G.R. No.

L-33580

February 6, 1931

MAXIMILIANO SANCHO, plaintiff-appellant,

vs.
SEVERIANO LIZARRAGA, defendant-appellee.
Jose Perez Cardenas and Jose M. Casal for appellant.
Celso B. Jamora and Antonio Gonzalez for appellee.
ROMUALDEZ, J.:
The plaintiff brought an action for the rescission of a partnership contract between himself and the
defendant, entered into on October 15, 1920, the reimbursement by the latter of his 50,000 peso
investment therein, with interest at 12 per cent per annum form October 15, 1920, with costs, and
any other just and equitable remedy against said defendant.
The defendant denies generally and specifically all the allegations of the complaint which are
incompatible with his special defenses, cross-complaint and counterclaim, setting up the latter and
asking for the dissolution of the partnership, and the payment to him as its manager and
administrator of P500 monthly from October 15, 1920, until the final dissolution, with interest, onehalf of said amount to be charged to the plaintiff. He also prays for any other just and equitable
remedy.
The Court of First Instance of Manila, having heard the cause, and finding it duly proved that the
defendant had not contributed all the capital he had bound himself to invest, and that the plaintiff had
demanded that the defendant liquidate the partnership, declared it dissolved on account of the
expiration of the period for which it was constituted, and ordered the defendant, as managing
partner, to proceed without delay to liquidate it, submitting to the court the result of the liquidation
together with the accounts and vouchers within the period of thirty days from receipt of notice of said
judgment, without costs.
The plaintiff appealed from said decision making the following assignments of error:
1. In holding that the plaintiff and appellant is not entitled to the rescission of the partnership
contract, Exhibit A, and that article 1124 of the Civil Code is not applicable to the present
case.
2. In failing to order the defendant to return the sum of P50,000 to the plaintiff with interest
from October 15, 1920, until fully paid.
3. In denying the motion for a new trial.
In the brief filed by counsel for the appellee, a preliminary question is raised purporting to show that
this appeal is premature and therefore will not lie. The point is based on the contention that
inasmuch as the liquidation ordered by the trial court, and the consequent accounts, have not been
made and submitted, the case cannot be deemed terminated in said court and its ruling is not yet
appealable. In support of this contention counsel cites section 123 of the Code of Civil Procedure,
and the decision of this court in the case of Natividad vs. Villarica (31 Phil., 172).
This contention is well founded. Until the accounts have been rendered as ordered by the trial court,
and until they have been either approved or disapproved, the litigation involved in this action cannot

be considered as completely decided; and, as it was held in said case of Natividad vs .Villarica, also
with reference to an appeal taken from a decision ordering the rendition of accounts following the
dissolution of partnership, the appeal in the instant case must be deemed premature.
But even going into the merits of the case, the affirmation of the judgment appealed from is
inevitable. In view of the lower court's findings referred to above, which we cannot revise because
the parol evidence has not been forwarded to this court, articles 1681 and 1682 of the Civil Code
have been properly applied. Owing to the defendant's failure to pay to the partnership the whole
amount which he bound himself to pay, he became indebted to it for the remainder, with interest and
any damages occasioned thereby, but the plaintiff did not thereby acquire the right to demand
rescission of the partnership contract according to article 1124 of the Code. This article cannot be
applied to the case in question, because it refers to the resolution of obligations in general, whereas
article 1681 and 1682 specifically refer to the contract of partnership in particular. And it is a well
known principle that special provisions prevail over general provisions.
By virtue of the foregoing, this appeal is hereby dismissed, leaving the decision appealed from in full
force, without special pronouncement of costs. So ordered.
Avancea, C.J., Johnson, Street, Malcolm, Villamor, Ostrand, Johns and Villa-Real, JJ., concur.

G.R. No. L-45441

June 26, 1939

MORA ELECTRIC CO., INC., petitioner,

vs.
PAULINO MATIC and BENITA QUIOGUE VIUDA DE DEL ROSARIO, respondents.
Claro M. Recto and John R. Mcfie for petitioner.
Gibbs and McDonough for respondents.
AVANCEA, C.J.:
Paulino Matic obtained from the City of Manila the concession to provide the lighting system of the
Manila North and South Cemeteries on All Saint's Day in 1934, for the amount of P8,733, the
payment of which was guaranteed by Luzon Surety Co.
Matic thereafter transferred his rights to said concession to Benita Quiogue, authorizing her to enter
into a contract with Mora Electric Co., Inc., to make the installation and to pay the P8,773 to the City
of Manila with the money to be collected from the installations.
Benita Quiogue entered into this contract with Mora Electric Co., Inc., each party binding itself to
contribute the necessary labor and material which the latter may be unable to put up, and dividing
the profits between them after deducting therefrom all the necessary expenses for labor, materials,
cost of the current and the amount of P8,773 which should be paid to the city, both parties also
binding themselves, for this purpose, to report the expenses which each might have incurred.
The business was a failure because it did not yield the expected profit.
For failure to pay the amount of P8,773 owing to the City of Manila for the concession, Luzon Surety
Co., had to make good the said amount. Luzon Surety Co., thereupon sued Paulino Matic and

Benita Quiogue for the recovery of this amount. Paulino Matic and Benita Quiogue, in turn, filed the
present action against Mora Electric Co., Inc., to recover from the latter the amount of P8,773 to
which they were sentenced to pay in the case commenced against them by Luzon Surety Co. The
Court of Appeals, affirming the judgment of the Court of First Instance, sentenced Mora Electric Co.,
Inc., to pay Paulino Matic and Benita Quiogue the amount of P8,773, minus that of P235 which had
already been paid on account of the former, or P8,518 with interest thereon at 12 per cent per
annum, plus 8 per cent of this amount as attorney's fee.
Mora Electric Co., Inc., has appealed this case to this court of certiorari. The Court of Appeals,
relying upon the evidence oral and documentary, held that Mora Electric Co., Inc., bound itself in its
contract with Benita Quiogue to pay the City of Manila the P8,773. Unable to review this evidence,
we have to decide this appeal on the basis of this finding of the Court of Appeals. Having undertaken
to pay this amount to the City of Manila, Mora Electric Co., Inc., is under a duty to reimburse
whoever made good the amount for it, namely, Paulino Matic and Benita Quiogue.
However, Mora Electric Co., Inc., also contends that, at all events, Benita Quiogue should share in
the payment of this amount to the City of Manila. It alleges that the contract entered into between
them is a civil partnership. It then invokes the provisions of the Civil Code regarding the distribution
of the profits and losses between the partners.
This question, however, is not raised in this case. It properly pertains to the liquidation of the
partnership and the distribution of the profits and losses, which are not here at issue. The amount
now sought to be recovered is not claimed as loss or profit, but as the contribution which Mora
Electric Co., Inc., bound itself to make to the partnership and which it was under a duty to pay,
although it was paid instead by Matic and Quiogue. The liquidation of the partnership is not now
sought. Indeed, there is no reason for such liquidation. While it is mentioned in the appealed
decision that the business produced P9,636.40, it does not appear that the parties have made a
report, as they have agreed to do, of the expenses incurred by each, and it is not possible to
determine whether there was a profit or loss and what is the extent thereof and the measure of the
respective liability or benefit.
As to the interest on the amount of P8,518, Matic and Quiogue having been sentenced to pay it, it
constitutes damages suffered by them due to the breach by Mora Electric Co., Inc., of the obligation
it assumed to pay the City the amount of the concession. The same is true with respect to the
judgment to pay 8 per cent on the amount of P8,518.
Wherefore, the judgment of the Court of Appeals is affirmed, with the costs to the petitioner. So
ordered.
Villa-Real, Imperial, Diaz, Laurel, and Concepcion, JJ., concur.
G.R. No. 134559 December 9, 1999
ANTONIA TORRES assisted by her husband, ANGELO TORRES; and EMETERIA
BARING, petitioners,
vs.
COURT OF APPEALS and MANUEL TORRES, respondents.

PANGANIBAN, J.:

Courts may not extricate parties from the necessary consequences of their acts. That the terms of a
contract turn out to be financially disadvantageous to them will not relieve them of their obligations
therein. The lack of an inventory of real property will not ipso facto release the contracting partners
from their respective obligations to each other arising from acts executed in accordance with their
agreement.
The Case
The Petition for Review on Certiorari before us assails the March 5, 1998 Decision 1 of the Court of
Appeals 2 (CA) in CA-GR CV No. 42378 and its June 25, 1998 Resolution denying reconsideration. The
assailed Decision affirmed the ruling of the Regional Trial Court (RTC) of Cebu City in Civil Case No. R21208, which disposed as follows:
WHEREFORE, for all the foregoing considerations, the Court, finding for the
defendant and against the plaintiffs, orders the dismissal of the plaintiffs complaint.
The counterclaims of the defendant are likewise ordered dismissed. No
pronouncement as to costs. 3
The Facts
Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture
agreement" with Respondent Manuel Torres for the development of a parcel of land into a
subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land
in favor of respondent, who then had it registered in his name. By mortgaging the property,
respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture
Agreement, was to be used for the development of the subdivision. 4 All three of them also agreed to
share the proceeds from the sale of the subdivided lots.
The project did not push through, and the land was subsequently foreclosed by the bank.
According to petitioners, the project failed because of "respondent's lack of funds or means and
skills." They add that respondent used the loan not for the development of the subdivision, but in
furtherance of his own company, Universal Umbrella Company.
On the other hand, respondent alleged that he used the loan to implement the Agreement. With the
said amount, he was able to effect the survey and the subdivision of the lots. He secured the Lapu
Lapu City Council's approval of the subdivision project which he advertised in a local newspaper. He
also caused the construction of roads, curbs and gutters. Likewise, he entered into a contract with
an engineering firm for the building of sixty low-cost housing units and actually even set up a model
house on one of the subdivision lots. He did all of these for a total expense of P85,000.
Respondent claimed that the subdivision project failed, however, because petitioners and their
relatives had separately caused the annotations of adverse claims on the title to the land, which
eventually scared away prospective buyers. Despite his requests, petitioners refused to cause the
clearing of the claims, thereby forcing him to give up on the project. 5
Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who were
however acquitted. Thereafter, they filed the present civil case which, upon respondent's motion,
was later dismissed by the trial court in an Order dated September 6, 1982. On appeal, however, the
appellate court remanded the case for further proceedings. Thereafter, the RTC issued its assailed
Decision, which, as earlier stated, was affirmed by the CA.

Hence, this Petition. 6

Ruling of the Court of Appeals
In affirming the trial court, the Court of Appeals held that petitioners and respondent had formed a
partnership for the development of the subdivision. Thus, they must bear the loss suffered by the
partnership in the same proportion as their share in the profits stipulated in the contract. Disagreeing
with the trial court's pronouncement that losses as well as profits in a joint venture should be
distributed equally, 7 the CA invoked Article 1797 of the Civil Code which provides:
Art. 1797 The losses and profits shall be distributed in conformity with the
agreement. If only the share of each partner in the profits has been agreed upon, the
share of each in the losses shall be in the same proportion.
The CA elucidated further:
In the absence of stipulation, the share of each partner in the profits and losses shall
be in proportion to what he may have contributed, but the industrial partner shall not
be liable for the losses. As for the profits, the industrial partner shall receive such
share as may be just and equitable under the circumstances. If besides his services
he has contributed capital, he shall also receive a share in the profits in proportion to
his capital.
The Issue
Petitioners impute to the Court of Appeals the following error:
. . . [The] Court of Appeals erred in concluding that the transaction
. . . between the petitioners and respondent was that of a joint venture/partnership,
ignoring outright the provision of Article 1769, and other related provisions of the Civil
Code of the Philippines. 8
The Court's Ruling
The Petition is bereft of merit.
Main Issue:
Existence of a Partnership
Petitioners deny having formed a partnership with respondent. They contend that the Joint Venture
Agreement and the earlier Deed of Sale, both of which were the bases of the appellate court's
finding of a partnership, were void.
In the same breath, however, they assert that under those very same contracts, respondent is liable
for his failure to implement the project. Because the agreement entitled them to receive 60 percent
of the proceeds from the sale of the subdivision lots, they pray that respondent pay them damages
equivalent to 60 percent of the value of the property. 9
The pertinent portions of the Joint Venture Agreement read as follows:

KNOW ALL MEN BY THESE PRESENTS:

This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th day
of March, 1969, by and between MR. MANUEL R. TORRES, . . . the FIRST PARTY,
likewise, MRS. ANTONIA B. TORRES, and MISS EMETERIA BARING, . . . the
SECOND PARTY:
WITNESSETH:
That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this
property located at Lapu-Lapu City, Island of Mactan, under Lot No. 1368 covering
TCT No. T-0184 with a total area of 17,009 square meters, to be sub-divided by the
FIRST PARTY;
Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of: TWENTY
THOUSAND (P20,000.00) Pesos, Philippine Currency upon the execution of this
contract for the property entrusted by the SECOND PARTY, for sub-division projects
and development purposes;
NOW THEREFORE, for and in consideration of the above covenants and promises
herein contained the respective parties hereto do hereby stipulate and agree as
follows:
ONE: That the SECOND PARTY signed an absolute Deed of Sale . . . dated March
5, 1969, in the amount of TWENTY FIVE THOUSAND FIVE HUNDRED THIRTEEN
& FIFTY CTVS. (P25,513.50) Philippine Currency, for 1,700 square meters at ONE
[PESO] & FIFTY CTVS. (P1.50) Philippine Currency, in favor of the FIRST PARTY,
but the SECOND PARTY did not actually receive the payment.
SECOND: That the SECOND PARTY, had received from the FIRST PARTY, the
necessary amount of TWENTY THOUSAND (P20,000.00) pesos, Philippine
currency, for their personal obligations and this particular amount will serve as an
advance payment from the FIRST PARTY for the property mentioned to be subdivided and to be deducted from the sales.
THIRD: That the FIRST PARTY, will not collect from the SECOND PARTY, the
interest and the principal amount involving the amount of TWENTY THOUSAND
(P20,000.00) Pesos, Philippine Currency, until the sub-division project is terminated
and ready for sale to any interested parties, and the amount of TWENTY
THOUSAND (P20,000.00) pesos, Philippine currency, will be deducted accordingly.
FOURTH: That all general expense[s] and all cost[s] involved in the sub-division
project should be paid by the FIRST PARTY, exclusively and all the expenses will not
be deducted from the sales after the development of the sub-division project.
FIFTH: That the sales of the sub-divided lots will be divided into SIXTY
PERCENTUM 60% for the SECOND PARTY and FORTY PERCENTUM 40% for the
FIRST PARTY, and additional profits or whatever income deriving from the sales will
be divided equally according to the . . . percentage [agreed upon] by both parties.

SIXTH: That the intended sub-division project of the property involved will start the
work and all improvements upon the adjacent lots will be negotiated in both parties[']
favor and all sales shall [be] decided by both parties.
SEVENTH: That the SECOND PARTIES, should be given an option to get back the
property mentioned provided the amount of TWENTY THOUSAND (P20,000.00)
Pesos, Philippine Currency, borrowed by the SECOND PARTY, will be paid in full to
the FIRST PARTY, including all necessary improvements spent by the FIRST PARTY,
and-the FIRST PARTY will be given a grace period to turnover the property
mentioned above.
That this AGREEMENT shall be binding and obligatory to the parties who executed
same freely and voluntarily for the uses and purposes therein stated. 10
A reading of the terms embodied in the Agreement indubitably shows the existence of a partnership
pursuant to Article 1767 of the Civil Code, which provides:
Art. 1767. By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of
dividing the profits among themselves.
Under the above-quoted Agreement, petitioners would contribute property to the partnership in the
form of land which was to be developed into a subdivision; while respondent would give, in addition
to his industry, the amount needed for general expenses and other costs. Furthermore, the income
from the said project would be divided according to the stipulated percentage. Clearly, the contract
manifested the intention of the parties to form a partnership. 11
It should be stressed that the parties implemented the contract. Thus, petitioners transferred the title
to the land to facilitate its use in the name of the respondent. On the other hand, respondent caused
the subject land to be mortgaged, the proceeds of which were used for the survey and the
subdivision of the land. As noted earlier, he developed the roads, the curbs and the gutters of the
subdivision and entered into a contract to construct low-cost housing units on the property.
Respondent's actions clearly belie petitioners' contention that he made no contribution to the
partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or
property, but also industry.
Petitioners Bound by
Terms of Contract
Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been expressly
stipulated, but also to all necessary consequences thereof, as follows:
Art. 1315. Contracts are perfected by mere consent, and from that moment the
parties are bound not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in keeping with
good faith, usage and law.

