1. CORTES VS. OLIVA appears to have been used for that purpose ever since.
appears to have been used for that purpose ever since. The smaller machine, the one owned in
2. DIAZ VS. GORRICHO AND AGUADO
3. GERONIMO AND ISIDRO VS. NAVA AND AQUINO
4. ALZONA VS. CAPUNITAN
5. YU vs. NLRC
6. US v. EUSEBIO CLARIN
7. ROJAS vs. MAGLANA
8. CAMPOS RUEDA & CO V PACIFIC COMMERCIAL
9. CIR vs. SUTER
10. SMITH, BELL & COMPANY (LTD.), v JOAQUIN NATIVIDAD
11. BACHE &CO. INC. vs. RUIZ
12. BATAAN SHIPYARD AND ENGINEERING CORPORATION VS. PCGG
______________________________________
[G.R. No. 10104. February 10, 1916. ]
ROMANA CORTES ET AL., Plaintiffs-Appellants, v. FLORENCIO G. OLIVA, Defendant-
Appellee.
Leodegario Azarraga for Appellants.
Jose Agoncillo for Appellee.
SYLLABUS
1. LIMITATION OF ACTIONS; RECOVERY OF POSSESSION OF SUGAR MILL. In an action
for the recovery of possession of a sugar mill wherein it appeared that the defendant had been in
possession for more than four years under a claim of ownership, Held: That the action had
prescribed at the date of its institution under the provisions of section 43 of Act No. 190.
2. ID.; ID.; ADVERSE POSSESSION BY COTENANT. Ordinarily possession by one joint owner
will not be presumed to be adverse to the others, but will, as a rule, be held to be for the benefit
of all. Much stronger evidence is required to show an adverse holding by one of several joint
owners than by a stranger; and in such cases, to sustain a plea of prescription, it must always
clearly appear that one who was originally a joint a joint owner has repudiated the claims of his
coowners, and that his coowners were apprised or should have been apprised of his claim of
adverse and exclusive ownership before the alleged prescriptive period began to run.
CARSON, J. :
This is an action for the recovery of personal property and for damages incident to its alleged
unlawful conversion.
The plaintiffs are the heirs of one Pio Oliva, deceased, who during his lifetime was the owner of
a large machine used for grinding sugar cane; he was also the joint owner with his brother,
Florencio Oliva, the defendant herein, of another smaller machine used for the same purpose.
Throughout the record the machine owned outright by Pio Oliva is referred to as the large
machine or mill (trapiche grande) while the other is referred to as the small or partnership
machine.
In 1896 the defendant was the manager of an hacienda in Nasugbu, Batangas, and Pio Oliva
was a tenant on the hacienda. The two machines in question were installed and in use on the
hacienda at the time of the breaking out of the revolution against Spain. Owing to the unsettled
conditions incident to the two machines in question and various other agricultural implements.
Pio Oliva died in 1898 in the pueblo of Calawang, Laguna, P.I., leaving as his heirs the plaintiffs
herein. The defendant, Florentino Oliva, returned to Nasugbu in 1899. In 1901 he took
possession of the two machines in question. He found them in an abandoned condition and
badly in need of repairs. On the large machine he expended approximately P163 and a less
amount on the smaller machine, and he kept both machines under shelter until work was
received on the hacienda. In 1906 the large machine was again used for grinding cane and it
partnership, had never been used since 1896, and unsuccessful efforts have been made to sell
it. The record is very unsatisfactory and inconclusive as to the value of the two machines. One of
the plaintiffs testified that the large machine was worth P1,200, while the defendant put its value
at P400. There is no direct evidence in the record as to what the value of the smaller machine is,
but it is very clear that its market value must be small indeed.
The plaintiffs contend that the defendant unlawfully took possession of these machines in the
year 1906 without their knowledge or consent; that from that date until the year 1912 he had
ground cane in the large machine to the value of P42,000, and that they, as the heirs of the true
owner of the machine, are entitled to P14,000 for the use of this machine, that being one third
the estimated value of the output; that the profits which would have accrued to them from the
use of the small machine during that period amounts to P3,500; that they are entitled to a
judgment for the recovery of the machines or their value; and further to a judgment for the sum
of P17,500 for the profits which should have accrued to them for the use of these machines from
the year 1906 to the year 1912.
The defendant contends that he took possession of the machines in 1901, and has held them in
his possession since that date under a claim of ownership; that took possession because his
brother, Pio Oliva, was indebted to him at the time of his death, and in view of conditions existing
at that time, 1901, he took this mode of indemnifying himself against loss of the amount of the
indebtedness which exceeded the value of both machines at the time when he took possession.
This action was instituted on the 6th day of June, 1913, and the trial judge was of opinion that it
had prescribed under the provisions of section 43 of the new Code of Civil Procedure (Act No.
190), the evidence of record disclosing that the defendant had been in possession of both mills
under a claim of ownership for a period of more than four years prior to the date of the institution
of the action.
As to the larger machine, we are of opinion that the ruling of the trial judge was unquestionably
correct. We find nothing in the record which would justify us in disturbing the findings of fact by
the trial judge and there can be no doubt that accepting his finding of facts as correct, the
plaintiffs action for possession had prescribed long before the action was instituted (sec. 43, Act
No. 190).
The plaintiffs contend that the defendant did not take and keep possession of this machine
under a claim of ownership; and that in truth and in fact he originally took possession of this
machine in the year 1906, and that since that time he has kept possession merely as security for
his claim of indebtedness against their father. In support of their contentions, they rely on certain
statements made by the defendant in a letter written to one of the plaintiffs. This letter appears to
have been written partly with a view to secure some compromise of the threatened litigation over
the machines, and partly by way of justification and defense of the defendants conduct in taking
possession of the machines after his brothers death. In the course of the letter he insists that
the plaintiffs were not wronged by his action in taking possession, because, as he indicates, their
claim of ownership in the machine and of profits from its operation is fully met by his claim of
indebtedness and of interest on the debt. Plaintiffs insist that this statement demonstrates that
the defendant was not asserting a right of ownership in the machine at the time when that letter
was written, but only the right to payment of the amount of the alleged indebtedness with
interest.
