Property Rights of Partners

Deluao VS Casteel

FACTSCasteel was the original occupant and applicant of a fishpond area since before the last World War. He wanted to precludesubsequent applicants from entering and spreading themselves within the area by expanding his occupation thereof by theconstruction of dikes and the cultivation of marketable fishes.

Thus, he borrowed P27, 000 from the Deluaos to finance needed improvements for the fishpond, and was compelled by forceof this circumstance to enter into the contract of partnership, with an agreement to divide the fishpond after the award.Eventually, Casteel administered the said property and single-handedly opposed rival applicants who occupied portions of the fishpond area. He relentlessly pursued his claim to the said area up to the Office of the DANR Secretary, until it wasfinally awarded to him.

ISSEWON the parties can now validly divide the said fishpond as agreed upon by them? NO.

RULINGSpouses Deluaos’ statement that the beneficial right over the fishpond in question is the "specific partnership property" contemplated by Art. 1811 of the Civil Code is incorrect. A reading of the said provision will show that what is meant istangible property, such as a car, truck or a piece of land, but not an intangible thing such as the beneficial right to afishpond. If what they have in mind is the fishpond itself, they are grossly in error. A fishpond of the public domain can neverbe considered a specific partnership property because only its use and enjoyment — never its title or ownership — is grantedto specific private persons.

Since we held as illegal the second part of the contract of partnership between the parties to divide the fishpond betweenthem after the award, a fortiori, no rights or obligations could have arisen therefrom. Inescapably, no trust could haveresulted because trust is founded on equity and can never result from an act violative of the law. Art. 1452 of the Civil Codedoes not support the appellees' stand because it contemplates an agreement between two or more persons to purchaseproperty — capable of private ownership — the legal title of  which is to be taken in the name of one of them for the benefitof all. In the case at bar, the parties did not agree to purchase the fishpond, and even if they did, such is prohibited by law, afishpond of the public domain not being susceptible of private ownership.

It must be observed that, despite the decisions of the DANR Secretary in DANR cases 353 and 353-B awarding the area toCasteel, and despite the latter's proposal that they divide the fishpond between them, the Deluaos unequivocally expressedin their aforequoted letter their decision not to share the fishpond with Casteel. This produced the dissolution of the entirecontract of partnership (to jointly administer and to divide the fishpond after the award) between the parties, not to mentionits automatic dissolution for being contrary to law.

Pettioner’s final proposition that only by giving effect to the confirmed intention of the parties may the cause of equity and justice be served, we must state that since the contract of service is contrary to law and, therefore, null and void, it is notand can never be considered as the law between the parties.

MAURO LOZANA vs. SERAFIN DEPAKAKIBO

LABRADOR, J.:

This is an appeal from a judgment of the Court of First Instance of Iloilo, certified to us by the Court of Appeals, for the reason that only questions of law are involved in said appeal.

The record discloses that on November 16, 1954 plaintiff Mauro Lozana entered into a contract with defendant Serafin Depakakibo wherein they established a partnership capitalized at the sum of P30,000, plaintiff furnishing 60% thereof and the defendant, 40%, for the purpose of maintaining, operating and distributing electric light and power in the Municipality of Dumangas, Province of Iloilo, under a franchise issued to Mrs. Piadosa Buenaflor. However, the franchise or certificate of public necessity and convenience in favor of the said Mrs. Piadosa Buenaflor was cancelled and revoked by the Public Service Commission on May 15, 1955. But the decision of the Public Service Commission was appealed to Us on October 21, 1955. A temporary certificate of public convenience was issued in the name of Olimpia D. Decolongon on December 22, 1955 (Exh. "B"). Evidently because of the cancellation of the franchise in the name of Mrs. Piadosa Buenaflor, plaintiff herein Mauro Lozana sold a generator, Buda (diesel), 75 hp. 30 KVA capacity, Serial No. 479, to the new grantee Olimpia D. Decolongon, by a deed dated October 30, 1955 (Exhibit "C"). Defendant Serafin Depakakibo, on the other hand, sold one Crossly Diesel Engine, 25 h. p., Serial No. 141758, to the spouses Felix Jimenea and Felina Harder, by a deed dated July 10, 1956.

On November 15, 1955, plaintiff Mauro Lozana brought an action against the defendant, alleging that he is the owner of the Generator Buda (Diesel), valued at P8,000 and 70 wooden posts with the wires connecting the generator to the different houses supplied by electric current in the Municipality of Dumangas, and that he is entitled to the possession thereof, but that the defendant has wrongfully detained them as a consequence of which plaintiff suffered damages. Plaintiff prayed that said properties be delivered back to him. Three days after the filing of the complaint, that is on November 18, 1955, Judge Pantaleon A. Pelayo issued an order in said case authorizing the sheriff to take possession of the generator and 70 wooden posts, upon plaintiff's filing of a bond in the amount of P16,000 in favor of the defendant (for subsequent delivery to the plaintiff). On December 5, 1955, defendant filed an answer, denying that the generator and the equipment

mentioned in the complaint belong to the plaintiff and alleging that the same had been contributed by the plaintiff to the partnership entered into between them in the same manner that defendant had contributed equipments also, and therefore that he is not unlawfully detaining them. By way of counterclaim, defendant alleged that under the partnership agreement the parties were to contribute equipments, plaintiff contributing the generator and the defendant, the wires for the purpose of installing the main and delivery lines; that the plaintiff sold his contribution to the partnership, in violation of the terms of their agreement. He, therefore, prayed that the complaint against him be dismissed; that plaintiff be adjudged guilty of violating the partnership contract and be ordered to pay the defendant the sum of P3,000, as actual damages, P600.00 as attorney's fees and P2,600 annually as actual damages; that the court order dissolution of the partnership, after the accounting and liquidation of the same.

On September 27, 1956, the defendant filed a motion to declare plaintiff in default on his counterclaim, but this was denied by the court. Hearings on the case were conducted on October 25, 1956 and November 5, 1956, and on the latter date the judge entered a decision declaring plaintiff owner of the equipment and entitled to the possession thereof, with costs against defendant. It is against this judgment that the defendant has appealed.

The above judgment of the court was rendered on a stipulation of facts, which is as follows:

1. That on November 16, 1954, in the City of Iloilo, the aforementioned plaintiff, and the defendant entered into a contract of Partnership, a copy of which is attached as Annex "A" of defendant's answer and counterclaim, for the purpose set forth therein and under the national franchise granted to Mrs. Piadosa Buenaflor;

2. That according to the aforementioned Partnership Contract, the plaintiff Mr. Mauro Lozana, contributed the amount of Eighteen Thousand Pesos (P18,000.00); said contributions of both parties being the appraised values of their respective properties brought into the partnership;

3. That the said Certificate of Public Convenience and Necessity was revoked and cancelled by order of the Public Service Commission dated March 15, 1955, promulgated in case No. 58188, entitled, "Piadosa Buenaflor, applicant", which order has been appealed to the Supreme Court by Mrs. Buenaflor;

4. That on October 30, 1955, the plaintiff sold properties brought into by him to the said partnership in favor of Olimpia Decolongon in the amount of P10,000.00 as per Deed of Sale dated October 30, 1955 executed and ratified before Notary Public, Delfin Demaisip, in and for the Municipality of Dumangas, Iloilo and entered in his Notarial Registry as Doc. No. 832; Page No. 6; Book No. XIII; and Series of 1955, a copy thereof is made as Annex "B" of defendant's answer and counterclaim;

