partnershp cases

7/31/2019 Partnershp Cases

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G.R. No. L-17295 July 30, 1962 ANG PUE & COMPANY, ET AL.,plaintiffs-appellants,vs.SECRETARY OF COMMERCE AND INDUSTRY,defendant-appellee.Action for declaratory relief filed in the Court of First Instanceof Iloilo by Ang Pue & Company, Ang Pue and Tan Siongagainst the Secretary of Commerce and Industry to secure judgment "declaring that plaintiffs could extend for five years

the term of the partnership pursuant to the provisions of plaintiffs' Amendment to the Article of Co-partnership."The answer filed by the defendant alleged, in substance, thatthe extension for another five years of the term of theplaintiffs' partnership would be in violation of the provisionsof Republic Act No. 1180.It appears that on May 1, 1953, Ang Pue and Tan Siong, bothChinese citizens, organized the partnership Ang Pue &Company for a term of five years from May 1, 1953,extendible by their mutual consent. The purpose of thepartnership was "to maintain the business of generalmerchandising, buying and selling at wholesale and retail,particularly of lumber, hardware and other constructionmaterials for commerce, either native or foreign." Thecorresponding articles of partnership (Exhibit B) wereregistered in the Office of the Securities & ExchangeCommission on June 16, 1953.On June 19, 1954 Republic Act No. 1180 was enacted toregulate the retail business. It provided, among other things,that, after its enactment, a partnership not wholly formed byFilipinos could continue to engage in the retail business untilthe expiration of its term.On April 15, 1958 prior to the expiration of the five-yearterm of the partnership Ang Pue & Company, but after theenactment of the Republic Act 1180, the partners already

mentioned amended the original articles of part ownership(Exhibit B) so as to extend the term of life of the partnershipto another five years. When the amended articles werepresented for registration in the Office of the Securities &Exchange Commission on April 16, 1958, registration wasrefused upon the ground that the extension was in violationof the aforesaid Act.From the decision of the lower court dismissing the action,with costs, the plaintiffs interposed this appeal.The question before us is too clear to require an extendeddiscussion. To organize a corporation or a partnership thatcould claim a juridical personality of its own and transactbusiness as such, is not a matter of absolute right but aprivilege which may be enjoyed only under such terms as theState may deem necessary to impose. That the State, throughCongress, and in the manner provided by law, had the right toenact Republic Act No. 1180 and to provide therein that onlyFilipinos and concerns wholly owned by Filipinos may engagein the retail business can not be seriously disputed. That thisprovision was clearly intended to apply to partnership alreadyexisting at the time of the enactment of the law is clearlyshowing by its provision giving them the right to continue

engaging in their retail business until the expiration of theirterm or life.To argue that because the original articles of partnershipprovided that the partners could extend the term of thepartnership, the provisions of Republic Act 1180 cannot beadversely affect appellants herein, is to erroneously assumethat the aforesaid provision constitute a property right of which the partners can not be deprived without due processor without their consent. The agreement contain therein

must be deemed subject to the law existing at the time whenthe partners came to agree regarding the extension. In thepresent case, as already stated, when the partners amendedthe articles of partnership, the provisions of Republic Act1180 were already in force, and there can be not the slightestdoubt that the right claimed by appellants to extend theoriginal term of their partnership to another five years wouldbe in violation of the clear intent and purpose of the lawaforesaid.WHEREFORE, the judgment appealed from is affirmed, withcosts


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LORENZO T. OA and HEIRS OF JULIA BUALES, namely:RODOLFO B. OA, MARIANO B. OA, LUZ B. OA, VIRGINIAB. OA and LORENZO B. OA, JR.,petitioners,vs.THE COMMISSIONER OF INTERNAL REVENUE,respondent.Petition for review of the decision of the Court of Tax Appealsin CTA Case No. 617, similarly entitled as above, holding thatpetitioners have constituted an unregistered partnership andare, therefore, subject to the payment of the deficiency

corporate income taxes assessed against them by respondentCommissioner of Internal Revenue for the years 1955 and1956 in the total sum of P21,891.00, plus 5% surcharge and1% monthly interest from December 15, 1958, subject to theprovisions of Section 51 (e) (2) of the Internal Revenue Code,as amended by Section 8 of Republic Act No. 2343 and thecosts of the suit, 1 as well as the resolution of said courtdenying petitioners' motion for reconsideration of saiddecision.The facts are stated in the decision of the Tax Court asfollows:Julia Buales died on March 23, 1944, leaving as heirs hersurviving spouse, Lorenzo T. Oa and her five children. In1948, Civil Case No. 4519 was instituted in the Court of FirstInstance of Manila for the settlement of her estate. Later,Lorenzo T. Oa the surviving spouse was appointedadministrator of the estate of said deceased (Exhibit 3, pp.34-41, BIR rec.). On April 14, 1949, the administratorsubmitted the project of partition, which was approved bythe Court on May 16, 1949 (See Exhibit K). Because three of the heirs, namely Luz, Virginia and Lorenzo, Jr., all surnamedOa, were still minors when the project of partition wasapproved, Lorenzo T. Oa, their father and administrator of the estate, filed a petition in Civil Case No. 9637 of the Courtof First Instance of Manila for appointment as guardian of

said minors. On November 14, 1949, the Court appointed himguardian of the persons and property of the aforenamedminors (See p. 3, BIR rec.).The project of partition (Exhibit K; see also pp. 77-70, BIR rec.)shows that the heirs have undivided one-half (1/2) interest inten parcels of land with a total assessed value of P87,860.00,six houses with a total assessed value of P17,590.00 and anundetermined amount to be collected from the War DamageCommission. Later, they received from said Commission theamount of P50,000.00, more or less. This amount was notdivided among them but was used in the rehabilitation of properties owned by them in common (t.s.n., p. 46). Of theten parcels of land aforementioned, two were acquired afterthe death of the decedent with money borrowed from thePhilippine Trust Company in the amount of P72,173.00 (t.s.n.,p. 24; Exhibit 3, pp. 31-34 BIR rec.).The project of partition also shows that the estate sharesequally with Lorenzo T. Oa, the administrator thereof, in theobligation of P94,973.00, consisting of loans contracted bythe latter with the approval of the Court (see p. 3 of Exhibit K;or see p. 74, BIR rec.).

Although the project of partition was approved by the Courton May 16, 1949, no attempt was made to divide theproperties therein listed. Instead, the properties remainedunder the management of Lorenzo T. Oa who used saidproperties in business by leasing or selling them and investingthe income derived therefrom and the proceeds from thesales thereof in real properties and securities. As a result,petitioners' properties and investments gradually increasedfrom P105,450.00 in 1949 to P480,005.20 in 1956 as can be

gleaned from the following year-end balances:Year Investment Land Building

Account Account Account

1949 P87,860.00 P17,590.00

1950 P24,657.65 128,566.72 96,076.26

1951 51,301.31 120,349.28 110,605.11

1952 67,927.52 87,065.28 152,674.39

1953 61,258.27 84,925.68 161,463.83

1954 63,623.37 99,001.20 167,962.04

1955 100,786.00 120,249.78 169,262.52

1956 175,028.68 135,714.68 169,262.52

(See Exhibits 3 & K t.s.n., pp. 22, 25-26, 40, 50, 102-104)From said investments and properties petitioners derivedsuch incomes as profits from installment sales of subdividedlots, profits from sales of stocks, dividends, rentals andinterests (see p. 3 of Exhibit 3; p. 32, BIR rec.; t.s.n., pp. 37-38). The said incomes are recorded in the books of accountkept by Lorenzo T. Oa where the corresponding shares of the petitioners in the net income for the year are also known.Every year, petitioners returned for income tax purposestheir shares in the net income derived from said propertiesand securities and/or from transactions involving them(Exhibit 3, supra ; t.s.n., pp. 25-26). However, petitioners didnot actually receive their shares in the yearly income. (t.s.n.,pp. 25-26, 40, 98, 100). The income was always left in thehands of Lorenzo T. Oa who, as heretofore pointed out,invested them in real properties and securities. (See Exhibit 3,t.s.n., pp. 50, 102-104).On the basis of the foregoing facts, respondent

(Commissioner of Internal Revenue) decided that petitionersformed an unregistered partnership and therefore, subject tothe corporate income tax, pursuant to Section 24, in relationto Section 84(b), of the Tax Code. Accordingly, he assessedagainst the petitioners the amounts of P8,092.00 andP13,899.00 as corporate income taxes for 1955 and 1956,respectively. (See Exhibit 5, amended by Exhibit 17, pp. 50and 86, BIR rec.). Petitioners protested against theassessment and asked for reconsideration of the ruling of respondent that they have formed an unregistered


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partnership. Finding no merit in petitioners' request,respondent denied it (See Exhibit 17, p. 86, BIR rec.). (See pp.1-4, Memorandum for Respondent, June 12, 1961).The original assessment was as follows:1955Net income as per investigation ................ P40,209.89

Income tax due thereon ............................... 8,042.0025% surcharge .............................................. 2,010.50

Compromise for non-filing .......................... 50.00Total ............................................................... P10,102.501956Net income as per investigation ................ P69,245.23Income tax due thereon ............................... 13,849.0025% surcharge .............................................. 3,462.25Compromise for non-filing .......................... 50.00Total ............................................................... P17,361.25(See Exhibit 13, page 50, BIR records)Upon further consideration of the case, the 25% surchargewas eliminated in line with the ruling of the Supreme Courtin Collector v. Batangas Transportation Co. , G.R. No. L-9692,Jan. 6, 1958, so that the questioned assessment refers solelyto the income tax proper for the years 1955 and 1956 and the"Compromise for non-filing," the latter item obviouslyreferring to the compromise in lieu of the criminal liability forfailure of petitioners to file the corporate income tax returnsfor said years. (See Exh. 17, page 86, BIR records). (Pp. 1-3,Annex C to Petition)Petitioners have assigned the following as alleged errors of the Tax Court:I.THE COURT OF TAX APPEALS ERRED IN HOLDING THAT THEPETITIONERS FORMED AN UNREGISTERED PARTNERSHIP;II.