It is undisputed that petitioners are educated and are thus presumed to have understood the terms
of the contract they voluntarily signed. If it was not in consonance with their expectations, they
should have objected to it and insisted on the provisions they wanted.
Courts are not authorized to extricate parties from the necessary consequences of their acts, and
the fact that the contractual stipulations may turn out to be financially disadvantageous will not
relieve parties thereto of their obligations. They cannot now disavow the relationship formed from
such agreement due to their supposed misunderstanding of its terms.
Alleged Nullity of the
Partnership Agreement
Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code,
which provides:
Art. 1773. A contract of partnership is void, whenever immovable property is
contributed thereto, if an inventory of said property is not made, signed by the
parties, and attached to the public instrument.
They contend that since the parties did not make, sign or attach to the public instrument an inventory
of the real property contributed, the partnership is void.
We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent
Arturo M. Tolentino states that under the aforecited provision which is a complement of Article
1771, 12 "The execution of a public instrument would be useless if there is no inventory of the property
contributed, because without its designation and description, they cannot be subject to inscription in the
Registry of Property, and their contribution cannot prejudice third persons. This will result in fraud to those
who contract with the partnership in the belief [in] the efficacy of the guaranty in which the immovables
may consist. Thus, the contract is declared void by the law when no such inventory is made." The case at
bar does not involve third parties who may be prejudiced.
Second, petitioners themselves invoke the allegedly void contract as basis for their claim that
respondent should pay them 60 percent of the value of the property. 13 They cannot in one breath deny
the contract and in another recognize it, depending on what momentarily suits their purpose. Parties
cannot adopt inconsistent positions in regard to a contract and courts will not tolerate, much less approve,
such practice.
In short, the alleged nullity of the partnership will not prevent courts from considering the Joint
Venture Agreement an ordinary contract from which the parties' rights and obligations to each other
may be inferred and enforced.
Partnership Agreement Not the Result
of an Earlier Illegal Contract
Petitioners also contend that the Joint Venture Agreement is void under Article 1422 14 of the Civil
Code, because it is the direct result of an earlier illegal contract, which was for the sale of the land without
valid consideration.
This argument is puerile. The Joint Venture Agreement clearly states that the consideration for the
sale was the expectation of profits from the subdivision project. Its first stipulation states that

petitioners did not actually receive payment for the parcel of land sold to respondent. Consideration,
more properly denominated as cause, can take different forms, such as the prestation or promise of
a thing or service by another. 15
In this case, the cause of the contract of sale consisted not in the stated peso value of the land, but
in the expectation of profits from the subdivision project, for which the land was intended to be used.
As explained by the trial court, "the land was in effect given to the partnership as [petitioner's]
participation therein. . . . There was therefore a consideration for the sale, the [petitioners] acting in
the expectation that, should the venture come into fruition, they [would] get sixty percent of the net
profits."
Liability of the Parties
Claiming that rerpondent was solely responsible for the failure of the subdivision project, petitioners
maintain that he should be made to pay damages equivalent to 60 percent of the value of the
property, which was their share in the profits under the Joint Venture Agreement.
We are not persuaded. True, the Court of Appeals held that petitioners' acts were not the cause of
the failure of the project. 16 But it also ruled that neither was respondent responsible therefor. 17 In
imputing the blame solely to him, petitioners failed to give any reason why we should disregard the factual
findings of the appellate court relieving him of fault. Verily, factual issues cannot be resolved in a petition
for review under Rule 45, as in this case. Petitioners have not alleged, not to say shown, that their Petition
constitutes one of the exceptions to this doctrine. 18 Accordingly, we find no reversible error in the CA's
ruling that petitioners are not entitled to damages.
WHEREFORE, the Perition is hereby DENIED and the challenged Decision AFFIRMED. Costs
against petitioners.
SO ORDERED
G.R. No. 149844

October 13, 2004

MIGUEL CUENCO, Substituted by MARIETTA C. CUYEGKENG, petitioner,

vs.
CONCEPCION CUENCO Vda. DE MANGUERRA, respondent.
DECISION
PANGANIBAN, J.:
Inasmuch as the facts indubitably and eloquently show an implied trust in favor of respondent, the
Court of Appeals did not err in affirming the Decision of the Regional Trial Court ordering petitioner to
convey the subject property to her. That Decision satisfied the demands of justice and prevented
unjust enrichment.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the August 22,
2001 Decision2 of the Court of Appeals (CA) in CA-GR CV No. 54852. The assailed Decision
disposed as follows:

"WHEREFORE, the decision appealed from is AFFIRMED."3

On the other hand, the Regional Trial Court (RTC) Decision affirmed by the CA disposed as follows:
"WHEREFORE, considering that this action is essentially one for reconveyance or
enforcement of a trust, judgment is hereby rendered ordering the substituted defendant
Marietta Cuenco Cuyegkeng to reconvey or transfer, in a duly registrable public instrument,
Lot No 903-A-6 under TCT No. 113781 of the Registry of Deeds of Cebu City, of the Banilad
Estate with an area of 834 square meters, in favor of plaintiff Concepcion Cuenco Vda. De
Manguerra; or should the substituted defendant, for one reason or another, fail to execute
the necessary instrument once the decision becomes final, the Clerk of Court of this Court
(RTC) is hereby instructed, in accordance with the Rules of Court, to prepare and execute
the appropriate and requisite conveyance and instrument in favor of herein plaintiff which, in
either case, shall be registered with the Office of the Register of Deeds of Cebu City.
Without costs in this instance."4
The Facts
The facts were summarized by the appellate court as follows:
"On September 19, 1970, the [respondent] filed the initiatory complaint herein for specific
performance against her uncle [Petitioner] Miguel Cuenco which averred, inter alia that her
father, the late Don Mariano Jesus Cuenco (who became Senator) and said [petitioner]
formed the Cuenco and Cuenco Law Offices; that on or around August 4, 1931, the Cuenco
and Cuenco Law Offices served as lawyers in two (2) cases entitled Valeriano Solon versus
Zoilo Solon (Civil Case 9037) and Valeriano Solon versus Apolonia Solon (Civil Case 9040)
involving a dispute among relatives over ownership of lot 903 of the Banilad Estate which is
near the Cebu Provincial Capitol; that records of said cases indicate the name of the
[petitioner] alone as counsel of record, but in truth and in fact, the real lawyer behind the
success of said cases was the influential Don Mariano Jesus Cuenco; that after winning said
cases, the awardees of Lot 903 subdivided said lot into three (3) parts as follows:
Lot 903-A: 5,000 [square meters]: Mariano Cuencos attorneys fees
Lot 903-B: 5,000 [square meters]: Miguel Cuencos attorneys fees
Lot 903-C: 54,000 [square meters]: Solons retention
"That at the time of distribution of said three (3) lots in Cebu, Mariano Jesus Cuenco was
actively practicing law in Manila, and so he entrusted his share (Lot 903-A) to his brother law
partner (the [petitioner]); that on September 10, 1938, the [petitioner] was able to obtain in
his own name a title for Lot 903-A (Transfer Certificate of Title [TCT] RT-6999 [T-21108]); that
he was under the obligation to hold the title in trust for his brother Marianos children by first
marriage; that sometime in 1947, the Cuenco family was anticipating Marianos second
marriage, and so on February 1, 1947, they partitioned Lot 903-A into six (6) sub-lots (Lots
903-A-1 to 903-A-6) to correspond to the six (6) children of Marianos first marriage (Teresita,
Manuel, Lourdes, Carmen, Consuelo, and Concepcion); that the [petitioner] did not object
nor oppose the partition plan; that on June 4, 1947, the [petitioner] executed four (4) deeds
of donation in favor of Marianos four (4) children: Teresita, Manuel, Lourdes, and Carmen,
pursuant to the partition plan (per notary documents 183, 184, 185, 186, Book III, Series

1947 of Cebu City Notary Public Candido Vasquez); that on June 24, 1947, the [petitioner]
executed the fifth deed of donation in favor of Marianos fifth child Consuelo (per notary
document 214, Book III, Series 1947 of Cebu City Notary Public Candido Vasquez) (Exhibits
2 to 5); that said five (5) deeds of donation left out Marianos sixth child Concepcion
who later became the [respondent] in this case; that in 1949, [respondent] occupied and
fenced a portion of Lot 903-A-6 for taxation purposes (Exhibit F, Exhibit 6); that she also
paid the taxes thereon (Exhibit G); that her father died on February 25, 1964 with a Last Will
and Testament; that the pertinent portion of her fathers Last Will and Testament bequeaths
the lot.
near the Cebu provincial capitol, which were my attorneys fees from my clients,
Victoria Rallos and Zoilo Solon, respectively have already long been disposed of,
and distributed by me, through my brother, Miguel, to all my said children in the first
marriage;
"That on June 3, 1966, the [petitioner] wrote a letter petitioning the Register of Deeds of
Cebu to transfer Lot 903-A-6 to his name on the ground that Lot 903-A-6 is a portion of Lot
903-A; that on April 6, 1967, the [respondent] requested the Register of Deeds to annotate
an affidavit of adverse claim against the [petitioners] TCT RT-6999 (T-21108) which covers
Lot 903-A; that on June 3, 1967, the Register of Deeds issued TCT 35275 covering Lot 903A-6 in the name of the [petitioner] but carrying the earlier annotation of adverse claim; that in
1969, the [petitioner] tore down the wire fence which the [respondent] constructed on Lot
903-A-6 which compelled the latter to institute the instant complaint dated August 20, 1970
on September 19, 1970.
"On December 5, 1970, the answer with counterclaim dated December 3, 1970 of [petitioner]
Miguel Cuenco was filed where he alleged that he was the absolute owner of Lot 903-A-6;
that this lot was a portion of Lot 903-A which in turn was part of Lot 903 which was the
subject matter of litigation; that he was alone in defending the cases involving Lot 903
without the participation of his brother Mariano Cuenco; that he donated five (5) of the six (6)
portions of Lot 903-A to the five (5) children of his brother Mariano out of gratitude for the
love and care they exhibited to him (Miguel) during the time of his long sickness; that he did
not give or donate any portion of the lot to the [respondent] because she never visited him
nor took care of him during his long sickness; that he became critically ill on February 11,
1946 and was confined at the Singians Clinic in Manila and then transferred to Cebu where
he nearly died in 1946; that his wife Fara Remia Ledesma Cuenco had an operation on
January 1951 and was confined at the University of Santo Tomas Hospital and John Hopkins
Hospital in the United States; that two of his children died at the University of Santo Tomas
Hospital in 1951 and 1952; and that his wife was blind for many months due to malignant
hypertension but [respondent] never remembered her nor did she commiserate with him and
his wife in their long period of sorrow.
"[Petitioner] Miguel Cuenco took the witness stand as early as September 13, 1974. His selfconducted direct examination lasted until 1985, the last one on November 22, 1985.
Unfortunately, he died5 before he was able to submit himself for cross-examination and so
his testimony had to be stricken off the record. His only surviving daughter, Marietta
Cuyegkeng, stood as the substitute [petitioner] in this case. She testified that she purchased
Lot 903-A-6 (the property subject matter of this case) from her late father sometime in 1990
and constructed a house thereon in the same year; that she became aware of this case
because her late father used to commute to Cebu City to attend to this case; and that Lot
903-A-6 is in her name per Transfer Certificate of Title #113781 of the Registry of Deeds for
Cebu."6

Ruling of the Court of Appeals

The CA found respondents action not barred by res judicata, because there was "no identity of
causes of action between the Petition for cancellation of adverse claim in L.R.C. Records 5988 and
the Complaint for specific performance to resolve the issue of ownership in Civil Case No. R-11891."
The appellate court further found no reason to disturb the findings of the trial court that respondent
"has the legal right of ownership over lot 903-A-6." The CA ruled that the subject land "is part of the
attorneys fees of Don Mariano Cuenco, predecessor-in-interest of [Respondent] Concepcion
Cuenco vda. de Manguerra and [petitioner] merely holds such property in trust for [her], his title
there[to] notwithstanding."
Finally, the CA held that the right of action of respondent "has not yet prescribed as she was in
possession of the lot in dispute and the prescriptive period to file the case commences to run only
from the time she acquired knowledge of an adverse claim over [her] possession."
Hence, this Petition.7
The Issues
In her Memorandum, petitioner raises the following issues for our consideration:
"I.
On question of law, the Court of Appeals failed to consider facts of substance and
significance which, if considered, will show that the preponderance of evidence is in favor of
the petitioner.
"II.
On question of law, the Court of Appeals failed to appreciate the proposition that, contrary to
the position taken by the trial court, no constructive or implied trust exists between the
parties, and neither is the action one for reconveyance based upon a constructive or implied
trust.
"III.
On question of law, the Court of Appeals erred in not finding that even where implied trust is
admitted to exist the respondents action for relief is barred by laches and prescription.
"IV.
On question of law, the trial court and the appellate court erred in expunging from the
records the testimony of Miguel Cuenco."8
This Courts Ruling
The Petition has no merit.
First Issue:

Evaluation of Evidence
Petitioner asks us to appreciate and weigh the evidence offered in support of the finding that Lot
903-A-6 constituted a part of Mariano Cuencos share in the attorneys fees. In other words, she
seeks to involve us in a reevaluation of the veracity and probative value of the evidence submitted to
the lower court. What she wants us to do is contrary to the dictates of Rule 45 that only questions of
law may be raised and resolved in a petition for review. "Absent any whimsical or capricious exercise
of judgment, and unless the lack of any basis for the conclusions made by the lower courts be amply
demonstrated, the Supreme Court will not disturb such factual findings." 9
As a rule, findings of fact of the Court of Appeals affirming those of the trial court are binding and
conclusive. Normally, such factual findings are not disturbed by this Court, to which only questions of
law may be raised in an appeal by certiorari.10 This Court has consistently ruled that these questions
"must involve no examination of the probative value of the evidence presented by the litigants or any
of them."11 Emphasizing the difference between the two types of question, it has explained that
"there is a question of law in a given case when the doubt or difference arises as to what the law is
pertaining to a certain state of facts, and there is a question of fact when the doubt arises as the
truth or the falsity of alleged facts."12
Indeed, after going over the records of the present case, we are not inclined to disturb the factual
findings of the trial and the appellate courts, just because of the insistent claim of petitioner. His
witnesses allegedly testified that Civil Case No. 9040 involving Lot 903 had not been handled by
Mariano for defendants therein -- Apolonia Solon, Zoilo Solon, et al. It has sufficiently been proven,
however, that these defendants were represented by the Cuenco and Cuenco Law Office, composed
of Partners Mariano Cuenco and Miguel Cuenco.
Given as attorneys fees was one hectare of Lot 903, of which two five-thousand square meter
portions were identified as Lot 903-A and Lot 903-B. That only Miguel handled Civil Case No. 9040
does not mean that he alone is entitled to the attorneys fees in the said cases. "When a client
employs the services of a law firm, he does not employ the services of the lawyer who is assigned to
personally handle the case. Rather, he employs the entire law firm." 13 Being a partner in the law firm,
Mariano -- like Miguel -- was likewise entitled14 to a share in the attorneys fees from the firms
clients. Hence, the lower courts finding that Lot 903-A was a part of Mariano Cuencos attorneys
fees has ample support.
Second Issue:
Implied Trust
Petitioner then contends that no constructive or implied trust exists between the parties.
A trust is a legal relationship between one having an equitable ownership in a property and another
having legal title to it.15
Trust relations between parties may either be express or implied. 16 Express trusts are created by the
direct and positive acts of the parties, indicated through some writing, deed, will, or words evidencing
an intention to create a trust.17 On the other hand, implied trusts are those that, "without being
express, are deducible from the nature of the transaction as matters of intent[;] or which are
superinduced on the transaction by operation of law as a matter of equity, independently of the
particular intention of the parties. Implied trusts may either be resulting or constructive trusts, both
coming into being by operation of law."18

