July 30, 1979

PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "SYCIP, SALAZAR, FELICIANO, HERNANDEZ &
CASTILLO." LUCIANO E. SALAZAR, FLORENTINO P. FELICIANO, BENILDO G. HERNANDEZ. GREGORIO R.
CASTILLO. ALBERTO P. SAN JUAN, JUAN C. REYES. JR., ANDRES G. GATMAITAN, JUSTINO H. CACANINDIN, NOEL
A. LAMAN, ETHELWOLDO E. FERNANDEZ, ANGELITO C. IMPERIO, EDUARDO R. CENIZA, TRISTAN A. CATINDIG,
ANCHETA K. TAN, and ALICE V. PESIGAN, petitioners.
IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "OZAETA, ROMULO,
DE LEON, MABANTA & REYES." RICARDO J. ROMULO, BENJAMIN M. DE LEON, ROMAN MABANTA, JR., JOSE
MA, REYES, JESUS S. J. SAYOC, EDUARDO DE LOS ANGELES, and JOSE F. BUENAVENTURA, petitioners.
R E S O L U T I O N
MELENCIO-HERRERA, J.:+.wph!1
Two separate Petitions were filed before this Court 1) by the surviving partners of Atty. Alexander Sycip, who
died on May 5, 1975, and 2) by the surviving partners of Atty. Herminio Ozaeta, who died on February 14, 1976,
praying that they be allowed to continue using, in the names of their firms, the names of partners who had
passed away. In the Court's Resolution of September 2, 1976, both Petitions were ordered consolidated.
Petitioners base their petitions on the following arguments:
1. Under the law, a partnership is not prohibited from continuing its business under a firm name which includes
the name of a deceased partner; in fact, Article 1840 of the Civil Code explicitly sanctions the practice when it
provides in the last paragraph that: t.hqw
The use by the person or partnership continuing the business of the partnership name, or the name of a
deceased partner as part thereof, shall not of itself make the individual property of the deceased partner liable
for any debts contracted by such person or partnership.
1

2. In regulating other professions, such as accountancy and engineering, the legislature has authorized the
adoption of firm names without any restriction as to the use, in such firm name, of the name of a deceased
partner;
2
the legislative authorization given to those engaged in the practice of accountancy a profession
requiring the same degree of trust and confidence in respect of clients as that implicit in the relationship of
attorney and client to acquire and use a trade name, strongly indicates that there is no fundamental policy
that is offended by the continued use by a firm of professionals of a firm name which includes the name of a
deceased partner, at least where such firm name has acquired the characteristics of a "trade name."
3

3. The Canons of Professional Ethics are not transgressed by the continued use of the name of a deceased
partner in the firm name of a law partnership because Canon 33 of the Canons of Professional Ethics adopted by
the American Bar Association declares that: t.hqw
... The continued use of the name of a deceased or former partner when permissible by local custom, is not
unethical but care should be taken that no imposition or deception is practiced through this use. ...
4

4. There is no possibility of imposition or deception because the deaths of their respective deceased partners
were well-publicized in all newspapers of general circulation for several days; the stationeries now being used by
them carry new letterheads indicating the years when their respective deceased partners were connected with
the firm; petitioners will notify all leading national and international law directories of the fact of their respective
deceased partners' deaths.
5

5. No local custom prohibits the continued use of a deceased partner's name in a professional firm's
name;
6
there is no custom or usage in the Philippines, or at least in the Greater Manila Area, which recognizes
that the name of a law firm necessarily Identifies the individual members of the firm.
7

6. The continued use of a deceased partner's name in the firm name of law partnerships has been consistently
allowed by U.S. Courts and is an accepted practice in the legal profession of most countries in the world.
8

The question involved in these Petitions first came under consideration by this Court in 1953 when a law firm in
Cebu (the Deen case) continued its practice of including in its firm name that of a deceased partner, C.D.
Johnston. The matter was resolved with this Court advising the firm to desist from including in their firm
designation the name of C. D. Johnston, who has long been dead."
The same issue was raised before this Court in 1958 as an incident in G. R. No. L-11964, entitled Register of
Deeds of Manila vs. China Banking Corporation. The law firm of Perkins & Ponce Enrile moved to intervene
asamicus curiae. Before acting thereon, the Court, in a Resolution of April 15, 1957, stated that it "would like to
be informed why the name of Perkins is still being used although Atty. E. A. Perkins is already dead." In a
Manifestation dated May 21, 1957, the law firm of Perkins and Ponce Enrile, raising substantially the same
arguments as those now being raised by petitioners, prayed that the continued use of the firm name "Perkins &
Ponce Enrile" be held proper.
On June 16, 1958, this Court resolved: t.hqw
After carefully considering the reasons given by Attorneys Alfonso Ponce Enrile and Associates for their
continued use of the name of the deceased E. G. Perkins, the Court found no reason to depart from the policy it
adopted in June 1953 when it required Attorneys Alfred P. Deen and Eddy A. Deen of Cebu City to desist from
including in their firm designation, the name of C. D. Johnston, deceased. The Court believes that, in view of the
personal and confidential nature of the relations between attorney and client, and the high standards demanded
in the canons of professional ethics, no practice should be allowed which even in a remote degree could give rise
to the possibility of deception. Said attorneys are accordingly advised to drop the name "PERKINS" from their
firm name.
Petitioners herein now seek a re-examination of the policy thus far enunciated by the Court.
The Court finds no sufficient reason to depart from the rulings thus laid down.
A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta, Romulo, De Leon, Mabanta and
Reyes" are partnerships, the use in their partnership names of the names of deceased partners will run counter
to Article 1815 of the Civil Code which provides: t.hqw
Art. 1815. Every partnership shall operate under a firm name, which may or may not include the name of one or
more of the partners.
Those who, not being members of the partnership, include their names in the firm name, shall be subject to the
liability, of a partner.
It is clearly tacit in the above provision that names in a firm name of a partnership must either be those of living
partners and. in the case of non-partners, should be living persons who can be subjected to liability. In fact,
Article 1825 of the Civil Code prohibits a third person from including his name in the firm name under pain of
assuming the liability of a partner. The heirs of a deceased partner in a law firm cannot be held liable as the old
members to the creditors of a firm particularly where they are non-lawyers. Thus, Canon 34 of the Canons of
Professional Ethics "prohibits an agreement for the payment to the widow and heirs of a deceased lawyer of a
percentage, either gross or net, of the fees received from the future business of the deceased lawyer's clients,
both because the recipients of such division are not lawyers and because such payments will not represent
service or responsibility on the part of the recipient. " Accordingly, neither the widow nor the heirs can be held
liable for transactions entered into after the death of their lawyer-predecessor. There being no benefits accruing,
there ran be no corresponding liability.
Prescinding the law, there could be practical objections to allowing the use by law firms of the names of
deceased partners. The public relations value of the use of an old firm name can tend to create undue
advantages and disadvantages in the practice of the profession. An able lawyer without connections will have to
make a name for himself starting from scratch. Another able lawyer, who can join an old firm, can initially ride on
that old firm's reputation established by deceased partners.
B. In regards to the last paragraph of Article 1840 of the Civil Code cited by petitioners, supra, the first factor to
consider is that it is within Chapter 3 of Title IX of the Code entitled "Dissolution and Winding Up." The Article
primarily deals with the exemption from liability in cases of a dissolved partnership, of the individual property of
the deceased partner for debts contracted by the person or partnership which continues the business using the
partnership name or the name of the deceased partner as part thereof. What the law contemplates therein is a
hold-over situation preparatory to formal reorganization.
Secondly, Article 1840 treats more of a commercial partnership with a good will to protect rather than of
aprofessional partnership, with no saleable good will but whose reputation depends on the personal
qualifications of its individual members. Thus, it has been held that a saleable goodwill can exist only in a
commercial partnership and cannot arise in a professional partnership consisting of lawyers.
9
t.hqw
As a general rule, upon the dissolution of a commercial partnership the succeeding partners or parties have the
right to carry on the business under the old name, in the absence of a stipulation forbidding it, (s)ince the name
of a commercial partnership is a partnership asset inseparable from the good will of the firm. ... (60 Am Jur 2d, s
204, p. 115) (Emphasis supplied)
On the other hand, t.hqw
... a professional partnership the reputation of which depends or; the individual skill of the members, such as
partnerships of attorneys or physicians, has no good win to be distributed as a firm asset on its dissolution,
however intrinsically valuable such skill and reputation may be, especially where there is no provision in the
partnership agreement relating to good will as an asset. ... (ibid, s 203, p. 115) (Emphasis supplied)
C. A partnership for the practice of law cannot be likened to partnerships formed by other professionals or for
business. For one thing, the law on accountancy specifically allows the use of a trade name in connection with
the practice of accountancy.
10
t.hqw
A partnership for the practice of law is not a legal entity. It is a mere relationship or association for a particular
purpose. ... It is not a partnership formed for the purpose of carrying on trade or business or of holding
property."
11
Thus, it has been stated that "the use of a nom de plume, assumed or trade name in law practice is
improper.
12

The usual reason given for different standards of conduct being applicable to the practice of law from those
pertaining to business is that the law is a profession.
Dean Pound, in his recently published contribution to the Survey of the Legal Profession, (The Lawyer from
Antiquity to Modern Times, p. 5) defines a profession as "a group of men pursuing a learned art as a common
calling in the spirit of public service, no less a public service because it may incidentally be a means of
livelihood."
xxx xxx xxx
Primary characteristics which distinguish the legal profession from business are:
1. A duty of public service, of which the emolument is a byproduct, and in which one may attain the highest
eminence without making much money.
2. A relation as an "officer of court" to the administration of justice involving thorough sincerity, integrity, and
reliability.
3. A relation to clients in the highest degree fiduciary.
4. A relation to colleagues at the bar characterized by candor, fairness, and unwillingness to resort to current
business methods of advertising and encroachment on their practice, or dealing directly with their clients.
13

"The right to practice law is not a natural or constitutional right but is in the nature of a privilege or
franchise.
14
It is limited to persons of good moral character with special qualifications duly ascertained and
certified.
15
The right does not only presuppose in its possessor integrity, legal standing and attainment, but also
the exercise of a special privilege, highly personal and partaking of the nature of a public trust."
16

D. Petitioners cited Canon 33 of the Canons of Professional Ethics of the American Bar Association" in support of
their petitions.
It is true that Canon 33 does not consider as unethical the continued use of the name of a deceased or former
partner in the firm name of a law partnership when such a practice is permissible by local custom but the Canon
warns that care should be taken that no imposition or deception is practiced through this use.
It must be conceded that in the Philippines, no local custom permits or allows the continued use of a deceased or
former partner's name in the firm names of law partnerships. Firm names, under our custom, Identify the more
active and/or more senior members or partners of the law firm. A glimpse at the history of the firms of
petitioners and of other law firms in this country would show how their firm names have evolved and changed
from time to time as the composition of the partnership changed. t.hqw
The continued use of a firm name after the death of one or more of the partners designated by it is proper only
where sustained by local custom and not where by custom this purports to Identify the active members. ...
There would seem to be a question, under the working of the Canon, as to the propriety of adding the name of a
new partner and at the same time retaining that of a deceased partner who was never a partner with the new
one. (H.S. Drinker, op. cit., supra, at pp. 207208) (Emphasis supplied).
The possibility of deception upon the public, real or consequential, where the name of a deceased partner
continues to be used cannot be ruled out. A person in search of legal counsel might be guided by the familiar ring
of a distinguished name appearing in a firm title.
E. Petitioners argue that U.S. Courts have consistently allowed the continued use of a deceased partner's name
in the firm name of law partnerships. But that is so because it is sanctioned by custom.
In the case of Mendelsohn v. Equitable Life Assurance Society (33 N.Y.S. 2d 733) which petitioners Salazar, et al.
quoted in their memorandum, the New York Supreme Court sustained the use of the firm name Alexander &
Green even if none of the present ten partners of the firm bears either name because the practice was
sanctioned by custom and did not offend any statutory provision or legislative policy and was adopted by
agreement of the parties. The Court stated therein: t.hqw
The practice sought to be proscribed has the sanction of custom and offends no statutory provision or legislative
policy. Canon 33 of the Canons of Professional Ethics of both the American Bar Association and the New York
State Bar Association provides in part as follows: "The continued use of the name of a deceased or former
partner, when permissible by local custom is not unethical, but care should be taken that no imposition or
deception is practiced through this use." There is no question as to local custom. Many firms in the city use the
names of deceased members with the approval of other attorneys, bar associations and the courts. The Appellate
Division of the First Department has considered the matter and reached The conclusion that such practice should
not be prohibited. (Emphasis supplied)
xxx xxx xxx
Neither the Partnership Law nor the Penal Law prohibits the practice in question. The use of the firm name
herein is also sustainable by reason of agreement between the partners.
18

Not so in this jurisdiction where there is no local custom that sanctions the practice. Custom has been defined as
a rule of conduct formed by repetition of acts, uniformly observed (practiced) as a social rule, legally binding and
obligatory.
19
Courts take no judicial notice of custom. A custom must be proved as a fact, according to the rules
of evidence.
20
A local custom as a source of right cannot be considered by a court of justice unless such custom
is properly established by competent evidence like any other fact.
21
We find such proof of the existence of a
local custom, and of the elements requisite to constitute the same, wanting herein. Merely because something is
done as a matter of practice does not mean that Courts can rely on the same for purposes of adjudication as a
juridical custom. Juridical custom must be differentiated from social custom. The former can supplement
statutory law or be applied in the absence of such statute. Not so with the latter.
Moreover, judicial decisions applying or interpreting the laws form part of the legal system.
22
When the
Supreme Court in the Deen and Perkins cases issued its Resolutions directing lawyers to desist from including the
names of deceased partners in their firm designation, it laid down a legal rule against which no custom or
practice to the contrary, even if proven, can prevail. This is not to speak of our civil law which clearly ordains that
a partnership is dissolved by the death of any partner.
23
Custom which are contrary to law, public order or public
policy shall not be countenanced.
24

The practice of law is intimately and peculiarly related to the administration of justice and should not be
considered like an ordinary "money-making trade." t.hqw
... It is of the essence of a profession that it is practiced in a spirit of public service. A trade ... aims primarily at
personal gain; a profession at the exercise of powers beneficial to mankind. If, as in the era of wide free
opportunity, we think of free competitive self assertion as the highest good, lawyer and grocer and farmer may
seem to be freely competing with their fellows in their calling in order each to acquire as much of the world's
good as he may within the allowed him by law. But the member of a profession does not regard himself as in
competition with his professional brethren. He is not bartering his services as is the artisan nor exchanging the
products of his skill and learning as the farmer sells wheat or corn. There should be no such thing as a lawyers' or
physicians' strike. The best service of the professional man is often rendered for no equivalent or for a trifling
equivalent and it is his pride to do what he does in a way worthy of his profession even if done with no
expectation of reward, This spirit of public service in which the profession of law is and ought to be exercised is a
prerequisite of sound administration of justice according to law. The other two elements of a profession, namely,
organization and pursuit of a learned art have their justification in that they secure and maintain that spirit.
25

In fine, petitioners' desire to preserve the Identity of their firms in the eyes of the public must bow to legal and
ethical impediment.
ACCORDINGLY, the petitions filed herein are denied and petitioners advised to drop the names "SYCIP" and
"OZAETA" from their respective firm names. Those names may, however, be included in the listing of individuals
who have been partners in their firms indicating the years during which they served as such.
SO ORDERED.

G.R. No. 19892 September 6, 1923
TECK SEING AND CO., LTD., petitioner-appellee.
SANTIAGO JO CHUNG, ET AL., partners,
vs.
PACIFIC COMMERCIAL COMPANY, ET AL., creditors-appellants.
Del Rosario & Del Rosario and Block, Johnston and Greenbaum for appellants.
F. V. Arias for appellants Jo Ibec and Go Tayco.
No appearance for petitioner and appellee.
Jose A. Espiritu and Felipe Ysmael as amici curiae.
MALCOLM, J.:
Following the presentation of an application to be adjudged an insolvent by the "Sociedad Mercantil, Teck Seing
& Co., Ltd.," the creditors, the Pacific Commercial Company, Piol & Company, Riu Hermanos, and W. H.
Anderson & Company, filed a motion in which the Court was prayed to enter an order: "(A) Declaring the
individual partners as described in paragraph 5 parties to this proceeding; (B) to require each of said partners to
file an inventory of his property in the manner required by section 51 of Act No. 1956; and (C) that each of said
partners be adjudicated insolvent debtors in this proceeding." The trial judge first granted the motion, but,
subsequently, on opposition being renewed, denied it. It is from this last order that an appeal was taken in
accordance with section 82 of the Insolvency Law.
There has been laid before us for consideration and decision a question of some importance and of some
intricacy. The issue in the case relates to a determination of the nature of the mercantile establishment which
operated under the name of Teck Seing & co., Ltd., and this issue requires us to look into, and analyze, the
document constituting Teck Seing & Co., Ltd. It reads:

por ser las mismas personas que otorgaron el preinserto documento, ratificando ant emi su contenido y
Proceeding by process of elimination, it is self-evident that Teck Seing & Co., Ltd., is not a corporation. Neither is
it contended by any one that Teck Seing & Co., Ltd., is accidental partnership denominated cuenta en
participacion(joint account association).
Counsel for the petitioner and appellee described his client in once place in his opposition to the motion of the
creditors as "una verdadera sociedad anonima" (a true sociedad anonima). The provisions of the Code of
Commerce relating to sociedades anonimas were, however, repealed by section 191 of the Corporation Law (Act
No. 1459), with the exceptions the sociedades anonimas lawfully organized at the time of the passage of the
Corporation Law were recognized, which is not our case.
The document providing for the partnership contract purported to form "una sociedad mercantil limitada," and
counsel for the petitioner's first contention was that Teck Seing & Co., Ltd., was not "una sociedad regular
colectiva, ni siquiera comanditaria, sino una sociedad mercantil limitada." Let us see if the partnership contract
created a "sociedad en comandita," or, as it is known in English, and will hereafter be spoken of, "a limited
partnership."
To establish a limited partnership there must be, at least, one general partner and the name of the least one of
the general partners must appear in the firm name. (Code of Commerce, arts. 122 [2], 146, 148.) But neither of
these requirements have been fulfilled. The general rule is, that those who seek to avail themselves of the
protection of laws permitting the creation of limited partnerships must show a substantially full compliance with
such laws. A limited partnership that has not complied with the law of its creation is not considered a limited
partnership at all, but a general partnership in which all the members are liable. (Mechem, Elements of
Partnership, p. 412; Gilmore, Partnership, pp. 499, 595; 20 R C. L. 1064.)
The contention of the creditors and appellants is that the partnership contract established a general partnership.
Article 125 of the Code of Commerce provides that the articles of general copartnership must estate the names,
surnames, and domiciles of the partners; the firm name; the names, and surnames of the partners to whom the
management of the firm and the use of its signature is instrusted; the capital which each partner contributes in
cash, credits, or property, stating the value given the latter or the basis on which their appraisement is to be
made; the duration of the copartnership; and the amounts which, in a proper case, are to be given to each
managing partner annually for his private expenses, while the succeeding article of the Code provides that the
general copartnership must transact business under the name of all its members, of several of them, or of one
only. Turning to the document before us, it will be noted that all of the requirements of the Code have been met,
with the sole exception of that relating to the composition of the firm name. We leave consideration of this
phase of the case for later discussion.
The remaining possibility is the revised contention of counsel for the petitioners to the effect that Teck Seing &
Co., Ltd., is "una sociedad mercantil "de facto" solamente" (only a de facto commercial association), and that the
decision of the Supreme court in the case of Hung-Man-Yoc vs. Kieng-Chiong-Seng [1906], 6 Phil., 498), is
controlling. It was this argument which convinced the trial judge, who gave effect to his understanding of the
case last cited and which here must be given serious attention.
The decision in Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, discloses that the firm Kieng-Chiong-Seng was not
organized by means of any public document; that the partnership had not been recorded in the mercantile
registry; and that Kieng-Chiong-Seng was not proven to be the firm name, but rather the designation of the
partnership. The conclusion then was, that the partnership in question was merely de facto and that, therefore,
giving effect to the provisions of article 120 of the Code of Commerce, the right of action was against the persons
in charge of the management of the association.
Laying the facts of the case of Hung-Man-Yoc vs. Kieng-Chiong-Seng, supra, side by side with the facts before us,
a marked difference is at once disclosed. In the cited case, the organization of the partnership was not evidenced
by any public document; here, it is by a public document. In the cited case, the partnership naturally could not
present a public instrument for record in the mercantile registry; here, the contract of partnership has been duly
registered. But the two cases are similar in that the firm name failed to include the name of any of the partners.
We come then to the ultimate question, which is, whether we should follow the decision in Hung-Man-Yoc vs.
Kieng-Chiong-Seng, supra, or whether we should differentiate the two cases, holding Teck Seing & Co., Ltd., a
general copartnership, notwithstanding the failure of the firm name to include the name of one of the partners.
Let us now notice this decisive point in the case.
Article 119 of the Code of Commerce requires every commercial association before beginning its business to
state its article, agreements, and conditions in a public instrument, which shall be presented for record in the
mercantile registry. Article 120, next following, provides that the persons in charge of the management of the
association who violate the provisions of the foregoing article shall be responsible in solidum to the persons not
members of the association with whom they may have transacted business in the name of the association.
Applied to the facts before us, it would seem that Teck Seing & Co., Ltd. has fulfilled the provisions of article 119.
Moreover, to permit the creditors only to look to the person in charge of the management of the association, the
partner Lim Yogsing, would not prove very helpful to them.
What is said in article 126 of the Code of Commerce relating to the general copartnership transacting business
under the name of all its members or of several of them or of one only, is wisely included in our commercial law.
It would appear, however, that this provision was inserted more for the protection of the creditors than of the
partners themselves. A distinction could well be drawn between the right of the alleged partnership to institute
action when failing to live up to the provisions of the law, or even the rights of the partners as among
themselves, and the right of a third person to hold responsible a general copartnership which merely lacks a legal
firm name in order to make it a partnership de jure.
The civil law and the common law alike seem to point to a difference between the rights of the partners who
have failed to comply with the law and the rights of third persons who have dealt with the partnership.
The supreme court of Spain has repeatedly held that notwithstanding the obligation of the members to register
the articles of association in the commercial registry, agreements containing all the essential requisites are valid
as between the contracting parties, whatever the form adopted, and that, while the failure to register in the
commercial registry necessarily precludes the members from enforcing rights acquired by them against third
persons, such failure cannot prejudice the rights of third persons. (See decisions of December 6, 1887, January
25, 1888, November 10, 1890, and January 26, 1900.) The same reasoning would be applicable to the less formal
requisite pertaining to the firm name.
The common law is to the same effect. The State of Michigan had a statute prohibiting the transaction of
business under an assumed name or any other than the real name of the individual conducting the same, unless
such person shall file with the county clerk a certificate setting forth the name under which the business is to be
conducted and the real name of each of the partners, with their residences and post-office addresses, and
making a violation thereof a misdemeanor. The supreme Court of Michigan said:
The one object of the act is manifestly to protect the public against imposition and fraud, prohibiting persons
from concealing their identity by doing business under an assumed name, making it unlawful to use other than
their real names in transacting business without a public record of who they are, available for use in courts, and
to punish those who violate the prohibition. The object of this act is not limited to facilitating the collection of
debts, or the protection of those giving credit to persons doing business under an assumed name. It is not
unilateral in its application. It applies to debtor and creditor, contractor and contractee, alike. Parties doing
business with those acting under an assumed name, whether they buy or sell, have a right, under the law, to
know who they are, and who to hold responsible, in case the question of damages for failure to perform or
breach of warranty should arise.
The general rule is well settled that, where statutes enacted to protect the public against fraud or imposition, or
to safeguard the public health or morals, contain a prohibition and impose a penalty, all contracts in violation
thereof are void. . . .
As this act involves purely business transactions, and affects only money interests, we think it should be
construed as rendering contracts made in violation of it unlawful and unforceable at the instance of the offending
party only, but not as designed to take away the rights of innocent parties who may have dealt with the offenders
in ignorance of their having violated the statute. (Cashin vs. Pliter [1912], 168 Mich., 386; Ann. Cas. [1913-C,
697.)
The early decision of our Supreme Court in the case of Prautch Scholes & Co. vs. Hernandez [1903], 1 Phil., 705),
contains the following pertinent observations:
Another case may be supposed. A partnership is organized for commercial purposes. It fails to comply with the
requirements of article 119. A creditor sues the partnership for a debt contracted by it, claiming to hold the
partners severally. They answer that their failure to comply with the Code of Commerce makes them a civil
partnership and that they are in accordance with article 1698 of the Civil Code only liable jointly. To allow such
liberty of action would be to permit the parties by a violation of the Code to escape a liability which the law has
seen fit to impose upon persons who organized commercial partnership; "Because it would be contrary to all
legal principles that the nonperformance of a duty should redound to the benefit of the person in default either
intentional or unintentional." (Mercantile Law, Eixala, fourth ed., p. 145.)" (See also Lichauco vs. Lichauco [1916],
33 Phil., 350, 360.)
Dr. Jose de Echavarri y Vivanco, in his Codigo de Comercio, includes the following comment after articles 121 and
126 of the Code:
From the decisions cited in this and in the previous comments, the following is deduced: 1st. Defects in the
organization cannot affect relations with third persons. 2d. Members who contract with other persons before
the association is lawfully organized are liable to these persons. 3d. The intention to form an association is
necessary, so that if the intention of mutual participation in the profits and losses in a particular business is
proved, and there are no articles of association, there is no association. 4th. An association, the articles of which
have not been registered, is valid in favor of third persons. 5th. The private pact or agreement to form a
commercial association is governed not by the commercial law but by the civil law. 6th. Secret
stipulationsexpressed in a public instrument, but not inserted in the articles of association, do not affect third
persons, but are binding on the parties themselves. 7th. An agreement made in a public instrument, other than
the articles of association, by means of which one of the partners guarantees to another certain profits or
secures him from losses, is valid between them, without affecting the association. 8th. Contracts entered into by
commercial associations defectively organized are valid when they are voluntarily executed by the parties, if the
only controversy relates to whether or not they complied with the agreement.
xxx xxx xxx
The name of the collective merchant is called firm name. By this name, the new being is distinguished from
others, its sphere of action fixed, and the juridical personality better determined, without constituting an
exclusive character of the general partnership to such an extent as to serve the purpose of giving a definition of
said kind of a mercantile partnership, as is the case in our Code.
Having in mind that these partnerships are prevailingly of a personal character, article 126 says that they must
transact business under the name of all its members, of some of them, or of one only, the words "and company"
to be added in the latter two cases.
It is rendered impossible for the general partnership to adopt a firm name appropriate to its commercial object;
the law wants to link, and does link, the solidary and unlimited responsibility of the members of this partnership
with the formation of its name, and imposes a limitation upon personal liberty in its selection, not only by
prescribing the requisites, but also by prohibiting persons not members of the company from including their
names in its firm name under penalty of civil solidary responsibility.
Of course, the form required by the Code for the adoption of the firm name does not prevent the addition
thereto of any other title connected with the commercial purpose of the association. The reader may see our
commentaries on the mercantile registry about the business names and firm names of associations, but it is
proper to establish here that, while the business name may be alienated by any of the means admitted by the
law, it seems impossible to separate the firm names of general partnerships from the juridical entity for the
creation of which it was formed. (Vol. 2, pp. 197, 213.)
On the question of whether the fact that the firm name "Teck Seing & Co., Ltd." does not contain the name of all
or any of the partners as prescribed by the Code of Commerce prevents the creation of a general partnership,
Professor Jose A. Espiritu, as amicus curi, states:
My opinion is that such a fact alone cannot and will not be a sufficient cause of preventing the formation of a
general partnership, especially if the other requisites are present and the requisite regarding registration of the
articles of association in the Commercial Registry has been complied with, as in the present case. I do not believe
that the adoption of a wrong name is a material fact to be taken into consideration in this case; first, because the
mere fact that a person uses a name not his own does not prevent him from being bound in a contract or an
obligation he voluntarily entered into; second, because such a requirement of the law is merely a formal and not
necessarily an essential one to the existence of the partnership, and as long as the name adopted sufficiently
identity the firm or partnership intended to use it, the acts and contracts done and entered into under such a
name bind the firm to third persons; and third, because the failure of the partners herein to adopt the correct
name prescribed by law cannot shield them from their personal liabilities, as neither law nor equity will permit
them to utilize their own mistake in order to put the blame on third persons, and much less, on the firm creditors
in order to avoid their personal possibility.
The legal intention deducible from the acts of the parties controls in determining the existence of a partnership.
If they intend to do a thing which in law constitutes a partnership, they are partners, although their purpose was
to avoid the creation of such relation. Here, the intention of the persons making up Teck Seing & co., Ltd. was to
establish a partnership which they erroneously denominated a limited partnership. If this was their purpose, all
subterfuges resorted to in order to evade liability for possible losses, while assuming their enjoyment of the
advantages to be derived from the relation, must be disregarded. The partners who have disguised their identity
under a designation distinct from that of any of the members of the firm should be penalized, and not the
creditors who presumably have dealt with the partnership in good faith.
Articles 127 and 237 of the Code of Commerce make all the members of the general copartnership liable
personally and in solidum with all their property for the results of the transactions made in the name and for the
account of the partnership. Section 51 of the Insolvency Law, likewise, makes all the property of the partnership
and also all the separate property of each of the partners liable. In other words, if a firm be insolvent, but one or
more partners thereof are solvent, the creditors may proceed both against the firm and against the solvent
partner or partners, first exhausting the assets of the firm before seizing the property of the partners.
(Brandenburg of Bankcruptcy, sec. 108; De los Reyes vs. Lukban and Borja [1916], 35 Phil., 757; Involuntary
Insolvency of Campos Rueda & Co. vs. Pacific Commercial Co. [1922], 44 Phil., 916).
We reach the conclusion that the contract of partnership found in the document hereinbefore quoted
established a general partnership or, to be more exact, a partnership as this word is used in the Insolvency Law.
Wherefore, the order appealed from is reversed, and the record shall be returned to the court of origin for
further proceedings pursuant to the motion presented by the creditors, in conformity with the provisions of the
Insolvency Law. Without special findings as to the costs in this instance, it is ordered.
G.R. No. L-26937 October 5, 1927
PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
SEVERO EUGENIO LO, ET AL., defendants.
SEVERIO EUGENIO LO, NG KHEY LING and YEP SENG, appellants.
Jose Lopez Vito for appellants.
Roman Lacson for appellee.