THE COURT OF TAX APPEALS ERRED IN NOT HOLDING THATTHE PETITIONERS WERE CO-OWNERS OF THE PROPERTIESINHERITED AND (THE) PROFITS DERIVED FROMTRANSACTIONS THEREFROM (sic);III.THE COURT OF TAX APPEALS ERRED IN HOLDING THATPETITIONERS WERE LIABLE FOR CORPORATE INCOME TAXESFOR 1955 AND 1956 AS AN UNREGISTERED PARTNERSHIP;IV.ON THE ASSUMPTION THAT THE PETITIONERS CONSTITUTEDAN UNREGISTERED PARTNERSHIP, THE COURT OF TAXAPPEALS ERRED IN NOT HOLDING THAT THE PETITIONERSWERE AN UNREGISTERED PARTNERSHIP TO THE EXTENTONLY THAT THEY INVESTED THE PROFITS FROM THEPROPERTIES OWNED IN COMMON AND THE LOANS RECEIVEDUSING THE INHERITED PROPERTIES AS COLLATERALS;V .ON THE ASSUMPTION THAT THERE WAS AN UNREGISTEREDPARTNERSHIP, THE COURT OF TAX APPEALS ERRED IN NOTDEDUCTING THE VARIOUS AMOUNTS PAID BY THEPETITIONERS AS INDIVIDUAL INCOME TAX ON THEIRRESPECTIVE SHARES OF THE PROFITS ACCRUING FROM THE

PROPERTIES OWNED IN COMMON, FROM THE DEFICIENTAX OF THE UNREGISTERED PARTNERSHIP.In other words, petitioners pose for our resolution thefollowing questions: (1) Under the facts found by the Court of Tax Appeals, should petitioners be considered as co-ownersof the properties inherited by them from the deceased JuliaBuales and the profits derived from transactions involvingthe same, or, must they be deemed to have formed anunregistered partnership subject to tax under Sections 24 and

84(b) of the National Internal Revenue Code? (2) Assumingthey have formed an unregistered partnership, should thisnot be only in the sense that they invested as a common fundthe profits earned by the properties owned by them incommon and the loans granted to them upon the security of the said properties, with the result that as far as theirrespective shares in the inheritance are concerned, the totalincome thereof should be considered as that of co-ownersand not of the unregistered partnership? And (3) assumingagain that they are taxable as an unregistered partnership,should not the various amounts already paid by them for thesame years 1955 and 1956 as individual income taxes on theirrespective shares of the profits accruing from the propertiesthey owned in common be deducted from the deficiencycorporate taxes, herein involved, assessed against suchunregistered partnership by the respondent Commissioner?Pondering on these questions, the first thing that has struckthe Court is that whereas petitioners' predecessor in interestdied way back on March 23, 1944 and the project of partitionof her estate was judicially approved as early as May 16,1949, and presumably petitioners have been holding theirrespective shares in their inheritance since those datesadmittedly under the administration or management of thehead of the family, the widower and father Lorenzo T. Oa,the assessment in question refers to the later years 1955 and

1956. We believe this point to be important because,apparently, at the start, or in the years 1944 to 1954, therespondent Commissioner of Internal Revenue did treatpetitioners as co-owners, not liable to corporate tax, and itwas only from 1955 that he considered them as havingformed an unregistered partnership. At least, there is nothingin the record indicating that an earlier assessment hadalready been made. Such being the case, and We see noreason how it could be otherwise, it is easily understandablewhy petitioners' position that they are co-owners and notunregistered co-partners, for the purposes of the impugnedassessment, cannot be upheld. Truth to tell, petitionersshould find comfort in the fact that they were not similarlyassessed earlier by the Bureau of Internal Revenue.The Tax Court found that instead of actually distributing theestate of the deceased among themselves pursuant to theproject of partition approved in 1949, "the propertiesremained under the management of Lorenzo T. Oa whoused said properties in business by leasing or selling themand investing the income derived therefrom and the proceedfrom the sales thereof in real properties and securities," as aresult of which said properties and investments steadily


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increased yearly from P87,860.00 in "land account" andP17,590.00 in "building account" in 1949 to P175,028.68 in"investment account," P135.714.68 in "land account" andP169,262.52 in "building account" in 1956. And all thesebecame possible because, admittedly, petitioners neveractually received any share of the income or profits fromLorenzo T. Oa and instead, they allowed him to continueusing said shares as part of the common fund for theirventures, even as they paid the corresponding income taxes

on the basis of their respective shares of the profits of theircommon business as reported by the said Lorenzo T. Oa.It is thus incontrovertible that petitioners did not, contrary totheir contention, merely limit themselves to holding theproperties inherited by them. Indeed, it is admitted thatduring the material years herein involved, some of the saidproperties were sold at considerable profit, and that with saidprofit, petitioners engaged, thru Lorenzo T. Oa, in thepurchase and sale of corporate securities. It is likewiseadmitted that all the profits from these ventures weredivided among petitioners proportionately in accordancewith their respective shares in the inheritance. In thesecircumstances, it is Our considered view that from themoment petitioners allowed not only the incomes from theirrespective shares of the inheritance but even the inheritedproperties themselves to be used by Lorenzo T. Oa as acommon fund in undertaking several transactions or inbusiness, with the intention of deriving profit to be shared bythem proportionally, such act was tantamonut to actuallycontributing such incomes to a common fund and, in effect,they thereby formed an unregistered partnership within thepurview of the above-mentioned provisions of the Tax Code.It is but logical that in cases of inheritance, there should be aperiod when the heirs can be considered as co-owners ratherthan unregistered co-partners within the contemplation of

our corporate tax laws aforementioned. Before the partitionand distribution of the estate of the deceased, all the incomethereof does belong commonly to all the heirs, obviously,without them becoming thereby unregistered co-partners,but it does not necessarily follow that such status as co-owners continues until the inheritance is actually andphysically distributed among the heirs, for it is easilyconceivable that after knowing their respective shares in thepartition, they might decide to continue holding said sharesunder the common management of the administrator orexecutor or of anyone chosen by them and engage inbusiness on that basis. Withal, if this were to be allowed, itwould be the easiest thing for heirs in any inheritance tocircumvent and render meaningless Sections 24 and 84(b) of the National Internal Revenue Code.It is true that in Evangelista vs. Collector , 102 Phil. 140, it wasstated, among the reasons for holding the appellants thereinto be unregistered co-partners for tax purposes, that theircommon fund "was not something they found already inexistence" and that "it was not a property inherited bythem pro indiviso ," but it is certainly far fetched to arguetherefrom, as petitioners are doing here, that ergo , in all

instances where an inheritance is not actually divided, therecan be no unregistered co-partnership. As already indicated,for tax purposes, the co-ownership of inherited properties isautomatically converted into an unregistered partnership themoment the said common properties and/or the incomesderived therefrom are used as a common fund with intent toproduce profits for the heirs in proportion to their respectiveshares in the inheritance as determined in a project partitioneither duly executed in an extrajudicial settlement or

approved by the court in the corresponding testate orintestate proceeding. The reason for this is simple. From themoment of such partition, the heirs are entitled already totheir respective definite shares of the estate and the incomesthereof, for each of them to manage and dispose of asexclusively his own without the intervention of the otherheirs, and, accordingly he becomes liable individually for alltaxes in connection therewith. If after such partition, heallows his share to be held in common with his co -heirs undera single management to be used with the intent of makingprofit thereby in proportion to his share, there can be nodoubt that, even if no document or instrument wereexecuted for the purpose, for tax purposes, at least, anunregistered partnership is formed. This is exactly whathappened to petitioners in this case.In this connection, petitioners' reliance on Article 1769,paragraph (3), of the Civil Code, providing that: "The sharingof gross returns does not of itself establish a partnership,whether or not the persons sharing them have a joint orcommon right or interest in any property from which thereturns are derived," and, for that matter, on any otherprovision of said code on partnerships is unavailing.In Evangelista , supra , this Court clearly differentiated theconcept of partnerships under the Civil Code from that of unregistered partnerships which are considered as

"corporations" under Sections 24 and 84(b) of the NationalInternal Revenue Code. Mr. Justice Roberto Concepcion, nowChief Justice, elucidated on this point thus:To begin with, the tax in question is one imposed upon"corporations", which, strictly speaking, are distinct anddifferent from "partnerships". When our Internal RevenueCode includes "partnerships" among the entities subject tothe tax on "corporations", said Code must allude, therefore,to organizations which are not necessarily "partnerships", inthe technical sense of the term. Thus, for instance, section 24of said Code exempts from the aforementioned tax "dulyregistered general partnerships," which constitute preciselyone of the most typical forms of partnerships in this

jurisdiction. Likewise, as defined in section 84(b) of said Code,"the term corporation includes partnerships, no matter how created or organized ." This qualifying expression clearlyindicates that a joint venture need not be undertaken in anyof the standard forms, or in confirmity with the usualrequirements of the law on partnerships, in order that onecould be deemed constituted for purposes of the tax oncorporation. Again, pursuant to said section 84(b),the term"corporation" includes, among others, "joint


