render its Decision dated 17 September 2001, discounting the existence of
178782 September 21, 2011
sufficient evidence from which the income, assets and the supposed
dissolution of the joint venture can be adequately reckoned. Upon the
finding, however, that the Spouses Jaso had been nevertheless subrogated
to Biondo’s rights in the business in view of their valid acquisition of the
latter’s share as capitalist partner,10 the RTC disposed of the case in the
following wise:
WHEREFORE, defendants are ordered to submit to plaintiffs a complete
accounting and inventory of the assets and liabilities of the joint venture
from its inception to the present, to allow plaintiffs access to the books and
accounting records of the joint venture, to deliver to plaintiffs their share in
the profits, if any, and to pay the plaintiffs the amount of ₱20,000. for moral
damages. The claims for exemplary damages and attorney’s fees are
denied for lack of basis.11
On appeal before the CA, the foregoing decision was set aside in the herein
assailed Decision dated 30 April 2007, upon the following findings and
conclusions: (a) the Spouses Jaso validly acquired Biondo’s share in the
business which had been transferred to and continued its operations at 66-C
Cenacle Drive, Sanville Subdivision, Project 6, Quezon City and not
dissolved as claimed by the Spouses Realubit; (b) absent showing of
Josefina’s knowledge and consent to the transfer of Biondo’s share, Eden
cannot be considered as a partner in the business, pursuant to Article 1813
of the Civil Code of the Philippines; (c) while entitled to Biondo’s share in the
profits of the business, Eden cannot, however, interfere with the
management of the partnership, require information or account of its
transactions and inspect its books; (d) the partnership should first be
dissolved before Eden can seek an accounting of its transactions and
demand Biondo’s share in the business; and, (e) the evidence adduced
before the RTC do not support the award of moral damages in favor of the
Spouses Jaso.12
The Spouses Realubit’s motion for reconsideration of the foregoing decision
was denied for lack of merit in the CA’s 28 June 2007 Resolution,13 hence,
this petition.
The Issues
The Spouses Realubit urge the reversal of the assailed decision upon the
negative of the following issues, to wit:
A. WHETHER OR NOT THERE WAS A VALID ASSIGNMENT OF RIGHTS
TO THE JOINT VENTURE.
B. WHETHER THE COURT MAY ORDER PETITIONER [JOSEFINA
REALUBIT] AS PARTNER IN THE JOINT VENTURE TO RENDER [A]N
ACCOUNTING TO ONE WHO IS NOT A PARTNER IN SAID JOINT
VENTURE.
C. WHETHER PRIVATE RESPONDENTS [SPOUSES JASO] HAVE ANY
RIGHT IN THE JOINT VENTURE AND IN THE SEPARATE ICE BUSINESS
OF PETITIONER[S].14
The Court’s Ruling
We find the petition bereft of merit.
The Spouses Realubit argue that, in upholding its validity, both the RTC and
the CA inordinately gave premium to the notarization of the 27 June 1997
Deed of Assignment executed by Biondo in favor of the Spouses Jaso.
Calling attention to the latter’s failure to present before the RTC said
assignor or, at the very least, the witnesses to said document, the Spouses
Realubit maintain that the testimony of Rolando Diaz, the Notary Public
before whom the same was acknowledged, did not suffice to establish its
authenticity and/or validity. They insist that notarization did not automatically
and conclusively confer validity on said deed, since it is still entirely possible
that Biondo did not execute said deed or, for that matter, appear before said
notary public.15 The dearth of merit in the Spouses Realubit’s position is,
however, immediately evident from the settled rule that documents
acknowledged before notaries public are public documents which are
admissible in evidence without necessity of preliminary proof as to their
authenticity and due execution.16
It cannot be gainsaid that, as a public document, the Deed of Assignment
Biondo executed in favor of Eden not only enjoys a presumption of
regularity17 but is also considered prima facie evidence of the facts therein
stated.18 A party assailing the authenticity and due execution of a notarized
document is, consequently, required to present evidence that is clear,
convincing and more than merely preponderant.19 In view of the Spouses
Realubit’s failure to discharge this onus, we find that both the RTC and the
CA correctly upheld the authenticity and validity of said Deed of Assignment
G.R. No.
JOSEFINA P. REALUBIT, Petitioner,
vs.
PROSENCIO D. JASO and EDEN G. JASO, Respondents.
DECISION
PEREZ, J.:
The validity as well as the consequences of an assignment of rights in a
joint venture are at issue in this petition for review filed pursuant to Rule 45
of the 1997 Rules of Civil Procedure,1 assailing the 30 April 2007 Decision2
rendered by the Court of Appeals’ (CA) then Twelfth Division in CA-G.R. CV
No. 73861,3 the dispositive portion of which states:
WHEREFORE, the Decision appealed from is SET ASIDE and we order the
dissolution of the joint venture between defendant-appellant Josefina
Realubit and Francis Eric Amaury Biondo and the subsequent conduct of
accounting, liquidation of assets and division of shares of the joint venture
business.
Let a copy hereof and the records of the case be remanded to the trial court
for appropriate proceedings.4
The Facts
On 17 March 1994, petitioner Josefina Realubit (Josefina) entered into a
Joint Venture Agreement with Francis Eric Amaury Biondo (Biondo), a
French national, for the operation of an ice manufacturing business. With
Josefina as the industrial partner and Biondo as the capitalist partner, the
parties agreed that they would each receive 40% of the net profit, with the
remaining 20% to be used for the payment of the ice making machine which
was purchased for the business.5 For and in consideration of the sum of
₱500,000.00, however, Biondo subsequently executed a Deed of
Assignment dated 27 June 1997, transferring all his rights and interests in
the business in favor of respondent Eden Jaso (Eden), the wife of
respondent Prosencio Jaso.6 With Biondo’s eventual departure from the
country, the Spouses Jaso caused their lawyer to send Josefina a letter
dated 19 February 1998, apprising her of their acquisition of said
Frenchman’s share in the business and formally demanding an accounting
and inventory thereof as well as the remittance of their portion of its profits.7
Faulting Josefina with unjustified failure to heed their demand, the Spouses
Jaso commenced the instant suit with the filing of their 3 August 1998
Complaint against Josefina, her husband, Ike Realubit (Ike), and their
alleged dummies, for specific performance, accounting, examination, audit
and inventory of assets and properties, dissolution of the joint venture,
appointment of a receiver and damages. Docketed as Civil Case No. 98-
0331 before respondent Branch 257 of the Regional Trial Court (RTC) of
Parañaque City, said complaint alleged, among other matters, that the
Spouses Realubit had no gainful occupation or business prior to their joint
venture with Biondo; that with the income of the business which earned not
less than ₱3,000.00 per day, they were, however, able to acquire the two-
storey building as well as the land on which the joint venture ’s ice plant
stands, another building which they used as their office and/or residence
and six (6) delivery vans; and, that aside from appropriating for themselves
the income of the business, the Spouses Realubit have fraudulently
concealed the funds and assets thereof thru their relatives, associates or
dummies.8
Served with summons, the Spouses Realubit filed their Answer dated 21
October 1998, specifically denying the material allegations of the foregoing
complaint. Claiming that they have been engaged in the tube ice trading
business under a single proprietorship even before their dealings with
Biondo, the Spouses Realubit, in turn, averred that their said business
partner had left the country in May 1997 and could not have executed the
Deed of Assignment which bears a signature markedly different from that
which he affixed on their Joint Venture Agreement; that they refused the
Spouses Jaso’s demand in view of the dubious circumstances surrounding
their acquisition of Biondo’s share in the business which was established at
Don Antonio Heights, Commonwealth Avenue, Quezon City; that said
business had already stopped operations on 13 January 1996 when its plant
shut down after its power supply was disconnected by MERALCO for non-
payment of utility bills; and, that it was their own tube ice trading business
which had been moved to 66-C Cenacle Drive, Sanville Subdivision, Project
6, Quezon City that the Spouses Jaso mistook for the ice manufacturing
business established in partnership with Biondo.9
The issues thus joined and the mandatory pre-trial conference subsequently
terminated, the RTC went on to try the case on its merits and, thereafter, to
recognized exceptions: (1) when the conclusion is a finding grounded
entirely on speculation, surmises and conjectures; (2) when the inference
made is manifestly mistaken, absurd or impossible; (3) where there is a
grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6)
when the CA, in making its findings, went beyond the issues of the case and
the same is contrary to the admissions of both appellant and appellee; (7)
when the findings are contrary to those of the trial court; (8) when the
findings of fact are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as in the
petitioners' main and reply briefs are not disputed by the respondents; and,
(10) when the findings of fact of the CA are premised on the supposed
absence of evidence and contradicted by the evidence on record.40
Unfortunately for the Spouses Realubit’s cause, not one of the foregoing
exceptions applies to the case.