VILLAMOR, J.:
On September 29, 1916, the appellants Severo Eugenio Lo and Ng Khey Ling, together with J. A. Say Lian Ping, Ko
Tiao Hun, On Yem Ke Lam and Co Sieng Peng formed a commercial partnership under the name of "Tai Sing and
Co.," with a capital of P40,000 contributed by said partners. In the articles of copartnership, Exhibit A, it appears
that the partnership was to last for five years from after the date of its organization, and that its purpose was to
do business in the City of Iloilo, Province of Iloilo, or in any other part of the Philippine Islands the partners might
desire, under the name of "Tai Sing & Co.," for the purchase and sale of merchandise, goods, and native, as well
as Chinese and Japanese, products, and to carry on such business and speculations as they might consider
profitable. One of the partners, J. A. Say Lian Ping was appointed general manager of the partnership, with the
appointed general manager of the partnership, with the powers specified in said articles of copartnership.
On June 4, 1917, general manager A. Say Lian Ping executed a power of attorney (Exhibit C-1) in favor of A. Y.
Kelam, authorizing him to act in his stead as manager and administrator of "Tai Sing & Co.," on July 26, 1918, for,
and obtained a loan of P8,000 in current account from the plaintiff bank. (Exhibit C). As security for said loan, he
mortgaged certain personal property of "Tai Sing & Co., (Exhibit C.)
This credit was renew several times and on March 25, 1919, A. Y. Kelam, as attorney-in-fact of "Tai Sing & Co.,
executed a chattel mortgage in favor of plaintiff bank as security for a loan of P20,000 with interest (Exhibit D).
This mortgage was again renewed on April 16, 1920 and A. Y. Kelam, as attorney-in-fact of "Tai Sing & Co.,
executed another chattel mortgage for the said sum of P20,000 in favor of plaintiff bank. (Exhibit E.) According to
this mortgage contract, the P20,000 loan was to earn 9 per cent interest per annum.
On April 20, 1920, Yap Seng, Severo Eugenio Lo, A. Y. Kelam and Ng Khey Ling, the latter represented by M.
Pineda Tayenko, executed a power of attorney in favor of Sy Tit by virtue of which Sy Tit, representing "Tai Sing
& Co., obtained a credit of P20,000 from plaintiff bank on January 7, 1921, executing a chattel mortgage on
certain personal property belonging to "Tai Sing & Co.
Defendants had been using this commercial credit in a current account with the plaintiff bank, from the year
1918, to May 22, 1921, and the debit balance of this account, with interest to December 31, 1924, is as follows:
TAI SING & CO.
To your outstanding account (C. O. D.) with us on June 30,
1922 P16,518.74
Interest on same from June 30, 1922 to December
31,1924, at 9 per cent per annum 3,720.86
Total

20, 239.00
=========
This total is the sum claimed in the complaint, together with interest on the P16,518.74 debt, at 9 per cent per
annum from January 1, 1925 until fully paid, with the costs of the trial.
Defendant Eugenio Lo sets up, as a general defense, that "Tai Sing & Co. was not a general partnership, and that
the commercial credit in current account which "Tai Sing & Co. obtained from the plaintiff bank had not been
authorized by the board of directors of the company, nor was the person who subscribed said contract
authorized to make the same, under the article of copartnership. The other defendants, Yap Sing and Ng Khey
Ling, answered the complaint denying each and every one of the allegations contained therein.
After the hearing, the court found:
(1) That defendants Eugenio Lo, Ng Khey Ling and Yap Seng Co., Sieng Peng indebted to plaintiff Philippine
National Bank in sum of P22,595.26 to July 29, 1926, with a daily interest of P4.14 on the balance on account of
the partnership "Tai Sing & Co. for the sum of P16,518.74 until September 9, 1922;
(2) Said defendants are ordered jointly and severally to pay the Philippine National Bank the sum of P22,727.74
up to August 31, 1926, and from the date, P4.14 daily interest on the principal; and
(3) The defendants are furthermore ordered to pay the costs of the action.1awph!l.net
Defendants appealed, making the following assignments of error:
I. The trial court erred in finding that article 126 of the Code of Commerce at present in force is not mandatory.
II. The trial court erred in finding that the partnership agreement of "Tai Sing & Co., (Exhibit A), is in accordance
with the requirements of article 125 of the Code of Commerce for the organization of a regular partnership.
III. The trial court erred in not admitting J. A. Sai Lian Ping's death in China in November, 1917, as a proven fact.
IV. The trial court erred in finding that the death of J. A. Say Lian Ping cannot extinguish the defendants'
obligation to the plaintiff bank, because the last debt incurred by the commercial partnership "Tai Sing & Co.,
was that evidence by Exhibit F, signed by Sy Tit as attorney-in-fact of the members of "Tai Sing & Co., by virtue of
Exhibit G.
V. The trial court erred in not finding that plaintiff bank was not able to collect its credit from the goods of "Tai
Sing & Co., given as security therefor through its own fault and negligence; and that the action brought by
plaintiff is a manifest violation of article 237 of the present Code of Commerce.
VI. The trial court erred in finding that the current account of "Tai Sing & Co. with plaintiff bank shows a debit
balance of P16,518.74, which in addition to interest at 9 per cent per annum from July 29, 1926, amount to
P16,595.26, with a daily interest of P4.14 on the sum of P16,518.74.
VII. The trial court erred in ordering the defendants appellants to pay jointly and severally to the Philippine
National Bank the sum of P22,727.74 up to August 31, 1926, and interest on P16,518.74 from that date until fully
paid, with the costs of the action.
VIII. The trial court erred in denying the motion for a new trial filed by defendants-appellants.
Appellants admit, and it appears from the context of Exhibit A, that the defendant association formed by the
defendants is a general partnership, as defined in article 126 of the Code Commerce. This partnership was
registered in the mercantile register of the Province of Iloilo. The only anomaly noted in its organization is that
instead of adopting for their firm name the names of all of the partners, of several of them, or only one of them,
to be followed in the last two cases, by the words "and to be followed in the last two cases, by the words "and
company" the partners agreed upon "Tai Sing & Co." as the firm name.
In the case of Hung-Man-Yoc, under the name of Kwong-Wo-Sing vs. Kieng-Chiong-Seng, cited by appellants, this
court held that, as the company formed by defendants had existed in fact, though not in law due to the fact that
it was not recorded in the register, and having operated and contracted debts in favor of the plaintiff, the same
must be paid by someone. This applies more strongly to the obligations contracted by the defendants, for they
formed a partnership which was registered in the mercantile register, and carried on business contracting debts
with the plaintiff bank. The anomalous adoption of the firm name above noted does not affect the liability of the
general partners to third parties under article 127 of the Code of Commerce. And the Supreme Court so held in
the case of Jo Chung Cang vs. Pacific Commercial Co., (45 Phil., 142), in which it said that the object of article 126
of the Code of Commerce in requiring a general partnership to transact business under the name of all its
members, of several of them, or of one only, is to protect the public from imposition and fraud; and that the
provision of said article 126 is for the protection of the creditors rather than of the partners themselves. And
consequently the doctrine was enunciated that the law must be unlawful and unenforceable only as between
the partners and at the instance of the violating party, but not in the sense of depriving innocent parties of their
rights who may have dealt with the offenders in ignorance of the latter having violated the law; and that
contracts entered into by commercial associations defectively organized are valid when voluntarily executed by
the parties, and the only question is whether or not they complied with the agreement. Therefore, the
defendants cannot invoke in their defense the anomaly in the firm name which they themselves adopted.
As to the alleged death of the manager of the company, Say Lian Ping, before the attorney-in-fact Ou Yong Kelam
executed Exhibits C, D and E, the trial court did not find this fact proven at the hearing. But even supposing that
the court had erred, such an error would not justify the reversal of the judgment, for two reasons at least: (1)
Because Ou Yong Kelam was a partner who contracted in the name of the partnership, without any objection of
the other partners; and (2) because it appears in the record that the appellant-partners Severo Eugenio Lo, Ng
Khey Ling and Yap Seng, appointed Sy Tit as manager, and he obtained from the plaintiff bank the credit in
current account, the debit balance of which is sought to be recovered in this action.
Appellants allege that such of their property as is not included in the partnership assets cannot-be seized for the
payment of the debts contracted by the partnership until after the partnership property has been exhausted.
The court found that the partnership property described in the mortgage Exhibit F no loner existed at the time of
the filing of the herein complaint nor has its existence been proven, nor was it offered to the plaintiff for sale.
We find no just reason to reverse this conclusion of the trial court, and this being so, it follows that article 237 of
the Code of Commerce, invoked by the appellant, can in no way have any application here.
Appellants also assign error to the action of the trial court in ordering them to pay plaintiff, jointly and severally,
the sums claimed with 9 per cent interest on P16,518.74, owing from them.
The judgment against the appellants is in accordance with article 127 of the Code of Commerce which provides
that all the members of a general partnership, be they managing partners thereof or not, shall be personally and
solidarily liable with all their property, for the results of the transactions made in the name and for the account
of the partnership, under the signature of the latter, and by a person authorized to use it.
As to the amount of the interest suffice it to remember that the credit in current account sued on in this case as
been renewed by the parties in such a way that while it appears in the mortgage Exhibit D executed on March
25, 1919 by the attorney-in-fact Ou Yong Kelam that the P20,000 credit would earn 8 per cent interest annually,
yet from that executed on April 16, 1920, Exhibit E, it appears that the P20,000 would earn 9 per cent interest
per annum. The credit was renewed in January, 1921, and in the deed of pledge, Exhibit F, executed by "Tai Sing
& Co., represented by the attorney-in-fact Sy Tit, it appears that this security is for the payment of the sums
received by the partnership, not to exceed P20,000 with interest and collection fees. There can be no doubt that
the parties agreed upon the rate of interest fixed in the document Exhibit E, namely 9 per cent per annum.
The judgment appealed from is in accordance with the law, and must therefore be, as it is hereby, affirmed with
costs against the appellants. So ordered.

G.R. No. L-3146 September 14, 1907
NICOLAS CO-PITCO, plaintiff-appellee,
vs.
PEDRO YULO, defendant-appellant.
Salvador Laguda, for appellant.
Rothrock and Ney, for appellee.
WILLIARD, J.:
The appellee makes the point in his brief in this court that although the defendant excepted to the order of the
court below denying his motion for a new trial on the ground of the insufficiency of the evidence, yet we can not
review such evidence because it is not properly certified. We think that this point is well taken. The testimony of
one witness is certified to by the stenographer, who says that it is all the evidence which took during the trial.
The testimony of this witness is unimportant. There follow in the record several pages of what purports to be
evidence of different witnesses taken in narrative form, but neither the judge, nor the clerk, nor the
stenographer certify in any way what these pages are or that they contain evidence taken during the trial of this
case. For the purpose of this review, therefore, we can only consider the facts admitted by the pleadings and
those stated in the decision of the court below. In that decision the court makes the following finding of fact,
among others:
Before February, 1903, Florencio Yulo and Jaime Palacios were partners in the operation of a sugar estate in
Victorias, Island of Negros, and had commercial dealings with a Chinaman named Dy-Sianco, who furnished them
with money and goods, and used to buy their crop of sugar. In February, 1903, the defendant, Pedro Yulo, father
of the said Florencio, took charge of the latter's interest in the above-mentioned partnership, and he became a
general partner with the said Jaime Palacios in the same business, and he continued as such partner until about
the end of 1904, dealing with Dy-Sianco in the same manner as the old partnership had dealt with the latter.
He then finds that the balance due from the firm Pedro Yulo and Jaime Palacios was 1,638.40 pesos, Philippine
currency, and orders judgment against the defendant, Pedro Yulo, for the entire amount, with interest.
The partnership of Yulo and Palacios was engaged in the operation of a sugar estate in Negros. It was, therefore
a civil partnership, as distinguished from a mercantile partnership. Being a civil partnership, by the express
provisions of articles 1698 and 1137 of the Civil Code, the partners are not liable each for the whole debt of the
partnership. The liability is pro rata and in this case Pedro Yulo is responsible to plaintiff for only one-half of the
debt. The fact that the other partner, Jaime Palacios, had left the country can not increase the liability of Pedro
Yulo.
The judgment of the court below is reversed and judgment is ordered in favor of the plaintiff and against the
defendant, Pedro Yulo, for the sum of P819.20 pesos, Philippine Currency, with interest thereon at the rate of 6
per cent per annum from the 12th day of January, 1905, and the costs of the Court of First Instance. No costs will
be allowed to either party in this court. So ordered.



G.R. No. L-22493 July 31, 1975
ISLAND SALES, INC., plaintiff-appellee,
vs.
UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL defendants. BENJAMIN C. DACO,defendant-
appellant.
Grey, Buenaventura and Santiago for plaintiff-appellee.
Anacleto D. Badoy, Jr. for defendant-appellant.

CONCEPCION JR., J.:
This is an appeal interposed by the defendant Benjamin C. Daco from the decision of the Court of First Instance
of Manila, Branch XVI, in Civil Case No. 50682, the dispositive portion of which reads:
WHEREFORE, the Court sentences defendant United Pioneer General Construction Company to pay plaintiff the
sum of P7,119.07 with interest at the rate of 12% per annum until it is fully paid, plus attorney's fees which the
Court fixes in the sum of Eight Hundred Pesos (P800.00) and costs.
The defendants Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim and Augusto Palisoc are sentenced to pay the
plaintiff in this case with the understanding that the judgment against these individual defendants shall be
enforced only if the defendant company has no more leviable properties with which to satisfy the judgment
against it. .
The individual defendants shall also pay the costs.
On April 22, 1961, the defendant company, a general partnership duly registered under the laws of the
Philippines, purchased from the plaintiff a motor vehicle on the installment basis and for this purpose executed a
promissory note for P9,440.00, payable in twelve (12) equal monthly installments of P786.63, the first
installment payable on or before May 22, 1961 and the subsequent installments on the 22nd day of every month
thereafter, until fully paid, with the condition that failure to pay any of said installments as they fall due would
render the whole unpaid balance immediately due and demandable.
Having failed to receive the installment due on July 22, 1961, the plaintiff sued the defendant company for the
unpaid balance amounting to P7,119.07. Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig,
and Augusto Palisoc were included as co-defendants in their capacity as general partners of the defendant
company.
Daniel A. Guizona failed to file an answer and was consequently declared in default.
1

Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the defendant Romulo B.
Lumauig is concerned.
2

When the case was called for hearing, the defendants and their counsels failed to appear notwithstanding the
notices sent to them. Consequently, the trial court authorized the plaintiff to present its evidence ex-parte
3
,
after which the trial court rendered the decision appealed from.
The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming that since there are
five (5) general partners, the joint and subsidiary liability of each partner should not exceed one-fifth (
1
/
5
) of the
obligations of the defendant company. But the trial court denied the said motion notwithstanding the
conformity of the plaintiff to limit the liability of the defendants Daco and Sim to only one-fifth (
1
/
5
) of the
obligations of the defendant company.
4
Hence, this appeal.
The only issue for resolution is whether or not the dismissal of the complaint to favor one of the general partners
of a partnership increases the joint and subsidiary liability of each of the remaining partners for the obligations
of the partnership.
Article 1816 of the Civil Code provides:
Art. 1816. All partners including industrial ones, shall be liable pro rata with all their property and after all the
partnership assets have been exhausted, for the contracts which may be entered into in the name and for the
account of the partnership, under its signature and by a person authorized to act for the partnership. However,
any partner may enter into a separate obligation to perform a partnership contract.
In the case of Co-Pitco vs. Yulo (8 Phil. 544) this Court held:
The partnership of Yulo and Palacios was engaged in the operation of a sugar estate in Negros. It was, therefore,
a civil partnership as distinguished from a mercantile partnership. Being a civil partnership, by the express
provisions of articles l698 and 1137 of the Civil Code, the partners are not liable each for the whole debt of the
partnership. The liability is pro rata and in this case Pedro Yulo is responsible to plaintiff for only one-half of the
debt. The fact that the other partner, Jaime Palacios, had left the country cannot increase the liability of Pedro
Yulo.
In the instant case, there were five (5) general partners when the promissory note in question was executed for
and in behalf of the partnership. Since the liability of the partners is pro rata, the liability of the appellant
Benjamin C. Daco shall be limited to only one-fifth (
1
/
5
) of the obligations of the defendant company. The fact
that the complaint against the defendant Romulo B. Lumauig was dismissed, upon motion of the plaintiff, does
not unmake the said Lumauig as a general partner in the defendant company. In so moving to dismiss the
complaint, the plaintiff merely condoned Lumauig's individual liability to the plaintiff.
WHEREFORE, the appealed decision as thus clarified is hereby AFFIRMED, without pronouncement as to costs.
SO ORDERED.







G.R. No. L-39780 November 11, 1985
ELMO MUASQUE, petitioner,
vs.
COURT OF APPEALS,CELESTINO GALAN TROPICAL COMMERCIAL COMPANY and RAMON PONS,respondents.
John T. Borromeo for petitioner.
Juan D. Astete for respondent C. Galan.
Paul Gornes for respondent R. Pons.
Viu Montecillo for respondent Tropical.
Paterno P. Natinga for Intervenor Blue Diamond Glass Palace.

GUTTIERREZ, JR., J.:
In this petition for certiorari, the petitioner seeks to annul and set added the decision of the Court of Appeals
affirming the existence of a partnership between petitioner and one of the respondents, Celestino Galan and
holding both of them liable to the two intervenors which extended credit to their partnership. The petitioner
wants to be excluded from the liabilities of the partnership.
Petitioner Elmo Muasque filed a complaint for payment of sum of money and damages against respondents
Celestino Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner entered
into a contract with respondent Tropical through its Cebu Branch Manager Pons for remodelling a portion of its
building without exchanging or expecting any consideration from Galan although the latter was casually named
as partner in the contract; that by virtue of his having introduced the petitioner to the employing company
(Tropical). Galan would receive some kind of compensation in the form of some percentages or commission; that
Tropical, under the terms of the contract, agreed to give petitioner the amount of P7,000.00 soon after the
construction began and thereafter, the amount of P6,000.00 every fifteen (15) days during the construction to
make a total sum of P25,000.00; that on January 9, 1967, Tropical and/or Pons delivered a check for P7,000.00
not to the plaintiff but to a stranger to the contract, Galan, who succeeded in getting petitioner's indorsement
on the same check persuading the latter that the same be deposited in a joint account; that on January 26, 1967
when the second check for P6,000.00 was due, petitioner refused to indorse said cheek presented to him by
Galan but through later manipulations, respondent Pons succeeded in changing the payee's name from Elmo
Muasque to Galan and Associates, thus enabling Galan to cash the same at the Cebu Branch of the Philippine
Commercial and Industrial Bank (PCIB) placing the petitioner in great financial difficulty in his construction
business and subjecting him to demands of creditors to pay' for construction materials, the payment of which
should have been made from the P13,000.00 received by Galan; that petitioner undertook the construction at
his own expense completing it prior to the March 16, 1967 deadline;that because of the unauthorized
disbursement by respondents Tropical and Pons of the sum of P13,000.00 to Galan petitioner demanded that
said amount be paid to him by respondents under the terms of the written contract between the petitioner and
respondent company.
The respondents answered the complaint by denying some and admitting some of the material averments and
setting up counterclaims.
During the pre-trial conference, the petitioners and respondents agreed that the issues to be resolved are:
(1) Whether or not there existed a partners between Celestino Galan and Elmo Muasque; and
(2) Whether or not there existed a justifiable cause on the part of respondent Tropical to disburse money to
respondent Galan.
The business firms Cebu Southern Hardware Company and Blue Diamond Glass Palace were allowed to
intervene, both having legal interest in the matter in litigation.
After trial, the court rendered judgment, the dispositive portion of which states:
IN VIEW WHEREOF, Judgment is hereby rendered:
(1) ordering plaintiff Muasque and defendant Galan to pay jointly and severally the intervenors Cebu and
Southern Hardware Company and Blue Diamond Glass Palace the amount of P6,229.34 and P2,213.51,
respectively;
(2) absolving the defendants Tropical Commercial Company and Ramon Pons from any liability,
No damages awarded whatsoever.
The petitioner and intervenor Cebu Southern Company and its proprietor, Tan Siu filed motions for
reconsideration.
On January 15, 197 1, the trial court issued 'another order amending its judgment to make it read as follows:
IN VIEW WHEREOF, Judgment is hereby rendered:
(1) ordering plaintiff Muasque and defendant Galan to pay jointly and severally the intervenors Cebu Southern
Hardware Company and Blue Diamond Glass Palace the amount of P6,229.34 and P2,213.51, respectively,
(2) ordering plaintiff and defendant Galan to pay Intervenor Cebu Southern Hardware Company and Tan Siu
jointly and severally interest at 12% per annum of the sum of P6,229.34 until the amount is fully paid;
(3) ordering plaintiff and defendant Galan to pay P500.00 representing attorney's fees jointly and severally to
Intervenor Cebu Southern Hardware Company:
(4) absolving the defendants Tropical Commercial Company and Ramon Pons from any liability,
No damages awarded whatsoever.
On appeal, the Court of Appeals affirmed the judgment of the trial court with the sole modification that the
liability imposed in the dispositive part of the decision on the credit of Cebu Southern Hardware and Blue
Diamond Glass Palace was changed from "jointly and severally" to "jointly."
Not satisfied, Mr. Muasque filed this petition.
The present controversy began when petitioner Muasque in behalf of the partnership of "Galan and
Muasque" as Contractor entered into a written contract with respondent Tropical for remodelling the
respondent's Cebu branch building. A total amount of P25,000.00 was to be paid under the contract for the
entire services of the Contractor. The terms of payment were as follows: thirty percent (30%) of the whole
amount upon the signing of the contract and the balance thereof divided into three equal installments at the
lute of Six Thousand Pesos (P6,000.00) every fifteen (15) working days.
The first payment made by respondent Tropical was in the form of a check for P7,000.00 in the name of the
petitioner.Petitioner, however, indorsed the check in favor of respondent Galan to enable the latter to deposit it
in the bank and pay for the materials and labor used in the project.
Petitioner alleged that Galan spent P6,183.37 out of the P7,000.00 for his personal use so that when the second
check in the amount of P6,000.00 came and Galan asked the petitioner to indorse it again, the petitioner
refused.
The check was withheld from the petitioner. Since Galan informed the Cebu branch of Tropical that there was
a"misunderstanding" between him and petitioner, respondent Tropical changed the name of the payee in the
second check from Muasque to "Galan and Associates" which was the duly registered name of the partnership
between Galan and petitioner and under which name a permit to do construction business was issued by the
mayor of Cebu City. This enabled Galan to encash the second check.
Meanwhile, as alleged by the petitioner, the construction continued through his sole efforts. He stated that he
borrowed some P12,000.00 from his friend, Mr. Espina and although the expenses had reached the amount of
P29,000.00 because of the failure of Galan to pay what was partly due the laborers and partly due for the
materials, the construction work was finished ahead of schedule with the total expenditure reaching P34,000.00.
The two remaining checks, each in the amount of P6,000.00,were subsequently given to the petitioner alone
with the last check being given pursuant to a court order.
As stated earlier, the petitioner filed a complaint for payment of sum of money and damages against the
respondents,seeking to recover the following: the amounts covered by the first and second checks which fell into
the hands of respondent Galan, the additional expenses that the petitioner incurred in the construction, moral
and exemplary damages, and attorney's fees.
Both the trial and appellate courts not only absolved respondents Tropical and its Cebu Manager, Pons, from any
liability but they also held the petitioner together with respondent Galan, hable to the intervenors Cebu
Southern Hardware Company and Blue Diamond Glass Palace for the credit which the intervenors extended to
the partnership of petitioner and Galan
In this petition the legal questions raised by the petitioner are as follows: (1) Whether or not the appellate court
erred in holding that a partnership existed between petitioner and respondent Galan. (2) Assuming that there
was such a partnership, whether or not the court erred in not finding Galan guilty of malversing the P13,000.00
covered by the first and second checks and therefore, accountable to the petitioner for the said amount; and (3)
Whether or not the court committed grave abuse of discretion in holding that the payment made by Tropical
through its manager Pons to Galan was "good payment, "
Petitioner contends that the appellate court erred in holding that he and respondent Galan were partners, the
truth being that Galan was a sham and a perfidious partner who misappropriated the amount of P13,000.00 due
to the petitioner.Petitioner also contends that the appellate court committed grave abuse of discretion in
holding that the payment made by Tropical to Galan was "good" payment when the same gave occasion for the
latter to misappropriate the proceeds of such payment.
The contentions are without merit.
The records will show that the petitioner entered into a con-tract with Tropical for the renovation of the latter's
building on behalf of the partnership of "Galan and Muasque." This is readily seen in the first paragraph of the
contract where it states:
This agreement made this 20th day of December in the year 1966 by Galan and Muasque hereinafter called the
Contractor, and Tropical Commercial Co., Inc., hereinafter called the owner do hereby for and in consideration
agree on the following: ... .
There is nothing in the records to indicate that the partner-ship organized by the two men was not a genuine
one. If there was a falling out or misunderstanding between the partners, such does not convert the partnership
into a sham organization.
Likewise, when Muasque received the first payment of Tropical in the amount of P7,000.00 with a check made
out in his name, he indorsed the check in favor of Galan. Respondent Tropical therefore, had every right to
presume that the petitioner and Galan were true partners. If they were not partners as petitioner claims, then he
has only himself to blame for making the relationship appear otherwise, not only to Tropical but to their other
creditors as well. The payments made to the partnership were, therefore, valid payments.
In the case of Singsong v. Isabela Sawmill (88 SCRA 643),we ruled:
Although it may be presumed that Margarita G. Saldajeno had acted in good faith, the appellees also acted in
good faith in extending credit to the partnership. Where one of two innocent persons must suffer, that person
who gave occasion for the damages to be caused must bear the consequences.
No error was committed by the appellate court in holding that the payment made by Tropical to Galan was a
good payment which binds both Galan and the petitioner. Since the two were partners when the debts were
incurred, they, are also both liable to third persons who extended credit to their partnership. In the case
of George Litton v. Hill and Ceron, et al, (67 Phil. 513, 514), we ruled:
There is a general presumption that each individual partner is an authorized agent for the firm and that he has
authority to bind the firm in carrying on the partnership transactions. (Mills vs. Riggle,112 Pan, 617).
The presumption is sufficient to permit third persons to hold the firm liable on transactions entered into by one
of members of the firm acting apparently in its behalf and within the scope of his authority. (Le Roy vs. Johnson,
7 U.S. (Law. ed.), 391.)
Petitioner also maintains that the appellate court committed grave abuse of discretion in not holding Galan liable
for the amounts which he "malversed" to the prejudice of the petitioner. He adds that although this was not one
of the issues agreed upon by the parties during the pretrial, he, nevertheless, alleged the same in his amended
complaint which was, duly admitted by the court.
When the petitioner amended his complaint, it was only for the purpose of impleading Ramon Pons in his
personal capacity. Although the petitioner made allegations as to the alleged malversations of Galan, these were
the same allegations in his original complaint. The malversation by one partner was not an issue actually raised
in the amended complaint but the alleged connivance of Pons with Galan as a means to serve the latter's
personal purposes.
The petitioner, therefore, should be bound by the delimitation of the issues during the pre-trial because he
himself agreed to the same. In Permanent Concrete Products, Inc. v. Teodoro, (26 SCRA 336), we ruled:
xxx xxx xxx
... The appellant is bound by the delimitation of the issues contained in the trial court's order issued on the very
day the pre-trial conference was held. Such an order controls the subsequent course of the action, unless
modified before trial to prevent manifest injustice.In the case at bar, modification of the pre-trial order was
never sought at the instance of any party.
Petitioner could have asked at least for a modification of the issues if he really wanted to include the
determination of Galan's personal liability to their partnership but he chose not to do so, as he vehemently
denied the existence of the partnership. At any rate, the issue raised in this petition is the contention of
Muasque that the amounts payable to the intervenors should be shouldered exclusively by Galan. We note that
the petitioner is not solely burdened by the obligations of their illstarred partnership. The records show that
there is an existing judgment against respondent Galan, holding him liable for the total amount of P7,000.00 in
favor of Eden Hardware which extended credit to the partnership aside from the P2, 000. 00 he already paid to
Universal Lumber.
We, however, take exception to the ruling of the appellate court that the trial court's ordering petitioner and
Galan to pay the credits of Blue Diamond and Cebu Southern Hardware"jointly and severally" is plain error since
the liability of partners under the law to third persons for contracts executed inconnection with partnership
business is only pro rata under Art. 1816, of the Civil Code.
While it is true that under Article 1816 of the Civil Code,"All partners, including industrial ones, shall be liable
prorate with all their property and after all the partnership assets have been exhausted, for the contracts which
may be entered into the name and fm the account cd the partnership, under its signature and by a person
authorized to act for the partner-ship. ...". this provision should be construed together with Article 1824 which
provides that: "All partners are liable solidarily with the partnership for everything chargeable to the partnership
under Articles 1822 and 1823." In short, while the liability of the partners are merely joint in transactions
entered into by the partnership, a third person who transacted with said partnership can hold the partners
solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823.
Articles 1822 and 1823 of the Civil Code provide:
Art. 1822. Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of
the partner-ship or with the authority of his co-partners, loss or injury is caused to any person, not being a
partner in the partnership or any penalty is incurred, the partnership is liable therefor to the same extent as the
partner so acting or omitting to act.
Art. 1823. The partnership is bound to make good:
(1) Where one partner acting within the scope of his apparent authority receives money or property of a third
person and misapplies it; and
(2) Where the partnership in the course of its business receives money or property of a third person and t he
money or property so received is misapplied by any partner while it is in the custody of the partnership.
The obligation is solidary, because the law protects him, who in good faith relied upon the authority of a partner,
whether such authority is real or apparent. That is why under Article 1824 of the Civil Code all partners, whether
innocent or guilty, as well as the legal entity which is the partnership, are solidarily liable.
In the case at bar the respondent Tropical had every reason to believe that a partnership existed between the
petitioner and Galan and no fault or error can be imputed against it for making payments to "Galan and
Associates" and delivering the same to Galan because as far as it was concerned, Galan was a true partner with
real authority to transact on behalf of the partnership with which it was dealing. This is even more true in the
cases of Cebu Southern Hardware and Blue Diamond Glass Palace who supplied materials on credit to the
partnership. Thus, it is but fair that the consequences of any wrongful act committed by any of the partners
therein should be answered solidarily by all the partners and the partnership as a whole
However. as between the partners Muasque and Galan,justice also dictates that Muasque be reimbursed by
Galan for the payments made by the former representing the liability of their partnership to herein intervenors,
as it was satisfactorily established that Galan acted in bad faith in his dealings with Muasque as a partner.
WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that the liability of
petitioner and respondent Galan to intervenors Blue Diamond Glass and Cebu Southern Hardware is declared to
be joint and solidary. Petitioner may recover from respondent Galan any amount that he pays, in his capacity as
a partner, to the above intervenors,
SO ORDERED.

