1. MAURO LOZANA, plaintiff-appellee, vs.
vs.SERAFIN DEPAKAKIBO, case were conducted on October 25, 1956 and November 5, 1956, and on the
defendant-appellant.
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
As it appears from the above stipulation of facts that the plaintiff and 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).
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.
2. MAXIMILIANO SANCHO, plaintiff-appellant, vs.SEVERIANO
LIZARRAGA, defendant-appellee.
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 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.
By virtue of the foregoing, this appeal is hereby dismissed, leaving the decision
appealed from in full force, without special pronouncement of costs. So ordered.
3. 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 Puzon's contribution to the partnership capital. 13
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
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
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)
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 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
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.
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,
Pagadian-Zamboanga City Road and five (5) Bridges in Malangas-Ganyangan
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.
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.
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:
(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.
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:
As for the sum of of P26,027.04, the same represents the expenses which the This argument must be overruled in the light of the law and evidence on the
appelle paid in connection withe the projects and not entered in the books of the matter. Under Article 2200 of the Civil Code, indemnification for damages shall
partnership since all vouchers and receipts were sent to the Manila office which comprehend not only the value of the loss suffered, but also that of the profits
were under the control of the appellant. However, officer which were under the which the obligee failed to obtain. In other words lucrum cessans is also a basis
control of the appellant. However, a list of these expenses are incorporated in for indemnification.
Exhibits ZZ, ZZ-1 to ZZ-4.
Has the appellee failed to make profits because of appellant's breach of
In resume', the appelllee's credit balance would be as follows: contract?
Undisputed balance as of Dec. 1967 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
Add: Items omitted from the books but P 8,242. ntracts in the construction of the road and bridges projects its deficient working
capital and the juggling of its funds by the appellant.
recognized and charged to Miscellaneous
Contrary to the appellant's claim, the partnership showed some profits during
Expenses by Mr. Ablaza 7,497.80 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
Add: Payrolls paid by the appellee P128,103.77 confusing accounting method employed by the auditor who intermixed h and
accthe cas ruamethod of accounting and the erroneous inclusion of certain
Less: Payroll remittances received 63,000.00 items, like personal expenses of the appellant and afteged extraordinary losses
due to an accidental plane crash, in the operating expenses of the partnership,
65,103.77 Corrected, the Profit and Loss Statement would indicate a net profit of
P41,611.28.
Add: Other expenses incurred at the site (Exhs, ZZ, ZZ-1 to ZZ-4) 26,027.04
For the period from January 1, 1958 to September 30, 1959, the partnership
TOTAL P106,871.00 admittedly made a net profit of P52,943.89. 46

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. 40
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
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) 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 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.
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.
4. THE UNITED STATES, plaintiff-appellee, vs.EUSEBIO CLARIN, defendant-
appellant.
Pedro Larin delivered to Pedro Tarug P172, in order that the latter, in company
with Eusebio Clarin and Carlos de Guzman, might buy and sell mangoes, and,
believing that he could make some money in this business, the said Larin made
an agreement with the three men by which the profits were to be divided equally
between him and them.
Pedro Tarug, Eusebio Clarin, and Carlos de Guzman did in fact trade in mangoes
and obtained P203 from the business, but did not comply with the terms of the
contract by delivering to Larin his half of the profits; neither did they render him
any account of the capital.
Larin charged them with the crime of estafa, but the provincial fiscal filed an
information only against Eusebio Clarin in which he accused him of appropriating
to himself not only the P172 but also the share of the profits that belonged to
Larin, amounting to P15.50.
Pedro Tarug and Carlos de Guzman appeared in the case as witnesses and
assumed that the facts presented concerned the defendant and themselves
together.
The trial court, that of First Instance of Pampanga, sentenced the defendant,
Eusebio Clarin, to six months' arresto mayor, to suffer the accessory penalties,
and to return to Pedro Larin P172, besides P30.50 as his share of the profits, or to
subsidiary imprisonment in case of insolvency, and to pay the costs. The
defendant appealed, and in deciding his appeal we arrive at the following
conclusions:
When 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, a contract is formed which is called partnership. (Art. 1665, Civil
Code.)
When Larin put the P172 into the partnership which he formed with Tarug,
Clarin, and Guzman, he invested his capital in the risks or benefits of the business
of the purchase and sale of mangoes, and, even though he had reserved the
capital and conveyed only the usufruct of his money, it would not devolve upon
of his three partners to return his capital to him, but upon the partnership of
which he himself formed part, or if it were to be done by one of the three
specifically, it would be Tarug, who, according to the evidence, was the person
who received the money directly from Larin.
The P172 having been received by the partnership, the business commenced and
profits accrued, the action that lies with the partner who furnished the capital for
the recovery of his money is not a criminal action for estafa, but a civil one
arising from the partnership contract for a liquidation of the partnership and a
levy on its assets if there should be any.
No. 5 of article 535 of the Penal Code, according to which those are guilty of
estafa "who, to the prejudice of another, shall appropriate or misapply any
money, goods, or any kind of personal property which they may have received as
a deposit on commission for administration or in any other character producing
the obligation to deliver or return the same," (as, for example, in commodatum,
precarium, and other unilateral contracts which require the return of the same
thing received) does not include money received for a partnership; otherwise the
result would be that, if the partnership, instead of obtaining profits, suffered
losses, as it could not be held liable civilly for the share of the capitalist partner
who reserved the ownership of the money brought in by him, it would have to
answer to the charge of estafa, for which it would be sufficient to argue that the
partnership had received the money under obligation to return it.
We therefore freely acquit Eusebio Clarin, with the costs de oficio. The complaint
for estafa is dismissed without prejudice to the institution of a civil action.
5. PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ALEJANDRO CAMPOS y
ARMADO, RENATO DE LA CRUZ y BORAC, accused.RENATO DE LA CRUZ y
BORAC, accused-appellant.
The case is an appeal from the decision[1] of the Regional Trial Court, Caloocan
City, Branch 124, convicting Alejandro Campos y Armado and Renato dela Cruz y
Borac of robbery with homicide with frustrated homicide[2], and sentencing each
of them to reclusion perpetua and to indemnify jointly and severally Felipa
Jacobe in the amount of P30,000.00 for burial expenses of Mercelina Alfaro
Jacobe, the amount of P60,000.00 for hospital expenses of Felicidad Alfaro, and
the amount of P10,000.00 representing the amount stolen from the victims, and
to pay the costs.
On August 18, 1989, Assistant City Fiscal Bartolome G. Viola, Jr. filed with the
Regional Trial Court, Caloocan City, an information charging Alejandro Campos y
Armado and Renato dela Cruz y Borac with robbery with homicide, committed as
follows:
"That on or about the 17th day of August 1989, in Kalookan City, Metro-Manila
and within the jurisdiction of this Honorable Court, the above-named accused,
conspiring together and mutually helping one another, with intent to gain and by
means of force, violence and intimidation employed on the person of one
MERCELINA ALFARO DE JACOBE, did then and there, willfully, unlawfully and
feloniously take, rob and carry away cash money amounting to P10,000.00
belonging to said complainant, to the damage and prejudice of the latter in the
aforestated amount of P10,000.00; that on the occasion of the said robbery and
for the purpose of enabling them to take, rob and carry away the said amount of
P10,000.00, the herein accused in pursuance of their conspiracy did then and
there willfully, unlawfully and feloniously with intent to kill the victim, attack and
stab on the different vital parts of the body, thereby inflicting upon said
MERCELINA ALFARO DE JACOBE, serious physical injuries, which directly caused
her death; and also with deliberate intent to kill, did then and there willfully,
unlawfully and feloniously attack, assault and stab with a bladed instrument on
the vital parts of the body one FELICIDAD ALFARO y CRUZ, thus, performing all
the acts of execution which would have produced the crime of Homicide as a
consequence, but which nevertheless did not produce it by reason of causes
independent of the will of the herein accused, that is due to the timely, able and
efficient medical attendance rendered the victim at the Quezon City General
Hospital, which prevented the victim's death.
"CONTRARY TO LAW.[3]
On August 29, 1989, at the arraignment, both accused pleaded not guilty.[4]
Felicidad Alfaro and Mercelina Alfaro Jacobe resided inside Maxim's Mini Mart at
Cefel's Park Subdivision, Tala, Novaliches, Caloocan City. Beside the mini mart
was Cefel's General Merchandise, a hardware store owned by Felipa Jacobe, the
mother-in-law of Mercelina Alfaro Jacobe.
On August 16, 1989, at around 10:00 in the evening, Felicidad and Mercelina
prepared to sleep. Their bedroom and the kitchen were located inside the mini
mart. Felicidad turned off all lights in the store except the kitchen light. Mercelina
laid on the bed with her two-year old son, Christopher, while Felicidad laid on the
floor beside them.
At around midnight, Felicidad roused from her sleep and stood up. Suddenly,
someone stabbed her on her left arm. She started to shout as her assailant
continued to stab her. She was hit on her abdomen, left arm, and left side. She
fell to the floor in a sitting position and she looked at the person who stabbed
her. She recognized accused Alejandro Campos, who worked at the neighboring
gravel and sand area and frequented their store to buy gas. She also noticed
accused Renato dela Cruz standing near the door of the room. She knew accused
dela Cruz because they used to work together in the Cefel's General Merchandise
Store, a hardware store adjacent to the mini-mart.
Suddenly, accused Campos moved towards Mercelina and started stabbing her.
Mercelina, still lying on the bed, woke up and shouted for help. Accused Campos
kept stabbing her.
Thereafter, the two accused left hurriedly, exiting through the storeroom of the
minimart.
At around midnight of August 17, 1989, Barangay Captain Federico Hallig was
inside the Barangay Hall at Malaria, Tala, Caloocan City together with Barangay
Tanods Romulo Meglares, Jesus Sienda, Marcos Manalo and Maximo Baylon.
Suddenly, they saw a man running outside the barangay hall with blood on his
chest and on his short pants. The man was holding a kitchen knife about eleven
inches long. After questioning the man, who identified himself as Alejandro
Campos, the barangay officials brought him to the police station.
Meanwhile, Felicidad, though wounded, managed to call for help from her
mother-in-law, Felipa Jacobe, who resided beside the store. Felicidad was
brought to Tala Hospital but was later transferred to Quezon City General
Hospital. Mercelina was taken to Tala Hospital. She was pronounced dead on
arrival.
Dr. Amancio Angustia of the Quezon City General Hospital found that Felicidad
Alfaro had several stab wounds on the chest and a fractured left arm.[5] Two
teams of surgeons immediately operated on Felicidad, thereby saving her life.
Dr. Dario Gajardo of the medico-legal unit of the Philippine Constabulary Crime
Laboratory conducted an autopsy on the body of Mercelina Alfaro Jacobo.[6] He
found eight stab wounds on different parts of the body of the deceased. He also
found internal injuries in the heart, right lung, liver, stomach and the diaphragm.
The cause of death was cardio-respiratory arrest due to shock and hemorrhage
secondary to multiple stab wounds.
On August 17, 1989, Felicidad, still in her hospital bed, asked her father, Ramon
Alfaro, to look for a bag containing money, amounting to ten thousand
(P10,000.00) pesos, from the store. Ramon Alfaro went to the store and found
the bag on the floor, empty.[7]
That afternoon, policemen brought accused dela Cruz and accused Campos to
Felicidad. Felicidad identified accused Campos and accused dela Cruz as the
persons who entered the room in the early morning of August 17, 1989 and
stabbed her and her sister.
Accused Alejandro Campos denied any participation in the stabbing incident. He
testified that at that time, he was at home in Malaria, Ilang-Ilang Street, Tala,
Caloocan City.
Upon further questioning, accused Alejandro Campos admitted that he went to
the mini-mart on the evening of August 16, 1989, at the call of accused Renato
dela Cruz. Accused Campos claimed that he stayed outside the store when
accused dela Cruz entered the minimart. Moments later, accused Campos heard
shouts of women inside and saw accused dela Cruz emerge from the store.
Accused dela Cruz entrusted a knife into the hands of accused Campos and told
him to keep it. Accused Campos walked away from the store, holding the knife.
He failed to notice that the knife was bloodied. Later, barangay officials
intercepted him and brought him to police headquarters for questioning.
Accused Renato dela Cruz, driver and caretaker of the hardware store owned by
Felipa Jacobe, denied any involvement in the crime. He alleged that Alejandro
Campos implicated him in this serious crime because the latter was envious that
he was receiving a higher salary than the other employees of Felipa Jacobe.[8]
He claimed that at around 9:00 in the evening of August 16, 1989, he was at his
residence, 40 meters away from the minimart, on the night in question.[9] He
played several games of Russian poker or pusoy with his friends until 11:00 in the
evening when his wife told him to go to sleep. At around 1:00 in the morning, his
wife woke him up because somebody was calling him outside their house. When
accused dela Cruz opened the door, he saw several policemen who told him that
Mrs. Felipa Jacobe wanted to see him. He went with the policemen but later
realized that he was being taken to the police station. There, the policemen
informed him that something happened to Mercelina and Felicidad Alfaro.
Accused dela Cruz stated that he knew nothing about the incident. Later,
policemen took him to the hospital where Felicidad Alfaro was lying unconscious.
Accused dela Cruz saw Patrolman Antonio Paras attempting to talk to Felicidad.
Later, accused dela Cruz and the policemen left the hospital. Accused dela Cruz
did not see Felicidad point to him as one of the suspects. It was only Pat. Antonio
Paras who told him that Felicidad identified him as one of the suspects.
On October 24, 1990, the trial court rendered a decision, the dispositive portion
of which states:
"WHEREFORE, in view of the foregoing, this Court finds the accused Alejandro
Campos y Armado and Renato dela Cruz y Borac guilty beyond reasonable doubt
of Robbery with Homicide with Frustrated Homicide as charged and hereby
sentences each accused to suffer imprisonment of RECLUSION PERPETUA. Both
accused are also directed to indemnify jointly and severally Felipa Jacobe the
amount of P30,000.00 for shouldering the burial and miscellaneous expenses of
Mercelina Alfaro Jacobe, the amount of P60,000.00 for shouldering the
hospitalization, operation and the purchase of medicine in the treatment of
Felicidad Alfaro and to jointly and severally indemnify the heirs of Mercelina
Alfaro Jacobe the amount of P10,000.00 which was stolen from Mercelina Alfaro.
Both accused are also directed to pay the costs.
"Both of the accused shall be entitled to be credited with the full period of their
preventive imprisonment pursuant to Art. 29 of the Revised Penal Code provided
the requirements listed therein have been complied with.
"SO ORDERED.
"Promulgated in open court on this 24th day of October 1990 at Kalookan City,
Metro Manila.
"(sgd.) RENE VICTORIANO
Judge"[10]
Only accused Renato dela Cruz appealed the decision to the Supreme Court.[11]
Accused-appellant Renato dela Cruz contended that the trial court erred in
convicting him because his participation in the crime was not clearly established.
The prosecution witness failed to see anyone taking the contents of the bag
containing the store earnings. The prosecution also failed to prove conspiracy
between the two accused in the stabbing incident.
In order to be convicted of robbery with homicide, four (4) elements are
necessary: (a) the taking of personal property with the use of violence or
intimidation against the person; (b) the property taken belongs to another; (c)
the taking is characterized by intent to gain or animus lucrandi; and, (d) on the
occasion of the robbery or by reason thereof the crime of homicide was
committed.[12]
We find insufficient evidence to show that accused-appellant dela Cruz was guilty
of the first three elements of robbery with homicide. In robbery with homicide
cases, the robbery itself must be proved as conclusively as any other essential
element of the crime.[13] Robbery is the taking of personal property belonging
to another, with intent to gain, by means of violence against or intimidation of
any person or by using force upon things.[14] In this case, all that the witness
Felicidad saw that night was the stabbing of her sister, not the taking of personal
property. The taking cannot be assumed from the actions of accused-appellant as
seen by Felicidad. She saw him at the doorway and then noticed him running out
the store after the stabbing occurred. Felicidad claimed that the bag purportedly
containing money was recovered empty the next day. However, it was
undisputed that various persons had entered the store of the victims after the
incident, including investigators and onlookers. The bag was not conclusively
shown to contain money nor was the money ever recovered. Further, there was
no substantial link from the loss of the contents of the bag to the accused, for the
money was never seen in the possession of the accused.
Thus, accused may not be held liable for robbery.
Regarding the stabbing involving Felicidad and Mercelina, the testimony of one of
the victims, namely, Felicidad, who survived the stabbing, becomes crucial.
Felicidad categorically stated that accused Campos stabbed her and her sister.
"The most natural reaction of victims of violence is to strive to look at the
appearance of the perpetrators of the crime and observe the manner in which
the crime is being committed."[15] Even as she fell to the floor, Felicidad
endeavored to see the identity of her assailant. She saw accused Campos as he
stabbed her at close range and watched as he moved on to stab her sister.
However, accused-appellant dela Cruz alleged that the prosecution witness failed
to establish his actual participation in the stabbing of Felicidad and Mercelina, as
well as his overt acts that tended to show his conspiracy with accused Campos.
We agree.
Conspiracy exists when two or more persons come to an agreement concerning
the commission of a felony and decide to commit it.[16] Direct proof is not
essential to prove conspiracy; however, the evidence to prove the same must be
positive and convincing.[17] Similar to the physical act constituting the crime
itself, the conspiracy must be proven beyond reasonable doubt.[18] It must be
founded on facts, not on mere surmises or conjectures.[19]
In this case, there was no clear indication of the existence of conspiracy. First,
eyewitness' identification of accused-appellant at the scene of the crime was not
clear. Although the witness was familiar with the accused-appellant, the lack of
lighting in the store at the time left doubt as to her proper identification of
accused-appellant, who was several meters away from her. Second, Felicidad
merely stated that she saw him standing by the door of the store.[20] Mere
presence at the scene of the crime is insufficient to prove conspiracy.[21] A
conspirator must perform an overt act in furtherance of the plan to commit a
felony; mere presence at the scene of the incident, knowledge of the plan or
acquiescence thereto are not sufficient grounds to hold a person liable as a
conspirator.[22] Mere presence, knowledge, acquiescence to or agreement to
cooperate, is not enough to constitute one as a party to a conspiracy, absent any
active participation in the commission of the crime, with a view to the
furtherance of the common design and purpose.[23]
Undoubtedly, accused-appellant did not stab Felicidad and Mercelina.
Considering the scant evidence showing conspiracy and accused-appellant's
involvement in the stabbing incident, accused-appellant can not be convicted of
the crime charged. It is axiomatic that the accused is accorded in his favor the
disputable presumption of innocence.[24] Unless the guilt of the accused is
proven beyond reasonable doubt, the constitutional presumption of innocence
applies.[25]
WHEREFORE, the Court REVERSES the decision of the Regional Trial Court,
Caloocan City, Branch 124, convicting accused-appellant Renato dela Cruz y Borac
of robbery with homicide. Accused-appellant Renato dela Cruz is hereby
ACQUITTED on reasonable doubt and is ordered released immediately from
confinement unless he is held for another case.
Costs de oficio.
The Director, Bureau of Corrections, shall implement this decision and report to
the Court the action taken hereon within ten (10) days from notice hereof.
SO ORDERED.
6. PEDRO MARTINEZ, plaintiff-appellee, vs.ONG PONG CO and ONG LAY,
defendants. ONG PONG CO., appellant.
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 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 one-half of the said capital of
P1,500 which, together with Ong Lay, he had received from the plaintiff, to wit,
P750, plus P90 as one-half of the profits, calculated at the rate of 12 per cent per
annum for the six months that the store was supposed to have been open, both
sums in Philippine currency, making a total of P840, with legal interest thereon at
the rate of 6 per cent per annum, from the 12th of June, 1901, when the
business terminated and on which date he ought to have returned the said
amount to the plaintiff, until the full payment thereof with costs.
From this judgment Ong Pong Co appealed to this court, and assigned the
following errors:
1. For not having taken into consideration the fact that the reason for the closing
of the store was the ejectment from the premises occupied by it.
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.
7. RAMNANI VS CA
This case involves the bitter quarrel of two brothers over two (2) parcels of land
and its improvements now worth a fortune. The bone of contention is the
apparently conflicting factual findings of the trial court and the appellate court,
the resolution of which will materially affect the result of the contest.
The following facts are not disputed.
Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of
the full blood. Ishwar and his spouse Sonya had their main business based in
New York. Realizing the difficulty of managing their investments in the
Philippines they executed a general power of attorney on January 24, 1966
appointing Navalrai and Choithram as attorneys-in-fact, empowering them to
manage and conduct their business concern in the Philippines. 1
On February 1, 1966 and on May 16, 1966, Choithram, in his capacity as
aforesaid attorney-in-fact of Ishwar, entered into two agreements for the
purchase of two parcels of land located in Barrio Ugong, Pasig, Rizal, from Ortigas
& Company, Ltd. Partnership (Ortigas for short) with a total area of approximately
10,048 square meters. 2 Per agreement, Choithram paid the down payment and
installments on the lot with his personal checks. A building was constructed
thereon by Choithram in 1966 and this was occupied and rented by Jethmal
Industries and a wardrobe shop called Eppie's Creation. Three other buildings
were built thereon by Choithram through a loan of P100,000.00 obtained from
the Merchants Bank as well as the income derived from the first building. The
buildings were leased out by Choithram as attorney-in-fact of Ishwar. Two of
these buildings were later burned.
Sometime in 1970 Ishwar asked Choithram to account for the income and
expenses relative to these properties during the period 1967 to 1970. Choithram
failed and refused to render such accounting. As a consequence, on February 4,
1971, Ishwar revoked the general power of attorney. Choithram and Ortigas were
duly notified of such revocation on April 1, 1971 and May 24, 1971, respectively.
3 Said notice was also registered with the Securities and Exchange Commission
on March 29, 1971 4 and was published in the April 2, 1971 issue of The Manila
Times for the information of the general public. 5
Nevertheless, Choithram as such attorney-in-fact of Ishwar, transferred all rights
and interests of Ishwar and Sonya in favor of his daughter-in-law, Nirmla
Ramnani, on February 19, 1973. Her husband is Moti, son of Choithram. Upon
complete payment of the lots, Ortigas executed the corresponding deeds of sale
in favor of Nirmla. 6 Transfer Certificates of Title Nos. 403150 and 403152 of the
Register of Deeds of Rizal were issued in her favor.
Thus, on October 6, 1982, Ishwar and Sonya (spouses Ishwar for short) filed a
complaint in the Court of First Instance of Rizal against Choithram and/or spouses
Nirmla and Moti (Choithram et al. for brevity) and Ortigas for reconveyance of
said properties or payment of its value and damages. An amended complaint for
damages was thereafter filed by said spouses.
After the issues were joined and the trial on the merits, a decision was rendered
by the trial court on December 3, 1985 dismissing the complaint and
counterclaim. A motion for reconsideration thereof filed by spouses Ishwar was
denied on March 3, 1986.
An appeal therefrom was interposed by spouses Ishwar to the Court of Appeals
wherein in due course a decision was promulgated on March 14, 1988, the
dispositive part of which reads as follows:
WHEREFORE, judgment is hereby rendered reversing and setting aside the
appealed decision of the lower court dated December 3, 1985 and the Order
dated March 3, 1986 which denied plaintiffs-appellants' Motion for
Reconsideration from aforesaid decision. A new decision is hereby rendered
sentencing defendants- appellees Choithram Jethmal Ramnani, Nirmla V.
Ramnani, Moti C. Ramnani, and Ortigas and Company Limited Partnership to pay,
jointly and severally, plaintiffs-appellants the following:
1. Actual or compensatory damages to the extent of the fair market
value of the properties in question and all improvements thereon covered by
Transfer Certificate of Title No. 403150 and Transfer Certificate of Title No.
403152 of the Registry of Deeds of Rizal, prevailing at the time of the satisfaction
of the judgment but in no case shall such damages be less than the value of said
properties as appraised by Asian Appraisal, Inc. in its Appraisal Report dated
August 1985 (Exhibits T to T-14, inclusive).
2. All rental incomes paid or ought to be paid for the use and occupancy
of the properties in question and all improvements thereon consisting of
buildings, and to be computed as follows:
a) On Building C occupied by Eppie's Creation and Jethmal Industries
from 1967 to 1973, inclusive, based on the 1967 to 1973 monthly rentals paid by
Eppie's Creation;
b) Also on Building C above, occupied by Jethmal Industries and Lavine
from 1974 to 1978, the rental incomes based on then rates prevailing as shown
under Exhibit "P"; and from 1979 to 1981, based on then prevailing rates as
indicated under Exhibit "Q";
c) On Building A occupied by Transworld Knitting Mills from 1972 to
1978, the rental incomes based upon then prevailing rates shown under Exhibit
"P", and from 1979 to 1981, based on prevailing rates per Exhibit "Q";
d) On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to
1978, the rentals based on the Lease Contract, Exhibit "P", and from 1979 to
1980, the rentals based on the Lease Contract, Exhibit "Q",
and thereafter commencing 1982, to account for and turn over the rental
incomes paid or ought to be paid for the use and occupancy of the properties
and all improvements totalling 10,048 sq. m based on the rate per square meter
prevailing in 1981 as indicated annually cumulative up to 1984. Then,
commencing 1985 and up to the satisfaction of the judgment, rentals shall be
computed at ten percent (10%) annually of the fair market values of the
properties as appraised by the Asian Appraisal, Inc. in August 1985 (Exhibits T to
T-14, inclusive.)
3. Moral damages in the sum of P200,000.00;
4. Exemplary damages in the sum of P100,000.00;
5. Attorney's fees equivalent to 10% of the award herein made;
6. Legal interest on the total amount awarded computed from first
demand in 1967 and until the full amount is paid and satisfied; and
7. The cost of suit. 7
Acting on a motion for reconsideration filed by Choithram, et al. and Ortigas, the
appellate court promulgated an amended decision on October 17, 1988 granting
the motion for reconsideration of Ortigas by affirming the dismissal of the case
by the lower court as against Ortigas but denying the motion for reconsideration
of Choithram, et al.
Choithram, et al. thereafter filed a petition for review of said judgment of the
appellate court alleging the following grounds:
1. The Court of Appeals gravely abused its discretion in making a factual
finding not supported by and contrary, to the evidence presented at the Trial
Court.
2. The Court of Appeals acted in excess of jurisdiction in awarding
damages based on the value of the real properties in question where the cause
of action of private respondents is recovery of a sum of money.
ARGUMENTS
I - THE COURT OF APPEALS ACTED IN GRAVE ABUSE OF ITS DISCRETION IN
MAKING A FACTUAL FINDING THAT PRIVATE RESPONDENT ISHWAR REMITTED
THE AMOUNT OF US $150,000.00 TO PETITIONER CHOITHRAM IN THE ABSENCE
OF PROOF OF SUCH REMITTANCE.
II - THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND
MANIFEST PARTIALITY IN DISREGARDING THE TRIAL COURTS FINDINGS BASED
ON THE DIRECT DOCUMENTARY AND TESTIMONIAL EVIDENCE PRESENTED BY
CHOITHRAM IN THE TRIAL COURT ESTABLISHING THAT THE PROPERTIES WERE
PURCHASED WITH PERSONAL FUNDS OF PETITIONER CHOITHRAM AND NOT
WITH MONEY ALLEGEDLY REMITTED BY RESPONDENT ISHWAR.
III - THE COURT OF APPEALS ACTED IN EXCESS OF JURISDICTION IN AWARDING
DAMAGES BASED ON THE VALUE OF THE PROPERTIES AND THE FRUITS OF THE
IMPROVEMENTS THEREON. 9
Similarly, spouses Ishwar filed a petition for review of said amended decision of
the appellate court exculpating Ortigas of liability based on the following
assigned errors
I - THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE
ERROR AND HAS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH
LAW AND/OR WITH APPLICABLE DECISIONS OF THIS HONORABLE COURT
A) IN PROMULGATING THE QUESTIONED AMENDED DECISION (ANNEX
"A") RELIEVING RESPONDENT ORTIGAS FROM LIABILITY AND DISMISSING
PETITIONERS' AMENDED COMPLAINT IN CIVIL CASE NO. 534-P, AS AGAINST SAID
RESPONDENT ORTIGAS;
B) IN HOLDING IN SAID AMENDED DECISION THAT AT ANY RATE NO ONE
EVER TESTIFIED THAT ORTIGAS WAS A SUBSCRIBER TO THE MANILA TIMES
PUBLICATION OR THAT ANY OF ITS OFFICERS READ THE NOTICE AS PUBLISHED IN
THE MANILA TIMES, THEREBY ERRONEOUSLY CONCLUDING THAT FOR
RESPONDENT ORTIGAS TO BE CONSTRUCTIVELY BOUND BY THE PUBLISHED
NOTICE OF REVOCATION, ORTIGAS AND/OR ANY OF ITS OFFICERS MUST BE A
SUBSCRIBER AND/OR THAT ANY OF ITS OFFICERS SHOULD READ THE NOTICE AS
ACTUALLY PUBLISHED;
C) IN HOLDING IN SAID AMENDED DECISION THAT ORTIGAS COULD NOT
BE HELD LIABLE JOINTLY AND SEVERALLY WITH THE DEFENDANTS-APPELLEES
CHOITHRAM, MOTI AND NIRMLA RAMNANI, AS ORTIGAS RELIED ON THE WORD
OF CHOITHRAM THAT ALL ALONG HE WAS ACTING FOR AND IN BEHALF OF HIS
BROTHER ISHWAR WHEN IT TRANSFERRED THE RIGHTS OF THE LATTER TO
NIRMLA V. RAMNANI;
D) IN IGNORING THE EVIDENCE DULY PRESENTED AND ADMITTED
DURING THE TRIAL THAT ORTIGAS WAS PROPERLY NOTIFIED OF THE NOTICE OF
REVOCATION OF THE GENERAL POWER OF ATTORNEY GIVEN TO CHOITHRAM,
EVIDENCED BY THE PUBLICATION IN THE MANILA TIMES ISSUE OF APRIL 2, 1971
(EXH. F) WHICH CONSTITUTES NOTICE TO THE WHOLE WORLD; THE RECEIPT OF
THE NOTICE OF SUCH REVOCATION WHICH WAS SENT TO ORTIGAS ON MAY 22,
1971 BY ATTY. MARIANO P. MARCOS AND RECEIVED BY ORTIGAS ON MAY 24,
1971 (EXH. G) AND THE FILING OF THE NOTICE WITH THE SECURITIES AND
EXCHANGE COMMISSION ON MARCH 29,1971 (EXH. H);
E) IN DISCARDING ITS FINDINGS CONTAINED IN ITS DECISION OF 14
MARCH 1988 (ANNEX B) THAT ORTIGAS WAS DULY NOTIFIED OF THE
REVOCATION OF THE POWER OF ATTORNEY OF CHOITHRAM, HENCE ORTIGAS
ACTED IN BAD FAITH IN EXECUTING THE DEED OF SALE TO THE PROPERTIES IN
QUESTION IN FAVOR OF NIRMLA V. RAMNANI;
F) IN SUSTAINING RESPONDENT ORTIGAS VACUOUS REHASHED
ARGUMENTS IN ITS MOTION FOR RECONSIDERATION THAT IT WOULD NOT GAIN
ONE CENTAVO MORE FROM CHOITHRAM FOR THE SALE OF SAID LOTS AND THE
SUBSEQUENT TRANSFER OF THE SAME TO THE MATTER'S DAUGHTER-IN-LAW,
AND THAT IT WAS IN GOOD FAITH WHEN IT TRANSFERRED ISHWAR'S RIGHTS TO
THE LOTS IN QUESTION.
