MAURO LOZANA, plaintiff-appellee, vs.
SERAFIN DEPAKAKIBO, defendant-
appellant.
This is an appeal from a judgment of the
Court of First Instance of Iloilo, certified to
us by the Court of Appeals, for the reason
that only questions of law are involved in
said appeal.
The record discloses that on November 16,
1954 plaintiff Mauro Lozana entered into a
contract with defendant Serafin Depakakibo
wherein they established a partnership
capitalized at the sum of P30,000, plaintiff
furnishing 60% thereof and the defendant,
40%, for the purpose of maintaining,
operating and distributing electric light and
power in the Municipality of Dumangas,
Province of Iloilo, under a franchise issued
to Mrs. Piadosa Buenaflor. However, the
franchise or certificate of public necessity
and convenience in favor of the said Mrs.
Piadosa Buenaflor was cancelled and
revoked by the Public Service Commission
on May 15, 1955. But the decision of the
Public Service Commission was appealed to
Us on October 21, 1955. A temporary
certificate of public convenience was issued
in the name of Olimpia D. Decolongon on
December 22, 1955 (Exh. "B"). Evidently
because of the cancellation of the franchise
in the name of Mrs. Piadosa Buenaflor,
plaintiff herein Mauro Lozana sold a
generator, Buda (diesel), 75 hp. 30 KVA
capacity, Serial No. 479, to the new grantee
Olimpia D. Decolongon, by a deed dated
October 30, 1955 (Exhibit "C"). Defendant
Serafin Depakakibo, on the other hand, sold
one Crossly Diesel Engine, 25 h. p., Serial No.
141758, to the spouses Felix Jimenea and
Felina Harder, by a deed dated July 10,
1956.
On November 15, 1955, plaintiff Mauro
Lozana brought an action against the
defendant, alleging that he is the owner of
the Generator Buda (Diesel), valued at
P8,000 and 70 wooden posts with the wires
connecting the generator to the different
houses supplied by electric current in the
Municipality of Dumangas, and that he is
entitled to the possession thereof, but that
the defendant has wrongfully detained them
as a consequence of which plaintiff suffered
damages. Plaintiff prayed that said
properties be delivered back to him. Three
days after the filing of the complaint, that is
Bus org 1| obligations of partners among themselves | 1
on November 18, 1955, Judge Pantaleon A.
Pelayo issued an order in said case
authorizing the sheriff to take possession of
the generator and 70 wooden posts, upon
plaintiff's filing of a bond in the amount of
P16,000 in favor of the defendant (for
subsequent delivery to the plaintiff). On
December 5, 1955, defendant filed an
answer, denying that the generator and the
equipment mentioned in the complaint
belong to the plaintiff and alleging that the
same had been contributed by the plaintiff
to the partnership entered into between
them in the same manner that defendant
had contributed equipments also, and
therefore that he is not unlawfully detaining
them. By way of counterclaim, defendant
alleged that under the partnership
agreement the parties were to contribute
equipments, plaintiff contributing the
generator and the defendant, the wires for
the purpose of installing the main and
delivery lines; that the plaintiff sold his
contribution to the partnership, in violation
of the terms of their agreement. He,
therefore, prayed that the complaint against
him be dismissed; that plaintiff be adjudged
guilty of violating the partnership contract
and be ordered to pay the defendant the
sum of P3,000, as actual damages, P600.00
as attorney's fees and P2,600 annually as
actual damages; that the court order
dissolution of the partnership, after the
accounting and liquidation of the same.
On September 27, 1956, the defendant filed
a motion to declare plaintiff in default on his
counterclaim, but this was denied by the
court. Hearings on the case were conducted
on October 25, 1956 and November 5, 1956,
and on the latter date the judge entered a
decision declaring plaintiff owner of the
equipment and entitled to the possession
thereof, with costs against defendant. It is
against this judgment that the defendant
has appealed.
The above judgment of the court was
rendered on a stipulation of facts, which is
as follows:
1. That on November 16, 1954, in the City of
Iloilo, the aforementioned plaintiff, and the
defendant entered into a contract of
Partnership, a copy of which is attached as
Annex "A" of defendant's answer and
counterclaim, for the purpose set forth
therein and under the national franchise
granted to Mrs. Piadosa Buenaflor;
2. That according to the aforementioned
Partnership Contract, the plaintiff Mr.
Mauro Lozana, contributed the amount of
Eighteen Thousand Pesos (P18,000.00); said
contributions of both parties being the
appraised values of their respective
properties brought into the partnership;
3. That the said Certificate of Public
Convenience and Necessity was revoked and
cancelled by order of the Public Service
Commission dated March 15, 1955,
promulgated in case No. 58188, entitled,
"Piadosa Buenaflor, applicant", which order
has been appealed to the Supreme Court by
Mrs. Buenaflor;
4. That on October 30, 1955, the plaintiff
sold properties brought into by him to the
said partnership in favor of Olimpia
Decolongon in the amount of P10,000.00 as
per Deed of Sale dated October 30, 1955
executed and ratified before Notary Public,
Delfin Demaisip, in and for the Municipality
of Dumangas, Iloilo and entered in his
Notarial Registry as Doc. No. 832; Page No.
