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Laguna Transportation Co. v.

SSS
Facts:
Petitioner Laguna Transpo Co. filed a petition with the CFI praying that an order be issued by the Court declaring that it is not bound to
register as a member of respondent Social Security System and, therefore, not obliged to pay to the latter the contributions required
under the Social Security Act. Respondent prayed for its dismissal due to petitioner's failure to exhaust administrative remedies, and for
a declaration that petitioner is covered by said Act, since the latter's business has been in operation for at least 2 years prior to September
1, 1957.
During trial, the stipulation of facts by both parties were:
1. That petitioner is a domestic corporation duly organized and existing under the laws of the Philippines, with principal place
of business at Biñan, Laguna;
2. That respondent is an agency created under Republic Act No. 1161, as amended by Republic Act No. 1792, with the principal
place of business at the new GSIS Bldg., corner Arroceros and Concepcion Streets, Manila, where it may be served with
summons;
3. That respondent has served notice upon the petitioner requiring it to register as member of the System and to remit the
premiums due from all the employees of the petitioner and the contribution of the latter to the System beginning the month of
September, 1957;
4. That sometime in 1949, the Biñan Transportation Co., a corporation duly registered with the Securities and Exchange
Commission, sold part of the lines and equipment it operates to Gonzalo Mercado, Artemio Mercado, Florentino Mata and
Dominador Vera Cruz;
5. That after the sale, the said vendees formed an unregistered partnership under the name of Laguna Transportation Company
which continued to operate the lines and equipment bought from the Biñan Transportation Company, in addition to new lines
which it was able to secure from the Public Service Commission;
6. That the original partners forming the Laguna Transportation Company, with the addition of two new members, organized
a corporation known as the Laguna Transportation Company, Inc., which was registered with the Securities and Exchange
Commission on June 20, 1956, and which corporation is the plaintiff now in this case;
7. That the incorporators of the Laguna Transportation Company, Inc., and their corresponding shares are as follows:
Name No. of Shares Amount Amount Paid
Subscribed

Dominador Cruz 333 shares P33,300.00 P9,160.81

Maura Mendoza 333 shares 33,300.00 9,160.81

Gonzalo Mercado 66 shares 6,600.00 1,822.49

Artemio Mercado 94 shares 9,400.00 2,565.90

Florentino Mata 110 shares 11,000.00 3,021.54

Sabina Borja 64 shares 6,400.00 1,750.00

1,000 shares P100,000.00 P27,481.55

8. That the corporation continued the same transportation business of the unregistered partnership;
9. That the plaintiff filed on August 30, 1957 an Employee's Data Record . . . and a supplemental Information Sheet . . .;
10. That prior to November 11, 1957, plaintiff requested for exemption from coverage by the System on the ground that it
started operation only on June 20, 1956, when it was registered with the Securities and Exchange Commission but on November
11, 1957, the Social Security System notified plaintiff that it was covered;
11. On November 14, 1957, plaintiff through counsel sent a letter to the Social Security System contesting the claim of the
System that plaintiff was covered, . . .
12. On November 27, 1957, Carlos Sanchez, Manager of the Production Department of the respondent System for and in behalf
of the Acting Administrator, informed plaintiff that plaintiff's business has been in actual operation for at least two years, . . .
On the basis of the foregoing stipulation of facts, the court rendered a decision the dispositive part of which reads:
Wherefore, the Court is of the opinion and so declares that the petitioner was an employer engaged in business as common
carrier which had been in operation for at least two years prior to the enactment of Republic Act No. 1161, as amended by
Republic Act 1792 and by virtue thereof, it was subject to compulsory coverage under said law. . . .

Issue: W/N Petitioner falls within the meaning of “an employer engaged in business as a common carrier” and thus is subject to the
Social Security Act.