II - THE RESPONDENT HONORABLE COURT OF APPEALS HAS SO FAR DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDING WHEN IT
HELD IN THE QUESTIONED AMENDED DECISION OF 17 NOVEMBER 1988 (ANNEX
A) THAT RESPONDENT ORTIGAS & CO., LTD., IS NOT JOINTLY AND SEVERALLY
LIABLE WITH DEFENDANTS-APPELLEES CHOITHRAM, MOTI AND NIRMLA
RAMNANI IN SPITE OF ITS ORIGINAL DECISION OF 14 MARCH 1988 THAT
ORTIGAS WAS DULY NOTIFIED OF THE REVOCATION OF THE POWER OF
ATTORNEY OF CHOITHRAM RAMNANI. 10
The center of controversy is the testimony of Ishwar that during the latter part of
1965, he sent the amount of US $150,000.00 to Choithram in two bank drafts of
US$65,000.00 and US$85,000.00 for the purpose of investing the same in real
estate in the Philippines. The trial court considered this lone testimony unworthy
of faith and credit. On the other hand, the appellate court found that the trial
court misapprehended the facts in complete disregard of the evidence,
documentary and testimonial.
Another crucial issue is the claim of Choithram that because he was then a British
citizen, as a temporary arrangement, he arranged the purchase of the properties
in the name of Ishwar who was an American citizen and who was then qualified
to purchase property in the Philippines under the then Parity Amendment. The
trial court believed this account but it was debunked by the appellate court.
As to the issue of whether of not spouses Ishwar actually sent US$150,000.00 to
Choithram precisely to be used in the real estate business, the trial court made
the following disquisition
After a careful, considered and conscientious examination of the evidence
adduced in the case at bar, plaintiff Ishwar Jethmal Ramanani's main evidence,
which centers on the alleged payment by sending through registered mail from
New York two (2) US$ drafts of $85,000.00 and $65,000.00 in the latter part of
1965 (TSN 28 Feb. 1984, p. 10-11). The sending of these moneys were before the
execution of that General Power of Attorney, which was dated in New York, on
January 24, 1966. Because of these alleged remittances of US $150,000.00 and
the subsequent acquisition of the properties in question, plaintiffs averred that
they constituted a trust in favor of defendant Choithram Jethmal Ramnani. This
Court can be in full agreement if the plaintiffs were only able to prove
preponderantly these remittances. The entire record of this case is bereft of even
a shred of proof to that effect. It is completely barren. His uncorroborated
testimony that he remitted these amounts in the "later part of 1965" does not
engender enough faith and credence. Inadequacy of details of such remittance
on the two (2) US dollar drafts in such big amounts is completely not positive,
credible, probable and entirely not in accord with human experience. This is a
classic situation, plaintiffs not exhibiting any commercial document or any
document and/or paper as regard to these alleged remittances. Plaintiff Ishwar
Ramnani is not an ordinary businessman in the strict sense of the word.
Remember his main business is based in New York, and he should know better
how to send these alleged remittances. Worst, plaintiffs did not present even a
scum of proof, that defendant Choithram Ramnani received the alleged two US
dollar drafts. Significantly, he does not know even the bank where these two (2)
US dollar drafts were purchased. Indeed, plaintiff Ishwar Ramnani's lone
testimony is unworthy of faith and credit and, therefore, deserves scant
consideration, and since the plaintiffs' theory is built or based on such testimony,
their cause of action collapses or falls with it.
Further, the rate of exchange that time in 1966 was P4.00 to $1.00. The alleged
two US dollar drafts amounted to $150,000.00 or about P600,000.00. Assuming
the cash price of the two (2) lots was only P530,000.00 (ALTHOUGH he said:
"Based on my knowledge I have no evidence," when asked if he even knows the
cash price of the two lots). If he were really the true and bonafide investor and
purchaser for profit as he asserted, he could have paid the price in full in cash
directly and obtained the title in his name and not thru "Contracts To Sell" in
installments paying interest and thru an attorney-in fact (TSN of May 2, 1984, pp.
10-11) and, again, plaintiff Ishwar Ramnani told this Court that he does not know
whether or not his late father-in-law borrowed the two US dollar drafts from the
Swiss Bank or whether or not his late father-in-law had any debit memo from the
Swiss Bank (TSN of May 2, 1984, pp. 9-10). 11
On the other hand, the appellate court, in giving credence to the version of
Ishwar, had this to say
While it is true, that generally the findings of fact of the trial court are binding
upon the appellate courts, said rule admits of exceptions such as when (1) the
conclusion is a finding grounded entirely on speculations, surmises and
conjectures; (2) when the inferences made is manifestly mistaken, absurd and
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts and when the court, in making its findings,
went beyond the issues of the case and the same are contrary to the admissions
of both appellant and appellee (Ramos vs. Court of Appeals, 63 SCRA 33;
Philippine American Life Assurance Co. vs. Santamaria, 31 SCRA 798; Aldaba vs.
Court of Appeals, 24 SCRA 189).
The evidence on record shows that the t court acted under a misapprehension of
facts and the inferences made on the evidence palpably a mistake.
The trial court's observation that "the entire records of the case is bereft of even
a shred of proof" that plaintiff-appellants have remitted to defendant-appellee
Choithram Ramnani the amount of US $ 150,000.00 for investment in real estate
in the Philippines, is not borne by the evidence on record and shows the trial
court's misapprehension of the facts if not a complete disregard of the evidence,
both documentary and testimonial.
Plaintiff-appellant Ishwar Jethmal Ramnani testifying in his own behalf, declared
that during the latter part of 1965, he sent the amount of US $150,000.00 to his
brother Choithram in two bank drafts of US $65,000.00 and US $85,000.00 for
the purpose of investing the same in real estate in the Philippines. His testimony
is as follows:
ATTY. MARAPAO:
Mr. Witness, you said that your attorney-in-fact paid in your behalf. Can you tell
this Honorable Court where your attorney-in-fact got the money to pay this
property?
ATTY. CRUZ:
Wait. It is now clear it becomes incompetent or hearsay.
COURT:
Witness can answer.
A I paid through my attorney-in-fact. I am the one who gave him the
money.
ATTY. MARAPAO:
Q You gave him the money?
A That's right.
Q How much money did you give him?
A US $ 150,000.00.
Q How was it given then?
A Through Bank drafts. US $65,000.00 and US $85,000.00 bank drafts.
The total amount which is $ 150,000.00 (TSN, 28 February 1984, p. 10; Emphasis
supplied.)
ATTY. CRUZ:
Q The two bank drafts which you sent I assume you bought that from
some banks in New York?
A No, sir.
Q But there is no question those two bank drafts were for the purpose
of paying down payment and installment of the two parcels of land?
A Down payment, installment and to put up the building.
Q I thought you said that the buildings were constructed . . . subject to
our continuing objection from rentals of first building?
ATTY. MARAPAO:
Your Honor, that is misleading.
COURT;
Witness (may) answer.
A Yes, the first building was immediately put up after the purchase of
the two parcels of land that was in 1966 and the finds were used for the
construction of the building from the US $150,000.00 (TSN, 7 March 1984, page
14; Emphasis supplied.)
Q These two bank drafts which you mentioned and the use for it you
sent them by registered mail, did you send them from New Your?
A That is right.
Q And the two bank drafts which were put in the registered mail, the
registered mail was addressed to whom?
A Choithram Ramnani. (TSN, 7 March 1984, pp. 14-15).
On cross-examination, the witness reiterated the remittance of the money to his
brother Choithram, which was sent to him by his father-in-law, Rochiram L.
Mulchandoni from Switzerland, a man of immense wealth, which even
defendants-appellees' witness Navalrai Ramnani admits to be so (tsn., p. 16, S.
Oct. 13, 1985). Thus, on cross-examination, Ishwar testified as follows:
Q How did you receive these two bank drafts from the bank the name of
which you cannot remember?
A I got it from my father-in-law.
Q From where did your father- in-law sent these two bank drafts?
A From Switzerland.
Q He was in Switzerland.
A Probably, they sent out these two drafts from Switzerland.
(TSN, 7 March 1984, pp. 16-17; Emphasis supplied.)
This positive and affirmative testimony of plaintiff-appellant that he sent the two
(2) bank drafts totalling US $ 150,000.00 to his brother, is proof of said
remittance. Such positive testimony has greater probative force than defendant-
appellee's denial of receipt of said bank drafts, for a witness who testifies
affirmatively that something did happen should be believed for it is unlikely that
a witness will remember what never happened (Underhill's Cr. Guidance, 5th Ed.,
Vol. 1, pp. 10-11).
That is not all. Shortly thereafter, plaintiff-appellant Ishwar Ramnani executed a
General Power of Attorney (Exhibit "A") dated January 24, 1966 appointing his
brothers, defendants-appellees Navalrai and Choithram as attorney-in-fact
empowering the latter to conduct and manage plaintiffs-appellants' business
affairs in the Philippines and specifically
No. 14. To acquire, purchase for us, real estates and improvements for the
purpose of real estate business anywhere in the Philippines and to develop,
subdivide, improve and to resell to buying public (individual, firm or corporation);
to enter in any contract of sale in oar behalf and to enter mortgages between the
vendees and the herein grantors that may be needed to finance the real estate
business being undertaken.
Pursuant thereto, on February 1, 1966 and May 16, 1966, Choithram Jethmal
Ramnani entered into Agreements (Exhibits "B' and "C") with the other
defendant. Ortigas and Company, Ltd., for the purchase of two (2) parcels of land
situated at Barrio Ugong, Pasig, Rizal, with said defendant-appellee signing the
Agreements in his capacity as Attorney-in-fact of Ishwar Jethmal Ramnani.
Again, on January 5, 1972, almost seven (7) years after Ishwar sent the US $
150,000.00 in 1965, Choithram Ramnani, as attorney-in fact of Ishwar entered
into a Contract of Lease with Sigma-Mariwasa (Exhibit "P") thereby re-affirming
the ownership of Ishwar over the disputed property and the trust relationship
between the latter as principal and Choithram as attorney-in-fact of Ishwar.
All of these facts indicate that if plaintiff-appellant Ishwar had not earlier sent the
US $ 150,000.00 to his brother, Choithram, there would be no purpose for him to
execute a power of attorney appointing his brothers as s attorney-in-fact in
buying real estate in the Philippines.
As against Choithram's denial that he did not receive the US $150,000.00
remitted by Ishwar and that the Power of Attorney, as well as the Agreements
entered into with Ortigas & Co., were only temporary arrangements, Ishwar's
testimony that he did send the bank drafts to Choithram and was received by the
latter, is the more credible version since it is natural, reasonable and probable. It
is in accord with the common experience, knowledge and observation of
ordinary men (Gardner vs. Wentors 18 Iowa 533). And in determining where the
superior weight of the evidence on the issues involved lies, the court may
consider the probability or improbability of the testimony of the witness (Sec. 1,
Rule 133, Rules of Court).
Contrary, therefore, to the trial court's sweeping observation that 'the entire
records of the case is bereft of even a shred of proof that Choithram received the
alleged bank drafts amounting to US $ 150,000.00, we have not only testimonial
evidence but also documentary and circumstantial evidence proving said
remittance of the money and the fiduciary relationship between the former and
Ishwar.12
The Court agrees. The environmental circumstances of this case buttress the
claim of Ishwar that he did entrust the amount of US $ 150,000.00 to his brother,
Choithram, which the latter invested in the real property business subject of this
litigation in his capacity as attorney-in-fact of Ishwar.
True it is that there is no receipt whatever in the possession of Ishwar to
evidence the same, but it is not unusual among brothers and close family
members to entrust money and valuables to each other without any formalities
or receipt due to the special relationship of trust between them.
And another proof thereof is the fact that Ishwar, out of frustration when
Choithram failed to account for the realty business despite his demands, revoked
the general power of attorney he extended to Choithram and Navalrai.
Thereafter, Choithram wrote a letter to Ishwar pleading that the power of
attorney be renewed or another authority to the same effect be extended, which
reads as follows:
June 25,1971
MR. ISHWAR JETHMAL
NEW YORK
(1) Send power of Atty. immediately, because the case has been
postponed for two weeks. The same way as it has been send before in favor of
both names. Send it immediately otherwise everything will be lost unnecessarily,
and then it will take us in litigation. Now that we have gone ahead with a case
and would like to end it immediately otherwise squatters will take the entire
land. Therefore, send it immediately.
(2) Ortigas also has sued us because we are holding the installments,
because they have refused to give a rebate of P5.00 per meter which they have
to give us as per contract. They have filed the law suit that since we have not
paid the installment they should get back the land. The hearing of this case is in
the month of July. Therefore, please send the power immediately. In one case
DADA (Elder Brother) will represent and in another one, I shall.
(3) In case if you do not want to give power then make one letter in favor
of Dada and the other one in my favor showing that in any litigation we can
represent you and your wife, and whatever the court decide it will be acceptable
by me. You can ask any lawyer, he will be able to prepare these letters. After that
you can have these letters ratify before P.I. Consulate. It should be dated April 15,
1971.
(4) Try to send the power because it will be more useful. Make it in any
manner whatever way you have confident in it. But please send it immediately.
You have cancelled the power. Therefore, you have lost your reputation
everywhere. What can I further write you about it. I have told everybody that
due to certain reasons I have written you to do this that is why you have done
this. This way your reputation have been kept intact. Otherwise if I want to do
something about it, I can show you that inspite of the power you have cancelled
you can not do anything. You can keep this letter because my conscience is clear.
I do not have anything in my mind.
I should not be writing you this, but because my conscience is clear do you know
that if I had predated papers what could you have done? Or do you know that I
have many paper signed by you and if had done anything or do then what can
you do about it? It is not necessary to write further about this. It does not matter
if you have cancelled the power. At that time if I had predated and done
something about it what could you have done? You do not know me. I am not
after money. I can earn money anytime. It has been ten months since I have not
received a single penny for expenses from Dada (elder brother). Why there are
no expenses? We can not draw a single penny from knitting (factory). Well I am
not going to write you further, nor there is any need for it. This much I am writing
you because of the way you have conducted yourself. But remember, whenever I
hale the money I will not keep it myself Right now I have not got anything at all.
I am not going to write any further.
Keep your business clean with Naru. Otherwise he will discontinue because he
likes to keep his business very clean. 13
The said letter was in Sindhi language. It was translated to English by the First
Secretary of the Embassy of Pakistan, which translation was verified correct by
the Chairman, Department of Sindhi, University of Karachi. 14
From the foregoing letter what could be gleaned is that
1. Choithram asked for the issuance of another power of attorney in
their favor so they can continue to represent Ishwar as Ortigas has sued them for
unpaid installments. It also appears therefrom that Ortigas learned of the
revocation of the power of attorney so the request to issue another.
2. Choithram reassured Ishwar to have confidence in him as he was not
after money, and that he was not interested in Ishwar's money.
3. To demonstrate that he can be relied upon, he said that he could have
ante-dated the sales agreement of the Ortigas lots before the issuance of the
powers of attorney and acquired the same in his name, if he wanted to, but he
did not do so.
4. He said he had not received a single penny for expenses from Dada
(their elder brother Navalrai). Thus, confirming that if he was not given money by
Ishwar to buy the Ortigas lots, he could not have consummated the sale.
5. It is important to note that in said letter Choithram never claimed
ownership of the property in question. He affirmed the fact that he bought the
same as mere agent and in behalf of Ishwar. Neither did he mention the alleged
temporary arrangement whereby Ishwar, being an American citizen, shall appear
to be the buyer of the said property, but that after Choithram acquires Philippine
citizenship, its ownership shall be transferred to Choithram.
This brings us to this temporary arrangement theory of Choithram.
The appellate court disposed of this matter in this wise
Choithram's claim that he purchased the two parcels of land for himself in 1966
but placed it in the name of his younger brother, Ishwar, who is an American
citizen, as a temporary arrangement,' because as a British subject he is
disqualified under the 1935 Constitution to acquire real property in the
Philippines, which is not so with respect to American citizens in view of the
Ordinance Appended to the Constitution granting them parity rights, there is
nothing in the records showing that Ishwar ever agreed to such a temporary
arrangement.
During the entire period from 1965, when the US $ 150,000. 00 was transmitted
to Choithram, and until Ishwar filed a complaint against him in 1982, or over 16
years, Choithram never mentioned of a temporary arrangement nor can he
present any memorandum or writing evidencing such temporary arrangement,
prompting plaintiff-appellant to observe:
The properties in question which are located in a prime industrial site in Ugong,
Pasig, Metro Manila have a present fair market value of no less than
P22,364,000.00 (Exhibits T to T-14, inclusive), and yet for such valuable pieces of
property, Choithram who now belatedly that he purchased the same for himself
did not document in writing or in a memorandum the alleged temporary
arrangement with Ishwar' (pp. 4-41, Appellant's Brief).
Such verbal allegation of a temporary arrangement is simply improbable and
inconsistent. It has repeatedly been held that important contracts made without
evidence are highly improbable.
The improbability of such temporary arrangement is brought to fore when we
consider that Choithram has a son (Haresh Jethmal Ramnani) who is an American
citizen under whose name the properties in question could be registered, both
during the time the contracts to sell were executed and at the time absolute title
over the same was to be delivered. At the time the Agreements were entered
into with defendant Ortigas & Co. in 1966, Haresh, was already 18 years old and
consequently, Choithram could have executed the deeds in trust for his minor
son. But, he did not do this. Three (3) years, thereafter, or in 1968 after Haresh
had attained the age of 21, Choithram should have terminated the temporary
arrangement with Ishwar, which according to him would be effective only
pending the acquisition of citizenship papers. Again, he did not do anything.
Evidence to be believed, said Vice Chancellor Van Fleet of New Jersey, must not
only proceed from the mouth of a credible witness, but it must be credible in
itselfsuch as the common experience and observation of mankind can approve
as probable under the circumstances. We have no test of the truth of human
testimony, except its conformity to our knowledge, observation and experience.
Whatever is repugnant to these belongs to the miraculous and is outside of
judicial cognizance. (Daggers vs. Van Dyek 37 M.J. Eq. 130, 132).
Another factor that can be counted against the temporary arrangement excuse is
that upon the revocation on February 4, 1971 of the Power of attorney dated
January 24, 1966 in favor of Navalrai and Choithram by Ishwar, Choithram wrote
(tsn, p. 21, S. July 19, 1985) a letter dated June 25, 1971 (Exhibits R, R-1, R-2 and
R-3) imploring Ishwar to execute a new power of attorney in their favor. That if he
did not want to give power, then Ishwar could make a letter in favor of Dada and
another in his favor so that in any litigation involving the properties in question,
both of them could represent Ishwar and his wife. Choithram tried to convince
Ishwar to issue the power of attorney in whatever manner he may want. In said
letter no mention was made at all of any temporary arrangement.
On the contrary, said letter recognize(s) the existence of principal and attorney-
in-fact relationship between Ishwar and himself. Choithram wrote: . . . do you
know that if I had predated papers what could you have done? Or do you know
that I have many papers signed by you and if I had done anything or do then
what can you do about it?' Choithram was saying that he could have repudiated
the trust and ran away with the properties of Ishwar by predating documents
and Ishwar would be entirely helpless. He was bitter as a result of Ishwar's
revocation of the power of attorney but no mention was made of any temporary
arrangement or a claim of ownership over the properties in question nor was he
able to present any memorandum or document to prove the existence of such
temporary arrangement.
Choithram is also estopped in pais or by deed from claiming an interest over the
properties in question adverse to that of Ishwar. Section 3(a) of Rule 131 of the
Rules of Court states that whenever a party has, by his own declaration, act, or
omission intentionally and deliberately led another to believe a particular thing
true and act upon such belief, he cannot in any litigation arising out of such
declaration, act or omission be permitted to falsify it.' While estoppel by deed is
a bar which precludes a party to a deed and his privies from asserting as against
the other and his privies any right of title in derogation of the deed, or from
denying the truth of any material fact asserted in it (31 C.J.S. 195; 19 Am. Jur.
603).
Thus, defendants-appellees are not permitted to repudiate their admissions and
representations or to assert any right or title in derogation of the deeds or from
denying the truth of any material fact asserted in the (1) power of attorney dated
January 24, 1966 (Exhibit A); (2) the Agreements of February 1, 1966 and May
16, 1966 (Exhibits B and C); and (3) the Contract of Lease dated January 5, 1972
(Exhibit P).
. . . The doctrine of estoppel is based upon the grounds of public policy, fair
dealing, good faith and justice, and its purpose is to forbid one to speak against
his own act, representations, or commitments to the injury of one to whom they
were directed and who reasonably relied thereon. The doctrine of estoppel
springs from equitable principles and the equities in the case. It is designed to aid
the law in the administration of justice where without its aid injustice might
result. It has been applied by court wherever and whenever special
circumstances of a case so demands' (Philippine National Bank vs. Court of
Appeals, 94 SCRA 357, 368 [1979]).
It was only after the services of counsel has been obtained that Choithram
alleged for the first time in his Answer that the General Power of attorney (Annex
A) with the Contracts to Sell (Annexes B and C) were made only for the sole
purpose of assuring defendants' acquisition and ownership of the lots described
thereon in due time under the law; that said instruments do not reflect the true
intention of the parties (par. 2, Answer dated May 30, 1983), seventeen (17) long
years from the time he received the money transmitted to him by his brother,
Ishwar.
Moreover, Choithram's 'temporary arrangement,' by which he claimed
purchasing the two (2) parcels in question in 1966 and placing them in the name
of Ishwar who is an American citizen, to circumvent the disqualification provision
of aliens acquiring real properties in the Philippines under the 1935 Philippine
Constitution, as Choithram was then a British subject, show a palpable disregard
of the law of the land and to sustain the supposed "temporary arrangement"
with Ishwar would be sanctioning the perpetration of an illegal act and culpable
violation of the Constitution.
Defendants-appellees likewise violated the Anti-Dummy Law (Commonwealth
Act 108, as amended), which provides in Section 1 thereof that:
In all cases in which any constitutional or legal provision requires Philippine or
any other specific citizenship as a requisite for the exercise or enjoyment of a
right, franchise or privilege, . . . any alien or foreigner profiting thereby, shall be
punished . . . by imprisonment . . . and of a fine of not less than the value of the
right, franchise or privileges, which is enjoyed or acquired in violation of the
provisions hereof . . .
Having come to court with unclean hands, Choithram must not be permitted foist
his 'temporary arrangement' scheme as a defense before this court. Being in
delicto, he does not have any right whatsoever being shielded from his own
wrong-doing, which is not so with respect to Ishwar, who was not a party to such
an arrangement.
The falsity of Choithram's defense is further aggravated by the material
inconsistencies and contradictions in his testimony. While on January 23, 1985 he
testified that he purchased the land in question on his own behalf (tsn, p. 4, S.
Jan. 23, 1985), in the July 18, 1985 hearing, forgetting probably what he stated
before, Choithram testified that he was only an attorney-in-fact of Ishwar (tsn, p.
5, S. July 18, 1985). Also in the hearing of January 23, 1985, Choithram declared
that nobody rented the building that was constructed on the parcels of land in
question (tsn, pp. 5 and 6), only to admit in the hearing of October 30, 1985, that
he was in fact renting the building for P12,000. 00 per annum (tsn, p. 3). Again, in
the hearing of July 19, 1985, Choithram testified that he had no knowledge of the
revocation of the Power of Attorney (tsn, pp. 20- 21), only to backtrack when
confronted with the letter of June 25, 1971 (Exhibits R to R-3), which he admitted
to be in "his own writing," indicating knowledge of the revocation of the Power
of Attorney.
These inconsistencies are not minor but go into the entire credibility of the
testimony of Choithram and the rule is that contradictions on a very crucial point
by a witness, renders s testimony incredible People vs. Rafallo, 80 Phil. 22). Not
only this the doctrine of falsus in uno, falsus in omnibus is fully applicable as far
as the testimony of Choithram is concerned. The cardinal rule, which has served
in all ages, and has been applied to all conditions of men, is that a witness
willfully falsifying the truth in one particular, when upon oath, ought never to be
believed upon the strength of his own testimony, whatever he may assert (U.S.
vs. Osgood 27 Feb. Case No. 15971-a, p. 364); Gonzales vs. Mauricio, 52 Phil,
728), for what ground of judicial relief can there be left when the party has
shown such gross insensibility to the difference between right and wrong,
between truth and falsehood? (The Santisima Trinidad, 7 Wheat, 283, 5 U.S. [L.
ed.] 454).
True, that Choithram's testimony finds corroboration from the testimony of his
brother, Navalrai, but the same would not be of much help to Choithram. Not
only is Navalrai an interested and biased witness, having admitted his close
relationship with Choithram and that whenever he or Choithram had problems,
they ran to each other (tsn, pp. 17-18, S. Sept. 20, 1985), Navalrai has a
pecuniary interest in the success of Choithram in the case in question. Both he
and Choithram are business partners in Jethmal and Sons and/or Jethmal
Industries, wherein he owns 60% of the company and Choithram, 40% (p. 62,
Appellant's Brief). Since the acquisition of the properties in question in 1966,
Navalrai was occupying 1,200 square meters thereof as a factory site plus the fact
that his son (Navalrais) was occupying the apartment on top of the factory with
his family rent free except the amount of P l,000.00 a month to pay for taxes on
said properties (tsn, p. 17, S. Oct. 3, 1985).
Inherent contradictions also marked Navalrai testimony. "While the latter was
very meticulous in keeping a receipt for the P 10,000.00 that he paid Ishwar as
settlement in Jethmal Industries, yet in the alleged payment of P 100,000.00 to
Ishwar, no receipt or voucher was ever issued by him (tsn, p. 17, S. Oct. 3, 1983).
15
We concur.
The foregoing findings of facts of the Court of Appeals which are supported by
the evidence is conclusive on this Court. The Court finds that Ishwar entrusted
US$150,000.00 to Choithram in 1965 for investment in the realty business. Soon
thereafter, a general power of attorney was executed by Ishwar in favor of both
Navalrai and Choithram. If it is true that the purpose only is to enable Choithram
to purchase realty temporarily in the name of Ishwar, why the inclusion of their
elder brother Navalrai as an attorney-in-fact?
Then, acting as attorney-in-fact of Ishwar, Choithram purchased two parcels of
land located in Barrio Ugong Pasig, Rizal, from Ortigas in 1966. With the balance
of the money of Ishwar, Choithram erected a building on said lot. Subsequently,
with a loan obtained from a bank and the income of the said property, Choithram
constructed three other buildings thereon. He managed the business and
collected the rentals. Due to their relationship of confidence it was only in 1970
when Ishwar demanded for an accounting from Choithram. And even as Ishwar
revoked the general power of attorney on February 4, 1971, of which Choithram
was duly notified, Choithram wrote to Ishwar on June 25, 1971 requesting that
he execute a new power of attorney in their favor. 16 When Ishwar did not
respond thereto, Choithram nevertheless proceeded as such attorney-in-fact to
assign all the rights and interest of Ishwar to his daughter-in-law Nirmla in 1973
without the knowledge and consent of Ishwar. Ortigas in turn executed the
corresponding deeds of sale in favor of Nirmla after full payment of the purchase
accomplice of the lots.
In the prefatory statement of their petition, Choithram pictured Ishwar to be so
motivated by greed and ungratefulness, who squandered the family business in
New York, who had to turn to his wife for support, accustomed to living in
ostentation and who resorted to blackmail in filing several criminal and civil suits
against them. These statements find no support and should be stricken from the
records. Indeed, they are irrelevant to the proceeding.
Moreover, assuming Ishwar is of such a low character as Choithram proposes to
make this Court to believe, why is it that of all persons, under his temporary
arrangement theory, Choithram opted to entrust the purchase of valuable real
estate and built four buildings thereon all in the name of Ishwar? Is it not an
unconscious emergence of the truth that this otherwise wayward brother of
theirs was on the contrary able to raise enough capital through the generosity of
his father-in-law for the purchase of the very properties in question? As the
appellate court aptly observed if truly this temporary arrangement story is the
only motivation, why Ishwar of all people? Why not the own son of Choithram,
Haresh who is also an American citizen and who was already 18 years old at the
time of purchase in 1966? The Court agrees with the observation that this theory
is an afterthought which surfaced only when Choithram, Nirmla and Moti filed
their answer.
When Ishwar asked for an accounting in 1970 and revoked the general power of
attorney in 1971, Choithram had a total change of heart. He decided to claim the
property as his. He caused the transfer of the rights and interest of Ishwar to
Nirmla. On his representation, Ortigas executed the deeds of sale of the
properties in favor of Nirmla. Choithram obviously surmised Ishwar cannot stake
a valid claim over the property by so doing.
Clearly, this transfer to Nirmla is fictitious and, as admitted by Choithram, was
intended only to place the property in her name until Choithram acquires
Philippine citizenship. 17 What appears certain is that it appears to be a scheme
of Choithram to place the property beyond the reach of Ishwar should he
successfully claim the same. Thus, it must be struck down.
Worse still, on September 27, 1990 spouses Ishwar filed an urgent motion for the
issuance of a writ of preliminary attachment and to require Choithram, et al. to
submit certain documents, inviting the attention of this Court to the following:
a) Donation by Choithram of his 2,500 shares of stock in General
Garments Corporation in favor of his children on December 29, 1989; 18
b) Sale on August 2, 1990 by Choithram of his 100 shares in Biflex
(Phils.), Inc., in favor of his children; 19 and
c) Mortgage on June 20, 1989 by Nirmla through her attorney-in-fact,
Choithram, of the properties subject of this litigation, for the amount of $3
Million in favor of Overseas Holding, Co. Ltd., (Overseas for brevity), a
corporation which appears to be organized and existing under and by virtue of
the laws of Cayman Islands, with a capital of only $100.00 divided into 100 shares
of $1.00 each, and with address at P.O. Box 1790, Grand Cayman, Cayman
Islands. 20
An opposition thereto was filed by Choithram, et al. but no documents were
produced. A manifestation and reply to the opposition was filed by spouses
Ishwar.
