SECOND DIVISION exercised either by a stockholder in person or by any duly authorized agent or
representative.
[G.R. No. 22442. August 1, 1924. ]
ANTONIO PARDO, Petitioner, v. THE HERCULES LUMBER CO., INC., and
IGNACIO FERRER, Respondents.
W.J. O’Donovan and M. H. de Joya for Petitioner.
Sumulong & Lavides and Ross, Lawrence & Selph for Respondents.
SYLLABUS
1. CORPORATIONS; STOCKHOLDERS’ RIGHT TO INSPECT RECORDS;
UNREASONABLE RESTRICTION BY DIRECTORS ON RIGHT OF
INSPECTION. — A resolution of the board of directors of a corporation limiting
the right of stockholders to inspect its records to a period of ten days shortly prior
to the annual stockholders’ meeting is an unreasonable restriction on the right of
inspection may be exercised at reasonable hours on business days throughout
the year, and not merely during an arbitrary period of a few days chosen by the
directors.
DECISION
STREET, J. :
The petitioner, Antonio Pardo ,a stockholder in the Hercules Lumber Company,
Inc., one of the respondents herein, seeks by this original proceeding in the
Supreme Court to obtain a writ of mandamus to compel the respondents to
permit the plaintiff and his duly authorized agent and representative to examine
the records and business transactions of said company. To this petition the
respondents interposed an answer, in which, after admitting certain allegations of
the petition, the respondents set forth the facts upon which they mainly rely as a
defense to the petition. To this answer the petitioner in turn interposed a
demurrer, and the cause is now before us for determination of the issue thus
presented.
It is inferentially, if not directly admitted that the petitioner is in fact a stockholder
in the Hercules Lumber Company, Inc., and that the respondent, Ignacio Ferrer,
as acting secretary of the said company, has refused to permit the petitioner or
his agent to inspect the records and business transactions of the said Hercules
Lumber Company, Inc., at times desired by the petitioner. No serious question is
of course made as to the right of the petitioner, by himself or proper
representative, to exercise the right of inspection conferred by section 51 of Act
No. 1459. Said provision was under the consideration of this court in the case of
Philpotts v. Philippine Manufacturing Co. and Berry (40 Phil., 471), where we
held that the right of examination there conceded to the stockholder may be
The main ground upon which the defense appears to be rested has reference to
the time, or times, within which the right of inspection may be exercised. In this
connection the answer asserts that in article 10 of the By-laws of the respondent
corporation its is declared that "Every shareholder may examine the books of the
company and other documents pertaining to the same upon the days which the
board of directors shall annually fix." It is further averred that at the directors’
meeting of the respondent corporation held on February 16, 1924, the board
passed a resolution to the following effect:jgc:chanrobles.com.ph
"The board also resolved to call the usual general (meeting of shareholders) for
March 30 of the present year, with notice to the shareholders that the books of
the company are at their disposition from the 15th to 25th of the same month for
examination, in appropriate hours."cralaw virtua1aw library
The contention for the respondent is that this resolution of the board constitutes a
lawful restriction on the right conferred by statute; and it is insisted that as the
petitioner has not availed himself of the permission to inspect the books and
transactions of the company within the ten days thus defined, his right to
inspection and examination is lost, at least for this year.
We are entirely unable to concur in this contention. The general right given by the
statute may not be lawfully abridged to the extent attempted in this resolution. It
may be admitted that the officials in charge of a corporation may deny inspection
when sought at unusual hours or under other improper conditions; but neither the
executive officers nor the board of directors have the power to deprive a
stockholder of the right altogether. A by-law unduly restricting the right of
inspection is undoubtedly invalid. Authorities to this effect are too numerous and
direct to require extended comment. (14 C.J., 859; 7 R.C.L., 325; 4 Thompson on
Corporations, 2d ed., sec. 4517; Harkness v. Guthrie, 27 Utah, 248; 107 Am. St.,
Rep., 664, 681.) Under a statute similar to our own it has been held that the
statutory right of inspection is not affected by the adoption by the board of
directors of a resolution providing for the closing of transfer books thirty days
before an election. (State v. St. Louis Railroad Co., 29 Mo. Ap., 301.)
It will be noted that our statute declares that the right of inspection can be
exercised "at reasonable hours." This means at reasonable hours on business
days throughout the year, and not merely during some arbitrary period of a few
days chosen by the directors.
In addition to relying upon the by-law, to which reference is above made, the
answer of the respondents calls in question the motive which is supposed to
prompt the petitioner to make inspection; and in this connection it is alleged that
the information which the petitioner seeks is desired for ulterior purposes in
connection with a competitive firm with which the petitioner is alleged to be
connected. It is also insisted that one of the purposes of the petitioner is to obtain
evidence preparatory to the institution of an action which he means to bring
against the corporation by reason of a contract of employment which once
existed between the corporation and himself. These suggestions are entirely
apart from the issue, as, generally speaking, the motive of the shareholder
exercising the right is immaterial (7 R.C.L., 327.)

We are of the opinion that, upon the allegations of the petition and the
admissions of the answer, the petitioner is entitled to relief. The demurrer is,
therefore, sustained; and the writ of mandamus will issue as prayed, with costs
against the respondents. So ordered.

Johnson, Malcolm, Villamor, Ostrand, and Romualdez, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 70926 January 31, 1989
DAN FUE LEUNG, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and LEUNG YIU, respondents.
John L. Uy for petitioner.
Edgardo F. Sundiam for private respondent.
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 (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 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 ATTY. HIPOLITO (direct examination to Mrs.
acknowledgment of the debt by the debtor.' Licup).

The argument is not well-taken. Q Mrs. Witness, you stated that among your
duties was that you were in charge of the
The private respondent is a partner of the petitioner in Sun Wah Panciteria. The custody of the cashier's box, of the money,
requisites of a partnership which are — 1) two or more persons bind themselves being the cashier, is that correct?
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 A Yes, sir.
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 Q So that every time there is a customer who
losses of the firm. If excellent relations exist among the partners at the start of pays, you were the one who accepted the
business and all the partners are more interested in seeing the firm grow rather money and you gave the change, if any, is that
than get immediate returns, a deferment of sharing in the profits is perfectly correct?
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
A Yes.
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 Q Now, after 11:30 (P.M.) which is the closing
the partnership. time as you said, what do you do with the
money?
It is Article 1842 of the Civil Code in conjunction with Articles 1144 and 1155
which is applicable. Article 1842 states: A We balance it with the manager, Mr. Dan Fue
Leung.
The right to an account of his interest shall accrue to any partner,
or his legal representative as against the winding up partners or ATTY. HIPOLITO:
the surviving partners or the person or partnership continuing the
business, at the date of dissolution, in the absence or any I see.
agreement to the contrary.
Q So, in other words, after your job, you huddle
Regarding the prescriptive period within which the private respondent may or confer together?
demand an accounting, Articles 1806, 1807, and 1809 show that the right to
demand an accounting exists as long as the partnership exists. Prescription A Yes, count it all. I total it. We sum it up.
begins to run only upon the dissolution of the partnership when the final
accounting is done. Q Now, Mrs. Witness, in an average day, more
or less, will you please tell us, how much is the
Finally, the petitioner assails the appellate court's monetary awards in favor of gross income of the restaurant?
the private respondent for being excessive and unconscionable and above the
claim of private respondent as embodied in his complaint and testimonial A For regular days, I received around P7,000.00
evidence presented by said private respondent to support his claim in the a day during my shift alone and during pay days
complaint. I receive more than P10,000.00. That is
excluding the catering outside the place.
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 Q What about the catering service, will you
income of the restaurant. please tell the Honorable Court how many times
a week were there catering services?
Mrs. Licup stated:
 A Sometimes three times a month; sometimes
two times a month or more.
xxx xxx xxx
Q Now more or less, do you know the cost of the
catering service?
A Yes, because I am the one who receives the
payment also of the catering.
Q How much is that?
A That ranges from two thousand to six
thousand pesos, sir.
Q Per service?
A Per service, Per catering.
Q So in other words, Mrs. witness, for your shift
alone in a single day from 3:30 P.M. to 11:30
P.M. in the evening the restaurant grosses an
income of P7,000.00 in a regular day?
A Yes.
Q And ten thousand pesos during pay day.?
A Yes.
(TSN, pp. 53 to 59, inclusive, November
15,1978)
xxx xxx xxx
COURT:
Any cross?
ATTY. UY (counsel for defendant):
No cross-examination, Your Honor. (T.S.N. p.
65, November 15, 1978). (Rollo, pp. 127-128)
The statements of the cashier were not rebutted. Not only did the petitioner's
counsel waive the cross-examination on the matter of income but he failed to
comply with his promise to produce pertinent 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 (4) A partner willfully or persistently commits a breach of the
Manila said date was declared a partial non-working holiday, so partnership agreement, or otherwise so conducts himself in
much so, the hearing was reset to December 7 and 22, 1981. On matters relating to the partnership business that it is not
December 7, 1981, on motion of defendant's counsel, the same reasonably practicable to carry on the business in partnership
was again reset to December 22, 1981 as previously scheduled with him;
which hearing was understood as intransferable in character.
Again on December 22, 1981, the defendant's counsel asked for xxx xxx xxx
postponement on the ground that the defendant was sick. the
Court, after much tolerance and judicial magnanimity, denied (6) Other circumstances render a dissolution equitable.
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 There shall be a liquidation and winding up of partnership affairs, return of
simultaneous memoranda. (Rollo, pp. 148-150) capital, and other incidents of dissolution because the continuation of the
partnership has become inequitable.
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. WHEREFORE, the petition for review is hereby DISMISSED for lack of merit.
According to the trial court, it is in the heart of Chinatown where people who buy The decision of the respondent court is AFFIRMED with a MODIFICATION that
and sell jewelries, businessmen, brokers, manager, bank employees, and people as indicated above, the partnership of the parties is ordered dissolved.
from all walks of life converge and patronize Sun Wah.
SO ORDERED.
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 Fernan, C.J., (Chairman), Feliciano, Bidin and Cortes, JJ., concur.
from judicial demand in 1978 and not from the opening of the restaurant in 1955,
it is because of the petitioner's contentions that all profits were being plowed
back into the expansion of the business. There is no basis in the records to
sustain the petitioners contention that the damages awarded are excessive. Even
if the Court is minded to modify the factual findings of both the trial court and the
appellate court, it cannot refer to any portion of the records for such modification.
There is no basis in the records for this Court to change or set aside the factual
findings of the trial court and the appellate court. The petitioner was given every
opportunity to refute or rebut the respondent's submissions but, after promising to
do so, it deliberately failed to present its books and other evidence.

The resolution of the Intermediate Appellate Court ordering the payment of the
petitioner's obligation shows that the same continues until fully paid. The
question now arises as to whether or not the payment of a share of profits shall
continue into the future with no fixed ending date.

Considering the facts of this case, the Court may decree a dissolution of the
partnership under Article 1831 of the Civil Code which, in part, provides:

Art. 1831. On application by or for a partner the court shall

decree a dissolution whenever:

xxx xxx xxx

(3) A partner has been guilty of such conduct as tends to affect

prejudicially the carrying on of the business;
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16318 October 21, 1921
PANG LIM and BENITO GALVEZ, plaintiffs-appellees,
vs.
LO SENG, defendant-appellant.
Cohn, Fisher and DeWitt for appellant.
No appearance for appellees.
STREET, J.:
For several years prior to June 1, 1916, two of the litigating parties herein,
namely, Lo Seng and Pang Lim, Chinese residents of the City of Manila, were
partners, under the firm name of Lo Seng and Co., in the business of running a
distillery, known as "El Progreso," in the Municipality of Paombong, in the
Province of Bulacan. The land on which said distillery is located as well as the
buildings and improvements originally used in the business were, at the time to
which reference is now made, the property of another Chinaman, who resides in
Hongkong, named Lo Yao, who, in September, 1911, leased the same to the firm
of Lo Seng and Co. for the term of three years.
Upon the expiration of this lease a new written contract, in the making of which
Lo Yao was represented by one Lo Shui as attorney in fact, became effective
whereby the lease was extended for fifteen years. The reason why the contract
was made for so long a period of time appears to have been that the Bureau of
Internal Revenue had required sundry expensive improvements to be made in
the distillery, and it was agreed that these improvements should be effected at
the expense of the lessees. In conformity with this understanding many
thousands of pesos were expended by Lo Seng and Co., and later by Lo Seng
alone, in enlarging and improving the plant.
Among the provisions contained in said lease we note the following:
Know all men by these presents:
xxx xxx xxx
1. That I, Lo Shui, as attorney in fact in charge of the
properties of Mr. Lo Yao of Hongkong, cede by way of
lease for fifteen years more said distillery "El Progreso"
to Messrs. Pang Lim and Lo Seng (doing business under
the firm name of Lo Seng and Co.), after the termination
of the previous contract, because of the fact that they
are required, by the Bureau of Internal Revenue, to
rearrange, alter and clean up the distillery.
2. That all the improvements and betterments which they
may introduce, such as machinery, apparatus, tanks,
pumps, boilers and buildings which the business may
require, shall be, after the termination of the fifteen years
of lease, for the benefit of Mr. Lo Yao, my principal, the
buildings being considered as improvements.
3. That the monthly rent of said distillery is P200, as
agreed upon in the previous contract of September 11,
1911, acknowledged before the notary public D. Vicente
Santos; and all modifications and repairs which may be
needed shall be paid for by Messrs. Pang Lim and Lo
Seng.
We, Pang Lim and Lo Seng, as partners in said distillery "El
Progreso," which we are at present conducting, hereby accept
this contract in each and all its parts, said contract to be effective
upon the termination of the contract of September 11, 1911.
Neither the original contract of lease nor the agreement extending the same was
inscribed in the property registry, for the reason that the estate which is the
subject of the lease has never at any time been so inscribed.
On June 1, 1916, Pang Lim sold all his interest in the distillery to his partner Lo
Seng, thus placing the latter in the position of sole owner; and on June 28, 1918,
Lo Shui, again acting as attorney in fact of Lo Yao, executed and acknowledged
before a notary public a deed purporting to convey to Pang Lim and another
Chinaman named Benito Galvez, the entire distillery plant including the land used
in connection therewith. As in case of the lease this document also was never
recorded in the registry of property. Thereafter Pang Lim and Benito Galvez
demanded possession from Lo Seng, but the latter refused to yield; and the
present action of unlawful detainer was thereupon initiated by Pang Lim and
Benito Galvez in the court of the justice of the peace of Paombong to recover
possession of the premises. From the decision of the justice of the peace the
case was appealed to the Court of First Instance, where judgment was rendered
for the plaintiffs; and the defendant thereupon appealed to the Supreme Court.
The case for the plaintiffs is rested exclusively on the provisions of article 1571 of
the Civil Code, which reads in part as follows:
 ART. 1571. The purchaser of a leased estate shall be entitled to
terminate any lease in force at the time of making the sale, unless the
contrary is stipulated, and subject to the provisions of the Mortgage Law.
In considering this provision it may be premised that a contract of lease is
personally binding on all who participate in it regardless of whether it is recorded
or not, though of course the unrecorded lease creates no real charge upon the
land to which it relates. The Mortgage Law was devised for the protection of third
parties, or those who have not participated in the contracts which are by that law
required to be registered; and none of its provisions with reference to leases
interpose any obstacle whatever to the giving of full effect to the personal
obligations incident to such contracts, so far as concerns the immediate parties
thereto. This is rudimentary, and the law appears to be so understood by all
commentators, there being, so far as we are aware, no authority suggesting the
contrary. Thus, in the commentaries of the authors Galindo and Escosura, on the
Mortgage Law, we find the following pertinent observation: "The Mortgage Law is
enacted in aid of and in respect to third persons only; it does not affect the
relations between the contracting parties, nor their capacity to contract. Any
question affecting the former will be determined by the dispositions of the special
law [i.e., the Mortgage Law], while any question affecting the latter will be
determined by the general law." (Galindo y Escosura, Comentarios a la
Legislacion Hipotecaria, vol. I, p. 461.)
Although it is thus manifest that, under the Mortgage Law, as regards the
personal obligations expressed therein, the lease in question was from the
beginning, and has remained, binding upon all the parties thereto — among
whom is to be numbered Pang Lim, then a member of the firm of Lo Seng and
Co. — this does not really solve the problem now before us, which is, whether
the plaintiffs herein, as purchasers of the estate, are at liberty to terminate the
lease, assuming that it was originally binding upon all parties participating in it.
Upon this point the plaintiffs are undoubtedly supported, prima facie, by the letter
of article 1571 of the Civil Code; and the position of the defendant derives no
assistance from the mere circumstance that the lease was admittedly binding as
between the parties thereto. 1awph!l.net
The words "subject to the provisions of the Mortgage Law," contained in article
1571, express a qualification which evidently has reference to the familiar
proposition that recorded instruments are effective against third persons from the
date of registration (Co-Tiongco vs. Co-Guia, 1 Phil., 210); from whence it follows
that a recorded lease must be respected by any purchaser of the estate
whomsoever. But there is nothing in the Mortgage Law which, so far as we now
see, would prevent a purchaser from exercising the precise power conferred in
article 1571 of the Civil Code, namely, of terminating any lease which is
unrecorded; nothing in that law that can be considered as arresting the force of
article 1571 as applied to the lease now before us.
Article 1549 of the Civil Code has also been cited by the attorneys for the
appellant as supplying authority for the proposition that the lease in question
cannot be terminated by one who, like Pang Lim, has taken part in the contract.
That provision is practically identical in terms with the first paragraph of article 23
of the Mortgage Law, being to the effect that unrecorded leases shall be of no
effect as against third persons; and the same observation will suffice to dispose
of it that was made by us above in discussing the Mortgage Law, namely, that
while it recognizes the fact that an unrecorded lease is binding on all persons
who participate therein, this does not determine the question whether, admitting
the lease to be so binding, it can be terminated by the plaintiffs under article
1571.
Having thus disposed of the considerations which arise in relation with the
Mortgage Law, as well as article 1549 of the Civil Coded — all of which, as we
have seen, are undecisive — we are brought to consider the aspect of the case
which seems to us conclusive. This is found in the circumstance that the plaintiff
Pang Lim has occupied a double role in the transactions which gave rise to this
litigation, namely, first, as one of the lessees; and secondly, as one of the
purchasers now seeking to terminate the lease. These two positions are
essentially antagonistic and incompatible. Every competent person is by law
bond to maintain in all good faith the integrity of his own obligations; and no less
certainly is he bound to respect the rights of any person whom he has placed in
his own shoes as regards any contract previously entered into by himself.
While yet a partner in the firm of Lo Seng and Co., Pang Lim participated in the
creation of this lease, and when he sold out his interest in that firm to Lo Seng
this operated as a transfer to Lo Seng of Pang Lim's interest in the firm assets,
including the lease; and Pang Lim cannot now be permitted, in the guise of a
purchaser of the estate, to destroy an interest derived from himself, and for which
he has received full value.
The bad faith of the plaintiffs in seeking to deprive the defendant of this lease is
strikingly revealed in the circumstance that prior to the acquisition of this property
Pang Lim had been partner with Lo Seng and Benito Galvez an employee. Both
therefore had been in relations of confidence with Lo Seng and in that position
had acquired knowledge of the possibilities of the property and possibly an
experience which would have enabled them, in case they had acquired
possession, to exploit the distillery with profit. On account of his status as partner
in the firm of Lo Seng and Co., Pang Lim knew that the original lease had been
extended for fifteen years; and he knew the extent of valuable improvements that
had been made thereon. Certainly, as observed in the appellant's brief, it would
be shocking to the moral sense if the condition of the law were found to be such
that Pang Lim, after profiting by the sale of his interest in a business, worthless
without the lease, could intervene as purchaser of the property and confiscate for
his own benefit the property which he had sold for a valuable consideration to Lo
Seng. The sense of justice recoils before the mere possibility of such eventuality.
Above all other persons in business relations, partners are required to exhibit
towards each other the highest degree of good faith. In fact the relation between
partners is essentially fiduciary, each being considered in law, as he is in fact, the
confidential agent of the other. It is therefore accepted as fundamental in equity
jurisprudence that one partner cannot, to the detriment of another, apply
exclusively to his own benefit the results of the knowledge and information
gained in the character of partner. Thus, it has been held that if one partner
obtains in his own name and for his own benefit the renewal of a lease on
property used by the firm, to commence at a date subsequent to the expiration of
the firm's lease, the partner obtaining the renewal is held to be a constructive
trustee of the firm as to such lease. (20 R. C. L., 878-882.) And this rule has even
been applied to a renewal taken in the name of one partner after the dissolution
of the firm and pending its liquidation. (16 R. C. L., 906; Knapp vs. Reed, 88
Neb., 754; 32 L. R. A. [N. S.], 869; Mitchell vs. Reed 61 N. Y., 123; 19 Am. Rep.,
252.)
An additional consideration showing that the position of the plaintiff Pang Lim in
this case is untenable is deducible from articles 1461 and 1474 of the Civil Code,
which declare that every person who sells anything is bound to deliver and
warrant the subject-matter of the sale and is responsible to the vendee for the
legal and lawful possession of the thing sold. The pertinence of these provisions
to the case now under consideration is undeniable, for among the assets of the
partnership which Pang Lim transferred to Lo Seng, upon selling out his interest
in the firm to the latter, was this very lease; and while it cannot be supposed that
the obligation to warrant recognized in the articles cited would nullify article 1571,
if the latter article had actually conferred on the plaintiffs the right to terminate this
lease, nevertheless said articles (1461, 1474), in relation with other
considerations, reveal the basis of an estoppel which in our opinion precludes
Pang Lim from setting up his interest as purchaser of the estate to the detriment
of Lo Seng.
themselves, in the position of tenants in common or owners pro indiviso,
according to the proportion of their respective contribution to the purchase price.
But it is well recognized that one tenant in common cannot maintain a
possessory action against his cotenant, since one is as much entitled to have
possession as the other. The remedy is ordinarily by an action for partition.
(Cornista vs. Ticson, 27 Phil., 80.) It follows that as Lo Seng is vested with the
possessory right as against Pang Lim, he cannot be ousted either by Pang Lim or
Benito Galvez. Having lawful possession as against one cotenant, he is entitled
to retain it against both. Furthermore, it is obvious that partition proceedings
could not be maintained at the instance of Benito Galvez as against Lo Seng,
since partition can only be effected where the partitioners are cotenants, that is,
have an interest of an identical character as among themselves. (30 Cyc., 178-
180.) The practical result is that both Pang Lim and Benito Galvez are bound to
respect Lo Seng's lease, at least in so far as the present action is concerned.
We have assumed in the course of the preceding discussion that the deed of sale
under which the plaintiffs acquired the right of Lo Yao, the owner of the fee, is
competent proof in behalf of the plaintiffs. It is, however, earnestly insisted by the
attorney for Lo Seng that this document, having never been recorded in the
property registry, cannot under article 389 of the Mortgage Law, be used in court
against him because as to said instrument he is a third party. The important
question thus raised is not absolutely necessary to the decision of this case, and
we are inclined to pass it without decision, not only because the question does
not seem to have been ventilated in the Court of First Instance but for the further
reason that we have not had the benefit of any written brief in this case in behalf
of the appellees.

It will not escape observation that the doctrine thus applied is analogous to the The judgment appealed from will be reversed, and the defendant will be absolved
doctrine recognized in courts of common law under the head of estoppel by from the complaint. It is so ordered, without express adjudication as to costs.
deed, in accordance with which it is held that if a person, having no title to land,
conveys the same to another by some one or another of the recognized modes of Johnson, Araullo, Avanceña and Villamor, JJ., concur.
conveyance at common law, any title afterwards acquired by the vendor will pass
to the purchaser; and the vendor is estopped as against such purchaser from
asserting such after-acquired title. The indenture of lease, it may be further
noted, was recognized as one of the modes of conveyance at common law which
created this estoppel. (8 R. C. L., 1058, 1059.)

From what has been said it is clear that Pang Lim, having been a participant in
the contract of lease now in question, is not in a position to terminate it: and this
is a fatal obstacle to the maintenance of the action of unlawful detainer by him.
Moreover, it is fatal to the maintenance of the action brought jointly by Pang Lim
and Benito Galvez. The reason is that in the action of unlawful detainer, under
section 80 of the Code of Civil Procedure, the only question that can be
adjudicated is the right to possession; and in order to maintain the action, in the
form in which it is here presented, the proof must show that occupant's
possession is unlawful, i. e., that he is unlawfully withholding possession after the
determination of the right to hold possession. In the case before us quite the
contrary appears; for, even admitting that Pang Lim and Benito Galvez have
purchased the estate from Lo Yao, the original landlord, they are, as between

