33685015 Partnership and Agency Digests for Atty Cochingyan

7/28/2019 33685015 Partnership and Agency Digests for Atty Cochingyan

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PARTNERSHIP Digests Atty. CochingyanTAN SEN GUAN & CO. VS. PHILIPPINE TRUST

CO.

Facts: Plaintiff Tan Sen Guan & Co. secured ajudgment for a sum of P21,426 against the MindoroSugar Co. of which the Philippine Trust is the trustee.

The plaintiff entered into an agreement with thedefendant Philippine Trust Co. wherein the formerassigned, transferred, and sold to the latter the fullamount of said judgment against Mindoro Sugar Co.

together with all its rights thereto and the latteroffered satisfactory consideration thereto. Theagreement further stipulated that upon signing of theagreement, Phil Trust shall pay Tan Sen the sum ofP5000; should the Mindoro Sugar be sold or itsownership be transferred, an additional P10,000pesos will be paid to Tan Sen upon perfection of thesale; in case any other creditor of Mindoro Sugarobtains in the payment of his credit a greaterproportion than the price paid to Tan Sen, the Phil

Trust shall pay to the latter whatever sum may benecessary to be proportioned the claim of thecreditor. However, if the Mindoro Sugar is sold to anyperson who does not pay anything to the creditors orpay them equal or less than 70 percent of theirclaim, or should the creditors obtain from othersources the payment of their claim equal to or less

than 70 percent, the Phil Trust will only pay to TanSenthe additional sum of P10,000 upon the sale ortransfer of the Mindoro Sugar as above stated. Theproperties of Mindoro Sugar were later on sold atpublic auction to the Roman Catholic Archbishop ofManila and base on the agreement plaintiff Tan Senbrought suit against defendant Phil Trust for the sumof P10,000.

Defendants argument: Only a portion of theMindoro Sugars properties were sold.

CFI: Absolved the defendant on two grounds: (a) inthe contract, it was only bound as a trustee and notas an individual; (b) that it has not been proved thatall the properties of the Mindoro Sugar had been

sold.

Issues:

(1) W/N the defendant is not personallyresponsible for the claim of the plaintiffbased on the deed of assignment becauseof having executed the same in its capacityas trustee of the properties of the MindoroSugar.

(2) W/N all the properties of the Mindoro Sugarwere sold at public auction to the RomanCatholic Archbishop of Manila.

Held: SC reversed CFIs ruling.

(1) The Phil Trust Company in its individual capacityis responsible for the contract as there was noexpress stipulation that the trust estate and notthe trustee should be held liable on the contractin question. Not only is there no expressstipulation that the trustee should not be heldresponsible but the Wherefore clause of thecontract states the judgment was expresslyassigned in favor of Phil Trust Company and notPhil Trust Company, the trustee. It thereforefollows that appellant had a right to proceeddirectly against the Phil Trust on its contract andhas no claim against either Mindoro Sugar or thetrust estate.

(2) Exhibit D (the certificate of sale to RomanCatholic Archbishop) shows that all properties toPhil Trust as Trustee were included in the sale.

The only thing reserved from the sale was thestanding crops, and it is reasonable to presumethat they had also been sold between the dateof the sale and the institution of this action.Where the real estate, the personal propertyincluding animals, and all the bills receivable aresold, it would be a forced construction of the

contract of agreement to hold that the assets ofthe Mindoro Sugar Company had not been sold.

PHIL. AIR LINES, INC. VS. HEALD LUMBER CO.

Facts: Lepanto Consolidated Mines chartered ahelicopter belonging to plaintiff Phil. Air Lines tomake a flight from its base at Nichols Field Airport tothe formers camp at Manyakan Mountain Province.

The helicopter, with Capt. Gabriel Hernandez and Lt.Rex Imperial on board, failed to reach the destinationas it collided with defendants tramway steel cablesresulting in its destruction and death of the officers.Plaintiff insured the helicopters and the officers whopiloted the same for P80,000 and P20,000respectively and as a result of the crash, theinsurance companies paid to the plaintiff the totalindemnity of P120,000. Plaintiff sustained additionaldamages totaling P103,347.82 which were notrecovered by insurance. The plaintiff instituted thisaction against defendant Heald Lumber Company torecover the sum paid by the insurance company tothe plaintiff and the additional damages which wasnot recovered from the insurance.

Defendants argument: Plaintiff has no cause ofaction against defendant for if anyone should duedefendant for its recovery, it will only be theinsurance companies.

Plaintiffs argument: It asserts that the claim ofthe said amount of P120,000 is on behalf and for thebenefit of the insurers and shall be held by plaintiff intrust for the insurers. It is appellants theory that,inasmuch as the loss it has sustained exceeds theamount of the insurance paid to it by the insurers,the right to recover the entire loss from thewrongdoer remains with the insured and so theaction must be brought in its own name as real partyin interest. To the extent of the amount received byit as indemnity from the insurers, plaintiff would thenbe acting as a trustee for them. To support thiscontention, appellant cites American authorities.

RTCs Ruling: The court ordered the plaintiff toamend its complaint to delete the first allegation thatinsurance companies have paid a portion of the

plaintiffs damages, since the Court believes that thereal parties in interest are the insurance companiesconcerned or bring in the insurance companies asparties plaintiff. And having manifested plaintiffsdecision not to amend the complaint, such move ofplaintiff amounts to a deletion of the portion objectedto and so the complaint should be deemed limited tothe additional damages.

Issue:

(1) W/N the plaintiff is not the real party ininterest respecting the claim for P120,000.

Partnership & Agency | 2B 2008-2009


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PARTNERSHIP Digests Atty. CochingyanHeld: SC affirmed the appealed judgment.

(1) In this jurisdiction, we have our own legalprovision which in substance differs from theAmerican law. Art. 2207 of the NCC providesthat if a property is insured and the ownerreceives the indemnity from the insurer thesame is deemed subrogated to the rights ofthe insured against the wrongdoer and if theamount paid by the insurer does not fully

cover the loss, then the aggrieved party is theone entitled to recover the deficiency. Underthis legal provision, the real party in interestwith regard to the portion of the indemnitypaid is the insurer and not the insured.

(2) Before a person can sue for the benefit ofanother under a trusteeship, he must be atrustee of an express trust. The right does notexist in cases of implied trust, that is, a trustwhich may be inferred merely from the acts ofthe parties or from other circumstances. Also,to adopt a contrary rule to what is authorizedby the American statues would be splitting acause of action or promoting multiplicity ofsuits which should be avoided. Under ourrules, both the insurer and the insured may

join as plaintiffs to press their claims against

the wrongdoer when the same arise out of thesame transaction or event. This is authorizedby section 6, rule 3, of the Rules of Court.

CRISTOBAL VS. GOMEZ

Facts: Epifanio Gomez owned a property which wassold in a pacto de retro sale to Luis Yangcoredeemable in 5 years, although the period passedwithout redemption, the vendee conceded thevendor the privilege of repurchase. Gomez apply to akinsman, Bibiano Baas, for assistance on acondition that he will let him have the money if hisbrother Marcelino Gomez and his sister Telesfora

Gomez would make themselves responsible for theloan. The siblings agreed and Baas advance thesum of P7000 which was used to repurchase theproperty in the names of Marcelino and Telesfora.. Aprivate partnership in participation was createdbetween Marcelino and Telesfora and therein agreedthat the capital of the partnership should consist ofP7000 of which Marcelino was to supply the amountof P1500 and Telesora the sume of P5500. It wasfurther agreed that the all the property to beredeemed shall be named to the two, that Marcelinoshould be its manager, that all the income, rent,produce of the property shall be applied exclusivelyto the amortization of the capital employed by thetwo parties with its corresponding interest and otherincidental expenses and as soon as the capital

employed, with its interest and other incidentalexpenses, shall have been covered, said propertiesshall be returned to Epifanio Gomez or his legitimatechildren. A year after Epifanios death, Telesforawanted to free herself from the responsibility whichshe had assumed to Baas and conveyed toMarcelino her interest and share in the threeproperties previously redeemed from Yangco andboth declared dissolved the partnership theycreated. With Marcelino as the sole debtor, Baasrequired him to execute a contract of sale of thethree parcels with pacto de retro for the purpose ofsecuring the indebtedness. Marcelino later on paidthe sum in full satisfaction of the entire claim andreceived from Baas a reconveyance of the three

parcels. The widow, Paulina Cristobal, and thechildren of Epifanio Gomez instituted an action forthe recovery of the three parcels of land fromMarcelino Gomez.

Defendants argument: Defendant answered witha general denial and claimed to be the owner in hisown right of all the property which is the subject ofthe action. He further claimed that the trustagreement was kept secret from Epifanio Gomez,

and that, having no knowledge of it, he could nothave accepted it before the stipulation was revoked.And that he has the benefit of prescription in hisfavor, having been in possession of more than 10years under the deed which he acquired the soleright from his sister.

RTCs ruling: ruled in favor of plaintiffs and foundthat the property in question belongs to the plaintiffs,as co-owners, and ordered the defendant tosurrender the property to them and execute anappropriate deed of transfer as well as to pay thecost of the proceeding.

Issue: (1) W/N the dissolution of partnershipbetween Marcelino and Telesfora destroyed thebeneficial right of Epifanio Gomez in the property.

