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G.R. No. L-13680 April 27, 1960

MAURO LOZANA, plaintiff-appellee,vs.SERAFIN DEPAKAKIBO, defendant-appellant.

Antonio T. Lozada for appellee. Agustin T. Misola and Tomas D. Dominado for appellant.

LABRADOR, J .:

This is an appeal from a judgment of the Court of First Instanceof Iloilo, certified to us by the Court of Appeals, for the reasonthat only questions of law are involved in said appeal.

The record discloses that on November 16, 1954 plaintiff MauroLozana entered into a contract with defendant SerafinDepakakibo wherein they established a partnership capitalized atthe sum of P30,000, plaintiff furnishing 60% thereof and thedefendant, 40%, for the purpose of maintaining, operating anddistributing electric light and power in the Municipality ofDumangas, Province of Iloilo, under a franchise issued to Mrs.Piadosa Buenaflor. However, the franchise or certificate of public

necessity and convenience in favor of the said Mrs. PiadosaBuenaflor was cancelled and revoked by the Public ServiceCommission on May 15, 1955. But the decision of the PublicService Commission was appealed to Us on October 21, 1955. Atemporary certificate of public convenience was issued in thename of Olimpia D. Decolongon on December 22, 1955 (Exh."B"). Evidently because of the cancellation of the franchise in thename of Mrs. Piadosa Buenaflor, plaintiff herein Mauro Lozanasold a generator, Buda (diesel), 75 hp. 30 KVA capacity, SerialNo. 479, to the new grantee Olimpia D. Decolongon, by a deeddated October 30, 1955 (Exhibit "C"). Defendant Serafin

Depakakibo, on the other hand, sold one Crossly Diesel Engine,25 h. p., Serial No. 141758, to the spouses Felix Jimenea andFelina Harder, by a deed dated July 10, 1956.

On November 15, 1955, plaintiff Mauro Lozana brought an actionagainst the defendant, alleging that he is the owner of theGenerator Buda (Diesel), valued at P8,000 and 70 wooden postswith the wires connecting the generator to the different housessupplied by electric current in the Municipality of Dumangas, andthat he is entitled to the possession thereof, but that thedefendant has wrongfully detained them as a consequence ofwhich plaintiff suffered damages. Plaintiff prayed that saidproperties be delivered back to him. Three days after the filing ofthe complaint, that is on November 18, 1955, Judge Pantaleon A. Pelayo issued an order in said case authorizing the sheriff totake possession of the generator and 70 wooden posts, uponplaintiff's filing of a bond in the amount of P16,000 in favor of thedefendant (for subsequent delivery to the plaintiff). On December5, 1955, defendant filed an answer, denying that the generatorand the equipment mentioned in the complaint belong to theplaintiff and alleging that the same had been contributed by theplaintiff to the partnership entered into between them in the samemanner that defendant had contributed equipments also, and

therefore that he is not unlawfully detaining them. By way ofcounterclaim, defendant alleged that under the partnershipagreement the parties were to contribute equipments, plaintiffcontributing the generator and the defendant, the wires for thepurpose of installing the main and delivery lines; that the plaintiffsold his contribution to the partnership, in violation of the termsof their agreement. He, therefore, prayed that the complaintagainst him be dismissed; that plaintiff be adjudged guilty ofviolating the partnership contract and be ordered to pay thedefendant the sum of P3,000, as actual damages, P600.00 asattorney's fees and P2,600 annually as actual damages; that the



court order dissolution of the partnership, after the accountingand liquidation of the same.

On September 27, 1956, the defendant filed a motion to declareplaintiff in default on his counterclaim, but this was denied by thecourt. Hearings on the case were conducted on October 25,1956 and November 5, 1956, and on the latter date the judgeentered a decision declaring plaintiff owner of the equipment andentitled to the possession thereof, with costs against defendant.It is against this judgment that the defendant has appealed.

The above judgment of the court was rendered on a stipulationof facts, which is as follows:

1. That on November 16, 1954, in the City of Iloilo, theaforementioned plaintiff, and the defendant entered into acontract of Partnership, a copy of which is attached as Annex "A"of defendant's answer and counterclaim, for the purpose set forththerein and under the national franchise granted to Mrs. PiadosaBuenaflor;

2. That according to the aforementioned Partnership Contract,the plaintiff Mr. Mauro Lozana, contributed the amount of

Eighteen Thousand Pesos (P18,000.00); said contributions ofboth parties being the appraised values of their respectiveproperties brought into the partnership;

3. That the said Certificate of Public Convenience and Necessitywas revoked and cancelled by order of the Public ServiceCommission dated March 15, 1955, promulgated in case No.58188, entitled, "Piadosa Buenaflor, applicant", which order hasbeen appealed to the Supreme Court by Mrs. Buenaflor;

4. That on October 30, 1955, the plaintiff sold properties broughtinto by him to the said partnership in favor of OlimpiaDecolongon in the amount of P10,000.00 as per Deed of Saledated October 30, 1955 executed and ratified before NotaryPublic, Delfin Demaisip, in and for the Municipality of Dumangas,Iloilo and entered in his Notarial Registry as Doc. No. 832; PageNo. 6; Book No. XIII; and Series of 1955, a copy thereof is madeas Annex "B" of defendant's answer and counterclaim;

5. That there was no liquidation of partnership and that at thetime of said Sale on October 30, 1955, defendant was themanager thereof;

6. That by virtue of the Order of this Honorable Court datedNovember 18, 1955, those properties sold were taken by theProvincial Sheriff on November 20, 1955 and delivered to theplaintiff on November 25, 1955 upon the latter posting therequired bond executed by himself and the Luzon Surety Co.,dated November 17, 1955 and ratified before the Notary Public,Eleuterio del Rosario in and for the province of Iloilo known asDoc. No. 200; Page 90; Book No. VII; and Series of 1955; of saidNotary Public;

7. That the said properties sold are now in the possession ofOlimpia Decolongon, the purchaser, who is presently operatingan electric light plant in Dumangas, Iloilo;

8. That the defendant sold certain properties in favor of thespouses, Felix Jimenea and Felisa Harder contributed by him tothe partnership for P3,500.00 as per Deed of Sale executed andratified before the Notary Public Rodrigo J. Harder in and for theProvince of Iloilo, known as Doc. No. 76; Page 94; Book No. V;and Series of 1955, a certified copy of which is hereto attached











Sisters Antonia Torres and Emeteria Baring, hereinpetitioners, entered into a "joint venture agreement" withRespondent Manuel Torres for the development of a parcel ofland into a subdivision. Pursuant to the contract, they executeda Deed of Sale covering the said parcel of land in favor ofrespondent, who then had it registered in his name. Bymortgaging the property, respondent obtained from EquitableBank a loan of P40,000 which, under the Joint Venture Agreement, was to be used for the development of thesubdivision.[4] All three of them also agreed to share theproceeds from the sale of the subdivided lots.

The project did not push through, and the land wassubsequently foreclosed by the bank.

According to petitioners, the project failed because of“respondent’s lack of funds or means and skills.” They add thatrespondent used the loan not for the development of thesubdivision, but in furtherance of his own company, UniversalUmbrella Company.

On the other hand, respondent alleged that he used theloan to implement the Agreement. With the said amount, he wasable to effect the survey and the subdivision of the lots. He

secured the Lapu Lapu City Council’s approval of the subdivisionproject which he advertised in a local newspaper. He alsocaused the construction of roads, curbs and gutters. Likewise,he entered into a contract with an engineering firm for thebuilding of sixty low-cost housing units and actually even set upa model house on one of the subdivision lots. He did all of thesefor a total expense of P85,000.

Respondent claimed that the subdivision project failed,however, because petitioners and their relatives had separatelycaused the annotations of adverse claims on the title to the land,

which eventually scared away prospective buyers. Despite hisrequests, petitioners refused to cause the clearing of the claims,thereby forcing him to give up on the project.[5]

Subsequently, petitioners filed a criminal case for estafaagainst respondent and his wife, who were however acquitted.Thereafter, they filed the present civil case which, uponrespondent's motion, was later dismissed by the trial court in an

Order dated September 6, 1982. On appeal, however, theappellate court remanded the case for further proceedings.Thereafter, the RTC issued its assailed Decision, which, asearlier stated, was affirmed by the CA.

Hence, this Petition.[6]

Ruling of the Court of Appeals

In affirming the trial court, the Court of Appeals held thatpetitioners and respondent had formed a partnership for thedevelopment of the subdivision. Thus, they must bear the losssuffered by the partnership in the same proportion as their sharein the profits stipulated in the contract. Disagreeing with the trialcourt’s pronouncement that losses as well as profits in a joint

venture should be distributed equally,[7] the CA invoked Article1797 of the Civil Code which provides:

“Article 1797 - The losses and profits shall be distributed inconformity with the agreement. If only the share of each partnerin the profits has been agreed upon, the share of each in thelosses shall be in the same proportion.”

The CA elucidated further:



“In the absence of stipulation, the share of each partner in theprofits and losses shall be in proportion to what he may havecontributed, but the industrial partner shall not be liable for thelosses. As for the profits, the industrial partner shall receive suchshare as may be just and equitable under the circumstances. Ifbesides his services he has contributed capital, he shall alsoreceive a share in the profits in proportion to his capital.”

The Issue

Petitioners impute to the Court of Appeals the followingerror:

“x x x [The] Court of Appeals erred in concluding that thetransaction x x x between the petitioners and respondent wasthat of a joint venture/partnership, ignoring outright the provisionof Article 1769, and other related provisions of the Civil Code ofthe Philippines.”[8]

The Court’s Ruling

The Petition is bereft of merit.

Main Issue: Existence of a Partnership

Petitioners deny having formed a partnership withrespondent. They contend that the Joint Venture Agreement andthe earlier Deed of Sale, both of which were the bases of theappellate court’s finding of a partnership, were void.

In the same breath, however, they assert that under thosevery same contracts, respondent is liable for his failure toimplement the project. Because the agreement entitled them toreceive 60 percent of the proceeds from the sale of thesubdivision lots, they pray that respondent pay them damagesequivalent to 60 percent of the value of the property.[9]

The pertinent portions of the Joint Venture Agreement read

as follows:

“KNOW ALL MEN BY THESE PRESENTS:

“This AGREEMENT, is made and entered into at Cebu City,Philippines, this 5th day of March, 1969, by and between MR.MANUEL R. TORRES, x x x the FIRST PARTY, likewise, MRS. ANTONIA B. TORRES, and MISS EMETERIA BARING, x x x theSECOND PARTY:

W I T N E S S E T H:

“That, whereas, the SECOND PARTY, voluntarily offered theFIRST PARTY, this property located at Lapu-Lapu City, Island ofMactan, under Lot No. 1368 covering TCT No. T-0184 with a

total area of 17,009 square meters, to be sub-divided by theFIRST PARTY;

“Whereas, the FIRST PARTY had given the SECOND PARTY,the sum of: TWENTY THOUSAND (P20,000.00) Pesos,Philippine Currency, upon the execution of this contract for theproperty entrusted by the SECOND PARTY, for sub-divisionprojects and development purposes;



“NOW THEREFORE, for and in consideration of the abovecovenants and promises herein contained the respective partieshereto do hereby stipulate and agree as follows:

“ONE: That the SECOND PARTY signed an absolute Deed ofSale x x x dated March 5, 1969, in the amount of TWENTY FIVETHOUSAND FIVE HUNDRED THIRTEEN & FIFTY CTVS.(P25,513.50) Philippine Currency, for 1,700 square meters atONE [PESO] & FIFTY CTVS. (P1.50) Philippine Currency, infavor of the FIRST PARTY, but the SECOND PARTY did notactually receive the payment.

“SECOND: That the SECOND PARTY, had received from theFIRST PARTY, the necessary amount of TWENTY THOUSAND(P20,000.00) pesos, Philippine currency, for their personalobligations and this particular amount will serve as an advancepayment from the FIRST PARTY for the property mentioned tobe sub-divided and to be deducted from the sales.

“THIRD: That the FIRST PARTY, will not collect from theSECOND PARTY, the interest and the principal amount involvingthe amount of TWENTY THOUSAND (P20,000.00) Pesos,Philippine Currency, until the sub-division project is terminated

and ready for sale to any interested parties, and the amount ofTWENTY THOUSAND (P20,000.00) pesos, Philippine currency,will be deducted accordingly.

“FOURTH: That all general expense[s] and all cost[s] involved inthe sub-division project should be paid by the FIRST PARTY,exclusively and all the expenses will not be deducted from thesales after the development of the sub-division project.

“FIFTH: That the sales of the sub-divided lots will be divided intoSIXTY PERCENTUM 60% for the SECOND PARTY and FORTYPERCENTUM 40% for the FIRST PARTY, and additional profitsor whatever income deriving from the sales will be dividedequally according to the x x x percentage [agreed upon] by bothparties.

“SIXTH: That the intended sub-division project of the propertyinvolved will start the work and all improvements upon theadjacent lots will be negotiated in both parties['] favor and allsales shall [be] decided by both parties.

“SEVENTH: That the SECOND PARTIES, should be given anoption to get back the property mentioned provided the amountof TWENTY THOUSAND (P20,000.00) Pesos, PhilippineCurrency, borrowed by the SECOND PARTY, will be paid in fullto the FIRST PARTY, including all necessary improvementsspent by the FIRST PARTY, and the FIRST PARTY will be givena grace period to turnover the property mentioned above.

“That this AGREEMENT shall be binding and obligatory to theparties who executed same freely and voluntarily for the usesand purposes therein stated.”[10]

A reading of the terms embodied in the Agreementindubitably shows the existence of a partnership pursuant to Article 1767 of the Civil Code, which provides:

“ART. 1767. By the contract of partnership two or more personsbind themselves to contribute money, property, or industry to acommon fund, with the intention of dividing the profits amongthemselves.”



Under the above-quoted Agreement, petitioners wouldcontribute property to the partnership in the form of land whichwas to be developed into a subdivision; while respondent wouldgive, in addition to his industry, the amount needed for generalexpenses and other costs. Furthermore, the income from thesaid project would be divided according to the stipulatedpercentage. Clearly, the contract manifested the intention of theparties to form a partnership.[11]

It should be stressed that the parties implemented thecontract. Thus, petitioners transferred the title to the land tofacilitate its use in the name of the respondent. On the otherhand, respondent caused the subject land to be mortgaged, theproceeds of which were used for the survey and the subdivisionof the land. As noted earlier, he developed the roads, the curbsand the gutters of the subdivision and entered into a contract toconstruct low-cost housing units on the property.

Respondent’s actions clearly belie petitioners’ contentionthat he made no contribution to the partnership. Under Article1767 of the Civil Code, a partner may contribute not only moneyor property, but also industry.

Petitioners Bound by Terms of Contract

Under Article 1315 of the Civil Code, contracts bind theparties not only to what has been expressly stipulated, but alsoto all necessary consequences thereof, as follows:

“ART. 1315. Contracts are perfected by mere consent, and fromthat moment the parties are bound not only to the fulfillment ofwhat has been expressly stipulated but also to all theconsequences which, according to their nature, may be inkeeping with good faith, usage and law.”

It is undisputed that petitioners are educated and are thuspresumed to have understood the terms of the contract theyvoluntarily signed. If it was not in consonance with theirexpectations, they should have objected to it and insisted on theprovisions they wanted.

Courts are not authorized to extricate parties from thenecessary consequences of their acts, and the fact that the

contractual stipulations may turn out to be financiallydisadvantageous will not relieve parties thereto of theirobligations. They cannot now disavow the relationship formedfrom such agreement due to their supposed misunderstanding ofits terms.

Alleged Nullity of the Partnership Agreement

Petitioners argue that the Joint Venture Agreement is voidunder Article 1773 of the Civil Code, which provides:

“ART. 1773. A contract of partnership is void, wheneverimmovable property is contributed thereto, if an inventory of saidproperty is not made, signed by the parties, and attached to thepublic instrument.”

They contend that since the parties did not make, sign orattach to the public instrument an inventory of the real propertycontributed, the partnership is void.

We clarify. First , Article 1773 was intended primarily toprotect third persons. Thus, the eminent Arturo M. Tolentinostates that under the aforecited provision which is a complementof Article 1771,[12] “the execution of a public instrument wouldbe useless if there is no inventory of the property contributed,because without its designation and description, they cannot be



subject to inscription in the Registry of Property, and theircontribution cannot prejudice third persons. This will result infraud to those who contract with the partnership in the belief [in]the efficacy of the guaranty in which the immovables mayconsist. Thus, the contract is declared void by the law when nosuch inventory is made.” The case at bar does not involve thirdparties who may be prejudiced.

Second , petitioners themselves invoke the allegedly voidcontract as basis for their claim that respondent should pay them60 percent of the value of the property.[13] They cannot in onebreath deny the contract and in another recognize it, dependingon what momentarily suits their purpose. Parties cannot adoptinconsistent positions in regard to a contract and courts will nottolerate, much less approve, such practice.

In short, the alleged nullity of the partnership will notprevent courts from considering the Joint Venture Agreement anordinary contract from which the parties’ rights and obligations toeach other may be inferred and enforced.

Partnership Agreement Not the Result of an Earlier IllegalContract

Petitioners also contend that the Joint Venture Agreementis void under Article 1422[14] of the Civil Code, because it is thedirect result of an earlier illegal contract, which was for the saleof the land without valid consideration.

This argument is puerile. The Joint Venture Agreementclearly states that the consideration for the sale was theexpectation of profits from the subdivision project. Its firststipulation states that petitioners did not actually receivepayment for the parcel of land sold to respondent.

Consideration, more properly denominated as cause, can takedifferent forms, such as the prestation or promise of a thing orservice by another.[15]

In this case, the cause of the contract of sale consisted notin the stated peso value of the land, but in the expectation ofprofits from the subdivision project, for which the land wasintended to be used. As explained by the trial court, “the land

was in effect given to the partnership as [petitioner’s]participation therein. x x x There was therefore a considerationfor the sale, the [petitioners] acting in the expectation that,should the venture come into fruition, they [would] get sixtypercent of the net profits.”

Liability of the Parties

Claiming that respondent was solely responsible for thefailure of the subdivision project, petitioners maintain that heshould be made to pay damages equivalent to 60 percent of thevalue of the property, which was their share in the profits underthe Joint Venture Agreement.

We are not persuaded. True, the Court of Appeals held

that petitioners’ acts were not the cause of the failure of theproject.[16] But it also ruled that neither was respondentresponsible therefor.[17] In imputing the blame solely to him,petitioners failed to give any reason why we should disregard thefactual findings of the appellate court relieving him of fault.Verily, factual issues cannot be resolved in a petition for reviewunder Rule 45, as in this case. Petitioners have not alleged, notto say shown, that their Petition constitutes one of the exceptionsto this doctrine.[18] Accordingly, we find no reversible error in theCA's ruling that petitioners are not entitled to damages.

The sisters did not show evidence as to Torres’fault in the failure of the partnership.

income of the projected will be divided into 60-40

sisters will bear the loss of 60 - capitalist partner

Torres is exempt from losses of 40 because he isan industrial partner.



WHEREFORE, the Petition is hereby DENIED and thechallenged Decision AFFIRMED. Costs against petitioners.

SO ORDERED.

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

D E C I S I O N

PANGANIBAN, J.:

Inasmuch as the facts indubitably and eloquently show animplied trust in favor of respondent, the Court of Appeals did noterr in affirming the Decision of the Regional Trial Court orderingpetitioner to convey the subject property to her. That Decisionsatisfied the demands of justice and prevented unjustenrichment.

The Case

Before us is a Petition for Review[1] under Rule 45 of theRules of Court, challenging the August 22, 2001 Decision[2] ofthe Court of Appeals (CA) in CA-GR CV No. 54852. Theassailed Decision disposed as follows:

“WHEREFORE, the decision appealed from is AFFIRMED.”[3]

On the other hand, the Regional Trial Court (RTC) Decisionaffirmed by the CA disposed as follows:

“WHEREFORE, considering that this action is essentially one forreconveyance or enforcement of a trust, judgment is herebyrendered ordering the substituted defendant Marietta CuencoCuyegkeng to reconvey or transfer, in a duly registrable publicinstrument, Lot No 903-A-6 under TCT No. 113781 of theRegistry of Deeds of Cebu City, of the Banilad Estate with anarea of 834 square meters, in favor of plaintiff ConcepcionCuenco Vda. De Manguerra; or should the substituteddefendant, for one reason or another, fail to execute thenecessary instrument once the decision becomes final, the Clerkof Court of this Court (RTC) is hereby instructed, in accordancewith the Rules of Court, to prepare and execute the appropriateand requisite conveyance and instrument in favor of hereinplaintiff which, in either case, shall be registered with the Officeof the Register of Deeds of Cebu City.