Without stopping to consider the question of the admissibility in evidence of the contents of his
letter, which seems to have been written with some view to a compromise of threatened
litigation, we hold that, read in connection with all the evidence of record, it falls far short of
sustaining the contentions of the plaintiffs. We agree with the trial judge, who carefully reviewed
the letter together with all the rest of the evidence, and held that the letter, as a whole, clearly
discloses that defendant regarded himself as the lawful owner of the machine at the time when
the letter was written; and that the references to the principal and interest of the debt for which it
was taken were made by the defendant merely for the sake of showing that he had not wronged
his brothers heirs by taking the machines for the debt.
With reference to the smaller machine, which was originally owned jointly by the defendant and
his brother by the plaintiffs is not satisfactorily established.
This machine having been originally the joint property of the defendant and his brother, the fact
that he held it in his possession for a long period of years, and exercised acts of ownership with
reference to it does not afford a sufficient ground for the inference that he had possession under
a claim of exclusive ownership, and adverse to the claims of his brothers estate. Ordinarily
possession by one joint owner will not be presumed to be adverse to the others, but stronger
evidence is required to show an adverse holding by one of several joint owners than by a
stranger; and in such cases, to sustain a plea of prescription, it must always clearly appear that
one who was originally a joint owner has repudiated the claims of his coowners, that his
coowners were apprised or should have been apprised of his claim of adverse and exclusive
ownership before the alleged prescriptive period began to run. We do not think that the evidence
or record is sufficient to sustain a finding to that effect with reference to the small machine.
On their own allegations, however, plaintiffs cannot maintain an action for possession of this
machine against the defendant, who was originally a joint owner with his brother, their
predecessor in interest. Doubtless they have a right to have the machine sold and to a partition
of the proceeds of the sale, and an accounting for profits while in the exclusive possession of the
defendant; and liberally construed, the allegations of their complaint would seem to be sufficient,
if supported by competent evidence, to entitle them to a judgment for such profits.
But there is no direct evidence in the record as to profits gained by the defendants from the use
of this machine, though there are indications in the record that in fact he made no such profits,
and that the machine, which was practically worthless, has lain idle ever since it came into his
possession.
The judgment entered in the court below dismissing the complaint at the costs of the plaintiffs
should be affirmed with the costs of this instance against the appellants, without prejudice,
nevertheless, to the right of the plaintiffs to bring another action asserting any right they may
have in the small machine, originally owned jointly by the defendant and his brother, their
predecessor in interest, or in profits arising from the use of this machine since the date of the
institution of this action. So ordered.
Arellano, C.J., Torres, Johnson, Moreland and Trent, JJ., concur.
DIAZ VS. GORRICHO AND AGUADO
G.R. L-11229
March 29, 1958
FACTS: 2 lots originally belonged to the conjugal partnership of Francisco Diaz and Maria Sevilla,
the OCTs under their name. Francisco died and was survived by wife and 3 children.
Appellee Gorricho filed an action against Maria in the CFI of Manila, and a writ of attachment was
issued upon the shares of Maria in said lots. Thereafter, said parcels were sold at public auction
and purchased by Gorricho. Maria failed to redeem within one year, whereupon the acting
provincial sheriff executed a final deed of sale in favor of Gorricho. In said final deed, however,
the sheriff conveyed to Gorricbo the whole of the 2 parcels instead of only the half-interest of Maria
therein. Pursuant to said deed, Gorricho obtained a TCT in her name and has been possessing
said land is as owner ever since.
Then, Maria died. Her 3 children filed the action in CFI of Nueva Ecija against Gorricho and her
husband Aguado to compel them to execute in their favor a deed of reconveyance over an
undivided one-half interest over the lots in question (the share therein of their deceased father
illegally conveyed by the provincial sheriff to Gorricho), which defendants were allegedly holding
in trust for them. Defendants answered denying the allegations of the complaint and alleging, as
a special defense, that plaintiffs action has long prescribed.
After trial, the court below rendered judgment, holding that while a constructive trust in plaintiffs
favor arose when defendant Gorricho took advantage of the error of the provincial sheriff in
conveying to her the whole of the parcels in question and obtained title in herself, the action of
plaintiffs was, however, barred by laches and prescription. From this judgment, plaintiffs appealed.
The principal contention of appellants is that their fathers half of the disputed property was
acquired by Gorricho through an error of the provincial sheriff; that having been acquired through
error, it was subject to an implied trust, as provided by Article 1456 of the new Civil Code; and
therefore, since the trust is continuing and subsisting, the appellants may compel reconveyance
of the property despite the lapse of time, specially, because prescription does not run against titles
registered under Act 496
ISSUE: WON laches constitutes a bar to actions to enforce a constructive trust
HELD: The judgment appealed from is affirmed
YES
Article 1456 of the new Civil Code, while not retroactive in character, merely expresses a rule
already recognized by our courts prior to the Codes promulgation. Appellants are, however, in
error in believing that like express trusts, such constructive trusts may not be barred by lapse of
time. The American law on trusts has always maintained a distinction between express trusts
created by intention of the parties, and the implied or constructive trusts that are exclusively
created by law, the latter not being trusts in their technical sense.
The express trusts disable the trustee from acquiring for his own benefit the property committed
to his management or custody, at least while he does not openly repudiate the trust, and makes
such repudiation known to the beneficiary or cestui que trust. For this reason, the old Code of Civil
Procedure declared that the rules on adverse possession do not apply to continuing and
subsisting (i.e., unrepudiated) trusts.
In constructive trusts, as pointed out by the court below, the rule is that laches constitutes a bar to
actions to enforce the trust, and repudiation is not required, unless there is concealment of the
facts giving rise to the trust
The reason for the difference in treatment is obvious. In express trusts, the delay of the beneficiary
is directly attributable to the trustee who undertakes to hold the property for the former, or who
linked to the beneficiary by confidential or fiduciary relations. The trustees possession is,
therefore, not adverse to the beneficiary, until and unless the latter is made aware that the trust
has been repudiated. But in constructive trusts (that are imposed by law), there is neither promise
nor fiduciary relation; the so-called trustee does not recognize any trust and has no intent to hold
for the beneficiary; therefore, the latter is not justified in delaying action to recover his property. It
is his fault if he delays; hence, he may be estopped by his own laches.
Of course the equitable doctrine of estoppel by laches requires that the one invoking it must show,
not only the unjustified inaction, but that some unfair injury would result to him unless the action
is held barred. This requirement the appellees have not met, and they are thereby bereft of the
protection of this rule.
