1. GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN
T. BACORRO, vs. HON. COURT OF APPEALS, SECURITIES AND EXCHANGE
COMMISSION and JOAQUIN L. MISAFacts:The law firm of ROSS, LAWRENCE,
SELPH and CARRASCOSO was duly registered in the Mercantile Registry
and reconstituted with the Securities and Exchange Commission. The
SEC records show that there were several subsequent amendments to
the articles of partnership to change the firm name which
eventually became BITO, MISA & LOZADA. Appellees Joaquin L.
Misa, Jesus B. Bito and Mariano M. Lozada associated themselves
together, as senior partners with respondents-appellees Gregorio F.
Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior
partners.Petitioner-appellant wrote the respondents-appellees a
letter stating that he is withdrawing and retiring from the firm of
Bito, Misa and Lozada. He also states that the partnership has
ceased to be mutually satisfactory because of the working
conditions of our employees including the assistant attorneys. Not
only have they refused to give meaningful increases to the
employees, even attorneys, are dressed down publicly in a loud
voice in a manner that deprived them of their
self-respect.Petitioner filed with this Commission's Securities
Investigation and Clearing Department (SICD) a petition for
dissolution and liquidation of partnership. The hearing officer
rendered a decision ruling that petitioner's withdrawal from the
law firm Bito, Misa & Lozada did not dissolve the said law
partnership.On appeal, the SEC en banc reversed the decision of the
Hearing Officer and held that the withdrawal of Attorney Joaquin L.
Misa had dissolved the partnership of "Bito, Misa & Lozada."
The Commission ruled that, being a partnership at will, the law
firm could be dissolved by any partner at anytime, such as by his
withdrawal therefrom, regardless of good faith or bad faith, since
no partner can be forced to continue in the partnership against his
will.During the pendency of the case with the Court of Appeals,
Attorney Jesus Bito and Attorney Mariano Lozada both died on,
respectively, 05 September 1991 and 21 December 1991. The death of
the two partners, as well as the admission of new partners, in the
law firm prompted Attorney Misa to renew his application for
receivership (in CA G.R. SP No. 24648). He expressed concern over
the need to preserve and care for the partnership assets. The other
partners opposed the prayer.The Court of Appeals, finding no
reversible error on the part of respondent Commission, AFFIRMED in
toto the SEC decision and order appealed from.Issue:Whether or not
the partnership of Bito, Misa & Lozada (now Bito, Lozada,
Ortega & Castillo) is a partnership at willHeld:Yes.A
partnership that does not fix its term is a partnership at will.
That the law firm "Bito, Misa & Lozada," and now "Bito, Lozada,
Ortega and Castillo," is indeed such a partnership.The hearing
officer however opined that the partnership is one for a specific
undertaking and hence not a partnership at will, citing paragraph 2
of the Amended Articles of Partnership (19 August 1948):"2.
Purpose. The purpose for which the partnership is formed, is to act
as legal adviser and representative of any individual, firm and
corporation engaged in commercial, industrial or other lawful
businesses and occupations; to counsel and advise such persons and
entities with respect to their legal and other affairs; and to
appear for and represent their principals and client in all courts
of justice and government departments and offices in the
Philippines, and elsewhere when legally authorized to do so."The
"purpose" of the partnership is not the specific undertaking
referred to in the law. Otherwise, all partnerships, which
necessarily must have a purpose, would all be considered as
partnerships for a definite undertaking. There would therefore be
no need to provide for articles on partnership at will as none
would so exist. Apparently what the law contemplates, is a specific
undertaking or "project" which has a definite or definable period
of completion.The birth and life of a partnership at will is
predicated on the mutual desire and consent of the partners. The
right to choose with whom a person wishes to associate himself is
the very foundation and essence of that partnership. Its continued
existence is, in turn, dependent on the constancy of that mutual
resolve, along with each partner's capability to give it, and the
absence of a cause for dissolution provided by the law itself.
Verily, any one of the partners may, at his sole pleasure, dictate
a dissolution of the partnership at will. He must, however, act in
good faith, not that the attendance of bad faith can prevent the
dissolution of the partnershipAttorney Misa did not act in bad
faith. Public respondents viewed his withdrawal to have been
spurred by "interpersonal conflict" among the partners.Decision
appealed is affirmed.
2. ISABELO MORAN, JR., vs. THE HON. COURT OF APPEALS and MARIANO
E. PECSONFacts:Pecson and Moran entered into an agreement whereby
both would contribute P15,000 each for the purpose of printing
95,000 posters (featuring the delegates to the 1971 Constitutional
Convention), with Moran actually supervising the work; that Pecson
would receive a commission of P l,000 a month starting on April 15,
1971 up to December 15, 1971; that on December 15, 1971, a
liquidation of the accounts in the distribution and printing of the
95,000 posters would be made, that Pecson gave Moran P10,000 for
which the latter issued a receipt; that only a few posters were
printed; that on or about May 28, 1971, Moran executed in favor of
Pecson a promissory note in the amount of P20,000 payable in two
equal installments (P10,000 payable on or before June 15, 1971 and
P10,000 payable on or before June 30, 1971), the whole sum becoming
due upon default in the payment of the first installment on the
date due, complete with the costs of collection.Private respondent
Pecson filed with the Court of First Instance of Manila an action
for the recovery of a sum of money.The CFI held that the plaintiff
did contribute P10,000.00, and another sum of P7,000.00 for the
Voice of the Veteran or Delegate Magazine. Of the expected 95,000
copies of the posters, the defendant was able to print 2,000 copies
only authorized of which, however, were sold at P5.00 each. Nothing
more was done after this and it can be said that the venture did
not really get off the ground. On the other hand, the plaintiff
failed to give his full contribution of P15,000.00. Thus, each
party is entitled to rescind the contract.The CFI renders judgment
ordering defendant Isabelo C. Moran, Jr. to return to plaintiff
Mariano E. Pecson the sum of P17,000.00, with interest.On appeal
the CA ordered defendant-appellant Isabelo C. Moran, Jr. to pay
plaintiff- appellant Mariano E. Pecson: Forty-seven thousand five
hundred (P47,500) (the amount that could have accrued to Pecson
under their agreement)The petitioner contends that the award is
highly speculative.Issue:WON Moran is obliged to give Pecson the
amount of expected profits from their partnershipHeld:No.We agree
with the petitioner that the award of speculative damages has no
basis in fact and law.There is no dispute over the nature of the
agreement between the petitioner and the private respondent. It is
a contract of partnership. The latter in his complaint alleged that
he was induced by the petitioner to enter into a partnership with
him under the following terms and conditions: 1. That the
partnership will print colored posters of the delegates to the
Constitutional Convention;2. That they will invest the amount of
Fifteen Thousand Pesos (P15,000.00) each;3. That they will print
Ninety Five Thousand (95,000) copies of the said posters;4. That
plaintiff will receive a commission of One Thousand Pesos
(P1,000.00) a month starting April 15, 1971 up to December 15,
1971;5. That upon the termination of the partnership on December
15, 1971, a liquidation of the account pertaining to the
distribution and printing of the said 95,000 posters shall be
made.When a partner who has undertaken to contribute a sum of money
fails to do so, he becomes a debtor of the partnership for whatever
he may have promised to contribute (Art. 1786, Civil Code) and for
interests and damages from the time he should have complied with
his obligation (Art. 1788, Civil Code).Article 1797 of the Civil
Code provides: The losses and profits shall be distributed in
conformity with the agreement. If only the share of each partner in
the profits has been agreed upon, the share of each in the losses
shall be in the same proportion.Being a contract of partnership,
each partner must share in the profits and losses of the venture.
