G.R. No.

413 February 2, 1903

JOSE FERNANDEZ,Plaintiff-Appellant, vs. FRANCISCO DE LA

ROSA,Defendant-Appellee.

Vicente Miranda, for appellant.

Simplicio del Rosario, for appellee.

LADD, J.:

The object of this action is to obtain from the court a declaration that a
partnership exists between the parties, that the plaintiff has a consequent
interested in certain cascoes which are alleged to be partnership property,
and that the defendant is bound to render an account of his administration
of the cascoes and the business carried on with them.chanrobles virtual law
library

Judgment was rendered for the defendant in the court below and the plaintiff
appealed.chanrobles virtual law library

The respective claims of the parties as to the facts, so far as it is necessary

to state them in order to indicate the point in dispute, may be briefly
summarized. The plaintiff alleges that in January, 1900, he entered into a
verbal agreement with the defendant to form a partnership for the purchase
of cascoes and the carrying on of the business of letting the same for hire in
Manila, the defendant to buy the cascoes and each partner to furnish for that
purpose such amount of money as he could, the profits to be divided
proportionately; that in the same January the plaintiff furnished the
defendant 300 pesos to purchase a casco designated as No. 1515, which the
defendant did purchase for 500 pesos of Doa Isabel Vales, taking the title
in his own name; that the plaintiff furnished further sums aggregating about
300 pesos for repairs on this casco; that on the fifth of the following March
he furnished the defendant 825 pesos to purchase another casco designated
as No. 2089, which the defendant did purchase for 1,000 pesos of Luis R.
Yangco, taking the title to this casco also in his own name; that in April the
parties undertook to draw up articles of partnership for the purpose of
embodying the same in an authentic document, but that the defendant
having proposed a draft of such articles which differed materially from the
terms of the earlier verbal agreement, and being unwillingly to include casco
No. 2089 in the partnership, they were unable to come to any understanding
and no written agreement was executed; that the defendant having in the
meantime had the control and management of the two cascoes, the plaintiff
made a demand for an accounting upon him, which the defendant refused to
render, denying the existence of the partnership altogether.chanrobles
virtual law library

The defendant admits that the project of forming a partnership in the casco
business in which he was already engaged to some extent individually was
discussed between himself and the plaintiff in January, 1900, and earlier,
one Marcos Angulo, who was a partner of the plaintiff in a bakery business,
being also a party to the negotiations, but he denies that any agreement
was ever consummated. He denies that the plaintiff furnished any money in
January, 1900, for the purchase of casco No. 1515, or for repairs on the
same, but claims that he borrowed 300 pesos on his individual account in
January from the bakery firm, consisting of the plaintiff, Marcos Angulo, and
Antonio Angulo. The 825 pesos, which he admits he received from the
plaintiff March 5, he claims was for the purchase of casco No. 1515, which
he alleged was bought March 12, and he alleges that he never received
anything from the defendant toward the purchase of casco No. 2089. He
claims to have paid, exclusive of repairs, 1,200 pesos for the first casco and
2,000 pesos for the second one.chanrobles virtual law library

The case comes to this court under the old procedure, and it is therefore
necessary for us the review the evidence and pass upon the facts. Our
general conclusions may be stated as follows:chanrobles virtual law library

(1) Doa Isabel Vales, from whom the defendant bought casco No. 1515,
testifies that the sale was made and the casco delivered in January, although
the public document of sale was not executed till some time afterwards. This
witness is apparently disinterested, and we think it is safe to rely upon the
truth of her testimony, especially as the defendant, while asserting that the
sale was in March, admits that he had the casco taken to the ways for
repairs in January.chanrobles virtual law library

It is true that the public document of sale was executed March 10, and that
the vendor declares therein that she is the owner of the casco, but such
declaration does not exclude proof as to the actual date of the sale, at least
as against the plaintiff, who was not a party to the instrument. (Civil Code,
sec. 1218.) It often happens, of course, in such cases, that the actual sale
precedes by a considerable time the execution of the formal instrument of
transfer, and this is what we think occurred here.chanrobles virtual law
library

(2) The plaintiff presented in evidence the following receipt: "I have this day
received from D. Jose Fernandez eight hundred and twenty-five pesos for
the cost of a casco which we are to purchase in company. Manila, March 5,
1900. Francisco de la Rosa." The authenticity of this receipt is admitted by
the defendant. If casco No. 1515 was bought, as we think it was, in January,
the casco referred to in the receipt which the parties "are to purchase in
company" must be casco No. 2089, which was bought March 22. We find this
to be the fact, and that the plaintiff furnished and the defendant received
825 pesos toward the purchase of this casco, with the understanding that it
was to be purchased on joint account.chanrobles virtual law library