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accounts,( cuentas en participacion )" and "associations", noneof which has a legal personality of its own, independent of that of its members. Accordingly, the lawmaker could nothave regarded that personality as a condition essential to theexistence of the partnerships therein referred to. In fact, asabove stated, "duly registered general co-partnerships" which are possessed of the aforementioned personality have been expressly excluded by law (sections 24 and 84[b])from the connotation of the term "corporation." ....

xxx xxx xxxSimilarly, the American Law... provides its own concept of a partnership. Under the term"partnership" it includes not only a partnership as known incommon law but, as well, a syndicate, group, pool, joint venture, or other unincorporated organization which carrieson any business, financial operation, or venture , and which isnot, within the meaning of the Code, a trust, estate, or acorporation. ... . (7A Merten's Law of Federal IncomeTaxation, p. 789; emphasis ours.)The term "partnership" includes a syndicate, group,pool, joint venture or other unincorporated organization,through or by means of which any business, financial operation, or venture is carried on . ... . (8 Merten's Law of Federal Income Taxation, p. 562 Note 63; emphasis ours.)For purposes of the tax on corporations, our National Internal Revenue Code includes these partnerships with theexception only of duly registered general copartnerships within the purview of the term "corporation." It is, therefore,clear to our mind that petitioners herein constitute apartnership, insofar as said Code is concerned, and aresubject to the income tax for corporations.We reiterated this view, thru Mr. Justice Fernando, in Reyesvs. Commissioner of Internal Revenue , G. R. Nos. L-24020-21,July 29, 1968, 24 SCRA 198, wherein the Court ruled against a

theory of co-ownership pursued by appellants therein.As regards the second question raised by petitioners aboutthe segregation, for the purposes of the corporate taxes inquestion, of their inherited properties from those acquired bythem subsequently, We consider as justified the followingratiocination of the Tax Court in denying their motion forreconsideration:In connection with the second ground, it is alleged that, if there was an unregistered partnership, the holding should belimited to the business engaged in apart from the propertiesinherited by petitioners. In other words, the taxable incomeof the partnership should be limited to the income derivedfrom the acquisition and sale of real properties and corporatesecurities and should not include the income derived fromthe inherited properties. It is admitted that the inheritedproperties and the income derived therefrom were used inthe business of buying and selling other real properties andcorporate securities. Accordingly, the partnership incomemust include not only the income derived from the purchaseand sale of other properties but also the income of theinherited properties.

Besides, as already observed earlier, the income derived frominherited properties may be considered as individual incomeof the respective heirs only so long as the inheritance orestate is not distributed or, at least, partitioned, but themoment their respective known shares are used as part of the common assets of the heirs to be used in making profits,it is but proper that the income of such shares should beconsidered as the part of the taxable income of anunregistered partnership. This, We hold, is the clear intent of

the law.Likewise, the third question of petitioners appears to havebeen adequately resolved by the Tax Court in theaforementioned resolution denying petitioners' motion forreconsideration of the decision of said court. Pertinently, thecourt ruled this wise:In support of the third ground, counsel for petitioners alleges:Even if we were to yield to the decision of this HonorableCourt that the herein petitioners have formed anunregistered partnership and, therefore, have to be taxed assuch, it might be recalled that the petitioners in theirindividual income tax returns reported their shares of theprofits of the unregistered partnership. We think it only fairand equitable that the various amounts paid by the individualpetitioners as income tax on their respective shares of theunregistered partnership should be deducted from thedeficiency income tax found by this Honorable Court againstthe unregistered partnership. (page 7, Memorandum for thePetitioner in Support of Their Motion for Reconsideration,Oct. 28, 1961.)In other words, it is the position of petitioners that thetaxable income of the partnership must be reduced by theamounts of income tax paid by each petitioner on his share of partnership profits. This is not correct; rather, it should be theother way around. The partnership profits distributable to the

partners (petitioners herein) should be reduced by theamounts of income tax assessed against the partnership.Consequently, each of the petitioners in his individualcapacity overpaid his income tax for the years in question,but the income tax due from the partnership has beencorrectly assessed. Since the individual income tax liabilitiesof petitioners are not in issue in this proceeding, it is notproper for the Court to pass upon the same.Petitioners insist that it was error for the Tax Court to so rulethat whatever excess they might have paid as individualincome tax cannot be credited as part payment of the taxesherein in question. It is argued that to sanction the view of the Tax Court is to oblige petitioners to pay double incometax on the same income, and, worse, considering the timethat has lapsed since they paid their individual income taxes,they may already be barred by prescription from recoveringtheir overpayments in a separate action. We do not agree. AsWe see it, the case of petitioners as regards the point underdiscussion is simply that of a taxpayer who has paid thewrong tax, assuming that the failure to pay the corporatetaxes in question was not deliberate. Of course, suchtaxpayer has the right to be reimbursed what he has


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erroneously paid, but the law is very clear that the claim andaction for such reimbursement are subject to the bar of prescription. And since the period for the recovery of theexcess income taxes in the case of herein petitioners hasalready lapsed, it would not seem right to virtually disregardprescription merely upon the ground that the reason for thedelay is precisely because the taxpayers failed to make theproper return and payment of the corporate taxes legally duefrom them. In principle, it is but proper not to allow any

relaxation of the tax laws in favor of persons who are notexactly above suspicion in their conduct vis-a-vis their taxobligation to the State.IN VIEW OF ALL THE FOREGOING, the judgment of the Courtof Tax Appeals appealed from is affirm with costs againstpetitioners.


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G.R. No. L-1147 September 24, 1903 ESCOLASTICO DUTERTE Y ROSALES,plaintiff-appellant,vs.FLORENTINO RALLOS,defendant-appellee.The plaintiff-appellant claimed that he, the defendant, andone Castro were partners in the management of a cockpit.The defendant denied this. The court found that no suchpartnership existed and ordered judgment for the defendant.The plaintiff moved for a new trial, which was denied. To this

order and the judgment he excepted and has brought herethe evidence on which the court below based its finding. Wehave examined the evidence and are of the opinion that saidfinding, so far as the existence of the copartnership toSeptember 1, 1901, is concerned, is plainly and manifestlyagainst the evidence.We reach this conclusion chiefly from the documents writtenby the defendant and sent to the plaintiff. It is notcontradicted that the plaintiff demanded by letter of thedefendant a settlement of their accounts. These demands thedefendant answered with the following letter:MY DEAR BOY: I am working at these accounts. Perhaps I willhave them ready tomorrow morning. But I have no money,unless Mr. Spitz comes on one of these boats, when we willhave funds.Yours, FLORENTINO RALLOS.April 13, 1902.On May 7 the defendant wrote another letter to the plaintiff which is in part as follows:CEBU,May 7, 1902.Seor Don Escolastico Duterte.DEAR BOY: In your letter which I received this afternoon, youdesignate me as a little less than embezzler. I have in mypossession the money of no one but myself. If I have notcalled you an embezzler or something worse on account of all

that you have done and are doing with me, reflect whetheryou have reason to write me in the manner you do. I havedone you a favor in admitting you into the cockpitpartnership, as the only manner in which I might collect whatyou owe me. I think you have made a mistake, and I willfrankly refresh your memory. You are indebted to me clearlyone thousand pesos, advanced for your former marketcontract.In the preceding year, the defendant sent to the plaintiff statements of the business for the months of June, July, andAugust. They are in legal effect the same. The one for July isas follows:

Receipts of the cockpit of this city during the entire month of July $520.622

Expenses

Cuotas $300.00

Rent, 6 days 60.00

Present to Biloy 20.00

One-third

Ticoy owes for seats

Ticoy's net share

Ticoy stands for the plaintiff.That the plaintiff rendered services in the management of thecockpit, and that the defendant paid him money on accountof the cockpit, is undisputed.The defendant, after denying that the plaintiff was hispartner, testified, among other things, as follows:The profits were divided. A portion was given to two friends,Seores Duterte and Castro, but not as partners. A portionwas given to Seor Duterte solely because he was a friendwho aided and encouraged the cockpit. I did not have anagreement with them. As a private individual, he had no dutyto perform, except when he had to preside at the cockpit. Iam not aware that they, or either of them, rendered otherservices. I did not tell them the reason why I gave them ashare. I paid them for my pleasure, as friends, Duterte had nolegal interest.Seor Duterte had not authority to employ any person in thecockpit; this function was exercised solely by Seor IsabeloAlburo, since I gave Seor Duterte a portion only as a friend.Castro, the other supposed partner, and a witness for the

defendant, denied that he was such a partner, but histestimony is in part as follows:I do not remember what the profit was, but, as I have said,Seor Rallos sent me $20 or $30. I did not keep any account. Idid not receive money monthly, but on Mondays Seor Ralloswould send me some money. Seor Rallos began to send memoney from 20 to 30 pesos, and this money was whatobtained on the preceding Sunday in the cockpit. I thinkSeor Rallos sent it to me as a present for the reason that hecould not be present at the cockpit. I am not a servant oremployee of the cockpit. I have not any conversation withSeor Rallos with reference to I am not a servant or employeeof the cockpit. I have not the business. When Seor Rallossent me that money he sent me no letter. He sent it to me bya messenger. I think that Seor Rallos sent me that moneybecause I went to the cockpit and helped the president onaccount of the former. Seor Rallos asked me to go to thecockpit. Yes, I have had a conversation with Seor Rallos. Inthis conversation Seor Rallos said nothing to me aboutmoney. Seor Rallos asked me to go to the cockpit to aid thepresident. It is not true, as I went to the cockpit only to dohim a favor.


