continue for a number of years; a partnership generally relates to a continuing
business of various transactions of a certain kind.
A joint venture "presupposes generally a parity of standing between the joint co-ventures partners, in which each party
has an equal proprietary interest in the capital or property contributed, and where each party exercises equal rights in
the conduct of the business.
The evidence presented by petitioners falls short of the quantum of proof required to establish a partnership. In the
absence of evidence, it cannot be established that Tan EngKee contributed his resources to a common fund for the
purpose of establishing a partnership. Besides, it is indeed odd, if not unnatural, that despite the forty years the
partnership was allegedly in existence, Tan EngKee never asked for an accounting. The essence of a partnership is that
the partners share in the profits and losses. Each has the right to demand an accounting as long as the partnership
exists. A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan EngKee appeared
never to have made any such demand for accounting from his brother, Tang Eng Lay. We conclude that Tan EngKee
was only an employee, not a partner since they did not present and offer evidence that would show that Tan EngKee
received amounts of money allegedly representing his share in the profits of the enterprise. There being no
partnership, it follows that there is no dissolution, winding up or liquidation to speak of.
7. Rojas vs. Maglana, G.R. No. L-30616, December 10, 1990

FACTS: Maglana and Rojas executed their Articles of Co-partnership called “Eastcoast Development Enterpises”
(EDE) which had an indefinite term of existence and was registered with the SEC and had a Timber License. One of
the EDE’s purposes was to apply for or secure timber and/or private forest lands and to operate, develop and promote
such forest rights and concessions. Maglana shall manage the business affairs while Rojas shall be the logging
superintendent. All profits and losses shall be divided share and share alike between them.
Because of the difficulties encountered, the two availed the services of Agustin Pahamotang as industrial partner and
executed another articles of co-partnership with the latter.
Aside from the slight difference in the purpose of the second partnership which is to hold and secure renewal of timber
license instead of to secure the license as in the first partnership and the term of the second partnership is fixed to
thirty (30) years, everything else is the same.
Still later on, the three executed a conditional sale of interest in the partnership wherein Maglana and Rojas shall
purchase the interest, share and participation in the partnership of Pahamotang. It was also agreed that after payment
of such an amount of loan secured by Pahamotang in favor of the partnership, the two shall become owners of all
equipment contributed by Pahamotang. [Binili nila yung shares ni Pahamotang para sa kanilang dalawa na lang ulit
partnership] After this, the two continued the partnership without any written agreement or reconstitution of their
articles of partnership.
Subsequently, Rojas entered into a management contract with CMS Estate Inc (engaged in the same line of business
as the partnership) and left/abandoned EDE. Rojas withdrew equipment which were his supposed contribution to the
first partnership and transferred these to CMS through chattel mortgage. Maglana wrote to him regarding his
contribution to the capital investments as well as his duties as logging superintendent. Rojas replied that he will not be
able to comply with both. Maglana then told Rojas that the latter’s share will just be 20% of the net profits. Such was
the sharing from 1957 to 1959 without complaint or dispute. Rojas took funds from the partnership more than his
contribution. Maglana notified Rojas that he dissolved the partnership. Rojas filed an action against Maglana for the
recovery of properties and accounting of the partnership and damages.
CFI RULING:
The partnership of Maglana and Rojas after Pahamotang retired is one of de facto and at will; the sharing of profits
and losses is on the basis of actual contributions;
there is no evidence these properties were acquired by the partnership funds thus it should not belong to it;
neither is entitled to damages; the letter of Maglana in effect dissolved the partnership;
sale of forest concession is valid and binding and should be considered as Maglana’s contribution;
Rojas must pay or turn over to the partnership the profits he received from CMS and pay his personal account to the
partnership;
Maglana must be paid 85k which he should’ve received but was not paid to him and must be considered as his
contribution
Rojas insists that the first partnership was not novated/superseded by the second, meaning, the first still governs as to
the sharing of profits
ISSUE/RULING:
Whether or not the partnership carried on after the second partnership was a de facto partnership or at will.
No. There was no intention to dissolve the first partnership upon the constitution of the second as everything else was
the same except for the fact that they took in an industrial partner: they pursued the same purposes, the capital
contributions call for the same amounts, all subsequent renewals of Timber License were secured in favor of the first
partnership, all businesses were carried out under the registered articles. To all intents and purposes therefore, the First
Articles of Partnership were only amended, in the form of Supplementary Articles of CoPartnership.
On the other hand, there is no dispute that the second partnership was dissolved by common consent. Said dissolution
did not affect the first partnership which continued to exist. Significantly, Maglana and Rojas agreed to purchase the
interest, share and participation in the second partnership of Pahamotang and that thereafter, the two (Maglana and
Rojas) became the owners of equipment contributed by Pahamotang. Maglana even reminded Rojas of his obligation
to contribute either in cash or in equipment, to the capital investment of the partnership as well as his obligation to
perform his duties as logging superintendent. This reminder cannot refer to any other but to the provisions of the duly
registered Articles of Co-Partnership.
The relationship of Rojas and Maglana after the withdrawal of Pahamotang can neither be considered as a De Facto
Partnership, nor a Partnership at Will, for as stressed, there is an existing partnership, duly registered.
Whether or not Magalana may unilaterally dissolve the partnership.
Yes. As there are only two parties when Maglana notified Rojas that he dissolved the partnership, it is in effect a
notice of withdrawal. Under Article 1830, par. 2 of the Civil Code, even if there is a specified term, one partner can
cause its dissolution by expressly withdrawing even before the expiration of the period, with or without justifiable
cause. Of course, if the cause is not justified or no cause was given, the withdrawing partner is liable for damages but
in no case can he be compelled to remain in the firm. With his withdrawal, the number of members decreased, hence,
the dissolution. And in whatever way he may view the situation, the conclusion is inevitable that Rojas and Maglana
shall be guided in the liquidation of the partnership by the provisions of its duly registered Articles of Co-
Partnership; that is, all profits and losses of the partnership shall be divided "share and share alike" between the
partners. But an accounting must first be made and which in fact was ordered by the trial court and accomplished by
the commissioners appointed for the purpose. According to the Commissioners’ report, Rojas is not entitled to any
profits as he failed to give the amount he had undertaken to contribute thus, had become a debtor of the partnership.
Maglana cannot be liable for damages as Rojas abandoned the partnership through his acts and also took funds in an
amount more than his contribution.
8. Torres vs. Court of Appeals, G.R. No. 134559, December 9, 1999

FACTS: Petitioners Antonia Torres and Emeteria Baring entered into a joint venture agreement with Private
Respondent Manuel Torres for the development of a parcel of land in Lapu-Lapu City, Cebu into a subdivision.
Pursuant to the contract, they executed a Deed of Sale covering the subject land in favor of the Private Respondent.
The Private Respondent was able to register the land under his name, and use the same to obtain a loan from Equitable
Bank to be used for the development of the subdivision. All of them agreed to share the proceeds from the sale of the
subdivided lots. However, the project did not push through, and the land was subsequently foreclosed by the bank.
Thus, the Petitioners filed a criminal case for estafa against the Private Respondent and his wife, who was later
acquitted.
Thereafter, the Petitioners filed a civil case before the Regional Trial Court (RTC) alleging that the project failed
because of the Private Respondents lack of funds, means, and skills to develop the subdivision. Further, they claimed
that the loan acquired by the Private Respondent was used in the furtherance of his own company. In his defense, the
Private Respondent claimed that he was able to secure the approval of the Lapu-Lapu City Council for the subdivision
project, to cause the construction of roads, curbs, and gutters, and to enter into a contract with an engineering firm to
build low-cost housing units. For him, the project failed because the Petitioners separately caused annotations of
adverse claims not the title of the land, which scared away prospective buyers. In its decision, the RTC dismissed the
Petitioner’s complaint.
On appeal, the Court of Appeals (CA) affirmed the RTC Decision, holding that the Petitioners and the Private
Respondent formed a partnership for the development of the subdivision. Thus, they must bear the loss suffered by the
partnership in the same proportion as their share in the profits stipulated in the joint venture agreement. Hence, this
Petition.
ISSUE/RULING:
Whether or not the joint venture agreement entered into between the Petitioners and Private Respondents constitutes a
partnership.
The Supreme Court ruled in the affirmative. Article 1767 of the Civil Code provides that in a contract of partnership,
two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention
of dividing the profits among themselves. In the present case, it is clear in the joint venture agreement that the
Petitioners would contribute property to the partnership, while the Private Respondent would give additional amount
for general expenses and other costs. Further, they have agreed that the income from the said project would be divided
according to the stipulated percentages. Thus, there is a clear intention of forming a partnership between the
Petitioners and Private Respondent.
2. Supposing it is a partnership, whether or not the joint venture agreement is void under Article 1733 of the Civil
Code.
2. The Court ruled in the negative. Article 1773, which provides that a contract of partnership is void whenever an
immovable property is contributed thereto, if an inventory of said property is not made, is intended only to protect
third persons. In the present case, no third parties are involved who may be prejudiced. Hence, it will not prevent the
courts from considering the agreement as an ordinary contract between the parties.
9. Angeles vs. Secretary of Justice, G.R. No. 142612, July 29, 2005
Doctrine: The purpose of registration of the contract of partnership is to give notice to third parties. Failure to register
the contract of partnership does not affect the liability of the partnership and of the partners to third persons. Neither
does such failure to register affect the partnership’s juridical personality.
FACTS: In November 1982, Private Respondent Felino Mercado convinced Petitioners Oscar and Emerita Angeles to
enter into a contract of antichresis covering eight parcel of land planted with fruit-bearing lanzones trees owned by
Juana Suazo, which to last for five years with ₱ 210,000 as consideration. After three years, the Petitioners asked for
an accounting from the Private Respondent. However, when no accounting was given in 1995, the Petitioners
discovered that the Private Respondent had put the contract of antichresis over the subject land under his and his
spouse’s name. Thus, they filed a criminal complaint for estafa against the Private Respondent. The Private
Respondent denied the allegations by claiming that there is already an existing industrial partnership between him and
his spouse and the Petitioners, whereby the former are the industrial partners and the latter are the financiers. They
used the earnings as part of the capital in the said business transaction. Further, the Petitioners did not want to be
identified as financiers which led them to name the contract under their name instead.
In a resolution, the Provincial Prosecution Office recommended the filing of a criminal information for estafa against
the Private Respondent, although the latter’s counter-affidavit was not considered. When the Private Respondent
moved for its reconsideration, the said office issued an amended resolution dismissing the complaint. On appeal, the
Secretary of Justice dismissed the appeal of the Petitioners, stating that they failed to show that the Private Respondent
deliberately deceived them into entering in the contract of antichresis. The Private Respondent satisfactorily explained
that the Petitioners did not want to be revealed as the financiers. Further, it found that a partnership truly existed
between them considering that they contributed money to a common fund with the intention of dividing the profits
among themselves. These were evidenced by deposits representing their share in the profits of their business venture.
Thus, there was no estafa where the money is delivered by a partner to his co-partner on the latter’s representation that
the amount shall be applied to the business of their partnership.
Hence, this Petition. The Petitioners alleged that there was no partnership between them and the Private Respondent
because the transaction lacked a public instrument indicating the same, and the a lack of registration with the
Securities and Exchange Commission.
ISSUE: Whether or not a partnership between the Petitioners and the Private Respondents exists.
RULING: The Supreme Court ruled in the affirmative. Indeed, Article 1771 of the Civil Code provides that a
partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in
which case a public instrument shall be necessary. Further, Article 1772 provides that every contract of partnership
having a capital of three thousand pesos or more, in money or property, shall appear in a public instrument, which
must be recorded in the Office of the Securities and Exchange Commission. However, the Court ruled that mere
failure to register the contract of partnership with the SEC or putting the same in a public instrument does not
invalidate a contract that has the essential requisites of a partnership. The purpose of registration of the contract of
partnership is merely to give notice to third parties. Failure thereof does not even affect the liability of the partnership
and of the partners to third persons, neither does such failure affect the partnership’s juridical personality.
In the present case, it is clear that the Petitioners contributed money and industry to a common fund, and the profits
thereof shall be divided between them and the Private Respondent. Hence, there is an existence of a partnership
between them.
IX. Obligations of the Partners Among Themselves

