JOSE FERNANDEZ VS. FRANCISCO DE LA ROSA
The
The object of this action is to obtain from the court a
declaration that a partnership exists between the parties,
that the plaintiff has a Consequent interest in certain
cascoes which are alleged to be partnership property, and
that the defendant is bound to render an account of his
administration of the cascoes and the business carried on
with them.
FACTS:
The plaintiff alleges that in January, 1900, he entered into
a verbal agreement with the defendant to form a
partnership for the purchase of cascoes and the carrying
on of the business.
The defendant will buy the cascoes and each partner to
furnish for that purpose such amount of money as he
could, the profits to be divided proportionately;
The plaintiff furnished the defendant 300 pesos to
purchase a casco designated as No. 1515, which the
defendant did purchase for 500 pesos taking the title in his
own name. That the plaintiff furnished further sums
aggregating about 300 pesos for repairs on this casco.
The plaintiff furnished the defendant 825 pesos to
purchase another casco designated as No. 2089, which the
defendant did purchase for 1,000 pesos taking the title to
this casco also in his own name.
The parties undertook to draw up articles of partnership
for the purpose of embodying the same in an authentic
document, but that the defendant having proposed a draft
of such articles which differed materially from the terms
of the earlier verbal agreement and being unwilling to
include casco No.2089 in the partnership, they were
unable to come to any understanding and no written
agreement was executed.
The defendant having the control and management of the
two cascoes, the plaintiff made a demand for an
accounting upon him, which the defendant refused to
render, denying the existence of the partnership.
The defendant admits that the project of forming a
partnership in the casco business was discussed but he
denies that any agreement was ever consummated.
He denies that the plaintiff furnished any for the purchase
of casco or for repairs on the same, but claims that he
borrowed 300 pesos on his individual account from the
bakery firm, consisting of the plaintiff, Marcos Angulo,
and Antonio Angulo.
GENERAL CLAIMS OF THE COURT:
(a) The plaintiff presented in evidence the receipt.
authenticity of this receipt is admitted by the defendant.
The casco referred to in the receipt "which the parties "are
to purchase in company" must be casco No. 2089. We find
this to be the fact, and that the plaintiff furnished and the
defendant received 825 pesos toward the purchase of this
casco, with the understanding that it was to be purchased
on joint account.
(b) We are unable to find upon the evidence before us that
there was any specific verbal agreement of partnership,
except such as may be implied from the facts as to the
purchase of the casco.
(c) At some time subsequently to the failure of the attempt
to agree upon partnership articles and after the defendant
had been operating the cascoes for some time, the
defendant returned to the plaintiff 1,125 pesos, in two
different sums, one of 300 and one of 825 pesos.
The only evidence in the record as to the circumstances
under which the plaintiff received these sums is contained
in his answers to the interrogatories proposed to him by
the defendant, and the whole of his statement on this point
may properly be considered in determining the fact as
being in the nature of an indivisible admission. He states
that both sums were received with an express reservation
on his part of all his rights as a partner.
ISSUES:
(1) Did a partnership exist between the parties?
(2) If such partnership existed, was it terminated as a
result of the act of the defendant in receiving back the
1,125 pesos?
RULING:
(1) YES. "Partnership is a contract by which two or more
persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing
the profits among themselves." (Civil Code, art. 1665.)
The essential points upon which the minds of the parties
must meet in a contract of partnership are, therefore, (1)
mutual contribution to a common stock, and (2) a joint
interest in the profits. If the contract contains these two
elements the partnership relation results, and the law itaelf
fteefc the incidents of this relation if the parties fail to do
so.
We have found as a fact that money was furnished by the
plaintiff and received by the defendant with the
understanding that it was to be used for the purchase of
the cascoes in question. This establishes the first element
of the contract, namely, mutual contribution to a common Did the defendant waive his right to such interest as
stock. remained to him in the partnership property by receiving
the money? Did he by so doing waive his right to an
The second element, namely, the intention to share
accounting of the profits already realized, if any, and a
profits, appears to be an unavoidable deduction from the
participation in them in proportion to the amount he had
fact of the purchase of the cascoes in common, in the
originally contributed to the common fund? Was the
absence of any other explanation of the object of the
partnership dissolved by the "will or withdrawal of one of
parties in making the purchase in that form, and,. it may
the partners" under article 1705 of the Civil Code? We
be added, in view of the admitted fact that prior to the
think these questions must be answered in the negative.
