Professional Documents
Culture Documents
L-45425
Tapia ...................................................................................................
.13
5.
Jesus
Legaspi ................................................................................................
...... .15
6.
Jose
Silva .....................................................................................................
........
.07
7.
Tomasa
Mercado ...............................................................................................
.
.08
8.
Julio
Gatchalian ...........................................................................................
........
.13
9.
Emiliana
Santiago ..............................................................................................
.. .13
10.
Maria
C.
Legaspi ...............................................................................................
.16
11.
Francisco
Cabral ...............................................................................................
.13
12.
Gonzalo
Javier ....................................................................................................
.14
13.
Maria
Santiago ..............................................................................................
..... .17
14.
Buenaventura
Guzman ................................................................................... .13
15.
Mariano
Santos .................................................................................................
.14
Total .....................................................................................................
...
2.00
3. That immediately thereafter but prior to December 15, 1934,
plaintiffs purchased, in the ordinary course of business, from one of
the duly authorized agents of the National Charity Sweepstakes
Office one ticket bearing No. 178637 for the sum of two pesos (P2)
and that the said ticket was registered in the name of Jose
Gatchalian and Company;
9. That in view of the failure of the plaintiffs to pay the amount of tax
demanded by the defendant, notwithstanding subsequent demand
made by defendant upon the plaintiffs through their attorney on
March 23, 1935, a copy of which marked Exhibit H is enclosed,
defendant on May 13, 1935 issued a warrant of distraint and levy
against the property of the plaintiffs, a copy of which warrant marked
Exhibit I is enclosed and made a part hereof;
10. That to avoid embarrassment arising from the embargo of the
property of the plaintiffs, the said plaintiffs on June 15, 1935, through
Gregoria Cristobal, Maria C. Legaspi and Jesus Legaspi, paid under
protest the sum of P601.51 as part of the tax and penalties to the
municipal treasurer of Pulilan, Bulacan, as evidenced by official
receipt No. 7454879 which is attached and marked Exhibit J and
made a part hereof, and requested defendant that plaintiffs be
allowed to pay under protest the balance of the tax and penalties by
monthly installments;
11. That plaintiff's request to pay the balance of the tax and
penalties was granted by defendant subject to the condition that
plaintiffs file the usual bond secured by two solvent persons to
guarantee prompt payment of each installments as it becomes due;
12. That on July 16, 1935, plaintiff filed a bond, a copy of which
marked Exhibit K is enclosed and made a part hereof, to guarantee
the payment of the balance of the alleged tax liability by monthly
installments at the rate of P118.70 a month, the first payment under
protest to be effected on or before July 31, 1935;
13. That on July 16, 1935 the said plaintiffs formally protested
against the payment of the sum of P602.51, a copy of which protest
is attached and marked Exhibit L, but that defendant in his letter
dated August 1, 1935 overruled the protest and denied the request
for refund of the plaintiffs;
14. That, in view of the failure of the plaintiffs to pay the monthly
installments in accordance with the terms and conditions of bond
filed by them, the defendant in his letter dated July 23, 1935, copy of
which is attached and marked Exhibit M, ordered the municipal
treasurer of Pulilan, Bulacan to execute within five days the warrant
of distraint and levy issued against the plaintiffs on May 13, 1935;
8. That the defendant in his letter dated January 28, 1935, a copy of
which marked Exhibit G is enclosed, denied plaintiffs' request of
January 20, 1935, for exemption from the payment of tax and
reiterated his demand for the payment of the sum of P1,499.94 as
income tax and gave plaintiffs until February 10, 1935 within which
to pay the said tax;
11.
12.
13.
14.
15.
.15
.13
.08
.18
.18
Do
Do
Do
Do
Do
2.00
Total cost of said
ticket; and that, therefore, the persons named above are entitled to
the parts of whatever prize that might be won by said ticket.
Pulilan, Bulacan, P.I.
(Sgd.) JOSE GATCHALIAN
16. That plaintiffs demanded upon defendant the refund of the total
sum of one thousand eight hundred and sixty three pesos and fortyfour centavos (P1,863.44) paid under protest by them but that
defendant refused and still refuses to refund the said amount
notwithstanding the plaintiffs' demands.
17. The parties hereto reserve the right to present other and
additional evidence if necessary.
Name Exhibit
No. Purchase
Price
Price
Won
Expenses
Net
prize
1. Jose Gatchalian .......................................... D-1 P0.18 P4,425 P
480 3,945
2. Gregoria Cristobal ...................................... D-2 .18 4,575 2,000
2,575
3. Saturnina Silva .............................................
D-3 .08 1,875
360 1,515
4. Guillermo Tapia .......................................... D-4 .13 3,325 360
2,965
5. Jesus Legaspi by Maria Cristobal ......... D-5 .15 3,825 720 3,105
6. Jose Silva .................................................... D-6 .08 1,875 360
1,515
7. Tomasa Mercado ....................................... D-7 .07 1,875 360
1,515
8. Julio Gatchalian by Beatriz Guzman .......
D-8 .13 3,150 240
2,910
9. Emiliana Santiago ...................................... D-9 .13 3,325 360
2,965
10. Maria C. Legaspi ...................................... D-10
.16 4,100
960 3,140
11. Francisco Cabral ...................................... D-11
360 2,965
12. Gonzalo Javier .......................................... D-12
360 2,965
13. Maria Santiago ..........................................D-13
360 3,990
14. Buenaventura Guzman ........................... D-14
360 2,965
15. Mariano Santos ........................................ D-15
360 2,965
.13 3,325
.14 3,325
The gain derived or loss sustained from the sale or other disposition
by a corporation, joint-stock company, partnership, joint account
(cuenta en participacion), association, or insurance company, or
property, real, personal, or mixed, shall be ascertained in accordance
with subsections (c) and (d) of section two of Act Numbered Two
thousand eight hundred and thirty-three, as amended by Act
Numbered Twenty-nine hundred and twenty-six.
