PAT Digests 2nd Set
PAT Digests 2nd Set
Paolo Dimayuga
13.
6. The continued use of a deceased partner's name in
PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM the firm name of law partnerships has been
NAME "SYCIP, SALAZAR, FELICIANO, HERNANDEZ & consistently allowed byU.S. Courts and is an
CASTILLO." LUCIANO E. SALAZAR, FLORENTINO P. accepted practice in the legal profession of most
FELICIANO, BENILDO G. HERNANDEZ. GREGORIO R. countries.
CASTILLO. ALBERTO P. SAN JUAN, JUAN C. REYES. JR.,
ANDRES G. GATMAITAN, JUSTINO H. CACANINDIN, NOEL A. Issue: WON they may be allowed to continue using the
LAMAN, ETHELWOLDO E. FERNANDEZ, ANGELITO C. current names of their firms.
IMPERIO, EDUARDO R. CENIZA, TRISTAN A. CATINDIG,
ANCHETA K. TAN, and ALICE V. PESIGAN, petitioners. Ruling:
Two firms ask that they be allowed to continue using the names NO. Petitioners advised to drop the names SYCIP and OZAETA
of their firms despite the fact that Attys. Sycip and Ozaeta died. from their respective firm names. Names may be included in the
listing of individuals who have been partners, indicating the
PETITIONERS ARGUMENTS years during which they served.
1. Under the law, a partnership is not prohibited from The Deen case [1953] Court advised the firm to desist from
continuing its business under a firm name that includes including in their firm designation the name of C. D.Johnston, who
the name of a deceased partner. NCC 1840 explicitly has long been dead
sanctions the practice.
Register of Deeds of Manila v. China Banking Corporation
The use by the person or partnership continuing the [1958] In this case, the law firm of Perkins & Ponce Enrile
business of the partnership name, or the name of a moved to intervene as amicus curiae. The Court in a Resolution
deceased partner as part thereof, shall not of itself make stated that it "would like to be informed why the name of Perkins
the individual property of the deceased partner liable for is still being used although Atty. E. A. Perkins is already dead."
any debts contracted by such person or partnership. The Court advised the firm to drop the name of E.A. Perkins from
the firm name, and ruled that no practice should be allowed
2. In regulating other professions (accountancy and which even in a remote degree could give rise to the possibility of
engineering), the legislature has authorized the deception.
adoption of firm names without any restriction as to
the use of the name of a deceased partner. There is Judicial decisions applying or interpreting the laws form
no fundamental policy that is offended by the part of the legal system. The Supreme Court in the Deen and
continued use by a firm of professionals of a firm Perkins cases laid down a legal rule against which no custom or
name, which includes the name of a deceased partner, practice to the contrary, even if proven, can prevail. This is not to
at least where such firm name has acquired the speak of our civil law which clearly ordains that a partnership is
characteristics of a "trade name." dissolved by the death of any partner. Custom which are contrary
to law, public order or public policy shall not be countenanced.
3. The Canons of Professional Ethics are not The use in their partnership names of the names of deceased
transgressed by the continued use of the name of a partners will run counter to NCC 1815.
deceased partner because Canon 33 of the Canons of
Professional Ethics adopted by the American Bar Art. 1815. Every partnership shall operate under a firm name,
Association declares that: which may or may not include the name of one or more of the
partners. Those who, not being members of the partnership, include
The continued use of the name of a deceased or former their names in the firm name shall be subject to the liability of a
partner when permissible by local custom, is not partner.
unethical but care should be taken that no imposition or
deception is practiced through this use. Names in a firm name of a partnership must either be those of
living partners and in the case of non-partners, should be
4. There is no possibility of imposition or deception living persons who can be subjected to liability. NCC 1825
because the deaths of their respective deceased prohibits a third person from including his name in the firm
partners were well- publicized in all newspapers of name under pain of assuming the liability of a partner.
general circulation for several days. The stationeries
now being used by them carry new letterheads The heirs of a deceased partner in a law firm cannot be held
indicating the years when their respective deceased liable as the old members to the creditors of a firm particularly
partners were connected with the firm. where they are non-lawyers. Canon 34 of the Canons of
Professional Ethics prohibits an agreement for the payment to
Petitioners will notify all leading national and the widow and heirs of a deceased lawyer of a percentage, either
international law directories of the fact of their gross or net, of the fees received from the future business of the
deceased partners' deaths. deceased lawyer's clients, both because the recipients of such
division are not lawyers and because such payments will not
5. No local custom prohibits the continued use of a represent service or responsibility on the part of the recipient.
deceased partner's name in a professional firm's Neither the widow nor the heirs can be held liable for
name. There is no Philippine custom or usage that transactions entered into after the death of their lawyer-
recognizes that the name of a law firm identifies the predecessor. There being no benefits accruing, there can be no
firms individual members. corresponding liability.
[PARTNERSHIP, AGENCY & TRUSTS: 3B] Atty. Paolo Dimayuga
The public relations value of the use of an old firm name can The possibility of deception upon the public, real or
tend to create undue advantages and disadvantages in the consequential, where the name of a deceased partner continues
practice of the profession. An able lawyer without connections to be used cannot be ruled out. A person in search of legal
will have to make a name for himself starting from scratch. counsel might be guided by the familiar ring of a distinguished
Another able lawyer, who can join an old firm, can initially ride name appearing in a firm title.
on that old firm's reputation established by deceased partners.
ON ARGUMENT #6
ON ARGUMENT #1 U.S. Courts have allowed the continued use of a deceased
NCC 1840 is within Chapter 3 of Title IX entitled "Dissolution partner's name because it is sanctioned by custom. Not so in
and Winding Up." It primarily deals with the exemption from this jurisdiction where there is no local custom that
liability in cases of a dissolved partnership, of the individual sanctions the practice.
property of the deceased partner for debts contracted by the
person or partnership, which continues the business using the Custom has been defined as a rule of conduct formed by
partnership name or the name of the deceased partner as part repetition of acts, uniformly observed (practiced) as a social rule,
thereof. What the law contemplates therein is a hold-over legally binding and obligatory. Courts take no judicial notice of
situation preparatory to formal reorganization. custom. A custom must be proved as a fact, according to the rules
of evidence. A local custom as a source of right cannot be
Secondly, NCC 1840 treats more of a commercial partnership considered by a court of justice unless such custom is properly
with a good will to protect rather than of a professional established by competent evidence like any other fact. Merely
partnership [with no saleable goodwill but whose reputation because something is done as a matter of practice does not mean
depends on the personal qualifications of its individual that Courts can rely on the same for purposes of adjudication as a
members]. A saleable goodwill can exist only in a commercial juridical custom. Juridical custom must be differentiated from
partnership, not in a professional partnership consisting of social custom. The former can supplement statutory law or be
lawyers. applied in the absence of such statute. Not so with the latter.
