1. FERNANDO SANTOS, petitioner, vs. Spouses ARSENIO and NIEVES REYES, respondents.

Remedial Law; Appeals; Factual findings of the Court of Appeals affirming those of the trial court are binding and conclusive on
the Supreme Court.—Petitioner has utterly failed to demonstrate why a review of these factual findings is warranted. Well-
entrenched is the basic rule that factual findings of the Court of Appeals affirming those of the trial court are binding and
conclusive on the Supreme Court. Although there are exceptions to this rule, petitioner has not satisfactorily shown that any of
them is applicable to this issue.

Same; Same; When the judgment of the Court of Appeals is premised on a misapprehension of facts or a failure to notice
certain relevant facts that would otherwise justify a different conclusion, a review of its factual findings may be conducted.—
When the judgment of the CA is premised on a misapprehension of facts or a failure to notice certain relevant facts that would
otherwise justify a different conclusion, as in this particular issue, a review of its factual findings may be conducted, as an
exception to the general rule applied to the first two issues.

PETITION for review on certiorari of a decision of the Court of Appeals.

PANGANIBAN, J.:

As a general rule, the factual findings of the Court of Appeals affirming those of the trial court are binding on the Supreme
Court. However, there are several exceptions to this principle. In the present case, we find occasion to apply both the rule and
one of the exceptions.

Before us is a Petition for Review on Certiorari assailing the November 28, 1997 Decision,1 as well as the August 17, 1998 and
the October 9, 1998 Resolutions,2 issued by the Court of Appeals (CA) in CA-GR CV No. 34742. The Assailed Decision disposed
as follows:

“WHEREFORE, the decision appealed from is AFFIRMED save as For the counterclaim which is hereby DISMISSED. Costs against
[petitioner].”3

Resolving respondent’s Motion for Reconsideration, the August 17, 1998 Resolution ruled as follows:

“WHEREFORE, [respondents’] motion for reconsideration is GRANTED. Accordingly, the court’s decision dated November 28,
1997 is hereby MODIFIED in that the decision appealed from is AFFIRMED in toto, with costs against [petitioner].”4

The October 9, 1998 Resolution denied “for lack of merit” petitioner’s Motion for Reconsideration of the August 17, 1998
Resolution.5

The Facts

The events that led to this case are summarized by the CA as follows:

“Sometime in June, 1986, [Petitioner] Fernando Santos and [Respondent] Nieves Reyes were introduced to each other by one
Meliton Zabat regarding a lending business venture proposed by Nieves. It was verbally agreed that [petitioner would] act as
financier while [Nieves] and Zabat [would] take charge of solicitation of members and collection of loan payments. The venture
was launched on June 13, 1986, with the understanding that [petitioner] would receive 70% of the profits while x x x Nieves
and Zabat would earn 15% each,

“In July, 1986, x x x Nieves introduced Cesar Gragera to [petitioner]. Gragera, as chairman of the Monte Maria Development
Corporation6 (Monte Maria, for brevity), sought short-term loans for members of the corporation. [Petitioner] and Gragera
executed an agreement providing funds for Monte Maria’s members. Under the agreement, Monte Maria, represented by
Gragera, was entitled to P1.31 commission per thousand paid daily to [petitioner] (Exh. ‘A’), x x x Nieves kept the books as
representative of [petitioner] while [Respondent] Arsenio, husband of Nieves, acted as credit investigator.

“On August 6, 1986, [petitioner], xxx [Nieves] and Zabat executed the ‘Article of Agreement’ which formalized their earlier
verbal arr angement.

“[Petitioner] and [Nieves] later discovered that their partner Zabat engaged in the same lending business in competition with
their partnership[.] Zabat was thereby expelled from the partnership. The operations with Monte Maria continued.

“On June 5, 1987, [petitioner] filed a complaint for recovery of sum of money and damages. [Petitioner] charged
[respondents], allegedly in their capacities as employees of [petitioner], with having misappropriated funds intended for
Gragera for the period July 8, 1986 up to March 31, 1987. Upon Gragera s complaint that his commissions were inadequately
remitted, [petitioner] entrusted P200,000.00 to x x x Nieves to be given to Gragera. x x x Nieves allegedly failed to account for
the amount. [Petitioner] asserted that after examination of the records, he found that of the total amount of P4,623,201.90
entrusted to [respondents], only P3,068,133.20 was remitted to Gragera, thereby leaving the balance of P1,555,065.70
unaccounted for.

“In their answer, [respondents] asserted that they were partners and not mere employees of [petitioner]. The complaint, they
alleged, was filed to preempt and prevent them from claiming their rightful share to the profits of the partnership.

“x x x Arsenic alleged that he was enticed by [petitioner] to take the place of Zabat after [petitioner] learned of Zabat’s
activities. Arsenio resigned from his job at the Asian Development Bank to join the partnership.

“For her part, x x x Nieves claimed that she participated in the business as a partner, as the lending activity with Monte Maria
originated from her initiative. Except for the limited period of July 8, 1986 through August 20, 1986, she did not handle sums
intended for Gragera. Collections were turned over to Gragera because he guaranteed 100% payment of all sums loaned by
Monte Maria. Entries she made on worksheets were based on this assumptive 100% collection of all loans. The loan releases
were made less Gragera’s agreed commission. Because of this arrangement, she neither received payments from borrowers
nor remitted any amount to Gragera. Her job was merely to make worksheets (Exhs. ‘15’ to ‘15-DDDDDDDDDD’) to convey to
[petitioner] how much he would earn if all the sums guaranteed by Gragera were collected.

“[Petitioner] on the other hand insisted that [respondents] were his mere employees and not partners with respect to the
agreement with Gragera. He claimed that after he discovered Zabat’s activities, he ceased infusing funds, thereby causing the
extinguishment of the partnership. The agreement with Gragera was a distinct partnership [from] that of [respondent] and
Zabat. [Petitioner] asserted that [respondents] were hired as salaried employees with respect to the partnership between
[petitioner] and Gragera.

“[Petitioner] further asserted that in Nieves’ capacity as bookkeeper, she received all payments from which Nieves deducted
Gragera’s commission. The commission would then be remitted to Gragera. She likewise determined loan releases.

“During the pre-trial, the parties narrowed the issues to the following points: whether [respondents] were employees or
partners of [petitioner], whether [petitioner] entrusted money to [respondents] for delivery to Gragera, whether the
P1,555,068.70 claimed under the complaint was actually remitted to Gragera and whether [respondents] were entitled to their
counterclaim for share in the profits.”7

Ruling of the Trial Court

In its August 13, 1991 Decision, the trial court held that respondents were partners, not mere employees, of petitioner. It
further ruled that Gragera was only a commission agent of petitioner, not his partner. Petitioner moreover failed to prove that
he had entrusted any money to Nieves. Thus, respondents’ counterclaim for their share in the partnership and for damages
was granted. The trial court disposed as follows:

“39. WHEREFORE, the Court hereby renders judgment as follows:

39.1. THE SECOND AMENDED COMPLAINT dated July 26, 1989 is DISMISSED.

39.2. The [Petitioner] FERNANDO J. SANTOS is ordered to pay the [Respondent] NIEVES S. REYES, the following:

39.2.1. P3,064,428.00 The 15 percent share of the [respondent] NIEVES S. REYES in the profits of her joint venture with the
[petitioner].

39.2.2. Six (6) percent of P3,064,428.00 As damages from August 3, 1987 until the P3,064,428.00 is fully paid.

39.2.3. ------ P50,000.00 As moral damages

39.2.4. P10,000.00 As exemplary damages

39.3. The [petitioner] FERNANDO J. SANTOS is ordered to pay the [respondent] ARSENIO REYES, the following:

39.3.1. P2,899,739.50 The balance of the 15 percent share of the [respondent] ARSENIO REYES in the profits of his joint
venture with the [petitioner].

39.3.2. ------ Six (6) percent of P2,899,739.50 As damages from August 3, 1987 until the P2,899,739.50 is fully paid.
39.3.3. P25,000.00 As moral damages

39.3.4. ------ P10,000.00 ------ As exemplary damages

39.4. ------ The [petitioner] FERNANDO J. SANTOS is ordered to pay the [respondents]:

39.4.1. ------ P50,000.00 As attorney’s fees; and

39.4.2. ------ The cost of the suit.”8

Ruling of the Court of Appeals

On appeal, the Decision of the trial court was upheld, and the counterclaim of respondents was dismissed. Upon the latter’s
Motion for Reconsideration, however, the trial court’s Decision was reinstated in toto. Subsequently, petitioner’s own Motion
for Reconsideration was denied in the CA Resolution of October 9, 1998.

The CA ruled that the following circumstances indicated the existence of a partnership among the parties: (1) it was Nieves
who broached to petitioner the idea of starting a money-lending business and introduced him to Gragera; (2) Arsenio received
“dividends” or “profit-shares” covering the period July 15 to August 7, 1986 (Exh. “6”); and (3) the partnership contract was
executed after the Agreement with Gragera and petitioner and thus showed the parties’ intention to consider it as a
transaction of the partnership. In their common venture, petitioner invested capital while respondents contributed industry or
services, with the intention of sharing in the profits of the business.

The CA disbelieved petitioner’s claim that Nieves had misappropriated a total of P200,000 which was supposed to be delivered
to Gragera to cover unpaid commissions. It was his task to collect the amounts due, while hers was merely to prepare the daily
cash flow reports (Exhs. “15–15DDDDDDDDDD”) to keep track of his collections.

Hence, this Petition.9

Issue

Petitioner asks this Court to rule on the following issues:10

“Whether or not Respondent Court of Appeals acted with grave abuse of discretion tantamount to excess or lack of jurisdiction
in:

9 On November 4, 1999, the Court received the Memorandum for the Respondents, signed by Atty. Benito P. Fabie.
Petitioner’s Memorandum, signed by Atty. Arcangelita M. Romilla-Lontok, was received on October 20, 1999. In its October 27,
1999 Resolution, this Court required the CA to explain the discrepancy in the copies of the August 17, 1998 Resolution received
by the parties and to furnish it with an authentic copy thereof. The CA complied on November 12, 1999, the date on which this
case was deemed submitted for resolution.

1. Holding that private respondents were partners/joint venturers and not employees of Santos in connection with the
agreement between Santos and Monte Maria/Gragera;

2. Affirming the findings of the trial court that the phrase ‘Received by’ on documents signed by Nieves Reyes signified
receipt of copies of the documents and not of the sums shown thereon;

3. Affirming that the signature of Nieves Reyes on Exhibit ‘E’ was a forgery;

4. Finding that Exhibit ‘H’ [did] not establish receipt by Nieves Reyes of P200,000.00 for delivery to Gragera;

5. Affirming the dismissal of Santos’ [Second] Amended Complaint;

6. Affirming the decision of the trial court, upholding private respondents’ counterclaim;

7. Denying Santos’ motion for reconsideration dated September 11, 1998.”

Succinctly put, the following were the issues raised by petitioner: (1) whether the parties’ relationship was one of partnership
or of employer-employee; (2) whether Nieves misappropriated the sums of money allegedly entrusted to her for delivery to
Gragera as his commissions; and (3) whether respondents were entitled to the partnership profits as determined by the trial
court.

The Court’s Ruling

The Petition is partly meritorious.

First Issue: Business Relationship

Petitioner maintains that he employed the services of respondent spouses in the money-lending venture with Gragera, with
Nieves as bookkeeper and Arsenio as credit investigator. That Nieves introduced Gragera to Santos did not make her a partner.
She was only a witness to the Agreement between the two. Separate from the partnership between petitioner and Gragera
was that which existed among petitioner, Nieves and Zabat, a partnership that was dissolved when Zabat was expelled.

On the other hand, both the CA and the trial court rejected petitioner’s contentions and ruled that the business relationship
was one of partnership. We quote from the CA Decision, as follows:

“[Respondents] were industrial partners of [petitioner]. xxx Nieves herself provided the initiative in the lending activities with
Monte Maria. In consonance with the agreement between appellant, Nieves and Zabat (later replaced by Arsenio),
[respondents] contributed industry to the common fund with the intention of sharing in the profits of the partnership.
[Respondents] provided services without which the partnership would not have [had] the wherewithal to carry on the purpose
for which it was organized and as such [were] considered industrial partners (Evangelista v. Abad Santos, 51 SCRA 416 [1973]).

“While concededly, the partnership between [petitioner,] Nieves and Zabat was technically dissolved by the expulsion of Zabat
therefrom, the remaining partners simply continued the business of the partnership without undergoing the procedure
relative to dissolution. Instead, they invited Arsenio to participate as a partner in their operations. There was therefore, no
intent to dissolve the earlier partnership. The partnership between [petitioner,] Nieves and Arsenio simply took over and
continued the business of the former partnership with Zabat, one of the incidents of which was the lending operations with
Monte Maria.

xxx xxx xxx

“Gragera and [petitioner] were not partners. The money-lending activities undertaken with Monte Maria was done in pursuit
of the business for which the partnership between [petitioner], Nieves and Zabat (later Arsenio) was organized. Gragera who
represented Monte Maria was merely paid commissions in exchange for the collection of loans. The commissions were fixed
on gross returns, regardless of the expenses incurred in the operation of the business. The sharing of gross returns does not in
itself establish a partnership.”11

We agree with both courts on this point. By the contract of partnership, two or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of dividing the profits among themselves.12 The “Articles of
Agreement” stipulated that the signatories shall share the profits of the business in a 70–15–15 manner, with petitioner
getting the lion’s share.13 This stipulation clearly proved the establishment of a partnership.

We find no cogent reason to disagree with the lower courts that the partnership continued lending money to the members of
the Monte Maria Community Development Group, Inc., which later on changed its business name to Private Association for
Community Development, Inc. (PACDI). Nieves was not merely petitioner’s employee. She discharged her bookkeeping duties
in accordance with paragraphs 2 and 3 of the Agreement, which states as follows:

“2. That the SECOND PARTY and THIRD PARTY shall handle the solicitation and screening of prospective borrowers, and shall
x x x each be responsible in handling the collection of the loan payments of the borrowers that they each solicited.

“3. That the bookkeeping and daily balancing of account of the business operation shall be handled by the SECOND
PARTY.”14

The “Second Party” named in the Agreement was none other than Nieves Reyes. On the other hand, Arsenio’s duties as credit
investigator are subsumed under the phrase “screening of prospective borrowers.” Because of this Agreement and the
disbursement of monthly “allowances” and “profit shares” or “dividends” (Exh. “6”) to Arsenio, we uphold the factual finding
of both courts that he replaced Zabat in the partnership.

Indeed, the partnership was established to engage in a moneylending business, despite the fact that it was formalized only
after the Memorandum of Agreement had been signed by petitioner and Gragera. Contrary to petitioner’s contention, there is
no evidence to show that a different business venture is referred to in this Agreement, which was executed on August 6, 1986,
or about a month after the Memorandum had been signed by petitioner and Gragera on July 14, 1986. The Agreement itself
attests to this fact:
“WHEREAS, the parties have decided to formalize the terms of their business relationship in order that their respective
interests may be properly defined and established for their mutual benefit and understanding,”15

Second Issue: No Proof of Misappropriation of

Gragera’s Unpaid Commission

Petitioner faults the CA finding that Nieves did not misappropriate money intended for Gragera’s commission. According to
him, Gragera remitted his daily collection to Nieves. This is shown by Exhibit “B” (the “Schedule of Daily Payments”), which
bears her signature under the words “received by.” For the period July 1986 to March 1987, Gragera should have earned a
total commission of P4,282,429.30. However, only P3,068,133.20 was received by him. Thus, petitioner infers that she
misappropriated the difference of P1,214,296.10, which represented the unpaid commissions. Exhibit “H” is an untitled
tabulation which, according to him, shows that Gragera was also entitled to a commission of P200,000, an amount that was
never delivered by Nieves.16

On this point, the CA ruled that Exhibits “B,” “F,” “E” and “H” did not show that Nieves received for delivery to Gragera any
amount from which the P1,214,296.10 unpaid commission was supposed to come, and that such exhibits were insufficient
proof that she had embezzled P200,000. Said the CA:

“The presentation of Exhibit ‘D’ vaguely denominated as ‘members ledger’ does not clearly establish that Nieves received
amounts from Monte Maria’s members. The document does not clearly state what amounts the entries thereon represent.
More importantly, Nieves made the entries for the limited period of January 11, 1987 to February 17, 1987 only while the rest
were made by Gragera’s own staff.

“Neither can we give probative value to Exhibit ‘E' which allegedly shows acknowledgment of the remittance of commissions
to Verona Gonzales. The document is a private one and its due execution and authenticity have not been duly proved as
required in [S]ection 20, Rule 132 of the Rules of Court which states:

‘Sec. 20. Proof of Private Document—Before any private document offered as authentic is received in evidence, its due
execution and authenticity must be proved either:

(a) By anyone who saw the document executed or written; or

(b) By evidence of the genuineness of the signature or handwriting of the maker.

‘Any other private document need only be identified as that which it is claimed to be.’

“The court a quo even ruled that that the signature thereon was a forgery, as it found that:

‘x x x. But NIEVES denied that Exh. E-1 is her signature; she claimed that it is a forgery. The initial stroke of Exh. E-1 starts from
up and goes downward. The initial stroke of the genuine signatures of NIEVES (Exhs. A-3, B-1, F-1, among others) starts from
below and goes upward. This difference in the start of the initial stroke of the signatures Exhs. E-1 and of the genuine
signatures lends credence to Nieves’ claim that the signature Exh. E-1 is a forgery.’

xxx xxx xxx

“Nieves’ testimony that the schedules of daily payment (Exhs. ‘B’ and ‘F’) were based on the predetermined 100% collection as
guaranteed by Gragera is credible and clearly in accord with the evidence. A perusal of Exhs. “B” and “F” as well as Exhs. 15’ to
15-DDDDDDDDDD’ reveal that the entries were indeed based on the 100% assumptive collection guaranteed by Gragera. Thus,
the total amount recorded on Exh. ‘B’ is exactly the number of borrowers multiplied by the projected collection of P150.00 per
borrower. This holds true for Exh. ‘F.’

“Corollarily, Nieves’ explanation that the documents were pro forma and that she signed them not to signify that she collected
the amounts but that she received the documents themselves is more believable than [petitioner’s] assertion that she actually
handled the amounts.

“Contrary to [petitioner’s] assertion, Exhibit ‘H’ does not unequivocally establish that x x x Nieves received P200,000.00
commission for Gragera. As correctly stated by the court a quo, the document showed a liquidation of P240,000.00 and not
P200,000.00.
“Accordingly, we find Nieves’ testimony that after August 20, 1986, all collections were made by Gragera believable and
worthy of credence. Since Gragera guaranteed a daily 100% payment of the loans, he took charge of the collections. As
[petitioner’s] representative, Nieves merely prepared the daily cash flow reports (Exh. ‘15’ to ‘15 DDDDDDDDDD’) to enable
[petitioner] to keep track of Gragera’s operations. Gragera on the other hand devised the schedule of daily payment (Exhs. ‘B’
and ‘F’) to record the projected gross daily collections.

“As aptly observed by the court a quo:

‘26.1. As between the versions of SANTOS and NIEVES on how the commissions of GRAGERA [were] paid to him[,] that of
NIEVES is more logical and practical and therefore, more believable. SANTOS’ version would have given rise to this improbable
situation: GRAGERA would collect the daily amortizations and then give them to NIEVES; NIEVES would get GRAGERA’s
commissions from the amortizations and then give such commission to GRAGERA.’ ”17

These findings are in harmony with the trial court’s ruling, which we quote below:

“21. Exh. H does not prove that SANTOS gave to NIEVES and the latter received P200,000.00 for delivery to GRAGERA. Exh. H
shows under its sixth column ADDITIONAL CASH’ that the additional cash was P240,000.00. If Exh. H were the liquidation of the
P200,000.00 as alleged by SANTOS, then his claim is not true. This is so because it is a liquidation of the sum of P240,000.00.

“21.1. SANTOS claimed that he learned of NIEVES’ failure to give the P200,000.00 to GRAGERA when he received the latter’s
letter complaining of its delayed release. Assuming as true SANTOS’ claim that he gave P200,000.00 to GRAGERA, there is no
competent evidence that NIEVES did not give it to GRAGERA. The only proof that NIEVES did not give it is the letter. But
SANTOS did not even present the letter in evidence. He did not explain why he did not.

“21.2. The evidence shows that all money transactions of the money-lending business of SANTOS were covered by petty cash
vouchers. It is therefore strange why SANTOS did not present any voucher or receipt covering the P200,000.00.”18

In sum, the lower courts found it unbelievable that Nieves had embezzled P1,555,068.70 from the partnership. She did not
remit P1,214,296.10 to Gragera, because he had deducted his commissions before remitting his collections. Exhibits “B” and
“F” are merely computations of what Gragera should collect for the day; they do not show that Nieves received the amounts
stated therein. Neither is there sufficient proof that she misappropriated P200,000, because Exhibit “H” does not indicate that
such amount was received by her; in fact, it shows a different figure.

Petitioner has utterly failed to demonstrate why a review of these factual findings is warranted. Well-entrenched is the basic
rule that factual findings of the Court of Appeals affirming those of the trial court are binding and conclusive on the Supreme
Court.19 Although there are exceptions to this rule, petitioner has not satisfactorily shown that any of them is applicable to
this issue.

Third Issue: Accounting of Partnership

Petitioner refuses any liability for respondents’ claims on the profits of the partnership. He maintains that “both business
propositions were flops,” as his investments were “consumed and eaten up by the commissions orchestrated to be due
Gragera”—a situation that “could not have been rendered possible without complicity between Nieves and Gragera.”

Respondent spouses, on the other hand, postulate that petitioner instituted the action below to avoid payment of the
demands of Nieves, because sometime in March 1987, she “signified to petitioner that it was about time to get her share of
the profits which had already accumulated to some P3 million.” Respondents add that while the partnership has not declared
dividends or liquidated its earnings, the profits are already reflected on paper. To prove the counterclaim of Nieves, the
spouses show that from June 13, 1986 up to April 19, 1987, the profit totaled P20,429,520 (Exhs. “10” et seq. and “15” et seq.).
Based on that income, her 15 percent share under the joint venture amounts to P3,064,428 (Exh. “10–1– 3”); and Arsenio’s,
P2,026,000 minus the P30,000 which was already advanced to him (Petty Cash Vouchers, Exhs. “6, 6-A to 6B”).

The CA originally held that respondents’ counterclaim was premature, pending an accounting of the partnership. However, in
its assailed Resolution of August 17, 1998, it turned volte face. Affirming the trial court’s ruling on the counterclaim, it held as
follows:

“We earlier ruled that there is still need for an accounting of the profits and losses of the partnership before we can rule with
certainty as to the respective shares of the partners. Upon a further review of the records of this case, however, there appears
to be sufficient basis to determine the amount of shares of the parties and damages incurred by [respondents]. The fact is that
the court a quo already made such a determination [in its] decision dated August 13, 1991 on the basis of the facts on
record.”20

The trial court’s ruling alluded to above is quoted below:

“27. The defendants’ counterclaim for the payment of their share in the profits of their joint venture with SANTOS is supported
by the evidence.

“27.1. NIEVES testified that: Her claim to a share in the profits is based on the agreement (Exhs. “5”, “5-A” and “5-B”). The
profits are shown in the working papers (Exhs. “10” to “10–1”, inclusive) which she prepared. Exhs. “10” to “10–1” (inclusive)
were based on the daily cash flow reports of which Exh. “3” is a sample. The originals of the daily cash flow reports (Exhs. “3”
and “15” to “15-D(10)” were given to SANTOS. The joint venture had a net profit of P20,429,520.00 (Exh. “10-I-1”), from its
operations from June 13, 1986 to April 19, 1987 (Exh. “1–1–4”). She had a share of P3,064,428.00 (Exh. “10-I-3”) and ARSENIO,
about P2,926,000.00, in the profits.