.17 4,350
.13 3,325
.14 3,325
The foregoing tax rate shall apply to the net income received by
every taxable corporation, joint-stock company, partnership, joint
account (cuenta en participacion), association, or insurance
company in the calendar year nineteen hundred and twenty and in
each year thereafter.
2.00
50,000
The legal questions raised in plaintiffs-appellants' five assigned
errors may properly be reduced to the two following: (1) Whether the
plaintiffs formed a partnership, or merely a community of property
without a personality of its own; in the first case it is admitted that
the partnership thus formed is liable for the payment of income tax,
whereas if there was merely a community of property, they are
exempt from such payment; and (2) whether they should pay the tax
collectively or whether the latter should be prorated among them
and paid individually.
concur.
partnership.[11]
It should be stressed that the parties implemented the contract.
Thus, petitioners transferred the title to the land to facilitate its use
in the name of the respondent. On the other hand, respondent
caused the subject land to be mortgaged, the proceeds of which
were used for the survey and the subdivision of the land. As noted
earlier, he developed the roads, the curbs and the gutters of the
subdivision and entered into a contract to construct low-cost housing
units on the property.
Respondents actions clearly belie petitioners contention that he
made no contribution to the partnership. Under Article 1767 of the
Civil Code, a partner may contribute not only money or property, but
also industry.
Petitioners Bound by Terms of Contract
Under Article 1315 of the Civil Code, contracts bind the parties not
only to what has been expressly stipulated, but also to all necessary
consequences thereof, as follows:
ART. 1315. Contracts are perfected by mere consent, and from that
moment the parties are bound not only to the fulfillment of what has
been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage
and law.
It is undisputed that petitioners are educated and are thus presumed
to have understood the terms of the contract they voluntarily signed.
If it was not in consonance with their expectations, they should have
objected to it and insisted on the provisions they wanted.
Courts are not authorized to extricate parties from the necessary
consequences of their acts, and the fact that the contractual
stipulations may turn out to be financially disadvantageous will not
relieve parties thereto of their obligations. They cannot now disavow
the relationship formed from such agreement due to their supposed
misunderstanding of its terms.
Alleged Nullity of the Partnership Agreement
Petitioners argue that the Joint Venture Agreement is void under
Article 1773 of the Civil Code, which provides:
ART. 1773. A contract of partnership is void, whenever immovable
property is contributed thereto, if an inventory of said property is not
made, signed by the parties, and attached to the public instrument.
They contend that since the parties did not make, sign or attach to
the public instrument an inventory of the real property contributed,
the partnership is void.
We clarify. First, Article 1773 was intended primarily to protect third
persons. Thus, the eminent Arturo M. Tolentino states that under the
aforecited provision which is a complement of Article 1771,[12]the
which was their share in the profits under the Joint Venture
Agreement.
We are not persuaded. True, the Court of Appeals held that
petitioners acts were not the cause of the failure of the project.[16]
But it also ruled that neither was respondent responsible therefor.
[17] In imputing the blame solely to him, petitioners failed to give
any reason why we should disregard the factual findings of the
appellate court relieving him of fault. Verily, factual issues cannot be
resolved in a petition for review under Rule 45, as in this case.
Petitioners have not alleged, not to say shown, that their Petition
constitutes one of the exceptions to this doctrine.[18] Accordingly,
we find no reversible error in the CA's ruling that petitioners are not
entitled to damages.
WHEREFORE, the Petition is hereby DENIED and the challenged
Decision AFFIRMED. Costs against petitioners.
SO ORDERED.
[40] The partnership exists until dissolved under the law. Since the
partnership created by petitioners and private respondent has no
fixed term and is therefore a partnership at will predicated on their
mutual desire and consent, it may be dissolved by the will of a
partner. Thus:
x x x. 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 partners capability to give it, and
the absence of 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.[41]
An unjustified dissolution by a partner can subject him to action for
damages because by the mutual agency that arises in a partnership,
the doctrine of delectus personae allows the partners to have the
power, although not necessarily the right to dissolve the partnership.
[42]
In this case, petitioner Tocaos unilateral exclusion of private
respondent from the partnership is shown by her memo to the Cubao
office plainly stating that private respondent was, as of October 9,
1987, no longer the vice-president for sales of Geminesse Enterprise.
[43] By that memo, petitioner Tocao effected her own withdrawal
from the partnership and considered herself as having ceased to be
associated with the partnership in the carrying on of the business.
Nevertheless, the partnership was not terminated thereby; it
continues until the winding up of the business.[44]
The winding up of partnership affairs has not yet been undertaken by
the partnership. This is manifest in petitioners claim for stocks that
had been entrusted to private respondent in the pursuit of the
partnership business.
The determination of the amount of damages commensurate with
the factual findings upon which it is based is primarily the task of the
trial court.[45] The Court of Appeals may modify that amount only
when its factual findings are diametrically opposed to that of the
lower court,[46] or the award is palpably or scandalously and
unreasonably excessive.[47] However, exemplary damages that are
awarded by way of example or correction for the public good,[48]
should be reduced to P50,000.00, the amount correctly awarded by
the Court of Appeals.Concomitantly, the award of moral damages of
P100,000.00 was excessive and should be likewise reduced to
P50,000.00. Similarly, attorneys fees that should be granted on
PARAS, J.:
Petition for certiorari to review and set aside the Decision dated June
27, 1983 of respondent Court of Tax Appeals in its C.T.A. Case No.
3204, entitled "Burroughs Limited vs. Commissioner of Internal
Revenue" which ordered petitioner Commissioner of Internal
Revenue to grant in favor of private respondent Burroughs Limited,
tax credit in the sum of P172,058.90, representing erroneously
overpaid branch profit remittance tax.
Burroughs Limited is a foreign corporation authorized to engage in
trade or business in the Philippines through a branch office located
at De la Rosa corner Esteban Streets, Legaspi Village, Makati, Metro
Manila.
