G.R. No.

L-13680

April 27, 1960

MAURO LOZANA, plaintiff-appellee,

vs.
SERAFIN DEPAKAKIBO, defendant-appellant.
Antonio T. Lozada for appellee.
Agustin T. Misola and Tomas D. Dominado for appellant.
LABRADOR, J.:
This is an appeal from a judgment of the Court of First Instance
of Iloilo, certified to us by the Court of Appeals, for the reason
that only questions of law are involved in said appeal.
The record discloses that on November 16, 1954 plaintiff Mauro
Lozana entered into a contract with defendant Serafin
Depakakibo wherein they established a partnership capitalized at
the sum of P30,000, plaintiff furnishing 60% thereof and the
defendant, 40%, for the purpose of maintaining, operating and
distributing electric light and power in the Municipality of
Dumangas, Province of Iloilo, under a franchise issued to Mrs.
Piadosa Buenaflor. However, the franchise or certificate of public
necessity and convenience in favor of the said Mrs. Piadosa
Buenaflor was cancelled and revoked by the Public Service
Commission on May 15, 1955. But the decision of the Public
Service Commission was appealed to Us on October 21, 1955. A
temporary certificate of public convenience was issued in the
name of Olimpia D. Decolongon on December 22, 1955 (Exh.
"B"). Evidently because of the cancellation of the franchise in the
name of Mrs. Piadosa Buenaflor, plaintiff herein Mauro Lozana
sold a generator, Buda (diesel), 75 hp. 30 KVA capacity, Serial
No. 479, to the new grantee Olimpia D. Decolongon, by a deed
dated October 30, 1955 (Exhibit "C"). Defendant Serafin

Depakakibo, on the other hand, sold one Crossly Diesel Engine,

25 h. p., Serial No. 141758, to the spouses Felix Jimenea and
Felina Harder, by a deed dated July 10, 1956.
On November 15, 1955, plaintiff Mauro Lozana brought an action
against the defendant, alleging that he is the owner of the
Generator Buda (Diesel), valued at P8,000 and 70 wooden posts
with the wires connecting the generator to the different houses
supplied by electric current in the Municipality of Dumangas, and
that he is entitled to the possession thereof, but that the
defendant has wrongfully detained them as a consequence of
which plaintiff suffered damages. Plaintiff prayed that said
properties be delivered back to him. Three days after the filing of
the complaint, that is on November 18, 1955, Judge Pantaleon
A. Pelayo issued an order in said case authorizing the sheriff to
take possession of the generator and 70 wooden posts, upon
plaintiff's filing of a bond in the amount of P16,000 in favor of the
defendant (for subsequent delivery to the plaintiff). On December
5, 1955, defendant filed an answer, denying that the generator
and the equipment mentioned in the complaint belong to the
plaintiff and alleging that the same had been contributed by the
plaintiff to the partnership entered into between them in the same
manner that defendant had contributed equipments also, and
therefore that he is not unlawfully detaining them. By way of
counterclaim, defendant alleged that under the partnership
agreement the parties were to contribute equipments, plaintiff
contributing the generator and the defendant, the wires for the
purpose of installing the main and delivery lines; that the plaintiff
sold his contribution to the partnership, in violation of the terms
of their agreement. He, therefore, prayed that the complaint
against him be dismissed; that plaintiff be adjudged guilty of
violating the partnership contract and be ordered to pay the
defendant the sum of P3,000, as actual damages, P600.00 as
attorney's fees and P2,600 annually as actual damages; that the

court order dissolution of the partnership, after the accounting

and liquidation of the same.
On September 27, 1956, the defendant filed a motion to declare
plaintiff in default on his counterclaim, but this was denied by the
court. Hearings on the case were conducted on October 25,
1956 and November 5, 1956, and on the latter date the judge
entered a decision declaring plaintiff owner of the equipment and
entitled to the possession thereof, with costs against defendant.
It is against this judgment that the defendant has appealed.
The above judgment of the court was rendered on a stipulation
of facts, which is as follows:
1. That on November 16, 1954, in the City of Iloilo, the
aforementioned plaintiff, and the defendant entered into a
contract of Partnership, a copy of which is attached as Annex "A"
of defendant's answer and counterclaim, for the purpose set forth
therein and under the national franchise granted to Mrs. Piadosa
Buenaflor;
2. That according to the aforementioned Partnership Contract,
the plaintiff Mr. Mauro Lozana, contributed the amount of
Eighteen Thousand Pesos (P18,000.00); said contributions of
both parties being the appraised values of their respective
properties brought into the partnership;
3. That the said Certificate of Public Convenience and Necessity
was revoked and cancelled by order of the Public Service
Commission dated March 15, 1955, promulgated in case No.
58188, entitled, "Piadosa Buenaflor, applicant", which order has
been appealed to the Supreme Court by Mrs. Buenaflor;

4. That on October 30, 1955, the plaintiff sold properties brought

into by him to the said partnership in favor of Olimpia
Decolongon in the amount of P10,000.00 as per Deed of Sale
dated October 30, 1955 executed and ratified before Notary
Public, Delfin Demaisip, in and for the Municipality of Dumangas,
Iloilo and entered in his Notarial Registry as Doc. No. 832; Page
No. 6; Book No. XIII; and Series of 1955, a copy thereof is made
as Annex "B" of defendant's answer and counterclaim;
5. That there was no liquidation of partnership and that at the
time of said Sale on October 30, 1955, defendant was the
manager thereof;
6. That by virtue of the Order of this Honorable Court dated
November 18, 1955, those properties sold were taken by the
Provincial Sheriff on November 20, 1955 and delivered to the
plaintiff on November 25, 1955 upon the latter posting the
required bond executed by himself and the Luzon Surety Co.,
dated November 17, 1955 and ratified before the Notary Public,
Eleuterio del Rosario in and for the province of Iloilo known as
Doc. No. 200; Page 90; Book No. VII; and Series of 1955; of said
Notary Public;
7. That the said properties sold are now in the possession of
Olimpia Decolongon, the purchaser, who is presently operating
an electric light plant in Dumangas, Iloilo;
8. That the defendant sold certain properties in favor of the
spouses, Felix Jimenea and Felisa Harder contributed by him to
the partnership for P3,500.00 as per Deed of Sale executed and
ratified before the Notary Public Rodrigo J. Harder in and for the
Province of Iloilo, known as Doc. No. 76; Page 94; Book No. V;
and Series of 1955, a certified copy of which is hereto attached

marked as Annex "A", and made an integral part hereof; (pp,

27-29 ROA).
As it appears from the above stipulation of facts that the plaintiff
and the defendant entered into the contract of partnership,
plaintiff contributing the amount of P18,000, and as it is not
stated therein that there bas been a liquidation of the partnership
assets at the time plaintiff sold the Buda Diesel Engine on
October 15, 1955, and since the court below had found that the
plaintiff had actually contributed one engine and 70 posts to the
partnership, it necessarily follows that the Buda diesel engine
contributed by the plaintiff had become the property of the
partnership. As properties of the partnership, the same could not
be disposed of by the party contributing the same without the
consent or approval of the partnership or of the other partner.
(Clemente vs. Galvan, 67 Phil., 565).
The lower court declared that the contract of partnership was null
and void, because by the contract of partnership, the parties
thereto have become dummies of the owner of the franchise.
The reason for this holding was the admission by defendant
when being cross-examined by the court that he and the plaintiff
are dummies. We find that this admission by the defendant is an
error of law, not a statement of a fact. The Anti-Dummy law has
not been violated as parties plaintiff and defendant are not aliens
but Filipinos. The Anti-Dummy law refers to aliens only
(Commonwealth Act 108 as amended).
Upon examining the contract of partnership, especially the
provision thereon wherein the parties agreed to maintain,
operate and distribute electric light and power under the
franchise belonging to Mrs. Buenaflor, we do not find the
agreement to be illegal, or contrary to law and public policy such
as to make the contract of partnership, null and void ab initio.

The agreement could have been submitted to the Public Service

Commission if the rules of the latter require them to be so
presented. But the fact of furnishing the current to the holder of
the franchise alone, without the previous approval of the Public
Service Commission, does not per se make the contract of
partnership null and void from the beginning and render the
partnership entered into by the parties for the purpose also void
and non-existent. Under the circumstances, therefore, the court
erred in declaring that the contract was illegal from the beginning
and that parties to the partnership are not bound therefor, such
that the contribution of the plaintiff to the partnership did not pass
to it as its property. It also follows that the claim of the defendant
in his counterclaim that the partnership be dissolved and its
assets liquidated is the proper remedy, not for each contributing
partner to claim back what he had contributed.
For the foregoing considerations, the judgment appealed from as
well as the order of the court for the taking of the property into
custody by the sheriff must be, as they hereby are set aside and
the case remanded to the court below for further proceedings in
accordance with law.
G.R. No. L-33580

February 6, 1931

SANCHO v. LIZARRAGA
Jose Perez Cardenas and Jose M. Casal for appellant.
Celso B. Jamora and Antonio Gonzalez for appellee.
ROMUALDEZ, J.:
The plaintiff brought an action for the rescission of a partnership
contract between himself and the defendant, entered into on
October 15, 1920, the reimbursement by the latter of his 50,000

peso investment therein, with interest at 12 per cent per annum

form October 15, 1920, with costs, and any other just and
equitable remedy against said defendant.
The defendant denies generally and specifically all the
allegations of the complaint which are incompatible with his
special defenses, cross-complaint and counterclaim, setting up
the latter and asking for the dissolution of the partnership, and
the payment to him as its manager and administrator of P500
monthly from October 15, 1920, until the final dissolution, with
interest, one-half of said amount to be charged to the plaintiff. He
also prays for any other just and equitable remedy.
The Court of First Instance of Manila, having heard the cause,
and finding it duly proved that the defendant had not contributed
all the capital he had bound himself to invest, and that the
plaintiff had demanded that the defendant liquidate the
partnership, declared it dissolved on account of the expiration of
the period for which it was constituted, and ordered the
defendant, as managing partner, to proceed without delay to
liquidate it, submitting to the court the result of the liquidation
together with the accounts and vouchers within the period of
thirty days from receipt of notice of said judgment, without costs.
The plaintiff appealed from said decision making the following
assignments of error:
1. In holding that the plaintiff and appellant is not entitled to the
rescission of the partnership contract, Exhibit A, and that article
1124 of the Civil Code is not applicable to the present case.
2. In failing to order the defendant to return the sum of P50,000
to the plaintiff with interest from October 15, 1920, until fully paid.

3. In denying the motion for a new trial.

In the brief filed by counsel for the appellee, a preliminary
question is raised purporting to show that this appeal is
premature and therefore will not lie. The point is based on the
contention that inasmuch as the liquidation ordered by the trial
court, and the consequent accounts, have not been made and
submitted, the case cannot be deemed terminated in said court
and its ruling is not yet appealable. In support of this contention
counsel cites section 123 of the Code of Civil Procedure, and the
decision of this court in the case of Natividad vs. Villarica (31
Phil., 172).
This contention is well founded. Until the accounts have been
rendered as ordered by the trial court, and until they have been
either approved or disapproved, the litigation involved in this
action cannot be considered as completely decided; and, as it
was held in said case of Natividad vs .Villarica, also with
reference to an appeal taken from a decision ordering the
rendition of accounts following the dissolution of partnership, the
appeal in the instant case must be deemed premature.
But even going into the merits of the case, the affirmation of the
judgment appealed from is inevitable. In view of the lower court's
findings referred to above, which we cannot revise because the
parol evidence has not been forwarded to this court, articles
1681 and 1682 of the Civil Code have been properly applied.
Owing to the defendant's failure to pay to the partnership the
whole amount which he bound himself to pay, he became
indebted to it for the remainder, with interest and any damages
occasioned thereby, but the plaintiff did not thereby acquire the
right to demand rescission of the partnership contract according
to article 1124 of the Code. This article cannot be applied to the
case in question, because it refers to the resolution of obligations
Application of ART 1786 Every partner is a debtor of a partnership for
whatever he promised to contribute thereto

And ART 1788 Partner becomes a debtor for interest and damages
from the time he should have complied with his obligation

in general, whereas article 1681 and 1682 specifically refer to

the contract of partnership in particular. And it is a well known
principle that special provisions prevail over general provisions.

parties also binding themselves, for this purpose, to report the

expenses which each might have incurred.

The business was a failure because it did not yield the expected
profit.

June 26, 1939 G.R. No. 45441

MORA ELECTRIC CO. v. MATIC
Claro M. Recto and John R. Mcfie for petitioner.
Gibbs and McDonough for respondents.
AVANCEA, C.J.:
Paulino Matic obtained from the City of Manila the concession to
provide the lighting system of the Manila North and South
Cemeteries on All Saint's Day in 1934, for the amount of P8,733,
the payment of which was guaranteed by Luzon Surety Co.
Matic thereafter transferred his rights to said concession to
Benita Quiogue, authorizing her to enter into a contract with
Mora Electric Co., Inc., to make the installation and to pay the
P8,773 to the City of Manila with the money to be collected from
the installations.
Benita Quiogue entered into this contract with Mora Electric Co.,
Inc., each party binding itself to contribute the necessary labor
and material which the latter may be unable to put up, and
dividing the profits between them after deducting therefrom all
the necessary expenses for labor, materials, cost of the current
and the amount of P8,773 which should be paid to the city, both

For failure to pay the amount of P8,773 owing to the City of

Manila for the concession, Luzon Surety Co., had to make good
the said amount. Luzon Surety Co., thereupon sued Paulino
Matic and Benita Quiogue for the recovery of this amount.
Paulino Matic and Benita Quiogue, in turn, filed the present
action against Mora Electric Co., Inc., to recover from the latter
the amount of P8,773 to which they were sentenced to pay in the
case commenced against them by Luzon Surety Co. The Court
of Appeals, affirming the judgment of the Court of First Instance,
sentenced Mora Electric Co., Inc., to pay Paulino Matic and
Benita Quiogue the amount of P8,773, minus that of P235 which
had already been paid on account of the former, or P8,518 with
interest thereon at 12 per cent per annum, plus 8 per cent of this
amount as attorney's fee.
Mora Electric Co., Inc., has appealed this case to this court of
certiorari. The Court of Appeals, relying upon the evidence oral
and documentary, held that Mora Electric Co., Inc., bound itself
in its contract with Benita Quiogue to pay the City of Manila the
P8,773. Unable to review this evidence, we have to decide this
appeal on the basis of this finding of the Court of Appeals.
Having undertaken to pay this amount to the City of Manila, Mora
Electric Co., Inc., is under a duty to reimburse whoever made
good the amount for it, namely, Paulino Matic and Benita
Quiogue.

However, Mora Electric Co., Inc., also contends that, at all

events, Benita Quiogue should share in the payment of this
amount to the City of Manila. It alleges that the contract entered
into between them is a civil partnership. It then invokes the
provisions of the Civil Code regarding the distribution of the
profits and losses between the partners.

TORRES et. al. v. COURT OF APPEALS [G.R. No. 134559.

December 9, 1999]

This question, however, is not raised in this case. It properly

pertains to the liquidation of the partnership and the distribution
of the profits and losses, which are not here at issue. The
amount now sought to be recovered is not claimed as loss or
profit, but as the contribution which Mora Electric Co., Inc.,
bound itself to make to the partnership and which it was under a
duty to pay, although it was paid instead by Matic and Quiogue.
The liquidation of the partnership is not now sought. Indeed,
there is no reason for such liquidation. While it is mentioned in
the appealed decision that the business produced P9,636.40, it
does not appear that the parties have made a report, as they
have agreed to do, of the expenses incurred by each, and it is
not possible to determine whether there was a profit or loss and
what is the extent thereof and the measure of the respective
liability or benefit.

Courts may not extricate parties from the necessary

consequences of their acts. That the terms of a contract turn out
to be financially disadvantageous to them will not relieve them of
their obligations therein. The lack of an inventory of real property
will not ipso facto release the contracting partners from their
respective obligations to each other arising from acts executed in
accordance with their agreement.

As to the interest on the amount of P8,518, Matic and Quiogue

having been sentenced to pay it, it constitutes damages suffered
by them due to the breach by Mora Electric Co., Inc., of the
obligation it assumed to pay the City the amount of the
concession. The same is true with respect to the judgment to pay
8 per cent on the amount of P8,518.
Wherefore, the judgment of the Court of Appeals is affirmed, with
the costs to the petitioner. So ordered.

PANGANIBAN, J.:

The Case
The Petition for Review on Certiorari before us assails the
March 5, 1998 Decision[1] Second Division of the Court of
Appeals[2] (CA) in CA-GR CV No. 42378 and its June 25, 1998
Resolution denying reconsideration. The assailed Decision
affirmed the ruling of the Regional Trial Court (RTC) of Cebu City
in Civil Case No. R-21208, which disposed as follows:
WHEREFORE, for all the foregoing considerations, the Court,
finding for the defendant and against the plaintiffs, orders the
dismissal of the plaintiffs complaint. The counterclaims of the
defendant are likewise ordered dismissed. No pronouncement
as to costs.[3]
The Facts

Sisters Antonia Torres and Emeteria Baring, herein

petitioners, entered into a "joint venture agreement" with
Respondent Manuel Torres for the development of a parcel of
land into a subdivision. Pursuant to the contract, they executed
a Deed of Sale covering the said parcel of land in favor of
respondent, who then had it registered in his name. By
mortgaging the property, respondent obtained from Equitable
Bank a loan of P40,000 which, under the Joint Venture
Agreement, was to be used for the development of the
subdivision.[4] All three of them also agreed to share the
proceeds from the sale of the subdivided lots.
The project did not push through, and the land was
subsequently foreclosed by the bank.
According to petitioners, the project failed because of
respondents lack of funds or means and skills. They add that
respondent used the loan not for the development of the
subdivision, but in furtherance of his own company, Universal
Umbrella Company.
On the other hand, respondent alleged that he used the
loan to implement the Agreement. With the said amount, he was
able to effect the survey and the subdivision of the lots. He
secured the Lapu Lapu City Councils approval of the subdivision
project which he advertised in a local newspaper. He also
caused the construction of roads, curbs and gutters. Likewise,
he entered into a contract with an engineering firm for the
building of sixty low-cost housing units and actually even set up
a model house on one of the subdivision lots. He did all of these
for a total expense of P85,000.
Respondent claimed that the subdivision project failed,
however, because petitioners and their relatives had separately
caused the annotations of adverse claims on the title to the land,

which eventually scared away prospective buyers. Despite his

requests, petitioners refused to cause the clearing of the claims,
thereby forcing him to give up on the project.[5]
Subsequently, petitioners filed a criminal case for estafa
against respondent and his wife, who were however acquitted.
Thereafter, they filed the present civil case which, upon
respondent's motion, was later dismissed by the trial court in an
Order dated September 6, 1982. On appeal, however, the
appellate court remanded the case for further proceedings.
Thereafter, the RTC issued its assailed Decision, which, as
earlier stated, was affirmed by the CA.
Hence, this Petition.[6]
Ruling of the Court of Appeals
In affirming the trial court, the Court of Appeals held that
petitioners and respondent had 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 contract. Disagreeing with the trial
courts pronouncement that losses as well as profits in a joint
venture should be distributed equally,[7] the CA invoked Article
1797 of the Civil Code which provides:
Article 1797 - 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.
The CA elucidated further:

In the absence of stipulation, the share of each partner in the

profits and losses shall be in proportion to what he may have
contributed, but the industrial partner shall not be liable for the
losses. As for the profits, the industrial partner shall receive such
share as may be just and equitable under the circumstances. If
besides his services he has contributed capital, he shall also
receive a share in the profits in proportion to his capital.
The Issue

In the same breath, however, they assert that under those

very same contracts, respondent is liable for his failure to
implement the project. Because the agreement entitled them to
receive 60 percent of the proceeds from the sale of the
subdivision lots, they pray that respondent pay them damages
equivalent to 60 percent of the value of the property.[9]
The pertinent portions of the Joint Venture Agreement read
as follows:
KNOW ALL MEN BY THESE PRESENTS:

Petitioners impute to the Court of Appeals the following

error:
x x x [The] Court of Appeals erred in concluding that the
transaction x x x between the petitioners and respondent was
that of a joint venture/partnership, ignoring outright the provision
of Article 1769, and other related provisions of the Civil Code of
the Philippines.[8]
The Courts Ruling
The Petition is bereft of merit.

This AGREEMENT, is made and entered into at Cebu City,

Philippines, this 5th day of March, 1969, by and between MR.
MANUEL R. TORRES, x x x the FIRST PARTY, likewise, MRS.
ANTONIA B. TORRES, and MISS EMETERIA BARING, x x x the
SECOND PARTY:
W I T N E S S E T H:
That, whereas, the SECOND PARTY, voluntarily offered the
FIRST PARTY, this property located at Lapu-Lapu City, Island of
Mactan, under Lot No. 1368 covering TCT No. T-0184 with a
total area of 17,009 square meters, to be sub-divided by the
FIRST PARTY;

Main Issue: Existence of a Partnership

Petitioners deny having formed a partnership with
respondent. They contend that the Joint Venture Agreement and
the earlier Deed of Sale, both of which were the bases of the
appellate courts finding of a partnership, were void.

Whereas, the FIRST PARTY had given the SECOND PARTY,

the sum of: TWENTY THOUSAND (P20,000.00) Pesos,
Philippine Currency, upon the execution of this contract for the
property entrusted by the SECOND PARTY, for sub-division
projects and development purposes;

NOW THEREFORE, for and in consideration of the above

covenants and promises herein contained the respective parties
hereto do hereby stipulate and agree as follows:
ONE: That the SECOND PARTY signed an absolute Deed of
Sale x x x dated March 5, 1969, in the amount of TWENTY FIVE
THOUSAND FIVE HUNDRED THIRTEEN & FIFTY CTVS.
(P25,513.50) Philippine Currency, for 1,700 square meters at
ONE [PESO] & FIFTY CTVS. (P1.50) Philippine Currency, in
favor of the FIRST PARTY, but the SECOND PARTY did not
actually receive the payment.
SECOND: That the SECOND PARTY, had received from the
FIRST PARTY, the necessary amount of TWENTY THOUSAND
(P20,000.00) pesos, Philippine currency, for their personal
obligations and this particular amount will serve as an advance
payment from the FIRST PARTY for the property mentioned to
be sub-divided and to be deducted from the sales.
THIRD: That the FIRST PARTY, will not collect from the
SECOND PARTY, the interest and the principal amount involving
the amount of TWENTY THOUSAND (P20,000.00) Pesos,
Philippine Currency, until the sub-division project is terminated
and ready for sale to any interested parties, and the amount of
TWENTY THOUSAND (P20,000.00) pesos, Philippine currency,
will be deducted accordingly.
FOURTH: That all general expense[s] and all cost[s] involved in
the sub-division project should be paid by the FIRST PARTY,
exclusively and all the expenses will not be deducted from the
sales after the development of the sub-division project.

FIFTH: That the sales of the sub-divided lots will be divided into
SIXTY PERCENTUM 60% for the SECOND PARTY and FORTY
PERCENTUM 40% for the FIRST PARTY, and additional profits
or whatever income deriving from the sales will be divided
equally according to the x x x percentage [agreed upon] by both
parties.
SIXTH: That the intended sub-division project of the property
involved will start the work and all improvements upon the
adjacent lots will be negotiated in both parties['] favor and all
sales shall [be] decided by both parties.
SEVENTH: That the SECOND PARTIES, should be given an
option to get back the property mentioned provided the amount
of TWENTY THOUSAND (P20,000.00) Pesos, Philippine
Currency, borrowed by the SECOND PARTY, will be paid in full
to the FIRST PARTY, including all necessary improvements
spent by the FIRST PARTY, and the FIRST PARTY will be given
a grace period to turnover the property mentioned above.
That this AGREEMENT shall be binding and obligatory to the
parties who executed same freely and voluntarily for the uses
and purposes therein stated.[10]
A reading of the terms embodied in the Agreement
indubitably shows the existence of a partnership pursuant to
Article 1767 of the Civil Code, which provides:
ART. 1767. By the contract of partnership two or more persons
bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among
themselves.

