Benjamin Yu v.

National Labor Relations Commission & Jade

Mountain ProductsCo. Ltd., Willy Co, Rhodora Bendal, Lea
Bendal, Chiu Shian Jeng and Chen Ho-Fu
G.R. No. 97212 June 30, 1993
Feliciano, J.
Facts:

Yu ex-Assistant General Manager of the marble quarrying and

export business operatedby a registered partnership called Jade
Mountain Products Co. Ltd.

Partnership was originally organized with Bendals as general

partners and Chin Shian Jeng,Chen Ho-Fu and Yu Chang as limited
partners; partnership business consisted of exploitinga marble
deposit in Bulacan

Yu, as Assistant General Manager, had a monthly salary of 4000. Yu,

however, actually received only half of his stipulated salary, since
he had accepted the promise of the partners that the balance would
be paid when the firm shall have secured additional operating funds
from abroad. Yu actually managed the operations and finances of
the business; he had overall supervision of the workers at the
marble quarry in Bulacan and took charge of the preparation of
papers relating to the exportation of the firms products.

General partners Bendals sold and transferred their interests in the

partnership to Co andEmmanuel Zapanta

partnership was constituted solely by Co and Zapanta; it continued

to use the old firmname of Jade Mountain

Yu dismissed by the new partners

Issues:
1. WON the
partnership which had hired Yu as Asst. Gen. Manager had bee
n extinguished and replaced by a new partnership composed
of Co and Zapanta;
2. 2. if indeed anew partnership had come into existence,
WON Yu could nonetheless assert his rights underhis
employment contract with the old partnership as against the
new partnership
Held:
1. Yes. Changes in the membership of the partnership resulted in the
dissolution of the old partnership which had hired Yu and the
emergence of a new partnership composed of Co and Zapanta.

Legal bases:


Art. 1828. The dissolution of a partnership is the change in the relati
on of thepartners caused by any partner ceasing to be associated in
the carrying on asdistinguished from the winding up of the business.

Art. 1830. Dissolution is caused:(1) without violation of the

agreement between the partners;(b) by the express will of
any partner, who must act in good faith, when no definite termor
particular undertaking is specified;(2) in contravention of the
agreement between the partners, where the circumstances donot
permit a dissolution under any other provision of this article, by the
express will of anypartner at any time;

No winding up of affairs in this case as contemplated

in Art. 1829: on dissolution thepartnership is not terminated, but
continues until the winding up of partnership affairs iscompleted

the new partnership simply took over the business enterprise owned
by the oldpartnership, and continued using the old name of Jade Mo
untain Products CompanyLimited, without winding up the business
affairs of the old partnership, paying off its debts,liquidating and
distributing its net assets, and then re-assembling the said assets or
mostof them and opening a new business enterprise

2. Yes. the new partnership is liable for the debts of the old
partnership

Legal basis: Art. 1840 (see codal)

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 5840

September 17, 1910

THE UNITED STATES, plaintiff-appellee,

vs.
EUSEBIO CLARIN, defendant-appellant.
Francisco Dominguez, for appellant.
Attorney-General Villamor, for appellee.
ARELLANO, C.J.:
Pedro Larin delivered to Pedro Tarug P172, in order that the latter, in company with
Eusebio Clarin and Carlos de Guzman, might buy and sell mangoes, and, believing that
he could make some money in this business, the said Larin made an agreement with the
three men by which the profits were to be divided equally between him and them.

Pedro Tarug, Eusebio Clarin, and Carlos de Guzman did in fact trade in mangoes and
obtained P203 from the business, but did not comply with the terms of the contract by
delivering to Larin his half of the profits; neither did they render him any account of the
capital.
Larin charged them with the crime of estafa, but the provincial fiscal filed an information
only against Eusebio Clarin in which he accused him of appropriating to himself not only
the P172 but also the share of the profits that belonged to Larin, amounting to P15.50.
Pedro Tarug and Carlos de Guzman appeared in the case as witnesses and assumed
that the facts presented concerned the defendant and themselves together.
The trial court, that of First Instance of Pampanga, sentenced the defendant, Eusebio
Clarin, to six months' arresto mayor, to suffer the accessory penalties, and to return to
Pedro Larin P172, besides P30.50 as his share of the profits, or to subsidiary
imprisonment in case of insolvency, and to pay the costs. The defendant appealed, and
in deciding his appeal we arrive at the following conclusions:
When two or more persons bind themselves to contribute money, property, or industry to
a common fund, with the intention of dividing the profits among themselves, a contract is
formed which is called partnership. (Art. 1665, Civil Code.)
When Larin put the P172 into the partnership which he formed with Tarug, Clarin, and
Guzman, he invested his capital in the risks or benefits of the business of the purchase
and sale of mangoes, and, even though he had reserved the capital and conveyed only
the usufruct of his money, it would not devolve upon of his three partners to return his
capital to him, but upon the partnership of which he himself formed part, or if it were to be
done by one of the three specifically, it would be Tarug, who, according to the evidence,
was the person who received the money directly from Larin.
The P172 having been received by the partnership, the business commenced and profits
accrued, the action that lies with the partner who furnished the capital for the recovery of
his money is not a criminal action for estafa, but a civil one arising from the partnership
contract for a liquidation of the partnership and a levy on its assets if there should be any.
No. 5 of article 535 of the Penal Code, according to which those are guilty of estafa "who,
to the prejudice of another, shall appropriate or misapply any money, goods, or any kind
of personal property which they may have received as a deposit on commission for
administration or in any other character producing the obligation to deliver or return the
same," (as, for example, in commodatum, precarium, and other unilateral contracts which
require the return of the same thing received) does not include money received for a
partnership; otherwise the result would be that, if the partnership, instead of obtaining
profits, suffered losses, as it could not be held liable civilly for the share of the capitalist
partner who reserved the ownership of the money brought in by him, it would have to
answer to the charge of estafa, for which it would be sufficient to argue that the
partnership had received the money under obligation to return it.
We therefore freely acquit Eusebio Clarin, with the costs de oficio. The complaint
for estafa is dismissed without prejudice to the institution of a civil action.
Torres, Johnson, Moreland and Trent, JJ., concur.
Rojas v. Maglana
Facts:

Maglana and Rojas executed their Articles of Co-Partnership called Eastcoast Development
Enterprises (EDE). It was a partnership with an indefinite term of existence. Maglana shall
manage the business affairs while Rojas shall be the logging superintendant and shall
manage the logging operation. They shall share in all profits and loss equally. Due to
difficulties encountered they decided to avail of the sources of Pahamatong as industrial
partners. They again executed their Articles of Co-Partnership under EDE. The term is 30
years. After sometime Pamahatong sold his interest to Maglana and Rojas including
equipment contributed. After withdrawal of Pamahatong, Maglana and Rojas continued the
partnership. After 3 months, Rojas entered into a management contract with another logging
enterprise. He left and abandoned the partnership. He even withdrew his equipment from the
partnership and was transferred to CMS. He never told Maglana that he will not be able to
comply with the promised contributions and he will not work as logging superintendent.
Maglana then told Rojas that the latter share will just be 20% of the net profits. Rojas took
funds from the partnership more than his contribution. Thus, Maglana notified Rojas that he
dissolved the partnership.
Issue: What is the nature of the partnership and legal relationship of Maglana and Rojas after
Pahamatong retired from the second partnership
Ruling:
It was not the intention of the partners to dissolve the first partnership, upon the constitution of
the second one, which they unmistakably called additional agreement. Otherwise stated
even during the existence of the second partnership, all business transactions were carried
out under the duly registered articles. No rights and obligations accrued in the name of the
second partnership except in favor of Pahamatong which was fully paid by the duly registered
partnership.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-8576

February 11, 1915

VARGAS and COMPANY, plaintiff-appellee,

vs.
CHAN HANG CHIU, ET AL., defendants-appellants.
Rohde and Wright for appellants.
Escaler and Salas for appellee.
MORELAND, J.:
This is an action brought to set aside a judgment of the justice's court of Manila on the
ground that the plaintiff here, the defendant in the action in which the judgment was
secured, was not served with summons and that, therefore, the justice's court acquired
no jurisdiction to render the judgment was that the same is null and void. Judgment was
entered in favor of plaintiff declaring the judgment in controversy void and setting it aside.
This appeal is from that judgment.