purchase of the first casco the formation of a partnership
had been a subject of negotiation between them. There was no intention on the part of the plaintiff in
accepting the money to relinquish his rights as a partner,
It is thus apparent that a complete and perfect contract of
nor is there any evidence that by anything that he said or
partnership was entered into by the parties. This contract,
by anything that he omitted to say he gave the defendant
it is true, might have been subject to a suspensive
any ground whatever to believe that he intended to
condition, postponing its operation until an agreement
relinquish them.
was reached as to the respective participation of the
partners in the profits, the character of the partnership as On the contrary he notified the defendant that he waived
collective or en comandita, and other details, but although none of his rights in the partnership. Nor was the
it is asserted by counsel for the defendant that such was acceptance of the money an act which was in itself
the case, there is little or nothing in the record to support inconsistent with the continuance of the partnership
this claim, and the fact that the defendant did actually go relation, as would have been the case had the plaintiff
on and purchase the boats, as it would seem, before any withdrawn his entire interest in the partnership.
attempt had been made to formulate partnership articles,
There is, therefore, nothing upon which a waiver, either
strongly discountenances the theory.
express or implied, can be predicated. The defendant
The execution of a written agreement was not necessary might have himself terminated the partnership relation at
in order to give efficacy to the verbal contract of any time, if he had chosen to do so, by recognizing the
partnership as a civil contract, the contributions of the plaintiff's right in the partnership property and in the
partners not having been in the form of immovables or profits.
rights in immovables. (Civil Code, art. 1667.) The special
Having failed to do this he cannot be permitted to force a
provision cited, requiring the execution of a public
dissolution upon his copartner upon terms which the latter
writing in the single case.
is unwilling to accept.
(2) NO. The remaining question is as to the legal effect of
We see nothing in the case which can give the transaction
the acceptance by the plaintiff of the money returned to
in question any other aspect than that of the withdrawal
him by the defendant after the definitive failure of the
by one partner with the consent of the other of a portion
attempt to agree upon partnership articles.
of the common capital. The result is that we hold and
The amount returned fell short, in our view of the facts, declare that a partnership was formed between the parties
of that which the plaintiff had contributed to the capital of in January, 1900, the existence of which the defendant
the partnership, since it did not include the sum which he igrXfund to recognize; that cascoes Nos, 1515 and 2089.
had furnished for the repairs of casco No. 1515.
The judgment of the court below will be reversed without
Moreover, it is quite possible, as claimed by the plaintiff, costs, and the record returned for the execution of the
that a profit may have been realized from the business judgment now rendered. So ordered.
during the period in which the defendant had been
administering it prior to the return of the money, and if so
he still retained that sum in his hands.
For these reasons the acceptance of the money by the
plaintiff did not have the effect of terminating the legal
existence of the partnership by converting it into a
societas leonina, as claimed by counsel for the defendant.
EVANGELISTA VS. ABAD SANTOS
On October 9, 1954 a co-partnership was formed under
the name of "Evangelista & Co."
On June 7, 1955 the Articles of Co-partnership were
amended so as to include herein respondent, Estrella
Abad Santos, as industrial partner, with herein petitioners
Domingo C. Evangelista, Jr., Leonarda Atienza Abad
Santos and Conchita P. Navarro, the original capitalist
partners, remaining in that capacity, with a contribution
of P17,500 each.
The amended Articles provided, that "the contribution of
Estrella Abad Santos consists of her industry being an
industrial partner;" and that the profits and losses "shall
be divided and distributed among the partners in the
proportion of 70% for the first three partners, Domingo C.
Evangelista, Jr., Conchita P. Navarro and Leonarda
Atienza Abad Santos to be divided among them equally;
and 30% for the fourth partner, Estrella Abad Santos."
Respondent filed suit against the three other partners in
the Court of First Instance of Manila, alleging that the
partnership, which was also made a party-defendant, had
been paying dividends to the partners except to her; and
that notwithstanding her demands the defendants had
refused and continued to refuse to let her examine the
partnership books or to give her information regarding the
partnership affairs or to pay her any share in the dividends
declared by the partnership.
She therefore prayed that the defendants be ordered to
render an accounting to her of the partnership business
and to pay her corresponding share in the partnership
profits after such accounting.