(3) Antonio Fernandez testifies that in the early part of January, 1900, he
saw Antonio Angulo give the defendant, in the name of the plaintiff, a sum of
money, the amount of which he is unable to state, for the purchase of a
casco to be used in the plaintiff's and defendant's business. Antonio Angulo
also testifies, but the defendant claims that the fact that Angulo was a
partner of the plaintiff rendered him incompetent as a witness under the
provisions of article 643 of the then Code of Civil Procedure, and without
deciding whether this point is well taken, we have discarded his testimony
altogether in considering the case. The defendant admits the receipt of 300
pesos from Antonio Angulo in January, claiming, as has been stated, that it
was a loan from the firm. Yet he sets up the claim that the 825 pesos which
he received from the plaintiff in March were furnished toward the purchase
of casco No. 1515, thereby virtually admitting that casco was purchased in
company with the plaintiff. We discover nothing in the evidence to support
the claim that the 300 pesos received in January was a loan, unless it may
be the fact that the defendant had on previous occasions borrowed money
from the bakery firm. We think all the probabilities of the case point to the
truth of the evidence of Antonio Fernandez as to this transaction, and we
find the fact to be that the sum in question was furnished by the plaintiff
toward the purchase for joint ownership of casco No. 1515, and that the
defendant received it with the understanding that it was to be used for this
purposed. We also find that the plaintiff furnished some further sums of
money for the repair of casco.chanrobles virtual law library

(4) The balance of the purchase price of each of the two cascoes over and
above the amount contributed by the plaintiff was furnished by the
defendant.chanrobles virtual law library

(5) We are unable to find upon the evidence before us that there was any
specific verbal agreement of partnership, except such as may be implied
from the fact as to the purchase of the casco.chanrobles virtual law library

(6) Although the evidence is somewhat unsatisfactory upon this point, we

think it more probable than otherwise that no attempt was made to agree
upon articles of partnership till about the middle of the April following the
purchase of the cascoes.chanrobles virtual law library
(7) At some time subsequently to the failure of the attempt to agree upon
partnership articles and after the defendant had been operating the cascoes
for some time, the defendant returned to the plaintiff 1,125 pesos, in two
different sums, one of 300 and one of 825 pesos. The only evidence in the
record as to the circumstances under which the plaintiff received these sums
is contained in his answer to the interrogatories proposed to him by the
defendant, and the whole of his statement on this point may properly be
considered in determining the fact as being in the nature of an indivisible
admission. He states that both sums were received with an express
reservation on his part of all his rights as a partner. We find this to be the
fact.chanrobles virtual law library

Two questions of law are raised by the foregoing facts: (1) Did a partnership
exist between the parties? (2) If such partnership existed, was it terminated
as a result of the act of the defendant in receiving back the 1,125 pesos?
chanrobles virtual law library

(1) "Partnership is a contract by which two or more persons bind themselves

to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves." (Civil Code, art.
1665.)chanrobles virtual law library

The essential points upon which the minds of the parties must meet in a
contract of partnership are, therefore, (1) mutual contribution to a common
stock, and (2) a joint interest in the profits. If the contract contains these
two elements the partnership relation results, and the law itself fixes the
incidents of this relation if the parties fail to do so. (Civil Code, secs. 1689,
1695.)chanrobles virtual law library

We have found as a fact that money was furnished by the plaintiff and
received by the defendant with the understanding that it was to be used for
the purchase of the cascoes in question. This establishes the first element of
the contract, namely, mutual contribution to a common stock. The second
element, namely, the intention to share profits, appears to be an
unavoidable deduction from the fact of the purchase of the cascoes in
common, in the absence of any other explanation of the object of the parties
in making the purchase in that form, and, it may be added, in view of the
admitted fact that prior to the purchase of the first casco the formation of a
partnership had been a subject of negotiation between them.chanrobles
virtual law library

Under other circumstances the relation of joint ownership, a relation distinct

though perhaps not essentially different in its practical consequence from
that of partnership, might have been the result of the joint purchase. If, for
instance, it were shown that the object of the parties in purchasing in
company had been to make a more favorable bargain for the two cascoes
that they could have done by purchasing them separately, and that they had
no ulterior object except to effect a division of the common property when
once they had acquired it, the affectio societatis would be lacking and the
parties would have become joint tenants only; but, as nothing of this sort
appears in the case, we must assume that the object of the purchase was
active use and profit and not mere passive ownership in common.chanrobles
virtual law library

