15.

G.R. No. L-49982 April 27, 1988

ELIGIO ESTANISLAO, JR., pettoner, vs.THE HONORABLE
COURT OF AEALS, RE!E"IOS ESTANISLAO, E!ILIO
#$% LEOCA"IO SANTIAGO, respondents.
GANCA&CO, J.:
By ths petton for certorar the Court s asked to determne
f a partnershp exsts between members of the same famy
arsng from ther |ont ownershp of certan propertes.
Pettoner and prvate respondents are brothers and ssters
who are co-owners of certan ots at the corner of Annapos
and Aurora Bvd., OuezonCty whch were then beng eased
to the She Company of the Phppnes Lmted (SHELL).
They agreed to open and operate a gas staton thereat to be
known as Estansao She Servce Staton wth an nta
nvestment of P 15,000.00 to be taken from the advance
rentas due to them from SHELL for the occupancy of the
sad ots owned n common by them. A |ont affdavt was
executed by them on Apr 11, 1966 whch was prepared
byAtty. Democrto Angees
1
They agreed to hep ther
brother, pettoner heren, by aowng hm to operate and
manage the gasone servce staton of the famy. They
negotated wth SHELL. For practca purposes and n order
not to run counter to the company's pocy of appontng
ony one deaer, t was agreed that pettoner woud appy
for the deaershp. Respondent Remedos heped n
managng the bussness wth pettoner from May 3, 1966 up
to February 16, 1967.
On May 26, 1966, the partes heren entered nto an
Addtona Cash Pedge Agreement wth SHELL wheren t
was reterated that the P 15,000.00 advance renta sha be
deposted wth SHELL to cover advances of fue to pettoner
as deaer wth a provso that sad agreement "cances and
supersedes the |ont Affdavt dated 11 Apr 1966 executed
by the co-owners."
2
For sometme, the pettoner submtted fnanca statements
regardng the operaton of the busness to prvate
respondents, but therafter pettoner faed to render
subsequent accountng. Hence through Atty. Angees, a
demand was made on pettoner to render an accountng of
the profts.
The fnanca report of December 31, 1968 shows that the
busness was abe to make a proft of P 87,293.79 and that
by the year endng 1969, a proft of P 150,000.00 was
reazed.
'
Thus, on August 25, 1970 prvate respondents fed a
compant n the Court of Frst Instance of Rza aganst
pettoner prayng among others that the atter be ordered:
1. to execute a pubc document embodyng a the
provsons of the partnershp agreement entered nto
between pantffs and defendant as provded n Artce 1771
of the New Cv Code;
2. to render a forma accountng of the busness operaton
coverng the perod from May 6, 1966 up to December 21,
1968 and from |anuary 1, 1969 up to the tme the order s
ssued and that the same be sub|ect to proper audt;
3. to pay the pantffs ther awfu shares and partcpaton
n the net profts of the busness n an amount of no ess
than P 50,000.00 wth nterest at the rate of 1% per month
from date of demand unt fu payment thereof for the
entre duraton of the busness; and
4. to pay the pantffs the amount of P 10,000.00 as
attorney's fees and costs of the sut (pp. 13-14 Record on
Appea.)
After tra on the merts, on October 15, 1975, Hon. Lno
Anover who was then the temporary presdng |udge of
Branch IV of the tra court, rendered |udgment dsmssng
the compant and countercam and orderng prvate
respondents to pay pettoner P 3,000.00 attorney's fee and
costs. Prvate respondent fed a moton for reconsderaton
of the decson. On December 10, 1975, Hon. Rcardo
Tensuan who was the newy apponted presdng |udge of
the same branch, set asde the aforesad derson and
rendered another decson n favor of sad respondents.
The dspostve part thereof reads as foows:
WHEREFORE, the Decson of ths Court dated October 14,
1975 s hereby reconsdered and a new |udgment s hereby
rendered n favor of the pantffs and as aganst the
defendant:
(1) Orderng the defendant to execute a pubc nstrument
embodyng a the provsons of the partnershp agreement
entered nto between pantffs and defendant as provded
for n Artce 1771, Cv Code of the Phppnes;
(2) Orderng the defendant to render a forma accountng of
the busness operaton from Apr 1969 up to the tme ths
order s ssued, the same to be sub|ect to examnaton and
audt by the pantff,
(3) Orderng the defendant to pay pantffs ther awfu
shares and partcpaton n the net profts of the busness n
the amount of P 150,000.00, wth nterest thereon at the
rate of One (1%) Per Cent per month from date of demand
unt fu payment thereof;
(4) Orderng the defendant to pay the pantffs the sum of P
5,000.00 by way of attorney's fees of pantffs' counse; as
we as the costs of sut. (pp. 161-162. Record on Appea).
Pettoner then nterposed an appea to the Court of Appeas
enumeratng seven (7) errors aegedy commtted by the
tra court. In due course, a decson was rendered by the
Court of Appeas on November 28,1978 affrmng in toto the
decson of the ower court wth costs aganst pettoner. *
A moton for reconsderaton of sad decson fed by
pettoner was dened on |anuary 30, 1979. Not satsfed
therewth, the pettoner now comes to ths court by way of
ths petton for certorar aegng that the respondent court
erred:
1. In nterpretng the ega mport of the |ont Affdavt (Exh.
'A') vs-a-vs the Addtona Cash Pedge Agreement (Exhs.
"B-2","6", and "L"); and
2. In decarng that a partnershp was estabshed by and
among the pettoner and the prvate respondents as
regards the ownershp and or operaton of the gasone
servce staton busness.
Pettoner rees heavy on the provsons of the |ont
Affdavt of Apr 11, 1966 (Exhbt A) and the Addtona
Cash Pedge Agreement of May 20, 1966 (Exhbt 6) whch
are heren reproduced-
(a) The |ont Affdavt of Apr 11, 1966, Exhbt A reads:
(1) That we are the Lessors of two parces of and fuy
descrbe n Transfer Certfcates of Tte Nos. 45071 and
71244 of the Regster of Deeds of Ouezon Cty, n favor of
the LESSEE - SHELL COMPANY OF THE PHILIPPINES LIMITED
a corporaton duy censed to do busness n the Phppnes;
(2) That we have requested the sad SHELL COMPANY OF
THE PHILIPPINE LIMITED advanced rentas n the tota
amount of FIFTEEN THOUSAND PESOS (P 5,000.00)
Phppne Currency, so that we can use the sad amount to
augment our capta nvestment n the operaton of that
gasone staton constructed ,by the sad company on our
two ots aforesad by vrtue of an outstandng Lease
Agreement we have entered nto wth the sad company;
(3) That the and SHELL COMPANY OF THE PHILIPPINE
LIMITED out of ts benevoence and desre to hep us n
aumentng our capta nvestment n the operaton of the
sad gasone staton, has agreed to gve us the sad amount
of P 15,000.00, whch amount w partake the nature of
ADVANCED RENTALS;
(4) That we have freey and vountary agreed that upon
recept of the sad amount of FIFTEEN THOUSAND PESOS (P
6,000.00) from he SHELL COMPANY OF THE PHILIPPINES
LIMITED, the sad sum as ADVANCED RENTALS to us be
apped as monthy rentas for the sa two ots under our
Lease Agreement startng on the 25th of May, 1966 unt
such tme that the sad of P 15,000.00 be appcabe, whch
tme to our estmate and one-haf months from May 25,
1966 or unt the 10th of October, 1966 more or ess;
(5) That we have kewse agreed among ourseves that the
SHELL COMPANY OF THE PHILIPPINES LIMITED execute an
nstrument for us to sgn embodyng our conformty that the
sad amount that t w generousy grant us as requested be
apped as ADVANCED RENTALS; and
(6) FURTHER AFFIANTS SAYETH NOT.,
(b) The Addtona Cash Pedge Agreement of May 20,1966,
Exhbt 6, s as foows:
WHEREAS, under the ease Agreement dated 13th
November, 1963 (dentfed as doc. Nos. 491 & 1407, Page
Nos. 99 & 66, Book Nos. V & III, Seres of 1963 n the
Notara Regsters of Notares Pubc Rosauro Marquez, and
R.D. Lwanag, respectvey) executed n favour of SHELL by
the heren CO-OWNERS and another Lease Agreement dated
19th March 1964 . . . aso executed n favour of SHELL by
CO-OWNERS Remedos and MARIA ESTANISLAO for the ease
of ad|onng portons of two parces of and at Aurora Bvd./
Annapos, Ouezon Cty, the CO OWNERS RECEIVE a tota
monthy renta of PESOS THREE THOUSAND THREE
HUNDRED EIGHTY TWO AND 29/100 (P 3,382.29), Phppne
Currency;
WHEREAS, CO-OWNER Ego Estansao |r. s the Deaer of
the She Staton constructed on the eased and, and as
Deaer under the Cash Pedge Agreement dated th May
1966, he deposted to SHELL n cash the amount of PESOS
TEN THOUSAND (P 10,000), Phppne Currency, to secure
hs purchase on credt of She petroeum products; . . .
WHEREAS, sad DEALER, n hs desre, to be granted an
ncreased the mt up to P 25,000, has secured the
conformty of hs CO-OWNERS to wave and assgn to SHELL
the tota monthy rentas due to a of them to accumuate
the equvaent amount of P 15,000, commencng 24th May
1966, ths P 15,000 sha be treated as addtona cash
depost to SHELL under the same terms and condtons of
the aforementoned Cash Pedge Agreement dated th May
1966.
NOW, THEREFORE, for and n consderaton of the foregong
premses,and the mutua covenants among the CO-OWNERS
heren and SHELL, sad partes have agreed and hereby
agree as foows:
. The CO-OWNERS dohere by wave n favor of DEALER the
monthy rentas due to a CO-OWNERS, coectvey, under
the above descrbe two Lease Agreements, one dated 13th
November 1963 and the other dated 19th March 1964 to
enabe DEALER to ncrease hs exstng cash depost to
SHELL, from P 10,000 to P 25,000, for such purpose, the
SHELL CO-OWNERS and DEALER hereby rrevocaby assgn
to SHELL the monthy renta of P 3,382.29 payabe to them
respectvey as they fa due, monthy, commencng 24th
May 1966, unt such tme that the monthy rentas
accumuated, sha be equa to P 5,000.
2. The above stated monthy rentas accumuated sha be
treated as addtona cash depost by DEALER to SHELL,
thereby n ncreasng hs credt mt from P 10,000 to P
25,000. This agreement, therefore, cancels and supersedes
the Joint affidavit dated 11 April 1966 executed by the CO
O!"#$%&
3. Effectve upon the sgnng of ths agreement, SHELL
agrees to aow DEALER to purchase from SHELL petroeum
products, on credt, up to the amount of P 25,000.
4. Ths ncrease n the credt sha aso be sub|ect to the
same terms and condtons of the above-mentoned Cash
Pedge Agreement dated th May 1966. (Exhs. "B-2," "L,"
and "6"; emphass supped)
In the aforesad |ont Affdavt of Apr 11, 1966 (Exhbt A), t
s ceary stpuated by the partes that the P 15,000.00
advance renta due to them from SHELL sha augment ther
"capta nvestment" n the operaton of the gasone staton,
whch advance rentas sha be credted as rentas from May
25, 1966 up to four and one-haf months or unt 10 October
1966, more or ess coverng sad P 15,000.00.
In the subsequent document entted "Addtona Cash
Pedge Agreement" above reproduced (Exhbt 6), the
prvate respondents and pettoners assgned to SHELL the
monthy rentas due them commencng the 24th of May
1966 unt such tme that the monthy rentas accumuated
equa P 15,000.00 whch prvate respondents agree to be a
cash depost of pettoner n favor of SHELL to ncrease hs
credt mt as deaer. As above-stated t provded theren
that "Ths agreement, therefore, cances and supersedes the
|ont Affdavt dated 11 Apr 1966 executed by the CO-
OWNERS."
Pettoner contends that because of the sad stpuaton
canceng and supersedng that prevous |ont Affdavt,
whatever partnershp agreement there was n sad prevous
agreement had thereby been abrogated. We fnd no mert n
ths argument. Sad canceng provson was necessary for
the |ont Affdavt speaks of P 15,000.00 advance rentas
startng May 25, 1966 whe the atter agreement aso refers
to advance rentas of the same amount startng May 24,
1966. There s, therefore, a dupcaton of reference to the P
15,000.00 hence the need to provde n the subsequent
document that t "cances and supersedes" the prevous
one. True t s that n the atter document, t s sent as to
the statement n the |ont Affdavt that the P 15,000.00
represents the "capta nvestment" of the partes n the
gasone staton busness and t speaks of pettoner as the
soe deaer, but ths s as t shoud be for n the atter
document SHELL was a sgnatory and t woud be aganst ts
pocy f n the agreement t shoud be stated that the
busness s a partnershp wth prvate respondents and not a
soe propretorshp of pettoner.
Moreover other evdence n the record shows that there was
n fact such partnershp agreement between the partes.
Ths s attested by the testmones of prvate respondent
Remedes Estansao and Atty. Angees. Pettoner submtted
to prvate respondents perodc accountng of the busness.
4
Pettoner gave a wrtten authorty to prvate respondent
Remedes Estansao, hs sster, to examne and audt the
books of ther "common busness' amng negosyo).
(
Respondent Remedos asssted n the runnng of the
busness. There s no doubt that the partes hereto formed a
partnershp when they bound themseves to contrbute
money to a common fund wth the ntenton of dvdng the
profts among themseves.
)
The soe deaershp by the
pettoner and the ssuance of a government permts and
censes n the name of pettoner was n compance wth
the afore-stated pocy of SHELL and the understandng of
the partes of havng ony one deaer of the SHELL products.
Further, the fndngs of facts of the respondent court are
concusve n ths proceedng, and ts concuson based on
the sad facts are n accordancewth the appcabe aw.
WHEREFORE, the |udgment appeaed from s AFFIRMED n
toto wth costs aganst pettoner. Ths decson s
mmedatey executory and no moton for extenson of tme
to fe a moton for reconsderaton shag beentertaned.

16.
G.R. No. L-47*4( No+,-.,r 22, 1988
NOBIO SAR"ANE, pettoner, vs.THE COURT OF
AEALS #$% RO!EO J. ACOJE"O, respondents.
REGALA"O, J.:
The extensve dscusson and exhaustve dsquston n the
decson 1 of the respondent Court 2 shoud have wrtten
finis to ths case wthout further recourse to Us. The
assgnment of errors and arguments rased n the
respondent Court by heren prvate respondent, as the
pettoner theren, havng been correcty and |ustfedy
sustaned by sad court wthout any reversbe error n ts
concusons, the present petton must fa.
The assaed decson detas the facts and proceedngs
whch spawned the present controversy as foows:
Pettoner brought an acton n the Cty Court of Dpoog for
coecton of a sum of P5,217.25 based on promssory notes
executed by the heren prvate respondent Nobo Sardane n
favor of the heren pettoner. Pettoner bases hs rght to
coect on Exhbts B, C, D, E, F, and G executed on dfferent
dates and sgned by prvate respondent Nobo Sardane.
Exhbt B s a prnted promssory note nvovng P,117.25
and dated May 13, 1972. Exhbt C s kewse a prnted
promssory note and denotes on ts face that the sum
oaned was P,400.00. Exhbt D s aso a prnted promssory
note dated May 31, 1977 nvovng an amount of P100.00.
Exhbt E s what s commony known to the ayman as 'vae'
whch reads: 'Good for: two hundred pesos (Sgd) Nobo
Sardane'. Exhbt F s stated n the foowng tenor: 'Receved
from Mr. Romeo Aco|edo the sum Pesos: Two Thousand Two
Hundred (P2,200.00) ONLY, to be pad on or before
December 25, 1975. (Sgd) Nobo Sardane.' Exhbt G and H
are both vaes' nvovng the same amount of one hundred
pesos, and dated August 25, 1972 and September 12, 1972
respectvey.
It has been estabshed n the tra court that on many
occasons, the pettoner demanded the payment of the tota
amount of P5,217.25. The faure of the prvate respondent
to pay the sad amount prompted the pettoner to seek the
servces of awyer who made a etter (Exhbt 1) formay
demandng the return of the sum oaned. Because of the
faure of the prvate respondent to heed the demands
extra|udcay made by the pettoner, the atter was
constraned to brng an acton for coecton of sum of
money.
Durng the schedued day for tra, prvate respondent faed
to appear and to fe an answer. On moton by the pettoner,
the Cty Court of Dpoog ssued an order dated May 18,
1976 decarng the prvate respondent n defaut and
aowed the pettoner to present hs evdence exparte.
Based on pettoner's evdence, the Cty Court of Dpoog
rendered |udgment by defaut n favor of the pettoner.
Prvate respondent fed a moton to ft the order of defaut
whch was granted by the Cty Court n an order dated May
24, 1976, takng nto consderaton that the answer was fed
wthn two hours after the hearng of the evdence presented
exparte by the pettoner.
After the tra on the merts, the Cty Court of Dpoog
rendered ts decson on September 14, 1976, the
dspostve porton of whch reads:
IN VIEW OF THE FOREGOING, |udgment s hereby rendered
n favor of the pantff and aganst the defendant as foows:
(a) Orderng the defendant to pay unto the pantff the sum
of Fve Thousand Two Hundred Seventeen Pesos and
Twenty-fve centavos (P5,217.25) pus ega nterest to
commence from Apr 23, 1976 when ths case was fed n
court; and
(b) Orderng the defendant to pay the pantff the sum of
P200.00 as attorney's fee and to pay the cost of ths
proceedng. '
Theren defendant Sardane appeaed to the Court of Frst
Instance of Zamboanga de Norte whch reversed the
decson of the ower court by dsmssng the compant and
ordered the pantff-appeee Aco|edo to pay sad defendant-
appeant P500.00 each for actua damages, mora damages,
exempary damages and attorney's fees, as we as the
costs of sut. Pantff-appeee then sought the revew of
sad decson by petton to the respondent Court.