The defendants denied that the plaintiff ever demanded
that she be allowed to examine the partnership books; and
alleged that the amended Articles of Co-partnership did
not express the true agreement of the parties, which was
that the plaintiff was not an industrial partner; that she did
not in fact contribute industry to the partnership; and that
her share of 30% was to be based on the profits which
might be realized by the partnership only until full
payment of the loan which it had obtained in December,
1955 from the Rehabilitation Finance Corporation in the
sum of P30,000, for which the plaintiff had signed a
promissory note as co-maker and mortgaged her property
as security.
CFI: ruled in favor of the plaintiff-appellee (reposdent
here). That she was an industrial partner. [declaring her
an industrial partner of Evangelista & Co., ordering the
defendants to render an accounting of the business
operations of the (said) partnership; to pay the plaintiff
such amounts as may be due as her share in the
partnership profits and/or dividends after such an
accounting has been properly made]
CA: affirmed.
ISSUE:
(1) W/N The Court of Appeals erred in finding that the
respondent is an industrial partner of Evangelista & Co.,
notwithstanding the admitted fact that since 1954 and
until after the promulgation of the decision of the
appellate court the said respondent was one of the judges
of the City Court of Manila, and despite its finding that
respondent has been paid for services allegedly
contributed by her to the partnership.
RULING:
NO. It is not the function of the Supreme Court to analyze
or weigh such evidence all over again, its jurisdiction
being limited to reviewing errors of law that might have
been committed by the lower court. It should be observed,
in this regard, that the Court of Appeals did not hold that
the Articles of Co-partnership, identified in the record as
Exhibit "A", was conclusive evidence that the respondent
was an industrial partner of the said company, but
considered it together with other factors, consisting of
both testimonial and documentary evidences, in arriving
at the factual conclusion expressed in the decision.
The Court of Appeals then proceeded to consider
appellee’s testimony on this point, quoting it in the
decision, and then concluded as follows:
"One cannot read appellee’s testimony just quoted
without gaining the very definite impression that, even as
she was and still is a Judge of the City Court of Manila,
she has rendered services for appellants without which
they would not have had the wherewithal to operate the
business for which appellant company was organized.
Article 1767 of the New Civil Code which provides that
‘By 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,’ does not specify the kind of industry
that a partner may thus contribute, hence the said services
may legitimately be considered as appellee’s contribution
to the common fund. Another article of the same Code
relied upon by appellants reads:chanrob1es virtual 1aw
library
‘ART. 1789. An industrial partner cannot engage in Corporation shall have been fully paid.’ (Appellants
business for himself, unless the partnership expressly Brief, p. 38).
permits him to do so; and if he should do so, the capitalist
partners may either exclude him from the firm or avail "What has gone before persuades us to hold with the
themselves of the benefits which he may have obtained in lower Court that appellee is an industrial partner of
violation of this provision, with a right to damages in appellant company, with the right to demand for a formal
either case.’ accounting and to receive her share in the net profit that
may result from such an accounting, to which right
It is not disputed that the prohibition against an industrial appellants take exception under their second assigned
partner engaging in business for himself seeks to prevent error. Our said holding is based on the following article
any conflict of interest between the industrial partner and of the New Civil Code:chanrob1es virtual 1aw library
the partnership, and to insure faithful compliance by said
partner with his prestation. ‘ART. 1299. Any partner shall have the right to a formal
account as to partnership affairs:chanrob1es virtual 1aw
There is no pretense, however, even on the part of
library
appellants that appellee is engaged in any business
antagonistic to that of appellant company, since being a
(1) If he is wrongfully excluded from the partnership
Judge of one of the branches of the City Court of Manila
business or possession of its property by his co-partners;
can hardly be characterized as a business.