WHEREFORE, the petition is DENIED for lack of merit and the assailed CA
Decision dated 30 April 2007 is, accordingly, AFFIRMED in toto.
SO ORDERED.
G.R. No. L-26937 October 5, 1927
PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
SEVERO EUGENIO LO, ET AL., defendants.
SEVERIO EUGENIO LO, NG KHEY LING and YEP SENG, appellants.
Jose Lopez Vito for appellants.
Roman Lacson for appellee.
VILLAMOR, J.:
On September 29, 1916, the appellants Severo Eugenio Lo and Ng Khey
Ling, together with J. A. Say Lian Ping, Ko Tiao Hun, On Yem Ke Lam and
Co Sieng Peng formed a commercial partnership under the name of "Tai
Sing and Co.," with a capital of P40,000 contributed by said partners. In the
articles of copartnership, Exhibit A, it appears that the partnership was to
last for five years from after the date of its organization, and that its purpose
was to do business in the City of Iloilo, Province of Iloilo, or in any other part
of the Philippine Islands the partners might desire, under the name of "Tai
Sing & Co.," for the purchase and sale of merchandise, goods, and native,
as well as Chinese and Japanese, products, and to carry on such business
and speculations as they might consider profitable. One of the partners, J.
A. Say Lian Ping was appointed general manager of the partnership, with
the appointed general manager of the partnership, with the powers specified
in said articles of copartnership.
On June 4, 1917, general manager A. Say Lian Ping executed a power of
attorney (Exhibit C-1) in favor of A. Y. Kelam, authorizing him to act in his
stead as manager and administrator of "Tai Sing & Co.," on July 26, 1918,
for, and obtained a loan of P8,000 in current account from the plaintiff bank.
(Exhibit C). As security for said loan, he mortgaged certain personal
property of "Tai Sing & Co., (Exhibit C.)
This credit was renew several times and on March 25, 1919, A. Y. Kelam, as
attorney-in-fact of "Tai Sing & Co., executed a chattel mortgage in favor of
plaintiff bank as security for a loan of P20,000 with interest (Exhibit D). This
mortgage was again renewed on April 16, 1920 and A. Y. Kelam, as
attorney-in-fact of "Tai Sing & Co., executed another chattel mortgage for
the said sum of P20,000 in favor of plaintiff bank. (Exhibit E.) According to
this mortgage contract, the P20,000 loan was to earn 9 per cent interest per
annum.
On April 20, 1920, Yap Seng, Severo Eugenio Lo, A. Y. Kelam and Ng Khey
Ling, the latter represented by M. Pineda Tayenko, executed a power of
attorney in favor of Sy Tit by virtue of which Sy Tit, representing "Tai Sing &
Co., obtained a credit of P20,000 from plaintiff bank on January 7, 1921,
executing a chattel mortgage on certain personal property belonging to "Tai
Sing & Co.
Defendants had been using this commercial credit in a current account with
the plaintiff bank, from the year 1918, to May 22, 1921, and the debit
balance of this account, with interest to December 31, 1924, is as follows:
TAI SING & CO.
upon the combined strength of the above-discussed disputable
presumptions and the testimonies elicited from Eden20 and Notary Public
Rolando Diaz.21 As for the Spouses’ Realubit’s bare assertion that Biondo’s
signature on the same document appears to be forged, suffice it to say that,
like fraud,22 forgery is never presumed and must likewise be proved by
clear and convincing evidence by the party alleging the same.23 Aside from
not being borne out by a comparison of Biondo’s signatures on the Joint
Venture Agreement24 and the Deed of Assignment,25 said forgery is,
moreover debunked by Biondo’s duly authenticated certification dated 17
November 1998, confirming the transfer of his interest in the business in
favor of Eden.26
Generally understood to mean an organization formed for some temporary
purpose, a joint venture is likened to a particular partnership or one which
"has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation."27 The rule is
settled that joint ventures are governed by the law on partnerships28 which
are, in turn, based on mutual agency or delectus personae.29 Insofar as a
partner’s conveyance of the entirety of his interest in the partnership is
concerned, Article 1813 of the Civil Code provides as follows:
Art. 1813. A conveyance by a partner of his whole interest in the partnership
does not itself dissolve the partnership, or, as against the other partners in
the absence of agreement, entitle the assignee, during the continuance of
the partnership, to interfere in the management or administration of the
partnership business or affairs, or to require any information or account of
partnership transactions, or to inspect the partnership books; but it merely
entitles the assignee to receive in accordance with his contracts the profits
to which the assigning partners would otherwise be entitled. However, in
case of fraud in the management of the partnership, the assignee may avail
himself of the usual remedies.
In the case of a dissolution of the partnership, the assignee is entitled to
receive his assignor’s interest and may require an account from the date
only of the last account agreed to by all the partners.
From the foregoing provision, it is evident that "(t)he transfer by a partner of
his partnership interest does not make the assignee of such interest a
partner of the firm, nor entitle the assignee to interfere in the management of
the partnership business or to receive anything except the assignee’s
profits. The assignment does not purport to transfer an interest in the
partnership, but only a future contingent right to a portion of the ultimate
residue as the assignor may become entitled to receive by virtue of his
proportionate interest in the capital."30 Since a partner’s interest in the
partnership includes his share in the profits,31 we find that the CA
committed no reversible error in ruling that the Spouses Jaso are entitled to
Biondo’s share in the profits, despite Juanita’s lack of consent to the
assignment of said Frenchman’s interest in the joint venture. Although Eden
did not, moreover, become a partner as a consequence of the assignment
and/or acquire the right to require an accounting of the partnership
business, the CA correctly granted her prayer for dissolution of the joint
venture conformably with the right granted to the purchaser of a partner ’s
interest under Article 1831 of the Civil Code.32 1âwphi1
Considering that they involve questions of fact, neither are we inclined to
hospitably entertain the Spouses Realubit’s insistence on the supposed fact
that Josefina’s joint venture with Biondo had already been dissolved and
that the ice manufacturing business at 66-C Cenacle Drive, Sanville
Subdivision, Project 6, Quezon City was merely a continuation of the same
business they previously operated under a single proprietorship. It is well-
entrenched doctrine that questions of fact are not proper subjects of appeal
by certiorari under Rule 45 of the Rules of Court as this mode of appeal is
confined to questions of law.33 Upon the principle that this Court is not a
trier of facts, we are not duty bound to examine the evidence introduced by
the parties below to determine if the trial and the appellate courts correctly
assessed and evaluated the evidence on record.34 Absent showing that the
factual findings complained of are devoid of support by the evidence on
record or the assailed judgment is based on misapprehension of facts, the
Court will limit itself to reviewing only errors of law.35
Based on the evidence on record, moreover, both the RTC36 and the CA37
ruled out the dissolution of the joint venture and concluded that the ice
manufacturing business at the aforesaid address was the same one
established by Juanita and Biondo. As a rule, findings of fact of the CA are
binding and conclusive upon this Court,38 and will not be reviewed or
disturbed on appeal39 unless the case falls under any of the following
Appellants admit, and it appears from the context of Exhibit A, that the
defendant association formed by the defendants is a general partnership, as
defined in article 126 of the Code Commerce. This partnership was
registered in the mercantile register of the Province of Iloilo. The only
anomaly noted in its organization is that instead of adopting for their firm
name the names of all of the partners, of several of them, or only one of
them, to be followed in the last two cases, by the words "and to be followed
in the last two cases, by the words "and company" the partners agreed upon
"Tai Sing & Co." as the firm name.
In the case of Hung-Man-Yoc, under the name of Kwong-Wo-Sing vs.
Kieng-Chiong-Seng, cited by appellants, this court held that, as the
company formed by defendants had existed in fact, though not in law due to
the fact that it was not recorded in the register, and having operated and
contracted debts in favor of the plaintiff, the same must be paid by
someone. This applies more strongly to the obligations contracted by the
defendants, for they formed a partnership which was registered in the
mercantile register, and carried on business contracting debts with the
plaintiff bank. The anomalous adoption of the firm name above noted does
not affect the liability of the general partners to third parties under article 127
of the Code of Commerce. And the Supreme Court so held in the case of Jo
Chung Cang vs. Pacific Commercial Co., (45 Phil., 142), in which it said that
the object of article 126 of the Code of Commerce in requiring a general
partnership to transact business under the name of all its members, of
several of them, or of one only, is to protect the public from imposition and
fraud; and that the provision of said article 126 is for the protection of the
creditors rather than of the partners themselves. And consequently the
doctrine was enunciated that the law must be unlawful and unenforceable
only as between the partners and at the instance of the violating party, but
not in the sense of depriving innocent parties of their rights who may have
dealt with the offenders in ignorance of the latter having violated the law;
and that contracts entered into by commercial associations defectively
organized are valid when voluntarily executed by the parties, and the only
question is whether or not they complied with the agreement. Therefore, the
defendants cannot invoke in their defense the anomaly in the firm name
which they themselves adopted.