We are of the opinion that the judgment of dismissal should be upheld, because the appellants
cause of action to attack the sheriffs deed and cancel the TCTs issued to the appellees accrued
from the year of issuance and recording, 1937, and appellants have, allowed fifteen (15) years to
elapse before taking remedial action, notwithstanding the appellees public assertion of title during
this entire period, to extinguish appellants action. Under the old Code of Civil Procedure, in force
at the time, the longest period extinctive prescription was only ten years.
Geronimo and Isidro vs. Nava and Aquino, 105 Phil. 145 [1959]
Vendee a retro, though the title to the property was still in his name, recognized the right to
repurchase of vendor a retro by allowing the latter to exercise acts of ownership over the property.
FACTS::
The trial court declared in a decision that JOSE NAVA and WIFE FELISA AQUINO had the right
to re-deem four (4) lots with a house of strong materials, and ordered AGATONA GERONIMO
and HUSBAND INOCENCIO ISIDORO to make the resale of the property in favor of JOSE NAVA
and WIFE FELISA AQUINO . After the decision had become nal and executory, AGATONA
GERONIMO and HUSBAND INOCENCIO ISIDORO suggested that the tenants of the house pay
his rentals to S instead of to him. Not only this but when the tenants left the house, JOSE NAVA
and WIFE FELISA AQUINO took posses-sion of, and exercised acts of, ownership over the house
and AGATONA GERONIMO and HUSBAND INOCENCIO ISIDORO all along showed conformity
thereto.
The following facts are not disputed. On October 19, 1935, Jose Nava and his wife, Felisa Aquino,
were owners of our lots, Nos. 2820, 2821, 2819 and 1729 of the Cabanatuan Cadastre, forming a
single mass, with a total area of 3,549 square meters, with a house of strong materials erected
thereon, with a total assessed value of P8,820.00. On that date, they mortgaged said four lots to
La Urbana, presumably a building and loan association, to secure the payment of a loan of
P3,047.76. For failure to live up to the terms of the mortgage, the latter was foreclosed by La
Urbana, pursuant to Act 3135, and on March 9, 1939, the said property was sold to La Urbana for
the sum of P3,786.26. On April 26, 1938, La Urbana transferred and assigned all its rights and
interest in the said property to Agatona Geronimo, plaintiff in the present case, for the sum of
P6,000.00, subject, however, to the right of redemption of Nava and his wife Felisa. Agatona paid
P600.00 on account of the purchase price and to secure the payment of the balance of P5,400.00,
mortgaged the same lots to la Urbana, which duly notified Nava and his wife of the assignment or
transfer. Immediately after buying the lots from the Sheriff in March, 1938, La Urbana took
possession of the same and collected the rentals thereon at the rate of P30.00 a month. In May,
1938 shortly after purchasing the same lots from La Urbana, Agatona also took possession of the
property and collected P62.50 representing the May and June rentals, and since July of the same
year, she had been collecting the rentals at the rate of P35.00 a month.
Within the one year period of redemption Nava tried to redeem the property, going to La Urbana
and offering to pay the amount of redemption, and when the latter refused to accept the offer,
disclaiming any interest in the property because it had already transferred the same to Agatona,
Nava wrote to Agatona, making the same offer to redeem after liquidation of the account consisting
of rentals so far received by her. He even offered to meet her at the office of the Clerk of Court
and waited for her there all day on the last day of the redemption period, and when she failed to
appear, he bought a cashier's check at the Philippine National Bank in the amount of P3,470.00
and deposited the sum in the Philippine National Bank branch in Cabanatuan in her name. On the
same day, he filed Civil Case No. 8071 of the Court of First Instance of Nueva Ecija against
Agatona and Inocencio to compel them to permit him to redeem the property after rendering an
account of the rentals received by them and to pay damages. On filing the case, Nava filed with
the Register of Deeds of Nueva Ecija a notice of lis pendens in accordance with the provisions of
Section 24, Rule 7, of the Rules of Court, and said notice was noted on the corresponding
certificates of title, covering the four lots. When Agatona and her husband bought the same lots
from La Urbana, transfer certificates of title for the four lots were issued to her, on which certificates
were also noted the notice of lis pendens and other annotations which appeared in the former
certificates of title which were cancelled. In that case, La Urbana was impleaded upon petition of
Agatona and her husband. After hearing, the trial court found that Nava and his wife had
substantially complied with the provisions regarding redemption; that they had made not only a
valid offer to redeem, but they actually made a valid tender of payment of the redemption price
RULING: The acts of AGATONA GERONIMO and HUSBAND INOCENCIO ISIDORO should be
construed as a recognition of the fact that the property, though still in his name, is to be held in
trust forJOSE NAVA and WIFE FELISA AQUINO , to be conveyed to the latter upon payment of
the repurchase price. Such trust is an express one, not subject to prescription.
Moreover, there is another aspect of this case which is not only important, but also decisive.
Considering the circumstances surrounding this case, as well as that of Civil Case No. 8071, we
find that when Agatona evidently acquiescing in the final decision in Civil Case No. 8071, not only
allowed but even directed the tenant of the house on the property to pay his rentals to Nava,
instead of to herself; and when in 1945, she allowed Nava to occupy the house when the tenant
disoccuppied it, and to take possession of the whole property, her acts should be construed as a
recognition of the fact that the property, though still in her name, was to be held in trust for Nava,
to be conveyed to him on payment of the repurchase price. Such trust is an express one, not
subject to prescription. We may also hold that when the trial court in that Civil Case No. 8071
declared in a decision that had become final and executory, that Nava et al. had the right to redeem
the property, and ordered Agatona et al. to make the resale, there was created what may be
regarded as a constructive trust, in the sense that although Agatona and her husband had the
naked title to the property by reason of the certificates of title issued in their names, and which
they retained, nevertheless, they were to hold such property in trust for Nava et al. to redeem,
subject to the payment of redemption price. Of course, it might be contended that in the latter
instance of a constructive trust, prescription may apply where the trustee asserts a right adverse
to that of the cestui que trust, such as, asserting and exercising acts of ownership over a property
being held in trust. But even under this theory, such a claim of prescription would not prosper in
the present case. As already stated, since 1944, after the decision in Civil Case No. 8071 became
final and executory, Agatona evidently acquiesced in the decision against her, so much so that
thereafter, as already stated, she suggested that the tenant of the house pay his rentals to Nava
instead of to her, meaning that Nava had a right to said rentals. No only this, but since May, 1945,
when the tenant left the house, Nava took possession thereof as well as the land on which it was
built, and has been occupying the same up to the present time, exercising acts of ownership over
the same, and Agatona evidently, all along, showing confirmity. It was only on September 30,
1956 that she and her husband filed the present case to cancel the notice of lis pendens of Civil
Case No. 8071, including naturally, the decision in said case against them, and to recover the
possession of the property. If such acts on her part as trustee can be considered as an assertion
of the right of ownership against Nava, the cestui que trust, over the property, then the prescription
invoked by her, assuming it to be available, falls far short of the period required by law to
established title by prescription. Agatona did not even have the possession of the property in order
to exercise acts of ownership over the same.