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We have, then, the testimony of the plaintiff that he made averbal contract of partnership with the defendant for thisbusiness, uncontradicted evidence that he performedservices in connection with it; that the defendant paid himthe money on account thereof and sent him accounts forthree months showing his interest to be one-third of theprofits in addition to the $5 each day, and wrote him a letterin which he said that he admitted the plaintiff into thepartnership in order to collect what the plaintiff owed him on

another transaction.The reason which the defendant gives for paying the plaintiff money is not credible.We see no way of explaining the accounts submitted by thedefendant to plaintiff on any theory other than that therewas a partnership between them up to September 1, 1901, atleast. The letter of the defendant, in which he says that headmitted the plaintiff into the partnership, can be explainedon no other theory.That there was an agreement to share the profits is clearlyproved by the accounts submitted. The plaintiff testified thatthe profits and losses were to be shared equally. But evenomitting this testimony, the case is covered by article 1689 of the Civil Code, which provides that, in the absence of agreement as to the losses, they shall be shared as the gainsare.Article 1668 of the Civil Code is not applicable to the case. Noreal estate was contributed by any member. The partnershipdid not become the owner of the cockpit. It is undisputedthat this was owned by the defendant and that thepartnership paid him ten dollars a day for the use of it.Neither can the judgment be sustained on the ground statedby the court in its decision and relied upon by counsel for theappellee here, namely, that Castro should have been joinedas a party to the suit. One of the grounds for demurrer

mentioned in section 91 of the Code of Civil Procedure is"that there is a defect or misjoinder of parties plaintiff ordefendants." No demurrer was interposed on this or in anyother ground, and by the terms of section 93 of the sameCode, by omitting to demur on this ground the defendantwaived the objection which he now makes.The finding of fact by the court below, that there was nopartnership, at least to September 1, 1901, was plainly andmanifestly against the evidence, and for that reason a newtrial of this case must be had. In this new trial, if the evidenceis the same as upon the first trial, the plaintiff will be entitledto an accounting, at least to September 1, 1901, and for suchfurther term as the proof upon the new trial shows, in theopinion of the court below, that the partnership existed; thataccounting can be had in this suit and a final judgmentrendered for the plaintiff if any balance appears in his favor.No second or other suit will be necessary.The judgment of the court below is reversed and the caseremanded for a new trial, with the costs of this instanceagainst the appellee, and after the expiration of twenty days,reckoned from the date of this decision, judgment shall be

rendered accordingly, and the case is returned to the courtbelow for compliance therewith


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G.R. No. L-49982 April 27, 1988ELIGIO ESTANISLAO, JR.,petitioner,vs.THE HONORABLE COURT OF APPEALS, REMEDIOSESTANISLAO, EMILIO and LEOCADIOSANTIAGO,respondents.

Agustin O. Benitez for petitioner.Benjamin C. Yatco for private respondents.

GANCAYCO, J.: By this petition for certiorari the Court is asked to determineif a partnership exists between members of the same familyarising from their joint ownership of certain properties.Petitioner and private respondents are brothers and sisterswho are co-owners of certain lots at the corner of Annapolisand Aurora Blvd., QuezonCity which were then being leasedto the Shell Company of the Philippines Limited (SHELL). Theyagreed to open and operate a gas station thereat to beknown as Estanislao Shell Service Station with an initialinvestment of P 15,000.00 to be taken from the advancerentals due to them from SHELL for the occupancy of the saidlots owned in common by them. A joint affidavit wasexecuted by them on April 11, 1966 which was preparedbyAtty. Democrito Angeles 1 They agreed to help theirbrother, petitioner herein, by allowing him to operate andmanage the gasoline service station of the family. Theynegotiated with SHELL. For practical purposes and in ordernot to run counter to the company's policy of appointing onlyone dealer, it was agreed that petitioner would apply for thedealership. Respondent Remedios helped in managing thebussiness with petitioner from May 3, 1966 up to February16, 1967.On May 26, 1966, the parties herein entered into anAdditional Cash Pledge Agreement with SHELL wherein it was

reiterated that the P 15,000.00 advance rental shall bedeposited with SHELL to cover advances of fuel to petitioneras dealer with a proviso that said agreement "cancels andsupersedes the Joint Affidavit dated 11 April 1966 executedby the co-owners." 2 For sometime, the petitioner submitted financial statementsregarding the operation of the business to privaterespondents, but therafter petitioner failed to rendersubsequent accounting. Hence through Atty. Angeles, ademand was made on petitioner to render an accounting of the profits.The financial report of December 31, 1968 shows that thebusiness was able to make a profit of P 87,293.79 and that bythe year ending 1969, a profit of P 150,000.00 was realized. 3 Thus, on August 25, 1970 private respondents filed acomplaint in the Court of First Instance of Rizal againstpetitioner praying among others that the latter be ordered:1. to execute a public document embodying all the provisionsof the partnership agreement entered into between plaintiffsand defendant as provided in Article 1771 of the New CivilCode;

2. to render a formal accounting of the business operationcovering the period from May 6, 1966 up to December 21,1968 and from January 1, 1969 up to the time the order isissued and that the same be subject to proper audit;3. to pay the plaintiffs their lawful shares and participation inthe net profits of the business in an amount of no less than Pl50,000.00 with interest at the rate of 1% per month fromdate of demand until full payment thereof for the entireduration of the business; and

4. to pay the plaintiffs the amount of P 10,000.00 asattorney's fees and costs of the suit (pp. 13-14 Record onAppeal.)After trial on the merits, on October 15, 1975, Hon. LinoAnover who was then the temporary presiding judge of Branch IV of the trial court, rendered judgment dismissing thecomplaint and counterclaim and ordering privaterespondents to pay petitioner P 3,000.00 attorney's fee andcosts. Private respondent filed a motion for reconsiderationof the decision. On December 10, 1975, Hon. Ricardo Tensuanwho was the newly appointed presiding judge of the samebranch, set aside the aforesaid derision and rendered anotherdecision in favor of said respondents.The dispositive part thereof reads as follows:WHEREFORE, the Decision of this Court dated October 14,1975 is hereby reconsidered and a new judgment is herebyrendered in favor of the plaintiffs and as against thedefendant:(1) Ordering the defendant to execute a public instrumentembodying all the provisions of the partnership agreemententered into between plaintiffs and defendant as providedfor in Article 1771, Civil Code of the Philippines;(2) Ordering the defendant to render a formal accounting of the business operation from April 1969 up to the time thisorder is issued, the same to be subject to examination and

audit by the plaintiff,(3) Ordering the defendant to pay plaintiffs their lawfulshares and participation in the net profits of the business inthe amount of P 150,000.00, with interest thereon at the rateof One (1%) Per Cent per month from date of demand untilfull payment thereof;(4) Ordering the defendant to pay the plaintiffs the sum of P5,000.00 by way of attorney's fees of plaintiffs' counsel; aswell as the costs of suit. (pp. 161-162. Record on Appeal).Petitioner then interposed an appeal to the Court of Appealsenumerating seven (7) errors allegedly committed by the trialcourt. In due course, a decision was rendered by the Court of Appeals on November 28,1978 affirming in toto the decisionof the lower court with costs against petitioner. *A motion for reconsideration of said decision filed bypetitioner was denied on January 30, 1979. Not satisfiedtherewith, the petitioner now comes to this court by way of this petition for certiorari alleging that the respondent courterred:1. In interpreting the legal import of the Joint Affidavit (Exh.'A') vis-a-vis the Additional Cash Pledge Agreement (Exhs. "B-2","6", and "L"); and


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2. In declaring that a partnership was established by andamong the petitioner and the private respondents as regardsthe ownership and or operation of the gasoline servicestation business.Petitioner relies heavily on the provisions of the JointAffidavit of April 11, 1966 (Exhibit A) and the Additional CashPledge Agreement of May 20, 1966 (Exhibit 6) which areherein reproduced-(a) The joint Affidavit of April 11, 1966, Exhibit A reads:

(1) That we are the Lessors of two parcels of land fullydescribe in Transfer Certificates of Title Nos. 45071 and71244 of the Register of Deeds of Quezon City, in favor of theLESSEE - SHELL COMPANY OF THE PHILIPPINES LIMITED acorporation duly licensed to do business in the Philippines;(2) That we have requested the said SHELL COMPANY OF THEPHILIPPINE LIMITED advanced rentals in the total amount of FIFTEEN THOUSAND PESOS (P l5,000.00) Philippine Currency,so that we can use the said amount to augment our capitalinvestment in the operation of that gasoline stationconstructed ,by the said company on our two lots aforesaidby virtue of an outstanding Lease Agreement we haveentered into with the said company;(3) That the and SHELL COMPANY OF THE PHILIPPINE LIMITEDout of its benevolence and desire to help us in aumenting ourcapital investment in the operation of the said gasolinestation, has agreed to give us the said amount of P 15,000.00,which amount will partake the nature of ADVANCEDRENTALS;(4) That we have freely and voluntarily agreed that uponreceipt of the said amount of FIFTEEN THOUSAND PESOS (Pl6,000.00) from he SHELL COMPANY OF THE PHILIPPINESLIMITED, the said sum as ADVANCED RENTALS to us beapplied as monthly rentals for the sai two lots under ourLease Agreement starting on the 25th of May, 1966 until such