1. Rojas vs. Maglana , G.R. No. L-30616, December 10, 1990
FACTS: (see facts above)
ISSUE:Whether or not the sharing of partnership profits should be on the basis of contribution or ratio/proportion of
their respective contributions.
RULING: YES. On the basis of the Commissioners' Report, the corresponding contribution of the partners from
19561961 are as follows: Eufracio Rojas who should have contributed P158,158.00, contributed only P18,750.00
while Maglana who should have contributed P160,984.00, contributed P267,541.44 (Decision, R.A. p. 976). It is a
settled rule that 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 (Article 1786, Civil Code) and for interests and
damages from the time he should have complied with his obligation (Article 1788, Civil Code) (Moran, Jr. v. Court of
Appeals, 133 SCRA 94 [1984]). Being a contract of partnership, each partner must share in the profits and losses of
the venture. That is the essence of a partnership (Ibid., p. 95).
2. Evangelista & Co. vs. Santos , G.R. No. L-31684, June 28, 1973
DOCTRINE: It is not disputed that the provision against the industrial partner engaging in business for himself seeks
to prevent any conflict of interest between the industrial partner and the partnership, and to insure faithful compliance
by said partner with this prestation. There is no pretense, however, even on the part of the appellee is engaged in any
business antagonistic to that of appellant company, since being a Judge of one of the branches of the City Court of
Manila can hardly be characterized as a business.
Partners: 1. Domingo C. Evangelista, Jr. / 2. Conchita B. Navarro / 3. Leonarda Atienza Abad Santos / 4. Estrella
Abad Santos
FACTS:
3. Guy vs. Gacott , G.R. No. 206147, January 13, 2016

Summary: Atty. Gacott purchased two (2) brand new transreceivers from Quantech Systems Corporation (QSC) in
Manila through its employee. Due to major defects, he personally returned the transreceivers to QSC and requested
that they be replaced. Time passed and Gacott did not receive the replacement units as promised, he filed a complaint
for damages. Subsequently, he obtained a favourable judgement from the RTC and was able to obtain a Writ of
execution. During the execution stage, Gacott learned that QSC was not a corporation, but was in fact a general
partnership registered with the SEC. In the articles of partnership, Guy was appointed as General Manager of QSC.
Upon learning that Guy had vehicles registered in his name, Gacott instructed the sheriff to proceed with the
attachment of one of the motor vehicles based on the certification issued by the DOTC-LTO. Thereafter, Guy filed his
Motion to Lift Attachment upon Personality, arguing that he was not a judgment debtor and, therefore, his vehicle
could not be attached. ISSUE: Whether or not Guy is solidarily liable with the partnership for damages arising from
the breach of the contract of sale with respondent Gacott. RULING: No. Article 1816 of the Civil Code clearly states
that, first, the partners' obligation with respect to the partnership liabilities is subsidiary in nature. It provides that the
partners shall only be liable with their property after all the partnership assets have been exhausted. The partners'
obligation to third persons with respect to the partnership liability is pro rata or joint. In this case, had he been
properly impleaded, Guy's liability would only arise after the properties of QSC would have been exhausted. The
records, however, miserably failed to show that the partnership's properties were exhausted. In contrast, a solidary
liability makes a debtor liable for the payment of the entire debt. In the same vein, Article 1207 does not presume
solidary liability unless: 1) the obligation expressly states; or 2) the law or nature requires solidarity. With regard to
partnerships, ordinarily, the liability of the partners is not solidary. The joint liability of the partners is a defense that
can be raised by a partner impleaded in a complaint against the partnership. In other words, only in exceptional
circumstances shall the partners' liability be solidary in nature. In the case at bench, it was not shown that Guy or the
other partners did a wrongful act or misapplied the money or property he or the partnership received from Gacott. A
third person who transacted with said partnership can hold the partners solidarity liable for the whole obligation if the
case of the third person falls under Articles 1822 or 1823. Gacott's claim stemmed from the alleged defective
transreceivers he bought from QSC, through the latter's employee, Medestomas. It was for a breach of warranty in a
contractual obligation entered into in the name and for the account of QSC, not due to the acts of any of the partners.
For said reason, it is the general rule under Article 1816 that governs the joint liability of such breach, and not the
exceptions under Articles 1822 to 1824. Thus, it was improper to hold Guy solidarity liable for the obligation of the
partnership.
—---
FACTS: Atty. Gacott from Palawan purchased two (2) brand new transreceivers from Quantech Systems Corporation
(QSC) in Manila through its employee Rey Medestomas. After some time, he returned it due to major defects. But
time passed, he was not able to get the replacement units and he was informed that there were no available units and
he cannot refund the purchase price. He filed a complaint for damages. But during execution, he learned that QSC was
not a corporation but, a general partnership with Mr. Guy as a partner and its general manager. Because of that, Gacott
instructed the sheriff to proceed with the attachment of one of the motor vehicles. After that, Guy filed a Motion to lift
Attachment Upon Personalty arguing that he was not a judgment debtor and, therefore, his vehicle could not be
attached but it has been denied by the RTC and CA stating that he is solidarily liable to the liability of the partnership
since he is the general manager.
ISSUE: Whether or not Guy is solidarily liable with the partnership for damages arising from the breach of
contract of sale with Gacott.
RULING: The Supreme Court stated that a partner must be separately and distinctly impleaded before he can be
bound by a judgment. It is not conclusive that a suit against a partnership will also be a suit impleading each partner
unless it was shown that the legal fiction of a different juridical personality was being used for fraudulent, unfair, or
illegal purposes. Since a partnership has a separate legal personality from the partners, the partners' obligation with
respect to partnership liabilities is joint and subsidiary in nature which means all partners shall be liable pro rata with
all their property and partners shall only be liable with their property after the partnership assets have been exhausted.
Therefore, since Guy did not act maliciously, he and his personal properties cannot be made directly and solely
accountable for the liability of QSC and that he was not the judgment debtor in the case before the RTC, with that, his
levied vehicle was released.
4. Moran, Jr. vs. Court of Appeals , G.R. No. 59956, October 31, 1984
FACTS: ISABELO MORAN JR and MARIANO PECSON entered into an agreement: a. contributing P15,000.00
each, to be used to print 95,000 posters featuring the candidates of the 1971 of the Constitutional Convention; b. that
Moran will supervise the work; c. that Pecson would receive a commission of P l,000 a month; and d. that on
December 15, 1971, a liquidation of the accounts in the distribution and printing of the 95,000 posters would be made.
Pecson partially gave P10,000 for which the latter issued a receipt. However, of the 95,000 posters agreed upon, only
2,000 were actually made. In May of 1971, Moran executed a promissory note in favor of Pecson in the amount of
P20,000 payable in two equal installments. The whole sum becomes due upon default in the payment of the first
installment on the date due, complete with the costs of collection. Pecson filed an action for the recovery of a sum of
money with the Court of First Instance of Manila.
ISSUE: Is MORAN liable to PECSON for the supposed expected profits due to him from their partnership? NO.
RULING: 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). Here, there is no evidence
whatsoever that the partnership between MORAN and PECSON 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 PECSON.
Article 1797 of the Civil Code provides: 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. The failure of the Commission on Elections to proclaim all the 320
candidates of the Constitutional Convention on time was a major factor.
MORAN’s 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 PECSON is not entitled to recover any amount from MORAN.
This net profit of P6,000.00 should be divided between the two of them. And since only P4,000.00 was undesirable by
MORAN in printing the 2,000 copies, the remaining P6,000.00 should therefore be returned to PECSON.
X. Property Rights of a Partner

1. Clemente vs. Galvan, G.R. No. L-45662, April 26, 1939
FACTS: Plaintiff (P) and Defendant (D)organized a civil partnership to engage in the manufacture and sale of paper
and other stationery. They contribute equal amounts of money. D was entrusted with management. In less than a year,
P asked for the dissolution of the partnership. D agreed, with a condition that P reimburse him for half the amount of a
deficit incurred by the partnership which he had covered with his own money.
Before final liquidation of its affairs, P filed a petition asking the court to order the delivery of certain machines to him
and to charge their value against hisportion in the partnership. This was granted by the court. However, before P could
take actual possession of said machines, and upon strong opposition ofD, the court suspended the effects of its
previous order.
In the meantime, judgments for money-recovery cases against the partnership were rendered. To avoid the attachment
and subsequent sale of the machines by the sheriff for the satisfaction of said judgments, P mortgaged the machines to
his nephew. When the terms in the mortgage expired, P's nephew commenced a case to collect his mortgage credit.
ISSUE/RULING:
Whether Echevvaria may take possession of the machines subject to the deed of mortgage.
No. It is clear that the plaintiff could not obtain possession of the machines in question. The constructive possession
deducible from the fact that he had the keys to the place where the machines were found (Ylaya Street Nos. 705-707),
as they had been delivered to him by the receiver, does not help him any because the lower court suspended the effects
of the order whereby the keys were delivered to him a few days after its issuance; and thereafter revoked it entirely in
the appealed decision. Consequently, if he did not have actual possession of the machines, he could not in any manner
mortgage them, for while it is true that the oft-mentioned deed of mortgage was annotated in the registry of property,
it is no less true that the machines to which it refers are not the same as those in question because the latter are on
Ylaya Street Nos. 705-707 and the former are on Singalong Street No. 1163.
Whether the mortgage property was owned by the partnership.

