Professional Documents
Culture Documents
SUPREME COURT
Manila
EN BANC
G.R. No. L-19342 May 25, 1972
LORENZO T. OA and HEIRS OF JULIA BUALES, namely:
RODOLFO B. OA, MARIANO B. OA, LUZ B. OA, VIRGINIA B.
OA and LORENZO B. OA, JR., petitioners,
vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.
Orlando Velasco for petitioners.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor
General Felicisimo R. Rosete, and Special Attorney Purificacion Ureta for
respondent.
BARREDO, J.:p
Petition for review of the decision of the Court of Tax Appeals in CTA
Case No. 617, similarly entitled as above, holding that petitioners have
constituted an unregistered partnership and are, therefore, subject to the
payment of the deficiency corporate income taxes assessed against them
by respondent Commissioner of Internal Revenue for the years 1955 and
1956 in the total sum of P21,891.00, plus 5% surcharge and 1% monthly
interest from December 15, 1958, subject to the provisions of Section 51
(e) (2) of the Internal Revenue Code, as amended by Section 8 of
Republic Act No. 2343 and the costs of the suit, 1 as well as the resolution
of said court denying petitioners' motion for reconsideration of said
decision.
The facts are stated in the decision of the Tax Court as follows:
Julia Buales died on March 23, 1944, leaving as heirs her
surviving spouse, Lorenzo T. Oa and her five children. In
Y
e
a
r
Inve
stme
nt
La
nd
Bu
ildi
ng
1954
63,623.37
99,001.20
167,962.04
1955
100,786.00
120,249.78
169,262.52
1956
175,028.68
135,714.68
169,262.52
(See Exhibits 3 & K t.s.n., pp. 22, 25-26, 40, 50, 102-104)
Acco
unt
Ac
co
un
t
Ac
co
un
t
1949
P87,860.00
P17,590.00
1950
P24,657.65
128,566.72
96,076.26
1951
51,301.31
120,349.28
110,605.11
1952
67,927.52
87,065.28
152,674.39
1953
61,258.27
84,925.68
161,463.83
I.
II.
1955
III.
THE COURT OF TAX APPEALS ERRED IN HOLDING THAT
PETITIONERS WERE LIABLE FOR CORPORATE INCOME
TAXES FOR 1955 AND 1956 AS AN UNREGISTERED
PARTNERSHIP;
1956
Net income as per investigation ................ P69,245.23
IV.
Income tax due thereon ............................... 13,849.00
25% surcharge .............................................. 3,462.25
Compromise for non-filing .......................... 50.00
Total ............................................................... P17,361.25
V.
ON THE ASSUMPTION THAT THERE WAS AN
UNREGISTERED PARTNERSHIP, THE COURT OF TAX
APPEALS ERRED IN NOT DEDUCTING THE VARIOUS
AMOUNTS PAID BY THE PETITIONERS AS INDIVIDUAL
INCOME TAX ON THEIR RESPECTIVE SHARES OF THE
PROFITS ACCRUING FROM THE PROPERTIES OWNED IN
COMMON, FROM THE DEFICIENCY TAX OF THE
UNREGISTERED PARTNERSHIP.
The Tax Court found that instead of actually distributing the estate of the
deceased among themselves pursuant to the project of partition approved
in 1949, "the properties remained under the management of Lorenzo T.
Oa who used said properties in business by leasing or selling them and
investing the income derived therefrom and the proceed from the sales
thereof in real properties and securities," as a result of which said
properties and investments steadily increased yearly from P87,860.00 in
"land account" and P17,590.00 in "building account" in 1949 to
P175,028.68 in "investment account," P135.714.68 in "land account" and
P169,262.52 in "building account" in 1956. And all these became possible
because, admittedly, petitioners never actually received any share of the
income or profits from Lorenzo T. Oa and instead, they allowed him to
continue using said shares as part of the common fund for their ventures,
even as they paid the corresponding income taxes on the basis of their
respective shares of the profits of their common business as reported by
the said Lorenzo T. Oa.
It is thus incontrovertible that petitioners did not, contrary to their
contention, merely limit themselves to holding the properties inherited by
them. Indeed, it is admitted that during the material years herein
involved, some of the said properties were sold at considerable profit,
and that with said profit, petitioners engaged, thru Lorenzo T. Oa, in the
purchase and sale of corporate securities. It is likewise admitted that all
the profits from these ventures were divided among petitioners
proportionately in accordance with their respective shares in the
inheritance. In these circumstances, it is Our considered view that from
the moment petitioners allowed not only the incomes from their
respective shares of the inheritance but even the inherited properties
themselves to be used by Lorenzo T. Oa as a common fund in
undertaking several transactions or in business, with the intention of
deriving profit to be shared by them proportionally, such act was
tantamonut to actually contributing such incomes to a common fund and,
in effect, they thereby formed an unregistered partnership within the
purview of the above-mentioned provisions of the Tax Code.
It is but logical that in cases of inheritance, there should be a period
when the heirs can be considered as co-owners rather than unregistered
co-partners within the contemplation of our corporate tax laws
aforementioned. Before the partition and distribution of the estate of the
deceased, all the income thereof does belong commonly to all the heirs,
obviously, without them becoming thereby unregistered co-partners, but
it does not necessarily follow that such status as co-owners continues
1. Jose
Gatchalian .......................................................................................
.............
P0.1
8
EN BANC
2. Gregoria
Cristobal .........................................................................................
......