In conclusion, we find that the order of dismissal appealed order, sustained. But if we merely
affirmed the appealed order, the parties would be in the same situation they were before the
present action was initiated, consequently, for the benefit of the parties, and in the interest of
justice we hereby order both parties plaintiff and defendant to comply with terms of the decision
of the trial court in Civil Case No. 8071. The trial court is directed to see to it that this is done within
a reasonable time. No costs.
[ GR No. L-10228, Feb 28, 1962 ]
CORNELIO ALZONA v. GREGORIA CAPUNITAN
FACTS
On January 28, 1950, plaintiffs instituted an action in the Court of First Instance of Laguna, for the
recovery of two registered parcels of land located in Bian, and for the cancellation of the
corresponding certificates of title in the names of the defendants and the issuance of the proper
certificates in their (plaintiffs') names. Defendants interposed the special defenses of estoppel and
prescription of action.
The parcels of land in question were part of the friar lands in the Spanish times possessed by
spouses Perfecto Alomia and Cepriana Almendras (both deaceased). The spouses were survived
by three children, Arcadio Alomia, Eulogio Alomia, (deceased father of plaintiff Gregorio and
Eleuteria Alomia) and Crispina Alomia (deceased mother of plaintiff Cornelio Alzona). Arcadio
Alomia purchased a residential lot from the Friar Lands Administration, on March 22, 1915, and
was issued a patent title. He also purchased Lot 2524 (rice land), by installment; but died on May
8, 1924, before completing the installments. His widow Ildefonsa Almeda executed an affidavit
stating that she was her husband's only heir, because he left no children, descendants,
ascendants, brothers or sisters, and was made the assignee of his contract. After payment of the
last installment in 1925, Ildefonsa received from the Bureau of Lands the conveyance of lot No.
2524 and was issued a Certificate of Title. Ildefonsa died on March 26, 1929, survived by two
sisters, Marciana Almeda and Narcisa Almeda (mother of defendant Gregoria Capunitan- Reyes.
After Ildefonsa's death, plaintiffs instituted an action in the CFI of Laguna, for the recovery of the
lots; that the case dismissed on December 16,1930, for failure of the parties and their lawyers to
appear at the hearing. On January 15, 1931, the plaintiffs renewed the action, against the spouses
Reyes and Capunitan, Marciana Almeda and "Alfonsa" Almeda, for the recovery of lots, plus
damages. The case was discontinued indefinitely. In August, 1936, however, the court again
dismissed the case for failure to comply with the Order dated August 20, 1936.
ISSUE
Whether the action for the recovery of the parcels of land is imprescriptible.
HELD
No. This case involves an implied or constructive trust upon the defendants-appellees. Ildefonsa
held in trust the 1/2 legally belonging to the plaintiffs; on which defendants had full knowledge.
The sale made by Ildefonsa in favor of the defendants, was not void or inexistent contract, action
on which is imprescriptible (Art. 1450, N.C.C.). It is voidable, and as such is valid until revoked
within the time prescribed by law for its revocation, and the reason why the Court of Appeals
pronounced that "the appellees had the right to ask for a reconveyance of their share, unless the
action is barred by prescription". The prescriptibility of an action for reconveyance based on
implied or constructive trust, prescribes in ten (10) years.
It is true "that no title to registered land in derogation to that of the registered owner shall be
acquired by prescription or adverse possession" (Sec. 46 of the Land Registration Act), but as
correctly stated by the trial court, "the prosecution given by the law is in favor only of registered
owners and consequently, the plaintiffs cannot invoke it in support of their cause of action as they
are not the registered owners of the property in litigation". The titles of the lands in question are
not in the names of plaintiffs-appellants, but in the names of the defendants-appellees since the
year 1928 or for a period of more than 27 years.
If the plaintiffs were the children of parents whose properties and titles were registered in the
names of said parents and the court had reasons to consider the said children as the continuation
of the personality of the decedents. In this case, the lands were not registered in the names of
their parents, Eulogio Alomia and Crispina Alomia, but in the names of Arcadio Alomia and
Ildefonsa Almeda, the latter being Arcadio's widow, who sold the lands in question to her niece
Gregoria Capunitan (defendant) daughter of Narcisa Almeda and cousin of plaintiffs-appellants
and in whose name new certificate of title was issued in 1928.
The cause of action of the plaintiffs against the defendants accrued in 1928 when the latter
purchased and took possession of the two lots from Ildefonsa Almeda. The action, being for
recovery of title to and possession of real property, the same should be brought within ten (10)
years from 1928, or up to 1938 (Sec. 40, Act 190). But after the dismissal of the second case on
August 31, 1936, the plaintiffs-appellants went into a long swoon only to wake up when they filed
the present action on November 28, 1949 (according to the lower court) or January 28, 1950
(according to appellants). In the first case, 13 years had elapsed and in the second, 14 years. In
either case, the action has long prescribed.