Under the above-quoted Agreement, petitioners would

contribute property to the partnership in the form of land which
was to be developed into a subdivision; while respondent would
give, in addition to his industry, the amount needed for general
expenses and other costs. Furthermore, the income from the
said project would be divided according to the stipulated
percentage. Clearly, the contract manifested the intention of the
parties to form a partnership.[11]
It should be stressed that the parties implemented the
contract. Thus, petitioners transferred the title to the land to
facilitate its use in the name of the respondent. On the other
hand, respondent caused the subject land to be mortgaged, the
proceeds of which were used for the survey and the subdivision
of the land. As noted earlier, he developed the roads, the curbs
and the gutters of the subdivision and entered into a contract to
construct low-cost housing units on the property.
Respondents actions clearly belie petitioners contention
that he made no contribution to the partnership. Under Article
1767 of the Civil Code, a partner may contribute not only money
or property, but also industry.
Petitioners Bound by Terms of Contract
Under Article 1315 of the Civil Code, contracts bind the
parties not only to what has been expressly stipulated, but also
to all necessary consequences thereof, as follows:
ART. 1315. Contracts are perfected by mere consent, and from
that moment the parties are bound not only to the fulfillment of
what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in
keeping with good faith, usage and law.

It is undisputed that petitioners are educated and are thus

presumed to have understood the terms of the contract they
voluntarily signed. If it was not in consonance with their
expectations, they should have objected to it and insisted on the
provisions they wanted.
Courts are not authorized to extricate parties from the
necessary consequences of their acts, and the fact that the
contractual stipulations may turn out to be financially
disadvantageous will not relieve parties thereto of their
obligations. They cannot now disavow the relationship formed
from such agreement due to their supposed misunderstanding of
its terms.
Alleged Nullity of the Partnership Agreement
Petitioners argue that the Joint Venture Agreement is void
under Article 1773 of the Civil Code, which provides:
ART. 1773. 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.
They contend that since the parties did not make, sign or
attach to the public instrument an inventory of the real property
contributed, the partnership is void.
We clarify. First, Article 1773 was intended primarily to
protect third persons. Thus, the eminent Arturo M. Tolentino
states that under the aforecited provision which is a complement
of Article 1771,[12] the execution of a public instrument would
be useless if there is no inventory of the property contributed,
because without its designation and description, they cannot be

subject to inscription in the Registry of Property, and their

contribution cannot prejudice third persons. This will result in
fraud to those who contract with the partnership in the belief [in]
the efficacy of the guaranty in which the immovables may
consist. Thus, the contract is declared void by the law when no
such inventory is made. The case at bar does not involve third
parties who may be prejudiced.
Second, petitioners themselves invoke the allegedly void
contract as basis for their claim that respondent should pay them
60 percent of the value of the property.[13] They cannot in one
breath deny the contract and in another recognize it, depending
on what momentarily suits their purpose. Parties cannot adopt
inconsistent positions in regard to a contract and courts will not
tolerate, much less approve, such practice.
In short, the alleged nullity of the partnership will not
prevent courts from considering the Joint Venture Agreement an
ordinary contract from which the parties rights and obligations to
each other may be inferred and enforced.
Partnership Agreement Not the Result of an Earlier Illegal
Contract
Petitioners also contend that the Joint Venture Agreement
is void under Article 1422[14] of the Civil Code, because it is the
direct result of an earlier illegal contract, which was for the sale
of the land without valid consideration.
This argument is puerile. The Joint Venture Agreement
clearly states that the consideration for the sale was the
expectation of profits from the subdivision project. Its first
stipulation states that petitioners did not actually receive
payment for the parcel of land sold to respondent.

Consideration, more properly denominated as cause, can take

different forms, such as the prestation or promise of a thing or
service by another.[15]
In this case, the cause of the contract of sale consisted not
in the stated peso value of the land, but in the expectation of
profits from the subdivision project, for which the land was
intended to be used. As explained by the trial court, the land
was in effect given to the partnership as [petitioners]
participation therein. x x x There was therefore a consideration
for the sale, the [petitioners] acting in the expectation that,
should the venture come into fruition, they [would] get sixty
percent of the net profits.
Liability of the Parties
Claiming that respondent was solely responsible for the
failure of the subdivision project, petitioners maintain that he
should be made to pay damages equivalent to 60 percent of the
value of the property, which was their share in the profits under
the Joint Venture Agreement.
We are not persuaded. True, the Court of Appeals held
that petitioners acts were not the cause of the failure of the
project.[16] But it also ruled that neither was respondent
responsible therefor.[17] In imputing the blame solely to him,
petitioners failed to give any reason why we should disregard the
factual findings of the appellate court relieving him of fault.
Verily, factual issues cannot be resolved in a petition for review
under Rule 45, as in this case. Petitioners have not alleged, not
to say shown, that their Petition constitutes one of the exceptions
to this doctrine.[18] Accordingly, we find no reversible error in the
CA's ruling that petitioners are not entitled to damages.

The sisters did not show evidence as to Torres

fault in the failure of the partnership.
income of the projected will be divided into 60-40
sisters will bear the loss of 60 - capitalist partners
Torres is exempt from losses of 40 because he is
an industrial partner.

WHEREFORE, the Petition is hereby DENIED and the

challenged Decision AFFIRMED. Costs against petitioners.
SO ORDERED.

!
MIGUEL CUENCO v. Vda. DE MANGUERRA [G.R. No. 149844.
October 13, 2004]

!
DECISION
PANGANIBAN, J.:
Inasmuch as the facts indubitably and eloquently show an
implied trust in favor of respondent, the Court of Appeals did not
err in affirming the Decision of the Regional Trial Court ordering
petitioner to convey the subject property to her. That Decision
satisfied the demands of justice and prevented unjust
enrichment.
The Case
Before us is a Petition for Review[1] under Rule 45 of the
Rules of Court, challenging the August 22, 2001 Decision[2] of
the Court of Appeals (CA) in CA-GR CV No. 54852. The
assailed Decision disposed as follows:
WHEREFORE, the decision appealed from is AFFIRMED.[3]
On the other hand, the Regional Trial Court (RTC) Decision
affirmed by the CA disposed as follows:

WHEREFORE, considering that this action is essentially one for

reconveyance or enforcement of a trust, judgment is hereby
rendered ordering the substituted defendant Marietta Cuenco
Cuyegkeng to reconvey or transfer, in a duly registrable public
instrument, Lot No 903-A-6 under TCT No. 113781 of the
Registry of Deeds of Cebu City, of the Banilad Estate with an
area of 834 square meters, in favor of plaintiff Concepcion
Cuenco Vda. De Manguerra; or should the substituted
defendant, for one reason or another, fail to execute the
necessary instrument once the decision becomes final, the Clerk
of Court of this Court (RTC) is hereby instructed, in accordance
with the Rules of Court, to prepare and execute the appropriate
and requisite conveyance and instrument in favor of herein
plaintiff which, in either case, shall be registered with the Office
of the Register of Deeds of Cebu City.
Without costs in this instance.[4]
The Facts
The facts were summarized by the appellate court as
follows:
On September 19, 1970, the [respondent] filed the initiatory
complaint herein for specific performance against her uncle
[Petitioner] Miguel Cuenco which averred, inter alia that her
father, the late Don Mariano Jesus Cuenco (who became
Senator) and said [petitioner] formed the Cuenco and Cuenco
Law Offices; that on or around August 4, 1931, the Cuenco and
Cuenco Law Offices served as lawyers in two (2) cases entitled
Valeriano Solon versus Zoilo Solon (Civil Case 9037) and
Valeriano Solon versus Apolonia Solon (Civil Case 9040)
involving a dispute among relatives over ownership of lot 903 of

the Banilad Estate which is near the Cebu Provincial Capitol;

that records of said cases indicate the name of the [petitioner]
alone as counsel of record, but in truth and in fact, the real
lawyer behind the success of said cases was the influential Don
Mariano Jesus Cuenco; that after winning said cases, the
awardees of Lot 903 subdivided said lot into three (3) parts as
follows:
Lot 903-A: 5,000 [square
meters]: Mariano Cuencos
attorneys fees
Lot 903-B: 5,000 [square
meters]: Miguel Cuencos
attorneys fees
Lot 903-C: 54,000 [square
meters]: Solons retention
That at the time of distribution of said three (3) lots in Cebu,
Mariano Jesus Cuenco was actively practicing law in Manila, and
so he entrusted his share (Lot 903-A) to his brother law partner
(the [petitioner]); that on September 10, 1938, the [petitioner]
was able to obtain in his own name a title for Lot 903-A (Transfer
Certificate of Title [TCT] RT-6999 [T-21108]); that he was under
the obligation to hold the title in trust for his brother Marianos
children by first marriage; that sometime in 1947, the Cuenco
family was anticipating Marianos second marriage, and so on
February 1, 1947, they partitioned Lot 903-A into six (6) sub-lots
(Lots 903-A-1 to 903-A-6) to correspond to the six (6) children of
Marianos first marriage (Teresita, Manuel, Lourdes, Carmen,
Consuelo, and Concepcion); that the [petitioner] did not object
nor oppose the partition plan; that on June 4, 1947, the
[petitioner] executed four (4) deeds of donation in favor of
Marianos four (4) children: Teresita, Manuel, Lourdes, and
Carmen, pursuant to the partition plan (per notary documents

183, 184, 185, 186, Book III, Series 1947 of Cebu City Notary
Public Candido Vasquez); that on June 24, 1947, the [petitioner]
executed the fifth deed of donation in favor of Marianos fifth child
Consuelo (per notary document 214, Book III, Series 1947 of
Cebu City Notary Public Candido Vasquez) (Exhibits 2 to 5);
that said five (5) deeds of donation left out Marianos sixth child
Concepcion who later became the [respondent] in this case;
that in 1949, [respondent] occupied and fenced a portion of Lot
903-A-6 for taxation purposes (Exhibit F, Exhibit 6); that she
also paid the taxes thereon (Exhibit G); that her father died on
February 25, 1964 with a Last Will and Testament; that the
pertinent portion of her fathers Last Will and Testament
bequeaths the lot.
near the Cebu provincial capitol, which were my attorneys
fees from my clients, Victoria Rallos and Zoilo Solon,
respectively have already long been disposed of, and
distributed by me, through my brother, Miguel, to all my said
children in the first marriage;
That on June 3, 1966, the [petitioner] wrote a letter petitioning
the Register of Deeds of Cebu to transfer Lot 903-A-6 to his
name on the ground that Lot 903-A-6 is a portion of Lot 903-A;
that on April 6, 1967, the [respondent] requested the Register of
Deeds to annotate an affidavit of adverse claim against the
[petitioners] TCT RT-6999 (T-21108) which covers Lot 903-A;
that on June 3, 1967, the Register of Deeds issued TCT 35275
covering Lot 903-A-6 in the name of the [petitioner] but carrying
the earlier annotation of adverse claim; that in 1969, the
[petitioner] tore down the wire fence which the [respondent]
constructed on Lot 903-A-6 which compelled the latter to institute
the instant complaint dated August 20, 1970 on September 19,
1970.

On December 5, 1970, the answer with counterclaim dated

December 3, 1970 of [petitioner] Miguel Cuenco was filed where
he alleged that he was the absolute owner of Lot 903-A-6; that
this lot was a portion of Lot 903-A which in turn was part of Lot
903 which was the subject matter of litigation; that he was alone
in defending the cases involving Lot 903 without the participation
of his brother Mariano Cuenco; that he donated five (5) of the six
(6) portions of Lot 903-A to the five (5) children of his brother
Mariano out of gratitude for the love and care they exhibited to
him (Miguel) during the time of his long sickness; that he did not
give or donate any portion of the lot to the [respondent] because
she never visited him nor took care of him during his long
sickness; that he became critically ill on February 11, 1946 and
was confined at the Singians Clinic in Manila and then
transferred to Cebu where he nearly died in 1946; that his wife
Fara Remia Ledesma Cuenco had an operation on January
1951 and was confined at the University of Santo Tomas Hospital
and John Hopkins Hospital in the United States; that two of his
children died at the University of Santo Tomas Hospital in 1951
and 1952; and that his wife was blind for many months due to
malignant hypertension but [respondent] never remembered her
nor did she commiserate with him and his wife in their long
period of sorrow.
[Petitioner] Miguel Cuenco took the witness stand as early as
September 13, 1974. His self-conducted direct examination
lasted until 1985, the last one on November 22, 1985.
Unfortunately, he died[5] before he was able to submit himself for
cross-examination and so his testimony had to be stricken off the
record. His only surviving daughter, Marietta Cuyegkeng, stood
as the substitute [petitioner] in this case. She testified that she
purchased Lot 903-A-6 (the property subject matter of this case)
from her late father sometime in 1990 and constructed a house
thereon in the same year; that she became aware of this case

because her late father used to commute to Cebu City to attend

to this case; and that Lot 903-A-6 is in her name per Transfer
Certificate of Title #113781 of the Registry of Deeds for Cebu.[6]
Ruling of the Court of Appeals
The CA found respondents action not barred by res
judicata, because there was no identity of causes of action
between the Petition for cancellation of adverse claim in L.R.C.
Records 5988 and the Complaint for specific performance to
resolve the issue of ownership in Civil Case No. R-11891.
The appellate court further found no reason to disturb the
findings of the trial court that respondent has the legal right of
ownership over lot 903-A-6. The CA ruled that the subject land
is part of the attorneys fees of Don Mariano Cuenco,
predecessor-in-interest of [Respondent] Concepcion Cuenco
vda. de Manguerra and [petitioner] merely holds such property in
trust for [her], his title there[to] notwithstanding.
Finally, the CA held that the right of action of respondent
has not yet prescribed as she was in possession of the lot in
dispute and the prescriptive period to file the case commences to
run only from the time she acquired knowledge of an adverse
claim over [her] possession.
Hence, this Petition.[7]
The Issues
In her Memorandum, petitioner raises the following issues
for our consideration:

I.
On question of law, the Court of Appeals failed to consider
facts of substance and significance which, if considered, will
show that the preponderance of evidence is in favor of the
petitioner.
II.
On question of law, the Court of Appeals failed to appreciate
the proposition that, contrary to the position taken by the
trial court, no constructive or implied trust exists between
the parties, and neither is the action one for reconveyance
based upon a constructive or implied trust.
III.
On question of law, the Court of Appeals erred in not finding
that even where implied trust is admitted to exist the
respondents action for relief is barred by laches and
prescription.
IV.
On question of law, the trial court and the appellate court
erred in expunging from the records the testimony of Miguel
Cuenco.[8]
This Courts Ruling
The Petition has no merit.
First Issue:
Evaluation of Evidence

Petitioner asks us to appreciate and weigh the evidence

offered in support of the finding that Lot 903-A-6 constituted a
part of Mariano Cuencos share in the attorneys fees. In other
words, she seeks to involve us in a reevaluation of the veracity
and probative value of the evidence submitted to the lower
court. What she wants us to do is contrary to the dictates of
Rule 45 that only questions of law may be raised and resolved in
a petition for review.
Absent any whimsical or capricious
exercise of judgment, and unless the lack of any basis for the
conclusions made by the lower courts be amply demonstrated,
the Supreme Court will not disturb such factual findings.[9]
As a rule, findings of fact of the Court of Appeals affirming
those of the trial court are binding and conclusive. Normally,
such factual findings are not disturbed by this Court, to which
only questions of law may be raised in an appeal by certiorari.
[10] This Court has consistently ruled that these questions must
involve no examination of the probative value of the evidence
presented by the litigants or any of them.[11] Emphasizing the
difference between the two types of question, it has explained
that there is a question of law in a given case when the doubt or
difference arises as to what the law is pertaining to a certain
state of facts, and there is a question of fact when the doubt
arises as the truth or the falsity of alleged facts.[12]
Indeed, after going over the records of the present case,
we are not inclined to disturb the factual findings of the trial and
the appellate courts, just because of the insistent claim of
petitioner. His witnesses allegedly testified that Civil Case No.
9040 involving Lot 903 had not been handled by Mariano for
defendants therein -- Apolonia Solon, Zoilo Solon, et al. It has
sufficiently been proven, however, that these defendants were
represented by the Cuenco and Cuenco Law Office, composed
of Partners Mariano Cuenco and Miguel Cuenco.

Given as attorneys fees was one hectare of Lot 903, of

which two five-thousand square meter portions were identified as
Lot 903-A and Lot 903-B. That only Miguel handled Civil Case
No. 9040 does not mean that he alone is entitled to the
attorneys fees in the said cases. When a client employs the
services of a law firm, he does not employ the services of the
lawyer who is assigned to personally handle the case. Rather,
he employs the entire law firm.[13] Being a partner in the law
firm, Mariano -- like Miguel -- was likewise entitled[14] to a share
in the attorneys fees from the firms clients. Hence, the lower
courts finding that Lot 903-A was a part of Mariano Cuencos
attorneys fees has ample support.
Second Issue:
Implied Trust
Petitioner then contends that no constructive or implied
trust exists between the parties.
A trust is a legal relationship between one having an
equitable ownership in a property and another having legal title
to it.[15]
Trust relations between parties may either be express or
implied.[16] Express trusts are created by the direct and positive
acts of the parties, indicated through some writing, deed, will, or
words evidencing an intention to create a trust.[17] On the other
hand, implied trusts are those that, without being express, are
deducible from the nature of the transaction as matters of
intent[;] or which are superinduced on the transaction by
operation of law as a matter of equity, independently of the
particular intention of the parties. Implied trusts may either be
resulting or constructive trusts, both coming into being by
operation of law.[18]

Resulting trusts are presumed to have been contemplated

by the parties and are based on the equitable doctrine that
valuable consideration, not legal title, determines the equitable
title or interest.[19] These trusts arise from the nature of or the
circumstances involved in a transaction,[20] whereby legal title
becomes vested in one person, who is obligated in equity to hold
that title for the benefit of another.
Constructive trusts are created by the construction of
equity in order to satisfy the demands of justice and prevent
unjust enrichment. They arise contrary to intention against one
who, by fraud, duress or abuse of confidence, obtains or holds
the legal right to property which he ought not, in equity and good
conscience, to hold.[21]
A review of the records shows that indeed there is an
implied trust between the parties.
Although Lot 903-A was titled in Miguels name, the
circumstances surrounding the acquisition and the subsequent
partial dispositions of this property eloquently speak of the intent
that the equitable or beneficial ownership of the property should
belong to Mariano and his heirs.
First, Lot 903-A was one half of the one-hectare portion of
Lot 903 given as attorneys fees by a client of the law firm of
Partners Miguel and Mariano Cuenco. It constituted the latters
share in the attorneys fees and thus equitably belonged to him,
as correctly found by the CA. That Lot 903-A had been titled in
the name of Miguel gave rise to an implied trust between him
and Mariano, specifically, the former holds the property in trust
for the latter. In the present case, it is of no moment that the
implied trust arose from the circumstance -- a share in the
attorneys fees -- that does not categorically fall under Articles
1448 to 1456 of the Civil Code. The cases of implied trust

enumerated therein does not exclude others established by the

general law of trust.[22]
Second, from the time it was titled in his name in 1938,[23]
Lot 903-A remained undivided and untouched[24] by Miguel.
Only on February 3, 1947, did Lourdes Cuenco,[25] upon the
instruction of Mariano, have it surveyed and subdivided into six
almost equal portions -- 903-A-1 to 903-A-6. Each portion was
specifically allocated to each of the six children of Mariano with
his first wife.[26]
Third, Miguel readily surrendered his Certificate of Title[27]
and interposed no objection[28] to the subdivision and the
allocation of the property to Marianos six children, including
Concepcion.
Fourth, Marianos children, including Concepcion,[29] were
the ones who shouldered the expenses incurred for the
subdivision of the property.
Fifth, after the subdivision of the property, Marianos
children -- including Concepcion[30] -- took possession of their
respective portions thereof.
Sixth, the legal titles to five portions of the property were
transferred via a gratuitous deed of conveyance to Marianos five
children, following the allocations specified in the subdivision
plan prepared for Lourdes Cuenco.[31]
With respect to Lot 903-A-6 in particular, the existence of
Concepcions equitable ownership thereof is bolstered, not just
by the above circumstances, but also by the fact that respondent
fenced the portion allocated to her and planted trees thereon.[32]
More significantly, she also paid real property taxes on Lot
903-A-6 yearly, from 1956 until 1969[33] -- the year when she

was dispossessed of the property. Although tax declarations or

realty tax payments of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of possession in
the concept of owner, for no one in his right mind would be
paying taxes for a property that is not in his actual or at least
constructive possession.[34] Such realty tax payments
constitute proof that the holder has a claim of title over the
property.
Tellingly, Miguel started paying real property taxes on Lot
903-A-6 only on April 4, 1964,[35] after the death of Mariano.[36]
This fact shows that it was only in that year that he was
emboldened to claim the property as his own and to stop
recognizing Marianos, and subsequently Concepcions,
ownership rights over it. It was only by then that the one who
could have easily refuted his claim had already been silenced by
death. Such a situation cannot be permitted to arise, as will be
explained below.
Estoppel
From the time Lot 903-A was subdivided and Marianos six
children -- including Concepcion -- took possession as owners of
their respective portions, no whimper of protest from petitioner
was heard until 1963. By his acts as well as by his omissions,
Miguel led Mariano and the latters heirs, including Concepcion,
to believe that Petitioner Cuenco respected the ownership rights
of respondent over Lot 903-A-6. That Mariano acted and relied
on Miguels tacit recognition of his ownership thereof is evident
from his will, executed in 1963, which states:
I hereby make it known and declare that x x x all properties
which my first wife and I had brought to, or acquired during our
marriage, or which I had acquired during the years I was a

widower including jewelry, war damage compensation, and two

other lots also located at Cebu City, one near the South-Western
University and the other near the Cebu provincial capitol,
which were my attorneys fees from my clients, Victoria
Rallos and Zoilo Solon, respectively have already long been
disposed of, and distributed by me, through my brother,
Miguel, to all my said six children in the first marriage.[37]
(emphasis supplied)
Indeed, as early as 1947, long before Mariano made his will
in 1963, Lot 903-A -- situated along Juana Osmea Extension,
Kamputhaw, Cebu City,[38] near the Cebu Provincial Capitol -had been subdivided and distributed to his six children in his first
marriage. Having induced him and his heirs to believe that Lot
903-A-6 had already been distributed to Concepcion as her own,
petitioner is estopped from asserting the contrary and claiming
ownership thereof.
The principle of estoppel in pais applies when -- by ones
acts, representations, admissions, or silence when there is a
need to speak out -- one, intentionally or through culpable
negligence, induces another to believe certain facts to exist; and
the latter rightfully relies and acts on such belief, so as to be
prejudiced if the former is permitted to deny the existence of
those facts.[39]
Third Issue:
Laches
Petitioner claims that respondents action is already barred
by laches.
We are not persuaded. Laches is negligence or omission
to assert a right within a reasonable time, warranting a
presumption that the party entitled to it has either abandoned or

declined to assert it.[40] In the present case, respondent has

persistently asserted her right to Lot 903-A-6 against petitioner.
Concepcion was in possession as owner of the property
from 1949 to 1969.[41] When Miguel took steps to have it
separately titled in his name, despite the fact that she had the
owners duplicate copy of TCT No. RT-6999 -- the title covering
the entire Lot 903-A -- she had her adverse claim annotated on
the title in 1967.
When petitioner ousted her from her
possession of the lot by tearing down her wire fence in 1969,[42]
she commenced the present action on September 19, 1970,[43]
to protect and assert her rights to the property. We find that she
cannot be held guilty of laches, as she did not sleep on her
rights.
Fourth Issue:
Expunging of Testimony
Petitioner Cuyegkeng questions the expunging of the direct
testimony of Miguel Cuenco. Respondent points out that this
issue was not raised before the CA. Neither had petitioner
asked the trial court to reconsider its Order expunging the
testimony. Hence, this issue cannot for the first time be raised at
this point of the appeal. Issues, arguments and errors not
adequately and seriously brought below cannot be raised for the
first time on appeal.[44] Basic considerations of due process
impel this rule.[45]
WHEREFORE, the Petition is DENIED, and the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.