Resulting trusts are presumed to have been contemplated by the parties and are based on the
equitable doctrine that valuable consideration, not legal title, determines the equitable title or
interest.19 These trusts arise from the nature of or the circumstances involved in a
transaction,20 whereby legal title becomes vested in one person, who is obligated in equity to hold
that title for the benefit of another.
Constructive trusts are "created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud,
duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in
equity and good conscience, to hold."21
A review of the records shows that indeed there is an implied trust between the parties.
Although Lot 903-A was titled in Miguels name, the circumstances surrounding the acquisition and
the subsequent partial dispositions of this property eloquently speak of the intent that the equitable
or beneficial ownership of the property should belong to Mariano and his heirs.
First, Lot 903-A was one half of the one-hectare portion of Lot 903 given as attorneys fees
by a client of the law firm of Partners Miguel and Mariano Cuenco. It constituted the latters
share in the attorneys fees and thus equitably belonged to him, as correctly found by the
CA. That Lot 903-A had been titled in the name of Miguel gave rise to an implied trust
between him and Mariano, specifically, the former holds the property in trust for the latter. In
the present case, it is of no moment that the implied trust arose from the circumstance -- a
share in the attorneys fees -- that does not categorically fall under Articles 1448 to 1456 of
the Civil Code. The cases of implied trust enumerated therein "does not exclude others
established by the general law of trust."22
Second, from the time it was titled in his name in 1938, 23 Lot 903-A remained undivided and
untouched24by Miguel. Only on February 3, 1947, did Lourdes Cuenco,25 upon the instruction
of Mariano, have it surveyed and subdivided into six almost equal portions -- 903-A-1 to 903A-6. Each portion was specifically allocated to each of the six children of Mariano with his
first wife.26
Third, Miguel readily surrendered his Certificate of Title27 and interposed no objection28 to the
subdivision and the allocation of the property to Marianos six children, including Concepcion.
Fourth, Marianos children, including Concepcion,29 were the ones who shouldered the
expenses incurred for the subdivision of the property.
Fifth, after the subdivision of the property, Marianos children -- including Concepcion 30 -- took
possession of their respective portions thereof.
Sixth, the legal titles to five portions of the property were transferred via a gratuitous deed of
conveyance to Marianos five children, following the allocations specified in the subdivision
plan prepared for Lourdes Cuenco.31
With respect to Lot 903-A-6 in particular, the existence of Concepcions equitable ownership thereof
is bolstered, not just by the above circumstances, but also by the fact that respondent fenced the
portion allocated to her and planted trees thereon.32

More significantly, she also paid real property taxes on Lot 903-A-6 yearly, from 1956 until 1969 33 -the year when she was dispossessed of the property. "Although tax declarations or realty tax
payments of property are not conclusive evidence of ownership, nevertheless, they are good indicia
of possession in the concept of owner, for no one in his right mind would be paying taxes for a
property that is not in his actual or at least constructive possession." 34 Such realty tax payments
constitute proof that the holder has a claim of title over the property.
Tellingly, Miguel started paying real property taxes on Lot 903-A-6 only on April 4, 1964, 35 after the
death of Mariano.36 This fact shows that it was only in that year that he was emboldened to claim the
property as his own and to stop recognizing Marianos, and subsequently Concepcions, ownership
rights over it. It was only by then that the one who could have easily refuted his claim had already
been silenced by death. Such a situation cannot be permitted to arise, as will be explained below.
Estoppel
From the time Lot 903-A was subdivided and Marianos six children -- including Concepcion -- took
possession as owners of their respective portions, no whimper of protest from petitioner was heard
until 1963. By his acts as well as by his omissions, Miguel led Mariano and the latters heirs,
including Concepcion, to believe that Petitioner Cuenco respected the ownership rights of
respondent over Lot 903-A-6. That Mariano acted and relied on Miguels tacit recognition of his
ownership thereof is evident from his will, executed in 1963, which states:
"I hereby make it known and declare that x x x all properties which my first wife and I had
brought to, or acquired during our marriage, or which I had acquired during the years I was a
widower including jewelry, war damage compensation, and two other lots also located at
Cebu City, one near the South-Western University and the other near the Cebu provincial
capitol, which were my attorneys fees from my clients, Victoria Rallos and Zoilo Solon,
respectively have already long been disposed of, and distributed by me, through my
brother, Miguel, to all my said six children in the first marriage."37 (emphasis supplied)
Indeed, as early as 1947, long before Mariano made his will in 1963, Lot 903-A -- situated along
Juana Osmea Extension, Kamputhaw, Cebu City,38 near the Cebu Provincial Capitol -- had been
subdivided and distributed to his six children in his first marriage. Having induced him and his heirs
to believe that Lot 903-A-6 had already been distributed to Concepcion as her own, petitioner is
estopped from asserting the contrary and claiming ownership thereof.
The principle of estoppel in pais applies when -- by ones acts, representations, admissions, or
silence when there is a need to speak out -- one, intentionally or through culpable negligence,
induces another to believe certain facts to exist; and the latter rightfully relies and acts on such
belief, so as to be prejudiced if the former is permitted to deny the existence of those facts. 39
Third Issue:
Laches
Petitioner claims that respondents action is already barred by laches.
We are not persuaded. Laches is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to it has either abandoned or declined to assert
it.40 In the present case, respondent has persistently asserted her right to Lot 903-A-6 against
petitioner.

Concepcion was in possession as owner of the property from 1949 to 1969. 41 When Miguel took
steps to have it separately titled in his name, despite the fact that she had the owners duplicate
copy of TCT No. RT-6999 -- the title covering the entire Lot 903-A -- she had her adverse claim
annotated on the title in 1967. When petitioner ousted her from her possession of the lot by tearing
down her wire fence in 1969,42 she commenced the present action on September 19, 1970,43 to
protect and assert her rights to the property. We find that she cannot be held guilty of laches, as she
did not sleep on her rights.
Fourth Issue:
Expunging of Testimony
Petitioner Cuyegkeng questions the expunging of the direct testimony of Miguel Cuenco.
Respondent points out that this issue was not raised before the CA. Neither had petitioner asked the
trial court to reconsider its Order expunging the testimony. Hence, this issue cannot for the first time
be raised at this point of the appeal. Issues, arguments and errors not adequately and seriously
brought below cannot be raised for the first time on appeal. 44"Basic considerations of due process
impel this rule."45
WHEREFORE, the Petition is DENIED, and the assailed Decision AFFIRMED. Costs against
petitioner.
SO ORDERED.
G.R. No. L-55397 February 29, 1988
TAI TONG CHUACHE & CO., petitioner,
vs.
THE INSURANCE COMMISSION and TRAVELLERS MULTI-INDEMNITY
CORPORATION, respondents.

GANCAYCO, J.:
This petition for review on certiorari seeks the reversal of the decision of the Insurance Commission
in IC Case #367 1dismissing the complaint 2 for recovery of the alleged unpaid balance of the proceeds of
the Fire Insurance Policies issued by herein respondent insurance company in favor of petitionerintervenor.
The facts of the case as found by respondent Insurance Commission are as follows:
Complainants acquired from a certain Rolando Gonzales a parcel of land and a
building located at San Rafael Village, Davao City. Complainants assumed the
mortgage of the building in favor of S.S.S., which building was insured with
respondent S.S.S. Accredited Group of Insurers for P25,000.00.
On April 19, 1975, Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in
the amount of P100,000.00. To secure the payment of the loan, a mortgage was
executed over the land and the building in favor of Tai Tong Chuache & Co. (Exhibit
"1" and "1-A"). On April 25, 1975, Arsenio Chua, representative of Thai Tong

Chuache & Co. insured the latter's interest with Travellers Multi-Indemnity
Corporation for P100,000.00 (P70,000.00 for the building and P30,000.00 for the
contents thereof) (Exhibit "A-a," contents thereof) (Exhibit "A-a").
On June 11, 1975, Pedro Palomo secured a Fire Insurance Policy No. F- 02500
(Exhibit "A"), covering the building for P50,000.00 with respondent Zenith Insurance
Corporation. On July 16, 1975, another Fire Insurance Policy No. 8459 (Exhibit "B")
was procured from respondent Philippine British Assurance Company, covering the
same building for P50,000.00 and the contents thereof for P70,000.00.
On July 31, 1975, the building and the contents were totally razed by fire.
Adjustment Standard Corporation submitted a report as follow
xxx xxx xxx
... Thus the apportioned share of each company is as follows:

Poli
cy
No..

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We are showing hereunder another apportionment of the loss which includes the
Travellers Multi-Indemnity policy for reference purposes.

Poli
cy
No.

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8
1

Based on the computation of the loss, including the Travellers Multi- Indemnity,
respondents, Zenith Insurance, Phil. British Assurance and S.S.S. Accredited Group
of Insurers, paid their corresponding shares of the loss. Complainants were paid the
following: P41,546.79 by Philippine British Assurance Co., P11,877.14 by Zenith
Insurance Corporation, and P5,936.57 by S.S.S. Group of Accredited Insurers (Par.
6. Amended Complaint). Demand was made from respondent Travellers MultiIndemnity for its share in the loss but the same was refused. Hence, complainants

demanded from the other three (3) respondents the balance of each share in the loss
based on the computation of the Adjustment Standards Report excluding Travellers
Multi-Indemnity in the amount of P30,894.31 (P5,732.79-Zenith Insurance:
P22,294.62, Phil. British: and P2,866.90, SSS Accredited) but the same was refused,
hence, this action.
In their answers, Philippine British Assurance and Zenith Insurance Corporation
admitted the material allegations in the complaint, but denied liability on the ground
that the claim of the complainants had already been waived, extinguished or paid.
Both companies set up counterclaim in the total amount of P 91,546.79.
Instead of filing an answer, SSS Accredited Group of Insurers informed the
Commission in its letter of July 22, 1977 that the herein claim of complainants for the
balance had been paid in the amount of P 5,938.57 in full, based on the Adjustment
Standards Corporation Report of September 22, 1975.
Travellers Insurance, on its part, admitted the issuance of the Policy No. 599 DV and
alleged as its special and affirmative defenses the following, to wit: that Fire
Policy No. 599 DV, covering the furniture and building of complainants was secured
by a certain Arsenio Chua, mortgage creditor, for the purpose of protecting his
mortgage credit against the complainants; that the said policy was issued in the
name of Azucena Palomo, only to indicate that she owns the insured premises; that
the policy contains an endorsement in favor of Arsenio Chua as his mortgage interest
may appear to indicate that insured was Arsenio Chua and the complainants; that the
premium due on said fire policy was paid by Arsenio Chua; that respondent
Travellers is not liable to pay complainants.
On May 31, 1977, Tai Tong Chuache & Co. filed a complaint in intervention claiming
the proceeds of the fire Insurance Policy No. F-559 DV, issued by respondent
Travellers Multi-Indemnity.
Travellers Insurance, in answer to the complaint in intervention, alleged that the
Intervenor is not entitled to indemnity under its Fire Insurance Policy for lack of
insurable interest before the loss of the insured premises and that the complainants,
spouses Pedro and Azucena Palomo, had already paid in full their mortgage
indebtedness to the intervenor. 3
As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint on
the ground that the insurance policy subject of the complaint was taken out by Tai Tong Chuache &
Company, petitioner herein, for its own interest only as mortgagee of the insured property and thus
complainant as mortgagors of the insured property have no right of action against herein
respondent. It likewise dismissed petitioner's complaint in intervention in the following words:
We move on the issue of liability of respondent Travellers Multi-Indemnity to the
Intervenor-mortgagee. The complainant testified that she was still indebted to
Intervenor in the amount of P100,000.00. Such allegation has not however, been
sufficiently proven by documentary evidence. The certification (Exhibit 'E-e') issued
by the Court of First Instance of Davao, Branch 11, indicate that the complainant was
Antonio Lopez Chua and not Tai Tong Chuache & Company. 4
From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but it
was likewise denied hence, the present petition.

It is the contention of the petitioner that respondent Insurance Commission decided an issue not
raised in the pleadings of the parties in that it ruled that a certain Arsenio Lopez Chua is the one
entitled to the insurance proceeds and not Tai Tong Chuache & Company.
This Court cannot fault petitioner for the above erroneous interpretation of the decision appealed
from considering the manner it was written. 5 As correctly pointed out by respondent insurance
commission in their comment, the decision did not pronounce that it was Arsenio Lopez Chua who has
insurable interest over the insured property. Perusal of the decision reveals however that it readily
absolved respondent insurance company from liability on the basis of the commissioner's conclusion that
at the time of the occurrence of the peril insured against petitioner as mortgagee had no more insurable
interest over the insured property. It was based on the inference that the credit secured by the mortgaged
property was already paid by the Palomos before the said property was gutted down by fire. The
foregoing conclusion was arrived at on the basis of the certification issued by the then Court of First
Instance of Davao, Branch II that in a certain civil action against the Palomos, Antonio Lopez Chua stands
as the complainant and not petitioner Tai Tong Chuache & Company.
We find the petition to be impressed with merit. It is a well known postulate that the case of a party is
constituted by his own affirmative allegations. Under Section 1, Rule 131 6 each party must prove his
own affirmative allegations by the amount of evidence required by law which in civil cases as in the
present case is preponderance of evidence. The party, whether plaintiff or defendant, who asserts the
affirmative of the issue has the burden of presenting at the trial such amount of evidence as required by
law to obtain favorable judgment. 7 Thus, petitioner who is claiming a right over the insurance must prove
its case. Likewise, respondent insurance company to avoid liability under the policy by setting up an
affirmative defense of lack of insurable interest on the part of the petitioner must prove its own affirmative
allegations.
It will be recalled that respondent insurance company did not assail the validity of the insurance
policy taken out by petitioner over the mortgaged property. Neither did it deny that the said property
was totally razed by fire within the period covered by the insurance. Respondent, as mentioned
earlier advanced an affirmative defense of lack of insurable interest on the part of the petitioner that
before the occurrence of the peril insured against the Palomos had already paid their credit due the
petitioner. Respondent having admitted the material allegations in the complaint, has the burden of
proof to show that petitioner has no insurable interest over the insured property at the time the
contingency took place. Upon that point, there is a failure of proof. Respondent, it will be noted,
exerted no effort to present any evidence to substantiate its claim, while petitioner did. For said
respondent's failure, the decision must be adverse to it.
However, as adverted to earlier, respondent Insurance Commission absolved respondent insurance
company from liability on the basis of the certification issued by the then Court of First Instance of
Davao, Branch II, that in a certain civil action against the Palomos, Arsenio Lopez Chua stands as
the complainant and not Tai Tong Chuache. From said evidence respondent commission inferred
that the credit extended by herein petitioner to the Palomos secured by the insured property must
have been paid. Such is a glaring error which this Court cannot sanction. Respondent Commission's
findings are based upon a mere inference.
The record of the case shows that the petitioner to support its claim for the insurance proceeds
offered as evidence the contract of mortgage (Exh. 1) which has not been cancelled nor released. It
has been held in a long line of cases that when the creditor is in possession of the document of
credit, he need not prove non-payment for it is presumed. 8 The validity of the insurance policy taken b
petitioner was not assailed by private respondent. Moreover, petitioner's claim that the loan extended to
the Palomos has not yet been paid was corroborated by Azucena Palomo who testified that they are still
indebted to herein petitioner.9

Public respondent argues however, that if the civil case really stemmed from the loan granted to
Azucena Palomo by petitioner the same should have been brought by Tai Tong Chuache or by its
representative in its own behalf. From the above premise respondent concluded that the obligation
secured by the insured property must have been paid.
The premise is correct but the conclusion is wrong. Citing Rule 3, Sec. 2 10 respondent pointed out
that the action must be brought in the name of the real party in interest. We agree. However, it should be
borne in mind that petitioner being a partnership may sue and be sued in its name or by its duly
authorized representative. The fact that Arsenio Lopez Chua is the representative of petitioner is not
questioned. Petitioner's declaration that Arsenio Lopez Chua acts as the managing partner of the
partnership was corroborated by respondent insurance company. 11 Thus Chua as the managing partner
of the partnership may execute all acts of administration 12 including the right to sue debtors of the
partnership in case of their failure to pay their obligations when it became due and demandable. Or at the
very least, Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the
partnership. Being an agent, it is understood that he acted for and in behalf of the firm. 13 Public
respondent's allegation that the civil case flied by Arsenio Chua was in his capacity as personal creditor of
spouses Palomo has no basis.
The respondent insurance company having issued a policy in favor of herein petitioner which policy
was of legal force and effect at the time of the fire, it is bound by its terms and conditions. Upon its
failure to prove the allegation of lack of insurable interest on the part of the petitioner, respondent
insurance company is and must be held liable.
IN VIEW OF THE FOREGOING, the decision appealed from is hereby SET ASIDE and ANOTHER
judgment is rendered order private respondent Travellers Multi-Indemnity Corporation to pay
petitioner the face value of Insurance Policy No. 599-DV in the amount of P100,000.00. Costs
against said private respondent.
SO ORDERED.
G.R. No. L-45624

April 25, 1939

GEORGE LITTON, petitioner-appellant,

vs.
HILL & CERON, ET AL., respondents-appellees.
George E. Reich for appellant.
Roy and De Guzman for appellees.
Espeleta, Quijano and Liwag for appellee Hill.
CONCEPCION, J.:
This is a petition to review on certiorari the decision of the Court of Appeals in a case originating
from the Court of First Instance of Manila wherein the herein petitioner George Litton was the plaintiff
and the respondents Hill & Ceron, Robert Hill, Carlos Ceron and Visayan Surety & Insurance
Corporation were defendants.
The facts are as follows: On February 14, 1934, the plaintiff sold and delivered to Carlos Ceron, who
is one of the managing partners of Hill & Ceron, a certain number of mining claims, and by virtue of
said transaction, the defendant Carlos Ceron delivered to the plaintiff a document reading as follows:
Feb. 14, 1934

