1

G.R. No. L-45662 April 26, 1939 On June 6, 1931, plaintiff and defendant organized a civil partnership which they
named "Galvan y Compaia" to engage in the manufacture and sale of paper
ENRIQUE CLEMENTE, plaintiff-appellee, and other stationery. they agreed to invest therein a capital of P100,000, but as
vs. a matter of fact they did not cover more than one-fifth thereof, each contributing
DIONISIO GALVAN, defendant-appellee. P10,000. Hardly a year after such organization, the plaintiff commenced the
JOSE ECHEVARRIA, intervenor-appellant. present case in the above-mentioned court to ask for the dissolution of the
partnership and to compel defendant to whom the management thereof was
entrusted to submit an accounting of his administration and to deliver to him his
Engracio F. Clemea and Celedonio Bernardo for appellant. share as such partner. In his answer defendant expressed his conformity to the
Vicente Bengson for defendant-appellee. dissolution of the partnership and the liquidation of its affairs; but by way of
No appearance for other party. counterclaim he asked that, having covered a deficit incurred by the partnership
amounting to P4,000 with his own money, plaintiff reimburse him of one-half of
DIAZ, J.: said sum. On petition of the plaintiff a receiver and liquidator to take charge of
the properties and business for the partnership while the same was not yet
definitely dissolved, was appointed, the person chosen being Juan D. Mencarini.
The intervenor Jose Echevarria having lost in the Court of First Instance of manila
The latter was already discharging the duties of his office when the court, by
which rendered judgment against him, the pertinent portion of which reads: "and
virtue of a petition ex parte of the plaintiff, issued the order of May 24, 1933,
with respect to the complaint of the intervenor, the mortgage executed in his
requiring said receiver to deliver to him (plaintiff) certain machines which were
favor by plaintiff is declared null and void, and said complaint in intervention, as
then at Nos. 705-707 Ylaya Street, Manila but authorizing him to charge their
well as the counterclaim filed by the defendant against the intervenor, is
value of P4,500 against the portion which may eventually be due to said plaintiff.
dismissed, without pronouncement as to costs," he appealed to this court on the
To comply with said order, the receiver delivered to plaintiff the keys to the place
ground that, according to him, the lower court committed the errors assigned in
his brief as follows: where the machines were found, which was the same place where defendant
had his home; but before he could take actual possession of said machines, upon
the strong opposition of defendant, the court, on motion of the latter, suspended
I. The court a quo erred in finding in the appealed decision that plaintiff the effects of its order of May 24, 1933. In the meantime the judgments rendered
was unable to take possession of the machines subject of the deed of in cases Nos. 42794 and 43070 entitled "Philippine Education Co.,
mortgage Exhibit B either before or after the execution thereof. Inc. vs. Enrique Clemente" for the recovery of a sum of money, and "Jose
Echevarria vs. Enrique Clemente", also for the recovery of a sum of money,
II. The court a quo likewise erred in deciding the present case against respectively, were made executory; and in order to avoid the attachment and
the intervenor-appellant, on the ground, among others, that "plaintiff subsequent sale of the machines by the sheriff for the satisfaction from the
has not adduced any evidence nor has he testified to show that the proceeds thereof of the judgments rendered in the two cases aforecited, plaintiff
machines mortgaged by him to the intervenor have ever belonged to agreed with the intervenor, who is his nephew, to execute, as he in fact executed
him, notwithstanding that said intervenor is his close relative.". in favor of the latter, a deed of mortgage Exhibit B encumbering the machines
described in said deed in which it is stated that "they are situated on Singalong
Street No. 1163", which is a place entirely different from the house Nos. 705 and
III. The lower court also erred in declaring null and void the mortgage
707 on Ylaya Street hereinbefore mentioned. The one year agreed upon in the
executed by plaintiff in favor of the intervenor and, thereby, dismissing
deed of mortgage for the fulfillment by the plaintiff of the obligation he had
the complaint in intervention.
contracted with the intervenor, having expired, the latter commenced case No.
49629 to collect his mortgage credit. The intervenor, as plaintiff in the said case,
IV. The lower court lastly erred in ordering the receiver J. D. Mencarini obtained judgment in his favor because the defendant did not interpose any
to deliver to the defendant the aforesaid machines upon petition of the defense or objection, and, moreover, admitted being really indebted to the
plaintiff. intervenor in the amount set forth in the deed of mortgage Exhibit B. The
machines which the intervenor said were mortgaged to him were then in fact in
In order to have a clear idea of the question, it is proper to state the facts bearing custodia legis, as they were under the control of the receiver and liquidator Juan
on the case as they appear in the decision and judgment of the lower court and D. Mencarini. It was, therefore, useless for the intervenor to attach the same in
in the documents which constitute all the evidence adduced by the parties during view of the receiver's opposition; and the question having been brought to court,
the trial. it decided that nothing could be done because the receiver was not a party to
the case which the intervenor instituted to collect his aforesaid credit. (Civil case

No. 49629.) The question ended thus because the intervenor did not take any
other step until he thought of joining in this case as intervenor.
1. From the foregoing facts, it is clear that plaintiff could not obtain
possession of the machines in question. The constructive possession
deducible from the fact that he had the keys to the place where the
machines were found (Ylaya Street Nos. 705-707), as they had been
delivered to him by the receiver, does not help him any because the
lower court suspended the effects of the other whereby the keys were
delivered to him a few days after its issuance; and thereafter revoked it
entirely in the appealed decision. Furthermore, when he attempted to
take actual possession of the machines, the defendant did not allow him
to do so. Consequently, if he did not have actual possession of the
machines, he could not in any manner mortgage them, for while it is
true that the oft-mentioned deed of mortgage Exhibit B was annotated
in the registry of property, it is no less true the machines to which it
refers are not the same as those in question because the latter are on
Ylaya Street Nos. 705-707 and the former are on Singalong Street No.
1163. It can not be said that Exhibit B-1, allegedly a supplementary
contract between the plaintiff and the intervenor, shows that the
machines referred to in the deed of mortgage are the same as those in
dispute and which are found on Ylaya Street because said exhibit being
merely a private document, the same cannot vary or alter the terms of
a public document which is Exhibit B or the deed of mortgage.
2. The second error attributed to the lower court is baseless. The
evidence of record shows that the machines in contention originally
belonged to the defendant and from him were transferred to the
partnership Galvan y Compania. This being the case, said machines
belong to the partnership and not to him, and shall belong to it until
partition is effected according to the result thereof after the liquidation.
3. The last two errors attributed by the appellant to the lower court have
already been disposed of by the considerations above set forth. they are
as baseless as the previous ones.
In view of all the foregoing, the judgment appealed from is affirmed, with costs
against the appellant. So ordered.
G.R. No. L-5963 May 20, 1953
THE LEYTE-SAMAR SALES CO., and RAYMUNDO TOMASSI, petitioners,
vs.
SULPICIO V. CEA, in his capacity as Judge of the Court of First Instance
of Leyte and OLEGARIO LASTRILLA, respondents.
2
Filomeno Montejo for petitioners.
Sulpicio V. Cea in his own behalf.
Olegario Lastrilla in his own behalf.
BENGZON, J.:
Labaled "Certiorari and Prohibition with preliminary Injunction" this petition
prays for the additional writ of mandamusto compel the respondent judge to give
due course to petitioners' appeal from his order taxing costs. However, inasmuch
as according to the answer, petitioners through their attorney withdrew their
cash appeal bond of P60 after the record on appeal bond of P60 after the record
on appeal had been rejected, the matter of mandamus may be summarily be
dropped without further comment.
From the pleadings it appears that,
In civil case No. 193 of the Court of First Instance of Leyte, which is a suit for
damages by the Leyte-Samar Sales Co. (hereinafter called LESSCO) and
Raymond Tomassi against the Far Eastern Lumber & Commercial Co.
(unregistered commercial partnership hereinafter called FELCO), Arnold Hall,
Fred Brown and Jean Roxas, judgment against defendants jointly and severally
for the amount of P31,589.14 plus costs was rendered on October 29, 1948. The
Court of Appeals confirmed the award in November 1950, minus P2,000
representing attorney's fees mistakenly included. The decision having become
final, the sheriff sold at auction on June 9, 1951 to Robert Dorfe and Pepito
Asturias "all the rights, interests, titles and participation" of the defendants in
certain buildings and properties described in the certificate, for a total price of
eight thousand and one hundred pesos. But on June 4, 1951 Olegario Lastrilla
filed in the case a motion, wherein he claimed to be the owner by purchase on
September 29, 1949, of all the "shares and interests" of defendant Fred Brown
in the FELCO, and requested "under the law of preference of credits" that the
sheriff be required to retain in his possession so much of the deeds of the auction
sale as may be necessary "to pay his right". Over the plaintiffs' objection the
judge in his order of June 13, 1951, granted Lastrilla's motion by requiring the
sheriff to retain 17 per cent of the money "for delivery to the assignee,
administrator or receiver" of the FELCO. And on motion of Lastrilla, the court on
August 14, 1951, modified its order of delivery and merely declared that Lastrilla
was entitled to 17 per cent of the properties sold, saying in part:
. . . el Juzgado ha encontrado que no se han respetado los derechos del
Sr. Lastrilla en lo que se refiere a su adquiscicion de las acciones de C.
Arnold Hall (Fred Brown) en la Far Eastern Lumber & Lumber
Commercial C. porque la mismas han sido incluidas en la subasta.
Es vedad que las acciones adquiridas por el Sr. Lastilla representan el
17 por ciento del capital de la sociedad "Far Eastern Lumber &

Commercial Co., Inc., et al." pero esto no quiere decir que su vlor no
esta sujeto a las fluctuaciones del negocio donde las invirtio.
Se vendieron propiedades de la corporacion "Far Eastern Lumber & Co.
Inc.," y de la venta solamente se obtuvo la cantidad de P8,100.
"En su virtud, se declara que el 17 por ciento de las propiedades
vendidas en publica subasta pretenece al Sr. O Lastrilla y este tiene
derecho a dicha porcion pero con la obligacion de pagar el 17 por ciento
de los gastos for la conservacion de dichas propriedades por parte del
Sheriff; . . . . (Annex K)
It is from this declaration and the subsequent orders to enforce it1 that the
petitioners seek relief by certiorari, their position being the such orders were null
and void for lack of jurisdiction. At their request a writ of preliminary injunction
was issued here.
The record is not very clear, but there are indications, and we shall assume for
the moment, that Fred Brown (like Arnold Hall and Jean Roxas) was a partner of
the FELCO, was defendant in Civil Case No. 193 as such partner, and that the
properties sold at auction actually belonged to the FELCO partnership and the
partners. We shall also assume that the sale made to Lastrilla on September 29,
1949, of all the shares of Fred Brown in the FELCO was valid. (Remember that
judgment in this case was entered in the court of first instance a year before.)
The result then, is that on June 9, 1951 when the sale was effected of the
properties of FELCO to Roberto Dorfe and Pepito Asturias, Lastilla was already a
partner of FELCO.
Now, does Lastrilla have any proper claim to the proceeds of the sale? If he was
a creditor of the FELCO, perhaps or maybe. But he was no. The partner of a
partnership is not a creditor of such partnership for the amount of his shares.
That is too elementary to need elaboration.
Lastrilla's theory, and the lower court's seems to be: inasmuch as Lastrilla had
acquired the shares of Brown is September, 1949, i.e., before the auction sale
and he was not a party to the litigation, such shares could not have been
transferred to Dorfe and Austrilla.
Granting arguendo that the auction sale and not included the interest or portion
of the FELCO properties corresponding to the shares of Lastrilla in the same
partnership (17%), the resulting situation would be at most that the
purchasers Dorfe and Austrias will have to recognized dominion of Lastrillas over
17 per cent of the properties awarded to them.2 So Lastrilla acquired no right to
demand any part of the money paid by Dorfe and Austrias to he sheriff any part
of the money paid by Dorfe and Austrias to the sheriff for the benefit of FELCO
3
and Tomassi, the plaintiffs in that case, for the reason that, as he says, his shares
(acquired from Brown) could not have been and were not auctioned off to Dorfe
and Austrias.
Supposing however that Lastrillas shares have been actually (but unlawfully)
sold by the sheriff (at the instance of plaintiffs) to Dorfe and Austrias, what is
his remedy? Section 15, Rule 39 furnishes the answer.
Precisely, respondents argue, Lastrilla vindicated his claim by proper
action, i.e., motion in the case. We ruled once that "action" in this section means
action as defined in section 1, Rule 2.3 Anyway his remedy is to claim "the
property", not the proceeds of the sale, which the sheriff is directed by section
14, Rule 39 to deliver unto the judgment creditors.
In other words, the owner of property wrongfully sold may not voluntarily come
to court, and insist, "I approve the sale, therefore give me the proceeds because
I am the owner". The reason is that the sale was made for the judgment creditor
(who paid for the fees and notices), and not for anybody else.
On this score the respondent judge's action on Lastrilla's motion should be
declared as in excess of jurisdiction, which even amounted to want of
jurisdiction, which even amounted to want of jurisdiction, considering specially
that Dorfe and Austrias, and the defendants themselves, had undoubtedly the
right to be heardbut they were not notified.4
Why was it necessary to hear them on the merits of Lastrilla's motion?
Because Dorfe and Austrillas might be unwilling to recognized the validity of
Lastrilla's purchase, or, if valid, they may want him not to forsake the partnership
that might have some obligations in connection with the partnership properties.
And what is more important, if the motion is granted, when the time for
redemptioner seventeen per cent (178%) less than amount they had paid for
the same properties.
The defendants Arnold Hall and Jean Roxas, eyeing Lastrilla's financial assets,
might also oppose the substitution by Lastrilla of Fred Brown, the judgment
against them being joint and several. They might entertain misgivings about
Brown's slipping out of their common predicament through the disposal of his
shares.
Lastly, all the defendants would have reasonable motives to object to the
delivery of 17 per cent of the proceeds to Lustrial, because it is so much money
deducted, and for which the plaintiffs might as another levy on their

