8/10/2019 Parnership Chapter II Digested Cases

1/31

TOPIC: PARTNERSHIP BY ESTOPPEL; PARTNER BY ESTOPPELEstoppel does not create partnership

Article 1825

[G.R. No. L-7991. May 21, 1956.]

PAUL MACDONALD, ET AL., Petitioners, vs. THE NATIONAL CITYBANK OF NEW YORK,Respondent.

PARAS,J.:

FACTS:

1. STASIKINOCEY is a partnership formed by Alan W. Gorcey, Louis F. da

Costa, Jr., William Kusik and Emma Badong Gavino.

2. This partnership was denied registration in the SEC, and while it is

confusing to see in this case that the CARDINAL RATTAN, sometimes

called the CARDINAL RATTAN FACTORY, is treated as a copartnership, of

which DefendantsGorcey and da Costa are considered general partners

3. The was satisfied that, as alleged in various instruments appearing of

record, said Cardinal Rattan is merely the business name or style used by

the partnership Stasikinocey.

3. Prior to June 3, 1949,DefendantStasikinocey had an overdraft account

with The National City Bank of New York, a foreign banking association

duly licensed to do business in the Philippines.

4. On June 3, 1949, the overdraft showed a balance of P6,134.92 against

the DefendantStasikinocey or the Cardinal Rattan, which account, due to

the failure of the partnership to make the required payment, wasconverted into an ordinary loan for which the corresponding promissory

joint note non-negotiable was executed on June 3, 1949, by Louis F. da

Costa for and in the name of the Cardinal Rattan, Louis F. da Costa and

Alan Gorcey.

5. This promissory note was secured on June 7, 1949, by a chattel

mortgage executed by Louis F. da Costa, Jr., General Partner for and in the

name of Stasikinocey, alleged to be a duly registered Philippine

partnership, doing business under the name and style of Cardinal Rattan,

with principal office at 69 Riverside, San Juan, Rizal.

5. The chattels mortgaged were the following motor vehicles:

(a) Fargo truck;

(b)Plymouth Sedan automobile; and

(c) Fargo Pick-Up (1949).

6. The mortgage deed was fully registered by the mortgagee on June 11,

1949, in the Office of the Register of Deeds for the province of Rizal, at

Pasig, and among other provisions it contained the following:

(a) That the mortgagor shall not sell or otherwise dispose of the said

chattels without the mortgagees written consent;and

(b)That the mortgagee may foreclose the mortgage at any time, after

breach of any condition thereof, the mortgagor waiving the 30- day notice

of foreclosure.

7. On June 7, 1949, the same day of the execution of the chattel mortgage

aforementioned, Gorcey and Da Costa executed an agreement purporting

to convey and transfer all their rights, title and participation

in Defendantpartnership to Shaeffer, allegedly in consideration of the

cancellation of an indebtedness of P25,000 owed by them

and Defendantpartnership to the latter, which transaction is said to be inviolation of the Bulk Sales Law (Act No. 3952 of the Philippine

Legislature).

8. While the said loan was still unpaid and the chattel mortgage

subsisting, Defendantpartnership, through DefendantsGorcey and Da

Costa transferred to DefendantMcDonald the Fargo truck and Plymouth

sedan on June 24, 1949. The Fargo pickup was also sold on June 28, 1949,

by William Shaeffer to Paul McDonald.

9. On or about July 19, 1944, Paul Mcdonald, notwithstanding Plaintiffs

existing mortgage lien, in turn transferred the Fargo truck and thePlymouth sedan to Benjamin Gonzales.

JUDICIAL FACTS:

10. The National City Bank of New York, Respondentherein, upon learning

of the transfers made by the partnership Stasikinocey to William Shaeffer,

from the latter to Paul McDonald, and from Paul McDonald to BenjaminGonzales, of the vehicles previously pledged by Stasikinocey to

the Respondent, filed an action against Stasikinocey and its alleged

partners Gorcey and Da Costa, as well as Paul McDonald and Benjamin

Gonzales, to recover its credit and to foreclose the corresponding chattel

mortgage.

11. McDonald and Gonzales were made Defendantsbecause they claimed

to have a better right over the pledged vehicle.

12. After trial the Court of First Instance of Manila rendered judgment in

favor of the Respondent, annulling the sale of the vehicles in question to

Benjamin Gonzales; sentencing Da Costa and Gorcey to pay to

the Respondentjointly and severally the sum of P6,134.92, with legal

interest from the debt of the promissory note involved; sentencing

the PetitionerGonzales to deliver the vehicles in question to

the Respondent for sale at public auction if Da Costa and Gorcey should

fail to pay the money judgment; and sentencing Da Costa, Gorcey and

Shaeffers to pay to the Respondent jointly and severally any deficiency

that may remain unpaid should the proceeds of the sale not be

sufficient; and sentencing Gorcey, Da Costa, McDonald and Shaeffer to pay

the costs. Only Paul McDonald and Benjamin Gonzales appealed to the

Court of Appeals which rendered a decision the dispositive part of which

reads as follows:

13. WHEREFORE, the decision appealed from is hereby modified,

relievingAppellantWilliam Shaeffer of the obligation of paying, jointly

and severally, together with Alan W. Gorcey and Louis F. da Costa, Jr., anydeficiency that may remain unpaid after applying the proceeds of the sale

of the said motor vehicles which shall be undertaken upon the lapse of 90

days from the date this decision becomes final, if by

then DefendantsLouis F. da Costa, Jr., and Alan W. Gorcey had not paid the

amount of the judgment debt.

14. With this modification the decision appealed from is in all other

respects affirmed, with costs againstAppellants. This decision is without

prejudice to whatever action Louis F. da Costa, Jr., and Alan W. Gorcey

may take against their co-partners in the Stasikinocey unregisteredpartnership.

15. This appeal by certiorari was taken by Paul McDonald and Benjamin

Gonzales, Petitionersherein, who have assigned the following errors:

I

IN RULING THAT AN UNREGISTERED COMMERCIAL CO-PARTNERSHIPWHICH HAS NO INDEPENDENT JURIDICAL PERSONALITY CAN HAVE A

DOMICILE SO THAT A CHATTEL MORTGAGE REGISTERED IN THAT

DOMICILE WOULD BIND THIRD PERSONS WHO ARE INNOCENT

PURCHASERS FOR VALUE.

II

IN RULING THAT WHEN A CHATTEL MORTGAGE IS EXECUTED BY ONE

OF THE MEMBERS OF AN UNREGISTERED COMMERCIAL CO-PARTNERSHIP WITHOUT JURIDICAL PERSONALITY INDEPENDENT OF

ITS MEMBERS, IT NEED NOT BE REGISTERED IN THE ACTUAL

RESIDENCE OF THE MEMBERS WHO EXECUTED SAME; chan

roblesvirtualawlibraryAND, AS A CONSEQUENCE THEREOF, IN NOT

MAKING ANY FINDING OF FACT AS TO THE ACTUAL RESIDENCE OF SAID

CHATTEL MORTGAGOR, DESPITEAPPELLANTS RAISING THAT

QUESTION PROPERLY BEFORE IT AND REQUESTING A RULING

THEREON.

III

IN NOT RULING THAT, WHEN A CHATTEL MORTGAGOR EXECUTES AN

AFFIDAVIT OF GOOD FAITH BEFORE A NOTARY PUBLIC OUTSIDE OF

THE TERRITORIAL JURISDICTION OF THE LATTER, THE AFFIDAVIT IS

VOID AND THE CHATTEL MORTGAGE IS NOT BINDING ON THIRD

PERSONS WHO ARE INNOCENT PURCHASERS FOR VALUE; chan

roblesvirtualawlibraryAND, AS A CONSEQUENCE THEREOF, IN NOT

MAKING ANY FINDING OF FACT AS TO WHERE THE DEED WAS IN FACT

EXECUTED, DESPITEAPPELLANTS RAISING THAT QUESTION PROPERLY

BEFORE IT AND EXPRESSLY REQUESTING A RULING THEREON.

IV

IN RULING THAT A LETTER AUTHORIZING ONE MEMBER OF AN

UNREGISTERED COMMERCIAL CO-PARTNERSHIP TO MAKE ALL

OFFICIAL AND BUSINESS ARRANGEMENTS .. WITH THE NATIONAL CITYBANK OF NEW YORK IN ORDER TO SIMPLIFY ALL MATTERS RELATIVETO LCS CABLE TRANSFERS, DRAFTS, OR OTHER BANKING MEDIUMS,

WAS SUFFICIENT AUTHORITY FOR THE SAID MEMBER TO EXECUTE A

CHATTEL MORTGAGE IN ORDER TO GIVE THE BANK SECURITY FOR A

PRE-EXISTING OVERDRAFT, GRANTED WITHOUT SECURITY. WHICH

THE BANK HAD CONVERTED INTO A DEMAND LOAN UPON FAILURE TO

PAY SAME AND BEFORE THE CHATTEL MORTGAGE WAS EXECUTED.

This is the first question propounded by

the Petitioners:chanroblesvirtuallawlibrarySince an unregistered

commercial partnership unquestionably has no juridical personality, can

it have a domicile so that the registration of a chattel mortgage therein isnotice to the world?.

