A Partnership and Agency Digests for Atty Cochingyan

8/10/2019 A Partnership and Agency Digests for Atty Cochingyan

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PARTNERSHIP Digests Atty. Cochingyan

Partnership & Agency | 2B 2008-2009

TAN SEN GUAN & CO. VS. PHILIPPINE TRUST CO.

Facts: Plaintiff Tan Sen Guan & Co. secured a judgmentfor a sum of P21,426 against the Mindoro Sugar Co. ofwhich the Philippine Trust is the trustee. The plaintiffentered into an agreement with the defendantPhilippine Trust Co. wherein the former assigned,transferred, and sold to the latter the full amount ofsaid judgment against Mindoro Sugar Co. together with

all its rights thereto and the latter offered satisfactoryconsideration thereto. The agreement furtherstipulated that upon signing of the agreement, PhilTrust shall pay Tan Sen the sum of P5000; should theMindoro Sugar be sold or its ownership be transferred,an additional P10,000 pesos will be paid to Tan Senupon perfection of the sale; in case any other creditorof Mindoro Sugar obtains in the payment of his credit agreater proportion than the price paid to Tan Sen, thePhil Trust shall pay to the latter whatever sum may benecessary to be proportioned the claim of the creditor.However, if the Mindoro Sugar is sold to any personwho does not pay anything to the creditors or paythem equal or less than 70 percent of their claim, orshould the creditors obtain from other sources thepayment of their claim equal to or less than 70

percent, the Phil Trust will only pay to Tan Sentheadditional sum of P10,000 upon the sale or transfer ofthe Mindoro Sugar as above stated. The properties ofMindoro Sugar were later on sold at public auction tothe Roman Catholic Archbishop of Manila and base onthe agreement plaintiff Tan Sen brought suit againstdefendant Phil Trust for the sum of P10,000.

Defendants argument: Only a portion of the MindoroSugars properties were sold.

CFI: Absolved the defendant on two grounds: (a) in thecontract, it was only bound as a trustee and not as anindividual; (b) that it has not been proved that all theproperties of the Mindoro Sugar had been sold.

Issues:

(1) W/N the defendant is not personallyresponsible for the claim of the plaintiffbased on the deed of assignment because ofhaving executed the same in its capacity astrustee of the properties of the MindoroSugar.

(2) W/N all the properties of the Mindoro Sugarwere sold at public auction to the RomanCatholic Archbishop of Manila.

Held: SC reversed CFIs ruling.

(1) The Phil Trust Company in its individual capacity

is responsible for the contract as there was noexpress stipulation that the trust estate and notthe trustee should be held liable on the contract inquestion. Not only is there no express stipulationthat the trustee should not be held responsiblebut the Wherefore clause of the contract statesthe judgment was expressly assigned in favor ofPhil Trust Company and not Phil Trust Company,the trustee. It therefore follows that appellant hada right to proceed directly against the Phil Truston its contract and has no claim against eitherMindoro Sugar or the trust estate.

(2) Exhibit D (the certificate of sale to Roman CatholicArchbishop) shows that all properties to Phil Trustas Trustee were included in the sale. The onlything reserved from the sale was the standingcrops, and it is reasonable to presume that theyhad also been sold between the date of the saleand the institution of this action. Where the realestate, the personal property including animals,and all the bills receivable are sold, it would be a

forced construction of the contract of agreementto hold that the assets of the Mindoro SugarCompany had not been sold.

PHIL. AIR LINES, INC. VS. HEALD LUMBER CO.

Facts: Lepanto Consolidated Mines chartered ahelicopter belonging to plaintiff Phil. Air Lines to makea flight from its base at Nichols Field Airport to theformers camp at Manyakan Mountain Province. Thehelicopter, with Capt. Gabriel Hernandez and Lt. RexImperial on board, failed to reach the destination as itcollided with defendants tramway steel cablesresulting in its destruction and death of the officers.

Plaintiff insured the helicopters and the officers whopiloted the same for P80,000 and P20,000 respectivelyand as a result of the crash, the insurance companiespaid to the plaintiff the total indemnity of P120,000.Plaintiff sustained additional damages totalingP103,347.82 which were not recovered by insurance.The plaintiff instituted this action against defendantHeald Lumber Company to recover the sum paid by theinsurance company to the plaintiff and the additionaldamages which was not recovered from the insurance.

Defendants argument: Plaintiff has no cause of actionagainst defendant for if anyone should due defendantfor its recovery, it will only be the insurancecompanies.

Plaintiffs argument: It asserts that the claim of thesaid amount of P120,000 is on behalf and for thebenefit of the insurers and shall be held by plaintiff intrust for the insurers. It is appellants theory that,inasmuch as the loss it has sustained exceeds theamount of the insurance paid to it by the insurers, theright to recover the entire loss from the wrongdoerremains with the insured and so the action must bebrought in its own name as real party in interest. Tothe extent of the amount received by it as indemnityfrom the insurers, plaintiff would then be acting as atrustee for them. To support this contention, appellantcites American authorities.

RTCs Ruling: The court ordered the plaintiff to amendits complaint to delete the first allegation that

insurance companies have paid a portion of theplaintiffs damages, since the Court believes that thereal parties in interest are the insurance companiesconcerned or bring in the insurance companies asparties plaintiff. And having manifested plaintiffsdecision not to amend the complaint, such move ofplaintiff amounts to a deletion of the portion objectedto and so the complaint should be deemed limited tothe additional damages.

Issue:


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(1) W/N the plaintiff is not the real party ininterest respecting the claim for P120,000.

Held: SC affirmed the appealed judgment.

(1) In this jurisdiction, we have our own legalprovision which in substance differs from theAmerican law. Art. 2207 of the NCC provides

that if a property is insured and the ownerreceives the indemnity from the insurer thesame is deemed subrogated to the rights of theinsured against the wrongdoer and if theamount paid by the insurer does not fully coverthe loss, then the aggrieved party is the oneentitled to recover the deficiency. Under thislegal provision, the real party in interest withregard to the portion of the indemnity paid isthe insurer and not the insured.

(2) Before a person can sue for the benefit ofanother under a trusteeship, he must be atrustee of an express trust. The right does notexist in cases of implied trust, that is, a trustwhich may be inferred merely from the acts ofthe parties or from other circumstances. Also,

to adopt a contrary rule to what is authorized bythe American statues would be splitting a causeof action or promoting multiplicity of suitswhich should be avoided. Under our rules, boththe insurer and the insured may join asplaintiffs to press their claims against thewrongdoer when the same arise out of the sametransaction or event. This is authorized bysection 6, rule 3, of the Rules of Court.

CRISTOBAL VS. GOMEZ

Facts: Epifanio Gomez owned a property which wassold in a pacto de retro sale to Luis Yangco redeemable

in 5 years, although the period passed withoutredemption, the vendee conceded the vendor theprivilege of repurchase. Gomez apply to a kinsman,Bibiano Baas, for assistance on a condition that hewill let him have the money if his brother MarcelinoGomez and his sister Telesfora Gomez would makethemselves responsible for the loan. The siblingsagreed and Baas advance the sum of P7000 whichwas used to repurchase the property in the names ofMarcelino and Telesfora.. A private partnership inparticipation was created between Marcelino andTelesfora and therein agreed that the capital of thepartnership should consist of P7000 of whichMarcelino was to supply the amount of P1500 andTelesora the sume of P5500. It was further agreed thatthe all the property to be redeemed shall be named to

the two, that Marcelino should be its manager, that allthe income, rent, produce of the property shall beapplied exclusively to the amortization of the capitalemployed by the two parties with its correspondinginterest and other incidental expenses and as soon asthe capital employed, with its interest and otherincidental expenses, shall have been covered, saidproperties shall be returned to Epifanio Gomez or hislegitimate children. A year after Epifanios death,Telesfora wanted to free herself from the responsibilitywhich she had assumed to Baas and conveyed toMarcelino her interest and share in the three propertiespreviously redeemed from Yangco and both declared

dissolved the partnership they created. With Marcelinoas the sole debtor, Baas required him to execute acontract of sale of the three parcels with pacto de retrofor the purpose of securing the indebtedness.Marcelino later on paid the sum in full satisfaction ofthe entire claim and received from Baas areconveyance of the three parcels. The widow, PaulinaCristobal, and the children of Epifanio Gomezinstituted an action for the recovery of the three

parcels of land from Marcelino Gomez.

Defendants argument: Defendant answered with ageneral denial and claimed to be the owner in his ownright of all the property which is the subject of theaction. He further claimed that the trust agreementwas kept secret from Epifanio Gomez, and that, havingno knowledge of it, he could not have accepted itbefore the stipulation was revoked. And that he has thebenefit of prescription in his favor, having been inpossession of more than 10 years under the deedwhich he acquired the sole right from his sister.

RTCs ruling: ruled in favor of plaintiffs and found thatthe property in question belongs to the plaintiffs, asco-owners, and ordered the defendant to surrender the

property to them and execute an appropriate deed oftransfer as well as to pay the cost of the proceeding.

Issue: (1) W/N the dissolution of partnership betweenMarcelino and Telesfora destroyed the beneficial rightof Epifanio Gomez in the property.