(2) W/N the partnership agreement of Marcelinoand Telesfora was a donation in favor ofEpifanio or an express trust.

(3) W/N Marcelino Gomez acquired the propertythrough prescription.

Held: SC declared ownership in favor of plaintiffs.

(1) The fact that one of the two individuals whohave constituted themselves trustees forthe purpose above indicated conveys hisinterest in the property to his cotrustee doesnot relieve the latter from the obligation tocomply with the trust.

(2) A trust constituted between two contractingparties for the benefit of a third person is

not subject to the rules governing donationsof real property. The beneficiary of the trustmay demand performance of the obligationwithout having formally accepted thebenefit of the trust in a public document,upon mere acquiescence in the formation ofthe trusts and acceptance under the secondpar. of article 1257 of the CC. Much energyhas been expanded by the attorneys for theappellant in attempting to demonstratethat, if Epifanio at any time had any right inthe property by virtue of the partnershipagreement between Marcelino and Telesforasuch right could be derived as a donationand that, inasmuch as the donation wasnever accepted by Epifanio in a public

document, his supposed interest therein isunenforceable. The partnership should notbe viewed in light of an intended donation,but as an express trust.

(3) As against the beneficiary, prescription isnot effective in favor of a person who isacting as a trustee of a continuing andsubsisting trust. Therefore, Marcelino cannotacquire ownership over the propertythrough prescription.

SALAO VS. SALAO



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PARTNERSHIP Digests Atty. CochingyanFacts: After the death of Valentina Ignacio, her estatewas administered by her daughter Ambrosia. It waspartitioned extrajudically and the deed was signed byher four legal heirs namely her 3 children (Alejandra,

Juan, and Ambrosia) and Valentin Salao, inrepresentation of his deceased father, Patricio. TheCalunuran fishpond is the property in contention inthis case. Prior to the death of Valentina Ignacio, herchildren Juan and Ambrosia secured a torrens title intheir names a 47 ha. fishpond located at SitioCalunuran, Lubao, Pampanga. A decree was alsoissued in the names of Juan and Ambrosia for thePinanganacan fishpond which adjoins the Calunuranfishpond. A year before Ambrosias death, shedonated her one-half share in the two fishponds inquestion to her nephew, Juan Salo Jr. He was alreadythe owner of the other half of the fishponds havinginherited it from his father, Juan Salao Sr. AfterAmbrosia died, the heirs of Valentin Salao, BenitaSalao and the children of Victorina Salao, filed acomplaint against Juan Salao Jr. for thereconveyance to them of the Canluran fishpond asValentin Salaos supposed one third share in the145 ha. of fishpond registered in the names of JuanSalao Sr. and Ambrosia Salao.

Defendants argument: Valentin Salao did nothave any interest in the two fishponds and that thesole owners thereof were his father and his auntAmbrosia, as shown in the Torrens titles and that hewas the donee of Ambrosias one-half share.

Plaintiffs argument: Their action is to enforce atrust which defendant Juan Salao Jr. allegedlyviolated. The existence of trust was not definitelyalleged in the plaintiffs complaint but in theirappellants brief.

RTCs Ruling: There was no community of propertyamong Juan, Ambrosia and Valentin when theCalunuran and the Pinanganacan lands wereacquired; that co ownership over the realproperties of Valentina Ignacio existed among her

heirs after her death in 1914; that the co ownershipwas administered by Ambrosia and that it subsistedup to 1918 when her estate was partitioned amongher three children and her grandson, Valentin Salao.It rationalized that Valentins omission during hislifetime to assail the Torrens titles of Juan andAmbrosia signified that he was not a co-owner of thefishponds. It did not give credence to the testimoniesof plaintiffs witnesses because their memories couldnot be trusted and because no strong evidencesupported the declarations. Moreover, the partiesinvolved in the alleged trust were already dead.

Judgment appealed to CA but the amounts involvedexceeded two hundred thousand pesos, the CAelevated the case to the SC.

Issue:

(1) W/N plaintiffs massive oral evidencesufficient to prove an implied trust, resultingor constructive, regarding the twofishponds.

Held: SC affirmed lower courts decision.

(1) Plaintiffs pleading and evidence cannot berelied upon to prove an implied trust. Thetrial courts firm conclusion that there wasno community of property during thelifetime of Valentina Ignacio or before 1914is substantiated by defendants

documentary evidence. There was noresulting trust in this case because therenever was any intention on the part of Juan,Ambrosia and Valentin to create any trust.

There was no constructive trust because theregistration of the 2 fishponds in the namesof Juan and Ambrosia was not vitiated byfraud or mistake. This is not a case where tosatisfy the demands of justice it isnecessary to consider the Calunuranfishpond as being held in trust by the heirsof Juan Salao Sr. for the heirs of ValentinSalao. And even assuming that there was animplied trust, plaintiffs action is clearlybarred by prescription when it filed anaction in 1952 or after the lapse of morethan 40 years from the date of registration.

CARANTES VS. CA

Facts: A proceeding for expropriation wascommenced by the government for the constructionof the Loakan Airport and a portion of Lot 44, whichwas originally owned by Mateo Carantes, was neededfor the landing field. The lot was subdivided into LotsNos. 44-a (the portion which the government soughtto expropriate), 44-b, 44-c, 44-d and 44-e.Negotiations were also under way for the purchaseby the government of lots 44-b and 44-c. WhenMateo Carantes died, his son Maximino Carantes wasappointed administrator of the estate and filed aproject of partition of the remaining portion of Lot 44wherein he listed as the heirs of Mateo Carantes whowere entitled to inherit the estate, himself and hisbrothers and sisters. An Assignment of Right toInheritance was executed by the children of Mateoand the heirs of Apung Carantes in favor of MaximinoCarantes for a consideration of P1. Maximino sold tothe government lots nos. 44-b and 44-c and dividedthe proceeds of the sale among himself and theother heirs of Mateo. The assignment of right toinheritance was registered by Maximino and the TCT

in the names of the heirs was cancelled and a newone was issued in the name of Maximino Carantes asthe sole owner of the remaining portions of lot 44. Acomplaint was instituted by the three children ofMateo and the heirs of Apung Carantes againstMaximino praying that the deed of assignment bedeclared null and void and that the remainingportions of lot 44 be ordered partitioned into sixequal shares and Maximino be accordingly orderedto execute the necessary deed of conveyance infavor of the other heirs.

Plaintiffs argument: They executed the deed ofassignment only because they were made to believeby Maximino that the said instrument embodied theunderstanding among parties that it merely

authorized the defendant Maximino to conveyportions of lot 44 to the government in their behalf tominimize expenses and facilitate the transaction andit was only when they secured a copy of the deedthat they came to know that the same purported toassign in favor of Maximino their rights to inheritancefrom Mateo Carantes.

Defendants argument: Filed a motion to dismiss.The plaintiffs cause of action is barred by the statuteof limitations because the deed of assignment wasrecorded in the Registry of Property and thatownership over the property became vested in himby acquisitive prescription ten years from itsregistration in his name of Feb. 21, 1947.



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PARTNERSHIP Digests Atty. CochingyanRTCs ruling: Ruled in favor of defendant MaximinoCarantes stating that since an action based on fraudprescribes in four years from the discovery of thefraud, and in this case the fraud allegedlyperpetrated by defendant must deemed to havebeen discovered on march 16, 1940 when the deedof assignment was registered, the plaintiffs right ofaction had already prescribed when they filed theaction in 1958. And even assuming co-ownershipexisted, the same was completely repudiated by thesaid defendant by performance pf several acts suchas the execution of deed of sale in favor of thegovernment in 1939, hence ownership had vested inthe defendant by acquisitive prescription.

CA reversed.

Issue:

(1) W/N the deed of assignment is void ab initioon the ground of fraud and the action toannul it has prescribed.

(2) W/N a constructive trust exist making anaction for reconveyance based onconstructive trust imprescriptable.

Held: SC dismissed the complaint and set aside CAsdecision.

(1) When the consent to a contract wasfraudulently obtained, the contract isvoidable. Fraud or deceit does not render acontract void ab initio, and can only be aground for rendering the contract voidableor annullable pursuant to article 1390 of theNCC by a proper action in court. The presentaction being one to annul a contract on theground of fraud, its prescriptive period is 4years from the time of discovery of fraud.

The weight og authorities is the effect thatthe registration of an instrument in theOffice of the Register of Deeds constitutes a

constructive notice to the whole world, and,therefore, discovery of fraud is deemed tohave taken place at the time of theregistration. In this case, the deed ofassignment was registered on March 16,1940. The 4 years period within which theprivate respondents could have filed thepresent action consequently commenced onmarch 16, 1940, and since they filed it onlyin September 4, 1958, it follows that thesame is barred by the statute of limitations.

(2) No express trust was created in favor of theprivate respondents. If trust there was, itcould only be a constructive trust, which isimposed by law. In constructive trusts thereis neither promise nor fiduciary relation; the

so called trustee does not recognize anytrust and has no intent to hold the propertyfor the beneficiary. An action forreconveyance based on implied orconstructive trust is prescriptable andprescribes in 10 years. In this case, the ten year prescriptive period began on march 16,1940, when the petitioner registered thedeed of assignment and secured thecancellation of the certificate of title in the

joint names of the heirs of Mateo Carantesand, in lieu thereof, the issuance of a newtitle exclusively in his name. Since thepresent action was commenced only on

September 4, 1958, the same in barred byextinctive prescription.