The assgnment of errors n sad petton for revew can be
capsuzed nto two decsve ssues, frsty, whether the ora
testmony for the theren prvate respondent Sardane that a
partnershp exsted between hm and theren pettoner
Aco|edo are admssbe to vary the meanng of the
abovementoned promssory notes; and, secondy, whether
because of the faure of theren pettoner to cross-examne
theren prvate respondent on hs sur-rebutta testmony,
there was a waver of the presumpton accorded n favor of
sad pettoner by Secton 8, Rue 8 of the Rues of Court.
On the frst ssue, the then Court of Frst Instance hed that
"the peadngs of the partes heren put n ssue the
mperfecton or ambguty of the documents n queston",
hence "the appeant can ava of the paro evdence rue to
prove hs sde of the case, that s, the sad amount taken by
hm from appeee s or was not hs persona debt to
appeee, but expenses of the partnershp between hm and
appeee."
Consequenty, sad tra court concuded that the promssory
notes nvoved were merey recepts for the contrbutons to
sad partnershp and, therefore, uphed the cam that there
was ambguty n the promssory notes, hence paro
evdence was aowabe to vary or contradct the terms of
the represented oan contract.
The paro evdence rue n Rue 130 provdes:
Sec. 7. #vidence of 'ritten agreements.-When the terms of
an agreement have been reduced to wrtng, t s to be
consdered as contanng a such terms, and, therefore,
there can be, between the partes and ther successors n
nterest, no evdence of the terms of the agreement other
than the contents of the wrtng except n the foowng
cases:
(a) Where a mstake or mperfecton of the wrtng or ts
faure to express the the true ntent and agreement of the
partes, or the vadty of the agreement s put n ssue by
the peadngs;
(b) When there s an ntrnsc ambguty n the wrtng.
As correcty ponted out by the respondent Court the
exceptons to the rue do not appy n ths case as there s
no ambguty n the wrtngs n queston, thus:
In the case at bar, Exhbts B, C, and D are prnted
promssory notes contanng a promse to pay a sum certan
n money, payabe on demand and the promse to bear the
costs of tgaton n the event of the prvate respondent's
faure to pay the amount oaned when demanded
extra|udcay. Lkewse, the vaes denote that the prvate
respondent s obged to return the sum oaned to hm by
the pettoner. On ther face, nothng appears to be vague or
ambgous, for the terms of the promssory notes ceary
show that t was ncumbent upon the prvate respondent to
pay the amount nvoved n the promssory notes f and
when the pettoner demands the same. It was ceary the
ntent of the partes to enter nto a contract of oan for how
coud an educated man ke the prvate respondent be
deceved to sgn a promssory note yet ntendng to make
such a wrtng to be mere recepts of the pettoner's
supposed contrbuton to the aeged partnershp exstng
between the partes?
It has been estabshed n the tra court that, the prvate
respondent has been engaged n busness for qute a ong
perod of tme--as owner of the Sardane Truckng Servce,
enterng nto contracts wth the government for the
constructon of wharfs and seawa; and a member of the
Cty Counc of Daptan (TSN, |uy 20, 1976, pp. 57-
58).()re**an+,1-'. It ndeed puzzes us how the prvate
respondent coud have been msed nto sgnng a document
contanng terms whch he dd not mean them to be. ...
xxx xxx xxx
The prvate respondent admtted durng the cross-
examnaton made by pettoner's counse that he was the
one who was responsbe for the prntng of Exhbts B, C,
and D (TSN, |uy 28, 1976, p. 64). How coud he purportedy
rey on such a fmsy pretext that the promssory notes were
recepts of the pettoner's contrbuton? 4
The Court of Appeas hed, and We agree, that even f
evdence aliunde other than the promssory notes may be
admtted to ater the meanng conveyed thereby, st the
evdence s nsuffcent to prove that a partnershp exsted
between the prvate partes hereto.
As manager of the basnig Sarcado naturay some degree of
contro over the operatons and mantenance thereof had to
be exercsed by heren pettoner. The fact that he had
receved 50% of the net profts does not concusvey
estabsh that he was a partner of the prvate respondent
heren. Artce 1769(4) of the Cv Code s expct that whe
the recept by a person of a share of the profts of a
busness s prima facie evdence that he s a partner n the
busness, no such nference sha be drawn f such profts
were receved n payment as wages of an empoyee.
Furthermore, heren pettoner had no voce n the
management of the affars of the basnig. Under smar
facts, ths Court n the eary case of /ortis vs& 0utierre1
2ermanos, ( n denyng the cam of the pantff theren that
he was a partner n the busness of the defendant, decared:
Ths contenton cannot be sustaned. It was a mere contract
of empoyment. The pantff had no voce nor vote n the
management of the affars of the company. The fact that the
compensaton receved by hm was to be determned wth
reference to the profts made by the defendant n ther
busness dd not n any sense make hm a partner theren. ...
The same rue was reterated n 3astida vs& 4en1i 5 Co&,
6nc&, et al& ) whch nvoved the same factua and ega
meu.
There are other consderatons noted by respondent Court
whch negate heren pettoner's pretenson that he was a
partner and not a mere empoyee ndebted to the present
prvate respondent. Thus, n an acton for damages fed by
heren prvate respondent aganst the North Zamboanga
Tmber Co., Inc. arsng from the operatons of the busness,
heren pettoner dd not ask to be |oned as a party pantff.
Aso, athough he contends that heren prvate respondent s
the treasurer of the aeged partnershp, yet t s the atter
who s demandng an accountng. The advertence of the
Court of Frst Instance to the fact that the casco bears the
name of heren pettoner dsregards the fndng of the
respondent Court that t was |ust a concesson snce t was
he who obtaned the engne used n the Sardaco from the
Department of Loca Government and Communty
Deveopment. Further, the use by the partes of the pronoun
"our" n referrng to "our basnig, our catch", "our depost", or
"our boseros" was merey ndcatve of the camaradere and
not evdentary of a partnershp, between them.
The foregong factua fndngs, whch bee the further cam
that the aforesad promssory notes do not express the true
ntent and agreement of the partes, are bndng on Us snce
there s no showng that they fa wthn the exceptons to
the rue mtng the scope of appeate revew heren to
questons of aw.
On the second ssue, the pertnent rue on actonabe
documents n Rue 8, for ready reference, reads:
Sec. 8. 2o' to contest genuineness of such documents.-
When an acton or defense s founded upon a wrtten
nstrument, coped n or attached to the correspondng
peadng as provded n the precedng secton, the
genuneness and due executon of the nstrument sha be
deemed admtted uness the adverse party, under oath,
specfcay denes them, and sets forth what he cams to be
the facts; but ths provson does not appy when the
adverse party does not appear to be a party to the
nstrument or when compance wth an order for the
nspecton of the orgna nstrument s refused.
The record shows that heren pettoner dd not deny under
oath n hs answer the authentcty and due executon of the
promssory notes whch had been duy peaded and
attached to the compant, thereby admttng ther
genuneness and due executon. Even n the tra court, he
dd not at a queston the fact that he sgned sad
promssory notes and that the same were genune. Instead,
he presented paro evdence to vary the mport of the
promssory notes by aegng that they were mere recepts
of hs contrbuton to the aeged partnershp.
Hs arguments on ths score refect a msapprehenson of
the rue on paro evdence as dstngushed from the rue on
actonabe documents. As the respondent Court correcty
expaned to heren pettoner, what he presented n the tra
Court was testmona evdence that the promssory notes
were recepts of hs supposed contrbutons to the aeged
partnershp whch testmony, n the ght of Secton 7, Rue
130, coud not be admtted to vary or ater the expct
meanng conveyed by sad promssory notes. On the other
hand, the presumed genuneness and due executon of sad
promssory notes were not affected, pursuant to the
provsons of Secton 8, Rue 8, snce such aspects were not
at a questoned but, on the contrary, were admtted by
heren pettoner.
Pettoner's nvocaton of the doctrnes n 7u Chuc8, et al& vs&
9ong :i ;o, 7 whch was reterated n Central %urety 5
6nsurance Co& vs& C& "& 2odges, et al. 8 does not sustan hs
thess that the heren prvate respondent had "waved the
mante of protecton gven hm by Rue 8, Sec. 8". It s true
that such mped admsson of genuneness and due
executon may be waved by a party but ony f he acts n a
manner ndcatve of ether an express or tact waver
thereof. Pettoner, however, ether overooked or gnored
the fact that, as hed n 7u Chuc8, and the same s true n
other cases of Identca factua settngs, such a fndng of
waver s proper where a case has been tred n compete
dsregard of the rue and the pantff havng peaded a
document by copy, presents ora evdence to prove the due
executon of the document and no ob|ectons are made to
the defendant's evdence n refutaton. Ths stuaton does
not obtan n the present case hence sad doctrne s
obvousy nappcabe.
Nether dd the faure of heren prvate respondent to cross-
examne heren pettoner on the atter's sur-rebutta
testmony consttute a waver of the aforesad mped
admsson. As found by the respondent Court, sad sur-
rebutta testmony conssted soey of the dena of the
testmony of heren prvate respondent and no new or
addtona matter was ntroduced n that sur-rebutta
testmony to exonerate heren pettoner from hs
obgatons under the aforesad promssory notes.
On the foregong premses and consderatons, the
respondent Court correcty reversed and set asde the
appeaed decson of the Court of Frst Instance of
Zamboanga de Norte and affrmed n fu the decson of the
Cty Court of Dpoog Cty n Cv Case No. A-1838, dated
September 14, 1976.
Beatedy, n hs moton for reconsderaton of sad decson
of the respondent Court, heren pettoner, as the prvate
respondent theren, rased a thrd unresoved ssue that the
petton for revew theren shoud have been dsmssed for
ack of |ursdcton snce the ower Court's decson dd not
affrm n fu the |udgment of the Cty Court of Dpoog, and
whch he camed was a sine <ua non for such a petton
under the aw then n force. He rases the same pont n hs
present appea and We w wave the procedura
techncates n order to put ths ssue at rest.
Parenthetcay, n that same moton for reconsderaton he
had sought affrmatve reef from the respondent Court
prayng that t sustan the decson of the tra Court, thereby
nvokng and submttng to ts |ursdcton whch he woud
now assa. Furthermore, the ob|ecton that he rases s
actuay not one of |ursdcton but of procedure. 9
At any rate, t w be noted that pettoner anchors hs sad
ob|ecton on the provsons of Secton 29, Repubc Act 296
as amended by Repubc Act 5433 effectve September 9,
1968. Subsequenty, the procedure for appea to the Court
of Appeas from decsons of the then courts of frst nstance
n the exercse of ther appeate |ursdcton over cases
orgnatng from the muncpa courts was provded for by
Repubc Act 6031, amendng Secton 45 of the |udcary Act
effectve August 4, 1969. The requrement for affrmance n
fu of the nferor court's decson was not adopted or
reproduced n Repubc Act 6031. Aso, snce Repubc Act
6031 faed to provde for the procedure or mode of appea
n the cases theren contempated, the Court of Appeas en
banc provded thereof n ts Resouton of August 12, 1971,
by requrng a petton for revew but whch aso dd not
requre for ts avaabty that the |udgment of the court of
frst nstance had affrmed n fu that of the ower court.
Sad mode of appea and the procedura requrements
thereof governed the appea taken n ths case from the
aforesad Court of Frst Instance to the Court of Appeas n
1977. 1* Heren pettoner's pant on ths ssue s,
therefore, devod of mert.
WHEREFORE, the |udgment of the respondent Court of
Appeas s AFFIRMED, wth costs aganst heren pettoner.
17.
G.R. No. L-'978* No+,-.,r 11, 198(
EL!O !U/AS0UE, pettoner, vs.COURT OF
AEALS,CELESTINO GALAN TROICAL CO!!ERCIAL
CO!AN& #$% RA!ON ONS, respondents.
GUTTIERRE1, JR., J.:
In ths petton for certorar, the pettoner seeks to annu
and set added the decson of the Court of Appeas affrmng
the exstence of a partnershp between pettoner and one of
the respondents, Ceestno Gaan and hodng both of them
abe to the two ntervenors whch extended credt to ther
partnershp. The pettoner wants to be excuded from the
abtes of the partnershp.
Pettoner Emo Muasque fed a compant for payment of
sum of money and damages aganst respondents Ceestno
Gaan, Tropca Commerca, Co., Inc. (Tropca) and Ramon
Pons, aegng that the pettoner entered nto a contract
wth respondent Tropca through ts Cebu Branch Manager
Pons for remodeng a porton of ts budng wthout
exchangng or expectng any consderaton from Gaan
athough the atter was casuay named as partner n the
contract; that by vrtue of hs havng ntroduced the
pettoner to the empoyng company (Tropca). Gaan woud
receve some knd of compensaton n the form of some
percentages or commsson; that Tropca, under the terms
of the contract, agreed to gve pettoner the amount of
P7,000.00 soon after the constructon began and thereafter,
the amount of P6,000.00 every ffteen (15) days durng the
constructon to make a tota sum of P25,000.00; that on
|anuary 9, 1967, Tropca and/or Pons devered a check for
P7,000.00 not to the pantff but to a stranger to the
contract, Gaan, who succeeded n gettng pettoner's
ndorsement on the same check persuadng the atter that
the same be deposted n a |ont account; that on |anuary
26, 1967 when the second check for P6,000.00 was due,
pettoner refused to ndorse sad cheek presented to hm by
Gaan but through ater manpuatons, respondent Pons
succeeded n changng the payee's name from Emo
Muasque to Gaan and Assocates, thus enabng Gaan to
cash the same at the Cebu Branch of the Phppne
Commerca and Industra Bank (PCIB) pacng the pettoner
n great fnanca dffcuty n hs constructon busness and
sub|ectng hm to demands of credtors to pay' for
constructon materas, the payment of whch shoud have
been made from the P13,000.00 receved by Gaan; that
pettoner undertook the constructon at hs own expense
competng t pror to the March 16, 1967 deadne;that
because of the unauthorzed dsbursement by respondents
Tropca and Pons of the sum of P13,000.00 to Gaan
pettoner demanded that sad amount be pad to hm by
respondents under the terms of the wrtten contract
between the pettoner and respondent company.
The respondents answered the compant by denyng some
and admttng some of the matera averments and settng
up countercams.
Durng the pre-tra conference, the pettoners and
respondents agreed that the ssues to be resoved are:
(1) Whether or not there exsted a partners between
Ceestno Gaan and Emo Muasque; and
(2) Whether or not there exsted a |ustfabe cause on the
part of respondent Tropca to dsburse money to
respondent Gaan.
The busness frms Cebu Southern Hardware Company and
Bue Damond Gass Paace were aowed to ntervene, both
havng ega nterest n the matter n tgaton.
After tra, the court rendered |udgment, the dspostve
porton of whch states:
IN VIEW WHEREOF, |udgment s hereby rendered:
(1) orderng pantff Muasque and defendant Gaan to pay
|onty and severay the ntervenors Cebu and Southern
Hardware Company and Bue Damond Gass Paace the
amount of P6,229.34 and P2,213.51, respectvey;
(2) absovng the defendants Tropca Commerca Company
and Ramon Pons from any abty,
No damages awarded whatsoever.
The pettoner and ntervenor Cebu Southern Company and
ts propretor, Tan Su fed motons for reconsderaton.
On |anuary 15, 197 1, the tra court ssued 'another order
amendng ts |udgment to make t read as foows:
IN VIEW WHEREOF, |udgment s hereby rendered:
(1) orderng pantff Muasque and defendant Gaan to pay
|onty and severay the ntervenors Cebu Southern
Hardware Company and Bue Damond Gass Paace the
amount of P6,229.34 and P2,213.51, respectvey,
(2) orderng pantff and defendant Gaan to pay Intervenor
Cebu Southern Hardware Company and Tan Su |onty and
severay nterest at 12% per annum of the sum of
P6,229.34 unt the amount s fuy pad;
(3) orderng pantff and defendant Gaan to pay P500.00
representng attorney's fees |onty and severay to
Intervenor Cebu Southern Hardware Company:
(4) absovng the defendants Tropca Commerca Company
and Ramon Pons from any abty,
No damages awarded whatsoever.
On appea, the Court of Appeas affrmed the |udgment of
the tra court wth the soe modfcaton that the abty
mposed n the dspostve part of the decson on the credt
of Cebu Southern Hardware and Bue Damond Gass Paace
was changed from "|onty and severay" to "|onty."
Not satsfed, Mr. Muasque fed ths petton.
The present controversy began when pettoner Muasque n
behaf of the partnershp of "Gaan and Muasque" as
Contractor entered nto a wrtten contract wth respondent
Tropca for remodeng the respondent's Cebu branch
budng. A tota amount of P25,000.00 was to be pad under
the contract for the entre servces of the Contractor. The
terms of payment were as foows: thrty percent (30%) of
the whoe amount upon the sgnng of the contract and the
baance thereof dvded nto three equa nstaments at the
ute of Sx Thousand Pesos (P6,000.00) every ffteen (15)
workng days.
The frst payment made by respondent Tropca was n the
form of a check for P7,000.00 n the name of the
pettoner.Pettoner, however, ndorsed the check n favor of
respondent Gaan to enabe the atter to depost t n the
bank and pay for the materas and abor used n the pro|ect.
Pettoner aeged that Gaan spent P6,183.37 out of the
P7,000.00 for hs persona use so that when the second
check n the amount of P6,000.00 came and Gaan asked
the pettoner to ndorse t agan, the pettoner refused.
The check was wthhed from the pettoner. Snce Gaan
nformed the Cebu branch of Tropca that there was
a"msunderstandng" between hm and pettoner,
respondent Tropca changed the name of the payee n the
second check from Muasque to "Gaan and Assocates"
whch was the duy regstered name of the partnershp
between Gaan and pettoner and under whch name a
permt to do constructon busness was ssued by the mayor
of Cebu Cty. Ths enabed Gaan to encash the second
check.