Without costs in this instance.”[4]

The Facts

The facts were summarized by the appellate court asfollows:

“On September 19, 1970, the [respondent] filed the initiatorycomplaint herein for specific performance against her uncle[Petitioner] Miguel Cuenco which averred, inter alia that herfather, the late Don Mariano Jesus Cuenco (who becameSenator) and said [petitioner] formed the ‘Cuenco and CuencoLaw Offices’; that on or around August 4, 1931, the Cuenco andCuenco Law Offices served as lawyers in two (2) cases entitled‘Valeriano Solon versus Zoilo Solon’ (Civil Case 9037) and‘Valeriano Solon versus Apolonia Solon’ (Civil Case 9040)involving a dispute among relatives over ownership of lot 903 of



the Banilad Estate which is near the Cebu Provincial Capitol;that records of said cases indicate the name of the [petitioner]alone as counsel of record, but in truth and in fact, the reallawyer behind the success of said cases was the influential DonMariano Jesus Cuenco; that after winning said cases, theawardees of Lot 903 subdivided said lot into three (3) parts asfollows:

Lot 903-A: 5,000 [squaremeters]: Mariano Cuenco’sattorney’s feesLot 903-B: 5,000 [squaremeters]: Miguel Cuenco’sattorney’s feesLot 903-C: 54,000 [squaremeters]: Solon’s retention

“That at the time of distribution of said three (3) lots in Cebu,Mariano Jesus Cuenco was actively practicing law in Manila, andso he entrusted his share (Lot 903-A) to his brother law partner(the [petitioner]); that on September 10, 1938, the [petitioner]was able to obtain in his own name a title for Lot 903-A (TransferCertificate of Title [TCT] RT-6999 [T-21108]); that he was under

the obligation to hold the title in trust for his brother Mariano’schildren by first marriage; that sometime in 1947, the Cuencofamily was anticipating Mariano’s second marriage, and so onFebruary 1, 1947, they partitioned Lot 903-A into six (6) sub-lots(Lots 903-A-1 to 903-A-6) to correspond to the six (6) children ofMariano’s first marriage (Teresita, Manuel, Lourdes, Carmen,Consuelo, and Concepcion); that the [petitioner] did not objectnor oppose the partition plan; that on June 4, 1947, the[petitioner] executed four (4) deeds of donation in favor ofMariano’s four (4) children: Teresita, Manuel, Lourdes, andCarmen, pursuant to the partition plan (per notary documents

183, 184, 185, 186, Book III, Series 1947 of Cebu City NotaryPublic Candido Vasquez); that on June 24, 1947, the [petitioner]executed the fifth deed of donation in favor of Mariano’s fifth child – Consuelo (per notary document 214, Book III, Series 1947 ofCebu City Notary Public Candido Vasquez) (Exhibits ‘2’ to ‘5’);that said five (5) deeds of donation left out Mariano’s sixth child –Concepcion – who later became the [respondent] in this case;that in 1949, [respondent] occupied and fenced a portion of Lot903-A-6 for taxation purposes (Exhibit ‘F’, Exhibit ‘6’); that shealso paid the taxes thereon (Exhibit ‘G’); that her father died onFebruary 25, 1964 with a Last Will and Testament; that thepertinent portion of her father’s Last Will and Testamentbequeaths the lot.

‘… near the Cebu provincial capitol, which were my attorney’sfees from my clients, Victoria Rallos and Zoilo Solon,respectively – have already long been disposed of, anddistributed by me, through my brother, Miguel, to all my saidchildren in the first marriage;’

“That on June 3, 1966, the [petitioner] wrote a letter petitioningthe Register of Deeds of Cebu to transfer Lot 903-A-6 to hisname on the ground that Lot 903-A-6 is a portion of Lot 903-A;

that on April 6, 1967, the [respondent] requested the Register ofDeeds to annotate an affidavit of adverse claim against the[petitioner’s] TCT RT-6999 (T-21108) which covers Lot 903-A;that on June 3, 1967, the Register of Deeds issued TCT 35275covering Lot 903-A-6 in the name of the [petitioner] but carryingthe earlier annotation of adverse claim; that in 1969, the[petitioner] tore down the wire fence which the [respondent]constructed on Lot 903-A-6 which compelled the latter to institutethe instant complaint dated August 20, 1970 on September 19,1970.



“On December 5, 1970, the answer with counterclaim datedDecember 3, 1970 of [petitioner] Miguel Cuenco was filed wherehe alleged that he was the absolute owner of Lot 903-A-6; thatthis lot was a portion of Lot 903-A which in turn was part of Lot903 which was the subject matter of litigation; that he was alonein defending the cases involving Lot 903 without the participationof his brother Mariano Cuenco; that he donated five (5) of the six(6) portions of Lot 903-A to the five (5) children of his brotherMariano out of gratitude for the love and care they exhibited tohim (Miguel) during the time of his long sickness; that he did notgive or donate any portion of the lot to the [respondent] becauseshe never visited him nor took care of him during his longsickness; that he became critically ill on February 11, 1946 andwas confined at the Singian’s Clinic in Manila and thentransferred to Cebu where he nearly died in 1946; that his wifeFara Remia Ledesma Cuenco had an operation on January1951 and was confined at the University of Santo Tomas Hospitaland John Hopkins Hospital in the United States; that two of hischildren died at the University of Santo Tomas Hospital in 1951and 1952; and that his wife was blind for many months due tomalignant hypertension but [respondent] never remembered hernor did she commiserate with him and his wife in their longperiod of sorrow.

“[Petitioner] Miguel Cuenco took the witness stand as early asSeptember 13, 1974. His self-conducted direct examinationlasted until 1985, the last one on November 22, 1985.Unfortunately, he died[5] before he was able to submit himself forcross-examination and so his testimony had to be stricken off therecord. His only surviving daughter, Marietta Cuyegkeng, stoodas the substitute [petitioner] in this case. She testified that shepurchased Lot 903-A-6 (the property subject matter of this case)from her late father sometime in 1990 and constructed a housethereon in the same year; that she became aware of this case

because her late father used to commute to Cebu City to attendto this case; and that Lot 903-A-6 is in her name per TransferCertificate of Title #113781 of the Registry of Deeds for Cebu.”[6]

Ruling of the Court of Appeals

The CA found respondent’s action not barred by res judicata, because there was “no identity of causes of actionbetween the Petition for cancellation of adverse claim in L.R.C.Records 5988 and the Complaint for specific performance toresolve the issue of ownership in Civil Case No. R-11891.”

The appellate court further found no reason to disturb thefindings of the trial court that respondent “has the legal right ofownership over lot 903-A-6.” The CA ruled that the subject land“is part of the attorney’s fees of Don Mariano Cuenco,predecessor-in-interest of [Respondent] Concepcion Cuencovda. de Manguerra and [petitioner] merely holds such property intrust for [her], his title there[to] notwithstanding.”

Finally, the CA held that the right of action of respondent“has not yet prescribed as she was in possession of the lot indispute and the prescriptive period to file the case commences torun only from the time she acquired knowledge of an adverseclaim over [her] possession.”

Hence, this Petition.[7]

The Issues

In her Memorandum, petitioner raises the following issuesfor our consideration:



“I.

On question of law, the Court of Appeals failed to considerfacts of substance and significance which, if considered, willshow that the preponderance of evidence is in favor of thepetitioner.

“II.

On question of law, the Court of Appeals failed to appreciatethe proposition that, contrary to the position taken by thetrial court, no constructive or implied trust exists betweenthe parties, and neither is the action one for reconveyancebased upon a constructive or implied trust.

“III.

On question of law, the Court of Appeals erred in not findingthat even where implied trust is admitted to exist therespondent’s action for relief is barred by laches andprescription.

“IV.

On question of law, the trial court and the appellate courterred in expunging from the records the testimony of MiguelCuenco.”[8]

This Court’s Ruling

The Petition has no merit.

First Issue:Evaluation of Evidence

Petitioner asks us to appreciate and weigh the evidenceoffered in support of the finding that Lot 903-A-6 constituted apart of Mariano Cuenco’s share in the attorney’s fees. In otherwords, she seeks to involve us in a reevaluation of the veracityand probative value of the evidence submitted to the lowercourt. What she wants us to do is contrary to the dictates ofRule 45 that only questions of law may be raised and resolved ina petition for review. “Absent any whimsical or capriciousexercise of judgment, and unless the lack of any basis for theconclusions made by the lower courts be amply demonstrated,the Supreme Court will not disturb such factual findings.”[9]

As a rule, findings of fact of the Court of Appeals affirmingthose of the trial court are binding and conclusive. Normally,such factual findings are not disturbed by this Court, to whichonly questions of law may be raised in an appeal by certiorari.[10] This Court has consistently ruled that these questions “mustinvolve no examination of the probative value of the evidencepresented by the litigants or any of them.”[11] Emphasizing thedifference between the two types of question, it has explainedthat “there is a question of law in a given case when the doubt ordifference arises as to what the law is pertaining to a certainstate of facts, and there is a question of fact when the doubt

arises as the truth or the falsity of alleged facts.”[12]Indeed, after going over the records of the present case,

we are not inclined to disturb the factual findings of the trial andthe appellate courts, just because of the insistent claim ofpetitioner. His witnesses allegedly testified that Civil Case No.9040 involving Lot 903 had not been handled by Mariano fordefendants therein -- Apolonia Solon, Zoilo Solon, et al. It hassufficiently been proven, however, that these defendants wererepresented by the Cuenco and Cuenco Law Office, composedof Partners Mariano Cuenco and Miguel Cuenco.



Given as attorney’s fees was one hectare of Lot 903, ofwhich two five-thousand square meter portions were identified asLot 903-A and Lot 903-B. That only Miguel handled Civil CaseNo. 9040 does not mean that he alone is entitled to theattorney’s fees in the said cases. “When a client employs theservices of a law firm, he does not employ the services of thelawyer who is assigned to personally handle the case. Rather,he employs the entire law firm.”[13] Being a partner in the lawfirm, Mariano -- like Miguel -- was likewise entitled[14] to a sharein the attorney’s fees from the firm’s clients. Hence, the lowercourts’ finding that Lot 903-A was a part of Mariano Cuenco’sattorney’s fees has ample support.

Second Issue:Implied Trust

Petitioner then contends that no constructive or impliedtrust exists between the parties.

A trust is a legal relationship between one having anequitable ownership in a property and another having legal titleto it.[15]

Trust relations between parties may either be express or

implied.[16] Express trusts are created by the direct and positiveacts of the parties, indicated through some writing, deed, will, orwords evidencing an intention to create a trust.[17] On the otherhand, implied trusts are those that, “without being express, arededucible from the nature of the transaction as matters ofintent[;] or which are superinduced on the transaction byoperation of law as a matter of equity, independently of theparticular intention of the parties. Implied trusts may either beresulting or constructive trusts, both coming into being byoperation of law.”[18]

Resulting trusts are presumed to have been contemplatedby the parties and are based on the equitable doctrine thatvaluable consideration, not legal title, determines the equitabletitle or interest.[19] These trusts arise from the nature of or thecircumstances involved in a transaction,[20] whereby legal titlebecomes vested in one person, who is obligated in equity to holdthat title for the benefit of another.

Constructive trusts are “created by the construction ofequity in order to satisfy the demands of justice and preventunjust enrichment. They arise contrary to intention against onewho, by fraud, duress or abuse of confidence, obtains or holdsthe legal right to property which he ought not, in equity and goodconscience, to hold.”[21]

A review of the records shows that indeed there is animplied trust between the parties.

Although Lot 903-A was titled in Miguel’s name, thecircumstances surrounding the acquisition and the subsequentpartial dispositions of this property eloquently speak of the intentthat the equitable or beneficial ownership of the property shouldbelong to Mariano and his heirs.

First , Lot 903-A was one half of the one-hectare portion ofLot 903 given as attorney’s fees by a client of the law firm ofPartners Miguel and Mariano Cuenco. It constituted the latter’sshare in the attorney’s fees and thus equitably belonged to him,as correctly found by the CA. That Lot 903-A had been titled inthe name of Miguel gave rise to an implied trust between himand Mariano, specifically, the former holds the property in trustfor the latter. In the present case, it is of no moment that theimplied trust arose from the circumstance -- a share in theattorney’s fees -- that does not categorically fall under Articles1448 to 1456 of the Civil Code. The cases of implied trust



enumerated therein “does not exclude others established by thegeneral law of trust.”[22]

Second , from the time it was titled in his name in 1938,[23]Lot 903-A remained undivided and untouched[24] by Miguel.Only on February 3, 1947, did Lourdes Cuenco,[25] upon theinstruction of Mariano, have it surveyed and subdivided into sixalmost equal portions -- 903-A-1 to 903-A-6. Each portion was

specifically allocated to each of the six children of Mariano withhis first wife.[26]

Third , Miguel readily surrendered his Certificate of Title[27]and interposed no objection[28] to the subdivision and theallocation of the property to Mariano’s six children, includingConcepcion.

Fourth, Mariano’s children, including Concepcion,[29] werethe ones who shouldered the expenses incurred for thesubdivision of the property.

Fifth, after the subdivision of the property, Mariano’schildren -- including Concepcion[30] -- took possession of theirrespective portions thereof.

Sixth, the legal titles to five portions of the property were

transferred via a gratuitous deed of conveyance to Mariano’s fivechildren, following the allocations specified in the subdivisionplan prepared for Lourdes Cuenco.[31]

With respect to Lot 903-A-6 in particular, the existence ofConcepcion’s equitable ownership thereof is bolstered, not justby the above circumstances, but also by the fact that respondentfenced the portion allocated to her and planted trees thereon.[32]

More significantly, she also paid real property taxes on Lot903-A-6 yearly, from 1956 until 1969[33] -- the year when she

was dispossessed of the property. “Although tax declarations orrealty tax payments of property are not conclusive evidence ofownership, nevertheless, they are good indicia of possession inthe concept of owner, for no one in his right mind would bepaying taxes for a property that is not in his actual or at leastconstructive possession.”[34] Such realty tax paymentsconstitute proof that the holder has a claim of title over theproperty.

Tellingly, Miguel started paying real property taxes on Lot903-A-6 only on April 4, 1964,[35] after the death of Mariano.[36]This fact shows that it was only in that year that he wasemboldened to claim the property as his own and to stoprecognizing Mariano’s, and subsequently Concepcion’s,ownership rights over it. It was only by then that the one whocould have easily refuted his claim had already been silenced bydeath. Such a situation cannot be permitted to arise, as will beexplained below.

Estoppel

From the time Lot 903-A was subdivided and Mariano’s sixchildren -- including Concepcion -- took possession as owners of

their respective portions, no whimper of protest from petitionerwas heard until 1963. By his acts as well as by his omissions,Miguel led Mariano and the latter’s heirs, including Concepcion,to believe that Petitioner Cuenco respected the ownership rightsof respondent over Lot 903-A-6. That Mariano acted and reliedon Miguel’s tacit recognition of his ownership thereof is evidentfrom his will, executed in 1963, which states:

“I hereby make it known and declare that x x x all propertieswhich my first wife and I had brought to, or acquired during ourmarriage, or which I had acquired during the years I was a



widower – including jewelry, war damage compensation, and twoother lots also located at Cebu City, one near the South-WesternUniversity and the other near the Cebu provincial capitol,which were my attorney’s fees from my clients, VictoriaRallos and Zoilo Solon, respectively – have already long beendisposed of, and distributed by me, through my brother,Miguel, to all my said six children in the first marriage.”[37](emphasis supplied)

Indeed, as early as 1947, long before Mariano made his willin 1963, Lot 903-A -- situated along Juana Osmeña Extension,Kamputhaw, Cebu City,[38] near the Cebu Provincial Capitol --had been subdivided and distributed to his six children in his firstmarriage. Having induced him and his heirs to believe that Lot903-A-6 had already been distributed to Concepcion as her own,petitioner is estopped from asserting the contrary and claimingownership thereof.

The principle of estoppel in pais applies when -- by one’sacts, representations, admissions, or silence when there is aneed to speak out -- one, intentionally or through culpablenegligence, induces another to believe certain facts to exist; andthe latter rightfully relies and acts on such belief, so as to be

prejudiced if the former is permitted to deny the existence ofthose facts.[39]

Third Issue:Laches

Petitioner claims that respondent’s action is already barredby laches.

We are not persuaded. Laches is negligence or omissionto assert a right within a reasonable time, warranting apresumption that the party entitled to it has either abandoned or

declined to assert it.[40] In the present case, respondent haspersistently asserted her right to Lot 903-A-6 against petitioner.

Concepcion was in possession as owner of the propertyfrom 1949 to 1969.[41] When Miguel took steps to have itseparately titled in his name, despite the fact that she had theowner’s duplicate copy of TCT No. RT-6999 -- the title coveringthe entire Lot 903-A -- she had her adverse claim annotated on

the title in 1967. When petitioner ousted her from herpossession of the lot by tearing down her wire fence in 1969,[42]she commenced the present action on September 19, 1970,[43]to protect and assert her rights to the property. We find that shecannot be held guilty of laches, as she did not sleep on herrights.

Fourth Issue:Expunging of Testimony

Petitioner Cuyegkeng questions the expunging of the directtestimony of Miguel Cuenco. Respondent points out that thisissue was not raised before the CA. Neither had petitionerasked the trial court to reconsider its Order expunging thetestimony. Hence, this issue cannot for the first time be raised atthis point of the appeal. Issues, arguments and errors notadequately and seriously brought below cannot be raised for thefirst time on appeal.[44] “Basic considerations of due processimpel this rule.”[45]

WHEREFORE, the Petition is DENIED, and the assailedDecision AFFIRMED. Costs against petitioner.

SO ORDERED.



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

TAI TONG CHUACHE v. INSURANCE COMMISSION

GANCAYCO, J.:

This petition for review on certiorari seeks the reversal of thedecision of the Insurance Commission in IC Case #367 1 dismissing the complaint 2 for recovery of the alleged unpaidbalance of the proceeds of the Fire Insurance Policies issued byherein respondent insurance company in favor of petitioner-intervenor.

The facts of the case as found by respondent InsuranceCommission are as follows:

Complainants acquired from a certain Rolando Gonzales aparcel of land and a building located at San Rafael Village,Davao City. Complainants assumed the mortgage of the buildingin favor of S.S.S., which building was insured with respondentS.S.S. Accredited Group of Insurers for P25,000.00.

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

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

On June 11, 1975, Pedro Palomo secured a Fire InsurancePolicy No. F- 02500 (Exhibit "A"), covering the building for

P50,000.00 with respondent Zenith Insurance Corporation. OnJuly 16, 1975, another Fire Insurance Policy No. 8459 (Exhibit"B") was procured from respondent Philippine British AssuranceCompany, covering the same building for P50,000.00 and thecontents thereof for P70,000.00.

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

Adjustment Standard Corporation submitted a report as follow

xxx xxx xxx

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

Policy No..

Company

Risk

Insures

Pays

MIRO

Zenith

Building

P50,000

P17,610.93



F-02500

Insurance

Corp.

F-84590

Phil.

Household

70,000

24,655.31

British

Assco. Co.

Inc.

FFF & F5

50,000

39,186.10

Policy No.

Company

Risk

Insures



Pays

FIC-15381

SSSAccre

dited Group

of Insurers

Building

P25,000

P8,805.47

Totals

P195,000

P90,257.81

We are showing hereunder another apportionment of the losswhich includes the Travellers Multi-Indemnity policy for referencepurposes.

Policy No.

Company

Risk

Injures

Pays

MIRO/

Zenith

F-02500



Insurance

Corp.

Building

P50,000

P11,877.14

F-84590

Phil.

British

Assco. Co.

I-Building

70,000

16,628.00

II-Building

FFF & PE

50,000

24,918.79



PVC-15181

SSS

Accredited

Group of

Insurers

Building

25,000

5,938.50

F-599 DV

Insurers

I-Ref

30,000

14,467.31

Multi

II-Building

70,000

16,628.00

Totals

P295.000

P90,257.81

Based on the computation of the loss, including the TravellersMulti- Indemnity, respondents, Zenith Insurance, Phil. British Assurance and S.S.S. Accredited Group of Insurers, paid theircorresponding shares of the loss. Complainants were paid thefollowing: P41,546.79 by Philippine British Assurance Co.,P11,877.14 by Zenith Insurance Corporation, and P5,936.57 byS.S.S. Group of Accredited Insurers (Par. 6. AmendedComplaint). Demand was made from respondent Travellers



Multi-Indemnity for its share in the loss but the same wasrefused. Hence, complainants demanded from the other three (3)respondents the balance of each share in the loss based on thecomputation of the Adjustment Standards Report excludingTravellers Multi-Indemnity in the amount of P30,894.31(P5,732.79-Zenith Insurance: P22,294.62, Phil. British: andP2,866.90, SSS Accredited) but the same was refused, hence,this action.

In their answers, Philippine British Assurance and ZenithInsurance Corporation admitted the material allegations in thecomplaint, but denied liability on the ground that the claim of thecomplainants had already been waived, extinguished or paid.Both companies set up counterclaim in the total amount of P91,546.79.

Instead of filing an answer, SSS Accredited Group of Insurersinformed the Commission in its letter of July 22, 1977 that theherein claim of complainants for the balance had been paid inthe amount of P 5,938.57 in full, based on the AdjustmentStandards Corporation Report of September 22, 1975.