other holdings or resources. Supposing of course, there was no fraudulent
collusion among them.
Now, these varied interest of necessity make Dorfe, Asturias and the
defendants indispensable parties to the motion of Lastrilla granting it was step
allowable under our regulations on execution. Yet these parties were not notified,
and obviously took no part in the proceedings on the motion.
A valid judgment cannot be rendered where there is a want of necessary
parties, and a court cannot properly adjudicate matters involved in a
suit when necessary and indispensable parties to the proceedings are
not before it. (49 C.J.S., 67.)
Indispensable parties are those without whom the action cannot be
finally determined. In a case for recovery of real property, the defendant
alleged in his answer that he was occupying the property as a tenant of
a third person. This third person is an indispensable party, for, without
him, any judgment which the plaintiff might obtain against the
tenant would have no effectiveness, for it would not be binding upon,
and cannot be executed against, the defendant's landlord, against whom
the plaintiff has to file another action if he desires to recover the
property effectively. In an action for partition of property, each co-owner
is an indispensable party. (Moran, Comments, 1952 ed. Vol. I, p. 56.)
(Emphasis supplied.)
Wherefore, the orders of the court recognizing Lastrilla's right and ordering
payment to him of a part of the proceeds were patently erroneous, because
promulgated in excess or outside of its jurisdiction. For this reason the
respondents' argument resting on plaintiffs' failure to appeal from the orders on
time, although ordinarily decisive, carries no persuasive force in this instance.
For as the former Chief Justice Dr. Moran has summarized in his Comments,
1952 ed. Vol. II, p. 168
. . . And in those instances wherein the lower court has acted without
jurisdiction over the subject-matter, or where the order or judgment
complained of is a patent nullity, courts have gone even as far as to
disregard completely the questions of petitioner's fault, the reason
being, undoubtedly, that acts performed with absolute want of
jurisdiction over the subject-matter are void ab initio and cannot be
validated by consent, express or implied, of the parties. Thus, the
Supreme Court granted a petition for certiorari and set aside an order
reopening a cadastral case five years after the judgment rendered
therein had become final. In another case, the Court set aside an order
amending a judgment acquired a definitive character. And still in
another case, an order granting a review of a decree of registration
issued more than a year ago had been declared null void. In all these
4
case the existence of the right to appeal has been recitals was rendered
without any trial or hearing, and the Supreme Court, in
granting certiorari, said that the judgment was by its own recitals a
patent nullity, which should be set aside though an appeal was available
but was not availed of. . . .
Invoking our ruling in Melocotones vs. Court of First Instance, (57 Phil., 144),
wherein we applied the theory of laches to petitioners' 3-years delay in
requesting certiorari, respondents point out that whereas the orders complained
of herein were issued in June 13, 1951 and August 14, 1951 this special civil
action was not filed until August 1952. It should be observed that the order of
June 13 was superseded by that of August 14, 1951. The last order merely
declared "que el 17 por ciento de la propiedades vendidas en publica subasta
pertenece at Sr. Lastrilla y este tiene derecho a dicha porcion." This does not
necessarily mean that 17 per cent of the money had to be delivered to him. It
could mean, as hereinbefore indicated, that the purchasers of the property
(Dorfe and Asturias) had to recognize Lastrilla's ownership. It was only on April
16, 1952 (Annex N) that the court issued an order directing the sheriff "to tun
over" to Lastrilla "17 per cent of the total proceeds of the auction sale". There is
the order that actually prejudiced the petitioners herein, and they fought it until
the last order of July 10,. 1952 (Annex Q). Surely a month's delay may not be
regarded as laches.
In view of the foregoing, it is our opinion, and we so hold, that all orders of the
respondents judge requiring delivery of 17 per cent of the proceeds of the
auction sale to respondent Olegario Lastrilla are null and void; and the costs of
this suit shall be taxed against the latter. The preliminary injunction heretofore
issued is made permanent. So ordered.
D.
G.R. No. L-26937 October 5, 1927
PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
SEVERO EUGENIO LO, ET AL., defendants.
SEVERIO EUGENIO LO, NG KHEY LING and YEP SENG, appellants.
Jose Lopez Vito for appellants.
Roman Lacson for appellee.
VILLAMOR, J.:

On September 29, 1916, the appellants Severo Eugenio Lo and Ng Khey Ling,
together with J. A. Say Lian Ping, Ko Tiao Hun, On Yem Ke Lam and Co Sieng
Peng formed a commercial partnership under the name of "Tai Sing and Co.,"
with a capital of P40,000 contributed by said partners. In the articles of
copartnership, Exhibit A, it appears that the partnership was to last for five years
from after the date of its organization, and that its purpose was to do business
in the City of Iloilo, Province of Iloilo, or in any other part of the Philippine Islands
the partners might desire, under the name of "Tai Sing & Co.," for the purchase
and sale of merchandise, goods, and native, as well as Chinese and Japanese,
products, and to carry on such business and speculations as they might consider
profitable. One of the partners, J. A. Say Lian Ping was appointed general
manager of the partnership, with the appointed general manager of the
partnership, with the powers specified in said articles of copartnership.
On June 4, 1917, general manager A. Say Lian Ping executed a power of attorney
(Exhibit C-1) in favor of A. Y. Kelam, authorizing him to act in his stead as
manager and administrator of "Tai Sing & Co.," on July 26, 1918, for, and
obtained a loan of P8,000 in current account from the plaintiff bank. (Exhibit C).
As security for said loan, he mortgaged certain personal property of "Tai Sing &
Co., (Exhibit C.)
This credit was renew several times and on March 25, 1919, A. Y. Kelam, as
attorney-in-fact of "Tai Sing & Co., executed a chattel mortgage in favor of
plaintiff bank as security for a loan of P20,000 with interest (Exhibit D). This
mortgage was again renewed on April 16, 1920 and A. Y. Kelam, as attorney-in-
fact of "Tai Sing & Co., executed another chattel mortgage for the said sum of
P20,000 in favor of plaintiff bank. (Exhibit E.) According to this mortgage
contract, the P20,000 loan was to earn 9 per cent interest per annum.
On April 20, 1920, Yap Seng, Severo Eugenio Lo, A. Y. Kelam and Ng Khey Ling,
the latter represented by M. Pineda Tayenko, executed a power of attorney in
favor of Sy Tit by virtue of which Sy Tit, representing "Tai Sing & Co., obtained
a credit of P20,000 from plaintiff bank on January 7, 1921, executing a chattel
mortgage on certain personal property belonging to "Tai Sing & Co.
Defendants had been using this commercial credit in a current account with the
plaintiff bank, from the year 1918, to May 22, 1921, and the debit balance of
this account, with interest to December 31, 1924, is as follows:
TAI SING & CO.
To your outstanding account (C. O. D.) with us on June 30,
1922 P16,518.74
Interest on same from June 30, 1922 to December 31,1924,
at 9 per cent per annum 3,720.86
5
Total 20, 239.00
=========
This total is the sum claimed in the complaint, together with interest on the
P16,518.74 debt, at 9 per cent per annum from January 1, 1925 until fully paid,
with the costs of the trial.
Defendant Eugenio Lo sets up, as a general defense, that "Tai Sing & Co. was
not a general partnership, and that the commercial credit in current account
which "Tai Sing & Co. obtained from the plaintiff bank had not been authorized
by the board of directors of the company, nor was the person who subscribed
said contract authorized to make the same, under the article of copartnership.
The other defendants, Yap Sing and Ng Khey Ling, answered the complaint
denying each and every one of the allegations contained therein.
After the hearing, the court found:
(1) That defendants Eugenio Lo, Ng Khey Ling and Yap Seng Co., Sieng
Peng indebted to plaintiff Philippine National Bank in sum of P22,595.26
to July 29, 1926, with a daily interest of P4.14 on the balance on account
of the partnership "Tai Sing & Co. for the sum of P16,518.74 until
September 9, 1922;
(2) Said defendants are ordered jointly and severally to pay the
Philippine National Bank the sum of P22,727.74 up to August 31, 1926,
and from the date, P4.14 daily interest on the principal; and
(3) The defendants are furthermore ordered to pay the costs of the
action.1awph!l.net
Defendants appealed, making the following assignments of error:
I. The trial court erred in finding that article 126 of the Code of
Commerce at present in force is not mandatory.
II. The trial court erred in finding that the partnership agreement of "Tai
Sing & Co., (Exhibit A), is in accordance with the requirements of article
125 of the Code of Commerce for the organization of a regular
partnership.
III. The trial court erred in not admitting J. A. Sai Lian Ping's death in
China in November, 1917, as a proven fact.

IV. The trial court erred in finding that the death of J. A. Say Lian Ping
cannot extinguish the defendants' obligation to the plaintiff bank,
because the last debt incurred by the commercial partnership "Tai Sing
& Co., was that evidence by Exhibit F, signed by Sy Tit as attorney-in-
fact of the members of "Tai Sing & Co., by virtue of Exhibit G.
V. The trial court erred in not finding that plaintiff bank was not able to
collect its credit from the goods of "Tai Sing & Co., given as security
therefor through its own fault and negligence; and that the action
brought by plaintiff is a manifest violation of article 237 of the present
Code of Commerce.
VI. The trial court erred in finding that the current account of "Tai Sing
& Co. with plaintiff bank shows a debit balance of P16,518.74, which in
addition to interest at 9 per cent per annum from July 29, 1926, amount
to P16,595.26, with a daily interest of P4.14 on the sum of P16,518.74.
VII. The trial court erred in ordering the defendants appellants to pay
jointly and severally to the Philippine National Bank the sum of
P22,727.74 up to August 31, 1926, and interest on P16,518.74 from
that date until fully paid, with the costs of the action.
VIII. The trial court erred in denying the motion for a new trial filed by
defendants-appellants.
Appellants admit, and it appears from the context of Exhibit A, that the defendant
association formed by the defendants is a general partnership, as defined in
article 126 of the Code Commerce. This partnership was registered in the
mercantile register of the Province of Iloilo. The only anomaly noted in its
organization is that instead of adopting for their firm name the names of all of
the partners, of several of them, or only one of them, to be followed in the last
two cases, by the words "and to be followed in the last two cases, by the words
"and company" the partners agreed upon "Tai Sing & Co." as the firm name.
In the case of Hung-Man-Yoc, under the name of Kwong-Wo-Sing vs. Kieng-
Chiong-Seng, cited by appellants, this court held that, as the company formed
by defendants had existed in fact, though not in law due to the fact that it was
not recorded in the register, and having operated and contracted debts in favor
of the plaintiff, the same must be paid by someone. This applies more strongly
to the obligations contracted by the defendants, for they formed a partnership
which was registered in the mercantile register, and carried on business
contracting debts with the plaintiff bank. The anomalous adoption of the firm
name above noted does not affect the liability of the general partners to third
parties under article 127 of the Code of Commerce. And the Supreme Court so
held in the case of Jo Chung Cang vs. Pacific Commercial Co., (45 Phil., 142), in
which it said that the object of article 126 of the Code of Commerce in requiring
a general partnership to transact business under the name of all its members,
6
of several of them, or of one only, is to protect the public from imposition and
fraud; and that the provision of said article 126 is for the protection of the
creditors rather than of the partners themselves. And consequently the doctrine
was enunciated that the law must be unlawful and unenforceable only as
between the partners and at the instance of the violating party, but not in the
sense of depriving innocent parties of their rights who may have dealt with the
offenders in ignorance of the latter having violated the law; and that contracts
entered into by commercial associations defectively organized are valid when
voluntarily executed by the parties, and the only question is whether or not they
complied with the agreement. Therefore, the defendants cannot invoke in their
defense the anomaly in the firm name which they themselves adopted.
As to the alleged death of the manager of the company, Say Lian Ping, before
the attorney-in-fact Ou Yong Kelam executed Exhibits C, D and E, the trial court
did not find this fact proven at the hearing. But even supposing that the court
had erred, such an error would not justify the reversal of the judgment, for two
reasons at least: (1) Because Ou Yong Kelam was a partner who contracted in
the name of the partnership, without any objection of the other partners; and
(2) because it appears in the record that the appellant-partners Severo Eugenio
Lo, Ng Khey Ling and Yap Seng, appointed Sy Tit as manager, and he obtained
from the plaintiff bank the credit in current account, the debit balance of which
is sought to be recovered in this action.
Appellants allege that such of their property as is not included in the partnership
assets cannot-be seized for the payment of the debts contracted by the
partnership until after the partnership property has been exhausted. The court
found that the partnership property described in the mortgage Exhibit F no loner
existed at the time of the filing of the herein complaint nor has its existence been
proven, nor was it offered to the plaintiff for sale. We find no just reason to
reverse this conclusion of the trial court, and this being so, it follows that article
237 of the Code of Commerce, invoked by the appellant, can in no way have any
application here.
Appellants also assign error to the action of the trial court in ordering them to
pay plaintiff, jointly and severally, the sums claimed with 9 per cent interest on
P16,518.74, owing from them.
The judgment against the appellants is in accordance with article 127 of the Code
of Commerce which provides that all the members of a general partnership, be
they managing partners thereof or not, shall be personally and solidarily liable
with all their property, for the results of the transactions made in the name and
for the account of the partnership, under the signature of the latter, and by a
person authorized to use it.
As to the amount of the interest suffice it to remember that the credit in current
account sued on in this case as been renewed by the parties in such a way that
while it appears in the mortgage Exhibit D executed on March 25, 1919 by the
 7

attorney-in-fact Ou Yong Kelam that the P20,000 credit would earn 8 per cent 1904, dealing with Dy-Sianco in the same manner as the old partnership
interest annually, yet from that executed on April 16, 1920, Exhibit E, it appears had dealt with the latter.
that the P20,000 would earn 9 per cent interest per annum. The credit was
renewed in January, 1921, and in the deed of pledge, Exhibit F, executed by "Tai He then finds that the balance due from the firm Pedro Yulo and Jaime Palacios
Sing & Co., represented by the attorney-in-fact Sy Tit, it appears that this was 1,638.40 pesos, Philippine currency, and orders judgment against the
security is for the payment of the sums received by the partnership, not to defendant, Pedro Yulo, for the entire amount, with interest.
exceed P20,000 with interest and collection fees. There can be no doubt that the
parties agreed upon the rate of interest fixed in the document Exhibit E, namely
9 per cent per annum. The partnership of Yulo and Palacios was engaged in the operation of a sugar
estate in Negros. It was, therefore a civil partnership, as distinguished from a
mercantile partnership. Being a civil partnership, by the express provisions of
The judgment appealed from is in accordance with the law, and must therefore articles 1698 and 1137 of the Civil Code, the partners are not liable each for the
be, as it is hereby, affirmed with costs against the appellants. So ordered. whole debt of the partnership. The liability is pro rata and in this case Pedro Yulo
is responsible to plaintiff for only one-half of the debt. The fact that the other
G.R. No. L-3146 September 14, 1907 partner, Jaime Palacios, had left the country can not increase the liability of
Pedro Yulo.
NICOLAS CO-PITCO, plaintiff-appellee,
vs. The judgment of the court below is reversed and judgment is ordered in favor of
PEDRO YULO, defendant-appellant. the plaintiff and against the defendant, Pedro Yulo, for the sum of P819.20 pesos,
Philippine Currency, with interest thereon at the rate of 6 per cent per annum
from the 12th day of January, 1905, and the costs of the Court of First Instance.
Salvador Laguda, for appellant. No costs will be allowed to either party in this court. So ordered.
Rothrock and Ney, for appellee.