.18
3. Saturnina
Silva ................................................................................................
....
.08
4. Guillermo
Tapia ...............................................................................................
....
.13
5. Jesus
Legaspi ............................................................................................
..........
.15
6. Jose
Silva ................................................................................................
.............
.07
7. Tomasa
Mercado ..........................................................................................
......
.08
8. Julio
Gatchalian .......................................................................................
............
.13
9. Emiliana
Santiago ..........................................................................................
......
.13
10. Maria C.
Legaspi ............................................................................................
...
.16
11. Francisco
Cabral .............................................................................................
..
.13
12. Gonzalo
.14
Javier ...............................................................................................
.....
13. Maria
Santiago ..........................................................................................
.........
.17
14. Buenaventura
Guzman ......................................................................................
.13
15. Mariano
Santos .............................................................................................
....
.14
Total ................................................................................................
........
2.00
Amoun
t
Address
2. Buenaventura
Guzman ...............................
.13
- Do -
3. Maria
Santiago ............................................
.17
- Do -
4. Gonzalo
Javier ..............................................
.14
- Do -
5. Francisco
Cabral ..........................................
.13
- Do -
6. Maria C.
Legaspi ..........................................
.16
- Do -
7. Emiliana
Santiago .........................................
.13
- Do -
8. Julio
Gatchalian ............................................
.13
- Do -
Name
Exhibi
t
No.
1. Jose
Gatchalian ...................... D-1
....................
Purch
ase
Price
Price
Won
Expenses
Net
priz
e
P4,42
5
P 480
3,94
5
2. Gregoria
Cristobal ........................ D-2
..............
.18 4,575
2,000
2,57
5
3. Saturnina
Silva ............................... D-3
..............
.08 1,875
360
1,51
5
.13 3,325
360
2,96
5
P0.18
9. Jose
Silva ......................................................
.07
- Do -
10. Tomasa
Mercado .......................................
.08
- Do -
11. Jesus
Legaspi .............................................
.15
- Do -
12. Guillermo
Tapia ...........................................
.13
- Do -
13. Saturnina
Silva ............................................
.08
- Do -
4. Guillermo
Tapia .............................. D-4
............
14. Gregoria
Cristobal .......................................
.18
- Do -
5. Jesus Legaspi by
Maria Cristobal .........
D-5
.15 3,825
720
3,10
5
15. Jose
Gatchalian ............................................
.18
- Do -
6. Jose
Silva ............................... D-6
.....................
.08 1,875
360
1,51
5
7. Tomasa
Mercado ......................... D-7
..............
.07 1,875
360
1,51
5
8. Julio Gatchalian by
Beatriz Guzman .......
D-8
.13 3,150
240
2,91
0
9. Emiliana
Santiago ......................... D-9
.............
.13 3,325
360
2,96
5
10. Maria C.
Legaspi .......................... D-10
............
.16 4,100
960
3,14
0
11. Francisco
Cabral ............................ D-11
..........
.13 3,325
360
2,96
5
12. Gonzalo
Javier .............................. D-12
............
.14 3,325
2,96
360
5
13. Maria
Santiago ......................... D-13
.................
.17 4,350
360
3,99
0
14. Buenaventura
Guzman .......................... D-14
.
.13 3,325
360
2,96
5
15. Mariano
Santos ............................ D-15
............
.14 3,325
360
2,96
5
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The legal questions raised in plaintiffs-appellants' five assigned errors
may properly be reduced to the two following: (1) Whether the plaintiffs
formed a partnership, or merely a community of property without a
personality of its own; in the first case it is admitted that the partnership
thus formed is liable for the payment of income tax, whereas if there was
merely a community of property, they are exempt from such payment;
and (2) whether they should pay the tax collectively or whether the latter
should be prorated among them and paid individually.
The Collector of Internal Revenue collected the tax under section 10 of
Act No. 2833, as last amended by section 2 of Act No. 3761, reading as
follows:
SEC. 10. (a) There shall be levied, assessed, collected, and paid
annually upon the total net income received in the preceding
calendar year from all sources by every corporation, joint-stock
issued the check for P50,000 in favor of Jose Gatchalian and company,
and the said partner, in the same capacity, collected the said check. All
these circumstances repel the idea that the plaintiffs organized and
formed a community of property only.
Having organized and constituted a partnership of a civil nature, the said
entity is the one bound to pay the income tax which the defendant
collected under the aforesaid section 10 (a) of Act No. 2833, as amended
by section 2 of Act No. 3761. There is no merit in plaintiff's contention
that the tax should be prorated among them and paid individually,
resulting in their exemption from the tax.
In view of the foregoing, the appealed decision is affirmed, with the costs
of this instance to the plaintiffs appellants. So ordered.
Avancea, C.J., Villa-Real, Diaz, Laurel, Concepcion and Moran, JJ.,
concur.
REGALADO, J.:
The extensive discussion and exhaustive disquisition in the decision 1 of
the respondent Court 2 should have written finis to this case without
further recourse to Us. The assignment of errors and arguments raised in
the respondent Court by herein private respondent, as the petitioner
therein, having been correctly and justifiedly sustained by said court
without any reversible error in its conclusions, the present petition must
fail.
The assailed decision details the facts and proceedings which spawned
the present controversy as follows:
Petitioner brought an action in the City Court of Dipolog for
collection of a sum of P5,217.25 based on promissory notes
executed by the herein private respondent Nobio Sardane in
favor of the herein petitioner. Petitioner bases his right to
collect on Exhibits B, C, D, E, F, and G executed on different
dates and signed by private respondent Nobio Sardane.
