G.R. No.
L-41182-3 April 16, 1988 solidarily liable with the party of the part for the prompt payment of
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-
appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC.,
ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondents-
appellees.
Civil Law; Partnership; Lina Sevilla’s own argument that the par-ties
had embarked on a joint venture or otherwise a partnership
rejected.—In rejecting Tourist World Service, Inc.'s arguments
however, we are not, as a consequence, accepting Lina Seviila’s
own, that is, that the parties had embarked on a joint venture or
otherwise, a partnership. And apparently, Sevilla herself did not
recognize the existence of such a relation. In her letter of November
28, 1961, she expressly “concedes your [Tourist World Service,
Inc.'s] right to stop the operation of your branch office,” in effect,
accepting Tourist World Service, Inc.'s control over the manner in
which the business was run. A joint venture, including a partnership,
presupposes generally a parity of standing between the joint co-
venturers or partners, in which each party has an equal proprietary
interest in the capital or property contributed and where each party
exercises equal rights in the conduct of the business. Furthermore,
the parties did not hold themselves out as partners, and the building
itself was embellished with the electric sign “Toimst World Service,
Inc.," in lieu of a distinct partnership name.
Same;Agency; The parties had contemplated a principal-agent
relationship rather than a joint management or a partnership.—It is
the Court’s considered opinion, that when the petitioner, Lina
Sevilla, agreed to (wo)man the private respondent, Tourist World
Service, Inc.'s Ermita office, she must have done so pursuant to a
contract of agency. It is the essence of this contract that the agent
renders services “in representation or on behalf of another.” In the
case at bar, Sevilla solicited airline fares, but she did so for and on
behalf of her principal, Touriat World Servioe, Inc. As compensation,
she received 4% of the proceeds in the concept of commissions.
And as we said, Sevilla herself, based on her letter of November
28,1961, presumed her printipaTs authority as owner of the
business undertaking. We are convinced, considering the
circumstances and from the respondent Court’s recital of facts, that
the parties had contemplated a principalagent relationship, rather
than a joint management or a partnership.
Same; Same; Same; The agency being one coupled with an interest
cannot be revoked at wilL—But unlike simple grants of a power of
attorney, the agency that we hereby declare to be compatible witJb
the intent of the parties, cannot be revoked at will. The reason is
that it is one coupled with an interest, the agency having been
created for the mutual interest of the agent and the principal. It
appears that Lina Sevilla is a bona fide travel agent herself, and as
such, she had acquired an interest in the business entrusted to her.
Moreover, she had assumed a personal obligation for the operation
thereof, holding herself solidarily liable for the payment of rentals.
She continued the business, using her own name, after Tourist
World had stopped further operations. Her interest, obviously, is not
limited to the commissions she earned as a result of her business
transactions. but one that extendB to the very subject matter of the
power of management delegated to her. It is an agency that, as we
said, cannot be revoked at the pleasure of the principal. Accordingly,
the revocation complained of should entitle the petitioner, Lina
Sevilla, to damages.
SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil
Code in this appeal by certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for
the appellees) entered into on Oct. 19, 1960 by and between Mrs.
Segundina Noguera, party of the first part; the Tourist World
Service, Inc., represented by Mr. Eliseo Canilao as party of the
second part, and hereinafter referred to as appellants, the Tourist
World Service, Inc. leased the premises belonging to the party of
the first part at Mabini St., Manila for the former-s use as a branch
office. In the said contract the party of the third part held herself
1
the monthly rental agreed on. When the branch office was opened,
the same was run by the herein appellant Una 0. Sevilla payable to
Tourist World Service Inc. by any airline for any fare brought in on
the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3%
was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World
Service, Inc. appears to have been informed that Lina Sevilla was
connected with a rival firm, the Philippine Travel Bureau, and, since
the branch office was anyhow losing, the Tourist World Service
considered closing down its office. This was firmed up by two
resolutions of the board of directors of Tourist World Service, Inc.
dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the
office of the manager and vice-president of the Tourist World
Service, Inc., Ermita Branch, and the second,authorizing the
corporate secretary to receive the properties of the Tourist World
Service then located at the said branch office. It further appears that
on Jan. 3, 1962, the contract with the appellees for the use of the
Branch Office premises was terminated and while the effectivity
thereof was Jan. 31, 1962, the appellees no longer used it. As a
matter of fact appellants used it since Nov. 1961. Because of this,
and to comply with the mandate of the Tourist World Service, the
corporate secretary Gabino Canilao went over to the branch office,
and, finding the premises locked, and, being unable to contact Lina
Sevilla, he padlocked the premises on June 4, 1962 to protect the
interests of the Tourist World Service. When neither the appellant
Lina Sevilla nor any of her employees could enter the locked
premises, a complaint wall filed by the herein appellants against the
appellees with a prayer for the issuance of mandatory preliminary
injunction. Both appellees answered with counterclaims. For
apparent lack of interest of the parties therein, the trial court ordered
the dismissal of the case without prejudice.
The appellee Segundina Noguera sought reconsideration of the
order dismissing her counterclaim which the court a quo, in an order
dated June 8, 1963, granted permitting her to present evidence in
support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the
herein appellees and after the issues were joined, the reinstated
counterclaim of Segundina Noguera and the new complaint of
appellant Lina Sevilla were jointly heard following which the court a
quo ordered both cases dismiss for lack of merit, on the basis of
which was elevated the instant appeal on the following assignment
of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE
NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S
COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT
MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE
TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF
EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD
THAT THE SAID ARRANGEMENT WAS ONE OF JOINT
BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-
APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM
D E N Y I N G T H AT S H E WA S A M E R E E M P L O Y E E O F
DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC.
EVEN AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT
APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA
O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW
INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL
APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT
LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A.
MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT
APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS
GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the
issues to be resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the
telephone line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World
Service was actionable or not; and
3. Whether or not the lessee to the office premises belonging to the
appellee Noguera was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness
venture was entered into by and between her and appellee TWS
with offices at the Ermita branch office and that she was not an
employee of the TWS to the end that her relationship with TWS was
one of a joint business venture appellant made declarations
showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an
eminent eye, ear and nose specialist as well as a imediately
columnist had been in the travel business prior to the establishment
of the joint business venture with appellee Tourist World Service,
Inc. and appellee Eliseo Canilao, her compadre, she being the
godmother of one of his children, with her own clientele, coming
mostly from her own social circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement dated
19 October 1960 (Exh. 'A') covering the premises at A. Mabini St.,
she expressly warranting and holding [sic] herself 'solidarily' liable
with appellee Tourist World Service, Inc. for the prompt payment of
the monthly rentals thereof to other appellee Mrs. Noguera (pp.
14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from appellee
Tourist World Service, Inc., which had its own, separate office
located at the Trade & Commerce Building; nor was she an
employee thereof, having no participation in nor connection with
said business at the Trade & Commerce Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own
passengers, her own bookings her own business (and not for any of
the business of appellee Tourist World Service, Inc.) obtained from
the airline companies. She shared the 7% commissions given by
the airline companies giving appellee Tourist World Service, Lic. 3%
thereof aid retaining 4% for herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of
maintaining the A. Mabini St. office, paying for the salary of an office
secretary, Miss Obieta, and other sundry expenses, aside from
desicion the office furniture and supplying some of fice furnishings
(pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc.
shouldering the rental and other expenses in consideration for the
3% split in the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb.
16,1965).
6. It was the understanding between them that appellant Mrs.
Sevilla would be given the title of branch manager for appearance's
sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was
just a title for dignity (p. 36 tsn. June 18, 1965- testimony of
appellee Eliseo Canilao pp. 38-39 tsn April 61965-testimony of
corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply
Brief)
Upon the other hand, appellee TWS contend that the appellant was
an employee of the appellee Tourist World Service, Inc. and as such
was designated manager.1
xxx xxx xxx
The trial court2 held for the private respondent on the premise that
the private respondent, Tourist World Service, Inc., being the true
lessee, it was within its prerogative to terminate the lease and
padlock the premises. 3 It likewise found the petitioner, Lina Sevilla,
to be a mere employee of said Tourist World Service, Inc. and as
such, she was bound by the acts of her employer. 4 The respondent
Court of Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining
the lower court, erred. Specifically, they state:
I employer-employee relationship.11
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW
AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT
"THE PADLOCKING OF THE PREMISES BY TOURIST WORLD
SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF
THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS.
LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT
INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO
IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN
CONFERENCE WITH THE CORPORATE SECRETARY OF
TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO
PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY
SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
(SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT)
ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX
2
"A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE
PROCESS WHICH ADHERES TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW
AND GRAVELY ABUSED ITS DISCRETION IN DENYING
APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED
TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND
COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE
WITHDRAWN." (ANNEX "A" P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW
AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT
NOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE
OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE
CIVIL CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW
AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL
APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM
THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD
SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN
INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED
UNILATERALLY BY TOURIST WORLD SERVICE INC.6
As a preliminary inquiry, the Court is asked to declare the true
nature of the relation between Lina Sevilla and Tourist World
Service, Inc. The respondent Court of see fit to rule on the question,
the crucial issue, in its opinion being "whether or not the padlocking
of the premises by the Tourist World Service, Inc. without the
knowledge and consent of the appellant Lina Sevilla entitled the
latter to the relief of damages prayed for and whether or not the
evidence for the said appellant supports the contention that the
appellee Tourist World Service, Inc. unilaterally and without the
consent of the appellant disconnected the telephone lines of the
Ermita branch office of the appellee Tourist World Service, Inc.7
Tourist World Service, Inc., insists, on the other hand, that Lina
SEVILLA was a mere employee, being "branch manager" of its
Ermita "branch" office and that inferentially, she had no say on the
lease executed with the private respondent, Segundina Noguera.
The petitioners contend, however, that relation between the
between parties was one of joint venture, but concede that
"whatever might have been the true relationship between Sevilla
and Tourist World Service," the Rule of Law enjoined Tourist World
Service and Canilao from taking the law into their own hands, 8 in
reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the
private respondent, Tourist World Service, Inc., maintains, that the
relation between the parties was in the character of employer and
employee, the courts would have been without jurisdiction to try the
case, labor disputes being the exclusive domain of the Court of
Industrial Relations, later, the Bureau Of Labor Relations, pursuant
to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the
evidence of an employer-employee relation. In general, we have
relied on the so-called right of control test, "where the person for
whom the services are performed reserves a right to control not only
the end to be achieved but also the means to be used in reaching
such end." 10 Subsequently, however, we have considered, in
addition to the standard of right-of control, the existing economic
conditions prevailing between the parties, like the inclusion of the
employee in the payrolls, in determining the existence of an
The records will show that the petitioner, Lina Sevilla, was not
subject to control by the private respondent Tourist World Service,
Inc., either as to the result of the enterprise or as to the means used
in connection therewith. In the first place, under the contract of
lease covering the Tourist Worlds Ermita office, she had bound
herself in solidum as and for rental payments, an arrangement that
would be like claims of a master-servant relationship. True the
respondent Court would later minimize her participation in the lease
as one of mere guaranty, 12 that does not make her an employee of
Tourist World, since in any case, a true employee cannot be made
to part with his own money in pursuance of his employer's business,
or otherwise, assume any liability thereof. In that event, the parties
must be bound by some other relation, but certainly not
employment.
In the second place, and as found by the Appellate Court, '[w]hen
the branch office was opened, the same was run by the herein
appellant Lina O. Sevilla payable to Tourist World Service, Inc. by
any airline for any fare brought in on the effort of Mrs. Lina Sevilla.
13 Under these circumstances, it cannot be said that Sevilla was
under the control of Tourist World Service, Inc. "as to the means
used." Sevilla in pursuing the business, obviously relied on her own
gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll.
For her efforts, she retained 4% in commissions from airline
bookings, the remaining 3% going to Tourist World. Unlike an
employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her booking
successes.
The fact that Sevilla had been designated 'branch manager" does
not make her, ergo, Tourist World's employee. As we said,
employment is determined by the right-of-control test and certain
economic parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are
not, as a consequence, accepting Lina Sevilla's own, that is, that the
parties had embarked on a joint venture or otherwise, a partnership.
And apparently, Sevilla herself did not recognize the existence of
such a relation. In her letter of November 28, 1961, she expressly
'concedes your [Tourist World Service, Inc.'s] right to stop the
operation of your branch office 14 in effect, accepting Tourist World
Service, Inc.'s control over the manner in which the business was
run. A joint venture, including a partnership, presupposes generally
a of standing between the joint co-venturers or partners, in which
each party has an equal proprietary interest in the capital or
property contributed 15 and where each party exercises equal rights
in the conduct of the business.16 furthermore, the parties did not
hold themselves out as partners, and the building itself was
embellished with the electric sign "Tourist World Service, Inc. 17in
lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina
Sevilla, agreed to (wo)man the private respondent, Tourist World
Service, Inc.'s Ermita office, she must have done so pursuant to a
contract of agency. It is the essence of this contract that the agent
renders services "in representation or on behalf of another.18 In the
case at bar, Sevilla solicited airline fares, but she did so for and on
behalf of her principal, Tourist World Service, Inc. As compensation,
she received 4% of the proceeds in the concept of commissions.
And as we said, Sevilla herself based on her letter of November 28,
1961, pre-assumed her principal's authority as owner of the
business undertaking. We are convinced, considering the
circumstances and from the respondent Court's recital of facts, that
the ties had contemplated a principal agent relationship, rather than
a joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we
hereby declare to be compatible with the intent of the parties,
cannot be revoked at will. The reason is that it is one coupled with
an interest, the agency having been created for mutual interest, of
the agent and the principal. 19 It appears that Lina Sevilla is a bona
fide travel agent herself, and as such, she had acquired an interest
in the business entrusted to her. Moreover, she had assumed a
personal obligation for the operation thereof, holding herself
solidarily liable for the payment of rentals. She continued the
business, using her own name, after Tourist World had stopped
further operations. Her interest, obviously, is not to the commissions
she earned as a result of her business transactions, but one that
extends to the very subject matter of the power of management
delegated to her. It is an agency that, as we said, cannot be revoked
at the pleasure of the principal. Accordingly, the revocation
complained of should entitle the petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue,
confining itself to the telephone disconnection and padlocking
incidents. Anent the disconnection issue, it is the holding of the
Court of Appeals that there is 'no evidence showing that the Tourist
World Service, Inc. disconnected the telephone lines at the branch
office. 20 Yet, what cannot be denied is the fact that Tourist World
Service, Inc. did not take pains to have them reconnected.
Assuming, therefore, that it had no hand in the disconnection now
complained of, it had clearly condoned it, and as owner of the
telephone lines, it must shoulder responsibility therefor.
3
The Court of Appeals must likewise be held to be in error with
respect to the padlocking incident. For the fact that Tourist World
Service, Inc. was the lessee named in the lease con-tract did not
accord it any authority to terminate that contract without notice to its
actual occupant, and to padlock the premises in such fashion. As
this Court has ruled, the petitioner, Lina Sevilla, had acquired a
personal stake in the business itself, and necessarily, in the
equipment pertaining thereto. Furthermore, Sevilla was not a
stranger to that contract having been explicitly named therein as a
third party in charge of rental payments (solidarily with Tourist
World, Inc.). She could not be ousted from possession as summarily
as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was
indeed some malevolent design to put the petitioner, Lina Sevilla, in
a bad light following disclosures that she had worked for a rival firm.
To be sure, the respondent court speaks of alleged business losses
to justify the closure '21 but there is no clear showing that Tourist
World Ermita Branch had in fact sustained such reverses, let alone,
the fact that Sevilla had moonlit for another company. What the
evidence discloses, on the other hand, is that following such an
information (that Sevilla was working for another company), Tourist
World's board of directors adopted two resolutions abolishing the
office of 'manager" and authorizing the corporate secretary, the
respondent Eliseo Canilao, to effect the takeover of its branch office
properties. On January 3, 1962, the private respondents ended the
lease over the branch office premises, incidentally, without notice to
her.
It was only on June 4, 1962, and after office hours significantly, that
the Ermita office was padlocked, personally by the respondent
Canilao, on the pretext that it was necessary to Protect the interests
of the Tourist World Service. " 22 It is strange indeed that Tourist
World Service, Inc. did not find such a need when it cancelled the
lease five months earlier. While Tourist World Service, Inc. would
not pretend that it sought to locate Sevilla to inform her of the
closure, but surely, it was aware that after office hours, she could
not have been anywhere near the premises. Capping these series
of "offensives," it cut the office's telephone lines, paralyzing
completely its business operations, and in the process, depriving
Sevilla articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays a
sinister effort to punish Sevillsa it had perceived to be disloyalty on
her part. It is offensive, in any event, to elementary norms of justice
and fair play.
We rule therefore, that for its unwarranted revocation of the contract
of agency, the private respondent, Tourist World Service, Inc.,
should be sentenced to pay damages. Under the Civil Code, moral
damages may be awarded for "breaches of contract where the
defendant acted ... in bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further
damages for the moral injury done to Lina Sevilla from its brazen
conduct subsequent to the cancellation of the power of attorney
granted to her on the authority of Article 21 of the Civil Code, in
relation to Article 2219 (10) thereof —
ART. 21. Any person who wilfully causes loss or injury to another in
a manner that is contrary to morals, good customs or public policy
shall compensate the latter for the damage.24
ART. 2219. Moral damages25 may be recovered in the following and
analogous cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32,
34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise
hereby ordered to respond for the same damages in a solidary
capacity.
Insofar, however, as the private respondent, Segundina Noguera is
concerned, no evidence has been shown that she had connived
with Tourist World Service, Inc. in the disconnection and padlocking
incidents. She cannot therefore be held liable as a cotortfeasor.
The Court considers the sums of P25,000.00 as and for moral
damages,24 P10,000.00 as exemplary damages, 25 and P5,000.00
as nominal 26 and/or temperate27 damages, to be just, fair, and
reasonable under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on
July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private
respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to
indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of
P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or
temperate damages. Costs against said private respondents. SO ORDERED.
G.R. No. L-49982 April 27, 1988
ELIGIO ESTANISLAO, JR., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, REMEDIOS
ESTANISLAO, EMILIO and LEOCADIO SANTIAGO, respondents.