That appellee has faithfully complied with her prestation (2) If the right exists under the terms of any agreement;
with respect to appellants is clearly shown by the fact that
it was only after the filing of the complaint in this case (3) As provided by article 1807;
and the answer thereto that appellants exercised their right
of exclusion under the codal article just mentioned by (4) Whenever other circumstances render it just and
alleging in their Supplemental Answer dated July 29, reasonable."cralaw virtua1aw library
1964 — or after around nine (9) years from June 7, 1955
— ‘That subsequent to the filing of defendants’ answer to We find no reason in this case to depart from the rule
the complaint, the defendants reached an agreement which limits this Court’s appellate jurisdiction to
whereby the herein plaintiff has been excluded from, and reviewing only errors of law, accepting as conclusive the
deprived of, her alleged share, interest or participation, as factual findings of the lower court upon its own
an alleged industrial partner, in the defendant partnership assessment of the evidence.
and/or in its net profits or income, on the ground that
plaintiff has never contributed her industry to the The judgment appealed from is affirmed, with costs.
partnership, and instead she has been and still is a judge
of the City Court (formerly Municipal Court) of the City
of Manila, devoting her time to the performance of her
duties as such judge and enjoying the privileges and
emoluments appertaining to the said office, aside from
teaching in law school in Manila, without the express
consent of the herein defendants’ (Record On Appeal, pp.
24-25).
Having always known appellee as a City Judge even
before she joined appellant company on June 7, 1955 as
an industrial partner, why did it take appellants so many
years before excluding her from said company as per
aforequoted allegations? And ‘how can they reconcile
such exclusion with their main theory that appellee has
never been such a partner because ‘The real agreement
evidenced by Exhibit ‘A’ was to grant the appellee a share
of 30% of the net profits which the appellant partnership
may realize from June 7, 1955, until the mortgage loan of
P30,000.00 obtained from the Rehabilitation Finance
CLEMENTE VS GALVAN
The intervenor Jose Echevarria having lost in the Court of
First Instance of Manila which rendered judgment against
him, the pertinent portion of which reads: "and with
respect to the complaint of the intervenor, the mortgage
executed in his favor by plaintiff is declared null and void,
and said complaint in intervention, as well as the
counterclaim filed by the defendant against the
intervenor, is dismissed, without pronouncement as to
costs," he appealed to this court on the ground that,
according to him, the lower court committed the errors
assigned in his brief as follows:
"I. The court a quo erred in finding in the appealed
decision that plaintiff was unable to take possession of the
machines subject of the deed of mortgage Exhibit B either
before or after the execution thereof.
"II. The court a quo likewise erred in deciding the present
case against the intervenor-appellant, on the ground,
among others, that 'plaintiff has not adduced any evidence
nor has he testified to show that the machines mortgaged
by him to the intervenor have ever belonged to him,
notwithstanding that said intervenor is his close relative.'
"III. The lower court also erred in declaring null and void
the mortgage executed by plaintiff in favor of the
intervenor and, thereby, dismissing the complaint in
intervention. "
IV. The lower court lastly erred in ordering the receiver
J.D. Mencarini to deliver to the defendant the aforesaid
machines upon petition of the plaintiff."
FACTS:
Plaintiff and defendant organized a civil partnership
which they named "Galvan y Compañia" to engage in the
manufacture and sale of paper and other stationery.
They agreed to invest therein a capital of P100,000, but as
a matter of fact they did not cover more than one-fifth
thereof, each contributing P10,000.
Year after such organization, the plaintiff commenced the
present case in the above-mentioned court to ask for the
dissolution of the partnership and to compel defendant to
whom the management thereof was entrusted to submit an
accounting of his administration and to deliver to him his
share as such partner.
In his answer defendant expressed his conformity to the
dissolution of the partnership and the liquidation of its
affairs; but by way of counterclaim he asked that, having
covered a deficit incurred by the partnership amounting to
P4,000 with his own money, plaintiff reimburse him of
one-half of said sum.
On petition of the plaintiff a receiver and liquidator to take
charge of the properties and business of the partnership
while the same was not yet definitely dissolved, was
appointed, the person chosen being Juan D. Mencarini.
The latter was already discharging the duties of his office
when the court, by virtue of a petition ex parte of the
plaintiff, issued the order requiring said receiver to deliver
to him (plaintiff) certain machines which were then at
Nos. 705-707 Ylaya Street, Manila but authorizing him to
charge their value of P4,500 against the portion which
may eventually be due to said plaintiff.
To comply with said order, the receiver delivered to
plaintiff the keys to the place where the machines were
found, which was the same place where defendant had his
home; but before he could take actual possession of said
machines, upon the strong opposition of defendant, the
court, on motion of the latter, suspended the effects of its
order.
