ATP 6 More Digest

15. Lim v CA
July 28, 1989

Pastor Lim died. His wife, Rufina Lim petitioned with the lower court, acting as a probate court, for the
inclusion of 5 corporations into the inventory of the estate of Pastor Lim. The 5 corporations were: Auto
Truck Corporation, Alliance Marketing Corporation, Speed Distributing, Inc., Active Distributing, Inc.
and Action Company. Rufina alleged that the assets of these corporations were owned wholly by Pastor;
that these corporations themselves are owned by Pastor and they are mere dummies of Pastor. The
corporations filed a motion for exclusion from the estate. They presented proof (Torrens Titles) showing
that the assets of the corporations are in their respective names and titles. The court denied their motion.
The Court of Appeals reversed the decision of the lower court.
ISSUE: Whether or not the corporations and/or their assets should be included in the inventory of the
estate.
HELD: No. As regards the assets, the corporations were able to present their respective Torrens Titles
over the disputed assets. It is true that a probate court may pass upon the question ownership albeit in a
provisional manner but still, a Torrens Title cannot be attacked collaterally in a probate proceeding, it
must be attacked directly in a separate proceeding.
As regards the corporations, to include them in the inventory is tantamount to the piercing of the veil of
corporate fiction because the probate court effectively adopted the theory of Rufina. This cannot be done.
Firstly, the probate court is sitting in a limited capacity. Secondly, Rufina was not able to present
sufficient evidence that indeed the corporations are mere conduits of Pastor. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of
itself a sufficient reason for disregarding the fiction of separate corporate personalities. The veil cant be
pierced without any showing that indeed the corporation is being used merely as a dummy. To disregard
the separate juridical personality of a corporation, the wrong-doing must be clearly and convincingly
established. It cannot be presumed.

16. Munasque v Lim

November 11, 1985
Elmo Muasque filed a complaint for payment of sum of money and damages against respondents
Celestino Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon Pons, alleging that the petitioner

entered into a contract with respondent Tropical through its Cebu Branch Manager Pons for remodeling a
portion of its building without exchanging or expecting any consideration from Galan although the latter
was casually named as partner in the contract; that by virtue of his having introduced the petitioner to the
employing company (Tropical), Galan would receive some kind of compensation in the form of some
percentages or commission.
Tropical agreed to give petitioner the amount of P7,000.00 soon after the construction began and
thereafter the amount of P6,000.00 every fifteen (15) days during the construction to make a total sum of
P25,000.00.
On January 9, 1967, Tropical and/or Pons delivered a check for P7,000.00 not to the plaintiff but to a
stranger to the contract, Galan, who succeeded in getting petitioner's indorsement on the same check
persuading the latter that the same be deposited in a joint account.
On January 26, 1967, when the second check for P6,000.00 was due, petitioner refused to indorse said
check presented to him by Galan but through later manipulations, respondent Pons succeeded in changing
the payee's name to Galan and Associates, thus enabling Galan to cash the same at the Cebu Branch of the
Philippine Commercial and Industrial Bank (PCIB) placing the petitioner in great financial difficulty in
his construction business and subjecting him to demands of creditors to pay for construction materials, the
payment of which should have been made from the P13,000.00 received by Galan.
Due to the unauthorized disbursement by respondents Tropical and Pons of the sum of P13,000.00 to
Galan, petitioner demanded that said amount be paid to him by respondents under the terms of the written
contract between the petitioner and respondent company.
ISSUE:
Whether there was a breach of trust when Tropical disbursed the money to Galan instead of Muasque
HELD:
No, there was no breach of trust when Tropical disbursed the money to Galan instead of Muasque.
The Supreme Court held that there is nothing in the records to indicate that the partnership organized by
the two men was not a genuine one. A falling out or misunderstanding between the partners does not
convert the partnership into a sham organization.
In the case at bar the respondent Tropical had every reason to believe that a partnership existed between
the petitioner and Galan and no fault or error can be imputed against it for making payments to "Galan
and Associates" and delivering the same to Galan because as far as it was concerned, Galan was a true
partner with real authority to transact on behalf of the partnership with which it was dealing.

17. Yu v NLRC
June 30, 1993
Facts:
Benjamin Yu used to be the Assistant General Manager of Jade Mountain, a partnership engaged in
marble quarrying and export business. The majority of the founding partners sold their interests in said
partnership to Willy Co and Emmanuel Zapanta without Yus knowledge. Said new partnership continued

operating under the same name and continued the businesss operations. However, it transferred its main
office from Makati to Mandaluyong. Said new partnership did not anymore availed of the services of Yu.
Issue: WON changes in membership dissolve the partnership
Held

The legal effect of the changes in the membership of the partnership was the dissolution of the old
partnership which had hired Yu in 1984 and the emergence of a new firm composed of Willy Co and
Emmanuel Zapanta in 1987. The new partnership simply took over the business enterprise owned by the
preceeding partnership, and continued using the old name of Jade Mountain Products Company Limited,
without winding up the business affairs of the old partnership, paying off its debts, liquidating and
distributing its net assets, and then re-assembling the said assets or most of them and opening a new
business enterprise. Not only the retiring partners but also the new partnership itself which continued the
business of the old, dissolved, one, are liable for the debts of the preceding partnership.