Civil Law; Partnership; No merit in the contention that because of
the stipulation cancelling and superseding the previous joint
affidavit, whatever partnership agreement there was in said
previous agreement had thereby been abrogated.—Petitioner
contends that because of the said stipulation cancelling and
superseding that previous Joint Affidavit, whatever partnership
agreement there was in said previous agreement had thereby been
abrogated. We find not merit in this argument. Said cancelling
provision was necessary for the Joint Aflfidavit speaks of
P15,QOO.OO advance rentals starting May 25, 1966 while the latter
agreement also refers to advance rentals of the same amount
starting May 24,1966, There is, therefore, a duplication of reference
to the Pl 5,000.00 hence the need to provide in the subsequent
document that it “cancels and supersedes” the previous one. True it
is that in the latter document, it is silent as to the statement in the
Joint Affidavit that the P15,000.00 represents the “capital
investment” of the parties in the gasoline station business and it
speaks of petitioner as the sole dealer, but this is as it should be for
in the latter document SHELL was a signatory and it would be
against its policy if in the agreement it should be stated that the
business is a partnership with private respondents and not a sole
proprietorship of petitioner.
Same; Same; Same; Evidence showing that there was in fact such
partnership agreement between theparties.—Moreover other
evidence in the record shows that there was in fact such partnership
agreement between the parties. This is attested by the testimonies
of private respondent Remedios Estanislao and Atty. Angeles.
Petitioner submitted to private respondents periodic accounting of
the business. Petitioner gave a written authority to private
respondent Remedios Estanislao, his sister, to examine and audit
the books of their “common business” (aming negosyo).
Reapondent Remedios assisted in the running of the business.
There is no doubt that the parties hereto formed a partnership when
they bound themselves to contribute money in a common fund with
the intention of dividing the profits among themselves. The sole
dealership by the petitioner and the issuance of all government
permits and licenses in the name of petitioner was in compliance
with the afore-stated policy of SHELL and the understanding of the
parties of having only one dealer of the SHELL products.
GANCAYCO, J.:
By this petition for certiorari the Court is asked to determine if a
partnership exists between members of the same family arising
from their joint ownership of certain properties.
Petitioner and private respondents are brothers and sisters who are
co-owners of certain lots at the corner of Annapolis and Aurora
Blvd., QuezonCity which were then being leased to the Shell
Company of the Philippines Limited (SHELL). They agreed to open
and operate a gas station thereat to be known as Estanislao Shell
Service Station with an initial investment of P 15,000.00 to be taken
from the advance rentals due to them from SHELL for the
occupancy of the said lots owned in common by them. A joint
affidavit was executed by them on April 11, 1966 which was
prepared byAtty. Democrito Angeles 1 They agreed to help their
brother, petitioner herein, by allowing him to operate and manage
the gasoline service station of the family. They negotiated with
SHELL. For practical purposes and in order not to run counter to the
company's policy of appointing only one dealer, it was agreed that
petitioner would apply for the dealership. Respondent Remedios
helped in managing the bussiness with petitioner from May 3, 1966
up to February 16, 1967.
On May 26, 1966, the parties herein entered into an Additional Cash
Pledge Agreement with SHELL wherein it was reiterated that the P
15,000.00 advance rental shall be deposited with SHELL to cover
advances of fuel to petitioner as dealer with a proviso that said
agreement "cancels and supersedes the Joint Affidavit dated 11
April 1966 executed by the co-owners." 2
For sometime, the petitioner submitted financial statements
regarding the operation of the business to private respondents, but
4
therafter petitioner failed to render subsequent accounting. Hence
through Atty. Angeles, a demand was made on petitioner to render
an accounting of the profits.
The financial report of December 31, 1968 shows that the business
was able to make a profit of P 87,293.79 and that by the year
ending 1969, a profit of P 150,000.00 was realized. 3
Thus, on August 25, 1970 private respondents filed a complaint in
the Court of First Instance of Rizal against petitioner praying among
others that the latter be ordered:
1. to execute a public document embodying all the provisions of the
partnership agreement entered into between plaintiffs and
defendant as provided in Article 1771 of the New Civil Code;
2. to render a formal accounting of the business operation covering
the period from May 6, 1966 up to December 21, 1968 and from
January 1, 1969 up to the time the order is issued and that the
same be subject to proper audit;
3. to pay the plaintiffs their lawful shares and participation in the net
profits of the business in an amount of no less than P l50,000.00
with interest at the rate of 1% per month from date of demand until
full payment thereof for the entire duration of the business; and
4. to pay the plaintiffs the amount of P 10,000.00 as attorney's fees
and costs of the suit (pp. 13-14 Record on Appeal.)
After trial on the merits, on October 15, 1975, Hon. Lino Anover who
was then the temporary presiding judge of Branch IV of the trial
court, rendered judgment dismissing the complaint and
counterclaim and ordering private respondents to pay petitioner P
3,000.00 attorney's fee and costs. Private respondent filed a motion
for reconsideration of the decision. On December 10, 1975, Hon.
Ricardo Tensuan who was the newly appointed presiding judge of
the same branch, set aside the aforesaid derision and rendered
another decision in favor of said respondents.
The dispositive part thereof reads as follows:
WHEREFORE, the Decision of this Court dated October 14, 1975 is
hereby reconsidered and a new judgment is hereby rendered in
favor of the plaintiffs and as against the defendant:
(1) Ordering the defendant to execute a public instrument
embodying all the provisions of the partnership agreement entered
into between plaintiffs and defendant as provided for in Article 1771,
Civil Code of the Philippines;
(2) Ordering the defendant to render a formal accounting of the
business operation from April 1969 up to the time this order is
issued, the same to be subject to examination and audit by the
plaintiff,
(3) Ordering the defendant to pay plaintiffs their lawful shares and
participation in the net profits of the business in the amount of P
150,000.00, with interest thereon at the rate of One (1%) Per Cent
per month from date of demand until full payment thereof;
(4) Ordering the defendant to pay the plaintiffs the sum of P
5,000.00 by way of attorney's fees of plaintiffs' counsel; as well as
the costs of suit. (pp. 161-162. Record on Appeal).
Petitioner then interposed an appeal to the Court of Appeals
enumerating seven (7) errors allegedly committed by the trial court.
In due course, a decision was rendered by the Court of Appeals on
November 28,1978 affirming in toto the decision of the lower court
with costs against petitioner. *
A motion for reconsideration of said decision filed by petitioner was
denied on January 30, 1979. Not satisfied therewith, the petitioner
now comes to this court by way of this petition for certiorari alleging
that the respondent court erred:
1. In interpreting the legal import of the Joint Affidavit (Exh. 'A') vis-
a-vis the Additional Cash Pledge Agreement (Exhs. "B-2","6", and
"L"); and
2. In declaring that a partnership was established by and among the
petitioner and the private respondents as regards the ownership
and or operation of the gasoline service station business.
Petitioner relies heavily on the provisions of the Joint Affidavit of
April 11, 1966 (Exhibit A) and the Additional Cash Pledge
Agreement of May 20, 1966 (Exhibit 6) which are herein
reproduced-
(a) The joint Affidavit of April 11, 1966, Exhibit A reads:
(1) That we are the Lessors of two parcels of land fully describe in
Transfer Certificates of Title Nos. 45071 and 71244 of the Register
of Deeds of Quezon City, in favor of the LESSEE - SHELL
COMPANY OF THE PHILIPPINES LIMITED a corporation duly
licensed to do business in the Philippines;
(2) That we have requested the said SHELL COMPANY OF THE
PHILIPPINE LIMITED advanced rentals in the total amount of
FIFTEEN THOUSAND PESOS (P l5,000.00) Philippine Currency, so
that we can use the said amount to augment our capital investment
in the operation of that gasoline station constructed ,by the said
company on our two lots aforesaid by virtue of an outstanding
Lease Agreement we have entered into with the said company;
(3) That the and SHELL COMPANY OF THE PHILIPPINE LIMITED
out of its benevolence and desire to help us in aumenting our capital
investment in the operation of the said gasoline station, has agreed
to give us the said amount of P 15,000.00, which amount will
partake the nature of ADVANCED RENTALS;
(4) That we have freely and voluntarily agreed that upon receipt of
the said amount of FIFTEEN THOUSAND PESOS (P l6,000.00)
from he SHELL COMPANY OF THE PHILIPPINES LIMITED, the
said sum as ADVANCED RENTALS to us be applied as monthly
rentals for the sai two lots under our Lease Agreement starting on
the 25th of May, 1966 until such time that the said of P 15,000.00 be
applicable, which time to our estimate and one-half months from
May 25, 1966 or until the 10th of October, 1966 more or less;
(5) That we have likewise agreed among ourselves that the SHELL
COMPANY OF THE PHILIPPINES LIMITED execute an instrument
for us to sign embodying our conformity that the said amount that it
will generously grant us as requested be applied as ADVANCED
RENTALS; and
(6) FURTHER AFFIANTS SAYETH NOT.,
(b) The Additional Cash Pledge Agreement of May 20,1966, Exhibit
6, is as follows:
WHEREAS, under the lease Agreement dated 13th November,
1963 (identified as doc. Nos. 491 & 1407, Page Nos. 99 & 66, Book
Nos. V & III, Series of 1963 in the Notarial Registers of Notaries
Public Rosauro Marquez, and R.D. Liwanag, respectively) executed
in favour of SHELL by the herein CO-OWNERS and another Lease
Agreement dated 19th March 1964 . . . also executed in favour of
SHELL by CO-OWNERS Remedios and MARIA ESTANISLAO for
the lease of adjoining portions of two parcels of land at Aurora Blvd./
Annapolis, Quezon City, the CO OWNERS RECEIVE a total
monthly rental of PESOS THREE THOUSAND THREE HUNDRED
EIGHTY TWO AND 29/100 (P 3,382.29), Philippine Currency;
WHEREAS, CO-OWNER Eligio Estanislao Jr. is the Dealer of the
Shell Station constructed on the leased land, and as Dealer under
the Cash Pledge Agreement dated llth May 1966, he deposited to
SHELL in cash the amount of PESOS TEN THOUSAND (P 10,000),
Philippine Currency, to secure his purchase on credit of Shell
petroleum products; . . .
WHEREAS, said DEALER, in his desire, to be granted an increased
the limit up to P 25,000, has secured the conformity of his CO-
OWNERS to waive and assign to SHELL the total monthly rentals
due to all of them to accumulate the equivalent amount of P 15,000,
commencing 24th May 1966, this P 15,000 shall be treated as
additional cash deposit to SHELL under the same terms and
conditions of the aforementioned Cash Pledge Agreement dated llth
May 1966.
NOW, THEREFORE, for and in consideration of the foregoing
premises,and the mutual covenants among the CO-OWNERS
herein and SHELL, said parties have agreed and hereby agree as
follows:
l. The CO-OWNERS dohere by waive in favor of DEALER the
monthly rentals due to all CO-OWNERS, collectively, under the
above describe two Lease Agreements, one dated 13th November
1963 and the other dated 19th March 1964 to enable DEALER to
increase his existing cash deposit to SHELL, from P 10,000 to P
25,000, for such purpose, the SHELL CO-OWNERS and DEALER
hereby irrevocably assign to SHELL the monthly rental of P
3,382.29 payable to them respectively as they fall due, monthly,
commencing 24th May 1966, until such time that the monthly rentals
accumulated, shall be equal to P l5,000.
2. The above stated monthly rentals accumulated shall be treated
as additional cash deposit by DEALER to SHELL, thereby in
increasing his credit limit from P 10,000 to P 25,000. This
agreement, therefore, cancels and supersedes the Joint affidavit
dated 11 April 1966 executed by the CO-OWNERS.
3. Effective upon the signing of this agreement, SHELL agrees to
allow DEALER to purchase from SHELL petroleum products, on
credit, up to the amount of P 25,000.
5
4. This increase in the credit shall also be subject to the same terms
and conditions of the above-mentioned Cash Pledge Agreement
dated llth May 1966. (Exhs. "B-2," "L," and "6"; emphasis supplied)
In the aforesaid Joint Affidavit of April 11, 1966 (Exhibit A), it is
clearly stipulated by the parties that the P 15,000.00 advance rental
due to them from SHELL shall augment their "capital investment" in
the operation of the gasoline station, which advance rentals shall be
credited as rentals from May 25, 1966 up to four and one-half
months or until 10 October 1966, more or less covering said P
15,000.00.
In the subsequent document entitled "Additional Cash Pledge
Agreement" above reproduced (Exhibit 6), the private respondents
and petitioners assigned to SHELL the monthly rentals due them
commencing the 24th of May 1966 until such time that the monthly
rentals accumulated equal P 15,000.00 which private respondents
agree to be a cash deposit of petitioner in favor of SHELL to
increase his credit limit as dealer. As above-stated it provided
therein that "This agreement, therefore, cancels and supersedes the
Joint Affidavit dated 11 April 1966 executed by the CO-OWNERS."
Petitioner contends that because of the said stipulation cancelling
and superseding that previous Joint Affidavit, whatever partnership
agreement there was in said previous agreement had thereby been
abrogated. We find no merit in this argument. Said cancelling
provision was necessary for the Joint Affidavit speaks of P
15,000.00 advance rentals starting May 25, 1966 while the latter
agreement also refers to advance rentals of the same amount
starting May 24, 1966. There is, therefore, a duplication of reference
to the P 15,000.00 hence the need to provide in the subsequent
document that it "cancels and supersedes" the previous one. True it
is that in the latter document, it is silent as to the statement in the
Joint Affidavit that the P 15,000.00 represents the "capital
investment" of the parties in the gasoline station business and it
speaks of petitioner as the sole dealer, but this is as it should be for
in the latter document SHELL was a signatory and it would be
against its policy if in the agreement it should be stated that the
business is a partnership with private respondents and not a sole
proprietorship of petitioner.
Moreover other evidence in the record shows that there was in fact
such partnership agreement between the parties. This is attested by
the testimonies of private respondent Remedies Estanislao and Atty.
Angeles. Petitioner submitted to private respondents periodic
accounting of the business. 4 Petitioner gave a written authority to
private respondent Remedies Estanislao, his sister, to examine and
audit the books of their "common business' aming negosyo). 5
Respondent Remedios assisted in the running of the business.
There is no doubt that the parties hereto formed a partnership when
they bound themselves to contribute money to a common fund with
the intention of dividing the profits among themselves.6 The sole
dealership by the petitioner and the issuance of all government
permits and licenses in the name of petitioner was in compliance
with the afore-stated policy of SHELL and the understanding of the
parties of having only one dealer of the SHELL products.
Further, the findings of facts of the respondent court are conclusive
in this proceeding, and its conclusion based on the said facts are in
accordancewith the applicable law.
WHEREFORE, the judgment appealed from is AFFIRMED in toto
with costs against petitioner. This decision is immediately executory
and no motion for extension of time to file a motion for
reconsideration shag beentertained.
SO ORDERED.
G.R. No. 70926 January 31, 1989
DAN FUE LEUNG, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and LEUNG YIU,
respondents.
Civil Law; Partnership; Prescription; The right to demand an
accounting exists as long as the partnership exists.—Regarding the
prescriptive period within which the private respondent may demand
an accounting, Articles 1806, 1807 and 1809 show that the right to
demand an accounting exists as long as the partnership exists.
Prescription begins to run only upon the dissolution of the
partnership when the final accounting is done.
Same; Same; Dissolution of Partnerships; The Court may order the
dissolution of the partnership in question because its continuation
has become inequitable.—Considering the facts of this case, the
Court may decree a dissolution of the partnership under Article 1831
of the Civil Code which, in part, provides: “Art. 1831. On application
by or for a partner the court shall decree a dissolution whenever: x x
x x x x xxx "(3) A partner has been guilty of such conduct as tends to
affect prejudicially the carrying on of the business; (4) A partner
willfully or persistently commits a breach of the partnership
agreement, or otherwise so conducts himself in matters relating to
the partnership business that it is not reasonably practicable to carry
on the business in partnership with him; xxx xxx xxx (6) Other
circumstances render a dissolution equitable.” There shall be a
liquidation and winding up of partnership affairs, return of capital,
and other incidents of dissolution because the continuation of the
partnership has become inequitable.
GUTIERREZ, JR., J.:
The petitioner asks for the reversal of the decision of the then
Intermediate Appellate Court in AC-G.R. No. CV-00881 which
affirmed the decision of the then Court of First Instance of Manila,
Branch II in Civil Case No. 116725 declaring private respondent
Leung Yiu a partner of petitioner Dan Fue Leung in the business of
Sun Wah Panciteria and ordering the petitioner to pay to the private
respondent his share in the annual profits of the said restaurant.
This case originated from a complaint filed by respondent Leung Yiu
with the then Court of First Instance of Manila, Branch II to recover
the sum equivalent to twenty-two percent (22%) of the annual profits
derived from the operation of Sun Wah Panciteria since October,
1955 from petitioner Dan Fue Leung.
The Sun Wah Panciteria, a restaurant, located at Florentino Torres
Street, Sta. Cruz, Manila, was established sometime in October,
1955. It was registered as a single proprietorship and its licenses
and permits were issued to and in favor of petitioner Dan Fue Leung
as the sole proprietor. Respondent Leung Yiu adduced evidence
during the trial of the case to show that Sun Wah Panciteria was
actually a partnership and that he was one of the partners having
contributed P4,000.00 to its initial establishment.
The private respondents evidence is summarized as follows:
About the time the Sun Wah Panciteria started to become
operational, the private respondent gave P4,000.00 as his
contribution to the partnership. This is evidenced by a receipt
identified as Exhibit "A" wherein the petitioner acknowledged his
acceptance of the P4,000.00 by affixing his signature thereto. The
receipt was written in Chinese characters so that the trial court
commissioned an interpreter in the person of Ms. Florence Yap to
translate its contents into English. Florence Yap issued a
certification and testified that the translation to the best of her
knowledge and belief was correct. The private respondent identified
the signature on the receipt as that of the petitioner (Exhibit A-3)
because it was affixed by the latter in his (private respondents')
presence. Witnesses So Sia and Antonio Ah Heng corroborated the
private respondents testimony to the effect that they were both
present when the receipt (Exhibit "A") was signed by the petitioner.
So Sia further testified that he himself received from the petitioner a
similar receipt (Exhibit D) evidencing delivery of his own investment
in another amount of P4,000.00 An examination was conducted by
the PC Crime Laboratory on orders of the trial court granting the
private respondents motion for examination of certain documentary
exhibits. The signatures in Exhibits "A" and 'D' when compared to
the signature of the petitioner appearing in the pay envelopes of
employees of the restaurant, namely Ah Heng and Maria Wong
6
(Exhibits H, H-1 to H-24) showed that the signatures in the two
receipts were indeed the signatures of the petitioner.
Furthermore, the private respondent received from the petitioner the
amount of P12,000.00 covered by the latter's Equitable Banking
Corporation Check No. 13389470-B from the profits of the operation
of the restaurant for the year 1974. Witness Teodulo Diaz, Chief of
the Savings Department of the China Banking Corporation testified
that said check (Exhibit B) was deposited by and duly credited to
the private respondents savings account with the bank after it was
cleared by the drawee bank, the Equitable Banking Corporation.