As to the alleged death of the manager of the company, Say Lian Ping,
before the attorney-in-fact Ou Yong Kelam executed Exhibits C, D and E,
the trial court did not find this fact proven at the hearing. But even supposing
that the court had erred, such an error would not justify the reversal of the
judgment, for two reasons at least: (1) Because Ou Yong Kelam was a
partner who contracted in the name of the partnership, without any objection
of the other partners; and (2) because it appears in the record that the
appellant-partners Severo Eugenio Lo, Ng Khey Ling and Yap Seng,
appointed Sy Tit as manager, and he obtained from the plaintiff bank the
credit in current account, the debit balance of which is sought to be
recovered in this action.
Appellants allege that such of their property as is not included in the
partnership assets cannot-be seized for the payment of the debts contracted
by the partnership until after the partnership property has been exhausted.
The court found that the partnership property described in the mortgage
Exhibit F no loner existed at the time of the filing of the herein complaint nor
has its existence been proven, nor was it offered to the plaintiff for sale. We
find no just reason to reverse this conclusion of the trial court, and this being
so, it follows that article 237 of the Code of Commerce, invoked by the
appellant, can in no way have any application here.
Appellants also assign error to the action of the trial court in ordering them
to pay plaintiff, jointly and severally, the sums claimed with 9 per cent
interest on P16,518.74, owing from them.
The judgment against the appellants is in accordance with article 127 of the
Code of Commerce which provides that all the members of a general
partnership, be they managing partners thereof or not, shall be personally
and solidarily liable with all their property, for the results of the transactions
made in the name and for the account of the partnership, under the
signature of the latter, and by a person authorized to use it.
As to the amount of the interest suffice it to remember that the credit in
current account sued on in this case as been renewed by the parties in such
a way that while it appears in the mortgage Exhibit D executed on March 25,
1919 by the attorney-in-fact Ou Yong Kelam that the P20,000 credit would
earn 8 per cent interest annually, yet from that executed on April 16, 1920,
Exhibit E, it appears that the P20,000 would earn 9 per cent interest per
To your outstanding account (C. O. D.) with us o
Interest on same from June 30, 1922 to Decemb
per annum
This total is the sum claimed in the complaint, together with interest on the
P16,518.74 debt, at 9 per cent per annum from January 1, 1925 until fully
paid, with the costs of the trial.
Defendant Eugenio Lo sets up, as a general defense, that "Tai Sing & Co.
was not a general partnership, and that the commercial credit in current
account which "Tai Sing & Co. obtained from the plaintiff bank had not been
authorized by the board of directors of the company, nor was the person
who subscribed said contract authorized to make the same, under the article
of copartnership. The other defendants, Yap Sing and Ng Khey Ling,
answered the complaint denying each and every one of the allegations
contained therein.
After the hearing, the court found:
(1) That defendants Eugenio Lo, Ng Khey Ling and Yap Seng Co., Sieng
Peng indebted to plaintiff Philippine National Bank in sum of P22,595.26 to
July 29, 1926, with a daily interest of P4.14 on the balance on account of the
partnership "Tai Sing & Co. for the sum of P16,518.74 until September 9,
1922;
(2) Said defendants are ordered jointly and severally to pay the Philippine
National Bank the sum of P22,727.74 up to August 31, 1926, and from the
date, P4.14 daily interest on the principal; and
(3) The defendants are furthermore ordered to pay the costs of the
action.1awph!l.net
Defendants appealed, making the following assignments of error:
I. The trial court erred in finding that article 126 of the Code of Commerce at
present in force is not mandatory.
II. The trial court erred in finding that the partnership agreement of "Tai Sing
& Co., (Exhibit A), is in accordance with the requirements of article 125 of
the Code of Commerce for the organization of a regular partnership.
III. The trial court erred in not admitting J. A. Sai Lian Ping's death in China
in November, 1917, as a proven fact.
IV. The trial court erred in finding that the death of J. A. Say Lian Ping
cannot extinguish the defendants' obligation to the plaintiff bank, because
the last debt incurred by the commercial partnership "Tai Sing & Co., was
that evidence by Exhibit F, signed by Sy Tit as attorney-in-fact of the
members of "Tai Sing & Co., by virtue of Exhibit G.
V. The trial court erred in not finding that plaintiff bank was not able to collect
its credit from the goods of "Tai Sing & Co., given as security therefor
through its own fault and negligence; and that the action brought by plaintiff
is a manifest violation of article 237 of the present Code of Commerce.
VI. The trial court erred in finding that the current account of "Tai Sing & Co.
with plaintiff bank shows a debit balance of P16,518.74, which in addition to
interest at 9 per cent per annum from July 29, 1926, amount to P16,595.26,
with a daily interest of P4.14 on the sum of P16,518.74.
VII. The trial court erred in ordering the defendants appellants to pay jointly
and severally to the Philippine National Bank the sum of P22,727.74 up to
August 31, 1926, and interest on P16,518.74 from that date until fully paid,
with the costs of the action.
VIII. The trial court erred in denying the motion for a new trial filed by
defendants-appellants.
name of a law firm necessarily Identifies the individual members of the firm.
7 pledge, Exhibit F, executed by "Tai Sing & Co., represented by the attorney-
6. The continued use of a deceased partner's name in the firm name of law
partnerships has been consistently allowed by U.S. Courts and is an
accepted practice in the legal profession of most countries in the world.8
The question involved in these Petitions first came under consideration by
this Court in 1953 when a law firm in Cebu (the Deen case) continued its
practice of including in its firm name that of a deceased partner, C.D.
Johnston. The matter was resolved with this Court advising the firm to desist
from including in their firm designation the name of C. D. Johnston, who has
long been dead."
The same issue was raised before this Court in 1958 as an incident in G. R.
No. L-11964, entitled Register of Deeds of Manila vs. China Banking
Corporation. The law firm of Perkins & Ponce Enrile moved to intervene as
amicus curiae. Before acting thereon, the Court, in a Resolution of April 15,
1957, stated that it "would like to be informed why the name of Perkins is
still being used although Atty. E. A. Perkins is already dead." In a
Manifestation dated May 21, 1957, the law firm of Perkins and Ponce Enrile,
raising substantially the same arguments as those now being raised by
petitioners, prayed that the continued use of the firm name "Perkins &
Ponce Enrile" be held proper.
On June 16, 1958, this Court resolved: têñ.£îhqwâ£
After carefully considering the reasons given by Attorneys Alfonso Ponce
Enrile and Associates for their continued use of the name of the deceased
E. G. Perkins, the Court found no reason to depart from the policy it adopted
in June 1953 when it required Attorneys Alfred P. Deen and Eddy A. Deen of
Cebu City to desist from including in their firm designation, the name of C.
D. Johnston, deceased. The Court believes that, in view of the personal and
confidential nature of the relations between attorney and client, and the high
standards demanded in the canons of professional ethics, no practice
should be allowed which even in a remote degree could give rise to the
possibility of deception. Said attorneys are accordingly advised to drop the
name "PERKINS" from their firm name.
Petitioners herein now seek a re-examination of the policy thus far
enunciated by the Court.
The Court finds no sufficient reason to depart from the rulings thus laid
down.
A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and
"Ozaeta, Romulo, De Leon, Mabanta and Reyes" are partnerships, the use
in their partnership names of the names of deceased partners will run
counter to Article 1815 of the Civil Code which provides: têñ.£îhqwâ£
Art. 1815. Every partnership shall operate under a firm name, which may or
may not include the name of one or more of the partners.
Those who, not being members of the partnership, include their names in
the firm name, shall be subject to the liability, of a partner.
It is clearly tacit in the above provision that names in a firm name of a
partnership must either be those of living partners and. in the case of non-
partners, should be living persons who can be subjected to liability. In fact,
Article 1825 of the Civil Code prohibits a third person from including his
name in the firm name under pain of assuming the liability of a partner. The
heirs of a deceased partner in a law firm cannot be held liable as the old
members to the creditors of a firm particularly where they are non-lawyers.
Thus, Canon 34 of the Canons of Professional Ethics "prohibits an
agreement for the payment to the widow and heirs of a deceased lawyer of
a percentage, either gross or net, of the fees received from the future
business of the deceased lawyer's clients, both because the recipients of
such division are not lawyers and because such payments will not represent
service or responsibility on the part of the recipient. " Accordingly, neither the
widow nor the heirs can be held liable for transactions entered into after the
death of their lawyer-predecessor. There being no benefits accruing, there
ran be no corresponding liability.
