BUSORG Additional Cases

8/13/2019 BUSORG Additional Cases

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15.G.R. No. L-49982 April 27, 1988

ELIGIO ESTANISLAO, JR., petitioner, vs.THE HONORABLECOURT OF AEALS, RE!E"IOS ESTANISLAO, E!ILIO#$% LEOCA"IO SANTIAGO, respondents.

GANCA&CO,J.:

By this petition for certiorari the Court is asked to determineif a partnership exists between members of the same familyarising from their joint ownership of certain properties.

etitioner and private respondents are brothers and sisterswho are co!owners of certain lots at the corner of "nnapolis

and "urora Blvd., #ue$onCity which were then being leasedto the %hell Company of the hilippines &imited '%()&&*.+hey agreed to open and operate a gas station thereat to beknown as )stanislao %hell %ervice %tation with an initialinvestment of 15,. to be taken from the advancerentals due to them from %()&& for the occupancy of thesaid lots owned in common by them. " joint affidavit wasexecuted by them on "pril 11, 1- which was preparedby"tty. /emocrito "ngeles 1 +hey agreed to help theirbrother, petitioner herein, by allowing him to operate andmanage the gasoline service station of the family. +heynegotiated with %()&&. 0or practical purposes and in order

not to run counter to the companys policy of appointingonly one dealer, it was agreed that petitioner would applyfor the dealership. 2espondent 2emedios helped inmanaging the bussiness with petitioner from 3ay 4, 1- upto 0ebruary 1, 1-.

6n 3ay 7, 1-, the parties herein entered into an"dditional Cash ledge "greement with %()&& wherein itwas reiterated that the 15,. advance rental shall be

deposited with %()&& to cover advances of fuel to petitioneras dealer with a proviso that said agreement 8cancels andsupersedes the 9oint "ffidavit dated 11 "pril 1- executedby the co!owners.8 2

0or sometime, the petitioner submitted financial statementsregarding the operation of the business to privaterespondents, but therafter petitioner failed to rendersubse:uent accounting. (ence through "tty. "ngeles, ademand was made on petitioner to render an accounting ofthe profits.

+he financial report of /ecember 41, 1-; shows that thebusiness was able to make a profit of ;,7-4.- and thatby the year ending 1--, a profit of 15,. was

reali$ed.'

+hus, on "ugust 75, 1- private respondents filed acomplaint in the Court of 0irst


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entire duration of the business? and

A. to pay the plaintiffs the amount of 1,. asattorneys fees and costs of the suit 'pp. 14!1A 2ecord on"ppeal.*

"fter trial on the merits, on 6ctober 15, 1-5, (on. &ino"nover who was then the temporary presiding judge ofBranch ovember 7;,1-; affirming in totothedecision of the lower court with costs against petitioner. D

" motion for reconsideration of said decision filed bypetitioner was denied on 9anuary 4, 1--. >ot satisfiedtherewith, the petitioner now comes to this court by way ofthis petition for certiorari alleging that the respondent courterred=

1.


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'a* +he joint "ffidavit of "pril 11, 1-, )xhibit " reads=

'1* +hat we are the &essors of two parcels of land fullydescribe in +ransfer Certificates of +itle >os. A51 and17AA of the 2egister of /eeds of #ue$on City, in favor ofthe &)%%)) ! %()&& C63">E 60 +() (E 60 +() (/ )%6% 'l,.* from he %()&& C63">E 60 +() (+% %"E)+( >6+.,

'b* +he "dditional Cash ledge "greement of 3ay 7,1-,)xhibit , is as follows=

()2)"%, under the lease "greement dated 14th>ovember, 1-4 'identified as doc. >os. A-1 G 1A, age>os. -- G , Book >os. G )2% and another &ease "greement dated

1-th 3arch 1-A . . . also executed in favour of %()&& byC6!6>)2% 2emedios and 3"2/ +(2))(F>/2)/ ))2 )ligio )stanislao 9r. is the /ealer ofthe %hell %tation constructed on the leased land, and as/ealer under the Cash ledge "greement dated llth 3ay1-, he deposited to %()&& in cash the amount of )%6%

+)> +(6F%">/ ' 1,*, hilippine Currency, to securehis purchase on credit of %hell petroleum products? . . .

()2)"%, said /)"&)2, in his desire, to be granted anincreased the limit up to 75,, has secured theconformity of his C6!6>)2% to waive and assign to %()&&the total monthly rentals due to all of them to accumulatethe e:uivalent amount of 15,, commencing 7Ath 3ay1-, this 15, shall be treated as additional cash


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deposit to %()&& under the same terms and conditions ofthe aforementioned Cash ledge "greement dated llth 3ay1-.

>6, +()2)062), for and in consideration of the foregoingpremises,and the mutual covenants among the C6!6>)2%herein and %()&&, said parties have agreed and herebyagree as follows=

l. +he C6!6>)2% dohere by waive in favor of /)"&)2 themonthly rentals due to all C6!6>)2%, collectively, underthe above describe two &ease "greements, one dated 14th>ovember 1-4 and the other dated 1-th 3arch 1-A toenable /)"&)2 to increase his existing cash deposit to%()&&, from 1, to 75,, for such purpose, the

%()&& C6!6>)2% and /)"&)2 hereby irrevocably assignto %()&& the monthly rental of 4,4;7.7- payable to themrespectively as they fall due, monthly, commencing 7Ath3ay 1-, until such time that the monthly rentalsaccumulated, shall be e:ual to l5,.

7. +he above stated monthly rentals accumulated shall betreated as additional cash deposit by /)"&)2 to %()&&,thereby in increasing his credit limit from 1, to 75,. This agreement, therefore, cancels and supersedesthe Joint affidavit dated 11 April 1966 executed by the COO!"#$%&

4. )ffective upon the signing of this agreement, %()&&agrees to allow /)"&)2 to purchase from %()&& petroleumproducts, on credit, up to the amount of 75,.

A. +his increase in the credit shall also be subject to thesame terms and conditions of the above!mentioned Cashledge "greement dated llth 3ay 1-. ')xhs. 8B!7,8 8&,8and 88? emphasis supplied*


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document %()&& was a signatory and it would be against itspolicy if in the agreement it should be stated that thebusiness is a partnership with private respondents and not asole proprietorship of petitioner.

