Ortega vs.

CA

FACTS:

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.

ORTEGA FULL

G.R. No. 109248 July 3, 1995

GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. 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 respondents-appellees 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 respondents-appellees another letter stating:

"The partnership has ceased to be mutually satisfactory because of the working conditions of
our employees including the assistant attorneys. All my efforts to ameliorate the below
subsistence level of the pay scale of our employees have been thwarted by the other
partners. Not only have they refused to give meaningful increases to the employees, even
attorneys, are dressed down publicly in a loud voice in a manner that deprived them of their
self-respect. The result of such policies is the formation of the union, including the assistant
attorneys."

On 30 June 1988, petitioner filed with this Commission's Securities Investigation and Clearing Department
(SICD) a petition for dissolution and liquidation of partnership, docketed as SEC Case No. 3384 praying that
the Commission:

"1. Decree the formal dissolution and order the immediate liquidation of (the partnership of)
Bito, Misa & Lozada;

"2. Order the respondents to deliver or pay for petitioner's share in the partnership assets
plus the profits, rent or interest attributable to the use of his right in the assets of the
dissolved partnership;

"3. Enjoin respondents from using the firm name of Bito, Misa & Lozada in any of their
correspondence, checks and pleadings and to pay petitioners damages for the use thereof
despite the dissolution of the partnership in the amount of at least P50,000.00;

"4. Order respondents jointly and severally to pay petitioner attorney's fees and expense of
litigation in such amounts as maybe proven during the trial and which the Commission may
deem just and equitable under the premises but in no case less than ten (10%) per cent of
the value of the shares of petitioner or P100,000.00;

"5. Order the respondents to pay petitioner moral damages with the amount of P500,000.00
and exemplary damages in the amount of P200,000.00.

"Petitioner likewise prayed for such other and further reliefs that the Commission may deem
just and equitable under the premises."

On 13 July 1988, respondents-appellees filed their opposition to the petition.

 On 13 July 1988, petitioner filed his Reply to the Opposition.

On 31 March 1989, the hearing officer rendered a decision ruling that:

"[P]etitioner's withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law
partnership. Accordingly, the petitioner and respondents are hereby enjoined to abide by the
provisions of the Agreement relative to the matter governing the liquidation of the shares of
any retiring or withdrawing partner in the partnership interest."1

On appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the withdrawal of Attorney
Joaquin L. Misa had dissolved the partnership of "Bito, Misa & Lozada." The Commission ruled that, being a
partnership at will, the law firm could be dissolved by any partner at anytime, such as by his withdrawal therefrom,
regardless of good faith or bad faith, since no partner can be forced to continue in the partnership against his will. In
its decision, dated 17 January 1990, the SEC held:

WHEREFORE, premises considered the appealed order of 31 March 1989 is hereby REVERSED insofar as
it concludes that the partnership of Bito, Misa & Lozada has not been dissolved. The case is hereby
REMANDED to the Hearing Officer for determination of the respective rights and obligations of the parties.2

The parties sought a reconsideration of the above decision. Attorney Misa, in addition, asked for an appointment of
a receiver to take over the assets of the dissolved partnership and to take charge of the winding up of its affairs. On
4 April 1991, respondent SEC issued an order denying reconsideration, as well as rejecting the petition for
receivership, and reiterating the remand of the case to the Hearing Officer.

The parties filed with the appellate court separate appeals (docketed CA-G.R. SP No. 24638 and CA-G.R. SP No.
24648).

During the pendency of the case with the Court of Appeals, Attorney Jesus Bito and Attorney Mariano Lozada both
died on, respectively, 05 September 1991 and 21 December 1991. The death of the two partners, as well as the
admission of new partners, in the law firm prompted Attorney Misa to renew his application for receivership (in CA
G.R. SP No. 24648). He expressed concern over the need to preserve and care for the partnership assets. The
other partners opposed the prayer.

The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIRMED in toto the SEC
decision and order appealed from. In fine, the appellate court held, per its decision of 26 February 1993, (a) that
Atty. Misa's withdrawal from the partnership had changed the relation of the parties and inevitably caused the
dissolution of the partnership; (b) that such withdrawal was not in bad faith; (c) that the liquidation should be to the
extent of Attorney Misa's interest or participation in the partnership which could be computed and paid in the manner
stipulated in the partnership agreement; (d) that the case should be remanded to the SEC Hearing Officer for the
corresponding determination of the value of Attorney Misa's share in the partnership assets; and (e) that the
appointment of a receiver was unnecessary as no sufficient proof had been shown to indicate that the partnership
assets were in any such danger of being lost, removed or materially impaired.

In this petition for review under Rule 45 of the Rules of Court, petitioners confine themselves to the following issues:

1. Whether or not the Court of Appeals has erred in holding that the partnership of Bito, Misa & Lozada (now
Bito, Lozada, Ortega & Castillo) is a partnership at will;

2. 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; and

3. Whether or not the Court of Appeals has erred in holding that private respondent's demand for the
dissolution of the partnership so that he can get a physical partition of partnership was not made in bad faith;

to which matters we shall, accordingly, likewise limit ourselves.

A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa & Lozada," and now
"Bito, Lozada, Ortega and Castillo," is indeed such a partnership need not be unduly belabored. We quote, with
approval, like did the appellate court, the findings and disquisition of respondent SEC on this matter; viz:

The partnership agreement (amended articles of 19 August 1948) does not provide for a specified period or
undertaking. The "DURATION" clause simply states:

"5. DURATION. The partnership shall continue so long as mutually satisfactory and upon the
death or legal incapacity of one of the partners, shall be continued by the surviving partners."