It appears from the record that the plaintiff is a merchantile association duly organized
under the laws of the Philippine Islands and presumably registered as required by law.
On the 19th day of August, 1911, an action was begun by Chan Hang Chiu against the
plaintiff in this case to recover a sum of money. The summons and complaint were placed
in the hands of the sheriff, who certified that on the 19th day of August, 1911, he served
the same on Vargas & Co. by delivering to and leaving with one Jose Macapinlac
personally true copies thereof, he being the managing agent of said Vargas & Co. at the
time of such service. On July 2. 1912, the justice's court rendered judgment against
Vargas & Co. for the sum of 372.28. Thereafter execution was duly issued and the
property of Vargas & Co. levied on for the payment thereof. Thereupon Vargas & Co. paid
the amount of the judgment and costs under protest, with notice that it would sue to
recover the amount paid. The execution was returned satisfied and there the matter
rested until the present action was brought.
The contention of plaintiff is, and that contention is supported by the decision of the court
below, that Vargas & Co. being a partnership, it is necessary, in bringing an action
against it, to serve the summons on all of the partners, delivering to each one of them
personally a copy thereof; and that the summons in this case having been served on the
managing agent of the company only, the service was of no effect as against the
company and the members thereof and the judgment entered by virtue of such a service
was void.
Plaintiff also contends, and this contention is likewise supported by the court below, that,
even admitting that service on the managing agent of the plaintiff is sufficient service, as
a matter of fact no service was really made on the managing agent of the company but,
rather, on an employee or salesman of the company, who had no powers of management
or supervision and who was not competent to receive service on behalf of the company
within the provisions of section 396 of the Code of Civil Procedure.
We are of the opinion that neither of these contentions can be sustained. As to the first,
we may say that it has been the universal practice in the Philippine Islands since
American occupation, and was the practice prior to that time, to treat companies of the
class to which the plaintiff belongs as legal or juridicial entities and to permit them to sue
and be sued in the name of the company, the summons being served solely on the
managing agent or other official of the company specified by the section of the Code of
Civil Procedure referred to. This very action is an illustration of the practice in vogue in
the Philippine Islands. The plaintiff brings this action in the company name and not in the
name of the members of the firm. Actions against companies of the class to which
plaintiff belongs are brought, according to the uninterrupted practice, against such
companies in their company names and not against the individual partners constituting
the firm. In the States, in which the individual members of the firm must be separately
served with process, the rule also prevails that they must be parties to the action, either
plaintiffs or defendant, and that the action cannot be brought in the name of or against
the company itself. This follows naturally for the reason that, if it is necessary to serve the
partners individually, they are entitled to be heard individually in the action and they must,
therefore, be made parties thereto so that they can be heard. It would be idle to serve
process on individual members of a partnership if the litigation were to be conducted in
the name of the partnership itself and by the duly constituted officials of the partnership
exclusively.
From what has been said it is apparent that the plaintiff in this action is acting contrary to
its own contention by bringing the action in the name of the company be served with
process, then the action should be brought in the individual names of the partners and
not in the name of the company itself.
Article 35 of the Civil Code provides:

The following are judicial persons:

1. The corporation, associations, and institutions of public interest recognized by
law.
2. The associations of private interest, be they civil, commercial, or industrial, to
which the law grants proper personality, independent of that of each member
thereof.
Article 38 provides: "Judicial persons may acquire and possess property of all kinds, as
well as contract obligations and institute civil or criminal actions in accordance with the
laws and rules of their establishment."
Article 116 of the Code of Commerce provides in part: "After a commercial association
has been established, it shall have legal representation in all its acts and contracts."
These provisions have been the foundation of the practice followed without interruption
for many years that association of the class to which plaintiff belongs have an
independent and separate legal entity sufficient to permit them to sue and be sued in the
company name and to be served with process through the chief officer or managing
agent thereof or any other official of the company specified by law.
As to the second contention, we may say that the presumption is that a judgment
rendered by a justice's court is a valid and enforceable judgment where the record
discloses that all of the steps necessary to confer jurisdiction on the court have been
taken. In the case before us it affirmatively appears that the service of process was made
on the person the sheriff certified was the managing agent of the defendant company.
The sheriff's certificate serves asprima facie evidence of the existence of the facts stated
therein. The record, therefore, discloses, so far as the fact of service is concerned, that it
was duly made on the managing agent of the company as required by section 396,
paragraph 1, of the Code of Civil Procedure. In attacking the judgement on the ground
that service was not made on the managing agent of the company, it is incumbent on the
plaintiff to overcome the presumption arising from the sheriff's certificate before the attack
will succeed. Endeavoring to overcome the presumption referred to, plaintiff offered as a
witness one Tomas O. Segovia, an employee of the plaintiff company. He testified that he
was a bookkeeper and that as such he was well acquainted with the business of the
company and that the person Macapinlac referred to in the sheriff's certificate as
managing agent of the plaintiff company was an agent for the sale of plows, of which the
plaintiff company was a manufacturer; and that he had no other relations with the
company than that stated. During the course of the examination this question was put to
and answer elicited from this witness:
How do you know that they were not summoned, or that they did not know of this
case brought before the justice of the peace of the city of Manila?
I being the bookkeeper and the general attorney-in-fact to Vargas & Co., in Iloilo,
ought to know whether they have been notified or summoned, but I only knew
about it when the sheriff appeared in our office to make the levy.
This is the only witness who testified in the case. It does not appear when he became the
bookkeeper of the company, or that he was in such a position that he could know or did
know personally the acts of the company and its relations to Macapinlac. He does not
testify of his own knowledge to the essential facts necessary to controvert the statements
contained it the sheriff's certificate of service. His testimony is rather negative than
positive, it being at all times possible, in spite of his evidence, indeed, in strict accord
therewith, that Vargas & Co., of which the witness was neither official nor manager, could

have appointed a managing agent for the company or could have removed him without
the personal knowledge of the witness. The witness had no personal knowledge of the
relation between the company and Macapinlac. He never saw the contract existing
between them. He did not hear the agreement between them nor did he know of his own
knowledge what the relations between the company and Macapinlac were. His testimony
besides being negative in character has in it many of the elements of hearsay and is not
at all satisfactory. It would have been very easy to present one of the members of the
company, or all of them, who engaged Macapinlac, who know the relations between him
and the company, to testify as to what those relations were and to deny, if that were the
fact, that Macapinlac was such an agent or official of the company as is within the
purview of section 396 above referred to. The facts stated in the certificate of the sheriff
will not be considered as overcome and rebutted except on clear evidence showing the
contrary. The evidence of the bookkeeper, who is the only witness for the company, is not
satisfactory in any sense and is quite insufficient to overcome the presumption
established by the sheriff's certificate.
In view of these considerations it is not necessary to consider the question presented by
the payment by the plaintiff company of the judgment.
The judgment appealed from is reversed and the complaint dismissed on the merits,
without costs in this instance. So ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 11263

November 2, 1916

ELOISA GOITIA DE LA CAMARA, plaintiff-appellant,

vs.
JOSE CAMPOS RUEDA, defendant-appellee.
Eduardo Gutierrez Repide and Felix Socias for appellant.
Sanz, Opisso and Luzuriaga for appellee.

TRENT, J.:
This is an action by the wife against her husband for support outside of the conjugal
domicile. From a judgment sustaining the defendant's demurrer upon the ground that the
facts alleged in the complaint do not state a cause of action, followed by an order
dismissing the case after the plaintiff declined to amend, the latter appealed.
It was urged in the first instance, and the court so held, that the defendant cannot be
compelled to support the plaintiff, except in his own house, unless it be by virtue of a
judicial decree granting her a divorce or separation from the defendant.
The parties were legally married in the city of Manila on January 7, 1915, and
immediately thereafter established their residence at 115 Calle San Marcelino, where

they lived together for about a month, when the plaintiff returned to the home of her
parents. The pertinent allegations of the complaint are as follows:
That the defendant, one month after he had contracted marriage with the plaintiff,
demanded of her that she perform unchaste and lascivious acts on his genital
organs; that the plaintiff spurned the obscene demands of the defendant and
refused to perform any act other than legal and valid cohabitation; that the
defendant, since that date had continually on other successive dates, made
similar lewd and indecorous demands on his wife, the plaintiff, who always
spurned them, which just refusals of the plaintiff exasperated the defendant and
induce him to maltreat her by word and deed and inflict injuries upon her lips, her
face and different parts of her body; and that, as the plaintiff was unable by any
means to induce the defendant to desist from his repugnant desires and cease
from maltreating her, she was obliged to leave the conjugal abode and take
refuge in the home of her parents.
Marriage in this jurisdiction is a contract entered into in the manner and with the
solemnities established by General Orders No. 68, in so far as its civil effects are
concerned requiring the consent of the parties. (Garcia vs. Montague, 12 Phil. Rep., 480,
citing article 1261 of Civil Code.) Upon the termination of the marriage ceremony, a
conjugal partnership is formed between the parties. (Sy Joc Lieng vs. Encarnacion, 16
Phil. Rep., 137.) To this extent a marriage partakes of the nature of an ordinary contract.
But it is something more than a mere contract. It is a new relation, the rights, duties, and
obligations of which rest not upon the agreement of the parties but upon the general law
which defines and prescribes those rights, duties, and obligations .Marriage is an
institution, in the maintenance of which in its purity the public is deeply interested. It is a
relation for life and the parties cannot terminate it at any shorter period by virtue of any
contract they may make .The reciprocal rights arising from this relation, so long as it
continues, are such as the law determines from time to time, and none other. When the
legal existence of the parties is merged into one by marriage, the new relation is
regulated and controlled by the state or government upon principles of public policy for
the benefit of society as well as the parties. And when the object of a marriage is
defeated by rendering its continuance intolerable to one of the parties and productive of
no possible good to the community, relief in some way should be obtainable. With these
principles to guide us, we will inquire into the status of the law touching and governing
the question under consideration.
Articles 42 to 107 of the Civil Code are not in force in the Philippine Islands (Benedicto
vs. De la Rama, 3 Phil .Rep., 34). Articles 44 to 78 of the Law of Civil Marriage of 1870,
in force in the Peninsula, were extended to the Philippine Islands by royal decree on April
13, 1883 (Ebreo vs. Sichon, 4 Phil. Rep., 705). Articles 44, 45, and 48 of this law read:
ART. 44. The spouses are obliged to be faithful to each other and to mutually
assist each other.
ART. 45. The husband must live with and protect his wife. (The second paragraph
deals with the management of the wife's property.)
ART. 48. The wife must obey her husband, live with him, and follow him when he
charges his domicile or residence.
Notwithstanding the provisions of the foregoing paragraph, the court may for just
cause relieve her from this duty when the husband removes his residence to a
foreign country.
And articles 143 and 149 of the Civil Code are as follows:

ART. 143. The following are obliged to support each other reciprocally to the
whole extent specified in the preceding article.
1. The consorts.
xxx

xxx

xxx

ART. (149) 49. The person obliged to give support may, at his option, satisfy it,
either by paying the pension that may be fixed or by receiving and maintaining in
his own home the person having the right to the same.
Article 152 of the Civil Code gives the instances when the obligation to give support shall
cease. The failure of the wife to live with her husband is not one of them.
The above quoted provisions of the Law of Civil Marriage and the Civil Code fix the
duties and obligations of the spouses. The spouses must be faithful to, assist, and
support each other. The husband must live with and protect his wife. The wife must obey
and live with her husband and follow him when he changes his domicile or residence,
except when he removes to a foreign country. But the husband who is obliged to support
his wife may, at his option, do so by paying her a fixed pension or by receiving and
maintaining her in his own home. May the husband, on account of his conduct toward his
wife, lose this option and be compelled to pay the pension? Is the rule established by
article 149 of the Civil Code absolute? The supreme court of Spain in its decision of
December 5, 1903, held:.
That in accordance with the ruling of the supreme court of Spain in its decisions
dated May 11, 1897, November 25, 1899, and July 5, 1901, the option which
article 149 grants the person, obliged to furnish subsistence, between paying the
pension fixed or receiving and keeping in his own house the party who is entitled
to the same, is not so absolute as to prevent cases being considered wherein,
either because this right would be opposed to the exercise of a preferential right
or because of the existence of some justifiable cause morally opposed to the
removal of the party enjoying the maintenance, the right of selection must be
understood as being thereby restricted.
Whereas the only question discussed in the case which gave rise to this appeal
was whether there was any reason to prevent the exercise of the option granted
by article 149 of the Civil Code to the person obliged to furnish subsistence, to
receive and maintain in his own house the one who is entitled to receive it; and
inasmuch as nothing has been alleged or discussed with regard to the parental
authority of Pedro Alcantara Calvo, which he ha not exercised, and it having been
set forth that the natural father simply claims his child for the purpose of thus
better attending to her maintenance, no action having been taken by him toward
providing the support until, owing to such negligence, the mother was obliged to
demand it; it is seen that these circumstances, together with the fact of the
marriage of Pedro Alcantara, and that it would be difficult for the mother to
maintain relations with her daughter, all constitute an impediment of such a
nature as to prevent the exercise of the option in the present case, without
prejudice to such decision as may be deemed proper with regard to the other
questions previously cited in respect to which no opinion should be expressed at
this time.
The above was quoted with approval in United States and De Jesus vs. Alvir (9 Phil.
Rep., 576), wherein the court held that the rule laid down in article 149 of the Civil Code
"is not absolute." but it is insisted that there existed a preexisting or preferential right in
each of these cases which was opposed to the removal of the one entitled to support. It

is true that in the first the person claiming the option was the natural father of the child
and had married a woman other than the child's mother, and in the second the right to
support had already been established by a final judgment in a criminal case.
Notwithstanding these facts the two cases clearly established the proposition that the
option given by article 149 of the Civil Code may not be exercised in any and all cases.
Counsel for the defendant cite, in support of their contention, the decision of the supreme
court of Spain, dated November 3, 1905. In this case Don Berno Comas, as a result of
certain business reverses and in order no to prejudice his wife, conferred upon her
powers to administer and dispose of her property. When she left him he gave her all the
muniments of title, mortgage credits, notes, P10,000 in accounts receivable, and the key
to the safe in which he kept a large amount of jewels, thus depriving himself of all his
possessions and being reduced in consequence to want. Subsequently he instituted this
civil action against his wife, who was then living in opulence, for support and the
revocation of the powers heretofore granted in reference to the administration and
disposal of her property. In her answer the wife claimed that the plaintiff (her husband)
was not legally in a situation to claim support and that the powers voluntarily conferred
and accepted by her were bilateral and could not be canceled by the plaintiff. From a
judgment in favor of the plaintiff the defendant wife appealed to the Audencia
Territorial wherein, after due trial, judgment was rendered in her favor dismissing the
action upon the merits. The plaintiff appealed to the supreme court and that high tribunal,
in affirming the judgment of the Audencia Territorial, said:
Considering that article 143, No. 1, of the Civil Code, providing that the spouses
are mutually obliged to provide each other with support, cannot but be
subordinate to the other provisions of said Code which regulates the family
organization and the duties of spouses not legally separated, among which duties
are those of their living together and mutually helping each other, as provided in
article 56 of the aforementioned code; and taking this for granted, the obligation
of the spouse who has property to furnish support to the one who has no property
and is in need of it for subsistence, is to be understood as limited to the case
where, in accordance with law, their separation has been decreed, either
temporarily or finally and this case, with respect to the husband, cannot occur
until a judgment of divorce is rendered, since, until then, if he is culpable, he is
not deprived of the management of his wife's property and of the product of the
other property belonging to the conjugal partnership; and
Considering that, should the doctrine maintained in the appeal prevail, it would
allow married persons to disregard the marriage bond and separate from each
other of their own free will, thus establishing, contrary to the legal provision
contained in said article 56 of the Civil Code, a legal status entirely incompatible
with the nature and effects of marriage in disregard of the duties inherent therein
and disturbing the unity of the family, in opposition to what the law, in conformity
with good morals, has established; and.
Considering that, as the spouses D. Ramon Benso and Doa Adela Galindo are
not legally separated, it is their duty to live together and afford each other help
and support; and for this reason, it cannot be held that the former has need of
support from his wife so that he may live apart from her without the conjugal
abode where it is his place to be, nor of her conferring power upon him to dispose
even of the fruits of her property in order therewith to pay the matrimonial
expenses and, consequently, those of his own support without need of going to
his wife; wherefore the judgment appealed from, denying the petition of D.
Ramon Benso for support, has not violated the articles of the Civil Code and the
doctrine invoked in the assignments of error 1 and 5 of the appeal.

10

From a careful reading of the case just cited and quoted from it appears quite clearly that
the spouses separated voluntarily in accordance with an agreement previously made. At
least there are strong indications to this effect, for the court says, "should the doctrine
maintained in the appeal prevail, it would allow married persons to disregard the
marriage bond and separate from each other of their own free will." If this be the true
basis upon which the supreme court of Spain rested its decision, then the doctrine
therein enunciated would not be controlling in cases where one of the spouses was
compelled to leave the conjugal abode by the other or where the husband voluntarily
abandons such abode and the wife seeks to force him to furnish support. That this is true
appears from the decision of the same high tribunal, dated October 16, 1903. In this case
the wife brought an action for support against her husband who had willfully and
voluntarily abandoned the conjugal abode without any cause whatever. The supreme
court, reversing the judgment absolving the defendant upon the ground that no action for
divorce, etc., had been instituted, said:
In the case at bar, it has been proven that it was Don Teodoro Exposito who left
the conjugal abode, although he claims, without however proving his contention,
that the person responsible for this situation was his wife, as she turned him out
of the house. From this state of affairs it results that it is the wife who is party
abandoned, the husband not having prosecuted any action to keep her in his
company and he therefore finds himself, as long as he consents to the situation,
under the ineluctable obligation to support his wife in fulfillment of the natural duty
sanctioned in article 56 of the Code in relation with paragraph 1 of article 143. In
not so holding, the trial court, on the mistaken ground that for the fulfillment of this
duty the situation or relation of the spouses should be regulated in the manner it
indicates, has made the errors of law assigned in the first three grounds alleged,
because the nature of the duty of affording mutual support is compatible and
enforcible in all situations, so long as the needy spouse does not create any illicit
situation of the court above described.
lawphil.net

If we are in error as to the doctrine enunciated by the supreme court of Spain in its
decision of November 3, 1905, and if the court did hold, as contended by counsel for the
defendant in the case under consideration, that neither spouse can be compelled to
support the other outside of the conjugal abode, unless it be by virtue of a final judgment
granting the injured one a divorce or separation from the other, still such doctrine or
holding would not necessarily control in this jurisdiction for the reason that the
substantive law is not in every particular the same here as it is in Spain. As we have
already stated, articles 42 to 107 of the Civil Code in force in the Peninsula are not in
force in the Philippine Islands. The law governing the duties and obligations of husband
and wife in this country are articles 44 to 78 of the Law of Civil Marriage of 1870 .In Spain
the complaining spouse has, under article 105 of the Civil Code, various causes for
divorce, such as adultery on the part of the wife in every case and on the part of the
husband when public scandal or disgrace of the wife results therefrom; personal violence
actually inflicted or grave insults: violence exercised by the husband toward the wife in
order to force her to change her religion; the proposal of the husband to prostitute his
wife; the attempts of the husband or wife to corrupt their sons or to prostitute their
daughters; the connivance in their corruption or prostitution; and the condemnation of a
spouse to perpetual chains or hard labor, while in this jurisdiction the only ground for a
divorce is adultery. (Benedicto vs. De la Rama, 3 Phil .Rep., 34, 45.) This positive and
absolute doctrine was announced by this court in the case just cited after an exhaustive
examination of the entire subject. Although the case was appealed to the Supreme Court
of the United States and the judgment rendered by this court was there reversed, the
reversal did not affect in any way or weaken the doctrine in reference to adultery being
the only ground for a divorce. And since the decision was promulgated by this court in
that case in December, 1903, no change or modification of the rule has been announced.
It is, therefore, the well settled and accepted doctrine in this jurisdiction.

