1.) Arbes v.

Polistico
G.R. No. 31057; September 7, 1929

FACTS:
An association called “Turnuhan Polistico & Co” was deemed by the court-appointed
commissioner, to which the court declared as well, as an unlawful partnership. The
defendants objected to the trial court’s report. Consequently, they filed a motion for a
charitable institution to be included as a party defendant applying the provisions of Art.
1666 of the NCC which provides:

“A partnership must have a lawful object and must be established for the common
benefit of the partners. When the dissolution of an unlawful partnership is decreed, the
profits shall be given to charitable institutions of the domicile of the partnership, or, in
default of such, to those of the province.”

ISSUE:
May a charitable institution be a party defendant based on the provisions of Art. 1666?

HELD:
No. The Court held that the application for the said article is improper.  An unlawful
partnership is a void contract, and as such, no right or cause of action can flow from it.

The Court made reference to Manresa which propounded that the relevant logic that
members of an unlawful partnership should not be able to recover profits since in the
eyes of the law, the partnership had not come into existence and that no judicial action
may flow from the contract.

However, such members may recover what they have contributed not on the basis of
the contract, but on the basis of the mere contribution they have made on the capital
and to disable them to do so would be an unjust sanction.

G.R. No. 31057           September 7, 1929

ADRIANO ARBES, ET AL., plaintiffs-appellees,

vs.
VICENTE POLISTICO, ET AL., defendants-appellants.
Marcelino Lontok and Manuel dela Rosa for appellants.
Sumulong & Lavides for appellees.

VILLAMOR, J.:

This is an action to bring about liquidation of the funds and property of the association called
"Turnuhan Polistico & Co." The plaintiffs were members or shareholders, and the defendants were
designated as president-treasurer, directors and secretary of said association.

It is well to remember that this case is now brought before the consideration of this court for the
second time. The first one was when the same plaintiffs appeared from the order of the court below
sustaining the defendant's demurrer, and requiring the former to amend their complaint within a
period, so as to include all the members of "Turnuhan Polistico & Co.," either as plaintiffs or as a
defendants. This court held then that in an action against the officers of a voluntary association to
wind up its affairs and enforce an accounting for money and property in their possessions, it is not
necessary that all members of the association be made parties to the action. (Borlasa vs. Polistico,
47 Phil., 345.) The case having been remanded to the court of origin, both parties amend,
respectively, their complaint and their answer, and by agreement of the parties, the court appointed
Amadeo R. Quintos, of the Insular Auditor's Office, commissioner to examine all the books,
documents, and accounts of "Turnuhan Polistico & Co.," and to receive whatever evidence the
parties might desire to present.

The commissioner rendered his report, which is attached to the record, with the following resume:

Income:
Member's shares............................ 97,263.70
Credits paid................................ 6,196.55
Interest received........................... 4,569.45
Miscellaneous...............................    1,891.00
P109,620.70
Expenses:
Premiums to members....................... 68,146.25
Loans on real-estate....................... 9,827.00
Loans on promissory notes.............. 4,258.55
Salaries.................................... 1,095.00
Miscellaneous...............................     1,686.10
    85,012.90
Cash on hand........................................     24,607.80

The defendants objected to the commissioner's report, but the trial court, having examined the
reasons for the objection, found the same sufficiently explained in the report and the evidence, and
accepting it, rendered judgment, holding that the association "Turnuhan Polistico & Co." is unlawful,
and sentencing the defendants jointly and severally to return the amount of P24,607.80, as well as
the documents showing the uncollected credits of the association, to the plaintiffs in this case, and to
the rest of the members of the said association represented by said plaintiffs, with costs against the
defendants.

The defendants assigned several errors as grounds for their appeal, but we believe they can all be
reduced to two points, to wit: (1) That not all persons having an interest in this association are
included as plaintiffs or defendants; (2) that the objection to the commissioner's report should have
been admitted by the court below.

As to the first point, the decision on the case of Borlasa vs. Polistico, supra, must be followed.

With regard to the second point, despite the praiseworthy efforts of the attorney of the defendants,
we are of opinion that, the trial court having examined all the evidence touching the grounds for the
objection and having found that they had been explained away in the commissioner's report, the
conclusion reached by the court below, accepting and adopting the findings of fact contained in said
report, and especially those referring to the disposition of the association's money, should not be
disturbed.

In Tan Dianseng Tan Siu Pic vs. Echauz Tan Siuco (5 Phil., 516), it was held that the findings of
facts made by a referee appointed under the provisions of section 135 of the Code of Civil
Procedure stand upon the same basis, when approved by the Court, as findings made by the judge
himself. And in Kriedt vs. E. C. McCullogh & Co.(37 Phil., 474), the court held: "Under section 140 of
the Code of Civil Procedure it is made the duty of the court to render judgment in accordance with
the report of the referee unless the court shall unless for cause shown set aside the report or
recommit it to the referee. This provision places upon the litigant parties of the duty of discovering
and exhibiting to the court any error that may be contained therein." The appellants stated the
grounds for their objection. The trial examined the evidence and the commissioner's report, and
accepted the findings of fact made in the report. We find no convincing arguments on the appellant's
brief to justify a reversal of the trial court's conclusion admitting the commissioner's findings.

There is no question that "Turnuhan Polistico & Co." is an unlawful partnership (U.S. vs. Baguio, 39
Phil., 962), but the appellants allege that because it is so, some charitable institution to whom the
partnership funds may be ordered to be turned over, should be included, as a party defendant. The
appellants refer to article 1666 of the Civil Code, which provides:

A partnership must have a lawful object, and must be established for the common benefit of
the partners.

When the dissolution of an unlawful partnership is decreed, the profits shall be given to
charitable institutions of the domicile of the partnership, or, in default of such, to those of the
province.

Appellant's contention on this point is untenable. According to said article, no charitable institution is
a necessary party in the present case of determination of the rights of the parties. The action which
may arise from said article, in the case of unlawful partnership, is that for the recovery of the
amounts paid by the member from those in charge of the administration of said partnership, and it is
not necessary for the said parties to base their action to the existence of the partnership, but on the
fact that of having contributed some money to the partnership capital. And hence, the charitable
institution of the domicile of the partnership, and in the default thereof, those of the province are not
necessary parties in this case. The article cited above permits no action for the purpose of obtaining
the earnings made by the unlawful partnership, during its existence as result of the business in
which it was engaged, because for the purpose, as Manresa remarks, the partner will have to base
his action upon the partnership contract, which is to annul and without legal existence by reason of
its unlawful object; and it is self evident that what does not exist cannot be a cause of action. Hence,
paragraph 2 of the same article provides that when the dissolution of the unlawful partnership is
decreed, the profits cannot inure to the benefit of the partners, but must be given to some charitable
institution.

We deem in pertinent to quote Manresa's commentaries on article 1666 at length, as a clear

explanation of the scope and spirit of the provision of the Civil Code which we are concerned.
Commenting on said article Manresa, among other things says:

When the subscriptions of the members have been paid to the management of the
partnership, and employed by the latter in transactions consistent with the purposes of the
partnership may the former demand the return of the reimbursement thereof from the
manager or administrator withholding them?

Apropos of this, it is asserted: If the partnership has no valid existence, if it is considered

juridically non-existent, the contract entered into can have no legal effect; and in that case,
how can it give rise to an action in favor of the partners to judicially demand from the
manager or the administrator of the partnership capital, each one's contribution?

The authors discuss this point at great length, but Ricci decides the matter quite clearly,
dispelling all doubts thereon. He holds that the partner who limits himself to demanding only
the amount contributed by him need not resort to the partnership contract on which to base
his action. And he adds in explanation that the partner makes his contribution, which passes
to the managing partner for the purpose of carrying on the business or industry which is the
object of the partnership; or in other words, to breathe the breath of life into a partnership
contract with an objection forbidden by law. And as said contrast does not exist in the eyes of
the law, the purpose from which the contribution was made has not come into existence, and
the administrator of the partnership holding said contribution retains what belongs to
others, without any consideration; for which reason he is not bound to return it and he who
has paid in his share is entitled to recover it.

But this is not the case with regard to profits earned in the course of the partnership,
because they do not constitute or represent the partner's contribution but are the result of the
industry, business or speculation which is the object of the partnership, and therefor, in order
to demand the proportional part of the said profits, the partner would have to base his action
on the contract which is null and void, since this partition or distribution of the profits is one of
the juridical effects thereof. Wherefore considering this contract as non-existent, by reason of
its illicit object, it cannot give rise to the necessary action, which must be the basis of the
judicial complaint. Furthermore, it would be immoral and unjust for the law to permit a profit
from an industry prohibited by it.

Hence the distinction made in the second paragraph of this article of this Code, providing
that the profits obtained by unlawful means shall not enrich the partners, but shall upon the
dissolution of the partnership, be given to the charitable institutions of the domicile of the
partnership, or, in default of such, to those of the province.