While an unregistered commercial partnership has no juridical

personality, nevertheless, where two or more persons attempt to create a

partnership failing to comply with all the legal formalities, the lawconsiders them as partners and the association is a partnership in so far

as it is a favorable to third persons, by reason of the equitable principle of

estoppel. In Jo Chung Chang vs. Pacific Commercial Co., 45 Phil., 145, it

was held that although the partnership with the firm name of Teck Seing

and Co. Ltd., could not be regarded as a partnership de jure, yet with

respect to third persons it will be considered a partnership with all the

consequent obligations for the purpose of enforcing the rights of such

third persons. Da Costa and Gorcey cannot deny that they are partners of

the partnership Stasikinocey, because in all their transactions with

the Respondentthey represented themselves as such. PetitionerMcDonald

cannot disclaim knowledge of the partnership Stasikinocey because he

dealt with said entity in purchasing two of the vehicles in question

through Gorcey and Da Costa. As was held in Behn Meyer & Co. vs.

8/10/2019 Parnership Chapter II Digested Cases

2/31

Rosatzin, 5 Phil., 660, where a partnership not duly organized has been

recognized as such in its dealings with certain persons, it shall beconsidered as partnership by estoppel and the persons dealing with it

are estopped from denying its partnership existence. The sale of the

vehicles in question being void as to PetitionerMcDonald, the transfer

from the latter to PetitionerBenjamin Gonzales is also void, as the buyer

cannot have a better right than the seller.

It results that if the law recognizes a defectively organized partnership as

de facto as far as third persons are concerned, for purposes of its de facto

existence it should have such attribute of a partnership as domicile. In

Hung-Man Yoc vs. Kieng-Chiong-Seng, 6 Phil., 498, it was held that

although it has no legal standing, it is a partnership de facto and thegeneral provisions of the Code applicable to all partnerships apply to it.

The registration of the chattel mortgage in question with the Office of the

Register of Deeds of Rizal, the residence or place of business of the

partnership Stasikinocey being San Juan, Rizal, was therefore in

accordance with section 4 of the Chattel Mortgage Law.

The second question propounded by

the Petitionersis:chanroblesvirtuallawlibrary If not, is a chattel mortgageexecuted by only one of the partners of an unregistered commercial

partnership validly registered so as to constitute notice to the world if itis not registered at the place where the aforesaid partner actually

resides but only in the place where the deed states that he resides, which

is not his real residence?

And the third question is as follows: If the actual residence of the chattel

mortgagor not the residence stated in the deed of chattel mortgage

is controlling, may the Court of Appeals refuse to make a finding of fact asto where the mortgagor resided despite your Petitioners having properly

raised that question before it and expressly requested a ruling thereon?

These two questions have become academic by reason of the answer to

the first question, namely, that as a de facto partnership, Stasikinocey had

its domicile in San Juan, Rizal.

The fourth question asked by the Petitioners is as follows: Is a chattel

mortgage executed by only one of the partners of an unregistered

commercial partnership valid as to third persons when that partner

executed the affidavit of good faith in Quezon City before a notary public

whose appointment is only for the City of Manila? If not, may the Court of

Appeals refuse to make a finding of fact as to where the deed was

executed, despite yourPetitioners having properly raised that issue

before it and expressly requested a ruling thereon?

It is noteworthy that the chattel mortgage in question is in the form

required by law, and there is therefore the presumption of its due

execution which cannot be easily destroyed by the biased testimony of

the one who executed it. The interested version of Da Costa that the

affidavit of good faith appearing in the chattel mortgage was executed in

Quezon City before a notary public for and in the City of Manila was

correctly rejected by the trial court and the Court of Appeals. Indeed,

cumbersome legal formalities are imposed to prevent fraud. As aptly

pointed out in El Hogar Filipino vs. Olviga, 60 Phil., 17 , If the biased and

interested testimony of a grantor and the vague and uncertain testimony

of his son are deemed sufficient to overcome a public instrument drawn

up with all the formalities prescribed by the law then there will have been

established a very dangerous doctrine which would throw wide open thedoors to fraud.

The last question raised by the Petitionersis as follows: Does only one of

several partners of an unregistered commercial partnership have

authority, by himself alone, to execute a valid chattel mortgage overproperty owned by the unregistered commercial partnership in order to

guarantee a pre-existing overdraft previously granted, without guaranty,by the bank?

In view of the conclusion that Stasikinocey is a de facto partnership, and

Da Costa appears as a co-manager in the letter of Gorcey to

the Respondentand in the promissory note executed by Da Costa, and that

even the partners considered him as such, as stated in the affidavit ofApril 21, 1948, to the effect that That we as the majority partners hereby

agree to appoint Louis da Costa co-managing partner of Alan W. Gorcey,duly approved managing partner of the said firm, the partner who

executed the chattel mortgage in question must be deemed to be so fully

authorized. Section 6 of the Chattel Mortgage Law provides that when a

partnership is a party to the mortgage, the affidavit may be made and

subscribed by one member thereof. In this case the affidavit was executedand subscribed by Da Costa, not only as a partner but as a managing

partner.

RATIO:

There is no merit in Petitioners pretense that the motor vehicles in

question are the common property of Da Costa and

Gorcey. Petitionersinvoke article 24 of the Code of Commerce in arguing

that an unregistered commercial partnership has no juridical personality

and cannot execute any act that would adversely affect innocent third

persons. Petitionersforget that the Respondentis a third person with

respect to the partnership, and the chattel mortgage executed by Da Costa

cannot therefore be impugned by Gorcey on the ground that there is no

partnership between them and that the vehicles in question belonged to

them in common. As a matter of fact, the Respondentand

the Petitionersare all third persons as regards the partnership

Stasikinocey; and even assuming that the Petitionersare purchasers in

good faith and for value, the Respondenthaving transacted with

Stasikinocey earlier than the Petitioners, it should enjoy and be given

priority.

Wherefore, the appealed decision of the Court of Appeals is affirmed with

costs against thePetitioners.

Bengzon, Montemayor, Reyes, A., Jugo, Bautista Angelo Labrador,Concepcion, Reyes, J.B.L., and Endencia,JJ., concur.

Behn, Meyer and Co. v. Rosatzin, 5 Phil. 660

G.R. No. 2715,February 27, 1906

BEHN, MEYER & CO.,plaintiffs-appellees,vs.

F. ROSATZIN,defendant-appellant.Hartigan, Marple, Rohde and Gutierrez for appellant.

Pillsbury and Sutro for appellees.

WILLARD,J.:

FACTS:

1. The defendant and appellant was employed by the partnership of Behn,

Meyer & Co. as a bookkeeper during the years 1901, 1902, and 1903.

2. He left their employ in the last-named year, and the partnership

brought this action to recover a balance of 686.24 pesos claimed to bedue it from the defendant.

3. The ledger for the partnership for the year 1901 contained a page

devoted to the account-current of the defendant with the partnership.

That account for that year showed a balance in favor of the partnership

and against the defendant of 686.24 pesos.

4. This account was kept by the defendant himself, and all the entries

therein are in his handwriting. The defendant introduced no evidence in

relation to the account or its payment, and judgment was entered against

him for P571.87 in Philippine currency, the equivalent of 686.24 pesos in

Mexican currency.

5. The defendant moved for a new trial, which was denied, and he has

brought the case here by bill of exceptions.

6. Objection was made in the court below to the admission of some of the

books of the partnership in evidence on the ground that they were not

kept as required by the Code of Commerce.

RULING:

We do not find it necessary to decide this question. The ledger which

contained the account above mentioned in the handwriting of the

defendant was certainly properly received in evidence, being an

admission by him of this indebtedness.

The fact that the book was not kept in accordance with the provisions of

the Code of Commerce could not detract from the force of this admission.

This book alone was sufficient evidence to prove the cause of action, and

the reception in evidence of the other books, if it were error, was error

without prejudice.

It was proved that the defendant continued in the employ of the

partnership during the years 1902 and 1903, and was paid for thoseyears his regular monthly salary, and it is claimed by the appellant that

this indicates that he must have paid the balance due from him for the

year 1901. This contention can not be sustained.

The plaintiff offered no evidence to show that this balance had not been

paid, and it is claimed by the appellant that the judgment must be

reversed for that reason. The plaintiff having proved the existence of the

obligation, the burden of proof was upon the defendant to show that it

had been discharged. This was the law in force during the Spanish

domination. (Art. 1214, Civil Code.) This rule has not been changed by

section 297 of the present Code of Procedure, which section is as follows:

Party must prove his affirmative allegations . Each party must prove his

own affirmative allegations. Evidence need not be given in support of a

negative allegation except when such negative allegation is an essential

part of the statement of the right or title on which the cause of action ofdefense is founded, nor even in such case when the allegation is a denial

of the existence of a document, the custody of which belongs to the

opposite party.

It is also claimed by the appellant that the existence of the plaintiff

partnership was not proved that is, that there was no proof to show

that the partnership had been organized in accordance with the Code of

Commerce. There was evidence presented by the defendant in the case

that a partnership known as Behn, Meyer & Co. existed in 1900. The

defendant contracted with the partnership in 1901 and subsequent years,

and is now estopped to say that it was not a partnership.