MUNICIPALITY OF VICTORIAS VS. CA

Facts: Norma Leuenberger, respondent, inherited aparcel of land from her grandmother, Simeona Vda.de Ditching in 1941. In 1963, she discovered that a

part of the parcel of land was being used bypetitioner Municipality of Victorias as a cemetery. Byreason of the discovery, respondent wrote a letter tothe Mayor of Victorias demanding payment of pastrentals over the land used a cemetery andrequesting delivery of the illegally occupied land bythe petitioner. The Mayor replied that themunicipality bought the land but however refused toshow the papers concerning the sale. Apparently, themunicipality failed to register the Deed of Sale of thelot in dispute.

Respondent filed a complaint in the Court ofFirst Instance of Negros Occidental for recovery ofpossession of the parcel of land occupied by themunicipal cemetery. In its answer, petitioner

Municipality alleged ownership of the lot havingbought it from Simeona Vda. de Ditching sometimein 1934. The lower court decided in favor of thepetitioner municipality.

On appeal, petitioner presented an entry inthe notarial register form the Bureau of RecordsManagement in Manila of a notary public of a salepurporting to be that of the disputed parcel of land.Included within it are the parties to the sale, Vda. deDitching, as the vendor and the Municipal Mayor ofVictorias in 1934, as vendee. The Court of Appealshowever claimed that this evidence is not a sufficientDeed of Sale. It therefore reversed the ruling of theCFI and ordered the petitioner to deliver thepossession of the land in question to respondents.

Issue: W/N the notary public of sale is sufficient tosubstantiate the municipalitys claim that it acquiredthe disputed land by means of a Deed of Sale. Yes.

Held: The fact that the notary public of sale showedthe nature of the instrument, the subject of the sale,the parties of the contract, the consideration and thedate of sale, the Court held that it was a sufficientevidence of the Deed of Sale.

Thus, when Norma inherited the land fromher grandmother, a portion of it has already beensold by the latter to the Municipality of Victorias in1934. Her registration of the parcel of land did nottherefore transfer ownership but merely confirmed it.As the civil code provides, where the land is decreed

in the name of a person through fraud or mistake,such person is by operation of law considered atrustee of an implied trust for the benefit of thepersons from whom the property comes.Consequently, she only held the land in dispute intrust for the petitioner hence private respondent is inequity bound to reconvey the subject land to thecestui que trust, the Municipality of Victorias.

MARIANO VS. DE VEGA



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PARTNERSHIP Digests Atty. CochingyanFacts: Spouses Urbano and Panganiban owned asconjugal property 29 unregistered parcels of landduring their lifetime. When Urbano died, hiscompulsory heirs were the children of Gaudencia, hischild with Panganiban, who are petitioners in thiscase, and two other legitimate children, his childrenwith his second wife, who are the privaterespondents in this case.

Petitioners filed a civil case in the CFI for

partition and delivery of possession of certain sharesin the conjugal assets. They contended that privaterespondents have excluded them from takingpossession of the whole conjugal property and thatthe latter appropriated to themselves the productscoming from the parcels of land. The court ruled infavor of the private respondents claiming that theaction of the petitioners has already prescribed forthe reason that an implied or constructive trustprescribes in ten years.

Issue: W/N there is an implied or constructive trustgranted by the petitioners in favor of therespondents. No.

Held: The Court ruled that the present case does notfall under the rules of implied trust. Considering thefact that the parties in this case inherited the landfrom the same ancestor, Urbano, both parties areclearly co-owners of the disputed properties. Thiscase is therefore governed by the rules on co-ownership. Under the civil code, prescription doesnot run against a co-owner or a co-heir so long as heexpressly or impliedly recognizes the co-ownership.

In view of their lack of a clear repudiation ofthe co-ownership, private respondents cannotacquire the share of the petitioners by prescription.

HEIRS OF CANDELARIA VS. ROMERO

Facts: Parties to this case are the heirs of EmilioCandelaria as plaintiff and Luisa Romero, and theheirs of Lucas as defendants.

Emilio and Lucas Candelaria bought a lot onan installment basis. Lucas paid the first twoinstallments but because of sickness which causedhim to be bedridden, he sold his share to his brotherEmilio who continued to pay the purchase price untilthe obligation to pay had been fully satisfied. The

TCT was however issued under the name of Lucas.Nevertheless, Lucas acknowledges that he merelyheld the title in trust for his brother with theunderstanding that the necessary documents oftransfer will be made later and this fact was knownnot only to him but also to the defendants. However

upon his death, his heirs refused to reconvey the lotto plaintiff despite repeated demands.

Plaintiff brought an action in the CFI for acomplaint for reconveyance of real property. Thelower court however dismissed the case on theground that an express trust, and not an impliedtrust, was created and that the action had alreadyprescribed.

Issue: What kind of trust was created? Express orimplied trust? Implied trust.

Held: Where the grantee takes the property underan agreement to convey to another on certainconditions, a trust results for the benefit of suchother or his heirs. It is also the rule that there is animplied trust when a person purchases land with hisown money and takes conveyance thereof in thename of another. In such a case, the property is heldon a resulting trust in favor of the one furnishing theconsideration for the transfer. This kind of trust isfrom equity and arises by implication or operation oflaw.

In the present case, it is apparent thatEmilio furnished the consideration intending to obtaina beneficial interest in the property in question.Having supplied the money, it is presumed that heintended to purchase the lot for his own benefit.Moreover, by entering into an agreement with Emiliothat the necessary documents of transfer will bemade later, Lucas acknowledged the he merely heldthe property in trust for his brother with theunderstanding that it will eventually be conveyed tothe plaintiffs predecessor in interest. Lastly, byacknowledging the presence of trust, the plaintiffsaction cannot be said to have been barred by lapseof time. The case is therefore remanded for furtherproceedings.

LAUREANO VS. STEVENSON

Facts: In 1912, Felix Laureano sold to EugenioKilayco a piece of property situated in the City ofIloilo, and such land was then registered in thelatters name. Adjoining such property was anotherproperty belonging to Laureano.

When the cadastral survey was initiated in Iloilo in1914, Kilayco made proper representations toconfirm the title to his property. Thereafter, title wasissued to him, but later, for some unknown reason,the certificate was ordered cancelled and a new one

was issued. Then, presumably by mistake, the titlewas made to include not only Kilaycos property butproperty belonging to his neighbor, Laureano. Thefinal decree to his effect was issued in 1916.

Creditors of Kilayco, becoming aware of theexistence of the title to the property, institutedactions and obtained writs of execution in May 1922.

The sale of the property was set for October 1922. Allthe while, Laureano had done nothing to protect hisinterests in the property. However, he claims tohave been absent in Spain at the time of the hearingin the cadastral case and to have known nothing ofit.

On June 1922, Laureano filed a case against Kilayco

to obtain a judgment, declaring him to be the ownerof the parcels of land mistakenly included in thelatters title, and ordering the cancellation of thecertificate of title theretofore issued in the name ofKilayco.

Issue: When property is acquired through mistake,can the real owner recover such property by virtue ofimplied trust?

Trial Court: Since the creditors were not parties tothe action, the cancellation of the annotations on thecertificate of title in favor of the creditors of Kilaycocannot be sustained.



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PARTNERSHIP Digests Atty. CochingyanHeld: It is proper to issue the injunction sought bythe petitioners to stop the sale of the property atpublic auction, to annul the levies made on theproperty, to obtain the cancellation in the registry ofproperty of the annotations made, and to secure anew title for the petitioner without theseencumbrances.

It is important to note that:

1. Kilayco never laid a claim to the property;

2. The two lots covered by the certificate weremistakenly registered in the name ofKilayco; and

3. The court did not have jurisdiction toconfirm the title of the two lots for thereason that no petition for title was filed, notrial was held, no evidence was presented,and no judgment was rendered regardingthese two lots in the land registrationproceedings.

Kilayco was, in effect, merely holding the title of theproperty in trust of Laureano. The creditors ofKilayco could acquire no higher or better right thanKilayco had in the property, which, in this case, wasnothing. Hence, Laureano can rightfully recover thetwo parcels of land included in the title of Kilaycothrough mistake.

GONZALES v. IAC

Facts: The land in dispute is registered in the nameof Fausto Soy. In 1941, Fausto sold 253 sq. m. toFrancisco Landingin. In 1954, pursuant to a Deed ofDonation executed by Fausto, Antonio Soy (son ofFausto) and Gregoria Miranda (wife) sold 240 sq. m.to Juanito Gonzales and Coronacion Ganaden. In

January 1960, Fausto sold another 240 sq. m. toGonzales and Ganaden and two days later, a TCT wasissued in favor of Gonzales, indicating his share asco-owner of 480 sq. m. and Fausto Soy, 240 sq. m. In1965, Fausto sold another 140 sq. m. to the Gonzalesand Ganaden.

April 1965, Respondents Rosita Lopez, GavinoCayabyab, Agueda and Felipa Ubando, PedroSoriano, Teosidia Lopez and Federico Ballesteros(nieces and nephews of Fausto) filed the instantcomplaint for partition against Fausto Soy. On thesame day they filed a notice of lis pendens and had itannotated on the OCT. Fausto answered andcontested plaintiffs claims, asserting exclusive title inhis name. Fausto countered that the questioned land

was never registered in the names of his parentsEugenio and Ambrosia, and that he had been theregistered owner of the premises since 1932.