Prescinding the law, there could be practical objections to allowing the use
by law firms of the names of deceased partners. The public relations value
of the use of an old firm name can tend to create undue advantages and
disadvantages in the practice of the profession. An able lawyer without
connections will have to make a name for himself starting from scratch.
Another able lawyer, who can join an old firm, can initially ride on that old
firm's reputation established by deceased partners.
B. In regards to the last paragraph of Article 1840 of the Civil Code cited by
petitioners, supra, the first factor to consider is that it is within Chapter 3 of
annum. The credit was renewed in January, 1921, and in the deed of
in-fact Sy Tit, it appears that this security is for the payment of the sums
received by the partnership, not to exceed P20,000 with interest and
collection fees. There can be no doubt that the parties agreed upon the rate
of interest fixed in the document Exhibit E, namely 9 per cent per annum.
The judgment appealed from is in accordance with the law, and must
therefore be, as it is hereby, affirmed with costs against the appellants. So
ordered.
July 30, 1979
PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME
"SYCIP, SALAZAR, FELICIANO, HERNANDEZ & CASTILLO." LUCIANO
E. SALAZAR, FLORENTINO P. FELICIANO, BENILDO G. HERNANDEZ.
GREGORIO R. CASTILLO. ALBERTO P. SAN JUAN, JUAN C. REYES.
JR., ANDRES G. GATMAITAN, JUSTINO H. CACANINDIN, NOEL A.
LAMAN, ETHELWOLDO E. FERNANDEZ, ANGELITO C. IMPERIO,
EDUARDO R. CENIZA, TRISTAN A. CATINDIG, ANCHETA K. TAN, and
ALICE V. PESIGAN, petitioners.
IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE
USE OF THE FIRM NAME "OZAETA, ROMULO, DE LEON, MABANTA &
REYES." RICARDO J. ROMULO, BENJAMIN M. DE LEON, ROMAN
MABANTA, JR., JOSE MA, REYES, JESUS S. J. SAYOC, EDUARDO DE
LOS ANGELES, and JOSE F. BUENAVENTURA, petitioners.
RESOLUTION
MELENCIO-HERRERA, J.:ñé+.£ªwph!1
Two separate Petitions were filed before this Court 1) by the surviving
partners of Atty. Alexander Sycip, who died on May 5, 1975, and 2) by the
surviving partners of Atty. Herminio Ozaeta, who died on February 14, 1976,
praying that they be allowed to continue using, in the names of their firms,
the names of partners who had passed away. In the Court's Resolution of
September 2, 1976, both Petitions were ordered consolidated.
Petitioners base their petitions on the following arguments:
1. Under the law, a partnership is not prohibited from continuing its business
under a firm name which includes the name of a deceased partner; in fact,
Article 1840 of the Civil Code explicitly sanctions the practice when it
provides in the last paragraph that: têñ.£îhqwâ£
The use by the person or partnership continuing the business of the
partnership name, or the name of a deceased partner as part thereof, shall
not of itself make the individual property of the deceased partner liable for
any debts contracted by such person or partnership. 1
2. In regulating other professions, such as accountancy and engineering,
the legislature has authorized the adoption of firm names without any
restriction as to the use, in such firm name, of the name of a deceased
partner; 2 the legislative authorization given to those engaged in the practice
of accountancy — a profession requiring the same degree of trust and
confidence in respect of clients as that implicit in the relationship of attorney
and client — to acquire and use a trade name, strongly indicates that there
is no fundamental policy that is offended by the continued use by a firm of
professionals of a firm name which includes the name of a deceased
partner, at least where such firm name has acquired the characteristics of a
"trade name." 3
3. The Canons of Professional Ethics are not transgressed by the continued
use of the name of a deceased partner in the firm name of a law partnership
because Canon 33 of the Canons of Professional Ethics adopted by the
American Bar Association declares that: têñ.£îhqwâ£
... The continued use of the name of a deceased or former partner when
permissible by local custom, is not unethical but care should be taken that
no imposition or deception is practiced through this use. ... 4
4. There is no possibility of imposition or deception because the deaths of
their respective deceased partners were well-publicized in all newspapers of
general circulation for several days; the stationeries now being used by
them carry new letterheads indicating the years when their respective
deceased partners were connected with the firm; petitioners will notify all
leading national and international law directories of the fact of their
respective deceased partners' deaths. 5
5. No local custom prohibits the continued use of a deceased partner's
name in a professional firm's name; 6 there is no custom or usage in the
Philippines, or at least in the Greater Manila Area, which recognizes that the
glimpse at the history of the firms of petitioners and of other law firms in this
country would show how their firm names have evolved and changed from
time to time as the composition of the partnership changed. têñ.£îhqwâ£
The continued use of a firm name after the death of one or more of the
partners designated by it is proper only where sustained by local custom
and not where by custom this purports to Identify the active members. ...
There would seem to be a question, under the working of the Canon, as to
the propriety of adding the name of a new partner and at the same time
retaining that of a deceased partner who was never a partner with the new
one. (H.S. Drinker, op. cit., supra, at pp. 207208) (Emphasis supplied).
The possibility of deception upon the public, real or consequential, where
the name of a deceased partner continues to be used cannot be ruled out. A
person in search of legal counsel might be guided by the familiar ring of a
distinguished name appearing in a firm title.
E. Petitioners argue that U.S. Courts have consistently allowed the
continued use of a deceased partner's name in the firm name of law
partnerships. But that is so because it is sanctioned by custom.
In the case of Mendelsohn v. Equitable Life Assurance Society (33 N.Y.S. 2d
733) which petitioners Salazar, et al. quoted in their memorandum, the New
York Supreme Court sustained the use of the firm name Alexander & Green
even if none of the present ten partners of the firm bears either name
because the practice was sanctioned by custom and did not offend any
statutory provision or legislative policy and was adopted by agreement of
the parties. The Court stated therein: têñ.£îhqwâ£
The practice sought to be proscribed has the sanction of custom and
offends no statutory provision or legislative policy. Canon 33 of the Canons
of Professional Ethics of both the American Bar Association and the New
York State Bar Association provides in part as follows: "The continued use of
the name of a deceased or former partner, when permissible by local
custom is not unethical, but care should be taken that no imposition or
deception is practiced through this use." There is no question as to local
custom. Many firms in the city use the names of deceased members with
the approval of other attorneys, bar associations and the courts. The
Appellate Division of the First Department has considered the matter and
reached The conclusion that such practice should not be prohibited.
(Emphasis supplied)
xxx xxx xxx
Neither the Partnership Law nor the Penal Law prohibits the practice in
question. The use of the firm name herein is also sustainable by reason of
agreement between the partners. 18
Not so in this jurisdiction where there is no local custom that sanctions the
practice. Custom has been defined as a rule of conduct formed by repetition
of acts, uniformly observed (practiced) as a social rule, legally binding and
obligatory. 19 Courts take no judicial notice of custom. A custom must be
proved as a fact, according to the rules of evidence. 20 A local custom as a
source of right cannot be considered by a court of justice unless such
custom is properly established by competent evidence like any other fact. 21
We find such proof of the existence of a local custom, and of the elements
requisite to constitute the same, wanting herein. Merely because something
is done as a matter of practice does not mean that Courts can rely on the
same for purposes of adjudication as a juridical custom. Juridical custom
must be differentiated from social custom. The former can supplement
statutory law or be applied in the absence of such statute. Not so with the
latter.
Moreover, judicial decisions applying or interpreting the laws form part of the
legal system. 22 When the Supreme Court in the Deen and Perkins cases
issued its Resolutions directing lawyers to desist from including the names
of deceased partners in their firm designation, it laid down a legal rule
against which no custom or practice to the contrary, even if proven, can
prevail. This is not to speak of our civil law which clearly ordains that a
partnership is dissolved by the death of any partner. 23 Custom which are
contrary to law, public order or public policy shall not be countenanced. 24
The practice of law is intimately and peculiarly related to the administration
of justice and should not be considered like an ordinary "money-making
trade." têñ.£îhqwâ£
... It is of the essence of a profession that it is practiced in a spirit of public
service. A trade ... aims primarily at personal gain; a profession at the
exercise of powers beneficial to mankind. If, as in the era of wide free
opportunity, we think of free competitive self assertion as the highest good,
lawyer and grocer and farmer may seem to be freely competing with their
Title IX of the Code entitled "Dissolution and Winding Up." The Article
primarily deals with the exemption from liability in cases of a dissolved
partnership, of the individual property of the deceased partner for debts
contracted by the person or partnership which continues the business using
the partnership name or the name of the deceased partner as part thereof.
