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ALL FOR JESUS BUSORG CASE DIGEST PAGE3OUTLINE

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-5242 August 6, 1910

ALDECOA & CO.,plaintiff-appellant,vs.WARNER, BARNES & CO., LTD.,defendant-appellee.

Rosado, Sanz and Opisso, for appellant.Haussermann, Ortigas, Cohn and Fisher, for appellee.

TORRES,J.:

By a complaint filed on September 26, 1907, the legal representativeof Aldecoa and Co., in liquidation, filed suit in the Court of FirstInstance of Manila against Warner, Barnes and Co., Ltd., alleging inthe first three paragraphs of their complaint, as a cause of action,that the plaintiff is a regular collective mercantile associationorganized in accordance with the laws of these islands, dulyregistered in the mercantile registry, and at present in liquidation;that the defendant is a joint stock mercantile firm organized inaccordance with the laws of England, registered in the mercantileregistry of Manila, and has done and is still doing business in theseIslands under the name of Warner, Barnes and Co., Ltd., which

required the business that was conducted in these Islands byWarner, Barnes and Co., the assets, liabilities, and all theobligations of which were assumed by the defendant.

In other paragraphs of the complaint, from the fourth to the twelfth,the plaintiff set forth that, prior to December 1, 1898, Warner,Barnes and Co. were conducting a business in Albay, the principal

object of which was the purchase of hemp in the pueblos of Legaspiand Tobacco for the purpose of bringing it to Manila, here to sell iffor exportation, and that on the said date of December 1, 1898, theplaintiff company became interested in the said business of Warner,Barnes and Co., in Albay and formed therewith a joint-accountpartnership whereby Aldecoa and Co., were to share equally in thegains and losses of the business in Albay; that the defendant is thesuccessor to all the rights and obligations of Warner, Barnes andCo., among which is that of being manager of the said joint-accountpartnership with Aldecoa and Co.; that the defendant acted, andcontinues to act as such manager, and is obliged to render accountssupported by proofs, and to liquidate the business, which defendantnot only has not done, in spite of the demand made upon it, but ithas expressly denied the right of plaintiff to examine the vouchers,contenting itself with forwarding copies of the entries in its books,which entries contain errors and omissions that hereinafter will bementioned.

Said entries moreover, whereas its operations should havecommenced and did commence on December 1, 1898, on whichdate the joint-account partnership commenced; that, with respect tothe liquidation of the business, the operations having been closedon December 31, 1903, Warner, Barnes and Co., Ltd., the defendant,has not realized upon the assets of the firm by selling the propertywhich constitutes its capital; that the persons who were themanagers and general partners of Warner, Barnes and Co., Ltd.,and are the managers and directors of that firm in the PhilippineIslands and are the ones who, under the previous firm name ofWarner, Barnes and Co., admitted Aldecoa and Co. as a participant

in one-half of the said business, on the 1st day of December, 1898;that the said directors of the defendant company, unlawfully,maliciously, and criminally conspired with the persons who weremanaging the commercial firm of Aldecoa and Co. during the years1899, 1900, 1901, 1902, and 1903, to defraud the latter of itsinterest in the said joint-account partnership, buying the silence of


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the said managers with respect to the operations of the joint-account partnership during the time comprised between the 1st ofDecember, 1898, and the 30th of June, 1899, and also with respectto the errors and omission in the accounts relating to the secondsemester of 1899, and those relating to 1900, 1901, 1902, and 1903.

That the said fraudulent acts were not known to the partners of theplaintiff firm until the managers, in collusion with the managers ofthe defendant firm to defraud and injure the plaintiff firm, hadceased to hold their positions, to wit, until after the 31st ofDecember, 1906, and that by reason of this conspiracy to defraudthe plaintiffs, the defendants have been benefited; that the errorsand omissions found in the entries of the books kept by thedefendant firm as manager of the joint-account partnership arethose expressed in details here below:

(a) It appears that between the 10th of July and the 26th of

December, 1899, 43,934 piculs of hemp arrived in Manila for thejoint-account partnership, which were purchased in Legaspi andTobacco at 13 pesos per picul, and, after charging against this hempexcessive expenses for collection, storage, freight, fire, marine, andwar insurance, personnel, etc., the defendants, Warner, Barnes andCo., as managers of the joint-account partnership and commissionagents of their joint-account partners, claim that they purchased thesaid hemp for themselves, but do not give the price received fromthe sale thereof and merely credit it at 13 pesos a picul, when theaverage market price at that time was 16.50 pesos a picul; saiddefendants thereby injuring plaintiffs to the amount of P76,884.50.

(b) Striking a balance from the amount of hemp debited and thatcredited, there results a difference of 4,332.96 piculs not creditedwhich, at 24 pesos a picul, the market price at the time, representsan injury to plaintiffs to the extent of P51,995.52, the said deficit,with respect to the hemp, pertaining to the period beginning withDecember 31, 1899, in the manner shown by the following table:

Invoices & Cr. Dr.

Piculs Piculs

1899 Dec. 31 ....................................... 86,534.18 43,934

1900 Apr. 30 ...................................... 13,069.97 50,261.78

1900 Dec. 31 ...................................... 67,892.56 71,277

1901 Dec. 31 ...................................... 101,253.31 100,342

1902 Dec. 31 ...................................... 98,074.52 94,279.20

1903 Dec. 31 ...................................... 66,482.49 68,880.09 433,307.03 428,974.07 4,332.96 Lacking.............................................. 433,307.03 433,307.03

(c) In 1900, on April 30, Messrs. Warner, Barnes and Co. Ltd., givecredit for 5,485 piculs of hemp, at 16 pesos a picul, when the marketprice at that time, according to themselves, was P23.78; therebyinjuring plaintiffs in the sum of P21,350.36.

(d) In 1901, on the date of January 31, Messrs. Warner, Barnes andCo., Ltd give credit for 4,600 piculs of hemp, at 8.93 pesos a picul,when, according to themselves, the market price at that time was11.50 pesos a picul; thereby injuring plaintiffs in the sum of P5,911.

(e) One of the sources of profit of the joint-account partnershipbetween Aldecoa and Co. and Warner, Barnes and Co., Ltd., wasfrom the pressing of hemp, which profit is to be credited to thepartnership joint-accounts, when the hemp is realized in Manila,and from this source there are due to the plaintiffs P149,084.12, in


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which sum they have been injured by the defendants. The saidcredit for pressing is omitted from the books of Warner, Barnes andCo., Ltd., and should be entered as follows:

1899 ............................................. 21,968 bales, at P1.25

................................. P27,460 1900 to April 30......................... 25,130 bales, at P1.25 .................................31,412.50 1900 May 10 to Dec. 31 ............ 35,639 bales, atP1.25 ................................. 44,548.751901.............................................. 50,151 bales, at P1.25................................. 62,688.75 1902 to July 31........................... 26,825 bales, at P1.25 .................................33,531.25Aug. 1 to Dec. 31 ............. 20,314 bales, at P1.75................................. 35,549.50 1903............................................. 34,440 bales, at P1.75................................. 60,270

214,467 bales................................................. 295,460.75 2,166 bales,lacking, at P1.25 2,707.50

216,633 bales.................................................. 298,168.25 20 loose.

216,653 bales.

(f) Another error found in the books of Warner, Barnes, and Co.,Ltd., is in connection with the outstanding accounts, which aredebited in the sum of P52,510.36, while only P2,769.24 are creditedin the manner set out in the following statement:

DR.

1899 July 31. W.B. and Co., Tobacco, transferred to net

account their account sale 92.25 piculs hides

by Kongsee .............................................................................

P1,149.46

1899 Dec. 31. For transfer account to cover business this

semester without statement ..................................................16,100.57

1900 Feb. 28. As transferred account items noted page

114 day-book ..........................................................................18,635.08

1900 Feb. 28. To cover war insurance, January................................................. 4,000

1900 Feb. 28. To cover outstanding accounts................................................... 2,625.25 52,510.36

CR.

1900 Feb. 28. As transferred account items noted page

113 day-book ..........................................................................2,769.24

There remain, therefore......................................................... 49,741.12 of which one-


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half, that is ...................................................... 24,870.56belongs to the plaintiffs.

(g) In 1900, there is unduly included an item of net account whichshould be stricken out, as it does not pertain to this business. This

item is the following:

1900

June 30. To Miguel Estela. For transfer made to his account

of 5 per cent commission on his hemp, which should

not be paid according to agreement .....................................P870.75

Half of this sum, P435.37, must be credited to the plaintiffs.

(h) On the date of December 26, 1899, Messrs. Warner, Barnes andCo., Ltd., deduct from the profits which they show as belonging toAldecoa and Co., the sum of P7,400, under the appearance of theinsurance premium, and they delivered that sum to the plaintiffs'managers with whom they conspired, for the purposes of thecollusion alleged in Paragraph VII of the complaint, in the mannerfailing to observe the truth in their statement of the facts. Aldecoaand Co., therefore, claim for themselves this amount, P7,400.

