Partnership Full Text II

8/16/2019 Partnership Full Text II

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Sancho v. Lizarraga

The plaintiff brought an action for the rescission of a partnership contract between himself and thedefendant, entered into on October 15, 1920, the reimbursement by the latter of his 50,000 pesoinvestment therein, with interest at 12 per cent per annum form October 15, 1920, with costs, andany other just and e uitable remedy against said defendant!

The defendant denies generally and specifically all the allegations of the complaint which areincompatible with his special defenses, cross"complaint and counterclaim, setting up the latter andas#ing for the dissolution of the partnership, and the payment to him as its manager andadministrator of $500 monthly from October 15, 1920, until the final dissolution, with interest, one"half of said amount to be charged to the plaintiff! %e also prays for any other just and e uitableremedy!

The &ourt of 'irst (nstance of )anila, having heard the cause, and finding it duly proved that thedefendant had not contributed all the capital he had bound himself to invest, and that the plaintiff haddemanded that the defendant li uidate the partnership, declared it dissolved on account of thee*piration of the period for which it was constituted, and ordered the defendant, as managingpartner, to proceed without delay to li uidate it, submitting to the court the result of the li uidationtogether with the accounts and vouchers within the period of thirty days from receipt of notice of said

judgment, without costs!

The plaintiff appealed from said decision ma#ing the following assignments of error+

1! (n holding that the plaintiff and appellant is not entitled to the rescission of the partnershipcontract, *hibit -, and that article 112. of the &ivil &ode is not applicable to the presentcase!

2! (n failing to order the defendant to return the sum of $50,000 to the plaintiff with interestfrom October 15, 1920, until fully paid!

/! (n denying the motion for a new trial!

(n the brief filed by counsel for the appellee, a preliminary uestion is raised purporting to show thatthis appeal is premature and therefore will not lie! The point is based on the contention thatinasmuch as the li uidation ordered by the trial court, and the conse uent accounts, have not beenmade and submitted, the case cannot be deemed terminated in said court and its ruling is not yetappealable! (n support of this contention counsel cites section 12/ of the &ode of &ivil $rocedure,and the decision of this court in the case of Natividad vs. Villarica /1 $hil!, 1 2 !

This contention is well founded! 3ntil the accounts have been rendered as ordered by the trial court,and until they have been either approved or disapproved, the litigation involved in this action cannotbe considered as completely decided4 and, as it was held in said case of atividad vs !6illarica, alsowith reference to an appeal ta#en from a decision ordering the rendition of accounts following thedissolution of partnership, the appeal in the instant case must be deemed premature!


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7ut even going into the merits of the case, the affirmation of the judgment appealed from isinevitable! (n view of the lower court8s findings referred to above, which we cannot revise becausethe parol evidence has not been forwarded to this court, articles 1 :1 and 1 :2 of the &ivil &odehave been properly applied! Owing to the defendant8s failure to pay to the partnership the wholeamount which he bound himself to pay, he became indebted to it for the remainder, with interest and

any damages occasioned thereby, but the plaintiff did not thereby ac uire the right to demandrescission of the partnership contract according to article 112. of the &ode! This article cannot beapplied to the case in uestion, because it refers to the resolution of obligations in general, whereasarticle 1 :1 and 1 :2 specifically refer to the contract of partnership in particular! -nd it is a well#nown principle that special provisions prevail over general provisions!

7y virtue of the foregoing, this appeal is hereby dismissed, leaving the decision appealed from in fullforce, without special pronouncement of costs! ;o ordered!

Evangelista v. Abad Santos

On October 9, 195. a co"partnership was formed under the name of < vangelista = &o!< On >une ,1955 the -rticles of &o"partnership was amended as to include herein respondent, strella -bad;antos, as industrial partner, with herein petitioners ?omingo &! vangelista, >r!, @eonardo -tienAa

-bad ;antos and &onchita $! avarro, the original capitalist partners, remaining in that capacity, witha contribution of $1 ,500 each! The amended -rticles provided, inter alia , that


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The parties are in agreement that the main issue in this case is


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partnership from >une , 1955, and to pay the respondent her alleged share in thenet profits of the partnership plus the sum of $2,000!00 as attorney8s fees and thecosts of the suit, instead of dismissing respondent8s complaint, with costs, againstthe respondent!

(t is uite obvious that the uestions raised in the first assigned errors refer to the facts as found bythe &ourt of -ppeals! The evidence presented by the parties as the trial in support of their respectivepositions on the issue of whether or not the respondent was an industrial partner was thoroughlyanalyAed by the &ourt of -ppeals on its decision, to the e*tent of reproducing verbatim therein thelengthy testimony of the witnesses!

(t is not the function of the ;upreme &ourt to analyAe or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been commited by the lowercourt! (t should be observed, in this regard, that the &ourt of -ppeals did not hold that the -rticles of&o"partnership, identified in the record as *hibit


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e*press the true intent and agreement of the parties thereto, the real understandingbetween them being the appellee would be merely a profit sharer entitled to /0B ofthe net profits that may be realiAed between the partners from >une , 1955, until themortgage loan of $/0,000!00 to be obtained from the C'& shall have been fully paid!This version, however, is discredited not only by the aforesaid documentary evidence

brought forward by the appellee, but also by the fact that from >une , 1955 up to thefiling of their answer to the complaint on 'ebruary :, 19 . F or a period of over eight: years F appellants did nothing to correct the alleged false agreement of the

parties contained in *hibit -t pages /2"// of appellants8 brief, they also ma#e much of the argument that 8thereis an overriding fact which proves that the parties to the -mended -rticles of$artnership, *hibit


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(t is not disputed that the provision against the industrial partner engaging inbusiness for himself see#s to prevent any conflict of interest between the industrialpartner and the partnership, and to insure faithful compliance by said partner withthis prestation! There is no pretense, however, even on the part of the appellee isengaged in any business antagonistic to that of appellant company, since being a

>udge of one of the branches of the &ity &ourt of )anila can hardly be characteriAedas a business! That appellee has faithfully complied with her prestation with respectto appellants is clearly shown by the fact that it was only after filing of the complaintin this case and the answer thereto appellants e*ercised their right of e*clusionunder the codal art just mentioned by alleging in their ;upplemental -nswer dated>une 29, 19 . F or after around nine 9 years from >une , 1955 F subse uent tothe filing of defendants8 answer to the complaint, defendants reached an agreementwhereby the herein plaintiff been e*cluded from, and deprived of, her alleged share,interests or participation, as an alleged industrial partner, in the defendantpartnership andDor in its net profits or income, on the ground plaintiff has nevercontributed her industry to the partnership, instead she has been and still is a judge

of the &ity &ourt formerly )unicipal &ourt of the &ity of )anila, devoting her time toperformance of her duties as such judge and enjoying the privilege and emolumentsappertaining to the said office, aside from teaching in law school in )anila, withoutthe e*press consent of the herein defendants8 Cecord On -ppeal, pp! 2."25 !%aving always #nows as a appellee as a &ity judge even before she joined appellantcompany on >une , 1955 as an industrial partner, why did it ta#e appellants manyyearn before e*cluding her from said company as afore uoted allegationsG -nd howcan they reconcile such e*clusive with their main theory that appellee has neverbeen such a partner because


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He find no reason in this case to depart from the rule which limits this &ourt8s appellate jurisdictionto reviewing only errors of law, accepting as conclusive the factual findings of the lower court uponits own assessment of the evidence!

The judgment appealed from is affirmed, with costs!

Soncuya v. De Luna

On ;eptember 11, 19/ , plaintiff >osue ;oncuya filed with the &ourt of 'irst (nstance of )anila andamended complaint against &armen de @una in her own name and as co"administratri* of theintestate estate, of @ibrada -velino, in which, upon the facts therein alleged, he prayed thatdefendant be sentenced to pay him the sum of $ 00,./2 as damages and costs!

To the aforesaid amended complaint defendant &armen de @una interposed a demurrer based onthe following grounds+ 1 That the complaint does not contain facts sufficient to constitute a cause of action4 and 2 that the complaint is ambiguous, unintelligible and vague!

Trial on the demurrer having been held and the parties heard, the court found the same well"foundedand sustained it, ordering the plaintiff to amend his complaint within a period of ten days from receiptof notice of the order!

