1. Gayondato v. Treasurer - AVILLON
In all such actions where there are
Petitioners: ​Rosario Goyandato
Respondents: ​Treasurer of the Philippine Islands et. al.
DOCTRINE: ​ If a person obtains legal title to property by fraud or
concealment, courts of equity will impress upon the title a so-called
constructive trust in favor of the defrauded party.
Facts:
● Three parcels of land in Isabela, Occidental Negros were originally owned by
Domingo Goyandato, who inherited the lands from his mother.
● In 1899, Domingo married Adela Gasataya who then gave birth to Rosario
Goyandato.
● When Domingo died, the father of Adela took charge of the three parcels of
land.
● In 1908, Adela married Domingo Cuachon and they were given the
possession of the land.
● The three parcels were included in a cadastral case in CFI Negros
Occidental and Cuachon appeared on behalf of his wife and stepdaughter
and filed a claim stating that the lots were the property of Adela and Rosario.
● CFI decreed the registration in the name of Adela alone.
● Adela, with the consent of Cuachon, then mortgaged the property to National
Bank and in 1920, she sold the property to Rodriguez for P13,000.
Rodriguez also assumed the liability for a mortgage of P8,000 to National
Bank and other debts amounting to P4,000.
● Rosario filed the instant case on 1922 against Adela, Cuachon, Rodriguez
and the Insular Treasurer claiming:
○ damages in the sum of P30,000 for the erroneous registration
in the name of the Adela of three parcels of land
○ That Rosario was the owner at the time of the registration
● The trial court absolved the Insular Treasurer and Rodriguez and ordered
Adela and Cuachon to indemnify Rosario.
● Rosario appealed arguing that the trial court erred in absolving the Insular
Treasurer.
● The Land Registration Act states:
○ SEC. 101. ...and any person who is wrongfully
deprived of any land or any interest therein, without
negligence on his part, through the bringing of the
same under the provisions of this Act or by the
registration of any other person as owner of such land
… and who by the provisions of this Act is barred or in
any way precluded from bringing an action for the
recovery of such land or interest therein, or claim
upon the same, may bring in any court of competent
jurisdiction an action against the Treasurer of the
Philippine Archipelago for the recovery of damages to
be paid out of the​ assurance fund.
○ SEC. 102 ….
defendants other than the Treasurer of the Philippine
Archipelago and damages shall have been recovered,
no final judgment shall be entered against the
Treasurer of the Philippine Archipelago until execution
against the other defendants shall be returned
unsatisfied in whole or in part….
● On the other hand, the Attorney-General argues that:
○ Cuachon and Adela must be considered to have held the
property in trust and for the benefit Rosario
○ the relation of trustee and cestui que trust was thus created;
and that the case therefore falls under​ section 106​​ of the Land
Registration Act, which provides that "the assurance fund shall
not be liable to pay for any loss or damage or deprivation
occasioned by a breach of trust, whether express, implied, or
constructive, by any registered owner who is a trustee, or by
the improper exercise of any sale in mortgage-foreclosure
proceedings
Issue/s:
1. WON ​the Rosario can claim damages from the assurance fund- ​YES, if
other defendants defaulted
Ratio: (numbered, according to issue/s)
1. As Rosario was a minor at the time of the registration of the land and
consequently no negligence can be imputed to her, it is clear from the
sections quoted that in the absence of special circumstances to the contrary,
the assurance fund is secondarily liable for the damages suffered by her
through the wrongful registration.
2. For want of better terms the words "trust'' and "trustee" are frequently used
in a broad and popular sense so as to embrace a large variety of relations.
Thus if a person obtains legal title to property by fraud or concealment,
courts of equity will impress upon the title a so-called constructive trust in
favor of the defrauded party.
3. It becomes quite apparent upon an examination of sections 101 and 102, in
which the right of recovery from the assurance fund in cases of registration
through fraud or wrongful facts is expressly recognized, that the term “trust”
as used in section 106 must be taken in its ​technical and more restricted
sense​​. Indeed, if it were to be regarded in its broadest sense, the assurance
fund would, under the conditions here prevailing, be of little or no value.
4. Rosario was a minor at the time of the registration of the land and had no
legal guardian. It is true that Adela, in whose name the land was registered,
was the natural guardian of Rosario, but that guardianship did not extend to
the property of the Rosario and conferred no right to the administration of the
same.
5. Rosario, being a minor and under disability, could not create a technical trust
of any kind. It is clear that there was no trust in its technical signification. The
 mother had no right of property or administration in her daughter's estate
and was nothing but a mere trespasser.
6. No trust -> Sec 106 will not apply

Dispositive: ​The judgment appealed from is reversed, and it is hereby ordered

that the defendants Domingo Cuachon and the estate of Adela Gasataya jointly
and severally pay to the plaintiff the sum of P25,000, with interest at the rate of 6
per cent per annum from August 18, 1922, the date of the filing of the complaint,
with the costs.​ It is further ordered that if the execution of this judgment is
returned unsatisfied in whole or in part and the officer returning the
execution certifies that the amount upon the execution cannot be collected
except by application to the assurance fund and the court having
jurisdiction over the action shall be satisfied as to the truth of such return,
said court shall order the amount of the execution and costs, or so much
thereof as remains unpaid, to be paid by the Treasurer of the Philippine
Archipelago out of the assurance fund. ​The complaint will stand dismissed as
to Francisco Rodriguez. No costs will be allowed. So ordered.
 2. Escobar v. Locsin (Jan. 30, 1943) - BALAGTAS
Petitioners: Eusebia Escobar
Respondents: Ramon Locsin (in his capacity as special administrator of
the intestate estate of Juana Ringor)
DOCTRINE: ​A trust is sacred and inviolable.
The Courts have shielded fiduciary relations against every manner of
chicanery or detestable design cloaked by legal technicalities.
The Torrens system was never calculated to foment betrayal in the
performance of a trust.
Facts:
1) Eusebia Escobar prays for the reconveyance of ​Lot No. 692 ​of the
Cuyapo Cadastre in Nueva Ecija in the CFI.
a) Escobar contends that she is the owner of the lot.
2) Escobar alleged that in the course of the cadastral proceedings, she,
being illiterate, asked Domingo Sumangil to claim the lot for her.
a) But Sumangil claimed the lot for himself, so the lot was
adjudicated in favor of Sumangil.
3) The lot, which became part of the intestate estate of Domingo Sumangil
and Honorata Duque, was then assigned by partition to the estate of
Juana Ringor.
a) Ramon Locsin, the defendant, is the special administrator of
Ringor’s estate.
4) The CFI ruled that Escobar is the real owner of the lot, but dismissed
the complaint.
a) Escobar acquired the lot in 1914 by ​donation propter nuptias
from Pablo Ringor;
b) That since then, Escobar had been in possession of the land,
but that the title of the lot had been decreed in the cadastral
proceedings in favor of Domingo Sumangil.
c) However, while Escobar had the ​equitable title ​and Juana
Ringor only had ​legal title, ​the period of one year provided for
in Section 38 of the Land Registration Act (No. 496) for the
review of a decree had elapsed, and the Escobar had not
availed herself of this remedy.
Issue/s:
1. WON ​the complaint was properly dismissed for being beyond the
prescription period for the review / reopening of a cadastral case.
Ratio: (numbered, according to issue/s)
1) No! The complaint did not seek the review of the decree or the
reopening of the cadastral case, but the enforcement of a trust.
Hence, Section 38 of Act No. 496 does not apply.
a) The estate of Juana Ringor as the successor in interest of the
trustee, Domingo Sumangil, is ​in equity​​ bound to execute a
deed of conveyance of this lot to the ​cestui que trust​, Eusebia
Escobar.
b) Turning to our own Land Registration Act, we find no indication
there of an intention to cut off, through the issuance of a
decree of registration, equitable rights or remedies.
i) On the contrary, Section 70 of the Act provides:
(1) “​Registered lands and ownership therein,
shall in all respects be subject to the same
burdens and incidents attached by law to
unregistered land.
(2) Nothing contained in this Act shall in any
way be construed to relieve registered land
or the owners thereof from any rights… or to
change or affect in any other way any other
rights or liabilities created by law and
applicable to unregistered land, except as
otherwise expressly provided in this Act or in
the amendments hereof.”
ii) Also, Sec. 102 of the Act, after providing for actions
for damages in which the Insular Treasurer, as the
custodian of the Assurance Fund is a party, contains
the following proviso:
(1) '​Provided, however, That nothing in this Act
shall be construed to deprive the plaintiff of
any action which he may have against any
person for such loss or damage or
deprivation of land or of any estate or
interest therein without joining the Treasurer
of the Philippine Archipelago as a defendant
therein.”
c) A trust — such as that which was created between the plaintiff
and Domingo Sumangil — is sacred and inviolable.
i) The Courts have therefore shielded fiduciary relations
against every manner of chicanery or detestable
design cloaked by legal technicalities.
ii) The Torrens system was never calculated to foment
betrayal in the performance of a trust.
Dispositive:
The judgment appealed from is hereby REVERSED, and the defendant is ORDERED to
convey the lot in question to the plaintiff within fifteen days from the entry of final judgment
herein; and, upon his failure or refusal to do so, this judgment shall constitute sufficient
authorization for the Register of Deeds of Nueva Ecija, in lieu of a deed of conveyance, to
transfer the certificate of title for said lot No. 692 to the plaintiff Eusebia Escobar. The
defendant shall pay the costs of both instances. SO ORDERED.

3. Pasino v. Monterroyo - BELENO
Petitioners: ​ROGELIO, GEORGE, LOLITA, ROSALINDA, and
JOSEPHINE, all surnamed PASIÑO, represented by their father and
attorney-in-fact JOSE PASIÑO
Respondents: ​DR. TEOFILO EDUARDO F. MONTERROYO,
ROMUALDO MONTERROYO, MARIA TERESA MONTERROYO, and
STEPHEN MONTERROYO
DOCTRINE: ​Registration of property by one person in his name, whether by
mistake or fraud, the real owner being another person, impresses upon the
title so acquired the character of a constructive trust for the real owner, which
would justify an action for reconveyance. If the registration of the land is
fraudulent, the person in whose name the land is registered holds it as a mere
trustee, and the real owner is entitled to file an action for reconveyance of the
property.
FACTS:
1. The original action was for recovery of possession and damages with a
prayer for a TRO or writ of preliminary injunction filed by Pasino
(Petitioner/Original claimant) against Monterroyo
(Respondents/Present Possessors)
2. Lot No. 2139 with an area of 19,979 square meters, located at
Panul-iran, Abuno, Iligan City, was part of a 24-hectare land occupied,
cultivated and cleared by Laureano Pasiño (Laureano) in 1933.
a. The 24-hectare land formed part of the public domain which
was later declared alienable and disposable
3. Laureano filed a homestead application over the entire 24-hectare
a. the Bureau of Forestry wrote informed him that the tract of
land covered by his application was not needed for forest
purposes and later was approved by the Director of Lands and
stating that it was recorded in his name for the land applied for
by him.
4. Homestead patent was issued in favor of Laureano after he died.
a. Laureano’s heirs did not receive the order and consequently,
the land was not registered under Laureano’s name or under
that of his heirs.
5. A Cadastral Survey was conducted in Iligan City.
a. The surveyor found that a small creek divided the 24-hectare
parcel of land into two portions, identified as Lot No. 2138
and Lot No. 2139.
PETITIONER:
1. Petitioners claimed that the heirs (headed by Jose) continuously
possessed and cultivated both lots.
2. Jose’s co-heirs renounced their rights thru a Deed of Quitclaim in favor
of Jose. Jose secured a title in his name for Lot No. 2138.
3. Jose alienated Lot No. 2139 in favor of his children (petitioners in this
case) who filed applications for grant of Free Patent Titles over their
respective shares of Lot No. 2139 which were all granted.
4. Petitioners alleged that their possession of Lot No. 2139 was
interrupted on 3 January 1993 when respondents forcibly took
possession of the property.
RESPONDENTS:
5. They had been in open, continuous, exclusive and notorious possession
of Lot No. 2139, by themselves and through their
predecessors-in-interest, since 10 July 1949.
6. Conveyances:
a. Rufo Larumbe (Larumbe) sold Lot No. 2139 to Petra Teves
(Petra).
b. Petra executed a deed of sale over Lot No. 2139 in favor of
Vicente Teves (Vicente).
c. Vicente executed a pacto de retro sale over the land in favor of
Arturo Teves (Arturo).
d. Arturo sold Lot No. 2139 in favor of respondents’ father, Dr.
Monterroyo, by virtue of an oral contract.
e. Arturo executed a Deed of Confirmation of Absolute Sale of
Unregistered Land in favor of Dr. Monterroyo’s heirs.
7. Jose was not the owner of Lot No. 2139 and as such, he could not sell
the land to his children.
a. Petitioners’ OCTs were null and void for having been
procured in violation of the Public Land Act.
b. Land Management Bureau had no authority to issue the free
patent titles because Lot No. 2139 was a private land
RTC Ruling: Lot No. 2139 have acquired the character of a private land over
which the Land Management Bureau has been divested of jurisdiction;
1. Lot No. 2139 had already acquired the character of a private land by
operation of law. Therefore it already ceased to be a public land, the
 Land Management Bureau had no power or authority to dispose of it by Principle of constructive trust
issuing free patent titles
o Registration of property by one person in his name, whether by
2. The order for the issuance of a patent in favor of Laureano lapsed and
mistake or fraud, the real owner being another person, impresses upon
became functus officio when it was not registered with the Director of
the title so acquired the character of a constructive trust for the real
Deeds.
owner, which would justify an action for reconveyance.
a. Laureano ceded the right to possession over half of the
property, denominated as Lot No. 2139, to Larumbe sometime o In the action for reconveyance, the decree of registration is respected
in 1947. as incontrovertible but what is sought instead is the transfer of the
b. T Laureano offered to sell half of the land to his tenant Gavino property wrongfully or erroneously registered in another’s name to its
Quinaquin (Gavino) but he did not have money. rightful owner or to one with a better right.
c. Later, Gavino learned from Larumbe that he (Larumbe) o If the registration of the land is fraudulent, the person in whose name
acquired half of the land from Laureano. Gavino then started the land is registered holds it as a mere trustee, and the real owner is
delivering the owner’s share of the harvest to Larumbe. entitled to file an action for reconveyance of the property.
d. Laureano never contested Gavino’s action nor did he demand
that Gavino deliver to him the owner’s share of the harvest WHEREFORE, we DENY the petition. We AFFIRM the 31 January 2003
and not to Larumbe. Decision and the 5 August 2003 Resolution of the Court of Appeals in CA-G.R.
e. When Lot No. 2139 was sold, Gavino and his successors CV No. 63199. Costs against petitioners.
delivered the owner’s share of the harvest to Petra, Vicente,
Arturo, Dr. Monterroyo, and Dindo Monterroyo, successively.
3. Petitioners had failed to present convincing evidence that they and their
predecessors-in-interest were in possession of Lot No. 2139 from 1947
to 1994 when they filed their application for free patent.
4. Petitioners committed actual fraud when they misrepresented in
their free patent applications that they were in possession of the
property continuously and publicly.

CA Ruling​​: Affirmed trial court’s decision.

ISSUES:​​ Who are the rightful owners and possessors of Lot No. 2139?

RULING: ​The petition is hereby DENIED and the CA Ruling AFFIRMED.

Respondents were able to establish that they have a better right to Lot No. 2139
since they had long been in possession of the property in the concept of owners,
by themselves and through their predecessors-in-interest. Hence, despite the
irrevocability of the Torrens titles issued in their names and even if they are
already the registered owners under the Torrens system, petitioners may still be
compelled under the law to reconvey the property to respondents.

1. Principle of Constructive Trust Applies ​– RELEVANT TO

AGENCY
 4. Home Guaranty Corp v. La Savoie Dev. Corp. - BULATAO
Petitioners: ​Home Guaranty Corp.​ (HGC)
Respondents: ​La Savoie Dev. Corp.​ (La Savoie)

DOCTRINE: ​Execution of a Deed of Conveyance without resorting to

foreclosure is indicative of ​PACTUM COMMISSORIUM and renders it void
and ineffectual, which in turn cannot vest ownership.

