G.R. No.

134559 December 9, 1999

ANTONIA TORRES assisted by her husband, ANGELO TORRES; and EMETERIA

BARING, petitioners,
vs.
COURT OF APPEALS and MANUEL TORRES, respondents.

PANGANIBAN, J.:

Courts may not extricate parties from the necessary consequences of their acts. That the terms
of a contract turn out to be financially disadvantageous to them will not relieve them of their
obligations therein. The lack of an inventory of real property will not ipso facto release the
contracting partners from their respective obligations to each other arising from acts executed in
accordance with their agreement.

The Case

The Petition for Review on Certiorari before us assails the March 5, 1998 Decision 1 of the Court
of Appeals 2 (CA) in CA-GR CV No. 42378 and its June 25, 1998 Resolution denying
reconsideration. The assailed Decision affirmed the ruling of the Regional Trial Court (RTC) of
Cebu City in Civil Case No. R-21208, which disposed as follows:

WHEREFORE, for all the foregoing considerations, the Court, finding for the
defendant and against the plaintiffs, orders the dismissal of the plaintiffs
complaint. The counterclaims of the defendant are likewise ordered dismissed.
No pronouncement as to costs. 3

The Facts

Sisters Antonia Torres and Emeteria Baring, herein petitioners, entered into a "joint venture
agreement" with Respondent Manuel Torres for the development of a parcel of land into a
subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of
land in favor of respondent, who then had it registered in his name. By mortgaging the property,
respondent obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture
Agreement, was to be used for the development of the subdivision. 4 All three of them also
agreed to share the proceeds from the sale of the subdivided lots.

The project did not push through, and the land was subsequently foreclosed by the bank.

According to petitioners, the project failed because of "respondent's lack of funds or means and
skills." They add that respondent used the loan not for the development of the subdivision, but
in furtherance of his own company, Universal Umbrella Company.

On the other hand, respondent alleged that he used the loan to implement the Agreement. With
the said amount, he was able to effect the survey and the subdivision of the lots. He secured the
Lapu Lapu City Council's approval of the subdivision project which he advertised in a local
newspaper. He also caused the construction of roads, curbs and gutters. Likewise, he entered
into a contract with an engineering firm for the building of sixty low-cost housing units and
actually even set up a model house on one of the subdivision lots. He did all of these for a total
expense of P85,000.

Respondent claimed that the subdivision project failed, however, because petitioners and their
relatives had separately caused the annotations of adverse claims on the title to the land, which
eventually scared away prospective buyers. Despite his requests, petitioners refused to cause
the clearing of the claims, thereby forcing him to give up on the project. 5

Subsequently, petitioners filed a criminal case for estafa against respondent and his wife, who
were however acquitted. Thereafter, they filed the present civil case which, upon respondent's
motion, was later dismissed by the trial court in an Order dated September 6, 1982. On appeal,
however, the appellate court remanded the case for further proceedings. Thereafter, the RTC
issued its assailed Decision, which, as earlier stated, was affirmed by the CA.

Hence, this Petition. 6

Ruling of the Court of Appeals

In affirming the trial court, the Court of Appeals held that petitioners and respondent had formed
a partnership for the development of the subdivision. Thus, they must bear the loss suffered by
the partnership in the same proportion as their share in the profits stipulated in the contract.
Disagreeing with the trial court's pronouncement that losses as well as profits in a joint venture
should be distributed equally, 7 the CA invoked Article 1797 of the Civil Code which provides:

Art. 1797 — The losses and profits shall be distributed in conformity with the
agreement. If only the share of each partner in the profits has been agreed upon,
the share of each in the losses shall be in the same proportion.

The CA elucidated further:

In the absence of stipulation, the share of each partner in the profits and losses
shall be in proportion to what he may have contributed, but the industrial partner
shall not be liable for the losses. As for the profits, the industrial partner shall
receive such share as may be just and equitable under the circumstances. If
besides his services he has contributed capital, he shall also receive a share in
the profits in proportion to his capital.

The Issue

Petitioners impute to the Court of Appeals the following error:

. . . [The] Court of Appeals erred in concluding that the transaction

. . . between the petitioners and respondent was that of a joint
venture/partnership, ignoring outright the provision of Article 1769, and other
related provisions of the Civil Code of the Philippines. 8

The Court's Ruling

The Petition is bereft of merit.

Main Issue:

Existence of a Partnership

Petitioners deny having formed a partnership with respondent. They contend that the Joint
Venture Agreement and the earlier Deed of Sale, both of which were the bases of the appellate
court's finding of a partnership, were void.

In the same breath, however, they assert that under those very same contracts, respondent is
liable for his failure to implement the project. Because the agreement entitled them to receive 60
percent of the proceeds from the sale of the subdivision lots, they pray that respondent pay
them damages equivalent to 60 percent of the value of the property. 9

The pertinent portions of the Joint Venture Agreement read as follows:

KNOW ALL MEN BY THESE PRESENTS:

This AGREEMENT, is made and entered into at Cebu City, Philippines, this 5th
day of March, 1969, by and between MR. MANUEL R. TORRES, . . . the FIRST
PARTY, likewise, MRS. ANTONIA B. TORRES, and MISS EMETERIA BARING,
. . . the SECOND PARTY:

WITNESSETH:

That, whereas, the SECOND PARTY, voluntarily offered the FIRST PARTY, this
property located at Lapu-Lapu City, Island of Mactan, under Lot No. 1368
covering TCT No. T-0184 with a total area of 17,009 square meters, to be sub-
divided by the FIRST PARTY;

Whereas, the FIRST PARTY had given the SECOND PARTY, the sum of:
TWENTY THOUSAND (P20,000.00) Pesos, Philippine Currency upon the
execution of this contract for the property entrusted by the SECOND PARTY, for
sub-division projects and development purposes;

NOW THEREFORE, for and in consideration of the above covenants and

promises herein contained the respective parties hereto do hereby stipulate and
agree as follows:

ONE: That the SECOND PARTY signed an absolute Deed of Sale . . . dated
March 5, 1969, in the amount of TWENTY FIVE THOUSAND FIVE HUNDRED
THIRTEEN & FIFTY CTVS. (P25,513.50) Philippine Currency, for 1,700 square
meters at ONE [PESO] & FIFTY CTVS. (P1.50) Philippine Currency, in favor of
the FIRST PARTY, but the SECOND PARTY did not actually receive the
payment.