11

But it is argued that to grant support in an independent suit is equivalent to granting

divorce or separation, as it necessitates a determination of the question whether the wife
has a good and sufficient cause for living separate from her husband; and, consequently,
if a court lacks power to decree a divorce, as in the instant case, power to grant a
separate maintenance must also be lacking. The weakness of this argument lies in the
assumption that the power to grant support in a separate action is dependent upon a
power to grant a divorce. That the one is not dependent upon the other is apparent from
the very nature of the marital obligations of the spouses. The mere act of marriage
creates an obligation on the part of the husband to support his wife. This obligation is
founded not so much on the express or implied terms of the contract of marriage as on
the natural and legal duty of the husband; an obligation, the enforcement of which is of
such vital concern to the state itself that the laws will not permit him to terminate it by his
own wrongful acts in driving his wife to seek protection in the parental home. A judgment
for separate maintenance is not due and payable either as damages or as a penalty; nor
is it a debt in the strict legal sense of the term, but rather a judgment calling for the
performance of a duty made specific by the mandate of the sovereign. This is done from
necessity and with a view to preserve the public peace and the purity of the wife; as
where the husband makes so base demands upon his wife and indulges in the habit of
assaulting her. The pro tanto separation resulting from a decree for separate support is
not an impeachment of that public policy by which marriage is regarded as so sacred and
inviolable in its nature; it is merely a stronger policy overruling a weaker one; and except
in so far only as such separation is tolerated as a means of preserving the public peace
and morals may be considered, it does not in any respect whatever impair the marriage
contract or for any purpose place the wife in the situation of a feme sole.
The foregoing are the grounds upon which our short opinion and order for judgment,
heretofore filed in this case, rest.
Torres, Johnson and Carson, JJ., concur.

CIR VS. SUTER

FACTS:A limited partnership named William J. Suter 'Morcoin' Co., Ltd was formed
30September 1947 by William J. Suter as the general partner, and Julia Spirig
andGustav Carlson. They contributed, respectively, P20,000.00, P18,000.00 andP2,000.
00. it was also duly registered with the SEC. On 1948 Suter and Spirig gotmarried and in
effect Carlson sold his share to the couple, the same was alsoregistered with the
SEC. The limited partnership had been filing its income tax returns as acorporation,
without objection by the herein petitioner, Commissioner of InternalRevenue, until in 1959
when the latter, in an assessment, consolidated the incomeof the firm and the individual
incomes of the partners-spouses Suter and Spirigresulting in a determination of a
deficiency income tax against respondent Suter inthe amount of P2,678.06 for 1954
and P4,567.00 for 1955.
ISSUE:Whether or not the limited partnership has been dissolved after the marriageof
Suter and Spirig and buying the interest of limited partner Carlson.
RULING:No, the limited partnership was not
dissolved.A husband and a wife may not enter into a contract of generalcopartnership, b
ecause under the Civil Code, which applies in the absence of express provision in the Co
de of Commerce, persons prohibited from makingdonations to each other are prohibited

12

from entering into universal partnerships. (2Echaverri 196) It follows that the marriage of
partners necessarily brings about thedissolution of a pre-existing partnership.
What the law prohibits was when the spouses entered into a generalpartnership. In
the case at bar, the partnership was limited

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 15574

September 17, 1919

SMITH, BELL & COMPANY (LTD.), petitioner,

vs.
JOAQUIN NATIVIDAD, Collector of Customs of the port of Cebu, respondent.
Ross and Lawrence for petitioner.
Attorney-General Paredes for respondent.
MALCOLM, J.:
A writ of mandamus is prayed for by Smith, Bell & Co. (Ltd.), against Joaquin Natividad,
Collector of Customs of the port of Cebu, Philippine Islands, to compel him to issue a
certificate of Philippine registry to the petitioner for its motor vessel Bato. The AttorneyGeneral, acting as counsel for respondent, demurs to the petition on the general ground
that it does not state facts sufficient to constitute a cause of action. While the facts are
thus admitted, and while, moreover, the pertinent provisions of law are clear and
understandable, and interpretative American jurisprudence is found in abundance, yet the
issue submitted is not lightly to be resolved. The question, flatly presented, is, whether
Act. No. 2761 of the Philippine Legislature is valid or, more directly stated, whether the
Government of the Philippine Islands, through its Legislature, can deny the registry of
vessels in its coastwise trade to corporations having alien stockholders.
FACTS.
Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the
Philippine Islands. A majority of its stockholders are British subjects. It is the owner of a
motor vessel known as the Bato built for it in the Philippine Islands in 1916, of more than
fifteen tons gross The Bato was brought to Cebu in the present year for the purpose of
transporting plaintiff's merchandise between ports in the Islands. Application was made at
Cebu, the home port of the vessel, to the Collector of Customs for a certificate of
Philippine registry. The Collector refused to issue the certificate, giving as his reason that
all the stockholders of Smith, Bell & Co., Ltd., were not citizens either of the United
States or of the Philippine Islands. The instant action is the result.
LAW.
The Act of Congress of April 29, 1908, repealing the Shipping Act of April 30, 1906 but
reenacting a portion of section 3 of this Law, and still in force, provides in its section 1:
That until Congress shall have authorized the registry as vessels of the United
States of vessels owned in the Philippine Islands, the Government of the

13

Philippine Islands is hereby authorized to adopt, from time to time, and enforce
regulations governing the transportation of merchandise and passengers
between ports or places in the Philippine Archipelago. (35 Stat. at L., 70; Section
3912, U. S. Comp Stat. [1916]; 7 Pub. Laws, 364.)
The Act of Congress of August 29, 1916, commonly known as the Jones Law, still in
force, provides in section 3, (first paragraph, first sentence), 6, 7, 8, 10, and 31, as
follows.
SEC. 3. That no law shall be enacted in said Islands which shall deprive any
person of life, liberty, or property without due process of law, or deny to any
person therein the equal protection of the laws. . . .
SEC. 6. That the laws now in force in the Philippines shall continue in force and
effect, except as altered, amended, or modified herein, until altered, amended, or
repealed by the legislative authority herein provided or by Act of Congress of the
United States.
SEC. 7. That the legislative authority herein provided shall have power, when not
inconsistent with this Act, by due enactment to amend, alter modify, or repeal any
law, civil or criminal, continued in force by this Act as it may from time to time see
fit
This power shall specifically extend with the limitation herein provided as to the
tariff to all laws relating to revenue provided as to the tariff to all laws relating to
revenue and taxation in effect in the Philippines.
SEC. 8. That general legislative power, except as otherwise herein provided, is
hereby granted to the Philippine Legislature, authorized by this Act.
SEC. 10. That while this Act provides that the Philippine government shall have
the authority to enact a tariff law the trade relations between the islands and the
United States shall continue to be governed exclusively by laws of the Congress
of the United States: Provided, That tariff acts or acts amendatory to the tariff of
the Philippine Islands shall not become law until they shall receive the approval of
the President of the United States, nor shall any act of the Philippine Legislature
affecting immigration or the currency or coinage laws of the Philippines become a
law until it has been approved by the President of the United States: Provided
further, That the President shall approve or disapprove any act mentioned in the
foregoing proviso within six months from and after its enactment and submission
for his approval, and if not disapproved within such time it shall become a law the
same as if it had been specifically approved.
SEC. 31. That all laws or parts of laws applicable to the Philippines not in conflict
with any of the provisions of this Act are hereby continued in force and effect." (39
Stat at L., 546.)
On February 23, 1918, the Philippine Legislature enacted Act No. 2761. The first section
of this law amended section 1172 of the Administrative Code to read as follows:
SEC. 1172. Certificate of Philippine register. Upon registration of a vessel of
domestic ownership, and of more than fifteen tons gross, a certificate of
Philippine register shall be issued for it. If the vessel is of domestic ownership
and of fifteen tons gross or less, the taking of the certificate of Philippine register
shall be optional with the owner.