(i) On December 31, 1903, on a capital of P50,000 brought in by

Aldecoa and Co., and to whom it should bear 5 per cent interestfrom the 8th of June, 1900, the interest is unduly credited to thejoint-account, thereby injuring the plaintiffs in the sum of P8,750.

(j) On December 31, 1902, Aldecoa and Co. are charged with sixmonths' interest, amounting to P736.46, on a balance debitedagainst them for alleged losses, and on June 30, 1903, they are

charged with P1,818.58 for a like reason. These two items should bestricken out, because the accounts when correctly made to show nolosses, but profits. By such debits the plaintiffs have been injured inthe sum of P1,277.52.

(k) In the entries corresponding to the years 1902 and 1903,Warner, Barnes and Co., Ltd., give the price of "corriente buena"(currect good), to the grade which, according to the mark, wasclassified as "abaca superior" (superior hemp); the price of"corriente ordinario" (current ordinary), to the hemp markedunder the classification of "corriente buena" (current good); theprice of "segunda superior" (second superior), to what is"corriente" or "current," and so on successively; whence results adifference of price to the value of P233,102.18, in 1902, andP74,274.90, in 1903, one-half of which differences should becredited to Aldecoa and Co., that is P153,688.54.

(l) The value of the properties brought in by Warner, Barnes andCo., Ltd., to the joint-account, instead of cash capital, is omittedfrom the accounts. These properties are the following:

Those purchased from Mariano Roisa, consisting of one galvanized-iron-roofed warehouse, with hemp press; one house of strongmaterials and the lot on which it stands, in Tobacco, P12,000.

That purchased from Juana Roisa, which is one small warehouse ofstrong materials, in Tobacco, worth about P2,500.

Those purchased from D. Manuel Zalvidea situated in Tobacco,which are: One warehouse of strong materials, with press; anotherwarehouse of strong materials; and two houses of strong materials,together with the lots on which they are built, P22,000.


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Those purchased from D. Marcos Zubeldia, in Legaspi, which are:Four warehouses with three hemp presses, and one house of strongmaterials, with their corresponding lots, P50,000.

Total cost, P86,500.

The complaint further sets forth that if the entries made by thedefendant in its books show in themselves the foregoing errors andomissions, the plaintiff has good grounds for believing that, if thevouchers were examined, still greater errors would be found, as towhich the plaintiff can not formulate its claims with exactness untilthe defendant renders it an account, accompanied by vouchers; thatthe defendant, as manager of the joint-account partnership withAlcodea & Co., neglected to comply with what is especiallyprescribed in article 243 of the Code of Commerce, as a duty toinherent to its position as manager of the joint-account partnership,which is that of rendering an account with vouchers, and that of

liquidating the said business, for it refuses to furnish the plaintiffthe documents required for their examination and verification, andalso refuses to realize the firm assets by selling the warehouses,houses, and other property which constitute the capital; that, as thedefendant refuses to do the things above related, the plaintiff has noother easy, expeditious and suitable remedy than to petition thecourt for a writ of mandamus, wherefore it prays the court toprotect it in its rights and to issue the said mandamus against thedefendant, ordering it, within a date set for this purpose, to renderto the court an account, accompanied by invoices, receipts, andvouchers of the Albay business, beginning the said account as ofDecember 1, 1898, the date on which the partnership was formed,

and correcting in it errors and omissions related in paragraph 9 ofthis complaint; that the defendant credit and pay to the plaintiff thesums alleged in that paragraph to be due to the plaintiff, withinterest at the legal rate upon the sums of omitted for the differencebetween the amounts incorrectly debited and credited, from therespective dates on which they should appear, if correctly entered;

that after the said accounts have been rendered and discussed,judgment be entered for any balance which may appear in favor ofthe plaintiff, including the sums claimed, and legal interest thereon.The plaintiff also prays that the writ of mandamus fix a term withinwhich the defendant is to liquidate the business, selling theproperties aforementioned and distributing the proceeds betweenboth the litigants, and that the defendant be adjudged liable forcosts of suit, and plaintiff be granted such other and further relief asmay be found just and equitable.

On November 11, 1907, the defendant filed a written answer ancounterclaim against the defendant, and, notwithstanding theoverruling of the demurrer filed by the latter to the counterclaim,the court by writ of December 4, 1907, ordered that the defendantshould, within a period of five days, make its allegations morespecific with respect to certain particulars mentioned in the order ofthe court, and both parties being notified thereof, the defendant, on

January 24, 1908 prayed the court to authorize it to file the attachedamended answer instead of the original one.

In the said amended answer the firm of Warner, Barnes & Co. Ltd.,the defendant, states that it denies each and every one of theallegations of the complaint, with the exception of those which areexpressly admitted in its answer, and admit the allegations ofparagraphs 1, 2, and 3 of the complaint. In answer to the allegationsof paragraphs 4 to 12 of the complaint, it admits that on June 30,1899, a joint-account partnership was formed between the plaintiffand the defendant transactions of which were the purchase of hempin Legaspi and Tobacco, of which business one-half of the results,

whether losses or gains, appertained to the plaintiff. Defendant alsoadmits that the said business continued under the management ofthe defendant company, as manager of the said joint-accountpartnership, until December 31, 1903; but it denies all the otherallegations contained in the said paragraphs. For its first specialdefense, the defendant alleges that during the period that the said


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joint-account partnership existed, the manager thereof, thedefendant, rendered to the plaintiff just and true accounts of itstransaction as manager of the said partnership, which accountshave been approved by the plaintiff, with the exception of thoserelating to the year 1903, and as to the latter, that the same wereobjected to by plaintiff firm solely upon the grounds mentioned inclause (k) of paragraph 9 of the complaint, which objections arewholly unfounded. As its second special defense, the defendantalleges that more than four years have expired between the time thealleged right of action accrued to the plaintiff and the date of thefiling of the complaint. For all the reasons set forth in this amendedanswer, the defendant prayed that it be absolved from thecomplaint, with the costs against the plaintiff.

On the subsequent to the 14th of August, 1908, the trial of this causewas held and oral evidence was introduced by the plaintiff, but nowitnesses were offered by the defendant, which finally moved for a

dismissal of the case, and the court, on December 26 of the sameyear, 1908, rendered judgment, dismissing the complaint withrespect to the petition for the rendering of an account, verified byinvoices, receipts and vouchers, of the said Albay business,pertaining to the period comprised from the beginning of thebusiness to the 31st of December, 1902, inclusive, assessing thecosts against the plaintiff, and opening the second period of the trialwith respect to the account for the whole year 1903, in accordancewith the ruling of the court made at the commencement of thehearing. The plaintiff on being notified of this judgment filed awritten exception thereto and announced his intention to forwardthrough regular channels a bill of exceptions, and by another

writing moved for a new trial on the ground that the evidence didnot justify the judgment rendered, which it alleged it was openlyand manifestly contrary to the weight of the evidence and to law.This motion being denied, to which exception was taken by theplaintiff, the latter duly filed a proper bill of exceptions which was

certified to and forwarded to this court, together with all thedocumentary and oral evidence produced at the trial.

This litigation concerns the rendering of accounts pertaining to themanagement of the business of a joint-account partnership formedbetween the two litigants companies.

Both the plaintiff and the defendant are in accord that, throughverbal agreement, the said partnership was established, wherebythey should share equally the profits and losses of the business ofgathering and storing hemp in Albay and selling it in Manila forexportation, and that the commercial firm of Warner, Barnes andCo., Ltd., was the manager of the said joint-account partnership.

The disagreement between the parties consists in the followingpoints: First, as to the date when the partnership was formed andbegan business in the province mentioned; second, whether the

managing firm did render accounts, duly verified by vouchers, of itsmanagement from the date of the organization of the partnership;third, whether errors and omission, prejudicial to the plaintiff,Aldecoa and Co., exist in the partnership books and in its accounts,and whether, in the management of the said business, fraudulentacts were committed also to the plaintiff's injury; and, fourth,whether the partnership property should be included in theliquidation of the said business and in the accounts appertaining tothe year 1903, when the existence of the partnership came to anend.

With respect to the date on which the said partnership began, the

plaintiff, Aldecoa and Co., submitted evidence unrebutted by that ofthe defendant, Warner, Barnes and Co., Ltd., and although thelatter averred that the joint-account partnership began on June 30,1899, denying that it was commenced, or was formed, on December1, 1898, as the plaintiff says that it was, it is certain that thedefendant has not proved its averment; and if, on the opening of


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this case de novo it shall not have done so within such period as thecourt may see fit to determine, it will be proper to find inaccordance with the value of the evidence adduced by the plaintiffand to advise the defendant to render, within a fixed period,accounts, verified by vouchers, of the management of thepartnership business and pertaining to the seven months fromDecember 1, 1898, to June 29, 1899; and, in view of the evidenceadduced by the plaintiff in proof of the aforesaid first point, if thedefendant does not produce other evidence in rebuttal, they must,for some reason, be expressly rejected in the judgment, if they arenot to be taken into account in reaching the conclusions or inconsidering the case upon the merits.