Travellers Insurance, on its part, admitted the issuance of the

Policy No. 599 DV and alleged as its special and affirmativedefenses the following, to wit: that Fire Policy No. 599 DV ,covering the furniture and building of complainants was securedby a certain Arsenio Chua, mortgage creditor, for the purpose ofprotecting his mortgage credit against the complainants; that thesaid policy was issued in the name of Azucena Palomo, only toindicate that she owns the insured premises; that the policycontains an endorsement in favor of Arsenio Chua as hismortgage interest may appear to indicate that insured was Arsenio Chua and the complainants; that the premium due on

said fire policy was paid by Arsenio Chua; that respondentTravellers is not liable to pay complainants.

On May 31, 1977, Tai Tong Chuache & Co. filed a complaint inintervention claiming the proceeds of the fire Insurance PolicyNo. F-559 DV, issued by respondent Travellers Multi-Indemnity.

Travellers Insurance, in answer to the complaint in intervention,alleged that the Intervenor is not entitled to indemnity under itsFire Insurance Policy for lack of insurable interest before the lossof the insured premises and that the complainants, spousesPedro and Azucena Palomo, had already paid in full theirmortgage indebtedness to the intervenor . 3

As adverted to above respondent Insurance Commissiondismissed spouses Palomos' complaint on the ground that theinsurance policy subject of the complaint was taken out by TaiTong Chuache & Company, petitioner herein, for its own interestonly as mortgagee of the insured property and thus complainantas mortgagors of the insured property have no right of actionagainst herein respondent. It likewise dismissed petitioner'scomplaint in intervention in the following words:

We move on the issue of liability of respondent Travellers Multi-Indemnity to the Intervenor-mortgagee. The complainant testifiedthat she was still indebted to Intervenor in the amount ofP100,000.00. Such allegation has not however, been sufficientlyproven by documentary evidence. The certification (Exhibit 'E-e')issued by the Court of First Instance of Davao, Branch 11,indicate that the complainant was Antonio Lopez Chua and notTai Tong Chuache & Company. 4



From the above decision, only intervenor Tai Tong Chuache fileda motion for reconsideration but it was likewise denied hence,the present petition.

It is the contention of the petitioner that respondent InsuranceCommission decided an issue not raised in the pleadings of theparties in that it ruled that a certain Arsenio Lopez Chua is theone entitled to the insurance proceeds and not Tai Tong Chuache& Company.

This Court cannot fault petitioner for the above erroneousinterpretation of the decision appealed from considering themanner it was written. 5 As correctly pointed out by respondentinsurance commission in their comment, the decision did notpronounce that it was Arsenio Lopez Chua who has insurableinterest over the insured property. Perusal of the decision revealshowever that it readily absolved respondent insurance companyfrom liability on the basis of the commissioner's conclusion thatat the time of the occurrence of the peril insured againstpetitioner as mortgagee had no more insurable interest over theinsured property. It was based on the inference that the creditsecured by the mortgaged property was already paid by thePalomos before the said property was gutted down by fire. The

foregoing conclusion was arrived at on the basis of thecertification issued by the then Court of First Instance of Davao,Branch II that in a certain civil action against the Palomos, Antonio Lopez Chua stands as the complainant and notpetitioner Tai Tong Chuache & Company.

We find the petition to be impressed with merit. It is a well knownpostulate that the case of a party is constituted by his ownaffirmative allegations. Under Section 1, Rule 131 6 each partymust prove his own affirmative allegations by the amount ofevidence required by law which in civil cases as in the present

case is preponderance of evidence. The party, whether plaintiffor defendant, who asserts the affirmative of the issue has theburden of presenting at the trial such amount of evidence asrequired by law to obtain favorable judgment. 7 Thus, petitionerwho is claiming a right over the insurance must prove its case.Likewise, respondent insurance company to avoid liability underthe policy by setting up an affirmative defense of lack ofinsurable interest on the part of the petitioner must prove its ownaffirmative allegations.

It will be recalled that respondent insurance company did notassail the validity of the insurance policy taken out by petitionerover the mortgaged property. Neither did it deny that the saidproperty was totally razed by fire within the period covered by theinsurance. Respondent, as mentioned earlier advanced anaffirmative defense of lack of insurable interest on the part of thepetitioner that before the occurrence of the peril insured againstthe Palomos had already paid their credit due the petitioner.Respondent having admitted the material allegations in thecomplaint, has the burden of proof to show that petitioner has noinsurable interest over the insured property at the time thecontingency took place. Upon that point, there is a failure ofproof. Respondent, it will be noted, exerted no effort to present

any evidence to substantiate its claim, while petitioner did. Forsaid respondent's failure, the decision must be adverse to it.

However, as adverted to earlier, respondent InsuranceCommission absolved respondent insurance company fromliability on the basis of the certification issued by the then Courtof First Instance of Davao, Branch II, that in a certain civil actionagainst the Palomos, Arsenio Lopez Chua stands as thecomplainant and not Tai Tong Chuache. From said evidencerespondent commission inferred that the credit extended byherein petitioner to the Palomos secured by the insured property





George E. Reich for appellant.Roy and De Guzman for appellees.Espeleta, Quijano and Liwag for appellee Hill.

CONCEPCION, J.:

This is a petition to review on certiorari the decision of the Courtof Appeals in a case originating from the Court of First Instanceof Manila wherein the herein petitioner George Litton was theplaintiff and the respondents Hill & Ceron, Robert Hill, CarlosCeron and Visayan Surety & Insurance Corporation weredefendants.

The facts are as follows: On February 14, 1934, the plaintiff soldand delivered to Carlos Ceron, who is one of the managingpartners of Hill & Ceron, a certain number of mining claims, andby virtue of said transaction, the defendant Carlos Cerondelivered to the plaintiff a document reading as follows:

Feb. 14, 1934

Received from Mr. George Litton share certificates Nos. 4428,4429 and 6699 for 5,000, 5,000 and 7,000 shares respectively —

total 17,000 shares of Big Wedge Mining Company, which wehave sold at P0.11 (eleven centavos) per share or P1,870.00less 1/2 per cent brokerage.

HILL & CERON

By: (Sgd.) CARLOS CERON

Ceron paid to the plaintiff the sum or P1,150 leaving an unpaidbalance of P720, and unable to collect this sum either from Hill &

Ceron or from its surety Visayan Surety & Insurance Corporation,Litton filed a complaint in the Court of First Instance of Manilaagainst the said defendants for the recovery of the said balance.The court, after trial, ordered Carlos Ceron personally to pay theamount claimed and absolved the partnership Hill & Ceron,Robert Hill and the Visayan Surety & Insurance Corporation. Onappeal to the Court of Appeals, the latter affirmed the decision ofthe court on May 29, 1937, having reached the conclusion thatCeron did not intend to represent and did not act for the firm Hill& Ceron in the transaction involved in this litigation.

Accepting, as we cannot but accept, the conclusion arrived at bythe Court of Appeals as to the question of fact just mentioned,namely, that Ceron individually entered into the transaction withthe plaintiff, but in view, however, of certain undisputed facts andof certain regulations and provisions of the Code of Commerce,we reach the conclusion that the transaction made by Ceron withthe plaintiff should be understood in law as effected by Hill &Ceron and binding upon it.

In the first place, it is an admitted fact by Robert Hill when hetestified at the trial that he and Ceron, during the partnership,had the same power to buy and sell; that in said partnership Hill

as well as Ceron made the transaction as partners in equalparts; that on the date of the transaction, February 14, 1934, thepartnership between Hill and Ceron was in existence. After thisdate, or on February 19th, Hill & Ceron sold shares of the BigWedge; and when the transaction was entered into with Litton, itwas neither published in the newspapers nor stated in thecommercial registry that the partnership Hill & Ceron had beendissolved.

Hill testified that a few days before February 14th he had aconversation with the plaintiff in the course of which he advised



the latter not to deliver shares for sale or on commission toCeron because the partnership was about to be dissolved; butwhat importance can be attached to said advice if thepartnership was not in fact dissolved on February 14th, the datewhen the transaction with Ceron took place?

Under article 226 of the Code of Commerce, the dissolution of acommercial association shall not cause any prejudice to thirdparties until it has been recorded in the commercial registry. (Seealso Cardell vs. Mañeru, 14 Phil., 368.) The Supreme Court ofSpain held that the dissolution of a partnership by the will of thepartners which is not registered in the commercial registry, doesnot prejudice third persons. (Opinion of March 23, 1885.)

Aside from the aforecited legal provisions, the order of theBureau of Commerce of December 7, 1933, prohibits brokersfrom buying and selling shares on their own account. Said orderreads:

The stock and/or bond broker is, therefore, merely an agent oran intermediary, and as such, shall not be allowed. . . .

(c ) To buy or to sell shares of stock or bonds on his own account

for purposes of speculation and/or for manipulating the market,irrespective of whether the purchase or sale is made from or to aprivate individual, broker or brokerage firm.

In its decision the Court of Appeals states:

But there is a stronger objection to the plaintiff's attempt to makethe firm responsible to him. According to the articles ofcopartnership of 'Hill & Ceron,' filed in the Bureau of Commerce.

Sixth. That the management of the business affairs of thecopartnership shall be entrusted to both copartners who shall jointly administer the business affairs, transactions and activitiesof the copartnership, shall jointly open a current account or anyother kind of account in any bank or banks, shall jointly sign allchecks for the withdrawal of funds and shall jointly or singly sign,in the latter case, with the consent of the other partner. . . .

Under this stipulation, a written contract of the firm can only besigned by one of the partners if the other partner consented.Without the consent of one partner, the other cannot bind thefirm by a written contract. Now, assuming for the moment thatCeron attempted to represent the firm in this contract with theplaintiff (the plaintiff conceded that the firm name was notmentioned at that time), the latter has failed to prove that Hill hadconsented to such contract.

It follows from the sixth paragraph of the articles of partnership ofHill &n Ceron above quoted that the management of thebusiness of the partnership has been entrusted to both partnersthereof, but we dissent from the view of the Court of Appeals thatfor one of the partners to bind the partnership the consent of theother is necessary. Third persons, like the plaintiff, are not bound

in entering into a contract with any of the two partners, toascertain whether or not this partner with whom the transactionis made has the consent of the other partner. The public neednot make inquires as to the agreements had between thepartners. Its knowledge, is enough that it is contracting with thepartnership which is represented by one of the managingpartners.

There is a general presumption that each individual partner is anauthorized agent for the firm and that he has authority to bind the



firm in carrying on the partnership transactions. (Mills vs. Riggle,112 Pac., 617.)

The presumption is sufficient to permit third persons to hold thefirm liable on transactions entered into by one of members of thefirm acting apparently in its behalf and within the scope of hisauthority. (Le Roy vs. Johnson, 7 U. S. [Law. ed.], 391.)

The second paragraph of the articles of partnership of Hill &Ceron reads in part:

Second: That the purpose or object for which this copartnershipis organized is to engage in the business of brokerage ingeneral, such as stock and bond brokers, real brokers,investment security brokers, shipping brokers, and otheractivities pertaining to the business of brokers in general.

The kind of business in which the partnership Hill & Ceron is toengage being thus determined, none of the two partners, underarticle 130 of the Code of Commerce, may legally engage in thebusiness of brokerage in general as stock brokers, securitybrokers and other activities pertaining to the business of thepartnership. Ceron, therefore, could not have entered into the

contract of sale of shares with Litton as a private individual, butas a managing partner of Hill & Ceron.

The respondent argues in its brief that even admitting that one ofthe partners could not, in his individual capacity, engage in atransaction similar to that in which the partnership is engagedwithout binding the latter, nevertheless there is no law whichprohibits a partner in the stock brokerage business for engagingin other transactions different from those of the partnership, as ithappens in the present case, because the transaction made byCeron is a mere personal loan, and this argument, so it is said, is

corroborated by the Court of Appeals. We do not find this allegedcorroboration because the only finding of fact made by the Courtof Appeals is to the effect that the transaction made by Ceronwith the plaintiff was in his individual capacity.

The appealed decision is reversed and the defendants areordered to pay to the plaintiff, jointly and severally, the sum ofP720, with legal interest, from the date of the filing of thecomplaint, minus the commission of one-half per cent (!%) fromthe original price of P1,870, with the costs to the respondents.So ordered.

G.R. No. L-11624 January 21, 1918

E. M. BACHRACH, plaintiff-appellee,vs.

"LA PROTECTORA", ET AL., defendants-appellants.

Vicente Foz for appellants. A. J. Burke for appellee.

STREET, J.:

In the year 1913, the individuals named as defendants in thisaction formed a civil partnership, called "La Protectora," for thepurpose of engaging in the business of transporting passengersand freight at Laoag, Ilocos Norte. In order to provide theenterprise with means of transportation, Marcelo Barba, actingas manager, came to Manila and upon June 23, 1913,negotiated the purchase of two automobile trucks from theplaintiff, E. M. Bachrach, for the agree price of P16,500. He paidthe sum of 3,000 in cash, and for the balance executedpromissory notes representing the deferred payments. Thesenotes provided for the payment of interest from June 23, 1913,



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

P. P. La ProtectoraBy Marcelo BarbaMarcelo Barba.

The other two notes are signed in the same way with the word"By" omitted before the name of Marcelo Barba in the secondline of the signature. It is obvious that in thus signing the notesMarcelo Barba intended to bind both the partnership and himself.In the body of the note the word "I" (yo) instead of"we" (nosotros) is used before the words "promise topay" (prometemos) used in the printed form. It is plain that thesingular pronoun here has all the force of the plural.

As preliminary to the purchase of these trucks, the defendants

Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and ModestoSerrano, upon June 12, 1913, executed in due form a documentin which they declared that they were members of the firm "LaProtectora" and that they had granted to its president fullauthority "in the name and representation of said partnership tocontract for the purchase of two automobiles" (en nombre yrepresentacion de la mencionada sociedad contratante lacompra de dos automoviles). This document was apparentlyexecuted in obedience to the requirements of subsection 2 ofarticle 1697 of the Civil Code, for the purpose of evidencing theauthority of Marcelo Barba to bind the partnership by the

purchase. The document in question was delivered by him toBachrach at the time the automobiles were purchased.

From time to time after this purchase was made, Marcelo Barbapurchased of the plaintiff various automobile effects andaccessories to be used in the business of "La Protectora." UponMay 21, 1914, the indebtedness resulting from these additionalpurchases amounted to the sum of P2,916.57

In May, 1914, the plaintiff foreclosed a chattel mortgage which hehad retained on the trucks in order to secure the purchase price.The amount realized from this sale was P1,000. This wascredited unpaid. To recover this balance, together with the sumdue for additional purchases, the present action was instituted inthe Court of First Instance of the city of Manila, upon May 29,1914, against "La Protectora" and the five individuals MarceloBarba, Nicolas Segundo, Antonio Adiarte, Ignacio Flores, andModesto Serrano. No question has been made as to thepropriety of impleading "La Protectora" as if it were a legal entity. At the hearing, judgment was rendered against all of thedefendants. From this judgment no appeal was taken in behalfeither of "La Protectora" or Marcelo Barba; and their liability isnot here under consideration. The four individuals who signed

the document to which reference has been made, authorizingBarba to purchase the two trucks have, however, appealed andassigned errors. The question here to be determined is whetheror not these individuals are liable for the firm debts and if so towhat extent.

The amount of indebtedness owing to the plaintiff is not indispute, as the principal of the debt is agreed to be P7,037. Ofthis amount it must now be assumed, in view of the finding of thetrial court, from which no appeal has been taken by the plaintiff,that the unpaid balance of the notes amounts to P4,121, while



the remainder (P2,916) represents the amount due forautomobile supplies and accessories.

The business conducted under the name of "La Protectora" wasevidently that of a civil partnership; and the liability of thepartners to this association must be determined under theprovisions of the Civil Code. The authority of Marcelo Barba tobind the partnership, in the purchase of the trucks, is fullyestablished by the document executed by the four appellantsupon June 12, 1913. The transaction by which Barba securedthese trucks was in conformity with the tenor of this document.The promissory notes constitute the obligation exclusively of "LaProtectora" and of Marcelo Barba; and they do not in any senseconstitute an obligation directly binding on the four appellants.Their liability is based on the fact that they are members of thecivil partnership and as such are liable for its debts. It is true thatarticle 1698 of the Civil Code declares that a member of a civilpartnership is not liable in solidum (solidariamente) with hisfellows for its entire indebtedness; but it results from this article,in connection with article 1137 of the Civil Code, that each isliable with the others (mancomunadamente) for his aliquot part ofsuch indebtedness. And so it has been held by this court. (Co-Pitco vs. Yulo, 8 Phil. Rep., 544.)

The Court of First Instance seems to have founded its judgmentagainst the appellants in part upon the idea that the documentexecuted by them constituted an authority for Marcelo Barba tobind them personally, as contemplated in the second clause ofarticle 1698 of the Civil Code. That cause says that no memberof the partnership can bind the others by a personal act if theyhave not given him authority to do so. We think that thedocument referred to was intended merely as an authority toenable Barba to bind the partnership and that the parties to thatinstrument did not intend thereby to confer upon Barba an

authority to bind them personally. It is obvious that the contractwhich Barba in fact executed in pursuance of that authority didnot by its terms profess to bind the appellants personally at all,but only the partnership and himself. It follows that the fourappellants cannot be held to have been personally obligated bythat instrument; but, as we have already seen, their liability restsupon the general principles underlying partnership liability.

As to so much of the indebtedness as is based upon the claimfor automobile supplies and accessories, it is obvious that thedocument of June 12, 1913, affords no authority for holding theappellants liable. Their liability upon this account is, however, noless obvious than upon the debt incurred by the purchase of thetrucks; and such liability is derived from the fact that the debtwas lawfully incurred in the prosecution of the partnershipenterprise.

There is no proof in the record showing what the agreement, ifany, was made with regard to the form of management. Underthese circumstances it is declared in article 1695 of the CivilCode that all the partners are considered agents of thepartnership. Barba therefore must be held to have had authorityto incur these expenses. But in addition to this he is shown to

have been in fact the president or manager, and there can be nodoubt that he had actual authority to incur this obligation.

From what has been said it results that the appellants areseverally liable for their respective shares of the entireindebtedness found to be due; and the Court of First Instancecommitted no error in giving judgment against them. The amountfor which judgment should be entered is P7,037, to which shallbe added (1) interest at 10 per cent per annum from June 23,1913, to be calculated upon the sum of P4.121; (2) interest at 6per cent per annum from July 21, 1915, to be calculated upon



the sum of P2,961; (3) the further sum of P1,030.25, this beingthe amount stipulated to be paid by way of attorney's fees.However, it should be noted that any property pertaining to "LaProtectora" should first be applied to this indebtedness pursuantto the judgment already entered in this case in the court below;and each of the four appellants shall be liable only for the one-fifth part of the remainder unpaid.

Let judgment be entered accordingly, without any express findingof costs of this instance. So ordered.

G.R. No. L-5236 January 10, 1910

PEDRO MARTINEZ, plaintiff-appellee,vs.

ONG PONG CO and ONG LAY, defendants.

ONG PONG CO., appellant.

Fernando de la Cantera for appellant.O'Brien and DeWitt for appellee.

ARELLANO, C.J.:

On the 12th of December, 1900, the plaintiff herein deliveredP1,500 to the defendants who, in a private document,acknowledged that they had received the same with theagreement, as stated by them, "that we are to invest the amountin a store, the profits or losses of which we are to divide with theformer, in equal shares."

The plaintiff filed a complaint on April 25, 1907, in order tocompel the defendants to render him an accounting of thepartnership as agreed to, or else to refund him the P1,500 thathe had given them for the said purpose. Ong Pong Co alone

appeared to answer the complaint; he admitted the fact of theagreement and the delivery to him and to Ong Lay of the P1,500for the purpose aforesaid, but he alleged that Ong Lay, who wasthen deceased, was the one who had managed the business,and that nothing had resulted therefrom save the loss of thecapital of P1,500, to which loss the plaintiff agreed.

The judge of the Court of First Instance of the city of Manila whotried the case ordered Ong Pong Co to return to the plaintiff one-half of the said capital of P1,500 which, together with Ong Lay,he had received from the plaintiff, to wit, P750, plus P90 as one-half of the profits, calculated at the rate of 12 per cent per annumfor the six months that the store was supposed to have beenopen, both sums in Philippine currency, making a total of P840,with legal interest thereon at the rate of 6 per cent per annum,from the 12th of June, 1901, when the business terminated andon which date he ought to have returned the said amount to theplaintiff, until the full payment thereof with costs.

From this judgment Ong Pong Co appealed to this court, andassigned the following errors:

1. For not having taken into consideration the fact that the

reason for the closing of the store was the ejectment from thepremises occupied by it.

2. For not having considered the fact that there were losses.

3. For holding that there should have been profits.

4. For having applied article 1138 of the Civil Code.



5. and 6. For holding that the capital ought to have yieldedprofits, and that the latter should be calculated 12 per cent perannum; and

7. The findings of the ejectment.

As to the first assignment of error, the fact that the store wasclosed by virtue of ejectment proceedings is of no importance forthe effects of the suit. The whole action is based upon the factthat the defendants received certain capital from the plaintiff forthe purpose of organizing a company; they, according to theagreement, were to handle the said money and invest it in astore which was the object of the association; they, in theabsence of a special agreement vesting in one sole person themanagement of the business, were the actual administratorsthereof; as such administrators they were the agent of thecompany and incurred the liabilities peculiar to every agent,among which is that of rendering account to the principal of theirtransactions, and paying him everything they may have receivedby virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.)Neither of them has rendered such account nor proven thelosses referred to by Ong Pong Co; they are therefore obliged torefund the money that they received for the purpose of

establishing the said store — the object of the association. Thiswas the principal pronouncement of the judgment.