What the law contemplates therein is a hold-over situation preparatory to
formal reorganization.
Secondly, Article 1840 treats more of a commercial partnership with a good
will to protect rather than of a professional partnership, with no saleable
good will but whose reputation depends on the personal qualifications of its
individual members. Thus, it has been held that a saleable goodwill can
exist only in a commercial partnership and cannot arise in a professional
partnership consisting of lawyers. 9têñ.£îhqwâ£
As a general rule, upon the dissolution of a commercial partnership the
succeeding partners or parties have the right to carry on the business under
the old name, in the absence of a stipulation forbidding it, (s)ince the name
of a commercial partnership is a partnership asset inseparable from the
good will of the firm. ... (60 Am Jur 2d, s 204, p. 115) (Emphasis supplied)
On the other hand, têñ.£îhqwâ£
... a professional partnership the reputation of which depends or; the
individual skill of the members, such as partnerships of attorneys or
physicians, has no good win to be distributed as a firm asset on its
dissolution, however intrinsically valuable such skill and reputation may be,
especially where there is no provision in the partnership agreement relating
to good will as an asset. ... (ibid, s 203, p. 115) (Emphasis supplied)
C. A partnership for the practice of law cannot be likened to partnerships
formed by other professionals or for business. For one thing, the law on
accountancy specifically allows the use of a trade name in connection with
the practice of accountancy.10 têñ.£îhqwâ£
A partnership for the practice of law is not a legal entity. It is a mere
relationship or association for a particular purpose. ... It is not a partnership
formed for the purpose of carrying on trade or business or of holding
property." 11 Thus, it has been stated that "the use of a nom de plume,
assumed or trade name in law practice is improper. 12
The usual reason given for different standards of conduct being applicable
to the practice of law from those pertaining to business is that the law is a
profession.
Dean Pound, in his recently published contribution to the Survey of the
Legal Profession, (The Lawyer from Antiquity to Modern Times, p. 5) defines
a profession as "a group of men pursuing a learned art as a common calling
in the spirit of public service, — no less a public service because it may
incidentally be a means of livelihood."
xxx xxx xxx
Primary characteristics which distinguish the legal profession from business
are:
1. A duty of public service, of which the emolument is a byproduct, and in
which one may attain the highest eminence without making much money.
2. A relation as an "officer of court" to the administration of justice involving
thorough sincerity, integrity, and reliability.
3. A relation to clients in the highest degree fiduciary.
4. A relation to colleagues at the bar characterized by candor, fairness, and
unwillingness to resort to current business methods of advertising and
encroachment on their practice, or dealing directly with their clients. 13
"The right to practice law is not a natural or constitutional right but is in the
nature of a privilege or franchise. 14 It is limited to persons of good moral
character with special qualifications duly ascertained and certified. 15 The
right does not only presuppose in its possessor integrity, legal standing and
attainment, but also the exercise of a special privilege, highly personal and
partaking of the nature of a public trust." 16
D. Petitioners cited Canon 33 of the Canons of Professional Ethics of the
American Bar Association" in support of their petitions.
It is true that Canon 33 does not consider as unethical the continued use of
the name of a deceased or former partner in the firm name of a law
partnership when such a practice is permissible by local custom but the
Canon warns that care should be taken that no imposition or deception is
practiced through this use.
It must be conceded that in the Philippines, no local custom permits or
allows the continued use of a deceased or former partner's name in the firm
names of law partnerships. Firm names, under our custom, Identify the
more active and/or more senior members or partners of the law firm. A
the goodwill attached to the names of those respected and esteemed law
practitioners. That is a legitimate motivation.
The retention of their names is not illegal per se. That practice was followed
before the war by the law firm of James Ross. Notwithstanding the death of
Judge Ross the founder of the law firm of Ross, Lawrence, Selph and
Carrascoso, his name was retained in the firm name with an indication of
the year when he died. No one complained that the retention of the name of
Judge Ross in the firm name was illegal or unethical.
# Separate Opinions
FERNANDO, C.J., concurring:
The petitions are denied, as there are only four votes for granting them,
seven of the Justices being of the contrary view, as explained in the plurality
opinion of Justice Ameurfina Melencio-Herrera. It is out of delicadeza that
the undersigned did not participate in the disposition of these petitions, as
the law office of Sycip, Salazar, Feliciano, Hernandez and Castillo started
with the partnership of Quisumbing, Sycip, and Quisumbing, the senior
partner, the late Ramon Quisumbing, being the father-in-law of the
undersigned, and the most junior partner then, Norberto J. Quisumbing,
being his brother- in-law. For the record, the undersigned wishes to invite
the attention of all concerned, and not only of petitioners, to the last
sentence of the opinion of Justice Ameurfina Melencio-Herrera: 'Those
names [Sycip and Ozaeta] may, however, be included in the listing of
individuals wtes
AQUINO, J., dissenting:
I dissent. The fourteen members of the law firm, Sycip, Salazar, Feliciano,
Hernandez & Castillo, in their petition of June 10, 1975, prayed for authority
to continue the use of that firm name, notwithstanding the death of Attorney
Alexander Sycip on May 5, 1975 (May he rest in peace). He was the
founder of the firm which was originally known as the Sycip Law Office.
On the other hand, the seven surviving partners of the law firm, Ozaeta,
Romulo, De Leon, Mabanta & Reyes, in their petition of August 13, 1976,
prayed that they be allowed to continue using the said firm name
notwithstanding the death of two partners, former Justice Roman Ozaeta
and his son, Herminio, on May 1, 1972 and February 14, 1976, respectively.
They alleged that the said law firm was a continuation of the Ozaeta Law
Office which was established in 1957 by Justice Ozaeta and his son and
that, as to the said law firm, the name Ozaeta has acquired an institutional
and secondary connotation.
Article 1840 of the Civil Code, which speaks of the use by the partnership of
the name of a deceased partner as part of the partnership name, is cited to
justify the petitions. Also invoked is the canon that the continued use by a
law firm of the name of a deceased partner, "when permissible by local
custom, is not unethical" as long as "no imposition or deception is practised
through this use" (Canon 33 of the Canons of Legal Ethics).
I am of the opinion that the petition may be granted with the condition that it
be indicated in the letterheads of the two firms (as the case may be) that
Alexander Sycip, former Justice Ozaeta and Herminio Ozaeta are dead or
the period when they served as partners should be stated therein.
Obviously, the purpose of the two firms in continuing the use of the names
of their deceased founders is to retain the clients who had customarily
sought the legal services of Attorneys Sycip and Ozaeta and to benefit from
the goodwill attached to the names of those respected and esteemed law
practitioners. That is a legitimate motivation.
The retention of their names is not illegal per se. That practice was followed
before the war by the law firm of James Ross. Notwithstanding the death of
Judge Ross the founder of the law firm of Ross, Lawrence, Selph and
Carrascoso, his name was retained in the firm name with an indication of
the year when he died. No one complained that the retention of the name of
Judge Ross in the firm name was illegal or unethical.
G.R. No. L-25007 March 2, 1926
PACIFIC COMMERCIAL COMPANY, plaintiff-appellee,
vs.
ABOITIZ & MARTINEZ, ET AL., defendants.
JOSE MARTINEZ, defendant-appellant.
Espina & Espina for appellant.
Block, Johnston & Greenbaum for appellee.
OSTRAND, J.:
fellows in their calling in order each to acquire as much of the world's good
as he may within the allowed him by law. But the member of a profession
does not regard himself as in competition with his professional brethren. He
is not bartering his services as is the artisan nor exchanging the products of
his skill and learning as the farmer sells wheat or corn. There should be no
such thing as a lawyers' or physicians' strike. The best service of the
professional man is often rendered for no equivalent or for a trifling
equivalent and it is his pride to do what he does in a way worthy of his
profession even if done with no expectation of reward, This spirit of public
service in which the profession of law is and ought to be exercised is a
prerequisite of sound administration of justice according to law. The other
two elements of a profession, namely, organization and pursuit of a learned
art have their justification in that they secure and maintain that spirit. 25
In fine, petitioners' desire to preserve the Identity of their firms in the eyes of
the public must bow to legal and ethical impediment.
ACCORDINGLY, the petitions filed herein are denied and petitioners
advised to drop the names "SYCIP" and "OZAETA" from their respective
firm names. Those names may, however, be included in the listing of
individuals who have been partners in their firms indicating the years during
which they served as such.
SO ORDERED.