FACTS:
● La Savoie Development Corporation ​(La Savoie) ​is a domestic
corporation.
● It is engaged in the business of "real estate development, subdivision
and brokering.
● With the onset of the Asian financial crisis in 1997, La Savoie found
itself unable to pay its obligations to its creditors.
● In 2003, La Savoie filed before the RTC, a "petition for the declaration of
state of suspension of payments with approval of proposed
rehabilitation plan" under the Interim Rules of Procedure on Corporate
Rehabilitation ​(Interim Rules).
● RTC issued the Stay Order staying the enforcement of all claims against
La Savoie.
● Following the issuance of the Stay Order, La Savoie's creditors filed
their Comments and/or Oppositions.
● Home Guaranty Corporation ​(HGC) filed an Opposition even though "it
was not a creditor of Petitioner."
● It asserted that it had a "material and beneficial interest in the Petition,
in relation to the interest of Philippine Veterans Bank ​(PVB)​​, Planters
Development Bank ​(PDB), and Land Bank of the Philippines ​(LBP)​​,
which are listed as creditors of Petitioner regarding certain assets that
might have been taken cognizance of, and placed under the custody of
the RTC and/or the appointed Rehabilitation Receiver."
● HGC noted that through the "La Savoie Asset Pool Formation and Trust
Agreement" ​(Trust Agreement)​​, La Savoie obtained financing for some
of its projects through a securitization process in which PDB as nominal
issuer issued P150 million in asset participation certificates dubbed as
the "La Savoie Development Certificates" ​(LSDC certificates) to be
sold to investors.
● The projects financed by these certificates consisted of the development
of real properties in Cavite; Batangas; Laguna; and Quezon City.
● The same properties were conveyed in trust by La Savoie, as trustor, to
PDB, as trustee, and constituted into the La Savoie Asset Pool ​(Asset
Pool)​​.
● The redemption of the LSDC certificates upon maturity and the interest
payments on them were "collateralized by the assets that were
conveyed by La Savoie to the Trust."
● The LSDC certificates were covered by a guaranty extended by HGC
through a "Contract of Guaranty" entered into by Home Guaranty
Corporation with La Savoie and PDB.
● HGC noted that it was "charged with the duty of ensuring that all funds
due to the Asset Pool are collected, and that funds are disbursed for the
purposes they were intended for."
● HGC added that La Savoie collected a total amount of P60,569,134.30
from the buyers of some of the properties covered by the Asset Pool.
● This amount, however, was not remitted by La Savoie to the trust.
● With La Savoie's failure to complete some of its projects and failure to
remit sales collections, the Asset Pool defaulted in redeeming and
paying interest on the LSDC certificates.
● Thus, La Savoie's investors placed a call on the guaranty.
● With La Savoie's failure to remit collections, however, HGC held in
abeyance the settlement of the investors' call.
● This settlement was then overtaken by the filing of La Savoie's Petition
for Rehabilitation.
● HGC argued that it and the investors on the LSDC certificates had
"preferential rights" over the properties making up the Asset Pool as
these "were conveyed as security or collaterals for the redemption of the
LSDC certificates."
● Thus, they should be excluded from the coverage of La Savoie's
Petition for Rehabilitation.
● RTC: issued Order denying due course to La Savoie's Petition for
Rehabilitation and lifting the Stay Order.
● La Savoie appealed.
● In the meantime, HGC approved and processed the call on the guaranty
for the redemption of the LSDC certificates.
● Thus, HGC, through PDB, paid a total of P128.5 million as redemption
value to certificate holders.
● Acting on this, PDB executed a "Deed of Assignment and Conveyance"
in favor of HGC through which, in the words of Home Guaranty
Corporation, PDB "absolutely conveyed and assigned to HGC the
ownership and possession of the entire assets that formed part of the
La Savoie Asset Pool."
● HGC claims that through the same Deed, PDB "absolutely conveyed
and assigned to HGC the right to collect from La Savoie cash
receivables . . . representing the amount collected by La Savoie from
sales in the course of the development of the projects which it failed to
remit to the Trust."
● HGC argued that all of the properties comprising the Asset Pool should
be excluded from the rehabilitation proceedings in view of the Deed of
Assignment and Conveyance executed in its favor by PDB.
● CA: reversed and set aside the RTC’s Order, reinstated the Stay Order,
gave due course to the Petition for Rehabilitation, and remanded the
case to the trial court for further proceedings.
● Hence, this present petition.
ISSUE/S:
1. W/N the conveyance to Home Guaranty Corporation of the properties
comprising the Asset Pool was valid and effectual. – ​NO.
RATIO:
● La Savoie argues that with Home Guaranty Corporation's payment of
the LSDC certificates' redemption value, Home Guaranty Corporation
was subrogated into the rights of La Savoie's creditors (i.e., the
certificate holders).
● It asserts that "effectively, petitioner HGC is already the creditor of
respondent La Savoie" and that as creditor, it cannot be given a
preference over the assets of La Savoie, something that is "prohibited,
in rehabilitation proceedings."
● During rehabilitation receivership, the assets are held in trust for the
equal benefit of all creditors to preclude one from obtaining an
advantage or preference over another by the expediency of an
attachment, execution or otherwise.
● It is true, as La Savoie asserts, that the suspension of the enforcement
of claims against corporations under receivership is intended "to prevent
a creditor from obtaining an advantage or preference over another."
● This is "intended to give enough breathing space for the management
committee or rehabilitation receiver to make the business viable again,
without having to divert attention and resources to litigations in various
fora."
● Thus, it applies only to corporations under receivership.
● It does not apply to corporations who have sought to put themselves
under receivership but, for lack of judicial sanction, have not been put
under or are no longer under receivership.
● The trial court's Order denied due course to and dismissed La Savoie's
Petition for Rehabilitation.
● It superseded the trial court's June 4, 2003 Stay Order thereby removing
La Savoie from receivership.
● Apart from these, the trial court's October 1, 2003 Order lifted the Stay
Order.
● This was significant not only with respect to the freedom it afforded to
La Savoie's creditors to (in the meantime that the lifting of the Stay
Order was not restrained) enforce their claims but similarly because it
established a context that removed this case from the strict applicability
of the rule being cited by La Savoie.
● Here, the Stay Order was lifted, and its lifting was not enjoined or
otherwise restrained.
● There was thus no Stay Order to speak of in those critical intervening
moments when Home Guaranty Corporation acted pursuant to the
guaranty call and paid the holders of the LSDC certificates.
● If, following this payment and while La Savoie remained to be not under
receivership, a valid transfer of the properties comprising the Asset Pool
was made in favor of Home Guaranty Corporation, the properties would
then no longer be under the dominion of La Savoie.
● They would thus be beyond the reach of rehabilitation proceedings and
no longer susceptible to the rule against preference of creditors.
● Viewed solely through the lens of the Trust Agreement and the Contract
of Guaranty, the transfer made to Home Guaranty Corporation on the
strength of the Deed of Conveyance ​APPEARS​​ valid and binding.
● HOWEVER​​, its execution is in violation of a fundamental principle in the
law governing credit transactions.
● We find the execution of a Deed of Conveyance without resorting
to foreclosure to be indicative of PACTUM COMMISSORIUM.
● Hence, it is void and ineffectual and does not serve to vest ownership in
Home Guaranty Corporation.
● Articles 2088 and 2137 of the Civil Code provide:
Art. 2088. The creditor cannot appropriate the things given by way of
pledge or mortgage, or dispose of them. Any stipulation to the contrary
is null and void.
Art. 2137. The creditor does not acquire the ownership of the real
estate for non-payment of the debt within the period agreed upon.
Every stipulation to the contrary shall be void. But the creditor may
petition the court for the payment of the debt or the sale of the real
property. In this case, the Rules of Court on the foreclosure of
mortgages shall apply.
● ELEMENTS OF PACTUM COMMISSORIUM​​:
○ There should be a property mortgaged by way of security for
the payment of the principal obligation; and
○ There should be a stipulation for automatic appropriation by
the creditor of the thing mortgaged in case of non-payment of
the principal obligation within the stipulated period.
● In this case, Sections 13.1 and 13.2 of the Contract of Guaranty call for
the "prompt assignment and conveyance to HGC of all the
corresponding properties in the Asset Pool" that are held as security in
favor of the guarantor.
● Moreover, ​Sections 13.1 and 13.2 dispense with the need of
conducting foreclosure proceedings, judicial or otherwise.
● Albeit requiring the intervention of the trustee of the Asset Pool,
Sections 13.1 and 13.2 spell out what is, for all intents and purposes,
the automatic appropriation by the paying guarantor of the properties
held as security.
● This is thus a clear case of pactum commissorium and it is null
and void.
● Accordingly, whatever conveyance was made by Planters Development
Bank to Home Guaranty Corporation in view of this illicit stipulation is
ineffectual. ​It did not vest ownership in Home Guaranty
Corporation.
● Air that this transfer engendered is a constructive trust in which the
properties comprising the Asset Pool are held in trust by Home
Guaranty Corporation, as trustee, for the trustor, La Savoie.
● Constructive trusts are created by the construction of equity in order to
satisfy the demands of justice and prevent unjust enrichment.
● They arise contrary to intention against one who, by fraud, duress or
abuse of confidence, obtains or holds the legal right to property which
he ought not, in equity and good conscience, to hold.104 (Emphasis
supplied)
● This case falls squarely under Article 1456 of the Civil Code.
● HGC acquired the properties comprising the Asset Pool by mistake or
through the ineffectual transfer (i.e., for being pactum commissorium)
made by the original trustee, Planters Development Bank.
● TWO KEY POINTS:
○ First, the CA’s Decision restored La Savoie's status as a
corporation under receivership.
○ Second, with all but a constructive trust created between HGC
and La Savoie, the properties comprising the Asset Pool
remain within the dominion of La Savoie.
● FIRST POINT, the restoration of La Savoie's status as a corporation
under receivership brings into operation the rule against preference of
creditors.
● SECOND POINT, La Savoie's continuing ownership entails the
continuing competence of the court having jurisdiction over the
rehabilitation proceedings to rule on how the properties comprising the
Asset Pool shall be disposed, managed, or administered in order to
satisfy La Savoie's obligations and/or effect its rehabilitation.
● CUMULATIVE EFFECT:
○ HGC must submit itself, like La Savoie's other creditors, to how
La Savoie's Petition for Rehabilitation shall be resolved.
○ As a paying guarantor, HGC was subrogated into the rights of
La Savoie's creditors and now stands as the latter's own
creditor.
○ It remains so pending the satisfaction of La Savoie's obligation
and as the void conveyance made to it by PDB failed to
terminate in the creditor-debtor relationship with La Savoie.
DISPOSITIVE:
WHEREFORE, the Petition is DENIED. The Regional. Trial Court, Branch 142,
Makati City is directed to proceed with dispatch in resolving the Petition for
Rehabilitation filed by respondent La Savoie Development Corporation. SO
ORDERED.

5. Tong v. Go Tiat Kun - CAPACITE

Petitioners: ​Jose Juan Tong, et al. (Juan Tong pala yung surname)
Respondents: ​Go Tiat Kun et al.
DOCTRINE:
Implied resulting trusts do not prescribe except when trustee repudiates the
trust. Action to reconvey does not prescribe so long as the property is in the
name of the vendee. To allow prescription would be tantamount to allowing a
trustee to acquire title against his principal and true owner.
Facts:
● Spouses Juan Tong have 10 children.
○ 9 are the ​petitioners​: Jose, Lucio, Simeon, Felisa, Luisa, Julia,
Ana, Elena, and Vicente (survived by widow and children).
○ The other one is Luis Sr., survived by ​respondents​: spouses
Go Tiat Kun and children including Luis Jr.
● 1957 - meeting by Juan Tong and children intending to purchase Lot
998 from the heirs of Ascencio for the family’s lumber business “Juan
Tong Lumber” (later incorporated)
○ Being disqualified as a Chinese citizen, the title was registered
in the name of the eldest, Luis Sr. (already of age and the only
Filipino citizen).
● 1981 - Luis Sr. died​​ and the respondents claimed ownership over Lot
998 by succession, alleging that no trust exists.
○ 1982 - Respondents executed a Deed of Extra-Judicial
Settlement of Estate of Luis Sr., adjudicating unto themselves
Lot 998 - approved
○ Respondents subdivided the lot where Lot 998-A was in the
name of Go Tiat Kun, while Lot 998-B for Luis Jr.
● Luis Jr. sold Lot 998-B to Fine Rock Devt Corp. (FRDC), which in turn
sold to Visayas Goodwill Credit Corp. (VGCC).
○ 1995 - only after petitioners received a letter from VGCC
that they discovered about the breach of trust
● Petitioners filed for annulment of sales and reconveyance of ​Lot 998-B​.
○ TC: in favor of petitioners; CA affirmed
○ Lot 998-B was reconveyed​​ and TCT was issued under
petitioners’ names including Luis Sr.
● 2001 - Go Tiat Kun executed a Deed of Sale of Undivided Interest over
Lot 998-A (subject in this case)​ in favor of her children.
○ Petitioners filed for nullification of titles as owners of Lot 998-A.
 ● TC: in favor of petitioners saying that there was an implied resulting
trust where Luis Sr. was a mere trustee and the beneficial interest
remained in Juan Tong and subsequently in the Juan Tong Lumber, Inc.
● CA reversed: express trust from the positive act of Juan Tong to create
a trust
○ Granting there was implied resulting trust, petitioners are
barred by prescription as the trust was terminated upon the
death of Luis Sr. and was converted into constructive
■ Reconveyance based on constructive trust -
prescribes in 10 years from the death (1981)
○ Presumption of donation to child - no trust, but gift
Issue/s:
1. W/N there was an implied resulting trust over the whole Lot 998 - YES
2. W/N parol evidence may be admitted - YES
3. (MAIN)​​ W/N the action of reconveyance prescribed - NO
Ratio:
1.
● An implied resulting trust was created, sometimes referred to as a
purchase money resulting trust, the elements of which are:
○ an actual payment of money, property or services, or an
equivalent, constituting valuable consideration; and
○ such consideration must be furnished by the alleged
beneficiary of a resulting trust.
● Here, Luis Sr. was merely a trustee of Juan Tong and the petitioners in
relation to the subject property, and it was Juan Tong who provided the
money for the purchase of Lot 998 but the corresponding transfer
certificate of title was placed in the name of Luis Sr.
○ Reason why Lot 998 was registered in the name of Luis Sr.
was to facilitate the purchase of the said property to be used in
the family’s lumber business since Luis Sr. was the only
Filipino Citizen.
2.
● For implied resulting trusts, what is crucial is the intention to create the
trust.
3.
● Implied resulting trusts do not prescribe except when trustee repudiates
the trust.
● Action to reconvey does not prescribe so long as the property is in the
name of the trustee. To allow prescription would be tantamount to
allowing a trustee to acquire title against his principal and true owner.
○ Title of Lot 998 was still in the name of Luis Sr. even when he
predeceased Juan Tong.
○ Trust was repudiated through Luis Sr.’s death - Lot 998 cannot
be included in his estate, except as to his undivided share
○ Tax declarations amplify petitioners’ claim over ​Lot 998-A.
○ Reconveyance of Lot 998-A as part of Lot 998 - imprescriptible
Dispositive: ​Petition is granted. CA decision is reversed.
Notes:
Other proof of intention to create trust: Juan Tong had the means to purchase;
Lot 998 had always been in the possession of petitioners; from registration of
Luis Sr in 1957, Lot 998 remained undivided and untouched by respondents until
after his death; real property taxes were paid by Juan Tong, not by Luis Sr.
6. Yu v. NLRC - CASAMA
Petitioners: BENJAMIN YU
Respondents: NLRC, JADE MOUNTAIN PRODUCTS COMPANY LIMITED,
WILLY CO, RHODORA D. BENDAL, LEA BENDAL, CHIU SHIAN JENG and
CHEN HO-FU
DOCTRINE: ​Art. 1830. Dissolution is caused:
(1) without violation of the agreement between the partners;
xxx
(b) ​by the express will of any partner, who must act in good faith, when no
definite term or particular undertaking is specified;​
xxx
(2) in contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of
this article, ​by the express will of any partner at any time
Facts:
· ​Petitioner Benjamin Yu was formerly the Assistant General Manager
(AGM) of the marble quarrying and export business operated by a registered
partnership with the firm name of "Jade Mountain Products Company
Limited" ("Jade Mountain").
- Partnership was originally organized in 1984 with Lea and
Rhodora Bendal as general partners and Chin Shian Jeng,
Chen Ho-Fu and Yu Chang (all citizens of Taiwan) as limited
partners
- The business consisted of exploiting marble deposit found on
land owned by Sps. Ricardo and Guillerma Cruz in Bulacan
under a Memorandum of Agreement (1984) with the Cruz
Spouses. Its main office is in Makati
· Yu was hired by virtue of Partnership Resolution as AGM with 4k salary
- He received only half of this monthly salary since he had
accepted the promise of the partners that the balance would be
paid when the firm shall have secured additional operating
funds from abroad
- Yu actually managed the operations and finances of the
business
- Yu had overall supervision of the workers and took charge of
the preparation of papers relating to the exportation of the
firm’s products
· In 1988, the general partners sold and transferred their interests to private
respondent Willy Co and to one Emmanuel Zapanta
· Yu Chang (limited partner) sold and transferred his interest in the
partnership to Willy Co.
· Between Zapanta and himself, Willy Co and Zapanta acquired the great
bulk of the partnership interest
· The partnership now constituted solely by Willy Co and Zapanta continued
to use the old firm name of Jade Mountain, though they moved the firm’s
main office from Makati to Mandaluyong
· A Supplement to the MOA was entered into with Cruz spouses in 1988.
The actual operations of the business enterprise continued as before.
· All employees continued working except petitioner Yu.
· When Yu learned the transfer of main office, Yu reported to the
Mandaluyng office for work and met Willy Co for the first time
· Willy Co told Yu that he had bought the business and it was form to decide
whether he was responsible for the obligations of the old partnership
including Yu’s salaries.
· Yu was not allowed to work anymore and his salaries remained unpaid
· Yu filed a complaint for illegal dismissal and recovery of unpaid salaries
· Labor arbiter De Castro held that yu was illegally dismissed and decreed
his reinstatement
· NLRC reversed the decision upon appeal.
- New partnership had bought the Jade Mountain business and
had not retained Yu
- No law is required to absorb employees of old partnership
- Yu’s claim of unpaid wages must be asserted against old
partners
· Petitioner contends that partnership overlooked the principle that a
partnership has a juridical personality separate and distinct from that of each
of its members and such independent legal personality subsists despite
change in the identities of the partners. His employment contract could not
have been affected.
Issue/s:
1. Whether the partnership which had hired Yu as AGM had been
extinguished and replaced by new partnership? - YES
2. If indeed a new partnership had come into existence, whether Yu
could nonetheless assert his rights under his employment contract as
against the new partnership? - YES
Ratio: (numbered, according to issue/s)
1. Yes
· Art. 1828. The dissolution of a partnership is the change in the relation of
the partners ​caused by any partner ceasing to be associated in the carrying
on​ as distinguished from the winding up ​of the business​.
· Art. 1830. Dissolution is caused:
(1) without violation of the agreement between the partners;
(b) ​by the express will of any partner, who must act in good faith, when no
definite term or particular undertaking is specified;​
(2) in contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of this
article, ​by the express will of any partner at any time
· In the case at bar, about all of the partners sold their partnership interests
(82%) to Willy Co and Zapanta. Although the record shows nothing about
the 18% of the original interests, the acquisition of 82% interests coupled
with the retirement or withdrawal of the original partners was enough to
constitute a new partnership
· The occurrence of events which precipitate the legal consequence of
dissolution of a partnership do not automatically result in the termination of
the legal personality of the old partnership (1829 - on dissolution the
partnership is not terminated, but continues until the winding up of
partnership affairs is completed.)
· It is important to underscore the fact that the business of the old
partnership was simply continued by the new partners, ​without the old
partnership undergoing the procedures relating to dissolution and winding up
of its business affairs
· The new partnership simply took over the business enterprise owned by
the preceeding partnership, and continued using the old name of Jade
Mountain Products Company Limited, without winding up the business
affairs of the old partnership, paying off its debts, liquidating and distributing
its net assets, and then re-assembling the said assets or most of them and
opening a new business enterprise. ( pointed out the issue of tax
considerations – not discussed)
2. YES
· ​As a result, the retiring partners (Rhodora Bendal, et al.) and the new
partnership itself which continued the business o ​ f the old, dissolved, one,
are liable for the debts of the preceding partnership.
· ​Sinsgson v. Isabela Saw Mill – w ​ ithdrawing partner remains liable to a third
party creditor of the old partnership
· Under Article 1840, creditors of the old Jade Mountain are also creditors of
the new Jade Mountain which continued the business of the old one without
liquidation of the partnership affairs.
· A creditor of the old Jade Mountain, like petitioner Benjamin Yu in respect
of his claim for unpaid wages, is entitled to priority ​vis-a-vis a ​ ny claim of any
retired or previous partner insofar as such retired partner's interest in the
dissolved partnership is concerned.
· Benjamin Yu is entitled to enforce his claim for unpaid salaries, as well as
other claims relating to his employment with the previous partnership,
against the new Jade Mountain.
· The new partnership was entitled to appoint and hire a new ASG who
belongs to the most senior ranks of management
· The non-retention of Yu did not constitute unlawful termination
· Precise authorized for termination in the case was a redundancy as Willy
Co, the principal owner, personally ran the business of Jade Mountain
NOTES
· Yu is entitled to a separation pay at the rate of one month’s pay for each
year of service that he rendered to the old partnership, a fraction of at least
six months being considered as a whole year
· Yu is entitled to moral damages as he was shabbily treated by the new
partnership considering that Yu exerted efforts for the benefit of the
company and there was no notice to him regarding the termination of his
services without cause and the transfer of the office.
· SEE 1840 – court held that the facts of this case were not detailed enough
to see what specific provision applies.
Dispositive: (copy paste)
WHEREFORE, for all the foregoing, the Petition for ​Certiorari i​ s GRANTED DUE
COURSE, the Comment filed by private respondents is treated as their Answer
to the Petition for ​Certiorari​, and the Decision of the NLRC dated 29 November
1990 is hereby NULLIFIED and SET ASIDE. A new Decision is hereby
ENTERED requiring private respondent Jade Mountain Products Company
Limited to pay to petitioner Benjamin Yu the following amounts:
(a) for unpaid wages which, as found by the Labor Arbiter, shall be computed at
the rate of P2,000.00 per month multiplied by thirty-six (36) months (November
1984 to December 1987) in the total amount of P72,000.00;(b) separation pay
computed at the rate of P4,000.00 monthly pay multiplied by three (3) years of
service or a total of P12,000.00;(c) indemnity for moral damages in the amount of
P20,000.00; (d) six percent (6%) per annum ​legal interest computed on items (a)
and (b) above, commencing on 26 December 1989 and until fully paid; and (e)
ten percent (10%) attorney's fees on the total amount due from private
respondent Jade Mountain.
7. Ortega v. CA - CASAMA
Petitioners: GREGORIO ORTEGA, TOMAS O. DEL CASTILLO, JR and
BENJAMIN T. BACORRO
Respondents: CA, SECURITIES AND EXCHANGE COMMISSION AND
JOAQUIN L. MISA
DOCTRINE: ​A partnership that does not fix its term is partnership at will.
The dissolution of a partnership is the change in the relation of the parties
caused by any partner ceasing to be associated in the carrying on, as might
be distinguished from the winding up of, the business. ​Upon its dissolution, the
partnership continues and its legal personality is retained until the complete
winding up of its business culminating in its termination.
Facts:
· The law firm Ross, Lawrence, Selph and Carrascoso was duly registered
in the Mercantile Registry on 1937 and reconstituted with the SEC in 1948
· SEC records shows that there were several subsequent amendments to
the articles of partnership to change the firm name to:
- Ross, Selph, and Carrascoso (1958)
- Ross, Selph, Salcedo, Del Rosario, Bito & Misa (1965)
- Salcedo, Del Rosario, Bito, Misa & Lozada (1972)
- Del Rosario, Bito, Misa & Lozada (1977)
- Bito, Misa & Lozada (1980)
· Bito and Lozada associated themselves together as senior partners with
petitioners Ortega, Castillo, and Bacorro as junior partners
· Feb. 17 1988 – Misa wrote petitioners that he is withdrawing and retiring
from the firm effective at the end of February, 1988 and he trust that the
accountants will be instructed to make the proper liquidation of his
participation in the firm (in letter form)
· On the same day, Misa wrote petitioners that he would like to have a
meeting with the partners with regard to the mechanics of liquidation, and
more particularly, his interst in the two floors of this building. He would like to
have this resoled soon because it has to do with his plans (in letter form)
· Feb 19, 1988 – Misa wrote that the partnership has ceased to be mutually
satisfactory because of the working conditions of their employees including
the assistant attorneys.
- He further stated that all of his efforts to ameliorate the below
subsistence level of the pay scale of their employees have
been thwarted by the other partners.
- The other partners refused to give meaningful increases to the
employees even attorneys are dressed down publicly in a loud
voice in a manner that deprived them of their self-respect.
- The result of such policies is the formation of the union
including the attorneys.
· Misa filed with Commission’s Securities Investigation and Clearing
Department a petition for dissolution and liquidation of partnership
· Hearing officer ruled that Misa’s withdrawal from the law firm Bito, Misa &
Lozada did not dissolve the said law partnership
· SEC en banc, on appeal, reversed the decision of the hearing officer.
- The withdrawal of Misa dissolved the partnership of “Bito, Misa
& Lozada”
- Being a partnership at will, the law firm could be dissolved by
any partner any time, such as by his withdrawal therefrom
regardless of good faith or bad faith since no partner can be
forced to continue in the partnership against his will
· The parties sought reconsideration and Misa asked for an appointment of
a receiver to take over the assets of the dissolved partnership but the SEC
denied such prayers
· The parties separately filed their appeals. Pending the case in CA, Bito
and Lozada both died
· The death of two partners and the admission of new partners prompted
Misa to renew his application for receivership to preserve partnership assets.
The new partners opposed.
· CA affirmed in toto the SEC decision.