Held:
Petitioner claims that the lower court erred in holding that it is an employer engaged in business as a common carrier which had been in
operation for at least 2 years prior to the enactment of the Social Security Act and, therefore, subject to compulsory coverage thereunder.
Section 9 of the Social Security Act, in part, provides:
SEC. 9 Compulsory Coverage. — Coverage in the System shall be compulsory upon all employees between the ages of sixteen
and sixty years, inclusive, if they have been for at least six months in the service of an employer who is a member of the System.
Provided, That the Commission may not compel any employer to become a member of the System unless he shall have been in
operation for at least two years . . . .

It is not disputed that the Laguna Transportation Company, an unregistered partnership composed of Gonzalo Mercado, Artemio
Mercado, Florentina Mata, and Dominador Vera Cruz, commenced the operation of its business as a common carrier on April 1, 1949.
These 4 original partners, with 2 others (Maura Mendoza and Sabina Borja) later converted the partnership into a corporate entity, by
registering its articles of incorporation with the Securities and Exchange Commission on June 20, 1956. The firm name "Laguna
Transportation Company" was not altered, except with the addition of the word "Inc." to indicate that petitioner was duly incorporated
under existing laws. The corporation continued the same transportation business of the unregistered partnership, using the same lines
and equipment. There was, in effect, only a change in the form of the organization of the entity engaged in the business of transportation
of passengers. Hence, said entity as an employer engaged in business, was already in operation for at least 3 years prior to the enactment
of the Social Security Act on June 18, 1954 and for at least two years prior to the passage of the amendatory act on June 21, 1957.
Petitioner argues that, since it was registered as a corporation with the Securities and Exchange Commission only on June 20, 1956, it
must be considered to have been in operation only on said date. While it is true that a corporation once formed is conferred a juridical
personality separate and district from the persons composing it, it is but a legal fiction introduced for purposes of convenience and to
subserve the ends of justice. The concept cannot be extended to a point beyond its reasons and policy, and when invoked in support of
an end subversive of this policy, will be disregarded by the courts.
If any general rule can be laid down, in the present state of authority, it is that a corporation will be looked upon as a legal
entity as a general rule, and until sufficient reason to the contrary appears; but, when the motion of legal entity is used
to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an
association of persons.
To adopt petitioner's argument would defeat, rather than promote, the ends for which the Social Security Act was enacted. An employer
could easily circumvent the statute by simply changing his form of organization every other year, and then claim exemption from
contribution to the System as required, on the theory that, as a new entity, it has not been in operation for a period of at least 2 years. the
door to fraudulent circumvention of the statute would, thereby, be opened.
Moreover, petitioner admitted that as an employer engaged in the business of a common carrier, its operation commenced on April 1,
1949 while it was a partnership and continued by the corporation upon its formation on June 20, 1956. Unlike in the conveyance made
by the Biñan Transportation Company to the partners Gonzalo Mercado, Artemio Mercado, Florentino Mata, and Dominador Vera Cruz,
no mention whatsoever is made either in the pleadings or in the stipulation of facts that the lines and equipment of the unregistered
partnership had been sold and transferred to the corporation, petitioner herein. This omission, to our mind, clearly indicates that there
was, in fact, no transfer of interest, but a mere change in the form of the organization of the employer engaged in the transportation
business, i.e., from an unregistered partnership to that of a corporation. As a rule, courts will look to the substance and not to the form.
Finally, the weight of authority supports the view that where a corporation was formed by, and consisted of members of a partnership
whose business and property was conveyed and transferred to the corporation for the purpose of continuing its business, in payment for
which corporate capital stock was issued, such corporation is presumed to have assumed partnership debts, and is prima facie liable
therefor. The reason for the rule is that the members of the partnership may be said to have simply put on a new coat, or taken on a
corporate cloak, and the corporation is a mere continuation of the partnership.

Wherefore, finding no error in the judgment of the court a quo, the same is hereby affirmed, with costs against petitioner-appellant. So
ordered.
J. M. TUASON & CO., INC., represented by it Managing PARTNER, GREGORIA ARANETA, INC., plaintiff-appellee,
vs.
QUIRINO BOLAÑOS, defendant-appellant.

