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215906-2018-Saludo Jr. v. Philippine National Bank20180920-5466-11aadlu
215906-2018-Saludo Jr. v. Philippine National Bank20180920-5466-11aadlu
DECISION
JARDELEZA J :
JARDELEZA, p
I.
[Sgd.]
A.G. SALUDO, JR.
[Sgd.] [Sgd.] [Sgd.]
RUBEN E. AGPALO FILEMON L. FERNANDEZ AMADO D. AQUINO
The foregoing evinces the parties' intention to entirely shift any liability that may
be incurred by SAFA Law O ce in the course of its operation to Saludo, who shall also
receive all the remaining assets of the rm upon its dissolution. This MOU, however,
does not serve to convert SAFA Law O ce into a sole proprietorship. As discussed,
SAFA Law O ce was manifestly established as a partnership based on the Articles of
Partnership. The MOU, from its tenor, reinforces this fact. It did not change the nature
of the organization of SAFA Law O ce but only excused the industrial partners from
liability.
The law, in its wisdom, recognized the possibility that partners in a partnership
may decide to place a limit on their individual accountability. Consequently, to protect
third persons dealing with the partnership, the law provides a rule, embodied in Article
1816 of the Civil Code, which states:
Art. 1816. All partners, including industrial ones, shall be liable pro
rata with all their property and after all the partnership assets have been
exhausted, for the contracts which may be entered into in the name and for the
account of the partnership, under its signature and by a person authorized to act
for the partnership. However, any partner may enter into a separate obligation to
perform a partnership contract.
The foregoing provision does not prevent partners from agreeing to limit their
liability, but such agreement may only be valid as among them. Thus, Article 1817 of the
Civil Code provides:
Art. 1817. Any stipulation against the liability laid down in the
preceding article shall be void, except as among the partners.
The MOU is an agreement forged under the foregoing provision. Consequently,
the sole liability being undertaken by Saludo serves to bind only the parties to the MOU,
but never third persons like PNB.
Considering that the MOU is sanctioned by the law on partnership, it cannot
change the nature of a duly-constituted partnership. Hence, we cannot sustain Saludo's
position that SAFA Law Office is a sole proprietorship.
II.
III.
In holding that SAFA Law O ce, a partnership for the practice of law, is not a
legal entity, the CA cited 5 8 the case of Petition for Authority to Continue Use of the
Firm Name "Sycip, Salazar, Feliciano, Hernandez & Castillo" 5 9 (Sycip case) wherein the
Court held that "[a] partnership for the practice of law is not a legal entity. It is a mere
relationship or association for a particular purpose. x x x It is not a partnership formed
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for the purpose of carrying on trade or business or of holding property." 6 0 These are
direct quotes from the US case of In re Crawford's Estate. 6 1 We hold, however, that our
reference to this US case is an obiter dictum which cannot serve as a binding
precedent. 6 2
A n obiter dictum is an opinion of the court upon a question which was not
necessary to the decision of the case before it. It is an opinion uttered by the way, not
upon the point or question pending, as if turning aside from the main topic of the case
to collateral subjects, or an opinion that does not embody the court's determination
and is made without argument or full consideration of the point. It is not a professed
deliberate determination of the judge himself. 6 3
The main issue raised for the court's determination in the Sycip case is whether
the two petitioner law rms may continue using the names of their deceased partners
in their respective rm names. The court decided the issue in the negative on the basis
of "legal and ethical impediments." 6 4 To be sure, the pronouncement that a partnership
for the practice of law is not a legal entity does not bear on either the legal or ethical
obstacle for the continued use of a deceased partner's name, inasmuch as it merely
describes the nature of a law rm. The pronouncement is not determinative of the main
issue. As a matter of fact, if deleted from the judgment, the rationale of the decision is
neither affected nor altered.