That is the essence of a partnership. And even with an assurance
made by one of the partners that they would earn a huge amount of
profits, in the absence of fraud, the other partner cannot claim a
right to recover the highly speculative profits. It is a rare
business venture guaranteed to give 100% profits. In this case, on
an investment of P15,000.00, the respondent was supposed to earn a
guaranteed P1,000.00 a month for eight months and around
P142,500.00 on 95,000 posters costing P2.00 each but 2,000 of which
were sold at P5.00 each. The fantastic nature of expected profits
is obvious. We have to take various factors into account. The
failure of the Commission on Elections to proclaim all the 320
candidates of the Constitutional Convention on time was a major
factor. The petitioner undesirable his best business judgment and
felt that it would be a losing venture to go on with the printing
of the agreed 95,000 copies of the posters. Hidden risks in any
business venture have to be considered.However, as it was shown
that Pecson gave money to Moran (P10k) which the latter used to
print the first batch of posters, and since these posters were sold
and profits were realized from such sale, Pecson is entitled to
recover his share of such profitsThe SC agrees with the petitioner
that the award of P8,000.00 as Pecson's supposed commission has no
justifiable basis in law. The partnership agreement stipulated that
the petitioner would give the private respondent a monthly
commission. he agreement does not state the basis of the
commission. The payment of the commission could only have been
predicated on relatively extravagant profits. The parties could not
have intended the giving of a commission inspite of loss or failure
of the venture. Since the venture was a failure, the private
respondent is not entitled to the P8,000.00 commission.The petition
is GRANTED. The Court of Appeals decision is hereby SET ASIDE and a
new one is rendered ordering the petitioner Isabelo Moran, Jr., to
pay private respondent Mariano Pecson SIX THOUSAND (P6,000.00)
PESOS representing the amount of the private respondent's
contribution to the partnership but which remained unused; and
THREE THOUSAND (P3,000.00) PESOS representing one half (1/2) of the
net profits gained by the partnership.
3. MAURO LOZANA vs. SERAFIN DEPAKAKIBOFacts:Plaintiff Mauro
Lozana entered into a contract with defendant Serafin Depakakibo
wherein they established a partnership capitalized at the sum of
P30,000, plaintiff furnishing 60% thereof and the defendant, 40%,
for the purpose of maintaining, operating and distributing electric
light and power in the Municipality of Dumangas, Province of
Iloilo, under a franchise issued to Mrs. Piadosa Buenaflor.
However, the franchise or certificate of public necessity and
convenience in favor of the said Mrs. Piadosa Buenaflor was
cancelled and revoked by the Public Service Commission. A temporary
certificate of public convenience was issued in the name of Olimpia
D. Decolongon. Evidently because of the cancellation of the
franchise in the name of Mrs. Piadosa Buenaflor, plaintiff herein
Mauro Lozana sold a generator, Buda (diesel), to the new grantee
Olimpia D. Decolongon. Defendant Serafin Depakakibo, on the other
hand, sold one Crossly Diesel Engine, 25 h. p., Serial No. 141758,
to the spouses Felix Jimenea and Felina Harder, by a deed.laintiff
Mauro Lozana brought an action against the defendant, alleging that
he is the owner of the Generator Buda (Diesel). Plaintiff prayed
that said properties be delivered back to him. Defendant filed an
answer, denying that the generator and the equipment mentioned in
the complaint belong to the plaintiff and alleging that the same
had been contributed by the plaintiff to the partnership entered
into between them in the same manner that defendant had contributed
equipments also, and therefore that he is not unlawfully detaining
them. He, therefore, prayed that the complaint against him be
dismissed.Issue:Whether or not the Buda Diesel Engine belonged to
the partnershipHeld:Yes.It is not stated therein that there bas
been a liquidation of the partnership assets at the time plaintiff
sold the Buda Diesel Engine on October 15, 1955, and since the
court below had found that the plaintiff had actually contributed
one engine and 70 posts to the partnership, it necessarily follows
that the Buda diesel engine contributed by the plaintiff had become
the property of the partnership. As properties of the partnership,
the same could not be disposed of by the party contributing the
same without the consent or approval of the partnership or of the
other partner.It also follows that the claim of the defendant in
his counterclaim that the partnership be dissolved and its assets
liquidated is the proper remedy, not for each contributing partner
to claim back what he had contributed.
4. MAXIMILIANO SANCHO vs. SEVERIANO LIZARRAGAFacts:The plaintiff
brought an action for the rescission of a partnership contract
between himself and the defendant, entered into on October 15,
1920, the reimbursement by the latter of his 50,000 peso investment
therein.The defendant denies generally and specifically all the
allegations of the complaint which are incompatible with his
special defenses, cross-complaint and counterclaim, setting up the
latter and asking for the dissolution of the partnership.The Court
of First Instance of Manila, having heard the cause, and finding it
duly proved that the defendant had not contributed all the capital
he had bound himself to invest, and that the plaintiff had demanded
that the defendant liquidate the partnership, declared it dissolved
on account of the expiration of the period for which it was
constituted, and ordered the defendant, as managing partner, to
proceed without delay to liquidate it hence, this appeal.Issue:WON
plaintiff acquired the right to demand rescission of the
partnership contract according to article 1124 of the Civil
Code.Held:No.Until the accounts have been rendered as ordered by
the trial court, and until they have been either approved or
disapproved, the litigation involved in this action cannot be
considered as completely decided; and, as it was held in said case
of Natividad vs .Villarica, also with reference to an appeal taken
from a decision ordering the rendition of accounts following the
dissolution of partnership, the appeal in the instant case must be
deemed premature.Owing to the defendant's failure to pay to the
partnership the whole amount which he bound himself to pay, he
became indebted to it for the remainder, with interest and any
damages occasioned thereby, but the plaintiff did not thereby
acquire the right to demand rescission of the partnership contract
according to article 1124 of the Code. This article cannot be
applied to the case in question, because it refers to the
resolution of obligations in general, whereas article 1681 and 1682
specifically refer to the contract of partnership in particular.
And it is a well known principle that special provisions prevail
over general provisions.
5. WILLIAM UY vs. BARTOLOME PUZON, substituted by FRANCO
PUZONFacts:Defendant Bartolome Puzon had a contract with the
Republic of the Philippines for the construction of the Ganyangan
Bato Section of the Pagadian Zamboanga City Road, province of
Zamboanga del Sur 1 and of five (5) bridges in the
Malangas-Ganyangan Road. 2 Finding difficulty in accomplishing both
projects, Bartolome Puzon sought the financial assistance of the
plaintiff, William Uy. As an inducement, Puzon proposed the
creation of a partnership between them which would be the
sub-contractor of the projects and the profits to be divided
equally between them. William Uy inspected the projects in question
and, expecting to derive considerable profits therefrom, agreed to
the proposition, thus resulting in the formation of the "U.P.
Construction Company" 3 which was subsequently engaged as
subcontractor of the construction projects.The partners agreed that
the capital of the partnership would be P100,000.00 of which each
partner shall contribute the amount of P50,000.00 in cash. 5 But,
as heretofore stated, Puzon was short of cash and he promised to
contribute his share in the partnership capital as soon as his
application for a loan with the Philippine National Bank in the
amount of P150,000.00 shall have been approved. However, before his
loan application could be acted upon, he had to clear his
collaterals of its incumbrances first. For this purpose, on October
24, 1956, Wilham Uy gave Bartolome Puzon the amount of P10,000.00
as advance contribution of his share in the partnership to be
organized between them under the firm name U.P. CONSTRUCTION
COMPANY which amount mentioned above will be used by Puzon to pay
his obligations with the Philippine National Bank to effect the
release of his mortgages with the said Bank. 6 On October 29, 1956,
William Uy again gave Puzon the amount of P30,000.00 as his partial
contribution to the proposed partnership and which the said Puzon
was to use in payment of his obligation to the Rehabilitation
Finance Corporation. 7 Puzon promised William Uy that the amount of
P150,000.00 would be given to the partnership to be applied thusly:
P40,000.00, as reimbursement of the capital contribution of William
Uy which the said Uy had advanced to clear the title of Puzon's
property; P50,000.00, as Puzon's contribution to the partnership;
and the balance of P60,000.00 as Puzon's personal loan to the
partnership.Since Puzon was busy with his other projects, William
Uy was entrusted with the management of the projects and whatever
expense the latter might incur, would be considered as part of his
contribution.The loan of Puzon was approved by the Philippine
National Bank in November, 1956 and he gave to William Uy the
amount of P60,000.00. Of this amount, P40,000.00 was for the
reimbursement of Uy's contribution to the partnership which was
used to clear the title to Puzon's property, and the P20,000.00 as
Puzon's contribution to the partnership capital.To guarantee the
repayment of the above-mentioned loan, Bartolome Puzon, without the
knowledge and consent of William Uy, 14 assigned to the Philippine
National Bank all the payments to be received on account of the
contracts with the Bureau of Public Highways for the construction
of the afore-mentioned projects. By virtue of said assignment, the
Bureau of Public Highways paid the money due on the partial
accomplishments on the government projects in question to the
Philippine National Bank which, in turn, applied portions of it in
payment of Puzon's loan. Of the amount of P1,047,181.07, released
by the Bureau of Public Highways in payment of the partial work
completed by the partnership on the projects, the amount of
P332,539.60 was applied in payment of Puzon's loan and only the
amount of P27,820.80 was deposited in the partnership funds, 16
which, for all practical purposes, was also under Puzon's account
since Puzon was the custodian of the common funds.Failing to reach
an agreement with William Uy, Bartolome Puzon, as prime contractor
of the construction projects, wrote the subcontractor, U.P.