In the meantime the judgments rendered in cases entitled
"Philippine Education Co., Inc. vs. Enrique Clemente" for
the recovery of a sum of money, and "Jose
Echevarria vs. Enrique Clemente", also for the recovery
of a sum of money, respectively, were made executory;
and in order to avoid the attachment and subsequent sale
of the machines by the sheriff for the satisfaction from the
proceeds thereof of the judgments rendered in the two
cases, plaintiff agreed with the intervenor, who is his
nephew, to execute, as he in fact executed in favor of the
latter, a deed of mortgage encumbering the machines
described in said deed in which it is stated that "they are
situated on Singalong Street No. 1163", which is a place
entirely different from the house Nos. 705 and 707 on
Ylaya Street hereinbefore mentioned.
The one year agreed upon in the deed of mortgage for the
fulfillment by the plaintiff of the obligation he had
contracted with the intervenor, having expired, the latter
commenced case to collect his mortgage credit.
The intervenor, as plaintiff in the said case, obtained
judgment in his favor because the defendant did not
interpose any defense or objection, and, moreover,
admitted being really indebted to the intervenor in the
amount set forth in the deed of mortgage.
The machines which the intervenor said were mortgaged
to him were then in fact in custodia legis, as they were
under the control of the receiver and liquidator Juan D.
Mencarini.
It was, therefore, useless for the intervenor to attach the partition is effected according to the result thereof after
same in view of the receiver's opposition; and the question the liquidation.
having been brought to court, it decided that nothing
In view of all the foregoing, the judgment appealed from
could be done because the receiver was not a party to the
is affirmed, with costs against the appellant. So ordered.
case which the intervenor instituted to collect his
aforesaid credit.
The question ended thus because the intervenor did not
take any other step until he thought of joining in this case
as intervenor.
ISSUE:
RULING:
1) From the foregoing facts, it is clear that plaintiff could
not obtain possession of the machines in question.
The constructive possession deducible from the fact that
he had the keys to the place where the machines were
found (Ylaya Street Nos. 705-707), as they had been
delivered to him by the receiver, does not help him any
because the lower court suspended the effects of the order
whereby the keys were delivered to him a few days after
its issuance; and thereafter revoked it entirely in the
appealed decision.
Furthermore, when he attempted to take actual possession
of the machines, the defendant did not allow him to do so.
Consequently, if he did not have actual possession of the
machines, he could not in any manner mortgage them, for
while it is true that the oft-mentioned deed of mortgage
was annotated in the registry of property, it is no less true
that the machines to which it refers are not the same as
those in question because the latter are on Ylaya Street
Nos. 705-707 and the former are on Singalong Street No.
1163.
It cannot be said that Exhibit B-1, allegedly a
supplementary contract between the plaintiff and the
intervenor, shows that the machines referred to in the deed
of mortgage are the same as those in dispute and which
are found on Ylaya Street because said exhibit being
merely a private document, the same cannot vary or alter
the terms of a public document which is Exhibit B or the
deed of mortgage.
(2) The second error attributed to the lower court is
baseless. The evidence of record shows that the machines
in contention originally belonged to the defendant and
from him were transferred to the partnership Galvan y
Compania.
This being the case, said machines belong to the
partnership and not to him, and shall belong to it until
LEYTE SAMAR SALES VS. CEA
FACTS:
In civil case No. 193 of the Court of First Instance of
Leyte, which is a suit for damages by the Leyte-Samar
Sales Co. (hereinafter called LESSCO) and Raymond
Tomassi against the Far Eastern Lumber & Commercial
Co. (unregistered commercial partnership hereinafter
called FELCO), Arnold Hall, Fred Brown and Jean
Roxas, judgment against defendants jointly and severally
for the amount of P31,589.14 plus costs was rendered on
October 29, 1948. The Court of Appeals confirmed the
award in November 1950, minus P2,000 representing
attorney's fees mistakenly included.
The decision having become final, the sheriff sold at
auction to Robert Dorfe and Pepito Asturias "all the
rights, interests, titles and participation" of the defendants
in certain buildings and properties described in the
certificate, for a total price of eight thousand and one
hundred pesos.
But Olegario Lastrilla filed in the case a motion, wherein
he claimed to be the owner by purchase on September 29,
1949, of all the "shares and interests" of defendant Fred
Brown in the FELCO, and requested "under the law of
preference of credits" that the sheriff be required to retain
in his possession so much of the proceeds of the auction
sale as may be necessary "to pay his right".