14

"Domestic ownership," as used in this section, means ownership vested in some

one or more of the following classes of persons: (a) Citizens or native inhabitants
of the Philippine Islands; (b) citizens of the United States residing in the
Philippine Islands; (c) any corporation or company composed wholly of citizens of
the Philippine Islands or of the United States or of both, created under the laws of
the United States, or of any State thereof, or of thereof, or the managing agent or
master of the vessel resides in the Philippine Islands
Any vessel of more than fifteen gross tons which on February eighth, nineteen
hundred and eighteen, had a certificate of Philippine register under existing law,
shall likewise be deemed a vessel of domestic ownership so long as there shall
not be any change in the ownership thereof nor any transfer of stock of the
companies or corporations owning such vessel to person not included under the
last preceding paragraph.
Sections 2 and 3 of Act No. 2761 amended sections 1176 and 1202 of the Administrative
Code to read as follows:
SEC. 1176. Investigation into character of vessel. No application for a
certificate of Philippine register shall be approved until the collector of customs is
satisfied from an inspection of the vessel that it is engaged or destined to be
engaged in legitimate trade and that it is of domestic ownership as such
ownership is defined in section eleven hundred and seventy-two of this Code.
The collector of customs may at any time inspect a vessel or examine its owner,
master, crew, or passengers in order to ascertain whether the vessel is engaged
in legitimate trade and is entitled to have or retain the certificate of Philippine
register.
SEC. 1202. Limiting number of foreign officers and engineers on board vessels.
No Philippine vessel operating in the coastwise trade or on the high seas shall
be permitted to have on board more than one master or one mate and one
engineer who are not citizens of the United States or of the Philippine Islands,
even if they hold licenses under section one thousand one hundred and ninetynine hereof. No other person who is not a citizen of the United States or of the
Philippine Islands shall be an officer or a member of the crew of such vessel. Any
such vessel which fails to comply with the terms of this section shall be required
to pay an additional tonnage tax of fifty centavos per net ton per month during the
continuance of said failure.
ISSUES.
Predicated on these facts and provisions of law, the issues as above stated recur,
namely, whether Act No 2761 of the Philippine Legislature is valid in whole or in part
whether the Government of the Philippine Islands, through its Legislature, can deny the
registry of vessel in its coastwise trade to corporations having alien stockholders .
OPINION.
1. Considered from a positive standpoint, there can exist no measure of doubt as to the
power of the Philippine Legislature to enact Act No. 2761. The Act of Congress of April
29, 1908, with its specific delegation of authority to the Government of the Philippine
Islands to regulate the transportation of merchandise and passengers between ports or
places therein, the liberal construction given to the provisions of the Philippine Bill, the
Act of Congress of July 1, 1902, by the courts, and the grant by the Act of Congress of
August 29, 1916, of general legislative power to the Philippine Legislature, are certainly

15

superabundant authority for such a law. While the Act of the local legislature may in a
way be inconsistent with the Act of Congress regulating the coasting trade of the
Continental United States, yet the general rule that only such laws of the United States
have force in the Philippines as are expressly extended thereto, and the abnegation of
power by Congress in favor of the Philippine Islands would leave no starting point for
convincing argument. As a matter of fact, counsel for petitioner does not assail legislative
action from this direction (See U. S. vs. Bull [1910], 15 Phil., 7; Sinnot vs. Davenport
[1859] 22 How., 227.)
2. It is from the negative, prohibitory standpoint that counsel argues against the
constitutionality of Act No. 2761. The first paragraph of the Philippine Bill of Rights of the
Philippine Bill, repeated again in the first paragraph of the Philippine Bill of Rights as set
forth in the Jones Law, provides "That no law shall be enacted in said Islands which shall
deprive any person of life, liberty, or property without due process of law, or deny to any
person therein the equal protection of the laws." Counsel says that Act No. 2761 denies
to Smith, Bell & Co., Ltd., the equal protection of the laws because it, in effect, prohibits
the corporation from owning vessels, and because classification of corporations based on
the citizenship of one or more of their stockholders is capricious, and that Act No. 2761
deprives the corporation of its properly without due process of law because by the
passage of the law company was automatically deprived of every beneficial attribute of
ownership in the Bato and left with the naked title to a boat it could not use .
The guaranties extended by the Congress of the United States to the Philippine Islands
have been used in the same sense as like provisions found in the United States
Constitution. While the "due process of law and equal protection of the laws" clause of
the Philippine Bill of Rights is couched in slightly different words than the corresponding
clause of the Fourteenth Amendment to the United States Constitution, the first should be
interpreted and given the same force and effect as the latter. (Kepner vs. U.S. [1904],
195 U. S., 100; Sierra vs. Mortiga [1907], 204 U. S.,.470; U. S. vs. Bull [1910], 15 Phil.,
7.) The meaning of the Fourteenth Amendment has been announced in classic decisions
of the United States Supreme Court. Even at the expense of restating what is so well
known, these basic principles must again be set down in order to serve as the basis of
this decision.
The guaranties of the Fourteenth Amendment and so of the first paragraph of the
Philippine Bill of Rights, are universal in their application to all person within the territorial
jurisdiction, without regard to any differences of race, color, or nationality. The word
"person" includes aliens. (Yick Wo vs. Hopkins [1886], 118 U. S., 356; Truax vs. Raich
[1915], 239 U. S., 33.) Private corporations, likewise, are "persons" within the scope of
the guaranties in so far as their property is concerned. (Santa Clara County vs. Southern
Pac. R. R. Co. [1886], 118.U. S., 394; Pembina Mining Co. vs. Pennsylvania [1888],.125
U. S., 181 Covington & L. Turnpike Road Co. vs. Sandford [1896], 164 U. S., 578.)
Classification with the end in view of providing diversity of treatment may be made
among corporations, but must be based upon some reasonable ground and not be a
mere arbitrary selection (Gulf, Colorado & Santa Fe Railway Co. vs. Ellis [1897],.165 U.
S., 150.) Examples of laws held unconstitutional because of unlawful discrimination
against aliens could be cited. Generally, these decisions relate to statutes which had
attempted arbitrarily to forbid aliens to engage in ordinary kinds of business to earn their
living. (State vs. Montgomery [1900], 94 Maine, 192, peddling but see.
Commonwealth vs. Hana [1907], 195 Mass., 262; Templar vs. Board of Examiners of
Barbers [1902], 131 Mich., 254, barbers; Yick Wo vs. Hopkins [1886], 118 U. S.,.356,
discrimination against Chinese; Truax vs. Raich [1915], 239 U. S., 33; In re Parrott
[1880], 1 Fed , 481; Fraser vs. McConway & Torley Co. [1897], 82 Fed , 257; Juniata
Limestone Co. vs. Fagley [1898], 187 Penn., 193, all relating to the employment of aliens
by private corporations.)

16

A literal application of general principles to the facts before us would, of course, cause
the inevitable deduction that Act No. 2761 is unconstitutional by reason of its denial to a
corporation, some of whole members are foreigners, of the equal protection of the laws.
Like all beneficient propositions, deeper research discloses provisos. Examples of a
denial of rights to aliens notwithstanding the provisions of the Fourteenth Amendment
could be cited. (Tragesser vs.Gray [1890], 73 Md., 250, licenses to sell spirituous liquors
denied to persons not citizens of the United States; Commonwealth vs. Hana [1907], 195
Mass , 262, excluding aliens from the right to peddle; Patsone vs.Commonwealth of
Pennsylvania [1914], 232 U. S. , 138, prohibiting the killing of any wild bird or animal by
any unnaturalized foreign-born resident; Ex parte Gilleti [1915], 70 Fla., 442,
discriminating in favor of citizens with reference to the taking for private use of the
common property in fish and oysters found in the public waters of the State;
Heim vs. McCall [1915], 239 U. S.,.175, and Crane vs. New York [1915], 239 U. S., 195,
limiting employment on public works by, or for, the State or a municipality to citizens of
the United States.)
One of the exceptions to the general rule, most persistent and far reaching in influence is,
that neither the Fourteenth Amendment to the United States Constitution, broad and
comprehensive as it is, nor any other amendment, "was designed to interfere with the
power of the State, sometimes termed its `police power,' to prescribe regulations to
promote the health, peace, morals, education, and good order of the people, and
legislate so as to increase the industries of the State, develop its resources and add to its
wealth and prosperity. From the very necessities of society, legislation of a special
character, having these objects in view, must often be had in certain districts."
(Barbier vs. Connolly [1884], 113 U.S., 27; New Orleans Gas Co. vs. Lousiana Light Co.
[1885], 115 U.S., 650.) This is the same police power which the United States Supreme
Court say "extends to so dealing with the conditions which exist in the state as to bring
out of them the greatest welfare in of its people." (Bacon vs.Walker [1907], 204 U.S.,
311.) For quite similar reasons, none of the provision of the Philippine Organic Law could
could have had the effect of denying to the Government of the Philippine Islands, acting
through its Legislature, the right to exercise that most essential, insistent, and illimitable
of powers, the sovereign police power, in the promotion of the general welfare and the
public interest. (U. S. vs. Toribio [1910], 15 Phil., 85; Churchill and Tait vs. Rafferty [1915],
32 Phil., 580; Rubi vs. Provincial Board of Mindoro [1919], 39 Phil., 660.) Another notable
exception permits of the regulation or distribution of the public domain or the common
property or resources of the people of the State, so that use may be limited to its citizens.
(Ex parte Gilleti [1915], 70 Fla., 442; McCready vs. Virginia [1876], 94 U. S., 391;
Patsone vs. Commonwealth of Pennsylvania [1914], 232U. S., 138.) Still another
exception permits of the limitation of employment in the construction of public works by,
or for, the State or a municipality to citizens of the United States or of the State.
(Atkin vs. Kansas [1903],191 U. S., 207; Heim vs. McCall [1915], 239 U.S., 175;
Cranevs. New York [1915], 239 U. S., 195.) Even as to classification, it is admitted that a
State may classify with reference to the evil to be prevented; the question is a practical
one, dependent upon experience. (Patsone vs.Commonwealth of Pennsylvania [1914],
232 U. S., 138.)
To justify that portion of Act no. 2761 which permits corporations or companies to obtain a
certificate of Philippine registry only on condition that they be composed wholly of citizens
of the Philippine Islands or of the United States or both, as not infringing Philippine
Organic Law, it must be done under some one of the exceptions here mentioned This
must be done, moreover, having particularly in mind what is so often of controlling effect
in this jurisdiction our local experience and our peculiar local conditions.
To recall a few facts in geography, within the confines of Philippine jurisdictional limits are
found more than three thousand islands. Literally, and absolutely, steamship lines are, for
an Insular territory thus situated, the arteries of commerce. If one be severed, the lifeblood of the nation is lost. If on the other hand these arteries are protected, then the