Construction Company, on November 20, 1957, advising the
partnership, of which he is also a partner, that unless they
presented an immediate solution and capacity to prosecute the work
effectively, he would be constrained to consider the sub-contract
terminated and, thereafter, to assume all responsibilities in the
construction of the projects in accordance with his original
contract with the Bureau of Public Highways.Thereafter, William Uy
was not allowed to hold office in the U.P. Construction Company and
his authority to deal with the Bureau of Public Highways in behalf
of the partnership was revoked by Bartolome Puzon who continued
with the construction projects alone. 22On May 20, 1958, William
Uy, claiming that Bartolome Puzon had violated the terms of their
partnership agreement, instituted an action in court, seeking,
inter alia, the dissolution of the partnership and payment of
damages.Answering, Bartolome Puzon denied that he violated the
terms of their agreement claiming that it was the plaintiff,
William Uy, who violated the terms thereof. He, likewise, prayed
for the dissolution of the partnership and for the payment by the
plaintiff of his, share in the losses suffered by the
partnership.After appropriate proceedings, the trial court found
that the defendant, contrary to the terms of their partnership
agreement, failed to contribute his share in the capital of the
partnership applied partnership funds to his personal use; ousted
the plaintiff from the management of the firm, and caused the
failure of the partnership to realize the expected profits of at
least P400,000.00. As a consequence, the trial court dismissed the
defendant's counterclaim and ordered the dissolution of the
partnership. The trial court further ordered the defendant to pay
the plaintiff the sum of P320,103.13. Hence, the instant appeal by
the defendant Bartolome Puzon.Issue:WON defendant Puzon failed to
contribute his share in the capital of the partnership and is
liable to plaintiff for what the latter investedHeld;Yes.The
findings of the trial court that the appellant failed to contribute
his share in the capital of the partnership is clear
incontrovertible. The record shows that after the appellant's loan
the amount of P150,000.00 was approved by the Philippine National
Bank in November, 1956, he gave the amount P60,000.00 to the
appellee who was then managing the construction projects. Of this
amount, P40,000.00 was to be applied a reimbursement of the
appellee's contribution to the partnership which was used to clear
the title to the appellant's property, and the balance of
P20,000.00, as Puzon's contribution to the partnership. Thereafter,
the appellant failed to make any further contributions the
partnership funds as shown in his letters to the appellee wherein
he confessed his inability to put in additional capital to continue
with the projects.Parenthetically, the claim of the appellant that
the appellee is equally guilty of not contributing his share in the
partnership capital inasmuch as the amount of P40,000.00, allegedly
given to him in October, 1956 as partial contribution of the
appellee is merely a personal loan of the appellant which he had
paid to the appellee, is plainly untenable. The terms of the
receipts signed by the appellant are clear and unequivocal that the
sums of money given by the appellee are appellee's partial
contributions to the partnership capital.The findings of the trial
court that the appellant misapplied partnership funds is, likewise,
sustained by competent evidence. It is of record that the appellant
assigned to the Philippine National Bank all the payments to be
received on account of the contracts with the Bureau of Public
Highways for the construction of the aforementioned projects to
guarantee the repayment of the bank. The appellee categorically
stated that the assignment to the Philippine National Bank was made
without his prior knowledge and consent.That the assignment to the
Philippine National Bank prejudicial to the partnership cannot be
denied. The record show that during the period from March, 1957 to
September, 1959, the appellant Bartolome Puzon received from the
Bureau of Public highways, in payment of the work accomplished on
the construction projects, the amount of P1,047,181.01, which
amount rightfully and legally belongs to the partnership by virtue
of the subcontract agreements between the appellant and the U.P.
Construction Company. In view of the assignemt made by Puzon to the
Philippine National Bank, the latter withheld and applied the
amount of P332,539,60 in payment of the appellant's personal loan
with the said bank. The balance was deposited in Puzon's current
account and only the amount of P27,820.80 was deposited in the
current account of the partnership.Under Article 2200 of the Civil
Code, indemnification for damages shall comprehend not only the
value of the loss suffered, but also that of the profits which the
obligee failed to obtain.Since the defendant-appellant was at
fault, the trial court properly ordered him to reimburse the
plaintiff-appellee whatever amount latter had invested in or spent
for the partnership on account of construction projects.Costs
against the appellant, it being understood that the liability
mentioned herein shall be home by the estate of the deceased
Bartolome Puzon.
6. EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR., CONCHITA
B. NAVARRO and LEONARDA ATIENZA ABAD SABTOS vs. ESTRELLA ABAD
SANTOS,Facts:A co-partnership was formed under the name of
"Evangelista & Co. The Articles of Co-partnership was amended
as to include herein respondent, Estrella Abad Santos, as
industrial partner, with herein petitioners Domingo C. Evangelista,
Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the
original capitalist partners, remaining in that capacity, with a
contribution of P17,500 each. The amended Articles provided, inter
alia, that "the contribution of Estrella Abad Santos consists of
her industry being an industrial partner", and that the profits and
losses "shall be divided and distributed among the partners ... in
the proportion of 70% for the first three partners, Domingo C.
Evangelista, Jr., Conchita P. Navarro and Leonardo Atienza Abad
Santos to be divided among them equally; and 30% for the fourth
partner Estrella Abad Santos."Respondent filed suit against the
three other partners in the Court of First Instance of Manila,
alleging that the partnership, which was also made a
party-defendant, had been paying dividends to the partners except
to her.The defendants, in their answer, denied ever having declared
dividends or distributed profits of the partnership. That her share
of 30% was to be based on the profits which might be realized by
the partnership only until full payment of the loan which it had
obtained in December, 1955 from the Rehabilitation Finance
Corporation in the sum of P30,000, for which the plaintiff had
signed a promisory note as co-maker and mortgaged her property as
security.The Court of First Instance found for the plaintiff and
rendered judgement "declaring her an industrial partner of
Evangelista & Co.; ordering the defendants to render an
accounting of the business operations of the (said) partnership.