Another witness Elvira Rana of the Equitable Banking Corporation
testified that the check in question was in fact and in truth drawn by
the petitioner and debited against his own account in said bank.
This fact was clearly shown and indicated in the petitioner's
statement of account after the check (Exhibit B) was duly cleared.
Rana further testified that upon clearance of the check and pursuant
to normal banking procedure, said check was returned to the
petitioner as the maker thereof.
The petitioner denied having received from the private respondent
the amount of P4,000.00. He contested and impugned the
genuineness of the receipt (Exhibit D). His evidence is summarized
as follows:
The petitioner did not receive any contribution at the time he started
the Sun Wah Panciteria. He used his savings from his salaries as
an employee at Camp Stotsenberg in Clark Field and later as waiter
at the Toho Restaurant amounting to a little more than P2,000.00 as
capital in establishing Sun Wah Panciteria. To bolster his contention
that he was the sole owner of the restaurant, the petitioner
presented various government licenses and permits showing the
Sun Wah Panciteria was and still is a single proprietorship solely
owned and operated by himself alone. Fue Leung also flatly denied
having issued to the private respondent the receipt (Exhibit G) and
the Equitable Banking Corporation's Check No. 13389470 B in the
amount of P12,000.00 (Exhibit B).
As between the conflicting evidence of the parties, the trial court
gave credence to that of the plaintiffs. Hence, the court ruled in
favor of the private respondent. The dispositive portion of the
decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff
and against the defendant, ordering the latter to deliver and pay to
the former, the sum equivalent to 22% of the annual profit derived
from the operation of Sun Wah Panciteria from October, 1955, until
fully paid, and attorney's fees in the amount of P5,000.00 and cost
of suit. (p. 125, Rollo)
The private respondent filed a verified motion for reconsideration in
the nature of a motion for new trial and, as supplement to the said
motion, he requested that the decision rendered should include the
net profit of the Sun Wah Panciteria which was not specified in the
decision, and allow private respondent to adduce evidence so that
the said decision will be comprehensively adequate and thus put an
end to further litigation.
The motion was granted over the objections of the petitioner. After
hearing the trial court rendered an amended decision, the
dispositive portion of which reads:
FOR ALL THE FOREGOING CONSIDERATIONS, the motion for
reconsideration filed by the plaintiff, which was granted earlier by
the Court, is hereby reiterated and the decision rendered by this
Court on September 30, 1980, is hereby amended. The dispositive
portion of said decision should read now as follows:
WHEREFORE, judgment is hereby rendered, ordering the plaintiff
(sic) and against the defendant, ordering the latter to pay the former
the sum equivalent to 22% of the net profit of P8,000.00 per day
from the time of judicial demand, until fully paid, plus the sum of
P5,000.00 as and for attorney's fees and costs of suit. (p. 150,
Rollo)
The petitioner appealed the trial court's amended decision to the
then Intermediate Appellate Court. The questioned decision was
further modified by the appellate court. The dispositive portion of the
appellate court's decision reads:
WHEREFORE, the decision appealed from is modified, the
dispositive portion thereof reading as follows:
1. Ordering the defendant to pay the plaintiff by way of temperate
damages 22% of the net profit of P2,000.00 a day from judicial
demand to May 15, 1971;
2. Similarly, the sum equivalent to 22% of the net profit of P8,000.00
a day from May 16, 1971 to August 30, 1975;
3. And thereafter until fully paid the sum equivalent to 22% of the
net profit of P8,000.00 a day.
Except as modified, the decision of the court a quo is affirmed in all
other respects. (p. 102, Rollo)
Later, the appellate court, in a resolution, modified its decision and
affirmed the lower court's decision. The dispositive portion of the
resolution reads:
WHEREFORE, the dispositive portion of the amended judgment of
the court a quo reading as follows:
WHEREFORE, judgment is rendered in favor of the plaintiff and
against the defendant, ordering the latter to pay to the former the
sum equivalent to 22% of the net profit of P8,000.00 per day from
the time of judicial demand, until fully paid, plus the sum of
P5,000.00 as and for attorney's fees and costs of suit.
is hereby retained in full and affirmed in toto it being understood that
the date of judicial demand is July 13, 1978. (pp. 105-106, Rollo).
In the same resolution, the motion for reconsideration filed by
petitioner was denied.
Both the trial court and the appellate court found that the private
respondent is a partner of the petitioner in the setting up and
operations of the panciteria. While the dispositive portions merely
ordered the payment of the respondents share, there is no question
from the factual findings that the respondent invested in the
business as a partner. Hence, the two courts declared that the
private petitioner is entitled to a share of the annual profits of the
restaurant. The petitioner, however, claims that this factual finding is
erroneous. Thus, the petitioner argues: "The complaint avers that
private respondent extended 'financial assistance' to herein
petitioner at the time of the establishment of the Sun Wah
Panciteria, in return of which private respondent allegedly will
receive a share in the profits of the restaurant. The same complaint
did not claim that private respondent is a partner of the business. It
was, therefore, a serious error for the lower court and the Hon.
Intermediate Appellate Court to grant a relief not called for by the
complaint. It was also error for the Hon. Intermediate Appellate
Court to interpret or construe 'financial assistance' to mean the
contribution of capital by a partner to a partnership;" (p. 75, Rollo)
The pertinent portions of the complaint state:
xxx xxx xxx
2. That on or about the latter (sic) of September, 1955, defendant
sought the financial assistance of plaintiff in operating the
defendant's eatery known as Sun Wah Panciteria, located in the
given address of defendant; as a return for such financial
assistance. plaintiff would be entitled to twenty-two percentum
(22%) of the annual profit derived from the operation of the said
panciteria;
3. That on October 1, 1955, plaintiff delivered to the defendant the
sum of four thousand pesos (P4,000.00), Philippine Currency, of
which copy for the receipt of such amount, duly acknowledged by
the defendant is attached hereto as Annex "A", and form an integral
part hereof; (p. 11, Rollo)
In essence, the private respondent alleged that when Sun Wah
Panciteria was established, he gave P4,000.00 to the petitioner with
the understanding that he would be entitled to twenty-two percent
(22%) of the annual profit derived from the operation of the said
panciteria. These allegations, which were proved, make the private
respondent and the petitioner partners in the establishment of Sun
Wah Panciteria because Article 1767 of the Civil Code provides that
"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".
Therefore, the lower courts did not err in construing the complaint
as one wherein the private respondent asserted his rights as partner
of the petitioner in the establishment of the Sun Wah Panciteria,
notwithstanding the use of the term financial assistance therein. We
agree with the appellate court's observation to the effect that "...
given its ordinary meaning, financial assistance is the giving out of
money to another without the expectation of any returns therefrom'.
It connotes an ex gratia dole out in favor of someone driven into a
state of destitution. But this circumstance under which the
P4,000.00 was given to the petitioner does not obtain in this
case.' (p. 99, Rollo) The complaint explicitly stated that "as a return
for such financial assistance, plaintiff (private respondent) would be
7
entitled to twenty-two percentum (22%) of the annual profit derived
from the operation of the said panciteria.' (p. 107, Rollo) The well-
settled doctrine is that the '"... nature of the action filed in court is
determined by the facts alleged in the complaint as constituting the
cause of action." (De Tavera v. Philippine Tuberculosis Society, Inc.,
113 SCRA 243; Alger Electric, Inc. v. Court of Appeals, 135 SCRA
37).
The appellate court did not err in declaring that the main issue in the
instant case was whether or not the private respondent is a partner
of the petitioner in the establishment of Sun Wah Panciteria.
The petitioner also contends that the respondent court gravely erred
in giving probative value to the PC Crime Laboratory Report (Exhibit
"J") on the ground that the alleged standards or specimens used by
the PC Crime Laboratory in arriving at the conclusion were never
testified to by any witness nor has any witness identified the
handwriting in the standards or specimens belonging to the
petitioner. The supposed standards or specimens of handwriting
were marked as Exhibits "H" "H-1" to "H-24" and admitted as
evidence for the private respondent over the vigorous objection of
the petitioner's counsel.
The records show that the PC Crime Laboratory upon orders of the
lower court examined the signatures in the two receipts issued
separately by the petitioner to the private respondent and So Sia
(Exhibits "A" and "D") and compared the signatures on them with
the signatures of the petitioner on the various pay envelopes
(Exhibits "H", "H-1" to 'H-24") of Antonio Ah Heng and Maria Wong,
employees of the restaurant. After the usual examination conducted
on the questioned documents, the PC Crime Laboratory submitted
its findings (Exhibit J) attesting that the signatures appearing in both
receipts (Exhibits "A" and "D") were the signatures of the petitioner.
The records also show that when the pay envelopes (Exhibits "H",
"H-1" to "H-24") were presented by the private respondent for
marking as exhibits, the petitioner did not interpose any objection.
Neither did the petitioner file an opposition to the motion of the
private respondent to have these exhibits together with the two
receipts examined by the PC Crime Laboratory despite due notice
to him. Likewise, no explanation has been offered for his silence nor
was any hint of objection registered for that purpose.
Under these circumstances, we find no reason why Exhibit "J"
should be rejected or ignored. The records sufficiently establish that
there was a partnership.
The petitioner raises the issue of prescription. He argues: The Hon.
Respondent Intermediate Appellate Court gravely erred in not
resolving the issue of prescription in favor of petitioner. The alleged
receipt is dated October 1, 1955 and the complaint was filed only on
July 13, 1978 or after the lapse of twenty-two (22) years, nine (9)
months and twelve (12) days. From October 1, 1955 to July 13,
1978, no written demands were ever made by private respondent.
The petitioner's argument is based on Article 1144 of the Civil Code
which provides:
Art. 1144. The following actions must be brought within ten years
from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
in relation to Article 1155 thereof which provides:
Art. 1155. The prescription of actions is interrupted when they are
filed before the court, when there is a written extra-judicial demand
by the creditor, and when there is any written acknowledgment of
the debt by the debtor.'
The argument is not well-taken.
The private respondent is a partner of the petitioner in Sun Wah
Panciteria. The requisites of a partnership which are — 1) two or
more persons bind themselves to contribute money, property, or
industry to a common fund; and 2) intention on the part of the
partners to divide the profits among themselves (Article 1767, Civil
Code; Yulo v. Yang Chiao Cheng, 106 Phil. 110)-have been
established. As stated by the respondent, a partner shares not only
in profits but also in the losses of the firm. If excellent relations exist
among the partners at the start of business and all the partners are
more interested in seeing the firm grow rather than get immediate
returns, a deferment of sharing in the profits is perfectly plausible. It
would be incorrect to state that if a partner does not assert his rights
anytime within ten years from the start of operations, such rights are
irretrievably lost. The private respondent's cause of action is
premised upon the failure of the petitioner to give him the agreed
profits in the operation of Sun Wah Panciteria. In effect the private
respondent was asking for an accounting of his interests in the
partnership.
It is Article 1842 of the Civil Code in conjunction with Articles 1144
and 1155 which is applicable. Article 1842 states:
The right to an account of his interest shall accrue to any partner, or
his legal representative as against the winding up partners or the
surviving partners or the person or partnership continuing the
business, at the date of dissolution, in the absence or any
agreement to the contrary.
Regarding the prescriptive period within which the private
respondent may demand an accounting, Articles 1806, 1807, and
1809 show that the right to demand an accounting exists as long as
the partnership exists. Prescription begins to run only upon the
dissolution of the partnership when the final accounting is done.
Finally, the petitioner assails the appellate court's monetary awards
in favor of the private respondent for being excessive and
unconscionable and above the claim of private respondent as
embodied in his complaint and testimonial evidence presented by
said private respondent to support his claim in the complaint.
Apart from his own testimony and allegations, the private
respondent presented the cashier of Sun Wah Panciteria, a certain
Mrs. Sarah L. Licup, to testify on the income of the restaurant.
Mrs. Licup stated:
ATTY. HIPOLITO (direct examination to Mrs. Licup).
Q Mrs. Witness, you stated that among your duties was that you
were in charge of the custody of the cashier's box, of the money,
being the cashier, is that correct?
A Yes, sir.
Q So that every time there is a customer who pays, you were the
one who accepted the money and you gave the change, if any, is
that correct?
A Yes.
Q Now, after 11:30 (P.M.) which is the closing time as you said, what
do you do with the money?
A We balance it with the manager, Mr. Dan Fue Leung.
ATTY. HIPOLITO:
I see.
Q So, in other words, after your job, you huddle or confer together?
A Yes, count it all. I total it. We sum it up.
Q Now, Mrs. Witness, in an average day, more or less, will you
please tell us, how much is the gross income of the restaurant?
A For regular days, I received around P7,000.00 a day during my
shift alone and during pay days I receive more than P10,000.00.
That is excluding the catering outside the place.
Q What about the catering service, will you please tell the
Honorable Court how many times a week were there catering
services?
A Sometimes three times a month; sometimes two times a month or
more.
xxx xxx xxx
Q Now more or less, do you know the cost of the catering service?
A Yes, because I am the one who receives the payment also of the
catering.
Q How much is that?
A That ranges from two thousand to six thousand pesos, sir.
Q Per service?
A Per service, Per catering.
Q So in other words, Mrs. witness, for your shift alone in a single
day from 3:30 P.M. to 11:30 P.M. in the evening the restaurant
grosses an income of P7,000.00 in a regular day?
A Yes.
Q And ten thousand pesos during pay day.?
A Yes.
(TSN, pp. 53 to 59, inclusive, November 15,1978)
xxx xxx xxx
COURT:
Any cross?
ATTY. UY (counsel for defendant):
No cross-examination, Your Honor. (T.S.N. p. 65, November 15,
1978). (Rollo, pp. 127-128)
The statements of the cashier were not rebutted. Not only did the
petitioner's counsel waive the cross-examination on the matter of
income but he failed to comply with his promise to produce pertinent
8
records. When a subpoena duces tecum was issued to the
petitioner for the production of their records of sale, his counsel
voluntarily offered to bring them to court. He asked for sufficient time
prompting the court to cancel all hearings for January, 1981 and
reset them to the later part of the following month. The petitioner's
counsel never produced any books, prompting the trial court to
state:
Counsel for the defendant admitted that the sales of Sun Wah were
registered or recorded in the daily sales book. ledgers, journals and
for this purpose, employed a bookkeeper. This inspired the Court to
ask counsel for the defendant to bring said records and counsel for
the defendant promised to bring those that were available.
Seemingly, that was the reason why this case dragged for quite
sometime. To bemuddle the issue, defendant instead of presenting
the books where the same, etc. were recorded, presented
witnesses who claimed to have supplied chicken, meat, shrimps,
egg and other poultry products which, however, did not show the
gross sales nor does it prove that the same is the best evidence.
This Court gave warning to the defendant's counsel that if he failed
to produce the books, the same will be considered a waiver on the
part of the defendant to produce the said books inimitably showing
decisive records on the income of the eatery pursuant to the Rules
of Court (Sec. 5(e) Rule 131). "Evidence willfully suppressed would
be adverse if produced." (Rollo, p. 145)
The records show that the trial court went out of its way to accord
due process to the petitioner.
The defendant was given all the chance to present all conceivable
witnesses, after the plaintiff has rested his case on February 25,
1981, however, after presenting several witnesses, counsel for
defendant promised that he will present the defendant as his last
witness. Notably there were several postponement asked by
counsel for the defendant and the last one was on October 1, 1981
when he asked that this case be postponed for 45 days because
said defendant was then in Hongkong and he (defendant) will be
back after said period. The Court acting with great concern and
understanding reset the hearing to November 17, 1981. On said
date, the counsel for the defendant who again failed to present the
defendant asked for another postponement, this time to November
24, 1981 in order to give said defendant another judicial
magnanimity and substantial due process. It was however a
condition in the order granting the postponement to said date that if
the defendant cannot be presented, counsel is deemed to have
waived the presentation of said witness and will submit his case for
decision.
On November 24, 1981, there being a typhoon prevailing in Manila
said date was declared a partial non-working holiday, so much so,
the hearing was reset to December 7 and 22, 1981. On December
7, 1981, on motion of defendant's counsel, the same was again
reset to December 22, 1981 as previously scheduled which hearing
was understood as intransferable in character. Again on December
22, 1981, the defendant's counsel asked for postponement on the
ground that the defendant was sick. the Court, after much tolerance
and judicial magnanimity, denied said motion and ordered that the
case be submitted for resolution based on the evidence on record
and gave the parties 30 days from December 23, 1981, within which
to file their simultaneous memoranda. (Rollo, pp. 148-150)
The restaurant is located at No. 747 Florentino Torres, Sta. Cruz,
Manila in front of the Republic Supermarket. It is near the corner of
Claro M. Recto Street. According to the trial court, it is in the heart of
Chinatown where people who buy and sell jewelries, businessmen,
brokers, manager, bank employees, and people from all walks of life
converge and patronize Sun Wah.
There is more than substantial evidence to support the factual
findings of the trial court and the appellate court. If the respondent
court awarded damages only from judicial demand in 1978 and not
from the opening of the restaurant in 1955, it is because of the
petitioner's contentions that all profits were being plowed back into
the expansion of the business. There is no basis in the records to
sustain the petitioners contention that the damages awarded are
excessive. Even if the Court is minded to modify the factual findings
of both the trial court and the appellate court, it cannot refer to any
portion of the records for such modification. There is no basis in the
records for this Court to change or set aside the factual findings of
the trial court and the appellate court. The petitioner was given
every opportunity to refute or rebut the respondent's submissions
but, after promising to do so, it deliberately failed to present its
books and other evidence.
The resolution of the Intermediate Appellate Court ordering the
payment of the petitioner's obligation shows that the same
continues until fully paid. The question now arises as to whether or
not the payment of a share of profits shall continue into the future
with no fixed ending date.
Considering the facts of this case, the Court may decree a
dissolution of the partnership under Article 1831 of the Civil Code
which, in part, provides:
Art. 1831. On application by or for a partner the court shall decree a
dissolution whenever:
xxx xxx xxx
(3) A partner has been guilty of such conduct as tends to affect
prejudicially the carrying on of the business;
(4) A partner willfully or persistently commits a breach of the
partnership agreement, or otherwise so conducts himself in matters
relating to the partnership business that it is not reasonably
practicable to carry on the business in partnership with him;
xxx xxx xxx
(6) Other circumstances render a dissolution equitable.
There shall be a liquidation and winding up of partnership affairs,
return of capital, and other incidents of dissolution because the
continuation of the partnership has become inequitable.