18. Ortega v CA
July 3, 1995
On December 19, 1980, respondent Misa associated himself together, as senior partner with petitioners
Ortega, del Castillo, Jr., and Bacorro, as junior partners. On Feb. 17, 1988, respondent Misa wrote a letter
stating that he is withdrawing and retiring from the firm and asking for a meeting with the petitioners to
discuss the mechanics of the liquidation. On June 30, 1988, petitioner filed a petition to the Commision's
Securities Investigation and Clearing Department for the formal dissolution and liquidation of the
partnership. On March 31, 1989, the hearing officer rendered a decision ruling that the withdrawal of the
petitioner has not dissolved the partnership. On appeal, the SEC en banc reversed the decision and was
affirmed by the Court of Appeals. Hence, this petition.
ISSUE:
Whether or not the Court of Appeals has erred in holding that the partnership is a partnership at will and
whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent
dissolved the partnership regardless of his good or bad faith
HELD:
No. The SC upheld the ruling of the CA regarding the nature of the partnership. The SC further stated that
a partnership that does not fix its term is a partnership at will. The birth and life of a partnership at will is
predicated on the mutual desire and consent of the partners. The right to choose with whom a person
wishes to associate himself is the very foundation and essence of that partnership. Its continued existence
is, in turn, dependent on the constancy of that mutual resolve, along with each partner's capability to give
it, and the absence of a cause for dissolution provided by the law itself. Verily, any one of the partners
may, at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, act in good
faith, not that the attendance of bad faith can prevent the dissolution of the partnership but that it can
result in a liability for damages.

19. Syjuico v Castro

July 7, 1989
Back in November 1964, the Lims, borrowed from petitioner Santiago Syjuco, Inc., the sum of
P800,000.00. The loan was given on the security of a first mortgage on property registered in the names
of said borrowers as owners in common under Transfer Certificates of Title Numbered 75413 and 75415
of the Registry of Deeds of Manila. Thereafter additional loans on the same security were obtained by the
Lims from Syjuco, so that as of May 8, 1967, the aggregate of the loans stood at P2,460,000.00, exclusive
of interest, and the security had been augmented by bringing into the mortgage other property, also
registered as owned pro indiviso by the Lims under two titles: TCT Nos. 75416 and 75418 of the Manila
Registry.
On November 8, 1967, the Lims failed to pay it despite demands therefore; that Syjuco consequently
caused extra-judicial proceedings for the foreclosure of the mortgage to be commenced by the Sheriff of
Manila; and that the latter scheduled the auction sale of the mortgaged property on December 27, 1968.
The attempt to foreclose triggered off a legal battle that has dragged on for more than twenty years now,
fought through five (5) cases in the trial courts, two (2) in the Court of Appeals, and three (3) more in the
Supreme Court.
One of the complaints filed by the Lims was filed not in their individual names, but in the name of a
partnership of which they themselves were the only partners: "Heirs of Hugo Lim." The complaint
advocated the theory that the mortgage which they, together with their mother, had individually
constituted (and thereafter amended during the period from 1964 to 1967) over lands standing in their
names in the Property Registry as owners pro indiviso, in fact no longer belonged to them at that time,
having been earlier deeded over by them to the partnership, "Heirs of Hugo Lim," more precisely, on
March 30, 1959, hence, said mortgage was void because executed by them without authority from the
partnership.
ISSUE:
Whether the mortgage executed by the Lims be attributable to their partnership
HELD:
Yes,

the

mortgage

executed

by

the

Lims

is

attributable

to

their

partnership.

The Supreme Court held that the legal fiction of a separate juridical personality and existence will not
shield it from the conclusion of having such knowledge which naturally and irresistibly flows from the
undenied facts. It would violate all precepts of reason, ordinary experience and common sense to propose
that a partnership, as such, cannot be held accountable with knowledge of matters commonly known to all
the partners or of acts in which all of the latter, without exception, have taken part, where such matters or
acts affect property claimed as its own by said partnership.

The silence and failure of the partnership to impugn said mortgage within a reasonable time, let alone a
space of more than seventeen years, brought into play the doctrine of estoppel to preclude any attempt to
avoid the mortgage as allegedly unauthorized.
There is no reason to distinguish between the Lims, as individuals, and the partnership itself, since the
former constituted the entire membership of the latter. In other words, despite the concealment of the
existence of the partnership, for all intents and purposes and consistently with the Lims' own theory, it

was that partnership which was the real party in interest in all the actions; it was actually represented in
said actions by all the individual members thereof, and consequently, those members' acts, declarations
and omissions cannot be deemed to be simply the individual acts of said members, but in fact and in law,
those of the partnership.

20. Rojas v Maglana

December 10, 1990
Maglana and Rojas executed their Articles of Co-Partnership called Eastcoast Development Enterprises
(EDE). It was a partnership with an indefinite term of existence. Maglana shall manage the business
affairs while Rojas shall be the logging superintendant and shall manage the logging operation. They shall
share in all profits and loss equally. Due to difficulties encountered they decided to avail of the sources of
Pahamatong as industrial partners. They again executed their Articles of Co-Partnership under EDE. The
term is 30 years. After sometime Pamahatong sold his interest to Maglana and Rojas including equipment
contributed. After withdrawal of Pamahatong, Maglana and Rojas continued the partnership. After 3
months, Rojas entered into a management contract with another logging enterprise. He left and
abandoned the partnership. He even withdrew his equipment from the partnership and was transferred to
CMS. He never told Maglana that he will not be able to comply with the promised contributions and he
will not work as logging superintendent. Maglana then told Rojas that the latter share will just be 20% of
the net profits. Rojas took funds from the partnership more than his contribution. Thus, Maglana notified
Rojas that he dissolved the partnership.

Issue: What is the nature of the partnership and legal relationship of Maglana and Rojas after Pahamatong
retired from the second partnership
It was not the intention of the partners to dissolve the first partnership, upon the constitution of the second
one, which they unmistakably called additional agreement. Otherwise stated even during the existence
of the second partnership, all business transactions were carried out under the duly registered articles. No
rights and obligations accrued in the name of the second partnership except in favor of Pahamatong which
was fully paid by the duly registered partnership.