5. That there was no liquidation of partnership and that at the time of said Sale on October 30, 1955, defendant was the manager thereof;

6. That by virtue of the Order of this Honorable Court dated November 18, 1955, those properties sold were taken by the Provincial Sheriff on November 20, 1955 and delivered to the plaintiff on November 25, 1955 upon the latter posting the required bond executed by himself and the Luzon Surety Co., dated November 17, 1955 and ratified before the Notary Public, Eleuterio del Rosario in and for the province of Iloilo known as Doc. No. 200; Page 90; Book No. VII; and Series of 1955; of said Notary Public;

7. That the said properties sold are now in the possession of Olimpia Decolongon, the purchaser, who is presently operating an electric light plant in Dumangas, Iloilo;

8. That the defendant sold certain properties in favor of the spouses, Felix Jimenea and Felisa Harder contributed by him to the partnership for P3,500.00 as per Deed of Sale executed and ratified before the Notary Public Rodrigo J. Harder in and for the Province of Iloilo, known as Doc. No. 76; Page 94; Book No. V; and Series of 1955, a certified copy of which is hereto attached marked as Annex "A", and made an integral part hereof; (pp, 27-29 ROA).

As it appears from the above stipulation of facts that the plaintiff and the defendant entered into the contract of partnership, plaintiff contributing the amount of P18,000, and as it is not stated therein that there bas been a liquidation of the partnership assets at the time plaintiff sold the Buda Diesel Engine on October 15, 1955, and since the court below had found that the plaintiff had actually contributed one engine and 70 posts to the partnership, it necessarily follows that the Buda diesel engine contributed by the plaintiff had become the property of the partnership. As properties of the partnership, the same could not be disposed of by the party contributing the same without the consent or approval of the partnership or of the other partner. (Clemente vs. Galvan, 67 Phil., 565).

The lower court declared that the contract of partnership was null and void, because by the contract of partnership, the parties thereto have become dummies of the owner of the franchise. The reason for this holding was the admission by defendant when being cross-examined by the court that he and the plaintiff are dummies. We find that this admission by the defendant is an error of law, not a statement of a fact. The Anti-Dummy law has not been violated as parties plaintiff and defendant are not aliens but Filipinos. The Anti-Dummy law refers to aliens only (Commonwealth Act 108 as amended).

Upon examining the contract of partnership, especially the provision thereon wherein the parties agreed to maintain, operate and distribute electric light and power under the franchise belonging to Mrs. Buenaflor, we do not find the agreement to be illegal, or contrary to law and public policy such as to make the contract of partnership, null and void  ab initio. The agreement could have been submitted to the Public Service Commission if the rules of the latter require them to be so presented. But the fact of furnishing the current to the holder of the franchise alone, without the previous approval of the Public Service Commission, does not per se make the contract of partnership null and void from the beginning and render the partnership entered into by the parties for the purpose also void and non-existent. Under the circumstances, therefore, the court erred in declaring that the contract was illegal from the beginning and that parties to the partnership are not bound therefor, such that the contribution of the plaintiff to the partnership did not pass to it as its property. It also follows that the claim of the defendant in his counterclaim that the partnership be dissolved and its assets liquidated is the proper remedy, not for each contributing partner to claim back what he had contributed.

For the foregoing considerations, the judgment appealed from as well as the order of the court for the taking of the property into custody by the sheriff must be, as they hereby are set aside and the case remanded to the court below for further proceedings in accordance with law.

ROGER V. NAVARRO vs. HON. JOSE L. ESCOBIDO

FACTSRespondent Karen T. Go filed two complaints before the RTC for replevin and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarro’s possession. In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the lease agreements) — the actionable documents on which the complaints were based. RTC dismissed the case but set aside the dismissal on the presumption that Glenn Go’s (husband) leasing business is a conjugal property and thus ordered Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff as per Rule 4, Section 3 of the Rules of Court. Navarro filed a petition for certiorari with the CA. According to Navarro, a complaint which failed to state a cause of action could not be converted into one with a cause of action by mere amendment or supplemental pleading. CA denied petition.

ISSUEWhether or not Karen Go is a real party in interest.

HELDYES. Karen Go is the registered owner of the business name Kargo Enterprises, as the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a judgment in this case. Thus, contrary to Navarro’s contention, Karen Go is the real party-in-interest, and it is legally incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease Agreement that her husband signed in behalf of Kargo Enterprises.

Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered under this name; hence, both have an equal right to seek possession of these properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is presumed to have been filed for the benefit of all co-owners.

We hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the Rules, which states:

Section 4.Spouses as parties. — Husband and wife shall sue or be sued jointly, except as provided by law.

Even assuming that Glenn Go is an indispensable party to the action, misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action as per Rule 3, Section 11 of the Rules of Court.

ARSENIO T. MENDIOLA vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST RESOURCES, PHILS., INC. and/or CELLMARK AB

DOCTRINE: In a partnership, the members become co-owners of what is contributed to the firm capital and of all property that may be acquired thereby and through the efforts of the members. The property or stock of the partnership forms a community of goods, a common fund, in which each party has a proprietary interest. In fact, the New Civil Code regards a partner as a co - owner of specific partnership property. Each partner possesses a joint interest in the whole of partnership property. If the relation does not have this feature, it is not one of partnership. This essential element, the community of interest, or co -ownership of, or joint interest in partnership property is absent in the relations between petitioner and private respondent Pacfor. xxx the parties in this case, merely shared profits. This alone does not make a partnership.

Besides, a corporation cannot become a member of a partnership in the absence of express authorization by statute or charter. This doctrine is based on the following considerations: (1) that the mutual agency between the partners, whereby the corporation would be bound by the acts of persons who are not its duly appointed and authorized agents and officers, would be inconsistent with the policy of the law that the corporation shall manage its own affairs separately and exclusively; and, (2) that such an arrangement would improperly allow corporate property to become subject to risks not contemplated by the stockholders when they originally invested in the corporation.

PONENTE: Puno, J.

FACTS:

Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and existing under the laws of California, USA. It is a subsidiary of Cellulose Marketing International (organized in Sweden)

Private respondent Pacfor entered into a "Side Agreement on Representative Office known as Pacific Forest Resources (Phils.), Inc." with petitioner Arsenio T. Mendiola (ATM) . The Side Agreement outlines the business relationship of the parties with regard to the Philippine operations of Pacfor. Private respondent will establish a Pacfor representative office in the Philippines, to be known as Pacfor Phils, and petitioner ATM will be its President. Petitioner's base salary and the overhead expenditures of the company shall be borne by the representative office and funded by Pacfor/ATM, since Pacfor Phils. is equally owned on a 50- 50 equity by ATM and Pacfor-usa.

In its application (to the SEC), private respondent Pacfor proposed to establish its representative office in the Philippines. It also designated petitioner as its resident agent in the Philippines, authorized to accept summons and processes in all legal proceedings, and all notices affecting the corporation.The Side Agreement was amended through a "Revised Operating and Profit Sharing Agreement for the Representative Office Known as Pacific Forest Resources (Philippines)," where the salary of petitioner was increased to $78,000 per annum. Both agreements show that the operational expenses will be borne by the representative office and funded by all parties "as equal partners," while the profits and commissions will be shared among them.