“27.1.1 SANTOS never denied NIEVES' testimony that the moneylending business he was engaged in netted a profit and that
the originals of the daily case flow reports were furnished to him. SANTOS however alleged that the money-lending operation
of his joint venture with NIEVES and ZABAT resulted in a loss of about half a million pesos to him. But such loss, even if true,
does not negate NIEVES’ claim that overall, the joint venture among them—SANTOS, NIEVES and ARSENIO—netted a profit.
There is no reason for the Court to doubt the veracity of [the testimony of] NIEVES.

“27.2 The P26,260.50 which ARSENIO received as part of his share in the profits (Exhs. 6, 6-A and 6-B) should be deducted from
his total share.”21

After a close examination of respondents’ exhibits, we find reason to disagree with the CA. Exhibit “10-I”22 shows that the
partnership earned a “total income” of P20,429,520 for the period June 13, 1986 until April 19, 1987. This entry is derived from
the sum of the amounts under the following column headings: “2-Day Advance Collection,” “Service Fee,” “Notarial Fee,”
“Application Fee,” “Net Interest Income” and “Interest Income on Investment.” Such entries represent the collections of the
money-lending business or its gross income.

The “total income” shown on Exhibit “10-I” did not consider the expenses sustained by the partnership. For instance, it did not
factor in the “gross loan releases” representing the money loaned to clients. Since the business is money-lending, such
releases are comparable with the inventory or supplies in other business enterprises.

Noticeably missing from the computation of the “total income” is the deduction of the weekly allowance disbursed to
respondents. Exhibits “I” et seq. and “J” et seq.23 show that Arsenio received allowances from July 19, 1986 to March 27, 1987
in the aggregate amount of P25,500; and Nieves, from July 12, 1986 to March 27, 1987, in the total amount of P25,600. These
allowances are different from the profit already received by Arsenio. They represent expenses that should have been deducted
from the business profits. The point is that all expenses incurred by the money-lending enterprise of the parties must first be
deducted from the “total income” in order to arrive at the “net profit” of the partnership. The share of each one of them
should be based on this “net profit” and not from the “gross income” or “total income” reflected in Exhibit “10–1,” which the
two courts invariably referred to as “cash flow” sheets.

Similarly, Exhibits “15” et seq.,24 which are the “Daily Cashflow Reports,” do not reflect the business expenses incurred by the
parties, because they show only the daily cash collections. Contrary to the rulings of both the trial and the appellate courts,
respondents’ exhibits do not reflect the complete financial condition of the money-lending business. The lower courts
obviously labored over a mistaken notion that Exhibit “10–1–1” represented the “net profits” earned by the partnership.

For the purpose of determining the profit that should go to an industrial partner (who shares in the profits but is not liable for
the losses), the gross income from all the transactions carried on by the firm must be added together, and from this sum must
be subtracted the expenses or the losses sustained in the business. Only in the difference representing the net profits does the
industrial partner share. But if, on the contrary, the losses exceed the income, the industrial partner does not share in the
losses.

When the judgment of the CA is premised on a misapprehension of facts or a failure to notice certain relevant facts that would
otherwise justify a different conclusion, as in this particular issue, a review of its factual findings may be conducted, as an
exception to the general rule applied to the first two issues.26
The trial court has the advantage of observing the witnesses while they are testifying, an opportunity not available to appellate
courts. Thus, its assessment of the credibility of witnesses and their testimonies are accorded great weight, even finality, when
supported by substantial evidence; more so when such assessment is affirmed by the CA. But when the issue involves the
evaluation of exhibits or documents that are attached to the case records, as in the third issue, the rule may be relaxed. Under
that situation, this Court has a similar opportunity to inspect, examine and evaluate those records, independently of the lower
courts. Hence, we deem the award of the partnership share, as computed by the trial court and adopted by the CA, to be
incomplete and not binding on this Court.

WHEREFORE, the Petition is partly GRANTED. The assailed November 28, 1997 Decision is AFFIRMED, but the challenged
Resolutions dated August 17, 1998 and October 9, 1998 are REVERSED and SET ASIDE. No costs.

SO ORDERED. Santos vs. Reyes, 368 SCRA 261, G.R. No. 135813 October 25, 2001

2. HEIRS OF TAN ENG KEE, petitioners, vs. COURT OF APPEALS and BENGUET LUMBER COMPANY, represented by its
President TAN ENG LAY, respondents.

Appeals; Evidence; Findings of facts of the Court of Appeals will not be disturbed on appeal if such are supported by the
evidence.—As a premise, we reiterate the oft-repeated rule that findings of facts of the Court of Appeals will not be disturbed
on appeal if such are supported by the evidence. Our jurisdiction, it must be emphasized, does not include review of factual
issues.

Same; Same; Exceptions.—Admitted exceptions have been recognized, though, and when present, may compel us to analyze
the evidentiary basis on which the lower court rendered judgment. Review of factual issues is therefore warranted: (1) when
the factual findings of the Court of Appeals and the trial court are contradictory; (2) when the findings are grounded entirely
on speculation, surmises, or conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is
manifestly mistaken, absurd, or impossible; (4) when there is grave abuse of discretion in the appreciation of facts; (5) when
the appellate court, in making its findings, goes beyond the issues of the case, and such findings are contrary to the admissions
of both appellant and appellee; (6) when the judgment of the Court of Appeals is premised on a misapprehension of facts; (7)
when the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a different conclusion;
(8) when the findings of fact are themselves conflicting; (9) when the findings of fact are conclusions without citation of the
specific evidence on which they are based; and (10) when the findings of fact of the Court of Appeals are premised on the
absence of evidence but such findings are contradicted by the evidence on record.

Partnerships; Words and Phrases; In order to constitute a partnership, it must be established that (1) two or more persons
bound themselves to contribute money, property or industry to a common fund, and (2) they intended to divide the profits
among themselves.—The primordial issue here is whether Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber. A
contract of partnership is defined by law as one where: x x x two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons
may also form a partnership for the exercise of a profession. Thus, in order to constitute a partnership, it must be established
that (1) two or more persons bound themselves to contribute money, property, or industry to a common fund, and (2) they
intend to divide the profits among themselves. The agreement need not be formally reduced into writing, since statute allows
the oral constitution of a partnership, save in two instances: (1) when immovable property or real rights are contributed, and
(2) when the partnership has a capital of three thousand pesos or more. In both cases, a public instrument is required. An
inventory to be signed by the parties and attached to the public instrument is also indispensable to the validity of the
partnership whenever immovable property is contributed to the partnership.

Same; Same; Joint Ventures; “Partnership” and “Joint Venture,” Distinguished.—The trial court determined that Tan Eng Kee
and Tan Eng Lay had entered into a joint venture, which it said is akin to a particular partnership. A particular partnership is
distinguished from a joint adventure, to wit: (a) A joint adventure (an American concept similar to our joint accounts ) is a sort
of informal partnership, with no firm name and no legal personality. In a joint account, the participating merchants can
transact business under their own name, and can be individually liable therefor, (b) Usually, but not necessarily a joint
adventure is limited to a SINGLE TRANSACTION, although the business of pursuing to a successful termination may continue for
a number of years; a partnership generally relates to a continuing business of various transactions of a certain kind.

Same; Same; Same; Same; A joint venture may be likened to a particular partnership; The legal concept of a joint venture is of
common law origin and has no precise legal definition, but it has been generally understood to mean an organization formed
for some temporary purpose.—A joint venture “presupposes generally a parity of standing between the joint co-ventures or
partners, in which each party has an equal proprietary interest in the capital or property contributed, and where each party
exercises equal rights in the conduct of the business.” Nonetheless, in Aurbach, et al. v. Sanitary Wares Manufacturing
Corporation, et al., we expressed the view that a joint venture may be likened to a particular partnership, thus: The legal
concept of a joint venture is of common law origin. It has no precise legal definition, but it has been generally understood to
mean an organization formed for some temporary purpose. (Gates v. Megargel, 266 Fed. 811 [1920]) It is hardly
distinguishable from the partnership, since their elements are similar—community of interest in the business, sharing of profits
and losses, and a mutual right of control. (Blackner v. McDermott, 176 F. 2d. 498 [1949]; Carboneau v. Peterson, 95 P.2d., 1043
[1939]; Buckley v. Chadwick, 45 Cal. 2d. 183, 288 P.2d. 12 289 P.2d. 242 [1955]). The main distinction cited by most opinions in
common law jurisdiction is that the partnership contemplates a general business with some degree of continuity, while the
joint venture is formed for the execution of a single transaction, and is thus of a temporary nature. (Tufts v. Mann, 116 Cal.
App. 170, 2 P.2d. 500 [1931]; Harmon v. Martin, 395 111. 595, 71 NE 2d. 74 [1947]; Gates v. Megargel, 266 Fed. 811 [1920]).
This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or
universal, and a particular partnership may have for its object a specific undertaking. (Art. 1783, Civil Code). It would seem
therefore that under Philippine law, a joint venture is a form of partnership and should thus be governed by the law of
partnerships. The Supreme Court has however recognized a distinction between these two business forms, and has held that
although a corporation cannot enter into a partnership contract, it may however engage in a joint venture with others. (At p.
12, Tuazon v. Bolaños, 95 Phil. 906 [1954]) (Campos and Lopez-Campos Comments, Notes and Selected Cases, Corporation
Code 1981).

Same; Co-Ownership; A co-ownership or co-possession is not an indicium of the existence of a partnership.—None of

petitioners’ witnesses could suitably account for the beginnings of Benguet Lumber Company, except perhaps for Dionisio
Peralta whose deceased wife was related to Matilde Abubo. He stated that when he met Tan Eng Kee after the liberation, the
latter asked the former to accompany him to get 80 pieces of G.I. sheets supposedly owned by both brothers. Tan Eng Lay,
however, denied knowledge of this meeting or of the conversation between Peralta and his brother. Tan Eng Lay consistently
testified that he had his business and his brother had his, that it was only later on that his said brother, Tan Eng Kee, came to
work for him. Be that as it may, co-ownership or copossession (specifically here, of the G.I. sheets) is not an indicium of the
existence of a partnership.

Same; The essence of a partnership is that the partners share in the profits and losses; A demand for periodic accounting is
evidence of a partnership.—Besides, it is indeed odd, if not unnatural, that despite the forty years the partnership was
allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a partnership is that the partners share in
the profits and losses. Each has the right to demand an accounting as long as the partnership exists. We have allowed a
scenario wherein “[i]f excellent relations exist among the partners at the start of the business and all the partners are more
interested in seeing the firm grow rather than get immediate returns, a deferment of sharing in the profits is perfectly
plausible.” But in the situation in the case at bar, the deferment, if any, had gone on too long to be plausible. A person is
presumed to take ordinary care of his concerns, x x x A demand for periodic accounting is evidence of a partnership. During his
lifetime, Tan Eng Kee appeared never to have made any such demand for accounting from his brother, Tang Eng Lay.

Same; Where circumstances taken singly may be inadequate to prove the intent to form a partnership, nevertheless, the
collective effect of these circumstances may be such as to support a finding of the existence of the parties’ intent.—In the
instant case, we find private respondent’s arguments to be well-taken. Where circumstances taken singly may be inadequate
to prove the intent to form a partnership, nevertheless, the collective effect of these circumstances may be such as to support
a finding of the existence of the parties’ intent. Yet, in the case at bench, even the aforesaid circumstances when taken
together are not persuasive indicia of a partnership. They only tend to show that Tan Eng Kee was involved in the operations of
Benguet Lumber, but in what capacity is unclear. We cannot discount the likelihood that as a member of the family, he
occupied a niche above the rank-and-file employees. He would have enjoyed liberties otherwise unavailable were he not kin,
such as his residence in the Benguet Lumber Company compound. He would have moral, if not actual, superiority over his
fellow employees, thereby entitling him to exercise powers of supervision. It may even be that among his duties is to place
orders with suppliers. Again, the circumstances proffered by petitioners do not provide a logical nexus to the conclusion
desired; these are not inconsistent with the powers and duties of a manager, even in a business organized and run as
informally as Benguet Lumber Company.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

DE LEON, JR., J .:

In this petition for review on certiorari, petitioners pray for the reversal of the Decision1 dated March 13, 1996 of the former
Fifth Division2 of the Court of Appeals in CA-G.R. CV No. 47937, the dispositive portion of which states:

THE FOREGOING CONSIDERED, the appealed decision is hereby set aside, and the complaint dismissed.

The facts are:

Following the death of Tan Eng Kee on September 13, 1984, Matilde Abubo, the common-law spouse of the decedent, joined
by their children Teresita, Nena, Clarita, Carlos, Corazon and Elpidio, collectively known as herein petitioners HEIRS OF TAN
ENG KEE, filed suit against the decedent’s brother TAN ENG LAY on February 19, 1990. The complaint,3 docketed as Civil Case
No. 1983-R in the Regional Trial Court of Baguio City was for accounting, liquidation and winding up of the alleged partnership
formed after World War II between Tan Eng Kee and Tan Eng Lay. On March 18, 1991, the petitioners filed an amended
complaint4 impleading private respondent herein BENGUET LUMBER COMPANY, as represented by Tan Eng Lay. The amended
complaint was admitted by the trial court in its Order dated May 3, 1991.5

The amended complaint principally alleged that after the second World War, Tan Eng Kee and Tan Eng Lay, pooling their
resources and industry together, entered into a partnership engaged in the business of selling lumber and hardware and
construction supplies. They named their enterprise “Benguet Lumber” which they jointly managed until Tan Eng Kee’s death.
Petitioners herein averred that the business prospered due to the hard work and thrift of the alleged partners. However, they
claimed that in 1981, Tan Eng Lay and his children caused the conversion of the partnership “Benguet Lumber” into a
corporation called “Benguet Lumber Company.” The incorporation was purportedly a ruse to deprive Tan Eng Kee and his heirs
of their rightful participation in the profits of the business. Petitioners prayed for accounting of the partnership assets, and the
dissolution, winding up and liquidation thereof, and the equal division of the net assets of Benguet Lumber.

After trial, Regional Trial Court of Baguio City, Branch 7 rendered judgment6 on April 12, 1995, to wit:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

a) Declaring that Benguet Lumber is a joint venture which is akin to a particular partnership;

b) Declaring that the deceased Tan Eng Kee and Tan Eng Lay are joint adventurers and/or partners in a business venture
and/or particular its and/or losses of the business venture or particular partnership;

c) Declaring that the assets of Benguet Lumber are the same assets turned over to Benguet Lumber Co., Inc. and as such the
heirs or legal representatives of the deceased Tan Eng Kee have a legal right to share in said assets;

d) Declaring that all the rights and obligations of Tan Eng Kee as joint adventurer and/or as partner in a particular
partnership have descended to the plaintiffs who are his legal heirs.

e) Ordering the defendant Tan Eng Lay and/or the President and/or General Manager of Benguet Lumber Company, Inc. to
render an accounting of all the assets of Benguet Lumber Company, Inc. so the plaintiffs know their proper share in the
business;

f) Ordering the appointment of a receiver to preserve and/or administer the assets of Benguet Lumber Company, Inc. until
such time that said corporation is finally liquidated are directed to submit the name of any person they want to be appointed
as receiver failing in which this Court will appoint the Branch Clerk of Court or another one who is qualified to act as such.

g) Denying the award of damages to the plaintiffs for lack of proof except the expenses in filing the instant case.

h) Dismissing the counter-claim of the defendant for lack of merit.

SO ORDERED.

Private respondent sought relief before the Court of Appeals which, on March 13, 1996, rendered the assailed decision
reversing the judgment of the trial court. Petitioners’ motion for reconsideration7 was denied by the Court of Appeals in a
Resolution8 dated October 11, 1996.

Hence, the present petition.

As a side-bar to the proceedings, petitioners filed Criminal Case No. 78856 against Tan Eng Lay and Wilborn Tan for the use of
allegedly falsified documents in a judicial proceeding. Petitioners complained that Exhibits “4” to “4-U” offered by the
defendants before the trial court, consisting of payrolls indicating that Tan Eng Kee was a mere employee of Benguet Lumber,
were fake, based on the discrepancy in the signatures of Tan Eng Kee. They also filed Criminal Cases Nos. 78857-78870 against
Gloria, Julia, Juliano, Willie, Wilfredo, Jean, Mary and Willy, all surnamed Tan, for alleged falsification of commercial
documents by a private individual. On March 20, 1999, the Municipal Trial Court of Baguio City, Branch 1, wherein the charges
were filed, rendered judgment9 dismissing the cases for insufficiency of evidence.

In their assignment of errors, petitioners claim that:

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP BETWEEN THE LATE TAN ENG
KEE AND HIS BROTHER TAN ENG LAY BECAUSE: (A) THERE WAS NO FIRM ACCOUNT; (B) THERE WAS NO FIRM LETTERHEADS
SUBMITTED AS EVIDENCE; (C) THERE WAS NO CERTIFICATE OF PARTNERSHIP; (D) THERE WAS NO AGREEMENT AS TO PROFITS
AND LOSSES; AND (E) THERE WAS NO TIME FIXED FOR THE DURATION OF THE PARTNERSHIP (PAGE 13, DECISION).

II

THE HONORABLE COURT OF APPEALS ERRED IN RELYING SOLELY ON THE SELF-SERVING TESTIMONY OF RESPONDENT TAN ENG
LAY THAT BENGUET LUMBER WAS A SOLE PROPRIETORSHIP AND THAT TAN ENG KEE WAS ONLY AN EMPLOYEE THEREOF.

III

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE FOLLOWING FACTS WHICH WERE DULY SUPPORTED BY
EVIDENCE OF BOTH PARTIES DO NOT SUPPORT THE EXISTENCE OF A PARTNERSHIP JUST BECAUSE THERE WAS NO ARTICLES OF
PARTNERSHIP DULY RECORDED BEFORE THE SECURITIES AND EXCHANGE COMMISSION:

a. THAT THE FAMILIES OF TAN ENG KEE AND TAN ENG LAY WERE ALL LIVING AT THE BENGUET LUMBER COMPOUND;

b. THAT BOTH TAN ENG LAY AND TAN ENG KEE WERE COMMANDING THE EMPLOYEES OF BENGUET LUMBER;

c. THAT BOTH TAN ENG KEE AND TAN ENG LAY WERE SUPERVISING THE EMPLOYEES THEREIN;

d. THAT TAN ENG KEE AND TAN ENG LAY WERE THE ONES DETERMINING THE PRICES OF STOCKS TO BE SOLD TO THE
PUBLIC; AND

e. THAT TAN ENG LAY AND TAN ENG KEE WERE THE ONES MAKING ORDERS TO THE SUPPLIERS (PAGE 18, DECISION).

IV

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP JUST BECAUSE THE CHILDREN
OF THE LATE TAN ENG KEE: ELPIDIO TAN AND VERONICA CHOI, TOGETHER WITH THEIR WITNESS BEATRIZ TANDOC, ADMITTED
THAT THEY DO NOT KNOW WHEN THE ESTABLISHMENT KNOWN IN BAGUIO CITY AS BENGUET LUMBER WAS STARTED AS A
PARTNERSHIP (PAGE 16-17, DECISION).

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PARTNERSHIP BETWEEN THE LATE TAN ENG
KEE AND HIS BROTHER TAN ENG LAY BECAUSE THE PRESENT CAPITAL OR ASSETS OF BENGUET LUMBER IS DEFINITELY MORE
THAN P3,000.00 AND AS SUCH THE EXECUTION OF A PUBLIC INSTRUMENT CREATING A PARTNERSHIP SHOULD HAVE BEEN
MADE AND NO SUCH PUBLIC INSTRUMENT ESTABLISHED BY THE APPELLEES (PAGE 17, DECISION).

As a premise, we reiterate the oft-repeated rule that findings of facts of the Court of Appeals will not be disturbed on appeal if
such are supported by the evidence.10 Our jurisdiction, it must be emphasized, does not include review of factual issues. Thus:

Filing of petition with Supreme Court.—A party desiring to appeal by certiorari from a judgment or final order or resolution of
the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with
the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be
distinctly set forth.11 [italics supplied]

Admitted exceptions have been recognized, though, and when present, may compel us to analyze the evidentiary basis on
which the lower court rendered judgment. Review of factual issues is therefore warranted:
 (1) when the factual findings of the Court of Appeals and the trial court are contradictory;

(2) when the findings are grounded entirely on speculation, surmises, or conjectures;

(3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or impossible;

(4) when there is grave abuse of discretion in the appreciation of facts;

(5) when the appellate court, in making its findings, goes beyond the issues of the case, and such findings are contrary to the
admissions of both appellant and appellee;

(6) when the judgment of the Court of Appeals is premised on a misapprehension of facts;

(7) when the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a different
conclusion;

(8) when the findings of fact are themselves conflicting;

(9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and

(10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings are
contradicted by the evidence on record.12

In reversing the trial court, the Court of Appeals ruled, to wit:

We note that the Court a quo over extended the issue because while the plaintiffs mentioned only the existence of a
partnership, the Court in turn went beyond that by justifying the existence of a joint venture.

When mention is made of a joint venture, it would presuppose parity of standing between the parties, equal proprietary
interest and the exercise by the parties equally of the conduct of the business, thus:

xxx xxx xxx xxx

We have the admission that the father of the plaintiffs was not a partner of the Benguet Lumber before the war. The appellees
however argued that (Rollo, p. 104; Brief, p. 6) this is because during the war, the entire stocks of the pre-war Benguet Lumber
were confiscated if not burned by the Japanese. After the war, because of the absence of capital to start a lumber and
hardware business, Lay and Kee pooled the proceeds of their individual businesses earned from buying and selling military
supplies, so that the common fund would be enough to form a partnership, both in the lumber and hardware business. That
Lay and Kee actually established the Benguet Lumber in Baguio City, was even testified to by witnesses. Because of the pooling
of resources, the postwar Benguet Lumber was eventually established. That the father of the plaintiffs and Lay were partners,
is obvious from the fact that: (1) they conducted the affairs of the business during Kee’s lifetime, jointly, (2) they were the ones
giving orders to the employees, (3) they were the ones preparing orders from the suppliers, (4) their families stayed together
at the Benguet Lumber compound, and (5) all their children were employed in the business in different capacities.

It is obvious that there was no partnership whatsoever. Except for a firm name, there was no firm account, no firm letterheads
submitted as evidence, no certificate of partnership, no agreement as to profits and losses, and no time fixed for the duration
of the partnership. There was even no attempt to submit an accounting corresponding to the period after the war until Kee’s
death in 1984. It had no business book, no written account nor any memorandum for that matter and no license mentioning
the existence of a partnership [citation omitted].

Also, the exhibits support the establishment of only a proprietorship. The certification dated March 4, 1971, Exhibit “2,”
mentioned codefendant Lay as the only registered owner of the Benguet Lumber and Hardware. His application for
registration, effective 1954, in fact mentioned that his business started in 1945 until 1985 (thereafter, the incorporation). The
deceased, Kee, on the other hand, was merely an employee of the Benguet Lumber Company, on the basis of his SSS coverage
effective 1958, Exhibit “3.” In the Payrolls, Exhibits “4” to “4-U,” inclusive, for the years 1982 to 1983, Kee was similarly listed
only as an employee; precisely, he was on the payroll listing. In the Termination Notice, Exhibit “5,” Lay was mentioned also as
the proprietor.

xxx xxx xxx xxx

We would like to refer to Arts. 771 and 772, NCC, that a partner [sic] may be constituted in any form, but when an immovable
is constituted, the execution of a public instrument becomes necessary. This is equally true if the capitalization exceeds
P3,000.00, in which case a public instrument is also necessary, and which is to be recorded with the Securities and Exchange
Commission. In this case at bar, we can easily assume that the business establishment, which from the language of the
appellees, prospered (pars. 5 & 9, Complaint), definitely exceeded P3,000.00, in addition to the accumulation of real properties
and to the fact that it is now a compound. The execution of a public instrument, on the other hand, was never established by
the appellees.