Meanwhe, as aeged by the pettoner, the constructon
contnued through hs soe efforts. He stated that he
borrowed some P12,000.00 from hs frend, Mr. Espna and
athough the expenses had reached the amount of
P29,000.00 because of the faure of Gaan to pay what was
party due the aborers and party due for the materas, the
constructon work was fnshed ahead of schedue wth the
tota expendture reachng P34,000.00.
The two remanng checks, each n the amount of
P6,000.00,were subsequenty gven to the pettoner aone
wth the ast check beng gven pursuant to a court order.
As stated earer, the pettoner fed a compant for
payment of sum of money and damages aganst the
respondents,seekng to recover the foowng: the amounts
covered by the frst and second checks whch fe nto the
hands of respondent Gaan, the addtona expenses that the
pettoner ncurred n the constructon, mora and exempary
damages, and attorney's fees.
Both the tra and appeate courts not ony absoved
respondents Tropca and ts Cebu Manager, Pons, from any
abty but they aso hed the pettoner together wth
respondent Gaan, habe to the ntervenors Cebu Southern
Hardware Company and Bue Damond Gass Paace for the
credt whch the ntervenors extended to the partnershp of
pettoner and Gaan
In ths petton the ega questons rased by the pettoner
are as foows: (1) Whether or not the appeate court erred
n hodng that a partnershp exsted between pettoner and
respondent Gaan. (2) Assumng that there was such a
partnershp, whether or not the court erred n not fndng
Gaan guty of maversng the P13,000.00 covered by the
frst and second checks and therefore, accountabe to the
pettoner for the sad amount; and (3) Whether or not the
court commtted grave abuse of dscreton n hodng that
the payment made by Tropca through ts manager Pons to
Gaan was "good payment, "
Pettoner contends that the appeate court erred n hodng
that he and respondent Gaan were partners, the truth beng
that Gaan was a sham and a perfdous partner who
msapproprated the amount of P13,000.00 due to the
pettoner.Pettoner aso contends that the appeate court
commtted grave abuse of dscreton n hodng that the
payment made by Tropca to Gaan was "good" payment
when the same gave occason for the atter to
msapproprate the proceeds of such payment.
The contentons are wthout mert.
The records w show that the pettoner entered nto a con-
tract wth Tropca for the renovaton of the atter's budng
on behaf of the partnershp of "Gaan and Muasque." Ths
s ready seen n the frst paragraph of the contract where t
states:
Ths agreement made ths 20th day of December n the year
1966 by Gaan and Muasque herenafter caed the
Contractor, and Tropca Commerca Co., Inc., herenafter
caed the owner do hereby for and n consderaton agree
on the foowng: ... .
There s nothng n the records to ndcate that the partner-
shp organzed by the two men was not a genune one. If
there was a fang out or msunderstandng between the
partners, such does not convert the partnershp nto a sham
organzaton.
Lkewse, when Muasque receved the frst payment of
Tropca n the amount of P7,000.00 wth a check made out
n hs name, he ndorsed the check n favor of Gaan.
Respondent Tropca therefore, had every rght to presume
that the pettoner and Gaan were true partners. If they
were not partners as pettoner cams, then he has ony
hmsef to bame for makng the reatonshp appear
otherwse, not ony to Tropca but to ther other credtors as
we. The payments made to the partnershp were,
therefore, vad payments.
In the case of %ingsong v& 6sabela %a'mill (88 SCRA 643),we
rued:
Athough t may be presumed that Margarta G. Sada|eno
had acted n good fath, the appeees aso acted n good
fath n extendng credt to the partnershp. Where one of
two nnocent persons must suffer, that person who gave
occason for the damages to be caused must bear the
consequences.
No error was commtted by the appeate court n hodng
that the payment made by Tropca to Gaan was a good
payment whch bnds both Gaan and the pettoner. Snce
the two were partners when the debts were ncurred, they,
are aso both abe to thrd persons who extended credt to
ther partnershp. In the case of 0eorge :itton v& 2ill and
Ceron, et al, (67 Ph. 513, 514), we rued:
There s a genera presumpton that each ndvdua partner
s an authorzed agent for the frm and that he has authorty
to bnd the frm n carryng on the partnershp transactons.
(Ms vs. Rgge,112 Pan, 617).
The presumpton s suffcent to permt thrd persons to hod
the frm abe on transactons entered nto by one of
members of the frm actng apparenty n ts behaf and
wthn the scope of hs authorty. (Le Roy vs. |ohnson, 7 U.S.
(Law. ed.), 391.)
Pettoner aso mantans that the appeate court commtted
grave abuse of dscreton n not hodng Gaan abe for the
amounts whch he "maversed" to the pre|udce of the
pettoner. He adds that athough ths was not one of the
ssues agreed upon by the partes durng the pretra, he,
nevertheess, aeged the same n hs amended compant
whch was, duy admtted by the court.
When the pettoner amended hs compant, t was ony for
the purpose of mpeadng Ramon Pons n hs persona
capacty. Athough the pettoner made aegatons as to the
aeged maversatons of Gaan, these were the same
aegatons n hs orgna compant. The maversaton by
one partner was not an ssue actuay rased n the amended
compant but the aeged connvance of Pons wth Gaan as
a means to serve the atter's persona purposes.
The pettoner, therefore, shoud be bound by the
demtaton of the ssues durng the pre-tra because he
hmsef agreed to the same. In ;ermanent Concrete
;roducts, 6nc& v& Teodoro, (26 SCRA 336), we rued:
xxx xxx xxx
... The appeant s bound by the demtaton of the ssues
contaned n the tra court's order ssued on the very day
the pre-tra conference was hed. Such an order contros the
subsequent course of the acton, uness modfed before tra
to prevent manfest n|ustce.In the case at bar, modfcaton
of the pre-tra order was never sought at the nstance of
any party.
Pettoner coud have asked at east for a modfcaton of the
ssues f he reay wanted to ncude the determnaton of
Gaan's persona abty to ther partnershp but he chose
not to do so, as he vehementy dened the exstence of the
partnershp. At any rate, the ssue rased n ths petton s
the contenton of Muasque that the amounts payabe to
the ntervenors shoud be shoudered excusvey by Gaan.
We note that the pettoner s not soey burdened by the
obgatons of ther starred partnershp. The records show
that there s an exstng |udgment aganst respondent
Gaan, hodng hm abe for the tota amount of P7,000.00
n favor of Eden Hardware whch extended credt to the
partnershp asde from the P2, 000. 00 he aready pad to
Unversa Lumber.
We, however, take excepton to the rung of the appeate
court that the tra court's orderng pettoner and Gaan to
pay the credts of Bue Damond and Cebu Southern
Hardware"|onty and severay" s pan error snce the
abty of partners under the aw to thrd persons for
contracts executed nconnecton wth partnershp busness
s ony pro rata under Art. 1816, of the Cv Code.
Whe t s true that under Artce 1816 of the Cv Code,"A
partners, ncudng ndustra ones, sha be abe prorate
wth a ther property and after a the partnershp assets
have been exhausted, for the contracts whch may be
entered nto the name and fm the account cd the
partnershp, under ts sgnature and by a person authorzed
to act for the partner-shp. ...". ths provson shoud be
construed together wth Artce 1824 whch provdes that:
"A partners are abe sodary wth the partnershp for
everythng chargeabe to the partnershp under Artces
1822 and 1823." In short, whe the abty of the partners
are merey |ont n transactons entered nto by the
partnershp, a thrd person who transacted wth sad
partnershp can hod the partners sodary abe for the
whoe obgaton f the case of the thrd person fas under
Artces 1822 or 1823.
Artces 1822 and 1823 of the Cv Code provde:
Art. 1822. Where, by any wrongfu act or omsson of any
partner actng n the ordnary course of the busness of the
partner-shp or wth the authorty of hs co-partners, oss or
n|ury s caused to any person, not beng a partner n the
partnershp or any penaty s ncurred, the partnershp s
abe therefor to the same extent as the partner so actng or
omttng to act.
Art. 1823. The partnershp s bound to make good:
(1) Where one partner actng wthn the scope of hs
apparent authorty receves money or property of a thrd
person and msappes t; and
(2) Where the partnershp n the course of ts busness
receves money or property of a thrd person and t he
money or property so receved s msapped by any partner
whe t s n the custody of the partnershp.
The obgaton s sodary, because the aw protects hm,
who n good fath reed upon the authorty of a partner,
whether such authorty s rea or apparent. That s why
under Artce 1824 of the Cv Code a partners, whether
nnocent or guty, as we as the ega entty whch s the
partnershp, are sodary abe.
In the case at bar the respondent Tropca had every reason
to beeve that a partnershp exsted between the pettoner
and Gaan and no faut or error can be mputed aganst t for
makng payments to "Gaan and Assocates" and deverng
the same to Gaan because as far as t was concerned,
Gaan was a true partner wth rea authorty to transact on
behaf of the partnershp wth whch t was deang. Ths s
even more true n the cases of Cebu Southern Hardware and
Bue Damond Gass Paace who supped materas on credt
to the partnershp. Thus, t s but far that the consequences
of any wrongfu act commtted by any of the partners
theren shoud be answered sodary by a the partners and
the partnershp as a whoe
However. as between the partners Muasque and
Gaan,|ustce aso dctates that Muasque be rembursed by
Gaan for the payments made by the former representng
the abty of ther partnershp to heren ntervenors, as t
was satsfactory estabshed that Gaan acted n bad fath
n hs deangs wth Muasque as a partner.
WHEREFORE, the decson appeaed from s hereby
AFFIRMED wth the MODIFICATION that the abty of
pettoner and respondent Gaan to ntervenors Bue
Damond Gass and Cebu Southern Hardware s decared to
be |ont and sodary. Pettoner may recover from
respondent Gaan any amount that he pays, n hs capacty
as a partner, to the above ntervenors,
18.
G.R. No. 7*4*' J2l3 7, 1989
SANTIAGO S&JUCO, INC., pettoner, vs.HON. JOSE .
CASTRO, AS RESI"ING JU"GE OF THE REGIONAL
TRIAL COURT OF THE NATIONAL CAITAL JU"ICIAL
REGION, BRANCH L4445, 0UE1ON CIT& respondents.
NAR5ASA, J.6
Ths case may we serve as a textbook exampe of how
|udca processes, desgned to promote the swft and
effcent dsposton of dsputes at aw, can be so grossy
abused and manpuated as to produce precsey the
opposte resut; how they can be utzed by partes wth
sma scrupes to foresta for an unconsconaby ong tme
so essentay smpe a matter as makng the securty gven
for a |ust debt answer for ts payment.
The records of the present proceedngs and of two other
cases aready decded by ths Court expose how ndeed the
routne procedure of an extra|udca forecosure came by
dnt of brazen forum shoppng and other devous
maneuverng to grow nto a vertabe thcket of tgaton
from whch the mortgagee has been tryng to extrcate tsef
for the ast twenty years.
Back n November 1964, Eugeno Lm, for and n hs own
behaf and as attorney-n-fact of hs mother, the wdow
Mara Moreno (now deceased) and of hs brother Lorenzo,
together wth hs other brothers, Arams, Maro and Pauno,
and hs sster, Na, a herenafter coectvey caed the
Lms, borrowed from pettoner Santago Sy|uco, Inc.
(herenafter, Sy|uco ony) the sum of P800,000.00. The oan
was gven on the securty of a frst mortgage on property
regstered n the names of sad borrowers as owners n
common under Transfer Certfcates of Tte Numbered
75413 and 75415 of the Regstry of Deeds of Mana.
Thereafter addtona oans on the same securty were
obtaned by the Lms from Sy|uco, so that as of May 8, 1967,
the aggregate of the oans stood at P2,460,000.00,
excusve of nterest, and the securty had been augmented
by brngng nto the mortgage other property, aso
regstered as owned pro ndvso by the Lms under two
ttes: TCT Nos. 75416 and 75418 of the Mana Regstry.
There s no dspute about these facts, nor about the
addtona crcumstance that as stpuated n the mortgage
deed the obgaton matured on November 8, 1967; that the
Lms faed to pay t despte demands therefor; that Sy|uco
consequenty caused extra-|udca proceedngs for the
forecosure of the mortgage to be commenced by the Sherff
of Mana; and that the atter schedued the aucton sae of
the mortgaged property on December 27, 1968.
1
The
attempt to forecose trggered off a ega batte that has
dragged on for more than twenty years now, fought through
fve (5) cases n the tra courts,
2
two (2) n the Court of
Appeas,
'
and three (3) more n ths Court,
4
wth the end
ony now n sght.
1. CIVIL CASE NO. 75180, CFI MANILA, BR.5; CA-G.R. NO.
00242-R; G.R. NO. L-34683
To stop the forecosure, the Lms - through Atty. Marca G.
Mendoa, who was ater |oned by Atty. Rau Correa - fed
Cv Case No. 75180 on December 24,1968 n the Court of
Frst Instance of Mana (Branch 5). In ther compant they
aeged that ther mortgage was vod, beng usurous for
stpuatng nterest of 23% on top of 11 % that they had
been requred to pay as "kckback." An order restranng the
aucton sae was ssued two days ater, on December
26,1968, premsed inter alia on the :ims= express 'aiver of
>their rights to the notice and republication of the notice of
sale 'hich may be conducted at some future date&"
(
On November 25,1970, the Court of Frst Instance (then
presded over by |udge Conrado M. Vasquez
)
rendered
|udgment fndng that usury taned the mortgage wthout,
however, renderng t vod, decarng the amount due to be
ony P,136,235.00 and aowng the forecosure to proceed
for satsfacton of the obgaton reckoned at ony sad
amount .
7
Sy|uco moved for new tra to enabe t to present addtona
evdence to overthrow the fndng of usury, and the Court
ordered the case reopened for that purpose. The Lms tred
to negate that order of reopenng n the Court of Appeas,
the proceedngs beng docketed as CA-G.R. No. 00242-R.
They faed. The Court of Appeas uphed the Tra Court. The
Lms then sought to nufy ths acton of the Appeate Court;
towards that end, they fed wth ths Court a petton for
certiorari and prohbton, docketed as G.R. No. L-34683. But
here, too, they faed; ther petton was dsmssed.
8
Thereafter, and on the bass of the addtona evdence
adduced by Sy|uco on remand of the case from ths Court,
the Tra Court promugated an amended decson on August
16, 1972, reversng ts prevous hodng that usury had
fawed the Lms' oan obgaton. It decared that the
prncpa of sad obgaton ndeed amounted to
P2,460,000.00, excusve of nterest at the rate of 12% per
annum from November 8, 1967, and, that obgaton beng
aready due, the defendants (Sy|uco and the Sherff of
Mana) coud proceed wth the extra|udca forecosure of
the mortgage gven to secure ts satsfacton.
9
2. APPEAL FROM CIVIL CASE NO. 75180; CA-G.R. NO. 51752;
G.R. NO. L-45752
On September 9, 1972, Atty. Paterno R. Canas entered hs
appearance n Cv Case No. 75180 as counse for the Lms
n coaboraton wth Atty. Rau Correa, and on the same
date appeaed to the Court of Appeas from the amended
decson of August 16, 1972.
1*
In that appea, whch was
docketed as CA G.R. No. 51752, Messrs. Canas and Correa
prayed that the oans be decared usurous; that the
prncpa of the oans be found to be n the tota amount of
P,269,505.00 ony, and the nterest thereon fxed at ony
6% per annum from the fng of the compant; and that the
mortgage be aso pronounced vod ab initio.
11
The appea met wth no success. In a decson promugated
on October 25,1976, the Court of Appeas affrmed in toto
the Tra Court's amended decson.
12
The Lms came to ths Court seekng reversa of the
appeate Court's decson. However, ther petton for
revew-fed n ther behaf by Canas, and Atty. Po R.
Marcos, and docketed as G.R. No. L-45752-was dened for
ack of mert n a mnute resouton dated August 5, 1977.
The Lms' moton for reconsderaton was dened and entry
of |udgment was made on September 24,1977.
1'
Here the
matter shoud have ended; t marked ony the begnnng of
Sy|uco's travas.
3. CIVIL CASE NO.112762, CFI MANILA BRANCH 9
Sy|uco then resumed ts efforts to proceed wth the
forecosure. It caused the aucton sae of the mortgaged
property to be schedued on December 20, 1977, ony to be
frustrated agan by another acton fed by the Lms on
December 19, 1977, docketed as Cv Case No. 112762 of
the Court of Frst Instance of Mana.
14
The acton sought to
stop the sae on the ground that the notce of forecosure
had not been repubshed; ths, notwthstandng that as
earer stressed, the restranng order of December 26, 1968
ssued n Cv Case No 75180 expcty decared tsef to be
predcated on the Lms' waver of "ther rghts to the notce
and repubcaton of the notce of sae whch may be
conducted at some future date."
1(
An order restranng the
sae ssued n the case, athough the petton for premnary
n|uncton was subsequenty dened. A suppementa
compant was aso fed by the Lms seekng recovery of
some P mon n damages aegedy suffered by reason of
sad ack of repubcaton.
1)
4. CIVIL CASE NO. 75180
That very same cam - that there had been no
republication of the notice of sale, whch was the foundaton
of the Lms' acton n Cv Case No. 112762 as aforesad -
was made by the Lms the bass of an urgent moton fed on
December 15, 1977 n Cv Case No. 75180, n whch, as
earer narrated, the |udgement authorzng the forecosure
had been affrmed by both the Court of Appeas and ths
Court, and had become fna and executory. And that moton
sought exacty the same remedy prayed for n Cv Case No.
112762 (fed by the Lms four |4| days ater, on December
19, 1977), .e., the preventon of the aucton sae. The Court
-- Branch 5, then presded over by |udge |ose H. Tecson -
granted the restranng order on December 19, 1977,
17
the
very same day that the Lms commenced Cv Case No.