In July 2000, petitioner wrote the Vice President for Asia of Pacfor, seeking confirmation of his 50% equity of Pacfor Phils. Private respondent Pacfor, through its President, replied that petitioner is not a part-owner of Pacfor Phils. because the latter is merely Pacfor-USA's representative office and not an entity separate and distinct from Pacfor-USA. "It's simply a 'theoretical company' with the purpose of dividing the income 50-50."11 Petitioner presumably knew of this arrangement from the start, having been the one to propose to private respondent Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes.

Petitioner claimed that he was all along made to believe that he was in a joint venture with them; that he would have been better off remaining as an independent agent or representative of Pacfor-USA as ATM Marketing Corp. Petitioner raised other issues, such as the rentals of office furniture, salary of the employees, company car, as well as commissions allegedly due him. The issues were not resolved, hence, in October 2000, petitioner wrote Pacfor -USA demanding payment of unpaid commissions and office furniture and equipment rentals.

Privatre respondent Pacfor through counsel ordered petitioner to turn over to it all papers, documents, files, records, and other materials in his or ATM Marketing Corporation's possession that belong to Pacfor or Pacfor Phils then to remit more than 300k xmas giveaway fund for clients of Pacfor Phil and finally Pacfor withdraw all its offers of settlement and ordered petitioner to transfer title and turn over to it possession of the service car.18

Private respondent Pacfor likewise sent letters to its clients in the Philippines, advising them not to deal with Pacfor Phils.

Petitioner construed these directives as a severance of the "unregistered partnership" between him and Pacfor, and the termination of his employment as resident manager of Pacfor Phils.

On the basis of the "Side Agreement," petitioner insisted that he and Pacfor equally own Pacfor Phils . Thus, it follows that he and Pacfor likewise own, on a 50/50 basis, Pacfor Phils.' office furniture and equipment and the service car. He also reiterated his demand for unpaid commissions, and proposed to offset these with the remaining Christmas giveaway fund in his possession. Furthermore, he did not renew the lease contract with Pulp and Paper, Inc., the lessor of the office premises of Pacfor Phils., wherein he was the signatory to the lease agreement.

Private respondent Pacfor placed petitioner on preventive suspension and ordered him to show cause why no disciplinary action should be taken against him. Private respondent Pacfor charged petitioner with willful disobedience and serious misconduct for his refusal to turn over the service car and the Christmas giveaway fund which he applied to his alleged unpaid commissions. Private respondent also alleged loss of confidence and gross neglect of duty on the part of petitioner for allegedly allowing another corporation owned by petitioner's relatives, High End Products, Inc. (HEPI), to use the same telephone and facsimile numbers of Pacfor, to possibly steal and divert the sales and business of private respondent.

Petitioner denied the charges. He reiterated that he considered the import of Pacfor President’s letters as a "cessation of his position and of the existence of Pacfor Phils." He likewise informed private respondent Pacfor that ATM Marketing Corp. now occupies Pacfor Phils.' office premises, and demanded payment of his separation pay.

Petitioner filed his complaint for illegal dismissal, recovery of separation pay, and payment of attorney's fees with the NLRC.

Private respondent directed petitioner to explain why he should not be disciplined for serious misconduct and conflict of interest; charged petitioner anew with serious misconduct for the latter's alleged act of fraud and misrepresentation in authorizing the release of an additional peso salary for himself, besides the dollar salary agreed upon by the parties. Private respondent also accused petitioner of disloyalty and representation of conflicting interests for having continued using the Pacfor Phils.' office for operations of HEPI

LA: ruled in favor of petitioner, finding there was constructive dismissal. By directing petitioner to turn over all office records and materials, regardless of whether he may have retained copies, private respondent Pacfor virtually deprived petitioner of his job by the gradual diminution of his authority as resident manager. Petitioner's position as resident manager whose duty, among others, was to maintain the security of its business transactions and communications was rendered meaningless.

NLRC: in favor of Private respondent Pacfor. He set aside the July 30, 2001 decision of the labor arbiter, for lack of jurisdiction and lack of merit. It held there was no employer-employee relationship between the parties. Based on the two agreements between the parties, it concluded that petitioner is not an employee of private respondent Pacfor, but a full co-owner (50/50 equity).MR denied.

CA: Affirmed holding that "the legal basis of the complaint is not employment but perhaps partnership, co-ownership, or independent contractorship." Hence, the Labor Code cannot apply.

MR denied

IssuesWas there an employer-employee relationship or a partnership? Can both exist at the same time? There was an employer employee relationship but no partnership

Was he constructively dismissed? (Not important so omitted) YES.

RatioPetitioner argues that he is an industrial partner of the partnership he formed with private respondent Pacfor, and also an employee of the partnership. Petitioner insists that an industrial partner may at the same time be an employee of the partnership, provided there is such an agreement, which, in this case, is the "Side Agreement" and the "Revised Operating and Profit Sharing Agreement." We hold that petitioner is an employee of private respondent Pacfor and that no partnership or co-ownership exists between the parties.

In a partnership, the members become co-owners of what is contributed to the firm capital and of all property that may be acquired thereby and through the efforts of the members. The property or stock of the partnership forms a community of goods, a common fund, in which each party has a proprietary interest. In fact, the New Civil Code regards a partner as a co-owner of specific partnership property. Each partner possesses a joint interest in the whole of partnership property. If the relation does not have this feature, it is not one of partnership. This essential element, the community of interest, or co-ownership of, or joint interest in partnership property is absent in the relations between petitioner and private respondent Pacfor. Petitioner is not a part -owner of Pacfor Phils. William Gleason, private respondent Pacfor's President established this fact when he said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing the income 50-50. He stressed that petitioner knew of this arrangement from the very start, having been the one to propose to private respondent Pacfor the setting up of a representative office, and "not a branch office" in the Philippines to save on taxes. Thus, the parties in this case, merely shared profits. This alone does not make a partnership.

Besides, a corporation cannot become a member of a partnership in the absence of express authorization by statute or charter. This doctrine is based on the following considerations: (1) that the mutual agency between the partners, whereby the corporation would be bound by the acts of persons who are not its duly appointed and authorized agents and officers, would be inconsistent with the policy of the law that the corporation shall manage its own affairs separately and exclusively; and, (2) that such an arrangement would improperly allow corporate property to become subject to risks not contemplated by the stockholders when they originally invested in the corporation. No such authorization has been proved in the case at bar.

(This part goes into the employer -employee relationship bit, I don’t think it’s important but I included it na din if ever magtanong re: paano nagging employee)

Be that as it may, we hold that on the basis of the evidence, an employer -employee relationship is present in the case at bar. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee;

(b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. The most important element is the employer's control of the employee's conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.43

In the instant case, all the foregoing elements are present. First, it was private respondent Pacfor which selected and engaged the services of petitioner as its resident agent in the Philippines. Second, as stipulated in their Side Agreement, private respondent Pacfor pays petitioner his salary amounting to $65,000 per annum which was later increased to $78,000. Third, private respondent Pacfor holds the power of dismissal, as may be gleaned through the various memoranda it issued against petitioner, placing the latter on preventive suspension while charging him with various offenses, including willful disobedience, serious misconduct, and gross neglect of duty, and ordering him to show cause why no disciplinary action should be taken against him.

