Escolar Documentos
Profissional Documentos
Cultura Documentos
* *
THIRD DIVISION.
GREGORIO F. ORTEGA, TOMAS O. DEL
530
CASTILLO, JR., and BENJAMIN T.
BACORRO, petitioners, vs. HON. COURT 530 SUPREME COURT REPORTS ANNOTAT
OF APPEALS, SECURITIES AND Ortega vs. Court of Appeals
EXCHANGE COMMISSION and JOAQUIN passing, neither would the presence of
L. MISA, respondents. a period for its specific duration or the
Commercial Law; Partnership; A statement of a particular purpose for its
partnership that does not fix its term is a creation prevent the dissolution of any
partnership at will.—A partnership that does partnership by an act or will of a partner.
not fix its term is a partnership at will. That Among partners, mutual agency arises and
the law firm “Bito, Misa & Lozada,” and now the doctrine of delectus personae allows
“Bito, Lozada, Ortega and Castillo,” is indeed them to have the power, although not
such a partnership need not be unduly necessarily the right, to dissolve the
belabored. We quote, with approval, like did partnership. An unjustified dissolution by the
the appellate court, the findings and partner can subject him to a possible action
disquisition of respondent SEC on this for damages.
matter. Same; Same; Upon its dissolution, the
Same; Same; The birth and life of a partnership continues and its legal
partnership at will is predicated on the mutual personality is retained until the complete
desire and consent of the partners.—The winding up of its business culminating in its
birth and life of a partnership at will is termination.—The dissolution of a
predicated on the mutual desire and consent partnership is the change in the relation of
of the partners. The right to choose with the parties caused by any partner ceasing to
whom a person wishes to associate himself be associated in the carrying on, as might be
is the very foundation and essence of that distinguished from the winding up of, the
partnership. Its continued existence is, in business. Upon its dissolution, the
turn, dependent on the constancy of that partnership continues and its legal
mutual resolve, along with each partner’s personality is retained until the complete
capability to give it, and the absence of a winding up of its business culminating in its
cause for dissolution provided by the law termination.
itself. Verily, any one of the partners may, at Same; Same; The liquidation of the
his sole pleasure, dictate a dissolution of the assets of the partnership following its
partnership at will. He must, however, act in dissolution is governed by various provisions
good faith, not that the attendance of bad of the Civil Code.—The liquidation of the
faith can prevent the dissolution of the assets of the partnership following its
partnership but that it can result in a liability dissolution is governed by various provisions
for damages. of the Civil Code; however, an agreement of
Same; Same; Neither would the the partners, like any other contract, is
presence of a period for its specific duration binding among them and normally takes
or the statement of a particular purpose for precedence to the extent applicable over the
its creation prevent the dissolution of any Code’s general provisions.
partnership by an act or will of a partner.—In Same; Same; It would not be right to let
_______________ any of the partners remain in the partnership
under such an atmosphere of animosity.— of the Securities and Exchange Commission
On the third and final issue, we accord due (“SEC”) in SEC AC 254.
respect to the appellate court and The antecedents of the controversy,
respondent Commission on their common summarized by respondent Commission and
factual finding, i.e., that Attorney Misa did not quoted at length by the appellate court in its
act in bad faith. Public respondents viewed decision, are hereunder restated.
his withdrawal to have been spurred by “The law firm of ROSS, LAWRENCE,
“interpersonal conflict” among the partners. It SELPH and CARRASCOSO was duly
would not be right, we agree, to let any of the registered in the Mercantile Registry on 4
partners remain in the partnership under January 1937 and reconstituted with the
such an atmosphere of animosity; certainly, Securities and Exchange Commission on 4
not against their will. Indeed, for as long as Au-gust 1948. The SEC records show that
the reason for withdrawal of a partner is not there were several subsequent amendments
contrary to the dictates of justice and to the articles of partnership on 18
fairness, nor for the purpose of unduly September 1958, to change the firm [name]
visiting harm and damage upon the to ROSS, SELPH and CARRASCOSO; on 6
partnership, bad faith cannot be said to July 1965 x x x to ROSS, SELPH,
characterize the act. Bad faith, in the context SALCEDO, DEL ROSARIO, BITO & MISA;
here used, is no different from its normal on 18 April 1972 to SALCEDO, DEL
concept of a conscious and intentional ROSARIO, BITO, MISA & LOZADA; on 4
design to do a wrongful act for a dishonest December 1972 to SALCEDO, DEL
purpose or moral obliquity. ROSARIO, BITO, MISA & LOZADA; on 11
March 1977 to DEL ROSARIO, BITO, MISA
PETITION for review on certiorari of a & LOZADA; on 7 June 1977 to BITO, MISA
decision of the Court of Appeals. & LOZADA; on 19 December 1980, [Joaquin
L. Misa] appellees Jesus B. Bito and Mariano
The facts are stated in the opinion of the M. Lozada associated themselves together,
Court. as senior partners with respondents-
531 appellees Gregorio F. Ortega, Tomas O. del
VOL. 245, JULY 3, 1995 531
Castillo, Jr., and Benjamin Bacorro, as junior
Ortega vs. Court of Appeals partners.
Bito, Lozada, Ortega & Castillo for “On February 17, 1988, petitioner-
petitioners. appellant wrote the respon-dents-appellees
Misa Law Offices for private a letter stating:
respondent. “ ‘I am withdrawing and retiring from the firm
Adrian Sison collaborating counsel for of Bito, Misa and Lozada, effective at the end
private respondent. of this month.
‘I trust that the accountants will be
VITUG, J.:
instructed to make the proper liquidation of
my participation in the firm.’
The instant petition seeks a review of the
decision rendered by the Court of Appeals, “On the same day, petitioner-appellant
dated 26 February 1993, in CA-G.R. SP No. wrote respondents-appellees another letter
24638 and No. 24648 affirming in toto that stating:
“Further to my letter to you today, I would like use of his right in the assets of the
to have a meeting with all of you with regard dissolved partnership;
to the mechanics of liquidation, and more 3. ‘3.Enjoin respondents from using the
particularly, my interest in the two floors of firm name of Bito, Misa & Lozada in
this any of their correspondence, checks
and pleadings and to pay petitioners
532
damages for the use thereof despite
532 SUPREME COURT REPORTS ANNOTATED
the dissolution of the partnership in
Ortega vs. Court of Appeals
the amount of at least P50,000.00;
building. I would like to have this resolved 4. ‘4.Order respondents jointly and
because it has to do with my own plans.’ severally to pay petitioner attorney’s
“On 19 February 1988, petitioner- fees and expense of litigation in
appellant wrote respondents-appellees such amounts as maybe proven
another letter stating: during the trial and which the
“ ‘The partnership has ceased to be mutually Commission may deem just and
satisfactory because of the working equitable under the premises but
conditions of our employees including the in no case less than ten (10%) per
assistant attorneys. All my efforts to cent of the value of the shares of
ameliorate the below subsistence level of the petitioner or P100,000.00;
pay scale of our employees have been 5. ‘5.Order the respondents to pay
thwarted by the other partners. Not only have petitioner moral damages with the
they refused to give meaningful increases to amount of P500,000.00 and
the employees, even attorneys, are dressed exemplary damages in the amount
down publicly in a loud voice in a manner that of P200,000.00.
deprived them of their self-respect. The
result of such policies is the formation of the ‘Petitioner likewise prayed for such other
union, including the assistant attorneys.’ and further reliefs that the Commission may
deem just and equitable under the premises.’
“On 30 June 1988, petitioner filed with this
Commission’s Securities Investigation and 533
Clearing Department (SICD) a petition for VOL. 245, JULY 3, 1995 5
dissolution and liquidation of partnership, Ortega vs. Court of Appeals
docketed as SEC Case No. 3384 praying “On 13 July 1988, respondents-appellees
that the Commission: filed their opposition to the petition.
“On 13 July 1988, petitioner filed his
1. “‘1.Decree the formal dissolution and Reply to the Opposition.
order the immediate liquidation of “On 31 March 1989, the hearing officer
(the partnership of) Bito, Misa & rendered a decision ruling that:
Lozada; “ ‘[P]etitioner’s withdrawal from the law
2. ‘2.Order the respondents to deliver or firm Bito, Misa & Lozada did not dissolve the
pay for petitioner’s share in the said law partnership. Accordingly, the
partnership assets plus the profits, petitioner and respondents are hereby
rent or interest attributable to the enjoined to abide by the provisions of the
Agreement relative to the matter governing
the liquidation of the shares of any retiring or
withdrawing partner in the partnership During the pendency of the case with the
interest.’ ”1 Court of Appeals, Attorney Jesus Bito and
Attorney Mariano Lozada both died on,
On appeal, the SEC en banc reversed the
respectively, 05 September 1991 and 21
decision of the Hearing Officer and held that
December 1991. The death of the two
the withdrawal of Attorney Joaquin L. Misa
partners, as well as the admission of new
had dissolved the partnership of “Bito, Misa
partners, in the law firm prompted Attorney
& Lozada.” The Commission ruled that,
Misa to renew his application for receivership
being a partnership at will, the law firm could
(in CA-G.R. SP No. 24648). He expressed
be dissolved by any partner at anytime, such
concern over the need to preserve and care
as by his withdrawal therefrom, regardless of
for the partnership assets. The other
good faith or bad faith, since no partner can
partners opposed the prayer.
be forced to continue in the partnership
The Court of Appeals,
against his will. In its decision, dated 17
finding no reversible error on the part of
January 1990, the SEC held:
respondent Commission, AFFIRMED in
“WHEREFORE, premises considered the
toto the SEC decision and order appealed
appealed order of 31 March 1989 is hereby
from. In fine, the appellate court held, per its
REVERSED insofar as it concludes that the
decision of 26 February 1993, (a) that Atty.
partnership of Bito, Misa & Lozada has not
Misa’s withdrawal from the partnership had
been dissolved. The case is hereby
changed the relation of the parties and
REMANDED to the Hearing Officer for
inevitably caused the dissolution of the
determination of the respective rights and
partnership; (b) that such withdrawal was not
obligations of the parties.”2
in bad faith; (c) that the liquidation should be
The parties sought a reconsideration of the to the extent of Attorney Misa’s interest or
above decision. Attorney Misa, in addition, participation in the partnership which could
asked for an appointment of a receiver to be computed and paid in the manner
take over the assets of the dissolved stipulated in the partnership agreement; (d)
partnership and to take charge of the winding that the case should be remanded to the
up of its affairs. On 04 April 1991, respondent SEC Hearing Officer for the corresponding
SEC issued an order denying determination of the value of Attorney Misa’s
reconsideration, as well as rejecting the share in the partnership assets; and (e) that
petition for receivership, and reiterating the the appointment of a receiver was
remand of the case to the Hearing Officer. unnecessary as nosufficient proof had been
The parties filed with the appellate court shown to indicate that the partnership assets
separate appeals (docketed CA-G.R. were in any such danger of being lost,
SP No. 24638 and CA-G.R. SP No. 24648). removed or materially impaired.
_______________ In this petition for review under Rule 45 of
the Rules of Court, petitioners confine
1
Rollo, pp. 53-56. themselves to the following issues:
2
Rollo, p. 122.
1. 1.Whether or not the Court of
534
Appeals has erred in holding that
534 SUPREME COURT REPORTS ANNOTATED
the partnership of Bito, Misa &
Ortega vs. Court of Appeals
Lozada (now Bito, Lozada, Ortega & “‘2. Purpose. The purpose for which the
Castillo) is a partnership at will; partnership is formed, is to act as legal
2. 2.Whether or not the Court of adviser and representative of any individual,
Appeals has erred in holding that firm and corporation engaged in commercial,
the withdrawal of private respondent industrial or other lawful businesses and
dissolved the partnership occupations; to counsel and advise such
regardless of his good or bad faith; persons and entities with respect to their
and legal and other affairs; and to appear for and
3. 3.Whether or not the Court of represent their principals and client in all
Appeals has erred in holding that courts of justice and government
private respondent’s demand for the departments and offices in the Philippines,
dissolution of the partnership so that and elsewhere when legally authorized to do
he can get a physical partition of so.’
partnership was not made in bad
“The ‘purpose’ of the partnership is not
faith;
the specific undertaking referred to in the
law. Otherwise, all partnerships, which
to which matters we shall, accordingly,
necessarily must have a purpose, would all
likewise limit ourselves.
be considered as partnerships for a definite
A partnership that does not fix its term is
undertaking. There would therefore
a partnership at will. That the law firm “Bito,
be no need to provide for articles on
Misa & Lozada,” and now “Bito, Lozada,
partnership at will as none would so exist.