On the basis of evidence adduced ex-parte, the TrialCourt held that respondents and Fausto were co-owners of the lot and ordered the partition thereof.Parties were enjoined to partition amongstthemselves and were to submit the same to thelower court for confirmation. Upon execution, thesheriff was unable to effect apportionment due to a3rd party claim of Juanito and Coronacion Gonzales,stating that they were registered owners of 480 sq.m. of the disputed land. The sheriff noted the various

improvements petitioners had introduced(apartment, residential house and piggery). Trialcourt allowed petitioners to intervene asindispensable parties, vacating its previous judgmentand granting a new trial.

Trial Court: There is no proof to show thatpetitioners are co-owners of the property in questionbecause the land has long been covered by an OCTsince 1932 in the name of their predecessor in

interest, Fausto Soy.

CA: Resolved in favor of respondents, declaring thatthe sale to intervenor-petitioners did not terminatethe trust relationship between the appellants and theappellees. The sale in favor of petitioners shall beenforced against the share of respondents as heirsof Fausto.

Issue: Was the disputed land held in trust by FaustoSoy for his sisters, Emilia, Cornelia and Anastacia(mothers of herein respondents)?

Ruling: CA decision reversed, order for partitiondismissed.

Fausto, being predecessor-in-interest, had appearedto be the registered owner of the lot for more than30 years and his dominical rights can no longer bechallenged. Any insinuation as to the existence of animplied or constructive trust should not be allowed.

Even assuming there was an implied trust,respondents attempt at reconveyance is barred byprescription, which in this case is 10 years, theperiod reckoned from the issuance of the adversetitle to the property which operates as a constructivenotice.

The assertion of adverse title, which was an explicitindication of repudiation of the trust for the purposeof the statute of limitations, took place when the OCTwas issued in the name of Fausto Soy in 1932, to the

exclusion of his 3 sisters.

Even if there were no repudiation, the rule is that anaction to enforce an implied trust may becircumscribed not only by prescription but also bylachesin which case, repudiation is not required.

Respondents had literally slept on their rightspresuming they had any and can no longer disputethe conclusive and incontrovertible character ofFaustos title as they are deemed to have acquiescedtherein.

ADAZA V. CA

Facts: In 1953, Victor Adaza Sr. executed a Deed ofDonation, covering the disputed land in this case,located in Sinonok, Zamboanga del Norte in favor ofRespondent Violeta. The land being disposable publicland had been held and cultivated by Victor, Sr. Withthe help of her brother, Horacio, Violeta filed ahomestead application over the land and a freepatent was issued in 1956. An OCT was issued in1960. In 1962, Violeta and husband, Lino obtained aloan from PNB by executing a mortgage on the land,while Homero Adaza, brother of Violeta remainedadministrator of the same.



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PARTNERSHIP Digests Atty. CochingyanIn 1971, Horacio invited his brothers and sisters for afamily gathering where he asked Violeta to sign aDeed of Waiver with respect to the property inSinonok. The Deed stated that the land was owned incommon by Violeta and Horacio even though theOCT was in her name only. The Deed also providedfor the waiver, transfer and conveyance of Violeta toHoracio of of the property and its improvements.Violeta and Horacio signed the Deed with Homero asa witness.

A few months later, Violeta and husband Lino filed acomplaint for annulment of the Deed of waiver andfor damages against Horacio and wife Felisa. Thecomplaint alleged that (1) she was absolute owner ofthe land by virtue of an unconditional donationexecuted by her father in her favor; (2) she wasregistered owner; (3) she signed the Deed of waiverbecause of fraud, misrepresentation and undueinfluence; and (4) because of such malicious acts,she is entitled to damages from Horacio.

Trial Court: Declared Deed of Waiver as valid andbinding upon Violeta, that Horacio was co-owner of of the land, and odering Violeta to pay Horacionthe proceeds of his share.

CA: Reversed Trial court decision, declaring thatthough the deed was signed voluntarily, such Deedwas without consideration or cause because the landhad been unconditionally donated to Violeta alone.

Issue: Who owns the disputed parcel of land?Ruling: Petition granted.

Deed of donation had a crossed-out provision: Thatthe donee shall share of the entire property withone of her brothers and sisters after the death of thedonor.

The record is bereft of any indication of any evilintent or malice on the part of Homero, Victor, Jr. and

Teresita (siblings of Violeta) that would suggest

deliberate collusion against Violeta. Their father hadexecuted the Deed of Donation with theunderstanding that the same would be dividedbetween Horacio and Violeta and that Violeta hadsigned the Deed of Waiver freely and voluntarily.

Victor Adaza, Sr. left 4 parcels of land divided amongthe 6 children through the practice of having thelands acquired by him titled to the name of one of hischildren.

The property involved in the instant case is owned incommon by Violeta and brother, Horacio eventhough the OCT was only in her name. She held halfof the land in trust for petitioner Horacioimpliedtrust based on Article 1449 of the Civil Code:

There is also an implied trust when a donation ismade to person but It appears that although thelegal estate is transmitted to the donee, henevertheless is either to have no beneficial interestof only a part thereof.

The doctrine of laces is not to be appliedmechanically as between near relatives.

ARMAMENTO V. GUERRERO

Facts:This case involves an action for reconveyanceor for the declaration of an implied trust on Lot No.974 and for damages.

The disputed land was the subject of 2 PatentApplications: (1) Free patent filed by Defendant onAug 1 1958, issued Jul 1961, OCT issued Feb 1962and (2) Homestead Patent filed by Plaintiff on Jul 71959, approved Jan 1964.

Plaintiff Armamento alleges that he is the possessor-actual occupant of and Homestead applicant over thedisputed lot. Upon following up his application, hewas shocked to discover that Defendant Guerrero,through fraud and misrepresentation obtained a FreePatent over the same land, by falsely stating that hehad continuously possessed the lot since July 1945 orprior thereto, when in truth defendant was never inpossession.

In his Answer, Guerrero denies that he was not inpossession claiming that he had been in occupationof said lot and even authorized a certain MacarioCaangay to administer the same while he wastermporarily away for missionary work in Cagayan deOro.

Trial Court: Dismissed the case on the followinggrounds: (a) Plaintiff has no personality to file theaction for reconveyancethe proper party being theRepublic of the Philippines; (b) Plaintiff has nocause of action in the absence of privity of contractbetween parties; (c) defendants title has becomeindefeasible and cannot be cancelled; and (d) evenif based on fraud, the action has prescribed.

Issues: Is plaintiffs action for reconveyancejustified? Was there a trust created?

Ruling: After the lapse of one year, a decree ofregistration is no longer open to review or attack,although its issuance is attended with fraud.However, an action for reconveyance is still available

for the aggrieved party if the property has not yetpassed to an innocent purchaser for value. This isexactly what plaintiff has done.

Plaintiff has not been able to prove fraud andmisrepresentation because of the trial courtdismissal. While plaintiff is not the owner of theland, so that, strictly speaking, he has no personalityto file this application, he pleads for equity andinvokes the doctrine of implied trust under Art.1456 of the Civil Code: If property is acquiredthrough mistake or fraud, the person obtaining it is,by force of law, considered a trustee of an impliedtrust for the benefit of the person from whom theproperty comes.

The doctrine of implied trust may be made tooperate in plaintiffs favor, assuming that he canprove his allegation that defendant had acquiredlegal title by fraud.

A constructive trust is a trust raised by constructionof law or arising by operation of law. If a personobtains legal title to property by fraud orconcealment, courts of equity will impress upon thetitle a so-called constructive trust in favor of thedefrauded part.



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PARTNERSHIP Digests Atty. CochingyanAction for reconveyance has not prescribedtheprescriptive period being 10 years. (Title obtained1962, Suit commenced 1967)

Case is remanded to CFI Cotobato.

RAMOS v RAMOS

Facts: Spouses Martin Ramos and Candida weresurvived by three legitimate children: Jose, Agustinand Granada. Martin was also survived by 7 naturalchildren. A special proceeding was instituted for thesettlement of the estate of said spouses. Rafael,brother of Martin was appointed administrator. Aproject of partition was submitted and the conjugalhereditary estate was appraised at P74,984.93. Itconsisted of 18 parcels of land, some head cattle andadvances to the legitimate children. It was agreed inthe project of partition that Jose and Agustin wouldpay the cash adjudications to their natural siblings.Only the sum of P 37, 492.46 of the P74krepresented the estate of Martin. 1/3 thereof was thefree portion out of which the shares of the naturalchildren were to be taken: each would get P1,785.35.

The project of partition as well as the intervention ofTimoteo as guardian of the five minor heirs wasapproved by the court. Later on, Judge Nepomucenoasked the administrator to submit a report showingthat the shares have been delivered to the heirs asrequired which the siblings acknowledged in amanifestation. The Himalayan cadastre (8 lots)involved in this case were registed in equal shares inthe names of Joses widow, Gregoria and herdaughter Granada.

