C. Property Rights of a partner
In his answer defendant expressed his conformity to
1. G.R. No. L-45662 April 26, 1939
ENRIQUE CLEMENTE, plaintiff-appellee,
vs.
DIONISIO GALVAN, defendant-appellee.
JOSE ECHEVARRIA, intervenor-appellant.
The intervenor Jose Echevarria having lost in the Court of First
Instance of manila which rendered judgment against him, the
pertinent portion of which reads: "and with respect to the
complaint of the intervenor, the mortgage executed in his
favor by plaintiff is declared null and void, and said complaint
in intervention, as well as the counterclaim filed by the
defendant against the intervenor, is dismissed, without
pronouncement as to costs," he appealed to this court on the
ground that, according to him, the lower court committed the
errors assigned in his brief as follows:
I. The court a quo erred in finding in the appealed decision that
plaintiff was unable to take possession of the machines subject
of the deed of mortgage Exhibit B either before or after the
execution thereof.
II. The court a quo likewise erred in deciding the present case
against the intervenor-appellant, on the ground, among
others, that "plaintiff has not adduced any evidence nor has he
testified to show that the machines mortgaged by him to the
intervenor have ever belonged to him, notwithstanding that
said intervenor is his close relative.".
III. The lower court also erred in declaring null and void the
mortgage executed by plaintiff in favor of the intervenor and,
thereby, dismissing the complaint in intervention.
IV. The lower court lastly erred in ordering the receiver J. D.
Mencarini to deliver to the defendant the aforesaid machines
upon petition of the plaintiff.
In order to have a clear idea of the question, it is proper to
state the facts bearing on the case as they appear in the
decision and judgment of the lower court and in the
documents which constitute all the evidence adduced by the
parties during the trial.
On June 6, 1931, plaintiff and defendant organized a civil
partnership which they named "Galvan y Compaia" to engage
in the manufacture and sale of paper and other stationery.
they agreed to invest therein a capital of P100,000, but as a
matter of fact they did not cover more than one-fifth thereof,
each contributing P10,000. Hardly a year after such
organization, the plaintiff commenced the present case in the
above-mentioned court to ask for the dissolution of the
partnership and to compel defendant to whom the
management thereof was entrusted to submit an accounting
of his administration and to deliver to him his share as such
partner.
the dissolution of the partnership and the liquidation of its
affairs; but by way of counterclaim he asked that, having
covered a deficit incurred by the partnership amounting to
P4,000 with his own money, plaintiff reimburse him of one-half
of said sum. On petition of the plaintiff a receiver and
liquidator to take charge of the properties and business for the
partnership while the same was not yet definitely dissolved,
was appointed, the person chosen being Juan D. Mencarini.
The latter was already discharging the duties of his office when
the court, by virtue of a petition ex parte of the plaintiff, issued
the order of May 24, 1933, requiring said receiver to deliver to
him (plaintiff) certain machines which were then at Nos. 705-
707 Ylaya Street, Manila but authorizing him to charge their
value of P4,500 against the portion which may eventually be
due to said plaintiff. To comply with said order, the receiver
delivered to plaintiff the keys to the place where the machines
were found, which was the same place where defendant had
his home; but before he could take actual possession of said
machines, upon the strong opposition of defendant, the court,
on motion of the latter, suspended the effects of its order of
May 24, 1933. In the meantime the judgments rendered in
cases Nos. 42794 and 43070 entitled "Philippine Education Co.,
Inc. vs. Enrique Clemente" for the recovery of a sum of money,
and "Jose Echevarria vs. Enrique Clemente", also for the
recovery of a sum of money, respectively, were made
executory; and in order to avoid the attachment and
subsequent sale of the machines by the sheriff for the
satisfaction from the proceeds thereof of the judgments
rendered in the two cases aforecited, plaintiff agreed with the
intervenor, who is his nephew, to execute, as he in fact
executed in favor of the latter, a deed of mortgage Exhibit B
encumbering the machines described in said deed in which it
is stated that "they are situated on Singalong Street No. 1163",
which is a place entirely different from the house Nos. 705 and
707 on Ylaya Street hereinbefore mentioned. The one year
agreed upon in the deed of mortgage for the fulfillment by the
plaintiff of the obligation he had contracted with the
intervenor, having expired, the latter commenced case No.
49629 to collect his mortgage credit. The intervenor, as
plaintiff in the said case, obtained judgment in his favor
because the defendant did not interpose any defense or
objection, and, moreover, admitted being really indebted to
the intervenor in the amount set forth in the deed of mortgage
Exhibit B. The machines which the intervenor said were
mortgaged to him were then in fact in custodia legis, as they
were under the control of the receiver and liquidator Juan D.
Mencarini. It was, therefore, useless for the intervenor to
attach the same in view of the receiver's opposition; and the
question having been brought to court, it decided that nothing
could be done because the receiver was not a party to the case
which the intervenor instituted to collect his aforesaid credit.
(Civil case No. 49629.) The question ended thus because the
intervenor did not take any other step until he thought of
joining in this case as intervenor.
1. From the foregoing facts, it is clear that plaintiff could not
obtain possession of the machines in question. The
constructive possession deducible from the fact that he had
the keys to the place where the machines were found (Ylaya
Street Nos. 705-707), as they had been delivered to him by the
receiver, does not help him any because the lower court
suspended the effects of the other whereby the keys were
delivered to him a few days after its issuance; and thereafter
revoked it entirely in the appealed decision. Furthermore,
when he attempted to take actual possession of the machines,
the defendant did not allow him to do so. Consequently, if he
did not have actual possession of the machines, he could not
in any manner mortgage them, for while it is true that the oft-
mentioned deed of mortgage Exhibit B was annotated in the
registry of property, it is no less true the machines to which it
refers are not the same as those in question because the latter
are on Ylaya Street Nos. 705-707 and the former are on
Singalong Street No. 1163. It can not be said that Exhibit B-1,
allegedly a supplementary contract between the plaintiff and
the intervenor, shows that the machines referred to in the
deed of mortgage are the same as those in dispute and which
are found on Ylaya Street because said exhibit being merely a
private document, the same cannot vary or alter the terms of
a public document which is Exhibit B or the deed of mortgage.