Lastly and most important, private respondent Pacfor has the power of control over the means and method of petitioner in accomplishing his work.The power of control refers merely to the existence of the power, and not to the actual exercise thereof. The principal consideration is whether the employer has the right to control the manner of doing the work, and it is not the actual exercise of the right by interfering with the work, but the right to control, which constitutes the test of the existence of an employer-employee relationship. 44 In the case at bar, private respondent Pacfor, as employer, clearly possesses such right of control. Petitioner, as private respondent Pacfor's resident agent in

the Philippines, is, exactly so, only an agent of the corporation, a representative of Pacfor, who transacts business, and accepts service on its behalf.

This right of control was exercised by private respondent Pacfor during the period of November to December 2000, when it directed petitioner to turn over to it all records of Pacfor Phils.; when it ordered petitioner to remit the Christmas giveaway fund intended for clients of Pacfor Phils.; and, when it withdrew all its offers of settlement and ordered petitioner to transfer title and turn over to it the possession of the service car. It was also during this period when private respondent Pacfor sent letters to its clients in the Philippines, particularly Intercontinental Paper Industries, Inc. and DAVCOR, advising them not to deal with petitioner and/or Pacfor Phils. In its letter to DAVCOR, private respondent Pacfor replied to the client's request for an invoice payment extension, and formulated a revised payment program for DAVCOR. This is one unmistakable proof that private respondent Pacfor exercises control over the petitioner.

DISPOSITIVE: IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals' January 30, 2003 Decision in CA-G.R. SP No. 71028 and July 30, 2003 Resolution, affirming the December 20, 2001 Decision of the National Labor Relations Commission, are ANNULED and SET ASIDE . The July 30, 2001 Decision of the Labor Arbiter isREINSTATED with the MODIFICATION that the amount of P250,000.00 representing an alleged increase in petitioner's salary shall be deducted from the grant of separation pay for lack of evidence.

SO ORDERED.

JOSEFINA P. REALUBIT vs. PROSENCIO D. JASO and EDEN G. JASO

PEREZ, J.:

The validity as well as the consequences of an assignment of rights in a joint venture are at issue in this petition for review filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure,1 assailing the 30 April 2007 Decision2rendered by the Court of Appeals’ (CA) then Twelfth Division in CA-G.R. CV No. 73861,3 the dispositive portion of which states:

WHEREFORE, the Decision appealed from is SET ASIDE and we order the dissolution of the joint venture between defendant-appellant Josefina Realubit and Francis Eric Amaury Biondo and the subsequent conduct of accounting, liquidation of assets and division of shares of the joint venture business.

Let a copy hereof and the records of the case be remanded to the trial court for appropriate proceedings.4

The Facts

On 17 March 1994, petitioner Josefina Realubit (Josefina) entered into a Joint Venture Agreement with Francis Eric Amaury Biondo (Biondo), a French national, for the operation of an ice manufacturing business. With Josefina as the industrial partner and Biondo as the capitalist partner, the parties agreed that they would each receive 40% of the net profit, with the remaining 20% to be used for the payment of the ice making machine which was purchased for the business.5 For and in consideration of the sum of P500,000.00, however, Biondo subsequently executed a Deed of Assignment dated 27 June 1997, transferring all his rights and interests in the business in favor of respondent Eden Jaso (Eden), the wife of respondent Prosencio Jaso.6 With Biondo’s eventual departure from the country, the Spouses Jaso caused their lawyer to send Josefina a letter dated 19 February 1998, apprising her of their acquisition of said Frenchman’s share in the business and formally demanding an accounting and inventory thereof as well as the remittance of their portion of its profits.7

Faulting Josefina with unjustified failure to heed their demand, the Spouses Jaso commenced the instant suit with the filing of their 3 August 1998 Complaint against Josefina, her husband, Ike Realubit (Ike), and their alleged dummies, for specific performance, accounting, examination, audit and inventory of assets and properties, dissolution of the joint venture, appointment of a receiver and damages. Docketed as Civil Case No. 98-0331 before respondent Branch 257 of the Regional Trial Court (RTC) of Parañaque City, said complaint alleged, among other matters, that the Spouses Realubit had no gainful occupation or business prior to their joint venture with Biondo; that with the income of the business which earned not less than P3,000.00 per day, they were, however, able to acquire the two-storey building as well as the land on which the joint venture’s ice plant stands, another building which they used as their office and/or residence and six (6) delivery vans; and, that aside from appropriating for themselves the income of the business, the Spouses Realubit have fraudulently concealed the funds and assets thereof thru their relatives, associates or dummies.8

Served with summons, the Spouses Realubit filed their Answer dated 21 October 1998, specifically denying the material allegations of the foregoing complaint. Claiming that they have been engaged in the tube ice trading business under a single proprietorship even before their dealings with Biondo, the Spouses Realubit, in turn, averred that their said business partner had left the country in May 1997 and could not have executed the Deed of Assignment which bears a signature markedly different from that which he affixed on their Joint Venture Agreement; that they refused the Spouses Jaso’s demand in view of the dubious circumstances surrounding their acquisition of Biondo’s share in the business which was established at Don Antonio Heights, Commonwealth Avenue, Quezon City; that said business had already stopped operations on 13 January 1996 when its plant shut down after its power supply was disconnected by MERALCO for non-payment of utility bills; and, that it was their own tube ice trading business which had been moved to 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City that the Spouses Jaso mistook for the ice manufacturing business established in partnership with Biondo.9

The issues thus joined and the mandatory pre-trial conference subsequently terminated, the RTC went on to try the case on its merits and, thereafter, to render its Decision dated 17 September 2001, discounting the existence of sufficient evidence from which the income, assets and the supposed dissolution of the joint venture can be adequately reckoned. Upon the finding, however, that the Spouses Jaso had been nevertheless subrogated to Biondo’s rights in the business in view of their valid acquisition of the latter’s share as capitalist partner, 10 the RTC disposed of the case in the following wise:

WHEREFORE, defendants are ordered to submit to plaintiffs a complete accounting and inventory of the assets and liabilities of the joint venture from its inception to the present, to allow plaintiffs access to the books and accounting records of the joint venture, to deliver to plaintiffs their share in the profits, if any, and to pay the plaintiffs the amount of P20,000. for moral damages. The claims for exemplary damages and attorney’s fees are denied for lack of basis.11

On appeal before the CA, the foregoing decision was set aside in the herein assailed Decision dated 30 April 2007, upon the following findings and conclusions: (a) the Spouses Jaso validly acquired Biondo’s share in the business which had been transferred to and continued its operations at 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City and not dissolved as claimed by the Spouses Realubit; (b) absent showing of Josefina’s knowledge and consent to the transfer of Biondo’s share, Eden cannot be considered as a partner in the business, pursuant to Article 1813 of the Civil Code of the Philippines; (c) while entitled to Biondo’s share in the profits of the business, Eden cannot, however, interfere with the management of the partnership, require information or account of its transactions and inspect its books; (d) the partnership should first be dissolved before Eden can seek an accounting of its transactions and demand Biondo’s share in the business; and, (e) the evidence adduced before the RTC do not support the award of moral damages in favor of the Spouses Jaso. 12

The Spouses Realubit’s motion for reconsideration of the foregoing decision was denied for lack of merit in the CA’s 28 June 2007 Resolution,13 hence, this petition.

The Issues

The Spouses Realubit urge the reversal of the assailed decision upon the negative of the following issues, to wit:

A. WHETHER OR NOT THERE WAS A VALID ASSIGNMENT OF RIGHTS TO THE JOINT VENTURE.

B. WHETHER THE COURT MAY ORDER PETITIONER [JOSEFINA REALUBIT] AS PARTNER IN THE JOINT VENTURE TO RENDER [A]N ACCOUNTING TO ONE WHO IS NOT A PARTNER IN SAID JOINT VENTURE.