FIRST DIVISION
[G.R. No. 126334. November 23, 2001.]
EMILIO EMNACE, Petitioner, v. COURT OF APPEALS, ESTATE OF VICENTE
TABANAO, SHERWIN TABANAO, VICENTE WILLIAM TABANAO, JANETTE
TABANAO DEPOSOY, VICENTA MAY TABANAO VARELA, ROSELA
TABANAO and VINCENT TABANAO, Respondents.
DECISION
YNARES-SANTIAGO, J.:
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were
partners in a business concern known as Ma. Nelma Fishing Industry. Sometime
in January of 1986, they decided to dissolve their partnership and executed an
agreement of partition and distribution of the partnership properties among them,
consequent to Jacinto Divinagracia’s withdrawal from the partnership. 1 Among
the assets to be distributed were five (5) fishing boats, six (6) vehicles, two (2)
parcels of land located at Sto. Niño and Talisay, Negros Occidental, and cash
deposits in the local branches of the Bank of the Philippine Islands and
Prudential Bank.chanrob1es virtua1 1aw 1ibrary
Throughout the existence of the partnership, and even after Vicente Tabanao’s
untimely demise in 1994, petitioner failed to submit to Tabanao’s heirs any
statement of assets and liabilities of the partnership, and to render an accounting
of the partnership’s finances. Petitioner also reneged on his promise to turn over
to Tabanao’s heirs the deceased’s 1/3 share in the total assets of the
partnership, amounting to P30,000,000.00, or the sum of P10,000,000.00,
despite formal demand for payment thereof. 2
Consequently, Tabanao’s heirs, respondents herein, filed against petitioner an
action for accounting, payment of shares, division of assets and damages. 3 In
their complaint, respondents prayed as follows:chanrob1es virtual 1aw library
1. Defendant be ordered to render the proper accounting of all the assets and
liabilities of the partnership at bar; and
2. After due notice and hearing defendant be ordered to
pay/remit/deliver/surrender/yield to the plaintiffs the following:chanrob1es virtual
1aw library
A. No less than One Third (1/3) of the assets, properties, dividends, cash,
land(s), fishing vessels, trucks, motor vehicles, and other forms and substance of
treasures which belong and/or should belong, had accrued and/or must accrue to
the partnership;
B. No less than Two Hundred Thousand Pesos (P200,000.00) as moral
damages;
C. Attorney’s fees equivalent to Thirty Percent (30%) of the entire
share/amount/award which the Honorable Court may resolve the plaintiffs as
entitled to plus P1,000.00 for every appearance in court. 4
Petitioner filed a motion to dismiss the complaint on the grounds of improper
venue, lack of jurisdiction over the nature of the action or suit, and lack of
capacity of the estate of Tabanao to sue. 5 On August 30, 1994, the trial court
denied the motion to dismiss. It held that venue was properly laid because, while
realties were involved, the action was directed against a particular person on the
basis of his personal liability; hence, the action is not only a personal action but
also an action in personam. As regards petitioner’s argument of lack of
jurisdiction over the action because the prescribed docket fee was not paid
considering the huge amount involved in the claim, the trial court noted that a
request for accounting was made in order that the exact value of the partnership
may be ascertained and, thus, the correct docket fee may be paid. Finally, the
trial court held that the heirs of Tabanao had a right to sue in their own names, in
view of the provision of Article 777 of the Civil Code, which states that the rights
to the succession are transmitted from the moment of the death of the decedent.
6
The following day, respondents filed an amended complaint, 7 incorporating the
additional prayer that petitioner be ordered to "sell all (the partnership’s) assets
and thereafter pay/remit/deliver/surrender/yield to the plaintiffs" their
corresponding share in the proceeds thereof. In due time, petitioner filed a
manifestation and motion to dismiss, 8 arguing that the trial court did not acquire
jurisdiction over the case due to the plaintiffs’ failure to pay the proper docket
fees. Further, in a supplement to his motion to dismiss, 9 petitioner also raised
prescription as an additional ground warranting the outright dismissal of the
complaint.
On June 15, 1995, the trial court issued an Order, 10 denying the motion to
dismiss inasmuch as the grounds raised therein were basically the same as the
earlier motion to dismiss which has been denied. Anent the issue of prescription,
the trial court ruled that prescription begins to run only upon the dissolution of the
partnership when the final accounting is done. Hence, prescription has not set in
the absence of a final accounting. Moreover, an action based on a written
contract prescribes in ten years from the time the right of action accrues.
Petitioner filed a petition for certiorari before the Court of Appeals, 11 raising the
following issues:chanrob1es virtual 1aw library
I. Whether or not respondent Judge acted without jurisdiction or with grave abuse
of discretion in taking cognizance of a case despite the failure to pay the required
docket fee;
II. Whether or not respondent Judge acted without jurisdiction or with grave
abuse of discretion in insisting to try the case which involve (sic) a parcel of land
situated outside of its territorial jurisdiction;
III. Whether or not respondent Judge acted without jurisdiction or with grave
abuse of discretion in allowing the estate of the deceased to appear as party
plaintiff, when there is no intestate case and filed by one who was never
appointed by the court as administratrix of the estates; and
IV. Whether or not respondent Judge acted without jurisdiction or with grave
abuse of discretion in not dismissing the case on the ground of prescription.
On August 8, 1996, the Court of Appeals rendered the assailed decision, 12
dismissing the petition for certiorari, upon a finding that no grave abuse of
discretion amounting to lack or excess of jurisdiction was committed by the trial
court in issuing the questioned orders denying petitioner’s motions to dismiss.
Not satisfied, petitioner filed the instant petition for review, raising the same
issues resolved by the Court of Appeals, namely:chanrob1es virtual 1aw library
I. Failure to pay the proper docket fee;
II. Parcel of land subject of the case pending before the trial court is outside the
said court’s territorial jurisdiction;
III. Lack of capacity to sue on the part of plaintiff heirs of Vicente Tabanao; and
IV. Prescription of the plaintiff heirs’ cause of action.
It can be readily seen that respondents’ primary and ultimate objective in
instituting the action below was to recover the decedent’s 1/3 share in the
partnership’s assets. While they ask for an accounting of the partnership’s assets
and finances, what they are actually asking is for the trial court to compel
petitioner to pay and turn over their share, or the equivalent value thereof, from
the proceeds of the sale of the partnership assets. They also assert that until and
unless a proper accounting is done, the exact value of the partnership’s assets,
as well as their corresponding share therein, cannot be ascertained.
Consequently, they feel justified in not having paid the commensurate docket fee
as required by the Rules of Court.
We do not agree. The trial court does not have to employ guesswork in
ascertaining the estimated value of the partnership’s assets, for respondents
themselves voluntarily pegged the worth thereof at Thirty Million Pesos
(P30,000,000.00). Hence, this case is one which is really not beyond pecuniary
estimation, but rather partakes of the nature of a simple collection case where the
value of the subject assets or amount demanded is pecuniarily determinable. 13
While it is true that the exact value of the partnership’s total assets cannot be
shown with certainty at the time of filing, respondents can and must ascertain,
through informed and practical estimation, the amount they expect to collect from
the partnership, particularly from petitioner, in order to determine the proper
amount of docket and other fees. 14 It is thus imperative for respondents to pay
the corresponding docket fees in order that the trial court may acquire jurisdiction
over the action. 15
Nevertheless, unlike in the case of Manchester Development Corp. v. Court of
Appeals, 16 where there was clearly an effort to defraud the government in
avoiding to pay the correct docket fees, we see no attempt to cheat the courts on
the part of respondents. In fact, the lower courts have noted their expressed
desire to remit to the court "any payable balance or lien on whatever award which
the Honorable Court may grant them in this case should there be any deficiency
in the payment of the docket fees to be computed by the Clerk of Court." 17
There is evident willingness to pay, and the fact that the docket fee paid so far is
inadequate is not an indication that they are trying to avoid paying the required
amount, but may simply be due to an inability to pay at the time of filing. This
consideration may have moved the trial court and the Court of Appeals to declare
that the unpaid docket fees shall be considered a lien on the judgment award.
Petitioner, however, argues that the trial court and the Court of Appeals erred in
condoning the non-payment of the proper legal fees and in allowing the same to
become a lien on the monetary or property judgment that may be rendered in
favor of respondents. There is merit in petitioner’s assertion. The third paragraph
of Section 16, Rule 141 of the Rules of Court states that:chanrob1es virtual 1aw
library
The legal fees shall be a lien on the monetary or property judgment in favor of the
pauper-litigant.
Respondents cannot invoke the above provision in their favor because it
specifically applies to pauper-litigants. Nowhere in the records does it appear that
respondents are litigating as paupers, and as such are exempted from the
payment of court fees. 18
The rule applicable to the case at bar is Section 5(a) of Rule 141 of the Rules of
Court, which defines the two kinds of claims as: (1) those which are immediately
ascertainable; and (2) those which cannot be immediately ascertained as to the
exact amount. This second class of claims, where the exact amount still has to
be finally determined be the courts based on evidence presented, falls squarely
under the third paragraph of said Section 5(a), which provides:chanrob1es virtual
1aw library
In case the value of the property or estate or the sum claimed is less or more in
accordance with the appraisal of the court, the difference of fee shall be refunded
or paid as the case may be. (Emphasis ours)
In Pilipinas Shell Petroleum Corporation v. Court of Appeals, 19 this Court
pronounced that the above-quoted provision "clearly contemplates an initial
payment of the filing fees corresponding to the estimated amount of the claim
subject to adjustment as to what later may be proved." 20 Moreover, we
reiterated therein the principle that the payment of filing fees cannot be made
contingent or dependent on the result of the case. Thus, an initial payment of the
docket fees based on an estimated amount must be paid simultaneous with the
filing of the complaint. Otherwise, the court would stand to lose the filing fees
should the judgment later turn out to be adverse to any claim of the respondent
heirs.
The matter of payment of docket fees is not a mere triviality. These fees are
necessary to defray court expenses in the handling of cases. Consequently, in
order to avoid tremendous losses to the judiciary, and to the government as well,
the payment of docket fees cannot be made dependent on the outcome of the
case, except when the claimant is a pauper-litigant.
Applied to the instant case, respondents have a specific claim — 1/3 of the value
of all the partnership assets — but they did not allege a specific amount. They
did, however, estimate the partnership’s total assets to be worth Thirty Million
Pesos (P30,000,000.00), in a letter 21 addressed to petitioner. Respondents
cannot now say that they are unable to make an estimate, for the said letter and
the admissions therein form part of the records of this case. They cannot avoid
paying the initial docket fees by conveniently omitting the said amount in their
amended complaint. This estimate can be made the basis for the initial docket
fees that respondents should pay. Even if it were later established that the
amount proved was less or more than the amount alleged or estimated, Rule
141, Section 5(a) of the Rules of Court specifically provides that the court may
refund the excess or exact additional fees should the initial payment be
insufficient. It is clear that it is only the difference between the amount finally
awarded and the fees paid upon filing of this complaint that is subject to
adjustment and which may be subjected to a lien.
In the oft-quoted case of Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion,
22 this Court held that when the specific claim "has been left for the
determination by the court, the additional filing fee therefor shall constitute a lien
on the judgment and it shall be the responsibility of the Clerk of Court or his duly
authorized deputy to enforce said lien and assess and collect the additional fee."
Clearly, the rules and jurisprudence contemplate the initial payment of filing and
docket fees based on the estimated claims of the plaintiff, and it is only when
there is a deficiency that a lien may be constituted on the judgment award until
such additional fee is collected.
Based on the foregoing, the trial court erred in not dismissing the complaint
outright despite their failure to pay the proper docket fees. Nevertheless, as in
other procedural rules, it may be liberally construed in certain cases if only to
secure a just and speedy disposition of an action. While the rule is that the
payment of the docket fee in the proper amount should be adhered to, there are
certain exceptions which must be strictly construed. 23
In recent rulings, this Court has relaxed the strict adherence to the Manchester
doctrine, allowing the plaintiff to pay the proper docket fees within a reasonable
time before the expiration of the applicable prescriptive or reglementary period.
24
In the recent case of National Steel Corp. v. Court of Appeals, 25 this Court held
that:chanrob1es virtual 1aw library
The court acquires jurisdiction over the action if the filing of the initiatory pleading
is accompanied by the payment of the requisite fees, or, if the fees are not paid
at the time of the filing of the pleading, as of the time of full payment of the fees
within such reasonable time as the court may grant, unless, of course,
prescription has set in the meantime.
It does not follow, however, that the trial court should have dismissed the
complaint for failure of private respondent to pay the correct amount of docket
fees. Although the payment of the proper docket fees is a jurisdictional
requirement, the trial court may allow the plaintiff in an action to pay the same
within a reasonable time before the expiration of the applicable prescriptive or
reglementary period. If the plaintiff fails to comply within this requirement, the
defendant should timely raise the issue of jurisdiction or else he would be
considered in estoppel. In the latter case, the balance between the appropriate
docket fees and the amount actually paid by the plaintiff will be considered a lien
or any award he may obtain in his favor. (Emphasis ours)
Accordingly, the trial court in the case at bar should determine the proper docket
fee based on the estimated amount that respondents seek to collect from
petitioner, and direct them to pay the same within a reasonable time, provided
the applicable prescriptive or reglementary period has not yet expired. Failure to
comply therewith, and upon motion by petitioner, the immediate dismissal of the
complaint shall issue on jurisdictional grounds.
On the matter of improper venue, we find no error on the part of the trial court
and the Court of Appeals in holding that the case below is a personal action
which, under the Rules, may be commenced and tried where the defendant
resides or may be found, or where the plaintiffs reside, at the election of the
latter. 26
Petitioner, however, insists that venue was improperly laid since the action is a
real action involving a parcel of land that is located outside the territorial
jurisdiction of the court a quo. This contention is not well-taken. The records
indubitably show that respondents are asking that the assets of the partnership
be accounted for, sold and distributed according to the agreement of the
partners. The fact that two of the assets of the partnership are parcels of land
does not materially change the nature of the action. It is an action in personam
because it is an action against a person, namely, Petitioner, on the basis of his
personal liability. It is not an action in rem where the action is against the thing
itself instead of against the person. 27 Furthermore, there is no showing that the
parcels of land involved in this case are being disputed. In fact, it is only
incidental that part of the assets of the partnership under liquidation happen to be
parcels of land.
The time-tested case of Claridades v. Mercader, Et Al., 28 settled this issue
thus:chanrob1es virtual 1aw library
The fact that plaintiff prays for the sale of the assets of the partnership, including
the fishpond in question, did not change the nature or character of the action,
such sale being merely a necessary incident of the liquidation of the partnership,
which should precede and/or is part of its process of dissolution.
The action filed by respondents not only seeks redress against petitioner. It also
seeks the enforcement of, and petitioner’s compliance with, the contract that the
partners executed to formalize the partnership’s dissolution, as well as to
implement the liquidation and partition of the partnership’s assets. Clearly, it is a
personal action that, in effect, claims a debt from petitioner and seeks the
performance of a personal duty on his part. 29 In fine, respondents’ complaint
seeking the liquidation and partition of the assets of the partnership with
damages is a personal action which may be filed in the proper court where any of
the parties reside. 30 Besides, venue has nothing to do with jurisdiction for venue
touches more upon the substance or merits of the case. 31 As it is, venue in this
case was properly laid and the trial court correctly ruled so.
On the third issue, petitioner asserts that the surviving spouse of Vicente
Tabanao has no legal capacity to sue since she was never appointed as
administratrix or executrix of his estate. Petitioner’s objection in this regard is
misplaced. The surviving spouse does not need to be appointed as executrix or
administratrix of the estate before she can file the action. She and her children
are complainants in their own right as successors of Vicente Tabanao. From the
very moment of Vicente Tabanao’s death, his rights insofar as the partnership
was concerned were transmitted to his heirs, for rights to the succession are
transmitted from the moment of death of the decedent. 32
Whatever claims and rights Vicente Tabanao had against the partnership and
petitioner were transmitted to respondents by operation of law, more particularly
by succession, which is a mode of acquisition by virtue of which the property,
rights and obligations to the extent of the value of the inheritance of a person are
transmitted. 33 Moreover, respondents became owners of their respective
hereditary shares from the moment Vicente Tabanao died. 34
A prior settlement of the estate, or even the appointment of Salvacion Tabanao
as executrix or administratrix, is not necessary for any of the heirs to acquire
legal capacity to sue. As successors who stepped into the shoes of their
decedent upon his death, they can commence any action originally pertaining to
the decedent. 35 From the moment of his death, his rights as a partner and to
demand fulfillment of petitioner’s obligations as outlined in their dissolution
agreement were transmitted to respondents. They, therefore, had the capacity to
sue and seek the court’s intervention to compel petitioner to fulfill his obligations.
Finally, petitioner contends that the trial court should have dismissed the
complaint on the ground of prescription, arguing that respondents’ action
prescribed four (4) years after it accrued in 1986. The trial court and the Court of
Appeals gave scant consideration to petitioner’s hollow arguments, and rightly
so.
The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and
(3) termination. 36 The partnership, although dissolved, continues to exist and its
legal personality is retained, at which time it completes the winding up of its
affairs, including the partitioning and distribution of the net partnership assets to
the partners. 37 For as long as the partnership exists, any of the partners may
demand an accounting of the partnership’s business. Prescription of the said
right starts to run only upon the dissolution of the partnership when the final
accounting is done. 38
Contrary to petitioner’s protestations that respondents’ right to inquire into the
business affairs of the partnership accrued in 1986, prescribing four (4) years
thereafter, prescription had not even begun to run in the absence of a final
accounting. Article 1842 of the Civil Code provides:chanrob1es virtual 1aw library
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 of any agreement to the contrary.
Applied in relation to Articles 1807 and 1809, which also deal with the duty to
account, the above-cited provision states that the right to demand an accounting
accrues at the date of dissolution in the absence of any agreement to the
contrary. When a final accounting is made, it is only then that prescription begins
to run. In the case at bar, no final accounting has been made, and that is
precisely what respondents are seeking in their action before the trial court, since
petitioner has failed or refused to render an accounting of the partnership’s
business and assets. Hence, the said action is not barred by prescription.
In fine, the trial court neither erred nor abused its discretion when it denied
petitioner’s motions to dismiss. Likewise, the Court of Appeals did not commit
reversible error in upholding the trial court’s orders. Precious time has been lost
just to settle this preliminary issue, with petitioner resurrecting the very same
arguments from the trial court all the way up to the Supreme Court. The litigation
of the merits and substantial issues of this controversy is now long overdue and
must proceed without further delay.chanrob1es virtua1 1aw 1ibrary
WHEREFORE, in view of all the foregoing, the instant petition is DENIED for lack
of merit, and the case is REMANDED to the Regional Trial Court of Cadiz City,
Branch 60, which is ORDERED to determine the proper docket fee based on the
estimated amount that plaintiffs therein seek to collect, and direct said plaintiffs to
pay the same within a reasonable time, provided the applicable prescriptive or
reglementary period has not yet expired. Thereafter, the trial court is ORDERED
to conduct the appropriate proceedings in Civil Case No. 416-C.
Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., Puno, Kapunan and Pardo, JJ., concur.
 EN BANC
G.R. No. 413 February 2, 1903
JOSE FERNANDEZ,Plaintiff-Appellant, vs. FRANCISCO DE LA
ROSA,Defendant-Appellee.
Vicente Miranda, for appellant.
Simplicio del Rosario, for appellee.
LADD, J.:
The object of this action is to obtain from the court a declaration that a
partnership exists between the parties, that the plaintiff has a consequent
interested in certain cascoes which are alleged to be partnership property, and
that the defendant is bound to render an account of his administration of the
cascoes and the business carried on with them.chanrobles virtual law library
Judgment was rendered for the defendant in the court below and the plaintiff
appealed.chanrobles virtual law library
The respective claims of the parties as to the facts, so far as it is necessary to
state them in order to indicate the point in dispute, may be briefly summarized.
The plaintiff alleges that in January, 1900, he entered into a verbal agreement
with the defendant to form a partnership for the purchase of cascoes and the
carrying on of the business of letting the same for hire in Manila, the defendant to
buy the cascoes and each partner to furnish for that purpose such amount of
money as he could, the profits to be divided proportionately; that in the same
January the plaintiff furnished the defendant 300 pesos to purchase a casco
designated as No. 1515, which the defendant did purchase for 500 pesos of
Doña Isabel Vales, taking the title in his own name; that the plaintiff furnished
further sums aggregating about 300 pesos for repairs on this casco; that on the
fifth of the following March he furnished the defendant 825 pesos to purchase
another casco designated as No. 2089, which the defendant did purchase for
1,000 pesos of Luis R. Yangco, taking the title to this casco also in his own
name; that in April the parties undertook to draw up articles of partnership for the
purpose of embodying the same in an authentic document, but that the defendant
having proposed a draft of such articles which differed materially from the terms
of the earlier verbal agreement, and being unwillingly to include casco No. 2089
in the partnership, they were unable to come to any understanding and no written
agreement was executed; that the defendant having in the meantime had the
control and management of the two cascoes, the plaintiff made a demand for an
accounting upon him, which the defendant refused to render, denying the
existence of the partnership altogether.chanrobles virtual law library
The defendant admits that the project of forming a partnership in the casco
business in which he was already engaged to some extent individually was
discussed between himself and the plaintiff in January, 1900, and earlier, one
Marcos Angulo, who was a partner of the plaintiff in a bakery business, being
also a party to the negotiations, but he denies that any agreement was ever
consummated. He denies that the plaintiff furnished any money in January, 1900,
for the purchase of casco No. 1515, or for repairs on the same, but claims that he
borrowed 300 pesos on his individual account in January from the bakery firm,
consisting of the plaintiff, Marcos Angulo, and Antonio Angulo. The 825 pesos,
which he admits he received from the plaintiff March 5, he claims was for the
purchase of casco No. 1515, which he alleged was bought March 12, and he
alleges that he never received anything from the defendant toward the purchase
of casco No. 2089. He claims to have paid, exclusive of repairs, 1,200 pesos for
the first casco and 2,000 pesos for the second one.chanrobles virtual law library
The case comes to this court under the old procedure, and it is therefore
necessary for us the review the evidence and pass upon the facts. Our general
conclusions may be stated as follows:chanrobles virtual law library
(1) Doña Isabel Vales, from whom the defendant bought casco No. 1515, testifies
that the sale was made and the casco delivered in January, although the public
document of sale was not executed till some time afterwards. This witness is
apparently disinterested, and we think it is safe to rely upon the truth of her
testimony, especially as the defendant, while asserting that the sale was in
March, admits that he had the casco taken to the ways for repairs in
January.chanrobles virtual law library
It is true that the public document of sale was executed March 10, and that the
vendor declares therein that she is the owner of the casco, but such declaration
does not exclude proof as to the actual date of the sale, at least as against the
plaintiff, who was not a party to the instrument. (Civil Code, sec. 1218.) It often
happens, of course, in such cases, that the actual sale precedes by a
considerable time the execution of the formal instrument of transfer, and this is
what we think occurred here.chanrobles virtual law library
(2) The plaintiff presented in evidence the following receipt: "I have this day
received from D. Jose Fernandez eight hundred and twenty-five pesos for the
cost of a casco which we are to purchase in company. Manila, March 5, 1900.
Francisco de la Rosa." The authenticity of this receipt is admitted by the
defendant. If casco No. 1515 was bought, as we think it was, in January, the
casco referred to in the receipt which the parties "are to purchase in company"
must be casco No. 2089, which was bought March 22. We find this to be the fact,
and that the plaintiff furnished and the defendant received 825 pesos toward the
purchase of this casco, with the understanding that it was to be purchased on
joint account.chanrobles virtual law library
(3) Antonio Fernandez testifies that in the early part of January, 1900, he saw
Antonio Angulo give the defendant, in the name of the plaintiff, a sum of money,
the amount of which he is unable to state, for the purchase of a casco to be used
in the plaintiff's and defendant's business. Antonio Angulo also testifies, but the
defendant claims that the fact that Angulo was a partner of the plaintiff rendered
him incompetent as a witness under the provisions of article 643 of the then
Code of Civil Procedure, and without deciding whether this point is well taken, we
have discarded his testimony altogether in considering the case. The defendant
admits the receipt of 300 pesos from Antonio Angulo in January, claiming, as has
been stated, that it was a loan from the firm. Yet he sets up the claim that the 825
pesos which he received from the plaintiff in March were furnished toward the
purchase of casco No. 1515, thereby virtually admitting that casco was
purchased in company with the plaintiff. We discover nothing in the evidence to
support the claim that the 300 pesos received in January was a loan, unless it
may be the fact that the defendant had on previous occasions borrowed money
from the bakery firm. We think all the probabilities of the case point to the truth of
the evidence of Antonio Fernandez as to this transaction, and we find the fact to
be that the sum in question was furnished by the plaintiff toward the purchase for
joint ownership of casco No. 1515, and that the defendant received it with the
understanding that it was to be used for this purposed. We also find that the
plaintiff furnished some further sums of money for the repair of casco.chanrobles
virtual law library
(4) The balance of the purchase price of each of the two cascoes over and above
the amount contributed by the plaintiff was furnished by the defendant.chanrobles
virtual law library
(5) We are unable to find upon the evidence before us that there was any specific
verbal agreement of partnership, except such as may be implied from the fact as
to the purchase of the casco.chanrobles virtual law library
(6) Although the evidence is somewhat unsatisfactory upon this point, we think it
more probable than otherwise that no attempt was made to agree upon articles of
partnership till about the middle of the April following the purchase of the
cascoes.chanrobles virtual law library
(7) At some time subsequently to the failure of the attempt to agree upon
partnership articles and after the defendant had been operating the cascoes for
some time, the defendant returned to the plaintiff 1,125 pesos, in two different
sums, one of 300 and one of 825 pesos. The only evidence in the record as to
the circumstances under which the plaintiff received these sums is contained in
his answer to the interrogatories proposed to him by the defendant, and the
whole of his statement on this point may properly be considered in determining
the fact as being in the nature of an indivisible admission. He states that both
sums were received with an express reservation on his part of all his rights as a
partner. We find this to be the fact.chanrobles virtual law library
Two questions of law are raised by the foregoing facts: (1) Did a partnership exist
between the parties? (2) If such partnership existed, was it terminated as a result
of the act of the defendant in receiving back the 1,125 pesos?chanrobles virtual
law library
(1) "Partnership is a contract by which 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." (Civil Code, art. 1665.)chanrobles virtual
law library
The essential points upon which the minds of the parties must meet in a contract
of partnership are, therefore, (1) mutual contribution to a common stock, and (2)
a joint interest in the profits. If the contract contains these two elements the
partnership relation results, and the law itself fixes the incidents of this relation if
the parties fail to do so. (Civil Code, secs. 1689, 1695.)chanrobles virtual law
library
We have found as a fact that money was furnished by the plaintiff and received
by the defendant with the understanding that it was to be used for the purchase
of the cascoes in question. This establishes the first element of the contract,
namely, mutual contribution to a common stock. The second element, namely,
the intention to share profits, appears to be an unavoidable deduction from the
fact of the purchase of the cascoes in common, in the absence of any other
explanation of the object of the parties in making the purchase in that form, and,
it may be added, in view of the admitted fact that prior to the purchase of the first
casco the formation of a partnership had been a subject of negotiation between
them.chanrobles virtual law library
Under other circumstances the relation of joint ownership, a relation distinct
though perhaps not essentially different in its practical consequence from that of
partnership, might have been the result of the joint purchase. If, for instance, it
were shown that the object of the parties in purchasing in company had been to
make a more favorable bargain for the two cascoes that they could have done by
purchasing them separately, and that they had no ulterior object except to effect
a division of the common property when once they had acquired it, the affectio
societatis would be lacking and the parties would have become joint tenants only;
but, as nothing of this sort appears in the case, we must assume that the object
of the purchase was active use and profit and not mere passive ownership in
common.chanrobles virtual law library
It is thus apparent that a complete and perfect contract of partnership was
entered into by the parties. This contract, it is true, might have been subject to a
suspensive condition, postponing its operation until an agreement was reached
as to the respective participation of the partners in the profits, the character of the
partnership as collective or en comandita, and other details, but although it is
asserted by counsel for the defendant that such was the case, there is little or
nothing in the record to support this claim, and that fact that the defendant did
actually go on and purchase the boat, as it would seem, before any attempt had
been made to formulate partnership articles, strongly discountenances the
theory.chanrobles virtual law library
The execution of a written agreement was not necessary in order to give efficacy
to the verbal contract of partnership as a civil contract, the contributions of the
partners not having been in the form of immovables or rights in immovables.
(Civil Code, art. 1667.) The special provision cited, requiring the execution of a
public writing in the single case mentioned and dispensing with all formal
requirements in other cases, renders inapplicable to this species of contract the
general provisions of article 1280 of the Civil Code.chanrobles virtual law library
(2) The remaining question is as to the legal effect of the acceptance by the
plaintiff of the money returned to him by the defendant after the definitive failure
of the attempt to agree upon partnership articles. The amount returned fell short,
in our view of the facts, of that which the plaintiff had contributed to the capital of
the partnership, since it did not include the sum which he had furnished for the
repairs of casco No. 1515. Moreover, it is quite possible, as claimed by the
plaintiff, that a profit may have been realized from the business during the period
in which the defendant have been administering it prior to the return of the
money, and if so he still retained that sum in his hands. For these reasons the
acceptance of the money by the plaintiff did not have the effect of terminating the
legal existence of the partnership by converting it into a societas leonina, as
claimed by counsel for the defendant.chanrobles virtual law library
Did the defendant waive his right to such interest as remained to him in the
partnership property by receiving the money? Did he by so doing waive his right
to an accounting of the profits already realized, if any, and a participation in them
in proportion to the amount he had originally contributed to the common fund?
Was the partnership dissolved by the "will or withdrawal of one of the partners"
under article 1705 of the Civil Code? We think these questions must be
answered in the negative.chanrobles virtual law library
There was no intention on the part of the plaintiff in accepting the money to
relinquish his rights as a partner, nor is there any evidence that by anything that
he said or by anything that he omitted to say he gave the defendant any ground
whatever to believe that he intended to relinquish them. On the contrary he
notified the defendant that he waived none of his rights in the partnership. Nor
was the acceptance of the money an act which was in itself inconsistent with the
continuance of the partnership relation, as would have been the case had the
plaintiff withdrawn his entire interest in the partnership. There is, therefore,
nothing upon which a waiver, either express or implied, can be predicated. The
defendant might have himself terminated the partnership relation at any time, if
he had chosen to do so, by recognizing the plaintiff's right in the partnership
property and in the profits. Having failed to do this he can not be permitted to
force a dissolution upon his co-partner upon terms which the latter is unwilling to
accept. We see nothing in the case which can give the transaction in question
any other aspect than that of the withdrawal by one partner with the consent of
the other of a portion of the common capital.chanrobles virtual law library
The result is that we hold and declare that a partnership was formed between the
parties in January, 1900, the existence of which the defendant is bound to
recognize; that cascoes No. 1515 and 2089 constitute partnership property, and
that the plaintiff is entitled to an accounting of the defendant's administration of
such property, and of the profits derived therefrom. This declaration does not
involve an adjudication as to any disputed items of the partnership
account.chanrobles virtual law library
The judgment of the court below will be reversed without costs, and the record
returned for the execution of the judgment now rendered. So ordered.chanrobles
virtual law library
Arellano, C.J., Torres, Cooper, and Mapa, JJ., concur.
Willard, J., dissenting.
ON MOTION FOR A REHEARING. chanrobles virtual law library
MAPA, J.:
This case has been decided on appeal in favor of the plaintiff, and the defendant
has moved for a rehearing upon the following grounds:chanrobles virtual law
library
1. Because that part of the decision which refers to the existence of the
partnership which is the object of the complaint is not based upon clear and
decisive legal grounds; andchanrobles virtual law library
2. Because, upon the supposition of the existence of the partnership, the decision
does not clearly determine whether the juridical relation between the partners
suffered any modification in consequence of the withdrawal by the plaintiff of the
sum of 1,125 pesos from the funds of the partnership, or if it continued as before,
the parties being thereby deprived, he alleges, of one of the principal bases for
determining with exactness the amount due to each.chanrobles virtual law library
With respect to the first point, the appellant cites the fifth conclusion of the
decision, which is as follows: "We are unable to find from the evidence before us
that there was any specific verbal agreement of partnership, except such as may
be implied from the facts as to the purchase of the cascoes."chanrobles virtual
law library
Discussing this part of the decision, the defendant says that, in the judgment of
the court, if on the one hand there is no direct evidence of a contract, on the
other its existence can only be inferred from certain facts, and the defendant
adds that the possibility of an inference is not sufficient ground upon which to
consider as existing what may be inferred to exist, and still less as sufficient
ground for declaring its efficacy to produce legal effects.chanrobles virtual law
library
This reasoning rests upon a false basis. We have not taken into consideration the
mere possibility of an inference, as the appellant gratuitously stated, for the
purpose of arriving at a conclusion that a contract of partnership was entered into
between him and the plaintiff, but have considered the proof which is derived
from the facts connected with the purchase of the cascoes. It is stated in the
decision that with the exception of this evidence we find no other which shows
the making of the contract. But this does not mean (for it says exactly the
contrary) that this fact is not absolutely proven, as the defendant erroneously
appears to think. From this data we infer a fact which to our mind is certain and
positive, and not a mere possibility; we infer not that it is possible that the
contract may have existed, but that it actually did exist. The proofs constituted by
the facts referred to, although it is the only evidence, and in spite of the fact that it
is not direct, we consider, however, sufficient to produce such a conviction, which
may certainly be founded upon any of the various classes of evidence which the
law admits. There is all the more reason for its being so in this case, because a
civil partnership may be constituted in any form, according to article 1667 of the
Civil Code, unless real property or real rights are contributed to it - the only case
of exception in which it is necessary that the agreement be recorded in a public
instrument.chanrobles virtual law library
therein is equivalent to or exceeds the sum mentioned. In this case it is evident
that, notwithstanding that payment, his interest in the partnership would still
continue. This is one case. It would be easy to imagine many others, as the
possible results of a liquidation are innumerable. The liquidation will finally
determine the condition of the legal relations of the partners inter se at the time of
the withdrawal of the sum mentioned. It was not, nor is it possible to determine
this status a priori without prejudging the result, as yet unknown, of the litigation.
Therefore it is that in the decision no direct statement has been made upon this
point. It is for the same reason that it was expressly stated in the decision that
it "does not involve an adjudication as to any disputed item of the partnership
account." chanrobles virtual law library
The contentions advanced by the moving party are so evidently unfounded that
we can not see the necessity or convenience of granting the rehearing prayed
for, and the motion is therefore denied.chanrobles virtual law library