2. The second error attributed to the lower court is baseless.

The evidence of record shows that the machines in contention
originally belonged to the defendant and from him were
transferred to the partnership Galvan y Compania. This being
the case, said machines belong to the partnership and not to
him, and shall belong to it until partition is effected according
to the result thereof after the liquidation.

3. The last two errors attributed by the appellant to the lower

court have already been disposed of by the considerations
above set forth. they are as baseless as the previous ones.

In view of all the foregoing, the judgment appealed from is

affirmed, with costs against the appellant. So ordered.
G.R. No. L-5963 May 20, 1953
2. THE LEYTE-SAMAR SALES CO., and RAYMUNDO
TOMASSI, petitioners,
vs.
SULPICIO V. CEA, in his capacity as Judge of the Court of First
Instance of Leyte and OLEGARIO LASTRILLA, respondents.
Labaled "Certiorari and Prohibition with preliminary
Injunction" this petition prays for the additional writ of
mandamus to compel the respondent judge to give due course
to petitioners' appeal from his order taxing costs. However,
inasmuch as according to the answer, petitioners through their
attorney withdrew their cash appeal bond of P60 after the
record on appeal bond of P60 after the record on appeal had
been rejected, the matter of mandamus may be summarily be
dropped without further comment.
From the pleadings it appears that,
In civil case No. 193 of the Court of First Instance of Leyte,
which is a suit for damages by the Leyte-Samar Sales Co.
(hereinafter called LESSCO) and Raymond Tomassi against the
Far Eastern Lumber & Commercial Co. (unregistered
commercial partnership hereinafter called FELCO), Arnold Hall,
Fred Brown and Jean Roxas, judgment against defendants
jointly and severally for the amount of P31,589.14 plus costs
was rendered on October 29, 1948. The Court of Appeals
confirmed the award in November 1950, minus P2,000
representing attorney's fees mistakenly included. The decision
having become final, the sheriff sold at auction on June 9, 1951
to Robert Dorfe and Pepito Asturias "all the rights, interests,
titles and participation" of the defendants in certain buildings
and properties described in the certificate, for a total price of
eight thousand and one hundred pesos. But on June 4, 1951
Olegario Lastrilla filed in the case a motion, wherein he claimed
to be the owner by purchase on September 29, 1949, of all the
"shares and interests" of defendant Fred Brown in the FELCO,
and requested "under the law of preference of credits" that
the sheriff be required to retain in his possession so much of
the deeds of the auction sale as may be necessary "to pay his
right". Over the plaintiffs' objection the judge in his order of
June 13, 1951, granted Lastrilla's motion by requiring the
sheriff to retain 17 per cent of the money "for delivery to the
assignee, administrator or receiver" of the FELCO. And on
motion of Lastrilla, the court on August 14, 1951, modified its
order of delivery and merely declared that Lastrilla was
entitled to 17 per cent of the properties sold, saying in part:
. . . el Juzgado ha encontrado que no se han respetado los
derechos del Sr. Lastrilla en lo que se refiere a su adquiscicion
de las acciones de C. Arnold Hall (Fred Brown) en la Far Eastern
Lumber & Lumber Commercial C. porque la mismas han sido
incluidas en la subasta.
Es vedad que las acciones adquiridas por el Sr. Lastilla
representan el 17 por ciento del capital de la sociedad "Far
Eastern Lumber & Commercial Co., Inc., et al." pero esto no
quiere decir que su vlor no esta sujeto a las fluctuaciones del
negocio donde las invirtio.
Se vendieron propiedades de la corporacion "Far Eastern
Lumber & Co. Inc.," y de la venta solamente se obtuvo la
cantidad de P8,100.
"En su virtud, se declara que el 17 por ciento de las
propiedades vendidas en publica subasta pretenece al Sr. O
Lastrilla y este tiene derecho a dicha porcion pero con la
obligacion de pagar el 17 por ciento de los gastos for la
conservacion de dichas propriedades por parte del Sheriff; . . .
. (Annex K)
It is from this declaration and the subsequent orders to
enforce it1 that the petitioners seek relief by certiorari, their
position being the such orders were null and void for lack of
jurisdiction. At their request a writ of preliminary injunction
was issued here.