Sometime in March 1979, said branch office applied with the Central
Bank for authority to remit to its parent company abroad, branch
profit amounting to P7,647,058.00. Thus, on March 14, 1979, it paid
the 15% branch profit remittance tax, pursuant to Sec. 24 (b) (2) (ii)
and remitted to its head office the amount of P6,499,999.30
computed as follows:
Amount applied for remittance................................ P7,647,058.00
Deduct: 15% branch profit
remittance tax ..............................................1,147,058.70
Net amount actually remitted.................................. P6,499,999.30
Claiming that the 15% profit remittance tax should have been
computed on the basis of the amount actually remitted
(P6,499,999.30) and not on the amount before profit remittance tax
(P7,647,058.00), private respondent filed on December 24, 1980, a
written claim for the refund or tax credit of the amount of
P172,058.90 representing alleged overpaid branch profit remittance
tax, computed as follows:
Profits actually remitted .........................................P6,499,999.30
Remittance tax rate .......................................................15%
Branch profit remittance taxdue thereon ......................................................P 974,999.89
Branch profit remittance
tax paid .............................................................Pl,147,058.70
Less: Branch profit remittance
tax as above computed................................................. 974,999.89
Total amount refundable........................................... P172,058.81
On February 24, 1981, private respondent filed with respondent
court, a petition for review, docketed as C.T.A. Case No. 3204 for the
recovery of the above-mentioned amount of P172,058.81.
On June 27, 1983, respondent court rendered its Decision, the
dispositive portion of which reads
ACCORDINGLY, respondent Commission of Internal Revenue is
Commerce.
The appellant's view, that by the marriage of both partners the
company became a single proprietorship, is equally erroneous. The
capital contributions of partners William J. Suter and Julia Spirig were
separately owned and contributed by them before their marriage;
and after they were joined in wedlock, such contributions remained
their respective separate property under the Spanish Civil Code
(Article 1396):
The following shall be the exclusive property of each spouse:
(a) That which is brought to the marriage as his or her own; ....
Thus, the individual interest of each consort in William J. Suter
"Morcoin" Co., Ltd. did not become common property of both after
their marriage in 1948.
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. The limited partnership's
separate individuality makes it impossible to equate its income with
that of the component members. True, section 24 of the Internal
Revenue
Code merges registered general
co-partnerships
(compaias colectivas) with the personality of the individual partners
for income tax purposes. But this rule is exceptional in its disregard
of a cardinal tenet of our partnership laws, and can not be extended
by mere implication to limited partnerships.
The rulings cited by the petitioner (Collector of Internal Revenue vs.
University of the Visayas, L-13554, Resolution of 30 October 1964,
and Koppel [Phil.], Inc. vs. Yatco, 77 Phil. 504) as authority for
disregarding the fiction of legal personality of the corporations
involved therein are not applicable to the present case. In the cited
cases, the corporations were already subject to tax when the fiction
of their corporate personality was pierced; in the present case, to do
so would exempt the limited partnership from income taxation but
would throw the tax burden upon the partners-spouses in their
individual capacities. The corporations, in the cases cited, merely
served as business conduits or alter egos of the stockholders, a
factor that justified a disregard of their corporate personalities for
tax purposes. This is not true in the present case. Here, the limited
partnership is not a mere business conduit of the partner-spouses; it
was organized for legitimate business purposes; it conducted its own
dealings with its customers prior to appellee's marriage, and had
been filing its own income tax returns as such independent entity.
question
involved
in
these
Petitions
first
came
under
memorandum, the New York Supreme Court sustained the use of the
firm name Alexander & Green even if none of the present ten
partners of the firm bears either name because the practice was
sanctioned by custom and did not offend any statutory provision or
legislative policy and was adopted by agreement of the parties. The
Court stated therein: t.hqw
The practice sought to be proscribed has the sanction of custom and
offends no statutory provision or legislative policy. Canon 33 of the
Canons of Professional Ethics of both the American Bar Association
and the New York State Bar Association provides in part as follows:
"The continued use of the name of a deceased or former partner,
when permissible by local custom is not unethical, but care should
be taken that no imposition or deception is practiced through this
use." There is no question as to local custom. Many firms in the city
use the names of deceased members with the approval of other
attorneys, bar associations and the courts. The Appellate Division of
the First Department has considered the matter and reached The
conclusion that such practice should not be prohibited. (Emphasis
supplied)
xxx xxx xxx
Neither the Partnership Law nor the Penal Law prohibits the practice
in question. The use of the firm name herein is also sustainable by
reason of agreement between the partners. 18
BACORRO, petitioners,
vs.
HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION
and JOAQUIN L. MISA,respondents.
VITUG, J.:
The instant petition seeks a review of the decision rendered by the
Court of Appeals, dated 26 February 1993, in CA-G.R. SP No. 24638
and No. 24648 affirming in toto that of the Securities and Exchange
Commission ("SEC") in SEC AC 254.
The antecedents of the controversy, summarized by respondent
Commission and quoted at length by the appellate court in its
decision, are hereunder restated.
The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly
registered in the Mercantile Registry on 4 January 1937 and
reconstituted with the Securities and Exchange Commission on 4
August 1948. The SEC records show that there were several
subsequent amendments to the articles of partnership on 18
September 1958, to change the firm [name] to ROSS, SELPH and
CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH, SALCEDO, DEL
ROSARIO, BITO & MISA; on 18 April 1972 to SALCEDO, DEL ROSARIO,
BITO, MISA & LOZADA; on 4 December 1972 to SALCEDO, DEL
ROSARIO, BITO, MISA & LOZADA; on 11 March 1977 to DEL ROSARIO,
BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA & LOZADA; on
19 December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and
Mariano M. Lozada associated themselves together, as senior
partners with respondents-appellees Gregorio F. Ortega, Tomas O. del
Castillo, Jr., and Benjamin Bacorro, as junior partners.
On February 17, 1988, petitioner-appellant wrote the respondentsappellees a letter stating:
I am withdrawing and retiring from the firm of Bito, Misa and Lozada,
effective at the end of this month.