The hearing officer however opined that the partnership is one for a specific undertaking and hence not a
partnership at will, citing paragraph 2 of the Amended Articles of Partnership (19 August 1948):

"2. Purpose. The purpose for which the partnership is formed, is to act as legal adviser and
representative of any individual, firm and corporation engaged in commercial, industrial or
other lawful businesses and occupations; to counsel and advise such persons and entities
with respect to their legal and other affairs; and to appear for and represent their principals
and client in all courts of justice and government departments and offices in the Philippines,
and elsewhere when legally authorized to do so."

The "purpose" of the partnership is not the specific undertaking referred to in the law. Otherwise, all
partnerships, which necessarily must have a purpose, would all be considered as partnerships for a definite
undertaking. There would therefore be no need to provide for articles on partnership at will as none would so
exist. Apparently what the law contemplates, is a specific undertaking or "project" which has a definite or
definable period of completion.3

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 partnership4 but that it can result in a
liability for damages.5

In passing, neither would the presence of a period for its specific duration or the statement of a particular purpose
for its creation prevent the dissolution of any partnership by an act or will of a partner.6 Among partners,7 mutual
agency arises and the doctrine of delectus personae allows them to have the power, although not necessarily
theright, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a possible action for
damages.

The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be
associated in the carrying on, as might be distinguished from the winding up of, the business.8 Upon its dissolution,
the partnership continues and its legal personality is retained until the complete winding up of its business
culminating in its termination.9

The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the Civil
Code; 10 however, an agreement of the partners, like any other contract, is binding among them and normally takes
precedence to the extent applicable over the Code's general provisions. We here take note of paragraph 8 of the
"Amendment to Articles of Partnership" reading thusly:

. . . In the event of the death or retirement of any partner, his interest in the partnership shall be liquidated
and paid in accordance with the existing agreements and his partnership participation shall revert to the
Senior Partners for allocation as the Senior Partners may determine; provided, however, that with respect to
the two (2) floors of office condominium which the partnership is now acquiring, consisting of the 5th and the
6th floors of the Alpap Building, 140 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

The term "retirement" must have been used in the articles, as we so hold, in a generic sense to mean the
dissociation by a partner, inclusive of resignation or withdrawal, from the partnership that thereby dissolves it.

On the third and final issue, we accord due respect to the appellate court and respondent Commission on their
common factual finding, i.e., that Attorney Misa did not act in bad faith. Public respondents viewed his withdrawal to
have been spurred by "interpersonal conflict" among the partners. It would not be right, we agree, to let any of the
partners remain in the partnership under such an atmosphere of animosity; certainly, not against their will. 12 Indeed,
for as long as the reason for withdrawal of a partner is not contrary to the dictates of justice and fairness, nor for the
purpose of unduly visiting harm and damage upon the partnership, bad faith cannot be said to characterize the act.
Bad faith, in the context here used, is no different from its normal concept of a conscious and intentional design to
do a wrongful act for a dishonest purpose or moral obliquity.

WHEREFORE, the decision appealed from is AFFIRMED. No pronouncement on costs.

SO ORDERED.

TOCAO V. CA
G.R. No. 127405; October 4, 2000

FACTS:

Private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations of
Ultra Clean Water Purifier, through her former employer in Bangkok. Belo introduced Anay to petitioner
Marjorie Tocao, who conveyed her desire to enter into a joint venture with her for the importation and local
distribution of kitchen cookwares

Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and Anay as
head of the marketing department and later, vice-president for sales

The parties agreed that Belo's name should not appear in any documents relating to their transactions
with West Bend Company. Anay having secured the distributorship of cookware products from the West
Bend Company and organized the administrative staff and the sales force, the cookware business took off
successfully. They operated under the name of Geminesse Enterprise, a sole proprietorship registered in
Marjorie Tocao's name.

The parties agreed further that Anay would be entitled to:

(1) ten percent (10%) of the annual net profits of the business;
(2) overriding commission of six percent (6%) of the overall weekly production;
(3) thirty percent (30%) of the sales she would make; and
(4) two percent (2%) for her demonstration services. The agreement was not reduced to writing on the
strength of Belo's assurances that he was sincere, dependable and honest when it came to financial
commitments.

On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter addressed to the Cubao sales
office to the effect that she was no longer the vice-president of Geminesse Enterprise.

Anay attempted to contact Belo. She wrote him twice to demand her overriding commission for the period
of January 8, 1988 to February 5, 1988 and the audit of the company to determine her share in the net
profits.
Anay still received her five percent (5%) overriding commission up to December 1987. The following year,
1988, she did not receive the same commission although the company netted a gross sales of P
13,300,360.00.

On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with damages
against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch 140

The trial court held that there was indeed an "oral partnership agreement between the plaintiff and the
defendants. The Court of Appeals affirmed the lower courts decision.

ISSUE:
Whether the parties formed a partnership

HELD:

Yes, the parties involved in this case formed a partnership

The Supreme Court held that to be considered a juridical personality, a partnership must fulfill these
requisites:

(1) two or more persons bind themselves to contribute money, property or industry to a common fund; and

(2) intention on the part of the partners to divide the profits among themselves. It may be constituted in
any form; a public instrument is necessary only where immovable property or real rights are contributed
thereto.

This implies that since a contract of partnership is consensual, an oral contract of partnership is as good
as a written one.

In the case at hand, Belo acted as capitalist while Tocao as president and general manager, and Anay as
head of the marketing department and later, vice-president for sales. Furthermore, Anay was entitled to a
percentage of the net profits of the business.

Therefore, the parties formed a partnership.