!
!

G.R. No. L-55397 February 29, 1988

TAI TONG CHUACHE v. INSURANCE COMMISSION
GANCAYCO, J.:

P50,000.00 with respondent Zenith Insurance Corporation. On

July 16, 1975, another Fire Insurance Policy No. 8459 (Exhibit
"B") was procured from respondent Philippine British Assurance
Company, covering the same building for P50,000.00 and the
contents thereof for P70,000.00.

This petition for review on certiorari seeks the reversal of the

decision of the Insurance Commission in IC Case #367 1
dismissing the complaint 2 for recovery of the alleged unpaid
balance of the proceeds of the Fire Insurance Policies issued by
herein respondent insurance company in favor of petitionerintervenor.

On July 31, 1975, the building and the contents were totally
razed by fire.

The facts of the case as found by respondent Insurance

Commission are as follows:

... Thus the apportioned share of each company is as follows:

Adjustment Standard Corporation submitted a report as follow

xxx xxx xxx

Policy No..
Complainants acquired from a certain Rolando Gonzales a
parcel of land and a building located at San Rafael Village,
Davao City. Complainants assumed the mortgage of the building
in favor of S.S.S., which building was insured with respondent
S.S.S. Accredited Group of Insurers for P25,000.00.

Company
Risk
Insures

On April 19, 1975, Azucena Palomo obtained a loan from Tai

Tong Chuache Inc. in the amount of P100,000.00. To secure the
payment of the loan, a mortgage was executed over the land and
the building in favor of Tai Tong Chuache & Co. (Exhibit "1" and
"1-A"). On April 25, 1975, Arsenio Chua, representative of Thai
Tong Chuache & Co. insured the latter's interest with Travellers
Multi-Indemnity Corporation for P100,000.00 (P70,000.00 for the
building and P30,000.00 for the contents thereof) (Exhibit "A-a,"
contents thereof) (Exhibit "A-a").

Pays
MIRO
Zenith
Building
P50,000

On June 11, 1975, Pedro Palomo secured a Fire Insurance

Policy No. F- 02500 (Exhibit "A"), covering the building for

P17,610.93

F-02500
Insurance

Assco. Co.

Corp.

Inc.
F-84590

FFF & F5

Phil.

50,000

Household

39,186.10

70,000

Policy No.

24,655.31

Company
Risk

British

Insures

Pays
FIC-15381

Totals

SSSAccre

P195,000
P90,257.81
We are showing hereunder another apportionment of the loss
which includes the Travellers Multi-Indemnity policy for reference
purposes.
Policy No.

dited Group

Company
Risk
Injures
Pays
MIRO/

of Insurers

Zenith

Building
P25,000
P8,805.47
F-02500

Insurance

Assco. Co.
I-Building
Corp.

70,000

Building

16,628.00

P50,000
P11,877.14
F-84590
Phil.

II-Building

FFF & PE
British

50,000
24,918.79

PVC-15181

I-Ref

SSS

30,000

Accredited

14,467.31

Multi
II-Building
Group of

70,000
16,628.00

Totals
Insurers

P295.000

Building

P90,257.81

25,000

Based on the computation of the loss, including the Travellers

Multi- Indemnity, respondents, Zenith Insurance, Phil. British
Assurance and S.S.S. Accredited Group of Insurers, paid their
corresponding shares of the loss. Complainants were paid the
following: P41,546.79 by Philippine British Assurance Co.,
P11,877.14 by Zenith Insurance Corporation, and P5,936.57 by
S.S.S. Group of Accredited Insurers (Par. 6. Amended
Complaint). Demand was made from respondent Travellers

5,938.50
F-599 DV
Insurers

Multi-Indemnity for its share in the loss but the same was
refused. Hence, complainants demanded from the other three (3)
respondents the balance of each share in the loss based on the
computation of the Adjustment Standards Report excluding
Travellers Multi-Indemnity in the amount of P30,894.31
(P5,732.79-Zenith Insurance: P22,294.62, Phil. British: and
P2,866.90, SSS Accredited) but the same was refused, hence,
this action.
In their answers, Philippine British Assurance and Zenith
Insurance Corporation admitted the material allegations in the
complaint, but denied liability on the ground that the claim of the
complainants had already been waived, extinguished or paid.
Both companies set up counterclaim in the total amount of P
91,546.79.
Instead of filing an answer, SSS Accredited Group of Insurers
informed the Commission in its letter of July 22, 1977 that the
herein claim of complainants for the balance had been paid in
the amount of P 5,938.57 in full, based on the Adjustment
Standards Corporation Report of September 22, 1975.
Travellers Insurance, on its part, admitted the issuance of the
Policy No. 599 DV and alleged as its special and affirmative
defenses the following, to wit: that Fire Policy No. 599 DV,
covering the furniture and building of complainants was secured
by a certain Arsenio Chua, mortgage creditor, for the purpose of
protecting his mortgage credit against the complainants; that the
said policy was issued in the name of Azucena Palomo, only to
indicate that she owns the insured premises; that the policy
contains an endorsement in favor of Arsenio Chua as his
mortgage interest may appear to indicate that insured was
Arsenio Chua and the complainants; that the premium due on

said fire policy was paid by Arsenio Chua; that respondent

Travellers is not liable to pay complainants.
On May 31, 1977, Tai Tong Chuache & Co. filed a complaint in
intervention claiming the proceeds of the fire Insurance Policy
No. F-559 DV, issued by respondent Travellers Multi-Indemnity.
Travellers Insurance, in answer to the complaint in intervention,
alleged that the Intervenor is not entitled to indemnity under its
Fire Insurance Policy for lack of insurable interest before the loss
of the insured premises and that the complainants, spouses
Pedro and Azucena Palomo, had already paid in full their
mortgage indebtedness to the intervenor. 3
As adverted to above respondent Insurance Commission
dismissed spouses Palomos' complaint on the ground that the
insurance policy subject of the complaint was taken out by Tai
Tong Chuache & Company, petitioner herein, for its own interest
only as mortgagee of the insured property and thus complainant
as mortgagors of the insured property have no right of action
against herein respondent. It likewise dismissed petitioner's
complaint in intervention in the following words:
We move on the issue of liability of respondent Travellers MultiIndemnity to the Intervenor-mortgagee. The complainant testified
that she was still indebted to Intervenor in the amount of
P100,000.00. Such allegation has not however, been sufficiently
proven by documentary evidence. The certification (Exhibit 'E-e')
issued by the Court of First Instance of Davao, Branch 11,
indicate that the complainant was Antonio Lopez Chua and not
Tai Tong Chuache & Company. 4

From the above decision, only intervenor Tai Tong Chuache filed
a motion for reconsideration but it was likewise denied hence,
the present petition.
It is the contention of the petitioner that respondent Insurance
Commission decided an issue not raised in the pleadings of the
parties in that it ruled that a certain Arsenio Lopez Chua is the
one entitled to the insurance proceeds and not Tai Tong Chuache
& Company.
This Court cannot fault petitioner for the above erroneous
interpretation of the decision appealed from considering the
manner it was written. 5 As correctly pointed out by respondent
insurance commission in their comment, the decision did not
pronounce that it was Arsenio Lopez Chua who has insurable
interest over the insured property. Perusal of the decision reveals
however that it readily absolved respondent insurance company
from liability on the basis of the commissioner's conclusion that
at the time of the occurrence of the peril insured against
petitioner as mortgagee had no more insurable interest over the
insured property. It was based on the inference that the credit
secured by the mortgaged property was already paid by the
Palomos before the said property was gutted down by fire. The
foregoing conclusion was arrived at on the basis of the
certification issued by the then Court of First Instance of Davao,
Branch II that in a certain civil action against the Palomos,
Antonio Lopez Chua stands as the complainant and not
petitioner Tai Tong Chuache & Company.
We find the petition to be impressed with merit. It is a well known
postulate that the case of a party is constituted by his own
affirmative allegations. Under Section 1, Rule 131 6 each party
must prove his own affirmative allegations by the amount of
evidence required by law which in civil cases as in the present

case is preponderance of evidence. The party, whether plaintiff

or defendant, who asserts the affirmative of the issue has the
burden of presenting at the trial such amount of evidence as
required by law to obtain favorable judgment. 7 Thus, petitioner
who is claiming a right over the insurance must prove its case.
Likewise, respondent insurance company to avoid liability under
the policy by setting up an affirmative defense of lack of
insurable interest on the part of the petitioner must prove its own
affirmative allegations.
It will be recalled that respondent insurance company did not
assail the validity of the insurance policy taken out by petitioner
over the mortgaged property. Neither did it deny that the said
property was totally razed by fire within the period covered by the
insurance. Respondent, as mentioned earlier advanced an
affirmative defense of lack of insurable interest on the part of the
petitioner that before the occurrence of the peril insured against
the Palomos had already paid their credit due the petitioner.
Respondent having admitted the material allegations in the
complaint, has the burden of proof to show that petitioner has no
insurable interest over the insured property at the time the
contingency took place. Upon that point, there is a failure of
proof. Respondent, it will be noted, exerted no effort to present
any evidence to substantiate its claim, while petitioner did. For
said respondent's failure, the decision must be adverse to it.
However, as adverted to earlier, respondent Insurance
Commission absolved respondent insurance company from
liability on the basis of the certification issued by the then Court
of First Instance of Davao, Branch II, that in a certain civil action
against the Palomos, Arsenio Lopez Chua stands as the
complainant and not Tai Tong Chuache. From said evidence
respondent commission inferred that the credit extended by
herein petitioner to the Palomos secured by the insured property

must have been paid. Such is a glaring error which this Court
cannot sanction. Respondent Commission's findings are based
upon a mere inference.
The record of the case shows that the petitioner to support its
claim for the insurance proceeds offered as evidence the
contract of mortgage (Exh. 1) which has not been cancelled nor
released. It has been held in a long line of cases that when the
creditor is in possession of the document of credit, he need not
prove non-payment for it is presumed. 8 The validity of the
insurance policy taken b petitioner was not assailed by private
respondent. Moreover, petitioner's claim that the loan extended
to the Palomos has not yet been paid was corroborated by
Azucena Palomo who testified that they are still indebted to
herein petitioner. 9
Public respondent argues however, that if the civil case really
stemmed from the loan granted to Azucena Palomo by petitioner
the same should have been brought by Tai Tong Chuache or by
its representative in its own behalf. From the above premise
respondent concluded that the obligation secured by the insured
property must have been paid.

including the right to sue debtors of the partnership in case of

their failure to pay their obligations when it became due and
demandable. Or at the very least, Chua being a partner of
petitioner Tai Tong Chuache & Company is an agent of the
partnership. Being an agent, it is understood that he acted for
and in behalf of the firm. 13 Public respondent's allegation that the
civil case flied by Arsenio Chua was in his capacity as personal
creditor of spouses Palomo has no basis.
The respondent insurance company having issued a policy in
favor of herein petitioner which policy was of legal force and
effect at the time of the fire, it is bound by its terms and
conditions. Upon its failure to prove the allegation of lack of
insurable interest on the part of the petitioner, respondent
insurance company is and must be held liable.
IN VIEW OF THE FOREGOING, the decision appealed from is
hereby SET ASIDE and ANOTHER judgment is rendered order
private respondent Travellers Multi-Indemnity Corporation to pay
petitioner the face value of Insurance Policy No. 599-DV in the
amount of P100,000.00. Costs against said private respondent.
SO ORDERED.

The premise is correct but the conclusion is wrong. Citing Rule 3,

Sec. 2 10 respondent pointed out that the action must be brought
in the name of the real party in interest. We agree. However, it
should be borne in mind that petitioner being a partnership may
sue and be sued in its name or by its duly authorized
representative. The fact that Arsenio Lopez Chua is the
representative of petitioner is not questioned. Petitioner's
declaration that Arsenio Lopez Chua acts as the managing
partner of the partnership was corroborated by respondent
insurance company. 11 Thus Chua as the managing partner of
the partnership may execute all acts of administration 12

!
!
G.R. No. L-45624

April 25, 1939

GEORGE LITTON, petitioner-appellant,

vs.
HILL & CERON, ET AL., respondents-appellees.

George E. Reich for appellant.

Roy and De Guzman for appellees.
Espeleta, Quijano and Liwag for appellee Hill.
CONCEPCION, J.:
This is a petition to review on certiorari the decision of the Court
of Appeals in a case originating from the Court of First Instance
of Manila wherein the herein petitioner George Litton was the
plaintiff and the respondents Hill & Ceron, Robert Hill, Carlos
Ceron and Visayan Surety & Insurance Corporation were
defendants.
The facts are as follows: On February 14, 1934, the plaintiff sold
and delivered to Carlos Ceron, who is one of the managing
partners of Hill & Ceron, a certain number of mining claims, and
by virtue of said transaction, the defendant Carlos Ceron
delivered to the plaintiff a document reading as follows:

Ceron or from its surety Visayan Surety & Insurance Corporation,

Litton filed a complaint in the Court of First Instance of Manila
against the said defendants for the recovery of the said balance.
The court, after trial, ordered Carlos Ceron personally to pay the
amount claimed and absolved the partnership Hill & Ceron,
Robert Hill and the Visayan Surety & Insurance Corporation. On
appeal to the Court of Appeals, the latter affirmed the decision of
the court on May 29, 1937, having reached the conclusion that
Ceron did not intend to represent and did not act for the firm Hill
& Ceron in the transaction involved in this litigation.
Accepting, as we cannot but accept, the conclusion arrived at by
the Court of Appeals as to the question of fact just mentioned,
namely, that Ceron individually entered into the transaction with
the plaintiff, but in view, however, of certain undisputed facts and
of certain regulations and provisions of the Code of Commerce,
we reach the conclusion that the transaction made by Ceron with
the plaintiff should be understood in law as effected by Hill &
Ceron and binding upon it.

Feb. 14, 1934

HILL & CERON

By: (Sgd.) CARLOS CERON

In the first place, it is an admitted fact by Robert Hill when he

testified at the trial that he and Ceron, during the partnership,
had the same power to buy and sell; that in said partnership Hill
as well as Ceron made the transaction as partners in equal
parts; that on the date of the transaction, February 14, 1934, the
partnership between Hill and Ceron was in existence. After this
date, or on February 19th, Hill & Ceron sold shares of the Big
Wedge; and when the transaction was entered into with Litton, it
was neither published in the newspapers nor stated in the
commercial registry that the partnership Hill & Ceron had been
dissolved.

Ceron paid to the plaintiff the sum or P1,150 leaving an unpaid

balance of P720, and unable to collect this sum either from Hill &

Hill testified that a few days before February 14th he had a

conversation with the plaintiff in the course of which he advised

Received from Mr. George Litton share certificates Nos. 4428,

4429 and 6699 for 5,000, 5,000 and 7,000 shares respectively
total 17,000 shares of Big Wedge Mining Company, which we
have sold at P0.11 (eleven centavos) per share or P1,870.00
less 1/2 per cent brokerage.

the latter not to deliver shares for sale or on commission to

Ceron because the partnership was about to be dissolved; but
what importance can be attached to said advice if the
partnership was not in fact dissolved on February 14th, the date
when the transaction with Ceron took place?
Under article 226 of the Code of Commerce, the dissolution of a
commercial association shall not cause any prejudice to third
parties until it has been recorded in the commercial registry. (See
also Cardell vs. Maeru, 14 Phil., 368.) The Supreme Court of
Spain held that the dissolution of a partnership by the will of the
partners which is not registered in the commercial registry, does
not prejudice third persons. (Opinion of March 23, 1885.)
Aside from the aforecited legal provisions, the order of the
Bureau of Commerce of December 7, 1933, prohibits brokers
from buying and selling shares on their own account. Said order
reads:
The stock and/or bond broker is, therefore, merely an agent or
an intermediary, and as such, shall not be allowed. . . .
(c) To buy or to sell shares of stock or bonds on his own account
for purposes of speculation and/or for manipulating the market,
irrespective of whether the purchase or sale is made from or to a
private individual, broker or brokerage firm.
In its decision the Court of Appeals states:
But there is a stronger objection to the plaintiff's attempt to make
the firm responsible to him. According to the articles of
copartnership of 'Hill & Ceron,' filed in the Bureau of Commerce.

Sixth. That the management of the business affairs of the

copartnership shall be entrusted to both copartners who shall
jointly administer the business affairs, transactions and activities
of the copartnership, shall jointly open a current account or any
other kind of account in any bank or banks, shall jointly sign all
checks for the withdrawal of funds and shall jointly or singly sign,
in the latter case, with the consent of the other partner. . . .
Under this stipulation, a written contract of the firm can only be
signed by one of the partners if the other partner consented.
Without the consent of one partner, the other cannot bind the
firm by a written contract. Now, assuming for the moment that
Ceron attempted to represent the firm in this contract with the
plaintiff (the plaintiff conceded that the firm name was not
mentioned at that time), the latter has failed to prove that Hill had
consented to such contract.
It follows from the sixth paragraph of the articles of partnership of
Hill &n Ceron above quoted that the management of the
business of the partnership has been entrusted to both partners
thereof, but we dissent from the view of the Court of Appeals that
for one of the partners to bind the partnership the consent of the
other is necessary. Third persons, like the plaintiff, are not bound
in entering into a contract with any of the two partners, to
ascertain whether or not this partner with whom the transaction
is made has the consent of the other partner. The public need
not make inquires as to the agreements had between the
partners. Its knowledge, is enough that it is contracting with the
partnership which is represented by one of the managing
partners.
There is a general presumption that each individual partner is an
authorized agent for the firm and that he has authority to bind the

firm in carrying on the partnership transactions. (Mills vs. Riggle,

112 Pac., 617.)
The presumption is sufficient to permit third persons to hold the
firm liable on transactions entered into by one of members of the
firm acting apparently in its behalf and within the scope of his
authority. (Le Roy vs. Johnson, 7 U. S. [Law. ed.], 391.)
The second paragraph of the articles of partnership of Hill &
Ceron reads in part:
Second: That the purpose or object for which this copartnership
is organized is to engage in the business of brokerage in
general, such as stock and bond brokers, real brokers,
investment security brokers, shipping brokers, and other
activities pertaining to the business of brokers in general.
The kind of business in which the partnership Hill & Ceron is to
engage being thus determined, none of the two partners, under
article 130 of the Code of Commerce, may legally engage in the
business of brokerage in general as stock brokers, security
brokers and other activities pertaining to the business of the
partnership. Ceron, therefore, could not have entered into the
contract of sale of shares with Litton as a private individual, but
as a managing partner of Hill & Ceron.
The respondent argues in its brief that even admitting that one of
the partners could not, in his individual capacity, engage in a
transaction similar to that in which the partnership is engaged
without binding the latter, nevertheless there is no law which
prohibits a partner in the stock brokerage business for engaging
in other transactions different from those of the partnership, as it
happens in the present case, because the transaction made by
Ceron is a mere personal loan, and this argument, so it is said, is

corroborated by the Court of Appeals. We do not find this alleged

corroboration because the only finding of fact made by the Court
of Appeals is to the effect that the transaction made by Ceron
with the plaintiff was in his individual capacity.
The appealed decision is reversed and the defendants are
ordered to pay to the plaintiff, jointly and severally, the sum of
P720, with legal interest, from the date of the filing of the
complaint, minus the commission of one-half per cent (%) from
the original price of P1,870, with the costs to the respondents.
So ordered.
G.R. No. L-11624

January 21, 1918

E. M. BACHRACH, plaintiff-appellee,
vs.
"LA PROTECTORA", ET AL., defendants-appellants.
Vicente Foz for appellants.
A. J. Burke for appellee.
STREET, J.:
In the year 1913, the individuals named as defendants in this
action formed a civil partnership, called "La Protectora," for the
purpose of engaging in the business of transporting passengers
and freight at Laoag, Ilocos Norte. In order to provide the
enterprise with means of transportation, Marcelo Barba, acting
as manager, came to Manila and upon June 23, 1913,
negotiated the purchase of two automobile trucks from the
plaintiff, E. M. Bachrach, for the agree price of P16,500. He paid
the sum of 3,000 in cash, and for the balance executed
promissory notes representing the deferred payments. These
notes provided for the payment of interest from June 23, 1913,

the date of the notes, at the rate of 10 per cent per annum.
Provision was also made in the notes for the payment of 25 per
cent of the amount due if it should be necessary to place the
notes in the hands of an attorney for collection. Three of these
notes, for the sum of P3,375 each, have been made the subject
of the present action, and there are exhibited with the complaint
in the cause. One was signed by Marcelo Barba in the following
manner:

purchase. The document in question was delivered by him to

Bachrach at the time the automobiles were purchased.

P. P. La Protectora
By Marcelo Barba
Marcelo Barba.

In May, 1914, the plaintiff foreclosed a chattel mortgage which he

had retained on the trucks in order to secure the purchase price.
The amount realized from this sale was P1,000. This was
credited unpaid. To recover this balance, together with the sum
due for additional purchases, the present action was instituted in
the Court of First Instance of the city of Manila, upon May 29,
1914, against "La Protectora" and the five individuals Marcelo
Barba, Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and
Modesto Serrano. No question has been made as to the
propriety of impleading "La Protectora" as if it were a legal entity.
At the hearing, judgment was rendered against all of the
defendants. From this judgment no appeal was taken in behalf
either of "La Protectora" or Marcelo Barba; and their liability is
not here under consideration. The four individuals who signed
the document to which reference has been made, authorizing
Barba to purchase the two trucks have, however, appealed and
assigned errors. The question here to be determined is whether
or not these individuals are liable for the firm debts and if so to
what extent.