All these acts of Choithram, et al. appear to be fraudulent attempts to remove
these properties to the detriment of spouses Ishwar should the latter prevail in
this litigation.
On December 10, 1990 the court issued a resolution that substantially reads as
follows:
Considering the allegations of petitioners Ishwar Jethmal Ramnani and Sonya
Ramnani that respondents Choithram Jethmal Ramnani, Nirmla Ramnani and
Moti G. Ramnani have fraudulently executed a simulated mortgage of the
properties subject of this litigation dated June 20, 1989, in favor of Overseas
Holding Co., Ltd. which appears to be a corporation organized in Cayman Islands,
for the amount of $ 3,000,000.00, which is much more than the value of the
properties in litigation; that said alleged mortgagee appears to be a "shell"
corporation with a capital of only $100.00; and that this alleged transaction
appears to be intended to defraud petitioners Ishwar and Sonya Jethmal
Ramnani of any favorable judgment that this Court may render in this case;
Wherefore the Court Resolved to issue a writ of preliminary injunction enjoining
and prohibiting said respondents Choithram Jethmal Ramnani, Nirmla V.
Ramnani, Moti G. Ramnani and the Overseas Holding Co., Ltd. from
encumbering, selling or otherwise disposing of the properties and improvements
subject of this litigation until further orders of the Court. Petitioners Ishwar and
Sonya Jethmal Ramnani are hereby required to post a bond of P 100,000.00 to
answer for any damages d respondents may suffer by way of this injunction if the
Court finally decides the said petitioners are not entitled thereto.
The Overseas Holding Co., Ltd. with address at P.O. Box 1790 Grand Cayman,
Cayman Islands, is hereby IMPLEADED as a respondent in these cases, and is
hereby required to SUBMIT its comment on the Urgent Motion for the Issuance
of a Writ of Preliminary Attachment and Motion for Production of Documents,
the Manifestation and the Reply to the Opposition filed by said petitioners,
within Sixty (60) days after service by publication on it in accordance with the
provisions of Section 17, Rule 14 of the Rules of Court, at the expense of
petitioners Ishwar and Sonya Jethmal Ramnani.
Let copies of this resolution be served on the Register of Deeds of Pasig, Rizal,
and the Provincial Assessor of Pasig, Rizal, both in Metro Manila, for its
annotation on the transfer Certificates of Titles Nos. 403150 and 403152
registered in the name of respondent Nirmla V. Ramnani, and on the tax
declarations of the said properties and its improvements subject of this litigation.
21
The required injunction bond in the amount of P 100,000.00 was filed by the
spouses Ishwar which was approved by the Court. The above resolution of the
Court was published in the Manila Bulletin issue of December 17, 1990 at the
expense of said spouses. 22 On December 19, 1990 the said resolution and
petition for review with annexes in G.R. Nos. 85494 and 85496 were transmitted
to respondent Overseas, Grand Cayman Islands at its address c/o Cayman
Overseas Trust Co. Ltd., through the United Parcel Services Bill of Lading 23 and it
was actually delivered to said company on January 23, 1991. 24
On January 22, 1991, Choithram, et al., filed a motion to dissolve the writ of
preliminary injunction alleging that there is no basis therefor as in the amended
complaint what is sought is actual damages and not a reconveyance of the
property, that there is no reason for its issuance, and that acts already executed
cannot be enjoined. They also offered to file a counterbond to dissolve the writ.
A comment/opposition thereto was filed by spouses Ishwar that there is basis for
the injunction as the alleged mortgage of the property is simulated and the other
donations of the shares of Choithram to his children are fraudulent schemes to
negate any judgment the Court may render for petitioners.
No comment or answer was filed by Overseas despite due notice, thus it is and
must be considered to be in default and to have lost the right to contest the
representations of spouses Ishwar to declare the aforesaid alleged mortgage nun
and void.
This purported mortgage of the subject properties in litigation appears to be
fraudulent and simulated. The stated amount of $3 Million for which it was
mortgaged is much more than the value of the mortgaged properties and its
improvements. The alleged mortgagee-company (Overseas) was organized only
on June 26,1989 but the mortgage was executed much earlier, on June 20, 1989,
that is six (6) days before Overseas was organized. Overseas is a "shelf" company
worth only $100.00. 25 In the manifestation of spouses Ishwar dated April 1,
1991, the Court was informed that this matter was brought to the attention of
the Central Bank (CB) for investigation, and that in a letter of March 20, 1991, the
CB informed counsel for spouses Ishwar that said alleged foreign loan of
Choithram, et al. from Overseas has not been previously approved/registered
with the CB. 26
Obviously, this is another ploy of Choithram, et al. to place these properties
beyond the reach of spouses Ishwar should they obtain a favorable judgment in
this case. The Court finds and so declares that this alleged mortgage should be as
it is hereby declared null and void.
All these contemporaneous and subsequent acts of Choithram, et al., betray the
weakness of their cause so they had to take an steps, even as the case was
already pending in Court, to render ineffective any judgment that may be
rendered against them.
The problem is compounded in that respondent Ortigas is caught in the web of
this bitter fight. It had all the time been dealing with Choithram as attorney-in-
fact of Ishwar. However, evidence had been adduced that notice in writing had
been served not only on Choithram, but also on Ortigas, of the revocation of
Choithram's power of attorney by Ishwar's lawyer, on May 24, 1971. 27 A
publication of said notice was made in the April 2, 1971 issue of The Manila
Times for the information of the general public. 28 Such notice of revocation in a
newspaper of general circulation is sufficient warning to third persons including
Ortigas. 29 A notice of revocation was also registered with the Securities and
Exchange Commission on March 29, 1 971. 30
Indeed in the letter of Choithram to Ishwar of June 25, 1971, Choithram was
pleading that Ishwar execute another power of attorney to be shown to Ortigas
who apparently learned of the revocation of Choithram's power of attorney. 31
Despite said notices, Ortigas nevertheless acceded to the representation of
Choithram, as alleged attorney-in-fact of Ishwar, to assign the rights of petitioner
Ishwar to Nirmla. While the primary blame should be laid at the doorstep of
Choithram, Ortigas is not entirely without fault. It should have required
Choithram to secure another power of attorney from Ishwar. For recklessly
believing the pretension of Choithram that his power of attorney was still good, it
must, therefore, share in the latter's liability to Ishwar.
In the original complaint, the spouses Ishwar asked for a reconveyance of the
properties and/or payment of its present value and damages. 32 In the amended
complaint they asked, among others, for actual damages of not less than the
present value of the real properties in litigation, moral and exemplary damages,
attorneys fees, costs of the suit and further prayed for "such other reliefs as may
be deemed just and equitable in the premises .33 The amended complaint
contain the following positive allegations:
7. Defendant Choithram Ramnani, in evident bad faith and despite due
notice of the revocation of the General Power of Attorney, Annex 'D" hereof,
caused the transfer of the rights over the said parcels of land to his daughter-in-
law, defendant Nirmla Ramnani in connivance with defendant Ortigas & Co., the
latter having agreed to the said transfer despite receiving a letter from plaintiffs'
lawyer informing them of the said revocation; copy of the letter is hereto
attached and made an integral part hereof as Annex "H";
8. Defendant Nirmla Ramnani having acquired the aforesaid property by
fraud is, by force of law, considered a trustee of an implied trust for the benefit of
plaintiff and is obliged to return the same to the latter:
9. Several efforts were made to settle the matter within the family but
defendants (Choithram Ramnani, Nirmla Ramnani and Moti Ramnani) refused
and up to now fail and still refuse to cooperate and respond to the same; thus,
the present case;
10. In addition to having been deprived of their rights over the properties
(described in par. 3 hereof), plaintiffs, by reason of defendants' fraudulent act,
suffered actual damages by way of lost rental on the property which defendants
(Choithram Ramnani, Nirmla Ramnani and Moti Ramnani have collected for
themselves; 34
In said amended complaint, spouses Ishwar, among others, pray for payment of
actual damages in an amount no less than the value of the properties in litigation
instead of a reconveyance as sought in the original complaint. Apparently they
opted not to insist on a reconveyance as they are American citizens as alleged in
the amended complaint.
The allegations of the amended complaint above reproduced clearly spelled out
that the transfer of the property to Nirmla was fraudulent and that it should be
considered to be held in trust by Nirmla for spouses Ishwar. As above-discussed,
this allegation is well-taken and the transfer of the property to Nirmla should be
considered to have created an implied trust by Nirmla as trustee of the property
for the benefit of spouses Ishwar.
The motion to dissolve the writ of preliminary injunction filed by Choithram, et
al. should be denied. Its issuance by this Court is proper and warranted under the
circumstances of the case. Under Section 3(c) Rule 58 of the Rules of Court, a
writ of preliminary injunction may be granted at any time after commencement
of the action and before judgment when it is established:
(c) that the defendant is doing, threatens, or is about to do, or is
procuring or suffering to be done, some act probably in violation of plaintiffs's
rights respecting the subject of the action, and tending to render the judgment
ineffectual.
As above extensively discussed, Choithram, et al. have committed and threaten
to commit further acts of disposition of the properties in litigation as well as the
other assets of Choithram, apparently designed to render ineffective any
judgment the Court may render favorable to spouses Ishwar.
The purpose of the provisional remedy of preliminary injunction is to preserve
the status quo of the things subject of the litigation and to protect the rights of
the spouses Ishwar respecting the subject of the action during the pendency of
the Suit 36 and not to obstruct the administration of justice or prejudice the
adverse party. 37 In this case for damages, should Choithram, et al. continue to
commit acts of disposition of the properties subject of the litigation, an award of
damages to spouses Ishwar would thereby be rendered ineffectual and
meaningless. 38
Consequently, if only to protect the interest of spouses Ishwar, the Court hereby
finds and holds that the motion for the issuance of a writ of preliminary
attachment filed by spouses Ishwar should be granted covering the properties
subject of this litigation.
Section 1, Rule 57 of the Rules of Court provides that at the commencement of
an action or at any time thereafter, the plaintiff or any proper party may have the
property of the adverse party attached as security for the satisfaction of any
judgment that may be recovered, in, among others, the following cases:
(d) In an action against a party who has been guilty of a fraud in
contracting the debt or incurring the obligation upon which the action is brought,
or in concealing or disposing of the property for the taking, detention or
conversion of which the action is brought;
(e) In an action against a party who has removed or disposed of his
property, or is about to do so, with intent to defraud his creditors; . . .
Verily, the acts of Choithram, et al. of disposing the properties subject of the
litigation disclose a scheme to defraud spouses Ishwar so they may not be able to
recover at all given a judgment in their favor, the requiring the issuance of the
writ of attachment in this instance.
Nevertheless, under the peculiar circumstances of this case and despite the fact
that Choithram, et al., have committed acts which demonstrate their bad faith
and scheme to defraud spouses Ishwar and Sonya of their rightful share in the
properties in litigation, the Court cannot ignore the fact that Choithram must
have been motivated by a strong conviction that as the industrial partner in the
acquisition of said assets he has as much claim to said properties as Ishwar, the
capitalist partner in the joint venture.
The scenario is clear. Spouses Ishwar supplied the capital of $150,000.00 for the
business.1wphi1 They entrusted the money to Choithram to invest in a
profitable business venture in the Philippines. For this purpose they appointed
Choithram as their attorney-in-fact.
Choithram in turn decided to invest in the real estate business. He bought the
two (2) parcels of land in question from Ortigas as attorney-in-fact of Ishwar-
Instead of paying for the lots in cash, he paid in installments and used the
balance of the capital entrusted to him, plus a loan, to build two buildings.
Although the buildings were burned later, Choithram was able to build two other
buildings on the property. He rented them out and collected the rentals. Through
the industry and genius of Choithram, Ishwar's property was developed and
improved into what it is nowa valuable asset worth millions of pesos. As of the
last estimate in 1985, while the case was pending before the trial court, the
market value of the properties is no less than P22,304,000.00. 39 It should be
worth much more today.
We have a situation where two brothers engaged in a business venture. One
furnished the capital, the other contributed his industry and talent. Justice and
equity dictate that the two share equally the fruit of their joint investment and
efforts. Perhaps this Solomonic solution may pave the way towards their
reconciliation. Both would stand to gain. No one would end up the loser. After all,
blood is thicker than water.
However, the Court cannot just close its eyes to the devious machinations and
schemes that Choithram employed in attempting to dispose of, if not dissipate,
the properties to deprive spouses Ishwar of any possible means to recover any
award the Court may grant in their favor. Since Choithram, et al. acted with
evident bad faith and malice, they should pay moral and exemplary damages as
well as attorney's fees to spouses Ishwar.
WHEREFORE, the petition in G.R. No. 85494 is DENIED, while the petition in G.R.
No. 85496 is hereby given due course and GRANTED. The judgment of the Court
of Appeals dated October 18, 1988 is hereby modified as follows:
1. Dividing equally between respondents spouses Ishwar, on the one
hand, and petitioner Choithram Ramnani, on the other, (in G.R. No. 85494) the
two parcels of land subject of this litigation, including all the improvements
thereon, presently covered by transfer Certificates of Title Nos. 403150 and
403152 of the Registry of Deeds, as well as the rental income of the property
from 1967 to the present.
2. Petitioner Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti C.
Ramnani and respondent Ortigas and Company, Limited Partnership (in G.R. No.
85496) are ordered solidarily to pay in cash the value of said one-half (1/2) share
in the said land and improvements pertaining to respondents spouses Ishwar and
Sonya at their fair market value at the time of the satisfaction of this judgment
but in no case less than their value as appraised by the Asian Appraisal, Inc. in its
Appraisal Report dated August 1985 (Exhibits T to T-14, inclusive).
3. Petitioners Choithram, Nirmla and Moti Ramnani and respondent
Ortigas & Co., Ltd. Partnership shall also be jointly and severally liable to pay to
said respondents spouses Ishwar and Sonya Ramnani one-half (1/2) of the total
rental income of said properties and improvements from 1967 up to the date of
satisfaction of the judgment to be computed as follows:
a. On Building C occupied by Eppie's Creation and Jethmal Industries
from 1967 to 1973, inclusive, based on the 1967 to 1973 monthly rentals paid by
Eppie's Creation;
b. Also on Building C above, occupied by Jethmal Industries and Lavine
from 1974 to 1978, the rental incomes based on then rates prevailing as shown
under Exhibit "P"; and from 1979 to 1981, based on then prevailing rates as
indicated under Exhibit "Q";
c. On Building A occupied by Transworld Knitting Mills from 1972 to
1978, the rental incomes based upon then prevailing rates shown under Exhibit
"P", and from 1979 to 1981, based on prevailing rates per Exhibit "Q";
d. On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to
1978, the rentals based on the Lease Contract, Exhibit "P", and from 1979 to
1980, the rentals based on the Lease Contract, Exhibit "Q".
and thereafter commencing 1982, to account for and turn over the rental
incomes paid or ought to be paid for the use and occupancy of the properties
and all improvements totalling 10,048 sq. m., based on the rate per square meter
prevailing in 1981 as indicated annually cumulative up to 1984. Then,
commencing 1985 and up to the satisfaction of the judgment, rentals shall be
computed at ten percent (10%) annually of the fair market values of the
properties as appraised by the Asian Appraisals, Inc. in August 1985. (Exhibits T
to T-14, inclusive.)
4. To determine the market value of the properties at the time of the
satisfaction of this judgment and the total rental incomes thereof, the trial court
is hereby directed to hold a hearing with deliberate dispatch for this purpose
only and to have the judgment immediately executed after such determination.
5. Petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, are
also jointly and severally liable to pay respondents Ishwar and Sonya Ramnani
the amount of P500,000.00 as moral damages, P200,000.00 as exemplary
damages and attorney's fees equal to 10% of the total award. to said
respondents spouses.
6. The motion to dissolve the writ of preliminary injunction dated
December 10, 1990 filed by petitioners Choithram, Nirmla and Moti, all
surnamed Ramnani, is hereby DENIED and the said injunction is hereby made
permanent. Let a writ of attachment be issued and levied against the properties
and improvements subject of this litigation to secure the payment of the above
awards to spouses Ishwar and Sonya.
7. The mortgage constituted on the subject property dated June 20,
1989 by petitioners Choithram and Nirmla, both surnamed Ramnani in favor of
respondent Overseas Holding, Co. Ltd. (in G.R. No. 85496) for the amount of $3-
M is hereby declared null and void. The Register of Deeds of Pasig, Rizal, is
directed to cancel the annotation of d mortgage on the titles of the properties in
question.
8. Should respondent Ortigas Co., Ltd. Partnership pay the awards to
Ishwar and Sonya Ramnani under this judgment, it shall be entitled to
reimbursement from petitioners Choithram, Nirmla and Moti, all surnamed
Ramnani.
9. The above awards shag bear legal rate of interest of six percent (6%)
per annum from the time this judgment becomes final until they are fully paid by
petitioners Choithram Ramnani, Nirmla V. Ramnani, Moti C. Ramnani and
Ortigas, Co., Ltd. Partnership. Said petitioners Choithram, et al. and respondent
Ortigas shall also pay the costs.
8. ISABELO MORAN, JR., petitioner, vs.THE HON. COURT OF APPEALS and
MARIANO E. PECSON, respondents.
This is a petition for review on certiorari of the decision of the respondent Court
of Appeals which ordered petitioner Isabelo Moran, Jr. to pay damages to
respondent Mariano E, Pecson.
As found by the respondent Court of Appeals, the undisputed facts indicate that:
t.hqw
... on February 22, 1971 Pecson and Moran entered into an agreement whereby
both would contribute P15,000 each for the purpose of printing 95,000 posters
(featuring the delegates to the 1971 Constitutional Convention), with Moran
actually supervising the work; that Pecson would receive a commission of P l,000
a month starting on April 15, 1971 up to December 15, 1971; that on December
15, 1971, a liquidation of the accounts in the distribution and printing of the
95,000 posters would be made, that Pecson gave Moran P10,000 for which the
latter issued a receipt; that only a few posters were printed; that on or about
May 28, 1971, Moran executed in favor of Pecson a promissory note in the
amount of P20,000 payable in two equal installments (P10,000 payable on or
before June 15, 1971 and P10,000 payable on or before June 30, 1971), the
whole sum becoming due upon default in the payment of the first installment on
the date due, complete with the costs of collection.
Private respondent Pecson filed with the Court of First Instance of Manila an
action for the recovery of a sum of money and alleged in his complaint three (3)
causes of action, namely: (1) on the alleged partnership agreement, the return of
his contribution of P10,000.00, payment of his share in the profits that the
partnership would have earned, and, payment of unpaid commission; (2) on the
alleged promissory note, payment of the sum of P20,000.00; and, (3) moral and
exemplary damages and attorney's fees.
After the trial, the Court of First Instance held that: t.hqw
From the evidence presented it is clear in the mind of the court that by virtue of
the partnership agreement entered into by the parties-plaintiff and defendant
the plaintiff did contribute P10,000.00, and another sum of P7,000.00 for the
Voice of the Veteran or Delegate Magazine. Of the expected 95,000 copies of the
posters, the defendant was able to print 2,000 copies only authorized of which,
however, were sold at P5.00 each. Nothing more was done after this and it can
be said that the venture did not really get off the ground. On the other hand, the
plaintiff failed to give his full contribution of P15,000.00. Thus, each party is
entitled to rescind the contract which right is implied in reciprocal obligations
under Article 1385 of the Civil Code whereunder 'rescission creates the
obligation to return the things which were the object of the contract ...
WHEREFORE, the court hereby renders judgment ordering defendant Isabelo C.
Moran, Jr. to return to plaintiff Mariano E. Pecson the sum of P17,000.00, with
interest at the legal rate from the filing of the complaint on June 19, 1972, and
the costs of the suit.
For insufficiency of evidence, the counterclaim is hereby dismissed.
From this decision, both parties appealed to the respondent Court of Appeals.
The latter likewise rendered a decision against the petitioner. The dispositive
portion of the decision reads: t.hqw
PREMISES CONSIDERED, the decision appealed from is hereby SET ASIDE, and a
new one is hereby rendered, ordering defendant-appellant Isabelo C. Moran, Jr.
to pay plaintiff- appellant Mariano E. Pecson:
(a) Forty-seven thousand five hundred (P47,500) (the amount that could have
accrued to Pecson under their agreement);
(b) Eight thousand (P8,000), (the commission for eight months);
(c) Seven thousand (P7,000) (as a return of Pecson's investment for the Veteran's
Project);
(d) Legal interest on (a), (b) and (c) from the date the complaint was filed (up to
the time payment is made)
The petitioner contends that the respondent Court of Appeals decided questions
of substance in a way not in accord with law and with Supreme Court decisions
when it committed the following errors:
I - THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING
PETITIONER ISABELO C. MORAN, JR. LIABLE TO RESPONDENT MARIANO E.
PECSON IN THE SUM OF P47,500 AS THE SUPPOSED EXPECTED PROFITS DUE
HIM.
II - THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING
PETITIONER ISABELO C. MORAN, JR. LIABLE TO RESPONDENT MARIANO E.
PECSON IN THE SUM OF P8,000, AS SUPPOSED COMMISSION IN THE
PARTNERSHIP ARISING OUT OF PECSON'S INVESTMENT.
III - THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING
PETITIONER ISABELO C. MORAN, JR. LIABLE TO RESPONDENT MARIANO E.
PECSON IN THE SUM OF P7,000 AS A SUPPOSED RETURN OF INVESTMENT IN A
MAGAZINE VENTURE.
IV - ASSUMING WITHOUT ADMITTING THAT PETITIONER IS AT ALL LIABLE FOR
ANY AMOUNT, THE HONORABLE COURT OF APPEALS DID NOT EVEN OFFSET
PAYMENTS ADMITTEDLY RECEIVED BY PECSON FROM MORAN.
V - THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT GRANTING
THE PETITIONER'S COMPULSORY COUNTERCLAIM FOR DAMAGES.
The first question raised in this petition refers to the award of P47,500.00 as the
private respondent's share in the unrealized profits of the partnership. The
petitioner contends that the award is highly speculative. The petitioner maintains
that the respondent court did not take into account the great risks involved in
the business undertaking.
We agree with the petitioner that the award of speculative damages has no basis
in fact and law.
There is no dispute over the nature of the agreement between the petitioner and
the private respondent. It is a contract of partnership. The latter in his complaint
alleged that he was induced by the petitioner to enter into a partnership with
him under the following terms and conditions: t.hqw
1. That the partnership will print colored posters of the delegates to the
Constitutional Convention;
2. That they will invest the amount of Fifteen Thousand Pesos
(P15,000.00) each;
3. That they will print Ninety Five Thousand (95,000) copies of the said
posters;
4. That plaintiff will receive a commission of One Thousand Pesos (P1,000.00) a
month starting April 15, 1971 up to December 15, 1971;
5. That upon the termination of the partnership on December 15, 1971, a
liquidation of the account pertaining to the distribution and printing of the said
95,000 posters shall be made.
The petitioner on the other hand admitted in his answer the existence of the
partnership.
The rule is, when a partner who has undertaken to contribute a sum of money
fails to do so, he becomes a debtor of the partnership for whatever he may have
promised to contribute (Art. 1786, Civil Code) and for interests and damages
from the time he should have complied with his obligation (Art. 1788, Civil Code).
Thus in Uy v. Puzon (79 SCRA 598), which interpreted Art. 2200 of the Civil Code
of the Philippines, we allowed a total of P200,000.00 compensatory damages in
favor of the appellee because the appellant therein was remiss in his obligations
as a partner and as prime contractor of the construction projects in question.
This case was decided on a particular set of facts. We awarded compensatory
damages in the Uy case because there was a finding that the constructing
business is a profitable one and that the UP construction company derived some
profits from its contractors in the construction of roads and bridges despite its
deficient capital." Besides, there was evidence to show that the partnership
made some profits during the periods from July 2, 1956 to December 31, 1957
and from January 1, 1958 up to September 30, 1959. The profits on two
government contracts worth P2,327,335.76 were not speculative. In the instant
case, there is no evidence whatsoever that the partnership between the
petitioner and the private respondent would have been a profitable venture. In
fact, it was a failure doomed from the start. There is therefore no basis for the
award of speculative damages in favor of the private respondent.
Furthermore, in the Uy case, only Puzon failed to give his full contribution while
Uy contributed much more than what was expected of him. In this case,
however, there was mutual breach. Private respondent failed to give his entire
contribution in the amount of P15,000.00. He contributed only P10,000.00. The
petitioner likewise failed to give any of the amount expected of him. He further
failed to comply with the agreement to print 95,000 copies of the posters.
Instead, he printed only 2,000 copies.
Article 1797 of the Civil Code provides: t.hqw
The losses and profits shall be distributed in conformity with the agreement. If
only the share of each partner in the profits has been agreed upon, the share of
each in the losses shall be in the same proportion.
Being a contract of partnership, each partner must share in the profits and losses
of the venture. That is the essence of a partnership. And even with an assurance
made by one of the partners that they would earn a huge amount of profits, in
the absence of fraud, the other partner cannot claim a right to recover the highly
speculative profits. It is a rare business venture guaranteed to give 100% profits.
In this case, on an investment of P15,000.00, the respondent was supposed to
earn a guaranteed P1,000.00 a month for eight months and around P142,500.00
on 95,000 posters costing P2.00 each but 2,000 of which were sold at P5.00 each.
The fantastic nature of expected profits is obvious. We have to take various
factors into account. The failure of the Commission on Elections to proclaim all
the 320 candidates of the Constitutional Convention on time was a major factor.
The petitioner undesirable his best business judgment and felt that it would be a
losing venture to go on with the printing of the agreed 95,000 copies of the
posters. Hidden risks in any business venture have to be considered.
It does not follow however that the private respondent is not entitled to recover
any amount from the petitioner. The records show that the private respondent
gave P10,000.00 to the petitioner. The latter used this amount for the printing of
2,000 posters at a cost of P2.00 per poster or a total printing cost of P4,000.00.
The records further show that the 2,000 copies were sold at P5.00 each. The
gross income therefore was P10,000.00. Deducting the printing costs of
P4,000.00 from the gross income of P10,000.00 and with no evidence on the cost
of distribution, the net profits amount to only P6,000.00. This net profit of
P6,000.00 should be divided between the petitioner and the private respondent.
And since only P4,000.00 was undesirable by the petitioner in printing the 2,000
copies, the remaining P6,000.00 should therefore be returned to the private
respondent.
Relative to the second alleged error, the petitioner submits that the award of
P8,000.00 as Pecson's supposed commission has no justifiable basis in law.
Again, we agree with the petitioner.
The partnership agreement stipulated that the petitioner would give the private
respondent a monthly commission of Pl,000.00 from April 15, 1971 to December
15, 1971 for a total of eight (8) monthly commissions. The agreement does not
state the basis of the commission. The payment of the commission could only
have been predicated on relatively extravagant profits. The parties could not
have intended the giving of a commission inspite of loss or failure of the venture.
Since the venture was a failure, the private respondent is not entitled to the
P8,000.00 commission.
Anent the third assigned error, the petitioner maintains that the respondent
Court of Appeals erred in holding him liable to the private respondent in the sum
of P7,000.00 as a supposed return of investment in a magazine venture.
In awarding P7,000.00 to the private respondent as his supposed return of
investment in the "Voice of the Veterans" magazine venture, the respondent
court ruled that: t.hqw
... Moran admittedly signed the promissory note of P20,000 in favor of Pecson.
Moran does not question the due execution of said note. Must Moran therefore
pay the amount of P20,000? The evidence indicates that the P20,000 was
assigned by Moran to cover the following: t.hqw
(a) P 7,000 the amount of the PNB check given by Pecson to Moran
representing Pecson's investment in Moran's other project (the publication and
printing of the 'Voice of the Veterans');
(b) P10,000 to cover the return of Pecson's contribution in the project of the
Posters;
(c) P3,000 representing Pecson's commission for three months (April, May,
June, 1971).
Of said P20,000 Moran has to pay P7,000 (as a return of Pecson's investment for
the Veterans' project, for this project never left the ground) ...
As a rule, the findings of facts of the Court of Appeals are final and conclusive
and cannot be reviewed on appeal to this Court (Amigo v. Teves, 96 Phil. 252),
provided they are borne out by the record or are based on substantial evidence
(Alsua-Betts v. Court of Appeals, 92 SCRA 332). However, this rule admits of
certain exceptions. Thus, in Carolina Industries Inc. v. CMS Stock Brokerage, Inc.,
et al., (97 SCRA 734), we held that this Court retains the power to review and
rectify the findings of fact of the Court of Appeals when (1) the conclusion is a
finding grounded entirely on speculation, surmises and conjectures; (2) when the
inference made is manifestly mistaken absurd and impossible; (3) where there is
grave abuse of discretion; (4) when the judgment is based on a misapprehension
of facts; and (5) when the court, in making its findings, went beyond the issues of
the case and the same are contrary to the admissions of both the appellant and
the appellee.
In this case, there is misapprehension of facts. The evidence of the private
respondent himself shows that his investment in the "Voice of Veterans" project
amounted to only P3,000.00. The remaining P4,000.00 was the amount of profit
that the private respondent expected to receive.
The records show the following exhibits- t.hqw 2. Do you know this promissory note?
E Xerox copy of PNB Manager's Check No. 234265 dated March 22, 1971 in
favor of defendant. Defendant admitted the authenticity of this check and of his
receipt of the proceeds thereof (t.s.n., pp. 3-4, Nov. 29, 1972). This exhibit is
being offered for the purpose of showing plaintiff's capital investment in the
printing of the "Voice of the Veterans" for which he was promised a fixed profit
of P8,000. This investment of P6,000.00 and the promised profit of P8,000 are
covered by defendant's promissory note for P14,000 dated March 31, 1971
marked by defendant as Exhibit 2 (t.s.n., pp. 20-21, Nov. 29, 1972), and by
plaintiff as Exhibit P. Later, defendant returned P3,000.00 of the P6,000.00
investment thereby proportionately reducing the promised profit to P4,000. With
the balance of P3,000 (capital) and P4,000 (promised profit), defendant signed
and executed the promissory note for P7,000 marked Exhibit 3 for the defendant
and Exhibit M for plaintiff. Of this P7,000, defendant paid P4,000 representing full
return of the capital investment and P1,000 partial payment of the promised
profit. The P3,000 balance of the promised profit was made part consideration of
the P20,000 promissory note (t.s.n., pp. 22-24, Nov. 29, 1972). It is, therefore,
being presented to show the consideration for the P20,000 promissory note.