With regard to the second and third assignments of error, thiscourt, like the court below, finds no evidence that the entirecapital or any part thereof was lost. It is no evidence of such lossto aver, without proof, that the effects of the store were ejected.Even though this were proven, it could not be inferred therefromthat the ejectment was due to the fact that no rents were paid,and that the rent was not paid on account of the loss of thecapital belonging to the enterprise.

With regard to the possible profits, the finding of the court beloware based on the statements of the defendant Ong Pong Co, tothe effect that "there were some profits, but not large ones." Thiscourt, however, does not find that the amount thereof has beenproven, nor deem it possible to estimate them to be a certainsum, and for a given period of time; hence, it can not admit theestimate, made in the judgment, of 12 per cent per annum for theperiod of six months.

Inasmuch as in this case nothing appears other than the failureto fulfill an obligation on the part of a partner who acted as agentin receiving money for a given purpose, for which he hasrendered no accounting, such agent is responsible only for thelosses which, by a violation of the provisions of the law, heincurred. This being an obligation to pay in cash, there are noother losses than the legal interest, which interest is not dueexcept from the time of the judicial demand, or, in the presentcase, from the filing of the complaint. (Arts. 1108 and 1100, CivilCode.) We do not consider that article 1688 is applicable in thiscase, in so far as it provides "that the partnership is liable toevery partner for the amounts he may have disbursed onaccount of the same and for the proper interest," for the reasonthat no other money than that contributed as is involved.

As in the partnership there were two administrators or agentsliable for the above-named amount, article 1138 of the Civil Codehas been invoked; this latter deals with debts of a partnershipwhere the obligation is not a joint one, as is likewise provided byarticle 1723 of said code with respect to the liability of two ormore agents with respect to the return of the money that theyreceived from their principal. Therefore, the other errors assignedhave not been committed.



In view of the foregoing judgment appealed from is herebyaffirmed, provided, however, that the defendant Ong Pong Coshall only pay the plaintiff the sum of P750 with the legal interestthereon at the rate of 6 per cent per annum from the time of thefiling of the complaint, and the costs, without special ruling as tothe costs of this instance. So ordered.

G.R. No. L-4597 November 23, 1908

JOSE GARCIA RON, plaintiff-appellee,vs.

LA COMPAÑIA DE MINAS DE BATAN, defendant-appellant.

Ortigas and Fisher, for appellant.C.W. O'Brien, for appellee.

CARSON, J.:

This was an action brought by the plaintiff to recover from thedefendant the sum of 9,558 1/3 Spanish pesetas for servicesrendered. The trial judge found, and the evidence of record fully

sustains his finding, that the plaintiff was employed as foremanor capataz by one Genaro Ansuategui, the local manager ofcertain mines of the defendant company, situated on the Islandsof Bataan; and that this employment continued from November1, 1903; until August 4, 1904. The trial judge found further that,while the plaintiff failed to establish satisfactorily his claim thatthe salary promised him by the company's manager was 1,000pesestas per month, nevertheless he is entitled to reasonablecompensation for the services rendered which were fixed at P5per day, or P150 per month, the record disclosing that theplaintiff had worked for the defendant company as foreman or

capataz and received compensation that the rate a short timeprior to his employment under his contract with Ansuategui.

The defendant comply alleged that it had never received suchservices of the plaintiff and denied the fact of the employment,but us we have said, the evidence of record affirmativelyestablishes the finding of the trial judge that the services wererendered, and that they were rendered under contract ofemployment between the plaintiff and one Ansuategui, the localmanager of the defendant company; the only evidenceintroduced by the defendant in this connection being thetestimony of the general manager of the company, who lived inManila, to the effect that it does not appear from the books of thecompany that the plaintiff was employed by the defendants, orthat any record of the employment was forwarded to the centraloffice in Manila.

Counsel for the defendant company insists, however, that,granting that the plaintiff did in fact work in the mines of thedefendant company and was employed by its local manager,nevertheless, defendant is not indebted to the plaintiff for theseservice, because the local manager at the mines was notauthorized to enter into the alleged contract of employment, such

authority not having been granted to him under his letter ofinstructions, a copy of which appears in the record.

It is not necessary for us to discuss the question of the liability ofthe defendant company to the plaintiff for the value of theservices rendered, if it in fact appeared that the manager at themines was not expressly authorized to employ the plaintiff and tocontract for his services, because we are of opinion that theauthority to contract for the employment of the plaintiff wasclearly conferred upon Ansuategui by the terms of this letter ofinstructions.



These transactions, which were introduced into the record, weredated in Manila, May 23, 1903, and among other provisionscontain the following:

Es tambien derroche los sueldos que dicen pagan a losfaginantes y el exceso de gente para poco trabajo; debe tenersela gente necesaria y pagar lo razonable, y al que no le convengaque se marche. Deben hacer por contrata el corte de trozos ymaderas de todas clases, y a sueldo le gente que se empleapara hacer los barracones y otros trabajos que su criterio ledicte, pero no permitiendo por ningun concepto que abusen.

(The salaries which it is said are paid to the faginantes and theexcess of employees for little work is also a waste. Thenecessary employees should be kept and paid reasonably, andhe who is not needed [satisfied], let him go. The cutting of logsand wood of all kinds ought to be done by contract, and thepersons employed in digging the barracones and other work atwages which your good judgment may dictate, but on accountpermitting abuses.)

And at the conclusion of the letter of instructions, we find thefollowing:

Lo que aqui no va anotado, esperamos lo subsane Vd. con subuen criterio, y le recomendamos por ultimo nos tenga alcorriente de todo.

(We trust you to correct and supply (subsanar ) anything which isnot noted herein, in accordance with your good judgment, andfinally we urgently request that you keep us informed ofeverything.)

Other provisions of the letter of instructions expressly authorized Ansuategui, as the local manager of the defendant company atthe mines, to discharge employees who did not provesatisfactory, and leave no room for doubt that he was dulyauthorized to represent the company at the mines so far as thiswas necessary for their proper local management.lawphil.net

Taking into consideration the fact that the mines of the defendantcompany are located upon an island some two days' distance bysteamer from the office of the company at Manila, that the onlycommunication therewith was by mail a few times per month,and that in the very nature of the enterprise, it was necessary, inorder that the local manager might successfully perform hisduties, to confer upon him wide scope in the employment anddischarge of labor, we think that there can be no doubt thatGenaro Ansuategui was fully and expressly authorized by theterms of this letter of instructions to enter into the allegedcontract of employment with the plaintiff on behalf of thedefendant company; and the evidence of record establishing thefact that he did so, and that the plaintiff worked for the companyfor the period set out in the findings of the trial court, we are ofopinion that the trial court properly rendered judgment in favor ofthe plaintiff and against the defendant for the value of the

services rendered.

The plaintiff not having appealed from the judgment of the trialcourt denying him the alleged contract value of the servicesrendered, and the evidence of record fully sustaining the findingsas to the reasonable value of these services, the judgment of thetrial court should be and is hereby affirmed, with the costs of thisinstance against the defendant. So ordered.



November 23, 1906, G.R. No. 3025SI-BOCO, plaintiff-appellee, vs.

YAP TENG, defendant-appellant.

Marcelo Caringal for appellant.Thos. L. McGirr for appellee.

MAPA, J.:

This is an action by the plaintiff to recover from the defendant thesum of P1,442.95, alleged to be due him from the latter. Thecourt below rendered judgment in favor of the plaintiff for theaforesaid sum and legal interest thereon at the rate of 6 per centper annum from the 25th of March, 1905, with costs against thedefendant, who excepted to the said judgment, made a motionfor a new trial on the ground that the findings of fact contained inthe said judgment were plainly and manifestly against the weightof the evidence, and has brought the case to this court by a billof exceptions.

The evidence shows that for a period of three years, more or

less, the plaintiff had been furnishing to the defendant nativecloth for the latter's store in the city of Manila. The goods were atfirst furnished on credit, but the business relations of the partiescaused entirely in 1904. The defendant had a partner by thename of Yapsuan, who was the manager of the business. Thedefendant introduced him to the plaintiff as such manager, andtold him that Yapsuan had authority from him to receive the cloth,and that the value thereof should be charged to his, thedefendant's account, and in fact the cloth was, as a rule,received by Yapsuan from the plaintiff. It became necessary forYapsuan to return to China in 1902 on account of ill health and a

liquidation of the accounts between the plaintiff and thedefendant was made in December of the said year, showing abalance of P1,444.95 in favor of the plaintiff, which the defendantexpressly undertook to pay. This was proved not only by thetestimony of the plaintiff himself, but by that of two witnesseswho were present. After the liquidation was made the defendantcontinued to buy the goods from the plaintiff for cash until theyear 1904, when, as already stated, the business relationsbetween the parties ceased.

The defendant has failed to show that he had paid the aforesaidbalance of P1,444.95 or an part thereof. Consequently the judgment of the court below is just and legal and should beaffirmed. There is a difference of P2 between the said balanceand the amount of the judgment but, as the court properly said,the plaintiff is not entitled to receive more than he prays for in hiscomplaint, and the amount stated in the judgment is all that issought to be recovered.

It is contented by the appellant that the court below erred in notfinding that, the only indebtedness of the defendant beingP1,442.95 according to the liquidation made in December, 1902,

he having thereafter paid the sum of P1,810.87 as alleged in thecomplaint, and in default of proof as to the value of the goodsfurnished to the defendant, after that date, the plaintiff could notmaintain an action to recover the said sum. There is, in fact, noevidence in the record upon this last point. It was not necessary,however, to offer such evidence. The action was not for therecovery of the value of the goods furnished to the defendantafter the liquidation of 1902. The plaintiff himself testified that thedefendant had paid cash for such goods, but alleged that thelatter had paid nothing on account of the balance due after thesaid liquidation. His testimony upon this point has not been



contradicted in any way and it is apparent from such testimonythat the P1,810.87 represented the value of the goods for whichthe defendant paid cash. If this amount was mentioned at all inthe complaint, it was for the purpose of comparing the same withthe total value of the goods furnished the defendant up to theyear 1904, which, according to the complaint, amounted toP3,235.75. It should be borne in mind that the plaintiff continuedto furnish goods to the defendant after the liquidation until theyear 1904. There is no evidence that the aforesaid amount waspaid on account of the balance due because of the liquidationand not on account of the value of the said goods. The plaintifftestified without contradiction, that absolutely nothing had beenpaid on the balance due from the said liquidation.

It is further alleged by the appellant that there is nothing to showthat after the year 1902 he continued to purchase goods from theplaintiff, paying cash therefor, as was erroneously found by thecourt below. The positive and uncontradicted statement of theplaintiff to the contrary is sufficient, however, to justify the findingof the court below upon that point. That court, therefore,committed no error in this respect.

The appellant finally contends that the goods having beenfurnished to and received by the partnership between himselfand Yapsuan, and the accounts of the same not having beenliquidated, this action should have been brought against thepartnership itself, or against the partners jointly, and not againstthe defendant only. However that may be, the fact remains thatthe defendant in this case was the only one who contradictedwith the plaintiff in his own name, as appears from the latter'stestimony. When the defendant told the plaintiff that he hadauthorized Yapsuan to receive the goods, he instructed theplaintiff to charge them to him (the defendant) personally. The

defendant, moreover, undertook personally to pay the balancedue the plaintiff, after the liquidation made in December, 1902,such as being the sum sought to be recovered in this case, asappears from the testimony of the plaintiff and that of the twowitnesses who took part in the said liquidation. Consequently thecourt below properly allowed the plaintiff to maintain this actionagainst the defendant. The judgment appealed from isaccordingly affirmed with the costs of this instance against theappellant. After expiration of twenty days let judgment be enteredin accordance herewith and in due time let the record beremanded to the court below for execution. So ordered.

G.R. No. 3186 March 7, 1907

THE GREAT COUNCIL OF THE UNITED STATES OF THEIMPROVED ORDER OF RED MEN, plaintiff-appellee,vs.THE VETERAN ARMY OF THE PHILIPPINES, defendant-appellant.

Hartigan, Rohde, & Gutierrez for appellant.W. A. Kincaid for appellee.

WILLAR, J.:

Article 3 of the Constitution of the Veteran Army of thePhilippines provides as follows:

The object of this association shall be to perpetuate the spirit ofpatriotism and fraternity those men who upheld the Stars andStripes in the Philippine Islands during the Spanish war and thePhilippine insurrection, and to promote the welfare of itsmembers in every just and honorable way; to assist the sick and



afflicted and to bury the dead, to maintain among its members intime of peace the same union and harmony with which theyserved their country in times of war and insurrection.

Article 5 provides that:

This association shall be composed of —

(a) A department.

(b) Two or more posts.

It is provided in article 6 that the department shall be composedof a department commander, fourteen officers, and thecommander of each post, or some member of the post appointedby him. Six members of the department constitute a quorum forthe transaction of business.

The Constitution also provides for the organization of posts. Among the posts thus organized is the General Henry W. LawtonPost, No. 1. On the 1st day of March, 1903, a contract of lease ofparts of a certain buildings in the city of Manila was signed byW.W. Lewis, E.C. Stovall, and V.O., Hayes, as trustees of the

Apache Tribe, No. 1, Improved Order of Red Men, as lessors,and Albert E. McCabe, citing for and on behalf of Lawton Post,Veteran Army of the Philippines as lessee. The lease was for theterm of two years commencing February 1, 903, and endingFebruary 28, 1905. The Lawton Post occupied the premises incontroversy for thirteen months, and paid the rent for that time. Itthem abandoned them and this action was commenced torecover the rent for the unexpired term. Judgment was renderedin the court below on favor of the defendant McCabe, acquittinghim of the complaint. Judgment was rendered also against theVeteran Army of the Philippines for P1,738.50, and the costs.

From this judgment, the last named defendant has appealed.The plaintiff did not appeal from the judgment acquittingdefendant McCabe of the complaint.

It is claimed by the appellant that the action can not bemaintained by the plaintiff, The Great Council of the UnitedStates of the Improved Order of Red Men, as this organizationdid not make the contract of lease.

It is also claimed that the action can not be maintained againstthe Veteran Army of the Philippines because it nevercontradicted, either with the plaintiff or with Apach Tribe, No. 1,and never authorized anyone to so contract in its name.

We do not find it necessary to consider the first point because wethink the contention of the appellant on the second point must besustained.

It is difficult to determine the exact nature of the defendantorganization. It is of course not a mercantile partnership. There issome doubt as to whether it is a civil partnership, in view of thedefinition of the term in article 1665 of the Civil Code. That articleis as follows:

Partnership is a contract by which two or more persons bindthemselves to contribute money, property, or industry to acommon fund, with the intention of dividing the profits amongthemselves.

It seems to be the opinion of the commentators that where thesociety is not constituted for the purpose of gain. it does not fallwithin this article of the Civil Code. Such an organization is fullycovered by the Law of Associations of 1887, but that law wasnever extended to the Philippine Islands. According to some



commentators it would be governed by the provisions relating tothe community of property. However, the questions thuspresented we do not find necessary to , and to not resolve. Theview most favorable to the appellee is the one that makes theappellant a civil partnership. Assuming that is such, and iscovered by the provisions of title 8, book 4 of the Civil Code, it isnecessary for the appellee to prove that the contract in questionwas executed by some authorized to so by the Veteran Army ofthe Philippines.

Article 1695 of the Civil Code provides as follows:

Should no agreement have been made with regard to the form ofmanagement, the following rules shall be observed:

1 All the partners shall be considered as agents, and whateverany one of them may do by himself shall bind the partnership;but each one may oppose the act of the others before they mayhave produced any legal effect.

One partner, therefore, is empowered to contract in the name ofthe partnership only when the articles of partnership make noprovision for the management of the partnership business. In the

case at bar we think that the articles of the Veteran Army of thePhilippines do so provide. It is true that an express disposition tothat effect is not found therein, but we think one may be fairlydeduced from the contents of those articles. They declare whatthe duties of the several officers are. In these various provisionsthere is nothing said about the power of making contracts, andthat faculty is not expressly given to any officer. We think that itwas, therefore, reserved to the department as a whole; that is,that in any case not covered expressly by the rules prescribingthe duties of the officers, the department were present. It ishardly conceivable that the members who formed this

organization should have had the intention of giving to any oneof the sixteen or more persons who composed the departmentthe power to make any contract relating to the society which thatparticular officer saw fit to make, or that a contract when somade without consultation with, or knowledge of the othermembers of the department should bind it. We therefore, hold,that no contract, such as the one in question, is binding on theVeteran Army of the Philippines unless it was authorized at ameeting of the department. No evidence was offered to showthat the department had never taken any such action. In fact, theproof shows that the transaction in question was entirelybetween Apache Tribe, No. 1, and the Lawton Post, and there isnothing to show that any member of the department ever knewanything about it, or had anything to do with it. The liability of theLawton Post is not presented in this appeal.

Judgment against the appellant is reversed, and the Veteran Army of the Philippines is acquitted of the complaint. No costswill be allowed to either party in this court. After the expiration oftwenty days let judgment be rendered in accordance to the lowercourt for proper action. So ordered.

G.R. No. L-11840 July 26, 1960

ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SINAN and ANTONIO C. GOQUIOLAY, plaintiffs-appellants,vs.WASHINGTON Z. SYCIP, ET AL., defendants-appellees.

Jose C. Colayco, Manuel O. Chan and Padilla Law Offices forappellants.Sycip, Quisumbing, Salazar and Associates for appellees.

REYES, J. B. L., J .:



Direct appeal from the decision of the Court of First Instance ofDavao (the amount involved being more than P200,00)dismissing the plaintiffs-appellants' complaint.

From the stipulation of facts of the parties and the evidence onrecord, it would appear that on May 29, 1940, Tan Sin An and Antonio C. Goquiolay", entered into a general commercialpartnership under the partnership name "Tan Sin An and AntonioC. Goquiolay", for the purpose in dealing in real state. Thepartnership had a capital of P30,000.00, P18,000.00 of whichwas contributed by Goquiolay and P12,000.00 by Tan Sin An.The agreement lodge upon Tan Sin An the sole management ofthe partnership affairs, stipulating that —

III. The co-partnership shall be composed of said Tan Sin An assole managing and partner (sic), and Antonio C. Goquiolay asco-partner.

IV. Vhe affairs of co-partnership shall be managed exclusively bythe managing and partner (sic) or by his authorized agent, and itis expressly stipulated that the managing and partner (sic) maydelegate the entire management of the affairs of the co-partnership by irrevocable power of attorney to any person, firm

or corporation he may select upon such terms as regardscompensation as he may deem proper, and vest in suchpersons, firm or corporation full power and authority, as the agentof the co-partnership and in his name, place and stead to doanything for it or on his behalf which he as such managing andpartner (sic) might do or cause to be done.

V. The co-partner shall have no voice or participation in themanagement of the affairs of the co-partnership; but he mayexamine its accounts once every six (6) months at any time

during ordinary business hours, and in accordance with theprovisions of the Code of Commerce. (Article of Co-Partnership).

The lifetime of the partnership was fixed at ten (10) years andalso that —

In the event of the death of any of the partners at any time beforethe expiration of said term, the co-partnership shall not bedissolved but will have to be continued and the deceased partnershall be represented by his heirs or assigns in said co-partnership (Art. XII, Articles of Co-Partnership).

However, the partnership could be dissolved and its affairsliquidated at any time upon mutual agreement in writing of thepartners (Art. XIII, articles of Co-Partnership).

On May 31, 1940, Antonio Goquiolay executed a general powerof attorney to this effect:

That besides the powers and duties granted the said Tan Sin Anby the articles of co-partnership of said co-partnership "Tan Sin An and Antonio Goquiolay ", that said Tan Sin An should act asthe Manager for said co-partnership for the full period of the term

for which said co-partnership was organized or until the wholeperiod that the said capital of P30,000.00 of the co-partnershipshould last, to carry on to the best advantage and interest of thesaid co-partnership, to make and execute, sign, seal and deliverfor the co-partnership, and in its name, all bills, bonds, notes,specialties, and trust receipts or other instruments or documentsin writing whatsoever kind or nature which shall be necessary tothe proper conduction of the said businesses, including thepower to mortgage and pledge real and personal properties, tosecure the obligation of the co-partnership, to buy real orpersonal properties for cash or upon such terms as he may



deem advisable, to sell personal or real properties, such as landsand buildings of the co-partnership in any manner he may deemadvisable for the best interest of said co-partnership, to borrowmoney on behalf of the co-partnership and to issue promissorynotes for the repayment thereof, to deposit the funds of the co-partnership in any local bank or elsewhere and to draw checksagainst funds so deposited ... .