This is a new rule, unprecedented by our law, introduced to supply an obvious deficiency of
the former law, which did not describe the purpose to which those profits denied the partners
were to be applied, nor state what to be done with them.
 The profits are so applied, and not the contributions, because this would be an excessive
and unjust sanction for, as we have seen, there is no reason, in such a case, for depriving
the partner of the portion of the capital that he contributed, the circumstances of the two
cases being entirely different.

Our Code does not state whether, upon the dissolution of the unlawful partnership, the
amounts contributed are to be returned by the partners, because it only deals with the
disposition of the profits; but the fact that said contributions are not included in the disposal
prescribed profits, shows that in consequences of said exclusion, the general law must be
followed, and hence the partners should reimburse the amount of their respective
contributions. Any other solution is immoral, and the law will not consent to the latter
remaining in the possession of the manager or administrator who has refused to return them,
by denying to the partners the action to demand them. (Manresa, Commentaries on the
Spanish Civil Code, vol. XI, pp. 262-264)

The judgment appealed from, being in accordance with law, should be, as it is hereby, affirmed with
costs against the appellants; provided, however, the defendants shall pay the legal interest on the
sum of P24,607.80 from the date of the decision of the court, and provided, further, that the
defendants shall deposit this sum of money and other documents evidencing uncollected credits in
the office of the clerk of the trial court, in order that said court may distribute them among the
members of said association, upon being duly identified in the manner that it may deem proper. So
ordered.

Avanceña, C.J., Johnson, Street, Johns, Romualdez, and Villa-Real, JJ., concur.

2.) Agad v. Mabato and Agad Company

G.R. No. L-24193; June 28, 1968

FACTS:
Mauricio Agad and Severino Mabato executed a public instrument to form a
partnership engaged in a fishpond business. Agad Contributed P1,000.00 with the right
to receive 50% of the profits. Mabato handled the partnership funds and rendered
accounts of the operations of the partnership. However, for the years 1957 to 1963,
Mabato failed to render accounts and pay Agad his share in the profits. Thus, Agad filed
a complaint for the recovery of the amount. However, Mabato contended that no
partnership had ever existed since the contract was not perfected because Agad
allegedly failed to contribute his P1,000.00 contribution. The court dismissed the
complaint since the contract was void for being in violation of Art. 1773 in because no
inventory of the fishpond had been attached with the instrument.

ISSUE:
Does the provision on Art. 1773 of the Civil Code apply?

HELD:
No. The Court held that Art. 1773 cannot apply. The public instrument forming the
supposed partnership indicated that it was established “to operate a fishpond” and not
to “engage in a fishpond business.” Moreover, no fishpond or a real right to any was
contributed, even if a fishpond or a real right thereto could become part of its assets,
and that contributions merely consisted of P1, 000.00 each from both parties. Thus,
Art. 1773 and 1771 are inapplicable as a basis for the dismissal of the complaint since
no immovable property or real rights were contributed.

G.R. No. L-24193           June 28, 1968

MAURICIO AGAD, plaintiff-appellant,
vs.
SEVERINO MABATO and MABATO and AGAD COMPANY, defendants-appellees.

Angeles, Maskarino and Associates for plaintiff-appellant.

Victorio S. Advincula for defendants-appellees.

CONCEPCION, C.J.:

In this appeal, taken by plaintiff Mauricio Agad, from an order of dismissal of the Court of First
Instance of Davao, we are called upon to determine the applicability of Article 1773 of our Civil Code
to the contract of partnership on which the complaint herein is based.

Alleging that he and defendant Severino Mabato are — pursuant to a public instrument dated August
29, 1952, copy of which is attached to the complaint as Annex "A" — partners in a fishpond
business, to the capital of which Agad contributed P1,000, with the right to receive 50% of the
profits; that from 1952 up to and including 1956, Mabato who handled the partnership funds, had
yearly rendered accounts of the operations of the partnership; and that, despite repeated demands,
Mabato had failed and refused to render accounts for the years 1957 to 1963, Agad prayed in his
complaint against Mabato and Mabato & Agad Company, filed on June 9, 1964, that judgment be
rendered sentencing Mabato to pay him (Agad) the sum of P14,000, as his share in the profits of the
partnership for the period from 1957 to 1963, in addition to P1,000 as attorney's fees, and ordering
the dissolution of the partnership, as well as the winding up of its affairs by a receiver to be
appointed therefor.

In his answer, Mabato admitted the formal allegations of the complaint and denied the existence of
said partnership, upon the ground that the contract therefor had not been perfected, despite the
execution of Annex "A", because Agad had allegedly failed to give his P1,000 contribution to the
partnership capital. Mabato prayed, therefore, that the complaint be dismissed; that Annex "A" be
declared void ab initio; and that Agad be sentenced to pay actual, moral and exemplary damages,
as well as attorney's fees.

Subsequently, Mabato filed a motion to dismiss, upon the ground that the complaint states no cause
of action and that the lower court had no jurisdiction over the subject matter of the case, because it
involves principally the determination of rights over public lands. After due hearing, the court issued
the order appealed from, granting the motion to dismiss the complaint for failure to state a cause of
action. This conclusion was predicated upon the theory that the contract of partnership, Annex "A", is
null and void, pursuant to Art. 1773 of our Civil Code, because an inventory of the fishpond referred
in said instrument had not been attached thereto. A reconsideration of this order having been
denied, Agad brought the matter to us for review by record on appeal.

Articles 1771 and 1773 of said Code provide:

Art. 1771. A partnership may be constituted in any form, except where immovable property
or real rights are contributed thereto, in which case a public instrument shall be necessary.

Art. 1773. A contract of partnership is void, whenever immovable property is contributed

thereto, if inventory of said property is not made, signed by the parties; and attached to the
public instrument.

The issue before us hinges on whether or not "immovable property or real rights" have
been contributed to the partnership under consideration. Mabato alleged and the lower court held
that the answer should be in the affirmative, because "it is really inconceivable how a partnership
engaged in the fishpond business could exist without said fishpond property (being) contributed to
the partnership." It should be noted, however, that, as stated in Annex "A" the partnership was
established "to operate a fishpond", not to "engage in a fishpond business". Moreover, none of the
partners contributed either a fishpond or a real right to any fishpond. Their contributions were limited
to the sum of P1,000 each. Indeed, Paragraph 4 of Annex "A" provides:

That the capital of the said partnership is Two Thousand (P2,000.00) Pesos Philippine
Currency, of which One Thousand (P1,000.00) pesos has been contributed by Severino
Mabato and One Thousand (P1,000.00) Pesos has been contributed by Mauricio Agad.

xxx     xxx     xxx

The operation of the fishpond mentioned in Annex "A" was the purpose of the partnership. Neither
said fishpond nor a real right thereto was contributed to the partnership or became part of the capital
thereof, even if a fishpond or a real right thereto could become part of its assets.

WHEREFORE, we find that said Article 1773 of the Civil Code is not in point and that, the order
appealed from should be, as it is hereby set aside and the case remanded to the lower court for
further proceedings, with the costs of this instance against defendant-appellee, Severino Mabato. It
is so ordered.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.

3.) G.R. No. L-42571-72 July 25, 1983

VICENTE DE LA CRUZ, RENATO ALIPIO, JOSE TORRES III, LEONCIO CORPUZ, TERESITA
CALOT, ROSALIA FERNANDEZ, ELIZABETH VELASCO, NANETTE VILLANUEVA, HONORATO
BUENAVENTURA, RUBEN DE CASTRO, VICENTE ROXAS, RICARDO DAMIAN, DOMDINO
ROMDINA, ANGELINA OBLIGACION, CONRADO GREGORIO, TEODORO REYES, LYDIA
ATRACTIVO, NAPOLEON MENDOZA, PERFECTO GUMATAY, ANDRES SABANGAN, ROSITA
DURAN, SOCORRO BERNARDEZ, and PEDRO GABRIEL, petitioners,
vs.
THE HONORABLE EDGARDO L. PARAS, MATIAS RAMIREZ as the Municipal Mayor, MARIO
MENDOZA as the Municipal Vice-Mayor, and THE MUNICIPAL COUNCIL OF BOCAUE,
BULACAN, respondents.

Federico N. Alday for petitioners.

Dakila F. Castro for respondents.