"I trust that the accountants will be instructed to make the proper
liquidation of my participation in the firm."
On the same day, petitioner-appellant wrote respondents-appellees
another letter stating:
"Further to my letter to you today, I would like to have a meeting
with all of you with regard to the mechanics of liquidation, and more
particularly, my interest in the two floors of this building. I would like
to have this resolved soon because it has to do with my own plans."
On 19 February 1988, petitioner-appellant wrote respondentsappellees another letter stating:
"The partnership has ceased to be mutually satisfactory because of
the working conditions of our employees including the assistant
26
Alfaro Street, Salcedo Village, Makati, Metro Manila, their true value
at the time of such death or retirement shall be determined by two
(2) independent appraisers, one to be appointed (by the partnership
and the other by the) retiring partner or the heirs of a deceased
partner, as the case may be. In the event of any disagreement
between the said appraisers a third appraiser will be appointed by
them whose decision shall be final. The share of the retiring or
deceased partner in the aforementioned two (2) floor office
condominium shall be determined upon the basis of the valuation
above mentioned which shall be paid monthly within the first ten
(10) days of every month in installments of not less than P20,000.00
for the Senior Partners, P10,000.00 in the case of two (2) existing
Junior Partners and P5,000.00 in the case of the new Junior Partner.
11
vs.
THE HONORABLE COURT OF APPEALS, REMEDIOS ESTANISLAO,
EMILIO and LEOCADIO SANTIAGO,respondents.
Agustin O. Benitez for petitioner.
Benjamin C. Yatco for private respondents.
GANCAYCO, J.:
By this petition for certiorari the Court is asked to determine if a
partnership exists between members of the same family arising from
their joint ownership of certain properties.
Petitioner and private respondents are brothers and sisters who are
co-owners of certain lots at the corner of Annapolis and Aurora Blvd.,
QuezonCity which were then being leased to the Shell Company of
the Philippines Limited (SHELL). They agreed to open and operate a
gas station thereat to be known as Estanislao Shell Service Station
with an initial investment of P 15,000.00 to be taken from the
advance rentals due to them from SHELL for the occupancy of the
said lots owned in common by them. A joint affidavit was executed
by them on April 11, 1966 which was prepared byAtty. Democrito
Angeles 1 They agreed to help their brother, petitioner herein, by
allowing him to operate and manage the gasoline service station of
the family. They negotiated with SHELL. For practical purposes and in
order not to run counter to the company's policy of appointing only
one dealer, it was agreed that petitioner would apply for the
dealership. Respondent Remedios helped in managing the bussiness
with petitioner from May 3, 1966 up to February 16, 1967.
On May 26, 1966, the parties herein entered into an Additional Cash
Pledge Agreement with SHELL wherein it was reiterated that the P
15,000.00 advance rental shall be deposited with SHELL to cover
advances of fuel to petitioner as dealer with a proviso that said
agreement "cancels and supersedes the Joint Affidavit dated 11 April
1966 executed by the co-owners." 2
For sometime, the petitioner submitted financial statements
regarding the operation of the business to private respondents, but
therafter petitioner failed to render subsequent accounting. Hence
through Atty. Angeles, a demand was made on petitioner to render
an accounting of the profits.
The financial report of December 31, 1968 shows that the business
was able to make a profit of P 87,293.79 and that by the year ending
1969, a profit of P 150,000.00 was realized. 3
Thus, on August 25, 1970 private respondents filed a complaint in
29
moot question now, for the reason that subsequent to the decision
appealed from, the partnership Campos Rueda & Co., voluntarily
filed an application for a judicial decree adjudging itself insolvent,
which is just what the herein petitioners and appellants tried to
obtain from the lower court in this proceeding.
The motion now before us must be, and is hereby, denied even
under the facts stated by the appellants in their motion aforesaid.
The question raised in this case is not purely moot one; the fact that
a man was insolvent on a certain day does not justify an inference
that he was some time prior thereto.
Proof that a man was insolvent on a certain day does not justify an
inference that he was on a day some time prior thereto. Many
contingencies, such as unwise investments, losing contracts,
misfortune, or accident, might happen to reduce a person from a
state of solvency within a short space of time. (Kimball vs. Dresser,
98 Me., 519; 57 Atl. Rep., 767.)
A decree of insolvency begins to operate on the date it is issued. It is
one thing to adjudge Campos Rueda & Co. insolvent in December,
1921, as prayed for in this case, and another to declare it insolvent
in July, 1922, as stated in the motion.
Turning to the merits of this appeal, we find that this limited
partnership was, and is, indebted to the appellants in various sums
amounting to not less than P1,000, payable in the Philippines, which
were not paid more than thirty days prior to the date of the filing by
the petitioners of the application for involuntary insolvency now
before us. These facts were sufficient established by the evidence.
The trial court denied the petition on the ground that it was not
proven, nor alleged, that the members of the aforesaid firm were
insolvent at the time the application was filed; and that was said
partners are personally and solidarily liable for the consequence of
the transactions of the partnership, it cannot be adjudged insolvent
so long as the partners are not alleged and proven to be insolvent.
From this judgment the petitioners appeal to this court, on the
ground that this finding of the lower court is erroneous.
The fundamental question that presents itself for decision is whether
or not a limited partnership, such as the appellee, which has failed to
pay its obligation with three creditors for more than thirty days, may
be held to have committed an act of insolvency, and thereby be
adjudged insolvent against its will.