F Xerox copy of PNB Manager's check dated May 29, 1971 for P7,000 in favor
of defendant. The authenticity of the check and his receipt of the proceeds
thereof were admitted by the defendant (t.s.n., pp. 3-4, Nov. 29, 1972). This P
7,000 is part consideration, and in cash, of the P20,000 promissory note (t.s.n., p.
25, Nov. 29, 1972), and it is being presented to show the consideration for the
P20,000 note and the existence and validity of the obligation.
L-Book entitled "Voice of the Veterans" which is being offered for the purpose of
showing the subject matter of the other partnership agreement and in which
plaintiff invested the P6,000 (Exhibit E) which, together with the promised profit
of P8,000 made up for the consideration of the P14,000 promissory note (Exhibit
2; Exhibit P). As explained in connection with Exhibit E. the P3,000 balance of the
promised profit was later made part consideration of the P20,000 promissory
note.
M-Promissory note for P7,000 dated March 30, 1971. This is also defendant's
Exhibit E. This document is being offered for the purpose of further showing the
transaction as explained in connection with Exhibits E and L.
N-Receipt of plaintiff dated March 30, 1971 for the return of his P3,000 out of his
capital investment of P6,000 (Exh. E) in the P14,000 promissory note (Exh. 2; P).
This is also defendant's Exhibit 4. This document is being offered in support of
plaintiff's explanation in connection with Exhibits E, L, and M to show the
transaction mentioned therein.
P-Promissory note for P14,000.00. This is also defendant's Exhibit 2. It is being
offered for the purpose of showing the transaction as explained in connection
with Exhibits E, L, M, and N above.
Explaining the above-quoted exhibits, respondent Pecson testified that: t.
hqw
Q During the pre-trial of this case, Mr. Pecson, the defendant presented a
promissory note in the amount of P14,000.00 which has been marked as Exhibit
A Yes, sir.
Q What is this promissory note, in connection with your transaction
with the defendant?
A This promissory note is for the printing of the "Voice of the Veterans".
Q What is this "Voice of the Veterans", Mr. Pecson?
A It is a book.t.hqw
(T.S.N., p. 19, Nov. 29, 1972)
Q And what does the amount of P14,000.00 indicated in the promissory
note, Exhibit 2, represent?
A It represents the P6,000.00 cash which I gave to Mr. Moran, as evidenced by
the Philippine National Bank Manager's check and the P8,000.00 profit assured
me by Mr. Moran which I will derive from the printing of this "Voice of the
Veterans" book.
Q You said that the P6,000.00 of this P14,000.00 is covered by, a Manager's
check. I show you Exhibit E, is this the Manager's check that mentioned?
A Yes, sir.
Q What happened to this promissory note of P14,000.00 which you said
represented P6,000.00 of your investment and P8,000.00 promised profits?
A Latter, Mr. Moran returned to me P3,000.00 which represented one-half (1/2)
of the P6,000.00 capital I gave to him.
Q As a consequence of the return by Mr. Moran of one-half (1/2) of the
P6,000.00 capital you gave to him, what happened to the promised profit of
P8,000.00?
A It was reduced to one-half (1/2) which is P4,000.00.
Q Was there any document executed by Mr. Moran in connection with the
Balance of P3,000.00 of your capital investment and the P4,000.00 promised
profits?
A Yes, sir, he executed a promissory note.
Q I show you a promissory note in the amount of P7,000.00 dated March 30,
1971 which for purposes of Identification I request the same to be marked as
Exhibit M. . .
Court t.hqw
Mark it as Exhibit M.
Q (continuing) is this the promissory note which you said was executed by Mr.
Moran in connection with your transaction regarding the printing of the "Voice of
the Veterans"?
A Yes, sir. (T.S.N., pp. 20-22, Nov. 29, 1972).
Q What happened to this promissory note executed by Mr. Moran, Mr. Pecson?
A Mr. Moran paid me P4,000.00 out of the P7,000.00 as shown by the promissory
note.
Q Was there a receipt issued by you covering this payment of P4,000.00 in favor
of Mr. Moran?
A Yes, sir.
(T.S.N., p. 23, Nov. 29, 1972).
Q You stated that Mr. Moran paid the amount of P4,000.00 on account of the
P7,000.00 covered by the promissory note, Exhibit M. What does this P4,000.00
covered by Exhibit N represent?
A This P4,000.00 represents the P3,000.00 which he has returned of my
P6,000.00 capital investment and the P1,000.00 represents partial payment of
the P4,000.00 profit that was promised to me by Mr. Moran.
Q And what happened to the balance of P3,000.00 under the promissory note,
Exhibit M?
A The balance of P3,000.00 and the rest of the profit was applied as part of the
consideration of the promissory note of P20,000.00.
(T.S.N., pp. 23-24, Nov. 29, 1972).
The respondent court erred when it concluded that the project never left the
ground because the project did take place. Only it failed. It was the private
respondent himself who presented a copy of the book entitled "Voice of the
Veterans" in the lower court as Exhibit "L". Therefore, it would be error to state
that the project never took place and on this basis decree the return of the
private respondent's investment.
As already mentioned, there are risks in any business venture and the failure of
the undertaking cannot entirely be blamed on the managing partner alone,
specially if the latter exercised his best business judgment, which seems to be
true in this case. In view of the foregoing, there is no reason to pass upon the
fourth and fifth assignments of errors raised by the petitioner. We likewise find
no valid basis for the grant of the counterclaim.
WHEREFORE, the petition is GRANTED. The decision of the respondent Court of
Appeals (now Intermediate Appellate Court) is hereby SET ASIDE and a new one
is rendered ordering the petitioner Isabelo Moran, Jr., to pay private respondent
Mariano Pecson SIX THOUSAND (P6,000.00) PESOS representing the amount of
the private respondent's contribution to the partnership but which remained
unused; and THREE THOUSAND (P3,000.00) PESOS representing one half (1/2) of
the net profits gained by the partnership in the sale of the two thousand (2,000)
copies of the posters, with interests at the legal rate on both amounts from the
date the complaint was filed until full payment is made.
10. M. TEAGUE, plaintiff-appellant, vs.H. MARTIN, J. T. MADDY and L.H.
GOLUCKE, defendants-appellees.
Plaintiff alleges that about December 23, 1926, he and the defendants formed a
partnership for the operation of a fish business and similar commercial
transactions, which by mutual contest was called "Malangpaya Fish Co," with a
capital of P35,000, of which plaintiff paid P25,000, the defendant Martin P5,000,
P2,500, and Golucke P2,500. That as such partnership, they agreed to share in
the profits and losses of the business in proportion to the amount of capital
which each contributed. That the plaintiff was named the general manager to
take charge of the business, with full power to do and perform all acts necessary
to carry out of the purposes of the partnership. That there was no agreement as
to the duration of the partnership. That plaintiff wants to dissolve it, but that the
defendants refused to do so. A statement marked Exhibit A, which purports to be
a cash book, is made a part of the complaint. That the partnership purchased and
now owns a lighter called Lapu-Lapu, and a motorship called Barracuda, and
other properties. That the lighter and the motorship are in the possession of the
defendants who are making use of them, to the damage and prejudice of the
plaintiff, for any damage which plaintiff may sustain. That it is for the best
interest of the parties to have a receiver appointed pending this litigation, to take
possession of the properties, and he prays that the Philippine Trust Company be
appointed receiver, and for judgment dissolving the partnership, with costs.
Each of the defendants filed a separate answer, but the same nature, in which
they admit that about December 10, 1926, the plaintiff and the defendants
formed a partnership for the purpose of the equipment of the Manila Fish Co.,
Inc., and the conduct of a fish business. That the terms of the partnership were
never evidenced by a truth and in fact, the partnership was formed under a
written plan, of which each member received a copy and to which all agreed.
That by its terms the amount of the capital was P45,000, of which the plaintiff
agreed to contribute P35,000. That P20,000 of the capital was to be used for the
purchase of the equipment of the Manila Fish Co., Inc. and the balance placed to
the checking account o the new company.
It is then alleged that "the new owners agree to duties as follows:
Capt. Maddy will have charger of the Barracuda and the navigating of the same.
Salary P300 per month.
Mr. Martin will have charge of the southern station, cold stores, commissary and
procuring fish. Salary P300 per month.
Mr. Teague will have charge of selling fish in Manila and purchasing supplies. No
salary until business is on paying basis, then the same as Maddy or Martin.
The principal office shall be in Manila, each party doing any business shall keep
books showing plainly all transactions, the books shall be available at all time for
inspections of any member of the partnership.
If Mr. Martin or Mr. Maddy wishes at some future time to repurchase a larger
share in the business Teague agrees to sell part of his shares to each on the basis
double the amount originally invested by each or ten thousand to Martin and five
thousand to Maddy.
This offer will expire after two years.
That no charge was ever made in the terms of said agreement of copartnership
as set forth above except that it was later agreed among the partners that the
business of the partnership should be conducted under the trade name
"Malangpaya Fish Company."
That as shown by the foregoing quoted agreement the agreed capital of the
copartnership was P45,000 and not P35,000 as stated in the third paragraph of
plaintiff's amended complaint, and the plaintiff herein, M. Teague, bound himself
and agreed to contribute to the said copartnership the sum of P35,000 and not
the sum of P25,000 as stated in the third paragraph of his said amended
complaint.
Defendant Martin specificaly denies the "plaintiff was named general manager of
the partnership," and alleged "that all the duties and powers of the said plaintiff
were specifically set forth in the above quoted written agreement and that no
further or additional powers were ever given the said plaintiff." But he admits the
purchase of the motorship Barracuda, by the partnership. He denies that Exhibit
A is a true or correct statement of the cash received and paid out by or on behalf
of the partnership, or that the partnership over purchased or that it now owns
the lighter Lapu-Lapu, "And/ or any other properties" as mentioned in said ninth
paragraph, except such motorship and a smoke in the house," or that the
defendants are making use of any of the properties of the partnership, to the
damage and prejudice of the plaintiff, or that they do not have any visible means
to answer for any damages, and alleges that at the time of the filing of the
complaint, partnership in cold storage, of the value of P6,000, for which he has
never accounted on the books of the partnership or mentioned in the complaint,
and defendant prays that plaintiff's complaint be dismissed, and that he be
ordered and required to render an accounting , and to pay to partnership the
balance of his unpaid subscription amounting to P10,000.
In his answer the defendant Maddy claimed and asserted that there is due and
owing him from the plaintiff P1,385.53, with legal interest, and in his amended
answer, the defendant Martin prays for judgment for P615.49.
To all which the plaintiff made a general and specific denial.
Upon such issues the lower court on April 30, 1928, rendered the following
judgment:
In view of the foregoing considerations, the court decrees:
That the partnership, existing among the parties in this suit, is hereby declared
dissolved; that all the existing properties of the said partnership are ordered to
be sold at public auction; and that all the proceeds and other unexpended funds
of the partnership be used, first, to pay he P529.48 tax to the Government of the
Philippine Islands; second, to pay debts owing to third persons; third, to
reimburse the partners for their advances and salaries due; and lastly, to return
to the partners the amounts they contributed to the capital of the association
and any other remaining such to be distributed proportionately among them as
profits:
That the plaintiff immediately render a true and proper account of all the money
due to and received by him for the partnership.
That the barge Lapu-Lapu as well as the Ford truck No. T-3019 and adding
machine belong exclusively to the plaintiff, M. Teague, but the said plaintiff must
return to and reimburse the partnership the sum of P14,032.26 taken from its
funds for the purchase and equipment of the said barge Lapu-Lapu; and also to
return the sum of P1,230 and P228 used for buying the Ford truck and adding
machine, respectively:
That the sum of P,1512.03 be paid to the defendant, J. T. Maddy, and the sum of
P615.49 be paid to defendant, H. Martin, for their advances and their unpaid
salaries, with legal interest from October 27, 1927, until paid; that the plaintiff
pay the costs of this action.
May 16, 1928, plaintiff filed a motion praying for an order "directing the court's
stenographic notes taken by them of the evidence presented in the present case,
as soon as possible." This motion was denied on May 19th, and on May 16th, the
court denied the plaintiff's motion for reconsideration. To all of which exceptions
were duly taken.
June 7, 1928, plaintiff filed a petition praying, for the reasons therein stated, that
the decision of the court in the case be set aside, and that the parties be
permitted to again present their testimony and to have the case decided upon its
merits. To which objections were duly made, and on June 28, 1928, the court
denied plaintiff's motion for a new trial. To which exceptions were duly taken,
and on July 10, 1928, the plaintiff filed a motion in which he prayed that the
period for the appeal interposed by the plaintiff be suspended, and that the
order of June 28, 1928, be set aside, "and that another be entered ordering the
re-taking of the evidence in this case." To which objections were also filed and
later overruled, from all of which the plaintiff appealed and assigns the following
errors:
I. The trial court erred in not having confined itself, in the determination
of this case, to the question as to whether or not it is proper to dissolve the
partnership and to liquidate its assets, for all other issues raised by appellees are
incidental with the process of liquidation provided for by law.
II. The trial court erred in not resolving the primary and most important
question at issue in his case, namely, whether or not the appellant M. Teague
was the manager of the unregistered partnership Malangpaya Fish Company.
III. The trial court erred in holding that the appellant had no authority to
buy the Lapu-Lapu, the Ford truck and the adding machine without the consent
of his copartners, for in accordance with article 131 of the Code of Commerce
the managing partner of a partnership can make purchases for the partnership
without the knowledge and/or consent of his copartners.
IV. The trial court erred in holding that the Lapu-Lapu, the Ford truck and
the adding machine purchased by appellant, as manager of the Malangpaya Fish
Company, for and with funds of the partnership, do not form part of the assets of
the partnership.
V. The trial court erred in requiring the appellant to pay to the
partnership the sum of P14,032.26, purchase price, cost of repairs and
equipment of the barge Lapu-Lapu; P1,230 purchase price of the adding
machine, for these properties were purchased for and they form part of the
assets of the partnership.
VI. The trial court erred in disapproving appellant's claim for salary and
expenses incurred by him for and in connection with the partnership's business.
VII. The trial court erred in approving the claims of appellees J.T. Maddy
and H. Martin and in requiring the appellant to pay them the sum of P1,512.03
and P615.49 respectively.
VIII. The trial court erred in not taking cognizance of appellant's claim for
reimbursement for advances made by him for the partnerships, as shown in the
statement attached to the complaint marked Exhibit A, in which there is a
balance in his favor and against the partnership amounting to over P16,000.
X. Lastly, considering the irregularities committed, the disappearance of
the stenographic notes for a considerable length of time, during which time
changes in the testimonies of the witnesses could have been made and the
impossibility of having an accurate and complete transcript of the stenographic
notes, the trial court erred in denying appellant's petition for the retaking of the
evidence in this case.
JOHNS, J.:
By their respective pleadings, all parties agreed that there was a partnership
between them, which appears at one time to have done a good business. In legal
effect, plaintiff asked for its dissolution and the appointment of a receiver
pendente lite. The defendants did not object to the dissolution of the
partnership, but prayed for an accounting with the plaintiff. It was upon such
issues that the evidence was taken and the case tried. Hence, there is no merit in
the first in the first assignment of error. Complaint is made that the lower court
did not specifically decide as to whether or not the plaintiff was the manager of
the unregistered partnership. But upon that question the lower court, in legal
effect, followed and approved the contention of the defendants that the duties
of each partners were specified and defined in the "plans for formation of a
limited partnership," in which it is stated that Captain Maddy would have charge
of the Barracuda and its navigation, with a salary of P300 per month, and that
Martin would have charge of the southern station, cold stores, commisary and
procuring fish, with a salary of P300 per month, and that the plaintiff would have
charge of selling fish in Manila and purchasing supplies, without salary until such
time as the business is placed on a paying basis, when his salary would be the
same as that of Maddy and Martin, and that the principal office of the
partnership "shall keep books showing plainly all transactions," which shall be
available at all time for inspection of any of the members.
It will thus be noted that the powers and duties of Maddy Martin, and the
plaintiff are specifically defined, and that each of them was more or less the
general manager in his particular part of the business. That is to say, that
Maddy's power and duties are confined and limited to the charge of the
Barracuda and its navigation, and Martin's to the southern station, cold stores,
commissary and procuring fish, and that plaintiff's powers and duties are
confined and limited to "selling fish in Manila and the purchase of supplies." In
the selling of fish, plaintiff received a substantial amount of money which he
deposited to the credit of the company signed by him as manager, but it appears
that was a requirement which the bank made in the ordinary course of business,
as to who was authorized to sign checks for the partnership; otherwise, it would
not cash the checks.
In the final analysis, the important question in this case is the ownership of the
Lapu-Lapu, the Ford truck, and the adding machine. The proof is conclusive that
they were purchased by the plaintiff and paid for him from and out of the money
of the partnership. That at the time of their purchase, the Lapu-Lapu was
purchased in the name of the plaintiff, and that he personally had it registered in
the customs house in his own name, for which he made an affidavit that he was
its owner. After the purchase, he also had the Ford truck registered in his won
name. His contention that this was done as a matter of convenience is not
tenable. The record shows that when the partnership purchased the Barracuda,
it was registered in the customs house in the name of the partnership, and that it
was a very simple process to have it so registered.
Without making a detailed analysis of the evidence, we agree with the trial court
that the Lapu-Lapu, the Ford truck, and the adding machine were purchased by
the plaintiff and paid for out of the funds of the partnership, and that by his own
actions and conduct, and the taking of the title in his own name, he is now
estopped to claim or assert that they are not his property or that they are the
property of the company. Again, under his powers and duties as specified in the
tentative, unsigned written agreement, his authority was confined and limited to
the "selling of fish in Manila and the purchase of supplies." It must be conceded
that, standing alone, the power to sell fish and purchase supplies does not carry
with it or imply the authority to purchase the Lapu-Lapu, or the Ford truck, or the
adding machine. From which it must follow that he had no authority to purchase
the lighter Lapu-Lapu, the Ford truck, or the adding machine, as neither of them
can be construed as supplies for the partnership business. While it is true that
the tentative agreement was never personally signed by any member of the firm,
the trial court found as a fact, and that finding is sustained by the evidence, that
this unsigned agreement was acted upon and accepted by all parties as the basis
of the partnership. It was upon that theory that the lower court allowed the
defendant s Maddy and Martin a salary of P300 per month and the money which
each of them paid out and advanced in the discharged of their respective duties,
and denied any salary to the plaintiff, for the simple reason that the business was
never on a paying basis.
Much could be said about this division of powers, and that Maddy and Martin's
duties were confined and limited to the catching and procuring of fish, which
were then shipped to the plaintiff who sold them on the Manila market and
received the proceeds of the sales. In other words, Maddy and Martin were
supplying the fish to plaintiff who sold them under an agreement that he would
account for the money.
Upon the question of accounting, his testimony as to the entries which he made
and how he kept the books of the partnership is very interesting:
Q. Then this salary does not take into consideration the fact that you claim
the company is very badly in debt?
A. Well, I put the salary in there.
Q. I am asking you if that is true?
A. I do not think I will decide that, I think it will be decided by the court.
Q. I will ask you to answer the question?
A. You asked me my opinion and I said that I am entitled to it.
I am not on trial as a bookkeeper; if my lawyers won't object to the question I will
object myself; I am not on trial as a bookkeeper; I keep my books any way I want
to, put in what I want to, and I leave out anything I don't choose to put in,
Q. You have your own bookkeeping?
A. Well, I run my business to suit myself, I put in the books what I want to,
and I leave out what I want to, and I have a quarter of a million pesos to show for
it,
Q. Did you not say that you paid yourself a salary in August because you
made a profit?
A. Yes. This profit was made counting the stock on hand and equipment on
hand, but as far as cash to pay this balance, I did not have it. when I wanted a
salary I just took it. I ran things to suit myself.
Q. In other words in going against these partners you are going to tax them
for the services of your attorney?
A. You are mistaken; I am not against them. I paid this out for filing this
complaint and if the honorable court strikes it out, all right. I think it was a just
charge. When I want to sue them the Company can pay for my suit.
Q. Would you have any objection to their asking for their attorney's fees
from the company as partners also in the business?
A. Yes.
Q. You would object to your partners having their attorney's fees here paid
out of the copartnership like you have had yours paid?
A. Yes, that is the way I do my business.
To say the least, this kind of evidence does not appeal to the court. This case has
been bitterly contested, and there is much feeling between the parties and even
their respective attorneys. Be that as it may, we are clearly of the opinion that
the findings of the lower court upon questions of fact are well sustained by the
evidence. Plaintiff's case was tried on the theory that the partnership was the
owner of the property in question, and no claim was made for the use of the
Lapu-Lapu, and it appears that P14,032.26 of the partnership money was used in
its purchase, overhauling, expenses and repairs. That in truth and in fact the
partnership had the use and benefit of the Lapu-Lapu in its business from
sometime in May until the receiver was appointed on November 11, 1927, or a
period of about six months, and that the partnership has never paid anything for
its use. it is true that there is no testimony as to the value of such use, but the
cost of the Lapu-Lapu and the time of its use and the purpose for which it was
used, all appear in the record. For such reason, in the interest of justice, plaintiff
should be compensated for the reasonable value of the time which the
partnership made use of the Lapu-Lapu.
All things considered, we are of the opinion that P2,000 is a reasonable, amount
which the plaintiff should receive for its use.
In all things and respects, the judgment of the lower court as to the merits is
affirmed, with the modification only that P2,000 shall be deducted from the
amount of the judgment which was awarded against the plaintiff, such deduction
to be made for and on account of such use of the Lapu-Lapu by the partnership,
with costs against the appellant. So ordered.
11. MARGARITA VILLANUEVA, as judicial administratrix of the deceased
Lorenzo Villanueva, Plaintiff-Appellant, vs. JUAN SANTOS, Defendant-Appellee.
This appeal was taken by the plaintiff from the order of the Court of First
Instance of Bulacan, holding that the consignation made by said plaintiff was
invalid and that the sale with the right of repurchase of the parcels of land in
litigation was final, and ordering her to yield possession thereof to the defendant
within ten days from receipt of notice of the said
order.chanroblesvirtualawlibrary chanrobles virtual law library
The plaintiff, as judicial administratrix of the deceased Lorenzo Villanueva,
commenced in the Court of First Instance of Bulacan civil case No. 5249 against
the defendant to annul the deed of sale with the right of repurchase of two
parcels of land executed by the said Lorenzo Villanueva while living in favor of
the defendant. The following decision was rendered in the said case:
When this case was called for trial, the parties through their respective attorneys
submitted the following stipulation for the decision of the court:chanrobles
virtual law library
"Both parties, assisted by their respective attorneys, agree that the plaintiff shall
pay on December 4, 1936, to the defendant to repurchase the two parcels of
land described in the complaint, the sum of three hundred fifty-nine pesos and
sixty centavos (P356.60), with legal interest thereon from January 8, 1934 until
the said date, December 4, 1936; and that should she fail to pay the said sum of
P359.60, or a part thereof, or the interest thereon, wholly or partially, then the
sale with the right of repurchase of said parcels, as they appear in the deed of
sale Exhibit A of the complaint, shall be deemed final; and that the plaintiff shall
deliver the possession of said parcels.chanroblesvirtualawlibrary chanrobles
virtual law library
"They likewise agree that should the plaintiff pay the aforesaid sums within the
stipulated period, the expenses for the execution of the corresponding deed and
the transfer of certificates shall be defrayed by the
plaintiff.chanroblesvirtualawlibrary chanrobles virtual law library
"They also agree that the plaintiff shall on this very date ask the authority of the
court to enter into this stipulation in the intestate of the deceased Lorenzo
Villanueva; and to render a decision in accordance therewith."chanrobles virtual
law library
Wherefore, the court approves this stipulation and orders the parties to observe
and comply strictly with the conditions thereof, without pronouncement as to
the costs. So ordered.chanroblesvirtualawlibrary chanrobles virtual law library
Malolos, Bulacan, today November 5, 1936.
(Sgd.) PEDRO MA. SISON
Judge (B. E., p. 7.)
On the night of December 4, 1936, the date of the expiration of the period
granted to the plaintiff to pay the repurchase price, the latter offered to the
defendant the check No. D-8695 for P421.04, issued by Ramon Meneses against
the Bank of the Philippines Islands in payment of the repurchase price. As the
defendant refused to accept the check on the allegation that the payment should
be made in money or legal tender, the plaintiff, through counsel, deposited the
check with the clerk of court who received the same, and at the same time put in
a motion asking that the payment be deemed effected and the two parcels of
land redeemed, and, further, that the defendant be ordered to pay her the sum
of P120 as damages. After hearing the motion, the court on April 30, 1937,
issued the aforementioned order from which the plaintiff
appealed.chanroblesvirtualawlibrary chanrobles virtual law library
In her sole assigned error the plaintiff contends that the court erred in holding
that the consignation of the check with the clerk of court was invalid and that it
did not have the effect of paying her obligation. The court correctly held that the
consignation was unavailing and that it did not produce any legal effect because
the defendant did not accept it and it was not in the form of money or legal
tender. Article 1170 of the Civil Code provides that payment of debts of money
shall be made in the specie stipulation and, should it not be possible to deliver
such specie, in silver or gold coin legally current; and provides, further, that the
delivery of promissory notes payable to order, or drafts or other commercial
paper, shall produce the effects of payment only when realized or when, by the
fault of the creditor, the privileges inherent in their negotiable character have
been lost. Under this legal provision the defendant was not under a duty to
accept the check because it is known that it does not constitute legal tender, and
the consignation having been refused, it did not produce any legal effect and
could not be considered as payment made by the plaintiff of the repurchase
price. In Belisario vs. Natividad ([1934]), 60 Phil., 156), it was held that a creditor
is not bound to accept a check in satisfaction of his demand, because a check,
even if good when offered, does not meet the requirements of a legal
tender.chanroblesvirtualawlibrary chanrobles virtual law library
The defendant, in turn, alleges that the court erred in concluding that he testified
that the plaintiff's indebtedness was P421.04, and in not holding that the
consignation was invalid because the plaintiff's debt was P422.29 and the check
only amounted to P421.04. These assigned errors can neither be considered nor
passed for the simple reason that the defendant did not appeal from any part of
the court's order.chanroblesvirtualawlibrary chanrobles virtual law library
In view of the foregoing, the appealed order is affirmed, with the costs of this
instance to the plaintiff-appellant. So ordered.
12. E. M. BACHRACH, plaintiff-appellee, vs."LA PROTECTORA", ET AL.,
defendants-appellants.
In the year 1913, the individuals named as defendants in this action formed a
civil partnership, called "La Protectora," for the purpose of engaging in the
business of transporting passengers and freight at Laoag, Ilocos Norte. In order to
provide the enterprise with means of transportation, Marcelo Barba, acting as
manager, came to Manila and upon June 23, 1913, negotiated the purchase of
two automobile trucks from the plaintiff, E. M. Bachrach, for the agree price of
P16,500. He paid the sum of 3,000 in cash, and for the balance executed
promissory notes representing the deferred payments. These notes provided for
the payment of interest from June 23, 1913, the date of the notes, at the rate of
10 per cent per annum. Provision was also made in the notes for the payment of
25 per cent of the amount due if it should be necessary to place the notes in the
hands of an attorney for collection. Three of these notes, for the sum of P3,375
each, have been made the subject of the present action, and there are exhibited
with the complaint in the cause. One was signed by Marcelo Barba in the
following manner:
P. P. La Protectora
By Marcelo Barba
Marcelo Barba.
The other two notes are signed in the same way with the word "By" omitted
before the name of Marcelo Barba in the second line of the signature. It is
obvious that in thus signing the notes Marcelo Barba intended to bind both the
partnership and himself. In the body of the note the word "I" (yo) instead of "we"
(nosotros) is used before the words "promise to pay" (prometemos) used in the
printed form. It is plain that the singular pronoun here has all the force of the
plural.
As preliminary to the purchase of these trucks, the defendants Nicolas Segundo,
Antonio Adiarte, Ignacio Flores, and Modesto Serrano, upon June 12, 1913,
executed in due form a document in which they declared that they were
members of the firm "La Protectora" and that they had granted to its president
full authority "in the name and representation of said partnership to contract for
the purchase of two automobiles" (en nombre y representacion de la
mencionada sociedad contratante la compra de dos automoviles). This document
was apparently executed in obedience to the requirements of subsection 2 of
article 1697 of the Civil Code, for the purpose of evidencing the authority of
Marcelo Barba to bind the partnership by the purchase. The document in
question was delivered by him to Bachrach at the time the automobiles were
purchased.
From time to time after this purchase was made, Marcelo Barba purchased of the
plaintiff various automobile effects and accessories to be used in the business of
"La Protectora." Upon May 21, 1914, the indebtedness resulting from these
additional purchases amounted to the sum of P2,916.57
In May, 1914, the plaintiff foreclosed a chattel mortgage which he had retained
on the trucks in order to secure the purchase price. The amount realized from
this sale was P1,000. This was credited unpaid. To recover this balance, together
with the sum due for additional purchases, the present action was instituted in
the Court of First Instance of the city of Manila, upon May 29, 1914, against "La
Protectora" and the five individuals Marcelo Barba, Nicolas Segundo, Antonio
Adiarte, Ignacio Flores, and Modesto Serrano. No question has been made as to
the propriety of impleading "La Protectora" as if it were a legal entity. At the
hearing, judgment was rendered against all of the defendants. From this
judgment no appeal was taken in behalf either of "La Protectora" or Marcelo
Barba; and their liability is not here under consideration. The four individuals
who signed the document to which reference has been made, authorizing Barba
to purchase the two trucks have, however, appealed and assigned errors. The
question here to be determined is whether or not these individuals are liable for
the firm debts and if so to what extent.
The amount of indebtedness owing to the plaintiff is not in dispute, as the
principal of the debt is agreed to be P7,037. Of this amount it must now be
assumed, in view of the finding of the trial court, from which no appeal has been
taken by the plaintiff, that the unpaid balance of the notes amounts to P4,121,
while the remainder (P2,916) represents the amount due for automobile supplies
and accessories.