6; Book No. XIII; and Series of 1955, a copy
thereof is made as Annex "B" of defendant's
answer and counterclaim;
5. That there was no liquidation of
partnership and that at the time of said Sale
on October 30, 1955, defendant was the
manager thereof;
6. That by virtue of the Order of this
Honorable Court dated November 18, 1955,
those properties sold were taken by the
Provincial Sheriff on November 20, 1955 and
delivered to the plaintiff on November 25,
1955 upon the latter posting the required
bond executed by himself and the Luzon
Surety Co., dated November 17, 1955 and
ratified before the Notary Public, Eleuterio
del Rosario in and for the province of Iloilo
known as Doc. No. 200; Page 90; Book No.
VII; and Series of 1955; of said Notary Public;
7. That the said properties sold are now in
the possession of Olimpia Decolongon, the
purchaser, who is presently operating an
electric light plant in Dumangas, Iloilo;
8. That the defendant sold certain
properties in favor of the spouses, Felix
Bus org 1| obligations of partners among themselves | 2
Jimenea and Felisa Harder contributed by
him to the partnership for P3,500.00 as per
Deed of Sale executed and ratified before
the Notary Public Rodrigo J. Harder in and
for the Province of Iloilo, known as Doc. No.
76; Page 94; Book No. V; and Series of 1955,
a certified copy of which is hereto attached
marked as Annex "A", and made an integral
part hereof; (pp, 27-29 ROA).
As it appears from the above stipulation of
facts that the plaintiff and the defendant
entered into the contract of partnership,
plaintiff contributing the amount of
P18,000, and as it is not stated therein that
there bas been a liquidation of the
partnership assets at the time plaintiff sold
the Buda Diesel Engine on October 15, 1955,
and since the court below had found that
the plaintiff had actually contributed one
engine and 70 posts to the partnership, it
necessarily follows that the Buda diesel
engine contributed by the plaintiff had
become the property of the partnership. As
properties of the partnership, the same
could not be disposed of by the party
contributing the same without the consent
or approval of the partnership or of the
other partner. (Clemente vs. Galvan, 67
Phil., 565).
The lower court declared that the contract
of partnership was null and void, because by
the contract of partnership, the parties
thereto have become dummies of the owner
of the franchise. The reason for this holding
was the admission by defendant when being
cross-examined by the court that he and the
plaintiff are dummies. We find that this
admission by the defendant is an error of
law, not a statement of a fact. The Anti-
Dummy law has not been violated as parties
plaintiff and defendant are not aliens but
Filipinos. The Anti-Dummy law refers to
aliens only (Commonwealth Act 108 as
amended).
Upon examining the contract of partnership,
especially the provision thereon wherein the
parties agreed to maintain, operate and
distribute electric light and power under the
franchise belonging to Mrs. Buenaflor, we
do not find the agreement to be illegal, or
contrary to law and public policy such as to
make the contract of partnership, null and
void ab initio. The agreement could have
been submitted to the Public Service
Commission if the rules of the latter require
them to be so presented. But the fact of
furnishing the current to the holder of the
franchise alone, without the previous
approval of the Public Service Commission,
does not per se make the contract of
partnership null and void from the beginning
and render the partnership entered into by
the parties for the purpose also void and
non-existent. Under the circumstances,
therefore, the court erred in declaring that
the contract was illegal from the beginning
and that parties to the partnership are not
bound therefor, such that the contribution
of the plaintiff to the partnership did not
pass to it as its property. It also follows that
the claim of the defendant in his
counterclaim that the partnership be
dissolved and its assets liquidated is the
proper remedy, not for each contributing
partner to claim back what he had
contributed.
For the foregoing considerations, the
judgment appealed from as well as the
order of the court for the taking of the
property into custody by the sheriff must be,
as they hereby are set aside and the case
remanded to the court below for further
proceedings in accordance with law.
-----------------------------------------------------------
G.R. No. L-33580 February 6,
1931MAXIMILIANO SANCHO, plaintiff-appellant,
Vs .SEVERIANO LIZARRAGA, defendant-appellee.
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, one-half 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
Bus org 1| obligations of partners among themselves | 3
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.
-----------------------------------------------------
Uy Vs. Puzon
Facts:
Bartolome Puzon had two contracts with the
government for the construction of roads
and bridges. (Bureau of Public Highways)
He sought the financial assistance of William
Uy, so he proposed that they create a
partnership which would be the sub-
contractor of the projects.
They also agreed that the profits will be
divided among themselves.
William Uy agreed to the formation of the
partnership "U.P. Construction Company".
They agreed to contribute P50,000 each.
(Note: P40,000 was advanced by William Uy
while Puzon was waiting for the approval of
his P150,000 PNB Loan. Upon release of the
loan, he promised to reimburse William Uy
of the P40,000; pay his share of P50,000 and
loan P60,000 to the partnership).
Loan was approved by November 1956.
Note: At the end of 1957, Uy contributed a
total of P115,
The partnership agreement was signed in
1957 (January 18) although the work for the
projects began as early as 1956 (October 1).