Yes. The evidence of record shows that the machines in contention originally belonged to the defendant and from him
were transferred to the partnership Galvan y Compania. This being the case, said machines belong to the partnership
and not to him, and shall belong to it until partition is effected according to the result thereof after the liquidation
2. Leyte-Samar Sales Co & R. Tomassi vs. S. Cea and O. Lastrilla, G.R. No. L-5963, May 20, 1953
FACTS: In civil case No. 193 of the Court of First Instance of Leyte, which is a suit for damages by the Leyte-Samar
Sales Co. (hereinafter called LESSCO) and Raymond Tomassi against the Far Eastern Lumber & Commercial Co.
(unregistered commercial partnership hereinafter called FELCO), Arnold Hall, Fred Brown and Jean Roxas, rendered
judgment against defendants jointly and severally for the amount of P31,589 plus cost on october 29, 1948.
The Court of Appeals confirmed the award in November 1950, minus P2,000 representing attorney's fees mistakenly
included. The decision having become final, the sheriff sold at auction on June 9, 1951 to Robert Dorfe and Pepito
Asturias “all the rights, interests, titles and participation" of the defendants in certain buildings and properties
described in the certificate, for a total price of eight thousand and one hundred pesos. On June 4, 1951 Olegario
Lastrilla filed in the case a motion, wherein he claimed to be the owner by purchase on September 29, 1949, of all the
"shares and interests” of defendant Fred Brown in the FELCO. Over the plaintiffs’ objection the judge in his order of
June 13, 1951, granted Lastrilla's motion by requiring the sheriff to retain 17 percent of the money And on motion of
Lastrilla, the court on August 14, 1951, modified its order of delivery and merely declared that Lastrilla was entitled
to17 percent of the properties sold.
Hence, this petition for "Certiorari and Prohibition with preliminary Injunction" praying for the additional writ of
mandamus.
ISSUE/RULING:
1. Whether or not Lastrilla is a partner of FELCO, having purchased the share and interest of defendant
Fred Brown after CFI rendered an unfavorable judgment, but prior to the auction sale, hence he can claim to the
proceeds of the sale?
In the situation it we can conclude that on June 9, 1951 when the sale was effected of the properties of
FELCO to Roberto Dorfe and Pepito Asturias, Lastilla was already a partner of FELCO.Now, does Lastrilla have
any proper claim to the proceeds of the sale? If he was a creditor of the FELCO, perhaps or maybe. But he was not.
The partner of a partnership is not a creditor of such partnership for the amount of his shares. That is too elementary to
need elaboration.
2. Whether or not there was grave abuse of discretion on the part of the judge in granting lastrilla's motion and
ordering the delivery to him of the 17% of the properties.
On this score the respondent judge's action on Lastrilla's motion should be declared as in excess of jurisdiction, which
even amounted to want of jurisdiction, considering specially that Dorfe and Austrias, and the defendants themselves,
had undoubtedly the right to be heard - but they were not notified. Varied interest of necessity make Dorfe, Asturias
and the defendants indispensable parties to the motion of Lastrilla. A valid judgment cannot be rendered where there
is a want of necessary parties, and a court cannot properly adjudicate matters involved in a suit when necessary and
indispensable parties to the proceedings are not before it. In view of the foregoing, it is our opinion, and we so hold,
that all orders of the respondents judge requiring delivery of 17 percent of the proceeds of the auction sale to
respondent Olegario Lastrilla are null and void
3. Litonjua, Jr. vs. Litonjua, Sr., G.R. Nos. 166299-300, December 13, 2005
FACTS: In 1973, Aurelio contends that he and his brother, Eduardo, started a partnership arrangement in the Odeon
Theater business which had expanded thru investment in Cineplex, Inc.,LCM Theatrical Enterprises, Odeon Realty
Corporation (operator of Odeon I and II theatres),Avenue Realty, Inc.,owner of lands and buildings, among other
corporations.
It was provided in the contract that Aurelio shall contribute his share in the business and his business as his share of
the common fund and shall receive 10% of profits. In 1992, their relationship became sour which caused Aurelio to
request for the accounting of the business for dissolution and liquidation of the partnership. The same request was not
heeded by the brother.
A complaint shows that Aurelio has reason to believe that properties of the partnership were transferred to another
person in order to defraud him. He provided a letter as evidence with the presumption that the same was addressed by
his brother.
RTC: Ruled in favor of Aurelio.

CA: Reversed the decision since there was no valid partnership, thus, Aurelio has no right over the properties which
avers to have contributed to the partnership.
SC: Affirmed the decision of the CA.
ISSUE: Whether there was a valid contract of partnership.
RULING: There was none, under Art. 1773. Contract validating requirement, void.
A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said
property is not made, signed by the parties, and attached to the public instrument. Absence of any of the essential
requisites,contract of partnership is null and void.
A further examination of the allegations in the complaint would show that petitioner’s contribution to the so-called
"partnership/joint venture" was his supposed share in the family business that consists of movie theaters, shipping and
land development under paragraph 3.02 of the complaint. In other words, his contribution as a partner in the alleged
partnership/joint venture consisted of immovable properties and real rights.
Significantly enough, petitioner matter-of-factly concurred with the appellate court’s observation that, prescinding
from what he himself alleged in his basic complaint, his contribution to the partnership consisted of his share in the
Litonjua family businesses which owned variable immovable properties. Petitioner’s assertion in his motion for
reconsideration of the CA’s decision, that “what was to be contributed to the business of the partnership was
[petitioner’s] industry and his share in the family theatre and land development business” leaves no room for
speculation as to what petitioner contributed to the perceived partnership.
Lest it be overlooked, the contract-validating inventory requirement under Article 1773 of the Civil Code applies as
long as real property or real rights are initially brought into the partnership. In short, it is really of no moment which of
the partners, or, in this case,who between petitioner and his brother Eduardo an inventory of the contributed property
duly signed by the parties should be attached to the public instrument, else there is legally no partnership to speak of
contributed immovables. In context, the more important consideration is that real property was contributed, in which
case.
Petitioner, in an obvious bid to evade the application of Article 1773, argues that the immovables in question were not
contributed, but were acquired after the formation of the supposed partnership. Needless to stress, the Court cannot
accord cogency to this specious argument. For, as earlier stated, petitioner himself admitted contributing his share in
the supposed shipping, movie theatres and realty development family businesses which already owned immovables
even before Annex"A-1"was allegedly executed.
Considering that the allegations in the complaint showed that petitioner contributed immovable properties to the
alleged partnership, the “Memorandum" (Annex “A” of the complaint) which purports to establish the said
"partnership/joint venture" is NOT a public instrument and there was NO inventory of the immovable property duly
signed by the parties. As such, the said “Memorandum” is null and void for purposes of establishing the existence of a
valid contract of partnership. Indeed, because of the failure to comply with the essential formalities of a valid contract,
the purported “partnership/joint venture” is legally inexistent and it produces no effect whatsoever. Necessarily, a
void or legally inexistent contract cannot be the source of any contractual or legal right. Accordingly,the allegations in
the complaint, including the actionable document attached thereto, clearly.
4. Jarantilla vs. Jarantilla, G.R. No. 154486, December 1, 2010.

FACTS: PetitionerJarantillafiled a complaint against Buenaventura Remotigue, Cynthia Remotigue, Federico
Jarantilla, Jr., Doroteo Jarantilla and Tomas Jarantilla, for the accounting of the assets and income of the co-
ownership, for its partition and the delivery of her share corresponding to eight percent (8%), and for damages.
Antonieta claimed That In 1946,shehadenteredintoanagreementwiththedefendantstoengage in business through the
execution of a document denominated as "Acknowledgement ofParticipating Capital”. Antonieta also alleged that she
had helped in the management of the business they co-owned without receiving any salary. Antonieta further
claimed co-ownership of certain properties (the subject real properties) in the name of the defendants since the
only way the defendants could have purchased these properties were through the partnership as they had no other
source of income.
ISSUE: Whether or not the partnership subject of the Acknowledgement of Participating Capital funded the subject
real properties.
RULING: There is no evidence that the subject real properties were assets of the partnership referred to in the
Acknowledgement Of Participating Capital.Article 1767 of the Civil Code provides two essential elements in a
contract of partnership:
(a) An agreement to contribute money, property or industry to a common fund; and
(b) intent to divide the profits among the contracting partiesThe first element is undoubtedly present in the case at
bar,for, admittedly, all the parties in this case have agreed to, and did, contribute money and property to a common
fund.
Hence, the issue narrows down to their intention acting as they did. It is not denied that all the parties in this
case have agreed to contribute capital to a common fund to be able to later on share its profits. They have admitted
this fact, agreed to its veracity, and even submitted one common documentary evidence to prove such
partnership -the Acknowledgement of Participating Capital. The petitioner himself claims his share to be 6%, as
stated in the Acknowledgement of Participating Capital.
However, the petitioner fails to realize that this document specifically enumerated the businesses covered by the
partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue Trading in Cotabato City. Since
there was a clear agreement that the capital the partners contributed went to the three businesses, then there is no
reason to deviate from such agreement and go beyond the stipulations in the document. Petition denied.
5. Kimteng vs. Atty. Walter Young, G.R. No. 210554, August 5, 2015
FACTS: “A disbarred lawyer's name cannot be part of a firm's name. A lawyer who appears under a firm name that
contains a disbarred lawyer's name commits indirect contempt of court.”
Through this Petition, petitioners ask that law firm, Young Revilla Gambol & Magat, and Judge Ofelia L. Calo (Judge
Calo), be cited in contempt of court under Rule 71 of the Rules of Court. Anastacio Revilla, Jr. (Revilla) was disbarred
in December 2009 in an En Banc Resolution of the court in A.C. No. 7054 entitled Que v. Atty. Revilla, Jr.
Young Revilla Gambol & Magat filed a Reply to the Opposition stating that the firm opted to retain Revilla's name in
the firm name even after he had been disbarred, with the retention serving as an act of charity. Judge Calo overruled
the opposition to the appearance of Young Revilla Gambol & Magat and stated that Atty. Young could still appear for
the liquidator as long as his appearance was under the Young Law Firm and not under Young Revilla Gambol &
Magat. However, Young Law Firm does not exist.
On April 16, 2014, petitioners filed a Motion for Leave to File Consolidated Reply. This was granted in the Resolution
dated June 18, 2014. In the same Resolution, the court denied petitioners' Motion to Consider Case Submitted without
Comment from Judge Calo and ordered the parties to await Judge Calo's comment.
Counsel for petitioners subsequently filed a Manifestation, informing this court that they have yet to receive a copy of
Judge Calo's Comment. No Comment was filed by Judge Calo.
Private respondents point out that the Balgos Law Firm is derailing the liquidation of Ruby Industrial Corporation by
filing this Petition for contempt because the Balgos Law Firm resents that its nominee was not elected as liquidator.
Private respondents add that petitioners have continuously blocked Ruby Industrial Corporation's unsecured creditors
from obtaining relief, as shown by the number of times that Ruby Industrial Corporation's cases have reached this
court.
Moreover, Private respondents also raise the issue of forum shopping in their Comment because petitioners allegedly
filed a disbarment Complaint against them before the Commission on Bar Discipline, Integrated Bar of the
Philippines. One of the grounds for disbarment cited by petitioners was the use of Revilla's name in their firm name.
Petitioners argue that liability for contempt is separate from disciplinary action; hence, no forum shopping was
committed. Also, petitioners did not address private respondents' allegations regarding the delay in the liquidation of
Ruby Industrial Corporation.
ISSUE: Whether private respondents Atty. Walter T. Young, Atty. Jovito Gambol, and Atty. Dan Reynald R. Magat
are in contempt of court when they continued to use respondent Anastacio E. Revilla, Jr.'s name in their firm name
even after his disbarment.
RULING: Respondents Atty. Walter T. Young and Atty. Dan Reynald R. Magat are found in contempt of court for
using a disbarred lawyer's name in their firm name and are meted a fine of P30,000.00 each. Rule 71, Section 3 of the
1997 Rules of Civil Procedure provides: SEC. 3. Indirect contempt to be punished after charge and hearing. After
charge in writing has been filed, and an opportunity given to the respondent to comment thereon within such period as
may be fixed by the court and to be heard by himself or counsel, a person guilty of any of the following acts may be
punished for indirect contempt. In this case, respondents committed acts that are considered indirect contempt under
Section 3 of Rule 71. In addition, respondents disregarded the Code of Professional Responsibility when they retained
the name of respondent Revilla in their firm name.
Rule 3.02. In the choice of a firm name, no false, misleading or assumed name shall be used. The continued use of the
name of a deceased partner is permissible provided that the firm indicates in all its communications that said partner is
deceased. Respondents argue that the use of respondent Revilla's name is "no more misleading than including the
names of dead or retired partners in a law firm's name." Maintaining a disbarred lawyer's name in the firm name is
different from using a deceased partner's name in the firm name. Canon 3, Rule 3.02 allows the use of a deceased
partner's name as long as there is an indication that the partner is deceased. This ensures that the public is not misled.
On the other hand, the retention of a disbarred lawyer's name in the firm name may mislead the public into believing
that the lawyer is still authorized to practice law.
6. Realubit vs. Jaso, G.R. No. 178782, September 21, 2011