Over the plaintiffs' objection the judge in his order of June
13, 1951, granted Lastrilla's motion by requiring the
sheriff to retain 17 per cent of the money "for delivery to
the assignee, administrator or receiver" of the FELCO.
And on motion of Lastrilla, the court on August 14, 1951,
modified its order of delivery and merely declared that
Lastrilla was entitled to 17 per cent of the properties sold.
It is from this declaration and the subsequent orders to
enforce it that the petitioners seek relief by certiorari, their
position being that such orders were null and void for lack
of jurisdiction. At their request a writ of preliminary
injunction was issued here.
The record is not very clear, but there are indications that
Fred Brown was a partner of the FELCO, was defendant
in Civil Case No. 193 as such partner, and that the
properties sold at auction actually belonged to the FELCO
partnership and the partners. We shall also assume that
the sale made to Lastrilla on September 29, 1949, of all
the shares of Fred Brown in the FELCO was valid.
The result then, is that on June 9, 1951 when the sale was
effected of the properties of FELCO to Roberto Dorfe and
Pepito Asturias, Lastrilla was already a partner of
FELCO.
Now, does Lastrilla have any proper claim to the proceeds
of the sale? If he was a creditor of the FELCO, perhaps
or maybe. But he was not. The partner of a partnership
is not a creditor of such partnership for the amount of his
shares.
Lastrilla's theory, and the lower court's, seems to be:
inasmuch as Lastrilla had acquired the shares of Brown in
September, 1949, i.e., before the auction sale, and he was
not a party to the litigation, such shares could not have
been transferred to Dorfe and Asturias.
Granting, arguendo that the auction sale did not include
the interest or portion of the FELCO properties
corresponding to the shares of Lastrilla in the same
partnership (17%), the resulting situation would be at
most that the purchasers Dorfe and Asturias will have to
recognize dominion of Lastrilla over 17 per cent of the
properties awarded to them.
So Lastrilla acquired no right to demand any part of the
money paid by Dorfe and Asturias to the sheriff for the
benefit of FELCO and Tomassi, the plaintiffs in that case,
for the reason that, as he says, his shares (acquired from
Brown) could not have been and were not auctioned off
to Dorfe and Asturias.
In other words, the owner of property wrongfully sold
may not voluntarily come to court, and insist, "I approve
the sale, therefore give me the proceeds because I am the
owner". The reason is that the sale was made for the
judgment creditor (who paid for the fees and notices), and
not for anybody else.
On this score the respondent judge's action on Lastrilla's
motion should be declared as in excess of jurisdiction,
which even amounted to want of jurisdiction, considering
specially that Dorfe and Asturias, and the defendants
themselves, had undoubtedly the right to be heard but they
were not notified.
Why was it necessary to hear them on the merits of
Lastrilla's motion?
Because Dorfe and Asturias might be unwilling to
recognize the validity of Lastrilla's purchase, or, if valid,
they may want him not to forsake the partnership that
might have some obligations in connection with the
partnership properties.
And what is more important, if the motion is granted,
when the time for redemption comes, Dorfe and Asturias
will receive from redemptioners seventeen per cent (17%) In view of the foregoing, it is our opinion, and we so hold,
less than the amount they had paid for the same properties. that all orders of the respondent judge requiring delivery
of 17 per cent of the proceeds of the auction sale to
The defendants Arnold Hall and Jean Roxas, eyeing
respondent Olegario Lastrilla are null and void; and the
Lastrilla's financial assets, might also oppose the
costs of this suit shall be taxed against the latter. The
substitution by Lastrilla of Fred Brown, the judgment
preliminary injunction heretofore issued is made
against them being joint and several. They might
permanent. So ordered.
entertain misgivings about Brown's slipping out of their
common predicament through the disposal of his shares.
Lastly, all the defendants would have reasonable motives
to object to the delivery of 17 per cent of the proceeds to
Lastrilla, because it is so much money deducted, and for
which the plaintiffs might ask another levy on their other
holdings or resources. Supposing of course, there was no
fraudulent collusion among them.
Now, these varied interests of necessity make Dorfe,
Asturias and the defendants indispensable parties to the
motion of Lastrilla granting it was a step allowable under
our regulations on execution. Yet these parties were not
notified, and obviously took no part in the proceedings on
the motion.