G.R. No. 124293, November 20, 2000

FACTS:

The National Investment and Development Corporation (NIDC), a government corporation, entered into a
Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. for the construction, operation and
management of the Subic National Shipyard, Inc., later became the Philippine Shipyard and Engineering
Corporation (PHILSECO). Under the JVA, NIDC and Kawasaki would maintain a shareholding proportion
of 60%-40% and that the parties have the right of first refusal in case of a sale.

Through a series of transfers, NIDCs rights, title and interest in PHILSECO eventually went to the
National Government. In the interest of national economy, it was decided that PHILSECO should be
privatized by selling 87.67% of its total outstanding capital stock to private entities. After negotiations, it
was agreed that Kawasakis right of first refusal under the JVA be exchanged for the right to top by five
percent the highest bid for said shares. Kawasaki that Philyards Holdings, Inc. (PHI), in which it was a
stockholder, would exercise this right in its stead.
During bidding, Kawasaki/PHI Consortium is the losing bidder. Even so, because of the right to top by 5%
percent the highest bid, it was able to top JG Summits bid. JG Summit protested, contending that
PHILSECO, as a shipyard is a public utility and, hence, must observe the 60%-40% Filipino-foreign
capitalization. By buying 87.67% of PHILSECOs capital stock at bidding, Kawasaki/PHI in effect now
owns more than 40% of the stock.

ISSUE:

Whether or not PHILSECO is a public utility

Whether or not Kawasaki/PHI can purchase beyond 40% of PHILSECOs stocks

HELD:

In arguing that PHILSECO, as a shipyard, was a public utility, JG Summit relied on sec. 13, CA No. 146.
On the other hand, Kawasaki/PHI argued that PD No. 666 explicitly stated that a shipyard was not a
public utility. But the SC stated that sec. 1 of PD No. 666 was expressly repealed by sec. 20, BP Blg.
391 and when BP Blg. 391 was subsequently repealed by EO 226, the latter law did not revive sec. 1 of
PD No. 666. Therefore, the law that states that a shipyard is a public utility still stands.

A shipyard such as PHILSECO being a public utility as provided by law is therefore required to comply
with the 60%-40% capitalization under the Constitution. Likewise, the JVA between NIDC and Kawasaki
manifests an intention of the parties to abide by this constitutional mandate. Thus, under the JVA, should
the NIDC opt to sell its shares of stock to a third party, Kawasaki could only exercise its right of first
refusal to the extent that its total shares of stock would not exceed 40% of the entire shares of stock. The
NIDC, on the other hand, may purchase even beyond 60% of the total shares. As a government
corporation and necessarily a 100% Filipino-owned corporation, there is nothing to prevent its purchase of
stocks even beyond 60% of the capitalization as the Constitution clearly limits only foreign capitalization.

Kawasaki was bound by its contractual obligation under the JVA that limits its right of first refusal to 40%
of the total capitalization of PHILSECO. Thus, Kawasaki cannot purchase beyond 40% of the
capitalization of the joint venture on account of both constitutional and contractual proscriptions.

Whether under the 1977 Joint Venture Agreement,

KAWASAKI can purchase only a maximum of 40%
of PHILSECOs total capitalization.

A careful reading of the 1977 Joint Venture Agreement reveals that there is nothing that prevents
KAWASAKI from acquiring more than 40% of PHILSECOs total capitalization. Section 1 of the 1977 JVA
states:

1.3 The authorized capital stock of Philseco shall be P330 million. The parties shall thereafter increase
their subscription in Philseco as may be necessary and as called by the Board of Directors, maintaining a
proportion of 60%-40% for NIDC and KAWASAKI respectively, up to a total subscribed and paid-up
capital stock of P312 million.

1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS [renamed PHILSECO] to
any third party without giving the other under the same terms the right of first refusal. This provision shall
not apply if the transferee is a corporation owned and controlled by the GOVERMENT [of the Philippines]
or by a Kawasaki affiliate.