C. WHETHER PRIVATE RESPONDENTS [SPOUSES JASO] HAVE ANY RIGHT IN THE JOINT VENTURE AND IN THE SEPARATE ICE BUSINESS OF PETITIONER[S].14

The Court’s Ruling

We find the petition bereft of merit.

The Spouses Realubit argue that, in upholding its validity, both the RTC and the CA inordinately gave premium to the notarization of the 27 June 1997 Deed of Assignment executed by Biondo in favor of the Spouses Jaso. Calling attention to the latter’s failure to present before the RTC said assignor or, at the very least, the witnesses to said document, the Spouses Realubit maintain that the testimony of Rolando Diaz, the Notary Public before whom the same was acknowledged, did not suffice to establish its authenticity and/or validity. They insist that notarization did not automatically and conclusively confer validity on said deed, since it is still entirely possible that Biondo did not execute said deed or, for that matter, appear before said notary public. 15 The dearth of merit in the Spouses Realubit’s position is, however, immediately evident from the settled rule that documents acknowledged before notaries public are public documents which are admissible in evidence without necessity of preliminary proof as to their authenticity and due execution.16

It cannot be gainsaid that, as a public document, the Deed of Assignment Biondo executed in favor of Eden not only enjoys a presumption of regularity17 but is also considered prima facie evidence of the facts therein stated.18A party assailing the authenticity and due execution of a notarized document is, consequently, required to present evidence that is clear, convincing and more than merely preponderant. 19 In view of the Spouses Realubit’s failure to discharge this onus, we find that both the RTC and the CA correctly upheld the authenticity and validity of said Deed of Assignment upon the combined strength of the above-discussed disputable presumptions and the testimonies elicited from Eden20 and Notary Public Rolando Diaz.21 As for the Spouses’ Realubit’s bare assertion that Biondo’s signature on the same document appears to be forged, suffice it to say that, like fraud, 22 forgery is never presumed and must likewise be proved by clear and convincing evidence by the party alleging the same.23Aside from not being borne out by a comparison of Biondo’s signatures on the Joint Venture Agreement24 and the Deed of Assignment,25 said forgery is, moreover debunked by Biondo’s duly authenticated certification dated 17 November 1998, confirming the transfer of his interest in the business in favor of Eden.26

Generally understood to mean an organization formed for some temporary purpose, a joint venture is likened to a particular partnership or one which "has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation."27 The rule is settled that joint ventures are governed by the law on partnerships28 which are, in turn, based on mutual agency or

delectus personae.29 Insofar as a partner’s conveyance of the entirety of his interest in the partnership is concerned, Article 1813 of the Civil Code provides as follows:

Art. 1813. A conveyance by a partner of his whole interest in the partnership does not itself dissolve the partnership, or, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with his contracts the profits to which the assigning partners would otherwise be entitled. However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual remedies.

In the case of a dissolution of the partnership, the assignee is entitled to receive his assignor’s interest and may require an account from the date only of the last account agreed to by all the partners.

From the foregoing provision, it is evident that "(t)he transfer by a partner of his partnership interest does not make the assignee of such interest a partner of the firm, nor entitle the assignee to interfere in the management of the partnership business or to receive anything except the assignee’s profits. The assignment does not purport to transfer an interest in the partnership, but only a future contingent right to a portion of the ultimate residue as the assignor may become entitled to receive by virtue of his proportionate interest in the capital." 30 Since a partner’s interest in the partnership includes his share in the profits,31 we find that the CA committed no reversible error in ruling that the Spouses Jaso are entitled to Biondo’s share in the profits, despite Juanita’s lack of consent to the assignment of said Frenchman’s interest in the joint venture. Although Eden did not, moreover, become a partner as a consequence of the assignment and/or acquire the right to require an accounting of the partnership business, the CA correctly granted her prayer for dissolution of the joint venture conformably with the right granted to the purchaser of a partner’s interest under Article 1831 of the Civil Code.32 1âwphi1

Considering that they involve questions of fact, neither are we inclined to hospitably entertain the Spouses Realubit’s insistence on the supposed fact that Josefina’s joint venture with Biondo had already been dissolved and that the ice manufacturing business at 66-C Cenacle Drive, Sanville Subdivision, Project 6, Quezon City was merely a continuation of the same business they previously operated under a single proprietorship. It is well-entrenched doctrine that questions of fact are not proper subjects of appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined to questions of law. 33 Upon the principle that this Court is not a trier of facts, we are not duty bound to examine the evidence introduced by the parties below to determine if the trial and the appellate courts correctly assessed and evaluated the evidence on record.34 Absent showing that the factual findings complained of are devoid of support by the evidence on record or the assailed judgment is based on misapprehension of facts, the Court will limit itself to reviewing only errors of law.35

Based on the evidence on record, moreover, both the RTC36 and the CA37 ruled out the dissolution of the joint venture and concluded that the ice manufacturing business at the aforesaid address was the same one established by Juanita and Biondo. As a rule, findings of fact of the CA are binding and conclusive upon this Court,38 and will not be reviewed or disturbed on appeal39 unless the case falls under any of the following recognized exceptions: (1) when the conclusion is a finding grounded entirely on speculation, surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the CA, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the respondents; and, (10) when the findings of fact of the CA are premised on the supposed absence of evidence and contradicted by the evidence on record. 40 Unfortunately for the Spouses Realubit’s cause, not one of the foregoing exceptions applies to the case.

WHEREFORE, the petition is DENIED for lack of merit and the assailed CA Decision dated 30 April 2007 is, accordingly, AFFIRMED in toto. SO ORDERED.

Obligations of the Partners With Regard to Third Persons

PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "SYCIP, SALAZAR, FELICIANO, HERNANDEZ & CASTILLO"and IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "OZAETA, ROMULO, DE LEON,

MABANTA & REYES."

Two firms ask that they be allowed to continue using the names of their firms despite the fact that Attys. Sycip and Ozaeta died.

Petitions were filed by the surviving partners of Atty. Alexander Sycip, who died on May 5, 1975 and by the surviving partners of Atty. Herminio Ozaeta, who died on February 14, 1976, praying that they be allowed to continue using, in the names of their firms, the names of partners who had passed away.

Petitioners contend that the continued use of the name of a deceased or former partner when permissible by local custom, is not unethical but care should be taken that no imposition or deception is practiced through this use. They also contend that no local custom prohibits the continued use of a deceased partner’s name in a professional firm’s name; there is no custom or usage in the Philippines, or at least in the Greater Manila Area, which recognizes that the name of a law firm necessarily identifies the individual members of the firm.

PETITIONERS’ ARGUMENTS1. Under the law, a partnership is not prohibited from continuing its business under a firm name that includes the name of a deceased

partner. NCC 1840 explicitly sanctions the practice.The use by the person or partnership continuing the business of the partnership name, or the name of a deceased partner as part thereof, shall not of itself make the individual property of the deceased partner liable for any debts contracted by such person or partnership.

2. In regulating other professions (accountancy and engineering), the legislature has authorized the adoption of firm names without any restriction as to the use of the name of a deceased partner. There is no fundamental policy that is offended by the continued use by a firm of professionals of a firm name, which includes the name of a deceased partner, at least where such firm name has acquired the characteristics of a "trade name."