FERNANDO, C.J.:

The crucial question posed by this certiorari proceeding is whether or not a municipal corporation,
Bocaue, Bulacan, represented by respondents,   can, prohibit the exercise of a lawful trade, the
1

operation of night clubs, and the pursuit of a lawful occupation, such clubs employing hostesses. It is
contended that the ordinance assailed as invalid is tainted with nullity, the municipality being devoid
of power to prohibit a lawful business, occupation or calling, petitioners at the same time alleging
that their rights to due process and equal protection of the laws were violated as the licenses
previously given to them was in effect withdrawn without judicial hearing.  2

The assailed ordinance   is worded as follows: "Section 1.— Title of Ordinance.— This Ordinance
3

shall be known and may be cited as the [Prohibition and Closure Ordinance] of Bocaue, Bulacan.
Section 2. — Definitions of Terms — (a) 'Night Club' shall include any place or establishment selling
to the public food or drinks where customers are allowed to dance. (b) 'Cabaret' or 'Dance Hall' shall
include any place or establishment where dancing is permitted to the public and where professional
hostesses or hospitality girls and professional dancers are employed. (c) 'Professional hostesses' or
'hospitality girls' shall include any woman employed by any of the establishments herein defined to
entertain guests and customers at their table or to dance with them. (d) 'Professional dancer' shall
include any woman who dances at any of the establishments herein defined for a fee or
remuneration paid directly or indirectly by the operator or by the persons she dances with. (e)
'Operator' shall include the owner, manager, administrator or any person who operates and is
responsible for the operation of any night club, cabaret or dance hall. Section 3. — Prohibition in the
Issuance and Renewal of Licenses, Permits. — Being the principal cause in the decadence of
morality and because of their other adverse effects on this community as explained above, no
operator of night clubs, cabarets or dance halls shall henceforth be issued permits/licenses to
operate within the jurisdiction of the municipality and no license/permit shall be issued to any
professional hostess, hospitality girls and professional dancer for employment in any of the
aforementioned establishments. The prohibition in the issuance of licenses/permits to said persons
and operators of said establishments shall include prohibition in the renewal thereof. Section 4.
— Revocation of Permits and Licenses.— The licenses and permits issued to operators of night
clubs, cabarets or dance halls which are now in operation including permits issued to professional
hostesses, hospitality girls and professional dancers are hereby revoked upon the expiration of the
thirty-day period given them as provided in Section 8 hereof and thenceforth, the operation of these
establishments within the jurisdiction of the municipality shall be illegal. Section 5.— Penalty in case
of violation. — Violation of any of the provisions of this Ordinance shall be punishable by
imprisonment not exceeding three (3) months or a fine not exceeding P200.00 or both at the
discretion of the Court. If the offense is committed by a juridical entity, the person charged with the
management and/or operation thereof shall be liable for the penalty provided herein. Section 6.
— Separability Clause.— If, for any reason, any section or provision of this Ordinance is held
unconstitutional or invalid, no other section or provision hereof shall be affected thereby. Section 7.
— Repealing Clause.— All ordinance, resolutions, circulars, memoranda or parts thereof that are
inconsistent with the provisions of this Ordinance are hereby repealed. Section 8.— Effectivity.—
This Ordinance shall take effect immediately upon its approval; provided, however, that operators of
night clubs, cabarets and dance halls now in operation including professional hostesses, hospitality
girls and professional dancers are given a period of thirty days from the approval hereof within which
to wind up their businesses and comply with the provisions of this Ordinance."  4

On November 5, 1975, two cases for prohibition with preliminary injunction were filed with the Court
of First Instance of Bulacan.   The grounds alleged follow:
5

1. Ordinance No. 84 is null and void as a municipality has no authority to prohibit a lawful business,
occupation or calling.

2. Ordinance No. 84 is violative of the petitioners' right to due process and the equal protection of the
law, as the license previously given to petitioners was in effect withdrawn without judicial hearing. 3.
That under Presidential Decree No. 189, as amended, by Presidential Decree No. 259, the power to
license and regulate tourist-oriented businesses including night clubs, has been transferred to the
Department of Tourism."   The cases were assigned to respondent Judge, now Associate Justice
6

Paras of the Intermediate Appellate Court, who issued a restraining order on November 7, 1975. The
answers were thereafter filed. It was therein alleged: " 1. That the Municipal Council is authorized by
law not only to regulate but to prohibit the establishment, maintenance and operation of night clubs
invoking Section 2243 of the RAC, CA 601, Republic Acts Nos. 938, 978 and 1224. 2. The
Ordinance No. 84 is not violative of petitioners' right to due process and the equal protection of the
law, since property rights are subordinate to public interests. 3. That Presidential Decree No. 189, as
amended, did not deprive Municipal Councils of their jurisdiction to regulate or prohibit night
clubs."   There was the admission of the following facts as having been established: "l. That
7

petitioners Vicente de la Cruz, et al. in Civil Case No. 4755-M had been previously issued licenses
by the Municipal Mayor of Bocaue-petitioner Jose Torres III, since 1958; petitioner Vicente de la
Cruz, since 1960; petitioner Renato Alipio, since 1961 and petitioner Leoncio Corpuz, since 1972; 2.
That petitioners had invested large sums of money in their businesses; 3. That the night clubs are
well-lighted and have no partitions, the tables being near each other; 4. That the petitioners
owners/operators of these clubs do not allow the hospitality girls therein to engage in immoral acts
and to go out with customers; 5. That these hospitality girls are made to go through periodic medical
check-ups and not one of them is suffering from any venereal disease and that those who fail to
submit to a medical check-up or those who are found to be infected with venereal disease are not
allowed to work; 6. That the crime rate there is better than in other parts of Bocaue or in other towns
of Bulacan."   Then came on January 15, 1976 the decision upholding the constitutionality and
8

validity of Ordinance No. 84 and dismissing the cases. Hence this petition for certiorari by way of
appeal.

In an exhaustive as well as scholarly opinion, the lower court dismissed the petitions. Its rationale is
set forth in the opening paragraph thus: "Those who lust cannot last. This in essence is why the
Municipality of Bocaue, Province of Bulacan, stigmatized as it has been by innuendos of sexual
titillation and fearful of what the awesome future holds for it, had no alternative except to order thru
its legislative machinery, and even at the risk of partial economic dislocation, the closure of its night
clubs and/or cabarets. This in essence is also why this Court, obedient to the mandates of good
government, and cognizant of the categorical imperatives of the current legal and social revolution,
hereby [upholds] in the name of police power the validity and constitutionality of Ordinance No. 84,
Series of 1975, of the Municipal Council of Bocaue, Bulacan. The restraining orders heretofore
issued in these two cases are therefore hereby rifted, effective the first day of February, 1976, the
purpose of the grace period being to enable the petitioners herein to apply to the proper appellate
tribunals for any contemplated redress."  This Court is, however, unable to agree with such a
9

conclusion and for reasons herein set forth, holds that reliance on the police power is insufficient to
justify the enactment of the assailed ordinance. It must be declared null and void.
1. Police power is granted to municipal corporations in general terms as follows: "General power of
council to enact ordinances and make regulations. - The municipal council shall enact such
ordinances and make such regulations, not repugnant to law, as may be necessary to carry into
effect and discharge the powers and duties conferred upon it by law and such as shall seem
necessary and proper to provide for the health and safety, promote the prosperity, improve the
morals, peace, good order, comfort, and convenience of the municipality and the inhabitants thereof,
and for the protection of property therein."   It is practically a reproduction of the former Section 39 of
10

Municipal Code.  An ordinance enacted by virtue thereof, according to Justice Moreland, speaking
11

for the Court in the leading case of United States v. Abendan   "is valid, unless it contravenes the
12

fundamental law of the Philippine Islands, or an Act of the Philippine Legislature, or unless it is
against public policy, or is unreasonable, oppressive, partial, discriminating, or in derogation of
common right. Where the power to legislate upon a given subject, and the mode of its exercise and
the details of such legislation are not prescribed, the ordinance passed pursuant thereto must be a
reasonable exercise of the power, or it will be pronounced invalid."   In another leading case, United
13

States v. Salaveria,   the ponente this time being Justice Malcolm, where the present Administrative
14

Code provision was applied, it was stated by this Court: "The general welfare clause has two
branches: One branch attaches itself to the main trunk of municipal authority, and relates to such
ordinances and regulations as may be necessary to carry into effect and discharge the powers and
duties conferred upon the municipal council by law. With this class we are not here directly
concerned. The second branch of the clause is much more independent of the specific functions of
the council which are enumerated by law. It authorizes such ordinances as shall seem necessary
and proper to provide for the health and safety, promote the prosperity, improve the morals, peace,
good order, comfort, and convenience of the municipality and the inhabitants thereof, and for the
protection of property therein.' It is a general rule that ordinances passed by virtue of the implied
power found in the general welfare clause must be reasonable, consonant with the general
powersand purposes of the corporation, and not inconsistent with the laws or policy of the State."   If15

night clubs were merely then regulated and not prohibited, certainly the assailed ordinance would
pass the test of validity. In the two leading cases above set forth, this Court had stressed
reasonableness, consonant with the general powers and purposes of municipal corporations, as well
as consistency with the laws or policy of the State. It cannot be said that such a sweeping exercise
of a lawmaking power by Bocaue could qualify under the term reasonable. The objective of fostering
public morals, a worthy and desirable end can be attained by a measure that does not encompass
too wide a field. Certainly the ordinance on its face is characterized by overbreadth. The purpose
sought to be achieved could have been attained by reasonable restrictions rather than by an
absolute prohibition. The admonition in Salaveria should be heeded: "The Judiciary should not lightly
set aside legislative action when there is not a clear invasion of personal or property rights under the
guise of police regulation."   It is clear that in the guise of a police regulation, there was in this
16

instance a clear invasion of personal or property rights, personal in the case of those individuals
desirous of patronizing those night clubs and property in terms of the investments made and salaries
to be earned by those therein employed.