WILLIARD, J.: G.R. No. L-22493 July 31, 1975

The appellee makes the point in his brief in this court that although the defendant ISLAND SALES, INC., plaintiff-appellee,
excepted to the order of the court below denying his motion for a new trial on vs.
the ground of the insufficiency of the evidence, yet we can not review such UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL
evidence because it is not properly certified. We think that this point is well defendants. BENJAMIN C. DACO, defendant-appellant.
taken. The testimony of one witness is certified to by the stenographer, who
says that it is all the evidence which took during the trial. The testimony of this Grey, Buenaventura and Santiago for plaintiff-appellee.
witness is unimportant. There follow in the record several pages of what purports
to be evidence of different witnesses taken in narrative form, but neither the Anacleto D. Badoy, Jr. for defendant-appellant.
judge, nor the clerk, nor the stenographer certify in any way what these pages
are or that they contain evidence taken during the trial of this case. For the
purpose of this review, therefore, we can only consider the facts admitted by the
pleadings and those stated in the decision of the court below. In that decision
the court makes the following finding of fact, among others: CONCEPCION JR., J.:

Before February, 1903, Florencio Yulo and Jaime Palacios were partners This is an appeal interposed by the defendant Benjamin C. Daco from the
in the operation of a sugar estate in Victorias, Island of Negros, and had decision of the Court of First Instance of Manila, Branch XVI, in Civil Case No.
commercial dealings with a Chinaman named Dy-Sianco, who furnished 50682, the dispositive portion of which reads:
them with money and goods, and used to buy their crop of sugar. In
February, 1903, the defendant, Pedro Yulo, father of the said Florencio,
WHEREFORE, the Court sentences defendant United Pioneer
took charge of the latter's interest in the above-mentioned partnership,
General Construction Company to pay plaintiff the sum of
and he became a general partner with the said Jaime Palacios in the
P7,119.07 with interest at the rate of 12% per annum until it is
same business, and he continued as such partner until about the end of

fully paid, plus attorney's fees which the Court fixes in the sum
of Eight Hundred Pesos (P800.00) and costs.
The defendants Benjamin C. Daco, Daniel A. Guizona, Noel C.
Sim and Augusto Palisoc are sentenced to pay the plaintiff in
this case with the understanding that the judgment against
these individual defendants shall be enforced only if the
defendant company has no more leviable properties with which
to satisfy the judgment against it. .
The individual defendants shall also pay the costs.
On April 22, 1961, the defendant company, a general partnership duly registered
under the laws of the Philippines, purchased from the plaintiff a motor vehicle
on the installment basis and for this purpose executed a promissory note for
P9,440.00, payable in twelve (12) equal monthly installments of P786.63, the
first installment payable on or before May 22, 1961 and the subsequent
installments on the 22nd day of every month thereafter, until fully paid, with the
condition that failure to pay any of said installments as they fall due would render
the whole unpaid balance immediately due and demandable.
Having failed to receive the installment due on July 22, 1961, the plaintiff sued
the defendant company for the unpaid balance amounting to P7,119.07.
Benjamin C. Daco, Daniel A. Guizona, Noel C. Sim, Romulo B. Lumauig, and
Augusto Palisoc were included as co-defendants in their capacity as general
partners of the defendant company.
Daniel A. Guizona failed to file an answer and was consequently declared in
default. 1
Subsequently, on motion of the plaintiff, the complaint was dismissed insofar as
the defendant Romulo B. Lumauig is concerned. 2
When the case was called for hearing, the defendants and their counsels failed
to appear notwithstanding the notices sent to them. Consequently, the trial court
authorized the plaintiff to present its evidence ex-parte 3 , after which the trial
court rendered the decision appealed from.
The defendants Benjamin C. Daco and Noel C. Sim moved to reconsider the
decision claiming that since there are five (5) general partners, the joint and
subsidiary liability of each partner should not exceed one-fifth ( 1/ 5 ) of the
obligations of the defendant company. But the trial court denied the said motion
notwithstanding the conformity of the plaintiff to limit the liability of the
defendants Daco and Sim to only one-fifth ( 1/ 5 ) of the obligations of the
defendant company. 4Hence, this appeal.
8
The only issue for resolution is whether or not the dismissal of the complaint to
favor one of the general partners of a partnership increases the joint and
subsidiary liability of each of the remaining partners for the obligations of the
partnership.
Article 1816 of the Civil Code provides:
Art. 1816. All partners including industrial ones, shall be
liable pro rata with all their property and after all the
partnership assets have been exhausted, for the contracts
which may be entered into in the name and for the account of
the partnership, under its signature and by a person authorized
to act for the partnership. However, any partner may enter into
a separate obligation to perform a partnership contract.
In the case of Co-Pitco vs. Yulo (8 Phil. 544) this Court held:
The partnership of Yulo and Palacios was engaged in the
operation of a sugar estate in Negros. It was, therefore, a civil
partnership as distinguished from a mercantile partnership.
Being a civil partnership, by the express provisions of articles
l698 and 1137 of the Civil Code, the partners are not liable each
for the whole debt of the partnership. The liability is pro
rata and in this case Pedro Yulo is responsible to plaintiff for
only one-half of the debt. The fact that the other partner, Jaime
Palacios, had left the country cannot increase the liability of
Pedro Yulo.
In the instant case, there were five (5) general partners when the promissory
note in question was executed for and in behalf of the partnership. Since the
liability of the partners is pro rata, the liability of the appellant Benjamin C. Daco
shall be limited to only one-fifth ( 1/ 5 ) of the obligations of the defendant
company. The fact that the complaint against the defendant Romulo B. Lumauig
was dismissed, upon motion of the plaintiff, does not unmake the said Lumauig
as a general partner in the defendant company. In so moving to dismiss the
complaint, the plaintiff merely condoned Lumauig's individual liability to the
plaintiff.
WHEREFORE, the appealed decision as thus clarified is hereby AFFIRMED,
without pronouncement as to costs.
SO ORDERED.
G.R. No. 70403 July 7, 1989

SANTIAGO SYJUCO, INC., petitioner,
vs.
HON. JOSE P. CASTRO, AS PRESIDING JUDGE OF THE REGIONAL TRIAL
COURT OF THE NATIONAL CAPITAL JUDICIAL REGION, BRANCH LXXXV,
QUEZON CITY, THE CITY SHERIFF OF THE CITY OF MANILA, THE CITY
REGISTER OF DEEDS OF THE CITY OF MANILA, EUGENIO LIM, ARAMIS
LIM, MARIO LIM, PAULINO LIM, LORENZO LIM, NILA LIM and/ or THE
PARTNERSHIP OF THE HEIRS OF HUGO LIM and ATTORNEY PATERNO P.
CANLAS, respondents.
Doroteo B. Daguna and Felix D. Carao for petitioner.
Paterno Canlas for private respondents.
NARVASA, J.:
This case may well serve as a textbook example of how judicial processes,
designed to promote the swift and efficient disposition of disputes at law, can be
so grossly abused and manipulated as to produce precisely the opposite result;
how they can be utilized by parties with small scruples to forestall for an
unconscionably long time so essentially simple a matter as making the security
given for a just debt answer for its payment.
The records of the present proceedings and of two other cases already decided
by this Court expose how indeed the routine procedure of an extrajudicial
foreclosure came by dint of brazen forum shopping and other devious
maneuvering to grow into a veritable thicket of litigation from which the
mortgagee has been trying to extricate itself for the last twenty years.
Back in November 1964, Eugenio Lim, for and in his own behalf and as attorney-
in-fact of his mother, the widow Maria Moreno (now deceased) and of his brother
Lorenzo, together with his other brothers, Aramis, Mario and Paulino, and his
sister, Nila, all hereinafter collectively called the Lims, borrowed from petitioner
Santiago Syjuco, Inc. (hereinafter, Syjuco only) the sum of P800,000.00. The
loan was given on the security of a first mortgage on property registered in the
names of said borrowers as owners in common under Transfer Certificates of
Title Numbered 75413 and 75415 of the Registry of Deeds of Manila. Thereafter
additional loans on the same security were obtained by the Lims from Syjuco,
so that as of May 8, 1967, the aggregate of the loans stood at P2,460,000.00,
exclusive of interest, and the security had been augmented by bringing into the
mortgage other property, also registered as owned pro indiviso by the Lims
under two titles: TCT Nos. 75416 and 75418 of the Manila Registry.
9
There is no dispute about these facts, nor about the additional circumstance that
as stipulated in the mortgage deed the obligation matured on November 8, 1967;
that the Lims failed to pay it despite demands therefor; that Syjuco consequently
caused extra-judicial proceedings for the foreclosure of the mortgage to be
commenced by the Sheriff of Manila; and that the latter scheduled the auction
sale of the mortgaged property on December 27, 1968. 1 The attempt to
foreclose triggered off a legal battle that has dragged on for more than twenty
years now, fought through five (5) cases in the trial courts, 2 two (2) in the Court
of Appeals, 3 and three (3) more in this Court, 4 with the end only now in sight.
1. CIVIL CASE NO. 75180, CFI MANILA, BR.5;
CA-G.R. NO. 00242-R; G.R. NO. L-34683
To stop the foreclosure, the Lims through Atty. Marcial G. Mendiola, who was
later joined by Atty. Raul Correa filed Civil Case No. 75180 on December
24,1968 in the Court of First Instance of Manila (Branch 5). In their complaint
they alleged that their mortgage was void, being usurious for stipulating interest
of 23% on top of 11 % that they had been required to pay as "kickback." An
order restraining the auction sale was issued two days later, on December
26,1968, premised inter alia on the Lims' express waiver of "their rights to the
notice and re-publication of the notice of sale which may be conducted at some
future date." 5
On November 25,1970, the Court of First Instance (then presided over by Judge
Conrado M. Vasquez 6 rendered judgment finding that usury tained the
mortgage without, however, rendering it void, declaring the amount due to be
only Pl,136,235.00 and allowing the foreclosure to proceed for satisfaction of the
obligation reckoned at only said amount . 7
Syjuco moved for new trial to enable it to present additional evidence to
overthrow the finding of usury, and the Court ordered the case reopened for that
purpose. The Lims tried to negate that order of reopening in the Court of Appeals,
the proceedings being docketed as CA-G.R. No. 00242-R. They failed. The Court
of Appeals upheld the Trial Court. The Lims then sought to nullify this action of
the Appellate Court; towards that end, they filed with this Court a petition
for certiorari and prohibition, docketed as G.R. No. L-34683. But here, too, they
failed; their petition was dismissed. 8
Thereafter, and on the basis of the additional evidence adduced by Syjuco on
remand of the case from this Court, the Trial Court promulgated an amended
decision on August 16, 1972, reversing its previous holding that usury had
flawed the Lims' loan obligation. It declared that the principal of said obligation
indeed amounted to P2,460,000.00, exclusive of interest at the rate of 12% per
annum from November 8, 1967, and, that obligation being already due, the
defendants (Syjuco and the Sheriff of Manila) could proceed with the
extrajudicial foreclosure of the mortgage given to secure its satisfaction. 9