3oreover other evidence in the record shows that there wasin fact such partnership agreement between the parties.+his is attested by the testimonies of private respondent2emedies )stanislao and "tty. "ngeles. etitioner submittedto private respondents periodic accounting of the business. 4

etitioner gave a written authority to private respondent2emedies )stanislao, his sister, to examine and audit thebooks of their 8common business aming negosyo*. (

2espondent 2emedios assisted in the running of thebusiness. +here is no doubt that the parties hereto formed apartnership when they bound themselves to contributemoney to a common fund with the intention of dividing theprofits among themselves. ) +he sole dealership by thepetitioner and the issuance of all government permits andlicenses in the name of petitioner was in compliance withthe afore!stated policy of %()&& and the understanding ofthe parties of having only one dealer of the %()&& products.

0urther, the findings of facts of the respondent court areconclusive in this proceeding, and its conclusion based onthe said facts are in accordancewith the applicable law.

()2)062), the judgment appealed from is "00


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(undred '7,7.* 6>&E, to be paid on or before/ecember 75, 1-5. '%gd* >obio %ardane. )xhibit I and (are both vales involving the same amount of one hundredpesos, and dated "ugust 75, 1-7 and %eptember 17, 1-7

respectively.


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prove his side of the case, that is, the said amount taken byhim from appellee is or was not his personal debt toappellee, but expenses of the partnership between him andappellee.8

Conse:uently, said trial court concluded that the promissorynotes involved were merely receipts for the contributions tosaid partnership and, therefore, upheld the claim that therewas ambiguity in the promissory notes, hence parolevidence was allowable to vary or contradict the terms ofthe represented loan contract.

+he parol evidence rule in 2ule 14 provides=

%ec. . #vidence of 'ritten agreements.Khen the terms of

an agreement have been reduced to writing, it is to beconsidered as containing all such terms, and, therefore,there can be, between the parties and their successors ininterest, no evidence of the terms of the agreement otherthan the contents of the writing except in the followingcases=

'a* here a mistake or imperfection of the writing or itsfailure to express the the true intent and agreement of theparties, or the validity of the agreement is put in issue bythe pleadings?

'b* hen there is an intrinsic ambiguity in the writing.

"s correctly pointed out by the respondent Court theexceptions to the rule do not apply in this case as there isno ambiguity in the writings in :uestion, thus=


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+he Court of "ppeals held, and e agree, that even ifevidence aliundeother than the promissory notes may beadmitted to alter the meaning conveyed thereby, still theevidence is insufficient to prove that a partnership existed

between the private parties hereto.

"s manager of thebasnig %arcado naturally some degree ofcontrol over the operations and maintenance thereof had tobe exercised by herein petitioner. +he fact that he hadreceived 5@ of the net profits does not conclusivelyestablish that he was a partner of the private respondentherein. "rticle 1-'A* of the Civil Code is explicit that whilethe receipt by a person of a share of the profits of abusiness isprima facieevidence that he is a partner in thebusiness, no such inference shall be drawn if such profitswere received in payment as wages of an employee.0urthermore, herein petitioner had no voice in themanagement of the affairs of the basnig. Fnder similarfacts, this Court in the early case of /ortis vs& 0utierre2ermanos, (in denying the claim of the plaintiff therein thathe was a partner in the business of the defendant, declared=

+his contention cannot be sustained. orth Jamboanga+imber Co.,


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instrument or when compliance with an order for theinspection of the original instrument is refused.

+he record shows that herein petitioner did not deny underoath in his answer the authenticity and due execution of thepromissory notes which had been duly pleaded andattached to the complaint, thereby admitting theirgenuineness and due execution. )ven in the trial court, hedid not at all :uestion the fact that he signed saidpromissory notes and that the same were genuine.


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under the law then in force. (e raises the same point in hispresent appeal and e will waive the proceduraltechnicalities in order to put this issue at rest.

arenthetically, in that same motion for reconsideration hehad sought affirmative relief from the respondent Courtpraying that it sustain the decision of the trial Court, therebyinvoking and submitting to its jurisdiction which he wouldnow assail. 0urthermore, the objection that he raises isactually not one of jurisdiction but of procedure. 9

"t any rate, it will be noted that petitioner anchors his saidobjection on the provisions of %ection 7-, 2epublic "ct 7-as amended by 2epublic "ct 5A44 effective %eptember -,1-;. %ubse:uently, the procedure for appeal to the Court

of "ppeals from decisions of the then courts of first instancein the exercise of their appellate jurisdiction over casesoriginating from the municipal courts was provided for by2epublic "ct 41, amending %ection A5 of the 9udiciary "cteffective "ugust A, 1--. +he re:uirement for affirmance infull of the inferior courts decision was not adopted orreproduced in 2epublic "ct 41. "lso, since 2epublic "ct41 failed to provide for the procedure or mode of appealin the cases therein contemplated, the Court of "ppeals enbancprovided thereof in its 2esolution of "ugust 17, 1-1,by re:uiring a petition for review but which also did notre:uire for its availability that the judgment of the court of

first instance had affirmed in full that of the lower court.%aid mode of appeal and the procedural re:uirementsthereof governed the appeal taken in this case from theaforesaid Court of 0irst


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construction to make a total sum of 75,.? that on9anuary -, 1-, +ropical andHor ons delivered a check for,. not to the plaintiff but to a stranger to thecontract, Ialan, who succeeded in getting petitioners

indorsement on the same check persuading the latter thatthe same be deposited in a joint account? that on 9anuary7, 1- when the second check for ,. was due,petitioner refused to indorse said cheek presented to him byIalan but through later manipulations, respondent onssucceeded in changing the payees name from )lmo3uMas:ue to Ialan and "ssociates, thus enabling Ialan tocash the same at the Cebu Branch of the hilippineCommercial and


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'7* ordering plaintiff and defendant Ialan to pay o damages awarded whatsoever.

6n appeal, the Court of "ppeals affirmed the judgment of

the trial court with the sole modification that the liabilityimposed in the dispositive part of the decision on the creditof Cebu %outhern (ardware and Blue /iamond Ilass alacewas changed from 8jointly and severally8 to 8jointly.8

>ot satisfied, 3r. 3uMas:ue filed this petition.

+he present controversy began when petitioner 3uMas:ue inbehalf of the partnership of 8Ialan and 3uMas:ue8 asContractor entered into a written contract with respondent+ropical for remodelling the respondents Cebu branchbuilding. " total amount of 75,. was to be paid underthe contract for the entire services of the Contractor. +heterms of payment were as follows= thirty percent '4@* ofthe whole amount upon the signing of the contract and thebalance thereof divided into three e:ual installments at thelute of %ix +housand esos ',.* every fifteen '15*working days.