$laintiff having manifested that he would prefer not to amend his amended complaint, the attorneyfor the defendant, &armen de @una, filed a motion praying that the amended complaint be dismissedwith costs against the plaintiff! ;aid motion was granted by The &ourt of 'irst (nstance of )anilawhich ordered the dismissal of the aforesaid amended complaint, with costs against the plaintiff!

'rom this order of dismissal, the appellant too# an appeal, assigning twenty alleged errorscommitted by the lower court in its order referred to!

The demurrer interposed by defendant to the amended complaint filed by plaintiff having beensustained on the grounds that the facts alleged in said complaint are not sufficient to constitute acause of action and that the complaint is ambiguous, unintelligible and vague, the only uestionswhich may be raised and considered in the present appeal are those which refer to said grounds!

(n the amended complaint it is prayed that defendant &armen de @una be sentenced to pay plaintiffdamages in the sum of $ 00,./2 as a result of the administration, said to be fraudulent, of hepartnership,


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%aving reached the conclusion that the facts alleged in the complaint are not sufficient to constitutea cause of action on the part of plaintiff as member of the partnership


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.! 'or having applied article 11/: of the &ivil &ode!

5! and ! 'or holding that the capital ought to have yielded profits, and that the latter shouldbe calculated 12 per cent per annum4 and

! The findings of the ejectment!

-s to the first assignment of error, the fact that the store was closed by virtue of ejectmentproceedings is of no importance for the effects of the suit! The whole action is based upon the factthat the defendants received certain capital from the plaintiff for the purpose of organiAing acompany4 they, according to the agreement, were to handle the said money and invest it in a storewhich was the object of the association4 they, in the absence of a special agreement vesting in onesole person the management of the business, were the actual administrators thereof4 as suchadministrators they were the agent of the company and incurred the liabilities peculiar to everyagent, among which is that of rendering account to the principal of their transactions, and paying himeverything they may have received by virtue of the mandatum ! -rts! 1 95 and 1 20, &ivil &ode!

either of them has rendered such account nor proven the losses referred to by Ong $ong &o4 theyare therefore obliged to refund the money that they received for the purpose of establishing the saidstore — the object of the association! This was the principal pronouncement of the judgment!

Hith regard to the second and third assignments of error, this court, li#e the court below, finds noevidence that the entire capital or any part thereof was lost! (t is no evidence of such loss to aver,without proof, that the effects of the store were ejected! ven though this were proven, it could notbe inferred therefrom that the ejectment was due to the fact that no rents were paid, and that the rentwas not paid on account of the loss of the capital belonging to the enterprise!

Hith regard to the possible profits, the finding of the court below are based on the statements of the

defendant Ong $ong &o, to the effect that


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the liability of two or more agents with respect to the return of the money that they received fromtheir principal! Therefore, the other errors assigned have not been committed!

(n view of the foregoing judgment appealed from is hereby affirmed, provided, however, that thedefendant Ong $ong &o shall only pay the plaintiff the sum of $ 50 with the legal interest thereon at

the rate of per cent per annum from the time of the filing of the complaint, and the costs, withoutspecial ruling as to the costs of this instance! ;o ordered!

Moran v. CA

$etitioner spouses Keorge and @ibrada )oran are the owners of the Hac#"Hac# $etron gasolinestation located at ;haw 7oulevard, corner Old Hac#"Hac# Coad, )andaluyong, )etro )anila! Theyregularly purchased bul# fuel and other related products from $etrophil &orporation on cash ondelivery &O? basis! Orders for bul# fuel and other related products were made by telephone andpayments were effected by personal chec#s upon delivery! 1

$etitioners maintained three joint accounts, namely one current account o! / "000 " and twosavings accounts, os! 10/ 002/: and 10/ 001/ 2 with the ;haw 7oulevard branch of &itytrust7an#ing &orporation! -s a special privilege to the )orans, whom it considered as valued clients, theban# allowed them to maintain a Aero balance in their current account! Transfers from ;aving

-ccount o! 10/ 002/: to their current account could be made only with their prior authoriAation,but they gave written authority to &itytrust to automatically transfer funds from their ;avings -ccount

o! 10/ 001/ 2 to their &urrent -ccount o! / "000 " at any time whenever the funds in theircurrent account were insufficient to meet withdrawals from said current account! ;uch arrangementfor automatic transfer of funds was called a pre"authoriAed transfer $-T agreement! 2

The $-T letter"agreement entered into by the parties on )arch 19, 19:2 contained the followingprovisions+

*** *** ***

1! The transfer may be effected on the day following the overdrawing of the currentaccount, but the check/s would be honored if the savings account has sufficientbalance to cover the overdraft !

2! The regular charges on overdraft, and activity fees will be imposed by the 7an#!

/! This is merely an accommodation on our part and we have the right, at all timesand for any reason whatsoever, to refuse to effect transfer of funds at our sole andabsolute option and discretion, reserving our right to terminate this arrangement atany time without written notice to you!

.! You hold C !Y!"#$! free and harmless for an% and all omissions or oversight ine&ecuting this automatic transfer of funds 4 ! ! ! 3


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*** *** ***

On ?ecember 12, 19:/, petitioners, through @ibrada )oran, drew a chec# &itytrust o! 0.19 0 for$50,5 !00 payable to $etrophil&orporation! 4 The ne*t day, ?ecember 1/, 19:/, petitioners, again through @ibrada )oran, issuedanother chec# &itytrust o! 0.19 2 in the amount of $5 ,090!00 in favor of the same corporation! 5 Thetotal sum of the two chec#s was $10 , !00!

On ?ecember 1., 19:/, $etrophil &orporation deposited the two aforementioned chec#s to itsaccount with the $andacan branch of the $hilippine ational 7an# $ 7 , the collecting ban#! (nturn, $ 7, $andacan branch presented them for clearing with the $hilippine &learing %ouse&orporation in the afternoon of the same day! The records show that on ?ecember 1., 19:/, &urrent

-ccount o! / "000 " had a Aero balance, while ;avings -ccount o! 10/ 001/ 2 covered bythe $-T had an available balance of$2 ,10.!/0 6 and ;avings -ccount o! 10/ 002/: had an available balance of $./,2 :!/9! 7

-t about ten o8cloc# in the morning of the following day, ?ecember 15, 19:/, petitioner Keorge)oran went to the ban#, as was his regular practice, to personally oversee their daily transactionswith the ban#! %e deposited in their ;avings -ccount o! 10/ 002/: the amounts of $10,: .!5:and $ , 5.!25, 8 and he li#ewise deposited in their ;avings -ccount o! 10/ 001/ 2 the amounts of$5,900!00, $/5,100!00 and /0!00! 9 The amount of $.0,000!00 was then transferred by him from ;aving

-ccount o! 10/ 002/: to their current account by means of a pro forma withdrawal form a debitmemorandum , which was provided by the ban#, authoriAing the latter to ma#e the necessary transfer! -tthe same time, the amount of $ , !00 was transferred from ;avings -ccount o! 10/ 001/ 2 to thesame current account through the pre"authoriAed transfer $-T agreement! 10

;ometime on ?ecember 15 or 1 , 19:/ Keorge )oran was informed by his wife @ibrada, that$etrophil refused to deliver their orders on a credit basis because the two chec#s they hadpreviously issued were dishonored upon presentment for payment! -pparently, the ban# dishonoredthe chec#s due to


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On >uly 2., 19:., or a little over si* months after the incident, petitioners, through counsel, wrote&itytrust claiming that the ban#8s dishonor of the chec#s caused them besmirched business andpersonal reputation, shame and an*iety, hence they were contemplating the filing of the necessarylegal actions unless the ban# issued a certification clearing their name and paid them $1,000,000!00as moral damages! 16

The ban# did not act favorably on their demands, hence petitioners filed a complaint for damages on;eptember :, 19:., with the Cegional Trial &ourt, 7ranch 159 at $asig, )etro )anila, which wasdoc#eted therein as &ivil &ase o! 515.9! (n turn, &itytrust filed a counterclaim for damages,alleging that the case filed against it was unfounded and unjust!