The appellant also attempted to prove that there had been a change in the

partners constituting the firm after 1901, and prior to the

8/10/2019 Parnership Chapter II Digested Cases

3/31

commencement of the action, and that the partnership which brought this

suit was not the partnership with which the defendant contracted. He

however, failed in his attempt, because the witness whom he called to

make the proof testified that the new partner, Dittmar, become a member

of the firm in 1900.

It is finally claimed by the defendant that the court erred in entering

judgment against him for the amount of the debt payable in Philippine

currency. This contention has already been decided adversely to the

appellant in the case of Gaspar vs. Molina,[[1]]No. 2206, November 2, 1905

(3 Off. Gaz., 651).

The judgment of the court below is affirmed, with the costs of thisinstance against the appellant. After the expiration of twenty days let

judgment be entered in accordance herewith and the case remanded to

the lower court for execution thereof. So ordered.

Torres, Mapa, Johnson, and Carson, JJ., concur.

Martinez v. Ong Pong Co and Ong Lay

January 10, 1910

G.R. No. 5236

Fernando de la Cantera for appellant.

O'Brien and DeWitt for appellee.

ARELLANO, C.J.:

FACTS:

1. On the 12th of December, 1900, the plaintiff herein delivered P1,500 to

the defendants who, in a private document, acknowledged that they had

received the same with the agreement, as stated by them, "that we are to

invest the amount in a store, the profits or losses of which we are to

divide with the former, in equal shares."

2. The plaintiff filed a complaint on April 25, 1907, in order to compel the

defendants to render him an accounting of the partnership as agreed to,

or else to refund him the P1,500 that he had given them for the said

purpose. Ong Pong Co alone appeared to answer the complaint; he

admitted the fact of the agreement and the delivery to him and to Ong Lay

of the P1,500 for the purpose aforesaid, but he alleged that Ong Lay, who

was then deceased, was the one who had managed the business, and that

nothing had resulted therefrom save the loss of the capital of P1,500, to

which loss the plaintiff agreed.

3. The judge of the Court of First Instance of the city of Manila who tried

the case ordered Ong Pong Co to return to the plaintiff one-half of the said

capital of P1,500 which, together with Ong Lay, he had received from the

plaintiff, to wit, P750, plus P90 as one-half of the profits, calculated at the

rate of 12 per cent per annum for the six months that the store was

supposed to have been open, both sums in Philippine currency, making a

total of P840, with legal interest thereon at the rate of 6 per cent per

annum, from the 12th of June, 1901, when the business terminated and

on which date he ought to have returned the said amount to the plaintiff,

until the full payment thereof with costs.

4. From this judgment Ong Pong Co appealed to SC contending that:

1. The fact that the store was closed by virtue of ejectment proceedings

was not taken into consideration.

2. For not having considered the fact that there were losses.

3. For holding that there should have been profits.4. For having applied article 1138 of the Civil Code.

5. For holding that the capital ought to have yielded profits, and that the

latter should be calculated 12 per cent per annum

I. The fact that the store was closed by virtue of ejectment proceedings is

of no importance for the effects of the suit. The whole action is based

upon the fact that the defendants received certain capital from the

plaintiff for the purpose of organizing a company; they, according to the

agreement, were to handle the said money and invest it in a store which

was the object of the association; they, in the absence of a special

agreement vesting in one sole person the management of the business,

were the actual administrators thereof; as such administrators they were

the agent of the company and incurred the liabilities peculiar to every

agent, among which is that of rendering account to the principal of their

transactions, and paying him everything they may have received by virtue

of the mandatum. (Arts. 1695 and 1720, Civil Code.) Neither of them hasrendered such account nor proven the losses referred to by Ong Pong Co;

they are therefore obliged to refund the money that they received for the

purpose of establishing the said store the object of the association.

This was the principal pronouncement of the judgment.

II. The SC, like the court below, finds no evidence that the entire capital or

any part thereof was lost. It is no evidence of such loss to aver, without

proof, that the effects of the store were ejected. Even though these were

proven, it could not be inferred therefrom that the ejectment was due to

the fact that no rents were paid, and that the rent was not paid on account

of the loss of the capital belonging to the enterprise.

III. With regard to the possible profits, the finding of the court below are

based on the statements of the defendant Ong Pong Co, to the effect that

"there were some profits, but not large ones." This court, however, does

not find that the amount thereof has been proven, nor deem it possible to

estimate them to be a certain sum, and for a given period of time; hence, it

can not admit the estimate, made in the judgment, of 12 per cent per

annum for the period of six months.

IV. Inasmuch as in this case nothing appears other than the failure to

fulfill an obligation on the part of a partner who acted as agent in

receiving money for a given purpose, for which he has rendered no

accounting, such agent is responsible only for the losses which, by a

violation of the provisions of the law, he incurred. This being an

obligation to pay in cash, there are no other losses than the legal interest,

which interest is not due except from the time of the judicial demand, or,in the present case, from the filing of the complaint. (Arts. 1108 and 1100,

Civil Code.) We do not consider that article 1688 is applicable in this case,

in so far as it provides "that the partnership is liable to every partner for

the amounts he may have disbursed on account of the same and for the

proper interest," for the reason that no other money than that

contributed as is involved.

V. As in the partnership there were two administrators or agents liable

for the above-named amount, article 1138 of the Civil Code has been

invoked; this latter deals with debts of a partnership where the obligation

is not a joint one, as is likewise provided by article 1723 of said code with

respect to the liability of two or more agents with respect to the return of

the money that they received from their principal. Therefore, the other

errors assigned have not been committed.

In view of the foregoing judgment appealed from is hereby affirmed,provided, however, that the defendant Ong Pong Co shall only pay the

plaintiff the sum of P750 with the legal interest thereon at the rate of 6

per cent per annum from the time of the filing of the complaint, and the

costs, without special ruling as to the costs of this instance. So ordered.

Torres, Johnson, Carson, and Moreland, JJ., concur.

[G.R. No. 114398. October 24, 1997.]

CARMEN LIWANAG, Petitioner, v. THE HON. COURT OF APPEALS andTHE PEOPLE OF THE PHILIPPINES, represented by the SolicitorGeneral, Respondents.

Efren L. Liwanag for Petitioner.

The Solicitor General for Respondents.

SYLLABUS

1. CRIMINAL LAW; REVISED PENAL CODE; ESTAFA; ELEMENTS

THEREOF. Estafa is a crime committed by a person who defrauds

another causing him to suffer damages, by means of unfaithfulness or

abuse of confidence, or of false pretenses of fraudulent acts. From the

foregoing, the elements of estafa are present, as follows: (1) that the

accused defrauded another by abuse of confidence or deceit, and (2) that

damage or prejudice capable of pecuniary estimation is caused to the

offended party or third party, and it is essential that there be a fiduciary

relation between them either in the form of a trust, commission or

administration.

2. ID.; ID.; ID.; WHEN MONEY OR PROPERTY HAVE BEEN RECEIVED BY A

PARTNER FOR A SPECIFIC PURPOSE, AND HE LATER

MISAPPROPRIATED IT, SUCH PARTNER IS GUILTY OF ESTAFA. Even

assuming that a contract of partnership was indeed entered into by and

between the parties, we have ruled that when money or property have

been received by a partner for a specific purpose (such as that obtaining

in the instant case) and he later misappropriated it, such partner is guilty

of estafa.

3. CIVIL LAW; LOANS; THE TRANSACTION IN THE CASE AT BAR CANNOT

BE CONSIDERED A LOAN, SINCE IN A CONTRACT OF LOAN ONCE THE

MONEY IS RECEIVED BY THE DEBTOR, OWNERSHIP OVER THE SAME IS

TRANSFERRED. Neither can the transaction be considered a loan, since

in a contract of loan once the money is received by a debtor, ownership

over the same is transferred. Being the owner, the borrower can dispose

of it for whatever purpose he may deem proper. In the instant petition,

however, it is evident that Liwanag could not dispose of the money as shepleased because it was only delivered to her for a single purpose, namely,

for the purchase of cigarettes, and if this was not possible then to return

the money to Rosales. Since in this case there was no transfer of

ownership of the money delivered, Liwanag is liable for conversion under

Art. 315, par. 1 (b) of the Revised Penal Code.

D E C I S I O N

ROMERO,J.:

http://philippinelaw.info/jurisprudence/gr2715-behn-meyer-and-co-v-rosatzin.html#fn1http://philippinelaw.info/jurisprudence/gr2715-behn-meyer-and-co-v-rosatzin.html#fn1http://philippinelaw.info/jurisprudence/gr2715-behn-meyer-and-co-v-rosatzin.html#fn1http://philippinelaw.info/jurisprudence/gr2715-behn-meyer-and-co-v-rosatzin.html#fn1

8/10/2019 Parnership Chapter II Digested Cases

4/31

Petitioner was charged with the crime of estafa before the Regional Trial

Court (RTC), Branch 93, Quezon City, in an information which reads as

follows:jgc:chanrobles.com.ph

"That on or between the month of May 19, 1988 and August, 1988 in

Quezon City, Philippines and within the jurisdiction of this Honorable

Court, the said accused, with intent of gain, with unfaithfulness, and abuse

of confidence, did then and there, willfully, unlawfully and feloniously

defraud one ISIDORA ROSALES, in the following manner, to wit: on the

date and in the place aforementioned, said accused received in trust from

the offended party cash money amounting to P536,650.00, Philippine

Currency, with the express obligation involving the duty to act as

complainants agent in purchasing local cigarettes (Philip Morris andMarlboro cigarettes), to resell them to several stores, to give her

commission corresponding to 40% of the profits; and to return the

aforesaid amount of offended party, but said accused, far from complying

her aforesaid obligation, and once in possession thereof, misapplied,

misappropriated and converted the same to her personal use and benefit,

despite repeated demands made upon her,Accusedfailed and refused and

still fails and refuses to deliver and/or return the same to the damage and

prejudice of the said ISIDORA ROSALES, in the aforementioned amount

and in such other amount as may be awarded under the provision of the

Civil Code.