2. The decision now under review refers to Republic Act No. 938 as amended.   It was originally
17

enacted on June 20, 1953. It is entitled: "AN ACT GRANTING MUNICIPAL OR CITY BOARDS AND
COUNCILS THE POWER TO REGULATE THE ESTABLISHMENT, MAINTENANCE AND
OPERATION OF CERTAIN PLACES OF AMUSEMENT WITHIN THEIR RESPECTIVE
TERRITORIAL JURISDICTIONS.'   Its first section insofar as pertinent reads: "The municipal or city
18

board or council of each chartered city shall have the power to regulate by ordinance the
establishment, maintenance and operation of night clubs, cabarets, dancing schools, pavilions,
cockpits, bars, saloons, bowling alleys, billiard pools, and other similar places of amusement within
its territorial jurisdiction: ... "   Then on May 21, 1954, the first section was amended to include not
19

merely "the power to regulate, but likewise "Prohibit ... "   The title, however, remained the same. It
20

is worded exactly as Republic Act No. 938. It is to be admitted that as thus amended, if only the
above portion of the Act were considered, a municipal council may go as far as to prohibit the
operation of night clubs. If that were all, then the appealed decision is not devoid of support in law.
That is not all, however. The title was not in any way altered. It was not changed one whit. The exact
wording was followed. The power granted remains that of regulation, not prohibition. There is thus
support for the view advanced by petitioners that to construe Republic Act No. 938 as allowing the
prohibition of the operation of night clubs would give rise to a constitutional question. The
Constitution mandates: "Every bill shall embrace only one subject which shall be expressed in the
title thereof. "   Since there is no dispute as the title limits the power to regulating, not prohibiting, it
21

would result in the statute being invalid if, as was done by the Municipality of Bocaue, the operation
of a night club was prohibited. There is a wide gap between the exercise of a regulatory power "to
provide for the health and safety, promote the prosperity, improve the morals,   in the language of
22

the Administrative Code, such competence extending to all "the great public needs,   to quote from
23

Holmes, and to interdict any calling, occupation, or enterprise. In accordance with the well-settled
principle of constitutional construction that between two possible interpretations by one of which it
will be free from constitutional infirmity and by the other tainted by such grave defect, the former is to
be preferred. A construction that would save rather than one that would affix the seal of doom
certainly commends itself. We have done so before We do so again.  24

3. There is reinforcement to the conclusion reached by virtue of a specific provision of the recently-
enacted Local Government Code.   The general welfare clause, a reiteration of the Administrative
25

Code provision, is set forth in the first paragraph of Section 149 defining the powers and duties of
the sangguniang bayan. It read as follows: "(a) Enact such ordinances and issue such regulations as
may be necessary to carry out and discharge the responsibilities conferred upon it by law, and such
as shall be necessary and proper to provide for the health, safety, comfort and convenience,
maintain peace and order, improve public morals, promote the prosperity and general welfare of the
municipality and the inhabitants thereof, and insure the protection of property therein; ..."   There are
26

in addition provisions that may have a bearing on the question now before this Court. Thus
the sangguniang bayan shall "(rr) Regulate cafes, restaurants, beer-houses, hotels, motels, inns,
pension houses and lodging houses, except travel agencies, tourist guides, tourist transports, hotels,
resorts, de luxe restaurants, and tourist inns of international standards which shall remain under the
licensing and regulatory power of the Ministry of Tourism which shall exercise such authority without
infringing on the taxing or regulatory powers of the municipality; (ss) Regulate public dancing
schools, public dance halls, and sauna baths or massage parlors; (tt) Regulate the establishment
and operation of billiard pools, theatrical performances, circuses and other forms of
entertainment; ..."   It is clear that municipal corporations cannot prohibit the operation of night clubs.
27

They may be regulated, but not prevented from carrying on their business. It would be, therefore, an
exercise in futility if the decision under review were sustained. All that petitioners would have to do is
to apply once more for licenses to operate night clubs. A refusal to grant licenses, because no such
businesses could legally open, would be subject to judicial correction. That is to comply with the
legislative will to allow the operation and continued existence of night clubs subject to appropriate
regulations. In the meanwhile, to compel petitioners to close their establishments, the necessary
result of an affirmance, would amount to no more than a temporary termination of their business.
During such time, their employees would undergo a period of deprivation. Certainly, if such an
undesirable outcome can be avoided, it should be. The law should not be susceptible to the
reproach that it displays less than sympathetic concern for the plight of those who, under a mistaken
appreciation of a municipal power, were thus left without employment. Such a deplorable
consequence is to be avoided. If it were not thus, then the element of arbitrariness enters the
picture. That is to pay less, very much less, than full deference to the due process clause with its
mandate of fairness and reasonableness.

4. The conclusion reached by this Court is not to be interpreted as a retreat from its resolute stand
sustaining police power legislation to promote public morals. The commitment to such an Ideal
forbids such a backward step. Legislation of that character is deserving of the fullest sympathy from
the judiciary. Accordingly, the judiciary has not been hesitant to lend the weight of its support to
measures that can be characterized as falling within that aspect of the police power. Reference is
made by respondents to Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of
Manila.   There is a misapprehension as to what was decided by this Court. That was a regulatory
28

measure. Necessarily, there was no valid objection on due process or equal protection grounds. It
did not prohibit motels. It merely regulated the mode in which it may conduct business in order
precisely to put an end to practices which could encourage vice and immorality. This is an entirely
different case. What was involved is a measure not embraced within the regulatory power but an
exercise of an assumed power to prohibit. Moreover, while it was pointed out in the aforesaid Ermita-
Malate Hotel and Motel Operators Association, Inc. decision that there must be a factual foundation
of invalidity, it was likewise made clear that there is no need to satisfy such a requirement if a statute
were void on its face. That it certainly is if the power to enact such ordinance is at the most dubious
and under the present Local Government Code non-existent.

WHEREFORE, the writ of certiorari is granted and the decision of the lower court dated January 15,
1976 reversed, set aside, and nullied. Ordinance No. 84, Series of 1975 of the Municipality of
Bocaue is declared void and unconstitutional. The temporary restraining order issued by this Court is
hereby made permanent. No costs.

Teehankee, Aquino, Concepcion Jr., Guerrero, Abad Santos, Plana, Escolin Relova and Gutierrez,
Jr., JJ., concur.

Makasiar, J, reserves his right to file a dissent.

De Castro, Melencio-Herrera and Vasquez, JJ., are on leave.

Footnotes

1 Municipal Mayor Matias Ramirez and Municipal Vice-Mayor Mario Mendoza.

2 Petition, 7. The other question raised was the jurisdiction of a municipal council to
prohibit the operation of nightclubs, it being alleged that the power of regulating
tourist-oriented businesses being granted to the then Department, now Ministry, of
Tourism.

3 Ordinance No. 84, Series of 1975.

4 Ibid.

5 Vicente de la Cruz, et al. v. Matias Ramirez, et al., and Teresita Calot, et al. v. The
Municipal Mayor, docketed as Civil Cases Nos. 4755-M and 4756-M, respectively.
On November 21, 1975, the petition in one of the above cases was amended to raise
the further issue of lack of authority of respondent Municipal Officials to pass the
ordinance in question, since the power to license, supervise and regulate night clubs
has been transferred to the Department of Tourism by virtue of Presidential Decree
No. 189, as amended.

6 Petition, 7.

7 Ibid, 8.
8 Ibid, 8-9.

9 Decision, Annex A to Petition 1.

10 Section 2238, Revised Administrative Code of the Philippines (1917).

11 Act No. 82 (1901).

12 24 Phil. 165 (1913). Abendan is followed in United States v. Tamparong, 31 Phil.

321 (1915); United States v. Gaspay, 33 Phil. 96 (1915) and Sarmiento v. Balderol,
112 Phil. 394 (1961).

13 Ibid, 168. Cf. United States v. Ten Yu, 24 Phil. 1 (1912); Case v. Board of Health,
24 Phil. 250 (1913).

14 39 Phil. 102 (1918).

15 Ibid, 109-110.

16 Ibid, 111. In Salaveria though the ordinance penalizing the playing

of panguingue on days not Sundays or legal holidays was declared as valid.

17 It was amended by Republic Act No. 979 and Republic Act No. 1224.

18 Title of Republic Act No. 938 as amended.

19 Republic Act No. 938, Section 1.

20 Republic Act No. 979, Section 1.

21 Article VIII, Section 19, par. 1 of the Constitution.

22 Section 2238.

23 Otis v. Parker, 187 US 606 (1902).

24 Cf. Nuñez v. Sandiganbayan, G.R. Nos. 50581-50617, January 30, 1982, 111
SCRA 433. Separate opinion of Justice Makasiar. De la Llana v. Alba, G.R. No.
57883, March 12,1982,112 SCRA 294.

25 Batas Pambansa Blg. 337 (1983). Under Section 234 of the Code it took effect
one month after its publication in the Official Gazette. It was published in the issue of
February 14,1983.