On the first issue, the then Court of First Instance held that "the
pleadings of the parties herein put in issue the imperfection or ambiguity
of the documents in question", hence "the appellant can avail of the parol
evidence rule to prove his side of the case, that is, the said amount taken
by him from appellee is or was not his personal debt to appellee, but
expenses of the partnership between him and appellee."
the casco bears the name of herein petitioner disregards the finding of
the respondent Court that it was just a concession since it was he who
obtained the engine used in the Sardaco from the Department of Local
Government and Community Development. Further, the use by the
parties of the pronoun "our" in referring to "our basnig, our catch", "our
deposit", or "our boseros" was merely indicative of the camaraderie and
not evidentiary of a partnership, between them.
The foregoing factual findings, which belie the further claim that the
aforesaid promissory notes do not express the true intent and agreement
of the parties, are binding on Us since there is no showing that they fall
within the exceptions to the rule limiting the scope of appellate review
herein to questions of law.
On the second issue, the pertinent rule on actionable documents in Rule
8, for ready reference, reads:
Sec. 8. How to contest genuineness of such documents.
When an action or defense is founded upon a written
instrument, copied in or attached to the corresponding
pleading as provided in the preceding section, the
genuineness and due execution of the instrument shall be
deemed admitted unless the adverse party, under oath,
specifically denies them, and sets forth what he claims to be
the facts; but this provision does not apply when the adverse
party does not appear to be a party to the instrument or
when compliance with an order for the inspection of the
original instrument is refused.
The record shows that herein petitioner did not deny under oath in his
answer the authenticity and due execution of the promissory notes which
had been duly pleaded and attached to the complaint, thereby admitting
their genuineness and due execution. Even in the trial court, he did not at
all question the fact that he signed said promissory notes and that the
same were genuine. Instead, he presented parol evidence to vary the
import of the promissory notes by alleging that they were mere receipts
of his contribution to the alleged partnership.
appeal taken in this case from the aforesaid Court of First Instance to the
Court of Appeals in 1977. 10 Herein petitioner's plaint on this issue is,
therefore, devoid of merit.
WHEREFORE, the judgment of the respondent Court of Appeals is
AFFIRMED, with costs against herein petitioner.
SO ORDERED.
Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ.,
concur.
be taken on his motion, unless he filed a new application for the area
concerned. So he filed on May 27, 1947 his fishpond application 1717.
Meanwhile, several applications were submitted by other persons for
portions of the area covered by Casteel's application.
On May 20, 1946 Leoncio Aradillos filed his fishpond application 1202
covering 10 hectares of land found inside the area applied for by Casteel;
he was later granted fishpond permit F-289-C covering 9.3 hectares
certified as available for fishpond purposes by the Bureau of Forestry.
Victor D. Carpio filed on August 8, 1946 his fishpond application 762 over
a portion of the land applied for by Casteel. Alejandro Cacam's fishpond
application 1276, filed on December 26, 1946, was given due course on
December 9, 1947 with the issuance to him of fishpond permit F-539-C to
develop 30 hectares of land comprising a portion of the area applied for
by Casteel, upon certification of the Bureau of Forestry that the area was
likewise available for fishpond purposes. On November 17, 1948 Felipe
Deluao filed his own fishpond application for the area covered by
Casteel's application.
Because of the threat poised upon his position by the above applicants
who entered upon and spread themselves within the area, Casteel
realized the urgent necessity of expanding his occupation thereof by
constructing dikes and cultivating marketable fishes, in order to prevent
old and new squatters from usurping the land. But lacking financial
resources at that time, he sought financial aid from his uncle Felipe
Deluao who then extended loans totalling more or less P27,000 with
which to finance the needed improvements on the fishpond. Hence, a
wide productive fishpond was built.
Moreover, upon learning that portions of the area applied for by him
were already occupied by rival applicants, Casteel immediately filed the
corresponding protests. Consequently, two administrative cases ensued
involving the area in question, to wit: DANR Case 353, entitled "Fp. Ap.
No. 661 (now Fp. A. No. 1717), Nicanor Casteel, applicant-appellant
versus Fp. A. No. 763, Victorio D. Carpio, applicant-appellant"; and DANR
Case 353-B, entitled "Fp. A. No. 661 (now Fp. A. No. 1717), Nicanor
Casteel, applicant-protestant versus Fp. Permit No. 289-C, Leoncio
That the Party of the First Part will be the administrator of the
same she having financed the construction and improvement of
said fishpond;
That this contract was the result of a verbal agreement entered
into between the Parties sometime in the month of November,
1947, with all the above-mentioned conditions enumerated; ...
On the same date the above contract was entered into, Inocencia Deluao
executed a special power of attorney in favor of Jesus Donesa, extending
to the latter the authority "To represent me in the administration of the
fishpond at Malalag, Municipality of Padada, Province of Davao,
Philippines, which has been applied for fishpond permit by Nicanor
Casteel, but rejected by the Bureau of Fisheries, and to supervise,
demand, receive, and collect the value of the fish that is being
periodically realized from it...."