The other two notes are signed in the same way with the word
"By" omitted before the name of Marcelo Barba in the second
line of the signature. It is obvious that in thus signing the notes
Marcelo Barba intended to bind both the partnership and himself.
In the body of the note the word "I" (yo) instead of
"we" (nosotros) is used before the words "promise to
pay" (prometemos) used in the printed form. It is plain that the
singular pronoun here has all the force of the plural.
As preliminary to the purchase of these trucks, the defendants
Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto
Serrano, upon June 12, 1913, executed in due form a document
in which they declared that they were members of the firm "La
Protectora" and that they had granted to its president full
authority "in the name and representation of said partnership to
contract for the purchase of two automobiles" (en nombre y
representacion de la mencionada sociedad contratante la
compra de dos automoviles). This document was apparently
executed in obedience to the requirements of subsection 2 of
article 1697 of the Civil Code, for the purpose of evidencing the
authority of Marcelo Barba to bind the partnership by the

From time to time after this purchase was made, Marcelo Barba
purchased of the plaintiff various automobile effects and
accessories to be used in the business of "La Protectora." Upon
May 21, 1914, the indebtedness resulting from these additional
purchases amounted to the sum of P2,916.57

The amount of indebtedness owing to the plaintiff is not in

dispute, as the principal of the debt is agreed to be P7,037. Of
this amount it must now be assumed, in view of the finding of the
trial court, from which no appeal has been taken by the plaintiff,
that the unpaid balance of the notes amounts to P4,121, while

the remainder (P2,916) represents the amount due for

automobile supplies and accessories.
The business conducted under the name of "La Protectora" was
evidently that of a civil partnership; and the liability of the
partners to this association must be determined under the
provisions of the Civil Code. The authority of Marcelo Barba to
bind the partnership, in the purchase of the trucks, is fully
established by the document executed by the four appellants
upon June 12, 1913. The transaction by which Barba secured
these trucks was in conformity with the tenor of this document.
The promissory notes constitute the obligation exclusively of "La
Protectora" and of Marcelo Barba; and they do not in any sense
constitute an obligation directly binding on the four appellants.
Their liability is based on the fact that they are members of the
civil partnership and as such are liable for its debts. It is true that
article 1698 of the Civil Code declares that a member of a civil
partnership is not liable in solidum (solidariamente) with his
fellows for its entire indebtedness; but it results from this article,
in connection with article 1137 of the Civil Code, that each is
liable with the others (mancomunadamente) for his aliquot part of
such indebtedness. And so it has been held by this court. (CoPitco vs. Yulo, 8 Phil. Rep., 544.)
The Court of First Instance seems to have founded its judgment
against the appellants in part upon the idea that the document
executed by them constituted an authority for Marcelo Barba to
bind them personally, as contemplated in the second clause of
article 1698 of the Civil Code. That cause says that no member
of the partnership can bind the others by a personal act if they
have not given him authority to do so. We think that the
document referred to was intended merely as an authority to
enable Barba to bind the partnership and that the parties to that
instrument did not intend thereby to confer upon Barba an

authority to bind them personally. It is obvious that the contract

which Barba in fact executed in pursuance of that authority did
not by its terms profess to bind the appellants personally at all,
but only the partnership and himself. It follows that the four
appellants cannot be held to have been personally obligated by
that instrument; but, as we have already seen, their liability rests
upon the general principles underlying partnership liability.
As to so much of the indebtedness as is based upon the claim
for automobile supplies and accessories, it is obvious that the
document of June 12, 1913, affords no authority for holding the
appellants liable. Their liability upon this account is, however, no
less obvious than upon the debt incurred by the purchase of the
trucks; and such liability is derived from the fact that the debt
was lawfully incurred in the prosecution of the partnership
enterprise.
There is no proof in the record showing what the agreement, if
any, was made with regard to the form of management. Under
these circumstances it is declared in article 1695 of the Civil
Code that all the partners are considered agents of the
partnership. Barba therefore must be held to have had authority
to incur these expenses. But in addition to this he is shown to
have been in fact the president or manager, and there can be no
doubt that he had actual authority to incur this obligation.
From what has been said it results that the appellants are
severally liable for their respective shares of the entire
indebtedness found to be due; and the Court of First Instance
committed no error in giving judgment against them. The amount
for which judgment should be entered is P7,037, to which shall
be added (1) interest at 10 per cent per annum from June 23,
1913, to be calculated upon the sum of P4.121; (2) interest at 6
per cent per annum from July 21, 1915, to be calculated upon

the sum of P2,961; (3) the further sum of P1,030.25, this being
the amount stipulated to be paid by way of attorney's fees.
However, it should be noted that any property pertaining to "La
Protectora" should first be applied to this indebtedness pursuant
to the judgment already entered in this case in the court below;
and each of the four appellants shall be liable only for the onefifth part of the remainder unpaid.
Let judgment be entered accordingly, without any express finding
of costs of this instance. So ordered.
G.R. No. L-5236

January 10, 1910

PEDRO MARTINEZ, plaintiff-appellee,

vs.
ONG PONG CO and ONG LAY, defendants.
ONG PONG CO., appellant.
Fernando de la Cantera for appellant.
O'Brien and DeWitt for appellee.

appeared to answer the complaint; he admitted the fact of the

agreement and the delivery to him and to Ong Lay of the P1,500
for the purpose aforesaid, but he alleged that Ong Lay, who was
then deceased, was the one who had managed the business,
and that nothing had resulted therefrom save the loss of the
capital of P1,500, to which loss the plaintiff agreed.
The judge of the Court of First Instance of the city of Manila who
tried the case ordered Ong Pong Co to return to the plaintiff onehalf of the said capital of P1,500 which, together with Ong Lay,
he had received from the plaintiff, to wit, P750, plus P90 as onehalf of the profits, calculated at the rate of 12 per cent per annum
for the six months that the store was supposed to have been
open, both sums in Philippine currency, making a total of P840,
with legal interest thereon at the rate of 6 per cent per annum,
from the 12th of June, 1901, when the business terminated and
on which date he ought to have returned the said amount to the
plaintiff, until the full payment thereof with costs.
From this judgment Ong Pong Co appealed to this court, and
assigned the following errors:

ARELLANO, C.J.:
On the 12th of December, 1900, the plaintiff herein delivered
P1,500 to the defendants who, in a private document,
acknowledged that they had received the same with the
agreement, as stated by them, "that we are to invest the amount
in a store, the profits or losses of which we are to divide with the
former, in equal shares."
The plaintiff filed a complaint on April 25, 1907, in order to
compel the defendants to render him an accounting of the
partnership as agreed to, or else to refund him the P1,500 that
he had given them for the said purpose. Ong Pong Co alone

1. For not having taken into consideration the fact that the
reason for the closing of the store was the ejectment from the
premises occupied by it.
2. For not having considered the fact that there were losses.
3. For holding that there should have been profits.
4. For having applied article 1138 of the Civil Code.

5. and 6. For holding that the capital ought to have yielded

profits, and that the latter should be calculated 12 per cent per
annum; and
7. The findings of the ejectment.
As to the first assignment of error, the fact that the store was
closed by virtue of ejectment proceedings is of no importance for
the effects of the suit. The whole action is based upon the fact
that the defendants received certain capital from the plaintiff for
the purpose of organizing a company; they, according to the
agreement, were to handle the said money and invest it in a
store which was the object of the association; they, in the
absence of a special agreement vesting in one sole person the
management of the business, were the actual administrators
thereof; as such administrators they were the agent of the
company and incurred the liabilities peculiar to every agent,
among which is that of rendering account to the principal of their
transactions, and paying him everything they may have received
by virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.)
Neither of them has rendered such account nor proven the
losses referred to by Ong Pong Co; they are therefore obliged to
refund the money that they received for the purpose of
establishing the said store the object of the association. This
was the principal pronouncement of the judgment.
With regard to the second and third assignments of error, this
court, like the court below, finds no evidence that the entire
capital or any part thereof was lost. It is no evidence of such loss
to aver, without proof, that the effects of the store were ejected.
Even though this were proven, it could not be inferred therefrom
that the ejectment was due to the fact that no rents were paid,
and that the rent was not paid on account of the loss of the
capital belonging to the enterprise.

With regard to the possible profits, the finding of the court below
are based on the statements of the defendant Ong Pong Co, to
the effect that "there were some profits, but not large ones." This
court, however, does not find that the amount thereof has been
proven, nor deem it possible to estimate them to be a certain
sum, and for a given period of time; hence, it can not admit the
estimate, made in the judgment, of 12 per cent per annum for the
period of six months.
Inasmuch as in this case nothing appears other than the failure
to fulfill an obligation on the part of a partner who acted as agent
in receiving money for a given purpose, for which he has
rendered no accounting, such agent is responsible only for the
losses which, by a violation of the provisions of the law, he
incurred. This being an obligation to pay in cash, there are no
other losses than the legal interest, which interest is not due
except from the time of the judicial demand, or, in the present
case, from the filing of the complaint. (Arts. 1108 and 1100, Civil
Code.) We do not consider that article 1688 is applicable in this
case, in so far as it provides "that the partnership is liable to
every partner for the amounts he may have disbursed on
account of the same and for the proper interest," for the reason
that no other money than that contributed as is involved.
As in the partnership there were two administrators or agents
liable for the above-named amount, article 1138 of the Civil Code
has been invoked; this latter deals with debts of a partnership
where the obligation is not a joint one, as is likewise provided by
article 1723 of said code with respect to the liability of two or
more agents with respect to the return of the money that they
received from their principal. Therefore, the other errors assigned
have not been committed.

In view of the foregoing judgment appealed from is hereby

affirmed, provided, however, that the defendant Ong Pong Co
shall only pay the plaintiff the sum of P750 with the legal interest
thereon at the rate of 6 per cent per annum from the time of the
filing of the complaint, and the costs, without special ruling as to
the costs of this instance. So ordered.
G.R. No. L-4597

November 23, 1908

JOSE GARCIA RON, plaintiff-appellee,

vs.
LA COMPAIA DE MINAS DE BATAN, defendant-appellant.
Ortigas and Fisher, for appellant.
C.W. O'Brien, for appellee.

CARSON, J.:
This was an action brought by the plaintiff to recover from the
defendant the sum of 9,558 1/3 Spanish pesetas for services
rendered. The trial judge found, and the evidence of record fully
sustains his finding, that the plaintiff was employed as foreman
or capataz by one Genaro Ansuategui, the local manager of
certain mines of the defendant company, situated on the Islands
of Bataan; and that this employment continued from November
1, 1903; until August 4, 1904. The trial judge found further that,
while the plaintiff failed to establish satisfactorily his claim that
the salary promised him by the company's manager was 1,000
pesestas per month, nevertheless he is entitled to reasonable
compensation for the services rendered which were fixed at P5
per day, or P150 per month, the record disclosing that the
plaintiff had worked for the defendant company as foreman or

capataz and received compensation that the rate a short time

prior to his employment under his contract with Ansuategui.
The defendant comply alleged that it had never received such
services of the plaintiff and denied the fact of the employment,
but us we have said, the evidence of record affirmatively
establishes the finding of the trial judge that the services were
rendered, and that they were rendered under contract of
employment between the plaintiff and one Ansuategui, the local
manager of the defendant company; the only evidence
introduced by the defendant in this connection being the
testimony of the general manager of the company, who lived in
Manila, to the effect that it does not appear from the books of the
company that the plaintiff was employed by the defendants, or
that any record of the employment was forwarded to the central
office in Manila.
Counsel for the defendant company insists, however, that,
granting that the plaintiff did in fact work in the mines of the
defendant company and was employed by its local manager,
nevertheless, defendant is not indebted to the plaintiff for these
service, because the local manager at the mines was not
authorized to enter into the alleged contract of employment, such
authority not having been granted to him under his letter of
instructions, a copy of which appears in the record.
It is not necessary for us to discuss the question of the liability of
the defendant company to the plaintiff for the value of the
services rendered, if it in fact appeared that the manager at the
mines was not expressly authorized to employ the plaintiff and to
contract for his services, because we are of opinion that the
authority to contract for the employment of the plaintiff was
clearly conferred upon Ansuategui by the terms of this letter of
instructions.

These transactions, which were introduced into the record, were

dated in Manila, May 23, 1903, and among other provisions
contain the following:
Es tambien derroche los sueldos que dicen pagan a los
faginantes y el exceso de gente para poco trabajo; debe tenerse
la gente necesaria y pagar lo razonable, y al que no le convenga
que se marche. Deben hacer por contrata el corte de trozos y
maderas de todas clases, y a sueldo le gente que se emplea
para hacer los barracones y otros trabajos que su criterio le
dicte, pero no permitiendo por ningun concepto que abusen.
(The salaries which it is said are paid to the faginantes and the
excess of employees for little work is also a waste. The
necessary employees should be kept and paid reasonably, and
he who is not needed [satisfied], let him go. The cutting of logs
and wood of all kinds ought to be done by contract, and the
persons employed in digging the barracones and other work at
wages which your good judgment may dictate, but on account
permitting abuses.)
And at the conclusion of the letter of instructions, we find the
following:
Lo que aqui no va anotado, esperamos lo subsane Vd. con su
buen criterio, y le recomendamos por ultimo nos tenga al
corriente de todo.
(We trust you to correct and supply (subsanar) anything which is
not noted herein, in accordance with your good judgment, and
finally we urgently request that you keep us informed of
everything.)

Other provisions of the letter of instructions expressly authorized

Ansuategui, as the local manager of the defendant company at
the mines, to discharge employees who did not prove
satisfactory, and leave no room for doubt that he was duly
authorized to represent the company at the mines so far as this
was necessary for their proper local management.lawphil.net
Taking into consideration the fact that the mines of the defendant
company are located upon an island some two days' distance by
steamer from the office of the company at Manila, that the only
communication therewith was by mail a few times per month,
and that in the very nature of the enterprise, it was necessary, in
order that the local manager might successfully perform his
duties, to confer upon him wide scope in the employment and
discharge of labor, we think that there can be no doubt that
Genaro Ansuategui was fully and expressly authorized by the
terms of this letter of instructions to enter into the alleged
contract of employment with the plaintiff on behalf of the
defendant company; and the evidence of record establishing the
fact that he did so, and that the plaintiff worked for the company
for the period set out in the findings of the trial court, we are of
opinion that the trial court properly rendered judgment in favor of
the plaintiff and against the defendant for the value of the
services rendered.
The plaintiff not having appealed from the judgment of the trial
court denying him the alleged contract value of the services
rendered, and the evidence of record fully sustaining the findings
as to the reasonable value of these services, the judgment of the
trial court should be and is hereby affirmed, with the costs of this
instance against the defendant. So ordered.

November 23, 1906, G.R. No. 3025

SI-BOCO, plaintiff-appellee, vs.
YAP TENG, defendant-appellant.
Marcelo Caringal for appellant.
Thos. L. McGirr for appellee.
MAPA, J.:
This is an action by the plaintiff to recover from the defendant the
sum of P1,442.95, alleged to be due him from the latter. The
court below rendered judgment in favor of the plaintiff for the
aforesaid sum and legal interest thereon at the rate of 6 per cent
per annum from the 25th of March, 1905, with costs against the
defendant, who excepted to the said judgment, made a motion
for a new trial on the ground that the findings of fact contained in
the said judgment were plainly and manifestly against the weight
of the evidence, and has brought the case to this court by a bill
of exceptions.
The evidence shows that for a period of three years, more or
less, the plaintiff had been furnishing to the defendant native
cloth for the latter's store in the city of Manila. The goods were at
first furnished on credit, but the business relations of the parties
caused entirely in 1904. The defendant had a partner by the
name of Yapsuan, who was the manager of the business. The
defendant introduced him to the plaintiff as such manager, and
told him that Yapsuan had authority from him to receive the cloth,
and that the value thereof should be charged to his, the
defendant's account, and in fact the cloth was, as a rule,
received by Yapsuan from the plaintiff. It became necessary for
Yapsuan to return to China in 1902 on account of ill health and a

liquidation of the accounts between the plaintiff and the

defendant was made in December of the said year, showing a
balance of P1,444.95 in favor of the plaintiff, which the defendant
expressly undertook to pay. This was proved not only by the
testimony of the plaintiff himself, but by that of two witnesses
who were present. After the liquidation was made the defendant
continued to buy the goods from the plaintiff for cash until the
year 1904, when, as already stated, the business relations
between the parties ceased.
The defendant has failed to show that he had paid the aforesaid
balance of P1,444.95 or an part thereof. Consequently the
judgment of the court below is just and legal and should be
affirmed. There is a difference of P2 between the said balance
and the amount of the judgment but, as the court properly said,
the plaintiff is not entitled to receive more than he prays for in his
complaint, and the amount stated in the judgment is all that is
sought to be recovered.
It is contented by the appellant that the court below erred in not
finding that, the only indebtedness of the defendant being
P1,442.95 according to the liquidation made in December, 1902,
he having thereafter paid the sum of P1,810.87 as alleged in the
complaint, and in default of proof as to the value of the goods
furnished to the defendant, after that date, the plaintiff could not
maintain an action to recover the said sum. There is, in fact, no
evidence in the record upon this last point. It was not necessary,
however, to offer such evidence. The action was not for the
recovery of the value of the goods furnished to the defendant
after the liquidation of 1902. The plaintiff himself testified that the
defendant had paid cash for such goods, but alleged that the
latter had paid nothing on account of the balance due after the
said liquidation. His testimony upon this point has not been

contradicted in any way and it is apparent from such testimony

that the P1,810.87 represented the value of the goods for which
the defendant paid cash. If this amount was mentioned at all in
the complaint, it was for the purpose of comparing the same with
the total value of the goods furnished the defendant up to the
year 1904, which, according to the complaint, amounted to
P3,235.75. It should be borne in mind that the plaintiff continued
to furnish goods to the defendant after the liquidation until the
year 1904. There is no evidence that the aforesaid amount was
paid on account of the balance due because of the liquidation
and not on account of the value of the said goods. The plaintiff
testified without contradiction, that absolutely nothing had been
paid on the balance due from the said liquidation.

defendant, moreover, undertook personally to pay the balance

due the plaintiff, after the liquidation made in December, 1902,
such as being the sum sought to be recovered in this case, as
appears from the testimony of the plaintiff and that of the two
witnesses who took part in the said liquidation. Consequently the
court below properly allowed the plaintiff to maintain this action
against the defendant. The judgment appealed from is
accordingly affirmed with the costs of this instance against the
appellant. After expiration of twenty days let judgment be entered
in accordance herewith and in due time let the record be
remanded to the court below for execution. So ordered.

It is further alleged by the appellant that there is nothing to show

that after the year 1902 he continued to purchase goods from the
plaintiff, paying cash therefor, as was erroneously found by the
court below. The positive and uncontradicted statement of the
plaintiff to the contrary is sufficient, however, to justify the finding
of the court below upon that point. That court, therefore,
committed no error in this respect.

THE GREAT COUNCIL OF THE UNITED STATES OF THE

IMPROVED ORDER OF RED MEN, plaintiff-appellee,
vs.
THE VETERAN ARMY OF THE PHILIPPINES, defendantappellant.

The appellant finally contends that the goods having been

furnished to and received by the partnership between himself
and Yapsuan, and the accounts of the same not having been
liquidated, this action should have been brought against the
partnership itself, or against the partners jointly, and not against
the defendant only. However that may be, the fact remains that
the defendant in this case was the only one who contradicted
with the plaintiff in his own name, as appears from the latter's
testimony. When the defendant told the plaintiff that he had
authorized Yapsuan to receive the goods, he instructed the
plaintiff to charge them to him (the defendant) personally. The

G.R. No. 3186

March 7, 1907

Hartigan, Rohde, & Gutierrez for appellant.

W. A. Kincaid for appellee.
WILLAR, J.:
Article 3 of the Constitution of the Veteran Army of the
Philippines provides as follows:
The object of this association shall be to perpetuate the spirit of
patriotism and fraternity those men who upheld the Stars and
Stripes in the Philippine Islands during the Spanish war and the
Philippine insurrection, and to promote the welfare of its
members in every just and honorable way; to assist the sick and

afflicted and to bury the dead, to maintain among its members in

time of peace the same union and harmony with which they
served their country in times of war and insurrection.

From this judgment, the last named defendant has appealed.

The plaintiff did not appeal from the judgment acquitting
defendant McCabe of the complaint.

Article 5 provides that:

It is claimed by the appellant that the action can not be

maintained by the plaintiff, The Great Council of the United
States of the Improved Order of Red Men, as this organization
did not make the contract of lease.

This association shall be composed of

(a) A department.
(b) Two or more posts.
It is provided in article 6 that the department shall be composed
of a department commander, fourteen officers, and the
commander of each post, or some member of the post appointed
by him. Six members of the department constitute a quorum for
the transaction of business.
The Constitution also provides for the organization of posts.
Among the posts thus organized is the General Henry W. Lawton
Post, No. 1. On the 1st day of March, 1903, a contract of lease of
parts of a certain buildings in the city of Manila was signed by
W.W. Lewis, E.C. Stovall, and V.O., Hayes, as trustees of the
Apache Tribe, No. 1, Improved Order of Red Men, as lessors,
and Albert E. McCabe, citing for and on behalf of Lawton Post,
Veteran Army of the Philippines as lessee. The lease was for the
term of two years commencing February 1, 903, and ending
February 28, 1905. The Lawton Post occupied the premises in
controversy for thirteen months, and paid the rent for that time. It
them abandoned them and this action was commenced to
recover the rent for the unexpired term. Judgment was rendered
in the court below on favor of the defendant McCabe, acquitting
him of the complaint. Judgment was rendered also against the
Veteran Army of the Philippines for P1,738.50, and the costs.