3. The Canons of Professional Ethics are not transgressed by the continued use of the name of a deceased partner because Canon 33 of the Canons of Professional Ethics adopted by the American Bar Association declares that:

The continued use of the name of a deceased or former partner when permissible by local custom, is not unethical but care should be taken that no imposition or deception is practiced through this use.

4. There is no possibility of imposition or deception because the deaths of their respective deceased partners were well-publicized in all newspapers of general circulation for several days. The stationeries now being used by them carry new letterheads indicating the years when their respective deceased partners were connected with the firm. Petitioners will notify all leading national and international law directories of the fact of their deceased partners' deaths.

5. No local custom prohibits the continued use of a deceased partner's name in a professional firm's name. There is no Philippine custom or usage that recognizes that the name of a law firm identifies the firm’s individual members.

6. The continued use of a deceased partner's name in the firm name of law partnerships has been consistently allowed by U.S. Courts and is an accepted practice in the legal profession of most countries.

ISSUE & HOLDINGWON they may be allowed to continue using the current names of their firms. NO. Petitioners advised to drop the names SYCIP and OZAETA from their respective firm names. Names may be included in the listing of individuals who have been partners, indicating the years during which they served.

RATIOJURISPRUDENCE

The Deen case [1953] – Court advised the firm to desist from including in their firm designation the name of C. D. Johnston, who has long been dead

Register of Deeds of Manila v. China Banking Corporation [1958] – In this case, the law firm of Perkins & Ponce Enrile moved to intervene as amicus curiae. The Court in a Resolution stated that it "would like to be informed why the name of Perkins is still being used although Atty. E. A. Perkins is already dead." The Court advised the firm to drop the name of E. A. Perkins from the firm name, and ruled that no practice should be allowed which even in a remote degree could give rise to the possibility of deception. Deen case cited in the ruling.

Judicial decisions applying or interpreting the laws form part of the legal system. The Supreme Court in the Deen and Perkins cases laid down a legal rule against which no custom or practice to the contrary, even if proven, can prevail. This is not to speak of our civil law which clearly ordains that a partnership is dissolved by the death of any partner. Custom which are contrary to law, public order or public policy shall not be countenanced.

The use in their partnership names of the names of deceased partners will run counter to NCC 1815. Art. 1815. Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners. Those who, not being members of the partnership, include their names in the firm name shall be subject to the liability of a partner.

Names in a firm name of a partnership must either be those of living partners and in the case of non-partners, should be living persons who can be subjected to liability. NCC 1825 prohibits a third person from including his name in the firm name under pain of assuming the liability of a partner.

The heirs of a deceased partner in a law firm cannot be held liable as the old members to the creditors of a firm particularly where they are non-lawyers. Canon 34 of the Canons of Professional Ethics “prohibits an agreement for the payment to the widow and heirs of a deceased lawyer of a percentage, either gross or net, of the fees received from the future business of the deceased lawyer's clients, both because the recipients of such division are not lawyers and because such payments will not represent service or responsibility on the part of the recipient.” Neither the widow nor the heirs can be held liable for transactions entered into after the death of their lawyer-predecessor. There being no benefits accruing, there can be no corresponding liability.

The public relations value of the use of an old firm name can tend to create undue advantages and disadvantages in the practice of the profession. An able lawyer without connections will have to make a name for himself starting from scratch. Another able lawyer, who can join an old firm, can initially ride on that old firm's reputation established by deceased partners.

ON ARGUMENT #1

NCC 1840 is within Chapter 3 of Title IX entitled "Dissolution and Winding Up." It primarily deals with the exemption from liability in cases of a dissolved partnership, of the individual property of the deceased partner for debts contracted by the person or partnership, which continues the business using the partnership name or the name of the deceased partner as part thereof. What the law contemplates therein is a hold-over situation preparatory to formal reorganization.

Secondly, NCC 1840 treats more of a commercial partnership with a good will to protect rather than of a professional partnership [with no saleable goodwill but whose reputation depends on the personal qualifications of its individual members]. A saleable goodwill can exist only in a commercial partnership, not in a professional partnership consisting of lawyers.

ON ARGUMENT #2

A partnership for the practice of law cannot be likened to partnerships formed by other professionals or for business. The law on accountancy specifically allows the use of a trade name in connection with the practice of accountancy.

A partnership for the practice of law is not a legal entity. It is a mere relationship or association for a particular purpose. It is not a partnership formed to carry on trade or business or of holding property. The use of a nom de plume, assumed or trade name in law practice is improper.

Primary characteristics which distinguish the legal profession from business1. A duty of public service, of which the emolument is a byproduct, and in which one may attain the highest eminence without making

much money2. A relation as an "officer of court" to the administration of justice involving thorough sincerity, integrity, and reliability3. A relation to clients in the highest degree fiduciary4. A relation to colleagues at the bar characterized by candor, fairness, and unwillingness to resort to current business methods of

advertising and encroachment on their practice, or dealing directly with their clients

The right to practice law does not only presuppose in its possessor integrity, legal standing and attainment, but also the exercise of a special privilege, highly personal and partaking of the nature of a public trust.

ON ARGUMENT #3

Canon 33 does not consider as unethical the continued use of the name of a deceased or former partner when such a practice is permissible by local custom, but the Canon warns that care should be taken that no imposition or deception is practiced.

In the Philippines, no local custom permits or allows the continued use of a deceased or former partner's name. Firm names, under our custom, identify the more active and/or more senior members or partners of the law firm.

The possibility of deception upon the public, real or consequential, where the name of a deceased partner continues to be used cannot be ruled out. A person in search of legal counsel might be guided by the familiar ring of a distinguished name appearing in a firm title.

ON ARGUMENT #6

U.S. Courts have allowed the continued use of a deceased partner's name because it is sanctioned by custom. Not so in this jurisdiction where there is no local custom that sanctions the practice.

Custom has been defined as a rule of conduct formed by repetition of acts, uniformly observed (practiced) as a social rule, legally binding and obligatory. Courts take no judicial notice of custom. A custom must be proved as a fact, according to the rules of evidence. A local custom as a source of right cannot be considered by a court of justice unless such custom is properly established by competent evidence like any other fact. Merely because something is done as a matter of practice does not mean that Courts can rely on the same for purposes of adjudication as a juridical custom. Juridical custom must be differentiated from social custom. The former can supplement statutory law or be applied in the absence of such statute. Not so with the latter.

The practice of law is related to the administration of justice and should not be considered like an ordinary "money-making trade." Petitioners' desire to preserve the identity of their firms in the eyes of the public must bow to legal and ethical impediment.

Petitions DENIED CONCURRENCE OF J. FERNANDO

It is out of delicadeza that the undersigned did not participate in the disposition of these petitions. Sycip Salazar started with partnership of Quisumbing, Sycip, and Quisumbing, the senior partner, the late Ramon Quisumbing, being the father-in-law of the undersigned, and the most junior partner then, Norberto J. Quisumbing, being his brother- in-law.

DISSENT OF J. AQUINO

The petition may be granted with the condition that it be indicated in the letterheads of the two firms (as the case may be) that A. Sycip, former J. Ozaeta and H. Ozaeta are dead or the period when they served as partners should be stated therein.

The purpose of the two firms in continuing the use of the names of their deceased founders is to retain the clients who had customarily sought the legal services of Attys. Sycip and Ozaeta and to benefit from the goodwill attached to the names of those respected and esteemed law practitioners. That is a legitimate motivation. The retention of their names is not illegal per se.