A partnership for the practice of law is not a legal entity. It is a Petitions DENIED
mere relationship or association for a particular purpose. It is not
a partnership formed to carry on trade or business or of holding
property. The use of a nom de plume, assumed or trade name in
law practice is improper.
14.
Primary characteristics which distinguish the legal
profession from business
G.R. No. L-4811 July 31, 1953
1. A duty of public service, of which the emolument is a
byproduct, and in which one may attain the highest eminence CHARLES F. WOODHOUSE, plaintiff-appellant,
without making much money vs.
2. A relation as an "officer of court" to the administration of FORTUNATO F. HALILI, defendant-appellant.
justice involving thorough sincerity, integrity, and reliability
3. A relation to clients in the highest degree fiduciary LABRADOR, J.:
4. A relation to colleagues at the bar characterized by candor,
fairness, and unwillingness to resort to current business methods
of advertising and encroachment on their practice, or dealing Plaintiff Woodhouse entered on a written agreement with the
directly with their clients defendant Halili, wherein they shall organize a partnership for
The right to practice law does not only presuppose in its the bottling and distribution of Mision soft drinks, Woodhouse to
possessor integrity, legal standing and attainment, but also the act as industrial partner or manager, and Halili as a capitalist,
exercise of a special privilege, highly personal and partaking of furnishing the capital necessary there for and that Woodhouse
the nature of a public trust. was to secure the Mission Soft Drinks franchise for and in behalf
of the proposed partnership, to which Woodhouse was to receive
ON ARGUMENT #3 30 per cent of the net profits of the business.
Canon 33 does not consider as unethical the continued use of the
name of a deceased or former partner when such a practice is Prior to entering into this agreement, Woodhouse requested the
permissible by local custom, but the Canon warns that care Mission Dry Corporation that the right to bottle and distribute be
should be taken that no imposition or deception is practiced. granted to him for a limited time in order that he may close the
deal with Halili, under the condition that it will finally be
In the Philippines, no local custom permits or allows the transferred to the corporation. Pursuant for this request, plaintiff
continued use of a deceased or former partner's name. Firm was given "a thirty-days" option on exclusive bottling and
names, under our custom, identify the more active and/or distribution rights for the Philippines".
more senior members or partners of the law firm.
[PARTNERSHIP, AGENCY & TRUSTS: 3B] Atty. Paolo Dimayuga
The contract was finally signed by plaintiff on December 3, 1947. plaintiff 30 per cent share in the net profits because he was
On that day plaintiff and defendant went to the United States, and transferring his exclusive franchise to the partnership.
on December 10, 1947, a franchise agreement (Exhibit V) was
entered into the Mission Dry Corporation and Fortunato F. Halili We conclude from the above that while the representation that
and/or Charles F. Woodhouse, granted defendant the exclusive plaintiff had the exclusive franchise did not vitiate defendant's
right, license, and authority to produce, bottle, distribute, and sell consent to the contract, it was used by plaintiff to get from
Mision beverages in the Philippines. defendant a share of 30 per cent of the net profits.
When the bottling plant was already on operation, plaintiff By pretending that he had the exclusive franchise and promising
demanded of defendant that the partnership papers be executed. to transfer it to defendant, he obtained the consent of the latter to
At first defendant executed himself, saying there was no hurry. give him (plaintiff) a big slice in the net profits. This is the dolo
Then he promised to do so after the sales of the product had been incidente defined in article 1270 of the Spanish Civil Code,
increased to P50,000. The defendant also reduced the plaintiffs because it was used to get the other party's consent to a big share
share from 30 percent to 15 percent after learning that the latter in the profits, an incidental matter in the agreement.
did not have the exclusive franchise.
In consequence, article 1270 of the Spanish Civil Code
TRIAL COURT: held that the execution of the contract of distinguishes two kinds of (civil) fraud, the causal fraud, which
partnership could not be enforced upon the parties, but it also may be a ground for the annulment of a contract, and the
held that the defense of fraud was not proved since it is incidental deceit, which only renders the party who employs it
improbable that defendant was never shown the letter ("a thirty- liable for damages. This Court had held that in order that fraud
days" option on exclusive bottling and distribution rights) may vitiate consent, it must be the causal (dolo causante), not
merely the incidental (dolo causante), inducement to the making
On this appeal the defendant, as appellant, insists that plaintiff of the contract.
did represent to the defendant that he had an exclusive franchise,
when as a matter of fact, at the time of its execution, he no longer ISSUE: May the agreement be executed?
had it as the same had expired, and that, therefore, the consent of
the defendant to the contract was vitiated by fraud and it is,
consequently, null and void. HELD: As the trial court correctly concluded, the defendant may
not be compelled against his will to carry out the agreement nor
execute the partnership papers. Under the Spanish Civil Code, the
ISSUE:Did Woodhouse falsely represent that he had an exclusive defendant has an obligation to do, not to give. The law recognizes
franchise to bottle Mission beverages? the individual's freedom or liberty to do an act he has promised
to do, or not to do it, as he pleases. It falls within what Spanish
HELD: Yes. It is improbable and incredible for him to have commentators call a very personal act (actopersonalismo), of
disclosed the fact that he had only an option to the exclusive which courts may not compel compliance, as it is considered an
franchise, which was to last thirty days only, and still more act of violence to do so.
improbable for him to have disclosed that, at the time of the
signing of the formal agreement, his option had already expired.
Had he done so, he would have destroyed all his bargaining
power and authority, and in all probability lost the deal itself.
15.
Plaintiff's attorney, Mr. Laurea, testified that Woodhouse
presented himself as being the exclusive grantee of a franchise. ISABELO MORAN, JR. vs. CA and MARIANO E. PECSON
As a matter of fact, the first draft that Mr. Laurea prepared, which
was made before the Manila Hotel conference on November 27th, Facts:
expressly states that plaintiff had the exclusive franchise.