17

security of the country and the promotion of the general welfare is sustained. Time and
again, with such conditions confronting it, has the executive branch of the Government of
the Philippine Islands, always later with the sanction of the judicial branch, taken a firm
stand with reference to the presence of undesirable foreigners. The Government has
thus assumed to act for the all-sufficient and primitive reason of the benefit and
protection of its own citizens and of the self-preservation and integrity of its dominion. (In
re Patterson [1902], 1 Phil., 93; Forbes vs.Chuoco, Tiaco and Crossfield [1910], 16 Phil.,
534;.228 U.S., 549; In re McCulloch Dick [1918], 38 Phil., 41.) Boats owned by
foreigners, particularly by such solid and reputable firms as the instant claimant, might
indeed traverse the waters of the Philippines for ages without doing any particular harm.
Again, some evilminded foreigner might very easily take advantage of such lavish
hospitality to chart Philippine waters, to obtain valuable information for unfriendly foreign
powers, to stir up insurrection, or to prejudice Filipino or American commerce. Moreover,
under the Spanish portion of Philippine law, the waters within the domestic jurisdiction
are deemed part of the national domain, open to public use. (Book II, Tit. IV, Ch. I, Civil
Code; Spanish Law of Waters of August 3, 1866, arts 1, 2, 3.) Common carriers which in
the Philippines as in the United States and other countries are, as Lord Hale said,
"affected with a public interest," can only be permitted to use these public waters as a
privilege and under such conditions as to the representatives of the people may seem
wise. (See De Villata vs. Stanley [1915], 32 Phil., 541.)
In Patsone vs. Commonwealth of Pennsylvania ([1913], 232 U.S., 138), a case herein
before mentioned, Justice Holmes delivering the opinion of the United States Supreme
Court said:
This statute makes it unlawful for any unnaturalized foreign-born resident to kill
any wild bird or animal except in defense of person or property, and `to that end'
makes it unlawful for such foreign-born person to own or be possessed of a
shotgun or rifle; with a penalty of $25 and a forfeiture of the gun or guns. The
plaintiff in error was found guilty and was sentenced to pay the abovementioned
fine. The judgment was affirmed on successive appeals. (231 Pa., 46; 79 Atl.,
928.) He brings the case to this court on the ground that the statute is contrary to
the 14th Amendment and also is in contravention of the treaty between the United
States and Italy, to which latter country the plaintiff in error belongs .
Under the 14th Amendment the objection is twofold; unjustifiably depriving the
alien of property, and discrimination against such aliens as a class. But the former
really depends upon the latter, since it hardly can be disputed that if the lawful
object, the protection of wild life (Geer vs. Connecticut, 161 U.S., 519; 40 L. ed.,
793; 16 Sup. Ct. Rep., 600), warrants the discrimination, the, means adopted for
making it effective also might be adopted. . . .
The discrimination undoubtedly presents a more difficult question. But we start
with reference to the evil to be prevented, and that if the class discriminated
against is or reasonably might be considered to define those from whom the evil
mainly is to be feared, it properly may be picked out. A lack of abstract symmetry
does not matter. The question is a practical one, dependent upon experience. . . .
The question therefore narrows itself to whether this court can say that the
legislature of Pennsylvania was not warranted in assuming as its premise for the
law that resident unnaturalized aliens were the peculiar source of the evil that it
desired to prevent. (Barrett vs. Indiana,. 229 U.S., 26, 29; 57 L. ed., 1050, 1052;
33 Sup. Ct. Rep., 692.)
Obviously the question, so stated, is one of local experience, on which this court
ought to be very slow to declare that the state legislature was wrong in its facts

18

(Adams vs. Milwaukee, 228 U.S., 572, 583; 57 L. ed., 971,.977; 33 Sup. Ct. Rep.,
610.) If we might trust popular speech in some states it was right; but it is enough
that this court has no such knowledge of local conditions as to be able to say that
it was manifestly wrong. . . .
Judgment affirmed.
We are inclined to the view that while Smith, Bell & Co. Ltd., a corporation having alien
stockholders, is entitled to the protection afforded by the due-process of law and equal
protection of the laws clause of the Philippine Bill of Rights, nevertheless, Act No. 2761 of
the Philippine Legislature, in denying to corporations such as Smith, Bell &. Co. Ltd., the
right to register vessels in the Philippines coastwise trade, does not belong to that vicious
species of class legislation which must always be condemned, but does fall within
authorized exceptions, notably, within the purview of the police power, and so does not
offend against the constitutional provision.
This opinion might well be brought to a close at this point. It occurs to us, however, that
the legislative history of the United States and the Philippine Islands, and, probably, the
legislative history of other countries, if we were to take the time to search it out, might
disclose similar attempts at restriction on the right to enter the coastwise trade, and might
thus furnish valuable aid by which to ascertain and, if possible, effectuate legislative
intention.
3. The power to regulate commerce, expressly delegated to the Congress by the
Constitution, includes the power to nationalize ships built and owned in the
United States by registries and enrollments, and the recording of the muniments
of title of American vessels. The Congress "may encourage or it may entirely
prohibit such commerce, and it may regulate in any way it may see fit between
these two extremes." (U.S. vs.Craig [1886], 28 Fed., 795; Gibbons vs. Ogden
[1824], 9 Wheat., 1; The Passenger Cases [1849], 7 How., 283.)
Acting within the purview of such power, the first Congress of the United States had not
been long convened before it enacted on September 1, 1789, "An Act for Registering and
Clearing Vessels, Regulating the Coasting Trade, and for other purposes." Section 1 of
this law provided that for any ship or vessel to obtain the benefits of American registry, it
must belong wholly to a citizen or citizens of the United States "and no other." (1 Stat. at
L., 55.) That Act was shortly after repealed, but the same idea was carried into the Acts of
Congress of December 31, 1792 and February 18, 1793. (1 Stat. at L., 287, 305.).Section
4 of the Act of 1792 provided that in order to obtain the registry of any vessel, an oath
shall be taken and subscribed by the owner, or by one of the owners thereof, before the
officer authorized to make such registry, declaring, "that there is no subject or citizen of
any foreign prince or state, directly or indirectly, by way of trust, confidence, or otherwise,
interested in such vessel, or in the profits or issues thereof." Section 32 of the Act of 1793
even went so far as to say "that if any licensed ship or vessel shall be transferred to any
person who is not at the time of such transfer a citizen of and resident within the United
States, ... every such vessel with her tackle, apparel, and furniture, and the cargo found
on board her, shall be forefeited." In case of alienation to a foreigner, Chief Justice
Marshall said that all the privileges of an American bottom were ipso
facto forfeited. (U.S. vs. Willings and Francis [1807], 4 Cranch, 48.) Even as late as 1873,
the Attorney-General of the United States was of the opinion that under the provisions of
the Act of December 31, 1792, no vessel in which a foreigner is directly or indirectly
interested can lawfully be registered as a vessel of the United. States. (14 Op. Atty.-Gen.
[U.S.], 340.)
These laws continued in force without contest, although possibly the Act of March 3,
1825, may have affected them, until amended by the Act of May 28, 1896 (29 Stat. at L.,

19

188) which extended the privileges of registry from vessels wholly owned by a citizen or
citizens of the United States to corporations created under the laws of any of the states
thereof. The law, as amended, made possible the deduction that a vessel belonging to a
domestic corporation was entitled to registry or enrollment even though some stock of the
company be owned by aliens. The right of ownership of stock in a corporation was
thereafter distinct from the right to hold the property by the corporation
(Humphreys vs. McKissock [1890], 140 U.S., 304; Queen vs. Arnaud [1846], 9 Q. B.,
806; 29 Op. Atty.-Gen. [U.S.],188.)
On American occupation of the Philippines, the new government found a substantive law
in operation in the Islands with a civil law history which it wisely continued in force Article
fifteen of the Spanish Code of Commerce permitted any foreigner to engage in Philippine
trade if he had legal capacity to do so under the laws of his nation. When the Philippine
Commission came to enact the Customs Administrative Act (No. 355) in 1902, it returned
to the old American policy of limiting the protection and flag of the United States to
vessels owned by citizens of the United States or by native inhabitants of the Philippine
Islands (Sec. 117.) Two years later, the same body reverted to the existing Congressional
law by permitting certification to be issued to a citizen of the United States or to a
corporation or company created under the laws of the United States or of any state
thereof or of the Philippine Islands (Act No. 1235, sec. 3.) The two administration codes
repeated the same provisions with the necessary amplification of inclusion of citizens or
native inhabitants of the Philippine Islands (Adm. Code of 1916, sec. 1345; Adm. Code of
1917, sec. 1172). And now Act No. 2761 has returned to the restrictive idea of the original
Customs Administrative Act which in turn was merely a reflection of the statutory
language of the first American Congress.
Provisions such as those in Act No. 2761, which deny to foreigners the right to a
certificate of Philippine registry, are thus found not to be as radical as a first reading
would make them appear.
Without any subterfuge, the apparent purpose of the Philippine Legislature is seen to be
to enact an anti-alien shipping act. The ultimate purpose of the Legislature is to
encourage Philippine ship-building. This, without doubt, has, likewise, been the intention
of the United States Congress in passing navigation or tariff laws on different occasions.
The object of such a law, the United States Supreme Court once said, was to encourage
American trade, navigation, and ship-building by giving American ship-owners exclusive
privileges. (Old Dominion Steamship Co. vs.Virginia [1905], 198 U.S., 299; Kent's
Commentaries, Vol. 3, p. 139.)
In the concurring opinion of Justice Johnson in Gibbons vs. Ogden ([1824], 9 Wheat., 1)
is found the following:
Licensing acts, in fact, in legislation, are universally restraining acts; as, for
example, acts licensing gaming houses, retailers of spirituous liquors, etc. The
act, in this instance, is distinctly of that character, and forms part of an extensive
system, the object of which is to encourage American shipping, and place them
on an equal footing with the shipping of other nations. Almost every commercial
nation reserves to its own subjects a monopoly of its coasting trade; and a
countervailing privilege in favor of American shipping is contemplated, in the
whole legislation of the United States on this subject. It is not to give the vessel
an American character, that the license is granted; that effect has been correctly
attributed to the act of her enrollment. But it is to confer on her American
privileges, as contradistinguished from foreign; and to preserve the. Government
from fraud by foreigners, in surreptitiously intruding themselves into the American
commercial marine, as well as frauds upon the revenue in the trade coastwise,
that this whole system is projected.