And then in 1981, the business was incorporated and the incorporators were only Lay and the members of his family. There is
no proof either that the capital assets of the partnership, assuming them to be in existence, were maliciously assigned or
transferred by Lay, supposedly to the corporation and since then have been treated as a part of the latter’s capital assets,
contrary to the allegations in pars. 6, 7 and 8 of the complaint.

These are not evidences supporting the existence of a partnership:

1) That Kee was living in a bunk house just across the lumber store, and then in a room in the bunk house in Trinidad, but
within the compound of the lumber establishment, as testified to by Tandoc; 2) that both Lay and Kee were seated on a table
and were “commanding people” as testified to by the son, Elpidio Tan; 3) that both were supervising the laborers, as testified
to by Victoria Choi; and 4) that Dionisio Peralta was supposedly being told by Kee that the proceeds of the 80 pieces of the G.I.
sheets were added to the business.

Partnership presupposes the following elements [citation omitted]: 1) a contract, either oral or written. However, if it involves
real property or where the capital is P3,000.00 or more, the execution of a contract is necessary; 2) the capacity of the parties
to execute the contract; 3) money property or industry contribution; 4) community of funds and interest, mentioning equality
of the partners or one having a proportionate share in the benefits; and 5) intention to divide the profits, being the true test of
the partnership. The intention to join in the business venture for the purpose of obtaining profits thereafter to be divided,
must be established. We cannot see these elements from the testimonial evidence of the appellees.

As can be seen, the appellate court disputed and differed from the trial court which had adjudged that TAN ENG KEE and TAN
ENG LAY had allegedly entered into a joint venture. In this connection, we have held that whether a partnership exists is a
factual matter; consequently, since the appeal is brought to us under Rule 45, we cannot entertain inquiries relative to the
correctness of the assessment of the evidence by the court a quo.13 Inasmuch as the Court of Appeals and the trial court had
reached conflicting conclusions, perforce we must examine the record to determine if the reversal was justified.

The primordial issue here is whether Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber. A contract of partnership
is defined by law as one where:

x x x two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of
dividing the profits among themselves.

Two or more persons may also form a partnership for the exercise of a profession.14

Thus, in order to constitute a partnership, it must be established that (1) two or more persons bound themselves to contribute
money, property, or industry to a common fund, and (2) they intend to divide the profits among themselves.15 The agreement
need not be formally reduced into writing, since statute allows the oral constitution of a partnership, save in two instances: (1)
when immovable property or real rights are contributed,16 and (2) when the partnership has a capital of three thousand pesos
or more.17 In both cases, a public instrument is required.18 An inventory to be signed by the parties and attached to the public
instrument is also indispensable to the validity of the partnership whenever immovable property is contributed to the
partnership.19

The trial court determined that Tan Eng Kee and Tan Eng Lay had entered into a joint venture, which it said is akin to a
particular partnership.20 A particular partnership is distinguished from a joint adventure, to wit:

(a) A joint adventure (an American concept similar to our joint accounts) is a sort of informal partnership, with no firm name
and no legal personality. In a joint account, the participating merchants can transact business under their own name, and can
be individually liable therefor.

(b) Usually, but not necessarily a joint adventure is limited to a SINGLE TRANSACTION, although the business of pursuing to a
successful termination may continue for a number of years; a partnership generally relates to a continuing business of various
transactions of a certain kind.21
A joint venture “presupposes generally a parity of standing between the joint co-ventures or partners, in which each party has
an equal proprietary interest in the capital or property contributed, and where each party exercises equal rights in the conduct
of the business.”22 Nonetheless, in Aurbach, et al. v. Sanitary Wares Manufacturing Corporation, et al.23 we expressed the
view that a joint venture may be likened to a particular partnership, thus:

The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been generally
understood to mean an organization formed for some temporary purpose. (Gates v. Megargel, 266 Fed. 811 [1920]) It is hardly
distinguishable from the partnership, since their elements are similar—community of interest in the business, sharing of profits
and losses, and a mutual right of control. (Blackner v. McDermott, 176 F. 2d. 498 [1949]; Carboneau v. Peterson, 95 P.2d., 1043
[1939]; Buckley v. Chadwick, 45 Cal. 2d. 183, 288 P.2d. 12 289 P.2d. 242 [1955]). The main distinction cited by most opinions in
common law jurisdiction is that the partnership contemplates a general business with some degree of continuity, while the
joint venture is formed for the execution of a single transaction, and is thus of a temporary nature. (Tufts v. Mann, 116 Cal.
App. 170, 2 P. 2d. 500 [1931]; Harmon v. Martin, 395 111. 595, 71 NE 2d. 74 [1947]; Gates v. Megargel, 266 Fed. 811 [1920]).
This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or
universal, and a particular partnership may have for its object a specific undertaking. (Art. 1783, Civil Code). It would seem
therefore that under Philippine law, a joint venture is a form of partnership and should thus be governed by the law of
partnerships. The Supreme Court has however recognized a distinction between these two business forms, and has held that
although a corporation cannot enter into a partnership contract, it may however engage in a joint venture with others. (At p.
12, Tuazon v. Bolaños, 95 Phil. 906 [1954]) (Campos and Lopez-Campos Comments, Notes and Selected Cases, Corporation
Code 1981).

Undoubtedly, the best evidence would have been the contract of partnership itself, or the articles of partnership, but there is
none. The alleged partnership, though, was never formally organized. In addition, petitioners point out that the New Civil Code
was not yet in effect when the partnership was allegedly formed sometime in 1945, although the contrary may well be argued
that nothing prevented the parties from complying with the provisions of the New Civil Code when it took effect on August 30,
1950. But all that is in the past. The net effect, however, is that we are asked to determine whether a partnership existed
based purely on circumstantial evidence. A review of the record persuades us that the Court of Appeals correctly reversed the
decision of the trial court. The evidence presented by petitioners falls short of the quantum of proof required to establish a
partnership.

Unfortunately for petitioners, Tan Eng Kee has passed away. Only he, aside from Tan Eng Lay, could have expounded on the
precise nature of the business relationship between them. In the absence of evidence, we cannot accept as an established fact
that Tan Eng Kee allegedly contributed his resources to a common fund for the purpose of establishing a partnership. The
testimonies to that effect of petitioners’ witnesses is directly controverted by Tan Eng Lay. It should be noted that it is not with
the number of witnesses wherein preponderance lies;24 the quality of their testimonies is to be considered. None of
petitioners’ witnesses could suitably account for the beginnings of Benguet Lumber Company, except perhaps for Dionisio
Peralta whose deceased wife was related to Matilde Abubo.25 He stated that when he met Tan Eng Kee after the liberation,
the latter asked the former to accompany him to get 80 pieces of G.I. sheets supposedly owned by both brothers.26 Tan Eng
Lay, however, denied knowledge of this meeting or of the conversation between Peralta and his brother.27 Tan Eng Lay
consistently testified that he had his business and his brother had his, that it was only later on that his said brother, Tan Eng
Kee, came to work for him. Be that as it may, co-ownership or co-possession (specifically here, of the G.I. sheets) is not an
indicium of the existence of a partnership.28

Besides, it is indeed odd, if not unnatural, that despite the forty years the partnership was allegedly in existence, Tan Eng Kee
never asked for an accounting. The essence of a partnership is that the partners share in the profits and losses.29 Each has the
right to demand an accounting as long as the partnership exists.30 We have allowed a scenario wherein “[i]f excellent relations
exist among the partners at the start of the business and all the partners are more interested in seeing the firm grow rather
than get immediate returns, a deferment of sharing in the profits is perfectly plausible.”31 But in the situation in the case at
bar, the deferment, if any, had gone on too long to be plausible. A person is presumed to take ordinary care of his concerns.32
As we explained in another case:

In the first place, plaintiff did not furnish the supposed P20,000.00 capital. In the second place, she did not furnish any help or
intervention in the management of the theatre. In the third place, it does not appear that she has even demanded from
defendant any accounting of the expenses and earnings of the business. Were she really a partner, her first concern should
have been to find out how the business was progressing, whether the expenses were legitimate, whether the earnings were
correct, etc. She was absolutely silent with respect to any of the acts that a partner should have done; all that she did was to
receive her share of P3,000.00 a month, which cannot be interpreted in any manner than a payment for the use of the
premises which she had leased from the owners. Clearly, plaintiff had always acted in accordance with the original letter of
defendant of June 17, 1945 (Exh. “A”), which shows that both parties considered this offer as the real contract between
them.33 [italics supplied]

A demand for periodic accounting is evidence of a partnership.34 During his lifetime, Tan Eng Kee appeared never to have
made any such demand for accounting from his brother, Tang Eng Lay.

This brings us to the matter of Exhibits “4” to “4-U” for private respondents, consisting of payrolls purporting to show that Tan
Eng Kee was an ordinary employee of Benguet Lumber, as it was then called. The authenticity of these documents was
questioned by petitioners, to the extent that they filed criminal charges against Tan Eng Lay and his wife and children. As
aforesaid, the criminal cases were dismissed for insufficiency of evidence. Exhibits “4” to “4-U” in fact shows that Tan Eng Kee
received sums as wages of an employee. In connection therewith, Article 1769 of the Civil Code provides:

In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as to third persons;

(2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessors do or
do not share any profits made by the use of the property;

(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a
joint or common right or interest in any property which the returns are derived;

(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business,
but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installment or otherwise;

(b) As wages of an employee or rent to a landlord;

(c) As an annuity to a widow or representative of a deceased partner;

(d) As interest on a loan, though the amount of payment vary with the profits of the business;

(e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.

In the light of the aforequoted legal provision, we conclude that Tan Eng Kee was only an employee, not a partner. Even if the
payrolls as evidence were discarded, petitioners would still be back to square one, so to speak, since they did not present and
offer evidence that would show that Tan Eng Kee received amounts of money allegedly representing his share in the profits of
the enterprise. Petitioners failed to show how much their father, Tan Eng Kee, received, if any, as his share in the profits of
Benguet Lumber Company for any particular period. Hence, they failed to prove that Tan Eng Kee and Tan Eng Lay intended to
divide the profits of the business between themselves, which is one of the essential features of a partnership.

Nevertheless, petitioners would still want us to infer or believe the alleged existence of a partnership from this set of
circumstances: that Tan Eng Lay and Tan Eng Kee were commanding the employees; that both were supervising the
employees; that both were the ones who determined the price at which the stocks were to be sold; and that both placed
orders to the suppliers of the Benguet Lumber Company. They also point out that the families of the brothers Tan Eng Kee and
Tan Eng Lay lived at the Benguet Lumber Company compound, a privilege not extended to its ordinary employees.

However, private respondent counters that:

Petitioners seem to have missed the point in asserting that the above enumerated powers and privileges granted in favor of
Tan Eng Kee, were indicative of his being a partner in Benguet Lumber for the following reasons:

(i) even a mere supervisor in a company, factory or store gives orders and directions to his subordinates. So long, therefore,
that an employee’s position is higher in rank, it is not unusual that he orders around those lower in rank.

(ii) even a messenger or other trusted employee, over whom confidence is reposed by the owner, can order materials from
suppliers for and in behalf of Benguet Lumber. Furthermore, even a partner does not necessarily have to perform this
particular task. It is, thus, not an indication that Tan Eng Kee was a partner.
 (iii) although Tan Eng Kee, together with his family, lived in the lumber compound and this privilege was not accorded to
other employees, the undisputed fact remains that Tan Eng Kee is the brother of Tan Eng Lay. Naturally, close personal
relations existed between them. Whatever privileges Tan Eng Lay gave his brother, and which were not given the other
employees, only proves the kindness and-generosity of Tan Eng Lay towards a blood relative.

(iv) and even if it is assumed that Tan Eng Kee was quarrelling with Tan Eng Lay in connection with the pricing of stocks, this
does not adequately prove the existence of a partnership relation between them. Even highly confidential employees and the
owners of a company sometimes argue with respect to certain matters which, in no way indicates that they are partners as to
each other.35

In the instant case, we find private respondent’s arguments to be well-taken. Where circumstances taken singly may be
inadequate to prove the intent to form a partnership, nevertheless, the collective effect of these circumstances may be such as
to support a finding of the existence of the parties’ intent.36 Yet, in the case at bench, even the aforesaid circumstances when
taken together are not persuasive indicia of a partnership. They only tend to show that Tan Eng Kee was involved in the
operations of Benguet Lumber, but in what capacity is unclear. We cannot discount the likelihood that as a member of the
family, he occupied a niche above the rank-and-file employees. He would have enjoyed liberties otherwise unavailable were he
not kin, such as his residence in the Benguet Lumber Company compound. He would have moral, if not actual, superiority over
his fellow employees, thereby entitling him to exercise powers of supervision. It may even be that among his duties is to place
orders with suppliers. Again, the circumstances proffered by petitioners do not provide a logical nexus to the conclusion
desired; these are not inconsistent with the powers and duties of a manager, even in a business organized and run as
informally as Benguet Lumber Company.

There being no partnership, it follows that there is no dissolution, winding up or liquidation to speak of. Hence, the petition
must fail.

WHEREFORE, the petition is hereby denied, and the appealed decision of the Court of Appeals is hereby AFFIRMED in toto. No
pronouncement as to costs.

SO ORDERED. Heirs of Tan Eng Kee vs. Court of Appeals, 341 SCRA 740, G.R. No. 126881 October 3, 2000

Notes.—A general professional partnership, unlike an ordinary business partnership, is not itself an income taxpayer, as the
income tax is imposed not on the professional partnership but on the partners themselves in their individual capacity. (Tan vs.
Del Rosario, Jr., 237 SCRA 324 [1994]) Heirs of Tan Eng Kee vs. Court of Appeals, 341 SCRA 740, G.R. No. 126881 October 3,
2000

Absent a clear showing that a barbershop owner and a barber had intended to pursue a relationship of industrial partnership,
the Court entertains no doubt that the latter was employed by the former as caretaker-barber—undoubtedly, the services
performed by a barber is related to, and in the pursuit of the principal business activity of the former. Heirs of Tan Eng Kee vs.
Court of Appeals, 341 SCRA 740, G.R. No. 126881 October 3, 2000

3. 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.

Commercial Law; Partnership; A partnership that does not fix its term is a partnership at will.—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.

Same; Same; The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners.—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.

Same; Same; 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.—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. Among partners, mutual agency arises and the doctrine of delectus personae allows
them to have the power, although not necessarily the right, to dissolve the partnership. An unjustified dissolution by the
partner can subject him to a possible action for damages.

Same; Same; Upon its dissolution, the partnership continues and its legal personality is retained until the complete winding up
of its business culminating in its termination.—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. Upon its dissolution, the partnership continues and its legal personality is retained until the complete winding up of
its business culminating in its termination.

Same; Same; The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the
Civil Code.—The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the
Civil Code; 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.

Same; Same; It would not be right to let any of the partners remain in the partnership under such an atmosphere of animosity.
—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. 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.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

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 Au-gust 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 x x x 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 respon-dents-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 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 04 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 the right, 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;
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:

“x x x 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. Ortega vs. Court of
Appeals, 245 SCRA 529, G.R. No. 109248 July 3, 1995

4. Saludo, Jr. vs. Philippine National Bank (2018)

Petitioners: ANICETO G. SALUDO, JR.

Respondents: PHILIPPINE NATIONAL BANK

Ponente: Jardeleza (First Division)

Topic: Civil Law; Remedial Law

SUMMARY: SC ordered the impleading of SAFA Law Office as the real party-in-interest involving a Contract of Lease between
said law office and PNB.

DOCTRINE: Article 1767 of the Civil Code provides that by a contract of partnership, two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two
or more persons may also form a partnership for the exercise of a profession. Under Article 1771, a partnership may be
constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public
instrument shall be necessary. Article 1784, on the other hand, provides that a partnership begins from the moment of the
execution of the contract, unless it is otherwise stipulated.

The law, in its wisdom, recognized the possibility that partners in a partnership may decide to place a limit on their
individual accountability. Consequently, to protect third persons dealing with the partnership, the law provides a rule,
embodied in Article 1816 of the Civil Code, which states:

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

The foregoing provision does not prevent partners from agreeing to limit their liability, but such agreement may only
be valid as among them. Thus, Article 1817 of the Civil Code provides:

Art. 1817. Any stipulation against the liability laid down in the preceding article shall be void, except as
among the partners.

---

The perfection and validity of a contract of partnership brings about the creation of a juridical person separate and
distinct from the individuals comprising the partnership. Thus, Article 1768 of the Civil Code provides:

Art. 1768. The partnership has a juridical personality separate and distinct from that of each of the partners,
even in case of failure to comply with the requirements of Article 1772, first paragraph.

Article 44 of the Civil Code likewise provides that partnerships are juridical persons.

---

Section 2, Rule 3 of the Rules of Court defines a real party-in-interest as the one "who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit." In Lee v. Romillo, Jr., we held that the "real
[party-in- interest]-plaintiffis one who has a legal right[,] while a real [party-in-interest]- defendant is one who has a correlative
legal obligation whose act or omission violates the legal rights of the former."

In Guy v. Gacott, we held that under Article 1816 of the Civil Code, the partners' obligation with respect to the
partnership liabilities is subsidiary in nature. It is merely secondary and only arises if the one primarily liable fails to sufficiently
satisfy the obligation. Resort to the properties of a partner may be made only after efforts in exhausting partnership assets
have failed or if such partnership assets are insufficient to cover the entire obligation.

FACTS:

Records show that on June 11, 1998, Saludo Agpalo Fernandez and Aquino Law Office entered into a Contract of
Lease with PNB, whereby the latter agreed to lease 632 square meters of the second floor of the PNB Financial Center Building
in Quezon City for a period of three years and for a monthly rental fee of P189,600.00. The rental fee is subject to a yearly
escalation rate of 10%. SAFA Law Office then occupied the leased premises and paid advance rental fees and security deposit
in the total amount of P1,137,600.00.

On August 1, 2001, the Contract of Lease expired. According to PNB, SAFA Law Office continued to occupy the leased
premises until February 2005, but discontinued paying its monthly rental obligations after December 2002. Consequently, PNB
sent a demand letter dated July 17, 2003 for SAFA Law Office to pay its outstanding unpaid rents in the amount of
P4,648,086.34. PNB sent another letter demanding the payment of unpaid rents in the amount of P5,856,803.53 which was
received by SAFA Law Office on November 10, 2003. In a letter to PNB dated June 9, 2004, SAFA Law Office expressed its
intention to negotiate.

In February 2005, SAFA Law Office vacated the leased premises. PNB sent a demand letter dated July 7, 2005
requiring the firm to pay its rental arrears in the total amount of P10,951,948.32. In response, SAFA Law Office sent a letter
dated June 8, 2006, proposing a settlement. PNB, however, declined the settlement proposal in a letter dated July 17, 2006,
stating that it was not amenable to the settlement's terms. PNB then made a final demand for SAFA Law Office to pay its
outstanding rental obligations in the amount of P25,587,838.09.

On September 1, 2006, Saludo, in his capacity as managing partner of SAFA Law Office, filed an amended complaint
for accounting and/or recomputation of unpaid rentals and damages against PNB in relation to the Contract of Lease.

On October 4, 2006, PNB filed a motion to include an indispensable party as plaintiff, praying that Saludo be ordered
to amend anew his complaint to include SAFA Law Office as principal plaintiff. PNB argued that the lessee in the Contract of
Lease is not Saludo but SAFA Law Office, and that Saludo merely signed the Contract of Lease as the managing partner of the
law firm. Thus, SAFA Law Office must be joined as a plaintiff in the complaint because it is considered an indispensable party
under Section 7, Rule 3 of the Rules of Court.

RTC denied PNB’s motion to include SAFA Law Office as plaintiff. CA affirmed.
ISSUES:

 WoN SAFA Law Office is a sole proprietorship

o NO, it is a partnership. Here, absent evidence of an earlier agreement, SAFA Law Office was constituted as a
partnership at the time its partners signed the Articles of Partnership wherein they bound themselves to
establish a partnership for the practice of law, contribute capital and industry for the purpose, and receive
compensation and benefits in the course of its operation. The opening paragraph of the Articles of
Partnership reveals the unequivocal intention of its signatories to form a partnership.
o The subsequent registration of the Articles of Partnership with the SEC, on the other hand, was made in
compliance with Article 1772 of the Civil Code, since the initial capital of the partnership was P500,000.00.
o The other provisions of the Articles of Partnership also positively identify SAFA Law Office as a partnership. It
constantly used the words "partners" and "partnership." It designated Saludo, Jr. Saludo as managing
partner, and Attys. Ruben E. Agpalo, Filemon L. Fernandez, and Amado D. Aquino as industrial partners.[49]
It also provided for the term of the partnership, distribution of net profits and losses, and management of
the firm in which "the partners shall have equal interest in the conduct of [its] affairs." Moreover, it
provided for the cause and manner of dissolution of the partnership. These provisions would not have been
necessary if what had been established was a sole proprietorship. Indeed, it may only be concluded from
the circumstances that, for all intents and purposes, SAFA Law Office is a partnership created and organized
in accordance with the Civil Code provisions on partnership.
o Saludo asserts that SAFA Law Office is a sole proprietorship on the basis of the MOU executed by the
partners of the firm. The MOU evinces the parties' intention to entirely shift any liability that may be
incurred by SAFA Law Office in the course of its operation to Saludo, who shall also receive all the remaining
assets of the firm upon its dissolution. This MOU, however, does not serve to convert SAFA Law Office into a
sole proprietorship. As discussed, SAFA Law Office was manifestly established as a partnership based on the
Articles of Partnership. The MOU, from its tenor, reinforces this fact. It did not change the nature of the
organization of SAFA Law Office but only excused the industrial partners from liability. The MOU is an
agreement forged under the foregoing provision. Consequently, the sole liability being undertaken by
Saludo serves to bind only the parties to the MOU, but never third persons like PNB.
 WoN SAFA Law Office has a separate and distinct juridical personality
o YES. Having settled that SAFA Law Office is a partnership, we hold that it acquired juridical personality by
operation of law.
o In holding that SAFA Law Office, a partnership for the practice of law, is not a legal entity, the CA cited the
case of Petition for Authority to Continue Use of the Firm Name "Sycip, Salazar, Feliciano, Hernandez &
Castillo" (Sycip case) wherein the Court held that "[a] partnership for the practice of law is not a legal entity.
It is a mere relationship or association for a particular purpose. x x x It is not a partnership formed for the
purpose of carrying on trade or business or of holding property." These are direct quotes from the US case
of In re Crawford's Estate. We hold, however, that our reference to this US case is an obiter dictum which
cannot serve as a binding precedent. The main issue raised for the court's determination in the Sycip case is
whether the two Saludo, Jr. law firms may continue using the names of their deceased partners in their
respective firm names.
o Moreover, reference of the Sycip case to the In re Crawford's Estate case was made without a full
consideration of the nature of a law firm as a partnership possessed with legal personality under our Civil
Code. First, we note that while the Court mentioned that a partnership for the practice of law is not a legal
entity, it also identified Saludo, Jr. law firms as partnerships over whom Civil Code provisions on partnership
apply. The Court thus cannot hold that a partnership for the practice of law is not a legal entity without
running into conflict with Articles 44 and 1768 of the Civil Code which provide that a partnership has a
juridical personality separate and distinct from that of each of the partners.

Second, our law on partnership does not exclude partnerships for the practice of law from its coverage. Article 1767 of the Civil
Code provides that "[t]wo or more persons may also form a partnership for the exercise of a profession." Article 1783, on the
other hand, states that "[a] particular partnership has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation." Since the law uses the word "profession" in the general sense, and
does not distinguish which professional partnerships are covered by its provisions and which are not, then no valid distinction
may be made.