As regards the second point, we agree with the opinion expressed bythe lower court and find that the firm of Warner, Barnes and Co.,Ltd., did render accounts from June 30, 1899, to December 31,1902, inasmuch as the very evidence introduced by the plaintiff

showed that the said accounts had been rendered and wereapproved by it, according to the context of its own letters of thedates of July 27, 1907, and February 19, 1903. Therefore, theplaintiff is in nowise entitled, and has no right of action to compelthe defendant to render the accounts pertaining to that period, theyhaving already been rendered and duly approved.

It is a rule of law generally observed that he who takes charge of themanagement of another's property is bound immediately thereafterto render accounts covering his transactions; and that it is always tobe understood that all accounts rendered must be dulysubstantiated by vouchers.

It is a fact admitted by both litigating parties that Warner, Barnesand Co., Ltd., was the manager of the business of the joint-accountpartnership formed between it and Aldecoa and Co., it isunquestionable that it was and is the defendant's duty to renderaccounts of the management of the business, as it partially has

done. Although the defendant has not proved, as it should havedone, that it complied with its duty of rendering accounts of itsmanagement, since the letters themselves exhibited by the plaintiff,and duly authenticated as being written by the latter, prove that thedefendant did render accounts from June 30, 1899, to December 31,1902, no legal reason whatever exists for not accepting the findingof the lower court which decided that it had been proved thataccounts were rendered pertaining to the period mentioned andthat the said accounts were approved by the plaintiff.

The procedure of the plaintiff is truly inexplicable in accepting andapproving accounts that were rendered to it, and which only beginwith June 30, 1899, inasmuch as such approval would appear toindicate that it agreed to the claim made by the defendant that thepartnership commenced on the said date; but even so, once that it isproved that the actual date on which the partnership was formedwas December 1, 1898, and that it is not shown that the defendant

has rendered accounts corresponding to the seven monthssubsequent to the said date of December 1, the acceptation andapproval of accounts rendered since the 30th of June 1899, does notexcuse nor release the manager of the partnership, the defendant,from complying with its unquestionable duty of rendering accountscovering the aforesaid seven months. The presumption must besustained until proof to the contrary is presented.

Moreover, the approval of accounts corresponding to the years fromJune 30, 1899, to December 31, 1902, does not imply that the saidapproved accounts comprise those pertaining that the seven monthsmentioned, December 1, 1899, to June 29, 1899, because the

defendant, the accountant, denied that the partnership commencedon the aforesaid date of December 1st, asserting it began on June30, 1899; wherefore, on defendant's rendering those accounts, it isto be presumed that it did so from the date which it avers was thatof the information of the partnership and the beginning of the


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business, and it is therefore evident that it has not renderedaccounts pertaining to the seven months mentioned.

With respect to the third point relative to whether errors andomissions prejudicial to the plaintiff, Aldecoa & Co., exist in thepartnership books and in its accounts, and whether, in themanagement of the said business, fraudulent acts were committedto plaintiff's injury, it must be borne in mind that once accountshave been approved which were rendered by the managing firm ofWarner, Barnes & Co., Ltd., the plaintiff, Aldecoa & Co., is notentitled afterwards to claim a revision of the same, unless it showsthat there was fraud, deceit, error, or mistake in the approval of thesaid accounts.

Under these hypothesis, Alcodea & Co. are strictly obliged to provethe errors, omissions, and fraudulent acts attributed to thedefendant, in connection with the accounts already rendered, and

approved by them, in order that the same may be revised inaccordance with law and the jurisprudence of the courts. (Pastor vs.Nicasio, 6 Phil. Rep., 152.)

The approval of an account does not prevent its subsequentrevision, or at least its correction, if it is proved in a satisfactorymanner that there was deceit and fraud or error and omission in it.(Arts. 1265, 1266, Civil Code.)

Law 30, title 11, 5thPartida, provides, among other things, thefollowing:

That is precisely what we say should be observed, in all otheraccounts that men make among themselves, in connectionwith the things which belong to them. Notwithstanding thatthey may acknowledge the settlement of the accountsbetween them and promise never to bring them up again, ifit had be known in truth that he who gave the account or had

the things in his keeping, concealed anything deceitfully, orcommitted other fraud against those who have a share insuch thing, then neither the suit, nor such previous statusand promise shall avail; on the contrary, we say that theymay sue him to compel him to remedy the deceit hecommitted against them, and to pay all the damages andlosses that have accrued to them by reason thereof;provided, however, he especially shall not have repaired thedeceit that he committed.

So that it does not matter that the accounts pertaining to the yearscomprised between the 30th of June, 1899, and the 31st ofDecember, 1902, may have been approved by Aldecoa & Co.Whenever this firm shall succeed in proving that there was error,omission, fraud, or deceit in these accounts, they may be dulyrevised, according to the law.

With regard to the last point in controversy, the defendant agreesthat the plaintiff has not yet approved the accounts that the formerrendered, pertaining to 1903, the last years of the existence of thejoint-account partnership; and, for this reason, it was provided inthe judgment appealed from that the trial should continue withrespect to the said accounts corresponding to the year 1903, inorder that the plaintiff might take such objections and statements inregard to the same as he deemed proper, and adduce the evidenceconducive to prove his claim, in accordance with law.

It is one of the duties of the manager of a joint-account partnership,to liquidate the assets that form the common property, and to state

the result obtained therefrom in the final rendering of the accountswhich he is to present at the conclusion of the partnership.

Article 243 of the Code of Commerce says;


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The liquidation shall be effected by the manager, and afterthe transactions have been concluded he shall render aproper account of its results.

It is a recognized fact, and one admitted by both parties that thepartnership herein concerned concluded its transactions onDecember 31, 1903; wherefore the firm of Warner, Barnes & Co.Ltd., the manager of the partnership, in declaring the latter'stransactions concluded and in rendering duly verified accounts ofits results, owes the duty to include therein the property and effectsbelonging to the partnership in common. This rule was establishedby the supreme court of Spain in applying a similar precept of themercantile code, in its decision on an appeal in causation of the 1stof July, 1870, setting up the following doctrine:

In case of the liquidation of a company of this kind(denominated joint-account partnership), inasmuch as the

sale of the firm assets is necessarily uncertain and eventual,considering the greater or lesser selling price that may beobtained from the property and effects which comprise suchassets, the price received should be alloted in the sameproportion as that fixed in the contract for the division of theprofits and losses, for otherwise one of the partners wouldbe benefited to the detriment and loss of his copartners.

This doctrine is perfectly legal and in accord with justice, as noperson should enrich himself wrongfully at the expense of another;and, in the case under review, should it be duly and fully provedthat the managing firm acquired realty in the name and at the

expense of the joint-account partnership with the plaintiff firm, it isjust that, in liquidating the property of common ownership, suchrealty should be divided between the partners in the same manneras were the profits and losses during the existence of the business,from the beginning of the partnership to the date of its dissolution.

By the facts herein above set forth, it has been shown that in thepresent state of this cause resulting from the rendering of thejudgment appealed from, it has not been possible to decide in a finalmanner the various issues brought up and controverted by thelitigants, for, though it be granted as proved that the defendantfirm, the manager of the said partnership, has in fact renderedaccounts pertaining to the years from June 30, 1899, to December31, 1902, as found in the said judgment, there still remain to bedecided the four points or questions of fact before specified.Wherefore, and in accordance with section 496 of the Code of CivilProcedure, a new trial should be held For the purpose of a finaldecision of all the questions involved in this litigation, andaccordingly the judgment appealed from is set aside and this causeshall be returned to the court below, accompanied by a certifiedcopy of this decision, for the holding of a new trial, for whichpurpose, first, the defendant shall be advised that it must, within afixed period, render an account, verified by vouchers, of its

management of the business of the joint-account partnership withthe plaintiff, pertaining to the months from December 1, 1898, toJune 29, 1899, and to the twelve months of the year 1903, unless itshall prove in a satisfactory manner that the said partnership beganon June 30, 1899, contrary to the averment of the plaintiffsupported by evidence that it commenced on December 1, 1898, inwhich case the said rendering of account shall be restricted to thetwelve months of the year 1903, in the accounts of which last periodmust be included all the property that is found to belong to the saidpartnership; second, in the examination of the accounts that may befound to have been rendered, the parties may allege and prove factsconducive to their revision or approval besides availing themselves

of the evidence already adduced at trial; and, third, with respect tothe accounts corresponding to the period from June 30, 1899, toDecember 31, 1902, already approved, the trial court shall beproceed in accordance with law, duly considering the errors,omissions, mistakes and fraudulent or deceitful acts that have beenalleged or may specifically be alleged in rejecting the said approvedaccounts, as well as the evidence introduced by both parties, and it


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shall be careful to decide in its final judgment all the issues raisedbetween the parties in the course of this litigation and to providesuch remedies as are proper in regard to their respective claims. Soordered.