Received from Mr. George Litton share certificates Nos. 4428, 4429 and 6699 for 5,000,
5,000 and 7,000 shares respectively total 17,000 shares of Big Wedge Mining Company,
which we have sold at P0.11 (eleven centavos) per share or P1,870.00 less 1/2 per cent
brokerage.
HILL & CERON
By: (Sgd.) CARLOS CERON
Ceron paid to the plaintiff the sum or P1,150 leaving an unpaid balance of P720, and unable to
collect this sum either from Hill & Ceron or from its surety Visayan Surety & Insurance Corporation,
Litton filed a complaint in the Court of First Instance of Manila against the said defendants for the
recovery of the said balance. The court, after trial, ordered Carlos Ceron personally to pay the
amount claimed and absolved the partnership Hill & Ceron, Robert Hill and the Visayan Surety &
Insurance Corporation. On appeal to the Court of Appeals, the latter affirmed the decision of the
court on May 29, 1937, having reached the conclusion that Ceron did not intend to represent and did
not act for the firm Hill & Ceron in the transaction involved in this litigation.
Accepting, as we cannot but accept, the conclusion arrived at by the Court of Appeals as to the
question of fact just mentioned, namely, that Ceron individually entered into the transaction with the
plaintiff, but in view, however, of certain undisputed facts and of certain regulations and provisions of
the Code of Commerce, we reach the conclusion that the transaction made by Ceron with the
plaintiff should be understood in law as effected by Hill & Ceron and binding upon it.
In the first place, it is an admitted fact by Robert Hill when he testified at the trial that he and Ceron,
during the partnership, had the same power to buy and sell; that in said partnership Hill as well as
Ceron made the transaction as partners in equal parts; that on the date of the transaction, February
14, 1934, the partnership between Hill and Ceron was in existence. After this date, or on February
19th, Hill & Ceron sold shares of the Big Wedge; and when the transaction was entered into with
Litton, it was neither published in the newspapers nor stated in the commercial registry that the
partnership Hill & Ceron had been dissolved.
Hill testified that a few days before February 14th he had a conversation with the plaintiff in the
course of which he advised the latter not to deliver shares for sale or on commission to Ceron
because the partnership was about to be dissolved; but what importance can be attached to said
advice if the partnership was not in fact dissolved on February 14th, the date when the transaction
with Ceron took place?
Under article 226 of the Code of Commerce, the dissolution of a commercial association shall not
cause any prejudice to third parties until it has been recorded in the commercial registry. (See also
Cardell vs. Maeru, 14 Phil., 368.) The Supreme Court of Spain held that the dissolution of a
partnership by the will of the partners which is not registered in the commercial registry, does not
prejudice third persons. (Opinion of March 23, 1885.)
Aside from the aforecited legal provisions, the order of the Bureau of Commerce of December 7,
1933, prohibits brokers from buying and selling shares on their own account. Said order reads:
The stock and/or bond broker is, therefore, merely an agent or an intermediary, and as such,
shall not be allowed. . . .

(c) To buy or to sell shares of stock or bonds on his own account for purposes of speculation
and/or for manipulating the market, irrespective of whether the purchase or sale is made
from or to a private individual, broker or brokerage firm.
In its decision the Court of Appeals states:
But there is a stronger objection to the plaintiff's attempt to make the firm responsible to him.
According to the articles of copartnership of 'Hill & Ceron,' filed in the Bureau of Commerce.
Sixth. That the management of the business affairs of the copartnership shall be entrusted to
both copartners who shall jointly administer the business affairs, transactions and activities of
the copartnership, shall jointly open a current account or any other kind of account in any
bank or banks, shall jointly sign all checks for the withdrawal of funds and shall jointly or
singly sign, in the latter case, with the consent of the other partner. . . .
Under this stipulation, a written contract of the firm can only be signed by one of the partners
if the other partner consented. Without the consent of one partner, the other cannot bind the
firm by a written contract. Now, assuming for the moment that Ceron attempted to represent
the firm in this contract with the plaintiff (the plaintiff conceded that the firm name was not
mentioned at that time), the latter has failed to prove that Hill had consented to such
contract.
It follows from the sixth paragraph of the articles of partnership of Hill &n Ceron above quoted that
the management of the business of the partnership has been entrusted to both partners thereof, but
we dissent from the view of the Court of Appeals that for one of the partners to bind the partnership
the consent of the other is necessary. Third persons, like the plaintiff, are not bound in entering into a
contract with any of the two partners, to ascertain whether or not this partner with whom the
transaction is made has the consent of the other partner. The public need not make inquires as to
the agreements had between the partners. Its knowledge, is enough that it is contracting with the
partnership which is represented by one of the managing partners.
There is a general presumption that each individual partner is an authorized agent for the
firm and that he has authority to bind the firm in carrying on the partnership transactions.
(Mills vs. Riggle, 112 Pac., 617.)
The presumption is sufficient to permit third persons to hold the firm liable on transactions
entered into by one of members of the firm acting apparently in its behalf and within the
scope of his authority. (Le Roy vs.Johnson, 7 U. S. [Law. ed.], 391.)
The second paragraph of the articles of partnership of Hill & Ceron reads in part:
Second: That the purpose or object for which this copartnership is organized is to engage in
the business of brokerage in general, such as stock and bond brokers, real brokers,
investment security brokers, shipping brokers, and other activities pertaining to the business
of brokers in general.
The kind of business in which the partnership Hill & Ceron is to engage being thus determined, none
of the two partners, under article 130 of the Code of Commerce, may legally engage in the business
of brokerage in general as stock brokers, security brokers and other activities pertaining to the
business of the partnership. Ceron, therefore, could not have entered into the contract of sale of
shares with Litton as a private individual, but as a managing partner of Hill & Ceron.

The respondent argues in its brief that even admitting that one of the partners could not, in his
individual capacity, engage in a transaction similar to that in which the partnership is engaged
without binding the latter, nevertheless there is no law which prohibits a partner in the stock
brokerage business for engaging in other transactions different from those of the partnership, as it
happens in the present case, because the transaction made by Ceron is a mere personal loan, and
this argument, so it is said, is corroborated by the Court of Appeals. We do not find this alleged
corroboration because the only finding of fact made by the Court of Appeals is to the effect that the
transaction made by Ceron with the plaintiff was in his individual capacity.
The appealed decision is reversed and the defendants are ordered to pay to the plaintiff, jointly and
severally, the sum of P720, with legal interest, from the date of the filing of the complaint, minus the
commission of one-half per cent (%) from the original price of P1,870, with the costs to the
respondents. So ordered.
Avancea, C. J., Villa-Real, Imperial, Diaz, Laurel, and Moran, JJ., concur.
RESOLUTION
July 13, 1939
CONCEPCION, J.:
A motion has been presented in this case by Robert Hill, one of the defendants sentenced in our
decision to pay to the plaintiff the amount claimed in his complaint. It is asked that we reconsider our
decision, the said defendant insisting that the appellant had not established that Carlos Ceron,
another of the defendants, had the consent of his copartner, the movant, to enter with the appellant
into the contract whose breach gave rise to the complaint. It is argued that, it being stipulated in the
articles of partnership that Hill and Ceron, only partners of the firm Hill & Ceron, would, as
managers, have the management of the business of the partnership, and that either may contract
and sign for the partnership with the consent of the other; the parties of partnership having been, so
it is said, recorded in the commercial registry, the appellant could not ignore the fact that the consent
of the movant was necessary for the validity of the contract which he had with the other partner and
defendant, Ceron, and there being no evidence that said consent had been obtained, the complaint
to compel compliance with the said contract had to be, as it must be in fact, a procedural failure.
Although this question has already been considered and settled in our decision, we nevertheless
take cognizance of the motion in order to enlarge upon our views on the matter.
The stipulation in the articles of partnership that any of the two managing partners may contract and
sign in the name of the partnership with the consent of the other, undoubtedly creates an obligation
between the two partners, which consists in asking the other's consent before contracting for the
partnership. This obligation of course is not imposed upon a third person who contracts with the
partnership. Neither is it necessary for the third person to ascertain if the managing partner with
whom he contracts has previously obtained the consent of the other. A third person may and has a
right to presume that the partner with whom he contracts has, in the ordinary and natural course of
business, the consent of his copartner; for otherwise he would not enter into the contract. The third
person would naturally not presume that the partner with whom he enters into the transaction is
violating the articles of partnership but, on the contrary, is acting in accordance therewith. And this
finds support in the legal presumption that the ordinary course of business has been followed (No.
18, section 334, Code of Civil Procedure), and that the law has been obeyed (No. 31, section 334).
This last presumption is equally applicable to contracts which have the force of law between the
parties.

Wherefore, unless the contrary is shown, namely, that one of the partners did not consent to his
copartner entering into a contract with a third person, and that the latter with knowledge thereof
entered into said contract, the aforesaid presumption with all its force and legal effects should be
taken into account.
There is nothing in the case at bar which destroys this presumption; the only thing appearing in he
findings of fact of the Court of Appeals is that the plaintiff "has failed to prove that Hill had consented
to such contract". According to this, it seems that the Court of Appeals is of the opinion that the two
partners should give their consent to the contract and that the plaintiff should prove it. The clause of
the articles of partnership should not be thus understood, for it means that one of the two partners
should have the consent of the other to contract for the partnership, which is different; because it is
possible that one of the partners may not see any prospect in a transaction, but he may nevertheless
consent to the realization thereof by his copartner in reliance upon his skill and ability or otherwise.
And here we have to hold once again that it is not the plaintiff who, under the articles of partnership,
should obtain and prove the consent of Hill, but the latter's partner, Ceron, should he file a complaint
against the partnership for compliance with the contract; but in the present case, it is a third person,
the plaintiff, who asks for it. While the said presumption stands, the plaintiff has nothing to prove.
Passing now to another aspect of the case, had Ceron in any way stated to the appellant at the time
of the execution of the contract, or if it could be inferred by his conduct, that he had the consent of
Hill, and should it turn out later that he did not have such consent, this alone would not annul the
contract judging from the provisions of article 130 of the Code of Commerce reading as follows:
No new obligation shall be contracted against the will of one of the managing partners,
should he have expressly stated it; but if, however, it should be contracted it shall not be
annulled for this reason, and shall have its effects without prejudice to the liability of the
partner or partners who contracted it to reimburse the firm for any loss occasioned by reason
thereof. (Emphasis supplied.)
Under the aforequoted provisions, when, not only without the consent but against the will of any of
the managing partners, a contract is entered into with a third person who acts in good faith, and the
transaction is of the kind of business in which the partnership is engaged, as in the present case,
said contract shall not be annulled, without prejudice to the liability of the guilty partner.
The reason or purpose behind these legal provisions is no other than to protect a third person who
contracts with one of the managing partners of the partnership, thus avoiding fraud and deceit to
which he may easily fall a victim without this protection which the Code of Commerce wisely
provides.
If we are to interpret the articles of partnership in question by holding that it is the obligation of the
third person to inquire whether the managing copartner of the one with whom he contracts has given
his consent to said contract, which is practically casting upon him the obligation to get such consent,
this interpretation would, in similar cases, operate to hinder effectively the transactions, a thing not
desirable and contrary to the nature of business which requires promptness and dispatch one the
basis of good faith and honesty which are always presumed.
In view of the foregoing, and sustaining the other views expressed in the decision, the motion is
denied. So ordered.
Avancea, C. J., Villa-Real, Imperial, Diaz, Laurel, and Moran, JJ., concur.
G.R. No. L-11624

January 21, 1918

E. M. BACHRACH, plaintiff-appellee,
vs.
"LA PROTECTORA", ET AL., defendants-appellants.
Vicente Foz for appellants.
A. J. Burke for appellee.
STREET, J.:
In the year 1913, the individuals named as defendants in this action formed a civil partnership, called
"La Protectora," for the purpose of engaging in the business of transporting passengers and freight
at Laoag, Ilocos Norte. In order to provide the enterprise with means of transportation, Marcelo
Barba, acting as manager, came to Manila and upon June 23, 1913, negotiated the purchase of two
automobile trucks from the plaintiff, E. M. Bachrach, for the agree price of P16,500. He paid the sum
of 3,000 in cash, and for the balance executed promissory notes representing the deferred
payments. These notes provided for the payment of interest from June 23, 1913, the date of the
notes, at the rate of 10 per cent per annum. Provision was also made in the notes for the payment of
25 per cent of the amount due if it should be necessary to place the notes in the hands of an
attorney for collection. Three of these notes, for the sum of P3,375 each, have been made the
subject of the present action, and there are exhibited with the complaint in the cause. One was
signed by Marcelo Barba in the following manner:
P. P. La Protectora
By Marcelo Barba
Marcelo Barba.
The other two notes are signed in the same way with the word "By" omitted before the name of
Marcelo Barba in the second line of the signature. It is obvious that in thus signing the notes Marcelo
Barba intended to bind both the partnership and himself. In the body of the note the word "I" (yo)
instead of "we" (nosotros) is used before the words "promise to pay" (prometemos) used in the
printed form. It is plain that the singular pronoun here has all the force of the plural.
As preliminary to the purchase of these trucks, the defendants Nicolas Segundo, Antonio Adiarte,
Ignacio Flores, and Modesto Serrano, upon June 12, 1913, executed in due form a document in
which they declared that they were members of the firm "La Protectora" and that they had granted to
its president full authority "in the name and representation of said partnership to contract for the
purchase of two automobiles" (en nombre y representacion de la mencionada sociedad contratante
la compra de dos automoviles). This document was apparently executed in obedience to the
requirements of subsection 2 of article 1697 of the Civil Code, for the purpose of evidencing the
authority of Marcelo Barba to bind the partnership by the purchase. The document in question was
delivered by him to Bachrach at the time the automobiles were purchased.
From time to time after this purchase was made, Marcelo Barba purchased of the plaintiff various
automobile effects and accessories to be used in the business of "La Protectora." Upon May 21,
1914, the indebtedness resulting from these additional purchases amounted to the sum of P2,916.57
In May, 1914, the plaintiff foreclosed a chattel mortgage which he had retained on the trucks in order
to secure the purchase price. The amount realized from this sale was P1,000. This was credited
unpaid. To recover this balance, together with the sum due for additional purchases, the present
action was instituted in the Court of First Instance of the city of Manila, upon May 29, 1914, against
"La Protectora" and the five individuals Marcelo Barba, Nicolas Segundo, Antonio Adiarte, Ignacio
Flores, and Modesto Serrano. No question has been made as to the propriety of impleading "La

Protectora" as if it were a legal entity. At the hearing, judgment was rendered against all of the
defendants. From this judgment no appeal was taken in behalf either of "La Protectora" or Marcelo
Barba; and their liability is not here under consideration. The four individuals who signed the
document to which reference has been made, authorizing Barba to purchase the two trucks have,
however, appealed and assigned errors. The question here to be determined is whether or not these
individuals are liable for the firm debts and if so to what extent.
The amount of indebtedness owing to the plaintiff is not in dispute, as the principal of the debt is
agreed to be P7,037. Of this amount it must now be assumed, in view of the finding of the trial court,
from which no appeal has been taken by the plaintiff, that the unpaid balance of the notes amounts
to P4,121, while the remainder (P2,916) represents the amount due for automobile supplies and
accessories.
The business conducted under the name of "La Protectora" was evidently that of a civil partnership;
and the liability of the partners to this association must be determined under the provisions of the
Civil Code. The authority of Marcelo Barba to bind the partnership, in the purchase of the trucks, is
fully established by the document executed by the four appellants upon June 12, 1913. The
transaction by which Barba secured these trucks was in conformity with the tenor of this document.
The promissory notes constitute the obligation exclusively of "La Protectora" and of Marcelo Barba;
and they do not in any sense constitute an obligation directly binding on the four appellants. Their
liability is based on the fact that they are members of the civil partnership and as such are liable for
its debts. It is true that article 1698 of the Civil Code declares that a member of a civil partnership is
not liable in solidum (solidariamente) with his fellows for its entire indebtedness; but it results from
this article, in connection with article 1137 of the Civil Code, that each is liable with the others
(mancomunadamente) for his aliquot part of such indebtedness. And so it has been held by this
court. (Co-Pitco vs. Yulo, 8 Phil. Rep., 544.)
The Court of First Instance seems to have founded its judgment against the appellants in part upon
the idea that the document executed by them constituted an authority for Marcelo Barba to bind
them personally, as contemplated in the second clause of article 1698 of the Civil Code. That cause
says that no member of the partnership can bind the others by a personal act if they have not given
him authority to do so. We think that the document referred to was intended merely as an authority
to enable Barba to bind the partnership and that the parties to that instrument did not intend thereby
to confer upon Barba an authority to bind them personally. It is obvious that the contract which Barba
in fact executed in pursuance of that authority did not by its terms profess to bind the appellants
personally at all, but only the partnership and himself. It follows that the four appellants cannot be
held to have been personally obligated by that instrument; but, as we have already seen, their
liability rests upon the general principles underlying partnership liability.
As to so much of the indebtedness as is based upon the claim for automobile supplies and
accessories, it is obvious that the document of June 12, 1913, affords no authority for holding the
appellants liable. Their liability upon this account is, however, no less obvious than upon the debt
incurred by the purchase of the trucks; and such liability is derived from the fact that the debt was
lawfully incurred in the prosecution of the partnership enterprise.
There is no proof in the record showing what the agreement, if any, was made with regard to the
form of management. Under these circumstances it is declared in article 1695 of the Civil Code that
all the partners are considered agents of the partnership. Barba therefore must be held to have had
authority to incur these expenses. But in addition to this he is shown to have been in fact the
president or manager, and there can be no doubt that he had actual authority to incur this obligation.