It is also claimed that the action can not be maintained against

the Veteran Army of the Philippines because it never
contradicted, either with the plaintiff or with Apach Tribe, No. 1,
and never authorized anyone to so contract in its name.
We do not find it necessary to consider the first point because we
think the contention of the appellant on the second point must be
sustained.
It is difficult to determine the exact nature of the defendant
organization. It is of course not a mercantile partnership. There is
some doubt as to whether it is a civil partnership, in view of the
definition of the term in article 1665 of the Civil Code. That article
is as follows:
Partnership is a contract by which 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.
It seems to be the opinion of the commentators that where the
society is not constituted for the purpose of gain. it does not fall
within this article of the Civil Code. Such an organization is fully
covered by the Law of Associations of 1887, but that law was
never extended to the Philippine Islands. According to some

commentators it would be governed by the provisions relating to

the community of property. However, the questions thus
presented we do not find necessary to , and to not resolve. The
view most favorable to the appellee is the one that makes the
appellant a civil partnership. Assuming that is such, and is
covered by the provisions of title 8, book 4 of the Civil Code, it is
necessary for the appellee to prove that the contract in question
was executed by some authorized to so by the Veteran Army of
the Philippines.
Article 1695 of the Civil Code provides as follows:
Should no agreement have been made with regard to the form of
management, the following rules shall be observed:
1 All the partners shall be considered as agents, and whatever
any one of them may do by himself shall bind the partnership;
but each one may oppose the act of the others before they may
have produced any legal effect.
One partner, therefore, is empowered to contract in the name of
the partnership only when the articles of partnership make no
provision for the management of the partnership business. In the
case at bar we think that the articles of the Veteran Army of the
Philippines do so provide. It is true that an express disposition to
that effect is not found therein, but we think one may be fairly
deduced from the contents of those articles. They declare what
the duties of the several officers are. In these various provisions
there is nothing said about the power of making contracts, and
that faculty is not expressly given to any officer. We think that it
was, therefore, reserved to the department as a whole; that is,
that in any case not covered expressly by the rules prescribing
the duties of the officers, the department were present. It is
hardly conceivable that the members who formed this

organization should have had the intention of giving to any one

of the sixteen or more persons who composed the department
the power to make any contract relating to the society which that
particular officer saw fit to make, or that a contract when so
made without consultation with, or knowledge of the other
members of the department should bind it. We therefore, hold,
that no contract, such as the one in question, is binding on the
Veteran Army of the Philippines unless it was authorized at a
meeting of the department. No evidence was offered to show
that the department had never taken any such action. In fact, the
proof shows that the transaction in question was entirely
between Apache Tribe, No. 1, and the Lawton Post, and there is
nothing to show that any member of the department ever knew
anything about it, or had anything to do with it. The liability of the
Lawton Post is not presented in this appeal.
Judgment against the appellant is reversed, and the Veteran
Army of the Philippines is acquitted of the complaint. No costs
will be allowed to either party in this court. After the expiration of
twenty days let judgment be rendered in accordance to the lower
court for proper action. So ordered.
G.R. No. L-11840

July 26, 1960

ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN

AN and ANTONIO C. GOQUIOLAY, plaintiffs-appellants,
vs.
WASHINGTON Z. SYCIP, ET AL., defendants-appellees.
Jose C. Colayco, Manuel O. Chan and Padilla Law Offices for
appellants.
Sycip, Quisumbing, Salazar and Associates for appellees.
REYES, J. B. L., J.:

Direct appeal from the decision of the Court of First Instance of

Davao (the amount involved being more than P200,00)
dismissing the plaintiffs-appellants' complaint.
From the stipulation of facts of the parties and the evidence on
record, it would appear that on May 29, 1940, Tan Sin An and
Antonio C. Goquiolay", entered into a general commercial
partnership under the partnership name "Tan Sin An and Antonio
C. Goquiolay", for the purpose in dealing in real state. The
partnership had a capital of P30,000.00, P18,000.00 of which
was contributed by Goquiolay and P12,000.00 by Tan Sin An.
The agreement lodge upon Tan Sin An the sole management of
the partnership affairs, stipulating that
III. The co-partnership shall be composed of said Tan Sin An as
sole managing and partner (sic), and Antonio C. Goquiolay as
co-partner.
IV. Vhe affairs of co-partnership shall be managed exclusively by
the managing and partner (sic) or by his authorized agent, and it
is expressly stipulated that the managing and partner (sic) may
delegate the entire management of the affairs of the copartnership by irrevocable power of attorney to any person, firm
or corporation he may select upon such terms as regards
compensation as he may deem proper, and vest in such
persons, firm or corporation full power and authority, as the agent
of the co-partnership and in his name, place and stead to do
anything for it or on his behalf which he as such managing and
partner (sic) might do or cause to be done.
V. The co-partner shall have no voice or participation in the
management of the affairs of the co-partnership; but he may
examine its accounts once every six (6) months at any time

during ordinary business hours, and in accordance with the

provisions of the Code of Commerce. (Article of Co-Partnership).
The lifetime of the partnership was fixed at ten (10) years and
also that
In the event of the death of any of the partners at any time before
the expiration of said term, the co-partnership shall not be
dissolved but will have to be continued and the deceased partner
shall be represented by his heirs or assigns in said copartnership (Art. XII, Articles of Co-Partnership).
However, the partnership could be dissolved and its affairs
liquidated at any time upon mutual agreement in writing of the
partners (Art. XIII, articles of Co-Partnership).
On May 31, 1940, Antonio Goquiolay executed a general power
of attorney to this effect:
That besides the powers and duties granted the said Tan Sin An
by the articles of co-partnership of said co-partnership "Tan Sin
An and Antonio Goquiolay", that said Tan Sin An should act as
the Manager for said co-partnership for the full period of the term
for which said co-partnership was organized or until the whole
period that the said capital of P30,000.00 of the co-partnership
should last, to carry on to the best advantage and interest of the
said co-partnership, to make and execute, sign, seal and deliver
for the co-partnership, and in its name, all bills, bonds, notes,
specialties, and trust receipts or other instruments or documents
in writing whatsoever kind or nature which shall be necessary to
the proper conduction of the said businesses, including the
power to mortgage and pledge real and personal properties, to
secure the obligation of the co-partnership, to buy real or
personal properties for cash or upon such terms as he may

deem advisable, to sell personal or real properties, such as lands

and buildings of the co-partnership in any manner he may deem
advisable for the best interest of said co-partnership, to borrow
money on behalf of the co-partnership and to issue promissory
notes for the repayment thereof, to deposit the funds of the copartnership in any local bank or elsewhere and to draw checks
against funds so deposited ... .
On May 29, 1940, the plaintiff partnership "Tan Sin An and
Goquiolay" purchased the three (3) parcels of land, known as
Lots Nos. 526, 441 and 521 of the Cadastral Survey of Davao,
subject-matter of the instant litigation, assuming the payment of
a mortgage obligation of P25,000.00, payable to "La Urbana
Sociedad Mutua de Construccion y Prestamos" for a period of
ten (10) years, with 10% interest per annum. Another 46 parcels
were purchased by Tan Sin An in his individual capacity, and he
assumed payment of a mortgage debt thereon for P35,000.00
with interest. The downpayment and the amortization were
advanced by Yutivo and Co., for the account of the purchasers.
On September 25, 1940, the two separate obligations were
consolidated in an instrument executed by the partnership and
Tan Sin An, whereby the entire 49 lots were mortgaged in favor
of the "Banco Hipotecario de Filipinas" (as successor to "La
Urbana") and the covenantors bound themselves to pay, jointly
and severally, the remaining balance of their unpaid accounts
amounting to P52,282.80 within eight 8 years, with 8% annual
interest, payable in 96 equal monthly installments.
On June 26, 1942, Tan Sin An died, leaving as surviving heirs his
widow, Kong Chai Pin, and four minor children, namely: Tan L.
Cheng, Tan L. Hua, Tan C. Chiu and Tan K. Chuan. Defendant
Kong Chai Pin was appointed administratrix of the intestate
estate of her deceased husband.

In the meantime, repeated demands for payment were made by

the Banco Hipotecario on the partnership and on Tan Sin An. In
March, 1944, the defendant Sing Yee and Cuan, Co., Inc., upon
request of defendant Yutivo Sans Hardware Co., paid the
remaining balance of the mortgage debt, and the mortgage was
cancelled.
Then in 1946, Yutivo Sons Hardware Co. and Sing Yee and
Cuan Co., Inc. filed their claims in the intestate proceedings of
Tan Sin An for P62,415.91 and P54,310.13, respectively, as
alleged obligations of the partnership "Tan Sin An and Antonio C.
Goquiolay" and Tan Sin An, for advances, interest and taxes paid
in amortizing and discharging their obligations to "La Urbana"
and the "Banco Hipotecario". Disclaiming knowledge of said
claims at first, Kong Chai Pin later admitted the claims in her
amended answer and they were accordingly approved by the
Court.
On March 29, 1949, Kong Chai Pin filed a petition with the
probate court for authority to sell all the 49 parcels of land to
Washington Z, Sycip and Betty Y. Lee, for the purpose
preliminary of settling the aforesaid debts of Tan Sin An and the
partnership. Pursuant to a court order of April 2, 1949, the
administratrix executed on April 4, 1949, a deed of sale1 of the
49 parcels of land to the defendants Washington Sycip and Betty
Lee in consideration of P37,000.00 and of vendees' assuming
payments of the claims filed by Yutivo Sons Hardware Co. and
Sing Yee and Cuan Co., Inc. Later, in July, 1949, defendants
Sycip and Betty Lee executed in favor of the Insular
Development Co., Inc. a deed of transfer covering the said 49
parcels of land.
Learning about the sale to Sycip and Lee, the surviving partner
Antonio Goquiolay filed, on or about July 25, 1949, a petition in

the intestate proceedings seeking to set aside the order of the

probate court approving the sale in so far as his interest over the
parcels of land sold was concerned. In its order of December 29,
1949, the probate court annulled the sale executed by the
administratrix with respect to the 60% interest of Antonio
Goquiolay over the properties sold. Kong Chai Pin appealed to
the Court of Appeals, which court later certified the case to us
(93 Phil., 413; 49 Off. Gaz. [7] 2307). On June 30, 1953, we
rendered decision setting aside the orders of the probate court
complained of and remanding the case for new trial, due to the
non-inclusion of indispensable parties. Thereafter, new pleadings
were filed.
The second amended complaint in the case at bar prays, among
other things, for the annulment of the sale in favor of Washington
Sycip and Betty Lee, and their subsequent conveyance in favor
of Insular Development Co., Inc., in so far as the three (3) lots
owned by the plaintiff partnership are concerned. The answer
averred the validity of the sale by Kong Chai Pin as successor
partner, in lieu of the late Tan Sin An. After hearing, the complaint
was dismissed by the lower court in its decision dated October
30, 1956; hence, this appeal taken directly to us by the plaintiffs,
as the amount involved is more than P200,000.00. Plaintiffsappellants assign as errors that
I The lower court erred in holding that Kong Chai Pin became
the managing partner of the partnership upon the death of her
husband, Tan Sin An, by virtue of the articles of Partnership
executed between Tan Sin An and Antonio Goquiolay, and the
general power of attorney granted by Antonio Goquiolay.
II The lower court erred in holding that Kong Chai Pin could
act alone as sole managing partner in view of the minority of the
other heirs.

III The lower court erred in holding that Kong Chai Pin was the
only heir qualified to act as managing partner.
IV The lower court erred in holding that Kong Chai Pin had
authority to sell the partnership properties by virtue of the articles
of partnership and the general power of attorney granted to Tan
Sin An in order to pay the partnership indebtedness.
V The lower court erred in finding that the partnership did not
pay its obligation to the Banco Hipotecario.
VI The lower court erred in holding that the consent of Antonio
Goquiolay was not necessary to consummate the sale of the
partnership properties.
VII The lower court erred in finding that Kong Chai Pin
managed the business of the partnership after the death of her
husband, and that Antonio Goquiolay knew it.
VIII The lower court erred in holding that the failure of Antonio
Goquiolay to oppose the management of the partnership by
Kong Chai Pin estops him now from attacking the validity of the
sale of the partnership properties.
IX The lower court erred in holding that the buyers of the
partnership properties acted in good faith.
X The lower court erred in holding that the sale was not
fraudulent against the partnership and Antonio Goquiolay.
XI The lower court erred in holding that the sale was not only
necessary but beneficial to the partnership.

XII The lower court erred in dismissing the complaint and in

ordering Antonio Goquiolay to pay the costs of suit.
There is a merit in the contention that the lower court erred in
holding that the widow, Kong Chai Pin, succeeded her husband,
Tan Sin An, in the sole management of the partnership, upon the
latter's death. While, as we previously stated in our narration of
facts, the Articles of Co-Partnership and the power of attorney
executed by Antonio Goquiolay, conferred upon Tan Sin An the
exclusive management of the business, such power, premised
as it is upon trust and confidence, was a mere personal right that
terminated upon Tan's demise. The provision in the articles
stating that "in the event of death of any one of the partners
within the 10-year term of the partnership, the deceased partner
shall be represented by his heirs", could not have referred to the
managerial right given to Tan Sin An; more appropriately, it
related to the succession in the proprietary interest of each
partner. The covenant that Antonio Goquiolay shall have no voice
or participation in the management of the partnership, being a
limitation upon his right as a general partner, must be held
coextensive only with Tan's right to manage the affairs, the
contrary not being clearly apparent.
Upon the other hand, consonant with the articles of copartnership providing for the continuation of the firm
notwithstanding the death of one of the partners, the heirs of the
deceased, by never repudiating or refusing to be bound under
the said provision in the articles, became individual partners with
Antonio Goquiolay upon Tan's demise. The validity of like
clauses in partnership agreements is expressly sanctioned under
Article 222 of the Code of Commerce.2
Minority of the heirs is not a bar to the application of that clause
in the articles of co-partnership (2 Vivante, Tratado de Derecho

Mercantil, 493; Planiol, Traite Elementaire de Droit Civil, English

translation by the Louisiana State Law Institute, Vol. 2, Pt. 2, p.
177).
Appellants argue, however, that since the "new" members'
liability in the partnership was limited merely to the value of the
share or estate left by the deceased Tan Sin An, they became no
more than limited partners and, as such, were disqualified from
the management of the business under Article 148 of the Code
of Commerce. Although ordinarily, this effect follows from the
continuance of the heirs in the partnership,3 it was not so with
respect to the widow Kong Chai Pin, who, by her affirmative
actions, manifested her intent to be bound by the partnership
agreement not only as a limited but as a general partner. Thus,
she managed and retained possession of the partnership
properties and was admittedly deriving income therefrom up to
and until the same were sold to Washington Sycip and Betty Lee.
In fact, by executing the deed of sale of the parcels of land in
dispute in the name of the partnership, she was acting no less
than as a managing partner. Having thus preferred to act as
such, she could be held liable for the partnership debts and
liabilities as a general partner, beyond what she might have
derived only from the estate of her deceased husband. By
allowing her to retain control of the firm's property from 1942 to
1949, plaintiff estopped himself to deny her legal representation
of the partnership, with the power to bind it by the proper
contracts.
The question now arises as to whether or not the consent of the
other partners was necessary to perfect the sale of the
partnership properties to Washington Sycip and Betty Lee. The
answer is, we believe, in the negative. Strangers dealing with a
partnership have the right to assume, in the absence of
restrictive clauses in the co-partnership agreement, that every

general partner has power to bind the partnership, specially

those partners acting with ostensible authority. And so, we held
in one case:
. . . Third persons, like the plaintiff, are not bound in entering into
a contract with any of the two partners, to ascertain whether or
not this partner with whom the transaction is made has the
consent of the other partner. The public need not make inquiries
as to the agreements had between the partners. Its knowledge is
enough that it is contracting with the partnership which is
represented by one of the managing partners.
"There is a general presumption that each individual partner is
an agent for the firm and that he has authority to bind the firm in
carrying on the partnership transactions." [Mills vs. Riggle, 112
Pac., 617]
"The presumption is sufficient to permit third persons to hold the
firm liable on transactions entered into by one of the members of
the firm acting apparently in its behalf and within the scope of his
authority." [Le Roy vs. Johnson, 7 U.S. Law, Ed., 391] (George
Litton vs. Hill & Ceron, et al., 67 Phil., 513-514).
We are not unaware of the provision of Article 129 of the Code of
Commerce to the effect that
If the management of the general partnership has not been
limited by special agreement to any of the members, all shall
have the power to take part in the direction and management of
the common business, and the members present shall come to
an agreement for all contracts or obligations which may concern
the association. (Emphasis supplied)

but this obligation is one imposed by law on the partners among

themselves, that does not necessarily affect the validity of the
acts of a partner, while acting within the scope of the ordinary
course of business of the partnership, as regards third persons
without notice. The latter may rightfully assume that the
contracting partner was duly authorized to contract for and in
behalf of the firm and that, furthermore, he would not ordinarily
act to the prejudice of his co-partners. The regular course of
business procedure does not require that each time a third
person contracts with one of the managing partners, he should
inquire as to the latter's authority to do so, or that he should first
ascertain whether or not the other partners had given their
consent thereto. In fact, Article 130 of the same Code of
Commerce provides that even if a new obligation was contracted
against the express will of one of the managing partners, "it shall
not be annulled for such reason, and it shall produce its effects
without prejudice to the responsibility of the member or members
who contracted it, for the damages they may have caused to the
common fund."
Cesar Vivante (2 Tratado de Derecho Mercantil, pp. 114-115)
points out:
367. Primera hipotesis. A falta de pactos especiales, la
facultad de administrar corresponde a cada socio
personalmente. No hay que esperar ciertamente concordia con
tantas cabezas, y para cuando no vayan de acuerdo, la
disciplina del Codigo no ofrece un sistema eficaz que evite los
inconvenientes. Pero, ante el silencio del contrato, debia quiza el
legislador privar de la administracion a uno de los socios en
beneficio del otro? Seria una arbitrariedad. Debera quiza
declarar nula la Sociedad que no haya elegido Administrador? El
remedio seria peor que el mal. Debera, tal vez, pretender que
todos los socios concurran en todo acto de la Sociedad? Pero

este concurso de todos habria reducido a la impotencia la

administracion, que es asunto d todos los dias y de todas horas.
Hubieran sido disposiciones menos oportunas que lo adoptado
por el Codigo, el cual se confia al espiritu de reciproca confianza
que deberia animar la colaboracion de los socios, y en la ley
inflexible de responsabilidad que implica comunidad en los
intereses de los mismos.
En esta hipotesis, cada socio puede ejercer todos los negocios
comprendidos en el contrato social sin dar de ello noticia a los
otros, porque cada uno de ellos ejerce la administracion en la
totalidad de sus relaciones, salvo su responsabilidad en el caso
de una administracion culpable. Si debiera dar noticia, el
beneficio de su simultania actividad, frecuentemente distribuida
en lugares y en tiempos diferentes, se echaria a perder. Se
objetara el que de esta forma, el derecho de oposicion de cada
uno de los socios puede quedar frustrado. Pero se puede
contestar que este derecho de oposicion concedido por la ley
como un remedio excepcional, debe subordinarse al derecho de
ejercer el oficio de Administrador, que el Codigo concede sin
limite: "se presume que los socios se han concedido
reciprocamente la facultad de administrar uno para otro." Se
haria precipitar esta hipotesis en la otra de una administracion
colectiva (art. 1,721, Codigo Civil) y se acabaria con pedir el
consentimiento, a lo menos tacito, de todos los socios lo que
el Codigo excluye ........, si se obligase al socio Administrador a
dar noticia previa del negocio a los otros, a fin de que pudieran
oponerse si no consintieran.
Commenting on the same subject, Gay de Montella (Codigo de
Comercio, Tomo II, 147-148) opines:
Para obligar a las Compaias enfrente de terceros (art. 128 del
Codigo), no es bastante que los actos y contratos hayan sido

ejecutados por un socio o varios en nombre colectivo, sino que

es preciso el concurso de estos dos elementos, uno, que el
socio o socios tengan reconocida la facultad de administrar la
Compaia, y otro, que el acto o contrato haya sido ejecutado en
nombre de la Sociedad y usando de su firma social. Asi se que
toda obligacion contraida bajo la razon social, se presume
contraida por la Compaia. Esta presunion es impuesta por
motivos de necesidad practica. El tercero no puede cada vez
que trata con la Compaia, inquirir si realmente el negocio
concierne a la Sociedad. La presuncion es juris tantum y no juris
et de jure, de modo que si el gerente suscribe bajo la razon
social una obligacion que no interesa a la Sociedad, este podra
rechazar la accion del tercero probando que el acreedor conocia
que la obligacion no tenia ninguna relacion con ella. Si tales
actos y contratos no comportasen la concurrencia de ambos
elementos, seria nulos y podria decretarse la responsabilidad
civil o penal contra sus autores.
En el caso que tales actos o contratos hayan sido tacitamente
aprobados por la Compaia, o contabilizados en sus libros, si el
acto o contrato ha sido convalidado sin protesta y se trata de
acto o contrato que ha producido beneficio social, tendria plena
validez, aun cuando le faltase algunos o ambos de aquellos
requisitos antes sealados.
Cuando los Estatutos o la escritura social no contienen ninguna
clausula relativa al nombramiento o designacion de uno o mas
de un socio para administrar la Compaia (art. 129 del Codigo)
todos tienen por un igual el derecho de concurir a la decision y
manejo de los negocios comunes. . . .
Although the partnership under consideration is a commercial
partnership and, therefore, to be governed by the Code of
Commerce, the provisions of the old Civil Code may give us

some light on the right of one partner to bind the partnership.

States Art. 1695 thereof:
Should no agreement have been made with respect to the form
of management, the following rules shall be observed:
1. All the partners shall be considered agents, and whatever any
one of the may do individually shall bind the partnership; but
each one may oppose any act of the others before it has become
legally binding.
The records fail to disclose that appellant Goquiolay made any
opposition to the sale of the partnership realty to Washington Z.
Sycip and Betty Lee; on the contrary, it appears that he
(Goquiolay) only interposed his objections after the deed of
conveyance was executed and approved by the probate court,
and, consequently, his opposition came too late to be effective.
Appellants assails the correctness of the amounts paid for the
account of the partnership as found by the trial court. This
question, however, need not be resolved here, as in the deed of
conveyance executed by Kong Chai Pin, the purchasers
Washington Sycip and Betty Lee assumed, as part consideration
of the purchase, the full claims of the two creditors, Sing Yee and
Cuan Co., Inc. and Yutivo Sons Hardware Co.
Appellants also question the validity of the sale covering the
entire firm realty, on the ground that it, in effect, threw the
partnership into dissolution, which requires consent of all the
partners. This view is untenable. That the partnership was left
without the real property it originally had will not work its
dissolution, since the firm was not organized to exploit these
precise lots but to engage in buying and selling real estate, and
"in general real estate agency and brokerage business".

Incidentally, it is to be noted that the payment of the solidary

obligation of both the partnership and the late Tan Sin An, leaves
open the question of accounting and contribution between the
co-debtors, that should be ventilated separately.
Lastly, appellants point out that the sale of the partnership
properties was only a fraudulent device by the appellees, with
the connivance of Kong Chai Pin, to ease out Antonio Goquiolay
from the partnership. The "devise", according to the appellants,
started way back sometime in 1945, when one Yu Khe Thai
sounded out Antonio Goquiolay on the possibility of selling his
share in the partnership; and upon his refusal to sell, was
followed by the filing of the claims of Yutivo Sons Hardware Co.
and Sing Yee and Cuan Co., Inc. in the intestate estate
proceedings of Tan Sin An. As creditors of Tan Sin An and the
plaintiff partnership (whose liability was alleged to be joint and
several), Yutivo Sons Hardware Co., and Sing Yee Cuan Co.,
Inc. had every right to file their claims in the intestate
proceedings. The denial of the claims at first by Kong Chai Pin
( for lack of sufficient knowledge) negatives any conspiracy on
her part in the alleged fraudulent scheme, even if she
subsequently decided to admit their validity after studying the
claims and finding it best to admit the same. It may not be amiss
to remark that the probate court approved the questioned claims.
There is complete failure of proof, moreover, that the price for
which the properties were sold was unreasonably low, or in any
way unfair, since appellants presented no evidence of the market
value of the lots as of the time of their sale to appellees Sycip
and Lee. The alleged value of P31,056.58 in May of 1955 is no
proof of the market value in 1949, specially because in the
interval, the new owners appear to have converted the land into
a subdivision, which they could not do without opening roads and
otherwise improving the property at their own expense. Upon the

other hand, Kong Chai Pin hardly had any choice but to execute
the questioned sale, as it appears that the partnership had
neither cash nor other properties with which to pay its
obligations. Anyway, we cannot consider seriously the inferences
freely indulged in by the appellants as allegedly indicating fraud
in the questioned transactions, leading to the conveyance of the
lots in dispute to the appellee Insular Development Co., Inc.
Wherefore, finding no reversible error in the appealed judgment,
we affirm the same, with costs against appellant Antonio
Goquiolay.
G.R. No. L-19819 October 26, 1977
WILLIAM UY, plaintiff-appellee,
vs.
BARTOLOME PUZON, substituted by FRANCO PUZON,
defendant-appellant.
R.P. Sarandi for appellant.
Jose L. Uy & Andres P. Salvador for appellee.

CONCEPCION JR., J.:t.hqw

Appeal from the decision of the Court of First Instanre of Manila,
dissolving the "U.P. Construction Company" and ordering the
defendant Bartolome Puzon to pay the plaintiff the amounts of:
(1) P115,102.13, with legal interest thereon from the date of the
filing of the complaint until fully paid; (2) P200,000.00, as
plaintiffs share in the unrealized profits of the "U.P. Construction
Company" and (3) P5,000.00, as and for attorney's fees.