Teehankee, Concepcion, Jr., Santos, Fernandez, Guerrero and De Castro,
JJ., concur
Fernando, C.J. and Abad Santos, J., took no part.
Separate Opinions
FERNANDO, C.J., concurring:
The petitions are denied, as there are only four votes for granting them,
seven of the Justices being of the contrary view, as explained in the plurality
opinion of Justice Ameurfina Melencio-Herrera. It is out of delicadeza that
the undersigned did not participate in the disposition of these petitions, as
the law office of Sycip, Salazar, Feliciano, Hernandez and Castillo started
with the partnership of Quisumbing, Sycip, and Quisumbing, the senior
partner, the late Ramon Quisumbing, being the father-in-law of the
undersigned, and the most junior partner then, Norberto J. Quisumbing,
being his brother- in-law. For the record, the undersigned wishes to invite
the attention of all concerned, and not only of petitioners, to the last
sentence of the opinion of Justice Ameurfina Melencio-Herrera: 'Those
names [Sycip and Ozaeta] may, however, be included in the listing of
individuals wtes
AQUINO, J., dissenting:
I dissent. The fourteen members of the law firm, Sycip, Salazar, Feliciano,
Hernandez & Castillo, in their petition of June 10, 1975, prayed for authority
to continue the use of that firm name, notwithstanding the death of Attorney
Alexander Sycip on May 5, 1975 (May he rest in peace). He was the
founder of the firm which was originally known as the Sycip Law Office.
On the other hand, the seven surviving partners of the law firm, Ozaeta,
Romulo, De Leon, Mabanta & Reyes, in their petition of August 13, 1976,
prayed that they be allowed to continue using the said firm name
notwithstanding the death of two partners, former Justice Roman Ozaeta
and his son, Herminio, on May 1, 1972 and February 14, 1976, respectively.
They alleged that the said law firm was a continuation of the Ozaeta Law
Office which was established in 1957 by Justice Ozaeta and his son and
that, as to the said law firm, the name Ozaeta has acquired an institutional
and secondary connotation.
Article 1840 of the Civil Code, which speaks of the use by the partnership of
the name of a deceased partner as part of the partnership name, is cited to
justify the petitions. Also invoked is the canon that the continued use by a
law firm of the name of a deceased partner, "when permissible by local
custom, is not unethical" as long as "no imposition or deception is practised
through this use" (Canon 33 of the Canons of Legal Ethics).
I am of the opinion that the petition may be granted with the condition that it
be indicated in the letterheads of the two firms (as the case may be) that
Alexander Sycip, former Justice Ozaeta and Herminio Ozaeta are dead or
the period when they served as partners should be stated therein.
Obviously, the purpose of the two firms in continuing the use of the names
of their deceased founders is to retain the clients who had customarily
sought the legal services of Attorneys Sycip and Ozaeta and to benefit from

G.R. No. L-22493 July 31, 1975
ISLAND SALES, INC., plaintiff-appellee,
vs.
UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL
defendants. BENJAMIN C. DACO, defendant-appellant.
Grey, Buenaventura and Santiago for plaintiff-appellee.
Anacleto D. Badoy, Jr. for defendant-appellant.
CONCEPCION JR., J.:
This is an appeal interposed by the defendant Benjamin C. Daco from the
decision of the Court of First Instance of Manila, Branch XVI, in Civil Case
No. 50682, the dispositive portion of which reads:
WHEREFORE, the Court sentences defendant United Pioneer General
Construction Company to pay plaintiff the sum of P7,119.07 with interest at
the rate of 12% per annum until it is fully paid, plus attorney's fees which the
Court fixes in the sum of Eight Hundred Pesos (P800.00) and costs.
The defendants Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim and
Augusto Palisoc are sentenced to pay the plaintiff in this case with the
understanding that the judgment against these individual defendants shall
be enforced only if the defendant company has no more leviable properties
with which to satisfy the judgment against it. .
The individual defendants shall also pay the costs.
On April 22, 1961, the defendant company, a general partnership duly
registered under the laws of the Philippines, purchased from the plaintiff a
motor vehicle on the installment basis and for this purpose executed a
promissory note for P9,440.00, payable in twelve (12) equal monthly
installments of P786.63, the first installment payable on or before May 22,
1961 and the subsequent installments on the 22nd day of every month
thereafter, until fully paid, with the condition that failure to pay any of said
installments as they fall due would render the whole unpaid balance
immediately due and demandable.
Having failed to receive the installment due on July 22, 1961, the plaintiff
sued the defendant company for the unpaid balance amounting to
P7,119.07. Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B.
Lumauig, and Augusto Palisoc were included as co-defendants in their
capacity as general partners of the defendant company.
Daniel A. Guizona failed to file an answer and was consequently declared in
default.1
Subsequently, on motion of the plaintiff, the complaint was dismissed insofar
as the defendant Romulo B. Lumauig is concerned.2
When the case was called for hearing, the defendants and their counsels
failed to appear notwithstanding the notices sent to them. Consequently, the
trial court authorized the plaintiff to present its evidence ex-parte3 , after
which the trial court rendered the decision appealed from.
The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider
the decision claiming that since there are five (5) general partners, the joint
and subsidiary liability of each partner should not exceed one-fifth (1/5 ) of
the obligations of the defendant company. But the trial court denied the said
motion notwithstanding the conformity of the plaintiff to limit the liability of
the defendants Daco and Sim to only one-fifth (1/5 ) of the obligations of the
defendant company.4 Hence, this appeal.
The only issue for resolution is whether or not the dismissal of the complaint
to favor one of the general partners of a partnership increases the joint and
subsidiary liability of each of the remaining partners for the obligations of the
partnership.
Article 1816 of the Civil Code provides:
Art. 1816. All partners including industrial ones, shall be liable pro rata with
all their property and after all the partnership assets have been exhausted,
for the contracts which may be entered into in the name and for the account
of the partnership, under its signature and by a person authorized to act for
the partnership. However, any partner may enter into a separate obligation
to perform a partnership contract.
In the case of Co-Pitco vs. Yulo (8 Phil. 544) this Court held:
The partnership of Yulo and Palacios was engaged in the operation of a
sugar estate in Negros. It was, therefore, a civil partnership as distinguished
from a mercantile partnership. Being a civil partnership, by the express
provisions of articles l698 and 1137 of the Civil Code, the partners are not
liable each for the whole debt of the partnership. The liability is pro rata and
in this case Pedro Yulo is responsible to plaintiff for only one-half of the
In April, 1919 Arnaldo F. de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose
Martinez formed a "regular, collective, merchantile partnership" with a
capital of P40,000 of which each of the partners Aboitiz and De Silva
furnished one-third. The partner Jose Martinez was an industrial partner and
furnished no capital; it was provided in the partnership article that he was to
receive 30 per cent of the profits and that his responsibility for losses should
not exceed the amount of the profits received by him.
On April 27, 1922, the partnership, through its duly authorized
representative, Guillermo Aboitiz, executed a promissory note in favor of the
plaintiff the Pacific Commercial Company for the sum of P23,168.71, with
interest at 12 per cent per annum until fully paid as additional sum of 10 per
cent as attorney's fees and costs of collection in the event it became
necessary to resort to judicial proceedings. As security for the payment of
the note, the partnership executed a chattel mortgage in favor of the plaintiff
on certain personal property therein described.
For failure of the partnership to pay the debt the chattel mortgage was
foreclosed the mortgages property sold and the proceeds of the sale,
P2,000 was paid over to the plaintiff on December 28, 1923. No further
payment on the note appears to have been made and January 4, 1924, the
present action was brought for the recovery of the unpaid balance with
interest. Upon trial the court below rendered judgment in favor of the plaintiff
and against the partnership for the sum of P27,951.68 and for the payment
of interest on the capital of P21,168.71 at the rate of 10 per cent per annum
from the 31st October, 1924, until paid, together with 10 per cent on the
amount due for fees for collection in accordance with the terms of the
aforesaid note. The judgment further provided that execution should first
issue against the property of the partnership should first issue against the
insolvency of the partnership, it might issue against the property of the
partners De Silva and Aboitiz and in the event of their insolvency, then
against the property of the industrial partner Jose Martinez. From this
judgment Martinez appealed to this court and here maintains that under
article 141 of the Code of Commerce he, as a mere industrial partner,
cannot be held responsible for the partnership's debt.
The case is practically identical with that of the Compania Maritima vs.
Munoz (9 Phil., 326), in which this court held the industrial partners
secondarily liable for the debts of the partnership but on the strength of the
vigorous dissenting opinion of Chief Justice Arellano in that case, that
appellant argues that the decision therein was erroneous and should now be
overruled. With all due respect for the legal acumen of the first Chief Justice
of this Court, we are still of the opinion that the case was correctly decided.