It is thus apparent that a complete and perfect contract of partnership was

entered into by the parties. This contract, it is true, might have been subject
to a suspensive condition, postponing its operation until an agreement was
reached as to the respective participation of the partners in the profits, the
character of the partnership as collective or en comandita, and other details,
but although it is asserted by counsel for the defendant that such was the
case, there is little or nothing in the record to support this claim, and that
fact that the defendant did actually go on and purchase the boat, as it would
seem, before any attempt had been made to formulate partnership articles,
strongly discountenances the theory.chanrobles virtual law library

The execution of a written agreement was not necessary in order to give

efficacy to the verbal contract of partnership as a civil contract, the
contributions of the partners not having been in the form of immovables or
rights in immovables. (Civil Code, art. 1667.) The special provision cited,
requiring the execution of a public writing in the single case mentioned and
dispensing with all formal requirements in other cases, renders inapplicable
to this species of contract the general provisions of article 1280 of the Civil
Code.chanrobles virtual law library

(2) The remaining question is as to the legal effect of the acceptance by the
plaintiff of the money returned to him by the defendant after the definitive
failure of the attempt to agree upon partnership articles. The amount
returned fell short, in our view of the facts, of that which the plaintiff had
contributed to the capital of the partnership, since it did not include the sum
which he had furnished for the repairs of casco No. 1515. Moreover, it is
quite possible, as claimed by the plaintiff, that a profit may have been
realized from the business during the period in which the defendant have
been administering it prior to the return of the money, and if so he still
retained that sum in his hands. For these reasons the acceptance of the
money by the plaintiff did not have the effect of terminating the legal
existence of the partnership by converting it into asocietas leonina, as
claimed by counsel for the defendant.chanrobles virtual law library
Did the defendant waive his right to such interest as remained to him in the
partnership property by receiving the money? Did he by so doing waive his
right to an accounting of the profits already realized, if any, and a
participation in them in proportion to the amount he had originally
contributed to the common fund? Was the partnership dissolved by the "will
or withdrawal of one of the partners" under article 1705 of the Civil Code?
We think these questions must be answered in the negative.chanrobles
virtual law library

There was no intention on the part of the plaintiff in accepting the money to
relinquish his rights as a partner, nor is there any evidence that by anything
that he said or by anything that he omitted to say he gave the defendant
any ground whatever to believe that he intended to relinquish them. On the
contrary he notified the defendant that he waived none of his rights in the
partnership. Nor was the acceptance of the money an act which was in itself
inconsistent with the continuance of the partnership relation, as would have
been the case had the plaintiff withdrawn his entire interest in the
partnership. There is, therefore, nothing upon which a waiver, either express
or implied, can be predicated. The defendant might have himself terminated
the partnership relation at any time, if he had chosen to do so, by
recognizing the plaintiff's right in the partnership property and in the profits.
Having failed to do this he can not be permitted to force a dissolution upon
his co-partner upon terms which the latter is unwilling to accept. We see
nothing in the case which can give the transaction in question any other
aspect than that of the withdrawal by one partner with the consent of the
other of a portion of the common capital.chanrobles virtual law library

The result is that we hold and declare that a partnership was formed
between the parties in January, 1900, the existence of which the defendant
is bound to recognize; that cascoes No. 1515 and 2089 constitute
partnership property, and that the plaintiff is entitled to an accounting of the
defendant's administration of such property, and of the profits derived
therefrom. This declaration does not involve an adjudication as to any
disputed items of the partnership account.chanrobles virtual law library

The judgment of the court below will be reversed without costs, and the
record returned for the execution of the judgment now rendered. So
ordered.chanrobles virtual law library

Arellano, C.J., Torres, Cooper, and Mapa, JJ., concur.

Willard, J., dissenting.
ON MOTION FOR A REHEARING. chanrobles virtual law library

MAPA, J.:

This case has been decided on appeal in favor of the plaintiff, and the
defendant has moved for a rehearing upon the following grounds:chanrobles
virtual law library

1. Because that part of the decision which refers to the existence of the
partnership which is the object of the complaint is not based upon clear and
decisive legal grounds; andchanrobles virtual law library

2. Because, upon the supposition of the existence of the partnership, the

decision does not clearly determine whether the juridical relation between
the partners suffered any modification in consequence of the withdrawal by
the plaintiff of the sum of 1,125 pesos from the funds of the partnership, or
if it continued as before, the parties being thereby deprived, he alleges, of
one of the principal bases for determining with exactness the amount due to
each.chanrobles virtual law library