SECOND: That the SECOND PARTY, had received from the FIRST PARTY, the
necessary amount of TWENTY THOUSAND (P20,000.00) pesos, Philippine
 currency, for their personal obligations and this particular amount will serve as an
advance payment from the FIRST PARTY for the property mentioned to be sub-
divided and to be deducted from the sales.

THIRD: That the FIRST PARTY, will not collect from the SECOND PARTY, the
interest and the principal amount involving the amount of TWENTY THOUSAND
(P20,000.00) Pesos, Philippine Currency, until the sub-division project is
terminated and ready for sale to any interested parties, and the amount of
TWENTY THOUSAND (P20,000.00) pesos, Philippine currency, will be deducted
accordingly.

FOURTH: That all general expense[s] and all cost[s] involved in the sub-division
project should be paid by the FIRST PARTY, exclusively and all the expenses
will not be deducted from the sales after the development of the sub-division
project.

FIFTH: That the sales of the sub-divided lots will be divided into SIXTY
PERCENTUM 60% for the SECOND PARTY and FORTY PERCENTUM 40% for
the FIRST PARTY, and additional profits or whatever income deriving from the
sales will be divided equally according to the . . . percentage [agreed upon] by
both parties.

SIXTH: That the intended sub-division project of the property involved will start
the work and all improvements upon the adjacent lots will be negotiated in both
parties['] favor and all sales shall [be] decided by both parties.

SEVENTH: That the SECOND PARTIES, should be given an option to get back
the property mentioned provided the amount of TWENTY THOUSAND
(P20,000.00) Pesos, Philippine Currency, borrowed by the SECOND PARTY, will
be paid in full to the FIRST PARTY, including all necessary improvements spent
by the FIRST PARTY, and-the FIRST PARTY will be given a grace period to
turnover the property mentioned above.

That this AGREEMENT shall be binding and obligatory to the parties who
executed same freely and voluntarily for the uses and purposes therein stated. 10

A reading of the terms embodied in the Agreement indubitably shows the existence of a
partnership pursuant to Article 1767 of the Civil Code, which provides:

Art. 1767. By the contract of partnership two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of
dividing the profits among themselves.

Under the above-quoted Agreement, petitioners would contribute property to the partnership in
the form of land which was to be developed into a subdivision; while respondent would give, in
addition to his industry, the amount needed for general expenses and other costs. Furthermore,
the income from the said project would be divided according to the stipulated percentage.
Clearly, the contract manifested the intention of the parties to form a partnership. 11
It should be stressed that the parties implemented the contract. Thus, petitioners transferred the
title to the land to facilitate its use in the name of the respondent. On the other hand, respondent
caused the subject land to be mortgaged, the proceeds of which were used for the survey and
the subdivision of the land. As noted earlier, he developed the roads, the curbs and the gutters
of the subdivision and entered into a contract to construct low-cost housing units on the
property.

Respondent's actions clearly belie petitioners' contention that he made no contribution to the
partnership. Under Article 1767 of the Civil Code, a partner may contribute not only money or
property, but also industry.

Petitioners Bound by

Terms of Contract

Under Article 1315 of the Civil Code, contracts bind the parties not only to what has been
expressly stipulated, but also to all necessary consequences thereof, as follows:

Art. 1315. Contracts are perfected by mere consent, and from that moment the
parties are bound not only to the fulfillment of what has been expressly stipulated
but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law.

It is undisputed that petitioners are educated and are thus presumed to have understood the
terms of the contract they voluntarily signed. If it was not in consonance with their expectations,
they should have objected to it and insisted on the provisions they wanted.

Courts are not authorized to extricate parties from the necessary consequences of their acts,
and the fact that the contractual stipulations may turn out to be financially disadvantageous will
not relieve parties thereto of their obligations. They cannot now disavow the relationship formed
from such agreement due to their supposed misunderstanding of its terms.

Alleged Nullity of the

Partnership Agreement

Petitioners argue that the Joint Venture Agreement is void under Article 1773 of the Civil Code,
which provides:

Art. 1773. A contract of partnership is void, whenever immovable property is

contributed thereto, if an inventory of said property is not made, signed by the
parties, and attached to the public instrument.

They contend that since the parties did not make, sign or attach to the public instrument an
inventory of the real property contributed, the partnership is void.

We clarify. First, Article 1773 was intended primarily to protect third persons. Thus, the eminent
Arturo M. Tolentino states that under the aforecited provision which is a complement of Article
1771, 12 "The execution of a public instrument would be useless if there is no inventory of the
property contributed, because without its designation and description, they cannot be subject to
inscription in the Registry of Property, and their contribution cannot prejudice third persons. This
will result in fraud to those who contract with the partnership in the belief [in] the efficacy of the
guaranty in which the immovables may consist. Thus, the contract is declared void by the law
when no such inventory is made." The case at bar does not involve third parties who may be
prejudiced.

Second, petitioners themselves invoke the allegedly void contract as basis for their claim that
respondent should pay them 60 percent of the value of the property. 13 They cannot in one
breath deny the contract and in another recognize it, depending on what momentarily suits their
purpose. Parties cannot adopt inconsistent positions in regard to a contract and courts will not
tolerate, much less approve, such practice.

In short, the alleged nullity of the partnership will not prevent courts from considering the Joint
Venture Agreement an ordinary contract from which the parties' rights and obligations to each
other may be inferred and enforced.

Partnership Agreement Not the Result

of an Earlier Illegal Contract

Petitioners also contend that the Joint Venture Agreement is void under Article 1422 14 of the
Civil Code, because it is the direct result of an earlier illegal contract, which was for the sale of
the land without valid consideration.