Moreover, reference of the Sycip case to the In re Crawford's Estate case was
made without a full consideration of the nature of a law rm as a partnership
possessed with legal personality under our Civil Code. First, we note that while the
Court mentioned that a partnership for the practice of law is not a legal entity, it also
identi ed petitioner law rms as partnerships over whom Civil Code provisions on
partnership apply. 6 5 The Court thus cannot hold that a partnership for the practice of
law is not a legal entity without running into con ict with Articles 44 and 1768 of the
Civil Code which provide that a partnership has a juridical personality separate and
distinct from that of each of the partners.
Second, our law on partnership does not exclude partnerships for the practice of
law from its coverage. Article 1767 of the Civil Code provides that "[t]wo or more
persons may also form a partnership for the exercise of a profession." Article 1783, on
the other hand, states that "[a] particular partnership has for its object determinate
things, their use or fruits, or a speci c undertaking, or the exercise of a profession or
vocation." Since the law uses the word "profession" in the general sense, and does not
distinguish which professional partnerships are covered by its provisions and which are
not, then no valid distinction may be made.
Finally, we stress that unlike Philippine law, American law does not treat of
partnerships as forming a separate juridical personality for all purposes. In the case of
Bellis v. United States , 6 6 the US Supreme Court stated that law rms, as a form of
partnership, are generally regarded as distinct entities for speci c purposes, such as
employment, capacity to be sued, capacity to hold title to property, and more. 6 7 State
and federal laws, however, do not treat partnerships as distinct entities for all
purposes. 6 8
Our jurisprudence has long recognized that American common law does not
treat of partnerships as a separate juridical entity unlike Philippine law. Hence, in the
case of Campos Rueda & Co. v. Paci c Commercial Co. , 6 9 which was decided under
the old Civil Code, we held:
Unlike the common law, the Philippine statutes consider a limited
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partnership as a juridical entity for all intents and purposes, which personality is
recognized in all its acts and contracts (art. 116, Code of Commerce). This being
so and the juridical personality of a limited partnership being different from that
of its members, it must, on general principle, answer for, and suffer, the
consequence of its acts as such an entity capable of being the subject of rights
and obligations. 7 0 x x x
On the other hand, in the case of Commissioner of Internal Revenue v. Suter , 71
which was decided under the new Civil Code, we held:
It being a basic tenet of the Spanish and Philippine law that the
partnership has a juridical personality of its own, distinct and separate from that
of its partners (unlike American and English law that does not recognize such
separate juridical personality), the bypassing of the existence of the limited
partnership as a taxpayer can only be done by ignoring or disregarding clear
statutory mandates and basic principles of our law. 7 2 x x x
Indeed, under the old and new Civil Codes, Philippine law has consistently treated
partnerships as having a juridical personality separate from its partners. In view of the
clear provisions of the law on partnership, as enriched by jurisprudence, we hold that
our reference to In re Crawford's Estate in the Sycip case is an obiter dictum.
IV.
Having settled that SAFA Law O ce is a juridical person, we hold that it is also
the real party-in-interest in the case filed by Saludo against PNB.
Section 2, Rule 3 of the Rules of Court de nes a real party-in-interest as the one
"who stands to be bene ted or injured by the judgment in the suit, or the party entitled
to the avails of the suit." In Lee v. Romillo, Jr., 7 3 we held that the "real [party-in-interest]-
plaintiff is one who has a legal right[,] while a real [party-in-interest]-defendant is one
who has a correlative legal obligation whose act or omission violates the legal rights of
the former." 7 4
SAFA Law O ce is the party that would be bene ted or injured by the judgment
in the suit before the RTC. Particularly, it is the party interested in the accounting and/or
recomputation of unpaid rentals and damages in relation to the contract of lease. It is
also the party that would be liable for payment to PNB of overdue rentals, if that claim
would be proven. This is because it is the one that entered into the contract of lease
with PNB. As an entity possessed of a juridical personality, it has concomitant rights
and obligations with respect to the transactions it enters into. Equally important, the
general rule under Article 1816 of the Civil Code is that partnership assets are primarily
liable for the contracts entered into in the name of the partnership and by a person
authorized to act on its behalf. All partners, including industrial ones, are only liable pro
rata with all their property after all the partnership assets have been exhausted.