On February 22, 1971 Pecson and Moran entered into an
ISSUE: Did plaintiffs false representation amount to a fraud that agreement whereby both would contribute P15,000 each for the
would vitiate the contract? purpose of printing 95,000 posters (featuring the delegates to the
1971 Constitutional Convention), with Moran actually
HELD:No. The agreement may not be declared null and void. supervising the work; that Pecson would receive a commission of
P l,000 a month starting on April 15, 1971 up to December 15,
1971; that on December 15, 1971, a liquidation of the accounts in
The principal obligation that the plaintiff assumed or undertook
the distribution and printing of the 95,000 posters would be
was to secure said franchise for the partnership, as the bottler
made, that Pecson gave Moran P10,000 for which the latter
and distributor for the Mission Dry Corporation. We declare,
issued a receipt; that only a few posters were printed; that on or
therefore, that if he was guilty of a false representation, this was
about May 28, 1971, Moran executed in favor of Pecson a
not the causal consideration, or the principal inducement, that
promissory note in the amount of P20,000 payable in two equal
led plaintiff to enter into the partnership agreement.
installments (P10,000 payable on or before June 15, 1971 and
P10,000 payable on or before June 30, 1971), the whole sum
But, on the other hand, this supposed ownership of an exclusive becoming due upon default in the payment of the first installment
franchise was actually the consideration or price plaintiff gave in on the date due, complete with the costs of collection.
exchange for the share of 30 percent granted him in the net
profits of the partnership business. Defendant agreed to give
[PARTNERSHIP, AGENCY & TRUSTS: 3B] Atty. Paolo Dimayuga
Private respondent Pecson filed with the CFI of Manila an action of P10,000.00 and with no evidence on the cost of distribution,
for the recovery of a sum of money and alleged in his complaint the net profits amount to only P6,000.00. This net profit of
three (3) causes of action, namely: (1) on the alleged partnership P6,000.00 should be divided between the petitioner and the
agreement, the return of his contribution of P10,000.00, payment private respondent. And since only P4,000.00 was undesirable by
of his share in the profits that the partnership would have the petitioner in printing the 2,000 copies, the remaining
earned, and, payment of unpaid commission; (2) on the alleged P6,000.00 should therefore be returned to the private
promissory note, payment of the sum of P20,000.00; and, (3) respondent.
moral and exemplary damages and attorney's fees.
Relative to the second alleged error, the petitioner submits that
The CFI held that by virtue of the partnership agreement entered the award of P8,000.00 as Pecson's supposed commission has no
into by the parties-plaintiff and defendant the plaintiff did justifiable basis in law.
contribute P10,000.00, and another sum of P7,000.00 for the
Voice of the Veteran or Delegate Magazine. Of the expected Again, we agree with the petitioner.
95,000 copies of the posters, the defendant was able to print
2,000 copies only authorized of which, however, were sold at
P5.00 each. Nothing more was done after this and it can be said The partnership agreement stipulated that the petitioner would
that the venture did not really get off the ground. On the other give the private respondent a monthly commission of Pl,000.00
hand, the plaintiff failed to give his full contribution of from April 15, 1971 to December 15, 1971 for a total of eight (8)
P15,000.00. Thus, each party is entitled to rescind the contract monthly commissions. The agreement does not state the basis of
which right is implied in reciprocal obligations under Article the commission. The payment of the commission could only have
1385 of the Civil Code where under 'rescission creates the been predicated on relatively extravagant profits. The parties
obligation to return the things which were the object of the could not have intended the giving of a commission inspite of loss
contract. The CA likewise rendered a decision against the or failure of the venture. Since the venture was a failure, the
petitioner. private respondent is not entitled to the P8,000.00 commission.
Being a contract of partnership, each partner must share in the Fleischer instituted an action before the CFI of the Province of
profits and losses of the venture. That is the essence of a Oriental Negros. against the board of directors of the Botica
partnership. And even with an assurance made by one of the
Nolasco, Inc., a corporation duly organized and existing under the
partners that they would earn a huge amount of profits, in the
absence of fraud, the other partner cannot claim a right to laws of the Philippine Islands. The plaintiff prayed that said
recover the highly speculative profits. It is a rare business board of directors be ordered to register in the books of the
venture guaranteed to give 100% profits. In this case, on an corporation five shares of its stock in his name and to pay him the
investment of P15,000.00, the respondent was supposed to earn sum of P500 for damages sustained by him resulting from the
a guaranteed P1,000.00 a month for eight months and around refusal of said body to register the shares of stock in question. .
P142,500.00 on 95,000 posters costing P2.00 each but 2,000 of
The defendant filed a demurrer on the ground that the facts
which were sold at P5.00 each. The fantastic nature of expected
profits is obvious. We have to take various factors into account. alleged in the complaint did not constitute sufficient cause of
The failure of the Commission on Elections to proclaim all the action, and that the action was not brought against the proper
320 candidates of the Constitutional Convention on time was a party, which was the Botica Nolasco, Inc. The demurrer was
major factor. The petitioner undesirable his best business sustained, and the plaintiff was granted five days to amend his
judgment and felt that it would be a losing venture to go on with complaint.
the printing of the agreed 95,000 copies of the posters. Hidden
risks in any business venture have to be considered. The plaintiff filed an amended complaint against the Botica
Nolasco. The defendant again filed a demurrer on the ground that
It does not follow however that the private respondent is not the amended complaint did not state facts sufficient to constitute
entitled to recover any amount from the petitioner. The records a cause of action, and that said amended complaint was
show that the private respondent gave P10,000.00 to the
ambiguous, unintelligible, uncertain, which demurrer was
petitioner. The latter used this amount for the printing of 2,000
posters at a cost of P2.00 per poster or a total printing cost of overruled by the court.
P4,000.00. The records further show that the 2,000 copies were
sold at P5.00 each. The gross income therefore was P10,000.00. The defendant answered the amended complaint denying
Deducting the printing costs of P4,000.00 from the gross income generally and specifically each and every one of the material
[PARTNERSHIP, AGENCY & TRUSTS: 3B] Atty. Paolo Dimayuga
allegations thereof, and, as a special defense, alleged that the The by-law now in question was adopted under the power
defendant, pursuant to article 12 of its by-laws, had preferential conferred upon the corporation by section 13, paragraph 7,
right to buy from the plaintiff said shares at the par value of P100 above quoted; but in adopting said by-law the corporation
a share, plus P90 as dividends corresponding to the year 1922, has transcended the limits fixed by law in the same section,
and that said offer was refused by the plaintiff. and has not taken into consideration the provisions of
section 35 of Act No. 1459.
Upon the issue presented by the pleadings above stated, the
cause was brought on for trial, at the conclusion of which, and on As a general rule, the by-laws of a corporation are valid if they are
August 21, 1924, the Honorable N. Capistrano, judge, held that, in reasonable and calculated to carry into effect the objects of the
his opinion, article 12 of the by-laws of the corporation which corporation, and are not contradictory to the general policy of the
gives it preferential right to buy its shares from retiring laws of the land.
stockholders, is in conflict with Act No. 1459 (Corporation Law),
The only restraint imposed by the Corporation Law upon
especially with section 35 thereof; and rendered a judgment
transfer of shares is found in section 35 of Act No. 1459, quoted
ordering the defendant corporation, through its board of
above, as follows: "No transfer, however, shall be valid, except
directors, to register in the books of said corporation the said five
as between the parties, until the transfer is entered and
shares of stock in the name of the plaintiff, Henry Fleischer, as the
noted upon the books of the corporation so as to show the
shareholder or owner thereof, instead of the original owner,
names of the parties to the transaction, the date of the
Manuel Gonzalez, with costs against the defendant.
transfer, the number of the certificate, and the number of
shares transferred." This restriction is necessary in order that
ISSUE: Whether or not article 12 of the by-laws of the the officers of the corporation may know who are the
corporation is in conflict with the provisions of the Corporation stockholders, which is essential in conducting elections of
Law (Act No. 1459). officers, in calling meeting of stockholders, and for other
purposes. but any restriction of the nature of that imposed in the
RULING: YES by-law now in question, is ultra vires, violative of the property
rights of shareholders, and in restraint of trade.