TIOSEJO VS ANG DECISION

PEREZ, J.:

Filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, the petition for review at bench seeks the
reversal of the Resolutions dated 23 May 2006 and 9 August 2006 issued by the Third Division of the Court of
Appeals (CA) in CA-G.R. SP No. 93841 which, respectively, dismissed the petition for review of petitioner J.
Tiosejo Investment Corp. (JTIC) for having been filed out of time
[1]
and denied the motion for reconsideration of
said dismissal.
[2]


The Facts

On 28 December 1995 petitioner entered into a Joint Venture Agreement (JVA) with Primetown Property
Group, Inc. (PPGI) for the development of a residential condominium project to be known as The Meditel on the
formers 9,502 square meter property along Samat St., Highway Hills, Mandaluyong City.
[3]
With petitioner
contributing the same property to the joint venture and PPGI undertaking to develop the condominium, the JVA
provided, among other terms and conditions, that the developed units shall be shared by the former and the
latter at a ratio of 17%-83%, respectively.
[4]
While both parties were allowed, at their own individual
responsibility, to pre-sell the units pertaining to them,
[5]
PPGI further undertook to use all proceeds from the pre-
selling of its saleable units for the completion of the Condominium Project.
[6]


On 17 June 1996, the Housing and Land Use Regulatory Board (HLURB) issued License to Sell No. 96-06-
2854 in favor of petitioner and PPGI as project owners.
[7]
By virtue of said license, PPGI executed Contract to Sell
No. 0212 with Spouses Benjamin and Eleanor Ang on 5 February 1997, over the 35.45-square meter
condominium unit denominated as Unit A-1006, for the agreed contract price of P52,597.88 per square meter
or a total P2,077,334.25.
[8]
On the same date PPGI and respondents also executedContract to Sell No. 0214 over
the 12.50 square meter parking space identified as Parking Slot No. 0405, for the stipulated consideration
of P26,400.00 square meters or a total ofP313,500.00.
[9]


On 21 July 1999, respondents filed against petitioner and PPGI the complaint for the rescission of the
aforesaid Contracts to Sell docketed before the HLURB as HLURB Case No. REM 072199-10567. Contending that
they were assured by petitioner and PPGI that the subject condominium unit and parking space would be
available for turn-over and occupancy in December 1998, respondents averred, among other matters, that in
view of the non-completion of the project according to said representation, respondents instructed petitioner
and PPGI to stop depositing the post-dated checks they issued and to cancel said Contracts to Sell; and, that
despite several demands, petitioner and PPGI have failed and refused to refund the P611,519.52 they already
paid under the circumstances. Together with the refund of said amount and interests thereon at the rate of 12%
per annum, respondents prayed for the grant of their claims for moral and exemplary damages as well as
attorneys fees and the costs.
[10]


Specifically denying the material allegations of the foregoing complaint, PPGI filed its 7 September 1999
answer alleging that the delay in the completion of the project was attributable to the economic crisis which
affected the country at the time; that the unexpected and unforeseen inflation as well as increase in interest
rates and cost of building materials constitute force majeure and were beyond its control; that aware of its
responsibilities, it offered several alternatives to its buyers like respondents for a transfer of their investment to
its other feasible projects and for the amounts they already paid to be considered as partial payment for the
replacement unit/s; and, that the complaint was prematurely filed in view of the on-going negotiations it is
undertaking with its buyers and prospective joint venture partners. Aside from the dismissal of the complaint,
PPGI sought the readjustment of the contract price and the grant of its counterclaims for attorneys fees and
litigation expenses.
[11]


Petitioner also specifically denied the material allegations of the complaint in separate answer

dated 5
February 2002
[12]
which it amended on 20 May 2002. Calling attention to the fact that its prestation under the
JVA consisted in contributing the property on which The Meditel was to be constructed, petitioner asseverated
that, by the terms of the JVA, each party was individually responsible for the marketing and sale of the units
pertaining to its share; that not being privy to the Contracts to Sell executed by PPGI and respondents, it did not
receive any portion of the payments made by the latter; and, that without any contributory fault and negligence
on its part, PPGI breached its undertakings under the JVA by failing to complete the condominium project. In
addition to the dismissal of the complaint and the grant of its counterclaims for exemplary damages, attorneys
fees, litigation expenses and the costs, petitioner interposed a cross-claim against PPGI for full reimbursement of
any sum it may be adjudged liable to pay respondents.
[13]


Acting on the position papers and draft decisions subsequently submitted by the parties,
[14]
Housing and
Land Use (HLU) Arbiter Dunstan T. San Vicente went on to render the 30 July 2003 decision declaring the subject
Contracts to Sell cancelled and rescinded on account of the non-completion of the condominium project. On the
ground that the JVA created a partnership liability on their part, petitioner and PPGI, as co-owners of the
condominium project, were ordered to pay: (a) respondents claim for refund of the P611,519.52 they paid, with
interest at the rate of 12% per annum from 5 February 1997; (b) damages in the sum of P75,000.00; (c)
attorneys fees in the sum of P30,000.00; (d) the costs; and, (e) an administrative fine in the sum of P10,000.00
for violation of Sec. 20 in relation to Sec. 38 of Presidential Decree No. 957.
[15]
Elevated to the HLURB Board of
Commissioners via the petition for review filed by petitioner,
[16]
the foregoing decision was modified to grant the
latters cross-claim in the 14 September 2004 decision rendered by said administrative bodys Second Division in
HLURB Case No. REM-A-031007-0240,
[17]
to wit:

Wherefore, the petition for review of the respondent Corporation is dismissed. However, the decision of
the Office below dated July 30, 2003 is modified, hence, its dispositive portion shall read:

1. Declaring the contracts to sell, both dated February 5, 1997, as cancelled and rescinded, and ordering the
respondents to immediately pay the complainants the following:

a. The amount of P611,519.52, with interest at the legal rate reckoned from February 5, 1997 until fully paid;
b. Damages of P75,000.00;
c. Attorneys fees equivalent to P30,000.00; and
d. The Cost of suit;

2. Ordering respondents to pay this Office administrative fine of P10,000.00 for violation of Section 20 in
relation to Section 38 of P.D. 957; and

3. Ordering respondent Primetown to reimburse the entire amount which the respondent Corporation will be
constrained to pay the complainants.

So ordered.
[18]



With the denial of its motion for reconsideration of the foregoing decision,
[19]
petitioner filed a Notice of
Appeal dated 28 February 2005 which was docketed before the Office of the President (OP) as O.P. Case No. 05-
B-072.
[20]
On 3 March 2005, the OP issued an order directing petitioner to submit its appeal memorandum
within 15 days from receipt thereof.
[21]
Acting on the motion therefor filed, the OP also issued another order on
the same date, granting petitioner a period of 15 days from 28 February 2005 or until 15 March 2005 within
which to file its appeal memorandum.
[22]
In view of petitioners filing of a second motion for extension dated 15
March 2005,
[23]
the OP issued the 18 March 2005 order granting the former an additional 10 days from 15 March
2005 or until 25 March 2005 within which to file its appeal memorandum, provided no further extension shall
be allowed.
[24]
Claiming to have received the aforesaid 3 March 2005 order only on 16 March 2005, however,
petitioner filed its 31 March 2005 motion seeking yet another extension of 10 days or until 10 April 2005 within
which to file its appeal memorandum.
[25]


On 7 April 2005, respondents filed their opposition to the 31 March 2005 motion for extension of
petitioner
[26]
which eventually filed its appeal memorandum by registered mail on 11 April 2005 in view of the
fact that 10 April 2005 fell on a Sunday.
[27]
On 25 October 2005, the OP rendered a decision dismissing
petitioners appeal on the ground that the latters appeal memorandum was filed out of time and that the
HLURB Board committed no grave abuse of discretion in rendering the appealed decision.
[28]
Aggrieved by the
denial of its motion for reconsideration of the foregoing decision in the 3 March 2006 order issued by the
OP,
[29]
petitioner filed before the CA its 29 March 2006 motion for an extension of 15 days from 31 March 2006
or until 15 April 2006 within which to file its petition for review.
[30]
Accordingly, a non-extendible period of 15
days to file its petition for review was granted petitioner in the 31 March 2006 resolution issued by the CA Third
Division in CA-G.R, SP No. 93841.
[31]


Maintaining that 15 April 2006 fell on a Saturday and that pressures of work prevented its counsel from finalizing
its petition for review, petitioner filed a motion on 17 April 2006, seeking for an additional time of 10 days or
until 27 April 2006 within which to file said pleading.
[32]
Although petitioner filed by registered mail a motion to
admit its attached petition for review on 19 April 2006,
[33]
the CA issued the herein assailed 23 May 2006
resolution,
[34]
disposing of the formers pending motion for extension as well as the petition itself in the
following wise:

We resolve to DENY the second extension motion and rule to DISMISS the petition for being filed late.

Settled is that heavy workload is by no means excusable (Land Bank of the Philippines vs. Natividad, 458 SCRA
441 [2005]). If the failure of the petitioners counsel to cope up with heavy workload should be considered a
valid justification to sidestep the reglementary period, there would be no end to litigations so long as counsel
had not been sufficiently diligent or experienced (LTS Philippine Corporation vs. Maliwat, 448 SCRA 254, 259-260
[2005], citing Sublay vs. National Labor Relations Commission, 324 SCRA 188 [2000]).

Moreover, lawyers should not assume that their motion for extension or postponement will be granted the
length of time they pray for (Ramos vs. Dajoyag, 378 SCRA 229 [2002]).

SO ORDERED.
[35]


Petitioners motion for reconsideration of the foregoing resolution
[36]
was denied for lack of merit in the CAs
second assailed 9 August 2006 resolution,
[37]
hence, this petition.
The Issues

Petitioner seeks the reversal of the assailed resolutions on the following grounds, to wit:

I. THE COURT OF APPEALS ERRED IN DISMISSING THE PETITION ON MERE TECHNICALITY;

II. THE COURT OF APPEALS ERRED IN REFUSING TO RESOLVE THE PETITION ON THE MERITS THEREBY
AFFIRMING THE OFFICE OF THE PRESIDENTS DECISION (A) DISMISSING JTICS APPEAL ON A MERE
TECHNICALITY; (B) AFFIRMING THE HLURB BOARDS DECISION INSOFAR AS IT FOUND JTIC SOLIDARILY LIABLE
WITH PRIMETOWN TO PAY SPOUSES ANG DAMAGES, ATTORNEYS FEES AND THE COST OF THE SUIT; AND (C)
AFFIRMING THE HLURB BOARDS DECISION INSOFAR AS IT FAILED TO AWARD JITC ITS COUNTERCLAIMS
AGAINST SPOUSES ANG.
[38]


The Courts Ruling

We find the petition bereft of merit.

While the dismissal of an appeal on purely technical grounds is concededly frowned upon,
[39]
it bears
emphasizing that the procedural requirements of the rules on appeal are not harmless and trivial technicalities
that litigants can just discard and disregard at will.
[40]
Neither being a natural right nor a part of due process, the
rule is settled that the right to appeal is merely a statutory privilege which may be exercised only in the manner
and in accordance with the provisions of the law.
[41]
The perfection of an appeal in the manner and within the
period prescribed by law is, in fact, not only mandatory but jurisdictional.
[42]
Considering that they are
requirements which cannot be trifled with as mere technicality to suit the interest of a party,
[43]
failure to perfect
an appeal in the prescribed manner has the effect of rendering the judgment final and executory.
[44]


Fealty to the foregoing principles impels us to discount the error petitioner imputes against the CA for
denying its second motion for extension of time for lack of merit and dismissing its petition for review for having
been filed out of time. Acting on the 29 March 2006 motion filed for the purpose, after all, the CA had already
granted petitioner an inextendible period of 15 days from 31 March 2006 or until 15 April 2006 within which to
file its petition for review. Sec. 4, Rule 43 of the 1997 Rules of Civil Procedureprovides as follows:

Sec. 4. Period of appeal. The appeal shall be taken within fifteen (15) days from notice of the award,
judgment, final order or resolution, or from the date of its last publication, if publication is required by law for its
effectivity, or of the denial of petitioners motion for new trial or reconsideration duly filed in accordance with
the governing law of the court or agency a quo. Only one (1) motion for reconsideration shall be allowed. Upon
proper motion and payment of the full amount of the docket fee before the expiration of the reglementary
period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the
petition for review. No further extension shall be granted except for the most compelling reason and in no case
to exceed fifteen (15) days. (Underscoring supplied)


The record shows that, having been granted the 15-day extension sought in its first motion, petitioner filed
a second motion for extension praying for an additional 10 days from 17 April 2006 within which to file its
petition for review, on the ground that pressures of work and the demands posed by equally important cases
prevented its counsel from finalizing the same. As correctly ruled by the CA, however, heavy workload cannot be
considered as a valid justification to sidestep the reglementary period
[45]
since to do so would only serve to
encourage needless delays and interminable litigations. Indeed, rules prescribing the time for doing specific acts
or for taking certain proceedings are considered absolutely indispensable to prevent needless delays and to
orderly and promptly discharge judicial business.
[46]
Corollary to the principle that the allowance or denial of a
motion for extension of time is addressed to the sound discretion of the court,
[47]
moreover, lawyers cannot
expect that their motions for extension or postponement will be granted
[48]
as a matter of course.

Although technical rules of procedure are not ends in themselves, they are necessary for an effective and
expeditious administration of justice and cannot, for said reason, be discarded with the mere expediency of
claiming substantial merit.
[49]
This holds particularly true in the case at bench where, prior to the filing of its
petition for review before the CA, petitioners appeal before the OP was likewise dismissed in view of its failure
to file its appeal memorandum within the extensions of time it had been granted by said office. After being
granted an initial extension of 15 days to do the same, the records disclose that petitioner was granted by the OP
a second extension of 10 days from 15 March 2005 or until 25 March 2005 within which to file its appeal
memorandum, on the condition that no further extensions shall be allowed. Aside from not heeding said
proviso, petitioner had, consequently, no more time to extend when it filed its 31 March 2005 motion seeking
yet another extension of 10 days or until 10 April 2005 within which to file its appeal memorandum.

With the foregoing procedural antecedents, the initial 15-day extension granted by the CA and the
injunction under Sec. 4, Rule 43 of the 1997 Rules of Civil Procedureagainst further extensions except for the
most compelling reason, it was clearly inexcusable for petitioner to expediently plead its counsels heavy
workload as ground for seeking an additional extension of 10 days within which to file its petition for review. To
our mind, petitioner would do well to remember that, rather than the low gate to which parties are
unreasonably required to stoop, procedural rules are designed for the orderly conduct of proceedings and
expeditious settlement of cases in the courts of law. Like all rules, they are required to be followed
[50]
and utter
disregard of the same cannot be expediently rationalized by harping on the policy of liberal
construction
[51]
which was never intended as an unfettered license to disregard the letter of the law or, for that
matter, a convenient excuse to substitute substantial compliance for regular adherence thereto. When it comes
to compliance with time rules, the Court cannot afford inexcusable delay.
[52]


Even prescinding from the foregoing procedural considerations, we also find that the HLURB Arbiter and
Board correctly held petitioner liable alongside PPGI for respondents claims and the P10,000.00 administrative
fine imposed pursuant to Section 20 in relation to Section 38 of P.D. 957. By the express terms of the JVA, it
appears that petitioner not only retained ownership of the property pending completion of the condominium
project
[53]
but had also bound itself to answer liabilities proceeding from contracts entered into by PPGI with
third parties. Article VIII, Section 1 of the JVA distinctly provides as follows:

Sec. 1. Rescission and damages. Non-performance by either party of its obligations under this Agreement
shall be excused when the same is due to Force Majeure. In such cases, the defaulting party must exercise due
diligence to minimize the breach and to remedy the same at the soonest possible time. In the event that either
party defaults or breaches any of the provisions of this Agreement other than by reason of Force Majeure, the
other party shall have the right to terminate this Agreement by giving notice to the defaulting party, without
prejudice to the filing of a civil case for damages arising from the breach of the defaulting party.

In the event that the Developer shall be rendered unable to complete the Condominium Project, and such
failure is directly and solely attributable to the Developer, the Owner shall send written notice to the Developer
to cause the completion of the Condominium Project. If the developer fails to comply within One Hundred
Eighty (180) days from such notice or, within such time, indicates its incapacity to complete the Project, the
Owner shall have the right to take over the construction and cause the completion thereof. If the Owner
exercises its right to complete the Condominium Project under these circumstances, this Agreement shall be
automatically rescinded upon written notice to the Developer and the latter shall hold the former free and
harmless from any and all liabilities to third persons arising from such rescission. In any case, the Owner shall
respect and strictly comply with any covenant entered into by the Developer and third parties with respect to
any of its units in the Condominium Project. To enable the owner to comply with this contingent liability, the
Developer shall furnish the Owner with a copy of its contracts with the said buyers on a month-to-month
basis. Finally, in case the Owner would be constrained to assume the obligations of the Developer to its own
buyers, the Developer shall lose its right to ask for indemnity for whatever it may have spent in the Development
of the Project.

Nevertheless, with respect to the buyers of the Developer for the First Phase, the area intended for the
Second Phase shall not be bound and/or subjected to the said covenants and/or any other liability incurred by
the Developer in connection with the development of the first phase. (Underscoring supplied)


Viewed in the light of the foregoing provision of the JVA, petitioner cannot avoid liability by claiming that it
was not in any way privy to the Contracts to Sell executed by PPGI and respondents. As correctly argued by the
latter, moreover, a joint venture is considered in this jurisdiction as a form of partnership and is, accordingly,
governed by the law of partnerships.
[54]
Under Article 1824 of the Civil Code of the Philippines, all partners are
solidarily liable with the partnership for everything chargeable to the partnership, including loss or injury caused
to a third person or penalties incurred due to any wrongful act or omission of any partner acting in the ordinary
course of the business of the partnership or with the authority of his co-partners.
[55]
Whether innocent or guilty,
all the partners are solidarily liable with the partnership itself.
[56]


WHEREFORE, premises considered, the petition for review is DENIED for lack of merit.




G.R. No. 110782 September 25, 1998
IRMA IDOS, petitioner,
vs.
COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

QUISUMBING, J.:
Before this Court is the petition for review of the Decision of respondent Court of Appeals
1
dismissing
petitioner's appeal in CA-G.R. CR No. 11960; and affirming her conviction as well as the sentence imposed on her
by the Regional Trial Court of Malolos, Bulacan, in Criminal Case No. 1395-M-88
2
as follows:
WHEREFORE . . . the (c)ourt finds the accused Irma Idos guilty beyond reasonable doubt and is hereby sentenced
to suffer the penalty of imprisonment of six (6) months and to pay a fine of P135,000.00 and to pay private
complainant Eddie Alarilla the amount of the check in question of P135,000.00 at 12% interest from the time of
the filing of the (i)nformation (August 10, 1988) until said amount has been fully paid.
Elevated from the Third Division
3
of this Court, the case was accepted for resolution en banc on the initial
impression that here, a constitutional question might be involved.
4
It was opined that petitioner's sentence,
particularly six months' imprisonment, might be in violation of the constitutional guarantee against
imprisonment for non-payment of a debt.
5

A careful consideration of the issues presented in the petition as well as the comments thereon and the findings
of fact by the courts below in the light of applicable laws and precedents convinces us, however, that the
constitutional dimension need not be reached in order to resolve those issues adequately. For, as herein
discussed, the merits of the petition could be determined without delving into aspects of the cited constitutional
guarantee vis-a-vis provisions of the Bouncing Checks Law (Batas Pambansa Blg. 22). There being no necessity
therefor, we lay aside discussions of the constitutional challenge to said law in deciding this petition.
The petitioner herein, Irma L. Idos, is a businesswoman engaged in leather tanning. Her accuser for violation of
B.P. 22 is her erstwhile supplier and business partner, the complainant below, Eddie Alarilla.
As narrated by the Court of Appeals, the background of this case is as follows:
The complainant Eddie Alarilla supplied chemicals and rawhide to the accused-appellant Irma L. Idos for use in
the latter's business of manufacturing leather. In 1985, he joined the accused-appellant's business and formed
with her a partnership under the style "Tagumpay Manufacturing," with offices in Bulacan and Cebu City.
However, the partnership was short lived. In January, 1986 the parties agreed to terminate their partnership.
Upon liquidation of the business the partnership had as of May 1986 receivables and stocks worth
P1,800,000.00. The complainant's share of the assets was P900,000.00 to pay for which the accused-appellant
issued the following postdated checks, all drawn against Metrobank Branch in Mandaue, Cebu:
CHECK NO. DATE AMOUNT
1) 103110295 8-15-86 P135,828.87
2) 103110294 P135,828.87
3) 103115490 9-30-86 P135,828.87
4) 103115491 10-30-86 P126,656.01
The complainant was able to encash the first, second, and fourth checks, but the third check (Exh. A) which is the
subject of this case, was dishonored on October 14, 1986 for insufficiency of funds. The complainant demanded
payment from the accused-appellant but the latter failed to pay. Accordingly, on December 18, 1986, through
counsel, he made a formal demand for payment. (Exh. B) In a letter dated January 2, 1987, the accused-appellant
denied liability. She claimed that the check had been given upon demand of complainant in May 1986 only as
"assurance" of his share in the assets of the partnership and that it was not supposed to be deposited until the
stocks had been sold.
Complainant then filed his complaint in the Office of the Provincial Fiscal of Bulacan which on August 22, 1988
filed an information for violation of BP Blg. 22 against accused-appellant.
Complainant danied that the checks issued to him by accused-appellant were subject to the disposition of the
stocks and the collection of receivables of the business. But the accused-appellant insisted that the complainant
had known that the checks were to be funded from the proceeds of the sale of the stocks and the collection of
receivables. She claimed that the complainant himself asked for the checks because he did not want to continue
in the tannery business and had no use for a share of the stocks. (TSN, p. 7, April 14, 1991; id., pp. 8-9, Nov. 13,
1989; id., pp. 12, 16, 20, Feb. 14, 1990; id, p. 14, June 4, 1990).
On February 15, 1992, the trial court rendered judgment finding the accused-appellant guilty of the crime
charged. The accused-appellant's motion for annulment of the decision and for reconsideration was denied by
the trial court in its order dated April 12, 1991.
6

Herein respondent court thereafter affirmed on appeal the decision of the trial court. Petitioner timely moved
for a reconsideration, but this was subsequently denied by respondent court in its Resolution
7
dated June 11,
1993. Petitioner has now appealed to us by way of a petition for certiorari under Rule 45 of the Rules of Court.
During the pendency of this petition, this Court by a resolutions
8
dated August 30, 1993, took note of the
compromise agreement executed between the parties, regarding the civil aspect of the case, as manifested by
petitioner in a Motion to Render Judgment based on Compromise Agreement
9
filed on August 5, 1993. After
submission of the Comment
10
by the Solicitor General, and the Reply
11
by petitioner, this case was deemed
submitted for decision.
Contending that the Court of Appeals erred in its affirmance of the trial court's decision, petitioner cites the
following reasons to justify the review of her case:
1. The Honorable Court of Appeals has decided against the innocence of the accused based on mere probabilities
which, on the contrary, should have warranted her acquittal on reasonable doubt. Even then, the conclusion of
the trial court is contrary to the evidence on record, including private complainant's judicial admission that there
was no consideration for the check.
2 The Honorable Court of Appeals has confused and merged into one the legal concepts of dissolution,
liquidation and termination of a partnership and on the basis of such misconception of the law, disregarded the
fact of absence of consideration of the check and convicted the accused.
3 While this appeal was pending, the parties submitted for the approval of the Honorable Court a compromise
agreement on the civil liability. The accused humbly submits that this supervening event, which by its terms puts
to rest any doubt the Court of Appeals had entertained against the defense of lack of consideration, should have
a legal effect favorable to the accused, considering that the dishonored check constitutes a private transaction
between partners which does not involve the public interest, and considering further that the offense is not one
involving moral turpitude.
4 The Honorable Court of Appeals failed to appreciate the fact that the accused had warned private complainant
that the check was not sufficiently funded, which should have exonerated the accused pursuant to the ruling in
the recent case of Magno vs. Court of Appeals, 210 SCRA 471, which calls for a more flexible and less rigid
application of the Bouncing Checks law.
12