BENJAMIN YU VS. NATIONAL LABOR RELATIONS COMMISSION (NLRC)
FACTS:
Petitioner Yu was hired as the Assistant General Manager of Jade Mountain Products Company
Limited primarily responsible for the overall operations of marble quarrying and export business
of said partnership. He was hired by a virtue of a Partnership Resolution in 1985 with a monthly
salary of P4,000.00. Initially he received only half of his stipulated monthly salary and was
promised by the partners that the balance would be paid upon securing additional operating funds
from abroad. However, in 1988 without his knowledge the general partners as well as one of the
limited partners sold and transferred their interest to Willy Co and Emmanuel Zapanta. Thus the
new major partners decided to transfer the firms main office but opted to continue the operation
of the old partnership under its old firm name and with all its employees and workers except for
the petitioner. Upon knowing of the changes in the partnership, petitioner went to the new main
office to meet the new partners and demand the payment of his unpaid salaries, but the latter
refused to pay him and instead informed him that since he bought the business from the original
partners, it was for him to decide whether or not he was responsible for the obligations of the old
partnership including petitioners unpaid salaries. Hence, petitioner was dismissed from said
partnership.
ISSUES:
1. Whether the partnership which had hired the petitioner as Asst. General Manager had been
extinguished and replaced by a new partnership composed of Willy Co and Emmanuel Zapanta.
2. Whether petitioner could assert his rights under his employment contract as against the new
partnership
HELD:
1. Yes. The legal effect of the changes in the membership of the partnership was the dissolution
of the old partnership which had hired the petitioner in 1984 and the emergence of the new firm
composed of Willy Co and Emmanuel Zapanta in 1988. This is based on the following provisions:
Art. 1828. The dissolution of partnership is the change in the relation of the partners caused by
any partner ceasing to be associated in the carrying on as a distinguished from the winding up of
the business.
Art. 1830. Dissolution is caused:
1. without violation of the agreement between the partners;
b. by the express will of any partner, who must act in good faith, when no definite
term or particular undertaking is specified.
2. in contravention of the agreement between the partners, where the circumstances
do not permit a dissolution under any other provision of this article, by the
express will of any partner at any time;
However, the legal consequence of dissolution of a partnership do not automatically result in the
termination of the legal personality of the old partnership as according to Art. 1829, on dissolution
of the partnership is not terminated, but continues until the winding up of the partnership affairs is
completed. The new partnership simply continued the operations of the old partnership under its
old firm name without winding up the business affairs of the old partnership.
2. Yes. Under Art. 1840, creditors of the old partnership are also creditors of the new partnership
which continued the business of former without liquidation of the partnership affairs. Thus, creditor
of the old Jade Mountain, such as the petitioner is entitled to enforce his claim for unpaid salaries,
as well as other claims relating to his employment with the old partnership against the new Jade
Mountain.
[ GR No. 5840, Sep 17, 1910 ]
US v. EUSEBIO CLARIN
17 Phil. 84
ARELLANO, C.J.:
Pedro Larin delivered to Pedro Tarug P172, in order that the latter, in company with Eusebio
Clarin and Carlos de Guzman, might buy and sell mangoes, and, believing that he could make
some money in this business, the said Larin made an agreement with the three men by which the
profits were to be divided equally between him and them.
Pedro Tarug, Eusebio Clarin, and Carlos de Guzman did in fact trade in mangoes and obtained
P203 from the business, but did not comply with the terms of the contract by delivering to Larin
his half of the profits; neither did they render him any account of the capital.
Larin charged them with the crime of estafa, but the provincial fiscal filed an information only
against Eusebio Clarin in which he accused him of appropriating to himself not only the P172 but
also the share of the profits that belonged to Larin, amounting to P15.50.
Pedro Tarug and Carlos de Guzman appeared in the case as witnesses and assumed that the
facts presented concerned the defendant and themselves together.
The trial court, that of First Instance of Pampanga, sentenced the defendant, Eusebio Clarin, to
six months' arresto mayor, to suffer the accessory penalties, and to return to Pedro Larin P172,
besides P30.50 as his share of the profits, or to subsidiary imprisonment in case of insolvency,
and to pay the costs. The defendant appealed, and in deciding his appeal we arrive at the
following conclusions:
When two or more persons bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among themselves, a contract is formed
which is called partnership. (Art. 1665, Civil Code.)
When Larin put the P172 into the partnership which he formed with Tarug, Clarin, and Guzman,
he invested his capital in the risks or benefits of the business of the purchase and sale of mangoes,
and, even though he had reserved the capital and conveyed only the usufruct of his money, it
would not devolve upon one of his three partners to return his capital to him, but upon the
partnership of which he himself formed part, or if it were to be done by one of the three specifically,
it would be Tarug, who, according to the evidence, was the person who received the money
directly from Larin.
The P172 having been received by the partnership, the business commenced and profits accrued,
the action that lies with the partner who furnished the capital for the recovery of his money is not
a criminal action for estafa, but a civil one arising from the partnership contract for a liquidation of
the partnership and a levy on its assets if there should be any.
No. 5 of article 535 of the Penal Code, according to which those are guilty of estafa "who, to the
prejudice of another, shall appropriate or misapply any money, goods, or any kind of personal
property which they may have received as a deposit on commission for administration or in any
other character producing the obligation to deliver or return the same," (as, for example, in
commodatum, precarium, and other unilateral contracts which require the return of the same thing
received) does not include money received for a partnership; otherwise the result would be that,
if the partnership, instead of obtaining profits, suffered losses, as it could not be held liable
civilly for the share of the capitalist partner who reserved the ownership of the money brought in
by him, it would have to answer to the charge of estafa, for which it would be sufficient to argue
that the partnership had received the money under obligation to return it
We therefore freely acquit Eusebio Clarin, with the costs de oficio. The complaint for estafa is
dismissed without prejudice to the institution of a civil action.
Torres, Johnson, Moreland, and Trent, JJ., concur.
192 SCRA 110
EUFRACIO D. ROJAS, Plaintiff-Appellant, vs. CONSTANCIO B. MAGLANA, Defendant-
Appellee.
Facts:
Maglana and Rojas executed their Articles of Co-Partnership called Eastcoast Development
Enterprises (EDE). It was a partnership with an indefinite term of existence. Maglana shall manage
the business affairs while Rojas shall be the logging superintendant and shall manage the logging
operation. They shall share in all profits and loss equally. Due to difficulties encountered they
decided to avail of the sources of Pahamatong as industrial partners. They again executed their
Articles of Co-Partnership under EDE. The term is 30 years. After sometime Pamahatong sold his
interest to Maglana and Rojas including equipment contributed. After withdrawal of Pamahatong,
Maglana and Rojas continued the partnership. After 3 months, Rojas entered into a management
contract with another logging enterprise. He left and abandoned the partnership. He even withdrew
his equipment from the partnership and was transferred to CMS. He never told Maglana that he
will not be able to comply with the promised contributions and he will not work as logging
superintendent. Maglana then told Rojas that the latter share will just be 20% of the net profits.