+he first payment made by respondent +ropical was in the

form of a check for ,. in the name of thepetitioner.etitioner, however, indorsed the check in favor ofrespondent Ialan to enable the latter to deposit it in thebank and pay for the materials and labor used in the project.

etitioner alleged that Ialan spent ,1;4.4 out of the,. for his personal use so that when the secondcheck in the amount of ,. came and Ialan askedthe petitioner to indorse it again, the petitioner refused.

+he check was withheld from the petitioner. %ince Ialaninformed the Cebu branch of +ropical that there wasa8misunderstanding8 between him and petitioner,respondent +ropical changed the name of the payee in thesecond check from 3uMas:ue to 8Ialan and "ssociates8

which was the duly registered name of the partnershipbetween Ialan and petitioner and under which name apermit to do construction business was issued by the mayorof Cebu City. +his enabled Ialan to encash the secondcheck.

3eanwhile, as alleged by the petitioner, the constructioncontinued through his sole efforts. (e stated that heborrowed some 17,. from his friend, 3r. )spina andalthough the expenses had reached the amount of7-,. because of the failure of Ialan to pay what waspartly due the laborers and partly due for the materials, the

construction work was finished ahead of schedule with thetotal expenditure reaching 4A,..

+he two remaining checks, each in the amount of,.,were subse:uently given to the petitioner alonewith the last check being given pursuant to a court order.

"s stated earlier, the petitioner filed a complaint forpayment of sum of money and damages against the


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respondents,seeking to recover the following= the amountscovered by the first and second checks which fell into thehands of respondent Ialan, the additional expenses that thepetitioner incurred in the construction, moral and exemplary

damages, and attorneys fees.

Both the trial and appellate courts not only absolvedrespondents +ropical and its Cebu 3anager, ons, from anyliability but they also held the petitioner together withrespondent Ialan, hable to the intervenors Cebu %outhern(ardware Company and Blue /iamond Ilass alace for thecredit which the intervenors extended to the partnership ofpetitioner and Ialan


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had acted in good faith, the appellees also acted in goodfaith in extending credit to the partnership. here one oftwo innocent persons must suffer, that person who gaveoccasion for the damages to be caused must bear the

conse:uences.

>o error was committed by the appellate court in holdingthat the payment made by +ropical to Ialan was a goodpayment which binds both Ialan and the petitioner. %incethe two were partners when the debts were incurred, they,are also both liable to third persons who extended credit totheir partnership.


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e, however, take exception to the ruling of the appellatecourt that the trial courts ordering petitioner and Ialan topay the credits of Blue /iamond and Cebu %outhern(ardware8jointly and severally8 is plain error since the

liability of partners under the law to third persons forcontracts executed inconnection with partnership businessis only pro rata under "rt. 1;1, of the Civil Code.

hile it is true that under "rticle 1;1 of the Civil Code,8"llpartners, including industrial ones, shall be liable proratewith all their property and after all the partnership assetshave been exhausted, for the contracts which may beentered into the name and fm the account cd thepartnership, under its signature and by a person authori$edto act for the partner!ship. ...8. this provision should beconstrued together with "rticle 1;7A which provides that=8"ll partners are liable solidarily with the partnership foreverything chargeable to the partnership under "rticles1;77 and 1;74.8


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()2)062), the decision appealed from is hereby"00ovember 1-A, )ugenio &im, for and in his ownbehalf and as attorney!in!fact of his mother, the widow

3aria 3oreno 'now deceased* and of his brother &oren$o,together with his other brothers, "ramis, 3ario and aulino,and his sister, >ila, all hereinafter collectively called the&ims, borrowed from petitioner %antiago %yjuco,


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7A7!2? I.2. >6. &!4A;4

+o stop the foreclosure, the &ims K through "tty. 3arcial I.3endiola, who was later joined by "tty. 2aul Correa K filed

Civil Case >o. 51; on /ecember 7A,1-; in the Court of0irst their rights to the notice and republication of the notice ofsale 'hich may be conducted at some future date&8 (

6n >ovember 75,1-, the Court of 0irst 6. &!A557

6n %eptember -, 1-7, "tty. aterno 2. Canlas entered hisappearance in Civil Case >o. 51; as counsel for the &imsin collaboration with "tty. 2aul Correa, and on the same

date appealed to the Court of "ppeals from the amendeddecision of "ugust 1, 1-7. 1*


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%yjucos travails.

4. CC( -

%yjuco then resumed its efforts to proceed with theforeclosure. o. 1177 ofthe Court of 0irst o 51; explicitly declared itself to bepredicated on the &ims waiver of 8their rights to the notice

and republication of the notice of sale which may beconducted at some future date.8 1("n order restraining thesale issued in the case, although the petition for preliminaryinjunction was subse:uently denied. " supplementalcomplaint was also filed by the &ims seeking recovery ofsome l million in damages allegedly suffered by reason ofsaid lack of republication. 1)

A. C


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the &ims? this, in line with the patently specious theoryadvocated by the &ims counsel that the bond flied by themfor the postponement of the sale, set at million by theCourt 'later increased by 4 million* had superseded and

caused novation of the mortgage. 21+he case lay fallow for ayear, certain other, incidents arising and remainingunresolved on account of numerous postponements.

5. I.2. >o. &!51A

0inally, on 9anuary 7;, 1-;1, %yjuco betook itself to thisCourt, presumably no longer disposed to await 9udge+ecsons pleasure or the &ims convenience. o.&!51A, alleging that in Civil Case >o. 51;, 9udge +ecsonhad gravely abused discretion in=

'1* unreasonably delaying the foreclosure of the mortgage?

'7* entertaining the &ims motion to discharge saidmortgage grounded on the theory that it had beensuperseded and novated by the &ims act of filing the bondre:uired by 9udge +ecson in connection with thepostponement of the foreclosure sale, and unreasonablydelaying resolution of the issue? and

'4* authori$ing the &ims to negotiate and consummate the

private sale of the mortgaged property and motu proprioextending the period granted the &ims for the purpose, indisregard of the final and executory judgment rendered inthe case.

By judgment rendered on %eptember 71, 1-;7, after dueproceedings, this Court 22 issued the writ prayed for andnullified the orders and actuations of 9udge +ecson in Civil

Case >o. 51;. +he judgment declared that=

'1* the republication by %yjuco of the notice of foreclosuresale rendered the complaint in Civil Case >o. 1177 moot

and academic? hence, said case could not operate to bar thesale?

'7* the &ims bonds 'of million and 4 million*, having bythe terms thereof been given to guarantee payment ofdamages to %yjuco and the %heriff of 3anila resulting fromthe suspension of the auction sale, could not in any senseand from any aspect have the effect of superseding themortgage or novating it?