For a thorough consideration of the merits of petitioner's appeal, we find pertinent and decisive the following
issues:
1. Whether respondent court erred in holding that the subject check was issued by petitioner to apply on
account or for value, that is, as part of the consideration of a "buy-out" of said complainant's interest in the
partnership, and not merely as a commitment on petitioner's part to return the investment share of
complainant, along with any profit pertaining to said share, in the partnership.
2. Whether the respondent court erred in concluding that petitioner issued the subject check knowing at the
time of issue that she did not have sufficient funds in or credit with the drawee bank and without communicating
this fact of insufficiency of funds to the complainant.
Both inquiries boil down into one ultimate issue: Did the respondent court err in affirming the trial court's
judgment that she violated Batas Pambansa Blg. 22?
Considering that penal statutes are strictly construed against the state and liberally in favor of the accused, it
bears stressing that for an act to be punishable under the B.P. 22, it "must come clearly within both the spirit and
the letter of the statue.
13
Otherwise, the act has to be declared outside the law's ambit and a plea of innocence
by the accused must be sustained.
The relevant provisions of B.P. 22 state that:
Sec. 1. Checks without sufficient funds. Any person who makes or draws and issues any check to apply on
account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the
drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored
by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had
not the drawer, without any valid reason, ordered the bank to stop payment, shall be punished by imprisonment
of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double
the amount of the check which fine shall in no case exceed Two hundred thousand pesos, or both such fine and
imprisonment at the discretion of the court.
The same penalty shall be imposed upon any person who having sufficient funds in or credit with the drawee
bank when he makes or draws and issues a check, shall fail to keep sufficient funds or to maintain a credit or to
cover the full amount of the check if presented within a period of ninety (90) days from the date appearing
thereon, for which reason it is dishonored by the drawee bank.
Where the check is drawn by a corporation, company or entity, the person or persons who actually signed the
check in behalf of such drawer shall be liable under this Act.
Sec. 2. Evidence of knowledge of insufficient funds. The making, drawing and issuance of a check payment of
which is refused by the drawee because of insufficient funds in or credit with such bank, when presented within
ninety (90) days from the date of the check, shall be prima facie evidence of knowledge of such insufficiency of
funds or credit unless such maker or drawer pays the holder thereof the amount due thereon or makes
arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice
that such check has not been paid by the drawee. (Emphasis supplied)
As decided by this Court, the elements of the offense penalized under B.P. 22, are as follows: "(1) the making,
drawing and issuance of any check to apply to account or for value; (2) the knowledge of the maker, drawer or
issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the
payment of such check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee
bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid
cause, ordered the bank to stop payment.
14

In the present case, with regard to the first issue, evidence on record would show that the subject check was to
be funded from receivables to be collected and goods to be sold by the partnership, and only when such
collection and sale were realized.
15
Thus, there is sufficient basis for the assertion that the petitioner issued the
subject check (Metrobank Check No. 103115490 dated October 30, 1986, in the amount of P135,828.87) to
evidence only complainant's share or interest in the partnership, or at best, to show her commitment that when
receivables are collected and goods are sold, she would give to private complainant the net amount due him
representing his interest in the partnership. It did not involve a debt of or any account due and payable by the
petitioner.
Two facts stand out. Firstly, three of four checks were properly encashed by complainant; only one (the third)
was not. But eventually even this one was redeemed by petitioner. Secondly, even private complainant admitted
that there was no consideration whatsoever for the issuance of the check, whose funding was dependent on
future sales of goods and receipts of payment of account receivables.
Now, it could not be denied that though the parties petitioner and complainant had agreed to dissolve the
partnership, such ageement did not automatically put an end to the partnership, since they still had to sell the
goods on hand and collect the receivables from debtors. In short, they were still in the process of "winding up"
the affairs of the partnership, when the check in question was issued.
Under the Civil Code, the three final stages of a partnership are (1) dissolution; (2) winding-up; and (3)
termination. These stages are distinguished, to wit:
(1) Dissolution Defined
Dissolution is the change in the relation of the partners caused by any partner ceasing to be associated in the
carrying on of the business (Art. 1828). It is that point of time the time the partners cease to carry on the
business tonether. (Citation omitted).
(2) Winding Up Defined
Winding up is the process of settling business affairs of dissolution.
(NOTE: Examples of winding up: the paying of previous obligations; the collecting of assets previously
demandable; even new business if needed to wind up, as the contracting with a demolition company for the
demolition of the garage used in a "used car" partnership.)
(3) Termination Defined
Termination is the point in time after all the partnership affairs have been wound up.
16
[Citation omitted]
(Emphasis supplied).
These final stages in the life of a partnership are recognized under the Civil Code that explicitly declares that
upon dissolution, the partnership is not terminated, to wit:
Art 1828. The dissolution of a partnership is the change in the relation of the partners caused by any partner
ceasing to be associated in the carrying on as distinguished from the winding up of the business.
Art. 1829. On dissolution the partnership is not terminated, but continues until the winding up of partnership
affairs is completed. (Emphasis supplied.)
The best evidence of the existence of the partnership, which was not yet terminated (though in the winding up
stage), were the unsold goods and uncollected receivables, which were presented to the trial court. Since the
partnership has not been terminated, the petitioner and private complainant remained as co-partners. The check
was thus issued by the petitioner to complainant, as would a partner to another, and not as payment from a
debtor to a creditor.
The more tenable view, one in favor of the accused, is that the check was issued merely to evidence the
complainant's share in the partnership property, or to assure the latter that he would receive in time his due
share therein. The alternative view that the check was in consideration of a "buy out" is but a theory, favorable
to the complainant, but lacking support in the record; and must necessarily be discarded.
For there is nothing on record which even slightly suggest that petitioner ever became interested in acquiring,
much less keeping, the shares of the complainant. What is very clear therefrom is that the petitioner exerted her
best efforts to sell the remaining goods and to collect the receivables of the partnership, in order to come up
with the amount necessary to satisfy the value of complainant's interest in the partnership at the dissolution
thereof. To go by accepted custom of the trade, we are more inclined to the view that the subject check was
issued merely to evidence complainant's interest in the partnership. Thus, we are persuaded that the check was
not intended to apply on account or for value; rather it should be deemed as having been drawn without
consideration at the time of issue.
Absent the first element of the offense penalized under B.P. 22, which is "the making, drawing and issuance of
any check to apply on account or for value", petitioner's issuance of the subject check was not an act
contemplated in nor made punishable by said statute.
As to the second issue, the Solicitor General contends that under the Bouncing Checks Law, the elements of
deceit and damage are not essential or required to constitute a violation thereof. In his view, the only essential
element is the knowledge on the part of the maker or drawer of the check of the insufficiency of his/her funds at
the time of the issuance of said check.
The Bouncing Checks Law makes the mere act of issuing a bad or worthless check a special offense punishable by
law. "Malice or intent in issuing the worthless check is immaterial, the offense being malum
prohibitum,"
17
so goes the argument for the public respondents.
But of course this could not be an absolute proposition without descending to absurdity. For if a check were
issued by a kidnap victim to a kidnapper for ransom, it would be absurd to hold the drawer liable under B.P. 22, if
the check is dishonored and unpaid. That would go against public policy and common sense.
Public respondents further contend that "since petitioner issued the check in favor of complainant. Alarilla and
when notified that it was returned for insufficiency of funds, failed to make good the check, then petitioner is
liable for violation of B.P. 22.
18
Again, this matter could not be all that simple. For while "the maker's knowledge
of the insufficiency of funds is legally presumed from the dishonor of his checks for insufficiency of funds,
19
this
presumption is rebuttable.
In the instant case, there is only a prima facie presumption which did not preclude the presentation of contrary
evidence.
20
In fact, such contrary evidence on two points could be gleaned from the record concerning (1) lack of
actual knowledge of insufficiency of funds; and (2) lack of adequate notice of dishonor.
Noteworthy for the defense, knowledge of insufficiency of funds or credit in the drawee bank for the payment of
a check upon its presentment is an essential element of the offense.
21
It must be proved, particularly where
the prima facie presumption of the existence of this element has been rebutted. The prima facie presumption
arising from the fact of drawing, issuing or making a check, the payment of which was subsequently refused for
insufficiency of funds is, moreover, not sufficient proof of guilt by the issuer.
In the case of Nieva v. Court of Appeals,
22
it was held that the subsequent dishonor of the subject check issued
by accused merely engendered the prima facie presumption that she knew of the insufficiency of funds, but did
not render the accused automatically guilty under B.P. 22.
23

The prosecution has a duty to prove all the elements of the crime, including the acts that give rise to the prima
facie presumption; petitioner, on the other hand, has a right to rebut the prima faciepresumption. Therefore, if
such knowledge of insufficiency of funds is proven to be actually absent or non-existent, the accused should not
be held liable for the offense defined under the first paragraph of Section 1 of B.P. 22. Although the offense
charged is a malum prohibitum, the prosecution is not thereby excused from its responsibility of proving beyond
reasonable doubt all the elements of the offense, one of which is knowledge of the insufficiency of funds.
Sec. 1 of B.P. 22 specifically requires that the person in making, drawing or issuing the check, be shown that he
knows at the time of issue, that he does not have sufficient funds in or credit with the drawee bank for the
payment of such check in full upon its presentment.
In the case at bar, as earlier discussed, petitioner issued the check merely to evidence the proportionate share of
complainant in the partnership assets upon its dissolution. Payment of that share in the partnership was
conditioned on the subsequent realization of profits from the unsold goods and collection of the receivables of
the firm. This condition must be satisfied or complied with before the complainant can actually "encash" the
check. The reason for the condition is that petitioner has no independent means to satisfy or discharge the
complainant's share, other than by the future sale and collection of the partnership assets. Thus, prior to the
selling of the goods and collecting of the receivables, the complainant could not, as of yet, demand his
proportionate share in the business. This situation would hold true until after the winding up, and subsequent
termination of the partnership. For only then, when the goods were already sold and receivables paid that cash
money could be availed of by the erstwhile partners.
Complainant did not present any evidence that petitioner signed and issued four checks actually knowing that
funds therefor would be insufficient at the time complainant would present them to the drawee bank. For it was
uncertain at the time of issuance of the checks whether the unsold goods would have been sold, or whether the
receivables would have been collected by the time the checks would be encashed. As it turned out, three were
fully funded when presented to the bank; the remaining one was settled only later on.
Since petitioner issued these four checks without actual knowledge of the insufficiency of funds, she could not
be held liable under B.P. 22 when one was not honored right away. For it is basic doctrine that penal statutes
such as B.P. 22 "must be construed with such strictness as to carefully safeguard the rights of the defendant . .
."
24
The element of knowledge of insufficiency of funds has to be proved by the prosecution; absent said proof,
petitioner could not be held criminally liable under that law. Moreover, the presumption of prima
facie knowledge of such insufficiency in this case was actually rebutted by petitioner's evidence.
Further, we find that the prosecution also failed to prove adequate notice of dishonor of the subject check on
petitioner's part, thus precluding any finding of prima facie evidence of knowledge of insufficiency of funds.
There is no proof that notice of dishonor was actually sent by the complainant or by the drawee bank to the
petitioner. On this point, the record is bereft of evidence to the contrary.
But in fact, while the subject check initially bounced, it was later made good by petitioner. In addition, the terms
of the parties' compromise agreement, entered into during the pendency of this case, effectively invalidates the
allegation of failure to pay or to make arrangement for the payment of the check in full. Verily, said compromise
agreement constitutes an arrangement for the payment in full of the subject check.
The absence of notice of dishonor is crucial in the present case. As held by this Court in prior cases:
Because no notice of dishonor was actually sent to and received by the petitioner, the prima faciepresumption
that she knew about the insufficiency of funds cannot apply. Section 2 of B.P. 22 clearly provides that this
presumption arises not from the mere fact of drawing, making and issuing a bum check; there must also be a
showing that, within five banking days from receipt of the notice of dishonor, such maker or drawer failed to pay
the holder of the check the amount due thereon or to make arrangement for its payment in full by the drawee of
such check.
25
[Emphasis supplied.]
The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a criminal
prosecution. Accordingly, procedural due process clearly enjoins that a notice of dishonor be actually served on
petitioner. Petitioner has a right to demand and the basic postulates of fairness require that the notice of
dishonor be actually sent to and received by her to afford her the opportunity to avert prosecution under
B.P.
26

Further, what militates strongly against public respondents' stand is the fact that petitioner repeatedly notified
the complainant of the insufficiency of funds. Instructive is the following pronouncement of this Court in Magno
v. Court of Appeals:
Furthermore, the element of "knowing at the time of issue that he does not have sufficient funds in or credit
with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently
dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same
reason . . ." is inversely applied in this case. From the very beginning. petitioner never hid the fact that he did not
have the funds with which to put up the warranty deposit and as a matter of fact, he openly intimated this to the
vital conduit of the transaction, Joey Gomez, to whom petitioner was introduced by Mrs. Teng. It would have
been different if this predicament was not communicated to all the parties he dealt with regarding the lease
agreement the financing or which was covered by L.S. Finance Management. "
27

In the instant case, petitioner intimated to private complainant the possibility that funds might be insufficient to
cover the subject check, due to the fact that the partnership's goods were yet to be sold and receivables yet to
be collected.
As Magno had well observed:
For all intents and purposes, the law was devised to safeguard the interest of the banking system and the
legitimate public checking account user. It did not intend to shelter or favor nor encourage users of the system to
enrich themselves through manipulations and circumvention of the noble purpose and objective of the law.
Least should it be used also as a means of jeopardizing honest-to-goodness transactions with some color of "get-
rich" scheme to the prejudice of well-meaning businessmen who are the pillars of society.
xxx xxx xxx
Thus, it behooves upon a court of law that in applying the punishment imposed upon the accused, the objective
of retribution of a wronged society, should be directed against the "actual and potential wrongdoers". In the
instant case, there is no doubt that petitioner's four (4) checks were used to collateralize an accommodation,
and not to cover the receipt of an actual "account or credit for value" as this was absent, and therefore
petitioner should not be punished for mere issuance of the checks in question. Following the aforecited theory,
in petitioner's stead the "potential wrongdoer," whose operation could be a menace to society, should not be
glorified by convicting the petitioner.
28

Under the circumstances obtaining in this case, we find the petitioner to have issued the check in good faith,
with every intention of abiding by her commitment to return, as soon as able, the investments of complainant in
the partnership. Evidently, petitioner issued the check with benign considerations in mind, and not for the
purpose of committing fraud, deceit, or violating public policy.
To recapitulate, we find the petition impressed with merit. Petitioner may not be held liable for violation of B.P.
22 for the following reasons: (1) the subject check was not made, drawn and issued by petitioner in exchange for
value received as to qualify it as a check on account or for value; (2) there is no sufficient basis to conclude that
petitioner, at the time of issue of the check, had actual knowledge of the insufficiency of funds; and (3) there was
no notice of dishonor of said check actually served on petitioner, thereby depriving her of the opportunity to pay
or make arrangements for the payment of the check, to avoid criminal prosecution.
Having resolved the foregoing principal issues, and finding the petition meritorious, we no longer need to pass
upon the validity and legality or necessity of the purported compromise agreement on civil liability between the
petitioner and the complainant.
WHEREFORE, the instant petition is hereby GRANTED AND THE PETITIONER ACQUITTED. The Decision of the
respondent Court of Appeals in CA-G.R. CR No. 11960 is hereby REVERSED and the Decision of Regional Trial
Court in Criminal Case No. 1395-M-88 is hereby SET ASIDE.
G.R. No. L-34581 March 31, 1932
ESTATE OF THE DECEASED LAZARO MOTA, ET AL., plaintiffs-appellants,
vs.
VENANCIO CONCEPCION, ET AL., defendants.
SALVADOR SERRA, intervenor-appellee.
Agustin, De Joya, Zaragoza & Araneta and Hilado & Hilado for appellee.
VILLAMOR, J.:
In the amended complaint in the present case, the plaintiffs seek to recover of the defendants Venancio
Concepcion and P.C. Whitaker the amount of P283,786.59 with interest from October, 1927, being the unpaid
balance of the selling price of a railway for transporting sugar cane from certain plantations situated in the
municipalities of Ylog and Kabankalan in the Province of Occidental Negros, and in default of the payment
thereof, to foreclose the mortgage upon said railway, and also to collect the sum of P808,375.02 by way of
damages arising from the alleged negligence of the defendants in maintaining said railway in a proper condition
for the transportation service for which it was intended.
With permission of the court, Salvador Serra intervened as a third-party claimant against the plaintiffs and the
defendants, praying: (1) That his conveyance of a half interest in said railway to the defendants be rescinded,
and that the railway or his interest therein be returned to him, or damages paid him in lieu thereof; and (2) that
plaintiffs and defendants be required to render an accounting of one-half of the returns from the management
of the railway line after May 15, 1920.
The principal defendants did not appear to defend themselves and the court rendered judgment against them
and for the plaintiffs in the sum of P245,804.65 with legal interest from October 31, 1925, at the same time
declaring that the mortgage upon the railway in favor of the plaintiffs is null and void, and that the claim of
damages against the defendants had not been proved.
As to the complaint of the intervenor, the court held that the conveyance of a half interest in the railroad made
by Serra to Concepcion and Whitaker was rescind, and rendered judgment in favor of Serra against the plaintiffs
for the sum of P150,000 instead of the railway, but denied his petition for an accounting, with costs in favor of
said intervenor.
From this judgment the plaintiffs appealed.
At the beginning of the year 1919, Lazaro Mota, now deceased, and Salvador Serra entered into a partnership to
construct several kilometers of railroad in the municipalities of Ylog and Kabankalan, Occidental Negros, in order
to facilitate the transportation of sugar cane to two sugar centrals named San Isidro and Palma of which they
were the respective owners. In January 1920 Serra transferred his half interest to the defendants Concepcion
and Whitaker in connection with the sale of the Palma central. In December 1920, Mota also sold his half
interest in the railroad to the same purchasers, Concepcion and Whitaker. At this last sale, only part of the price
was paid down, and in order to secure the payment of the remainder, Concepcion and Whitaker mortgage to
Mota the entire railroad. The present action was brought by the plaintiffs to recover the unpaid balance and to
foreclose the mortgage. As the mortgage included not only the railroad, which is real property, but also the
rolling stock, which is movable, and therefore personal property, Mota had the contract recorded in the registry,
not only as a mortgage upon registered reap property, according to Act No. 3344, but also as a mortgage of
personal property. However, we are here concerned only with the contract as a mortgage upon unregistered real
property.
The trial court erred in holding that the mortgage was null and void. It is true that the contract does not contain
some of the data mentioned in section 194 of the Administrative Code, but the mortgage was actually recorded
in the registry of deeds by the registrar, and we are of the opinion that it is valid between the contracting parties,
as it would be even if it had not been recorded. From among the decisions of this court cases may be cited
wherein it is held that a mortgage upon unregistered real property is void under the Spanish Mortgage Law, but
the rule upon this point has been modified by section 194 of the Administrative Code, as amended, which clearly
recognizes the validity of such a contract between the contracting parties. (Standard Oil Co. vs. Castro, 54 Phil.,
716.)
On the other hand, we agree with the trial court that the plaintiffs are not entitled to recover damages of the
defendants, as claimed in the second cause of action. Such damages, in addition to being speculative in nature,
have not been proved.
Taking up once more the matter of the intervention, we hold that the court below did not err in permitting it.
Supposing that Serra's contention were well-founded upon its merits, his interest in the litigated property would
be a sufficient justification for the court to grant him permission to intervene and litigate with plaintiffs and
defendants upon said interest. But the intervenor's contention is, we find, wholly untenable upon the merits. His
right to rescission, which he could once have exercised against Concepcion and Whitaker, has lapsed. With
regard to this, it is to be noticed that the transfer of Serra's one-half interest in the railway to Concepcion and
Whitaker is evidenced by a document whereby he sold to them the Palma central. It is clear that this conveyance
of Serra's half interest in the railroad to them was an actual sale, and not a mere assignment, as Serra now
pretends. In the case of Estate of Mota vs. Serra (47 Phil., 464), which refers to another aspect of the controversy
between the parties here litigant, this court held that all of the railway together with the Palma plantation was
the property of Whitaker and Concepcion in consequence of the contract here in question. We see no reason for
arriving at a different conclusion now. In paragraph VI of said contract the railway is mentioned, and Concepcion
and Whitaker are said to be subrogated to all the rights and obligations arising from said contract, binding
themselves likewise to comply with all the contracts entered into between the vendor and the partners, tenants
on shares, and employees. The words "were subrogated" used in said contract evidently mean "succeeded", and
one who succeeds to the rights and obligations created by a contract becomes, to all intents and purposes, the
owner of the property which is the subject of such rights and obligations.
Now then, when the Palma plantation was sold with Serra's half interest in the railroad, as stated above, Serra
was given a mortgage upon said plantation, though not upon the railway, to secure the payment of some
hundred thousand pesos, having received only the sum of P945,861.90 cash. The balance of the price was never
paid, with the result that Serra foreclosed the mortgage upon the Palma plantation, and upon execution, he
bought it with the improvements made thereon by the vendees, for the sum of P500,000. It is evident that
having foreclosed the mortgage given him to secure the unpaid portion of the selling price of plantation and
railway, Serra cannot now maintain another action to rescind the sale of his half interest in the railway. Having
demanded the fulfillment of the contract in another action for the foreclosure of the mortgage, his right to
rescission has been extinguished. Furthermore, even supposing that Serra could have exercised the right of
rescission against his vendees, he could not do so against the Estate of Mota, because the latter was a third party
in the contract between Serra and the vendees, and is, moreover, an innocent creditor for value.
In view of the conclusion that Serra's alleged right to rescind that contract does not exist, his claim for damages,
instead of the return of the railway, becomes of necessity unfounded, and the judgment of the court granting
Serra the sum of P150,000 erroneous.
For the foregoing considerations, the judgment appealed from must be affirmed so far as it holds that
defendants Concepcion and Whitaker are indebted to the plaintiffs in the amount of P245,804.69 with legal
interest from October 31, 1925 until fully paid, and reversed with regard to the rest of it; wherefore, plaintiffs
and defendants are absolved from Serra's cross-complaint, and let the cause be remanded to the court of origin
with instructions that unless the debt of Concepcion and Whitaker is paid within ninety days from notice hereof,
the railway shall be sold for the payment of said debt and the incidental expenses in the foreclosure of the
mortgage. Without special award of costs. So ordered.
MARJORIE TOCAO and WILLIAM T. BELO, petitioners, vs. COURT OF APPEALS and NENITA A.
ANAY, respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:
This is a petition for review of the Decision of the Court of Appeals in CA-G.R. CV No. 41616,
[1]
affirming the
Decision of the Regional Trial Court of Makati, Branch 140, in Civil Case No. 88-509.
[2]

Fresh from her stint as marketing adviser of Technolux in Bangkok, Thailand, private respondent Nenita A. Anay
met petitioner William T. Belo, then the vice-president for operations of Ultra Clean Water Purifier, through her
former employer in Bangkok. Belo introduced Anay to petitioner Marjorie Tocao, who conveyed her desire to
enter into a joint venture with her for the importation and local distribution of kitchen cookwares. Belo
volunteered to finance the joint venture and assigned to Anay the job of marketing the product considering her
experience and established relationship with West Bend Company, a manufacturer of kitchen wares in
Wisconsin, U.S.A. Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and
Anay as head of the marketing department and later, vice-president for sales. Anay organized the administrative
staff and sales force while Tocao hired and fired employees, determined commissions and/or salaries of the
employees, and assigned them to different branches. The parties agreed that Belos name should not appear in
any documents relating to their transactions with West Bend Company. Instead, they agreed to use Anays name
in securing distributorship of cookware from that company. The parties agreed further that Anay would be
entitled to: (1) ten percent (10%) of the annual net profits of the business; (2) overriding commission of six
percent (6%) of the overall weekly production; (3) thirty percent (30%) of the sales she would make; and (4) two
percent (2%) for her demonstration services. The agreement was not reduced to writing on the strength of
Belos assurances that he was sincere, dependable and honest when it came to financial commitments.
Anay having secured the distributorship of cookware products from the West Bend Company and organized the
administrative staff and the sales force, the cookware business took off successfully. They operated under the
name of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocaos name, with office at 712
Rufino Building, Ayala Avenue, Makati City.Belo made good his monetary commitments to Anay. Thereafter,
Roger Muencheberg of West Bend Company invited Anay to the distributor/dealer meeting in West Bend,
Wisconsin, U.S.A., from July 19 to 21, 1987 and to the southwestern regional convention in Pismo Beach,
California, U.S.A., from July 25-26, 1987. Anay accepted the invitation with the consent of Marjorie Tocao who,
as president and general manager of Geminesse Enterprise, even wrote a letter to the Visa Section of the U.S.
Embassy in Manila on July 13, 1987. A portion of the letter reads:
Ms. Nenita D. Anay (sic), who has been patronizing and supporting West Bend Co. for twenty (20) years now,
acquired the distributorship of Royal Queen cookware for Geminesse Enterprise, is the Vice President Sales
Marketing and a business partner of our company, will attend in response to the invitation. (Italics supplied.)
[3]

Anay arrived from the U.S.A. in mid-August 1987, and immediately undertook the task of saving the business on
account of the unsatisfactory sales record in the Makati and Cubao offices. On August 31, 1987, she received a
plaque of appreciation from the administrative and sales people through Marjorie Tocao
[4]
for her excellent job
performance. On October 7, 1987, in the presence of Anay, Belo signed a memo
[5]
entitling her to a thirty-seven
percent (37%) commission for her personal sales "up Dec 31/87. Belo explained to her that said commission
was apart from her ten percent (10%) share in the profits. On October 9, 1987, Anay learned that Marjorie Tocao
had signed a letter
[6]
addressed to the Cubao sales office to the effect that she was no longer the vice-president
of Geminesse Enterprise. The following day, October 10, she received a note from Lina T. Cruz, marketing
manager, that Marjorie Tocao had barred her from holding office and conducting demonstrations in both Makati
and Cubao offices.
[7]
Anay attempted to contact Belo. She wrote him twice to demand her overriding commission
for the period of January 8, 1988 to February 5, 1988 and the audit of the company to determine her share in the
net profits. When her letters were not answered, Anay consulted her lawyer, who, in turn, wrote Belo a letter.
Still, that letter was not answered.
Anay still received her five percent (5%) overriding commission up to December 1987. The following year, 1988,
she did not receive the same commission although the company netted a gross sales of P13,300,360.00.
On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with
damages
[8]
against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch 140.
In her complaint, Anay prayed that defendants be ordered to pay her, jointly and severally, the following: (1)
P32,00.00 as unpaid overriding commission from January 8, 1988 to February 5, 1988; (2) P100,000.00 as moral
damages, and (3) P100,000.00 as exemplary damages. The plaintiff also prayed for an audit of the finances of
Geminesse Enterprise from the inception of its business operation until she was illegally dismissed to
determine her ten percent (10%) share in the net profits. She further prayed that she be paid the five percent
(5%) overriding commission on the remaining 150 West Bend cookware sets before her dismissal.
In their answer,
[9]
Marjorie Tocao and Belo asserted that the alleged agreement with Anay that was neither
reduced in writing, nor ratified, was either unenforceable or void or inexistent. As far as Belo was concerned,
his only role was to introduce Anay to Marjorie Tocao. There could not have been a partnership because, as Anay
herself admitted, Geminesse Enterprise was the sole proprietorship of Marjorie Tocao. Because Anay merely
acted as marketing demonstrator of Geminesse Enterprise for an agreed remuneration, and her complaint
referred to either her compensation or dismissal, such complaint should have been lodged with the Department
of Labor and not with the regular court.
Petitioners (defendants therein) further alleged that Anay filed the complaint on account of ill-will and
resentment because Marjorie Tocao did not allow her to lord it over in the Geminesse Enterprise. Anay had
acted like she owned the enterprise because of her experience and expertise. Hence, petitioners were the ones
who suffered actual damages including unreturned and unaccounted stocks of Geminesse Enterprise, and
serious anxiety, besmirched reputation in the business world, and various damages not less than P500,000.00.
They also alleged that, to vindicate their names, they had to hire counsel for a fee of P23,000.00.
At the pre-trial conference, the issues were limited to: (a) whether or not the plaintiff was an employee or
partner of Marjorie Tocao and Belo, and (b) whether or not the parties are entitled to damages.
[10]