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The United States Congress in assuming its grave responsibility of legislating wisely for a
new country did so imbued with a spirit of Americanism. Domestic navigation and trade, it
decreed, could only be carried on by citizens of the United States. If the representatives
of the American people acted in this patriotic manner to advance the national policy, and
if their action was accepted without protest in the courts, who can say that they did not
enact such beneficial laws under the all-pervading police power, with the prime motive of
safeguarding the country and of promoting its prosperity? Quite similarly, the Philippine
Legislature made up entirely of Filipinos, representing the mandate of the Filipino people
and the guardian of their rights, acting under practically autonomous powers, and imbued
with a strong sense of Philippinism, has desired for these Islands safety from foreign
interlopers, the use of the common property exclusively by its citizens and the citizens of
the United States, and protection for the common good of the people. Who can say,
therefore, especially can a court, that with all the facts and circumstances affecting the
Filipino people before it, the Philippine Legislature has erred in the enactment of Act No.
2761?
Surely, the members of the judiciary are not expected to live apart from active life, in
monastic seclusion amidst dusty tomes and ancient records, but, as keen spectators of
passing events and alive to the dictates of the general the national welfare, can
incline the scales of their decisions in favor of that solution which will most effectively
promote the public policy. All the presumption is in favor of the constitutionally of the law
and without good and strong reasons, courts should not attempt to nullify the action of
the Legislature. "In construing a statute enacted by the Philippine Commission
(Legislature), we deem it our duty not to give it a construction which would be repugnant
to an Act of Congress, if the language of the statute is fairly susceptible of another
construction not in conflict with the higher law." (In re Guaria [1913], 24. Phil., 36;
U.S. vs. Ten Yu [1912], 24 Phil., 1.) That is the true construction which will best carry
legislative intention into effect.
With full consciousness of the importance of the question, we nevertheless are clearly of
the opinion that the limitation of domestic ownership for purposes of obtaining a
certificate of Philippine registry in the coastwise trade to citizens of the Philippine Islands,
and to citizens of the United States, does not violate the provisions of paragraph 1 of
section 3 of the Act of Congress of August 29, 1916 No treaty right relied upon Act No.
2761 of the Philippine Legislature is held valid and constitutional .
Bache&CoVs.Ruiz
FACTS:

On 24 Feb 1970, Commissioner Vera of Internal Revenue, wrote a letter

addressed to J Ruiz requesting the issuance of a search warrant against
petitioners for violation of Sec 46(a) of the NIRC, in relation to all other
pertinent provisions thereof, particularly Sects 53, 72, 73, 208 and 209,
and authorizing Revenue Examiner de Leon make and file the
application for search warrant which was attached to the letter. The
next day, de Leon and his witnesses went to CFI Rizal to obtain the
search warrant. At that time J Ruiz was hearing a certain case; so, by
means of a note, he instructed his Deputy Clerk of Court to take the
depositions of De Leon and Logronio. After the session had adjourned, J
Ruiz was informed that the depositions had already been taken. The

21

stenographer read to him her stenographic notes; and thereafter, J Ruiz

asked respondent Logronio to take the oath and warned him that if his
deposition was found to be false and without legal basis, he could be
charged for perjury. J Ruiz signed de Leons application for search
warrant and Logronios deposition. The search was subsequently
conducted.
ISSUE: Whether or not there had been a valid search warrant.
HELD: The SC ruled in favor of Bache on three grounds.
1. J Ruiz failed to personally examine the complainant and his witness.
Personal examination by the judge of the complainant and his
witnesses is necessary to enable him to determine the existence or
non-existence of a probable cause.
2. The search warrant was issued for more than one specific offense.
The search warrant in question was issued for at least four distinct
offenses under the Tax Code. As ruled in Stonehill Such is the
seriousness of the irregularities committed in connection with the
disputed search warrants, that this Court deemed it fit to amend
Section 3 of Rule 122 of the former Rules of Court that a search
warrant shall not issue but upon probable cause in connection with one
specific offense. Not satisfied with this qualification, the Court added
thereto a paragraph, directing that no search warrant shall issue for
more than one specific offense.
3. The search warrant does not particularly describe the things to be
seized.
The documents, papers and effects sought to be seized are described
in the Search Warrant
Unregistered and private books of accounts (ledgers, journals,
columnars, receipts and disbursements books, customers ledgers);
receipts for payments received; certificates of stocks and securities;
contracts, promissory notes and deeds of sale; telex and coded
messages; business communications, accounting and business records;
checks and check stubs; records of bank deposits and withdrawals; and
records of foreign remittances, covering the years 1966 to 1970.

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The description does not meet the requirement in Art III, Sec. 1, of the
Constitution, and of Sec. 3, Rule 126 of the Revised Rules of Court, that
the warrant should particularly describe the things to be seized.
A search warrant may be said to particularly describe the things to be
seized when the description therein is as specific as the circumstances
will ordinarily allow or when the description expresses a conclusion of
fact not of law by which the warrant officer may be guided in making
the search and seizure or when the things described are limited to
those which bear direct relation to the offense for which the warrant is
being issued.

Bataan Shipyard Vs. PCGG

When President Corazon Aquino took power, the Presidential
Commission on Good Government (PCGG) was formed in order to
recover ill gotten wealth allegedly acquired by former President Marcos
and his cronies. Aquino then issued two executive orders in 1986 and
pursuant thereto, a sequestration and a takeover order were issued
against Bataan Shipyard & engineering Co., Inc. (BASECO). BASECO
was alleged to be in actuality owned and controlled by the Marcoses
through the Romualdez family, and in turn, through dummy
stockholders.
The sequestration order issued in 1986 required, among others, that
BASECO produce corporate records from 1973 to 1986 under pain of
contempt of the PCGG if it fails to do so. BASECO assails this order as it
avers, among others, that it is against BASECOs right against self
incrimination and unreasonable searches and seizures.
ISSUE: Whether or not BASECO is correct.

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HELD: No. First of all, PCGG has the right to require the production of
such documents pursuant to the power granted to it. Second, and more
importantly, right against self-incrimination has no application to
juridical persons. There is a reserve right in the legislature to
investigate the contracts of a corporation and find out whether it has
exceeded its powers. It would be a strange anomaly to hold that a
state, having chartered a corporation like BASECO to make use of
certain franchises, could not, in the exercise of sovereignty, inquire
how these franchises had been employed, and whether they had been
abused, and demand the production of the corporate books and papers
for that purpose.
Neither is the right against unreasonable searches and seizures
applicable here. There were no searches made and no seizure pursuant
to any search was ever made. BASECO was merely ordered to produce
the corporate records.

ILLAREAL VS. RAMIREZ

G.R. No. 144214
July 14, 2003
FACTS: Villareal, C. Jose and J. Jose formed a partnership for the
operation of a restaurant and catering business under the name
Aquarius Food House and Catering Services, each contributing
250K. Ramirez was later added, contributing 250K as well. After
some time, one of them (J. Jose) withdrew from the partnership; his
capital contribution was refunded to him in cash by agreement of the
partners.
Without prior knowledge of respondents, petitioners closed down the
restaurant, allegedly because of increased rental. On March 1, 1987,
The respondent spouses wrote petitioners, saying that they were no
longer interested in continuing their partnership or in reopening the

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restaurant, and that they were accepting the latters offer to return
their capital contribution. The repeated oral and written requests
were, however, left unheeded
Before the RTC, respondents subsequently filed a Complaintfor the
collection of a sum of money from petitioners. the RTC ruled in favor
of the respondents, ordering petitioners to pay damages and AF and
costs.
The CA sustained the lower courts decision, and made a computation
on the petitioners liability to respondents:

Capital, at dissolution:

**P1,000,000.00

Less: liability to creditors

240,658.00

Amount to be distributed to partners

759,342.00
3

Over: Number of partners

Each partners share at dissolution

253,114.00

** which is erroneous, as this is the capital at the BEGINNING of the

partnership

Hence this petition.