Finally, we stress that unlike Philippine law, American law does not treat of partnerships as forming a separate juridical
personality for all purposes. In the case of Bellis v. United States, the US Supreme Court stated that law firms, as a form of
partnership, are generally regarded as distinct entities for specific purposes, such as employment, capacity to be sued, capacity
to hold title to property, and more. State and federal laws, however, do not treat partnerships as distinct entities for all
purposes.
  WoN SAFA is the real party-in-interest
o YES. SAFA Law Office is the party that would be benefited or injured by the judgment in the suit before
the RTC. Particularly, it is the party interested in the accounting and/or recomputation of unpaid
rentals and damages in relation to the contract of lease. It is also the party that would be liable for
payment to PNB of overdue rentals, if that claim would be proven. This is because it is the one that
entered into the contract of lease with PNB. As an entity possessed of a juridical personality, it has
concomitant rights and obligations with respect to the transactions it enters into. Equally important,
the general rule under Article 1816 of the Civil Code is that partnership assets are primarily liable for
the contracts entered into in the name of the partnership and by a person authorized to act on its
behalf. All partners, including industrial ones, are only liable pro rata with all their property after all
the partnership assets have been exhausted.
o Considering that SAFA Law Office is primarily liable under the contract of lease, it is the real party-in-
interest that should be joined as plaintiff in the RTC case.

NOTES: Petition DENIED. Saludo, Jr. is hereby ordered to amend his complaint to include SAFA Law Office as plaintiff in
Civil Case No. 06-678 pending before Branch 58 of the Regional Trial Court of Makati City, it being the real party-in-
interest.

5. LOURDES NAVARRO AND MENARDO NAVARRO, petitioners, vs. COURT OF APPEALS, JUDGE BETHEL
KATALBAS-MOSCARDON, Presiding Judge, Regional Trial Court of Bacolod City, Branch 52, Sixth Judicial
Region and Spouses OLIVIA V. YANSON AND RICARDO B. YANSON, respondents.

Remedial Law; Annulment of Judgments; Judgments may be annulled only on grounds of extrinsic or collateral fraud.—
Having lost their right of appeal, petitioners resorted to annulment proceedings to justify a belated judicial review of
their case. This was, however, correctly thrown out by the Court of Appeals because petitioners failed to cite extrinsic or
collateral fraud to warrant the setting aside of the trial court’s decision. We respect the appellate court’s finding in this
regard.

Civil Law; Partnerships; Co-ownership or co-possession or any sharing of proceeds not an indicia of the existence of
partnership.—While there may have been co-ownership or co-possession of some items and/ or any sharing of proceeds
by way of advances received by both plaintiff and the defendant, these are not indicative and supportive of the existence
of any partnership between them.

PETITION for review of the decision of the Court of Appeals.

Assailed and sought to be set aside by the petition before us is the Resolution of the Court of Appeals dated June 20,
1991 which dismissed the petition for annulment of judgment filed by the Spouses Lourdes and Menardo Navarro,
thusly:

The instant petition for annulment of decision is DISMISSED.

1. Judgments may be annulled only on the ground of extrinsic or collateral fraud, as distinguished from intrinsic fraud
(Canlas vs. Court of Appeals, 164 SCRA 160, 170). No such ground is alleged in the petition.

2. Even if the judgment rendered by the respondent Court were erroneous, it is not necessarily void (Chereau vs.
Fuentebella, 43 Phil. 216). Hence, it cannot be annulled by the proceeding sought to be commenced by the petitioners.

3. The petitioners’ remedy against the judgment enforcement of which is sought to be stopped should have been
appeal.

SO ORDERED. (pp. 24-25, Rollo.)

The antecedent facts of the case are as follows:

On July 23, 1976, herein private respondent Olivia V. Yanson filed a complaint against petitioner Lourdes Navarro for
“Delivery of Personal Properties With Damages”. The complaint incorporated an application for a writ of replevin. The
complaint was later docketed as Civil Case No. 716 (12562) of the then Court of First Instance of Bacolod (Branch 55) and
was subsequently amended to include private respondent’s husband, Ricardo B. Yanson, as co-plaintiff, and petitioner’s
husband, as co-defendant.

On July 27, 1976, then Executive Judge Oscar R. Victoriano (later to be promoted and to retire as Presiding Justice of the
Court of Appeals) approved private respondents’ application for a writ of replevin. The Sheriff’s Return of Service dated
March 3, 1978 affirmed receipt by private respondents of all the pieces of personal property sought to be recovered
from petitioners.

On April 30, 1990, Presiding Judge Bethel Katalbas-Moscardon rendered a decision, disposing as follows:

Accordingly, in the light of the aforegoing findings, all chattels already recovered by plaintiff by virtue of the Writ of
Replevin and as listed in the complaint are hereby sustained to belong to plaintiff being the owner of these properties;
the motor vehicle, particularly that Ford Fiera Jeep registered in and which had remain in the possession of the
defendant is likewise declared to belong to her, however, said defendant is hereby ordered to reimburse plaintiff the
sum of P6,500.00 representing the amount advanced to pay part of the price therefor; and said defendant is likewise
hereby ordered to return to plaintiff such other equipment[s] as were brought by the latter to and during the operation
of their business as were listed in the complaint and not recovered as yet by virtue of the previous Writ of Replevin. (p.
12, Rollo.)

Petitioner received a copy of the decision on January 10, 1991 (almost 9 months after its rendition) and filed on January
16, 1991 a “Motion for Extension of Time to File a Motion for Reconsideration”. This was granted on January 18, 1991.
Private respondents filed their opposition, citing the ruling in the case of Habaluyas Enterprises, Inc. vs. Japson (142 SCRA
208 [1986]) proscribing the filing of any motion for extension of time to file a motion for new trial or reconsideration.
The trial judge vacated the order dated January 18, 1991 and declared the decision of April 30, 1990 as final and
executory. (Petitioner’s motion for reconsideration was subsequently filed on February 1, 1991 or 22 days after the
receipt of the decision).

On February 4, 1991, the trial judge issued a writ of execution (Annex “5”, p. 79, Rollo). The Sheriff’s Return of Service
(Annex “6”, p. 82, Rollo) declared that the writ was “duly served and satisfied”. A receipt for the amount of P6,500.00
issued by Mrs. Lourdes Yanson, co-petitioner in this case, was likewise submitted by the Sheriff (Annex “7”, p. 83, Rollo).

On June 26, 1991, petitioners filed with respondent court a petition for annulment of the trial court’s decision, claiming
that the trial judge erred in declaring the non-existence of a partnership, contrary to the evidence on record.

The appellate court, as aforesaid, outrightly dismissed the petition due to absence of extrinsic or collateral fraud,
observing further that an appeal was the proper remedy.

In the petition before us, petitioners claim that the trial judge ignored evidence that would show that the parties “clearly
intended to form, and (in fact) actually formed a verbal partnership engaged in the business of Air Freight Service Agency
in Bacolod”; and that the decision sustaining the writ of replevin is void since “the properties belonging to the
partnership do not actually belong to any of the parties until the final disposition and winding up of the partnership” (p.
15, Rollo). These issues, however, were extensively discussed by the trial judge in her 16-page, single-spaced decision.

We agree with respondents that the decision in this case has become final. In fact a writ of execution had been issued
and was promptly satisfied by the payment of P6,500.00 to private respondents.

Having lost their right of appeal, petitioners resorted to annulment proceedings to justify a belated judicial review of
their case. This was, however, correctly thrown out by the Court of Appeals because petitioners failed to cite extrinsic or
collateral fraud to warrant the setting aside of the trial court’s decision. We respect the appellate court’s finding in this
regard.
Petitioners have come to us in a petition for review. However, the petition is focused solely on factual issues which can
no longer be entertained. Petitioners’ arguments are all directed against the decision of the regional trial court; not a
word is said in regard to the appellate court’s disposition of their petition for annulment of judgment. Verily, petitioners
keep on pressing the idea that a partnership exists on account of the so-called admissions in judicio. But the factual
premises of the trial court were more than enough to suppress and negate petitioners’ submissions along this line:

To be resolved by this Court factually involved the issue of whether there was a partnership that existed between the
parties based on their verbal contention; whether the properties that were commonly used in the operation of Allied Air
Freight belonged to this alleged partnership business; and the status of the parties in this transaction of alleged
partnership. On the other hand, the legal issue revolves on the dissolution and winding up in case a partnership so
existed as well as the issue of ownership over the properties subject matter of recovery.

As a premise, Article 1767 of the New Civil Code defines the contract of partnership to quote:

“ART. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the proceeds among themselves.

xxx xxx xxx.”

Corollary to this definition is the provision in determining whether a partnership exist as so provided under Article 1769,
to wit:

xxx xxx xxx

Furthermore, the Code provides under Article 1771 and 1772 that while a partnership may be constituted in any form, a
public instrument is necessary where immovables or any rights is constituted. Likewise, if the partnership involves a
capitalization of P3,000.00 or more in money or property, the same must appear in a public instrument which must be
recorded in the Office of the Securities and Exchange Commission. Failure to comply with these requirements shall only
affect liability of the partners to third persons.

In consideration of the above, it is undeniable that both the plaintiff and the defendant-wife made admission to have
entered into an agreement of operating this Allied Air Freight Agency of which the plaintiff personally constituted with
the Manila Office in a sense that the plaintiff did supply the necessary equipments and money while her brother Atty.
Rodolfo Villaflores was the Manager and the defendant the Cashier. It was also admitted that part of this agreement was
an equal sharing of whatever proceeds realized. Consequently, the plaintiff brought into this transaction certain chattels
in compliance with her obligation. The same has been done by the herein brother and the herein defendant who started
to work in the business. A cursory examination of the evidences presented no proof that a partnership, whether oral or
written had been constituted at the inception of this transaction. True it is that even up to the filing of this complaint
those movables brought by plaintiff for the use in the operation of the business remain registered in her name.

While there may have been co-ownership or co-possession of some items and/or any sharing of proceeds by way of
advances received by both plaintiff and the defendant, these are not indicative and supportive of the existence of any
partnership between them. Article 1769 of the New Civil Code is explicit. Even the books and records retrieved by the
Commissioner appointed by the Court did not show proof of the existence of a partnership as conceptualized by law.
Such that if assuming that there were profits realized in 1975 after the two-year deficits were compensated, this could
only be subject to an equal sharing consonant to the agreement to equally divide any profit realized. However, this Court
cannot overlook the fact that the Audit Report of the appointed Commissioner was not highly reliable in the sense that it
was more of his personal estimate of what is available on hand. Besides, the alleged profits was a difference found after
valuating the assets and not arising from the real operation of the business. In accounting procedures, strictly, this could
not be profit but a net worth.

In view of the above factual findings of the Court it follows inevitably therefore that there being no partnership that
existed, any dissolution, liquidation or winding up is beside the point. The plaintiff herself had summarily ceased from
her contract of agency and it is a personal prerogative to desist. On the other hand, the assumption by the defendant in
negotiating for herself the continuance of the Agency with the principal in Manila is comparable to plaintiff’s. Any
account of plaintiff with the principal as alleged, bore no evidence as no collection was ever demanded of from her. The
alleged P20,000.00 assumption specifically, as would have been testified to by the defendant’s husband remain a mere
allegation.

As to the properties sought to be recovered, the Court sustains the possession by plaintiff of all equipments and chattels
recovered by virtue of the Writ of Replevin. Considering the other vehicle which appeared registered in the name of the
defendant, and to which even she admitted that part of the purchase price came from the business claimed mutually
operated, although the Court have not as much considered all entries in the Audit report as totally reliable to be
sustained insofar as the operation of the business is concerned, nevertheless, with this admission of the defendant and
the fact that as borne out in said Report there has been disbursed and paid for this vehicle out of the business funds in
the total sum of P6,500.00, it is only fitting and proper that validity of these disbursements must be sustained as true
(Exhs. M-1 to M-3, p. 180, Records). In this connection and taking into account the earlier agreement that only profits
were to be shared equally, the plaintiff must be reimbursed of this cost if only to allow the defendant continuous
possession of the vehicle in question. It is a fundamental, moral and civil injunction that no one shall enrich himself at
the expense of another. (pp. 71-75, Rollo.)

Withal, the appellate court acted properly in dismissing the petition for annulment of judgment, the issue raised therein
having been directly litigated in, and passed upon by, the trial court.

WHEREFORE, the petition is DISMISSED. The Resolution of the Court of Appeals dated June 20, 1991 is AFFIRMED in all
respects.

No special pronouncements is made as to costs. SO ORDERED. Navarro vs. Court of Appeals, 222 SCRA 675, G.R. No.
101847 May 27, 1993

6. MARJORIE TOCAO and WILLIAM T. BELO, petitioners, vs. COURT OF APPEALS and NENITA A. ANAY,
respondents.

Partnerships; Appeals; The issue of whether or not a partnership exists is a factual matter which are within the exclusive
domain of both the trial court and the Court of Appeals.—The issue of whether or not a partnership exists is a factual
matter which are within the exclusive domain of both the trial and appellate courts. This Court cannot set aside factual
findings of such courts absent any showing that there is no evidence to support the conclusion drawn by the court a quo.
In this case, both the trial court and the Court of Appeals are one in ruling that petitioners and private respondent
established a business partnership. This Court finds no reason to rule otherwise.

Same; Requisites for a Partnership to Have Juridical Personality; Since a contract of partnership is consensual, an oral
contract of partnership is as good as a written one; Where no immovable property or real rights are involved, what
matters is that the parties have complied with the requisites of a partnership.—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. Where no immovable property or real rights are involved, what matters is that the parties have
complied with the requisites of a partnership. The fact that there appears to be no record in the Securities and Exchange
Commission of a public instrument embodying the partnership agreement pursuant to Article 1772 of the Civil Code did
not cause the nullification of the partnership. The pertinent provision of the Civil Code on the matter states: Art. 1768.
The partnership has a juridical personality separate and distinct from that of each of the partners, even in case of failure
to comply with the requirements of article 1772, first paragraph.

Same; Guaranty; While Article 2055 of the Civil Code simply provides that guaranty must be “express,” Article 1403, the
Statute of Frauds, requires that “a special promise to answer for the debt, default or miscarriage of another” be in
writing.—Petitioner Belo’s denial that he financed the partnership rings hollow in the face of the established fact that he
presided over meetings regarding matters affecting the operation of the business. Moreover, his having authorized in
writing on October 7, 1987, on a stationery of his own business firm, Wilcon Builders Supply, that private respondent
should receive thirty-seven (37%) of the proceeds of her personal sales, could not be interpreted otherwise than that he
had a proprietary interest in the business. His claim that he was merely a guarantor is belied by that personal act of
proprietorship in the business. Moreover, if he was indeed a guarantor of future debts of petitioner Tocao under Article
2053 of the Civil Code, he should have presented documentary evidence therefor. While Article 2055 of the Civil Code
simply provides that guaranty must be “express,” Article 1403, the Statute of Frauds, requires that “a special promise to
answer for the debt, default or miscarriage of another” be in writing.

Same; Employer-Employee Relationship; While it is true that the receipt of a percentage of net profits constitutes only
prima facie evidence that the recipient is a partner in the business, the evidence in the instant case at bar controverts an
employer-employee relationship between the parties.—The business venture operated under Geminesse Enterprise did
not result in an employer-employee relationship between petitioners and private respondent. While it is true that the
receipt of a percentage of net profits constitutes only prima facie evidence that the recipient is a partner in the business,
the evidence in the case at bar controverts an employer-employee relationship between the parties. In the first place,
private respondent had a voice in the management of the affairs of the cookware distributorship, including selection of
people who would constitute the administrative staff and the sales force. Secondly, petitioner Tocao’s admissions
militate against an employer-employee relationship. She admitted that, like her who owned Geminesse Enterprise,
private respondent received only commissions and transportation and representation allowances and not a fixed salary.

Same; Same; If indeed a person is employed by another, it is difficult to believe that the former and the latter shall
receive the same income in the business.—If indeed petitioner Tocao was private respondent’s employer, it is difficult to
believe that they shall receive the same income in the business. In a partnership, each partner must share in the profits
and losses of the venture, except that the industrial partner shall not be liable for the losses. As an industrial partner,
private respondent had the right to demand for a formal accounting of the business and to receive her share in the net
profit.

Same; The best evidence of the existence of the partnership, which is not yet terminated (though in the winding up
stage), are the unsold goods and uncollected receivables.—Petitioners underscore the fact that the Court of Appeals did
not return the “unaccounted and unremitted stocks of Geminesse Enterprise amounting to P208,250.00.” Obviously a
ploy to offset the damages awarded to private respondent, that claim, more than anything else, proves the existence of a
partnership between them. In Idos v. Court of Appeals, this Court said: “The best evidence of the existence of the
partnership, which was not yet terminated (though in the winding up stage), were the unsold goods and uncollected
receivables, which were presented to the trial court. Since the partnership has not been terminated, the petitioner and
private complainant remained as co-partners. x x x.”

Same; Dissolution of Partnerships; A mere falling out or misunderstanding between partners does not convert the
partnership into a sham organization—the partnership exists until dissolved under the law.—Undoubtedly, petitioner
Tocao unilaterally excluded private respondent from the partnership to reap for herself and/or for petitioner Belo
financial gains resulting from private respondent’s efforts to make the business venture a success. Thus, as petitioner
Tocao became adept in the business operation, she started to assert herself to the extent that she would even shout at
private respondent in front of other people. Her instruction to Lina Torda Cruz, marketing manager, not to allow private
respondent to hold office in both the Makati and Cubao sales offices concretely spoke of her perception that private
respondent was no longer necessary in the business operation, and resulted in a falling out between the two. However, a
mere falling out or misunderstanding between partners does not convert the partnership into a sham organization. The
partnership exists until dissolved under the law.

Same; Same; Any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership at will, though 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; An unjustified dissolution by a partner can subject him to action for damages.
——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 partner’s 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.” 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.

Same; Same; Even if one partner had 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, the partnership was not terminated
thereby—it continues until the winding up of the business.—Petitioner Tocao’s 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. 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.

YNARES-SANTIAGO, J.:

This is a petition for review of the Decision of the Court of Appeals in CA-G.R. CV No. 41616,1 affirming the Decision of
the Regional Trial Court of Makati, Branch 140, in Civil Case No. 88-509.2

Fresh from her stint as marketing adviser of Technolux in Bangkok, Thailand, 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. Belo volunteered to finance the joint
venture and assigned to Anay the job of marketing the product considering her experience and established relationship
with West Bend Company, a manufacturer of kitchen wares in Wisconsin, U.S.A. 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. Anay organized the administrative staff and sales force while Tocao hired and fired employees,
determined commissions and/or salaries of the employees, and assigned them to different branches. The parties agreed
that Belo’s name should not appear in any documents relating to their transactions with West Bend Company. Instead,
they agreed to use Anay’s name in securing distributorship of cookware from that company. 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

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, with office at 712 Rufino Building,
Ayala Avenue, Makati City. Belo made good his monetary commitments to Anay. Thereafter, Roger Muencheberg of
West Bend Company invited Anay to the distributor/dealer meeting in West Bend, Wisconsin, U.S.A., from July 19 to 21,
1987 and to the southwestern regional convention in Pismo Beach, California, U.S.A., from July 25-26, 1987. Anay
accepted the invitation with the consent of Marjorie Tocao who, as president and general manager of Geminesse
Enterprise, even wrote a letter to the Visa Section of the U.S. Embassy in Manila on July 13, 1987. A portion of the letter
reads:

“Ms. Nenita D. Anay (sic), who has been patronizing and supporting West Bend Co. for twenty (20) years now, acquired
the distributorship of Royal Queen cookware for Geminesse Enterprise, is the Vice President Sales Marketing and a
business partner of our company, will attend in response to the invitation.” (Italics supplied.)3

Anay arrived from the U.S.A. in mid-August 1987, and immediately undertook the task of saving the business on account
of the unsatisfactory sales record in the Makati and Cubao offices. On August 31, 1987, she received a plaque of
appreciation from the administrative and sales people through Marjorie Tocao4 for her excellent job performance. On
October 7, 1987, in the presence of Anay, Belo signed a memo5 entitling her to a thirty-seven percent (37%) commission
for her personal sales “up Dec 31/87.” Belo explained to her that said commission was apart from her ten percent (10%)
share in the profits. On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter6 addressed to the Cubao
sales office to the effect that she was no longer the vice-president of Geminesse Enterprise. The following day, October
10, she received a note from Lina T. Cruz, marketing manager, that Marjorie Tocao had barred her from holding office
and conducting demonstrations in both Makati and Cubao offices.7 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. When her letters were not answered, Anay consulted her lawyer,
who, in turn, wrote Belo a letter. Still, that letter was not answered.

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 P13,300,360.00.

On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with damages8 against
Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch 140.

In her complaint, Anay prayed that defendants be ordered to pay her, jointly and severally, the following: (1) P32,000.00
as unpaid overriding commission from January 8, 1988 to February 5, 1988; (2) P100,000.00 as moral damages; and (3)
P100,000.00 as exemplary damages. The plaintiff also prayed for an audit of the finances of Geminesse Enterprise from
the inception of its business operation until she was “illegally dismissed” to determine her ten percent (10%) share in the
net profits. She further prayed that she be paid the five percent (5%) “overriding commission” on the remaining 150
West Bend cookware sets before her “dismissal.”

In their answer,9 Marjorie Tocao and Belo asserted that the “alleged agreement” with Anay that was “neither reduced in
writing, nor ratified,” was “either unenforceable or void or inexistent.” As far as Belo was concerned, his only role was to
introduce Anay to Marjorie Tocao. There could not have been a partnership because, as Anay herself admitted,
Geminesse Enterprise was the sole proprietorship of Marjorie Tocao. Because Anay merely acted as marketing
demonstrator of Geminesse Enterprise for an agreed remuneration, and her complaint referred to either her
compensation or dismissal, such complaint should have been lodged with the Department of Labor and not with the
regular court.

Petitioners (defendants therein) further alleged that Anay filed the complaint on account of “ill-will and resentment”
because Marjorie Tocao did not allow her to lord it over in the Geminesse Enterprise.” Anay had acted like she owned
the enterprise because of her experience and expertise. Hence, petitioners were the ones who suffered actual damages
“including unreturned and unaccounted stocks of Geminesse Enterprise,” and “serious anxiety, besmirched reputation in
the business world, and various damages not less than P500,000.00.” They also alleged that, to “vindicate their names,”
they had to hire counsel for a fee of P23,000.00.

At the pre-trial conference, the issues were limited to: (a) whether or not the plaintiff was an employee or partner of
Marjorie Tocao and Belo, and (b) whether or not the parties are entitled to damages.10

In their defense, Belo denied that Anay was supposed to receive a share in the profit of the business. He, however,
admitted that the two had agreed that Anay would receive a three to four percent (3-4%) share in the gross sales of the
cookware. He denied contributing capital to the business or receiving a share in its profits as he merely served as a
guarantor of Marjorie Tocao, who was new in the business. He attended and/or presided over business meetings of the
venture in his capacity as a guarantor but he never participated in decision-making. He claimed that he wrote the memo
granting the plaintiff thirty-seven percent (37%) commission upon her dismissal from the business venture at the request
of Tocao, because Anay had no other income.

For her part, Marjorie Tocao denied having entered into an oral partnership agreement with Anay. However, she
admitted that Anay was an expert in the cookware business and hence, they agreed to grant her the following
commissions: thirty-seven percent (37%) on personal sales; five percent (5%) on gross sales; two percent (2%) on
product demonstrations, and two percent (2%) for recruitment of personnel. Marjorie denied that they agreed on a ten
percent (10%) commission on the net profits. Marjorie claimed that she got the capital for the business out of the sale of
the sewing machines used in her garments business and from Peter Lo, a Singaporean friend-financier who loaned her
the funds with interest. Because she treated Anay as her “co-equal,” Marjorie received the same amounts of
commissions as her. However, Anay failed to account for stocks valued at P200,000.00.