From what has been said it results that the appellants are severally liable for their respective shares
of the entire indebtedness found to be due; and the Court of First Instance committed no error in
giving judgment against them. The amount for which judgment should be entered is P7,037, to which
shall be added (1) interest at 10 per cent per annum from June 23, 1913, to be calculated upon the
sum of P4.121; (2) interest at 6 per cent per annum from July 21, 1915, to be calculated upon the
sum of P2,961; (3) the further sum of P1,030.25, this being the amount stipulated to be paid by way
of attorney's fees. However, it should be noted that any property pertaining to "La Protectora" should
first be applied to this indebtedness pursuant to the judgment already entered in this case in the
court below; and each of the four appellants shall be liable only for the one-fifth part of the remainder
unpaid.
Let judgment be entered accordingly, without any express finding of costs of this instance. So
ordered.
Arellano, C.J., Torres, Araullo, Malcolm, and Avancea, JJ., concur.
G.R. No. L-5236

January 10, 1910

PEDRO MARTINEZ, plaintiff-appellee,

vs.
ONG PONG CO and ONG LAY, defendants.
ONG PONG CO., appellant.
Fernando de la Cantera for appellant.
O'Brien and DeWitt for appellee.
ARELLANO, C.J.:
On the 12th of December, 1900, the plaintiff herein delivered P1,500 to the defendants who, in a
private document, acknowledged that they had received the same with the agreement, as stated by
them, "that we are to invest the amount in a store, the profits or losses of which we are to divide with
the former, in equal shares."
The plaintiff filed a complaint on April 25, 1907, in order to compel the defendants to render him an
accounting of the partnership as agreed to, or else to refund him the P1,500 that he had given them
for the said purpose. Ong Pong Co alone appeared to answer the complaint; he admitted the fact of
the agreement and the delivery to him and to Ong Lay of the P1,500 for the purpose aforesaid, but
he alleged that Ong Lay, who was then deceased, was the one who had managed the business, and
that nothing had resulted therefrom save the loss of the capital of P1,500, to which loss the plaintiff
agreed.
The judge of the Court of First Instance of the city of Manila who tried the case ordered Ong Pong
Co to return to the plaintiff one-half of the said capital of P1,500 which, together with Ong Lay, he
had received from the plaintiff, to wit, P750, plus P90 as one-half of the profits, calculated at the rate
of 12 per cent per annum for the six months that the store was supposed to have been open, both
sums in Philippine currency, making a total of P840, with legal interest thereon at the rate of 6 per
cent per annum, from the 12th of June, 1901, when the business terminated and on which date he
ought to have returned the said amount to the plaintiff, until the full payment thereof with costs.
From this judgment Ong Pong Co appealed to this court, and assigned the following errors:

1. For not having taken into consideration the fact that the reason for the closing of the store
was the ejectment from the premises occupied by it.
2. For not having considered the fact that there were losses.
3. For holding that there should have been profits.
4. For having applied article 1138 of the Civil Code.
5. and 6. For holding that the capital ought to have yielded profits, and that the latter should
be calculated 12 per cent per annum; and
7. The findings of the ejectment.
As to the first assignment of error, the fact that the store was closed by virtue of ejectment
proceedings is of no importance for the effects of the suit. The whole action is based upon the fact
that the defendants received certain capital from the plaintiff for the purpose of organizing a
company; they, according to the agreement, were to handle the said money and invest it in a store
which was the object of the association; they, in the absence of a special agreement vesting in one
sole person the management of the business, were the actual administrators thereof; as such
administrators they were the agent of the company and incurred the liabilities peculiar to every
agent, among which is that of rendering account to the principal of their transactions, and paying him
everything they may have received by virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.)
Neither of them has rendered such account nor proven the losses referred to by Ong Pong Co; they
are therefore obliged to refund the money that they received for the purpose of establishing the said
store the object of the association. This was the principal pronouncement of the judgment.
With regard to the second and third assignments of error, this court, like the court below, finds no
evidence that the entire capital or any part thereof was lost. It is no evidence of such loss to aver,
without proof, that the effects of the store were ejected. Even though this were proven, it could not
be inferred therefrom that the ejectment was due to the fact that no rents were paid, and that the rent
was not paid on account of the loss of the capital belonging to the enterprise.
With regard to the possible profits, the finding of the court below are based on the statements of the
defendant Ong Pong Co, to the effect that "there were some profits, but not large ones." This court,
however, does not find that the amount thereof has been proven, nor deem it possible to estimate
them to be a certain sum, and for a given period of time; hence, it can not admit the estimate, made
in the judgment, of 12 per cent per annum for the period of six months.
Inasmuch as in this case nothing appears other than the failure to fulfill an obligation on the part of a
partner who acted as agent in receiving money for a given purpose, for which he has rendered no
accounting, such agent is responsible only for the losses which, by a violation of the provisions of
the law, he incurred. This being an obligation to pay in cash, there are no other losses than the legal
interest, which interest is not due except from the time of the judicial demand, or, in the present
case, from the filing of the complaint. (Arts. 1108 and 1100, Civil Code.) We do not consider that
article 1688 is applicable in this case, in so far as it provides "that the partnership is liable to every
partner for the amounts he may have disbursed on account of the same and for the proper interest,"
for the reason that no other money than that contributed as is involved.
As in the partnership there were two administrators or agents liable for the above-named amount,
article 1138 of the Civil Code has been invoked; this latter deals with debts of a partnership where

the obligation is not a joint one, as is likewise provided by article 1723 of said code with respect to
the liability of two or more agents with respect to the return of the money that they received from
their principal. Therefore, the other errors assigned have not been committed.
In view of the foregoing judgment appealed from is hereby affirmed, provided, however, that the
defendant Ong Pong Co shall only pay the plaintiff the sum of P750 with the legal interest thereon at
the rate of 6 per cent per annum from the time of the filing of the complaint, and the costs, without
special ruling as to the costs of this instance. So ordered.
Torres, Johnson, Carson, and Moreland, JJ., concur.
G.R. No. L-4597

November 23, 1908

JOSE GARCIA RON, plaintiff-appellee,

vs.
LA COMPAIA DE MINAS DE BATAN, defendant-appellant.
Ortigas and Fisher, for appellant.
C.W. O'Brien, for appellee.

CARSON, J.:
This was an action brought by the plaintiff to recover from the defendant the sum of 9,558 1/3
Spanish pesetas for services rendered. The trial judge found, and the evidence of record fully
sustains his finding, that the plaintiff was employed as foreman or capataz by one Genaro
Ansuategui, the local manager of certain mines of the defendant company, situated on the Islands of
Bataan; and that this employment continued from November 1, 1903; until August 4, 1904. The trial
judge found further that, while the plaintiff failed to establish satisfactorily his claim that the salary
promised him by the company's manager was 1,000 pesestas per month, nevertheless he is entitled
to reasonable compensation for the services rendered which were fixed at P5 per day, or P150 per
month, the record disclosing that the plaintiff had worked for the defendant company as foreman
or capataz and received compensation that the rate a short time prior to his employment under his
contract with Ansuategui.
The defendant comply alleged that it had never received such services of the plaintiff and denied the
fact of the employment, but us we have said, the evidence of record affirmatively establishes the
finding of the trial judge that the services were rendered, and that they were rendered under contract
of employment between the plaintiff and one Ansuategui, the local manager of the defendant
company; the only evidence introduced by the defendant in this connection being the testimony of
the general manager of the company, who lived in Manila, to the effect that it does not appear from
the books of the company that the plaintiff was employed by the defendants, or that any record of
the employment was forwarded to the central office in Manila.
Counsel for the defendant company insists, however, that, granting that the plaintiff did in fact work
in the mines of the defendant company and was employed by its local manager, nevertheless,
defendant is not indebted to the plaintiff for these service, because the local manager at the mines
was not authorized to enter into the alleged contract of employment, such authority not having been
granted to him under his letter of instructions, a copy of which appears in the record.

It is not necessary for us to discuss the question of the liability of the defendant company to the
plaintiff for the value of the services rendered, if it in fact appeared that the manager at the mines
was not expressly authorized to employ the plaintiff and to contract for his services, because we are
of opinion that the authority to contract for the employment of the plaintiff was clearly conferred upon
Ansuategui by the terms of this letter of instructions.
These transactions, which were introduced into the record, were dated in Manila, May 23, 1903, and
among other provisions contain the following:
Es tambien derroche los sueldos que dicen pagan a los faginantes y el exceso de gente
para poco trabajo; debe tenerse la gente necesaria y pagar lo razonable, y al que no le
convenga que se marche. Deben hacer por contrata el corte de trozos y maderas de todas
clases, y a sueldo le gente que se emplea para hacer los barracones y otros trabajos que su
criterio le dicte, pero no permitiendo por ningun concepto que abusen.
(The salaries which it is said are paid to the faginantes and the excess of employees for little
work is also a waste. The necessary employees should be kept and paid reasonably, and he
who is not needed [satisfied], let him go. The cutting of logs and wood of all kinds ought to be
done by contract, and the persons employed in digging the barracones and other work at
wages which your good judgment may dictate, but on account permitting abuses.)
And at the conclusion of the letter of instructions, we find the following:
Lo que aqui no va anotado, esperamos lo subsane Vd. con su buen criterio, y le
recomendamos por ultimo nos tenga al corriente de todo.
(We trust you to correct and supply (subsanar) anything which is not noted herein, in
accordance with your good judgment, and finally we urgently request that you keep us
informed of everything.)
Other provisions of the letter of instructions expressly authorized Ansuategui, as the local manager
of the defendant company at the mines, to discharge employees who did not prove satisfactory, and
leave no room for doubt that he was duly authorized to represent the company at the mines so far as
this was necessary for their proper local management.
lawphil.net

Taking into consideration the fact that the mines of the defendant company are located upon an
island some two days' distance by steamer from the office of the company at Manila, that the only
communication therewith was by mail a few times per month, and that in the very nature of the
enterprise, it was necessary, in order that the local manager might successfully perform his duties, to
confer upon him wide scope in the employment and discharge of labor, we think that there can be no
doubt that Genaro Ansuategui was fully and expressly authorized by the terms of this letter of
instructions to enter into the alleged contract of employment with the plaintiff on behalf of the
defendant company; and the evidence of record establishing the fact that he did so, and that the
plaintiff worked for the company for the period set out in the findings of the trial court, we are of
opinion that the trial court properly rendered judgment in favor of the plaintiff and against the
defendant for the value of the services rendered.
The plaintiff not having appealed from the judgment of the trial court denying him the alleged
contract value of the services rendered, and the evidence of record fully sustaining the findings as to
the reasonable value of these services, the judgment of the trial court should be and is hereby
affirmed, with the costs of this instance against the defendant. So ordered.

Arellano, C.J., Torres, Mapa, Willard, and Tracey, JJ., concur.

G.R. No. L-3025

November 23, 1906

SI-BOCO, plaintiff-appellee,
vs.
YAP TENG, defendant-appellant.
Marcelo Caringal for appellant.
Thos. L. McGirr for appellee.

MAPA, J.:
This is an action by the plaintiff to recover from the defendant the sum of P1,442.95, alleged to be
due him from the latter. The court below rendered judgment in favor of the plaintiff for the aforesaid
sum and legal interest thereon at the rate of 6 per cent per annum from the 25th of March, 1905,
with costs against the defendant, who excepted to the said judgment, made a motion for a new trial
on the ground that the findings of fact contained in the said judgment were plainly and manifestly
against the weight of the evidence, and has brought the case to this court by a bill of exceptions.
The evidence shows that for a period of three years, more or less, the plaintiff had been furnishing to
the defendant native cloth for the latter's store in the city of Manila. The goods were at first furnished
on credit, but the business relations of the parties caused entirely in 1904. The defendant had a
partner by the name of Yapsuan, who was the manager of the business. The defendant introduced
him to the plaintiff as such manager, and told him that Yapsuan had authority from him to receive the
cloth, and that the value thereof should be charged to his, the defendant's account, and in fact the
cloth was, as a rule, received by Yapsuan from the plaintiff. It became necessary for Yapsuan to
return to China in 1902 on account of ill health and a liquidation of the accounts between the plaintiff
and the defendant was made in December of the said year, showing a balance of P1,444.95 in favor
of the plaintiff, which the defendant expressly undertook to pay. This was proved not only by the
testimony of the plaintiff himself, but by that of two witnesses who were present. After the liquidation
was made the defendant continued to buy the goods from the plaintiff for cash until the year 1904,
when, as already stated, the business relations between the parties ceased.
The defendant has failed to show that he had paid the aforesaid balance of P1,444.95 or an part
thereof. Consequently the judgment of the court below is just and legal and should be affirmed.
There is a difference of P2 between the said balance and the amount of the judgment but, as the
court properly said, the plaintiff is not entitled to receive more than he prays for in his complaint, and
the amount stated in the judgment is all that is sought to be recovered.
It is contented by the appellant that the court below erred in not finding that, the only indebtedness of
the defendant being P1,442.95 according to the liquidation made in December, 1902, he having
thereafter paid the sum of P1,810.87 as alleged in the complaint, and in default of proof as to the
value of the goods furnished to the defendant, after that date, the plaintiff could not maintain an
action to recover the said sum. There is, in fact, no evidence in the record upon this last point. It was
not necessary, however, to offer such evidence. The action wasnot for the recovery of the value of
the goods furnished to the defendant after the liquidation of 1902. The plaintiff himself testified that
the defendant had paid cash for such goods, but alleged that the latter had paid nothing on account
of the balance due after the said liquidation. His testimony upon this point has not been contradicted
in any way and it is apparent from such testimony that the P1,810.87 represented the value of the

goods for which the defendant paid cash. If this amount was mentioned at all in the complaint, it was
for the purpose of comparing the same with the total value of the goods furnished the defendant up
to the year 1904, which, according to the complaint, amounted to P3,235.75. It should be borne in
mind that the plaintiff continued to furnish goods to the defendant after the liquidation until the year
1904. There is no evidence that the aforesaid amount was paid on account of the balance due
because of the liquidation and not on account of the value of the said goods. The plaintiff testified
without contradiction, that absolutely nothing had been paid on the balance due from the said
liquidation.
It is further alleged by the appellant that there is nothing to show that after the year 1902 he
continued to purchase goods from the plaintiff, paying cash therefor, as was erroneously found by
the court below. The positive and uncontradicted statement of the plaintiff to the contrary is sufficient,
however, to justify the finding of the court below upon that point. That court, therefore, committed no
error in this respect.
1wphil.net

The appellant finally contends that the goods having been furnished to and received by the
partnership between himself and Yapsuan, and the accounts of the same not having been liquidated,
this action should have been brought against the partnership itself, or against the partners jointly,
and not against the defendant only. However that may be, the fact remains that the defendant in this
case was the only one who contradicted with the plaintiff in his own name, as appears from the
latter's testimony. When the defendant told the plaintiff that he had authorized Yapsuan to receive
the goods, he instructed the plaintiff to charge them to him (the defendant) personally. The
defendant, moreover, undertook personally to pay the balance due the plaintiff, after the liquidation
made in December, 1902, such as being the sum sought to be recovered in this case, as appears
from the testimony of the plaintiff and that of the two witnesses who took part in the said liquidation.
Consequently the court below properly allowed the plaintiff to maintain this action against the
defendant. The judgment appealed from is accordingly affirmed with the costs of this instance
against the appellant. After expiration of twenty days let judgment be entered in accordance herewith
and in due time let the record be remanded to the court below for execution. So ordered.
Arellano, C.J., Torres, Johnson, Carson, Willard and Tracey, JJ., concur.
G.R. No. 3186

March 7, 1907

THE GREAT COUNCIL OF THE UNITED STATES OF THE IMPROVED ORDER OF RED
MEN, plaintiff-appellee,
vs.
THE VETERAN ARMY OF THE PHILIPPINES, defendant-appellant.
Hartigan, Rohde, & Gutierrez for appellant.
W. A. Kincaid for appellee.
WILLAR, J.:
Article 3 of the Constitution of the Veteran Army of the Philippines provides as follows:
The object of this association shall be to perpetuate the spirit of patriotism and fraternity
those men who upheld the Stars and Stripes in the Philippine Islands during the Spanish war
and the Philippine insurrection, and to promote the welfare of its members in every just and
honorable way; to assist the sick and afflicted and to bury the dead, to maintain among its
members in time of peace the same union and harmony with which they served their country
in times of war and insurrection.