FACTS: Petitioner Josefina Realubit entered into a Joint Venture Agreement with Francis Eric Amaury Biondo, a
Frenchnational, for the operation of an ice manufacturing business. With Josefina as the industrial partner and Biondo
as the capitalist partner, the parties agreed that they would each receive 40% of the net profit, with the remaining 20%
to be used for the payment of the ice making machine which was purchased for the business. For and in consideration
of the sum of P500,000.00,however, Biondo subsequently executed a Deed of Assignment transferring all his rights
and interests in the business in favor of respondent Eden Jaso, the wife of respondent Prosencio Jaso.
With Biondo’s eventual departure from the country, the Spouses Jaso caused their lawyer to send Josefina a letter
apprising her of their acquisition of said Frenchmans share in the business and formally demanding an accounting and
inventory thereof as well as the remittance of their portion of its profits.
Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the instant suit for
specific performance, accounting, examination, audit and inventory of assets and properties, dissolution of the joint
venture,appointment of a receiver and damages. The said complaint alleged that the Spouses Realubit had no gainful
occupation or business prior to their joint venture with Biondo and that aside from appropriating for themselves the
income of the business,they have fraudulently concealed the funds and assets thereof thru their relatives, associates or
dummies. The SpousesRealubit claimed that they have been engaged in the tube ice trading business under a single
proprietorship even before their dealings with Biondo.The RTC rendered its Decision discounting the existence of
sufficient evidence from which the income, assets and the supposed dissolution of the joint venture can be adequately
reckoned. Upon the finding, however, that the Spouses Jaso had been nevertheless subrogated to Biondo's rights in the
business in view of their valid acquisition of the
latter’s
share as a capitalist partner. On appeal before the CA, the foregoing decision was set aside.Upon the following
findings that the Spouses Jaso validly acquired Biondo's share in the business which had been transferred to and
continued its operations and not dissolved as claimed by the Spouses Realubit.
ISSUE/RULING:
1. Whether there was a valid assignment or rights to the joint venture.
Yes. As a public document, the Deed of Assignment Biondo executed in favor of Eden not only enjoys a presumption
of regularity but is also considered prima facie evidence of the facts therein stated. A party assailing the authenticity
and due execution of a notarized document is, consequently, required to present evidence that is clear, convincing and
more than merely preponderant. In view of the Spouses Realubits failure to discharge this onus, we find that both the
RTC and the CA correctly upheld the authenticity and validity of said Deed of Assignment upon the combined
strength of the above-discussed disputable presumptions and the testimonies elicited from Eden and Notary Public
Rolando Diaz.
2. Whether the joint venture is a contract of partnership.

Yes. Generally understood to mean an organization formed for some temporary purpose, a joint venture is likened to a
particular partnership or one which has for its object determinate things, their use or fruits, or a specific undertaking,
or the exercise of a profession or vocation. The rule is settled that joint ventures are governed by the law on
partnerships which are,in turn, based on mutual agency or delectus personae.3. No. It is evident that the transfer by a
partner of his partnership interest does not make the assignee of such interest a partner of the firm, nor entitle the
assignee to interfere in the management of the partnership business or to receive anything except the assignee's profits.
The assignment does not purport to transfer an interest in the partnership, but only a future contingent right to a
portion of the ultimate residue as the assignor may become entitled to receive by virtue of his proportionate interest in
the capital.
3. Whether Jaso acquired the title of being a partner based on the Deed of Assignment.
Since a partner’s interest in the partnership includes his share in the profits, we find that the CA committed no
reversible error in ruling that the Spouses Jaso are entitled to Biondo's share in the profits, despiteJuanitas lack of
consent to the assignment of said Frenchmans interest in the joint venture. Although Eden did not, moreover,become a
partner as a consequence of the assignment and/or acquire the right to require an accounting of the partnership
business, the CA correctly granted her prayer for dissolution of the joint venture conformably with the right granted to
the purchaser of a partner’s interest under Article 1831 of the Civil Code.
- PNB vs. Lo, October 5, 1927
FACTS:
In September 1916, Severo Eugenio Lo and Ling, together with Ping, Hun, Lam, and Peng formed a commercial
partnership under the name of "Tai Sing and Co.," with a capital of P40,000 contributed by said partners. The firm
name was registered in the mercantile registrar in the Province of Iloilo. Ping, in the articles of partnership, was
assigned as the general manager. However, in 1917, he executed a special power of attorney in favor of Lam to act on
his behalf as the manager of the firm.
Subsequently, Lam obtained a loan from PNB – the loan was under the firm’s name. In the same year, Ping died in
China. From 1918 to 1920, the firm, via GM Lam, incurred other loans from PNB. The loans were not objected to by
any of the partners. Later, PNB sued the firm for non-payment.
Lo, in his defense, argued that he cannot be liable as a partner because the partnership, according to him, is void; that
it is void because the firm’s name did not comply with the requirement of the Code of Commerce that a firm name
should contain the “names of all of the partners, of several of them, or only one of them”. Lo also argued that the acts
of Lam after the death of Ping are not binding upon the other partners because the special power of attorney shall have
already ceased.
ISSUE:
Whether or not Lo is correct in both arguments.
HELD:
No. The anomalous adoption of the firm name above noted does not affect the liability of the general partners to third
parties under Article 127 of the Code of Commerce. The object of the Code of Commerce in requiring a general
partnership to transact business under the name of all its members, of several of them, or of one only, is to protect the
public from imposition and fraud; it is for the protection of the creditors rather than of the partners themselves.
It is unenforceable as between the partners and at the instance of the violating party, but not in the sense of depriving
innocent parties of their rights who may have dealt with the offenders in ignorance of the latter having violated the
law. Contracts entered into by a partnership firm defectively organized are valid when voluntarily executed by the
parties, and the only question is whether or not they complied with the agreement. Therefore, Lo cannot invoke in his
defense the anomaly in the firm name which they themselves adopted.
Lo was not able to prove his second argument. But even assuming arguendo, his second contention does not deserve
merit because (a) Lam, in acting as a GM, is also a partner and his actions were never objected to by the partners, and
(b) it also appeared from the evidence that Lo, Lam, and the other partners authorized some of the loans.
- Co-Pitco vs. Yulo, September 14, 1907
APPEAL from a judgment of the Court of First Instance of Iloilo. The facts are stated in the opinion of the court.
Salvador Laguda, for appellant. Rothrock & Ney, for appellee. WILLARD, J.: The appellee makes the point in his
brief in this court that although the defendant excepted to the order of the court below denying his motion for a new
trial on the ground of the insufficiency of the evidence, yet we cannot review such evidence because it is not properly
certified. We think that this point is well taken. The testimony of one witness is certified to by the stenographer, who
says that it is all the evidence which he took during the trial. The testimony of this witness is unimportant. There
follow in the record several pages of what purports to be evidence of different witnesses taken in narrative form, but
neither the judge, nor the clerk, nor the stenographer certify in any way what these pages are or that they contain
evidence taken during the trial of this case. For the purposes of this review, therefore, we can only consider the facts
admitted by the pleadings and those stated in the decision of the court below. In that decision the court makes the
following finding of fact, among others:
"Before February, 1903, Florencio Yulo and Jaime Palacios were partners in the operation of a sugar estate in
Victorias, Island of Negros, and had commercial dealings with a Chinaman named Dy-Sianco, who furnished them
with money and goods, and used to buy their crop of sugar. In February, 1903, the defendant, Pedro Yulo, father of
the said Florencio, took charge of the latter's interest in the above-mentioned partnership, and he became a general
partner with the said Jaime Palacios in the same business and continued as such partner until about the end of 1904,
dealing with Dy-Sianco in the same manner as the old partnership had dealt with the latter." He then finds that the
balance due from the firm of Pedro Yulo and Jaime Palacios was 1,638.40 pesos, Philippine currency, and orders
judgment against the defendant, Pedro Yulo, for the entire amount, with interest. The partnership of Yulo and Palacios
was engaged in the operation of a sugar estate in Negros. It was, therefore, a civil partnership, as distinguished from a
mercantile partnership. Being a civil partnership, by the express provisions of articles 1098 and 1137 of the Civil
Code, the partners are not liable each for the whole debt of the partnership. The liability is pro rata, and in this case,
Pedro Yulo is responsible to plaintiff for only one-half of the debt. The fact that the other partner, Jaime Palacios, had
left the country cannot increase the liability of Pedro Yulo. The judgment of the court below is reversed and judgment
is ordered in favor of the plaintiff and against the defendant, Pedro Yulo, for the sum of 819.20 pesos, Philippine
currency, with interest thereon at the rate of 6 per cent per annum from the 12th day of January 1905, and the costs of
the Court of First Instance. No costs will be allowed to either party in this court. So ordered.
- Island Sales, Inc. vs. United Pioneers Gen. Construction Co., July 31, 1975
DOCTRINE: Condonation by creditor of a partner's share in the partnership debt does not increase the pro rata
liability of other partners.
FACTS: The defendant company (UNITED PIONEERS GENERAL CONSTRUCTION COMPANY ET. AL), a
general partnership duly registered under the laws of the Philippines, purchased a motor vehicle from the plaintiff
(ISLAND SALES, INC) on an installment basis. For this purpose, the defendant company executed a promissory note
for P9,440.00, payable in twelve (12) equal monthly installments of P786.63, with the first installment due on or
before May 22, 1961. The plaintiff, in the promissory note, expressly reserved the right to limit the liability of the
individual defendants, Benjamin C. Daco and Noel C. Sim, to one-fifth (1/5) of the company's obligations.
After failing to receive the installment due on July 22, 1961, the plaintiff sued the defendant company for the unpaid
balance of P7,119.07. Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto
Palisoc, the general partners, were included as co-defendants.
Daniel A. Guizona failed to file an answer and was declared in default. The plaintiff, on motion, had the complaint
dismissed as to defendant Romulo B. Lumauig. Subsequently, the trial court allowed the plaintiff to present evidence
ex-parte, leading to the decision appealed from.
ISSUE: Whether the condonation of a partner's share in the debts of the company increases the remaining partners'
liability.
RULING: No. In this case, with five general partners when the promissory note was executed, the liability is pro rata.
The plaintiff's motion to dismiss the complaint against Romulo B. Lumauig did not negate his status as a general
partner. The pro rata liability of appellant Benjamin C. Daco is limited to one-fifth (1/5) of the obligations of the
defendant company. The court affirmed that the condonation of Lumauig's individual liability does not alter this
arrangement.
RATIO: Article 1816 of the Civil Code provides that all partners, including industrial ones, shall be liable pro rata for
contracts entered into on behalf of the partnership. The separate obligation of any partner does not change this pro rata
liability.
- La Compania Maritima vs. Muñoz, December 12, 1907
Facts:
On March 31, 1905, defendants Francisco, Emilio, and Rafael formed an ordinary general mercantile partnership
under the name of Francisco Munoz & Sons for carrying on the mercantile business in Albay which had formerly been
carried on by Francisco alone. Francisco was a capitalist partner while Emilio and Rafael were industrial partners. -
Plaintiff filed an action to recover a sum of money with interest and costs against the partnership of Francisco Munoz
& Sons and against Francisco Munoz de Bustillo, Emilio Munoz de Bastillo, and Rafael Naval. Emilio and Rafael
were acquitted while the partnership, Francisco Munoz & Sons, and Francisco were ordered to pay the sum of
Php26,828 with an interest of 8% pa from March 31, 1905. - In the articles of partnership signed by the partners, it is
expressly stated that they have agreed to form an ordinary, general mercantile partnership. The object of the
partnership is a purely mercantile one, and all the requirements of the Code of Commerce in reference to such a
partnership were complied with as the articles of partnership were recorded in the mercantile registry in Albay.
Issue:
Whether Emilio is a partner
Ruling:
Yes, Emilio contributed, and by the articles, he was to receive 1/8 of the profits after five years. The postponement of
this receipt does not negate his status as a partner. - Emilio's exclusion from the management does not mean he is not a
partner. The articles confer management expressly to others, and his exclusion was voluntary. 2. WON Emilio, as an
industrial partner, should be liable to third persons for the obligations contracted by the partnership - YES - In a
general partnership, all members, whether industrial or capitalist partners, are liable personally and in solidum for
partnership obligations. - Imposing the same liability on industrial partners is justifiable as they have a voice in
management, share profits, and it aligns with the Code of Commerce provisions. - Industrial partners cannot be
relieved from liability to third persons for the debts of the partnership. DECISION - Petition granted. All defendants
ordered to pay. SEPARATE OPINION Dissenting [Chief Justice Arellano] - An industrial partner is not liable as to
third persons. - Collective partners respond with their capital for obligations. An industrial partner has no capital
contribution, and imposing liability on their private property is anomalous. - An industrial partner has not obligated
himself, and holding them responsible for most obligations is unjust.
- Dietrich vs. Freeman, January 28, 1911
Facts: Plaintiff sued to collect from the partners of Manila Steam Laundry. The trial court held the defendants jointly
and severally liable. The Court reversed holding that the business was a partnership of cuentas en participacion and
the liability of the partners is pro-rata based on their interest in the business.
Plaintiff Dietrich was employed by defendants Freeman and Whitcomb as owners and operators of Manila Steam
Laundry (Whitcomb obtained his interest in the business from Pierce, who sold his interests to him). He filed the
action to collect from defendants the balance due to him for the services he performed. The trial court held Freeman
and Whitcomb jointly and severally liable to Dietrich. Whitcomb appealed the decision insisting that he should not be
held jointly and severally liable with Freeman. (Note: Freeman was the managing partner of the laundry, and
Whitcomb barely had a hand in the operations of the business).
To avoid liability, it appears that the theory of Whitcomb here is two-layered. First, that the partnership was a
commercial partnership. Second, that it is a partnership of cuentas en participacion.
Issue: Whether Whitcomb is liable to Freeman.
Yes. What is the nature of liability? Pro rata based on his interest in the business.
Ratio: In determining the liability of Freeman, the Court first identified the nature of the business. Art 17 and 119 of
the Code of Commerce then applicable provide the requirements for the constitution of a commercial partnership (i.e.
recording of the business agreements in the commercial registry). The requirements were not complied with. The
Court, therefore, held that no formal partnership was entered into between Freeman and Whitcomb. As such, the Civil
Code and not the Code of Commerce must govern in determining the liability of the partners.
Insisting that he is not liable, Whitcomb posits that the association was one of cuentas en participacion. A partnership
of cuentas en participacion is constituted in such a manner that its existence was only known to those who had an
interest in the same, there being no mutual agreement between the partners, and without a corporate name indicating
to the public in some way that there were other people besides the one who ostensibly managed and conducted the
business. Under the provisions of article 242 of the Code of Commerce, those who contract with the person in whose
name the business of such a partnership was conducted shall have only the right of action against such a person and
not against other persons interested.
However, a partnership of cuentas en participacion does not have a corporate name. Here, the business is known as
Manila Steam Laundry, and Dietrich was employed by Manila Steam Laundry and not Freeman alone. Since the
partners were doing business under this name, and since it is not a commercial partnership, Articles 1698 and 1137 of
the Civil Code should govern and the partners are not liable individually for the entire amount due to the plaintiff. The
liability is pro rata, and in this case, the appellant is responsible to the plaintiff for only one-half of the debt.
- Santiago Syjuco, Inc. vs. Castro, July 7, 1989
The Lims, consisting of Eugenio Lim and his brothers, collectively borrowed 800,000.00 from petitioner Santiago
Syjuco, Inc. (Syjuco). The loan was secured by a first mortgage on property registered in the names of the Lims as
owners in common. Subsequently, additional loans on the same security were obtained, bringing the aggregate loans
to 2,460,000.00, exclusive of interest. When the obligation matured, the Lims failed to pay, leading Syjuco to initiate
extra-judicial foreclosure proceedings.
The legal battle ensued, and the respondents argued that the mortgage, individually constituted by them, no longer
belonged to them, having been earlier deeded over to the partnership, "Heirs of Hugo Lim," making the mortgage void
due to lack of authority. The trial court declared the mortgage void, citing lack of authority, and issued a permanent
injunction against the foreclosure sale.
Syjuco filed a petition for certiorari, prohibition, and mandamus, seeking to annul the default judgment on grounds of
estoppel, res judicata, and Article 1819 of the Civil Code.
Issue: Whether the conveyance of real property belongs to the partnership.
Held: Yes. The court held that the respondent partnership was chargeable with knowledge of the mortgage executed
by all its partners. The partnership's silence and failure to challenge the mortgage within a reasonable time, spanning
more than 17 years, invoked the doctrine of estoppel, preventing any attempt to invalidate the mortgage as
unauthorized.
Moreover, the last paragraph of Article 1819 of the Civil Code supported Syjuco's position. It states that "where the
title to real property is in the names of all the partners, a conveyance executed by all the partners passes all their rights
in such property." Therefore, the acts, declarations, and omissions of the partnership members cannot be treated as
individual actions but are legally considered actions of the partnership itself.
- Liwanag & Reyes vs. Workmen’s Compensation Commission, May 22, 1959
Appellants Benito Liwanag and Maria Liwanag Reyes, co-owners of Liwanag Auto Supply, faced a claim for
compensation filed by the dependents of a deceased commercial guard who was killed in the line of duty. The
Workmen's Compensation Commission granted the claim, ordering the appellants to pay jointly and severally the
awarded amount.
The appellants did not dispute the right to compensation or the awarded amount but contested the joint and several
liability, asserting that the Workmen's Compensation Act does not explicitly provide for solidary obligations and, in
the absence of such provision, their responsibility should be joint.
The court rejected the appellants' contention, citing Arts. 1711 and 1712 of the Civil Code and Section 2 of the
Workmen's Compensation Act. These provisions suggest that in compensation cases, the liability of business partners,
like the appellants, should be solidary. The court emphasized the need to construe the Workmen's Compensation Act
liberally in favor of the employee and his dependents, resolving doubts in their favor to promote the law's intended
purpose.
Art. 1207 of the Civil Code was also invoked, stating that there is solidary liability when the obligation expressly
states it or when the law or the nature of the obligation requires solidarity. Given that the Workmen's Compensation
Act aims to provide full protection to the employee, the court held that the nature of the obligation for employers to
pay compensation to the heirs of a deceased employee should be solidary.
In conclusion, the court affirmed the award, declaring the liability of the appellants as solidary, in line with the
purpose of the Workmen's Compensation Act. The decision carried costs against the appellants.
- Pioneer Insurance & Security Corp. vs. Court of Appeals, July 28, 1989
FACTS:
1. Jacob S. Lim owned (single proprietorship) Southern Air Lines (SAL).