CONTRARY TO LAW."cralaw virtua1aw library

The antecedent facts are as follows:chanrob1es virtual 1aw library

FACTS:1. Petitioner Carmen Liwanag (Liwanag) and a certain Thelma Tabligan

went to the house of complainant Isidora Rosales (Rosales) and asked her

to join them in the business of buying and selling cigarettes. Convinced of

the feasibility of the venture, Rosales readily agreed. Under their

agreement, Rosales would give the money needed to buy the cigarettes

while Liwanag and Tabligan would act as her agents, with a

corresponding 40% commission to her if the goods are sold; otherwise

the money would be returned to Rosales. Consequently, Rosales gave

several cash advances to Liwanag and Tabligan amounting to

P633,650.00.

2. During the first two months, Liwanag and Tabligan made periodic visits

to Rosales to report on the progress of the transactions. The visits,

however, suddenly stopped, and all efforts by Rosales to obtain

information regarding their business proved futile.

3. Alarmed by this development and believing that the amounts she

advanced were being misappropriated, Rosales filed a case of estafa

against Liwanag.

4. After trial on the merits, the trial court rendered a decision dated

January 9, 1991, finding Liwanag guilty as charged. The dispositive

portion of the decision reads thus:

"WHEREFORE, the Court holds, that the prosecution has established the

guilt of the accused, beyond reasonable doubt, and therefore, imposes

upon the accused, Carmen Liwanag, an Indeterminate Penalty of SIX (6)

YEARS, EIGHT (8) MONTHS AND TWENTY ONE (21) DAYS OF PRISION

CORRECCIONAL TO FOURTEEN (14) YEARS AND EIGHT (8) MONTHS OF

PRISION MAYOR AS MAXIMUM, AND TO PAY THE COSTS.

5. The accused is likewise ordered to reimburse complainant the sum of

P526,650.00, without subsidiary imprisonment, in case of insolvency.

6. Said decision was affirmed with modification by the Court of Appeals in

a decision dated November 29, 1993, the decretal portion of which reads:

"WHEREFORE, in view of the foregoing, the judgment appealed from is

hereby affirmed with the correction of the nomenclature of the penalty

which should be: SIX (6) YEARS, EIGHT (8) MONTHS and TWENTY ONE

(21) DAYS of prision mayor, as minimum, to FOURTEEN (14) YEARS and

EIGHT (8) MONTHS of reclusion temporal, as maximum. In all other

respects, the decision is AFFIRMED.

7. Her motion for reconsideration having been denied in the resolution of

March 16, 1994, Liwanag filed the instant petition, submitting the

following assignment of errors:

"1. RESPONDENT APPELLATE COURT GRAVELY ERRED IN AFFIRMING

THE CONVICTION OF THE ACCUSED-PETITIONER FOR THE CRIME OFESTAFA, WHEN CLEARLY THE CONTRACT THAT EXIST (sic) BETWEEN

THE ACCUSED-PETITIONER AND COMPLAINANT IS EITHER THAT OF A

SIMPLE LOAN OR THAT OF A PARTNERSHIP OR JOINT VENTURE HENCE

THE NON RETURN OF THE MONEY OF THE COMPLAINANT IS PURELY

CIVIL IN NATURE AND NOT CRIMINAL.

2. RESPONDENT APPELLATE COURT GRAVELY ERRED IN NOT

ACQUITTING THE ACCUSED-PETITIONER ON GROUNDS OF

REASONABLE DOUBT BY APPLYING THE EQUIPOISE RULE."cralaw

virtua1aw library

Liwanag advances the theory that the intention of the parties was to enter

into a contract of partnership, wherein Rosales would contribute the

funds while she would buy and sell the cigarettes, and later divide the

profits between them. 1 She also argues that the transaction can also be

interpreted as a simple loan, with Rosales lending to her the amount

stated on an installment basis. 2

The Court of Appeals correctly rejected these pretenses.

While factual findings of the Court of Appeals are conclusive on the

parties and not reviewable by the Supreme Court, and carry more weight

when these affirm the factual findings of the trial court, 3 we deem it

more expedient to resolve the instant petition on its merits.

Estafa is a crime committed by a person who defrauds another causing

him to suffer damages, by means of unfaithfulness or abuse of confidence,or of false pretenses or fraudulent acts. 4

From the foregoing, the elements of estafa are present, as follows: (1) that

the accused defrauded another by abuse of confidence or deceit; and (2)

that damage or prejudice capable of pecuniary estimation is caused to the

offended party or third party, 5 and it is essential that there be a fiduciary

relation between them either in the form of a trust, commission or

administration. 6

The receipt signed by Liwanag states thus:jgc:chanrobles.com.ph

"May 19, 1988 Quezon City

Received from Mrs. Isidora P. Rosales the sum of FIVE HUNDRED

TWENTY SIX THOUSAND AND SIX HUNDRED FIFTY PESOS

(P526,650.00) Philippine Currency, to purchase cigarrets (sic) (Philip &Marlboro) to be sold to customers. In the event the said cigarrets (sic) are

not sold, the proceeds of the sale or the said products (shall) be returned

to said Mrs. Isidora P. Rosales the said amount of P526,650.00 or the said

items on or before August 30, 1988.

The language of the receipt could not be any clearer. It indicates that the

money delivered to Liwanag was for a specific purpose, that is, for the

purchase of cigarettes, and in the event the cigarettes cannot be sold, the

money must be returned to Rosales.

Thus, even assuming that a contract of partnership was indeed entered

into by and between the parties, we have ruled that when money or

property have been received by a partner for a specific purpose (such as

that obtaining in the instant case) and he later misappropriated it, such

partner is guilty of estafa. 7chanroblesvirtualawlibrary

Neither can the transaction be considered a loan, since in a contract of

loan once the money is received by the debtor, ownership over the same

is transferred. 8 Being the owner, the borrower can dispose of it for

whatever purpose he may deem proper.

In the instant petition, however, it is evident that Liwanag could not

dispose of the money as she pleased because it was only delivered to her

for a single purpose, namely, for the purchase of cigarettes, and if this was

not possible then to return the money to Rosales. Since in this case there

was no transfer of ownership of the money delivered, Liwanag is liable

for conversion under Art. 315, par. 1(b) of the Revised Penal Code.

WHEREFORE, in view of the foregoing, the appealed decision of the Court

of Appeals dated November 29, 1993, is AFFIRMED. Costs against

petitioner.

SO ORDERED.

Melo, Francisco and Panganiban,JJ., concur.

Narvasa, C.J., on leave.

G.R. No. L-45624 April 25, 1939

GEORGE LITTON,petitioner-appellant,vs.

HILL & CERON, ET AL.,respondents-appellees.

George E. Reich for appellant.

Roy and De Guzman for appellees.Espeleta, Quijano and Liwag for appellee Hill.

CONCEPCION, J.:

This is a petition to review on certiorarithe decision of the Court of

Appeals in a case originating from the Court of First Instance of Manila

wherein the herein petitioner George Litton was the plaintiff and the

respondents Hill & Ceron, Robert Hill, Carlos Ceron and Visayan Surety &

Insurance Corporation were defendants.

FACTS:

8/10/2019 Parnership Chapter II Digested Cases

5/31

1. On February 14, 1934, the plaintiff sold and delivered to Carlos Ceron,

who is one of the managing partners of Hill & Ceron, a certain number of

mining claims, and by virtue of said transaction, the defendant CarlosCeron delivered to the plaintiff a document reading as follows:

Feb. 14, 1934

Received from Mr. George Litton share certificates Nos. 4428,

4429 and 6699 for 5,000, 5,000 and 7,000 shares respectively total 17,000 shares of Big Wedge Mining Company, which

we have sold at P0.11 (eleven centavos) per share or P1,870.00

less 1/2 per cent brokerage.

HILL & CERON

By: (Sgd.) CARLOS CERON

2. Ceron paid to the plaintiff the sum or P1,150 leaving an unpaid balanceof P720, and unable to collect this sum either from Hill & Ceron or from

its surety Visayan Surety & Insurance Corporation, Litton filed a

complaint in the Court of First Instance of Manila against the said

defendants for the recovery of the said balance.