In their defense, Belo denied that Anay was supposed to receive a share in the profit of the business. He,
however, admitted that the two had agreed that Anay would receive a three to four percent (3-4%) share in the
gross sales of the cookware. He denied contributing capital to the business or receiving a share in its profits as he
merely served as a guarantor of Marjorie Tocao, who was new in the business. He attended and/or presided over
business meetings of the venture in his capacity as a guarantor but he never participated in decision-making. He
claimed that he wrote the memo granting the plaintiff thirty-seven percent (37%) commission upon her dismissal
from the business venture at the request of Tocao, because Anay had no other income.
For her part, Marjorie Tocao denied having entered into an oral partnership agreement with Anay. However, she
admitted that Anay was an expert in the cookware business and hence, they agreed to grant her the following
commissions: thirty-seven percent (37%) on personal sales; five percent (5%) on gross sales; two percent (2%) on
product demonstrations, and two percent (2%) for recruitment of personnel. Marjorie denied that they agreed
on a ten percent (10%) commission on the net profits. Marjorie claimed that she got the capital for the business
out of the sale of the sewing machines used in her garments business and from Peter Lo, a Singaporean friend-
financier who loaned her the funds with interest. Because she treated Anay as her co-equal, Marjorie received
the same amounts of commissions as her. However, Anay failed to account for stocks valued at P200,000.00.
On April 22, 1993, the trial court rendered a decision the dispositive part of which is as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. Ordering defendants to submit to the Court a formal account as to the partnership affairs for the years 1987
and 1988 pursuant to Art. 1809 of the Civil Code in order to determine the ten percent (10%) share of plaintiff in
the net profits of the cookware business;
2. Ordering defendants to pay five percent (5%) overriding commission for the one hundred and fifty (150)
cookware sets available for disposition when plaintiff was wrongfully excluded from the partnership by
defendants;
3. Ordering defendants to pay plaintiff overriding commission on the total production which for the period
covering January 8, 1988 to February 5, 1988 amounted to P32,000.00;
4. Ordering defendants to pay P100,000.00 as moral damages and P100,000.00 as exemplary damages, and
5. Ordering defendants to pay P50,000.00 as attorneys fees and P20,000.00 as costs of suit.
SO ORDERED.
The trial court held that there was indeed an oral partnership agreement between the plaintiff and the
defendants, based on the following: (a) there was an intention to create a partnership; (b) a common fund was
established through contributions consisting of money and industry, and (c) there was a joint interest in the
profits. The testimony of Elizabeth Bantilan, Anays cousin and the administrative officer of Geminesse Enterprise
from August 21, 1986 until it was absorbed by Royal International, Inc., buttressed the fact that a partnership
existed between the parties. The letter of Roger Muencheberg of West Bend Company stating that he awarded
the distributorship to Anay and Marjorie Tocao because he was convinced that with Marjories financial
contribution and Anays experience, the combination of the two would be invaluable to the partnership, also
supported that conclusion. Belos claim that he was merely a guarantor has no basis since there was no written
evidence thereof as required by Article 2055 of the Civil Code. Moreover, his acts of attending and/or presiding
over meetings of Geminesse Enterprise plus his issuance of a memo giving Anay 37% commission on personal
sales belied this. On the contrary, it demonstrated his involvement as a partner in the business.
The trial court further held that the payment of commissions did not preclude the existence of the partnership
inasmuch as such practice is often resorted to in business circles as an impetus to bigger sales volume. It did not
matter that the agreement was not in writing because Article 1771 of the Civil Code provides that a partnership
may be constituted in any form. The fact that Geminesse Enterprise was registered in Marjorie Tocaos name is
not determinative of whether or not the business was managed and operated by a sole proprietor or a
partnership. What was registered with the Bureau of Domestic Trade was merely the business name or style of
Geminesse Enterprise.
The trial court finally held that a partner who is excluded wrongfully from a partnership is an innocent partner.
Hence, the guilty partner must give him his due upon the dissolution of the partnership as well as damages or
share in the profits realized from the appropriation of the partnership business and goodwill. An innocent
partner thus possesses pecuniary interest in every existing contract that was incomplete and in the trade name
of the co-partnership and assets at the time he was wrongfully expelled.
Petitioners appeal to the Court of Appeals
[11]
was dismissed, but the amount of damages awarded by the trial
court were reduced to P50,000.00 for moral damages and P50,000.00 as exemplary damages. Their Motion for
Reconsideration was denied by the Court of Appeals for lack of merit.
[12]
Petitioners Belo and Marjorie Tocao are
now before this Court on a petition for review on certiorari, asserting that there was no business partnership
between them and herein private respondent Nenita A. Anay who is, therefore, not entitled to the damages
awarded to her by the Court of Appeals.
Petitioners Tocao and Belo contend that the Court of Appeals erroneously held that a partnership existed
between them and private respondent Anay because Geminesse Enterprise came into being exactly a year
before the alleged partnership was formed, and that it was very unlikely that petitioner Belo would invest the
sum of P2,500,000.00 with petitioner Tocao contributing nothing, without any memorandum whatsoever
regarding the alleged partnership.
[13]

The issue of whether or not a partnership exists is a factual matter which are within the exclusive domain of both
the trial and appellate courts. This Court cannot set aside factual findings of such courts absent any showing that
there is no evidence to support the conclusion drawn by the court a quo.
[14]
In this case, both the trial court and
the Court of Appeals are one in ruling that petitioners and private respondent established a business
partnership. This Court finds no reason to rule otherwise.
To be considered a juridical personality, a partnership must fulfill these requisites: (1) two or more persons bind
themselves to contribute money, property or industry to a common fund; and (2) intention on the part of the
partners to divide the profits among themselves.
[15]
It may be constituted in any form; a public instrument is
necessary only where immovable property or real rights are contributed thereto.
[16]
This implies that since a
contract of partnership is consensual, an oral contract of partnership is as good as a written one. Where no
immovable property or real rights are involved, what matters is that the parties have complied with the
requisites of a partnership. The fact that there appears to be no record in the Securities and Exchange
Commission of a public instrument embodying the partnership agreement pursuant to Article 1772 of the Civil
Code
[17]
did not cause the nullification of the partnership. The pertinent provision of the Civil Code on the matter
states:
Art. 1768. The partnership has a juridical personality separate and distinct from that of each of the partners,
even in case of failure to comply with the requirements of article 1772, first paragraph.
Petitioners admit that private respondent had the expertise to engage in the business of distributorship of
cookware. Private respondent contributed such expertise to the partnership and hence, under the law, she was
the industrial or managing partner. It was through her reputation with the West Bend Company that the
partnership was able to open the business of distributorship of that companys cookware products; it was
through the same efforts that the business was propelled to financial success. Petitioner Tocao herself admitted
private respondents indispensable role in putting up the business when, upon being asked if private respondent
held the positions of marketing manager and vice-president for sales, she testified thus:
A: No, sir at the start she was the marketing manager because there were no one to sell yet, its only me there
then her and then two (2) people, so about four (4). Now, after that when she recruited already Oscar Abella and
Lina Torda-Cruz these two (2) people were given the designation of marketing managers of which definitely Nita
as superior to them would be the Vice President.
[18]

By the set-up of the business, third persons were made to believe that a partnership had indeed been forged
between petitioners and private respondents. Thus, the communication dated June 4, 1986 of Missy Jagler of
West Bend Company to Roger Muencheberg of the same company states:
Marge Tocao is president of Geminesse Enterprises. Geminesse will finance the operations. Marge does not
have cookware experience. Nita Anay has started to gather former managers, Lina Torda and Dory Vista. She has
also gathered former demonstrators, Betty Bantilan, Eloisa Lamela, Menchu Javier. They will continue to gather
other key people and build up the organization. All they need is the finance and the products to sell.
[19]

On the other hand, petitioner Belos denial that he financed the partnership rings hollow in the face of the
established fact that he presided over meetings regarding matters affecting the operation of the business.
Moreover, his having authorized in writing on October 7, 1987, on a stationery of his own business firm, Wilcon
Builders Supply, that private respondent should receive thirty-seven (37%) of the proceeds of her personal sales,
could not be interpreted otherwise than that he had a proprietary interest in the business. His claim that he was
merely a guarantor is belied by that personal act of proprietorship in the business. Moreover, if he was indeed a
guarantor of future debts of petitioner Tocao under Article 2053 of the Civil Code,
[20]
he should have presented
documentary evidence therefor. While Article 2055 of the Civil Code simply provides that guaranty must be
express, Article 1403, the Statute of Frauds, requires that a special promise to answer for the debt, default or
miscarriage of another be in writing.
[21]

Petitioner Tocao, a former ramp model,
[22]
was also a capitalist in the partnership. She claimed that she herself
financed the business. Her and petitioner Belos roles as both capitalists to the partnership with private
respondent are buttressed by petitioner Tocaos admissions that petitioner Belo was her boyfriend and that the
partnership was not their only business venture together. They also established a firm that they called Wiji, the
combination of petitioner Belos first name, William, and her nickname, Jiji.
[23]
The special relationship between
them dovetails with petitioner Belos claim that he was acting in behalf of petitioner Tocao. Significantly, in the
early stage of the business operation, petitioners requested West Bend Company to allow them to utilize their
banking and trading facilities in Singapore in the matter of importation and payment of the cookware
products.
[24]
The inevitable conclusion, therefore, was that petitioners merged their respective capital and
infused the amount into the partnership of distributing cookware with private respondent as the managing
partner.
The business venture operated under Geminesse Enterprise did not result in an employer-employee relationship
between petitioners and private respondent. While it is true that the receipt of a percentage of net profits
constitutes only prima facie evidence that the recipient is a partner in the business,
[25]
the evidence in the case at
bar controverts an employer-employee relationship between the parties. In the first place, private respondent
had a voice in the management of the affairs of the cookware distributorship,
[26]
including selection of people
who would constitute the administrative staff and the sales force. Secondly, petitioner Tocaos admissions
militate against an employer-employee relationship. She admitted that, like her who owned Geminesse
Enterprise,
[27]
private respondent received only commissions and transportation and representation
allowances
[28]
and not a fixed salary.
[29]
Petitioner Tocao testified:
Q: Of course. Now, I am showing to you certain documents already marked as Exhs. X and Y. Please go over
this. Exh. Y is denominated `Cubao overrides 8-21-87 with ending August 21, 1987, will you please go over this
and tell the Honorable Court whether you ever came across this document and know of your own knowledge the
amount ---
A: Yes, sir this is what I am talking about earlier. Thats the one I am telling you earlier a certain percentage for
promotions, advertising, incentive.
Q: I see. Now, this promotion, advertising, incentive, there is a figure here and words which I quote: Overrides
Marjorie Ann Tocao P21,410.50 this means that you have received this amount?
A: Oh yes, sir.
Q: I see. And, by way of amplification this is what you are saying as one representing commission,
representation, advertising and promotion?
A: Yes, sir.
Q: I see. Below your name is the words and figure and I quote Nita D. Anay P21,410.50, what is this?
A: Thats her overriding commission.
Q: Overriding commission, I see. Of course, you are telling this Honorable Court that there being the same
P21,410.50 is merely by coincidence?
A: No, sir, I made it a point that we were equal because the way I look at her kasi, you know in a sense because of
her expertise in the business she is vital to my business. So, as part of the incentive I offer her the same thing.
Q: So, in short you are saying that this you have shared together, I mean having gotten from the company
P21,140.50 is your way of indicating that you were treating her as an equal?
A: As an equal.
Q: As an equal, I see. You were treating her as an equal?
A: Yes, sir.
Q: I am calling again your attention to Exh. Y Overrides Makati the other one is ---
A: That is the same thing, sir.
Q: With ending August 21, words and figure Overrides Marjorie Ann Tocao P15,314.25 the amount there you
will acknowledge you have received that?
A: Yes, sir.
Q: Again in concept of commission, representation, promotion, etc.?
A: Yes, sir.
Q: Okey. Below your name is the name of Nita Anay P15,314.25 that is also an indication that she received the
same amount?
A: Yes, sir.
Q: And, as in your previous statement it is not by coincidence that these two (2) are the same?
A: No, sir.
Q: It is again in concept of you treating Miss Anay as your equal?
A: Yes, sir. (Italics supplied.)
[30]

If indeed petitioner Tocao was private respondents employer, it is difficult to believe that they shall receive the
same income in the business. In a partnership, each partner must share in the profits and losses of the venture,
except that the industrial partner shall not be liable for the losses.
[31]
As an industrial partner, private respondent
had the right to demand for a formal accounting of the business and to receive her share in the net profit.
[32]

The fact that the cookware distributorship was operated under the name of Geminesse Enterprise, a sole
proprietorship, is of no moment. What was registered with the Bureau of Domestic Trade on August 19, 1987
was merely the name of that enterprise.
[33]
While it is true that in her undated application for renewal of
registration of that firm name, petitioner Tocao indicated that it would be engaged in retail of kitchenwares,
cookwares, utensils, skillet,
[34]
she also admitted that the enterprise was only 60% to 70% for the cookware
business, while 20% to 30% of its business activity was devoted to the sale of water sterilizer or
purifier.
[35]
Indubitably then, the business name Geminesse Enterprise was used only for practical reasons - it
was utilized as the common name for petitioner Tocaos various business activities, which included the
distributorship of cookware.
Petitioners underscore the fact that the Court of Appeals did not return the unaccounted and unremitted stocks
of Geminesse Enterprise amounting to P208,250.00.
[36]
Obviously a ploy to offset the damages awarded to
private respondent, that claim, more than anything else, proves the existence of a partnership between them.
In Idos v. Court of Appeals, this Court said:
The best evidence of the existence of the partnership, which was not yet terminated (though in the winding up
stage), were the unsold goods and uncollected receivables, which were presented to the trial court. Since the
partnership has not been terminated, the petitioner and private complainant remained as co-partners. x x x.
[37]

It is not surprising then that, even after private respondent had been unceremoniously booted out of the
partnership in October 1987, she still received her overriding commission until December 1987.
Undoubtedly, petitioner Tocao unilaterally excluded private respondent from the partnership to reap for herself
and/or for petitioner Belo financial gains resulting from private respondents efforts to make the business
venture a success. Thus, as petitioner Tocao became adept in the business operation, she started to assert
herself to the extent that she would even shout at private respondent in front of other people.
[38]
Her instruction
to Lina Torda Cruz, marketing manager, not to allow private respondent to hold office in both the Makati and
Cubao sales offices concretely spoke of her perception that private respondent was no longer necessary in the
business operation,
[39]
and resulted in a falling out between the two. However, a mere falling out or
misunderstanding between partners does not convert the partnership into a sham organization.
[40]
The
partnership exists until dissolved under the law. Since the partnership created by petitioners and private
respondent has no fixed term and is therefore a partnership at will predicated on their mutual desire and
consent, it may be dissolved by the will of a partner. Thus:
x x x. 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 partners capability to give it, and the absence of 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 partnership
but that it can result in a liability for damages.
[41]

An unjustified dissolution by a partner can subject him to action for damages because by the mutual agency that
arises in a partnership, the doctrine of delectus personae allows the partners to have the power, although not
necessarily the right to dissolve the partnership.
[42]

In this case, petitioner Tocaos unilateral exclusion of private respondent from the partnership is shown by her
memo to the Cubao office plainly stating that private respondent was, as of October 9, 1987, no longer the vice-
president for sales of Geminesse Enterprise.
[43]
By that memo, petitioner Tocao effected her own withdrawal
from the partnership and considered herself as having ceased to be associated with the partnership in the
carrying on of the business. Nevertheless, the partnership was not terminated thereby; it continues until the
winding up of the business.
[44]

The winding up of partnership affairs has not yet been undertaken by the partnership. This is manifest in
petitioners claim for stocks that had been entrusted to private respondent in the pursuit of the partnership
business.
The determination of the amount of damages commensurate with the factual findings upon which it is based is
primarily the task of the trial court.
[45]
The Court of Appeals may modify that amount only when its factual
findings are diametrically opposed to that of the lower court,
[46]
or the award is palpably or scandalously and
unreasonably excessive.
[47]
However, exemplary damages that are awarded by way of example or correction for
the public good,
[48]
should be reduced to P50,000.00, the amount correctly awarded by the Court of
Appeals. Concomitantly, the award of moral damages of P100,000.00 was excessive and should be likewise
reduced to P50,000.00. Similarly, attorneys fees that should be granted on account of the award of exemplary
damages and petitioners evident bad faith in refusing to satisfy private respondents plainly valid, just and
demandable claims,
[49]
appear to have been excessively granted by the trial court and should therefore be
reduced to P25,000.00.
WHEREFORE, the instant petition for review on certiorari is DENIED. The partnership among petitioners and
private respondent is ordered dissolved, and the parties are ordered to effect the winding up and liquidation of
the partnership pursuant to the pertinent provisions of the Civil Code. This case is remanded to the Regional Trial
Court for proper proceedings relative to said dissolution. The appealed decisions of the Regional Trial Court and
the Court of Appeals are AFFIRMED with MODIFICATIONS, as follows ---
1. Petitioners are ordered to submit to the Regional Trial Court a formal account of the partnership affairs for the
years 1987 and 1988, pursuant to Article 1809 of the Civil Code, in order to determine private respondents ten
percent (10%) share in the net profits of the partnership;
2. Petitioners are ordered, jointly and severally, to pay private respondent five percent (5%) overriding
commission for the one hundred and fifty (150) cookware sets available for disposition since the time private
respondent was wrongfully excluded from the partnership by petitioners;
3. Petitioners are ordered, jointly and severally, to pay private respondent overriding commission on the total
production which, for the period covering January 8, 1988 to February 5, 1988, amounted to P32,000.00;
4. Petitioners are ordered, jointly and severally, to pay private respondent moral damages in the amount of
P50,000.00, exemplary damages in the amount of P50,000.00 and attorneys fees in the amount of P25,000.00.
SO ORDERED.

G.R. No. L-11840 December 10, 1963
ANTONIO C. GOQUIOLAY, ET AL., plaintiffs-appellants,
vs.
WASHINGTON Z. SYCIP, ET AL., defendants-appellees.
Norberto J. Quisumbing and Sycip, Salazar and Associates for defendants-appellees.
Jose C. Calayco for plaintiffs-appellants..
R E S O L U T I O N
REYES, J.B.L., J.:
The matter now pending is the appellant's motion for reconsideration of our main decision, wherein we have
upheld the validity of the sale of the lands owned by the partnership Goquiolay & Tan Sin An, made in 1949 by
the widow of the managing partner, Tan Sin An (Executed in her dual capacity as Administratrix of the husband's
estate and as partner in lieu of the husband), in favor of the buyers Washington Sycip and Betty Lee for the
following consideration:
Cash paid P37,000.00
Debts assumed by purchaser:

To Yutivo 62,415.91
To Sing Yee Cuan & Co., 54,310.13
T O T A L

P153,726.04
Appellant Goquiolay, in his motion for reconsideration, insist that, contrary to our holding, Kong Chai Pin, widow
of the deceased partner Tan Sin An, never became more than a limited partner, incapacitated by law to manage
the affairs of partnership; that the testimony of her witness Young and Lim belies that she took over the
administration of the partnership property; and that, in any event, the sale should be set aside because it was
executed with the intent to defraud appellant of his share in the properties sold.
Three things must be always held in mind in the discussion of this motion to reconsider, being basic and beyond
controversy:
(a) That we are dealing here with the transfer of partnership property by one partner, acting in behalf of the
firm, to a stranger. There is no question between partners inter se, and this aspect to the case was expressly
reserved in the main decision of 26 July 1960;
(b) That partnership was expressly organized: "to engage in real estate business, either by buying and selling real
estate". The Articles of co-partnership, in fact, expressly provided that:
IV. The object and purpose of the copartnership are as follows:
1. To engage in real estate business, either by buying and selling real estates; to subdivide real estates into lots
for the purpose of leasing and selling them.;
(c) That the properties sold were not part of the contributed capital (which was in cash) but land precisely
acquired to be sold, although subject to a mortgage in favor of the original owners, from whom the partnership
had acquired them.
With these points firmly in mind, let us turn to the points insisted upon by appellant.
It is first averred that there is "not one iota of evidence" that Kong Chai Pin managed and retained possession of
the partnership properties. Suffice it to point out that appellant Goquiolay himself admitted that
... Mr. Yu Eng Lai asked me if I can just let Mrs. Kong Chai Pin continue to manage the properties (as) she had no
other means of income. Then I said, because I wanted to help Mrs. Kong Chai Pin, she could just do it and besides
I am not interested in agricultural lands. I allowed her to take care of the properties in order to help her and
because I believe in God and wanted to help her.
Q So the answer to my question is you did not take any steps?
A I did not.
Q And this conversation which you had with Mrs. Yu Eng Lai was few months after 1945?
A In the year 1945. (Emphasis supplied).
The appellant subsequently ratified this testimony in his deposition of 30 June 1956, pages 8-9, wherein he
stated:
that plantation was being occupied at that time by the widow, Mrs. Tan Sin An, and of course they are
receiving quiet a lot benefit from the plantation.
Discarding the self-serving expressions, these admissions of Goquiolay are certainly entitled to greater weight
than those of Hernando Young and Rufino Lim, having been made against the party's own interest.
Moreover, the appellant's reference to the testimony of Hernando Young, that the witness found the properties
"abandoned and undeveloped", omits to mention that said part of the testimony started with the question:
Now, you said that about 1942 or 1943 you returned to Davao. Did you meet Mrs. Kong Chai Pin there in Davao
at that time?
Similarly, the testimony of Rufino Lim, to the effect that the properties of the partnership were undeveloped,
and the family of the widow (Kong Chai Pin) did not receive any income from the partnership properties, was
given in answer to the question:
According to Mr. Goquiolay, during the Japanese occupation Tan Sin an and his family lived on the plantation of
the partnership and derived their subsistence from that plantation. What can you say to that? (Dep. 19 July
1956, p. 8).
And also
What can you say as to the development of these other properties of the partnership which you saw during the
occupation? (Dep. p. 13, Emphasis supplied).
to which witness gave the following answer:
I saw the properties in Mamay still undeveloped. The third property which is in Tigato is about eleven (11)
hectares and planted with abaca seedlings planted by Mr. Sin An. When I went there with Hernando Youngwe
saw all the abaca destroyed. The place was occupied by the Japanese Army. They planted camotes and
vegetables to feed the Japanese Army. Of course they never paid any money to Tan Sin An or his family. (Dep.,
Lim, pp. 13-14. Emphasis supplied).
Plainly, both Young and Lim's testimonies do not belie, or contradict, Goquiolay's admission that he told Mr. Yu
Eng Lai that the widow "could just do it" (i.e., continue to manage the properties). Witnesses Lim and Young
referred to the period of Japanese occupation; but Goquiolay's authority was, in fact, given to the widow in
1945,after the occupation.
Again, the disputed sale by the widow took place in 1949. That Kong Chai Pin carried out no acts of management
during the Japanese occupation (1942-1944) does not mean that she did not do so from 1945 to 1949.
We thus find that Goquiolay did not merely rely on reports from Lim and Young; he actually manifested his
willingness that the widow should manage the partnership properties. Whether or not she complied with this
authority is a question between her and the appellant, and is not here involved. But the authority was given, and
she did have it when she made the questioned sale, because it was never revoked.
It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only to manage the property,
and that it did not include the power to alienate, citing Article 1713 of the Civil Code of 1889. What this
argument overlooks is that the widow was not a mere agent, because she had become a partner upon her
husband's death, as expressly provided by the articles of copartnership. Even more, granting that by succession
to her husband, Tan Sin An, the widow only became a limited partner, Goquiolay's authorization to manage the
partnership property was proof that he considered and recognized her as general partner, at least since 1945.
The reason is plain: Under the law (Article 148, last paragraph, Code of Commerce), appellant could not
empower the widow, if she were only a limited partner, to administer the properties of the firm, even as a mere
agent:
Limited partners may not perform any act of administration with respect to the interests of the copartnership,
not even in the capacity of agents of the managing partners. (Emphasis supplied).
By seeking authority to manage partnership property, Tan Sin An's widow showed that she desired to be
considered a general partner. By authorizing the widow to manage partnership property (which a limited partner
could not be authorized to do), Goquiolay recognized her as such partner, and is now in estoppel to deny her
position as a general partner, with authority to administer and alienate partnership property.
Besides, as we pointed out in our main decision, the heir ordinarily (and we did not say "necessarily") becomes a
limited partner for his own protection, because he would normally prefer to avoid any liability in excess of the
value of the estate inherited so as not to jeopardize his personal assets. But this statutory limitation of
responsibility being designed to protect the heir, the latter may disregard it and instead elect to become a
collective or general partner, with all the rights and privileges of one, and answering for the debts of the firm not
only with the inheritance but also with the heir's personal fortune. This choice pertains exclusively to the heir,
and does not require the assent of the surviving partner.
It must be remember that the articles of co-partnership here involved expressly stipulated that:
In the event of the death of any of the partners at any time before the expiration of said term, the co-
partnership shall not be dissolved but will have to be continued and the deceased partner shall be represented
by his heirs or assigns in said co-partnership (Art. XII, Articles of Co-Partnership).
The Articles did not provide that the heirs of the deceased would be merely limited partners; on the contrary,
they expressly stipulated that in case of death of either partner "the co-partnership ... will have to be continued"
with the heirs or assigns. It certainly could not be continued if it were to be converted from a general partnership
into a limited partnership, since the difference between the two kinds of associations is fundamental; and
specially because the conversion into a limited association would have the heirs of the deceased partner without
a share in the management. Hence, the contractual stipulation does actually contemplate that the heirs would
becomegeneral partners rather than limited ones.
Of course, the stipulation would not bind the heirs of the deceased partner should they refuse to assume
personal and unlimited responsibility for the obligations of the firm. The heirs, in other words, can not be
compelled to become general partners against their wishes. But because they are not so compellable, it does not
legitimately follow that they may not voluntarily choose to become general partners, waiving the protective
mantle of the general laws of succession. And in the latter event, it is pointless to discuss the legality of any
conversion of a limited partner into a general one. The heir never was a limited partner, but chose to be, and
became, a general partner right at the start.
It is immaterial that the heir's name was not included in the firm name, since no conversion of status is involved,
and the articles of co-partnership expressly contemplated the admission of the partner's heirs into the
partnership.
It must never be overlooked that this case involved the rights acquired by strangers, and does not deal with the
rights existing between partners Goquiolay and the widow of Tan Sin An. The issues between the partners inter
sewere expressly reserved in our main decision. Now, in determining what kind of partner the widow of partner
Tan Sin an Had elected to become, strangers had to be guided by her conduct and actuations and those of
appellant Goquiolay. Knowing that by law a limited partner is barred from managing the partnership business or
property, third parties (like the purchasers) who found the widow possessing and managing the firm property
with the acquiescence (or at least without apparent opposition) of the surviving partners were perfectly justified
in assuming that she had become a general partner, and, therefore, in negotiating with her as such a partner,
having authority to act for, and in behalf of the firm. This belief, be it noted, was shared even by the probate
court that approved the sale by the widow of the real property standing in the partnership name. That belief was
fostered by the very inaction of appellant Goquiolay. Note that for seven long years, from partner Tan Sin An's
death in 1942 to the sale in 1949, there was more than ample time for Goquiolay to take up the management of
these properties, or at least ascertain how its affairs stood. For seven years Goquiolay could have asserted his
alleged rights, and by suitable notice in the commercial registry could have warned strangers that they must deal
with him alone, as sole general partner. But he did nothing of the sort, because he was not interested (supra),
and he did not even take steps to pay, or settle the firm debts that were overdue since before the outbreak of
the last war. He did not even take steps, after Tan Sin An died, to cancel, or modify, the provisions of the
partnership articles that he (Goquiolay) would have no intervention in the management of the partnership.
This laches certainly contributed to confirm the view that the widow of Tan Sin An had, or was given, authority to
manage and deal with the firm's properties apart from the presumption that a general partner dealing with
partnership property has to requisite authority from his co-partners (Litton vs. Hill and Ceron, et al., 67 Phil. 513;
quoted in our main decision, p. 11).
The stipulation in the articles of partnership that any of the two managing partners may contract and sign in the
name of the partnership with the consent of the other, undoubtedly creates on obligation between the two
partners, which consists in asking the other's consent before contracting for the partnership. This obligation of
course is not imposed upon a third person who contracts with the partnership. Neither it is necessary for the
third person to ascertain if the managing partner with whom he contracts has previously obtained the consent of
the other. A third person may and has a right to presume that the partner with whom he contracts has, in the
ordinary and natural course of business, the consent of his copartner; for otherwise he would not enter into the
contract. The third person would naturally not presume that the partner with whom he enters into the
transaction is violating the articles of partnership, but on the contrary is acting in accordance therewith. And this
finds support in the legal presumption that the ordinary course of business has been followed (No. 18, section
334, Code of Civil Procedure), and that the law has been obeyed (No. 31, section 334). This last presumption is
equally applicable to contracts which have the force of law between the parties. (Litton vs. Hill & Ceron, et al., 67
Phil. 409, 516). (Emphasis supplied.)
It is next urged that the widow, even as a partner, had no authority to sell the real estate of the firm. This
argument is lamentably superficial because it fails to differentiate between real estate acquired and held
as stock-in-tradeand real estate held merely as business site (Vivante's "taller o banco social") for the
partnership. Where the partnership business is to deal in merchandise and goods, i.e., movable property, the
sale of its real property (immovables) is not within the ordinary powers of a partner, because it is not in line with
the normal business of the firm. But where the express and avowed purpose of the partnership is to buy and sell
real estate (as in the present case), the immovables thus acquired by the firm from part of its stock-in-trade, and
the sale thereof is in pursuance of partnership purposes, hence within the ordinary powers of the partner. This
distinction is supported by the opinion of Gay de Montella
1
, in the very passage quoted in the appellant's
motion for reconsideration:
La enajenacion puede entrar en las facultades del gerante, cuando es conforme a los fines sociales. Pero esta
facultad de enajenar limitada a las ventas conforme a los fines sociales, viene limitada a los objetos de comercio
o a los productos de la fabrica para explotacion de los cuales se ha constituido la Sociedad.Ocurrira una cosa
parecida cuando el objeto de la Sociedad fuese la compra y venta de inmuebles, en cuyo caso el gerente estaria
facultado para otorgar las ventas que fuere necesario. (Montella) (Emphasis supplied).
The same rule obtains in American law.
In Rosen vs. Rosen, 212 N.Y. Supp. 405, 406, it was held:
a partnership to deal in real estate may be created and either partner has the legal right to sell the firm real
estate.
In Chester vs. Dickerson, 54 N. Y. 1, 13 Am. Rep. 550:
And hence, when the partnership business is to deal in real estate, one partner has ample power, as a general
agent of the firm, to enter into an executory contract for the sale of real estate.
And in Revelsky vs. Brown, 92 Ala. 522, 9 South 182, 25 Am. St. Rep. 83:
If the several partners engaged in the business of buying and selling real estate can not bind the firm by
purchases or sales of such property made in the regular course of business, then they are incapable of exercising
the essential rights and powers of general partners and their association is not really a partnership at all, but a
several agency.
Since the sale by the widow was in conformity with the express objective of the partnership, "to engage ...
in buying and selling real estate" (Art. IV, No. 1 Articles of Copartnership), it can not be maintained that the sale
was made in excess of her power as general partner.
Considerable stress is laid by appellant in the ruling of the Supreme Court of Ohio in McGrath, et al., vs. Cowen,
et al., 49 N.E., 338. But the facts of that case are vastly different from the one before us. In the McGrath case,
the Court expressly found that:
The firm was then, and for some time had been, insolvent, in the sense that its property was insufficient to pay
its debts, though it still had good credit, and was actively engaged in the prosecution of its business. On that day,
which was Saturday, the plaintiff caused to be prepared, ready for execution, the four chattel mortgages in
question, which cover all the tangible property then belonging to the firm, including the counters, shelving, and
other furnishings and fixtures necessary for, and used in carrying on, its business, and signed the same in this
form: "In witness whereof, the said Cowen & McGrath, a firm, and Owen McGrath, surviving partner, of said
firm, and Owen McCrath, individually, have hereunto set their hands, this 20th day of May, A.D. 1893. Cowen &
Mcgrath, by Owen McGrath. Owen McGrath, Surviving partner of Cowen & McGrath. Owen McGrath." At the
same time, the plaintiff had prepared, ready for filing, the petitionfor the dissolution of the partnership and
appointment of a receiver which he subsequently filed, as hereinafter stated. On the day the mortgages were
signed, they were placed in the hands of the mortgagees, which was the first intimation to them that there was
any intention to make them. At the timenone of the claims secured by the mortgages were due, except, it may
be, a small part of one of them, andnone of the creditors to whom the mortgages were made had requested
security, or were pressing for the payment of their debts. ... The mortgages appear to be without a sufficient
condition of defiance, and contain a stipulation authorizing the mortgagees to take immediate possession of the
property, which they did as soon as the mortgages were filed through the attorney who then represented them,
as well as the plaintiff; and the stores were at once closed, and possession delivered by them to the
receiver appointed upon the filing of the petition. The avowed purposes of the plaintiff, in the course pursued by
him, was to terminate the partnership, place its properly beyond the control of the firm, and insure the
preference of the mortgagees, all of which was known to them at the time; .... (Cas cit., p. 343, Emphasis
supplied).
It is natural that form these facts the Supreme Court of Ohio should draw the conclusion that the conveyances
were made with intent to terminate the partnership, and that they were not within the powers of McGrath as a
partner. But there is no similarity between those acts and the sale by the widow of Tan Sin An. In the McGrath
case, the sale included even the fixtures used in the business; in our case, the lands sold were those acquired to
be sold. In the McGrath case, none of the creditors were pressing for payment; in our case, the creditors had
been unpaid for more than seven years, and their claims had been approved by the probate court for payment.
In the McGrath case, the partnership received nothing beyond the discharge of its debts; in the present case, not
only were its debts assumed by the buyers, but the latter paid, in addition, P37,000.00 in cash to the widow, to
the profit of the partnership. Clearly, the McGrath ruling is not applicable.
We will now turn to the question of fraud. No direct evidence of it exists; but appellant point out, as indicia
thereof, the allegedly low price paid for the property, and the relationship between the buyers, the creditors of
the partnership, and the widow of Tan Sin An.
First, as to the price: As already noted, this property was actually sold for a total of P153,726.04, of which
P37,000.00 was in cash, and the rest in partnership debts assumed by the purchaser. These debts (62,415.91 to
Yutivo, and P54,310.13 to Sing Ye Cuan & Co.) are not questioned; they were approved by the court, and its
approval is now final. The claims were, in fact, for the balance on the original purchase price of the land sold (sue
first to La Urbana, later to the Banco Hipotecario) plus accrued interests and taxes, redeemed by the two
creditors-claimants. To show that the price was inadquate, appellant relies on the testimony of the realtor Mata,
who is 1955, six years after the sale in question, asserted that the land was worth P312,000.00. Taking into
account the continued rise of real estate values since liberation, and the fact that the sale in question was
practically a forced sale because the partnership had no other means to pay its legitimate debts, this evidence
certainly does not show such "gross inadequacy" as to justify recission of the sale. If at the time of the sale
(1949) the price of P153,726.04 was really low, how is it that appellant was not able to raise the amount, even if
the creditor's representative, Yu Khe Thai, had already warned him four years before (1945) that the creditors
wanted their money back, as they were justly entitled to?
It is argued that the land could have been mortgaged to raise the sum needed to discharge the debts. But the
lands were already mortgaged, and had been mortgaged since 1940, first to La Urbana, and then to the Banco
Hipotecario. Was it reasonable to expect that other persons would loan money to the partnership when it was
unable even to pay the taxes on the property, and the interest on the principal since 1940? If it had been
possible to find lenders willing to take a chance on such a bad financial record, would not Goquiolay have taken
advantage of it? But the fact is clear on the record that since liberation until 1949 Goquiolay never lifted a finger
to discharge the debts of the partnership. Is he entitled now to cry fraud after the debts were discharged with no
help from him.
With regard to the relationship between the parties, suffice it to say that the Supreme Court has ruled that
relationship alone is not a badge of fraud (Oria Hnos. vs. McMicking, 21 Phil. 243; also Hermandad del Smo.
Nombre de Jesus vs. Sanchez, 40 Off. Gaz., 1685). There is no evidence that the original buyers, Washington
Sycip and Betty Lee, were without independent means to purchase the property. That the Yutivos should be
willing to extend credit to them, and not to appellant, is neither illegal nor immoral; at the very least, these
buyers did not have a record of inveterate defaults like the partnership "Tan Sin An & Goquiolay".
Appellant seeks to create the impression that he was the victim of a conspiracy between the Yutivo firm and
their component members. But no proof is adduced. If he was such a victim, he could have easily defeated the
conspirators by raising money and paying off the firm's debts between 1945 and 1949; but he did not; he did not
even care to look for a purchaser of the partnership assets. Were it true that the conspiracy to defraud him arose
(as he claims) because of his refusal to sell the lands when in 1945 Yu Khe Thai asked him to do so, it is certainly
strange that the conspirators should wait 4 years, until 1949, to have the sale effected by the widow of Tan Sin
An, and that the sale should have been routed through the probate court taking cognizance of Tan Sin An's
estate, all of which increased the risk that the supposed fraud should be detected.
Neither was there any anomaly in the filing of the claims of Yutivo and Sing Yee Cuan & Co., (as subrogees of the
Banco Hipotecario) in proceedings for the settlement of the estate of Tan Sin An. This for two reasons: First, Tan
Sin An and the partnership "Tan Sin An & Goquiolay" were solidary (Joint and several)debtors (Exhibits "N",
mortgage to the Banco Hipotecario), and Rule 87, section 6 is the effect that:
Where the obligation of the decedent is joint and several with another debtor, the claim shall be filed against
the decedent as if he were the only debtor, without prejudice to the right of the estate to recover contribution
from the other debtor. (Emphasis supplied).
Secondly, the solidary obligation was guaranteed by a mortgage on the properties of the partnership and those
of Tan Sim An personally, and a mortgage is indivisible, in the sense that each and every parcel under mortgage
answers for the totality of the debt (Civ. Code of 1889, Article 1860; New Civil Code, Art. 2089).
A final and conclusive consideration: The fraud charged not being one used to obtain a party's consent to a
contract (i.e., not being deceit or dolus in contrahendo), if there is fraud at al, it can only be a fraud of
creditorsthat gives rise to a rescission of the offending contract. But by express provision of law (Article 1294,
Civil Code of 1889; Article 1383, New Civil Code) "the action for rescission is subsidiary; it can not be instituted
except when the party suffering damage has no other legal means to obtain reparation for the same". Since
there is no allegation, or evidence, that Goquiolay can not obtain reparation from the widow and heirs of Tan Sin
An, the present suit to rescind the sale in question is not maintainable, even if the fraud charged actually did
exist.
PREMISES CONSIDERED, the motion for reconsideration is denied.

G.R. No. L-14832 January 28, 1961
NG CHO CIO ET AL., plaintiffs-appellants,
vs.
NG DIONG, defendant-appellant.
C. N. HODGES, ET AL., defendants-appellees.
BAUTISTA, ANGELO, J.:
This action was begun in the Court of First Instance of Iloilo by Ng Cho Cio Ng Sian King and Ng Due King to
recover their three-fourths (3/4) pro-indiviso share on seven (7) parcels of land situated in the City of Iloilo which
were sold by Ng Diong as manager of the commercial firm NG CHIN BENG HERMANOS in favor of C.N. Hodges.
The latter had sold four of those parcels of land to Jose C. Tayengco and the other three parcels to Julian Go, and
for that reason these two were included as party defendants. As the original plaintiffs sold their rights, title and
interest in said partnership to Ng Be Chuat and Ng Feng Tuan, the latter two were allowed to intervene as
plaintiffs. Since Jose C. Tayengco had mortgaged three of the lands which he purchased from C. N. Hodges in
favor of the Bank of the Philippine Islands, the complaint was amended so as to include the Bank also as party
defendant.
On October 16, 1956, after trial had begun, defendant Ng Diong died, whereupon his heirs were order to
substitute him parties defendants. Defendants C. N. Hodges, Ng Diong and Jose C. Tayengco answered the
complaint separately setting up certain special defenses and counterclaims. In substance, they refuted the
allegations set forth in the complaint and prayed for its dismissal.
The parties submitted a partial Stipulation of facts on many points covered by the pleadings thus simplifying the
trial of the case while at the same time they introduced additional evidence in amplification of the fact
stipulated, Thereupon, the trial court, after a thorough evaluation of the evidence, rendered decision dismissing
the complaint with costs. Plaintiffs interposed the present appeal on purely questions of law.
The pertinent facts may be briefly stated, as follow On May 23, 1925, Ng Diong, Ng Be Chuat, Ng Feng Tuan Ng
Be Kian Ng Cho Cio, Ng Sian King and Ng Due King entered into a contract of general co-partnership under the
name NG CHIN BENG HERMANOS. The partnership was to exist for a period of 10 years from May 23, 1925 and
Ng Diong was named as managing partner. On May 10, 1935, the articles of co-partnership were amended by
extending its life to 16 years more to be counted from May 23, 1925, or up to May 23, 1941.
On January 5, 1938, the partnership obtained from the National Loan and Investment Board a loan in the amount
of P30,000.00, and to guarantee its payment it executed in its favor a mortgage on Lots Nos. 236-B, 317-A, 233
and 540 of the cadastral survey of Iloilo. On the same date, the partnership also obtained from the same entity
another loan in the amount of P50,000.00 to secure which it also executed in its favor a mortgage on Lots Nos.
386, 829 and 237 of the same cadastral survey.
Sometime in 1938, the partnership was declared insolvent upon petition of its creditors in, Special Proceedings
No. 2419 of the Court of First Instance of Iloilo wherein one Crispino Melocoton was elected as assignee. As a
consequence, on June 21, 1939, the titles to the seven parcels of land abovementioned were issued in his name
as assignee. In due time, the creditors filed their claims in said proceeding which totalled P192,901.12.
On August 9, 1940, a majority of the creditors with claims amounting to P139,704.81, and the partners of the
firm, acting thru counsel, entered into a composition agreement whereby it was agreed that said creditors would
receive 20% of the amount of their claims in full payment thereof. Prior to this agreement, however, defendant
Julian Go had already acquired the rights of 24 of the creditors of the insolvent whose total claims amounted to
P139,323.10. Said composition agreement was approved by the insolvency court.
On January 30, 1941, the Agricultural and Industrial Bank which had succeeded the National Loan and
Investment Board assigned its rights and interests in the loans obtained from it by the partnership in the
aggregate amount of P80,000.00 in favor of C.N. Hodges, together with the right and interest in the mortgage
executed to secure the loans. Since said loans became due and no payment was forthcoming, Hodges asked
permission from the insolvency court to file a complaint against the assignee to foreclose he mortgage executed
to secure the same in a separate proceeding, and permission having been granted, Hodges filed a complaint for
that purpose on May 13, 1941. In his complaint, Hodges prayed that the assignee be ordered to pay him the sum
of P75,622.90, with interest at 8% per annum thereon from March 6, 1941, plus P8,000.00 attorney's fees,
exclusive of costs and charges. Meanwhile, war broke out and nothing appears to have been done in the
insolvency proceedings. The court records were destroyed. However, they were reconstituted later and given
due course.
On August 15, 1945, the partners of the insolvent firm and Julian Go, who acquired most of the claims of the
creditors, filed a petition with the insolvency court praying at the insolvency proceedings be closed or
terminated cause the composition agreement the creditors had submitted relative to the settlement of the
claims had already been approved on October 10, 1940. And on October 6, 1946, the court, acting favorably on
the petition, ordered, closure of the proceedings directing the assignee to turn and reconvey all the properties of
the partnership back to the latter as required by law. In accordance with this order of the court, the assignee
executed a deed of reconveyance of the properties to the partnership on April 2, 1946 and by virtue thereof, the
register of deeds cancelled the titles issued in the name of the assignee and issued new ones in lieu thereof in
the name of the partnership.
As of said date, April 2, 1946, the indebtedness of the partnership to C. N. Hodges which was the subject of the
foreclosure proceedings in a separate case was P103,883.34. In order to pay off the same and raise necessary
funds to pay the other obligations of the partnership, it was deemed proper and wise by Ng Diong, who
continued to be the manager of the partnership, to sell all its properties mortgaged to Hodges in order that the
excess may be applied to the Payment of said other obligations, and to that effect Ng Diong executed on April 2,
1946 a deed of sale thereof in favor of Hodges for the sum of P124,580.00. Out of this price; the sum of
P103,883.34 was applied to the payment of the debt of the partnership to Hodges and the balance was paid to
the other creditors of the partnership. On the same date, Hodges executed another contract giving the
partnership the right to repurchase Lots Nos. 237, 386 and 829 in installments for the sum of P26,000.00 within
three years with interest the rate of 1% Per annum, Payable monthly.
On May 23, 1947, the partnership had not yet paid its indebtedness to Julian Go in he amount of P24,864.62
under the composition agreement, nor did it have any money to repurchase Lots Nos. 237, 386 and 829 and so
Ng Diong, in behalf of the partnership, transferred the right of the latter to repurchase the same from Hodges to
Julian Go in full payment of the partnership's indebtedness to him. And having Julian Go exercised the option
January 6, 1948, Hodges executed a deed of sale of the properties in his favor, and pursuant thereto the register
of deeds issued new titles' in his name covering said lots. On May 29, 1948, Hodges executed another deed of
sale covering Lots Nos. 317-A, 236-B, 233 and 540 for the sum of P119,067.79 in favor of Jose C. Tayengco. And
on August 31, 1948, Tayengco mortgaged said lots, together with three other lots of his, to the Bank of the
Philippine Islands to secure a loan of P126,000.00 to be used in the construction of a commercial building on said
lots.
Appellants make in their brief six assignments of errors, which, reduced to bare essentials, may be boiled down
to the following points: (1) the sale made by Ng Diong in behalf of the partnership NG CHIN BENG HERMANOS of
the seven lots belonging to it in favor of C. N. Hodges on April 2, 1946 is null and void because at that time said
parcels were still in the custody of the assignee of the insolvency proceedings, or in custodia legis, and, hence,
the same is null and void; (2) said sale is also null and void "because of the disparity, irrationality and
unreasonableness between the consideration and the real value of the properties when sold"; and (3) the lower
court erred in not finding that the two deeds of mortgage executed by he partnership in favor of the National
Loan and Investment Board which were later assigned to C. N. Hodges can no longer be enforced because the
action to foreclose the same has already prescribed.
Anent the first issue, it would be well to state the following facts by way of clarification: It should be recalled that
on August 8, 1940 the majority of the creditors of the partnership, as well as the representatives of the latter,
submitted to the court taking cognizance of the insolvency proceedings a composition agreement whereby it was
agreed that said creditors would receive 20% of the amount of their claims in full payment thereof. This
agreement was approved on October 10, 1940 which, in contemplation of law, has the effect of putting an end
to the insolvency proceedings. However, no further step was taken thereon because of the outbreak of the war.
Later, the record of the case was reconstituted and the parties on August 15, 1945 filed a petition with the court
praying for the dismissal and closure of the proceedings in view of the approval of the aforesaid composition
agreement, and acting favorably thereon, the court on October 6, 1945, issued an order declaring the
proceedings terminated and ordering the assignee to return and reconvey the properties the partnership. The
actual reconveyance was done by a assignee on April 2, 1946.
It would, therefore, appear that for legal and practical purposes the insolvency ended on said date. Since then
partnership became, restored to its status quo. It again reacquired its personality as such with Ng Diong as its
general manager. From that date on its properties ceased to be in custodia legis. Such being the case, it is
obvious that when Ng Diong as manager of the partnership sold the seven parcels of land to C. N. Hodges on
April 2, 1946 by virtue of a deed of sale acknowledged before a notary public on April 6, 1946, the properties
were already was at liberty to do what it may deem convenient and proper to protect its interest. And acting
accordingly, Ng Diong made the sale in the exercise of the power granted to him by the partnership in its articles
of co-partnership. We do not, therefore, find anything irregular in this actuation of Ng Diong.
Since at the time of the sale the life of the partnership had already expired, the question may be fixed: Who shall
wind up it business affairs? May its manager still execute the sale of its properties to C. N. Hodges as was done
by Ng Diong? The answer to this question cannot but be in the affirmative because Ng Diong was still the
managing partner of the partnership and he had the necessary authority to liquidate its affairs under its articles
of co-partnership. And considering that war had intervened and the affairs of the partnership were placed under
receivership up to October 6, 1945, we are of the opinion that Ng Diong could still exercise his power as
liquidator when he executed the sale in question in favor of C. N. Hodges. This is sanctioned by Article 228 of the
Code of Commerce which was the law in force at the time.
1

With regard to the second issue, it is contended that the trial court should have declared the sale of the lots
made to C. N. Hodges null and void "because of the disparity, irrationality and unreasonableness between the
consideration and real value of the properties when sold." In stressing his point, counsel contends that the lands
in question, which are located in a commercial section of the City of Iloilo, were frittered away only for a
"pittance of P124,580.00" when, borrowing his words they could have been sold like hot cakes to any resident of
the city of regular financial standing upon proper approaches and representations, because at that time those
properties were fairly worth one-half of a million pesos."
This claim may be true, but the same is unsupported. Appellants have failed to introduce any evidence to show
that they could have secured better offers for the properties if given a chance to do so and that they advance
now is a mere speculation or conjecture which had no place in our judicial system. Since every claim must be
substantiated by sufficient evidence, and this appellants have failed to do, their pretense cannot be entertained.
Neither can we give any value to the claim that the action for the foreclosure of the mortgage executed by the
partnership in favor of C. N. Hodges has already prescribed not only because the same is immaterial but because
it is an issue that appellants are raising for the first time in this appeal. Such issue has never been raised in their
pleadings, nor in the trial court. Verily, this claim has no merit.
With regard to the appeal taken by the heirs of defendant Ng Diong whose main claim is that the trial court
failed to adjudicate to the partnership the properties which were bought by Julian Go from C. N. Hodges, suffice
it to say that the same could not be done, firstly, because no such claim was made by them in their pleadings in
the trial court, and, secondly, because the evidence shows that said properties were bought by Julian Go by
virtue of the option given to him by the partnership for a valuable consideration in full payment of the credits
assigned to him by a good number of creditors of said partnership. There is no evidence that he promised to
reconvey the same to the partnership.
WHEREFORE, the decision appealed from is affirmed, with costs against appellants.

G.R. No. 167379 June 27, 2006
PRIMELINK PROPERTIES AND DEVELOPMENT CORPORATION and RAFAELITO W. LOPEZ, Petitioners,
vs.
MA. CLARITA T. LAZATIN-MAGAT, JOSE SERAFIN T. LAZATIN, JAIME TEODORO T. LAZATIN and JOSE MARCOS T.
LAZATIN, Respondents.
D E C I S I O N
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure of the
Decision
1
of the Court of Appeals (CA) in CA-G.R. CV No. 69200 and its Resolution
2
denying petitioners motion
for reconsideration thereof.
The factual and procedural antecedents are as follows:
Primelink Properties and Development Corporation (Primelink for brevity) is a domestic corporation engaged in
real estate development. Rafaelito W. Lopez is its President and Chief Executive Officer.
3

Ma. Clara T. Lazatin-Magat and her brothers, Jose Serafin T. Lazatin, Jaime T. Lazatin and Jose Marcos T. Lazatin
(the Lazatins for brevity), are co-owners of two (2) adjoining parcels of land, with a combined area of 30,000
square meters, located in Tagaytay City and covered by Transfer Certificate of Title (TCT) No. T-10848
4
of the
Register of Deeds of Tagaytay City.
On March 10, 1994, the Lazatins and Primelink, represented by Lopez, in his capacity as President, entered into a
Joint Venture Agreement
5
(JVA) for the development of the aforementioned property into a residential
subdivision to be known as "Tagaytay Garden Villas." Under the JVA, the Lazatin siblings obliged themselves to
contribute the two parcels of land as their share in the joint venture. For its part, Primelink undertook to
contribute money, labor, personnel, machineries, equipment, contractors pool, marketing activities, managerial
expertise and other needed resources to develop the property and construct therein the units for sale to the
public. Specifically, Primelink bound itself to accomplish the following, upon the execution of the deed:
a.) Survey the land, and prepare the projects master plans, engineering designs, structural and architectural
plans, site development plans, and such other need plans in accordance with existing laws and the rules and
regulations of appropriate government institutions, firms or agencies;
b.) Secure and pay for all the licenses, permits and clearances needed for the projects;
c.) Furnish all materials, equipment, labor and services for the development of the land in preparation for the
construction and sale of the different types of units (single-detached, duplex/twin, cluster and row house);
d.) Guarantee completion of the land development work if not prevented by force majeure or fortuitous event or
by competent authority, or other unavoidable circumstances beyond the DEVELOPERS control, not to exceed
three years from the date of the signing of this Joint Venture Agreement, except the installation of the electrical
facilities which is solely MERALCOS responsibility;
e.) Provide necessary manpower resources, like executive and managerial officers, support personnel and
marketing staff, to handle all services related to land and housing development (administrative and construction)
and marketing (sales, advertising and promotions).
6

The Lazatins and Primelink covenanted that they shall be entitled to draw allowances/advances as follows:
1. During the first two years of the Project, the DEVELOPER and the LANDOWNER can draw allowances or make
advances not exceeding a total of twenty percent (20%) of the net revenue for that period, on the basis of sixty
percent (60%) for the DEVELOPER and forty percent (40%) for the LANDOWNERS.
The drawing allowances/advances are limited to twenty percent (20%) of the net revenue for the first two years,
in order to have sufficient reserves or funds to protect and/or guarantee the construction and completion of the
different types of units mentioned above.
2. After two years, the DEVELOPER and the LANDOWNERS shall be entitled to drawing allowances and/or
advances equivalent to sixty percent (60%) and forty percent (40%), respectively, of the total net revenue or
income of the sale of the units.
7

They also agreed to share in the profits from the joint venture, thus:
1. The DEVELOPER shall be entitled to sixty percent (60%) of the net revenue or income of the Joint Venture
project, after deducting all expenses incurred in connection with the land development (such as administrative
management and construction expenses), and marketing (such as sales, advertising and promotions), and
2. The LANDOWNERS shall be entitled to forty percent (40%) of the net revenue or income of the Joint Venture
project, after deducting all the above-mentioned expenses.
8

Primelink submitted to the Lazatins its Projection of the Sales-Income-Cost of the project:
SALES-INCOME-COST PROJECTION
lawphil.net
SELLING PRICE COST PRICE DIFFERENCE INCOME
CLUSTER:
A1 3,200,000 - A2 1,260,000 = 1,940,000 x 24 = P 46,560,000.00
TWIN:

B1 2,500,000 - B2 960,000 = 1,540,000 x 24 = 36,960,000.00
SINGLE:

C1 3,500,000 - C2 1,400,000 = 2,100,000 x 16 = 33,600,000.00
ROW-TYPE TOWNHOMES:

RECONCILIATION OF INCOME VS. EXPENSES
Total Projected Income (incl. income from interest earn.) P307,769,740.00

less: 132,224,000.00
Total Expenses P175,545,740.00
9

The parties agreed that any unsettled or unresolved misunderstanding or conflicting opinions between the
parties relative to the interpretation, scope and reach, and the enforcement/implementation of any provision of
the agreement shall be referred to Voluntary Arbitration in accordance with the Arbitration Law.
10

The Lazatins agreed to subject the title over the subject property to an escrow agreement. Conformably with the
escrow agreement, the owners duplicate of the title was deposited with the China Banking
Corporation.
11
However, Primelink failed to immediately secure a Development Permit from Tagaytay City, and
applied the permit only on August 30, 1995. On October 12, 1995, the City issued a Development Permit to
Primelink.
12