This argument is puerile. The Joint Venture Agreement clearly states that the consideration for
the sale was the expectation of profits from the subdivision project. Its first stipulation states that
petitioners did not actually receive payment for the parcel of land sold to respondent.
Consideration, more properly denominated as cause, can take different forms, such as the
prestation or promise of a thing or service by another. 15

In this case, the cause of the contract of sale consisted not in the stated peso value of the land,
but in the expectation of profits from the subdivision project, for which the land was intended to
be used. As explained by the trial court, "the land was in effect given to the partnership as
[petitioner's] participation therein. . . . There was therefore a consideration for the sale, the
[petitioners] acting in the expectation that, should the venture come into fruition, they [would] get
sixty percent of the net profits."

Liability of the Parties

Claiming that rerpondent was solely responsible for the failure of the subdivision project,
petitioners maintain that he should be made to pay damages equivalent to 60 percent of the
value of the property, which was their share in the profits under the Joint Venture Agreement.

We are not persuaded. True, the Court of Appeals held that petitioners' acts were not the cause
of the failure of the project. 16 But it also ruled that neither was respondent responsible
therefor. 17 In imputing the blame solely to him, petitioners failed to give any reason why we
should disregard the factual findings of the appellate court relieving him of fault. Verily, factual
issues cannot be resolved in a petition for review under Rule 45, as in this case. Petitioners
have not alleged, not to say shown, that their Petition constitutes one of the exceptions to this
doctrine. 18Accordingly, we find no reversible error in the CA's ruling that petitioners are not
entitled to damages.

WHEREFORE, the Perition is hereby DENIED and the challenged Decision AFFIRMED. Costs
against petitioners.

SO ORDERED
G.R. No. L-11840 July 26, 1960

ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and ANTONIO C.

GOQUIOLAY, plaintiffs-appellants,
vs.
WASHINGTON Z. SYCIP, ET AL., defendants-appellees.

Jose C. Colayco, Manuel O. Chan and Padilla Law Offices for appellants.
Sycip, Quisumbing, Salazar and Associates for appellees.

REYES, J. B. L., J.:

Direct appeal from the decision of the Court of First Instance of Davao (the amount involved
being more than P200,00) dismissing the plaintiffs-appellants' complaint.

From the stipulation of facts of the parties and the evidence on record, it would appear that on
May 29, 1940, Tan Sin An and Antonio C. Goquiolay", entered into a general commercial
partnership under the partnership name "Tan Sin An and Antonio C. Goquiolay", for the purpose
in dealing in real state. The partnership had a capital of P30,000.00, P18,000.00 of which was
contributed by Goquiolay and P12,000.00 by Tan Sin An. The agreement lodge upon Tan Sin
An the sole management of the partnership affairs, stipulating that —

III. The co-partnership shall be composed of said Tan Sin An as sole managing and
partner (sic), and Antonio C. Goquiolay as co-partner.

IV. Vhe affairs of co-partnership shall be managed exclusively by the managing and
partner (sic) or by his authorized agent, and it is expressly stipulated that the managing
and partner (sic) may delegate the entire management of the affairs of the co-
partnership by irrevocable power of attorney to any person, firm or corporation he may
select upon such terms as regards compensation as he may deem proper, and vest in
such persons, firm or corporation full power and authority, as the agent of the co-
partnership and in his name, place and stead to do anything for it or on his behalf which
he as such managing and partner (sic) might do or cause to be done.

V. The co-partner shall have no voice or participation in the management of the affairs of
the co-partnership; but he may examine its accounts once every six (6) months at any
time during ordinary business hours, and in accordance with the provisions of the Code
of Commerce. (Article of Co-Partnership).

The lifetime of the partnership was fixed at ten (10) years and also that —

In the event of the death of any of the partners at any time before the expiration of said
term, the co-partnership shall not be dissolved but will have to be continued and the
deceased partner shall be represented by his heirs or assigns in said co-partnership
(Art. XII, Articles of Co-Partnership).

However, the partnership could be dissolved and its affairs liquidated at any time upon mutual
agreement in writing of the partners (Art. XIII, articles of Co-Partnership).
On May 31, 1940, Antonio Goquiolay executed a general power of attorney to this effect:

That besides the powers and duties granted the said Tan Sin An by the articles of co-
partnership of said co-partnership "Tan Sin An and Antonio Goquiolay", that said Tan
Sin An should act as the Manager for said co-partnership for the full period of the term
for which said co-partnership was organized or until the whole period that the said
capital of P30,000.00 of the co-partnership should last, to carry on to the best advantage
and interest of the said co-partnership, to make and execute, sign, seal and deliver for
the co-partnership, and in its name, all bills, bonds, notes, specialties, and trust receipts
or other instruments or documents in writing whatsoever kind or nature which shall be
necessary to the proper conduction of the said businesses, including the power to
mortgage and pledge real and personal properties, to secure the obligation of the co-
partnership, to buy real or personal properties for cash or upon such terms as he may
deem advisable, to sell personal or real properties, such as lands and buildings of the
co-partnership in any manner he may deem advisable for the best interest of said co-
partnership, to borrow money on behalf of the co-partnership and to issue promissory
notes for the repayment thereof, to deposit the funds of the co-partnership in any local
bank or elsewhere and to draw checks against funds so deposited ... .

On May 29, 1940, the plaintiff partnership "Tan Sin An and Goquiolay" purchased the three (3)
parcels of land, known as Lots Nos. 526, 441 and 521 of the Cadastral Survey of Davao,
subject-matter of the instant litigation, assuming the payment of a mortgage obligation of
P25,000.00, payable to "La Urbana Sociedad Mutua de Construccion y Prestamos" for a period
of ten (10) years, with 10% interest per annum. Another 46 parcels were purchased by Tan Sin
An in his individual capacity, and he assumed payment of a mortgage debt thereon for
P35,000.00 with interest. The downpayment and the amortization were advanced by Yutivo and
Co., for the account of the purchasers.