2. On May 17, 1965, Japan Domestic Airlines (JDA) and Lim entered into and executed a sales contract for the sale
and purchase of 2 DC-3A Type aircraft and 1 set of necessary spare parts for the total agreed price of US $109,000.00
to be paid in installments. Both aircraft came in June and July 1965.
3. On May 22, 1965, Pioneer Insurance and Surety Corporation as surety executed and issued its Surety Bond No.
6639 in favor of JDA, on behalf of its principal, Lim, for the balance price of the aircraft and spare parts.
4. It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and Modesto
Cervantes (Cervanteses), and Constancio Maglana contributed some funds used in the purchase of the above aircraft
and spare parts. The funds were supposed to be their contributions to a new corporation proposed by Lim to expand
his airline business.
5. They executed 2 separate indemnity agreements in favor of Pioneer, one signed by Maglana and the other jointly
signed by Lim for SAL, Bormaheco, and the Cervanteses. The indemnitors agreed jointly and severally to indemnify
and hold and save harmless Pioneer from any/all damages, losses, costs, damages, taxes, penalties, charges, and
expenses incurred as a result of becoming surety upon the bond/note and to pay, reimburse, and make good to Pioneer,
its successors and assigns, all sums and amounts of money it or its representatives should or may pay or become liable
to pay.
6. On June 10, 1965, Lim, doing business under the name and style of SAL, executed in favor of Pioneer a deed of
chattel mortgage as security for the suretyship, stipulating that Lim transfers and conveys to the surety the two aircraft.
The deed was duly registered with the Office of the Register of Deeds of the City of Manila and with the Civil
Aeronautics Administration.
7. Lim defaulted on his subsequent installment payments. JDA requested payments from the surety. Pioneer paid a
total sum of P298,626.12.
8. On July 19, 1966, Pioneer filed an action for judicial foreclosure with an application for a writ of preliminary
attachment against Lim and respondents, the Cervanteses, Bormaheco, and Maglana.
9. In their Answers, Maglana, Bormaheco, and the Cervanteses filed cross-claims against Lim, alleging that they were
not privy to the contracts signed by Lim and, by way of counterclaim, sought damages for being exposed to litigation
and for recovery of the sums advanced to Lim for the purchase of the aircraft.
- CFI: Decision rendered holding Lim liable to pay Pioneer but dismissing Pioneer's complaint against all other
defendants.
- CA: Modified the trial court's decision, dismissing the plaintiff’s complaint against all the defendants. The trial
court's decision was affirmed in all other respects.
ISSUE:
1. Whether a de facto partnership was formed by the parties (Lim, Cervanteses, Bormaheco, and Maglana).
2. Whether persons who attempt, but fail, to form a corporation create a partnership inter se.
HELD:
1. NO.
2. YES.
RATIO:
1. The record shows that the petitioner was acting on his own and not on behalf of his other would-be incorporators in
transacting the sale of the airplanes and spare parts. Hence, no de facto partnership was created among the parties,
entitling the petitioner to reimbursement of the supposed losses of the proposed corporation.
2. While it has been held that as between themselves, the rights of the stockholders in a defectively incorporated
association should be governed by the supposed charter and the laws of the state relating thereto and not by the rules
governing partners, it is ordinarily held that persons who attempt, but fail, to form a corporation and who carry on
business under the corporate name occupy the position of partners inter se. Thus, where persons associate themselves
together under articles to purchase property to carry on a business, and their organization is so defective as to come
short of creating a corporation within the statute, they become, in legal effect, partners inter se, and their rights as
members of the company to the property acquired by the company will be recognized.
CASE LAW/DOCTRINE:
- Agreements have the force of law between the parties. (Herrera vs. Petrophil Corp., 146 SCRA 385)
- The fact that there was a misunderstanding does not convert the partnership into a sham organization. (Monasque vs.
CA, 139 SCRA 533)
- A partnership relation between certain stockholders and other stockholders, who were also directors, will not be
implied in the absence of an agreement, so as to make the former liable to contribute for payment of debts illegally
contracted by the latter (Heald v. Owen, 44 N.W. 210, 79 Iowa 23). (Corpus Juris Secundum, Vol. 68, p. 464). (Italics
supplied).
- Vda. De Chan vs. Pen, October 24, 1928
Facts: The San Miguel Brewery, Porta Pueo & Co., and Ruiz & Rementeria S. en C. instituted insolvency proceedings
against Leoncia Vda. de Chan Diaco, alleged to be the owner of a grocery store on Calle Nueva, Binondo, known as
the store of "La Viuda de G. G. Chan Diaco." The abovementioned firms alleged, among other things, that Leoncia
was indebted to them. The petition for the declaration of insolvency was set down for hearing. Leoncia did not appear
at the hearing and the court declared her insolvent and ordered the sheriff to take possession of her property. Attorney
for the insolvent filed a motion asking the court to dismiss the proceedings against her on the ground that they should
have been brought against the partnership "Lao Liong Naw & Co.," of which she was only a member. The alleged
partnership was evidenced by an agreement and from which it appeared that Lao Liong Naw (Leoncia), Chan Chiaco
Wa, Cua Yuk, Chan Bun Suy, Chan Bun Le, and Juan Maquitan Chan had formed a partnership. In view of the
aforesaid motion Judge Del Rosario suspended for the time being the effects of the decision. After several hearings in
which various witnesses were examined and documents presented on behalf of both sides, the referee rendered a
second report, in which he found as facts that the alleged partnership between the insolvent and some of her relatives
and employees was only a fictitious organization created for the purpose of deceiving the Bureau of Customs and
enable some of the aforesaid relatives, who were mere coolies, to come to the Philippines under the status of
merchants. The court, therefore, affirmed the suspension of the decision, dismissed the insolvency proceedings, and
ordered the assignee to return to the sheriff all the property of the insolvent which he, the sheriff, might have in his
possession.
Issues: Whether or not Leoncia Vda. de Chan Diaco is liable
Ruling: Yes. All of the assignments of error are well taken. The evidence appearing in the record fully supports the
findings of the referee and his report should have been approved by the court below. It clearly appears from the record
that said partnership, as such, has no visible assets and that, therefore, the partners individually must, jointly and
severally, respond for its debts (Code of Commerce, art. 127). As the appellee is one of the partners and admits that
she is insolvent, we can see no reason for the dismissal of the proceedings against her. It is further to be noted that
both the partnership and the separate partners thereof may be joined in the same action, though the private property of
the latter cannot be taken in payment of the partnership debts until the common property of the concern is exhausted.
The decision appealed from is hereby reversed, the reports and recommendations of the referee are approved, and the
order for the dismissal of the case is set aside.
- Mendoza vs. Paule, February 13, 2009
Facts: Engineer Paule is the proprietor of E.M. Paule Construction and Trading (EMPCT). PAULE executed an SPA
authorizing Mendoza to participate in the prequalification and bidding of a National Irrigation Administration (NIA)
project, the Casicnan Multi-Purpose Irrigation and Power Plant (CMIPPL). Mendoza was given the power to bid and
secure bonds with the NIA as well as receive and collect payments. EMPCT, through Mendoza, was awarded the
project. When Cruz learned that Mendoza was in need of heavy equipment for use in the NIA project, he met up with
him to discuss an agreement for such project. The product of their agreement was two job orders for dump trucks in
December of 1999. On April 2000, Paule revoked the SPA of Mendoza, prompting NIA to refuse payment on her
billings. CRUZ, therefore, could not be paid for the rent of the equipment. Upon advice of MENDOZA, CRUZ
addressed his demands for payment of lease rentals directly to NIA, but the latter refused to acknowledge the same
and informed CRUZ that it would be remitting payment only to EMPCT as the winning contractor for the project.
Cruz then sued Paule (EMPTC) and NIA. Paule proceeds against Mendoza. MENDOZA alleged in her crossclaim that
because of PAULE's whimsical revocation of the SPA, she was barred from collecting payments from NIA, thus
resulting in her inability to fund her checks which she had issued to suppliers of materials, equipment, and labor for
the project. She claimed that estafa and B.P. Blg. 22 cases were filed against her.
Mendoza/Paule/EMPTC/NIA needs to pay because Mendoza was the agent of EMPTC and she incurred liabilities
pursuant to the NIA project! Paule: I shouldn't pay nor forward the money I have from NIA because Mendoza acted
outside the scope of her authority! Mendoza: I acted within the scope of my authority and am now facing charges with
liabilities I incurred which weren't even mine to begin with since I was just an agent! Paule/EMPTC/NIA should pay
me! Lower Court said Paule is liable as Mendoza acted as an agent while CA reversed and said that Mendoza was in
excess so Paule was not liable.
Issues: 1. On Paule's and Mendoza's side: Whether or not Mendoza, as an agent, could claim from Paule/EMPTC for
debts she incurred from Cruz? 2. On Cruz's side: Whether or not Paule/EMPTC is liable as Mendoza was an agent that
acted within the scope of her authority?
Held: "Records show that PAULE (or, more appropriately, EMPCT) and MENDOZA had entered into a
PARTNERSHIP in regard to the NIA project. PAULE's contribution thereto is his contractor's license and expertise,
while MENDOZA would provide and secure the needed funds for labor, materials, and services; deal with the
suppliers and subcontractors; and, in general and together with PAULE, oversee the effective implementation of the
project. For this, PAULE would receive as his share three per cent (3%) of the project cost while the rest of the profits
shall go to MENDOZA. PAULE admits to this arrangement in all his pleadings." 1. YES. Although the SPA limited
Mendoza only to bid on behalf of EMPTC with regard to the project, MENDOZA's actions were in accord with what
she and PAULE originally agreed upon, as to the division of labor and delineation of functions within their
partnership. Under the Civil Code, every partner is an agent of the partnership for the purpose of its business; each one
may separately execute all acts of administration unless a specification of their respective duties has been agreed upon,
or else it is stipulated that any one of them shall not act without the consent of all the others. At any rate, PAULE does
not have any valid cause for opposition because his only role in the partnership is to provide his contractor's license
and expertise, while the sourcing of funds, materials, labor, and equipment have been relegated to MENDOZA. 2.
YES. Given the present factual milieu, CRUZ has a cause of action against PAULE and MENDOZA. Thus, the Court
of Appeals erred in dismissing CRUZ's complaint on a finding of exceeded agency. There was no valid reason for
PAULE to revoke MENDOZA's SPAs. Since MENDOZA took care of the funding and sourcing of labor, materials,
and equipment for the project, it is only logical that she controls the finances, which means that the SPAs issued to her
were necessary for the proper performance of her role in the partnership and to discharge the obligations she had
already contracted before revocation. Without the SPAs, she could not collect from NIA because as far as it is
concerned, EMPCT and not the PAULE-MENDOZA partnership is the entity it had contracted with. Without these
payments from NIA, there would be no source of funds to complete the project and to pay off obligations incurred. As
MENDOZA correctly argues, an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means
of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of
partnership and his removal from the management is unjustifiable. Moreover, PAULE should be made civilly liable
for abandoning the partnership, leaving MENDOZA to fend for her own, and for unduly revoking her authority to
collect payments from NIA, payments which were necessary for the settlement of obligations contracted for and
already owing to laborers and suppliers of materials and equipment like CRUZ, not to mention the agreed profits to be
derived from the venture that are owing to MENDOZA by reason of their partnership agreement.
- Guy vs. Gacott, January 13, 2016
The Court is presented with a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner
Michael C. Guy, contesting the June 25, 2012 Decision and the March 5, 2013 Resolution of the Court of Appeals
(CA) in CA-G.R. CV No. 94816. These rulings upheld the June 28, 2009, and February 19, 2010 Orders of the
Regional Trial Court (RTC), Branch 52, Puerto Princesa City, Palawan, in Civil Case No. 3108, a damages case. The
RTC orders denied Guy's Motion to Lift Attachment Upon Personalty on the grounds that he was not a judgment
debtor.
Actions in the Lower Courts:

- Supreme Court (SC): Reversed and set aside
- Court of Appeals (CA): Affirmed the RTC’s denial of the order
- RTC: Denied Guy's Motion to Lift Attachment Upon Personalty
Doctrine Laid Down (if any):

1. Notice to any partner operates as notice to or knowledge to the partnership only. It does not provide for the reverse
situation, where notice to the partnership is considered notice to the partners.
2. Regarding partnerships, the liability of partners is not solidary by default. Solidary liability applies only in
exceptional circumstances, as outlined in Articles 1822, 1823, and 1824 of the Civil Code.
Facts:
- Gacott purchased two transceivers from Quantech Systems Corp (QSC), a general partnership.
- Due to defects, Gacott returned the items and sought replacement or a refund, which was not provided.
- Gacott filed a complaint for damages, and after the case, a decision was rendered against QSC.
- During execution, it was discovered that QSC was a general partnership, and Guy, a partner, had his vehicle
attached.
- Guy filed a Motion to Lift Attachment Upon Personalty, arguing that he was not a judgment debtor.
Issues:
1. Whether the service of summons to QSC was flawed.
2. Whether the trial court’s jurisdiction over QSC extended to the person of Guy in holding him solidarily liable with
the partnership.
3. Whether a partner’s liability is subsidiary and generally joint and whether immediate levy upon the property of a
partner can be made.
4. Whether it is necessary to implead a partner to be bound by the partnership liability.
Held:
1. Yes, the service of summons to QSC was flawed; however, voluntary appearance cured the defect.
2. No, the trial court's jurisdiction over QSC did not extend to Guy regarding solidary liability.
3. No, a partner’s liability is not subsidiary and generally joint; immediate levy upon the property of a partner cannot
be made.
4. Yes, it is necessary to implead a partner to be bound by the partnership liability.
Rationale:
1. Proper service of summons is necessary, but the lack or defect in service may be cured by voluntary submission to
the court’s jurisdiction. QSC's filing of an Answer despite the defective summons constituted voluntary appearance.
2. A partnership is a separate entity, and a suit against it does not necessarily implicate every partner. Guy was never
made a party to the case; thus, the trial court's jurisdiction did not extend to him regarding solidary liability.
3. A partner's liability is subsidiary, and joint liability is the general rule. Solidary liability applies only in exceptional
circumstances outlined in Articles 1822, 1823, and 1824. The specific conditions were not met in this case.
4. Notice to any partner operates as notice to or knowledge of the partnership only. Therefore, it is necessary to
implead a partner to bind them by the partnership liability.
Supreme Court Ruling:

The petition is granted. The Decision and Resolution of the Court of Appeals are reversed and set aside. The Regional
Trial Court, Branch 52, Puerto Princesa City, is ordered to release Michael C. Guy's Suzuki Grand Vitara subject to
the Notice of Levy/Attachment upon Personalty.
- Bendecio vs. Bautista, December 7, 2021
Facts:
1. Bautista extended loans to her niece, Bendecio, on different occasions in February 2013, amounting to P1,100,000.
The repayment terms included an 8% monthly interest, and the loans were due in May 2013.
2. Bendecio informed Bautista that Mascariñas, her friend and business partner, would settle the outstanding loans by
depositing a manager's check into Bautista's Banco De Oro (BDO) account. However, this arrangement did not
materialize as planned. Instead, Mascariñas executed a promissory note, committing to pay the total loan amount on
August 23, 2013, maintaining the same interest rate.
3. Despite oral demands and a formal demand letter sent on September 5, 2013, neither Bendecio nor Mascariñas
fulfilled their payment obligations. Consequently, Bautista initiated legal proceedings, filing a complaint before the
Regional Trial Court (RTC) on September 25, 2013.
Issue:
Whether the Court of Appeals erred in affirming the joint and solidary liability of Bendecio and Mascariñas to pay
Bautista the loan amount of P1,100,000.00.
RulingL
The Court affirmed the RTC's decision, upholding the joint and solidary liability of Bendecio and Mascariñas. The
appellate court rejected the claims of novation and payment due to the insufficiency of evidence supporting these
assertions. Crucially, it emphasized the absence of Bautista's explicit consent to any substitution of debtors, rendering
the novation claim unsubstantiated.
Moreover, the Court considered the acknowledgment by Bendecio and Mascariñas of their business partnership. Both
parties admitted, during their judicial affidavits and testimonies, that they were business partners who utilized the loan
proceeds for their business activities. This admission fortified the conclusion that the loan was acquired for the
partnership's benefit.
In essence, the Court's ruling emphasized the fundamental principle that novation must be established by clear and
unequivocal terms or circumstances, with the creditor's consent being a crucial element. The mere issuance of a
promissory note by Mascariñas and the return of checks by Bendecio were insufficient to establish novation or
payment. Consequently, the joint and solidary liability of Bendecio and Mascariñas for the loan, as determined by the
RTC and affirmed by the Court of Appeals, was upheld.
- Magdusa vs. Albaran, June 30, 1962
FACTS:
1. The Court of Appeals affirmed the formation of a de facto partnership among the appellant and appellees, along
with other individuals, for the sale of general merchandise in Surigao, Surigao. The partnership arrangement involved
a P2,000 capital contribution from the appellant, with a condition that 25% of net profits would augment the capital,
and the remaining 75% would be distributed proportionally based on each member's length of service.
2. In 1953 and 1954, the appellees expressed their intention to withdraw from the partnership. Appellant computed the
value of the partners' shares up to that point, documented in Exhibit "C," outlining the distribution of shares.
3. Despite demands from the appellees for payment, the appellant denied the existence of a partnership, asserting that
the appellees were mere employees.
4. The Court of First Instance of Bohol dismissed the complaint, challenging the credibility of Exhibit "C" and noting
the absence of indispensable parties. The Court of Appeals reversed this decision.
5. Gregorio Magdusa sought a review of the decision.
ISSUE:
Whether the action of the appellees is valid, considering that in the distribution of a partnership's assets, all partners
are indispensable parties, and their absence renders any decree of distribution invalid.
RULING:
NO.
A partner's share cannot be returned without the prior dissolution and liquidation of the partnership. The distribution
of shares is contingent upon discharging the partnership's creditors, who hold priority over the partners. All members
of the partnership have a vested interest in the assets and business, making them indispensable parties in the
liquidation process.
The document Exhibit "C," representing the liquidation, lacks the approval, authorization, or ratification of other
partnership members. Therefore, it is not binding on them, and they have the right to be heard regarding its accuracy.
Additionally, the capital shares of the withdrawing partners cannot be repaid without proper accounting and
liquidation. Outside creditors must be settled first, as per Civil Code Article 1839, before the partnership's assets are
distributed.
The appellant, acting as manager or trustee for the partnership, cannot be personally liable for the payment of partners'
shares. The responsibility lies with the partnership itself. As not all members of the partnership have been impleaded,
no judgment for refund can be rendered, necessitating the dismissal of the action.
- Yu vs. NLRC, June 30, 1993
ISSUES:
1. Whether the partnership that hired petitioner Yu had been extinguished and replaced by a new partnership
composed of Willy Co and Emmanuel Zapanta.
2. If a new partnership had come into existence, whether petitioner Yu could nonetheless assert his rights under his
employment contract against the new partnership.
RULING:
1. The legal effect of the changes in the membership of the partnership was the dissolution of the old partnership that
hired petitioner in 1984 and the emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987.
- The applicable law is Article 1828 of the Civil Code, which defines dissolution as the change in the relation of the
partners caused by any partner ceasing to be associated in the carrying on, as distinguished from the winding up, of the
business.
- Article 1830 is also relevant, stating that dissolution can occur without violation of the agreement between the
partners, including the express will of any partner acting in good faith when no definite term or particular undertaking
is specified.
2. Under Article 1840, creditors of the old Jade Mountain are also creditors of the new Jade Mountain, which
continued the business of the old one without liquidation of the partnership affairs. A creditor of the old Jade
Mountain, like petitioner Yu in his claim for unpaid wages, is entitled to priority over any claim of a retired or
previous partner concerning their interest in the dissolved partnership.
- The claim that a new partnership had been formed is supported by the change in partners, the sale and transfer of
interests, and the relocation of the main office.
- Petitioner Yu, having been an employee of the old partnership, can assert his rights under the employment contract
against the new partnership. Creditors, including employees, have a right to payment from the assets of the
partnership, and such claims are not limited to the old members but extend to the new partnership that continued the
business.
Therefore, the petition is meritorious, and petitioner Yu can pursue his rights under the employment contract against
the new partnership formed by Willy Co and Emmanuel Zapanta.
- Rojas vs. Maglana, December 10, 1990