On April 22, 1993, the trial court rendered a decision the dispositive part of which is as follows:

“WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. Ordering defendants to submit to the Court a formal account as to the partnership affairs for the years 1987 and
1988 pursuant to Art. 1809 of the Civil Code in order to determine the ten percent (10%) share of plaintiff in the net
profits of the cookware business;

2. Ordering defendants to pay five percent (5%) overriding commission for the one hundred and fifty (150) cookware
sets available for disposition when plaintiff was wrongfully excluded from the partnership by defendants;

3. Ordering defendants to pay plaintiff overriding commission on the total production which for the period covering
January 8, 1988 to February 5, 1988 amounted to P32,000.00;

4. Ordering defendants to pay P100,000.00 as moral damages and P 100,000.00 as exemplary damages; and

5. Ordering defendants to pay P50,000.00 as attorney’s fees and P20,000.00 as costs of suit.

SO ORDERED.”

The trial court held that there was indeed an “oral partnership agreement between the plaintiff and the defendants,”
based on the following: (a) there was an intention to create a partnership; (b) a common fund was established through
contributions consisting of money and industry; and (c) there was a joint interest in the profits. The testimony of
Elizabeth Bantilan, Anay’s cousin and the administrative officer of Geminesse Enterprise from August 21, 1986 until it
was absorbed by Royal International, Inc., buttressed the fact that a partnership existed between the parties. The letter
of Roger Muencheberg of West Bend Company stating that he awarded the distributorship to Anay and Marjorie Tocao
because he was convinced that with Marjorie’s financial contribution and Anay’s experience, the combination of the two
would be invaluable to the partnership, also supported that conclusion. Belo’s claim that he was merely a “guarantor”
has no basis since there was no written evidence thereof as required by Article 2055 of the Civil Code. Moreover, his acts
of attending and/or presiding over meetings of Geminesse Enterprise plus his issuance of a memo giving Anay 37%
commission on personal sales belied this. On the contrary, it demonstrated his involvement as a partner in the business.

The trial court further held that the payment of commissions did not preclude the existence of the partnership inasmuch
as such practice is often resorted to in business circles as an impetus to bigger sales volume. It did not matter that the
agreement was not in writing because Article 1771 of the Civil Code provides that a partnership may be “constituted in
any form.” The fact that Geminesse Enterprise was registered in Marjorie Tocao’s name is not determinative of whether
or not the business was managed and operated by a sole proprietor or a partnership. What was registered with the
Bureau of Domestic Trade was merely the business name or style of Geminesse Enterprise.

The trial court finally held that a partner who is excluded wrongfully from a partnership is an innocent partner. Hence,
the guilty partner must give him his due upon the dissolution of the partnership as well as damages or share in the
profits “realized from the appropriation of the partnership business and goodwill.” An innocent partner thus possesses
“pecuniary interest in every existing contract that was incomplete and in the trade name of the co-partnership and
assets at the time he was wrongfully expelled.”

Petitioners’ appeal to the Court of Appeals11 was dismissed, but the amount of damages awarded by the trial court were
reduced to P50,000.00 for moral damages and P50,000.00 as exemplary damages. Their Motion for Reconsideration was
denied by the Court of Appends for lack of merit.12 Petitioners Belo and Marjorie Tocao are now before this Court on a
petition for review on certiorari, asserting that there was no business partnership between them and herein private
respondent Nenita A. Anay who is, therefore, not entitled to the damages awarded to her by the Court of Appeals.
Petitioners Tocao and Belo contend that the Court of Appeals erroneously held that a partnership existed between them
and private respondent Anay because Geminesse Enterprise “came into being” exactly a year before the “alleged
partnership” was formed, and that it was very unlikely that petitioner Belo would invest the sum of P2,500,000.00 with
petitioner Tocao contributing nothing, without any “memorandum whatsoever regarding the alleged partnership.”13

The issue of whether or not a partnership exists is a factual matter which are within the exclusive domain of both the
trial and appellate courts. This Court cannot set aside factual findings of such courts absent any showing that there is no
evidence to support the conclusion drawn by the court a quo,14 In this case, both the trial court and the Court of
Appeals are one in ruling that petitioners and private respondent established a business partnership. This Court finds no
reason to rule otherwise.

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.15 It may be constituted in any form; a public instrument is necessary only where
immovable property or real rights are contributed thereto.16 This implies that since a contract of partnership is
consensual, an oral contract of partnership is as good as a written one. Where no immovable property or real rights are
involved, what matters is that the parties have complied with the requisites of a partnership. The fact that there appears
to be no record in the Securities and Exchange Commission of a public instrument embodying the partnership agreement
pursuant to Article 1772 of the Civil Code17 did not cause the nullification of the partnership. The pertinent provision of
the Civil Code on the matter states:

Art. 1768. The partnership has a juridical personality separate and distinct from that of each of the partners, even in case
of failure to comply with the requirements of article 1772, first paragraph.

Petitioners admit that private respondent had the expertise to engage in the business of distributorship of cookware.
Private respondent contributed such expertise to the partnership and hence, under the law, she was the industrial or
managing partner. It was through her reputation with the West Bend Company that the partnership was able to open
the business of distributorship of that company’s cookware products; it was through the same efforts that the business
was propelled to financial success. Petitioner Tocao herself admitted private respondent’s indispensable role in putting
up the business when, upon being asked if private respondent held the positions of marketing manager and vice-
president for sales, she testified thus:

“A: No, sir at the start she was the marketing manager because there were no one to sell yet, it’s only me there then her
and then two (2) people, so about four (4). Now, after that when she recruited already Oscar Abella and Lina Torda-Cruz
these two (2) people were given the designation of marketing managers of which definitely Nita as superior to them
would be the Vice President.”18

By the set-up of the business, third persons were made to believe that a partnership had indeed been forged between
petitioners and private respondents. Thus, the communication dated June 4, 1986 of Missy Jagler of West Bend
Company to Roger Muencheberg of the same company states:

“Marge Tocao is president of Geminesse Enterprises. Geminesse will finance the operations. Marge does not have
cookware experience. Nita Anay has started to gather former managers, Lina Torda and Dory Vista. She has also
gathered former demonstrators, Betty Bantilan, Eloisa Lamela, Menchu Javier. They will continue to gather other key
people and build up the organization. All they need is the finance and the products to sell.”19

On the other hand, petitioner Belo’s denial that he financed the partnership rings hollow in the face of the established
fact that he presided over meetings regarding matters affecting the operation of the business. Moreover, his having
authorized in writing on October 7, 1987, on a stationery of his own business firm, Wilcon Builders Supply, that private
respondent should receive thirty-seven (37%) of the proceeds of her personal sales, could not be interpreted otherwise
than that he had a proprietary interest in the business. His claim that he was merely a guarantor is belied by that
personal act of proprietorship in the business. Moreover, if he was indeed a guarantor of future debts of petitioner
Tocao under Article 2053 of the Civil Code,20 he should have presented documentary evidence therefor. While Article
2055 of the Civil Code simply provides that guaranty must be “express,” Article 1403, the Statute of Frauds, requires that
“a special promise to answer for the debt, default or miscarriage of another” be in writing.21

Petitioner Tocao, a former ramp model,22 was also a capitalist in the partnership. She claimed that she herself financed
the business. Her and petitioner Belo’s roles as both capitalists to the partnership with private respondent are buttressed
by petitioner Tocao’s admissions that petitioner Belo was her boyfriend and that the partnership was not their only
business venture together. They also established a firm that they called “Wiji,” the combination of petitioner Belo’s first
name, William, and her nickname, Jiji.23 The special relationship between them dovetails with petitioner Belo’s claim
that he was acting in behalf of petitioner Tocao. Significantly, in the early stage of the business operation, petitioners
requested West Bend Company to allow them to “utilize their banking and trading facilities in Singapore” in the matter
of importation and payment of the cookware products.24 The inevitable conclusion, therefore, was that petitioners
merged their respective capital and infused the amount into the partnership of distributing cookware with private
respondent as the managing partner.

The business venture operated under Geminesse Enterprise did not result in an employer-employee relationship
between petitioners and private respondent. While it is true that the receipt of a percentage of net profits constitutes
only prima facie evidence that the recipient is a partner in the business,25 the evidence in the case at bar controverts an
employer-employee relationship between the parties. In the first place, private respondent had a voice in the
management of the affairs of the cookware distributorship,26 in-against the guarantor until the debt is liquidated. A
conditional obligation may also be secured.

cluding selection of people who would constitute the administrative staff and the sales force. Secondly, petitioner
Tocao’s admissions militate against an employer-employee relationship. She admitted that, like her who owned
Geminesse Enterprise,27 private respondent received only commissions and transportation and representation
allowances28 and not a fixed salary.29 Petitioner Tocao testified:

“Q:

Of course. Now, I am showing to you certain documents already marked as Exhs. ‘X’ and ‘Y.’ Please go over this. Exh. ‘Y’
is denominated ‘Cubao overrides’ 8-21-87 with ending August 21, 1987, will you please go over this and tell the
Honorable Court whether you ever came across this document and know of your own knowledge the amount—

A: Yes, sir this is what I am talking about earlier. That’s the one I am telling you earlier a certain percentage for
promotions, advertising, incentive.

Q: I see. Now, this promotion, advertising, incentive, there is a figure here and words which I quote: ‘Overrides Marjorie
Ann Tocao P21,410.50’ this means that you have received this amount?

A: Oh yes, sir.

Q: I see. And, by way of amplification this is what you are saying as one representing commission, representation,
advertising and promotion?

A: Yes, sir.

Q: I see. Below your name is the words and figure and I quote ‘Nita D. Anay P21,410.50’, what is this?

A: That’s her overriding commission.

Q: Overriding commission, I see. Of course, you are telling this Honorable Court that there being the same P21,410.50 is
merely by coincidence?

A: No, sir, I made it a point that we were equal because the way I look at her kasi, you know in a sense because of her
expertise in the business she is vital to my business. So, as part of the incentive I offer her the same thing.

Q: So, in short you are saying that this you have shared together, I mean having gotten from the company P21,140.50 is
your way of indicating that you were treating her as an equal?
A: As an equal.

Q: As an equal, I see. You were treating her as an equal?

A: Yes, sir.

Q: Iam calling again your attention to Exh. ‘Y’ ‘Overrides Makati the other one is—

A: That is the same thing, sir.

Q: With ending August 21, words and figure ‘Overrides Marjorie Ann Tocao P15,314.25’ the amount there you will
acknowledge you have received that?

A: Yes, sir.

Q: Again in concept of commission, representation, promotion, etc.?

A: Yes, sir.

Q:Okey. Below your name is the name of Nita Anay P15,314.25 that is also an indication that she received the same
amount?

A:Yes, sir.

Q: And, as in your previous statement it is not by coincidence that these two (2) are the same?

A: No, sir.

Q: It is again in concept of you treating Miss Anay as your equal?

A: Yes, sir.” (Italics supplied.)30

If indeed petitioner Tocao was private respondent’s employer, it is difficult to believe that they shall receive the same
income in the business. In a partnership, each partner must share in the profits and losses of the venture, except that the
industrial partner shall not be liable for the losses.31 As an industrial partner, private respondent had the right to
demand for a formal accounting of the business and to receive her share in the net profit.32

The fact that the cookware distributorship was operated under the name of Geminesse Enterprise, a sole proprietorship,
is of no moment. What was registered with the Bureau of Domestic Trade on August 19, 1987 was merely the name of
that enterprise.33 While it is true that in her undated application for renewal of registration of that firm name, petitioner
Tocao indicated that it would be engaged in retail of “kitchenwares, cookwares, utensils, skillet,”34 she also admitted
that the enterprise was only “60% to 70% for the cookware business,” while 20% to 30% of its business activity was
devoted to the sale of water sterilizer or purifier.35 Indubitably then, the business name Geminesse Enterprise was used
only for practical reasons—it was utilized as the common name for petitioner Tocao’s various business activities, which
included the distributorship of cookware.

Petitioners underscore the fact that the Court of Appeals did not return the “unaccounted and unremitted stocks of
Geminesse Enterprise amounting to P208,250.00.”36 Obviously a ploy to offset the damages awarded to private
respondent, that claim, more than anything else, proves the existence of a partnership between them. In Idos v. Court of
Appeals, this Court said:

“The best evidence of the existence of the partnership, which was not yet terminated (though in the winding up stage),
were the unsold goods and uncollected receivables, which were presented to the trial court. Since the partnership has
not been terminated, the petitioner and private complainant remained as co-partners, x x x.”37

It is not surprising then that, even after private respondent had been unceremoniously booted out of the partnership in
October 1987, she still received her overriding commission until December 1987.
Undoubtedly, petitioner Tocao unilaterally excluded private respondent from the partnership to reap for herself and/or
for petioner Belo financial gains resulting from private respondent’s efforts to make the business venture a success.
Thus, as petitioner Tocao became adept in the business operation, she started to assert herself to the extent that she
would even shout at private respondent in front of other people.38 Her instruction to Lina Torda Cruz, marketing
manager, not to allow private respondent to hold office in both the Makati and Cubao sales offices concretely spoke of
her perception that private respondent was no longer necessary in the business operation,39 and resulted in a falling out
between the two. However, a mere falling out or misunderstanding between partners does not convert the partnership
into a sham organization.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
partner’s 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 Tocao’s 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, attorney’s fees
that should be granted on account of the award of exemplary damages and petitioners’ evident bad faith in refusing to
satisfy private respondent’s plainly valid, just and demandable claims,49 appear to have been excessively granted by the
trial court and should therefore be reduced to P25,000.00.

WHEREFORE, the instant petition for review on certiorari is DENIED. The partnership among petitioners and private
respondent is ordered dissolved, and the parties are ordered to effect the winding up and liquidation of the partnership
pursuant to the pertinent provisions of the Civil Code. This case is remanded to the Regional Trial Court for proper
proceedings relative to said dissolution. The appealed decisions of the Regional Trial Court and the Court of Appeals are
AFFIRMED with MODIFICATIONS, as follows—

1. Petitioners are ordered to submit to the Regional Trial Court a formal account of the partnership affairs for the years
1987 and 1988, pursuant to Article 1809 of the Civil Code, in order to determine private respondent’s ten percent (10%)
share in the net profits of the partnership;

2. Petitioners are ordered, jointly and severally, to pay private respondent five percent (5%) overriding commission for
the one hundred and fifty (150) cookware sets available for disposition since the time private respondent was wrongfully
excluded from the partnership by petitioners;
 3. Petitioners are ordered, jointly and severally, to pay private respondent overriding commission on the total
production which, for the period covering January 8, 1988 to February 5, 1988, amounted to P32,000.00;

4. Petitioners are ordered, jointly and severally, to pay private respondent moral damages in the amount of
P50,000.00, exemplary damages in the amount of P50,000.00 and attorney’s fees in the amount of P25,000.00. SO
ORDERED.

7. JG SUMMIT HOLDINGS, INC., petitioner, vs. COURT OF APPEALS, COMMITTEE ON PRIVATIZATION, its
Chairman and Members; ASSET PRIVATIZATION TRUST and PHILYARDS HOLDINGS, INC., respondents.

Remedial Law; Mandamus; Mandamus applies as a remedy only where petitioner’s right is founded clearly in law and not
when it is doubtful.—With respect to the propriety of the remedy availed by petitioner, the Court of Appeals correctly
held that the special civil action of mandamus is not the proper remedy to question the legality of the exercise of the
right to top by private respondent. It does not lie to compel the award of a contract subject of bidding to an unsuccessful
bidder. Mandamus applies as a remedy only where petitioner’s right is founded clearly in law and not when it is doubtful.

Same; Same; Mandamus may not be availed to direct the exercise of judgment or discretion in a particular way or to
retract or reverse an action already taken in the exercise of either.—The Court of Appeals cannot de-dare petitioner as
the winning bidder in this case and direct the COP/APT to award the sale to it without first determining the validity of the
right to top stipulated in the ASBR. Moreover, the sale of government share in PHILSECO is a fait accompli, in view of the
execution of the Stock Purchase Agreement between APT and PHI. Mandamus may not be availed to direct the exercise
of judgment or discretion in a particular way or to retract or reverse an action already taken in the exercise of either.

Same; Certiorari; Petitioner’s failure to include certiorari in its caption should not negate the fact that the petition
charged public respondent with grave abuse of discretion in awarding the sale to private respondent; It is not the caption
of the pleading but the allegations therein that determine the nature of the action and the Court shall grant relief
warranted by the allegations and the proof even if no such relief is prayed for.—The petition alleges that “respondents
COP and APT have committed such a grave abuse of discretion tantamount to lack or excess of their jurisdiction in
insisting on awarding the bid to Philyards, for the various reasons stated herein, particularly since the right of first refusal
and the right to top the bid are unconstitutional, contrary to law and public policy.” Petitioner’s failure to include
certiorari in its caption should not negate the fact that the petition charged public respondent with grave abuse of
discretion in awarding the sale to private respondent. Well-settled is the rule that it is not the caption of the pleading but
the allegations therein that determine the nature of the action and the Court shall grant relief warranted by the
allegations and the proof even if no such relief is prayed for.

Contracts; Bids and Bidding; Comprehensive Meaning of Bidding.—The word “bidding” in its comprehensive sense
means making an offer or an invitation to prospective contractors whereby the government manifests its intention to
make proposals for the purchase of supplies, materials and equipment for official business or public use, or for public
works or repair. The three principles in public bidding are: the offer to the public; an opportunity for competition; and a
basis for exact comparison of bids. The distinctive character of the system is destroyed and the purpose of its adoption is
thwarted when a regulation thereon excludes any of these principles. Public bidding of government contracts and for the
disposition of government assets should have the same principles and objectives. Their only difference, if at all, is that in
the public bidding for public contracts, the award is generally given to the lowest bidder while in the disposition of
government assets, the award is to the highest bidder. The term “public bidding” imports a sale to the highest bidder
with absolute freedom for competitive bidding.

Same; Same; A public auction, which is the mode of divestment or disposal of government property, shall adhere to
established mechanics and procedures in public bidding.—Under Section 504 of the Government Auditing Rules and
Regulations, a public auction, which is the mode of divestment or disposal of government property, shall adhere to
established mechanics and procedures in public bidding. In such public auction sales, the presence of a Commission on
Audit (COA) representative who shall see to the proper observance of auditing rules is imperative.
PETITION for review on certiorari of a decision of the Court of Appeals.

On January 27, 1977, the National Investment and Development Corporation (NIDC), a government corporation, entered
into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (Kawasaki) for the
construction, operation, and management of the Subic National Shipyard, Inc. (SNS), which subsequently became the
Philippine Shipyard and Engineering Corporation (PHILSECO) Under the JVA, NIDC and Kawasaki would maintain a
shareholding proportion of 60%-40%, respectively. One of the provisions of the JVA accorded the parties the right of first
refusal should either party sell, assign or transfer its interest in the joint venture. Thus, paragraph 1.4 of the JVA states:

“Neither party shall sell, transfer or assign all or any part of its interest in SNS 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 or
controlled by the GOVERNMENT or by a KAWASAKI affiliate.” (Italics supplied.)

On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank
(PNB). More than two months later or on February 3, 1987, by virtue of Administrative Order No. 14, PNB’s interest in
PHILSECO was transferred to the National Government.

Meanwhile, on December 8, 1986, President Corazon C. Aquino issued Proclamation No. 50 establishing the Committee
on Privatization (COP) and the Asset Privatization Trust (APT) to take title to and possession of, conserve, manage and
dispose of nonperforming assets of the National Government. On February 27, 1987, a trust agreement was entered into
between the National Government and the APT by virtue of which the latter was named the trustee of the National
Government’s share in PHILSECO. In 1989, as a result of a quasi-reorganization of PHILSECO to settle its huge obligations
to PNB, the National Government’s shareholdings in PHILSECO increased to 97.41% thereby reducing Kawasaki’s
shareholdings to 2.59%.

Exercising their discretion, the COP and the APT deemed it in the best interest of the national economy and the
government to privatize PHILSECO by selling 87.67% of its total outstanding capital stock to private entities. After a series
of negotiations between the APT and Kasawaki, they agreed that the latter’s right of first refusal under the JVA be
“exchanged” for the right to top by five percent (5%) the highest bid for said shares. They further agreed that Kawasaki
would be entitled to name a company in which it was a stockholder, which could exercise the right to top. On September
7, 1990, Kawasaki informed APT that Philyards Holdings, Inc. (PHI) would exercise its right to top by 5%.

At the pre-bidding conference held on September 28, 1993, interested bidders were given copies of the JVA between
NIDC and Kawasaki, and of the Asset Specific Bidding Rules (ASBR) drafted for the 87.67% equity (sic)1 in PHILSECO of the
National Government. Salient provisions of the ASBR state:

“1.0. The subject of this Asset Privatization Trust (APT) sale through public bidding is the National Government’s equity
in PHILSECO consisting of 896,869,942 shares of stock (representing 87.67% of PHILSECO’s outstanding capital stock),
which will be sold as a whole block in accordance with the rules herein enumerated.

xxx xxx xxx

3.0. This public bidding shall be on an Indicative Price Bidding basis. The Indicative price set for the National
Government’s 87.67% equity in PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION (P1,300,000,000.00).

xxx xxx xxx

12.0. The bidder shall be solely responsible for examining with appropriate care these rules, the official bid forms,
including any addenda or amendments thereto issued during the bidding period. The bidder shall likewise be responsible
for informing itself with respect to any and all conditions concerning the PHILSECO Shares which may, in any manner,
affect the bidder’s proposal. Failure on the part of the bidder to so examine and inform itself shall be its sole risk and no
relief for error or omission will be given by APT or COP. x x x.”
The provisions of the ASBR were explained to the interested bidders who were notified that bidding would be held on
December 2, 1993.

At the public bidding on said date, the consortium composed of petitioner JG Summit Holdings, Inc., Sembawang
Shipyard Ltd. of Singapore (Sembawang), and Jurong Shipyard Limited of Malaysia (Jurong), was declared the highest
bidder at P2.03 billion. The following day, December 3, 1993, the COP approved the sale of 87.67% National Government
shares of stock in PHILSECO to said consortium. It notified petitioner of said approval “subject to the right of Kawasaki
Heavy Industries, Inc./Philyards Holdings, Inc. to top JGSMI’s (petitioner’s) bid by 5% as specified in the bidding rules.”

On December 29, 1993, petitioner informed the APT that it was protesting the offer of PHI to top its bid on the grounds
that: (a) the Kawasaki/PHI consortium composed of Kawasaki, Philyards, Mitsui, Keppel, SM Group, ICTSI and Insular Life
violated the ASBR because the last four (4) companies were the losing bidders (for P1.528 billion) thereby circumventing
the law and prejudicing the weak winning bidder; (b) only Kawasaki could exercise the right to top; (c) giving the same
option to top to PHI constituted unwarranted benefit to a third party; (d) no right of first refusal can be exercised in a
public bidding or auction sale; and (e) the JG Summit Consortium was not estopped from questioning the proceedings.

On February 2, 1994, petitioner was notified that PHI had fully paid the balance of the purchase price of the subject
bidding. On February 7, 1994, the APT notified petitioner that PHI had exercised its option to top the highest bid and that
the COP had approved the same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock Purchase
Agreement.