Johnson, Moreland and Trent, JJ.,concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-18707 December 9, 1922

PO YENG CHEO,plaintiff-appellee,vs.LIM KA YAM,defendant-appellant.

F. R. Feria and Romualdez Bros. for appellant.Quintin Llorente and Carlos C. Viana for appellee.

STREET,J.:

By the amended complaint in this action, the present plaintiff, PoYeng Cheo, alleged sole owner of a business formerly conducted inthe City of Manila under the style of Kwong Cheong, as managingpartner in said business and to recover from him its properties andassets. The defendant having died during the pendency of the causein the court below and the death suggested of record, his

administrator, one Lim Yock Tock, was required to appear andmake defense.

In a decision dated July 1, 1921, the Honorable C. A. Imperial,presiding in the court below, found that the plaintiff was entitled toan accounting from Lim Ka Yam, the original defendant, asmanager of the business already reffered to, and he accordinglyrequired Lim Yock Tock, as administrator, to present a liquidationof said business within a stated time. This order bore no substantialfruit, for the reason that Lim Yock Tock personally knew nothingabout the aforesaid business (which had ceased operation morethan ten years previously) and was apparently unable to find anybooks or documents that could shed any real light on itstransaction. However, he did submit to the court a paper written byLim Ka Yam in life purporting to give, with vague and uncertaindetails, a history of the formation of the Kwong Cheong Tay andsome account of its disruption and cessation from business in 1910.

To this narrative was appended a statement of assets and liabilities,purporting to show that after the business was liquidate, it wasactually debtor to Lim Ka Yam to the extent of several thousandpesos. Appreciating the worthlessness of this so-called statement,and all parties apparently realizing that nothing more was likely tobe discovered by further insisting on an accounting, the courtproceeded, on December 27, 1921, to render final judgment in favorof the plaintiff.

The decision made on this occasion takes as its basis the fact statedby the court in its earlier decision of July 1, 1921, which may bebriefly set fourth as follows:lawphil.net

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 PoGui Yao in a business conducted in Manila under the style of KwongCheong Tay. This business had been in existence in Manila for manyyears prior to 1903, as a mercantile partnership, with a


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capitalization of P160,000, engaged in the import and export trade;and after the death of Po Gui Yao the following seven persons wereinterested therein as partners in the amounts set opposite theirrespective names, to wit: Po Yeng Cheo, P60,000; Chua Chi Yek,P50,000; Lim Ka Yam, P10,000; Lee Kom Chuen, P10,000; LeyWing Kwong, P10,000; Chan Liong Chao, P10,000; Lee Ho Yuen,P10,000. The manager of Kwong Cheong Tay, for many years priorof its complete cessation from business in 1910, was Lim Ka Yam,the original defendant herein.

Among the properties pertaining to Kwong Cheong Tay andconsisting part of its assets were ten shares of a total par value ofP10,000 in an enterprise conducted under the name of Yut SiongChyip Konski and certain shares to the among of P1,000 in theManila Electric Railroad and Light Company, of Manila.

In the year 1910 (exact date unstated) Kwong Cheong Tay ceased to

do business, owing principally to the fact that the plaintiff ceased atthat time to transmit merchandise from Hongkong, where he thenresided. Lim Ka Yam appears at no time to have submitted to thepartners any formal liquidation of the business, though repeateddemands to that effect have been made upon him by the plaintiff.

In view of the facts above stated, the trial judge rendered judgmentin favor of the plaintiff, Po Yeng Cheo, to recover of the defendantLim Yock Tock, as administrator of Lim Ka Yam, the sum of sixtythousand pesos (P60,000), constituting the interest of the plaintiffin the capital of Kwong Cheong Tay, plus the plaintiff's proportionalinterest in shares of the Yut Siong Chyip Konski and Manila Electric

Railroad and Light Company, estimated at P11,000, together withthe costs. From this judgment the defendant appealed.

In beginning our comment on the case, it is to be observed that thiscourt finds itself strictly circumscribed so far as our power of reviewis concerned, to the facts found by the trial judge, for the plaintiff

did not appeal from the decision of the court below in so far as itwas unfavorable to him, and the defendant, as appellant, has notcaused a great part of the oral testimony to be brought up. It results,as stated, that we must accept the facts as found by the trial judge;and our review must be limited to the error, or errors, if any, whichmay be apparent upon the face of the appealed decision, in relationwith the pleadings of record.

Proceeding then to consider the appealed decision in relation withthe facts therein stated and other facts appearing in the orders andproceedings in the cause, it is quite apparent that the judgmentcannot be sustained. In the first place, it was erroneous in any eventto give judgment in favor of the plaintiff to the extent of his share ofthe capital of Kwong Cheong Tay. The managing partner of amercantile enterprise is not a debtor to the shareholders for thecapital embarked by them in the business; and he can only be madeliable for the capital when, upon liquidation of the business, there

are found to be assets in his hands applicable to capital account.That the sum of one hundred and sixty thousand pesos (P160,000)was embarked in this business many years ago reveals nothing as tothe condition of the capital account at the time the concern ceasedto do business; and even supposing--as the court possibly did--thatthe capital was intact in 1908, this would not prove it was intact in1910 when the business ceased to be a going concern; for in thatprecise interval of time the capital may have been diminished ordissipated from causes in no wise chargeable to the negligence ormisfeasance of the manager.

Again, so far as appears from the appealed decision, the only

property pertaining to Kwong Cheong Tay at the time this actionwas brought consisted of shares in the two concerns alreadymentioned of the total par value of P11,000. Of course, if theseshares had been sold and converted into money, the proceeds, if notneeded to pay debts, would have been distributable among thevarious persons in interest, that is, among the various shareholders,


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in their respective proportions. But under the circumstancesrevealed in this case, it was erroneous to give judgment in favor ofthe plaintiff for his aliquot part of the par value of said shares. It iselementary that one partner, suing alone, cannot recover of themanaging partner the value of such partner's individual interest;and a liquidation of the business is an essential prerequisite. It istrue that in Lichauco vs. Lichauco (33 Phil., 350), this courtpermitted one partner to recover of the manager the plaintiff'saliquot part of the proceeds of the business, then long since closed;but in that case the affairs of the defunct concern had been actuallyliquidate by the manager to the extent that he had apparentlyconverted all its properties into money and had pocketed the same--which was admitted;--and nothing remained to be done except tocompel him to pay over the money to the persons in interest. In thepresent case, the shares referred to--constituting the only assets ofKwong Cheong Tay--have not been converted into ready money anddoubtless still remain in the name of Kwong Cheong Tay as owner.Under these circumstances it is impossible to sustain a judgment infavor of the plaintiff for his aliquot part of the par value of saidshares, which would be equivalent to allowing one of severalcoowners to recover from another, without process of division, apart of an undivided property.

Another condition will be noted as present in this case which in ouropinion is fatal to the maintenance of the appealed judgment. Thisis that, after the death of the original defendant, Lim Ka Yam, thetrial court allowed the action to proceed against Lim Yock Tock, ashis administrator, and entered judgment for a sum of moneyagainst said administrator as the accounting party,--

notwithstanding the insistence of the attorneys for the latter thatthe action should be discontinued in the form in which it was thenbeing prosecuted. The error of the trial court in so doing can bereadily demonstrated from more than one point of view.

In the first place, it is well settled that when a member of amercantile partnership dies, the duty of liquidating its affairdevolves upon the surviving member, or members, of the firm, notupon the legal representative of the deceased partner. (Wahl vs.Donaldson Sim & Co., 5 Phil., 11; Sugo and Shibata vs. Green, 6Phil., 744) And the same rule must be equally applicable to a civilpartnership clothed with the form of a commercial association (art.1670, Civil Code; Lichauco vs. Lichauco, 33 Phil., 350) Upon thedeath of Lim Ka Yam it therefore became the duty of his survivingassociates to take the proper steps to settle the affairs of the firm,and any claim against him, or his estate, for a sum of money due tothe partnership by reason of any misappropriation of its funds byhim, or for damages resulting from his wrongful acts as manager,should be prosecuted against his estate in administration in themanner pointed out in sections 686 to 701, inclusive, of the Code ofCivil Procedure. Moreover, when it appears, as here, that theproperty pertaining to Kwong Cheong Tay, like the shares in the YutSiong Chyip Konski and the Manila Electric Railroad and LightCompany, are in the possession of the deceased partner, the properstep for the surviving associates to take would be to makeapplication to the court having charge to the administration torequire the administrator to surrender such property.

But, in the second place, as already indicated, the proceedings inthis cause, considered in the character of an action for anaccounting, were futile; and the court, abandoning entirely theeffort to obtain an accounting, gave judgment against theadministrator upon the supposed liability of his intestate to respondfor the plaintiff's proportionate share of the capital and assets. But

of course the action was not maintainable in this aspect after thedeath of the defendant; and the motion to discontinue the action asagainst the administrator should have been granted.