(2) W/N the partnership agreement of Marcelinoand Telesfora was a donation in favor ofEpifanio or an express trust.

(3) W/N Marcelino Gomez acquired the propertythrough prescription.

Held:SC declared ownership in favor of plaintiffs.

(1) The fact that one of the two individuals whohave constituted themselves trustees for the

purpose above indicated conveys his interestin the property to his cotrustee does notrelieve the latter from the obligation tocomply with the trust.

(2) A trust constituted between two contractingparties for the benefit of a third person is notsubject to the rules governing donations ofreal property. The beneficiary of the trust maydemand performance of the obligationwithout having formally accepted the benefitof the trust in a public document, upon mereacquiescence in the formation of the trustsand acceptance under the second par. ofarticle 1257 of the CC. Much energy has beenexpanded by the attorneys for the appellantin attempting to demonstrate that, if Epifanioat any time had any right in the property byvirtue of the partnership agreement betweenMarcelino and Telesfora such right could bederived as a donation and that, inasmuch asthe donation was never accepted by Epifanioin a public document, his supposed interesttherein is unenforceable. The partnershipshould not be viewed in light of an intendeddonation, but as an express trust.

(3)

As against the beneficiary, prescription is noteffective in favor of a person who is acting asa trustee of a continuing and subsisting trust.Therefore, Marcelino cannot acquire


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ownership over the property throughprescription.

SALAO VS. SALAO

Facts: After the death of Valentina Ignacio, her estatewas administered by her daughter Ambrosia. It waspartitioned extrajudically and the deed was signed by

her four legal heirs namely her 3 children (Alejandra,Juan, and Ambrosia) and Valentin Salao, inrepresentation of his deceased father, Patricio. TheCalunuran fishpond is the property in contention inthis case. Prior to the death of Valentina Ignacio, herchildren Juan and Ambrosia secured a torrens title intheir names a 47 ha. fishpond located at SitioCalunuran, Lubao, Pampanga. A decree was also issuedin the names of Juan and Ambrosia for thePinanganacan fishpond which adjoins the Calunuranfishpond. A year before Ambrosias death, she donatedher one-half share in the two fishponds in question toher nephew, Juan Salo Jr. He was already the owner ofthe other half of the fishponds having inherited it fromhis father, Juan Salao Sr. After Ambrosia died, the heirsof Valentin Salao, Benita Salao and the children of

Victorina Salao, filed a complaint against Juan Salao Jr.for the reconveyance to them of the Canluran fishpondas Valentin Salaos supposed one third share in the145 ha. of fishpond registered in the names of JuanSalao Sr. and Ambrosia Salao.

Defendants argument: Valentin Salao did not haveany interest in the two fishponds and that the soleowners thereof were his father and his aunt Ambrosia,as shown in the Torrens titles and that he was thedonee of Ambrosias one-half share.

Plaintiffs argument: Their action is to enforce a trustwhich defendant Juan Salao Jr. allegedly violated. Theexistence of trust was not definitely alleged in theplaintiffs complaint but in their appellants brief.

RTCs Ruling: There was no community of propertyamong Juan, Ambrosia and Valentin when theCalunuran and the Pinanganacan lands were acquired;that co ownership over the real properties ofValentina Ignacio existed among her heirs after herdeath in 1914; that the co ownership wasadministered by Ambrosia and that it subsisted up to1918 when her estate was partitioned among her threechildren and her grandson, Valentin Salao. Itrationalized that Valentins omission during hislifetime to assail the Torrens titles of Juan andAmbrosia signified that he was not a co-owner of thefishponds. It did not give credence to the testimoniesof plaintiffs witnesses because their memories couldnot be trusted and because no strong evidence

supported the declarations. Moreover, the partiesinvolved in the alleged trust were already dead.

Judgment appealed to CA but the amounts involvedexceeded two hundred thousand pesos, the CAelevated the case to the SC.

Issue:

(1) W/N plaintiffs massive oral evidencesufficient to prove an implied trust, resultingor constructive, regarding the two fishponds.

Held: SC affirmed lower courts decision.

(1) Plaintiffs pleading and evidence cannot berelied upon to prove an implied trust. Thetrial courts firm conclusion that there was nocommunity of property during the lifetime ofValentina Ignacio or before 1914 issubstantiated by defendants documentaryevidence. There was no resulting trust in thiscase because there never was any intentionon the part of Juan, Ambrosia and Valentin to

create any trust. There was no constructivetrust because the registration of the 2fishponds in the names of Juan and Ambrosiawas not vitiated by fraud or mistake. This isnot a case where to satisfy the demands of

justice it is necessary to consider theCalunuran fishpond as being held in trust bythe heirs of Juan Salao Sr. for the heirs ofValentin Salao. And even assuming that therewas an implied trust, plaintiffs action isclearly barred by prescription when it filed anaction in 1952 or after the lapse of more than40 years from the date of registration.

CARANTES VS. CA

Facts: A proceeding for expropriation was commencedby the government for the construction of the LoakanAirport and a portion of Lot 44, which was originallyowned by Mateo Carantes, was needed for the landingfield. The lot was subdivided into Lots Nos. 44-a (theportion which the government sought to expropriate),44-b, 44-c, 44-d and 44-e. Negotiations were alsounder way for the purchase by the government of lots44-b and 44-c. When Mateo Carantes died, his sonMaximino Carantes was appointed administrator of theestate and filed a project of partition of the remainingportion of Lot 44 wherein he listed as the heirs ofMateo Carantes who were entitled to inherit the estate,himself and his brothers and sisters. An Assignmentof Right to Inheritance was executed by the children of

Mateo and the heirs of Apung Carantes in favor ofMaximino Carantes for a consideration of P1.Maximino sold to the government lots nos. 44-b and44-c and divided the proceeds of the sale amonghimself and the other heirs of Mateo. The assignmentof right to inheritance was registered by Maximino andthe TCT in the names of the heirs was cancelled and anew one was issued in the name of Maximino Carantesas the sole owner of the remaining portions of lot 44.A complaint was instituted by the three children ofMateo and the heirs of Apung Carantes againstMaximino praying that the deed of assignment bedeclared null and void and that the remaining portionsof lot 44 be ordered partitioned into six equal sharesand Maximino be accordingly ordered to execute thenecessary deed of conveyance in favor of the other

heirs.

Plaintiffs argument: They executed the deed ofassignment only because they were made to believe byMaximino that the said instrument embodied theunderstanding among parties that it merely authorizedthe defendant Maximino to convey portions of lot 44 tothe government in their behalf to minimize expensesand facilitate the transaction and it was only when theysecured a copy of the deed that they came to knowthat the same purported to assign in favor of Maximinotheir rights to inheritance from Mateo Carantes.


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Defendants argument: Filed a motion to dismiss. Theplaintiffs cause of action is barred by the statute oflimitations because the deed of assignment wasrecorded in the Registry of Property and thatownership over the property became vested in him byacquisitive prescription ten years from its registrationin his name of Feb. 21, 1947.

RTCs ruling: Ruled in favor of defendant Maximino

Carantes stating that since an action based on fraudprescribes in four years from the discovery of thefraud, and in this case the fraud allegedly perpetratedby defendant must deemed to have been discovered onmarch 16, 1940 when the deed of assignment wasregistered, the plaintiffs right of action had alreadyprescribed when they filed the action in 1958. Andeven assuming co-ownership existed, the same wascompletely repudiated by the said defendant byperformance pf several acts such as the execution ofdeed of sale in favor of the government in 1939, henceownership had vested in the defendant by acquisitiveprescription.

CA reversed.

Issue:

(1) W/N the deed of assignment is void ab initioon the ground of fraud and the action toannul it has prescribed.

(2) W/N a constructive trust exist making anaction for reconveyance based onconstructive trust imprescriptable.

Held: SC dismissed the complaint and set aside CAsdecision.

(1) When the consent to a contract wasfraudulently obtained, the contract isvoidable. Fraud or deceit does not render a

contract void ab initio, and can only be aground for rendering the contract voidable orannullable pursuant to article 1390 of theNCC by a proper action in court. The presentaction being one to annul a contract on theground of fraud, its prescriptive period is 4years from the time of discovery of fraud. Theweight og authorities is the effect that theregistration of an instrument in the Office ofthe Register of Deeds constitutes aconstructive notice to the whole world, and,therefore, discovery of fraud is deemed tohave taken place at the time of theregistration. In this case, the deed ofassignment was registered on March 16,1940. The 4 years period within which the

private respondents could have filed thepresent action consequently commenced onmarch 16, 1940, and since they filed it only inSeptember 4, 1958, it follows that the same isbarred by the statute of limitations.

(2) No express trust was created in favor of theprivate respondents. If trust there was, itcould only be a constructive trust, which isimposed by law. In constructive trusts there isneither promise nor fiduciary relation; the socalled trustee does not recognize any trustand has no intent to hold the property for thebeneficiary. An action for reconveyance based

on implied or constructive trust isprescriptable and prescribes in 10 years. Inthis case, the ten year prescriptive periodbegan on march 16, 1940, when thepetitioner registered the deed of assignmentand secured the cancellation of the certificateof title in the joint names of the heirs ofMateo Carantes and, in lieu thereof, theissuance of a new title exclusively in his

name. Since the present action wascommenced only on September 4, 1958, thesame in barred by extinctive prescription.