535
Apparently what the law contemplates, is a
VOL. 245, JULY 3, 1995 535
specific undertaking or ‘project’ which has a
Ortega vs. Court of Appeals
definite or definable period of completion.”3
Ortega and Castillo,” is indeed such a
partnership need not be unduly belabored. The birth and life of a partnership at will is
We quote, with approval, like did the predicated on the mutual desire and consent
appellate court, the findings and disquisition of the partners. The right to choose with
of respondent SEC on this matter; viz: whom a person wishes to associate himself
“The partnership agreement (amended is the very foundation and essence of that
articles of 19 August 1948) does not provide partnership. Its continued existence is, in
for a specified period or undertaking. The turn, dependent on the constancy of that
‘DURATION’ clause simply states: mutual resolve, along with each partner’s
“ ‘5. DURATION. The partnership shall capability to give it, and the
continue so long as mutually satisfactory and _______________
upon the death or legal incapacity of one of
3
the partners, shall be continued by the Rollo, pp. 119-120.
surviving partners.’
536
“The hearing officer however opined that 536 SUPREME COURT REPORTS ANNOTATED
the partnership is one for a specific Ortega vs. Court of Appeals
undertaking and hence not a partnership at absence of a cause for dissolution provided
will, citing paragraph 2 of the Amended by the law itself. Verily, any one of the
Articles of Partnership (19 August 1948): partners may, at his sole pleasure, dictate a
dissolution of the partnership at will. He must,
however, act in good faith, not that the against his co-partners and all persons
attendance of bad faith can prevent the claiming through them in respect of their
dissolution of the partnership4 but that it can interests in the partnership, unless otherwise
result in a liability for damages.5 agreed, may have the partnership property
In passing, neither would the presence of applied to discharge its liabilities, and the
a period for its specific duration or the surplus applied to pay in cash the net amount
statement of a particular purpose for its owning to the respective partners. But if
creation prevent the dissolution of any dissolution is caused by expulsion of a
partnership by an act or will of a partner, bona fide under the partnership
partner.6 Among partners,7 mutual agency agreement and if the expelled partner is
arises and the doctrine of delectus discharged from all
personae allows them to have the power,
537
although not necessarily the right, to dissolve
VOL. 245, JULY 3, 1995 5
the partnership. An unjustified dissolution by
Ortega vs. Court of Appeals
the partner can subject him to a possible
action for damages. however, an agreement of the partners, like
The dissolution of a partnership is the any other contract, is binding among them
change in the relation of the parties caused and normally takes precedence to the extent
by any partner ceasing to be associated in applicable over the Code’s general
the carrying on, as might be distinguished provisions. We here take note of paragraph
from the winding up of, the business.8 Upon 8 of the “Amendment to Articles of
its dissolution, the partnership continues and Partnership” reading thusly:
its legal personality is retained until the “x x x In the event of the death or retirement
complete winding up of its business of any partner, his interest in the partnership
culminating in its termination.9 shall be liquidated and paid in accordance
The liquidation of the assets of the with the existing agreements and his
partnership following its dissolution is partnership participation shall revert to the
governed by various provisions of the Civil Senior Partners for allocation as the Senior
Code;10 Partners may determine; provided, however,
_______________ that with respect to the two (2) floors of office
condominium which the partnership is now
4
Art. 1830(1) (b), Civil Code. acquiring, consisting of the 5th and the 6th
5
See Art. 19, Civil Code. floors of the Alpap Building, 140 Alfaro
6
Art. 1830(2), Civil Code; see also Rojas Street, Salcedo Village, Makati, Metro
vs. Maglana, 192 SCRA 110. Manila, their true value at the time of such
7
As general, as distinguished from death or retirement shall be determined by
limited partners. two (2) independent appraisers, one to be
8
Art. 1828, Civil Code. appointed (by the partnership and the other
9
Art. 1829, Civil Code. by the) retiring partner or the heirs of a
10
For instance, Art. 1837 of the Civil deceased partner, as the case may be. In the
Code provides: event of any disagreement between the said
“ART. 1837. When dissolution is caused in appraisers a third appraiser will be appointed
any way, except in contravention of the by them whose decision shall be final. The
partnership agreement, each partner, as share of the retiring or deceased partner in
the aforementioned two (2) floor office
condominium shall be determined upon the design to do a wrongful act for a dishonest
basis of the valuation above mentioned purpose or moral obliquity.
which shall be paid monthly within the first WHEREFORE, the decision appealed
ten (10) days of every month in installments from is AFFIRMED. No pronouncement on
of not less than P20,000.00 for the Senior costs.
Partners, P10,000.00 in the case of two (2) SO ORDERED.
existing Junior Partners and P5,000.00 in the Feliciano (Chairman), Romero, Mel
case of the new Junior Partner.”11 o and Francisco, JJ., concur.
538
538 SUPREME COURT REPORTS ANNOTATED
People vs. De Leon
ship under such an atmosphere of animosity; TORRES, J.:
certainly, not against their will.12 Indeed, for
On December 5, 1913, Teodoro de los
as long as the reason for withdrawal of a
Reyes brought suit in the Court of First
partner is not contrary to the dictates of
Instance of this city against Vicente Lukban
justice and fairness, nor for the purpose of
and Esperidion Borja, to recover from them
unduly visiting harm and damage upon the
individually the sum of P853, the balance of
partnership, bad faith cannot be said to
a debt of P1,086.65 owing for merchandise
characterize the act. Bad faith, in the context
bought on credit in October and November,
here used, is no different from its normal
1904, by the firm Lukban & Borja, from the
concept of a conscious and intentional
plaintiff's ship supply store, named La
Industria.
In case No. 3759, prosecuted in the said had not been exhausted (by attachment),
court by the creditor Reyes against the said wherefore the present action is premature;
firm of Lukban & Borja, the latter was ordered and (5) that the plaintiff Reyes' action, as
by a final judgment of October 19, 1905, to regards this defendant Lukban, has
pay the said sum of P1,086.65, together with prescribed.
the interest thereon, amounting to a total of
P1,102.95, in addition to the costs, P46.24. At the trial of the case the parties made the
following stipulation:
One of the partner, Esperidion Borja, paid
P522.69 on account of the 1. That on July 15, 1905, the herein
debt.lawphi1.net There still remains to be plaintiff Teodoro de los Reyes
paid P610.21, and this sum, together with the brought suit against the firm of
costs and legal interest thereon from July 14, Lukban & Borja to recover the sum of
1905, to the date of the complaint, December P1,086.65 owing for merchandise
5, 1913, aggregates the total sum of bought on credit in the months of
P894.17. The plaintiff prayed the court to October and November, 1904, from
order the defendants jointly or severally to the ship supply store known by the
pay him, the plaintiff, this last mentioned name of La Industria. The said suit
amount, together with the legal interest was heard before the Honorable
thereon from the date of the complaint, and John C. Sweeney, on October 19,
the costs. 1905, on which date the said judge
sentenced the defendant firm to pay
After due summons the defendants the sum of P1,086.65, Philippine
appeared, and one of them, Esperidion currency, with legal interest thereon
Borja, in answer to the complaint entered a from July 14, 1905, to the date of the
general and specific denial of each and all of judgment, amounting to P16.30,
the allegations therein contained, and, as a Philippine currency, and costs
special defense, alleged that it was res amounting to P46.24. It does not
judicata and that the plaintiff's action, if it appear that this obligation was set
existed, had already prescribed. forth in writing. All the preceding has
been taken from the record of that
The other defendant, Vicente Lukban, in his court in case No. 3759, De los Reyes
amended answer set forth (1) that he denied vs, Lukban & Borja.
generally and specifically each and all of the
facts alleged in each and all of the 2. On August 19, 1913, the same
paragraphs of the complaint; (2) that the plaintiff Teodoro de los Reyes
issues raised by the complaint had already brought suit against Lukban & Borja
been decided in case No. 10908, in which the to recover the sum of P853, alleging
firm of Lukban & Borja was acquitted, without for this purpose that the defendant
costs; (3) that the defendant Lukban was Espiridion Borja paid P522.69 on
merely an industrial partner in the firm of account of the sum of P1,086.65
Lukban & Borja, Espiridion Borja being the allowed in the judgment referred to in
partner thereof who furnished the capital; (4) the preceding paragraph, there
that the assets of the firm of Lukban & Borja remaining unpaid P610.21 of the
principal debt, to which is added the After hearing the evidence, the court
legal interest thereon from January 1, rendered judgment on November 25, 1914,
1906, to the date of the sentencing the defendants Vicente Lukban
commencement of the said suit, thus and Espiridion Borja jointly and severally to
forming the total sum above stated of pay to the plaintiff Teodoro de los Reyes the
P853. After hearing the case, the sum of P610.20, together with the legal
Honorable Judge Del Rosario, on interest thereon from December 17, 1913,
November 20, 1913, rendered and the costs. To this judgment Lukban
judgment absolving the firm of excepted, announced his intention to file the
Lukban & Borja from the complaint proper bill of exceptions and moved for a new
without special finding as to costs. All trial on the grounds that the evidence did not
the facts related in this paragraph justify the decision and that the latter was
appear in case No. 10908 of this contrary to law. By an order of December 10,
court. the motion for a new trial was overruled and
an exception was entered by this defendant-
3. That several years ago and seven appellant. The other defendant, Espiridion
months after its organization, or, Borja, made no exception to the said ruling
more specifically, on April 13, 1909, so the judgment became final with respect to
the firm of Lukban & Borja was him.
lawfully dissolved, as stated by Borja;
and that the five years from the 13th The subject matter of this suit is an
of the same month of the year 1904, acknowledged debt held to be owing by a
stipulated for its duration had judicial pronouncement contained in a
elapsed. (Judgment in case No. judgment rendered in case No. 3759,
10908.) The articles of incorporation prosecuted by the creditor Teodor de los
of the firm of Lukban & Borja are Reyes against the general partnership of
found in the attached document, Lukban & Borja, which was sentenced to pay
which, for its identification, is marked the said debt. The creditor was unable to
as Exhibit A of this agreement. collect it in its entirety but recovered only a
part thereof, to wit, P522.69, which was paid
4. That the assets of the firm of by the partner Borja. In order to demonstrate
Lukban & Borja had not been the propriety of the judgment appealed from,
exhausted (by attachment) for the rendered against the parties who were the
reason that the plaintiff did not know partners of the said firm, we shall confine
what property belonged to it. ourselves in this decision to the four errors
assigned to the said judgment by the
5. Vicente Lukban and Espiridion defendant Lukban, inasmuch as the other
Borja, notwithstanding that they defendant Borja acquiesced in the said
alleged themselves to be copartners judgment and the same became final as to
of the firm of Lukban & Borja, were him. These error are the following:
not sued by the herein plaintiff in
cases Nos. 3759 and 10908, but that 1. In not holding that the action
plaintiff sued the firm of Lukban & brought against this defendant is
Borja, represented by Borja. improper, inasmuch as prior to its
prosecution no attachment was los Reyes the aforementioned sum of
levied on the assets of the said P522.69, on account of the firm's debt to
partnership. Teodoro de los Reyes, a debt which was
recognized in the said judgment of October
2. In not holding that the action 19, 1905. The attachment, or recourse to the
brought against this appellee property, the lack of which proceeding was
[defendant] has not been proven. complained of, is a proceeding that was
resorted to when attempt was made to
3. In not holding that the present is execute the final judgment rendered against
not a true case of res judicata. the partnership of Lukban & Borja, which
proceeding gave negative results; therefore,
4. In not holding that the appellee's if the requirement of article 237 of the Code
action has prescribed in so far as it of Commerce must be complied with by the
concerns this appellant. creditor it is evident that it has already been
done for the defendant Lukban was unable
With respect to the first assignment of error, to show that the partnership to which he
the contents of the writ and the return of the belonged actually possessed any more
execution of the final judgment rendered in assets.
the said case No. 3759 show that the
dissolved partnership of Lukban & Borja had With respect to the second assignment of
absolutely no property whatever of its own. error, if Teodoro de los Reyes is entitled to
Had any property whatever of the said collect individually from the partners Lukban
partnership still remained, the defendant and Borja the amount of the debt that the
Lukban would have pointed it out inorder to dissolved partnership owed at the time of its
avoid being obliged to pay in solidum all the dissolution, it is unquestionable that such a
balance of the sum which the firm was right has given rise to the corresponding right
sentenced to pay by the said final judgment of action to demand the payment of the debt
of October 19, 1905. He did not do so from the partners individually, or from each
because the firm of Lukban & Borja no longer of them, by the insolvency of the partnership,
had any kind of property or credits, as shown inasmuch as they are personally and
by the document setting forth the agreement severally liable with all their property for the
made by and between several creditors of results of the operations of the partnership
the said firm, a third party named Ramon which they conducted.