It is of no importance that the parties have failed to reach an agreement with Arellano, C.J., Torres, Cooper, and Ladd, JJ., concur.
respect to the minor details of contract. These details pertain to the accidental Willard and McDonough, JJ., did not sit in this case.
and not to the essential part of the contract. We have already stated in the
opinion what are the essential requisites of a contract of partnership, according to
the definition of article 1665. Considering as a whole the probatory facts which
appears from the record, we have reached the conclusion that the plaintiff and
the defendant agreed to the essential parts of that contract, and did in fact
constitute a partnership, with the funds of which were purchased the cascoes
with which this litigation deals, although it is true that they did not take the
precaution to precisely establish and determine from the beginning the conditions
with respect to the participation of each partner in the profits or losses of the
partnership. The disagreements subsequently arising between them, when
endeavoring to fix these conditions, should not and can not produce the effect of
destroying that which has been done, to the prejudice of one of the partners, nor
could it divest his rights under the partnership which had accrued by the actual
contribution of capital which followed the agreement to enter into a partnership,
together with the transactions effected with partnership funds. The law has
foreseen the possibility of the constitution of a partnership without an express
stipulation by the partners upon those conditions, and has established rules
which may serve as a basis for the distribution of profits and losses among the
partners. (Art. 1689 of the Civil Code. ) We consider that the partnership entered
into by the plaintiff and the defendant falls within the provisions of this
article.chanrobles virtual law library