Article 12 of the by-laws of the corporationgoverns the
transfer of shares of stock of defendant corporation. It also And moreover, the by-laws now in question cannot have any
creates a preferential right to buy, under the same effect on the appellee. He had no knowledge of such by-law when
conditions, the share or shares of stock of a retiring the shares were assigned to him. He obtained them in good faith
shareholder. and for a valuable consideration. He was not a privy to the
contract created by said by-law between the shareholder Manuel
On the on the other hand, Section 13, paragraph 7 of the Gonzalez and the Botica Nolasco, Inc. Said by-law cannot operate
Corporation Law, empowers a corporation to make by-laws, not to defeat his rights as a purchaser.
inconsistent with any existing law, for the transferring of its
stock.It follows from said provision, that a by-law adopted by a
corporation relating to transfer of stock should be in harmony 17.
with the law on the subject of transfer of stock. The law on this
subject is found in section 35 of Act No. 1459. Said section
LAGUNA TRANSPORTATION CO., INC. vs. SOCIAL SECURITY
specifically provides that the shares of stock "are personal SYSTEM
property and may be transferred by delivery of the certificate
indorsed by the owner, etc." Said section 35 defines the nature,
On January 24, 1958, petitioner Laguna Transportation Co., Inc.
character and transferability of shares of stock. Under said filed with the Court of First Instance of Laguna petition praying
section they are personal property and may be transferred as that an order be issued by the court declaring that it is not bound
therein provided. Said section contemplates no restriction as to to register as a member of respondent Social Security System
whom they may be transferred or sold. It does not suggest that and, therefore, not obliged to pay to the latter the contributions
any discrimination may be created by the corporation in favor or required under the Social Security Act. To this petition,
respondent filed its answer on February 11, 1958 praying for its
against a certain purchaser. The holder of shares, as owner of
dismissal due to petitioner's failure to exhaust administrative
personal property, is at liberty, under said section, to dispose of remedies, and for a declaration that petitioner is covered by said
them in favor of whomsoever he pleases, without any other Act, since the latter's business has been in operation for at least 2
limitation in this respect, than the general provisions of law. years prior to September 1, 1957. The facts are as follows:
Therefore, a stock corporation in adopting a by-law
governing transfer of shares of stock should take into 1. That petitioner is a domestic corporation duly organized and
consideration the specific provisions of section 35 of Act No. existing under the laws of the Philippines, with principal place of
1459, and said by-law should be made to harmonize with business at Bian, Laguna;
said provisions. It should not be inconsistent therewith. 2. That respondent has served notice upon the petitioner
requiring it to register as member of the System and to remit the
premiums due from all the employees of the petitioner and the
[PARTNERSHIP, AGENCY & TRUSTS: 3B] Atty. Paolo Dimayuga
contribution of the latter to the System beginning the month of when invoked in support of an end subversive of this policy, will
September, 1957; be disregarded by the courts.
3. That sometime in 1949, the Bian Transportation Co., a
corporation duly registered with the Securities and Exchange To adopt petitioner's argument would defeat, rather than
Commission, sold part of the lines and equipment it operates to promote, the ends for which the Social Security Act was enacted.
Gonzalo Mercado, Artemio Mercado, Florentino Mata and An employer could easily circumvent the statute by simply
Dominador Vera Cruz; changing his form of organization every other year, and then
4. That after the sale, the said vendees formed an unregistered claim exemption from contribution to the System as required, on
partnership under the name of Laguna Transportation Company the theory that, as a new entity, it has not been in operation for a
which continued to operate the lines and equipment bought from period of at least 2 years. the door to fraudulent circumvention of
the Bian Transportation Company, in addition to new lines the statute would, thereby, be opened.
which it was able to secure from the Public Service Commission;
5. That the original partners forming the Laguna Transportation
Company, with the addition of two new members, organized a Moreover, petitioner admitted that as an employer engaged in
corporation known as the Laguna Transportation Company, Inc., the business of a common carrier, its operation commenced on
which was registered with the Securities and Exchange April 1, 1949 while it was a partnership and continued by the
Commission on June 20, 1956, and which corporation is the corporation upon its formation on June 20, 1956. Unlike in the
plaintiff now in this case; conveyance made by the Bian Transportation Company to the
6. That the corporation continued the same transportation partners Gonzalo Mercado, Artemio Mercado, Florentino Mata,
business of the unregistered partnership; and Dominador Vera Cruz, no mention whatsoever is made either
7. That prior to November 11, 1957, plaintiff requested for in the pleadings or in the stipulation of facts that the lines and
exemption from coverage by the System on the ground that it equipment of the unregistered partnership had been sold and
started operation only on June 20, 1956, when it was registered transferred to the corporation, petitioner herein. This omission,
with the Securities and Exchange Commission but on November to our mind, clearly indicates that there was, in fact, no transfer
11, 1957, the Social Security System notified plaintiff that it was of interest, but a mere change in the form of the organization of
covered; the employer engaged in the transportation business, i.e., from an
8. On November 14, 1957, plaintiff through counsel sent a letter unregistered partnership to that of a corporation. As a rule,
to the Social Security System contesting the claim of the System courts will look to the substance and not to the form.
that plaintiff was covered, . . .
9. On November 27, 1957, Carlos Sanchez, Manager of the Finally, the weight of authority supports the view that where a
Production Department of the respondent System for and in corporation was formed by, and consisted of members of a
behalf of the Acting Administrator, informed plaintiff that partnership whose business and property was conveyed and
plaintiff's business has been in actual operation for at least two transferred to the corporation for the purpose of continuing its
years, . . . business, in payment for which corporate capital stock was
issued, such corporation is presumed to have assumed
TC rendered a decision in favor of SSS, it was subject to partnership debts, and is prima facie liable therefor.
compulsory coverage under said law. . . .