Issue/s:
1. Whether the partnership of Bito, Misa & Lozada (now Bito, Lozada,
Ortega and Castillo) is a partnership at will? - YES
2. Whether the withdrawal of Misa dissolved the partnership regardless
of his good or bad faith? - YES
3. Whether Misa’s demand for dissolution of the partnership so that he
can get a physical partition of partnership was not made in bad faith? -
YES
Ratio: (numbered, according to issue/s)
1. YES
· A partnership that does not fix its term is partnership at will.
· The law firm Bito, Misa & Lozada, and now Bito, Lozada, Ortega & Castillo
does not provide for a specific period or undertaking
· "5. DURATION. The partnership shall continue so long as mutually
satisfactory and upon the death or legal incapacity of one of the partners,
shall be continued by the surviving partners." (duration clause)
· The hearing officer opined that the partnership is one for a specific
undertaking
· "2. ​Purpose​. The purpose for which the partnership is formed, is to act as
legal adviser and representative of any individual, firm and corporation
engaged in commercial, industrial or other lawful businesses and
occupations; to counsel and advise such persons and entities with respect to
their legal and other affairs; and to appear for and represent their principals
and client in all courts of justice and government departments and offices in
the Philippines, and elsewhere when legally authorized to do so."
· The "purpose" of the partnership is not the specific undertaking referred to
in the law. Otherwise, all partnerships, which necessarily must have a
purpose, would all be considered as partnerships for a definite undertaking.
There would therefore be no need to provide for articles on partnership at
will as none would so exist.
· What the law contemplates, is a specific undertaking or "project" which has
a definite or definable period of completion.
· The birth and life of a partnership at will is predicated on the mutual desire
and consent of the partners.
· The right to choose with whom a person wishes to associate himself is the
very foundation and essence of that partnership.
· Its continued existence is, in turn, dependent on the constancy of that
mutual resolve, along with each partner's capability to give it, and the
absence of a cause for dissolution provided by the law itself.
2. ​ YES
· Verily, any one of the partners may, at his sole pleasure, dictate dissolution
of the partnership at will. He must, however, act in good faith, not that the
attendance of bad faith can prevent the dissolution of the partnership ​but that
it can result in a liability for damages.
· Neither would the presence of a period for its specific duration or the
statement of a particular purpose for its creation prevent the dissolution of
any partnership by an act or will of a partner. ​Among partners, ​mutual agency
arises and the doctrine of ​delectus personae allows them to have the power,​
although not necessarily the ​right​, to dissolve the partnership. An unjustified
dissolution by the partner can subject him to a possible action for damages.
· The dissolution of a partnership is the change in the relation of the parties
caused by any partner ceasing to be associated in the carrying on, as might
be distinguished from the winding up of, the business. ​Upon its dissolution,
the partnership continues and its legal personality is retained until the
complete winding up of its business culminating in its termination.
· The liquidation of the assets of the partnership following its dissolution is
governed by various provisions of the Civil Code, however, an agreement of
the partners, like any other contract, is binding among them and normally
takes precedence to the extent applicable over the Code's general
provisions.
· Paragraph 8 of the "Amendment to Articles of Partnership"
“……In the event of the death or retirement of any partner, his interest in the
partnership shall be liquidated and paid in accordance with the existing
agreements and his partnership participation shall revert to the Senior Partners
for allocation as the Senior Partners may determine……”
· The term "retirement" must have been used in the articles, as we so hold,
in a generic sense to mean the dissociation by a partner, inclusive of
resignation or withdrawal, from the partnership that thereby dissolves it.
3. YES
· Attorney Misa did not act in bad faith.
· His withdrawal to have been spurred by "interpersonal conflict" among the
partners.
· It would not be right, we agree, to let any of the partners remain in the
partnership under such an atmosphere of animosity; certainly, not against
their will.
· As long as the reason for withdrawal of a partner is not contrary to the
dictates of justice and fairness, nor for the purpose of unduly visiting harm
and damage upon the partnership, ​bad faith cannot be said to characterize
the act.
Bad faith, in the context here used, is no different from its normal concept of a
conscious and intentional design to do a wrongful act for a dishonest
Dispositive: (copy paste)
WHEREFORE, the decision appealed from is AFFIRMED. No
pronouncement on costs.
 8. Diaz v. Gorricho and Aguado -CHANG
Petitioners: Manuel Diaz, Constancia Diaz, Sor Petra Diaz (aka Lolita)
plaintiffs-appellants
Respondents: ​Carmen Gorricho and her husband Fransisco Aguado,
defendants-appellees.

DOCTRINE: ​In constructive trusts (that are imposed by law), there is neither
promise nor fiduciary relation; the so-called trustee does not recognize any
trust and has no intent to hold for the beneficiary; therefore, the latter is not
justified in delaying action to recover his property. It is his fault if he delays;
hence, he may be estopped by his own laches.

Facts:
● Lots Nos. 1941 and 3073 of the Cadastral Survey of Cabanatuan originally
belonged to the conjugal partnership of the spouses Francisco Diaz and
Maria Sevilla.
● Francisco Diaz died in 1919, survived by his widow Maria Sevilla and their
three children — Manuel, Lolita, and Constancia.
● 1935: Carmen Gorricho filed an action against Maria Sevilla in the CFI
Manila, a writ of attachment was issued upon the shares of Maria Sevilla in
said lots.
● Said parcels were sold at public auction and purchased by Gorricho.
● Maria Sevilla failed to redeem within one year, whereupon the acting
provincial sheriff executed a final deed of sale in favor of Gorricho.
● In said final deed the sheriff conveyed to Gorricho the whole of parcels
numbers 1941 and 3073 instead of only the half-interest of Maria Sevilla
therein.
● Pursuant to said deed, Gorricho obtained Transfer Certificate of Titles in her
name on April 13, 1937, and has been possessing said land is as owner
ever since.
● 1951, Maria Sevilla died.
● 1952: her children Manuel, Constancia, and Sor Petra filed the action in CFI
Nueva Ecija, against Gorricho and her husband Aguado to compel them to
execute in their favor a deed of reconveyance over an undevided
one-half interest over the lots in question , ​which defendants were
allegedly holding in trust for them.
Gorricho’s contention: as a special defense, they claim that plaintiffs' action
has long prescribed.
Diaz’s contention: their father's half of the disputed property was acquired by
Gorricho through an error of the provincial sheriff; that having been acquired
through error, ​it was subject to an implied trust, as provided by Article 1456 of the
new Civil Code;​ and therefore, since the trust is continuing and subsisting, the
appellants may compel reconveyance of the property despite the lapse of time,
specially, because prescription does not run against titles registered under Act
496.
Issue/s:
1. WON the petitioners are barred by laches? YES.
Ratio: Constructive trusts may be barred by lapse of time.
1. In constructive trusts the rule is that laches constitutes a bar to actions
to enforce the trust, and repudiation is not required, unless there is
concealment of the facts giving rise to the trust.
2. In Case of Express Trust​. — Laches does not apply until the lapse of
time is great, or until the active duties of the trustee are terminated
except for turning over the trust property or funds to the beneficiaries.
a. No laches exists until a reasonable time after a beneficiary is
notified of a breach or other cause of suit against the trustee.
Laches does exist, however, where suit is not commenced
within such reasonable time.
3. In case of Constructive or Resulting Trust​. — Laches constitutes a
defense to a suit to declare and enforce a constructive trust for the
purpose of the rule, repudiation of the constructive trust is not required,
and time runs from the moment that the law creates the trust, which is
the time when the cause of action arises.
a. But laches does not exist while the trusted, fraudulently and
successfully conceals the facts giving rise to the trust, although
the concealment must be adequately pleaded by the plaintiff in
a suit to declare a trust where the delay is apparent on the face
of his pleading.
4. The reason for the difference in treatment is obvious. In ​express trusts​​,
the delay of the beneficiary is directly attributable to the trustee who
undertakes to hold the property for the former, or who linked to the
beneficiary by confidential or fiduciary relations.
a. The trustee's possession is, therefore, not adverse to the
beneficiary, until and unless the latter is made aware that the
trust has been repudiated.
5. In constructive trusts (imposed by law), ​there is neither promise nor
fiduciary relation​​; the so-called trustee does not recognize any trust
and has no intent to hold for the beneficiary; ​therefore, the latter is not
justified in delaying action to recover his property. It is his fault if he
delays; hence, he may be estopped by his own laches.
6. The equitable doctrine of estoppel by laches ​requires that the one
invoking it must show, not only the unjustified inaction, but that some
unfair injury would result to him unless the action is held barred. This
requirement Gorricho has not met, and she is bereft of the protection of
this rule.
7. Nevertheless​​, the judgment of dismissal should be upheld, because
Diaz's cause of action to attack the sheriff's deed and cancel the
transfer certificates of title ​accrued from the year of issuance and
recording, 1937​​, and ​they have, allowed 15 years to elapse before
taking remedial action in 1952.
8. Even considering that the youngest among them (Constancia), born in
1918, only became of age in 1939, more than sufficient time (13 years)
 has been allowed to elapse, notwithstanding Gorricho’s public assertion
of title during this entire period, to extinguish appellant's action.
9. Under the old Code of Civil Procedure, in force at the time, the longest
period extinctive prescription was only ten years.

Dispositive: (copy paste)

Wherefore, the judgment appealed from is affirmed, with costs against
appellants.

Lyons v Rosenstock-Combate
Petitioners: E.S. Lyons
Respondents:C.W. Rosenstock, Executor of the Estate of Henry W. Elser,
deceased

DOCTRINE:
Facts:
● Henry W. Elser was engaged in buying, selling, and administering real
estate. E. S. Lyons joined with him,the profits being shared by the two in
equal parts.
● Lyons, whose regular vocation was that of a missionary, or missionary
agent, of the Methodist Episcopal Church, went on leave to the United
States and was gone for nearly a year and a half.
● Elser made written statements showing that Lyons was, at that time,
half owner with Elser of three particular pieces of real property.
● Concurrently with this act Lyons execute in favor of Elser a general
power of attorney empowering him to manage and dispose of said
properties at will and to represent Lyons fully and amply, to the mutual
advantage of both.
● The attention of Elser was drawn to a piece of land, referred to as the
San Juan Estate​​. The amount needed was 150k and he only had
120k. He obtained the loan of P50,000 ​with his own money​​ from a
Chinese merchant to complete the amount needed for the first payment
on the San Juan Estate.
● For the purpose of the further development of the property a limited
partnership had, about this time, been organized by Elser and three
 associates, under the name of J. K. Pickering & Company; and when 1. WON there was a general relation of partnership. NO
the transfer of the property was effected the deed was made directly to
this company. As Elser was the principal capitalist in the enterprise he Ratio: (numbered, according to issue/s)
received by far the greater number of the shares issued, his portion 1. There was clearly no general relation of partnership, under article 1678 of
amount in the beginning to 3,290 shares. the Civil Code. It is clear that Elser, in buying the San Juan Estate, was not
● Elser contemplated and hoped that Lyons might be induced to come in acting for any partnership composed of himself and Lyons, and the law
with him and supply part of the means necessary to carry the enterprise cannot be distorted into a proposition which would make Lyons a participant
through. In this connection it appears that on May 20, 1920, Elser wrote in this deal contrary to his express determination.
Lyons a letter, informing him that he had made an offer for a big 2. The doctrines of equity worked out in the jurisprudence of England and the
subdivision and that, if it should be acquired and Lyons would come in, United States with reference to trust supply a basis for this action by Lyons.
the two would be well fixed. However those doctrines operate only where money belonging to one
● June 21, 1920, Lyons wrote a letter from New York thanking Elser for person is used by another for the acquisition of property which should
his offer to take Lyons into his new project and adding that from the belong to both.
standpoint of making money, he had passed up a good thing. 3. No money belonging to Lyons or any partnership composed of Elser and
● Going back to the mortgage, the lender (Chinese Merchant) insisted Lyons was in fact used by Elser in the purchase of the San Juan Estate.
that he should procure the signature of the Fidelity & Surety Co. on the
note to be given for said loan. Elser mortgaged to the Fidelity & Surety Dispositive: (copy paste)
Co. the equity of redemption in the property owned by himself and The judgment appealed from will be affirmed, and it is so ordered, with
Lyons on Carriedo Street (Carriedo Property) as security. costs against the appellant.
● This mortgage was executed on June 30, 1920, at which time Elser
expected that Lyons would come in on the purchase of the San Juan
Estate. But when he learned from the letter from Lyons of July 21, 1920,
that the latter had determined not to come into this deal, Elser began to
cast around for means to relieve the Carriedo property of the
encumbrance which he had placed upon it.
● September 9, 1920, he addressed a letter to the Fidelity & Surety Co.,
asking it to permit him to substitute a property owned by himself at 644
M. H. del Pilar Street, Manila, and 1,000 shares of the J. K. Pickering &
Company, in lieu of the Carriedo property, as security. The new
mortgage and the release of the old were never registered.
● The San Juan Estate was acquired.
● The explanation of this change of mortgage is to be found in the fact
that Lyons had arrived in Manila on September 21, 1920, and shortly
thereafter, in the course of a conversation with Elser told him to let the
Carriedo mortgage remain on the property ("Let the Carriedo mortgage
ride").
● The case for Lyons supposes that, when Elser placed a mortgage for
P50,000 upon the equity of redemption in the Carriedo property, Lyons,
as half owner of said property, became, as it were, involuntarily the
owner of an undivided interest in the San Juan Estate acquired partly by
that money; and in consideration of this fact, he is entitled to the four
hundred forty-six and two-thirds shares of J. K. Pickering & Company,
with the earnings thereon, as claimed in his complaint.
● Lyons also claimed that Elser was going to use the mortgage on the
Carriedo property to buy the Ronquillo property, which is why he did not
allow it to be mortgaged. (not really relevant but sir might ask)

Issue/s:
 1. YULO v YANG CHIAO SENG - CORPUS
Petitioners: Rosario U. Yulo, assisted by her husband Jose C. Yulo
Respondents: Yang Chisao Seng
DOCTRINE: There is no partnership if the other party does not furnish
capital or furnish any help or intervention in the management of the
business.
Facts:
● On June 17, 1945, Yang Chiao Seng wrote a letter to the Mrs. Rosario U.
Yulo, proposing the formation of a partnership between them to run and
operate a theatre at Plaza Sta. Cruz, Manila, with the following conditions:
○ Yang guarantees Yulo a monthly participation of P3,000
payable quarterly in advance within the first 15 days of each
quarter
○ The partnership shall be for a period of 2 years and 6 months,
starting from July 1, 1945 to December 31, 1947
■ if the land is expropriated or rendered impracticable
for the business, or if the owner constructs a
permanent building thereon, or Yulo's right of lease is
terminated by the owner, then the partnership shall be
terminated even if the period for which the partnership
was agreed to be established has not yet expired;
○ Yulo is authorized personally to conduct such business in the
lobby of the building as is ordinarily carried on in lobbies of
theatres in operation
○ After December 31, 1947, all improvements placed by the
partnership shall belong to Yulo, but if the partnership
agreement is terminated before the lapse of 1 ½ years period,
under any of the causes mentioned in the 2nd paragraph, then
Yang shall have the right to remove and take away all
improvements that the partnership may place in the premises.
● Pursuant to Yang’s offer, the parties executed a partnership agreement
establishing the "Yang & Company, Limited,". The capital is fixed at
P100,000.
○ P80,000 of which is to be furnished by Yang and P20,000, by
Yulo.
○ Profits are to be distributed among the partners in the same
proportion as their capital contribution.
○ In case of loss, Yulo’s liability shall be limited to her capital
contribution
● In June 1946, they executed a supplementary agreement, extending the
partnership for a period of 3 years beginning January 1, 1948 to
December 31, 1950.
○ The benefits are to be divided between them at the rate of
50-50
○ After the said date, the show house building shall belong
exclusively to Yulo.
● The land on which the theatre was constructed was leased by Yulo from
Carrion Santa Marina. Contract of lease states that the lease shall
continue for an indefinite period of time, but that after one year the lease
may be cancelled by either party by written notice to the other party at
least 90 days before the date of cancellation.
● On April 12, 1949, Yulo was informed of the owner's desire to cancel the
contract of lease on July 31, 1949. The owners filed an ejectment suit
against Yulo. Yulo also brought a civil action to the CFI of Manila to
declare the lease of the premises.
○ CFI declared the contract of lease of the premises terminated
as of July 31, 1949, and fixing the reasonable monthly rentals
of said premises at P100.
○ CA affirmed the judgment.
● Yulo demanded from Yang her share in the profits of the business.
● Yang refused because he was advised by his counsel to suspend the
payment of the rentals because of the pendency of the ejectment suit by
the owners of the land against Yulo.
○ He is a sublessee and since Yulo has not paid to the lessors
the rentals from August, 1949, he was retaining the rentals to
pay to the landowners the rentals due from Yulo in arrears.
● In view of Yang’s refusal to pay, Yulo instituted this action, alleging:
○ the existence of a partnership between them and that Yang
refused to pay her share from December, 1949 to December,
1950;
○ After December 31, 1950 the partnership between Yulo and
Yang terminated, as a result of which, Yulo became the
absolute owner of the building occupied by the Cine Astor;
○ the reasonable rental that the defendant should pay therefor
from January, 1951 is P5,000;
● Yang alleged that the real agreement between the Yulo and Yang was
one of lease and not of partnership; that the partnership was adopted as
a subterfuge to get around the prohibition contained in the contract of
lease between the owners and the plaintiff against the sublease of the
said property.
● TC denied Yulo’s claim:
○ no partnership was created between Yulo and Yang because
the latter has not actually contributed the sum mentioned in the
Articles of Partnership, or any other amount;
○ the real agreement between the plaintiff and the defendant is
not of the partnership but one of the lease for the reason that
under the agreement the plaintiff did not share either in the
profits or in the losses of the business as required by Art. 1769
of the Civil Code;
○ the fact that Yulo was granted a "guaranteed participation" in
the profits also belies the supposed existence of a partnership
between them.