26 Ibid, Section 149 (1) (a).

27 Ibid, Section 149 (1) (rr, ss and tt ).

28 L-24693, 20 SCRA 849, July 31, 1967.

4.) Soncuya v. de Luna
Soncuya v. de Luna G.R. No. L-45464, April 28, 1939, Villa-Real, J.

Facts:

 Petitioner filed a complaint against respondent for damages as a result of the fraudulent administration of
the partnership, “Centro Escolar de Senoritas” of which petitioner and the deceased Avelino Librada were
members. For the purpose of adjudicating to plaintiff damages which he alleges to have suffered as a
partner, it is necessary that a liquidation of the business be made that the end profits and losses maybe
known and the causes of the latter and the responsibility of the defendant as well as the damages in
which each partner may have suffered, maybe determined.

 Issue: Whether the petitioner is entitled to damages.

 Ruling:

 According to the Supreme Court the complaint is not sufficient to constitute a cause of action on the part
of the plaintiff as member of the partnership to collect damages from defendant as managing partner
thereof, without previous liquidation. Thus, for a partner to be able to claim from another partner who
manages the general co-partnership, allegedly suffered by him by reason of the fraudulent administration
of the latter, a previous liquidation of said partnership is necessary.

G.R. No. L-45464             April 28, 1939

JOSUE SONCUYA, plaintiff-appellant,
vs.
CARMEN DE LUNA, defendant-appellee.

Josue Soncuya in his own behalf.

Conrado V. Sanchez and Jesus de Veyra for appellee.

VILLA-REAL, J.:

On September 11, 1936, plaintiff Josue Soncuya filed with the Court of First Instance of Manila and
amended complaint against Carmen de Luna in her own name and as co-administratrix of the
intestate estate, of Librada Avelino, in which, upon the facts therein alleged, he prayed that
defendant be sentenced to pay him the sum of P700,432 as damages and costs.

To the aforesaid amended complaint defendant Carmen de Luna interposed a demurrer based on
the following grounds: (1) That the complaint does not contain facts sufficient to constitute a cause of
action; and (2) that the complaint is ambiguous, unintelligible and vague.

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

Plaintiff having manifested that he would prefer not to amend his amended complaint, the attorney
for the defendant, Carmen de Luna, filed a motion praying that the amended complaint be dismissed
with costs against the plaintiff. Said motion was granted by The Court of First Instance of Manila
which ordered the dismissal of the aforesaid amended complaint, with costs against the plaintiff.
From this order of dismissal, the appellant took an appeal, assigning twenty alleged errors
committed by the lower court in its order referred to.

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

In the amended complaint it is prayed that defendant Carmen de Luna be sentenced to pay plaintiff
damages in the sum of P700,432 as a result of the administration, said to be fraudulent, of he
partnership, "Centro Escolar de Señoritas", of which plaintiff, defendant and the deceased Librada
Avelino were members. For the purpose of adjudicating to plaintiff damages which he alleges to
have suffered as a partner by reason of the supposed fraudulent management of he partnership
referred to, it is first necessary that a liquidation of the business thereof be made to the end that the
profits and losses may be known and the causes of the latter and the responsibility of the defendant
as well as the damages which each partner may have suffered, may be determined. It is not alleged
in the complaint that such a liquidation has been effected nor is it prayed that it be made.
Consequently, there is no reason or cause for plaintiff to institute the action for damages which he
claims from the managing partner Carmen de Luna (Po Yeng Cheo vs. Lim Ka Yam, 44 Phil., 172).

Having reached the conclusion that the facts alleged in the complaint are not sufficient to constitute
a cause of action on the part of plaintiff as member of the partnership "Centro Escolar de Señoritas"
to collect damages from defendant as managing partner thereof, without a previous liquidation, we
do not deem it necessary to discuss the remaining question of whether or not the complaint is
ambiguous, unintelligible and vague.

In view of the foregoing considerations, we are of the opinion and so hold that for a partner to be
able to claim from another partner who manages the general copartnership, damages allegedly
suffered by him by reason of the fraudulent administration of the latter, a previous liquidation of said
partnership is necessary.

Wherefore, finding no error in the order appealed from the same is affirmed in all its parts, with costs
against the appellant. So ordered.

Avanceña, C. J., Imperial, Diaz, Laurel, Concepcion, and Moran, JJ., concur.

5.)

G.R. No. L-5236             January 10, 1910

PEDRO MARTINEZ, plaintiff-appellee,
vs.
ONG PONG CO and ONG LAY, defendants.
ONG PONG CO., appellant.

Fernando de la Cantera for appellant.

O'Brien and DeWitt for appellee.
ARELLANO, C.J.:

On the 12th of December, 1900, the plaintiff herein delivered P1,500 to the defendants who, in a
private document, acknowledged that they had received the same with the agreement, as stated by
them, "that we are to invest the amount in a store, the profits or losses of which we are to divide with
the former, in equal shares."

The plaintiff filed a complaint on April 25, 1907, in order to compel the defendants to render him an
accounting of the partnership as agreed to, or else to refund him the P1,500 that he had given them
for the said purpose. Ong Pong Co alone appeared to answer the complaint; he admitted the fact of
the agreement and the delivery to him and to Ong Lay of the P1,500 for the purpose aforesaid, but
he alleged that Ong Lay, who was then deceased, was the one who had managed the business, and
that nothing had resulted therefrom save the loss of the capital of P1,500, to which loss the plaintiff
agreed.

The judge of the Court of First Instance of the city of Manila who tried the case ordered Ong Pong
Co to return to the plaintiff one-half of the said capital of P1,500 which, together with Ong Lay, he
had received from the plaintiff, to wit, P750, plus P90 as one-half of the profits, calculated at the rate
of 12 per cent per annum for the six months that the store was supposed to have been open, both
sums in Philippine currency, making a total of P840, with legal interest thereon at the rate of 6 per
cent per annum, from the 12th of June, 1901, when the business terminated and on which date he
ought to have returned the said amount to the plaintiff, until the full payment thereof with costs.

From this judgment Ong Pong Co appealed to this court, and assigned the following errors:

1. For not having taken into consideration the fact that the reason for the closing of the store
was the ejectment from the premises occupied by it.

2. For not having considered the fact that there were losses.

3. For holding that there should have been profits.

4. For having applied article 1138 of the Civil Code.

5. and 6. For holding that the capital ought to have yielded profits, and that the latter should
be calculated 12 per cent per annum; and

7. The findings of the ejectment.

As to the first assignment of error, the fact that the store was closed by virtue of ejectment
proceedings is of no importance for the effects of the suit. The whole action is based upon the fact
that the defendants received certain capital from the plaintiff for the purpose of organizing a
company; they, according to the agreement, were to handle the said money and invest it in a store
which was the object of the association; they, in the absence of a special agreement vesting in one
sole person the management of the business, were the actual administrators thereof; as such
administrators they were the agent of the company and incurred the liabilities peculiar to every
agent, among which is that of rendering account to the principal of their transactions, and paying him
everything they may have received by virtue of the mandatum. (Arts. 1695 and 1720, Civil Code.)
Neither of them has rendered such account nor proven the losses referred to by Ong Pong Co; they
are therefore obliged to refund the money that they received for the purpose of establishing the said
store — the object of the association. This was the principal pronouncement of the judgment.
With regard to the second and third assignments of error, this court, like the court below, finds no
evidence that the entire capital or any part thereof was lost. It is no evidence of such loss to aver,
without proof, that the effects of the store were ejected. Even though this were proven, it could not
be inferred therefrom that the ejectment was due to the fact that no rents were paid, and that the rent
was not paid on account of the loss of the capital belonging to the enterprise.

With regard to the possible profits, the finding of the court below are based on the statements of the
defendant Ong Pong Co, to the effect that "there were some profits, but not large ones." This court,
however, does not find that the amount thereof has been proven, nor deem it possible to estimate
them to be a certain sum, and for a given period of time; hence, it can not admit the estimate, made
in the judgment, of 12 per cent per annum for the period of six months.

Inasmuch as in this case nothing appears other than the failure to fulfill an obligation on the part of a
partner who acted as agent in receiving money for a given purpose, for which he has rendered no
accounting, such agent is responsible only for the losses which, by a violation of the provisions of
the law, he incurred. This being an obligation to pay in cash, there are no other losses than the legal
interest, which interest is not due except from the time of the judicial demand, or, in the present
case, from the filing of the complaint. (Arts. 1108 and 1100, Civil Code.) We do not consider that
article 1688 is applicable in this case, in so far as it provides "that the partnership is liable to every
partner for the amounts he may have disbursed on account of the same and for the proper interest,"
for the reason that no other money than that contributed as is involved.

As in the partnership there were two administrators or agents liable for the above-named amount,
article 1138 of the Civil Code has been invoked; this latter deals with debts of a partnership where
the obligation is not a joint one, as is likewise provided by article 1723 of said code with respect to
the liability of two or more agents with respect to the return of the money that they received from
their principal. Therefore, the other errors assigned have not been committed.