As defined in section 84 (b) of the Internal Revenue Code, "the amounts thus paid should be credited as part of the first
term corporation includes partnerships, no matter how created payment. The amounts paid for this option and its extension
or organized." This qualifying expression clearly indicates that a were supplied by Elser entirely from his own funds. In the end he
was able from his own means, and with the assistance which he
joint venture need not be undertaken in any of the standard
obtained from others, to acquire said estate. The amount
forms, or in conformity with the usual requirements of the law on required for the first payment was P150,000, and as Elser had
partnerships, in order that one could be deemed constituted for available only about P120,000, including the P20,000 advanced
purposes of the tax on corporations. Partnership, as has been upon the option, it was necessary to raise the remainder by
defined in the civil code refers to two or more persons who bind obtaining a loan for P50,000. This amount was finally obtained
themselves to contribute money, properly, or industry to a from a Chinese merchant of the city named Uy Siuliong. This loan
common fund, with the intention of dividing the profits among was secured through Uy Cho Yee, a son of the lender; and in order
to get the money it was necessary for Elser not only to give a
themselves. Thus, petitioners, being engaged in the real estate
personal note signed by himself and his two associates in the
transactions for monetary gain and dividing the same among projected enterprise, but also by the Fidelity & Surety Company.
themselves constitute a partnership so far as the Code is The money thus raised was delivered to Elser by Uy Siuliong on
concerned and are subject to income tax for corporation. June 24, 1920. With this money and what he already had in bank
Elser purchased the San Juan Estate on or about June 28, 1920.
Since Sec 2 of the Code in defining corporations also includes For the purpose of the further development of the property a
joint-stock company, partnership, joint account, association or limited partnership had, about this time, been organized by Elser
insurance company, no matter how created or organized, it and three associates, under the name of J. K. Pickering &
Company; and when the transfer of the property was effected the
follows that petitioners, regardless of how their partnership was
deed was made directly to this company. As Elser was the
created is also subject to the residence tax for corporations. principal capitalist in the enterprise he received by far the
greater number of the shares issued, his portion amount in the
beginning to 3,290 shares.
19.
While these negotiations were coming to a head, Elser
contemplated and hoped that Lyons might be induced to come in
Lyons v. Rosenstock with him and supply part of the means necessary to carry the
enterprise through. In this connection it appears that on May 20,
FACTS 1920, Elser wrote Lyons a letter, informing him that he had made
an offer for a big subdivision and that, if it should be acquired and
Prior to his death on June 18, 1923, Henry W. Elser had been a Lyons would come in, the two would be well fixed. On June 3,
resident of the City of Manila where he was engaged during the 1920, eight days before the first option expired, Elser cabled
years with which we are here concerned in buying, selling, and Lyons that he had bought the San Juan Estate and thought it
administering real estate. In several ventures which he had made advisable for Lyons to resign, meaning that he should resign his
in buying and selling property of this kind the plaintiff, E. S. position with the mission board in New York. On the same date
Lyons, had joined with him, the profits being shared by the two in he wrote Lyons a letter explaining some details of the purchase,
equal parts. In April, 1919, Lyons, whose regular vocation was and added "have advised in my cable that you resign and I hope
that of a missionary, or missionary agent, of the Methodist you can do so immediately and will come and join me on the lines
Episcopal Church, went on leave to the United States and was we have so often spoken about. . . . There is plenty of business for
gone for nearly a year and a half, returning on September 21, us all now and I believe we have started something that will keep
1920. On the eve of his departure Elser made a written us going for some time." In one or more communications prior to
statements showing that Lyons was, at that time, half owner with this, Elser had sought to impress Lyons with the idea that he
Elser of three particular pieces of real property. Concurrently should raise all the money he could for the purpose of giving the
with this act Lyons execute in favor of Elser a general power of necessary assistance in future deals in real estate.
attorney empowering him to manage and dispose of said
properties at will and to represent Lyons fully and amply, to the The enthusiasm of Elser did not communicate itself in any
mutual advantage of both. During the absence of Lyons two of the marked degree to Lyons, and found him averse from joining in
pieces of property above referred to were sold by Elser, leaving the purchase of the San Juan Estate. In fact upon this visit of
in his hands a single piece of property located at 616-618 Carried Lyons to the United States a grave doubt had arisen as to whether
Street, in the City of Manila, containing about 282 square meters he would ever return to Manila, and it was only in the summer of
of land, with the improvements thereon. 1920 that the board of missions of his church prevailed upon him
to return to Manila and resume his position as managing
In the spring of 1920 the attention of Elser was drawn to a piece treasurer and one of its trustees. Accordingly, on June 21, 1920,
of land, containing about 1,500,000 square meters, near the City Lyons wrote a letter from New York thanking Elser for his offer
of Manila, and he discerned therein a fine opportunity for the to take Lyons into his new project and adding that from the
promotion and development of a suburban improvement. This standpoint of making money, he had passed up a good thing.
property, which will be herein referred to as the San Juan Estate,
was offered by its owners for P570,000. To afford a little time for When Elser was concluding the transaction for the purchase of
maturing his plans, Elser purchased an option on this property the San Juan Estate, his book showed that he was indebted to
for P5,000, and when this option was about to expire without his Lyons to the extent of, possibly, P11,669.72, which had accrued to
having been able to raise the necessary funds, he paid P15,000 Lyons from profits and earnings derived from other properties;
more for an extension of the option, with the understanding in and when the J. K. Pickering & Company was organized and stock
both cases that, in case the option should be exercised, the issued, Elser indorsed to Lyons 200 of the shares allocated to
[PARTNERSHIP, AGENCY & TRUSTS: 3B] Atty. Paolo Dimayuga
himself, as he then believed that Lyons would be one of his The explanation of this change of purpose is undoubtedly to be
associates in the deal. It will be noted that the par value of these found in the fact that Lyons had arrived in Manila on September
200 shares was more than P8,000 in excess of the amount which 21, 1920, and shortly thereafter, in the course of a conversation
Elser in fact owed to Lyons; and when the latter returned to the with Elser told him to let the Carriedo mortgage remain on the
Philippine Islands, he accepted these shares and sold them for his property ("Let the Carriedo mortgage ride"). Mrs. Elser
own benefit. It seems to be supposed in the appellant's brief that testified to the conversation in which Lyons used the words
the transfer of these shares to Lyons by Elser supplies some sort above quoted, and as that conversation supplies the most
of basis for the present action, or at least strengthens the reasonable explanation of Elser's recession from his purpose of
considerations involved in a feature of the case to be presently relieving the Carriedo property, the trial court was, in our
explained. This view is manifestly untenable, since the opinion, well justified in accepting as a proven fact the consent of
ratification of the transaction by Lyons and the appropriation by Lyons for the mortgage to remain on the Carriedo property. This
him of the shares which were issued to him leaves no ground concession was not only reasonable under the circumstances, in
whatever for treating the transaction as a source of further view of the abundant solvency of Elser, but in view of the further
equitable rights in Lyons. We should perhaps add that after fact that Elser had given to Lyons 200 shares of the stock of the J.
