4 RVS

E.S. LYONS v. C.W. ROSENSTOCK

March 17, 1932 | Street, J.
Nature of Partnerships
DOCTRINE: If one person is not acting for any partnership, then another cannot claim to be a participant in that transaction.

CASE SUMMARY: Elser bought a property in San Juan by getting a loan and mortgaging a lot on Carriedo St. owned by him
and Lyons. Elser paid back the loan. Lyons is now claiming that he has an interest in the San Juan estate because he owned
half of the Carriedo property. SC ruled that (1) no money from the Carriedo mortgage was ever applied to the purchase (2) no
partnership existed between them. Elser had financed the property on his own and was not acting for any partnership.

FACTS:
Henry Elser’s business is buying, selling and administering real estate (now he is dead, Rosenstock is his executor)
- Lyons joined w/ him and they split the profits 50/50
- In 1919, Lyons, a missionary, went on leave to the US and was gone for nearly 1.5 years.
o He executed a general power of attorney empowering Elser to manage and dispose of their properties at will &
to represent Lyons fully and amply
In 1920, Elser wanted to buy 1.5Msqm of land (“San Juan Estate”) for PHP 570K
- Elser purchased an option for the property (5K), paid an extension when he couldn’t raise enough money (15K)
- He obtained a loan from Uy Siuliong (50K) and managed to purchase the SJ Estate on 6/28/1920
o Uy Siuliong insisted that Elser procure the signature of the Fidelity & Surety Co.
o Fidelity & Surety Co. told Elser to first secure his liability first so:
o Elser mortgaged the equity of redemption in the property owned by him & Lyons on Carriedo St.
To develop the land, he organized a limited partnership w/ 3 associates and the name was J.K. Pickering & Co.
- The property was transferred to the company along w/ the deed
Simultaneously w/ the negotiations to purchase the SJ Estate, Elser wanted Lyons to join him & help fund the development
- Elser wrote Lyons letters saying he should resign and join him in the business
- Lyons refused (reason: his church did not like him engaging in business not related to the church)
- Elser made no more efforts
o He started looking for means to relieve the Carriedo property of the encumbrance
o He wanted to substituted the Carriedo property w/ his own property
o However, he did not push thru because Lyons told him to let the mortgage remain on the property when
he came back from the US
When Elser was concluding the purchase of the SJ Estate, he was indebted to Lyons for PHP 11K from Lyons’s profits and
earnings derived from other properties
- Elser indorsed 200 of his shares from JK Pickering to Lyons
- When Lyons returned to the PH, he accepted these and sold them for his own benefit
1/18/1921: Elser already paid back Uy Siuliong because the development was a success
Now, Lyons filed an action to recover money arguing that he has an interest in the SJ Estate because
- Elser placed a mortgage on the Carriedo property for the 50K
- Lyons, as half owner of the property, involuntarily became the owner of an undivided interest in the property acquired
partly by that money

ISSUE: W/N Lyons has an interest in the property- NO

RULING:
The risk imposed upon Lyons was negligible and no money actually deriving from the Carriedo mortgage was ever
applied to the purchase of the SJ Estate
- Elser merely subjected the property to a contingent liability and no actual liability arose
- The financing of the purchase was accomplished by Elser on his own
Lyons says that he thought the 50K was used to finance the purchase of the “Ronquillo property”
- SC: Elser was trying to buy it with a part of the 50K but did not push thru because the price went up
o When Lyons came back, he would have first asked about the status of this transaction
Elser did not act in bad faith & is not guilty of fraud
- Elser had notified Lyons thru cablegram that he mortgaged the Carriedo property
- Lyons had knew about the mortgage and consented to letting it remain on the property
NO general relation of partnership existed between the parties
- At most, Elser & Lyons are coparticipants in various transactions in real estate
o Partnership is a descriptive term of their relation in those transactions but in each case it was a particular
partnership under CC 1678
o Art. 1783. A particular partnership has for its object determinate things, their use or fruits, or specific
undertaking, or the exercise of a profession or vocation. (1678)
- In buying the SJ Estate, Elser was not acting for any partnership w/c would make Lyons a participant in the deal

DISPOSITION: Judgment AFFIRMED.