MUNICIPALITY OF VICTORIAS VS. CA

Facts: Norma Leuenberger, respondent, inherited aparcel of land from her grandmother, Simeona Vda. deDitching in 1941. In 1963, she discovered that a partof the parcel of land was being used by petitionerMunicipality of Victorias as a cemetery. By reason ofthe discovery, respondent wrote a letter to the Mayorof Victorias demanding payment of past rentals overthe land used a cemetery and requesting delivery of

the illegally occupied land by the petitioner. The Mayorreplied that the municipality bought the land buthowever refused to show the papers concerning thesale. Apparently, the municipality failed to register theDeed of Sale of the lot in dispute.

Respondent filed a complaint in the Court ofFirst Instance of Negros Occidental for recovery ofpossession of the parcel of land occupied by themunicipal cemetery. In its answer, petitionerMunicipality alleged ownership of the lot havingbought it from Simeona Vda. de Ditching sometime in1934. The lower court decided in favor of thepetitioner municipality.

On appeal, petitioner presented an entry in

the notarial register form the Bureau of RecordsManagement in Manila of a notary public of a salepurporting to be that of the disputed parcel of land.Included within it are the parties to the sale, Vda. deDitching, as the vendor and the Municipal Mayor ofVictorias in 1934, as vendee. The Court of Appealshowever claimed that this evidence is not a sufficientDeed of Sale. It therefore reversed the ruling of the CFIand ordered the petitioner to deliver the possession ofthe land in question to respondents.

Issue: W/N the notary public of sale is sufficient tosubstantiate the municipalitys claim that it acquiredthe disputed land by means of a Deed of Sale. Yes.

Held: The fact that the notary public of sale showed

the nature of the instrument, the subject of the sale,the parties of the contract, the consideration and thedate of sale, the Court held that it was a sufficientevidence of the Deed of Sale.

Thus, when Norma inherited the land fromher grandmother, a portion of it has already been soldby the latter to the Municipality of Victorias in 1934.Her registration of the parcel of land did not thereforetransfer ownership but merely confirmed it. As the civilcode provides, where the land is decreed in the nameof a person through fraud or mistake, such person isby operation of law considered a trustee of an implied


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trust for the benefit of the persons from whom theproperty comes. Consequently, she only held the landin dispute in trust for the petitioner hence privaterespondent is in equity bound to reconvey the subjectland to the cestui que trust, the Municipality ofVictorias.

MARIANO VS. DE VEGA

Facts: Spouses Urbano and Panganiban owned asconjugal property 29 unregistered parcels of landduring their lifetime. When Urbano died, hiscompulsory heirs were the children of Gaudencia, hischild with Panganiban, who are petitioners in this case,and two other legitimate children, his children with hissecond wife, who are the private respondents in thiscase.

Petitioners filed a civil case in the CFI forpartition and delivery of possession of certain shares inthe conjugal assets. They contended that privaterespondents have excluded them from takingpossession of the whole conjugal property and that the

latter appropriated to themselves the products comingfrom the parcels of land. The court ruled in favor of theprivate respondents claiming that the action of thepetitioners has already prescribed for the reason thatan implied or constructive trust prescribes in ten years.

Issue: W/N there is an implied or constructive trustgranted by the petitioners in favor of the respondents.No.

Held:The Court ruled that the present case does notfall under the rules of implied trust. Considering thefact that the parties in this case inherited the land fromthe same ancestor, Urbano, both parties are clearly co-owners of the disputed properties. This case istherefore governed by the rules on co-ownership.

Under the civil code, prescription does not run againsta co-owner or a co-heir so long as he expressly orimpliedly recognizes the co-ownership.

In view of their lack of a clear repudiation ofthe co-ownership, private respondents cannot acquirethe share of the petitioners by prescription.

HEIRS OF CANDELARIA VS. ROMERO

Facts: Parties to this case are the heirs of EmilioCandelaria as plaintiff and Luisa Romero, and the heirsof Lucas as defendants.

Emilio and Lucas Candelaria bought a lot onan installment basis. Lucas paid the first twoinstallments but because of sickness which caused himto be bedridden, he sold his share to his brother Emiliowho continued to pay the purchase price until theobligation to pay had been fully satisfied. The TCT washowever issued under the name of Lucas. Nevertheless,Lucas acknowledges that he merely held the title intrust for his brother with the understanding that thenecessary documents of transfer will be made laterand this fact was known not only to him but also to thedefendants. However upon his death, his heirs refused

to reconvey the lot to plaintiff despite repeateddemands.

Plaintiff brought an action in the CFI for acomplaint for reconveyance of real property. The lowercourt however dismissed the case on the ground thatan express trust, and not an implied trust, was createdand that the action had already prescribed.

Issue: What kind of trust was created? Express orimplied trust? Implied trust.

Held:Where the grantee takes the property under anagreement to convey to another on certain conditions,a trust results for the benefit of such other or his heirs.It is also the rule that there is an implied trust when aperson purchases land with his own money and takesconveyance thereof in the name of another. In such acase, the property is held on a resulting trust in favorof the one furnishing the consideration for thetransfer. This kind of trust is from equity and arises byimplication or operation of law.

In the present case, it is apparent that Emiliofurnished the consideration intending to obtain a

beneficial interest in the property in question. Havingsupplied the money, it is presumed that he intended topurchase the lot for his own benefit. Moreover, byentering into an agreement with Emilio that thenecessary documents of transfer will be made later,Lucas acknowledged the he merely held the property intrust for his brother with the understanding that it willeventually be conveyed to the plaintiffs predecessor ininterest. Lastly, by acknowledging the presence oftrust, the plaintiffs action cannot be said to have beenbarred by lapse of time. The case is thereforeremanded for further proceedings.

LAUREANO VS. STEVENSON

Facts: In 1912, Felix Laureano sold to Eugenio Kilaycoa piece of property situated in the City of Iloilo, andsuch land was then registered in the latters name.Adjoining such property was another propertybelonging to Laureano.

When the cadastral survey was initiated in Iloilo in1914, Kilayco made proper representations to confirmthe title to his property. Thereafter, title was issued tohim, but later, for some unknown reason, thecertificate was ordered cancelled and a new one wasissued. Then, presumably by mistake, the title wasmade to include not only Kilaycos property butproperty belonging to his neighbor, Laureano. Thefinal decree to his effect was issued in 1916.

Creditors of Kilayco, becoming aware of the existenceof the title to the property, instituted actions andobtained writs of execution in May 1922. The sale ofthe property was set for October 1922. All the while,Laureano had done nothing to protect his interests inthe property. However, he claims to have been absentin Spain at the time of the hearing in the cadastral caseand to have known nothing of it.

On June 1922, Laureano filed a case against Kilayco toobtain a judgment, declaring him to be the owner ofthe parcels of land mistakenly included in the latters


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title, and ordering the cancellation of the certificate oftitle theretofore issued in the name of Kilayco.

Issue: When property is acquired through mistake, canthe real owner recover such property by virtue ofimplied trust?

Trial Court: Since the creditors were not parties to theaction, the cancellation of the annotations on the

certificate of title in favor of the creditors of Kilaycocannot be sustained.

Held: It is proper to issue the injunction sought by thepetitioners to stop the sale of the property at publicauction, to annul the levies made on the property, toobtain the cancellation in the registry of property ofthe annotations made, and to secure a new title for thepetitioner without these encumbrances.

It is important to note that:

1. Kilayco never laid a claim to the property;2. The two lots covered by the certificate were

mistakenly registered in the name of Kilayco;and

3.

The court did not have jurisdiction to confirmthe title of the two lots for the reason that nopetition for title was filed, no trial was held,no evidence was presented, and no judgmentwas rendered regarding these two lots in theland registration proceedings.

Kilayco was, in effect, merely holding the title of theproperty in trust of Laureano. The creditors of Kilaycocould acquire no higher or better right than Kilaycohad in the property, which, in this case, was nothing.Hence, Laureano can rightfully recover the two parcelsof land included in the title of Kilayco through mistake.

GONZALES v. IAC

Facts: The land in dispute is registered in the nameof Fausto Soy. In 1941, Fausto sold 253 sq. m. toFrancisco Landingin. In 1954, pursuant to a Deed ofDonation executed by Fausto, Antonio Soy (son ofFausto) and Gregoria Miranda (wife) sold 240 sq. m. to

Juanito Gonzales and Coronacion Ganaden. In January1960, Fausto sold another 240 sq. m. to Gonzales andGanaden and two days later, a TCT was issued in favorof Gonzales, indicating his share as co-owner of 480sq. m. and Fausto Soy, 240 sq. m. In 1965, Fausto soldanother 140 sq. m. to the Gonzales and Ganaden.

April 1965, Respondents Rosita Lopez, Gavino

Cayabyab, Agueda and Felipa Ubando, Pedro Soriano,Teosidia Lopez and Federico Ballesteros (nieces andnephews of Fausto) filed the instant complaint forpartition against Fausto Soy. On the same day theyfiled a notice of lis pendens and had it annotated onthe OCT. Fausto answered and contested plaintiffsclaims, asserting exclusive title in his name. Faustocountered that the questioned land was neverregistered in the names of his parents Eugenio andAmbrosia, and that he had been the registered ownerof the premises since 1932.