On November 29, 1949 the Director of Fisheries rejected the application
filed by Felipe Deluao on November 17, 1948. Unfazed by this rejection,
Deluao reiterated his claim over the same area in the two administrative
cases (DANR Cases 353 and 353-B) and asked for reinvestigation of the
application of Nicanor Casteel over the subject fishpond. However, by
letter dated March 15, 1950 sent to the Secretary of Commerce and
Agriculture and Natural Resources (now Secretary of Agriculture and
Natural Resources), Deluao withdrew his petition for reinvestigation.
On September 15, 1950 the Secretary of Agriculture and Natural
Resources issued a decision in DANR Case 353, the dispositive portion of
which reads as follows:
In view of all the foregoing considerations, Fp. A. No. 661 (now Fp.
A. No. 1717) of Nicanor Casteel should be, as hereby it is,
reinstated and given due course for the area indicated in the
sketch drawn at the back of the last page hereof; and Fp. A. No.
762 of Victorio D. Carpio shall remain rejected.
On the same date, the same official issued a decision in DANR Case 353B, the dispositive portion stating as follows:
WHEREFORE, Fishpond Permit No. F-289-C of Leoncio Aradillos
and Fishpond Permit No. F-539-C of Alejandro Cacam, should be,
Amador Gomez of Branch II. The defendants, thru counsel, on April 26,
1956 filed a motion for postponement. Acting on this motion, the lower
court (Branch II, presided by Judge Gomez) issued an order dated April
27, 1956, quoted as follows:
This is a motion for postponement of the hearing of this case set
for May 2 and 3, 1956. The motion is filed by the counsel for the
defendants and has the conformity of the counsel for the plaintiffs.
An examination of the records of this case shows that this case was
initiated as early as April 1951 and that the same has been under
advisement of the Honorable Enrique A. Fernandez, Presiding
Judge of Branch No. I, since September 24, 1953, and that various
incidents have already been considered and resolved by Judge
Fernandez on various occasions. The last order issued by Judge
Fernandez on this case was issued on March 21, 1956, wherein he
definitely states that the Court will not entertain any further
postponement of the hearing of this case.
CONSIDERING ALL THE FOREGOING, the Court believes that the
consideration and termination of any incident referring to this case
should be referred back to Branch I, so that the same may be
disposed of therein. (emphasis supplied)
A copy of the abovequoted order was served on the defendants' counsel
on May 4, 1956.
On the scheduled date of hearing, that is, on May 2, 1956, the lower
court (Branch I, with Judge Fernandez presiding), when informed about
the defendants' motion for postponement filed on April 26, 1956, issued
an order reiterating its previous order handed down in open court on
March 21, 1956 and directing the plaintiffs to introduce their evidence ex
parte, there being no appearance on the part of the defendants or their
counsel. On the basis of the plaintiffs' evidence, a decision was rendered
on May 4, 1956 the dispositive portion of which reads as follows:
EN SU VIRTUD, el Juzgado dicta de decision a favor de los
demandantes y en contra del demandado Nicanor Casteel:
(a) Declara permanente el interdicto prohibitorio expedido contra
el demandado;
Atty. Ruiz knows the nature of the order of this Court dated March
21, 1956, which reads as follows:
Upon petition of the plaintiff without any objection on the
part of the defendants, the hearing of this case is hereby
transferred to May 2 and 3, 1956, at 8:30 o'clock in the
morning.
This case was filed on April 3, 1951, and under any
circumstance this Court will not entertain any other transfer
of the hearing of this case, and if the parties will not be
ready on the day set for hearing, the Court will take
necessary steps for the final disposition of this case.
In view of the order above-quoted, the Court will not accede to any
transfer of this case and the duty of Atty. Ruiz is no other than to
be present in the Sala of this Court and to call the attention of the
same to the existence of his motion for transfer.
Petition for relief from judgment filed by Atty. Ruiz in behalf of the
defendant, not well taken, the same is hereby denied.
Dissatisfied with the said ruling, Casteel appealed to the Court of Appeals
which certified the case to us for final determination on the ground that it
involves only questions of law.
Casteel raises the following issues:
(1) Whether the lower court committed gross abuse of discretion
when it ordered reception of the appellees' evidence in the
absence of the appellant at the trial on May 2, 1956, thus depriving
the appellant of his day in court and of his property without due
process of law;
(2) Whether the lower court committed grave abuse of discretion
when it denied the verified petition for relief from judgment filed
by the appellant on May 11, 1956 in accordance with Rule 38,
Rules of Court; and
Ruiz of the order dated March 21, 1956 intransferably setting the case
for hearing for May 2 and 3, 1956, was sufficient notice to all the
appellant's eleven other counsel of record. This is a well-settled rule in
our jurisdiction.4
It was the duty of Atty. Ruiz, or of the other lawyers of record, not
excluding the appellant himself, to appear before Judge Fernandez on the
scheduled dates of hearing Parties and their lawyers have no right to
presume that their motions for postponement will be granted. 5 For
indeed, the appellant and his 12 lawyers cannot pretend ignorance of the
recorded fact that since September 24, 1953 until the trial held on May
2, 1956, the case was under the advisement of Judge Fernandez who
presided over Branch I. There was, therefore, no necessity to "re-assign"
the same to Branch II because Judge Fernandez had exclusive control of
said case, unless he was legally inhibited to try the case and he was
not.
There is truth in the appellant's contention that it is the duty of the clerk
of court not of the Court to prepare the trial calendar. But the
assignment or reassignment of cases already pending in one sala to
another sala, and the setting of the date of trial after the trial calendar
has been prepared, fall within the exclusive control of the presiding
judge.