Rojas took funds from the partnership more than his contribution. Thus, Maglana notified Rojas
that he dissolved the partnership.
Issue: What is the nature of the partnership and legal relationship of Maglana and Rojas after
Pahamatong retired from the second partnership
Ruling:
It was not the intention of the partners to dissolve the first partnership, upon the constitution of the
second one, which they unmistakably called additional agreement. Otherwise stated even during
the existence of the second partnership, all business transactions were carried out under the duly
registered articles. No rights and obligations accrued in the name of the second partnership except
in favor of Pahamatong which was fully paid by the duly registered partnership.
Hence, as there are only two parties when Maglana notified Rojas that he dissolved the
partnership, it is in effect a notice of withdrawal.
Under Article 1830, par. 2 of the Civil Code, even if there is a specified term, one partner can
cause its dissolution by expressly withdrawing even before the expiration of the period, with or
without justifiable cause. Of course, if the cause is not justified or no cause was given, the
withdrawing partner is liable for damages but in no case can he be compelled to remain in the
firm. With his withdrawal, the number of members is decreased, hence, the dissolution. And in
whatever way he may view the situation, the conclusion is inevitable that Rojas and Maglana shall
be guided in the liquidation of the partnership by the provisions of its duly registered Articles of
Co-Partnership; that is, all profits and losses of the partnership shall be divided "share and share
alike" between the partners.
In the given situation Maglana cannot be said to be in bad faith nor can he be liable for damages.
PREMISES CONSIDERED, the assailed decision of the Court of First Instance of Davao, Branch
III, is hereby MODIFIED in the sense that the duly registered partnership of Eastcoast
Development Enterprises continued to exist until liquidated and that the sharing basis of the
partners should be on share and share alike as provided for in its Articles of Partnership, in
accordance with the computation of the commissioners. We also hereby AFFIRM the decision of
the trial court in all other respects.: nad
SO ORDERED.
Campos Rueda & Co v Pacific Commercial (44 Phil 916)
Facts:
Campos, Rueda & Co., a limited partnership, is indebted to the appellants: Pacific Commercial
Co., Asiatic Petroleum Co, and International Banking Corporation amounting to not less than
P1,000.00 (which were not paid more than 30 days prior to the date of the filing by petitioners of
the application for voluntary insolvency).
The trial court denied their petition on the ground that it was not proven, nor alleged, that the
members of the firm were insolvent at the time the application was filed. It also held that the
partners are personally and solidarily liable for the consequences of the transactions of the G.R. No. L-25532 February 28, 1969
partnership. COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
WILLIAM J. SUTER and THE COURT OF TAX APPEALS
Issue:
Whether or not a limited partnership may be held to have committed an act of insolvency.

Held:
Yes. A limited partnerships juridical personality is different from the personality of its members.
On general principle, the limited partnership must answer for and suffer the consequence of its
acts. Under our Insolvency Law, one of the acts of bankruptcy upon w/c an adjudication of
involuntary insolvency can be predicated is the failure to pay obligations.

The failure of Campos, Rueda & Co., to pay its obligations constitutes an act w/c is specifically
provided for in the Insolvency Law for declaration of involuntary insolvency. The petitioners have
a right to a judicial decree declaring the involuntary insolvency of said partnership.

ACTUAL COURT RULING:

The general consideration that these partnership had no juridical personality and the limitations
prescribed in subsection (h) above set forth gave rise to the conflict noted in American decisions,
as stated in the case of In re Samuels (215 Fed., 845), which mentions the two apparently
conflicting doctrines, citing one from In re Bertenshaw (157 Fed., 363), and the other from Francis
vs. McNeal (186 Fed., 481).

But there being in our insolvency law no such provision as that contained in section 5 of said Act
of Congress of July 1, 1898, nor any rule similar thereto, and the juridical personality of limited
partnership being recognized by our statutes from their formation in all their acts and contracts the
decision of American courts on this point can have no application in this jurisdiction, nor we see
any reason why these partnerships cannot be adjudged bankrupt irrespective of the solvency or
insolvency of their members, provided the partnership has, as such, committed some of the acts
of insolvency provided in our law. Under this view it is unnecessary to discuss the other points
raised by the parties, although in the particular case under consideration it can be added that the
liability of the limited partners for the obligations and losses of the partnership is limited to the
amounts paid or promised to be paid into the common fund except when a limited partner should
have included his name or consented to its inclusion in the firm name (arts. 147 and 148, Code of
Commerce).

Therefore, it having been proven that the partnership Campos Rueda & Co. failed for more than
thirty days to pay its obligations to the petitioners the Pacific Commercial Co. the Asiatic Petroleum
Co. and the International Banking Corporation, the case comes under paragraph 11 of section 20
of Act No. 1956, and consequently the petitioners have the right to a judicial decree declaring the
involuntary insolvency of said partnership.
Wherefore, the judgment appealed from is reversed, and it is adjudged that the limited partnership
Campos Rueda & Co. is and was on December 28, 1921, insolvent and liable for having failed for
more than thirty days to meet its obligations with the three petitioners herein, and it is ordered that
this proceeding be remanded to the Court of First Instance of Manila with instruction to said court
to issue the proper decrees under section 24 of Act No. 1956, and proceed therewith until its final
disposition.
SMITH, BELL & COMPANY (LTD.), v JOAQUIN NATIVIDAD 40 PHIL 136
Facts:
Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the
Philippine Islands. A majority of its stockholders are British subjects. It is the owner of a motor
vessel known as the Bato built for it in the Philippine Islands in 1916, of more than fifteen tons
gross The Bato was brought to Cebu in the present year for the purpose of transporting plaintiff's
merchandise between ports in the Islands. Application (Certificate of Philippine Regitry) was made
at Cebu, the home port of the vessel, to the Collector of Customs for a certificate of Philippine
registry. The Collector refused to issue the certificate, giving as his reason that all the stockholders
of Smith, Bell & Co., Ltd., were not citizens either of the United States or of the Philippine Islands
under Act No. 2761 which provides:

SEC. 1172. Certificate of Philippine register. Upon registration of a vessel of

domestic ownership, and of more than fifteen tons gross, a certificate of Philippine register shall
be issued for it. If the vessel is of domestic ownership and of fifteen tons gross or less, the taking
of the certificate of Philippine register shall be optional with the owner.