On September 25, 1940, the two separate obligations were consolidated in an instrument
executed by the partnership and Tan Sin An, whereby the entire 49 lots were mortgaged in
favor of the "Banco Hipotecario de Filipinas" (as successor to "La Urbana") and the covenantors
bound themselves to pay, jointly and severally, the remaining balance of their unpaid accounts
amounting to P52,282.80 within eight 8 years, with 8% annual interest, payable in 96 equal
monthly installments.

On June 26, 1942, Tan Sin An died, leaving as surviving heirs his widow, Kong Chai Pin, and
four minor children, namely: Tan L. Cheng, Tan L. Hua, Tan C. Chiu and Tan K. Chuan.
Defendant Kong Chai Pin was appointed administratrix of the intestate estate of her deceased
husband.

In the meantime, repeated demands for payment were made by the Banco Hipotecario on the
partnership and on Tan Sin An. In March, 1944, the defendant Sing Yee and Cuan, Co., Inc.,
upon request of defendant Yutivo Sans Hardware Co., paid the remaining balance of the
mortgage debt, and the mortgage was cancelled.

Then in 1946, Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. filed their claims in
the intestate proceedings of Tan Sin An for P62,415.91 and P54,310.13, respectively, as
alleged obligations of the partnership "Tan Sin An and Antonio C. Goquiolay" and Tan Sin An,
for advances, interest and taxes paid in amortizing and discharging their obligations to "La
Urbana" and the "Banco Hipotecario". Disclaiming knowledge of said claims at first, Kong Chai
Pin later admitted the claims in her amended answer and they were accordingly approved by
the Court.

On March 29, 1949, Kong Chai Pin filed a petition with the probate court for authority to sell all
the 49 parcels of land to Washington Z, Sycip and Betty Y. Lee, for the purpose preliminary of
settling the aforesaid debts of Tan Sin An and the partnership. Pursuant to a court order of April
2, 1949, the administratrix executed on April 4, 1949, a deed of sale1 of the 49 parcels of land to
the defendants Washington Sycip and Betty Lee in consideration of P37,000.00 and of vendees'
assuming payments of the claims filed by Yutivo Sons Hardware Co. and Sing Yee and Cuan
Co., Inc. Later, in July, 1949, defendants Sycip and Betty Lee executed in favor of the Insular
Development Co., Inc. a deed of transfer covering the said 49 parcels of land.

Learning about the sale to Sycip and Lee, the surviving partner Antonio Goquiolay filed, on or
about July 25, 1949, a petition in the intestate proceedings seeking to set aside the order of the
probate court approving the sale in so far as his interest over the parcels of land sold was
concerned. In its order of December 29, 1949, the probate court annulled the sale executed by
the administratrix with respect to the 60% interest of Antonio Goquiolay over the properties sold.
Kong Chai Pin appealed to the Court of Appeals, which court later certified the case to us (93
Phil., 413; 49 Off. Gaz. [7] 2307). On June 30, 1953, we rendered decision setting aside the
orders of the probate court complained of and remanding the case for new trial, due to the non-
inclusion of indispensable parties. Thereafter, new pleadings were filed.

The second amended complaint in the case at bar prays, among other things, for the annulment
of the sale in favor of Washington Sycip and Betty Lee, and their subsequent conveyance in
favor of Insular Development Co., Inc., in so far as the three (3) lots owned by the plaintiff
partnership are concerned. The answer averred the validity of the sale by Kong Chai Pin as
successor partner, in lieu of the late Tan Sin An. After hearing, the complaint was dismissed by
the lower court in its decision dated October 30, 1956; hence, this appeal taken directly to us by
the plaintiffs, as the amount involved is more than P200,000.00. Plaintiffs-appellants assign as
errors that —

I — The lower court erred in holding that Kong Chai Pin became the managing partner of
the partnership upon the death of her husband, Tan Sin An, by virtue of the articles of
Partnership executed between Tan Sin An and Antonio Goquiolay, and the general
power of attorney granted by Antonio Goquiolay.

II — The lower court erred in holding that Kong Chai Pin could act alone as sole
managing partner in view of the minority of the other heirs.

III — The lower court erred in holding that Kong Chai Pin was the only heir qualified to
act as managing partner.

IV — The lower court erred in holding that Kong Chai Pin had authority to sell the
partnership properties by virtue of the articles of partnership and the general power of
attorney granted to Tan Sin An in order to pay the partnership indebtedness.

V — The lower court erred in finding that the partnership did not pay its obligation to the
Banco Hipotecario.
 VI — The lower court erred in holding that the consent of Antonio Goquiolay was not
necessary to consummate the sale of the partnership properties.

VII — The lower court erred in finding that Kong Chai Pin managed the business of the
partnership after the death of her husband, and that Antonio Goquiolay knew it.

VIII — The lower court erred in holding that the failure of Antonio Goquiolay to oppose
the management of the partnership by Kong Chai Pin estops him now from attacking the
validity of the sale of the partnership properties.

IX — The lower court erred in holding that the buyers of the partnership properties acted
in good faith.

X — The lower court erred in holding that the sale was not fraudulent against the
partnership and Antonio Goquiolay.

XI — The lower court erred in holding that the sale was not only necessary but beneficial
to the partnership.

XII — The lower court erred in dismissing the complaint and in ordering Antonio
Goquiolay to pay the costs of suit.

There is a merit in the contention that the lower court erred in holding that the widow, Kong Chai
Pin, succeeded her husband, Tan Sin An, in the sole management of the partnership, upon the
latter's death. While, as we previously stated in our narration of facts, the Articles of Co-
Partnership and the power of attorney executed by Antonio Goquiolay, conferred upon Tan Sin
An the exclusive management of the business, such power, premised as it is upon trust and
confidence, was a mere personal right that terminated upon Tan's demise. The provision in the
articles stating that "in the event of death of any one of the partners within the 10-year term of
the partnership, the deceased partner shall be represented by his heirs", could not have
referred to the managerial right given to Tan Sin An; more appropriately, it related to the
succession in the proprietary interest of each partner. The covenant that Antonio Goquiolay
shall have no voice or participation in the management of the partnership, being a limitation
upon his right as a general partner, must be held coextensive only with Tan's right to manage
the affairs, the contrary not being clearly apparent.