-fter trial, a decision dated October 9, 19:9 was rendered by the trial court dismissing both thecomplaint and the counterclaim! 17 On appeal, the &ourt of -ppeals rendered judgment in &-"K!C! &6

o! 25009 on October 9, 19:9 affirming the decision of the trial court! 18

He start some basic and accepted rules, statutory and doctrinal! - chec# is a bill of e*change drawn

on a ban# payable on demand!19

Thus, a chec# is a written order addressed to a ban# or personscarrying on the business of ban#ing, by a party having money in their hands, re uesting them to pay onpresentment, to a person named therein or to bearer or order, a named sum of money! 20

'i*ed savings and current deposits of money in ban#s and similar institutions shall be governed bythe provisions concerning simple loan! 21 (n other words, the relationship between the ban# and thedepositor is that of a debtor and creditor! 22 7y virtue of the contract of deposit between the ban#er and itsdepositor, the ban#er agrees to pay chec#s drawn by the depositor provided that said depositor hasmoney in the hands of the ban#! 23

%ence, where the ban# possesses funds of a depositor, it is bound to honor his chec#s to the e*tentof the amount of his deposits! The failure of a ban# to pay the chec# of a merchant or a trader, whenthe deposit is sufficient, entitles the drawer to substantial damages without any proof of actualdamages! 24

&onversely, a ban# is not liable for its refusal to pay a chec# on account of insufficient funds,notwithstanding the fact that a deposit may be made later in the day! 25 7efore a ban# depositor maymaintain a suit to recover a specific amount from his ban#, he must first show that he had on depositsufficient funds to meet his demand! 26

The present action for damages accordingly hinges on the resolution of the in uiry as to whether ornot petitioners had sufficient funds in their accounts when the ban# dishonored the chec#s in

uestion! (n view of the factual findings of the two lower courts the correctness of which arechallenged by what appear to be plausible, arguments, we feel that the same should properly beresolved by us! This would necessarily re uire us to in uire into both the savings and currentaccounts of petitioners in relation to the $-T arrangement!

On ?ecember 1., 19:/, when $ 7, $andacan branch, presented the chec#s for collection, theavailable balance for ;avings -ccount o! 10/ 001/ 2 was $2 ,10.!/0 while &urrent -ccount o!/ "000 " e*pectedly had a Aero balance! On ?ecember 15, 19:/, at appro*imately ten o8cloc# inthe morning, petitioners, through Keorge )oran, learned that $ , !00 from ;aving -ccount o!


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10/ 001/ 2 was transferred to their current account! -nother $.0,000!00 was transferred from;aving -ccounts o! 10/ 002/: to the current account! &onsidering that the transfers were bythen sufficient to cover the two chec#s, it is asserted by petitioners that such fact should haveprevented the dishonor of the chec#s! (t appears, however, that it was not so!

-s e*plained by respondent court in its decision, Kerard ! Cionisto, head of the centraliAed clearingunit of &itytrust, detailed on the witness stand the standard clearing procedure adopted byrespondent ban# and the $hilippine &learing %ouse &orporation, to wit+!

L+ @et me again re"phase the uestion! )ost of sic these twochec#s issued by )rs! @ibrada )oran under the accounts of theplaintiffs with &itytrust 7an#ing &orporation were drawn dated?ecember 12, 19:/ and ?ecember 1/, 19:/ and these two 2chec#s were made payable to $etrophil &orporation! On record,$etrophil &orporation presented these two 2 chec#s for clearingwith $ 7 $andacan 7ranch on ?ecember 1., 19:/! ow in

accordance with the ban#, what would happen with these chec#sdrawn with sic $ 7 on ?ecember 1., 19:/G!

-+ $o these checks will now be presented b% 'N( with the 'hilippineClearing )ouse on *ecember + , and then the 'hilippine Clearing)ouse will process it until midnight of *ecember + . Cit%trust willsend a clearing representative to the 'hilippine Clearing )ouse ataround - o0clock in the morning of *ecember +1 and then get thechecks. !he checks will now be processed at the Cit%trust Computerat around 2 o0clock in the morning of *ecember + 3sic4but it willbe processed for balance of Cit%trust as of *ecember + because for

one, we have not opened on *ecember +1 at 2 o0clock. #nder theclearing house rules, we are supposed to process it on the date itwas presented for clearing ! tsn, ;eptember 9, 19::, pp! 9"10 ! 27

&onsidering the clearing process adopted, as e*plained in the afore uoted testimony, it is clear thatthe available balance on ?ecember 1., 19:/ was used by the ban# in determining whether or notthere was sufficient cash deposited to fund the two chec#s, although what was stamped on thedorsal side of the two chec#s in uestion was


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dishonor of the two chec#s in uestion! Thus, although he #new the standard clearing procedure, itdoes not necessarily mean that the same procedure was adopted with regard to the two chec#s!

He do not agree! ;ection / , Cule 1/1 of the Cules of &ourt provides a disputable presumption inlaw that the ordinary course of business has been followed! (n the absence of a contrary showing, it

is presumed that the acts in uestion were in conformity with the usual conduct of business! (n thecase at bar, petitioners failed to present countervailing evidence to rebut the presumption that thechec#s involved underwent the same regular process for clearing of chec#s followed by the ban#since 19:/!

$etitioner had no reason to complain, for they alone were at fault! - drawer must remember hisresponsibilities every time he issues a chec#! %e must personally #eep trac# of his available balancein the ban# and not rely on the ban# to notify him of the necessity to fund certain chec# shepreviously issued! - chec#, as distinguished from an ordinary bill of e*change, is supposed to bedrawn against a previous deposit of funds for it is ordinarily intended for immediately payment! 28

)oreover, between the time of the issuance of said chec#s on ?ecember 12 and 1/ and the time oftheir presentment on ?ecember 1., petitioners had, at the very least, twenty"four hours to replenishtheir balance in the ban#!

-s previously noted, it was only during business hours in the morning of ?ecember 15, 19:/, that$ , !00 was automatically transferred from ;avings -ccount o! 10/ 001/ 2 to &urrent

-ccount o! / "000 " , and another $.0,000!00 was transferred from ;avings -ccount o!10/ 002/: to the same current by a debit memorandum! $etitioners argue that if indeed thechec#s were dishonored in the early morning of ?ecember 15, 19:/, the ban# would not haveautomatically transferred $ , !00 to said current account! They theoriAe that the chec#s havingalready been dishonored, there was no necessity to put into effect the pre"authoriAed transfer

agreement!

That theory is incorrect! Hhen the transfer from both savings accounts to the current account weremade, they were done in the hope that the chec#s may be retrieved, thus preventing their dishonor!3nfortunately, respondent ban# did not succeed in effectuating its good intentions! The transferswere made to preserve its relations with petitioners whom it #new were valued clients, hence itwanted to prevent the dishonor of their chec#s, if the same was at all possible! -lthough notadmitting fault, it tried its best to ma#e sure that the chec#s would not bounce!

3nder similar circumstances, it was held in 5hitman vs. 6irst National (ank 29 that a ban# performs itsfull duty where, upon the receipt of a chec# drawn against an account in which there are insufficient funds

to pay it in full, it endeavors to induce the drawer to ma#e good his account so that the chec# can be paid,and failing in this, it protests the chec# on the following morning and notifies its correspondent ban# by thetelegraph of the protest! (t cannot, therefore, be held liable to the payee and holder of the chec# for notprotesting it upon the day when it was received! (n fact, the court added that the ban# did more that it wasre uired to do by ma#ing an effort to induce the drawer to deposit sufficient money to ma#e the chec#good, and by notifying its correspondent of the dishonor of the chec# by telegram!


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$etitioners maintain that at the time the chec#s were dishonored, they had already depositedsufficient funds to cover said chec#s! To prove their point, petitioners uoted in their petition thefollowing testimony of said witness Cionisto, to wit+

L+ ow according to you, you would receive the chec#s from being

deposited to the collecting ban# which in this particular e*ample wasthe $andacan 7ranch of $ 7 which in turn will deliver it to the$hilippine &learing %ouse and the $hilippine &learing %ouse willdeliver it to your office around 12+00 o8cloc# of ?ecember ! ! ! G

-+ -round 2+00 o8cloc# of ?ecember 15! He sent a clearingrepresentative!

L+ -nd the chec#s will be processed in accordance with the balanceavailable as of ?ecember 1.G

-+ Jes, sir!