On May 29, 1940, the plaintiff partnership "Tan Sin An andGoquiolay" purchased the three (3) parcels of land, known asLots Nos. 526, 441 and 521 of the Cadastral Survey of Davao,subject-matter of the instant litigation, assuming the payment ofa mortgage obligation of P25,000.00, payable to "La UrbanaSociedad Mutua de Construccion y Prestamos" for a period often (10) years, with 10% interest per annum. Another 46 parcelswere purchased by Tan Sin An in his individual capacity, and heassumed payment of a mortgage debt thereon for P35,000.00with interest. The downpayment and the amortization wereadvanced by Yutivo and Co., for the account of the purchasers.

On September 25, 1940, the two separate obligations wereconsolidated in an instrument executed by the partnership andTan Sin An, whereby the entire 49 lots were mortgaged in favor

of the "Banco Hipotecario de Filipinas" (as successor to "LaUrbana") and the covenantors bound themselves to pay, jointlyand severally, the remaining balance of their unpaid accountsamounting to P52,282.80 within eight 8 years, with 8% annualinterest, payable in 96 equal monthly installments.

On June 26, 1942, Tan Sin An died, leaving as surviving heirs hiswidow, Kong Chai Pin, and four minor children, namely: Tan L.Cheng, Tan L. Hua, Tan C. Chiu and Tan K. Chuan. DefendantKong Chai Pin was appointed administratrix of the intestateestate of her deceased husband.

In the meantime, repeated demands for payment were made bythe Banco Hipotecario on the partnership and on Tan Sin An. InMarch, 1944, the defendant Sing Yee and Cuan, Co., Inc., uponrequest of defendant Yutivo Sans Hardware Co., paid theremaining balance of the mortgage debt, and the mortgage wascancelled.

Then in 1946, Yutivo Sons Hardware Co. and Sing Yee andCuan Co., Inc. filed their claims in the intestate proceedings ofTan Sin An for P62,415.91 and P54,310.13, respectively, asalleged obligations of the partnership "Tan Sin An and Antonio C.Goquiolay" and Tan Sin An, for advances, interest and taxes paidin amortizing and discharging their obligations to "La Urbana"and the "Banco Hipotecario". Disclaiming knowledge of saidclaims at first, Kong Chai Pin later admitted the claims in heramended answer and they were accordingly approved by theCourt.

On March 29, 1949, Kong Chai Pin filed a petition with theprobate court for authority to sell all the 49 parcels of land toWashington Z, Sycip and Betty Y. Lee, for the purposepreliminary of settling the aforesaid debts of Tan Sin An and thepartnership. Pursuant to a court order of April 2, 1949, the

administratrix executed on April 4, 1949, a deed of sale 1 of the49 parcels of land to the defendants Washington Sycip and BettyLee in consideration of P37,000.00 and of vendees' assumingpayments of the claims filed by Yutivo Sons Hardware Co. andSing Yee and Cuan Co., Inc. Later, in July, 1949, defendantsSycip and Betty Lee executed in favor of the InsularDevelopment Co., Inc. a deed of transfer covering the said 49parcels of land.

Learning about the sale to Sycip and Lee, the surviving partner Antonio Goquiolay filed, on or about July 25, 1949, a petition in



the intestate proceedings seeking to set aside the order of theprobate court approving the sale in so far as his interest over theparcels of land sold was concerned. In its order of December 29,1949, the probate court annulled the sale executed by theadministratrix with respect to the 60% interest of AntonioGoquiolay over the properties sold. Kong Chai Pin appealed tothe Court of Appeals, which court later certified the case to us(93 Phil., 413; 49 Off. Gaz. [7] 2307). On June 30, 1953, werendered decision setting aside the orders of the probate courtcomplained of and remanding the case for new trial, due to thenon-inclusion of indispensable parties. Thereafter, new pleadingswere filed.

The second amended complaint in the case at bar prays, amongother things, for the annulment of the sale in favor of WashingtonSycip and Betty Lee, and their subsequent conveyance in favorof Insular Development Co., Inc., in so far as the three (3) lotsowned by the plaintiff partnership are concerned. The answeraverred the validity of the sale by Kong Chai Pin as successorpartner, in lieu of the late Tan Sin An. After hearing, the complaintwas dismissed by the lower court in its decision dated October30, 1956; hence, this appeal taken directly to us by the plaintiffs,as the amount involved is more than P200,000.00. Plaintiffs-

appellants assign as errors that —

I — The lower court erred in holding that Kong Chai Pin becamethe managing partner of the partnership upon the death of herhusband, Tan Sin An, by virtue of the articles of Partnershipexecuted between Tan Sin An and Antonio Goquiolay, and thegeneral power of attorney granted by Antonio Goquiolay.

II — The lower court erred in holding that Kong Chai Pin couldact alone as sole managing partner in view of the minority of theother heirs.

III — The lower court erred in holding that Kong Chai Pin was theonly heir qualified to act as managing partner.

IV — The lower court erred in holding that Kong Chai Pin hadauthority to sell the partnership properties by virtue of the articlesof partnership and the general power of attorney granted to TanSin An in order to pay the partnership indebtedness.

V — The lower court erred in finding that the partnership did notpay its obligation to the Banco Hipotecario.

VI — The lower court erred in holding that the consent of AntonioGoquiolay was not necessary to consummate the sale of thepartnership properties.

VII — The lower court erred in finding that Kong Chai Pinmanaged the business of the partnership after the death of herhusband, and that Antonio Goquiolay knew it.

VIII — The lower court erred in holding that the failure of AntonioGoquiolay to oppose the management of the partnership byKong Chai Pin estops him now from attacking the validity of thesale of the partnership properties.

IX — The lower court erred in holding that the buyers of thepartnership properties acted in good faith.

X — The lower court erred in holding that the sale was notfraudulent against the partnership and Antonio Goquiolay.

XI — The lower court erred in holding that the sale was not onlynecessary but beneficial to the partnership.



XII — The lower court erred in dismissing the complaint and inordering Antonio Goquiolay to pay the costs of suit.

There is a merit in the contention that the lower court erred inholding that the widow, Kong Chai Pin, succeeded her husband,Tan Sin An, in the sole management of the partnership, upon thelatter's death. While, as we previously stated in our narration offacts, the Articles of Co-Partnership and the power of attorneyexecuted by Antonio Goquiolay, conferred upon Tan Sin An theexclusive management of the business, such power, premisedas it is upon trust and confidence, was a mere personal right thatterminated upon Tan's demise. The provision in the articlesstating that "in the event of death of any one of the partnerswithin the 10-year term of the partnership, the deceased partnershall be represented by his heirs", could not have referred to themanagerial right given to Tan Sin An; more appropriately, itrelated to the succession in the proprietary interest of eachpartner. The covenant that Antonio Goquiolay shall have no voiceor participation in the management of the partnership, being alimitation upon his right as a general partner, must be heldcoextensive only with Tan's right to manage the affairs, thecontrary not being clearly apparent.

Upon the other hand, consonant with the articles of co-partnership providing for the continuation of the firmnotwithstanding the death of one of the partners, the heirs of thedeceased, by never repudiating or refusing to be bound underthe said provision in the articles, became individual partners with Antonio Goquiolay upon Tan's demise. The validity of likeclauses in partnership agreements is expressly sanctioned under Article 222 of the Code of Commerce.2

Minority of the heirs is not a bar to the application of that clausein the articles of co-partnership (2 Vivante, Tratado de Derecho

Mercantil, 493; Planiol, Traite Elementaire de Droit Civil, Englishtranslation by the Louisiana State Law Institute, Vol. 2, Pt. 2, p.177).

Appellants argue, however, that since the "new" members'liability in the partnership was limited merely to the value of theshare or estate left by the deceased Tan Sin An, they became nomore than limited partners and, as such, were disqualified fromthe management of the business under Article 148 of the Codeof Commerce. Although ordinarily, this effect follows from thecontinuance of the heirs in the partnership,3 it was not so withrespect to the widow Kong Chai Pin, who, by her affirmativeactions, manifested her intent to be bound by the partnershipagreement not only as a limited but as a general partner. Thus,she managed and retained possession of the partnershipproperties and was admittedly deriving income therefrom up toand until the same were sold to Washington Sycip and Betty Lee.In fact, by executing the deed of sale of the parcels of land indispute in the name of the partnership, she was acting no lessthan as a managing partner. Having thus preferred to act assuch, she could be held liable for the partnership debts andliabilities as a general partner, beyond what she might havederived only from the estate of her deceased husband. By

allowing her to retain control of the firm's property from 1942 to1949, plaintiff estopped himself to deny her legal representationof the partnership, with the power to bind it by the propercontracts.

The question now arises as to whether or not the consent of theother partners was necessary to perfect the sale of thepartnership properties to Washington Sycip and Betty Lee. Theanswer is, we believe, in the negative. Strangers dealing with apartnership have the right to assume, in the absence ofrestrictive clauses in the co-partnership agreement, that every



general partner has power to bind the partnership, speciallythose partners acting with ostensible authority. And so, we heldin one case:

. . . Third persons, like the plaintiff, are not bound in entering intoa contract with any of the two partners, to ascertain whether ornot this partner with whom the transaction is made has theconsent of the other partner. The public need not make inquiriesas to the agreements had between the partners. Its knowledge isenough that it is contracting with the partnership which isrepresented by one of the managing partners.

"There is a general presumption that each individual partner isan agent for the firm and that he has authority to bind the firm incarrying on the partnership transactions." [Mills vs. Riggle, 112Pac., 617]

"The presumption is sufficient to permit third persons to hold thefirm liable on transactions entered into by one of the members ofthe firm acting apparently in its behalf and within the scope of hisauthority." [Le Roy vs. Johnson, 7 U.S. Law, Ed., 391] (GeorgeLitton vs. Hill & Ceron, et al., 67 Phil., 513-514).

We are not unaware of the provision of Article 129 of the Code ofCommerce to the effect that —

If the management of the general partnership has not beenlimited by special agreement to any of the members, all shallhave the power to take part in the direction and management ofthe common business, and the members present shall come toan agreement for all contracts or obligations which may concernthe association. (Emphasis supplied)

but this obligation is one imposed by law on the partners amongthemselves, that does not necessarily affect the validity of theacts of a partner, while acting within the scope of the ordinarycourse of business of the partnership, as regards third personswithout notice. The latter may rightfully assume that thecontracting partner was duly authorized to contract for and inbehalf of the firm and that, furthermore, he would not ordinarilyact to the prejudice of his co-partners. The regular course ofbusiness procedure does not require that each time a thirdperson contracts with one of the managing partners, he shouldinquire as to the latter's authority to do so, or that he should firstascertain whether or not the other partners had given theirconsent thereto. In fact, Article 130 of the same Code ofCommerce provides that even if a new obligation was contractedagainst the express will of one of the managing partners, "it shallnot be annulled for such reason, and it shall produce its effectswithout prejudice to the responsibility of the member or memberswho contracted it, for the damages they may have caused to thecommon fund."

Cesar Vivante (2 Tratado de Derecho Mercantil, pp. 114-115)points out:

367. Primera hipotesis. — A falta de pactos especiales, lafacultad de administrar corresponde a cada sociopersonalmente. No hay que esperar ciertamente concordia contantas cabezas, y para cuando no vayan de acuerdo, ladisciplina del Codigo no ofrece un sistema eficaz que evite losinconvenientes. Pero, ante el silencio del contrato, debia quiza ellegislador privar de la administracion a uno de los socios enbeneficio del otro? Seria una arbitrariedad. Debera quizadeclarar nula la Sociedad que no haya elegido Administrador? Elremedio seria peor que el mal. Debera, tal vez, pretender quetodos los socios concurran en todo acto de la Sociedad? Pero



este concurso de todos habria reducido a la impotencia laadministracion, que es asunto d todos los dias y de todas horas.Hubieran sido disposiciones menos oportunas que lo adoptadopor el Codigo, el cual se confia al espiritu de reciproca confianzaque deberia animar la colaboracion de los socios, y en la leyinflexible de responsabilidad que implica comunidad en losintereses de los mismos.

En esta hipotesis, cada socio puede ejercer todos los negocioscomprendidos en el contrato social sin dar de ello noticia a losotros, porque cada uno de ellos ejerce la administracion en latotalidad de sus relaciones, salvo su responsabilidad en el casode una administracion culpable. Si debiera dar noticia, elbeneficio de su simultania actividad, frecuentemente distribuidaen lugares y en tiempos diferentes, se echaria a perder. Seobjetara el que de esta forma, el derecho de oposicion de cadauno de los socios puede quedar frustrado. Pero se puedecontestar que este derecho de oposicion concedido por la leycomo un remedio excepcional, debe subordinarse al derecho deejercer el oficio de Administrador, que el Codigo concede sinlimite: "se presume que los socios se han concedidoreciprocamente la facultad de administrar uno para otro." Seharia precipitar esta hipotesis en la otra de una administracion

colectiva (art. 1,721, Codigo Civil) y se acabaria con pedir elconsentimiento, a lo menos tacito, de todos los socios — lo queel Codigo excluye ........, si se obligase al socio Administrador adar noticia previa del negocio a los otros, a fin de que pudieranoponerse si no consintieran.

Commenting on the same subject, Gay de Montella (Codigo deComercio, Tomo II, 147-148) opines:

Para obligar a las Compañias enfrente de terceros (art. 128 delCodigo), no es bastante que los actos y contratos hayan sido

ejecutados por un socio o varios en nombre colectivo, sino quees preciso el concurso de estos dos elementos, uno, que elsocio o socios tengan reconocida la facultad de administrar laCompañia, y otro, que el acto o contrato haya sido ejecutado ennombre de la Sociedad y usando de su firma social. Asi se quetoda obligacion contraida bajo la razon social, se presumecontraida por la Compañia. Esta presunion es impuesta pormotivos de necesidad practica. El tercero no puede cada vezque trata con la Compañia, inquirir si realmente el negocioconcierne a la Sociedad. La presuncion es juris tantum y no juriset de jure, de modo que si el gerente suscribe bajo la razonsocial una obligacion que no interesa a la Sociedad, este podrarechazar la accion del tercero probando que el acreedor conociaque la obligacion no tenia ninguna relacion con ella. Si talesactos y contratos no comportasen la concurrencia de amboselementos, seria nulos y podria decretarse la responsabilidadcivil o penal contra sus autores.

En el caso que tales actos o contratos hayan sido tacitamenteaprobados por la Compañia, o contabilizados en sus libros, si elacto o contrato ha sido convalidado sin protesta y se trata deacto o contrato que ha producido beneficio social, tendria plenavalidez, aun cuando le faltase algunos o ambos de aquellos

requisitos antes señalados.

Cuando los Estatutos o la escritura social no contienen ningunaclausula relativa al nombramiento o designacion de uno o masde un socio para administrar la Compañia (art. 129 del Codigo)todos tienen por un igual el derecho de concurir a la decision ymanejo de los negocios comunes. . . .

Although the partnership under consideration is a commercialpartnership and, therefore, to be governed by the Code ofCommerce, the provisions of the old Civil Code may give us



some light on the right of one partner to bind the partnership.States Art. 1695 thereof:

Should no agreement have been made with respect to the formof management, the following rules shall be observed:

1. All the partners shall be considered agents, and whatever anyone of the may do individually shall bind the partnership; buteach one may oppose any act of the others before it has becomelegally binding.

The records fail to disclose that appellant Goquiolay made anyopposition to the sale of the partnership realty to Washington Z.Sycip and Betty Lee; on the contrary, it appears that he(Goquiolay) only interposed his objections after the deed ofconveyance was executed and approved by the probate court,and, consequently, his opposition came too late to be effective.

Appellants assails the correctness of the amounts paid for theaccount of the partnership as found by the trial court. Thisquestion, however, need not be resolved here, as in the deed ofconveyance executed by Kong Chai Pin, the purchasersWashington Sycip and Betty Lee assumed, as part consideration

of the purchase, the full claims of the two creditors, Sing Yee andCuan Co., Inc. and Yutivo Sons Hardware Co.

Appellants also question the validity of the sale covering theentire firm realty, on the ground that it, in effect, threw thepartnership into dissolution, which requires consent of all thepartners. This view is untenable. That the partnership was leftwithout the real property it originally had will not work itsdissolution, since the firm was not organized to exploit theseprecise lots but to engage in buying and selling real estate, and"in general real estate agency and brokerage business".

Incidentally, it is to be noted that the payment of the solidaryobligation of both the partnership and the late Tan Sin An, leavesopen the question of accounting and contribution between theco-debtors, that should be ventilated separately.

Lastly, appellants point out that the sale of the partnershipproperties was only a fraudulent device by the appellees, withthe connivance of Kong Chai Pin, to ease out Antonio Goquiolayfrom the partnership. The "devise", according to the appellants,started way back sometime in 1945, when one Yu Khe Thaisounded out Antonio Goquiolay on the possibility of selling hisshare in the partnership; and upon his refusal to sell, wasfollowed by the filing of the claims of Yutivo Sons Hardware Co.and Sing Yee and Cuan Co., Inc. in the intestate estateproceedings of Tan Sin An. As creditors of Tan Sin An and theplaintiff partnership (whose liability was alleged to be joint andseveral), Yutivo Sons Hardware Co., and Sing Yee Cuan Co.,Inc. had every right to file their claims in the intestateproceedings. The denial of the claims at first by Kong Chai Pin( for lack of sufficient knowledge) negatives any conspiracy onher part in the alleged fraudulent scheme, even if shesubsequently decided to admit their validity after studying theclaims and finding it best to admit the same. It may not be amiss

to remark that the probate court approved the questioned claims.

There is complete failure of proof, moreover, that the price forwhich the properties were sold was unreasonably low, or in anyway unfair, since appellants presented no evidence of the marketvalue of the lots as of the time of their sale to appellees Sycipand Lee. The alleged value of P31,056.58 in May of 1955 is noproof of the market value in 1949, specially because in theinterval, the new owners appear to have converted the land intoa subdivision, which they could not do without opening roads andotherwise improving the property at their own expense. Upon the



other hand, Kong Chai Pin hardly had any choice but to executethe questioned sale, as it appears that the partnership hadneither cash nor other properties with which to pay itsobligations. Anyway, we cannot consider seriously the inferencesfreely indulged in by the appellants as allegedly indicating fraudin the questioned transactions, leading to the conveyance of thelots in dispute to the appellee Insular Development Co., Inc.

Wherefore, finding no reversible error in the appealed judgment,we affirm the same, with costs against appellant AntonioGoquiolay.

G.R. No. L-19819 October 26, 1977

WILLIAM UY, plaintiff-appellee,vs.

BARTOLOME PUZON, substituted by FRANCO PUZON,defendant-appellant.

R.P. Sarandi for appellant.

Jose L. Uy & Andres P. Salvador for appellee.

CONCEPCION JR., J.:têñ.£îhqwâ£

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

It is of record that the defendant Bartolome Puzon had a contractwith the Republic of the Philippines for the construction of theGanyangan Bato Section of the Pagadian Zamboanga CityRoad, province of Zamboanga del Sur 1 and of five (5) bridges inthe Malangas-Ganyangan Road. 2 Finding difficulty inaccomplishing both projects, Bartolome Puzon sought thefinancial assistance of the plaintiff, William Uy. As aninducement, Puzon proposed the creation of a partnershipbetween them which would be the sub-contractor of the projectsand the profits to be divided equally between them. William Uyinspected the projects in question and, expecting to deriveconsiderable profits therefrom, agreed to the proposition, thusresulting in the formation of the "U.P. Construction Company" 3 which was subsequently engaged as subcontractor of theconstruction projects. 4

The partners agreed that the capital of the partnership would beP100,000.00 of which each partner shall contribute the amountof P50,000.00 in cash. 5 But, as heretofore stated, Puzon wasshort of cash and he promised to contribute his share in thepartnership capital as soon as his application for a loan with thePhilippine National Bank in the amount of P150,000.00 shallhave been approved. However, before his loan application could

be acted upon, he had to clear his collaterals of its incumbrancesfirst. For this purpose, on October 24, 1956, Wilham Uy gaveBartolome Puzon the amount of P10,000.00 as advancecontribution of his share in the partnership to be organizedbetween them under the firm name U.P. CONSTRUCTIONCOMPANY which amount mentioned above will be used byPuzon to pay his obligations with the Philippine National Bank toeffect the release of his mortgages with the said Bank. 6 OnOctober 29, 1956, William Uy again gave Puzon the amount ofP30,000.00 as his partial contribution to the proposedpartnership and which the said Puzon was to use in payment of



his obligation to the Rehabilitation Finance Corporation. 7 Puzonpromised William Uy that the amount of P150,000.00 would begiven to the partnership to be applied thusly: P40,000.00, asreimbursement of the capital contribution of William Uy which thesaid Uy had advanced to clear the title of Puzon's property;P50,000.00, as Puzon's contribution to the partnership; and thebalance of P60,000.00 as Puzon's personal loan to thepartnership. 8

Although the partnership agreement was signed by the partieson January 18, 1957,9 work on the projects was started by thepartnership on October 1, 1956 in view of the insistence of theBureau of Public Highways to complete the project right away. 10 Since Puzon was busy with his other projects, William Uy wasentrusted with the management of the projects and whateverexpense the latter might incur, would be considered as part of hiscontribution. 11 At the end of December, 1957, William Uy hadcontributed to the partnership the amount of P115,453.39,including his capital. 12

The loan of Puzon was approved by the Philippine National Bankin November, 1956 and he gave to William Uy the amount ofP60,000.00. Of this amount, P40,000.00 was for the

reimbursement of Uy's contribution to the partnership which wasused to clear the title to Puzon's property, and the P20,000.00 asPuzon's contribution to the partnership capital. 13

To guarantee the repayment of the above-mentioned loan,Bartolome Puzon, without the knowledge and consent of WilliamUy, 14 assigned to the Philippine National Bank all the paymentsto be received on account of the contracts with the Bureau ofPublic Highways for the construction of the afore-mentionedprojects. 15 By virtue of said assignment, the Bureau of PublicHighways paid the money due on the partial accomplishments

on the government projects in question to the Philippine NationalBank which, in turn, applied portions of it in payment of Puzon'sloan. Of the amount of P1,047,181.07, released by the Bureau ofPublic Highways in payment of the partial work completed by thepartnership on the projects, the amount of P332,539.60 wasapplied in payment of Puzon's loan and only the amount ofP27,820.80 was deposited in the partnership funds, 16 which, forall practical purposes, was also under Puzon's account sincePuzon was the custodian of the common funds.