FACTS:
Maglana and Rojas formed the "Eastcoast Development Enterprises" (EDE) partnership, registered with the SEC, for
timber and forest products. Facing difficulties, they included Pahamotang as an industrial partner through an
unregistered agreement. After Pahamotang's withdrawal, Maglana and Rojas bought his interest and continued the
partnership without a written agreement. Rojas later entered into a management contract with another logging
company, abandoning the EDE partnership.
ISSUE:
1. Whether the partnership carried on after the second partnership was a de facto partnership and at will - NO
2. Whether Magalana may unilaterally dissolve the partnership - YES
RATIO:
1. There was no intention to dissolve the first partnership upon the constitution of the second as everything else was
the same except for the fact that they took in an industrial partner. The first Articles of Partnership were only
amended, in the form of Supplementary Articles of Co-Partnership. There is no dispute that the second partnership
was dissolved by common consent. Said dissolution did not affect the first partnership which continued to exist.
Maglana and Rojas agreed to purchase the interest, share, and participation in the second partnership of Pahamotang,
and thereafter, the two became the owners of equipment contributed by Pahamotang. The relationship of Rojas and
Maglana after the withdrawal of Pahamotang cannot be considered a De Facto Partnership or a Partnership at Will, as
there is an existing partnership, duly registered.
2. As there are only two parties when Maglana notified Rojas that he dissolved the partnership, it is, in effect, a notice
of withdrawal. Under Article 1830, par. 2 of the Civil Code, even if there is a specified term, one partner can cause its
dissolution by expressly withdrawing even before the expiration of the period, with or without justifiable cause. The
withdrawing partner is liable for damages if the cause is not justified or no cause was given, but in no case can he be
compelled to remain in the firm. With his withdrawal, the number of members is decreased, hence, the dissolution.
Rojas and Maglana shall be guided in the liquidation of the partnership by the provisions of its duly registered Articles
of Co-Partnership, where all profits and losses of the partnership shall be divided "share and share alike" between the
partners. An accounting must first be made, and according to the Commissioners’ report, Rojas is not entitled to any
profits as he failed to give the amount he had undertaken to contribute, thus becoming a debtor of the partnership.
Maglana cannot be liable for damages as Rojas abandoned the partnership through his acts and also took funds in an
amount more than his contribution.
- Idos vs. Court of Appeals, September 25, 1998
FACTS: Irma Idos (Idos) and Eddie Alarilla formed a partnership in the business of leather tanning, which was
dissolved after one year. During the liquidation, Alarilla's share amounted to P900,000, for which Idos issued four
checks. Alarilla encashed the first three checks but failed to do so with the last one. Following Alarilla's formal
demand, Idos was charged with violation of BP 22 (Bouncing Checks Law). Idos argued that the checks were given as
assurance of Alarilla's share in the partnership assets and were not supposed to be deposited until the stocks were sold.
The RTC found Idos guilty, a decision affirmed by the Court of Appeals.
ISSUE:
1. Whether or not Idos is guilty of violating BP 22 - NO
2. Whether or not the partnership is dissolved - NO
RULING:
1. NO. The check in question was intended to be funded from receivables and sales of goods by the partnership, with
the understanding that it would be honored upon the realization of such collections and sales. As Idos issued the
checks without knowledge of insufficient funds, she cannot be held liable under BP 22.
3. NO. Even if there was an agreement to dissolve the partnership, it did not automatically terminate the partnership.
The dissolution agreement did not conclude the partnership as they were still in the process of selling goods and
collecting receivables. The partnership continues until the winding up of affairs is completed, and the presence of
unsold goods and uncollected receivables indicates the ongoing existence of the partnership.
- Tocao vs. Court of Appeals, October 4, 2000
FACTS: Nenita A. Anay, William T. Belo, and Marjorie Tocao formed a joint venture for the importation and
distribution of kitchen cookware under the name Geminesse Enterprise. An oral agreement was made, with Belo
contributing P2.5 million, Tocao contributing cash and acting as president, and Anay as head of marketing and later,
vice-president for sales. Anay was entitled to various commissions based on the agreement. The business operated
successfully, but Anay later discovered Tocao's unilateral exclusion memo, stating she was no longer vice-president.
Anay demanded commissions and an audit, leading to a lawsuit.
ISSUES:
1. Whether there is a partnership.
2. Whether Anay is entitled to damages upon her expulsion from the partnership.
RULING:
1. Yes, a partnership exists. An oral contract is as valid as a written one. Belo acted as capitalist, Tocao as president,
and Anay contributed expertise. Anay's entitlement to a percentage of net profits also signifies a partnership.
2. Yes, Anay is entitled to damages. The unilateral exclusion by Tocao constitutes a wrongful dissolution. An
unjustified dissolution can lead to a liability for damages. Tocao's memo and her withdrawal from the partnership did
not terminate it; it continued until the business was wound up.
The Supreme Court denied the petition, affirming the existence of the partnership and Anay's entitlement to damages.
- Emnace vs. Court of Appeals, November 23, 2001
SUMMARY: Emnace, Tabanao, and Divina-Gracia were partners in a fishing industry. They decided to dissolve their
partnership. However, throughout the existence of the partnership, and even after Vicente Tabanao’s demise, Emnace
failed to submit to Tabanao’s heirs any statement of assets and liabilities of the partnership and to render an
accounting of the partnership’s finances. Emnace also failed to turn over Tabanao’s shares. Heirs of Tabanao filed an
action for accounting and payment of shares against Emnace. The issue in this case is whether the heirs' action for
accounting has prescribed. The SC ruled in favor of Emnace.
DOCTRINE: For as long as the partnership exists, any of the partners may demand an accounting of the partnership’s
business, and prescription of the said right starts to run only upon the dissolution of the partnership when the final
accounting is done.
FACTS: Emilio Emnace, Vicente Tabanao, and Jacinto Divina-Gracia were partners in a fishing business, Ma. Nelma
Fishing Industry. After Jacinto Divinagracia withdrew from the partnership, they decided to dissolve their partnership
and executed an agreement of partition and distribution of the partnership properties among them in January 1986.
Assets to be distributed were five (5) fishing boats, six (6) vehicles, and two (2) parcels of land. Tabanao died in 1994.
Throughout the existence of the partnership, and even after Vicente Tabanao’s demise, petitioner failed to submit to
Tabanao’s heirs any statement of assets and liabilities of the partnership and to render an accounting of the
partnership’s finances. Petitioner also reneged on his promise to turn over to Tabanao’s heirs the deceased’s 1/3 share
in the total assets of the partnership, amounting to P30,000,000.00, despite formal demand for payment thereof.
Consequently, Tabanao’s heirs, respondents herein, filed against petitioner an action for accounting, payment of
shares, division of assets, and damages.
ISSUES:
1. Whether the action for accounting was filed in an improper venue. (NO)
2. Whether the surviving spouse of Tabunao has legal capacity to sue. (YES)
3. Whether the action for accounting has prescribed. (NO) <- TOPICAL
HOLDING/RATIO:
1. Petitioner’s argument: Petitioner insists that venue was improperly laid since the action is a real action involving a
parcel of land located outside the territorial jurisdiction of the court a quo. SC ruled that there was no error on the part
of the trial court and the Court of Appeals in holding that it was filed in the correct venue. An action for accounting,
payment of partnership shares, division of assets, and damages is a personal action which, under the Rules, may be
commenced and tried where the defendant resides or may be found, or where the plaintiffs reside, at the election of the
latter.
2. Petitioner’s argument: Petitioner asserts that the surviving spouse of Vicente Tabanao has no legal capacity to sue
since she was never appointed as administratrix or executrix of his estate. SC ruled that petitioner’s objection in this
regard is misplaced. The surviving spouse does not need to be appointed as executrix or administratrix of the estate
before she can file the action. She and her children are complainants in their own right as successors of Vicente
Tabanao. From the very moment of Vicente Tabanao’s death, his rights, insofar as the partnership was concerned,
were transmitted to his heirs, for rights to the succession are transmitted from the moment of death of the decedent.
Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were transmitted to
respondents by operation of law, more particularly by succession. Moreover, respondents became owners of their
respective hereditary shares from the moment Vicente Tabanao died. As successors who stepped into the shoes of
their decedent upon his death, they can commence any action originally pertaining to the decedent. From the moment
of his death, his rights as a partner and to demand fulfillment of petitioner’s obligations as outlined in their dissolution
agreement were transmitted to respondents. They, therefore, had the capacity to sue and seek the court’s intervention
to compel petitioner to fulfill his obligations.
4. Petitioner’s argument: Petitioner contends that the trial court should have dismissed the complaint on the ground of
prescription, arguing that respondents’ action prescribed four (4) years after it accrued in 1986. The three (3) final
stages of a partnership are: (1) dissolution; (2) winding-up; and (3) termination. The partnership, although dissolved,
continues to exist, and its legal personality is retained, at which time it completes the winding up of its affairs,
including the partitioning and distribution of the net partnership assets to the partners. For as long as the partnership
exists, any of the partners may demand an accounting of the partnership’s business. Prescription of the said right starts
to run only upon the dissolution of the partnership when the final accounting is done. The SC found that prescription
had not even begun to run in the absence of a final accounting. Article 1842 of the Civil Code provides: 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 of
any agreement to the contrary. The provision states that the right to demand an accounting accrues at the date of
dissolution in the absence of any agreement to the contrary. When a final accounting is made, it is only then that
prescription begins to run. In the case at bar, no final accounting has been made, and that is precisely what
respondents are seeking in their action before the trial court since petitioner has failed or refused to render an
accounting of the partnership’s business and assets. Hence, the said action is not barred by prescription.
WHEREFORE, in view of all the foregoing, the instant petition is DENIED for lack of merit, and the case is
REMANDED to the Regional Trial Court.
- Villareal vs. Ramirez, July 14, 2003
Facts:
Luzviminda Villareal, Jesus Jose, and Carmelito Jose formed a partnership, contributing a capital of Php 750,000 for
the operation of the restaurant and catering business under the name “Aquarius Food House and Catering Services.”
Donaldo Ramirez joined the partnership on September 5, 1984, contributing Php 250,000. In January 1987, Jesus Jose
withdrew, and the restaurant was closed down without the respondent's prior knowledge. Respondents expressed their
desire to withdraw, and after some time, reiterated their request for the return of their capital contribution, which was
ignored.
Issues:
1. Whether petitioners are liable to respondents for their share in the partnership.
2. Whether the CA’s computation of Php 253,114 as respondents’ share is correct.
3. Whether the CA was correct in not assessing costs.
Ruling:
1. No. Respondents have no right to demand the return of their equity share. The partnership, having a separate
juridical personality, is responsible for refunding the equity of the retiring parties.
2. No. The exact amount to be refunded cannot be determined until all partnership assets are liquidated. CA's
computation is considered erroneous.
3. Yes. Costs are adjudged against the losing party, but for special reasons, the court has the discretion not to award
costs. No costs are awarded unless shown to be capricious.
Disposition:
The petition is granted, and the decision and resolution of the CA are set aside. This disposition is without prejudice to
proper proceedings for the accounting, liquidation, and distribution of the remaining partnership assets, if any. No
pronouncement as to costs.
- CIR vs. Suter, February 28, 1969
Facts:
A limited partnership, "William J. Suter 'Morcoin' Co., Ltd.," was established by respondent William J. Sutter as the
general partner, and Julia Spirig and Gustav Carlson as limited partners. The partnership was lawfully registered, and
the partners contributed amounts of P20,000.00, P18,000.00, and P2,000.00, respectively. Subsequently, Sutter and
Spirig got married, while Carlson sold his share to the spouses. The partnership filed income tax returns as a
corporation without objection until the Commissioner of Internal Revenue (CIR) assessed a deficiency income tax
against Sutter, consolidating the income of the firm and the individual incomes of the partners.
Issue:
Whether the partnership dissolved by the marriage of Sutter and Spirig and the subsequent sale of Carlson's share to
the spouses?
Ruling:
No. The marriage of both partners did not dissolve the partnership. The capital contributions of Sutter and Spirig were
separately owned before their marriage, and after marriage, these contributions remained their respective separate
property. According to the Spanish Civil Code, the property brought into the marriage remains the exclusive property
of each spouse. The limited partnership, having its own juridical personality distinct from its partners, cannot be
equated with the individual incomes of its members. While Section 24 of the Internal Revenue Code merges registered
general co-partnerships with the personality of individual partners for income tax purposes, this rule cannot be
extended by implication to limited partnerships. The limited partnership is taxable on its income, and requiring
inclusion of that income in the individual tax return of Sutter would go against the law's letter and intent. It would
result in equal tax treatment of general co-partnerships and limited partnerships, contrary to the explicit differentiation
in the code. Therefore, the Commissioner's stance is not in line with the specific provisions of the law, which taxes
limited partnerships on their income.
- Teck Seeing & Co., Ltd. vs. Pacific Commercial Co., September 6, 1923
Facts:
1. Pacific Commercial Company and other creditors of Teck Seing & Co., Ltd. filed a motion requesting the court to
declare individual partners as parties to the insolvency proceeding, require them to file an inventory of their property,
and adjudicate them as insolvent debtors.
2. The motion was filed after Teck Seing & Co., Ltd. applied to be adjudged insolvent.
3. The trial judge initially granted the motion but later denied it.
4. Creditors appealed from the denial of their motion.
5. Petitioners argued that Teck Seing & Co., Ltd. was a sociedad en comandita or a limited partnership based on the
articles of partnership.
6. Creditors contended that the partnership contract established a general partnership.
7. The trial judge denied the motion based on the revised contention that Teck Seing & Co., Ltd. was a de facto
commercial association.
Issue:
Whether Teck Seing & Co., Ltd. should be treated as a general partnership notwithstanding the failure of the firm
name to include the name of one of the partners.
Ratio Decidendi:
The court held that Teck Seing & Co., Ltd. appeared to have fulfilled the requirements of Article 119 of the Code of
Commerce, which mandates every commercial association to state its articles, agreements, and conditions in a public
instrument presented for record in the mercantile registry. Article 120 of the same Code imposes responsibility on
those in charge of the management of the association violating these provisions.
Regarding the absence of all partners' names in the firm name, the court cited Professor Jose A. Espiritu, stating that
substantial compliance prevails, and the legal intention deducible from the acts of the parties controls in determining
the existence of a partnership. The intention of the persons comprising Teck Seing & Co., Ltd. was to establish a
partnership mistakenly denominated as limited.
The court emphasized that the Code of Commerce provisions on general partnerships aim to protect the public from
imposition and fraud. Article 126 requires a general partnership to transact business under the name of all its
members, several of them, or one only to safeguard creditors.
Ruling:
The order denying the creditors' motion was reversed, and the case was remanded to the court of origin for further
proceedings pursuant to the creditors' motion under the Insolvency Law. No special finding was made as to costs.
- Goquiolay vs. Sycip, July 26, 1960; December 10, 1963
FACTS:
On May 29, 1940, Tan Sin An and Antonio C. Goquiolay entered into a general commercial partnership for dealing in
real estate. The partnership purchased 49 parcels of land, assuming mortgage obligations. Tan Sin An later died, and
Kong Chai Pin, his wife, was appointed administratrix of his estate. Banco Hipotecario demanded payment, and Sing
Yee and Cuan, Co., Inc. paid the remaining balance. In 1946, they filed claims in Tan Sin's estate, leading to the sale
of the 49 parcels to Washington Sycip and Betty Lee. Antonio Goquiolay sought to set aside the sale, alleging fraud
due to inadequate pricing.
ISSUE/S:
Whether the alleged inadequate price justifies the rescission of the sale.
RATIO/RULING:
The Supreme Court held that the sale was practically a forced sale since the partnership had no other means to pay its
legitimate debts. The evidence did not show such gross inadequacy as to justify rescission. The Court noted that the
realtor's valuation was based on the land's value six years after the sale, and the continued rise in real estate values
since liberation explained the difference. There was a complete failure of proof that the sale price was unreasonably
low or unfair. Appellants presented no evidence of the market value of the lots at the time of the sale to Sycip and Lee.
Therefore, the alleged inadequate price did not justify rescission of the sale.

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Doguiles, Aaron John R.

22-00382 Agency, Trust and Partnership

Express Trust: Obligations of the Partners Among Themselves:

Ruling of the Court of First Instance:

Ruling of the Court of Appeals:

Julio vs. Dalandan, G.R. No. L-19012, October 30, 1967

Key provisions of the affidavit ("SALAYSAY") included:

Adjudging her as the owner of the land described in the affidavit.

IDENTITY OF LAND DETERMINED FROM SETTING OF WRITINGS; PAROL EVIDENCE ADMISSIBLE TO

Cañezo vs. Rojas, G.R. No. 148788, November 23, 2007

Ruling of the Supreme Court:

Peñalber vs. Ramos, G.R. No. 178645, January 30, 2009

Issue about Express Trust:

2. Whether respondent is entitled to collect damages.

The Supreme Court affirmed the CA's ruling.

Salao vs. Salao, G.R. No. L-26699, March 16, 1976

Ty vs. Ty, G.R. No. 165696, April 30, 2008

- The probate court approved this project of partition.

Cavile vs. Litania-Hong, G.R. No. 179540, March 13, 2009

3. Declaring Banco Filipino as the owner of Lot 356-A.

4. Ordering Banco Filipino to be given a writ of possession over Lot 356-A.

ISSUE: : Whether there was a partnership established between the parties.

ISSUE: Whether a partnership between Aurelio and Eduardo exists or not

A particular partnership is distinguished from a joint adventure, to wit:

7. Rojas vs. Maglana, G.R. No. L-30616, December 10, 1990

Whether or not Magalana may unilaterally dissolve the partnership.

8. Torres vs. Court of Appeals, G.R. No. 134559, December 9, 1999

IX. Obligations of the Partners Among Themselves

3. Guy vs. Gacott , G.R. No. 206147, January 13, 2016

X. Property Rights of a Partner

Whether the mortgage property was owned by the partnership.

RTC: Ruled in favor of Aurelio.

ISSUE: Whether there was a valid contract of partnership.

4. Jarantilla vs. Jarantilla, G.R. No. 154486, December 1, 2010.

6. Realubit vs. Jaso, G.R. No. 178782, September 21, 2011

2. Whether the joint venture is a contract of partnership.

- PNB vs. Lo, October 5, 1927

- Co-Pitco vs. Yulo, September 14, 1907

- La Compania Maritima vs. Muñoz, December 12, 1907

Whether Emilio is a partner

- Dietrich vs. Freeman, January 28, 1911

Issue: Whether Whitcomb is liable to Freeman.

- Santiago Syjuco, Inc. vs. Castro, July 7, 1989

Issue: Whether the conveyance of real property belongs to the partnership.

1. Jacob S. Lim owned (single proprietorship) Southern Air Lines (SAL).

- Vda. De Chan vs. Pen, October 24, 1928

Issues: Whether or not Leoncia Vda. de Chan Diaco is liable

- Mendoza vs. Paule, February 13, 2009

- Guy vs. Gacott, January 13, 2016

Actions in the Lower Courts:

Doctrine Laid Down (if any):

Supreme Court Ruling:

- Bendecio vs. Bautista, December 7, 2021

- Magdusa vs. Albaran, June 30, 1962

- Yu vs. NLRC, June 30, 1993

- Rojas vs. Maglana, December 10, 1990

- Idos vs. Court of Appeals, September 25, 1998

- Tocao vs. Court of Appeals, October 4, 2000

- Emnace vs. Court of Appeals, November 23, 2001

- Villareal vs. Ramirez, July 14, 2003

- CIR vs. Suter, February 28, 1969

- Goquiolay vs. Sycip, July 26, 1960; December 10, 1963

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