The judgment must be reversed, and the defendant will be absolvedfrom the complaint; but it will be understood that this order is


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without prejudice to any proceeding which may be undertaken bythe proper person or persons in interest to settle the affairs ofKwong Cheong Tay and in connection therewith to recover from theadministrator of Lim Ka Yam the shares in the two concernsmentioned above. No special pronouncement will be made as tocosts of either. So ordered.

Araullo, C. J., Johnson, Malcolm, Avancea, and Villamor, JJ.,concur.Ostrand, J., concurs in the result.Johns, and Romualdez, JJ., took no part in the decision of this case.

MAXIMO GUIDOTE v.ROMANA BORJA (administratrix ofthe estate of Narciso Santos)

1928 / Ostrand

FACTS

Maximo Guidote and Narciso Santos formed in 1918 a partnershipbusiness under the name of Taller Sinukuan, in which Santos was

the capitalist partner and Guidote was the industrial partner. Santosdied in 1920. Guidote failed to liquidate the affairs of thepartnership and to render an account thereof to Borja, theadministratrix of Santos estate.

Guidote brought an action against Borja to recovera sum of money[9k~], a part of which was alleged to be the netprofits from the business due Guidote, and the rest of the sumconsisting of advances allegedly made by Guidote. Borja admittedthe partnerships existence and prayed that Guidote be

ordered to render an accounting and to pay the estate 25kas net profits, credits, and property pertaining to Santos.

Guidote called several witnesses and introduced aso-called accounting and a mass of documentary evidence,which was so hopelessly and inextricably confused that the courtcould not consider it of much probative value. The courtdismissed Guidotes complaint and absolved Borja.Guidotewas ordered to render a full and complete accounting, verified byvouchers, of the partnership business.

Guidote rendered an account prepared by one

Tomas Alfonso, a public accountant.Numerous objectionswere presented by Borja. The court disapproved the accountand ordered that Borja submit an accountingfrom the dateof the commencement of the partnership up to the time thebusiness was closed.

Borja presented an account and liquidationprepared by a public accountant, Santiago A. Lindaya,showing a balance of P29k~ in Borjas [Santos estate]favor.At the hearing, Borja introduced the public accountant JoseTuriano Santiago to testify as to the results of an audit made by him

of the partnership accounts. Santiago testified that he had prepareda separate accounting or liquidation similar in results to thatprepared by Lindaya, but with a few differences in the sums total.[Computation: Santos is a creditor of the Taller Sinukuan in thesum of P26k. Guidote is a debtor to the Taller Sinukuan in the sumof P20k.]


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In order to contradict the conclusions of the twopublic accountants, Guidote presented Tomas Alfonso andthe bookkeeper, Pio Gaudier, as witnesses.The trial courtjudge said that the testimonies of these witnesses areunreliable.

Tomas Alfonso is the same public accountant whofiled the liquidation Exhibit O on behalf of Guidote, inrelation to the partnership business, which liquidationwas disapproved by this court in a decision. The judgedid not believe Alfonsos proposition that Guidote, amere industrial partner, notwithstanding his havingreceived 21k on the various jobs and contracts of thebusiness had actually expended and paid out 63k, of 44kin excess of the gross receipts of the business. Itmaterially contradicts Guidotes allegations to the effectthat the advances that he [Guidote] made amounted only

to 2k. Pio Gaudier is the same bookkeeper who preparedthree entirely separate and distinct liquidation for thesame partnership business, and the court found that thetestimony given by him at the last hearing is confusing,contradictory and unreliable.

Other witnesses were given scantconsiderationChua Chak can neither read nor writeEnglish, Spanish, or Tagalog; Claro Reyes was forced toadmit that a certain exhibit was not the original.

The court gave credence to the conclusions reachedby the public accountants presented by Borja. Guidote was

ordered to pay P26k to Borja, with legal interest, pluscosts.

ISSUE & HOLDING

WON the trial court is correct in ordering Guidote to pay P26k toBorja.YES

RATIO

There may be some merit in Guidotes contention that the dismissalof his complaint was premature. The better practice would been tolet the complaint stand until the result of the liquidation of thepartnership affairs was known. But under the circumstances, noharm was done by the dismissal of Guidotes complaint.

GUIDOTES ARGUMENT

Since Santos, up to the time of his death, generally took care of thepartnerships payments and collections, his legal representatives

were under the obligation to render accounts of the operations,notwithstanding the fact that Guidote was in charge of the businesssubsequent to the death of Santos.

GUIDOTES ARGUMENT IS UNAVAILING

Wahl v. Donaldson Sim & Co.

The death of one of the partners dissolves the partnership, but thatthe liquidation of its affairs is by law entrusted, not to the executorsof the deceased partner, but to the surviving partners or the

liquidators appointed by them.

The rule for the conduct of a surviving partner


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In equity, surviving partners are treated as trusteesof therepresentatives of the deceased partner, with regard to the interestof the deceased partner in the firm. As a consequence of thistrusteeship, surviving partners are held in their dealings with thefirm assets and the representatives of the deceased to that nicety of

dealing and that strictness of accountability required of andincident to the position of one occupying a confidential relation. Itis the duty of surviving partners to render an account of theperformance of their trust to the personal representatives of thedeceased partner, and to pay over to them the share of suchdeceased member in the surplus of firm property, whether itconsists of real or personal assets.

Guidote failed to observe this rule, and he is not in position tocomplain if his testimony and that of his witnesses is discredited.

The appealed judgment is AFFIRMED.

Nielson & Co. Inc. vs. Lepanto Consolidated Mining Co.[GR L-21601, 28 December 1968]En Banc, Zaldivar (J): 6 concur, 4 took no part

Facts: [GR L-21601, 17 December 1966; Zaldivar (J): 6 concur, 2took no part] An operating agreement was executed before WorldWar II (on 30 January 1937) between Nielson & Co. Inc. and the

Lepanto Consolidated Mining Co. whereby the former operated andmanaged the mining properties owned by the latter for amanagement fee of P2,500.00 a month and a 10% participation inthe net profits resulting from the operation of the miningproperties, for a period of 5 years. In 1940, a dispute aroseregarding the computation of the 10% share of Nielson in the

profits. The Board of Directors of Lepanto, realizing that themechanics of the contract was unfair to Nielson, authorized itsPresident to enter into an agreement with Nielson modifying thepertinent provision of the contract effective 1 January 1940 in sucha way that Nielson shall receive (1) 10% of the dividends declaredand paid, when and as paid, during the period of the contract and at

the end of each year, (2) 10% of any depletion reserve that may beset up, and (3) 10% of any amount expended during the year out ofsurplus earnings for capital account. In the latter part of 1941, theparties agreed to renew the contract for another period of 5 years,but in the meantime, the Pacific War broke out in December 1941.In January 1942 operation of the mining properties was disruptedon account of the war. In February 1942, the mill, power plant,supplies on hand, equipment, concentrates on hand and mines,were destroyed upon orders of the United States Army, to preventtheir utilization by the invading Japanese Army. The Japaneseforces thereafter occupied the mining properties, operated themines during the continuance of the war, and who were ousted fromthe mining properties only in August 1945. After the miningproperties were liberated from the Japanese forces, LEPANTO tookpossession thereof and embarked in rebuilding and reconstructingthe mines and mill; setting up new organization; clearing the millsite; repairing the mines; erecting staff quarters and bodegas andrepairing existing structures; installing new machinery andequipment; repairing roads and maintaining the same; salvagingequipment and storing the same within the bodegas; doing policework necessary to take care of the materials and equipmentrecovered; repairing and renewing the water system; andretimbering. The rehabilitation and reconstruction of the mine and

mill was not completed until 1948. On 26 June 1948 the minesresumed operation under the exclusive management of LEPANTO.Shortly after the mines were liberated from the Japanese invadersin 1945, a disagreement arose between NIELSON and LEPANTOover the status of the operating contract which as renewed expiredin 1947. Under the terms thereof, the management contract shallremain in suspense in case fortuitous event or force majeure, such


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as war or civil commotion, adversely affects the work of mining andmilling. On 6 February 1958, NIELSON brought an action againstLEPANTO before the Court of First Instance of Manila to recovercertain sums of money representing damages allegedly suffered bythe former in view of the refusal of the latter to comply with theterms of a management contract entered into between them on 30