The CA affirmed the decision.Issue:Whether or not the
plaintiff-appellee (respondent here) is an industrial
partnerHeld:Yes.Even if appellee was and still is a Judge of the
City Court of Manila, she has rendered services for appellants
without which they would not have had the wherewithal to operate
the business for which appellant company was organized. Art 1767
does not specify the kind of industry that a partner may thus
contribute, hence the said services may legitimately be considered
as appellee's contribution to the common fund.Art 1789 of the NCC
also relied upon by appellants reads:'ART. 1789. An industrial
partner cannot engage in business for himself, unless the
partnership expressly permits him to do so; and if he should do so,
the capitalist partners may either exclude him from the firm or
avail themselves of the benefits which he may have obtained in
violation of this provision, with a right to damages in either
case.'It is not disputed that the provision against the industrial
partner engaging in business for himself seeks to prevent any
conflict of interest between the industrial partner and the
partnership, and to insure faithful compliance by said partner with
this prestation. There is no pretense, however, even on the part of
the appellee is engaged in any business antagonistic to that of
appellant company, since being a Judge of one of the branches of
the City Court of Manila can hardly be characterized as a
business.That appellee has faithfully complied with her prestation
with respect to appellants is clearly shown by the fact that it was
only after filing of the complaint in this case and the answer
thereto appellants exercised their right of exclusion under the
codal art just mentioned by alleging in their Supplemental Answer
dated June 29, 1964 or after around nine (9) years from June 7,
1955 subsequent to the filing of defendants' answer to the
complaint, defendants reached an agreement whereby the herein
plaintiff been excluded from, and deprived of, her alleged share,
interests or participation, as an alleged industrial partner, in
the defendant partnership and/or in its net profits or income, on
the ground plaintiff has never contributed her industry to the
partnership, instead she has been and still is a judge of the City
Court (formerly Municipal Court) of the City of Manila, devoting
her time to performance of her duties as such judge and enjoying
the privilege and emoluments appertaining to the said office, aside
from teaching in law school in Manila, without the express consent
of the herein defendants'
7. JOSUE SONCUYA vs. CARMEN DE LUNAFacts:Plaintiff Josue Soncuya
filed with the Court of First Instance of Manila and amended
complaint against Carmen de Luna in her own name and as
co-administratrix of the intestate estate, of Librada Avelino, in
which, upon the facts therein alleged, he prayed that defendant be
sentenced to pay him the sum of P700,432 as damages and costs.To
the aforesaid amended complaint defendant Carmen de Luna interposed
a demurrer based on the following grounds: (1) That the complaint
does not contain facts sufficient to constitute a cause of action;
and (2) that the complaint is ambiguous, unintelligible and
vague.Trial on the demurrer having been held and the parties heard,
the court found the same well-founded and sustained it, ordering
the plaintiff to amend his complaint within a period of ten days
from receipt of notice of the order.Plaintiff having manifested
that he would prefer not to amend his amended complaint, the
attorney for the defendant, Carmen de Luna, filed a motion praying
that the amended complaint be dismissed with costs against the
plaintiff. Said motion was granted by The Court of First Instance
of Manila which ordered the dismissal of the aforesaid amended
complaint, with costs against the plaintiff.From this order of
dismissal, the appellant took an appeal, assigning twenty alleged
errors committed by the lower court in its order referred to.The
demurrer interposed by defendant to the amended complaint filed by
plaintiff having been sustained on the grounds that the facts
alleged in said complaint are not sufficient to constitute a cause
of action and that the complaint is ambiguous, unintelligible and
vague, the only questions which may be raised and considered in the
present appeal are those which refer to said grounds.Issue:Whether
or not he facts alleged in the complaint are sufficient to
constitute a cause of action on the part of plaintiffHeld:No.In the
amended complaint it is prayed that defendant Carmen de Luna be
sentenced to pay plaintiff damages in the sum of P700,432 as a
result of the administration, said to be fraudulent, of he
partnership, "Centro Escolar de Seoritas", of which plaintiff,
defendant and the deceased Librada Avelino were members. For the
purpose of adjudicating to plaintiff damages which he alleges to
have suffered as a partner by reason of the supposed fraudulent
management of the partnership referred to, it is first necessary
that a liquidation of the business thereof be made to the end that
the profits and losses may be known and the causes of the latter
and the responsibility of the defendant as well as the damages
which each partner may have suffered, may be determined. It is not
alleged in the complaint that such a liquidation has been effected
nor is it prayed that it be made. Consequently, there is no reason
or cause for plaintiff to institute the action for damages which he
claims from the managing partner Carmen de Luna.For a partner to be
able to claim from another partner who manages the general
copartnership, damages allegedly suffered by him by reason of the
fraudulent administration of the latter, a previous liquidation of
said partnership is necessary.
8. PO YENG CHEO vs. LIM KA YAMFacts:The plaintiff, Po Yeng Cheo,
is the sole heir of one Po Gui Yao, deceased, and as such Po Yeng
Cheo inherited the interest left by Po Gui Yao in a business
conducted in Manila under the style of Kwong Cheong Tay. This
business had been in existence in Manila for many years prior to
1903, as a mercantile partnership, engaged in the import and export
trade; and after the death of Po Gui Yao the following seven
persons were interested therein as partners in the amounts set
opposite their respective names, to wit: Po Yeng Cheo, Chua Chi
Yek, Lim Ka Yam, Lee Kom Chuen, Ley Wing Kwong, Chan Liong Chao,
Lee Ho Yuen. The manager of Kwong Cheong Tay, for many years prior
of its complete cessation from business in 1910, was Lim Ka Yam,
the original defendant herein.Among the properties pertaining to
Kwong Cheong Tay and consisting part of its assets were ten shares
of a total par value of P10,000 in an enterprise conducted under
the name of Yut Siong Chyip Konski and certain shares to the among
of P1,000 in the Manila Electric Railroad and Light Company, of
Manila.In the year 1910 Kwong Cheong Tay ceased to do business,
owing principally to the fact that the plaintiff ceased at that
time to transmit merchandise from Hongkong, where he then resided.
Lim Ka Yam appears at no time to have submitted to the partners any
formal liquidation of the business, though The trial judge rendered
judgment in favor of the plaintiff, Po Yeng Cheo, to recover of the
defendant Lim Yock Tock, as administrator of Lim Ka Yam, the sum of
sixty thousand pesos (P60,000), constituting the interest of the
plaintiff in the capital of Kwong Cheong Tay, plus the plaintiff's
proportional interest in shares of the Yut Siong Chyip Konski and
Manila Electric Railroad and Light Company, estimated at P11,000,
together with the costs. From this judgment the defendant
appealed.Issue:Whether or not the award given to Po Yeng Cheo
constituting his interest to the extent of his share of the capital
of Kwong Cheong Tay was proper.Held:No.It was erroneous in any
event to give judgment in favor of the plaintiff to the extent of
his share of the capital of Kwong Cheong Tay. The managing partner
of a mercantile enterprise is not a debtor to the shareholders for
the capital embarked by them in the business; and he can only be
made liable for the capital when, upon liquidation of the business,
there are found to be assets in his hands applicable to capital
account.The only property pertaining to Kwong Cheong Tay at the
time this action was brought consisted of shares in the two
concerns already mentioned of the total par value of P11,000. Of
course, if these shares had been sold and converted into money, the
proceeds, if not needed to pay debts, would have been distributable
among the various persons in interest, that is, among the various
shareholders, in their respective proportions. But under the
circumstances revealed in this case, it was erroneous to give
judgment in favor of the plaintiff for his aliquot part of the par
value of said shares. It is elementary that one partner, suing
alone, cannot recover of the managing partner the value of such
partner's individual interest; and a liquidation of the business is
an essential prerequisite.Moreover, after the death of the original
defendant, Lim Ka Yam, the trial court allowed the action to
proceed against Lim Yock Tock, as his administrator, and entered
judgment for a sum of money against said administrator as the
accounting party. This is an error because it is well settled that
when a member of a mercantile partnership dies, the duty of
liquidating its affair devolves upon the surviving member, or
members, of the firm, not upon the legal representative of the
deceased partner.The judgment must be reversed, and the defendant
will be absolved from the complaint.
9. Matela vs Chua SintekThe managing partner has authority to
dismiss an employee, particularly, when there is a justiable cause
for dismissal as when the employee hurled at the manager abusive
and unsavory remarks in the presence of the customers of the
rm.Matela, a pharmacy clerk in a drug store operated by a
partnership, was suspected of having misappropriated P300 worth of
anti-tetanus serum; whereupon, while being investigated by the
police, he hurled abusive and unsavory language against the
manager, in the presence customers of the firm. The manager then
dismissed him, which the CA held to be highly justified.