L+ -nd naturally you will place there


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-my 7elen Cogado, a ban# employee, testified that she would normally copy the details stated in thereport and transfer in on a


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(n the present case, the actions ta#en by the ban# after the incident clearly show that there wasneither malice nor bad faith, but rather a clear intent to mollify an obviously agitated client! Caul?iaA, the branch manager, even went for this purpose to the )oran residence to facilitate theirapplication for a manager8s chec#! @ater, he went to the $etrophil &orporation to personally redeemthe chec#s! ;till later, the letter was sent by respondent ban# to $etrophil e*plaining that the

dishonor of the chec#s was due to


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The record discloses that on ovember 1 , 195. plaintiff )auro @oAana entered into a contract withdefendant ;erafin ?epa#a#ibo wherein they established a partnership capitaliAed at the sum of$/0,000, plaintiff furnishing 0B thereof and the defendant, .0B, for the purpose of maintaining,operating and distributing electric light and power in the )unicipality of ?umangas, $rovince of (loilo,under a franchise issued to )rs! $iadosa 7uenaflor! %owever, the franchise or certificate of public

necessity and convenience in favor of the said )rs! $iadosa 7uenaflor was cancelled and revo#edby the $ublic ;ervice &ommission on )ay 15, 1955! 7ut the decision of the $ublic ;ervice&ommission was appealed to 3s on October 21, 1955! - temporary certificate of public conveniencewas issued in the name of Olimpia ?! ?ecolongon on ?ecember 22, 1955 *h! uly 10, 195 !

On ovember 15, 1955, plaintiff )auro @oAana brought an action against the defendant, alleging

that he is the owner of the Kenerator 7uda ?iesel , valued at $:,000 and 0 wooden posts with thewires connecting the generator to the different houses supplied by electric current in the )unicipalityof ?umangas, and that he is entitled to the possession thereof, but that the defendant has wrongfullydetained them as a conse uence of which plaintiff suffered damages! $laintiff prayed that saidproperties be delivered bac# to him! Three days after the filing of the complaint, that is on ovember1:, 1955, >udge $antaleon -! $elayo issued an order in said case authoriAing the sheriff to ta#epossession of the generator and 0 wooden posts, upon plaintiff8s filing of a bond in the amount of$1 ,000 in favor of the defendant for subse uent delivery to the plaintiff ! On ?ecember 5, 1955,defendant filed an answer, denying that the generator and the e uipment mentioned in the complaintbelong to the plaintiff and alleging that the same had been contributed by the plaintiff to thepartnership entered into between them in the same manner that defendant had contributed

e uipments also, and therefore that he is not unlawfully detaining them! 7y way of counterclaim,defendant alleged that under the partnership agreement the parties were to contribute e uipments,plaintiff contributing the generator and the defendant, the wires for the purpose of installing the mainand delivery lines4 that the plaintiff sold his contribution to the partnership, in violation of the terms oftheir agreement! %e, therefore, prayed that the complaint against him be dismissed4 that plaintiff beadjudged guilty of violating the partnership contract and be ordered to pay the defendant the sum of$/,000, as actual damages, $ 00!00 as attorney8s fees and $2, 00 annually as actual damages4that the court order dissolution of the partnership, after the accounting and li uidation of the same!

On ;eptember 2 , 195 , the defendant filed a motion to declare plaintiff in default on hiscounterclaim, but this was denied by the court! %earings on the case were conducted on October 25,

195 and ovember 5, 195 , and on the latter date the judge entered a decision declaring plaintiffowner of the e uipment and entitled to the possession thereof, with costs against defendant! (t isagainst this judgment that the defendant has appealed!

The above judgment of the court was rendered on a stipulation of facts, which is as follows+

1! That on ovember 1 , 195., in the &ity of (loilo, the aforementioned plaintiff, and thedefendant entered into a contract of $artnership, a copy of which is attached as -nne*


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defendant8s answer and counterclaim, for the purpose set forth therein and under thenational franchise granted to )rs! $iadosa 7uenaflor4

2! That according to the aforementioned $artnership &ontract, the plaintiff )r! )auro@oAana, contributed the amount of ighteen Thousand $esos $1:,000!00 4 said

contributions of both parties being the appraised values of their respective properties broughtinto the partnership4

/! That the said &ertificate of $ublic &onvenience and ecessity was revo#ed and cancelledby order of the $ublic ;ervice &ommission dated )arch 15, 1955, promulgated in case o!5:1::, entitled,


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partnership, the same could not be disposed of by the party contributing the same without theconsent or approval of the partnership or of the other partner! &lemente vs. Kalvan, $hil!, 5 5 !

The lower court declared that the contract of partnership was null and void, because by the contractof partnership, the parties thereto have become dummies of the owner of the franchise! The reason

for this holding was the admission by defendant when being cross"e*amined by the court that heand the plaintiff are dummies! He find that this admission by the defendant is an error of law, not astatement of a fact! The -nti"?ummy law has not been violated as parties plaintiff and defendant arenot aliens but 'ilipinos! The -nti"?ummy law refers to aliens only &ommonwealth -ct 10: asamended !

3pon e*amining the contract of partnership, especially the provision thereon wherein the partiesagreed to maintain, operate and distribute electric light and power under the franchise belonging to)rs! 7uenaflor, we do not find the agreement to be illegal, or contrary to law and public policy suchas to ma#e the contract of partnership, null and void ab initio ! The agreement could have beensubmitted to the $ublic ;ervice &ommission if the rules of the latter re uire them to be so presented!

7ut the fact of furnishing the current to the holder of the franchise alone, without the previousapproval of the $ublic ;ervice &ommission, does not per se ma#e the contract of partnership nulland void from the beginning and render the partnership entered into by the parties for the purposealso void and non"e*istent! 3nder the circumstances, therefore, the court erred in declaring that thecontract was illegal from the beginning and that parties to the partnership are not bound therefor,such that the contribution of the plaintiff to the partnership did not pass to it as its property! (t alsofollows that the claim of the defendant in his counterclaim that the partnership be dissolved and itsassets li uidated is the proper remedy, not for each contributing partner to claim bac# what he hadcontributed!

'or the foregoing considerations, the judgment appealed from as well as the order of the court for

the ta#ing of the property into custody by the sheriff must be, as they hereby are set aside and thecase remanded to the court below for further proceedings in accordance with law!

Uy v. Puzon

(NOTE: A partner in a construction venture who failed to standby his commitmentto the partnership will be ordered to reimburse to his co-partner whatever thelatter invested and spent for the projects of the venture.

-ppeal from the decision of the &ourt of 'irst (nstanre of )anila, dissolving the


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inspected the projects in uestion and, e*pecting to derive considerable profits therefrom, agreed to theproposition, thus resulting in the formation of the anuary 1:, 195 , 9 wor# on theprojects was started by the partnership on October 1, 195 in view of the insistence of the 7ureau of$ublic %ighways to complete the project right away! 10 ;ince $uAon was busy with his other projects,Hilliam 3y was entrusted with the management of the projects and whatever e*pense the latter mightincur, would be considered as part of his contribution! 11 -t the end of ?ecember, 195 , Hilliam 3y hadcontributed to the partnership the amount of $115,.5/!/9, including his capital! 12

The loan of $uAon was approved by the $hilippine ational 7an# in ovember, 195 and he gave toHilliam 3y the amount of $ 0,000!00! Of this amount, $.0,000!00 was for the reimbursement of3y8s contribution to the partnership which was used to clear the title to $uAon8s property, and the$20,000!00 as $uAon8s contribution to the partnership capital! 13

To guarantee the repayment of the above"mentioned loan, 7artolome $uAon, without the #nowledgeand consent of Hilliam 3y, 14 assigned to the $hilippine ational 7an# all the payments to be receivedon account of the contracts with the 7ureau of $ublic %ighways for the construction of the afore"mentioned projects! 15 7y virtue of said assignment, the 7ureau of $ublic %ighways paid the money dueon the partial accomplishments on the government projects in uestion to the $hilippine ational 7an#which, in turn, applied portions of it in payment of $uAon8s loan! Of the amount of $1,0. ,1:1!0 ,released by the 7ureau of $ublic %ighways in payment of the partial wor# completed by the partnershipon the projects, the amount of $//2,5/9! 0 was applied in payment of $uAon8s loan and only the amountof $2 ,:20!:0 was deposited in the partnership funds, 16 which, for all practical purposes, was also under$uAon8s account since $uAon was the custodian of the common funds!