Lyons' return to the Philippine Islands he acted for a time as one K. Pickering & Co., having a value of nearly P8,000 in excess of the
of the members of the board of directors of the J. K. Pickering & indebtedness which Elser had owed to Lyons upon statement of
Company, his qualification for this office being derived precisely account. The trial court found in effect that the excess value of
from the ownership of these shares. these shares over Elser's actual indebtedness was conceded by
Elser to Lyons in consideration of the assistance that had been
derived from the mortgage placed upon Lyon's interest in the
Carriedo property. Whether the agreement was reached exactly
upon this precise line of thought is of little moment, but the
ISSUE relations of the parties had been such that it was to be expected
that Elser would be generous; and he could scarcely have failed
Whether or not there was a partnership between Elser and to take account of the use he had made of the joint property of
Lyons? the two.
RULING As the development of the San Juan Estate was a success from the
start, Elser paid the note of P50,000 to Uy Siuliong on January 18,
We now turn to the incident which supplies the main basis of this 1921, although it was not due until more than five months later.
action. It will be remembered that, when Elser obtained the loan It will thus be seen that the mortgaging of the Carriedo
of P50,000 to complete the amount needed for the first payment property never resulted in damage to Lyons to the extent of a
on the San Juan Estate, the lender, Uy Siuliong, insisted that he single cent; and although the court refused to allow the
should procure the signature of the Fidelity & Surety Co. on the defendant to prove the Elser was solvent at this time in an
note to be given for said loan. But before signing the note with amount much greater than the entire encumbrance placed upon
Elser and his associates, the Fidelity & Surety Co. insisted upon the property, it is evident that the risk imposed upon Lyons was
having security for the liability thus assumed by it. To meet this negligible. It is also plain that no money actually deriving from
requirements Elser mortgaged to the Fidelity & Surety Co. the this mortgage was ever applied to the purchase of the San Juan
equity of redemption in the property owned by himself and Estate. What really happened was the Elser merely subjected the
Lyons on Carriedo Street. This mortgage was executed on June property to a contingent liability, and no actual liability ever
30, 1920, at which time Elser expected that Lyons would come in resulted therefrom. The financing of the purchase of the San Juan
on the purchase of the San Juan Estate. But when he learned from Estate, apart from the modest financial participation of his three
the letter from Lyons of July 21, 1920, that the latter had associates in the San Juan deal, was the work of Elser
determined not to come into this deal, Elser began to cast around accomplished entirely upon his own account.
for means to relieve the Carriedo property of the encumbrance
which he had placed upon it. For this purpose, on September 9, The case for the plaintiff supposes that, when Elser placed a
1920, he addressed a letter to the Fidelity & Surety Co., asking it mortgage for P50,000 upon the equity of redemption in the
to permit him to substitute a property owned by himself at 644 Carriedo property, Lyons, as half owner of said property, became,
M. H. del Pilar Street, Manila, and 1,000 shares of the J. K. as it were, involuntarily the owner of an undivided interest in the
Pickering & Company, in lieu of the Carriedo property, as property acquired partly by that money; and it is insisted for him
security. The Fidelity & Surety Co. agreed to the proposition; and that, in consideration of this fact, he is entitled to the four
on September 15, 1920, Elser executed in favor of the Fidelity & hundred forty-six and two-thirds shares of J. K. Pickering &
Surety Co. a new mortgage on the M. H. del Pillar property and Company, with the earnings thereon, as claimed in his complaint.
delivered the same, with 1,000 shares of J. K. Pickering &
Company, to said company. The latter thereupon in turn executed
Lyons tells us that he did not know until after Elser's death that
a cancellation of the mortgage on the Carriedo property and
the money obtained from Uy Siuliong in the manner already
delivered it to Elser. But notwithstanding the fact that these
explained had been used to held finance the purchase of the San
documents were executed and delivered, the new mortgage and
Juan Estate. He seems to have supposed that the Carried property
the release of the old were never registered; and on September
had been mortgaged to aid in putting through another deal,
25, 1920, thereafter, Elser returned the cancellation of the
namely, the purchase of a property referred to in the
mortgage on the Carriedo property and took back from the
correspondence as the "Ronquillo property"; and in this
Fidelity & Surety Co. the new mortgage on the M. H. del Pilar
connection a letter of Elser of the latter part of May, 1920, can be
property, together with the 1,000 shares of the J. K. Pickering &
quoted in which he uses this language:
Company which he had delivered to it.
[PARTNERSHIP, AGENCY & TRUSTS: 3B] Atty. Paolo Dimayuga
As stated in cablegram I have arranged for P50,000 loan or any partnership composed of Elser and Lyons was in fact
on Carriedo property. Will use part of the money for used by Elser in the purchase of the San Juan Estate. Of
Ronquillo buy (P60,000) if the owner comes through. course, if any damage had been caused to Lyons by the placing of
the mortgage upon the equity of redemption in the Carriedo
Other correspondence shows that Elser had apparently been property, Elser's estate would be liable for such damage. But it is
trying to buy the Ronquillo property, and Lyons leads us to infer evident that Lyons was not prejudice by that act.
that he thought that the money obtained by mortgaging the
Carriedo property had been used in the purchase of this
property. It doubtedless appeared so to him in the retrospect, but
certain consideration show that he was inattentive to the 20.
contents of the quotation from the letter above given. He had
already been informed that, although Elser was angling for the
G.R. No. L-27741 July 29, 1968
Ronquillo property, its price had gone up, thus introducing a
doubt as to whether he could get it; and the quotation above
given shows that the intended use of the money obtained by R.B. INDUSTRIAL DEVELOPMENT COMPANY, LIMITED, and
mortgaging the Carriedo property was that only part of the RAY N. KITTILSTVEDT, petitioners,
P50,000 thus obtained would be used in this way, if the deal went vs.
through. Naturally, upon the arrival of Lyons in September, 1920, HON. MANUEL LOPEZ ENAGE, Judge of the Court of First
one of his first inquiries would have been, if he did not know Instance of Agusan, Branch II, and EASTERN TIMBER
before, what was the status of the proposed trade for the CORPORATION, respondents.
Ronquillo property.