Wherefore, the orders of the court recognizing Lastrilla's
right and ordering payment to him of a part of the
proceeds were patently erroneous, because promulgated
in excess or outside of its jurisdiction. For this reason the
respondents' argument resting on plaintiffs' failure to
appeal from the orders on time, although ordinarily
decisive, carries no persuasive force in this instance.
Invoking our ruling in Melocotones vs. Court of First
Instance, (57 Phil., 144), wherein we applied the theory of
laches to petitioners' 3-year delay in requesting certiorari,
the respondents point out that whereas the orders
complained of herein were issued in June 13, 1951 and
August 14, 1951 this special civil action was not filed
until August 1952.
It should be observed that the order of June 13 was
superseded by that of August 14,1951. This does not
necessarily mean that 17 per cent of the money had to be
delivered to him. It could mean, as hereinbefore
indicated, that the purchasers of the property (Dorfe and
Asturias) had to recognize Lastrilla's ownership.
It was only on April 16, 1952 (Annex N) that the court
issued an order directing the sheriff "to turn over" to
Lastrilla "17 per cent of the total proceeds of the auction
sale". There is the order that actually prejudiced the
petitioners herein, and they fought it until the last order of
July 10, 1952 (Annex Q). Surely a month's delay may not
be regarded as laches.
PNB VS. LO
FACTS:
On September 29, 1916, the appellants Severo Eugenio
Lo and Ng Khey Ling, together with J. A. Say Lian Ping,
Ko Tiao Hun, On Yem Ke Lam and Co Sieng Peng
formed a commercial partnership under the name of “Tai
Sing and Co.,” with a capital of P40,000 contributed by
said partners.
In the articles of copartnership, Exhibit A, it appears that
the partnership was to last for five years from after the
date of its organization, and that its purpose was to do
business in the City of Iloilo, Province of Iloilo, or in any
other part of the Philippine Islands the partners might
desire, under the name of “Tai Sing & Co.,” for the
purchase and sale of merchandise, goods, and native, as
well as Chinese and Japanese, products, and to carry on
such business and speculations as they might consider
profitable.
General manager J. A. Say Lian Ping executed a power of
attorney in favor of A. Y. Kelam, authorizing him to act
in his stead as manager and administrator of “Tai Sing &
Co.,” on July 26, 1918, for, and obtained a loan of P8,000
in current account from the plaintiff bank. (Exhibit C). As
security for said loan, he mortgaged certain personal
property of “Tai Sing & Co”
This credit was renewed several times and on March 25,
1919, A. Y. Kelam, as attorney-in-fact of “Tai Sing &
Co., executed a chattel mortgage in favor of plaintiff bank
as security for a loan of P20,000 with interest.
This mortgage was again renewed. According to this
mortgage contract, the P20,000 loan was to earn 9 per cent
interest per annum.
On April 20, 1920, Yap Seng, Severo Eugenio Lo, A. Y.
Kelam and Ng Khey Ling, the latter represented by M.
Pineda Tayenko, executed a power of attorney in favor of
Sy Tit by virtue of which Sy Tit, representing “Tai Sing
& Co., obtained a credit of P20,000 from plaintiff bank
on January 7, 1921, executing a chattel mortgage on
certain personal property belonging to “Tai Sing & Co.
Defendants had been using this commercial credit in a
current account with the plaintiff bank, from the year
1918, to May 22, 1921, and the debit balance of this
account, with interest to December 31, 1924.
This total is the sum claimed in the complaint, together
with interest on the P16,518.74 debt, at 9 per cent per
annum from January 1, 1925 until fully paid, with the
costs of the trial.
Defendant Eugenio Lo sets up, as a general defense, that
“Tai Sing & Co. was not a general partnership, and that
the commercial credit in current account which “Tai Sing
& Co. obtained from the plaintiff bank had not been
authorized by the board of directors of the company, nor
was the person who subscribed said contract authorized to
make the same, under the article of copartnership.
The other defendants, Yap Sing and Ng Khey Ling,
answered the complaint denying each and every one of
the allegations contained therein.