-s time passed and the financial demands of the projects increased, Hilliam 3y, who supervised thesaid projects, found difficulty in obtaining the necessary funds with which to pursue the constructionprojects! Hilliam 3y correspondingly called on 7artolome $uAon to comply with his obligations under the terms of their partnership agreement and to place, at lest, his capital contribution at the disposalof the partnership! ?espite several promises, $uAon, however, failed to do so! 17 CealiAing that hisverbal demands were to no avail, Hilliam 3y conse uently wrote 7artolome $uAon pormal letters ofdemand, 18 to which $uAon replied that he is unable to put in additional capital to continue with theprojects! 19


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'ailing to reach an agreement with Hilliam 3y, 7artolome $uAon, as prime contractor of theconstruction projects, wrote the subcontractor, 3!$! &onstruction &ompany, on ovember 20, 195 ,advising the partnership, of which he is also a partner, that unless they presented an immediatesolution and capacity to prosecute the wor# effectively, he would be constrained to consider the sub"contract terminated and, thereafter, to assume all responsibilities in the construction of the projectsin accordance with his original contract with the 7ureau of $ublic %ighways! 20 On ovember 2 ,

195 , 7artolome $uAon again wrote the 3!$!&onstruction &ompany finally terminating their subcontractagreement as of ?ecember 1, 195 ! 21

Thereafter, Hilliam 3y was not allowed to hold office in the 3!$! &onstruction &ompany and hisauthority to deal with the 7ureau of $ublic %ighways in behalf of the partnership was revo#ed by7artolome $uAon who continued with the construction projects alone! 22

On )ay 20, 195:, Hilliam 3y, claiming that 7artolome $uAon had violated the terms of theirpartnership agreement, instituted an action in court, see#ing, inter alia , the dissolution of thepartnership and payment of damages!

-nswering, 7artolome $uAon denied that he violated the terms of their agreement claiming that it

was the plaintiff, Hilliam 3y, who violated the terms thereof! %e, li#ewise, prayed for the dissolutionof the partnership and for the payment by the plaintiff of his, share in the losses suffered by thepartnership!

-fter appropriate proceedings, the trial court found that the defendant, contrary to the terms of theirpartnership agreement, failed to contribute his share in the capital of the partnership appliedpartnership funds to his personal use4 ousted the plaintiff from the management of the firm, andcaused the failure of the partnership to realiAe the e*pected profits of at least $.00,000!00! -s aconse uence, the trial court dismissed the defendant8s counterclaim and ordered the dissolution ofthe partnership! The trial court further ordered the defendant to pay the plaintiff the sum of$/20,10/!1/!

%ence, the instant appeal by the defendant 7artolome $uAon during the pendency of the appealbefore this &ourt, the said 7artolome $uAon died, and was substituted by 'ranco $uAon!

The appellant ma#es in his brief nineteen 19 assignment of errors, involving uestions of fact,which relates to the following points+

1 That the appellant is not guilty of breach of contract4 and

2 That the amounts of money the appellant has been order to pay the appellee is not supported bythe evidence and the law!

-fter going over the record, we find no reason for rejecting the findings of fact below, justifying thereversal of the decision appealed from!

The findings of the trial court that the appellant failed to contribute his share in the capital of thepartnership is clear incontrovertible! The record shows that after the appellant8s loan the amount of$150,000!00 was approved by the $hilippin ational 7an# in ovember, 195 , he gave the amount$ 0,000!00 to the appellee who was then managing the construction projects! Of this amount,$.0,000!00 was to be applied a reimbursement of the appellee8s contribution to the partnershipwhich was used to clear the title to the appellant8s property, and th balance of $20,000!00, as$uAon8s contribution to the partnership! 23 Thereafter, the appellant failed to ma#e any further


23/39

contributions the partnership funds as shown in his letters to the appellee wherein he confessed hisinability to put in additional capital to continue with the projects! 24

$arenthetically, the claim of the appellant that the appellee is e ually guilty of not contributing hisshare in the partnership capital inasmuch as the amount of $.0,000!00, allegedly given to him inOctober, 195 as partial contribution of the appellee is merely a personal loan of the appellant which

he had paid to the appellee, is plainly untenable! The terms of the receipts signed by the appellantare clear and une uivocal that the sums of money given by the appellee are appellee8s partialcontributions to the partnership capital! Thus, in the receipt for $10,000!00 dated October 2.,195 , 25 the appellant stated+ 789.:;wph


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and the 3!$! &onstruction &ompany! (n view of the assignemt made by $uAon to the $hilippineational 7an#, the latter withheld and applied the amount of $//2,5/9, 0 in payment of the

appellant8s personal loan with the said ban#! The balance was deposited in $uAon8s current accountand only the amount of $2 ,:20!:0 was deposited in the current account of the partnership! 30 'orsure, if the appellant gave to the partnership all that were eamed and due it under the subcontractagreements, the money would have been used as a safe reserve for the discharge of all obligations of the

firm and the partnership would have been able to successfully and profitably prosecute the projects itsubcontracted!

Hhen did the appellant ma#e the reimbursement claimed by himG

'or the same period, the appellant actually disbursed for the partnership, in connection with theconstruction projects, the amount of $952,:/9! ! 31 ;ince the appellant received from the 7ureau of$ublic %ighways the sum of $1,0. ,1:1!01, the appellant has a deficit balance of $9.,/.2!2.! Theappellant, therefore, did not ma#e complete restitution!

The findings of the trial court that the appellee has been ousted from the management of thepartnership is also based upon persuasive evidence! The appellee testified that after he haddemanded from the appellant payment of the latter8s contribution to the partnership capital, the saidappellant did not allow him to hold office in the 3!$! &onstruction &ompany and his authority to dealwith the 7ureau of $ublic %ighways was revo#ed by the appellant! 32

-s the record stands, He cannot say, therefore, that the decis of the trial court is not sustained bythe evidence of record as warrant its reverw!

;ince the defendantappellant was at fauh, the tral court properly ordered him to reimburse theplaintiff"appellee whatever amount latter had invested in or spent for the partnership on account ofconstruction projects!

%ow much did the appellee spend in the construction projects uestionG

(t appears that although the partnership agreement stated the capital of the partnership is$100,000!00 of which each part shall contribute to the partnership the amount of $50,000!00cash 33 the partners of the 3!$! &onstruction &ompany did contribute their agreed share in thecapitaliAation of the enterprise in lump sums of $50,000!00 each! -side from the initial amount$.0,000!00 put up by the appellee in October, 195 , 34 the partners8 investments too#, the form of cashadvances coveting e*penses of the construction projects as they were incurred! ;ince the determinationof the amount of the disbursements which each of them had made for the construction projects re uire ane*amination of the boo#s of account, the trial court appointed two commissioners, designated by theparties,


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balance of $:,2.2!/9! 38 (t is in their respective adjustments of the capital account of the appellee thatthe commissioners had disagreed!

)r! -blaAa, designated by the appellant, would want to charge the appellee with the sum of$2.,2/9!.:, representing the chec#s isssued by the appellant, 39 and encashed by the appellee or hisbrother, 3y %an so that the appellee would owe the partnership the amount of $15,99 !09!

)r! Tayag, designated by the appellee, upon the other hand, would credit the appellee the followingadditional amounts+

1 $ ,.9 !:0 F items omitted from the boo#s of partnership but recogniAed and charged to)iscellaneous *penses by )r! -blaAa4

2 $ 5,10/! F payrolls paid by the appellee in the amount $12:,10/! less payroll remittancesfrom the appellant in amount of $ /,000!004 and

/ $2 ,02 !0. other e*peses incurred by the appellee at construction site!