3. The court, after trial, ordered Carlos Ceron personally to pay the

amount claimed and absolved the partnership Hill & Ceron, Robert Hill

and the Visayan Surety & Insurance Corporation. On appeal to the Courtof Appeals, the latter affirmed the decision of the court on May 29, 1937,

having reached the conclusion that Ceron did not intend to represent and

did not act for the firm Hill & Ceron in the transaction involved in thislitigation.

3. Accepting, as we cannot but accept, the conclusion arrived at by the

Court of Appeals as to the question of fact just mentioned, namely, that

Ceron individually entered into the transaction with the plaintiff, but in

view, however, of certain undisputed facts and of certain regulations and

provisions of the Code of Commerce, we reach the conclusion that the

transaction made by Ceron with the plaintiff should be understood in lawas effected by Hill & Ceron and binding upon it.

RULING

In the first place, it is an admitted fact by Robert Hill when he testified at

the trial that he and Ceron, during the partnership, had the same power to

buy and sell; that in said partnership Hill as well as Ceron made the

transaction as partners in equal parts; that on the date of the transaction,

February 14, 1934, the partnership between Hill and Ceron was in

existence. After this date, or on February 19th, Hill & Ceron sold shares of

the Big Wedge; and when the transaction was entered into with Litton, it

was neither published in the newspapers nor stated in the commercialregistry that the partnership Hill & Ceron had been dissolved.

Hill testified that a few days before February 14th he had a conversation

with the plaintiff in the course of which he advised the latter not to

deliver shares for sale or on commission to Ceron because the

partnership was about to be dissolved; but what importance can be

attached to said advice if the partnership was not in fact dissolved onFebruary 14th, the date when the transaction with Ceron took place?

RATIO

Under article 226 of the Code of Commerce, the dissolution of a

commercial association shall not cause any prejudice to third parties until

it has been recorded in the commercial registry. (See also

Cardell vs.Maeru, 14 Phil., 368.) The Supreme Court of Spain held that

the dissolution of a partnership by the will of the partners which is not

registered in the commercial registry, does not prejudice third persons.(Opinion of March 23, 1885.)

Aside from the aforecited legal provisions, the order of the Bureau of

Commerce of December 7, 1933, prohibits brokers from buying and

selling shares on their own account. Said order reads:

The stock and/or bond broker is, therefore, merely an agent oran intermediary, and as such, shall not be allowed. . . .

(c) To buy or to sell shares of stock or bonds on his own

account for purposes of speculation and/or for manipulating

the market, irrespective of whether the purchase or sale is

made from or to a private individual, broker or brokerage firm.

In its decision the Court of Appeals states:

But there is a stronger objection to the plaintiff's attempt to

make the firm responsible to him. According to the articles of

copartnership of 'Hill & Ceron,' filed in the Bureau ofCommerce.

Sixth. That the management of the business affairs of the

copartnership shall be entrusted to both copartners who shall

jointly administer the business affairs, transactions and

activities of the copartnership, shall jointly open a current

account or any other kind of account in any bank or banks,

shall jointly sign all checks for the withdrawal of funds and

shall jointly or singly sign, in the latter case, with the consent ofthe other partner. . . .

Under this stipulation, a written contract of the firm can only

be signed by one of the partners if the other partner consented.

Without the consent of one partner, the other cannot bind the

firm by a written contract. Now, assuming for the moment that

Ceron attempted to represent the firm in this contract with the

plaintiff (the plaintiff conceded that the firm name was not

mentioned at that time), the latter has failed to prove that Hillhad consented to such contract.

It follows from the sixth paragraph of the articles of partnership of Hill &n

Ceron above quoted that the management of the business of the

partnership has been entrusted to both partners thereof, but we dissent

from the view of the Court of Appeals that for one of the partners to bind

the partnership the consent of the other is necessary. Third persons, likethe plaintiff, are not bound in entering into a contract with any of the two

partners, to ascertain whether or not this partner with whom the

transaction is made has the consent of the other partner. The public need

not make inquires as to the agreements had between the partners. Its

knowledge, is enough that it is contracting with the partnership which isrepresented by one of the managing partners.

There is a general presumption that each individual partner is

an authorized agent for the firm and that he has authority to

bind the firm in carrying on the partnership transactions.(Mills vs.Riggle, 112 Pac., 617.)

The presumption is sufficient to permit third persons to holdthe firm liable on transactions entered into by one of members

of the firm acting apparently in its behalf and within the scopeof his authority. (Le Roy vs.Johnson, 7 U. S. [Law. ed.], 391.)

The second paragraph of the articles of partnership of Hill & Ceron readsin part:

Second: That the purpose or object for which this

copartnership is organized is to engage in the business of

brokerage in general, such as stock and bond brokers, real

brokers, investment security brokers, shipping brokers, andother activities pertaining to the business of brokers in general.

The kind of business in which the partnership Hill & Ceron is to engage

being thus determined, none of the two partners, under article 130 of the

Code of Commerce, may legally engage in the business of brokerage in

general as stock brokers, security brokers and other activities pertainingto the business of the partnership. Ceron, therefore, could not have

entered into the contract of sale of shares with Litton as a private

individual, but as a managing partner of Hill & Ceron.

The respondent argues in its brief that even admitting that one of the

partners could not, in his individual capacity, engage in a transaction

similar to that in which the partnership is engaged without binding the

latter, nevertheless there is no law which prohibits a partner in the stock

brokerage business for engaging in other transactions different from

those of the partnership, as it happens in the present case, because the

transaction made by Ceron is a mere personal loan, and this argument, so

it is said, is corroborated by the Court of Appeals. We do not find this

alleged corroboration because the only finding of fact made by the Court

of Appeals is to the effect that the transaction made by Ceron with theplaintiff was in his individual capacity.

The appealed decision is reversed and the defendants are ordered to pay

to the plaintiff, jointly and severally, the sum of P720, with legal interest,

from the date of the filing of the complaint, minus the commission of one-

half per cent (%) from the original price of P1,870, with the costs to therespondents. So ordered.

Avancea, C. J., Villa-Real, Imperial, Diaz, Laurel, and Moran, JJ., concur.

RESOLUTION

July 13, 1939

8/10/2019 Parnership Chapter II Digested Cases

6/31

CONCEPCION, J.:

A motion has been presented in this case by Robert Hill, one of the

defendants sentenced in our decision to pay to the plaintiff the amount

claimed in his complaint. It is asked that we reconsider our decision, the

said defendant insisting that the appellant had not established that Carlos

Ceron, another of the defendants, had the consent of his copartner, the

movant, to enter with the appellant into the contract whose breach gave

rise to the complaint. It is argued that, it being stipulated in the articles of

partnership that Hill and Ceron, only partners of the firm Hill & Ceron,

would, as managers, have the management of the business of the

partnership, and that either may contract and sign for the partnershipwith the consent of the other; the parties of partnership having been, so it

is said, recorded in the commercial registry, the appellant could not

ignore the fact that the consent of the movant was necessary for the

validity of the contract which he had with the other partner and

defendant, Ceron, and there being no evidence that said consent had been

obtained, the complaint to compel compliance with the said contract hadto be, as it must be in fact, a procedural failure.

Although this question has already been considered and settled in our

decision, we nevertheless take cognizance of the motion in order to

enlarge upon our views on the matter.

The stipulation in the articles of partnership that any of the two managing

partners may contract and sign in the name of the partnership with the

consent of the other, undoubtedly creates an obligation between the two

partners, which consists in asking the other's consent before contractingfor the partnership. This obligation of course is not imposed upon a third

person who contracts with the partnership. Neither is it necessary for the

third person to ascertain if the managing partner with whom he contracts

has previously obtained the consent of the other. A third person may and

has a right to presume that the partner with whom he contracts has, in

the ordinary and natural course of business, the consent of his copartner;

for otherwise he would not enter into the contract. The third person

would naturally not presume that the partner with whom he enters intothe transaction is violating the articles of partnership but, on the

contrary, is acting in accordance therewith. And this finds support in the

legal presumption that the ordinary course of business has been followed

(No. 18, section 334, Code of Civil Procedure), and that the law has been

obeyed (No. 31, section 334). This last presumption is equally applicable

to contracts which have the force of law between the parties.

Wherefore, unless the contrary is shown, namely, that one of the partners

did not consent to his copartner entering into a contract with a third

person, and that the latter with knowledge thereof entered into said

contract, the aforesaid presumption with all its force and legal effectsshould be taken into account.

There is nothing in the case at bar which destroys this presumption; the

only thing appearing in he findings of fact of the Court of Appeals is that

the plaintiff "has failed to prove that Hill had consented to such contract".

According to this, it seems that the Court of Appeals is of the opinion that

the two partners should give their consent to the contract and that the

plaintiff should prove it. The clause of the articles of partnership should

not be thus understood, for it means that one of the two partners should

have the consent of the other to contract for the partnership, which is

different; because it is possible that one of the partners may not see any

prospect in a transaction, but he may nevertheless consent to therealization thereof by his copartner in reliance upon his skill and ability

or otherwise. And here we have to hold once again that it is not the

plaintiff who, under the articles of partnership, should obtain and prove

the consent of Hill, but the latter's partner, Ceron, should he file a

complaint against the partnership for compliance with the contract; but

in the present case, it is a third person, the plaintiff, who asks for it. Whilethe said presumption stands, the plaintiff has nothing to prove.