Since Puzon was busy with other projects,
Uy was the one who managed the
partnership.
In order to guarantee the PNB Loan, Puzon,
without the knowledge of Uy, assigned the
payments to the payments to be received
from the projects to PNB.
Due to the financial demands of the
projects, Uy demanded that Puzon comply
with his obligation to place his capital
contribution in the company.
However, Puzon failed to comply even after
formal demand letters were sent to him.
Thereafter, Puzon (as the primary contractor
of the projects) wrote terminated the
subcontract agreement with the partnership
to which he is also a partner. (November 27,
1957)
Bus org 1| obligations of partners among themselves | 4
Thereafter, Uy was not allowed to hold
office in the UP Construction Company and
his authority to negotiate with the Bureau
was revoked by Puzon.
Uy clamied that Puzon had violated the
terms of their partnership agreement. He
sought for the dissolution of the partnership
with damages.
The lower court ruled in favor of Uy.
Issue: WON Puzon failed to comply with his
obligation of paying the capital contribution
to the company. YES
Ruling: YES
According to the court, there was failure on
the part of Puzon to contribute capital to
the partnership. When his load with PNB
was approved, he only gave P60,000 to Uy;
P40,000 was for reimbursement to the
payments made by Uy and the other
P20,000 was for the capital contribution.
Thereafter, Puzon never made additional
contribution.
Also, it was found by the SC that Puzon
misapplied partnership funds by assigning all
payments for the projects to PNB.
Such assignment was prejudicial to the
partnership since the partnership only
received a small share from the total
payments made by the Bureau of Public
Highways. As a result, the partnership was
unable to discharge its obligations.
Here, the Court ordered Puzon to reimburse
whatever amount Uy had invested in or
spent for the partnership on account of
construction projects. The amount P200,000
as compensatory damages was also
awarded in favor of Uy.
RULING:
Had the appellant not been remiss in his
obligations as partner and as prime
contractor of the construction projects in
question as he was bound to perform
pursuant to the partnership and subcontract
agreements, and considering the fact that
the total contract amount of these two
projects is P2,327,335.76, it is reasonable to
expect that the partnership would have
earned much more than the P334,255.61
We have hereinabove indicated. The award,
therefore, made by the trial court of the
amount of P200,000.00, as compensatory
damages, is not speculative, but based on
reasonable estimate.
WHEREFORE, finding no error in the decision
appealed from, the said decision is hereby
affirmed with costs against the appellant, it
being understood that the liability
mentioned herein shall be home by the
estate of the deceased Bartolome Puzon,
represented in this instance by the
administrator thereof, Franco Puzon.
-------------------------------------------------------
G.R. No. 5840 September 17, 1910
THE UNITED STATES, plaintiff-appellee,
vs.
EUSEBIO CLARIN, defendant-appellant.
ARELLANO, C.J.:
Pedro Larin delivered to Pedro Tarug P172,
in order that the latter, in company with
Eusebio Clarin and Carlos de Guzman, might
buy and sell mangoes, and, believing that he
could make some money in this business,
the said Larin made an agreement with the
three men by which the profits were to be
divided equally between him and them.
Pedro Tarug, Eusebio Clarin, and Carlos de
Guzman did in fact trade in mangoes and
obtained P203 from the business, but did
not comply with the terms of the contract
by delivering to Larin his half of the profits;
neither did they render him any account of
the capital.
Larin charged them with the crime of estafa,
but the provincial fiscal filed an information
only against Eusebio Clarin in which he
accused him of appropriating to himself not
only the P172 but also the share of the
profits that belonged to Larin, amounting to
P15.50.
Pedro Tarug and Carlos de Guzman
appeared in the case as witnesses and
assumed that the facts presented concerned
the defendant and themselves together.
The trial court, that of First Instance of
Pampanga, sentenced the defendant,
Eusebio Clarin, to six months' arresto mayor,
Bus org 1| obligations of partners among themselves | 5
to suffer the accessory penalties, and to
return to Pedro Larin P172, besides P30.50
as his share of the profits, or to subsidiary
imprisonment in case of insolvency, and to
pay the costs. The defendant appealed, and
in deciding his appeal we arrive at the
following conclusions:
When 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, a
contract is formed which is called
partnership. (Art. 1665, Civil Code.)
When Larin put the P172 into the
partnership which he formed with Tarug,
Clarin, and Guzman, he invested his capital
in the risks or benefits of the business of the
purchase and sale of mangoes, and, even
though he had reserved the capital and
conveyed only the usufruct of his money, it
would not devolve upon of his three
partners to return his capital to him, but
upon the partnership of which he himself
formed part, or if it were to be done by one
of the three specifically, it would be Tarug,
who, according to the evidence, was the
person who received the money directly
from Larin.
The P172 having been received by the
partnership, the business commenced and
profits accrued, the action that lies with the
partner who furnished the capital for the
recovery of his money is not a criminal
action for estafa, but a civil one arising from
the partnership contract for a liquidation of
the partnership and a levy on its assets if
there should be any.