2. APPEAL FROM CIVIL CASE NO. 75180; CA-
G.R. NO. 51752; G.R. NO. L-45752
On September 9, 1972, Atty. Paterno R. Canlas entered his appearance in Civil
Case No. 75180 as counsel for the Lims in collaboration with Atty. Raul Correa,
and on the same date appealed to the Court of Appeals from the amended
decision of August 16, 1972. 10 In that appeal, which was docketed as CA G.R.
No. 51752, Messrs. Canlas and Correa prayed that the loans be declared
usurious; that the principal of the loans be found to be in the total amount of
Pl,269,505.00 only, and the interest thereon fixed at only 6% per annum from
the filing of the complaint; and that the mortgage be also pronounced
void ab initio. 11
The appeal met with no success. In a decision promulgated on October 25,1976,
the Court of Appeals affirmed in toto the Trial Court's amended decision. 12
The Lims came to this Court seeking reversal of the appellate Court's decision.
However, their petition for review-filed in their behalf by Canlas, and Atty. Pio
R. Marcos, and docketed as G.R. No. L-45752-was denied for lack of merit in a
minute resolution dated August 5, 1977. The Lims' motion for reconsideration
was denied and entry of judgment was made on September 24,1977. 13 Here
the matter should have ended; it marked only the beginning of Syjuco's travails.
3. CIVIL CASE NO.112762, CFI MANILA
BRANCH 9
Syjuco then resumed its efforts to proceed with the foreclosure. It caused the
auction sale of the mortgaged property to be scheduled on December 20, 1977,
only to be frustrated again by another action filed by the Lims on December 19,
1977, docketed as Civil Case No. 112762 of the Court of First Instance of
Manila. 14 The action sought to stop the sale on the ground that the notice of
foreclosure had not been republished; this, notwithstanding that as earlier
stressed, the restraining order of December 26, 1968 issued in Civil Case No
75180 explicitly declared itself to be predicated on the Lims' waiver of "their
rights to the notice and republication of the notice of sale which may be
conducted at some future date." 15An order restraining the sale issued in the
case, although the petition for preliminary injunction was subsequently denied.
A supplemental complaint was also filed by the Lims seeking recovery of some
Pl million in damages allegedly suffered by reason of said lack of republication. 16
4. CIVIL CASE NO. 75180
That very same claim that there had been no republication of the notice of
sale, which was the foundation of the Lims' action in Civil Case No. 112762 as
aforesaid was made by the Lims the basis of an urgent motion filed on
December 15, 1977 in Civil Case No. 75180, in which, as earlier narrated, the
judgement authorizing the foreclosure had been affirmed by both the Court of
10
Appeals and this Court, and had become final and executory. And that motion
sought exactly the same remedy prayed for in Civil Case No. 112762 (filed by
the Lims four [4] days later, on December 19, 1977), i.e., the prevention of the
auction sale. The Court -- Branch 5, then presided over by Judge Jose H. Tecson
granted the restraining order on December 19, 1977, 17 the very same day
that the Lims commenced Civil Case No. 112762 in the same Court and in which
subsequent action they asked for and obtained a similar restraining order.
The Lims' counsel thus brought about the anomalous situation of two (2)
restraining orders directed against the same auction sale, based on the same
ground, issued by different courts having cognizance of two (2) separate
proceedings instituted for identical objectives. This situation lasted for all of three
(3) years, despite the republication of the notice of sale caused by Syjuco in
January, 1978 in an effort to end all dispute about the matter, and despite Judge
Tecson's having been made aware of Civil Case No. 112762. It should have been
apparent to Judge Tecson that there was nothing more to be done in Civil Case
No. 75180 except to enforce the judgment, already final and executory,
authorizing the extrajudicial foreclosure of the mortgage, a judgment
sanctioned, to repeat, by both the Court of Appeals and the Supreme Court; that
there was in truth no need for another publication of the notice since the Lims
had precisely waived such republication, this waiver having been the condition
under which they had earlier obtained an order restraining the first scheduled
sale; that, in any event, the republication effected by Syjuco had removed the
only asserted impediment to the holding of the same; and that, finally, the Lims
were acting in bad faith: they were maintaining proceedings in two (2) different
courts for essentially the same relief. 18 Incredibly, not only did Judge Tecson
refuse to allow the holding of the auction sale, as was the only just and lawful
course indicated by the circumstances, 19 he authorized the Lims to sell the
mortgaged property in a private sale, 20 with the evident intention that the
proceeds of the sale, which he directed to be deposited in court, would be divided
between Syjuco and the Lims; this, in line with the patently specious theory
advocated by the Lims' counsel that the bond flied by them for the postponement
of the sale, set at P6 million by the Court (later increased by P 3 million) had
superseded and caused novation of the mortgage. 21The case lay fallow for a
year, certain other, incidents arising and remaining unresolved on account of
numerous postponements.
5. G.R. No. L-56014
Finally, on January 28, 1981, Syjuco betook itself to this Court, presumably no
longer disposed to await Judge Tecson's pleasure or the Lims' convenience. It
filed a petition for certiorari and prohibition, docketed as G.R. No. L-56014,
alleging that in Civil Case No. 75180, Judge Tecson had gravely abused discretion
in:
(1) unreasonably delaying the foreclosure of the mortgage;

(2) entertaining the Lims' motion to discharge said mortgage
grounded on the theory that it had been superseded and
novated by the Lims' act of filing the bond required by Judge
Tecson in connection with the postponement of the foreclosure
sale, and unreasonably delaying resolution of the issue; and
(3) authorizing the Lims to negotiate and consummate the
private sale of the mortgaged property and motu proprio
extending the period granted the Lims for the purpose, in
disregard of the final and executory judgment rendered in the
case.
By judgment rendered on September 21, 1982, after due
proceedings, this Court 22 issued the writ prayed for and
nullified the orders and actuations of Judge Tecson in Civil Case
No. 75180. The judgment declared that:
(1) the republication by Syjuco of the notice of foreclosure sale
rendered the complaint in Civil Case No. 112762 moot and
academic; hence, said case could not operate to bar the sale;
(2) the Lims' bonds (of P 6 million and P 3 million), having by
the terms thereof been given to guarantee payment of damages
to Syjuco and the Sheriff of Manila resulting from the
suspension of the auction sale, could not in any sense and from
any aspect have the effect of superseding the mortgage or
novating it;
(3) in fact, the bonds had become worthless when, as shown
by the record, the bondsman's authority to transact non-life
insurance business in the Philippines was not renewed, for
cause, as of July 1, 1981.
The decision consequently decreed that the Sheriff of Manila should proceed with
the mortgage sale, there being no further impediment thereto. 23
Notice of the decision was served on the Lims, through Atty. Canlas, on October
2, 1982. A motion for reconsideration was filed, 24 but the same was denied with
finality for lack of merit and entry of final judgment was made on March
22,1983. 25
6. THE SECRET ACTION CIVIL CASE NO. Q-
36845 OF THE REGIONAL TRIAL COURT,
QUEZON CITY, JUDGE JOSE P. CASTRO,
PRESIDING
11
Twelve (12) days after the Lims were served, as above mentioned, with notice
of this Court's judgment in G.R. No. 56014, or on October 14,1982, they caused
the filing with the Regional Trial Court of Quezon City of still another action, the
third, also designed, like the first two, to preclude enforcement of the mortgage
held by Syjuco.
This time the complaint was presented, not in their individual names, but in the
name of a partnership of which they themselves were the only partners: "Heirs
of Hugo Lim." The complaint advocated the theory that the mortgage which they,
together with their mother, had individually constituted (and thereafter amended
during the period from 1964 to 1967) over lands standing in their names in the
Property Registry as owners pro indiviso, in fact no longer belonged to them at
that time, having been earlier deeded over by them to the partnership, "Heirs of
Hugo Lim", more precisely, on March 30, 1959, hence, said mortgage was void
because executed by them without authority from the partnership.
The complaint was signed by a lawyer other than Atty. Canlas, but the records
disclose that Atty. Canlas took over as counsel as of November 4,1982. The case,
docketed as Civil Case No. Q-39295, was assigned to Branch 35 of the Quezon
City Regional Trial Court, then presided over by Judge Jose P. Castro.
Judge Castro issued a restraining order on October 15, 1982. Then, Sheriff
Perfecto G. Dalangin submitted a return of summons to the effect that on
December 6, 1982 he
.. served personally and left a copy of summons together with
a copy of Complaint and its annexes x x upon defendant's office
formerly at 313 Quirino Ave., Paranaque, Metro-Manila and now
at 407 Dona Felisa Syjuco Building, Remedios St., corner Taft
Avenue, Manila, through the Manager, a person of sufficient age
and discretion duly authorized to receive service of such nature,
but who refused to accept service and signed receipt thereof. 26
A vaguer return will be hard to find. It is impossible to discern from it where
precisely the summons was served, whether at Quirino Avenue, Paranaque, or
Taft Avenue, Manila; and it is inexplicable that the name of the person that the
sheriff had been able to identify as the manager is not stated, the latter being
described merely as "a person of sufficient age and discretion." In any event, as
it was to claim later, Syjuco asserts that it was never so served with summons,
or with any other notice, pleading, or motion relative to the case, for that matter.
On February 10, 1983, Atty. Canlas filed an ex-parte motion to declare Syjuco
in default. The order of default issued the next day, also directing the plaintiff
partnership to present evidence ex parte within three (3) days. On February 22,
1983, judgment by default was rendered, declaring void the mortgage in
question because executed by the Lims without authority from the partnership
which was and had been since March 30,1959 the exclusive owner of the

mortgaged property, and making permanent an injunction against the
foreclosure sale that had issued on January 14,1983. 27 Service of notice of the
default judgment was, according to the return of the same Sheriff Perfecto
Dalangin, effected on the following day, February 23, 1983. His return is a virtual
copy of his earlier one regarding service of summons: it also states the place of
service as the defendant's office, either at its former location, 313 Quirino
Avenue, Paranaque, or at the later address, 407 Dona Felisa, Syjuco Building,
Taft Avenue, Manila; and it also fails to identify the person on whom service was
made, describing him only as "the clerk or person in charge" of the office. 28
Unaccountably, and contrary to what might be expected from the rapidity with
which it was decided-twelve (12) days from February 10, 1983, when the motion
to declare defendant Syjuco in default was filed-the case was afterwards allowed
by Atty. Canlas to remain dormant for seventeen (17) months. He made no effort
to have the judgment executed, or to avail of it in other actions instituted by him
against Syjuco. The judgment was not to be invoked until sometime in or after
July, 1984, again to stop the extrajudicial mortgage sale scheduled at or about
that time at the instance of Syjuco, as shall presently be recounted.
7. Other Actions in the Interim:
a. CIVIL CASE No. 83-19018, RTC MANILA
While the Lims, through their partnership ("Heirs of Hugo Lim"), were
prosecuting their action in the sala of Judge Castro, as above narrated, Syjuco
once again tried to proceed with the foreclosure after entry of judgment had
been made in G.R. No. 56014 on March 22, 1983. It scheduled the auction sale
on July 30, 1983. But once again it was frustrated. Another obstacle was put up
by the Lims and their counsel, Atty. Canlas. This was Civil Case No. 83-19018 of
the Manila Regional Trial Court. The case was filed to stop the sale on the theory
that what was sought to be realized from the sale was much in excess of the
judgment in Civil Case No. 75180, and that there was absence of the requisite
notice. It is significant that the judgment by default rendered by Judge Castro in
Civil Case No. Q-36485 was not asserted as additional ground to support the
cause of action. Be this as it may, a restraining order was issued on July 20,1983
in said Civil Case No. 83-9018. 29
b. CIVIL CASE NO. Q-32924, RTC QUEZON CITY
What the outcome of this case, No. 83-19018, is not clear. What is certain is (1)
that the auction sale was re-scheduled for September 20, 1983, (2) that it was
aborted because the Lims managed to obtain still another restraining order in
another case commenced by their lawyer, Atty. Canlas: Civil Case No. Q-32924
of the Court of First Instance of Quezon City, grounded on the proposition that
the publication of the notice of sale was defective; and (3) that the action was
dismissed by the Regional Trial Court on February 3, 1984. 30
12
No other salient details about these two (2) cases are available in the voluminous
records before the Court, except that it was Atty. Canlas who had filed them. He
admits having done so unequivocally: "Thus, the undersigned counsel filed
injunction cases in Civil Case No. 83-19018 and Civil Case No. 39294, Regional
Trial Courts of Manila and Quezon City. ... " 31
7. RE-ACTIVATION OF CIVIL CASE NO. Q-
36485, RTC, Q QUEZON CITY, BRANCH XXXV
Upon the dismissal of Civil Case No. 39294, Syjuco once more resumed its efforts
to effect the mortgage sale which had already been stymied for more than fifteen
(15) years. At its instance, the sheriff once again set a date for the auction sale.
But on the date of the sale, a letter of Atty. Canlas was handed to the sheriff
drawing attention to the permanent injunction of the sale embodied in the
judgment by default rendered by Judge Castro in Civil Case No. Q-
36485. 32 Syjuco lost no time in inquiring about Civil Case No. Q-36485, and was
very quickly made aware of the judgment by default therein promulgated and
the antecedent events leading thereto. It was also made known that on July 9,
1984, Judge Castro had ordered execution of the judgment; that Judge Castro
had on July 16, 1984 granted Atty. Canlas' motion to declare cancelled the titles
to the Lims' mortgaged properties and as nun and void the annotation of the
mortgage and its amendments on said titles, and to direct the Register of Deeds
of Manila to issue new titles, in lieu of the old, in the name of the partnership,
"Heirs of Hugo Lim." 33
On July 17,1984, Syjuco filed in said Civil Case No. Q-36485 a motion for
reconsideration of the decision and for dismissal of the action, alleging that it
had never been served with summons; that granting arguendo that service had
somehow been made, it had never received notice of the decision and therefore
the same had not and could not have become final; and that the action should
be dismissed on the ground of bar by prior judgment premised on the final
decisions of the Supreme Court in G.R. No. L-45752 and G.R. No. 56014.
Two other motions by Syjuco quickly followed. The first, dated July 20, 1984,
prayed for abatement of Judge Castro's order decreeing the issuance of new
certificates of title over the mortgaged lands in the name of the plaintiff
partnership. 34 The second, filed on July 24, 1984, was a supplement to the
motion to dismiss earlier filed, asserting another ground for the dismissal of the
action, i.e., failure to state a cause of action, it appearing that the mortgaged
property remained registered in the names of the individual members of the Lim
family notwithstanding that the property had supposedly been conveyed to the
plaintiff partnership long before the execution of the mortgage and its
amendments,-and that even assuming ownership of the property by the
partnership, the mortgage executed by all the partners was valid and binding
under Articles 1811 and 1819 of the Civil Code. 35