Consequently, petitioner filed with this Court a petition for mandamus under G.R. No. 114057. On May 11, 1994, said
petition was referred to the Court of Appeals—

“x x x for proper determination and disposition, pursuant to Section 9, paragraph 1 of B.P. 129, granting the Court of
Appeals ‘original jurisdiction to issue writs of mandamus x x x and auxiliary writs or processes, whether or not in aid of its
appellate jurisdiction,’ which jurisdiction is concurrent with this Court, there being no special and important reason for
this Court to assume jurisdiction over the case in the first instance.”2

On July 18, 1995, the Court of Appeals “denied” for lack of merit the petition for mandamus. Citing Guanio v.
Fernandez,3 it held that mandamus is not the proper remedy to “compel the undoing of an act already done or the
correction of a wrong already perpetuated, even though the action taken was clearly illegal.” It was further ruled that it
was not the proper forum for a “mere petition for mandamus” that aimed to question the constitutionality or legality of
the right of first refusal and the right to top that was exercised by Kawasaki/PHI and that the matter must be brought “by
the proper party in the proper forum at the proper time and threshed out in a full blown trial.”

After ruling that the right of first refusal and the right to top are prima facie legal, the Court of Appeals found petitioner
to be in estoppel for the following reasons:

“5. If petitioner found the right to top to be illegal, it should not have participated in the public bidding; or it should have
questioned the legality of the rules before the courts or filed a petition for declaratory relief (Rule 64, Rules of Court)
before the public bidding could have taken place.

By participating in the public bidding, with full knowledge of the right to top granted to Kawasaki/Philyards, petitioner is
estopped from questioning the validity of the award given to Philyards after the latter exercised the right to top and had
paid in full the purchase price of the subject shares, pursuant to the ASBR.

6. The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group, Insular Life Assurance, Mitsui and
ICTSI) appears to have joined Philyards in the latter’s effort to raise P2.131 billion necessary in exercising the right to top
by 5% is a valid activity in free enterprise that is not contrary to law, public policy or public morals. It should not be a
cause of grievance for petitioner as it is the very essence of free competition in the business world. Astute businessmen
involved in the public bidding in question knew what they were up against. And when they participated in the public
bidding with prior knowledge of the right to top, they did so, with full knowledge of the eventuality that the highest
bidder may still be topped by Kawasaki/Philyards by 5%. It is admitted by petitioner that it likewise represents a
consortium composed of JG Summit, Sembawang Singapore and Jurong of Malaysia. Why should petitioner then expect
Philyards to limit itself to its own resources when the latter can enter into agreements with other entities to help it raise
the money it needed to pay the full purchase price as in fact it had already paid the National Government in the amount
of P2.131 billion as required under the ASBR?”4

Petitioner filed a motion for the reconsideration of said Decision which was denied on March 15, 1996. Petitioner thus
filed the instant petition for review on certiorari, raising the following arguments:

I.

THE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING THAT PETITIONER JG SUMMIT IS LEGALLY ESTOPPED FROM
CHALLENGING THE LEGALITY OF THE RIGHT TO TOP, INSERTED IN THE BIDDING RULES, AS WELL AS THE RIGHT OF FIRST
REFUSAL FROM WHICH THE RIGHT TO TOP WAS ADMITTEDLY SOURCED, BY SIMPLY STATING THAT THOSE RIGHTS ARE
VALID AND ENFORCEABLE WITHOUT RULING ON ANY OF THE IMPORTANT LEGAL AND CONSTITUTIONAL GROUNDS
RAISED BY THE PETITIONER AS FOLLOWS:

(A) THE RIGHT OF FIRST REFUSAL, GRANTED TO A JAPANESE CORPORATION AT A TIME WHEN IT HELD 40% EQUITY IN
PHILSECO, A LANDHOLDING CORPORATION, IS NULL AND VOID FOR BEING CONTRARY TO THE CONSTITUTION.

(B) THE RIGHT TO TOP WAS GRANTED TO THE JAPANESE CORPORATION AT A TIME WHEN IT MERELY HELD 2.6% EQUITY
IN PHILSECO.

(C) THE RIGHT OF FIRST REFUSAL GRANTED TO THE JAPANESE CORPORATION OVER SHARES OF STOCK IS CONTRARY TO
THE CORPORATION CODE.

(D) THE RIGHT TO TOP IS CONTRARY TO PUBLIC POLICY AS IT IS ANATHEMA TO COMPETITIVE PUBLIC BIDDING FOR
BEING UNDULY RESTRICTIVE THEREOF, AND, MOREOVER, IS CONTRARY TO DUE PROCESS OF LAW AS IT IS AGAINST THE
BASIC RUDIMENTS OF FAIR PLAY.

(E) THE GRANT OF THE RIGHT TO TOP IS A CRIMINAL VIOLATION OF THE ANTI-GRAFT LAW AS IT GIVES A CLEARLY
UNWARRANTED BENEFIT IN FAVOR OF PHILYARDS AS SHOWN BY CLEAR AND UNDISPUTED DOCUMENTARY EVIDENCE.

II. THE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING THAT MANDAMUS IS NOT A PROPER REMEDY IN THIS CASE.

III. FOLLOWING ITS OWN FINDINGS, THE COURT OF APPEALS GRIEVOUSLY ERRED (A) IN NOT DIRECTING THAT TRIAL BE
HELD ON ALLEGED ISSUES OF FACT AND (B) IN NOT APPOINTING AN AMICUS CURIAE FROM AMONG THE LAWYERS IN
THE COMMISSION ON AUDIT TO DETERMINE THE APPLICABILITY OF ITS REQUIREMENTS TO THE TRANSACTIONS IN THIS
CASE.5

In their comment on the petition, private respondent PHI contends that the real party in interest which should have filed
the petition for mandamus is the JG Summit Consortium and not solely petitioner JG Summit Holdings, Inc. which is just a
part of that consortium. Since Sembawang and Jurong, the other members of the consortium, are indispensable parties
to the petition,6 petitioner’s failure to implead them as co-petitioners warranted the dismissal of the petition.

Public respondents’ contention must fail. While it is true that Rule 3, Section 2 of the Rules of Court provides that “(a)ll
persons having an interest in the subject of the action and in obtaining the relief demanded shall be joined as plaintiffs,”
petitioner may file the petition alone. In the first place, Sembawang and Jurong are not indispensable parties, such that
their non-joinder as petitioners will not necessarily result in a failure to arrive at a final determination of the case.7 They
may be necessary parties as they were members of the consortium that won the public bidding prior to the exercise of
the right to top by private respondent, but the petition may be resolved even without their active participation.
Secondly, there is a doubt as to whether or not said foreign corporations are “subject to the jurisdiction of the court as to
both service of process and venue.”8 Thirdly, petitioner may be deemed to represent Sembawang and Jurong. The
admission of petitioner’s counsel that said foreign corporations are underwriting his and the other counsel’s fees reflects
this fact.9 By the nexus that binds the members of the consortium, in the event that petitioner succeeds in pursuing this
case, it is bound to respect the existence of the consortium and the corresponding responsibilities arising therefrom.
Public respondents also contend that petitioner has no standing to question the legality of a provision of the JVA in
which it is not a party.10 However, as this Court held in Kilosbayan v. Morato,11 there is a difference between the rule
on real-party-in-interest and the rule on standing, as the latter has constitutional underpinnings. In the case at bar,
petitioner has sufficiently alleged constitutional ramifications in the questioned public bidding of the PHILSECO that
merit the attention of the Court. Moreover, the prospect of financial gains arising from the award of the sale of
PHILSECO is enough personal stake in the outcome of the controversy to vest upon petitioner the locus standi to file the
petition for mandamus. Besides, without Kawasaki-PHI’s right to top the highest bid, petitioner would have been
awarded the sale as the highest bidder. A winning bidder has personality to initiate proceedings to prevent setting at
naught his right; otherwise, his right to due process would be violated.12 As such winning bidder, petitioner has “a
present substantial interest,” or such interest in the subject matter of action as will entitle it, under substantive law, to
recover if the evidence is sufficient.13

With respect to the propriety of the remedy availed by petitioner, the Court of Appeals correctly held that the special
civil action of mandamus is not the proper remedy to question the legality of the exercise of the right to top by private
respondent. It does not lie to compel the award of a contract subject of bidding to an unsuccessful bidder.14 Mandamus
applies as a remedy only

where petitioner’s right is founded clearly in law and not when it is doubtful.15 Thus:

“In order that a writ of mandamus may issue, it is essential that the person petitioning for the same has a clear legal right
to the thing demanded and that it is the imperative duty of the respondent to perform the act required. It neither
confers powers nor imposes duties and is never issued in doubtful cases. It is simply a command to exercise a power
already possessed and to perform a duty already imposed.”16

The Court of Appeals cannot declare petitioner as the winning bidder in this case and direct the COP/APT to award the
sale to it without first determining the validity of the right to top stipulated in the ASBR. Moreover, the sale of
government share in PHILSECO is a fait accompli, in view of the execution of the Stock Purchase Agreement between APT
and PHI. Mandamus may not be availed to direct the exercise of judgment or discretion in a particular way or to retract
or reverse an action already taken in the exercise of either.17

Be that as it may, the Court of Appeals erred when it dismissed the petition on the sole ground of the impropriety of the
special civil action of mandamus. It must be stressed that the petition was also one for certiorari, seeking to nullify the
award of the sale to private respondent of the PHILSECO shares. Verily, the petition alleges that “respondents COP and
APT have committed such a grave abuse of discretion tantamount to lack or excess of their jurisdiction in insisting on
awarding the bid to Philyards, for the various reasons stated herein, particularly since the right of first refusal and the
right to top the bid are unconstitutional, contrary to law and public policy."18 Petitioner's failure to include certiorari in
its caption should not negate the fact that the petition charged public respondent with grave abuse of discretion in
awarding the sale to private respondent. Well-settled is the rule that it is not the caption of the pleading but the
allegations therein that determine the nature of the action and the Court shall grant relief warranted by the allegations
and the proof even if no such relief is prayed for.19

Petitioner’s main contention is that PHILSECO, as a shipyard, is a public utility and, hence, could be operated only by a
corporation at least 60% of whose capital is owned by Filipino citizens, in accordance with Article XII, Section 10 of the
Constitution. Petitioner asserts that a shipyard is a public utility pursuant to Section 13 (b) of Commonwealth Act No.
146.20 Respondents, on the other hand, contend that shipyards are no longer public utilities by express provision of
Presidential Decree No. 666, which provided incentives to the shipbuilding and ship repair industry.

Indeed, P.D. No. 666 dated March 5, 1975 explicitly stated that a “shipyard” was not a “public utility.” Section 1 thereof
provide as follows:

“d) Registration required but not as Public Utility.—The business of constructing and repairing vessels or parts thereof
shall not be considered a public utility and no Certificate of Public Convenience shall be required therefor. However, no
shipyard, graving dock, marine railway or marine repair shop and no person or enterprise shall engage in the
construction and/or repair of any vessel, or any phase or part thereof, without a valid Certificate of Registration and
license for this purpose from the Maritime Industry Authority, except those owned or operated by the Armed Forces of
the Philippines or by foreign governments pursuant to a treaty or agreement.” (Italics supplied.)

However, Section 1 of P.D. No. 666 was expressly repealed by Section 20 of Batas Pambansa Big. 391, the Investment
Incentive Policy Act of 1983.21 Subsequently, Executive Order No. 226, the Omnibus Invest

The express repeal of B.P. Big. 391 by E.O. No. 226 did not revive Section 1 of P.D. No. 666, declassifying the shipbuilding
and ship repair industry as a public utility, as said executive order did not provide otherwise. When a law which expressly
repeals a prior law is itself repealed, the law first repealed shall not be thereby revived unless expressly so provided.23
Consequently, when the APT drafted the ASBR sometime in 1993, P.D. No. 666 no longer existed in our statute books.
While it is true that the repeal of a statute does not operate to impair rights that have become vested or accrued while
the statute was in force, there are no vested rights of the parties that should be protected in the case at bar. The reason
is simple: said decree was already inexistent when the ASBR was issued.

A shipyard such as PHILSECO being a public utility as provided by law, the following provision of the Article XII of the
Constitution applies:

“Sec. 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least
sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be
exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except
under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good
so requires. The State shall encourage equity participation in public utilities by the general public. The participation of
foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its
capital, and all the executive and managing officers of such corporation or association shall be citizens of the
Philippines.” (Italics supplied.)

The progenitor of this constitutional provision, Article XIV, Section 5 of the 1973 Constitution, required the same
proportion of 60%-40% capitalization. The JVA between NIDC and Kawasaki entered into on January 27, 1977 manifests
the intention of the parties to abide by the constitutional mandate on capitalization of public utilities.24 Paragraph 1.3 of
the JVA, as amended by Addendum No. 2 dated December 28, 1983,25 provides:

“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.” (Italics supplied.)

A joint venture is an association of persons or companies jointly undertaking some commercial enterprise with all of
them generally contributing assets and sharing risks. It requires a community of interest in the performance of the
subject matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by
agreement to share both in profit and losses.26 Persons and business enterprises usually enter into a joint venture
because it is exempt from corporate income tax.27 Considered more of a partnership,28 a joint venture is governed by
the laws on contracts and on partnership. The joint venture created between NIDC and Kawasaki falls within the purview
of an “association” pursuant to Section 5 of Article XIV of the 1973 Constitution and Section 11 of Article XII of the 1987
Constitution. Consequently, a joint venture that would engage in the business of operating a public utility, such as a
shipyard, must observe the proportion of 60%-40% Filipino-foreign capitalization.

Notably, paragraph 1.4 of the JVA accorded the parties the right of first refusal “under the same terms.” This phrase
implies that when either party exercises the right of first refusal under paragraph 1.4, they can only do so to the extent
allowed them by paragraphs 1.2 and 1.3 of the JVA or under the proportion of 60%-40% of the shares of stock. Thus,
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 of SNS or PHILSECO. 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.

Parenthetically, the Maritime Industry Authority (MARINA) which has been tasked to regulate the operation of
shipbuilding and ship repair yards,29 abides by the Filipino capitalization requirement as far as corporations and
partnerships are concerned. However, Section 2.3.1 (a) of its Memorandum Circular No. 95, Series of 1994,30 setting out
the Revised Implementing Guidelines on the Licensing of Shipbuilders, Ship Repairers, Afloat Repairers, Boatbuilders and
Shipbreakers, seems to exempt joint ventures registered with the SEC, the BOI and the EPZA from the 60% requirement
of Filipino ownership.31 The said provision states:

“The applicant must be a Filipino citizen or a corporation/partnership at least 60% of the authorized capital stock of
which is owned by Filipino citizens except for joint ventures which are registered with the Securities and Exchange
Commission, the Board of Investments and/or Export Processing Zone Authorities.”32

The constitutionality of said MARINA guideline, however, is not in issue here. 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.

From the facts on record, it appears that at the outset, the APT and Kawasaki respected the 60%-40% capitalization
proportion in PHILSECO. However, APT subsequently encouraged Kawasaki to participate in the public bidding of the
National Government’s shareholdings of 87.67% of the total PHILSECO shares, definitely over and above the 40% limit of
its shareholdings. In so doing, the APT went beyond the ambit of its authority.

It is well settled that the role of courts is to ascertain whether a branch or instrumentality of Government has
transgressed its constitutional or statutory boundaries. The courts, must examine those boundaries in the light of
provisions of the law. Otherwise, it would stray into the realm of policy decision-making.33

Proclamation No. 50, creating the COP and the APT, was issued by President Corazon C. Aquino pursuant to her
legislative powers under the Provisional Constitution of 1986. Section 12 of said Proclamation vested the APT with the
following powers:

“(1) To formulate and, after approval by the Committee, implement a program for the disposition of assets transferred to
it under this Proclamation, such program to be completed within a period of five years from the date of the issuance of
this Proclamation;

(2) Subject to its having received the prior written approval of the Committee to sell such asset at a price and on terms of
payment and to a party disclosed to the Committee, to sell each asset referred to it by the Committee to such party and
on such terms as in its discretion are in the best interest of the National Government, and for such purpose to execute
and deliver, on behalf and in the name of the National Government, such deeds of sale, contracts and other instruments
as may be necessary or appropriate to convey title to such assets;

xxx xxx xxx

(7) To adopt its internal rules and regulations, to adopt, alter and use a seal which shall be judicially noticed; to enter into
contracts; to sue and be sued;

xxx xxx x x x”

Pursuant to these provisions, the APT drafted the ASBR. Since the APTs rule-making authority is merely delegated, the
ASBR should be measured by the standard set by said proclamation.34 Notably, the discretion granted by the
proclamation to the APT for the sale of government property is circumscribed only by the “best interest of the National
Government.”

Implicitly written in any delegated legislative authority, such as that provided for in Proclamation No. 50, is the requisite
that the rules and regulations which an administrative body adopts must respect pertinent provisions of the Constitution
and the law.35 Article XII, Section 11 of the Constitution providing for a 60% Filipino capitalization in order that public
utilities may be granted a franchise should thus be deemed a paramount consideration in drafting the ASBR. In this
regard, worth noting is paragraph 15.0 of the ASBR, which provides that:

“In the event that the winning bidder is a 100% foreign-owned corporation, it may name its nominee corporation to
whom the NG shares shall be conveyed, provided it owns 40% equity in the nominee corporation, so as not to affect
PHILSECO’s qualification to own real estate properties in the Philippines.”

This rule is fraught with dangerous implications. It allows a completely foreign corporation to participate in the public
bidding of more than 60% of the total shares of a public utility corporation without setting a period within which the
foreign bidder should name its nominee. As it is, the rule allows a totally foreign investor to engage in the business of
operating a public utility for an unlimited period of time in total disregard of the constitutional proscription on the
percentage of Filipino ownership of corporations engaged therein. Paragraph 15.0 of the ASBR is thus directly and openly
repugnant to the Constitution considering that it allows foreign corporations to operate a public utility for an unlimited
period of time.

In carrying out its objective of disposing of government property, the APT should take into account the pertinent laws.
Since the method of disposing the PHILSECO that the APT had adopted was through public bidding, it was duty-bound to
follow the rules and regulations on competitive public bidding, in order to uphold the elementary rule on fairness in such
disposition. As this Court once said:

“x x x. A competitive public bidding aims to protect the public interest by giving the public the best possible advantages
through open competition. It is a mechanism that enables the government agency to avoid or preclude anomalies in the
execution of public contracts.”36

The word “bidding” in its comprehensive sense means making an offer37 or an invitation to prospective contractors
whereby the government manifests its intention to make proposals38 for the purchase of supplies, materials and
equipment for official business or public use,39 or for public works or repair. The three principles in public bidding are:
the offer to the public; an opportunity for competition; and a basis for exact comparison of bids. The distinctive character
of the system is destroyed and the purpose of its adoption is thwarted when a regulation thereon excludes any of these
principles.40 Public bidding of government contracts and for the disposition of government assets should have the same
principles and objectives. Their only difference, if at all, is that in the public bidding for public contracts, the award is
generally given to the lowest bidder while in the disposition of government assets, the award is to the highest bidder.41
The term “public bidding” imports a sale to the highest bidder with absolute freedom for competitive bidding.42

Under Section 504 of the Government Auditing Rules and Regulations, a public auction, which is the mode of divestment
or disposal of government property, shall adhere to established mechanics and procedures in public bidding.43 In such
public auction sales, the presence of a Commission on Audit (COA) representative who shall see to the proper
observance of auditing rules is imperative.44 In this case, there is no record that a COA representative witnessed the
public auction on December 2, 1993. Neither is there a showing that the APT observed the requirement of COA Circular
No. 89-296, to the effect that a government entity that is disposing of government property shall furnish the COA with
the disposal procedure adopted. Likewise, nowhere in the record is it stated that the APT heeded the suggestion of
Secretary of Finance and COP Chairman Jayme that its decision to grant Kawasaki the right to top the highest bid be
made “known to the Commission on Audit.” What appears on record is that the COA did not approve the ASBR,
specifically the provision on the right to top the highest

43 COA Circular No. 89-296 dated January 27, 1989, No. VI (1); GOVERNMENT ACCOUNTING AND AUDITING MANUAL,
Vol. I, p. 301.

44 The pertinent provision of COA Circular No. 89-296 states:

“VII. COA ROLE DURING DISPOSAL:—

In all modes or instances of disposal of government property or assets as hereinabove contemplated, the proceedings
shall be undertaken by the appropriate authority in the presence of the Auditor or other COA representative who shall
act as an intelligent, responsible and articulate witness thereto. The said act of witnessing shall not be confined merely
to seeing what is being done during the proceedings but shall be related to the more meaningful discharge by the
Auditor of his/her constitutional duty to examine, audit and settle all accounts pertaining to the expenditures or uses of
government funds and property. Thus, the Auditor acting as such witness may verbally advise the agency head or his
duly authorized representative of any objectionable feature/s of the proceedings. Otherwise, he may sign documents
and other papers pertinent only to those proceedings which he witnessed with his comments which he deems necessary
under the circumstances. Related advices and/or comments done in writing should invariably be sent officially to and
duly receipted for by the head of the agency or his duly authorized representative concerned. These written advices or
comments shall form part of the bases of action to be taken by the auditor in the preaudit or post audit of the subject
transactions.” bidder. Thus, then COA Chairman Pascasio S. Banaria, replying to the query of petitioner’s counsel on
whether or not the COA had approved the right to top the highest bid by 5%, stated:

“Per information received from our Auditor at APT, no prior approval was issued by their Office regarding said
preferential option. We have instructed our Auditor thereat to advise this Office of the result of the review of the
Corporation’s procedures for the sale of the assets including the review of the bidding documents pertaining to the
subject public bidding pursuant to the provisions of the Commission on Audit Circular No. 89-296 dated January 27,
1989.”45

In according the KHI/PHI the right to top, the APT violated the rule on competitive public bidding, under which the
highest bidder is declared the winner entitled to the award of the subject of the auction sale. In effect, the grant to
KHI/PHI of the right to top can be likened to a second bidding, which, however, is allowed only if there is a failure of
bidding, such as when there is only One bidder or none at all.46 By placing KHI/PHI in the advantageous position of
topping the highest bidder, the APT set aside the basic rule in public bidding that there be an opportunity for
competition.

While it may be argued that the right to top was aimed at giving the best financial advantage to the government, the
manner by which that right was conceived and arrived at in this case manifested bias in favor of KHI, thereby clearly
brushing aside the rule on fair competition. More importantly, the ASBR provision on the right to top the highest bidder
completely disregarded the stipulation in the JVA between NIDC and KHI to comply with the 60%40% capitalization
arrangement whereby KHI, the foreign investor, would be able to exercise its right of first refusal to the extent of only
40% of the total capitalization of the PHILSECO. Thus, KHI, whose investment exposure was already diminished to only
2.59% of the total PHILSECO shares, was given the privilege, through its nominee PHI, of exercising the right to top the
highest bid to 87.67% of those shares or definitely over and above its 40% contractual right to PHILSECO shares under
the JVA. Consequently, the APT rendered nugatory the constitutional and contractual proscriptions clearly to favor a
foreign investor.

Furthermore, while the right of first refusal entitled KHI to priority in the award of the contract, that right cannot bar
another bidder from submitting a bid because, precisely, the law requires public bidding in government contracts.47
Thus, by engrafting in the provisions of the ASBR the right to top, which was only an offshoot of the right of first refusal,
the APT effectively did away with public bidding insofar as KHI/PHI was concerned. To be sure, the right to top is
different from the right to match. In the latter, a qualified bidder is given the privilege of offering the same bid as that of
the highest bidder.48 In the former, as provided for by the ASBR, a non-bidder is accorded the right to top the highest
bid. There is reason, therefore, for the petitioner to complain that the APT made a show of a public bidding in order to
elicit the highest bid, only to award the sale to a non-bidder. The unfair manner by which the purported public bidding
was conducted by the APT is even made more blatant by the fact that after the “public bidding,” KHI exercised the right
to top through its nominee, private respondent PHI, which has among its stockholders some losing bidders.