Tinsay and the former partner of the firm,
Espiridion Borja, in which document it Article 127 of the Code of Commerce
appears that the firm Lukban & Borja owed provides:
four creditors, among them the plaintiff De
los Reyes, the total sum of P10,165.01 and All the member of the general
these creditors with some difficulty copartnership, be they or be they not
succeeded in collecting the sum of P5,000 managing partners of the same, are
through a transaction with the said Ramon personally and severally liable with all
Tinsay who paid this last amount for the their property for the results of the
account of the partner Espiridion Borja. It transactions made in the name and
appears that the latter paid to the creditor De for the account of the partnership,
under the signature of the latter, and section 307 of the Code of Civil Procedure,
by a person authorized to make use the former judgment can not be set up as res
thereof. judicata in the present action.
With regard to the third assignment of error. As regards the last assignment of error,
Although the action brought in case No. alleging prescription of action, suffice it to say
10908 by the creditor Teodoro de los Reyes that from October 19, 1905, to December 5,
against the partnership Lukban & Borja be 1913, even without counting the interruption
not different from that brought in the present caused by the action brought on August 18th
case No. 11296, and although it be deemed of this latter year, the ten year period fixed by
to have arisen out of the right of the plaintiff- section 43 of the Code of Civil Procedure has
creditor to collect his credit, yet the first time not elapsed. In view of the negative results of
it was brought against the partnership. The the proceedings had by the sheriff in levying
action against Vicente Lukban and Espiridion execution of the final judgment rendered
Borja individually ca not be demurred to on against the partnership of Lukban & Borja,
the ground of res judicata by the judgment of the creditor in the exercise of his rights has
acquittal entered in case No. 10908. brought the proper action against those who
were the members of that firm for the
Article 1252 of the Civil Code provides: recovery of the unpaid balance of his credit,
and he filed his complaint within the period
In order that the presumption of the fixed by the law of procedure and the
res judicata may be valid in another defendants cannot allege that it is now res
suit, it is necessary that, between the judicata.
case decided by the sentence and
that in which the name is invoked, For the foregoing reasons the judgment
there must be the most perfect appealed from is affirmed with the costs of
identity between the things causes, this instance against the appellant. So
and persons of the litigants, and their ordered.
capacity as such.
Johnson, Carson, Trent and Araullo, JJ.,
There may be perfect identity between the concur.
cause of action and the things demanded in
case no. 10908, wherein the said partnership
was absolved from the complaint, and in the
present case No. 11296; it is, however,
undeniable that the parties defendant are not Separate Opinions
the same nor is their capacity as such. In the
first case it was the partnership that was
sued, while in the present case it is Lukban
and Borja individually, as former members of
that dissolved partnership, who are sued MORELAND, J., dissenting:
jointly and severally. Therefore, pursuant to
the above-cited article of the Civil Code, the This action was begun against Vicente
provisions of which harmonize with those of Lukban and Espiridion Borja personally to
recover the sum of P853, the balance due on 3d. That the partnership of Lukban
a judgment obtained against the partnership and Borja was dissolved by operation
known as "Lukban & Borja." The facts of law about five years ago, that is to
preceding the beginning of this action are say, about the 13th of April, 1909, on
stated in a stipulation between the parties as which date the five years stipulated in
follows: the contract of partnerships the
duration of the same expired, said
1st. That on the 15th of July, 1905, partnership having been formed on
the plaintiff, Teodoro de los Reyes, the 13th of April, 1904. . . .
sued the firm of Lukban and Borja, a
copartnership, for the recovery of 4th That the plaintiff made no attempt
P1,086.65, the purchase price of to collect the said judgment of
article sold to the said partnership P1,086.65, or any part thereof, from
during the months of October and the partnership property for the
November, 1904. The action was reason that he did not know of the
tried before the Hon. John C. existence of any such property.
Sweeney who, on October 19, 1905,
found in favor of the plaintiff for 5th. That Vicente Lukban and
P1,086.65, Philippine currency, with Espiridion Borja, although they were
interest from the 14th of July, 1905, members of the firm of Lukban and
to the date of the judgment, Borja, were not made parties to the
amounting to P16.30, and costs, actions in which the judgments above
amounting to P46.24. . . . referred to were obtained, but in each
of said actions the partnership of
2d. That on the 19th of August, 1913, Lukban and Borja was the sole
the said plaintiff, Tedoro de los defendant.
Reyes, began an action against the
said partnership, Lukban and Borja, The trial court found in favor of the plaintiff
to recover the sum of P853, alleging and entered judgment against the
that the defendant Espiridion Borja defendants Vicente Lukban and Espiridion
paid on the above-mentioned Borja jointly and severally for the sum of
judgment the sum of P522.69, P610.20, with interest from the 17th day of
leaving a balance due thereon of December, 1913. From that judgment this
P610.21, with interest from the 1st of appeal was taken.
January, 1906, to the date of filing the
complaint, principal and interest We have these facts before us:
amounting to P853, already
mentioned. On the trial of the case The partnership of Lukban and Borja was
the Hon. Judge Del Rosario in the formed on the 13th of April, 1904, to run for
month of November, 1913, entered a a period of five years. On the 19th of
judgment dismissing the complaint October, 1905, the plaintiff obtained a
on the merits against the said judgment against the said partnership for the
partnership of Lukban and Borja sum of P1,086.65. Later the partnership paid
without costs. on said judgment the sum of P522.69, a
balance of P610.21. On the 19th of August, better or higher; and an action for that
1913, and after the lapse of more than five purpose is useless. It would seem to be but
years from the date of the judgment and natural that the law not permit the courts to
without execution having been issued be moved and parties perturbed and cause
thereon, the plaintiff began the action for the loss of time and money for the sole purpose
recovery of the balance due on said of obtaining a thing not one with better than
judgment. The complaint in that action was that which the courts have already given him
dismissed on the ground that, on the date on and cannot be of the slightest legal value to
which the action was brought, the him. When courts have given a party the very
partnership had ceased to exist, the five highest thing of which they are capable their
years term having expired, and that no action powers cannot be again exercised in that
could be brought against it. Later the present particular regard. They exhausted. Why
action was commenced against the should a party who has one judgment which
members of the partnership personally for is completely enforceable be permitted to
the recovery of the balance due on said have another on top of it no more
judgment. It is admitted that no attempt has enforceable?
been made by the plaintiff to collect the
original judgment out of the partnership An action on a judgment as a debt,
property. obligation, or contract being unknown to the
Civil Code or the Spanish law generally, it is
The first question which arises is: Can an a necessary result that , if any right of action
action be maintained against the partnership, on a judgment exists in this jurisdiction, it
or against any or all of the members thereof, must have been conferred by a statute
on the old judgment for the purpose of passed since the American occupation. The
obtaining another judgment of precisely only legislation on that subject is found, as
similar character? We think not. The only we have stated, in section 447 of the Code of
action on a judgment authorized either by the Civil Procedure, which permits an action to
Civil Code or by the Code of Civil Procedure be brought, not on the judgment as a debt or
is one for the enforcement of the judgment for the purpose of securing a new judgment
(section 447, Code of Civil Procedure). 1 A of precisely similar character to the old one,
judgment is not recognized by the Civil Code, but to enforce the old judgment after the
or by the Code of Civil Procedure or any explanation of the time during which an
other law called to our attention, as a contract execution may be issued. In other words, the
either express or implied, or as a quasi action authorized by section 447 is not
contract, or as a debt, or any other kind of to obtain a new judgment but to enforce the
obligation which can be made the basis of an old; and the judgment secured in such an
action to obtain another judgment of action is not for a sum of money, but it is
precisely the same nature. In some cases it simply an order directing the execution of the
is regarded more in the nature of an order for old judgment. It simply takes the place of the
the specific performance of the contract on execution which, five years having elapsed,
which the action is founded; and in every is not issuable. In a word, it is another means
case it is considered the highest form which of obtaining an execution. 2
men's relations can take under the law and
no action based thereon can make it any
We are of the opinion, therefore, that the the old judgment against them? Under the
second action against the partnership to law and procedure existing in this jurisdiction
procure a new judgment for the amount prior to American occupation, a new
remaining due on the old judgment was not judgment against the members of the firm
maintainable and was property dismissed by personally under circumstances such as
the court; and, while the dismissal was based appear in this case was not permitted. The
on an untenable ground, it was, first step required of a plaintiff who had a
nevertheless, correct. No appeal was taken judgment against a partnership of the
from that judgment, and it is now, of course, character described in this action was to
final and was when this action was execute the judgment as far as possible
commenced. against the property of the partnership; and,
after was exhausted, to proceed, by
The second question which arises is: Can an execution, against the property of the
action to recover a judgment on a judgment individual members under the same
be maintained against the members of a judgment. It was not necessary, nor was it
partnership personally if it cannot be permitted, to bring a new action against the
maintained against the partnership itself? As members of the firm personally on the old
we have already said, the present action is judgment and obtain a new judgment against
directed against the members of the them. That procedure has not been changed
partnership personally and is to recover a by any legislation since American occupation
joint and several judgment against them and that is the practice to-day.
upon the old judgment against the
partnership. As a necessary result the plaintiff is not
entitled to a judgment in this action.
It is clear that our reasoning in connection
with the first question is correct, then this We do not stop to discuss the question
action cannot be maintained. If there is no presented by the appellant as to whether the
authority of law for bringing an action on a exhaustion of the property of the partnership
judgment to secure a new judgment, then is a necessary prerequisite to the bringing of
this action cannot be maintained any more this action. That question is not involved,
than the action against the partnership under inasmuch as it cannot be reached until has
similar circumstances. There is no law giving been determined whether such as an action
a right of action on a judgment in favor of or can be maintained. If the action cannot be
against anybody, except that conferred by maintained under any theory, then it is
section 447 above quoted; and that, as we unnecessary to determine the validity of the
have seen, is simply a right to enforce the old defenses to that action, one of which is,
judgment. appellant claims, that the plaintiff has not
exhausted his remedy against the
The third question which presents itself is: partnership property.