Unlike the common law, the Philippine statutes consider a limited
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. If, as in the instant case, the limited partnership of
Campos Rueda & Co. Failed to pay its obligations with three creditors
for a period of more than thirty days, which failure constitutes, under
our Insolvency Law, one of the acts of bankruptcy upon which an
adjudication of involuntary insolvency can be predicated, this
partnership must suffer the consequences of such a failure, and
must be adjudged insolvent. We are not unmindful of the fact that
some courts of the United States have held that a partnership may
not be adjudged insolvent in an involuntary insolvency proceeding
unless all of its members are insolvent, while others have maintained
a contrary view. But it must be borne in mind that under the
American common law, partnerships have no juridical personality
independent from that of its members; and if now they have such
personality for the purpose of the insolvency law, it is only by virtue
of general law enacted by the Congress of the United States on July
1, 1898, section 5, paragraph (h), of which reads thus:
In the event of one or more but not all of the members of a
partnership being adjudged bankrupt, the partnership property shall
not be administered in bankruptcy, unless by consent of the partner
or partners not adjudged bankrupt; but such partner or partners not
adjudged bankrupt shall settle the partnership business as
expeditiously as its nature will permit, and account for the interest of
the partner or partners adjudged bankrupt.
The general consideration that these partnership had no juridical
personality and the limitations prescribed in subsection (h) above set
forth gave rise to the conflict noted in American decisions, as stated
in the case of In reSamuels (215 Fed., 845), which mentions the two
apparently conflicting doctrines, citing one from In reBertenshaw
(157 Fed., 363), and the other from Francis vs. McNeal (186 Fed.,
481).
But there being in our insolvency law no such provision as that
contained in section 5 of said Act of Congress of July 1, 1898, nor any
rule similar thereto, and the juridical personality of limited
partnership being recognized by our statutes from their formation in
all their acts and contracts the decision of American courts on this
point can have no application in this jurisdiction, nor we see any
reason why these partnerships cannot be adjudged bankrupt
irrespective of the solvency or insolvency of their members, provided
the partnership has, as such, committed some of the acts of
insolvency provided in our law. Under this view it is unnecessary to
discuss the other points raised by the parties, although in the
particular case under consideration it can be added that the liability
32
was made on the person the sheriff certified was the managing
agent of the defendant company. The sheriff's certificate serves as
prima facie evidence of the existence of the facts stated therein. The
record, therefore, discloses, so far as the fact of service is concerned,
that it was duly made on the managing agent of the company as
required by section 396, paragraph 1, of the Code of Civil Procedure.
In attacking the judgement on the ground that service was not made
on the managing agent of the company, it is incumbent on the
plaintiff to overcome the presumption arising from the sheriff's
certificate before the attack will succeed. Endeavoring to overcome
the presumption referred to, plaintiff offered as a witness one Tomas
O. Segovia, an employee of the plaintiff company. He testified that
he was a bookkeeper and that as such he was well acquainted with
the business of the company and that the person Macapinlac
referred to in the sheriff's certificate as managing agent of the
plaintiff company was an agent for the sale of plows, of which the
plaintiff company was a manufacturer; and that he had no other
relations with the company than that stated. During the course of
the examination this question was put to and answer elicited from
this witness:
How do you know that they were not summoned, or that they did not
know of this case brought before the justice of the peace of the city
of Manila?
I being the bookkeeper and the general attorney-in-fact to Vargas &
Co., in Iloilo, ought to know whether they have been notified or
summoned, but I only knew about it when the sheriff appeared in our
office to make the levy.
This is the only witness who testified in the case. It does not appear
when he became the bookkeeper of the company, or that he was in
such a position that he could know or did know personally the acts of
the company and its relations to Macapinlac. He does not testify of
his own knowledge to the essential facts necessary to controvert the
statements contained it the sheriff's certificate of service. His
testimony is rather negative than positive, it being at all times
possible, in spite of his evidence, indeed, in strict accord therewith,
that Vargas & Co., of which the witness was neither official nor
manager, could have appointed a managing agent for the company
or could have removed him without the personal knowledge of the
witness. The witness had no personal knowledge of the relation
between the company and Macapinlac. He never saw the contract
existing between them. He did not hear the agreement between
them nor did he know of his own knowledge what the relations
between the company and Macapinlac were. His testimony besides
being negative in character has in it many of the elements of
34
hearsay and is not at all satisfactory. It would have been very easy to
present one of the members of the company, or all of them, who
engaged Macapinlac, who know the relations between him and the
company, to testify as to what those relations were and to deny, if
that were the fact, that Macapinlac was such an agent or official of
the company as is within the purview of section 396 above referred
to. The facts stated in the certificate of the sheriff will not be
considered as overcome and rebutted except on clear evidence
showing the contrary. The evidence of the bookkeeper, who is the
only witness for the company, is not satisfactory in any sense and is
quite insufficient to overcome the presumption established by the
sheriff's certificate.
In view of these considerations it is not necessary to consider the
question presented by the payment by the plaintiff company of the
judgment.
The judgment appealed from is reversed and the complaint
dismissed on the merits, without costs in this instance. So ordered.
the partnership Ngo Tian Tek and Ngo Hay, petitioner herein.
"It appears that," quoting from the decision of the Court of Appeals
whose findings of fact are conclusive, "as far back as the year 1925,
the Modern Box Factory was established at 603 Magdalena Street,
Manila. It was at first owned by Ngo Hay, who three years later was
joined by Ngo Tian Tek as a junior partner. The modern Box Factory
dealt in pare and similar merchandise and purchased goods from the
plaintiff and its assignors in the names of the Modern Box Factory,
Ngo Hay and Co., Go Hay Box Factory, or Go Hay. Then about the
year 1930, the Lee Guan Box Factory was established a few meters
from the Modern Box Factory, under the management of Vicente Tan.
When that concern, through Vicente Tan, sought credit with the
plaintiff and its assignors, Ngo Hay, in conversations and interviews
with their officers and employees, represented that he was the
principal owner of such factory, that the Lee Guan Box Factory and
the Modern Box Factory belonged to the same owner, and that the
Lee Guan Box Factory was a subsidiary of the Modern Box Factory.
There is evidence that many goods purchased in the name of the Lee
Guan Box Factory were delivered to the Modern Box Factory by the
employees of the plaintiff and its assignors upon the express
direction of Vicente Tan. There is also evidence that the collectors of
the sellers were requested by Vicente Tan to collect and did collect
from the Modern Box Factory the bills against the Lee Guan Box
Factory. In the fact the record shows many checks signed by Ngo Hay
or Ngo Tian Tek in payment of accounts of the Lee Guan Box Factory.