The record is not very clear, but there are indications, and we
shall assume for the moment, that Fred Brown (like Arnold Hall
and Jean Roxas) was a partner of the FELCO, was defendant in
Civil Case No. 193 as such partner, and that the properties sold
at auction actually belonged to the FELCO partnership and the
partners. We shall also assume that the sale made to Lastrilla
on September 29, 1949, of all the shares of Fred Brown in the
FELCO was valid. (Remember that judgment in this case was
entered in the court of first instance a year before.)
The result then, is that on June 9, 1951 when the sale was
effected of the properties of FELCO to Roberto Dorfe and
Pepito Asturias, Lastilla was already a partner of FELCO.
Now, does Lastrilla have any proper claim to the proceeds of
the sale? If he was a creditor of the FELCO, perhaps or maybe.
But he was no. The partner of a partnership is not a creditor of
such partnership for the amount of his shares. That is too
elementary to need elaboration.
Lastrilla's theory, and the lower court's seems to be: inasmuch
as Lastrilla had acquired the shares of Brown is September,
1949, i.e., before the auction sale and he was not a party to
the litigation, such shares could not have been transferred to
Dorfe and Austrilla.
Granting arguendo that the auction sale and not included the
interest or portion of the FELCO properties corresponding to
the shares of Lastrilla in the same partnership (17%), the
resulting situation would be at most that the purchasers
Dorfe and Austrias will have to recognized dominion of
Lastrillas over 17 per cent of the properties awarded to them.2
So Lastrilla acquired no right to demand any part of the money
paid by Dorfe and Austrias to he sheriff any part of the money
paid by Dorfe and Austrias to the sheriff for the benefit of
FELCO and Tomassi, the plaintiffs in that case, for the reason
that, as he says, his shares (acquired from Brown) could not
have been and were not auctioned off to Dorfe and Austrias.
Supposing however that Lastrillas shares have been actually
(but unlawfully) sold by the sheriff (at the instance of plaintiffs)
to Dorfe and Austrias, what is his remedy? Section 15, Rule 39
furnishes the answer.
Precisely, respondents argue, Lastrilla vindicated his claim by
proper action, i.e., motion in the case. We ruled once that
"action" in this section means action as defined in section 1,
Rule 2.3 Anyway his remedy is to claim "the property", not the
proceeds of the sale, which the sheriff is directed by section
14, Rule 39 to deliver unto the judgment creditors.
In other words, the owner of property wrongfully sold may not
voluntarily come to court, and insist, "I approve the sale,
therefore give me the proceeds because I am the owner". The
reason is that the sale was made for the judgment creditor
(who paid for the fees and notices), and not for anybody else.
On this score the respondent judge's action on Lastrilla's
motion should be declared as in excess of jurisdiction, which
even amounted to want of jurisdiction, which even amounted
to want of jurisdiction, considering specially that Dorfe and
Austrias, and the defendants themselves, had undoubtedly the
right to be heardbut they were not notified.4
Why was it necessary to hear them on the merits of Lastrilla's
motion?
Because Dorfe and Austrillas might be unwilling to recognized
the validity of Lastrilla's purchase, or, if valid, they may want
him not to forsake the partnership that might have some
obligations in connection with the partnership properties. And
what is more important, if the motion is granted, when the
time for redemptioner seventeen per cent (178%) less than
amount they had paid for the same properties.
The defendants Arnold Hall and Jean Roxas, eyeing Lastrilla's
financial assets, might also oppose the substitution by Lastrilla
of Fred Brown, the judgment against them being joint and
several. They might entertain misgivings about Brown's
slipping out of their common predicament through the
disposal of his shares.
Lastly, all the defendants would have reasonable motives to
object to the delivery of 17 per cent of the proceeds to Lustrial,
because it is so much money deducted, and for which the
plaintiffs might as another levy on their other holdings or
resources. Supposing of course, there was no fraudulent
collusion among them.
Now, these varied interest of necessity make Dorfe, Asturias