The appellant does not deny the appellees' claim that on May 2 and 3,
1956, the office of the clerk of court of the Court of First Instance of
Davao was located directly below Branch I. If the appellant and his
counsel had exercised due diligence, there was no impediment to their
going upstairs to the second storey of the Court of First Instance building
in Davao on May 2, 1956 and checking if the case was scheduled for
hearing in the said sala. The appellant after all admits that on May 2,
1956 his counsel went to the office of the clerk of court.
The appellant's statement that parties as a matter of right are entitled to
notice of trial, is correct. But he was properly accorded this right. He was
notified in open court on March 21, 1956 that the case was definitely and
intransferably set for hearing on May 2 and 3, 1956 before Branch I. He
cannot argue that, pursuant to the doctrine in Siochi vs. Tirona,6 his
counsel was entitled to a timely notice of the denial of his motion for
postponement. In the cited case the motion for postponement was the
first one filed by the defendant; in the case at bar, there had already been
a series of postponements. Unlike the case at bar, the Siochi case was not
intransferably set for hearing. Finally, whereas the cited case did not
spend for a long time, the case at bar was only finally and intransferably
set for hearing on March 21, 1956 after almost five years had elapsed
from the filing of the complaint on April 3, 1951.
The pretension of the appellant and his 12 counsel of record that they
lacked ample time to prepare for trial is unacceptable because between
March 21, 1956 and May 2, 1956, they had one month and ten days to do
so. In effect, the appellant had waived his right to appear at the trial and
therefore he cannot be heard to complain that he has been deprived of
his property without due process of law.7 Verily, the constitutional
requirements of due process have been fulfilled in this case: the lower
court is a competent court; it lawfully acquired jurisdiction over the
person of the defendant (appellant) and the subject matter of the action;
the defendant (appellant) was given an opportunity to be heard; and
judgment was rendered upon lawful hearing.8
2. Finally, the appellant contends that the lower court incurred an error
in ordering the issuance ex parte of a writ of preliminary injunction
against him, and in not dismissing the appellee's complaint. We find this
contention meritorious.
Apparently, the court a quo relied on exhibit A the so-called "contract
of service" and the appellees' contention that it created a contract of
co-ownership and partnership between Inocencia Deluao and the
appellant over the fishpond in question.
Too well-settled to require any citation of authority is the rule that
everyone is conclusively presumed to know the law. It must be assumed,
conformably to such rule, that the parties entered into the so-called
"contract of service" cognizant of the mandatory and prohibitory laws
governing the filing of applications for fishpond permits. And since they
were aware of the said laws, it must likewise be assumed in fairness to
the parties that they did not intend to violate them. This view must
perforce negate the appellees' allegation that exhibit A created a
contract of co-ownership between the parties over the disputed fishpond.
Were we to admit the establishment of a co-ownership violative of the
prohibitory laws which will hereafter be discussed, we shall be compelled
to declare altogether the nullity of the contract. This would certainly not
serve the cause of equity and justice, considering that rights and
The lessee shall not assign, encumber, or sublet his rights without
the consent of the Secretary of Agriculture and Commerce, and the
violation of this condition shall avoid the contract; Provided, That
assignment, encumbrance, or subletting for purposes of
speculation shall not be permitted in any case: Provided, further,
That nothing contained in this section shall be understood or
construed to permit the assignment, encumbrance, or subletting of
lands leased under this Act, or under any previous Act, to persons,
corporations, or associations which under this Act, are not
authorized to lease public lands.
Finally, section 37 of Administrative Order No. 14 of the Secretary of
Agriculture and Natural Resources issued in August 1937, prohibits a
transfer or sublease unless first approved by the Director of Lands and
under such terms and conditions as he may prescribe. Thus, it states:
When a transfer or sub-lease of area and improvement may be
allowed. If the permittee or lessee had, unless otherwise
specifically provided, held the permit or lease and actually
operated and made improvements on the area for at least one year,
he/she may request permission to sub-lease or transfer the area
and improvements under certain conditions.
(a) Transfer subject to approval. A sub-lease or transfer shall
only be valid when first approved by the Director under such terms
and conditions as may be prescribed, otherwise it shall be null and
void. A transfer not previously approved or reported shall be
considered sufficient cause for the cancellation of the permit or
lease and forfeiture of the bond and for granting the area to a
qualified applicant or bidder, as provided in subsection (r) of Sec.
33 of this Order.
Since the partnership had for its object the division into two equal parts
of the fishpond between the appellees and the appellant after it shall
have been awarded to the latter, and therefore it envisaged the
unauthorized transfer of one-half thereof to parties other than the
applicant Casteel, it was dissolved by the approval of his application and
the award to him of the fishpond. The approval was an event which made
it unlawful for the business of the partnership to be carried on or for the
members to carry it on in partnership.
considering the absence of any proof that the said official exceeded his
statutory authority, exercised unconstitutional powers, or acted with
arbitrariness and in disregard of his duty, or with grave abuse of
discretion, we can do no less than respect and maintain unfettered his
official acts in the premises. It is a salutary rule that the judicial
department should not dictate to the executive department what to do
with regard to the administration and disposition of the public domain
which the law has entrusted to its care and administration. Indeed,
courts cannot superimpose their discretion on that of the land
department and compel the latter to do an act which involves the
exercise of judgment and discretion.22
Therefore, with the view that we take of this case, and even assuming
that the injunction was properly issued because present all the requisite
grounds for its issuance, its continuation, and, worse, its declaration as
permanent, was improper in the face of the knowledge later acquired by
the lower court that it was the appellant's application over the fishpond
which was given due course. After the Secretary of Agriculture and
Natural Resources approved the appellant's application, he became to all
intents and purposes the legal permittee of the area with the
corresponding right to possess, occupy and enjoy the same.