Furthermore, and this seems to be conclusive-Ngo Hay, testifying
for the defense, admitted that 'he' was the owner of the Lee Guan
Box Factory in and before the year 1934, but that in January, 1935,
'he' sold it, by the contract of sale Exhibit 7, to Vicente Tan, who had
been his manager of the business. Tan declared also that before
January, 1935, the Lee Guan Box Factory pertained to Ngo Hay and
Ngo Tian Tek. The contract Exhibit 7 was found by the referee, to be
untrue and simulated, for various convincing reasons that need no
repetition here. And the quoted statements serve effectively to
confirm the evidence for the plaintiff that it was Ngo Hay's
representations of ownership of, and responsibility for, Lee Guan Box
Factory that induced them to open credit for that concern. It must be
stated that in this connection to answer appellant's fitting
observation that the plaintiff and the assignors have considered
Ngo Hay, the Modern Box Factory and Ngo Hay and Co. as one and
the same, through the acts of the partners themselves, and that the
proof as to Ngo Hay's statements regarding the ownership of Lee
Guan Box Factory must be taken in that view. Ngo Hay was wont to
say 'he' owned the Modern Box Factory, meaning that he was the
principal owner, his other partner being Ngo Tian Tek. Now, it needs
no demonstration for appellant does not deny it that the
obligations of the Lee Guan Box Factory must rest upon its known
owner. And that owner in Ngo Tian Tek and Ngo Hay."
We must overrule petitioner's contention that the Court of Appeals
erred in holding that Lee Guan Box Factory was a subsidiary of the
Modern Box Factory and in disregarding the fact that the contracts
evidencing the debts in question were signed by Vicente Tan alias
Chan Sy, without any indication that tended to involve the Modern
Box Factory or the petitioner. In the first place, we are concluded by
the finding of the Court of Appeals regarding the ownership by the
petitioner of Lee Guan Box Factory. Secondly, the circumstances that
Vicente Tan alias Chan Sy acted in his own name cannot save the
petitioner, in view of said ownership, and because contracts entered
into by a factor of a commercial establishment known to belong to a
well known enterprise or association, shall be understood as made
for the account of the owner of such enterprise or association, even
when the factor has not so stated at the time of executing the same,
provided that such contracts involve objects comprised in the line
and business of the establishment. (Article 286, Code of Commerce.)
The fact that Vicente Tan did not have any recorded power of
attorney executed by the petitioner will not operate to prejudice
third persons, like the respondent Philippine Education Co., Inc., and
its assignors. (3 Echavarri, 133.)
Another defense set up by the petitioner is that prior to the
transactions which gave rise to this suit, Vicente Tan had purchased
Lee Guan Box Factory from Ngo Hay under the contract, Exhibit 7;
and the petitioner assails, under the second assignment of error, the
conclusion of the Court of Appeals that said contract is simulated.
This contention is purely factual and must also be overruled.
The petitioner questions the right of the respondent Philippine
Education Co., Inc., to sue for the credits assigned by the five entities
with which Lee Guan Box Factory originally contracted, it being
argued that the assignment, intended only for purposes of collection,
did not make said respondent the real party in interest. The
petitioner has cited 5 Corpus Juris, section 144, page 958, which
points out that "under statutes authorizing only a bona fideassignee
of choses in action to sue thereon in his own name, an assignee for
collection merely is not entitled to sue in his own name."
The finding of the Court of Appeals that there is nothing "simulated
in the assignment," precludes us from ruling that respondent
company is not a bona fide assignee. Even assuming, however, that
said assignment was only for collection, we are not prepared to say
that, under section 114 of the Code of Civil Procedure, in force at the
time this action was instituted, ours is not one of those jurisdictions
following the rule that "when a choose, capable of legal assignment,
is assigned absolutely to one, but the assignment is made for
purpose of collection, the legal title thereto vests in the assignee,
and it is no concern of the debtor that the equitable title is in
another, and payment to the assignee discharges the debtor." (5 C.
J., section 144, p. 958.) No substantial right of the petitioner could
indeed be prejudiced by such assignment, because section 114 of
the Code of Civil Procedure reserves to it "'any set-off or other
defense existing at the time of or before notice of the assignment.'"
Petitioner's allegation that "fraud in the inception of the debt is
personal to the contracting parties and does not follow assignment,"
and that the contracts assigned to the respondent company "are
immoral and against public policy and therefore void," constitute
defenses on the merits, but do not affect the efficacy of the
assignment. It is obvious that, apart from the fact that the petitioner
can not invoke fraud of its authorship to evade liability, the appealed
decision is founded on an obligation arising, not from fraud, but from
the very contracts under which merchandise had been purchased by
Lee Guan Box Factory.
The fourth and fifth assignments of error relate to the refusal of the
Court of Appeals to hold that the writ of attachment is issued at the
commencement of this action by the Court of First Instance is illegal,
and to award in favor of the petitioner damages for such wrongful
attachment. For us to sustain petitioner's contention will amount to
an unauthorized reversal of the following conclusion of fact of the
Court of Appeals: "The stereotyped manner in which defendants
obtained goods on credit from the six companies, Vicente Tan's
sudden disappearance, the execution of the fake sale Exhibit 7 to
throw the whole responsibility upon the absent or otherwise
insolvent Tan, defendant's mercurial and unbelievable theories as to
the ownership of the Modern Box Factory and Lee Guan Box Factory
obviously adopted in a vain effort to meet or explain away the
evidentiary force of plaintiff's documentary evidence are much too
significant to permit a declaration that the attachment was not
justified."
Regarding the suggestion in petitioner's memorandum that this case
should be dismissed because of the death of Ngo Hay, it is sufficient
to state that the petitioner Ngo Tian Tek and Ngo Hay is sued as a
partnership possessing a personality distinct from any of the
partners.