10. TAI TONG CHUACHE & CO. vs. THE INSURANCE COMMISSION and
TRAVELLERS MULTI-INDEMNITY CORPORATIONFacts:Complainants acquired
from a certain Rolando Gonzales a parcel of land and a building
located at San Rafael Village, Davao City. Complainants assumed the
mortgage of the building in favor of S.S.S., which building was
insured with respondent S.S.S. Accredited Group of Insurers for
P25,000.00.On April 19, 1975, Azucena Palomo obtained a loan from
Tai Tong Chuache Inc. in the amount of P100,000.00. To secure the
payment of the loan, a mortgage was executed over the land and the
building in favor of Tai Tong Chuache & Co. On April 25, 1975,
Arsenio Chua, representative of Thai Tong Chuache & Co. insured
the latter's interest with Travellers Multi-Indemnity Corporation
for P100,000.00 On June 11, 1975, Pedro Palomo secured a Fire
Insurance Policy No. F- 02500, covering the building for P50,000.00
with respondent Zenith Insurance Corporation. On July 16, 1975,
another Fire Insurance Policy No. 8459 was procured from respondent
Philippine British Assurance Company, covering the same building
for P50,000.00 and the contents thereof for P70,000.00.On July 31,
1975, the building and the contents were totally razed by
fire.Based on the computation of the loss, including the Travellers
Multi- Indemnity, respondents, Zenith Insurance, Phil. British
Assurance and S.S.S. Accredited Group of Insurers, paid their
corresponding shares of the loss. Demand was made from respondent
Travellers Multi-Indemnity for its share in the loss but the same
was refused. Hence, complainants demanded from the other three (3)
respondents the balance of each share in the loss based on the
computation of the Adjustment Standards Report excluding Travellers
Multi-Indemnity but the same was refused, hence, this action.On May
31, 1977, Tai Tong Chuache & Co. filed a complaint in
intervention claiming the proceeds of the fire Insurance Policy No.
F-559 DV, issued by respondent Travellers
Multi-Indemnity.Travellers Insurance, in answer to the complaint in
intervention, alleged that the Intervenor is not entitled to
indemnity under its Fire Insurance Policy for lack of insurable
interest before the loss of the insured premises and that the
complainants, spouses Pedro and Azucena Palomo, had already paid in
full their mortgage indebtedness to the intervenorAs adverted to
above respondent Insurance Commission dismissed spouses Palomos'
complaint on the ground that the insurance policy subject of the
complaint was taken out by Tai Tong Chuache & Company,
petitioner herein, for its own interest only as mortgagee of the
insured property and thus complainant as mortgagors of the insured
property have no right of action against herein respondent. It
likewise dismissed petitioner's complaint in
intervention.Issue:Whether or not the action was brought in the
name of the real party in interest.Held:Yes.Respondent Insurance
Commission absolved respondent insurance company from liability on
the basis of the certification issued by the then Court of First
Instance of Davao, Branch II, that in a certain civil action
against the Palomos, Arsenio Lopez Chua stands as the complainant
and not Tai Tong Chuache. From said evidence respondent commission
inferred that the credit extended by herein petitioner to the
Palomos secured by the insured property must have been paid. Such
is a glaring error which this Court cannot sanction. Respondent
Commission's findings are based upon a mere inference.Public
respondent argues that if the civil case really stemmed from the
loan granted to Azucena Palomo by petitioner the same should have
been brought by Tai Tong Chuache or by its representative in its
own behalf. From the above premise respondent concluded that the
obligation secured by the insured property must have been paid.The
premise is correct but the conclusion is wrong. Citing Rule 3, Sec.
2 10 respondent pointed out that the action must be brought in the
name of the real party in interest. We agree. However, it should be
borne in mind that petitioner being a partnership may sue and be
sued in its name or by its duly authorized representative. The fact
that Arsenio Lopez Chua is the representative of petitioner is not
questioned. Petitioner's declaration that Arsenio Lopez Chua acts
as the managing partner of the partnership was corroborated by
respondent insurance company. Thus Chua as the managing partner of
the partnership may execute all acts of administration including
the right to sue debtors of the partnership in case of their
failure to pay their obligations when it became due and demandable.
Or at the very least, Chua being a partner of petitioner Tai Tong
Chuache & Company is an agent of the partnership. Being an
agent, it is understood that he acted for and in behalf of the
firm. Public respondent's allegation that the civil case filed by
Arsenio Chua was in his capacity as personal creditor of spouses
Palomo has no basis.The respondent insurance company having issued
a policy in favor of herein petitioner which policy was of legal
force and effect at the time of the fire, it is bound by its terms
and conditions. Upon its failure to prove the allegation of lack of
insurable interest on the part of the petitioner, respondent
insurance company is and must be held liable.11. THE GREAT COUNCIL
OF THE UNITED STATES OF THE IMPROVED ORDER OF RED MEN vs. THE
VETERAN ARMY OF THE PHILIPPINESFacts:The Constitution of the
Veteran Army of the Philippines provides for the organization of
posts. Among the posts thus organized is the General Henry W.
Lawton Post, No. 1. On the 1st day of March, 1903, a contract of
lease of parts of a certain buildings in the city of Manila was
signed by W.W. Lewis, E.C. Stovall, and V.O., Hayes, as trustees of
the Apache Tribe, No. 1, Improved Order of Red Men, as lessors, and
Albert E. McCabe, citing for and on behalf of Lawton Post, Veteran
Army of the Philippines as lessee. The lease was for the term of
two years commencing February 1, 903, and ending February 28, 1905.
The Lawton Post occupied the premises in controversy for thirteen
months, and paid the rent for that time. It then abandoned them and
this action was commenced to recover the rent for the unexpired
term. Judgment was rendered in the court below on favor of the
defendant McCabe, acquitting him of the complaint. Judgment was
rendered also against the Veteran Army of the Philippines for
P1,738.50, and the costs. From this judgment, the last named
defendant has appealed. The plaintiff did not appeal from the
judgment acquitting defendant McCabe of the complaint.It is claimed
by the appellant that the action cannot be maintained by the
plaintiff, The Great Council of the United States of the Improved
Order of Red Men, as this organization did not make the contract of
lease. It is also claimed that the action cannot be maintained
against the Veteran Army of the Philippines because it never
contradicted, either with the plaintiff or with Apach Tribe, No. 1,
and never authorized anyone to so contract in its
name.Issue:Whether or not the contract in question was executed by
some authorized to so by the Veteran Army of the
Philippines.Held:No.The view most favorable to the appellee is the
one that makes the appellant a civil partnership.Article 1695 of
the Civil Code provides as follows:Should no agreement have been
made with regard to the form of management, the following rules
shall be observed:
1 All the partners shall be considered as agents, and whatever
any one of them may do by himself shall bind the partnership; but
each one may oppose the act of the others before they may have
produced any legal effect.One partner, therefore, is empowered to
contract in the name of the partnership only when the articles of
partnership make no provision for the management of the partnership
business. In the case at bar we think that the articles of the
Veteran Army of the Philippines do so provide.It is true that an
express disposition to that effect is not found therein, but we
think one may be fairly deduced from the contents of those
articles. They declare what the duties of the several officers are.
In these various provisions there is nothing said about the power
of making contracts, and that faculty is not expressly given to any
officer. We think that it was, therefore, reserved to the
department as a whole; that is, that in any case not covered
expressly by the rules prescribing the duties of the officers, the
department were present.We therefore, hold, that no contract, such
as the one in question, is binding on the Veteran Army of the
Philippines unless it was authorized at a meeting of the
department.The Veteran Army of the Philippines is acquitted.
12. SI-BOCO vs. YAP TENGFacts:For a period of three years, more
or less, the plaintiff had been furnishing to the defendant native
cloth for the latter's store in the city of Manila. The goods were
at first furnished on credit, but the business relations of the
parties caused entirely in 1904. The defendant had a partner by the
name of Yapsuan, who was the manager of the business. The defendant
introduced him to the plaintiff as such manager, and told him that
Yapsuan had authority from him to receive the cloth, and that the
value thereof should be charged to his, the defendant's account,
and in fact the cloth was, as a rule, received by Yapsuan from the
plaintiff. It became necessary for Yapsuan to return to China in
1902 on account of ill health and a liquidation of the accounts
between the plaintiff and the defendant was made in December of the
said year, showing a balance of P1,444.95 in favor of the
plaintiff, which the defendant expressly undertook to pay. After
the liquidation was made the defendant continued to buy the goods
from the plaintiff for cash until the year 1904, when, as already
stated, the business relations between the parties ceased.The
defendant has failed to show that he had paid the aforesaid balance
of P1,444.95 or any part thereof.Issue:Whether or not this action
should have been brought against the partnership itself, or against
the defendant onlyHeld:Defendant only.The appellant contends that
the goods having been furnished to and received by the partnership
between himself and Yapsuan, and the accounts of the same not
having been liquidated, this action should have been brought
against the partnership itself, or against the partners jointly,
and not against the defendant only. However that may be, the fact
remains that the defendant in this case was the only one who
contradicted with the plaintiff in his own name, as appears from
the latter's testimony. When the defendant told the plaintiff that
he had authorized Yapsuan to receive the goods, he instructed the
plaintiff to charge them to him (the defendant) personally. The
defendant, moreover, undertook personally to pay the balance due
the plaintiff, after the liquidation made in December, 1902, such
as being the sum sought to be recovered in this case, as appears
from the testimony of the plaintiff and that of the two witnesses
who took part in the said liquidation. Consequently the court below
properly allowed the plaintiff to maintain this action against the
defendant.