The motions having been opposed in due course by the plaintiff partnership, they
remained pending until January 31, 1985 when Syjuco moved for their
immediate resolution. Syjuco now claims that Judge Castro never acted on the
motions. The latter however states that that he did issue an order on February
22, 1985 declaring that he had lost jurisdiction to act thereon because, petitio
principii, his decision had already become final and executory.
8. G.R.NO.L-70403; THE PROCEEDING AT BAR
For the third time Syjuco is now before this Court on the same matter. It filed
on April 3, 1985 the instant petition for certiorari, prohibition and mandamus. It
prays in its petition that the default judgment rendered against it by Judge
Castro in said Civil Case No. Q-36485 be annulled on the ground of lack of service
of summons, res judicata and laches, and failure of the complaint to state a
cause of action; that the sheriff be commanded to proceed with the foreclosure
of the mortgage on the property covered by Transfer Certificates of Title
Numbered 75413, 75415, 75416 and 75418 of the Manila Registry; and that the
respondents the Lims, Judge Castro, the Sheriff and the Register of Deeds of
Manila, the partnership known as "Heirs of Hugo Lim," and Atty. Paterno R.
Canlas, counsel for-the Lims and their partnership-be perpetually enjoined from
taking any further steps to prevent the foreclosure.
The comment filed for the respondents by Atty. Canlas in substance alleged that
(a) Syjuco was validly served with summons in Civil Case No. Q-36485, hence,
that the decision rendered by default therein was also valid and, having been
also duly served on said petitioner, became final by operation of law after the
lapse of the reglementary appeal period; (b) finality of said decision removed
the case from the jurisdiction of the trial court, which was powerless to entertain
and act on the motion for reconsideration and motion to dismiss; (c) the petition
was in effect an action to annul a judgment, a proceeding within the original
jurisdiction of the Court of Appeals; (d) the plea of res judicata came too late
because raised after the decision had already become final; moreover, no
Identity of parties existed between the cases invoked, on the one hand, and Civil
Case No. Q-36485, on the other, the parties in the former being the Lims in their
personal capacities and in the latter, the Lim Partnership, a separate and distinct
juridical entity; and the pleaded causes of action being different, usury in the
earlier cases and authority of the parties to encumber partnership property in
the case under review; (e) the plea of laches also came too late, not having been
invoked in the lower court; and (f) the property involved constituted assets of
the Lim partnership, being registered as such with the Securities and Exchange
Commission. 36
On his own behalf Atty. Canlas submitted that he had no knowledge of the
institution of Civil Case No. Q-36485 (though he admitted being collaborating
counsel in said case); that he did not represent the Lims in all their cases against
Syjuco, having been counsel for the former only since 1977, not for the last
seventeen years as claimed by Syjuco; and that he had no duty to inform
opposing counsel of the pendency of Civil Case No. Q-36485. 37
13
Respondent Judge Castro also filed a comment 38 disclaiming knowledge of
previous controversies regarding the mortgaged property. He asserted that
Syjuco had been properly declared in default for having failed to answer the
complaint despite service of summons upon it, and that his decision in said case
which was also properly served on Syjuco became final when it was not timely
appealed, after which he lost jurisdiction to entertain the motion for
reconsideration and motion to dismiss. He also denied having failed to act on
said motions, adverting to an alleged order of February 22, 1985 where he
declared his lack of jurisdiction to act thereon.
The respondent Register of Deeds for his part presented a comment wherein he
stated that by virtue of an order of execution in Civil Case No. Q-36485, he had
cancelled TCTs Nos. 75413, 75415, 75416 and 75418 of his Registry and
prepared new certificates of title in lieu thereof, but that cancellation had been
held in abeyance for lack of certain registration requirements and by reason also
of the motion of Syjuco's Atty. Formoso to hold in abeyance enforcement of the
trial court's order of July 16, 1984 as well as of the temporary restraining order
subsequently issued by the Court. 39
It is time to write finis to this unedifying narrative which is notable chiefly for
the deception, deviousness and trickery which have marked the private
respondents' thus far successful attempts to avoid the payment of a just
obligation. The record of the present proceeding and the other records already
referred to, which the Court has examined at length, make it clear that the
dispute should have been laid to rest more than eleven years ago, with entry of
judgment of this Court (on September 24, 1977) in G.R. No. L-45752 sealing the
fate of the Lims' appeal against the amended decision in Civil Case No. 75180
where they had originally questioned the validity of the mortgage and its
foreclosure. That result, the records also show, had itself been nine (9) years in
coming, Civil Case No. 75180 having been instituted in December 1968 and,
after trial and judgment, gone through the Court of Appeals (in CA-G.R. No.
00242-R) and this Court (in G.R. No. 34683), both at the instance of the Lims,
on the question of reopening before the amended decision could be issued.
Unwilling, however, to concede defeat, the Lims moved (in Civil Case No. 75180)
to stop the foreclosure sale on the ground of lack of republication. On December
19,1977 they obtained a restraining order in said case, but this notwithstanding,
on the very same date they filed another action (Civil Case No. 117262) in a
different branch of the same Court of First Instance of Manila to enjoin the
foreclosure sale on the same ground of alleged lack of republication. At about
this time, Syjuco republished the notice of sale in order, as it was later to
manifest, to end all further dispute.
That move met with no success. The Lims managed to persuade the judge in
Civil Case No. 75180, notwithstanding his conviction that the amended decision
in said case had already become final, not only to halt the foreclosure sale but
also to authorize said respondents to dispose of the mortgaged property at a
private sale upon posting a bond of P6,000,000.00 (later increased by

P3,000,000.00) to guarantee payment of Syjuco's mortgage credit. This gave
the Lims a convenient excuse for further suspension of the foreclosure sale by
introducing a new wrinkle into their contentions-that the bond superseded the
mortgage which should, they claimed, therefore be discharged instead of
foreclosed.
Thus from the final months of 1977 until the end of 1980, a period of three years,
Syjuco found itself fighting a legal battle on two fronts: in the already finally
decided Civil Case No. 75180 and in Civil Case No. 117262, upon the single issue
of alleged lack of republication, an issue already mooted by the Lims' earlier
waiver of republication as a condition for the issuance of the original restraining
order of December 26,1968 in Civil Case No. 75180, not to mention the fact that
said petitioner had also tried to put an end to it by actually republishing the
notice of sale.
With the advent of 1981, its pleas for early resolution having apparently fallen
on deaf ears, Syjuco went to this Court (in G.R. No. L-56014) from which, on
September 21, 1982, it obtained the decision already referred to holding, in fine,
that there existed no further impediment to the foreclosure sale and that the
sheriff could proceed with the same.
Said decision, instead of deterring further attempts to derail the foreclosure,
apparently gave the signal for the clandestine filing this time by the
Partnership of the Heirs of Hugo Lim -on October 14,1982 of Civil Case No. Q-
36485, the subject of the present petition, which for the first time asserted the
claim that the mortgaged property had been contributed to the plaintiff
partnership long before the execution of the Syjuco's mortgage in order to defeat
the foreclosure.
Syjuco now maintains that it had no actual knowledge of the existence and
pendency of Civil Case No. Q-36485 until confronted, in the manner already
adverted to, with the fait accompli of a "final" judgment with permanent
injunction therein, and nothing in the record disabuses the Court about the truth
of this disclaimer. Indeed, considering what had transpired up to that
denouement, it becomes quite evident that actuations of the Lims and their
lawyer had been geared to keeping Syjuco in the dark about said case. Their
filing of two other cases also seeking to enjoin the foreclosure sale (Civil Case
No. 83-19018, Regional Trial Court of Manila in July 1983, and Civil Case No. Q-
32924, Regional Trial Court of Quezon City in September of the same year) after
said sale had already been permanently enjoined by default judgment in Civil
Case No. Q-36485, appears in retrospect to be nothing but a brace of feints
calculated to keep Syjuco in that state of ignorance and to lull any apprehensions
it mat may have harbored about encountering further surprises from any other
quarter.
Further credence is lent to this appraisal by the unusually rapid movement of
Civil Case No. Q-36485 itself in its earlier stages, which saw the motion to
14
declare Syjuco in default filed, an order of default issued, evidence ex partefor
the plaintiffs received and judgment by default rendered, all within the brief span
of twelve days, February 10-22, 1983. Notice of said judgment was "served" on
February 23, 1983, the day after it was handed down, only to be followed by an
unaccountable lull of well over a year before it was ordered executed on July 9,
1984 unaccountable, considering that previous flurry of activity, except in the
context of a plan to rush the case to judgment and then divert Syjuco's attention
to the Lims' moves in other directions so as to prevent discovery of the existence
of the case until it was too late.
The Court cannot but condemn in the strongest terms this trifling with the judicial
process which degrades the administration of justice, mocks, subverts and
misuses that process for purely dilatory purposes, thus tending to bring it into
disrepute, and seriously erodes public confidence in the will and competence of
the courts to dispense swift justice.
Upon the facts, the only defense to the foreclosure that could possibly have
merited the full-blown trial and appeal proceedings it actually went through was
that of alleged usury pleaded in Civil Case No. 75180 and finally decided against
the respondent Lims in G.R. No. L-45752 in September 1977. The other issues
of failure to republish and discharge of mortgage by guarantee set up in
succeeding actions were sham issues, questions without substance raised only
for purposes of delay by the private respondents, in which they succeeded only
too well. The claim urged in this latest case: that the mortgaged property had
been contributed to the respondent partnership and was already property of said
partnership when the individual Lims unauthorizedly mortgaged it to Syjuco, is
of no better stripe, and this, too, is clear from the undisputed facts and the legal
conclusions to be drawn therefrom.
The record shows that the respondent partnership is composed exclusively of
the individual Lims in whose name all the cases herein referred to, with the sole
exception of Civil Case No. Q-36485, were brought and prosecuted, their
contribution to the partnership consisting chiefly, if not solely, of the property
subject of the Syjuco mortgage. It is also a fact that despite its having been
contributed to the partnership, allegedly on March 30, 1959, the property was
never registered with the Register of Deeds in the name of the partnership, but
to this date remains registered in the names of the Lims as owners in common.
The original mortgage deed of November 14,1964 was executed by the Lims as
such owners, as were all subsequent amendments of the mortgage. There can
be no dispute that in those circumstances, the respondent partnership was
chargeable with knowledge of the mortgage from the moment of its execution.
The legal fiction of a separate juridical personality and existence will not shield
it from the conclusion of having such knowledge which naturally and irresistibly
flows from the undenied facts. It would violate all precepts of reason, ordinary
experience and common sense to propose that a partnership, as commonly
known to all the partners or of acts in which all of the latter, without exception,
have taken part, where such matters or acts affect property claimed as its own
by said partnership.

If, therefore, the respondent partnership was inescapably chargeable with
knowledge of the mortgage executed by all the partners thereof, its silence and
failure to impugn said mortgage within a reasonable time, let alone a space of
more than seventeen years, brought into play the doctrine of estoppel to
preclude any attempt to avoid the mortgage as allegedly unauthorized.
The principles of equitable estoppel, sometimes called estoppel in pais, are made
part of our law by Art. 1432 of the Civil Code. Coming under this class is estoppel
by silence, which obtains here and as to which it has been held that:
... an estoppel may arise from silence as well as from words.
'Estoppel by silence' arises where a person, who by force of
circumstances is under a duty to another to speak, refrains from
doing so and thereby leads the other to believe in the existence
of a state of facts in reliance on which he acts to his prejudice.
Silence may support an estoppel whether the failure to speak is
intentional or negligent.
Inaction or silence may under some circumstances amount to a
misrepresentation and concealment of the facts, so as to raise
an equitable estoppel. When the silence is of such a character
and under such circumstances that it would become a fraud on
the other party to permit the party who has kept silent to deny
what his silence has induced the other to believe and act on, it
will operate as an estoppel. This doctrine rests on the principle
that if one maintains silence, when in conscience he ought to
speak, equity will debar him from speaking when in conscience
he ought to remain silent. He who remains silent when he ought
to speak cannot be heard to speak when he should be silent. 40
And more to the point:
A property owner who knowingly permits another to sell or
encumber the property, without disclosing his title or objecting
to the transaction, is estopped to set up his title or interest as
against a person who has been thereby misled to his injury.
xxx
An owner of real property who stands by and sees a third person
selling or mortgaging it under claim of title without asserting
his own title or giving the purchaser or mortgagee any notice
thereof is estopped, as against such purchaser or mortgagee,
afterward to assert his title; and, although title does not pass
under these circumstances, a conveyance will be decreed by a
court of equity. Especially is the rule applicable where the party
15
against whom the estoppel is claimed, in addition to standing
by, takes part in malting the sale or mortgage. 41
More specifically, the concept to which that species of estoppel
which results from the non-disclosure of an estate or interest in
real property has ordinarily been referred is fraud, actual or
constructive. ... Although fraud is not an essential element of
the original conduct working the estoppel, it may with perfect
property be said that it would be fraudulent for the party to
repudiate his conduct, and to assert a right or claim in
contravention thereof. 42
Equally or even more preclusive of the respondent partnership's claim to the
mortgaged property is the last paragraph of Article 1819 of the Civil Code, which
contemplates a situation duplicating the circumstances that attended the
execution of the mortgage in favor of Syjuco and therefore applies foursquare
thereto:
Where the title to real property is in the names of all the
partners a conveyance executed by all the partners passes all
their rights in such property.
The term "conveyance" used in said provision, which is taken from Section 10 of
the American Uniform Partnership Act, includes a mortgage.
Interpreting Sec. 10 of the Uniform Partnership Act, it has been
held that the right to mortgage is included in the right to
convey. This is different from the rule in agency that a special
power to sell excludes the power to mortgage (Art. 1879). 43
As indisputable as the propositions and principles just stated is that the cause of
action in Civil Case No. Q-36485 is barred by prior judgment. The right subsumed
in that cause is the negation of the mortgage, postulated on the claim that the
parcels of land mortgaged by the Lims to Syjuco did not in truth belong to them
but to the partnership. Assuming this to be so, the right could have been
asserted at the time that the Lims instituted their first action on December 24,
1968 in the Manila Court of First Instance, Civil Case No. 75180, or when they
filed their subsequent actions: Civil Case No. 112762, on December 19, 1977;
Civil Case No. 83-19018, in 1983, and Civil Case No. Q-39294, also in 1983. The
claim could have been set up by the Lims, as members composing the
partnership, "Heirs of Hugo Lim." It could very well have been put forth by the
partnership itself, as co-plaintiff in the corresponding complaints, considering
that the actions involved property supposedly belonging to it and were being
prosecuted by the entire membership of the partnership, and therefore, the
partnership was in actuality, the real party in interest. In fact, consistently with
the Lims' theory, they should be regarded, in all the actions presented by them,
as having sued for vindication, not of their individual rights over the property