WHEREFORE, the petition for review is hereby DISMISSED for lack
of merit. The decision of the respondent court is AFFIRMED with a
MODIFICATION that as indicated above, the partnership of the
parties is ordered dissolved.
SO ORDERED.

9
G.R. No. L-25532 February 28, 1969
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
WILLIAM J. SUTER and THE COURT OF TAX APPEALS,
respondents.
Partnership; Where respondent company in the case at bar is
considered a particular partnership and not universal.—The
respondent company was not a universal partnership, but a
particular one. As appears f rom Articles 1674 and 1675 of the
Spanish Civil Code of 1889 (law in force when firm organized in
1947), a universal partnership requires either that the object of the
association be all the present property of the partners, as
contributed by them to the common fund, or else “all that the
partners may acquire by their industry or work during the existence
of the partnership.” Respondent company was not such a universal
partnership, since the contributions of the partners were fixed sums
of money and neither one of them was an industrial partner. It
follows that respondent company was not a partnership that
spouses were forbidden to enter by Article 1677 of the Civil Code of
1889. Nor could the subsequent marriage of the partners operate to
dissolve it, such marriage not being one of the causes provided for
that purpose either by the Spanish Civil Code or the Code of
Commerce.
Same; Where marriage of partners does not make the company a
single proprietorship.—The capital contributions of respondents-
partners were separately owned and contributed by them before
their marriage; and after they were joined in wedlock, such
contributions remained their respective separate property under the
Spanish Civil Code.
Same; Partnership has distinct and separate personality from that of
its partners; Section 24 of Internal Revenue Code is exception to
the rule.—The basic tenet of ,the Spanish and Philippine law is that
the partnership has a juridical personality of its own, distinct and
separate from that of its partners, the bypassing of the existence of
the limited partnership as a taxpayer can only be done by ignoring
or disregarding clear statutory mandates and basic principles of our
law. The limited partnership’s separate individuality makes it
impossible to equate its income with that of the component
members. True, section 24 of the Internal Revenue Code merges
registered general copartnerships with the personality of the
individual partners for income tax purposes. But this rule is
exceptional in its disregard of a cardinal tenet of our partnership
laws, and can not be extended by mere implication to limited
partnerships.
REYES, J.B.L., J.:
A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.,"
was formed on 30 September 1947 by herein respondent William J.
Suter as the general partner, and Julia Spirig and Gustav Carlson,
as the limited partners. The partners contributed, respectively,
P20,000.00, P18,000.00 and P2,000.00 to the partnership. On 1
October 1947, the limited partnership was registered with the
Securities and Exchange Commission. The firm engaged, among
other activities, in the importation, marketing, distribution and
operation of automatic phonographs, radios, television sets and
amusement machines, their parts and accessories. It had an office
and held itself out as a limited partnership, handling and carrying
merchandise, using invoices, bills and letterheads bearing its trade-
name, maintaining its own books of accounts and bank accounts,
and had a quota allocation with the Central Bank.
In 1948, however, general partner Suter and limited partner Spirig
got married and, thereafter, on 18 December 1948, limited partner
Carlson sold his share in the partnership to Suter and his wife. The
sale was duly recorded with the Securities and Exchange
Commission on 20 December 1948.
The limited partnership had been filing its income tax returns as a
corporation, without objection by the herein petitioner,
Commissioner of Internal Revenue, until in 1959 when the latter, in
an assessment, consolidated the income of the firm and the
individual incomes of the partners-spouses Suter and Spirig
resulting in a determination of a deficiency income tax against
respondent Suter in the amount of P2,678.06 for 1954 and
P4,567.00 for 1955.
10
Respondent Suter protested the assessment, and requested its
cancellation and withdrawal, as not in accordance with law, but his
request was denied. Unable to secure a reconsideration, he
appealed to the Court of Tax Appeals, which court, after trial,
rendered a decision, on 11 November 1965, reversing that of the
Commissioner of Internal Revenue.
The present case is a petition for review, filed by the Commissioner
of Internal Revenue, of the tax court's aforesaid decision. It raises
these issues:
(a) Whether or not the corporate personality of the William J. Suter
"Morcoin" Co., Ltd. should be disregarded for income tax purposes,
considering that respondent William J. Suter and his wife, Julia
Spirig Suter actually formed a single taxable unit; and
(b) Whether or not the partnership was dissolved after the marriage
of the partners, respondent William J. Suter and Julia Spirig Suter
and the subsequent sale to them by the remaining partner, Gustav
Carlson, of his participation of P2,000.00 in the partnership for a
nominal amount of P1.00.
The theory of the petitioner, Commissioner of Internal Revenue, is
that the marriage of Suter and Spirig and their subsequent
acquisition of the interests of remaining partner Carlson in the
partnership dissolved the limited partnership, and if they did not, the
fiction of juridical personality of the partnership should be
disregarded for income tax purposes because the spouses have
exclusive ownership and control of the business; consequently the
income tax return of respondent Suter for the years in question
should have included his and his wife's individual incomes and that
of the limited partnership, in accordance with Section 45 (d) of the
National Internal Revenue Code, which provides as follows:
(d) Husband and wife. — In the case of married persons, whether
citizens, residents or non-residents, only one consolidated return for
the taxable year shall be filed by either spouse to cover the income
of both spouses; ....
In refutation of the foregoing, respondent Suter maintains, as the
Court of Tax Appeals held, that his marriage with limited partner
Spirig and their acquisition of Carlson's interests in the partnership
in 1948 is not a ground for dissolution of the partnership, either in
the Code of Commerce or in the New Civil Code, and that since its
juridical personality had not been affected and since, as a limited
partnership, as contra distinguished from a duly registered general
partnership, it is taxable on its income similarly with corporations,
Suter was not bound to include in his individual return the income of
the limited partnership.
We find the Commissioner's appeal unmeritorious.
The thesis that the limited partnership, William J. Suter "Morcoin"
Co., Ltd., has been dissolved by operation of law because of the
marriage of the only general partner, William J. Suter to the
originally limited partner, Julia Spirig one year after the partnership
was organized is rested by the appellant upon the opinion of now
Senator Tolentino in Commentaries and Jurisprudence on
Commercial Laws of the Philippines, Vol. 1, 4th Ed., page 58, that
reads as follows:
A husband and a wife may not enter into a contract of general
copartnership, because under the Civil Code, which applies in the
absence of express provision in the Code of Commerce, persons
prohibited from making donations to each other are prohibited from
entering into universal partnerships. (2 Echaverri 196) It follows that
the marriage of partners necessarily brings about the dissolution of
a pre-existing partnership. (1 Guy de Montella 58)
The petitioner-appellant has evidently failed to observe the fact that
William J. Suter "Morcoin" Co., Ltd. was not a universal partnership,
but a particular one. As appears from Articles 1674 and 1675 of the
Spanish Civil Code, of 1889 (which was the law in force when the
subject firm was organized in 1947), a universal partnership
requires either that the object of the association be all the present
property of the partners, as contributed by them to the common
fund, or else "all that the partners may acquire by their industry or
work during the existence of the partnership". William J. Suter
"Morcoin" Co., Ltd. was not such a universal partnership, since the
contributions of the partners were fixed sums of money, P20,000.00
by William Suter and P18,000.00 by Julia Spirig and neither one of
them was an industrial partner. It follows that William J. Suter
"Morcoin" Co., Ltd. was not a partnership that spouses were
forbidden to enter by Article 1677 of the Civil Code of 1889.
The former Chief Justice of the Spanish Supreme Court, D. Jose results in equal treatment, tax wise, of a general copartnership
Casan, in his Derecho Civil, 7th Edition, 1952, Volume 4, page 546, (compañia colectiva) and a limited partnership, when the code
footnote 1, says with regard to the prohibition contained in the plainly differentiates the two. Thus, the code taxes the latter on its
aforesaid Article 1677: income, but not the former, because it is in the case of compañias
Los conyuges, segun esto, no pueden celebrar entre si el contrato colectivas that the members, and not the firm, are taxable in their
de sociedad universal, pero o podran constituir sociedad particular? individual capacities for any dividend or share of the profit derived
Aunque el punto ha sido muy debatido, nos inclinamos a la tesis from the duly registered general partnership (Section 26, N.I.R.C.;
permisiva de los contratos de sociedad particular entre esposos, ya Arañas, Anno. & Juris. on the N.I.R.C., As Amended, Vol. 1, pp.
que ningun precepto de nuestro Codigo los prohibe, y hay que estar 88-89).lawphi1.nêt
a la norma general segun la que toda persona es capaz para But it is argued that the income of the limited partnership is actually
contratar mientras no sea declarado incapaz por la ley. La or constructively the income of the spouses and forms part of the
jurisprudencia de la Direccion de los Registros fue favorable a esta conjugal partnership of gains. This is not wholly correct. As pointed
misma tesis en su resolution de 3 de febrero de 1936, mas parece out in Agapito vs. Molo 50 Phil. 779, and People's Bank vs. Register
cambiar de rumbo en la de 9 de marzo de 1943. of Deeds of Manila, 60 Phil. 167, the fruits of the wife's parapherna
Nor could the subsequent marriage of the partners operate to become conjugal only when no longer needed to defray the
dissolve it, such marriage not being one of the causes provided for expenses for the administration and preservation of the paraphernal
that purpose either by the Spanish Civil Code or the Code of capital of the wife. Then again, the appellant's argument
Commerce. erroneously confines itself to the question of the legal personality of
The appellant's view, that by the marriage of both partners the the limited partnership, which is not essential to the income
company became a single proprietorship, is equally erroneous. The taxability of the partnership since the law taxes the income of even
capital contributions of partners William J. Suter and Julia Spirig joint accounts that have no personality of their own. 1 Appellant is,
were separately owned and contributed by them before their likewise, mistaken in that it assumes that the conjugal partnership of
marriage; and after they were joined in wedlock, such contributions gains is a taxable unit, which it is not. What is taxable is the "income
remained their respective separate property under the Spanish Civil of both spouses" (Section 45 [d] in their individual capacities.
Code (Article 1396): Though the amount of income (income of the conjugal partnership
The following shall be the exclusive property of each spouse: vis-a-vis the joint income of husband and wife) may be the same for
(a) That which is brought to the marriage as his or her own; .... a given taxable year, their consequences would be different, as their
Thus, the individual interest of each consort in William J. Suter contributions in the business partnership are not the same.
"Morcoin" Co., Ltd. did not become common property of both after The difference in tax rates between the income of the limited
their marriage in 1948. partnership being consolidated with, and when split from the income
It being a basic tenet of the Spanish and Philippine law that the of the spouses, is not a justification for requiring consolidation; the
partnership has a juridical personality of its own, distinct and revenue code, as it presently stands, does not authorize it, and
separate from that of its partners (unlike American and English law even bars it by requiring the limited partnership to pay tax on its own
that does not recognize such separate juridical personality), the income.
bypassing of the existence of the limited partnership as a taxpayer FOR THE FOREGOING REASONS, the decision under review is
can only be done by ignoring or disregarding clear statutory hereby affirmed. No costs.
mandates and basic principles of our law. The limited partnership's
separate individuality makes it impossible to equate its income with
that of the component members. True, section 24 of the Internal
Revenue Code merges registered general co-partnerships
(compañias colectivas) with the personality of the individual partners
for income tax purposes. But this rule is exceptional in its disregard
of a cardinal tenet of our partnership laws, and can not be extended
by mere implication to limited partnerships.
The rulings cited by the petitioner (Collector of Internal Revenue vs.
University of the Visayas, L-13554, Resolution of 30 October 1964,
and Koppel [Phil.], Inc. vs. Yatco, 77 Phil. 504) as authority for
disregarding the fiction of legal personality of the corporations
involved therein are not applicable to the present case. In the cited
cases, the corporations were already subject to tax when the fiction
of their corporate personality was pierced; in the present case, to do
so would exempt the limited partnership from income taxation but
would throw the tax burden upon the partners-spouses in their
individual capacities. The corporations, in the cases cited, merely
served as business conduits or alter egos of the stockholders, a
factor that justified a disregard of their corporate personalities for tax
purposes. This is not true in the present case. Here, the limited
partnership is not a mere business conduit of the partner-spouses; it
was organized for legitimate business purposes; it conducted its
own dealings with its customers prior to appellee's marriage, and
had been filing its own income tax returns as such independent
entity. The change in its membership, brought about by the marriage
of the partners and their subsequent acquisition of all interest
therein, is no ground for withdrawing the partnership from the
coverage of Section 24 of the tax code, requiring it to pay income
tax. As far as the records show, the partners did not enter into
matrimony and thereafter buy the interests of the remaining partner
with the premeditated scheme or design to use the partnership as a
business conduit to dodge the tax laws. Regularity, not otherwise, is
presumed.
As the limited partnership under consideration is taxable on its
income, to require that income to be included in the individual tax
return of respondent Suter is to overstretch the letter and intent of
the law. In fact, it would even conflict with what it specifically
provides in its Section 24: for the appellant Commissioner's stand

11
G.R. Nos. L-11483-11484 February 14, 1958
In the matter of the Testate Estate of the deceased Edward E.
Christensen, ADOLFO CRUZ AZNAR, petitioner.
MARIA LUCY CHRISTENSEN DANEY and ADOLFO CRUZ
AZNAR, petitioners-appellants,
vs.
MARIA HELEN CHRISTENSEN GARCIA and BERNARDA
CAMPOREDONDO, oppositors-appellees.
BERNARDA CAMPOREDONDO, plaintiff-appellee,
vs.
ADOLFO CRUZ AZNAR, as Executor of the Deceased EDWARD
E. CHRISTENSEN, defendant-appellant.
INFORMAL CIVIL PARTNERSHIP; REQUISITE BEFORE A PARTY
MAY BE ENTITLED) TO SHARE IN THE PROPERTIES
ACQUIRED DURING THE COHABITATION; CASE AT
BAR.—Before Republic Act No. 386 (Civil Code of the
Philippines) went into operation on August 30, 1950, this
Court had already declared that where a man and a
woman, not suffering from any impediment to contract
marriage, live together as husband and wife, an informal
civil partnership exists, and each of them has an equal
interest in the properties acquired during said union and is
entitled to participate therein if said properties were the
product of their JOINT effort (Marata vs. Dionio G. R. No,
24419, December 31, 1925; Lesaca vs. Felix Vda. de
Lesaca, 91 Phil., 135; Flores vs. Rehabilitation Finance
Corporation, 94 Phil., 451, 50 Off. Gaz. 1029). In the case
at bar, aside from the observation of the trial court that
appellee was an illiterate woman, there appears no
evidence to prove appellee's contribution or participation in
the acquisition of the properties involved; therefore,
following the aforecited ruling of this Court, appellee's
claim f or ½ of the properties cannot be granted. Even
assuming for the sake of argument that this case falls
under the provisions of Article 144 of the Civil Code which
recognizes the parties as co-owners of the properties
acquired during the union, the law would be applicable only
as far as properties acquired after the Act are concerned
and to no other, for such law cannot be given retroactive
effect to govern those already possessed before August
30, 1950.
FELIX, J.:
From the records of the above-entitled cases, it appears that as of
1913,Edward E. Christensen, an American citizen, was already
residing in Davao and on the following year became the manager of
Mindanao Estates located in the municipality of Padada of the same
province. At a certain time, which the lower court placed at 1917, a
group of laborers recruited from Argao, Cebu, arrived to work in the
said plantation. Among the group was a young girl,Bernarda
Camporendondo, who became an assistant to the cook. Thereafter,
thegirl and Edward E. Christensen, who was also unmarried staring
living together as husband and wife and although the records failed
to establishthe exact date when such relationship commenced, the
lower court found the same to have been continous for over 30
years until the death of Christensen occurecd on April 30, 1953. Out
of said relations, 2 children, Lucy and Helen Christensen, were
allegedly born.
G. R. NO. L-11484.
Upon the demise of the American, who had left a considerable
amount of properties his will naming Adolfo Cruz Aznar as executor
was duly presented for probate in court and became the subject of
Special Proceedings No. 622 of the Court of First Instance of
Davao. Said will contains, among others, the following provisions:
xxx xxx xxx.
3. I declare . . . that I have but one (1) child, named MARIA LUCY
CHRISTENSEN (now Mrs. Bernard Daney), who was born in the
Philippines about twenty-eight years ago, and who is now residing
at No. 665 Rodger Young Village, Los Angeles, California, U.S.A.
4. I further declare that I have no living ascendants, andno
descendantsexcept my above named daughter, MARIA LUCY
CHRISTENSEN DANEY.
12
xxx xxx xxx.
7. I give, devise and bequeath unto MARIA LUCY CHRISTENSEN,
now married toEduardo Garcia, about eighteen years of age and
who, notwithstanding the factthat she was baptized Christensen, is
not in any way related to me, nor hasshe been at any time adopted
to me, and who, from all information I have now resides in Egipt,
Digos, Davao, Philippines, the sum of THREEE THOUSAND
SIXHUNDRED PESOS (P3,600) Philippine Currency, the same to
be deposited in trustfor said Maria Lucy Christensen with the Davao
Branch of the PhilippineNational Bank, and paid to her at the rate of
One Hundred Pesos (P100), Philippine Currency per month until the
the principal thereof as well as any interest which may have accrued
thereon, is exhausted.
8. I give devise and bequeath unto BERNARDA
CAMPORENDONDO, now residing inPadada, Davao, Philippines,
the sum of One Thousand Pesos (P1,000), Philippine Currency.
xxx xxx xxx.
12. I hereby give, devise and bequeath, unto my well-beloved
daughter, the said MARIA Lucy CHRISTENSEN DANEY (Mrs.
Bernard Daney), now residing as aforesaid at No. 665 Rodger
Young Village Los Angeles, California, U.S.A., all the income from
the rest, remainder, and residue of my property and estate, real,
personal and/or mixed, of whatsoever kind or character,
andwheresover situated; of which I may be possessed at any death
and which mayhave come to me from any source whatsoever,
during her lifetime,Provided, honvever, that should the said MARIA
LUCY CHRISTENSEN DANEY at any time prior to her decease
having living issue, then, and in that event, the life interest herein
given shall terminate, and if so terminated, then I give, devise, and
bequeath to my said daughter, the said MARIA LUCY
CHRISTENSEN DANEY, the rest remainder and residue of my
property, with the same force and effectas if I had originally so
given, devised and bequeathedit to her; and provided, further, that
should be said Maria Lucy ChristensenDaney die without living
issue then, and in that event, I give, devise and bequeath all the
rest, remainder and residue of my property, one-half (1/2) to my
well-beloved sister, Mrs. CARRIE LOIUSE C. BORTON, now
residing at No. 2124 Twentieth Street, Bakersfield, California, U.S.A.
and one-half (1/2) to the children of my deceased brother, JOSEPH
C. CRISTENSEN, . . .
13. I hereby nominate and appoint Mr Adolfo Cruz Aznar, of Davao
City, Philippines, my executor, and the executor of this, my last will
and testament.