Hith respect to the amount of $2.,2/9!.:, claimed by appellant, we are hereunder adopting thefindings of the trial which we find to be in accord with the evidence+

To enhance defendant8s theory that he should be credited $2.,2/9!.:, he presented chec#sallegedly given to plaintiff and the latter8s brother, 3y %an, mar#ed as *hibits 2 to 11! %owever,defendant admitted that said chee#s were not entered nor record their boo#s of account, ase*penses for and in behalf of partnership or its affairs! On the other hand, 3y %an testified that of thechee#s he received were e*change for cash, while other used in the purchase of spare partsre uisitioned by defendant! This testimony was not refuted to the satisfaction of the &ourt,considering that %an8s e*planation thereof is the more plausible because if they were employed inthe prosecution of the partners projects, the corresponding disbursements would have certainly beenrecorded in its boo#s, which is not the case! Ta#ing into account defendant is the custodian of the

boo#s of account, his failure to so enter therein the alleged disbursements, accentuates the falsity ofhis claim on this point! 40

7esides, as further noted by the trial court, the report &ommissioner -blaAa is unreliable in view ofhis proclivity to favor the appellant and because of the inaccurate accounting procedure adopted byhim in auditing the boo#s of account of the partnership unli#e )r! Tayag8s report which inspires faithand credence! 41

-s e*plained by )r! Tayag, the amount of $ ,.9 !:0 represen e*penses paid by the appellee out ofhis personal funds which not been entered in the boo#s of the partnership but which beenrecogniAed and conceded to by the auditor designated by the appellant who included the saidamount under *penses! 42

The e*planation of )r! Tayag on the inclusion of the amount of $ 5,10/! is li#ewise clear andconvincing! 43

-s for the sum of of $2 ,02 !0., the same represents the e*penses which the appelle paid inconnection withe the projects and not entered in the boo#s of the partnership since all vouchers andreceipts were sent to the )anila office which were under the control of the appellant! %owever,officer which were under the control of the appellant! %owever, a list of these e*penses areincorporated in *hibits NN, NN"1 to NN".!


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(n resume8, the appelllee8s credit balance would be as follows+

789.:;wph


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incurr ed atthe

site*hs

, NN,NN"1toNN".

2 ,02!0.

TOT-@

$10 ,: 1!00

-t the trial, the appellee presented a claim for the amounts of $/,91 !/9 and $., 5!00 which healso advanced for the construction projects but which were not included in the &ommissioner8sCeport! 44

-ppellee8s total investments in the partnership would, therefore, be+

-ppellee8s total

credits

$10 ,: 1!00

-dd+unrecordedbalancesfor themonth of?ec! 195

*hs!EEE, EE"1

to EEE 19,EEE"22

/,91 ,/9

-dd+$aymentsto )unoA,as

., 5!00


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subcontractor of five,

5 7ridgesp! 2 . tsn4*hs! EEE"

20, EEE"21

Total(nvestments

$l15,.5/!/9

Cegarding the award of $200,000!00 as his share in the unrealiAed profits of the partnership, the

appellant contends that the findings of the trial court that the amount of $.00,000!00 as reasonableprofits of the partnership venture is without any basis and is not supported by the evidence! Theappemnt maintains that the lower court, in ma#ing its determination, did not ta#e into considerationthe great ris#s involved in business operations involving as it does the completion of the projectswithin a definite period of time, in the face of adverse and often unpredictable circumstances, as wellas the fact that the appellee, who was in charge of the projects in the field, contributed in a largemeasure to the failure of the partnership to realiAe such profits by his field management!

This argument must be overruled in the light of the law and evidence on the matter! 3nder -rticle2200 of the &ivil &ode, indemnification for damages shall comprehend not only the value of the losssuffered, but also that of the profits which the obligee failed to obtain! (n other words lucrumcessans is also a basis for indemnification!

%as the appellee failed to ma#e profits because of appellant8s breach of contractG

There is no doubt that the contracting business is a profitable one and that the 3!$! &onstruction&ompany derived some profits from8 co io oa ects its sub ntracts in the construction of the road andbridges projects its deficient wor#ing capital and the juggling of its funds by the appellant!

&ontrary to the appellant8s claim, the partnership showed some profits during the period from >uly 2,195 to ?ecember /1, 195 ! (f the $rofit and @oss ;tatement 45 showed a net loss of $1/.,019!./, thiswas primarily due to the confusing accounting method employed by the auditor who intermi*ed h andaccthe cas ruamethod of accounting and the erroneous inclusion of certain items, li#e personal e*pensesof the appellant and afteged e*traordinary losses due to an accidental plane crash, in the operatinge*penses of the partnership, &orrected, the $rofit and @oss ;tatement would indicate a net profit of

$.1, 11!2:!

'or the period from >anuary 1, 195: to ;eptember /0, 1959, the partnership admittedly made a netprofit of $52,9./!:9! 46

7esides, as He have heretofore pointed out, the appellant received from the 7ureau of $ublic%ighways, in payment of the Aonstruction projects in uestion, the amount of $1,0. ,1:1!01 47 anddisbursed the amount of $952,:/9! , 48 leaving an unaccounted balance of $9.,/.2!2.! Obviously, thisamount is also part of the profits of the partnership!


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?uring the trial of this case, it was discovered that the appellant had money and credits receivablefroin the projects in uestion, in the custody of the 7ureau of $ublic %ighways, in the amount of$12:, 9! 5, representing the 10B retention of said projects! 49 -fter the trial of this case, it was shownthat the total retentions Hucted from the appemnt amounted to $1.5,/5:!00! 50 ;urely, these retainedamounts also form part of the profits of the partnership!

%ad the appellant not been remiss in his obligations as partner and as prime contractor of theconstruction projects in uestion as he was bound to perform pursuant to the partnership andsubcontract agreements, and considering the fact that the total contract amount of these twoprojects is $2,/2 ,//5! , it is reasonable to e*pect that the partnership would have earned muchmore than the $//.,255! 1 He have hereinabove indicated! The award, therefore, made by the trialcourt of the amount of $200,000!00, as compensatory damages, is not speculative, but based onreasonable estimate!

H% C 'OC , finding no error in the decision appealed from, the said decision is hereby affirmedwith costs against the appellant, it being understood that the liability mentioned herein shall be homeby the estate of the deceased 7artolome $uAon, represented in this instance by the administratorthereof, 'ranco $uAon!

Ramnani v CA

Execution of a judgment is the fruit and end of the suit and is the life of thelaw. To frustrate it for almost a decade by means of deception and dilatory schemeson the part of the losing litigants is to frustrate all the efforts, time and expenditure of the courts. This Court’s Decision in this case became final and executory as early as1 !. "fter years of continuous wrangling during the execution stage, it isunfortunate that the judgment still awaits full implementation. Delaying tacticsemployed by the said losing litigants ha#e pre#ented the orderly execution. $t is in theinterest of justice that we should write finis to this litigation.

%or resolution is the &otion for 'econsideration of this Court’s 'esolution dated"ugust 1(, 1 filed by spouses $shwar and )onya 'amnani. *ur assailed'esolution denied their &anifestation and +rgent &otion dated &ay , 1 - andaffirmed the orders of the 'egional Trial Court of asay City, /ranch 11 dated0anuary !( and "pril , 1 -.

The factual bac2drop, culled from the #oluminous records in these cases, are3

$n the latter part of 1 , spouses $shwar 0ethmal 'amnani, an "merican citi4en,and )onya 0ethmal 'amnani, both from 5ew 6or2 7hereinafter referred to as spouses$shwar8, in#ested substantial amount of money for a profitable business #enture in the

hilippines. )ince they could not personally manage their in#estments, they


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appointed two of $shwar’s brothers, Choithram 0ethmal 'amnani and 5a#alrai0ethmal 'amnani, as their attorneys9in9fact.

Choithram decided to in#est in the real estate business. *n %ebruary 1, 1 and

&ay 1 , 1 , Choithram, in his capacity as attorney9in9fact of $shwar, bought two parcels of land located in /arrio +gong, asig, 'i4al from *rtigas : Company, ;td.artnership 7*rtigas, for short8 and had buildings constructed thereon. Through the

industry and genius of Choithram, $shwar’s property was de#eloped and impro#edinto a #aluable asset worth millions of pesos.

+nfortunately, Choithram, while showing himself to be a good manager, pro#edunfaithful to the trust reposed in him by spouses $shwar. =1 > and ->=1 ! wereissued by the 'egistry of Deeds of 'i4al in her fa#or.

Choithram also donated !, >> shares of stoc2 in a garment corporation to hischildren. ?e also fraudulently mortgaged @=,>>>,>>>.>> worth of the spouses’

property to A*#erseas ?olding Co.B 'ecords show that the @=,>>>,>>>.>> mortgage

was executed on 0une !>, 1 , or days before the corporation was organi4ed.