January 1937, including attorney's fees and costs. LEPANTO in itsanswer denied the material allegations of the complaint and set upcertain special defenses, among them, prescription and laches, asbars against the institution of the action. After trial, the court a quorendered a decision dismissing the complaint with costs. The courtstated that it did not find sufficient evidence to establishLEPANTO's counterclaim and so it likewise dismissed the same.NIELSON appealed. The Supreme Court reversed the decision ofthe trial court and enter in lieu thereof another, ordering Lepanto topay Nielson (1) 10% share of cash dividends of December, 1941 inthe amount of P17,500.00, with legal interest thereon from the dateof the filing of the complaint; (2) management fee for January, 1942in the amount of P2,500.00, with legal interest thereon from thedate of the filing of the complaint; (3) management fees for thesixty-month period of extension of the management contract,amounting to P150,000.00, with legal interest from the date of thefiling of the complaint; (4) 10% share in the cash dividends duringthe period of extension of the management contract, amounting toP1,400,000.00, with legal interest thereon from the date of thefiling of the complaint; (5) 10% of the depletion reserve set upduring the period of extension, amounting to P53,928.88, with legalinterest thereon from the date of the filing of the complaint; (6) 10%of the expenses for capital account during the period of extension,

amounting to P694,364.76, with legal interest thereon from the dateof the filing of the complaint; (7) to issue and deliver to Nielson andCo. Inc. shares of stock of Lepanto Consolidated Mining Co. at parvalue equivalent to the total of Nielson's 10% share in the stockdividends declared on November 28, 1949 and August 22, 1950,together with all cash and stock dividends, if any, as may have beendeclared and issued subsequent to November 28, 1949 and August

22, 1950, as fruits that accrued to said shares; provided that ifsufficient shares of stock of Lepanto's are not available to satisfy thisjudgment, Lepanto shall pay Nielson an amount in cash equivalentto the market value of said shares at the time of default, that is, allshares of stock that should have been delivered to Nielson beforethe filing of the complaint must be paid at their market value as of

the date of the filing of the complaint; and all shares, if any, thatshould have been delivered after the filing of the complaint at themarket value of the shares at the time Lepanto disposed of all itsavailable shares, for it is only then that Lepanto placed itself incondition of not being able to perform its obligation; (8) the sum ofP50,000.00 as attorney's fees; and (9) the costs.

Lepanto seeks the reconsideration of the decision rendered on 17December 1966.

Issue:Whether the management contract is a contract of agency or

a contract of lease of services.

Held: Article 1709 of the Old Civil Code, defining contract ofagency, provides that "By the contract of agency, one person bindshimself to render some service or do something for the account or atthe request of another." Article 1544, defining contract of lease ofservice, provides that "In a lease of work or services, one of theparties binds himself to make or construct something or to render aservice to the other for a price certain." In both agency and lease ofservices one of the parties binds himself to render some service tothe other party. Agency, however, is distinguished from lease ofwork or services in that the basis of agency is representation, while

in the lease of work or services the basis is employment. The lessorof services does not represent his employer, while the agentrepresents his principal. Further, agency is a preparatory contract,as agency "does not stop with the agency because the purpose is toenter into other contracts." The most characteristic feature of anagency relationship is the agent's power to bring about business


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relations between his principal and third persons. "The agent isdestined to execute juridical acts (creation, modification orextinction of relations with third parties). Lease of servicescontemplate only material (non-juridical) acts." Herein, theprincipal and paramount undertaking of Nielson under themanagement contract was the operation and development of the

mine and the operation of the mill. All the other undertakingsmentioned in the contract are necessary or incidental to theprincipal undertaking these other undertakings being dependentupon the work on the development of the mine and the operation ofthe mill. In the performance of this principal undertaking Nielsonwas not in any way executing juridical acts for Lepanto, destined tocreate, modify or extinguish business relations between Lepantoand third persons. In other words, in performing its principalundertaking Nielson was not acting as an agent of Lepanto, in thesense that the term agent is interpreted under the law of agency, butas one who was performing material acts for an employer, for acompensation. It is true that the management contract providesthat Nielson would also act as purchasing agent of supplies andenter into contracts regarding the sale of mineral, but the contractalso provides that Nielson could not make any purchase, or sell theminerals, without the prior approval of Lepanto. It is clear,therefore, that even in these cases Nielson could not executejuridical acts which would bind Lepanto without first securing theapproval of Lepanto. Nielson, then, was to act only as anintermediary, not as an agent. Further, from the statements in theannual report for 1936, and from the provision of paragraph XI ofthe Management contract, that the employment by Lepanto ofNielson to operate and manage its mines was principally in

consideration of the know-how and technical services that Nielsonoffered Lepanto. The contract thus entered into pursuant to theoffer made by Nielson and accepted by Lepanto was a "detailedoperating contract". It was not a contract of agency. Nowhere in therecord is it shown that Lepanto considered Nielson as its agent andthat Lepanto terminated the management contract because it hadlost its trust and confidence in Nielson.

1. DE LA CRUZ V NORTHERN THEATRIAL ENTERPRISES

FACTS:

*The Northern Theatrical Enterprises, a domesticcorporation opearated a movie house in Laoag, Ilocos Norte andamong the persons employed by it was plaintiff De La Cruz, hired asspecial guard whose duties were to guard the main entrance of thecine, to maintain peace and order and to report the commission ofdisorder within the premises

*As such guard, he carried a revolver

* One Benjamin Martin wanted to crash the gate or entranceof the movie house. Infuriated by the refusal of plaintiff to let him inwithout first providing himself with a ticket, Martin attacked him

with a bolo*Plaintiff defended himself until he was cornered, at which

moment to save himself, he shot gate crasher resulting in lattersdeath

*Plaintiff was charged with homicide but was acquitted ofcharge after trial. In both criminal cases against him, he employed alawyer to defend him

*He then demanded from NLE reimbursement of expensesbut was refused thus filed present action against the company andt3 members of its Board of Directors to recover not only theamounts he had paid his lawyers but also moral damages said tohave been suffered due to his worry, neglect of his interests and hisfamily as well in the supervision of the cultivation of his land, a totalof P 15,000.


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*CFI rejected plaintiffs theory that he was an age nt of thecompany and that he had no cause of action and dismissed thecomplaint

ISSUE: W/N Plaintiff De la Cruz is considered as an agent of thecorporation and as such entitled to reimbursement for expensesincurred in conncection with agency

RULING: No, Plaintiff is mere employee

The relationship between the movie corporation andplaintiff was not that of principal and agent because the principle ofrepresentation as a characteristic of agency was in no way involved.

Plaintiff was not employed to represent corporation in its

dealings with 3rdparties

Plaintiff is a mere employee hired to perform a certainspecific duty or task, that of acting as a special guard and staying atthe main entrance of the movie house to stop gate crashers and tomaintain peace and order within the premises.

Sub issue: W/N an employee or servant who in line of duty andwhile in the performance of the task assigned to him, performs anact which eventually results in his incurring in expenses caused not

directly by his master or employer or by reason of his performanceof his duty, but rather by a 3rdparty or stranger not in the employ ofhis employer may recover said damages against his employer

Ruling: No

Although the employer has a moral obligation to give employeelegal assistance to aid the latter in his case, he has no legalobligation to do so.

If the employer is not legally obliged to give legal assistance toemployee and provide him with a lawyer, naturally said employee

may not recover the amount he may have paid a lawyer hired byhim.

Damages suffered by plaintiff by reason of expensesincurred by him in remunerating his lawyer is not caused by his actof shooting to death the gate crasher but rather by filing the chargeof homicide which made it necessary for him to defend himself withthe aid of counsel.

Had no criminal charge against him, there would have beenno expenses incurred or damages suffered.

Fressel v Mariano Uy Chaco Sons & Co. (ABBY)March 3, 1916Trent, J.

FACTS: Merritt undertook and agreed with the defendant to buildfor the defendant a costly edifice in the city of Manila at the cornerof Calle Rosario and Plaza del Padre Moraga. In the contract it wasagreed between the parties thereto, that Uy Chaco at any time, uponcertain contingencies, before the completion of said edifice couldtake possession of said edifice in the course of construction and ofall the materials in and about said premises acquired by Merritt for

the construction of said edifice.Fressel delivered to Merritt at thesaid edifice in the course of construction certain materials of thevalue of P1,381.21Uy Chaco took possession of the incompleteedifice in course of construction together with all the materials onsaid premises including the materials delivered. Neither Meritt norUy Chaco paid for the materials even after extrajudicial demand.


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The appellants insist that the above quoted allegations show thatMerritt acted as the agent of the defendant in purchasing thematerials in question and that the defendant, by taking over andusing such materials, accepted and ratified the purchase, therebyobligating itself to pay for the same.

ISSUE: Fressels allegation That in pursuance of the contractbetween Merritt and the defendant, Merritt acted as the agent fordefendant in the acquisition of the materials from plaintiffs. W/N Meritt acted as an agent for Uy Chaco and Sons

Held: NO. Meritt is an independent contractor. Where one party toa contract was authorized to do work according to his own methodand without being subject to the other partys control, except as tothe result of the work, he is an independent contractor and not anagent.