The business conducted under the name of "La Protectora" was evidently that of
a civil partnership; and the liability of the partners to this association must be
determined under the provisions of the Civil Code. The authority of Marcelo
Barba to bind the partnership, in the purchase of the trucks, is fully established
by the document executed by the four appellants upon June 12, 1913. The
transaction by which Barba secured these trucks was in conformity with the
tenor of this document. The promissory notes constitute the obligation
exclusively of "La Protectora" and of Marcelo Barba; and they do not in any sense
constitute an obligation directly binding on the four appellants. Their liability is
based on the fact that they are members of the civil partnership and as such are
liable for its debts. It is true that article 1698 of the Civil Code declares that a
member of a civil partnership is not liable in solidum (solidariamente) with his
fellows for its entire indebtedness; but it results from this article, in connection
with article 1137 of the Civil Code, that each is liable with the others
(mancomunadamente) for his aliquot part of such indebtedness. And so it has
been held by this court. (Co-Pitco vs. Yulo, 8 Phil. Rep., 544.)
The Court of First Instance seems to have founded its judgment against the
appellants in part upon the idea that the document executed by them
constituted an authority for Marcelo Barba to bind them personally, as
contemplated in the second clause of article 1698 of the Civil Code. That cause
says that no member of the partnership can bind the others by a personal act if
they have not given him authority to do so. We think that the document referred
to was intended merely as an authority to enable Barba to bind the partnership
and that the parties to that instrument did not intend thereby to confer upon
Barba an authority to bind them personally. It is obvious that the contract which
Barba in fact executed in pursuance of that authority did not by its terms profess
to bind the appellants personally at all, but only the partnership and himself. It
follows that the four appellants cannot be held to have been personally obligated
by that instrument; but, as we have already seen, their liability rests upon the
general principles underlying partnership liability.
As to so much of the indebtedness as is based upon the claim for automobile
supplies and accessories, it is obvious that the document of June 12, 1913,
affords no authority for holding the appellants liable. Their liability upon this
account is, however, no less obvious than upon the debt incurred by the
purchase of the trucks; and such liability is derived from the fact that the debt
was lawfully incurred in the prosecution of the partnership enterprise.
There is no proof in the record showing what the agreement, if any, was made
with regard to the form of management. Under these circumstances it is
declared in article 1695 of the Civil Code that all the partners are considered
agents of the partnership. Barba therefore must be held to have had authority to
incur these expenses. But in addition to this he is shown to have been in fact the
president or manager, and there can be no doubt that he had actual authority to
incur this obligation.
From what has been said it results that the appellants are severally liable for
their respective shares of the entire indebtedness found to be due; and the Court
of First Instance committed no error in giving judgment against them. The
amount for which judgment should be entered is P7,037, to which shall be added
(1) interest at 10 per cent per annum from June 23, 1913, to be calculated upon
the sum of P4.121; (2) interest at 6 per cent per annum from July 21, 1915, to be
calculated upon the sum of P2,961; (3) the further sum of P1,030.25, this being
the amount stipulated to be paid by way of attorney's fees. However, it should be
noted that any property pertaining to "La Protectora" should first be applied to
this indebtedness pursuant to the judgment already entered in this case in the
court below; and each of the four appellants shall be liable only for the one-fifth
part of the remainder unpaid.
Let judgment be entered accordingly, without any express finding of costs of this
instance. So ordered.
13. JOSE MACHUCA, plaintiff-appellee, vs.CHUIDIAN, BUENAVENTURA & CO.,
defendants-appellants.
Most of the allegations of the complaint were admitted by the defendant at the
hearing, and the judgment of the court below is based on the state of facts
appearing from such admissions, no evidence having been taken.
The defendants are a regular general partnership, organized in Manila, December
29, 1882, as a continuation of a prior partnership of the same name. The original
partners constituting the partnership of 1882 were D. Telesforo Chuidian, Doa
Raymunda Chuidian, Doa Candelaria Chuidian, and D. Mariano Buenaventura.
The capital was fixed in the partnership agreement at 16,000 pesos, of which the
first three partners named contributed 50,000 pesos each, and the last named
10,000 pesos, and it was stipulated that the liability of the partners should be
"limited to the amounts brought in by them to form the partnership stock."
In addition to the amounts contributed by the partners to the capital, it appears
from the partnership agreement that each one of them had advanced money to
the preexisting partnership, which advances were assumed or accounts-current
aggregated something over 665,000 pesos, of which sum about 569,000 pesos
represented the advances from the Chuidians and the balance that balance that
from D. Mariano Buenaventura.
Doa Raymunda Chuidian retired from the partnership November 4, 1885. On
January 1, 1888, the partnership went into liquidation, and it does not appear
that the liquidation had been terminated when this action was brought.
Down to the time the partnership went into liquidation the accounts-current of
D. Telesforo Chuidian and Doa Candelaria Chuidian had been diminished in an
amount aggregating about 288,000 pesos, while that of D. Mariano
Buenaventura had been increased about 51,000 pesos. During the period from
the commencement of the liquidation down to January 1, 1896, the account-
current of each of the Chuidians had been still further decreased, while that of D.
Mariano Buenaventura had been still further increased.
On January 1, 1894, D. Mariano Buenaventura died, his estate passing by will to
his children, among whom was D. Vicente Buenaventura. Upon the partition of
the estate the amount of the interest of D. Vicente Buenaventura in his father's
account-current and in the capital was ascertained and recorded in the books of
the firm.
On December 15, 1898, D. Vicente Buenaventura executed a public instrument in
which for a valuable consideration he "assigns to D. Jose Gervasio Garcia . . . a 25
per cent share in all that may be obtained by whatever right in whatever form
from the liquidation of the partnership of Chuidian, Buenaventura & Co., in the
part pertaining to him in said partnership, . . . the assignee, being expressly
empowered to do in his own name, and as a part owner, by virtue of this
assignment in the assets of the partnership, whatever things may be necessary
for the purpose of accelerating the liquidation, and of obtaining on judicially or
extrajudicially the payment of the deposits account-current pertaining to the
assignor, it being understood that D. Jose Gervasio Garcia is to receive the 25 per
cent assigned to him, in the same form in which it may be obtained from said
partnership, whether in cash, credits, goods, movables or immovables, and on
the date when Messrs. Chuidian, Buenaventura & Co., in liquidation, shall have
effected the operations necessary in order to satisfy the credits and the share in
the partnership capital hereinbefore mentioned."
The plaintiff claims under Garcia by virtue of a subsequent assignment, which has
been notified to the liquidator of the partnership.
The liquidator of the partnership having declined to record in the books of the
partnership the plaintiff's claim under the assignment as a credit due from the
concern to him this action is brought to compel such record to be made, and the
plaintiff further asks that he be adjudicated to be a creditor of the partnership in
an amount equal to 25 per cent of D. Vicente Buenaventura's share in his father's
account-current, as ascertained when the record was made in the books of the
partnership upon the partition of the latters estate, with interest, less the liability
to which the plaintiff is subject by reason of his share in the capital; that the
necessary liquidation being first had, the partnership pay to the plaintiff the
balance which may be found to be due him; and that if the partnership has no
funds with which to discharge this obligation an adjudication of bankruptcy be
made. He also asks to recover the damages caused by reason of the failure of the
liquidator to record his credit in the books of partnership.
The judgment of the court below goes beyond the relief asked by the plaintiff in
the complaint, the plaintiff being held entitled not only to have the credit
assigned him recorded in the books of the partnership but also to receive
forthwith 25 per cent of an amount representing the share of D. Vicente
Buenaventura in the account-current at the time of the partition of his father's
estate, with interest, the payment of the 25 percent of Buenaventura's share in
the capital to be postponed till the termination of the liquidation. This point has
not, however, been taken by counsel, and we have therefore considered the case
upon its merits.
The underlying question in the case relates to the construction of clause 19 of
the partnership agreement, by which it was stipulated that "upon the dissolution
of the company, the pending obligations in favor of outside parties should be
satisfied, the funds of the minors Jose and Francisco Chuidian [it does not appear
what their interest in the partnership was or when or how it was acquired]
should be taken out, and afterwards the resulting balance of the account-current
of each one of those who had put in money (imponentes) should be paid."
Our construction of this clause is that it establishes a a basis for the final
adjustment of the affairs of the partnership; that that basis is that the liabilities
to noncompartners are to be first discharged; that the claims of the Chuidian
minors are to be next satisfied; and that what is due to the respective partners
on account of their advances to the firm is to be paid last of all, leaving the
ultimate residue, of course, if there be any, to be distributed, among the partners
in the proportions in which they may be entitled thereto.
Although in a sense the partners, being at the same time creditors, were "outside
parties," it is clear that a distinction is made in this clause between creditors who
were partners and creditors who were not partners, and that the expression
"outside parties" refers to the latter class. And the words "pending obligations,"
we think, clearly comprehend outstanding obligations of every kind in favor of
such outside parties, and do not refer merely, as claimed by counsel for the
plaintiff, to the completion of mercantile operations unfinished at the time of the
dissolution of the partnership, such as consignments of goods and the like. As
respects the claims of the Chuidian minors, the suggestion of counsel is that the
clause in question means that their accounts are to be adjusted before those of
the partners but not paid first. Such a provision would have been of no practical
utility, and the language used that the funds should be "taken out" (se
dedujeran) does not admit of such a construction.
Such being the basis upon which by agreement of the partners the assets of the
partnership are to be applied to the discharge of the various classes of the firm's
liabilities, it follows that D. Vicente Buenaventura, whose rights are those of his
father, is in no case entitled to receive any part of the assets until the creditors
who are nonpartners and the Chuidian minors are paid. Whatever rights he had
either as creditor or partner, he could only transfer subject to this condition. And
it is clear, from the language of the instrument under which the plaintiff claims,
that this conditional interest was all that D. Vicente Buenaventura ever intended
to transfer. By that instrument he undertakes to assign to Garcia not a present
interest in the assets of the partnership but an interest in whatever "may be
obtained from the liquidation of the partnership," which Garcia is to receive "in
the same form in which it may be obtained from said partnership," and "on the
date when Messrs. Chuidian, Buenaventura & Co., in liquidation, shall have
effected the operations necessary in order to satisfy" the claims of D. Vicente
Buenaventura.
Upon this interpretation of the assignment, it becomes unnecessary to inquire
whether article 143 of the Code of Commerce, prohibiting a partner from
transferring his interest in the partnership without the consent of the other
partners, applies to partnerships in liquidation, as contended by the defendant.
The assignment by its terms is not to take effect until all the liabilities of the
partnership have been discharged and nothing remains to be done except to
distribute the assets, if there should be any, among the partners. Meanwhile the
assignor, Buenaventura, is to continue in the enjoyment of the rights and is to
remain subject to the liabilities of a partner as though no assignment had been
made. In other words, the assignment does not purport to transfer an interest in
the partnership, but only a future contingent right to 25 per cent of such portion
of the ultimate residue of the partnership property as the assignor may become
entitled to receive by virtue of his proportionate interest in the capital.
There is nothing in the case to show either that the nonpartner creditors of the
partnership have been paid or that the claims of the Chuidian minors have been
satisfied. Such rights as the plaintiff has acquired against the partnership under
the assignment still remain, therefore, subject to the condition which attached to
them in their origin, a condition wholly uncertain of realization, since it may be
that the entire assets of the partnership will be exhausted in the payment of the
creditors entitled to preference under the partnership agreement, thus
extinguishing the plaintiff's right to receive anything from the liquidation.
It is contended by the plaintiff that, as the partnership was without authority to
enter upon new mercantile operations after the liquidation commenced, the
increase in D. Mariano Buenaventura's account-current during that period was
the result of a void transaction, and that therefore the plaintiff is entitled to
withdraw at once the proportion of such increase to which he is entitled under
the assignment. With reference to this contention, it is sufficient to say that it
nowhere appears in the case that the increase in D. Mariano Buenaventura's
account-current during the period of liquidation was the result of new advances
to the firm, and the figures would appear to indicate that it resulted from the
accumulation of interest.
Counsel for the plaintiff have discussed at length in their brief the meaning of the
clause in the partnership agreement limiting the liability of the partners to the
amounts respectively brought into the partnership by them, and the effect of this
stipulation upon their rights as creditors of the firm. These are questions which
relate to the final adjustment of the affairs of the firm, the distribution of the
assets remaining after all liabilities have been discharged, or, on the other hand,
the apportionment of the losses if the assets should not be sufficient to meet the
liabilities. They are in no way involved in the determination of the present case.
The plaintiff having acquired no rights under the assignment which are now
enforceable against the defendant, this action can not be maintained. The
liquidator of the defendant having been notified of the assignment, the plaintiff
will be entitled to receive from the assets of the partnership, if any remain, at the
termination of the liquidation, 25 per cent of D. Vicente's resulting interest, both
as partner and creditor. The judgment in this case should not affect the plaintiff's
right to bring another action against the partnership when the affairs of the same
are finally wound up. The proper judgment will be that the action be dismissed.
The judgment of the court below is reversed and the case is remanded to that
court with directions to enter a judgment of dismissal. So ordered.
14. DAN FUE LEUNG, petitioner, vs.HON. INTERMEDIATE APPELLATE COURT and
LEUNG YIU, respondents.
The petitioner asks for the reversal of the decision of the then Intermediate
Appellate Court in AC-G.R. No. CV-00881 which affirmed the decision of the then
Court of First Instance of Manila, Branch II in Civil Case No. 116725 declaring
private respondent Leung Yiu a partner of petitioner Dan Fue Leung in the
business of Sun Wah Panciteria and ordering the petitioner to pay to the private
respondent his share in the annual profits of the said restaurant.
This case originated from a complaint filed by respondent Leung Yiu with the
then Court of First Instance of Manila, Branch II to recover the sum equivalent to
twenty-two percent (22%) of the annual profits derived from the operation of
Sun Wah Panciteria since October, 1955 from petitioner Dan Fue Leung.
The Sun Wah Panciteria, a restaurant, located at Florentino Torres Street, Sta.
Cruz, Manila, was established sometime in October, 1955. It was registered as a
single proprietorship and its licenses and permits were issued to and in favor of
petitioner Dan Fue Leung as the sole proprietor. Respondent Leung Yiu adduced
evidence during the trial of the case to show that Sun Wah Panciteria was
actually a partnership and that he was one of the partners having contributed
P4,000.00 to its initial establishment.
The private respondents evidence is summarized as follows:
About the time the Sun Wah Panciteria started to become operational, the
private respondent gave P4,000.00 as his contribution to the partnership. This is
evidenced by a receipt identified as Exhibit "A" wherein the petitioner
acknowledged his acceptance of the P4,000.00 by affixing his signature thereto.
The receipt was written in Chinese characters so that the trial court
commissioned an interpreter in the person of Ms. Florence Yap to translate its
contents into English. Florence Yap issued a certification and testified that the
translation to the best of her knowledge and belief was correct. The private
respondent identified the signature on the receipt as that of the petitioner
(Exhibit A-3) because it was affixed by the latter in his (private respondents')
presence. Witnesses So Sia and Antonio Ah Heng corroborated the private
respondents testimony to the effect that they were both present when the
receipt (Exhibit "A") was signed by the petitioner. So Sia further testified that he
himself received from the petitioner a similar receipt (Exhibit D) evidencing
delivery of his own investment in another amount of P4,000.00 An examination
was conducted by the PC Crime Laboratory on orders of the trial court granting
the private respondents motion for examination of certain documentary exhibits.
The signatures in Exhibits "A" and 'D' when compared to the signature of the
petitioner appearing in the pay envelopes of employees of the restaurant,
namely Ah Heng and Maria Wong (Exhibits H, H-1 to H-24) showed that the
signatures in the two receipts were indeed the signatures of the petitioner.
Furthermore, the private respondent received from the petitioner the amount of
P12,000.00 covered by the latter's Equitable Banking Corporation Check No.
13389470-B from the profits of the operation of the restaurant for the year 1974.
Witness Teodulo Diaz, Chief of the Savings Department of the China Banking
Corporation testified that said check (Exhibit B) was deposited by and duly
credited to the private respondents savings account with the bank after it was
cleared by the drawee bank, the Equitable Banking Corporation. Another witness
Elvira Rana of the Equitable Banking Corporation testified that the check in
question was in fact and in truth drawn by the petitioner and debited against his
own account in said bank. This fact was clearly shown and indicated in the
petitioner's statement of account after the check (Exhibit B) was duly cleared.
Rana further testified that upon clearance of the check and pursuant to normal
banking procedure, said check was returned to the petitioner as the maker
thereof.
The petitioner denied having received from the private respondent the amount
of P4,000.00. He contested and impugned the genuineness of the receipt (Exhibit
D). His evidence is summarized as follows:
The petitioner did not receive any contribution at the time he started the Sun
Wah Panciteria. He used his savings from his salaries as an employee at Camp
Stotsenberg in Clark Field and later as waiter at the Toho Restaurant amounting
to a little more than P2,000.00 as capital in establishing Sun Wah Panciteria. To
bolster his contention that he was the sole owner of the restaurant, the
petitioner presented various government licenses and permits showing the Sun
Wah Panciteria was and still is a single proprietorship solely owned and operated
by himself alone. Fue Leung also flatly denied having issued to the private
respondent the receipt (Exhibit G) and the Equitable Banking Corporation's Check
No. 13389470 B in the amount of P12,000.00 (Exhibit B).
As between the conflicting evidence of the parties, the trial court gave credence
to that of the plaintiffs. Hence, the court ruled in favor of the private respondent.
The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against
the defendant, ordering the latter to deliver and pay to the former, the sum
equivalent to 22% of the annual profit derived from the operation of Sun Wah
Panciteria from October, 1955, until fully paid, and attorney's fees in the amount
of P5,000.00 and cost of suit. (p. 125, Rollo)
The private respondent filed a verified motion for reconsideration in the nature
of a motion for new trial and, as supplement to the said motion, he requested
that the decision rendered should include the net profit of the Sun Wah
Panciteria which was not specified in the decision, and allow private respondent
to adduce evidence so that the said decision will be comprehensively adequate
and thus put an end to further litigation.
The motion was granted over the objections of the petitioner. After hearing the
trial court rendered an amended decision, the dispositive portion of which reads:
FOR ALL THE FOREGOING CONSIDERATIONS, the motion for reconsideration filed
by the plaintiff, which was granted earlier by the Court, is hereby reiterated and
the decision rendered by this Court on September 30, 1980, is hereby amended.
The dispositive portion of said decision should read now as follows:
WHEREFORE, judgment is hereby rendered, ordering the plaintiff (sic) and
against the defendant, ordering the latter to pay the former the sum equivalent
to 22% of the net profit of P8,000.00 per day from the time of judicial demand,
until fully paid, plus the sum of P5,000.00 as and for attorney's fees and costs of
suit. (p. 150, Rollo)
The petitioner appealed the trial court's amended decision to the then
Intermediate Appellate Court. The questioned decision was further modified by
the appellate court. The dispositive portion of the appellate court's decision
reads:
WHEREFORE, the decision appealed from is modified, the dispositive portion
thereof reading as follows:
1. Ordering the defendant to pay the plaintiff by way of temperate damages 22%
of the net profit of P2,000.00 a day from judicial demand to May 15, 1971;
2. Similarly, the sum equivalent to 22% of the net profit of P8,000.00 a day from
May 16, 1971 to August 30, 1975;
3. And thereafter until fully paid the sum equivalent to 22% of the net profit of
P8,000.00 a day.
Except as modified, the decision of the court a quo is affirmed in all other
respects. (p. 102, Rollo)
Later, the appellate court, in a resolution, modified its decision and affirmed the
lower court's decision. The dispositive portion of the resolution reads:
WHEREFORE, the dispositive portion of the amended judgment of the court a
quo reading as follows:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the
defendant, ordering the latter to pay to the former the sum equivalent to 22% of
the net profit of P8,000.00 per day from the time of judicial demand, until fully
paid, plus the sum of P5,000.00 as and for attorney's fees and costs of suit.
is hereby retained in full and affirmed in toto it being understood that the date of
judicial demand is July 13, 1978. (pp. 105-106, Rollo).
In the same resolution, the motion for reconsideration filed by petitioner was
denied.
Both the trial court and the appellate court found that the private respondent is
a partner of the petitioner in the setting up and operations of the panciteria.
While the dispositive portions merely ordered the payment of the respondents
share, there is no question from the factual findings that the respondent invested
in the business as a partner. Hence, the two courts declared that the private
petitioner is entitled to a share of the annual profits of the restaurant. The
petitioner, however, claims that this factual finding is erroneous. Thus, the
petitioner argues: "The complaint avers that private respondent extended
'financial assistance' to herein petitioner at the time of the establishment of the
Sun Wah Panciteria, in return of which private respondent allegedly will receive a
share in the profits of the restaurant. The same complaint did not claim that
private respondent is a partner of the business. It was, therefore, a serious error
for the lower court and the Hon. Intermediate Appellate Court to grant a relief
not called for by the complaint. It was also error for the Hon. Intermediate
Appellate Court to interpret or construe 'financial assistance' to mean the
contribution of capital by a partner to a partnership;" (p. 75, Rollo)
The pertinent portions of the complaint state:
2. That on or about the latter (sic) of September, 1955, defendant sought the
financial assistance of plaintiff in operating the defendant's eatery known as Sun
Wah Panciteria, located in the given address of defendant; as a return for such
financial assistance. plaintiff would be entitled to twenty-two percentum (22%)
of the annual profit derived from the operation of the said panciteria;
3. That on October 1, 1955, plaintiff delivered to the defendant the sum of four
thousand pesos (P4,000.00), Philippine Currency, of which copy for the receipt of
such amount, duly acknowledged by the defendant is attached hereto as Annex
"A", and form an integral part hereof; (p. 11, Rollo)
In essence, the private respondent alleged that when Sun Wah Panciteria was
established, he gave P4,000.00 to the petitioner with the understanding that he
would be entitled to twenty-two percent (22%) of the annual profit derived from
the operation of the said panciteria. These allegations, which were proved, make
the private respondent and the petitioner partners in the establishment of Sun
Wah Panciteria because Article 1767 of the Civil Code provides that "By the
contract of partnership two or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of dividing the
profits among themselves".
Therefore, the lower courts did not err in construing the complaint as one
wherein the private respondent asserted his rights as partner of the petitioner in
the establishment of the Sun Wah Panciteria, notwithstanding the use of the
term financial assistance therein. We agree with the appellate court's
observation to the effect that "... given its ordinary meaning, financial assistance
is the giving out of money to another without the expectation of any returns
therefrom'. It connotes an ex gratia dole out in favor of someone driven into a
state of destitution. But this circumstance under which the P4,000.00 was given
to the petitioner does not obtain in this case.' (p. 99, Rollo) The complaint
explicitly stated that "as a return for such financial assistance, plaintiff (private
respondent) would be entitled to twenty-two percentum (22%) of the annual
profit derived from the operation of the said panciteria.' (p. 107, Rollo) The well-
settled doctrine is that the '"... nature of the action filed in court is determined
by the facts alleged in the complaint as constituting the cause of action." (De
Tavera v. Philippine Tuberculosis Society, Inc., 113 SCRA 243; Alger Electric, Inc. v.
Court of Appeals, 135 SCRA 37).
The appellate court did not err in declaring that the main issue in the instant case
was whether or not the private respondent is a partner of the petitioner in the
establishment of Sun Wah Panciteria.
The petitioner also contends that the respondent court gravely erred in giving
probative value to the PC Crime Laboratory Report (Exhibit "J") on the ground
that the alleged standards or specimens used by the PC Crime Laboratory in
arriving at the conclusion were never testified to by any witness nor has any
witness identified the handwriting in the standards or specimens belonging to
the petitioner. The supposed standards or specimens of handwriting were
marked as Exhibits "H" "H-1" to "H-24" and admitted as evidence for the private
respondent over the vigorous objection of the petitioner's counsel.
The records show that the PC Crime Laboratory upon orders of the lower court
examined the signatures in the two receipts issued separately by the petitioner
to the private respondent and So Sia (Exhibits "A" and "D") and compared the
signatures on them with the signatures of the petitioner on the various pay
envelopes (Exhibits "H", "H-1" to 'H-24") of Antonio Ah Heng and Maria Wong,
employees of the restaurant. After the usual examination conducted on the
questioned documents, the PC Crime Laboratory submitted its findings (Exhibit J)
attesting that the signatures appearing in both receipts (Exhibits "A" and "D")
were the signatures of the petitioner.
The private respondent is a partner of the petitioner in Sun Wah Panciteria. The
requisites of a partnership which are 1) two or more persons bind themselves
to contribute money, property, or industry to a common fund; and 2) intention
on the part of the partners to divide the profits among themselves (Article 1767,
Civil Code; Yulo v. Yang Chiao Cheng, 106 Phil. 110)-have been established. As
stated by the respondent, a partner shares not only in profits but also in the
losses of the firm. If excellent relations exist among the partners at the start of
business and all the partners are more interested in seeing the firm grow rather
than get immediate returns, a deferment of sharing in the profits is perfectly
plausible. It would be incorrect to state that if a partner does not assert his rights
anytime within ten years from the start of operations, such rights are
irretrievably lost. The private respondent's cause of action is premised upon the
failure of the petitioner to give him the agreed profits in the operation of Sun
Wah Panciteria. In effect the private respondent was asking for an accounting of
his interests in the partnership.
Q Now, after 11:30 (P.M.) which is the closing time as you said, what do
you do with the money?
A We balance it with the manager, Mr. Dan Fue Leung.
ATTY. HIPOLITO:
I see.
Q So, in other words, after your job, you huddle or confer together?
A Yes, count it all. I total it. We sum it up.
Q Now, Mrs. Witness, in an average day, more or less, will you please tell
us, how much is the gross income of the restaurant?

The records also show that when the pay envelopes (Exhibits "H", "H-1" to "H-
24") were presented by the private respondent for marking as exhibits, the
petitioner did not interpose any objection. Neither did the petitioner file an
opposition to the motion of the private respondent to have these exhibits
together with the two receipts examined by the PC Crime Laboratory despite due
notice to him. Likewise, no explanation has been offered for his silence nor was
any hint of objection registered for that purpose.
Under these circumstances, we find no reason why Exhibit "J" should be rejected
or ignored. The records sufficiently establish that there was a partnership.
The petitioner raises the issue of prescription. He argues: The Hon. Respondent
Intermediate Appellate Court gravely erred in not resolving the issue of
prescription in favor of petitioner. The alleged receipt is dated October 1, 1955
and the complaint was filed only on July 13, 1978 or after the lapse of twenty-
two (22) years, nine (9) months and twelve (12) days. From October 1, 1955 to
July 13, 1978, no written demands were ever made by private respondent.
The petitioner's argument is based on Article 1144 of the Civil Code which
provides:
Art. 1144. The following actions must be brought within ten years from the time
the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
in relation to Article 1155 thereof which provides:
Art. 1155. The prescription of actions is interrupted when they are filed before
the court, when there is a written extra-judicial demand by the creditor, and
when there is any written acknowledgment of the debt by the debtor.'
The argument is not well-taken.
It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155 A For regular days, I received around P7,000.00 a day during my shift alone and
which is applicable. Article 1842 states: during pay days I receive more than P10,000.00. That is excluding the catering
outside the place.
The right to an account of his interest shall accrue to any partner, or his legal
representative as against the winding up partners or the surviving partners or the Q What about the catering service, will you please tell the Honorable Court how
person or partnership continuing the business, at the date of dissolution, in the many times a week were there catering services?
absence or any agreement to the contrary.
A Sometimes three times a month; sometimes two times a month or more.
Regarding the prescriptive period within which the private respondent may
demand an accounting, Articles 1806, 1807, and 1809 show that the right to Q Now more or less, do you know the cost of the catering service?
demand an accounting exists as long as the partnership exists. Prescription
begins to run only upon the dissolution of the partnership when the final A Yes, because I am the one who receives the payment also of the catering.
accounting is done.
Q How much is that?
Finally, the petitioner assails the appellate court's monetary awards in favor of
the private respondent for being excessive and unconscionable and above the A That ranges from two thousand to six thousand pesos, sir.
claim of private respondent as embodied in his complaint and testimonial
evidence presented by said private respondent to support his claim in the Q Per service?
complaint.
A Per service, Per catering.
Apart from his own testimony and allegations, the private respondent presented
the cashier of Sun Wah Panciteria, a certain Mrs. Sarah L. Licup, to testify on the Q So in other words, Mrs. witness, for your shift alone in a single day
income of the restaurant. from 3:30 P.M. to 11:30 P.M. in the evening the restaurant grosses an income of
P7,000.00 in a regular day?
Mrs. Licup stated:
A Yes.
ATTY. HIPOLITO (direct examination to Mrs. Licup).
Q And ten thousand pesos during pay day.?
Q Mrs. Witness, you stated that among your duties was that you were in charge
of the custody of the cashier's box, of the money, being the cashier, is that A Yes.
correct?
(TSN, pp. 53 to 59, inclusive, November 15,1978)
A Yes, sir.
COURT:
Q So that every time there is a customer who pays, you were the one
who accepted the money and you gave the change, if any, is that correct? Any cross?
A Yes. ATTY. UY (counsel for defendant):
No cross-examination, Your Honor. (T.S.N. p. 65, November 15, 1978). (Rollo, pp.
127-128)
The statements of the cashier were not rebutted. Not only did the petitioner's
counsel waive the cross-examination on the matter of income but he failed to
comply with his promise to produce pertinent records. When a subpoena duces
tecum was issued to the petitioner for the production of their records of sale, his
counsel voluntarily offered to bring them to court. He asked for sufficient time
prompting the court to cancel all hearings for January, 1981 and reset them to
the later part of the following month. The petitioner's counsel never produced
any books, prompting the trial court to state:
Counsel for the defendant admitted that the sales of Sun Wah were registered or
recorded in the daily sales book. ledgers, journals and for this purpose, employed
a bookkeeper. This inspired the Court to ask counsel for the defendant to bring
said records and counsel for the defendant promised to bring those that were
available. Seemingly, that was the reason why this case dragged for quite
sometime. To bemuddle the issue, defendant instead of presenting the books
where the same, etc. were recorded, presented witnesses who claimed to have
supplied chicken, meat, shrimps, egg and other poultry products which, however,
did not show the gross sales nor does it prove that the same is the best evidence.
This Court gave warning to the defendant's counsel that if he failed to produce
the books, the same will be considered a waiver on the part of the defendant to
produce the said books inimitably showing decisive records on the income of the
eatery pursuant to the Rules of Court (Sec. 5(e) Rule 131). "Evidence willfully
suppressed would be adverse if produced." (Rollo, p. 145)
The records show that the trial court went out of its way to accord due process to
the petitioner.