Facts:
Elser's widow and one of his clerks testified that about June 15,
1920, Elser cabled Lyons something to this effect;: "I have On January 22, 1959, Ray Kittilstvedt was granted by the Bureau
mortgaged the property on Carriedo Street, secured by my of Forestry a forest concession involving 6,850 hectares located
personal note. You are amply protected. I wish you to join me in in Cabadbaran, Agusan. The license was non-transferable and
the San Juan Subdivision. Borrow all money you can." Lyons says was to expire on June 30, 1959. On December 22, 1959, more
that no such cablegram was received by him, and we consider than five months after the license expired, Kittilsvedt assigned
this point of fact of little moment, since the proof shows that said license to Eastern Timber Corporation for 400 shares of
Lyons knew that the Carriedo mortgage had been executed, and stocks with a par value of Php 40,000 and was made vice-
after his arrival in Manila he consented for the mortgage to president of the corporation. Soon thereafter, Kittilsvedt sold his
remain on the property until it was paid off, as shortly occurred. 400 shares to Democrito O. Plaza for the same consideration.
It may well be that Lyons did not at first clearly understand all
the ramifications of the situation, but he knew enough, we think,
Kittilstvedt's timber license was extended on March 6, 1963, and
to apprise him of the material factors in the situation, and we
was again renewed, likewise in his name, on October 27, 1965.
concur in the conclusion of the trial court that Elser did not act in
While the license appears in Kittilstvedt's name, averment is
bad faith and was guilty of no fraud.
made by Eastern that the expenses for the renewal and other
incidental expenses were paid for by Eastern.
In the purely legal aspect of the case, the position of the appellant
is, in our opinion, untenable. If Elser had used any money actually
The day following the issuance of the last renewal license, or on
belonging to Lyons in this deal, he would under article 1724 of
October 28, 1965, Kittilstvedt transferred the same to Industrial.
the Civil Code and article 264 of the Code of Commerce, be
Industrial thus obtained its own Ordinary Timber License 981-
obligated to pay interest upon the money so applied to his own
103166 (New).
use. Under the law prevailing in this jurisdiction a trust does not
ordinarily attach with respect to property acquired by a person
who uses money belonging to another. Of course, if an actual On December 21, 1965, Eastern lodged a complaint with the
relation of partnership had existed in the money used, the Director of Forestry against R.B. Mining Co., Ltd. (instead of
case might be difference; and much emphasis is laid in the Industrial) and Kittilstvedt, praying for (1) the cancellation of
appellant's brief upon the relation of partnership which, it is Industrials ordinary timber license and (2) the issuance in lieu
claimed, existed. But there was clearly no general relation of thereof of another license in the name of Eastern; and (3) in the
partnership, under article 1678 of the Civil Code. It is clear meantime, for an order stopping Industrial from conducting
that Elser, in buying the San Juan Estate, was not acting for logging operations within the forest area. But the remedy
any partnership composed of himself and Lyons, and the law pursued in the Bureau of Forestry was thereafter abandoned.
cannot be distorted into a proposition which would make
Lyons a participant in this deal contrary to his express On February 4, 1966 Eastern filed a case against Kittilstvedt and
determination. Industrial before the CFI of Agusan asking for the following
reliefs: (1) preliminary injunction to stop logging operations in
It seems to be supposed that the doctrines of equity worked out the area under Industrial's timber license; (2) nullification of the
in the jurisprudence of England and the United States with transfer of Kittilstvedt to Industrial; (3) declaration that plaintiff
reference to trust supply a basis for this action. The doctrines is the owner of the said timber license appearing in the name of
referred to operate, however, only where money belonging to Industrial; (4) directing defendants to transfer said license in
one person is used by another for the acquisition of property Eastern's name; and, (5) accounting by defendants of logs and
which should belong to both; and it takes but little discernment forest products, damages, attorneys' fees, and costs.
to see that the situation here involved is not one for the
application of that doctrine, for no money belonging to Lyons
[PARTNERSHIP, AGENCY & TRUSTS: 3B] Atty. Paolo Dimayuga
The defendants filed motion to dismiss saying that Eastern has no that contract. For, there is no duty where the law forbids. And
cause of action against them and that the court has no even if we concede that the transfer were valid, the same would
jurisdiction over the said case. The court held in abeyance not produce any effect until and unless approved by the Director
resolution on the motion to dismiss. Defendants moved to of Forestry and the Secretary of Agriculture and Natural
reconsider. On May 2, 1967, the trial court issued an order (1) Resources. The suit below being one for specific performance of
denying the motion to reconsider; (2) denying plaintiff's ex- an illegal conveyance will not prosper for lack of cause of action.
parte motion to declare defendants in default; (3) ordering
defendants to answer the complaint within the reglementary On the second issue, the Court ruled that the court has
period; and (4) setting for on June 5, 1967 plaintiff's urgent no jurisdiction to try the case, the jurisdiction being lodged with
motion for preliminary injunction. the Bureau of Forestry. The thrust of the reliefs sought by Eastern
is that it be, declared owner of the timber license now in the
On June 1, 1967, defendants went to the Court of Appeals name of Industrial, and that, in consequence, the transfer thereof
on certiorari. Since jurisdiction was the main question involved by Kittilstvedt to Industrial be annulled. But the question of
therein, cognizable only by the Supreme Court, the Court of whether or not Industrial's timber license should be cancelled
Appeals, on June 14, 1967, dismissed the petition. and a new one issue in Eastern's name in lieu thereof is one, upon
the facts of record, beyond the reach of the courts. Such a
Meanwhile, on June 5, 1967, at a time when the certiorari petition prerogative is vested in the Bureau of Forestry by Section 1816 of
was pending consideration by the Court of Appeals, respondent the Revised Administrative Code. This codal provision reads:
judge issued two orders: the first, declaring defendants in default
and denying their counsel's request to defer the proceedings, and SEC. 1816. Jurisdiction of Bureau of Forestry. The
giving leave to plaintiff to present evidence before the deputy Bureau of Forestry shall have jurisdiction and authority
clerk of court; the second, authorizing the deputy clerk of court to over the demarcation protection, management,
receive plaintiff's evidence in connection with the latter's reproduction, reforestation, occupancy, and use of all
(Eastern's) application for a preliminary injunction, hence this public forests and forest reserves and over the granting
petition. of licenses for game, and fish, and for the taking of
forest products, including stone and earth, therefrom.
Issue: WON Eastern has a cause of action against Industrial and
WON the court has jurisdiction to try the case A doctrine long recognized is that where the law
confines in an administrative office the power to determine
On the first issue, the Court ruled that Eastern has no cause of particular questions or matters, upon the facts to be presented,
action against the defendants. First, the license had already the jurisdiction of such office shall prevail over the
expired, thus, there was no license to transfer. Second, the license courts. Respondent Eastern had gone to the Bureau of Forestry. It
itself says that it was non-transferable. Third, the conveyance withdrew its complaint. Eastern may not go to the courts of
was illegal as provided for in Forestry Administrative Order No. justice which have no jurisdiction in the first instance to approve
21 (Sept. 18, 1954) which expressly prohibits such transfer. the alleged transfer and to direct the issuance of the license in
favor of Eastern. At this stage, the jurisdiction of the court may
not be invoked.