and the defendants indispensable parties to the motion of
Lastrilla granting it was step allowable under our regulations
on execution. Yet these parties were not notified, and
obviously took no part in the proceedings on the motion.
A valid judgment cannot be rendered where there is a want of
necessary parties, and a court cannot properly adjudicate
matters involved in a suit when necessary and indispensable
parties to the proceedings are not before it. (49 C.J.S., 67.)
Indispensable parties are those without whom the action
cannot be finally determined. In a case for recovery of real
property, the defendant alleged in his answer that he was
occupying the property as a tenant of a third person. This third
person is an indispensable party, for, without him, any
judgment which the plaintiff might obtain against the tenant
would have no effectiveness, for it would not be binding upon,
and cannot be executed against, the defendant's landlord,
against whom the plaintiff has to file another action if he
desires to recover the property effectively. In an action for
partition of property, each co-owner is an indispensable party.
(Moran, Comments, 1952 ed. Vol. I, p. 56.) (Emphasis
supplied.)
Wherefore, the orders of the court recognizing Lastrilla's right
and ordering payment to him of a part of the proceeds were
patently erroneous, because promulgated in excess or outside
of its jurisdiction. For this reason the respondents' argument
resting on plaintiffs' failure to appeal from the orders on time,
although ordinarily decisive, carries no persuasive force in this
instance.
For as the former Chief Justice Dr. Moran has summarized in
his Comments, 1952 ed. Vol. II, p. 168
. . . And in those instances wherein the lower court has acted
without jurisdiction over the subject-matter, or where the
order or judgment complained of is a patent nullity, courts
have gone even as far as to disregard completely the questions
of petitioner's fault, the reason being, undoubtedly, that acts
performed with absolute want of jurisdiction over the subject-
matter are void ab initio and cannot be validated by consent,
express or implied, of the parties. Thus, the Supreme Court
granted a petition for certiorari and set aside an order
reopening a cadastral case five years after the judgment
rendered therein had become final. In another case, the Court
set aside an order amending a judgment acquired a definitive
character. And still in another case, an order granting a review
of a decree of registration issued more than a year ago had
been declared null void. In all these case the existence of the
right to appeal has been recitals was rendered without any trial
or hearing, and the Supreme Court, in granting certiorari, said
that the judgment was by its own recitals a patent nullity,
which should be set aside though an appeal was available but
was not availed of. . . .
Invoking our ruling in Melocotones vs. Court of First Instance,
(57 Phil., 144), wherein we applied the theory of laches to
petitioners' 3-years delay in requesting certiorari, respondents
point out that whereas the orders complained of herein were
issued in June 13, 1951 and August 14, 1951 this special civil
action was not filed until August 1952. It should be observed
that the order of June 13 was superseded by that of August 14,
1951. The last order merely declared "que el 17 por ciento de
la propiedades vendidas en publica subasta pertenece at Sr.
Lastrilla y este tiene derecho a dicha porcion." This does not
necessarily mean that 17 per cent of the money had to be
delivered to him. It could mean, as hereinbefore indicated,
that the purchasers of the property (Dorfe and Asturias) had
to recognize Lastrilla's ownership. It was only on April 16, 1952
(Annex N) that the court issued an order directing the sheriff
"to tun over" to Lastrilla "17 per cent of the total proceeds of
the auction sale". There is the order that actually prejudiced
the petitioners herein, and they fought it until the last order of
July 10,. 1952 (Annex Q). Surely a month's delay may not be
regarded as laches.

In view of the foregoing, it is our opinion, and we so hold, that

all orders of the respondents judge requiring delivery of 17 per
cent of the proceeds of the auction sale to respondent
Olegario Lastrilla are null and void; and the costs of this suit
shall be taxed against the latter. The preliminary injunction
heretofore issued is made permanent. So ordered.