Even admitting the right of the plaintiff to
maintain an action on the old judgment, is the Nor do we find it necessary to consider at this
remedy of the plaintiff a new judgment time whether or not the judgment in the
against the members of the partnership second action against the plaintiff and in
personally or it is the execution of favor of the partnership is res adjudicata in
the present action. For the same reason we Petitioner Elmo Muñasque filed a complaint
find it unnecessary to decide whether the for payment of sum of money and damages
action has prescribed under the provisions of against respondents Celestino Galan,
the Code of Civil Procedure. Tropical Commercial, Co., Inc. (Tropical) and
Ramon Pons, alleging that the petitioner
The judgment appealed from should be entered into a contract with respondent
reversed and the cause dismissed on the Tropical through its Cebu Branch Manager
merits, without costs in this instance. Pons for remodelling a portion of its building
without exchanging or expecting any
G.R. No. L-39780 November 11, 1985 consideration from Galan although the latter
was casually named as partner in the
ELMO MUÑASQUE, petitioner, contract; that by virtue of his having
vs. introduced the petitioner to the employing
COURT OF APPEALS,CELESTINO company (Tropical). Galan would receive
GALAN TROPICAL COMMERCIAL some kind of compensation in the form of
COMPANY and RAMON some percentages or commission; that
PONS, respondents. Tropical, under the terms of the contract,
agreed to give petitioner the amount of
John T. Borromeo for petitioner. P7,000.00 soon after the construction began
and thereafter, the amount of P6,000.00
Juan D. Astete for respondent C. Galan. every fifteen (15) days during the
construction to make a total sum of
Paul Gornes for respondent R. Pons. P25,000.00; that on January 9, 1967,
Tropical and/or Pons delivered a check for
Viu Montecillo for respondent Tropical. P7,000.00 not to the plaintiff but to a stranger
to the contract, Galan, who succeeded in
Paterno P. Natinga for Intervenor Blue getting petitioner's indorsement on the same
Diamond Glass Palace. 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
GUTTIERREZ, JR., J.:
indorse said cheek presented to him by
Galan but through later manipulations,
In this petition for certiorari, the petitioner
respondent Pons succeeded in changing the
seeks to annul and set added the decision of
payee's name from Elmo Muñasque to Galan
the Court of Appeals affirming the existence
and Associates, thus enabling Galan to cash
of a partnership between petitioner and one
the same at the Cebu Branch of the
of the respondents, Celestino Galan and
Philippine Commercial and Industrial Bank
holding both of them liable to the two
(PCIB) placing the petitioner in great
intervenors which extended credit to their
financial difficulty in his construction
partnership. The petitioner wants to be
business and subjecting him to demands of
excluded from the liabilities of the
creditors to pay' for construction materials,
partnership.
the payment of which should have been
made from the P13,000.00 received by
Galan; that petitioner undertook the Galan to pay jointly and
construction at his own expense completing severally the intervenors
it prior to the March 16, 1967 deadline;that Cebu and Southern Hardware
because of the unauthorized disbursement Company and Blue Diamond
by respondents Tropical and Pons of the sum Glass Palace the amount of
of P13,000.00 to Galan petitioner demanded P6,229.34 and P2,213.51,
that said amount be paid to him by respectively;
respondents under the terms of the written
contract between the petitioner and (2) absolving the defendants
respondent company. Tropical Commercial
Company and Ramon Pons
The respondents answered the complaint by from any liability,
denying some and admitting some of the
material averments and setting up No damages awarded
counterclaims. whatsoever.
During the pre-trial conference, the The petitioner and intervenor Cebu Southern
petitioners and respondents agreed that the Company and its proprietor, Tan Siu filed
issues to be resolved are: motions for reconsideration.
(1) Whether or not there On January 15, 197 1, the trial court issued
existed a partners between 'another order amending its judgment to
Celestino Galan and Elmo make it read as follows:
Muñasque; and
IN VIEW WHEREOF,
(2) Whether or not there Judgment is hereby rendered:
existed a justifiable cause on
the part of respondent (1) ordering plaintiff
Tropical to disburse money to Muñasque and defendant
respondent Galan. Galan to pay jointly and
severally the intervenors
The business firms Cebu Southern Cebu Southern Hardware
Hardware Company and Blue Diamond Company and Blue Diamond
Glass Palace were allowed to intervene, both Glass Palace the amount of
having legal interest in the matter in litigation. P6,229.34 and P2,213.51,
respectively,
After trial, the court rendered judgment, the
dispositive portion of which states: (2) ordering plaintiff and
defendant Galan to pay
IN VIEW WHEREOF, Intervenor Cebu Southern
Judgment is hereby rendered: Hardware Company and Tan
Siu jointly and severally
(1) ordering plaintiff interest at 12% per annum of
Muñasque and defendant
the sum of P6,229.34 until the Pesos (P6,000.00) every fifteen (15) working
amount is fully paid; days.
In the case at bar the respondent Tropical ROSARIO U. YULO, assisted by her
had every reason to believe that a husband JOSE C. YULO, plaintiffs-
partnership existed between the petitioner appellants,
and Galan and no fault or error can be vs.
imputed against it for making payments to YANG CHIAO SENG, defendant-appellee.
"Galan and Associates" and delivering the
Punzalan, Yabut, Eusebio & Tiburcio for
same to Galan because as far as it was
appellants.
concerned, Galan was a true partner with
Augusto Francisco and Julian T. Ocampo for
real authority to transact on behalf of the
appellee.
partnership with which it was dealing. This is
even more true in the cases of Cebu LABRADOR, J.:
Southern Hardware and Blue Diamond
Glass Palace who supplied materials on Appeal from the judgment of the Court of First
credit to the partnership. Thus, it is but fair Instance of Manila, Hon. Bienvenido A. Tan,
that the consequences of any wrongful act presiding, dismissing plaintiff's complaint as
committed by any of the partners therein well as defendant's counterclaim. The appeal
should be answered solidarily by all the is prosecuted by plaintiff.
partners and the partnership as a whole
The record discloses that on June 17, 1945,
However. as between the partners defendant Yang Chiao Seng wrote a letter to
Muñasque and Galan,justice also dictates the palintiff Mrs. Rosario U. Yulo, proposing the
that Muñasque be reimbursed by Galan for formation of a partnership between them to run
the payments made by the former and operate a theatre on the premises
representing the liability of their partnership occupied by former Cine Oro at Plaza Sta.
to herein intervenors, as it was satisfactorily Cruz, Manila. The principal conditions of the
offer are (1) that Yang Chiao Seng guarantees
Mrs. Yulo a monthly participation of P3,000
payable quarterly in advance within the first 15 period of three years beginning January 1,
days of each quarter, (2) that the partnership 1948 to December 31, 1950. The benefits are
shall be for a period of two years and six to be divided between them at the rate of 50-
months, starting from July 1, 1945 to 50 and after December 31, 1950, the
December 31, 1947, with the condition that if showhouse building shall belong exclusively to
the land is expropriated or rendered the second party, Mrs. Yulo.
impracticable for the business, or if the owner
constructs a permanent building thereon, or The land on which the theatre was constructed
Mrs. Yulo's right of lease is terminated by the was leased by plaintiff Mrs. Yulo from Emilia
owner, then the partnership shall be terminated Carrion Santa Marina and Maria Carrion Santa
even if the period for which the partnership was Marina. In the contract of lease it was stipulated
agreed to be established has not yet expired; that the lease shall continue for an indefinite
(3) that Mrs. Yulo is authorized personally to period of time, but that after one year the lease
conduct such business in the lobby of the may be cancelled by either party by written
building as is ordinarily carried on in lobbies of notice to the other party at least 90 days before
theatres in operation, provided the said the date of cancellation. The last contract was
business may not obstruct the free ingress and executed between the owners and Mrs. Yulo
agrees of patrons of the theatre; (4) that after on April 5, 1948. But on April 12, 1949, the
December 31, 1947, all improvements placed attorney for the owners notified Mrs. Yulo of the
by the partnership shall belong to Mrs. Yulo, owner's desire to cancel the contract of lease
but if the partnership agreement is terminated on July 31, 1949. In view of the above notice,
before the lapse of one and a half years period Mrs. Yulo and her husband brought a civil
under any of the causes mentioned in action to the Court of First Instance of Manila
paragraph (2), then Yang Chiao Seng shall on July 3, 1949 to declare the lease of the
have the right to remove and take away all premises. On February 9, 1950, the Municipal
improvements that the partnership may place Court of Manila rendered judgment ordering
in the premises. the ejectment of Mrs. Yulo and Mr. Yang. The
judgment was appealed. In the Court of First
Pursuant to the above offer, which plaintiff Instance, the two cases were afterwards heard
evidently accepted, the parties executed a jointly, and judgment was rendered dismissing
partnership agreement establishing the "Yang the complaint of Mrs. Yulo and her husband,
& Company, Limited," which was to exist from and declaring the contract of lease of the
July 1, 1945 to December 31, 1947. It states premises terminated as of July 31, 1949, and
that it will conduct and carry on the business of fixing the reasonable monthly rentals of said
operating a theatre for the exhibition of motion premises at P100. Both parties appealed from
and talking pictures. The capital is fixed at said decision and the Court of Appeals, on April
P100,000, P80,000 of which is to be furnished 30, 1955, affirmed the judgment.
by Yang Chiao Seng and P20,000, by Mrs.
Yulo. All gains and profits are to be distributed On October 27, 1950, Mrs. Yulo demanded
among the partners in the same proportion as from Yang Chiao Seng her share in the profits
their capital contribution and the liability of Mrs. of the business. Yang answered the letter
Yulo, in case of loss, shall be limited to her saying that upon the advice of his counsel he
capital contribution (Exh. "B"). had to suspend the payment (of the rentals)
because of the pendency of the ejectment suit
In June , 1946, they executed a supplementary by the owners of the land against Mrs. Yulo. In
agreement, extending the partnership for a this letter Yang alleges that inasmuch as he is
a sublessee and inasmuch as Mrs. Yulo has The first hearing was had on April 19, 1955, at
not paid to the lessors the rentals from August, which time only the plaintiff appeared. The
1949, he was retaining the rentals to make court heard evidence of the plaintiff in the
good to the landowners the rentals due from absence of the defendant and thereafter
Mrs. Yulo in arrears (Exh. "E"). rendered judgment ordering the defendant to
pay to the plaintiff P41,000 for her participation
In view of the refusal of Yang to pay her the in the business up to December, 1950; P5,000
amount agreed upon, Mrs. Yulo instituted this as monthly rental for the use and occupation of
action on May 26, 1954, alleging the existence the building from January 1, 1951 until
of a partnership between them and that the defendant vacates the same, and P3,000 for
defendant Yang Chiao Seng has refused to the use and occupation of the lobby from July
pay her share from December, 1949 to 1, 1945 until defendant vacates the property.
December, 1950; that after December 31, 1950 This decision, however, was set aside on a
the partnership between Mrs. Yulo and Yang motion for reconsideration. In said motion it is
terminated, as a result of which, plaintiff claimed that defendant failed to appear at the
became the absolute owner of the building hearing because of his honest belief that a joint
occupied by the Cine Astor; that the petition for postponement filed by both parties,
reasonable rental that the defendant should in view of a possible amicable settlement,
pay therefor from January, 1951 is P5,000; that would be granted; that in view of the decision
the defendant has acted maliciously and of the Court of Appeals in two previous cases
refuses to pay the participation of the plaintiff in between the owners of the land and the plaintiff
the profits of the business amounting to Rosario Yulo, the plaintiff has no right to claim
P35,000 from November, 1949 to October, the alleged participation in the profit of the
1950, and that as a result of such bad faith and business, etc. The court, finding the above
malice on the part of the defendant, Mrs. Yulo motion, well-founded, set aside its decision and
has suffered damages in the amount of a new trial was held. After trial the court
P160,000 and exemplary damages to the rendered the decision making the following
extent of P5,000. The prayer includes a findings: that it is not true that a partnership
demand for the payment of the above sums was created between the plaintiff and the
plus the sum of P10,000 for the attorney's fees. defendant because defendant has not actually
contributed the sum mentioned in the Articles
In answer to the complaint, defendant alleges of Partnership, or any other amount; that the
that the real agreement between the plaintiff real agreement between the plaintiff and the
and the defendant was one of lease and not of defendant is not of the partnership but one of
partnership; that the partnership was adopted the lease for the reason that under the
as a subterfuge to get around the prohibition agreement the plaintiff did not share either in
contained in the contract of lease between the the profits or in the losses of the business as
owners and the plaintiff against the sublease of required by Article 1769 of the Civil Code; and
the said property. As to the other claims, he that the fact that plaintiff was granted a
denies the same and alleges that the fair rental "guaranteed participation" in the profits also
value of the land is only P1,100. By way of belies the supposed existence of a partnership
counterclaim he alleges that by reason of an between them. It. therefore, denied plaintiff's
attachment issued against the properties of the claim for damages or supposed participation in
defendant the latter has suffered damages the profits.
amounting to P100,000.