As time passed and the financial demands of the projectsincreased, William Uy, who supervised the said projects, founddifficulty in obtaining the necessary funds with which to pursuethe construction projects. William Uy correspondingly called onBartolome Puzon to comply with his obligations under the termsof their partnership agreement and to place, at lest, his capitalcontribution at the disposal of the partnership. Despite severalpromises, Puzon, however, failed to do so. 17 Realizing that hisverbal demands were to no avail, William Uy consequently wroteBartolome Puzon pormal letters of demand, 18 to which Puzonreplied that he is unable to put in additional capital to continuewith the projects. 19

Failing to reach an agreement with William Uy, Bartolome Puzon,as prime contractor of the construction projects, wrote thesubcontractor, U.P. Construction Company, on November 20,1957, advising the partnership, of which he is also a partner, thatunless they presented an immediate solution and capacity toprosecute the work effectively, he would be constrained toconsider the sub-contract terminated and, thereafter, to assumeall responsibilities in the construction of the projects inaccordance with his original contract with the Bureau of PublicHighways. 20 On November 27, 1957, Bartolome Puzon again



wrote the U.P.Construction Company finally terminating theirsubcontract agreement as of December 1, 1957. 21

Thereafter, William Uy was not allowed to hold office in the U.P.Construction Company and his authority to deal with the Bureauof Public Highways in behalf of the partnership was revoked byBartolome Puzon who continued with the construction projectsalone. 22

On May 20, 1958, William Uy, claiming that Bartolome Puzonhad violated the terms of their partnership agreement, institutedan action in court, seeking, inter alia, the dissolution of thepartnership and payment of damages.

Answering, Bartolome Puzon denied that he violated the terms oftheir agreement claiming that it was the plaintiff, William Uy, whoviolated the terms thereof. He, likewise, prayed for thedissolution of the partnership and for the payment by the plaintiffof his, share in the losses suffered by the partnership.

After appropriate proceedings, the trial court found that thedefendant, contrary to the terms of their partnership agreement,failed to contribute his share in the capital of the partnership

applied partnership funds to his personal use; ousted the plaintifffrom the management of the firm, and caused the failure of thepartnership to realize the expected profits of at leastP400,000.00. As a consequence, the trial court dismissed thedefendant's counterclaim and ordered the dissolution of thepartnership. The trial court further ordered the defendant to paythe plaintiff the sum of P320,103.13.

Hence, the instant appeal by the defendant Bartolome Puzonduring the pendency of the appeal before this Court, the saidBartolome Puzon died, and was substituted by Franco Puzon.

The appellant makes in his brief nineteen (19) assignment oferrors, involving questions of fact, which relates to the followingpoints:

(1) That the appellant is not guilty of breach of contract; and

(2) That the amounts of money the appellant has been order topay the appellee is not supported by the evidence and the law.

After going over the record, we find no reason for rejecting thefindings of fact below, justifying the reversal of the decisionappealed from.

The findings of the trial court that the appellant failed tocontribute his share in the capital of the partnership is clearincontrovertible. The record shows that after the appellant's loanthe amount of P150,000.00 was approved by the PhilippinNational Bank in November, 1956, he gave the amountP60,000.00 to the appellee who was then managing theconstruction projects. Of this amount, P40,000.00 was to beapplied a reimbursement of the appellee's contribution to thepartnership which was used to clear the title to the appellant'sproperty, and th balance of P20,000.00, as Puzon's contribution

to the partnership. 23 Thereafter, the appellant failed to make anyfurther contributions the partnership funds as shown in his lettersto the appellee wherein he confessed his inability to put inadditional capital to continue with the projects. 24

Parenthetically, the claim of the appellant that the appellee isequally guilty of not contributing his share in the partnershipcapital inasmuch as the amount of P40,000.00, allegedly givento him in October, 1956 as partial contribution of the appellee ismerely a personal loan of the appellant which he had paid to theappellee, is plainly untenable. The terms of the receipts signed



by the appellant are clear and unequivocal that the sums ofmoney given by the appellee are appellee's partial contributionsto the partnership capital. Thus, in the receipt for P10,000.00dated October 24, 1956, 25 the appellant stated:ñé+.£ªwph!1

Received from Mr. William Uy the sum of TEN THOUSANDPESOS (P10,000.00) in Check No. SC 423285 EquitableBanking Corporation, dated October 24, 1956, as advancecontribution of the share of said William Uy in the partnership tobe organized between us under the firm name U.P.CONSTRUCTION COMPANY which amount mentioned abovewill be used by the undersigned to pay his obligations with thePhilippine National Bank to effect the release of his mortgageswith the said bank. (Emphasis supplied)

In the receipt for the amount of P30,000.00 dated October 29,1956, 26 the appellant also said:ñé+.£ªwph!1

Received from William Uy the sum of THIRTY THOUSANDPESOS (P30,000.00) in Check No. SC423287, of the EquitableBanking Corporation, as partial contribution of the share of thesaid William Uy to the U.P. CONSTRUCTION COMPANY forwhich the undersigned will use the said amount in payment of his

obligation to the Rehabilitation Finance Corporation. (Emphasissupplied)

The findings of the trial court that the appellant misappliedpartnership funds is, likewise, sustained by competent evidence.It is of record that the appellant assigned to the PhilippineNational Bank all the payments to be received on account of thecontracts with the Bureau of Public Highways for the constructionof the aforementioned projects to guarantee the repayment ofthe bank. 27 By virtue of the said appeflant's personal loan withthe said bank assignment, the Bureau of Public Highways paid

the money due on the partial accomplishments on theconstruction projects in question to the Philippine National Bankwho, in turn, applied portions of it in payment of the appellant'sloan. 28

The appellant claims, however, that the said assignment wasmade with the consent of the appellee and that the assignmentnot prejudice the partnership as it was reimbursed by theappellant.

But, the appellee categorically stated that the assignment to thePhilippine National Bank was made without his prior knowledgeand consent and that when he learned of said assignment, hecal the attention of the appellant who assured him that theassignment was only temporary as he would transfer the loan tothe Rehabilitation Finance Corporation within three (3) monthstime. 29

The question of whom to believe being a matter large dependenton the trier's discretion, the findings of the trial court who had thebetter opportunity to examine and appraise the fact issue,certainly deserve respect.

That the assignment to the Philippine National Bank prejudicialto the partnership cannot be denied. The record show that duringthe period from March, 1957 to September, 1959, the appellantBartolome Puzon received from the Bureau of Public highways,in payment of the work accomplished on the constructionprojects, the amount of P1,047,181.01, which amount rightfullyand legally belongs to the partnership by virtue of thesubcontract agreements between the appellant and the U.P.Construction Company. In view of the assignemt made by Puzonto the Philippine National Bank, the latter withheld and appliedthe amount of P332,539,60 in payment of the appellant's



personal loan with the said bank. The balance was deposited inPuzon's current account and only the amount of P27,820.80 wasdeposited in the current account of the partnership. 30 For sure, ifthe appellant gave to the partnership all that were eamed anddue it under the subcontract agreements, the money would havebeen used as a safe reserve for the discharge of all obligationsof the firm and the partnership would have been able tosuccessfully and profitably prosecute the projects itsubcontracted.

When did the appellant make the reimbursement claimed byhim?

For the same period, the appellant actually disbursed for thepartnership, in connection with the construction projects, theamount of P952,839.77. 31 Since the appellant received from theBureau of Public Highways the sum of P1,047,181.01, theappellant has a deficit balance of P94,342.24. The appellant,therefore, did not make complete restitution.

The findings of the trial court that the appellee has been oustedfrom the management of the partnership is also based uponpersuasive evidence. The appellee testified that after he had

demanded from the appellant payment of the latter's contributionto the partnership capital, the said appellant did not allow him tohold office in the U.P. Construction Company and his authority todeal with the Bureau of Public Highways was revoked by theappellant. 32

As the record stands, We cannot say, therefore, that the decis ofthe trial court is not sustained by the evidence of record aswarrant its reverw.

Since the defendantappellant was at fauh, the tral court properlyordered him to reimburse the plaintiff-appellee whatever amountlatter had invested in or spent for the partnership on account ofconstruction projects.

How much did the appellee spend in the construction projectsquestion?

It appears that although the partnership agreement stated thecapital of the partnership is P100,000.00 of which each part shallcontribute to the partnership the amount of P50,000.00 cash 33 the partners of the U.P. Construction Company did contributetheir agreed share in the capitalization of the enterprise in lumpsums of P50,000.00 each. Aside from the initial amountP40,000.00 put up by the appellee in October, 1956, 34 thepartners' investments took, the form of cash advances covetingexpenses of the construction projects as they were incurred.Since the determination of the amount of the disbursementswhich each of them had made for the construction projectsrequire an examination of the books of account, the trial courtappointed two commissioners, designated by the parties, "toexamine the books of account of the defendant regarding theU.P. Construction Company and his personal account with

particular reference to the Public Works contract for theconstruction of the Ganyangan-Bato Section, Pagadian-Zamboanga City Road and five (5) Bridges in Malangas-Ganyangan Road, including the payments received by defendantfrom the Bureau of Public Highways by virtue of the two projectsabove mentioned, the disbursements or disposition made bydefendant of the portion thereof released to him by the PhilippineNational Bank and in whose account these funds are deposited .35



In due time, the loners so appointed, 36 submitted their report 37 they indicated the items wherein they are in agreement, as wellas their points of disagreement.

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

Mr. Ablaza, designated by the appellant, would want to chargethe appellee with the sum of P24,239.48, representing thechecks isssued by the appellant, 39 and encashed by theappellee or his brother, Uy Han so that the appellee would owethe partnership the amount of P15,997.09.

Mr. Tayag, designated by the appellee, upon the other hand,would credit the appellee the following additional amounts:

(1) P7,497.80 — items omitted from the books of partnership butrecognized and charged to Miscellaneous Expenses by Mr.

Ablaza;

(2) P65,103.77 — payrolls paid by the appellee in the amountP128,103.77 less payroll remittances from the appellant inamount of P63,000.00; and

(3) P26,027.04 other expeses incurred by the appellee atconstruction site.

With respect to the amount of P24,239.48, claimed by appellant,we are hereunder adopting the findings of the trial which we findto be in accord with the evidence:

To enhance defendant's theory that he should be creditedP24,239.48, he presented checks allegedly given to plaintiff andthe latter's brother, Uy Han, marked as Exhibits 2 to 11.However, defendant admitted that said cheeks were not enterednor record their books of account, as expenses for and in behalfof partnership or its affairs. On the other hand, Uy Han testifiedthat of the cheeks he received were exchange for cash, whileother used in the purchase of spare parts requisitioned bydefendant. This testimony was not refuted to the satisfaction ofthe Court, considering that Han's explanation thereof is the moreplausible because if they were employed in the prosecution ofthe partners projects, the corresponding disbursements wouldhave certainly been recorded in its books, which is not the case.Taking into account defendant is the custodian of the books ofaccount, his failure to so enter therein the allegeddisbursements, accentuates the falsity of his claim on this point.40

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

Commissioner Ablaza is unreliable in view of his proclivity tofavor the appellant and because of the inaccurate accountingprocedure adopted by him in auditing the books of account of thepartnership unlike Mr. Tayag's report which inspires faith andcredence. 41

As explained by Mr. Tayag, the amount of P7,497.80 represenexpenses paid by the appellee out of his personal funds whichnot been entered in the books of the partnership but which beenrecognized and conceded to by the auditor designated by theappellant who included the said amount under Expenses. 42



The explanation of Mr. Tayag on the inclusion of the amount ofP65,103.77 is likewise clear and convincing. 43

As for the sum of of P26,027.04, the same represents theexpenses which the appelle paid in connection withe the projectsand not entered in the books of the partnership since allvouchers and receipts were sent to the Manila office which wereunder the control of the appellant. However, officer which wereunder the control of the appellant. However, a list of theseexpenses are incorporated in Exhibits ZZ, ZZ-1 to ZZ-4.

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

ñé+.£ªwph!1

Undisputed balance as of Dec. 1967

Add : Items omitted from the books but

P 8,242.

recognized and charged to Miscellaneous

Expenses by Mr. Ablaza

7,497.80

Add: Payrolls paid by the appellee

P128,103.77

Less: Payroll remittances received

63,000.00

65,103.77

Add: Other expenses incurred at the

site (Exhs, ZZ, ZZ-1 to ZZ-4)

26,027.04

TOTAL

P106,871.00

At the trial, the appellee presented a claim for the amounts ofP3,917.39 and P4,665.00 which he also advanced for the





Besides, as We have heretofore pointed out, the appellantreceived from the Bureau of Public Highways, in payment of thezonstruction projects in question, the amount of P1,047,181.01 47 and disbursed the amount of P952,839.77, 48 leaving anunaccounted balance of P94,342.24. Obviously, this amount isalso part of the profits of the partnership.

During the trial of this case, it was discovered that the appellanthad money and credits receivable froin the projects in question,in the custody of the Bureau of Public Highways, in the amountof P128,669.75, representing the 10% retention of said projects.49 After the trial of this case, it was shown that the total retentionsWucted from the appemnt amounted to P145,358.00. 50 Surely,these retained amounts also form part of the profits of thepartnership.

Had the appellant not been remiss in his obligations as partnerand as prime contractor of the construction projects in questionas he was bound to perform pursuant to the partnership andsubcontract agreements, and considering the fact that the totalcontract amount of these two projects is P2,327,335.76, it isreasonable to expect that the partnership would have earnedmuch more than the P334,255.61 We have hereinabove

indicated. The award, therefore, made by the trial court of theamount of P200,000.00, as compensatory damages, is notspeculative, but based on reasonable estimate.

WHEREFORE, finding no error in the decision appealed from,the said decision is hereby affirmed with costs against theappellant, it being understood that the liability mentioned hereinshall be home by the estate of the deceased Bartolome Puzon,represented in this instance by the administrator thereof, FrancoPuzon.

SO ORDERED.

G.R. No. L-47823 July 26, 1943

JOSE ORNUM and EMERENCIANA ORNUM, petitioners,vs.

MARIANO, LASALA, et al., respondent.

Marcelino Lontok for petitioners.Duran, Lim and Bausa and Augusto Francisco for respondents.

PARAS, J.:

The following facts are practically admitted in the pleadings andbriefs of the parties: The respondents (plaintiffs below) arenatives of Taal, Batangas, and resided therein or in Manila. Thepetitioners (defendants below) are also natives of Taal, butresided in the barrio of Tan-agan, municipality of Tablas,Province of Romblon. In 1908 Pedro Lasala, father of therespondents, and Emerenciano Ornum formed a partnership,whereby the former, as capitalist, delivered the sum of P1,000 tothe latter who, as industrial partner, was to conduct a business athis place of residence in Romblon. In 1912, when the assets of

the partnership consisted of outstanding accounts and old stockof merchandise, Emerenciano Ornum, following the wishes of hiswife, asked for the dissolution of the Lasala, EmerencianoOrnum looked for some one who could take his place and hesuggested the names of the petitioners who accordingly becamethe new partners. Upon joining the business, the petitioners,contributed P505.54 as their capital, with the result that in thenew partnership Pedro Lasala had a capital of P1,000, appraisedvalue of the assets of the former partnership, plus the saidP505.54 invested by the petitioners who, as industrial partners,were to run the business in Romblon. After the death of Pedro



Lasala, his children (the respondents) succeeded to all his rightsand interest in the partnership. The partners never knew eachother personally. No formal partnership agreement was everexecuted. The petitioners, as managing partners, were receivedone-half of the net gains, and the other half was to be dividedbetween them and the Lasala group in proportion to the capitalput in by each group. During the course divided, but the partnerswere given the election, as evidenced by the statements ofaccounts referred to in the decision of the Court of Appeals, toinvest their respective shares in such profits as additional capital.The petitioners accordingly let a greater part of their profits asadditional investment in the partnership. After twenty years thebusiness had grown to such an extent that is total value,including profits, amounted to P44,618.67. Statements ofaccounts were periodically prepared by the petitioners and sentto the respondents who invariably did not make any objectionthereto. Before the last statement of accounts was made, therespondents had received P5,387.29 by way of profits. The lastand final statement of accounts, dated May 27, 1932, andprepared by the petitioners after the respondents had announcedtheir desire to dissolve the partnership, read as follows:

Ganancia total desde el ultimo balance hasta la fecha

P575.45

Participacion del capital de los hermanos Lasala en la ganancia

P55.39

Participacion del capital de Jose Ornum en el ganancia

125.79

Participacion de Jose Ornum como socio industrial

143.96

Participacion del capital de Emerenciana Ornum en la ganancia

106.54

Participacion de Emerenciana Ornum como socia industrial

143.86

Siendo este el balance final lo siguiente es la cantidad que debecorresponder a cada socio:

Capital de los hermanos Lasala segun el ultimo balance

P4,393.08

Ganancia de este capital

55.39

P4,448.47

Pero se debe deducir la cantidad tomada por los hermanosLasala



1,730.00

Cantidad nota que debe corresponder a los hermanos Lasala

P2,718.47

Capital de Jose Ornum segun el ultimo balance

P9,975.13


125.79

Participacion de Jose Ornum como socio industrial

143.86

P10,244.65

Pero se debe deducir la cantidad tomada por Jose Ornum

1,650.00

Cantidad neta que debe corresponder a Jose Ornum

P8,594.65

Capital de Emerenciana Ornum segun el ultimo balance

P8,448.00


106.54



Participacion de Emerenciana Ornum como socia industrial

143.86

P8,698.40

Pero se debe deducir la cantidad tomada por EmerencianaOrnum

1,850.00

Cantidad neta que debe corresponder a Emerenciana Ornum

P6,848.40

After the receipt of the foregoing statement of accounts, FatherMariano Lasala, spokesman for the respondents, wrote thefollowing letter to the petitioners on July 19, 1932:

Ya te manifestamos francamente aqui, como consocio, y teautorizamos tambien para que lo repitas a tu hermana Mering,viuda, que el motivo porque recogemos el capital y utilidades de

nuestra sociedad en todo nuestro negocio que esta al cuidadovosotros dos, es que tenemos un grande compromiso que casino podemos evitarlo. Por esto volvemos a rogarles que porcualquier medio antes de terminar este mes de julio, 1932,nosotros esperamos vuestra consideracion. Gracias.

En cuanto hayamos recibido esto, entonces firmaremos elbalance que habeis hecho alli, cuya copia has dejado aqui.

Recuerdos a todos alli y mandar.

Pursuant to the request contained in this letter, the petitionersremitted and paid to the respondents the total amountcorresponding to them under the above-quoted statement ofaccounts which, however, was not signed by the latter.Thereafter the complaint in this case was filed by therespondents, praying for an accounting and final liquidation ofthe assets of the partnership. The Court of First Instance ofManila held that the last and final statement of accountsprepared by the petitioners was tacitly approved and acceptedby the respondents who, by virtue of the above-quoted letter ofFather Mariano Lasala, lost their right to a further accountingfrom the moment they received and accepted their shares as

itemized in said statement. This judgment was reversed by theCourt of Appeals principally on the ground that as the finalstatement of accounts remains unsigned by the respondents, thesame stands disapproved. The decision appealed by thepetitioners thus said:

To support a plea of a stated account so as to conclude theparties in relation to all dealings between them, the accountingmust be shown to have been final. (1 Cyc. 366.) All the first ninestatements which the defendants sent the plaintiffs were partial



settlements, while the last, although intended to be final, has notbeen signed.