Consequently, the lower court erred in issuing the preliminary mandatory
injunction. We cannot overemphasize that an injunction should not be
granted to take property out of the possession and control of one party
and place it in the hands of another whose title has not been clearly
established by law.23
However, pursuant to our holding that there was a partnership between
the parties for the exploitation of the fishpond before it was awarded to
Casteel, this case should be remanded to the lower court for the
reception of evidence relative to an accounting from November 25, 1949
to September 15, 1950, in order for the court to determine (a) the profits
realized by the partnership, (b) the share (in the profits) of Casteel as
industrial partner, (e) the share (in the profits) of Deluao as capitalist
partner, and (d) whether the amounts totalling about P27,000 advanced
by Deluao to Casteel for the development and improvement of the
fishpond have already been liquidated. Besides, since the appellee
Inocencia Deluao continued in possession and enjoyment of the fishpond
even after it was awarded to Casteel, she did so no longer in the concept
of a capitalist partner but merely as creditor of the appellant, and
therefore, she must likewise submit in the lower court an accounting of
the proceeds of the sales of all the fishes harvested from the fishpond
from September 16, 1950 until Casteel shall have been finally given the
possession and enjoyment of the same. In the event that the appellee
Deluao has received more than her lawful credit of P27,000 (or whatever
amounts have been advanced to Casteel), plus 6% interest thereon per
annum, then she should reimburse the excess to the appellant.
ACCORDINGLY, the judgment of the lower court is set aside. Another
judgment is hereby rendered: (1) dissolving the injunction issued against
the appellant, (2) placing the latter back in possession of the fishpond in
litigation, and (3) remanding this case to the court of origin for the
reception of evidence relative to the accounting that the parties must
perforce render in the premises, at the termination of which the court
shall render judgment accordingly. The appellant's counterclaim is
dismissed. No pronouncement as to costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,
Fernando and Capistrano, JJ., concur.
By virtue of the agreement, from 1910 to 1917, Kiel worked upon and
developed the plantation. During the World War, he was deported from
the Philippines.
On August 16, 1919, five persons, including P. S. Sabert, organized the
Nituan Plantation Company, with a subscribed capital of P40,000. On
April 10, 1922, P. S. Sabert transferred all of his rights in two parcels of
land situated in the municipality of Parang, Province of Cotabato,
embraced within his homestead application No. 21045 and his purchase
application No. 1048, in consideration of the sum of P1, to the Nituan
Plantation Company.
In this same period, Kiel appears to have tried to secure a settlement
from Sabert. At least in a letter dated June 6, 1918, Sabert wrote Kiel
that he had offered "to sell all property that I have for P40,000 or take in
a partner who is willing to develop the plantation, to take up the K. & S.
debt no matter which way I will straiten out with you." But Sabert's death
came before any amicable arrangement could be reached and before an
action by Kiel against Sabert could be decided. So these proceedings
against the estate of Sabert.
In this court, the defendant-appellant assigns the following errors:
The lower court erred
(1) In finding this was an action to establish a resulting trust in
land.
(2) In finding a resulting trust in land could have been established
in public lands in favor of plaintiff herein who was an alien subject
at the same time said alleged resulting trust was created.
(3) In finding a resulting trust in land had been established by the
evidence in the case.
(4) In admitting the testimony of the plaintiff herein.
(5) In admitting the testimony of William Milfeil, John C.
Beyersdorfer, Frank R. Lasage, Oscar C. Butler and Stephen Jurika
September 6, 1923
Del Rosario & Del Rosario and Block, Johnston and Greenbaum for
appellants.
F. V. Arias for appellants Jo Ibec and Go Tayco.
No appearance for petitioner and appellee.
Jose A. Espiritu and Felipe Ysmael as amici curiae.
MALCOLM, J.:
P6,000.00
Go
Tayco . . . . . . . . . . . . . . . . . . . . . . .
...
6,000.00
Yap Gueco . . . . . . . . . . . . . . . . . . .
.....
6,000.00
Jo
Ybec . . . . . . . . . . . . . . . . . . . . . . .
....
6,000.00
Lim Yogsing . . . . . . . . . . . . . . . . . .
.....
6,000.00
Total . . . . . . . . . . . . . . . . . . . . . .
30,000.00
(Fdo.) "F.V.ARIAS
"Notario Publico
"Hasta el 1. de enero de 1920
The supreme court of Spain has repeatedly held that notwithstanding the
obligation of the members to register the articles of association in the
commercial registry, agreements containing all the essential requisites
are valid as between the contracting parties, whatever the form adopted,
and that, while the failure to register in the commercial registry
necessarily precludes the members from enforcing rights acquired by
them against third persons, such failure cannot prejudice the rights of
third persons. (See decisions of December 6, 1887, January 25, 1888,
November 10, 1890, and January 26, 1900.) The same reasoning would
be applicable to the less formal requisite pertaining to the firm name.