Issue/s:
● WON the written contract between Yulo and Yang is one of lease and
not of partnership. YES.
Ratio: (numbered, according to issue/s)
● The SC agrees with the trial court’s conclusion that the agreement was a
sublease, not a partnership. Under Art. 1767 of the CC, the following are the
requisites of partnership:
a. two or more persons who bind themselves to contribute
money, property, or industry to a common fund;
b. intention on the part of the partners to divide the profits among
themselves.
● Yulo did not furnish the supposed P20,000 capital. She did not furnish
any help or intervention in the management of the theatre. It also does
not appear that she has ever demanded from defendant any accounting
of the expenses and earnings of the business. She was absolutely silent
with respect to any of the acts that a partner should have done; all that
she did was to receive her share of P3,000 a month, which cannot be
interpreted in any manner than a payment for the use of the premises
which she had leased from the owners.
Dispositive: (copy paste)
We find no error in the judgment of the court below and we affirm it
in toto, with costs against plaintiff-appellant.
2. Eligio Estanislao Jr. v. CA - CRUZ
Petitioners: ​Eligio Estanaislao Jr.
Respondents: ​CA, Medeios Estanislao, Emilio and Leocadio Santiago
DOCTRINE: ​There is partnership when parties bound themselves to
contribute to the common fund with the intention of dividing the profits among
themselves
Facts:
● Petitioner Eligio and Respondents Remedios, Emilio and Leocadio are
brothers and sisters who are co-owners of certain lots at the corner of
Annapolis and Aurora Blvd., QuezonCity which were then being leased
to the Shell Company of the Philippines Limited (SHELL).
● They agreed to open and operate a gas station thereat to be known as
Estanislao Shell Service Station with an initial investment of P15,000.00
to be taken from the advance rentals due to them from SHELL for the
occupancy of the said lots owned in common by them.
● A joint affidavit was executed by them on April 11, 1966 which was
prepared by Atty. Democrito Angeles. They agreed to help their brother,
petitioner herein, by allowing him to operate and manage the gasoline
service station of the family.
● They negotiated with SHELL.
● For practical purposes and in order not to run counter to the company's
policy of appointing only one dealer, it was agreed that petitioner would
apply for the dealership.
● Respondent Remedios helped in managing the business with petitioner
from May 3, 1966 up to February 16, 1967.
● On May 26, 1966, the parties herein entered into an Additional Cash
Pledge Agreement with SHELL wherein it was reiterated that the
P15,000.00 advance rental shall be deposited with SHELL to cover
advances of fuel to petitioner as dealer with a proviso that said
agreement "cancels and supersedes the Joint Affidavit dated 11 April
1966 executed by the co-owners."
● For sometime, the petitioner submitted financial statements regarding
the operation of the business to private respondents, but therafter
petitioner failed to render subsequent accounting.
● Hence through Atty. Angeles, a demand was made on petitioner to
render an accounting of the profits.
● The financial report of December 31, 1968 shows that the business was
able to make a profit of P 87,293.79 and that by the year ending 1969, a
profit of P 150,000.00 was realized.
● Thus, on August 25, 1970 private respondents filed a complaint in the
Court of First Instance of Rizal against Eligio
● The trial court dismissed the complaint and counterclaim
● TC reversed
● CA decided in against petitioner
Issue/s: W/N there is a partnership built between petitioner and private
respondents. YEEEeeesss
Ratio:
● In the aforesaid Joint Affidavit, it is clearly stipulated by the parties that
the P 15,000.00 advance rental due to them from SHELL shall augment
their "capital investment" in the operation of the gasoline station, which
advance rentals shall be credited as rentals from May 25, 1966 up to
four and one-half months or until 10 October 1966, more or less
covering said P 15,000.00.
● In the subsequent document entitled "Additional Cash Pledge
Agreement" the private respondents and petitioners assigned to SHELL
 the monthly rentals due them commencing the 24th of May 1966 until
such time that the monthly rentals accumulated equal P 15,000.00
which private respondents agree to be a cash deposit of petitioner in
favor of SHELL to increase his credit limit as dealer. As above-stated it
provided therein that "This agreement, therefore, cancels and
supersedes the Joint Affidavit dated 11 April 1966 executed by the
CO-OWNERS."
● Petitioner contends that because of the said stipulation cancelling and
superseding that previous Joint Affidavit, whatever partnership
agreement there was in said previous agreement had thereby been
abrogated.
● We find no merit in this argument. Said cancelling provision was
necessary for the Joint Affidavit speaks of P15,000.00 advance rentals
starting May 25, 1966 while the latter agreement also refers to advance
rentals of the same amount starting May 24, 1966.
● There is, therefore, a duplication of reference to the P 15,000.00 hence
the need to provide in the subsequent document that it "cancels and
supersedes" the previous one.
● True it is that in the latter document, it is silent as to the statement in the
Joint Affidavit that the P 15,000.00 represents the "capital investment"
of the parties in the gasoline station business and it speaks of petitioner
as the sole dealer, but this is as it should be for in the latter document
SHELL was a signatory and it would be against its policy if in the
agreement it should be stated that the business is a partnership with
private respondents and not a sole proprietorship of petitioner.
● Moreover other evidence in the record shows that there was in fact such
partnership agreement between the parties. This is attested by the
testimonies of private respondent Remedies Estanislao and Atty.
Angeles.
● Petitioner submitted to private respondents periodic accounting of the
business. Petitioner gave a written authority to private respondent
Remedies Estanislao, his sister, to examine and audit the books of their
"common business' aming negosyo).
● Respondent Remedios assisted in the running of the business.
● There is no doubt that the parties hereto formed a partnership when
they bound themselves to contribute money to a common fund with the
intention of dividing the profits among themselves.
● The sole dealership by the petitioner and the issuance of all government
permits and licenses in the name of petitioner was in compliance with
the afore-stated policy of SHELL and the understanding of the parties of
having only one dealer of the SHELL products.
Dispositive: ​WHEREFORE, the judgment appealed from is AFFIRMED in toto
with costs against petitioner. This decision is immediately executory and no
motion for extension of time to file a motion for reconsideration shag be
entertained.
3. Evangelista v. CIR - CRUZ
Petitioners: ​Eufemia Evangelista, Manuela Evangelista and Francisca
Evangelista
Respondents: ​Collector of Internal Revenue and Court of Tax Appeals
DOCTRINE:
Facts:
● Petitioners borrowed from their father the sum of P59,1400.00 which
amount together with their personal monies was used by them for the
purpose of buying real properties,.
● The petitioner bought the ff from different sellers:
○ A lot including improvements thereon
○ 21 parcels of land
○ Lot from Insular Investments
○ Another lot
● A document dated August 16, 1945, they appointed their brother
Simeon Evangelista to 'manage their properties with full power to lease;
to collect and receive rents; to issue receipts therefor; in default of such
payment, to bring suits against the defaulting tenants; to sign all letters,
contracts, etc., for and in their behalf, and to endorse and deposit all
notes and checks for them;
● After having bought the above-mentioned real properties the petitioners
had the same rented or leases to various tenants
● Collector of Internal Revenue demanded the payment of income tax on
corporations, real estate dealer's fixed tax and corporation residence tax
for the years 1945-1949
● Court of Tax Appeals ruled in favor of CIR
Issue/s: ​W/N petitioners are subject to the tax on corporations as well as to the
residence tax for corporations and the real estate dealers fixed tax. YEEEEEsss

Ratio: (numbered, according to issue/s)
● National Internal Revenue Code:
● SEC. 24. ​Rate of tax on corporations.​ —There shall be levied, assessed,
collected, and paid annually upon the total net income received in the
preceding taxable year from all sources by every corporation organized
in, or existing under the laws of the Philippines, no matter how created
or organized but not including duly registered general co-partnerships
(​compañias colectivas​), a tax upon such income equal to the sum of the
following: . . .
● SEC. 84 (b). The term 'corporation' includes partnerships, no matter
how created or organized, joint-stock companies, joint accounts
(​cuentas en participacion​), associations or insurance companies, but
does not include duly registered general copartnerships. (​compañias
colectivas​).
● Article 1767 of the Civil Code of the Philippines provides: By the
contract of partnership two or more persons bind themselves to
contribute money, properly, or industry to a common fund, with the
intention of dividing the profits among themselves.
● Pursuant to the article, the essential elements of a partnership are two,
namely:
● (a) an agreement to contribute money, property or industry to a common
fund; and
● (b) intent to divide the profits among the contracting parties.
● The first element is undoubtedly present in the case at bar, for,
admittedly, petitioners have agreed to, and did, contribute money and
property to a common fund.
● We are fully satisfied that their purpose was to engage in real estate
transactions for monetary gain and then divide the same among
themselves
● The common fund was not something they found already in existence.
● They ​jointly borrowed ​a substantial portion thereof in ​order​ to establish
said common fund.
● They invested the same, not merely not merely in one transaction, but in
a ​series​ of transactions.
● The number of lots (24) acquired and transactions undertaken, as well
as the brief interregnum between each, particularly the last three
purchases, is strongly indicative of a pattern or common design that was
not limited to the conservation and preservation of the aforementioned
common fund or even of the property acquired by the petitioners
● The aforesaid lots were not devoted to residential purposes, or to other
personal uses, of petitioners herein.
● Properties have been under the management of one person, namely
Simeon Evangelista. Thus, the affairs relative to said properties have
been handled as if the same belonged to a corporation or business and
enterprise operated for profit.
● Foregoing conditions have existed for more than ten (10) years, or, to
be exact, over fifteen (15) years, since the first property was acquired,
and over twelve (12) years, since Simeon Evangelista became the
manager.
● The collective effect of these circumstances is such as to leave no room
for doubt on the existence of said intent in petitioners herein.
● Petitioners insist, however, that they are mere co-owners, not
copartners, for, in consequence of the acts performed by them, a legal
entity, with a personality independent of that of its members, did not
come into existence, and some of the characteristics of partnerships are
lacking in the case at bar. This pretense was correctly rejected by the
Court of Tax Appeals.
● The term 'partnership' includes a syndicate, group, pool, ​joint venture or
other unincorporated organization, through or by means of which any
business, financial operation, or venture is carried on
● For purposes of the tax on corporations, ​our National Internal Revenue
Code, includes these partnerships​ — with the exception only of duly
registered general co-partnerships — ​within the purview of the term
"corporation."
● As regards the residence of tax for corporations, section 2 of
Commonwealth Act No. 465 provides in part: Entities liable to residence
tax.-Every corporation, no matter how created or organized, whether
domestic or resident foreign, engaged in or doing business in the
Philippines shall pay an annual residence tax of five pesos and an
annual additional tax which in no case, shall exceed one thousand
pesos, in accordance with the following schedule: the term 'corporation'
as used in this Act includes joint-stock company, ​partnership​, joint
account (​cuentas en participacion)​ , association or insurance company,
no matter how created or organized.​
● Lastly, the records show that petitioners have habitually engaged in
leasing the properties above mentioned for a period of over twelve
 years, and that the yearly gross rentals of said properties from June
1945 to 1948 ranged from P9,599 to P17,453.
● Thus, they are subject to the tax provided in section 193 (q) of our
National Internal Revenue Code, for "real estate dealers," inasmuch as,
pursuant to section 194 (s) thereof: 'Real estate dealer' includes any
person engaged in the business of buying, selling, exchanging, ​leasing,
or renting property or his own account as principal​ and holding himself
out as a full or part time dealer in real estate or as an owner of rental
property or properties rented or offered to rent for an aggregate amount
of three thousand pesos or more a year.
Dispositive: ​Wherefore, the appealed decision of the Court of Tax appeals is
hereby affirmed with costs against the petitioners herein. It is so ordered.
NOTES:
BAUTISTA ANGELO, J., concurring:
● I agree with the opinion that petitioners have actually contributed money
to a common fund with express purpose of engaging in real estate
business for profit.
● I wish however to make the following observation: Article 1769 of the
new Civil Code lays down the rule for determining when a transaction
should be deemed a partnership or a co-ownership. Said article
paragraphs 2 and 3, provides:
● (2) Co-ownership or co-possession does not of itself establish a
partnership, whether such co-owners or co-possessors do or do not
share any profits made by the use of the property;
● (3) The sharing of gross returns does not of itself establish partnership,
whether or not the person sharing them have a joint or common right or
interest in any property from which the returns are derived;
● From the above it appears that the fact that those who agree to form a
co-ownership shared or do not share any profits made by the use of
property held in common does not convert their venture into a
partnership.
● Or the sharing of the gross returns does not of itself establish a
partnership whether or not the persons sharing therein have a joint or
common right or interest in the property.
● This only means that, aside from the circumstance of profit, the
presence of other elements constituting partnership is necessary, such
as the clear intent to form a partnership, the existence of a judicial
personality different from that of the individual partners, and the freedom
to transfer or assign any interest in the property by one with the consent
of the others
● It is evident that an isolated transaction whereby two or more persons
contribute funds to buy certain real estate for profit in the absence of
other circumstances showing a contrary intention cannot be considered
a partnership.
● This is impliedly recognized in the following portion of the decision:
"Although, taken singly, they might not suffice to establish the intent
necessary to constitute a partnership, the collective effect of these
circumstances (referring to the series of transactions) such as to leave
no room for doubt on the existence of said intent in petitioners herein."
4. Ona vs CIR - DELA CRUZ
Petitioners: LORENZO T. OÑA and HEIRS OF JULIA BEÑALES
Respondents: THE COMMISSIONER OF INTERNAL REVENUE
DOCTRINE:
Facts:
● ​Julia Buñales died on March 23, 1944, leaving as heirs her surviving
spouse, Lorenzo T. Oña and her five children.
● A case was filed for the settlement of her estate.
● Later, Lorenzo T. Oña the surviving spouse was appointed
administrator of the estate.
● Oña then submitted the project of partition, which was approved by the
Court. The Court appointed Oña to be guardian of the persons and
property of the 3 minor children.
● No attempt was made to divide the properties which remained under the
management of Oña who used said properties in business by leasing or
selling them and investing the income derived from them.
● As a result, petitioners’ properties and investments gradually increased.
The children usually comes back to Oña for payment of the taxes.
● Respondent CIR decided that the petitioners formed an unregistered
partnership and therefore, subject to the corporate income tax and was
assessed.
● Petitioners protested against the assessment and asked for
reconsideration which was denied. They then filed a Petition for review
of the decision of the Court of Tax Appeals
 1. WON
Issue/s:
1. WON the petitioners formed an unregistered partnership and thus Ratio: (numbered, according to issue/s)
subject to corporate taxes. 1.

Ratio: (numbered, according to issue/s) Dispositive: (copy paste)

1. · ​ Yes. The petitioners formed an unregistered partnership. The
project of partition was approved in 1949 yet, the properties remained
under the management of Oña who used said properties in business by
leasing or selling them and investing the income derived from it which 6.
increased the value of the properties.
· The corporate tax law states that in cases of inheritance, there Petitioners:
should be a period when the heirs can be considered as co-owners Respondents:
rather than unregistered co-partners.
· For tax purposes, the co-ownership of inherited properties is DOCTRINE:
automatically converted into an unregistered partnership the moment Facts:
the said common properties and/or the incomes derived therefrom are ●
used as a common fund with intent to produce profits for the heirs in
proportion to their respective shares in the inheritance as determined in Issue/s:
a project partition either duly executed in an extrajudicial settlement or 1. WON
approved by the court in the corresponding testate or intestate
proceeding. Ratio: (numbered, according to issue/s)
· From the moment of such partition, the heirs are entitled already 1.
to their respective definite shares of the estate and the incomes thereof,
for each of them to manage and dispose of as exclusively his own Dispositive: (copy paste)
without the intervention of the other heirs, therefore he becomes liable
individually for all taxes in connection with his share. If after such
partition, he allows his share to be held in common with his co-heirs 7.
under a single management to be used with the intent of making profit,
even if no document or instrument were executed for that purpose, an Petitioners:
unregistered partnership is formed. Respondents:

DOCTRINE:
Dispositive: IN VIEW OF ALL THE FOREGOING, the judgment of the Court Facts:
of Tax Appeals appealed from is affirm with costs against petitioners. ●

Issue/s:
5. 1. WON
Petitioners:
Respondents: Ratio: (numbered, according to issue/s)
1.
DOCTRINE:
Dispositive: (copy paste)
Facts:
●

Issue/s:
 8.
Petitioners:
Respondents:

DOCTRINE:
Facts:
●

Issue/s:
1. WON

Ratio: (numbered, according to issue/s)

1.

Dispositive: (copy paste)

9.
Petitioners:
Respondents:

DOCTRINE:
Facts:
●

Issue/s:
1. WON

Ratio: (numbered, according to issue/s)

1.