The fact that "the defendant entered into a contract with one E.Merritt, where by the said Merritt undertook and agreed with thedefendant to build for the defendant a costly edifice" shows thatMerritt was authorized to do the work according to his own methodand without being subject to the defendant's control, except as tothe result of the work. He could purchase his materials and suppliesfrom whom he pleased and at such prices as he desired to pay.Again, the allegations that the "plaintiffs delivered the Merritt . . . .certain materials (the materials in question) of the value ofP1,381.21, . . . . which price Merritt agreed to pay," show that therewere no contractual relations whatever between the sellers and thedefendant. The mere fact that Merritt and the defendant had

stipulated in their building contract that the latter could, "uponcertain contingencies," take possession of the incompleted buildingand all materials on the ground, did not change Merritt from anindependent contractor to an agent. In the absence of a statutecreating what is known as mechanics' liens, the owner of a buildingis not liable for the value of materials purchased by an independentcontractor either as such owner or as the assignee of the contractor.

SHELL COMPANY OF THE PHILIPPINES, LTD. V.FIREMENS INSURANCE CO. OF NEWARK J. Padilla(1957)

FACTS: o A car belonging to Salvador SISON was brought to agasoline and service station somewhere in Manila, owned by theSHELL Company of the Philippine Islands, Limited, but operatedby Porfirio DE LA FUENTE, for the purpose of having said carwashed and greased for a consideration of P8.00 o Said car wasinsured against loss or damage by Firemen's Insurance Company ofNewark, New Jersey, and Commercial Casualty Insurance Companyjointly for the sum of P10,000 o The job of washing and greasingwas undertaken by DE LA FUENTE through his two employees agreaseman and a helper/washer. To perform the job, the car wascarefully and centrally placed on the platform of a hydraulic lifter

before raising up said platform to a height of about 5 feet and thenthe servicing job was started o After more than one hour of washingand greasing, the job was about to be completed except for anungreased portion underneath the vehicle which could not bereached by the greaseman. So, the lifter was lowered a little by thegreaseman and while doing so, the car for unknown reasonaccidentally fell and suffered substantial damage o SISON forthwithbrought the matter to his insurers attention. The insurance

companies after due inspection paid the sum of P1,651.38 for thedamaged cars repair. SISON, for his part made assignments of hisrights to recover damages in favor of the Firemen's Insurance

Company and the Commercial Casualty Insurance Company hence, the instant case for the recovery of the total amount of thedamage from SHELL and DE LA FUENTE on the ground ofnegligence o CFI dismissed the complaint. Insurance Companiesappealed. The Court of Appeals reversed the CFIs judgment and

sentenced SHELL and DE LA FUENTE to pay the amount sought to


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be recovered, plus legal interest and costs o The CA ruled that DELA FUENTE is SHELLs agent; hence, as principal, it is liable for hisagents breach of undertaking o SHELL now comes to the SC on

appeal questioning the aforesaid CA decision, raising thefollowing

ISSUE: WON DE LA FUENTE is really SHELLs agent? Isnt hemore of an independent contractor?

HELD: DE LA FUENTE is SHELLs agent. The operator of a

gasoline station is an agent of the oil company. He cannot beconsidered as an independent contractor by reason of SHELLsextensive control and supervision over his tasks. The assailed CAdecision is affirmed.

RATIO: o DE LA FUENTE owed his position to SHELL which couldremove him or terminate his services at any time. He merelyundertook to exclusively sell SHELLs products at the station heoperates. For this purpose, he was placed in possession of all theequipments needed to operate it, including the hydraulic lifter fromwhich SISONs automobile fell o But it must be noted that theseequipments were delivered to DE LA FUENTE merely on loan basis.SHELL still took charge of its care and maintenance. It supervisedDE LA FUENTE and conducted periodic inspection of the gasolineand service station o Moreover, SHELL did not leave the fixing ofprice for gasoline to DE LA FUENTE; on the other hand, SHELLhad complete control thereof; and it had supervision over DE LAFUENTE in the operation of the station and in the sale of itsproducts therein o In fine, the gasoline and service station reallybelonged to SHELL. It bore its tradename and the operator DE LAFUENTE merely sold the products of SHELL there o Consideringthe abovelisted, in no wise can it be said that DE LA FUENTE is anindependent contractor of SHELL. The extensive control andsupervision that SHELL exercises over DE LA FUENTE militate

heavily against this contention. On the contrary, such circumstancesshow the existence of agency between them o The existence ofagency between SHELL and DE LA FUENTE is also evidenced by areceipt issued by SHELL and signed by DE LA FUENTE,acknowledging the delivery of equipments for the gas station in

question and an official from of the inventory of said equipmentcontaining DE LA FUENTEs signature above the words: "Agent'ssignature"

RE: Liability of Principal for Agents breach of undertaking o As theCA correctly ruled, the fall of SISONs car from the hydraulic lift was

the result of some unforeseen shortcoming of the mechanism itself.As the servicing job on SISONs car was accepted by DE LA

FUENTE in the normal and ordinary conduct of his business asoperator of SHELLs service station, and that the defective hydrauliclift caused the fall of the car, he is liable therefor. SHELL, hisprincipal, is also liable as DE LA FUENTE acted withn the

representative authority granted him as SHELLs agent. As the actof the agent acting within the scope of his authority is the act of theprincipal, the breach of the undertaking by the agent is one forwhich the principal is answerable Moreover, SHELL undertook to"answer and see to it that the equipments are in good running orderand usable condition." Obviously, SHELL failed to make a thoroughcheck up of the hydraulic lifter. Hence, it was also negligent in thataspect to which it must answer, as the faulty lifter was the cause ofthe fall of the SISONs car.

Africa vs. Caltex, 16 SCRA 448

Facts: In the afternoon of March 18, 1948, a fire broke out at theCaltex service station at the corner of Antipolo St. and Rizal Avenue,Manila. It started while gasoline was being hosed from a tank truckinto the underground storage, right at the opening of the receiving


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tank where the nozzle of the hose was inserted. The fire spread toand burned several houses. The owners, among them petitionerspouses Africa and heirs of Ong, sued respondents Caltex Phil., Inc.,the alleged owner of the station, and Mateo Boquiren, the agent incharge of its operation, for damages. The CFI and CA found that the

petitioners failed to prove negligence of the respondents, and thatthere was due care in the premises and with respect to thesupervision of their employees.

Issue:Whether or not, without proof as to the cause and origin ofthe fire, the doctrine of res ipsa loquitur should apply so as topresume negligence on the part of the respondents.

Held:Yes.Res ipsa loquiturliterally means the thing ortransaction speaks for itself. For the doctrine ofres ipsa loquitur toapply, the following requisites should be present: (a) the accident is

of a kind which ordinarily does not occur in the absence ofsomeones negligence; (b) it is caused by an instrumentality within

the exclusive control of the defendant or defendants; and (c) thepossibility of contributing conduct which would make the plaintiffresponsible is eliminated. In the case at bar, the gasoline station,with all its appliances, equipment and employees, was under thecontrol of respondents. A fire occurred therein and spread to andburned the neighboring houses. The persons who knew or couldhave known how the fire started were respondents and theiremployees, but they gave no explanation thereof whatsoever. It is afair and reasonable inference that the incident happened because of

want of care. The negligence of the employees was the proximatecause of the fire, which in the ordinary course of things does nothappen. Therefore, the petitioners are entitled to the award fordamages.

6. DE LA PENA V HIDALGO

FACTS:

* De la Pena y de Ramon and De Ramon, in her own behalfand as the legal guardian of her son Roberto De la Pena, filed in the

CFI a written complaint against Hidalgos* De La Pena y de Ramon, as the judicial administrator of

the estate of the deceased De la Pena y Gomiz, with the consent ofthe court filed a second amended complaint prosecuting his actionsolely against Frederico Hidalgo

* CFI ruled in favor of plainiff-administrator for the sum ofP13, 606.19 and legal interest from the date of the filing of thecomplaint and the costs of the trial.

* De la Pena y Ramon filed a third amended complaint with

the permission of the court alleging, among other things, as a firstcause of action, when Frederico Hidalgo had possession of andadministered the following properties to wit, 1 house and lot; atCalle San Luis; another house and lot at Calle Cortada; anotherhouse and lot at Calle San Luis, and a fenced lot on the same street,all of the district of Ermita, and another house and lot at CalleLooban de Paco, belonging to his principal, De la Pena y Gomiz,according to the power of attorey executed in his favor

*Hidalgo, as such agent, collected the rents and income fromsaid properties, amounting to P50, 244, which sum, collected inpartial amounts and on different dates, he should have deposited, in

accordance with the verbal agreement between the deceased andhimself in the general treasury of the Spanish Government at aninterest of 5% per annum, which interest on accrual was likewise tobe deposited in order that it also might bear interest; that Hidalgodid not remit or pay to Gomiz, during his lifetime, nor to any


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representative of the said Gomiz, the sum aforestated nor any partthereof with the sole exception of P1,289.03, nor has he depositedthe unpaid balance of said sum in the treasury, according toagreement, wherefore he has become liable to his principal and tothe administrator for the said sum, together with its interest

amounting to P72,548.24* The court ruled in favor of De la Pena and said that

Hidalgo, as administrator of the estate of deceased Gomiz, actuallyowed De la Pena

ISSUE: W/N Hidalgo is considered an agent of Gomiz and as suchmust reimburse present administrator, De la Pena

RULING: NoGomiz, before embarking for Spain, executed before a notary

a power of attorney in favor of Hidalgo as his agent and that heshould represent him and administer various properties he ownedand possessed in Manila.