'4* in fact, the bonds had become worthless when, as shown

by the record, the bondsmans authority to transact non!lifeinsurance business in the hilippines was not renewed, forcause, as of 9uly 1, 1-;1.

+he decision conse:uently decreed that the %heriff of 3anilashould proceed with the mortgage sale, there being nofurther impediment thereto.2'

>otice of the decision was served on the &ims, through "tty.Canlas, on 6ctober 7, 1-;7. " motion for reconsiderationwas filed, 24but the same was denied with finality for lack ofmerit and entry of final judgment was made on 3arch

77,1-;4. 2(

. +() %)C2)+ "C+ C


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51A, or on 6ctober 1A,1-;7, they caused the filing withthe 2egional +rial Court of #ue$on City of still anotheraction, the third, also designed, like the first two, topreclude enforcement of the mortgage held by %yjuco.

+his time the complaint was presented, not in theirindividual names, but in the name of a partnership of whichthey themselves were the only partners= 8(eirs of (ugo&im.8 +he complaint advocated the theory that themortgage which they, together with their mother, hadindividually constituted 'and thereafter amended during theperiod from 1-A to 1-* over lands standing in theirnames in the roperty 2egistry as owners pro indiviso, infact no longer belonged to them at that time, having beenearlier deeded over by them to the partnership, 8(eirs of(ugo &im8, more precisely, on 3arch 4, 1-5-, hence, said

mortgage was void because executed by them withoutauthority from the partnership.

+he complaint was signed by a lawyer other than "tty.Canlas, but the records disclose that "tty. Canlas took overas counsel as of >ovember A,1-;7. +he case, docketed asCivil Case >o. #!4-7-5, was assigned to Branch 45 of the#ue$on City 2egional +rial Court, then presided over by9udge 9ose . Castro.

9udge Castro issued a restraining order on 6ctober 15, 1-;7.

+hen, %heriff erfecto I. /alangin submitted a return ofsummons to the effect that on /ecember , 1-;7 he K

.. served personally and left a copy of summons togetherwith a copy of Complaint and its annexes x x upondefendants office formerly at 414 #uirino "ve., arana:ue,3etro!3anila and now at A /ona 0elisa %yjuco Building,2emedios %t., corner +aft "venue, 3anila, through the3anager, a person of sufficient age and discretion duly

authori$ed to receive service of such nature, but whorefused to accept service and signed receipt thereof.2)

" vaguer return will be hard to find.


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from the rapidity with which it was decided!twelve '17* daysfrom 0ebruary 1, 1-;4, when the motion to declaredefendant %yjuco in default was filed!the case wasafterwards allowed by "tty. Canlas to remain dormant for

seventeen '1* months. (e made no effort to have thejudgment executed, or to avail of it in other actionsinstituted by him against %yjuco. +he judgment was not tobe invoked until sometime in or after 9uly, 1-;A, again tostop the extrajudicial mortgage sale scheduled at or aboutthat time at the instance of %yjuco, as shall presently berecounted.

. 6ther "ctions in the 6. #!47-7A, 2+C #F)J6> Co. ;4!1-1;, is not clear.hat is certain is '1* that the auction sale was re!scheduledfor %eptember 7, 1-;4, '7* that it was aborted because the&ims managed to obtain still another restraining order in

another case commenced by their lawyer, "tty. Canlas= CivilCase >o. #!47-7A of the Court of 0irst o other salient details about these two '7* cases areavailable in the voluminous records before the Court, exceptthat it was "tty. Canlas who had filed them. (e admitshaving done so une:uivocally= 8+hus, the undersignedcounsel filed injunction cases in Civil Case >o. ;4!1-1; and

Civil Case >o. 4-7-A, 2egional +rial Courts of 3anila and#ue$on City. ... 8 '1

. 2)!"C+6. #!4A;5, 2+C, ##F)J6> C


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granted "tty. Canlas motion to declare cancelled the titlesto the &ims mortgaged properties and as nun and void theannotation of the mortgage and its amendments on saidtitles, and to direct the 2egister of /eeds of 3anila to issue

new titles, in lieu of the old, in the name of the partnership,8(eirs of (ugo &im.8 ''

6n 9uly 1,1-;A, %yjuco filed in said Civil Case >o. #!4A;5a motion for reconsideration of the decision and fordismissal of the action, alleging that it had never beenserved with summons? that granting arguendo that servicehad somehow been made, it had never received notice ofthe decision and therefore the same had not and could nothave become final? and that the action should be dismissedon the ground of bar by prior judgment premised on thefinal decisions of the %upreme Court in I.2. >o. &!A557 and

I.2. >o. 51A.

+wo other motions by %yjuco :uickly followed. +he first,dated 9uly 7, 1-;A, prayed for abatement of 9udge Castrosorder decreeing the issuance of new certificates of title overthe mortgaged lands in the name of the plaintiff partnership.'4+he second, filed on 9uly 7A, 1-;A, was a supplement tothe motion to dismiss earlier filed, asserting another groundfor the dismissal of the action, i.e., failure to state a cause ofaction, it appearing that the mortgaged property remainedregistered in the names of the individual members of the

&im family notwithstanding that the property hadsupposedly been conveyed to the plaintiff partnership longbefore the execution of the mortgage and its amendments,!and that even assuming ownership of the property by thepartnership, the mortgage executed by all the partners wasvalid and binding under "rticles 1;11 and 1;1- of the CivilCode.'(

+he motions having been opposed in due course by the

plaintiff partnership, they remained pending until 9anuary41, 1-;5 when %yjuco moved for their immediate resolution.%yjuco now claims that 9udge Castro never acted on themotions. +he latter however states that that he did issue an

order on 0ebruary 77, 1-;5 declaring that he had lostjurisdiction to act thereon because, petitio principii, hisdecision had already become final and executory.

;. I.2.>6.&!A4? +() 26C))/I "+ B"2

0or the third time %yjuco is now before this Court on thesame matter.