1.5 The By-Laws of SNS [PHILSECO] shall grant the parties preemptive rights to unissued shares of SNS
[PHILSECO].[35]
 Under section 1.3, the parties agreed to the amount of P330 million as the total capitalization of their
joint venture. There was no mention of the amount of their initial subscription. What is clear is that they
are to infuse the needed capital from time to time until the total subscribed and paid-up capital
reaches P312 million. The phrase maintaining a proportion of 60%-40% refers to their respective share of
the burden each time the Board of Directors decides to increase the subscription to reach the target paid-
up capital of P312 million. It does not bind the parties to maintain the sharing scheme all throughout the
existence of their partnership.
The parties likewise agreed to arm themselves with protective mechanisms to preserve their
respective interests in the partnership in the event that (a) one party decides to sell its shares to third
parties; and (b) new Philseco shares are issued. Anent the first situation, the non-selling party is given
the right of first refusal under section 1.4 to have a preferential right to buy or to refuse the selling partys
shares. The right of first refusal is meant to protect the original or remaining joint venturer(s) or
shareholder(s) from the entry of third persons who are not acceptable to it as co-venturer(s) or co-
shareholder(s). The joint venture between the Philippine Government and KAWASAKI is in the nature of a
partnership[36] which, unlike an ordinary corporation, is based on delectus personae.[37] No one can
become a member of the partnership association without the consent of all the other associates. The right
of first refusal thus ensures that the parties are given control over who may become a new partner in
substitution of or in addition to the original partners. Should the selling partner decide to dispose all its
shares, the non-selling partner may acquire all these shares and terminate the partnership. No person or
corporation can be compelled to remain or to continue the partnership. Of course, this presupposes that
there are no other restrictions in the maximum allowable share that the non-selling partner may acquire
such as the constitutional restriction on foreign ownership in public utility. The theory that KAWASAKI can
acquire, as a maximum, only 40% of PHILSECOs shares is correct only if a shipyard is a public utility. In
such instance, the non-selling partner who is an alien can acquire only a maximum of 40% of the total
capitalization of a public utility despite the grant of first refusal. The partners cannot, by mere agreement,
avoid the constitutional proscription. But as afore-discussed, PHILSECO is not a public utility and no other
restriction is present that would limit the right of KAWASAKI to purchase the Governments share to 40%
of Philsecos total capitalization.
Furthermore, the phrase under the same terms in section 1.4 cannot be given an interpretation that
would limit the right of KAWASAKI to purchase PHILSECO shares only to the extent of its original
proportionate contribution of 40% to the total capitalization of the PHILSECO. Taken together with the
whole of section 1.4, the phrase under the same terms means that a partner to the joint venture that
decides to sell its shares to a third party shall make a similar offer to the non-selling partner. The selling
partner cannot make a different or a more onerous offer to the non-selling partner.
The exercise of first refusal presupposes that the non-selling partner is aware of the terms of the
conditions attendant to the sale for it to have a guided choice. While the right of first refusal protects the
non-selling partner from the entry of third persons, it cannot also deprive the other partner the right to sell
its shares to third persons if, under the same offer, it does not buy the shares.
Apart from the right of first refusal, the parties also have preemptive rights under section 1.5 in the
unissued shares of Philseco. Unlike the former, this situation does not contemplate transfer of a partners
shares to third parties but the issuance of new Philseco shares. The grant of preemptive rights preserves
the proportionate shares of the original partners so as not to dilute their respective interests with the
issuance of the new shares. Unlike the right of first refusal, a preemptive right gives a partner a
preferential right over the newly issued shares only to the extent that it retains its original proportionate
share in the joint venture.
The case at bar does not concern the issuance of new shares but the transfer of a partners share in
the joint venture. Verily, the operative protective mechanism is the right of first refusal which does not
impose any limitation in the maximum shares that the non-selling partner may acquire.

ABOITIZ CASE
In 1919, Arnaldo de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a partnership. De
Silva, Guillermo, and Vidal were the capitalist partners while Martinez was the industrial partner. The
articles of partnership contained, among others, that Martinez may also be liable for losses but only to the
extent of his shares in the profits which was at 30%.
The partnership incurred loans from Pacific Commercial Company which the partnership failed to pay.
The partnerships property was exhausted but there remained an unpaid balance for which PCC sued the
partnership. The trial court issued a judgment where it ordered that the deficiency should be satisfied by
the properties of the three capitalist partners; that in the event the properties of the three will not be
enough, the remaining balance shall issue against the property of Martinez. Martinez appealed the
decision.
ISSUE: Whether or not Martinez is liable for the said debt.
HELD: Yes. As held in the case of La Compaia Maritama vs Francisco Muoz et al, all the members
of a general partnership are liable with all their property for the results of the duly authorized transactions
made in the name and for the account of the partnership. All the members of the general copartnership,
be they or be they not managing partners of the same are liable personally and in solidum with all their
property for the results of the transaction made in the name and for the account of the partnership.
The Supreme Court also emphasized that liability for losses relates merely to the distribution of losses
among the partners themselves in the settlement of the partnership affairs and has no reference to
partnership obligations or liabilities to third parties.
NOTE: An industrial partner is not liable for losses. A provision exempting an industrial partner from
losses is naturally valid but the same provision exempting a capitalist partner is void. A provision making
an industrial partner liable for losses is permissible. An industrial partner may be held liable by third
persons but he may recover from the capitalist partners for after all, he is not liable for losses.
In April, 1919 Arnaldo F. de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a regular,
collective, mercantile partnership with a capital of P40,000 of which each of the partners Aboitiz and De
Silva furnished one-third. The partner Jose Martinez was an industrial partner and furnished no capital; it
was provided in the partnership article that he was to receive 30 per cent of the profits and that his
responsibility for losses should not exceed the amount of the profits received by him.
On April 27, 1922, the partnership, through its duly authorized representative, Guillermo Aboitiz, executed
a promissory note in favor of the plaintiff the Pacific Commercial Company for the sum of P23,168.71, with
interest at 12 per cent per annum until fully paid as additional sum of 10 per cent as attorneys fees and
costs of collection in the event it became necessary to resort to judicial proceedings. As security for the
payment of the note, the partnership executed a chattel mortgage in favor of the plaintiff on certain
personal property therein described.
For failure of the partnership to pay the debt the chattel mortgage was foreclosed the mortgages property
sold and the proceeds of the sale, P2,000 was paid over to the plaintiff on December 28, 1923. No further
payment on the note appears to have been made and January 4, 1924, the present action was brought for
the recovery of the unpaid balance with interest. Upon trial the court below rendered judgment in favor of
the plaintiff and against the partnership for the sum of P27,951.68 and for the payment of interest on the
capital of P21,168.71 at the rate of 10 per cent per annum from the 31st October, 1924, until paid,
together with 10 per cent on the amount due for fees for collection in accordance with the terms of the
aforesaid note. The judgment further provided that execution should first issue against the property of the
partnership should first issue against the insolvency of the partnership, it might issue against the property
of the partners De Silva and Aboitiz and in the event of their insolvency, then against the property of the
industrial partner Jose Martinez. From this judgment Martinez appealed to this court and here maintains
that under article 141 of the Code of Commerce he, as a mere industrial partner, cannot be held
responsible for the partnerships debt.
The case is practically identical with that of the Compania Maritima vs. Munoz (9 Phil., 326), in which this
court held the industrial partners secondarily liable for the debts of the partnership but on the strength of
the vigorous dissenting opinion of Chief Justice Arellano in that case, that appellant argues that the
decision therein was erroneous and should now be overruled. With all due respect for the legal acumen of
the first Chief Justice of this Court, we are still of the opinion that the case was correctly decided. Article
127 of the Code of Commerce reads as follows:
All the members of the general copartnership, be they or be they not managing partners of the same are
liable personally and in solidum with all their property for the results of the transaction made in the name
and for the account of the partnership, under the signature of the later, and by a person authorized to
make use thereof.
The language of this article is clear and specific that all the members of a general copartnership are liable
with all their property for the results of the duly authorized transactions made in the name and for the
account of the partnership. On the other hand, Article 141, upon which the appellants relies and which
provides that losses shall be computed in the same proportion among the capitalist partners without
including the industrial partners, unless by special agreement the latter have been constituted as
participants therein, is susceptible of two different interpretations of which that given it in the Compania
Maritima case, supra, i. e., that it relates merely to the distribution of losses among the partners
themselves in the settlement of the partnership affairs and has no reference to partnership obligations to
third parties, appears to us to be the more logical.
There is a marked distinction between a liability and a loss and the inability of a partnership to pay a debt
to a third party at a particular time does not necessarily mean that the partnership business as a whole,
has been operated at a loss. The partnership may have outstanding credits which for the moment may
have be unavailable for the payment of debts, but which eventually may be realized upon and yield profits
more than sufficient to cover all losses. Bearing this in mind it will be found that there in reality is no
conflict between the two articles quoted; one speaks of liabilities, the other of losses.
The judgment appealed from is affirmed with the costs against the appellant. So ordered.
Avancea, C. J., Street, Malcolm, Villamor, Johns, Romualdez, and Villa-Real, JJ., concur.