No. 5 of article 535 of the Penal Code,
according to which those are guilty
of estafa "who, to the prejudice of another,
shall appropriate or misapply any money,
goods, or any kind of personal property
which they may have received as a deposit
on commission for administration or in any
other character producing the obligation to
deliver or return the same," (as, for
example, in commodatum, precarium, and
other unilateral contracts which require the
return of the same thing received) does not
include money received for a partnership;
otherwise the result would be that, if the
partnership, instead of obtaining profits,
suffered losses, as it could not be held liable
civilly for the share of the capitalist partner
who reserved the ownership of the money
brought in by him, it would have to answer
to the charge of estafa, for which it would
be sufficient to argue that the partnership
had received the money under obligation to
return it.
We therefore freely acquit Eusebio Clarin,
with the costs de oficio. The complaint
for estafa is dismissed without prejudice to
the institution of a civil action.
G.R. No. L-5236 January 10, 1910
PEDRO MARTINEZ, plaintiff-appellee,
vs.ONG PONG CO and ONG LAY, defendants.
ONG PONG CO., appellant.
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
Bus org 1| obligations of partners among themselves | 6
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
Bus org 1| obligations of partners among themselves | 7
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.
-----------------------------------------------------------
CHOITHRAM JETHMAL RAMNANI et.al. vs CA
FACTS: Ishwar Jethmal Ramnani and his
wife Sonya had their main business based in
New York. Ishwar received US $150,000.00
from his father-in-law in Switzerland. In
1965, Ishwar Jethmal Ramnani sent the
amount of US $150,000.00 to Choithram in
two bank drafts of US$65,000.00 and
US$85,000.00 for the purpose of investing
the same in real estate in the Philippines.
Subsequently, spouses Ishwar executed a
general power of attorney appointing
Ishwars full blood brothers Choithram and
Navalrai as attorneys-in-fact, empowering
them to manage and conduct their business
concerns in the Philippines. Choithram, as
attorney-in-factr, entered into two
agreements for the purchase of two parcels
of land located in Pasig Rizal from Ortigas &
Company, Ltd. Partnership (Ortigas Ltd.)
with a total area of approximately 10,048
square meters. Three buildings were
constructed thereon and were leased out by
Choithram as attorney-in-fact of spouses
Ishwar. Two of these buildings were later
burned.

In 1970 Ishwar asked Choithram to account ----------------------------------------------------------

for the income and expenses relative to
these properties during the period 1967 to
1970. Choithram failed and refused to
render such accounting which prompted
Ishwar to revoke the general power of
attorney. Choithram and Ortigas Ltd. were
duly notified by notice in writing of such
revocation. It was also registered with the
Securities and Exchange Commission and
published in The Manila Times.
Nevertheless, Choithram as such attorney-
in-fact of Ishwar, transferred all rights and
interests of Ishwar spouses in favor of
Nirmla Ramnani, the wife of Choitrams son,
Moti. Ortigas also executed the
corresponding deeds of sale in favor of
Nirmla and the TCT ISSUEd in her favour.
Thus, spouses Ishwar filed a complaint in the
Court of First Instance of Rizal against
Choithram and spouses Nirmla and Moti
(Choithram et al.) and Ortigas Ltd. for
reconveyance of said properties or payment
of its value and damages.
Issue: Whether a partnership was formed?
Held: The Court held that there was a
partnership formed. Even without a written
agreement, the scenario is clear. Spouses
Ishwar supplied the capital of $150,000.00
for the business. They entrusted the money
to Choithram to invest in a profitable
business venture in the Philippines. For this
purpose they appointed Choithram as their
attorney-in-fact. We have a situation where
two brothers engaged in a business venture.
One furnished the capital, the other
contributed his industry and talent. Justice
and equity dictate that the two share
equally the fruit of their joint investment
and efforts.
Machuca v Chuidian (1903, Ladd)
Parties: Jose Machuca (Plaintiff-Appellee),
Chuidian Buenaventura & Co. (Defendant-
Appellant)
Partners: D. Telesforo Chuidian, Doa
Raymunda Chuidian, Doa Candelaria
Chuidian, and D. Mariano Buenaventura
DOCTRINE:
The assignment by its terms is not to take
effect until all the liabilities of the
partnership have been discharged and
nothing remains to be done except to
distribute the assets, if there should be any,
among the partners. Meanwhile the
assignor is to continue in the enjoyment of
the rights and is to remain subject to the
liabilities of a partner as though no
assignment had been made. The assignment
does not purport to transfer an interest in
the partnership, but only a future
contingent right to such portion of the
ultimate residue of the partnership property
as the assignor may become entitled to
receive by virtue of his proportionate
interest in the capital.
FACTS:
Chuidian Buenaventura & Co. is regular
general partnership, organized in Manila,
December 29, 1882, as a continuation of a
prior partnership of the same name. The
original partners constituting the
partnership of 1882 were D. Telesforo
Chuidian, Doa Raymunda Chuidian, Doa
Candelaria Chuidian, and D. Mariano
Buenaventura.
Doa Raymunda Chuidian retired from the
partnership November 4, 1885. On January
1, 1888, the partnership went into
liquidation, and it does not appear that the

Bus org 1| obligations of partners among themselves | 8

liquidation had been terminated when this
action was brought.