Article 127 of the Code of Commerce reads as follows:
All the members of the general copartnership, be they or be they not
managing partners of the same are liable personally and in solidum with all
their property for the results of the transaction made in the name and for the
account of the partnership, under the signature of the later, and by a person
authorized to make use thereof.
The language of this article is clear and specific that all the members of a
general copartnership are liable with all their property for the results of the
duly authorized transactions made in the name and for the account of the
partnership. On the other hand, article 141, upon which the appellants relies
and which provides that "losses shall be computed in the same proportion
among the capitalist partners without including the industrial partners,
unless by special agreement the latter have been constituted as participants
therein," is susceptible of two different interpretations of which that given it in
the Compania Maritima case, supra, i. e., that it relates merely to the
distribution of losses among the partners themselves in the settlement of the
partnership affairs and has no reference to partnership obligations to third
parties, appears to us to be the more logical.
There is a marked distinction between a liability and a loss and the inability
of a partnership to pay a debt to a third party at a particular time does not
necessarily mean that the partnership business as a whole, has been
operated at a loss. The partnership may have outstanding credits which for
the moment may have be unavailable for the payment of debts, but which
eventually may be realized upon and yield profits more than sufficient to
cover all losses. Bearing this in mind it will be found that there in reality is no
conflict between the two articles quoted; one speaks of liabilities, the other
of losses.
The judgment appealed from is affirmed with the costs against the appellant.
So ordered
(1) Whether or not there existed a partners between Celestino Galan and
Elmo Muñasque; and
(2) Whether or not there existed a justifiable cause on the part of respondent
Tropical to disburse money to respondent Galan.
The business firms Cebu Southern Hardware Company and Blue Diamond
Glass Palace were allowed to intervene, both having legal interest in the
matter in litigation.
After trial, the court rendered judgment, the dispositive portion of which
states:
IN VIEW WHEREOF, Judgment is hereby rendered:
(1) ordering plaintiff Muñasque and defendant Galan to pay jointly and
severally the intervenors Cebu and Southern Hardware Company and Blue
Diamond Glass Palace the amount of P6,229.34 and P2,213.51,
respectively;
(2) absolving the defendants Tropical Commercial Company and Ramon
Pons from any liability,
No damages awarded whatsoever.
The petitioner and intervenor Cebu Southern Company and its proprietor,
Tan Siu filed motions for reconsideration.
On January 15, 197 1, the trial court issued 'another order amending its
judgment to make it read as follows:
IN VIEW WHEREOF, Judgment is hereby rendered:
(1) ordering plaintiff Muñasque and defendant Galan to pay jointly and
severally the intervenors Cebu Southern Hardware Company and Blue
Diamond Glass Palace the amount of P6,229.34 and P2,213.51,
respectively,
(2) ordering plaintiff and defendant Galan to pay Intervenor Cebu Southern
Hardware Company and Tan Siu jointly and severally interest at 12% per
annum of the sum of P6,229.34 until the amount is fully paid;
(3) ordering plaintiff and defendant Galan to pay P500.00 representing
attorney's fees jointly and severally to Intervenor Cebu Southern Hardware
Company:
(4) absolving the defendants Tropical Commercial Company and Ramon
Pons from any liability,
No damages awarded whatsoever.
On appeal, the Court of Appeals affirmed the judgment of the trial court with
the sole modification that the liability imposed in the dispositive part of the
decision on the credit of Cebu Southern Hardware and Blue Diamond Glass
Palace was changed from "jointly and severally" to "jointly."
Not satisfied, Mr. Muñasque filed this petition.
The present controversy began when petitioner Muñasque in behalf of the
partnership of "Galan and Muñasque" as Contractor entered into a written
contract with respondent Tropical for remodelling the respondent's Cebu
branch building. A total amount of P25,000.00 was to be paid under the
contract for the entire services of the Contractor. The terms of payment were
as follows: thirty percent (30%) of the whole amount upon the signing of the
contract and the balance thereof divided into three equal installments at the
lute of Six Thousand Pesos (P6,000.00) every fifteen (15) working days.
The first payment made by respondent Tropical was in the form of a check
for P7,000.00 in the name of the petitioner.Petitioner, however, indorsed the
check in favor of respondent Galan to enable the latter to deposit it in the
bank and pay for the materials and labor used in the project.
Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00 for his
personal use so that when the second check in the amount of P6,000.00
came and Galan asked the petitioner to indorse it again, the petitioner
refused.
The check was withheld from the petitioner. Since Galan informed the Cebu
branch of Tropical that there was a"misunderstanding" between him and
petitioner, respondent Tropical changed the name of the payee in the
second check from Muñasque to "Galan and Associates" which was the duly
registered name of the partnership between Galan and petitioner and under
which name a permit to do construction business was issued by the mayor
of Cebu City. This enabled Galan to encash the second check.
Meanwhile, as alleged by the petitioner, the construction continued through
his sole efforts. He stated that he borrowed some P12,000.00 from his
friend, Mr. Espina and although the expenses had reached the amount of
P29,000.00 because of the failure of Galan to pay what was partly due the
laborers and partly due for the materials, the construction work was finished
ahead of schedule with the total expenditure reaching P34,000.00.
debt. The fact that the other partner, Jaime Palacios, had left the country
cannot increase the liability of Pedro Yulo.
In the instant case, there were five (5) general partners when the promissory
note in question was executed for and in behalf of the partnership. Since the
liability of the partners is pro rata, the liability of the appellant Benjamin C.
Daco shall be limited to only one-fifth (1/5 ) of the obligations of the
defendant company. The fact that the complaint against the defendant
Romulo B. Lumauig was dismissed, upon motion of the plaintiff, does not
unmake the said Lumauig as a general partner in the defendant company. In
so moving to dismiss the complaint, the plaintiff merely condoned Lumauig's
individual liability to the plaintiff.
WHEREFORE, the appealed decision as thus clarified is hereby
AFFIRMED, without pronouncement as to costs.
SO ORDERED.
G.R. No. L-39780 November 11, 1985
ELMO MUÑASQUE, petitioner,
vs.
COURT OF APPEALS,CELESTINO GALAN TROPICAL COMMERCIAL
COMPANY and RAMON PONS, respondents.
John T. Borromeo for petitioner.
Juan D. Astete for respondent C. Galan.
Paul Gornes for respondent R. Pons.
Viu Montecillo for respondent Tropical.
Paterno P. Natinga for Intervenor Blue Diamond Glass Palace.
GUTTIERREZ, JR., J.:
In this petition for certiorari, the petitioner seeks to annul and set added the
decision of the Court of Appeals affirming the existence of a partnership
between petitioner and one of the respondents, Celestino Galan and holding
both of them liable to the two intervenors which extended credit to their
partnership. The petitioner wants to be excluded from the liabilities of the
partnership.
Petitioner Elmo Muñasque filed a complaint for payment of sum of money
and damages against respondents Celestino Galan, Tropical Commercial,
Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner entered into
a contract with respondent Tropical through its Cebu Branch Manager Pons
for remodelling a portion of its building without exchanging or expecting any
consideration from Galan although the latter was casually named as partner
in the contract; that by virtue of his having introduced the petitioner to the
employing company (Tropical). Galan would receive some kind of
compensation in the form of some percentages or commission; that
Tropical, under the terms of the contract, agreed to give petitioner the
amount of P7,000.00 soon after the construction began and thereafter, the
amount of P6,000.00 every fifteen (15) days during the construction to make
a total sum of P25,000.00; that on January 9, 1967, Tropical and/or Pons
delivered a check for P7,000.00 not to the plaintiff but to a stranger to the
contract, Galan, who succeeded in getting petitioner's indorsement on the
same check persuading the latter that the same be deposited in a joint
account; that on January 26, 1967 when the second check for P6,000.00
was due, petitioner refused to indorse said cheek presented to him by Galan
but through later manipulations, respondent Pons succeeded in changing
the payee's name from Elmo Muñasque to Galan and Associates, thus
enabling Galan to cash the same at the Cebu Branch of the Philippine
Commercial and Industrial Bank (PCIB) placing the petitioner in great
financial difficulty in his construction business and subjecting him to
demands of creditors to pay' for construction materials, the payment of
which should have been made from the P13,000.00 received by Galan; that
petitioner undertook the construction at his own expense completing it prior
to the March 16, 1967 deadline;that because of the unauthorized
disbursement by respondents Tropical and Pons of the sum of P13,000.00
to Galan petitioner demanded that said amount be paid to him by
respondents under the terms of the written contract between the petitioner
and respondent company.
The respondents answered the complaint by denying some and admitting
some of the material averments and setting up counterclaims.