SECOND DIVISION

[G.R. No. L-22493, July 31, 1975]

ISLAND SALES, INC., PLAINTIFF-APPELLEE, VS. UNITED PIONEERS GENERAL CONSTRUCTION

COMPANY, ET AL, DEFENDANTS. BENJAMIN C. DACO, DEFENDANT-APPELLANT.

DECISION

CONCEPCION, JR., J.:

This is an appeal interposed by the defendant Benjamin C. Daco from the decision of the Court of First
Instance of Manila, Branch XVI, in Civil Case No. 50682, the dispositive portion of which reads:

"WHEREFORE, the Court sentences defendant United Pioneer General Construction Company to pay
plaintiff the sum of P7,119.07 with interest at the rate of 12% per annum until it is fully paid, plus attorney's
fees which the Court fixes in the sum of Eight Hundred Pesos (P800.00) and costs.

"The defendants Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim and Augusto Palisoc are sentenced
to pay the plaintiff in this case with the understanding that the judgment against these individual
defendants shall be enforced only if the defendant company has no more leviable properties with which to
satisfy the judgment against it.

"The individual defendants shall also pay the costs."

On April 22,1961, the defendant company, a general partnership duly registered under the laws of the
Philippines, purchased from the plaintiff a motor vehicle on the installment basis and for this purpose
executed a promissory note for P9,440.00, payable in twelve (12) equal monthly installments of P786.63,
the first installment payable on or before May 22, 1961 and the subsequent installments on the 22nd day
of every month thereafter, until fully paid, with the condition that failure to pay any of said installments as
they fall due would render the whole unpaid balance immediately due and demandable.

Having failed to receive the installment due on July 22, 1961, the plaintiff sued the defendant company for
the unpaid balance amounting to P7,119.07. Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo
B. Lumauig, and Augusto Palisoc were included as co-defendants in their capacity as general partners of
the defendant company.

Daniel A. Guizona failed to file an answer and was consequently declared in default.[1]

Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as the defendant Romulo B.
Lumauig is concerned.[2]

When the case was called for hearing, the defendants and their counsels failed to appear notwithstanding
the notices sent to them. Consequently, the trial court authorized the plaintiff to present its evidence ex-
parte[3] after which the trial court rendered the decision appealed from.

The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the decision claiming that since
there are five (5) general partners, the joint and subsidiary liability of each partner should not exceed one-
fifth (1/5) of the obligations of the defendant company. But the trial court denied the said motion
notwithstanding the conformity of the plaintiff to limit the liability of the defendants Daco and Sim to only
one-fifth (1/5) of the obligations of the defendant company. Hence, this appeal.

The only issue for resolution is whether or not the dismissal of the complaint to favor one of the general
partners of a partnership increases the joint and subsidiary liability of each of the remaining partners for
the obligations of the partnership.

Article 1816 of the Civil Code provides:

"Art. 1816. All partners including industrial ones, shall be liable pro rata with all their property and after all
the partnership assets have been exhausted, for the contracts which may be entered into in the name and
for the account of the partnership, under its signature and by a person authorized to act for the
partnership. However, any partner may enter into a separate obligation to perform a partnership contract."

In the case of Co-Pitco vs. Yulo (8 Phil. 544) this Court held:

"The partnership of Yulo and Paiacios was engaged in the operation of a sugar estate in Negros. It was,
therefore, a civil partnership as distinguished from a mercantile partnership. Being a civil partnership, by
the express provisions of articles 1698 and 1137 of the Civil Code, the partners are not liable each for the
whole debt of the partnership. The liability is pro rata and in this case Pedro Yulo is responsible to plaintiff
for only one-half of the debt. The fact that the other partner, Jaime Paiacios, had left the country cannot
increase the liability of Pedro Yulo."
In the instant case, there were five (5) general partners when the promissory note in question was
executed for and in behalf of the partnership. Since the liability of the partners is pro rata, the liability of
the appellant Benjamin C. Daco shall be limited to only one-fifth (1/5) ofthe obligations ofthe defendant
company. The fact that the complaint against the defendant Romulo B. Lumauig was dismissed, upon
motion ofthe plaintiff, does not unmake the said Lumauig as a general partner in the defendant company.
In so moving to dismiss the complaint, the plaintiff merely condoned Lumauig's individual liability to the
plaintiff.