112762 n the same Court and n whch subsequent acton
they asked for and obtaned a smar restranng order.
The Lms' counse thus brought about the anomaous
stuaton of two (2) restranng orders drected aganst the
same aucton sae, based on the same ground, ssued by
dfferent courts havng cognzance of two (2) separate
proceedngs nsttuted for dentca ob|ectves. Ths stuaton
asted for a of three (3) years, despte the repubcaton of
the notce of sae caused by Sy|uco n |anuary, 1978 n an
effort to end a dspute about the matter, and despte |udge
Tecson's havng been made aware of Cv Case No. 112762.
It shoud have been apparent to |udge Tecson that there
was nothng more to be done n Cv Case No. 75180 except
to enforce the |udgment, aready fna and executory,
authorzng the extra|udca forecosure of the mortgage, a
|udgment sanctoned, to repeat, by both the Court of
Appeas and the Supreme Court; that there was n truth no
need for another pubcaton of the notce snce the Lms
had precsey waved such repubcaton, ths waver havng
been the condton under whch they had earer obtaned an
order restranng the frst schedued sae; that, n any event,
the repubcaton effected by Sy|uco had removed the ony
asserted mpedment to the hodng of the same; and that,
fnay, the Lms were actng n bad fath: they were
mantanng proceedngs n two (2) dfferent courts for
essentay the same reef.
18
Incredby, not ony dd |udge
Tecson refuse to aow the hodng of the aucton sae, as
was the ony |ust and awfu course ndcated by the
crcumstances,
19
he authorzed the Lms to se the
mortgaged property n a prvate sae,
2*
wth the evdent
ntenton that the proceeds of the sae, whch he drected to
be deposted n court, woud be dvded between Sy|uco and
the Lms; ths, n ne wth the patenty specous theory
advocated by the Lms' counse that the bond fed by them
for the postponement of the sae, set at P6 mon by the
Court (ater ncreased by P 3 mon) had superseded and
caused novaton of the mortgage.
21
The case ay faow for a
year, certan other, ncdents arsng and remanng
unresoved on account of numerous postponements.
5. G.R. No. L-56014
Fnay, on |anuary 28, 1981, Sy|uco betook tsef to ths
Court, presumaby no onger dsposed to awat |udge
Tecson's peasure or the Lms' convenence. It fed a
petton for certiorari and prohbton, docketed as G.R. No.
L-56014, aegng that n Cv Case No. 75180, |udge Tecson
had gravey abused dscreton n:
(1) unreasonaby deayng the forecosure of the mortgage;
(2) entertanng the Lms' moton to dscharge sad
mortgage grounded on the theory that t had been
superseded and novated by the Lms' act of fng the bond
requred by |udge Tecson n connecton wth the
postponement of the forecosure sae, and unreasonaby
deayng resouton of the ssue; and
(3) authorzng the Lms to negotate and consummate the
prvate sae of the mortgaged property and motu propro
extendng the perod granted the Lms for the purpose, n
dsregard of the fna and executory |udgment rendered n
the case.
By |udgment rendered on September 21, 1982, after due
proceedngs, ths Court
22
ssued the wrt prayed for and
nufed the orders and actuatons of |udge Tecson n Cv
Case No. 75180. The |udgment decared that:
(1) the repubcaton by Sy|uco of the notce of forecosure
sae rendered the compant n Cv Case No. 112762 moot
and academc; hence, sad case coud not operate to bar the
sae;
(2) the Lms' bonds (of P 6 mon and P 3 mon), havng by
the terms thereof been gven to guarantee payment of
damages to Sy|uco and the Sherff of Mana resutng from
the suspenson of the aucton sae, coud not n any sense
and from any aspect have the effect of supersedng the
mortgage or novatng t;
(3) n fact, the bonds had become worthess when, as shown
by the record, the bondsman's authorty to transact non-fe
nsurance busness n the Phppnes was not renewed, for
cause, as of |uy 1, 1981.
The decson consequenty decreed that the Sherff of Mana
shoud proceed wth the mortgage sae, there beng no
further mpedment thereto.
2'
Notce of the decson was served on the Lms, through Atty.
Canas, on October 2, 1982. A moton for reconsderaton
was fed,
24
but the same was dened wth fnaty for ack of
mert and entry of fna |udgment was made on March
22,1983.
2(
6. THE SECRET ACTION CIVIL CASE NO. O-36845 OF THE
REGIONAL TRIAL COURT, OUEZON CITY, |UDGE |OSE P.
CASTRO, PRESIDING
Tweve (12) days after the Lms were served, as above
mentoned, wth notce of ths Court's |udgment n G.R. No.
56014, or on October 14,1982, they caused the fng wth
the Regona Tra Court of Ouezon Cty of st another
acton, the thrd, aso desgned, ke the frst two, to
precude enforcement of the mortgage hed by Sy|uco.
Ths tme the compant was presented, not n ther
ndvdua names, but n the name of a partnershp of whch
they themseves were the ony partners: "Hers of Hugo
Lm." The compant advocated the theory that the
mortgage whch they, together wth ther mother, had
ndvduay consttuted (and thereafter amended durng the
perod from 1964 to 1967) over ands standng n ther
names n the Property Regstry as owners pro ndvso, n
fact no onger beonged to them at that tme, havng been
earer deeded over by them to the partnershp, "Hers of
Hugo Lm", more precsey, on March 30, 1959, hence, sad
mortgage was vod because executed by them wthout
authorty from the partnershp.
The compant was sgned by a awyer other than Atty.
Canas, but the records dscose that Atty. Canas took over
as counse as of November 4,1982. The case, docketed as
Cv Case No. O-39295, was assgned to Branch 35 of the
Ouezon Cty Regona Tra Court, then presded over by
|udge |ose P. Castro.
|udge Castro ssued a restranng order on October 15, 1982.
Then, Sherff Perfecto G. Daangn submtted a return of
summons to the effect that on December 6, 1982 he -
.. served personay and eft a copy of summons together
wth a copy of Compant and ts annexes x x upon
defendant's offce formery at 313 Ourno Ave., Paranaque,
Metro-Mana and now at 407 Dona Fesa Sy|uco Budng,
Remedos St., corner Taft Avenue, Mana, through the
Manager, a person of suffcent age and dscreton duy
authorzed to receve servce of such nature, but who
refused to accept servce and sgned recept thereof.
2)
A vaguer return w be hard to fnd. It s mpossbe to
dscern from t where precsey the summons was served,
whether at Ourno Avenue, Paranaque, or Taft Avenue,
Mana; and t s nexpcabe that the name of the person
that the sherff had been abe to dentfy as the manager s
not stated, the atter beng descrbed merey as "a person of
suffcent age and dscreton." In any event, as t was to
cam ater, Sy|uco asserts that t was never so served wth
summons, or wth any other notce, peadng, or moton
reatve to the case, for that matter.
On February 10, 1983, Atty. Canas fed an ex-parte moton
to decare Sy|uco n defaut. The order of defaut ssued the
next day, aso drectng the pantff partnershp to present
evdence ex parte wthn three (3) days. On February 22,
1983, |udgment by defaut was rendered, decarng vod the
mortgage n queston because executed by the Lms wthout
authorty from the partnershp whch was and had been
snce March 30,1959 the excusve owner of the mortgaged
property, and makng permanent an n|uncton aganst the
forecosure sae that had ssued on |anuary 14,1983.
27
Servce of notce of the defaut |udgment was, accordng to
the return of the same Sherff Perfecto Daangn, effected on
the foowng day, February 23, 1983. Hs return s a vrtua
copy of hs earer one regardng servce of summons: t aso
states the pace of servce as the defendant's offce, ether
at ts former ocaton, 313 Ourno Avenue, Paranaque, or at
the ater address, 407 Dona Fesa, Sy|uco Budng, Taft
Avenue, Mana; and t aso fas to dentfy the person on
whom servce was made, descrbng hm ony as "the cerk
or person n charge" of the offce.
28
Unaccountaby, and contrary to what mght be expected
from the rapdty wth whch t was decded-tweve (12) days
from February 10, 1983, when the moton to decare
defendant Sy|uco n defaut was fed-the case was
afterwards aowed by Atty. Canas to reman dormant for
seventeen (17) months. He made no effort to have the
|udgment executed, or to ava of t n other actons
nsttuted by hm aganst Sy|uco. The |udgment was not to
be nvoked unt sometme n or after |uy, 1984, agan to
stop the extra|udca mortgage sae schedued at or about
that tme at the nstance of Sy|uco, as sha presenty be
recounted.
7. Other Actons n the Interm:
a. CIVIL CASE No. 83-19018, RTC MANILA
Whe the Lms, through ther partnershp ("Hers of Hugo
Lm"), were prosecutng ther acton n the saa of |udge
Castro, as above narrated, Sy|uco once agan tred to
proceed wth the forecosure after entry of |udgment had
been made n G.R. No. 56014 on March 22, 1983. It
schedued the aucton sae on |uy 30, 1983. But once agan
t was frustrated. Another obstace was put up by the Lms
and ther counse, Atty. Canas. Ths was Cv Case No. 83-
19018 of the Mana Regona Tra Court. The case was fed
to stop the sae on the theory that what was sought to be
reazed from the sae was much n excess of the |udgment
n Cv Case No. 75180, and that there was absence of the
requste notce. It s sgnfcant that the |udgment by defaut
rendered by |udge Castro n Cv Case No. O-36485 was not
asserted as addtona ground to support the cause of acton.
Be ths as t may, a restranng order was ssued on |uy
20,1983 n sad Cv Case No. 83-9018.
29
b. CIVIL CASE NO. O-32924, RTC OUEZON CITY
What the outcome of ths case, No. 83-19018, s not cear.
What s certan s (1) that the aucton sae was re-schedued
for September 20, 1983, (2) that t was aborted because the
Lms managed to obtan st another restranng order n
another case commenced by ther awyer, Atty. Canas: Cv
Case No. O-32924 of the Court of Frst Instance of Ouezon
Cty, grounded on the proposton that the pubcaton of the
notce of sae was defectve; and (3) that the acton was
dsmssed by the Regona Tra Court on February 3, 1984.
'*
No other saent detas about these two (2) cases are
avaabe n the voumnous records before the Court, except
that t was Atty. Canas who had fed them. He admts
havng done so unequvocay: "Thus, the undersgned
counse fed n|uncton cases n Cv Case No. 83-19018 and
Cv Case No. 39294, Regona Tra Courts of Mana and
Ouezon Cty. ... "
'1
7. RE-ACTIVATION OF CIVIL CASE NO. O-36485, RTC, O
OUEZON CITY, BRANCH XXXV
Upon the dsmssa of Cv Case No. 39294, Sy|uco once
more resumed ts efforts to effect the mortgage sae whch
had aready been stymed for more than ffteen (15) years.
At ts nstance, the sherff once agan set a date for the
aucton sae. But on the date of the sae, a etter of Atty.
Canas was handed to the sherff drawng attenton to the
permanent n|uncton of the sae emboded n the |udgment
by defaut rendered by |udge Castro n Cv Case No. O-
36485.
'2
Sy|uco ost no tme n nqurng about Cv Case
No. O-36485, and was very qucky made aware of the
|udgment by defaut theren promugated and the
antecedent events eadng thereto. It was aso made known
that on |uy 9, 1984, |udge Castro had ordered executon of
the |udgment; that |udge Castro had on |uy 16, 1984
granted Atty. Canas' moton to decare canceed the ttes
to the Lms' mortgaged propertes and as nun and vod the
annotaton of the mortgage and ts amendments on sad
ttes, and to drect the Regster of Deeds of Mana to ssue
new ttes, n eu of the od, n the name of the partnershp,
"Hers of Hugo Lm."
''
On |uy 17,1984, Sy|uco fed n sad Cv Case No. O-36485
a moton for reconsderaton of the decson and for
dsmssa of the acton, aegng that t had never been
served wth summons; that grantng arguendo that servce
had somehow been made, t had never receved notce of
the decson and therefore the same had not and coud not
have become fna; and that the acton shoud be dsmssed
on the ground of bar by pror |udgment premsed on the
fna decsons of the Supreme Court n G.R. No. L-45752 and
G.R. No. 56014.
Two other motons by Sy|uco qucky foowed. The frst,
dated |uy 20, 1984, prayed for abatement of |udge Castro's
order decreeng the ssuance of new certfcates of tte over
the mortgaged ands n the name of the pantff partnershp.
'4
The second, fed on |uy 24, 1984, was a suppement to
the moton to dsmss earer fed, assertng another ground
for the dsmssa of the acton, .e., faure to state a cause of
acton, t appearng that the mortgaged property remaned
regstered n the names of the ndvdua members of the
Lm famy notwthstandng that the property had
supposedy been conveyed to the pantff partnershp ong
before the executon of the mortgage and ts amendments,-
and that even assumng ownershp of the property by the
partnershp, the mortgage executed by a the partners was
vad and bndng under Artces 1811 and 1819 of the Cv
Code.
'(
The motons havng been opposed n due course by the
pantff partnershp, they remaned pendng unt |anuary
31, 1985 when Sy|uco moved for ther mmedate resouton.
Sy|uco now cams that |udge Castro never acted on the
motons. The atter however states that that he dd ssue an
order on February 22, 1985 decarng that he had ost
|ursdcton to act thereon because, petto prncp, hs
decson had aready become fna and executory.
8. G.R.NO.L-70403; THE PROCEEDING AT BAR
For the thrd tme Sy|uco s now before ths Court on the
same matter. It fed on Apr 3, 1985 the nstant petton for
certorar, prohbton and mandamus. It prays n ts petton
that the defaut |udgment rendered aganst t by |udge
Castro n sad Cv Case No. O-36485 be annued on the
ground of ack of servce of summons, res |udcata and
aches, and faure of the compant to state a cause of
acton; that the sherff be commanded to proceed wth the
forecosure of the mortgage on the property covered by
Transfer Certfcates of Tte Numbered 75413, 75415,
75416 and 75418 of the Mana Regstry; and that the
respondents the Lms, |udge Castro, the Sherff and the
Regster of Deeds of Mana, the partnershp known as "Hers
of Hugo Lm," and Atty. Paterno R. Canas, counse for-the
Lms and ther partnershp-be perpetuay en|oned from
takng any further steps to prevent the forecosure.
The comment fed for the respondents by Atty. Canas n
substance aeged that (a) Sy|uco was vady served wth
summons n Cv Case No. O-36485, hence, that the
decson rendered by defaut theren was aso vad and,
havng been aso duy served on sad pettoner, became
fna by operaton of aw after the apse of the regementary
appea perod; (b) fnaty of sad decson removed the case
from the |ursdcton of the tra court, whch was poweress
to entertan and act on the moton for reconsderaton and
moton to dsmss; (c) the petton was n effect an acton to
annu a |udgment, a proceedng wthn the orgna
|ursdcton of the Court of Appeas; (d) the pea of res
|udcata came too ate because rased after the decson had
aready become fna; moreover, no Identty of partes
exsted between the cases nvoked, on the one hand, and
Cv Case No. O-36485, on the other, the partes n the
former beng the Lms n ther persona capactes and n the
atter, the Lm Partnershp, a separate and dstnct |urdca
entty; and the peaded causes of acton beng dfferent,
usury n the earer cases and authorty of the partes to
encumber partnershp property n the case under revew; (e)
the pea of aches aso came too ate, not havng been
nvoked n the ower court; and (f) the property nvoved
consttuted assets of the Lm partnershp, beng regstered
as such wth the Securtes and Exchange Commsson.
')
On hs own behaf Atty. Canas submtted that he had no
knowedge of the nsttuton of Cv Case No. O-36485
(though he admtted beng coaboratng counse n sad
case); that he dd not represent the Lms n a ther cases
aganst Sy|uco, havng been counse for the former ony
snce 1977, not for the ast seventeen years as camed by
Sy|uco; and that he had no duty to nform opposng counse
of the pendency of Cv Case No. O-36485.
'7
Respondent |udge Castro aso fed a comment
'8
dscamng knowedge of prevous controverses regardng
the mortgaged property. He asserted that Sy|uco had been
propery decared n defaut for havng faed to answer the
compant despte servce of summons upon t, and that hs
decson n sad case whch was aso propery served on
Sy|uco became fna when t was not tmey appeaed, after
whch he ost |ursdcton to entertan the moton for
reconsderaton and moton to dsmss. He aso dened
havng faed to act on sad motons, advertng to an aeged
order of February 22, 1985 where he decared hs ack of
|ursdcton to act thereon.
The respondent Regster of Deeds for hs part presented a
comment wheren he stated that by vrtue of an order of
executon n Cv Case No. O-36485, he had canceed TCTs
Nos. 75413, 75415, 75416 and 75418 of hs Regstry and
prepared new certfcates of tte n eu thereof, but that
canceaton had been hed n abeyance for ack of certan
regstraton requrements and by reason aso of the moton
of Sy|uco's Atty. Formoso to hod n abeyance enforcement
of the tra court's order of |uy 16, 1984 as we as of the
temporary restranng order subsequenty ssued by the
Court.
'9
It s tme to wrte finis to ths unedfyng narratve whch s
notabe chefy for the decepton, devousness and trckery
whch have marked the prvate respondents' thus far
successfu attempts to avod the payment of a |ust
obgaton. The record of the present proceedng and the
other records aready referred to, whch the Court has
examned at ength, make t cear that the dspute shoud
have been ad to rest more than eeven years ago, wth
entry of |udgment of ths Court (on September 24, 1977) n
G.R. No. L-45752 seang the fate of the Lms' appea aganst
the amended decson n Cv Case No. 75180 where they
had orgnay questoned the vadty of the mortgage and
ts forecosure. That resut, the records aso show, had tsef
been nne (9) years n comng, Cv Case No. 75180 havng
been nsttuted n December 1968 and, after tra and
|udgment, gone through the Court of Appeas (n CA-G.R. No.