On the basis of evidence adduced ex-parte, the TrialCourt held that respondents and Fausto were co-owners of the lot and ordered the partition thereof.Parties were enjoined to partition amongst themselvesand were to submit the same to the lower court forconfirmation. Upon execution, the sheriff was unableto effect apportionment due to a 3 rdparty claim of

Juanito and Coronacion Gonzales, stating that theywere registered owners of 480 sq. m. of the disputed

land. The sheriff noted the various improvementspetitioners had introduced (apartment, residentialhouse and piggery). Trial court allowed petitioners tointervene as indispensable parties, vacating itsprevious judgment and granting a new trial.

Trial Court: There is no proof to show that petitionersare co-owners of the property in question because theland has long been covered by an OCT since 1932 inthe name of their predecessor in interest, Fausto Soy.

CA: Resolved in favor of respondents, declaring thatthe sale to intervenor-petitioners did not terminate thetrust relationship between the appellants and theappellees. The sale in favor of petitioners shall beenforced against the share of respondents as heirs

of Fausto.

Issue: Was the disputed land held in trust by FaustoSoy for his sisters, Emilia, Cornelia and Anastacia(mothers of herein respondents)?

Ruling: CA decision reversed, order for partitiondismissed.

Fausto, being predecessor-in-interest, had appeared tobe the registered owner of the lot for more than 30years and his dominical rights can no longer bechallenged. Any insinuation as to the existence of animplied or constructive trust should not be allowed.

Even assuming there was an implied trust, respondents

attempt at reconveyance is barred by prescription,which in this case is 10 years, the period reckonedfrom the issuance of the adverse title to the propertywhich operates as a constructive notice.

The assertion of adverse title, which was an explicitindication of repudiation of the trust for the purpose ofthe statute of limitations, took place when the OCT wasissued in the name of Fausto Soy in 1932, to theexclusion of his 3 sisters.

Even if there were no repudiation, the rule is that anaction to enforce an implied trust may becircumscribed not only by prescription but also bylachesin which case, repudiation is not required.

Respondents had literally slept on their rightspresuming they had any and can no longer dispute theconclusive and incontrovertible character of Faustostitle as they are deemed to have acquiesced therein.

ADAZA V. CA

Facts: In 1953, Victor Adaza Sr. executed a Deed ofDonation, covering the disputed land in this case,located in Sinonok, Zamboanga del Norte in favor ofRespondent Violeta. The land being disposable public


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land had been held and cultivated by Victor, Sr. Withthe help of her brother, Horacio, Violeta filed ahomestead application over the land and a free patentwas issued in 1956. An OCT was issued in 1960. In1962, Violeta and husband, Lino obtained a loan fromPNB by executing a mortgage on the land, whileHomero Adaza, brother of Violeta remainedadministrator of the same.

In 1971, Horacio invited his brothers and sisters for afamily gathering where he asked Violeta to sign a Deedof Waiver with respect to the property in Sinonok. TheDeed stated that the land was owned in common byVioleta and Horacio even though the OCT was in hername only. The Deed also provided for the waiver,transfer and conveyance of Violeta to Horacio of ofthe property and its improvements. Violeta andHoracio signed the Deed with Homero as a witness.

A few months later, Violeta and husband Lino filed acomplaint for annulment of the Deed of waiver and fordamages against Horacio and wife Felisa. Thecomplaint alleged that (1) she was absolute owner ofthe land by virtue of an unconditional donationexecuted by her father in her favor; (2) she was

registered owner; (3) she signed the Deed of waiverbecause of fraud, misrepresentation and undueinfluence; and (4) because of such malicious acts, sheis entitled to damages from Horacio.

Trial Court: Declared Deed of Waiver as valid andbinding upon Violeta, that Horacio was co-owner of of the land, and odering Violeta to pay Horacion theproceeds of his share.

CA: Reversed Trial court decision, declaring thatthough the deed was signed voluntarily, such Deed waswithout consideration or cause because the land hadbeen unconditionally donated to Violeta alone.

Issue: Who owns the disputed parcel of land?

Ruling:Petition granted.

Deed of donation had a crossed-out provision: That thedonee shall share of the entire property with one ofher brothers and sisters after the death of the donor.

The record is bereft of any indication of any evil intentor malice on the part of Homero, Victor, Jr. andTeresita (siblings of Violeta) that would suggestdeliberate collusion against Violeta. Their father hadexecuted the Deed of Donation with the understandingthat the same would be divided between Horacio andVioleta and that Violeta had signed the Deed of Waiverfreely and voluntarily.

Victor Adaza, Sr. left 4 parcels of land divided among

the 6 children through the practice of having the landsacquired by him titled to the name of one of hischildren.

The property involved in the instant case is owned incommon by Violeta and brother, Horacio even thoughthe OCT was only in her name. She held half of theland in trust for petitioner Horacioimplied trustbased on Article 1449 of the Civil Code:

There is also an implied trust when a donation is madeto person but It appears that although the legal estate

is transmitted to the donee, he nevertheless is either tohave no beneficial interest of only a part thereof.

The doctrine of laces is not to be applied mechanicallyas between near relatives.

ARMAMENTO V. GUERRERO

Facts: This case involves an action for reconveyance orfor the declaration of an implied trust on Lot No. 974and for damages.

The disputed land was the subject of 2 PatentApplications: (1) Free patent filed by Defendant on Aug1 1958, issued Jul 1961, OCT issued Feb 1962 and (2)Homestead Patent filed by Plaintiff on Jul 7 1959,approved Jan 1964.

Plaintiff Armamento alleges that he is the possessor-actual occupant of and Homestead applicant over thedisputed lot. Upon following up his application, he wasshocked to discover that Defendant Guerrero, throughfraud and misrepresentation obtained a Free Patent

over the same land, by falsely stating that he hadcontinuously possessed the lot since July 1945 or priorthereto, when in truth defendant was never inpossession.

In his Answer, Guerrero denies that he was not inpossession claiming that he had been in occupation ofsaid lot and even authorized a certain Macario Caangayto administer the same while he was termporarily awayfor missionary work in Cagayan de Oro.

Trial Court: Dismissed the case on the followinggrounds: (a)Plaintiff has no personalityto file theaction for reconveyancethe proper party being theRepublic of the Philippines; (b)Plaintiff has no causeof actionin the absence of privity of contract betweenparties; (c)defendants title has become indefeasibleand cannot be cancelled; and (d) even if based onfraud, the action has prescribed.

Issues: Is plaintiffs action for reconveyance justified?Was there a trust created?

Ruling: After the lapse of one year, a decree ofregistration is no longer open to review or attack,although its issuance is attended with fraud. However,an action for reconveyance is still available for theaggrieved party if the property has not yet passed toan innocent purchaser for value. This is exactly whatplaintiff has done.

Plaintiff has not been able to prove fraud and

misrepresentation because of the trial court dismissal.While plaintiff is not the owner of the land, so that,strictly speaking, he has no personality to file thisapplication, he pleads for equity and invokes thedoctrine of implied trust under Art. 1456of the CivilCode: If property is acquired through mistake or fraud,the person obtaining it is, by force of law, considered atrustee of an implied trust for the benefit of the personfrom whom the property comes.

The doctrine of implied trust may be made to operatein plaintiffs favor, assuming that he can prove his


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allegation that defendant had acquired legal title byfraud.

A constructive trust is a trust raised by construction oflaw or arising by operation of law. If a person obtainslegal title to property by fraud or concealment, courtsof equity will impress upon the title a so-calledconstructive trust in favor of the defrauded part.

Action for reconveyance has not prescribedtheprescriptive period being 10 years. (Title obtained1962, Suit commenced 1967)

Case is remanded to CFI Cotobato.

RAMOS v RAMOS

Facts: Spouses Martin Ramos and Candida weresurvived by three legitimate children: Jose, Agustin andGranada. Martin was also survived by 7 naturalchildren. A special proceeding was instituted for thesettlement of the estate of said spouses. Rafael,brother of Martin was appointed administrator. A

project of partition was submitted and the conjugalhereditary estate was appraised at P74,984.93. Itconsisted of 18 parcels of land, some head cattle andadvances to the legitimate children. It was agreed inthe project of partition that Jose and Agustin wouldpay the cash adjudications to their natural siblings.Only the sum of P 37, 492.46 of the P74k representedthe estate of Martin. 1/3 thereof was the free portionout of which the shares of the natural children were tobe taken: each would get P1,785.35. The project ofpartition as well as the intervention of Timoteo asguardian of the five minor heirs was approved by thecourt. Later on, Judge Nepomuceno asked theadministrator to submit a report showing that theshares have been delivered to the heirs as requiredwhich the siblings acknowledged in a manifestation.

The Himalayan cadastre (8 lots) involved in this casewere registed in equal shares in the names of Joseswidow, Gregoria and her daughter Granada.