Passing now to another aspect of the case, had Ceron in any way stated to

the appellant at the time of the execution of the contract, or if it could be

inferred by his conduct, that he had the consent of Hill, and should it turn

out later that he did not have such consent, this alone would not annul the

contract judging from the provisions of article 130 of the Code ofCommerce reading as follows:

No new obligation shall be contracted against the willof one of

the managing partners, should he have expressly stated it; but

if, however, it should be contracted it shall not be annulled for

this reason, and shall have its effects without prejudice to the

liability of the partner or partners who contracted it to

reimburse the firm for any loss occasioned by reason thereof.(Emphasis supplied.)

Under the aforequoted provisions, when, not only without the consent

but against the will of any of the managing partners, a contract is entered

into with a third person who acts in good faith, and the transaction is of

the kind of business in which the partnership is engaged, as in the present

case, said contract shall not be annulled, without prejudice to the liabilityof the guilty partner.

The reason or purpose behind these legal provisions is no other than to

protect a third person who contracts with one of the managing partners

of the partnership, thus avoiding fraud and deceit to which he may easily

fall a victim without this protection which the Code of Commerce wisely

provides.

If we are to interpret the articles of partnership in question by holding

that it is the obligation of the third person to inquire whether the

managing copartner of the one with whom he contracts has given his

consent to said contract, which is practically casting upon him the

obligation to get such consent, this interpretation would, in similar cases,

operate to hinder effectively the transactions, a thing not desirable andcontrary to the nature of business which requires promptness and

dispatch one the basis of good faith and honesty which are alwayspresumed.

In view of the foregoing, and sustaining the other views expressed in the

decision, the motion is denied. So ordered.

Avancea, C. J., Villa-Real, Imperial, Diaz, Laurel, and Moran, JJ., concur.

G.R. No. L-11840 December 10, 1963

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

Norberto J. Quisumbing and Sycip, Salazar and Associates for defendants-

appellees.

Jose C. Calayco for plaintiffs-appellants..

R E S O L U T I O N

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

FACTS:

The matter now pending is the appellant's motion for reconsideration of

our main decision, wherein we have upheld the validity of the sale of the

lands owned by the partnership Goquiolay & Tan Sin An, made in 1949 by

the widow of the managing partner, Tan Sin An (Executed in her dual

capacity as Administratrix of the husband's estate and as partner in lieu

of the husband), in favor of the buyers Washington Sycip and Betty Leefor the following consideration:

Cash paid P37,000.00

Debts assumed by purchaser:

To Yutivo 62,415.91

To Sing Yee Cuan & Co., 54,310.13

T O T A L P153,726.04

Appellant Goquiolay, in his motion for reconsideration, insist that,

contrary to our holding, Kong Chai Pin, widow of the deceased partner

Tan Sin An, never became more than a limited partner, incapacitated by

law to manage the affairs of partnership; that the testimony of her

witness Young and Lim belies that she took over the administration of the

partnership property; and that, in any event, the sale should be set aside

because it was executed with the intent to defraud appellant of his sharein the properties sold.

Three things must be always held in mind in the discussion of this motionto reconsider, being basic and beyond controversy:

(a) That we are dealing here with the transfer of partnership property by

one partner, acting in behalf of the firm, to a stranger. There is no

question between partners inter se, and this aspect to the case wasexpressly reserved in the main decision of 26 July 1960;

(b) That partnership was expressly organized: "to engage in real estate

business, either by buying and selling real estate". The Articles of co-partnership, in fact, expressly provided that:

IV. The object and purpose of the copartnership are as follows:

1. To engage in real estate business, either by buying and

selling real estates; to subdivide real estates into lots for thepurpose of leasing and selling them.;

8/10/2019 Parnership Chapter II Digested Cases

7/31

(c) That the properties sold were not part of the contributed capital

(which was in cash) but land precisely acquired to be sold, although

subject to a mortgage in favor of the original owners, from whom thepartnership had acquired them.

With these points firmly in mind, let us turn to the points insisted upon

by appellant.

It is first averred that there is "not one iota of evidence" that Kong Chai

Pin managed and retained possession of the partnership properties.

Suffice it to point out that appellant Goquiolay himself admitted that

... Mr. Yu Eng Lai asked me if I can just let Mrs. Kong Chai

Pin continue to manage the properties (as) she had no other

means of income. Then I said, because I wanted to help Mrs.

Kong Chai Pin, she could just do it and besides I am not

interested in agricultural lands. I allowed her to take care of the

properties in order to help her and because I believe in God andwanted to help her.

Q So the answer to my question is you did not

take any steps?

A I did not.

Q And this conversation which you had with Mrs.Yu Eng Lai was few months after 1945?

A In the year 1945. (Emphasis supplied).

The appellant subsequently ratified this testimony in his deposition of 30

June 1956, pages 8-9, wherein he stated:

that plantation was being occupied at that time by the widow,

Mrs. Tan Sin An, and of course they are receiving quiet a lotbenefit from the plantation.

Discarding the self-serving expressions, these admissions of Goquiolay

are certainly entitled to greater weight than those of Hernando Youngand Rufino Lim, having been made against the party's own interest.

Moreover, the appellant's reference to the testimony of Hernando Young,

that the witness found the properties "abandoned and undeveloped",

omits to mention that said part of the testimony started with the

question:

Now, you said that about 1942 or 1943 you returned to Davao.

Did you meet Mrs. Kong Chai Pin there in Davao at that time?

Similarly, the testimony of Rufino Lim, to the effect that the properties of

the partnership were undeveloped, and the family of the widow (Kong

Chai Pin) did not receive any income from the partnership properties,was given in answer to the question:

According to Mr. Goquiolay, during the Japanese occupationTan Sin an and his family lived on the plantation of the

partnership and derived their subsistence from that plantation.What can you say to that? (Dep. 19 July 1956, p. 8).

And also

What can you say as to the development of these other

properties of the partnership which you saw during theoccupation? (Dep. p. 13, Emphasis supplied).

to which witness gave the following answer:

I saw the properties in Mamay still undeveloped. The third

property which is in Tigato is about eleven (11) hectares andplanted with abaca seedlings planted by Mr. Sin An. When I

went there with Hernando Youngwe saw all the abaca

destroyed. The place was occupied by the Japanese Army. They

planted camotes and vegetables to feed the Japanese Army. Of

course they never paid any money to Tan Sin An or his family.(Dep., Lim, pp. 13-14. Emphasis supplied).

Plainly, both Young and Lim's testimonies do not belie, or contradict,

Goquiolay's admission that he told Mr. Yu Eng Lai that the widow "could

just do it" (i.e., continue to manage the properties). Witnesses Lim and

Young referred to the period ofJapanese occupation; but Goquiolay'sauthority was, in fact, given to the widow in 1945,after the occupation.

Again, the disputed sale by the widow took place in 1949. That Kong Chai

Pin carried out no acts of management during the Japanese occupation(1942-1944) does not mean that she did not do so from 1945 to 1949.

We thus find that Goquiolay did not merely rely on reports from Lim and

Young; he actually manifested his willingness that the widow should

manage the partnership properties. Whether or not she complied with

this authority is a question between her and the appellant, and is not here

involved. But the authority was given, and she did have it when she madethe questioned sale, because it was never revoked.

It is argued that the authority given by Goquiolay to the widow Kong ChaiPin was only to manage the property, and that it did not include the

power to alienate, citing Article 1713 of the Civil Code of 1889. What this

argument overlooks is that the widow was not a mere agent, because she

had become a partner upon her husband's death, as expressly provided

by the articles of copartnership. Even more, granting that by succession

to her husband, Tan Sin An, the widow only became a limited

partner, Goquiolay's authorization to manage the partnership property

was proof that he considered and recognized her as general partner, at

least since 1945. The reason is plain: Under the law (Article 148, last

paragraph, Code of Commerce), appellant could not empower the widow,

if she were only a limited partner, to administer the properties of the

firm, even as a mere agent:

Limited partners may not perform any act of administration

with respect to the interests of the copartnership, not even in

the capacity of agents of the managing partners. (Emphasissupplied).

By seeking authority to manage partnership property, Tan Sin An's

widow showed that she desired to be considered ageneral partner. By

authorizing the widow to manage partnership property (which a limited

partner could not be authorized to do), Goquiolay recognized her as such

partner, and is now in estoppel to deny her position as a general partner,

with authority to administer and alienate partnership property.

Besides, as we pointed out in our main decision, the heir ordinarily (and

we did not say "necessarily") becomes a limited partner for his own

protection, because he would normally prefer to avoid any liability in

excess of the value of the estate inherited so as not to jeopardize hispersonal assets. But this statutory limitation of responsibility being

designed to protect the heir, the latter may disregard it and instead electto become a collective or general partner, with all the rights and

privileges of one, and answering for the debts of the firm not only with

the inheritance but also with the heir's personal fortune. This choice

pertains exclusively to the heir, and does not require the assent of thesurviving partner.

It must be remember that the articles of co-partnership here involvedexpressly stipulated that:

In the event of the death of any of the partners at any time

before the expiration of said term, the co-partnership shall not

be dissolved but will have to be continued and the deceased

partner shall be represented by his heirs or assigns in said co-partnership (Art. XII, Articles of Co-Partnership).