The appealed decision is affirmed, with costs against the petitioner.
So ordered.
36
was refused upon the ground that the extension was in violation of
the aforesaid Act.
From the decision of the lower court dismissing the action, with
costs, the plaintiffs interposed this appeal.
The question before us is too clear to require an extended
discussion. To organize a corporation or a partnership that could
claim a juridical personality of its own and transact business as such,
is not a matter of absolute right but a privilege which may be
enjoyed only under such terms as the State may deem necessary to
impose. That the State, through Congress, and in the manner
provided by law, had the right to enact Republic Act No. 1180 and to
provide therein that only Filipinos and concerns wholly owned by
Filipinos may engage in the retail business can not be seriously
disputed. That this provision was clearly intended to apply to
partnership already existing at the time of the enactment of the law
is clearly showing by its provision giving them the right to continue
engaging in their retail business until the expiration of their term or
life.
To argue that because the original articles of partnership provided
that the partners could extend the term of the partnership, the
provisions of Republic Act 1180 cannot be adversely affect
appellants herein, is to erroneously assume that the aforesaid
provision constitute a property right of which the partners can not be
deprived without due process or without their consent. The
agreement contain therein must be deemed subject to the law
existing at the time when the partners came to agree regarding the
extension. In the present case, as already stated, when the partners
amended the articles of partnership, the provisions of Republic Act
1180 were already in force, and there can be not the slightest doubt
that the right claimed by appellants to extend the original term of
their partnership to another five years would be in violation of the
clear intent and purpose of the law aforesaid.
WHEREFORE, the judgment appealed from is affirmed, with costs.
were sold in 1970. Realizing profits from the sale, petitioners filed
capital gains tax. However, they were assessed with deficiency tax
for corporate income taxes.
ISSUE:
Whether or not petitioners formed an unregistered partnership
thereby assessed with corporate income tax.
RULING:
By the contract of partnership, two or more persons bind themselves
to contribute money, industry or property to a common fund with the
intention of dividing profits among themselves. There is no evidence
though, that petitioners entered into an agreement to contribute MPI
to a common fund and that they intend to divide profits among
themselves. The petitioners purchased parcels of land and became
co-owners thereof. Their transactions of selling the lots were isolated
cases. The character of habituality peculiar to the business
transactions for the purpose of gain was not present.
The sharing of returns foes not in itself establish a partnership
whether or not the persons sharing therein have a joint or common
right or interest in the property. There must be a clear intent to form
partnership, the existence of a juridical personality different from the
individual partners, and the freedom of each party to transfer or
assign the whole property.
Petitioner,
v.
THE
COMMISSIONER
OF
SYLLABUS
1. CENTRAL BANK; VIOLATION OF CIRCULAR NO. 44; SHIPMENT
SUBJECT TO FORFEITURE UNDER THE REVISED ADMINISTRATIVE
CODE. Circular No. 44 of the Central Bank does not provide for the
penalty of forfeiture in case of violation thereof, but the same is
subject to enforcement by the Bureau of Customs and as such is
deemed part of the customs law under Section 1419 of the Revised
Administrative Code. It may, therefore, be said that a shipment
imported in violation of said circular is subject to forfeiture under
In due time, the importer elevated the case to the Court of Tax
Appeals contending that the seizure of his shipment was illegal not
38
only because the same does not involve a dollar allocation but also
because the Central Bank has no authority under the law to issue
Circular Nos. 44 and 45 which prohibit its importation. After hearing
was held, the Court of Tax Appeals brushed aside the contention of
the importer and affirmed the decision of the Commissioner of
Customs. Thereupon, it ordered the surety bond executed by the
Reliance Surety and Insurance Company, Inc. in the amount of
P1,790.00 forfeited, with costs against the importer. The latter
interposed the present appeal.
"Central Bank Circular No. 44, implementing Republic Act 265, has
the affect of a Customs law as defined in the last paragraph of
Section 1419, Revised Administrative Code. In accordance with
Section 1250 of the Revised Administrative Code, the Collector of
Customs has jurisdiction, indeed, has the duty to exercise jurisdiction
to prevent importation or otherwise secure compliance with all legal
requirements in the case of merchandise of prohibited importation or
subject to importation only upon conditions prescribed by law. In the
exercise of this jurisdiction, he may subject to forfeiture cargoes and
other objects of prohibited importation, in accordance with Section
1363(f), Revised Administrative Code."cralaw virtua1aw library
Since the submission of this case to the Court of Tax Appeals for
determination which calls for an interpretation of the validity of
Circular Nos. 44 and 45 of the Central Bank, several cases involving
a similar question have been decided by this Court which now
constitute a precedent decisive in the present case. Thus, we held
therein that the Central Bank has authority to issue said circulars
even if the same have the effect of regulating no-dollar importation
"for the reason that the broad powers of the Central Bank, under its
charter, to maintain our monetary stability and to preserve the
international value of our currency, under Section 2 of Republic Act
No. 265, in relation to Section 14 of said Act - authorizing the bank to
issue such rules and regulations as it may consider necessary for the
effective discharge of the responsibilities and the exercise of the
powers assigned to the Monetary Board and to the Central Bank
connote the authority to regulate no-dollar importations owing to the
influence and effect that the same may and do have upon the
stability of our peso and its international value" (The Commissioner
of Customs, Et. Al. v. Eastern Sea Trading, G. R. No. L-14279, October
31, 1961; Emphasis supplied). 1 There can therefore be no question
that the Central Bank has authority under its charter to issue Circular
No. 44 even if its scope covers no-dollar importation as apparently is
the shipment under consideration.