Upon the other hand, consonant with the articles of co-partnership providing for the continuation
of the firm notwithstanding the death of one of the partners, the heirs of the deceased, by never
repudiating or refusing to be bound under the said provision in the articles, became individual
partners with Antonio Goquiolay upon Tan's demise. The validity of like clauses in partnership
agreements is expressly sanctioned under Article 222 of the Code of Commerce.2

Minority of the heirs is not a bar to the application of that clause in the articles of co-partnership
(2 Vivante, Tratado de Derecho Mercantil, 493; Planiol, Traite Elementaire de Droit Civil,
English translation by the Louisiana State Law Institute, Vol. 2, Pt. 2, p. 177).

Appellants argue, however, that since the "new" members' liability in the partnership was limited
merely to the value of the share or estate left by the deceased Tan Sin An, they became no
more than limited partners and, as such, were disqualified from the management of the
business under Article 148 of the Code of Commerce. Although ordinarily, this effect follows
from the continuance of the heirs in the partnership,3 it was not so with respect to the widow
Kong Chai Pin, who, by her affirmative actions, manifested her intent to be bound by the
partnership agreement not only as a limited but as a general partner. Thus, she managed and
retained possession of the partnership properties and was admittedly deriving income therefrom
up to and until the same were sold to Washington Sycip and Betty Lee. In fact, by executing the
deed of sale of the parcels of land in dispute in the name of the partnership, she was acting no
less than as a managing partner. Having thus preferred to act as such, she could be held liable
for the partnership debts and liabilities as a general partner, beyond what she might have
derived only from the estate of her deceased husband. By allowing her to retain control of the
firm's property from 1942 to 1949, plaintiff estopped himself to deny her legal representation of
the partnership, with the power to bind it by the proper contracts.

The question now arises as to whether or not the consent of the other partners was necessary
to perfect the sale of the partnership properties to Washington Sycip and Betty Lee. The answer
is, we believe, in the negative. Strangers dealing with a partnership have the right to assume, in
the absence of restrictive clauses in the co-partnership agreement, that every general partner
has power to bind the partnership, specially those partners acting with ostensible authority. And
so, we held in one case:

. . . Third persons, like the plaintiff, are not bound in entering into a contract with any of
the two partners, to ascertain whether or not this partner with whom the transaction is
made has the consent of the other partner. The public need not make inquiries as to the
agreements had between the partners. Its knowledge is enough that it is contracting with
the partnership which is represented by one of the managing partners.

"There is a general presumption that each individual partner is an agent for the firm and
that he has authority to bind the firm in carrying on the partnership transactions."
[Mills vs. Riggle, 112 Pac., 617]

"The presumption is sufficient to permit third persons to hold the firm liable on
transactions entered into by one of the members of the firm acting apparently in its
behalf and within the scope of his authority." [Le Roy vs. Johnson, 7 U.S. Law, Ed., 391]
(George Litton vs. Hill & Ceron, et al., 67 Phil., 513-514).

We are not unaware of the provision of Article 129 of the Code of Commerce to the effect that
—

If the management of the general partnership has not been limited by special agreement
to any of the members, all shall have the power to take part in the direction and
management of the common business, and the members present shall come to an
agreement for all contracts or obligations which may concern the association. (Emphasis
supplied)

but this obligation is one imposed by law on the partners among themselves, that does not
necessarily affect the validity of the acts of a partner, while acting within the scope of the
ordinary course of business of the partnership, as regards third persons without notice. The
latter may rightfully assume that the contracting partner was duly authorized to contract for and
in behalf of the firm and that, furthermore, he would not ordinarily act to the prejudice of his co-
partners. The regular course of business procedure does not require that each time a third
person contracts with one of the managing partners, he should inquire as to the latter's authority
to do so, or that he should first ascertain whether or not the other partners had given their
consent thereto. In fact, Article 130 of the same Code of Commerce provides that even if a new
obligation was contracted against the express will of one of the managing partners, "it shall not
be annulled for such reason, and it shall produce its effects without prejudice to the
responsibility of the member or members who contracted it, for the damages they may have
caused to the common fund."

Cesar Vivante (2 Tratado de Derecho Mercantil, pp. 114-115) points out:

367. Primera hipotesis. — A falta de pactos especiales, la facultad de administrar

corresponde a cada socio personalmente. No hay que esperar ciertamente concordia
con tantas cabezas, y para cuando no vayan de acuerdo, la disciplina del Codigo no
ofrece un sistema eficaz que evite los inconvenientes. Pero, ante el silencio del contrato,
debia quiza el legislador privar de la administracion a uno de los socios en beneficio del
otro? Seria una arbitrariedad. Debera quiza declarar nula la Sociedad que no haya
elegido Administrador? El remedio seria peor que el mal. Debera, tal vez, pretender que
todos los socios concurran en todo acto de la Sociedad? Pero este concurso de todos
habria reducido a la impotencia la administracion, que es asunto d todos los dias y de
todas horas. Hubieran sido disposiciones menos oportunas que lo adoptado por el
Codigo, el cual se confia al espiritu de reciproca confianza que deberia animar la
colaboracion de los socios, y en la ley inflexible de responsabilidad que implica
comunidad en los intereses de los mismos.

En esta hipotesis, cada socio puede ejercer todos los negocios comprendidos en el
contrato social sin dar de ello noticia a los otros, porque cada uno de ellos ejerce la
administracion en la totalidad de sus relaciones, salvo su responsabilidad en el caso de
una administracion culpable. Si debiera dar noticia, el beneficio de su simultania
actividad, frecuentemente distribuida en lugares y en tiempos diferentes, se echaria a
perder. Se objetara el que de esta forma, el derecho de oposicion de cada uno de los
socios puede quedar frustrado. Pero se puede contestar que este derecho de oposicion
concedido por la ley como un remedio excepcional, debe subordinarse al derecho de
ejercer el oficio de Administrador, que el Codigo concede sin limite: "se presume que los
socios se han concedido reciprocamente la facultad de administrar uno para otro." Se
haria precipitar esta hipotesis en la otra de una administracion colectiva (art. 1,721,
Codigo Civil) y se acabaria con pedir el consentimiento, a lo menos tacito, de todos los
socios — lo que el Codigo excluye ........, si se obligase al socio Administrador a dar
noticia previa del negocio a los otros, a fin de que pudieran oponerse si no consintieran.