Trial court: (1) That defendants Eugenio Lo, Ng Khey
Ling and Yap Seng Co., Sieng Peng indebted to plaintiff
Philippine National Bank in sum of P22,595.26 to July 29,
1926, with a daily interest of P4.14 on the balance on
account of the partnership “Tai Sing & Co. for the sum of
P16,518.74 until September 9, 1922;
(2) Said defendants are ordered jointly and severally to
pay the Philippine National Bank the sum of P22,727.74
up to August 31, 1926, and from the date, P4.14 daily
interest on the principal.
ISSUES:
(1) The trial court erred in finding that the partnership
agreement of “Tai Sing & Co., (Exhibit A), is in
accordance with the requirements of Article 125 of the
Code of Commerce for the organization of a regular
partnership.
(2) W/N The trial court erred in finding that the death of
J. A. Say Lian Ping cannot extinguish the defendants’
obligation to the plaintiff bank, because the last debt
incurred by the commercial partnership “Tai Sing & Co.,
was that evidence by Exhibit F, signed by Sy Tit as
attorney-in-fact of the members of “Tai Sing & Co., by
virtue of Exhibit G.
RULING:
(1) NO. Appellants admit, and it appears from the context
of Exhibit A, that the defendant association formed by the
defendants is a general partnership, as defined in Article
126 of the Code Commerce. This partnership was
registered in the mercantile register of the Province of
Iloilo.
The only anomaly noted in its organization is that instead
of adopting for their firm name the names of all of the
partners, of several of them, or only one of them, to be
followed in the last two cases, by the words “and to be
followed in the last two cases, by the words “and
company” the partners agreed upon “Tai Sing & Co.” as
the firm name.
The anomalous adoption of the firm name above noted
does not affect the liability of the general partners to third
parties under Article 127 of the Code of Commerce. And
the Supreme Court so held in the case of Jo Chung Cang
vs. Pacific Commercial Co., (45 Phil., 142), in which it
said that the object of Article 126 of the Code of The judgment against the appellants is in accordance with
Commerce in requiring a general partnership to transact Article 127 of the Code of Commerce which provides that
business under the name of all its members, of several of all the members of a general partnership, be they
them, or of one only, is to protect the public from managing partners thereof or not, shall be personally and
imposition and fraud; and that the provision of said solidarily liable with all their property, for the results of
Article 126 is for the protection of the creditors rather than the transactions made in the name and for the account of
of the partners themselves. the partnership, under the signature of the latter, and by a
person authorized to use it.
And consequently the doctrine was enunciated that the
law must be unlawful and unenforceable only as between The judgment appealed from is in accordance with the
the partners and at the instance of the violating party, but law, and must therefore be, as it is hereby, affirmed with
not in the sense of depriving innocent parties of their costs against the appellants. So ordered.
rights who may have dealt with the offenders in ignorance
of the latter having violated the law; and that contracts
entered into by commercial associations defectively
organized are valid when voluntarily executed by the
parties, and the only question is whether or not they
complied with the agreement.
Therefore, the defendants cannot invoke in their defense
the anomaly in the firm name which they themselves
adopted.
(2) NO. As to the alleged death of the manager of the
company, Say Lian Ping, before the attorney-in-fact Ou
Yong Kelam executed Exhibits C, D and E, the trial court
did not find this fact proven at the hearing. But even
supposing that the court had erred, such an error would
not justify the reversal of the judgment, for two reasons at
least:
(1) Because Ou Yong Kelam was a partner who
contracted in the name of the partnership, without any
objection of the other partners; and
(2) because it appears in the record that the appellant-
partners Severo Eugenio Lo, Ng Khey Ling and Yap
Seng, appointed Sy Tit as manager, and he obtained from
the plaintiff bank the credit in current account, the debit
balance of which is sought to be recovered in this action.
Appellants allege that such of their property as is not
included in the partnership assets cannot-be seized for the
payment of the debts contracted by the partnership until
after the partnership property has been exhausted.
The court found that the partnership property described in
the mortgage Exhibit F no longer existed at the time of the
filing of the herein complaint nor has its existence been
proven, nor was it offered to the plaintiff for sale. We find
no just reason to reverse this conclusion of the trial court,
and this being so, it follows that Article 237 of the Code
of Commerce, invoked by the appellant, can in no way
have any application here.
Appellants also assign error to the action of the trial court
in ordering them to pay plaintiff, jointly and severally, the
sums claimed with 9 per cent interest on P16,518.74,
owing from them.