Oppositions to the probate of this will were separately filed by Maria
Helen Christensen Garcia and Bernarda Camporendondo, the first
contending that thewill lacked the formalities required by law; that
granting that he had, thedispositions made therein were illegal
because although she and Lucy Christensen were both children had
by the deceased with Bernarda Camporendondo, yet she was given
only a meager sum of P3,600 out of an estate valued at $485,000
while Lucy would get the rest of the properties;and that the
petitioner Adolfo Cruz Aznar was not qualified to be appointed as
administrator of the estate because he had an interest adverse to
thatof the estate. It was therefore prayed by his oppositor that the
application for probate be denied and the will disallowed; that the
proceeding be declared intestate and that another disinterested
person be appointed as administrator.
Bernarda Camporedondo, on the other hand, claimed ownership
over one-halfof the entire estate in virtue of her relationship with the
deceased, it being alleged that she and the testator having lived
together as husband andwife continuously for a period of over 30
years, the properties acquired during such cohabitation should be
governed by the rules on co-ownership. This opposition was
dismissed by the probate court on the ground that shehad no right
to intervene in said proceeding, for as such common-law wife she
had no successional right that might be affected by the probate of
thewill, and likewise, she could not be allowed to establish her title
and co-ownership over the properties therein for such questions
must be ventilated in a court of general jurisdiction. In view of this
ruling of the Court and in order to attain the purpose sought by her
overruled opposition Bernarda Camporedondo had to institute, as
she did institute Civil Case No. 1076 of the Court of First Instance of
Davao (G.R. No. L-11483) which we will consider and discuss
hereinafter.
In the meantime, Adolfo Cruz Aznar was appointed special
adminsitrator of the estate after filing a bond for P5,000 pending the
appointment of a regular one, and letters of special administrition
were correspondingly issued to him on May 21, 1953.
The records further show that subsequent to her original opposition.
Helen Christensen Garcia filed a supplemental opposition and
motion to declare her an acknowledged natural child of Edward E.
Christensen, alleging that shewas conceived during the time when
her mother Bernarda Camporendondo was living with the deceased
as his common-law wife; that she had been in continous possession
of the status of a natural child of the deceased; thatahe had in her
favor evidence and/or proof that Edward Christensen was her
father; and that she and Lucy had the same civil status as children
of the decedent and Bernarda Camporedondo. This motion was
opposed jointly by the executor and Maria Lucy Christensen Daney
asserting that before, during and after the conception and birth of
Helen Christensen Garcia, her mother was generally known to be
carrying relations with 3 different men; that during the lifetime of the
decedent and even years before his death, Edward Christensen
verbally as well as in writing disavowed relationship with said
oppositor; that oppositor appropriated and used the surname
Christensen illegally and without permission from the deceased.
Thus they prayed the Court that the will be allowed; that Maria
Helen Christensen Garcia be declared not in any way related to the
deceased; and that the motion of said oppositor be denied.
After due hearing, the lower court in a decision dated February 28,
1953, found that oppositor Maria Helen Cristensen had been in
continous possession of the status of a natural child of the
deceased Edward Christensen notwithstanding the fact that she
was disowned by him in his will, for such action must have been
brought about by the latter's disaproval of said oppositor's marriage
to a man he did not like. But taking into considerationthat such
possession of the status of a natural child did not itself constitute
acknowledgment but may only be availed of to compel
acknowledgment, the lower Court directed Maria Lucy Christensen
Daney toacknowledge the oppositor as a natural child of Edward E.
Christensen. Thewill was, however, allowed the letters testamentary
consequently issued toAdolfo Cruz Aznar, the executor named
therein. From the portion of the decision requiring Lucy Christensen
to acknowledge Helen as a natural child of the testator, the former
and the executor interposed an appeal to the Court of Appeals (CA-
G. R. No. 13421-R), but the appellate tribunal elevatedthe same to
Us on the ground that the case involves an estate the value of
which far exceeds P50,000.00 and thus falls within the exclusive
appellate jurisdiction of this Court pursuant to Section 17 (5),
Republic Act No. 296.
The principal issue in this litigation is whether the lower court erred
in finding that the oppositor Maria Helen Christensen Garcia had
been in continous possession of the status of a natural child of the
deceased EdwardE. Christensen and in directing Maria Lucy
Christensen Daney, recognizeddaughter and instituted heirs of the
decedent, to acknowledge the former assuch natural child.
Maria Lucy Christensen was born on April 25, 1922, and Maria
Helen Christensen on July 2, 1934, of the same mother, Bernarda
Camporedondo, during the period when the latter was publicly
known to have been living as common-law wife of Edward E.
Chrisiensen. From the facts of the case there can be no question as
to Lucy's parentage, but controversy arose when Edward
Christensen, in making his last will and testament, disavowed such
paternity to Helen and gave her only a legacy of P3,600. ln the
course of the proceeding for the probate of the will (Exh, A), Helen
introduced documentary and testimonial evidence to support her
claim that she, Lucy,was a natural child of the deceased and,
therefore, entitled to the hereditaryshare corresponding to such
descendant. Several witness testified in herfavor, including the
mother Bernarda Camporendondo, her former teachers andother
residents of the community, tending to prove that she was known in
the locality as a child of the testator and was introduced by the latter
to the circle of his friends and acquaintances as his daughter.
Family portraits, greeting cards and letters were likewise presented
to bolster herassertion that she had always been treated by the
deceased and by Lucy herself as a member of the family.
Lucy Christensen and Adolfo Cruz Aznar, as executor, tried to
repudiate herclaim by introducing evidence to prove that on or about
the period when shewas conceived and born, her mother was
13
carrying an affair with another man,Zosimo Silva, a former laborer in
her Paligue plantation. Silva executed an affidavit and even took the
witness stand to testify to this effect. Appellants also strived to show
that the defendant's solicitations for Helen's welfare and the help
extended to her merely sprang out generosity and hammered on the
fact that on several occasions, the deceased disclaimed any
relationship with her (Exh. O-Daney, Exh. Q-Daney, Exh. Z-Daney,
Exh. 8-Helen).
Going over the evidence adduced during the trial, it appears
indubitable that on or about the period when Helen was born,
Bernarda Camporendondo had established residence at her
plantation at Paligue, Davao, and that although Edward Christensen
stayed in Davao City to manage his merchandising business, he
spent the weekends with the former and their child Lucy in the
Christensenplantation. Even granting that Zosimo Silva at his stage
fitted himself intothe picture, it cannot be denied that Helen's mother
and the deceased weregenerally and publicly known to be living
together as husband and wife. Thismust have been the reason why
Christensen from Helen's birth in 1934 providedfor her
maintenance; shouldered the expenses for her education to the
extentthat she was even enrolled as an intern in an exclusive
college for girls inManila; tolerated or allowed her carrying the
surname "Christensen", and ineffect gaver her the attention and
care that a father would only do to this offspring. We should take
note that nothing appears on record to show thatChristensen ever
entertained any doubt or disputed Helen's paternity. Hisrepudations
of her relationship with him came about only after he andBernarda
Comperodondo parted ways in March, 1950, and apparently after
Helentook sides with her mother. Furthermore, it seems that despite
that decedent's desire that she continue her studies, Helen ignored
the same andgot married to a man for Christensen held no high
esteem. We may state at hisjuncture that while it is true that herein
appellants introduced witnesses todisprove oppositor'r claim, the
lower Court that had the opportunity to observe the conduct of the
witnesses while testifying and could better gaugetheir credibility and
impartiality in the case, arrived at the conclusion that Maria Helen
Christensen had established that she had been in
continouspossessions of the status of a natural child of the
deceased. Considering the preponderant evidence on record, We
see no reason to reverse said ruling.The testator' lastacts cannot be
made the criterion in determining whether oppositor was his child or
not, for human frailty and parental arrogance maydraw a person to
adopt unnatural or harsh measures against an erring child orone
who displeases just so the weight of his authority could be felt. In
theconsideration of a claim that one is a natural child, the attitude or
directacts of the person against whom such action is directed or that
of his family before the controversy arose or during his lifetime if he
predeceases the claimant, and not a single opportunity or an
isolated occasions but as a whole, must be taken into account. The
possession of such status is one of the cases that gives rise to the
right, in favor of the child, of coumpulsaryrecognition. (Art. 283, Civil
Code).
The lower Court, however, after making its finding directed Maria
Lucy Christensen Daney, an heir of the decedent, to recognize
oppositor as a natural child of the deceased. This seems improper.
The Civil Code for 2 kinds of acknowledgement of a natural child:
voluntary and compulsory. In the first instance, which may be
effected in the record of birth, a will, a statement before a court of
record or in an authentic writing (Art. 278,Civil Code), court
intervention is very nil and not altogether wanting, whereas in the
second, judicial pronouncement is essential, and while it is true that
the effect of a voluntary and a compulsory acknowledgment onthe
right of the child so recognized is the same, to maintain the view of
thelower Court would eliminate the distinction between voluntary
acts and those brought about by judicial dicta. And if We consider
that in the case, where, the presumed parent dies ahead of the child
and action for compulsory recogniton is brought against the heirs of
the deceased, as in the instant case, the situation would take
absurd turn, for the heirs would be compelled to recognize such
child as a natural child of the deceased without a properprovision of
the law, for as it now stands, the Civil Code only requires a
declaration by the court of the child's status as a natural child of the
parent who, if living, would be compelled to recognize his offspring
as such.Therefore, We hold that in cases of compulsory recognition,
as in the case at bar, it would be sufficient that a competent court,
after taking into account all the evidence on record, would declare
that under any of the circumstances specified by Article 283 of the
Civil Code, a child has acquired the status of a natural child of the
presumptive parent and as such is entitled to all rights granted it by
law, for such declaration is by itself already a judicial recognition of
the paternity of the parent concerned which is her against whom the
action is directed, are bound to respect.
G.R. No. L-11483
Coming now to Civil Case No. 1076 of the Court of First Instance of
Davao, Bernarda Camporendondo claimed in her complaint 1/2 of
the properties of thedeceased as co-owner thereof in virtue of her
relations with the deceased. She alleged as basis for action that she
and the deceased Edward E. Christensen had lived and cohabitated
as husband and wife, continously and openly for a period for more
than 30 years; that within said period, plaintiff and the deceased
acquired real and personal properties through their common effort
and industry; and that in virtue of such relationship, she was a co-
owner of said properties. As the executor refused to account forand
deliver the share allegedly belonging to her despite her repeated
demands, she prayed the court that said executor be ordered to
submit an inventory and render an accounting of the entire estate of
the deceased;to divide the same into 2 equal parts and declare that
one of them lawfully belonged to plaintiff; and for such other reliefs
as may be deemed just and equitable in the premises. In his
answer, the executor denied the avermentsof the complaint,
contending that the decedent was the sole owner of the properties
left by him as they were acquired through his own efforts;
thatplaintiff had never been a co-owner of any property acquired or
possessed by the late Edward christensen during his lifetime; that
the personal relationship between plaintiff and the deceased was
purely clandestinebecause the former habitually lived in her
plantation at Paligue, Davao, from the time she acquired the same
in 1928; that she also maintained relations with 2 other men; and
that the claim of plaintiff would violate the provisions of Article 2253
of the Civil Code as the vested rights of the compulsory heirs of the
deceased would be impaired. Defendant thus prayed for the
dismissal of the complaint and as counterclaim demanded the sum
ofP70.000.00 representing actual, moral and exemplary damages.
Due hearing was conducted thereon and after the parties ad
submitted theirrespective memoranda, the lower Court on August
25, 1954, rendered judgmentfinding that the deceased Edward
Christensen and Bernarda Camporendondo,not otherwise suffering
from any impediment to contract marriage, lived together as
husband and wife without marital ties continously for over 30years
until the former's death in 1953; that out of such relations 2
childrenwere born; and that the properties in controversy were
acquired by either orboth of them through their work or industry.
Relying on Section 144 of theCivil Code which said court
considered to have created another mode ofacquiring ownership,
plaintiff was held to be entitled to one-half of saidproperties as co-
owner thereof in view of her relationship with the deceasedand
ordered the executor to account for and deliver the same by her.
Fromthis decision, defendant Aznar, as Executor of the will,
perfected an appealto the Court of Appeals, but as the property
involved in the litigation exceeds P50,000.00 said tribunal elevated
the case to Us for consideration.
It is not controverted that at the time of his death, Edward
Christensen was the owner of certain properties, including shares of
stock in the plantation bearing his name and a general
merchandising store in Davao City. It is also undeniable that the
deceased and appellee, both capacitated to enter into the married
state, maintained relations as husband and wife, continuously and
publicly for a considerable number of years which the lower Court
declared to be until the death of Christensen in 1953. While as a
general rule appellate courts do not usually disturb the lower court's
findings of fact, unless said finding is not supported by or totally
devoid of or inconsistent with the evidence on record, such finding
must ofnecessity be modified to confrom with the evidence if the
reviewing tribunalwere to arrive at the proper and just solution of the
controversy. In theinstant case, the court a quo overlooked or failed
to consider the testimonies of both Lucy and Helen Christensen to
the effect that the deceased and their mother Bernarda
Camporendondo had some sort of quarrel or misunderstanding and
parted ways as of March, 1950, a fact which appelleewas not able
to overcome. Taking into account the circumstances of this caseas
14
found by the trial court, with the modification that the cohabitation
should appear as continuous from the early 20's until March, 1950,
the question left for our determination is whether Bernarda
Camporedondo, byreason of such relationship, may be considered
as a co-owner of the properties acquired by the deceased during
said period and thus entitledto one-half thereof after the latter's
death.
Presumably taking judicial notice of the existence in our society of a
certain kind of relationship brought about by couples living together
as husbands and wives without the benefit of marriage, acquiring
and bringingproperties unto said union, and probably realizing that
while same may not beacceptable from the moral point of view they
are as much entitled to theprotection of the laws as any other
property owners, the lawmakersincorporated Article 144 in Republic
Act No. 386 (Civil Code of the Philippines) to govern their property
relations. Said article read as follows:
ART. 114. When a man and a woman live together as husband and
wife, but they are not married, or their marriage is void from the
beginning, the property acquired by either or both of them through
their work or industry or their wages and salaries shall be governed
by the rules of co-ownership.
It must be noted that such form of co-ownership requires that the
man and the woman thus living together must not in any way be
incapacitated to contract marriage and that the properties realized
during their cohabitation be acquired through the work, industry,
employment or occupation of both or either of them. And the same
thing may be said of whose marriages are by provision of law
declared void ab intio. While it is true that these requisites are fully
met and satisfied in the case at bar, We must remember that the
deceased and herein appellee were already estranged as of March,
1950. There being no provision of law governing the cessation of
such informal civil partnership, if ever existed, same may be
considered terminated upon their separation or desistance to
continue said relations.The Spanish Civil Code which was then
enforce contains to counterpart of Article 144 and as the records in
the instant case failed to show show thata subsequent reconciliation
ever took place and considering that Republic ActNo. 386 which
recognizeed such form of co-ownership went into operation onlyon
August 30, 1950, evidently, this later enactment cannot be invoked
as basis for appellee's claim.
In determining the question poised by this action We may look upon
the jurisprudence then obtaining on the matter. As early as 1925,
this Court already declared that where a man and a woman, not
suffering from any impediment to contract marriage, live together as
husband and wife, an informal civil partnership exists and made the
pronouncement that each of them has an intereat in the properties
acquired during said union and is entitled to participate therein if
said properties were the product oftheir JOINT efforts (Marata vs.
Dionio G.R. No. 24449, Dec. 31, 1925). In another case, this Court
similarly held that although there is no technical marital partnership
between person living maritally without being lawfully married,
nevertheless there is between them an informalcivil partnership, and
the parties would be entitled to an equal interest where the property
is acquired through their JOINT efforts (Lesaca vs. FelixVda. de
Lesaca, 91 Phil., 135).
Appellee, claiming that the properties in controversy were the
product of their joint industry apparently in her desire to tread on the
doctrine laiddown in the aforementioned cases, would lead Us to
believe that her help wassolicited or she took a hand in the
management of and/or acquisition of thesame. But such assertion
appears incredible if We consider that she wasobserved by the trial
Court as an illiterate woman who cannot even remembersimple
things as the date when she arrived at the Mindanao Estate, when
shecommenced relationship with the deceased, not even her
approximate age orthat of her children. And considering that aside
from her own declaration, which We find to be highly improbable,
there appears no evidence to proveher alleged contribution or
participation in the acquisition of the properties involved therein, and
that in view of the holding of this Courtthat for a claim to one-half of
such property to be allowed it must be provedthat the same was
acquired through their joint efforts and labor (Flores
vs.Rehabilitation Finance Corporation, * 50 Off. Gaz. 1029), We
have no recoursebut reverse the holding of the lower Court and
deny the claim of BernardaCampredondo. We may further state that
even granting, for the sake ofargument, that this case falls under the
provisions of Article 144 of theCivil Code, same would be applicable
only as far as properties acquiredafter the effectivity of Republic Act
386 are concerned and to no other, forsuch law cannot be given
retroactive effect to govern those already possessedbefore August
30, 1950. It may be argued, however, that being a newly created
right, the provisions of Section 144 should be made to retroact if
only toenforce such right. Article 2252 of the same Code is explicit
in thisrespect when it states:
SEC. 2252. Changes made and new provisions and rules laid down
by this Code which may prejudice or impair vested or acquired
rights in accordance with the old legislation, shall have ro retroactive
effect.
xxx xxx xxx.
As it cannot be denied that the rights and legitimes of the
compulsory heirsof the deceased Edward Christensen would be
impaired or diminished if the claim of herein appellee would
succeed, the answer to such argument wouldbe simply obvious.
With regard to appellant Aznar's contention that the lower Court
erred in admitting the testimony of appellee Bernarda
Camporedondo dealing with facts that transpired before the death of
Edward Christensen on the ground that it is prohibited by Section
26-(c), Rule 123 of the Rules of Court. We deem it unnecessary to
delve on the same because even admitting that the court a quo
committed the error assigned, yet it will not affect anymore the
outcome of the case in view of the conclusion We have already
arrived at on the main issue.
On the strength of the foregoing considerations, We affirm the
decision of the lower Court in case G.R. No. L-11484, with the
modification that MariaLucy Christensen Daney need not be
compelled to acknowledge her sister Maria Helen Christensen
Garcia as a natural child of her father Edward E. Christensen, the
declaration of the Court in this respect being sufficient to enable her
to all the rights inherent to such status.