The Plaintiffs (natural children) contend that whilethey were growing up, they had been well supportedby Jose and Agustin as they had been receiving theirshares from the produce of the Haciendas in variedamounts over the years. Even after the death of Jose,Gregoria had continued giving them money but hadstopped in 1951 by reason that lessee Lacson was notable to pay the lease rental. No accounting had everbeen made to them by Jose nor Gregoria. Upon thesurvey of the land, they did not intervene, as Jose andAgustin promised that said lands shall be registered inthe names of the heirs. They did not know that the

intestate proceedings were instituted for thedistribution of the estate of their father. Neither didthey have any knowledge that a guardian was assignedto represent their minor siblings, considering thatModesto and Miguel who were claimed to be such wereno longer minors at the time of the partition. Theynever received their share in the estate of their father.Plaintiffs later on discovered that the property had aTorrens title in the name of Gregoria and her daughterwhen Modestos children had inquired from theRegister of Deeds. Petitioners now bring the presentsuit for the reconveyance of the subject parcels of landin their favor.

Petitioners claim that in effect, Gregoria and daughterare holding their shares in trust which was denied bydefendants. Defendants alledge res judicata andprescription.

LOWER COURT: Dismissed the complaint on the basisof res judicata as their shares were already settled inthe intestate proceedings. No deed of trust wasalledged and proven.

Plaintiffs appealed saying that they were grievouslyprejudiced by the partition and thus res judicatashould not bar their action.

SC: The plaintiffs have not proven any express trustsneither have they specified the kind of implied trustcontemplated in their action. Either way, such actionmay be barred by laches.

In the cadastral proceedings, Jose and wife claimed the8 lots of the plaintiffs. After the death of Jose, the saidlots were adjudicated to his widow and daughter. In1932 Gregoria leased the said lots to Yulo, who in1934 transferred his lease rights over HaciendaCalazato to Bonin and Olmedo, husband of plaintiff

Atanacia. Bonin and Olmedo in 1935 sold their leaserights over Hacienda Calaza to Consing.

Those transactions prove that the heirs of Jose hadrepudiated any trust which was supposedly constitutedover Hacienda Calaza in favor of the plaintiffs.

The period of extinctive prescription is 10 years.Atanacia, Modesto and Manuel, could have brought theaction to annul the partition. Maria and Emiliano wereboth born in 1896. They reached the age of 21 in 1917and could have brought the action from that year.

The instant action was filed only in 1957. As toAtanacia, Modesto and Manuel, the action was filed 43years after it accrued and, as to Maria and Emiliano,

the action was filed 40 years after it accrued. The delaywas inexcusable. The instant action is unquestionablybarred by prescription and res judicata.

It was anomalous that the manifestation should recitethat they received their shares from theiradministrator, when in the project of partition it wasindicated that said shares shall be received in cashfrom brothers Jose and Agustin. Thus due to thisirregularities as well as those of the intestateproceedings, the plaintiffs contend that the partitionwas not binding on them (except for Timoteo whoconsidered himself bound by the partition). They askthat the case be remanded to the lower court for thedetermination and adjudication of their rightful shares.

However, due to the fact that the plaintiffs slept ontheir rights, the courts can no longer afford them relief

VARSITY HILLS, INC v NAVARRO

Facts: The present action began from a previous civilcase wherein a petition was filed by herein respondentsMejia as heirs of Quintin Mejia and by Elpidio Tiburcioas assignee of a portion of the estate left by the latteras plaintiff against petitioners Tuason et. al. Thecomplaint alleged that Quintin Mejia had obtained a


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Spanish title to the land and that he and his successorsin interest had occupied the land without interruptionuntil they were forcibly rejected therefrom and theirhouses demolished in 1934 through a writ ofexecution. In 1914, the defendants Tuason hadobtained a decree of registration covering 35,403hectares and that they had fraudulently and insidiouslyincluded plaintiffs land in the area covered by theCertificate of Transfer by inserting fake and false

technical descriptions. UP et al. as subsequentacquirers whose titles are derived from the originalfraudulent certificates should likewise be annulled.

Herein Petitioners contend that the decision in a civilcase wherein the Respondents were declared aswithout title to the land and ejected by a writ ofexecution was affirmed by the Supreme Court. ThePetitioners contend in the present case that the causesof action averred by the Respondents were barred bythe LRA and the statute of limitations over 51 yearshaving elapsed since the decree of registration wasissued, barred by laches as 32 years have elapsed sincethe ejectment and that the court had no jurisdiction toreview and revise the decree of registration. They alsomaintain as affirmative defenses that they had in

possession for over 30 years of the land thus acquiringtitle by acquisitive prescription and that claims forownership were extinguished by the decree and thatthey are purchasers for value and in good faith of thelands standing in their names. A motion to dismiss wasfiled yet was denied by the lower court. The Petitionersresorted to the SC for a special proceeding for writs ofcertiorari and prohibition thus the trial court wasenjoined from proceeding with the trial until furtherorders.

Mejia and Tiburcio claim that appeal in due time wasthe proper remedy.

Issue:Can the present action prosper based on claimsof implied/constructive trust?

SC: The court below gravely abused its discretion indenying petitioners motion to dismiss based on theiraffirmative defenses. The action by Tiburcio and Mejiaswas already barred by res judicata and extinctiveprescription. A previous case was decided whereinQuintin Mejia had been found without title and thusejected. The action in the court below was definitelybarred as while the present respondents were notparties to the cause which Quintin Mejia was such aparty, the final judgment against him concludes andbars his predecessors and privies as well. Since therespondents failed to file a petition for review of thedecree within one year after the entry thereof despiteclaims that there was fraud in the inclusion of theirland in the title, they are barred by the LRA. However ifthe fraud had been committed after the issuance of thedecree, they should have pleaded when Quintin wasmade a defendant in Civil Case 4420. Nevertheless,their cause of action is barred by res judicata. With orwithout judgment against Quintin, their action hadbeen extinguished by the lapse of 30 years from thetime he was ejected from the land in question. Anaction to recover is also foreclosed by the statute oflimitations. Actions on implied trusts areextinguished by laches or prescription of 10 years.Respondents have presented no cause of action. Thelower court by denying the motion to dismissconstituted GADLEJ since they prolonged a litigationthat was unmeritorious on its face.

GERONA v DE GUZMAN

Facts: Petitioner Gerona heirs are the legitimatechildren of Domingo Gerona and Placida de Guzman.Placida was a legitimate daughter of Marcelo deGuzman and his first wife Teodora de la Cruz. After thedeath of Teodora, Marcelo married Camila Ramos.

Their children are herein respondents de Guzmanheirs. Marcelo died some time in Septermber 1945 andrespondents executed a deed of extra-judicialsettlement of his estate. They fraudulently stipulatedtherein that they were the only surviving heirs ofMarcelo although knowing that petitioners were alsohis forced heirs. They were able to cause the transferthe certificates of 7 parcels of land each in theirnames. The petitioners discovered the fraud only theyear before the institution of the case. Petitioners seekto annul the extra-judicial settlement as well as havetheir shares in the said properties reconveyed to them.

Contentions: Defendants argue that Placida deGuzman was not entitled to share in the estate ofMarcelo as she was an illegitimate child and that the

action of the Petitioners is barred by the statute oflimitations.

Rulings:

TRIAL COURT: The trial court dismissed the case afterfinding that Placida was a legitimate child of Marceloand that the properties described herein belonged tothe conjugal partnership of Marcelo and Camila. It alsoruled that Petitioners action had already prescribed.

CA: affirmed ruling of the trial court

Contentions: Petitioners assert that since they are co-heirs of Marcelo, the action for partition is not subjectto the statue of limitations; that if affected, the period

of 4 years did not begin to run until discovery of thefraud. They claim that the fraud done by respondentstook place in 1956 or 1957 and that it had notprescribed when the present action was commenced.

SC: The rule holds true only when the defendants donot hold the property in question under an adversetitle. The statute of limitations operates from the timethe adverse title is asserted by the possessor of theproperty.

The defendants excluded the petitioners from theestate of Marcelo when they executed the deed ofextra-judicial settlement claiming that they are the soleheirs thus setting up an adverse title to the estate.

An action for reconveyance of real property basedupon a constructive or implied trust, resulting fromfraud may be barred by the statute of limitations andthe action may only be filed within 4 years from thediscovery of the fraud. In the case at bar, the discoverywas made on June 25, 1948 when the deed was filedwith the Register of Deeds and new certificates of titlewere issued in the names of the respondentsexclusively. Plaintiffs complaint was not filed untilNovember 4, 1958 or more than 10 years after.


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Held: The petitioners are in error in believing that likeexpress trusts, such constructive trusts may not bebarred by lapse of time. The American law on trustshas always maintained a distinction between expresstrusts created by intention of parties, and theimplied/constructive trusts that are exclusively createdby law, the later not being trusts in their technicalsense. The express trusts disable the trustee fromacquiring for his own benefit the property

committed to his management or custody, at leastwhile he does not openly repudiate the trust, andmakes such repudiation known to the beneficiary orcestui que trust.

Also, in express trusts, the delay of the beneficiary isdirectly attributable to the trustee who undertakesto hold the property for the former, or who is linkedto the beneficiary by confidential or fiduciaryrelations. The trustees possession is, therefore, notadverse to the beneficiary, until and unless the latter ismade aware that the trust has been repudiated.