time that the said of P 15,000.00 be applicable, which time toour estimate and one-half months from May 25, 1966 or untilthe 10th of October, 1966 more or less;(5) That we have likewise agreed among ourselves that theSHELL COMPANY OF THE PHILIPPINES LIMITED execute aninstrument for us to sign embodying our conformity that thesaid amount that it will generously grant us as requested beapplied as ADVANCED RENTALS; and(6) FURTHER AFFIANTS SAYETH NOT.,(b) The Additional Cash Pledge Agreement of May 20,1966,Exhibit 6, is as follows:WHEREAS, under the lease Agreement dated 13th November,1963 (identified as doc. Nos. 491 & 1407, Page Nos. 99 & 66,Book Nos. V & III, Series of 1963 in the Notarial Registers of Notaries Public Rosauro Marquez, and R.D. Liwanag,respectively) executed in favour of SHELL by the herein CO-OWNERS and another Lease Agreement dated 19th March1964 . . . also executed in favour of SHELL by CO-OWNERSRemedios and MARIA ESTANISLAO for the lease of adjoiningportions of two parcels of land at Aurora Blvd./ Annapolis,Quezon City, the CO OWNERS RECEIVE a total monthly rental

of PESOS THREE THOUSAND THREE HUNDRED EIGHTY TWAND 29/100 (P 3,382.29), Philippine Currency;WHEREAS, CO-OWNER Eligio Estanislao Jr. is the Dealer of theShell Station constructed on the leased land, and as Dealerunder the Cash Pledge Agreement dated llth May 1966, hedeposited to SHELL in cash the amount of PESOS TENTHOUSAND (P 10,000), Philippine Currency, to secure hispurchase on credit of Shell petroleum products; . . .WHEREAS, said DEALER, in his desire, to be granted an

increased the limit up to P 25,000, has secured theconformity of his CO-OWNERS to waive and assign to SHELLthe total monthly rentals due to all of them to accumulatethe equivalent amount of P 15,000, commencing 24th May1966, this P 15,000 shall be treated as additional cash depositto SHELL under the same terms and conditions of theaforementioned Cash Pledge Agreement dated llth May 1966.NOW, THEREFORE, for and in consideration of the foregoingpremises,and the mutual covenants among the CO-OWNERSherein and SHELL, said parties have agreed and hereby agreeas follows:l. The CO-OWNERS dohere by waive in favor of DEALER themonthly rentals due to all CO-OWNERS, collectively, underthe above describe two Lease Agreements, one dated 13thNovember 1963 and the other dated 19th March 1964 toenable DEALER to increase his existing cash deposit to SHELL,from P 10,000 to P 25,000, for such purpose, the SHELL CO-OWNERS and DEALER hereby irrevocably assign to SHELL themonthly rental of P 3,382.29 payable to them respectively asthey fall due, monthly, commencing 24th May 1966, untilsuch time that the monthly rentals accumulated, shall beequal to P l5,000.2. The above stated monthly rentals accumulated shall betreated as additional cash deposit by DEALER to SHELL,thereby in increasing his credit limit from P 10,000 to P

25,000. This agreement, therefore, cancels and supersedesthe Joint affidavit dated 11 April 1966 executed by the CO-OWNERS. 3. Effective upon the signing of this agreement, SHELL agreesto allow DEALER to purchase from SHELL petroleum products,on credit, up to the amount of P 25,000.4. This increase in the credit shall also be subject to the sameterms and conditions of the above-mentioned Cash PledgeAgreement dated llth May 1966. (Exhs. "B-2," "L," and "6";emphasis supplied)In the aforesaid Joint Affidavit of April 11, 1966 (Exhibit A), itis clearly stipulated by the parties that the P 15,000.00advance rental due to them from SHELL shall augment their"capital investment" in the operation of the gasoline station,which advance rentals shall be credited as rentals from May25, 1966 up to four and one-half months or until 10 October1966, more or less covering said P 15,000.00.In the subsequent document entitled "Additional Cash PledgeAgreement" above reproduced (Exhibit 6), the privaterespondents and petitioners assigned to SHELL the monthlyrentals due them commencing the 24th of May 1966 untilsuch time that the monthly rentals accumulated equal P


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15,000.00 which private respondents agree to be a cashdeposit of petitioner in favor of SHELL to increase his creditlimit as dealer. As above-stated it provided therein that "Thisagreement, therefore, cancels and supersedes the JointAffidavit dated 11 April 1966 executed by the CO-OWNERS."Petitioner contends that because of the said stipulationcancelling and superseding that previous Joint Affidavit,whatever partnership agreement there was in said previousagreement had thereby been abrogated. We find no merit in

this argument. Said cancelling provision was necessary for theJoint Affidavit speaks of P 15,000.00 advance rentals startingMay 25, 1966 while the latter agreement also refers toadvance rentals of the same amount starting May 24, 1966.There is, therefore, a duplication of reference to the P15,000.00 hence the need to provide in the subsequentdocument that it "cancels and supersedes" the previous one.True it is that in the latter document, it is silent as to thestatement in the Joint Affidavit that the P 15,000.00represents the "capital investment" of the parties in thegasoline station business and it speaks of petitioner as thesole dealer, but this is as it should be for in the latterdocument SHELL was a signatory and it would be against itspolicy if in the agreement it should be stated that thebusiness is a partnership with private respondents and not asole proprietorship of petitioner.Moreover other evidence in the record shows that there wasin fact such partnership agreement between the parties. Thisis attested by the testimonies of private respondentRemedies Estanislao and Atty. Angeles. Petitioner submittedto private respondents periodic accounting of thebusiness. 4 Petitioner gave a written authority to privaterespondent Remedies Estanislao, his sister, to examine andaudit the books of their "common business' amingnegosyo). 5 Respondent Remedios assisted in the running of

the business. There is no doubt that the parties heretoformed a partnership when they bound themselves tocontribute money to a common fund with the intention of dividing the profits among themselves. 6 The sole dealershipby the petitioner and the issuance of all government permitsand licenses in the name of petitioner was in compliance withthe afore-stated policy of SHELL and the understanding of theparties of having only one dealer of the SHELL products.Further, the findings of facts of the respondent court areconclusive in this proceeding, and its conclusion based on thesaid facts are in accordancewith the applicable law.WHEREFORE, the judgment appealed from is AFFIRMED intoto with costs against petitioner. This decision isimmediately executory and no motion for extension of timeto file a motion for reconsideration shag beentertained.SO ORDERED.


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G.R. No. L-18010 June 21, 1922 BASILIO BORJA,petitioner-appellee,vs.P. W. ADDISON, ADELINA FERRER, VITALIANA BELISARIO,EUGENIO BELISARIO, and AURENO BELISARIO,objectors-appellants.This is an appeal from a decision of the Court of First Instanceof Pangasinan ordering the registration, under Act No. 496, of two parcels of land in the name of the petitioner Basilio

Borja. The parcels are situated in the barrio of San Francisco,municipality of Umingan, Pangasinan, and contain a total of over 326 hectares.At the trial of the case, a large number of opponentspresented themselves but only two of them, P. W. Addisonand Adelina Ferrer have appealed. The latter appears forherself and her three children, Vitaliana, Eugenio, andAureno.The evidence established the following facts:(1) That one Eulalio Belisario acquired the two parcels of landin question through information posesoria proceedings,instituted in accordance with the provisions of articles 19-21of the Royal Decree of February 13, 1894, and recordedunder the provision of the Mortgage Law. The record of theproceedings show that Belisario occupied and began tocultivate the smaller parcel of land in 1880 and the larger onein 1882. According to the somewhat vague testimony of thewitness Francisco Ira, Belisario was married to Paula Ira whenhe took possession of the parcels which therefore probablywere community property of the marriage, but this fact doesnot appear from the record of the informacion

posesoria proceedings or from any other documentpresented in evidence.(2) That on December 20, 1909, Eulalio Belisario conveyedthe two parcels mentioned to one Jose Castillo, reserving the

right to repurchase the lands for the sum of P550 within theterm of five months and two days from the date of the sale.(3) That Paula Ira, the wife of Eulalio Belisario, died onFebruary 13, 1913, leaving as her sole heir their son MaximoBelisario.(4) That after the death of the said Paula Ira, Eulalio andMaximo Belisario occupied and administered the two parcelsof land in common.(5) That on August 25, 1913, and upon certain datessubsequent thereto, the lands in question were forfeited toand confiscated by the Government for the non-payment of taxes.(6) That on July 5, 1916, in civil case No. 435 in the court of the justice of the peace of Dagupan, C. H.McClure vs. Maximo Belisario and Eulalio Belisario, an orderfor attachment was issued against the lands described incertain land tax declarations of which tax Nos. 5437, 5348,and 5351 refer to parts of the land inscribed in the registry of deeds as finca No. 334, and of which tax No. 5352 refers tothat land inscribed in the registry of deeds as finca No. 335.(7) That on July 31, 1916, the aforesaid order and notice of attachment were served upon Maximo Belisario and Eulalio