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motion to dismiss? 'c* the petition was in effect an action toannul a judgment, a proceeding within the originaljurisdiction of the Court of "ppeals? 'd* the plea of resjudicata came too late because raised after the decision had

already become final? moreover, no o. #!4A;5, on the other, the parties in theformer being the &ims in their personal capacities and in thelatter, the &im artnership, a separate and distinct juridicalentity? and the pleaded causes of action being different,usury in the earlier cases and authority of the parties toencumber partnership property in the case under review? 'e*the plea of laches also came too late, not having beeninvoked in the lower court? and 'f* the property involvedconstituted assets of the &im partnership, being registeredas such with the %ecurities and )xchange Commission. ')

6n his own behalf "tty. Canlas submitted that he had noknowledge of the institution of Civil Case >o. #!4A;5'though he admitted being collaborating counsel in saidcase*? that he did not represent the &ims in all their casesagainst %yjuco, having been counsel for the former onlysince 1-, not for the last seventeen years as claimed by%yjuco? and that he had no duty to inform opposing counselof the pendency of Civil Case >o. #!4A;5. '7

2espondent 9udge Castro also filed a comment '8

disclaiming knowledge of previous controversies regardingthe mortgaged property. (e asserted that %yjuco had beenproperly declared in default for having failed to answer thecomplaint despite service of summons upon it, and that hisdecision in said case which was also properly served on%yjuco became final when it was not timely appealed, afterwhich he lost jurisdiction to entertain the motion forreconsideration and motion to dismiss. (e also deniedhaving failed to act on said motions, adverting to an alleged

order of 0ebruary 77, 1-;5 where he declared his lack ofjurisdiction to act thereon.

+he respondent 2egister of /eeds for his part presented a

comment wherein he stated that by virtue of an order ofexecution in Civil Case >o. #!4A;5, he had cancelled +C+s>os. 5A14, 5A15, 5A1 and 5A1; of his 2egistry andprepared new certificates of title in lieu thereof, but thatcancellation had been held in abeyance for lack of certainregistration re:uirements and by reason also of the motionof %yjucos "tty. 0ormoso to hold in abeyance enforcementof the trial courts order of 9uly 1, 1-;A as well as of thetemporary restraining order subse:uently issued by theCourt. '9

o. 51; havingbeen instituted in /ecember 1-; and, after trial andjudgment, gone through the Court of "ppeals 'in C"!I.2. >o.7A7!2* and this Court 'in I.2. >o. 4A;4*, both at theinstance of the &ims, on the :uestion of reopening beforethe amended decision could be issued.

Fnwilling, however, to concede defeat, the &ims moved 'in


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Civil Case >o. 51;* to stop the foreclosure sale on theground of lack of republication. 6n /ecember 1-,1- theyobtained a restraining order in said case, but thisnotwithstanding, on the very same date they filed another

action 'Civil Case >o. 1177* in a different branch of thesame Court of 0irst


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0urther credence is lent to this appraisal by the unusuallyrapid movement of Civil Case >o. #!4A;5 itself in its earlierstages, which saw the motion to declare %yjuco in defaultfiled, an order of default issued, evidence ex parte for the

plaintiffs received and judgment by default rendered, allwithin the brief span of twelve days, 0ebruary 1!77, 1-;4.>otice of said judgment was 8served8 on 0ebruary 74, 1-;4,the day after it was handed down, only to be followed by anunaccountable lull of well over a year before it was orderedexecuted on 9uly -, 1-;A K unaccountable, considering thatprevious flurry of activity, except in the context of a plan torush the case to judgment and then divert %yjucos attentionto the &ims moves in other directions so as to preventdiscovery of the existence of the case until it was too late.

+he Court cannot but condemn in the strongest terms this

trifling with the judicial process which degrades theadministration of justice, mocks, subverts and misuses thatprocess for purely dilatory purposes, thus tending to bring itinto disrepute, and seriously erodes public confidence in thewill and competence of the courts to dispense swift justice.

Fpon the facts, the only defense to the foreclosure thatcould possibly have merited the full!blown trial and appealproceedings it actually went through was that of allegedusury pleaded in Civil Case >o. 51; and finally decidedagainst the respondent &ims in I.2. >o. &!A557 in%eptember 1-. +he other issues of failure to republish anddischarge of mortgage by guarantee set up in succeedingactions were sham issues, :uestions without substanceraised only for purposes of delay by the privaterespondents, in which they succeeded only too well. +heclaim urged in this latest case= that the mortgaged propertyhad been contributed to the respondent partnership andwas already property of said partnership when the individual&ims unauthori$edly mortgaged it to %yjuco, is of no better

stripe, and this, too, is clear from the undisputed facts andthe legal conclusions to be drawn therefrom.

+he record shows that the respondent partnership is

composed exclusively of the individual &ims in whose nameall the cases herein referred to, with the sole exception ofCivil Case >o. #!4A;5, were brought and prosecuted, theircontribution to the partnership consisting chiefly, if notsolely, of the property subject of the %yjuco mortgage. ovember 1A,1-A was executed by the&ims as such owners, as were all subse:uent amendments

of the mortgage. +here can be no dispute that in thosecircumstances, the respondent partnership was chargeablewith knowledge of the mortgage from the moment of itsexecution. +he legal fiction of a separate juridicalpersonality and existence will not shield it from theconclusion of having such knowledge which naturally andirresistibly flows from the undenied facts.


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+he principles of e:uitable estoppel, sometimes calledestoppelin pais, are made part of our law by "rt. 1A47 ofthe Civil Code. Coming under this class is estoppel bysilence, which obtains here and as to which it has been held

that=

... an estoppel may arise from silence as well as from words.)stoppel by silence arises where a person, who by force ofcircumstances is under a duty to another to speak, refrainsfrom doing so and thereby leads the other to believe in theexistence of a state of facts in reliance on which he acts tohis prejudice. %ilence may support an estoppel whether thefailure to speak is intentional or negligent.


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been held that the right to mortgage is included in the rightto convey. +his is different from the rule in agency that aspecial power to sell excludes the power to mortgage '"rt.1;-*. 4'

"s indisputable as the propositions and principles just statedis that the cause of action in Civil Case >o. #!4A;5 isbarred by prior judgment. +he right subsumed in that causeis the negation of the mortgage, postulated on the claimthat the parcels of land mortgaged by the &ims to %yjuco didnot in truth belong to them but to the partnership. "ssumingthis to be so, the right could have been asserted at the timethat the &ims instituted their first action on /ecember 7A,1-; in the 3anila Court of 0irst o.51;, or when they filed their subse:uent actions= CivilCase >o. 1177, on /ecember 1-, 1-? Civil Case >o. ;4!