In Guy v. Gacott, 7 5 we held that under Article 1816 of the Civil Code, the partners'
obligation with respect to the partnership liabilities is subsidiary in nature. It is merely
secondary and only arises if the one primarily liable fails to su ciently satisfy the
obligation. Resort to the properties of a partner may be made only after efforts in
exhausting partnership assets have failed or if such partnership assets are insu cient
to cover the entire obligation. 7 6 Consequently, considering that SAFA Law O ce is
primarily liable under the contract of lease, it is the real party-in-interest that should be
joined as plaintiff in the RTC case.
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Section 2, Rule 3 of the Rules of Court requires that every action must be
prosecuted or defended in the name of the real party-in-interest. As the one primarily
affected by the outcome of the suit, SAFA Law O ce should have led the complaint
with the RTC and should be made to respond to any counterclaims that may be brought
in the course of the proceeding.
In Aguila, Jr. v. Court of Appeals , 7 7 a case for declaration of nullity of a deed of
sale was led against a partner of A.C. Aguila & Sons, Co. We dismissed the complaint
and held that it was the partnership, not its partners, which should be impleaded for a
cause of action against the partnership itself. Moreover, the partners could not be held
liable for the obligations of the partnership unless it was shown that the legal ction of
a different juridical personality was being used for fraudulent, unfair, or illegal purposes.
We held:
Rule 3, §2 of the Rules of Court of 1964, under which the complaint in
this case was led, provided that "every action must be prosecuted and
defended in the name of the real party in interest." A real party in interest is one
who would be bene ted or injured by the judgment, or who is entitled to the
avails of the suit. This ruling is now embodied in Rule 3, §2 of the 1997 Revised
Rules of Civil Procedure. Any decision rendered against a person who is not a
real party in interest in the case cannot be executed. Hence, a complaint led
against such a person should be dismissed for failure to state a cause of
action.
Under Art. 1768 of the Civil Code, a partnership "has a juridical
personality separate and distinct from that of each of the partners." The
partners cannot be held liable for the obligations of the partnership unless it is
shown that the legal ction of a different juridical personality is being used for
fraudulent, unfair, or illegal purposes. In this case, private respondent has not
shown that A.C. Aguila & Sons, Co., as a separate juridical entity, is being used
for fraudulent, unfair, or illegal purposes. Moreover, the title to the subject
property is in the name of A.C. Aguila & Sons, Co. and the Memorandum of
Agreement was executed between private respondent, with the consent of her
late husband, and A.C. Aguila & Sons, Co., represented by petitioner. Hence, it is
the partnership, not its o cers or agents, which should be impleaded in any
litigation involving property registered in its name. A violation of this rule will
result in the dismissal of the complaint. 7 8
In this case, there is likewise no showing that SAFA Law O ce, as a separate
juridical entity, is being used for fraudulent, unfair, or illegal purposes. Hence, its
partners cannot be held primarily liable for the obligations of the partnership. As it was
SAFA Law O ce that entered into a contract of lease with respondent PNB, it should
also be impleaded in any litigation concerning that contract.
Accordingly, the complaint led by Saludo should be amended to include SAFA
Law O ce as plaintiff. Section 11, 7 9 Rule 3 of the Rules of Court gives power to the
court to add a party to the case on its own initiative at any stage of the action and on
such terms as are just. We have also held in several cases 8 0 that the court has full
powers, apart from that power and authority which are inherent, to amend processes,
pleadings, proceedings, and decisions by substituting as party-plaintiff the real party-in-
interest.