Commenting on the same subject, Gay de Montella (Codigo de Comercio, Tomo II, 147-148)
opines:

Para obligar a las Compañias enfrente de terceros (art. 128 del Codigo), no es bastante
que los actos y contratos hayan sido ejecutados por un socio o varios en nombre
colectivo, sino que es preciso el concurso de estos dos elementos, uno, que el socio o
socios tengan reconocida la facultad de administrar la Compañia, y otro, que el acto o
contrato haya sido ejecutado en nombre de la Sociedad y usando de su firma social. Asi
se que toda obligacion contraida bajo la razon social, se presume contraida por la
Compañia. Esta presunion es impuesta por motivos de necesidad practica. El tercero no
puede cada vez que trata con la Compañia, inquirir si realmente el negocio concierne a
la Sociedad. La presuncion es juris tantum y no juris et de jure, de modo que si el
 gerente suscribe bajo la razon social una obligacion que no interesa a la Sociedad, este
podra rechazar la accion del tercero probando que el acreedor conocia que la obligacion
no tenia ninguna relacion con ella. Si tales actos y contratos no comportasen la
concurrencia de ambos elementos, seria nulos y podria decretarse la responsabilidad
civil o penal contra sus autores.

En el caso que tales actos o contratos hayan sido tacitamente aprobados por la
Compañia, o contabilizados en sus libros, si el acto o contrato ha sido convalidado sin
protesta y se trata de acto o contrato que ha producido beneficio social, tendria plena
validez, aun cuando le faltase algunos o ambos de aquellos requisitos antes señalados.

Cuando los Estatutos o la escritura social no contienen ninguna clausula relativa al

nombramiento o designacion de uno o mas de un socio para administrar la Compañia
(art. 129 del Codigo) todos tienen por un igual el derecho de concurir a la decision y
manejo de los negocios comunes. . . .

Although the partnership under consideration is a commercial partnership and, therefore, to be

governed by the Code of Commerce, the provisions of the old Civil Code may give us some light
on the right of one partner to bind the partnership. States Art. 1695 thereof:

Should no agreement have been made with respect to the form of management, the
following rules shall be observed:

1. All the partners shall be considered agents, and whatever any one of the may do
individually shall bind the partnership; but each one may oppose any act of the others
before it has become legally binding.

The records fail to disclose that appellant Goquiolay made any opposition to the sale of the
partnership realty to Washington Z. Sycip and Betty Lee; on the contrary, it appears that he
(Goquiolay) only interposed his objections after the deed of conveyance was executed and
approved by the probate court, and, consequently, his opposition came too late to be effective.

Appellants assails the correctness of the amounts paid for the account of the partnership as
found by the trial court. This question, however, need not be resolved here, as in the deed of
conveyance executed by Kong Chai Pin, the purchasers Washington Sycip and Betty Lee
assumed, as part consideration of the purchase, the full claims of the two creditors, Sing Yee
and Cuan Co., Inc. and Yutivo Sons Hardware Co.

Appellants also question the validity of the sale covering the entire firm realty, on the ground
that it, in effect, threw the partnership into dissolution, which requires consent of all the partners.
This view is untenable. That the partnership was left without the real property it originally had
will not work its dissolution, since the firm was not organized to exploit these precise lots but to
engage in buying and selling real estate, and "in general real estate agency and brokerage
business". Incidentally, it is to be noted that the payment of the solidary obligation of both the
partnership and the late Tan Sin An, leaves open the question of accounting and contribution
between the co-debtors, that should be ventilated separately.

Lastly, appellants point out that the sale of the partnership properties was only a fraudulent
device by the appellees, with the connivance of Kong Chai Pin, to ease out Antonio Goquiolay
from the partnership. The "devise", according to the appellants, started way back sometime in
1945, when one Yu Khe Thai sounded out Antonio Goquiolay on the possibility of selling his
share in the partnership; and upon his refusal to sell, was followed by the filing of the claims of
Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. in the intestate estate proceedings
of Tan Sin An. As creditors of Tan Sin An and the plaintiff partnership (whose liability was
alleged to be joint and several), Yutivo Sons Hardware Co., and Sing Yee Cuan Co., Inc. had
every right to file their claims in the intestate proceedings. The denial of the claims at first by
Kong Chai Pin ( for lack of sufficient knowledge) negatives any conspiracy on her part in the
alleged fraudulent scheme, even if she subsequently decided to admit their validity after
studying the claims and finding it best to admit the same. It may not be amiss to remark that the
probate court approved the questioned claims.

There is complete failure of proof, moreover, that the price for which the properties were sold
was unreasonably low, or in any way unfair, since appellants presented no evidence of the
market value of the lots as of the time of their sale to appellees Sycip and Lee. The alleged
value of P31,056.58 in May of 1955 is no proof of the market value in 1949, specially because in
the interval, the new owners appear to have converted the land into a subdivision, which they
could not do without opening roads and otherwise improving the property at their own expense.
Upon the other hand, Kong Chai Pin hardly had any choice but to execute the questioned sale,
as it appears that the partnership had neither cash nor other properties with which to pay its
obligations. Anyway, we cannot consider seriously the inferences freely indulged in by the
appellants as allegedly indicating fraud in the questioned transactions, leading to the
conveyance of the lots in dispute to the appellee Insular Development Co., Inc.

Wherefore, finding no reversible error in the appealed judgment, we affirm the same, with costs
against appellant Antonio Goquiolay.
G.R. No. 156015. August 11, 2005

REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M. CALIMLIM, in his

capacity as former Chief of the Intelligence Service, Armed Forces of the Philippines
(ISAFP), and former Commanding General, Presidential Security Group (PSG), and MAJ.
DAVID B. DICIANO, in his capacity as an Officer of ISAFP and former member of the
PSG, Petitioners,
vs.
HON. VICTORINO EVANGELISTA, in his capacity as Presiding Judge, Regional Trial
Court, Branch 223, Quezon City, and DANTE LEGASPI, represented by his attorney-in-
fact, Paul Gutierrez, Respondent.