The Plaintiffs (natural children) contend that whilethey were growing up, they had been well supportedby Jose and Agustin as they had been receiving theirshares from the produce of the Haciendas in variedamounts over the years. Even after the death of Jose,Gregoria had continued giving them money but had

stopped in 1951 by reason that lessee Lacson wasnot able to pay the lease rental. No accounting hadever been made to them by Jose nor Gregoria. Uponthe survey of the land, they did not intervene, as Joseand Agustin promised that said lands shall beregistered in the names of the heirs. They did notknow that the intestate proceedings were institutedfor the distribution of the estate of their father.Neither did they have any knowledge that a guardianwas assigned to represent their minor siblings,considering that Modesto and Miguel who wereclaimed to be such were no longer minors at the timeof the partition. They never received their share inthe estate of their father. Plaintiffs later ondiscovered that the property had a Torrens title inthe name of Gregoria and her daughter when

Modestos children had inquired from the Register ofDeeds. Petitioners now bring the present suit for thereconveyance of the subject parcels of land in theirfavor.

Petitioners claim that in effect, Gregoria anddaughter are holding their shares in trust which wasdenied by defendants. Defendants alledge res

judicata and prescription.

LOWER COURT: Dismissed the complaint on thebasis of res judicata as their shares were alreadysettled in the intestate proceedings. No deed of trustwas alledged and proven.

Plaintiffs appealed saying that they were grievouslyprejudiced by the partition and thus res judicatashould not bar their action.

SC:The plaintiffs have not proven any express trustsneither have they specified the kind of implied trustcontemplated in their action. Either way, such actionmay be barred by laches.

In the cadastral proceedings, Jose and wife claimed

the 8 lots of the plaintiffs. After the death of Jose, thesaid lots were adjudicated to his widow anddaughter. In 1932 Gregoria leased the said lots to

Yulo, who in 1934 transferred his lease rights overHacienda Calazato to Bonin and Olmedo, husband ofplaintiff Atanacia. Bonin and Olmedo in 1935 soldtheir lease rights over Hacienda Calaza to Consing.

Those transactions prove that the heirs of Jose hadrepudiated any trust which was supposedlyconstituted over Hacienda Calaza in favor of theplaintiffs.

The period of extinctive prescription is 10 years.Atanacia, Modesto and Manuel, could have broughtthe action to annul the partition. Maria and Emilianowere both born in 1896. They reached the age of 21in 1917 and could have brought the action from thatyear.

The instant action was filed only in 1957. As toAtanacia, Modesto and Manuel, the action was filed43 years after it accrued and, as to Maria andEmiliano, the action was filed 40 years after itaccrued. The delay was inexcusable. The instantaction is unquestionably barred by prescription andres judicata.

It was anomalous that the manifestation shouldrecite that they received their shares from theiradministrator, when in the project of partition it wasindicated that said shares shall be received in cashfrom brothers Jose and Agustin. Thus due to this

irregularities as well as those of the intestateproceedings, the plaintiffs contend that the partitionwas not binding on them (except for Timoteo whoconsidered himself bound by the partition). They askthat the case be remanded to the lower court for thedetermination and adjudication of their rightfulshares.

However, due to the fact that the plaintiffs slept ontheir rights, the courts can no longer afford themrelief

VARSITY HILLS, INC v NAVARRO

Facts: The present action began from a previouscivil case wherein a petition was filed by hereinrespondents Mejia as heirs of Quintin Mejia and byElpidio Tiburcio as assignee of a portion of the estateleft by the latter as plaintiff against petitioners

Tuason et. al. The complaint alleged that QuintinMejia had obtained a Spanish title to the land andthat he and his successors in interest had occupiedthe land without interruption until they were forciblyrejected therefrom and their houses demolished in1934 through a writ of execution. In 1914, thedefendants Tuason had obtained a decree ofregistration covering 35,403 hectares and that theyhad fraudulently and insidiously included plaintiffs



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PARTNERSHIP Digests Atty. Cochingyanland in the area covered by the Certificate of

Transfer by inserting fake and false technicaldescriptions. UP et al. as subsequent acquirerswhose titles are derived from the original fraudulentcertificates should likewise be annulled.

Herein Petitioners contend that the decision in a civilcase wherein the Respondents were declared aswithout title to the land and ejected by a writ ofexecution was affirmed by the Supreme Court. The

Petitioners contend in the present case that thecauses of action averred by the Respondents werebarred by the LRA and the statute of limitations over51 years having elapsed since the decree ofregistration was issued, barred by laches as 32 yearshave elapsed since the ejectment and that the courthad no jurisdiction to review and revise the decree ofregistration. They also maintain as affirmativedefenses that they had in possession for over 30years of the land thus acquiring title by acquisitiveprescription and that claims for ownership wereextinguished by the decree and that they arepurchasers for value and in good faith of the landsstanding in their names. A motion to dismiss wasfiled yet was denied by the lower court. ThePetitioners resorted to the SC for a specialproceeding for writs of certiorari and prohibition thus

the trial court was enjoined from proceeding with thetrial until further orders.

Mejia and Tiburcio claim that appeal in due time wasthe proper remedy.

Issue: Can the present action prosper based onclaims of implied/constructive trust?

SC: The court below gravely abused its discretion indenying petitioners motion to dismiss based on theiraffirmative defenses. The action by Tiburcio andMejias was already barred by res judicata andextinctive prescription. A previous case was decidedwherein Quintin Mejia had been found without titleand thus ejected. The action in the court below was

definitely barred as while the present respondentswere not parties to the cause which Quintin Mejiawas such a party, the final judgment against himconcludes and bars his predecessors and privies aswell. Since the respondents failed to file a petition forreview of the decree within one year after the entrythereof despite claims that there was fraud in theinclusion of their land in the title, they are barred bythe LRA. However if the fraud had been committedafter the issuance of the decree, they should havepleaded when Quintin was made a defendant in CivilCase 4420. Nevertheless, their cause of action isbarred by res judicata. With or without judgmentagainst Quintin, their action had beenextinguished by the lapse of 30 years from thetime he was ejected from the land in question.

An action to recover is also foreclosed by thestatute of limitations. Actions on implied trustsare extinguished by laches or prescription of10 years. Respondents have presented no cause ofaction. The lower court by denying the motion todismiss constituted GADLEJ since they prolonged alitigation that was unmeritorious on its face.

GERONA v DE GUZMAN

Facts: Petitioner Gerona heirs are the legitimatechildren of Domingo Gerona and Placida de Guzman.

Placida was a legitimate daughter of Marcelo deGuzman and his first wife Teodora de la Cruz. Afterthe death of Teodora, Marcelo married CamilaRamos. Their children are herein respondents deGuzman heirs. Marcelo died some time inSeptermber 1945 and respondents executed a deedof extra-judicial settlement of his estate. Theyfraudulently stipulated therein that they were theonly surviving heirs of Marcelo although knowing thatpetitioners were also his forced heirs. They were ableto cause the transfer the certificates of 7 parcels ofland each in their names. The petitioners discoveredthe fraud only the year before the institution of thecase. Petitioners seek to annul the extra-judicialsettlement as well as have their shares in the saidproperties reconveyed to them.

Contentions: Defendants argue that Placida deGuzman was not entitled to share in the estate ofMarcelo as she was an illegitimate child and that theaction of the Petitioners is barred by the statute oflimitations.

Rulings:

TRIAL COURT: The trial court dismissed the caseafter finding that Placida was a legitimate child ofMarcelo and that the properties described hereinbelonged to the conjugal partnership of Marcelo andCamila. It also ruled that Petitioners action hadalready prescribed.

CA: affirmed ruling of the trial court

Contentions: Petitioners assert that since they areco-heirs of Marcelo, the action for partition is notsubject to the statue of limitations; that if affected,the period of 4 years did not begin to run untildiscovery of the fraud. They claim that the frauddone by respondents took place in 1956 or 1957 andthat it had not prescribed when the present actionwas commenced.

SC: The rule holds true only when the defendants donot hold the property in question under an adversetitle. The statute of limitations operates from thetime the adverse title is asserted by the possessor ofthe property.

The defendants excluded the petitioners from theestate of Marcelo when they executed the deed ofextra-judicial settlement claiming that they are thesole heirs thus setting up an adverse title to theestate.

An action for reconveyance of real property basedupon a constructive or implied trust, resulting fromfraud may be barred by the statute of limitations andthe action may only be filed within 4 years from the

discovery of the fraud. In the case at bar, thediscovery was made on June 25, 1948 when the deedwas filed with the Register of Deeds and newcertificates of title were issued in the names of therespondents exclusively. Plaintiffs complaint was notfiled until November 4, 1958 or more than 10 yearsafter.

Ignacio Gerona as well as Maria Concepcion attainedthe age of majortity in 1948 thus had 4 years fromdate of discovery within which to file an action.

Francisco and Delfin attained the age of majority in1952 and 1954, thus had 2 years after removal of



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PARTNERSHIP Digests Atty. Cochingyanlegal incapacity within which to commence theiraction.

CALADIAO v VDA DE BLAS

FACTS: Prudencio Limpin sold, ceded, and transferredto Simeon Blas an unregistered fishpond for theP4440 with the right to repurchase the property

within one year from Sept. 30, 1932 and with theexpress stipulation that the sale would automaticallybecome absolute and irrevocable if no repurchasewas made within the agreed period. Maxima Santos,(Blas wife) took over upon the death of Blas andpaid taxes until 1955. The fishpond together with theother properties was adjudicated to her by the courtin an estate proceeding. Despite such, Limpinobtained a judicial registration of the fishpond infavor of his conjugal partnership with Caladiao andsecured a new title in their names. A TCT was issuedin the name of Caladiao when Limpin died. Unawareof such, Santos Vda de Blas applied for theregistration of the fishpond which was adjudicated toher as it was proven that Limpin sold the property toBlas and had failed to repurchase the same. While

this registration case was pending, Caladiao filed acomplaint for the return of the fishpond and theannulment of the sale a retro executed by Limpin.