In drafting the ASBR, the APT should have noted the fact that foreign investors were competing in the bidding. While it is
true that foreign investment should be encouraged in this country, however, the ASBR provision on the right to top is
unfair to all competitors, be they foreign or local, in the public auction of 87.67% of PHILSECO shares as it provided for a
method that would set at naught the entire public bidding.

It was thus error for the Court of Appeals to conclude that petitioner was estopped from contesting the validity of the
ASBR and the bidding procedure conducted pursuant to it. It is clear from the provisions of the ASBR itself that the basic
rules on fair competition in public biddings have been disregarded. Although petitioner had the opportanity to examine
the ASBR before it participated in the bidding, it cannot be estopped from questioning the unconstitutional, illegal and
inequitable provisions thereof. Estoppel is unavailing in this case; otherwise, it would stamp validity to an act that is
prohibited by law or against public policy.49

WHEREFORE, the instant petition for review on certiorari is GRANTED. The assailed Decision and Resolution of the Court
of Appeals are REVERSED and SET ASIDE. Petitioner is ordered to pay to APT its bid price of Two Billion Thirty Million
Pesos (P2,030,000,000.00), less its bid deposit plus interests upon the finality of this Decision. In turn, APT is ordered to:

(a) accept said amount of P2,030,000,000.00 less bid deposit and interests from petitioner;

(b) execute a Stock Purchase Agreement with petitioner;

(c) cause the issuance in favor of petitioner of the certificates of stocks representing 87.67% of PHILSECO’s total
capitalization;

(d) return to private respondent PHI the amount of Two Billion One Hundred Thirty One Million Five Hundred
Thousand Pesos (P2,131,500,000.00); and

(e) cause the cancellation of the stock certificates issued to PHI.

SO ORDERED. JG Summit Holdings, Inc. vs. Court of Appeals, 345 SCRA 143, G.R. No. 124293 November 20, 2000

8. ALDECOA & Co., plaintiff and appellant, vs. WARNER, BARNES & Co., LTD., defendant and appellee.

1. PARTNERSHIP; ACCOUNTING; DUTY OF BUSINESS MANAGER.—It is a general rule of law that he who takes charge of
the management of another's property is bound immediately thereafter to render accounts of his transactions; and that
it is always to be understood that all accounts must be duly supported by proofs.

2. ID. ; ID, ; ID.—The acceptance and approval of any account rendered from a certain date does not excuse nor relieve
the manager of a joint-account partnership from complying with the unquestionable duty of rendering accounts covering
a period of time prior to the said date. They must be rendered from the time the partnership was actually formed and its
business actually commenced.

3. ID.; ID.; ID.; REVISION OF ACCOUNTS.—Once certain accounts have been approved, which were duly rendered by
the manager of a joint-account partnership, the member of the entity not vested with the character of manager is not
entitled afterwards to claim the revision of the accounts already approved, unless it shall be proved satisfactorily, by the
production of evidence, that there was fraud, deceit, error, or mistake in the approval of the said accounts. (Arts. 1265,
1266, Civil Code, and law 30, title 11, 5th Partida.)

4. ID.; ID.; ID.—One of the duties of the manager of a joint-account partnership is that of liquidating the assets of the
common ownership and to state the result obtained therefrom in the final rendering of accounts which he is to present
at the conclusion of the partnership, as no person should enrich himself unjustly at the expense of another. (Art. 243,
Code of Commerce, and decision in cassation given on July 1, 1870, by the supreme court of Spain.)

APPEAL from a judgment of the Court of First Instance of Manila. Araullo, J.

By a complaint filed on September 26, 1907, the legal representative of Aldecoa & Co., in liquidation, filed suit in the
Court of First Instance of Manila against Warner, Barnes & Co., Ltd., alleging in the first three paragraphs of their
complaint, as a cause of action, that the plaintiff is a regular collective mercantile association organized in accordance
with the laws of these Islands, duly registered in the mercantile registry, and at present in liquidation; that the defendant
is a joint stock mercantile firm organized in accordance with the laws of England, registered in the mercantile registry of
Manila, and has done and is still doing business in these Islands under the name of Warner, Barnes & Co., Ltd., which
acquired the business that was conducted in these Islands by Warner, Barnes & Co., the assets, liabilities, and all the
obligations of which were assumed by the defendant.

In the other paragraphs of the complaint, from the fourth to the twelfth, the plaintiff set forth that, prior to December 1,
1898, Warner, Barnes & Co. were conducting a business in Albay, the principal object of which was the purchase of hemp
in the pueblos of Legaspi and Tabaco for the purpose of bringing it to Manila, here to sell it for exportation, and that on
the said date of December 1, 1898, the plaintiff company became interested in the said business of Warner, Barnes &
Co., in Albay and formed therewith a joint-account partnership whereby Aldecoa & Co., were to share equally in the
gains and losses of the business in Albay; that the defendant is the successor to all the rights and obligations of Warner,
Barnes & Co., among which is that of being manager of the said joint-account partnership with Aldecoa & Co.; that the
defendant acted, and continues to act as such manager, and is obliged to render accounts supported by proofs, and to
liquidate the business, which defendant not only has not done, in spite of the demand made upon it, but it has expressly
denied the right of plaintiff to examine the vouchers, contenting itself with forwarding copies of the entries in its books,
which entries contain errors and omissions that hereinafter will be mentioned.

Said entries moreover, show the partnership to have commenced on June 30, 1899, whereas its operations should have
commenced and did commence on December 1, 1898, on which date the joint-account partnership commenced; that,
with respect to the liquidation of the business, the operations having been closed on December 31, 1903, Warner,
Barnes & Co., Ltd., the defendant, has not realized upon the assets of the firm by selling the property which constitutes
its capital; that the persons who were the managers and general partners of Warner, Barnes & Co., are also members of
Warner, Barnes & Co., Ltd., and are the managers and directors of that firm in the Philippine Islands and are the same
ones who, under the previous firm name of Warner, Barnes & Co., admitted Aldecoa & Co. as a participant in one-half of
the said business, on the 1st day of December, 1898; that the said directors of the defendant company, unlawfully,
maliciously, and criminally conspired with the persons who were managing the commercial firm of Aldecoa & Co. during
the years 1899, 1900, 1901, 1902, and 1903, to defraud the latter of its interest in the said joint-account partnership,
buying the silence of the said managers with respect to the operations of the joint-account partnership during the time
comprised between the 1st of December, 1898, and the 30th of June, 1899, and also with respect to the errors and
omissions in the accounts relating to the second semester of 1899, and those relating to 1900, 1901, 1902, and 1903.

That the said fraudulent acts were not known to the partners of the plaintiff firm until the managers, in collusion with
the managers of the defendant firm to defraud and injure the plaintiff firm, had ceased to hold their positions, to wit,
until after the 31st of December, 1906, and that by reason of this conspiracy to defraud the plaintiffs, the defendants
have been benefited; that the errors and omissions found in the entries of the books kept by the defendant firm as
manager of the joint-account partnership are those expressed in detail here below:

(a) It appears that between the 10th of July and the 26th of December, 1899, 43,934 piculs of hemp arrived in Manila for
the joint-account partnership, which were purchased in Legaspi and Tabaco at 13 pesos per picul, and, after charging
against this hemp excessive expenses for collection, storage, freight, fire, marine, and war insurance, personnel, etc., the
defendants, Warner, Barnes & Co., as managers of the joint-account partnership and commission agents of their joint-
account partners, claim that they purchased the said hemp for themselves, but do not give the price received from the
sale thereof and merely credit it at 13 pesos a picul, when the average market price at that time was 16.50 pesos a picul;
said defendants thereby injuring plaintiffs to the amount of P76,884.50.

(b) Striking a balance from the amount of hemp debited and that credited, there results a difference of 4,332.96 piculs
not credited which, at 24 pesos a picul, the market price at the time, represents an injury to plaintiffs to the extent of
P51,995.52, the said deficit, with respect to the hemp, pertaining to the period beginning with December 31, 1899, in the
manner shown by the following table:

(c) In 1900, on April 30, Messrs. Warner, Barnes and Co., Ltd., give credit for 5,485 piculs of hemp, at 16 pesos a picul,
when the market price at that time, according to themselves, was P23.78½; thereby injuring plaintiffs in the sum of
P21,350.36.
(d) In 1901, on the date of January 31, Messrs. Warner, Barnes and Co., Ltd., give credit for 4,600 piculs of hemp, at 8.93
pesos a picul, when, according to themselves, the market price at that time was 11.50 pesos a picul; thereby injuring
plaintiffs in the sum of P5,911.

(e) One of the sources of profit of the joint-account partnership between Aldecoa & Co. and Warner, Barnes & Co., Ltd.,
was from the pressing of hemp, which profit is to be credited to the partnership joint-accounts, when the hemp is
realized in Manila, and from this source there are due to the plaintiffs P149,084.12, in which sum they have been injured
by the defendants. The said credit for pressing is omitted from the books of Warner, Barnes & Co., Ltd., and should be
entered as follows:

(wala yung table)

(g) In 1900, there is unduly included an item of net account which should be stricken out, as it does not pertain to this
business. This item is the following: 1900.

June 30. To Miguel Estela. For transfer made to his account of 5 per cent commission on his hemp, which should not be
paid according to agreement......................

P870.75

Half of this sum, P435.37, must be credited to the plaintiffs.

(h) On the date of .December 26, 1899, Messrs. Warner, Barnes & Co., Ltd., deduct from the profits which they show as
belonging to Aldecoa & Co., the sum of P7,400, under the appearance of an insurance premium, and they delivered that
sum to the plaintiffs' managers with whom they conspired, for the purposes of the collusion alleged in Paragraph VII of
the complaint, in this manner failing to observe the truth in their statement of the facts. Aldecoa & Co., therefore, claim
for themselves this amount, P7,400.

(i) On December 31, 1903, on a capital of P50,000 brought in by Aldecoa & Co. and to whom it should bear 5 per cent
interest from the 8th of June, 1900, the interest is unduly credited to the joint-account, thereby injuring the plaintiffs in
the sum of P8,750.

(j) On December 31, 1902, Aldecoa & Co. are charged with six months' interest, amounting to P736.46, on a balance
debited against them for alleged losses, and on June 30, 1903, they are charged with P1,818.58 for a like reason. These
two items should be stricken out, because the accounts when correctly made show no losses, but profits. By such debits
the plaintiffs have been injured in the sum of P1,277.52.

(k) In the entries corresponding to the years 1902 and 1903, Warner, Barnes & Co., Ltd., give the price of "corriente
buena" (current good), to the grade which, according to the mark, was classified as "abacá superior" (superior hemp) ;
the price of "corriente ordinario" (current ordinary), to the hemp marked under the classification of "corriente buena"
(current good) ; the price of "segunda superior" (second superior), to what is "corriente" or "current," and so on
successively; whence results a difference of price to the value of P233,102.18, in 1902, and P74,274.90, in 1903, one-half
of which differences should be credited to Aldecoa & Co., that is, P153.688.54.

(l) The value of the properties brought in by Warner, Barnes & Co., Ltd., to the joint-account, instead of cash capital, is
omitted from the accounts. These properties are the following:

Those purchased from Mariano Roisa, consisting of one galvanized-iron-roofed warehouse, with hemp press; one house
of strong materials and the lot on which it stands, in Tabaco, P12,000.

That purchased from Juana Roisa, which is one small warehouse of strong materials, in Tabaco, worth about P2,500.

Those purchased from D. Manuel Zalvidea situated in Tabaco, which are: One warehouse of strong materials, with press;
another warehouse of strong materials; and two houses of strong materials, together with the lots on which they are
built, P22,000.
Those purchased from D. Marcos Zubeldia, in Legaspi, which are: Four warehouses with three hemp presses, and one
house of strong materials, with their corresponding lots, P50,000.

Total cost, P86,500.

The complaint further sets forth that if the entries made by the defendant in its books show in themselves the foregoing
errors and omissions, the plaintiff has good grounds for believing that, if the vouchers were examined, still greater errors
would be found, as to which the plaintiff can not formulate its claims with exactness until the defendant renders it an
account, accompanied by vouchers; that the defendant, as manager of the joint-account partnership with Aldecoa & Co.,
neglected to comply with what is especially prescribed in article 243 of the Code of Commerce, as a duty inherent to its
position as manager of the jointaccount partnership, which is that of rendering an account with vouchers, and that of
liquidating the said business, for it refuses to furnish the plaintiff the documents required for their examination and
verification, and also refuses to realize the firm assets by selling the warehouses, houses, and other property which
constitute the capital; that, as the defendant refuses to do the things above related, the plaintiff has no other easy,
expeditious and suitable remedy than to petition the court for a writ of mandamus, wherefore it prays the court to
protect it in its rights and to issue the said mandamus against the defendant, ordering it, within a date set for this
purpose, to render to the court an account, accompanied by invoices, receipts, and vouchers of the Albay business,
beginning the said account as of December 1, 1898, the date on which the partnership was formed, and correcting in it
the errors and omissions related in paragraph 9 of this complaint; that the def endant credit and pay to the plaintiff the
sums alleged in that paragraph to be due to plaintiff, with interest at the legal rate upon the sums omitted and for the
difference between the amounts incorrectly debited and credited, from the respective dates on which they should
appear, if correctly entered; that after the said accounts have been rendered and discussed, judgment be entered for
any balance which may appear in favor of the plaintiff, including the sums claimed, and legal interest thereon. The
plaintiff also prays that the writ of mandamus fix a term within which the defendant is to liquidate the business, selling
the properties aforementioned and distributing the proceeds between both the litigants, and that the defendant be
adjudged liable for costs of suit, and plaintiff be granted such other and further relief as may be found just and equitable.

On November 11, 1907, the defendant filed a written answer and counterclaim against the defendant, and,
notwithstanding the overruling of the demurrer filed by the latter to the counterclaim, the court by writ of December 4,
1907, ordered that the defendant should, within a period of five days, make its allegations more specific with respect to
certain particulars mentioned in the order of the court, and both parties being notified thereof, the defendant, on
January 24, 1908, prayed the court to authorize it to file the attached amended answer instead of the original one.

In the said amended answer the firm of Warner, Barnes & Co., Ltd., the defendant, states that it denies each and every
one of the allegations of the complaint, with the exception of those which are expressly admitted in its answer, and
admits the allegations of paragraphs 1, 2, and 3 of the complaint. In answer to the allegations of paragraphs 4 to 12 of
the complaint, it admits that on June 30, 1899, a joint-account partnership was formed between the plaintiff and the
defendant for the operation of a business in Albay, the principal transactions of which were the purchase of hemp in
Legaspi and Tabaco, of which business one-half of the results, whether losses or gains, appertained to the plaintiff.
Defendant also admits that the said business continued under the management of the defendant company, as manager
of the said joint-account partnership, until December 31, 1903; but it denies all the other allegations contained in the
said paragraphs. For its first special defense, the defendant alleges that during the period that the said joint-account
partnership existed, the manager thereof, the defendant, rendered to the plaintiff just and true accounts of its
transactions as manager of the said partnership, which accounts have been approved by the plaintiff, with the exception
of those relating to the year 1903, and as to the latter, that the same were objected to by plaintiff firm solely upon the
grounds mentioned in clause (k) of paragraph 9 of the complaint, which objections are wholly unfounded. As its second
special defense, the defendant alleges that more than four years have expired between the time the alleged right of
action accrued to the plaintiff and the date of the filing of the complaint. For all the reasons set forth in this amended
answer, the defendant prayed that it be absolved from the complaint, with the costs against the plaintiff.

On and subsequent to the 14th of August, 1908, the trial of this cause was held and oral evidence was introduced by the
plaintiff, but no witnesses were offered by the defendant, which finally moved for a dismissal of the case, and the court,
on December 26 of the same year, 1908, rendered judgment, dismissing the complaint with respect to the petition for
the rendering of an account, verified by invoices, receipts and vouchers, of the said Albay business, pertaining to the
period comprised from the beginning of the business to the 31st of December, 1902, inclusive, assessing the cost against
the plaintiff, and opening the second period of the trial with respect to the account for the whole year 1903, in
accordance with the ruling of the court made at the commencement of the hearing. The plaintiff on being notified of this
judgment filed a written exception thereto and announced his intention to forward through regular channels a bill of
exceptions, and by another writing moved for a new trial on the ground that the evidence did not justify the judgment
rendered, which it alleged was openly and manifestly contrary to the weight of the evidence and to law. This motion
being denied, to which exception was taken by the plaintiff, the latter duly filed a proper bill of exceptions which was
certified to and forwarded to this court, together with all the documentary and oral evidence produced at the trial.

This litigation concerns the rendering of accounts pertaining to the management of the business of a joint-account
partnership formed between the two litigant companies.

Both the plaintiff and the defendant are in accord that, through verbal agreement, the said partnership was established,
whereby they should share equally the profits and losses of the business of gathering and storing hemp in Albay and
selling it in Manila for exportation, and that the commercial firm of Warner, Barnes & Co., Ltd., was the manager of the
said joint-account partnership.

The disagreement between the parties consists in the following points: First, as to the date when the partnership was
formed and began business in the province mentioned; second, whether the managing firm did render accounts, duly
verified by vouchers, of its management from the date of the organization of the partnership; third, whether errors and
omissions, prejudicial to the plaintiff, Aldecoa & Co., exist in the partnership books and in its accounts, and whether, in
the management of the said business, f raudulent acts were committed, also to the plaintiffs injury; and, fourth, whether
the partnership property should be included in the liquidation of the said business and in the accounts appertaining to
the year 1903, when the existence of the partnership came to an end.

With respect to the date on which the said partnership began, the plaintiff, Aldecoa & Co., submitted evidence
unrebutted by that of the defendant, Warner, Barnes & Co., Ltd., and although the latter averred that the joint-account
partnership began on June 30, 1899, denying that it was commenced, or was formed, on December 1, 1898, as the
plaintiff says that it was, it is certain that the defendant has not proved its averment; and if, on the opening of this case
de novo it shall not have done so within such period as the court may see fit to determine, it will be proper to find in
accordance with the value of the evidence adduced by the plaintiff and to advise the defendant to render, within a fixed
period, accounts, verified by vouchers, of the management of the partnership business and pertaining to the seven
months from December 1, 1898, to June 29, 1899; and, in view of the evidence adduced by the plaintiff in proof of the
aforesaid first point, if the defendant does not produce other evidence in rebuttal, they must, for some reason, be
expressly rejected in the judgment, if they are not to be taken into account in reaching the conclusions or in considering
the case upon the merits.

As regards the second point, we agree with the opinion expressed by the lower court and find that the firm of Warner,
Barnes & Co., Ltd., did render accounts from June 30, 1899, to December 31, 1902, inasmuch as the very evidence
introduced by the plaintiff showed that the said accounts had been rendered and were approved by it, according to the
context of its own letters of the dates of July 27, 1907, and February 19, 1903. Therefore, the plaintiff is in nowise
entitled, and has no right of action to compel the defendant to render accounts pertaining to that period, they having
already been rendered and duly approved.

It is a rule of law generally observed that he who takes charge of the management of another's property, is bound
immediately thereafter to render accounts covering his transactions; and that it is always to be understood that all
accounts rendered must be duly substantiated by vouchers.

If it is a fact admitted by both litigating parties that Warner, Barnes & Co., Ltd., was the manager of the business of the
joint-account partnership formed between it and Aldecoa & Co., it is unquestionable that it was and is the defendant's
duty to render accounts of the management of the business, as it partially has done. Although the defendant has not
proved, as it should have done, that it complied with its duty of rendering accounts of its management, since the letters
themselves exhibited by the plaintiff, and duly authenticated as being written by the latter, prove that the defendant did
render accounts from June 30, 1899, to December 31, 1902, no legal reason whatever exists for not accepting the finding
of the lower court which decided that it had been proved that accounts were rendered pertaining to the period
mentioned and that the said accounts were approved by the plaintiff.

The procedure of the plaintiff is truly inexplicable in accepting and approving accounts that were rendered to it and
which only begin with June 30, 1899, inasmuch as such approval would appear to indicate that it agreed to the claim
made by the defendant that the partnership commenced on the said date; but even so, once that it is proved that the
actual date on which the partnership was formed was December 1, 1898, and that it is not shown that the defendant has
rendered accounts corresponding to the seven months subsequent to the said date of December 1, the acceptation and
approval of accounts rendered since the 30th of June 1899, does not excuse nor release the manager of the partnership,
the defendant, from complying with its unquestionable duty of rendering accounts covering the aforesaid seven months.
The presumption must be sustained until proof to the contrary is presented.

Moreover, the approval of accounts corresponding to the years from June 30, 1899, to December 31, 1902, does not
imply that the said approved accounts comprise those pertaining to the seven months mentioned, December 1, 1898, to
June 29, 1899, because the defendant, the accountant, denies that the partnership commenced on the aforesaid date of
December 1st, asserting it began on June 30, 1899; wherefore, on defendant's rendering those accounts, it is to be
presumed that it did so from the date which it avers was that of the formation of the partnership and the beginning of
the business, and it is therefore evident that it has not rendered accounts pertaining to the seven months mentioned.

With respect to the third point relative to whether errors and omissions prejudicial to the plaintiff, Aldecoa & Co., exist in
the partnership books and in its accounts, and whether, in the management of the said business, fraudulent acts were
committed to plaintiff's injury, it must be borne in mind that once the accounts have been approved which were
rendered by the managing firm of Warner, Barnes & Co., Ltd., the plaintiff, Aldecoa & Co., is not entitled afterwards to
claim a revision of the same, unless it shows that there was fraud, deceit, error, or mistake in the approval of the said
accounts.

Under this hypothesis, Aldecoa & Co. are strictly obliged to prove the errors, omissions, and fraudulent acts attributed to
the defendant, in connection with the accounts already rendered, and approved by them, in order that the same may be
revised in accordance with law and the jurisprudence of the courts. (Pastor vs. Nicasio, 6 Phil. Rep., 152.)

The approval of an account does not prevent its subsequent revision, or at least its correction, if it is proved in a
satisfactory manner that there was deceit and fraud or error and omission in it. (Arts. 1265, 1266, Civil Code.)

Law 30, title 11, 5th Partida, provides, among other things, the following:

"That is precisely what we say should be observed, in all other accounts that men make among themselves, in
connection with the things which belong to them. Notwithstanding that they may acknowledge the settlement of the
accounts between them and promise never to bring them up again, if it be known in truth that he who gave the account
or had the things in his keeping, concealed anything deceitfully, or committed other fraud against those who have a
share in such thing, then neither the suit, nor such previous status and promise shall avail; on the contrary, we say that
they may sue him to compel him to remedy the deceit he committed against them, and to pay all the damages and
losses that have accrued to them by reason thereof; provided, however, he especially shall not have repaired the deceit
that he committed."

So that it does not matter that the accounts pertaining to the years comprised between the 30th of June, 1899, and the
31st of December, 1902, may have been approved by Aldecoa & Co. Whenever this firm shall succeed in proving that
there was error, omission, fraud, or deceit in these accounts, they may be duly revised, according to law.

With regard to the last point in controversy, the defendant agrees that the plaintiff has not yet approved the accounts
that the former rendered, pertaining to 1903, the last year of the existence of the joint-account partnership; and, for this
reason, it was provided in the judgment appealed from that the trial should continue with respect to the said accounts
corresponding to the year 1903, in order that the plaintiff might make such objections and statements in regard to the
same as he deemed proper, and adduce the evidence conducive to prove his claim, in accordance with law.
It is one of the duties of the manager of a joint-account partnership, to liquidate the assets that form the common
property, and to state the result obtained therefrom in the final rendering of the accounts which he is to present at the
conclusion of the partnership.