In a Letter
13
dated April 10, 1997, the Lazatins, through counsel, demanded that Primelink comply with its
obligations under the JVA, otherwise the appropriate action would be filed against it to protect their rights and
interests. This impelled the officers of Primelink to meet with the Lazatins and enabled the latter to review its
business records/papers. In another Letter
14
dated October 22, 1997, the Lazatins informed Primelink that they
had decided to rescind the JVA effective upon its receipt of the said letter. The Lazatins demanded that Primelink
cease and desist from further developing the property.
Subsequently, on January 19, 1998, the Lazatins filed, with the Regional Trial Court (RTC) of Tagaytay City, Branch
18, a complaint for rescission accounting and damages, with prayer for temporary restraining order and/or
preliminary injunction against Primelink and Lopez. The case was docketed as Civil Case No. TG-1776. Plaintiffs
alleged, among others, that, despite the lapse of almost four (4) years from the execution of the JVA and the
delivery of the title and possession of the land to defendants, the land development aspect of the project had
not yet been completed, and the construction of the housing units had not yet made any headway, based on the
following facts, namely: (a) of the 50 housing units programmed for Phase I, only the following types of houses
appear on the site in these condition: (aa) single detached, one completed and two units uncompleted; (bb)
cluster houses, one unit nearing completion; (cc) duplex, two units completed and two units unfinished; and (dd)
row houses, two units, completed; (b) in Phase II thereof, all that was done by the defendants was to grade the
area; the units so far constructed had been the object of numerous complaints by their owners/purchasers for
poor workmanship and the use of sub-standard materials in their construction, thus, undermining the projects
marketability. Plaintiffs also alleged that defendants had, without justifiable reason, completely disregarded
previously agreed accounting and auditing procedures, checks and balances system installed for the mutual
protection of both parties, and the scheduled regular meetings were seldom held to the detriment and
disadvantage of plaintiffs. They averred that they sent a letter through counsel, demanding compliance of what
was agreed upon under the agreement but defendants refused to heed said demand. After a succession of
letters with still no action from defendants, plaintiffs sent a letter on October 22, 1997, a letter formally
rescinding the JVA.
Plaintiffs also claimed that in a sales-income-costs projection prepared and submitted by defendants, they
(plaintiffs) stood to receive the amount of P70,218,296.00 as their net share in the joint venture project; to date,
however, after almost four (4) years and despite the undertaking in the JVA that plaintiffs shall initially get 20%
of the agreed net revenue during the first two (2) years (on the basis of the 60%-40% sharing) and their full 40%
share thereafter, defendants had yet to deliver these shares to plaintiffs which by conservative estimates would
amount to no less than P40,000,000.00.
15

Plaintiffs prayed that, after due proceedings, judgment be rendered in their favor, thus:
WHEREFORE, it is respectfully prayed of this Honorable Court that a temporary restraining order be forthwith
issued enjoining the defendants to immediately stop their land development, construction and marketing of the
housing units in the aforesaid project; after due proceedings, to issue a writ of preliminary injunction enjoining
and prohibiting said land development, construction and marketing of housing units, pending the disposition of
the instant case.
After trial, a decision be rendered:
1. Rescinding the Joint Venture Agreement executed between the plaintiffs and the defendants;
2. Immediately restoring to the plaintiffs possession of the subject parcels of land;
3. Ordering the defendants to render an accounting of all income generated as well as expenses incurred and
disbursement made in connection with the project;
4. Making the Writ of Preliminary Injunction permanent;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount Forty Million Pesos
(P40,000,000.00) in actual and/or compensatory damages;
6. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of Two Million Pesos
(P2,000,000.00) in exemplary damages;
7. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount equivalent to ten percent
(10%) of the total amount due as and for attorneys fees; and
8. To pay the costs of this suit.
Other reliefs and remedies as are just and equitable are likewise being prayed for.
16

Defendants opposed plaintiffs plea for a writ of preliminary injunction on the ground that plaintiffs complaint
was premature, due to their failure to refer their complaint to a Voluntary Arbitrator pursuant to the JVA in
relation to Section 2 of Republic Act No. 876 before filing their complaint in the RTC. They prayed for the
dismissal of the complaint under Section 1(j), Rule 16 of the Rules of Court:
WHEREFORE, it is respectfully prayed that an Order be issued:
a) dismissing the Complaint on the basis of Section 1(j), Rule 16 of the aforecited Rules of Court, or, in the
alternative,
b) requiring the plaintiffs to make initiatory step for arbitration by filing the demand to arbitrate, and then asking
the parties to resolve their controversies, pursuant to the Arbitration Law, or in the alternative;
c) staying or suspending the proceedings in captioned case until the completion of the arbitration, and
d) denying the plaintiffs prayer for the issuance of a temporary restraining order or writ of preliminary
injunction.
Other reliefs and remedies just and equitable in the premises are prayed for.
17

In the meantime, before the expiration of the reglementary period to answer the complaint, defendants,
invoking their counsels heavy workload, prayed for a 15-day extension
18
within which to file their answer. The
additional time prayed for was granted by the RTC.
19
However, instead of filing their answer, defendants prayed
for a series of 15-day extensions in eight (8) successive motions for extensions on the same justification.
20
The
RTC again granted the additional time prayed for, but in granting the last extension, it warned against further
extension.
21
Despite the admonition, defendants again moved for another 15-day extension,
22
which, this time,
the RTC denied. No answer having been filed, plaintiffs moved to declare the defendants in default,
23
which the
RTC granted in its Order
24
dated June 24, 1998.
On June 25, 1998, defendants filed, via registered mail, their "Answer with Counterclaim and Opposition to the
Prayer for the Issuance of a Writ of Preliminary Injunction."
25
On July 8, 1998, defendants filed a Motion to Set
Aside the Order of Default.
26
This was opposed by plaintiffs.
27
In an Order
28
dated July 14, 1998, the RTC denied
defendants motion to set aside the order of default and ordered the reception of plaintiffs evidence ex parte.
Defendants filed a motion for reconsideration
29
of the July 14, 1998 Order, which the RTC denied in its
Order
30
dated October 21, 1998.
Defendants thereafter interposed an appeal to the CA assailing the Order declaring them in default, as well as
the Order denying their motion to set aside the order of default, alleging that these were contrary to facts of the
case, the law and jurisprudence.
31
On September 16, 1999, the appellate court issued a Resolution
32
dismissing
the appeal on the ground that the Orders appealed from were interlocutory in character and, therefore, not
appealable. No motion for reconsideration of the Order of the dismissal was filed by defendants.
In the meantime, plaintiffs adduced ex parte their testimonial and documentary evidence. On April 17, 2000, the
RTC rendered a Decision, the dispositive part of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:
1. Ordering the rescission of the Joint Venture Agreement as of the date of filing of this complaint;
2. Ordering the defendants to return possession, including all improvements therein, of the real estate property
belonging to the plaintiffs which is described in, and covered by Transfer Certificate of Title No. T-10848 of the
Register of Deeds of Tagaytay City, and located in Barangay Anulin, City of Tagaytay;
3. Ordering the defendants to turn over all documents, records or papers that have been executed, prepared and
retained in connection with any contract to sell or deed of sale of all lots/units sold during the effectivity of the
joint venture agreement;
4. Ordering the defendants to pay the plaintiffs the sum of P1,041,524.26 representing their share of the net
income of the P2,603,810.64 as of September 30, 1995, as stipulated in the joint venture agreement;
5. Ordering the defendants to pay the plaintiffs attorneys fees in the amount of P104,152.40;
6. Ordering the defendants to pay the costs.
SO ORDERED.
33

The trial court anchored its decision on the following findings:
x x x Evidence on record have shown patent violations by the defendants of the stipulations particularly
paragraph II covering Developers (defendant) undertakings, as well as paragraph III and paragraph V of the JVA.
These violations are not limited to those made against the plaintiffs alone as it appears that some of the unit
buyers themselves have their own separate gripes against the defendants as typified by the letters (Exhibits "G"
and "H") of Mr. Emmanuel Enciso.
x x x x
Rummaging through the evidence presented in the course of the testimony of Mrs. Maminta on August 6, 1998
(Exhibits "N," "O," "P," "Q" and "R" as well as submarkings, pp. 60 to 62, TSN August 6, 1998) this court has
observed, and is thus convinced, that a pattern of what appears to be a scheme or plot to reduce and eventually
blot out the net income generated from sales of housing units by defendants, has been established. Exhibit "P-2"
is explicit in declaring that, as of September 30, 1995, the joint venture project earned a net income of
aboutP2,603,810.64. This amount, however, was drastically reduced in a subsequent financial report submitted
by the defendants to P1,954,216.39. Shortly thereafter, and to the dismay of the plaintiffs, the defendants
submitted an income statement and a balance sheet (Exhibits "R" and "R-1") indicating a net loss
of P5,122,906.39 as of June 30, 1997.
Of the reported net income of P2,603,810.64 (Exhibit "P-2") the plaintiffs should have received the sum
ofP1,041,524.26 representing their 40% share under paragraph II and V of the JVA. But this was not to be so.
Even before the plaintiffs could get hold of their share as indicated above, the defendants closed the chance
altogether by declaring a net loss. The court perceives this to be one calculated coup-de-grace that would put to
thin air plaintiffs hope of getting their share in the profit under the JVA.
That this matter had reached the court is no longer a cause for speculation. The way the defendants treated the
JVA and the manner by which they handled the project itself vis--vis their partners, the plaintiffs herein, there is
bound to be certain conflict as the latter repeatedly would received the losing end of the bargain.
Under the intolerable circumstances, the plaintiffs could not have opted for some other recourse but to file the
present action to enforce their rights. x x x
34

On May 15, 2000, plaintiffs filed a Motion for Execution Pending Appeal
35
alleging defendants dilatory tactics for
its allowance. This was opposed by defendants.
36

On May 22, 2000, the RTC resolved the motion for execution pending appeal in favor of plaintiffs.
37
Upon posting
a bond of P1,000,000.00 by plaintiffs, a writ of execution pending appeal was issued on June 20, 2000.
38

Defendants appealed the decision to the CA on the following assignment of errors:
I
THE TRIAL COURT ERRED IN DECIDING THE CASE WITHOUT FIRST REFERRING THE COMPLAINT FOR VOLUNTARY
ARBITRATION (RA NO. 876), CONTRARY TO THE MANDATED VOLUNTARY ARBITRATION CLAUSE UNDER THE
JOINT VENTURE AGREEMENT, AND THE DOCTRINE IN "MINDANAO PORTLAND CEMENT CORPORATION V.
MCDONOUGH CONSTRUCTION COMPANY OF FLORIDA" (19 SCRA 814-815).
II
THE TRIAL COURT ERRED IN ISSUING A WRIT OF EXECUTION PENDING APPEAL EVEN IN THE ABSENCE OF GOOD
AND COMPELLING REASONS TO JUSTIFY SAID ISSUANCE, AND DESPITE PRIMELINKS STRONG OPPOSITION
THERETO.
III
THE TRIAL COURT ERRED IN REFUSING TO DECIDE PRIMELINKS MOTION TO QUASH THE WRIT OF EXECUTION
PENDING APPEAL AND THE MOTION FOR RECONSIDERATION, ALTHOUGH THE COURT HAS RETAINED ITS
JURISDICTION TO RULE ON ALL QUESTIONS RELATED TO EXECUTION.
IV
THE TRIAL COURT ERRED IN RESCINDING THE JOINT VENTURE AGREEMENT ALTHOUGH PRIMELINK HAS
SUBSTANTIALLY DEVELOPED THE PROJECT AND HAS SPENT MORE OR LESS FORTY MILLION PESOS, AND DESPITE
APPELLEES FAILURE TO PRESENT SUFFICIENT EVIDENCE JUSTIFYING THE SAID RESCISSION.
V
THE TRIAL COURT ERRED IN DECIDING THAT THE APPELLEES HAVE THE RIGHT TO TAKE OVER THE SUBDIVISION
AND TO APPROPRIATE FOR THEMSELVES ALL THE EXISTING IMPROVEMENTS INTRODUCED THEREIN BY
PRIMELINK, ALTHOUGH SAID RIGHT WAS NEITHER ALLEGED NOR PRAYED FOR IN THE COMPLAINT, MUCH LESS
PROVEN DURING THE EX PARTE HEARING, AND EVEN WITHOUT ORDERING APPELLEES TO FIRST REIMBURSE
PRIMELINK OF THE SUBSTANTIAL DIFFERENCE BETWEEN THE MARKET VALUE OF APPELLEES RAW,
UNDEVELOPED AND UNPRODUCTIVE LAND (CONTRIBUTED TO THE PROJECT) AND THE SUM OF MORE OR LESS
FORTY MILLION PESOS WHICH PRIMELINK HAD SPENT FOR THE HORIZONTAL AND VERTICAL DEVELOPMENT OF
THE PROJECT, THEREBY ALLOWING APPELLEES TO UNJUSTLY ENRICH THEMSELVES AT THE EXPENSE OF
PRIMELINK.
39

The appeal was docketed in the CA as CA-G.R. CV No. 69200.
On August 9, 2004, the appellate court rendered a decision affirming, with modification, the appealed decision.
The fallo of the decision reads:
WHEREFORE, in view of the foregoing, the assailed decision of the Regional Trial Court of Tagaytay City, Branch
18, promulgated on April 17, 2000 in Civil Case No. TG-1776, is hereby AFFIRMED. Accordingly, Transfer
Certificate of Title No. T-10848 held for safekeeping by Chinabank pursuant to the Escrow Agreement is ordered
released for return to the plaintiffs-appellees and conformably with the affirmed decision, the cancellation by
the Register of Deeds of Tagaytay City of whatever annotation in TCT No. 10848 by virtue of the Joint Venture
Agreement, is now proper.
SO ORDERED.
40

Citing the ruling of this Court in Aurbach v. Sanitary Wares Manufacturing Corporation,
41
the appellate court
ruled that, under Philippine law, a joint venture is a form of partnership and is to be governed by the laws of
partnership. The aggrieved parties filed a motion for reconsideration,
42
which the CA denied in its
Resolution
43
dated March 7, 2005.
Petitioners thus filed the instant Petition for Review on Certiorari, alleging that:
1) DID THE HONORABLE COURT OF APPEALS COMMIT A FATAL AND REVERSIBLE LEGAL ERROR AND/OR GRAVE
ABUSE OF DISCRETION IN ORDERING THE RETURN TO THE RESPONDENTS OF THE PROPERTY WITH ALL
IMPROVEMENTS THEREON, EVEN WITHOUT ORDERING/REQUIRING THE RESPONDENTS TO FIRST PAY OR
REIMBURSE PRIMELINK OF ALL EXPENSES INCURRED IN DEVELOPING AND MARKETING THE PROJECT, LESS THE
ORIGINAL VALUE OF THE PROPERTY, AND THE SHARE DUE RESPONDENTS FROM THE PROFITS (IF ANY) OF THE
JOINT VENTURE PROJECT?
2) IS THE AFORESAID ORDER ILLEGAL AND CONFISCATORY, OPPRESSIVE AND UNCONSCIONABLE, CONTRARY TO
THE TENETS OF GOOD HUMAN RELATIONS AND VIOLATIVE OF EXISTING LAWS AND JURISPRUDENCE ON
JUDICIAL NOTICE, DEFAULT, UNJUST ENRICHMENT AND RESCISSION OF CONTRACT WHICH REQUIRES MUTUAL
RESTITUTION, NOT UNILATERAL APPROPRIATION, OF PROPERTY BELONGING TO ANOTHER?
44

Petitioners maintain that the aforesaid portion of the decision which unconditionally awards to respondents "all
improvements" on the project without requiring them to pay the value thereof or to reimburse Primelink for all
expenses incurred therefore is inherently and essentially illegal and confiscatory, oppressive and unconscionable,
contrary to the tenets of good human relations, and will allow respondents to unjustly enrich themselves at
Primelinks expense. At the time respondents contributed the two parcels of land, consisting of 30,000 square
meters to the joint venture project when the JVA was signed on March 10, 1994, the said properties were worth
not more than P500.00 per square meter, the "price tag" agreed upon the parties for the purpose of the JVA.
Moreover, before respondents rescinded the JVA sometime in October/November 1997, the property had
already been substantially developed as improvements had already been introduced thereon; petitioners had
likewise incurred administrative and marketing expenses, among others, amounting to more or
less P40,000,000.00.
45

Petitioners point out that respondents did not pray in their complaint that they be declared the owners and
entitled to the possession of the improvements made by petitioner Primelink on the property; neither did they
adduce evidence to prove their entitlement to said improvements. It follows, petitioners argue, that respondents
were not entitled to the improvements although petitioner Primelink was declared in default.
They also aver that, under Article 1384 of the New Civil Code, rescission shall be only to the extent necessary to
cover the damages caused and that, under Article 1385 of the same Code, rescission creates the obligation to
return the things which were not object of the contract, together with their fruits, and the price with its interest;
consequently, it can be effected only when respondents can return whatever they may be obliged to return.
Respondents who sought the rescission of the JVA must place petitioner Primelink in the status quo. They insist
that respondents cannot rescind and, at the same time, retain the consideration, or part of the consideration
received under the JVA. They cannot have the benefits of rescission without assuming its burden. All parties
must be restored to their original positions as nearly as possible upon the rescission of a contract. In the event
that restoration to the status quo is impossible, rescission may be granted if the Court can balance the equities
and fashion an appropriate remedy that would be equitable to both parties and afford complete relief.
Petitioners insist that being defaulted in the court a quo would in no way defeat their claim for reimbursement
because "[w]hat matters is that the improvements exist and they cannot be denied."
46
Moreover, they point out,
the ruling of this Court in Aurbach v. Sanitary Wares Manufacturing Corporation
47
cited by the CA is not in point.
On the other hand, the CA ruled that although respondents therein (plaintiffs below) did not specifically pray for
their takeover of the property and for the possession of the improvements on the parcels of land, nevertheless,
respondents were entitled to said relief as a necessary consequence of the ruling of the trial court ordering the
rescission of the JVA. The appellate court cited the ruling of this Court in the Aurbach case and Article 1838 of
the New Civil Code, to wit:
As a general rule, the relation of the parties in joint ventures is governed by their agreement. When the
agreement is silent on any particular issue, the general principles of partnership may be resorted to.
48

Respondents, for their part, assert that Articles 1380 to 1389 of the New Civil Code deal with rescissible
contracts. What applies is Article 1191 of the New Civil Code, which reads:
ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage Law.
They insist that petitioners are not entitled to rescission for the improvements because, as found by the RTC and
the CA, it was petitioner Primelink that enriched itself at the expense of respondents. Respondents reiterate the
ruling of the CA, and argue as follows:
PRIMELINK argued that the LAZATINs in their complaint did not allege, did not prove and did not pray that they
are and should be entitled to take over the development of the project, and that the improvements and existing
structures which were introduced by PRIMELINK after spending more or less Forty Million Pesos be awarded to
them. They merely asked in the complaint that the joint venture agreement be rescinded, and that the parcels of
land they contributed to the project be returned to them.
PRIMELINKs argument lacks merit. The order of the court for PRIMELINK to return possession of the real estate
property belonging to the LAZATINs including all improvements thereon was not a judgment that was different in
kind than what was prayed for by the LAZATINs. The order to return the property with all the improvements
thereon is just a necessary consequence to the order of rescission.
As a general rule, the relation of the parties in joint ventures is governed by their agreement. When the
agreement is silent on any particular issue, the general principles of partnership may be resorted to. In Aurbach
v. Sanitary Wares Manufacturing Corporation, the Supreme Court discussed the following points regarding joint
ventures and partnership:
The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been
generally understood to mean an organization formed for some temporary purpose. (Gates v. Megargel, 266
Fed. 811 [1920]) It is, in fact, hardly distinguishable from the partnership, since elements are similar
community of interest in the business, sharing of profits and losses, and a mutual right of control. (Blackner v.
McDermott, 176 F.2d 498 [1949]; Carboneau v. Peterson, 95 P.2d 1043 [1939]; Buckley v. Chadwick, 45 Cal.2d
183, 288 P.2d 12, 289 P.2d 242 [1955]) The main distinction cited by most opinions in common law jurisdictions
is that the partnership contemplates a general business with some degree of continuity, while the joint venture
is formed for the execution of a single transaction, and is thus of a temporary nature. (Tuffs v. Mann, 116
Cal.App. 170, 2 P.2d 500 [1931]; Harmon v. Martin, 395 III. 595, 71 N.E.2d 74 [1947]; Gates v. Megargel, 266 Fed.
811 [1920]) This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership
may be particular or universal, and a particular partnership may have for its object a specific undertaking. (Art.
1783, Civil Code). It would seem therefore that, under Philippine law, a joint venture is a form of partnership and
should thus be governed by the laws of partnership. The Supreme Court has, however, recognized a distinction
between these two business forms, and has held that although a corporation cannot enter into a partnership
contract, it may, however, engage in a joint venture with others. (At p. 12, Tuazon v. Bolanos, 95 Phil. 906 [1954];
Campos and Lopez Campos Comments, Notes and Selected Cases, Corporation Code 1981) (Emphasis Supplied)
The LAZATINs were able to establish fraud on the part of PRIMELINK which, in the words of the court a quo, was
a pattern of what appears to be a scheme or plot to reduce and eventually blot out the net incomes generated
from sales of housing units by the defendants. Under Article 1838 of the Civil Code, where the partnership
contract is rescinded on the ground of the fraud or misrepresentation of one of the parties thereto, the party
entitled to rescind is, without prejudice to any other right is entitled to a lien on, or right of retention of, the
surplus of the partnership property after satisfying the partnership liabilities to third persons for any sum of
money paid by him for the purchase of an interest in the partnership and for any capital or advance contributed
by him. In the instant case, the joint venture still has outstanding liabilities to third parties or the buyers of the
property.
It is not amiss to state that title to the land or TCT No. T-10848 which is now held by Chinabank for safekeeping
pursuant to the Escrow Agreement executed between Primelink Properties and Development Corporation and
Ma. Clara T. Lazatin-Magat should also be returned to the LAZATINs as a necessary consequence of the order of
rescission of contract. The reason for the existence of the Escrow Agreement has ceased to exist when the joint
venture agreement was rescinded.
49

Respondents stress that petitioners must bear any damages or losses they may have suffered. They likewise
stress that they did not enrich themselves at the expense of petitioners.
In reply, petitioners assert that it is unjust and inequitable for respondents to retain the improvements even if
their share in the P1,041,524.26 of the net income of the property and the sale of the land were to be deducted
from the value of the improvements, plus administrative and marketing expenses in the total amount
of P40,000,000.00. Petitioners will still be entitled to an accounting from respondents. Respondents cannot deny
the existence and nature of said improvements as they are visible to the naked eye.
The threshold issues are the following: (1) whether respondents are entitled to the possession of the parcels of
land covered by the JVA and the improvements thereon introduced by petitioners as their contribution to the
JVA; (2) whether petitioners are entitled to reimbursement for the value of the improvements on the parcels of
land.
The petition has no merit.
On the first issue, we agree with petitioners that respondents did not specifically pray in their complaint below
that possession of the improvements on the parcels of land which they contributed to the JVA be transferred to
them. Respondents made a specific prayer in their complaint that, upon the rescission of the JVA, they be placed
in possession of the parcels of land subject of the agreement, and for other "reliefs and such other remedies as
are just and equitable in the premises." However, the trial court was not precluded from awarding possession of
the improvements on the parcels of land to respondents in its decision. Section 2(c), Rule 7 of the Rules of Court
provides that a pleading shall specify the relief sought but it may add as general prayer for such further or other
relief as may be deemed just and equitable. Even without the prayer for a specific remedy, proper relief may be
granted by the court if the facts alleged in the complaint and the evidence introduced so warrant.
50
The court
shall grant relief warranted by the allegations and the proof even if no such relief is prayed for.
51
The prayer in
the complaint for other reliefs equitable and just in the premises justifies the grant of a relief not otherwise
specifically prayed for.
52

The trial court was not proscribed from placing respondents in possession of the parcels of land and the
improvements on the said parcels of land. It bears stressing that the parcels of land, as well as the improvements
made thereon, were contributed by the parties to the joint venture under the JVA, hence, formed part of the
assets of the joint venture.
53
The trial court declared that respondents were entitled to the possession not only
of the parcels of land but also of the improvements thereon as a consequence of its finding that petitioners
breached their agreement and defrauded respondents of the net income under the JVA.
On the second issue, we agree with the CA ruling that petitioner Primelink and respondents entered into a joint
venture as evidenced by their JVA which, under the Courts ruling in Aurbach, is a form of partnership, and as
such is to be governed by the laws on partnership.
When the RTC rescinded the JVA on complaint of respondents based on the evidence on record that petitioners
willfully and persistently committed a breach of the JVA, the court thereby dissolved/cancelled the
partnership.
54
With the rescission of the JVA on account of petitioners fraudulent acts, all authority of any
partner to act for the partnership is terminated except so far as may be necessary to wind up the partnership
affairs or to complete transactions begun but not yet finished.
55
On dissolution, the partnership is not
terminated but continues until the winding up of partnership affairs is completed.
56
Winding up means the
administration of the assets of the partnership for the purpose of terminating the business and discharging the
obligations of the partnership.
The transfer of the possession of the parcels of land and the improvements thereon to respondents was only for
a specific purpose: the winding up of partnership affairs, and the partition and distribution of the net partnership
assets as provided by law.
57
After all, Article 1836 of the New Civil Code provides that unless otherwise agreed by
the parties in their JVA, respondents have the right to wind up the partnership affairs:
Art. 1836. Unless otherwise agreed, the partners who have not wrongfully dissolved the partnership or the legal
representative of the last surviving partner, not insolvent, has the right to wind up the partnership affairs,
provided, however, that any partner, his legal representative or his assignee, upon cause shown, may obtain
winding up by the court.
It must be stressed, too, that although respondents acquired possession of the lands and the improvements
thereon, the said lands and improvements remained partnership property, subject to the rights and obligations
of the parties, inter se, of the creditors and of third parties under Articles 1837 and 1838 of the New Civil Code,
and subject to the outcome of the settlement of the accounts between the parties as provided in Article 1839 of
the New Civil Code, absent any agreement of the parties in their JVA to the contrary.
58
Until the partnership
accounts are determined, it cannot be ascertained how much any of the parties is entitled to, if at all.
It was thus premature for petitioner Primelink to be demanding that it be indemnified for the value of the
improvements on the parcels of land owned by the joint venture/partnership. Notably, the JVA of the parties
does not contain any provision designating any party to wind up the affairs of the partnership.
Thus, under Article 1837 of the New Civil Code, the rights of the parties when dissolution is caused in
contravention of the partnership agreement are as follows:
(1) Each partner who has not caused dissolution wrongfully shall have:
(a) All the rights specified in the first paragraph of this article, and
(b) The right, as against each partner who has caused the dissolution wrongfully, to damages for breach of the
agreement.
(2) The partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the
same name either by themselves or jointly with others, may do so, during the agreed term for the partnership
and for that purpose may possess the partnership property, provided they secure the payment by bond
approved by the court, or pay to any partner who has caused the dissolution wrongfully, the value of his interest
in the partnership at the dissolution, less any damages recoverable under the second paragraph, No. 1(b) of this
article, and in like manner indemnify him against all present or future partnership liabilities.
(3) A partner who has caused the dissolution wrongfully shall have:
(a) If the business is not continued under the provisions of the second paragraph, No. 2, all the rights of a partner
under the first paragraph, subject to liability for damages in the second paragraph, No. 1(b), of this article.
(b) If the business is continued under the second paragraph, No. 2, of this article, the right as against his co-
partners and all claiming through them in respect of their interests in the partnership, to have the value of his
interest in the partnership, less any damage caused to his co-partners by the dissolution, ascertained and paid to
him in cash, or the payment secured by a bond approved by the court, and to be released from all existing
liabilities of the partnership; but in ascertaining the value of the partners interest the value of the good-will of
the business shall not be considered.
And under Article 1838 of the New Civil Code, the party entitled to rescind is, without prejudice to any other
right, entitled:
(1) To a lien on, or right of retention of, the surplus of the partnership property after satisfying the partnership
liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership
and for any capital or advances contributed by him;
(2) To stand, after all liabilities to third persons have been satisfied, in the place of the creditors of the
partnership for any payments made by him in respect of the partnership liabilities; and
(3) To be indemnified by the person guilty of the fraud or making the representation against all debts and
liabilities of the partnership.
The accounts between the parties after dissolution have to be settled as provided in Article 1839 of the New Civil
Code:
Art. 1839. In settling accounts between the partners after dissolution, the following rules shall be observed,
subject to any agreement to the contrary:
(1) The assets of the partnership are:
(a) The partnership property,
(b) The contributions of the partners necessary for the payment of all the liabilities specified in No. 2.
(2) The liabilities of the partnership shall rank in order of payment, as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.
(3) The assets shall be applied in the order of their declaration in No. 1 of this article to the satisfaction of the
liabilities.
(4) The partners shall contribute, as provided by article 1797, the amount necessary to satisfy the liabilities.
(5) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce
the contributions specified in the preceding number.
(6) Any partner or his legal representative shall have the right to enforce the contributions specified in No. 4, to
the extent of the amount which he has paid in excess of his share of the liability.
(7) The individual property of a deceased partner shall be liable for the contributions specified in No. 4.
(8) When partnership property and the individual properties of the partners are in possession of a court for
distribution, partnership creditors shall have priority on partnership property and separate creditors on
individual property, saving the rights of lien or secured creditors.
(9) Where a partner has become insolvent or his estate is insolvent, the claims against his separate property shall
rank in the following order:
(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of contribution.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 69200 are AFFIRMED insofar as they conform to this Decision of the Court.
Costs against petitioners.
SO ORDERED.