The transfer, sale or conveyance of any license, permit
or lease issued by the Director of Forestry, now or
hereafter authorized under the forest laws, rules and The petition for certiorari and prohibition was granted;
regulations in favor of any individual, companies or the writ of preliminary injunction was made permanent; and the
private corporations within the period of three years respondent judge was directed to dismiss Civil Case 1087 of the
after the issuance of such license, permit or lease, or any Court of First Instance of Agusan entitled "Eastern Timber
transaction under any guise which will allow or permit Corporation, Plaintiff, vs. Ray N. Kittilstvedt and R. B. Industrial
others to enjoy the privilege granted therein, is hereby Development Company, Limited, Defendants".
prohibited.
1279 to compel the defendant to reduce it to writing requisites of the law shall be valid and binding upon the
from the moment in which consent and the other parties thereto, whatever may be its form, or whatever
requirements, necessary for their validity, have taken lawful and fair conditions and combinations may enter into it,
place. provided they are not expressly prohibited by this Code . . . .
On May 3, 1897, the trial court held that, Article 1279 does We hold that under this article a verbal contract of
not impose an obligation, but confers a privilege upon partnership is good as between the parties themselves. The
both contracting parties, and the fact that plaintiff has not phrase "essential requisites of the law" means those
made use of same does not bar his action. general requirements of the law which are of the essence
On Oct 19, 1901, the Audiencia ruled in favor of the plaintiff, of every contract, namely, parties who are capable of
Doa Ana Laborda, who agreed verbally with the defendant, contracting, the meeting of the minds, the absence of fraud,
Don Nemesio Alamanzon, to leave the employment which and those enumerated in article 1261 of the Civil Code.
she then had and to enter the defendant's service, and he "Form" refers to the manner in which the contract is made,
agreed that if she left his service he would pay her during life whether by parol or in writing, and not the class to which it
an annuity equal to the salary which she was receiving in her may belong as general, limited, or corporate. Article, 117, is
former employment. Having been dismissed, she sued for expressly limited to partners, and as to them it is declared
several months' salary and the annuity. that a verbal contract is sufficient. But when third persons
are involved, the Code has established a different rule,
ISSUE: Article 118 and 119.
WON THE COURT HAD INFRINGED ART. 1280 WHICH There being no provision of the Code of Commerce which
REQUIRED THAT THE PARTNERSHIP CONTRACT BE IN requires the contract of partnership to be in any particular
WRITING. form as between the partners, this case does not fall within
the terms of article 52 of this Code, and that article is not
HELD: NO, even supposing that the contract upon which this applicable.
case turns is one of the class which should be reduced to Article 117, expressly authorizing, as we hold, a verbal
writing. contract of partnership as between the partners, such a
General rule, Art. 1278: Contracts are binding and therefore contract is thereby excepted from the operations of article
enforceable reciprocally by the contracting parties, whatever 51. The case at bar is covered by Art. 117.
may be the form in which the contract has been entered into, Whether, therefore, this be a civil partnership (oral
provided that the essential conditions for their validity are contract of partnership under the Civil Code is valid and
present,which is not in opposition with the following: binding between the parties, even if the amount of capital
1) Art. 1279, which is far from making the enforceability contributed is in excess of P1500) and so governed by the
of the contract dependent upon any special extrinsic form. It Civil Code, or a commercial partnership (by which, to affect
recognizes its enforceability by the mere act of granting to persons, must be reduced to writing and recorded in
the contracting parties an adequate remedy whereby to mercantile registry, a verbal contract of partnership is good
compel the execution of a public writing, or any other special between the parties themselves) and so governed by the Code
form, whenever such form is necessary in order that the of Commerce, in neither case can the objections made by
contract may produce the effect which is desired, according the appellant be sustained.
to whatever may be its object.
2) Art. 1280, which is limited to an enumeration of the
acts contracts which should be reduced to writing, in a
public or private document. 22.
Those provisions establishes an implied condition of every
contract that these formal requisites shall be complied with, ENCARNACION MAGALONA, ET AL., vs. JUAN PESAYCO
notwithstanding the absence of any express agreement by
the contracting parties to that effect, but does not FACTS:
subordinate the principal action for the enforcement of
the agreement to the bringing of the secondary action The plaintiffs, Encarnacion, Magalona, Juan Sermeno,
concerning the form. Such subordination would be and the defendant, Juan Pesayco, formed a partnership
unnecessary, as the cause of action would be the same in for the purpose of catching semilias de bangus o aua
both cases, i.e., the existence of a valid contract. in San Jose, Antique.
On June 18, 1902 the court laid down same doctrine: The It was agreed that the defendant should put in a bid for
enforceability of contracts does not depend upon their this privilege and that the partners should each supply
extrinsic form, but solely upon the presence of the one third of the capital in case the defendant was
conditions necessary for their validity which it is not awarded the desired privilege.
denied are present in the contract in question that The defendant having had experience in this line, was to
contracts are binding whatever may be the form of their be the manager in case his bid was accepted.
celebration. The reduction to writing in a public or private The defendant offered the sum of P5,550.09. This bid
document, required by the law with respect to certain being the highest, the privilege was awarded to the
contracts, is not an essential requisite of their existence, but is defendant. The latter entered upon his duties under the
simply a coercive power granted to the contracting parties contract and gave an account of two sales of semilias
by which they can reciprocally compel the observance of de bangus, to TiburcioLutero as representative of the
these formal requisites. plaintiff Magalona.
The appellant, however, assigns as error the infringement of The defendant managed the business from January 1,
articles 119 and 51 of the Code of Commerce. Article 117 of 1931 and with the exception of the two sales above
the Code of Commerce is as follows: The contract of
mercantile partnership entered into with the essential
[PARTNERSHIP, AGENCY & TRUSTS: 3B] Atty. Paolo Dimayuga
ISSUE:
YES.
The court ruled that it cannot agree with the appellant
that one of the requisites of a partnership agreement
such as the one under consideration, is that it should be
in writing.
Art. 1667 of the Civil Code provides that;
Civil partnerships may be established in any
form whatever, unless real property or real
rights are contributed to the same, in which
case a public instrument shall be necessary.
Articles of partnership are not required to be in writing
except in the cases mentioned in article 1667, Civil
Code, which controls article 1280 of the same Code.
(Fernandez vs. Dela Rosa, 1 Phil., 671.)
A verbal partnership agreement is valid between the
parties even though more than 1,500 pesetas are
involved and can be enforced without bringing action
under article 1279, Civil Code, to compel execution of a
written instrument. (Arts. 1261, 1278-1280, 1667, Civil
Code; arts. 116-119, 51, Code of Commerce.) Thunga
Chui vs. QueBentec.