On January 1, 1894, D. Mariano
Buenaventura died, his estate passing by will
to his children, among whom was D. Vicente
Buenaventura. Upon the partition of the
estate the amount of the interest of D.
Vicente Buenaventura in his father's
account-current and in the capital was
ascertained and recorded in the books of
the firm.
On December 15, 1898, D. Vicente
Buenaventura executed a public instrument
in which for a valuable consideration he
"assigns to D. Jose Gervasio Garcia . . . a 25
per cent share in all that may be obtained by
whatever right in whatever form from the
liquidation of the partnership of Chuidian,
Buenaventura & Co., in the part pertaining
to him in said partnership
A subsequent assignment was made by D.
Jose Gervasio Garcia in favour of Jose
Machuca (Plaintiff-Appellee), which has
been notified to the liquidator of the
partnership.
Trial Court Brought by Jose Machuca
against Chuidian Buenaventura & Co.. Action
was for specific performance to compel the
liquidator of the partnership to record in the
books Machucas claim under the
assignment as a credit due, and the he
further asks that he be adjudicated to be a
creditor of the partnership in an amount
equal to 25 per cent of D. Vicente
Buenaventura's share in his father's
account-current. That the necessary
liquidation being first had, the partnership
pay to the plaintiff the balance which may
be found to be due him; and that if the
partnership has no funds with which to
discharge this obligation an adjudication of
bankruptcy be made. He also asks to recover
the damages caused by reason of the failure
of the liquidator to record his credit in the
books of partnership. Court ruled in favor of
the plaintiff.
Bus org 1| obligations of partners among themselves | 9
ISSUE(s): WON Machuca is entitled to
the relief prayed pending the liquidation of
the partnership?
HELD/RATIO: NO
Clause 19 of the partnership agreement
stipulates that:
"upon the dissolution of the company, the
pending obligations in favor of outside
parties should be satisfied, the funds of the
minors Jose and Francisco Chuidian should
be taken out, and afterwards the resulting
balance of the account-current of each one
of those who had put in money
(imponentes) should be paid."
A construction of this clause establishes
that the liabilities to noncompartners are to
be first discharged; that the claims of the
Chuidian minors are to be next satisfied; and
that what is due to the respective partners
on account of their advances to the firm is
to be paid last of all, leaving the ultimate
residue, of course, if there be any, to be
distributed, among the partners in the
proportions in which they may be entitled
thereto. A distinction is made in this clause
between creditors who were partners and
creditors who were not partners, and that
the expression "outside parties" refers to
the latter class.
Thus, it follows that D. Vicente
Buenaventura, whose rights are those of his
father, is in no case entitled to receive any
part of the assets until the creditors who are
nonpartners and the Chuidian minors are
paid. Whatever rights he had either as
creditor or partner, he could only transfer
subject to this condition.
It is clear, from the language of the
instrument, that this conditional interest
was all that D. Vicente Buenaventura ever
intended to transfer. By that instrument he
undertakes to assign to Garcia not a present
interest in the assets of the partnership but
an interest in whatever "may be obtained
from the liquidation of the partnership,"
which Garcia is to receive "in the same form
in which it may be obtained from said
partnership," and "on the date when
Messrs. Chuidian, Buenaventura & Co., in
liquidation, shall have effected the
operations necessary in order to satisfy" the
claims of D. Vicente Buenaventura.
The assignment by its terms is not to take
effect until all the liabilities of the
partnership have been discharged and
nothing remains to be done except to
distribute the assets, if there should be any,
among the partners. Meanwhile the
assignor, Buenaventura, is to continue in
the enjoyment of the rights and is to
remain subject to the liabilities of a partner
as though no assignment had been made.
The assignment does not purport to
transfer an interest in the partnership, but
only a future contingent right to 25 per
cent of such portion of the ultimate residue
of the partnership property as the assignor
may become entitled to receive by virtue of
his proportionate interest in the capital.
There is nothing in the case to show either
that the nonpartner creditors of the
partnership have been paid or that the
claims of the Chuidian minors have been
satisfied. Thus, Machuca is not yet entitled
to the relief.
DISPOSITIVE:
The plaintiff having acquired no rights under
the assignment which are now enforceable
against the defendant, this action can not be
maintained. The liquidator of the defendant
having been notified of the assignment, the
plaintiff will be entitled to receive from the
assets of the partnership, if any remain, at
the termination of the liquidation, 25 per
cent of D. Vicente's resulting interest, both
as partner and creditor. The judgment in this
case should not affect the plaintiff's right to
bring another action against the partnership
when the affairs of the same are finally
wound up. The proper judgment will be that
the action be dismissed. The judgment of
the court below is reversed and the case is
remanded to that court with directions to
enter a judgment of dismissal. So ordered.
Sison v. Helen McQuaid December 29, 1953
Bus org 1| obligations of partners among themselves | 10
Principle: Liquidation shall happen before a
partner may claim his share of profit from
the partnership.