13. ANTONIO PARDO vs. THE HERCULES LUMBER CO., INC., and IGNACIO
FERRERFacts:Petitioner is a stockholder in the Hercules Lumber
Company, Inc., and that the respondent, Ignacio Ferrer, as acting
secretary of the said company, has refused to permit the petitioner
or his agent to inspect the records and business transactions of
the said Hercules Lumber Company, Inc., at times desired by the
petitioner.The main ground upon which the defense appears to be
rested has reference to the time, or times, within which the right
of inspection may be exercised. In this connection the answer
asserts that in article 10 of the By-laws of the respondent
corporation it is declared that "Every shareholder may examine the
books of the company and other documents pertaining to the same
upon the days which the board of directors shall annually fix."The
board also resolved to call the usual general (meeting of
shareholders) for March 30 of the present year, with notice to the
shareholders that the books of the company are at their disposition
from the 15th to 25th of the same month for examination, in
appropriate hours. The contention for the respondent is that this
resolution of the board constitutes a lawful restriction on the
right conferred by statute; and it is insisted that as the
petitioner has not availed himself of the permission to inspect the
books and transactions of the company within the ten days thus
defined, his right to inspection and examination is lost, at least
for this year.Petitioner now seeks to obtain a writ of mandamus to
compel the respondents to permit the plaintiff and his duly
authorized agent and representative to examine the records and
business transactions of said companyIssue:WON the board resolution
constitutes a lawful restriction on the right conferred by
statute.Held:No.In the case of Philpotts vs. Philippine
Manufacturing Co., and Berry it was held that the right of
examination there conceded to the stockholder may be exercised
either by a stockholder in person or by any duly authorized agent
or representative.It may be admitted that the officials in charge
of a corporation may deny inspection when sought at unusual hours
or under other improper conditions; but neither the executive
officers nor the board of directors have the power to deprive a
stockholder of the right altogether. A by-law unduly restricting
the right of inspection is undoubtedly invalid.It will be noted
that our statute declares that the right of inspection can be
exercised "at reasonable hours." This means at reasonable hours on
business days throughout the year, and not merely during some
arbitrary period of a few days chosen by the directors.In addition,
the motive of the shareholder exercising the right is
immaterial.The writ of mandamus will lie.
14. JOSE GARRIDO vs. AGUSTIN ASENCIOFacts:Plaintiff and
defendant were members of a partnership doing business under the
firm name of Asencio y Cia. The business of the partnership did not
prosper and it was dissolved by mutual agreement of the members.
The plaintiff brings this action to recover from the defendant, who
appears to have been left in charge of the books and the funds of
the firm, the amount of the capital which he had invested in the
business. The defendant, alleging that there had been considerable
losses in the conduct of the business of the partnership, denied
that there was anything due the plaintiff as claimed, and filed a
cross complaint wherein he prayed for a judgment against the
plaintiff for a certain amount which he alleged to be due by the
plaintiff under the articles of partnership on account of
plaintiff's share of these losses.The trial court found that the
evidence substantially sustains the claim of the defendant as to
the alleged losses in the business of the partnership and gave
judgment in his favor.Issue:Whether or not there is existence of
losses in the business of the said partnership Held:Yes.It appears
from the record that by mutual agreement the defendant had general
charge and supervision of the books and funds of the firm, but it
appears that these books were at all times open to the inspection
of the plaintiff, and there is evidence which tends to show that
the plaintiff himself made entries in these books touching
particular transactions in which he happened to be interested; so
that while it is clear that the defendant was more especially
burdened with the care of the books and accounts of the
partnership, it would appear that the plaintiff had equal rights
with the defendant in this regard, and that during the existence of
the partnership they were equally responsible for the mode in which
the books were kept and that the entries made by one had the same
effect as if they had been made by the other.As to the trial the
principal question at issue was the amount of the profits or losses
of the business of the partnership during the period of its
operation. The plaintiff made no allegation as to profits, but
denied defendant's allegation as to the losses. The defendant in
support of his allegations offered in evidence the estado de
cuentas (general statement of accounts) of the partnership,
supported by a number of vouchers, and by his own testimony under
oath as to the accuracy and correctness of the items set out
therein.It appears from the record that the statement of account,
the vouchers, and the books of the company were placed at the
disposition of the plaintiff for more than six weeks prior to the
trial, and that during the trial he was given every opportunity to
indicate any erroneous or fraudulent items appearing in the
account, yet he was unable, or in any event he declined to specify
such items, contenting himself with a general statement to the
effect that there must be some mistake, as he did not and could not
believe that the business had been conducted at a loss.Costs
against appellant.
15. ADRIANO BUENAVENTURA Y DEZOLLIER vs. ANTONIO DAVID y
ABELIDOFacts:A partnership was formed by Antonio David y Abelido
and Adriano Buenaventura y Dezollier for the conduct of the
business of real estate brokers in the city of Manila, under the
firm name "Abelido and Co." The former was the capitalist member of
the firm and its manager, while the latter was the industrial
member and bookkeeper. The firm maintained a feeble external
existence for a few months, during which period the capitalist
associate placed P209.86 in the enterprise. This was consumed in
office rent and other incidental expenses. Only two profitable
transactions were ever accomplished by the firm of Abelido and Co.
during its existence. These produced a total income of P42, which
sum was noted on the credit side of the company's ledger.It was
agreed in writing that the partnership should not be liquidated
until the sale of a piece of real estate in which the firm had
become interested should be effected with profit. The property to
which reference was thus made consisted of a farm in the
municipality of Murcia, in the Province of Tarlac, known as the
"Hacienda de Guitan."This farm had been formerly owned by the
spouses Loni Diangco and Epifania Torres; and long before the firm
of Abelido and Co. had come into existence Antonio David y Abelido
had been their creditor by reason of certain sums of money from
time to time loaned them. Upon July 10, 1906, Epifania agreed to
convey the Hacienda de Guitan to Abelido and Buenaventura for a
consideration stated at P2,050. The purpose of the transaction was
to settle the debt of several thousand pesos owing by her and her
son to Antonio David y Abelido. The grantee named in the deed was
Antonio David y Abelido; and no reference was made in this
instrument to the firm of Abelido and Co., or to Buenaventura as a
partner therein. Buenaventura was present at the time of the
execution of this deed and signed as a subscribing witness. It
further appears that Antonio David y Abelido proceeded to procure
the registration of the hacienda in his own name and a Torrens
title was in due course issued to him.From the date of the
conveyance above mentioned David exercised all the rights of an
owner over the property. Upon one occasion he mortgaged it for the
sum of P5,000 and Buenaventura was paid P300 for assisting in the
securing of this loan. At another time David mortgaged the property
for the sum of P15,000 and applied the money thus secured to his
own use.More than seven years after the day upon which the deed to
the property had been executed to David, Buenaventura filed the
complaint in this action. In this proceeding he seeks relief which
includes features among others: a dissolution of the partnership of
Abelido and Co and a transfer of the title of the Hacienda de
Guitan to Abelido and Co.At the hearing the court entered a
judgment declaring that the partnership of Abelido and Co. was
dissolved and denying all other relief sought in the complaint.