Article 5 provides that:

This association shall be composed of
(a) A department.
(b) Two or more posts.
It is provided in article 6 that the department shall be composed of a department commander,
fourteen officers, and the commander of each post, or some member of the post appointed by him.
Six members of the department constitute a quorum for the transaction of business.
The Constitution also provides for the organization of posts. Among the posts thus organized is the
General Henry W. Lawton Post, No. 1. On the 1st day of March, 1903, a contract of lease of parts of
a certain buildings in the city of Manila was signed by W.W. Lewis, E.C. Stovall, and V.O., Hayes, as
trustees of the Apache Tribe, No. 1, Improved Order of Red Men, as lessors, and Albert E. McCabe,
citing for and on behalf of Lawton Post, Veteran Army of the Philippines as lessee. The lease was for
the term of two years commencing February 1, 903, and ending February 28, 1905. The Lawton
Post occupied the premises in controversy for thirteen months, and paid the rent for that time. It
them abandoned them and this action was commenced to recover the rent for the unexpired term.
Judgment was rendered in the court below on favor of the defendant McCabe, acquitting him of the
complaint. Judgment was rendered also against the Veteran Army of the Philippines for P1,738.50,
and the costs. From this judgment, the last named defendant has appealed. The plaintiff did not
appeal from the judgment acquitting defendant McCabe of the complaint.
It is claimed by the appellant that the action can not be maintained by the plaintiff, The Great Council
of the United States of the Improved Order of Red Men, as this organization did not make the
contract of lease.
It is also claimed that the action can not be maintained against the Veteran Army of the Philippines
because it never contradicted, either with the plaintiff or with Apach Tribe, No. 1, and never
authorized anyone to so contract in its name.
We do not find it necessary to consider the first point because we think the contention of the
appellant on the second point must be sustained.
It is difficult to determine the exact nature of the defendant organization. It is of course not a
mercantile partnership. There is some doubt as to whether it is a civil partnership, in view of the
definition of the term in article 1665 of the Civil Code. That article is as follows:
Partnership is a contract by which two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among
themselves.
It seems to be the opinion of the commentators that where the society is not constituted for the
purpose of gain. it does not fall within this article of the Civil Code. Such an organization is fully
covered by the Law of Associations of 1887, but that law was never extended to the Philippine
Islands. According to some commentators it would be governed by the provisions relating to the
community of property. However, the questions thus presented we do not find necessary to , and to
not resolve. The view most favorable to the appellee is the one that makes the appellant a civil
partnership. Assuming that is such, and is covered by the provisions of title 8, book 4 of the Civil

Code, it is necessary for the appellee to prove that the contract in question was executed by some
authorized to so by the Veteran Army of the Philippines.
Article 1695 of the Civil Code provides as follows:
Should no agreement have been made with regard to the form of management, the following
rules shall be observed:
1 All the partners shall be considered as agents, and whatever any one of them may do by
himself shall bind the partnership; but each one may oppose the act of the others before they
may have produced any legal effect.
One partner, therefore, is empowered to contract in the name of the partnership only when the
articles of partnership make no provision for the management of the partnership business. In the
case at bar we think that the articles of the Veteran Army of the Philippines do so provide. It is true
that an express disposition to that effect is not found therein, but we think one may be fairly deduced
from the contents of those articles. They declare what the duties of the several officers are. In these
various provisions there is nothing said about the power of making contracts, and that faculty is not
expressly given to any officer. We think that it was, therefore, reserved to the department as a whole;
that is, that in any case not covered expressly by the rules prescribing the duties of the officers, the
department were present. It is hardly conceivable that the members who formed this organization
should have had the intention of giving to any one of the sixteen or more persons who composed the
department the power to make any contract relating to the society which that particular officer saw fit
to make, or that a contract when so made without consultation with, or knowledge of the other
members of the department should bind it. We therefore, hold, that no contract, such as the one in
question, is binding on the Veteran Army of the Philippines unless it was authorized at a meeting of
the department. No evidence was offered to show that the department had never taken any such
action. In fact, the proof shows that the transaction in question was entirely between Apache Tribe,
No. 1, and the Lawton Post, and there is nothing to show that any member of the department ever
knew anything about it, or had anything to do with it. The liability of the Lawton Post is not presented
in this appeal.
Judgment against the appellant is reversed, and the Veteran Army of the Philippines is acquitted of
the complaint. No costs will be allowed to either party in this court. After the expiration of twenty days
let judgment be rendered in accordance to the lower court for proper action. So ordered.
Arellano, C.J., Torres, Mapa, Johnson and Tracey, JJ., concur.
Carson, J., did not sit in this case.
G.R. No. L-11840

December 10, 1963

ANTONIO C. GOQUIOLAY, ET AL., plaintiffs-appellants,

vs.
WASHINGTON Z. SYCIP, ET AL., defendants-appellees.
Norberto J. Quisumbing and Sycip, Salazar and Associates for defendants-appellees.
Jose C. Calayco for plaintiffs-appellants..
RESOLUTION
REYES, J.B.L., J.:

The matter now pending is the appellant's motion for reconsideration of our main decision, wherein
we have upheld the validity of the sale of the lands owned by the partnership Goquiolay & Tan Sin
An, made in 1949 by the widow of the managing partner, Tan Sin An (Executed in her dual capacity
as Administratrix of the husband's estate and as partner in lieu of the husband), in favor of the
buyers Washington Sycip and Betty Lee for the following consideration:
Cash paid

P37,000.00

Debts assumed by purchaser:

To Yutivo

62,415.91

To Sing Yee Cuan & Co.,

54,310.13

T O TAL

P153,726.04

Appellant Goquiolay, in his motion for reconsideration, insist that, contrary to our holding, Kong Chai
Pin, widow of the deceased partner Tan Sin An, never became more than a limited partner,
incapacitated by law to manage the affairs of partnership; that the testimony of her witness Young
and Lim belies that she took over the administration of the partnership property; and that, in any
event, the sale should be set aside because it was executed with the intent to defraud appellant of
his share in the properties sold.
Three things must be always held in mind in the discussion of this motion to reconsider, being basic
and beyond controversy:
(a) That we are dealing here with the transfer of partnership property by one partner, acting in behalf
of the firm, to a stranger. There is no question between partners inter se, and this aspect to the case
was expressly reserved in the main decision of 26 July 1960;
(b) That partnership was expressly organized: "to engage in real estate business, either by buying
and selling real estate". The Articles of co-partnership, in fact, expressly provided that:
IV. The object and purpose of the copartnership are as follows:
1. To engage in real estate business, either by buying and selling real estates; to subdivide
real estates into lots for the purpose of leasing and selling them.;
(c) That the properties sold were not part of the contributed capital (which was in cash) but land
precisely acquired to be sold, although subject to a mortgage in favor of the original owners, from
whom the partnership had acquired them.
With these points firmly in mind, let us turn to the points insisted upon by appellant.
It is first averred that there is "not one iota of evidence" that Kong Chai Pin managed and retained
possession of the partnership properties. Suffice it to point out that appellant Goquiolay himself
admitted that
... Mr. Yu Eng Lai asked me if I can just let Mrs. Kong Chai Pin continue to manage the
properties (as) she had no other means of income. Then I said, because I wanted to help
Mrs. Kong Chai Pin, she could just do it and besides I am not interested in agricultural

lands. I allowed her to take care of the properties in order to help her and because I believe
in God and wanted to help her.
Q So the answer to my question is you did not take any steps?
A I did not.
Q And this conversation which you had with Mrs. Yu Eng Lai was few months after
1945?
A In the year 1945. (Emphasis supplied).
The appellant subsequently ratified this testimony in his deposition of 30 June 1956, pages 8-9,
wherein he stated:
that plantation was being occupied at that time by the widow, Mrs. Tan Sin An, and of course
they are receiving quiet a lot benefit from the plantation.
Discarding the self-serving expressions, these admissions of Goquiolay are certainly entitled to
greater weight than those of Hernando Young and Rufino Lim, having been made against the party's
own interest.
Moreover, the appellant's reference to the testimony of Hernando Young, that the witness found the
properties "abandoned and undeveloped", omits to mention that said part of the testimony started
with the question:
Now, you said that about 1942 or 1943 you returned to Davao. Did you meet Mrs. Kong Chai
Pin there in Davao at that time?
Similarly, the testimony of Rufino Lim, to the effect that the properties of the partnership were
undeveloped, and the family of the widow (Kong Chai Pin) did not receive any income from the
partnership properties, was given in answer to the question:
According to Mr. Goquiolay, during the Japanese occupation Tan Sin an and his family lived
on the plantation of the partnership and derived their subsistence from that plantation. What
can you say to that? (Dep. 19 July 1956, p. 8).
And also
What can you say as to the development of these other properties of the partnership which
you saw during the occupation? (Dep. p. 13, Emphasis supplied).
to which witness gave the following answer:
I saw the properties in Mamay still undeveloped. The third property which is in Tigato is
about eleven (11) hectares and planted with abaca seedlings planted by Mr. Sin An. When I
went there with Hernando Youngwe saw all the abaca destroyed. The place was occupied
by the Japanese Army. They planted camotes and vegetables to feed the Japanese Army. Of
course they never paid any money to Tan Sin An or his family. (Dep., Lim, pp. 13-14.
Emphasis supplied).

Plainly, both Young and Lim's testimonies do not belie, or contradict, Goquiolay's admission that he
told Mr. Yu Eng Lai that the widow "could just do it" (i.e., continue to manage the properties).
Witnesses Lim and Young referred to the period of Japanese occupation; but Goquiolay's authority
was, in fact, given to the widow in 1945,after the occupation.
Again, the disputed sale by the widow took place in 1949. That Kong Chai Pin carried out no acts of
management during the Japanese occupation (1942-1944) does not mean that she did not do so
from 1945 to 1949.
We thus find that Goquiolay did not merely rely on reports from Lim and Young; he actually
manifested his willingness that the widow should manage the partnership properties. Whether or not
she complied with this authority is a question between her and the appellant, and is not here
involved. But the authority was given, and she did have it when she made the questioned sale,
because it was never revoked.
It is argued that the authority given by Goquiolay to the widow Kong Chai Pin was only
to manage the property, and that it did not include the power to alienate, citing Article 1713 of the
Civil Code of 1889. What this argument overlooks is that the widow was not a mere agent, because
she had become a partner upon her husband's death, as expressly provided by the articles of
copartnership. Even more, granting that by succession to her husband, Tan Sin An, the widow only
became a limited partner, Goquiolay's authorization to manage the partnership property was proof
that he considered and recognized her as general partner, at least since 1945. The reason is plain:
Under the law (Article 148, last paragraph, Code of Commerce), appellant could not empower the
widow, if she were only a limited partner, to administer the properties of the firm, even as a mere
agent:
Limited partners may not perform any act of administration with respect to the interests of the
copartnership, not even in the capacity of agents of the managing partners. (Emphasis
supplied).
By seeking authority to manage partnership property, Tan Sin An's widow showed that she desired to
be considered a general partner. By authorizing the widow to manage partnership property (which a
limited partner could not be authorized to do), Goquiolay recognized her as such partner, and is now
in estoppel to deny her position as a general partner, with authority to administer and alienate
partnership property.
Besides, as we pointed out in our main decision, the heir ordinarily (and we did not say
"necessarily") becomes a limited partner for his own protection, because he would normally prefer to
avoid any liability in excess of the value of the estate inherited so as not to jeopardize his personal
assets. But this statutory limitation of responsibility being designed to protect the heir, the latter may
disregard it and instead elect to become a collective or general partner, with all the rights and
privileges of one, and answering for the debts of the firm not only with the inheritance but also with
the heir's personal fortune. This choice pertains exclusively to the heir, and does not require the
assent of the surviving partner.
It must be remember that the articles of co-partnership here involved expressly stipulated that:
In the event of the death of any of the partners at any time before the expiration of said term,
the co-partnership shall not be dissolved but will have to be continued and the deceased
partner shall be represented by his heirs or assigns in said co-partnership (Art. XII, Articles of
Co-Partnership).

The Articles did not provide that the heirs of the deceased would be merely limited partners; on the
contrary, they expressly stipulated that in case of death of either partner "the co-partnership ... will
have to be continued" with the heirs or assigns. It certainly could not be continued if it were to be
converted from a general partnership into a limited partnership, since the difference between the two
kinds of associations is fundamental; and specially because the conversion into a limited association
would have the heirs of the deceased partner without a share in the management. Hence, the
contractual stipulation does actually contemplate that the heirs would becomegeneral partners rather
than limited ones.
Of course, the stipulation would not bind the heirs of the deceased partner should they refuse to
assume personal and unlimited responsibility for the obligations of the firm. The heirs, in other
words, can not be compelled to become general partners against their wishes. But because they are
not so compellable, it does not legitimately follow that they may not voluntarily choose to become
general partners, waiving the protective mantle of the general laws of succession. And in the latter
event, it is pointless to discuss the legality of any conversion of a limited partner into a general one.
The heir never was a limited partner, but chose to be, and became, a general partner right at the
start.
It is immaterial that the heir's name was not included in the firm name, since no conversion of status
is involved, and the articles of co-partnership expressly contemplated the admission of the partner's
heirs into the partnership.
It must never be overlooked that this case involved the rights acquired by strangers, and does not
deal with the rights existing between partners Goquiolay and the widow of Tan Sin An. The issues
between the partners inter sewere expressly reserved in our main decision. Now, in determining
what kind of partner the widow of partner Tan Sin an Had elected to become, strangers had to be
guided by her conduct and actuations and those of appellant Goquiolay. Knowing that by law a
limited partner is barred from managing the partnership business or property, third parties (like the
purchasers) who found the widow possessing and managing the firm property with the acquiescence
(or at least without apparent opposition) of the surviving partners were perfectly justified in assuming
that she had become a general partner, and, therefore, in negotiating with her as such a partner,
having authority to act for, and in behalf of the firm. This belief, be it noted, was shared even by the
probate court that approved the sale by the widow of the real property standing in the partnership
name. That belief was fostered by the very inaction of appellant Goquiolay. Note that for seven long
years, from partner Tan Sin An's death in 1942 to the sale in 1949, there was more than ample time
for Goquiolay to take up the management of these properties, or at least ascertain how its affairs
stood. For seven years Goquiolay could have asserted his alleged rights, and by suitable notice in
the commercial registry could have warned strangers that they must deal with him alone, as sole
general partner. But he did nothing of the sort, because he was not interested (supra), and he did not
even take steps to pay, or settle the firm debts that were overdue since before the outbreak of the
last war. He did not even take steps, after Tan Sin An died, to cancel, or modify, the provisions of the
partnership articles that he (Goquiolay) would have no intervention in the management of the
partnership. This laches certainly contributed to confirm the view that the widow of Tan Sin An had,
or was given, authority to manage and deal with the firm's properties apart from the presumption that
a general partner dealing with partnership property has to requisite authority from his co-partners
(Litton vs. Hill and Ceron, et al., 67 Phil. 513; quoted in our main decision, p. 11).
The stipulation in the articles of partnership that any of the two managing partners may
contract and sign in the name of the partnership with the consent of the other, undoubtedly
creates on obligation between the two partners, which consists in asking the other's consent
before contracting for the partnership. This obligation of course is not imposed upon a third
person who contracts with the partnership. Neither it is necessary for the third person to

ascertain if the managing partner with whom he contracts has previously obtained the
consent of the other. A third person may and has a right to presume that the partner with
whom he contracts has, in the ordinary and natural course of business, the consent of his
copartner; for otherwise he would not enter into the contract. The third person would
naturally not presume that the partner with whom he enters into the transaction is violating
the articles of partnership, but on the contrary is acting in accordance therewith. And this
finds support in the legal presumption that the ordinary course of business has been followed
(No. 18, section 334, Code of Civil Procedure), and that the law has been obeyed (No. 31,
section 334). This last presumption is equally applicable to contracts which have the force of
law between the parties. (Litton vs. Hill & Ceron, et al., 67 Phil. 409, 516). (Emphasis
supplied.)
It is next urged that the widow, even as a partner, had no authority to sell the real estate of the firm.
This argument is lamentably superficial because it fails to differentiate between real estate acquired
and held as stock-in-tradeand real estate held merely as business site (Vivante's "taller o banco
social") for the partnership. Where the partnership business is to deal in merchandise and goods,
i.e., movable property, the sale of its real property (immovables) is not within the ordinary powers of
a partner, because it is not in line with the normal business of the firm. But where the express and
avowed purpose of the partnership is to buy and sell real estate (as in the present case), the
immovables thus acquired by the firm from part of its stock-in-trade, and the sale thereof is in
pursuance of partnership purposes, hence within the ordinary powers of the partner. This distinction
is supported by the opinion of Gay de Montella1 , in the very passage quoted in the appellant's
motion for reconsideration:
La enajenacion puede entrar en las facultades del gerante, cuando es conforme a los fines
sociales. Pero esta facultad de enajenar limitada a las ventas conforme a los fines sociales,
viene limitada a los objetos de comercio o a los productos de la fabrica para explotacion de
los cuales se ha constituido la Sociedad.Ocurrira una cosa parecida cuando el objeto de la
Sociedad fuese la compra y venta de inmuebles, en cuyo caso el gerente estaria facultado
para otorgar las ventas que fuere necesario. (Montella) (Emphasis supplied).
The same rule obtains in American law.
In Rosen vs. Rosen, 212 N.Y. Supp. 405, 406, it was held:
a partnership to deal in real estate may be created and either partner has the legal right to
sell the firm real estate.
In Chester vs. Dickerson, 54 N. Y. 1, 13 Am. Rep. 550:
And hence, when the partnership business is to deal in real estate, one partner has ample power, as
a general agent of the firm, to enter into an executory contract for the sale of real estate.
And in Revelsky vs. Brown, 92 Ala. 522, 9 South 182, 25 Am. St. Rep. 83:
If the several partners engaged in the business of buying and selling real estate can not bind
the firm by purchases or sales of such property made in the regular course of business, then
they are incapable of exercising the essential rights and powers of general partners and their
association is not really a partnership at all, but a several agency.