00242-R) and ths Court (n G.R. No. 34683), both at the
nstance of the Lms, on the queston of reopenng before
the amended decson coud be ssued.
Unwng, however, to concede defeat, the Lms moved (n
Cv Case No. 75180) to stop the forecosure sae on the
ground of ack of repubcaton. On December 19,1977 they
obtaned a restranng order n sad case, but ths
notwthstandng, on the very same date they fed another
acton (Cv Case No. 117262) n a dfferent branch of the
same Court of Frst Instance of Mana to en|on the
forecosure sae on the same ground of aeged ack of
repubcaton. At about ths tme, Sy|uco repubshed the
notce of sae n order, as t was ater to manfest, to end a
further dspute.
That move met wth no success. The Lms managed to
persuade the |udge n Cv Case No. 75180, notwthstandng
hs convcton that the amended decson n sad case had
aready become fna, not ony to hat the forecosure sae
but aso to authorze sad respondents to dspose of the
mortgaged property at a prvate sae upon postng a bond of
P6,000,000.00 (ater ncreased by P3,000,000.00) to
guarantee payment of Sy|uco's mortgage credt. Ths gave
the Lms a convenent excuse for further suspenson of the
forecosure sae by ntroducng a new wrnke nto ther
contentons-that the bond superseded the mortgage whch
shoud, they camed, therefore be dscharged nstead of
forecosed.
Thus from the fna months of 1977 unt the end of 1980, a
perod of three years, Sy|uco found tsef fghtng a ega
batte on two fronts: n the aready fnay decded Cv Case
No. 75180 and n Cv Case No. 117262, upon the snge
ssue of aeged ack of repubcaton, an ssue aready
mooted by the Lms' earer waver of repubcaton as a
condton for the ssuance of the orgna restranng order of
December 26,1968 n Cv Case No. 75180, not to menton
the fact that sad pettoner had aso tred to put an end to t
by actuay repubshng the notce of sae.
Wth the advent of 1981, ts peas for eary resouton havng
apparenty faen on deaf ears, Sy|uco went to ths Court (n
G.R. No. L-56014) from whch, on September 21, 1982, t
obtaned the decson aready referred to hodng, n fne,
that there exsted no further mpedment to the forecosure
sae and that the sherff coud proceed wth the same.
Sad decson, nstead of deterrng further attempts to dera
the forecosure, apparenty gave the sgna for the
candestne fng ths tme - by the Partnershp of the Hers
of Hugo Lm -on October 14,1982 of Cv Case No. O-36485,
the sub|ect of the present petton, whch for the frst tme
asserted the cam that the mortgaged property had been
contrbuted to the pantff partnershp ong before the
executon of the Sy|uco's mortgage n order to defeat the
forecosure.
Sy|uco now mantans that t had no actua knowedge of the
exstence and pendency of Cv Case No. O-36485 unt
confronted, n the manner aready adverted to, wth the fait
accompli of a "fna" |udgment wth permanent n|uncton
theren, and nothng n the record dsabuses the Court about
the truth of ths dscamer. Indeed, consderng what had
transpred up to that denouement, t becomes qute evdent
that actuatons of the Lms and ther awyer had been
geared to keepng Sy|uco n the dark about sad case. Ther
fng of two other cases aso seekng to en|on the
forecosure sae (Cv Case No. 83-19018, Regona Tra
Court of Mana n |uy 1983, and Cv Case No. O-32924,
Regona Tra Court of Ouezon Cty n September of the
same year) after sad sae had aready been permanenty
en|oned by defaut |udgment n Cv Case No. O-36485,
appears n retrospect to be nothng but a brace of fents
cacuated to keep Sy|uco n that state of gnorance and to
u any apprehensons t mat may have harbored about
encounterng further surprses from any other quarter.
Further credence s ent to ths apprasa by the unusuay
rapd movement of Cv Case No. O-36485 tsef n ts earer
stages, whch saw the moton to decare Sy|uco n defaut
fed, an order of defaut ssued, evdence ex parte for the
pantffs receved and |udgment by defaut rendered, a
wthn the bref span of tweve days, February 10-22, 1983.
Notce of sad |udgment was "served" on February 23, 1983,
the day after t was handed down, ony to be foowed by an
unaccountabe u of we over a year before t was ordered
executed on |uy 9, 1984 - unaccountabe, consderng that
prevous furry of actvty, except n the context of a pan to
rush the case to |udgment and then dvert Sy|uco's attenton
to the Lms' moves n other drectons so as to prevent
dscovery of the exstence of the case unt t was too ate.
The Court cannot but condemn n the strongest terms ths
trfng wth the |udca process whch degrades the
admnstraton of |ustce, mocks, subverts and msuses that
process for purey datory purposes, thus tendng to brng t
nto dsrepute, and serousy erodes pubc confdence n the
w and competence of the courts to dspense swft |ustce.
Upon the facts, the ony defense to the forecosure that
coud possby have merted the fu-bown tra and appea
proceedngs t actuay went through was that of aeged
usury peaded n Cv Case No. 75180 and fnay decded
aganst the respondent Lms n G.R. No. L-45752 n
September 1977. The other ssues of faure to repubsh and
dscharge of mortgage by guarantee set up n succeedng
actons were sham ssues, questons wthout substance
rased ony for purposes of deay by the prvate
respondents, n whch they succeeded ony too we. The
cam urged n ths atest case: that the mortgaged property
had been contrbuted to the respondent partnershp and
was aready property of sad partnershp when the ndvdua
Lms unauthorzedy mortgaged t to Sy|uco, s of no better
strpe, and ths, too, s cear from the undsputed facts and
the ega concusons to be drawn therefrom.
The record shows that the respondent partnershp s
composed excusvey of the ndvdua Lms n whose name
a the cases heren referred to, wth the soe excepton of
Cv Case No. O-36485, were brought and prosecuted, ther
contrbuton to the partnershp consstng chefy, f not
soey, of the property sub|ect of the Sy|uco mortgage. It s
aso a fact that despte ts havng been contrbuted to the
partnershp, aegedy on March 30, 1959, the property was
never regstered wth the Regster of Deeds n the name of
the partnershp, but to ths date remans regstered n the
names of the Lms as owners n common. The orgna
mortgage deed of November 14,1964 was executed by the
Lms as such owners, as were a subsequent amendments
of the mortgage. There can be no dspute that n those
crcumstances, the respondent partnershp was chargeabe
wth knowedge of the mortgage from the moment of ts
executon. The ega fcton of a separate |urdca
personaty and exstence w not shed t from the
concuson of havng such knowedge whch naturay and
rresstby fows from the undened facts. It woud voate a
precepts of reason, ordnary experence and common sense
to propose that a partnershp, as commony known to a the
partners or of acts n whch a of the atter, wthout
excepton, have taken part, where such matters or acts
affect property camed as ts own by sad partnershp.
If, therefore, the respondent partnershp was nescapaby
chargeabe wth knowedge of the mortgage executed by a
the partners thereof, ts sence and faure to mpugn sad
mortgage wthn a reasonabe tme, et aone a space of
more than seventeen years, brought nto pay the doctrne
of estoppe to precude any attempt to avod the mortgage
as aegedy unauthorzed.
The prncpes of equtabe estoppe, sometmes caed
estoppe in pais, are made part of our aw by Art. 1432 of
the Cv Code. Comng under ths cass s estoppe by
sence, whch obtans here and as to whch t has been hed
that:
... an estoppe may arse from sence as we as from words.
'Estoppe by sence' arses where a person, who by force of
crcumstances s under a duty to another to speak, refrans
from dong so and thereby eads the other to beeve n the
exstence of a state of facts n reance on whch he acts to
hs pre|udce. Sence may support an estoppe whether the
faure to speak s ntentona or neggent.
Inacton or sence may under some crcumstances amount
to a msrepresentaton and conceament of the facts, so as
to rase an equtabe estoppe. When the sence s of such a
character and under such crcumstances that t woud
become a fraud on the other party to permt the party who
has kept sent to deny what hs sence has nduced the
other to beeve and act on, t w operate as an estoppe.
Ths doctrne rests on the prncpe that f one mantans
sence, when n conscence he ought to speak, equty w
debar hm from speakng when n conscence he ought to
reman sent. He who remans sent when he ought to
speak cannot be heard to speak when he shoud be sent.
4*
And more to the pont:
A property owner who knowngy permts another to se or
encumber the property, wthout dscosng hs tte or
ob|ectng to the transacton, s estopped to set up hs tte or
nterest as aganst a person who has been thereby msed to
hs n|ury.
x x x
An owner of rea property who stands by and sees a thrd
person seng or mortgagng t under cam of tte wthout
assertng hs own tte or gvng the purchaser or mortgagee
any notce thereof s estopped, as aganst such purchaser or
mortgagee, afterward to assert hs tte; and, athough tte
does not pass under these crcumstances, a conveyance w
be decreed by a court of equty. Especay s the rue
appcabe where the party aganst whom the estoppe s
camed, n addton to standng by, takes part n matng the
sae or mortgage.
41
More specfcay, the concept to whch that speces of
estoppe whch resuts from the non-dscosure of an estate
or nterest n rea property has ordnary been referred s
fraud, actua or constructve. ... Athough fraud s not an
essenta eement of the orgna conduct workng the
estoppe, t may wth perfect property be sad that t woud
be frauduent for the party to repudate hs conduct, and to
assert a rght or cam n contraventon thereof.
42
Equay or even more precusve of the respondent
partnershp's cam to the mortgaged property s the ast
paragraph of Artce 1819 of the Cv Code, whch
contempates a stuaton dupcatng the crcumstances that
attended the executon of the mortgage n favor of Sy|uco
and therefore appes foursquare thereto:
Where the tte to rea property s n the names of a the
partners a conveyance executed by a the partners passes
a ther rghts n such property.
The term "conveyance" used n sad provson, whch s
taken from Secton 10 of the Amercan Unform Partnershp
Act, ncudes a mortgage.
Interpretng Sec. 10 of the Unform Partnershp Act, t has
been hed that the rght to mortgage s ncuded n the rght
to convey. Ths s dfferent from the rue n agency that a
speca power to se excudes the power to mortgage (Art.
1879).
4'
As ndsputabe as the propostons and prncpes |ust stated
s that the cause of acton n Cv Case No. O-36485 s
barred by pror |udgment. The rght subsumed n that cause
s the negaton of the mortgage, postuated on the cam
that the parces of and mortgaged by the Lms to Sy|uco dd
not n truth beong to them but to the partnershp. Assumng
ths to be so, the rght coud have been asserted at the tme
that the Lms nsttuted ther frst acton on December 24,
1968 n the Mana Court of Frst Instance, Cv Case No.
75180, or when they fed ther subsequent actons: Cv
Case No. 112762, on December 19, 1977; Cv Case No. 83-
19018, n 1983, and Cv Case No. O-39294, aso n 1983.
The cam coud have been set up by the Lms, as members
composng the partnershp, "Hers of Hugo Lm." It coud
very we have been put forth by the partnershp tsef, as
co-pantff n the correspondng compants, consderng that
the actons nvoved property supposedy beongng to t and
were beng prosecuted by the entre membershp of the
partnershp, and therefore, the partnershp was n actuaty,
the rea party n nterest. In fact, consstenty wth the Lms'
theory, they shoud be regarded, n a the actons presented
by them, as havng sued for vndcaton, not of ther
ndvdua rghts over the property mortgaged, but those of
the partnershp. There s thus no reason to dstngush
between the Lms, as ndvduas, and the partnershp tsef,
snce the former consttuted the entre membershp of the
atter. In other words, despte the conceament of the
exstence of the partnershp, for a ntents and purposes
and consstenty wth the Lms' own theory, t was that
partnershp whch was the rea party n nterest n a the
actons; t was actuay represented n sad actons by a the
ndvdua members thereof, and consequenty, those
members' acts, decaratons and omssons cannot be
deemed to be smpy the ndvdua acts of sad members,
but n fact and n aw, those of the partnershp.
What was done by the Lms - or by the partnershp of whch
they were the ony members-was to spt ther cause of
acton n voaton of the we known rue that ony one sut
may be nsttuted for a snge cause of acton.
44
The rght
sought to be enforced by them n a ther actons was, at
bottom, to strke down the mortgage consttuted n favor of
Sy|uco, a rght whch, n ther vew, resuted from severa
crcumstances, namey that the mortgage was consttuted
over property beongng to the partnershp wthout the
atter's authorty; that the prncpa obgaton thereby
secured was usurous; that the pubcaton of the notce of
forecosure sae was fatay defectve, crcumstances whch
had aready taken pace at the tme of the nsttuton of the
actons. They nsttuted four (4) actons for the same
purpose on one ground or the other, makng each ground
the sub|ect of a separate acton. Upon these premses,
appcaton of the sancton ndcated by aw s caned for, .e.,
the |udgment on the merts n any one s avaabe as a bar
n the others.
4(
The frst |udgment-rendered n Cv Case No. 75180 and
affrmed by both the Court of Appeas (CA-G.R. No. 51752)
and ths Court (G.R. No. L-45752) shoud therefore have
barred a the others, a the requstes of res |udcata beng
present. The |udgment was a fna and executory |udgment;
t had been rendered by a competent court; and there was,
between the frst and subsequent cases, not ony dentty of
sub|ect-matter and of cause of acton, but aso of partes. As
aready ponted out, the pantffs n the frst four (4) actons,
the Lms, were representng exacty the same cams as
those of the partnershp, the pantff n the ffth and ast
acton, of whch partnershp they were the ony members,
and there was hence no substanta dfference as regards
the partes pantff n a the actons. Under the doctrne of
res |udcata, the |udgment n the frst was and shoud have
been regarded as concusve n a other, actons not ony
"wth respect to the matter drecty ad|udged," but aso "as
to any other matter that coud have been rased n reaton
thereto. "
4)
It beng ndsputabe that the matter of the
partnershp's beng the owner of the mortgaged propertes
"coud have been rased n reaton" to those expressy
made ssuabe n the frst acton, t foows that that matter
coud not be re-tgated n the ast acton, the ffth.
Though confronted wth the facts thus precudng the
respondent partnershp's cam to the property under both
the prncpe of estoppe and the provsons of Artce 1819,
ast paragraph, of the Cv Code, as we as the famar
doctrne of res |udcata, the respondent |udge refused to act
on Sy|uco's motons on the ground that he no onger had
|ursdcton to do so because they were fed after |udgment
by defaut aganst Sy|uco, whch faed to answer the
compant despte vad servce of summons, had been
rendered and become fna. The sherffs return, however,
creates grave doubts about the correctness of the |udge's
basc premse that summons had been vady served on
Sy|uco. For one thng, the return
47
s unspecfc about where
servce was effected. No safe concuson about the pace of
servce can be made from ts reference to a former and a
present offce of Sy|uco n wdey separate ocatons, wth
nothng to ndcate whether servce was effected at one
address or the other, or even at both. A more serous defect
s the faure to name the person served who s, wth equa
ambguty, dentfed ony as "the Manager" of the defendant
corporaton (pettoner heren). Snce the sherffs return
consttutes prmary evdence of the manner and ncdents of
persona servce of a summons, the Rues are qute specfc
about what such a document shoud contan:
SEC. 20. Proof of servce. - The proof of servce of a
summons sha be made n wrtng by the server and sha
set forth the manner, pace and date of servce; sha specfy
any papers whch have been served wth the process and
the name of the person who receved the same; and sha be
sworn to when made by a person other than a sherff or hs
deputy.
48
In the case of ?elta 4otor %ales Corporation vs& 4angosing
49
t was hed that:"
(a) strct compance wth the mode of servce s necessary
to confer |ursdcton of the court over a corporaton. The
offcer upon whom servce s made must be one who s
named n the statute; otherwse the servce s nsuffcent.
So, where the statute requres that n the case of a domestc
corporaton summons shoud be served on 'the presdent or
head of the corporaton, secretary, treasurer, casher or
managng agent thereof, servce of summons on the
secretary's wfe dd not confer |ursdcton over the
corporaton n the forecosure proceedng aganst t. Hence,
the decree of forecosure and the defcency |udgment were
vod and shoud be vacated (Reader vs. Dstrct Court, 94
Pacfc 2nd 858).
The purpose s to render t reasonaby certan that the
corporaton w receve prompt and proper notce n an
acton aganst t or to nsure that the summons be served on
a representatve so ntegrated wth the corporaton that
such person w know what to do wth the ega papers
served on hm. In other words, 'to brng home to the
corporaton notce of the fng of the acton'. (35 A C.|.S. 288
ctng |enkns vs. Lykes Bros. S.S. Co., 48 F. Supp. 848;
MacCarthy vs. Langston, D.C. Fa., 23 F.R.D. 249).
The bera constructon rue cannot be nvoked and utzed
as a substtute for the pan ega requrements as to the
manner n whch summons shoud be served on a domestc
corporaton (U.S. vs. Moenhauer Laboratores, Inc., 267
Fed. Rep. 2nd 260).'
The rue cannot be any ess exactng as regards adherence
to the requrements of proof of servce, t beng usuay by
such proof that suffcency of compance wth the
prescrbed mode of servce s measured. Here the ony proof
of servce of summons s the questoned sherff's return
whch, as aready ponted out, s not ony vague and
unspecfc as to the pace of servce, but aso negects to
Identfy by name the recpent of the summons as requred
by Rue 20, Secton 14, of the Rues of Court. Where the
sherffs return s defectve the presumpton of reguarty n
the performance of offca functons w not e.
(*
The
defectve sherffs return thus beng nsuffcent and
ncompetent to prove that summons was served n the
manner prescrbed for servce upon corporatons, there s no
aternatve to affrmng the pettoner's cam that t had not
been vady summoned n Cv Case No. O-36485. It goes
wthout sayng that ackng such vad servce, the Tra
Court dd not acqure |ursdcton over the pettoner Sy|uco,
renderng nu and vod a subsequent proceedngs and
ssuances n the acton from the order of defaut up to and
ncudng the |udgment by defaut and the order for ts
executon.