From this judgment the plaintiff Buenaventura has
appealed.Issue:Whether or not plaintiff, through the partnership of
the firm of Abelido and Co., can still claim his relief sought on
the hacienda and other investmentsHeld:No.Buenaventura had no
resources, and it was evidently quite beyond his power to raise the
funds necessary to participate in a business transaction of the
size of that in question. His pretension that he supplied P1,025 or
half of the consideration named in the original contract (Exhibit
C) was rightly rejected by the court. Furthermore it appears that
the firm of Abelido and Co., as distinguished from the individual
David Abelido, never in fact advanced a single peso in the
transaction. David, who supplied all the funds, has obtained the
legal title in his own individual name. This was accomplished with
knowledge on the part of Buenaventura. Furthermore he has
registered his title by means of legal proceedings which were
probably known to Buenaventura. Still later, the latter is seen
acting as broker for David in securing a loan on the hacienda and
receives a fee for his services. Meanwhile the original partnership
enterprise is abandoned. Finally more than seven years after the
day when Buenaventura stood by and signed as a witness the deed
conveying the property to David, he comes into court and seeks to
reach this property through the ghost of the firm of Abelido and
Co. and bring the defendant to account for the profits which he has
obtained from the investments of its proceeds in various
enterprises.No such relief can be granted, upon purely equitable
grounds, against a party who has himself paid the entire purchase
price in favor of one who advanced nothing.Furthermore, it is
evident that the plaintiff's case is adversely affected by his long
delay in bringing this action. Undue delay in the enforcement of a
right is strongly persuasive of a lack of merit in the claim.Costs
against appellant.
16. PANG LIM and BENITO GALVEZ vs. LO SENGFacts:Lo Seng and Pang
Lim, Chinese residents of the City of Manila, were partners, under
the firm name of Lo Seng and Co., in the business of running a
distillery, known as "El Progreso," in the Municipality of
Paombong, in the Province of Bulacan. The land on which said
distillery is located as well as the buildings and improvements
originally used in the business were, at the time to which
reference is now made, the property of another Chinaman, who
resides in Hongkong, named Lo Yao, who, in September, 1911, leased
the same to the firm of Lo Seng and Co. for the term of three
years.Upon the expiration of this lease a new written contract, in
the making of which Lo Yao was represented by one Lo Shui as
attorney in fact, became effective whereby the lease was extended
for fifteen years.Neither the original contract of lease nor the
agreement extending the same was inscribed in the property
registry, for the reason that the estate which is the subject of
the lease has never at any time been so inscribed.Pang Lim sold all
his interest in the distillery to his partner Lo Seng, thus placing
the latter in the position of sole owner; and on June 28, 1918, Lo
Shui, again acting as attorney in fact of Lo Yao, executed and
acknowledged before a notary public a deed purporting to convey to
Pang Lim and another Chinaman named Benito Galvez, the entire
distillery plant including the land used in connection therewith.
As in case of the lease this document also was never recorded in
the registry of property. Thereafter Pang Lim and Benito Galvez
demanded possession from Lo Seng, but the latter refused to yield;
and the present action of unlawful detainer was thereupon initiated
by Pang Lim and Benito Galvez in the court of the justice of the
peace of Paombong to recover possession of the premises. From the
decision of the justice of the peace the case was appealed to the
Court of First Instance, where judgment was rendered for the
plaintiffs; and the defendant thereupon appealed to the Supreme
Court.Issue:Whether or not Pang Lim be permitted being one of the
lessees before and now as one of the purchasers seeking to
terminate the lease.Held;No.The plaintiff Pang Lim has occupied a
double role in the transactions which gave rise to this litigation,
namely, first, as one of the lessees; and secondly, as one of the
purchasers now seeking to terminate the lease. These two positions
are essentially antagonistic and incompatible. Every competent
person is by law bond to maintain in all good faith the integrity
of his own obligations; and no less certainly is he bound to
respect the rights of any person whom he has placed in his own
shoes as regards any contract previously entered into by
himself.While yet a partner in the firm of Lo Seng and Co., Pang
Lim participated in the creation of this lease, and when he sold
out his interest in that firm to Lo Seng this operated as a
transfer to Lo Seng of Pang Lim's interest in the firm assets,
including the lease; and Pang Lim cannot now be permitted, in the
guise of a purchaser of the estate, to destroy an interest derived
from himself, and for which he has received full value.It is
therefore accepted as fundamental in equity jurisprudence that one
partner cannot, to the detriment of another, apply exclusively to
his own benefit the results of the knowledge and information gained
in the character of partner. Thus, it has been held that if one
partner obtains in his own name and for his own benefit the renewal
of a lease on property used by the firm, to commence at a date
subsequent to the expiration of the firm's lease, the partner
obtaining the renewal is held to be a constructive trustee of the
firm as to such lease. And this rule has even been applied to a
renewal taken in the name of one partner after the dissolution of
the firm and pending its liquidationDefendant will be absolved from
the complaint
17. R. Y. HANLON vs. JOHN W. HAUSSERMANN and A. W. BEAM,
defendants-appellants. GEORGE C. SELLNER,
intervenerFacts:Haussermann and Beam, officers of the Benguet
Consolidated Mining Company, entered into an agreement with Sellner
and Hanlon whereby in consideration of P50,000 to be raised by the
latter two to rehabilitate certain essential machineries within a
six-month period, the two would receive certain shares in the
company. Because the P50,000 was not raised within the proper
period, Haussermann and Beam had to look for other sources of
capital. Fortunately, they were able to do so, and the shares in
the company rose 10 times their original value. Sellner and Hanlon
now desire to participate in said profits on the ground that the
four of them had jointly agreed to improve the company, and it is
but fair that they should share in the profits.Issue:Whether or not
Sellner and Hanlon are entitled to the profitsHeld:No.In the first
place, Sellner and Hanlon are not partners. Second, granting that
they were originally joint ventures, still the fiduciary relations
between them ceased when Sellner and Hanlon were unable to raise
the needed P50,000. It is true that the defendants had obliged
themselves to seek financial assistance from the plaintiff but only
for the period of sex months, not indefinitely afterwards.
Moreover, after termination of an agency, partnership, or joint
venture, each of the parties is free to act in his own interest,
provided he has done nothing during the continuance of the relation
to lay a foundation for an undue advantage to himself.
18. ANTONIO LIM TANHU, DY OCHAY, ALFONSO LEONARDO NG SUA and CO
OYO vs. HON. JOSE R. RAMOLETE as Presiding Judge, Branch III, CFI,
Cebu and TAN PUTFacts:Tan Put filed a complaint against spouses Lim
Tanhu and Dy Ochay. She later amended her complaint and included
some other people as defendantsTan Put alleges that she is the
widow of Tee Hoon Lim Po Chuan, who was a partner of defendants in
the commercial partnership Glory Commercial Co.Tan Put alleges,
among others, that Tanhu et. al., through fraud and machinations,
took actual and active management of the partnership, and that
although her deceased husband was the manager of Glory,Tanhu et.al
managed to use the funds of the partnership to purchase lands and
buildings in different cities in Visayas.Further, she also alleges
that after the death of Tee Hoon Lim Po Chuan,Tanhu et. al.
continued the business without liquidation by organizing a
corporationshe alleges that the assets of the corporation are
actually the assets of the defunct partnership.In the CFI level,
Tan Put prayed for an accounting of the real and personal
properties of the Glory Commercial Co., and to subsequently deliver
to her 1/3 of the total value of the properties.Defendants defense:
That Tan Put was not the legitimate wife of the deceased; that the
assets of the partnership has already been properly liquidated, and
that it was the legitimate wife Ang Siok Tin who had received Tee
Hoons share.Issue:Whether Tan Put, as she alleged being married
with Tee Hoon, can claim from the company of the latters
share.Held:Yes.Indeed, not only does this document prove that
plaintiff's relation to the deceased was that of a common-law wife
but that they had settled their property interests with the payment
to her of P40,000.In the light of all these circumstances, We find
no alternative but to hold that plaintiff Tan Put's allegation that
she is the widow of Tee Hoon Lim Po Chuan has not been
satisfactorily established and that, on the contrary, the evidence
on record convincingly shows that her relation with said deceased
was that of a common-law wife and furthermore, that all her claims
against the company and its surviving partners as well as those
against the estate of the deceased have already been settled and
paid. We take judicial notice of the fact that the respective
counsel who assisted the parties in the quitclaim, Attys. H.