WHEREFORE, the appealed decision as thus clarified is hereby AFFIRMED, without pronouncement as
to costs.

SO ORDERED.

Makalintal, C.J., Fernando (Chairman), Barredo, and Aquino, JJ., concur.

MUASQUE v. CA
G.R. No. L-39780; November 11, 1985
Ponente: J. Gutierrez. Jr

FACTS:

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.

[ G.R. No. L-12164, May 22, 1959 ]

BENITO LIWANAG AND MARIA LIWANAG REYES, PETITIONERS AND APPELLANTS, VS.
WORKMEN'S COMPENSATION COMMISSION, ET AL., RESPONDENTS AND APPELLEES.

DECISION

ENDENCIA, J.:
Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners of Liwanag Auto Supply, a
commercial establishment located at 349 Dimasalang, Sampaloc, Manila. They employed Roque
Balderama as security guard who, while in line of duty, was killed by criminal hands. His widow Ciriaca
vda. de Balderama and minor children Genara, Carlos and Leogardo, all surnamed Balderama, in due
time filed a claim for compensation with the Workmen's Compensation Commission, which was
granted in an award worded as follows:

WHEREFORE, the order of the referee under consideration should be, as it is hereby, affirmed and
respondents Benito Liwanag and Maria Liwanag Reyes, ordered:

"1. To pay jointly and severally the amount of Three Thousand Four Hundred Ninety-four
and 40/100 (P3,494.40) Pesos to the claimants in lump sum; and

"To pay to the Workmen's Compensation Funds the sum of P4.00 (including P5.00 for this review) as
fees, pursuant to Section 55 of the Act."

In appealing the case to this Tribunal, appellants do not question the right of appellees to
compensation nor the amount awarded. They only claim that, under the Workmen's Compensation Act,
the compensation is divisible, hence the Commission erred in ordering appellants to pay jointly and
severally the amount awarded. They argue that there is nothing in the compensation Act which
provides that the obligation of an employer arising from compensable injury or death of
an employee should be solidary ; that if the legislative intent in enacting the law is to impose solidary
obligation, the same should have been specifically provided, and that, in the absence of such clear
provision, the responsibility of appellants should not be solidary but merely joint.
At first blush, appellants' contention would seem to be well taken, for, ordinarily, the liability of the
partners in a partnership is not solidary; but the law governing the liability of partners is not applicable
to the case at bar wherein a claim for compensation by dependents of an employee who died in line
of duty is involved. And although the Workmen's Compensation Act does not contain
any provision expressly declaring solidary obligation of business partners like the herein appellants,
there are other provisions of law from which it could be gathered that their liability must be
solidary. Arts. 1711 and 1712 of the new Civil Code provide:

"ART. 1711. Owners of enterprises and other employers are obliged to pay compensation for the death
of or injuries to their laborers, workmen, mechanics or other employees, even though the event
may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury
arose out of and in the course of the employment. * * *."

"Art. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the employer
shall be solidarity liable for compensation. * * *."

And Section 2 of the Workmen's Compensation Act, as amended, reads in part as follows:

"* * *. The right to compensation as provided in this Act shall not be defeated or impaired on the ground
that the death, injury or disease was due to the negligence of a fellow servant or employee, without
prejudice to the right of the employer to proceed against the negligent party."

The provisions of the new Civil Code above quoted taken together with those of Section 2 of the
Workmen's Compensation Act, reasonably indicate that in compensation cases, the liability of business
partners, like appellants, should be solidary; otherwise, the right of the employee may be defeated, or at
least crippled. If the responsibility of appellants were to be merely joint and not solidary, and one of
them happens to be insolvent, the amount awarded to the appellees would only be partially satisfied,
which is evidently contrary to the intent and purposes of the Act. In previous cases we have already held
that the Workmen's Compensation Act should be construed fairly, reasonably and liberally in favor of and
for the benefit of the employee and his dependents; that all doubts as to right of compensation
resolved in his favor; and that it should be interpreted to promote its purpose. Accordingly, the present
controversy should be decided in favor of the appellees.

Moreover, Art. 1207 of the new Civil Code provides:

"* * *. There is solidary liability only when the obligation expressly so states, or when the law or the
nature of the obligation requires solidarity."

Since the Workmen's Compensation Act was enacted to give full protection to the employee,
reason demands that the nature of the obligation of the employers to pay compensation to the heirs of
their employee who died in line of duty, should be solidary; otherwise, the purpose of the law could
not be attained.

Wherefore, finding no error in the award appealed from, the same is hereby affirmed, with costs against
appellants.

[Digest] Manotok vs. Barque (2010)

MANOTOK vs. BARQUE[1] (G.R. Nos. 162335 & 162605; August 24, 2010; VILLARAMA, JR., J.)