It is of record that the defendant Bartolome Puzon had a contract

with the Republic of the Philippines for the construction of the
Ganyangan Bato Section of the Pagadian Zamboanga City
Road, province of Zamboanga del Sur 1 and of five (5) bridges in
the Malangas-Ganyangan Road. 2 Finding difficulty in
accomplishing both projects, Bartolome Puzon sought the
financial assistance of the plaintiff, William Uy. As an
inducement, Puzon proposed the creation of a partnership
between them which would be the sub-contractor of the projects
and the profits to be divided equally between them. William Uy
inspected the projects in question and, expecting to derive
considerable profits therefrom, agreed to the proposition, thus
resulting in the formation of the "U.P. Construction Company" 3
which was subsequently engaged as subcontractor of the
construction projects. 4
The partners agreed that the capital of the partnership would be
P100,000.00 of which each partner shall contribute the amount
of P50,000.00 in cash. 5 But, as heretofore stated, Puzon was
short of cash and he promised to contribute his share in the
partnership capital as soon as his application for a loan with the
Philippine National Bank in the amount of P150,000.00 shall
have been approved. However, before his loan application could
be acted upon, he had to clear his collaterals of its incumbrances
first. For this purpose, on October 24, 1956, Wilham Uy gave
Bartolome Puzon the amount of P10,000.00 as advance
contribution of his share in the partnership to be organized
between them under the firm name U.P. CONSTRUCTION
COMPANY which amount mentioned above will be used by
Puzon to pay his obligations with the Philippine National Bank to
effect the release of his mortgages with the said Bank. 6 On
October 29, 1956, William Uy again gave Puzon the amount of
P30,000.00 as his partial contribution to the proposed
partnership and which the said Puzon was to use in payment of

his obligation to the Rehabilitation Finance Corporation. 7 Puzon

promised William Uy that the amount of P150,000.00 would be
given to the partnership to be applied thusly: P40,000.00, as
reimbursement of the capital contribution of William Uy which the
said Uy had advanced to clear the title of Puzon's property;
P50,000.00, as Puzon's contribution to the partnership; and the
balance of P60,000.00 as Puzon's personal loan to the
partnership. 8
Although the partnership agreement was signed by the parties
on January 18, 1957,9 work on the projects was started by the
partnership on October 1, 1956 in view of the insistence of the
Bureau of Public Highways to complete the project right away. 10
Since Puzon was busy with his other projects, William Uy was
entrusted with the management of the projects and whatever
expense the latter might incur, would be considered as part of his
contribution. 11 At the end of December, 1957, William Uy had
contributed to the partnership the amount of P115,453.39,
including his capital. 12
The loan of Puzon was approved by the Philippine National Bank
in November, 1956 and he gave to William Uy the amount of
P60,000.00. Of this amount, P40,000.00 was for the
reimbursement of Uy's contribution to the partnership which was
used to clear the title to Puzon's property, and the P20,000.00 as
Puzon's contribution to the partnership capital. 13
To guarantee the repayment of the above-mentioned loan,
Bartolome Puzon, without the knowledge and consent of William
Uy, 14 assigned to the Philippine National Bank all the payments
to be received on account of the contracts with the Bureau of
Public Highways for the construction of the afore-mentioned
projects. 15 By virtue of said assignment, the Bureau of Public
Highways paid the money due on the partial accomplishments

on the government projects in question to the Philippine National

Bank which, in turn, applied portions of it in payment of Puzon's
loan. Of the amount of P1,047,181.07, released by the Bureau of
Public Highways in payment of the partial work completed by the
partnership on the projects, the amount of P332,539.60 was
applied in payment of Puzon's loan and only the amount of
P27,820.80 was deposited in the partnership funds, 16 which, for
all practical purposes, was also under Puzon's account since
Puzon was the custodian of the common funds.
As time passed and the financial demands of the projects
increased, William Uy, who supervised the said projects, found
difficulty in obtaining the necessary funds with which to pursue
the construction projects. William Uy correspondingly called on
Bartolome Puzon to comply with his obligations under the terms
of their partnership agreement and to place, at lest, his capital
contribution at the disposal of the partnership. Despite several
promises, Puzon, however, failed to do so. 17 Realizing that his
verbal demands were to no avail, William Uy consequently wrote
Bartolome Puzon pormal letters of demand, 18 to which Puzon
replied that he is unable to put in additional capital to continue
with the projects. 19
Failing to reach an agreement with William Uy, Bartolome Puzon,
as prime contractor of the construction projects, wrote the
subcontractor, U.P. Construction Company, on November 20,
1957, advising the partnership, of which he is also a partner, that
unless they presented an immediate solution and capacity to
prosecute the work effectively, he would be constrained to
consider the sub-contract terminated and, thereafter, to assume
all responsibilities in the construction of the projects in
accordance with his original contract with the Bureau of Public
Highways. 20 On November 27, 1957, Bartolome Puzon again

wrote the U.P.Construction Company finally terminating their

subcontract agreement as of December 1, 1957. 21
Thereafter, William Uy was not allowed to hold office in the U.P.
Construction Company and his authority to deal with the Bureau
of Public Highways in behalf of the partnership was revoked by
Bartolome Puzon who continued with the construction projects
alone. 22
On May 20, 1958, William Uy, claiming that Bartolome Puzon
had violated the terms of their partnership agreement, instituted
an action in court, seeking, inter alia, the dissolution of the
partnership and payment of damages.
Answering, Bartolome Puzon denied that he violated the terms of
their agreement claiming that it was the plaintiff, William Uy, who
violated the terms thereof. He, likewise, prayed for the
dissolution of the partnership and for the payment by the plaintiff
of his, share in the losses suffered by the partnership.
After appropriate proceedings, the trial court found that the
defendant, contrary to the terms of their partnership agreement,
failed to contribute his share in the capital of the partnership
applied partnership funds to his personal use; ousted the plaintiff
from the management of the firm, and caused the failure of the
partnership to realize the expected profits of at least
P400,000.00. As a consequence, the trial court dismissed the
defendant's counterclaim and ordered the dissolution of the
partnership. The trial court further ordered the defendant to pay
the plaintiff the sum of P320,103.13.
Hence, the instant appeal by the defendant Bartolome Puzon
during the pendency of the appeal before this Court, the said
Bartolome Puzon died, and was substituted by Franco Puzon.

The appellant makes in his brief nineteen (19) assignment of

errors, involving questions of fact, which relates to the following
points:
(1) That the appellant is not guilty of breach of contract; and
(2) That the amounts of money the appellant has been order to
pay the appellee is not supported by the evidence and the law.
After going over the record, we find no reason for rejecting the
findings of fact below, justifying the reversal of the decision
appealed from.
The findings of the trial court that the appellant failed to
contribute his share in the capital of the partnership is clear
incontrovertible. The record shows that after the appellant's loan
the amount of P150,000.00 was approved by the Philippin
National Bank in November, 1956, he gave the amount
P60,000.00 to the appellee who was then managing the
construction projects. Of this amount, P40,000.00 was to be
applied a reimbursement of the appellee's contribution to the
partnership which was used to clear the title to the appellant's
property, and th balance of P20,000.00, as Puzon's contribution
to the partnership. 23 Thereafter, the appellant failed to make any
further contributions the partnership funds as shown in his letters
to the appellee wherein he confessed his inability to put in
additional capital to continue with the projects. 24
Parenthetically, the claim of the appellant that the appellee is
equally guilty of not contributing his share in the partnership
capital inasmuch as the amount of P40,000.00, allegedly given
to him in October, 1956 as partial contribution of the appellee is
merely a personal loan of the appellant which he had paid to the
appellee, is plainly untenable. The terms of the receipts signed

by the appellant are clear and unequivocal that the sums of

money given by the appellee are appellee's partial contributions
to the partnership capital. Thus, in the receipt for P10,000.00
dated October 24, 1956, 25 the appellant stated:+.wph!1

the money due on the partial accomplishments on the

construction projects in question to the Philippine National Bank
who, in turn, applied portions of it in payment of the appellant's
loan. 28

Received from Mr. William Uy the sum of TEN THOUSAND

PESOS (P10,000.00) in Check No. SC 423285 Equitable
Banking Corporation, dated October 24, 1956, as advance
contribution of the share of said William Uy in the partnership to
be organized between us under the firm name U.P.
CONSTRUCTION COMPANY which amount mentioned above
will be used by the undersigned to pay his obligations with the
Philippine National Bank to effect the release of his mortgages
with the said bank. (Emphasis supplied)

The appellant claims, however, that the said assignment was

made with the consent of the appellee and that the assignment
not prejudice the partnership as it was reimbursed by the
appellant.

In the receipt for the amount of P30,000.00 dated October 29,

1956, 26 the appellant also said:+.wph!1
Received from William Uy the sum of THIRTY THOUSAND
PESOS (P30,000.00) in Check No. SC423287, of the Equitable
Banking Corporation, as partial contribution of the share of the
said William Uy to the U.P. CONSTRUCTION COMPANY for
which the undersigned will use the said amount in payment of his
obligation to the Rehabilitation Finance Corporation. (Emphasis
supplied)
The findings of the trial court that the appellant misapplied
partnership funds is, likewise, sustained by competent evidence.
It is of record that the appellant assigned to the Philippine
National Bank all the payments to be received on account of the
contracts with the Bureau of Public Highways for the construction
of the aforementioned projects to guarantee the repayment of
the bank. 27 By virtue of the said appeflant's personal loan with
the said bank assignment, the Bureau of Public Highways paid

But, the appellee categorically stated that the assignment to the

Philippine National Bank was made without his prior knowledge
and consent and that when he learned of said assignment, he
cal the attention of the appellant who assured him that the
assignment was only temporary as he would transfer the loan to
the Rehabilitation Finance Corporation within three (3) months
time. 29
The question of whom to believe being a matter large dependent
on the trier's discretion, the findings of the trial court who had the
better opportunity to examine and appraise the fact issue,
certainly deserve respect.
That the assignment to the Philippine National Bank prejudicial
to the partnership cannot be denied. The record show that during
the period from March, 1957 to September, 1959, the appellant
Bartolome Puzon received from the Bureau of Public highways,
in payment of the work accomplished on the construction
projects, the amount of P1,047,181.01, which amount rightfully
and legally belongs to the partnership by virtue of the
subcontract agreements between the appellant and the U.P.
Construction Company. In view of the assignemt made by Puzon
to the Philippine National Bank, the latter withheld and applied
the amount of P332,539,60 in payment of the appellant's

personal loan with the said bank. The balance was deposited in
Puzon's current account and only the amount of P27,820.80 was
deposited in the current account of the partnership. 30 For sure, if
the appellant gave to the partnership all that were eamed and
due it under the subcontract agreements, the money would have
been used as a safe reserve for the discharge of all obligations
of the firm and the partnership would have been able to
successfully and profitably prosecute the projects it
subcontracted.
When did the appellant make the reimbursement claimed by
him?
For the same period, the appellant actually disbursed for the
partnership, in connection with the construction projects, the
amount of P952,839.77. 31 Since the appellant received from the
Bureau of Public Highways the sum of P1,047,181.01, the
appellant has a deficit balance of P94,342.24. The appellant,
therefore, did not make complete restitution.
The findings of the trial court that the appellee has been ousted
from the management of the partnership is also based upon
persuasive evidence. The appellee testified that after he had
demanded from the appellant payment of the latter's contribution
to the partnership capital, the said appellant did not allow him to
hold office in the U.P. Construction Company and his authority to
deal with the Bureau of Public Highways was revoked by the
appellant. 32
As the record stands, We cannot say, therefore, that the decis of
the trial court is not sustained by the evidence of record as
warrant its reverw.

Since the defendantappellant was at fauh, the tral court properly

ordered him to reimburse the plaintiff-appellee whatever amount
latter had invested in or spent for the partnership on account of
construction projects.
How much did the appellee spend in the construction projects
question?
It appears that although the partnership agreement stated the
capital of the partnership is P100,000.00 of which each part shall
contribute to the partnership the amount of P50,000.00 cash 33
the partners of the U.P. Construction Company did contribute
their agreed share in the capitalization of the enterprise in lump
sums of P50,000.00 each. Aside from the initial amount
P40,000.00 put up by the appellee in October, 1956, 34 the
partners' investments took, the form of cash advances coveting
expenses of the construction projects as they were incurred.
Since the determination of the amount of the disbursements
which each of them had made for the construction projects
require an examination of the books of account, the trial court
appointed two commissioners, designated by the parties, "to
examine the books of account of the defendant regarding the
U.P. Construction Company and his personal account with
particular reference to the Public Works contract for the
construction of the Ganyangan-Bato Section, PagadianZamboanga City Road and five (5) Bridges in MalangasGanyangan Road, including the payments received by defendant
from the Bureau of Public Highways by virtue of the two projects
above mentioned, the disbursements or disposition made by
defendant of the portion thereof released to him by the Philippine
National Bank and in whose account these funds are deposited .
35

In due time, the loners so appointed, 36 submitted their report 37

they indicated the items wherein they are in agreement, as well
as their points of disagreement.

With respect to the amount of P24,239.48, claimed by appellant,

we are hereunder adopting the findings of the trial which we find
to be in accord with the evidence:

In the commissioners' report, the appellant's advances are listed

under Credits; the money received from the firm, under Debits;
and the resulting monthly investment standings of the partners,
under Balances. The commissioners are agreed that at the end
of December, 1957, the appellee had a balance of P8,242.39. 38
It is in their respective adjustments of the capital account of the
appellee that the commissioners had disagreed.

To enhance defendant's theory that he should be credited

P24,239.48, he presented checks allegedly given to plaintiff and
the latter's brother, Uy Han, marked as Exhibits 2 to 11.
However, defendant admitted that said cheeks were not entered
nor record their books of account, as expenses for and in behalf
of partnership or its affairs. On the other hand, Uy Han testified
that of the cheeks he received were exchange for cash, while
other used in the purchase of spare parts requisitioned by
defendant. This testimony was not refuted to the satisfaction of
the Court, considering that Han's explanation thereof is the more
plausible because if they were employed in the prosecution of
the partners projects, the corresponding disbursements would
have certainly been recorded in its books, which is not the case.
Taking into account defendant is the custodian of the books of
account, his failure to so enter therein the alleged
disbursements, accentuates the falsity of his claim on this point.

Mr. Ablaza, designated by the appellant, would want to charge

the appellee with the sum of P24,239.48, representing the
checks isssued by the appellant, 39 and encashed by the
appellee or his brother, Uy Han so that the appellee would owe
the partnership the amount of P15,997.09.
Mr. Tayag, designated by the appellee, upon the other hand,
would credit the appellee the following additional amounts:

40

(1) P7,497.80 items omitted from the books of partnership but

recognized and charged to Miscellaneous Expenses by Mr.
Ablaza;
(2) P65,103.77 payrolls paid by the appellee in the amount
P128,103.77 less payroll remittances from the appellant in
amount of P63,000.00; and
(3) P26,027.04 other expeses incurred by the appellee at
construction site.

Besides, as further noted by the trial court, the report

Commissioner Ablaza is unreliable in view of his proclivity to
favor the appellant and because of the inaccurate accounting
procedure adopted by him in auditing the books of account of the
partnership unlike Mr. Tayag's report which inspires faith and
credence. 41
As explained by Mr. Tayag, the amount of P7,497.80 represen
expenses paid by the appellee out of his personal funds which
not been entered in the books of the partnership but which been
recognized and conceded to by the auditor designated by the
appellant who included the said amount under Expenses. 42

The explanation of Mr. Tayag on the inclusion of the amount of

P65,103.77 is likewise clear and convincing. 43

Add: Payrolls paid by the appellee

P128,103.77

As for the sum of of P26,027.04, the same represents the

expenses which the appelle paid in connection withe the projects
and not entered in the books of the partnership since all
vouchers and receipts were sent to the Manila office which were
under the control of the appellant. However, officer which were
under the control of the appellant. However, a list of these
expenses are incorporated in Exhibits ZZ, ZZ-1 to ZZ-4.

Less: Payroll remittances received

63,000.00
65,103.77

In resume', the appelllee's credit balance would be as follows:

Add: Other expenses incurred at the
+.wph!1
Undisputed balance as of Dec. 1967
site (Exhs, ZZ, ZZ-1 to ZZ-4)
Add: Items omitted from the books but
26,027.04
P 8,242.
recognized and charged to Miscellaneous
TOTAL
Expenses by Mr. Ablaza
P106,871.00
7,497.80

!
!

!
At the trial, the appellee presented a claim for the amounts of
P3,917.39 and P4,665.00 which he also advanced for the

construction projects but which were not included in the

Commissioner's Report. 44
Appellee's total investments in the partnership would, therefore,
be:
Appellee's total credits
P106,871.00
Add: unrecorded balances for the month of Dec. 1957 (Exhs.
KKK, KK-1 to KKK_19, KKK-22)

appellee, who was in charge of the projects in the field,

contributed in a large measure to the failure of the partnership to
realize such profits by his field management.
This argument must be overruled in the light of the law and
evidence on the matter. Under Article 2200 of the Civil Code,
indemnification for damages shall comprehend not only the value
of the loss suffered, but also that of the profits which the obligee
failed to obtain. In other words lucrum cessans is also a basis for
indemnification.
Has the appellee failed to make profits because of appellant's
breach of contract?

3,917,39
Add: Payments to Munoz, as subcontractor of five,(5) Bridges (p.
264 tsn; Exhs. KKK-20, KKK-21)
4,665.00
Total Investments
Pl 15,453.39
Regarding the award of P200,000.00 as his share in the
unrealized profits of the partnership, the appellant contends that
the findings of the trial court that the amount of P400,000.00 as
reasonable profits of the partnership venture is without any basis
and is not supported by the evidence. The appemnt maintains
that the lower court, in making its determination, did not take into
consideration the great risks involved in business operations
involving as it does the completion of the projects within a
definite period of time, in the face of adverse and often
unpredictable circumstances, as well as the fact that the

There is no doubt that the contracting business is a profitable

one and that the U.P. Construction Company derived some
profits from' co io oa ects its sub ntracts in the construction of the
road and bridges projects its deficient working capital and the
juggling of its funds by the appellant.
Contrary to the appellant's claim, the partnership showed some
profits during the period from July 2, 1956 to December 31,
1957. If the Profit and Loss Statement 45 showed a net loss of
P134,019.43, this was primarily due to the confusing accounting
method employed by the auditor who intermixed h and accthe
cas ruamethod of accounting and the erroneous inclusion of
certain items, like personal expenses of the appellant and
afteged extraordinary losses due to an accidental plane crash, in
the operating expenses of the partnership, Corrected, the Profit
and Loss Statement would indicate a net profit of P41,611.28.
For the period from January 1, 1958 to September 30, 1959, the
partnership admittedly made a net profit of P52,943.89. 46

Besides, as We have heretofore pointed out, the appellant

received from the Bureau of Public Highways, in payment of the
zonstruction projects in question, the amount of P1,047,181.01 47
and disbursed the amount of P952,839.77, 48 leaving an
unaccounted balance of P94,342.24. Obviously, this amount is
also part of the profits of the partnership.
During the trial of this case, it was discovered that the appellant
had money and credits receivable froin the projects in question,
in the custody of the Bureau of Public Highways, in the amount
of P128,669.75, representing the 10% retention of said projects.
49 After the trial of this case, it was shown that the total retentions
Wucted from the appemnt amounted to P145,358.00. 50 Surely,
these retained amounts also form part of the profits of the
partnership.
Had the appellant not been remiss in his obligations as partner
and as prime contractor of the construction projects in question
as he was bound to perform pursuant to the partnership and
subcontract agreements, and considering the fact that the total
contract amount of these two projects is P2,327,335.76, it is
reasonable to expect that the partnership would have earned
much more than the P334,255.61 We have hereinabove
indicated. The award, therefore, made by the trial court of the
amount of P200,000.00, as compensatory damages, is not
speculative, but based on reasonable estimate.
WHEREFORE, finding no error in the decision appealed from,
the said decision is hereby affirmed with costs against the
appellant, it being understood that the liability mentioned herein
shall be home by the estate of the deceased Bartolome Puzon,
represented in this instance by the administrator thereof, Franco
Puzon.

SO ORDERED.
G.R. No. L-47823

July 26, 1943

JOSE ORNUM and EMERENCIANA ORNUM, petitioners,

vs.
MARIANO, LASALA, et al., respondent.
Marcelino Lontok for petitioners.
Duran, Lim and Bausa and Augusto Francisco for respondents.
PARAS, J.:
The following facts are practically admitted in the pleadings and
briefs of the parties: The respondents (plaintiffs below) are
natives of Taal, Batangas, and resided therein or in Manila. The
petitioners (defendants below) are also natives of Taal, but
resided in the barrio of Tan-agan, municipality of Tablas,
Province of Romblon. In 1908 Pedro Lasala, father of the
respondents, and Emerenciano Ornum formed a partnership,
whereby the former, as capitalist, delivered the sum of P1,000 to
the latter who, as industrial partner, was to conduct a business at
his place of residence in Romblon. In 1912, when the assets of
the partnership consisted of outstanding accounts and old stock
of merchandise, Emerenciano Ornum, following the wishes of his
wife, asked for the dissolution of the Lasala, Emerenciano
Ornum looked for some one who could take his place and he
suggested the names of the petitioners who accordingly became
the new partners. Upon joining the business, the petitioners,
contributed P505.54 as their capital, with the result that in the
new partnership Pedro Lasala had a capital of P1,000, appraised
value of the assets of the former partnership, plus the said
P505.54 invested by the petitioners who, as industrial partners,
were to run the business in Romblon. After the death of Pedro

Lasala, his children (the respondents) succeeded to all his rights

and interest in the partnership. The partners never knew each
other personally. No formal partnership agreement was ever
executed. The petitioners, as managing partners, were received
one-half of the net gains, and the other half was to be divided
between them and the Lasala group in proportion to the capital
put in by each group. During the course divided, but the partners
were given the election, as evidenced by the statements of
accounts referred to in the decision of the Court of Appeals, to
invest their respective shares in such profits as additional capital.
The petitioners accordingly let a greater part of their profits as
additional investment in the partnership. After twenty years the
business had grown to such an extent that is total value,
including profits, amounted to P44,618.67. Statements of
accounts were periodically prepared by the petitioners and sent
to the respondents who invariably did not make any objection
thereto. Before the last statement of accounts was made, the
respondents had received P5,387.29 by way of profits. The last
and final statement of accounts, dated May 27, 1932, and
prepared by the petitioners after the respondents had announced
their desire to dissolve the partnership, read as follows:

Participacion de Jose Ornum como socio industrial

143.96
Participacion del capital de Emerenciana Ornum en la ganancia
106.54
Participacion de Emerenciana Ornum como socia industrial
143.86
Siendo este el balance final lo siguiente es la cantidad que debe
corresponder a cada socio:
Capital de los hermanos Lasala segun el ultimo balance
P4,393.08

!
!

Ganancia total desde el ultimo balance hasta la fecha

Ganancia de este capital
P575.45

55.39
Participacion del capital de los hermanos Lasala en la ganancia
P4,448.47
P55.39

Participacion del capital de Jose Ornum en el ganancia

125.79

Pero se debe deducir la cantidad tomada por los hermanos

Lasala

P10,244.65

1,730.00

Pero se debe deducir la cantidad tomada por Jose Ornum

Cantidad nota que debe corresponder a los hermanos Lasala

!
!
P2,718.47

1,650.00

!
Cantidad neta que debe corresponder a Jose Ornum

!
!

Capital de Jose Ornum segun el ultimo balance

P9,975.13

!
!

P8,594.65
Capital de Emerenciana Ornum segun el ultimo balance

Ganancia de este capital

P8,448.00

!
!