With respect to the second point, it is obvious that upon declaring the existence
of a partnership and the right of the plaintiff to demand from the defendant an
itemized accounting of his management thereof, it was impossible at the same
time to determine the effects which might have been produced with respect to the
interest of the partnership by the withdrawal by the plaintiff of the sum of 1,125
pesos. This could only be determined after a liquidation of the partnership. Then,
and only then, can it be known if this sum is to be charged to the capital
contributed by the plaintiff, or to his share of the profits, or to both. It might well
be that the partnership has earned profits, and that the plaintiff's participation
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-31684 June 28, 1973
EVANGELISTA & CO., DOMINGO C. EVANGELISTA, JR., CONCHITA B.
NAVARRO and LEONARDA ATIENZA ABAD SABTOS, petitioners,
vs.
ESTRELLA ABAD SANTOS, respondent.
Leonardo Abola for petitioners.
Baisas, Alberto & Associates for respondent.
MAKALINTAL, J.:
On October 9, 1954 a co-partnership was formed under the name of "Evangelista
& Co." On June 7, 1955 the Articles of Co-partnership was amended as to
include herein respondent, Estrella Abad Santos, as industrial partner, with
herein petitioners Domingo C. Evangelista, Jr., Leonardo Atienza Abad Santos
and Conchita P. Navarro, the original capitalist partners, remaining in that
capacity, with a contribution of P17,500 each. The amended Articles
provided, inter alia, that "the contribution of Estrella Abad Santos consists of her
industry being an industrial partner", and that the profits and losses "shall be
divided and distributed among the partners ... in the proportion of 70% for the first
three partners, Domingo C. Evangelista, Jr., Conchita P. Navarro and Leonardo
Atienza Abad Santos to be divided among them equally; and 30% for the fourth
partner Estrella Abad Santos."
On December 17, 1963 herein respondent filed suit against the three other
partners in the Court of First Instance of Manila, alleging that the partnership,
which was also made a party-defendant, had been paying dividends to the
partners except to her; and that notwithstanding her demands the defendants
had refused and continued to refuse and let her examine the partnership books
or to give her information regarding the partnership affairs to pay her any share in
the dividends declared by the partnership. She therefore prayed that the
defendants be ordered to render accounting to her of the partnership business
and to pay her corresponding share in the partnership profits after such
accounting, plus attorney's fees and costs.
The defendants, in their answer, denied ever having declared dividends or
distributed profits of the partnership; denied likewise that the plaintiff ever
demanded that she be allowed to examine the partnership books; and byway of
affirmative defense alleged that the amended Articles of Co-partnership did not
express the true agreement of the parties, which was that the plaintiff was not an
industrial partner; that she did not in fact contribute industry to the partnership;
and that her share of 30% was to be based on the profits which might be realized
by the partnership only until full payment of the loan which it had obtained in
December, 1955 from the Rehabilitation Finance Corporation in the sum of
P30,000, for which the plaintiff had signed a promisory note as co-maker and
mortgaged her property as security.
The parties are in agreement that the main issue in this case is "whether the
plaintiff-appellee (respondent here) is an industrial partner as claimed by her or
merely a profit sharer entitled to 30% of the net profits that may be realized by
the partnership from June 7, 1955 until the mortgage loan from the Rehabilitation
Finance Corporation shall be fully paid, as claimed by appellants (herein
petitioners)." On that issue the Court of First Instance found for the plaintiff and
rendered judgement "declaring her an industrial partner of Evangelista & Co.;
ordering the defendants to render an accounting of the business operations of
the (said) partnership ... from June 7, 1955; to pay the plaintiff such amounts as
may be due as her share in the partnership profits and/or dividends after such an
accounting has been properly made; to pay plaintiff attorney's fees in the sum of
P2,000.00 and the costs of this suit."
The defendants appealed to the Court of Appeals, which thereafter affirmed
judgments of the court a quo.
In the petition before Us the petitioners have assigned the following errors:
I. The Court of Appeals erred in the finding that the respondent is
an industrial partner of Evangelista & Co., notwithstanding the
admitted fact that since 1954 and until after promulgation of the
decision of the appellate court the said respondent was one of
the judges of the City Court of Manila, and despite its findings
that respondent had been paid for services allegedly contributed
by her to the partnership. In this connection the Court of Appeals
erred:
(A) In finding that the "amended Articles of Co-
partnership," Exhibit "A" is conclusive evidence
that respondent was in fact made an industrial
partner of Evangelista & Co.
(B) In not finding that a portion of respondent's
testimony quoted in the decision proves that said
respondent did not bind herself to contribute her
industry, and she could not, and in fact did not,
 because she was one of the judges of the City
Court of Manila since 1954.
(C) In finding that respondent did not in fact
contribute her industry, despite the appellate
court's own finding that she has been paid for
the services allegedly rendered by her, as well
as for the loans of money made by her to the
partnership.
II. The lower court erred in not finding that in any event the
respondent was lawfully excluded from, and deprived of, her
alleged share, interests and participation, as an alleged industrial
partner, in the partnership Evangelista & Co., and its profits or
net income.
III. The Court of Appeals erred in affirming in toto the decision of
the trial court whereby respondent was declared an industrial
partner of the petitioner, and petitioners were ordered to render
an accounting of the business operation of the partnership from
June 7, 1955, and to pay the respondent her alleged share in the
net profits of the partnership plus the sum of P2,000.00 as
attorney's fees and the costs of the suit, instead of dismissing
respondent's complaint, with costs, against the respondent.
It is quite obvious that the questions raised in the first assigned errors refer to the
facts as found by the Court of Appeals. The evidence presented by the parties as
the trial in support of their respective positions on the issue of whether or not the
respondent was an industrial partner was thoroughly analyzed by the Court of
Appeals on its decision, to the extent of reproducing verbatim therein the lengthy
testimony of the witnesses.
It is not the function of the Supreme Court to analyze or weigh such evidence all
over again, its jurisdiction being limited to reviewing errors of law that might have
been commited by the lower court. It should be observed, in this regard, that the
Court of Appeals did not hold that the Articles of Co-partnership, identified in the
record as Exhibit "A", was conclusive evidence that the respondent was an
industrial partner of the said company, but considered it together with other
factors, consisting of both testimonial and documentary evidences, in arriving at
the factual conclusion expressed in the decision.
The findings of the Court of Appeals on the various points raised in the first
assignment of error are hereunder reproduced if only to demonstrate that the
same were made after a through analysis of then evidence, and hence are
beyond this Court's power of review.
The aforequoted findings of the lower Court are assailed under
Appellants' first assigned error, wherein it is pointed out that
"Appellee's documentary evidence does not conclusively prove
that appellee was in fact admitted by appellants as industrial
partner of Evangelista & Co." and that "The grounds relied upon
by the lower Court are untenable" (Pages 21 and 26, Appellant's
Brief).
The first point refers to Exhibit A, B, C, K, K-1, J, N and S,
appellants' complaint being that "In finding that the appellee is an
industrial partner of appellant Evangelista & Co., herein referred
to as the partnership — the lower court relied mainly on the
appellee's documentary evidence, entirely disregarding facts and
circumstances established by appellants" evidence which
contradict the said finding' (Page 21, Appellants' Brief). The
lower court could not have done otherwise but rely on the
exhibits just mentioned, first, because appellants have admitted
their genuineness and due execution, hence they were admitted
without objection by the lower court when appellee rested her
case and, secondly the said exhibits indubitably show the
appellee is an industrial partner of appellant company.
Appellants are virtually estopped from attempting to detract from
the probative force of the said exhibits because they all bear the
imprint of their knowledge and consent, and there is no credible
showing that they ever protested against or opposed their
contents prior of the filing of their answer to appellee's complaint.
As a matter of fact, all the appellant Evangelista, Jr., would have
us believe — as against the cumulative force of appellee's
aforesaid documentary evidence — is the appellee's Exhibit "A",
as confirmed and corroborated by the other exhibits already
mentioned, does not express the true intent and agreement of
the parties thereto, the real understanding between them being
the appellee would be merely a profit sharer entitled to 30% of
the net profits that may be realized between the partners from
June 7, 1955, until the mortgage loan of P30,000.00 to be
obtained from the RFC shall have been fully paid. This version,
however, is discredited not only by the aforesaid documentary
evidence brought forward by the appellee, but also by the fact
that from June 7, 1955 up to the filing of their answer to the
complaint on February 8, 1964 — or a period of over eight (8)
years — appellants did nothing to correct the alleged false
agreement of the parties contained in Exhibit "A". It is thus
reasonable to suppose that, had appellee not filed the present
action, appellants would not have advanced this obvious
afterthought that Exhibit "A" does not express the true intent and
agreement of the parties thereto.
At pages 32-33 of appellants' brief, they also make much of the
argument that 'there is an overriding fact which proves that the
parties to the Amended Articles of Partnership, Exhibit "A", did
not contemplate to make the appellee Estrella Abad Santos, an
 industrial partner of Evangelista & Co. It is an admitted fact that
since before the execution of the amended articles of
partnership, Exhibit "A", the appellee Estrella Abad Santos has
been, and up to the present time still is, one of the judges of the
City Court of Manila, devoting all her time to the performance of
the duties of her public office. This fact proves beyond
peradventure that it was never contemplated between the
parties, for she could not lawfully contribute her full time and
industry which is the obligation of an industrial partner pursuant
to Art. 1789 of the Civil Code.
The Court of Appeals then proceeded to consider appellee's testimony on this
point, quoting it in the decision, and then concluded as follows:
One cannot read appellee's testimony just quoted without
gaining the very definite impression that, even as she was and
still is a Judge of the City Court of Manila, she has rendered
services for appellants without which they would not have had
the wherewithal to operate the business for which appellant
company was organized. Article 1767 of the New Civil Code
which provides that "By 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, 'does not specify the kind of industry
that a partner may thus contribute, hence the said services may
legitimately be considered as appellee's contribution to the
common fund. Another article of the same Code relied upon
appellants reads:
'ART. 1789. An industrial partner cannot engage
in business for himself, unless the partnership
expressly permits him to do so; and if he should
do so, the capitalist partners may either exclude
him from the firm or avail themselves of the
benefits which he may have obtained in violation
of this provision, with a right to damages in
either case.'
It is not disputed that the provision against the industrial partner
engaging in business for himself seeks to prevent any conflict of
interest between the industrial partner and the partnership, and
to insure faithful compliance by said partner with this prestation.
There is no pretense, however, even on the part of the appellee
is engaged in any business antagonistic to that of appellant
company, since being a Judge of one of the branches of the City
Court of Manila can hardly be characterized as a business. That
appellee has faithfully complied with her prestation with respect
to appellants is clearly shown by the fact that it was only after
filing of the complaint in this case and the answer thereto
appellants exercised their right of exclusion under the codal art
just mentioned by alleging in their Supplemental Answer dated
June 29, 1964 — or after around nine (9) years from June 7,
1955 — subsequent to the filing of defendants' answer to the
complaint, defendants reached an agreement whereby the
herein plaintiff been excluded from, and deprived of, her alleged
share, interests or participation, as an alleged industrial partner,
in the defendant partnership and/or in its net profits or income,
on the ground plaintiff has never contributed her industry to the
partnership, instead she has been and still is a judge of the City
Court (formerly Municipal Court) of the City of Manila, devoting
her time to performance of her duties as such judge and enjoying
the privilege and emoluments appertaining to the said office,
aside from teaching in law school in Manila, without the express
consent of the herein defendants' (Record On Appeal, pp. 24-
25). Having always knows as a appellee as a City judge even
before she joined appellant company on June 7, 1955 as an
industrial partner, why did it take appellants many yearn before
excluding her from said company as aforequoted allegations?
And how can they reconcile such exclusive with their main theory
that appellee has never been such a partner because "The real
agreement evidenced by Exhibit "A" was to grant the appellee a
share of 30% of the net profits which the appellant partnership
may realize from June 7, 1955, until the mortgage of P30,000.00
obtained from the Rehabilitation Finance Corporal shall have
been fully paid." (Appellants Brief, p. 38).
What has gone before persuades us to hold with the lower Court
that appellee is an industrial partner of appellant company, with
the right to demand for a formal accounting and to receive her
share in the net profit that may result from such an accounting,
which right appellants take exception under their second
assigned error. Our said holding is based on the following article
of the New Civil Code:
'ART. 1899. Any partner shall have the right to a
formal account as to partnership affairs:
(1) If he is wrongfully excluded from the partnership business or
possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstance render it just and reasonable.
We find no reason in this case to depart from the rule which limits this Court's
appellate jurisdiction to reviewing only errors of law, accepting as conclusive the
factual findings of the lower court upon its own assessment of the evidence.