FACTS:
 Piedad Estate originally owned by Philippine Sugar Estates Development Company, Ltd., La Sociedad Agricola de
Ultramar, the British-Manila Estate Company, Ltd., and the Recoleto Order of the Philippine Islands. (It is a Friar Land.)
o The subject parcel Lot No. 823 is part of the Piedad Estate and is located in QC.
On 23 December 1903, Piedad Estate was acquired by the Philippine Government pursuant to the Friar Lands Act. The
certificate of title in the name of the government was OCT No. 614. The Estate was placed under the administration of the
Director of Lands.
Controversy arising from conflicting claims over Lot 823 began after a fire gutted portions of the Quezon City Hall on June
11, 1988 which destroyed records stored in the Office of the Register of Deeds.
In 1990, Manotoks filed a petition with the LRA for administrative reconstitution of TCT No. 372302 covering Lot No. 823
with an area of 342,945 square meters GRANTED TCT No. RT-22481 (372302) was issued in 1991.
In 1996, 8 years after the fire the Barques filed a petition with the LRA for administrative reconstitution of TCT No. 210177
in the name of Homer Barque also covering Lot 823. In support of their petition, the Barques submitted copies of the
alleged owners duplicate of the TCT, real estate tax receipts, tax declarations and a Plan Fls 3168-D covering the
property.
o MANOTOKs opposed alleging that TCT No. 210177 was spurious.
Although both titles of the Manotoks and the Barques refer to land belonging to Lot No. 823, TCT No. 210177 actually
involves 2 parcels with an aggregate area of 342,945 square meters, while TCT No. RT-22481 (372302) pertains only to a
1 parcel of land, with a similar area of 342,945 square meters.
1997 Barques petition was DENIED. Lot. No. 823 already registered in the name of the Manotoks. --> Barques
MR was denied They appealed to the LRA LRA Reversed.
o LRA found that the reconstitution of the Manotok title was fraudulent. Hence, it ordered the Barque title to be reconstituted.
BUT cancellation must 1st be sought in a court of competent jurisdiction of the 1991 Manotok TCT.
The LRA denied the Manotoks MR and the Barques prayer for immediate reconstitution. Both the Manotoks and the
Barques appealed the LRA decision to the CA.
In the CA, Felicitas Manahan filed a motion to intervene and sought the dismissal of the cases claiming ownership of the
subject property.
2002 and 2003 2 separate divisions of the CA both directed the RD of QC to cancel the Reconstituted Manotok Title
and to reconstitute the Barques valid, genuine and existing TCT No. 210177.
o Hence, the Manotoks filed the present separate petitions which were ordered consolidated on August 2, 2004.
December 12, 2005, SC First Division affirmed both decisions of the CA. Manotoks filed MR Denied in April 2006
Resolution.
o Thereafter, the Manotoks filed a Motion for Leave to File a Second MR with their MR attached. Denied in June 2006
Resolution. Eventually entry of judgment was made in the Book of Entries of Judgment on May 2, 2006. In the meantime,
the Barques filed multiple motions with the First Division for execution of the judgment, while the Manotoks filed an Urgent
Motion to Refer Motion for Possession to the SC En Banc (with prayer to set motion for oral arguments). Case was
referred to the En Banc in July 2006.
On September 7, 2006, Felicitas Manahan and Rosendo Manahan filed a motion to intervene, to which was attached
their petition in intervention. They alleged that their predecessor-in-interest, Valentin Manahan, was issued Sale
Certificate No. 511 covering Lot No. 823 and attached the findings of the NBI that the documents of the Manotoks were
not as old as they were purported to be. Consequently, the Director of the Legal Division of the LMB recommended to the
Director of the LMB the reconstituted Manotok Title should be reverted to the state.
o Oral arguments were held on July 24, 2007.
2008 - En Banc set aside the December 2005 1st division decision and entry of judgment recalled and the CAs Amended
Decisions in CA-G.R. SP Nos. 66642 and 66700 were reversed and set aside. The En Banc remanded the case to the
CA.
o The CA was directed to receive evidence of and focus on the issue of WON the Manotoks can trace their claim of title to a
valid alienation by the Government of Lot No. 823 of the Piedad Estate, which was a Friar Land. PURPOSE: to decide
WON the title of the Maotoks should be annulled.
CAs findings None of the parties were able to prove a valid alienation of Lot 823 from the government in accordance
with the provisions of Act No. 1120 otherwise known as the Friar Lands Act. Notably lacking in the deed of conveyance
of the Manotoks is the approval of the Secretary of Agriculture and Commerce as required by Section 18 of the said law.
Upon close scrutiny, the factual allegations and voluminous documentary exhibits relating to the purchase of Lot 823 by
the predecessors-in-interest of the claimants revealed badges of fraud and irregularity.

BASIS FOR THEIR CLAIMS FOR OWNERSHIP:

Manotoks Their grandfather bought Lot 823 from the Government in 1919. They have since occupied the land, built
their houses and buildings on it. The subject land is now known as Manotok Compound.
Barques Teresita claims her father (Homer) bought land from Emiliano Setosta who had a TCT in his name.
Manahans The lot originally belonged to his parents but was subsequently bought by his wife. They had a caretaker on
the property but she was ousted by armed men in 1950s so they just declared the property for taxation to protect their
rights.
 ISSUE: Who has the better right over Lot No. 823? NO ONE! It belongs to the National Government.

RATIO:
From the proceedings in the CA, it was established that while records of the DENR-LMB indicate the original
claimant/applicant of Lot 823 as a certain Valentin Manahan, only the Manotoks were able to produce a sale certificate in
the name of their predecessors-in-interest, certified by the LMB Records Management Division. In addition, the Manotoks
submitted photocopies of original documents entitled Assignment of Sale Certificate dated 1919, 1920 and 1923.
Sale Certificate No. 1054 was not signed by the Director of Lands nor approved by the Secretary of the Interior. The
Certificates of Assignment of Sale contained only the signature of the Director of Lands. The Manotoks belatedly secured
from the National Archives a certified copy of Deed of Conveyance No. 29204 dated December 7, 1932, which likewise
lacks the approval of the Secretary of Agriculture and Natural Resources as it was signed only by the Director of Lands.