This is an action originally brought in the Court of First Instance of Rizal, Quezon City Branch, to recover possession of registered land
situated in barrio Tatalon, Quezon City.

Plaintiff's complaint was amended three times with respect to the extent and description of the land sought to be recovered. The original
complaint described the land as a portion of a lot registered in plaintiff's name under Transfer Certificate of Title No. 37686 of the land
record of Rizal Province and as containing an area of 13 hectares more or less. But the complaint was amended by reducing the area of
6 hectares, after the defendant had indicated the plaintiff's surveyors the portion of land claimed and occupied by him. The second
amendment became necessary and was allowed following the testimony of plaintiff's surveyors that a portion of the area was embraced
in another certificate of title, which was plaintiff's Transfer Certificate of Title No. 37677. And still later, in the course of trial, after
defendant's surveyor and witness, Quirino Feria, had testified that the area occupied and claimed by defendant was about 13 hectares,
as shown in his Exhibit 1, plaintiff again, with the leave of court, amended its complaint to make its allegations conform to the evidence.

Defendant, in his answer, sets up prescription and title in himself thru "open, continuous, exclusive and public and notorious possession
(of land in dispute) under claim of ownership, adverse to the entire world by defendant and his predecessor in interest" from "time in-
memorial". The answer further alleges that registration of the land in dispute was obtained by plaintiff or its predecessors in interest thru
"fraud or error and without knowledge (of) or interest either personal or thru publication to defendant and/or predecessors in interest."
The answer therefore prays that the complaint be dismissed with costs and plaintiff required to reconvey the land to defendant or pay its
value.

After trial, the lower court rendered judgment for plaintiff, declaring defendant to be without any right to the land in question and
ordering him to restore possession thereof to plaintiff and to pay the latter a monthly rent of P132.62 from January, 1940, until he vacates
the land, and also to pay the costs.

Appealing directly to this court because of the value of the property involved, defendant makes the following assignment or errors:

I. The trial court erred in not dismissing the case on the ground that the case was not brought by the real property in interest.

II. The trial court erred in admitting the third amended complaint.

III. The trial court erred in denying defendant's motion to strike.

IV. The trial court erred in including in its decision land not involved in the litigation.

V. The trial court erred in holding that the land in dispute is covered by transfer certificates of Title Nos. 37686 and 37677.

Vl. The trial court erred in not finding that the defendant is the true and lawful owner of the land.

VII. The trial court erred in finding that the defendant is liable to pay the plaintiff the amount of P132.62 monthly from January,
1940, until he vacates the premises.

VIII. The trial court erred in not ordering the plaintiff to reconvey the land in litigation to the defendant.

As to the first assigned error, there is nothing to the contention that the present action is not brought by the real party in interest, that is,
by J. M. Tuason and Co., Inc. What the Rules of Court require is that an action be brought in the name of, but not necessarily by, the
real party in interest. (Section 2, Rule 2.) In fact the practice is for an attorney-at-law to bring the action, that is to file the complaint, in
the name of the plaintiff. That practice appears to have been followed in this case, since the complaint is signed by the law firm of
Araneta and Araneta, "counsel for plaintiff" and commences with the statement "comes now plaintiff, through its undersigned counsel."
It is true that the complaint also states that the plaintiff is "represented herein by its Managing Partner Gregorio Araneta, Inc.", another
corporation, but there is nothing against one corporation being represented by another person, natural or juridical, in a suit in court. The
contention that Gregorio Araneta, Inc. can not act as managing partner for plaintiff on the theory that it is illegal for two corporations to
enter into a partnership is without merit, for the true rule is that "though a corporation has no power to enter into a partnership, it
may nevertheless enter into a joint venture with another where the nature of that venture is in line with the business authorized
by its charter." (Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2 Fletcher Cyc. of Corp., 1082.) There is nothing
in the record to indicate that the venture in which plaintiff is represented by Gregorio Araneta, Inc. as "its managing partner" is not in
line with the corporate business of either of them.
Errors II, III, and IV, referring to the admission of the third amended complaint, may be answered by mere reference to section 4 of
Rule 17, Rules of Court, which sanctions such amendment. It reads:

Sec. 4. Amendment to conform to evidence. — When issues not raised by the pleadings are tried by express or implied consent
of the parties, they shall be treated in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings
as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party
at my time, even of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues
made by the pleadings, the court may allow the pleadings to be amended and shall be so freely when the presentation of the
merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such
evidence would prejudice him in maintaining his action or defense upon the merits. The court may grant a continuance to
enable the objecting party to meet such evidence.

Under this provision amendment is not even necessary for the purpose of rendering judgment on issues proved though not alleged. Thus,
commenting on the provision, Chief Justice Moran says in this Rules of Court:

Under this section, American courts have, under the New Federal Rules of Civil Procedure, ruled that where the facts shown
entitled plaintiff to relief other than that asked for, no amendment to the complaint is necessary, especially where defendant
has himself raised the point on which recovery is based, and that the appellate court treat the pleadings as amended to conform
to the evidence, although the pleadings were not actually amended. (I Moran, Rules of Court, 1952 ed., 389-390.)

Our conclusion therefore is that specification of error II, III, and IV are without merit..

Let us now pass on the errors V and VI. Admitting, though his attorney, at the early stage of the trial, that the land in dispute "is that
described or represented in Exhibit A and in Exhibit B enclosed in red pencil with the name Quirino Bolaños," defendant later changed
his lawyer and also his theory and tried to prove that the land in dispute was not covered by plaintiff's certificate of title. The evidence,
however, is against defendant, for it clearly establishes that plaintiff is the registered owner of lot No. 4-B-3-C, situate in barrio Tatalon,
Quezon City, with an area of 5,297,429.3 square meters, more or less, covered by transfer certificate of title No. 37686 of the land
records of Rizal province, and of lot No. 4-B-4, situated in the same barrio, having an area of 74,789 square meters, more or less, covered
by transfer certificate of title No. 37677 of the land records of the same province, both lots having been originally registered on July 8,
1914 under original certificate of title No. 735. The identity of the lots was established by the testimony of Antonio Manahan and Magno
Faustino, witnesses for plaintiff, and the identity of the portion thereof claimed by defendant was established by the testimony of his
own witness, Quirico Feria. The combined testimony of these three witnesses clearly shows that the portion claimed by defendant is
made up of a part of lot 4-B-3-C and major on portion of lot 4-B-4, and is well within the area covered by the two transfer certificates
of title already mentioned. This fact also appears admitted in defendant's answer to the third amended complaint.

As the land in dispute is covered by plaintiff's Torrens certificate of title and was registered in 1914, the decree of registration can no
longer be impugned on the ground of fraud, error or lack of notice to defendant, as more than one year has already elapsed from the
issuance and entry of the decree. Neither court the decree be collaterally attacked by any person claiming title to, or interest in, the land
prior to the registration proceedings. (Soroñgon vs. Makalintal,1 45 Off. Gaz., 3819.) Nor could title to that land in derogation of that of
plaintiff, the registered owner, be acquired by prescription or adverse possession. (Section 46, Act No. 496.) Adverse, notorious and
continuous possession under claim of ownership for the period fixed by law is ineffective against a Torrens title. (Valiente vs. Judge of
CFI of Tarlac,2 etc., 45 Off. Gaz., Supp. 9, p. 43.) And it is likewise settled that the right to secure possession under a decree of
registration does not prescribed. (Francisco vs. Cruz, 43 Off. Gaz., 5105, 5109-5110.) A recent decision of this Court on this point is
that rendered in the case of Jose Alcantara et al., vs. Mariano et al., 92 Phil., 796. This disposes of the alleged errors V and VI.