In view of the foregoing judgment appealed from is hereby affirmed, provided, however, that the
defendant Ong Pong Co shall only pay the plaintiff the sum of P750 with the legal interest thereon at
the rate of 6 per cent per annum from the time of the filing of the complaint, and the costs, without
special ruling as to the costs of this instance. So ordered.

Yellow pad – digest

6.) FIRST DIVISION

G.R. No. 85494             May 7, 1991

CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V. RAMNANI and MOTI G.

RAMNANI, petitioners,
vs.
COURT OF APPEALS, SPOUSES ISHWAR JETHMAL RAMNANI, SONYA JETHMAL RAMNANI
and OVERSEAS HOLDING CO., LTD., respondents.

G.R. No. 85496             May 7, 1991

SPOUSES ISHWAR JETHMAL RAMNANI AND SONYA JET RAMNANI, petitioners,

vs.
THE HONORABLE COURT OF APPEALS, ORTIGAS & CO., LTD. PARTNERSHIP, and
OVERSEAS HOLDING CO., LTD., respondents.
Quasha, Asperilla Ancheta, Peña and Nolasco for petitioners Ishwar Jethmal Ramnani & Sonya
Ramnani.
Salonga, Andres, Hernandez & Allado for Choithram Jethmal Ramnani, Nirmla Ramnani & Moti
Ramnani.
Rama Law Office for private respondents in collaboration with Salonga, Andres, Hernandez &
Allado.
Eulogio R. Rodriguez for Ortigas & Co., Ltd.

GANCAYCO, J.:

This case involves the bitter quarrel of two brothers over two (2) parcels of land and its
improvements now worth a fortune. The bone of contention is the apparently conflicting factual
findings of the trial court and the appellate court, the resolution of which will materially affect the
result of the contest.

The following facts are not disputed.

Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of the full blood.
Ishwar and his spouse Sonya had their main business based in New York. Realizing the difficulty of
managing their investments in the Philippines they executed a general power of attorney on January
24, 1966 appointing Navalrai and Choithram as attorneys-in-fact, empowering them to manage and
conduct their business concern in the Philippines. 1

On February 1, 1966 and on May 16, 1966, Choithram, in his capacity as aforesaid attorney-in-fact
of Ishwar, entered into two agreements for the purchase of two parcels of land located in Barrio
Ugong, Pasig, Rizal, from Ortigas & Company, Ltd. Partnership (Ortigas for short) with a total area of
approximately 10,048 square meters.  Per agreement, Choithram paid the down payment and
2

installments on the lot with his personal checks. A building was constructed thereon by Choithram in
1966 and this was occupied and rented by Jethmal Industries and a wardrobe shop called Eppie's
Creation. Three other buildings were built thereon by Choithram through a loan of P100,000.00
obtained from the Merchants Bank as well as the income derived from the first building. The
buildings were leased out by Choithram as attorney-in-fact of Ishwar. Two of these buildings were
later burned.

Sometime in 1970 Ishwar asked Choithram to account for the income and expenses relative to these
properties during the period 1967 to 1970. Choithram failed and refused to render such accounting.
As a consequence, on February 4, 1971, Ishwar revoked the general power of attorney. Choithram
and Ortigas were duly notified of such revocation on April 1, 1971 and May 24, 1971,
respectively.  Said notice was also registered with the Securities and Exchange Commission on
3

March 29, 1971  and was published in the April 2, 1971 issue of The Manila Times for the
4

information of the general public. 5

Nevertheless, Choithram as such attorney-in-fact of Ishwar, transferred all rights and interests of
Ishwar and Sonya in favor of his daughter-in-law, Nirmla Ramnani, on February 19, 1973. Her
husband is Moti, son of Choithram. Upon complete payment of the lots, Ortigas executed the
corresponding deeds of sale in favor of Nirmla.  Transfer Certificates of Title Nos. 403150 and
6

403152 of the Register of Deeds of Rizal were issued in her favor.

Thus, on October 6, 1982, Ishwar and Sonya (spouses Ishwar for short) filed a complaint in the
Court of First Instance of Rizal against Choithram and/or spouses Nirmla and Moti (Choithram et al.
for brevity) and Ortigas for reconveyance of said properties or payment of its value and damages. An
amended complaint for damages was thereafter filed by said spouses.

After the issues were joined and the trial on the merits, a decision was rendered by the trial court on
December 3, 1985 dismissing the complaint and counterclaim. A motion for reconsideration thereof
filed by spouses Ishwar was denied on March 3, 1986.

An appeal therefrom was interposed by spouses Ishwar to the Court of Appeals wherein in due
course a decision was promulgated on March 14, 1988, the dispositive part of which reads as
follows:

WHEREFORE, judgment is hereby rendered reversing and setting aside the appealed
decision of the lower court dated December 3, 1985 and the Order dated March 3, 1986
which denied plaintiffs-appellants' Motion for Reconsideration from aforesaid decision. A new
decision is hereby rendered sentencing defendants- appellees Choithram Jethmal Ramnani,
Nirmla V. Ramnani, Moti C. Ramnani, and Ortigas and Company Limited Partnership to pay,
jointly and severally, plaintiffs-appellants the following:

1. Actual or compensatory damages to the extent of the fair market value of the properties in
question and all improvements thereon covered by Transfer Certificate of Title No. 403150
and Transfer Certificate of Title No. 403152 of the Registry of Deeds of Rizal, prevailing at
the time of the satisfaction of the judgment but in no case shall such damages be less than
the value of said properties as appraised by Asian Appraisal, Inc. in its Appraisal Report
dated August 1985 (Exhibits T to T-14, inclusive).

2. All rental incomes paid or ought to be paid for the use and occupancy of the properties in
question and all improvements thereon consisting of buildings, and to be computed as
follows:

a) On Building C occupied by Eppie's Creation and Jethmal Industries from 1967 to

1973, inclusive, based on the 1967 to 1973 monthly rentals paid by Eppie's Creation;

b) Also on Building C above, occupied by Jethmal Industries and Lavine from 1974 to
1978, the rental incomes based on then rates prevailing as shown under Exhibit "P";
and from 1979 to 1981, based on then prevailing rates as indicated under Exhibit
"Q";

c) On Building A occupied by Transworld Knitting Mills from 1972 to 1978, the rental
incomes based upon then prevailing rates shown under Exhibit "P", and from 1979 to
1981, based on prevailing rates per Exhibit "Q";

d) On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to 1978, the
rentals based on the Lease Contract, Exhibit "P", and from 1979 to 1980, the rentals
based on the Lease Contract, Exhibit "Q",

and thereafter commencing 1982, to account for and turn over the rental incomes paid or
ought to be paid for the use and occupancy of the properties and all improvements totalling
10,048 sq. m based on the rate per square meter prevailing in 1981 as indicated annually
cumulative up to 1984. Then, commencing 1985 and up to the satisfaction of the judgment,
 rentals shall be computed at ten percent (10%) annually of the fair market values of the
properties as appraised by the Asian Appraisal, Inc. in August 1985 (Exhibits T to T-14,
inclusive.)

3. Moral damages in the sum of P200,000.00;

4. Exemplary damages in the sum of P100,000.00;

5. Attorney's fees equivalent to 10% of the award herein made;

6. Legal interest on the total amount awarded computed from first demand in 1967 and until
the full amount is paid and satisfied; and

7. The cost of suit. 7

Acting on a motion for reconsideration filed by Choithram, et al. and Ortigas, the appellate court
promulgated an amended decision on October 17, 1988 granting the motion for reconsideration of
Ortigas by affirming the dismissal of the case by the lower court as against Ortigas but denying the
motion for reconsideration of Choithram, et al. 8

Choithram, et al. thereafter filed a petition for review of said judgment of the appellate court alleging
the following grounds:

1. The Court of Appeals gravely abused its discretion in making a factual finding not
supported by and contrary, to the evidence presented at the Trial Court.

2. The Court of Appeals acted in excess of jurisdiction in awarding damages based on the
value of the real properties in question where the cause of action of private respondents is
recovery of a sum of money.

ARGUMENTS

THE COURT OF APPEALS ACTED IN GRAVE ABUSE OF ITS DISCRETION IN MAKING A

FACTUAL FINDING THAT PRIVATE RESPONDENT ISHWAR REMITTED THE AMOUNT
OF US $150,000.00 TO PETITIONER CHOITHRAM IN THE ABSENCE OF PROOF OF
SUCH REMITTANCE.

II

THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND

MANIFEST PARTIALITY IN DISREGARDING THE TRIAL COURTS FINDINGS BASED ON
THE DIRECT DOCUMENTARY AND TESTIMONIAL EVIDENCE PRESENTED BY
CHOITHRAM IN THE TRIAL COURT ESTABLISHING THAT THE PROPERTIES WERE
PURCHASED WITH PERSONAL FUNDS OF PETITIONER CHOITHRAM AND NOT WITH
MONEY ALLEGEDLY REMITTED BY RESPONDENT ISHWAR.