)pouses $shwar learned what Choithram was doing. ?ence, they as2ed him torender an accounting, but there was none forthcoming. They then re#o2edChoithram’s general power of attorney. ?e earnestly pleaded in writing to $shwar toissue another power of attorney, but to no a#ail.

Choithram repudiated all well9meaning efforts to sol#e the contro#ersy within the'amnani family. &oreo#er, he denied the genuine nature of the trust relationship

between him and his brother $shwar.

"gitated, spouses $shwar filed on *ctober , 1 ! with the Court of %irst $nstanceof 'i4al a complaint for recon#eyance and damages against Choithram and his son&oti and daughter9in9law 5irmla 7Choithram family for short8. $ronically, the C%$dismissed the complaint and recogni4ed Choithram’s full ownership of the uestionedtwo parcels of land. *n appeal, the Court of "ppeals re#ersed the trial court’s


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decision, finding that spouses $shwar entrusted capital to Choithram to be in#ested inthe hilippines. The appellate court held the Choithram family and *rtigas jointlyand se#erally liable to spouses $shwar.

)ubse uently, the Court of "ppeals modified its earlier decision by dismissing thecase against *rtigas. /oth parties appealed to this Court. $n G.R. No. 85494 , theChoithram family #igorously asserted their right of ownership o#er the disputed lots,while in G.R. No. 85496 , spouses $shwar faulted the Court of "ppeals in dismissingthe case against *rtigas.

$n the meantime, Choithram continued to dissipate $shwar’s assets.

*n &ay (, 1 1, this Court rendered a joint Decision in .'.

5os. 85494 and 85496 , now in 1 )C'" (=1. This Court held that Choithram#iolated the trust relationship between him and $shwar. Considering, howe#er, that thetwo protagonists are brothers and that Choithram made wise in#estments of spouses$shwar’s money, this Court applied a Solomonic solution by di#iding e ually betweenspouses $shwar and the Choithram family the two parcels of land subject of thelitigation, including all the impro#ements thereon and income from 1 (. This Courtalso ruled that *rtigas is solidarily liable with Choithram family to spouses $shwar

because of its bad faith in executing the deeds of sale in fa#or of 5irmla despite its2nowledge that Choithram’s general power of attorney had been re#o2ed by $shwar.

;ater, this Court reali4ed that its Solomonic Decision, in effect, formulated a newcontract for the parties. Thus, in its 'esolution dated %ebruary ! , 1 !, this Courtdeclared that the disputed lots are solely owned by spouses $shwar. The motion for reconsideration of the Choithram family was denied with finality.

*n &arch 1 , 1 !, this Court also denied Choithram’s motion for clarificationand/or second motion for reconsideration. Entry of final judgment was thenmade on &arch !>, 1 !.

)till obstinate to abide with this Court’s final judgment, the Choithram familyfiled a petition for certiorari, through the *#erseas ?olding Corporation, 7doc2etedas G.R. No. 105071 8 see2ing to set aside as AunconstitutionalB this Court’s &ay (,1 1 joint Decision declaring, among others, that the mortgaged contract in#ol#ingthe two parcels of land executed between 5irmla and *#erseas ?olding is #oid. This


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Court denied the said petition for being in the nature of a third motion for reconsideration and stressed that a writ of certiorari may not issue from the Court enbanc to annul a Decision of one of the Court’s Di#isions. This Court forthwithordered the 'egional Trial Court of asay City, /ranch 11! to execute with dispatch

its joint Decision of &ay (, 1 1 and 'esolution dated %ebruary ! , 1 !. The parties and counsel were also warned to desist from further assailing an already finalDecision and raising anew issues already passed upon.

er 'esolution of this Court dated "ugust ! , 1 !, the case was re9assigned tothe 'TC of asay City, /ranch 11 . Thereafter, execution proceedings and hearing onthe #aluation of the disputed properties ensued.

/ecause of the Choithram family’s continuing delaying tactics and e#asi#e mo#es

against the execution of this Court’s Decision and due to the desire of spouses $shwar to uic2ly obtain the fruits of their many years of court battle, the latter wereconstrained to agree to a compromise agreement which was denominated as Tripartite"greement.

$t bears stressing that spouses $shwar were claiming for the #alue of the two lots,not the lots themsel#es. To clear up this issue, the 0uly 1 , 1 = Tripartite "greementfixed the #aluation at ,>>>,>>>.>> which the Choithram family, together with*rtigas, agreed to pay spouses $shwar, thus3

A7a8 -> &illion upon the signing hereof by the partiesF

b8 1> &illion within thirty 7=>8 days from 0uly , 1 = or on or before)eptember =, 1 =F

c8 1 &illion within sixty 7 >8 days from 0uly , 1 = or on or before)eptember =, 1 =F

Choithram andGor ?arish 'amnani shall issue to plaintiffs postdated chec2s on theamounts co#ered by paragraph 7b and c abo#e8 immediately encashable on duedates.BH1I

There is also a specific agreement on default by the Choithram family, thus3

http://sc.judiciary.gov.ph/jurisprudence/2001/jul2001/85494.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/2001/jul2001/85494.htm#_edn1


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A . $n the e#ent of default of defendants *rtigas and Choithram 0ethmal 'amnani to pay any of the amounts within the agreed period, proceedings in execution, includinghearings on #aluation, shall immediately resume and plaintiff shall be entitled toenforce and execute the )upreme Court’s judgment against the defendants in

accordance with the terms thereof and the final and total monetary entitlementsdescribed in paragraph 1 abo#e, less whate#er amounts plaintiffs may ha#e partiallyreco#ered from the defendants. $n case of execution of the balance due $shwar asfinally determined by the Court, plaintiffs shall proceeds to first sell the subject

properties mentioned in par. hereof.B H!I

The Choithram family paid spouses $shwar ->,>>>,>>>.>>, as agreedupon. ?owe#er, when the payment of the ! ,>>>,>>>.>> balance became due, theydefaulted and again bal2ed at complying with their commitments under the

compromise agreement.

*n "ugust =, 1 =, or one day before "ugust -, 1 =, the due date of the second payment, the Choithram family wrote the /ureau of $nternal 'e#enue, ostensiblyre uesting clarification whether or not, as payors of million, they should pay thego#ernment any tax. )ignificantly, they did not inform the /$' that $shwar is a

permanent resident alien here and that the amount he will recei#e under the Tripartite"greement is not subject to withholding tax at source. $n response, the /$' Commissioner, in a letter dated "ugust , 1 =, informed Choithram and *rtigas thatthe million compromise settlement is subject to =>J withholding tax collectibleagainst spouses $shwar and at the same time constituted Choithram and *rtigas asAwithholding agents.B

The side issue arising from the Choithram family’s report to /$' of alleged non9 payment of taxes due was e#entually decided in fa#or of spouses $shwar. /ut it ga#ethe Choithram family a con#enient excuse for not complying with their obligation to

pay when due the balance under the compromise agreement.

*n )eptember =, 1 =, the Choithram family filed a manifestation tendering payment of the balance of ! million as e#idenced by chec2s payable, not to spouses$shwar, but to the /ranch Cler2 of Court of the 'TC. )ubse uently, or particularly on)eptember (, 1 =, or three days after the maturity date of the second set of chec2s,spouses $shwar filed with the court a quo an urgent motion for immediate resumptionof hearing, arguing that pursuant to aragraph of the Tripartite "greement,



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Choithram and *rtigas were already in default, hence, execution proceedings should be resumed. The trial court, in its assailed order dated 0anuary !(, 1 -, denied themotion, thus3

AThat defendant’s desire to pay the balance of the amount stipulated in their Tripartite"greement is apparent. +nder the aforestated facts and circumstances, is it e uitablethat they be held in defaultK "rticle 1!! of the Ci#il Code gi#es the court the powerto e uitably reduce penalty when the principal obligation has been partly compliedwith by the debtor. $n default cases, the court may li2ewise reconsider its order ofdefault when the interest of justice so dictates.