PNB vs. Lo

FACTSIn September 1916, Severo Eugenio Lo and Ling, together with Ping, Hun, Lam and Peng formed a commercial partnership under the name of “Tai Sing and Co.,” with a capital of P40,000 contributed by said partners. The firm name was registered in the mercantile registrar in the Province of Iloilo. Ping, in the articles of partnership, was assigned as the general manager. However, in 1917, he executed a special power of attorney in favor of Lam to act in his behalf as the manager of the firm. Subsequently, Lam obtained a loan from PNB – the loan was under the firm’s name. In the same year, Ping died in China. From 1918 to 1920, the firm, via GM Lam, incurred other loans from PNB.   The loans were not objected by any of the partners. Later, PNB sued the firm for non-payment. Lo, in his defense, argued that he cannot be liable as a partner because the partnership, according to him, is void; that it is void because the firm’s name did not comply with the requirement of the Code of Commerce that a firm name should contain the “names of all of the partners, of several of them, or only one of them”. Lo also argued that the acts of Lam after the death of Ping is not binding upon the other partners because the special power of attorney shall have already ceased.

ISSUEWhether or not Lo is correct in both arguments.

HELDNo. The anomalous adoption of the firm name above noted does not affect the liability of the general partners to third parties under Article 127 of the Code of Commerce. The object of the Code of Commerce in requiring a general partnership to transact business under the name of all its members, of several of them, or of one only, is to protect the public from imposition and fraud; it is for the protection of the creditors rather than of the partners themselves. It is unenforceable as between the partners and at the instance of the violating party, but not in the sense of depriving innocent parties of their rights who may have dealt with the offenders in ignorance of the latter having violated the law; and that contracts entered into by a partnership firm defectively organized are valid when voluntarily executed by the parties, and the only question is whether or not they complied with the agreement. Therefore, Lo cannot invoke in his defense the anomaly in the firm name which they themselves adopted. Lo was not able to prove his second argument. But even assuming arguendo, his second contention does not deserve merit because (a) Lam, in acting as a GM, is also a partner and his actions were never objected to by the partners, and (b) it also appeared from the evidence that Lo, Lam and the other partners authorized some of the loans.

NOTE: Under the New Civil Code, a firm name may or may not include the name of one or more of the partners (Article 1815).

Co-Pitco vs. YuloFACTS:Before Feb. 1903, FLORENCIO Yulo and Jaime PALACIOS were partners in the operation of a sugar estate in Victorias,Island of Negros, and had commercial dealings with a Chinaman named Dy-Sianco, who furnished them with money and goods, and used to buy their crop of sugar. Pedro YULO, father of the said Florencio, took charge of the latter's interest in the above-mentioned partnership, and he became a general partner with PALACIOS in the same business, and he continued as such partner until about the end of 1904, ealing with Dy-Sianco in the same manner as the old partnership had dealt with the latter.

CO-PITCO then finds that the balance due from the firm was 1,638.40 pesos and orders judgment against YULO for the entire amount, with interest.

ISSUE/HELD:WON YULO is liable for the entire amount. NO

RATIO:The partnership of YULO and PALACIOS was engaged in theoperation of a sugar estate in Negros. It was, therefore a civilpartnership, as distinguished from a mercantile partnership.Being a civil partnership, by the express provisions of  articles 1698 and 1137 of the Civil Code, the partners are not liable each for the whole debt of the partnership. Theliability is pro rata and in this case YULO is responsible toCO-PITCO for only one-half of the debt. The fact that theother partner, PALACIOS, had left the country can not increase the liability of YULO.

The judgment of the court below is reversed and judgment isordered in favor of CO-PITCO and against YULO for the sumof P819.20 pesos with interest thereon at the rate of 6 percent per annum from the 12th day of January, 1905, and thecosts of the Court of First Instance.

Island Sales vs. UnitedDOCTRINECondonation by creditor of share in partnership debt of one partner does not increase pro rata liability of otherpartners.

FACTSThe defendant company ( UNITED PIONEERS GENERALCONSTRUCTION COMPANY ET .AL ), a general partnership dulyregistered under the laws of the Philippines, purchased fromtheplaintiff ( ISLAND SALES, INC) a motor vehicle on installment basis and for this purpose executed apromissory note forP9,440.00, payable in twelve (12) equal monthly installments of P786.63, the first installment payable on or before May 22, 1961and the subsequent installments on the 22nd day of every monththereafter, until fully paid, with the condition that failure to payany of said installments asthey fall due would render the wholeunpaid balance immediately due and demandable.

Having failed to receive the installment due on July 22, 1961, theplaintiff sued the defendant company for the unpaid balanceamounting to P7,119.07. Benjamin C. Daco, Daniel A. Guizona,Noel C. Sim, Romulo B. Lumauig, and Augusto Palisoc wereincluded as co-defendants in their capacity as general partners of the defendant company.

Daniel A. Guizona failed to file an answer and was consequentlydeclared in default.

Subsequently, on motion of the plaintiff, the complaint wasdismissed insofar as the defendant Romulo

B. Lumauig is concerned.

When the case was called for hearing, the defendants and their counsels failed to appear notwithstanding the notices sent tothem. Consequently, the trial court authorized the plaintiff topresent its evidence ex-parte , after which the trial court rendered the decision appealed from.

The defendants Benjamin C. Daco and Noel C. Sim moved toreconsider the decision claiming that since there are five (5)general partners, the joint and subsidiary liability of each partnershould notexceed one-fifth (1/5) of the obligations of thedefendant company. But the trial court denied the said motionnotwithstanding the conformity of the plaintiff to limit theliability of the defendants Daco and Sim to only one-fifth (1/5 ) of the obligations of the defendant company.Hence, this appeal.

IsseWhether the condonation of a partner’s share in the debts of the company increases the remaining partner’s liability?

RulingNo. In the instant case, there were five (5) general partners whenthe promissory note in question was executed for and in behalf of  the partnership. Since the liability of the partners is pro rata, theliability of the appellant Benjamin C. Daco shall be limited to onlyone-fifth (1/ 5) of the obligations of the defendant company. The fact that the complaint against the defendant Romulo B. Lumauigwas dismissed, upon motion of the plaintiff, does not unmake thesaid Lumauig as a general partner in the defendant company. Inso moving to dismiss the complaint, the plaintiff merelycondoned Lumauig's individual liability to the plaintiff.

RATIO: Article 1816 of the Civil Code provides:Art. 1816. All partners including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may beentered into in the name and for the account of thepartnership,under its signature and by a person authorized to act forthepartnership. However, any partner may enter into a separate obligation to perform

Munasque v. CADoctrineArticle 1816 must be construed together with Article 1824. Whilethe liability of the partners are merely joint in transactionsentered into by the partnership, a third person who transactedwith said partnership can hold the partners solidarily liable forthe whole obligation if the case of the third person falls underArticles 1822 and 1823.

FactsMunasque entered in behalf of the partnership with Galan under the duly registered name “Galan and Associates” as Contractor entered into a written contract with respondent Tropical for remodeling the respondent’s Cebu branch building. Under the contract, the project was for the total of P25,000 to be paid ininstallments- 7, 000 upon signing and 6, 000 every 15 workingdays.

 

Tropical made the first payment in the form of a check in thename of Munasque. Munasque indorsed the check in favor of Galan to enable Galan to deposit it in the bank and pay for thematerials and labor used in the project. However, Galan allegedlyspent P6, 183.37 for his personal use. When the second check came, refused to indorse it again to Galan.