Facts: Plaintiff brought an action in the CFI
against defendant. Defendant borrowed
from him money (P 2,210) to enable her to
pay her obligations and to add to her capital
in her lumber business. She could not pay so
she proposed to take plaintiff as a partner in
her business, plaintiff to contribute the P
2,210 due him from defendant. Before
the last World War, the partnership sold
230,000boardft. of lumber to the US Army
for P 13,800.00. Defendant refused to
deliver of it (P 6,900.00) to plaintiff
despite his repeated demands. Plaintiff filed
an action to compel defendant to pay him
his half of the profit from the partnership.
The case was dismissed upon the ground of
prescription.
Issue: Whether or not plaintiff is entitled to
the sum he claims
Held: NO. Order of dismissal was affirmed,
but on the ground that the complaint states
no cause of action.
Ratio: It is not clear from the complaint just
when the cause of action accrued. Thus the
dismissal of the case is erroneous. However
order should be retained on the ground that
the complaint has no cause of
action. Plaintiff seeks to recover from
defendant one-half of the purchase price of
lumber sold by the partnership to the United
States Army. But his complaint does not
show why he should be entitled to the sum
he claims. It does not allege that there has
been a liquidation of the partnership
business and the said sum has been found
to be due him as his share of the profits. The
proceeds from the sale of a certain amount
of lumber cannot be considered profits until
costs and expenses have been deducted.
Moreover, the profits of the business cannot
be determined by taking into account the
result of one particular transaction instead
of all the transactions had. Hence, the need
for a general liquidation before a member of
a partnership may claim a specific sum as his
share of the profits.
De la Rosa v Ortega GoCotay No. 24243; 15
January 1926; Gancayco, J.
FACTS:
1. Go Lio and Vicente GoSengco formed a
society for the purchase and sale of articles
of commerce and opened a store in San
Isidro, Nueva Ecija
2. Go Lio went to China and died there
leaving a widow and 3 children, one of
whom came to the Philippines and filed a
petition for the appointment of Ildefonso de
la Rosa (PLAINTIFF) as administrator of the
intestate estate of his deceased father. The
petition was granted by the CFI of Nueva
Ecija
3. Vicente GoSengco also died and his son
Enrique Ortega Go Catay (DEFENDANT) took
charge of the business
4. Enrique Ortega refused to wind up the
business and deliver to De la Rosa the
portion corresponding to the deceased Go
Lio. He alleged that the business is his
exclusively
5. This prompted De La Rosa to file a
complaint against Enrique Ortega. De La
Rosa also prayed that he be appointed as
receiver for the property of the partnership.
Defendant opposed the prayer.
6. The CFI appointed 3 commissioners to
make an inventory, liquidate and determine
the half belonging to the plaintiff. The
commissioners submitted a report showing
that the business showed net profits from
19131917 amounting to P25,038.70
7. August 3, 1918: In order to prevent Justo
CaboChan (one of the commissioners) from
assuming the position of receiver pursuant
to the order of the court, the defendant
filed a bond in the sum of P10,000.
8. In view of the appeal taken by defendant,
the parties agreed to suspend the
liquidation ordered by the lower court and
Bus org 1| obligations of partners among themselves | 11
the defendant was authorized to continue in
the possession of the property in litigation
after giving a P25,000 bond cancelling the
P10,000 bond.
9. After trial, the lower court adopted the
report made by Justo CaboChan which
showed that the business suffered a net loss
amounting to P89,099.22 and rejected the
report of the two other commissioners.
10. Because of the loss, the plaintiff had
nothing to recover from defendant as there
was no profit to divide. The reports showed
the status of the business from 19191922
(Loses were incurred 1918 onwards)
ISSUE: WON the loss should be borne by the
partnership NO. The defendant alone
should bear the loss
HELD: Defendant should pay the plaintiff
P30,299.14 as his share before August 3,
1918.
RATIO: 1. In August 3, 1918, the defendant
assumed complete responsibility for the
business when he objected to the
appointment of a receiver and even giving a
bond. a) From that point forward, his acts
were no longer that of a managing partner
binding against the partnership. He became
a receiver whose authority is provided for in
Section 175 of the Code of Civil Procedure b)
According to the Code, a receiver has no
right to carry on and conduct a business
unless he is authorized or directed by the
court to do so. His role is to take and
preserve the property. c) Since he was not
authorized by the court to continue the
business of the partnership in liquidation, he
is personally liable for the losses that the
business had sustained after he became a
receiver d) The partnership therefore is not
liable for the acts of the defendant in
connection with the management of the
business after August 3, 1918.
2. The court added the Capital of the
partnership and profits until the first
semester of 1918 to amount to P60,598.28.
One half of the total is P30,299.14 which
pertains to the estate of Go Lio.
SIDE NOTES:
3. The assets of the partnership, as well as
the value of its property, could not be
determined when making the liquidation
because there was no inventory hence it
was not possible to determine the capital of
the partnership. The plaintiff however
agreed to consider the initial capital as the
capital at the time of winding up of the
business. 4. It was also difficult for the court
to determine net profits earlier than 1912
because some of the books of account were
destroyed by anay. The SC computed the
net profits based on the average net profit
in 1913 onwards.