The defendant was given all the chance to present all conceivable witnesses,
after the plaintiff has rested his case on February 25, 1981, however, after
presenting several witnesses, counsel for defendant promised that he will
present the defendant as his last witness. Notably there were several
postponement asked by counsel for the defendant and the last one was on
October 1, 1981 when he asked that this case be postponed for 45 days because
said defendant was then in Hongkong and he (defendant) will be back after said
period. The Court acting with great concern and understanding reset the hearing
to November 17, 1981. On said date, the counsel for the defendant who again
failed to present the defendant asked for another postponement, this time to
November 24, 1981 in order to give said defendant another judicial magnanimity
and substantial due process. It was however a condition in the order granting the
postponement to said date that if the defendant cannot be presented, counsel is
deemed to have waived the presentation of said witness and will submit his case
for decision.
On November 24, 1981, there being a typhoon prevailing in Manila said date was
declared a partial non-working holiday, so much so, the hearing was reset to
December 7 and 22, 1981. On December 7, 1981, on motion of defendant's
counsel, the same was again reset to December 22, 1981 as previously scheduled
which hearing was understood as intransferable in character. Again on December
22, 1981, the defendant's counsel asked for postponement on the ground that
the defendant was sick. the Court, after much tolerance and judicial
magnanimity, denied said motion and ordered that the case be submitted for
resolution based on the evidence on record and gave the parties 30 days from
December 23, 1981, within which to file their simultaneous memoranda. (Rollo,
pp. 148-150)
The restaurant is located at No. 747 Florentino Torres, Sta. Cruz, Manila in front
of the Republic Supermarket. It is near the corner of Claro M. Recto Street.
According to the trial court, it is in the heart of Chinatown where people who buy
and sell jewelries, businessmen, brokers, manager, bank employees, and people
from all walks of life converge and patronize Sun Wah.
There is more than substantial evidence to support the factual findings of the
trial court and the appellate court. If the respondent court awarded damages
only from judicial demand in 1978 and not from the opening of the restaurant in
1955, it is because of the petitioner's contentions that all profits were being
plowed back into the expansion of the business. There is no basis in the records
to sustain the petitioners contention that the damages awarded are excessive.
Even if the Court is minded to modify the factual findings of both the trial court
and the appellate court, it cannot refer to any portion of the records for such
modification. There is no basis in the records for this Court to change or set aside
the factual findings of the trial court and the appellate court. The petitioner was
given every opportunity to refute or rebut the respondent's submissions but,
after promising to do so, it deliberately failed to present its books and other
evidence.
The resolution of the Intermediate Appellate Court ordering the payment of the
petitioner's obligation shows that the same continues until fully paid. The
question now arises as to whether or not the payment of a share of profits shall
continue into the future with no fixed ending date.
Considering the facts of this case, the Court may decree a dissolution of the
partnership under Article 1831 of the Civil Code which, in part, provides:
Art. 1831. On application by or for a partner the court shall decree a dissolution
whenever:
(3) A partner has been guilty of such conduct as tends to affect prejudicially the
carrying on of the business;
(4) A partner willfully or persistently commits a breach of the partnership
agreement, or otherwise so conducts himself in matters relating to the
partnership business that it is not reasonably practicable to carry on the business
in partnership with him;
(6) Other circumstances render a dissolution equitable.
There shall be a liquidation and winding up of partnership affairs, return of
capital, and other incidents of dissolution because the continuation of the
partnership has become inequitable.
WHEREFORE, the petition for review is hereby DISMISSED for lack of merit. The
decision of the respondent court is AFFIRMED with a MODIFICATION that as
indicated above, the partnership of the parties is ordered dissolved.
SO ORDERED.
15. SERGIO V. SISON, plaintiff-appellant, vs.HELEN J. MCQUAID, defendant-
appellee
On March 28, 1951, plaintiff brought an action in the Court of First Instance of
Manila against defendant, alleging that during the year 1938 the latter borrowed
from him various sums of money, aggregating P2,210, to enable her to pay her
obligation to the Bureau of Forestry and to add to her capital in her lumber
business, receipt of the amounts advanced being acknowledged in a document,
Exhibit A, executed by her on November 10, 1938 and attached to the complaint;
that as defendant was not able to pay the loan in 1938, as she had promised, she
proposed to take in plaintiff as a partner in her lumber business, plaintiff to
contribute to the partnership the said sum of P2,210 due him from defendant in
addition to his personal services; that plaintiff agreed to defendant's proposal
and, as a result, there was formed between them, under the provisions of the
Civil Code, a partnership in which they were to share alike in the income or
profits of the business, each to get one-half thereof; that in accordance with said
contract, plaintiff, together with defendant, rendered services to the partnership
without compensation from June 15, 1938 to December, 1941; that before the
last World War, the partnership sold to the United States Army 230,000 board
feet of lumber for P13,800, for the collection of which sum defendant, as
manager of the partnership, filed the corresponding claim with the said army
after the war; that the claim was "finally" approved and the full amount paid
the complaint does not say when but defendant has persistently refused to
deliver one-half of it, or P6,900, to plaintiff notwithstanding repeated demands,
investing the whole sum of P13,800 for her own benefit. Plaintiff, therefore, prays
for judgment declaring the existence of the alleged partnership and requiring the
defendant to pay him the said sum of P6,900, in addition to damages and costs.
Notified of the action, defendant filed a motion to dismiss on the grounds that
plaintiff's action had already prescribed, that plaintiff's claim was not provable
under the Statute of Frauds, and that the complaint stated no cause of action.
Sustaining the first ground, the court dismissed the case, whereupon, plaintiff
appealed to the Court of Appeals; but that court has certified the case here on
the ground that the appeal involved only questions of law.
It is not clear from the allegations of the complaint just when plaintiff's cause of
action accrued. Consequently, it cannot be determined with certainty whether
that action has already prescribed or not. Such being the case, the defense of
prescription can not be sustained on a mere motion to dismiss based on what
appears on the face of the complaint.
But though the reason given for the order of dismissal be untenable, we find that
the said order should be upheld on the ground that the complaint states no
cause of action, which is also one of the grounds on which defendant's motion to
dismiss was based. Plaintiff seeks to recover from defendant one-half of the
purchase price of lumber sold by the partnership to the United States Army. But
his complaint does not show why he should be entitled to the sum he claims. It
does not allege that there has been a liquidation of the partnership business and
the said sum has been found to be due him as his share of the profits. The
proceeds from the sale of a certain amount of lumber cannot be considered
profits until costs and expenses have been deducted. Moreover, the profits of the
business cannot be determined by taking into account the result of one
particular transaction instead of all the transactions had. Hence, the need for a
general liquidation before a member of a partnership may claim a specific sum as
his share of the profits.
In view of the foregoing, the order of dismissal is affirmed, but on the ground
that the complaint states no cause of action and without prejudice to the filing of
an action for accounting or liquidation should that be what plaintiff really wants.
Without costs in this instance.1awphil.net
16. JOSE ORNUM and EMERENCIANA ORNUM, petitioners, vs.MARIANO,
LASALA, et al., respondent.
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:
Ganancia total desde el ultimo balance hasta la fecha P575.45
Participacion del capital de los hermanos Lasala en la ganancia P55.39
Participacion del capital de Jose Ornum en el ganancia 125.79
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 Pursuant to the request contained in this letter, the petitioners remitted and paid
cada socio: to the respondents the total amount corresponding to them under the above-
quoted statement of accounts which, however, was not signed by the latter.
Capital de los hermanos Lasala segun el ultimo balance P4,393.08 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
Ganancia de este capital 55.39 First Instance of Manila held that the last and final statement of accounts
prepared by the petitioners was tacitly approved and accepted by the
P4,448.47 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
Pero se debe deducir la cantidad tomada por los hermanos Lasala 1,730.00 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
Cantidad nota que debe corresponder a los hermanos Lasala P2,718.47 accounts remains unsigned by the respondents, the same stands disapproved.
The decision appealed by the petitioners thus said:
Capital de Jose Ornum segun el ultimo balance P9,975.13
To support a plea of a stated account so as to conclude the parties in relation to
Ganancia de este capital 125.79 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
Participacion de Jose Ornum como socio industrial 143.86 were partial settlements, while the last, although intended to be final, has not
been signed.
P10,244.65
We hold that the last and final statement of accounts hereinabove quoted, had
Pero se debe deducir la cantidad tomada por Jose Ornum 1,650.00 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
Cantidad neta que debe corresponder a Jose Ornum P8,594.65 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
Capital de Emerenciana Ornum segun el ultimo balance P8,448.00 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
Ganancia de este capital 106.54 accounts was virtually confirmed and its signing thereby became a mere
formality to be complied with by the respondents exclusively. Their refusal to
Participacion de Emerenciana Ornum como socia industrial 143.86 sign, after receiving their shares, amounted to a waiver to that formality in favor
of the petitioners who has already performed their obligation.
P8,698.40
This approval precludes any right on the part of the respondents to a further
Pero se debe deducir la cantidad tomada por Emerenciana Ornum 1,850.00 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.
Cantidad neta que debe corresponder a Emerenciana Ornum P6,848.40 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:
After the receipt of the foregoing statement of accounts, Father Mariano Lasala,
spokesman for the respondents, wrote the following letter to the petitioners on
The question, then is, have mistakes, been committed in the statements sent
July 19, 1932:
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
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 their counterclaims they said:
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 "(a) Que recientemente se ha hecho una acabada revision de las cuentas y libros
podemos evitarlo. Por esto volvemos a rogarles que por cualquier medio antes del negocio, y, se ha descubierto que los demandados cometieron un error al
de terminar este mes de julio, 1932, nosotros esperamos vuestra consideracion. hacer las entregas de las varias cantidades en efectivo a los demandantes,
Gracias. entregando en total mayor cantidades a la que tenian derecho estos por su
participacion y ganancias en dicho negocio;
En cuanto hayamos recibido esto, entonces firmaremos el balance que habeis
hecho alli, cuya copia has dejado aqui. "(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
Recuerdos a todos alli y mandar. 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.
17. ANTONIO M. PABALAN, plaintiff-appellant, vs.FELICIANO VELEZ, defendant-
appellee.
This case was appealed by counsel for the plaintiff, from the judgment rendered
by the Honorable Judge A. S. Crossfield.
On January 20, 1908, counsel for the plaintiff filed a written complaint against
the defendant, the administrator of the intestate estate of Walter A. Fitton, now
deceased. The said administrator was appointed by an order issued on December
21, 1907, by the aforementioned judge in case No. 5103, heard in the Court of
First Instance of this city.
The complaint alleged: That until June 27, 1900, the plaintiff, Antonio M. Pabalan,
was the owner in fee simple of a rural estate consisting of an hacienda known by
the name of "Pantayani," which was devoted to agricultural purposes, situated
on the roads leading from Mariquina to Antipolo, within the pueblos of Cainta
and Antipolo, Province of Rizal, and which covered an area of 1,978,822 square
meters; also a parcel of land consisting of a building lot situated on Calle Real, of
Cainta, measuring 371.30 square meters, the metes and bounds of which were
specified in the complaint; that, on the said date of June 27, 1900, the plaintiff,
desiring to make use of the two properties described, and lacking the required
means for the purpose, entered into an agreement with the said Walter A. Fitton
whereby they formed a regular mercantile partnership for the development of
the said properties and for the manufacture and sale of their products and other
business pertinent thereto; that the sum of 9,000 pesos Mexican currency was
fixed as the amount of the capital stock of the partnership, of which 3,000 pesos,
in cash, were to be contributed by the plaintiff and 6,000 pesos, in real property,
by the said Fitton; that, for the purpose of obtaining the said 3,000 pesos, the
plaintiff sold his two aforementioned real properties to the said Walter A. Fitton,
the rural estate, shown in Exhibit A, for 5,900 pesos, and the urban property,
described in Exhibit B, for 100 pesos; that the plaintiff received from the
purchaser the sum of 3,000 pesos and the latter, Walter A. Fitton, bound himself
to pay into the funds of the said partnership, as the plaintiff's capital, the
remaining 3,000 pesos of the selling price; that it was furthermore agreed that
the two said real properties should constitute the capital of Walter A. Fitton in
the partnership, which would be known by the name of "A. M. Pabalan and
Company" and should be an equivalent for the aforesaid sum of 6,000 pesos;
that all the foregoing facts set forth in the complaint were recorded in the
instrument of sale and organization of the partnership, executed on June 27,
1900, before the notary public Rosado, a copy of which was attached to and
made an integral part of the complaint; that, from June 27, 1900, up to the date
when the partner Fitton died, the latter failed to pay into the partnership funds
the said 3,000 pesos, the remainder of the price of the properties purchased by
him, or any part thereof, and did not pay the said sum or any part of the same to
the plaintiff; that, since Fitton's death, and up to the date of the filing of the
complaint, neither the administrator of the latter's estate nor any other person
had turned into the partnership or paid to the plaintiff the aforesaid 3,000 pesos;
that, owing to the failure of Fitton to comply with his obligation, the properties in
question had been entirely unproductive and losses and damages had been
occasioned to the plaintiff in the sum of 2,000 pesos Philippine currency. The
latter, therefore, prayed for the rescission of the contract entered into, on June
27, 1900, by himself, the plaintiff, and Walter A. Fitton, the dissolution of the
partnership "A. M. Pabalan and Company," and the annulment of the sale of the
said properties, by returning to the defendant a sum in Philippine currency
equivalent to the 3,000 pesos in Mexican currency received from Walter A.
Fitton, and that the defendant be sentenced to pay to the plaintiff, as losses and
damages, the sum of 2,000 pesos, and to the payment of the cost of the suit, in
addition to the other remedies sought.
The instrument attached to the complaint and executed on June 27, 1900, before
the notary public Jose M.a Rosado y Calvo, by Antonio M. Pabalan y Santos, on
the one hand, and Walter A. Fitton, on the other, contains the following clauses:
First. That Don Antonio Maria Pabalan y Santos is the sole and exclusive owner in
fee-simple of the following landed properties, to wit: (a) A rural estate consisting
of an hacienda, known as Pantayaning or Pantaen, devoted to agricultured and
situated on the roads which lead from Mariquina to Antipolo, within the pueblos
of Cainta and Antipolo of the district of Morong, inscribed in the property
registry of this city as of the north district, with an area of 1,978,022 square
meters and bounded on the north by the land of Victor Vargas and the Sucabin
River, by a part of the Tabang River, Mount Magpatong, the sitio of Palenque and
another part of the said Tabang River, as far as the foot of Mount Cay-Alaring,
Mount Sapang, and the road leading to the pueblo of Taytay; on the south by the
summit of Mount Matugalo, the Paglilingohan estero, the old Cainta highway,
and the land of Juan Santa Ana; and one on the west by the lands of Doa
Columba Suarez and Don Mariano Sumulong, the Bilao road, and the lands of
Perfecto Legaspi Miguel Gonzales, Zacarias Gonzales, Juan Adriano, and that of
the aforesaid Juan Santa Ana. And (b) an urban property consisting of a building
lot, with neither street nor district number, situated on Calle Real, pueblo of
Cainta, Morong District, and in the north district division of the property registry
of this city; it is bounded on its front, which faces the south, by the aforesaid
Calle Real; on its right, upon entering, or on the east, by the lot belonging to Don
Alejandro San Diego and his wife Doa Buenaventura Santos; on its left, or the
west, by the lot of Don Pablo Ordoez and his wife Dionisia Salandanan; and on
its rear, or the north, by the lot of Don Florencio San Antonio, his wife and Doa
Severina Santos, and has an area of 361 square meters and 30 square
centimeters. Second. That the properties hereinbefore described belong to the
aforementioned Don Antonio Maria Pabalan y Santos, who purchased the same
from their former owner, the firm of G. Buchanan and Company, of the city of
London, represented by its agent, Herbert Heiden Todd, through a deed, serial
number 852, drawn up in this city and attested before the former notary public
of the same, Don Jose Engracio Monroy y Torres, on the twenty-ninth of
November, 1894, as shown by the notarial instrument containing the description
of the said properties, written by the undersigned notary at the request of their
owner, Sr. Pabalan, on the twelfth of the present month of June, which
certificate, without number, on account of its notarial character, was exhibited to
me by the latter and I certify to the same. Third. That the properties in question
are free of all encumbrance, charge, and liability, and Don Antonio Maria Pabalan
y Santos and Mr. Walter A. Fitton having agreed to sell the same and to form a
regular mercantile partnership for the purpose of their improvement and the
utilization of their products, hereby execute the present instrument, in order that
all its contents may appear in an authenticated form, and solemnly stipulated:
That Don Antonio Maria Pabalan y Santos hereby sells absolutely and finally to
Mr. Walter A. Fitton, the property which, under the letters A and B, is mentioned
and described in the first paragraph of this instrument, together with all the
rights, actions, uses and easements thereto pertaining, for the price of 5,900
pesos, for the property specified under letter A, and the price of 100 pesos, for
that described under letter B, that is, for the total price of 6,000 pesos, of which
the vendor received in the act, in my presence and in that of the witnesses
hereunto, which I, the notary, hereby attest, and from the hands of the vendee,
the sum of 3,000 pesos in coin, counted to his entire satisfaction, for which the
said Walter A. Fitton hereby acknowledges by a binding receipt which secures the
said Antonio M. Pabalan in all his rights and the vendor binds himself to protect
and defend the title to the properties hereby sold and guarantees them in
accordance with law; and the vendee shall retain the remaining 3,000 pesos for
the purpose of bringing them, as the vendor's capital, into the partnership which
is also a subject of this public instrument. Fourth. Walter A. Fitton, in his turn,
covenants: That he accepts this sale in the precise terms in which it is executed
by Antonio Maria Pabalan y Santos. Fifth. That, by virtue of the preinserted
stipulations, both parties to this contract, by this same public instrument, form a
regular mercantile partnership, upon the following bases and conditions: 1. The
company organized through the present public instrument shall operate under
the firm name of "A. M. Pabalan and Company" and shall have its domicile, for all
legal purposes, in this city of Manila. 2. The object and aim of the company is the
cultivation and improvement of the two properties described under letters A and
B of the first paragraph hereof, the manufacture and sale of their products, and
the conduct of all other business connected with, incidental or pertinent to the
said lands. 3. The management, direction and administration of the company
shall be in charge of the two partners who shall both be entitled to use the firm
name, it being thereof understood that they are authorized to carry on, jointly or
severally, all kinds of operations comprised within the purpose of this
partnership, with the sole limitation that neither of them may make the company
a surety or borrow money for the same, without its being necessary, with respect
to this latter prohibition, for Mr. Pabalan to state that it does not suit him to
increase his capital to an amount equal to that invested by Mr. Fitton. Both
partners are likewise authorized, for the purposes of management, to appoint
general or social attorneys-in-fact to represent the company, as well as attorneys
to demand and collect such credits and bring such suits before the courts as be
proper. 4. The management of agricultural matters pertaining to the rural and the
urban property described in the first paragraph of this instrument, shall be solely
and exclusively in charge of the partner Antonio Maria Pabalan or the person by
him designated for this purpose. 5. The capital stock is composed of the total
sum of 9,000 pesos contributed by the partners in the following proportion and
from: Antonio Maria Pabalan, 3,000 pesos in cash, which shall be paid into the
partnership fund by Walter A. Fitton, who, for this purpose, has retained them in
his possession upon his paying the amount of the sale herein set forth; Walter A.
Fitton, 6,000 pesos, represented by the two properties described under letters A
and B in the first paragraph herein, and in which the said lands are by common
accord appraised. 6. The partners may not engage, in the Province of Morong, in
the same kinds of business engaged in by this company, but they mutually
authorize each other personally to carry on and conduct any such business at any
other place outside of the said province. 7. Any and all rural or city properties
which Mr. Pabalan may acquire to the west of the hacienda hereinabove
described under letter A, shall necessarily form a part of the hacienda itself. 8.
The term of the existence of this partnership shall be twenty-five years, which
shall begin to run from this date and may be extended at the will of the
contracting parties. 9. In order that a regular and orderly course be pursued in
the management of the company, and the losses and profits of the latter
ascertained, an annual balance of accounts shall be struck in the month of June
of each year, in addition to such other balances as the partners may, by mutual
accord, determine. 10. If, during the term of this contract, either of the partners
should die, the company shall not, on such account, be considered as dissolved,
but shall be continued by the surviving partner and the heirs of the deceased
partner, unless it should suit the former to be separated from the latter, in which
case he shall deliver to such heirs the part of the capital that belonged to the
deceased, together with all the latter's vested rights. 11. The profits obtained and
losses suffered by the company shall be shared by the partners in proportion to
the capital invested by each respectively. 12. The partners may, by agreement,
change the company hereby organized into a joint stock company, in which case
they shall observe and comply with the formalities provided and prescribed by
the existing Code of Commerce in respect to companies of this kind. 13. All
questions, controversies, doubts or differences which may arise between the
partners, by reason of this company or from any acts performed by them on
account of the same, shall be determined by the decision of friendly arbitrators
appointed one by each party, such appointees so designated to choose a third
arbitrator in case of disagreement.
The demurrer interposed to the complaint having been overruled by an order of
April 1, 1908, and exception thereto taken by the defendant, the latter, on the
11th of the same month, filed a written answer wherein he set forth that he
admitted the allegations contained in paragraphs 1, 2, and 4 of the complaint and
denied, generally and specifically, each and all of those contained in paragraphs
3, 5, 6, 7, 8, and 9.
As a special defense the defendant alleged that the action prosecuted by the
plaintiff had prescribed; that the fact that the properties of the company known
as "A. M. Pabalan and Company" had been unproductive was exclusively due to
the great negligence of the plaintiff, since he had had more than sufficient time,
from June 27, 1900, to the date of the death of Fitton, to have demanded from
his copartner the sum offered by the latter and which he was to contribute to the
common assets, and that, notwithstanding all the time that had elapsed since
the execution of the articles of partnership, up to the date of the presentation of
the complaint the plaintiff had never required his copartner to turn into the
partnership funds the capital pledged.
The defendant, in his cross-complaint and counterclaim, set forth: That,
according to the said articles of partnership, the plaintiff had the management of
agricultural matters pertaining to the properties, rural and urban, described
therein, and, consequently, was alone responsible for the successful
management of the company; that, also, according to the articles of partnership,
either of the two partners had charge of the management, direction, and
administration of the company; that, some months after the execution of the
said instrument of partnership, Walter A. Fitton was obliged, for reasons of
health, to go abroad, where he resided until his death, and during his absence
from this city the plaintiff, Antonio M. Pabalan, with notable negligence and
abandonment of the interests of the company, failed to attend to the
administration of its affairs and did not employ on his part any means to maintain
in a productive condition the two properties brought into the partnership by the
partner Fitton, and that, through the negligence, abandonment, and carelessness
of the plaintiff Pabalan, the defendant suffered losses and damages in the sum of
P3,000 Philippine currency; the latter, therefore, prayed that the complaint be
dismissed and that, by reason of his cross-complaint and counterclaim, an award
be made in his behalf, and against the plaintiff, for losses and damages, in the
sum of P3,000 Philippine currency, with the costs.
By a written motion of March 19, 1909, Antonio Vasquez represented: That,
owing to the death of the plaintiff, the hearing of the case had to be suspended
until, on the 4th of March, as aforesaid, letters of administration were issued in
his behalf, relative to the estate of the plaintiff Pabalan; and he therefore prayed
that he be admitted as a party in the capacity of administrator of the estate of
the deceased Antonio M. Pabalan.
The case having come to trial on April 29, 1909, with the introduction of oral
evidence by counsel for the plaintiff, the court, on July 9 of the same year,
pronounced judgment and found that the defendant had not proved any of the
damages alleged in his answer, and was not entitled to any recovery therefore,
nor the plaintiff for the taxes that he had paid. The court ordered a dissolution of
the partnership formed between the plaintiff and the deceased Walter A. Fitton
and a recission of the sale and contract of partnership executed between them
on July 27, 1900, and further ordered that the defendant, as the administrator of
the estate of the said deceased Walter A. Fitton, deliver to the plaintiff, upon the
latter's paying to the defendant, out of the property which belonged to the
aforesaid deceased, the sum of P3,000 Mexican currency, equivalent to P2,700
Philippine currency, the following real properties:
A. A rural estate consisting of an hacienda, known as Pantayani or Pantaen,
devoted to agriculture and situated on the roads from Mariquina to Antipolo,
within the pueblos of Cainta and Antipolo of the old district of Morong, now
Province of Rizal, having an area of 1,978,822 square meters, bounded on the
north by the land of Victor Vargas and the Sucabin River; on the east by a part of
the said Sucabin River, a part of the Tabang River, Mount Nagtapong, the sitio of
Palenque, and by another part of the Tabang River toward the base of Mount
Cay-Alaring, Mount Sapang, and the road leading to the pueblo of Taytay; on the
south by the summit of Mount Matugalo, the Paglilingohan estero, the old Cainta
highway, and the land of Juan Santa Ana; and on the east by the lands of
Columba Suarez and Mariano Sumulong, the Bulao Road, the lands of Perfecto
Legaspi, Miguel Gonzales, Zacarias Gonzales, Juan Adriano, and of the
aforementioned Juan Santa Ana.
B. An urban property consisting of a building lot, without either street or district
number, situated on Calle Real in Cainta, a municipality of the Province of Rizal;
bounded on its front, which faces the south, by the aforesaid Calle Real; on its
right, upon entering, or on the east, by the lot belonging to Alejandro San Diego
and his wife Buenaventura Santos; on its left, or the west, by the lot of Pablo
Ordoez and his wife Dionisia Salandanan; and on its rear, or the north, by the lot
of Florencio San Antonio and his wife Severina Santos, with an area of 361 square
meters and 30 square centimeters.
This litigation concerns the dissolution of a regular mercantile partnership and
the rescission of the sale of certain real properties, the contracts with respect to
which were entered into between Antonio M. Pabalan y Santos, on one hand,
and Walter A. Fitton, on the other, according to a notarial instrument executed
by the contracting parties on July 27, 1900.
The plaintiff's claim is founded on the alleged fact that the said Walter A. Fitton
failed to comply with his obligations as stipulated in the said double contract,
inasmuch as he did not pay into the funds of the company entitled "A. M.
Pabalan and Company," as the capital of the partner Pabalan, the sum of P3,000,
or the remainder of P6,000, the price of the properties which he had purchased
from the plaintiff, did not pay to the latter the said amount, nor any part thereof,
nor was such payment made, after the said Fitton's death, by the administrator
of the latter's estate.
Article 1506 of the Civil Code prescribes:
The sale shall be rescinded for the same causes as all other obligations, etc.
Article 1124 provides:
The right to rescind the obligations is considered as implied in mutual ones, in
case one of the obligated persons does not comply with what is incumbent upon
him.
The person prejudiced may choose between exacting the fulfillment of the
obligation or its rescission, with indemnity for damages and the payment of
interest in either case. He may also demand the rescission, even after having
requested its fulfillment, should the latter appear impossible.
The court shall order the rescission demanded, unless there are sufficient causes
authorizing it to fix a period.
This is understood without prejudice to the rights of third acquirers, in
accordance with articles 1295 and 1298, and with the provisions of the Mortgage
Law.
Article 116 of the Code of Commerce prescribes:
Articles of association by which two or more persons obligate themselves to
place in a common fund any property, industry, or any of these things, in order to
obtain profit, shall be commercial, no matter what its class may be, provided it
has been established in accordance with the provisions of this code.
After the organization of the general mercantile partnership denominated "A. M.
Pabalan and Company," through the aforesaid instrument of June 27, 1900, the
partner Fitton did not turn into the company funds the sum of P3,000, in the
name and to the credit of Pabalan, as the latter's capital, which sum was a part of
the price of the sale of the two real properties purchased from the said Pabalan
by his partner Fitton who, in turn, brought the said two parcels of land, as his
capital, into the common fund, without having paid the said sum up to the time
when he absented himself from these Islands, a few months after the
establishment of the partnership, and died in a foreign country.
It was duly proved at the trial of this case, that the partner Walter A. Fitton failed
to observe the stipulations of the two aforesaid contracts; that he did not pay
any part of the price of the sale of the two parcels of land which he had
purchased from his partner, Antonio M. Pabalan, and, consequently, did not turn
into the company funds, as capital of the said Pabalan, the sum of which the said
price consisted; it is therefore unquestionable that he did not comply with his
two principal obligations, assumed in the said double contract wherein he
expressly agreed that the said P3,000, a part of the price of the two pieces of
land that he purchased from Pabalan, would be by him turned into the fund of
the general partnership which they had formed, as capital of the partner
Pabalan.
In case one of the parties to a contract does not fulfill his obligation as stipulated
therein, the other contracting party, by the provisions of the above-quoted
article 1124 of the Civil Code, is entitled to demand the rescission of the
contract, as such obligations are mutual, and the court must order the rescission
demanded. The partner, Walter A. Fitton, came within such a case, since he failed
to pay any part of the price of the two properties which he had acquired and did
not turn into the company fund, as capital of the vendor partner, the sum
representing such sale, and therefore justice requires the dissolution of the
aforementioned company and the rescission of the said sale, in conformity with
the finding contained in the judgment appealed from the prayer rightfully and
lawfully made by the partner who did not violate his obligations as set forth in
the said contract.
During the course of this suit in the Court of First Instance, the plaintiff, Antonio
M. Pabalan, also died; and if the latter, while living, was not obliged, according to
clause 10 of the articles of partnership, to continue in the company after the
decease of his copartner, and had a right to withdraw therefrom or from the
heirs of the deceased Walter A. Fitton, after the death of the partner Pabalan,
neither are the latter's successors in interest obliged to continue in the company,
and, therefore, under this circumstance, the propriety of the judgment appealed
from is still more evident. With respect to the interest on the capital which
belonged to Pabalan, and which Fitton failed to turn into the company fund in
conformity with the agreement made, and in regard to the amount of the losses
and damages occasioned by the noncompliance, on the part of the partner
Fitton, with the stipulated provisions, both such amounts should be considered
as the company's losses and computed pro rata, in proportion to the extent that
each partner is interested in the company and on the same basis as the profits.
(Arts. 140 and 141 of the Code of Commerce.)
As regards the amount of the land tax, which the partner Pabalan had to pay,
amounting to P522.30, under the assessment levied upon the two real properties
owned by the company, inasmuch as the latter is the owner of the said two
parcels of land, which form the assets of the company known as "A. M. Pabalan
and Company," it is unquestionable that this company should have paid the said
tax to the Government, and the same being paid by the partner Pabalan out of
his private funds and not of those of the company, he was solely entitled to be
reimbursed for two-thirds of the said sum paid, in proportion to the amount of
the respective capital brought in, which two-thirds of the sum of P522.30, that is,
P348.20, may be deducted from the sum of P2,700 Philippine currency,
equivalent to P3,000 Mexican currency, which the estate of Antonio M. Pabalan
must restore to the testate or intestate estate of Walter A. Fitton, upon the
defendant's returning to the plaintiff the two aforesaid parcels of land.