The decision appealed from in case G.R. No. L-11483 is hereby
reversed and another one rendered, dismissing plaintiff's complaint.
Costs are taxed against appellants in G.R. No. L-11484 and against
appellee Bernarda Camporedondo in G.R. No. L-11483. It is so
ordered.

15
G.R. No. 21639 September 25, 1924
ALBERT F. KIEL, plaintiff-appellee,
vs.
ESTATE OF P. S. SABERT, defendant-appellant.
PARTNERSHIP; PROOF OF PARTNERSHIP; DECLARATIONS
AND ADMISSIONS.—The declarations of one partner, not
made in the presence of his copartner, are not competent
to prove the existence of a partnership between them as
against such other partner. The existence of a partnership
cannot be established by general reputation, rumor, or
hearsay.
MALCOLM, J.:
This action relates to the legal right of Albert F. Kiel to secure from
the estate of P. S. Sabert the sum of P20,000, on a claim first
presented to the commissioners and disallowed, then on appeal to
the Court of First Instance allowed, and ultimately the subject-matter
of the appeal taken to this court.
A skeletonized statement of the case and the facts based on the
complaint, the findings of the trial judge, and the record, may be
made in the following manner:
In 1907, Albert F. Kiel along with William Milfeil commenced to work
on certain public lands situated in the municipality of Parang,
Province of Cotabato, known as Parang Plantation Company. Kiel
subsequently took over the interest of Milfeil. In 1910, Kiel and P. S.
Sabert entered into an agreement to develop the Parang Plantation
Company. Sabert was to furnish the capital to run the plantation and
Kiel was to manage it. They were to share and share alike in the
property. It seems that this partnership was formed so that the land
could be acquired in the name of Sabert, Kiel being a German
citizen and not deemed eligible to acquire public lands in the
Philippines.
By virtue of the agreement, from 1910 to 1917, Kiel worked upon
and developed the plantation. During the World War, he was
deported from the Philippines.
On August 16, 1919, five persons, including P. S. Sabert, organized
the Nituan Plantation Company, with a subscribed capital of
P40,000. On April 10, 1922, P. S. Sabert transferred all of his rights
in two parcels of land situated in the municipality of Parang,
Province of Cotabato, embraced within his homestead application
No. 21045 and his purchase application No. 1048, in consideration
of the sum of P1, to the Nituan Plantation Company.
In this same period, Kiel appears to have tried to secure a
settlement from Sabert. At least in a letter dated June 6, 1918,
Sabert wrote Kiel that he had offered "to sell all property that I have
for P40,000 or take in a partner who is willing to develop the
plantation, to take up the K. & S. debt no matter which way I will
straiten out with you." But Sabert's death came before any amicable
arrangement could be reached and before an action by Kiel against
Sabert could be decided. So these proceedings against the estate
of Sabert.
In this court, the defendant-appellant assigns the following errors:
The lower court erred —
(1) In finding this was an action to establish a resulting trust in land.
(2) In finding a resulting trust in land could have been established in
public lands in favor of plaintiff herein who was an alien subject at
the same time said alleged resulting trust was created.
(3) In finding a resulting trust in land had been established by the
evidence in the case.
(4) In admitting the testimony of the plaintiff herein.
(5) In admitting the testimony of William Milfeil, John C.
Beyersdorfer, Frank R. Lasage, Oscar C. Butler and Stephen Jurika
with reference to alleged statements and declarations of the
deceased P. S. Sabert.
(6) In finding any copartnership existed between plaintiff and the
deceased Sabert.
(7) In rendering judgment for the plaintiff herein.
Errors 1, 2, and 3, relating to resulting trusts. — These three errors
discussing the same subject may be resolved together. In effect, as
will soon appear, we reach the conclusion that both parties were in
error in devoting so much time to the elaboration of these questions,
and that a ruling on the same is not needed.
It is conceivable, that the facts in this case could have been so
presented to the court by means of allegations in the complaint, as
16
to disclose characteristics of a resulting trust. But the complaint as
framed asks for a straight money judgment against an estate. In no
part of the complaint did plaintiff allege any interest in land, claim
any interest in land, or pretend to establish a resulting trust in land.
That the plaintiff did not care to press such an action is
demonstrated by the relation of the fact of alienage with the rule,
that a trust will not be created when, for the purpose of evading the
law prohibiting one from taking or holding real property, he takes a
conveyance thereof in the name of a third person. (26 R. C. L.,
1214-1222; Leggett vs. Dubois [1835], 5 Paige, N. Y., 114; 28 Am.
Dec., 413.)
The parties are wrong in assuming that the trial judge found that this
was an action to establish a resulting trust in land. In reality, all that
the trial judge did was to ground one point of his decision on an
authority coming from the Supreme Court of California, which
discussed the subject of resulting trusts.
Error 4, relating to the admission of testimony of the plaintiff herein.
— Well taken.
The Code of Civil Procedure in section 383, No. 7, names as
incompetent witnesses, parties to an action or proceeding against
an executor or administrator of a deceased person upon a claim or
demand against the estate of such deceased person, who "cannot
testify as to any matter of fact occuring before the death of such
deceased person." But the trial judge, misled somewhat by the
decision of the Supreme Court of California in the city of Myers vs.
Reinstein ([1885], 67 Cal., 89), permitted this testimony to go in,
whereas if the decision had been read more carefully, it would have
been noted that "the action was not on a claim or demand against
the estate of Reinstein." Here this is exactly the situation which
confronts us.
The case of Maxilom vs. Tabotabo ([1907], 9 Phil., 390), is squarely
on all fours with the case at bar. It was there held that "A party to an
action against an executor or administrator of a deceased person,
upon a claim against the estate of the latter, is absolutely prohibited
by law from giving testimony concerning such claim or demand as
to anything that occurred before the death of the person against
whose estate the action is prosecuted."
Error 5, relating to the testimony of five witnesses with reference to
alleged statements and declarations of the deceased P. S. Sabert.
— Not well taken.
By section 282 of the Code of Civil Procedure, the declaration, act,
or omission of a deceased person having sufficient knowledge of
the subject, against his pecuniary interest, is admissible as
evidence to that extent against his successor in interest. By section
298, No. 4, of the same Code, evidence may be given up a trial of
the following facts: ". . . the act or declaration of a deceased person,
done or made against his interest in respect to his real
property." (See Leonardo vs. Santiago [1907], 7 Phil., 401.) The
testimony of these witnesses with reference to the acts or
declarations of Sabert was, therefore, properly received for
whatever they might be worth.
Error 6, relating to the existence of a copartnership between Kiel
and Sabert. — Not well taken.
No partnership agreement in writing was entered into by Kiel and
Sabert. The question consequently is whether or not the alleged
verbal copartnership formed by Kiel and Sabert has been proved, if
we eliminate the testimony of Kiel and only consider the relevant
testimony of other witnesses. In performing this task, we are not
unaware of the rule of partnership that the declarations of one
partner, not made in the presence of his copartner, are not
competent to prove the existence of a partnership between them as
against such other partner, and that the existence of a partnership
cannot be established by general reputation, rumor, or hearsay.
(Mechem on Partnership, sec. 65; 20 R. C. L., sec. 53; Owensboro
Wagon Company vs. Bliss [1901], 132 Ala., 253.)
The testimony of the plaintiff's witnesses, together with the
documentary evidence, leaves the firm impression with us that Kiel
and Sabert did enter into a partnership, and that they were to share
equally. Applying the tests as to the existence of partnership, we feel
that competent evidence exists establishing the partnership. Even
more primary than any of the rules of partnership above announced,
is the injunction to seek out the intention of the parties, as gathered
from the facts and as ascertained from their language and conduct,
and then to give this intention effect. (Giles vs. Vette [1924], 263 U.
S., 553.)
Error 7, relating to the judgment rendered for the plaintiff. — Well
taken in part.
The judgment handed down, it will be remembered, permitted the
plaintiff to recover from the estate the full amount claimed,
presumably on the assumption that Sabert having sold by property
to the Nituan Plantation Company for P40,000, Kiel should have
one-half of the same, or P20,000. There is, however, extant in the
record absolutely no evidence as to the precise amount received by
Sabert from the sale of this particular land. If it is true that Sabert
sold all his land to the Nituan Plantation Company for P40,000,
although this fact was not proven, what part of the P40,000 would
correspond to the property which belonged to Kiel and Sabert under
their partnership agreement? It impresses us further that Kiel under
the facts had no standing in court to ask for any part of the land and
in fact he does not do so; his only legal right is to ask for what is in
effect an accounting with reference to its improvements and income
as of 1917 when Sabert became the trustee of the estate on behalf
of Kiel.
As we have already intimated, we do not think that Kiel is entitled to
any share in the land itself, but we are of the opinion that he has
clearly shown his right to one-half of the value of the improvements
and personal property on the land as to the date upon which he left
the plantation. Such improvements and personal property include
buildings, coconut palms, and other plantings, cattle and other
animals, implements, fences, and other constructions, as well as
outstanding collectible credits, if any, belonging to the partnership.
The value of these improvements and of the personal property
cannot be ascertained from the record and the case must therefore
be remanded for further proceedings.
In resume, we disregard errors 1, 2, and 3, we find well taken,
errors 4 and 7, and we find not well taken, errors 5 and 6.
The judgment appealed from is set aside and the record is returned
to the lower court where the plaintiff, if he so desires, may proceed
further to prove his claim against the estate of P. S. Sabert. Without
costs. So ordered.

17
G.R. No. 75875 December 15, 1989
W O L R G A N G A U R B A C H , J O H N G R I F F I N , D AV I D P.
WHITTINGHAM and CHARLES CHAMSAY, petitioners,
vs.
SANITARY WARES MANUFACTURING CORPORATOIN,
ERNESTO V. LAGDAMEO, ERNESTO R. LAGDAMEO, JR.,
ENRIQUE R. LAGDAMEO, GEORGE F. LEE, RAUL A. BONCAN,
BALDWIN YOUNG and AVELINO V. CRUZ, respondents.
GUTIERREZ, JR., J.:
These consolidated petitions seek the review of the amended
decision of the Court of Appeals in CA-G.R. SP Nos. 05604 and
05617 which set aside the earlier decision dated June 5, 1986, of
the then Intermediate Appellate Court and directed that in all
subsequent elections for directors of Sanitary Wares Manufacturing
Corporation (Saniwares), American Standard Inc. (ASI) cannot
nominate more than three (3) directors; that the Filipino
stockholders shall not interfere in ASI's choice of its three (3)
nominees; that, on the other hand, the Filipino stockholders can
nominate only six (6) candidates and in the event they cannot agree
on the six (6) nominees, they shall vote only among themselves to
determine who the six (6) nominees will be, with cumulative voting
to be allowed but without interference from ASI.
The antecedent facts can be summarized as follows:
In 1961, Saniwares, a domestic corporation was incorporated for
the primary purpose of manufacturing and marketing sanitary
wares. One of the incorporators, Mr. Baldwin Young went abroad to
look for foreign partners, European or American who could help in
its expansion plans. On August 15, 1962, ASI, a foreign corporation
domiciled in Delaware, United States entered into an Agreement
with Saniwares and some Filipino investors whereby ASI and the
Filipino investors agreed to participate in the ownership of an
enterprise which would engage primarily in the business of
manufacturing in the Philippines and selling here and abroad
vitreous china and sanitary wares. The parties agreed that the
business operations in the Philippines shall be carried on by an
incorporated enterprise and that the name of the corporation shall
initially be "Sanitary Wares Manufacturing Corporation."
The Agreement has the following provisions relevant to the issues in
these cases on the nomination and election of the directors of the
corporation:
3. Articles of Incorporation
(a) The Articles of Incorporation of the Corporation shall be
substantially in the form annexed hereto as Exhibit A and, insofar as
permitted under Philippine law, shall specifically provide for
(1) Cumulative voting for directors:
xxx xxx xxx
5. Management
(a) The management of the Corporation shall be vested in a Board
of Directors, which shall consist of nine individuals. As long as
American-Standard shall own at least 30% of the outstanding stock
of the Corporation, three of the nine directors shall be designated by
American-Standard, and the other six shall be designated by the
other stockholders of the Corporation. (pp. 51 & 53, Rollo of 75875)
At the request of ASI, the agreement contained provisions designed
to protect it as a minority group, including the grant of veto powers
over a number of corporate acts and the right to designate certain
officers, such as a member of the Executive Committee whose vote
was required for important corporate transactions.
Later, the 30% capital stock of ASI was increased to 40%. The
corporation was also registered with the Board of Investments for
availment of incentives with the condition that at least 60% of the
capital stock of the corporation shall be owned by Philippine
nationals.
The joint enterprise thus entered into by the Filipino investors and
the American corporation prospered. Unfortunately, with the
business successes, there came a deterioration of the initially
harmonious relations between the two groups. According to the
Filipino group, a basic disagreement was due to their desire to
expand the export operations of the company to which ASI objected
as it apparently had other subsidiaries of joint joint venture groups in
the countries where Philippine exports were contemplated. On
March 8, 1983, the annual stockholders' meeting was held. The
meeting was presided by Baldwin Young. The minutes were taken
by the Secretary, Avelino Cruz. After disposing of the preliminary
18
items in the agenda, the stockholders then proceeded to the
election of the members of the board of directors. The ASI group
nominated three persons namely; Wolfgang Aurbach, John Griffin
and David P. Whittingham. The Philippine investors nominated six,
namely; Ernesto Lagdameo, Sr., Raul A. Boncan, Ernesto R.
Lagdameo, Jr., George F. Lee, and Baldwin Young. Mr. Eduardo R,
Ceniza then nominated Mr. Luciano E. Salazar, who in turn
nominated Mr. Charles Chamsay. The chairman, Baldwin Young
ruled the last two nominations out of order on the basis of section 5
(a) of the Agreement, the consistent practice of the parties during
the past annual stockholders' meetings to nominate only nine
persons as nominees for the nine-member board of directors, and
the legal advice of Saniwares' legal counsel. The following events
then, transpired:
... There were protests against the action of the Chairman and
heated arguments ensued. An appeal was made by the ASI
representative to the body of stockholders present that a vote be
taken on the ruling of the Chairman. The Chairman, Baldwin Young,
declared the appeal out of order and no vote on the ruling was
taken. The Chairman then instructed the Corporate Secretary to
cast all the votes present and represented by proxy equally for the 6
nominees of the Philippine Investors and the 3 nominees of ASI,
thus effectively excluding the 2 additional persons nominated,
namely, Luciano E. Salazar and Charles Chamsay. The ASI
representative, Mr. Jaqua protested the decision of the Chairman
and announced that all votes accruing to ASI shares, a total of
1,329,695 (p. 27, Rollo, AC-G.R. SP No. 05617) were being
cumulatively voted for the three ASI nominees and Charles
Chamsay, and instructed the Secretary to so vote. Luciano E.
Salazar and other proxy holders announced that all the votes owned
by and or represented by them 467,197 shares (p. 27, Rollo, AC-
G.R. SP No. 05617) were being voted cumulatively in favor of
Luciano E. Salazar. The Chairman, Baldwin Young, nevertheless
instructed the Secretary to cast all votes equally in favor of the three
ASI nominees, namely, Wolfgang Aurbach, John Griffin and David
Whittingham and the six originally nominated by Rogelio Vinluan,
namely, Ernesto Lagdameo, Sr., Raul Boncan, Ernesto Lagdameo,
Jr., Enrique Lagdameo, George F. Lee, and Baldwin Young. The
Secretary then certified for the election of the following Wolfgang
Aurbach, John Griffin, David Whittingham Ernesto Lagdameo, Sr.,
Ernesto Lagdameo, Jr., Enrique Lagdameo, George F. Lee, Raul A.
Boncan, Baldwin Young. The representative of ASI then moved to
recess the meeting which was duly seconded. There was also a
motion to adjourn (p. 28, Rollo, AC-G.R. SP No. 05617). This motion
to adjourn was accepted by the Chairman, Baldwin Young, who
announced that the motion was carried and declared the meeting
adjourned. Protests against the adjournment were registered and
having been ignored, Mr. Jaqua the ASI representative, stated that
the meeting was not adjourned but only recessed and that the
meeting would be reconvened in the next room. The Chairman then
threatened to have the stockholders who did not agree to the
decision of the Chairman on the casting of votes bodily thrown out.
The ASI Group, Luciano E. Salazar and other stockholders,
allegedly representing 53 or 54% of the shares of Saniwares,
decided to continue the meeting at the elevator lobby of the
American Standard Building. The continued meeting was presided
by Luciano E. Salazar, while Andres Gatmaitan acted as Secretary.
On the basis of the cumulative votes cast earlier in the meeting, the
ASI Group nominated its four nominees; Wolfgang Aurbach, John
Griffin, David Whittingham and Charles Chamsay. Luciano E.
Salazar voted for himself, thus the said five directors were certified
as elected directors by the Acting Secretary, Andres Gatmaitan, with
the explanation that there was a tie among the other six (6)
nominees for the four (4) remaining positions of directors and that
the body decided not to break the tie. (pp. 37-39, Rollo of 75975-76)
These incidents triggered off the filing of separate petitions by the
parties with the Securities and Exchange Commission (SEC). The
first petition filed was for preliminary injunction by Saniwares,
Emesto V. Lagdameo, Baldwin Young, Raul A. Bonean Ernesto R.
Lagdameo, Jr., Enrique Lagdameo and George F. Lee against
Luciano Salazar and Charles Chamsay. The case was denominated
as SEC Case No. 2417. The second petition was for quo warranto
and application for receivership by Wolfgang Aurbach, John Griffin,
David Whittingham, Luciano E. Salazar and Charles Chamsay
against the group of Young and Lagdameo (petitioners in SEC Case
No. 2417) and Avelino F. Cruz. The case was docketed as SEC
Case No. 2718. Both sets of parties except for Avelino Cruz claimed
to be the legitimate directors of the corporation.
The two petitions were consolidated and tried jointly by a hearing
officer who rendered a decision upholding the election of the
Lagdameo Group and dismissing the quo warranto petition of
Salazar and Chamsay. The ASI Group and Salazar appealed the
decision to the SEC en banc which affirmed the hearing officer's
decision.
The SEC decision led to the filing of two separate appeals with the
Intermediate Appellate Court by Wolfgang Aurbach, John Griffin,
David Whittingham and Charles Chamsay (docketed as AC-G.R. SP
No. 05604) and by Luciano E. Salazar (docketed as AC-G.R. SP
No. 05617). The petitions were consolidated and the appellate court
in its decision ordered the remand of the case to the Securities and
Exchange Commission with the directive that a new stockholders'
meeting of Saniwares be ordered convoked as soon as possible,
under the supervision of the Commission.