III
 THE COURT OF APPEALS ACTED IN EXCESS OF JURISDICTION IN AWARDING
DAMAGES BASED ON THE VALUE OF THE PROPERTIES AND THE FRUITS OF THE
IMPROVEMENTS THEREON. 9

Similarly, spouses Ishwar filed a petition for review of said amended decision of the appellate court
exculpating Ortigas of liability based on the following assigned errors

THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR

AND HAS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW
AND/OR WITH APPLICABLE DECISIONS OF THIS HONORABLE COURT—

A) IN PROMULGATING THE QUESTIONED AMENDED DECISION (ANNEX "A")

RELIEVING RESPONDENT ORTIGAS FROM LIABILITY AND DISMISSING
PETITIONERS' AMENDED COMPLAINT IN CIVIL CASE NO. 534-P, AS AGAINST
SAID RESPONDENT ORTIGAS;

B) IN HOLDING IN SAID AMENDED DECISION THAT AT ANY RATE NO ONE

EVER TESTIFIED THAT ORTIGAS WAS A SUBSCRIBER TO THE MANILA TIMES
PUBLICATION OR THAT ANY OF ITS OFFICERS READ THE NOTICE AS
PUBLISHED IN THE MANILA TIMES, THEREBY ERRONEOUSLY CONCLUDING
THAT FOR RESPONDENT ORTIGAS TO BE CONSTRUCTIVELY BOUND BY THE
PUBLISHED NOTICE OF REVOCATION, ORTIGAS AND/OR ANY OF ITS
OFFICERS MUST BE A SUBSCRIBER AND/OR THAT ANY OF ITS OFFICERS
SHOULD READ THE NOTICE AS ACTUALLY PUBLISHED;

C) IN HOLDING IN SAID AMENDED DECISION THAT ORTIGAS COULD NOT BE

HELD LIABLE JOINTLY AND SEVERALLY WITH THE DEFENDANTS-APPELLEES
CHOITHRAM, MOTI AND NIRMLA RAMNANI, AS ORTIGAS RELIED ON THE
WORD OF CHOITHRAM THAT ALL ALONG HE WAS ACTING FOR AND IN
BEHALF OF HIS BROTHER ISHWAR WHEN IT TRANSFERRED THE RIGHTS OF
THE LATTER TO NIRMLA V. RAMNANI;

D) IN IGNORING THE EVIDENCE DULY PRESENTED AND ADMITTED DURING

THE TRIAL THAT ORTIGAS WAS PROPERLY NOTIFIED OF THE NOTICE OF
REVOCATION OF THE GENERAL POWER OF ATTORNEY GIVEN TO
CHOITHRAM, EVIDENCED BY THE PUBLICATION IN THE MANILA TIMES ISSUE
OF APRIL 2, 1971 (EXH. F) WHICH CONSTITUTES NOTICE TO THE WHOLE
WORLD; THE RECEIPT OF THE NOTICE OF SUCH REVOCATION WHICH WAS
SENT TO ORTIGAS ON MAY 22, 1971 BY ATTY. MARIANO P. MARCOS AND
RECEIVED BY ORTIGAS ON MAY 24, 1971 (EXH. G) AND THE FILING OF THE
NOTICE WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH
29,1971 (EXH. H);

E) IN DISCARDING ITS FINDINGS CONTAINED IN ITS DECISION OF 14 MARCH

1988 (ANNEX B) THAT ORTIGAS WAS DULY NOTIFIED OF THE REVOCATION
OF THE POWER OF ATTORNEY OF CHOITHRAM, HENCE ORTIGAS ACTED IN
BAD FAITH IN EXECUTING THE DEED OF SALE TO THE PROPERTIES IN
QUESTION IN FAVOR OF NIRMLA V. RAMNANI;
 F) IN SUSTAINING RESPONDENT ORTIGAS VACUOUS REHASHED
ARGUMENTS IN ITS MOTION FOR RECONSIDERATION THAT IT WOULD NOT
GAIN ONE CENTAVO MORE FROM CHOITHRAM FOR THE SALE OF SAID LOTS
AND THE SUBSEQUENT TRANSFER OF THE SAME TO THE MATTER'S
DAUGHTER-IN-LAW, AND THAT IT WAS IN GOOD FAITH WHEN IT
TRANSFERRED ISHWAR'S RIGHTS TO THE LOTS IN QUESTION.

II

THE RESPONDENT HONORABLE COURT OF APPEALS HAS SO FAR DEPARTED

FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDING WHEN IT
HELD IN THE QUESTIONED AMENDED DECISION OF 17 NOVEMBER 1988 (ANNEX A)
THAT RESPONDENT ORTIGAS & CO., LTD., IS NOT JOINTLY AND SEVERALLY LIABLE
WITH DEFENDANTS-APPELLEES CHOITHRAM, MOTI AND NIRMLA RAMNANI IN SPITE
OF ITS ORIGINAL DECISION OF 14 MARCH 1988 THAT ORTIGAS WAS DULY NOTIFIED
OF THE REVOCATION OF THE POWER OF ATTORNEY OF CHOITHRAM RAMNANI. 10

The center of controversy is the testimony of Ishwar that during the latter part of 1965, he sent the
amount of US $150,000.00 to Choithram in two bank drafts of US$65,000.00 and US$85,000.00 for
the purpose of investing the same in real estate in the Philippines. The trial court considered this
lone testimony unworthy of faith and credit. On the other hand, the appellate court found that the trial
court misapprehended the facts in complete disregard of the evidence, documentary and testimonial.

Another crucial issue is the claim of Choithram that because he was then a British citizen, as a
temporary arrangement, he arranged the purchase of the properties in the name of Ishwar who was
an American citizen and who was then qualified to purchase property in the Philippines under the
then Parity Amendment. The trial court believed this account but it was debunked by the appellate
court.

As to the issue of whether of not spouses Ishwar actually sent US$150,000.00 to Choithram
precisely to be used in the real estate business, the trial court made the following disquisition —

After a careful, considered and conscientious examination of the evidence adduced in the
case at bar, plaintiff Ishwar Jethmal Ramanani's main evidence, which centers on the
alleged payment by sending through registered mail from New York two (2) US$ drafts of
$85,000.00 and $65,000.00 in the latter part of 1965 (TSN 28 Feb. 1984, p. 10-11). The
sending of these moneys were before the execution of that General Power of Attorney, which
was dated in New York, on January 24, 1966. Because of these alleged remittances of US
$150,000.00 and the subsequent acquisition of the properties in question, plaintiffs averred
that they constituted a trust in favor of defendant Choithram Jethmal Ramnani. This Court
can be in full agreement if the plaintiffs were only able to prove preponderantly these
remittances. The entire record of this case is bereft of even a shred of proof to that effect. It
is completely barren. His uncorroborated testimony that he remitted these amounts in the
"later part of 1965" does not engender enough faith and credence. Inadequacy of details of
such remittance on the two (2) US dollar drafts in such big amounts is completely not
positive, credible, probable and entirely not in accord with human experience. This is a
classic situation, plaintiffs not exhibiting any commercial document or any document and/or
paper as regard to these alleged remittances. Plaintiff Ishwar Ramnani is not an ordinary
businessman in the strict sense of the word. Remember his main business is based in New
York, and he should know better how to send these alleged remittances. Worst, plaintiffs did
not present even a scum of proof, that defendant Choithram Ramnani received the alleged
two US dollar drafts. Significantly, he does not know even the bank where these two (2) US
 dollar drafts were purchased. Indeed, plaintiff Ishwar Ramnani's lone testimony is unworthy
of faith and credit and, therefore, deserves scant consideration, and since the plaintiffs'
theory is built or based on such testimony, their cause of action collapses or falls with it.

Further, the rate of exchange that time in 1966 was P4.00 to $1.00. The alleged two US
dollar drafts amounted to $150,000.00 or about P600,000.00. Assuming the cash price of the
two (2) lots was only P530,000.00 (ALTHOUGH he said: "Based on my knowledge I have no
evidence," when asked if he even knows the cash price of the two lots). If he were really the
true and bonafide investor and purchaser for profit as he asserted, he could have paid the
price in full in cash directly and obtained the title in his name and not thru "Contracts To Sell"
in installments paying interest and thru an attorney-in fact (TSN of May 2, 1984, pp. 10-11)
and, again, plaintiff Ishwar Ramnani told this Court that he does not know whether or not his
late father-in-law borrowed the two US dollar drafts from the Swiss Bank or whether or not
his late father-in-law had any debit memo from the Swiss Bank (TSN of May 2, 1984, pp. 9-
10).11

On the other hand, the appellate court, in giving credence to the version of Ishwar, had this to say —

While it is true, that generally the findings of fact of the trial court are binding upon the
appellate courts, said rule admits of exceptions such as when (1) the conclusion is a finding
grounded entirely on speculations, surmises and conjectures; (2) when the inferences made
is manifestly mistaken, absurd and impossible; (3) when there is grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts and when the court, in
making its findings, went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee (Ramos vs. Court of Appeals, 63 SCRA 33;
Philippine American Life Assurance Co. vs. Santamaria, 31 SCRA 798; Aldaba vs. Court of
Appeals, 24 SCRA 189).