The judgment appealed from is affirmed, with costs.

Zaldivar, Castro, Fernando, Teehankee, Barredo, Makasiar, Antonio and

Esguerra, JJ., concur.
EN BANC
[G.R. No. 45662. April 26, 1939.]
ENRIQUE CLEMENTE, Plaintiff-Appellee, v. DIONISIO GALVAN, Defendant-
Appellee. JOSE ECHEVARRIA, Intervenor-Appellant.
Engracio F. Clemeña and Celedonio Bernardo for Appellant.
Vicente Bengzon for defendant and appellee.
No appearance for other party.
SYLLABUS
1. POSSESSION; CONSTRICTIVE POSSESSION. — From the facts stated in
the decision of the court. it is clear that plaintiff could not obtain possession of the
machines in question. The constructive possession deducible from the fact that
he had control of the keys to the place where the machines were found (Ylaya
Street Nos. 705-707), as they had been delivered to him by the receiver, does
not help him any because the lower court suspended the effects of the order
whereby the keys were delivered to him a few days after its issuance; and
thereafter revolved it entirely in the appealed decision.
2. ID.; ACTUAL POSSESSION. — Furthermore, when he attempted to take
material possession of the machines, the defendant did not allow him to do so.
Consequently, if he did not have material possession of the said machines, he
could not in any manner mortgage them. While it is true that the deed of
mortgage Exhibit B was annotated in the registry of property, it is no less true that
the machines to which it refers are not the same as those in question because
the latter are on Ylaya Street Nos. 705-707 and the former are on Singalong
Street N o. 1163.
3. ID.; PRIVATE DOCUMENT DOES NOT CHANGE TERMS OF A PUBLIC
DOCUMENT. — It can not be said that Exhibit B-1 allegedly a supplementary
contract between the plaintiff and the intervenor, shows that the machines
referred to in the deed of mortgage are the same as those which are in dispute
and which are found on Ylaya Street, for the reason that said exhibit being
merely a private document, the same cannot vary or alter the terms of a public
document which is Exhibit B or the deed of mortgage.
DECISION
DIAZ, J.:
The intervenor Jose Echevarria having lost in the Court of First Instance of
Manila which rendered judgment against him, the pertinent portion of which
reads: "and with respect to the complaint of the intervenor, the mortgage
executed in his favor by plaintiff is declared null and void, and said complaint in
intervention. as well as the counterclaim filed by the defendant against the
intervenor, is dismissed, without pronouncement as to costs," he appealed to this
court on the ground that, according to him, the lower court committed the errors
assigned in his brief as follows:jgc:chanrobles.com.ph
"I. The court a quo erred in finding in the appealed decision that plaintiff was
unable to take possession of the machines subject of the deed of mortgage
Exhibit B either before or after the execution thereof.
"II. The court a quo likewise erred in deciding the present case against the
intervenor-appellant, on the ground, among others, that ’plaintiff has not adduced
any evidence nor has he testified to show that the machines mortgaged by him to
the intervenor have ever belonged to him, notwithstanding that said intervenor is
his close relative.’
"III. The lower court also erred in declaring null and void the mortgage executed
by plaintiff in favor of the intervenor and, thereby, dismissing the complaint in
intervention.
"IV. The lower court lastly erred in ordering the receiver J. D. Mencarini to deliver
to the defendant the aforesaid machines upon petition of the plaintiff."cralaw
virtua1aw library
In order to have a clear idea of the question, it is proper to state the facts bearing
on the case as they appear in the decision and judgment of the lower court and in
the documents which constitute all the evidence adduced by the parties during
the trial.
On June 6, 1931, plaintiff and defendant organized a civil partnership which they
named "Galvan y Compañia" to engage in the manufacture and sale of paper
and other stationery. They agreed to invest therein a capital of P100,000, but as
a matter of fact they did not cover more than one-fifth thereof, each contributing
P10,000. Hardly a y ear after such organization, the plaintiff commenced the
present case in the above-mentioned court to ask for the dissolution of the
partnership and to compel defendant to whom the management thereof was
entrusted to submit an accounting of his administration and to deliver to him his
share as such partner. In his answer defendant expressed his conformity to the
dissolution of the partnership and the liquidation of its affairs; but by way of
counterclaim he asked that, having covered a deficit incurred by the partnership
amounting to P4,000 with his own money, plaintiff reimburse him of one-half of
said sum. On petition of the plaintiff a receiver and liquidator to take charge of the
properties and business of the partnership while the same was not yet definitely
dissolved, was appointed, the person chosen being Juan D. Mencarini. The latter
was already discharging the duties of his office when the court, by virtue of a
petition ex parte of the plaintiff, issued the order of May 24, 1933, requiring said
receiver to deliver to him (plaintiff) certain machines which were then at Nos.
705-707 Ylaya Street, Manila, but authorizing him to charge their value of P4,500 the same cannot vary or alter the terms of a public document which is Exhibit B
against the portion which may eventually be due to said plaintiff. To comply with or the deed of mortgage.
said order. the receiver delivered to plaintiff the keys to the place where the
machines were found, which was the same place where defendant had his home; 2. The second error attributed to the lower court is baseless. The evidence of
but before he could take actual possession of said machines, upon the strong record shows that the machines in contention originally belonged to the
opposition of defendant, the court, on motion of the latter, suspended the effects defendant and from him were transferred to the partnership Galvan y Compañia.
of its order of May 24, 1933. In the meantime the judgments rendered in cases This being the case, said machines belong to the partnership and not to him, and
Nos. 42794 and 43070 entitled "Philippine Education Co., Inc. v. Enrique shall belong to it until partition is effected according to the result thereof after the
Clemente" for the recovery of a sum of money, and "Jose Echevarria v. Enrique liquidation.
Clemente", also for the recovery of a sum of money, respectively, were made
executory; and in order to avoid the attachment and subsequent sale of the 3. The last two errors attributed by the appellant to the lower court have already
machines by the sheriff for the satisfaction from the proceeds thereof of the been disposed of by the considerations above set forth. They are as baseless as
judgments rendered in the two cases aforecited, plaintiff agreed with the the previous ones.
intervenor, who is his nephew, to execute, as he in fact executed in favor of the
latter, a deed of mortgage Exhibit B encumbering the machines described in said In view of all the foregoing, the judgment appealed from is affirmed, with costs
deed in which it is stated that "they are situated on Singalong Street No. 1163", against the appellant. So ordered.
which is a place entirely different from the house Nos. 705 and 707 on Ylaya
Street hereinbefore mentioned. The one year agreed upon in the deed of Avanceña, C.J., Villa-Real, Imperial, Laurel, Concepcion and Moran, JJ., concur.
mortgage for the fulfillment by the plaintiff of the obligation he had contracted with
the intervenor, having expired, the latter commenced case No. 49629 to collect
his mortgage credit. The intervenor, as plaintiff in the said case, obtained
judgment in his favor because the defendant did not interpose any defense or
objection, and, moreover, admitted being really indebted to the intervenor in the
amount set forth in the deed of mortgage Exhibit B. The machines which the
intervenor said were mortgaged to him were then in fact in custodia legis, as they
were under the control of the receiver and liquidator Juan D. Mencarini. It was,
therefore, useless for the intervenor to attach the same in view of the receiver’s
opposition; and the question having been brought to court, it decided that nothing
could be done because the receiver was not a party to the case which the
intervenor instituted to collect his aforesaid credit. (Civil case. No. 49629.) The
question ended thus because the intervenor did not take any other step until he
thought of joining in this case as intervenor.