DECISION

PUNO, J.:

The case at bar stems from a complaint for damages, with prayer for the issuance of a writ of
preliminary injunction, filed by private respondent Dante Legaspi, through his attorney-in-fact
Paul Gutierrez, against petitioners Gen. Jose M. Calimlim, Ciriaco Reyes and Maj. David
Diciano before the Regional Trial Court (RTC) of Quezon City.1

The Complaint alleged that private respondent Legaspi is the owner of a land located in Bigte,
Norzagaray, Bulacan. In November 1999, petitioner Calimlim, representing the Republic of the
Philippines, and as then head of the Intelligence Service of the Armed Forces of the Philippines
and the Presidential Security Group, entered into a Memorandum of Agreement (MOA) with one
Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure in a land in Bigte,
Norzagaray, Bulacan. Petitioner Diciano signed the MOA as a witness.2 It was further alleged
that thereafter, Reyes, together with petitioners, started, digging, tunneling and blasting works
on the said land of Legaspi. The complaint also alleged that petitioner Calimlim assigned about
80 military personnel to guard the area and encamp thereon to intimidate Legaspi and other
occupants of the area from going near the subject land.

On February 15, 2000, Legaspi executed a special power of attorney (SPA) appointing his
nephew, private respondent Gutierrez, as his attorney-in-fact. Gutierrez was given the power to
deal with the treasure hunting activities on Legaspi’s land and to file charges against those who
may enter it without the latter’s authority.3 Legaspi agreed to give Gutierrez 40% of the treasure
that may be found in the land.

On February 29, 2000, Gutierrez filed a case for damages and injunction against petitioners for
illegally entering Legaspi’s land. He hired the legal services of Atty. Homobono Adaza. Their
contract provided that as legal fees, Atty. Adaza shall be entitled to 30% of Legaspi’s share in
whatever treasure may be found in the land. In addition, Gutierrez agreed to pay Atty. Adaza
₱5,000.00 as appearance fee per court hearing and defray all expenses for the cost of the
litigation.4 Upon the filing of the complaint, then Executive Judge Perlita J. Tria Tirona issued a
72-hour temporary restraining order (TRO) against petitioners.

The case5 was subsequently raffled to the RTC of Quezon City, Branch 223, then presided by
public respondent Judge Victorino P. Evangelista. On March 2, 2000, respondent judge issued
another 72-hour TRO and a summary hearing for its extension was set on March 7, 2000.
On March 14, 2000, petitioners filed a Motion to Dismiss6 contending: first, there is no real party-
in-interest as the SPA of Gutierrez to bring the suit was already revoked by Legaspi on March 7,
2000, as evidenced by a Deed of Revocation,7 and, second, Gutierrez failed to establish that the
alleged armed men guarding the area were acting on orders of petitioners. On March 17, 2000,
petitioners also filed a Motion for Inhibition8 of the respondent judge on the ground of alleged
partiality in favor of private respondent.

On March 23, 2000, the trial court granted private respondent’s application for a writ of
preliminary injunction on the following grounds: (1) the diggings and blastings appear to have
been made on the land of Legaspi, hence, there is an urgent need to maintain the status quo to
prevent serious damage to Legaspi’s land; and, (2) the SPA granted to Gutierrez continues to
be valid.9 The trial court ordered thus:

WHEREFORE, in view of all the foregoing, the Court hereby resolves to GRANT plaintiff’s
application for a writ of preliminary injunction. Upon plaintiff’s filing of an injunction bond in the
amount of ONE HUNDRED THOUSAND PESOS (₱100,000.00), let a Writ of Preliminary
Injunction issue enjoining the defendants as well as their associates, agents or representatives
from continuing to occupy and encamp on the land of the plaintiff LEGASPI as well as the
vicinity thereof; from digging, tunneling and blasting the said land of plaintiff LEGASPI; from
removing whatever treasure may be found on the said land; from preventing and threatening the
plaintiffs and their representatives from entering the said land and performing acts of ownership;
from threatening the plaintiffs and their representatives as well as plaintiffs’ lawyer.

On even date, the trial court issued another Order10 denying petitioners’ motion to dismiss and
requiring petitioners to answer the complaint. On April 4, 2000, it likewise denied petitioners’
motion for inhibition.11

On appeal, the Court of Appeals affirmed the decision of the trial court.12

Hence this petition, with the following assigned errors:

WHETHER THE CONTRACT OF AGENCY BETWEEN LEGASPI AND PRIVATE

RESPONDENT GUTIERREZ HAS BEEN EFFECTIVELY REVOKED BY LEGASPI.

II

WHETHER THE COMPLAINT AGAINST PETITIONERS SHOULD BE DISMISSED.

III

WHETHER RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM

FURTHER PROCEEDING WITH THE CASE.

We find no merit in the petition.

On the first issue, petitioners claim that the special power of attorney of Gutierrez to represent
Legaspi has already been revoked by the latter. Private respondent Gutierrez, however,
contends that the unilateral revocation is invalid as his agency is coupled with interest.

We agree with private respondent.

Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to
render some service or do something in representation or on behalf of another, known as the
principal, with the consent or authority of the latter.13

A contract of agency is generally revocable as it is a personal contract of representation based

on trust and confidence reposed by the principal on his agent. As the power of the agent to act
depends on the will and license of the principal he represents, the power of the agent ceases
when the will or permission is withdrawn by the principal. Thus, generally, the agency may be
revoked by the principal at will.14

However, an exception to the revocability of a contract of agency is when it is coupled with

interest, i.e., if a bilateral contract depends upon the agency.15 The reason for its irrevocability is
because the agency becomes part of another obligation or agreement. It is not solely the rights
of the principal but also that of the agent and third persons which are affected. Hence, the law
provides that in such cases, the agency cannot be revoked at the sole will of the principal.