Belisario; and on August 5, 1916, the deputy provincial sheriff presented the said order and notice of attachment to theregister of deeds for record, but no entries appear to havebeen made in the book of the registry.(8) That on October 14, 1916, pursuant to a writ of executionissued upon final judgment in said civil case No. 435, theattached lands, as specified in paragraph (6) hereof , we soldto the judgment creditor C. H. McClure, represented by PeterW. Addison. The sale was not recorded in the registry of

deeds.(9) That on October 14, 1916, pursuant to a writ of executionissued upon final judgment of the court of the justice of thepeace of Dagupan, in civil case No. 450, C. H. McClure vs. FelixBelisario and Eulalio Belisario, the statutory right of redemption belonging to Eulalio Belisario, of the land soldunder execution in said case No. 435, was sold by the sheriff at public auction to the judgment creditor C. H. McClure,represented by Peter W. Addison. No record of this saleappears to have been made in the registry of deeds.(10) That on September 19, 1916, a writ of execution wasissued upon final judgment of the court of the justice of thepeace of Dagupan, in civil case No. 454, C. H.McClure vs. Eulalio Belisario, pursuant to which, onNovember 14, 1916, levy was made upon the undivided half of the two parcels of land in question, belonging to EulalioBelisario and upon all right, title, and interest which he had ormight have therein.(11) That on December 13, 1916, in conformity with adecision of the Supreme Court of the Philippine Islands, in thecase of the Castillo vs. Belisario (35 Phil., 89). Jose Castilloexecuted in favor of Eulalio Belisario a deed of resale of thetwo parcels of land conveyed in the sale with right torepurchase mentioned in paragraph (2) hereof.(12) That on January 11, 1917, an alias writ of execution was

issued in the said civil case No. 454, mentioned in paragraph(10) hereof, pursuant to which on February 10, 1917, the

judgment creditor C. H. McClure, represented by P. W.Addison, purchased at execution sale the undivided half of the two parcels of land in question, belonging to the saidEulalio Belisario, and all rights, title, interests, and ownershipwhich the defendant in execution had or might have in andto both of said parcels of land in their entirely. This sale wasduly presented for record in the registry of deed on March 1,1917, and recorded on the 14th of the same month.(13) That on January 19, 1917, Eulalio Belisario executed infavor of Basilio Borja a deed of sale of the two parcels of landin question for P7,500, reserving the right to repurchase thelands for the same price within the term of eighteen monthsfrom the date thereof.(14) That on January 26, 1917, the said deed of sale with rightto repurchase was presented for record in the registry of deeds, but inscription was refused and the deed was returnedon February 5, 1917, with an official communication from theregister of deeds to the effect that it favor of Jose Castillo,mentioned in paragraph (2) hereof, had not been cancelledon the record.


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(15) That on February 13, 1917, the deed of resale from JoseCastillo to Eulalio Belisario, mentioned in paragraph (11)hereof, was presented for record in the registry of deeds andwas recorded on February 26, 1917.(16) That on March 5, 1917, an alias writ of execution wasissued in civil case No. 499 of the court of the justice of thepeace of Dagupan, C. H. McClure vs. Maximo Belisario andEulalio Belisario, pursuant to which, levy was made upon allthe remaining interest belonging to said defendants, in and to

the two parcels of lands in question, as specified in paragraph(19) and that notice of said levy was duly presented forrecord and entered upon the daybook of the register of deeds on March 7, 1917.(17) That on March 27, 1917, the deed of sale with right torepurchase executed by Eulalio Belisario in favor of BasilioBorja, mentioned in paragraph (13) hereof, was entered uponthe day-book of the register of deed for the first time, thisentry being cancelled on April 4, 1917.(18) That on March 30, 1917, Peter W. Addison purchased atthe sheriff's sale under the execution in civil case No. 499,mentioned in paragraph (16) hereof, the undivided half of thetwo parcels of land in question, belonging to MaximoBelisario, and all the rights, title, interests and ownershipwhich both of the defendants in execution, Maximo Belisarioand Eulalio Belisario, had or might have in and to both of thesaid parcels of land in their entirely(19) That on April 4, 1917, Peter W. Addison presented thecertificate for the property and interest acquired at executionsale in civil case No. 499, for record in the registry of deed,the document being recorded on April 18, 1917.(20) That on November 12, 1917, in conformity withinstructions received from the Judge of the Fourth Sala of theCourt of First Instance of the City of Manila, the deed of salewith right to repurchase executed by Eulalio Belisario in favor

of Basilio Borja and mentioned in paragraphs (13) and (18)hereof, was reinstated in the day-book and recorded in theregistry of deems.(21) That on January 23, 1918, the attorney for Basilio Borjatransmitted to the provincial sheriff of Pangasinan the sum of P230 for the redemption of the property and interest soldunder execution in civil case No. 454, mentioned in paragraph(12) hereof.(22) That on February 11, 1918, the attorney for Basilio Borjawas informed by the said sheriff the redemption mentionedin the preceding paragraph would be allowed only upon thecondition that the right of redemption be exercised in theexecution sales in civil cases Nos. 435, 499, and 450,mentioned in paragraphs (8), (9), and (18) hereof.(23) That on February 16, 1918, the affidavit of C. H. McClurefor the consolidacion de dominio in civil case No. 454 waspresented for record in the registry of deeds, and inscribed inthe registry on February 19, 1919.(24) That on June 24, 1918, the provincial sheriff of Pangasinan signed final deeds of sale for the property andinterest, mentioned in paragraph (12) and (18) hereof, in

favor of C. H. McClure and Peter W. Addison, the respectivepurchasers at execution sales in civil cases Nos. 454 and 499.(25) The on June 25, 1918, possession was delivered by theprovincial sheriff of Pangasinan to Peter W. Addison, in hisown representation and that of C. H. McClure, of the twoparcels of land in question, sold under execution in civil casesNos. 454 and 499.(26) That on July 3, 1918, the affidavit of Peter W. Addison forthe consolidacion de dominio in civil case No. 499 was

entered upon the day-book in the registry of deeds, andrecorded in the registry on March 11, 1919.(27) That on July 12, 1918, C. H. McClure executed a quit-claim deed to Peter W. Addison, for all right, title, andinterest that he had in the two parcels of land in question.(28) That on July 31, 1918, the deeds of sale executed by theprovincial sheriff of Pangasinan, in favor of C. H. McClure incivil cases No. 454, as mentioned in paragraph (25) hereof,and the quit-claim deed executed by C. H. McClure in favor of Peter W. Addison, as mentioned in the preceding paragraph,were entered on the day-book of the registry of deeds, andinscribed in the registry on March 10, 1919.(29) That on January 21, 1919, the Director of Landsauthorized Peter W. Addison to repurchase the lands inquestion, which had been forfeited to an confiscated by theGovernment, as mentioned in paragraph (5) hereof Thisrepurchase was made under the last proviso of section 19 of Act No. 1791 and was not purchased with the formalitiesrequired for the sale of public lands by Act No. 926.(30) That on June 4, 1919, the provincial treasurer of Pangasinan issued a certificate of repurchase to Peter W.Addison, for the confiscated lands mentioned in thepreceding paragraph, pursuant to which the said lands werereassessed for taxation in his name.(31) That on March 12, 1919, Eulalio Belisario not having

exercised his right of repurchase reserved in the sale of Basilio Borja mentioned in paragraph (13) hereof, theaffidavit of Basilio Borja for the consolidacion de dominio waspresented for record in the registry of deeds and recorded inthe registry on the same date.(32) The Maximo Belisario left a widow, the opponent AdelinaFerrer and three minor children, Vitaliana, Eugenio, andAureno Belisario as his only heirs.(33) That in the execution and sales thereunder, in which C.H. McClure appears as the judgment creditor, he wasrepresented by the opponent Peter W. Addison, whoprepared and had charge of publication of the notices of thevarious sales and that in none of the sales was the noticepublished more than twice in a newspaper.The claims of the opponent-appellant Addison have beenvery fully and ably argued by his counsel but may, we think,be disposed of in comparatively few words. As will be seenfrom the foregoing statement of facts, he rest his title (1) onthe sales under the executions issued in cases Nos. 435, 450,454, and 499 of the court of the justice of the peace of Dagupan with the priority of inscription of the last two salesin the registry of deeds, and (2) on a purchase from the


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Director of Lands after the land in question had beenforfeited to the Government for non-payment of taxes underAct No. 1791.The sheriff's sales under the execution mentioned are fatallydefective for what of sufficient publication of the notice of sale. Section 454 of the Code of civil Procedure reads in partas follows:SEC. 454. Before the sale of property on execution, noticethereof must be given, as follows:

1. In case of perishable property, by posing written notice of the time and place of the sale in three public places of themunicipality or city where the sale is to take place, for suchtime as may be reasonable, considering the character andcondition of the property;2. * * * * * * *3. In cases of real property, by posting a similar noticeparticularly describing the property, for twenty days in threepublic places of the municipality or city where the property issituated, and also where the property is to be sold, andpublishing a copy thereof once a week, for the same period,in some newspaper published or having general circulation inthe province, if there be one. If there are newspaperpublished in the province in both the Spanish and Englishlanguages, then a like publication for a like period shall bemade in one newspaper published in the Spanish language,and in one published in the English language: Provided,however, That such publication in a newspaper will not berequired when the assessed valuation of the property doesnot exceed four hundred pesos;4. * * * * * * *Examining the record, we find that in cases Nos. 435 and 450the sales took place on October 14, 1916; the notice firstpublished gave the date of the sale as October 15th, but upondiscovering that October 15th was a Sunday, the date was

changed to October 14th. The correct notice was publishedtwice in a local newspaper, the first publication was made onOctober 7th and the second and last on October 14th, thedate of the sale itself. The newspaper is a weekly periodicalpublished every Saturday afternoon.In case No. 454 there were only two publications of thenotice in a newspaper, the first publication being made onlyfourteen days before the date of the sale. In case No. 499,there were also only two publications, the first of which wasmade thirteen days before the sale. In the last case the salewas advertised for the hours of from 8:30 in the morning until4:30 in the afternoon, in violation of section 457 of the Codeof Civil Procedure. In cases Nos. 435 and 450 the hoursadvertised were from 9:00 in the morning until 4.30 in theafternoon. In all of the cases the notices of the sale wereprepared by the judgment creditor or his agent, who alsotook charged of the publication of such notices.In the case of Campomanes vs. Bartolome and Germann &Co. (38 Phil., 808), this court held that if a sheriff sells withoutthe notice prescribe by the Code of Civil Procedure inducedthereto by the judgment creditor and the purchaser at thesale is the judgment creditor , the sale is absolutely void and