This was however, dismissed. The court ordered anissuance of decree in favor of Vda de Blas butsubsequently dismissed the proceedings in findingthat the said fishpond was registered previously infavor of Limpin. Rosalina Santos substituted Maximaupon death.

CFI: in favor of Santos, ordered reconveyance andwas awarded P3000.

CA: affirmed.

Defendants claim that the action for reconveyancehad prescribed as it was filed more than 20 yearssince Limpin had acquired a CTC in their name overthe fishpond.

SC: The existence of a decree of registration in favorof one party is no bar to an action to compelreconveyance of the property to the true owner,which is an action in personam, even if such actionbe instituted after the year fixed by Section 38 of theLRA as a limit to the review of the registrationdecree, provided it is shown that the registration iswrongful and the property sought to be reconveyedhas not passed to an innocent third party holder forvalue.

Limpin obtained the decree of registrationfraudulently and in utter bad faith thus he and his

heirs may be compelled to reconvey it to the trueowner. The registration of the property did not annulthe conveyance in favor of Blas and after theregistration, the Limpins held the property in trust forthe true owners.

The application for registration was in bad faith, withthe result that the certificate of title issued to Limpinin 1934 was in law issued to and held by him inbehalf and in trust for the benefit of Blas. Under theold code of civil procedure, prescription does notapply to continuing and subsisting trusts; so thatactions against a trustee to recover trust propertyheld by him are imprescriptible. Actions for the

reconveyance of property wrongfully registered areof this category.

The possession of the property has been with Blasand his successors since the sale thus, their actioncannot be deemed extinguished by prescription asunder the old civil procedure, an action by thevendee of real property in possession thereof toobtain the conveyance of it is not subject toprescription.

DIAZ, ET.AL. VS. GORRICHO AND AGUADO

Facts: Spouses Francisco Diaz and Maria Sevillaowned two parcels of lots (Lots Nos. 1941 and 3073)in Cabanatuan. Sometime later, Francisco died, andthe properties were left in the hands of her wife andthree children.

Sometime in 1935, the appellee Carmen Gorrichofiled an action against Maria Sevilla and inconnection therewith, a writ of attachment wasissued upon the shares of the latter in the twoparcels of land. Since Maria Sevilla failed to redeem

it within one year, a final deed of sale in favor ofCarmen Gorricho was issued. In the said deed,however, the sheriff conveyed to Gorricho the wholeof the two parcels instead of only the half-interest ofMaria Sevilla therein. Pursuant to the said deed,Carmen Gorricho obtained the titles of the twoparcels of land in her name in the year 1937, and hasbeen possessing the said lands as owner ever since.

In 1952, the children of Maria Sevilla (who died ayear before) filed an action against the respondentsto compel the latter to execute in their favor a deedof reconveyance over an undivided one-half interestof the lots in question, which the respondents wereallegedly holding in trust for them. The respondentsraised the defense that the petitioners action haslong prescribed.

Issue: Do implied trust prescribe or may they bedefeated by laches?

Ruling of the CFI of Nueva Ecija: While aconstructive trust in plaintiffs favor arose whenGorricho took advantage of the error of the provincialyepquestion and obtained title in herself, the actionof the plaintiff was, however, barred by laches andprescription.

Petitioners: The disputed property was acquired byGorricho through an error of the provincial sheriff;that having been acquired through error, it wassubject to an implied trust, as provided by Article1456 of the New Civil Code; and therefore, since the

trust is continuing and subsisting, the appellants maycompel reconveyance of the property despite thelapse of time, specially because prescription does notrun against titles registered under Article 496.

Held: The petitioners are in error in believing thatlike express trusts, such constructive trusts may notbe barred by lapse of time. The American law ontrusts has always maintained a distinction betweenexpress trusts created by intention of parties, andthe implied/constructive trusts that are exclusivelycreated by law, the later not being trusts in theirtechnical sense. The express trusts disable thetrustee from acquiring for his own benefit the



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PARTNERSHIP Digests Atty. Cochingyanproperty committed to his management orcustody, at least while he does not openlyrepudiate the trust, and makes suchrepudiation known to the beneficiary or cestuique trust.

Also, in express trusts, the delay of thebeneficiary is directly attributable to thetrustee who undertakes to hold the propertyfor the former, or who is linked to the

beneficiary by confidential or fiduciaryrelations. The trustees possession is, therefore,not adverse to the beneficiary, until and unless thelatter is made aware that the trust has beenrepudiated.

But in constructive trusts, there is neither promisenor fiduciary relation. The so-called trustee doesnot recognize any trust and has no intent tohold for the beneficiary; therefore, the latter isnot justified in delaying action to recover hisproperty. It is his fault if he delays; hence, hemay be estopped by his own laches.

Thus, the judgment of dismissal (of the CFI) shouldbe upheld, because the petitioners cause of actionto attack the deed and cancel the transfercertificates of title issued to the respondents accruedfrom the year of issuance and recording, 1937, andthe petitioners have allowed 15 years to elapsebefore taking remedial action in 1952. Under the oldCode of Civil Procedure, in force at the time, thelongest period of extinctive prescription was only 10years.

EVANGELISTA, ET. AL. VS. COLLECTOR OFINTERNAL REVENUE, ET. AL.

Facts: The petitioners borrowed from their fatherPhP59,140.00 which amount together with theirpersonal monies was used by them for the purposeof buying and selling real properties. From 1943 to1944, they bought 24 parcels of land (including theimprovements thereon) on four different occasions.In 1945, they appointed their brother Simeon tomanage their properties with full power to lease; tocollect and receive rents; to issue receipts therefore;in default of such payment, to bring suits against thedefaulting tenant; and to endorse and deposit allnotes and checks for them. In 1948, their net rentalincome amounted to PhP12,615.35.

On September 1954, the respondent Collector ofInternal Revenue demanded the payment of (1)income tax on corporations, (2) real estate dealersfixed tax, and (3) corporation residence tax for theyears 1945-1949, computed according to the

assessments made on their properties.

Because of this, the petitioners filed a case againstthe respondents in the Court of Tax Appeals, prayingthat the decision of the respondent contained in itsletter of demand be reversed and that they beabsolved from the payment of the taxes in question.

Issue: Whether the petitioners are subject to thetax on corporations, real estate dealers fixed tax,and corporation residence tax.

Court of Tax Appeals: The petitioners are liable.(No explanation for such in the case)

Petitioners: They are mere co-owners, not co-partners, for, in consequence of the acts performedby them, a legal entity, with a personalityindependent of that of its members, did not comeinto existence, and some of the characteristics ofpartnerships are lacking in the case at bar.

Held: The petitioners are liable to pay the tax oncorporations provided for in Sec. 24 of theCommonwealth Act No. 466, otherwise known as the

National Internal Revenue Code. According to Sec.84 of the same statute, the term corporationincludes partnerships, no matter how created ororganized, joint-stock companies, joint accounts,associations or insurance companies, but does notinclude duly registered general co-partnerships.

Also, Article 1767 of the Civil Code provides:By the contract of partnership, two or more personsbind themselves to contribute money, property, orindustry to a common fund, with the intention ofdividing the profits among themselves. Pursuant tothis article, the essential elements of apartnership are two, namely: (1) an agreement tocontribute money, property or industry to a commonfund; and (2) intent to divide the profits among thecontracting parties. The first element is undoubtedly

present in the case at bar, for, admittedly, thepetitioners have agreed to, and did, contributemoney and property to a common fund. Also, it canbe said that their purpose was to engage in realestate transactions for monetary gain and thendivide the same among themselves because: (1)they created the common fund purposely; (2) theyinvested the same, not merely in one transaction,but in a series of transactions; (3) the parcels of landthat they bought were not devoted to residentialpurposes, or to other personal uses of the petitionersbut were leased separately to several persons; (4)the properties have been under the management ofone person, namely Simeon Evangelista, making theaffairs relative to the said properties appear to havebeen handled as if the same belonged to a

corporation or business enterprise operated forprofit; and (5) the petitioners have not testified orintroduced any evidence, either on their purpose increating the set up already adverted to, or on thecauses for its continued existence.

Hence, the petitioners herein constitute apartnership, and in so far as the National InternalRevenue Code is concerned, they are subject to theincome tax for corporations.

I. As regards to the residence tax forcorporations provided Sec. 2 ofCommonwealth Act No. 4651, the termscorporation and partnership are used inboth statutes with substantially the same

meaning. Consequently, petitioners aresubject, also, to the residence tax forcorporations.