mortgaged, but those of the partnership. There is thus no reason to distinguish
between the Lims, as individuals, and the partnership itself, since the former
constituted the entire membership of the latter. In other words, despite the
concealment of the existence of the partnership, for all intents and purposes and
consistently with the Lims' own theory, it was that partnership which was the
real party in interest in all the actions; it was actually represented in said actions
by all the individual members thereof, and consequently, those members' acts,
declarations and omissions cannot be deemed to be simply the individual acts of
said members, but in fact and in law, those of the partnership.
What was done by the Lims or by the partnership of which they were the only
members-was to split their cause of action in violation of the well known rule
that only one suit may be instituted for a single cause of action. 44 The right
sought to be enforced by them in all their actions was, at bottom, to strike down
the mortgage constituted in favor of Syjuco, a right which, in their view, resulted
from several circumstances, namely that the mortgage was constituted over
property belonging to the partnership without the latter's authority; that the
principal obligation thereby secured was usurious; that the publication of the
notice of foreclosure sale was fatally defective, circumstances which had already
taken place at the time of the institution of the actions. They instituted four (4)
actions for the same purpose on one ground or the other, making each ground
the subject of a separate action. Upon these premises, application of the sanction
indicated by law is caned for, i.e., the judgment on the merits in any one is
available as a bar in the others. 45
The first judgment-rendered in Civil Case No. 75180 and affirmed by both the
Court of Appeals (CA-G.R. No. 51752) and this Court (G.R. No. L-45752) should
therefore have barred all the others, all the requisites of res judicata being
present. The judgment was a final and executory judgment; it had been rendered
by a competent court; and there was, between the first and subsequent cases,
not only identity of subject-matter and of cause of action, but also of parties. As
already pointed out, the plaintiffs in the first four (4) actions, the Lims, were
representing exactly the same claims as those of the partnership, the plaintiff in
the fifth and last action, of which partnership they were the only members, and
there was hence no substantial difference as regards the parties plaintiff in all
the actions. Under the doctrine of res judicata, the judgment in the first was and
should have been regarded as conclusive in all other, actions not only "with
respect to the matter directly adjudged," but also "as to any other matter that
could have been raised in relation thereto. " 46 It being indisputable that the
matter of the partnership's being the owner of the mortgaged properties "could
have been raised in relation" to those expressly made issuable in the first action,
it follows that that matter could not be re-litigated in the last action, the fifth.
Though confronted with the facts thus precluding the respondent partnership's
claim to the property under both the principle of estoppel and the provisions of
Article 1819, last paragraph, of the Civil Code, as well as the familiar doctrine of
res judicata, the respondent Judge refused to act on Syjuco's motions on the
ground that he no longer had jurisdiction to do so because they were filed after
16
judgment by default against Syjuco, which failed to answer the complaint despite
valid service of summons, had been rendered and become final. The sheriffs
return, however, creates grave doubts about the correctness of the Judge's basic
premise that summons had been validly served on Syjuco. For one thing, the
return 47 is unspecific about where service was effected. No safe conclusion
about the place of service can be made from its reference to a former and a
present office of Syjuco in widely separate locations, with nothing to indicate
whether service was effected at one address or the other, or even at both. A
more serious defect is the failure to name the person served who is, with equal
ambiguity, identified only as "the Manager" of the defendant corporation
(petitioner herein). Since the sheriffs return constitutes primary evidence of the
manner and incidents of personal service of a summons, the Rules are quite
specific about what such a document should contain:
SEC. 20. Proof of service. The proof of service of a summons
shall be made in writing by the server and shall set forth the
manner, place and date of service; shall specify any papers
which have been served with the process and the name of the
person who received the same; and shall be sworn to when
made by a person other than a sheriff or his deputy. 48
In the case of Delta Motor Sales Corporation vs. Mangosing 49
it was held that:"
(a) strict compliance with the mode of service is necessary to confer jurisdiction
of the court over a corporation. The officer upon whom service is made must be
one who is named in the statute; otherwise the service is insufficient. So, where
the statute requires that in the case of a domestic corporation summons should
be served on 'the president or head of the corporation, secretary, treasurer,
cashier or managing agent thereof, service of summons on the secretary's wife
did not confer jurisdiction over the corporation in the foreclosure proceeding
against it. Hence, the decree of foreclosure and the deficiency judgment were
void and should be vacated (Reader vs. District Court, 94 Pacific 2nd 858).
The purpose is to render it reasonably certain that the
corporation will receive prompt and proper notice in an action
against it or to insure that the summons be served on a
representative so integrated with the corporation that such
person will know what to do with the legal papers served on
him. In other words, 'to bring home to the corporation notice of
the filing of the action'. (35 A C.J.S. 288 citing Jenkins vs. Lykes
Bros. S.S. Co., 48 F. Supp. 848; MacCarthy vs. Langston, D.C.
Fla., 23 F.R.D. 249).
The liberal construction rule cannot be invoked and utilized as
a substitute for the plain legal requirements as to the manner
in which summons should be served on a domestic corporation

(U.S. vs. Mollenhauer Laboratories, Inc., 267 Fed. Rep. 2nd
260).'
The rule cannot be any less exacting as regards adherence to the requirements
of proof of service, it being usually by such proof that sufficiency of compliance
with the prescribed mode of service is measured. Here the only proof of service
of summons is the questioned sheriff's return which, as already pointed out, is
not only vague and unspecific as to the place of service, but also neglects to
Identify by name the recipient of the summons as required by Rule 20, Section
14, of the Rules of Court. Where the sheriffs return is defective the presumption
of regularity in the performance of official functions will not lie. 50 The defective
sheriffs return thus being insufficient and incompetent to prove that summons
was served in the manner prescribed for service upon corporations, there is no
alternative to affirming the petitioner's claim that it had not been validly
summoned in Civil Case No. Q-36485. It goes without saying that lacking such
valid service, the Trial Court did not acquire jurisdiction over the petitioner
Syjuco, rendering null and void all subsequent proceedings and issuances in the
action from the order of default up to and including the judgment by default and
the order for its execution. 51
The respondents' contention that the petition is in effect an action to annul a
judgment which is within the exclusive original jurisdiction of the Court of
Appeals 52 has already been answered in Matanguihan vs. Tengco 53 where, by
declaring that an action for annulment of judgment is not a plain, speedy and
adequate remedy, this Court in effect affirmed that certiorari is an appropriate
remedy against judgments or proceedings alleged to have been rendered or had
without valid service of summons. 54
Respondent Judge Castro begged the question when, instead of resolving on the
merits the issue of the invalidity of his default judgment and of the proceedings
leading thereto because of absence of valid service of summons on the
defendant, which had been expressly raised in the defendant's motion for
reconsideration, he simply refused to do so on the excuse that he had lost
jurisdiction over the case. This refusal was, in the premises, a grave abuse of
judicial discretion which must be rectified.
What has been said makes unnecessary any further proceedings in the Court
below, which might otherwise be indicated by the consideration that two of the
postulates of petitioner's unresolved motions which the Court considers equally
as decisive as res judicata, to wit: estoppel by silence and Article 1819, last
paragraph, of the Civil Code, do not constitute grounds for a motion to dismiss
under rule 16, of the Rules of Court. Such a step would only cause further delay.
And delay has been the bane of petitioner's cause, defying through all these
years all its efforts to collect on a just debt.
The undenied and undisputable facts make it perfectly clear that the claim to the
mortgaged property belatedly and in apparent bad faith pressed by the
17
respondent partnership is foreclosed by both law and equity. Further proceedings
will not make this any clearer than it already is. The Court is clothed with ample
authority, in such a case, to call a halt to all further proceedings and pronounce
judgment on the basis of what is already manifestly of record.
So much for the merits; the consequences that should attend the inexcusable
and indefensible conduct of the respondents Lims, the respondent partnership
and their counsel, Atty. Paterno R. Canlas, should now be addressed. That the
Lims and their partnership acted in bad faith and with intent to defraud is
manifest in the record of their actuations, presenting as they did, piecemeal and
in one case after another, defenses to the foreclosure or claims in derogation
thereof that were available to them from the very beginning actuations that
were to stave off the liquidation of an undenied debt for more than twenty years
and culminated in the clandestine filing and prosecution of the action subject of
the present petition.
What has happened here, it bears repeating, is nothing less than an abuse of
process, a trifling with the courts and with the rights of access thereto, for which
Atty. Canlas must share responsibility equally with his clients. The latter could
not have succeeded so well in obstructing the course of justice without his aid
and advice and his tireless espousal of their claims and pretensions made in the
various cases chronicled here. That the cause to which he lent his advocacy was
less than just or worthy could not have escaped him, if not at the start of his
engagement, in the years that followed when with his willing assistance, if not
instigation, it was shuttled from one forum to another after each setback. This
Court merely stated what is obvious and cannot be gainsaid when, in Surigao
Mineral Reservation Board vs. Cloribel, 55 it held that a party's lawyer of record
has control of the proceedings and that '(w)hatever steps his client takes should
be within his knowledge and responsibility."
In Prudential Bank vs. Castro, 56 strikingly similar actuations in a case, which are
described in the following paragraph taken from this Court's decision therein:
Respondents' foregoing actuations reveal an 'unholy alliance'
between them and a clear indication of partiality for the party
represented by the other to the detriment of the objective
dispensation of justice. Writs of Attachment and Execution were
issued and implemented with lightning speed; the case itself
was railroaded to a swift conclusion through a similar judgment;
astronomical sums were awarded as damages and attorney's
fees; and topping it all, the right to appeal was foreclosed by
clever maneuvers," and which, the Court found, followed a
pattern of conduct in other cases of which judicial notice was
taken, were deemed sufficient cause for disbarment.
Atty. Canlas even tried to mislead this Court by claiming that he became the
Lims' lawyer only in 1977, 57 when the record indubitably shows that he has

represented them since September 9, 1972 when he first appeared for them to
prosecute their appeal in Civil Case No. 75180. 58 He has also quite impenitently
disclaimed a duty to inform opposing counsel in Civil Case No. Q-39294 of the
existence of Civil Case No. Q-36485, as plaintiffs' counsel in both actions, even
while the former, which involved the same mortgage, was already being litigated
when the latter was filed, although in the circumstances such disclosure was
required by the ethics of his profession, if not indeed by his lawyer's oath.
A clear case also exists for awarding at least nominal damages to petitioner,
though damages are not expressly prayed for, under the general prayer of the
petition for "such other reliefs as may be just and equitable under the premises,"
and the action being not only of certiorari and prohibition, but also of mandamus-
in which the payment of "damages sustained by the petitioner by reason of the
wrongful acts of the defendant' is expressly authorized. 59
There is no question in the Court's mind that such interests as may have
accumulated on the mortgage loan will not offset the prejudice visited upon the
petitioner by the excruciatingly long delay in the satisfaction of said debt that
the private respondents have engineered and fomented.
These very same considerations dictate the imposition of exemplary damages in
accordance with Art. 2229 of the Civil Code.
WHEREFORE, so that complete justice may be dispensed here and, as far as
consistent with that end, all the matters and incidents with which these
proceedings are concerned may be brought to a swift conclusion:
(1) the assailed judgment by default in Civil Case No.Q-36485,
the writ of execution and all other orders issued in
implementation thereof, and all proceedings in the case leading
to said judgment after the filing of the complaint are DECLARED
null and void and are hereby SET ASIDE; and the complaint in
said case is DISMISSED for being barred by prior judgment and
estoppel, and for lack of merit;
(2) the City Sheriff of Manila is ORDERED, upon receipt of this
Decision, to schedule forthwith and thereafter conduct with all
due dispatch the sale at public auction of the mortgaged
property in question for the satisfaction of the mortgage debt
of the respondents Lims to petitioner, in the principal amount
of P2,460,000.00 as found in the amended decision in Civil Case
No. 75180 of the Court of First Instance of Manila, interests
thereon at the rate of twelve (12%) percent per annum from
November 8, 1967 until the date of sale, plus such other and
additional sums for commissions, expenses, fees, etc. as may
be lawfully chargeable in extrajudicial foreclosure and sale
proceedings;
18
(3) the private respondents, their successors and assigns, are
PERPETUALLY ENJOINED from taking any action whatsoever to
obstruct, delay or prevent said auction sale;
(4) the private respondents (the Lims, the Partnership of the
Heirs of Hugo Lim and Atty. Paterno R. Canlas) are sentenced,
jointly and severally, to pay the petitioner P25,000.00 as
nominal damages and P100,000.00 as exemplary damages, as
well as treble costs; and
(5) let this matter be referred to the Integrated Bar of the
Philippines for investigation, report, and recommendation
insofar as the conduct of Atty. Canlas as counsel in this case
and in the other cases hereinabove referred to is concerned.
G.R. No. L-12164 May 22, 1959
BENITO LIWANAG and MARIA LIWANAG REYES, petitioners-appellants,
vs.
WORKMEN'S COMPENSATION COMMISSION, ET AL., respondents-
appellees.
J. de Guia for appellants.
Estanislao R. Bayot for appellees.
ENDENCIA, J.:
Appellants Benito Liwanag and Maria Liwanag Reyes are co-owners of Liwanag
Auto Supply, a commercial guard who while in line of duty, was skilled by
criminal hands. His widow Ciriaca Vda. de Balderama and minor children Genara,
Carlos and Leogardo, all surnamed Balderama, in due time filed a claim for
compensation with the Workmen's Compensation Commission, which was
granted in an award worded as follows:
WHEREFORE, the order of the referee under consideration should be, as
it is hereby, affirmed and respondents Benito Liwanag and Maria
Liwanag Reyes, ordered.
1. To pay jointly and severally the amount of three thousand Four
Hundred Ninety Four and 40/100 (P3,494.40) Pesos to the claimants in
lump sum; and
To pay to the Workmen's Compensation Funds the sum of P4.00
(including P5.00 for this review) as fees, pursuant to Section 55 of the
Act.