As to error VII, it is claimed that `there was no evidence to sustain the finding that defendant should be sentenced to pay plaintiff P132.62
monthly from January, 1940, until he vacates the premises.' But it appears from the record that that reasonable compensation for the use
and occupation of the premises, as stipulated at the hearing was P10 a month for each hectare and that the area occupied by defendant
was 13.2619 hectares. The total rent to be paid for the area occupied should therefore be P132.62 a month. It is appears from the
testimony of J. A. Araneta and witness Emigdio Tanjuatco that as early as 1939 an action of ejectment had already been filed against
defendant. And it cannot be supposed that defendant has been paying rents, for he has been asserting all along that the premises in
question 'have always been since time immemorial in open, continuous, exclusive and public and notorious possession and under claim
of ownership adverse to the entire world by defendant and his predecessors in interest.' This assignment of error is thus clearly without
merit.

Error No. VIII is but a consequence of the other errors alleged and needs for further consideration.

During the pendency of this case in this Court appellant, thru other counsel, has filed a motion to dismiss alleging that there is pending
before the Court of First Instance of Rizal another action between the same parties and for the same cause and seeking to sustain that
allegation with a copy of the complaint filed in said action. But an examination of that complaint reveals that appellant's allegation is
not correct, for the pretended identity of parties and cause of action in the two suits does not appear. That other case is one for recovery
of ownership, while the present one is for recovery of possession. And while appellant claims that he is also involved in that order action
because it is a class suit, the complaint does not show that such is really the case. On the contrary, it appears that the action seeks relief
for each individual plaintiff and not relief for and on behalf of others. The motion for dismissal is clearly without merit.

Wherefore, the judgment appealed from is affirmed, with costs against the plaintiff.

Moran vs. CA and Pecson


Facts:

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.

 Pecson and Moran entered into an agreement whereby both would contribute P15,000 each for the purpose of printing 95,000
posters
 Pecson received a commission of P l,000 a month starting on April 15, 1971 up to December 15, 1971
 On December 15, 1971, a liquidation of the accounts in the distribution and printing of the 95,000 posters would be made and
Pecson gave Moran P10,000 for which the latter issued a receipt.
 However, only a few posters were printed. Moran then executed a promissory note in the amount of P20,000 payable in 2
equal installments, 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 CFI 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.
 CFI ruled 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, 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.”
 CFI ordered 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.
 CA ordered Moran to pay (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)

Issue:

1. W/N the award of P47,000 as speculative damages / unrealized profit is justifiable – No

 The award of P47,000 as speculative damages has no basis. 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 abovementioned terms and conditions.
 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 which interpreted Art. 2200 of the Civil Code, 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 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: 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, in his best business judgment, felt that it would be a losing venture to go on with the
printing of the agreed 95,000 copies of the posters.
 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.

2. W/N the award of P8000 as supposed eight months is justifed – No

 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.

3. W/N CA erred in holding petitioner liable to the private respondent in the sum of P7000 as supposed return of investment –
Yes

 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 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.

WHEREFORE, the petition is GRANTED


Leyte-Samar Sales Co. v CEA

Facts:
 Hall, Brown and Roxas were awarded the amount of P31,589.14 against defendants, affirmed by the CA.
 The decision having become final, the sheriff sold at auction on June 9, 1951 to Robert Dorfe and Pepito
Asturias "all the rights, interests, titles and participation" of the defendants in certain buildings and properties
described in the certificate, for a total price of eight thousand and one hundred pesos. But on June 4, 1951
Olegario Lastrilla filed in the case a motion, wherein he claimed to be the owner by purchase on September
29, 1949, of all the "shares and interests" of defendant Fred Brown in the FELCO, and requested "under the
law of preference of credits" that the sheriff be required to retain in his possession so much of the deeds of
the auction sale as may be necessary "to pay his right". Over the plaintiffs' objection the judge in his order of
June 13, 1951, granted Lastrilla's motion by requiring the sheriff to retain 17 per cent of the money "for
delivery to the assignee, administrator or receiver" of the FELCO. And on motion of Lastrilla, the court on
August 14, 1951, modified its order of delivery and merely declared that Lastrilla was entitled to 17 per cent
of the properties sold, saying in part:

It is from this declaration and the subsequent orders to enforce it1 that the petitioners seek relief by certiorari, their
position being the such orders were null and void for lack of jurisdiction. At their request a writ of preliminary
injunction was issued here.