In view of the above discussion, we nd it unnecessary to discuss the other
issues raised in the petition. It is unfortunate that the case has dragged on for more
than 10 years even if it involves an issue that may be resolved by a simple application of
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Civil Code provisions on partnership. It is time for trial to proceed so that the parties'
substantial rights may be adjudicated without further unnecessary delay.
WHEREFORE , the petition is DENIED.
DENIED Petitioner is hereby ordered to amend his
complaint to include SAFA Law O ce as plaintiff in Civil Case No. 06-678 pending
before Branch 58 of the Regional Trial Court of Makati City, it being the real party-in-
interest.
SO ORDERED.
ORDERED
Peralta, * Del Castillo, Tijam and Gesmundo, ** JJ., concur.
Footnotes
* Designated as Acting Chairperson of the First Division per Special Order No. 2582 (Revised)
dated August 8, 2018.
** Designated as Acting Member of the First Division per Special Order No. 2560 (Revised)
dated May 11, 2018.
3. Id. at 167-169.
4. Id. at 272-273. Issued by Presiding Judge Eugene C. Paras.
7. Rollo, p. 216.
8. Id. at 153; CA rollo, p. 100.
36. Sec. 15. Entity without juridical personality as defendant. — When two or more persons not
organized as an entity with juridical personality enter into a transaction, they may be
sued under the name by which they are generally or commonly known.
The term for which the partnership is to exist shall be for an indefinite period from date
hereof, until dissolved for any cause recognized by law. Id. at 205.
That the partnership shall be dissolved by agreement of the partners or for any cause as
and in accordance with the manner provided by law, in which event the Articles of
Dissolution of said partnership shall be filed with the Securities and Exchange
Commission. All remaining assets upon dissolution shall accrue exclusively to A.G.
Saludo, Jr. and all liabilities shall be solely for his account. Id. at 212.
53. Id. at 103-105. Italics and emphasis in the original.
In addition[,] the Lessee shall pay the Lessor (i) all accrued and unpaid rents and penalty
charges; (ii) all expenses incurred by the Lessor in repossessing and [clearing] the
Leased Premises; and (iii) any other damages incurred by the Lessor due to the default
of the Lessee. Id. at 88.
57. Id. at 91-102.
60. Id. at 9.
61. Cited as 184 NE 2d 779, 783. Id.
62. See Republic v. Gingoyon, G.R. No. 166429, December 19, 2005, 478 SCRA 474.
63. Advincula-Velasquez v. Court of Appeals, G.R. No. 111387, June 8, 2004, 431 SCRA 165,
188, citing Auyong Hian v. Court of Tax Appeals, G.R. No. L-28782, September 12, 1974,
59 SCRA 110, 120 and People v. Macadaeg, 91 Phil. 410, 413 (1952).
64. Petition for Authority to Continue Use of the Firm Name "Sycip, Salazar, Feliciano,
Hernandez & Castillo," supra at 59.
65. Id. at 7.
73. G.R. No. L-60937, May 28, 1988, 161 SCRA 589.
74. Id. at 595. Italics supplied.
75. G.R. No. 206147, January 13, 2016, 780 SCRA 579.
76. Id. at 593.
77. G.R. No. 127347, November 25, 1999, 319 SCRA 246.
78. Id. at 253-254. Citations omitted.
79. Sec. 11. Misjoinder and non-joinder of parties. — Neither misjoinder nor non-joinder of
parties is ground for dismissal of an action. Parties may be dropped or added by order of
the court on motion of any party or on its own initiative at any stage of the action and on
such terms as are just. Any claim against a misjoined party may be severed and
proceeded with separately.
80. See Salvador v. Court of Appeals, G.R. No. 109910, April 5, 1995, 243 SCRA 239, 257;
Domingo v. Scheer, G.R. No. 154745, January 29, 2004, 421 SCRA 468, 484; and Pacaña-
Contreras v. Rovila Water Supply, Inc., G.R. No. 168979, December 2, 2013, 711 SCRA
219, 244.