The Articles did not provide that the heirs of the deceased would be

merely limitedpartners; on the contrary, they expressly stipulated that in

case of death of either partner "the co-partnership ... will have to be

continued" with the heirs or assigns. It certainly could not be continued if

it were to be converted from a general partnership into a limited

partnership, since the difference between the two kinds of associations is

fundamental; and specially because the conversion into a

limited association would have the heirs of the deceased partner without

a share in the management. Hence, the contractual stipulation does

actually contemplate that the heirs would becomegeneral partners ratherthan limited ones.

Of course, the stipulation would not bind the heirs of the deceased

partner should they refuse to assume personal and unlimited

responsibility for the obligations of the firm. The heirs, in other words,

can not be compelled to become general partners against their wishes.

But because they are not so compellable, it does not legitimately follow

that they may not voluntarily choose to become general partners, waiving

the protective mantle of the general laws of succession. And in the latter

event, it is pointless to discuss the legality of any conversion of a limitedpartner into a general one. The heir never was a limited partner, but

chose to be, and became, a general partner right at the start.

It is immaterial that the heir's name was not included in the firm name,

since no conversion of status is involved, and the articles of co-

partnership expressly contemplated the admission of the partner's heirsinto the partnership.

8/10/2019 Parnership Chapter II Digested Cases

8/31

It must never be overlooked that this case involved the rights acquired by

strangers, and does not deal with the rights existing between partners

Goquiolay and the widow of Tan Sin An. The issues between the

partners inter sewere expressly reserved in our main decision. Now, in

determining what kind of partner the widow of partner Tan Sin an Had

elected to become, strangers had to be guided by her conduct and

actuations and those of appellant Goquiolay. Knowing that by law a

limited partner is barred from managing the partnership business or

property, third parties (like the purchasers) who found the widow

possessing and managing the firm property with the acquiescence (or at

least without apparent opposition) of the surviving partners were

perfectly justified in assuming that she had become a general partner,

and, therefore, in negotiating with her as such a partner, having authorityto act for, and in behalf of the firm. This belief, be it noted, was shared

even by the probate court that approved the sale by the widow of the real

property standing in the partnership name. That belief was fostered by

the very inaction of appellant Goquiolay. Note that for seven long years,

from partner Tan Sin An's death in 1942 to the sale in 1949, there was

more than ample time for Goquiolay to take up the management of these

properties, or at least ascertain how its affairs stood. For seven years

Goquiolay could have asserted his alleged rights, and by suitable notice in

the commercial registry could have warned strangers that they must deal

with him alone, as sole general partner. But he did nothing of the sort,

because he was not interested (supra), and he did not even take steps to

pay, or settle the firm debts that were overdue since before the outbreak

of the last war. He did not even take steps, after Tan Sin An died, to cancel,

or modify, the provisions of the partnership articles that he (Goquiolay)

would have no intervention in the management of the partnership.

This laches certainly contributed to confirm the view that the widow ofTan Sin An had, or was given, authority to manage and deal with the

firm's properties apart from the presumption that a general partner

dealing with partnership property has to requisite authority from his co-

partners (Litton vs. Hill and Ceron, et al., 67 Phil. 513; quoted in our maindecision, p. 11).

The stipulation in the articles of partnership that any of the

two managing partners may contract and sign in the name of

the partnership with the consent of the other, undoubtedly

creates on obligation between the two partners, which consists

in asking the other's consent before contracting for the

partnership. This obligation of course is not imposed upon a

third person who contracts with the partnership. Neither it is

necessary for the third person to ascertain if the managing

partner with whom he contracts has previously obtained the

consent of the other. A third person may and has a right topresume that the partner with whom he contracts has, in the

ordinary and natural course of business,the consent of his

copartner; for otherwise he would not enter into the contract.

The third person would naturally not presume that the partner

with whom he enters into the transaction is violating the

articles of partnership, but on the contrary is acting in

accordance therewith. And this finds support in the legal

presumption that the ordinary course of business has been

followed (No. 18, section 334, Code of Civil Procedure), and

that the law has been obeyed (No. 31, section 334). This last

presumption is equally applicable to contracts which have the

force of law between the parties. (Litton vs. Hill & Ceron, et al.,67 Phil. 409, 516). (Emphasis supplied.)

It is next urged that the widow, even as a partner, had no authority to sell

the real estate of the firm. This argument is lamentably superficialbecause it fails to differentiate between real estate acquired and held

as stock-in-tradeand real estate held merely as business site (Vivante's

"taller o banco social") for the partnership. Where the partnership

business is to deal in merchandise and goods, i.e., movable property, the

sale of its real property (immovables) is not within the ordinary powers

of a partner, because it is not in line with the normal business of the firm.

But where the express and avowed purpose of the partnership is to buy

and sell real estate (as in the present case), the immovables thus acquired

by the firm from part of its stock-in-trade, and the sale thereof is in

pursuance of partnership purposes, hence within the ordinary powers of

the partner. This distinction is supported by the opinion of Gay de

Montella1, in the very passage quoted in the appellant's motion forreconsideration:

La enajenacion puede entrar en las facultades del gerante,

cuando es conforme a los fines sociales. Pero esta facultad de

enajenar limitada a las ventas conforme a los fines sociales,

viene limitada a los objetos de comercio o a los productos de la

fabrica para explotacion de los cuales se ha constituido la

Sociedad.Ocurrira una cosa parecida cuando el objeto de la

Sociedad fuese la compra y venta de inmuebles, en cuyo caso el

gerente estaria facultado para otorgar las ventas que fuere

necesario. (Montella) (Emphasis supplied).

The same rule obtains in American law.

In Rosen vs. Rosen, 212 N.Y. Supp. 405, 406, it was held:

a partnership to deal in real estate may be created and eitherpartner has the legal right to sell the firm real estate.

In Chester vs. Dickerson, 54 N. Y. 1, 13 Am. Rep. 550:

And hence, when the partnership business is to deal in real estate, one

partner has ample power, as a general agent of the firm, to enter into anexecutory contract for the sale of real estate.

And in Revelsky vs. Brown, 92 Ala. 522, 9 South 182, 25 Am. St. Rep. 83:

If the several partners engaged in the business of buying and

selling real estate can not bind the firm by purchases or sales

of such property made in the regular course of business, then

they are incapable of exercising the essential rights and powers

of general partners and their association is not really a

partnership at all, but a several agency.

Since the sale by the widow was in conformity with the express objective

of the partnership, "to engage ... in buying and selling real estate" (Art. IV,

No. 1 Articles of Copartnership), it can not be maintained that the salewas made in excess of her power as general partner.

Considerable stress is laid by appellant in the ruling of the Supreme Court

of Ohio in McGrath, et al., vs. Cowen, et al., 49 N.E., 338. But the facts of

that case are vastly different from the one before us. In the McGrath case,the Court expressly found that:

The firm was then, and for some time had been, insolvent, in

the sense that its property was insufficient to pay its debts,

though it still had good credit, and was actively engaged in the

prosecution of its business. On that day, which was Saturday,

the plaintiff caused to be prepared, ready for execution, the

four chattel mortgages in question, which cover all the tangible

property then belonging to the firm, including the counters,

shelving, and other furnishings and fixtures necessary for, andused in carrying on, its business, and signed the same in this

form: "In witness whereof, the said Cowen & McGrath, a firm,

and Owen McGrath, surviving partner, of said firm, and Owen

McCrath, individually, have hereunto set their hands, this 20th

day of May, A.D. 1893. Cowen & Mcgrath, by Owen McGrath.

Owen McGrath, Surviving partner of Cowen & McGrath. OwenMcGrath." At the same time, theplaintiff had prepared, ready

for filing, the petitionfor the dissolution of the partnership and

appointment of a receiverwhich he subsequently filed, as

hereinafter stated. On the day the mortgages were signed, they

were placed in the hands of the mortgagees, which was the

first intimation to them that there was any intention to make

them. At the timenone of the claims secured by the mortgages

were due,except, it may be, a small part of one of them,

andnone of the creditors to whom the mortgages were

made had requested security, or were pressing for the payment

of their debts.... The mortgages appear to be without a

sufficient condition of defiance, and contain a stipulation

authorizing the mortgagees to take immediate possession of

the property, which they did as soon as the mortgages were

filed through the attorney who then represented them, as well

as the plaintiff; and the stores were at once closed, andpossession delivered by them to the receiver appointed upon the

filing of the petition. The avowed purposes of the plaintiff, in the

course pursued by him, was to terminate the partnership, place

its properly beyond the control of the firm, and insure the

preference of the mortgagees, all of which was known to themat the time; .... (Cas cit., p. 343, Emphasis supplied).

It is natural that form these facts the Supreme Court of Ohio should draw

the conclusion that the conveyances were made with intent to terminate

the partnership, and that they were not within the powers of McGrath as

a partner. But there is no similarity between those acts and the sale by

the widow of Tan Sin An. In the McGrath case, the sale included even the

fixtures used in the business; in our case, the lands sold were those

acquired to be sold. In the McGrath case, none of the creditors were

pressing for payment; in our case, the creditors had been unpaid for more

than seven years, and their claims had been approved by the probatecourt for payment. In the McGrath case, the partnership received nothing

beyond the discharge of its debts; in the present case, not only were its

debts assumed by the buyers, but the latter paid, in addition, P37,000.00

in cash to the widow, to the profit of the partnership. Clearly, the McGrathruling is not applicable.