125.79

!
!
Participacion de Jose Ornum como socio industrial

Ganancia de este capital

106.54

143.86

!
Participacion de Emerenciana Ornum como socia industrial
143.86
P8,698.40

!
Pero se debe deducir la cantidad tomada por Emerenciana
Ornum

!
1,850.00

!
Cantidad neta que debe corresponder a Emerenciana Ornum

!
!
P6,848.40
After the receipt of the foregoing statement of accounts, Father
Mariano Lasala, spokesman for the respondents, wrote the
following letter to the petitioners on July 19, 1932:
Ya te manifestamos francamente aqui, como consocio, y te
autorizamos tambien para que lo repitas a tu hermana Mering,
viuda, que el motivo porque recogemos el capital y utilidades de

nuestra sociedad en todo nuestro negocio que esta al cuidado

vosotros dos, es que tenemos un grande compromiso que casi
no podemos evitarlo. Por esto volvemos a rogarles que por
cualquier medio antes de terminar este mes de julio, 1932,
nosotros esperamos vuestra consideracion. Gracias.
En cuanto hayamos recibido esto, entonces firmaremos el
balance que habeis hecho alli, cuya copia has dejado aqui.
Recuerdos a todos alli y mandar.
Pursuant to the request contained in this letter, the petitioners
remitted and paid to the respondents the total amount
corresponding to them under the above-quoted statement of
accounts which, however, was not signed by the latter.
Thereafter the complaint in this case was filed by the
respondents, praying for an accounting and final liquidation of
the assets of the partnership. The Court of First Instance of
Manila held that the last and final statement of accounts
prepared by the petitioners was tacitly approved and accepted
by the respondents who, by virtue of the above-quoted letter of
Father Mariano Lasala, lost their right to a further accounting
from the moment they received and accepted their shares as
itemized in said statement. This judgment was reversed by the
Court of Appeals principally on the ground that as the final
statement of accounts remains unsigned by the respondents, the
same stands disapproved. The decision appealed by the
petitioners thus said:
To support a plea of a stated account so as to conclude the
parties in relation to all dealings between them, the accounting
must be shown to have been final. (1 Cyc. 366.) All the first nine
statements which the defendants sent the plaintiffs were partial

settlements, while the last, although intended to be final, has not

been signed.
We hold that the last and final statement of accounts
hereinabove quoted, had been approved by the respondents.
This approval resulted, by virtue of the letter of Father Mariano
Lasala of July 19, 1932, quoted in part in the appealed decision
from the failure of the respondents to object to the statement and
from their promise to sign the same as soon as they received
their shares as shown in said statement. After such shares had
been paid by the petitioners and accepted by the respondents
without any reservation, the approval of the statement of
accounts was virtually confirmed and its signing thereby became
a mere formality to be complied with by the respondents
exclusively. Their refusal to sign, after receiving their shares,
amounted to a waiver to that formality in favor of the petitioners
who has already performed their obligation.
This approval precludes any right on the part of the respondents
to a further liquidation, unless the latter can show that there was
fraud, deceit, error or mistake in said approval. (Pastor, vs.
Nicasio, 6 Phil., 152; Aldecoa & Co., vs. Warner, Barnes & Co.,
16 Phil., 423; Gonsalez vs. Harty, 32 Phil. 328.) The Court of
Appeals did not make any findings that there was fraud, and on
the matter of error or mistake it merely said:
The question, then is, have mistakes, been committed in the
statements sent appellants? Not only do plaintiffs so allege, and
not only does not evidence so tend to prove, but the charge is
seconded by the defendants themselves when in their
counterclaims they said:
"(a) Que recientemente se ha hecho una acabada revision de las
cuentas y libros del negocio, y, se ha descubierto que los

demandados cometieron un error al hacer las entregas de las

varias cantidades en efectivo a los demandantes, entregando en
total mayor cantidades a la que tenian derecho estos por su
participacion y ganancias en dicho negocio;
"(b) Que el exceso entregado a los demandantes, asciende a la
suma de quinientos setenta y cinco pesos con doce centimos
(P575.12), y que los demandados reclaman ahora de aquellos
su devolucion o pago en la presente contrademanda;"
In our opinion, the pronouncement that the evidence tends to
prove that there were mistakes in the petitioners' statements of
accounts, without specifying the mistakes, merely intimates as
suspicion and is not such a positive and unmistakable finding of
fact (Cf. Concepcion vs. People, G.R. No. 48169, promulgated
December 28, 1942) as to justify a revision, especially because
the Court of Appeals has relied on the bare allegations of the
parties, Even admitting that, as alleged by the petitioners in their
counterclaim, they overpaid the respondents in the sum of
P575.12, this error is essentially fatal to the latter's theory what
the statement of accounts shows, and is therefore not the kind of
error that calls for another accounting which will serve the
purpose of the respondent's suit. Moreover, as the petitioners did
not appeal from the decision of the Court abandoned such
allegation in the Court of Appeals.
If the liquidation is ordered in the absence of any particular error,
found as a fact, simply because no damage will be suffered by
the petitioners in case the latter's final statement of the accounts
proves to be correct, we shall be assuming a fundamentally
inconsistent position. If there is not mistake, the only reason for a
new accounting disappears. The petitioners may not be
prejudiced in the sense that they will be required to pay anything
to the respondents, but they will have to go to the trouble of

itemizing accounts covering a period of twenty years mostly from

memory, its appearing that no regular books of accounts were
kept. Stated more emphatically, they will be told to do what
seems to be hardly possible. When it is borne in mind that this
case has been pending for nearly nine years and that, if another
accounting is ordered, a costly action or proceeding may arise
which may not be disposed of within a similar period, it is not
improbable that the intended relief may in fact be the
respondents' funeral.
We are reversing the appealed decision on the legal ground that
the petitioners' final statement of accounts had been approved
by the respondents and no justifiable reason (fraud, deceit, error
or mistake) has been positively and unmistakably found by the
Court of Appeals so as to warrant the liquidations sought by the
respondents. In justice to the petitioners, however, we may add
that, considering that they ran the business of the partnership for
about twenty years at a place far from the residence of the
respondents and without the latter's intervention; that the
partners did not even know each other personally; that no formal
partnership agreement was entered into which bound the
petitioners under specific conditions; that the petitioners could
have easily and freely alleged that the business became partial,
or even a total, loss for any plausible reason which they could
have concocted, it appearing that the partnership engaged in
such uncertain ventures as agriculture, cattle raising and
operation of rice mill, and the petitioners did not keep any regular
books of accounts; that the petitioners were still frank enough to
disclose that the original capital of P1,505.54 amounted, as of
the date of the dissolution of the partnership, to P44,618.67; and
that the respondents had received a total of P8,105.76 out of
their capital of P1,000, without any effort on their part, we are
reluctant even to make the conjecture that the petitioners had
ever intended to, or actually did, take undue advantage of the

absence and confidence of the respondents. Indeed, we feel

justified in stating that the petitioners have here given a
remarkable demonstration of the legendary honesty, good faith
and industry with which the natives of Taal pursue business
arrangements similar to the partnership in question, and we
would hate, in the absence of any sufficient reason, to let such a
beautiful legend have a distateful ending.
The appealed decision is hereby reversed and the petitioners
(defendants below) absolved from the complaints of the
respondents (plaintiffs below), with costs against the latter.
Yulo, C.J., and Hontiveros, J., concur.

Separate Opinions
OZAETA J., concurring:
Let us record here the mental processes by which I arrived at my
vote for the reversal of the judgment of the Court of Appeals.
After the respondents had announced their desire to withdraw
from the "partnership," the petitioners rendered a final statement
of account dated May 27, 1932, which is set forth in the opinion
written by Mr. Justice Paras and which was accepted as correct
by the respondents, who them asked from the payment to them
in cash of their participation in the capital and profits of the
business as shown by said statement. It must be borne in mind
that the assets reflected in said statement of account did not
consist of cash but of merchandise, credits, land, large cattle,
and a rice mill. To gratify the respondent wish the petitioners
raised money and paid respondents' total participation. After their
interest and participation in the business had thus been

liquidated, the respondents, apparently believing that they might

be entitled to more money than they had accepted and received,
sought to have the books and records examined by a
representative of theirs. The petitioners regarded such conduct
of the respondents not only as a violation of their agreement to
consider the "partnership" dissolved upon the payment of
respondents' participation therein but as an unwarranted
reflections upon their honesty and good faith. Hence they
refused to allow the examination or proposed reliquidation.
On November 20, 1933, the complaint in this case was filed by
the respondents, praying for an accounting and final liquidation
of the assets of the "partnership." The trial lasted off and on from
September 26, 1934, to March 23, 1937, involving a transcript of
815 pages of oral testimony. The Court of First Instance of
Manila rendered its decision on December 29, 1937, in which it
found that there was no proof whatever to the effect that the
defendants acted in bad faith in the preparation of the periodical
statements of account by not including merchandise or money to
defraud the plaintiffs. Judge Rovira analyzed the main aspect of
the case as follows:
Pasado ahora a considerar la cuestion de las cuentas, los
demandantes sostienen que los demandados deben rendir
nueva cuenta porque, segun ellos, estos, como socios
industriales y capitalistas, no podian incluir su participacion
como capital, pues por este procedimiento los demandantes
fueron absorbidos y los demandados obtuvieron mayor
participacion en las ganancias.
Resulta de las pruebas que los demandados, al hacer cada
balance, separaban la ganancia del capital, asi como la
ganancia que correspondia a los socios industriales, y despues
la participacion proporcional que corresponde al capital y la que

los correspondia como socios industriales, aumentando asi su

capital en la sociedad. Esto mismo hacian en relacion con las
gananciales del capital de Pedro Lasala.
El primer balance sometido por los demandados a los
demandantes, despues de la muerte de Pedro Lasala esta
fechado el 28 de diciembre de 1913, los demandantes no
protestaron contra este balance; al contrario, recibieron su
participacion de P103, y no existe prueba alguna que desvirtue
la anotacion que aparece a pagina 4 del Exhibit S, de que Jose
Ornum entrego esta cantidad a los demandantes.
En los aos subsiguientes, o sea en los aos de 1914, 1915,
1917, 1919, 1920, 1922, 1924 y 1929 y ultimamente el ao de
1932, los demandados han estado sometiendo los balances del
negocio.
Contra ninguno de los balances presentados por los
demandados se ha presentado protesta alguna; al contrario, en
1929, cuando los demandantes deseaban separarse del negoci,
Dionisia Lasala escribio la carta Exhibit 1, en donde, entre otras,
se hizo constar que el capital 'esta en buenas manos, produce
ganancias y ademas estoy contenta de los balances que me
habeis estado enviando.
Por otra parte, el mismo Mariano Lasala, en carta de fecha 19
de julio de 1932, Exhibit 2, dijo que 'en cuanto hayamos recibido
todo (refiriendose indudablemente al capital y ganancia)
entonces firmaremos el balance que habeis hecho alli, cuya
copia has dejado aqui.'
Si los demandantes no estaban conformes con el procedimiento
adoptado por los demandados, por que no protestaron desde
el principio? Cuando los demandados les enviaban los balances,

era la oportunidad para ellos de expresar sus quejas o sus

agravios, pero se callaron; expresaron su conformidad, y ahora
vienen a pedir otra nueva liquidacion.
Es mas; segun las pruebas despues del balance del ao de
1932, los demandantes han enviado cartas y telegramas
pidiendo su participacion de acuerdo con dicho balance.
Cayetano Montenegro, por ordenes del demandado Jose
Ornum, entrego a los demandantes las respectivas cantidades
que les correspondia, sin ninguna protesta. Segun el Exhibit 3,
de fecha 20 de octubre de 1932. Dionisia Lasala recibio de Jose
Ornum P1,600, de los cuales P1,000 habian sido recibidos por
dicha Dionisia Lasala en 2 de junio del mismo ao. Tambien
Rafaela Lasala, por el Exhibit 6, recibio de Jose Ornum, por
conducto de Cipriano Montenegro, la cantidad de P368.47, y,
segun la nota que aparece al pie de dicho Exhibit 6, el resto de
la deuda de P400 fue recibido por Mariano Lasala segun los
Exhibits 12, 13 y 14. Todo lo cual demuestra que los
demandantes estaban conformes con los balances presentados,
incluyendo el ultimo balance del ao de 1932.
El Juzgado es de opinio de que no procede ordenar a los
demandados que presenten una nueva liquidacion. Ademas,
segun las pruebas los demandados no llevaban otros libros
fuera de los Exhibits S y T. Es verdad que la ley require que los
demandados lleven algunos libros, y el contador de los
demandantes declaro que, por la falta de dichos libros, no ha
podido verificar un balance mas corecto, pues solo tuvo por
base de la liquidacion presentada los libros presentados como
exhibits S y T. Las deficiencias notadas y las conclusiones de
dicho contador no pueden, en manera alguna, cambiar el
aspecto de la cuestion.

No existe prueba alguna de que los demandados llevaban otros

libros. Lo unico que se probo es que segun la ley, los
demandados debian haber llevado otros libros, pero no se ha
probado que estos en alguna ocasion hayan existido y que
dichos demandados, para defraudar a los demandantes, no han
querido presentar dichos libros. Tampoco existe prueba alguna
de que, en la preparacion de los balances que obran en los
Exhibits S y T, los demandados procedieron de mala fe, no
incluyendo mercaderias o dinero para defraudar a los
demandantes. Bajo estas circunstancias, no podemos dar al
Exhibit U de los demandantes, que se relaciona con los Exhibits
S y T, el valor que pretenden los demandantes por cuanto
resultan incompletos los datos sobre los cuales descansa dicho
report.
Es principio generalmente reconocido que la ley no puede
amparar al que duerme, y siendo esto asi, no acertamos a
comprender por que desde el ao de 1913, en que se presento
el primer balance, despues de la muerte de Pedro Lasala y los
s u c e s i v o s b a l a n c e s h a s t a 1 9 2 9 y, u l t i m a m e n t e , e l
correspondiente al ao de 1932, solamente el 20 de noviembre
de 1933 se inicia la presente accion para exigir una rendicion de
cuentas a los demandados, en esta causa. Con una contalibidad
tan deficiente, de una parte, de otra, con balances anteriores ya
aceptados, y, finalmente, con el recibo de cantidades resultantes
del ultimo balance de 1932 de parte de los demandados, no
vemos camino legal y expedito para sostener la accion de los
demandantes en el presente asunto, y somos, por tanto, de
opinion de que los demandados, despues de presentada su
liquidacion de 1932 y entregados a los demandantes sus saldos,
segun queda dicho, no pueden ahora ser obligados a una
rendicion de cuentas.

Por todas las consideraciones expuestas, dclaramos que no

procede ordenar que los demandados rindan nuevas cuentas y,
en su consecuencia, se absuelve a los demandados de la
demanda, sin especial pronunciamiento en cuanto a las costas.
The Court of Appeals reversed that judgment and ordered the
defendants "to render an accounting of all the assets of the
partnership and of all its profits and losses from the time of its
organization to the date of plaintiffs' withdrawal."
This is an unfortunate and unnecessary lawsuit, engendered by
suspicion and misunderstanding on the part of the respondents
and abetted by pride and amor propio on the part of their
opponents. It is unfortunate from two viewpoints sentimental
and material: (1) Friendship that for twenty years united the
parties for the sake of business and of their common birthplace
has become but a program memory to them, it having been
dethroned from their hearts and replaced by ill will and lacerated
sentiments. (2) The fruit of more than twenty years of toil that
should entitle the petitioners to enjoy competence and comfort in
their declining years is being squandered by them in their
defense of this protracted litigation. This lawsuit is unnecessary
because once the smoke of passion and misunderstanding has
vanished, the parties would or should see that there is no real
cause for quarrel between them.
The judgment of the trial court which would, once and for all, put
an end to this unnecessary lawsuit, achieves practical justice;
that of the Court of Appeals which would prolong it, pursues
theoretical justice. Our own verdict is not difficult to make. Let us
pour oil on troubled waters.

First. The suspicions entertained by the respondents against the

good faith of their erstwhile friends, the petitioners, finds
expression in the allegation of paragraph 8 of their complaint:
8. That the said defendants, in order to defraud and deprive the
plaintiffs of their just share in the business have caused
properties, which rightfully belong to the business of which they
were and are the managers, to be inscribed in their own joint
names or in their individual names, by virtue of which said
defendants now appears to be the sole and exclusive owners of
said properties and their fruits.
Such suspicion is unjustified. There is nothing irregular or
improper in the act of the petitioners of putting the properties and
the business in their own names. The association of the parties
was not a general copartnership under articles 125-144 of the
Code of Commerce but one of joint accounts governed by
articles 239-243 of the same Code. The respondents acquired an
interest in the transactions of the petitioners by contributing
thereto merchandise and accounts receivable valued at P1,000
(Article 239.) No formality was observed in the formation of the
association. (Article 240.) No commercial name, common to all
the participants was adopted, and the petitioners transacted and
managed the business in their own individual names and under
their individual liability. (Article 241.) The respondents had no
reason to expect the petitioners to put the business and
properties in the name of the "partnership" because they knew
that from the beginning no firm name had been adopted for it.
The respondents were silent partners.
Second. An apparent misunderstanding on the part of the
respondents is reflected in the allegation of paragraph 10 of their
complaint:

10. That the defendants have fraudulently withdrawn from the

funds of the said partnership large amounts of money, which they
applied for their personal use and benefit to which withdrawals
they were not legally entitled, thereby impairing seriously the
capital of the partnership and hampering its orderly and efficient
administration.
Such unkind words uttered against long-trusted business
associates can only be attributed to a serious misunderstanding
in view of the fact that neither the trial court nor the Court of
Appeals found any indicia of bad faith on the part of the
petitioners. The aspersion was wholly unwarranted.
Third. The respondents have apparently been misled by the
public accountant they employed, who advanced a different
method of computing the participations of the parties in the
profits. As noted by the trial court in its decision and as urged by
the respondents in their brief, they claim that the petitioners, "as
industrial and capitalist partners, could not include their
participation in the profits as capital because by such procedure
the plaintiffs [respondents] were absorbed and the defendants
[petitioners] obtained greater participation in the profits.
Following the hint of their "expert" accountant, the respondent
contend in their brief that the original profit-sharing agreement of
50 per cent to the industrial partner and the balance to be
distributed among the partners in proportion to their capital,
namely 66.67 per cent to the respondents for their capital of
P1,000 and 33.33 per cent to the petitioners for their capital of
P500, should be maintained notwithstanding the increase of the
capital of the petitioners through the accumulation of
unwithdrawn profits. This contention does not impress us as
being either fair or sound. Throughout the twenty years of have
by common consent followed the same method of distributing the
profits in party was permitted to put in as much capital as he

wanted and to share in the profits accordingly. Up to the time the

respondents received the last centavo of their participation in the
capital and profits of the business, they had tacitly and
repeatedly approved, the same procedure of dividing the profits.
They must have found it to be fair, as indeed it was, for why
should not one's share of the profits increase in proportions to
one's capital? It is true that the original capital of respondents
and petitioners were P1,000 and P505.54 respectively, or,
roughly, a proportion of two to one be maintained after the capital
of the petitioners has increased through the accumulation of
unwithdrawn profits? In any event, as the trial court held, the
respondents are now estopped from insisting on a fixed and
invariable two-to-one division of the profits regardless of the
amount of the capital of each of the parties in a given year.
Fourth. If, as we have seen, there is no reasons for a new
division of the profits as contended by the respondents, it seems
to us that no useful purpose would be attained by remanding the
case to the trial court with an order to the petitioners to render a
new account. As we have noted, respondents' allegation of fraud
and bad faith on the part of the petitioners in the preparation of
the statements of account submitted by them to the respondents
and tacitly approved by the latter, was not found proven by the
Court of Appeals. All that the Court of Appeals intimated was that
the plaintiffs alleged that mistakes had been committed and that
the evidence so tended to prove. But the mistake pointed out by
the respondents consisted principally in the mode or procedure
of dividing the profits and in petitioners' having caused the
properties "to be inscribed in their own joint names or in their
individual names"; and as we have seen, such alleged mistakes
are unfounded.
During the trial of this case, which off and on lasted nearly three
years, the petitioners and their witnesses, who had to come from

the Province of Romblon to Manila, presented the only books

they kept to the business (Exhibits S and T). which respondents'
expert accountants audited and found to be incorrect as to the
mode of dividing the profits. Of course, the auditor of the
respondents also demanded vouchers, ledgers, and other books.
But the business having been run for twenty years without
employing a bookkeeper, it seems too late now to do so after the
"partnership" has been dissolved.
In the absence of any finding of fraud or prejudicial error
committed by the petitioners in the rendition of their accounts,
which were tacitly, approved by their respondents, who asked for
and received their participation in accordance with the
liquidation, we think it would only occasion unnecessary trouble
and expense to both parties to require further accounting and
remand the case to the trial court for further proceedings. Nine
years of litigation in three instances should be enough to afford
the parties in this case their day in court. It would be scandalous
to prolong it under the circumstances. After all, it's only a tempest
in a teapot.

MORAN, J., dissenting:

The decision of the majority, ultimately analyzed, suggests the
query: May this Court, in an appeal by certiorari from a judgment
of the Court of Appeals, make its own finding of fact in disregard
of the findings of the latter Court of Appeals, make its own
findings of fact in disregard to the findings of the latter Court and
reverse the appealed judgment accordingly? The rule is settled
that this Court cannot, and that, on the contrary, in every such
appeal "everything necessary to uphold the jurisdiction" of the
Court of Appeals "and the correctness of its proceedings and

decision will be presumed, in the absence of a clear showing to

the contrary". (4 C.J., 1082.)
The essential facts of the case, as found by the Court of
Appeals, are as follows: Petitioners and respondents were
members of a commercial partnership, the former being the
managers of the business and the latter having "no hand
whatsoever in the conduct of it." From December 23, 1913 to
May 27, 1932, petitioners had made ten balance statements and
sent copies thereof to respondents together with the latter's
shares in the profits. No question arose between the parties as
to the correctness of the balance statements until the tenth
statement was made, respondents had made known to
petitioners their desire to withdraw from the partnership and had
requested for the remittance of their capital and profits. On July
9, 1932, after the tenth statement was received by them,
respondent reiterated their desire for withdrawal, adding that "en
cuanto hayamos recibido todo, entonces firmaremos el balance
que habeis hecho alli, cuya copia has dejado aqui." The amount
which purported to be their entire capital and profits was
received by respondents but they refused to sign the statement
of final liquidation because they had an agreement with petition
to the effect that before they sign it, "they would send some one
to Tablas to examine the partnership books, but that afterwards
the defendants (petitioners here) declined to allow
plaintiffs' (respondents here) representative to see said books."
And the evidence tends to prove, so the Court of Appeals
concluded, that there were mistakes in petitioners statements of
account sent to respondents, as corroborated by petitioners
themselves in their counterclaims.
Upon these facts, the majority reversed the decision of the Court
of Appeals and sustained the petitioners plea of concluded
accounting upon the following grounds.