The record is not very clear, but there are indications that Fred Brown (like Arnold Hall and Jean Roxas) was a
partner of the FELCO, was defendant in Civil Case No. 193 as such partner, and that the properties sold at auction
actually belonged to the FELCO partnership and the partners. We shall also assume that the sale made to Lastrilla
on September 29, 1949, of all the shares of Fred Brown in the FELCO was valid. (Remember that judgment in this
case was entered in the court of first instance a year before.)

The result then, is that on June 9, 1951 when the sale was effected of the properties of FELCO to Roberto Dorfe
and Pepito Asturias, Lastilla was already a partner of FELCO.

Now, does Lastrilla have any proper claim to the proceeds of the sale? If he was a creditor of the FELCO, perhaps
or maybe. But he was no. The partner of a partnership is not a creditor of such partnership for the amount of his
shares. That is too elementary to need elaboration.

Lastrilla's theory, and the lower court's seems to be: inasmuch as Lastrilla had acquired the shares of Brown is
September, 1949, i.e., before the auction sale and he was not a party to the litigation, such shares could not have
been transferred to Dorfe and Austrilla.

Granting arguendo that the auction sale and not included the interest or portion of the FELCO properties
corresponding to the shares of Lastrilla in the same partnership (17%), the resulting situation would be — at most —
that the purchasers Dorfe and Austrias will have to recognized dominion of Lastrillas over 17 per cent of the
properties awarded to them.2 So Lastrilla acquired no right to demand any part of the money paid by Dorfe and
Austrias to he sheriff any part of the money paid by Dorfe and Austrias to the sheriff for the benefit of FELCO and
Tomassi, the plaintiffs in that case, for the reason that, as he says, his shares (acquired from Brown) could not have
been and were not auctioned off to Dorfe and Austrias.

Supposing however that Lastrillas shares have been actually (but unlawfully) sold by the sheriff (at the instance of
plaintiffs) to Dorfe and Austrias, what is his remedy? Section 15, Rule 39 furnishes the answer.

Precisely, respondents argue, Lastrilla vindicated his claim by proper action, i.e., motion in the case. We ruled once
that "action" in this section means action as defined in section 1, Rule 2.3 Anyway his remedy is to claim "the
property", not the proceeds of the sale, which the sheriff is directed by section 14, Rule 39 to deliver unto the
judgment creditors.

In other words, the owner of property wrongfully sold may not voluntarily come to court, and insist, "I approve the
sale, therefore give me the proceeds because I am the owner". The reason is that the sale was made for the
judgment creditor (who paid for the fees and notices), and not for anybody else.
On this score the respondent judge's action on Lastrilla's motion should be declared as in excess of jurisdiction,
which even amounted to want of jurisdiction, which even amounted to want of jurisdiction, considering specially that
Dorfe and Austrias, and the defendants themselves, had undoubtedly the right to be heard—but they were not
notified.4

Why was it necessary to hear them on the merits of Lastrilla's motion?

Because Dorfe and Austrillas might be unwilling to recognized the validity of Lastrilla's purchase, or, if valid, they
may want him not to forsake the partnership that might have some obligations in connection with the partnership
properties. And what is more important, if the motion is granted, when the time for redemptioner seventeen per cent
(178%) less than amount they had paid for the same properties.

The defendants Arnold Hall and Jean Roxas, eyeing Lastrilla's financial assets, might also oppose the substitution
by Lastrilla of Fred Brown, the judgment against them being joint and several. They might entertain misgivings about
Brown's slipping out of their common predicament through the disposal of his shares.