We hold that the last and final statement of accountshereinabove quoted, had been approved by the respondents.This approval resulted, by virtue of the letter of Father MarianoLasala of July 19, 1932, quoted in part in the appealed decisionfrom the failure of the respondents to object to the statement andfrom their promise to sign the same as soon as they receivedtheir shares as shown in said statement. After such shares hadbeen paid by the petitioners and accepted by the respondentswithout any reservation, the approval of the statement ofaccounts was virtually confirmed and its signing thereby becamea mere formality to be complied with by the respondentsexclusively. Their refusal to sign, after receiving their shares,amounted to a waiver to that formality in favor of the petitionerswho has already performed their obligation.

This approval precludes any right on the part of the respondentsto a further liquidation, unless the latter can show that there wasfraud, deceit, error or mistake in said approval. (Pastor, vs. Nicasio, 6 Phil., 152; Aldecoa & Co., vs. Warner, Barnes & Co.,16 Phil., 423; Gonsalez vs. Harty, 32 Phil. 328.) The Court of

Appeals did not make any findings that there was fraud, and onthe matter of error or mistake it merely said:

The question, then is, have mistakes, been committed in thestatements sent appellants? Not only do plaintiffs so allege, andnot only does not evidence so tend to prove, but the charge isseconded by the defendants themselves when in theircounterclaims they said:

"(a) Que recientemente se ha hecho una acabada revision de lascuentas y libros del negocio, y, se ha descubierto que los

demandados cometieron un error al hacer las entregas de lasvarias cantidades en efectivo a los demandantes, entregando entotal mayor cantidades a la que tenian derecho estos por suparticipacion y ganancias en dicho negocio;

"(b) Que el exceso entregado a los demandantes, asciende a lasuma de quinientos setenta y cinco pesos con doce centimos(P575.12), y que los demandados reclaman ahora de aquellossu devolucion o pago en la presente contrademanda;"

In our opinion, the pronouncement that the evidence tends toprove that there were mistakes in the petitioners' statements ofaccounts, without specifying the mistakes, merely intimates assuspicion and is not such a positive and unmistakable finding offact (Cf. Concepcion vs. People, G.R. No. 48169, promulgatedDecember 28, 1942) as to justify a revision, especially becausethe Court of Appeals has relied on the bare allegations of theparties, Even admitting that, as alleged by the petitioners in theircounterclaim, they overpaid the respondents in the sum ofP575.12, this error is essentially fatal to the latter's theory whatthe statement of accounts shows, and is therefore not the kind oferror that calls for another accounting which will serve thepurpose of the respondent's suit. Moreover, as the petitioners did

not appeal from the decision of the Court abandoned suchallegation in the Court of Appeals.

If the liquidation is ordered in the absence of any particular error,found as a fact, simply because no damage will be suffered bythe petitioners in case the latter's final statement of the accountsproves to be correct, we shall be assuming a fundamentallyinconsistent position. If there is not mistake, the only reason for anew accounting disappears. The petitioners may not beprejudiced in the sense that they will be required to pay anythingto the respondents, but they will have to go to the trouble of



itemizing accounts covering a period of twenty years mostly frommemory, its appearing that no regular books of accounts werekept. Stated more emphatically, they will be told to do whatseems to be hardly possible. When it is borne in mind that thiscase has been pending for nearly nine years and that, if anotheraccounting is ordered, a costly action or proceeding may arisewhich may not be disposed of within a similar period, it is notimprobable that the intended relief may in fact be therespondents' funeral.

We are reversing the appealed decision on the legal ground thatthe petitioners' final statement of accounts had been approvedby the respondents and no justifiable reason (fraud, deceit, erroror mistake) has been positively and unmistakably found by theCourt of Appeals so as to warrant the liquidations sought by therespondents. In justice to the petitioners, however, we may addthat, considering that they ran the business of the partnership forabout twenty years at a place far from the residence of therespondents and without the latter's intervention; that thepartners did not even know each other personally; that no formalpartnership agreement was entered into which bound thepetitioners under specific conditions; that the petitioners couldhave easily and freely alleged that the business became partial,

or even a total, loss for any plausible reason which they couldhave concocted, it appearing that the partnership engaged insuch uncertain ventures as agriculture, cattle raising andoperation of rice mill, and the petitioners did not keep any regularbooks of accounts; that the petitioners were still frank enough todisclose that the original capital of P1,505.54 amounted, as ofthe date of the dissolution of the partnership, to P44,618.67; andthat the respondents had received a total of P8,105.76 out oftheir capital of P1,000, without any effort on their part, we arereluctant even to make the conjecture that the petitioners hadever intended to, or actually did, take undue advantage of the

absence and confidence of the respondents. Indeed, we feel justified in stating that the petitioners have here given aremarkable demonstration of the legendary honesty, good faithand industry with which the natives of Taal pursue businessarrangements similar to the partnership in question, and wewould hate, in the absence of any sufficient reason, to let such abeautiful legend have a distateful ending.

The appealed decision is hereby reversed and the petitioners(defendants below) absolved from the complaints of therespondents (plaintiffs below), with costs against the latter.

Yulo, C.J., and Hontiveros, J., concur.

Separate Opinions

OZAETA J., concurring:

Let us record here the mental processes by which I arrived at myvote for the reversal of the judgment of the Court of Appeals.

After the respondents had announced their desire to withdraw

from the "partnership," the petitioners rendered a final statementof account dated May 27, 1932, which is set forth in the opinionwritten by Mr. Justice Paras and which was accepted as correctby the respondents, who them asked from the payment to themin cash of their participation in the capital and profits of thebusiness as shown by said statement. It must be borne in mindthat the assets reflected in said statement of account did notconsist of cash but of merchandise, credits, land, large cattle,and a rice mill. To gratify the respondent wish the petitionersraised money and paid respondents' total participation. After theirinterest and participation in the business had thus been



liquidated, the respondents, apparently believing that they mightbe entitled to more money than they had accepted and received,sought to have the books and records examined by arepresentative of theirs. The petitioners regarded such conductof the respondents not only as a violation of their agreement toconsider the "partnership" dissolved upon the payment ofrespondents' participation therein but as an unwarrantedreflections upon their honesty and good faith. Hence theyrefused to allow the examination or proposed reliquidation.

On November 20, 1933, the complaint in this case was filed bythe respondents, praying for an accounting and final liquidationof the assets of the "partnership." The trial lasted off and on fromSeptember 26, 1934, to March 23, 1937, involving a transcript of815 pages of oral testimony. The Court of First Instance ofManila rendered its decision on December 29, 1937, in which itfound that there was no proof whatever to the effect that thedefendants acted in bad faith in the preparation of the periodicalstatements of account by not including merchandise or money todefraud the plaintiffs. Judge Rovira analyzed the main aspect ofthe case as follows:

Pasado ahora a considerar la cuestion de las cuentas, los

demandantes sostienen que los demandados deben rendirnueva cuenta porque, segun ellos, estos, como sociosindustriales y capitalistas, no podian incluir su participacioncomo capital, pues por este procedimiento los demandantesfueron absorbidos y los demandados obtuvieron mayorparticipacion en las ganancias.

Resulta de las pruebas que los demandados, al hacer cadabalance, separaban la ganancia del capital, asi como laganancia que correspondia a los socios industriales, y despuesla participacion proporcional que corresponde al capital y la que

los correspondia como socios industriales, aumentando asi sucapital en la sociedad. Esto mismo hacian en relacion con lasgananciales del capital de Pedro Lasala.

El primer balance sometido por los demandados a losdemandantes, despues de la muerte de Pedro Lasala estafechado el 28 de diciembre de 1913, los demandantes noprotestaron contra este balance; al contrario, recibieron suparticipacion de P103, y no existe prueba alguna que desvirtuela anotacion que aparece a pagina 4 del Exhibit S, de que JoseOrnum entrego esta cantidad a los demandantes.

En los años subsiguientes, o sea en los años de 1914, 1915,1917, 1919, 1920, 1922, 1924 y 1929 y ultimamente el año de1932, los demandados han estado sometiendo los balances delnegocio.

Contra ninguno de los balances presentados por losdemandados se ha presentado protesta alguna; al contrario, en1929, cuando los demandantes deseaban separarse del negoci,Dionisia Lasala escribio la carta Exhibit 1, en donde, entre otras,se hizo constar que el capital 'esta en buenas manos, produceganancias y ademas estoy contenta de los balances que me

habeis estado enviando.

Por otra parte, el mismo Mariano Lasala, en carta de fecha 19de julio de 1932, Exhibit 2, dijo que 'en cuanto hayamos recibidotodo (refiriendose indudablemente al capital y ganancia)entonces firmaremos el balance que habeis hecho alli, cuyacopia has dejado aqui.'

Si los demandantes no estaban conformes con el procedimientoadoptado por los demandados, ¿por que no protestaron desdeel principio? Cuando los demandados les enviaban los balances,





Por todas las consideraciones expuestas, dclaramos que noprocede ordenar que los demandados rindan nuevas cuentas y,en su consecuencia, se absuelve a los demandados de lademanda, sin especial pronunciamiento en cuanto a las costas.

The Court of Appeals reversed that judgment and ordered thedefendants "to render an accounting of all the assets of thepartnership and of all its profits and losses from the time of itsorganization to the date of plaintiffs' withdrawal."

This is an unfortunate and unnecessary lawsuit, engendered bysuspicion and misunderstanding on the part of the respondentsand abetted by pride and amor propio on the part of theiropponents. It is unfortunate from two viewpoints — sentimentaland material: (1) Friendship that for twenty years united theparties for the sake of business and of their common birthplacehas become but a program memory to them, it having beendethroned from their hearts and replaced by ill will and laceratedsentiments. (2) The fruit of more than twenty years of toil thatshould entitle the petitioners to enjoy competence and comfort intheir declining years is being squandered by them in theirdefense of this protracted litigation. This lawsuit is unnecessarybecause once the smoke of passion and misunderstanding has

vanished, the parties would or should see that there is no realcause for quarrel between them.

The judgment of the trial court which would, once and for all, putan end to this unnecessary lawsuit, achieves practical justice;that of the Court of Appeals which would prolong it, pursuestheoretical justice. Our own verdict is not difficult to make. Let uspour oil on troubled waters.

First . The suspicions entertained by the respondents against thegood faith of their erstwhile friends, the petitioners, findsexpression in the allegation of paragraph 8 of their complaint:

8. That the said defendants, in order to defraud and deprive theplaintiffs of their just share in the business have causedproperties, which rightfully belong to the business of which theywere and are the managers, to be inscribed in their own jointnames or in their individual names, by virtue of which saiddefendants now appears to be the sole and exclusive owners ofsaid properties and their fruits.

Such suspicion is unjustified. There is nothing irregular orimproper in the act of the petitioners of putting the properties andthe business in their own names. The association of the partieswas not a general copartnership under articles 125-144 of theCode of Commerce but one of joint accounts governed byarticles 239-243 of the same Code. The respondents acquired aninterest in the transactions of the petitioners by contributingthereto merchandise and accounts receivable valued at P1,000(Article 239.) No formality was observed in the formation of theassociation. (Article 240.) No commercial name, common to allthe participants was adopted, and the petitioners transacted and

managed the business in their own individual names and undertheir individual liability. (Article 241.) The respondents had noreason to expect the petitioners to put the business andproperties in the name of the "partnership" because they knewthat from the beginning no firm name had been adopted for it.The respondents were silent partners.

Second . An apparent misunderstanding on the part of therespondents is reflected in the allegation of paragraph 10 of theircomplaint:



10. That the defendants have fraudulently withdrawn from thefunds of the said partnership large amounts of money, which theyapplied for their personal use and benefit to which withdrawalsthey were not legally entitled, thereby impairing seriously thecapital of the partnership and hampering its orderly and efficientadministration.

Such unkind words uttered against long-trusted businessassociates can only be attributed to a serious misunderstandingin view of the fact that neither the trial court nor the Court of Appeals found any indicia of bad faith on the part of thepetitioners. The aspersion was wholly unwarranted.

Third . The respondents have apparently been misled by thepublic accountant they employed, who advanced a differentmethod of computing the participations of the parties in theprofits. As noted by the trial court in its decision and as urged bythe respondents in their brief, they claim that the petitioners, "asindustrial and capitalist partners, could not include theirparticipation in the profits as capital because by such procedurethe plaintiffs [respondents] were absorbed and the defendants[petitioners] obtained greater participation in the profits.Following the hint of their "expert" accountant, the respondent

contend in their brief that the original profit-sharing agreement of50 per cent to the industrial partner and the balance to bedistributed among the partners in proportion to their capital,namely 66.67 per cent to the respondents for their capital ofP1,000 and 33.33 per cent to the petitioners for their capital ofP500, should be maintained notwithstanding the increase of thecapital of the petitioners through the accumulation ofunwithdrawn profits. This contention does not impress us asbeing either fair or sound. Throughout the twenty years of haveby common consent followed the same method of distributing theprofits in party was permitted to put in as much capital as he

wanted and to share in the profits accordingly. Up to the time therespondents received the last centavo of their participation in thecapital and profits of the business, they had tacitly andrepeatedly approved, the same procedure of dividing the profits.They must have found it to be fair, as indeed it was, for whyshould not one's share of the profits increase in proportions toone's capital? It is true that the original capital of respondentsand petitioners were P1,000 and P505.54 respectively, or,roughly, a proportion of two to one be maintained after the capitalof the petitioners has increased through the accumulation ofunwithdrawn profits? In any event, as the trial court held, therespondents are now estopped from insisting on a fixed andinvariable two-to-one division of the profits regardless of theamount of the capital of each of the parties in a given year.

Fourth. If, as we have seen, there is no reasons for a newdivision of the profits as contended by the respondents, it seemsto us that no useful purpose would be attained by remanding thecase to the trial court with an order to the petitioners to render anew account. As we have noted, respondents' allegation of fraudand bad faith on the part of the petitioners in the preparation ofthe statements of account submitted by them to the respondentsand tacitly approved by the latter, was not found proven by the

Court of Appeals. All that the Court of Appeals intimated was thatthe plaintiffs alleged that mistakes had been committed and thatthe evidence so tended to prove. But the mistake pointed out bythe respondents consisted principally in the mode or procedureof dividing the profits and in petitioners' having caused theproperties "to be inscribed in their own joint names or in theirindividual names"; and as we have seen, such alleged mistakesare unfounded.

During the trial of this case, which off and on lasted nearly threeyears, the petitioners and their witnesses, who had to come from



the Province of Romblon to Manila, presented the only booksthey kept to the business (Exhibits S and T). which respondents'expert accountants audited and found to be incorrect as to themode of dividing the profits. Of course, the auditor of therespondents also demanded vouchers, ledgers, and other books.But the business having been run for twenty years withoutemploying a bookkeeper, it seems too late now to do so after the"partnership" has been dissolved.

In the absence of any finding of fraud or prejudicial errorcommitted by the petitioners in the rendition of their accounts,which were tacitly, approved by their respondents, who asked forand received their participation in accordance with theliquidation, we think it would only occasion unnecessary troubleand expense to both parties to require further accounting andremand the case to the trial court for further proceedings. Nineyears of litigation in three instances should be enough to affordthe parties in this case their day in court. It would be scandalousto prolong it under the circumstances. After all, it's only a tempestin a teapot.

MORAN, J., dissenting:

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

decision will be presumed, in the absence of a clear showing tothe contrary". (4 C.J., 1082.)

The essential facts of the case, as found by the Court of Appeals, are as follows: Petitioners and respondents weremembers of a commercial partnership, the former being themanagers of the business and the latter having "no handwhatsoever in the conduct of it." From December 23, 1913 toMay 27, 1932, petitioners had made ten balance statements andsent copies thereof to respondents together with the latter'sshares in the profits. No question arose between the parties asto the correctness of the balance statements until the tenthstatement was made, respondents had made known topetitioners their desire to withdraw from the partnership and hadrequested for the remittance of their capital and profits. On July9, 1932, after the tenth statement was received by them,respondent reiterated their desire for withdrawal, adding that "encuanto hayamos recibido todo, entonces firmaremos el balanceque habeis hecho alli, cuya copia has dejado aqui." The amountwhich purported to be their entire capital and profits wasreceived by respondents but they refused to sign the statementof final liquidation because they had an agreement with petitionto the effect that before they sign it, "they would send some one

to Tablas to examine the partnership books, but that afterwardsthe defendants (petitioners here) declined to allowplaintiffs' (respondents here) representative to see said books." And the evidence tends to prove, so the Court of Appealsconcluded, that there were mistakes in petitioners statements ofaccount sent to respondents, as corroborated by petitionersthemselves in their counterclaims.

Upon these facts, the majority reversed the decision of the Courtof Appeals and sustained the petitioners plea of concludedaccounting upon the following grounds.



1. That as respondents have promised to sign the final statementof accounts upon their receipt of their entire capital and profits,their acceptance without reservation of said capital and profits,constitutes virtual approval of the final liquidation and theirsigning the same becomes a mere formality to be subsequentlycomplied with and which was waived by their refusal to do so;

2. That while re-examination of accounts is authorized uponproof of fraud or gross error, in the instant case, the Court'sfinding as to mistake is not positive and its pronouncement that"the evidence tends to prove that there was mistake in thestatement of accounts is not a definite conclusion sufficient to justify a further accounting";

3. That as this case has been pending for nearly nine years, "ifanother accounting is ordered, a costly action or proceedingsmay arise which may not be disposed of within a similar period,"and that accordingly "it is not improbable that the intended reliefmay prove to be the respondents' funeral"; and

4. That, in a nutshell, the circumstances of the case attestremarkably to the honesty of petitioners in their dealings withrespondents.

I propose to take up these grounds seriatim.

"An account stated" has been defined as "an agreement that thebalance and all items of an account representing the previousmonetary transaction of the parties thereto are correct, togetherwith the promise to pay such balance." (1 C. J.S., p. 693.) In thepresent case, was there such an agreement? Respondents, it istrue, had promised to sign the balance statement upon receivingtheir capital and share in the profits, but they actually had neversigned such statement and a promise to sign is not equivalent to

signing. The fact that respondents have never signed thestatement only indicates that they could not agree withpetitioners thereon. And if there is no agreement there is noaccount stated. Indeed, it has been held that "in stating asaccount, as in making any other agreement, the minds of theparties must meet." (1 C.J., pp. 684-685.) Here, there has beenno meeting of minds as to the true balance.

Besides, respondents' promise to sign the statement of finalliquidation upon receipts of their entire capital and profits was notabsolute. It was subject to the agreement with petitioners thatbefore respondents "sign the final settlement they would sendsome one to Tablas to examine the partnership books." This is afact supported by proof expressly mentioned by the Court of Appeals which the majority has utterly ignored and if consideredwould have been decidedly fatal to the conclusion it hasreached. As respondents "to whom the accounts were renderedhad no knowledge of all the circumstances relating to thebusiness and had to rely upon the good faith of theirpartners" (words of the Court of Appeals), the examination of thepartnership books becomes to them a matter of capital importantwhich, for purposes of final liquidation, cannot lightly bedismissed. When petitioners declined to allow respondents'

representative to see said books in violation of the agreement,respondents must be deemed legally exempted from theirpromise and are, therefore, entirely justified in refusing to signthe final settlement.

Even if it be conceded that the final settlement had beenacquiesced in by the respondent, a reopening of accounts, asthe majority itself admits, is authorized upon a showing of fraudor mistake. The rule is that "an account stated being only primafacie evidence of its correctness, does not work an estoppel andis subject to impeachment for fraud or mistake; and if fraud or



mistake exists it is immaterial that the parties agreed that theaccount shall not be opened for error after a fixed period, that itwas signed by the party charged, or that evidence ofindebtedness, receipt in full, or releases were given." (1 C.J.S.,pp. 728-729.) In the instant case, does there exist evidence ofsuch mistake? The Court of Appeals, putting up the samequestion, categorically stated:

The question then is, have mistakes been committed in thestatements sent appellants? Not only do plaintiffs so allege, andnot only does the evidence so tend to prove, but the charged isseconded by the defendant themselves when in theircounterclaims they said:

(a) Que recientemente se ha hecho una acabada revision de lascuentas y libros del negocio, y, se ha descubierto que losdemandados cometieron un error al hacer las entregas de lasvarias cantidades en efectivo a los demandantes, entregando entotal mayores cantidades a la que tenian derecho estos por suparticipacion y ganancias en dicho negocio.

But the majority averred that this does not constitute a positivefindings of mistake and that "the pronouncement of the Court of

Appeals that the evidence tends to prove that there was amistake in the statement of accounts is not a definite conclusionin a sense sufficient to justify a further accounting." As a generalrule when the grant or refusal of a legal relief sought in this Courtdepends upon the existence of findings of fact by the Court of Appeals, the test for the grant or refusal of such relief is notwhether its finding is positive or not, but whether such findingsactually exists and is sufficient for the purpose. The reason is, inthe language of the majority itself, "we are not here authorized toreview the evidence and determine the existence" of any matter

of fact. In the closely analogue case of Zubiri vs. Quijano, G.R.No. 48696. November 28, 1942, this Court held:

Under the second assignment, the petitioners alleged that theCourt of Appeals erred in not finding that she had paid to therespondent usurious interest amounting (as found by the Courtof the First Instance of Mindoro) to P950. The pronouncementsof the Court of Appeals to wit, "pero rechazamos la pretension dela demandada, aceptada por el Tribunal a quo, de que eldemandante percibio intereses usurarios" and "con respecto a laalegacion sobre usura, la misma nos parece insostenible", beingconclusions, of fact, must be accepted for the purposes of thepresent appeal, since we cannot make contrary findings withoutreexamining the evidence, and we are not authorized to do this.