Upon a motion for reconsideration filed by the appellees Lagdameo
Group) the appellate court (Court of Appeals) rendered the
questioned amended decision. Petitioners Wolfgang Aurbach, John
Griffin, David P. Whittingham and Charles Chamsay in G.R. No.
75875 assign the following errors:
I. THE COURT OF APPEALS, IN EFFECT, UPHELD THE
ALLEGED ELECTION OF PRIVATE RESPONDENTS AS
MEMBERS OF THE BOARD OF DIRECTORS OF SANIWARES
WHEN IN FACT THERE WAS NO ELECTION AT ALL.
II. THE COURT OF APPEALS PROHIBITS THE STOCKHOLDERS
FROM EXERCISING THEIR FULL VOTING RIGHTS
REPRESENTED BY THE NUMBER OF SHARES IN SANIWARES,
THUS DEPRIVING PETITIONERS AND THE CORPORATION
THEY REPRESENT OF THEIR PROPERTY RIGHTS WITHOUT
DUE PROCESS OF LAW.
III. THE COURT OF APPEALS IMPOSES CONDITIONS AND
READS PROVISIONS INTO THE AGREEMENT OF THE PARTIES
WHICH WERE NOT THERE, WHICH ACTION IT CANNOT
LEGALLY DO. (p. 17, Rollo-75875)
Petitioner Luciano E. Salazar in G.R. Nos. 75975-76 assails the
amended decision on the following grounds:
11.1. ThatAmendedDecisionwouldsanctiontheCA'sdisregard of
binding contractual agreements entered into by stockholders and
the replacement of the conditions of such agreements with terms
never contemplated by the stockholders but merely dictated by the
CA .
11.2. The Amended decision would likewise sanction the deprivation
of the property rights of stockholders without due process of law in
order that a favored group of stockholders may be illegally
benefitted and guaranteed a continuing monopoly of the control of a
corporation. (pp. 14-15, Rollo-75975-76)
On the other hand, the petitioners in G.R. No. 75951 contend that:
I from all of them taken jointly (Art. 1374, New Civil Code). Moreover,
THE AMENDED DECISION OF THE RESPONDENT COURT,
WHILE RECOGNIZING THAT THE STOCKHOLDERS OF
SANIWARES ARE DIVIDED INTO TWO BLOCKS, FAILS TO
FULLY ENFORCE THE BASIC INTENT OF THE AGREEMENT
AND THE LAW.
II
THE AMENDED DECISION DOES NOT CATEGORICALLY RULE
THAT PRIVATE PETITIONERS HEREIN WERE THE DULY
ELECTED DIRECTORS DURING THE 8 MARCH 1983 ANNUAL
STOCKHOLDERS MEETING OF SANTWARES. (P. 24,
Rollo-75951)
The issues raised in the petitions are interrelated, hence, they are
discussed jointly.
The main issue hinges on who were the duly elected directors of
Saniwares for the year 1983 during its annual stockholders' meeting
held on March 8, 1983. To answer this question the following factors
should be determined: (1) the nature of the business established by
the parties whether it was a joint venture or a corporation and (2)
whether or not the ASI Group may vote their additional 10% equity
during elections of Saniwares' board of directors.
The rule is that whether the parties to a particular contract have
thereby established among themselves a joint venture or some
other relation depends upon their actual intention which is
determined in accordance with the rules governing the interpretation
19
and construction of contracts. (Terminal Shares, Inc. v. Chicago, B.
and Q.R. Co. (DC MO) 65 F Supp 678; Universal Sales Corp. v.
California Press Mfg. Co. 20 Cal. 2nd 751, 128 P 2nd 668)
The ASI Group and petitioner Salazar (G.R. Nos. 75975-76)
contend that the actual intention of the parties should be viewed
strictly on the "Agreement" dated August 15,1962 wherein it is
clearly stated that the parties' intention was to form a corporation
and not a joint venture.
They specifically mention number 16 under Miscellaneous
Provisions which states:
xxx xxx xxx
c) nothing herein contained shall be construed to constitute any of
the parties hereto partners or joint venturers in respect of any
transaction hereunder. (At P. 66, Rollo-GR No. 75875)
They object to the admission of other evidence which tends to show
that the parties' agreement was to establish a joint venture
presented by the Lagdameo and Young Group on the ground that it
contravenes the parol evidence rule under section 7, Rule 130 of
the Revised Rules of Court. According to them, the Lagdameo and
Young Group never pleaded in their pleading that the "Agreement"
failed to express the true intent of the parties.
The parol evidence Rule under Rule 130 provides:
Evidence of written agreements-When the terms of an agreement
have been reduced to writing, it is to be considered as containing all
such terms, and therefore, there can be, between the parties and
their successors in interest, no evidence of the terms of the
agreement other than the contents of the writing, except in the
following cases:
(a) Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties or the validity
of the agreement is put in issue by the pleadings.
(b) When there is an intrinsic ambiguity in the writing.
Contrary to ASI Group's stand, the Lagdameo and Young Group
pleaded in their Reply and Answer to Counterclaim in SEC Case
No. 2417 that the Agreement failed to express the true intent of the
parties, to wit:
xxx xxx xxx
4. While certain provisions of the Agreement would make it appear
that the parties thereto disclaim being partners or joint venturers
such disclaimer is directed at third parties and is not inconsistent
with, and does not preclude, the existence of two distinct groups of
stockholders in Saniwares one of which (the Philippine Investors)
shall constitute the majority, and the other ASI shall constitute the
minority stockholder. In any event, the evident intention of the
Philippine Investors and ASI in entering into the Agreement is to
enter into ajoint venture enterprise, and if some words in the
Agreement appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former (Art. 1370, New Civil
Code). The various stipulations of a contract shall be interpreted
together attributing to the doubtful ones that sense which may result
in order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally
considered. (Art. 1371, New Civil Code). (Part I, Original Records,
SEC Case No. 2417)
It has been ruled:
In an action at law, where there is evidence tending to prove that the
parties joined their efforts in furtherance of an enterprise for their
joint profit, the question whether they intended by their agreement to
create a joint adventure, or to assume some other relation is a
question of fact for the jury. (Binder v. Kessler v 200 App. Div.
40,192 N Y S 653; Pyroa v. Brownfield (Tex. Civ. A.) 238 SW 725;
Hoge v. George, 27 Wyo, 423, 200 P 96 33 C.J. p. 871)
In the instant cases, our examination of important provisions of the
Agreement as well as the testimonial evidence presented by the
Lagdameo and Young Group shows that the parties agreed to
establish a joint venture and not a corporation. The history of the
organization of Saniwares and the unusual arrangements which
govern its policy making body are all consistent with a joint venture
and not with an ordinary corporation. As stated by the SEC:
According to the unrebutted testimony of Mr. Baldwin Young, he
negotiated the Agreement with ASI in behalf of the Philippine
nationals. He testified that ASI agreed to accept the role of minority
vis-a-vis the Philippine National group of investors, on the condition
that the Agreement should contain provisions to protect ASI as the
minority.
An examination of the Agreement shows that certain provisions
were included to protect the interests of ASI as the minority. For
example, the vote of 7 out of 9 directors is required in certain
enumerated corporate acts [Sec. 3 (b) (ii) (a) of the Agreement]. ASI
is contractually entitled to designate a member of the Executive
Committee and the vote of this member is required for certain
transactions [Sec. 3 (b) (i)].
The Agreement also requires a 75% super-majority vote for the
amendment of the articles and by-laws of Saniwares [Sec. 3 (a) (iv)
and (b) (iii)]. ASI is also given the right to designate the president
and plant manager [Sec. 5 (6)]. The Agreement further provides that
the sales policy of Saniwares shall be that which is normally
followed by ASI [Sec. 13 (a)] and that Saniwares should not export
"Standard" products otherwise than through ASI's Export Marketing
Services [Sec. 13 (6)]. Under the Agreement, ASI agreed to provide
technology and know-how to Saniwares and the latter paid royalties
for the same. (At p. 2).
xxx xxx xxx
It is pertinent to note that the provisions of the Agreement requiring
a 7 out of 9 votes of the board of directors for certain actions, in
effect gave ASI (which designates 3 directors under the Agreement)
an effective veto power. Furthermore, the grant to ASI of the right to
designate certain officers of the corporation; the super-majority
voting requirements for amendments of the articles and by-laws;
and most significantly to the issues of tms case, the provision that
ASI shall designate 3 out of the 9 directors and the other
stockholders shall designate the other 6, clearly indicate that there
are two distinct groups in Saniwares, namely ASI, which owns 40%
of the capital stock and the Philippine National stockholders who
own the balance of 60%, and that 2) ASI is given certain protections
as the minority stockholder.
Premises considered, we believe that under the Agreement there
are two groups of stockholders who established a corporation with
provisions for a special contractual relationship between the parties,
i.e., ASI and the other stockholders. (pp. 4-5)
Section 5 (a) of the agreement uses the word "designated" and not
"nominated" or "elected" in the selection of the nine directors on a
six to three ratio. Each group is assured of a fixed number of
directors in the board.
Moreover, ASI in its communications referred to the enterprise as
joint venture. Baldwin Young also testified that Section 16(c) of the
Agreement that "Nothing herein contained shall be construed to
constitute any of the parties hereto partners or joint venturers in
respect of any transaction hereunder" was merely to obviate the
possibility of the enterprise being treated as partnership for tax
purposes and liabilities to third parties.
Quite often, Filipino entrepreneurs in their desire to develop the
industrial and manufacturing capacities of a local firm are
constrained to seek the technology and marketing assistance of
huge multinational corporations of the developed world.
Arrangements are formalized where a foreign group becomes a
minority owner of a firm in exchange for its manufacturing expertise,
use of its brand names, and other such assistance. However, there
is always a danger from such arrangements. The foreign group may,
from the start, intend to establish its own sole or monopolistic
operations and merely uses the joint venture arrangement to gain a
foothold or test the Philippine waters, so to speak. Or the
covetousness may come later. As the Philippine firm enlarges its
operations and becomes profitable, the foreign group undermines
the local majority ownership and actively tries to completely or
predominantly take over the entire company. This undermining of
joint ventures is not consistent with fair dealing to say the least. To
the extent that such subversive actions can be lawfully prevented,
the courts should extend protection especially in industries where
constitutional and legal requirements reserve controlling ownership
to Filipino citizens.
The Lagdameo Group stated in their appellees' brief in the Court of
Appeal
In fact, the Philippine Corporation Code itself recognizes the right of
stockholders to enter into agreements regarding the exercise of
their voting rights.
Sec. 100. Agreements by stockholders.-
xxx xxx xxx
20
2. An agreement between two or more stockholders, if in writing and
signed by the parties thereto, may provide that in exercising any
voting rights, the shares held by them shall be voted as therein
provided, or as they may agree, or as determined in accordance
with a procedure agreed upon by them.
Appellants contend that the above provision is included in the
Corporation Code's chapter on close corporations and Saniwares
cannot be a close corporation because it has 95 stockholders.
Firstly, although Saniwares had 95 stockholders at the time of the
disputed stockholders meeting, these 95 stockholders are not
separate from each other but are divisible into groups representing
a single Identifiable interest. For example, ASI, its nominees and
lawyers count for 13 of the 95 stockholders. The YoungYutivo family
count for another 13 stockholders, the Chamsay family for 8
stockholders, the Santos family for 9 stockholders, the Dy family for
7 stockholders, etc. If the members of one family and/or business or
interest group are considered as one (which, it is respectfully
submitted, they should be for purposes of determining how closely
held Saniwares is there were as of 8 March 1983, practically only 17
stockholders of Saniwares. (Please refer to discussion in pp. 5 to 6
of appellees' Rejoinder Memorandum dated 11 December 1984 and
Annex "A" thereof).
Secondly, even assuming that Saniwares is technically not a close
corporation because it has more than 20 stockholders, the
undeniable fact is that it is a close-held corporation. Surely,
appellants cannot honestly claim that Saniwares is a public issue or
a widely held corporation.
In the United States, many courts have taken a realistic approach to
joint venture corporations and have not rigidly applied principles of
corporation law designed primarily for public issue corporations.
These courts have indicated that express arrangements between
corporate joint ventures should be construed with less emphasis on
the ordinary rules of law usually applied to corporate entities and
with more consideration given to the nature of the agreement
between the joint venturers (Please see Wabash Ry v. American
Refrigerator Transit Co., 7 F 2d 335; Chicago, M & St. P. Ry v. Des
Moines Union Ry; 254 Ass'n. 247 US. 490'; Seaboard Airline Ry v.
Atlantic Coast Line Ry; 240 N.C. 495,.82 S.E. 2d 771; Deboy v.
Harris, 207 Md., 212,113 A 2d 903; Hathway v. Porter Royalty Pool,
Inc., 296 Mich. 90, 90, 295 N.W. 571; Beardsley v. Beardsley, 138
U.S. 262; "The Legal Status of Joint Venture Corporations", 11 Vand
Law Rev. p. 680,1958). These American cases dealt with legal
questions as to the extent to which the requirements arising from
the corporate form of joint venture corporations should control, and
the courts ruled that substantial justice lay with those litigants who
relied on the joint venture agreement rather than the litigants who
relied on the orthodox principles of corporation law.
As correctly held by the SEC Hearing Officer:
It is said that participants in a joint venture, in organizing the joint
venture deviate from the traditional pattern of corporation
management. A noted authority has pointed out that just as in close
corporations, shareholders' agreements in joint venture corporations
often contain provisions which do one or more of the following: (1)
require greater than majority vote for shareholder and director
action; (2) give certain shareholders or groups of shareholders
power to select a specified number of directors; (3) give to the
shareholders control over the selection and retention of employees;
and (4) set up a procedure for the settlement of disputes by
arbitration (See I O' Neal, Close Corporations, 1971 ed., Section
1.06a, pp. 15-16) (Decision of SEC Hearing Officer, P. 16)
Thirdly paragraph 2 of Sec. 100 of the Corporation Code does not
necessarily imply that agreements regarding the exercise of voting
rights are allowed only in close corporations. As Campos and
Lopez-Campos explain:
Paragraph 2 refers to pooling and voting agreements in particular.
Does this provision necessarily imply that these agreements can be
valid only in close corporations as defined by the Code? Suppose
that a corporation has twenty five stockholders, and therefore
cannot qualify as a close corporation under section 96, can some of
them enter into an agreement to vote as a unit in the election of
directors? It is submitted that there is no reason for denying
stockholders of corporations other than close ones the right to enter
into not voting or pooling agreements to protect their interests, as
long as they do not intend to commit any wrong, or fraud on the
other stockholders not parties to the agreement. Of course, voting
or pooling agreements are perhaps more useful and more often
resorted to in close corporations. But they may also be found
necessary even in widely held corporations. Moreover, since the
Code limits the legal meaning of close corporations to those which
comply with the requisites laid down by section 96, it is entirely
possible that a corporation which is in fact a close corporation will
not come within the definition. In such case, its stockholders should
not be precluded from entering into contracts like voting agreements
if these are otherwise valid. (Campos & Lopez-Campos, op cit, p.
405)
In short, even assuming that sec. 5(a) of the Agreement relating to
the designation or nomination of directors restricts the right of the
Agreement's signatories to vote for directors, such contractual
provision, as correctly held by the SEC, is valid and binding upon
the signatories thereto, which include appellants. (Rollo No. 75951,
pp. 90-94)
In regard to the question as to whether or not the ASI group may
vote their additional equity during elections of Saniwares' board of
directors, the Court of Appeals correctly stated:
As in other joint venture companies, the extent of ASI's participation
in the management of the corporation is spelled out in the
Agreement. Section 5(a) hereof says that three of the nine directors
shall be designated by ASI and the remaining six by the other
stockholders, i.e., the Filipino stockholders. This allocation of board
seats is obviously in consonance with the minority position of ASI.
Having entered into a well-defined contractual relationship, it is
imperative that the parties should honor and adhere to their
respective rights and obligations thereunder. Appellants seem to
contend that any allocation of board seats, even in joint venture
corporations, are null and void to the extent that such may interfere
with the stockholder's rights to cumulative voting as provided in
Section 24 of the Corporation Code. This Court should not be
prepared to hold that any agreement which curtails in any way
cumulative voting should be struck down, even if such agreement
has been freely entered into by experienced businessmen and do
not prejudice those who are not parties thereto. It may well be that it
would be more cogent to hold, as the Securities and Exchange
Commission has held in the decision appealed from, that cumulative
voting rights may be voluntarily waived by stockholders who enter
into special relationships with each other to pursue and implement
specific purposes, as in joint venture relationships between foreign
and local stockholders, so long as such agreements do not
adversely affect third parties.
In any event, it is believed that we are not here called upon to make
a general rule on this question. Rather, all that needs to be done is
to give life and effect to the particular contractual rights and
obligations which the parties have assumed for themselves.
On the one hand, the clearly established minority position of ASI
and the contractual allocation of board seats Cannot be
disregarded. On the other hand, the rights of the stockholders to
cumulative voting should also be protected.
In our decision sought to be reconsidered, we opted to uphold the
second over the first. Upon further reflection, we feel that the proper
and just solution to give due consideration to both factors suggests
itself quite clearly. This Court should recognize and uphold the
division of the stockholders into two groups, and at the same time
uphold the right of the stockholders within each group to cumulative
voting in the process of determining who the group's nominees
would be. In practical terms, as suggested by appellant Luciano E.
Salazar himself, this means that if the Filipino stockholders cannot
agree who their six nominees will be, a vote would have to be taken
among the Filipino stockholders only. During this voting, each
Filipino stockholder can cumulate his votes. ASI, however, should
not be allowed to interfere in the voting within the Filipino group.
Otherwise, ASI would be able to designate more than the three
directors it is allowed to designate under the Agreement, and may
even be able to get a majority of the board seats, a result which is
clearly contrary to the contractual intent of the parties.