But in constructive trusts, there is neither promise norfiduciary relation. The so-called trustee does notrecognize any trust and has no intent to hold for

the beneficiary; therefore, the latter is not justifiedin delaying action to recover his property. It is hisfault if he delays; hence, he may be estopped by hisown laches.

Thus, thejudgment of dismissal (of the CFI) should beupheld, because the petitioners cause of action toattack the deed and cancel the transfer certificates oftitle issued to the respondents accrued from the yearof issuance and recording, 1937, and the petitionershave allowed 15 years to elapse before taking remedialaction in 1952. Under the old Code of Civil Procedure,in force at the time, the longest period of extinctiveprescription was only 10 years.

EVANGELISTA, ET. AL. VS. COLLECTOR OF INTERNALREVENUE, ET. AL.

Facts: The petitioners borrowed from their fatherPhP59,140.00 which amount together with theirpersonal monies was used by them for the purpose ofbuying and selling real properties. From 1943 to1944, they bought 24 parcels of land (including theimprovements thereon) on four different occasions. In1945, they appointed their brother Simeon to managetheir properties with full power to lease; to collect andreceive rents; to issue receipts therefore; in default ofsuch payment, to bring suits against the defaultingtenant; and to endorse and deposit all notes andchecks for them. In 1948, their net rental income

amounted to PhP12,615.35.

On September 1954, the respondent Collector ofInternal Revenue demanded the payment of (1) incometax on corporations, (2) real estate dealers fixed tax,and (3) corporation residence tax for the years 1945-1949, computed according to the assessments madeon their properties.

Because of this, the petitioners filed a case against therespondents in the Court of Tax Appeals, praying thatthe decision of the respondent contained in its letter of

demand be reversed and that they be absolved fromthe payment of the taxes in question.

Issue: Whether the petitioners are subject to the taxon corporations, real estate dealers fixed tax, andcorporation residence tax.

Court of Tax Appeals: The petitioners are liable. (Noexplanation for such in the case)

Petitioners: They are mere co-owners, not co-partners, for, in consequence of the acts performed bythem, a legal entity, with a personality independent ofthat of its members, did not come into existence, andsome of the characteristics of partnerships are lackingin the case at bar.

Held: The petitioners are liable to pay the tax oncorporations provided for in Sec. 24 of theCommonwealth Act No. 466, otherwise known as theNational Internal Revenue Code. According to Sec. 84of the same statute, the term corporation includespartnerships, no matter how created or organized,

joint-stock companies, joint accounts, associations orinsurance companies, but does not include duly

registered general co-partnerships.

Also, Article 1767 of the Civil Code provides:By the contract of partnership, two or more personsbind themselves to contribute money, property, orindustry to a common fund, with the intention ofdividing the profits among themselves. Pursuant tothis article, the essential elements of a partnershipare two, namely: (1) an agreement to contributemoney, property or industry to a common fund; and (2)intent to divide the profits among the contractingparties. The first element is undoubtedly present inthe case at bar, for, admittedly, the petitioners haveagreed to, and did, contribute money and property to acommon fund. Also, it can be said that their purposewas to engage in real estate transactions for monetary

gain and then divide the same among themselvesbecause: (1) they created the common fund purposely;(2) they invested the same, not merely in onetransaction, but in a series of transactions; (3) theparcels of land that they bought were not devoted toresidential purposes, or to other personal uses of thepetitioners but were leased separately to severalpersons; (4) the properties have been under themanagement of one person, namely SimeonEvangelista, making the affairs relative to the saidproperties appear to have been handled as if the samebelonged to a corporation or business enterpriseoperated for profit; and (5) the petitioners have nottestified or introduced any evidence, either on theirpurpose in creating the set up already adverted to, oron the causes for its continued existence.

Hence, the petitioners herein constitute apartnership, and in so far as the National InternalRevenue Code is concerned, they are subject to theincome tax for corporations.

I. As regards to the residence tax forcorporations provided Sec. 2 of


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Commonwealth Act No. 4651, the termscorporation and partnership are used inboth statutes with substantially the samemeaning. Consequently, petitioners aresubject, also, to the residence tax forcorporations.

II. Lastly, the records show that the petitionershave habitually engaged in leasing the

properties for a period of 12 years, and thatthe yearly gross rentals of the said propertiesfrom 1945 to 1948 ranged from PhP9,599.00to PhP 17,453.00. Thus, they are subject tothe tax provided in Section 193 (q) of ourNational Internal Revenue Code, for realestate dealers, inasmuch as, pursuant toSection 194 (s) thereof:

Real estate dealers include any person engaged inthe business of buying, selling, exchanging, leasing, orrenting property of his own account as principal andholding himself out as full ro part-time dealer in realestate or as an owner of rental property or propertiesrented or offered to rent for an aggregate amount ofthree thousand pesos or more a year. * * *

YULO V. YANG CHIAO SENG

Facts: Yang Chiao Seng proposed to form apartnership with Rosario Yulo to run and operate atheatre on the premises occupied by Cine Oro, PlazaSta. Cruz, Manila, the principal conditions of the offerbeing (1) Yang guarantees Yulo a monthly participationof P3,000 (2) partnership shall be for a period of 2years and 6 months with the condition that if the landis expropriated, rendered impracticable for business,owner constructs a permanent building, then Yulosright to lease and partnership even if period agreedupon has not yet expired; (3) Yulo is authorized to

personally conduct business in the lobby of thebuilding; and (4) after Dec 31, 1947, all improvementsplaced by partnership shall belong to Yulo but ifpartnership is terminated before lapse of 1 and years, Yang shall have right to remove improvements.Parties established, Yang and Co. Ltd., to exist from

July 1, 1945 Dec 31, 1947.

In June 1946, they executed a supplementaryagreement extending the partnership for 3 yearsbeginning Jan 1, 1948 to Dec 31, 1950.

The land on which the theater was constructed wasleased by Yulo from owners, Emilia Carrion and MariaCarrion Santa Marina for an indefinite period but thatafter 1 year, such lease may be cancelled by either

party upon 90-day notice. In Apr 1949, the ownersnotified Yulo of their desire to cancel the lease contract

1Entities liable to residence taxEvery corporation, no

matter how created or organized, whether domestic or

resident foreign, engaged in or doing business in the

Philippines shall pay an annual residence tax of five pesos

and an annual additional tax, which in no case, shall

exceed one thousand pesos, in accordance with the

following schedule: * * *

come July. Yulo and husband brought a civil action todeclare the lease for a indefinite period. Ownersbrought their own civil action for ejectment upon Yuloand Yang.

CFI: Two cases were heard jointly; Complaint of Yuloand Yang dismissed declaring contract of leaseterminated.

CA: Affirmed the judgment.

In 1950, Yulo demanded from Yang her share in theprofits of the business. Yang answered saying he hadto suspend payment because of pending ejectmentsuit.

Yulo filed present action in 1954, alleging theexistence of a partnership between them and that Yanghas refused to pay her shares.

Defendants Position: The real agreement betweenplaintiff and defendant was one of lease and not ofpartnership; that the partnership was adopted as asubterfuge to get around the prohibition contained inthe contract of lease between the owners and the

plaintiff against the sublease of the property.

Trial Court: Dismissal. It is not true that a partnershipwas created between them because defendant has notactually contributed the sum mentioned in the Articlesof Partnership or any other amount. The agreement isa lease because plaintiff didnt share either in theprofits or in the losses of the business as required byArt 1769 (CC) and because plaintiff was granted aguaranteed participation in the profits belies thesupposed existence of a partnership.

Issue: Was the agreement a contract a lease or apartnership?

Ruling: Dismissal. The agreement was a sublease not a

partnership. The following are the requisites ofpartnership:(1)two or more persons who bindthemselves to contribute money, property orindustryto a common fund; (2)the intention on thepart of the partners to divide the profitsamongthemselves (Article 1761, CC)

Plaintiff did not furnish the supposed P20,000 capitalnor did she furnish any help or intervention in themanagement of the theatre. Neither has she demandedfrom defendant any accounting of the expenses andearnings of the business. She was absolutely silentwith respect to any of the acts that a partner shouldhave done; all she did was to receive her share ofP3,000 a month which cannot be interpreted in anymanner than a payment for the use of premises which

she had leased from the owners.

ESTANISLAO, JR. VS. COURT OF APPEALS

Facts: The petitioner and private respondents arebrothers and sisters who are co-owners of certain lotsat the in Quezon City which were then being leased toSHELL. They agreed to open and operate a gas stationthereat to be known as Estanislao Shell Service Stationwith an initial investment of PhP15,000.00 to be takenfrom the advance rentals due to them from SHELL for


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the occupancy of the said lots owned in common bythem. A joint affidavit was executed by them on April11, 1966. The respondents agreed to help theirbrother, petitioner therein, by allowing him to operateand manage the gasoline service station of the family.In order not to run counter to the companys policy ofappointing only one dealer, it was agreed thatpetitioner would apply for the dealership. RespondentRemedios helped in co-managing the business with

petitioner from May 1966 up to February 1967.