Galan informed Tropical of the misunderstanding between himand Munasque. Tropical changed the name of the payee in thesecond check from Munasque to “Galan and Associates” which enabled Galan to encash the second check.

Meanwhile, the construction was continued through Munasque’s sole efforts. The construction work was finished ahead of schedule with the total expenditure reaching P 34, 000.

Munasque filed a complaint for payment of sum of money and damages against Galan, Tropical, and Tropical’s Cebu branch manager Pons. Cebu Southern Hardware Company and BlueDiamond Glass Palace intervened in the case for the credit whichthey extended to the partnership of Munasque and Galan for theconstruction project.

Both trial court and Court of Appeals absolved respondentsTropical and its Cebu manager, Pons, from any liability but they also held that Munasque and Galan liable to the intervenors.

IssueWhether the obligation of Munasque and Galan is joint or  solidary?

HeldSolidary.

While it is true that under Article 1816 of CC, “All partners, including industrial ones, shall be liable pro rate with all theirproperty and after all the partnership assets have beenexhausted, for the contracts which may be entered into the nameand for account of the partnership, under its signature and by a person authorized to act for the partnership. xxx”, this provision should be construed together with Article 1824 which provides that: “All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822and 1823.” While the liability of the partners are merely joint in transactions entered into by the partnership, a third person whotransacted with said partnership can hold the partners solidarilyliable for the whole obligation if the case of the third person fallsunder Articles 1822 and 1823.

The obligation is solidary because the law protects him, who ingood faith relied upon the authority of a partner, whether such authority is real orapparent. Tropical had every reason to believe that a partnership existedbetween Munasque and Galan and no fault or error can be imputed against it for making payments to “Galan andAssociates” because as far as it was concerned, Galan was a true partner with real authority to transact in behalf of thepartnership it was dealing with. This is even more true in thecases of the intervenors who supplied materials on credit to the partnership. Thus, it is but fair that the consequences of anywrongful act committed by any of the partners therein should beanswered solidarily by all the partners and the partnership as awhole.However, as between Munasque and Galan, Galan must  reimburse Munasque for the payments made to the intervenorsas it was satisfactorily established that Galan acted in bad faith inhis dealings with Munasque as a partner.

J. Tiosejo Investment Corp. v. Spouses Benjamin and Eleanor Ang (2010)Doctrines:

A joint venture is considered in this jurisdiction as a form of partnership and is accordingly, governed by the law on partnerships. Under Article 1824 of the Civil Code of the Philippines, all partners are solidarily liable with the partnership for everything

chargeable to the partnership, including loss or injury caused to a third person or penalties incurred due to any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his co-partners. Whether innocent or guilty, all the partners are solidarily liable with the partnership itself.

Facts:This is a petition for review seeking the reversal of the CA’s Resolution declaring J Tiosejo (petitioner) solidary liable with Primetown Property Group, Inc. (PPGI) to pay Spouses Ang.

J. Tiosejo entered into a Joint Venture Agreeemtn with PPGI for the development of a residential condominium project known as Meditel in Mandaluyong City. Petitioner contributed the lot while PPGI undertook to develop the condominium. The parties further agreed to a 17%-83% sharing as to developed units. PPGI further undertook to use all proceeds from the pre-selling of its saleable units for the completion of the Condominium Project.

Sometime in 1996, PPGI executed a Contract to Sell with Spouses Ang on a certain condominium unit and parking slot for P2,077,334.25 and P313,500.00, respectively.

On July 1999, respondent Spouses filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for the rescission of the Contract to Sell, against J. Tiosejo and PPGI. They claim that they were promised that the condo unit would be available for turn-over and occupancy by December 1998, however the project was not completed as of the said date. Spouses Ang instructed petitioner and PPGI to stop depositing the post-dated checks they issued and to cancel said Contracts to Sell. Despite several demands, petitioner and PPGI have failed and refused to refund the P611,519.52 they already paid under the circumstances.

As defense, PPGI claim that the delay was attributable to the economic crisis and to force majeure (unexpected and unforeseen inflation and increase rates and cost of building materials). They also state that it offered several alternatives to Spouses Ang to transfer their investment to its other feasible projects and for the amounts they already paid to be considered as partial payment for the replacement unit/s.

On a separate answer, petitioner claims that its prestation under the JVA consisted of contributing the property on which the condominium was to be contributed. Not being privy to the Contracts to Sell executed by PPGI and respondents, it did not receive any portion of the payments made by the latter; and, that without any contributory fault and negligence on its part, PPGI (and not the petitioner) breached its undertakings under the JVA by failing to complete the condominium project.

The Housing and Land Use (HLU) ruled in favor of respondents, rescinding the contract and ordering petitioner and PPGI to pay refund, interest, damages, attorney’s fees and administrative fines.

The HLURB Board of Commissioners affirmed the HLU’s order. Motion for Reconsideration (MR) was denied

The case was subsequently raised to the Office of the President (OP) which rendered a decision dismissing petitioner’s appeal on the ground that the latter’s appeal memorandum was filed out of time and that the HLURB Board committed no grave abuse of discretion in rendering the appealed decision. MR was also denied.

Petitioner filed before the CA a motion for extension within which to file its petition for review, claiming heavy workload of its counsel. This was denied by the CA. MR was denied for lack of merit.

Issues:1. W/N the CA erred in dismissing the petition on mere technicality.2. JV Related: - W/N the CA erred in affirming the HLURB’s decision insofar as it found J. Teosejo’s with PPGI to pay Spouses Ang.

Held/Ratio:1. NO, while the dismissal of an appeal on purely technical grounds is concededly frowned upon, it bears emphasizing that the

procedural requirements of the rules on appeal are not harmless and trivial technicalities that litigants can just discard and disregard at will.

In view of the initial 15-day extension granted by the CA and the injunction under Sec. 4, Rule 43 of the 1997 Rules of Civil Procedure against further extensions “except for the most compelling reason”, it was clearly inexcusable for petitioner to expediently plead its counsel’s heavy workload as ground for seeking an additional extension of 10 days within which to file its petition for review.

2. NO, the HLURB Arbiter and Board correctly held petitioner liable alongside PPGI for respondents’ claims and the administrative fine.

By express terms of the JVA, it appears that petitioner not only retained ownership of the property pending completion of the condominium project but had also bound itself to answer liabilities proceeding from contracts entered into by PPGI with third parties. Article VIII, Section 1 of the JVA distinctly provides as follows:

Section 1: Rescission and damages:xxxIn any case, the Owner shall respect and strictly comply with any covenant entered into by the Developer and third parties with respect to any of its units in the Condominium Project. To enable the owner to comply with this contingent liability, the Developer shall furnish the Owner with a copy of its contracts with the said buyers on a month-to-month basis.xxx

Viewed in the light of the foregoing provision of the JVA, petitioner cannot avoid liability by claiming that it was not in any way privy to the Contracts to Sell executed by PPGI and respondents.

Moreover, a joint venture is considered in this jurisdiction as a form of partnership and is, accordingly, governed by the law of partnerships. Under Article 1824 of the Civil Code of the Philippines, all partners are solidarily liable with the partnership for everything chargeable to the partnership, including loss or injury caused to a third person or penalties incurred due to any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his co- partners. Whether innocent or guilty, all the partners are solidarily liable with the partnership itself.