Since the sale by the widow was in conformity with the express objective of the partnership, "to
engage ... in buying and selling real estate" (Art. IV, No. 1 Articles of Copartnership), it can not be
maintained that the sale was made in excess of her power as general partner.
Considerable stress is laid by appellant in the ruling of the Supreme Court of Ohio in McGrath, et al.,
vs. Cowen, et al., 49 N.E., 338. But the facts of that case are vastly different from the one before us.
In the McGrath case, the Court expressly found that:
The firm was then, and for some time had been, insolvent, in the sense that its property was
insufficient to pay its debts, though it still had good credit, and was actively engaged in the
prosecution of its business. On that day, which was Saturday, the plaintiff caused to be
prepared, ready for execution, the four chattel mortgages in question, which cover all the
tangible property then belonging to the firm, including the counters, shelving, and other
furnishings and fixtures necessary for, and used in carrying on, its business, and signed the
same in this form: "In witness whereof, the said Cowen & McGrath, a firm, and Owen
McGrath, surviving partner, of said firm, and Owen McCrath, individually, have hereunto set
their hands, this 20th day of May, A.D. 1893. Cowen & Mcgrath, by Owen McGrath. Owen
McGrath, Surviving partner of Cowen & McGrath. Owen McGrath." At the same time,
the plaintiff had prepared, ready for filing, the petitionfor the dissolution of the partnership
and appointment of a receiver which he subsequently filed, as hereinafter stated. On the day
the mortgages were signed, they were placed in the hands of the mortgagees, which was the
first intimation to them that there was any intention to make them. At the timenone of the
claims secured by the mortgages were due, except, it may be, a small part of one of them,
andnone of the creditors to whom the mortgages were made had requested security, or were
pressing for the payment of their debts. ... The mortgages appear to be without a sufficient
condition of defiance, and contain a stipulation authorizing the mortgagees to take immediate
possession of the property, which they did as soon as the mortgages were filed through the
attorney who then represented them, as well as the plaintiff; and the stores were at once
closed, and possession delivered by them to the receiver appointed upon the filing of the
petition. The avowed purposes of the plaintiff, in the course pursued by him, was to
terminate the partnership, place its properly beyond the control of the firm, and insure the
preference of the mortgagees, all of which was known to them at the time; .... (Cas cit., p.
343, Emphasis supplied).
It is natural that form these facts the Supreme Court of Ohio should draw the conclusion that the
conveyances were made with intent to terminate the partnership, and that they were not within the
powers of McGrath as a partner. But there is no similarity between those acts and the sale by the
widow of Tan Sin An. In the McGrath case, the sale included even the fixtures used in the business;
in our case, the lands sold were those acquired to be sold. In the McGrath case, none of the
creditors were pressing for payment; in our case, the creditors had been unpaid for more than seven
years, and their claims had been approved by the probate court for payment. In the McGrath case,
the partnership received nothing beyond the discharge of its debts; in the present case, not only
were its debts assumed by the buyers, but the latter paid, in addition, P37,000.00 in cash to the
widow, to the profit of the partnership. Clearly, the McGrath ruling is not applicable.
We will now turn to the question of fraud. No direct evidence of it exists; but appellant point out, as
indicia thereof, the allegedly low price paid for the property, and the relationship between the buyers,
the creditors of the partnership, and the widow of Tan Sin An.
First, as to the price: As already noted, this property was actually sold for a total of P153,726.04, of
which P37,000.00 was in cash, and the rest in partnership debts assumed by the purchaser. These
debts (62,415.91 to Yutivo, and P54,310.13 to Sing Ye Cuan & Co.) are not questioned; they were

approved by the court, and its approval is now final. The claims were, in fact, for the balance on the
original purchase price of the land sold (sue first to La Urbana, later to the Banco Hipotecario) plus
accrued interests and taxes, redeemed by the two creditors-claimants. To show that the price was
inadquate, appellant relies on the testimony of the realtor Mata, who is 1955, six years after the sale
in question, asserted that the land was worth P312,000.00. Taking into account the continued rise of
real estate values since liberation, and the fact that the sale in question was practically a forced sale
because the partnership had no other means to pay its legitimate debts, this evidence certainly does
not show such "gross inadequacy" as to justify recission of the sale. If at the time of the sale (1949)
the price of P153,726.04 was really low, how is it that appellant was not able to raise the amount,
even if the creditor's representative, Yu Khe Thai, had already warned him four years before (1945)
that the creditors wanted their money back, as they were justly entitled to?
It is argued that the land could have been mortgaged to raise the sum needed to discharge the
debts. But the lands were already mortgaged, and had been mortgaged since 1940, first to La
Urbana, and then to the Banco Hipotecario. Was it reasonable to expect that other persons would
loan money to the partnership when it was unable even to pay the taxes on the property, and the
interest on the principal since 1940? If it had been possible to find lenders willing to take a chance
on such a bad financial record, would not Goquiolay have taken advantage of it? But the fact is clear
on the record that since liberation until 1949 Goquiolay never lifted a finger to discharge the debts of
the partnership. Is he entitled now to cry fraud after the debts were discharged with no help from
him.
With regard to the relationship between the parties, suffice it to say that the Supreme Court has ruled
that relationship alone is not a badge of fraud (Oria Hnos. vs. McMicking, 21 Phil. 243; also
Hermandad del Smo. Nombre de Jesus vs. Sanchez, 40 Off. Gaz., 1685). There is no evidence that
the original buyers, Washington Sycip and Betty Lee, were without independent means to purchase
the property. That the Yutivos should be willing to extend credit to them, and not to appellant, is
neither illegal nor immoral; at the very least, these buyers did not have a record of inveterate
defaults like the partnership "Tan Sin An & Goquiolay".
Appellant seeks to create the impression that he was the victim of a conspiracy between the Yutivo
firm and their component members. But no proof is adduced. If he was such a victim, he could have
easily defeated the conspirators by raising money and paying off the firm's debts between 1945 and
1949; but he did not; he did not even care to look for a purchaser of the partnership assets. Were it
true that the conspiracy to defraud him arose (as he claims) because of his refusal to sell the lands
when in 1945 Yu Khe Thai asked him to do so, it is certainly strange that the conspirators should
wait 4 years, until 1949, to have the sale effected by the widow of Tan Sin An, and that the sale
should have been routed through the probate court taking cognizance of Tan Sin An's estate, all of
which increased the risk that the supposed fraud should be detected.
Neither was there any anomaly in the filing of the claims of Yutivo and Sing Yee Cuan & Co., (as
subrogees of the Banco Hipotecario) in proceedings for the settlement of the estate of Tan Sin An.
This for two reasons: First, Tan Sin An and the partnership "Tan Sin An & Goquiolay"
were solidary (Joint and several)debtors (Exhibits "N", mortgage to the Banco Hipotecario), and Rule
87, section 6 is the effect that:
Where the obligation of the decedent is joint and several with another debtor, the claim shall
be filed against the decedent as if he were the only debtor, without prejudice to the right of
the estate to recover contribution from the other debtor. (Emphasis supplied).
Secondly, the solidary obligation was guaranteed by a mortgage on the properties of the partnership
and those of Tan Sim An personally, and a mortgage is indivisible, in the sense that each and every

parcel under mortgage answers for the totality of the debt (Civ. Code of 1889, Article 1860; New Civil
Code, Art. 2089).
A final and conclusive consideration: The fraud charged not being one used to obtain a party's
consent to a contract (i.e., not being deceit or dolus in contrahendo), if there is fraud at al, it can only
be a fraud of creditorsthat gives rise to a rescission of the offending contract. But by express
provision of law (Article 1294, Civil Code of 1889; Article 1383, New Civil Code) "the action for
rescission is subsidiary; it can not be instituted except when the party suffering damage has no other
legal means to obtain reparation for the same". Since there is no allegation, or evidence, that
Goquiolay can not obtain reparation from the widow and heirs of Tan Sin An, the present suit to
rescind the sale in question is not maintainable, even if the fraud charged actually did exist.
PREMISES CONSIDERED, the motion for reconsideration is denied.
Bengzon, C.J., Padilla, Concepcion, Barrera and Dizon, JJ., concur.
Regala, J., took no part.

Separate Opinions
BAUTISTA ANGELO, J., dissenting:
This is an appeal from a decision of the Court of First Instance of Davao dismissing the complaint
filed by Antonio C. Goquiolay, et al., seeking to annul the sale made Z. Sycip and Betty Y. Lee on the
ground that it was executed without proper authority and under fraudulent circumstances. In a
decision rendered on July 26, 1960 we affirmed this decision although on grounds different from
those on which the latter is predicted. The case is once more before us on a motion for
reconsideration filed by appellants raising both questions of fact and of law.
On May 29, 1940, Tan Sin An and Antonio C. Goquiolay executed in Davao City a commercial
partnership for a period of ten years with a capital of P30,000.00 of which Goquiolay contributed
P18,000.00 representing 60% while Tan Sin An P12,000.00 representing 40%. The business of the
partnership was to engage in buying real estate properties for subdivision, resale and lease. The
partnership was duly registered, and among the conditions agreed upon in the partnership
agreement which are material to this case are: (1) that Tan Sin An would be the exclusive managing
partner, and (2) in the event of the death of any of the partners the partnership would continue, the
deceased to be represented by his heirs. On May 31, 1940, Goquiolay executed a general power of
attorney in favor of Tan Sin An appointing the latter manager of the partnership and conferring upon
him the usual powers of management.
On May 29, 1940, the partnership acquired three parcels of land known as Lots Nos. 526, 441 and
521 of the cadastral survey of Davao, the only assets of the partnership, with the capital orginally
invested, financing the balance of the purchase price with a mortgage in favor of "La Urbana
Sociedad Mutua de Construccion Prestamos" in the amount of P25,000.00, payable in ten years. On
the same date, Tan Sin An, in his individual capacity, acquired 46 parcels of land executing a
mortgage thereon in favor of the same company for the sum of P35,000.00. On September 25,
1940, these two mortgage obligations were consolidated and transferred to the Banco Hipotecario
de Filipinas and as a result Tan Sin An, in his individual capacity, and the partnership bound

themselves to pay jointly and severally the total amount of P52,282.80, with 8% annual interest
thereon within a period of eight years mortgaging in favor of said entity the 3 parcels of land
belonging to the partnership and the 46 parcels of land belonging individually to Tan Sin An.
Tan Sin An died on June 26, 1942 and was survived by his widow, defendant Kong Chai Pin, and
four children, all of whom are minors of tender age. On March 18, 1944, Kong Chai Pin, was
appointed administratrix of the intestate estate of Tan Sin An. And on the same date, Sing, Yee and
Cuan Co., Inc. paid to the Banco Hipotecario the remaining unpaid balance of the mortgage
obligation of the partnership amounting to P46,116.75 in Japanese currency.
Sometimes in 1945, after the liberation of Manila, Yu Khe Thai, president and general manager of
Yutivo Sons Hardware Co. and Sing, Yee and Cuan Co., Inc., called for Goquiolay and the two had a
conference in the office of the former during which he offered to buy the interest of Goquiolay in the
partnership. In 1948, Kong Chai Pin, the widow, sent her counsel, Atty. Dominador Zuo, to ask
Goquiolay to execute in her favor a power of attorney. Goquiolay refused both to sell his interest in
the partnership as well as to execute the power of attorney.
Having failed to get Goquiolay to sell his share in the partnership, Yutivo Sons Hardware Co. and
Sing, Yee and Cuan Co., Inc. filed in November, 1946 a claim each in the intestate proceedings of
Tan Sin An for the sum of P84,705.48 and P66,529.91, respectively, alleging that they represent
obligations of both Tan Sin An and the partnership. After first denying any knowledge of the claims,
Kong Chai Pin, as administratrix, admitted later without qualification the two claims in an amended
answer she filed on February 28, 1947. The admission was predicted on the ground that she and the
creditors were closely related by blood, affinity and business ties. In due course, these two claims
were approved by the court.
On March 29, 1949, more than two years after the approval of the claims, Kong Chai Pin filed a
petition in the probate court to sell all the properties of the partnership as well as some of the
conjugal properties left by Tan Sin An for the purpose of paying the claims. Following approval by the
court of the petition for authority to sell, Kong Chai Pin, in her capacity as administratrix, and
presuming to act as managing partner of the partnership, executed on April 4, 1949 a deed of sale of
the properties owned by Tan Sin An and by the partnership in favor of Betty Y. Lee and Washington
Z. Sycip in consideration of the payment to Kong Chai Pin of the sum of P37,000.00, and the
assumption by the buyers of the claims filed by Yutivo & Sons Hardware Co. and Sing, Yee and
Cuan Co., Inc. in whose favor the buyers executed a mortgage on the properties purchased. Betty Y.
Lee and Washington Z. Zycip subsequently executed a deed of sale of the same properties in favor
of their co-defendant Insular Development Company, Inc. It should be noted that these transactions
took place without the knowledge of Goquiolay and it is admitted that Betty Lee and Washington Z.
Sycip bought the properties on behalf of the ultimate buyer, the Insular Development Company, Inc.,
with money given by the latter.
Upon learning of the sale of the partnership properties, Goquiolay filed on July 25, 1949 in the
intestate proceedings a petition to set aside the order of the court approving the sale. The court
granted the petition. While the order was pending appeal in the Supreme Court, Goquiolay filed the
present case on January 15, 1953 seeking to nullify the sale as stated in the early part of this
decision. In the meantime, the Supreme Court remanded the original case to the probate court for
rehearing due to lack of necessary parties.
The plaintiffs in their complaint challenged the authority of Kong Chai Pin to sell the partnership
properties on the ground that she had no authority to sell because even granting that she became a
partner upon the death of Tan Sin An the power of attorney granted in favor of the latter expired after
his death.