The common law is to the same effect. The State of Michigan had a
statute prohibiting the transaction of business under an assumed name
or any other than the real name of the individual conducting the same,
unless such person shall file with the county clerk a certificate setting
forth the name under which the business is to be conducted and the real
name of each of the partners, with their residences and post-office
addresses, and making a violation thereof a misdemeanor. The supreme
Court of Michigan said:
The one object of the act is manifestly to protect the public against
imposition and fraud, prohibiting persons from concealing their
identity by doing business under an assumed name, making it
unlawful to use other than their real names in transacting business
without a public record of who they are, available for use in courts,
and to punish those who violate the prohibition. The object of this
act is not limited to facilitating the collection of debts, or the
protection of those giving credit to persons doing business under
an assumed name. It is not unilateral in its application. It applies
to debtor and creditor, contractor and contractee, alike. Parties
doing business with those acting under an assumed name, whether
they buy or sell, have a right, under the law, to know who they are,
and who to hold responsible, in case the question of damages for
failure to perform or breach of warranty should arise.
The general rule is well settled that, where statutes enacted to
protect the public against fraud or imposition, or to safeguard the
public health or morals, contain a prohibition and impose a
penalty, all contracts in violation thereof are void. . . .
xxx
xxx
price stipulated with the Deudors, but at "the current prices and terms
specified by the OWNERS (Tuason) in their sales of lots in their
subdivision known as 'Sta. Mesa Heights Subdivision'". This is what is
expressly provided. Further, the paragraph plainly imports that these
buyers of the Deudors must "recognize the title of the OWNERS (Tuason)
over the property purportedly bought by them" from the Deudors, and
"sign, whenever possible, new contracts of purchase for said property";
and, if and when they do so, "the sums paid by them to the Deudors . . .
shall be credited to the buyers." All that Tuason & Co. agreed to,
therefore, was to grant the Deudor buyers preferential right to purchase
"at current prices and terms" the lots occupied by them, upon their
recognizing the title of Tuason & Co., Inc., and signing new contracts
therefor; and to credit them for the amounts they had paid to the
Deudors.
Nowhere in her answer did the respondent Estrella Vda. de Lumanlan
claim that she had signed a new contract with J. M. Tuason & Co., Inc. for
the purchase of the lot occupied. What is worse, instead of recognizing
the title of the owners (Tuason & Co.) as required by the aforementioned
compromise agreement, she charged in paragraph 6 of her special
defense (Rec. on Appeal, p. 10) that "Pedro Deudor and his co-owners
and the plaintiff herein . . .conspired together and helped each
other . . . by entering into a supposed Compromise" whereby "Pedro
Deudor and his co-owners renounced, ceded, waived and quitclaimed all
their rights, title and interest in the property including the land sold to
herein defendant, in favor of the plaintiff J. M. Tuason & Co., Inc., in
consideration of the sum of P1,201,063.00, without the knowledge and
consent, and much less the intervention of the herein defendant." In
other words, the respondent Lumanlan in her answer repudiated and
assailed the compromise between the Deudors and J. M. Tuason & Co.
How then can she now claim to take advantage and derive rights from
that compromise?
Without the compromise agreement, Lumanlan must justify her
possession on the basis of a pretended superiority of the Deudors' old
Spanish informacion posesoria over Tuason's Certificate of Title No.
1267, traceable back to the original Certificate of Title No. 735 of Rizal,
issued under the Registration Act No. 496. But, as ruled by this Court in
previous cases, Lumanlan is by now barred from assailing the decree of
registration in favor of Tuason & Co., Inc.'s predecessors twenty years
after its issuance (Tiburcio vs. PHHC, L-13429, Oct. 31, 1959; Tuason &
Co. vs. Bolaos, 95 Phil. 107; Tuason & Co. vs. Santiago, 99 Phil. 622623; Tuason & Co. vs. Macalindong, supra; Tuason & Co. vs. Jaramillo, L16827, Jan. 31, 1963).
It is thus apparent that no legal basis exists for the pronouncement in the
appealed decision that Tuason & Co. had committed itself to sell to
Lumanlan the lot occupied by her at a reasonable price, or that the
compromise agreement legalized the possession of the respondent, since
the latter does not rely on the compromise but, on the contrary, she
assails it.
The Court of Appeals ruled that the price to be paid by Lumanlan to
Tuason & Co., Inc., is governed by Article 1474 of the new Civil Code of
the Philippines, which provides that:
Where the price cannot be determined in accordance with the
preceding articles, or in any other manner, the contract is
inefficacious. However, if the thing or any part thereof has been
delivered to and appropriated by the buyer, he must pay a
reasonable price therefor. What is a reasonable price is a question
of fact dependent on the circumstances of each particular case.
Since there has been no contract between petitioner Tuason & Co. and
respondent Lumanlan for the sale of the lot occupied by the latter, and by
paragraph 7 of the Compromise Agreement (assuming that respondentappellee still has the right to invoke the same, and seek refuge
thereunder), Tuason & Co. did not consider itself bound by the sales
made by the Deudors, but demanded that the Deudor buyers should
sign new contracts with it at current prices specified for the sales of lots
in "Sta. Mesa Heights Subdivision" (ante) the aforequoted Article 1474
can have no bearing on the case, Lumanlan not being a buyer from
Tuason & Co.