Dispositive: (copy paste)

 10. Anton vs Oliva - DE VERA
Petitioners: ​Jose Miguel Anton
Respondents: ​Spouses Ernesto Oliva and Corazon Oliva, as substituted by
her legal heirs, namely: Graziela Marie Collantes, Gretel Elaine Ding, Gladys
Miriam Oliva, Geoffrey Joseph Oliva and Glynnis Carmen Calpotura
DOCTRINE: ​Although the Olivas were mere creditors, not partners, the
Antons agreed to compensate them for the risks they had taken. The Olivas
gave the loans with no security and they were to be paid such loans only if the
stores made profits. Had the business suffered loses and could not pay what it
owed, the Olivas would have ultimately assumed those loses just by
themselves. Still there was nothing illegal or immoral about this scheme.
Facts:
● 2008: The Olivas (Ernesto and Corazon Oliva) filed an ​action for
accounting and specific performance and damages ​against the
Antons​​ (Jose and Gladys Oliva-Anton)
○ They alleged that they entered into three ​Memoranda of
Agreement (MOA)​​ ​with Gladys, their daughter and Jose
○ Under the MOAs, they set up a ​business partnership known
as “Pinoy Toppings” that were to be established at SM
Megamall, SM Cubao and SM Southmall; ​pertinent stipulations
are as follows​:
■ “That the FIRST PARTY (Olivas) shall be considered
a partner”
■ The Spouses Oliva were entitled to 30% share of the
net profits from the Megamall store and 20% share of
the net profits from the Cubao and Southmall stores.
■ The proceeds of the business (minus expenses) shall
be used to pay the principal amount of P500,000 and
the interest therein xxx since the Olivas secured the
above amount through a bank loan
■ Jose shall have a free hand in running the businesses
without any interference from his partners
■ Jose would provide monthly sales reports to the
Olivas
● The Olivas alleged that:
○ They were not given their share from the Cubao store.
○ Jose did not render an account of the operations of the three
stores
○ Beginning November 1997, the Antons stopped giving their
share in the net profits in the three stores
○ They demanded an accounting but Jose terminated their
partnership agreements
● As Answers,
○ Jose stated that they never partnered with the Olivas and
merely borrowed money to finance the opening of the stores
○ Gladys stated that because of her legal separation with Jose,
the latter terminated the business partnership with her parents
● RTC: no partnership relation existed, but Jose Miguel had an obligation
to render an accounting from the start of the business until the
termination of their MOAs and pay the Olivas their share of the net
profits with interests (affirmed by CA with few modifications)
○ Jose appeals, arguing that since the Olivas were not the
Antons’ partners in the stores, they were not entitled to receive
percentage shares of the net profits from the stores’ operations
Issue/s: ​WoN that notwithstanding the absence of a partnership between the
Olivas and the Antons, the latter have the obligation to pay the former their
shares of the net profits of the three stores plus legal interest on those shares
until they have been paid - YES
Ratio:
1. The relationship between the Olivas and Antons, as found by the lower
courts, was one of ​creditor-debtor, not of partnership
a. Although the MOA denominated the Olivas as partners, the
amounts they gave did not appear to be capital contributions to
the establishment of the stores
b. Indeed, the stores had to pay the amounts back with interests
c. Moreover, the MOAs forbade the Olivas from interfering with
the running of the stores
2. Although the Olivas were mere creditors, not partners, the Antons
agreed to compensate them for the risks they had taken
a. Olivas gave the loans with no security and were to be paid only
if the stores made profits
b. Unless the MOAs are rescinded on valid grounds or the parties
mutually terminate them, they remain valid and enforceable
3. It did not matter that the Antons had already paid for two of the loans
and their interests
a. Their obligation to share the net profits with the Olivas was not
extinguished by such payment
b. The Antons paid the Olivas their share of the profits from two
stores, although the loans had been paid
c. Only after the legal separation between Jose and Gladys did
he cease to pay the shares of the profits
4. Since the Olivas were mere creditors, not partners, they had no right to
demand that the Antons make an accounting of the money loaned out to
them.
a. Still, the Olivas were entitled to know from the Antons how
much net profits the three stores were making annually since
the Olivas were entitled to certain percentages of those profits.
 b. Indeed, the third and second MOA directed the Antons to
provide the Olivas with copies of the monthly sales reports
from the operations of the stores involved.
c. There is no reason why the Antons should not furnish the
Olivas copies of similar reports from the operations of the store
at SM Megamall, this merely being a consequence of the
Antons' obligation to share with the Olivas the net profits from
that store.
5. Jose Miguel also complains that the CA had no basis in awarding
interest on the third loan covering the establishment of the SM
Southmall store since the particular MOA did not provide for such
interest.
a. But, actually, the interests that the CA awarded to the Olivas
referred, not to interests on the loans they gave, but to interest
that their unpaid shares of the net profits of the three stores
should earn on account of Jose Miguel's unjustified refusal to
pay them beginning November 1997.

Dispositive: ​WHEREFORE, the Court DENIES the petition and AFFIRMS the
decision dated November 22, 2007 of the Court of Appeals in CA-G.R. CV 85521
with the following MODIFICATIONS:
1. The legal interest that petitioner Jose Miguel Anton shall pay
respondent Ernesto Oliva and the substituted heirs of respondent
Corazon Oliva on their unpaid shares in the net profits of the "Pinoy
Toppings" stores at SM Southmall, SM Megamall, and SM Cubao shall
be computed at the rate of 6% per annum; and
2. Petitioner Jose Miguel Anton is to furnish respondent Ernesto Oliva and
the substituted legal heirs of respondent Corazon Oliva copies of the
monthly sales reports of all three "Pinoy Toppings" stores at SM
Southmall, SM Cubao, and SM Megamall from November 1997 until the
proper termination of their Memoranda of Agreement dated May 2,
1992, May 6, 1993, and April 20, 1995.
 11. Woodhouse vs. Halili
Petitioners: Charles Woodhouse
Respondents: Fortunato Halili
DOCTRINE: ​Action to compel a party to execute the contract of partnership to
enforce the terms by which an enterprise had been constituted is an
enforcement of an obligation to do, which is contrary to policy against
involuntary servitude.
Facts:
1. Defendant Halili informed Woodhouse (plaintiff) of his desire to invest
half a million dollars in the bottling and distribution of Mission Soft
Drinks​​.
2. Woodhouse then relayed this message to Mission Dry Corporation of
Los Angeles, USA.
3. Mission Dry Corporation then gave plaintiff a ​thirty-day option on
exclusive bottling and distribution rights in the Philippines (Exhibit J).
4. Formal negotiations between plaintiff and defendant began at a meeting
at the Manila Hotel, with their lawyers attending.
a. Before this meeting plaintiff's lawyer had prepared a draft of
the agreement but this was not satisfactory because a
partnership, instead of a corporation, was desired.
5. Thereafter, plaintiff and defendant entered into a ​written agreement
with the ff. pertinent provisions:
(1) they shall organize a partnership for the bottling and
distributing of Mission soft drinks, with plaintiff, Woodhouse, as
industrial partner or manager, and defendant, Halili, as
capitalist;
(2) defendant (Halili) was to decide matters of general policy
regarding the business, while plaintiff was to attend the
operation and development of the bottling plant;
(3) plaintiff was to secure Mission soft drinks franchise for and
in behalf of the proposed partnership; and
(4) plaintiff was to receive 30 percent of the net profits of the
business.
6. This contract was signed and the parties to this case then went to the
United States to finalize the ​franchising agreemen​​t.
7. Mission Dry Corporation then granted the defendant the exclusive right,
license, and authority to produce, bottle, distribute and sell Mission
beverages in the Philippines.
8. When both parties went back to the Philippines, the bottling plant began
its operation. At first, plaintiff was given advances, on account of the
profits, and allowances which however ceased after two months
9. Moreover, when plaintiff demanded that the partnership papers be
executed, defendant refused to do so and instead suggested that they
just enter into a settlement. As no settlement was reached, the plaintiff
filed a complaint in the CFI.
10. In the CFI, plaintiff asks for ​execution of the contract of partnership,
accounting ​of the profits and a share thereof of 30 percent.
11. Defendant claims that plaintiff misrepresented himself that he was about
to become the owner of an exclusive bottling franchise when in fact
franchise was exclusively given to defendant​​, and that the plaintiff
failed to contribute to the exclusive franchise of the partnership.
12. CFI ordered defendant to render an accounting of the profits of the
business and to pay plaintiff 15 percent thereof. But it held that the
execution of the contract could not be enforced and the defense of fraud
was not proved. Unsatisfied with this ruling, both parties appealed to the
SC.
Issue/s and Ratio:
WHETHER PLAINTIFF FALSELY REPRESENTED THAT HE HAD AN
EXCLUSIVE FRANCHISE TO BOTTLE MISSION BEVERAGES - YES
Yes. As found by the SC, Exhibit J was used by plaintiff as an instrument with
which to bargain with the defendant and to close a deal with him, because if
plaintiff claimed that all he had was an option to exclusively bottle and distribute
Mission soft drinks in the Philippines, he would have probably lost the deal itself.
This is further supported by the fact that when defendant learned that plaintiff
did not have an exclusive franchise, he reduced plaintiff’s participation in
the profit to 15 percent, to which the plaintiff agreed.
The purpose of considering the drafts is not to vary, alter, or modify the
agreement, but to discover the intent of the parties thereto and the circumstances
surrounding the execution of the contract.
The issue of fact is, did plaintiff represent to defendant that he had an
exclusive franchise? Certainly, his acts or statements prior to the agreement are
essential and relevant to the determination of said issue. The act or statement
of the plaintiff was not sought to be introduced to change or alter the terms
of the agreement, but to prove how he induced the defendant to enter into
it - to prove the representations or inducements, or fraud, with which or by
which he secured the other party's consent thereto. These are expressly
excluded from the parol evidence rule.
Fraud and false representation are an incident to the creation of a jural act,
not to its integration, and are not governed by the rules on integration. Where
parties are prohibited from proving said representations or inducements, on the
ground that the agreement had already been entered into, it would be impossible
to prove misrepresentation or fraud. The parol evidence rule expressly allows the
evidence to be introduced when the validity of an instrument is put in issue by the
pleadings.
WHETHER THIS FALSE REPRESENTATION AMOUNTS TO FRAUD AND
MAY ANNUL THE AGREEMENT TO FORM A PARTNERSHIP

No. Article 1270 of the Spanish Civil Code distinguished two kinds of fraud​​,
causal fraud​​, which may be a ground for the annulment of a contract, and the
incidental fraud​​, which only renders the party who employs it liable for
damages.

As founded by the SC the misrepresentation of plaintiff does not amount to

causal fraud because ​it was not the principal inducement that led the
plaintiff to enter into the partnership agreement​​. As it was already noted,
both parties expressly agreed that they shall form a partnership.

In the case at bar, inasmuch as the principal consideration, the main cause
that induced defendant to enter into the partnership agreement with plaintiff, was
the ability of plaintiff to get the exclusive franchise to bottle and distribute for the
defendant or for the partnership, the false representation made by the plaintiff
was not the casual consideration, or the principal inducement, that led the
defendant to enter into the partnership agreement.

Lastly, the SC upheld the ruling of the trial court that the defendant may not
be compelled against his will to carry out the partnership. The law recognizes the
individual‘s freedom or liberty to do an act he has promised to do or not to do it
as he pleases

Dispositive: (copy paste)

With the modification above indicated, the judgment appealed from is
hereby affirmed. Without costs.
 12.
Petitioners:
Respondents:

DOCTRINE:
Facts:
●

Issue/s:
1. WON

Ratio: (numbered, according to issue/s)

1.

Dispositive: (copy paste)

 13. FERNANDEZ V. DE LA ROSA
Petitioners: Jose Fernandez
Respondents: Fransisco De La Rosa
DOCTRINE: If the contract contains the elements of common fund and
joint interest in the profit, the partnership relation results, and the law
fixes the incidents of this relation if the parties fail to do so. It is of no
importance that the parties have failed to reach an agreement with
respect to the minor details of the contract (since these are merely
accidental and not essential to the contract).
Facts:
● Petitioner Jose Fernandez (FERNANDEZ) claims that he entered into a
verbal agreement with Respondent Francisco De la Rosa (DE LA ROSA) to
form a partnership for the following purposes and conditions:
○ purchase of cascoes and the carrying on of the business of
letting the same for hire in Manila
○ o DE LA ROSA will buy the cascoes
○ o each partner will furnish such amount as he could
○ o the profits will be divided proportionately
○ In January, FERNANDEZ furnished DE LA ROSA P300 to
purchase casco No. 1515
○ o DE LA ROSA bought this from Dona Isabel Vales for 500
pesos and was placed in DE LA ROSA’s own name
○ FERNANDEZ also furnished DE LA ROSA with 300 pesos for
repairs
● In March P825 was furnished to DE LA ROSA from FERNANDEZ to buy
casco No. 2089
○ Also placed under the name of the DE LA ROSA only
○ purchased from Luis Yangco for 1k
● In April 1900, the parties undertook to draw up articles of their partnership
for the purpose of embodying it in an authentic document.
○ This did not materialize because DE LA ROSA proposed
articles which were materially different from their verbal
agreement
○ DE LA ROSA was also unwilling to include casco No. 2089 in
the partnership.
● Because the cascoes were under the management and control of DE LA
ROSA, the FERNANDEZ demanded an accounting over it
○ DE LA ROSA refused claiming that no partnership existed
between them
● DE LA ROSA admits the formation of the partnership in the casco business
which he was already engaged individually
○ but denies that the plaintiff furnished any money for the
purchase of casco No. 1515
○ DE LA ROSA claims that he merely borrowed the P300 on his
individual account from the bakery business in which plaintiff
was a copartner
● DE LA ROSA further alleges that the alleged 825 pesos was received by him
for the purchase of casco no. 1515 not for casco No. 2089 (as alleged by
FERNANDEZ) which was bought on March and not during January
○ And that for the purchase of casco no. 2089, he received no
amounts from FERNANDEZ
● He also added that the repairs made on the two cascoes were exclusively
borne by him, and that he returned a sum of P1,125 to plaintiff with an
express reservation on his part of all his rights as a partner.
Issue:
1. W/N a partnership existed between the parties. ​Yes.
2. W/N the partnership was terminated when the defendant returned the
P1,125 to plaintiff. ​No.
Ruling​​:
1. "Partnership is a contract by which two or more persons bind
themselves to contribute money, property, or industry to a common
fund, with the intention of dividing the profits among themselves." (Civil
Code, art. 1665.)chanrobles virtual law library
● The essential points upon which the minds of the parties must meet in a
contract of partnership are:
○ mutual contribution to a common stock, and
○ a joint interest in the profits.
● If the contract contains these two elements the partnership relation results,
and the law itself fixes the incidents of this relation if the parties fail to do so.
● MUTUAL CONTRIBUTION: It is a fact that money was furnished by FJ,
received by DE LA ROSA, with an agreement that it will be used to
purchased the said cascoes
● INTENTION TO SHARE PROFITS: the purchase of the cascoes in common
○ it may be added, in view of the admitted fact that prior to the
purchase of the first casco the formation of a partnership had
been a subject of negotiation between them
● Under other circumstances the relation of joint ownership, a relation distinct
though perhaps not essentially different in its practical consequence from
that of partnership, might have been the result of the joint purchase.
● If it were shown that the intention of the parties in purchasing in company is
to make a more favorable bargain for the two cascoes that they could have
done by purchasing them separately, in the absence of contrary intent
except to divide the common property once they had acquired it the ​affectio
societatis w​ ould be lacking
○ Therefore the parties would have become joint tenants only;
● But, as nothing of this sort appears in the case, we must assume that the
object of the purchase was active use and profit and not mere passive
ownership in common.
● The execution of a written agreement is not necessary effect the verbal
contract of partnership as a civil contract, the contributions of the partners
 not having been in the form of immovables or rights in immovables. (Civil
Code, art. 1667.)
○ Even if this is the suspensive condition for the contract 15. Heirs of Tan Eng Kee vs CA

2. The amount returned fell short, in our view of the facts, of that which the Petitioners: Heirs of Tan Eng Kee
plaintiff had contributed to the capital of the partnership, since it did not Respondents:Benguet Lumber Company
include the sum which he had furnished for the repairs of casco No.
1515. DOCTRINE: ​A joint venture "presupposes generally a parity of standing
● Moreover, it is quite possible, as claimed by the plaintiff, that a profit may between the joint co-ventures or partners, in which each party has an equal
have been realized from the business during the period in which the proprietary interest in the capital or property contributed, and where each party
defendant have been administering it prior to the return of the money, and if exercises equal rights in the conduct of the business.
so he still retained that sum in his hands. Facts:
● For these reasons the acceptance of the money by the plaintiff did not have ● After the second World War, Tan EngKee and Tan Eng Lay, pooling
the effect of terminating the legal existence of the partnership by converting their resources and industry together, entered into a partnership
it into a ​societas leonina,​ as claimed by counsel for the defendant engaged in the business of selling lumber and hardware and
● construction supplies.
● ● They named their enterprise "Benguet Lumber" which they jointly
● managed until Tan EngKee's death.
● Petitioners herein averred that the business prospered due to the hard
Issue/s: work and thrift of the alleged partners.
1. WON ● However, they claimed that in 1981, Tan Eng Lay and his children
caused the conversion of the partnership "Benguet Lumber" into a
Ratio: (numbered, according to issue/s) corporation called "Benguet Lumber Company."
1. ● The incorporation was purportedly a tactic to deprive Tan EngKee and
his heirs of their rightful participation in the profits of the business.
Dispositive: (copy paste) ● Petitioners prayed for accounting of the partnership assets, and the
dissolution, winding up and liquidation thereof, and the equal division of
the net assets of Benguet Lumber.
● The RTC ruled in favor of petitioners, declaring that Benguet Lumber is
a joint venture which is akin to a particular partnership.
● The Court of Appeals rendered the assailed decision reversing the
14. judgment of the trial court.
Petitioners: Issue/s:
Respondents: 1. WON the deceased Tan EngKee and Tan Eng Lay are partners-NO

DOCTRINE: Ratio: (numbered, according to issue/s)