In the instant case, the Court of Appeals made a generalconclusion of fact as to the existence of mistake and, on theauthority of the case cited, this general conclusion must bedeemed sufficient. When the Court of Appeals went further andfortified its general conclusion of fact by a specific instance ofsuch mistake, are we to reject the finding as less sufficientbecause more specific?

But it is said that the Court of Appeals merely stated that theevidence so tend to prove" the existence of mistake. The use,however, of the verb "tend" in no way imports ex necessitate reiindefiniteness or ambiguity of the evidence upon which the Courtof Appeals rested its conclusion of mistake. Doubtless, the verbwas used advisedly because, the action being merely to compelaccounting, the Court cannot and is not actually passing finallyupon the correctness of the accounts. Its pronouncement as tomistake cannot accordingly be couched with finality, much as themajority wishes it to be, but should merely be worded as toindicate that a ground exists for the accounting prayed for.



And as to the specific mistake found by the Court of Appeals tohave been admitted in petitioners' counterclaim, the majorityargues that such mistake consists in overpayment ofrespondents of what is due to them, and therefore, the error wasnot to their prejudice. This argument entirely misses the point.Whether the mistake be favorable or unfavorable to respondents,the fact remains that a mistake exists and this is sufficient toauthorize a reopening even of a concluded account. Indeed, ifthe mistake be one prejudicial to the interest of the party whomade the statement, it is all the worse. When a person makes amistake against himself when he is presumed to have takenspecial care for the protection of his interest, he may in allprobability be presumed to have made more mistakes againstothers whose interests he is less concerned with, if at all.

But assuming that the Court's finding as to mistake is insufficient,is the majority justified in closing the case upon that ground? Toforeclose accounting, under the circumstances, is to make, ineffect, a contrary finding that there is no mistake and to presumethat petitioners' accountings is correct. This is both unauthorizedand faulty. Unauthorized, because when the finding of the Courtof Appeals is here deemed insufficient, the remedy is not for thisCourt to make contrary findings but to supply the deficiency by

remanding the case to the Court of Appeals for further findings,as we did in Ofiana vs. People (40 Off. Gaz., 2293), and Bautistavs. Victoriano G.R. No. 46879, April 3, 1940. Faulty, becausewhen the majority presumes that petitioners accounting iscorrect, it takes for granted precisely the basic issue of the case. And the presumption becomes the more faulty when weconsidered that it militates against positive findings of mistake bythe Court of Appeals. The existence of such findings, whether ornot they are insufficient, constitutes a solemn warning againstreliance upon a mere presumption, specially if there exists acontrary presumption to the effect that everything necessary to

uphold the correctness of the decision appealed from shall bedeemed present in the record, in the absence of a clear showingto the contrary. And here, there is absolutely no showing that thesupposedly insufficient findings are erroneous.

The majority expresses the fear that, as this case has beenpending for nearly, nine years, if another accounting is ordered acostly action or proceedings may arise which may not bedisposed of within a similar period. I cannot understand how thisCourt would haphazardly close a case only upon bare fear ordelay. What the law abhors is unnecessary delay in theadministration of justice. Delays necessary for the ascertainmentof truth are welcomed. Hurried justice is certainly not to be lessdeplored than delayed justice. Dispatch in the disposal of casesis, indeed, in every system of law, a beautiful ideal to be devoutlywished for; but, like every other ideal, its beauty or utility endswith its abuse. We owe it to the paramount interests of justicethat in every litigation we are called upon to decide, we shouldstrive thoroughly and judiciously to ascertain the truth and not tohurriedly pull down the curtain on the case until we arereasonably certain that all efforts to the end have beenexhausted.

The majority adds that if the accounting prayed for the permitted,it is not improbable that the intended relief may prove to be therespondents' funeral. I take this statement to mean that themajority hazards the conjecture that if a new accounting isordered, respondents will probably come out to be less entitledthat what they have received. I do not think this Court should, inpropriety, hazard any guess on the probable outcome of any suitspecially where the guess is made on the basis of factualevidence about which it cannot speak with authority. And, neitheris the guess good, for if we remand the case to the Court of Appeals for more specific findings, the likelihood is that more



specific mistakes will be shown as to render it inevitable for thisCourt to order a new accounting. This probability is founded noton mere conjecture but on the presumption of law abovementioned that the conclusions of fact of the Court of Appealsare in accordance with the evidence. Furthermore, respondentsin asking for an accounting are of course ready and willing toabide by any result, whether it be favorable or unfavorable tothem. There being just grounds therefor, it should not be deniedby this Court because such accounting may be disastrous torespondents.

The majority concluded its decision thus:

Considering that they (petitioners) ran the business of thepartnership for about twenty years at a place far from theresidence of the respondents and without the latter'sintervention; that the partners did not even know each otherpersonally; that no formal partnership agreement was enteredinto which bound the petitioners under specific conditions; thatthe petitioners could have easily and freely alleged that thebusiness became a partial, or even a total, loss for any plausiblereason which they could have concocted, it appearing that thepartnership engaged in such uncertain ventures as agriculture,

cattle raising, and the operation of rice mill, and the petitionersdid not keep any regular books of accounts; that the petitionerswere still frank enough to disclose that the original capital ofP1,505.54 amounted, as of the date of the dissolution of thepartnership to P44,618.67; and that the respondents hadreceived a total of P3,105.76 out of their capital of P1,000,without any effort on their part, we are reluctant even to make theconjecture that the petitioners had ever intended to, or actuallydid, take undue advantage of the absence and confidence of therespondents. Indeed, we feel justified in stating that thepetitioners have here given a remarkable demonstration of the

legendary honesty, good faith and industry with which the nativesof Taal pursue business arrangements similar to the partnershipin question, and we would hate in the absence of any sufficientreason to let such a beautiful legend have a distateful ending.

Too much, I fear, has here been assumed by the majority. Theyassumed that the figures cited are correct when they are inquestion; they assumed that petitioners have not takenadvantage of the confidence of the respondents when this yetremains to be seen; they assumed that petitioners' accounting iscorrect when this is precisely the question between the parties;and, finally, they held that because petitioners did not keep anyregular books of account, they should not be compelled to anaccounting because they may not be able to do so, which is ineffect offering a premium for negligence. This mode ofratiocination is, to my regret, without authority and withoutparallel. True petitioners ran the business of the partnershipwithout intervention whatever on the part of respondents whorelied entirely on the good faith of the former. This indicates thatthe relation between the parties is manifestly fiduciary and it hasbeen held that "when a a fiduciary relationship exists betweenthe parties stating an account in will be more readily reopenedthan when the parties had been dealing with each other at arm's

length." (1 C.J.S. p. 729.)

I wish I could share with the majority in the abundance of theiradmirations for what they called the "legendary honesty, goodfaith and industry with which the natives of Taal pursue businessarrangements similar to the partnership in question to let "such abeautiful legend have a distasteful ending." But I fell loath topose a set of men as paragons of virtue and otherwise reflect,without cause or reason, upon the integrity of the rest of theirkind. I fell even more loath to rest the judgment of this Courtupon a mere legend, no matter how beautiful that legend may



be, and would prefer to adjudicate every case upon what theevidence and the law alone may direct. Facts, not fancy, are stillthe chosen tools with which the courts perform their solemnfunction of dispensing justice of litigants.

After this dissent had been written, Brother Justice Ozaeta gaveout his concurring opinion predicated fundamentally upon factsnot appearing in the findings of the Court of Appeals. We haveheld time and again that in appeals by certiorari from the Court of Appeals and in cases like the present one, only questions of lawmay be considered, question of fact requiring examination ofevidence being without our jurisdiction. (Rule 46, sec. 2; Guicovs. Mayuga, 63 Phil., 328; Mateo vs. Collector of Customs, 63Phil., 470; Mamuyac vs. Abena, 38 Off. Gaz., 34, Meneses vs. Com. of the Philippines, 40 Off, Gaz., 7th Sup. 41; Diaz vs. People, 40 Off. Gaz. 3d Sup. 22.) I abstain, therefore, fromdealing on matters that are forbidden to us by our own Rules.Doubtless, the concurring opinion is impelled by thecommendable desire to do "practical," not "theoretical," justice.Regrettably, however, we cannot fulfill this end at the risk oftranscending the limits of this Court's jurisdictions. Beyond that jurisdiction all our pronouncements have no judicial value forthey may be regarded as made out of court and do not constitute

due process of law. And, what is worse is that the concurringopinion takes the decision of the Court of First Instance wholly orin part as a basis for reversing the decision of the Court of Appeals. This mode of procedure is unprecedented andamazing. The law considers the Court of Appeals as superior toa Court of First Instance specially on matters of fact, and yet thereverse is implied in the concurring opinion.

I vote, therefore, to affirm the judgment of the Court of Appeals.

G.R. No. L-31684 June 28, 1973

EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR.,CONCHITA B. NAVARRO and LEONARDA ATIENZA ABADSABTOS, petitioners,vs.ESTRELLA ABAD SANTOS, respondent.

Leonardo Abola for petitioners.

Baisas, Alberto & Associates for respondent.

MAKALINTAL, J.:

On October 9, 1954 a co-partnership was formed under thename of "Evangelista & Co." On June 7, 1955 the Articles of Co-partnership was amended as to include herein respondent,Estrella Abad Santos, as industrial partner, with hereinpetitioners Domingo C. Evangelista, Jr., Leonardo Atienza AbadSantos and Conchita P. Navarro, the original capitalist partners,remaining in that capacity, with a contribution of P17,500 each.The amended Articles provided, inter alia, that "the contributionof Estrella Abad Santos consists of her industry being an

industrial partner", and that the profits and losses "shall bedivided and distributed among the partners ... in the proportion of70% for the first three partners, Domingo C. Evangelista, Jr.,Conchita P. Navarro and Leonardo Atienza Abad Santos to bedivided among them equally; and 30% for the fourth partnerEstrella Abad Santos."

On December 17, 1963 herein respondent filed suit against thethree other partners in the Court of First Instance of Manila,alleging that the partnership, which was also made a party-defendant, had been paying dividends to the partners except to



her; and that notwithstanding her demands the defendants hadrefused and continued to refuse and let her examine thepartnership books or to give her information regarding thepartnership affairs to pay her any share in the dividends declaredby the partnership. She therefore prayed that the defendants beordered to render accounting to her of the partnership businessand to pay her corresponding share in the partnership profitsafter such accounting, plus attorney's fees and costs.

The defendants, in their answer, denied ever having declareddividends or distributed profits of the partnership; denied likewisethat the plaintiff ever demanded that she be allowed to examinethe partnership books; and byway of affirmative defense allegedthat the amended Articles of Co-partnership did not express thetrue agreement of the parties, which was that the plaintiff was notan industrial partner; that she did not in fact contribute industry tothe partnership; and that her share of 30% was to be based onthe profits which might be realized by the partnership only untilfull payment of the loan which it had obtained in December, 1955from the Rehabilitation Finance Corporation in the sum ofP30,000, for which the plaintiff had signed a promisory note asco-maker and mortgaged her property as security.

The parties are in agreement that the main issue in this case is"whether the plaintiff-appellee (respondent here) is an industrialpartner as claimed by her or merely a profit sharer entitled to30% of the net profits that may be realized by the partnershipfrom June 7, 1955 until the mortgage loan from the RehabilitationFinance Corporation shall be fully paid, as claimed by appellants(herein petitioners)." On that issue the Court of First Instancefound for the plaintiff and rendered judgement "declaring her anindustrial partner of Evangelista & Co.; ordering the defendantsto render an accounting of the business operations of the (said)partnership ... from June 7, 1955; to pay the plaintiff such

amounts as may be due as her share in the partnership profitsand/or dividends after such an accounting has been properlymade; to pay plaintiff attorney's fees in the sum of P2,000.00 andthe costs of this suit."

The defendants appealed to the Court of Appeals, whichthereafter affirmed judgments of the court a quo.

In the petition before Us the petitioners have assigned thefollowing errors:

I. The Court of Appeals erred in the finding that the respondent isan industrial partner of Evangelista & Co., notwithstanding theadmitted fact that since 1954 and until after promulgation of thedecision of the appellate court the said respondent was one ofthe judges of the City Court of Manila, and despite its findingsthat respondent had been paid for services allegedly contributedby her to the partnership. In this connection the Court of Appealserred:

(A) In finding that the "amended Articles of Co-partnership,"Exhibit "A" is conclusive evidence that respondent was in factmade an industrial partner of Evangelista & Co.

(B) In not finding that a portion of respondent's testimony quotedin the decision proves that said respondent did not bind herselfto contribute her industry, and she could not, and in fact did not,because she was one of the judges of the City Court of Manilasince 1954.

(C) In finding that respondent did not in fact contribute herindustry, despite the appellate court's own finding that she hasbeen paid for the services allegedly rendered by her, as well asfor the loans of money made by her to the partnership.



II. The lower court erred in not finding that in any event therespondent was lawfully excluded from, and deprived of, heralleged share, interests and participation, as an alleged industrialpartner, in the partnership Evangelista & Co., and its profits ornet income.

III. The Court of Appeals erred in affirming in toto the decision ofthe trial court whereby respondent was declared an industrialpartner of the petitioner, and petitioners were ordered to renderan accounting of the business operation of the partnership fromJune 7, 1955, and to pay the respondent her alleged share in thenet profits of the partnership plus the sum of P2,000.00 asattorney's fees and the costs of the suit, instead of dismissingrespondent's complaint, with costs, against the respondent.

It is quite obvious that the questions raised in the first assignederrors refer to the facts as found by the Court of Appeals. Theevidence presented by the parties as the trial in support of theirrespective positions on the issue of whether or not therespondent was an industrial partner was thoroughly analyzed bythe Court of Appeals on its decision, to the extent of reproducingverbatim therein the lengthy testimony of the witnesses.

It is not the function of the Supreme Court to analyze or weighsuch evidence all over again, its jurisdiction being limited toreviewing errors of law that might have been commited by thelower court. It should be observed, in this regard, that the Courtof Appeals did not hold that the Articles of Co-partnership,identified in the record as Exhibit "A", was conclusive evidencethat the respondent was an industrial partner of the saidcompany, but considered it together with other factors, consistingof both testimonial and documentary evidences, in arriving at thefactual conclusion expressed in the decision.

The findings of the Court of Appeals on the various points raisedin the first assignment of error are hereunder reproduced if onlyto demonstrate that the same were made after a throughanalysis of then evidence, and hence are beyond this Court'spower of review.

The aforequoted findings of the lower Court are assailed under Appellants' first assigned error, wherein it is pointed out that"Appellee's documentary evidence does not conclusively provethat appellee was in fact admitted by appellants as industrialpartner of Evangelista & Co." and that "The grounds relied uponby the lower Court are untenable" (Pages 21 and 26, Appellant'sBrief).

The first point refers to Exhibit A, B, C, K, K-1, J, N and S,appellants' complaint being that "In finding that the appellee is anindustrial partner of appellant Evangelista & Co., herein referredto as the partnership — the lower court relied mainly on theappellee's documentary evidence, entirely disregarding facts andcircumstances established by appellants" evidence whichcontradict the said finding' (Page 21, Appellants' Brief). The lowercourt could not have done otherwise but rely on the exhibits justmentioned, first, because appellants have admitted their

genuineness and due execution, hence they were admittedwithout objection by the lower court when appellee rested hercase and, secondly the said exhibits indubitably show theappellee is an industrial partner of appellant company. Appellantsare virtually estopped from attempting to detract from theprobative force of the said exhibits because they all bear theimprint of their knowledge and consent, and there is no credibleshowing that they ever protested against or opposed theircontents prior of the filing of their answer to appellee's complaint. As a matter of fact, all the appellant Evangelista, Jr., would haveus believe — as against the cumulative force of appellee's



aforesaid documentary evidence — is the appellee's Exhibit "A",as confirmed and corroborated by the other exhibits alreadymentioned, does not express the true intent and agreement ofthe parties thereto, the real understanding between them beingthe appellee would be merely a profit sharer entitled to 30% ofthe net profits that may be realized between the partners fromJune 7, 1955, until the mortgage loan of P30,000.00 to beobtained from the RFC shall have been fully paid. This version,however, is discredited not only by the aforesaid documentaryevidence brought forward by the appellee, but also by the factthat from June 7, 1955 up to the filing of their answer to thecomplaint on February 8, 1964 — or a period of over eight (8)years — appellants did nothing to correct the alleged falseagreement of the parties contained in Exhibit "A". It is thusreasonable to suppose that, had appellee not filed the presentaction, appellants would not have advanced this obviousafterthought that Exhibit "A" does not express the true intent andagreement of the parties thereto.

At pages 32-33 of appellants' brief, they also make much of theargument that 'there is an overriding fact which proves that theparties to the Amended Articles of Partnership, Exhibit "A", didnot contemplate to make the appellee Estrella Abad Santos, an

industrial partner of Evangelista & Co. It is an admitted fact thatsince before the execution of the amended articles ofpartnership, Exhibit "A", the appellee Estrella Abad Santos hasbeen, and up to the present time still is, one of the judges of theCity Court of Manila, devoting all her time to the performance ofthe duties of her public office. This fact proves beyondperadventure that it was never contemplated between theparties, for she could not lawfully contribute her full time andindustry which is the obligation of an industrial partner pursuantto Art. 1789 of the Civil Code.

The Court of Appeals then proceeded to consider appellee'stestimony on this point, quoting it in the decision, and thenconcluded as follows:

One cannot read appellee's testimony just quoted withoutgaining the very definite impression that, even as she was andstill is a Judge of the City Court of Manila, she has renderedservices for appellants without which they would not have hadthe wherewithal to operate the business for which appellantcompany was organized. Article 1767 of the New Civil Codewhich provides that "By contract of partnership two or morepersons bind themselves, to contribute money, property, orindustry to a common fund, with the intention of dividing theprofits among themselves, 'does not specify the kind of industrythat a partner may thus contribute, hence the said services maylegitimately be considered as appellee's contribution to thecommon fund. Another article of the same Code relied uponappellants reads:

'ART. 1789. An industrial partner cannot engage in business forhimself, unless the partnership expressly permits him to do so;and if he should do so, the capitalist partners may either excludehim from the firm or avail themselves of the benefits which he

may have obtained in violation of this provision, with a right todamages in either case.'

It is not disputed that the provision against the industrial partnerengaging in business for himself seeks to prevent any conflict ofinterest between the industrial partner and the partnership, andto insure faithful compliance by said partner with this prestation.There is no pretense, however, even on the part of the appelleeis engaged in any business antagonistic to that of appellantcompany, since being a Judge of one of the branches of the CityCourt of Manila can hardly be characterized as a business. That



appellee has faithfully complied with her prestation with respectto appellants is clearly shown by the fact that it was only afterfiling of the complaint in this case and the answer theretoappellants exercised their right of exclusion under the codal art just mentioned by alleging in their Supplemental Answer datedJune 29, 1964 — or after around nine (9) years from June 7,1955 — subsequent to the filing of defendants' answer to thecomplaint, defendants reached an agreement whereby theherein plaintiff been excluded from, and deprived of, her allegedshare, interests or participation, as an alleged industrial partner,in the defendant partnership and/or in its net profits or income,on the ground plaintiff has never contributed her industry to thepartnership, instead she has been and still is a judge of the CityCourt (formerly Municipal Court) of the City of Manila, devotingher time to performance of her duties as such judge and enjoyingthe privilege and emoluments appertaining to the said office,aside from teaching in law school in Manila, without the expressconsent of the herein defendants' (Record On Appeal, pp.24-25). Having always knows as a appellee as a City judge evenbefore she joined appellant company on June 7, 1955 as anindustrial partner, why did it take appellants many yearn beforeexcluding her from said company as aforequoted allegations? And how can they reconcile such exclusive with their main theory

that appellee has never been such a partner because "The realagreement evidenced by Exhibit "A" was to grant the appellee ashare of 30% of the net profits which the appellant partnershipmay realize from June 7, 1955, until the mortgage of P30,000.00obtained from the Rehabilitation Finance Corporal shall havebeen fully paid." (Appellants Brief, p. 38).

What has gone before persuades us to hold with the lower Courtthat appellee is an industrial partner of appellant company, withthe right to demand for a formal accounting and to receive hershare in the net profit that may result from such an accounting,

which right appellants take exception under their secondassigned error. Our said holding is based on the following articleof the New Civil Code:

'ART. 1899. Any partner shall have the right to a formal accountas to partnership affairs:

(1) If he is wrongfully excluded from the partnership business orpossession of its property by his co-partners;

(2) If the right exists under the terms of any agreement;

(3) As provided by article 1807;

(4) Whenever other circumstance render it just and reasonable.

We find no reason in this case to depart from the rule whichlimits this Court's appellate jurisdiction to reviewing only errors oflaw, accepting as conclusive the factual findings of the lowercourt upon its own assessment of the evidence.

The judgment appealed from is affirmed, with costs.

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