The joint enterprise thus entered into by the Filipino investors and the
American corporation prospered. Unfortunately, with the business
successes, there came a deterioration of the initially harmonious
relations between the two groups. According to the Filipino group, a
basic disagreement was due to their desire to expand the export
operations of the company to which ASI objected as it apparently had
other subsidiaries of joint joint venture groups in the countries where
Philippine exports were contemplated. On March 8, 1983, the annual
stockholders' meeting was held. The meeting was presided by Baldwin
Young. The minutes were taken by the Secretary, Avelino Cruz. After
disposing of the preliminary items in the agenda, the stockholders then
proceeded to the election of the members of the board of directors. The
ASI group nominated three persons namely; Wolfgang Aurbach, John
Griffin and David P. Whittingham. The Philippine investors nominated six,
namely; Ernesto Lagdameo, Sr., Raul A. Boncan, Ernesto R. Lagdameo,
Jr., George F. Lee, and Baldwin Young. Mr. Eduardo R, Ceniza then
nominated Mr. Luciano E. Salazar, who in turn nominated Mr. Charles
Chamsay. The chairman, Baldwin Young ruled the last two nominations
out of order on the basis of section 5 (a) of the Agreement, the consistent
practice of the parties during the past annual stockholders' meetings to
nominate only nine persons as nominees for the nine-member board of
directors, and the legal advice of Saniwares' legal counsel. The following
events then, transpired:
... There were protests against the action of the Chairman
and heated arguments ensued. An appeal was made by the
ASI representative to the body of stockholders present that
a vote be taken on the ruling of the Chairman. The
Chairman, Baldwin Young, declared the appeal out of order
and no vote on the ruling was taken. The Chairman then
instructed the Corporate Secretary to cast all the votes
present and represented by proxy equally for the 6 nominees
of the Philippine Investors and the 3 nominees of ASI, thus
effectively excluding the 2 additional persons nominated,
namely, Luciano E. Salazar and Charles Chamsay. The ASI
representative, Mr. Jaqua protested the decision of the
The rule is that whether the parties to a particular contract have thereby
established among themselves a joint venture or some other relation
depends upon their actual intention which is determined in accordance
with the rules governing the interpretation and construction of contracts.
(Terminal Shares, Inc. v. Chicago, B. and Q.R. Co. (DC MO) 65 F Supp
678; Universal Sales Corp. v. California Press Mfg. Co. 20 Cal. 2nd 751,
128 P 2nd 668)
The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that
the actual intention of the parties should be viewed strictly on the
"Agreement" dated August 15,1962 wherein it is clearly stated that the
parties' intention was to form a corporation and not a joint venture.
They specifically mention number 16 under Miscellaneous
Provisions which states:
[Sec. 3 (a) (iv) and (b) (iii)]. ASI is also given the right to
designate the president and plant manager [Sec. 5 (6)]. The
Agreement further provides that the sales policy of
Saniwares shall be that which is normally followed by ASI
[Sec. 13 (a)] and that Saniwares should not export
"Standard" products otherwise than through ASI's Export
Marketing Services [Sec. 13 (6)]. Under the Agreement, ASI
agreed to provide technology and know-how to Saniwares
and the latter paid royalties for the same. (At p. 2).
xxx xxx xxx
Bearing these principles in mind, the correct view would be that the
resolution of the question of whether or not the ASI Group may vote their
additional equity lies in the agreement of the parties.
Necessarily, the appellate court was correct in upholding the agreement
of the parties as regards the allocation of director seats under Section 5
(a) of the "Agreement," and the right of each group of stockholders to
cumulative voting in the process of determining who the group's
nominees would be under Section 3 (a) (1) of the "Agreement." As
pointed out by SEC, Section 5 (a) of the Agreement relates to the manner
of nominating the members of the board of directors while Section 3 (a)
(1) relates to the manner of voting for these nominees.
This is the proper interpretation of the Agreement of the parties as
regards the election of members of the board of directors.
To allow the ASI Group to vote their additional equity to help elect even a
Filipino director who would be beholden to them would obliterate their
minority status as agreed upon by the parties. As aptly stated by the
appellate court:
... ASI, however, should not be allowed to interfere in the
voting within the Filipino group. Otherwise, ASI would be
able to designate more than the three directors it is allowed
to designate under the Agreement, and may even be able to
get a majority of the board seats, a result which is clearly
contrary to the contractual intent of the parties.
Such a ruling will give effect to both the allocation of the
board seats and the stockholder's right to cumulative voting.
Moreover, this ruling will also give due consideration to the
issue raised by the appellees on possible violation or
circumvention of the Anti-Dummy Law (Com. Act No. 108, as
amended) and the nationalization requirements of the
Constitution and the laws if ASI is allowed to nominate more
than three directors. (At p. 39, Rollo, 75875)
Section 5 (a) of the Agreement which uses the word designates in the
allocation of board directors should not be interpreted in isolation. This
should be construed in relation to section 3 (a) (1) of the Agreement. As
we stated earlier, section 3(a) (1) relates to the manner of voting for
these nominees which is cumulative voting while section 5(a) relates to
the manner of nominating the members of the board of directors. The
petitioners in G.R. No. 75951 agreed to this procedure, hence, they
cannot now impugn its legality.
The insinuation that the ASI Group may be able to control the enterprise
under the cumulative voting procedure cannot, however, be ignored. The
validity of the cumulative voting procedure is dependent on the directors
thus elected being genuine members of the Filipino group, not voters
whose interest is to increase the ASI share in the management of
Saniwares. The joint venture character of the enterprise must always be
taken into account, so long as the company exists under its original
agreement. Cumulative voting may not be used as a device to enable ASI
to achieve stealthily or indirectly what they cannot accomplish openly.
There are substantial safeguards in the Agreement which are intended to