As to her claim for damages for the refusal of The most important issue raised in the appeal
the defendant to allow the use of the supposed is that contained in the fourth assignment of
lobby of the theatre, the court after ocular error, to the effect that the lower court erred in
inspection found that the said lobby was very holding that the written contracts, Exhs. "A",
narrow space leading to the balcony of the "B", and "C, between plaintiff and defendant,
theatre which could not be used for business are one of lease and not of partnership. We
purposes under existing ordinances of the City have gone over the evidence and we fully
of Manila because it would constitute a hazard agree with the conclusion of the trial court that
and danger to the patrons of the theatre. The the agreement was a sublease, not a
court, therefore, dismissed the complaint; so partnership. The following are the requisites of
did it dismiss the defendant's counterclaim, on partnership: (1) two or more persons who bind
the ground that the defendant failed to present themselves to contribute money, property, or
sufficient evidence to sustain the same. It is industry to a common fund; (2) intention on the
against this decision that the appeal has been part of the partners to divide the profits among
prosecuted by plaintiff to this Court. themselves. (Art. 1767, Civil Code.).
The first assignment of error imputed to the trial In the first place, plaintiff did not furnish the
court is its order setting aside its former supposed P20,000 capital. In the second
decision and allowing a new trial. This place, she did not furnish any help or
assignment of error is without merit. As that intervention in the management of the theatre.
parties agreed to postpone the trial because of In the third place, it does not appear that she
a probable amicable settlement, the plaintiff has ever demanded from defendant any
could not take advantage of defendant's accounting of the expenses and earnings of the
absence at the time fixed for the hearing. The business. Were she really a partner, her first
lower court, therefore, did not err in setting concern should have been to find out how the
aside its former judgment. The final result of the business was progressing, whether the
hearing shown by the decision indicates that expenses were legitimate, whether the
the setting aside of the previous decision was earnings were correct, etc. She was absolutely
in the interest of justice. silent with respect to any of the acts that a
partner should have done; all that she did was
In the second assignment of error plaintiff- to receive her share of P3,000 a month, which
appellant claims that the lower court erred in can not be interpreted in any manner than a
not striking out the evidence offered by the payment for the use of the premises which she
defendant-appellee to prove that the relation had leased from the owners. Clearly, plaintiff
between him and the plaintiff is one of the had always acted in accordance with the
sublease and not of partnership. The action of original letter of defendant of June 17, 1945
the lower court in admitting evidence is justified (Exh. "A"), which shows that both parties
by the express allegation in the defendant's considered this offer as the real contract
answer that the agreement set forth in the between them.
complaint was one of lease and not of
partnership, and that the partnership formed Plaintiff claims the sum of P41,000 as
was adopted in view of a prohibition contained representing her share or participation in the
in plaintiff's lease against a sublease of the business from December, 1949. But the
property. original letter of the defendant, Exh. "A",
expressly states that the agreement between
the plaintiff and the defendant was to end upon
the termination of the right of the plaintiff to the 37677. And still later, in the course of trial, after
lease. Plaintiff's right having terminated in July, defendant's surveyor and witness, Quirino
1949 as found by the Court of Appeals, the Feria, had testified that the area occupied and
partnership agreement or the agreement for claimed by defendant was about 13 hectares,
her to receive a participation of P3,000 as shown in his Exhibit 1, plaintiff again, with
automatically ceased as of said date. the leave of court, amended its complaint to
make its allegations conform to the evidence.
We find no error in the judgment of the court
below and we affirm it in toto, with costs against Defendant, in his answer, sets up prescription
plaintiff-appellant. and title in himself thru "open, continuous,
exclusive and public and notorious possession
G.R. No. L-4935 May 28, 1954 (of land in dispute) under claim of ownership,
adverse to the entire world by defendant and
J. M. TUASON & CO., INC., represented by his predecessor in interest" from "time in-
it Managing PARTNER, GREGORIA memorial". The answer further alleges that
ARANETA, INC., plaintiff-appellee, registration of the land in dispute was obtained
vs. by plaintiff or its predecessors in interest thru
QUIRINO BOLAÑOS, defendant-appellant. "fraud or error and without knowledge (of) or
interest either personal or thru publication to
Araneta and Araneta for appellee. defendant and/or predecessors in interest."
Jose A. Buendia for appellant. The answer therefore prays that the complaint
be dismissed with costs and plaintiff required to
REYES, J.: reconvey the land to defendant or pay its value.
This is an action originally brought in the Court After trial, the lower court rendered judgment
of First Instance of Rizal, Quezon City Branch, for plaintiff, declaring defendant to be without
to recover possesion of registered land any right to the land in question and ordering
situated in barrio Tatalon, Quezon City. him to restore possession thereof to plaintiff
and to pay the latter a monthly rent of P132.62
Plaintiff's complaint was amended three times from January, 1940, until he vacates the land,
with respect to the extent and description of the and also to pay the costs.
land sought to be recovered. The original
complaint described the land as a portion of a Appealing directly to this court because of the
lot registered in plaintiff's name under Transfer value of the property involved, defendant
Certificate of Title No. 37686 of the land record makes the following assignment or errors:
of Rizal Province and as containing an area of
13 hectares more or less. But the complaint I. The trial court erred in not dismissing
was amended by reducing the area of 6 the case on the ground that the case
hectares, more or less, after the defendant had was not brought by the real property in
indicated the plaintiff's surveyors the portion of interest.
land claimed and occupied by him. The second
amendment became necessary and was II. The trial court erred in admitting the
allowed following the testimony of plaintiff's third amended complaint.
surveyors that a portion of the area was
embraced in another certificate of title, which III. The trial court erred in denying
was plaintiff's Transfer Certificate of Title No. defendant's motion to strike.
IV. The trial court erred in including in it is illegal for two corporations to enter into a
its decision land not involved in the partnership is without merit, for the true rule is
litigation. that "though a corporation has no power to
enter into a partnership, it may nevertheless
V. The trial court erred in holding that enter into a joint venture with another where the
the land in dispute is covered by nature of that venture is in line with the
transfer certificates of Title Nos. 37686 business authorized by its charter." (Wyoming-
and 37677. Indiana Oil Gas Co. vs. Weston, 80 A. L. R.,
1043, citing 2 Fletcher Cyc. of Corp., 1082.)
Vl. The trial court erred in not finding There is nothing in the record to indicate that
that the defendant is the true and lawful the venture in which plaintiff is represented by
owner of the land. Gregorio Araneta, Inc. as "its managing
partner" is not in line with the corporate
VII. The trial court erred in finding that business of either of them.
the defendant is liable to pay the
plaintiff the amount of P132.62 monthly Errors II, III, and IV, referring to the admission
from January, 1940, until he vacates of the third amended complaint, may be
the premises. answered by mere reference to section 4 of
Rule 17, Rules of Court, which sanctions such
VIII. The trial court erred in not ordering amendment. It reads:
the plaintiff to reconvey the land in
litigation to the defendant. Sec. 4. Amendment to conform to
evidence. — When issues not raised
As to the first assigned error, there is nothing by the pleadings are tried by express or
to the contention that the present action is not implied consent of the parties, they
brought by the real party in interest, that is, by shall be treated in all respects, as if
J. M. Tuason and Co., Inc. What the Rules of they had been raised in the pleadings.
Court require is that an action be brought in the Such amendment of the pleadings as
name of, but not necessarily by, the real party may be necessary to cause them to
in interest. (Section 2, Rule 2.) In fact the conform to the evidence and to raise
practice is for an attorney-at-law to bring the these issues may be made upon
action, that is to file the complaint, in the name motion of any party at my time, even of
of the plaintiff. That practice appears to have the trial of these issues. If evidence is
been followed in this case, since the complaint objected to at the trial on the ground
is signed by the law firm of Araneta and that it is not within the issues made by
Araneta, "counsel for plaintiff" and commences the pleadings, the court may allow the
with the statement "comes now plaintiff, pleadings to be amended and shall be
through its undersigned counsel." It is true that so freely when the presentation of the
the complaint also states that the plaintiff is merits of the action will be subserved
"represented herein by its Managing Partner thereby and the objecting party fails to
Gregorio Araneta, Inc.", another corporation, satisfy the court that the admission of
but there is nothing against one corporation such evidence would prejudice him in
being represented by another person, natural maintaining his action or defense upon
or juridical, in a suit in court. The contention the merits. The court may grant a
that Gregorio Araneta, Inc. can not act as continuance to enable the objecting
managing partner for plaintiff on the theory that party to meet such evidence.
Under this provision amendment is not even The identity of the lots was established by the
necessary for the purpose of rendering testimony of Antonio Manahan and Magno
judgment on issues proved though not alleged. Faustino, witnesses for plaintiff, and the
Thus, commenting on the provision, Chief identity of the portion thereof claimed by
Justice Moran says in this Rules of Court: defendant was established by the testimony of
his own witness, Quirico Feria. The combined
Under this section, American courts testimony of these three witnesses clearly
have, under the New Federal Rules of shows that the portion claimed by defendant is
Civil Procedure, ruled that where the made up of a part of lot 4-B-3-C and major on
facts shown entitled plaintiff to relief portion of lot 4-B-4, and is well within the area
other than that asked for, no covered by the two transfer certificates of title
amendment to the complaint is already mentioned. This fact also appears
necessary, especially where defendant admitted in defendant's answer to the third
has himself raised the point on which amended complaint.
recovery is based, and that the
appellate court treat the pleadings as As the land in dispute is covered by plaintiff's
amended to conform to the evidence, Torrens certificate of title and was registered in
although the pleadings were not 1914, the decree of registration can no longer
actually amended. (I Moran, Rules of be impugned on the ground of fraud, error or
Court, 1952 ed., 389-390.) lack of notice to defendant, as more than one
year has already elapsed from the issuance
Our conclusion therefore is that specification of and entry of the decree. Neither court the
error II, III, and IV are without merit.. decree be collaterally attacked by any person
claiming title to, or interest in, the land prior to
Let us now pass on the errors V and VI. the registration proceedings. (Soroñgon vs.
Admitting, though his attorney, at the early Makalintal,1 45 Off. Gaz., 3819.) Nor could title
stage of the trial, that the land in dispute "is that to that land in derogation of that of plaintiff, the
described or represented in Exhibit A and in registered owner, be acquired by prescription
Exhibit B enclosed in red pencil with the name or adverse possession. (Section 46, Act No.
Quirino Bolaños," defendant later changed his 496.) Adverse, notorious and continuous
lawyer and also his theory and tried to prove possession under claim of ownership for the
that the land in dispute was not covered by period fixed by law is ineffective against a
plaintiff's certificate of title. The evidence, Torrens title. (Valiente vs. Judge of CFI of
however, is against defendant, for it clearly Tarlac,2 etc., 45 Off. Gaz., Supp. 9, p. 43.) And
establishes that plaintiff is the registered owner it is likewise settled that the right to secure
of lot No. 4-B-3-C, situate in barrio Tatalon, possession under a decree of registration does
Quezon City, with an area of 5,297,429.3 not prescribed. (Francisco vs. Cruz, 43 Off.
square meters, more or less, covered by Gaz., 5105, 5109-5110.) A recent decision of
transfer certificate of title No. 37686 of the land this Court on this point is that rendered in the
records of Rizal province, and of lot No. 4-B-4, case of Jose Alcantara et al., vs. Mariano et al.,
situated in the same barrio, having an area of 92 Phil., 796. This disposes of the alleged
74,789 square meters, more or less, covered errors V and VI.
by transfer certificate of title No. 37677 of the
land records of the same province, both lots As to error VII, it is claimed that `there was no
having been originally registered on July 8, evidence to sustain the finding that defendant
1914 under original certificate of title No. 735. should be sentenced to pay plaintiff P132.62
monthly from January, 1940, until he vacates for and on behalf of others. The motion for
the premises.' But it appears from the record dismissal is clearly without merit.
that that reasonable compensation for the use
and occupation of the premises, as stipulated Wherefore, the judgment appealed from is
at the hearing was P10 a month for each affirmed, with costs against the plaintiff.
hectare and that the area occupied by
defendant was 13.2619 hectares. The total rent
to be paid for the area occupied should
therefore be P132.62 a month. It is appears G.R. Nos. L-32347-53 December 26, 1973
from the testimony of J. A. Araneta and witness
Emigdio Tanjuatco that as early as 1939 an AGUSTIN ABONG, petitioner,
action of ejectment had already been filed vs.
against defendant. And it cannot be supposed THE WORKMEN'S COMPENSATION
that defendant has been paying rents, for he COMMISSION, NELLY BALLARES,
has been asserting all along that the premises ANACORITA DAHIL-DAHIL, MANUEL
in question 'have always been since time LAHAO-LAHAO, CONCHITA MONTEROYO,
immemorial in open, continuous, exclusive and SHIRLEY LOZADA and ROSARIO
public and notorious possession and under ALOVA, respondents.
claim of ownership adverse to the entire world
by defendant and his predecessors in interest.' Pelaez, Jalandoni and Jamir for petitioner.