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ISSUE: WON the CA computation was erroneous

HELD: We hold that respondents have no right to demand from
petitioners the return of their equity share.
YES
Generally, in the pursuit of a partnership business, its capital is either
increased by profits earned or decreased by losses sustained. It does
not remain static and unaffected by the changing fortunes of the
business. In the computation of the amount to be refunded to
respondents, The CA did not consider:
1. The omission of any provision for the depreciationof the furniture
and the equipment.
2. The amortization of the goodwill is not reflected
3. The capitalization amount paid by the partnership to J. Jose when
he withdrew from the partnership.
Because of the above-mentioned transactions, the partnership capital
was actually reduced.
But the disposition is without prejudice to proper proceedings for the
accounting, the liquidation and the distribution of the remaining
partnership assets, if any

Gregorio Ortega, Tomas del Castillo, Jr. and Benjamin

Bacorro v. CA, SEC and Joaquin Misa
G.R. No. 109248 July 3, 1995
Vitug, J.
Facts:

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Ortega, then a senior partner in the law firm Bito, Misa, and Lozada
withdrew in said firm.

He filed with SEC a petition for dissolution and liquidation of

partnership.

SEC en banc ruled that withdrawal of Misa from the firm had
dissolved the partnership.Reason: since it is partnership at will, the
law firm could be dissolved by any partner atanytime, such as by
withdrawal therefrom, regardless of good faith or bad faith, since
nopartner can be forced to continue in the partnership against his
will.
Issue:
1. WON the partnership of Bito, Misa & Lozada (now Bito, Lozada,
Ortega & Castillo)is a partnership at will; 2. WON the
withdrawal of Misa dissolved the partnership regardlessof his
good or bad faith;
Held:
1. Yes. The partnership agreement of the firm provides that [t]he
partnership shallcontinue so long as mutually satisfactory and upon
the death or legal incapacity of one of the partners, shall be
continued by the surviving partners.2. Yes. Any one of the partners
may, at his sole pleasure, dictate a dissolution of thepartnership at
will (e.g. by way of withdrawal of a partner). He must, however, act
in goodfaith, not that the attendance of bad faith can prevent the
dissolution of the partnership butthat it can result in a liability for
damages

Heirs of Jose Lim Vs. Lim

Business Organization Partnership, Agency, Trust Partner Periodic

Accounting Profit Sharing
In 1980, the heirs of Jose Lim alleged that Jose Lim entered into a
partnership agreement with Jimmy Yu and Norberto Uy. The three
contributed P50,000.00 each and used the funds to purchase a truck to
start their trucking business. A year later however, Jose Lim died. The
eldest son of Jose Lim, Elfledo Lim, took over the trucking business and
under his management, the trucking business prospered. Elfledo was
able to but real properties in his name. From one truck, he increased it
to 9 trucks, all trucks were in his name however. He also acquired other
motor vehicles in his name.

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In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a heart

attack. Elfledos wife, Juliet Lim, took over the properties but she
intimated to Jimmy and the heirs of Norberto that she could not go on
with the business. So the properties in the partnership were divided
among them.
Now the other heirs of Jose Lim, represented by Elenito Lim, required
Juliet to do an accounting of all income, profits, and properties from the
estate of Elfledo Lim as they claimed that they are co-owners thereof.
Juliet refused hence they sued her.
The heirs of Jose Lim argued that Elfledo Lim acquired his properties
from the partnership that Jose Lim formed with Norberto and Jimmy. In
court, Jimmy Yu testified that Jose Lim was the partner and not Elfledo
Lim. The heirs testified that Elfledo was merely the driver of Jose Lim.
ISSUE: Who is the partner between Jose Lim and Elfledo Lim?
HELD: It is Elfledo Lim based on the evidence presented regardless of
Jimmy Yus testimony in court that Jose Lim was the partner. If Jose Lim
was the partner, then the partnership would have been dissolved upon
his death (in fact, though the SC did not say so, I believe it should have
been dissolved upon Norbertos death in 1993). A partnership is
dissolved upon the death of the partner. Further, no evidence was
presented as to the articles of partnership or contract of partnership
between Jose, Norberto and Jimmy. Unfortunately, there is none in this
case, because the alleged partnership was never formally organized.
But at any rate, the Supreme Court noted that based on the functions
performed by Elfledo, he is the actual partner.
The following circumstances tend to prove that Elfledo was himself the
partner of Jimmy and Norberto:
1.) Cresencia testified that Jose gave Elfledo P50,000.00, as share in
the partnership, on a date that coincided with the payment of the initial
capital in the partnership;
2.) Elfledo ran the affairs of the partnership, wielding absolute control,
power and authority, without any intervention or opposition
whatsoever from any of petitioners herein;

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3.) all of the properties, particularly the nine trucks of the partnership,
were registered in the name of Elfledo;
4.) Jimmy testified that Elfledo did not receive wages or salaries from
the partnership, indicating that what he actually received were shares
of the profits of the business; and
5.) none of the heirs of Jose, the alleged partner, demanded periodic
accounting from Elfledo during his lifetime. As repeatedly stressed in
the case of Heirs of Tan Eng Kee, a demand for periodic accounting is
evidence of a partnership.
Furthermore, petitioners failed to adduce any evidence to show that
the real and personal properties acquired and registered in the names
of Elfledo and Juliet formed part of the estate of Jose, having been
derived from Joses alleged partnership with Jimmy and Norberto.
Elfledo was not just a hired help but one of the partners in the trucking
business, active and visible in the running of its affairs from day one
until this ceased operations upon his demise. The extent of his control,
administration and management of the partnership and its business,
the fact that its properties were placed in his name, and that he was
not paid salary or other compensation by the partners, are indicative of
the fact that Elfledo was a partner and a controlling one at that. It is
apparent that the other partners only contributed in the initial capital
but had no say thereafter on how the business was ran. Evidently it
was through Elfredos efforts and hard work that the partnership was
able to acquire more trucks and otherwise prosper. Even the appellant
participated in the affairs of the partnership by acting as the
bookkeeper sans salary.

Pioneer Insurance vs. CA

G.R. No. 84197; July 28, 1989
FACTS:Lim is an owner-operator of Southern Airlines (SAL). Japan
Domestic Airlines (JDA) and Lim enteredinto a sales contract.
Pioneer Insurance and Surety Corp. as surety executed its surety
bond in favor of JDA onbehalf of its principal Lim. Border Machinery
and Heacy Equipment Co, Inc., Francisco and ModestoCervantes,
and Constancio Maglana contributed funds based on the
misrepresentation of Lim that they willform a new corporation to
expand his business. They executed two separate indemnity
agreements in favorof Pioneer, one signed by Maglana and the other
29

jointly signed by Lim for SAL, Bormaheco and theCervanteses. The

indemnity agreements stipulated that the indemnitors principally
agree and bindthemselves jointly and severally to indemnify and
hold and save Pioneer from and against any/all damages,losses, etc.
of whatever kind and nature may incur in consequence of having
become surety.Lim executed in favor of Pioneer a deed of chattel
mortgage as security. Upon default on thepayments, Pioneer paid
for him and filed a petition for the foreclosure of chattel mortgage as
security.
Maglana, Bormaheco and the Cervantess filed cross
-claims against Lim alleging that they were not privies tothe
contracts signed by Lim and for recovery of the sum of money they
advanced to Lim for the purchase of the aircrafts. The decision was
rendered holding Lim liable to pay.
ISSUE:
1. Whether Pioneer has a cause of action against respondents.
2. Whether failure to incorporate automatically resulted to de facto
partnership.
HELD:
1. , Pioneer has no right to institute and maintain in its own name an
action for the benefit of thereinsurers. It is well-settled that an
action brought by an attorney-in-fact in his own name instead of
that of the principal will not prosper, and this is so even where the
name of the principal is disclosed in thecomplaint. An attorney-infact is not a real party in interest, that there is no law permitting an
action to bebrought by an attorney-in-fact.
2. NO. Partnership inter se does not necessarily exist, for ordinarily
persons cannot be made toassume the relation of partners as
between themselves, when their purpose is that no partnership shall
existand it should be implied only when necessary to do justice
between the parties; thus, one who takes no partexcept to subscribe
for stock in a proposed corporation which is never legally formed
does not become apartner with other subscribers who engage in
business under the name of the pretended corporation, so asto be
liable as such in an action for settlement of the alleged partnership
and contribution.
Lim Tong Lim Vs. Phil Fishing Gear Industries
G.R. No. 136448 November 3, 1999
Lessons Applicable: Corporation by estoppel doctrine (Corporate
Law)
FACTS:

30

Feb 7 1990: On behalf of "Ocean Quest Fishing Corp.", Antonio

Chua and Peter Yao entered into a purchase of fishing nets of
various sizes from Phil. Fishing Gear Industries Inc. (PFGI)
claiming they were engaged in venture with Lim Tong Lim
(NOT a signatory)
Buyers failed to pay
PFGI filed a suit against Chua, Yao and Lim w/ writ of
preliminary attachment
Chua: Admitted liability and requested resonable time and
turned over nets in his possession
Yao: Failre to appear in subsequent hearings
Lim: Counterclaim and Crossclaim to life writ of Attachment
CA affirmed RTC: Writ of Attachment & Chua, Yao and Lim as
general partners
Chua, Yao and Lim had decided to engage in business w/ Lim's
brother Jesus Lim as financer of a loan = common fund
Compromise Agreement: pay loan w/ the proceeds of boats
sale and to divide equally among them the excess or loss
ISSUE: W/N Doctrine of Estoppel can apply to Lim

HELD: YES. CA affirmed.

Although petitioner did not directly act on behalf of the corp.,
having reaped the benefits of the contract entered into by
persons w/ whom he previously had an existing rel., he is
deemed to be part of said assoc. and covered by the doctrine
of estoppel

31