G.R. No. L-17526 June 30, 1962
GREGORIO MAGDUSA, ET AL., petitioners,
vs.
GERUNDIO ALBARAN, ET AL., respondents.
Montenegro, Madayag, Viola and Hernandez, Olimpio R. Epis, David C. Ocangas and Bonifacio M. Belderol for
petitioners.
Lozano, Soria, Muana, Ruiz and Morales for respondents.
REYES, J.B.L., J.:
Appeal from a decision of the Court of Appeals (G.R. No. 24248-R) reversing a judgment of the Court of First
Instance of Bohol and ordering appellant Gregorio Magdusa to pay to appellees, by way of refund of their shares
as partners, the following amounts: Gerundio Albaran, P8,979.10; Pascual Albaran, P5,394.78; Zosimo Albaran,
P1,979.28; and Telesforo Bebero, P3,020.27; plus legal interests from the filing of the complaint, and costs.
The Court of Appeals found that appellant and appellees, together with various other persons, had verbally
formed a partnership de facto, for the sale of general merchandise in Surigao, Surigao, to which appellant
contributed P2,000 as capital, and the others contributed their labor, under the condition that out of the net
profits of the business 25% would be added to the original capital, and the remaining 75% would be divided
among the members in proportion to the length of service of each. Sometime in 1953 and 1954, the appellees
expressed their desire to withdraw from the partnership, and appellant thereupon made a computation to
determine the value of the partners' shares to that date. The results of the computation were embodied in the
document Exhibit "C", drawn in the handwriting of appellant. Appellees thereafter made demands upon
appellant for payment, but appellant having refused, they filed the initial complaint in the court below. Appellant
defended by denying any partnership with appellees, whom he claimed to be mere employees of his.
The Court of First Instance of Bohol refused to give credence to Exhibit "C", and dismissed the complaint on the
ground that the other were indispensable parties but hid not been impleaded. Upon appeal, the Court of
Appeals reversed, with the result noted at the start of this opinion.
Gregorio Magdusa then petitioned for a review of the decision, and we gave it due course.1wph1.t
The main argument of appellant is that the appellees' action can not be entertained, because in the distribution
of all or part of a partnership's assets, all the partners have no interest and are indispensable parties without
whose intervention no decree of distribution can be validly entered. This argument was considered and
answered by the Court of Appeals in the following words:
We now come to the last issue involved. While finding that some amounts are due the plaintiffs, the lower court
withheld an award in their favor, reasoning that a judgment ordering the defendant to pay might affect the
rights of other partners who were not made parties in this case. The reason cited by the lower court does not
constitute a legal impediment to a judgment for the plaintiffs in this case. This is not an action for a dissolution of
a partnership and winding up of its affairs or liquidation of its assets in which the interest of other partners who
are not brought into the case may be affected. The action of the plaintiffs is one for the recovery of a sum of
money with Gregorio Magdusa as the principal defendant. The partnership, with Gregorio Magdusa as managing
partner, was brought into the case as an alternative defendant only. Plaintiffs' action was based on the
allegation, substantiated in evidence, that Gregorio Magdusa, having taken delivery of their shares, failed and
refused and still fails and refuses to pay them their claims. The liability, therefore, is personal to Gregorio
Magdusa, and the judgment should be against his sole interest, not against the partnership's although the
judgment creditors may satisfy the judgment against the interest of Gregorio Magdusa in the partnership subject
to the condition imposed by Article 1814 of the Civil Code.
We do not find the preceding reasoning tenable. A partner's share can not be returned without first dissolving
and liquidating the partnership (Po Yeng Cheo vs. Lim Ka Yam, 44 Phil. 177), for the return is dependent on the
discharge of the creditors, whose claims enjoy preference over those of the partners; and it is self-evident that
all members of the partnership are interested in his assets and business, and are entitled to be heard in the
matter of the firm's liquidation and the distribution of its property. The liquidation Exhibit "C" is not signed by
the other members of the partnership besides appellees and appellant; it does not appear that they have
approved, authorized, or ratified the same, and, therefore, it is not binding upon them. At the very least, they
are entitled to be heard upon its correctness.
In addition, unless a proper accounting and liquidation of the partnership affairs is first had, the capital shares of
the appellees, as retiring partners, can not be repaid, for the firm's outside creditors have preference over the
assets of the enterprise (Civ. Code, Art. 1839), and the firm's property can not be diminished to their prejudice.
Finally, the appellant can not be held liable in his personal capacity for the payment of partners' shares for he
does not hold them except as manager of, or trustee for, the partnership. It is the latter that must refund their
shares to the retiring partners. Since not all the members of the partnership have been impleaded, no judgment
for refund can be rendered, and the action should have been dismissed.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals is reversed and the action ordered dismissed,
without prejudice to a proper proceeding for the dissolution and liquidation of the common enterprise. Costs
against appellees.

G.R. No. 97212 June 30, 1993
BENJAMIN YU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JADE MOUNTAIN PRODUCTS COMPANY LIMITED, WILLY CO,
RHODORA D. BENDAL, LEA BENDAL, CHIU SHIAN JENG and CHEN HO-FU, respondents.
Jose C. Guico for petitioner.
Wilfredo Cortez for private respondents.

FELICIANO, J.:
Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble quarrying and export business
operated by a registered partnership with the firm name of "Jade Mountain Products Company Limited" ("Jade
Mountain"). The partnership was originally organized on 28 June 1984 with Lea Bendal and Rhodora Bendal as
general partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang, all citizens of the Republic of China (Taiwan), as
limited partners. The partnership business consisted of exploiting a marble deposit found on land owned by the
Sps. Ricardo and Guillerma Cruz, situated in Bulacan Province, under a Memorandum Agreement dated 26 June
1984 with the Cruz spouses.
1
The partnership had its main office in Makati, Metropolitan Manila.
Benjamin Yu was hired by virtue of a Partnership Resolution dated 14 March 1985, as Assistant General Manager
with a monthly salary of P4,000.00. According to petitioner Yu, however, he actually received only half of his
stipulated monthly salary, since he had accepted the promise of the partners that the balance would be paid
when the firm shall have secured additional operating funds from abroad. Benjamin Yu actually managed the
operations and finances of the business; he had overall supervision of the workers at the marble quarry in
Bulacan and took charge of the preparation of papers relating to the exportation of the firm's products.
Sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea Bendal and Rhodora Bendal
sold and transferred their interests in the partnership to private respondent Willy Co and to one Emmanuel
Zapanta. Mr. Yu Chang, a limited partner, also sold and transferred his interest in the partnership to Willy Co.
Between Mr. Emmanuel Zapanta and himself, private respondent Willy Co acquired the great bulk of the
partnership interest. The partnership now constituted solely by Willy Co and Emmanuel Zapanta continued to
use the old firm name of Jade Mountain, though they moved the firm's main office from Makati to
Mandaluyong, Metropolitan Manila. A Supplement to the Memorandum Agreement relating to the operation of
the marble quarry was entered into with the Cruz spouses in February of 1988.
2
The actual operations of the
business enterprise continued as before. All the employees of the partnership continued working in the business,
all, save petitioner Benjamin Yu as it turned out.
On 16 November 1987, having learned of the transfer of the firm's main office from Makati to Mandaluyong,
petitioner Benjamin Yu reported to the Mandaluyong office for work and there met private respondent Willy Co
for the first time. Petitioner was informed by Willy Co that the latter had bought the business from the original
partners and that it was for him to decide whether or not he was responsible for the obligations of the old
partnership, including petitioner's unpaid salaries. Petitioner was in fact not allowed to work anymore in the
Jade Mountain business enterprise. His unpaid salaries remained unpaid.
3

On 21 December 1988. Benjamin Yu filed a complaint for illegal dismissal and recovery of unpaid salaries
accruing from November 1984 to October 1988, moral and exemplary damages and attorney's fees, against Jade
Mountain, Mr. Willy Co and the other private respondents. The partnership and Willy Co denied petitioner's
charges, contending in the main that Benjamin Yu was never hired as an employee by the present or new
partnership.
4

In due time, Labor Arbiter Nieves Vivar-De Castro rendered a decision holding that petitioner had been illegally
dismissed. The Labor Arbiter decreed his reinstatement and awarded him his claim for unpaid salaries,
backwages and attorney's fees.
5

On appeal, the National Labor Relations Commission ("NLRC") reversed the decision of the Labor Arbiter and
dismissed petitioner's complaint in a Resolution dated 29 November 1990. The NLRC held that a new partnership
consisting of Mr. Willy Co and Mr. Emmanuel Zapanta had bought the Jade Mountain business, that the new
partnership had not retained petitioner Yu in his original position as Assistant General Manager, and that there
was no law requiring the new partnership to absorb the employees of the old partnership. Benjamin Yu,
therefore, had not been illegally dismissed by the new partnership which had simply declined to retain him in his
former managerial position or any other position. Finally, the NLRC held that Benjamin Yu's claim for unpaid
wages should be asserted against the original members of the preceding partnership, but these though
impleaded had, apparently, not been served with summons in the proceedings before the Labor Arbiter.
6

Petitioner Benjamin Yu is now before the Court on a Petition for Certiorari, asking us to set aside and annul the
Resolution of the NLRC as a product of grave abuse of discretion amounting to lack or excess of jurisdiction.
The basic contention of petitioner is that the NLRC has overlooked the principle that a partnership has a juridical
personality separate and distinct from that of each of its members. Such independent legal personality subsists,
petitioner claims, notwithstanding changes in the identities of the partners. Consequently, the employment
contract between Benjamin Yu and the partnership Jade Mountain could not have been affected by changes in
the latter's membership.
7

Two (2) main issues are thus posed for our consideration in the case at bar: (1) whether the partnership which
had hired petitioner Yu as Assistant General Manager had been extinguished and replaced by a new partnerships
composed of Willy Co and Emmanuel Zapanta; and (2) if indeed a new partnership had come into existence,
whether petitioner Yu could nonetheless assert his rights under his employment contract as against the new
partnership.
In respect of the first issue, we agree with the result reached by the NLRC, that is, that the legal effect of the
changes in the membership of the partnership was the dissolution of the old partnership which had hired
petitioner in 1984 and the emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987.
The applicable law in this connection of which the NLRC seemed quite unaware is found in the Civil Code
provisions relating to partnerships. Article 1828 of the Civil Code provides as follows:
Art. 1828. The dissolution of a partnership is the change in the relation of the partners caused by any partner
ceasing to be associated in the carrying on as distinguished from the winding up of the business. (Emphasis
supplied)
Article 1830 of the same Code must also be noted:
Art. 1830. Dissolution is caused:
(1) without violation of the agreement between the partners;
xxx xxx xxx
(b) by the express will of any partner, who must act in good faith, when no definite term or particular undertaking
is specified;
xxx xxx xxx
(2) in contravention of the agreement between the partners, where the circumstances do not permit a
dissolution under any other provision of this article, by the express will of any partner at any time;
xxx xxx xxx
(Emphasis supplied)
In the case at bar, just about all of the partners had sold their partnership interests (amounting to 82% of the
total partnership interest) to Mr. Willy Co and Emmanuel Zapanta. The record does not show what happened to
the remaining 18% of the original partnership interest. The acquisition of 82% of the partnership interest by new
partners, coupled with the retirement or withdrawal of the partners who had originally owned such 82%
interest, was enough to constitute a new partnership.
The occurrence of events which precipitate the legal consequence of dissolution of a partnership do not,
however, automatically result in the termination of the legal personality of the old partnership. Article 1829 of
the Civil Code states that:
[o]n dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is
completed.
In the ordinary course of events, the legal personality of the expiring partnership persists for the limited purpose
of winding up and closing of the affairs of the partnership. In the case at bar, it is important to underscore the
fact that the business of the old partnership was simply continued by the new partners, without the old
partnership undergoing the procedures relating to dissolution and winding up of its business affairs. In other
words, the new partnership simply took over the business enterprise owned by the preceeding partnership, and
continued using the old name of Jade Mountain Products Company Limited, without winding up the business
affairs of the old partnership, paying off its debts, liquidating and distributing its net assets, and then re-
assembling the said assets or most of them and opening a new business enterprise. There were, no doubt,
powerful tax considerations which underlay such an informal approach to business on the part of the retiring
and the incoming partners. It is not, however, necessary to inquire into such matters.
What is important for present purposes is that, under the above described situation, not only the retiring
partners (Rhodora Bendal, et al.) but also the new partnership itself which continued the business of the old,
dissolved, one, are liable for the debts of the preceding partnership. In Singson, et al. v. Isabela Saw Mill, et
al,
8
the Court held that under facts very similar to those in the case at bar, a withdrawing partner remains liable
to a third party creditor of the old partnership.
9
The liability of the new partnership, upon the other hand, in the
set of circumstances obtaining in the case at bar, is established in Article 1840 of the Civil Code which reads as
follows:
Art. 1840. In the following cases creditors of the dissolved partnership are also creditors of the person or
partnership continuing the business:
(1) When any new partner is admitted into an existing partnership, or when any partner retires and assigns (or
the representative of the deceased partner assigns) his rights in partnership property to two or more of the
partners, or to one or more of the partners and one or more third persons, if the business is continued without
liquidation of the partnership affairs;
(2) When all but one partner retire and assign (or the representative of a deceased partner assigns) their rights in
partnership property to the remaining partner, who continues the business without liquidation of partnership
affairs, either alone or with others;
(3) When any Partner retires or dies and the business of the dissolved partnership is continued as set forth in Nos.
1 and 2 of this Article, with the consent of the retired partners or the representative of the deceased partner, but
without any assignment of his right in partnership property;
(4) When all the partners or their representatives assign their rights in partnership property to one or more third
persons who promise to pay the debts and who continue the business of the dissolved partnership;
(5) When any partner wrongfully causes a dissolution and remaining partners continue the businessunder the
provisions of article 1837, second paragraph, No. 2, either alone or with others, and without liquidation of the
partnership affairs;
(6) When a partner is expelled and the remaining partners continue the business either alone or with others
without liquidation of the partnership affairs;
The liability of a third person becoming a partner in the partnership continuing the business, under this article, to
the creditors of the dissolved partnership shall be satisfied out of the partnership property only, unless there is a
stipulation to the contrary.
When the business of a partnership after dissolution is continued under any conditions set forth in this article
the creditors of the retiring or deceased partner or the representative of the deceased partner, have a prior right
to any claim of the retired partner or the representative of the deceased partner against the person or
partnership continuing the business on account of the retired or deceased partner's interest in the dissolved
partnership or on account of any consideration promised for such interest or for his right in partnership
property.
Nothing in this article shall be held to modify any right of creditors to set assignment on the ground of fraud.
xxx xxx xxx
(Emphasis supplied)
Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the new Jade Mountain which
continued the business of the old one without liquidation of the partnership affairs. Indeed, a creditor of the old
Jade Mountain, like petitioner Benjamin Yu in respect of his claim for unpaid wages, is entitled to priority vis-a-
visany claim of any retired or previous partner insofar as such retired partner's interest in the dissolved
partnership is concerned. It is not necessary for the Court to determine under which one or mare of the above
six (6) paragraphs, the case at bar would fall, if only because the facts on record are not detailed with sufficient
precision to permit such determination. It is, however, clear to the Court that under Article 1840 above,
Benjamin Yu is entitled to enforce his claim for unpaid salaries, as well as other claims relating to his
employment with the previous partnership, against the new Jade Mountain.
It is at the same time also evident to the Court that the new partnership was entitled to appoint and hire a new
general or assistant general manager to run the affairs of the business enterprise take over. An assistant general
manager belongs to the most senior ranks of management and a new partnership is entitled to appoint a top
manager of its own choice and confidence. The non-retention of Benjamin Yu as Assistant General Manager did
not therefore constitute unlawful termination, or termination without just or authorized cause. We think that
the precise authorized cause for termination in the case at bar was redundancy.
10
The new partnership had its
own new General Manager, apparently Mr. Willy Co, the principal new owner himself, who personally ran the
business of Jade Mountain. Benjamin Yu's old position as Assistant General Manager thus became superfluous or
redundant.
11
It follows that petitioner Benjamin Yu is entitled to separation pay at the rate of one month's pay
for each year of service that he had rendered to the old partnership, a fraction of at least six (6) months being
considered as a whole year.
While the new Jade Mountain was entitled to decline to retain petitioner Benjamin Yu in its employ, we consider
that Benjamin Yu was very shabbily treated by the new partnership. The old partnership certainly benefitted
from the services of Benjamin Yu who, as noted, previously ran the whole marble quarrying, processing and
exporting enterprise. His work constituted value-added to the business itself and therefore, the new partnership
similarly benefitted from the labors of Benjamin Yu. It is worthy of note that the new partnership did not try to
suggest that there was any cause consisting of some blameworthy act or omission on the part of Mr. Yu which
compelled the new partnership to terminate his services. Nonetheless, the new Jade Mountain did not notify
him of the change in ownership of the business, the relocation of the main office of Jade Mountain from Makati
to Mandaluyong and the assumption by Mr. Willy Co of control of operations. The treatment (including the
refusal to honor his claim for unpaid wages) accorded to Assistant General Manager Benjamin Yu was so
summary and cavalier as to amount to arbitrary, bad faith treatment, for which the new Jade Mountain may
legitimately be required to respond by paying moral damages. This Court, exercising its discretion and in view of
all the circumstances of this case, believes that an indemnity for moral damages in the amount of P20,000.00 is
proper and reasonable.
In addition, we consider that petitioner Benjamin Yu is entitled to interest at the legal rate of six percent (6%) per
annum on the amount of unpaid wages, and of his separation pay, computed from the date of promulgation of
the award of the Labor Arbiter. Finally, because the new Jade Mountain compelled Benjamin Yu to resort to
litigation to protect his rights in the premises, he is entitled to attorney's fees in the amount of ten percent (10%)
of the total amount due from private respondent Jade Mountain.
WHEREFORE, for all the foregoing, the Petition for Certiorari is GRANTED DUE COURSE, the Comment filed by
private respondents is treated as their Answer to the Petition for Certiorari, and the Decision of the NLRC dated
29 November 1990 is hereby NULLIFIED and SET ASIDE. A new Decision is hereby ENTERED requiring private
respondent Jade Mountain Products Company Limited to pay to petitioner Benjamin Yu the following amounts:
(a) for unpaid wages which, as found by the Labor Arbiter, shall be computed at the rate of P2,000.00 per month
multiplied by thirty-six (36) months (November 1984 to December 1987) in the total amount of P72,000.00;
(b) separation pay computed at the rate of P4,000.00 monthly pay multiplied by three (3) years of service or a
total of P12,000.00;
(c) indemnity for moral damages in the amount of P20,000.00;
(d) six percent (6%) per annum legal interest computed on items (a) and (b) above, commencing on 26 December
1989 and until fully paid; and
(e) ten percent (10%) attorney's fees on the total amount due from private respondent Jade Mountain.
Costs against private respondents.
SO ORDERED.

G.R. No. L-24243 January 15, 1926
ILDEFONSO DE LA ROSA, administrator of the intestate estate of the deceased Go-Lio, plaintiff-appellant,
vs.
ENRIQUE ORTEGA GO-COTAY, defendant-appellant.
Crispin Oben for palintiff-appellant.
Paredes, Buencamino and Yulo for defendant-appellant.
VILLA-REAL, J.:
During the Spanish regime the Chinamen Go-Lio and Vicente Go-Sengco formed a society for the purchase and
sale of articles of commerce, and for this purpose they opened a store in the town of San Isidro, Nueva Ecija.
Later Go-Lio went to China. Vicenyte Go-Sengco died and his son Enrique Ortega Go-Cotay took charge of the
businesses. Go-Lio died in China in October, 1916, leaving a widow and three children, one of whom came to the
Philippines and filed a petition for the appointment of Ildefonso de la Rosa as administrator of the intestate
estate of his deceased father, which petition was granted by the Court of First Instance of Nueva Ecija. Ildefonso
de la Rosa, in his capacity as administrator of the intestate estate of the deceased Go-Lio, requested Enrique Go-
Cotay to wind up the business and to deliver to him the portion corresponding to the deceased Go-Lio. Enrique
Ortega Go-Cotay denied the petition, alleging that the business was his exclusively. In view of this denial,
Ildefonso de la Rosa, as administratorm, on July 2, 1918, filed with the Court of First Instance of Nueva Ecija a
complaint against Enrique Ortega Co-Cotay in which he prayed that the defendant be sentenced to deliver to the
plaintiff one-half of all the property of the partnership formed by Go-lIo and Vicente Go-Sengco, with costs
against the defendant, and that the said plaintiff be appointed receiver for the property of the said partnership.
Defendant, in answering the complaint, denied each and every allegation thereof, and as a special defense
alleged that more than ten years had elapsed before the filing of the complaint, and prayed that he be absolved
therefrom, with costs against the plaintiff.
On August 3, 1918, the Court of First Instance of Nueva Ecija appointed Justo Cabo-Chan, Francisco T. Tantengco
and Go-Tiao, as commissioners to make an inventory, liquidate and determine the one-half belonging to the
plaintiff of all the property of the store in question.
On August 9, 1918, in order to prevent Justo Cabo-Chan from assuming the office of receiver, pursuant to the
order of the court dated August 3, 1918, the defendant filed a bond in the sum of P10,000.
Under the date of November 15, 1920, the said commissioners submitted to the court their report, showing the
net profits of the business between the period from 1913 to 1917, which amounted to the total sum of
P25,038.70 and consisted of the following items:
Profits for the year 1913........................ P2,979.00
Profits for the year 1914........................ 3,046.94
Profits for the year 1915........................ 4,103.07
Profits for the year 1916........................ 4,735.00
Profits for the year 1917........................ 10,174.69
Total........................................................... 25.038.70
In view of the appeal taken by defendant the parties on December 7, 1921, entered into an agreement whereby
they agreed to suspend the liquidation ordered by the court until the appeal to the Supreme Court was decided,
and whereby the defenadnt was authorized to continue in the possession of the property in litigation, upon the
giving of a bond in the amount of P25,000, and cancelling the former bond for P10,000.
This court in deciding case R. G. No. 18919, on October 5, 1922,
1
held that the appeal was premature and
ordered that the record be remanded to the court of origin with instruction to enter a final order in accordance
with the liquidation made by the commissioners.
The record having been remanded and two of the commissioners having filed their resignations, the copurt
below appointed again Justo Cabo-Chan suggested by the defendant and Cua POco suggested by the plaintiff, as
commissioners, who submitted two reports, one prepared by commissioners Tantengco and Cua Poco, and the
other by commissioners Justo Cabo-Chan. The former stated in their report that they had examined the books
for the years 1919 to 1922, for the reason, they said, that they appeared "to have been prepared by some
person in a careful way at a certain time." The later commissioner examined all books and stated in his report
that the business had suffered a net loss amounting to the sum of P89,099.22.
After trial and the parties having introduced all their evidence, the lower court, by order of December 13, 1924,
disapproved the report of the commissioners Tantengco and Cua Poco, but approved, with slight modifications,
the report of commissioner Cabo-Chan, holding that the result of the liquidation showed liabilities to the
amiount of P89,690.45 in view of which plaintiff had nothing to recover from defendant, as there was no profit
to divide.
From this decision the plaintiff has appealed in due time and form making the following assignment of errors: (1)
The lower court erred in holding that the books were authentic, and in not holding that they were false books
exhibited by the defendant about alleged operations in the years 1918 et seq. which show enormous debts and
imaginary losses of the business; (2) the lower court erred in giving full credit to the testimony of commissioner
Justo Cabo-Chan; (3) the lower court erred in holding that the partnership had incurred debts and suffered
losses, as shown in the report of Justo Cabo-Cahn from 1918 on; (4) the lower court erred in not holding that the
share of the plaintiff, as his capital and profits until the end of 1917, is equivalent to the sum of twenty-seven
thousand seven hundred fifty-five pesos and forty-seven centavos (P27,755.47). Philippine currency, plus an
annual quota of at least two thousand five hundred three pesos and eighty-seven centavos (P2,503.87),
Philippime currency, as his portion of the profits since the beginning of 1918 until the delivery to the palintiff of
his share in the partnership; (5) the court below erred in not ordering the prosecuting attorney to commence an
investigation as to the falsified books of accounts that the defendant had exhibited for proper criminal
proceeding.
From the evidence it appears that the partnership capital was P4,779.39, and the net profits until the year 1915
amounted to P5,551.40. Because some books of account had been destroyed by white ants (anay), the
liquidation of the business of the partnership for the period from 1906 to 1912 could not be made. But knowing
the net profit for the period between 1904 and 1905, which is P5,551.40, and findng the average of the profits
for each of these years, which is P2,775.70; and knowing the net profit for the year 1913, which is P2,979, we can
find the average between the net profit for 1905, namely, P2,979. Said average is the sum of P2,877.35, which
may be considered as the average of the net annual profits for the period between 1906 an 1912, which in seven
years make a total of P20,141.45. The assets of the partnership, as well as the value of its property, could not be
determined when making the liquidation because there was no inventory and for this reason it was not possible
to determine the capital of the partnership. The plaintiff, however, seems to be agreeable to considering the
initial partnership capital as the capital at the time of the winding up of the business.
August 3, 1918, defendant assumed complete responsibility for the business by objecting to the appointment of
a receiver as prayed for by plaintiff, and giving a bond therefor. Until that date his acts were those of a managing
partner, binding against the partnership; but thereafter his acts were those of a receiver whose authority is
contained in section 175 of the Code of Civil Procedure.
A receiver has no right to carry on and conduct a business unless he is authorized or directed by the court to do
some, and such authority is not derived from an order of appointment to take and preserve the property (34
Cyc., 283; 23 R. C. L., 73). It does not appear that the defendant as a receiver was authorized by the court to
continue the business of the partnership in liquidation. This being so, he is personally liable for the losses that
the business amy have sustained. (34 Cyc., 296.) The partnership must not, therefore, be liable for the acts of the
defendant in connection with the management of the business until August 3, 1918, the date when he ceased to
be a member and manager in order to become receiver.
As to the first semester of 1918, during which time the defendant had seen managing the business of the
partnership as a member and manager, taking into account that the profits had been on the increase, said profits
having reached the amount of P10,174.69 in the year 1917, it would not be an exaggeration to estimate that the
profits for 1918 would have been at least the same as the profits of 1917; so that for the first half of 1918, the
profit would be P5,087.34.
In conclusion we have the following profits of the business of this partnership now in liquidation, to wit:
Capital of partnership........................... P4,779.39
Profits until 1905.................................. 5,551.40
Profits 1906-1912................................ 20,141.45
Profits 1913-1917................................ 25,038.70
Profits first semester 1918............... 5,087.34
Total....................................................... 60,598.28
One-half of this total, that is, P30,299.14 pertains to the plaintiff as administrator of the intestate estate of Go-
Lio.
In view of the foregoing, we are of the opinion that the case must be, as is hereby, decided by the reversing the
judgment appealed from, and sentencing the defendant to pay the plaintiff the sum of P30,299.14 with legal
interest at the rate of 6 per cent per annum from July 1, 1918, until fully paid, with costs. So ordered.