This assignment of error is thus clearly without
merit. Pagano C. Villavieja for respondent Workmen
Compensation Commission.
Error No. VIII is but a consequence of the other
errors alleged and needs for further Labaton and Labaton for private respondents.
consideration.
After due hearing before Acting Referee, Section 4-A of the Workmen's
Bertito D. Dadivas, he rendered on August 1, Compensation Act provides for
1966, a decision granting the claims, the payment of an additional
pertinent portions of which are quoted as compensation equal to fifty per
follows: centum of the compensation to
be awarded, in case of failure
In the light of the testimonies of of the employer to comply with
herein claimants and their any order, rule or regulation of
the Workmen's Compensation HUNDRED PESOS (P200.00),
Act in the event of the death of through this Office;
the employee or employees
concerned. 4. To pay to claimant,
SHIRLEY LOZADA, the sum of
Wherefore, under the law, the FIVE THOUSAND ONE
claimants are entitled to HUNDRED TWENTY PESOS
compensation and respondent (P5,120.00) plus 50% penalty
is hereby ordered: in the sum of TWO
THOUSAND FIVE HUNDRED
1. To pay to claimant, SIXTY PESOS (P2,560.00) or
ANACORITA DAHIL-DAHIL the total sum of SEVEN
the sum of SIX THOUSAND THOUSAND SIX HUNDRED
PESOS (P6,000.00), plus 50% EIGHTY PESOS (P7,680.00),
penalty in the sum of THREE plus burial expenses of TWO
THOUSAND PESOS HUNDRED PESOS (P200.00)
(P3,000.00), plus the further through this Office;
sum of TWO HUNDRED
PESOS as burial expenses, 5. To pay to claimant,
through this Office; ROSARIO ALOVA, the sum of
SIX THOUSAND PESOS
2. To pay to claimant, NELLY (P6,000.00) plus 50% penalty
BALLARES, the sum of SIX in the sum of THREE
THOUSAND PESOS THOUSAND PESOS
(P6,000.00) plus 50% penalty (P3,000.00) or the total sum of
in the sum of THREE NINE THOUSAND PESOS
THOUSAND PESOS (P9,000.00), plus the further
(P3,000.00) or the total sum of sum of TWO HUNDRED
NINE THOUSAND PESOS PESOS (P200.00) for burial
(P9,000.00) plus the further expenses, through this Office;
sum of TWO HUNDRED
PESOS (P200.00), as burial 6. To pay to claimant,
expenses through this Office; CONCHITA MONTEROYO,
the sum of SIX THOUSAND
3. To pay to claimant, MANUEL PESOS (P6,000.00) plus 50%
LAHAO-LAHAO, the sum of penalty in the sum of THREE
TWO THOUSAND SIX THOUSAND PESOS
HUNDRED PESOS (P3,000.00) representing
(P2,600.00) plus 50% penalty compensation for the death of
in the sum of ONE THOUSAND her husband, Juanito; and
THREE HUNDRED PESOS TWO THOUSAND SIX
(P1,300.00), or the total sum of HUNDRED PESOS
THREE THOUSAND NINE (P2,600.00) plus 50% penalty
HUNDRED PESOS in the sum of ONE THOUSAND
(P3,900.00), plus burial THREE HUNDRED PESOS
expenses in the sum of TWO (P1,300.00) or the total sum of
THREE THOUSAND NINE opposition thereto was interposed by private
HUNDRED PESOS respondents on November 10, 1966.7
(P3,900.00) representing
compensation for the death of On March 23, 1970, Associate (Medical)
her son, Wilfredo; plus the Commissioner Herminia Castelo-Sotto, M.D.,
further sum of FOUR of the Workmen Compensation Commission
HUNDRED PESOS (P400.00) rendered a decision affirming the earlier
for burial expenses of Juanito decision of the referee.8
and Wilfredo Monteroyo; or a
grand total for these two cases On April 17, 1970, petitioner sought the review
of THIRTEEN THOUSAND of the decision of Associate (Medical)
THREE HUNDRED PESOS Commission Castelo-Sotto by the respondent
(P13,300.00), through this Workmen's Compensation Commission
Office; sitting en banc, but the latter however affirmed
the decision with the modification that the 50%
7. To pay to counsel for additional compensation earlier imposed as
claimants, Atty. Angel F. penalty was eliminated, in its resolution of July
Lobaton, Sr. the sum of TWO 7, 1970.9
THOUSAND SIX HUNDRED
FORTY-FOUR PESOS Dissatisfied with the verdict, petitioner came to
(P2,644.00) as attorney's fees; this Court for reversal of the adverse decision
and against him.
G.R. No. 31057 September 7, 1929 The commissioner rendered his report, which
is attached to the record, with the following
ADRIANO ARBES, ET AL., plaintiffs- resume:
appellees,
vs. Income:
VICENTE POLISTICO, ET AL., defendants-
appellants. Member's shares............................ 97
Marcelino Lontok and Manuel dela Rosa for Credits paid................................ 6,1
appellants.
Interest received........................... 4,5
Sumulong & Lavides for appellees.
Miscellaneous............................... With regard to the second point, despite the
1,891.00
praiseworthy efforts of the attorney of the
defendants, we are P109,620.70
of opinion that, the trial
court having examined all the evidence
Expenses: touching the grounds for the objection and
having found that they had been explained
Premiums to members....................... away 68,146.25
in the commissioner's report, the
conclusion reached by the court below,
Loans on real-estate....................... 9,827.00
accepting and adopting the findings of fact
Loans on promissory notes.............. contained in said report, and especially those
4,258.55
referring to the disposition of the association's
Salaries.................................... money, 1,095.00
should not be disturbed.
4. Guillermo Tapia
IMPERIAL, J.: .............................................................. .13
.....................................
The plaintiff brought this action to recover from
the defendant Collector of Internal Revenue 5. Jesus Legaspi
the sum of P1,863.44, with legal interest .............................................................. .15
thereon, which they paid under protest by way ........................................
of income tax. They appealed from the decision
6. Jose Silva
rendered in the case on October 23, 1936 by
.............................................................. .07
the Court of First Instance of the City of Manila,
...............................................
which dismissed the action with the costs
against them. 7. Tomasa Mercado
.............................................................. .08
The case was submitted for decision upon the ..................................
following stipulation of facts:
8. Julio Gatchalian
Come now the parties to the above- .............................................................. .13
mentioned case, through their .....................................
respective undersigned attorneys, and
9. Emiliana Santiago
hereby agree to respectfully submit to
.............................................................. .13
this Honorable Court the case upon the
..................................
following statement of facts:
10. Maria C. Legaspi
1. That plaintiff are all residents of the .............................................................. .16
municipality of Pulilan, Bulacan, and .................................
that defendant is the Collector of
Internal Revenue of the Philippines; 11. Francisco Cabral
.............................................................. .13
2. That prior to December 15, 1934 .................................
plaintiffs, in order to enable them to
purchase one sweepstakes ticket
valued at two pesos (P2), subscribed
12. Gonzalo Javier 5. That on December 29, 1934, Jose
.............................................................. .14 Gatchalian was required by income tax
...................................... examiner Alfredo David to file the
corresponding income tax return
13. Maria Santiago covering the prize won by Jose
.............................................................. .17 Gatchalian & Company and that on
..................................... December 29, 1934, the said return
was signed by Jose Gatchalian, a copy
14. Buenaventura Guzman of which return is enclosed as Exhibit A
.............................................................. .13
and made a part hereof;
........................
8. Julio Gatchalian
17. The parties hereto reserve the right
........................................... .13 - Do -
to present other and additional
.
evidence if necessary.
9. Jose Silva
Exhibit E referred to in the stipulation is of the ........................................... .07 - Do -
following tenor: ...........
The gain derived or loss sustained from Having organized and constituted a
the sale or other disposition by a partnership of a civil nature, the said entity is
corporation, joint-stock company, the one bound to pay the income tax which the
partnership, joint account (cuenta en defendant collected under the aforesaid
participacion), association, or section 10 (a) of Act No. 2833, as amended by
insurance company, or property, real, section 2 of Act No. 3761. There is no merit in
personal, or mixed, shall be plaintiff's contention that the tax should be
ascertained in accordance with prorated among them and paid individually,
subsections (c) and (d) of section two resulting in their exemption from the tax.
of Act Numbered Two thousand eight
hundred and thirty-three, as amended In view of the foregoing, the appealed decision
by Act Numbered Twenty-nine hundred is affirmed, with the costs of this instance to the
and twenty-six. plaintiffs appellants. So ordered.
The foregoing tax rate shall apply to the G.R. No. L-18703 August 28, 1922
net income received by every taxable
corporation, joint-stock company, INVOLUNTARY INSOLVENCY OF CAMPOS
partnership, joint account (cuenta en RUEDA & CO., S. en C., appellee,
participacion), association, or vs.
insurance company in the calendar PACIFIC COMMERCIAL CO., ASIATIC
year nineteen hundred and twenty and PETROLEUM CO., and INTERNATIONAL
in each year thereafter. BANKING CORPORATION,petitioners-
appellants.
There is no doubt that if the plaintiffs merely
formed a community of property the latter is Jose Yulo, Ross and Lawrence and J. A.
exempt from the payment of income tax under Wolfson for appellants.
the law. But according to the stipulation facts Antonio Sanz for appellee.
the plaintiffs organized a partnership of a civil
nature because each of them put up money to ROMUALDEZ, J.:
buy a sweepstakes ticket for the sole purpose
of dividing equally the prize which they may The record of this proceeding having been
win, as they did in fact in the amount of transmitted to this court by virtue of an appeal
P50,000 (article 1665, Civil Code). The taken herein, a motion was presented by the
partnership was not only formed, but upon the appellants praying this court that this case be
organization thereof and the winning of the considered purely a moot question now, for the
reason that subsequent to the decision members of the aforesaid firm were insolvent
appealed from, the partnership Campos Rueda at the time the application was filed; and that
& Co., voluntarily filed an application for a was said partners are personally and solidarily
judicial decree adjudging itself insolvent, which liable for the consequence of the transactions
is just what the herein petitioners and of the partnership, it cannot be adjudged
appellants tried to obtain from the lower court insolvent so long as the partners are not
in this proceeding. alleged and proven to be insolvent. From this
judgment the petitioners appeal to this court,
The motion now before us must be, and is on the ground that this finding of the lower court
hereby, denied even under the facts stated by is erroneous.
the appellants in their motion aforesaid. The
question raised in this case is not purely moot The fundamental question that presents itself
one; the fact that a man was insolvent on a for decision is whether or not a limited
certain day does not justify an inference that he partnership, such as the appellee, which has
was some time prior thereto. failed to pay its obligation with three creditors
for more than thirty days, may be held to have
Proof that a man was insolvent on a committed an act of insolvency, and thereby be
certain day does not justify an adjudged insolvent against its will.