For the reasons hereinbefore stated, we are of opinion that the judgment
appealed from should be and is hereby affirmed, with no special finding as to the
costs; provided, however, that the administrator of the estate of the deceased
Fitton shall deliver to the administrator of the estate of Pabalan the two parcels
of land, the sale of which was rescinded, upon payment by the last named
administrator to that of the estate of Fitton, of the sum of P2,700, equivalent to
P3,000 Mexican pesos, the said administrator of the Pabalan estate being
entitled to deduct from the said sum that of P348.20, which is two-thirds of the
amount paid as land tax on the properties concerned. So ordered.
18. ILDEFONSO DE LA ROSA, administrator of the intestate estate of the
deceased Go-Lio, plaintiff-appellant, vs.ENRIQUE ORTEGA GO-COTAY,
defendant-appellant.
During the Spanish regime the Chinamen Go-Lio and Vicente Go-Sengco formed
a society for the purchase and sale of articles of commerce, and for this purpose
they opened a store in the town of San Isidro, Nueva Ecija. Later Go-Lio went to
China. Vicenyte Go-Sengco died and his son Enrique Ortega Go-Cotay took
charge of the businesses. Go-Lio died in China in October, 1916, leaving a widow
and three children, one of whom came to the Philippines and filed a petition for
the appointment of Ildefonso de la Rosa as administrator of the intestate estate
of his deceased father, which petition was granted by the Court of First Instance
of Nueva Ecija. Ildefonso de la Rosa, in his capacity as administrator of the
intestate estate of the deceased Go-Lio, requested Enrique Go-Cotay to wind up
the business and to deliver to him the portion corresponding to the deceased
Go-Lio. Enrique Ortega Go-Cotay denied the petition, alleging that the business
was his exclusively. In view of this denial, Ildefonso de la Rosa, as administratorm,
on July 2, 1918, filed with the Court of First Instance of Nueva Ecija a complaint
against Enrique Ortega Co-Cotay in which he prayed that the defendant be
sentenced to deliver to the plaintiff one-half of all the property of the
partnership formed by Go-lIo and Vicente Go-Sengco, with costs against the
defendant, and that the said plaintiff be appointed receiver for the property of
the said partnership.
Defendant, in answering the complaint, denied each and every allegation
thereof, and as a special defense alleged that more than ten years had elapsed
before the filing of the complaint, and prayed that he be absolved therefrom,
with costs against the plaintiff.
On August 3, 1918, the Court of First Instance of Nueva Ecija appointed Justo
Cabo-Chan, Francisco T. Tantengco and Go-Tiao, as commissioners to make an
inventory, liquidate and determine the one-half belonging to the plaintiff of all
the property of the store in question.
On August 9, 1918, in order to prevent Justo Cabo-Chan from assuming the office
of receiver, pursuant to the order of the court dated August 3, 1918, the
defendant filed a bond in the sum of P10,000.
Under the date of November 15, 1920, the said commissioners submitted to the
court their report, showing the net profits of the business between the period
from 1913 to 1917, which amounted to the total sum of P25,038.70 and
consisted of the following items:
Profits for the year 1913........................ P2,979.00
Profits for the year 1914........................ 3,046.94
Profits for the year 1915........................ 4,103.07
Profits for the year 1916........................ 4,735.00
Profits for the year 1917........................ 10,174.69
Total........................................................... 25.038.70
In view of the appeal taken by defendant the parties on December 7, 1921,
entered into an agreement whereby they agreed to suspend the liquidation
ordered by the court until the appeal to the Supreme Court was decided, and
whereby the defenadnt was authorized to continue in the possession of the
property in litigation, upon the giving of a bond in the amount of P25,000, and
cancelling the former bond for P10,000.
This court in deciding case R. G. No. 18919, on October 5, 1922, 1 held that the
appeal was premature and ordered that the record be remanded to the court of
origin with instruction to enter a final order in accordance with the liquidation
made by the commissioners.
The record having been remanded and two of the commissioners having filed
their resignations, the copurt below appointed again Justo Cabo-Chan suggested
by the defendant and Cua POco suggested by the plaintiff, as commissioners,
who submitted two reports, one prepared by commissioners Tantengco and Cua
Poco, and the other by commissioners Justo Cabo-Chan. The former stated in
their report that they had examined the books for the years 1919 to 1922, for the
reason, they said, that they appeared "to have been prepared by some person in
a careful way at a certain time." The later commissioner examined all books and
stated in his report that the business had suffered a net loss amounting to the
sum of P89,099.22.
After trial and the parties having introduced all their evidence, the lower court,
by order of December 13, 1924, disapproved the report of the commissioners
Tantengco and Cua Poco, but approved, with slight modifications, the report of
commissioner Cabo-Chan, holding that the result of the liquidation showed
liabilities to the amiount of P89,690.45 in view of which plaintiff had nothing to
recover from defendant, as there was no profit to divide.
From this decision the plaintiff has appealed in due time and form making the
following assignment of errors: (1) The lower court erred in holding that the
books were authentic, and in not holding that they were false books exhibited by
the defendant about alleged operations in the years 1918 et seq. which show
enormous debts and imaginary losses of the business; (2) the lower court erred
in giving full credit to the testimony of commissioner Justo Cabo-Chan; (3) the
lower court erred in holding that the partnership had incurred debts and suffered
losses, as shown in the report of Justo Cabo-Cahn from 1918 on; (4) the lower
court erred in not holding that the share of the plaintiff, as his capital and profits
until the end of 1917, is equivalent to the sum of twenty-seven thousand seven
hundred fifty-five pesos and forty-seven centavos (P27,755.47). Philippine
currency, plus an annual quota of at least two thousand five hundred three pesos
and eighty-seven centavos (P2,503.87), Philippime currency, as his portion of the
profits since the beginning of 1918 until the delivery to the palintiff of his share
in the partnership; (5) the court below erred in not ordering the prosecuting
attorney to commence an investigation as to the falsified books of accounts that
the defendant had exhibited for proper criminal proceeding.
From the evidence it appears that the partnership capital was P4,779.39, and the
net profits until the year 1915 amounted to P5,551.40. Because some books of
account had been destroyed by white ants (anay), the liquidation of the business
of the partnership for the period from 1906 to 1912 could not be made. But
knowing the net profit for the period between 1904 and 1905, which is
P5,551.40, and findng the average of the profits for each of these years, which is
P2,775.70; and knowing the net profit for the year 1913, which is P2,979, we can
find the average between the net profit for 1905, namely, P2,979. Said average is
the sum of P2,877.35, which may be considered as the average of the net annual
profits for the period between 1906 an 1912, which in seven years make a total
of P20,141.45. The assets of the partnership, as well as the value of its property,
could not be determined when making the liquidation because there was no
inventory and for this reason it was not possible to determine the capital of the
partnership. The plaintiff, however, seems to be agreeable to considering the
initial partnership capital as the capital at the time of the winding up of the
business.
August 3, 1918, defendant assumed complete responsibility for the business by
objecting to the appointment of a receiver as prayed for by plaintiff, and giving a
bond therefor. Until that date his acts were those of a managing partner, binding
against the partnership; but thereafter his acts were those of a receiver whose
authority is contained in section 175 of the Code of Civil Procedure.
A receiver has no right to carry on and conduct a business unless he is authorized
or directed by the court to do some, and such authority is not derived from an
order of appointment to take and preserve the property (34 Cyc., 283; 23 R. C. L.,
73). It does not appear that the defendant as a receiver was authorized by the
court to continue the business of the partnership in liquidation. This being so, he
is personally liable for the losses that the business amy have sustained. (34 Cyc.,
296.) The partnership must not, therefore, be liable for the acts of the defendant
in connection with the management of the business until August 3, 1918, the
date when he ceased to be a member and manager in order to become receiver.
As to the first semester of 1918, during which time the defendant had seen
managing the business of the partnership as a member and manager, taking into
account that the profits had been on the increase, said profits having reached
the amount of P10,174.69 in the year 1917, it would not be an exaggeration to
estimate that the profits for 1918 would have been at least the same as the
profits of 1917; so that for the first half of 1918, the profit would be P5,087.34.
In conclusion we have the following profits of the business of this partnership
now in liquidation, to wit:
Capital of partnership........................... P4,779.39
Profits until 1905.................................. 5,551.40
Profits 1906-1912................................ 20,141.45
Profits 1913-1917................................ 25,038.70
Profits first semester 1918............... 5,087.34
Total....................................................... 60,598.28
One-half of this total, that is, P30,299.14 pertains to the plaintiff as administrator
of the intestate estate of Go-Lio.
In view of the foregoing, we are of the opinion that the case must be, as is
hereby, decided by the reversing the judgment appealed from, and sentencing
the defendant to pay the plaintiff the sum of P30,299.14 with legal interest at the
rate of 6 per cent per annum from July 1, 1918, until fully paid, with costs. So
ordered.
19. JOSUE SONCUYA, plaintiff-appellant, vs.CARMEN DE LUNA, defendant-
appellee
On September 11, 1936, plaintiff Josue Soncuya filed with the Court of First
Instance of Manila and amended complaint against Carmen de Luna in her own
name and as co-administratrix of the intestate estate, of Librada Avelino, in
which, upon the facts therein alleged, he prayed that defendant be sentenced to
pay him the sum of P700,432 as damages and costs.
To the aforesaid amended complaint defendant Carmen de Luna interposed a
demurrer based on the following grounds: (1) That the complaint does not
contain facts sufficient to constitute a cause of action; and (2) that the complaint
is ambiguous, unintelligible and vague.
Trial on the demurrer having been held and the parties heard, the court found
the same well-founded and sustained it, ordering the plaintiff to amend his
complaint within a period of ten days from receipt of notice of the order.
Plaintiff having manifested that he would prefer not to amend his amended
complaint, the attorney for the defendant, Carmen de Luna, filed a motion
praying that the amended complaint be dismissed with costs against the plaintiff.
Said motion was granted by The Court of First Instance of Manila which ordered
the dismissal of the aforesaid amended complaint, with costs against the plaintiff.
From this order of dismissal, the appellant took an appeal, assigning twenty
alleged errors committed by the lower court in its order referred to.
The demurrer interposed by defendant to the amended complaint filed by
plaintiff having been sustained on the grounds that the facts alleged in said
complaint are not sufficient to constitute a cause of action and that the
complaint is ambiguous, unintelligible and vague, the only questions which may
be raised and considered in the present appeal are those which refer to said
grounds.
In the amended complaint it is prayed that defendant Carmen de Luna be
sentenced to pay plaintiff damages in the sum of P700,432 as a result of the
administration, said to be fraudulent, of he partnership, "Centro Escolar de
Seoritas", of which plaintiff, defendant and the deceased Librada Avelino were
members. For the purpose of adjudicating to plaintiff damages which he alleges
to have suffered as a partner by reason of the supposed fraudulent management
of he partnership referred to, it is first necessary that a liquidation of the
business thereof be made to the end that the profits and losses may be known
and the causes of the latter and the responsibility of the defendant as well as the
damages which each partner may have suffered, may be determined. It is not
alleged in the complaint that such a liquidation has been effected nor is it prayed
that it be made. Consequently, there is no reason or cause for plaintiff to
institute the action for damages which he claims from the managing partner
Carmen de Luna (Po Yeng Cheo vs. Lim Ka Yam, 44 Phil., 172).
Having reached the conclusion that the facts alleged in the complaint are not
sufficient to constitute a cause of action on the part of plaintiff as member of the
partnership "Centro Escolar de Seoritas" to collect damages from defendant as
managing partner thereof, without a previous liquidation, we do not deem it
necessary to discuss the remaining question of whether or not the complaint is
ambiguous, unintelligible and vague.
In view of the foregoing considerations, we are of the opinion and so hold that
for a partner to be able to claim from another partner who manages the general
copartnership, damages allegedly suffered by him by reason of the fraudulent
administration of the latter, a previous liquidation of said partnership is
necessary.
Wherefore, finding no error in the order appealed from the same is affirmed in
all its parts, with costs against the appellant. So ordered.
20. ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and ANTONIO
C. GOQUIOLAY, plaintiffs-appellants, vs.WASHINGTON Z. SYCIP, ET AL.,
defendants-appellees.
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 co-partnership 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 co-partnership (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 co-partnership 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. Plaintiffs-
appellants 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 co-partnership 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.
Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia, Barrera,
and Gutierrez David, JJ., concur.
RESOLUTION
December 10, 1963
REYES, J. B. L., J.:
The matter now pending is the appellant's motion for reconsideration of our
main decision, wherein we have upheld the validity of the sale of the lands
owned by the partnership Goquiolay & Tan Sin An, made in 1949 by the widow of
the managing partner, Tan Sin An (executed in her dual capacity of Administratrix
of her husband's estate and as partner, in lieu of the husband), in favor of buyers
Washington Sycip and Betty Lee for the following consideration:
Cash paid P37,000.00
Debts assumed by purchase:
To Yutivo 62,415.91
To Sing Yee Cuan & Co. 54,310.13
TOTAL P153,726.04
Appellant Goquiolay, in his motion for reconsideration, insists that, contrary to
our holding, Kong Chai Pin, widow of the deceased partner Tan Sin An, never
became more than a limited partner, incapacitated by law to manage the affairs
of the partnership; that the testimony of her witnesses Young and Lim belies that
she took over administration of the partnership property; and that, in any event,
the sale should be set aside because it was executed with the intent to defraud
appellant of his share in the properties sold.
Three things must be always held in mind in the discussion of this motion to
reconsider, being basic and beyond controversy:
(a) That we are dealing here with the transfer of partnership property by one
partner, acting in behalf of the firm, to a stranger. There is no question between
partners inter se, and this aspects of the case was expressly reserved in the main
decision of 26 July 1960;
(b) That the partnership was expressly organized "to engage in real estate
business, either by buying and selling real estate". The Article of co-partnership,
in fact, expressly provided that:
IV. The object and purpose of the co-partnership are as follows:
1. To engage in real estate business, either by buying and selling real estates; to
subdivide real estates into lots for the purpose of leasing and selling them.;
(c) That the properties sold were not part of the contributed capital (which was
in cash) but land precisely acquired to be sold, although subject a mortgage in
favor of the original owners, from whom the partnership had acquired them.
With these points firmly in mind, let us turn to the points insisted upon by
appellant.
It is first averred that there is "not one iota evidence" that Kong Chai Pin
managed and retained possession of the partnership properties. Suffice it to
point out that appellant Goquiolay himself admitted that
. . . Mr. Yu Eng Lai asked me if I can just let Mrs. Kong Chai Pin continue to
manage the properties (as) she had no other means of income. Then I said,
because I wanted to help Mrs. Kong Chai Pin, she could just do it and besides I
am not interested in agricultural lands. I allowed her to take care of the
properties in order to help her and because I believe in God and I wanted to help
her.
Q. So the answer to my question is you did not take any steps?
A. I did not.
Q. And this conversation which you had with Mrs. Yu Eng Lai was few months
after 1945?
A. In the year 1945. (Emphasis supplied)
The appellant subsequently ratified this testimony in his deposition of 30 June
1956, page 8-9, wherein he sated: that plantation was being occupied at that
time by the widow, Mrs. Tan Sin An, and of course they are receiving quite a lot
of benefit from that plantation.
Discarding the self-serving expressions, these admissions of Goquiolay are
certainly entitled to greater weight than those of Hernando Young and Rufino
Lim, having been made against the party's own interest.
Moreover, the appellant's reference to the testimony of Hernando Young, that
the witness found the properties "abandoned and undeveloped", omits to
mention that said part of the testimony started with the question:
Now, you said that about 1942 or 1943 you returned to Davao. Did you meet
Mrs. Kong Chai Pin there in Davao at that time?
Similarly, the testimony of Rufino Lim, to the effect that the properties of the
partnership were undeveloped, and the family of the widow (Kong Chai Pin) did
not receive any income from the partnership properties, was given in answer to
the question:
According to Mr. Goquiolay, during the Japanese occupation Tan Sin An and his
family lived on the plantation of the partnership and derived their subsistence
from that plantation. What can you say to that? (Dep. 19 July 1956, p. 8)
And also What can you say so to the development of these other properties of
the partnership which you saw during the occupation?" (Dep., p. 13, Emphasis
supplied) to which witness gave the following answer:
I saw the properties in Mamay still undeveloped. The third property which is in
Tigatto is about eleven (11) hectares and planted with abaca seedlings planted by
Mr. Sin An. When I went there with Hernando Young we saw all the abaca
destroyed. The place was occupied by the Japanese Army. They planted camotes
and vegetables to feed the Japanese Army. Of course they never paid any money
to Tan Sin An or his family. (Dep., Lim. pp. 13-14.) (Emphasis supplied)
Plainly, Both Young and Lim's testimonies do not belie, or contradict, Goquiolay's
admission that he told Mr. Yu Eng Lai that the widow "could just do it" (i e.,
continue to manage the properties. Witnesses Lim and Young referred to the
period of Japanese occupation; but Goquiolay's authority was, in fact, given to
the widow in 1945, after the occupation.
Again, the disputed sale by the widow took place in 1949. That Kong Chai Pin
carried out no acts of management during the Japanese occupation (1942-1944)
does not mean that she did not do so from 1945 to 1949.
We thus fine that Goquiolay did not merely rely on reports from Lim and Young;
he actually manifested his willingness that the widow should manage the
partnership properties. Whether or not she complied with this authority is a
question between her and the appellant, and is not here involved. But the
authority was given, and she did have it when she made the questioned sale,
because it has never revoked.
It is argued that the authority given by Goquiolay to the widow Kong Chai Pin
was only to manage the property, and that it did not include the power to
alienate, citing Article 1713 of the Civil Code of 1889. What this argument
overlooks is that the widow was not a mere agent, because she had become a
partner upon her husband's death, as expressly provided by the articles of co-
partnership. Even more, granting that by succession to her husband, Tan Sin An,
the widow only a became the limited partner, Goquiolay's authorization to
manage the partnership property was proof that he considered and recognized
her has general partner, at least since 1945. The reason is plain: Under the law
(Article 148, last paragraph, Code of Commerce), appellant could not empower
the widow, if she were only a limited partner, to administer the properties of the
firm, even as a mere agent:
Limited partners may not perform any act of administration with respect to the
interests of the co-partnership, not even in the capacity agents of the managing
partners.(Emphasis supplied)
By seeking authority to manage partnership property, Tan Sin An's widow
showed that she desired to be considered a general partner. By authorizing the
widow to manage partnership property (which a limited partner could not be
authorized to do), Goquiolay recognized her as such partner, and is now in
estoppel to deny her position as a general partner, with authority to administer
and alienate partnership property.
Besides, as we pointed out in our main decision, the heir ordinarily (and we did
not say "necessarily") becomes a limited partner for his own protection, because
he would normally prefer to avoid any liability in excess of the value of the estate
inherited so as not to jeopardize his personal assets. But this statutory limitation
of responsibility being designed to protect the heir, the latter may disregard it
and instead elect to become a collective or general partner, with all the rights
and privileges of one, and answering for the debts of the firm not only with the
inheritance bud also with the heir's personal fortune. This choice pertains
exclusively to the heir, and does not require the assent of the surviving partner.
It must be remembered that the articles of co-partnership here involved
expressly stipulated that:
In that 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 co-partnership" (Art. XII, Articles of Co-Partnership).
The Articles did not provide that the heirs of the deceased would be merely
limited partner; on the contrary they expressly stipulated that in case of death of
either partner "the co-partnership ... will have to be continued" with the heirs or
assigns. It certainly could not be continued if it were to be converted from a
general partnership into a limited partnership, since the difference between the
two kinds of associations is fundamental; and specially because the conversion
into a limited association would leave the heirs of the deceased partner without
a share in the management. Hence, the contractual stipulation does actually
contemplate that the heirs would become general partners rather than limited
ones.
Of course, the stipulation would not bind the heirs of the deceased partner
should they refuse to assume personal and unlimited responsibility for the
obligations of the firm. The heirs, in other words, can not be compelled to
become general partners against their wishes. But because they are not so
compellable, it does not legitimately follow that they may not voluntarily choose
to become general partners, waiving the protective mantle of the general laws of
succession. And in the latter event, it is pointless to discuss the legality of any
conversion of a limited partner into a general one. The heir never was a limited
partner, but chose to be, and became, a general partner right at the start.
It is immaterial that the heirs name was not included in the firm name, since no
conversion of status is involved, and the articles of co-partnership expressly
contemplated the admission of the partner's heirs into the partnership.
It must never be overlooked that this case involves the rights acquired by
strangers, and does not deal with the rights arising between partners Goquiolay
and the widow of Tan Sin An. The issues between the partners inter se were
expressly reversed in our main decision. Now, in determining what kind of
partner the widow of partner Tan Sin An had elected to become, strangers had to
be guided by her conduct and actuations and those of appellant Goquiolay.
Knowing that by law a limited partner is barred from managing the partnership
business or property, third parties (like the purchasers) who found the widow
possessing and managing the firm property with the acquiescense (or at least
without apparent opposition) of the surviving partners were perfectly justified in
assuming that she had become a general partner, and, therefore, in negotiating
with her as such a partner, having authority to act for, and in behalf of, the firm.
This belief, be it noted, was shared even by the probate court that approved the
sale by the widow of the real property standing in the partnership name. That
belief was fostered by the very inaction of appellant Goquiolay. Note that for
seven long years, from partner Tan Sin An's death in 1942 to the sale in 1949,
there was more than ample time for Goquiolay to take up the management of
these properties, or at least ascertain how its affairs stood. For seven years
Goquiolay could have asserted his alleged rights, and by suitable notice in the
commercial registry could have warned strangers that they must deal with him
alone, as sole general partner. But he did nothing of the sort, because he was not
interested (supra), and he did not even take steps to pay, or settle, the firm debts
that were overdue since before the outbreak of the last war. He did not even take
steps, after Tan Sin An died, to cancel, or modify, the provisions of the
partnership articles that he (Goquiolay) would have no intervention in the
management of the partnership. This laches certainly contributed to confirm the
view that the widow of Tan Sin An had, or was given, authority to manage and
deal with the firm's properties, apart from the presumption that a general
partner dealing with partnership property has the requisite authority from his co-
partners (Litton vs. Hill and Ceron, et al., 67 Phil., 513; quoted in our main
decision, p. 11).
The stipulation in the articles of partnership that any of the two managing
partners may contract and sign in the name of the partnership with the consent
of the other, undoubtedly creates an obligation between the two partners, which
consists in asking the other's consent before contracting for the partnership. This
obligation of course is not imposed upon a third person who contracts with the
partnership. Neither is it necessary for the third person to ascertain if the
managing partner with whom he contracts has previously obtained the consent
of the other. A third person may and has a right to presume that the partner with
whom he contracts has, in the ordinary and natural course of business, the
consent of his co-partner; for otherwise he would not enter into the contract.
The third person would naturally not presume that the partner with whom he
enters into the transaction is violating the articles of partnership, but on the
contrary, is acting in accordance therewith. And this finds support in the legal
presumption that the ordinary course of business has been followed (No. 18,
section 334, Code of Civil Procedure), and that the law has been obeyed (No. 31,
section 334). This last presumption is equally applicable to contracts which have
the force of law between the parties. (Litton vs. Hill & Ceron, et al., 67 Phil., 509,
516) (Emphasis supplied)
It is next urged that the widow, even as a partner, had no authority to sell the
real estate of the firm. This argument is lamentably superficial because it fails to
differentiate between real estate acquired and held as stock-in-trade and real
state held merely as business site (Vivante's "taller o banco social") for the
partnership. Where the partnership business is to deal in merchandise and
goods, i.e., movable property, the sale of its real property (immovables) is not
within the ordinary powers of a partner, because it is not in line with the normal
business of the firm. But where the express and avowed purpose of the
partnership is to buy and sell real estate (as in the present case), the immovables
thus acquired by the firm form part of its stock-in-trade, and the sale thereof is in
pursuance of partnership purposes, hence within the ordinary powers of the
partner. This distinction is supported by the opinion of Gay de Montella1, in the
very passage quoted in the appellant's motion for reconsideration:
La enajenacion puede entrar en las facultades del gerente: cuando es conforme a
los fines sociales. Pero esta facultad de enajenar limitada a las ventas conforme a
los fines sociales, viene limitada a los objetos de comecio o a los productos de la
fabrica para explotacion de los cuales se ha constituido la Sociedad. Ocurrira una
cosa parecida cuando el objeto de la Sociedad fuese la compra y venta de
inmuebles, en cuyo caso el gerente estaria facultado para otorgar las ventas que
fuere necesario. (Montella) (Emphasis supplied)
The same rule obtains in American law.
In Rosen vs. Rosen, 212 N. Y. Supp. 405, 406, it was held:
a partnership to deal in real estate may be created and either partner has the
legal right to sell the firm real estate
In Chester vs. Dickerson, 54 N. Y. 1, 13 Am. Rep. 550:
And hence, when the partnership business is to deal in real estate, one partner
has ample power, as a general agent of the firm, to enter into an executory
contract for the sale of real estate.
And in Rovelsky vs. Brown, 92 Ala. 522, 9 South 182, 25 Am. St., Rep. 83:
If the several partners engaged in the business of buying and selling real estate
can not bind the firm by purchases or sales of such property made in the regular
course of business, then they are incapable of exercising the essential rights and
powers of general partners and their association is not really a partnership at all,
but a several agency.
Since the sale by the widow was in conformity with the express objective of the
partnership, "to engage * * * in buying and selling real estate" (Art IV, No. 1,
Articles of Copartnership), it can not be maintained that the sale was made in
excess of her powers as general partner.
Considerable stress is laid by appellant in the ruling of the Supreme Court of Ohio
in McGrath, et al., vs. Cowen, et al., 49 N. E., 338. But the facts of that case are
vastly different from the one before us. In the McGrath case, the Court expressly
found that:
The firm was then, and for some time had been, insolvent, in the sense that its
property was insufficient to pay its debts, though it still had good credit, and was
actively engaged in the prosecution of its business. On that day, which was
Saturday, the plaintiff caused to be prepared, ready for execution, the four
chattel mortgages in question, which cover all the tangible property then
belonging to the firm, including the counters, shelving, and other furnishings and
fixtures necessary for, and used in carrying on, its business, and signed the same
in this form: "In witness whereof, the said Cowen & McGrath, a firm, and Owen
McGrath, surviving partner of said firm, and Owen McGrath, individually, have
here-unto set their hands, this 20th day of May, A. D. 1893. Cowen & McGrath,
by Owen McGrath. Owen McGrath, Surviving partner of Cowen & McGrath.
Owen McGrath" At the same time, the plaintiff had prepared, ready for filing, the
petition for the dissolution of the partnership and appointment of a receiver,
which he subsequently filed, as hereinafter stated. On the day the mortgages
were signed, they were placed in the hands of the mortgagees, which was the
first intimation to them that there was any intention to make then. At that time
none of the claims secured by the mortgages were due, except, it may be, a small
part of one of them, and none of the creditors to whom the mortgages were
made had requested security, or were pressing for the payment of their debts. ...
The mortgages appear to be without a sufficient condition of defeasance, and
contain a stipulation authorizing the mortgagees to take immediate possession of
the property, which they did as soon as the mortgages were filed, through the
attorney who then represented them, as well as the plaintiff; and the stores were
at once closed, and possession delivered by them to the receiver appointed upon
the filing of the petition. The avowed purpose of the plaintiff in the course
pursued by him, was to terminate the partnership, place its property beyond the
control of the firm, and insure the preference of the mortgages, all of which was
known to them at the time: ... . (Cas cit., p. 343, Emphasis supplied)
It is natural that from these facts the Supreme Court of Ohio should draw the
conclusion that conveyances were made with intent to terminate the
partnership, and that they were not within the powers of McGrath as partner.
But there is no similarly between those acts and the sale by the widow of Tan Sin
An. In the McGrath case, the sale included even the fixtures used in the business,
in our case, the lands sold were those acquired to be sold. In the McGrath case,
none of the creditors were pressing for payment; in our case, the creditors had
been unpaid for more than seven years, and their claims had been approved by
the probate court for payment. In the McGrath case, the partnership received
nothing beyond the discharge of its debts; in the present case, not only were its
debts assumed by the buyers, but the latter paid, in addition, P37,000.00 in cash
to the widow, to the profit of the partnership. Clearly, the McGrath ruling is not
applicable.
We will now turn to the question to fraud. No direct evidence of it exists; but
appellant points out, as indicia thereof, the allegedly low price paid for the
property, and the relationship between the buyers, the creditors of the
partnership, and the widow of Tan Sin An.
First, as to the price: As already noted, this property was actually sold for a total
of P153,726.04, of which P37,000.00 was in cash, and the rest in partnership
debts assumed by the purchaser. These debts (P62,415.91 to Yutivo, and
P54,310.13 to Sing Yee Cuan & Co.) are not questioned; they were approved by
the Court, and its approval is now final. The claims were, in fact, for the balance
on the original purchase price of the land sold (due first to La Urbana, later to the
Banco Hipotecario) plus accrued interests and taxes, redeemed by the two
creditors-claimants. To show that the price was inadequate, appellant relies on
the testimony of the realtor Mata, who in 1955, six years after the sale in
question, asserted that the land was worth P312,000.00. Taking into account the
continued rise of real estate values since liberation, and the fact that the sale in
question was practically a forced sale because the partnership had no other
means to pay its legitimate debts, this evidence certainly does not show such
"gross inadequacy" as to justify rescission of the sale. If at the time of the sale
(1949 the price of P153,726.04 was really low, how is it that appellant was not
able to raise the amount, even if the creditor's representative, Yu Khe Thai, had
already warned him four years before (1946) that the creditors wanted their
money back, as they were justly entitled to?
It is argued that the land could have been mortgaged to raise the sum needed to
discharge the debts. But the lands were already mortgaged, and had been
mortgaged since 1940, first to La Urbana, and then to the Banco Hipotecario.
Was it reasonable to expect that other persons would loan money to the
partnership when it was unable even to pay the taxes on the property, and the
interest on the principal since 1940? If it had been possible to find lenders willing
to take a chance on such a bad financial record, would not Goquiolay have taken
advantage of it? But the fact is clear on the record that since liberation until 1949
Goquiolay never lifted a finger to discharge the debts of the partnership. Is he
entitled now to cry fraud after the debts were discharged with no help from him?
With regard to the relationship between the parties, suffice it to say that the
Supreme Court has ruled that relationship alone is not a badge of fraud (Oria
Hnos. vs. McMicking, 21 Phil., 243; also Hermandad de Smo. Nombre de Jesus vs.