G.R. No. L-12151 January 19, 1918
ADRIANO BUENAVENTURA Y
DEZOLLIER, palintiff- appellant,
vs.
ANTONIO DAVID y ABELIDO, defendant-
appellee.
STREET, J.:
By an agreement effective from April 20,
1906, a partnership was formed by Antonio
David y Abelido and Adriano Buenaventura y
Dezollier for the conduct of the business of
real estate brokers in the city of Manila,
under the firm name "Abelido and Co." The
first named party was the capitalist member
of the firm and its manager., while the last
named was the industrial member and
bookkeeper. The firm maintained a feeble
external existence for a few months, during
which period the capitalist associate placed
P209.86 in the enterprise. This was
consumed in office rent and other incidental
expenses. Only two profitable transactions
were ever accomplished by the firm of
Abelido and Co. during its existence. These
produced a total income of P42, which sum
was noted on the credit side of the
company's ledger.
It was agreed in the articles that the
partnership should be liquidated upon April
20, 1907, in the absence of any agreement
for the extension of its life; but upon
February 1, 1908, it was agreed in writing
Bus org 1| obligations of partners among themselves | 12
that the partnership should not be
liquidated until the sale of a piece of real
estate in which the firm had become
interested should be effected with profit.
The property to which reference was thus
made consisted of a farm in the municipality
of Murcia, in the Province of Tarlac, known
as the "Hacienda de Guitan."
This farm had been formerly owned by the
spouses Loni Diangco and Epifania Torres;
and long before the firm of Abelido and Co.
had come into existence Antonio David y
Abelido had been their creditor by reason of
certain sums of money from time to time
loaned them. After the death of Lino
Diangco in 1890 still other sums of money
were advanced by David to the widow,
Epifania Torres, in behalf of herself and her
minor son Pablo Diangco. Upon July 10,
1906, Epifania agreed to convey the
Hacienda de Guitan to Abelido and
Buenaventura for a consideration stated at
P2,050 (Exhibit C). The purpose of the
transaction was to settle the debt of several
thousand pesos owing by her and her son to
Antonio David y Abelido. The conveyance by
which this contract was finally carried into
effect was executed upon January 30, 1908.
The grantee named in the deed was Antonio
David y Abelido; and no reference was made
in this instrument to the firm of Abelido and
Co., or to Buenaventura as a partner
therein. Buenaventura was present at the
time of the execution of this deed and
signed as a subscribing witness. The total
consideration for the conveyance was
P7,170, of which the sum of P5,870 was
consumed in satisfying the old indebtedness
due to David. The balance (according to the
recitals of the deed) was paid by him to
Epifania Torres. It further appears that
Antonio David y Abelido proceeded to
procure the registration of the hacienda in
his own name and a Torrens title was in due
course issued to him.
Upon the same day that the above-
mentioned deed was executed by Epifania
Torres to Antonio David, a declaration was
drawn up and ratified by Antonio David and
Adiano Buenaventura in which it was stated
that Epifania Torres had sold the estate
above mentioned to Antonio David for the
sum of P7,170 and that of this amount the
sum of P3,370 had been advanced by
Abelido & Co., while P3,800 had been paid
by David individually. It was then said that
the firm thereby became the owner of the
property in the proportion of the value
satisfied by it; and this was followed by an
obscure clause meaning, probably, that the
right of the firm to acquire this participation
was dependent on the reimbursement of
David for the outlay made by him with
respect to such share. A further statement
was added to the effect that Buenaventura
should have the option to advance half of
the sum paid out by Antonio David y
Abelido, to wit, the sum of P1,900, in the
event Buenaventura should desire to have a
half interest in the property in his own
name.
From the date of the conveyance above
mentioned David exercised all the rights of
an owner over the property. Upon one
occasion he mortgaged it for the sum of
P5,000 and Buenaventura was paid P300 for
assisting in the securing of this loan. At
another time David mortgaged the property
for the sum of P15,000 and applied the
money thus secured to his own use.
Upon February 18, 1915, or more than
seven years after the day upon which the
deed to the property had been executed to
David, Buenaventura filed the complaint in
this action. In this proceeding he seeks relief
embracing the following features: (1) a
dissolution of the partnership of Abelido and
Co.; (2) judgment for a balance of some
P2,344.85. alleged to be due as arrears upon
salary account; (3) a transfer of the title of
the Hacienda de Guitan to Abelido and Co.;
(4) and accounting for, and division of all
money, property and other effects of the
firm; and especially an accounting for profits
alleged to have been made by the
defendant David from investments of
money derived from the hacienda, which
profits were alleged to amount to the sum
of P5,190; (5) a judgment for damages in the
sum of P10,000; (6) such and further relief
Bus org 1| obligations of partners among themselves | 13
as might seem to the court just and
equitable.
At the hearing the court entered a judgment
declaring that the partnership of Abelido
and Co. was dissolved and denying all other
relief sought in the complaint. From this
judgment the plaintiff Buenaventura has
appealed.
As regards the Hacienda de Guitan, it is in
our opinion clear upon the oral testimony
and other proof adduced in the cause that
every cent of the consideration for the
purchase of this property was supplied by
David; and it consisted, as we have seen,
mostly of money previously loaned.