1-1;, in 1-;4, and Civil Case >o. #!4-7-A, also in 1-;4.+he claim could have been set up by the &ims, as memberscomposing the partnership, 8(eirs of (ugo &im.8


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action, of which partnership they were the only members,and there was hence no substantial difference as regardsthe parties plaintiff in all the actions. Fnder the doctrine ofres judicata, the judgment in the first was and should have

been regarded as conclusive in all other, actions not only8with respect to the matter directly adjudged,8 but also 8asto any other matter that could have been raised in relationthereto. 8 4)


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+he liberal construction rule cannot be invoked and utili$edas a substitute for the plain legal re:uirements as to themanner in which summons should be served on a domesticcorporation 'F.%. vs. 3ollenhauer &aboratories,


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respondents &ims, the respondent partnership and theircounsel, "tty. aterno 2. Canlas, should now be addressed.+hat the &ims and their partnership acted in bad faith andwith intent to defraud is manifest in the record of their

actuations, presenting as they did, piecemeal and in onecase after another, defenses to the foreclosure or claims inderogation thereof that were available to them from thevery beginning K actuations that were to stave off theli:uidation of an undenied debt for more than twenty yearsand culminated in the clandestine filing and prosecution ofthe action subject of the present petition.

hat has happened here, it bears repeating, is nothing lessthan an abuse of process, a trifling with the courts and withthe rights of access thereto, for which "tty. Canlas mustshare responsibility e:ually with his clients. +he latter could

not have succeeded so well in obstructing the course ofjustice without his aid and advice and his tireless espousalof their claims and pretensions made in the various caseschronicled here. +hat the cause to which he lent hisadvocacy was less than just or worthy could not haveescaped him, if not at the start of his engagement, in theyears that followed when with his willing assistance, if notinstigation, it was shuttled from one forum to another aftereach setback. +his Court merely stated what is obvious andcannot be gainsaid when, in %urigao 4ineral $eservation3oard vs& Cloribel,(( it held that a partys lawyer of recordhas control of the proceedings and that 'w*hatever steps

his client takes should be within his knowledge andresponsibility.8

o. 51;. (8 (e hasalso :uite impenitently disclaimed a duty to inform opposingcounsel in Civil Case >o. #!4-7-A of the existence of CivilCase >o. #!4A;5, as plaintiffs counsel in both actions,even while the former, which involved the same mortgage,was already being litigated when the latter was filed,although in the circumstances such disclosure was re:uiredby the ethics of his profession, if not indeed by his lawyersoath.

" clear case also exists for awarding at least nominaldamages to petitioner, though damages are not expresslyprayed for, under the general prayer of the petition for 8suchother reliefs as may be just and e:uitable under thepremises,8 and the action being not only of certiorari andprohibition, but also of mandamus!in which the payment of8damages sustained by the petitioner by reason of thewrongful acts of the defendant is expressly authori$ed. (9

+here is no :uestion in the Courts mind that such interests


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as may have accumulated on the mortgage loan will notoffset the prejudice visited upon the petitioner by theexcruciatingly long delay in the satisfaction of said debt thatthe private respondents have engineered and fomented.

+hese very same considerations dictate the imposition ofexemplary damages in accordance with "rt. 777- of theCivil Code.

()2)062), so that complete justice may be dispensedhere and, as far as consistent with that end, all the mattersand incidents with which these proceedings are concernedmay be brought to a swift conclusion=

'1* the assailed judgment by default in Civil Case >o.#!

4A;5, the writ of execution and all other orders issued inimplementation thereof, and all proceedings in the caseleading to said judgment after the filing of the complaint are/)C&"2)/ null and void and are hereby %)+ "%ovember ;, 1- until thedate of sale, plus such other and additional sums forcommissions, expenses, fees, etc. as may be lawfullychargeable in extrajudicial foreclosure and sale proceedings?

'4* the private respondents, their successors and assigns,

are )2)+F"&&E )>96)/ from taking any actionwhatsoever to obstruct, delay or prevent said auction sale?

'A* the private respondents 'the &ims, the artnership of the

(eirs of (ugo &im and "tty. aterno 2. Canlas* aresentenced, jointly and severally, to pay the petitioner75,. as nominal damages and 1,. asexemplary damages, as well as treble costs? and

'5* let this matter be referred to the


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respondent Commission and :uoted at length by theappellate court in its decision, are hereunder restated.

+he law firm of 26%%, &"2)>C), %)&( and C"22"%C6%6

was duly registered in the 3ercantile 2egistry on A 9anuary1-4 and reconstituted with the %ecurities and )xchangeCommission on A "ugust 1-A;. +he %)C records show thatthere were several subse:uent amendments to the articlesof partnership on 1; %eptember 1-5;, to change the firmNnameO to 26%%, %)&( and C"22"%C6%6? on 9uly 1-5 . .. to 26%%, %)&(, %"&C)/6, /)& 26%"2ot only have they refused to give meaningful increases tothe employees, even attorneys, are dressed down publicly ina loud voice in a manner that deprived them of their self!respect. +he result of such policies is the formation of theunion, including the assistant attorneys.8

6n 4 9une 1-;;, petitioner filed with this Commissions%ecurities


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thereof despite the dissolution of the partnership in theamount of at least 5,.?

8A. 6rder respondents jointly and severally to pay petitioner

attorneys fees and expense of litigation in such amounts asmaybe proven during the trial and which the Commissionmay deem just and e:uitable under the premises but in nocase less than ten '1@* per cent of the value of the sharesof petitioner or 1,.?

85. 6rder the respondents to pay petitioner moral damageswith the amount of 5,. and exemplary damages inthe amount of 7,..

8etitioner likewise prayed for such other and further reliefsthat the Commission may deem just and e:uitable under thepremises.8

6n 14 9uly 1-;;, respondents!appellees filed theiropposition to the petition.

6n 14 9uly 1-;;, petitioner filed his 2eply to the 6pposition.

6n 41 3arch 1-;-, the hearing officer rendered a decisionruling that=

8NOetitioners withdrawal from the law firm Bito, 3isa G&o$ada did not dissolve the said law partnership."ccordingly, the petitioner and respondents are herebyenjoined to abide by the provisions of the "greementrelative to the matter governing the li:uidation of the sharesof any retiring or withdrawing partner in the partnershipinterest.81

6n appeal, the %)C en banc reversed the decision of the

(earing 6fficer and held that the withdrawal of "ttorney9oa:uin &. 3isa had dissolved the partnership of 8Bito, 3isaG &o$ada.8 +he Commission ruled that, being a partnershipat will, the law firm could be dissolved by any partner at

anytime, such as by his withdrawal therefrom, regardless ofgood faith or bad faith, since no partner can be forced tocontinue in the partnership against his will. o. 7A4; and C"!I.2. % >o. 7AA;*.

/uring the pendency of the case with the Court of "ppeals,"ttorney 9esus Bito and "ttorney 3ariano &o$ada both diedon, respectively, 5 %eptember 1--1 and 71 /ecember1--1. +he death of the two partners, as well as theadmission of new partners, in the law firm prompted"ttorney 3isa to renew his application for receivership 'inC" I.2. % >o. 7AA;*. (e expressed concern over the needto preserve and care for the partnership assets. +he other


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partners opposed the prayer.