inference that he was on a day some
time prior thereto. Many contingencies, Unlike the common law, the Philippine statutes
such as unwise investments, losing consider a limited partnership as a juridical
contracts, misfortune, or accident, entity for all intents and purposes, which
might happen to reduce a person from personality is recognized in all its acts and
a state of solvency within a short space contracts (art. 116, Code of Commerce). This
of time. (Kimball vs. Dresser, 98 Me., being so and the juridical personality of a
519; 57 Atl. Rep., 767.) limited partnership being different from that of
its members, it must, on general principle,
A decree of insolvency begins to operate on the answer for, and suffer, the consequence of its
date it is issued. It is one thing to adjudge acts as such an entity capable of being the
Campos Rueda & Co. insolvent in December, subject of rights and obligations. If, as in the
1921, as prayed for in this case, and another to instant case, the limited partnership of Campos
declare it insolvent in July, 1922, as stated in Rueda & Co. Failed to pay its obligations with
the motion. three creditors for a period of more than thirty
days, which failure constitutes, under our
Turning to the merits of this appeal, we find that Insolvency Law, one of the acts of bankruptcy
this limited partnership was, and is, indebted to upon which an adjudication of involuntary
the appellants in various sums amounting to insolvency can be predicated, this partnership
not less than P1,000, payable in the must suffer the consequences of such a failure,
Philippines, which were not paid more than and must be adjudged insolvent. We are not
thirty days prior to the date of the filing by the unmindful of the fact that some courts of the
petitioners of the application for involuntary United States have held that a partnership may
insolvency now before us. These facts were not be adjudged insolvent in an involuntary
sufficient established by the evidence. insolvency proceeding unless all of its
members are insolvent, while others have
The trial court denied the petition on the ground maintained a contrary view. But it must be
that it was not proven, nor alleged, that the borne in mind that under the American
common law, partnerships have no juridical insolvency provided in our law. Under this view
personality independent from that of its it is unnecessary to discuss the other points
members; and if now they have such raised by the parties, although in the particular
personality for the purpose of the insolvency case under consideration it can be added that
law, it is only by virtue of general law enacted the liability of the limited partners for the
by the Congress of the United States on July 1, obligations and losses of the partnership is
1898, section 5, paragraph (h), of which reads limited to the amounts paid or promised to be
thus: paid into the common fund except when a
limited partner should have included his name
In the event of one or more but not all or consented to its inclusion in the firm name
of the members of a partnership being (arts. 147 and 148, Code of Commerce).
adjudged bankrupt, the partnership
property shall not be administered in Therefore, it having been proven that the
bankruptcy, unless by consent of the partnership Campos Rueda & Co. failed for
partner or partners not adjudged more than thirty days to pay its obligations to
bankrupt; but such partner or partners the petitioners the Pacific Commercial Co. the
not adjudged bankrupt shall settle the Asiatic Petroleum Co. and the International
partnership business as expeditiously Banking Corporation, the case comes under
as its nature will permit, and account for paragraph 11 of section 20 of Act No. 1956,
the interest of the partner or partners and consequently the petitioners have the right
adjudged bankrupt. to a judicial decree declaring the involuntary
insolvency of said partnership.
The general consideration that these
partnership had no juridical personality and the Wherefore, the judgment appealed from is
limitations prescribed in subsection (h) above reversed, and it is adjudged that the limited
set forth gave rise to the conflict noted in partnership Campos Rueda & Co. is and was
American decisions, as stated in the case of In on December 28, 1921, insolvent and liable for
reSamuels (215 Fed., 845), which mentions having failed for more than thirty days to meet
the two apparently conflicting doctrines, citing its obligations with the three petitioners herein,
one from In re Bertenshaw (157 Fed., 363), and it is ordered that this proceeding be
and the other from Francis vs. McNeal (186 remanded to the Court of First Instance of
Fed., 481). Manila with instruction to said court to issue the
proper decrees under section 24 of Act No.
But there being in our insolvency law no such 1956, and proceed therewith until its final
provision as that contained in section 5 of said disposition.
Act of Congress of July 1, 1898, nor any rule
similar thereto, and the juridical personality of It is so ordered without special finding as to
limited partnership being recognized by our costs.
statutes from their formation in all their acts and
contracts the decision of American courts on .R. No. L-25532 February 28, 1969
this point can have no application in this
jurisdiction, nor we see any reason why these COMMISSIONER OF INTERNAL
partnerships cannot be adjudged bankrupt REVENUE, petitioner,
irrespective of the solvency or insolvency of vs.
their members, provided the partnership has, WILLIAM J. SUTER and THE COURT OF
as such, committed some of the acts of TAX APPEALS, respondents.
Office of the Solicitor General Antonio P. Suter and Spirig resulting in a determination of
Barredo, Assistant Solicitor General Felicisimo a deficiency income tax against respondent
R. Rosete and Special Attorneys B. Gatdula, Suter in the amount of P2,678.06 for 1954 and
Jr. and T. Temprosa Jr. for petitioner. P4,567.00 for 1955.
A. S. Monzon, Gutierrez, Farrales and Ong for
respondents. Respondent Suter protested the assessment,
and requested its cancellation and withdrawal,
REYES, J.B.L., J.: as not in accordance with law, but his request
was denied. Unable to secure a
A limited partnership, named "William J. Suter reconsideration, he appealed to the Court of
'Morcoin' Co., Ltd.," was formed on 30 Tax Appeals, which court, after trial, rendered
September 1947 by herein respondent William a decision, on 11 November 1965, reversing
J. Suter as the general partner, and Julia Spirig that of the Commissioner of Internal Revenue.
and Gustav Carlson, as the limited partners.
The partners contributed, respectively, The present case is a petition for review, filed
P20,000.00, P18,000.00 and P2,000.00 to the by the Commissioner of Internal Revenue, of
partnership. On 1 October 1947, the limited the tax court's aforesaid decision. It raises
partnership was registered with the Securities these issues:
and Exchange Commission. The firm engaged,
among other activities, in the importation, (a) Whether or not the corporate personality of
marketing, distribution and operation of the William J. Suter "Morcoin" Co., Ltd. should
automatic phonographs, radios, television sets be disregarded for income tax purposes,
and amusement machines, their parts and considering that respondent William J. Suter
accessories. It had an office and held itself out and his wife, Julia Spirig Suter actually formed
as a limited partnership, handling and carrying a single taxable unit; and
merchandise, using invoices, bills and
letterheads bearing its trade-name, (b) Whether or not the partnership was
maintaining its own books of accounts and dissolved after the marriage of the partners,
bank accounts, and had a quota allocation with respondent William J. Suter and Julia Spirig
the Central Bank. Suter and the subsequent sale to them by the
remaining partner, Gustav Carlson, of his
In 1948, however, general partner Suter and participation of P2,000.00 in the partnership for
limited partner Spirig got married and, a nominal amount of P1.00.
thereafter, on 18 December 1948, limited
partner Carlson sold his share in the The theory of the petitioner, Commissioner of
partnership to Suter and his wife. The sale was Internal Revenue, is that the marriage of Suter
duly recorded with the Securities and and Spirig and their subsequent acquisition of
Exchange Commission on 20 December 1948. the interests of remaining partner Carlson in
the partnership dissolved the limited
The limited partnership had been filing its partnership, and if they did not, the fiction of
income tax returns as a corporation, without juridical personality of the partnership should
objection by the herein petitioner, be disregarded for income tax purposes
Commissioner of Internal Revenue, until in because the spouses have exclusive
1959 when the latter, in an assessment, ownership and control of the business;
consolidated the income of the firm and the consequently the income tax return of
individual incomes of the partners-spouses respondent Suter for the years in question
should have included his and his wife's of general copartnership, because
individual incomes and that of the limited under the Civil Code, which applies in
partnership, in accordance with Section 45 (d) the absence of express provision in the
of the National Internal Revenue Code, which Code of Commerce, persons
provides as follows: prohibited from making donations to
each other are prohibited from entering
(d) Husband and wife. — In the case of into universal partnerships. (2
married persons, whether citizens, Echaverri 196) It follows that the
residents or non-residents, only one marriage of partners necessarily brings
consolidated return for the taxable year about the dissolution of a pre-existing
shall be filed by either spouse to cover partnership. (1 Guy de Montella 58)
the income of both spouses; ....
The petitioner-appellant has evidently failed to
In refutation of the foregoing, respondent Suter observe the fact that William J. Suter "Morcoin"
maintains, as the Court of Tax Appeals held, Co., Ltd. was not a universal partnership, but
that his marriage with limited partner Spirig and a particular one. As appears from Articles 1674
their acquisition of Carlson's interests in the and 1675 of the Spanish Civil Code, of 1889
partnership in 1948 is not a ground for (which was the law in force when the subject
dissolution of the partnership, either in the firm was organized in 1947),
Code of Commerce or in the New Civil Code, a universal partnership requires either that the
and that since its juridical personality had not object of the association be all the present
been affected and since, as a limited property of the partners, as contributed by
partnership, as contra distinguished from a them to the common fund, or else "all that the
duly registered general partnership, it is partners may acquire by their industry or
taxable on its income similarly with work during the existence of the partnership".
corporations, Suter was not bound to include in William J. Suter "Morcoin" Co., Ltd. was not
his individual return the income of the limited such a universal partnership, since the
partnership. contributions of the partners were fixed sums
of money, P20,000.00 by William Suter and
We find the Commissioner's appeal P18,000.00 by Julia Spirig and neither one of
unmeritorious. them was an industrial partner. It follows that
William J. Suter "Morcoin" Co., Ltd. was not a
The thesis that the limited partnership, William partnership that spouses were forbidden to
J. Suter "Morcoin" Co., Ltd., has been enter by Article 1677 of the Civil Code of 1889.
dissolved by operation of law because of the
marriage of the only general partner, William J. The former Chief Justice of the Spanish
Suter to the originally limited partner, Julia Supreme Court, D. Jose Casan, in his Derecho
Spirig one year after the partnership was Civil, 7th Edition, 1952, Volume 4, page 546,
organized is rested by the appellant upon the footnote 1, says with regard to the prohibition
opinion of now Senator Tolentino in contained in the aforesaid Article 1677:
Commentaries and Jurisprudence on
Commercial Laws of the Philippines, Vol. 1, 4th Los conyuges, segun esto, no pueden
Ed., page 58, that reads as follows: celebrar entre si el contrato de
sociedad universal, pero o podran
A husband and a wife may not enter constituir sociedad particular? Aunque
into a contract el punto ha sido muy debatido, nos
inclinamos a la tesis permisiva de los recognize such separate juridical personality),
contratos de sociedad particular entre the bypassing of the existence of the limited
esposos, ya que ningun precepto de partnership as a taxpayer can only be done by
nuestro Codigo los prohibe, y hay que ignoring or disregarding clear statutory
estar a la norma general segun la que mandates and basic principles of our law. The
toda persona es capaz para contratar limited partnership's separate individuality
mientras no sea declarado incapaz por makes it impossible to equate its income with
la ley. La jurisprudencia de la Direccion that of the component members. True, section
de los Registros fue favorable a esta 24 of the Internal Revenue Code merges
misma tesis en su resolution de 3 de registered general co-partnerships (compañias
febrero de 1936, mas parece cambiar colectivas) with the personality of the individual
de rumbo en la de 9 de marzo de 1943. partners for income tax purposes. But this rule
is exceptional in its disregard of a cardinal tenet
Nor could the subsequent marriage of the of our partnership laws, and can not be
partners operate to dissolve it, such marriage extended by mere implication to limited
not being one of the causes provided for that partnerships.
purpose either by the Spanish Civil Code or the
Code of Commerce. The rulings cited by the petitioner (Collector of
Internal Revenue vs. University of the Visayas,
The appellant's view, that by the marriage of L-13554, Resolution of 30 October 1964, and
both partners the company became a single Koppel [Phil.], Inc. vs. Yatco, 77 Phil. 504) as
proprietorship, is equally erroneous. The authority for disregarding the fiction of legal
capital contributions of partners William J. personality of the corporations involved therein
Suter and Julia Spirig were separately owned are not applicable to the present case. In the
and contributed by them before their marriage; cited cases, the corporations were
and after they were joined in wedlock, such already subject to tax when the fiction of their
contributions remained their respective corporate personality was pierced; in the
separate property under the Spanish Civil present case, to do so would exempt the
Code (Article 1396): limited partnership from income taxation but
would throw the tax burden upon the partners-
The following shall be spouses in their individual capacities. The
the exclusive property of each spouse: corporations, in the cases cited, merely served
as business conduits or alter egos of the
(a) That which is brought to the stockholders, a factor that justified a disregard
marriage as his or her own; .... of their corporate personalities for tax
purposes. This is not true in the present case.