Lastly, all the defendants would have reasonable motives to object to the delivery of 17 per cent of the proceeds to
Lustrial, because it is so much money deducted, and for which the plaintiffs might as another levy on their other
holdings or resources. Supposing of course, there was no fraudulent collusion among them.

Now, these varied interest of necessity make Dorfe, Asturias and the defendants indispensable parties to the motion
of Lastrilla — granting it was step allowable under our regulations on execution. Yet these parties were not notified,
and obviously took no part in the proceedings on the motion.

A valid judgment cannot be rendered where there is a want of necessary parties, and a court cannot
properly adjudicate matters involved in a suit when necessary and indispensable parties to the proceedings
are not before it. (49 C.J.S., 67.)

Indispensable parties are those without whom the action cannot be finally determined. In a case for recovery
of real property, the defendant alleged in his answer that he was occupying the property as a tenant of a
third person. This third person is an indispensable party, for, without him, any judgment which the plaintiff
might obtain against the tenant would have no effectiveness, for it would not be binding upon, and cannot be
executed against, the defendant's landlord, against whom the plaintiff has to file another action if he desires
to recover the property effectively. In an action for partition of property, each co-owner is an indispensable
party. (Moran, Comments, 1952 ed. Vol. I, p. 56.) (Emphasis supplied.)

Wherefore, the orders of the court recognizing Lastrilla's right and ordering payment to him of a part of the proceeds
were patently erroneous, because promulgated in excess or outside of its jurisdiction. For this reason the
respondents' argument resting on plaintiffs' failure to appeal from the orders on time, although ordinarily decisive,
carries no persuasive force in this instance.

For as the former Chief Justice Dr. Moran has summarized in his Comments, 1952 ed. Vol. II, p. 168 —

. . . And in those instances wherein the lower court has acted without jurisdiction over the subject-matter, or
where the order or judgment complained of is a patent nullity, courts have gone even as far as to disregard
completely the questions of petitioner's fault, the reason being, undoubtedly, that acts performed with
absolute want of jurisdiction over the subject-matter are void ab initio and cannot be validated by consent,
express or implied, of the parties. Thus, the Supreme Court granted a petition for certiorari and set aside an
order reopening a cadastral case five years after the judgment rendered therein had become final. In
another case, the Court set aside an order amending a judgment acquired a definitive character. And still in
another case, an order granting a review of a decree of registration issued more than a year ago had been
declared null void. In all these case the existence of the right to appeal has been recitals was rendered
without any trial or hearing, and the Supreme Court, in granting certiorari, said that the judgment was by its
own recitals a patent nullity, which should be set aside though an appeal was available but was not availed
of. . . .
Invoking our ruling in Melocotones vs. Court of First Instance, (57 Phil., 144), wherein we applied the theory of
laches to petitioners' 3-years delay in requesting certiorari, respondents point out that whereas the orders
complained of herein were issued in June 13, 1951 and August 14, 1951 this special civil action was not filed until
August 1952. It should be observed that the order of June 13 was superseded by that of August 14, 1951. The last
order merely declared "que el 17 por ciento de la propiedades vendidas en publica subasta pertenece at Sr. Lastrilla
y este tiene derecho a dicha porcion." This does not necessarily mean that 17 per cent of the money had to be
delivered to him. It could mean, as hereinbefore indicated, that the purchasers of the property (Dorfe and Asturias)
had to recognize Lastrilla's ownership. It was only on April 16, 1952 (Annex N) that the court issued an order
directing the sheriff "to tun over" to Lastrilla "17 per cent of the total proceeds of the auction sale". There is the order
that actually prejudiced the petitioners herein, and they fought it until the last order of July 10,. 1952 (Annex Q).
Surely a month's delay may not be regarded as laches.

In view of the foregoing, it is our opinion, and we so hold, that all orders of the respondents judge requiring delivery
of 17 per cent of the proceeds of the auction sale to respondent Olegario Lastrilla are null and void; and the costs of
this suit shall be taxed against the latter. The preliminary injunction heretofore issued is made permanent. So
ordered.