With respect to the first point, the appellant cites the fifth conclusion of the
decision, which is as follows: "We are unable to find from the evidence
before us that there was any specific verbal agreement of partnership,
except such as may be implied from the facts as to the purchase of the
cascoes."chanrobles virtual law library

Discussing this part of the decision, the defendant says that, in the
judgment of the court, if on the one hand there is no direct evidence of a
contract, on the other its existence can only be inferred from certain facts,
and the defendant adds that the possibility of an inference is not sufficient
ground upon which to consider as existing what may be inferred to exist,
and still less as sufficient ground for declaring its efficacy to produce legal
effects.chanrobles virtual law library

This reasoning rests upon a false basis. We have not taken into
consideration the mere possibility of an inference, as the appellant
gratuitously stated, for the purpose of arriving at a conclusion that a
contract of partnership was entered into between him and the plaintiff, but
have considered the proof which is derived from the facts connected with the
purchase of the cascoes. It is stated in the decision that with the exception
of this evidence we find no other which shows the making of the contract.
But this does not mean (for it says exactly the contrary) that this fact is not
absolutely proven, as the defendant erroneously appears to think. From this
data we infer a fact which to our mind is certain and positive, and not a
mere possibility; we infer not that it is possible that the contract may have
existed, but that it actually did exist. The proofs constituted by the facts
referred to, although it is the only evidence, and in spite of the fact that it is
not direct, we consider, however, sufficient to produce such a conviction,
which may certainly be founded upon any of the various classes of evidence
which the law admits. There is all the more reason for its being so in this
case, because a civil partnership may be constituted in any form, according
to article 1667 of the Civil Code, unless real property or real rights are
contributed to it - the only case of exception in which it is necessary that the
agreement be recorded in a public instrument.chanrobles virtual law library

It is of no importance that the parties have failed to reach an agreement

with respect to the minor details of contract. These details pertain to the
accidental and not to the essential part of the contract. We have already
stated in the opinion what are the essential requisites of a contract of
partnership, according to the definition of article 1665. Considering as a
whole the probatory facts which appears from the record, we have reached
the conclusion that the plaintiff and the defendant agreed to the essential
parts of that contract, and did in fact constitute a partnership, with the funds
of which were purchased the cascoes with which this litigation deals,
although it is true that they did not take the precaution to precisely establish
and determine from the beginning the conditions with respect to the
participation of each partner in the profits or losses of the partnership. The
disagreements subsequently arising between them, when endeavoring to fix
these conditions, should not and can not produce the effect of destroying
that which has been done, to the prejudice of one of the partners, nor could
it divest his rights under the partnership which had accrued by the actual
contribution of capital which followed the agreement to enter into a
partnership, together with the transactions effected with partnership funds.
The law has foreseen the possibility of the constitution of a partnership
without an express stipulation by the partners upon those conditions, and
has established rules which may serve as a basis for the distribution of
profits and losses among the partners. (Art. 1689 of the Civil Code. ) We
consider that the partnership entered into by the plaintiff and the defendant
falls within the provisions of this article.chanrobles virtual law library

With respect to the second point, it is obvious that upon declaring the
existence of a partnership and the right of the plaintiff to demand from the
defendant an itemized accounting of his management thereof, it was
impossible at the same time to determine the effects which might have been
produced with respect to the interest of the partnership by the withdrawal by
the plaintiff of the sum of 1,125 pesos. This could only be determined after a
liquidation of the partnership. Then, and only then, can it be known if this
sum is to be charged to the capital contributed by the plaintiff, or to his
share of the profits, or to both. It might well be that the partnership has
earned profits, and that the plaintiff's participation therein is equivalent to or
exceeds the sum mentioned. In this case it is evident that, notwithstanding
that payment, his interest in the partnership would still continue. This is one
case. It would be easy to imagine many others, as the possible results of a
liquidation are innumerable. The liquidation will finally determine the
condition of the legal relations of the partners inter se at the time of the
withdrawal of the sum mentioned. It was not, nor is it possible to determine
this status a priori without prejudging the result, as yet unknown, of the
litigation. Therefore it is that in the decision no direct statement has been
made upon this point. It is for the same reason that it was expressly stated
in the decision that it"does not involve an adjudication as to any disputed
item of the partnership account." chanrobles virtual law library

The contentions advanced by the moving party are so evidently unfounded

that we can not see the necessity or convenience of granting the rehearing
prayed for, and the motion is therefore denied.chanrobles virtual law library

Arellano, C.J., Torres, Cooper, and Ladd, JJ., concur.

Willard and McDonough, JJ., did not sit in this case.