not title passes. This must now be regarded as the settleddoctrine in this jurisdiction whatever the rule may beelsewhere.It appears affirmatively from the evidence in the present casethat there is a newspaper published in the province wherethe sale in question took place and that the assessedvaluation of the property disposed of at each sale exceededP400. Comparing the requirements of section 454, suprawith what was actually done, it is self-evident that notices of

the sales mentioned were not given as prescribed by thestatute and taking into consideration that in connection withthese sales the appellant Addison was either the judgmentcreditor or else occupied a position analogous to that of a

judgment creditor, the sales must be held invalid.The conveyance or reconveyance of the land from theDirector of Lands is equally invalid. The provisions of Act No.1791 pertinent to the purchase or repurchase of landconfiscated for non-payment of taxes are found in section 19of the Act and read:. . . In case such redemption be not made within the timeabove specified the Government of the Philippine Islandsshall have an absolute, indefeasible title to said real property.Upon the expiration of the said ninety days, if redemption benot made, the provincial treasurer shall immediately notifythe Director of Lands of the forfeiture and furnish him with adescription of the property, and said Director of Lands shallhave full control and custody thereof to lease or sell the sameor any portion thereof in the same manner as other publiclands are leased or sold: Provided, That the original owner, orhis legal representative, shall have the right to repurchase theentire amount of his said real property, at any time before asale or contract of sale has been made by the director of Lands to a third party, by paying therefore the whole sum duethereon at the time of ejectment together with a penalty of

ten per centum . . . .The appellant Addison repurchased under the final proviso of the section quoted and was allowed to do so as the successorin interest of the original owner under the execution saleabove discussed. As we have seen, he acquired no rightsunder these sales, was therefore not the successor of theoriginal owner and could only have obtained a validconveyance of such titles as the Government might have byfollowing the procedure prescribed by the Public Land Act forthe sale of public lands. he is entitled to reimbursement forthe money paid for the redemption of the land, with interest,but has acquired no title through the redemption.The question of the priority of the record of the sheriff's salesover that of the sale from Belisario to Borja is extensivelyargued in the briefs, but from our point of view is of noimportance; void sheriff's or execution sales cannot bevalidated through inscription in the Mortgage Law registry.The opposition of Adelina Ferrer must also be overruled. Shemaintained that the land in question was communityproperty of the marriage of Eulalio Belisario and Paula Ira:that upon the death of Paula Ira in 1913, Maximo Belisario,the only son and heir of the spouses, entered into the joint


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administration of the property with his father; that this jointadministration was equivalent to the formation of a newcommunity of property between father and son and that itsucceeded and extinguished the preexisting community of property between the spouses; that the special rights of thesurviving husband as liquidator of the community property of the marriage thereupon also terminated; that, therefore, thesurviving husband had not right to sell or otherwise disposeof more than his own undivided share of such community

property and that, consequently, the right Maximo Belisarioas the sole heir of his mother to one-half of the communityproperty was unaffected by the sale made by his father to thepetitioner Borja.This court held in the cases of Nable Jose vs. Nable Jose (41Phil., 713) and Manuel and Laxamana vs. Losano (41 Phil.,855), that "in the absence of fraud and collusion, sales ormortgages of community property, either real or personal,made by a husband-administrator clothed with the insignia of ownership and in whose name the property is held, after thedeath of his spouse, are valid and effective. the purchaserbeing entitled to presume that such sales or mortgages areexecuted for the purpose of securing money to paycommunity debts and that the vendor has authority todispose of the property thus administered by him and held inhis name. . . ." Though this rule is, perhaps, not in harmonywith the views of various commentators upon the Civil Code,it is the main supported by a line of decisions of the supremecourt of Spain and until the pertinent provisions of the CivilCode are amended, will probably not be greatly modified byfuture decisions of this court.There is no reason in a law why the heirs of the deceasedwife may not form a partnership with the surviving husbandfor the management and control of the community propertyof the marriage and conceivably such a partnership, or rather

community of property, between the heirs and the survivinghusband might be formed without a written agreement. But,in the absence of the formalities prescribed by the Code of Commerce or by articles 1667 and 1668 of the Civil Code,knowledge of the existence of the new partnership orcommunity of property must, at least, be brought home tothird persons dealing with the surviving husband in regard tocommunity real property in order to bind them by thecommunity agreement.In the present case the land was recorded in the real propertyregister in the name of Eulalio Belisario and there is not ascintilla of evidence to show that the petitioner herein, BasilioBorja, had any notice of the fact that Maximo Belisarioparticipated in the administration of the property or claimedany rights or ownership therein. The case, therefore, fallssquarely within the rule laid down in the cases above citedand the deed from Eulalio Belisario to Basilio Borja must beheld to have conveyed to the latter the whole fee of the landin question.The decision appealed from is affirmed without costs. Theregistration of the land will be made subject to the lien of P.W. Addison for the sums of money expended for the

redemption of the land from the forfeiture for nonpaymentof taxes. So ordered.


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G.R. No. 3186 March 7, 1907 THE GREAT COUNCIL OF THE UNITED STATES OF THEIMPROVED ORDER OF RED MEN,plaintiff-appellee,vs.THE VETERAN ARMY OF THE PHILIPPINES,defendant-appellant.Article 3 of the Constitution of the Veteran Army of thePhilippines provides as follows:The object of this association shall be to perpetuate the spirit

of patriotism and fraternity those men who upheld the Starsand Stripes in the Philippine Islands during the Spanish warand the Philippine insurrection, and to promote the welfareof its members in every just and honorable way; to assist thesick and afflicted and to bury the dead, to maintain among itsmembers in time of peace the same union and harmony withwhich they served their country in times of war andinsurrection.Article 5 provides that:This association shall be composed of (a ) A department.(b) Two or more posts.It is provided in article 6 that the department shall becomposed of a department commander, fourteen officers,and the commander of each post, or some member of thepost appointed by him. Six members of the departmentconstitute a quorum for the transaction of business.The Constitution also provides for the organization of posts.Among the posts thus organized is the General Henry W.Lawton Post, No. 1. On the 1st day of March, 1903, a contractof lease of parts of a certain buildings in the city of Manilawas signed by W.W. Lewis, E.C. Stovall, and V.O., Hayes, astrustees of the Apache Tribe, No. 1, Improved Order of RedMen, as lessors, and Albert E. McCabe, citing for and onbehalf of Lawton Post, Veteran Army of the Philippines as

lessee. The lease was for the term of two years commencingFebruary 1, 903, and ending February 28, 1905. The LawtonPost occupied the premises in controversy for thirteenmonths, and paid the rent for that time. It them abandonedthem and this action was commenced to recover the rent forthe unexpired term. Judgment was rendered in the courtbelow on favor of the defendant McCabe, acquitting him of the complaint. Judgment was rendered also against theVeteran Army of the Philippines for P1,738.50, and the costs.From this judgment, the last named defendant has appealed.The plaintiff did not appeal from the judgment acquittingdefendant McCabe of the complaint.It is claimed by the appellant that the action can not bemaintained by the plaintiff, The Great Council of the UnitedStates of the Improved Order of Red Men, as thisorganization did not make the contract of lease.It is also claimed that the action can not be maintainedagainst the Veteran Army of the Philippines because it nevercontradicted, either with the plaintiff or with Apach Tribe, No.1, and never authorized anyone to so contract in its name.

We do not find it necessary to consider the first pointbecause we think the contention of the appellant on thesecond point must be sustained.It is difficult to determine the exact nature of the defendantorganization. It is of course not a mercantile partnership.There is some doubt as to whether it is a civil partnership, inview of the definition of the term in article 1665 of the CivilCode. That article is as follows:Partnership is a contract by which two or more persons bind

themselves to contribute money, property, or industry to acommon fund, with the intention of dividing the profitsamong themselves.It seems to be the opinion of the commentators that wherethe society is not constituted for the purpose of gain. it doesnot fall within this article of the Civil Code. Such anorganization is fully covered by the Law of Associations of 1887, but that law was never extended to the PhilippineIslands. According to some commentators it would begoverned by the provisions relating to the community of property. However, the questions thus presented we do notfind necessary to , and to not resolve. The view mostfavorable to the appellee is the one that makes the appellanta civil partnership. Assuming that is such, and is covered bythe provisions of title 8, book 4 of the Civil Code, it isnecessary for the appellee to prove that the contract inquestion was executed by some authorized to so by theVeteran Army of the Philippines.Article 1695 of the Civil Code provides as follows:Should no agreement have been made with regard to theform of management, the following rules shall be observed:1 All the partners shall be considered as agents, and whateverany one of them may do by himself shall bind thepartnership; but each one may oppose the act of the othersbefore they may have produced any legal effect.