A$n order not to put to naught all the efforts of the parties in forging the Tripartite"greement which too2 them a long period of time to arri#e at, the branch Cler2 of

Court is directed to immediately endorse to the counsel of plaintiffs, up to the time thesame is encashed, under the following terms3

1. That the Luasha ;aw 7%8irm recei#es the balance of the amount of ! million incompliance with the Tripartite "greement, ad#erted to, and subject to the tax claim of the/$'F

!. That it shall release to the plaintiffs the amount due them after the tax matter on said amountshall ha#e been resol#ed, and in the meanwhile the said amount shall be deposited in aninterest bearing account andGor money placement in treasury billsF and

=. T he upon receipt of the aforestated amount, plaintiffs shall execute the Deed of "ssignmentof 0udgment in fa#or of defendants *rtigas : Co., ;td., artnership and Choithram 0ethmal'amnani in the proportion agreed upon by the said defendants.

$n #iew of the foregoing, plaintiffs’ &otion for continuation of hearing is DE5$ED.B H=I

)pouses $shwar filed a &otion for 'econsideration but was denied. This prompted them to file with this Court a &anifestation and +rgent &otioncontending inter alia that the lower court committed gra#e abuse of discretion in

denying their motion for resumption of the execution proceedings.

*n "ugust 1(, 1 , this Court issued a 'esolution denying spouses $shwar’s&anifestation and +rgent &otion and sustaining the challenged orders of the 'TC.

?ence, the present &otion for 'econsideration of the said 'esolution.



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$n their motion, spouses $shwar contend that we are rewarding bad faith andfraudulent maneu#erings on the part of the Choitram family. To allow non9compliance with the terms of the Tripartite "greement and, therefore, a de#iation fromour &ay (, 1 1 Decision and %ebruary ! , 1 ! 'esolution is an act of injustice.

)pouses $shwar specified in their motion the reprehensible acts of Choithram,among them3

a8 atent #iolation of a clear compromise agreement burdensome to $shwar 'amnaniF

b8 $n spite of $shwar’s generous concessions, Choithram repaid the fa#ors with bad faith,delaying tactics and sinister mo#es intended to thwart him 7$shwar8 from getting what is

justly due him, resulting in extreme anxiety, considerable distress and needless expenses onhis partF

c8 %iling fabricated charges with the /$' regarding $shwar’s alleged tax liabilities, all of themfound without basis but only after causing the delayed settlement of what Choithram

promised to pay under the compromise agreementF and

d8 Continued maneu#er to delay or pre#ent the execution of this Court’s Decision dated &ay (,1 1 and %ebruary ! , 1 !.

$n what spouses $shwar call a Aplea for simple justice,B they now as2, A)houlddeceit and unscrupulous7ness8 be rewardedKB

$t is elementary that nothing beneficial or lucrati#e should arise from subterfugeor deception. /ad faith has characteri4ed the history of this case. $t started withChoithram’s #iolations of the trust agreement and has continued throughout theexecution stage. Dilatory tactics, including a misleading report to the /$', ha#eresulted in non9implementation for ten 71>8 years of a final and executory Decision of this Court. &oreo#er, there ha#e been late and faulty payments under a compromiseagreement.

! . " compromise is a contract whereby the parties, by ma2ing reciprocalconcessions, a#oid a litigation or put an end to one already commenced.B


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" compromise is intended to pre#ent or put an end to a lawsuit. The parties adjusttheir difficulties by mutual consent. Each of the parties prefers the terms of thecompromise to their earlier hope of gaining, balanced by the danger of losing. $t isintended to end litigation because of the uncertainty of its result. rolonging a

litigation is anathema to a compromise agreement.

$n this particular case, there is no longer any uncertainty o#er the result of litigation. 0udgments were rendered ten 71>8 years bac2. )pouses $shwar ha#e wontheir cases. The Choithram family should ha#e accepted this settled matter a longtime ago. )pouses $shwar agreed to the compromise simply because after more than adecade of litigation, their lots or the #alue thereof ha#e not been returned to them. $nfact, up to the present time, or 1( years from the filing of the complaint and more thannine 7 8 years after our Adenied9with9finality judgment,B they ha#e not been fully

paid.

" compromise agreement is #alid and binding, not because it is the settlement of acontro#ersy. *nce the compromise is perfected, the parties are bound to abide by it ingood faith.

$n the cases at bar, the Choithram family persisted in dilatory tactics e#en after thecourt battle was supposed to ha#e ended with finality. Their claims ha#e beenadjudged in#alid but they continued the conflict.

+nder the compromise agreement, the post9dated chec2 for 1>,>>>,>>>.>>should ha#e been cashed not later than "ugust -, 1 =, and the 1 ,>>>,>>>.>> chec2 not later than )eptember =, 1 =. The post dated chec2s could not be cashed. $nstead,a 1>,>>>,>>>.>> chec2 was tendered on )eptember 1!, 1 =, or days late. Thechec2s were personal chec2s payable to the Cler2 of Court, meaning that spouses$shwar could not e#en encash them until ordered by the trial court. The chec2 for

1 ,>>>,>>>.>> was tendered on )eptember 1!, 1 =, or days late. $t has to beemphasi4ed at this point that the compromise agreement is e#idently in amountssubstantially less than what the Choitram family should pay spouses $shwar. Thecompromise is spouses $shwar’s concession to the Choithram family for them to endthe seemingly interminable litigation.


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therefore, not subject to =>J withholding tax at source. +nder the Tax Code, a final=>J withholding tax at source is mandated to be collected only from non9residentaliens. The /$' promptly issued an assessment based on an incomplete presentationof facts by Choithram, directing him to withhold Twenty &illion *ne ?undred %ifty

Thousand esos 7 !>,1 >,>>>.>>8

%or the mischief of the Choithram family, spouses $shwar were needlesslycompelled to litigate before the Court of Tax "ppeals and subse uently before theCourt of "ppeals, and in the process wasted time and incurred expenses just to correctthe harm done by the said family. The Court of Tax appeals re#ersed the /$' andruled that $shwar is a resident alien and his income is not subject to =>J automaticfinal withholding tax at source. )ubse uently, the Court of "ppeals affirmed the CT"ruling on the status of $shwar as a resident alien.

The administrati#e and judicial processes which $shwar had to undergo because of the deceit and unscrupulous acts of the Choithram family consumed fi#e 7 8exhausting years, from 1 = until the dispute was finally resol#ed in 1 . $ndeed,incessant bad faith on the part of the %amily Choithram is e#ident.

" second hard loo2 at the history of these cases shows that it was a mis9step andwhen we upheld the orders of the trial court dated 0anuary (, 1 - and "pril ,1 -. They should be rescinded.

/y way of conclusion, it is elementary that if a party fails or refuses to abide by acompromise agreement, the other party may either enforce the compromise or regardit as rescinded and insist upon his original demand. H I This rule must be followed. %or indeed, Ait is not the pro#ince of the court to alter a contract by construction or toma2e a new contract for the partiesF its duty is confined to the interpretation of the onewhich they ha#e made for themsel#es without regard to its wisdom or folly as thecourt cannot supply material stipulations or read into the contract words which it doesnot contain.B H I

W ERE!"RE , this Court’s 'esolution dated "ugust 1(, 1 isreconsidered. The 0anuary !(, 1 - and "pril , 1 - orders of the 'egional TrialCourt, /ranch 11 , asay City, in Ci#il Case 5o. > =-9 are set aside. The trial courtis ordered to speedily enforce and execute this Court’s final and executory Decisiondated &ay (, 1 1 and the 'esolution dated %ebruary ! , 1 !F and to expeditiously

http://sc.judiciary.gov.ph/jurisprudence/2001/jul2001/85494.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/2001/jul2001/85494.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/2001/jul2001/85494.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/2001/jul2001/85494.htm#_edn6


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resume and complete the proceedings in execution, including the #aluation of the parcels of land co#ered by TCT 5os. ->=1 > and ->=1 ! of the 'egistry of Deeds of

asig City for the purpose of determining the final and total monetary entitlement of spouses $shwar 0ethmal and )onya 0ethmal 'amnani, less the amount of %orty &illion

7->,>>>,>>>.>>8 esos recei#ed by them, strictly according to the tenor of the abo#eDecision and 'esolution of this Court. The trial court is further directed to report the

progress of its compliance within 1 days from notice and e#ery 1> days thereafter,until the execution is terminated.

#" "R$ERE$.

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Partnership Full Text II