(1
The respondents' contenton that the petton s n effect an
acton to annu a |udgment whch s wthn the excusve
orgna |ursdcton of the Court of Appeas
(2
has aready
been answered n 4atanguihan vs& Tengco
('
where, by
decarng that an acton for annument of |udgment s not a
pan, speedy and adequate remedy, ths Court n effect
affrmed that certorar s an approprate remedy aganst
|udgments or proceedngs aeged to have been rendered or
had wthout vad servce of summons.
(4
Respondent |udge Castro begged the queston when,
nstead of resovng on the merts the ssue of the nvadty
of hs defaut |udgment and of the proceedngs eadng
thereto because of absence of vad servce of summons on
the defendant, whch had been expressy rased n the
defendant's moton for reconsderaton, he smpy refused to
do so on the excuse that he had ost |ursdcton over the
case. Ths refusa was, n the premses, a grave abuse of
|udca dscreton whch must be rectfed.
What has been sad makes unnecessary any further
proceedngs n the Court beow, whch mght otherwse be
ndcated by the consderaton that two of the postuates of
pettoner's unresoved motons whch the Court consders
equay as decsve as res |udcata, to wt: estoppe by
sence and Artce 1819, ast paragraph, of the Cv Code,
do not consttute grounds for a moton to dsmss under rue
16, of the Rues of Court. Such a step woud ony cause
further deay. And deay has been the bane of pettoner's
cause, defyng through a these years a ts efforts to
coect on a |ust debt.
The undened and undsputabe facts make t perfecty cear
that the cam to the mortgaged property beatedy and n
apparent bad fath pressed by the respondent partnershp s
forecosed by both aw and equty. Further proceedngs w
not make ths any cearer than t aready s. The Court s
cothed wth ampe authorty, n such a case, to ca a hat to
a further proceedngs and pronounce |udgment on the
bass of what s aready manfesty of record.
So much for the merts; the consequences that shoud
attend the nexcusabe and ndefensbe conduct of the
respondents Lms, the respondent partnershp and ther
counse, Atty. Paterno R. Canas, shoud now be addressed.
That the Lms and ther partnershp acted n bad fath and
wth ntent to defraud s manfest n the record of ther
actuatons, presentng as they dd, pecemea and n one
case after another, defenses to the forecosure or cams n
derogaton thereof that were avaabe to them from the
very begnnng - actuatons that were to stave off the
qudaton of an undened debt for more than twenty years
and cumnated n the candestne fng and prosecuton of
the acton sub|ect of the present petton.
What has happened here, t bears repeatng, s nothng ess
than an abuse of process, a trfng wth the courts and wth
the rghts of access thereto, for whch Atty. Canas must
share responsbty equay wth hs cents. The atter coud
not have succeeded so we n obstructng the course of
|ustce wthout hs ad and advce and hs treess espousa
of ther cams and pretensons made n the varous cases
chronced here. That the cause to whch he ent hs
advocacy was ess than |ust or worthy coud not have
escaped hm, f not at the start of hs engagement, n the
years that foowed when wth hs wng assstance, f not
nstgaton, t was shutted from one forum to another after
each setback. Ths Court merey stated what s obvous and
cannot be gansad when, n %urigao 4ineral $eservation
3oard vs& Cloribel,
((
t hed that a party's awyer of record
has contro of the proceedngs and that '(w)hatever steps
hs cent takes shoud be wthn hs knowedge and
responsbty."
In ;rudential 3an8 vs& Castro,
()
strkngy smar actuatons
n a case, whch are descrbed n the foowng paragraph
taken from ths Court's decson theren:
Respondents' foregong actuatons revea an 'unhoy
aance' between them and a cear ndcaton of partaty for
the party represented by the other to the detrment of the
ob|ectve dspensaton of |ustce. Wrts of Attachment and
Executon were ssued and mpemented wth ghtnng
speed; the case tsef was raroaded to a swft concuson
through a smar |udgment; astronomca sums were
awarded as damages and attorney's fees; and toppng t a,
the rght to appea was forecosed by cever maneuvers,"
and whch, the Court found, foowed a pattern of conduct n
other cases of whch |udca notce was taken, were deemed
suffcent cause for dsbarment.
Atty. Canas even tred to msead ths Court by camng
that he became the Lms' awyer ony n 1977,
(7
when the
record ndubtaby shows that he has represented them
snce September 9, 1972 when he frst appeared for them to
prosecute ther appea n Cv Case No. 75180.
(8
He has
aso qute mpententy dscamed a duty to nform opposng
counse n Cv Case No. O-39294 of the exstence of Cv
Case No. O-36485, as pantffs' counse n both actons,
even whe the former, whch nvoved the same mortgage,
was aready beng tgated when the atter was fed,
athough n the crcumstances such dscosure was requred
by the ethcs of hs professon, f not ndeed by hs awyer's
oath.
A cear case aso exsts for awardng at east nomna
damages to pettoner, though damages are not expressy
prayed for, under the genera prayer of the petton for "such
other reefs as may be |ust and equtabe under the
premses," and the acton beng not ony of certorar and
prohbton, but aso of mandamus-n whch the payment of
"damages sustaned by the pettoner by reason of the
wrongfu acts of the defendant' s expressy authorzed.
(9
There s no queston n the Court's mnd that such nterests
as may have accumuated on the mortgage oan w not
offset the pre|udce vsted upon the pettoner by the
excrucatngy ong deay n the satsfacton of sad debt that
the prvate respondents have engneered and fomented.
These very same consderatons dctate the mposton of
exempary damages n accordance wth Art. 2229 of the
Cv Code.
WHEREFORE, so that compete |ustce may be dspensed
here and, as far as consstent wth that end, a the matters
and ncdents wth whch these proceedngs are concerned
may be brought to a swft concuson:
(1) the assaed |udgment by defaut n Cv Case No.O-
36485, the wrt of executon and a other orders ssued n
mpementaton thereof, and a proceedngs n the case
eadng to sad |udgment after the fng of the compant are
DECLARED nu and vod and are hereby SET ASIDE; and the
compant n sad case s DISMISSED for beng barred by
pror |udgment and estoppe, and for ack of mert;
(2) the Cty Sherff of Mana s ORDERED, upon recept of
ths Decson, to schedue forthwth and thereafter conduct
wth a due dspatch the sae at pubc aucton of the
mortgaged property n queston for the satsfacton of the
mortgage debt of the respondents Lms to pettoner, n the
prncpa amount of P2,460,000.00 as found n the amended
decson n Cv Case No. 75180 of the Court of Frst
Instance of Mana, nterests thereon at the rate of tweve
(12%) percent per annum from November 8, 1967 unt the
date of sae, pus such other and addtona sums for
commssons, expenses, fees, etc. as may be awfuy
chargeabe n extra|udca forecosure and sae proceedngs;
(3) the prvate respondents, ther successors and assgns,
are PERPETUALLY EN|OINED from takng any acton
whatsoever to obstruct, deay or prevent sad aucton sae;
(4) the prvate respondents (the Lms, the Partnershp of the
Hers of Hugo Lm and Atty. Paterno R. Canas) are
sentenced, |onty and severay, to pay the pettoner
P25,000.00 as nomna damages and P100,000.00 as
exempary damages, as we as trebe costs; and
(5) et ths matter be referred to the Integrated Bar of the
Phppnes for nvestgaton, report, and recommendaton
nsofar as the conduct of Atty. Canas as counse n ths case
and n the other cases herenabove referred to s concerned.
19.
G.R. No. 1*9248 J2l3 ', 199(
GREGORIO F. ORTEGA, TO!AS O. "EL CASTILLO, JR.,
#$% BENJA!IN T. BACORRO, pettoners, vs.HON.
COURT OF AEALS, SECURITIES AN" E4CHANGE
CO!!ISSION #$% JOA0UIN L. !ISA, respondents.

5ITUG, J.:
The nstant petton seeks a revew of the decson rendered
by the Court of Appeas, dated 26 February 1993, n CA-G.R.
SP No. 24638 and No. 24648 affrmng in toto that of the
Securtes and Exchange Commsson ("SEC") n SEC AC 254.
The antecedents of the controversy, summarzed by
respondent Commsson and quoted at ength by the
appeate court n ts decson, are hereunder restated.
The aw frm of ROSS, LAWRENCE, SELPH and CARRASCOSO
was duy regstered n the Mercante Regstry on 4 |anuary
1937 and reconsttuted wth the Securtes and Exchange
Commsson on 4 August 1948. The SEC records show that
there were severa subsequent amendments to the artces
of partnershp on 18 September 1958, to change the frm
|name| to ROSS, SELPH and CARRASCOSO; on 6 |uy 1965 . .
. to ROSS, SELPH, SALCEDO, DEL ROSARIO, BITO & MISA; on
18 Apr 1972 to SALCEDO, DEL ROSARIO, BITO, MISA &
LOZADA; on 4 December 1972 to SALCEDO, DEL ROSARIO,
BITO, MISA & LOZADA; on 11 March 1977 to DEL ROSARIO,
BITO, MISA & LOZADA; on 7 |une 1977 to BITO, MISA &
LOZADA; on 19 December 1980, ||oaqun L. Msa| appeees
|esus B. Bto and Marano M. Lozada assocated themseves
together, as senor partners wth respondents-appeees
Gregoro F. Ortega, Tomas O. de Casto, |r., and Ben|amn
Bacorro, as |unor partners.
On February 17, 1988, pettoner-appeant wrote the
respondents-appeees a etter statng:
I am wthdrawng and retrng from the frm of Bto, Msa and
Lozada, effectve at the end of ths month.
"I trust that the accountants w be nstructed to make the
proper qudaton of my partcpaton n the frm."
On the same day, pettoner-appeant wrote respondents-
appeees another etter statng:
"Further to my etter to you today, I woud ke to have a
meetng wth a of you wth regard to the mechancs of
qudaton, and more partcuary, my nterest n the two
foors of ths budng. I woud ke to have ths resoved soon
because t has to do wth my own pans."
On 19 February 1988, pettoner-appeant wrote
respondents-appeees another etter statng:
"The partnershp has ceased to be mutuay satsfactory
because of the workng condtons of our empoyees
ncudng the assstant attorneys. A my efforts to
ameorate the beow subsstence eve of the pay scae of
our empoyees have been thwarted by the other partners.
Not ony have they refused to gve meanngfu ncreases to
the empoyees, even attorneys, are dressed down pubcy n
a oud voce n a manner that deprved them of ther sef-
respect. The resut of such poces s the formaton of the
unon, ncudng the assstant attorneys."
On 30 |une 1988, pettoner fed wth ths Commsson's
Securtes Investgaton and Cearng Department (SICD) a
petton for dssouton and qudaton of partnershp,
docketed as SEC Case No. 3384 prayng that the
Commsson:
"1. Decree the forma dssouton and order the mmedate
qudaton of (the partnershp of) Bto, Msa & Lozada;
"2. Order the respondents to dever or pay for pettoner's
share n the partnershp assets pus the profts, rent or
nterest attrbutabe to the use of hs rght n the assets of
the dssoved partnershp;
"3. En|on respondents from usng the frm name of Bto,
Msa & Lozada n any of ther correspondence, checks and
peadngs and to pay pettoners damages for the use
thereof despte the dssouton of the partnershp n the
amount of at east P50,000.00;
"4. Order respondents |onty and severay to pay pettoner
attorney's fees and expense of tgaton n such amounts as
maybe proven durng the tra and whch the Commsson
may deem |ust and equtabe under the premses but n no
case ess than ten (10%) per cent of the vaue of the shares
of pettoner or P100,000.00;
"5. Order the respondents to pay pettoner mora damages
wth the amount of P500,000.00 and exempary damages n
the amount of P200,000.00.
"Pettoner kewse prayed for such other and further reefs
that the Commsson may deem |ust and equtabe under the
premses."
On 13 |uy 1988, respondents-appeees fed ther
opposton to the petton.
On 13 |uy 1988, pettoner fed hs Repy to the Opposton.
On 31 March 1989, the hearng offcer rendered a decson
rung that:
"|P|ettoner's wthdrawa from the aw frm Bto, Msa &
Lozada dd not dssove the sad aw partnershp.
Accordngy, the pettoner and respondents are hereby
en|oned to abde by the provsons of the Agreement
reatve to the matter governng the qudaton of the shares
of any retrng or wthdrawng partner n the partnershp
nterest."
1
On appea, the SEC en banc reversed the decson of the
Hearng Offcer and hed that the wthdrawa of Attorney
|oaqun L. Msa had dssoved the partnershp of "Bto, Msa
& Lozada." The Commsson rued that, beng a partnershp
at w, the aw frm coud be dssoved by any partner at
anytme, such as by hs wthdrawa therefrom, regardess of
good fath or bad fath, snce no partner can be forced to
contnue n the partnershp aganst hs w. In ts decson,
dated 17 |anuary 1990, the SEC hed:
WHEREFORE, premses consdered the appeaed order of 31
March 1989 s hereby REVERSED nsofar as t concudes that
the partnershp of Bto, Msa & Lozada has not been
dssoved. The case s hereby REMANDED to the Hearng
Offcer for determnaton of the respectve rghts and
obgatons of the partes.
2
The partes sought a reconsderaton of the above decson.
Attorney Msa, n addton, asked for an appontment of a
recever to take over the assets of the dssoved partnershp
and to take charge of the wndng up of ts affars. On 4 Apr
1991, respondent SEC ssued an order denyng
reconsderaton, as we as re|ectng the petton for
recevershp, and reteratng the remand of the case to the
Hearng Offcer.
The partes fed wth the appeate court separate appeas
(docketed CA-G.R. SP No. 24638 and CA-G.R. SP No. 24648).
Durng the pendency of the case wth the Court of Appeas,
Attorney |esus Bto and Attorney Marano Lozada both ded
on, respectvey, 05 September 1991 and 21 December
1991. The death of the two partners, as we as the
admsson of new partners, n the aw frm prompted
Attorney Msa to renew hs appcaton for recevershp (n
CA G.R. SP No. 24648). He expressed concern over the need
to preserve and care for the partnershp assets. The other
partners opposed the prayer.
The Court of Appeas, fndng no reversbe error on the part
of respondent Commsson, AFFIRMED in toto the SEC
decson and order appeaed from. In fne, the appeate
court hed, per ts decson of 26 February 1993, (a) that
Atty. Msa's wthdrawa from the partnershp had changed
the reaton of the partes and nevtaby caused the
dssouton of the partnershp; (b) that such wthdrawa was
not n bad fath; (c) that the qudaton shoud be to the
extent of Attorney Msa's nterest or partcpaton n the
partnershp whch coud be computed and pad n the
manner stpuated n the partnershp agreement; (d) that
the case shoud be remanded to the SEC Hearng Offcer for
the correspondng determnaton of the vaue of Attorney
Msa's share n the partnershp assets; and (e) that the
appontment of a recever was unnecessary as no suffcent
proof had been shown to ndcate that the partnershp
assets were n any such danger of beng ost, removed or
materay mpared.
In ths petton for revew under Rue 45 of the Rues of
Court, pettoners confne themseves to the foowng
ssues:
1. Whether or not the Court of Appeas has erred n hodng
that the partnershp of Bto, Msa & Lozada (now Bto,
Lozada, Ortega & Casto) s a partnershp at w;
2. Whether or not the Court of Appeas has erred n hodng
that the wthdrawa of prvate respondent dssoved the
partnershp regardess of hs good or bad fath; and
3. Whether or not the Court of Appeas has erred n hodng
that prvate respondent's demand for the dssouton of the
partnershp so that he can get a physca partton of
partnershp was not made n bad fath;
to whch matters we sha, accordngy, kewse mt
ourseves.
A partnershp that does not fx ts term s a partnershp at
w. That the aw frm "Bto, Msa & Lozada," and now "Bto,
Lozada, Ortega and Casto," s ndeed such a partnershp
need not be unduy beabored. We quote, wth approva, ke
dd the appeate court, the fndngs and dsquston of
respondent SEC on ths matter; vi1:
The partnershp agreement (amended artces of 19 August
1948) does not provde for a specfed perod or
undertakng. The "DURATION" cause smpy states:
"5. DURATION. The partnershp sha contnue so ong as
mutuay satsfactory and upon the death or ega ncapacty
of one of the partners, sha be contnued by the survvng
partners."
The hearng offcer however opned that the partnershp s
one for a specfc undertakng and hence not a partnershp
at w, ctng paragraph 2 of the Amended Artces of
Partnershp (19 August 1948):
"2. ;urpose. The purpose for whch the partnershp s
formed, s to act as ega advser and representatve of any
ndvdua, frm and corporaton engaged n commerca,
ndustra or other awfu busnesses and occupatons; to
counse and advse such persons and enttes wth respect to
ther ega and other affars; and to appear for and represent
ther prncpas and cent n a courts of |ustce and
government departments and offces n the Phppnes, and
esewhere when egay authorzed to do so."
The "purpose" of the partnershp s not the specfc
undertakng referred to n the aw. Otherwse, a
partnershps, whch necessary must have a purpose, woud
a be consdered as partnershps for a defnte undertakng.
There woud therefore be no need to provde for artces on
partnershp at w as none woud so exst. Apparenty what
the aw contempates, s a specfc undertakng or "pro|ect"
whch has a defnte or defnabe perod of competon.
'
The brth and fe of a partnershp at w s predcated on the
mutua desre and consent of the partners. The rght to
choose wth whom a person wshes to assocate hmsef s
the very foundaton and essence of that partnershp. Its
contnued exstence s, n turn, dependent on the constancy
of that mutua resove, aong wth each partner's capabty
to gve t, and the absence of a cause for dssouton
provded by the aw tsef. Very, any one of the partners
may, at hs soe peasure, dctate a dssouton of the
partnershp at w. He must, however, act n good fath, not
that the attendance of bad fath can prevent the dssouton
of the partnershp
4
but that t can resut n a abty for
damages.