We will now turn to the question of fraud. No direct evidence of it exists;

but appellant point out, as indicia thereof, the allegedly low price paid for

the property, and the relationship between the buyers, the creditors ofthe partnership, and the widow of Tan Sin An.

First, as to the price: As already noted, this property was actually sold for

a total of P153,726.04, of which P37,000.00 was in cash, and the rest in

8/10/2019 Parnership Chapter II Digested Cases

9/31

partnership debts assumed by the purchaser. These debts (62,415.91 to

Yutivo, and P54,310.13 to Sing Ye Cuan & Co.) are not questioned; they

were approved by the court, and its approval is now final. The claims

were, in fact, for the balance on the original purchase price of the land

sold (sue first to La Urbana, later to the Banco Hipotecario) plus accrued

interests and taxes, redeemed by the two creditors-claimants. To show

that the price was inadquate, appellant relies on the testimony of the

realtor Mata, who is 1955, six years after the sale in question, asserted

that the land was worth P312,000.00. Taking into account the continued

rise of real estate values since liberation, and the fact that the sale in

question was practically a forced sale because the partnership had no

other means to pay its legitimate debts, this evidence certainly does not

show such "gross inadequacy" as to justify recission of the sale. If at thetime of the sale (1949) the price of P153,726.04 was really low, how is it

that appellant was not able to raise the amount, even if the creditor's

representative, Yu Khe Thai, had already warned him four years before

(1945) that the creditors wanted their money back, as they were justlyentitled to?

It is argued that the land could have been mortgaged to raise the sum

needed to discharge the debts. But the lands were already mortgaged, and

had been mortgaged since 1940, first to La Urbana, and then to the Banco

Hipotecario. Was it reasonable to expect that other persons would loan

money to the partnership when it was unable even to pay the taxes on the

property, and the interest on the principal since 1940? If it had been

possible to find lenders willing to take a chance on such a bad financial

record, would not Goquiolay have taken advantage of it? But the fact is

clear on the record that since liberation until 1949 Goquiolay never l ifted

a finger to discharge the debts of the partnership. Is he entitled now tocry fraud after the debts were discharged with no help from him.

With regard to the relationship between the parties, suffice it to say that

the Supreme Court has ruled that relationship alone is not a badge of

fraud (Oria Hnos. vs. McMicking, 21 Phil. 243; also Hermandad del Smo.

Nombre de Jesus vs. Sanchez, 40 Off. Gaz., 1685). There is no evidence

that the original buyers, Washington Sycip and Betty Lee, were without

independent means to purchase the property. That the Yutivos should be

willing to extend credit to them, and not to appellant, is neither illegal nor

immoral; at the very least, these buyers did not have a record ofinveterate defaults like the partnership "Tan Sin An & Goquiolay".

Appellant seeks to create the impression that he was the victim of a

conspiracy between the Yutivo firm and their component members. But

no proof is adduced. If he was such a victim, he could have easily defeatedthe conspirators by raising money and paying off the firm's debts

between 1945 and 1949; but he did not; he did not even care to look for a

purchaser of the partnership assets. Were it true that the conspiracy to

defraud him arose (as he claims) because of his refusal to sell the lands

when in 1945 Yu Khe Thai asked him to do so, it is certainly strange that

the conspirators should wait 4 years, until 1949, to have the sale effected

by the widow of Tan Sin An, and that the sale should have been routed

through the probate court taking cognizance of Tan Sin An's estate, all ofwhich increased the risk that the supposed fraud should be detected.

Neither was there any anomaly in the filing of the claims of Yutivo and

Sing Yee Cuan & Co., (as subrogees of the Banco Hipotecario) in

proceedings for the settlement of the estate of Tan Sin An. This for two

reasons: First, Tan Sin An and the partnership "Tan Sin An & Goquiolay"

were solidary (Joint and several)debtors (Exhibits "N", mortgage to the

Banco Hipotecario), and Rule 87, section 6 is the effect that:

Where the obligation of the decedent is joint and several with

another debtor, the claim shall be filed against the decedent as if

he were the only debtor, without prejudice to the right of the

estate to recover contribution from the other debtor.(Emphasis supplied).

Secondly, the solidary obligation was guaranteed by a mortgage on the

properties of the partnership and those of Tan Sim An personally, and a

mortgage is indivisible, in the sense that each and every parcel under

mortgage answers for the totality of the debt (Civ. Code of 1889, Article1860; New Civil Code, Art. 2089).

A final and conclusive consideration: The fraud charged not being one

used to obtain a party's consent to a contract (i.e., not being deceit

or dolus in contrahendo), if there is fraud at al, it can only be afraud of

creditorsthat gives rise to a rescission of the offending contract. But by

express provision of law (Article 1294, Civil Code of 1889; Article 1383,

New Civil Code) "the action for rescission is subsidiary; it can not be

instituted except when the party suffering damage has no other legal

means to obtain reparation for the same". Since there is no allegation, or

evidence, that Goquiolay can not obtain reparation from the widow and

heirs of Tan Sin An, the present suit to rescind the sale in question is not

maintainable, even if the fraud charged actually did exist.

PREMISES CONSIDERED, the motion for reconsideration is denied.

Bengzon, C.J., Padilla, Concepcion, Barrera and Dizon, JJ., concur.Regala, J., took no part.

Separate Opinions

BAUTISTA ANGELO,J., dissenting:

This is an appeal from a decision of the Court of First Instance of Davao

dismissing the complaint filed by Antonio C. Goquiolay, et al., seeking to

annul the sale made Z. Sycip and Betty Y. Lee on the ground that it was

executed without proper authority and under fraudulent circumstances.In a decision rendered on July 26, 1960 we affirmed this decision

although on grounds different from those on which the latter is predicted.

The case is once more before us on a motion for reconsideration filed byappellants raising both questions of fact and of law.

On May 29, 1940, Tan Sin An and Antonio C. Goquiolay executed in Davao

City a commercial partnership for a period of ten years with a capital of

P30,000.00 of which Goquiolay contributed P18,000.00 representing60% while Tan Sin An P12,000.00 representing 40%. The business of the

partnership was to engage in buying real estate properties for

subdivision, resale and lease. The partnership was duly registered, and

among the conditions agreed upon in the partnership agreement which

are material to this case are: (1) that Tan Sin An would be the exclusivemanaging partner, and (2) in the event of the death of any of the partners

the partnership would continue, the deceased to be represented by his

heirs. On May 31, 1940, Goquiolay executed a general power of attorneyin favor of Tan Sin An appointing the latter manager of the partnership

and conferring upon him the usual powers of management.

On May 29, 1940, the partnership acquired three parcels of land known

as Lots Nos. 526, 441 and 521 of the cadastral survey of Davao, the only

assets of the partnership, with the capital orginally invested, financing the

balance of the purchase price with a mortgage in favor of "La Urbana

Sociedad Mutua de Construccion Prestamos" in the amount of

P25,000.00, payable in ten years. On the same date, Tan Sin An, in his

individual capacity, acquired 46 parcels of land executing a mortgage

thereon in favor of the same company for the sum of P35,000.00. On

September 25, 1940, these two mortgage obligations were consolidated

and transferred to the Banco Hipotecario de Filipinas and as a result Tan

Sin An, in his individual capacity, and the partnership bound themselvesto pay jointly and severally the total amount of P52,282.80, with 8%

annual interest thereon within a period of eight years mortgaging in favorof said entity the 3 parcels of land belonging to the partnership and the

46 parcels of land belonging individually to Tan Sin An.

Tan Sin An died on June 26, 1942 and was survived by his widow,

defendant Kong Chai Pin, and four children, all of whom are minors of

tender age. On March 18, 1944, Kong Chai Pin, was appointed

administratrix of the intestate estate of Tan Sin An. And on the same date,

Sing, Yee and Cuan Co., Inc. paid to the Banco Hipotecario the remaining

unpaid balance of the mortgage obligation of the partnership amountingto P46,116.75 in Japanese currency.

Sometimes in 1945, after the liberation of Manila, Yu Khe Thai, president

and general manager of Yutivo Sons Hardware Co. and Sing, Yee and Cuan

Co., Inc., called for Goquiolay and the two had a conference in the office of

the former during which he offered to buy the interest of Goquiolay in thepartnership. In 1948, Kong Chai Pin, the widow, sent her counsel, Atty.

Dominador Zuo, to ask Goquiolay to execute in her favor a power of

attorney. Goquiolay refused both to sell his interest in the partnership aswell as to execute the power of attorney.

Having failed to get Goquiolay to sell his share in the partnership, Yutivo

Sons Hardware Co. and Sing, Yee and Cuan Co., Inc. filed in November,

1946 a claim each in the intestate proceedings of Tan Sin An for the sum

of P84,705.48 and P66,529.91, respectively, alleging that they represent

obligations of both