1. From the foregoing facts, it is clear that plaintiff could not obtain possession of
the machines in question. The constructive possession deducible from the fact
that he had the keys to the place where the machines were found (Ylaya Street
Nos. 705-707), as they had been delivered to him by the receiver, does not help
him any because the lower court suspended the effects of the order whereby the
keys were delivered to him a few days after its issuance; and thereafter revoked
it entirely in the appealed decision. Furthermore, when he attempted to take
actual possession of the machines, the defendant did not allow him to do so.
Consequently, if he did not have actual possession of the machines, he could not
in any manner mortgage them, for while it is true that the oft-mentioned deed of
mortgage Exhibit B was annotated in the registry of property, it is no less true that
the machines to which it refers are not the same as those in question because
the latter are on Ylaya Street Nos. 705-707 and the former are on Singalong
Street No. 1163. It can not be said that Exhibit B-1, allegedly a supplementary
contract between the plaintiff and the intervenor, shows that the machines
referred to in the deed of mortgage are the same as those in dispute and which
are found on Ylaya Street because said exhibit being merely a private document,
 EN BANC
G.R. No. L-5963 May 20, 1953
THE LEYTE-SAMAR SALES CO., and RAYMUNDO TOMASSI Petitioners,
vs. SULPICIO V. CEA, in his capacity as Judge of the Court of First Instance
of Leyte and OLEGARIO LASTRILLA, Respondents.
Filomeno Montejo for petitioners.
Sulpicio V. Cea in his own behalf.
Olegario Lastrilla in his own behalf.
BENGZON, J.:
Labaled "Certiorari and Prohibition with preliminary Injunction" this petition prays
for the additional writ of mandamus to compel the respondent judge to give due
course to petitioners' appeal from his order taxing costs. However, inasmuch as
according to the answer, petitioners through their attorney withdrew their cash
appeal bond of P60 after the record on appeal bond of P60 after the record on
appeal had been rejected, the matter of mandamus may be summarily be
dropped without further comment.chanroblesvirtualawlibrary chanrobles virtual
law library
From the pleadings it appears that,chanrobles virtual law library
In civil case No. 193 of the Court of First Instance of Leyte, which is a suit for
damages by the Leyte-Samar Sales Co. (hereinafter called LESSCO) and
Raymond Tomassi against the Far Eastern Lumber & Commercial Co.
(unregistered commercial partnership hereinafter called FELCO), Arnold Hall,
Fred Brown and Jean Roxas, judgment against Defendants jointly and severally
for the amount of P31,589.14 plus costs was rendered on October 29, 1948. The
Court of Appeals confirmed the award in November 1950, minus P2,000
representing attorney's fees mistakenly included. The decision having become
final, the sheriff sold at auction on June 9, 1951 to Robert Dorfe and Pepito
Asturias "all the rights, interests, titles and participation" of the Defendants in
certain buildings and properties described in the certificate, for a total price of
eight thousand and one hundred pesos. But on June 4, 1951 Olegario Lastrilla
filed in the case a motion, wherein he claimed to be the owner by purchase on
September 29, 1949, of all the "shares and interests" of defendant Fred Brown in
the FELCO, and requested "under the law of preference of credits" that the
sheriff be required to retain in his possession so much of the deeds of the auction
sale as may be necessary "to pay his right". Over the plaintiffs' objection the
judge in his order of June 13, 1951, granted Lastrilla's motion by requiring the
sheriff to retain 17 per cent of the money "for delivery to the assignee,
administrator or receiver" of the FELCO. And on motion of Lastrilla, the court on
August 14, 1951, modified its order of delivery and merely declared that Lastrilla
was entitled to 17 per cent of the properties sold, saying in part:
. . . el Juzgado ha encontrado que no se han respetado los derechos del Sr.
Lastrilla en lo que se refiere a su adquiscicion de las acciones de C. Arnold Hall
(Fred Brown) en la Far Eastern Lumber & Lumber Commercial C. porque la
mismas han sido incluidas en la subasta.chanroblesvirtualawlibrary chanrobles
virtual law library
Es vedad que las acciones adquiridas por el Sr. Lastilla representan el 17 por
ciento del capital de la sociedad "Far Eastern Lumber & Commercial Co., Inc., et
al." pero esto no quiere decir que su vlor no esta sujeto a las fluctuaciones del
negocio donde las invirtio.chanroblesvirtualawlibrary chanrobles virtual law library
Se vendieron propiedades de la corporacion "Far Eastern Lumber & Co. Inc.," y
de la venta solamente se obtuvo la cantidad de
P8,100.chanroblesvirtualawlibrary chanrobles virtual law library
"En su virtud, se declara que el 17 por ciento de las propiedades vendidas en
publica subasta pretenece al Sr. O Lastrilla y este tiene derecho a dicha porcion
pero con la obligacion de pagar el 17 por ciento de los gastos for la conservacion
de dichas propriedades por parte del Sheriff; . . . . (Annex K)
It is from this declaration and the subsequent orders to enforce it 1 that the
petitioners seek relief by certiorari, their position being the such orders were null
and void for lack of jurisdiction. At their request a writ of preliminary injunction
was issued here.chanroblesvirtualawlibrary chanrobles virtual law library
The record is not very clear, but there are indications, and we shall assume for
the moment, that Fred Brown (like Arnold Hall and Jean Roxas) was a partner of
the FELCO, was defendant in Civil Case No. 193 as such partner, and that the
properties sold at auction actually belonged to the FELCO partnership and the
partners. We shall also assume that the sale made to Lastrilla on September 29,
1949, of all the shares of Fred Brown in the FELCO was valid. (Remember that
judgment in this case was entered in the court of first instance a year
before.)chanrobles virtual law library
The result then, is that on June 9, 1951 when the sale was effected of the
properties of FELCO to Roberto Dorfe and Pepito Asturias, Lastilla was already a
partner of FELCO.chanroblesvirtualawlibrary chanrobles virtual law library
Now, does Lastrilla have any proper claim to the proceeds of the sale? If he was
a creditor of the FELCO, perhaps or maybe. But he was no. The partner of a
partnership is not a creditor of such partnership for the amount of his shares.
That is too elementary to need elaboration.chanroblesvirtualawlibrary chanrobles
virtual law library
Lastrilla's theory, and the lower court's seems to be: inasmuch as Lastrilla had
acquired the shares of Brown is September, 1949, i.e., before the auction sale
and he was not a party to the litigation, such shares could not have been
transferred to Dorfe and Austrilla.chanroblesvirtualawlibrary chanrobles virtual
law library
Granting arguendo that the auction sale and not included the interest or portion of
the FELCO properties corresponding to the shares of Lastrilla in the same
partnership (17%), the resulting situation would be - at most - that the purchasers
Dorfe and Austrias will have to recognized dominion of Lastrillas over 17 per cent
of the properties awarded to them. 2 So Lastrilla acquired no right to demand any
part of the money paid by Dorfe and Austrias to he sheriff any part of the money
paid by Dorfe and Austrias to the sheriff for the benefit of FELCO and Tomassi,
the plaintiffs in that case, for the reason that, as he says, his shares (acquired
from Brown) could not have been and were not auctioned off to Dorfe and
Austrias.chanroblesvirtualawlibrary chanrobles virtual law library
Supposing however that Lastrillas shares have been actually (but unlawfully) sold
by the sheriff (at the instance of plaintiffs) to Dorfe and Austrias, what is his
remedy? Section 15, Rule 39 furnishes the
answer.chanroblesvirtualawlibrary chanrobles virtual law library
Precisely, respondents argue, Lastrilla vindicated his claim by proper
action, i.e., motion in the case. We ruled once that "action" in this section means
action as defined in section 1, Rule 2. 3 Anyway his remedy is to claim "the
property", not the proceeds of the sale, which the sheriff is directed by section 14,
Rule 39 to deliver unto the judgment
creditors.chanroblesvirtualawlibrary chanrobles virtual law library
In other words, the owner of property wrongfully sold may not voluntarily come to
court, and insist, "I approve the sale, therefore give me the proceeds because I
am the owner". The reason is that the sale was made for the judgment creditor
(who paid for the fees and notices), and not for anybody
else.chanroblesvirtualawlibrary chanrobles virtual law library
On this score the respondent judge's action on Lastrilla's motion should be
declared as in excess of jurisdiction, which even amounted to want of jurisdiction,
which even amounted to want of jurisdiction, considering specially that Dorfe and
Austrias, and the Defendants themselves, had undoubtedly the right to be heard-
but they were not notified. 4 chanrobles virtual law library
Why was it necessary to hear them on the merits of Lastrilla's motion?chanrobles
virtual law library
Because Dorfe and Austrillas might be unwilling to recognized the validity of
Lastrilla's purchase, or, if valid, they may want him not to forsake the partnership
that might have some obligations in connection with the partnership properties.
And what is more important, if the motion is granted, when the time for
redemptioner seventeen per cent (178%) less than amount they had paid for the
same properties.chanroblesvirtualawlibrary chanrobles virtual law library
The Defendants Arnold Hall and Jean Roxas, eyeing Lastrilla's financial assets,
might also oppose the substitution by Lastrilla of Fred Brown, the judgment
against them being joint and several. They might entertain misgivings about
Brown's slipping out of their common predicament through the disposal of his
shares.chanroblesvirtualawlibrary chanrobles virtual law library
Lastly, all the Defendants would have reasonable motives to object to the
delivery of 17 per cent of the proceeds to Lustrial, because it is so much money
deducted, and for which the plaintiffs might as another levy on their other
holdings or resources. Supposing of course, there was no fraudulent collusion
among them.chanroblesvirtualawlibrary chanrobles virtual law library
Now, these varied interest of necessity make Dorfe, Asturias and the
Defendants indispensable parties to the motion of Lastrilla - granting it was step
allowable under our regulations on execution. Yet these parties were not notified,
and obviously took no part in the proceedings on the motion.
A valid judgment cannot be rendered where there is a want of necessary parties,
and a court cannot properly adjudicate matters involved in a suit when necessary
and indispensable parties to the proceedings are not before it. (49 C.J.S.,
67.)chanrobles virtual law library
Indispensable parties are those without whom the action cannot be finally
determined. In a case for recovery of real property, the defendant alleged in his
answer that he was occupying the property as a tenant of a third person. This
third person is an indispensable party, for, without him, any judgment which the
plaintiff might obtain against the tenant would have no effectiveness, for it would
not be binding upon, and cannot be executed against, the defendant's landlord,
against whom the plaintiff has to file another action if he desires to recover the
property effectively. In an action for partition of property, each co-owner is an
indispensable party. (Moran, Comments, 1952 ed. Vol. I, p. 56.)
(Emphasis supplied.)
Wherefore, the orders of the court recognizing Lastrilla's right and ordering
payment to him of a part of the proceeds were patently erroneous, because
promulgated in excess or outside of its jurisdiction. For this reason the
respondents' argument resting on plaintiffs' failure to appeal from the orders on
time, although ordinarily decisive, carries no persuasive force in this
instance.chanroblesvirtualawlibrary chanrobles virtual law library
For as the former Chief Justice Dr. Moran has summarized in his Comments,
1952 ed. Vol. II, p. 168 -
. . . And in those instances wherein the lower court has acted without jurisdiction
over the subject-matter, or where the order or judgment complained of is a patent
nullity, courts have gone even as far as to disregard completely the questions of
petitioner's fault, the reason being, undoubtedly, that acts performed with
absolute want of jurisdiction over the subject-matter are void ab initio and cannot
be validated by consent, express or implied, of the parties. Thus, the Supreme
Court granted a petition for certiorari and set aside an order reopening a
cadastral case five years after the judgment rendered therein had become final.
In another case, the Court set aside an order amending a judgment acquired a
definitive character. And still in another case, an order granting a review of a
decree of registration issued more than a year ago had been declared null void.
In all these case the existence of the right to appeal has been recitals was
rendered without any trial or hearing, and the Supreme Court, in
granting certiorari, said that the judgment was by its own recitals a patent nullity,
which should be set aside though an appeal was available but was not availed of.
...

Invoking our ruling in Melocotones vs. Court of First Instance, (57 Phil., 144),
wherein we applied the theory of laches to petitioners' 3-years delay in
requesting certiorari, respondents point out that whereas the orders complained
of herein were issued in June 13, 1951 and August 14, 1951 this special civil
action was not filed until August 1952. It should be observed that the order of
June 13 was superseded by that of August 14, 1951. The last order merely
declared "que el 17 por ciento de la propiedades vendidas en publica subasta
pertenece at Sr. Lastrilla y este tiene derecho a dicha porcion." This does not
necessarily mean that 17 per cent of the money had to be delivered to him. It
could mean, as hereinbefore indicated, that the purchasers of the property (Dorfe
and Asturias) had to recognize Lastrilla's ownership. It was only on April 16,
1952 (Annex N) that the court issued an order directing the sheriff "to tun over" to
Lastrilla "17 per cent of the total proceeds of the auction sale". There is the order
that actually prejudiced the petitioners herein, and they fought it until the last
order of July 10,. 1952 (Annex Q). Surely a month's delay may not be regarded
as laches.chanroblesvirtualawlibrary chanrobles virtual law library

In view of the foregoing, it is our opinion, and we so hold, that all orders of the
respondents judge requiring delivery of 17 per cent of the proceeds of the auction
sale to respondent Olegario Lastrilla are null and void; and the costs of this suit
shall be taxed against the latter. The preliminary injunction heretofore issued is
made permanent. So ordered.chanroblesvirtualawlibrary chanrobles virtual law
library