In appealing the case to this Tribunal, appellants do not question the right of
appellees to compensation nor the amount awarded. They only claim that, under
the Workmen's Compensation Act, the compensation is divisible, hence the
commission erred in ordering appellants to pay jointly and severally the amount
awarded. They argue that there is nothing in the compensation Act which
provides that the obligation of an employer arising from compensable injury or
death of an employee should be solidary obligation, the same should have been
specifically provided, and that, in absence of such clear provision, the
responsibility of appellants should not be solidary but merely joint.
At first blush appellants' contention would seem to be well, for ordinarily, the
liability of the partners in a partnership is not solidary; but the law governing
the liability of partners is not applicable to the case at bar wherein a claim for
compensation by dependents of an employee who died in line of duty is involved.
And although the Workmen's Compensation Act does not contain any provision
expressly declaring solidary obligation of business partners like the herein
appellants, there are other provisions of law from which it could be gathered that
their liability must be solidary. Arts. 1711 and 1712 of the new Civil Code
provide:
ART. 1711. Owners of enterprises and other employers are obliged to
pay compensation for the death of or injuries to their laborers,
workmen, mechanics or other employees, even though the event may
have been purely accidental or entirely due to a fortuitous cause, if the
death or personal injury arose out of and in the course of the
employment. . . . .
ART. 1712. If the death or injury is due to the negligence of a fellow-
worker, the latter and the employer shall be solidarily liable for
compensation. . . . .
And section 2 of the Workmen's Compensation Act, as amended reads in part as
follows:
. . . The right to compensation as provided in this Act shall not be
defeated or impaired on the ground that the death, injury or disease
was due to the negligence of a fellow servant or employee, without
prejudice to the right of the employer to proceed against the negligence
party.
The provisions of the new Civil Code above quoted taken together with those of
Section 2 of the Workmen's Compensation Act, reasonably indicate that in
compensation cases, the liability of business partners, like appellants, should be
solidary; otherwise, the right of the employee may be defeated, or at least
crippled. If the responsibility of appellants were to be merely joint and solidary,
and one of them happens to be insolvent, the amount awarded to the appellees
would only be partially satisfied, which is evidently contrary to the intent and
19
purposes of the Act. In the previous cases we have already held that the
Workmen's Compensation Act should be construed fairly, reasonably and
liberally in favor of and for the benefit of the employee and his dependents; that
all doubts as to the right of compensation resolved in his favor; and that it should
be interpreted to promote its purpose. Accordingly, the present controversy
should be decided in favor of the appellees.
Moreover, Art. 1207 of the new Civil Code provides:
. . . . There is solidary liability only when the obligation expressly so
states, or when the law or the nature of the obligation
requires solidarity.
Since the Workmen's Compensation Act was enacted to give full protection to
the employee, reason demands that the nature of the obligation of the employers
to pay compensation to the heirs of their employee who died in line of duty,
should be solidary; otherwise, the purpose of the law could not be attained.
Wherefore, finding no error in the award appealed from, the same is hereby
affirmed, with costs against appellants.
G.R. No. L-29182 October 24, 1928
LEONCIA VIUDA DE CHAN DIACO (alias LAO LIONG NAW) appellee,
vs.
JOSE S. Y. PENG, assignee, appellant.
C. A. Sobral for appellant.
Amador Constantino for appellee.
OSTRAND, J.:
This is an appeal from a decision of the Court of First Instance of Manila
dismissing an insolvency proceeding.
It appears from the record that on June 13, 1925, the San Miguel Brewery, Porta
Pueco & Co., and Ruiz & Rementaria S. en C. instituted insolvency proceedings
against Leoncia Vda. de Chan Diaco (alias Lao Liong Naw), alleged to be the
owner of a grocery store on Calle Nueva, Binondo, known as the store of "La
Viuda de G. G. Chan Diaco."
In their petition for the declaration of the insolvency, the above-mentioned firms
alleged, among other things, that Leoncia was indebted to them in the sum of
 20

P26,234.47, which debt was incurred within thirty days prior to the filing of said
petition. It further appears that other creditors have filed claims against the
estate to the amount of P50,000.
The petition for the declaration of insolvency was set down for hearing on June
25, 1925. Leoncia did not appear at the hearing, notwithstanding the fact that
she was duly notified, and the court declared her insolvent and ordered the
sheriff to take possession of her property, the visible part of which at that time
consisting of some merchandise, afterwards sold at public auction for P3,300.
Judge Simplicio del Rosario, in an order dated September 12, 11925, appointed
Ricardo Summers, the clerk of the Court of First Instance of Manila, referee,
authorizing him to take further evidence in regard to the questions of fact raised
by the motions of August 5th and 19th.
After various hearings and the taking of considerable testimony, the referee, on
February 18, 1926, rendered a report to the court in which he made the following
recommendations:
That the insolvent deliver to the assignee:
(a) The sum of P56,000 more or less that the "encargado" of the
insolvent's business, Chan Chiao Wa, had delivered to her on the 18th
of April, 1925, which amount was in fact, on the 19th day of April, 1925,
about P56,102.65.
(b) The accounts receivable as of June 19, 1925, or that is to say, two
months after the insolvent took charge of her store, amounting to
P40,000.
(c) The amount taken for her own use and out of the business on June
8, 1925, to wit, P2,000.
(d) Another P2,000 that on June 5, 1925, and being already insolvent,
the widow of Chan Diaco had taken from the China Banking corporation
for her personal use.
Libros de Balances e Inventarios.
Libro mayor de 1924 y 1925.
The report was approved by Judge del Rosario on April 14, 1926, and the
merchants Cua Ico, Chan Keep, and Simon A. Chan Bona were ordered to show
cause why they should not return that alleged merchandise to the value of
P20,000, alleged to have been delivered to them by Leoncia, together with
P5,000 in cash alleged to have been received from her by the merchant Chua
Ico between the 8th and 11th days of June, 1925.
On April 22, 1926, the attorney for the insolvent filed her exception to the report
of the referee, which had already been approved on April 14, and on July 23,
1926, the court rendered a decision, reaffirming its order of April 14, and ordered
the insolvent to deliver to the assignee the sum of P56,000, more or less. alleged
to have been in her possession on April 19, 1925. The court further ordered her
to surrender the books of accounts mentioned in the referee's report together
with the accounts receivable amounting to P40,000 and the sums withdrawn by
her from her current account with the China Banking Corporation a few days
prior to the declaration of insolvency; and directed the assignee to file actions
against the merchants Cua Ico, Chan Keep, and Simon A. Chan Bona for the
return by them of the sum of P5,000 in cash, plus the merchandise valued at
P20,000 delivered to them by the insolvent in fraud of her creditors.
On August 4, 1926, attorney for the insolvent filed a motion asking the court to
dismiss the proceedings against her on the ground that they should have been
brought against the partnership "Lao Liong Naw & Co.," of which she was only a
member. The alleged partnership was evidenced by an agreement dated July 22,
1922, and from which it appeared that on that date Lao Liong Naw (Leoncia),
Chan Chiaco Wa, Cua Yuk, Chan Bun Suy, Cahn Bun Le, and Juan Maquitan Chan
had formed a partnership with a capital of P21,000, of which only P4,000 was
contributed by Leoncia.
In view of the aforesaid motion Judge Del Rosario on August 7, 1926, suspended
for the time being the effects of the decision of July 23, 1926, and set the motion
down for hearing on the 14th of August, 1926. His Honor again appointed
Summers as referee.

(e) The following account books: 1awph!l.net After several hearings in which various witnesses were examined and documents
presented on behalf of both sides, the referee, on February 28, 1927, rendered
a second report, in which he found as facts that the alleged partnership between
Libros de Acreedores Extranjeros.
the insolvent and some of her relatives and employees was only a fictitious
Libros de Acreedores Chinos.
organization created for the purpose of deceiving the Bureau of Customs and
Libros de Deudores de Manila.
enable some of the aforesaid relatives, who were mere coolies, to come to the
Libros de Deudores de Provincias.
Philippines under the status of merchants. He, therefore, recommended that the
Libros de Entrada y salida de efectos y mercancias para Manila
motion of the insolvent to dismiss the proceedings against her be denied.
y Provincias. Libro Diario de Caja.
Libro de Sueldos de Empleados.

The report was assigned for hearing on May 21, 1927. Judge Del Rosario was
then absent on leave and the matter was, therefore, submitted to Judge
Francisco Zandueta, who had been temporarily assigned to take the place of
Judge Del Rosario, and on June 6, 1927, a decision was rendered disapproving
the report of the referee. The court, therefore, affirmed the suspension of the
decision of Judge Del Rosario, and on June 23, 1926, dismissed the insolvency
proceedings, and ordered the assignee to return to the sheriff all the property of
the insolvent which he, the sheriff, might have in his possession. The decision
further provided for leave to the petitioners to file a new petition in insolvency
against the partnership Lao Liong Naw & Co. if they so desired. A motion for
reconsideration was presented by the assignee but was denied by the court in
an order of July 1, 1927. the assignee, thereupon, appealed to this court and
presents the following assignments of error:
1. The lower court erred in disapproving the report of the referee dated
February 28, 1927.
2. The lower court erred in dismissing the petition for the involuntary
insolvency of the merchant Leoncia Vda. de Chan Diaco (alias Lao Liong
Naw or Niew).
3. The lower court erred in ordering the filing of a new petition of
insolvency against the fictitious partnership Lao Liong Niew & Co. and
the delivery to the sheriff of all the property of the insolvency.
In our opinion, all of the assignments of error are well taken. The evidence
appearing in the record fully supports the findings of the referee and his report
should have been approved by the court below.
As to the second and third assignments of error it is to be observed that
conceding for the sake of the argument that the debts in question were incurred
by the alleged partnership, it clearly appears from the record that said
partnership, as such, has no visible assets that, therefore, the partners
individually must, jointly and severally, respond for its debts (Code of
Commerce, art. 127). As the appellee is one of the partners and admits that she
is insolvent, we can see no reason for the dismissal of the proceedings against
her. It is further to be noted that both the partnership and the separate partners
thereof may be joined in the same action, though the private property of the
latter cannot be taken in payment of the partnership debts until the common
property of the concern is exhausted (Comapnia Maritima vs. Munoz, 9 Phil.,
326) and, under this rule, it seems clear that the alleged partnership here in
question may, if necessary, be included in the case by amendments to the
insolvency petition.
We also call attention to the fact that the evidence clearly shows that the
business, alleged to have been that of the partnership, was carried on under the
name "Leoncia Vda. de Chan Diaco" or "La Vda. de G. G. Chan Diaco," both of
21
which are names of the appellee, and we think it can be safely held that a
partnership may be adjudged bankrupt in the name of an ostensible partner,
when such name is the name under which the partnership did business.
The decision appealed from is hereby reversed, the reports and
recommendations of the referee are approved, the order for the dismissal of the
case is set aside, and the decision of Judge Simplicio Del Rosario dated July 23,
1926, will remain in full force and effect. No costs will be allowed. So ordered.
July 30, 1979
PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME
"SYCIP, SALAZAR, FELICIANO, HERNANDEZ & CASTILLO." LUCIANO E.
SALAZAR, FLORENTINO P. FELICIANO, BENILDO G. HERNANDEZ.
GREGORIO R. CASTILLO. ALBERTO P. SAN JUAN, JUAN C. REYES. JR.,
ANDRES G. GATMAITAN, JUSTINO H. CACANINDIN, NOEL A. LAMAN,
ETHELWOLDO E. FERNANDEZ, ANGELITO C. IMPERIO, EDUARDO R.
CENIZA, TRISTAN A. CATINDIG, ANCHETA K. TAN, and ALICE V.
PESIGAN, petitioners.
IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE
OF THE FIRM NAME "OZAETA, ROMULO, DE LEON, MABANTA & REYES."
RICARDO J. ROMULO, BENJAMIN M. DE LEON, ROMAN MABANTA, JR.,
JOSE MA, REYES, JESUS S. J. SAYOC, EDUARDO DE LOS ANGELES, and
JOSE F. BUENAVENTURA, petitioners.
RESOLUTION
MELENCIO-HERRERA, J.:+.wph!1
Two separate Petitions were filed before this Court 1) by the surviving partners
of Atty. Alexander Sycip, who died on May 5, 1975, and 2) by the surviving
partners of Atty. Herminio Ozaeta, who died on February 14, 1976, praying that
they be allowed to continue using, in the names of their firms, the names of
partners who had passed away. In the Court's Resolution of September 2, 1976,
both Petitions were ordered consolidated.
Petitioners base their petitions on the following arguments:
1. Under the law, a partnership is not prohibited from continuing its business
under a firm name which includes the name of a deceased partner; in fact, Article
1840 of the Civil Code explicitly sanctions the practice when it provides in the
last paragraph that: t.hqw

The use by the person or partnership continuing the business
of the partnership name, or the name of a deceased partner as
part thereof, shall not of itself make the individual property of
the deceased partner liable for any debts contracted by such
person or partnership. 1
2. In regulating other professions, such as accountancy and engineering, the
legislature has authorized the adoption of firm names without any restriction as
to the use, in such firm name, of the name of a deceased partner; 2 the
legislative authorization given to those engaged in the practice of accountancy
a profession requiring the same degree of trust and confidence in respect of
clients as that implicit in the relationship of attorney and client to acquire and
use a trade name, strongly indicates that there is no fundamental policy that is
offended by the continued use by a firm of professionals of a firm name which
includes the name of a deceased partner, at least where such firm name has
acquired the characteristics of a "trade name." 3
3. The Canons of Professional Ethics are not transgressed by the continued use
of the name of a deceased partner in the firm name of a law partnership because
Canon 33 of the Canons of Professional Ethics adopted by the American Bar
Association declares that: t.hqw
... The continued use of the name of a deceased or former
partner when permissible by local custom, is not unethical but
care should be taken that no imposition or deception is
practiced through this use. ... 4
4. There is no possibility of imposition or deception because the deaths of their
respective deceased partners were well-publicized in all newspapers of general
circulation for several days; the stationeries now being used by them carry new
letterheads indicating the years when their respective deceased partners were
connected with the firm; petitioners will notify all leading national and
international law directories of the fact of their respective deceased partners'
deaths. 5
5. No local custom prohibits the continued use of a deceased partner's name in
a professional firm's name; 6 there is no custom or usage in the Philippines, or
at least in the Greater Manila Area, which recognizes that the name of a law firm
necessarily Identifies the individual members of the firm. 7
6. The continued use of a deceased partner's name in the firm name of law
partnerships has been consistently allowed by U.S. Courts and is an accepted
practice in the legal profession of most countries in the world. 8
The question involved in these Petitions first came under consideration by this
Court in 1953 when a law firm in Cebu (the Deen case) continued its practice of
including in its firm name that of a deceased partner, C.D. Johnston. The matter
22
was resolved with this Court advising the firm to desist from including in their
firm designation the name of C. D. Johnston, who has long been dead."
The same issue was raised before this Court in 1958 as an incident in G. R. No.
L-11964, entitled Register of Deeds of Manila vs. China Banking Corporation.
The law firm of Perkins & Ponce Enrile moved to intervene as amicus
curiae. Before acting thereon, the Court, in a Resolution of April 15, 1957, stated
that it "would like to be informed why the name of Perkins is still being used
although Atty. E. A. Perkins is already dead." In a Manifestation dated May 21,
1957, the law firm of Perkins and Ponce Enrile, raising substantially the same
arguments as those now being raised by petitioners, prayed that the continued
use of the firm name "Perkins & Ponce Enrile" be held proper.
On June 16, 1958, this Court resolved: t.hqw
After carefully considering the reasons given by Attorneys
Alfonso Ponce Enrile and Associates for their continued use of
the name of the deceased E. G. Perkins, the Court found no
reason to depart from the policy it adopted in June 1953 when
it required Attorneys Alfred P. Deen and Eddy A. Deen of Cebu
City to desist from including in their firm designation, the name
of C. D. Johnston, deceased. The Court believes that, in view of
the personal and confidential nature of the relations between
attorney and client, and the high standards demanded in the
canons of professional ethics, no practice should be allowed
which even in a remote degree could give rise to the possibility
of deception. Said attorneys are accordingly advised to drop the
name "PERKINS" from their firm name.
Petitioners herein now seek a re-examination of the policy thus far enunciated
by the Court.
The Court finds no sufficient reason to depart from the rulings thus laid down.
A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta,
Romulo, De Leon, Mabanta and Reyes" are partnerships, the use in their
partnership names of the names of deceased partners will run counter to Article
1815 of the Civil Code which provides: t.hqw
Art. 1815. Every partnership shall operate under a firm name,
which may or may not include the name of one or more of the
partners.
Those who, not being members of the partnership, include their
names in the firm name, shall be subject to the liability, of a
partner.