1. That as respondents have promised to sign the final statement

of accounts upon their receipt of their entire capital and profits,
their acceptance without reservation of said capital and profits,
constitutes virtual approval of the final liquidation and their
signing the same becomes a mere formality to be subsequently
complied with and which was waived by their refusal to do so;
2. That while re-examination of accounts is authorized upon
proof of fraud or gross error, in the instant case, the Court's
finding as to mistake is not positive and its pronouncement that
"the evidence tends to prove that there was mistake in the
statement of accounts is not a definite conclusion sufficient to
justify a further accounting";
3. That as this case has been pending for nearly nine years, "if
another accounting is ordered, a costly action or proceedings
may arise which may not be disposed of within a similar period,"
and that accordingly "it is not improbable that the intended relief
may prove to be the respondents' funeral"; and
4. That, in a nutshell, the circumstances of the case attest
remarkably to the honesty of petitioners in their dealings with
respondents.
I propose to take up these grounds seriatim.
"An account stated" has been defined as "an agreement that the
balance and all items of an account representing the previous
monetary transaction of the parties thereto are correct, together
with the promise to pay such balance." (1 C. J.S., p. 693.) In the
present case, was there such an agreement? Respondents, it is
true, had promised to sign the balance statement upon receiving
their capital and share in the profits, but they actually had never
signed such statement and a promise to sign is not equivalent to

signing. The fact that respondents have never signed the

statement only indicates that they could not agree with
petitioners thereon. And if there is no agreement there is no
account stated. Indeed, it has been held that "in stating as
account, as in making any other agreement, the minds of the
parties must meet." (1 C.J., pp. 684-685.) Here, there has been
no meeting of minds as to the true balance.
Besides, respondents' promise to sign the statement of final
liquidation upon receipts of their entire capital and profits was not
absolute. It was subject to the agreement with petitioners that
before respondents "sign the final settlement they would send
some one to Tablas to examine the partnership books." This is a
fact supported by proof expressly mentioned by the Court of
Appeals which the majority has utterly ignored and if considered
would have been decidedly fatal to the conclusion it has
reached. As respondents "to whom the accounts were rendered
had no knowledge of all the circumstances relating to the
business and had to rely upon the good faith of their
partners" (words of the Court of Appeals), the examination of the
partnership books becomes to them a matter of capital important
which, for purposes of final liquidation, cannot lightly be
dismissed. When petitioners declined to allow respondents'
representative to see said books in violation of the agreement,
respondents must be deemed legally exempted from their
promise and are, therefore, entirely justified in refusing to sign
the final settlement.
Even if it be conceded that the final settlement had been
acquiesced in by the respondent, a reopening of accounts, as
the majority itself admits, is authorized upon a showing of fraud
or mistake. The rule is that "an account stated being only prima
facie evidence of its correctness, does not work an estoppel and
is subject to impeachment for fraud or mistake; and if fraud or

mistake exists it is immaterial that the parties agreed that the

account shall not be opened for error after a fixed period, that it
was signed by the party charged, or that evidence of
indebtedness, receipt in full, or releases were given." (1 C.J.S.,
pp. 728-729.) In the instant case, does there exist evidence of
such mistake? The Court of Appeals, putting up the same
question, categorically stated:
The question then is, have mistakes been committed in the
statements sent appellants? Not only do plaintiffs so allege, and
not only does the evidence so tend to prove, but the charged is
seconded by the defendant themselves when in their
counterclaims they said:
(a) Que recientemente se ha hecho una acabada revision de las
cuentas y libros del negocio, y, se ha descubierto que los
demandados cometieron un error al hacer las entregas de las
varias cantidades en efectivo a los demandantes, entregando en
total mayores cantidades a la que tenian derecho estos por su
participacion y ganancias en dicho negocio.
But the majority averred that this does not constitute a positive
findings of mistake and that "the pronouncement of the Court of
Appeals that the evidence tends to prove that there was a
mistake in the statement of accounts is not a definite conclusion
in a sense sufficient to justify a further accounting." As a general
rule when the grant or refusal of a legal relief sought in this Court
depends upon the existence of findings of fact by the Court of
Appeals, the test for the grant or refusal of such relief is not
whether its finding is positive or not, but whether such findings
actually exists and is sufficient for the purpose. The reason is, in
the language of the majority itself, "we are not here authorized to
review the evidence and determine the existence" of any matter

of fact. In the closely analogue case of Zubiri vs. Quijano, G.R.

No. 48696. November 28, 1942, this Court held:
Under the second assignment, the petitioners alleged that the
Court of Appeals erred in not finding that she had paid to the
respondent usurious interest amounting (as found by the Court
of the First Instance of Mindoro) to P950. The pronouncements
of the Court of Appeals to wit, "pero rechazamos la pretension de
la demandada, aceptada por el Tribunal a quo, de que el
demandante percibio intereses usurarios" and "con respecto a la
alegacion sobre usura, la misma nos parece insostenible", being
conclusions, of fact, must be accepted for the purposes of the
present appeal, since we cannot make contrary findings without
reexamining the evidence, and we are not authorized to do this.
In the instant case, the Court of Appeals made a general
conclusion of fact as to the existence of mistake and, on the
authority of the case cited, this general conclusion must be
deemed sufficient. When the Court of Appeals went further and
fortified its general conclusion of fact by a specific instance of
such mistake, are we to reject the finding as less sufficient
because more specific?
But it is said that the Court of Appeals merely stated that the
evidence so tend to prove" the existence of mistake. The use,
however, of the verb "tend" in no way imports ex necessitate rei
indefiniteness or ambiguity of the evidence upon which the Court
of Appeals rested its conclusion of mistake. Doubtless, the verb
was used advisedly because, the action being merely to compel
accounting, the Court cannot and is not actually passing finally
upon the correctness of the accounts. Its pronouncement as to
mistake cannot accordingly be couched with finality, much as the
majority wishes it to be, but should merely be worded as to
indicate that a ground exists for the accounting prayed for.

And as to the specific mistake found by the Court of Appeals to

have been admitted in petitioners' counterclaim, the majority
argues that such mistake consists in overpayment of
respondents of what is due to them, and therefore, the error was
not to their prejudice. This argument entirely misses the point.
Whether the mistake be favorable or unfavorable to respondents,
the fact remains that a mistake exists and this is sufficient to
authorize a reopening even of a concluded account. Indeed, if
the mistake be one prejudicial to the interest of the party who
made the statement, it is all the worse. When a person makes a
mistake against himself when he is presumed to have taken
special care for the protection of his interest, he may in all
probability be presumed to have made more mistakes against
others whose interests he is less concerned with, if at all.
But assuming that the Court's finding as to mistake is insufficient,
is the majority justified in closing the case upon that ground? To
foreclose accounting, under the circumstances, is to make, in
effect, a contrary finding that there is no mistake and to presume
that petitioners' accountings is correct. This is both unauthorized
and faulty. Unauthorized, because when the finding of the Court
of Appeals is here deemed insufficient, the remedy is not for this
Court to make contrary findings but to supply the deficiency by
remanding the case to the Court of Appeals for further findings,
as we did in Ofiana vs. People (40 Off. Gaz., 2293), and Bautista
vs. Victoriano G.R. No. 46879, April 3, 1940. Faulty, because
when the majority presumes that petitioners accounting is
correct, it takes for granted precisely the basic issue of the case.
And the presumption becomes the more faulty when we
considered that it militates against positive findings of mistake by
the Court of Appeals. The existence of such findings, whether or
not they are insufficient, constitutes a solemn warning against
reliance upon a mere presumption, specially if there exists a
contrary presumption to the effect that everything necessary to

uphold the correctness of the decision appealed from shall be

deemed present in the record, in the absence of a clear showing
to the contrary. And here, there is absolutely no showing that the
supposedly insufficient findings are erroneous.
The majority expresses the fear that, as this case has been
pending for nearly, nine years, if another accounting is ordered a
costly action or proceedings may arise which may not be
disposed of within a similar period. I cannot understand how this
Court would haphazardly close a case only upon bare fear or
delay. What the law abhors is unnecessary delay in the
administration of justice. Delays necessary for the ascertainment
of truth are welcomed. Hurried justice is certainly not to be less
deplored than delayed justice. Dispatch in the disposal of cases
is, indeed, in every system of law, a beautiful ideal to be devoutly
wished for; but, like every other ideal, its beauty or utility ends
with its abuse. We owe it to the paramount interests of justice
that in every litigation we are called upon to decide, we should
strive thoroughly and judiciously to ascertain the truth and not to
hurriedly pull down the curtain on the case until we are
reasonably certain that all efforts to the end have been
exhausted.
The majority adds that if the accounting prayed for the permitted,
it is not improbable that the intended relief may prove to be the
respondents' funeral. I take this statement to mean that the
majority hazards the conjecture that if a new accounting is
ordered, respondents will probably come out to be less entitled
that what they have received. I do not think this Court should, in
propriety, hazard any guess on the probable outcome of any suit
specially where the guess is made on the basis of factual
evidence about which it cannot speak with authority. And, neither
is the guess good, for if we remand the case to the Court of
Appeals for more specific findings, the likelihood is that more

specific mistakes will be shown as to render it inevitable for this

Court to order a new accounting. This probability is founded not
on mere conjecture but on the presumption of law above
mentioned that the conclusions of fact of the Court of Appeals
are in accordance with the evidence. Furthermore, respondents
in asking for an accounting are of course ready and willing to
abide by any result, whether it be favorable or unfavorable to
them. There being just grounds therefor, it should not be denied
by this Court because such accounting may be disastrous to
respondents.
The majority concluded its decision thus:
Considering that they (petitioners) ran the business of the
partnership for about twenty years at a place far from the
residence of the respondents and without the latter's
intervention; that the partners did not even know each other
personally; that no formal partnership agreement was entered
into which bound the petitioners under specific conditions; that
the petitioners could have easily and freely alleged that the
business became a partial, or even a total, loss for any plausible
reason which they could have concocted, it appearing that the
partnership engaged in such uncertain ventures as agriculture,
cattle raising, and the operation of rice mill, and the petitioners
did not keep any regular books of accounts; that the petitioners
were still frank enough to disclose that the original capital of
P1,505.54 amounted, as of the date of the dissolution of the
partnership to P44,618.67; and that the respondents had
received a total of P3,105.76 out of their capital of P1,000,
without any effort on their part, we are reluctant even to make the
conjecture that the petitioners had ever intended to, or actually
did, take undue advantage of the absence and confidence of the
respondents. Indeed, we feel justified in stating that the
petitioners have here given a remarkable demonstration of the

legendary honesty, good faith and industry with which the natives
of Taal pursue business arrangements similar to the partnership
in question, and we would hate in the absence of any sufficient
reason to let such a beautiful legend have a distateful ending.
Too much, I fear, has here been assumed by the majority. They
assumed that the figures cited are correct when they are in
question; they assumed that petitioners have not taken
advantage of the confidence of the respondents when this yet
remains to be seen; they assumed that petitioners' accounting is
correct when this is precisely the question between the parties;
and, finally, they held that because petitioners did not keep any
regular books of account, they should not be compelled to an
accounting because they may not be able to do so, which is in
effect offering a premium for negligence. This mode of
ratiocination is, to my regret, without authority and without
parallel. True petitioners ran the business of the partnership
without intervention whatever on the part of respondents who
relied entirely on the good faith of the former. This indicates that
the relation between the parties is manifestly fiduciary and it has
been held that "when a a fiduciary relationship exists between
the parties stating an account in will be more readily reopened
than when the parties had been dealing with each other at arm's
length." (1 C.J.S. p. 729.)
I wish I could share with the majority in the abundance of their
admirations for what they called the "legendary honesty, good
faith and industry with which the natives of Taal pursue business
arrangements similar to the partnership in question to let "such a
beautiful legend have a distasteful ending." But I fell loath to
pose a set of men as paragons of virtue and otherwise reflect,
without cause or reason, upon the integrity of the rest of their
kind. I fell even more loath to rest the judgment of this Court
upon a mere legend, no matter how beautiful that legend may

be, and would prefer to adjudicate every case upon what the
evidence and the law alone may direct. Facts, not fancy, are still
the chosen tools with which the courts perform their solemn
function of dispensing justice of litigants.
After this dissent had been written, Brother Justice Ozaeta gave
out his concurring opinion predicated fundamentally upon facts
not appearing in the findings of the Court of Appeals. We have
held time and again that in appeals by certiorari from the Court of
Appeals and in cases like the present one, only questions of law
may be considered, question of fact requiring examination of
evidence being without our jurisdiction. (Rule 46, sec. 2; Guico
vs. Mayuga, 63 Phil., 328; Mateo vs. Collector of Customs, 63
Phil., 470; Mamuyac vs. Abena, 38 Off. Gaz., 34, Meneses vs.
Com. of the Philippines, 40 Off, Gaz., 7th Sup. 41; Diaz vs.
People, 40 Off. Gaz. 3d Sup. 22.) I abstain, therefore, from
dealing on matters that are forbidden to us by our own Rules.
Doubtless, the concurring opinion is impelled by the
commendable desire to do "practical," not "theoretical," justice.
Regrettably, however, we cannot fulfill this end at the risk of
transcending the limits of this Court's jurisdictions. Beyond that
jurisdiction all our pronouncements have no judicial value for
they may be regarded as made out of court and do not constitute
due process of law. And, what is worse is that the concurring
opinion takes the decision of the Court of First Instance wholly or
in part as a basis for reversing the decision of the Court of
Appeals. This mode of procedure is unprecedented and
amazing. The law considers the Court of Appeals as superior to
a Court of First Instance specially on matters of fact, and yet the
reverse is implied in the concurring opinion.
I vote, therefore, to affirm the judgment of the Court of Appeals.
G.R. No. L-31684 June 28, 1973

EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR.,

CONCHITA B. NAVARRO and LEONARDA ATIENZA ABAD
SABTOS, petitioners,
vs.
ESTRELLA ABAD SANTOS, respondent.
Leonardo Abola for petitioners.
Baisas, Alberto & Associates for respondent.

MAKALINTAL, J.:
On October 9, 1954 a co-partnership was formed under the
name of "Evangelista & Co." On June 7, 1955 the Articles of Copartnership was amended as to include herein respondent,
Estrella Abad Santos, as industrial partner, with herein
petitioners Domingo C. Evangelista, Jr., Leonardo Atienza Abad
Santos and Conchita P. Navarro, the original capitalist partners,
remaining in that capacity, with a contribution of P17,500 each.
The amended Articles provided, inter alia, that "the contribution
of Estrella Abad Santos consists of her industry being an
industrial partner", and that the profits and losses "shall be
divided and distributed among the partners ... in the proportion of
70% for the first three partners, Domingo C. Evangelista, Jr.,
Conchita P. Navarro and Leonardo Atienza Abad Santos to be
divided among them equally; and 30% for the fourth partner
Estrella Abad Santos."
On December 17, 1963 herein respondent filed suit against the
three other partners in the Court of First Instance of Manila,
alleging that the partnership, which was also made a partydefendant, had been paying dividends to the partners except to

her; and that notwithstanding her demands the defendants had

refused and continued to refuse and let her examine the
partnership books or to give her information regarding the
partnership affairs to pay her any share in the dividends declared
by the partnership. She therefore prayed that the defendants be
ordered to render accounting to her of the partnership business
and to pay her corresponding share in the partnership profits
after such accounting, plus attorney's fees and costs.
The defendants, in their answer, denied ever having declared
dividends or distributed profits of the partnership; denied likewise
that the plaintiff ever demanded that she be allowed to examine
the partnership books; and byway of affirmative defense alleged
that the amended Articles of Co-partnership did not express the
true agreement of the parties, which was that the plaintiff was not
an industrial partner; that she did not in fact contribute industry to
the partnership; and that her share of 30% was to be based on
the profits which might be realized by the partnership only until
full payment of the loan which it had obtained in December, 1955
from the Rehabilitation Finance Corporation in the sum of
P30,000, for which the plaintiff had signed a promisory note as
co-maker and mortgaged her property as security.
The parties are in agreement that the main issue in this case is
"whether the plaintiff-appellee (respondent here) is an industrial
partner as claimed by her or merely a profit sharer entitled to
30% of the net profits that may be realized by the partnership
from June 7, 1955 until the mortgage loan from the Rehabilitation
Finance Corporation shall be fully paid, as claimed by appellants
(herein petitioners)." On that issue the Court of First Instance
found for the plaintiff and rendered judgement "declaring her an
industrial partner of Evangelista & Co.; ordering the defendants
to render an accounting of the business operations of the (said)
partnership ... from June 7, 1955; to pay the plaintiff such

amounts as may be due as her share in the partnership profits

and/or dividends after such an accounting has been properly
made; to pay plaintiff attorney's fees in the sum of P2,000.00 and
the costs of this suit."
The defendants appealed to the Court of Appeals, which
thereafter affirmed judgments of the court a quo.
In the petition before Us the petitioners have assigned the
following errors:
I. The Court of Appeals erred in the finding that the respondent is
an industrial partner of Evangelista & Co., notwithstanding the
admitted fact that since 1954 and until after promulgation of the
decision of the appellate court the said respondent was one of
the judges of the City Court of Manila, and despite its findings
that respondent had been paid for services allegedly contributed
by her to the partnership. In this connection the Court of Appeals
erred:
(A) In finding that the "amended Articles of Co-partnership,"
Exhibit "A" is conclusive evidence that respondent was in fact
made an industrial partner of Evangelista & Co.
(B) In not finding that a portion of respondent's testimony quoted
in the decision proves that said respondent did not bind herself
to contribute her industry, and she could not, and in fact did not,
because she was one of the judges of the City Court of Manila
since 1954.
(C) In finding that respondent did not in fact contribute her
industry, despite the appellate court's own finding that she has
been paid for the services allegedly rendered by her, as well as
for the loans of money made by her to the partnership.

II. The lower court erred in not finding that in any event the
respondent was lawfully excluded from, and deprived of, her
alleged share, interests and participation, as an alleged industrial
partner, in the partnership Evangelista & Co., and its profits or
net income.

The findings of the Court of Appeals on the various points raised

in the first assignment of error are hereunder reproduced if only
to demonstrate that the same were made after a through
analysis of then evidence, and hence are beyond this Court's
power of review.

III. The Court of Appeals erred in affirming in toto the decision of

the trial court whereby respondent was declared an industrial
partner of the petitioner, and petitioners were ordered to render
an accounting of the business operation of the partnership from
June 7, 1955, and to pay the respondent her alleged share in the
net profits of the partnership plus the sum of P2,000.00 as
attorney's fees and the costs of the suit, instead of dismissing
respondent's complaint, with costs, against the respondent.

The aforequoted findings of the lower Court are assailed under

Appellants' first assigned error, wherein it is pointed out that
"Appellee's documentary evidence does not conclusively prove
that appellee was in fact admitted by appellants as industrial
partner of Evangelista & Co." and that "The grounds relied upon
by the lower Court are untenable" (Pages 21 and 26, Appellant's
Brief).

It is quite obvious that the questions raised in the first assigned

errors refer to the facts as found by the Court of Appeals. The
evidence presented by the parties as the trial in support of their
respective positions on the issue of whether or not the
respondent was an industrial partner was thoroughly analyzed by
the Court of Appeals on its decision, to the extent of reproducing
verbatim therein the lengthy testimony of the witnesses.
It is not the function of the Supreme Court to analyze or weigh
such evidence all over again, its jurisdiction being limited to
reviewing errors of law that might have been commited by the
lower court. It should be observed, in this regard, that the Court
of Appeals did not hold that the Articles of Co-partnership,
identified in the record as Exhibit "A", was conclusive evidence
that the respondent was an industrial partner of the said
company, but considered it together with other factors, consisting
of both testimonial and documentary evidences, in arriving at the
factual conclusion expressed in the decision.

The first point refers to Exhibit A, B, C, K, K-1, J, N and S,

appellants' complaint being that "In finding that the appellee is an
industrial partner of appellant Evangelista & Co., herein referred
to as the partnership the lower court relied mainly on the
appellee's documentary evidence, entirely disregarding facts and
circumstances established by appellants" evidence which
contradict the said finding' (Page 21, Appellants' Brief). The lower
court could not have done otherwise but rely on the exhibits just
mentioned, first, because appellants have admitted their
genuineness and due execution, hence they were admitted
without objection by the lower court when appellee rested her
case and, secondly the said exhibits indubitably show the
appellee is an industrial partner of appellant company. Appellants
are virtually estopped from attempting to detract from the
probative force of the said exhibits because they all bear the
imprint of their knowledge and consent, and there is no credible
showing that they ever protested against or opposed their
contents prior of the filing of their answer to appellee's complaint.
As a matter of fact, all the appellant Evangelista, Jr., would have
us believe as against the cumulative force of appellee's

aforesaid documentary evidence is the appellee's Exhibit "A",

as confirmed and corroborated by the other exhibits already
mentioned, does not express the true intent and agreement of
the parties thereto, the real understanding between them being
the appellee would be merely a profit sharer entitled to 30% of
the net profits that may be realized between the partners from
June 7, 1955, until the mortgage loan of P30,000.00 to be
obtained from the RFC shall have been fully paid. This version,
however, is discredited not only by the aforesaid documentary
evidence brought forward by the appellee, but also by the fact
that from June 7, 1955 up to the filing of their answer to the
complaint on February 8, 1964 or a period of over eight (8)
years appellants did nothing to correct the alleged false
agreement of the parties contained in Exhibit "A". It is thus
reasonable to suppose that, had appellee not filed the present
action, appellants would not have advanced this obvious
afterthought that Exhibit "A" does not express the true intent and
agreement of the parties thereto.

The Court of Appeals then proceeded to consider appellee's

testimony on this point, quoting it in the decision, and then
concluded as follows:

At pages 32-33 of appellants' brief, they also make much of the

argument that 'there is an overriding fact which proves that the
parties to the Amended Articles of Partnership, Exhibit "A", did
not contemplate to make the appellee Estrella Abad Santos, an
industrial partner of Evangelista & Co. It is an admitted fact that
since before the execution of the amended articles of
partnership, Exhibit "A", the appellee Estrella Abad Santos has
been, and up to the present time still is, one of the judges of the
City Court of Manila, devoting all her time to the performance of
the duties of her public office. This fact proves beyond
peradventure that it was never contemplated between the
parties, for she could not lawfully contribute her full time and
industry which is the obligation of an industrial partner pursuant
to Art. 1789 of the Civil Code.

'ART. 1789. An industrial partner cannot engage in business for

himself, unless the partnership expressly permits him to do so;
and if he should do so, the capitalist partners may either exclude
him from the firm or avail themselves of the benefits which he
may have obtained in violation of this provision, with a right to
damages in either case.'

One cannot read appellee's testimony just quoted without

gaining the very definite impression that, even as she was and
still is a Judge of the City Court of Manila, she has rendered
services for appellants without which they would not have had
the wherewithal to operate the business for which appellant
company was organized. Article 1767 of the New Civil Code
which provides that "By 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, 'does not specify the kind of industry
that a partner may thus contribute, hence the said services may
legitimately be considered as appellee's contribution to the
common fund. Another article of the same Code relied upon
appellants reads:

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. That

appellee has faithfully complied with her prestation with respect

to appellants is clearly shown by the fact that it was only after
filing of the complaint in this case and the answer thereto
appellants exercised their right of exclusion under the codal art
just mentioned by alleging in their Supplemental Answer dated
June 29, 1964 or after around nine (9) years from June 7,
1955 subsequent to the filing of defendants' answer to the
complaint, defendants reached an agreement whereby the
herein plaintiff been excluded from, and deprived of, her alleged
share, interests or participation, as an alleged industrial partner,
in the defendant partnership and/or in its net profits or income,
on the ground plaintiff has never contributed her industry to the
partnership, instead she has been and still is a judge of the City
Court (formerly Municipal Court) of the City of Manila, devoting
her time to performance of her duties as such judge and enjoying
the privilege and emoluments appertaining to the said office,
aside from teaching in law school in Manila, without the express
consent of the herein defendants' (Record On Appeal, pp.
24-25). Having always knows as a appellee as a City judge even
before she joined appellant company on June 7, 1955 as an
industrial partner, why did it take appellants many yearn before
excluding her from said company as aforequoted allegations?
And how can they reconcile such exclusive with their main theory
that appellee has never been such a partner because "The real
agreement evidenced by Exhibit "A" was to grant the appellee a
share of 30% of the net profits which the appellant partnership
may realize from June 7, 1955, until the mortgage of P30,000.00
obtained from the Rehabilitation Finance Corporal shall have
been fully paid." (Appellants Brief, p. 38).
What has gone before persuades us to hold with the lower Court
that appellee is an industrial partner of appellant company, with
the right to demand for a formal accounting and to receive her
share in the net profit that may result from such an accounting,

which right appellants take exception under their second

assigned error. Our said holding is based on the following article
of the New Civil Code:
'ART. 1899. Any partner shall have the right to a formal account
as to partnership affairs:
(1) If he is wrongfully excluded from the partnership business or
possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstance render it just and reasonable.
We find no reason in this case to depart from the rule which
limits this Court's appellate jurisdiction to reviewing only errors of
law, accepting as conclusive the factual findings of the lower
court upon its own assessment of the evidence.
The judgment appealed from is affirmed, with costs.