After Hidalgo occupied the position of agent andadministrator of De la Pena y Gomizs property for several years, the

former wrote to the latter requesting him to designate a person whomight substitute him in his said position in the event of his beingobliged to absent himself from these Islannds

From the procedure followed by the agent, Hidalgo, it islogically inferred that he had definitely renounced his agency andthat the agency was duly terminated according to the provisions ofart 1782

Although the word Renounce was not employed inconnection with the agency executed in his favor, yet when theagent informs his principal that for reasons of health and bymedical advice he is about to depart from the place where he isexercising his trust and where the property subject to his

administration is situated, abandons the property, turns it over to athird party, and transmits to his principal a general statementwhich summarizes and embraces all the balances of his accountssince he began to exercise his agency to the date when he ceased tohold his trust, it then reasonable and just to conclude that the saidagent expressly and definitely renounced his agency.

Jai-Alai Corp vs BPI

Jai-Alai Corp. of the Phil. vs. Bank of the Phil. Islands

G.R. No. L-29432 August 6, 1975 66 SCRA 29

-forgery

FACTS:

Petitioner deposited 10 checks in its current account with BPI. Thechecks which were acquired by petitioner from Ramirez, a salesagent of the Inter-Island Gas were all payable to Inter-Island GasService, Inc. or order. After the checks had been submitted to Inter-bank clearing, Inter-Island Gas discovered that all the indorsements

made on the checks purportedly by its cashiers were forgeries. BPIthus debited the value of the checks against petitioner's currentaccount and forwarded to the latter the checks containing the forgedindorsements which petitioner refused to accept.


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ISSUE:

Whether BPI had the right to debit from petitioner's currentaccount the value of the checks with the forged indorsements.

RULING:

BPI acted within legal bounds when it debited the petitioner'saccount. Having indorsed the checks to respondent bank, petitioneris deemed to have given the warranty prescribed in Section 66 of theNIL that every single one of those checks "is genuine and in allrespects what it purports to be." Respondent which relied upon thepetitioner's warranty should not be held liable for the resulting loss.

**The depositor of a check as indorser warrants that it is genuine

and in all respects what it purports to be. Having indorsed thechecks to respondent bank, petitioner is deemed to have given the

warranty prescribed in Section 66 of the NIL that every single oneof those checks " is genuine and in all respects what it purports to

be."

QUIROGA V PARSONS HARDWARE CO. 38 PHIL 501AVANCEA; August 23, 1918

FACTS - a contract was entered into by and between the plaintiffand J. for the exclusive sale of quiroga beds in the Visayan Island.

The contract provides: - ARTICLE 1. Don Andres Quiroga grantsthe exclusive right to sell his beds in the Visayan Islands to J.Parsons under the following conditions: (A) Mr. Quiroga shallfurnish beds of his manufacture to Mr. Parsons for the latter'sestablishment in Iloilo, and shall invoice them at the same price hehas fixed for sales, in Manila + 25 per cent discount of the invoiced

prices, as commission on the sale; and Mr. Parsons shall order thebeds by the dozen (B) Mr. Parsons binds himself to pay Mr.Quiroga for the beds received, within 60 days from the date of theirshipment.

Argument of Plaintiff: defendant violated the following obligations

(a) not to sell the beds at higher prices than those of the invoices;(b) to have an open establishment in Iloilo; (c) itself to conduct theagency; (d) to keep the beds on public exhibition, and (e) to pay forthe advertisement expenses fo the same; and to order the beds bythe dozen and in no other manner.

Some of these obligations were not set forth in the contract but theplaintiff alleged that the defendant was his agent for the sale of hisbeds in Iloilo, and that said obligations are implied in a contract ofcommercial agency.

ISSUE WON the defendant, by reason of the contract, was apurchaser or an agent of the plaintiff for the sale of his bed.

HELD The contract is one of PURCHASE AND SALE. - In thecontract in question, what was essential, as constituting its causeand subject matter, is that the plaintiff was to furnish the defendantwith the beds which the latter might order, at the price stipulated,and that the defendant was to pay the price in the mannerstipulated. The price agreed upon was the one determined by theplaintiff for the sale of these beds in Manila, with a discount of from20 to 25 per cent, according to their class. Payment was to be madeat the end of sixty days, or before, at the plaintiff's request, or in

cash, if the defendant so preferred, and in these last two cases anadditional discount was to be allowed for prompt payment. Theseare precisely the essential features of a contract of purchase andsale.


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DISTINCTION: PURCHASE AND SALE (case at bar): There wasthe obligation on the part of the plaintiff to supply the beds, and, onthe part of the defendant, to pay their price. AGENCY or order tosell: whereby the mandatory or agent received the thing to sell it,and does not pay its price, but delivers to the principal the price he

obtains from the sale of the thing to a third person, and if he doesnot succeed in selling it, he returns it.

By virtue of the contract between the plaintiff and the defendant,the latter, on receiving the beds, was necessarily obliged to pay theirprice within the term fixed, without any other consideration andregardless as to whether he had or had not sold the beds.

- Not a single one of these clauses necessarily conveys the idea of anagency. The words commission on sales used in clause (A) of article1 mean nothing else, as stated in the contract itself, than a merediscount on the invoice price. The word agency, also used in articles

2 and 3, only expresses that the defendant was the only one thatcould sell the plaintiff's beds in the Visayan Islands. With regard tothe remaining clauses, the least that can be said is that they are notincompatible with the contract of purchase and sale.

- The plaintiff also endeavored to prove that the defendant hadreturned beds that it could not sell; that, without previous notice, itforwarded to the defendant the beds that it wanted; and that thedefendant received its commission for the beds sold by the plaintiffdirectly to persons in Iloilo. But all this, at the most only shows that,on the part of both of them, there was mutual tolerance in theperformance of the contract in disregard of its terms; and it gives noright to have the contract considered, not as the parties stipulated it,but as they performed it. Only the acts of the contracting parties,subsequent to, and in connection with, the execution of thecontract, must be considered for the purpose of interpreting thecontract, when such interpretation is necessary, but not when its

essential agreements are clearly set forth and plainly show that thecontract belongs to a certain kind and not to another. Furthermore,the return made was of certain brass beds, and was not effected inexchange for the price paid for them, but was for other beds ofanother kind; and requested the plaintiff's prior consent with

respect to said beds, which shows that it was not considered that thedefendant had a right, by virtue of the contract, to make this return.As regards the shipment of beds without previous notice, it isinsinuated in the record that these brass beds were precisely theones so shipped, and that, for this very reason, the plaintiff agreedto their return. And with respect to the so-called commissions, wehave said that they merely constituted a discount on the invoiceprice, and the reason for applying this benefit to the beds solddirectly by the plaintiff to persons in Iloilo was because, as thedefendant obligated itself in the contract to incur the expenses ofadvertisement of the plaintiff's beds, such sales were to be

considered as a result of that advertisement.GONZALO PUYAT & SONS VS. ARCO AMUSEMENTCOMPANYJune 20, 1941Keywords: discounted price of sound reproducing equipment notdisclosed; Arco Amusement seeks reimbursement.

Facts:- In 1929, Arco Amusement Company (formerly known as

Teatro Arco) was engaged in the business of operatingcinematographs.

- Around 1930, Arco Amusement approached Gonzalo Puyat& Sons, Inc., the exclusive agents in the Phils of the StarrPiano Company (of Richmond, Indiana, USA) to negotiatewith them their intent to buy sound reproducing equipmentfrom Starr Piano through Gonzalo Puyat & Sons.

- After some negotiations, the parties agreed that GonzaloPuyat & Sons would order the equipment from Starr Piano


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and Arco Amusement would pay Gonzalo Puyat, in additionto the price of the equipment, a 10% commission, plusexpenses, such as freight, insurance, banking charges, cablesetc.

- In ordering the equipment, Gonzalo Puyat & Sons was ableto get a discounted price from Starr Piano. However,

Gonzalo Puyat did not inform Arco Amusement of thediscounted price, and still billed them the list price of $1,700 plus the 10% commission and the expenses incurred inordering the equipment.

- Arco Amusement paid the bills and then placed anotherorder for a second sound reproducing equipment, which wasquoted at $1,600 plus commission and other expenses. Arcopaid the amount assessed by Gonzalo Puyat.

- 3 years later, Arco Amusement discovered that the pricequoted to them by Gonzalo Puyat was not the net price butwas rather the list price and that Gonzalo Puyat obtained adiscount from Starr Piano.

- They sought for reimbursement of what they have paidGonzalo Puyat by filing a case for reimbursement.

- CFI of Manila held that the contract between the petitionerand the respondent was one of outright purchase and sale,and absolved Gonzalo Puyat from the c

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