Thus, the individual interest of each consort in Here, the limited partnership is not a mere
William J. Suter "Morcoin" Co., Ltd. did not business conduit of the partner-spouses; it was
become common property of both after their organized for legitimate business purposes; it
marriage in 1948. conducted its own dealings with its customers
prior to appellee's marriage, and had been
It being a basic tenet of the Spanish and filing its own income tax returns as such
Philippine law that the partnership has a independent entity. The change in its
juridical personality of its own, distinct and membership, brought about by the marriage of
separate from that of its partners (unlike the partners and their subsequent acquisition
American and English law that does not of all interest therein, is no ground for
withdrawing the partnership from the coverage that have no personality of their
of Section 24 of the tax code, requiring it to pay own. 1 Appellant is, likewise, mistaken in that it
income tax. As far as the records show, the assumes that the conjugal partnership of gains
partners did not enter into matrimony and is a taxable unit, which it is not. What is taxable
thereafter buy the interests of the remaining is the "income of both spouses" (Section 45 [d]
partner with the premeditated scheme or in their individual capacities. Though the
design to use the partnership as a business amount of income (income of the conjugal
conduit to dodge the tax laws. Regularity, not partnership vis-a-vis the joint income of
otherwise, is presumed. husband and wife) may be the same for a given
taxable year, their consequences would be
As the limited partnership under consideration different, as their contributions in the business
is taxable on its income, to require that income partnership are not the same.
to be included in the individual tax return of
respondent Suter is to overstretch the letter The difference in tax rates between the income
and intent of the law. In fact, it would even of the limited partnership being consolidated
conflict with what it specifically provides in its with, and when split from the income of the
Section 24: for the appellant Commissioner's spouses, is not a justification for requiring
stand results in equal treatment, tax wise, of a consolidation; the revenue code, as it presently
general copartnership (compañia colectiva) stands, does not authorize it, and even bars it
and a limited partnership, when the code by requiring the limited partnership to pay tax
plainly differentiates the two. Thus, the code on its own income.
taxes the latter on its income, but not the
former, because it is in the case of compañias FOR THE FOREGOING REASONS, the
colectivas that the members, and not the firm, decision under review is hereby affirmed. No
are taxable in their individual capacities for any costs.
dividend or share of the profit derived from the
duly registered general partnership (Section G.R. No. L-27010 April 30, 1969
26, N.I.R.C.; Arañas, Anno. & Juris. on the
N.I.R.C., As Amended, Vol. 1, pp. 88-89). lawphi 1.nêt MARLENE DAUDEN-HERNAEZ, petitioner,
vs.
But it is argued that the income of the limited HON. WALFRIDO DE LOS ANGELES, Judge
partnership is actually or constructively the of the Court of First Instance of Quezon
income of the spouses and forms part of the City, HOLLYWOOD FAR EAST
conjugal partnership of gains. This is not wholly PRODUCTIONS, INC., and RAMON
correct. As pointed out in Agapito vs. Molo 50 VALENZUELA, respondents.
Phil. 779, and People's Bank vs. Register of
Deeds of Manila, 60 Phil. 167, the fruits of the R. M. Coronado and Associates for petitioner.
wife's parapherna become conjugal only when Francisco Lavides for respondent.
no longer needed to defray the expenses for
the administration and preservation of the REYES, J.B.L., Acting C.J.:
paraphernal capital of the wife. Then again, the
appellant's argument erroneously confines Petition for a writ of certiorari to set aside
itself to the question of the legal personality of certain orders of the Court of First Instance of
the limited partnership, which is not essential to Quezon City (Branch IV), in its Civil Case No.
the income taxability of the partnership since Q-10288, dismissing a complaint for breach of
the law taxes the income of even joint accounts contract and damages, denying
reconsideration, refusing to admit an amended was not alleged to be in writing; that by Article
complaint, and declaring the dismissal final and 1358 the writing was absolute and
unappealable. indispensable, because the amount involved
exceeds five hundred pesos; and that the
The essential facts are the following: second motion for reconsideration did not
interrupt the period for appeal, because it was
Petitioner Marlene Dauden-Hernaez, a motion not served on three days' notice.
picture actress, had filed a complaint against
herein private respondents, Hollywood Far We shall take up first the procedural question.
East Productions, Inc., and its President and It is a well established rule in our jurisprudence
General Manager, Ramon Valenzuela, to that when a court sustains a demurrer or
recover P14,700.00 representing a balance motion to dismiss it is error for the court to
allegedly due said petitioner for her services as dismiss the complaint without giving the party
leading actress in two motion pictures plaintiff an opportunity to amend his complaint
produced by the company, and to recover if he so chooses. 1 Insofar as the first order of
damages. Upon motion of defendants, the dismissal (Annex D, Petition) did not provide
respondent court (Judge Walfrido de los that the same was without prejudice to
Angeles presiding) ordered the complaint amendment of the complaint, or reserve to the
dismissed, mainly because the "claim of plaintiff the right to amend his complaint, the
plaintiff was not evidenced by any written said order was erroneous; and this error was
document, either public or private", and the compounded when the motion to accept the
complaint "was defective on its face" for amended complaint was denied in the
violating Articles 1356 and 1358 of the Civil, subsequent order of 3 October 1966 (Annex F,
Code of the Philippines, as well as for Petition). Hence, the petitioner-plaintiff was
containing defective allege, petitions. Plaintiff within her rights in filing her so-called second
sought reconsideration of the dismissal and for motion for reconsideration, which was actually
admission of an amended complaint, attached a first motion against the refusal to admit the
to the motion. The court denied reconsideration amended complaint.
and the leave to amend; whereupon, a second
motion for reconsideration was filed. It is contended that the second motion for
Nevertheless, the court also denied it for reconsideration was merely pro forma and did
being pro forma, as its allegations "are, more not suspend the period to appeal from the first
or less, the same as the first motion", and for order of dismissal (Annex D) because (1) it
not being accompanied by an affidavit of merely reiterated the first motion for
merits, and further declared the dismissal final reconsideration and (2) it was filed without
and unappealable. In view of the attitude of the giving the counsel for defendant-appellee the 3
Court of First Instance, plaintiff resorted to this days' notice provided by the rules. This
Court. argument is not tenable, for the reason that the
second motion for reconsideration was
The answer sets up the defense that "the addressed to the court' refusal to allow an
proposed amended complaint did not vary in amendment to the original complaint, and this
any material respect from the original was a ground not invoked in the first motion for
complaint except in minor details, and suffers reconsideration. Thus, the second motion to
from the same vital defect of the original reconsider was really not pro forma, as it was
complaint", which is the violation of Article 1356 based on a different ground, even if in its first
of the Civil Code, in that the contract sued upon part it set forth in greater detail the arguments
against the correctness of the first order to The foregoing observations leave this Court
dismiss. And as to the lack of 3 days' notice, free to discuss the main issue in this petition.
the record shows that appellees had filed their Did the court below abuse its discretion in
opposition (in detail) to the second motion to ruling that a contract for personal services
reconsider (Answer, Annex 4); so that even if it involving more than P500.00 was either invalid
were true that respondents were not given the of unenforceable under the last paragraph of
full 3 days' notice they were not deprived of any Article 1358 of the Civil Code of the
substantial right. Therefore, the claim that the Philippines?
first order of dismissal had become final and
unappealable must be overruled. We hold that there was abuse, since the ruling
herein contested betrays a basic and
It is well to observe in this regard that since a lamentable misunderstanding of the role of the
motion to dismiss is not a responsive pleading, written form in contracts, as ordained in the
the plaintiff-petitioner was entitled as of right to present Civil Code.
amend the original dismissed complaint.
In Paeste vs. Jaurigue 94 Phil. 179, 181, this In the matter of formalities, the contractual
Court ruled as follows: system of our Civil Code still follows that of the
Spanish Civil Code of 1889 and of the
Appellants contend that the lower court "Ordenamiento de Alcala" 2 of upholding the
erred in not admitting their amended spirit and intent of the parties over formalities:
complaint and in holding that their hence, in general, contracts are valid and
action had already prescribed. binding from their perfection regardless of form
Appellants are right on both counts. whether they be oral or written. This is plain
from Articles 1315 and 1356 of the present Civil
Amendments to pleadings are favored Code. Thus, the first cited provision prescribes:
and should be liberally allowed in the
furtherance of justice. (Torres vs. ART. 1315. Contracts are perfected by
Tomacruz, 49 Phil. 913). Moreover, mere consent, and from that moment
under section 1 of Rule 17, Rules of the parties are bound not only to the
Court, a party may amend his pleading fulfillment of what has been expressly
once as a matter of course, that is, stipulated but also to all the
without leave of court, at any time consequences which, according to
before a responsive pleading is served. their nature, may be in keeping with
A motion to dismiss is not a good faith, usage and law. (Emphasis
"responsive pleading". (Moran on the supplied)
Rules of Court, vol. 1, 1952, ed., p.
376). As plaintiffs amended their Concordantly, the first part of Article 1356 of
complaint before it was answered, the the Code Provides:
motion to admit the amendment should
not have been denied. It is true that the ART. 1356. Contracts shall be
amendment was presented after the obligatory in whatever form they may
original complaint had been ordered have been entered into, provided all
dismissed. But that order was not yet the essential requisites for their validity
final for it was still under are present.... (Emphasis supplied)
reconsideration.
These essential requisites last mentioned are (b) Contracts that the law requires to be
normally (1) consent (2) proper subject matter, proved by some writing (memorandum) of its
and (3) consideration or causa for the terms, as in those covered by the old Statute of
obligation assumed (Article 1318). 3 So that Frauds, now Article 1403(2) of the Civil Code.
once the three elements exist, the contract is Their existence not being provable by mere
generally valid and obligatory, regardless of the oral testimony (unless wholly or partly
form, oral or written, in which they are executed), these contracts are exceptional in
couched. lawphi1.nêt requiring a writing embodying the terms thereof
for their enforceability by action in court.
To this general rule, the Code admits
exceptions, set forth in the second portion of The contract sued upon by petitioner herein
Article 1356: (compensation for services) does not come
under either exception. It is true that it appears
However, when the law requires that a included in Article 1358, last clause, providing
contract be in some form in order that it that "all other contracts where the amount
may be valid or enforceable, or that a involved exceeds five hundred pesos must
contract be proved in a certain way, appear in writing, even a private one." But
that requirement is absolute and Article 1358 nowhere provides that the
indispensable.... absence of written form in this case will make
the agreement invalid or unenforceable. On the
It is thus seen that to the general rule that the contrary, Article 1357 clearly indicates that
form (oral or written) is irrelevant to the binding contracts covered by Article 1358 are binding
effect inter partes of a contract that possesses and enforceable by action or suit despite the
the three validating elements of consent, absence of writing.
subject matter, and causa, Article 1356 of the
Code establishes only two exceptions, to wit: ART. 1357. If the law requires a
document or other special form, as
(a) Contracts for which the law itself requires in the acts and contracts enumerated
that they be in some particular form (writing) in in the following article, the contracting
order to make them valid and enforceable (the parties may compel each other to
so-called solemn contracts). Of these the observe that form, once the contract
typical example is the donation of immovable has been perfected. This right may be
property that the law (Article 749) requires to exercised simultaneously with the
be embodied in a public instrument in order action the contract. (Emphasis
"that the donation may be valid", i.e., existing supplied) .
or binding. Other instances are the donation of
movables worth more than P5,000.00 which It thus becomes inevitable to conclude that
must be in writing, "otherwise the donation both the court a quo as well as the private
shall be void" (Article 748); contracts to pay respondents herein were grossly mistaken in
interest on loans (mutuum) that must be holding that because petitioner Dauden's
"expressly stipulated in writing" (Article 1956); contract for services was not in writing the
and the agreements contemplated by Article same could not be sued upon, or that her
1744, 1773, 1874 and 2134 of the present Civil complaint should be dismissed for failure to
Code. state a cause of action because it did not plead
any written agreement.
The basic error in the court's decision lies in
overlooking that in our contractual system it is
not enough that the law should require that the
contract be in writing, as it does in Article 1358.
The law must further prescribe that without the
writing the contract is not valid or not
enforceable by action.