Buenaventura had no resources, and it was
evidently quite beyond his power to raise
the funds necessary to participate in a
business transaction of the size of that in
question. His pretension that he supplied
P1,025 or half of the consideration named in
the original contract (Exhibit C) was rightly
rejected by the court. Furthermore it
appears that the firm of Abelido and Co., as
distinguished from the individual David
Abelido, never in fact advanced a single
peso in the transaction, although the
"declaration" of January 30, 1908, states
that the firm advanced P3,370. That
declaration constitutes an admission which
entitles it to weight but its recital as to the
money paid or received may be explained
and even contradicted, as in case of a simple
receipt. David's explanation is that the
plaintiff, as bookkeeper, had made it appear
in the firm books that the firm was debtor to
David in the amount of P3,370 in respect to
this transaction and that the plaintiff had
requested David to sign the declaration
showing the firm to be a participant.
Throughout this affair David exhibited
considerable complaisance in signing papers
at Buenaventura's request. He apparently
considered Buenaventura an amiable old
friend and was willing to indulge the latter's
fancy with the idea that he was party to an
important transaction, well knowing that he
could never put up the necessary money to
enable him to share in the deal. Whatever
may be the explanation of David's
imprudence in allowing himself to be thus
drawn into an admission showing that the
firm participated in the deal, it is quite clear
that he supplied all the money for the
purchase in question.
The situation then, as regards the title to the
hacienda is this: David, who supplied all the
funds, has obtained the legal title in his own
individual name. This was accomplished
with knowledge on the part of
Buenaventura. Furthermore he has
registered his title by means of legal
proceedings which were probably known to
Buenaventura. Still later, the latter is seen
acting as broker for David in securing a loan
on the hacienda and receives a fee for his
services. Meanwhile the original partnership
enterprise is abandoned. Finally more than
seven years after the day when
Buenaventura stood by and signed as a
witness the deed conveying the property to
David, he comes into court and seeks to
reach this property through the ghost of the
firm of Abelido and Co. and bring the
defendant to account for the profits which
he has obtained from the investments of its
proceeds in various enterprises.
The purpose of the action is to impress a
trust on the property in favor of Abelido and
Co., to divest the title out of the present
owner, and to have it, or its proceeds,
liquidated and administered as firm assets.
We are of the opinion that there is no merit
in the plaintiff's contention. It is true that a
court will not hesitate, under certain
circumstances, to divest a title out of the
holder and impress a trust upon it in favor of
another, or to require the holder of the title
to administer the property for the true
owner (Uy Aloc vs. Cho Jan Ling, 19 Phil.
Rep., 202); yet this will not be done in the
absence of a sufficient contract, an express
trust, or other strong equitable
circumstances requiring the intervention of
equity. No such relief can be granted, upon
purely equitable grounds, against a party
who has himself paid the entire purchase
price in favor of one who advanced nothing.
But the declaration of January 30, 1908, is
relied upon as evidence of a contract
Bus org 1| obligations of partners among themselves | 14
establishing the right of Abelido and Co. The
reply is that by the terms of that instrument
Buenaventura's personal right was
dependent upon the advancement of money
by him which was in fact never supplied, and
as to the statement contained in that
declaration that Abelido and Co. had
advanced a certain sum, it clearly appears
that this is not true; and we hold that the
defendant is not precluded, or estopped, by
that admission from showing the actual
facts.
Furthermore, it is evident that the plaintiff's
case is adversely affected by his long delay
in bringing this action. Undue delay in the
enforcement of a right is strongly persuasive
of a lack of merit in the claim, since it is
human nature for a person to assert his
rights most strongly when they are
threatened or invaded. It is hard to believe
that, if the plaintiff had been convinced of
the justice of his contention, he would have
failed to assert his right to a division at the
time when the defendant was pocketing the
proceeds of the loans obtained upon the
security of the Hacienda de Guitan. The
probabilities are that Buenaventura realized
at the time that his hopes of sharing in this
investment were doomed to
disappointment and that with full
knowledge of all the facts he decided to
abandon the claim, or not assert it.
However, the documents which appear on
their face to establish his right to a
participation in this property remained in
existence; and in course of time said claim
was made the basis of this action. The
assertion of doubtful claims, after long
delay, can not be favored by the courts.
Time inevitably tends to obliterate
occurrences from the memory of witnesses,
and even where the recollection appears to
be entirely clear, the true clue to the
solution of a case may be hopelessly lost.
These consideration constitute one of the
pillars of the doctrine long familiar in equity
jurisprudence to the effect that laches or
unreasonable delay on the part of a plaintiff
in seeking to enforce a right is not only
persuasive of a want of merit but may,
according to the circumstances, be
destructive of the right itself. Vigilantibus
non dormientibus equitas subvenit.

The decision of the main issue relative to the

hacienda renders unnecessary any
discussion of other features of the case
presented in the appellant's brief. Upon the
whole it is our opinion that there was no
error prejudicial to the plaintiff in the action
of the court below and the judgment is
therefore affirmed, with costs against the
appellant.

Bus org 1| obligations of partners among themselves | 15