(
In passng, nether woud the presence of a perod for ts
specfc duraton or the statement of a partcuar purpose for
ts creaton prevent the dssouton of any partnershp by an
act or w of a partner.
)
Among partners,
7
mutua agency
arses and the doctrne of delectus personae aows them to
have the po'er, athough not necessary the right, to
dssove the partnershp. An un|ustfed dssouton by the
partner can sub|ect hm to a possbe acton for damages.
The dssouton of a partnershp s the change n the reaton
of the partes caused by any partner ceasng to be
assocated n the carryng on, as mght be dstngushed
from the wndng up of, the busness.
8
Upon ts dssouton,
the partnershp contnues and ts ega personaty s
retaned unt the compete wndng up of ts busness
cumnatng n ts termnaton.
9
The qudaton of the assets of the partnershp foowng ts
dssouton s governed by varous provsons of the Cv
Code;
1*
however, an agreement of the partners, ke any
other contract, s bndng among them and normay takes
precedence to the extent appcabe over the Code's genera
provsons. We here take note of paragraph 8 of the
"Amendment to Artces of Partnershp" readng thusy:
. . . In the event of the death or retrement of any partner,
hs nterest n the partnershp sha be qudated and pad n
accordance wth the exstng agreements and hs
partnershp partcpaton sha revert to the Senor Partners
for aocaton as the Senor Partners may determne;
provided, ho'ever, that wth respect to the two (2) foors of
offce condomnum whch the partnershp s now acqurng,
consstng of the 5th and the 6th foors of the Apap Budng,
140 Afaro Street, Sacedo Vage, Makat, Metro Mana,
ther true vaue at the tme of such death or retrement sha
be determned by two (2) ndependent apprasers, one to be
apponted (by the partnershp and the other by the) retrng
partner or the hers of a deceased partner, as the case may
be. In the event of any dsagreement between the sad
apprasers a thrd appraser w be apponted by them
whose decson sha be fna. The share of the retrng or
deceased partner n the aforementoned two (2) foor offce
condomnum sha be determned upon the bass of the
vauaton above mentoned whch sha be pad monthy
wthn the frst ten (10) days of every month n nstaments
of not ess than P20,000.00 for the Senor Partners,
P10,000.00 n the case of two (2) exstng |unor Partners
and P5,000.00 n the case of the new |unor Partner.
11
The term "retrement" must have been used n the artces,
as we so hod, n a generc sense to mean the dssocaton
by a partner, ncusve of resgnaton or wthdrawa, from the
partnershp that thereby dssoves t.
On the thrd and fna ssue, we accord due respect to the
appeate court and respondent Commsson on ther
common factua fndng, i&e&, that Attorney Msa dd not act
n bad fath. Pubc respondents vewed hs wthdrawa to
have been spurred by "nterpersona confct" among the
partners. It woud not be rght, we agree, to et any of the
partners reman n the partnershp under such an
atmosphere of anmosty; certany, not aganst ther w.
12
Indeed, for as ong as the reason for wthdrawa of a partner
s not contrary to the dctates of |ustce and farness, nor for
the purpose of unduy vstng harm and damage upon the
partnershp, bad faith cannot be sad to characterze the act.
Bad fath, n the context here used, s no dfferent from ts
norma concept of a conscous and ntentona desgn to do a
wrongfu act for a dshonest purpose or mora obquty.
WHEREFORE, the decson appeaed from s AFFIRMED. No
pronouncement on costs.
20.
JACOB S. LI!, pettoner, vs.COURT OF AEALS,
IONEER INSURANCE AN" SURET& CORORATION,
BOR"ER !ACHINER& #$% HEA5& E0UI!ENT CO.,
INC,, FRANCISCO #$% !O"ESTO CER5ANTES #$%
CONSTANCIO !AGLANA, respondents.
GUTIERRE1, JR., J.:
The sub|ect matter of these consodated pettons s the
decson of the Court of Appeas n CA-G.R. CV No. 66195
whch modfed the decson of the then Court of Frst
Instance of Mana n Cv Case No. 66135. The pantffs
compant (pettoner n G.R. No. 84197) aganst a
defendants (respondents n G.R. No. 84197) was dsmssed
but n a other respects the tra court's decson was
affrmed.
The dspostve porton of the tra court's decson reads as
foows:
WHEREFORE, |udgment s rendered aganst defendant |acob
S. Lm requrng Lm to pay pantff the amount of
P311,056.02, wth nterest at the rate of 12% per annum
compounded monthy; pus 15% of the amount awarded to
pantff as attorney's fees from |uy 2,1966, unt fu
payment s made; pus P70,000.00 mora and exempary
damages.
It s found n the records that the cross party pantffs
ncurred addtona msceaneous expenses asde from
P51,000.00,,makng a tota of P184,878.74. Defendant
|acob S. Lm s further requred to pay cross party pantff,
Bormaheco, the Cervanteses one-haf and Magana the
other haf, the amount of P84,878.74 wth nterest from the
fng of the cross-compants unt the amount s fuy pad;
pus mora and exempary damages n the amount of
P184,878.84 wth nterest from the fng of the cross-
compants unt the amount s fuy pad; pus mora and
exempary damages n the amount of P50,000.00 for each of
the two Cervanteses.
Furthermore, he s requred to pay P20,000.00 to
Bormaheco and the Cervanteses, and another P20,000.00 to
Constanco B. Magana as attorney's fees.
xxx xxx xxx
WHEREFORE, n vew of a above, the compant of pantff
Poneer aganst defendants Bormaheco, the Cervanteses
and Constanco B. Magana, s dsmssed. Instead, pantff s
requred to ndemnfy the defendants Bormaheco and the
Cervanteses the amount of P20,000.00 as attorney's fees
and the amount of P4,379.21, per year from 1966 wth ega
rate of nterest up to the tme t s pad.
Furthermore, the pantff s requred to pay Constanco B.
Magana the amount of P20,000.00 as attorney's fees and
costs.
No mora or exempary damages s awarded aganst pantff
for ths acton was fed n good fath. The fact that the
propertes of the Bormaheco and the Cervanteses were
attached and that they were requred to fe a counterbond
n order to dssove the attachment, s not an act of bad
fath. When a man tres to protect hs rghts, he shoud not
be sadded wth mora or exempary damages. Furthermore,
the rghts exercsed were provded for n the Rues of Court,
and t was the court that ordered t, n the exercse of ts
dscreton.
No damage s decded aganst Maayan Insurance Company,
Inc., the thrd-party defendant, for t ony secured the
attachment prayed for by the pantff Poneer. If an
nsurance company woud be abe for damages n
performng an act whch s ceary wthn ts power and
whch s the reason for ts beng, then nobody woud engage
n the nsurance busness. No further cam or counter-cam
for or aganst anybody s decared by ths Court. (Roo - G.R.
No. 24197, pp. 15-16)
In 1965, |acob S. Lm (pettoner n G.R. No. 84157) was
engaged n the arne busness as owner-operator of
Southern Ar Lnes (SAL) a snge propretorshp.
On May 17, 1965, at Tokyo, |apan, |apan Domestc Arnes
(|DA) and Lm entered nto and executed a saes contract
(Exhbt A) for the sae and purchase of two (2) DC-3A Type
arcrafts and one (1) set of necessary spare parts for the
tota agreed prce of US $109,000.00 to be pad n
nstaments. One DC-3 Arcraft wth Regstry No. PIC-718,
arrved n Mana on |une 7,1965 whe the other arcraft,
arrved n Mana on |uy 18,1965.
On May 22, 1965, Poneer Insurance and Surety Corporaton
(Poneer, pettoner n G.R. No. 84197) as surety executed
and ssued ts Surety Bond No. 6639 (Exhbt C) n favor of
|DA, n behaf of ts prncpa, Lm, for the baance prce of
the arcrafts and spare parts.
It appears that Border Machnery and Heavy Equpment
Company, Inc. (Bormaheco), Francsco and Modesto
Cervantes (Cervanteses) and Constanco Magana
(respondents n both pettons) contrbuted some funds used
n the purchase of the above arcrafts and spare parts. The
funds were supposed to be ther contrbutons to a new
corporaton proposed by Lm to expand hs arne busness.
They executed two (2) separate ndemnty agreements
(Exhbts D-1 and D-2) n favor of Poneer, one sgned by
Magana and the other |onty sgned by Lm for SAL,
Bormaheco and the Cervanteses. The ndemnty agreements
stpuated that the ndemntors prncpay agree and bnd
themseves |onty and severay to ndemnfy and hod and
save harmess Poneer from and aganst any/a damages,
osses, costs, damages, taxes, penates, charges and
expenses of whatever knd and nature whch Poneer may
ncur n consequence of havng become surety upon the
bond/note and to pay, remburse and make good to Poneer,
ts successors and assgns, a sums and amounts of money
whch t or ts representatves shoud or may pay or cause to
be pad or become abe to pay on them of whatever knd
and nature.
On |une 10, 1965, Lm dong busness under the name and
stye of SAL executed n favor of Poneer as deed of chatte
mortgage as securty for the atter's suretyshp n favor of
the former. It was stpuated theren that Lm transfer and
convey to the surety the two arcrafts. The deed (Exhbt D)
was duy regstered wth the Offce of the Regster of Deeds
of the Cty of Mana and wth the Cv Aeronautcs
Admnstraton pursuant to the Chatte Mortgage Law and
the Cv Aeronautcs Law (Repubc Act No. 776),
respectvey.
Lm defauted on hs subsequent nstament payments
promptng |DA to request payments from the surety. Poneer
pad a tota sum of P298,626.12.
Poneer then fed a petton for the extra|udca forecosure
of the sad chatte mortgage before the Sherff of Davao
Cty. The Cervanteses and Magana, however, fed a thrd
party cam aegng that they are co-owners of the arcrafts,
On |uy 19, 1966, Poneer fed an acton for |udca
forecosure wth an appcaton for a wrt of premnary
attachment aganst Lm and respondents, the Cervanteses,
Bormaheco and Magana.
In ther Answers, Magana, Bormaheco and the Cervanteses
fed cross-cams aganst Lm aegng that they were not
prves to the contracts sgned by Lm and, by way of
countercam, sought for damages for beng exposed to
tgaton and for recovery of the sums of money they
advanced to Lm for the purchase of the arcrafts n
queston.
After tra on the merts, a decson was rendered hodng
Lm abe to pay Poneer but dsmssed Poneer's compant
aganst a other defendants.
As stated earer, the appeate court modfed the tra
court's decson n that the pantffs compant aganst a
the defendants was dsmssed. In a other respects the tra
court's decson was affrmed.
We frst resove G.R. No. 84197.
Pettoner Poneer Insurance and Surety Corporaton avers
that:
RESPONDENT COURT OF APPEALS GRIEVOUSLY ERRED
WHEN IT DISMISSED THE APPEAL OF PETITIONER ON THE
SOLE GROUND THAT PETITIONER HAD ALREADY COLLECTED
THE PROCEEDS OF THE REINSURANCE ON ITS BOND IN
FAVOR OF THE |DA AND THAT IT CANNOT REPRESENT A
REINSURER TO RECOVER THE AMOUNT FROM HEREIN
PRIVATE RESPONDENTS AS DEFENDANTS IN THE TRIAL
COURT. (Roo - G. R. No. 84197, p. 10)
The pettoner questons the foowng fndngs of the
appeate court:
We fnd no mert n pantffs appea. It s undsputed that
pantff Poneer had rensured ts rsk of abty under the
surety bond n favor of |DA and subsequenty coected the
proceeds of such rensurance n the sum of P295,000.00.
Defendants' aeged obgaton to Poneer amounts to
P295,000.00, hence, pantffs nstant acton for the recovery
of the amount of P298,666.28 from defendants w no
onger prosper. Pantff Poneer s not the rea party n
nterest to nsttute the nstant acton as t does not stand to
be benefted or n|ured by the |udgment.
Pantff Poneer's contenton that t s representng the
rensurer to recover the amount from defendants, hence, t
nsttuted the acton s uttery devod of mert. Pantff dd
not even present any evdence that t s the attorney-n-fact
of the rensurance company, authorzed to nsttute an
acton for and n behaf of the atter. To quafy a person to
be a rea party n nterest n whose name an acton must be
prosecuted, he must appear to be the present rea owner of
the rght sought to be enforced (Moran, Vo. I, Comments on
the Rues of Court, 1979 ed., p. 155). It has been hed that
the rea party n nterest s the party who woud be benefted
or n|ured by the |udgment or the party entted to the avas
of the sut (Saonga v. Warner Barnes & Co., Ltd., 88 Ph.
125, 131). By rea party n nterest s meant a present
substanta nterest as dstngushed from a mere
expectancy or a future, contngent, subordnate or
consequenta nterest (Garca v. Davd, 67 Ph. 27; Ogeaby
v. Sprngfed Marne Bank, 52 N.E. 2d 1600, 385 III, 414;
Fowers v. Germans, 1 NW 2d 424; Weber v. Cty of Cheye,
97 P. 2d 667, 669, quotng 47 C.V. 35).
Based on the foregong premses, pantff Poneer cannot be
consdered as the rea party n nterest as t has aready
been pad by the rensurer the sum of P295,000.00 - the
buk of defendants' aeged obgaton to Poneer.
In addton to the sad proceeds of the rensurance receved
by pantff Poneer from ts rensurer, the former was abe to
forecose extra-|udcay one of the sub|ect arpanes and ts
spare engne, reazng the tota amount of P37,050.00 from
the sae of the mortgaged chattes. Addng the sum of
P37,050.00, to the proceeds of the rensurance amountng
to P295,000.00, t s patent that pantff has been overpad
n the amount of P33,383.72 consderng that the tota
amount t had pad to |DA totas to ony P298,666.28. To
aow pantff Poneer to recover from defendants the
amount n excess of P298,666.28 woud be tantamount to
un|ust enrchment as t has aready been pad by the
rensurance company of the amount pantff has pad to |DA
as surety of defendant Lm vs-a-vs defendant Lm's abty
to |DA. We setted s the rue that no person shoud un|usty
enrch hmsef at the expense of another (Artce 22, New
Cv Code). (Roo-84197, pp. 24-25).
The pettoner contends that-(1) t s at a oss where
respondent court based ts fndng that pettoner was pad
by ts rensurer n the aforesad amount, as ths matter has
never been rased by any of the partes heren both n ther
answers n the court beow and n ther respectve brefs
wth respondent court; (Roo, p. 11) (2) even assumng
hypothetcay that t was pad by ts rensurer, st none of
the respondents had any nterest n the matter snce the
rensurance s strcty between the pettoner and the re-
nsurer pursuant to secton 91 of the Insurance Code; (3)
pursuant to the ndemnty agreements, the pettoner s
entted to recover from respondents Bormaheco and
Magana; and (4) the prncpe of un|ust enrchment s not
appcabe consderng that whatever amount he woud
recover from the co-ndemntor w be pad to the rensurer.
The records bee the pettoner's contenton that the ssue
on the rensurance money was never rased by the partes.
A cursory readng of the tra court's engthy decson shows
that two of the ssues threshed out were:
xxx xxx xxx
1. Has Poneer a cause of acton aganst defendants wth
respect to so much of ts obgatons to |DA as has been pad
wth rensurance money?
2. If the answer to the precedng queston s n the negatve,
has Poneer st any cam aganst defendants, consderng
the amount t has reazed from the sae of the mortgaged
propertes? (Record on Appea, p. 359, Annex B of G.R. No.
84157).
In resovng these ssues, the tra court made the foowng
fndngs:
It appearng that Poneer rensured ts rsk of abty under
the surety bond t had executed n favor of |DA, coected
the proceeds of such rensurance n the sum of P295,000,
and pad wth the sad amount the buk of ts aeged abty
to |DA under the sad surety bond, t s pan that on ths
score t no onger has any rght to coect to the extent of
the sad amount.
On the queston of why t s Poneer, nstead of the
rensurance (sc), that s sung defendants for the amount
pad to t by the rensurers, notwthstandng that the cause
of acton pertans to the atter, Poneer says: The rensurers
opted nstead that the Poneer Insurance & Surety
Corporaton sha pursue aone the case.. . . . Poneer
Insurance & Surety Corporaton s representng the
rensurers to recover the amount.' In other words, nsofar as
the amount pad to t by the rensurers Poneer s sung
defendants as ther attorney-n-fact.
But n the frst pace, there s not the sghtest ndcaton n
the compant that Poneer s sung as attorney-n- fact of the
rensurers for any amount. Lasty, and most mportant of a,
Poneer has no rght to nsttute and mantan n ts own
name an acton for the beneft of the rensurers. It s we-
setted that an acton brought by an attorney-n-fact n hs
own name nstead of that of the prncpa w not prosper,
and ths s so even where the name of the prncpa s
dscosed n the compant.
Secton 2 of Rue 3 of the Od Rues of Court provdes that
'Every acton must be prosecuted n the name of the rea
party n nterest.' Ths provson s mandatory. The rea party
n nterest s the party who woud be beneftted or n|ured by
the |udgment or s the party entted to the avas of the sut.
Ths Court has hed n varous cases that an attorney-n-fact
s not a rea party n nterest, that there s no aw permttng
an acton to be brought by an attorney-n-fact. Arroyo v.
Granada and Gentero, 18 Ph. Rep. 484; Luchauco v.
Lm|uco and Gonzao, 19 Ph. Rep. 12; Fpnos Industra
Corporaton v. San Dego G.R. No. L- 22347,1968, 23 SCRA
706, 710-714.
The tota amount pad by Poneer to |DA s P299,666.29.