1 Entities liable to residence taxEverycorporation, no matter how created ororganized, whether domestic or residentforeign, engaged in or doing business in thePhilippines shall pay an annual residence tax offive pesos and an annual additional tax, whichin no case, shall exceed one thousand pesos,in accordance with the following schedule: * * *



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PARTNERSHIP Digests Atty. CochingyanII. Lastly, the records show that the petitioners

have habitually engaged in leasing theproperties for a period of 12 years, and thatthe yearly gross rentals of the saidproperties from 1945 to 1948 ranged fromPhP9,599.00 to PhP 17,453.00. Thus, theyare subject to the tax provided in Section193 (q) of our National Internal RevenueCode, for real estate dealers, inasmuchas, pursuant to Section 194 (s) thereof:

Real estate dealers include any person engagedin the business of buying, selling, exchanging,leasing, or renting property of his own account asprincipal and holding himself out as full ro part-timedealer in real estate or as an owner of rentalproperty or properties rented or offered to rent for anaggregate amount of three thousand pesos or morea year. * * *

YULO V. YANG CHIAO SENG

Facts:Yang Chiao Seng proposed to form apartnership with Rosario Yulo to run and operate a

theatre on the premises occupied by Cine Oro, PlazaSta. Cruz, Manila, the principal conditions of the offerbeing (1) Yang guarantees Yulo a monthlyparticipation of P3,000 (2) partnership shall be for aperiod of 2 years and 6 months with the conditionthat if the land is expropriated, renderedimpracticable for business, owner constructs apermanent building, then Yulos right to lease andpartnership even if period agreed upon has not yetexpired; (3) Yulo is authorized to personally conductbusiness in the lobby of the building; and (4) afterDec 31, 1947, all improvements placed bypartnership shall belong to Yulo but if partnership isterminated before lapse of 1 and years, Yang shallhave right to remove improvements. Partiesestablished, Yang and Co. Ltd., to exist from July 1,1945 Dec 31, 1947.

In June 1946, they executed a supplementaryagreement extending the partnership for 3 yearsbeginning Jan 1, 1948 to Dec 31, 1950.

The land on which the theater was constructed wasleased by Yulo from owners, Emilia Carrion and MariaCarrion Santa Marina for an indefinite period but thatafter 1 year, such lease may be cancelled by eitherparty upon 90-day notice. In Apr 1949, the ownersnotified Yulo of their desire to cancel the leasecontract come July. Yulo and husband brought a civilaction to declare the lease for a indefinite period.Owners brought their own civil action for ejectmentupon Yulo and Yang.

CFI: Two cases were heard jointly; Complaint of Yuloand Yang dismissed declaring contract of leaseterminated.

CA: Affirmed the judgment.

In 1950, Yulo demanded from Yang her share in theprofits of the business. Yang answered saying he hadto suspend payment because of pending ejectmentsuit.

Yulo filed present action in 1954, alleging theexistence of a partnership between them and that

Yang has refused to pay her shares.

Defendants Position: The real agreementbetween plaintiff and defendant was one of lease andnot of partnership; that the partnership was adoptedas a subterfuge to get around the prohibitioncontained in the contract of lease between theowners and the plaintiff against the sublease of theproperty.

Trial Court: Dismissal. It is not true that apartnership was created between them because

defendant has not actually contributed the summentioned in the Articles of Partnership or any otheramount. The agreement is a lease because plaintiffdidnt share either in the profits or in the losses ofthe business as required by Art 1769 (CC) andbecause plaintiff was granted a guaranteedparticipation in the profits belies the supposedexistence of a partnership.

Issue: Was the agreement a contract a lease or apartnership?

Ruling: Dismissal. The agreement was a sublease nota partnership. The following are the requisites ofpartnership:(1) two or more persons who bindthemselves to contribute money, property orindustry to a common fund; (2) the intention onthe part of the partners to divide the profits amongthemselves (Article 1761, CC)

Plaintiff did not furnish the supposed P20,000 capitalnor did she furnish any help or intervention in themanagement of the theatre. Neither has shedemanded from defendant any accounting of theexpenses and earnings of the business. She wasabsolutely silent with respect to any of the acts thata partner should have done; all she did was toreceive her share of P3,000 a month which cannot beinterpreted in any manner than a payment for theuse of premises which she had leased from theowners.

ESTANISLAO, JR. VS. COURT OF APPEALS

Facts: The petitioner and private respondents arebrothers and sisters who are co-owners of certainlots at the in Quezon City which were then beingleased to SHELL. They agreed to open and operate agas station thereat to be known as Estanislao ShellService Station with an initial investment ofPhP15,000.00 to be taken from the advance rentalsdue to them from SHELL for the occupancy of thesaid lots owned in common by them. A joint affidavitwas executed by them on April 11, 1966. Therespondents agreed to help their brother, petitionertherein, by allowing him to operate and manage thegasoline service station of the family. In order not to

run counter to the companys policy of appointingonly one dealer, it was agreed that petitioner wouldapply for the dealership. Respondent Remedioshelped in co-managing the business with petitionerfrom May 1966 up to February 1967.

On May 1966, the parties entered into an AdditionalCash Pledge Agreement with SHELL wherein it wasreiterated that the P15,000.00 advance rental shallbe deposited with SHELL to cover advances of fuel topetitioner as dealer with a proviso that saidagreement cancels and supersedes the JointAffidavit.



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PARTNERSHIP Digests Atty. CochingyanFor sometime, the petitioner submitted financialstatement regarding the operation of the business tothe private respondents, but thereafter petitionerfailed to render subsequent accounting. Hence , theprivate respondents filed a complaint against thepetitioner praying among others that the latter beordered:

(1) To execute a public document embodyingall the provisions of the partnership

agreement they entered into;

(2) To render a formal accounting of thebusiness operation veering the period fromMay 6, 1966 up to December 21, 1968, andfrom January 1, 1969 up to the time theorder is issued and that the same be subjectto proper audit;

(3) To pay the plaintiffs their lawful shares andparticipation in the net profits of thebusiness; and

(4) To pay the plaintiffs attorneys fees andcosts of the suit.

Issue: Can a partnership exist between members ofthe same family arising from their joint ownership ofcertain properties?

Trial Court:The complaint (of the respondents) wasdismissed. But upon a motion for reconsideration ofthe decision, another decision was rendered in favorof the respondents.

CA: Affirmed in toto

Petitioner: The CA erred in interpreting the legalimport of the Joint Affidavit vis--vis the AdditionalCash Pledge Agreement. Because of the stipulationcancelling and superseding the Joint Affidavit,whatever partnership agreement there was in saidprevious agreement had thereby been abrogated.

Also, the CA erred in declaring that a partnership wasestablished by and among the petitioner and theprivate respondents as regards the ownership and /oroperation of the gasoline service station business.

Held:There is no merit in the petitioners contentionthat because of the stipulation cancelling andsuperseding the previous joint affidavit, whateverpartnership agreement there was in said previousagreement had thereby been abrogated. Saidcancelling provision was necessary for the JointAffidavit speaks of P15,000.00 advance rentalstarting May 25, 1966 while the latter agreementalso refers to advance rentals of the same amountstarting May 24, 1966. There is therefore aduplication of reference to the P15,000.00 hence the

need to provide in the subsequent document that itcancels and supercedes the previous none.Indeed, it is true that the latter document is silent asto the statement in the Join Affidavit that the valuerepresents the capital investment of the parties inthe business and it speaks of the petitioner as thesole dealer, but this is as it should be for in the latterdocument, SHELL was a signatory and it would beagainst their policy if in the agreement it should bestated that the business is a partnership with privaterespondents and not a sole proprietorship of thepetitioner.

Furthermore, there are other evidences in the recordwhich show that there was in fact such partnershipagreement between parties. The petitionersubmitted to the private respondents periodicaccounting of the business and gave a writtenauthority to the private respondent RemediosEstanislao to examine and audit the books of theircommon business (aming negosyo). Therespondent Remedios, on the other hand, assisted inthe running of the business. Indeed, the partieshereto formed a partnership when they boundthemselves to contribute money in a common fundwith the intention of dividing the profits amongthemselves.

IN THE MATTER OF THE PETITION FORAUTHORITY TO CONTINUE USE OF THE FIRM

NAME OZAETA, ROMULO, ETC.

Facts: Two petitions were filed, one by the survivingpartners of Atty. Herminio Ozaeta and the other bythe surviving partners of Atty. Alexander Sycip

praying that they be allowed to continue using thenames of partners who had passed away in their firmnames. Both petitions were consolidated.

Petitioners Arguments:

Under the law, a partnership is not prohibitedfrom continuing its business under a firm namewhich includes the name of a deceasedpartner. In fact, art. 1840 of the civil codeexplicitly sanctions the practice.

In regulating other professions, such asaccountancy and engineering, the legislaturehas authorized the adoption of firm nameswithout any restriction as to the use, in suchfirm name, of the name of the deceasedpartner, the legislative authorization given tothose engaged in the practice of accountancy a profession requiring the same degree of trustand confidence in respect of clients as thatimplicit in the relationship of attorney andclient to acquire and use a trade name,strongly indicates that there us no fundamentalpolicy that is offended by the continued use bya firm of professionals of a firm name whichincluded the name of a deceased partner, atleast where such firm name has acquired thecharacteristics of a trade name

The Canon of Professional Ethics are nottransgressed by the continued use of the nameof a deceased partner in the firm name of a lawpartnership as declared by Canon 33 adoptedby American Bar Association declaring that

The continued use of the name of a deceasedor former partner when permissible by localcustom, is not unethical, but care should betaken that no imposition or deception ispracticed through this use.

There is no possibility of imposition ordeception because the deaths of theirrespective deceased partners were well publicized in all newspapers of generalcirculation for several days.