SEC. 1176. Investigation into character of vessel. No application for a certificate
of Philippine register shall be approved until the collector of customs is satisfied from an
inspection of the vessel that it is engaged or destined to be engaged in legitimate trade
and that it is of domestic ownership as such ownership is defined in section eleven hundred
and seventy-two of this Code.
Counsel says that Act No. 2761 denies to Smith, Bell & Co., Ltd., the equal protection
of the laws because it, in effect, prohibits the corporation from owning vessels, and because
classification of corporations based on the citizenship of one or more of their stockholders is
capricious, and that Act No. 2761 deprives the corporation of its properly without due process of
law because by the passage of the law company was automatically deprived of every beneficial
attribute of ownership in the Bato and left with the naked title to a boat it could not use.
Issue: Whether the legislature through Act no. 2761 can deny registry of vessel with foreign
stockholders.
Ruling: Yes. We are inclined to the view that while Smith, Bell & Co. Ltd., a corporation having
alien stockholders, is entitled to the protection afforded by the due-process of law and
equal protection of the laws clause of the Philippine Bill of Rights, nevertheless, Act No.
2761 of the Philippine Legislature, in denying to corporations such as Smith, Bell &. Co.
Ltd., the right to register vessels in the Philippines coastwise trade, does not belong to that
vicious species of class legislation which must always be condemned, but does fall within
authorized exceptions, notably, within the purview of the police power, and so does not
offend against the constitutional provision.
The guaranties of the Fourteenth Amendment and so of the first paragraph of the
Philippine Bill of Rights, are universal in their application to all person within the territorial
jurisdiction, without regard to any differences of race, color, or nationality. The word "person"
includes aliens. Private corporations, likewise, are "persons" within the scope of the guaranties in
so far as their property is concerned. Classification with the end in view of providing diversity
of treatment may be made among corporations, but must be based upon some reasonable
ground and not be a mere arbitrary selection.
A literal application of general principles to the facts before us would, of course, cause
the inevitable deduction that Act No. 2761 is unconstitutional by reason of its denial to a
corporation, some of whole members are foreigners, of the equal protection of the laws.
To justify that portion of Act no. 2761 which permits corporations or companies to obtain
a certificate of Philippine registry only on condition that they be composed wholly of citizens of the
Philippine Islands or of the United States or both, as not infringing Philippine Organic Law, it must
be done under some one of the exceptions.
One of the exceptions to the general rule, most persistent and far reaching in influence
is, broad and comprehensive as it is, nor any other amendment, "was designed to interfere with
the power of the State, sometimes termed its `police power,' to prescribe regulations to promote
the health, peace, morals, education, and good order of the people, and legislate so as to increase
the industries of the State, develop its resources and add to its wealth and prosperity. From the
very necessities of society, legislation of a special character, having these objects in view, must
often be had in certain districts. This is the same police power which the United States Supreme
Court say "extends to so dealing with the conditions which exist in the state as to bring out of them
the greatest welfare in of its people." For quite similar reasons, none of the provision of the
Philippine Organic Law could could have had the effect of denying to the Government of the
Philippine Islands, acting through its Legislature, the right to exercise that most essential, insistent,
and illimitable of powers, the sovereign police power, in the promotion of the general welfare and
the public interest.
Without any subterfuge, the apparent purpose of the Philippine Legislature is seen to
be to enact an anti-alien shipping act. The ultimate purpose of the Legislature is to encourage
Philippine ship-building.
[G.R. No. L-32409. February 27, 1971.]
BACHE & CO. (PHIL.), INC. and FREDERICK E. SEGGERMAN, Petitioners, v. HON. JUDGE
VIVENCIO M. RUIZ, MISAEL P. VERA, in his capacity as Commissioner of Internal Revenue,
ARTURO LOGRONIO, RODOLFO DE LEON, GAVINO VELASQUEZ, MIMIR DELLOSA,
NICANOR ALCORDO, JOHN DOE, JOHN DOE, JOHN DOE, and JOHN DOE, Respondents.
Facts:
Commissioner of Internal Revenue Vera wrote a letter to Judge Ruiz requesting the issuance of a
search warrant for the violation of Section 46 (a) of the National Revenue Code in relation with
Sections 53, 72, 73, 208 and 209 and for Judge Ruiz to authorize Examiner De Leon to male and
file the application for search warrant which was attached to the same letter. Three days after, De
Leo and his witness Logronio went to Judge Ruizs CFI bringing the letter-request, the application
for the search warrant prepared by him [unsigned], Logronios affidavit subscribed defore De Leon,
a deposition by Logronio [printed and signed but not subscribed] and a search warrant
accomplished but yet unsigned by Judge Ruiz.
At the time they [De Leon and Logronio] were at the court, Judge Ruiz was conducting a hearing
in his sala and so he [Ruiz] instructed his Deputy Clerk of Court to take the depositions of De Leon
and Logronio, after which [hearing done] Judge Ruiz along with Deputy Clerk Gonzales,
stenographer Gaspar, De Leon and Logronio went inside the chamber where Judge Ruiz
requested for the Gaspar [stenographer] to read to him her stenographic notes [deposition]. After
that Judge Ruiz then had De Leon and Logronio swear an oath and warned them that should
statements be false and without legal basis they would be charged with perjury.
Judge Ruiz then signed De Leons application for Search Warrant and Logronios deposition,
Search Warrant No. 2-M-70 was issued.
Petitioners filed for MTQ, preliminary and prohibitory Writs of Injunction to be issued, for the SW
to be declared null and void and for respondents to pay for damages and attorneys fees.
Respondent filed an answer and the motion was dismissed. While the case was ongoing, BIR
made tax assessments based or partly based on the documents seized during the search.
Issues:
1) W/N Judge Ruiz sufficiently determined if there was probable cause before issuing the
Search Warrant.
2) W/N the Search Warrant was valid for covering more than one offense.
3) W/N the Search Warrant is general in nature.