● There was no partnership whatsoever. Except for a firm name, there
Facts: was no firm account, no firm letterheads submitted as evidence, no
● certificate of partnership, no agreement as to profits and losses, and no
time fixed for the duration of the partnership.
Issue/s: ● There was even no attempt to submit an accounting corresponding to
1. WON the period after the war until Kee's death in 1984.
● It had no business book, no written account nor any memorandum for
Ratio: (numbered, according to issue/s) that matter and no license mentioning the existence of a partnership.
1. Also, the trial court determined that Tan Eng Kee and Tan Eng Lay had
entered into a joint venture, which it said is akin to a particular
Dispositive: (copy paste) partnership.
 ● A particular partnership is distinguished from a joint adventure, to wit:
○ (a) A joint adventure (an American concept similar to our joint
accounts) is a sort of informal partnership, with no firm name
and no legal personality. In a joint account, the participating
merchants can transact business under their own name, and
can be individually liable therefor.
○ (b) Usually, but not necessarily a joint adventure is limited to a
SINGLE TRANSACTION, although the business of pursuing to
a successful termination maycontinue for a number of years; a
partnership generally relates to a continuing business of
various transactions of a certain kind.
● A joint venture "presupposes generally a parity of standing between the
joint co-ventures or partners, in which each party has an equal
proprietary interest in the capital or property contributed, and where
each party exercises equal rights in the conduct of the business.
● The evidence presented by petitioners falls short of the quantum of
proof required to establish a partnership. In the absence of evidence,
we cannot accept as an established fact that Tan Eng Kee allegedly
contributed his resources to a common fund for the purpose of
establishing a partnership.
● Besides, it is indeed odd, if not unnatural, that despite the forty years
the partnership was allegedly in existence, Tan Eng Kee never asked
for an accounting.
● The essence of a partnership is that the partners share in the profits and
losses .Each has the right to demand an accounting as long as the
partnership exists. A demand for periodic accounting is evidence of a
partnership.
● During his lifetime, Tan Eng Kee appeared never to have made any
such demand for accounting from his brother, Tang Eng Lay.
● The court concluded that Tan Eng Kee was only an employee, not a
partner since they did not present and offer evidence that would show
that Tan Eng Kee received amounts of money allegedly representing his
share in the profits of the enterprise.
● There being no partnership, it follows that there is no dissolution,
winding up or liquidation to speak of.
*** The court also noted that in determining whether a partnership exists, these
rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to each
other are not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a partnership,
whether such co-owners or co-possessors do or do not share any profits made
by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership,
whether or not the persons sharing them have a joint or common right or interest
in any property which the returns are derived;
(4) The receipt by a person of a share of the profits of a business is prima facie
evidence that he is a partner in the business, but no such inference shall be
drawn if such profits were received in payment:
(a) As a debt by installment or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of
the business;
(e) As the consideration for the sale of a goodwill of a business or other property
by installments or otherwise.
Dispositive: (copy paste)
WHEREFORE, the petition is hereby denied, and the appealed decision of the
Court of Appeals is hereby AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED​.
16. Torres v. CA - Kee
Petitioners: Antonio Torres, Angelo Torres and Emeteria Baring
Respondents: Court of Appeals and Manuel Torres
DOCTRINE: A partner may contribute not only money or property, but
also industry.
Facts:
● Sisters Antonia and Baring entered into a “joint venture agreement” with
Manuel for the development of a parcel of land into a subdivision. They
executed the deed of sale covering said property in favor of Manuel and
registering it in the latter’s name. The land was then mortgaged to Equitable
Bank for a loan of 40k to be used for such development.
● However, the project did not push through and the land was foreclosed.
Antonia and Baring alleged that it was due to Manuel’s lack of funds, means
and skills. Manuel in turn alleged that it was their fault for causing
annotations of adverse claims on the title of the land which scared away the
prospective buyers.
● Manuel also contended that he used the loan to implement the Agreement
by effecting survey and subdivision of lots, securing City Council’s approval
of the project, advertising in a local newspaper, construction of roads, curbs
and gutters, entering into a contract with an engineering firm for the building
of 60 low-cost housing units and eventually setting up a model house. His
total expenses for all these was 85k.
● TC and CA: Partnership was formed among the parties. Loss shall be
suffered by all of them in the same proportion as their share in the profits
stipulated in the Agreement.
● Antonia and Baring denied forming a partnership. They contended that the
joint venture agreement and the deed of sale are void.
Issue/s:
1. WON there exists a partnership among Antonia, Baring and Manuel - YES
2. WON the Joint Venture Agreement is void - NO
Ratio: (numbered, according to issue/s)
1. A reading of the Agreement shows the existence of a partnership which
provides that Antonia and Baring would contribute property in the form of
land while Manuel would give, in addition to his industry, the amount
needed for general expenses and other costs. Furthermore, the income
would be divided according to the stipulated percentage.
● The parties’ agreement is exactly what Article 1767 contemplates: “By
the contract of partnership two or more persons bind themselves to
contribute money, property or industry to a common fund, with the
intention of dividing the profits among themselves.”
● Parties implemented the contract. Petitioners transferred title to the land
in the name of Manuel. The latter, in turn, caused the subject land to be
mortgaged, developed the land in preparation for a subdivision project.
● Hence, Antonia and Baring’s contention is untenable that Manuel made
no contribution to the partnership.
● Further, Antonia and Baring’s allegation that Manuel should pay them
damages equivalent to 60% of the value of the property which was their
share in the profits under the Joint Venture Agreement is without merit.
True, they were not the cause of the failure of the project. But it was
also not the fault of Manuel. The former’s assertions failed to convince
the courts.
2. Antonia and Baring’s contention that the Joint Venture Agreement is
void under Article 1773 is untenable because Art. 1773 was intended only
to protect third persons.
● Art. 1773 provides “A contract of partnership is void, whenever
immovable property is contributed thereto, if an inventory of said
property is not made, signed by the parties, and attached to the public
instrument.
● Antonia and Baring contend that since the parties did not make, sign or
attach to the public instrument an inventory of the real property
contributed, the partnership is void.
● First, such provision is intended primarily to protect third persons. The
execution of a public instrument would be useless if there is no
inventory of the property contributed because without the description of
the property, they cannot be subject to inscription in the Registry of
Property, and their contribution cannot prejudice third persons. This will
result to fraud to those innocent persons who contract with the
partnership believing the efficacy of the guaranty in which the
immovables may consist. However, in the case at bar, it does not
involve third parties who may be prejudiced. Such article is not
applicable in this case.
● Second, Antonia and Baring invoke the allegedly void contract as basis
for their claim that Manuel should pay them 60% of the value of the
property. They cannot in one breath deny the contract and in another
recognize it as basis for their claim.
Dispositive: WHEREFORE, the Petition is hereby DENIED and the
challenged Decision AFFIRMED. Costs against petitioners.
Notes:
● The parties, in the Joint Venture Agreement, agreed to a profit-sharing
scheme as follows: Sale of subdivided lots - 60% for Antonia and
Baring, 40% for Manuel; additional profits or whatever income deriving
from sales will be divided equally according to the percentage agreed
upon by both parties.
17. Jose Lim vs LIm- Lim
Petitioners:HEIRS OF JOSE LIM, represented by ELENITO LIM
Respondents: JULIET VILLA LIM
DOCTRINE: Registration of the partnership is the best evidence to prove
the existence of partnership among partners.
Facts:
● Petitioners are the heirs of Jose Lim namely Jose’s widow Cresencia Lim;
and their children Elenito, Evelia, Imelda, Edelyna and Edison, all surnamed
Lim
● Julieta is the widow of the late Elfledo Lim who was the eldest son of Jose
and Cresencia
● The heirs of Jose Lim claims that Jose was the liason officer of Interwood
Sawmill in Mauban, Quezon. That sometime in 1980 he entered into a
partnership with Jimmy and Norberto to engage in a trucking business and
with an initial capital of 50k, they bought a truck to be used in the hauling
and transport of sawmill. That Jose managed the business until his death
and that the partners of Jose only agreed to continue under the
management of Elfledo. That Elfledo merely supervised the purchase of the
additional trucks using the income of the partnership.
● The heirs of Jose claim that Elfledo was holding the shares of the
partnership, its income and profits in behalf of the estate for them and they
only gave him authority to use, purchase or acquire properties using the said
funds and that upon his death, Juliet took over the administration of the
properties without their consent.
● Upon the demand of the heir of Jose Lim for Juliet to render an accounting,
she refused.
● On the other hand, Juliet claims the Elfledo was a partner of Norberto and
Jimmy and that it is thru their efforts and hard work that the business
flourished. Moreover, Juliet claims that Elfledo even entered into other
 businesses with his partners. She also claimed that when the trucking
business started to falter, she talked with the other partners as she could no
longer run the business and they agreed that the trucks (9 at that time) will
be divided among them with 3 trucks for each partner. Juliet bought the
share of Norberto’s heirs thru installments which left her with 6 trucks
● Juliet claims that when Jose died, he did not leave any properties which
Elfledo could have held in trust. Thus, since the properties from the
partnership are conjugal properties, she cannot be compelled to render an
accounting.
● The heirs of Jose Lim then filed a complaint for partition and damages
against Juliet.
● RTC: Ordered the partition of the properties between Juliet and the heirs of
Jose Lim and ordered Juliet to render an accounting.
● CA: ​reversed the RTC’s decision.
Issue/s:
1. WON Elfledo was a partner? Yes
Ratio: (numbered, according to issue/s)
● The court reviewed the facts because the findings of fact of the RTC
was contrary to that of the CA.
● A partnership exists when two or more persons agree to place their
money, effects, labor, and skill in lawful commerce or business, with the
understanding that there shall be a proportionate sharing of the profits
and losses among them. A contract of partnership is defined by the Civil
Code as one where two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of
dividing the profits among themselves.
● The best evidence to find out the members of the partnership would
have been the contract of partnership or the articles of partnership.
Unfortunately, there is none in this case, because the alleged
partnership was never formally organized.
● The heirs of Jose Lim heavily rely on Jimmy's testimony which states
that Elfledo was not a partner. However, that testimony is just one piece
of evidence against respondent. It must be considered and weighed
along with the other evidence vis-à-vis respondent's contrary evidence.
● In civil cases, the party having the burden of proof must establish his
case by a preponderance of evidence. "Preponderance of evidence" is
the weight, credit, and value of the aggregate evidence on either side
and is usually considered synonymous with the term "greater weight of
the evidence" or "greater weight of the credible evidence." It is a phrase
that, means probability of the truth. It is evidence that is more
convincing to the court as worthy of belief than that which is offered in
opposition thereto.
● Article 1769 provides the rules in determining the existence of
partnership:
(1) Except as provided by Article 1825, persons who are not partners as
to each other are not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a
partnership, whether such co-owners or co-possessors do or do not
share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a joint or
common right or interest in any property from which the returns are
derived;
(4) The receipt by a person of a share of the profits of a business is a
prima facie evidence that he is a partner in the business, but no such
inference shall be drawn if such profits were received in payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased
partner;
(d) As interest on a loan, though the amount of payment vary
with the profits of the business;
(e) As the consideration for the sale of a goodwill of a business
or other property by installments or otherwise.
● Applying Art. 1769, Elfledo was a partner based on the ff:
1) Cresencia testified that Jose gave Elfledo P50,000.00, as share in
the partnership, on the same date of the payment of the initial capital in
the partnership;
(2) Elfledo ran the affairs of the partnership, wielding absolute control,
power and authority, without any
intervention or opposition whatsoever from any of petitioners herein;
(3) all of the properties, particularly the 9 trucks of the partnership, were
registered in the name of Elfledo;
(4) Jimmy testified that Elfledo did not receive wages or salaries from
the partnership, indicating that what he actually received were shares of
the profits of the business;
(5) none of the petitioners, as heirs of Jose, the alleged partner,
demanded periodic accounting from Elfledo during his lifetime. As
repeatedly stressed, a demand for periodic accounting is evidence of a
partnership.
● Moreover, even assuming that the partner was Jose, the heirs failed to
produce any evidence to show that the properties acquired by Elfledo
formed part of the estate of Jose which were acquired thru the alleged
partnership. They failed to refute respondent's claim that Elfledo and
Juliet engaged in other businesses. Edison even admitted that Elfledo
also sold Interwood lumber as a sideline. It is also notable that Jose
died when the partnership was only a year old. If he were the partner
the partnership should have been dissolved and the assets liquidated.
● Thus, based on the testimonies, Elfledo is a partner. He was active and
visible in the running of the business from the start. The extent of his
control, administration and management of the partnership and its
business, the fact that its properties were placed in his name, and that
he was not paid salary or other compensation by the partners, are
 indicative of the fact that he was a controlling partner. His partners only
contributed in the initial capital but had no say on how the business was
ran. It was through Elfredo's efforts and hard work that the partnership
prospered. Even Juliet participated in the affairs of the partnership by
acting as the bookkeeper sans salary.
Dispositive: (copy paste)
WHEREFORE, the instant Petition is DENIED. The assailed Court of Appeals
Decision dated June 29, 2005 is AFFIRMED. Costs against petitioners.
Angeles v. Secretary of Justice -- KIT
Petitioners: ​OSCAR ANGELES and EMERITA ANGELES
Respondents: ​HON. SECRETARY OF JUSTICE and FELINO MERCADO
DOCTRINE:​​ Failure to register the contract of partnership does not affect the
liability of the partnership and of the partners to third persons. Neither does
such failure to register affect the partnerships juridical personality. A
partnership may exist even if the partners do not use the words partner or
partnership.
FACTS:
● Sps. Angeles filed a criminal complaint for estafa against Felino
Mercado before the Provincial Prosecution Office
○ Mercado is the brother-in-law of the Angeles’, being married to
Emerita’s sister Laura
● Claimed that in November 1992, Mercado convinced them to enter into
a contract of antichresis (sanglaang-perde)
○ 8 parcels of land planted with lanzones trees located in
Nagcarlan, Laguna and owned by Juana Suazo.
○ The contract of antichresis was for 5 years for P210K.
○ Sps. Angeles stay in Manila during weekdays so parties
agreed Mercado would administer lands and complete the
paperwork
● After 3 years, Sps. Angeles asked for an accounting from Mercado.
Mercado said that the land earned P46K in 1993, which he used to buy
more lanzones trees.
○ Reported no fruit on trees in 1994, and did not give accounting
for 1995
○ Only after the demand for an accounting did they discover that
he put the contract under his and his spouse’s names
○ No partnership because of lack of a public instrument and lack
of registration with SEC
Mercado’s Contentions:
● There exists an industrial partnership (sosyo industrial) between him
and his spouse as industrial partners and the Angeles spouses as the
financiers.
○ This existed since 1991, before the antichresis over the land.
Through the years, Mercado used his and his spouses
earnings as part of the capital in the business transactions
which he entered into in behalf of the Angeles spouses.
● Was Angeles’ practice to enter into business transactions with others
under the name of Mercado because the Angeles spouses did not want
to be identified as financiers
● Attached bank receipts showing deposits in behalf of Emerita Angeles
and contracts under his name for the Angeles spouses.
○ Attached minutes of the barangay conciliation proceedings
where Oscar Angeles stated there was a written sosyo
industrial agreement: capital would come from the Angeles
spouses while the profit would be divided evenly between
Mercado and the Angeles spouses
● Prov. Prosecutor’s Office:​ issued resolution recommending filing of
criminal info for estafa against Mercado
○ This was filed without Mercado’s counter-affidavit
● Upon MR, PPO​: issued amended resolution dismissing the complaint of
Angeles
● Sec. of Justice:​ dismissed their appeal
ISSUE/S:
W/N partnership existed between Sps. Angeles and Mercado even without
documentary proof to sustain its existence -- YES
W/N there was misappropriation by Mercado -- NO
RATIO:
● Sps. Angeles contributed money to the partnership and not
immovable property, and mere failure to register the contract of
partnership with the SEC does not invalidate a contract that has
the essential requisites of a partnership.
 ● Failure to register the contract of partnership does not affect the liability
of the partnership and of the partners to third persons. Neither does
such failure to register affect the partnerships juridical personality.
○ The purpose of registration of the contract of partnership is to
give notice to third parties.
● A partnership may exist even if the partners do not use the words
partner or partnership.
● Angeles spouses admit to facts that prove the existence of a
partnership: a contract showing a sosyo industrial or industrial
partnership, contribution of money and industry to a common fund, and
division of profits between the Angeles spouses and Mercado.
● The document alone, which was in the name of Mercado and his
spouse failed to sufficiently prove deceit or false representation on
the part of Mercado that induced the Sps. Angeles to part with their
money. He satisfactorily explained that the Sps. Angeles simply do
not want to be revealed as the financiers
DISPOSITIVE: ​WHEREFORE, we AFFIRM the decision of the Secretary of
Justice. The present petition for certiorari is DISMISSED.
Issue/s:
18. Pioneer Insurance v. Court of Appeals - Lumber
Petitioners: Jacob Lim
Respondents: CA, Border Machinery and Heavy Equipment Inc.,
Constancio Maglana, Francisco and Modesto Cervantes, Pioneer
Insurance and Surety Corporation
Ratio:
DOCTRINE: One who takes no part except to subscribe for stock in a
proposed corporation which is never legally formed does not become a
partner with other subscribers so as to be liable as such in an action for
settlement of the alleged partnership.
Facts:
● Jacob Lim was engaged in the airline business as owner-operator of
Southern Air Lines (SAL), a single proprietorship
● In 1965, Lim entered into a sale and purchase agreement of two DC-3A
type aircrafts and one set of necessary spare parts with Japan Domestic
Airlines (JDA), to which Pioneer Insurance executed a surety bond in
favor of JDA, in behalf of Lim.
● For the purchase of said aircrafts and parts, and with the understanding
of incorporating SAL with the parties mentioned below as
co-incorporators, contributions have been made –
BORMAHECO (probably operated by the Cervanteses) and the
Cervanteses - 76,000
Atty. Maglana - 75,000
Total amount received by Lim – 151,000
● BORMAHECO, Maglana, the Cervanteses and Lim also executed an
indemnity agreement in favor of Pioneer.
● Lim then executed a chattel mortgage in favor of Pioneer as security for
the latter’s suretyship.
● Subsequently, Lim defaulted on his installment payments, prompting
JDA to collect from Pioneer.
● Pioneer then instituted a judicial foreclosure of the mortgaged property,
while BORMAHECO et al., also filed their cross-claims against Lim
● The trial court dismissed the claim of Pioneer against all other
defendants except Lim. But the CA modified it, dismissing entirely the
claim of Pioneer against all defendants.
● However, assailed by Lim in this case is part of the CA ruling which, in
brief, held Lim liable to BORMAHECO, Maglana and the Cervanteses
for an aggregate amount of 184,878.74.
● Lim avers that with such loss, all parties in a de facto partnership must
share in the losses
1. WoN a de facto partnership among them was created for failure to
incorporate, and thus as a consequence of such relationship all
must share in the losses and/or gains of the venture in proportion
to their contribution - NO
1. No de facto partnership was created among the parties which
would entitle the petitioner to a reimbursement of the supposed
losses of the proposed corporation. The record shows that the
petitioner was acting on his own and not in behalf of his other
would-be incorporators in transacting the sale of the airplanes and
spare parts.
2. Clear in this case is that Lim never had the intention to form a
corporation with the respondents despite his representations to
them, giving credence to the cross-claims of the respondents.
3. Jurisprudence stated that one who takes no part except to
subscribe for stock in a proposed corporation which is never
 legally formed does not become a partner with other subscribers
who engage in business under the name of the pretended
corporation, so as to be liable as such in an action for settlement
of the alleged partnership and contribution. A partnership relation
between certain stockholders and other stockholders, who were
also directors, will not be implied in the absence of an agreement,
so as to make the former liable to contribute for payment of debts
illegally contracted by the latter.
Dispositive: WHEREFORE, the instant petitions are DISMISSED. The
questioned decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
LITTON sold and delivered to Carlos CERON, one of the managing partners of
Hill & Ceron, a certain number of mining claims. CERON thereafter executed the
document below:
Feb. 14, 1934
Received from Mr. George Litton share certificates Nos. 4428, 4429 and 6699 for
5,000, 5,000 and 7,000 shares respectively — total 17,000 shares of Big Wedge
Mining Company, which we have sold at P0.11 (eleven centavos) per share or
P1,870.00 less 1/2 percent brokerage.
HILL & CERON
By: (Sgd.) CARLOS CERON

CERON however failed to fully settle the unpaid balance. LITTON was unable to
19. collect the sum from Hill & Ceron (partnership) nor from its surety - Visayan
Surety & Insurance Corporation. Hence, LITTON filed a complaint for recovery of
Petitioners: the P720 balance.
Respondents:
CFI: The trial court absolved the partnership Hill & Ceron, Robert Hill and the
DOCTRINE: Visayan Surety & Insurance Corporation, and ordered ordered CERON
Facts: personally to pay the unpaid balance.
●
CA: The appellate court affirmed the decision of the trial court. It also ruled that
Issue/s: CERON did not intend to represent and did not act for the firm Hill & Ceron in the
1. WON transaction involved in this litigation.