But it is contended that there is nothing in Circular No. 44 which
Central Bank Circular No. 44, for the reason that the only penal
clause contained in its charter for such violation is a fine or
imprisonment and not forfeiture. Petitioner invokes Section 34 of
Republic Act No. 265 which provides that any person or entity who
violates said Act, "shall be punished by a fine of not more than
P20,000.00 or by imprisonment of not more than five years", which
being a special law should prevail over the provisions of the Revised
Administrative Code. The trial court has correctly answered this
question in its resolution dated March 26, 1957 on the motion for
reconsideration filed by petitioner, which we hereunder quote with
approval:jgc:chanrobles.com.ph
"Petitioner has lost sight of the fact that his act of importing
contrary to law entails two penalties one penalty for violation of
Central Bank Circular No. 44 as prescribed by Section 34 of Republic
Act No. 265 directed principally against the person of the offender
and which may be had in a criminal prosecution involving an action
in personam, and the other penalty of forfeiture imposed by Section
1363(f) of the Revised Administrative Code directed primarily against
the goods rather than the offender and which may be had in action
in rem (see Origet v. U.S. 125, U.S. 240, 246-247; 31 L. Ed. 743, 746747). The two penalties being distinct and different, the forfeiture
may be enforced against the goods by proceedings in rem
independently of the criminal prosecution against the offender
(Origet v. U.S., supra). The imposition of one does not preclude the
imposition of the other, for it is a well-established rule that forfeiture
proceedings stand independent of and are wholly unaffected by any
criminal proceeding in personam (23 Am. Jur. 613). For while
punishment for the crime and forfeiture of the goods might be
coincident, they are not necessarily so (U.S. v. 25 pkgs. of Panama
Hats, 231 U.S. 358, 362, 58 L. Ed. 267, 269). Thus, while it is true
that the Bureau of Customs is not authorized to impose the penalty
prescribed by section 34 of Republic Act No. 265 for violation of
Central Bank Circular No. 44, there is nothing to preclude the Bureau
of Customs from imposing the penalty of forfeiture of the goods or
merchandise the importation of which has been effected or
attempted contrary to law in accordance with section 1363(f) of the
Revised Administrative Code."cralaw virtua1aw library
Income:
Member's shares............................
97,263.70
Credits paid................................
6,196.55
Interest received...........................
4,569.45
Miscellaneous...............................
1,891.00
P109,620.7
40
upon the same basis, when approved by the Court, as findings made
by the judge himself. And in Kriedt vs. E. C. McCullogh & Co.(37 Phil.,
474), the court held: "Under section 140 of the Code of Civil
Premiums to members.......................
68,146.25
Procedure it is made the duty of the court to render judgment in
accordance with the report of the referee unless the court shall
Loans on real-estate.......................
9,827.00
unless for cause shown set aside the report or recommit it to the
referee. This provision places upon the litigant parties of the duty of
Loans on promissory notes..............
4,258.55
discovering and exhibiting to the court any error that may be
contained therein." The appellants stated the grounds for their
Salaries....................................
1,095.00
objection. The trial examined the evidence and the commissioner's
Miscellaneous...............................
1,686.10
report, and accepted the findings of fact made in the report. We find
no convincing arguments on the appellant's brief to justify a reversal
85,012.90
of the trial court's conclusion admitting the commissioner's findings.
There is no question that "Turnuhan Polistico & Co." is an unlawful
Cash on hand........................................
24,607.80
partnership (U.S. vs. Baguio, 39 Phil., 962), but the appellants allege
that because it is so, some charitable institution to whom the
partnership funds may be ordered to be turned over, should be
The defendants objected to the commissioner's report, but the trial
included, as a party defendant. The appellants refer to article 1666
court, having examined the reasons for the objection, found the
of the Civil Code, which provides:
same sufficiently explained in the report and the evidence, and
A partnership must have a lawful object, and must be established for
accepting it, rendered judgment, holding that the association
the common benefit of the partners.
"Turnuhan Polistico & Co." is unlawful, and sentencing the
When the dissolution of an unlawful partnership is decreed, the
defendants jointly and severally to return the amount of P24,607.80,
profits shall be given to charitable institutions of the domicile of the
as well as the documents showing the uncollected credits of the
partnership, or, in default of such, to those of the province.
association, to the plaintiffs in this case, and to the rest of the
Appellant's contention on this point is untenable. According to said
members of the said association represented by said plaintiffs, with
article, no charitable institution is a necessary party in the present
costs against the defendants.
case of determination of the rights of the parties. The action which
The defendants assigned several errors as grounds for their appeal,
may arise from said article, in the case of unlawful partnership, is
but we believe they can all be reduced to two points, to wit: (1) That
that for the recovery of the amounts paid by the member from those
not all persons having an interest in this association are included as
in charge of the administration of said partnership, and it is not
plaintiffs or defendants; (2) that the objection to the commissioner's
necessary for the said parties to base their action to the existence of
report should have been admitted by the court below.
the partnership, but on the fact that of having contributed some
As to the first point, the decision on the case of Borlasa vs. Polistico,
money to the partnership capital. And hence, the charitable
supra, must be followed.
institution of the domicile of the partnership, and in the default
With regard to the second point, despite the praiseworthy efforts of
thereof, those of the province are not necessary parties in this case.
the attorney of the defendants, we are of opinion that, the trial court
The article cited above permits no action for the purpose of
having examined all the evidence touching the grounds for the
obtaining the earnings made by the unlawful partnership, during its
objection and having found that they had been explained away in
existence as result of the business in which it was engaged, because
the commissioner's report, the conclusion reached by the court
for the purpose, as Manresa remarks, the partner will have to base
below, accepting and adopting the findings of fact contained in said
his action upon the partnership contract, which is to annul and
report, and especially those referring to the disposition of the
without legal existence by reason of its unlawful object; and it is self
association's money, should not be disturbed.
evident that what does not exist cannot be a cause of action. Hence,
In Tan Dianseng Tan Siu Pic vs. Echauz Tan Siuco (5 Phil., 516), it was
paragraph 2 of the same article provides that when the dissolution of
held that the findings of facts made by a referee appointed under
the unlawful partnership is decreed, the profits cannot inure to the
the provisions of section 135 of the Code of Civil Procedure stand
Expenses:
41
42