In the case at bar, we agree with the finding of the trial and appellate courts that the agency
granted by Legaspi to Gutierrez is coupled with interest as a bilateral contract depends on it. It
is clear from the records that Gutierrez was given by Legaspi, inter alia, the power to
manage the treasure hunting activities in the subject land; to file any case against
anyone who enters the land without authority from Legaspi; to engage the services of
lawyers to carry out the agency; and, to dig for any treasure within the land and enter
into agreements relative thereto. It was likewise agreed upon that Gutierrez shall be entitled
to 40% of whatever treasure may be found in the land. Pursuant to this authority and to
protect Legaspi’s land from the alleged illegal entry of petitioners, agent Gutierrez hired the
services of Atty. Adaza to prosecute the case for damages and injunction against petitioners. As
payment for legal services, Gutierrez agreed to assign to Atty. Adaza 30% of Legaspi’s
share in whatever treasure may be recovered in the subject land. It is clear that the
treasure that may be found in the land is the subject matter of the agency; that under the SPA,
Gutierrez can enter into contract for the legal services of Atty. Adaza; and, thus Gutierrez and
Atty. Adaza have an interest in the subject matter of the agency, i.e., in the treasures that may
be found in the land. This bilateral contract depends on the agency and thus renders it as one
coupled with interest, irrevocable at the sole will of the principal Legaspi.16 When an agency is
constituted as a clause in a bilateral contract, that is, when the agency is inserted in another
agreement, the agency ceases to be revocable at the pleasure of the principal as the agency
shall now follow the condition of the bilateral agreement.17Consequently, the Deed of
Revocation executed by Legaspi has no effect. The authority of Gutierrez to file and continue
with the prosecution of the case at bar is unaffected.

On the second issue, we hold that the issuance of the writ of preliminary injunction is justified. A
writ of preliminary injunction is an ancilliary or preventive remedy that is resorted to by a litigant
to protect or preserve his rights or interests and for no other purpose during the pendency of the
principal action.18 It is issued by the court to prevent threatened or continuous irremediable
injury to the applicant before his claim can be thoroughly studied and adjudicated.19 Its aim is to
preserve the status quo ante until the merits of the case can be heard fully, upon the applicant’s
showing of two important conditions, viz.: (1) the right to be protected prima facie exists; and, (2)
the acts sought to be enjoined are violative of that right.20

Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of preliminary
injunction may be issued when it is established:

(a) that the applicant is entitled to the relief demanded, the whole or part of such relief consists
in restraining the commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;

(b) that the commission, continuance or non-performance of the act or acts complained of
during the litigation would probably work injustice to the applicant; or

(c) that a party, court, agency or a person is doing, threatening, or is attempting to do, or is
procuring or suffering to be done, some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or proceeding, and tending to render the judgment
ineffectual.

It is crystal clear that at the hearing for the issuance of a writ of preliminary injunction,
mere prima facie evidence is needed to establish the applicant’s rights or interests in the subject
matter of the main action.21 It is not required that the applicant should conclusively show that
there was a violation of his rights as this issue will still be fully litigated in the main
case.22 Thus, an applicant for a writ is required only to show that he has an ostensible
right to the final relief prayed for in his complaint. 23

In the case at bar, we find that respondent judge had sufficient basis to issue the writ of
preliminary injunction. It was established, prima facie, that Legaspi has a right to peaceful
possession of his land, pendente lite. Legaspi had title to the subject land. It was likewise
established that the diggings were conducted by petitioners in the enclosed area of Legaspi’s
land. Whether the land fenced by Gutierrez and claimed to be included in the land of
Legaspi covered an area beyond that which is included in the title of Legaspi is a factual
issue still subject to litigation and proof by the parties in the main case for damages. It
was necessary for the trial court to issue the writ of preliminary injunction during the pendency
of the main case in order to preserve the rights and interests of private respondents Legaspi
and Gutierrez.

On the third issue, petitioners charge that the respondent judge lacked the neutrality of an
impartial judge. They fault the respondent judge for not giving credence to the testimony of their
surveyor that the diggings were conducted outside the land of Legaspi. They also claim that
respondent judge’s rulings on objections raised by the parties were biased against them.

We have carefully examined the records and we find no sufficient basis to hold that respondent
judge should have recused himself from hearing the case. There is no discernible pattern of
bias on the rulings of the respondent judge. Bias and partiality can never be presumed. Bare
allegations of partiality will not suffice in an absence of a clear showing that will overcome the
presumption that the judge dispensed justice without fear or favor.24 It bears to stress again that
a judge’s appreciation or misappreciation of the sufficiency of evidence adduced by the parties,
or the correctness of a judge’s orders or rulings on the objections of counsels during the
hearing, without proof of malice on the part of respondent judge, is not sufficient to show bias or
partiality. As we held in the case of Webb vs. People,25 the adverse and erroneous rulings of a
judge on the various motions of a party do not sufficiently prove bias and prejudice to disqualify
him. To be disqualifying, it must be shown that the bias and prejudice stemmed from an
extrajudicial source and result in an opinion on the merits on some basis other than what the
judge learned from his participation in the case. Opinions formed in the course of judicial
proceedings, although erroneous, as long as based on the evidence adduced, do not prove bias
or prejudice. We also emphasized that repeated rulings against a litigant, no matter how
erroneously, vigorously and consistently expressed, do not amount to bias and prejudice which
can be a bases for the disqualification of a judge.

Finally, the inhibition of respondent judge in hearing the case for damages has become moot
and academic in view of the latter’s death during the pendency of the case. The main case for
damages shall now be heard and tried before another judge.

IN VIEW WHEREOF, the impugned Orders of the trial court in Civil Case No. Q-00-40115,
dated March 23 and April 4, 2000, are AFFIRMED. The presiding judge of the Regional Trial
Court of Quezon City to whom Civil Case No. Q-00-40115 was assigned is directed to proceed
with dispatch in hearing the main case for damages. No pronouncement as to costs.

SO ORDERED.