+he Court of "ppeals, finding no reversible error on the partof respondent Commission, "00


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+he 8purpose8 of the partnership is not the specificundertaking referred to in the law. 6therwise, allpartnerships, which necessarily must have a purpose, wouldall be considered as partnerships for a definite undertaking.

+here would therefore be no need to provide for articles onpartnership at will as none would so exist. "pparently whatthe law contemplates, is a specific undertaking or 8project8which has a definite or definable period of completion. '

+he birth and life of a partnership at will is predicated on themutual desire and consent of the partners. +he right tochoose with whom a person wishes to associate himself isthe very foundation and essence of that partnership.


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+he term 8retirement8 must have been used in the articles,as we so hold, in a generic sense to mean the dissociationby a partner, inclusive of resignation or withdrawal, from thepartnership that thereby dissolves it.

6n the third and final issue, we accord due respect to theappellate court and respondent Commission on theircommon factual finding, i&e&, that "ttorney 3isa did not actin bad faith. ublic respondents viewed his withdrawal tohave been spurred by 8interpersonal conflict8 among thepartners. o. 1-5which modified the decision of the then Court of 0irsto. 145. +he plaintiffs

complaint 'petitioner in I.2. >o. ;A1-* against alldefendants 'respondents in I.2. >o. ;A1-* was dismissedbut in all other respects the trial courts decision wasaffirmed.

+he dispositive portion of the trial courts decision reads asfollows=

()2)062), judgment is rendered against defendant 9acob%. &im re:uiring &im to pay plaintiff the amount of411,5.7, with interest at the rate of 17@ per annumcompounded monthly? plus 15@ of the amount awarded to

plaintiff as attorneys fees from 9uly 7,1-, until fullpayment is made? plus ,. moral and exemplarydamages.


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xxx xxx xxx

()2)062), in view of all above, the complaint of plaintiffioneer against defendants Bormaheco, the Cervanteses

and Constancio B. 3aglana, is dismissed. o moral or exemplary damages is awarded against plaintifffor this action was filed in good faith. +he fact that theproperties of the Bormaheco and the Cervanteses wereattached and that they were re:uired to file a counterbondin order to dissolve the attachment, is not an act of badfaith. hen a man tries to protect his rights, he should notbe saddled with moral or exemplary damages. 0urthermore,the rights exercised were provided for in the 2ules of Court,and it was the court that ordered it, in the exercise of itsdiscretion.

>o damage is decided against 3alayan o. ;A15* was

engaged in the airline business as owner!operator of%outhern "ir &ines '%"&* a single proprietorship.

6n 3ay 1, 1-5, at +okyo, 9apan, 9apan /omestic "irlines

'9/"* and &im entered into and executed a sales contract')xhibit "* for the sale and purchase of two '7* /C!4" +ypeaircrafts and one '1* set of necessary spare parts for thetotal agreed price of F% Q1-,. to be paid ininstallments. 6ne /C!4 "ircraft with 2egistry >o.


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its successors and assigns, all sums and amounts of moneywhich it or its representatives should or may pay or cause tobe paid or become liable to pay on them of whatever kindand nature.

6n 9une 1, 1-5, &im doing business under the name andstyle of %"& executed in favor of ioneer as deed of chattelmortgage as security for the latters suretyship in favor ofthe former. C) 6> / 0"62 60 +() 9/" ">/ +("+ /)>+% "% /)0)>/">+% +() +2


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longer prosper. laintiff ioneer is not the real party ininterest to institute the instant action as it does not stand tobe benefited or injured by the judgment.

laintiff ioneers contention that it is representing thereinsurer to recover the amount from defendants, hence, itinstituted the action is utterly devoid of merit. laintiff didnot even present any evidence that it is the attorney!in!factof the reinsurance company, authori$ed to institute anaction for and in behalf of the latter. +o :ualify a person tobe a real party in interest in whose name an action must beprosecuted, he must appear to be the present real owner ofthe right sought to be enforced '3oran, ol.


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1. (as ioneer a cause of action against defendants withrespect to so much of its obligations to 9/" as has been paidwith reinsurance moneyL

7.


41/46

effect of payment made by the reinsurers to the petitioner.+herefore, the petitioners argument that the respondentshad no interest in the reinsurance contract as this is strictlybetween the petitioner as insured and the reinsuring

company pursuant to %ection -1 'should be %ection -;* ofthe evertheless, the petitioner argues that the appeal asregards the counter indemnitors should not have beendismissed on the premise that the evidence on record showsthat it is entitled to recover from the counter indemnitors.


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+estimonies of defendants 0rancisco Cervantes and 3odestoCervantes.

ioneer ew Civil Code of the hilippines.

ew CivilCode, known as the 2ecto &aw.

ioneer exercised the remedy of foreclosure of the chattelmortgage both by extrajudicial foreclosure and the instantsuit. %uch being the case, as provided by theaforementioned provisions, ioneer shall have no furtheraction against the purchaser to recover any unpaid balanceand any agreement to the contrary is void. Cru$, et al. v.0ilipinas o. &! 7A7, 3ay7,1-;, 74 %C2" -1, -5!.

+he operation of the foregoing provision cannot be escapedfrom through the contention that ioneer is not the vendorbut 9/". +he reason is that ioneer is actually exercising therights of 9/" as vendor, having subrogated it in such rights.>or may the application of the provision be validly opposedon the ground that these defendants and defendant

3aglana are not the vendee but indemnitors. ascual, et al.v. Fniversal 3otors Corporation, I.2. >o. &! 7;7, >ov.7,1-A, 1 %C2" 17A.

+he restructuring of the obligations of %"& or &im, thru thechange of their maturity dates discharged these defendantsfrom any liability as alleged indemnitors. +he change of thematurity dates of the obligations of &im, or %"& extinguishthe original obligations thru novations thus discharging the


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indemnitors.

+he principal hereof shall be paid in eight e:ual successivethree months interval installments, the first of which shall be

due and payable 75 "ugust 1-5, the remainder of which ...shall be due and payable on the 7th day x x x of eachsucceeding three months and the last of which shall be dueand payable 7th 3ay 1-.

(owever, at the trial of this case, ioneer produced amemorandum executed by %"& or &im and 9/", modifyingthe maturity dates of the obligations, as follows=

+he principal hereof shall be paid in eight e:ual successivethree month interval installments the first of which shall bedue and payable A %eptember 1-5, the remainder of which... shall be due and payable on the Ath day ... of eachsucceeding months and the last of which shall be due andpayable Ath 9une 1-.