On May 1966, the parties entered into an AdditionalCash Pledge Agreement with SHELL wherein it wasreiterated that the P15,000.00 advance rental shall bedeposited with SHELL to cover advances of fuel topetitioner as dealer with a proviso that said agreementcancels and supersedes the Joint Affidavit.

For sometime, the petitioner submitted financialstatement regarding the operation of the business tothe private respondents, but thereafter petitioner failedto render subsequent accounting. Hence , the privaterespondents filed a complaint against the petitionerpraying among others that the latter be ordered:

(1)

To execute a public document embodying allthe provisions of the partnership agreementthey entered into;

(2) To render a formal accounting of the businessoperation veering the period from May 6,1966 up to December 21, 1968, and from

January 1, 1969 up to the time the order isissued and that the same be subject to properaudit;

(3) To pay the plaintiffs their lawful shares andparticipation in the net profits of thebusiness; and

(4) To pay the plaintiffs attorneys fees and costsof the suit.

Issue: Can a partnership exist between members of the

same family arising from their joint ownership ofcertain properties?

Trial Court: The complaint (of the respondents) wasdismissed. But upon a motion for reconsideration ofthe decision, another decision was rendered in favor ofthe respondents.

CA: Affirmed in toto

Petitioner: The CA erred in interpreting the legalimport of the Joint Affidavit vis--vis the AdditionalCash Pledge Agreement. Because of the stipulationcancelling and superseding the Joint Affidavit,whatever partnership agreement there was in saidprevious agreement had thereby been abrogated.

Also, the CA erred in declaring that a partnership wasestablished by and among the petitioner and theprivate respondents as regards the ownership and /oroperation of the gasoline service station business.

Held: There is no merit in the petitioners contentionthat because of the stipulation cancelling andsuperseding the previous joint affidavit, whateverpartnership agreement there was in said previousagreement had thereby been abrogated. Saidcancelling provision was necessary for the JointAffidavit speaks of P15,000.00 advance rental startingMay 25, 1966 while the latter agreement also refers to

advance rentals of the same amount starting May 24,1966. There is therefore a duplication of reference tothe P15,000.00 hence the need to provide in thesubsequent document that it cancels and supercedesthe previous none. Indeed, it is true that the latterdocument is silent as to the statement in the JoinAffidavit that the value represents the capitalinvestment of the parties in the business and it speaksof the petitioner as the sole dealer, but this is as it

should be for in the latter document, SHELL was asignatory and it would be against their policy if in theagreement it should be stated that the business is apartnership with private respondents and not a soleproprietorship of the petitioner.

Furthermore, there are other evidences in the recordwhich show that there was in fact such partnershipagreement between parties. The petitioner submittedto the private respondents periodic accounting of thebusiness and gave a written authority to the privaterespondent Remedios Estanislao to examine and auditthe books of their common business (amingnegosyo). The respondent Remedios, on the otherhand, assisted in the running of the business. Indeed,the parties hereto formed a partnership when they

bound themselves to contribute money in a commonfund with the intention of dividing the profits amongthemselves.

IN THE MATTER OF THE PETITION FOR AUTHORITYTO CONTINUE USE OF THE FIRM NAME OZAETA,

ROMULO, ETC.

Facts:Two petitions were filed, one by the survivingpartners of Atty. Herminio Ozaeta and the other by thesurviving partners of Atty. Alexander Sycip praying thatthey be allowed to continue using the names of

partners who had passed away in their firm names.Both petitions were consolidated.

Petitioners Arguments:

Under the law, a partnership is not prohibitedfrom continuing its business under a firm namewhich includes the name of a deceased partner.In fact, art. 1840 of the civil code explicitlysanctions the practice.

In regulating other professions, such asaccountancy and engineering, the legislature hasauthorized the adoption of firm names withoutany restriction as to the use, in such firm name,of the name of the deceased partner, thelegislative authorization given to those engaged

in the practice of accountancy a professionrequiring the same degree of trust andconfidence in respect of clients as that implicit inthe relationship of attorney and client toacquire and use a trade name, strongly indicatesthat there us no fundamental policy that isoffended by the continued use by a firm ofprofessionals of a firm name which included thename of a deceased partner, at least where suchfirm name has acquired the characteristics of atrade name

The Canon of Professional Ethics are nottransgressed by the continued use of the name


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of a deceased partner in the firm name of a lawpartnership as declared by Canon 33 adopted byAmerican Bar Association declaring that Thecontinued use of the name of a deceased orformer partner when permissible by localcustom, is not unethical, but care should betaken that no imposition or deception ispracticed through this use.

There is no possibility of imposition or deception

because the deaths of their respective deceasedpartners were well publicized in all newspapersof general circulation for several days.

No local custom prohibits the continued use of adeceased partners name in a professional firmname; and

The continued use of a deceased partners namein the firm name of law partnerships has beenconsistently allowed by U.S. Courts and is anaccepted practice in legal profession of mostcountries in the world.

Issue:Whether or not a firm name engaged in the legalprofession should continue using the name of partnerswho had passed away.

SC ruling:No.

The use in partnership names of the names ofdeceased partners will run counter to Article 1825of the CC which provides that names in a firmname of a partnership must either be those ofliving partners and, in the case of non partners,should be living persons who can be subjected toliability. In fact, art. 1825 prohibits a third personfrom including his name in the firm name underpain of assuming the liability of a partner. Theheirs of a deceased partner in a law firm cannot beheld liable as the old members to the creditors ofa firm particularly where they are non-lawyers.With regard to art. 1840, it treats more of a

commercial partnership with a good will to protectrather than a professional partnership, with nosaleable good will but whose reputation dependson the personal qualifications of its individualmembers. Thus, it has been held that a saleablegoodwill can exist only in a commercialpartnership and cannot arise in a professionalpartnership consisting of lawyers.

A partnership for the practice of law cannot belikened to partnerships formed by otherprofessionals or for business. For one thing, thelaw on accountancy specifically allows the use of atrade name in connection with the practice ofaccountancy. A partnership for the practice of lawis not a legal entity. It is a mere relationship orassociation for a particular purpose. It is not a

partnership formed for the purpose of carrying ina trade or business or of holding property. Thus, ithas been stated that the used of an assumed ortrade name in law practice is improper.

The right to practice law is not a natural orconstitutional right but is in the nature of aprivilege or franchise. It is limited to persons ofgood moral character with special qualificationsduly ascertained and certified. The right does notonly presuppose in its possessor integrity, legalstanding and attainment but also the exercise of aspecial privilege, highly personal and partaking ofthe nature of a public trust.

The continued use of a deceased or formerpartners name in the firm names of lawpartnerships not sanctioned by local custom dueto the possibility of deception upon the publicwhere the name of a deceased partner continuesto be used. The possibility of deception upon thepublic, real or consequential, where the name of adeceased partner continues to be used cannot beruled out. A person in search of legal counsel

might be guided by the familiar ring of adistinguished name appearing in a firm title. Inaddition, theres no local custom within our

jurisdiction that sanctions the practice ofcontinued use of a deceased partners name.Courts take no judicial notice of custom. A localcustom as a source of right cannot be consideredby a court of justice unless such custom isproperly established by competent evidence likeany other fact. Merely because something is doneas a matter of practice does not mean that Courtscan rely on the same for purposes of adjudicationas a juridical custom. Juridical custom must bedifferentiated from social custom. The former cansupplement statutory law or be applied in theabsence of such statute. Not so with the latter.

BASTIDA VS. MENZI CO.

Facts: Menzi Co. was organized in 1921 for thepurpose of importing and selling general merchandise,including fertilizers and fertilizer ingredients.Sometime in November of that year, the plaintiff, whohad had some experience in mixing and sellingfertilizer, went to see Toehl, the manager of thesundries department of Menzi & Co. (through whichthe fertilizer business was carried out) and told himthat he had a written contract with the Philippine SugarCentrals Agency for 1,250 tons of mixed fertilizers,and that he could obtain other contracts, including onefrom Calamba Sugar Estates for 450 tons, but that he

did not have the money to buy the ingredients to fillthe order and carry on the business. He offered toassign to Menzi & Co. his contract with Phil SugarCentrals Agency and to supervise the mixing of thefertilizer and to obtain other orders for 50 % of the netprofit that Menzi & Co., Inc., might derive therefrom. J.M. Menzi (gen. manager of Menzi & Co.) accepted theoffer. The agreement between the parties was verbaland was confirmed by the letter of Menzi to theplaintiff on January 10, 1922.

Menzi & Co. continued to carry on its fertilizerbusiness under this arrangement with the plaintiff. Itordered ingredients from the US and other countries,and the interest on the drafts for the purchase of thesematerials was charged to the business as a part of the

cost of the materials. The mixed fertilizers were soldby Menzi & Co. between January 19 and April 1, 1922under its Corona brand.

Pursuant to the verbal agreement, the defendantcorporation on April 27, 1922 entered into a writtencontract with the plaintiff, marked Exhibit A, which isthe basis of the present action. Still, the fertilizerbusiness as carried on in the same manner as it wasprior to the written contract, but the net profit that theplaintiff herein shall get would only be 35%. Theintervention of the plaintiff was limited to supervisingthe mixing of the fertilizers in the bodegas of Menzi.