Act No. 1120 SECTION 18. No lease or sale made by Chief of the Bureau of Public Lands under the provisions of this
Act shall be valid until approved by the Secretary of the Interior.

It is clear from the foregoing provision and from jurisprudence that the sale of friar lands shall be valid only if approved by
the Secretary of the Interior (later the Secretary of Agriculture and Commerce).

In their Memorandum, the Manotoks pointed out that their photocopy of the original Deed of Conveyance No. 29204,
sourced from the National Archives, shows on the second page a poorly imprinted typewritten name over the words
Secretary of Agriculture and Natural Resources, which name is illegible, and above it an even more poorly imprinted
impression of what may be a stamp of the Secretarys approval.
The Manotoks are invoking the presumption of regularity in the performance of the RDs task in issuing the TCT in the
Manotok name. The Manotoks contend that we can assume that the Manotok deed of conveyance was in fact approved
by the Department Secretary because the register of deeds did issue TCT No. 22813 in the name of the buyer Severino
Manotok. FURTHER, the Manotoks assert that even if we were to ignore the presumption of validity in the performance
of official duty, Department Memorandum Order No. 16-05 issued on October 27, 2005 by then DENR Secretary Michael
T. Defensor, supplies the omission of approval by the Secretary of Agriculture and Natural Resources in deeds of
conveyances over friar lands.
o NO! These arguments fail.
Citing Alonso v. Cebu Country Club which applied the rule in the Solid State and Liao Cases the absence of approval
by the Secretary of Agriculture and Commerce in the sale certificate and assignment of sale certificate made the sale null
and void ab initio. Necessarily, there can be no valid titles issued on the basis of such sale or assignment.
o SC in the MR of the Alonso case underscored that the approval is a MADATORY requirement. Approval of the Secretary
of the Interior cannot simply be presumed or inferred from certain acts since the law is explicit in its mandate. Petitioners
have not offered any cogent reason that would justify a deviation from this rule.

DENR Memorandum Order No. 16, invoked by both the Manotoks and the Manahans, states that some Deeds of
Conveyance on record in the field offices of the LMB do not bear the Secretarys signature despite full payment for the
Friar Land. They are deemed signed or otherwise ratified by this Memo provided that the applicant really paid the
purchase price and complied with all the requirements under the Friar Lands Act.
o The CA opined that the Manotoks cannot benefit from the above department issuance because it makes reference only to
those deeds of conveyance on file with the records of the DENR field offices. The Manotoks copy of the alleged Deed of
Conveyance No. 29204 issued in 1932, was sourced from the National Archives.
Manotoks also point out that the Friar Lands Act itself states that the Government ceases reservation of its title once the
buyer had fully paid the price. (They were claiming that they fully paid!) Their basis is SECTION 15[2] of the Friar Lands
Act.
Court found that the old rule would support the Manotoks contention however, the new rule Pugeda v. Trias, the
conveyance executed in favor of a buyer or purchaser, or the so-called certificate of sale, is a conveyance of the
ownership of the property, subject only to the resolutory condition that the sale may be cancelled if the price agreed upon
is not paid for in full.
Clearly, it is the execution of the contract to sell and delivery of the certificate of sale that vests title and ownership to the
purchaser of friar land. Such certificate of sale must, of course, be signed by the Secretary of Agriculture and Natural
Resources, as evident from Sections 11[3], 12[4] and the 2nd paragraph of Section 15[5], in relation to Section 18.

CONCLUSIONS
Manotoks could not have acquired ownership of the subject lot as they had no valid certificate of sale issued to them by
the Government because their Certificate lacks the signature of the Director of Lands and the Secretary of Agriculture and
Natural Resources
 The decades-long occupation by the Manotoks of Lot 823, their payment of real property taxes and construction of
buildings, are of no moment. It must be noted that the Manotoks miserably failed to prove the existence of the title
allegedly issued in the name of Severino Mantotok after the latter had paid in full the purchase price. The Manotoks did
not offer any explanation as to why the only copy of TCT No. 22813 was torn in half and no record of documents leading
to its issuance can be found in the registry of deeds. As to the certification issued by the Register of Deeds of Caloocan,
it simply described the copy presented as DILAPIDATED without stating if the original copy of TCT No. 22813 actually
existed in their records, nor any information on the year of issuance and name of registered owner.
o As we stressed in Alonso: Prescription can never lie against the Government.

RE: MANAHANS No copy of the alleged Sale Certificate No. 511 can be found in the records of either the DENR-NCR,
LMB or National Archives. Although the OSG submitted a certified copy of Assignment of Sale Certificate No. 511
allegedly executed by Valentin Manahan in favor of Hilaria de Guzman, there is no competent evidence to show that the
claimant Valentin Manahan or his successors-in-interest actually occupied Lot 823, declared the land for tax purposes, or
paid the taxes due thereon.
Even assuming arguendo the existence and validity of the alleged Sale Certificate No. 511 and Assignment of Sale
Certificate No. 511 presented by the Manahans, the CA correctly observed that the claim had become stale after the
lapse of 86 years from the date of its alleged issuance. Citing Liao v. CA the certificates of sale x x x became stale after
10 years from its issuance and hence cannot be the source documents for issuance of title more than 70 years later.

Dispositive:
Manotok Appeal denied
Manahan Petition for intervention denied
Petition for reconstitution of the Barque title denied
All the TCTs in the name of Manotoks, Manahans and Barque, are NULL and VOID. The Register of Deeds of Caloocan
City and/or Quezon City are hereby ordered to CANCEL the said titles.
Lot No. 823 is property of the National Government of the Philippines w/o prejudice to Reversion proceedings