Such a ruling will give effect to both the allocation of the board seats
and the stockholder's right to cumulative voting. Moreover, this
ruling will also give due consideration to the issue raised by the
appellees on possible violation or circumvention of the Anti-Dummy
Law (Com. Act No. 108, as amended) and the nationalization
requirements of the Constitution and the laws if ASI is allowed to
nominate more than three directors. (Rollo-75875, pp. 38-39)
21
The ASI Group and petitioner Salazar, now reiterate their theory that
the ASI Group has the right to vote their additional equity pursuant
to Section 24 of the Corporation Code which gives the stockholders
of a corporation the right to cumulate their votes in electing
directors. Petitioner Salazar adds that this right if granted to the ASI
Group would not necessarily mean a violation of the Anti-Dummy
Act (Commonwealth Act 108, as amended). He cites section 2-a
thereof which provides:
And provided finally that the election of aliens as members of the
board of directors or governing body of corporations or associations
engaging in partially nationalized activities shall be allowed in
proportion to their allowable participation or share in the capital of
such entities. (amendments introduced by Presidential Decree 715,
section 1, promulgated May 28, 1975)
The ASI Group's argument is correct within the context of Section
24 of the Corporation Code. The point of query, however, is whether
or not that provision is applicable to a joint venture with clearly
defined agreements:
The legal concept of ajoint venture is of common law origin. It has
no precise legal definition but it has been generally understood to
mean an organization formed for some temporary purpose. (Gates
v. Megargel, 266 Fed. 811 [1920]) It is in fact hardly distinguishable
from the partnership, since their elements are similar community of
interest in the business, sharing of profits and losses, and a mutual
right of control. Blackner v. Mc Dermott, 176 F. 2d. 498, [1949];
Carboneau v. Peterson, 95 P. 2d., 1043 [1939]; Buckley v.
Chadwick, 45 Cal. 2d. 183, 288 P. 2d. 12 289 P. 2d. 242 [1955]).
The main distinction cited by most opinions in common law
jurisdictions is that the partnership contemplates a general business
with some degree of continuity, while the joint venture is formed for
the execution of a single transaction, and is thus of a temporary
nature. (Tufts v. Mann 116 Cal. App. 170, 2 P. 2d. 500 [1931];
Harmon v. Martin, 395 111. 595, 71 NE 2d. 74 [1947]; Gates v.
Megargel 266 Fed. 811 [1920]). This observation is not entirely
accurate in this jurisdiction, since under the Civil Code, a
partnership may be particular or universal, and a particular
partnership may have for its object a specific undertaking. (Art.
1783, Civil Code). It would seem therefore that under Philippine law,
a joint venture is a form of partnership and should thus be governed
by the law of partnerships. The Supreme Court has however
recognized a distinction between these two business forms, and has
held that although a corporation cannot enter into a partnership
contract, it may however engage in a joint venture with others. (At p.
12, Tuazon v. Bolanos, 95 Phil. 906 [1954]) (Campos and Lopez-
Campos Comments, Notes and Selected Cases, Corporation Code
1981)
Moreover, the usual rules as regards the construction and
operations of contracts generally apply to a contract of joint venture.
(O' Hara v. Harman 14 App. Dev. (167) 43 NYS 556).
Bearing these principles in mind, the correct view would be that the
resolution of the question of whether or not the ASI Group may vote
their additional equity lies in the agreement of the parties.
Necessarily, the appellate court was correct in upholding the
agreement of the parties as regards the allocation of director seats
under Section 5 (a) of the "Agreement," and the right of each group
of stockholders to cumulative voting in the process of determining
who the group's nominees would be under Section 3 (a) (1) of the
"Agreement." As pointed out by SEC, Section 5 (a) of the
Agreement relates to the manner of nominating the members of the
board of directors while Section 3 (a) (1) relates to the manner of
voting for these nominees.
This is the proper interpretation of the Agreement of the parties as
regards the election of members of the board of directors.
To allow the ASI Group to vote their additional equity to help elect
even a Filipino director who would be beholden to them would
obliterate their minority status as agreed upon by the parties. As
aptly stated by the appellate court:
... ASI, however, should not be allowed to interfere in the voting
within the Filipino group. Otherwise, ASI would be able to designate
more than the three directors it is allowed to designate under the
Agreement, and may even be able to get a majority of the board
seats, a result which is clearly contrary to the contractual intent of
the parties.
Such a ruling will give effect to both the allocation of the board seats
and the stockholder's right to cumulative voting. Moreover, this
ruling will also give due consideration to the issue raised by the
appellees on possible violation or circumvention of the Anti-Dummy
Law (Com. Act No. 108, as amended) and the nationalization
requirements of the Constitution and the laws if ASI is allowed to
nominate more than three directors. (At p. 39, Rollo, 75875)
Equally important as the consideration of the contractual intent of
the parties is the consideration as regards the possible domination
by the foreign investors of the enterprise in violation of the
nationalization requirements enshrined in the Constitution and
circumvention of the Anti-Dummy Act. In this regard, petitioner
Salazar's position is that the Anti-Dummy Act allows the ASI group
to elect board directors in proportion to their share in the capital of
the entity. It is to be noted, however, that the same law also limits
the election of aliens as members of the board of directors in
proportion to their allowance participation of said entity. In the
instant case, the foreign Group ASI was limited to designate three
directors. This is the allowable participation of the ASI Group.
Hence, in future dealings, this limitation of six to three board seats
should always be maintained as long as the joint venture agreement
exists considering that in limiting 3 board seats in the 9-man board
of directors there are provisions already agreed upon and embodied
in the parties' Agreement to protect the interests arising from the
minority status of the foreign investors.
With these findings, we the decisions of the SEC Hearing Officer
and SEC which were impliedly affirmed by the appellate court
declaring Messrs. Wolfgang Aurbach, John Griffin, David P
Whittingham, Emesto V. Lagdameo, Baldwin young, Raul A.
Boncan, Emesto V. Lagdameo, Jr., Enrique Lagdameo, and George
F. Lee as the duly elected directors of Saniwares at the March
8,1983 annual stockholders' meeting.
On the other hand, the Lagdameo and Young Group (petitioners in
G.R. No. 75951) object to a cumulative voting during the election of
the board of directors of the enterprise as ruled by the appellate
court and submits that the six (6) directors allotted the Filipino
stockholders should be selected by consensus pursuant to section 5
(a) of the Agreement which uses the word "designate" meaning
"nominate, delegate or appoint."
They also stress the possibility that the ASI Group might take
control of the enterprise if the Filipino stockholders are allowed to
select their nominees separately and not as a common slot
determined by the majority of their group.
Section 5 (a) of the Agreement which uses the word designates in
the allocation of board directors should not be interpreted in
isolation. This should be construed in relation to section 3 (a) (1) of
the Agreement. As we stated earlier, section 3(a) (1) relates to the
manner of voting for these nominees which is cumulative voting
while section 5(a) relates to the manner of nominating the members
of the board of directors. The petitioners in G.R. No. 75951 agreed
to this procedure, hence, they cannot now impugn its legality.
The insinuation that the ASI Group may be able to control the
enterprise under the cumulative voting procedure cannot, however,
be ignored. The validity of the cumulative voting procedure is
dependent on the directors thus elected being genuine members of
the Filipino group, not voters whose interest is to increase the ASI
share in the management of Saniwares. The joint venture character
of the enterprise must always be taken into account, so long as the
company exists under its original agreement. Cumulative voting
may not be used as a device to enable ASI to achieve stealthily or
indirectly what they cannot accomplish openly. There are substantial
safeguards in the Agreement which are intended to preserve the
majority status of the Filipino investors as well as to maintain the
minority status of the foreign investors group as earlier discussed.
They should be maintained.
WHEREFORE, the petitions in G.R. Nos. 75975-76 and G.R. No.
75875 are DISMISSED and the petition in G.R. No. 75951 is partly
GRANTED. The amended decision of the Court of Appeals is
MODIFIED in that Messrs. Wolfgang Aurbach John Griffin, David
Whittingham Emesto V. Lagdameo, Baldwin Young, Raul A. Boncan,
Ernesto R. Lagdameo, Jr., Enrique Lagdameo, and George F. Lee
are declared as the duly elected directors of Saniwares at the March
8,1983 annual stockholders' meeting. In all other respects, the
questioned decision is AFFIRMED. Costs against the petitioners in
G.R. Nos. 75975-76 and G.R. No. 75875.
SO ORDERED.

22
G.R. No. L-4935 May 28, 1954
J. M. TUASON & CO., INC., represented by it Managing
PARTNER, GREGORIA ARANETA, INC., plaintiff-appellee,
vs.
QUIRINO BOLAÑOS, defendant-appellant.
PARTIES; REAL PARTY IN INTEREST; ATTORNEY MAY BRING
ACTION IN PLAINTIFF'S NAME.—Section 2, Rule 2. of
the Rules of Court requires that an action be brought in the
name of, but not necessarily by, the real property interest.
In fact the practice is for an attorney-at-law to bring the
action, that is, to file the complaint, in the name of the
plaintiff.
ID.; CORPORATION AS PARTY MAY BE REPRESENTED BY
ANOTHER PERSON, NATURAL OR JUDICIAL.—There is
nothing against one corporation being represented by
another person, natural or juridical, in a suit in court, for the
true rule is that "although a corporation has no power to
enter into a partnership, it may nevertheless enter into a
joint venture with another where the nature of that venture
is in line with the business authorized by its
charter." (Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A.
L. R., 1043, citing 2, Fletcher Cyc. E. 1082.)
REYES, J.:
This is an action originally brought in the Court of First Instance of
Rizal, Quezon City Branch, to recover possesion of registered land
situated in barrio Tatalon, Quezon City.
Plaintiff's complaint was amended three times with respect to the
extent and description of the land sought to be recovered. The
original complaint described the land as a portion of a lot registered
in plaintiff's name under Transfer Certificate of Title No. 37686 of the
land record of Rizal Province and as containing an area of 13
hectares more or less. But the complaint was amended by reducing
the area of 6 hectares, more or less, after the defendant had
indicated the plaintiff's surveyors the portion of land claimed and
occupied by him. The second amendment became necessary and
was allowed following the testimony of plaintiff's surveyors that a
portion of the area was embraced in another certificate of title,
which was plaintiff's Transfer Certificate of Title No. 37677. And still
later, in the course of trial, after defendant's surveyor and witness,
Quirino Feria, had testified that the area occupied and claimed by
defendant was about 13 hectares, as shown in his Exhibit 1, plaintiff
again, with the leave of court, amended its complaint to make its
allegations conform to the evidence.
Defendant, in his answer, sets up prescription and title in himself
thru "open, continuous, exclusive and public and notorious
possession (of land in dispute) under claim of ownership, adverse to
the entire world by defendant and his predecessor in interest" from
"time in-memorial". The answer further alleges that registration of
the land in dispute was obtained by plaintiff or its predecessors in
interest thru "fraud or error and without knowledge (of) or interest
either personal or thru publication to defendant and/or predecessors
in interest." The answer therefore prays that the complaint be
dismissed with costs and plaintiff required to reconvey the land to
defendant or pay its value.
After trial, the lower court rendered judgment for plaintiff, declaring
defendant to be without any right to the land in question and
ordering him to restore possession thereof to plaintiff and to pay the
latter a monthly rent of P132.62 from January, 1940, until he
vacates the land, and also to pay the costs.
Appealing directly to this court because of the value of the property
involved, defendant makes the following assignment or errors:
I. The trial court erred in not dismissing the case on the ground that
the case was not brought by the real property in interest.
II. The trial court erred in admitting the third amended complaint.
III. The trial court erred in denying defendant's motion to strike.
IV. The trial court erred in including in its decision land not involved
in the litigation.
V. The trial court erred in holding that the land in dispute is covered
by transfer certificates of Title Nos. 37686 and 37677.
23
Vl. The trial court erred in not finding that the defendant is the true
and lawful owner of the land.
VII. The trial court erred in finding that the defendant is liable to pay
the plaintiff the amount of P132.62 monthly from January, 1940, until
he vacates the premises.
VIII. The trial court erred in not ordering the plaintiff to reconvey the
land in litigation to the defendant.
As to the first assigned error, there is nothing to the contention that
the present action is not brought by the real party in interest, that is,
by J. M. Tuason and Co., Inc. What the Rules of Court require is
that an action be brought in the name of, but not necessarily by, the
real party in interest. (Section 2, Rule 2.) In fact the practice is for an
attorney-at-law to bring the action, that is to file the complaint, in the
name of the plaintiff. That practice appears to have been followed in
this case, since the complaint is signed by the law firm of Araneta
and Araneta, "counsel for plaintiff" and commences with the
statement "comes now plaintiff, through its undersigned counsel." It
is true that the complaint also states that the plaintiff is "represented
herein by its Managing Partner Gregorio Araneta, Inc.", another
corporation, but there is nothing against one corporation being
represented by another person, natural or juridical, in a suit in court.
The contention that Gregorio Araneta, Inc. can not act as managing
partner for plaintiff on the theory that it is illegal for two corporations
to enter into a partnership is without merit, for the true rule is that
"though a corporation has no power to enter into a partnership, it
may nevertheless enter into a joint venture with another where the
nature of that venture is in line with the business authorized by its
charter." (Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R.,
1043, citing 2 Fletcher Cyc. of Corp., 1082.) There is nothing in the
record to indicate that the venture in which plaintiff is represented by
Gregorio Araneta, Inc. as "its managing partner" is not in line with
the corporate business of either of them.
Errors II, III, and IV, referring to the admission of the third amended
complaint, may be answered by mere reference to section 4 of Rule
17, Rules of Court, which sanctions such amendment. It reads:
Sec. 4. Amendment to conform to evidence. — When issues not
raised by the pleadings are tried by express or implied consent of
the parties, they shall be treated in all respects, as if they had been
raised in the pleadings. Such amendment of the pleadings as may
be necessary to cause them to conform to the evidence and to raise
these issues may be made upon motion of any party at my time,
even of the trial of these issues. If evidence is objected to at the trial
on the ground that it is not within the issues made by the pleadings,
the court may allow the pleadings to be amended and shall be so
freely when the presentation of the merits of the action will be
subserved thereby and the objecting party fails to satisfy the court
that the admission of such evidence would prejudice him in
maintaining his action or defense upon the merits. The court may
grant a continuance to enable the objecting party to meet such
evidence.
Under this provision amendment is not even necessary for the
purpose of rendering judgment on issues proved though not
alleged. Thus, commenting on the provision, Chief Justice Moran
says in this Rules of Court:
Under this section, American courts have, under the New Federal
Rules of Civil Procedure, ruled that where the facts shown entitled
plaintiff to relief other than that asked for, no amendment to the
complaint is necessary, especially where defendant has himself
raised the point on which recovery is based, and that the appellate
court treat the pleadings as amended to conform to the evidence,
although the pleadings were not actually amended. (I Moran, Rules
of Court, 1952 ed., 389-390.)
Our conclusion therefore is that specification of error II, III, and IV
are without merit..
Let us now pass on the errors V and VI. Admitting, though his
attorney, at the early stage of the trial, that the land in dispute "is
that described or represented in Exhibit A and in Exhibit B enclosed
in red pencil with the name Quirino Bolaños," defendant later
changed his lawyer and also his theory and tried to prove that the
land in dispute was not covered by plaintiff's certificate of title. The
evidence, however, is against defendant, for it clearly establishes
that plaintiff is the registered owner of lot No. 4-B-3-C, situate in
barrio Tatalon, Quezon City, with an area of 5,297,429.3 square
meters, more or less, covered by transfer certificate of title No.
37686 of the land records of Rizal province, and of lot No. 4-B-4,
situated in the same barrio, having an area of 74,789 square
meters, more or less, covered by transfer certificate of title No.
37677 of the land records of the same province, both lots having
been originally registered on July 8, 1914 under original certificate
of title No. 735. The identity of the lots was established by the
testimony of Antonio Manahan and Magno Faustino, witnesses for
plaintiff, and the identity of the portion thereof claimed by defendant
was established by the testimony of his own witness, Quirico Feria.
The combined testimony of these three witnesses clearly shows that
the portion claimed by defendant is made up of a part of lot 4-B-3-C
and major on portion of lot 4-B-4, and is well within the area covered
by the two transfer certificates of title already mentioned. This fact
also appears admitted in defendant's answer to the third amended
complaint.
As the land in dispute is covered by plaintiff's Torrens certificate of
title and was registered in 1914, the decree of registration can no
longer be impugned on the ground of fraud, error or lack of notice to
defendant, as more than one year has already elapsed from the
issuance and entry of the decree. Neither court the decree be
collaterally attacked by any person claiming title to, or interest in,
the land prior to the registration proceedings. (Soroñgon vs.
Makalintal,1 45 Off. Gaz., 3819.) Nor could title to that land in
derogation of that of plaintiff, the registered owner, be acquired by
prescription or adverse possession. (Section 46, Act No. 496.)
Adverse, notorious and continuous possession under claim of
ownership for the period fixed by law is ineffective against a Torrens
title. (Valiente vs. Judge of CFI of Tarlac,2 etc., 45 Off. Gaz., Supp.
9, p. 43.) And it is likewise settled that the right to secure
possession under a decree of registration does not prescribed.
(Francisco vs. Cruz, 43 Off. Gaz., 5105, 5109-5110.) A recent
decision of this Court on this point is that rendered in the case of
Jose Alcantara et al., vs. Mariano et al., 92 Phil., 796. This disposes
of the alleged errors V and VI.
As to error VII, it is claimed that `there was no evidence to sustain
the finding that defendant should be sentenced to pay plaintiff
P132.62 monthly from January, 1940, until he vacates the
premises.' But it appears from the record that that reasonable
compensation for the use and occupation of the premises, as
stipulated at the hearing was P10 a month for each hectare and that
the area occupied by defendant was 13.2619 hectares. The total
rent to be paid for the area occupied should therefore be P132.62 a
month. It is appears from the testimony of J. A. Araneta and witness
Emigdio Tanjuatco that as early as 1939 an action of ejectment had
already been filed against defendant. And it cannot be supposed
that defendant has been paying rents, for he has been asserting all
along that the premises in question 'have always been since time
immemorial in open, continuous, exclusive and public and notorious
possession and under claim of ownership adverse to the entire
world by defendant and his predecessors in interest.' This
assignment of error is thus clearly without merit.
Error No. VIII is but a consequence of the other errors alleged and
needs for further consideration.
During the pendency of this case in this Court appellant, thru other
counsel, has filed a motion to dismiss alleging that there is pending
before the Court of First Instance of Rizal another action between
the same parties and for the same cause and seeking to sustain
that allegation with a copy of the complaint filed in said action. But
an examination of that complaint reveals that appellant's allegation
is not correct, for the pretended identity of parties and cause of
action in the two suits does not appear. That other case is one for
recovery of ownership, while the present one is for recovery of
possession. And while appellant claims that he is also involved in
that order action because it is a class suit, the complaint does not
show that such is really the case. On the contrary, it appears that
the action seeks relief for each individual plaintiff and not relief for
and on behalf of others. The motion for dismissal is clearly without
merit.
Wherefore, the judgment appealed from is affirmed, with costs
against the plaintiff.
Paras, C.J., Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo,
Labrador, and Concepcion, JJ., concur.

24