Ratio: (numbered, according to issue/s) Issue: ​Whether or not CERON acted in his capacity as one of the managing
1. partners of Hill & Ceron. YES.

Dispositive: (copy paste) Ratio:

Robert HILL testified during trial that:

20. LITTON v. HILL & CERON - MEDEL
Petitioners: ​GEORGE LITTON
Respondents: ​HILL & CERON, ET AL.
DOCTRINE: ​Third persons are not bound to ascertain whether or not the
partner with whom the transaction is made obtained the consent of the other
partner. The public need not make inquires as to the agreements had between
the partners. Its knowledge, is enough that it is contracting with the partnership
which is represented by one of the managing partners.
Facts:
● he and CERON, during the partnership, had the same power to buy and
sell;
● that in said partnership Hill as well as Ceron made the transaction as
partners in equal parts;
● on the date of the transaction, February 14, 1934, the partnership
between Hill and Ceron was in existence
● On February 19th, Hill & Ceron sold shares of the Big Wedge; and
● when the transaction was entered into with Litton, it was neither
published in the newspapers nor stated in the commercial registry that
the partnership Hill & Ceron had been dissolved.
HILL further claims that a few days before February 14th, he had a conversation
with LITTON advising the latter not to deliver shares for sale or on commission to
CERON because the ​partnership was about to be dissolved​.
This allegation is however immaterial. The Supreme Court of Spain held that the
dissolution of a partnership by the will of the partners which is not registered in
the commercial registry, does not prejudice third persons. The Code further
prohibits brokers from buying and selling shares on their own account.
The Articles of Co-Partnership of HILL & CERON states the following:
Sixth. ​That the management of the business affairs of the
copartnership shall be entrusted to both copartners who
shall jointly administer the business affairs​​, transactions
and activities of the copartnership, shall jointly open a current
account or any other kind of account in any bank or banks,
shall jointly sign all checks for the withdrawal of funds and shall
jointly or singly sign, in the latter case, with the consent of the
other partner. . . .
As observed by the SC, the sixth paragraph means that the management of the
business of the partnership has been entrusted to both partners thereof. The CA
erred when it ruled that for one of the partners to bind the partnership the
consent of the other is necessary.
Third persons, like LITTON, are not bound in entering into a contract with any of
the two partners, to ascertain whether or not this partner with whom the
transaction is made has the consent of the other partner. ​The public need not
make inquires as to the agreements had between the partners. Its
knowledge, is enough that it is contracting with the partnership which is
represented by one of the managing partners.
The Articles of Co-Partnership further states the following:
Second: ​That the purpose or object for which this
copartnership is organized is to engage in the business of
brokerage in general​​, such as stock and bond brokers, real
brokers, investment security brokers, shipping brokers, and
other activities pertaining to the business of brokers in general.
From this, the SC ruled that neither of the two partners, under article 130 of the
Code of Commerce, may legally engage in the business of brokerage in general
as stock brokers, security brokers and other activities pertaining to the business
of the partnership. Therefore, CERON, therefore, could not have entered into the
contract of sale of shares with Litton as a private individual, but as a managing
partner of Hill & Ceron.
Dispositive: ​The appealed decision is reversed and the defendants are ordered
to pay to the plaintiff, jointly and severally, the sum of P720, with legal interest,
from the date of the filing of the complaint, minus the commission of one-half per
cent (1⁄2%) from the original price of P1,870, with the costs to the respondents.
MOTION FOR RECONSIDERATION BY ROBERT HILL
HILL, as he was asked to pay LITTON, sought a reconsideration of the SC’s
earlier decision. He based his claim on the fact that CERON failed to obtain his
consent to enter into the said contract with LITTON.
The SC reiterated that: The stipulation in the articles of partnership that any of
the two managing partners may contract and sign in the name of the partnership
with the consent of the other, undoubtedly creates an obligation between the two
partners, which consists in asking the other's consent before contracting for the
partnership. This obligation of course is not imposed upon a third person who
contracts with the partnership. ​Neither is it necessary for the third person to
ascertain if the managing partner with whom he contracts has previously
obtained the consent of the other. A third person may and has a right to
presume that the partner with whom he contracts has, in the ordinary and
natural course of business, the consent of his copartner; for otherwise he
would not enter into the contract​​. The legal presumption that the ordinary
course of business has been followed thereafter takes effect. There is nothing in
the case at bar which destroys this presumption.
The Code of Commerce further states that when, not only without the consent
but against the will of any of the managing partners, a contract is entered into
with a third person who acts in good faith, and the transaction is of the kind of
business in which the partnership is engaged, as in the present case, ​said
contract shall not be annulled​, without prejudice to the liability of the guilty
partner. The reason or purpose behind these legal provisions is no other than to
protect a third person who contracts with one of the managing partners of the
partnership, thus avoiding fraud and deceit.
In view of the foregoing, and sustaining the other views expressed in the
decision, the motion is denied.
21. GOQUIOLAY VS SYCIP
Petitioners:​​ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN
AN and ANTONIO C. GOQUIOLAY
Respondents:​​WASHINGTON Z. SYCIP, ET AL

DOCTRINE:
Facts:
● On 1940, Tan Sin An and Goquiolay entered into a general commercial
partnership under the partnership name “Tan Sin An and Antonio
Goquiolay” for the purpose of dealing in real estate.
● The agreement lodged upon Tan Sin An the sole management of the
partnership affairs.
● The lifetime of the partnership was fixed at ten (10) years and the
Articles of Co-partnership stipulated that i​n the event of death of any of
the partners before the expiration of the term, the partnership will not be
dissolved but will be continued by the heirs or assigns of the deceased
partner​. However the partnership could be dissolved upon mutual
agreement in writing of the partners.
● Goquiolay executed a GPA in favor of Tan Sin An.
● The plaintiff partnership purchased 3 parcels of land which was
mortgaged to “La Urbana” as payment of P25,000.
● Another 46 parcels of land were purchased by Tan Sin An in his
individual capacity which he assumed payment of a mortgage debt for
P35K. A downpayment and the amortization were advanced by Yutivo
and Co.
● The two obligations were consolidated in an instrument executed by the
partnership and Tan Sin An, whereby the entire 49 lots were mortgaged
in favor of “Banco Hipotecario de Filipinas” (as successor to La Urbana”
● On 1942 Tan Sin An died leaving his widow, Kong Chai Pin and four
minor children. The widow was subsequently became the administratrix
of the estate.
● Repeated demands were made by Banco Hipotecario on the
partnership and on Tan Sin An.
● Defendant Sing Yee, upon request of defendant Yutivo Sons , paid the
remaining balance of the mortgage debt, the mortgage was cancelled
● Yutivo Sons and Sing Yee filed their claim in the intestate proceedings
of Tan Sin An for advances, interest and taxes paid in amortizing and
discharging their obligations to “La Urbana” and “Banco Hipotecario”
● Kong Chai Pin filed a petition with the probate court for authority to sell
all the 49 parcels of land. She then sold it to Sycip and Lee in
consideration of P37K and of the vendees assuming payment of the
claims filed by Yutivo Sons and Sing Yee.
● Later, Sycip and Lee executed in favor of Insular Development a deed
of transfer covering the 49 parcels of land.
● When Goquiolay learned about the sale to Sycip and Lee, he filed a
petition in the intestate proceedings to set aside the order of the probate
court approving the sale in so far as his interest over the parcels of land
sold was concerned.
● Probate court annulled the sale executed by the administratrix w/
respect to the 60% interest of Goquiolay over the properties
● Administratrix appealed. The decision of probate court was set aside
for failure to include the indispensable parties. New pleadings were filed
● The second amended complaint prays for the annulment of the sale in
favor of Sycip and Lee and their subsequent conveyance to Insular
Development in so far as the three lots owned by the plaintiff
partnership are concerned
● The plaintiffs in their complaint challenged the authority of Kong Chai
Pin to sell the partnership properties on the ground that she had no
authority to sell because even granting that she became a partner upon
the death of Tan Sin An the power of attorney granted in favor of the
latter expired after his death.
● The defendant’s defended the validity of the sale on the theory that she
succeeded to all the rights and prerogatives of Tan Sin An as managing
partner.
● The trial court sustained the validity of the sale on the ground that under
the provisions of the articles of partnership allowing the heirs of the
deceased partner to represent him in the partnership after his death
Kong Chai Pin became a managing partner, this being the capacity held
by Tan Sin An when he died.
Issue/s:
1. Whether or not a widow or substitute become also a general partner or
only a limited partner?--> WIDOW : GENERAL PARTNER
2. Whether or not the consent of the other partners was necessary to
perfect the sale of the partnership properties to Sycip and Lee? NO
Ratio:
Kong Chai Pin became a general partner.
● By seeking authority to manage partnership property, Tan Sin An’s
widow showed that she desired to be considered a general partner.
● By authorizing the widow to manage partnership property (which a
limited partner could not be authorized to do), Goqulay recognized her
as such partner, and is now in estoppel to deny her position as a
general partner, with authority to administer and alienate partnership
property.
● The articles did not provide that the heirs of the deceased would be
merely limited partners; on the contrary, they expressly stipulated that in
case of death of either partner, “the co partnership will have to be
continued” with the heirs or assignees.
● It certainly could not be continued if it were to be converted from a
general partnership into a limited partnership since the difference
between the two kinds of associations is fundamental, and specially
because the conversion into a limited association would leave the heirs
of the deceased partner without a share in the management.
● Hence, the contractual stipulation actually contemplated that the heirs
would become general partners rather than limited ones.

Dispositive: (copy paste)
25. Muñasque v. CA (1985) ​(SAN DIEGO)
Petitioners:​​ELMO MUÑASQUE
Respondents: ​COURT OF APPEALS, CELESTINO GALAN, TROPICAL
COMMERCIAL COMPANY AND RAMON PONS (Manager of Tropical)
DOCTRINES:
1. A misunderstanding between the partners does not convert the
partnership into a sham organization.
2. There is a presumption that each individual partner is an authorized agent
for the firm and that he has authority to bind the firm in carrying on the
partnership transactions
3. The presumption is sufficient to permit third persons to hold the firm liable
on transactions entered into by one of members of the firm acting
apparently in its behalf and within the scope of his authority
Facts:
● “Galan and Associates” is a partnership between Elmo Muñasque and
Celestino Galan
● Muñasque entered into a contract with Tropical for remodelling a portion of
its building without expecting any consideration from Galan although Galan
was casually named as partner in the contract
● Since Galan introduced Munasque to Tropical, Galan would receive
commission
● Tropical agreed to give Munasque P7,000.00 soon after the construction
began and thereafter the amount of P6,000.00 every fifteen (15) days during
the construction to make a total sum of P25,000.00
● Tropical delivered a check to Galan for P7,000.00 in the name of Munasque
as Payee
● Munasque indorsed the check in favor of Galan to enable the latter to
deposit it in the bank and pay for the materials and labor used in the project,
but Galan spent it for personal use.
● And so, when the second check for P6,000.00 was due, Munasque refused
to indorse the check. The check was withheld from Munasque
● Then, Galan informed Tropical that there was a "misunderstanding" between
him and Munasque.
● For this reason, ​Tropical changed the name of the payee in the second
check from Muñasque to "Galan and Associates" which was the duly
registered name of the partnership between Galan and Munasque thus
enabling Galan to encash it,
● Munasque was placed in great financial difficulty in his construction business
and was subjected to demands of creditors, Blue Diamond and Cebu
Southern Hardware, to pay for construction materials, the payment of which
should have been made from the P13,000.00 received by Galan
● The two remaining checks, each in the amount of P6,000.00, were
subsequently given to Munasque alone with the last check being given
pursuant to a court order.
● Munasque filed a complaint for payment of sum of money and damages
against Tropical and Galan, seeking to recover the amounts covered by the
first and second checks which fell into the hands of Galan
● RTC absolved Tropical from any liability, and also ordered Munasque
and Galan to pay the credits of Blue Diamond and Cebu Southern
Hardware (creditors/suppliers-intervenors) "jointly and severally"
Issues:
1. Whether or not there existed a partnership between Celestino Galan and
Elmo Muñasque
2. Whether or not the payment made by Tropical to Galan was "good
payment."
3. Whether or not Munasque and Galan is liable to pay the credits of Blue
Diamond and Cebu Southern Hardware (creditors-intervenors of the
partnership) "jointly and severally"
Ratio:
1. Whether or not there existed a partnership between Celestino Galan
and Elmo Muñasque
● Munasque entered into a contract with Tropical for the renovation of the
latter's building on behalf of the partnership of Galan and Muñasque.
● A misunderstanding between the partners does not convert the
partnership into a sham organization.
● When Muñasque received the first payment of Tropical in the amount of
P7,000.00 with a check made out in his name, he indorsed the check in
favor of Galan. ​Tropical therefore, had every right to presume that
Munasque and Galan were true partners.
● If they were not partners, then Munasque has only himself to blame for
making the relationship appear otherwise
2. Whether or not the payment made by Tropical to Galan was "good
payment."
● Since Tropical had every right to presume that Munasque and Galan were
true partners, the payments made to the partnership were, therefore, valid
payments.
● Since the two were partners when the debts were incurred, they are also
both liable to third persons who extended credit to their partnership
● There is a presumption that each individual partner is an authorized
agent for the firm and that he has authority to bind the firm in carrying
on the partnership transactions
● The presumption is sufficient to permit third persons to hold the firm
liable on transactions entered into by one of members of the firm
acting apparently in its behalf and within the scope of his authority
3. Whether or not Munasque and Galan is liable to pay the credits of Blue
Diamond and Cebu Southern Hardware (creditors-intervenors of the
partnership) "jointly and severally"
● Although the liability of partners under the law to third persons for contracts
executed in connection with partnership business is only pro rata under Art.
1816, a third person who transacted with said partnership can hold the
partners solidarily liable for the whole obligation if the case of the third
person falls under Articles 1822 or 1823.
● The obligation is solidary because the law protects him, who in good
faith relied upon the authority of a partner, whether such authority is
real or apparent, and whether the partner is innocent or guilty
● Tropical had every reason to believe that a partnership existed between the
petitioner and Galan and no fault or error can be imputed against it for
making payments to "Galan and Associates" and delivering the same to
Galan because as far as it was concerned, Galan was a true partner with
real authority to transact on behalf of the partnership with which it was
dealing
● However, as between the partners Muñasque and Galan, justice
dictates that Muñasque be reimbursed by Galan, since Galan acted in
bad faith in his dealings with Muñasque as a partner.
Dispositive: WHEREFORE, the decision appealed from is hereby AFFIRMED
with the MODIFICATION that the liability of petitioner and respondent Galan to
intervenors Blue Diamond Glass and Cebu Southern Hardware is declared to be
joint and solidary. Petitioner may recover from respondent Galan any amount
that he pays, in his capacity as a partner, to the above intervenors
26. MORAN, JR. v. CA
Petitioners: ​Isabelo Moran, Jr.
Respondents: ​The Hon. Court of Appeals and Mariano E. Pecson
DOCTRINE: ​When a partner who has undertaken to contribute a sum of
money fails to do so, he becomes a debtor of the partnership for whatever he
may have promised to contribute (Art. 1786) and for interests and damages
from the time he should have complied with his obligations (Art. 1788).
Being a contract of partnership, each partner must share in the profits and
losses of the venture, for that is the essence of partnership.
Facts:
● Pecson and Moran entered into an agreement for the printing of posters
featuring the delegates of the 1971 Constitutional Convention.
○ That 95,000 posters were supposed to be printed and sold at
P2/each
○ That each would contribute P15,000
○ That Moran will supervise the work, while Pecson would
receive a P1,000 monthly commission
● Pecson gave Moran P10,000 for which the latter issued a receipt
● Only 2k posters were printed, but each was sold for P5
○ Moran then executed 2 promissory notes in favor of Pecson
● Pecson then filed an action for the recovery of a sum of money for the
return of his P10,000 contribution, payment of his share in the profits
that the partnership would have earned
● TC: each party is entitled to rescind the contract since both failed to
fulfill their respective promises (Moran – the printing of the 95,000
posters; Pecson – the P15,000 contribution)
● CA: Moran must pay Pecson, among others, the amount of expected
profits and the latter’s commission in the partnership
Issue/s:
● WON Moran is obliged to give Pecson the amount of expected profits
from their partnership -- NO
Ratio: (numbered, according to issue/s)
● Rule: when a partner who has undertaken to contribute a sum of money
fails to do so, he becomes a debtor of the partnership for whatever he
may have promised to contribute (Art. 1786) and for interests and
damages from the time he should have complied with his obligations
(Art. 1788).
● Being a contract of partnership, each partner must share in the profits
and losses of the venture, for that is the essence of partnership.
○ Even in the assurance of the other partner that they would earn
a huge amount of profits, in the absence of fraud, the other
cannot claim a right to recover the highly speculative profits
○ In the present case, the fantastic nature of expected profits is
obvious that various factors need to be considered
○ The failure of COMELEC to proclaim all 320 candidates of the
Constitutional Convention on time was a major factor in
Moran’s decision not to go on with the printing of all 95,000
posters
○ Hidden risks in any business venture have to be considered
● However, as it was shown that Pecson gave money to Moran (P10k)
which the latter used to print the first batch of posters, and since these
posters were sold and profits were realized from such sale, Pecson is
entitled to recover his share of such profits
Dispositive: ​WHEREFORE, the petition is GRANTED. The decision of the
respondent Court of Appeals (now Intermediate Appellate Court) is hereby SET
ASIDE and a new one is rendered ordering the petitioner Isabelo Moran, Jr., to
pay private respondent Mariano Pecson SIX THOUSAND (P6,000.00) PESOS
representing the amount of the private respondent's contribution to the
partnership but which remained unused; and THREE THOUSAND (P3,000.00)
PESOS representing one half (1/2) of the net profits gained by the partnership in
the sale of the two thousand (2,000) copies of the posters, with interests at the
legal rate on both amounts from the date the complaint was filed until full
payment is made.
RAMNANI v. CA - TORIO
Petitioners: ​CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V.
RAMNANI and MOTI G. RAMNANI
Respondents: ​COURT OF APPEALS, SPOUSES ISHWAR JETHMAL
RAMNANI, SONYA JETHMAL RAMNANI and OVERSEAS HOLDING CO.,
LTD.
DOCTRINE: ​In a joint venture agreement, the capitalist and industrialist
partner equally share the fruits of the joint venture.
Facts:
● Ishwar, Choithram, and Navalrai (all surnamed Jethmal Ramnani) are
full blood brothers.
● Ishwar and his spouse Sonya had a main business in New York. In
1966, they executed a general power of attorney in favor of Choithram
and Navalrai empowering them to manage and conduct Sps. Ishwar's
business concern in the Philippines.
● Acting as Ishwar's agent, Choithraam entered into two agreements with
Ortigas & Company, Ltd. Partnership (Ortigas) where Choithram bought
two parcels of land in Barrio Ugong, Pasig, Rizal (10 048 sqm) from
Ortigas. Choithram constructed a building and was leased to Jethmal
Industries and a wardrobe shop (Eppie's Creation). Three other building
were constructed and leased. Two of these buildings were later burned.
● Sometime in 1970, Ishwar asked Choithram to account for the income
and expenses relative to the properties for the period 1967-1970.
Choithram refused so in 1971, Ishwar revoked the general power of
attorney of Choithram. Choithram and Ortigas were notifIed of the
revocation. The revocation was also published in the Manila Times and
was also registered with the Securities and Exchange Commission.
● Notwithstanding the revocation, Choithram transferred all rights and
interests of Sps. Ishwar to his daughter-in-law (Nirmla Ramnan, wife of
Moti [son of Choithram]). Upon full payment of the lots, Ortigas
executed the corresponding deeds of sale in favor of Nirmla. TCTs were
issued in favor of Nirmla.
● Sps. Ishwar filed a complaint against Choithram, Moti, Nirmla, and
Ortigas in the CFI for reconveyance of the properties or payment of its
value and damages.
● CFI ruled in favor of Choithram et al. CA reversed but absolved Ortigas
from liability.
Issue: ​Who is entitled to the property? -- Both Choithram and Ishwar (50-50) but
Choithram liable for damages
Ratio: (numbered, according to issue/s)
1. SC gave credence to the factual finding of CA that Ishwar sent $150K to
Choithram (through US dollar drafts of $85K and $65K) in the latter part
of 1965. Said $150K was to be invested by Choithram for Ishwar,
hence, why Ishwar later gave a general power of attorney to Choithrman
and Navalrai. In upholding Ishwar's testimony about the $150K
remittance, SC considered the following facts:
a. Power of atty was later issued in favor of Choithram and
Navalrai to take care of Sps. Ishwar's business
b. Choithram's power of atty was revoked when he refused to
render account
c. Choithram sent a letter to Ishwar requesting for renewal of
power of attorney. In that letter, Choithram never claimed
ownership of the property in question. Choithram affirmed the
fact that he bought the land as mere agent of Ishwar.
2. Choithram alleged that the principal-agent relationship was merely a
temporary arrangement. Choithram claimed that he wanted to buy land
in PH but he couldn't do so because he's a British citizen and so he
placed the property under the name of Ishwar who was an American
citizen (and was then allowed to own land because of the Parity
Agreement). SC did not believe Choithram because:
a. if Choithram's argument is true, why did he not just place the
property under the name of his son who is an American citizen
b. if Choithram's argument is true, then why put the property in
Ishwar's name (who Choithram alleged as an irresponsible
brother who squandered the family fortune in NY)
3. Choithram's act of transferring the property to Nirmla was an attempt to
place the property beyond Sps. Ishwar's reach. The transfer, therefore,
should be struck down. Nirmla is merely holding the properties in
[implied] trust for Sps. Ishwar.
4. However, notwithstanding Choithram's fraudulent acts, he is entitled to
50% of the properties because a joint venture exists in this case. Ishwar
is the capitalist partner (he provided the $150K capital) while Choithram
is the industrialist partner (through Choithram's industry and genius,
Ishwar's property developed and improved into what it is now-- a
valuable asset worth Php 22 304 000 [this was the value while the case
was still pending. property is worth more today]). Justice and equity
dictate that the two share equally the fruit of their joint investment and
efforts. Perhaps this Solomonic solution may pave the way towards their
reconciliation. Both would stand to gain. No one would end up the loser.
5. However, because of Choithram's devious machinations to deprive Sps.
Ishwar of their share in the property, Choithram should be liable for
moral and exemplary damages as well as attorney's fees.
Dispositive: ​WHEREFORE, the petition in G.R. No. 85494 is DENIED, while the of P500,000.00 as moral damages, P200,000.00 as exemplary damages and
petition in G.R. No. 85496 is hereby given due course and GRANTED. The attorney's fees equal to 10% of the total award. to said respondents spouses.
judgment of the Court of Appeals dated October 18, 1988 is hereby modified as 6. The motion to dissolve the writ of preliminary injunction dated December 10,
follows: 1990 filed by petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, is
1. Dividing equally between respondents spouses Ishwar, on the one hand, and hereby DENIED and the said injunction is hereby made permanent. Let a writ of
petitioner Choithram Ramnani, on the other, (in G.R. No. 85494) the two parcels attachment be issued and levied against the properties and improvements
of land subject of this litigation, including all the improvements thereon, presently subject of this litigation to secure the payment of the above awards to spouses
covered by transfer Certificates of Title Nos. 403150 and 403152 of the Registry Ishwar and Sonya.
of Deeds, as well as the rental income of the property from 1967 to the present. 7. The mortgage constituted on the subject property dated June 20, 1989 by
2. Petitioner Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti C. Ramnani petitioners Choithram and Nirmla, both surnamed Ramnani in favor of
and respondent Ortigas and Company, Limited Partnership (in G.R. No. 85496) respondent Overseas Holding, Co. Ltd. (in G.R. No. 85496) for the amount of
are ordered solidarily to pay in cash the value of said one-half (1/2) share in the $3-M is hereby declared null and void. The Register of Deeds of Pasig, Rizal, is
said land and improvements pertaining to respondents spouses Ishwar and directed to cancel the annotation of d mortgage on the titles of the properties in
Sonya at their fair market value at the time of the satisfaction of this judgment but question.
in no case less than their value as appraised by the Asian Appraisal, Inc. in its 8. Should respondent Ortigas Co., Ltd. Partnership pay the awards to Ishwar and
Appraisal Report dated August 1985 (Exhibits T to T-14, inclusive). Sonya Ramnani under this judgment, it shall be entitled to reimbursement from
3. Petitioners Choithram, Nirmla and Moti Ramnani and respondent Ortigas & petitioners Choithram, Nirmla and Moti, all surnamed Ramnani.
Co., Ltd. Partnership shall also be jointly and severally liable to pay to said 9. The above awards shag bear legal rate of interest of six percent (6%) per
respondents spouses Ishwar and Sonya Ramnani one-half (1/2) of the total annum from the time this judgment becomes final until they are fully paid by
rental income of said properties and improvements from 1967 up to the date of petitioners Choithram Ramnani, Nirmla V. Ramnani, Moti C. Ramnani and
satisfaction of the judgment to be computed as follows: Ortigas, Co., Ltd. Partnership. Said petitioners Choithram, et al. and respondent
a. On Building C occupied by Eppie's Creation and Jethmal Industries from 1967 Ortigas shall also pay the costs.
to 1973, inclusive, based on the 1967 to 1973 monthly rentals paid by Eppie's
Creation;
b. Also on Building C above, occupied by Jethmal Industries and Lavine from
1974 to 1978, the rental incomes based on then rates prevailing as shown under
Exhibit "P"; and from 1979 to 1981, based on then prevailing rates as indicated
under Exhibit "Q";
c. On Building A occupied by Transworld Knitting Mills from 1972 to 1978, the
rental incomes based upon then prevailing rates shown under Exhibit "P", and
from 1979 to 1981, based on prevailing rates per Exhibit "Q";
d. On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to 1978,
the rentals based on the Lease Contract, Exhibit "P", and from 1979 to 1980, the
rentals based on the Lease Contract, Exhibit "Q".
and thereafter commencing 1982, to account for and turn over the rental incomes
paid or ought to be paid for the use and occupancy of the properties and all
improvements totalling 10,048 sq. m., based on the rate per square meter
prevailing in 1981 as indicated annually cumulative up to 1984. Then,
commencing 1985 and up to the satisfaction of the judgment, rentals shall be
computed at ten percent (10%) annually of the fair market values of the
properties as appraised by the Asian Appraisals, Inc. in August 1985. (Exhibits T
to T-14, inclusive.)
4. To determine the market value of the properties at the time of the satisfaction
of this judgment and the total rental incomes thereof, the trial court is hereby
directed to hold a hearing with deliberate dispatch for this purpose only and to
have the judgment immediately executed after such determination.
5. Petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, are also jointly
and severally liable to pay respondents Ishwar and Sonya Ramnani the amount