Defendants, on the other hand, defended the validity of the sale on the theory that she succeeded to
all the rights and prerogatives of Tan Sin an as managing partner.
The trial court sustained the validity of the sale on the ground that under the provisions of the articles
of partnership allowing the heirs of the deceased partner to represent him in the partnership after his
death Kong Chai Pin became a managing partner, this being the capacity held by Tan Sin an when
he died.
In the decision rendered by this Court on July 26, 1960, we affirmed this decision but on different
grounds, among which the salient points are: (1) the power of attorney given by Goquiloay to Tan Sin
An as manager of the partnership expired after his death; (2) his widow Kong Chai Pin did not inherit
the management of the partnership, it being a personal right; (3) as a general rule, the heirs of a
deceased general partner come into the partnership in the capacity only of limited partners; (4) Kong
Chai Pin, however, became a general partner because she exercised certain alleged acts of
management; and (5) the sale being necessary to pay the obligations of the partnership properties
without the consent of Goquiolay under the principle of estoppel the buyers having the right to rely
on her acts of management and to believe her to be in fact the managing partner.
Considering that some of the above findings of fact and conclusions of law are without legal or
factual basis, appellants have in due course filed a motion for reconsideration which because of the
importance of the issues therein raised has been the subject of mature deliberation.
In support of said motion, appellants advanced the following arguments:
1. If the conclusion of the Court is that heirs as a general rule enter the partnership as limited
partners only, therefore Kong Chai Pin, who must necessarily have entered the partnership
as a limited partner originally, could have not chosen to be a general partner by exercising
the alleged acts of management, because under Article 148 of the Code of Commerce a
limited partner cannot intervene in the management of the partnership, even if given a power
of attorney by the general partners. An Act prohibited by law cannot given rise to any right
and is void under the express provisions of the Civil Code.
2. The buyers were not strangers to Kong Chai Pin, all of them being members of the Yu
(Yutivo) family, the rest, members of the law firm which handles the Yutivo interests and
handled the papers of sale. They did not rely on the alleged acts of management they
believed (this was the opinion of their lawyers) that Kong Chai Pin succeeded her husband
as a managing partner and it was on this theory alone that they submitted the case in the
lower court.
3. The alleged acts of management were denied and repudiated by the very witnesses
presented by the defendants themselves.
The arguments advanced by appellants are in our opinion well-taken and furnish sufficient to
reconsider our decision if we want to do justice to Antonio C. Goquiolay. And to justify this
conclusion, it is enough that we lay stress on the following points: (1) there is no sufficient factual
basis to conclude that Kong Chai Pin executed acts of management to give her the character of
general manager of the partnership, or to serve as basis for estoppel that may benefit the
purchasers of the partnership properties; (92) the alleged acts of management, even if proven, could
not give Kong Chai Pin the character of general manager for the same contrary to law and wellknown authorities; (3) even if Kong Chai Pin acted as general manager she had no authority to sell
the partnership properties as to make it legal and valid; and (4) Kong Chai Pin had no necessity to

sell the properties to pay the obligation of the partnership and if she did so it was merely to favor the
purchasers who were close relatives to the prejudice of Goquiolay.
1. This point is pivotal for if Kong Chai Pin did not execute the acts of management imputed to her
our ruling cannot be sustained. In making our aforesaid ruling we apparently gave particular
importance to the fact that it was Goquiolay himself who tried to prove the acts of management.
Appellants, however, have emphasized the fact, and with reason, the appellees themselves are the
ones who denied and refuted the so-called acts of management imputed to Kong Chai Pin. To have
a clear view of this factual situation, it becomes necessary that we analyze the evidence of record.
Plaintiff Goquiolay, it is intimated, testified on cross-examination that he had a conversation with one
Hernando Young in Manila in the year 1945 who informed him that Kong Chai Pin "was attending to
the properties and deriving some income therefrom and she had no other means of livelihood except
those properties and some rentals derived from the properties." He went on to say by way of remark
that she could continue doing this because he wanted to help her. One point that he emphasized
was that he was "no interested in agricultural lands."
On the other hand, defendants presented Hernando Young, the same person referred to by
Goquiolay, who was a close friend of the family of Kong Chai Pin, for the purpose of denying the
testimony of Goquiolay. Young testified that in 1945 he was still in Davao, and insisted no less than
six times during his testimony that he was not in Manila in 1945, the year when he allegedly gave the
information to Goquiolay, stating that he arrived in Manila for the first time in 1947. He testified
further that he had visited the partnership properties during the period covered by the alleged
information given by him to Goquiolay and that he found them "abandoned and underdeveloped,"
and that Kong Chai Pin was not deriving any income from them.
The other witness for the defendants, Rufino Lim, also testified that he had seen the partnership
properties and corroborated the testimony of Hernando Young in all respects: "the properties in
Mamay were underdeveloped, the shacks were destroyed in Tigato, and the family of Kong Chai Pin
did not receive my income from the partnership properties." He specifically rebutted the testimony of
Goquiolay, in his deposition given on June 30, 1956 that Kong Chai Pin and her family were living in
the partnership properties, and stated that the "family never actually lived in the properties of the
partnership even before the war or after the war."
It is unquestionable that Goquiolay was merely repeating an information given to him by a third
person, Hernando Young he stressed this point twice. A careful analysis of the substance of
Goquiolay's testimony will show that he merely had no objection to allowing Kong Chai Pin to
continue attending to the properties in order to give her some means of livelihood, because,
according to the information given him by Hernando Young, which he assumed to be true, Kong Chai
Pin had no other means of livelihood. But certainly he made it very clear that he did not allow her
to manage the partnership when he explained his reason for refusing to sign a general power of
attorney for Kong Chai Pin which her counsel, Atty. Zuo, brought with him to his house in 1948. He
said:
... Then Mr. Yu Eng Lai told me that he brought with him Atty. Zuo and he asked me if I
could execute a general power of attorney for Mrs. Kong Chai Pin. Then I told Atty. Zuo
what is the use of executing a general power of attorney for Mrs. Kong Chai Pin when Mrs.
Kong Chai Pin had already got that plantation for agricultural purposes, I said for agricultural
purposes she can use that plantation ... (T.S.N. p. 9, Hearing on May 5, 1955).
It must be noted that in his testimony Goquiolay was categorically stating his opposition to the
management of the partnership by Kong Chai Pin and carefully made the distinction that his

conformity was for her to attend to the partnership properties in order to give her merely a means of
livelihood. It should be stated that the period covered by the testimony refers to the period of
occupation when living condition was difficult and precarious. And Atty. Zuo, it should also be
stated, did not deny the statement of Goquiolay.
It can therefore be seen that the question as to whether Kong Chai Pin exercised certain acts of
management of the partnership properties is highly controverted. The most that we can say is that
the alleged acts are doubtful more so when they are disputed by the defendants themselves who
later became the purchasers of the properties, and yet these alleged acts, if at all, only refer
to management of the properties and not to management of the partnership, which are two different
things.
In resume, we may conclude that the sale of the partnership properties by Kong Chai Pin cannot be
upheld on the ground of estoppel, first, because the alleged acts of management have not been
clearly proven; second, because the record clearly shows that the defendants, or the buyers, were
not misled nor did they rely on the acts of management, but instead they acted solely on the opinion
of their counsel, Atty. Quisumbing, to the effect that she succeeded her husband in the partnership
as managing partner by operation of law; and third, because the defendants are themselves
estopped to invoke a defense which they tried to dispute and repudiate.
2. Assuming arguendo that the acts of management imputed to Kong Chai Pin are true, could such
acts give as we have concluded in our decision?
Our answer is in the negative because it is contrary to law and precedents. Garrigues, a well-known
commentator, is clearly of the opinion that mere acceptance of the inheritance does not maked the
heir of a general partner a general partner himself. He emphasized that heir must declare that he is
entering the partnership as a general partner unless the deceased partner has made it an express
condition in his will that the heir accepts the condition of entering the partnership as a prerequisite of
inheritance, in which case acceptance of the inheritance is enough. 1 But here Tan Sin An died
intestate.
Now, could Kong Chai Pin be deemed to have declared her intention to become a general partner by
exercising acts of management? We believe not, for, in consonance with our ruling that as a general
rule the heirs of a deceased partner succeed as limited partners only by operation of law, it is
obvious that the heirs, upon entering the partnership, must make a declaration of his characters,
otherwise he should be deemed as having succeeded as limited partner by the mere acceptance of
the inheritance. And here Kong Chai Pin did not make such declaration. Being then a limited partner
upon the death of Tan Sin An by operation of law, the peremptory prohibition contained in Article
1482 of the Code of Commerce became binding upon her and as a result she could not change her
status by violating its provisions not only under the general principle that prohibited acts cannot
produce any legal effect, but also because under the provisions of Article 1473 of the same Code she
was precluded from acquiring more rights than those pertaining to her as a limited partner. The
alleged acts of management, therefore, did not give Kong Chai Pin the character of general manager
to authorized her to bind the partnership.
Assuming also arguendo that the alleged acts of management imputed to Kong Chai Pin gave her
the character of a general partner, could she sell the partnership properties without authority from
the other partners?
Our answer is also in the negative in the light of the provisions of the articles of partnership and the
pertinent provisions of the Code of Commerce and the Civil Code. Thus, Article 129 of the Code of
Commerce says:

If the management of the general partnership has not been limited by special agreement to
any of the members, all shall have the power to take part in the direction and management of
the common business, and the members present shall come to an agreement for all
contracts or obligations which may concern the association.
And the pertinent portions of the articles of partnership provides:
VII. The affairs of the co-partnership shall be managed exclusively by the managing partner
or by his authorized agent, and it is expressly stipulated that the managing partner may
delegate the entire management of the affairs of the co-partnership by irrevocable power of
attorney to any person, firm or corporation he may select, upon such terms as regards
compensation as he may deem proper, and vest in such person, firm or corporation full
power and authority, as the agent of the co-partnership and in his name, place and stead to
do anything for it or on his behalf which he as such managing partner might do or cause to
be done. (Page 23, Record on Appeal).
It would thus be seen that the powers of the managing partner are not defined either under the
provisions of the Code of Commerce or in the articles of partnership, a situation which, under Article
2 of the same Code, renders applicable herein the provisions of the Civil Code. And since, according
to well-known authorities, the relationship between a managing partner and the partnership is
substantially the same as that of the agent and his principal,4the extent of the power of Kong Chai
Pin must, therefore, be determined under the general principles governing agency. And, on this
point, the law says that an agency created in general terms includes only acts of administrations, but
with regard to the power to compromise, sell mortgage, and other acts of strict ownership, an
express power of attorney is required.5 Here Kong Chai Pin did not have such power when she sold
the properties of the partnership.
Of course, there is authority to the effect that a managing partner, even without express power of
attorney may perform acts affecting ownership if the same are necessary to promote or accomplish
a declared object of the partnership, but here the transaction is not for this purpose. It was effected
not to promote any avowed object of the partnership. 6 Rather, the sale was affected to pay an
obligation of the partnership by selling its real properties which Kong Chai Pin could not do without
express authority. The authorities supporting this view are overwhelming.
La enajenacion puede entrar en las facultades del gerente, cuando es conforme a los fines
sociales. Pero esta facultad de enajenar limitada a las ventas conforme a los fines sociales,
viene limitada a los objetos de comercio, o a los productos de la fabrica para explotacion de
los cauale se ha constituido la Sociedad. Ocurrira una cosa parecida cuando el objeto de la
Sociedad fuese la compra y venta de inmuebles, en cuyo caso el gerente estaria facultado
para otorgar las ventas que fuere necesario. Por el contrario el generente no tiene
attribuciones para vender las instalaciones del comercio, ni la fabrica, ni las maquinarias,
vehiculos de transporte, etc. que forman parte de la explotacion social. En todos estas
casos, equalmente que sisse tratase de la venta de una marca o procedimiento mecanico o
quimico, etc., siendo actos de disposicion, seria necesario contar con la conformidad
expresa de todos los socios. (R. Gay de Montella, id., pp. 223-224; Emphasis supplied).
Los poderes de los Administradores no tienen ante el silencio del contrato otros limites que
los sealados por el objeto de la Sociedad y, por consiguiente, pueden llevar a cabo todas
las operaciones que sirven para aquel ejercicio, incluso cambiando repetidas veces los
propios acuerdos segun el interest convenido de la Sociedad. Pueden contratar y despedir a
los empleados. tomar en arriendo almacenes y tiendas; expedir cambiales, girarlas,
avalarlas, dar en prenda o en hipoteca los bienes de la sociedad y adquirir inmuebles

destinados a su explotacion o al empleo, estable de sus capitales. Pero no podran ejecutar

los actos que esten en contradiccion con la explotacion que les fue confiada; no podran
cambiar el objeto, el domicilio, la razon social; fundir a la Sociedad en otro; ceder la accion,
y por tanto, el uso de la firma social a otro, renunciar definitivamente el ejercicio de uno de
otro ramo comercio que se les haya confiado yenajenar o pignorar el taller o el banco social,
excepto que la venta o pignoracion tengan por el objeto procurar los medios necesarios
para la continuacion de la empresa social. (Cesar Vivante, Tratado de Derecho Mercantil,
pp. 124-125, Vol. II, 1a. ed.; Emphasis supplied).
The act of one partner, to bind the firm, must be necessary for the carrying one of its
business. If all that can be said of it was that it was convenient, or that it facilitated the
transaction of the business of the firm, that is not sufficient, in the absence of evidence of
sanction by other partners. Nor, it, seems, will necessity itself be sufficient if it be an
extraordinary necessity. What is necessary for carrying on the business of the firm under
ordinary circumstances and in the usual way, is the test. Lindl. Partn. Sec. 126. While, within
this rule, one member of a partnership may, in the usual and ordinary course of its business,
make a valid sale or pledge, by way of mortgage or otherwise, of all or part of its effects
intended for sale, to a bona fidepurchaser of mortgagee, without the consent of the other
members of the firm, it is not within the scope of his implied authority to make a final
disposition of al of its effects, including those employed as the means of carrying on its
business, the object and effect of which is to immediately terminate the partnership, and
place its property beyond its control. Such a disposition, instead of being within the scope of
the partnership business, or in the usual and ordinary way of carrying it on, is necessarily
subversive of the object of the partnership, and contrary to the presumed intention of the
partnership in its formation. (McGrath, et al. vs. Cowen, et al., 49 N.E., 338, 343; Emphasis
supplied).
Since Kong Chai Pin sold the partnership properties not in line with the business of the partnership
but to pay its obligation without first obtaining the consent of the other partners the sale is invalid in
excess of her authority.
4. Finally, the sale under consideration was effected in a suspicious manner as may be gleaned from
the following circumstances:
(a) The properties subject of the instant sale which consist of three parcels of land situated in the
City of Davao have an area of 200 hectares more or less, or 2,000,000 square meters. These
properties were purchased by the partnership for purposes of subdivision. According to realtor Mata,
who testified in court, these properties could command at the time he testified a value of not less
than P312,000.00, and according to Dalton Chen, manager of the firm which took over the
administration, since the date of sale no improvement was ever made thereon precisely because of
this litigation. And yet, for said properties, aside from the sum of P37,000.00 which was paid for the
properties of the deceased and the partnership, only the paltry sum of P66,529.91 was paid as a
consideration therefor, of which the sum of P46,116.75 was even paid in Japanese currency.
(b) Considering the area of the properties Kong Chai Pin had no valid reason to sell them if her
purpose was only to pay the partnership obligation. She could have negotiated a loan if she wanted
to pay it by placing the properties as security, but preferred to sell them even at such low price
because of her close relationship with the purchasers and creditors who conveniently organized a
partnership to exploit them, as may be seen from the following relationship of their pedigree:
KONG CHAI PIN, the administratrix, was a grandaughter of Jose P. Yutivo, founder of the
defendant Yutivo Sons Hardware Co. YUTIVO SONS HARDWARE CO. and SING, YEE &

CUAN CO., INC., alleged creditors, are owned by the heirs of Jose P. Yutivo (Sing, Yee &
Cuan are the three children of Jose). YU KHE THAI is a grandson of the same Jose P.
Yutivo, and president of the two alleged creditors. He is the acknowledged head of the Yu
families. WASHINGTON Z. SYCIP, one of the original buyers, is married to Ana Yu, a
daughter of Yu Khe Thai. BETTY Y. LEE, the other original buyer is also a daughter of Yu
Khe Thai. The INSULAR DEVELOPMENT CO., the ultimate buyer, was organized for the
specific purpose of buying the partnership properties. Its incorporators were: Ana Yu and
Betty Y. Lee, Attys. Quisumbing and Salazar, the lawyers who studied the papers of the sale
and have been counsel for the Yutivo interests; Dalton Chen, a brother-in-law of Yu Khe Thai
and an executive of Sing, Yee & Cuan Co; Lillian Yu, daughter of Yu Eng Poh, an executive
of Yutivo Sons Hardware, and Simeon Daguiwag, a trusted employee of the Yutivos.
(c) Lastly, even since Tan Sin An died in 1942 the creditors, who were close relatives of Kong Chai
Pin, have already conceived the idea of possessing the lands for purposes of subdivision, excluding
Goquilolay from their plan, and this is evident from the following sequence of events;
lawphil.net

Tan Sin An died in 1942 and intestate proceedings were opened in 1944. In 1946, the
creditors of the partnership filed their claim against the partnership in the intestate
proceedings. The creditors studied ways and means of liquidating the obligation of the
partnership, leading to the formation of the defendant Insular Development Co., composed of
members of the Yutivo family and the counsel of record of the defendants, which
subsequently bought the properties of the partnership and assumed the obligation of the
latter in favor of the creditors of the partnership, Yutivo Sons Hardware and Sing, Yee &
Cuan, also of the Yutivo family. The buyers took time to study the commercial potentialities of
the partnership properties and their lawyers carefully studied the document and other papers
involved in the transaction. All these steps led finally to the sale of the three partnership
properties.
UPON THE STRENGTH OF THE FOREGOING CONSIDERATIONS, I vote to grant the motion for
reconsideration.
Labrador, Paredes, and Makalintal, JJ., concur.