No local custom prohibits the continued use ofa deceased partners name in a professionalfirm name; and



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PARTNERSHIP Digests Atty. Cochingyan The continued use of a deceased partners

name in the firm name of law partnerships hasbeen consistently allowed by U.S. Courts and isan accepted practice in legal profession ofmost countries in the world.

Issue: Whether or not a firm name engaged in thelegal profession should continue using the name ofpartners who had passed away.

SC ruling: No.

The use in partnership names of the names ofdeceased partners will run counter to Article1825 of the CC which provides that names in afirm name of a partnership must either be thoseof living partners and, in the case of non partners, should be living persons who can besubjected to liability. In fact, art. 1825 prohibitsa third person from including his name in thefirm name under pain of assuming the liability ofa partner. The heirs of a deceased partner in alaw firm cannot be held liable as the oldmembers to the creditors of a firm particularlywhere they are non-lawyers. With regard to art.1840, it treats more of a commercial partnershipwith a good will to protect rather than aprofessional partnership, with no saleable goodwill but whose reputation depends on thepersonal qualifications of its individual members.

Thus, it has been held that a saleable goodwillcan exist only in a commercial partnership andcannot arise in a professional partnershipconsisting of lawyers.

A partnership for the practice of law cannot belikened to partnerships formed by otherprofessionals or for business. For one thing, thelaw on accountancy specifically allows the use ofa trade name in connection with the practice ofaccountancy. A partnership for the practice oflaw is not a legal entity. It is a mere relationshipor association for a particular purpose. It is not a

partnership formed for the purpose of carrying ina trade or business or of holding property. Thus,it has been stated that the used of an assumedor trade name in law practice is improper.

The right to practice law is not a natural orconstitutional right but is in the nature of aprivilege or franchise. It is limited to persons ofgood moral character with special qualificationsduly ascertained and certified. The right doesnot only presuppose in its possessor integrity,legal standing and attainment but also theexercise of a special privilege, highly personaland partaking of the nature of a public trust.

The continued use of a deceased or formerpartners name in the firm names of lawpartnerships not sanctioned by local custom due

to the possibility of deception upon the publicwhere the name of a deceased partner continuesto be used. The possibility of deception upon thepublic, real or consequential, where the name ofa deceased partner continues to be used cannotbe ruled out. A person in search of legal counselmight be guided by the familiar ring of adistinguished name appearing in a firm title. Inaddition, theres no local custom within our

jurisdiction that sanctions the practice ofcontinued use of a deceased partners name.Courts take no judicial notice of custom. A localcustom as a source of right cannot beconsidered by a court of justice unless such

custom is properly established by competentevidence like any other fact. Merely becausesomething is done as a matter of practice doesnot mean that Courts can rely on the same forpurposes of adjudication as a juridical custom.

Juridical custom must be differentiated fromsocial custom. The former can supplementstatutory law or be applied in the absence ofsuch statute. Not so with the latter.

BASTIDA VS. MENZI CO.

Facts: Menzi Co. was organized in 1921 for thepurpose of importing and selling generalmerchandise, including fertilizers and fertilizeringredients. Sometime in November of that year, theplaintiff, who had had some experience in mixing andselling fertilizer, went to see Toehl, the manager ofthe sundries department of Menzi & Co. (throughwhich the fertilizer business was carried out) and toldhim that he had a written contract with the PhilippineSugar Centrals Agency for 1,250 tons of mixedfertilizers, and that he could obtain other contracts,including one from Calamba Sugar Estates for 450tons, but that he did not have the money to buy theingredients to fill the order and carry on thebusiness. He offered to assign to Menzi & Co. hiscontract with Phil Sugar Centrals Agency and tosupervise the mixing of the fertilizer and to obtainother orders for 50 % of the net profit that Menzi &Co., Inc., might derive therefrom. J. M. Menzi (gen.manager of Menzi & Co.) accepted the offer. Theagreement between the parties was verbal and wasconfirmed by the letter of Menzi to the plaintiff on

January 10, 1922.

Menzi & Co. continued to carry on its fertilizerbusiness under this arrangement with the plaintiff. Itordered ingredients from the US and other countries,and the interest on the drafts for the purchase ofthese materials was charged to the business as apart of the cost of the materials. The mixed

fertilizers were sold by Menzi & Co. between January19 and April 1, 1922 under its Corona brand.

Pursuant to the verbal agreement, the defendantcorporation on April 27, 1922 entered into a writtencontract with the plaintiff, marked Exhibit A, which isthe basis of the present action. Still, the fertilizerbusiness as carried on in the same manner as it wasprior to the written contract, but the net profit thatthe plaintiff herein shall get would only be 35%. Theintervention of the plaintiff was limited to supervisingthe mixing of the fertilizers in the bodegas of Menzi.

The trademarks used in the sale of the fertilizer wereregistered in the Bureau of Commerce & Industry inthe name of Menzi & Co., Inc. and the fees were paidby that company.

Prior to the expiration of the contract (April 27,1927), the manager of Menzi notified the plaintiffthat the contract for his services would not berenewed. Subsequently, when the contract expired,Menzi proceeded to liquidate the fertilizer business inquestion. The plaintiff refused to agree to this. Itargued, among others, that the written contractentered into by the parties is a contract of generalregular commercial partnership, wherein Menzi wasthe capitalist and the plaintiff the industrial partner.

Issue: Is the relationship between the petitioner andMenzi that of partners?



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PARTNERSHIP Digests Atty. CochingyanHeld:The relationship established between theparties was not that of partners, but that of employerand employee, whereby the plaintiff was to receive35% of the net profits of the fertilizer business ofMenzi in compensation for his services forsupervising the mixing of the fertilizers. Neither theprovisions of the contract nor the conduct of theparties prior or subsequent to its execution justifiedthe finding that it was a contract of co-partnership.

The written contract was, in fact, a continuation ofthe verbal agreement between the parties, wherebythe plaintiff worked for the defendant corporation forone-half of the net profits derived by the corporationform certain fertilizer contracts.

According to Art. 116 of the Code of Commerce,articles of association by which two or more personsobligate themselves to place in a common fund anyproperty, industry, or any of these things, in order toobtain profit, shall be commercial, no matter what itclass may be, provided it has been established inaccordance with the provisions of the Code.However in this case, there was no common fund.

The business belonged to Menzi & Co. The plaintiffwas working for Menzi, and instead of receiving afixed salary, he was to receive 35% of the net profitsas compensation for his services. The phrase in the

written contract en sociedad con, which is used asa basis of the plaintiff to prove partnership in thiscase, merely means en reunion con or inassociation with.

It is also important to note that although Menziagreed to furnish the necessary financial aid for thefertilizer business, it did not obligate itself tocontribute any fixed sum as capital or to defray at itsown expense the cost of securing the necessarycredit.

OA VS. COMMSSIONER OF INTERNAL REVENUE

Facts: Lorenzo Oa and his five children are thesurviving heirs of Julia Buales. Lorenzo, thesurviving spouse was appointed administrator of

Julias estate. He submitted the project of partitionwhich was approved by the court and since 3 of the 5children were still minors, he was appointed by thecourt as guardian of said minors. Despite theapproval of the project of partition, no attempt wasmade to divide the properties therein listed andremained under the management of Lorenzo whoused said properties in business by leasing or sellingthem and investing the income derived therefromand proceeds form the sales thereof in realproperties and securities. Respondent CIR decidedthat petitioners formed an unregistered partnershipand therefore subject to corporate tax pursuant to

Sec. 24 of the Tax Code. Accordingly he assessedagainst the petitioners the amounts of P8,092.00 andP13.899.00 as corporate income taxes for 1955 and1956 respectively. Petitioners protested against theassessment and asked for reconsideration which wasdenied.

Petitioners Argument: Petitioners are consideredas co owners of the properties inherited by themfrom the deceased Julia Buales and the profitsderived from transactions involving the same, theycannot be considered as an unregistered partnershipand cannot be subject to corporate tax.

Issue: W/N petitioners are deemed to have formedan unregistered partnership subject to tax undersections 24 and 84(b) of the National InternalRevenue code.

Ruling: YES

For tax purposes, the co ownership ofinherited properties is automatically convertedinto unregistered partnership the moment the

said common properties and/or incomesderived therefrom are use as a common fundwith the intent to produce profits for the heirsin proportion to their respective shares in theinheritance as determined in a projectpartition. This is because from the moment ofsuch partition, the heirs are entitled already totheir respective definite shares of estate andthe incomes thereof, for each of them tomanage and dispose of as exclusively his ownwithout the intervention of the other heirs andaccordingly he becomes liable individually forall taxes in connection therewith. If after suchpartition, he allows his share to be held incommon with his co heirs under a singlemanagement to be used with the intent ofmaking profit thereby in proportion to hisshare, there can be no doubt that even if nodocument or instrument were executed for thepurpose, for tax purposes at least, anunregistered partnership is formed.

The income derived from inherited propertiesmay be considered as individual income of therespective heirs only so long as the inheritanceor estate is not distributed or, at least,partitioned, but the moment their respectiveknow shares are used as part of the commonassets of the heirs to be used in making profits,it is but proper that the income of such sharesshould be considered as part of the taxableincome of an unregistered partnership.

For purposes of the tax on

33685015 Partnership and Agency Digests for Atty Cochingyan

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