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The trademarks used in the sale of the fertilizer wereregistered in the Bureau of Commerce & Industry in thename of Menzi & Co., Inc. and the fees were paid bythat company.

Prior to the expiration of the contract (April 27, 1927),the manager of Menzi notified the plaintiff that thecontract for his services would not be renewed.Subsequently, when the contract expired, Menzi

proceeded to liquidate the fertilizer business inquestion. The plaintiff refused to agree to this. Itargued, among others, that the written contractentered into by the parties is a contract of generalregular commercial partnership, wherein Menzi was thecapitalist and the plaintiff the industrial partner.

Issue: Is the relationship between the petitioner andMenzi that of partners?

Held: The relationship established between the partieswas not that of partners, but that of employer andemployee, whereby the plaintiff was to receive 35% ofthe net profits of the fertilizer business of Menzi incompensation for his services for supervising themixing of the fertilizers. Neither the provisions of the

contract nor the conduct of the parties prior orsubsequent to its execution justified the finding that itwas a contract of co-partnership. The written contractwas, in fact, a continuation of the verbal agreementbetween the parties, whereby the plaintiff worked forthe defendant corporation for one-half of the netprofits derived by the corporation form certainfertilizer contracts.

According to Art. 116 of the Code of Commerce,articles of association by which two or more personsobligate themselves to place in a common fund anyproperty, industry, or any of these things, in order toobtain profit, shall be commercial, no matter what itclass may be, provided it has been established inaccordance with the provisions of the Code. However

in this case, there was no common fund. The businessbelonged to Menzi & Co. The plaintiff was working forMenzi, and instead of receiving a fixed salary, he wasto receive 35% of the net profits as compensation forhis services. The phrase in the written contract ensociedad con, which is used as a basis of the plaintiffto prove partnership in this case, merely means enreunion con or in association with.

It is also important to note that although Menzi agreedto furnish the necessary financial aid for the fertilizerbusiness, it did not obligate itself to contribute anyfixed sum as capital or to defray at its own expensethe cost of securing the necessary credit.

OA VS. COMMSSIONER OF INTERNAL REVENUE

Facts:Lorenzo Oa and his five children are thesurviving heirs of Julia Buales. Lorenzo, the survivingspouse was appointed administrator of Julias estate.He submitted the project of partition which wasapproved by the court and since 3 of the 5 childrenwere still minors, he was appointed by the court asguardian of said minors. Despite the approval of theproject of partition, no attempt was made to divide theproperties therein listed and remained under themanagement of Lorenzo who used said properties in

business by leasing or selling them and investing theincome derived therefrom and proceeds form the salesthereof in real properties and securities. RespondentCIR decided that petitioners formed an unregisteredpartnership and therefore subject to corporate taxpursuant to Sec. 24 of the Tax Code. Accordingly heassessed against the petitioners the amounts ofP8,092.00 and P13.899.00 as corporate income taxesfor 1955 and 1956 respectively. Petitioners protested

against the assessment and asked for reconsiderationwhich was denied.

Petitioners Argument:Petitioners are considered asco owners of the properties inherited by them fromthe deceased Julia Buales and the profits derived fromtransactions involving the same, they cannot beconsidered as an unregistered partnership and cannotbe subject to corporate tax.

Issue:W/N petitioners are deemed to have formed anunregistered partnership subject to tax under sections24 and 84(b) of the National Internal Revenue code.

Ruling:YES

For tax purposes, the co ownership of inheritedproperties is automatically converted intounregistered partnership the moment the saidcommon properties and/or incomes derivedtherefrom are use as a common fund with theintent to produce profits for the heirs inproportion to their respective shares in theinheritance as determined in a project partition.This is because from the moment of suchpartition, the heirs are entitled already to theirrespective definite shares of estate and theincomes thereof, for each of them to manageand dispose of as exclusively his own withoutthe intervention of the other heirs andaccordingly he becomes liable individually for alltaxes in connection therewith. If after such

partition, he allows his share to be held incommon with his co heirs under a singlemanagement to be used with the intent ofmaking profit thereby in proportion to his share,there can be no doubt that even if no documentor instrument were executed for the purpose, fortax purposes at least, an unregisteredpartnership is formed.

The income derived from inherited propertiesmay be considered as individual income of therespective heirs only so long as the inheritanceor estate is not distributed or, at least,partitioned, but the moment their respectiveknow shares are used as part of the commonassets of the heirs to be used in making profits,it is but proper that the income of such sharesshould be considered as part of the taxableincome of an unregistered partnership.

For purposes of the tax on corporations, theNational Internal Revenue Code, includespartnerships with the exception only of dulyregistered general co-partnerships within thepurview of the term corporation.

LYONS VS. ROSENSTOCK

Facts:During his lifetime, Henry Elser got engaged inthe real estate business. Petitioner Lyons, on the other


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hand, joined Elser in some of his ventures and theyequally divided profits gained from these. In 1919,Lyons needed to go back to the United States for a yearand a half and by reason of which he executed ageneral power of attorney in favor of Elser,empowering the latter to manage and dispose theproperties owned by them.

In 1920, Elser was drawn to a piece of land,

the San Juan Estate, and he perceived an opportunity todevelop it into a suburban community. The Estate wasoffered by its owners for P570,000 with an initialpayment of P150,000. In May 1920, Elser wrote a letterto Lyons inducing the latter to join him in this ventureand to likewise supply the means necessary for thefulfillment of this project. In the meantime, Elser raisedP120,000 from his own funds and loaned P50,000from Uy Siolong to pay for the initial payment. Howeverin order to obtain the loan he had to give a personalnote signed by himself, by his other associates and bythe Fidelity and Surety Company. Then again, in orderto obtain the signature of the Fidelity and SuretyCompany Elser had to execute a mortgage on one ofthe properties owned by him and Lyons on CarriedoStreet.

Lyons replied to the letter of Elser only in July1920 and he expressed in it his unwillingness to jointhe latter in this venture. Because of this Elser relievedthe Carriedo property of the encumbrance which hehad placed upon it and requested the Fidelity andSurety Company to allow him to substitute anotherproperty for it. However the release of the oldmortgage and the recording of the new were neverregistered because in September 1920, when Lyonsreturned to Manila, he allowed the mortgage to remainon the Carriedo property. But in January 1921, Elserwas able to pay the note executed by him to Uy Siolongwhich enabled the release of the Carriedo Property.

Issue:W/N Lyons, as half owner of the Carriedo

property, involuntarily became the owner or a co-partner of an undivided interest in the San Juan Estate,which was acquired partly by the money obtainedthrough an encumbrance placed on the Carriedoproperty. No.

Held:Under our law, a trust does not necessarilyattach with respect to property acquired by a personwho uses money belonging to another. In the case atbar, there was clearly no general relation ofpartnership between Lyons and Elser and the most thatcan be said is that they had been co-participants invarious transactions involving real estate. It is clear theElser, in buying the San Juan Estate, was not acting forany partnership composed for himself and Lyons,especially that the latter expressly communicated hisdesire not to participate in this venture. Lastly, itshould be noted that no money belonging to Lyons orany partnership composed by Lyons and Elser was infact used by the latter in the purchase of the San JuanEstate.

FERNANDEZ VS. DE LA ROSA

Facts: On the part of plaintiff Fernandez, he claims thathe entered into a verbal agreement with defendant Dela Rosa to form a partnership for the purchase of

cascoes with the undertaking that the defendant willbuy the cascoes and that each partner will furnish suchamount as he could, while the profits will be dividedproportionately. Plaintiff furnished P300 for casco No.1515 and P825 for casco No. 2089, both of which wereplaced under the name of the defendant only. In April1900, the parties undertook to draw up articles of theirpartnership for the purpose of embodying it in anauthentic document. The agreement however did not

materialize because defendant proposed articles whichwere materially different from their verbal agreement,and he was also unwilling to include casco No. 2089 inthe partnership. Because the cascoes were under themanagement of the defendant, the plaintiff demandedan accounting over it to which the defendant refusedclaiming that no partnership existed between them.

De la Rosa, on the other hand, admits that hedesired to form a partnership with the plaintiff butdenies that any agreement was ever consummated.Moreover, he denied receiving any money furnished byplaintiff for casco No. 1515, but claims that he merelyborrowed the P300 on his individual account from thebakery business in which plaintiff was a co-partner.And as for the P825 furnished by the plaintiff, the

defendant claims that it was actually for casco No.1515 and not for casco No. 2089. He also added thatthe repairs made on the two cascoes were exclusivelyborne by him, and that he returned a sum of P1,125 toplaintiff with an express reservation on his part of allhis rights as a partner.

Issue:a) W/N a partnership existed between theparties. Yes.b) W/N the partnership was terminated when thedefendant returned the P1,125 to plaintiff. No.

Held:a) The essential points upon which the minds ofthe parties must meet in a contract of partnership are1) mutual contribution and 2) joint interest in theprofits.

The fact that the defendant received moneyfurnished by the plaintiff for the purpose of using it topurchase the cascoes establishes the first element o

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A Partnership and Agency Digests for Atty Cochingyan

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