>ot only that, ioneer also produced eight purportedpromissory notes bearing maturity dates different from thatfixed in the aforesaid memorandum? the due date of the firstinstallment appears as 6ctober 15, 1-5, and those of therest of the installments, the 15th of each succeeding threemonths, that of the last installment being 9uly 15, 1-.

+hese restructuring of the obligations with regard to theirmaturity dates, effected twice, were done without theknowledge, much less, would have it believed that thesedefendants 3aglana 'sic*. ioneers official >umerianoCarbonel would have it believed that these defendants anddefendant 3aglana knew of and consented to themodification of the obligations. But if that were so, therewould have been the corresponding documents in the formof a written notice to as well as written conformity of these

defendants, and there are no such document. +heconse:uence of this was the extinguishment of theobligations and of the surety bond secured by the indemnityagreement which was thereby also extinguished. "pplicable

by analogy are the rulings of the %upreme Court in the caseof Rabankalan %ugar Co. v. acheco, 55 hil. 554, 54, andthe case of "siatic etroleum Co. v. (i$on /avid, A5 hil.547, 54;.

"rt. 7-. "n extension granted to the debtor by thecreditor without the consent of the guarantor extinguishesthe guaranty +he mere failure on the part of the creditor todemand payment after the debt has become due does notof itself constitute any extension time referred to herein,'>ew Civil Code*.

3anresa, Ath ed., ol. 17, pp. 41!41, ol.


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+hese defendants are entitled to recover damages andattorneys fees from ioneer and its surety by reason of thefiling of the instant case against them and the attachmentand garnishment of their properties. +he instant action is

clearly unfounded insofar as plaintiff drags these defendantsand defendant 3aglana. '2ecord on "ppeal, pp. 44!4-,2ollo of I.2. >o. ;A15*.

e find no cogent reason to reverse or modify thesefindings.

(ence, it is our conclusion that the petition in I.2. >o.;A1- is not meritorious.

e now discuss the merits of I.2. >o. ;A15.

etitioner 9acob %. &im poses the following issues=

l. hat legal rules govern the relationship among co!investors whose agreement was to do business through thecorporate vehicle but who failed to incorporate the entity inwhich they had chosen to investL (ow are the losses to betreated in situations where their contributions to theintended corporation were invested not through thecorporate formL +his etition presents these fundamental:uestions which we believe were resolved erroneously bythe Court of "ppeals 'C"*. '2ollo, p. *.

+hese :uestions are premised on the petitioners theory thatas a result of the failure of respondents Bormaheco, %pousesCervantes, Constancio 3aglana and petitioner &im toincorporate, a de facto partnership among them wascreated, and that as a conse:uence of such relationship allmust share in the losses andHor gains of the venture inproportion to their contribution. +he petitioner, therefore,

:uestions the appellate courts findings ordering him toreimburse certain amounts given by the respondents to thepetitioner as their contributions to the intended corporation,to wit=

(owever, defendant &im should be held liable to pay his co!defendants cross!claims in the total amount of 1;A,;;.Aas correctly found by the trial court, with interest from thefiling of the cross!complaints until the amount is fully paid./efendant &im should pay one!half of the said amount toBormaheco and the Cervanteses and the other one!half todefendant 3aglana.


45/46

ac:uired by the company will be recogni$ed '%mith v.%choodoc ond acking Co., ;A ". 7;,1- 3e. 555? hipplev. arker, 7- 3ich. 4-*. %o, where certain personsassociated themselves as a corporation for the development

of land for irrigation purposes, and each conveyed land tothe corporation, and two of them contracted to pay a thirdthe difference in the proportionate value of the landconveyed by him, and no stock was ever issued in thecorporation, it was treated as a trustee for the associates inan action between them for an accounting, and its capitalstock was treated as partnership assets, sold, and theproceeds distributed among them in proportion to the valueof the property contributed by each '%horb v. Beaudry, 5Cal. AA*. 2o'ever, such a relation does not necessarilyexist, for ordinarily persons cannot be made to assume therelation of partners, as bet'een themselves, 'hen their

purpose is that no partnership shall exist '&ondon "ssur.Corp. v. /rennen, 3inn., %.Ct. AA7, 11 F.%. A1, A7, 7-&.)d. ;;*, and it should be implied only 'hen necessary todo @ustice bet'een the parties thus, one 'ho ta8es no partexcept to subscribe for stoc8 in a proposed corporation'hich is never legally formed does not become a partner'ith other subscribers 'ho engage in business under thename of the pretended corporation, so as to be liable assuch in an action for settlement of the alleged partnershipand contribution 'ard v. Brigham, 17 3ass. 7A*. "partnership relation between certain stockholders and otherstockholders, who were also directors, will not be implied in

the absence of an agreement, so as to make the formerliable to contribute for payment of debts illegally contractedby the latter '(eald v. 6wen, AA >.. 71, -


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in their answer, counterclaim, cross!claim and third partycomplaint=

%ometime in "pril 1-5, defendant &im lured and induced

the answering defendants to purchase two airplanes andspare parts from 9apan which the latter considered as theirlawful contribution and participation in the proposedcorporation to be known as %"&. "rrangements andnegotiations were undertaken by defendant &im. /ownpayments were advanced by defendants Bormaheco andthe Cervanteses and Constancio 3aglana ')xh. )! 1*.Contrary to the agreement among the defendants,defendant &im in connivance with the plaintiff, signed andexecuted the alleged chattel mortgage and surety bondagreement in his personal capacity as the alleged proprietorof the %"&. +he answering defendants learned for the first

time of this trickery and misrepresentation of the other,9acob &im, when the herein plaintiff chattel mortgage 'sic*allegedly executed by defendant &im, thereby forcing themto file an adverse claim in the form of third party claim.>otwithstanding repeated oral demands made bydefendants Bormaheco and Cervanteses, to defendant &im,to surrender the possession of the two planes and theiraccessories and or return the amount advanced by theformer amounting to an aggregate sum of 1;,--.1A asevidenced by a statement of accounts, the latter ignored,omitted and refused to comply with them. '2ecord on"ppeal, pp. 4A1!4A7*.

"pplying therefore the principles of law earlier cited to thefacts of the case, necessarily, no de facto partnership wascreated among the parties which would entitle the petitionerto a reimbursement of the supposed losses of the proposedcorporation. +he record shows that the petitioner was actingon his own and not in behalf of his other would!beincorporators in transacting the sale of the airplanes and

spare parts.

()2)062), the instant petitions are /

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