During the pre-trial conference, the petitioners and respondents agreed that
the issues to be resolved are:
Petitioner also maintains that the appellate court committed grave abuse of
discretion in not holding Galan liable for the amounts which he "malversed"
to the prejudice of the petitioner. He adds that although this was not one of
the issues agreed upon by the parties during the pretrial, he, nevertheless,
alleged the same in his amended complaint which was, duly admitted by the
court.
When the petitioner amended his complaint, it was only for the purpose of
impleading Ramon Pons in his personal capacity. Although the petitioner
made allegations as to the alleged malversations of Galan, these were the
same allegations in his original complaint. The malversation by one partner
was not an issue actually raised in the amended complaint but the alleged
connivance of Pons with Galan as a means to serve the latter's personal
purposes.
The petitioner, therefore, should be bound by the delimitation of the issues
during the pre-trial because he himself agreed to the same. In Permanent
Concrete Products, Inc. v. Teodoro, (26 SCRA 336), we ruled:
xxx xxx xxx
... The appellant is bound by the delimitation of the issues contained in the
trial court's order issued on the very day the pre-trial conference was held.
Such an order controls the subsequent course of the action, unless modified
before trial to prevent manifest injustice.In the case at bar, modification of
the pre-trial order was never sought at the instance of any party.
Petitioner could have asked at least for a modification of the issues if he
really wanted to include the determination of Galan's personal liability to
their partnership but he chose not to do so, as he vehemently denied the
existence of the partnership. At any rate, the issue raised in this petition is
the contention of Muñasque that the amounts payable to the intervenors
should be shouldered exclusively by Galan. We note that the petitioner is
not solely burdened by the obligations of their illstarred partnership. The
records show that there is an existing judgment against respondent Galan,
holding him liable for the total amount of P7,000.00 in favor of Eden
Hardware which extended credit to the partnership aside from the P2, 000.
00 he already paid to Universal Lumber.
We, however, take exception to the ruling of the appellate court that the trial
court's ordering petitioner and Galan to pay the credits of Blue Diamond and
Cebu Southern Hardware"jointly and severally" is plain error since the
liability of partners under the law to third persons for contracts executed
inconnection with partnership business is only pro rata under Art. 1816, of
the Civil Code.
While it is true that under Article 1816 of the Civil Code,"All partners,
including industrial ones, shall be liable prorate with all their property and
after all the partnership assets have been exhausted, for the contracts which
may be entered into the name and fm the account cd the partnership, under
its signature and by a person authorized to act for the partner-ship. ...". this
provision should be construed together with Article 1824 which provides
that: "All partners are liable solidarily with the partnership for everything
chargeable to the partnership under Articles 1822 and 1823." In short, while
the liability of the partners are merely joint in transactions entered into by the
partnership, a third person who transacted with said partnership can hold
the partners solidarily liable for the whole obligation if the case of the third
person falls under Articles 1822 or 1823.
Articles 1822 and 1823 of the Civil Code provide:
Art. 1822. Where, by any wrongful act or omission of any partner acting in
the ordinary course of the business of the partner-ship or with the authority
of his co-partners, loss or injury is caused to any person, not being a partner
in the partnership or any penalty is incurred, the partnership is liable therefor
to the same extent as the partner so acting or omitting to act.
Art. 1823. The partnership is bound to make good:
(1) Where one partner acting within the scope of his apparent authority
receives money or property of a third person and misapplies it; and
(2) Where the partnership in the course of its business receives money or
property of a third person and t he money or property so received is
misapplied by any partner while it is in the custody of the partnership.
The obligation is solidary, because the law protects him, who in good faith
relied upon the authority of a partner, whether such authority is real or
apparent. That is why under Article 1824 of the Civil Code all partners,
whether innocent or guilty, as well as the legal entity which is the
partnership, are solidarily liable.
In the case at bar the respondent Tropical had every reason to believe that a
partnership existed between the petitioner and Galan and no fault or error
The two remaining checks, each in the amount of P6,000.00,were
subsequently given to the petitioner alone with the last check being given
pursuant to a court order.
As stated earlier, the petitioner filed a complaint for payment of sum of
money and damages against the respondents,seeking to recover the
following: the amounts covered by the first and second checks which fell into
the hands of respondent Galan, the additional expenses that the petitioner
incurred in the construction, moral and exemplary damages, and attorney's
fees.
Both the trial and appellate courts not only absolved respondents Tropical
and its Cebu Manager, Pons, from any liability but they also held the
petitioner together with respondent Galan, hable to the intervenors Cebu
Southern Hardware Company and Blue Diamond Glass Palace for the credit
which the intervenors extended to the partnership of petitioner and Galan
In this petition the legal questions raised by the petitioner are as follows: (1)
Whether or not the appellate court erred in holding that a partnership existed
between petitioner and respondent Galan. (2) Assuming that there was such
a partnership, whether or not the court erred in not finding Galan guilty of
malversing the P13,000.00 covered by the first and second checks and
therefore, accountable to the petitioner for the said amount; and (3) Whether
or not the court committed grave abuse of discretion in holding that the
payment made by Tropical through its manager Pons to Galan was "good
payment, "
Petitioner contends that the appellate court erred in holding that he and
respondent Galan were partners, the truth being that Galan was a sham and
a perfidious partner who misappropriated the amount of P13,000.00 due to
the petitioner.Petitioner also contends that the appellate court committed
grave abuse of discretion in holding that the payment made by Tropical to
Galan was "good" payment when the same gave occasion for the latter to
misappropriate the proceeds of such payment.
The contentions are without merit.
The records will show that the petitioner entered into a con-tract with
Tropical for the renovation of the latter's building on behalf of the partnership
of "Galan and Muñasque." This is readily seen in the first paragraph of the
contract where it states:
This agreement made this 20th day of December in the year 1966 by Galan
and Muñasque hereinafter called the Contractor, and Tropical Commercial
Co., Inc., hereinafter called the owner do hereby for and in consideration
agree on the following: ... .
There is nothing in the records to indicate that the partner-ship organized by
the two men was not a genuine one. If there was a falling out or
misunderstanding between the partners, such does not convert the
partnership into a sham organization.
Likewise, when Muñasque received the first payment of Tropical in the
amount of P7,000.00 with a check made out in his name, he indorsed the
check in favor of Galan. Respondent Tropical therefore, had every right to
presume that the petitioner and Galan were true partners. If they were not
partners as petitioner claims, then he has only himself to blame for making
the relationship appear otherwise, not only to Tropical but to their other
creditors as well. The payments made to the partnership were, therefore,
valid payments.
In the case of Singsong v. Isabela Sawmill (88 SCRA 643),we ruled:
Although it may be presumed that Margarita G. Saldajeno had acted in good
faith, the appellees also acted in good faith in extending credit to the
partnership. Where one of two innocent persons must suffer, that person
who gave occasion for the damages to be caused must bear the
consequences.
No error was committed by the appellate court in holding that the payment
made by Tropical to Galan was a good payment which binds both Galan and
the petitioner. Since the two were partners when the debts were incurred,
they, are also both liable to third persons who extended credit to their
partnership. In the case of George Litton v. Hill and Ceron, et al, (67 Phil.
513, 514), we ruled:
There is a general presumption that each individual partner is an authorized
agent for the firm and that he has authority to bind the firm in carrying on the
partnership transactions. (Mills vs. Riggle,112 Pan, 617).
The presumption is sufficient to permit third persons to hold the firm liable
on transactions entered into by one of members of the firm acting apparently
in its behalf and within the scope of his authority. (Le Roy vs. Johnson, 7
U.S. (Law. ed.), 391.)
can be imputed against it for making payments to "Galan and Associates"
and delivering the same to Galan because as far as it was concerned,
Galan was a true partner with real authority to transact on behalf of the
partnership with which it was dealing. This is even more true in the cases of
Cebu Southern Hardware and Blue Diamond Glass Palace who supplied
materials on credit to the partnership. Thus, it is but fair that the
consequences of any wrongful act committed by any of the partners therein
should be answered solidarily by all the partners and the partnership as a
whole
However. as between the partners Muñasque and Galan,justice also
dictates that Muñasque be reimbursed by Galan for the payments made by
the former representing the liability of their partnership to herein intervenors,
as it was satisfactorily established that Galan acted in bad faith in his
dealings with Muñasque as a partner.
WHEREFORE, the decision appealed from is hereby AFFIRMED with the
MODIFICATION that the liability of petitioner and respondent Galan to
intervenors Blue Diamond Glass and Cebu Southern Hardware is declared
to be joint and solidary. Petitioner may recover from respondent Galan any
amount that he pays, in his capacity as a partner, to the above intervenors,
SO ORDERED.