Article 243 of the Code of Commerce says:

"The liquidation shall be effected by the manager, and after the transactions have been concluded he shall render a
proper account of its results."

It is a recognized fact, and one admitted by both parties, that the partnership herein concerned concluded its
transactions on December 31, 1903; wherefore the firm of Warner, Barnes & Co., Ltd., the manager of the partnership, in
declaring the latter's transactions concluded and in rendering duly verified accounts of its results, owes the duty to
include therein the property and effects belonging to the partnership in common. This rule was established by the
supreme court of Spain in applying a similar preception of the 1st of July, 1870, setting up the following doctrine:

"In case of the liquidation of a company of this kind (denominated joint-account partnership), inasmuch as the sale of
the firm assets is necessarily uncertain and eventual, considering the greater or lesser selling price that may be obtained
from the property and effects which comprise such assets, the price received should be allotted in the same proportion
as that fixed in the contract for the division of the profits and losses, for otherwise one of the partners would be
benefited to the detriment and loss of his copartners."

This doctrine is perfectly legal and in accord with justice, as no person should enrich himself wrongf ully at the expense
of another; and, in the case under review, should it be duly and fully proved that the managing firm acquired realty in
the name and at the expense of the joint-account partnership with the plaintiff firm, it is just that, in liquidating the
property of common ownership, such realty should be divided between the partners in the same manner as were the
profits and losses during the existence of the business, from the beginning of the partnership to the date of its
dissolution.

By the facts herein above set forth, it has been shown that in the present state of this cause resulting from the rendering
of the judgment appealed from, it has not been possible to decide in a final manner the various issues brought up and
controverted by the litigants, for, though it be granted as proved that the defendant firm, the manager of the said
partnership, has in fact rendered accounts pertaining to the years from June 30, 1899, to December 31, 1902, as found in
the said judgment, there still remain to be decided the four points or questions of fact before specified. Wherefore, and
in accordance with section 496 of the Code of Civil Procedure, a new trial should be held PHILIPPINE REPORTS
ANNOTATED

involved in this litigation, and accordingly the judgment appealed from is set aside and this cause shall be returned to the
court below, accompanied by a certified copy of this decision, for the holding of a new trial, for which purpose, first, the
defendant shall be advised that it must, within a fixed period, render an account, verified by vouchers, of its
management of the business of the joint-account partnership with the plaintiff, pertaining to the months from December
1, 1898, to June 29, 1899, and to the twelve months of the year 1903, unless it shall prove in a satisfactory manner that
the said partnership began on June 30, 1899, contrary to the averment of the plaintiff supported by evidence that it
commenced on December 1, 1898, in which case the said rendering of account shall be restricted to the twelve months
of the year 1903, in the accounts of which last period must be included all the property that is found to belong to the
said partnership; second, in the examination of the accounts that may be found to have been rendered, the parties may
allege and prove facts conducive to their revision or approval besides availing themselves of the evidence already
adduced at trial; and, third, with respect to the accounts corresponding to the period from June 30, 1899, to December
31, 1902, already approved, the trial court shall proceed in accordance with law, duly considering the errors, omissions,
mistakes and fraudulent or deceitful acts that have been alleged or may specifically be alleged in rejecting the said
approved accounts, as well as the evidence introduced by both parties, and it shall be careful to decide in its final
judgment all the issues raised between the parties in the course of this litigation and to provide such remedies as are
proper in regard to their respective claims. So ordered. Aldecoa & Co. vs. Wsarner, Barnes & Co., 16 Phil. 423, No. 5242
August 6, 1910
 9. Po YENG CHEO, plaintiff and appellee, vs. LIM KA YAM, defendant and appellant.

1. PARTNERSHIP; LIABILITY OF MANAGER TO ACCOUNT; LIQUIDATION.— Though the manager of a mercantile

partnership which has ceased to do business is accountable to his associates for any assets of the concern in his hands,
judgment cannot be rendered against him for the proportionate share of the capital claimed by one of the partners in an
action brought by such partner alone, where the concern has not been liquidated and there is no proof showing the
existence of assets applicable to capital account.

2. ID.; ID.; ACTION BY SINGLE PARTNER.—Where the only assets in the hands of the manager of a defunct partnership
consists of shares in other companies, the true value of which is not proved, it is error, in an action for an accounting
brought against him by one of the partners, to give judgment in favor of the plaintiff for a sum of money equivalent to
his aliquot part of the par value of such shares. A single partner cannot recover from another, without process of
liquidation or division, a part of the undivided property of the partnership.

3. ID.; LIQUIDATION; SURVIVING MEMBER.—When the manager of a mercantile partnership dies the duty of
liquidating it devolves upon the surviving member, or members, of the firm and not upon the legal representative of the
deceased member.

4. ID.; ID.; CLAIM FOR DAMAGES AGAINST MANAGER.—When the manager of a mercantile partnership who is charged
with the duty of liquidating the same dies, his associates should take the proper steps to settle its affairs; and any claim
against him, or his estate, for damages incident to the misappropriation of its funds by him or for damage resulting from
his wrongful acts as manager, in excess of his interest in the firm assets, should be prosecuted against his estate in
administration in the manner provided by law.

5. EXECUTORS AND ADMINISTRATORS; PARTNERSHIP; ACCOUNTING; DlSCONTINUANCE OF ACTION.—When the

manager of a defunct partnership who is named defendant in an action for an accounting of its affairs and against whom
judgment is sought for mismanagement or misappropriation of its funds dies, the action should be discontinued, upon
motion to that effect by his personal representative, and the claim for damages should be presented to the committee
on claims in the administration of his estate. It is error to prosecute such an action to judgment over the objection of the
administrator.

By the amended complaint in this action, the present plaintiff, Po Yeng Cheo, alleged sole owner of a business formerly
conducted in the City of Manila under the style of Kwong Cheong Tay, sought to obtain an accounting from Lim Ka Yam,
as managing partner in said business and to recover from him its properties and assets. The defendant having died
during the pendency of the cause in the court below and the death suggested of record, his administrator, one Lim Yock
Tock, was required to appear and make defense.

In a decision dated July 1, 1921, the Honorable C. A. Imperial, presiding in the court below, found that the plaintiff was
entitled to an accounting from Lim Ka Yam, the original defendant, as manager of the business already referred to, and
he accordingly required Lim Yock Tock, as administrator, to present a liquidation of said business within a stated time.
This order bore no substantial fruit, for the reason that Lim Yock Tock personally knew nothing about the aforesaid
business (which had ceased operation more than ten years previously) and was apparently unable to find any books or
documents that could shed any real light on its transactions. However, he did submit to the court a paper written by Lim
Ka Yam in life purporting to give, with vague and uncertain details, a history of the formation of the Kwong Cheong Tay
and some account of its disruption and cessation from business in 1910. To this narrative was appended a statement of
assets and liabilities, purporting to show that after the business was liquidated, it was actually debtor to Lim Ka Yam to
the extent of several thousand pesos. Appreciating the worthlessness of this so-called statement, and all parties
apparently realizing that nothing more was likely to be discovered by further insisting on an accounting, the court
proceeded, on December 27, 1921, to render final judgment in favor of the plaintiff.

The decision made on this occasion takes as its basis the fact stated by the court in its earlier decision of July 1, 1921,
which may be briefly set forth as follows:
The plaintiff, Po Yeng Cheo, is the sole heir of one Po Gui Yao, deceased, and as such Po Yeng Cheo inherited the interest
left by Po Gui Yao in a business conducted in Manila under the style of Kwong Cheong Tay. This business had been in
existence in Manila for many years prior to 1903, as a mercantile partnership, with a capitalization of P160,000, engaged
in the import and export trade; and after the death of Po Gui Yao the following seven persons were interested therein as
partners in the amounts set opposite their respective names, to wit: Po Yeng Cheo, P60,000; Chua Chi Yek, P50,000; Lim
Ka Yam, P10,000; Lee Kom Chuen, P10,000; Ley Wing Kwong, P10,000; Chan Liong Chao, P10,000; Lee Ho Yuen, P10,000.
The manager of Kwong Cheong Tay, for many years prior to its complete cessation from business in 1910, was Lim Ka
Yam, the original defendant herein.

Among the properties pertaining to Kwong Cheong Tay and constituting part of its assets were ten shares of a total par
value of P10,000 in an enterprise conducted under the name of Yut Siong Chyip Konski and certain shares to the amount
of P1,000 in the Manila Electric Railroad and Light Company, of Manila.

In the year 1910 (exact date unstated) Kwong Cheong Tay ceased to do business, owing principally to the f act that the
plaintiff ceased at that time to transmit merchandise from Hongkong, where he then resided. Lim Ka Yam appears at no
time to have submitted to the partners any formal liquidation of the business, though repeated demands to that effect
have been made upon him by the plaintiff.

In view of the facts above stated, the trial judge rendered judgment in favor of the plaintiff, Po Yeng Cheo, to recover of
the defendant Lim Yock Tock, as administrator of Lim Ka Yam, the sum of sixty thousand pesos (P60,000), constituting
the interest of the plaintiff in the capital of Kwong Cheong Tay, plus the plaintiff's proportional interest in shares of the
Yut Siong Chyip Konski and Manila Electric Railroad and Light Company, estimated at P11,000, together with the costs.
From this judgment the defendant appealed.

In beginning our comment on the case, it is to be observed that this court finds itself strictly circumscribed so far as our
power of review is concerned, to the facts found by the trial judge, for the plaintiff did not appeal from the decision of
the court below in so far as it was unfavorable to him, and the defendant, as appellant, has not caused a great part of the
oral testimony to be brought up. It results, as stated, that we must accept the facts as found by the trial judge; and our
review must be limited to the error, or errors, if any, which may be apparent upon the face of the appealed decision, in
relation with the pleadings of record.

Proceeding then to consider the appealed decision in relation with the facts therein stated and other facts appearing in
the orders and proceedings in the cause, it is quite apparent that the judgment cannot be sustained. In the first place, it
was erroneous in any event to give judgment in favor of the plaintiff to the extent of his share of the capital of Kwong
Cheong Tay. The managing partner of a mercantile enterprise is not a debtor to the shareholders for the capital
embarked by them in the business; and he can only be made liable for the capital when, upon liquidation of the business,
there are found to be assets in his hands applicable to capital account. That the sum of one hundred and sixty thousand
pesos (P160,000) was embarked in this business many years ago reveals nothing as to the condition of the capital
account at the time the concern ceased to do business; and even supposing—as the court possibly did—that the capital
was intact in 1908, this would not prove that it was intact in 1910 when the business ceased to be a going concern; for in
that precise interval of time the capital may have been diminished or dissipated from causes in no wise chargeable to the
negligence or misfeasance of the manager.

Again, so far as appears from the appealed decision, the only property pertaining to Kwong Cheong Tay at the time this
action was brought consisted of shares in the two concerns already mentioned of the total par value of P11,000. Of
course, if these shares had been sold and converted into money, the proceeds, if not needed to pay debts, would have
been distributable among the various persons in interest, that is, among the various shareholders, in their respective
proportions. But under the circumstances revealed in this case, it was erroneous to give judgment in favor of the plaintiff
for his aliquot part of the par value of said shares. It is- elementary that one partner, suing alone, cannot recover of the
managing partner the value of such partner's individual interest; and a liquidation of the business is an essential
prerequisite. It is true that in Lichauco vs. Lichauco (33, Phil., 350), this court permitted one partner to recover of the
manager the plaintiff's aliquot part of the proceeds of the business, then long since closed; but in that case the affairs of
the defunct concern had been actually liquidated by the manager to the extent that he had apparently converted all its
properties into money and had pocketed the same—which was admitted;—and nothing remained to be done except to
compel him to pay over the money to the persons in interest. In the present case, the shares referred to—constituting
the only assets of Kwong Cheong Tay—have not been converted into ready money and doubtless still remain in the
name of Kwong Cheong Tay as owner. Under these circumstances it is impossible to sustain a judgment in favor of the
plaintiff for his aliquot part of the par value of said shares, which would be equivalent to allowing one of several
coöwners to recover from another, without process of division, a part of an undivided property.

Another condition will be noted as present in this case which in our opinion is fatal to the maintenance of the appealed
judgment. This is that, after the death of the original def endant, Lim Ka Yam, the trial court allowed the action to
proceed against Lim Yock Tock, as his administrator, and entered judgment f or a sum of money against said
administrator as the accounting party,—notwithstanding the insistence of the attorneys for the latter that the action
should be discontinued in the form in which it was then being prosecuted. The error of the trial court in so doing can be
readily demonstrated from more than one point of view.

In the first place, it is well settled that when a member of a mercantile partnership dies, the duty of liquidating its affairs
devolves upon the surviving member, or members, of the firm, not upon the legal representative of the deceased
partner. (Wahl vs. Donaldson Sim & Co., 5 Phil., 11; Sugo and Shibata vs. Green, 6 Phil., 744.) And the same rule must be
equally applicable to a civil partnership clothed with the form of a commercial association (art. 1670, Civil Code; Lichauco
vs. Lichauco, 33 Phil., 350). Upon the death of Lim Ka Yam it therefore became the duty of his surviving associates to take
the proper steps to settle the affairs of the firm, and any claim against him, or his estate, for a sum of money due to the
partnership by reason of any misappropriation of its funds by him, or for damages resulting from his wrongful acts as
manager, should be prosecuted against his estate in administration in the manner pointed out in sections 686 to 701,
inclusive, of the Code of Civil Procedure. Moreover, when it appears, as here, that the property pertaining to Kwong
Cheong Tay, like the shares in the Yut Siong Chyip Konski and the Manila Electric Railroad and Light Company, are in the
possession of the deceased partner, the proper step for the surviving associates to take would be to make application to
the court having charge of the administration to require the administrator to surrender such property.

But, in the second place, as already indicated, the proceedings in this cause, considered in the character of an action for
an accounting, were futile; and the court, abandoning entirely the effort to obtain an accounting, gave judgment against
the administrator upon the supposed liability of his intestate to respond for the plaintiff's proportionate share of the
capital and assets. But of course the action was not maintainable in this aspect after the death of the defendant; and the
motion to discontinue the action as against the administrator should have been granted.

The judgment must be reversed, and the defendant will be absolved from the complaint; but it will be understood that
this order is without prejudice to any proceeding which may be undertaken by the proper person or persons in interest
to settle the affairs of Kwong Cheong Tay and in connection therewith to recover from the administrator of Lim Ka Yam
the shares in the two concerns mentioned above. No special pronouncement will be made as to costs of either instance.
So ordered. Po Yeng Cheo vs. Lim Ka Yam, 44 Phil. 172, No. 18707 December 9, 1922

10. MAXIMO GUIDOTE, plaintiff and appellant, vs. ROMANA BORJA, as administratrix of the estate of Narciso
Santos, deceased, defendant and appellee.

1. PARTNERSHIPS, DISSOLUTION OF; LIQUIDATION.—The death of one of the partners dissolves the partnership, but
the liquidation of its affairs is by law intrusted to the surviving partners, or to liquidators appointed by them, and not to
the executors of the deceased partner. (Wahl vs. Donaldson Sim & Co., 5 Phil., 11.)

2. ID.; ID.; DECEASED PARTNER; SURVIVING PARTNERS TRUSTEES.—In equity, surviving partners are treated as trustees
of the representatives of the deceased partner in regard to his interest in the firm and are held to that strictness of
accountability required of an incident to the position of one occupying a confidential relation.

APPEAL from a judgment of the Court of First Instance of Manila. Harvey, J.

On March 4, 1921, the plaintiff brought an action against the administratrix of the estate of Narciso Santos, deceased, to
recover the sum of P9,534.14, a 'part of which was alleged to be the net profits due the plaintiff in a partnership business
conducted under the name of "Taller Sinukuan," in which the deceased was the capitalist partner and the plaintiff the
industrial partner, the rest of the sum consisting of advances alleged to have been made to said partnership by the
plaintiff. The defendant in her answer admitted the existence of the partnership and in a cross-complaint and counter-
claim prayed that the plaintiff be ordered to render an accounting of the partnership business and to pay to the estate of
the deceased the sum of P25,000 as net profits, credits, and property pertaining to said deceased.

In the first trial of the case the plaintiff called several witnesses and introduced a so-called accounting and a mass of
documentary evidence consisting of books, bills, and alleged vouchers, which documentary evidence was so hopelessly
and inextricably confused that the court, as stated in its decision, could not consider it of much probative value. It was,
however, found as facts that the aforesaid partnership had been formed, on or about June 15, 1918; that Narciso Santos
died on April 6, 1920, leaving the plaintiff as the surviving partner; and that plaintiff failed to liquidate the affairs of the
partnership and to render an account thereof to the administratrix of Santos' estate. The court, therefore, dismissed the
plaintiff's complaint and absolved the defendant theref rom, and ordered the plaintiff to render a full and complete
accounting, verified by vouchers, of the partnership business from June 15, 1918, until September 1, 1922. To this
decision and order the plaintiff duly excepted.

The plaintiff thereupon rendered an account prepared by one Tomas Alfonso, a public accountant. Numerous objections
to said account were presented by the defendant, and the court, upon hearing, disapproved the account and ordered
that the defendant submit to the court an accounting of the partnership business from the date of the commencement
of the partnership, June 15, 1918, up to the time the business was closed.

On January 25, 1924, the defendant presented an account and liquidation prepared by a public accountant, Santiago A.
Lindaya, showing a balance of P29,088.95 in favor of the defendant. The account was set down for hearing upon the
question of its approval or disapproval by the court, at which hearing the def endant introduced the public accountant
Jose Turiano Santiago to testify as to the results of an audit made by him of the accounts of the partnership. Santiago
testified that he had. been a public accountant for over 20 years, having appeared in court as such on several occasions;
that he had examined the exhibits offered in evidence of the case by both parties; that he had prepared a separate
accounting or liquidation similar in results to that prepared by Lindaya, but with a few differences in the sums total; and
that according to his examination, the financial status of the partnership was as follows:

Narciso Santos is a creditor of the Taller Sinukuan in the sum of P26,020.89 consisting as

follows:

For his capital ....................................................................................................

P12,588.58

For his credit ......................................................................................................

10,384.30

For his share of the profits .................................................................................

3,068.06

Total .............................................................................................................

26,020.89

Maximo Guidote is a debtor to the Taller Sinukuan in the sum, of P26,020.89, consisting

as follows:

For his debit (débito) ...............................................................................................

P29,088.95
 Less his share of the profits ....................................................................................

3,068.06

Total balance .....................................................................................................

26,020.89

In order .to contradict the conclusions of Lindaya and Jose Turiano Santiago, the plaintiff presented Tomas Alfonso and
the bookkeeper, Pio Gaudier, as witnesses in his favor. In regard to the character of the testimony of these witnesses, His
Honor, the trial judge, says:

"The testimony of these two witnesses is so unreliable that the court can place no reliance thereon. Mr. Tomas Alfonso is
the same public accountant who filed the liquidation Exhibit O on behalf of the plaintiff, in relation to the partnership
business, which liquidation was disapproved by this court in its decision of August 20, 1923. It is also to be noted that Mr.
Alfonso would have this court believe the proposition that the plaintiff, a mere industrial partner, notwithstanding his
having received the sum of P21,649.61 on the various jobs and contracts of the 'Taller Sinukuan,' had actually expended
and paid out the sum of P68,360.27, or P44,710.66 in excess of the gross receipts of the business. This proposition is not
only improbable on its face, but it materially contradicts the allegations of plaintiff's complaint to the effect that the
advances made by the plaintiff only amount to P2,017.50.

"Mr. Pio Gaudier is the same bookkeeper who prepared three entirely separate and distinct liquidation for. the same
partnership business, all of which were rejected by the court in its decisions, of September 1, 1922, and the court finds
that the testimony given by him at the last hearing is confusing, contradictory and unreliable."

As to the other witnesses for the plaintiff His Honor further says:

"The testimony of the other witnesses for the plaintiff deserves but scant consideration as evidence to overcome the
testimony of Mr. Santiago, as a whole, particularly that of the witness Chua Chak, who, after identifying and testifying as
to a certain exhibit shown him by counsel for plaintiff, showed that he could neither read nor write English, Spanish or
Tagalog, and that of the witness Mr. Claro Reyes, who, after positively assuring the court that a certain exhibit tendered
him for identification was an original document, was forced to admit that it was but a mere copy."

The court, therefore, found that the conclusions reached by Santiago A. Lindaya as modified by Jose Turiano Santiago
were just and correct and ordered the plaintiff to pay the defendant the sum of P26,020.89, Philippine currency, with
legal interest thereon from April 2, 1921, the date of the defendant's answer, and to pay the costs. From this judgment
the plaintiff appealed to this court and presents the following assignments of error:

(1) That the court erred in dismissing the plaintiff's complaint and ordering him to present a liquidation of the
operations and accounts of the partnership formed with the deceased Narciso Santos, from the beginning of the
partnership until September 1, 1922.

(2) That the court erred in approving the liquidation made by the public accountant Santiago A. Lindaya, with the
modification introduced by the witness Jose Turiano Santiago.

(3) That the court erred in ordering the plaintiff and appellant to pay to the def endant and appellee the sum of
P26,020.89.

As to the first assignment of error there may be some merit in the appellant's contention that the dismissal of his
complaint was premature. The better practise would, perhaps, have been to let the complaint stand until the result of
the liquidation of the partnership affairs was known. But under the circumstances of this case no harm was done by the
dismissal of the complaint, and the error, if any there be, is not reversible.

Under the same assignment of error the plaintiff argues that as the deceased up to the time of his death generally took
care of the payments and collections of the partnership, his legal representatives were under the obligation to render
accounts of the operations of the partnership, notwithstanding the fact that the plaintiff was in charge of the business
subsequent to the death of Santos. This argument is without merit. In the case of Wahl vs Donaldson Sim & Co. (5 Phil.,
11,14), it was held that the death of one of the partners dissolves the partnership, but that the liquidation of its affairs is
by law intrusted, not to the executors of the deceased partner, but to the surviving partners or to liquidators appointed
by them (citing article 229 of the Code of Commerce and secs. 664 and 665 of the Code of Civil Procedure). The same
rule is laid down by the Supreme Court of Spain in sentence of October 12, 1870.

The other assignments of error have reference only to questions of fact in regard to which the findings of the court
below seem to be as nearly correct as possible upon the evidence presented. There may be errors in the interpretation
of the accounts, and it is possible that the amount of P26,020.89 charged against the plaintiff is excessive, but the
evidence presented by him is so confusing and unreliable as to be practically of no weight and cannot serve as a basis for
a readjustment of the accounts prepared by the accountant Lindaya and the apparently reliable witness, Jose Turiano
Santiago.

We should, perhaps, have been more inclined to question the conclusions of Lindaya and Santiago if the plaintiff had
shown a disposition to render an honest account of the business and to effect a fair liquidation of the partnership, but
instead of doing so, he has by means of very questionable, and apparently false, evidence sought to mulct his deceased
partner's estate to the extent of over ?9,000. The rule for the conduct of a surviving partner is thus stated in 20 R. C. L.,
1003:

"In equity surviving partners are treated as trustees of the representatives of the deceased partner, in regard to the
interest of the deceased partner in the firm. As a consequence of this trusteeship, surviving partners are held in their
dealings with the firm assets and the representatives of the deceased to that nicety of dealing and that strictness of
accountability required of and incident to the position of one occupying a confidential relation. It is the duty of surviving
partners to render an account of the performance of their trust to the personal representatives of the deceased partner,
and to pay over to them the share of such deceased member in the surplus of firm property, whether it consists of real
or personal assets."

The appellant has completely failed to observe the rule quoted, and he is not in position to complain if his testimony and
that of his witnesses is discredited.

The appealed judgment is affirmed with the costs against the appellant. So ordered. Guidote vs. Borja, 53 Phil. 900, No.
28920 October 24, 1928