One partner, therefore, is empowered to contract in thename of the partnership only when the articles of partnershipmake no provision for the management of the partnershipbusiness. In the case at bar we think that the articles of theVeteran Army of the Philippines do so provide. It is true thatan express disposition to that effect is not found therein, butwe think one may be fairly deduced from the contents of those articles. They declare what the duties of the severalofficers are. In these various provisions there is nothing saidabout the power of making contracts, and that faculty is notexpressly given to any officer. We think that it was, therefore,reserved to the department as a whole; that is, that in anycase not covered expressly by the rules prescribing the dutiesof the officers, the department were present. It is hardlyconceivable that the members who formed this organizationshould have had the intention of giving to any one of thesixteen or more persons who composed the department thepower to make any contract relating to the society which thatparticular officer saw fit to make, or that a contract when somade without consultation with, or knowledge of the othermembers of the department should bind it. We therefore,hold, that no contract, such as the one in question, is binding


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on the Veteran Army of the Philippines unless it wasauthorized at a meeting of the department. No evidence wasoffered to show that the department had never taken anysuch action. In fact, the proof shows that the transaction inquestion was entirely between Apache Tribe, No. 1, and theLawton Post, and there is nothing to show that any memberof the department ever knew anything about it, or hadanything to do with it. The liability of the Lawton Post is notpresented in this appeal.

Judgment against the appellant is reversed, and the VeteranArmy of the Philippines is acquitted of the complaint. Nocosts will be allowed to either party in this court. After theexpiration of twenty days let judgment be rendered inaccordance to the lower court for proper action. So ordered.


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G.R. No. L-35840 March 31, 1933 FRANCISCO BASTIDA,plaintiff-appellee,vs.MENZI & Co., INC., J.M. MENZI and P.C.SCHLOBOHM,defendants.MENZI & CO.,appellant.This is an appeal by Menzi & Co., Inc., one of the defendants,from a decision of the Court of First Instance of Manila. Thecase was tried on the amended complaint dated May 26,

1928 and defendants' amended answer thereto of September1, 1928. For the sake of clearness, we shall incorporate hereinthe principal allegations of the parties.FIRST CAUSE OF ACTIONPlaintiff alleged:IThat the defendant J.M. Menzi, together with his wife anddaughter, owns ninety-nine per cent (99%) of the capitalstock of the defendant Menzi & Co., Inc., that the plaintiff hasbeen informed and therefore believes that the defendantJ.M. Menzi, his wife and daughter, together with thedefendant P.C. Schlobohm and one Juan Seiboth, constitutethe board of directors of the defendant, Menzi & Co., Inc.;IIThat on April 27, 1922, the defendant Menzi & Co., Inc.through its president and general manager, J.M. Menzi, underthe authority of the board of directors, entered into acontract with the plaintiff to engage in the business of exploiting prepared fertilizers, as evidenced by the contractmarked Exhibit A, attached to the original complaint as a partthereof, and likewise made a part of the amended complaint,as if it were here copied verbatim;IIIThat in pursuance of said contract, plaintiff and defendantMenzi & Co., Inc., began to manufacture prepared fertilizers,

the former superintending the work of actual preparation,and the latter, through defendants J.M. Menzi and P. C.Schlobohm, managing the business and opening an accountentitled "FERTILIZERS" on the books of the defendant Menzi& Co., Inc., where all the accounts of the partnership businesswere supposed to be kept; the plaintiff had no participationin the making of these entries, which were wholly in thedefendants' charge, under whose orders every entry wasmade;IVThat according to paragraph 7 of the contract Exhibit A, thedefendant Menzi & Co., Inc., was obliged to render annualbalance sheets to be plaintiff upon the 30th day of June of each year; that the plaintiff had no intervention in thepreparation of these yearly balances, nor was he permitted tohave any access to the books of account; and when thebalance sheets were shown him, he, believing in good faiththat they contained the true statement of the partnershipbusiness, and relying upon the good faith of the defendants,Menzi & Co., Inc., J.M. Menzi, and P.C. Schlobohm, acceptedand signed them, the last balance sheet having beenrendered in the year 1926;

VThat by reason of the foregoing facts and especially those setforth in the preceding paragraph, the plaintiff was kept inignorance of the defendants' acts relating to themanagement of the partnership funds, and the keeping of accounts, until he was informed and so believes and alleges,that the defendants had conspired to conceal from him thetrue status of the business, and to his damage and prejudicemade false entries in the books of account and in the yearly

balance sheets, the exact nature and amount of which it isimpossible to ascertain, even after the examination of thebooks of the business, due to the defendants' refusal tofurnish all the books and data required for the purpose, andthe constant obstacles they have placed in the way of theexamination of the books of account and vouchers;VIThat when the plaintiff received the information mentionedin the preceding paragraph, he demanded that thedefendants permit him to examine the books and vouchers of the business, which were in their possession, in order toascertain the truth of the alleged false entries in the booksand balance sheets submitted for his approval, but thedefendants refused, and did not consent to the examinationuntil after the original complaint was filed in this case; but upto this time they have refused to furnish all the books, data,and vouchers necessary for a complete and accurateexamination of all the partnership's accounts; andVIIThat as a result of the partial examination of the books of account of the business, the plaintiff has, through hisaccountants, discovered that the defendants, conspiring andconfederating together, presented to the plaintiff during theperiod covered by the partnership contract false andincorrect accounts,

(a ) For having included therein undue interest;(b) For having entered, as a charge to fertilizers, salaries andwages which should have been paid and were in fact paid bythe defendant Menzi & Co., Inc.;(c) For having collected from the partnership the income taxwhich should have been paid for its own account by Menzi &Co., Inc.;(d ) For having collected, to the damage and prejudice of theplaintiff, commissions on the purchase of materials for themanufacture of fertilizers;(e) For having appropriated, to the damage and prejudice of the plaintiff, the profits obtained from the sale of fertilizersbelonging to the partnership and bought with its own funds;and(f) For having appropriated to themselves all rebates forfreight insurance, taxes, etc., upon materials for fertilizerbought abroad, no entries of said rebates having been madeon the books to the credit of the partnership.Upon the strength of the facts set out in this first cause of action, the plaintiff prays the court:1. To prohibit the defendants, each and every one of them,from destroying and concealing the books and papers of the


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partnership constituted between the defendant Menzi & Co.,Inc., and the plaintiff;2. To summon each and every defendant to appear and give atrue account of all facts relating to the partnership betweenthe plaintiff and the defendant Menzi & Co., Inc., and of eachand every act and transaction connected with the business of said partnership from the beginning to April 27, 1927, and atrue statement of all merchandise of whatever description,purchased for said partnership, and of all the expenditures

and sale of every kind, together with the true amountthereof, besides the sums received by the partnership fromevery source together with their exact nature, and a true andcomplete account of the vouchers for all sums paid by thepartnership, and of the salaries paid to its employees;3. To declare null and void the yearly balances submitted bythe defendants to the plaintiff from 1922 to 1926, bothinclusive;4. To order the defendants to give a true statement of allreceipts and disbursements of the partnership during theperiod of its existence, besides granting the plaintiff anyother remedy that the court may deem just and equitable.EXHIBIT ACONTRATOque se celebra entre los Sres. Menzi y Compaia, de Manila,como Primera Parte, y D. Francisco Bastada, tambien deManila, como Segunda Parte, bajo las siguientesCONDICIONES1. El objeto de este contrato es la explotacion del negocio deAbonos o Fertilizantes Preparados, para diversas aplicacionesagricolas;2. La duracion de este contrato sera de cinco aos, a contrardesde la fecha de su firma;3. La Primera Parte se compromete a facilitar la ayudafinanciera necesaria para el negocio;

4. La Segunda Parte se compromete a poner su enterotiempo y toda su experiencia a la disposicion del negocio;5. La Segunda Parte no podra, directa o indirectamente,dedicarse por si sola ni en sociedad con otras personas, o demanera alguna que no sea con la Primera Parte, al negecio deAbonos, simples o preparados, o de materia alguna que seaplique comunmente a la fertilizacion de suelos y plantas,durante la vigencia de este contrato, a menos que obtengaautorizacion expresa de la Primera Parte para ello;6. La Primera Parte no podra dedicarse, por si sola ni ensociedad o combinacion con otras personas o entidades, ni deotro modo que en sociedad con la Segunda Parte, al negociode Abonos o Fertilizantes preparados, ya sean ellosimportados, ya preparados en las Islas Fllipinas; tampocopodra dedicarse a la venta o negocio de materias o productosque tengan aplicacion como fertilizantes, o que se usen en lacomposicion de fertilizantes o abonos, si ellos son productosde suelo de la manufactura filipinos, pudiendo sin embargovender o negociar en materim fertilizantes simplesimportados de los Estados Unidos o del Extranjero;7. La Primera Parte se obliga a ceder y a hacer efectivo a laSegunda Parte el 35 por ciento (treinta y cinco por ciento) de

las utilidades netas del negocio de abonos, liquidables el 30de junio de cada ao;8. La Primera Parte facilitara la Segunda, mensualmente, lacantidad de P300 (trescientos pesos), a cuenta de su parte debeneficios.9. Durante el ao 1923 la Parte concedera a la Segundapermiso para que este se ausente de Filipinas por un periodode tiempo que no exceda de un ao, sin menoscabo paraderechos de la Segunda Parte con arreglo a este contrato.

En testimonio de lo cual firmamos el presente en la Ciudad deManila, I. F., a veintisiete de abril de 1922.MENZI & CO., INCPor (Fdo.) J. MENZGeneral Manager Primera Parte (Fdo.) F. BASTIDASegunda ParteMENZI & CO., INC(Fdo.) MAX KAEG

Acting Secretary Defendants denied all the allegations of the amendedcomplaint, except the formal allegations as to the parties, andas a special defense to the first cause of action alleged:1. That the defendant corporation, Menzi & Co., Inc., hasbeen engaged in the general merchandise business in thePhilippine Islands since its organization in October, 1921,including the importation and sale of all kinds of goods,wares, and merchandise, and especially simple fertilizer andfertilizer ingredients, and as a part of that business, it hasbeen engaged since its organization in the manufacture andsale of prepared fertilizers for agricultural purposes, and

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