Hermosisima and Natalio Castillo, are members in good standing of
the Philippine Bar, with the particularity that the latter has been
a member of the Cabinet and of the House of Representatives of the
Philippines, hence, absent any credible proof that they had allowed
themselves to be parties to a fraudulent document His Honor did
right in recognizing its existence, albeit erring in not giving due
legal significance to its contents.Of course, the existence of the
partnership has not been denied, it is actually admitted impliedly
in defendants' affirmative defense that Po Chuan's share had
already been duly settled with and paid to both the plaintiff and
his legitimate family. But the evidence as to the actual
participation of the defendants Lim Tanhu and Ng Sua in the
operation of the business that could have enabled them to make the
extractions of funds alleged by plaintiff is at best confusing and
at certain points manifestly inconsistent.If Po Chuan was in
control of the affairs and the running of the partnership, how
could the defendants have defrauded him of such huge amounts as
plaintiff had made his Honor believe? Upon the other hand, since Po
Chuan was in control of the affairs of the partnership, the more
logical inference is that if defendants had obtained any portion of
the funds of the partnership for themselves, it must have been with
the knowledge and consent of Po Chuan, for which reason no
accounting could be demanded from them therefor, considering that
Article 1807 of the Civil Code refers only to what is taken by a
partner without the consent of the other partner or partners.
Incidentally again, this theory about Po Chuan having been actively
managing the partnership up to his death is a substantial deviation
from the allegation in the amended complaint to the effect that
"defendants Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck
Chuan and Eng Chong Leonardo, through fraud and machination, took
actual and active management of the partnership and although Tee
Hoon Lim Po Chuan was the manager of Glory Commercial Co.,
defendants managed to use the funds of the partnership to purchase
lands and buildings etc. and should not have been permitted to be
proven by the hearing officer, who naturally did not know any
better.Moreover, it is very significant that according to the very
tax declarations and land titles listed in the decision, most if
not all of the properties supposed to have been acquired by the
defendants Lim Tanhu and Ng Sua with funds of the partnership
appear to have been transferred to their names only in 1969 or
later, that is, long after the partnership had been automatically
dissolved as a result of the death of Po Chuan. Accordingly,
defendants have no obligation to account to anyone for such
acquisitions in the absence of clear proof that they had violated
the trust of Po Chuan during the existence of the
partnership.Besides, assuming there has not yet been any
liquidation of the partnership, contrary to the allegation of the
defendants, then Glory Commercial Co. would have the status of a
partnership in liquidation and the only right plaintiff could have
would be to what might result after such liquidation to belong to
the deceased partner, and before this is finished, it is impossible
to determine, what rights or interests, if any, the deceased had.
In other words, no specific amounts or properties may be
adjudicated to the heir or legal representative of the deceased
partner without the liquidation being first terminated.Petition is
granted.
19. DAN FUE LEUNG vs.HON. INTERMEDIATE APPELLATE COURT and LEUNG
YIUFacts:The Sun Wah Panciteria was registered as a single
proprietorship and its licenses and permits were issued to and in
favor of petitioner Dan Fue Leung as the sole proprietor.
Respondent Leung Yiu adduced evidence during the trial of the case
to show that Sun Wah Panciteria was actually a partnership and that
he was one of the partners having contributed P4,000.00 to its
initial establishment.Furthermore, the private respondent received
from the petitioner the amount of P12,000.00 covered by the
latter's Equitable Banking Corporation Check from the profits of
the operation of the restaurant.The petitioner denied having
received from the private respondent the amount of P4,000.00. He
contested and impugned the genuineness of the receiptLower court
ruled in favor of the private respondent. Petitioner appealed the
trial court's amended decision. However, the questioned decision
was further modified and affirmed by the appellate court. Both the
trial court and the appellate court declared that the private
petitioner is a partner and is entitled to a share of the annual
profits of the restaurant. Hence, an appeal to the SC. The
petitioner argues that private respondent extended 'financial
assistance' to herein petitioner at the time of the establishment
of the Sun Wah Panciteria, in return of which private respondent
allegedly will receive a share in the profits of the restaurant. It
was, therefore, error for the Appellate Court to interpretor
construe 'financial assistance' to mean the contribution of capital
by a partner to a partnership.Issue:WON the private respondent is a
partner of the petitioner in the establishment of Sun Wah
Panciteria.Held:Yes.In essence, the private respondent alleged that
when Sun Wah Panciteria was established, he gave P4,000.00 to the
petitioner with the understanding that he would be entitled to
twenty-two percent (22%) of the annual profit derived from the
operation of the said panciteria. These allegations, which were
proved, make the private respondent and the petitioner partners in
the establishment of Sun Wah Panciteria because Article 1767 of the
Civil Code provides that "By the contract of partnership two or
more persons bind themselves to contribute money, property or
industry to a common fund, with the intention of dividing the
profits among themselves".The complaint explicitly stated that "as
a return for such financial assistance, plaintiff (private
respondent) would be entitled to twenty-two percentum (22%) of the
annual profit derived from the operation of the said panciteria.The
petitioner raises the issue of prescription and asserted that the
complaint was only filed 22 years after. This argument is not well
taken.The private respondent's cause of action is premised upon the
failure of the petitioner to give him the agreed profits in the
operation of Sun Wah Panciteria. In effect the private respondent
was asking for an accounting of his interests in the partnership.
Regarding the prescriptive period within which the private
respondent may demand an accounting, Articles 1806, 1807, and 1809
show that the right to demand an accounting exists as long as the
partnership exists. Prescription begins to run only upon the
dissolution of the partnership when the final accounting is done.SC
affirmed appellate courts decision and ordered the dissolution of
the partnership.20. EMILIO EMNACE vs. COURT OF
APPEALSFacts:Petitioner Emilio Emnace, Vicente Tabanao and Jacinto
Divinagracia were partners in a business concern known as Ma. Nelma
Fishing Industry. Sometime in January of 1986, they decided to
dissolve their partnership and executed an agreement of partition
and distribution of the partnership properties among them,
consequent to Jacinto Divinagracias withdrawal from the
partnership.[1] Among the assets to be distributed were five (5)
fishing boats, six (6) vehicles, two (2) parcels of land located
and cash deposits.Throughout the existence of the partnership, and
even after Vicente Tabanaos untimely demise in 1994, petitioner
failed to submit to Tabanaos heirs any statement of assets and
liabilities of the partnership, and to render an accounting of the
partnerships finances. Petitioner also reneged on his promise to
turn over to Tabanaos heirs the deceaseds 1/3 share in the total
assets of the partnership, despite formal demand for payment
thereof.Consequently, Tabanaos heirs, respondents herein, filed
against petitioner an action for accounting, payment of shares,
division of assets and damages.Petitioner also raised prescription
as one of the grounds warranting the outright dismissal of the
complaint.The trial court issued an Order, denying the motion to
dismiss. The Court of Appeals rendered the assailed decision,
dismissing the petition for certiorari of petitioner. Hence, this
appeal.Issue:Whether or not thecourt should have dismissed the
complaint on the ground of prescriptionHeld:No.Petitioner contends
that the trial court should have dismissed the complaint on the
ground of prescription, arguing that respondents action prescribed
four (4) years after it accrued in 1986. The trial court and the
Court of Appeals gave scant consideration to petitioners hollow
arguments, and rightly so.The three (3) final stages of a
partnership are: (1) dissolution; (2) winding-up; and (3)
termination. The partnership, although dissolved, continues to
exist and its legal personality is retained, at which time it
completes the winding up of its affairs, including the partitioning
and distribution of the net partnership assets to the partners. For
as long as the partnership exists, any of the partners may demand
an accounting of the partnerships business. Prescription of the
said right starts to run only upon the dissolution of the
partnership when the final accounting is done.Contrary to
petitioners protestations that respondents right to inquire into
the business affairs of the partnership accrued in 1986,
prescribing four (4) years thereafter, prescription had not even
begun to run in the absence of a final accounting.When a final
accounting is made, it is only then that prescription begins to
run. In the case at bar, no final accounting has been made, and
that is precisely what respondents are seeking in their action
before the trial court, since petitioner has failed or refused to
render an accounting of the partnerships business and assets.
Hence, the said action is not barred by prescription.Petition
denied.