22. Tocao v. CA
Petitioners: ​MARJORIE TOCAO and WILLIAM T. BELO
Respondents: ​COURT OF APPEALS and NENITA A. ANAY
DOCTRINE: ​An unjustified dissolution by a partner can subject him to action
for damages because by the mutual agency that arises in a partnership, the
doctrine of ​delectus personae​ allows the partners to have the power, although
not necessarily the right, to dissolve the partnership.
Facts:
● Nenita Anay was a marketing adviser in Technolux in Bangkok. It was
through her former employer that she met William Belo, then vice president
for operations of Ultra Clean Water Purifier.
● Belo introduced Anay to petitioner Marjorie Tocao, who conveyed her desire
to enter into a joint venture with her for the importation and local distribution
of kitchen cookwares which Belo had volunteered to finance.
● Anay was assigned to marketing the product, considering her experience
and established relationship with West Bend (manufacturer of kitchenwares).
Anay was also tasked to organize the administrative staff and sales force
while Toca was in charge of hiring, firing employees and determining
commissions.
● The agreement was not reduced in writing on the strength of Belo’s
assurances.
● The business operated under the name of Geminesse Enterprises, a sole
proprietorship registered in Tocao’s name, located in Ayala Avenue, Makati.
● Anay was invited to a distributor/dealer meeting of Westbend in California.
Tocao, even wrote to the Visa Section of the US Embassy to convince to
them to grant her ​business partner a ​ visa.
○ When Anay arrived from the trip, she undertook the task of
saving the unsatisfactory sales record in the Makati and Cubao
offices.
○ She also received a plaque of appreciation from the
administration of Tocao.
○ Belo also granted her a 37% commission up to December
1987.
○ However, on October 1987, Anay learned that Tocao had
signed a ​letter addressed to the Cubao Sales office to the
effect that she was no longer viec president of Geminesse.
○ The next day, she received a note from the marketing manager
that Tocao had barred her from holding office and conducting
demonstrations in the offices.
● Anay filed a complaint for sum of money with damages against Tocao and
Belo after demanding her overriding commission and her share in the net
profits (after the audit).
● Tocao and Belo asserted that the alleged agreement with Anay was not
reduced in writing and was either unenforceable or void. Geminesse was the
sole proprietorship of Tocao. They also alleged that Anay acted like she
owned the enterprise.
● Trial court held that there was indeed an oral partnership agreement
between the three:
○ Intentions to create partnership
○ Common fund was established through contributions
consisting of money and industry
○ Joint interest in profits
○ Proven by testimony of Anay’s cousin who was the
administrative officer of Geminesse until it was absorbed by
Royal International.
○ A letter was also sent by West bend granting them
distributorship because of Tocao’s financial contribution ​and
Anay’s experience.
● Trial court also held that payment of commissions did not preclude existence
of partnership.
Issue/s:
2. WON Anay was an employee or a partner - PARTNER
Ratio: (numbered, according to issue/s)
The evidence in the case at bar controverts an employer-employee
relationship between the parties. Receipt of a percentage of net profits
constitutes only prima facie evidence that the recipient is a partner in
the business
○ private respondent Anay had a voice in the management of the
affairs of the cookware distributorship including selection of
people who would constitute the administrative staff and the
sales force
○ petitioner Tocao's admissions militate against an
employer-employee relationship. She admitted that, like her
who owned Geminesse Enterprise, Anay received only
commissions and transportation and representation allowances
and not a fixed salary.
○ Tocao and Anay in fact almost received the same income from
the business.
In a partnership, each partner has a share in the profits and losses of
the venture except that the ​industrial partner​​ shall not be liable for the
losses. As an industrial partner, Anay had the right to demand for formal
accounting and to receive such share.
Petitioner Tocao's unilateral exclusion of private respondent from the
partnership is shown by her memo to the Cubao office plainly stating
that private respondent was, as of October 1987, no longer the
vice-president for sales
○ By that memo, petitioner Tocao effected her own withdrawal
from the partnership and considered herself as having ceased
to be associated with the partnership in the carrying on of the
business.
 ○ Nevertheless, the partnership was not terminated thereby; it
continues until the winding up of the business
○ The winding up of partnership affairs has not yet been
undertaken by the partnership as manifest in petitioners' claim
for stocks that had been entrusted to private respondent in the
pursuit of the partnership business.

Dispositive: ​WHEREFORE, the instant petition for review on certiorari is

DENIED. The partnership among petitioners and private respondent is ordered
dissolved, and the parties are ordered to effect the winding up and liquidation of
the partnership pursuant to the pertinent provisions of the Civil Code. This case
is remanded to the Regional Trial Court for proper proceedings relative to said
dissolution. The appealed decisions of the Regional Trial Court and the Court of
Appeals are AFFIRMED with MODIFICATIONS, as follows ---

1. Petitioners are ordered to submit to the Regional Trial Court a formal account
of the partnership affairs for the years 1987 and 1988, pursuant to Article 1809 of
the Civil Code, in order to determine private respondent’s ten percent (10%)
share in the net profits of the partnership;

2. Petitioners are ordered, jointly and severally, to pay private respondent five
percent (5%) overriding commission for the one hundred and fifty (150) cookware
sets available for disposition since the time private respondent was wrongfully
excluded from the partnership by petitioners;

3. Petitioners are ordered, jointly and severally, to pay private respondent

overriding commission on the total production which, for the period covering
January 8, 1988 to February 5, 1988, amounted to P32,000.00;

4. Petitioners are ordered, jointly and severally, to pay private respondent moral
damages in the amount of P50,000.00, exemplary damages in the amount of
P50,000.00 and attorney’s fees in the amount of P25,000.00.

SO ORDERED.
 23. SINGSON v ISABELA SAWMILL - ZABALA When Saldanejo withdrew from the partnership, Garibay and Tubungbanua did
not divide the assets and properties of the Isabela Sawmill between them, but
Petitioners: [CREDITORS] ​MANUEL G. SINGSONG, JOSE BELZUNCE, they continued the business of said partnership under the same firm name
AGUSTIN E. TONSAY, JOSE L. ESPINOS, BACOLOD SOUTHERN "Isabela Sawmill".
LUMBER YARD, and OPPEN, ESTEBAN, INC
Saldanejo then foreclosed on the mortgaged, and acquired at public auction the
Respondents: said assets of the partnership. A certificate of sale was issued in favor of
[PARTNERSHIP AND PARTNERS] ​ISABELA SAWMILL, MARGARITA G. Saldanejo by the Provincial Sherriff of Negros Occidental. Saldanejo, in turn, sold
SALDAJENO and her husband CECILIO SALDAJENO LEON GARIBAY, the same to Pan Oriental Lumber.
TIMOTEO TUBUNGBANUA, and THE PROVINCIAL SHERIFF OF NEGROS
OCCIDENTAL In the instant case, the petitioner-creditors are assailing the sale of the
partnership assets in favor of Saldanejo contending that they have a preferred
DOCTRINE: ​Failure of partner to have published her withdrawal, and her right over the assets of the said partnership and over the proceeds of their sale at
agreeing to have remaining partners proceed with running the partnership public auction, superior to the right of Saldajeno, as creditor of the partners Leon
business instead of insisting on the liquidation of the partnership, will not Garibay and Timoteo Tubungbanua
relieve withdrawing partner from her liability to the partnership creditors.
Facts: Issue/s: ​WON Saldanejo is liable to the creditors for the proceeds of
In 1951 Leon Garibay, Margarita Saldejeno, and Timoteo Tubungbanua entered the assets of the partnership - YES
into a Contract of Partnership under the firm name "Isabela Sawmill”
Ratio:
A few years after, petitioner Oppen, Esteban, Inc. sold a Motor Truck and two
It is true that the dissolution of a partnership is caused by any partner ceasing to
Tractors to the partnership Isabela Sawmill for the sum of P20,500.00.
be associated in the carrying on of the business. However, on dissolution, the
● In order to pay the said purchase price, the said partnership agreed to
partnership is not terminated but continuous until the winding up to the business.
make arrangements with the International Harvester Company at
● The remaining partners did not terminate the business of the
Bacolod City so that the latter would sell farm machinery to Oppen,
partnership "Isabela Sawmill". Instead of winding up the business of the
Esteban, Inc. with the understanding that the price was to be paid by the
partnership, they continued the business still in the name of said
partnership.
partnership.
● the International Harvester Company has been paid a total of
● It is expressly stipulated in the memorandum-agreement that the
P19,211.11, leaving an unpaid balance of P1,288.89
remaining partners had constituted themselves as the partnership entity,
● Over the years, the partnership also became indebted to various
the "Isabela Sawmill".
creditors, the petitioners in the instant case.
The properties mortgaged to Saldajeno by the remaining partners belonged to
the partnership "Isabela Sawmill." Saldajeno, was correctly held liable by the trial
Thereafter, a civil case was filed by the spouses Cecilio Saldajeno and Margarita
court because she purchased at public auction the properties of the partnership
G. Saldajeno against the Isabela Sawmill, Garibay, and Tubungbanua
which were mortgaged to her.
● The parties then entered into a Memorandum of Agreement where after
Saldanejo’s withdrawal from the partnership, she agreed to let Garibay
It does not appear that the withdrawal of Margarita G. Saldajeno from the
and Tubungbanua to continue the partnership still under the name
partnership was published in the newspapers. ​The appellees and the public
Isabela Sawmill
in general had a right to expect that whatever, credit they extended to Leon
● Under the agreement, Garibay and Tubungbaun also undertook to
Garibay and Timoteo Tubungbanua doing the business in the name of the
release Saldajeno from any obligation of "Isabela Sawmill" to third
partnership "Isabela Sawmill" could be enforced against the properties of said
persons
partnership. The judicial foreclosure of the chattel mortgage executed in favor of
● Garibay and Tubungbanua then executed an Assignment of Right with
Margarita G. Saldajeno did not relieve her from liability to the creditors of the
Chattel Mortgage in favor of Saldajeno over certain trucks, tractors,
partnership.
machinery, office equipment (partnership assets). Thus, partner
Saldajeno also became a creditor of Isabela Sawmill.
Although it may be presumed that Margarita G. Saldajeno had action in good
faith, the appellees also acted in good faith in extending credit to the partnership.
 ● Where one of two innocent persons must suffer, that person who gave
occasion for the damages to be caused must bear the consequences.
● Had Saldajeno not entered into the memorandum-agreement allowing
Garibay and Tubungbanua to continue doing the business of the
partnership, the appellees would not have been misled into thinking that
they were still dealing with the partnership "Isabela Sawmill".
● Under the facts, it is of no moment that technically speaking the
partnership "Isabela Sawmill" was dissolved by the withdrawal
therefrom of Margarita G. Saldajeno. The partnership was not
terminated and it continued doing business through the two remaining
partners.

The plaintiffs-appellees were prejudiced in their rights by the execution of the

chattel mortgage over the properties of the partnership "Isabela Sawmill" in favor
of. Saldajeno by the remaining partners, Leon Garibay and Timoteo
Tubungbanua. Hence, said appelees have a right to file the action to nullify the
chattel mortgage in question.

Still, the Saldanejos have a right to be reimbursed whatever amounts they shall
pay the appellees by their co-defendants Leon Garibay and Timoteo
Tubungbanua. In the memorandum-agreement, Leon Garibay and Timoteo
Tubungbaun undertook to release Margarita G. Saldajeno from any obligation of
"Isabela Sawmill" to third persons.

Dispositive:
WHEREFORE, the decision appealed from is hereby affirmed with the
elimination of the portion ordering appellants to pay attorney's fees and with the
modification that the defendsants, Leon Garibay and Timoteo Tubungbanua,
should reimburse the defendants-appellants, Margarita G. Saldajeno and her
husband Cecilio Saldajeno, whatever they shall pay to the plaintiffs-appellees,
without pronouncement as to costs.
SO ORDERED.