Sanchez, 40 Off. Gaz., 1685). There is no evidence that the original buyers,
Washington Sycip and Betty Lee, were without independent means to purchase
the property. That the Yutivos should be willing to extend credit to them, and not
to appellant, is neither illegal nor immoral; at the very least, these buyers did not
have a record of inveterate defaults like the partnership "Tan Sin An &
Goquiolay".
Appellant seeks to create the impression that he was the victim of a conspiracy
between the Yutivo firm and their component members. But no proof is
adduced. If he was such a victim, he could have easily defeated the conspirators
by raising money and paying off the firm's debts between 1945 and 1949; but he
did; he did not even care to look for a purchaser of the partnership assets. Were
it true that the conspiracy to defraud him arose (as he claims) because of his
refusal to sell the lands when in 1945 Yu Khe Thai asked him to do so, it is
certainly strange that the conspirators should wait 4 years, until 1949, to have
the sale effected by the widow of Tan Sin An, and that the sale should have been
routed through the probate court taking cognizance of Tan Sin An's estate, all of
which increased the risk that the supposed fraud should be detected.
Neither was there any anomaly in the filing of the claims of Yutivo and Sing Yee
Cuan & Co., (as subrogees of the Banco Hipotecario) in proceedings for the
settlement of the estate of Tan Sin An. This for two reasons: First, Tan Sin An and
the partnership "Tan Sin An & Goquiolay" were solidary (joint and several)
debtors (Exhibit "N" mortgage to the Banco Hipotecario), and Rule 87, section 6,
is to the effect that:
Where the obligation of the decedent is joint and several with another debtor,
the claim shall be filed against the decedent as if he were the only debtor,
without prejudice to the right of the estate to recover contribution from the
other debtor. (Emphasis supplied)
Secondly, the solidary obligation was guaranteed by a mortgage on the
properties of the partnership and those of Tan Sin An personally, and a mortgage
in indivisible, in the sense that each and every parcel under mortgage answers
for the totality of the debt (Civ. Code of 1889, Article 1860; New Civil Code, Art.
2089).
A final and conclusive consideration. The fraud charged not being one used to
obtain a party's consent to a contract (i.e., not being deceit or dolus in
contrahendo), if there is fraud at all, it can only be a fraud of creditors that gives
rise to a rescission of the offending contract. But by express provision of law
(Article 1294, Civil Code of 1889; Article 1383, New Civil Code), "the action for
rescission is subsidiary; it can not be instituted except when the party suffering
damage has no other legal means to obtain reparation for the same". Since there
is no allegation, or evidence, that Goquiolay can not obtain reparation from the
widow and heirs of Tan Sin An, the present suit to rescind the sale in question is
not maintenable, even if the fraud charged actually did exist.
Premises considered, the motion for reconsideration is denied.
21. ADRIANO BUENAVENTURA Y DEZOLLIER, palintiff- appellant, vs.ANTONIO
DAVID y ABELIDO, defendant-appellee.
By an agreement effective from April 20, 1906, a partnership was formed by
Antonio David y Abelido and Adriano Buenaventura y Dezollier for the conduct of
the business of real estate brokers in the city of Manila, under the firm name
"Abelido and Co." The first named party was the capitalist member of the firm
and its manager., while the last named was the industrial member and
bookkeeper. The firm maintained a feeble external existence for a few months,
during which period the capitalist associate placed P209.86 in the enterprise.
This was consumed in office rent and other incidental expenses. Only two
profitable transactions were ever accomplished by the firm of Abelido and Co.
during its existence. These produced a total income of P42, which sum was noted
on the credit side of the company's ledger.
It was agreed in the articles that the partnership should be liquidated upon April
20, 1907, in the absence of any agreement for the extension of its life; but upon
February 1, 1908, it was agreed in writing that the partnership should not be
liquidated until the sale of a piece of real estate in which the firm had become
interested should be effected with profit. The property to which reference was
thus made consisted of a farm in the municipality of Murcia, in the Province of
Tarlac, known as the "Hacienda de Guitan."
This farm had been formerly owned by the spouses Loni Diangco and Epifania
Torres; and long before the firm of Abelido and Co. had come into existence
Antonio David y Abelido had been their creditor by reason of certain sums of
money from time to time loaned them. After the death of Lino Diangco in 1890
still other sums of money were advanced by David to the widow, Epifania Torres,
in behalf of herself and her minor son Pablo Diangco. Upon July 10, 1906,
Epifania agreed to convey the Hacienda de Guitan to Abelido and Buenaventura
for a consideration stated at P2,050 (Exhibit C). The purpose of the transaction
was to settle the debt of several thousand pesos owing by her and her son to
Antonio David y Abelido. The conveyance by which this contract was finally
carried into effect was executed upon January 30, 1908. The grantee named in
the deed was Antonio David y Abelido; and no reference was made in this
instrument to the firm of Abelido and Co., or to Buenaventura as a partner
therein. Buenaventura was present at the time of the execution of this deed and
signed as a subscribing witness. The total consideration for the conveyance was
P7,170, of which the sum of P5,870 was consumed in satisfying the old
indebtedness due to David. The balance (according to the recitals of the deed)
was paid by him to Epifania Torres. It further appears that Antonio David y
Abelido proceeded to procure the registration of the hacienda in his own name
and a Torrens title was in due course issued to him.
Upon the same day that the above-mentioned deed was executed by Epifania
Torres to Antonio David, a declaration was drawn up and ratified by Antonio
David and Adiano Buenaventura in which it was stated that Epifania Torres had
sold the estate above mentioned to Antonio David for the sum of P7,170 and
that of this amount the sum of P3,370 had been advanced by Abelido & Co.,
while P3,800 had been paid by David individually. It was then said that the firm
thereby became the owner of the property in the proportion of the value
satisfied by it; and this was followed by an obscure clause meaning, probably,
that the right of the firm to acquire this participation was dependent on the
reimbursement of David for the outlay made by him with respect to such share.
A further statement was added to the effect that Buenaventura should have the
option to advance half of the sum paid out by Antonio David y Abelido, to wit,
the sum of P1,900, in the event Buenaventura should desire to have a half
interest in the property in his own name.
From the date of the conveyance above mentioned David exercised all the rights
of an owner over the property. Upon one occasion he mortgaged it for the sum
of P5,000 and Buenaventura was paid P300 for assisting in the securing of this
loan. At another time David mortgaged the property for the sum of P15,000 and
applied the money thus secured to his own use.
Upon February 18, 1915, or more than seven years after the day upon which the
deed to the property had been executed to David, Buenaventura filed the
complaint in this action. In this proceeding he seeks relief embracing the
following features: (1) a dissolution of the partnership of Abelido and Co.; (2)
judgment for a balance of some P2,344.85. alleged to be due as arrears upon
salary account; (3) a transfer of the title of the Hacienda de Guitan to Abelido
and Co.; (4) and accounting for, and division of all money, property and other
effects of the firm; and especially an accounting for profits alleged to have been
made by the defendant David from investments of money derived from the
hacienda, which profits were alleged to amount to the sum of P5,190; (5) a
judgment for damages in the sum of P10,000; (6) such and further relief as might
seem to the court just and equitable.
At the hearing the court entered a judgment declaring that the partnership of
Abelido and Co. was dissolved and denying all other relief sought in the
complaint. From this judgment the plaintiff Buenaventura has appealed.
As regards the Hacienda de Guitan, it is in our opinion clear upon the oral
testimony and other proof adduced in the cause that every cent of the
consideration for the purchase of this property was supplied by David; and it
consisted, as we have seen, mostly of money previously loaned. Buenaventura
had no resources, and it was evidently quite beyond his power to raise the funds
necessary to participate in a business transaction of the size of that in question.
His pretension that he supplied P1,025 or half of the consideration named in the
original contract (Exhibit C) was rightly rejected by the court. Furthermore it
appears that the firm of Abelido and Co., as distinguished from the individual
David Abelido, never in fact advanced a single peso in the transaction, although
the "declaration" of January 30, 1908, states that the firm advanced P3,370. That
declaration constitutes an admission which entitles it to weight but its recital as
to the money paid or received may be explained and even contradicted, as in
case of a simple receipt. David's explanation is that the plaintiff, as bookkeeper,
had made it appear in the firm books that the firm was debtor to David in the
amount of P3,370 in respect to this transaction and that the plaintiff had
requested David to sign the declaration showing the firm to be a participant.
Throughout this affair David exhibited considerable complaisance in signing
papers at Buenaventura's request. He apparently considered Buenaventura an
amiable old friend and was willing to indulge the latter's fancy with the idea that
he was party to an important transaction, well knowing that he could never put
up the necessary money to enable him to share in the deal. Whatever may be
the explanation of David's imprudence in allowing himself to be thus drawn into
an admission showing that the firm participated in the deal, it is quite clear that
he supplied all the money for the purchase in question.
The situation then, as regards the title to the hacienda is this: David, who
supplied all the funds, has obtained the legal title in his own individual name.
This was accomplished with knowledge on the part of Buenaventura.
Furthermore he has registered his title by means of legal proceedings which were
probably known to Buenaventura. Still later, the latter is seen acting as broker for
David in securing a loan on the hacienda and receives a fee for his services.
Meanwhile the original partnership enterprise is abandoned. Finally more than
seven years after the day when Buenaventura stood by and signed as a witness
the deed conveying the property to David, he comes into court and seeks to
reach this property through the ghost of the firm of Abelido and Co. and bring
the defendant to account for the profits which he has obtained from the
investments of its proceeds in various enterprises.
The purpose of the action is to impress a trust on the property in favor of Abelido
and Co., to divest the title out of the present owner, and to have it, or its
proceeds, liquidated and administered as firm assets. We are of the opinion that
there is no merit in the plaintiff's contention. It is true that a court will not
hesitate, under certain circumstances, to divest a title out of the holder and
impress a trust upon it in favor of another, or to require the holder of the title to
administer the property for the true owner (Uy Aloc vs. Cho Jan Ling, 19 Phil.
Rep., 202); yet this will not be done in the absence of a sufficient contract, an
express trust, or other strong equitable circumstances requiring the intervention
of equity. No such relief can be granted, upon purely equitable grounds, against a
party who has himself paid the entire purchase price in favor of one who
advanced nothing. But the declaration of January 30, 1908, is relied upon as
evidence of a contract establishing the right of Abelido and Co. The reply is that
by the terms of that instrument Buenaventura's personal right was dependent
upon the advancement of money by him which was in fact never supplied, and as
to the statement contained in that declaration that Abelido and Co. had
advanced a certain sum, it clearly appears that this is not true; and we hold that
the defendant is not precluded, or estopped, by that admission from showing the
actual facts.
Furthermore, it is evident that the plaintiff's case is adversely affected by his long
delay in bringing this action. Undue delay in the enforcement of a right is strongly
persuasive of a lack of merit in the claim, since it is human nature for a person to
assert his rights most strongly when they are threatened or invaded. It is hard to
believe that, if the plaintiff had been convinced of the justice of his contention,
he would have failed to assert his right to a division at the time when the
defendant was pocketing the proceeds of the loans obtained upon the security of
the Hacienda de Guitan. The probabilities are that Buenaventura realized at the
time that his hopes of sharing in this investment were doomed to
disappointment and that with full knowledge of all the facts he decided to
abandon the claim, or not assert it. However, the documents which appear on
their face to establish his right to a participation in this property remained in
existence; and in course of time said claim was made the basis of this action. The
assertion of doubtful claims, after long delay, can not be favored by the courts.
Time inevitably tends to obliterate occurrences from the memory of witnesses,
and even where the recollection appears to be entirely clear, the true clue to the
solution of a case may be hopelessly lost. These consideration constitute one of
the pillars of the doctrine long familiar in equity jurisprudence to the effect that
laches or unreasonable delay on the part of a plaintiff in seeking to enforce a
right is not only persuasive of a want of merit but may, according to the
circumstances, be destructive of the right itself. Vigilantibus non dormientibus
equitas subvenit.
The decision of the main issue relative to the hacienda renders unnecessary any
discussion of other features of the case presented in the appellant's brief. Upon
the whole it is our opinion that there was no error prejudicial to the plaintiff in
the action of the court below and the judgment is therefore affirmed, with costs
against the appellant.
22. EMILIO EMNACE, petitioner, vs. COURT OF APPEALS, ESTATE OF VICENTE
TABANAO, SHERWIN TABANAO, VICENTE WILLIAM TABANAO, JANETTE
TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA TABANAO and
VINCENT TABANAO, respondents.
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were
partners in a business concern known as Ma. Nelma Fishing Industry. Sometime
in January of 1986, they decided to dissolve their partnership and executed an
agreement of partition and distribution of the partnership properties among
them, consequent to Jacinto Divinagracias withdrawal from the partnership.[1]
Among the assets to be distributed were five (5) fishing boats, six (6) vehicles,
two (2) parcels of land located at Sto. Nio and Talisay, Negros Occidental, and
cash deposits in the local branches of the Bank of the Philippine Islands and
Prudential Bank.
Throughout the existence of the partnership, and even after Vicente Tabanaos
untimely demise in 1994, petitioner failed to submit to Tabanaos heirs any
statement of assets and liabilities of the partnership, and to render an accounting
of the partnerships finances. Petitioner also reneged on his promise to turn over
to Tabanaos heirs the deceaseds 1/3 share in the total assets of the partnership,
amounting to P30,000,000.00, or the sum of P10,000,000.00, despite formal
demand for payment thereof.[2]
Consequently, Tabanaos heirs, respondents herein, filed against petitioner an
action for accounting, payment of shares, division of assets and damages.[3] In
their complaint, respondents prayed as follows:
1. Defendant be ordered to render the proper accounting of all the assets and
liabilities of the partnership at bar; and
2. After due notice and hearing defendant be ordered to
pay/remit/deliver/surrender/yield to the plaintiffs the following:
A. No less than One Third (1/3) of the assets, properties, dividends, cash, land(s),
fishing vessels, trucks, motor vehicles, and other forms and substance of
treasures which belong and/or should belong, had accrued and/or must accrue
to the partnership;
B. No less than Two Hundred Thousand Pesos (P200,000.00) as moral damages;
C. Attorneys fees equivalent to Thirty Percent (30%) of the entire
share/amount/award which the Honorable Court may resolve the plaintiffs as
entitled to plus P1,000.00 for every appearance in court.[4]
Petitioner filed a motion to dismiss the complaint on the grounds of improper
venue, lack of jurisdiction over the nature of the action or suit, and lack of
capacity of the estate of Tabanao to sue.[5] On August 30, 1994, the trial court
denied the motion to dismiss. It held that venue was properly laid because, while
realties were involved, the action was directed against a particular person on the
basis of his personal liability; hence, the action is not only a personal action but
also an action in personam. As regards petitioners argument of lack of
jurisdiction over the action because the prescribed docket fee was not paid
considering the huge amount involved in the claim, the trial court noted that a
request for accounting was made in order that the exact value of the partnership
may be ascertained and, thus, the correct docket fee may be paid. Finally, the
trial court held that the heirs of Tabanao had a right to sue in their own names, in
view of the provision of Article 777 of the Civil Code, which states that the rights
to the succession are transmitted from the moment of the death of the
decedent.[6]
The following day, respondents filed an amended complaint,[7] incorporating the
additional prayer that petitioner be ordered to sell all (the partnerships) assets
and thereafter pay/remit/deliver/surrender/yield to the plaintiffs their
corresponding share in the proceeds thereof. In due time, petitioner filed a
manifestation and motion to dismiss,[8] arguing that the trial court did not
acquire jurisdiction over the case due to the plaintiffs failure to pay the proper
docket fees. Further, in a supplement to his motion to dismiss,[9] petitioner also
raised prescription as an additional ground warranting the outright dismissal of
the complaint.
On June 15, 1995, the trial court issued an Order,[10] denying the motion to
dismiss inasmuch as the grounds raised therein were basically the same as the
earlier motion to dismiss which has been denied. Anent the issue of prescription,
the trial court ruled that prescription begins to run only upon the dissolution of
the partnership when the final accounting is done. Hence, prescription has not
set in the absence of a final accounting. Moreover, an action based on a written
contract prescribes in ten years from the time the right of action accrues.
Petitioner filed a petition for certiorari before the Court of Appeals,[11] raising
the following issues:
I. Whether or not respondent Judge acted without jurisdiction or with grave
abuse of discretion in taking cognizance of a case despite the failure to pay the
required docket fee;
II. Whether or not respondent Judge acted without jurisdiction or with grave
abuse of discretion in insisting to try the case which involve (sic) a parcel of land
situated outside of its territorial jurisdiction;
III. Whether or not respondent Judge acted without jurisdiction or with grave
abuse of discretion in allowing the estate of the deceased to appear as party
plaintiff, when there is no intestate case and filed by one who was never
appointed by the court as administratrix of the estates; and
IV. Whether or not respondent Judge acted without jurisdiction or with grave
abuse of discretion in not dismissing the case on the ground of prescription.
On August 8, 1996, the Court of Appeals rendered the assailed decision,[12]
dismissing the petition for certiorari, upon a finding that no grave abuse of
discretion amounting to lack or excess of jurisdiction was committed by the trial
court in issuing the questioned orders denying petitioners motions to dismiss.
Not satisfied, petitioner filed the instant petition for review, raising the same
issues resolved by the Court of Appeals, namely:
I. Failure to pay the proper docket fee;
II. Parcel of land subject of the case pending before the trial court is outside the
said courts territorial jurisdiction;
III. Lack of capacity to sue on the part of plaintiff heirs of Vicente Tabanao; and
IV. Prescription of the plaintiff heirs cause of action.
It can be readily seen that respondents primary and ultimate objective in
instituting the action below was to recover the decedents 1/3 share in the
partnerships assets. While they ask for an accounting of the partnerships assets
and finances, what they are actually asking is for the trial court to compel
petitioner to pay and turn over their share, or the equivalent value thereof, from
the proceeds of the sale of the partnership assets. They also assert that until and
unless a proper accounting is done, the exact value of the partnerships assets, as
well as their corresponding share therein, cannot be ascertained. Consequently,
they feel justified in not having paid the commensurate docket fee as required by
the Rules of Court.
We do not agree. The trial court does not have to employ guesswork in
ascertaining the estimated value of the partnerships assets, for respondents
themselves voluntarily pegged the worth thereof at Thirty Million Pesos
(P30,000,000.00). Hence, this case is one which is really not beyond pecuniary
estimation, but rather partakes of the nature of a simple collection case where
the value of the subject assets or amount demanded is pecuniarily determinable.
[13] While it is true that the exact value of the partnerships total assets cannot
be shown with certainty at the time of filing, respondents can and must
ascertain, through informed and practical estimation, the amount they expect to
collect from the partnership, particularly from petitioner, in order to determine
the proper amount of docket and other fees.[14] It is thus imperative for
respondents to pay the corresponding docket fees in order that the trial court
may acquire jurisdiction over the action.[15]
Nevertheless, unlike in the case of Manchester Development Corp. v. Court of
Appeals,[16] where there was clearly an effort to defraud the government in
avoiding to pay the correct docket fees, we see no attempt to cheat the courts on
the part of respondents. In fact, the lower courts have noted their expressed
desire to remit to the court any payable balance or lien on whatever award which
the Honorable Court may grant them in this case should there be any deficiency
in the payment of the docket fees to be computed by the Clerk of Court.[17]
There is evident willingness to pay, and the fact that the docket fee paid so far is
inadequate is not an indication that they are trying to avoid paying the required
amount, but may simply be due to an inability to pay at the time of filing. This
consideration may have moved the trial court and the Court of Appeals to
declare that the unpaid docket fees shall be considered a lien on the judgment
award.
Petitioner, however, argues that the trial court and the Court of Appeals erred in
condoning the non-payment of the proper legal fees and in allowing the same to
become a lien on the monetary or property judgment that may be rendered in
favor of respondents. There is merit in petitioners assertion. The third paragraph
of Section 16, Rule 141 of the Rules of Court states that:
The legal fees shall be a lien on the monetary or property judgment in favor of
the pauper-litigant.
Respondents cannot invoke the above provision in their favor because it
specifically applies to pauper-litigants. Nowhere in the records does it appear
that respondents are litigating as paupers, and as such are exempted from the
payment of court fees.[18]
The rule applicable to the case at bar is Section 5(a) of Rule 141 of the Rules of
Court, which defines the two kinds of claims as: (1) those which are immediately
ascertainable; and (2) those which cannot be immediately ascertained as to the
exact amount. This second class of claims, where the exact amount still has to be
finally determined by the courts based on evidence presented, falls squarely
under the third paragraph of said Section 5(a), which provides:
In case the value of the property or estate or the sum claimed is less or more in
accordance with the appraisal of the court, the difference of fee shall be
refunded or paid as the case may be. (Underscoring ours)
In Pilipinas Shell Petroleum Corporation v. Court of Appeals,[19] this Court
pronounced that the above-quoted provision clearly contemplates an initial
payment of the filing fees corresponding to the estimated amount of the claim
subject to adjustment as to what later may be proved.[20] Moreover, we
reiterated therein the principle that the payment of filing fees cannot be made
contingent or dependent on the result of the case. Thus, an initial payment of the
docket fees based on an estimated amount must be paid simultaneous with the
filing of the complaint. Otherwise, the court would stand to lose the filing fees
should the judgment later turn out to be adverse to any claim of the respondent
heirs.
The matter of payment of docket fees is not a mere triviality. These fees are
necessary to defray court expenses in the handling of cases. Consequently, in
order to avoid tremendous losses to the judiciary, and to the government as well,
the payment of docket fees cannot be made dependent on the outcome of the
case, except when the claimant is a pauper-litigant.
Applied to the instant case, respondents have a specific claim 1/3 of the value of
all the partnership assets but they did not allege a specific amount. They did,
however, estimate the partnerships total assets to be worth Thirty Million Pesos
(P30,000,000.00), in a letter[21] addressed to petitioner. Respondents cannot
now say that they are unable to make an estimate, for the said letter and the
admissions therein form part of the records of this case. They cannot avoid
paying the initial docket fees by conveniently omitting the said amount in their
amended complaint. This estimate can be made the basis for the initial docket
fees that respondents should pay. Even if it were later established that the
amount proved was less or more than the amount alleged or estimated, Rule
141, Section 5(a) of the Rules of Court specifically provides that the court may
refund the excess or exact additional fees should the initial payment be
insufficient. It is clear that it is only the difference between the amount finally
awarded and the fees paid upon filing of this complaint that is subject to
adjustment and which may be subjected to a lien.
In the oft-quoted case of Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,
[22] this Court held that when the specific claim has been left for the
determination by the court, the additional filing fee therefor shall constitute a
lien on the judgment and it shall be the responsibility of the Clerk of Court or his
duly authorized deputy to enforce said lien and assess and collect the additional
fee. Clearly, the rules and jurisprudence contemplate the initial payment of filing
and docket fees based on the estimated claims of the plaintiff, and it is only when
there is a deficiency that a lien may be constituted on the judgment award until
such additional fee is collected.
Based on the foregoing, the trial court erred in not dismissing the complaint
outright despite their failure to pay the proper docket fees. Nevertheless, as in
other procedural rules, it may be liberally construed in certain cases if only to
secure a just and speedy disposition of an action. While the rule is that the
payment of the docket fee in the proper amount should be adhered to, there are
certain exceptions which must be strictly construed.[23]
In recent rulings, this Court has relaxed the strict adherence to the Manchester
doctrine, allowing the plaintiff to pay the proper docket fees within a reasonable
time before the expiration of the applicable prescriptive or reglementary period.
[24]
In the recent case of National Steel Corp. v. Court of Appeals,[25] this Court held
that:
The court acquires jurisdiction over the action if the filing of the initiatory
pleading is accompanied by the payment of the requisite fees, or, if the fees are
not paid at the time of the filing of the pleading, as of the time of full payment of
the fees within such reasonable time as the court may grant, unless, of course,
prescription has set in the meantime.
It does not follow, however, that the trial court should have dismissed the
complaint for failure of private respondent to pay the correct amount of docket
fees. Although the payment of the proper docket fees is a jurisdictional
requirement, the trial court may allow the plaintiff in an action to pay the same
within a reasonable time before the expiration of the applicable prescriptive or
reglementary period. If the plaintiff fails to comply within this requirement, the
defendant should timely raise the issue of jurisdiction or else he would be
considered in estoppel. In the latter case, the balance between the appropriate
docket fees and the amount actually paid by the plaintiff will be considered a lien
or any award he may obtain in his favor. (Underscoring ours)
Accordingly, the trial court in the case at bar should determine the proper docket
fee based on the estimated amount that respondents seek to collect from
petitioner, and direct them to pay the same within a reasonable time, provided
the applicable prescriptive or reglementary period has not yet expired. Failure to
comply therewith, and upon motion by petitioner, the immediate dismissal of the
complaint shall issue on jurisdictional grounds.
On the matter of improper venue, we find no error on the part of the trial court
and the Court of Appeals in holding that the case below is a personal action
which, under the Rules, may be commenced and tried where the defendant
resides or may be found, or where the plaintiffs reside, at the election of the
latter.[26]
Petitioner, however, insists that venue was improperly laid since the action is a
real action involving a parcel of land that is located outside the territorial
jurisdiction of the court a quo. This contention is not well-taken. The records
indubitably show that respondents are asking that the assets of the partnership
be accounted for, sold and distributed according to the agreement of the
partners. The fact that two of the assets of the partnership are parcels of land
does not materially change the nature of the action. It is an action in personam
because it is an action against a person, namely, petitioner, on the basis of his
personal liability. It is not an action in rem where the action is against the thing
itself instead of against the person.[27] Furthermore, there is no showing that
the parcels of land involved in this case are being disputed. In fact, it is only
incidental that part of the assets of the partnership under liquidation happen to
be parcels of land.
The time-tested case of Claridades v. Mercader, et al.,[28] settled this issue thus:
The fact that plaintiff prays for the sale of the assets of the partnership, including
the fishpond in question, did not change the nature or character of the action,
such sale being merely a necessary incident of the liquidation of the partnership,
which should precede and/or is part of its process of dissolution.
The action filed by respondents not only seeks redress against petitioner. It also
seeks the enforcement of, and petitioners compliance with, the contract that the
partners executed to formalize the partnerships dissolution, as well as to
implement the liquidation and partition of the partnerships assets. Clearly, it is a
personal action that, in effect, claims a debt from petitioner and seeks the
performance of a personal duty on his part.[29] In fine, respondents complaint
seeking the liquidation and partition of the assets of the partnership with
damages is a personal action which may be filed in the proper court where any of
the parties reside.[30] Besides, venue has nothing to do with jurisdiction for
venue touches more upon the substance or merits of the case.[31] As it is, venue
in this case was properly laid and the trial court correctly ruled so.
On the third issue, petitioner asserts that the surviving spouse of Vicente
Tabanao has no legal capacity to sue since she was never appointed as
administratrix or executrix of his estate. Petitioners objection in this regard is
misplaced. The surviving spouse does not need to be appointed as executrix or
administratrix of the estate before she can file the action. She and her children
are complainants in their own right as successors of Vicente Tabanao. From the
very moment of Vicente Tabanaos death, his rights insofar as the partnership was
concerned were transmitted to his heirs, for rights to the succession are
transmitted from the moment of death of the decedent.[32]
Whatever claims and rights Vicente Tabanao had against the partnership and
petitioner were transmitted to respondents by operation of law, more
particularly by succession, which is a mode of acquisition by virtue of which the
property, rights and obligations to the extent of the value of the inheritance of a
person are transmitted.[33] Moreover, respondents became owners of their
respective hereditary shares from the moment Vicente Tabanao died.[34]
A prior settlement of the estate, or even the appointment of Salvacion Tabanao
as executrix or administratrix, is not necessary for any of the heirs to acquire
legal capacity to sue. As successors who stepped into the shoes of their decedent
upon his death, they can commence any action originally pertaining to the
decedent.[35] From the moment of his death, his rights as a partner and to
demand fulfillment of petitioners obligations as outlined in their dissolution
agreement were transmitted to respondents. They, therefore, had the capacity to
sue and seek the courts intervention to compel petitioner to fulfill his obligations.
Applied in relation to Articles 1807 and 1809, which also deal with the duty to
account, the above-cited provision states that the right to demand an accounting
accrues at the date of dissolution in the absence of any agreement to the
contrary. When a final accounting is made, it is only then that prescription begins
to run. In the case at bar, no final accounting has been made, and that is precisely
what respondents are seeking in their action before the trial court, since
petitioner has failed or refused to render an accounting of the partnerships
business and assets. Hence, the said action is not barred by prescription.
In fine, the trial court neither erred nor abused its discretion when it denied
petitioners motions to dismiss. Likewise, the Court of Appeals did not commit
reversible error in upholding the trial courts orders. Precious time has been lost
just to settle this preliminary issue, with petitioner resurrecting the very same
arguments from the trial court all the way up to the Supreme Court. The litigation
of the merits and substantial issues of this controversy is now long overdue and
must proceed without further delay.
WHEREFORE, in view of all the foregoing, the instant petition is DENIED for lack
of merit, and the case is REMANDED to the Regional Trial Court of Cadiz City,
Branch 60, which is ORDERED to determine the proper docket fee based on the
estimated amount that plaintiffs therein seek to collect, and direct said plaintiffs
to pay the same within a reasonable time, provided the applicable prescriptive or
reglementary period has not yet expired. Thereafter, the trial court is ORDERED
to conduct the appropriate proceedings in Civil Case No. 416-C.
Costs against petitioner.

Finally, petitioner contends that the trial court should have dismissed the
complaint on the ground of prescription, arguing that respondents action
prescribed four (4) years after it accrued in 1986. The trial court and the Court of
Appeals gave scant consideration to petitioners hollow arguments, and rightly so.

The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and
(3) termination.[36] The partnership, although dissolved, continues to exist and
its legal personality is retained, at which time it completes the winding up of its
affairs, including the partitioning and distribution of the net partnership assets to
the partners.[37] For as long as the partnership exists, any of the partners may
demand an accounting of the partnerships business. Prescription of the said right
starts to run only upon the dissolution of the partnership when the final
accounting is done.[38]

Contrary to petitioners protestations that respondents right to inquire into the

business affairs of the partnership accrued in 1986, prescribing four (4) years
thereafter, prescription had not even begun to run in the absence of a final
accounting. Article 1842 of the Civil Code provides:

The right to an account of his interest shall accrue to any partner, or his legal
representative as against the winding up partners or the surviving partners or the
person or partnership continuing the business, at the date of dissolution, in the
absence of any agreement to the contrary.