4) W/N the corporation is entitled to protection against unreasonable search and
seizures.
Ruling:
I
Judge Ruiz failed to personally examine the complainant and his witness [Art. III, Sec. 1 of 1987
Constitution and Rule 126, Sec. 3 and 4 of ROC ]
Section 4, Rule 126 of ROC requires that the judge himself personally examine the complainant
and his witness to determine the existence of probable cause. There was no examination done
in the present case, while it is true that the application for SW and Logronios deposition were
subscribed before the judge, there were no questions asked to which could possibly be the basis
in determining whether or not there was probable cause.
II
The SW was for at least 4 distinct offenses under the Tax Code:
1st violation Sec. 46 (a), Sec. 72 and 73 provided for the filing of ITR which are interrelated;
2nd violation Sec. 53 for withholding of income taxes at source;
3rd violation Sec. 208 for unlawful pursuit of business or occupation;
4th violation Sec. 209 for failure to make a return of receipts, sales, business or gross value of
output actually removed or to pay tax due.
Stonehill v Diokno is not applicable to the case, respondents contend since at the time, the
Search Warrant was issued for violation of Central Bank Laws, Internal Revenue (Code) and
Revised Penal Code; whereas, here Search Warrant No 2-M-70 was issued for violation of only
one code. This is not true since it [Stonehill v Diokno] it was ruled that no search warrant shall
issue for more than one specific offense.
III
The search warrant does not particularly describe the things to be seized. In Stonehill v Diokno
where the warrants sanctioned the seizure of all records of the petitioners and the
aforementioned corporations, whatever their nature, thus openly contravening the explicit
command of our Bill of Rights that the things to be seized be particularly described as well as
tending to defeat its major objective: the elimination of general warrants.
In Uy Kheytin, et.al. v Villareal, it was established that the purpose and intent of the requiring
that a search warrant describe the place to be searched and the things to be seized is to limit the
things to be seized and only those particularly described in the SW so as unreasonable
searches and seizures may not be made.
Tests for SW:
- A search warrant may be said to particularly describe the things to be seized when the
description therein is as specific as the circumstances will ordinarily allow (People vs.
Rubio; 57 Phil. 384);
- or when the description expresses a conclusion of fact not of law by which the warrant
officer may be guided in making the search and seizure (idem., dissent of Abad
Santos, J.,)
- or when the things described are limited to those which bear direct relation to the
offense for which the warrant is being issued (Sec. 2, Rule 126, Revised Rules of
Court)
IV
A corporation is, after all, but an association of individuals under an assumed name and
with a distinct legal entity. In organizing itself as a collective body it waives no
constitutional immunities appropriate to such body. Its property cannot be taken without
compensation. It can only be proceeded against by due process of law, and is protected,
under the 14th Amendment, against unlawful discrimination . . . (Hale v. Henkel, 201 U.S.
43, 50 L. ed. 652.)
Separate Opinion by Justice Barredo: side note.
BATAAN SHIPYARD AND ENGINEERING CORPORATION VS. PCGG, 150 SCRA 181
Facts:
Challenged in this special civil action of certiorari and prohibition by a private corporation known
as the Bataan Shipyard and Engineering Co., Inc. are: (1) Executive Orders Numbered 1 and 2,
promulgated by President Corazon C. Aquino on February 28, 1986 and March 12, 1986,
respectively, and (2) the sequestration, takeover, and other orders issued, and acts done, in
accordance with said executive orders by the Presidential Commission on Good Government
and/or its Commissioners and agents, affecting said corporation. The sequestration order issued
on April 14, 1986 was addressed to three of the agents of the Commission, ordering them to
sequester several companies among which is Bataan Shipyard and Engineering Co., Inc. On the
strength of the above sequestration order, several letters were sent to BASECO among which is
that from Mr. Jose M. Balde, acting for the PCGG, addressed a letter dated April 18, 1986 to the
President and other officers of petitioner firm, reiterating an earlier request for the production of
certain documents. The letter closed with the warning that if the documents were not submitted
within five days, the officers would be cited for "contempt in pursuance with Presidential Executive
Order Nos. 1 and 2." BASECO contends that its right against self-incrimination and unreasonable
searches and seizures had been transgressed by the Order of April 18, 1986 which required it "to
produce corporate records from 1973 to 1986 under pain of contempt of the Commission if it fails
to do so." BASECO prays that the Court 1) declare unconstitutional and void Executive Orders
Numbered 1 and 2; 2) annul the sequestration order dated April- 14, 1986, and all other orders
subsequently issued and acts done on the basis thereof, inclusive of the takeover order of July
14, 1986 and the termination of the services of the BASECO executives.
ISSUE: WON documents ask in by PCGG would vitiate their right against self incrimination.
RULING:
It is elementary that the right against self-incrimination has no application to juridical
persons. While an individual may lawfully refuse to answer incriminating questions unless
protected by an immunity statute, it does not follow that a corporation, vested with special
privileges and franchises, may refuse to show its hand when charged with an abuse of
such privileges. Corporations are not entitled to all of the constitutional protections, which
private individuals have. They are not at all within the privilege against self-incrimination;
although this court more than once has said that the privilege runs very closely with the 4th
Amendment's Search and Seizure provisions. It is also settled that an officer of the company
cannot refuse to produce its records in its possession upon the plea that they will either incriminate
him or may incriminate it." The corporation is a creature of the state. It is presumed to be
incorporated for the benefit of the public. It received certain special privileges and franchises, and
holds them subject to the laws of the state and the limitations of its charter. Its powers are limited
by law. It can make no contract not authorized by its charter. Its rights to act as a corporation are
only preserved to it so long as it obeys the laws of its creation. There is a reserve right in the
legislature to investigate its contracts and find out whether it has exceeded its powers. It would be
a strange anomaly to hold that a state, having chartered a corporation to make use of certain
franchises, could not, in the exercise of sovereignty, inquire how these franchises had been
employed, and whether they had been abused, and demand the production of the corporate books
and papers for that purpose. The defense amounts to this, that an officer of the corporation which
is charged with a criminal violation of the statute may plead the criminality of such corporation as
a refusal to produce its books. To state this proposition is to answer it. While an individual may
lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does
not follow that a corporation, vested with special privileges and franchises may refuse to show its
hand when charged with an abuse of such privileges.