Paras, C.J., Feria, Pablo, Tuason, Montemayor, Reyes, Jugo, Bautista Angelo
and Labrador, JJ., concur.
 [G.R. NO. 153788 : November 27, 2009]
ROGER V. NAVARRO, Petitioner, v. HON. JOSE L. ESCOBIDO, Presiding
Judge, RTC Branch 37, Cagayan de Oro City, and KAREN T. GO, doing
business under the name KARGO ENTERPRISES, Respondents.
DECISION
BRION, J.:
This is a Petition for Review on Certiorari 1 that seeks to set aside the Court of
Appeals (CA) Decision2 dated October 16, 2001 and Resolution3 dated May 29,
2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26,
20004 and March 7, 20015 orders of the Regional Trial Court (RTC), Misamis
Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarro's (Navarro)
motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two complaints, docketed
as Civil Case Nos. 98-599 (first complaint)6 and 98-598 (second
complaint),7 before the RTC for replevin and/or sum of money with damages
against Navarro. In these complaints, Karen Go prayed that the RTC issue writs
of replevin for the seizure of two (2) motor vehicles in Navarro's possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O.
GO, a resident of Cagayan de Oro City and doing business under the trade name
KARGO ENTERPRISES, an entity duly registered and existing under and by
virtue of the laws of the Republic of the Philippines, which has its business
address at Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO is a
Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro
City, where he may be served with summons and other processes of the
Honorable Court; that defendant "JOHN DOE" whose real name and address are
at present unknown to plaintiff is hereby joined as party defendant as he may be
the person in whose possession and custody the personal property subject
matter of this suit may be found if the same is not in the possession of defendant
ROGER NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among others, buying and
selling motor vehicles, including hauling trucks and other heavy equipment;
3. That for the cause of action against defendant ROGER NAVARRO, it is hereby
stated that on August 8, 1997, the said defendant leased [from] plaintiff a certain
motor vehicle which is more particularly described as follows '
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE
entered into by and between KARGO ENTERPRISES, then represented by its
Manager, the aforementioned GLENN O. GO, and defendant ROGER
NAVARRO xxx; that in accordance with the provisions of the above LEASE
AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO
delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-
SIX THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS
(P66,333.33) which were supposedly in payment of the agreed rentals; that when
the fifth and sixth checks, i.e. PHILIPPINE BANK OF COMMUNICATIONS -
CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively
dated January 8, 1998 and February 8, 1998, were presented for payment and/or
credit, the same were dishonored and/or returned by the drawee bank for the
common reason that the current deposit account against which the said checks
were issued did not have sufficient funds to cover the amounts thereof; that the
total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-
TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66)
therefore represents the principal liability of defendant ROGER NAVARRO unto
plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH
RIGHT TO PURCHASE; that demands, written and oral, were made of defendant
ROGER NAVARRO to pay the amount of ONE HUNDRED THIRTY-TWO
THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to
return the subject motor vehicle as also provided for in the LEASE AGREEMENT
WITH RIGHT TO PURCHASE, but said demands were, and still are, in vain to
the great damage and injury of herein plaintiff; xxx
4. That the aforedescribed motor vehicle has not been the subject of any tax
assessment and/or fine pursuant to law, or seized under an execution or an
attachment as against herein plaintiff;
xxx
8. That plaintiff hereby respectfully applies for an order of the Honorable Court for
the immediate delivery of the above-described motor vehicle from defendants
unto plaintiff pending the final determination of this case on the merits and, for
that purpose, there is attached hereto an affidavit duly executed and bond double
the value of the personal property subject matter hereof to answer for damages
and costs which defendants may suffer in the event that the order for replevin
prayed for may be found out to having not been properly issued.
The second complaint contained essentially the same allegations as the first
complaint, except that the Lease Agreement with Option to Purchase involved is
dated October 1, 1997 and the motor vehicle leased is described as follows:
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-dated
checks, each for the amount of P100,000.00, to Karen Go in payment of the
agreed rentals; however, the third check was dishonored when presented for
payment.8
On October 12, 19989 and October 14, 1998,10 the RTC issued writs of replevin
for both cases; as a result, the Sheriff seized the two vehicles and delivered them
to the possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative defense that the two
complaints stated no cause of action, since Karen Go was not a party to the
Lease Agreements with Option to Purchase (collectively, the lease agreements) -
the actionable documents on which the complaints were based.
On Navarro's motion, both cases were duly consolidated on December 13, 1999.
In its May 8, 2000 order, the RTC dismissed the case on the ground that the
complaints did not state a cause of action.
In response to the motion for reconsideration Karen Go filed dated May 26,
2000,11 the RTC issued another order dated July 26, 2000 setting aside the order
of dismissal. Acting on the presumption that Glenn Go's leasing business is a
conjugal property, the RTC held that Karen Go had sufficient interest in his
leasing business to file the action against Navarro. However, the RTC held that
Karen Go should have included her husband, Glenn Go, in the complaint based
on Section 4, Rule 3 of the Rules of Court (Rules).12 Thus, the lower court
ordered Karen Go to file a motion for the inclusion of Glenn Go as co-
plaintiff.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
When the RTC denied Navarro's motion for reconsideration on March 7, 2001,
Navarro filed a petition for certiorari with the CA, essentially contending that the
RTC committed grave abuse of discretion when it reconsidered the dismissal of
the case and directed Karen Go to amend her complaints by including her
husband Glenn Go as co-plaintiff. According to Navarro, a complaint which failed
to state a cause of action could not be converted into one with a cause of action
by mere amendment or supplemental pleading.
On October 16, 2001, the CA denied Navarro's petition and affirmed the RTC's
order.13 The CA also denied Navarro's motion for reconsideration in its resolution
of May 29, 2002,14 leading to the filing of the present petition.
THE PETITION
Navarro alleges that even if the lease agreements were in the name of Kargo
Enterprises, since it did not have the requisite juridical personality to sue, the
actual parties to the agreement are himself and Glenn Go. Since it was Karen Go
who filed the complaints and not Glenn Go, she was not a real party-in-interest
and the complaints failed to state a cause of action.
Navarro posits that the RTC erred when it ordered the amendment of the
complaint to include Glenn Go as a co-plaintiff, instead of dismissing the
complaint outright because a complaint which does not state a cause of action
cannot be converted into one with a cause of action by a mere amendment or a
supplemental pleading. In effect, the lower court created a cause of action for
Karen Go when there was none at the time she filed the complaints.
Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff
drastically changed the theory of the complaints, to his great prejudice. Navarro
claims that the lower court gravely abused its discretion when it assumed that the
leased vehicles are part of the conjugal property of Glenn and Karen Go. Since
Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of
the complaint are her paraphernal properties and the RTC gravely erred when it
ordered the inclusion of Glenn Go as a co-plaintiff.
Navarro likewise faults the lower court for setting the trial of the case in the same
order that required Karen Go to amend her complaints, claiming that by issuing
this order, the trial court violated Rule 10 of the Rules.
Even assuming the complaints stated a cause of action against him, Navarro
maintains that the complaints were premature because no prior demand was
made on him to comply with the provisions of the lease agreements before the
complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin were issued based on
flawed complaints, the vehicles were illegally seized from his possession and
should be returned to him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro to state that
she has no real interest in the subject of the complaint, even if the lease
agreements were signed only by her husband, Glenn Go; she is the owner of
Kargo Enterprises and Glenn Go signed the lease agreements merely as the
manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarro's
insistence that Kargo Enterprises is Karen Go's paraphernal property is without
basis. Based on the law and jurisprudence on the matter, all property acquired
during the marriage is presumed to be conjugal property. Finally, Karen Go
insists that her complaints sufficiently established a cause of action against
Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff,
this was merely to comply with the rule that spouses should sue jointly, and was
not meant to cure the complaints' lack of cause of action.
THE COURT'S RULING
 We find the petition devoid of merit.
Karen Go is the real party-in-interest
The 1997 Rules of Civil Procedure requires that every action must be prosecuted
or defended in the name of the real party-in-interest, i.e., the party who stands to
be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit.15
Interestingly, although Navarro admits that Karen Go is the registered owner of
the business name Kargo Enterprises, he still insists that Karen Go is not a real
party-in-interest in the case. According to Navarro, while the lease contracts were
in Kargo Enterprises' name, this was merely a trade name without a juridical
personality, so the actual parties to the lease agreements were Navarro and
Glenn Go, to the exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with grave abuse of
discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since this in
effect created a cause of action for the complaints when in truth, there was none.
We do not find Navarro's arguments persuasive.
The central factor in appreciating the issues presented in this case is the
business name Kargo Enterprises. The name appears in the title of the
Complaint where the plaintiff was identified as "KAREN T. GO doing business
under the name KARGO ENTERPRISES," and this identification was repeated in
the first paragraph of the Complaint. Paragraph 2 defined the business KARGO
ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the
defendant "leased from plaintiff a certain motor vehicle" that was thereafter
described. Significantly, the Complaint specifies and attaches as its integral part
the Lease Agreement that underlies the transaction between the plaintiff and the
defendant. Again, the name KARGO ENTERPRISES entered the picture as this
Lease Agreement provides:
This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office address at xxx, herein
referred to as the LESSOR-SELLER; representing KARGO ENTERPRISES as
its Manager,
xxx
thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O.
Go represented. In other words, by the express terms of this Lease Agreement,
Glenn Go did sign the agreement only as the manager of Kargo Enterprises and
the latter is clearly the real party to the lease agreements.
As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which
is neither a natural person, nor a juridical person, as defined by Article 44 of the
Civil Code:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose,
created by law; their personality begins as soon as they have been constituted
according to law;
(3) Corporations, partnerships and associations for private interest or purpose to
which the law grants a juridical personality, separate and distinct from that of
each shareholder, partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises cannot be
a party to a civil action. This legal reality leads to the question: who then is the
proper party to file an action based on a contract in the name of Kargo
Enterprises?cralawred
We faced a similar question in Juasing Hardware v. Mendoza,17 where we said:
Finally, there is no law authorizing sole proprietorships like petitioner to bring suit
in court. The law merely recognizes the existence of a sole proprietorship as a
form of business organization conducted for profit by a single individual, and
requires the proprietor or owner thereof to secure licenses and permits, register
the business name, and pay taxes to the national government. It does not vest
juridical or legal personality upon the sole proprietorship nor empower it to file or
defend an action in court.
Thus, the complaint in the court below should have been filed in the name of the
owner of Juasing Hardware. The allegation in the body of the complaint would
show that the suit is brought by such person as proprietor or owner of the
business conducted under the name and style Juasing Hardware. The
descriptive words "doing business as Juasing Hardware" may be added to the
title of the case, as is customarily done.18 [Emphasis supplied.]
This conclusion should be read in relation with Section 2, Rule 3 of the Rules,
which states:
SEC. 2. Parties in interest. - A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails
of the suit. Unless otherwise authorized by law or these Rules, every action must
be prosecuted or defended in the name of the real party in interest.
As the registered owner of Kargo Enterprises, Karen Go is the party who will
directly benefit from or be injured by a judgment in this case. Thus, contrary to
Navarro's contention, Karen Go is the real party-in-interest, and it is legally
incorrect to say that her Complaint does not state a cause of action because her
name did not appear in the Lease Agreement that her husband signed in behalf
of Kargo Enterprises. Whether Glenn Go can legally sign the Lease Agreement in
his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a
question we do not decide, as this is a matter for the trial court to consider in a
trial on the merits.
Glenn Go's Role in the Case
We find it significant that the business name Kargo Enterprises is in the name of
Karen T. Go,19 who described herself in the Complaints to be "a Filipino, of legal
age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing
business under the trade name KARGO ENTERPRISES."20 That Glenn Go and
Karen Go are married to each other is a fact never brought in issue in the case.
Thus, the business name KARGO ENTERPRISES is registered in the name of a
married woman, a fact material to the side issue of whether Kargo Enterprises
and its properties are paraphernal or conjugal properties. To restate the parties'
positions, Navarro alleges that Kargo Enterprises is Karen Go's paraphernal
property, emphasizing the fact that the business is registered solely in Karen
Go's name. On the other hand, Karen Go contends that while the business is
registered in her name, it is in fact part of their conjugal property.
The registration of the trade name in the name of one person - a woman - does
not necessarily lead to the conclusion that the trade name as a property is hers
alone, particularly when the woman is married. By law, all property acquired
during the marriage, whether the acquisition appears to have been made,
contracted or registered in the name of one or both spouses, is presumed to be
conjugal unless the contrary is proved.21 Our examination of the records of the
case does not show any proof that Kargo Enterprises and the properties or
contracts in its name are conjugal. If at all, only the bare allegation of Navarro to
this effect exists in the records of the case. As we emphasized in Castro v.
Miat:22
Petitioners also overlook Article 160 of the New Civil Code. It provides that "all
property of the marriage is presumed to be conjugal partnership, unless it be
prove[n] that it pertains exclusively to the husband or to the wife." This
article does not require proof that the property was acquired with funds of
the partnership. The presumption applies even when the manner in which the
property was acquired does not appear.23 [Emphasis supplied.]
Thus, for purposes solely of this case and of resolving the issue of whether Kargo
Enterprises as a sole proprietorship is conjugal or paraphernal property, we hold
that it is conjugal property.
Article 124 of the Family Code, on the administration of the conjugal property,
provides:
Art. 124. The administration and enjoyment of the conjugal partnership
property shall belong to both spouses jointly. In case of disagreement, the
husband's decision shall prevail, subject to recourse to the court by the wife for
proper remedy, which must be availed of within five years from the date of the
contract implementing such decision.
xxx
This provision, by its terms, allows either Karen or Glenn Go to speak and act
with authority in managing their conjugal property, i.e., Kargo Enterprises. No
need exists, therefore, for one to obtain the consent of the other before
performing an act of administration or any act that does not dispose of or
encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed by
the rules on the contract of partnership in all that is not in conflict with what is
expressly determined in this Chapter or by the spouses in their marriage
settlements. In other words, the property relations of the husband and wife shall
be governed primarily by Chapter 4 on Conjugal Partnership of Gains of the
Family Code and, suppletorily, by the spouses' marriage settlement and by the
rules on partnership under the Civil Code. In the absence of any evidence of a
marriage settlement between the spouses Go, we look at the Civil Code provision
on partnership for guidance.
A rule on partnership applicable to the spouses' circumstances is Article 1811 of
the Civil Code, which states:
Art. 1811. A partner is a co-owner with the other partners of specific partnership
property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to any agreement
between the partners, has an equal right with his partners to possess
specific partnership property for partnership purposes; xxx
Under this provision, Glenn and Karen Go are effectively co-owners of Kargo
Enterprises and the properties registered under this name; hence, both have an
equal right to seek possession of these properties. Applying Article 484 of the
Civil Code, which states that "in default of contracts, or special provisions, co-
ownership shall be governed by the provisions of this Title," we find further
support in Article 487 of the Civil Code that allows any of the co-owners to bring
an action in ejectment with respect to the co-owned property.
While ejectment is normally associated with actions involving real property, we
find that this rule can be applied to the circumstances of the present case,
following our ruling in Carandang v. Heirs of De Guzman.24 In this case, one
spouse filed an action for the recovery of credit, a personal property considered
conjugal property, without including the other spouse in the action. In resolving
the issue of whether the other spouse was required to be included as a co-
plaintiff in the action for the recovery of the credit, we said:
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly
extended to the spouses Carandang, seems to be either an indispensable or a
necessary party. If she is an indispensable party, dismissal would be proper. If
she is merely a necessary party, dismissal is not warranted, whether or not there
was an order for her inclusion in the complaint pursuant to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on the contract
of partnership in all that is not in conflict with what is expressly determined in this
Chapter or by the spouses in their marriage settlements.
This provision is practically the same as the Civil Code provision it superseded:
Art. 147. The conjugal partnership shall be governed by the rules on the contract
of partnership in all that is not in conflict with what is expressly determined in this
Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-
owner with the other partners of specific partnership property." Taken with the
presumption of the conjugal nature of the funds used to finance the four checks
used to pay for petitioners' stock subscriptions, and with the presumption that the
credits themselves are part of conjugal funds, Article 1811 makes Quirino and
Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may
separately bring an action for the recovery thereof. In the fairly recent cases
of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-ownership, co-
owners may bring actions for the recovery of co-owned property without the
necessity of joining all the other co-owners as co-plaintiffs because the suit is
presumed to have been filed for the benefit of his co-owners. In the latter case
and in that of De Guia v. Court of Appeals, we also held that Article 487 of the
Civil Code, which provides that any of the co-owners may bring an action for
ejectment, covers all kinds of action for the recovery of possession.
In sum, in suits to recover properties, all co-owners are real parties in interest.
However, pursuant to Article 487 of the Civil Code and relevant jurisprudence,
any one of them may bring an action, any kind of action, for the recovery of co-
owned properties. Therefore, only one of the co-owners, namely the co-owner
who filed the suit for the recovery of the co-owned property, is an indispensable
party thereto. The other co-owners are not indispensable parties. They are not
even necessary parties, for a complete relief can be accorded in the suit even
without their participation, since the suit is presumed to have been filed for the
benefit of all co-owners.25 [Emphasis supplied.]
Under this ruling, either of the spouses Go may bring an action against Navarro
to recover possession of the Kargo Enterprises-leased vehicles which they co-
own. This conclusion is consistent with Article 124 of the Family Code, supporting
as it does the position that either spouse may act on behalf of the conjugal
partnership, so long as they do not dispose of or encumber the property in
question without the other spouse's consent.
On this basis, we hold that since Glenn Go is not strictly an indispensable party in
the action to recover possession of the leased vehicles, he only needs to be
impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the
Rules, which states:
Section 4. Spouses as parties. - Husband and wife shall sue or be sued jointly,
except as provided by law.
Non-joinder of indispensable parties not ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action, we have
held in a number of cases26 that the misjoinder or non-joinder of indispensable
parties in a complaint is not a ground for dismissal of action. As we stated in
Macababbad v. Masirag:27
Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor
nonjoinder of parties is a ground for the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder
of parties is ground for dismissal of an action. Parties may be dropped or added
by order of the court on motion of any party or on its own initiative at any stage of
the action and on such terms as are just. Any claim against a misjoined party
may be severed and proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy when a party is left
out is to implead the indispensable party at any stage of the action. The court,
either motu proprio or upon the motion of a party, may order the inclusion of the
indispensable party or give the plaintiff opportunity to amend his complaint in
order to include indispensable parties. If the plaintiff to whom the order to include
the indispensable party is directed refuses to comply with the order of the court,
the complaint may be dismissed upon motion of the defendant or upon the
court's own motion. Only upon unjustified failure or refusal to obey the order to
include or to amend is the action dismissed.
In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join
her husband as a party plaintiff is fully in order.
Demand not required prior
to filing of replevin action

In arguing that prior demand is required before an action for a writ of replevin is
filed, Navarro apparently likens a replevin action to an unlawful detainer.

For a writ of replevin to issue, all that the applicant must do is to file an affidavit
and bond, pursuant to Section 2, Rule 60 of the Rules, which states:

Sec. 2. Affidavit and bond.

The applicant must show by his own affidavit or that of some other person who
personally knows the facts:

(a) That the applicant is the owner of the property claimed, particularly
describing it, or is entitled to the possession thereof;

(b) That the property is wrongfully detained by the adverse party, alleging the
cause of detention thereof according to the best of his knowledge, information,
and belief;

(c) That the property has not been distrained or taken for a tax assessment or a
fine pursuant to law, or seized under a writ of execution or preliminary
attachment, or otherwise placed under custodia legis, or if so seized, that it is
exempt from such seizure or custody; andcralawlibrary

(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the
value of the property as stated in the affidavit aforementioned, for the return of
the property to the adverse party if such return be adjudged, and for the payment
to the adverse party of such sum as he may recover from the applicant in the
action.

We see nothing in these provisions which requires the applicant to make a prior
demand on the possessor of the property before he can file an action for a writ of
replevin. Thus, prior demand is not a condition precedent to an action for a writ of
replevin.

More importantly, Navarro is no longer in the position to claim that a prior

demand is necessary, as he has already admitted in his Answers that he had
received the letters that Karen Go sent him, demanding that he either pay his
unpaid obligations or return the leased motor vehicles. Navarro's position that a
demand is necessary and has not been made is therefore totally unmeritorious.

WHEREFORE, premises considered, we DENY the Petition for Review for lack
of merit. Costs against petitioner Roger V. Navarro.