It is clearly tacit in the above provision that names in a firm name of a
partnership must either be those of living partners and. in the case of non-
partners, should be living persons who can be subjected to liability. In fact,
Article 1825 of the Civil Code prohibits a third person from including his name in
the firm name under pain of assuming the liability of a partner. The heirs of a
deceased partner in a law firm cannot be held liable as the old members to the
creditors of a firm particularly where they are non-lawyers. Thus, Canon 34 of
the Canons of Professional Ethics "prohibits an agreement for the payment to
the widow and heirs of a deceased lawyer of a percentage, either gross or net,
of the fees received from the future business of the deceased lawyer's clients,
both because the recipients of such division are not lawyers and because such
payments will not represent service or responsibility on the part of the recipient.
" Accordingly, neither the widow nor the heirs can be held liable for transactions
entered into after the death of their lawyer-predecessor. There being no benefits
accruing, there ran be no corresponding liability.
Prescinding the law, there could be practical objections to allowing the use by
law firms of the names of deceased partners. The public relations value of the
use of an old firm name can tend to create undue advantages and disadvantages
in the practice of the profession. An able lawyer without connections will have to
make a name for himself starting from scratch. Another able lawyer, who can
join an old firm, can initially ride on that old firm's reputation established by
deceased partners.
B. In regards to the last paragraph of Article 1840 of the Civil Code cited by
petitioners, supra, the first factor to consider is that it is within Chapter 3 of Title
IX of the Code entitled "Dissolution and Winding Up." The Article primarily deals
with the exemption from liability in cases of a dissolved partnership, of the
individual property of the deceased partner for debts contracted by the person
or partnership which continues the business using the partnership name or the
name of the deceased partner as part thereof. What the law contemplates
therein is a hold-over situation preparatory to formal reorganization.
Secondly, Article 1840 treats more of a commercial partnership with a good will
to protect rather than of a professional partnership, with no saleable good will
but whose reputation depends on the personal qualifications of its individual
members. Thus, it has been held that a saleable goodwill can exist only in a
commercial partnership and cannot arise in a professional partnership consisting
of lawyers. 9t.hqw
As a general rule, upon the dissolution of a commercial
partnership the succeeding partners or parties have the right to
carry on the business under the old name, in the absence of a
stipulation forbidding it, (s)ince the name of a commercial
partnership is a partnership asset inseparable from the good
will of the firm. ... (60 Am Jur 2d, s 204, p. 115) (Emphasis
supplied)
23
On the other hand, t.hqw
... a professional partnership the reputation of which depends
or; the individual skill of the members, such as partnerships of
attorneys or physicians, has no good win to be distributed as a
firm asset on its dissolution, however intrinsically valuable such
skill and reputation may be, especially where there is no
provision in the partnership agreement relating to good will as
an asset. ... (ibid, s 203, p. 115) (Emphasis supplied)
C. A partnership for the practice of law cannot be likened to partnerships formed
by other professionals or for business. For one thing, the law on accountancy
specifically allows the use of a trade name in connection with the practice of
accountancy. 10 t.hqw
A partnership for the practice of law is not a legal entity. It is a
mere relationship or association for a particular purpose. ... It
is not a partnership formed for the purpose of carrying on trade
or business or of holding property." 11 Thus, it has been stated
that "the use of a nom de plume, assumed or trade name in law
practice is improper. 12
The usual reason given for different standards of conduct being
applicable to the practice of law from those pertaining to
business is that the law is a profession.
Dean Pound, in his recently published contribution to the
Survey of the Legal Profession, (The Lawyer from Antiquity to
Modern Times, p. 5) defines a profession as "a group of men
pursuing a learned art as a common calling in the spirit of public
service, no less a public service because it may incidentally
be a means of livelihood."
xxx xxx xxx
Primary characteristics which distinguish the legal profession
from business are:
1. A duty of public service, of which the emolument is a
byproduct, and in which one may attain the highest eminence
without making much money.
2. A relation as an "officer of court" to the administration of
justice involving thorough sincerity, integrity, and reliability.
3. A relation to clients in the highest degree fiduciary.

4. A relation to colleagues at the bar characterized by candor,
fairness, and unwillingness to resort to current business
methods of advertising and encroachment on their practice, or
dealing directly with their clients. 13
"The right to practice law is not a natural or constitutional right but is in the
nature of a privilege or franchise. 14 It is limited to persons of good moral
character with special qualifications duly ascertained and certified. 15 The right
does not only presuppose in its possessor integrity, legal standing and
attainment, but also the exercise of a special privilege, highly personal and
partaking of the nature of a public trust." 16
D. Petitioners cited Canon 33 of the Canons of Professional Ethics of the
American Bar Association" in support of their petitions.
It is true that Canon 33 does not consider as unethical the continued use of the
name of a deceased or former partner in the firm name of a law partnership
when such a practice is permissible by local custom but the Canon warns that
care should be taken that no imposition or deception is practiced through this
use.
It must be conceded that in the Philippines, no local custom permits or allows the
continued use of a deceased or former partner's name in the firm names of law
partnerships. Firm names, under our custom, Identify the more active and/or
more senior members or partners of the law firm. A glimpse at the history of the
firms of petitioners and of other law firms in this country would show how their
firm names have evolved and changed from time to time as the composition of
the partnership changed. t.hqw
The continued use of a firm name after the death of one or more
of the partners designated by it is proper only where sustained
by local custom and not where by custom this purports to
Identify the active members. ...
There would seem to be a question, under the working of the
Canon, as to the propriety of adding the name of a new partner
and at the same time retaining that of a deceased partner who
was never a partner with the new one. (H.S. Drinker, op.
cit., supra, at pp. 207208) (Emphasis supplied).
The possibility of deception upon the public, real or consequential, where the
name of a deceased partner continues to be used cannot be ruled out. A person
in search of legal counsel might be guided by the familiar ring of a distinguished
name appearing in a firm title.
24
E. Petitioners argue that U.S. Courts have consistently allowed the continued use
of a deceased partner's name in the firm name of law partnerships. But that is
so because it is sanctioned by custom.
In the case of Mendelsohn v. Equitable Life Assurance Society (33 N.Y.S. 2d 733)
which petitioners Salazar, et al. quoted in their memorandum, the New York
Supreme Court sustained the use of the firm name Alexander & Green even if
none of the present ten partners of the firm bears either name because the
practice was sanctioned by custom and did not offend any statutory provision or
legislative policy and was adopted by agreement of the parties. The Court stated
therein: t.hqw
The practice sought to be proscribed has the sanction of
custom and offends no statutory provision or legislative policy.
Canon 33 of the Canons of Professional Ethics of both the
American Bar Association and the New York State Bar
Association provides in part as follows: "The continued use of
the name of a deceased or former partner, when permissible by
local custom is not unethical, but care should be taken that no
imposition or deception is practiced through this use." There is
no question as to local custom. Many firms in the city use the
names of deceased members with the approval of other
attorneys, bar associations and the courts. The Appellate
Division of the First Department has considered the matter and
reached The conclusion that such practice should not be
prohibited. (Emphasis supplied)
xxx xxx xxx
Neither the Partnership Law nor the Penal Law prohibits the
practice in question. The use of the firm name herein is also
sustainable by reason of agreement between the partners. 18
Not so in this jurisdiction where there is no local custom that sanctions the
practice. Custom has been defined as a rule of conduct formed by repetition of
acts, uniformly observed (practiced) as a social rule, legally binding and
obligatory. 19 Courts take no judicial notice of custom. A custom must be proved
as a fact, according to the rules of evidence. 20 A local custom as a source of
right cannot be considered by a court of justice unless such custom is properly
established by competent evidence like any other fact. 21 We find such proof of
the existence of a local custom, and of the elements requisite to constitute the
same, wanting herein. Merely because something is done as a matter of practice
does not mean that Courts can rely on the same for purposes of adjudication as
a juridical custom. Juridical custom must be differentiated from social custom.
The former can supplement statutory law or be applied in the absence of such
statute. Not so with the latter.

Moreover, judicial decisions applying or interpreting the laws form part of the
legal system. 22 When the Supreme Court in the Deen and Perkins cases issued
its Resolutions directing lawyers to desist from including the names of deceased
partners in their firm designation, it laid down a legal rule against which no
custom or practice to the contrary, even if proven, can prevail. This is not to
speak of our civil law which clearly ordains that a partnership is dissolved by the
death of any partner. 23 Custom which are contrary to law, public order or public
policy shall not be countenanced. 24
The practice of law is intimately and peculiarly related to the administration of
justice and should not be considered like an ordinary "money-making
trade." t.hqw
... It is of the essence of a profession that it is practiced in a
spirit of public service. A trade ... aims primarily at personal
gain; a profession at the exercise of powers beneficial to
mankind. If, as in the era of wide free opportunity, we think of
free competitive self assertion as the highest good, lawyer and
grocer and farmer may seem to be freely competing with their
fellows in their calling in order each to acquire as much of the
world's good as he may within the allowed him by law. But the
member of a profession does not regard himself as in
competition with his professional brethren. He is not bartering
his services as is the artisan nor exchanging the products of his
skill and learning as the farmer sells wheat or corn. There
should be no such thing as a lawyers' or physicians' strike. The
best service of the professional man is often rendered for no
equivalent or for a trifling equivalent and it is his pride to do
what he does in a way worthy of his profession even if done
with no expectation of reward, This spirit of public service in
which the profession of law is and ought to be exercised is a
prerequisite of sound administration of justice according to law.
The other two elements of a profession, namely, organization
and pursuit of a learned art have their justification in that they
secure and maintain that spirit. 25
In fine, petitioners' desire to preserve the Identity of their firms in the eyes of
the public must bow to legal and ethical impediment.
ACCORDINGLY, the petitions filed herein are denied and petitioners advised to
drop the names "SYCIP" and "OZAETA" from their respective firm names. Those
names may, however, be included in the listing of individuals who have been
partners in their firms indicating the years during which they served as such.
SO ORDERED.
G.R. No. L-20735 August 14, 1965
25
GLICERIA C. LIWANAG, Special Administratrix of the Estate of PIO D.
LIWANAG, petitioner,
vs.
HON. COURT OF APPEALS, HON. JESUS DE VEYRA, as Judge of the Court
of First Instance of Manila, and MANUEL AGREGADO, respondents.
C. M. Baltazar and A. P. Narvasa for petitioner.
Manuel P. Calanog for respondents.
CONCEPCION, J.:
Appeal by certiorari from a decision of the Court of Appeals.
Petitioner Gliceria C. Liwanag is the special administratrix of the estate of Pio D.
Liwanag, the settlement of which is the subject of Special Proceeding No. 46599
of the Court of First Instance of Manila. On January 9, 1962 respondent Manuel
Agregado commenced against her as such special administratrix, Civil Case No.
50897 of the same court, for the foreclosure of a real estate mortgage
constituted in his favor by said Pio D. Liwanag during his lifetime. On July 18,
1962, here petitioner moved to dismiss Agregado's complaint, upon the ground
that as special administratrix she cannot be sued by a creditor of the deceased.
In an order dated August 1, 1962, respondent, Hon. Jesus de Veyra, as Judge
of said court, denied the motion, whereupon petitioner filed case CA-G.R. No.
31168-R of the Court of Appeals against respondent Judge and Agregado, to
annul said order by writ of certiorariand enjoin said Judge from entertaining said
Case No. 50897. Upon petitioner's motion, the Court of Appeals issued a writ of
preliminary injunction directing respondent Judge to refrain from proceeding
with the trial of that case, until further orders. However, subsequently, or on
December 3, 1962, the Court of Appeals rendered a decision denying the writ
prayed for and dissolving said writ of preliminary injunction, with costs against
the petitioner. Hence this appeal taken by petitioner upon the theory that,
pursuant to Section 2, Rule 81 of the (old) Rules of Court, "a special
administrator shall not be liable to pay any debts of the deceased," and that,
accordingly, Agregado has no cause of action against her as a special
administratrix.
In as much, however, as the alleged absence of a cause of action does not affect
respondent's jurisdiction to hear Case No. 50897, it follows that the denial of
petitioner's motion to the same, even if it were erroneous, is reviewable, not by
writ of certiorari, but by appeal, after the rendition of judgment on the merits.
Moreover, the theory that a mortgagee cannot bring an action for foreclosure
against the special administrator of the estate of a deceased person has already
been rejected by this Court. In Liwanag vs. Hon. Luis B. Reyes, G.R. No. L-19159
(September 29, 1964), involving the same petitioner herein, the same estate of
the deceased Pio D. Liwanag, a similar action for foreclosure, although of another
mortgage and an identical motion to dismiss and issue, we expressed ourselves
as follows:
 26

The defendant Gliceria Liwanag filed a motion to dismiss the complaint

for foreclosure, on the theory that she may not be sued as special
administratrix.

xxx xxx xxx

Section 7 of Rule 86 of the New Rules of Court provides that a creditor

holding a claim against the deceased, secured by a mortgage or other
collateral security, may pursue any of these remedies: (1) abandon his
security and prosecute his claim and share in the general distribution of
the assets of the estate; (2) foreclose his mortgage or realize upon his
security by an action in court, making the executor or administrator a
party defendant, and if there is a deficiency after the sale of the
mortgaged property, he may prove the same in the testate or intestate
proceedings; and (3) rely exclusively upon his mortgage and foreclose
it any time within the ordinary period of limitations, and if he relies
exclusively upon the mortgage, he shall not...share in the distribution
of the assets.

Obviously, the herein respondent has chosen the second remedy, having
filed his action for foreclosure against the administratrix of the property.

Now the question arises as to whether the petitioner herein can be sued
as special administratrix. The Rules of Court do not expressly prohibit
making the special administratrix a defendant in a suit against the
estate. Otherwise, creditors would find the adverse effects of the statute
of limitations running against them in cases where the appointment of
a regular administrator is delayed. So that if We are not to deny the
present action on this technical ground alone, and the appointment of a
regular administrator will be delayed, the very purpose for which the
mortgage was constituted will be defeated.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against
the petitioner. It is so ordered.