Snce Poneer has coected P295,000.00 from the
rensurers, the unnsured porton of what t pad to |DA s the
dfference between the two amounts, or P3,666.28. Ths s
the amount for whch Poneer may sue defendants,
assumng that the ndemnty agreement s st vad and
effectve. But snce the amount reazed from the sae of the
mortgaged chattes are P35,000.00 for one of the arpanes
and P2,050.00 for a spare engne, or a tota of P37,050.00,
Poneer s st overpad by P33,383.72. Therefore, Poneer
has no more cam aganst defendants. (Record on Appea,
pp. 360-363).
The payment to the pettoner made by the rensurers was
not dsputed n the appeate court. Consderng ths
admtted payment, the ony ssue that cropped up was the
effect of payment made by the rensurers to the pettoner.
Therefore, the pettoner's argument that the respondents
had no nterest n the rensurance contract as ths s strcty
between the pettoner as nsured and the rensurng
company pursuant to Secton 91 (shoud be Secton 98) of
the Insurance Code has no bass.
In genera a rensurer, on payment of a oss acqures the
same rghts by subrogaton as are acqured n smar cases
where the orgna nsurer pays a oss (Unversa Ins. Co. v.
Od Tme Moasses Co. C.C.A. La., 46 F 2nd 925).
The rues of practce n actons on orgna nsurance poces
are n genera appcabe to actons or contracts of
rensurance. (Deaware, Ins. Co. v. Pennsyvana Fre Ins.
Co., 55 S.E. 330,126 GA. 380, 7 Ann. Con. 1134).
Hence the appcabe aw s Artce 2207 of the new Cv
Code, to wt:
Art. 2207. If the pantffs property has been nsured, and he
has receved ndemnty from the nsurance company for the
n|ury or oss arsng out of the wrong or breach of contract
companed of, the nsurance company sha be subrogated
to the rghts of the nsured aganst the wrongdoer or the
person who has voated the contract. If the amount pad by
the nsurance company does not fuy cover the n|ury or
oss, the aggreved party sha be entted to recover the
defcency from the person causng the oss or n|ury.
Interpretng the aforesad provson, we rued n the case of
;hil& Air :ines, 6nc& v& 2eald :umber Co. (101 Ph. 1031
|1957|) whch we subsequenty apped n 4anila 4ahogany
4anufacturing Corporation v& Court of Appeals (154 SCRA
650 |1987|):
Note that f a property s nsured and the owner receves the
ndemnty from the nsurer, t s provded n sad artce that
the nsurer s deemed subrogated to the rghts of the
nsured aganst the wrongdoer and f the amount pad by
the nsurer does not fuy cover the oss, then the aggreved
party s the one entted to recover the defcency. #vidently,
under this legal provision, the real party in interest 'ith
regard to the portion of the indemnity paid is the insurer
and not the insured. (Emphass supped).
It s cear from the records that Poneer sued n ts own
name and not as an attorney-n-fact of the rensurer.
Accordngy, the appeate court dd not commt a reversbe
error n dsmssng the pettoner's compant as aganst the
respondents for the reason that the pettoner was not the
rea party n nterest n the compant and, therefore, has no
cause of acton aganst the respondents.
Nevertheess, the pettoner argues that the appea as
regards the counter ndemntors shoud not have been
dsmssed on the premse that the evdence on record shows
that t s entted to recover from the counter ndemntors. It
does not, however, cte any grounds except ts aegaton
that respondent "Maganas defense and evdence are
certany ncredbe" (p. 12, Roo) to back up ts contenton.
On the other hand, we fnd the tra court's fndngs on the
matter repete wth evdence to substantate ts fndng that
the counter-ndemntors are not abe to the pettoner. The
tra court stated:
Apart from the foregong proposton, the ndemnty
agreement ceased to be vad and effectve after the
executon of the chatte mortgage.
Testmones of defendants Francsco Cervantes and Modesto
Cervantes.
Poneer Insurance, knowng the vaue of the arcrafts and
the spare parts nvoved, agreed to ssue the bond provded
that the same woud be mortgaged to t, but ths was not
possbe because the panes were st n |apan and coud not
be mortgaged here n the Phppnes. As soon as the
arcrafts were brought to the Phppnes, they woud be
mortgaged to Poneer Insurance to cover the bond, and ths
ndemnty agreement woud be canceed.
The foowng s averred under oath by Poneer n the
orgna compant:
The varous confctng cams over the mortgaged
propertes have mpared and rendered nsuffcent the
securty under the chatte mortgage and there s thus no
other suffcent securty for the cam sought to be enforced
by ths acton.
Ths s |udca admsson and asde from the chatte
mortgage there s no other securty for the cam sought to
be enforced by ths acton, whch necessary means that the
ndemnty agreement had ceased to have any force and
effect at the tme ths acton was nsttuted. Sec 2, Rue 129,
Revsed Rues of Court.
Prescndng from the foregong, Poneer, havng forecosed
the chatte mortgage on the panes and spare parts, no
onger has any further acton aganst the defendants as
ndemntors to recover any unpad baance of the prce. The
ndemnty agreement was pso |ure extngushed upon the
forecosure of the chatte mortgage. These defendants, as
ndemntors, woud be entted to be subrogated to the rght
of Poneer shoud they make payments to the atter. Artces
2067 and 2080 of the New Cv Code of the Phppnes.
Independenty of the precedng proposton Poneer's
eecton of the remedy of forecosure precudes any further
acton to recover any unpad baance of the prce.
SAL or Lm, havng faed to pay the second to the eght and
ast nstaments to |DA and Poneer as surety havng made
of the payments to |DA, the aternatve remedes open to
Poneer were as provded n Artce 1484 of the New Cv
Code, known as the Recto Law.
Poneer exercsed the remedy of forecosure of the chatte
mortgage both by extra|udca forecosure and the nstant
sut. Such beng the case, as provded by the
aforementoned provsons, Poneer sha have no further
acton aganst the purchaser to recover any unpad baance
and any agreement to the contrary s vod.' Cruz, et a. v.
Fpnas Investment & Fnance Corp. No. L- 24772, May
27,1968, 23 SCRA 791, 795-6.
The operaton of the foregong provson cannot be escaped
from through the contenton that Poneer s not the vendor
but |DA. The reason s that Poneer s actuay exercsng the
rghts of |DA as vendor, havng subrogated t n such rghts.
Nor may the appcaton of the provson be vady opposed
on the ground that these defendants and defendant
Magana are not the vendee but ndemntors. Pascua, et a.
v. Unversa Motors Corporaton, G.R. No. L- 27862, Nov.
20,1974, 61 SCRA 124.
The restructurng of the obgatons of SAL or Lm, thru the
change of ther maturty dates dscharged these defendants
from any abty as aeged ndemntors. The change of the
maturty dates of the obgatons of Lm, or SAL extngush
the orgna obgatons thru novatons thus dschargng the
ndemntors.
The prncpa hereof sha be pad n eght equa successve
three months nterva nstaments, the frst of whch sha be
due and payabe 25 August 1965, the remander of whch ...
sha be due and payabe on the 26th day x x x of each
succeedng three months and the ast of whch sha be due
and payabe 26th May 1967.
However, at the tra of ths case, Poneer produced a
memorandum executed by SAL or Lm and |DA, modfyng
the maturty dates of the obgatons, as foows:
The prncpa hereof sha be pad n eght equa successve
three month nterva nstaments the frst of whch sha be
due and payabe 4 September 1965, the remander of whch
... sha be due and payabe on the 4th day ... of each
succeedng months and the ast of whch sha be due and
payabe 4th |une 1967.
Not ony that, Poneer aso produced eght purported
promssory notes bearng maturty dates dfferent from that
fxed n the aforesad memorandum; the due date of the frst
nstament appears as October 15, 1965, and those of the
rest of the nstaments, the 15th of each succeedng three
months, that of the ast nstament beng |uy 15, 1967.
These restructurng of the obgatons wth regard to ther
maturty dates, effected twce, were done wthout the
knowedge, much ess, woud have t beeved that these
defendants Magana (sc). Poneer's offca Numerano
Carbone woud have t beeved that these defendants and
defendant Magana knew of and consented to the
modfcaton of the obgatons. But f that were so, there
woud have been the correspondng documents n the form
of a wrtten notce to as we as wrtten conformty of these
defendants, and there are no such document. The
consequence of ths was the extngushment of the
obgatons and of the surety bond secured by the ndemnty
agreement whch was thereby aso extngushed. Appcabe
by anaogy are the rungs of the Supreme Court n the case
of Kabankaan Sugar Co. v. Pacheco, 55 Ph. 553, 563, and
the case of Asatc Petroeum Co. v. Hzon Davd, 45 Ph.
532, 538.
Art. 2079. An extenson granted to the debtor by the
credtor wthout the consent of the guarantor extngushes
the guaranty The mere faure on the part of the credtor to
demand payment after the debt has become due does not
of tsef consttute any extenson tme referred to heren,
(New Cv Code).'
Manresa, 4th ed., Vo. 12, pp. 316-317, Vo. VI, pp. 562-563,
M.F. Stevenson & Co., Ltd., v. Cmacom et a. (C.A.) 36 O.G.
1571.
Poneer's abty as surety to |DA had aready prescrbed
when Poneer pad the same. Consequenty, Poneer has no
more cause of acton to recover from these defendants, as
supposed ndemntors, what t has pad to |DA. By vrtue of
an express stpuaton n the surety bond, the faure of |DA
to present ts cam to Poneer wthn ten days from defaut
of Lm or SAL on every nstament, reeased Poneer from
abty from the cam.
Therefore, Poneer s not entted to exact rembursement
from these defendants thru the ndemnty.
Art. 1318. Payment by a sodary debtor sha not entte hm
to rembursement from hs co-debtors f such payment s
made after the obgaton has prescrbed or became ega.
These defendants are entted to recover damages and
attorney's fees from Poneer and ts surety by reason of the
fng of the nstant case aganst them and the attachment
and garnshment of ther propertes. The nstant acton s
ceary unfounded nsofar as pantff drags these defendants
and defendant Magana.' (Record on Appea, pp. 363-369,
Roo of G.R. No. 84157).
We fnd no cogent reason to reverse or modfy these
fndngs.
Hence, t s our concuson that the petton n G.R. No.
84197 s not mertorous.
We now dscuss the merts of G.R. No. 84157.
Pettoner |acob S. Lm poses the foowng ssues:
. What ega rues govern the reatonshp among co-
nvestors whose agreement was to do busness through the
corporate vehce but who faed to ncorporate the entty n
whch they had chosen to nvest? How are the osses to be
treated n stuatons where ther contrbutons to the
ntended 'corporaton' were nvested not through the
corporate form? Ths Petton presents these fundamenta
questons whch we beeve were resoved erroneousy by
the Court of Appeas ('CA'). (Roo, p. 6).
These questons are premsed on the pettoner's theory that
as a resut of the faure of respondents Bormaheco, Spouses
Cervantes, Constanco Magana and pettoner Lm to
ncorporate, a de facto partnershp among them was
created, and that as a consequence of such reatonshp a
must share n the osses and/or gans of the venture n
proporton to ther contrbuton. The pettoner, therefore,
questons the appeate court's fndngs orderng hm to
remburse certan amounts gven by the respondents to the
pettoner as ther contrbutons to the ntended corporaton,
to wt:
However, defendant Lm shoud be hed abe to pay hs co-
defendants' cross-cams n the tota amount of P184,878.74
as correcty found by the tra court, wth nterest from the
fng of the cross-compants unt the amount s fuy pad.
Defendant Lm shoud pay one-haf of the sad amount to
Bormaheco and the Cervanteses and the other one-haf to
defendant Magana. It s estabshed n the records that
defendant Lm had duy receved the amount of P51,000.00
from defendants Bormaheco and Magana representng the
atter's partcpaton n the ownershp of the sub|ect
arpanes and spare parts (Exhbt 58). In addton, the cross-
party pantffs ncurred addtona expenses, hence, the
tota sum of P 184,878.74.
We frst state the prncpes.
Whe t has been hed that as between themseves the
rghts of the stockhoders n a defectvey ncorporated
assocaton shoud be governed by the supposed charter
and the aws of the state reatng thereto and not by the
rues governng partners (Cannon v. Brush Eectrc Co., 54 A.
121, 96 Md. 446, 94 Am. S.R. 584), t s ordnary hed that
persons who attempt, but fa, to form a corporaton and
who carry on busness under the corporate name occupy the
poston of partners nter se (Lynch v. Perryman, 119 P. 229,
29 Ok. 615, Ann. Cas. 1913A 1065). Thus, where persons
assocate themseves together under artces to purchase
property to carry on a busness, and ther organzaton s so
defectve as to come short of creatng a corporaton wthn
the statute, they become n ega effect partners nter se,
and ther rghts as members of the company to the property
acqured by the company w be recognzed (Smth v.
Schoodoc Pond Packng Co., 84 A. 268,109 Me. 555; Whppe
v. Parker, 29 Mch. 369). So, where certan persons
assocated themseves as a corporaton for the deveopment
of and for rrgaton purposes, and each conveyed and to
the corporaton, and two of them contracted to pay a thrd
the dfference n the proportonate vaue of the and
conveyed by hm, and no stock was ever ssued n the
corporaton, t was treated as a trustee for the assocates n
an acton between them for an accountng, and ts capta
stock was treated as partnershp assets, sod, and the
proceeds dstrbuted among them n proporton to the vaue
of the property contrbuted by each (Shorb v. Beaudry, 56
Ca. 446). 2o'ever, such a relation does not necessarily
exist, for ordinarily persons cannot be made to assume the
relation of partners, as bet'een themselves, 'hen their
purpose is that no partnership shall exist (London Assur.
Corp. v. Drennen, Mnn., 6 S.Ct. 442, 116 U.S. 461, 472, 29
L.Ed. 688), and it should be implied only 'hen necessary to
do @ustice bet'een the partiesA thus, one 'ho ta8es no part
except to subscribe for stoc8 in a proposed corporation
'hich is never legally formed does not become a partner
'ith other subscribers 'ho 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 (Ward v. Brgham, 127 Mass. 24). A
partnershp reaton between certan stockhoders and other
stockhoders, who were aso drectors, w not be mped n
the absence of an agreement, so as to make the former
abe to contrbute for payment of debts egay contracted
by the atter (Head v. Owen, 44 N.W. 210, 79 Iowa 23).
(Corpus |urs Secundum, Vo. 68, p. 464). (Itacs supped).
In the nstant case, t s to be noted that the pettoner was
decared non-suted for hs faure to appear durng the
pretra despte notfcaton. In hs answer, the pettoner
dened havng receved any amount from respondents
Bormaheco, the Cervanteses and Magana. The tra court
and the appeate court, however, found through Exhbt 58,
that the pettoner receved the amount of P151,000.00
representng the partcpaton of Bormaheco and Atty.
Constanco B. Magana n the ownershp of the sub|ect
arpanes and spare parts. The record shows that defendant
Magana gave P75,000.00 to pettoner |acob Lm thru the
Cervanteses.
It s therefore cear that the pettoner never had the
ntenton to form a corporaton wth the respondents despte
hs representatons to them. Ths gves credence to the
cross-cams of the respondents to the effect that they were
nduced and ured by the pettoner to make contrbutons to
a proposed corporaton whch was never formed because
the pettoner reneged on ther agreement. Magana aeged
n hs cross-cam:
... that sometme n eary 1965, |acob Lm proposed to
Francsco Cervantes and Magana to expand hs arne
busness. Lm was to procure two DC-3's from |apan and
secure the necessary certfcates of pubc convenence and
necessty as we as the requred permts for the operaton
thereof. Magana sometme n May 1965, gave Cervantes hs
share of P75,000.00 for devery to Lm whch Cervantes dd
and Lm acknowedged recept thereof. Cervantes, kewse,
devered hs share of the undertakng. Lm n an
undertakng sometme on or about August 9,1965, promsed
to ncorporate hs arne n accordance wth ther agreement
and proceeded to acqure the panes on hs own account.
Snce then up to the fng of ths answer, Lm has refused,
faed and st refuses to set up the corporaton or return the
money of Magana. (Record on Appea, pp. 337-338).
whe respondents Bormaheco and the Cervanteses aeged
n ther answer, countercam, cross-cam and thrd party
compant:
Sometme n Apr 1965, defendant Lm ured and nduced
the answerng defendants to purchase two arpanes and
spare parts from |apan whch the atter consdered as ther
awfu contrbuton and partcpaton n the proposed
corporaton to be known as SAL. Arrangements and
negotatons were undertaken by defendant Lm. Down
payments were advanced by defendants Bormaheco and
the Cervanteses and Constanco Magana (Exh. E- 1).
Contrary to the agreement among the defendants,
defendant Lm n connvance wth the pantff, sgned and
executed the aeged chatte mortgage and surety bond
agreement n hs persona capacty as the aeged propretor
of the SAL. The answerng defendants earned for the frst
tme of ths trckery and msrepresentaton of the other,
|acob Lm, when the heren pantff chatte mortgage (sc)
aegedy executed by defendant Lm, thereby forcng them
to fe an adverse cam n the form of thrd party cam.
Notwthstandng repeated ora demands made by
defendants Bormaheco and Cervanteses, to defendant Lm,
to surrender the possesson of the two panes and ther
accessores and or return the amount advanced by the
former amountng to an aggregate sum of P 178,997.14 as
evdenced by a statement of accounts, the atter gnored,
omtted and refused to compy wth them. (Record on
Appea, pp. 341-342).
Appyng therefore the prncpes of aw earer cted to the
facts of the case, necessary, no de facto partnershp was
created among the partes whch woud entte the pettoner
to a rembursement of the supposed osses of the proposed
corporaton. The record shows that the pettoner was actng
on hs own and not n behaf of hs other woud-be
ncorporators n transactng the sae of the arpanes and
spare parts.
WHEREFORE, the nstant pettons are DISMISSED. The
questoned decson of the Court of Appeas s AFFIRMED.