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