The evidence on record shows that the t court acted under a misapprehension of facts and
the inferences made on the evidence palpably a mistake.

The trial court's observation that "the entire records of the case is bereft of even a shred of
proof" that plaintiff-appellants have remitted to defendant-appellee Choithram Ramnani the
amount of US $ 150,000.00 for investment in real estate in the Philippines, is not borne by
the evidence on record and shows the trial court's misapprehension of the facts if not a
complete disregard of the evidence, both documentary and testimonial.

Plaintiff-appellant Ishwar Jethmal Ramnani testifying in his own behalf, declared that during
the latter part of 1965, he sent the amount of US $150,000.00 to his brother Choithram in
two bank drafts of US $65,000.00 and US $85,000.00 for the purpose of investing the same
in real estate in the Philippines. His testimony is as follows:

ATTY. MARAPAO:

Mr. Witness, you said that your attorney-in-fact paid in your behalf. Can you tell this
Honorable Court where your attorney-in-fact got the money to pay this property?

ATTY. CRUZ:

Wait. It is now clear it becomes incompetent or hearsay.

COURT:

Witness can answer.

A I paid through my attorney-in-fact. I am the one who gave him the money.

ATTY. MARAPAO:

Q You gave him the money?

A That's right.

Q How much money did you give him?

A US $ 150,000.00.

Q How was it given then?

A Through Bank drafts. US $65,000.00 and US $85,000.00 bank drafts. The total
amount which is $ 150,000.00 (TSN, 28 February 1984, p. 10; Emphasis supplied.)

x x x           x x x          x x x

ATTY. CRUZ:

Q The two bank drafts which you sent I assume you bought that from some banks in
New York?

A No, sir.

Q But there is no question those two bank drafts were for the purpose of paying
down payment and installment of the two parcels of land?

A Down payment, installment and to put up the building.

Q I thought you said that the buildings were constructed . . . subject to our continuing
objection from rentals of first building?

ATTY. MARAPAO:

Your Honor, that is misleading.

COURT;

Witness (may) answer.

A Yes, the first building was immediately put up after the purchase of the two parcels
of land that was in 1966 and the finds were used for the construction of the building
from the US $150,000.00 (TSN, 7 March 1984, page 14; Emphasis supplied.)
 x x x           x x x          x x x

Q These two bank drafts which you mentioned and the use for it you sent them by
registered mail, did you send them from New Your?

A That is right.

Q And the two bank drafts which were put in the registered mail, the registered mail
was addressed to whom?

A Choithram Ramnani. (TSN, 7 March 1984, pp. 14-15).

On cross-examination, the witness reiterated the remittance of the money to his brother
Choithram, which was sent to him by his father-in-law, Rochiram L. Mulchandoni from
Switzerland, a man of immense wealth, which even defendants-appellees' witness Navalrai
Ramnani admits to be so (tsn., p. 16, S. Oct. 13, 1985). Thus, on cross-examination, Ishwar
testified as follows:

Q How did you receive these two bank drafts from the bank the name of which you
cannot remember?

A I got it from my father-in-law.

Q From where did your father- in-law sent these two bank drafts?

A From Switzerland.

Q He was in Switzerland.

A Probably, they sent out these two drafts from Switzerland.

(TSN, 7 March 1984, pp. 16-17; Emphasis supplied.)

This positive and affirmative testimony of plaintiff-appellant that he sent the two (2) bank
drafts totalling US $ 150,000.00 to his brother, is proof of said remittance. Such positive
testimony has greater probative force than defendant-appellee's denial of receipt of said
bank drafts, for a witness who testifies affirmatively that something did happen should be
believed for it is unlikely that a witness will remember what never happened (Underhill's Cr.
Guidance, 5th Ed., Vol. 1, pp. 10-11).

That is not all. Shortly thereafter, plaintiff-appellant Ishwar Ramnani executed a General

Power of Attorney (Exhibit "A") dated January 24, 1966 appointing his brothers, defendants-
appellees Navalrai and Choithram as attorney-in-fact empowering the latter to conduct and
manage plaintiffs-appellants' business affairs in the Philippines and specifically—

No. 14. To acquire, purchase for us, real estates and improvements for the purpose
of real estate business anywhere in the Philippines and to develop, subdivide,
improve and to resell to buying public (individual, firm or corporation); to enter in any
contract of sale in oar behalf and to enter mortgages between the vendees and the
herein grantors that may be needed to finance the real estate business being
undertaken.
 Pursuant thereto, on February 1, 1966 and May 16, 1966, Choithram Jethmal Ramnani
entered into Agreements (Exhibits "B' and "C") with the other defendant. Ortigas and
Company, Ltd., for the purchase of two (2) parcels of land situated at Barrio Ugong, Pasig,
Rizal, with said defendant-appellee signing the Agreements in his capacity as Attorney-in-
fact of Ishwar Jethmal Ramnani.

Again, on January 5, 1972, almost seven (7) years after Ishwar sent the US $ 150,000.00 in
1965, Choithram Ramnani, as attorney-in fact of Ishwar entered into a Contract of Lease
with Sigma-Mariwasa (Exhibit "P") thereby re-affirming the ownership of Ishwar over the
disputed property and the trust relationship between the latter as principal and Choithram as
attorney-in-fact of Ishwar.

All of these facts indicate that if plaintiff-appellant Ishwar had not earlier sent the US $
150,000.00 to his brother, Choithram, there would be no purpose for him to execute a power
of attorney appointing his brothers as s attorney-in-fact in buying real estate in the
Philippines.

As against Choithram's denial that he did not receive the US $150,000.00 remitted by Ishwar
and that the Power of Attorney, as well as the Agreements entered into with Ortigas & Co.,
were only temporary arrangements, Ishwar's testimony that he did send the bank drafts to
Choithram and was received by the latter, is the more credible version since it is natural,
reasonable and probable. It is in accord with the common experience, knowledge and
observation of ordinary men (Gardner vs. Wentors 18 Iowa 533). And in determining where
the superior weight of the evidence on the issues involved lies, the court may consider the
probability or improbability of the testimony of the witness (Sec. 1, Rule 133, Rules of Court).

Contrary, therefore, to the trial court's sweeping observation that 'the entire records of the
case is bereft of even a shred of proof that Choithram received the alleged bank drafts
amounting to US $ 150,000.00, we have not only testimonial evidence but also documentary
and circumstantial evidence proving said remittance of the money and the fiduciary
relationship between the former and Ishwar. 12

The Court agrees. The environmental circumstances of this case buttress the claim of Ishwar that he
did entrust the amount of US $ 150,000.00 to his brother, Choithram, which the latter invested in the
real property business subject of this litigation in his capacity as attorney-in-fact of Ishwar.

True it is that there is no receipt whatever in the possession of Ishwar to evidence the same, but it is
not unusual among brothers and close family members to entrust money and valuables to each
other without any formalities or receipt due to the special relationship of trust between them.

And another proof thereof is the fact that Ishwar, out of frustration when Choithram failed to account
for the realty business despite his demands, revoked the general power of attorney he extended to
Choithram and Navalrai. Thereafter, Choithram wrote a letter to Ishwar pleading that the power of
attorney be renewed or another authority to the same effect be extended, which reads as follows:

June 25,1971

MR. ISHWAR JETHMAL

NEW YORK
 (1) Send power of Atty. immediately, because the case has been postponed for two
weeks. The same way as it has been send before in favor of both names. Send it
immediately otherwise everything will be lost unnecessarily, and then it will take us in
litigation. Now that we have gone ahead with a case and would like to end it
immediately otherwise squatters will take the entire land. Therefore, send it
immediately.

(2) Ortigas also has sued us because we are holding the installments, because they
have refused to give a rebate of P5.00 per meter which they have to give us as per
contract. They have filed the law suit that since we have not paid the installment they
should get back the land. The hearing of this case is in the month of July. Therefore,
please send the power immediately. In one case DADA (Elder Brother) will represent
and in another one, I shall.

(3) In case if you do not want to give power then make one letter in favor of Dada
and the other one in my favor showing that in any litigation we can represent you and
your wife, and whatever the court decide it will be acceptable by me. You can ask
any lawyer, he will be able to prepare these letters. After that you can have these
letters ratify before P.I. Consulate. It should be dated April 15, 1971.

(4) Try to send the power because it will be more useful. Make it in any manner
whatever way you have confident in it. But please send it immediately.

You have cancelled the power. Therefore, you have lost your reputation everywhere. What can I
further write you about it. I have told everybody that due to certain reasons I have written you to do
this that is why you have done this. This way your reputation have been kept intact. Otherwise if I
want to do something about it, I can show you that inspite of the power you have cancelled you can
not do anything. You can keep this letter because my conscience is clear. I do not have anything in
my mind.

I should not be writing you this, but because my conscience is clear do you know that if I had
predated papers what could you have done? Or do you know that I have many paper signed by you
and if had done anything or do then what can you do about it? It is not necessary to write further
about this. It does not matter if you have cancelled the power. At that time if I had predated and
done something about it what could you have done? You do not know me. I am not after money. I
can earn money anytime. It has been ten months since I have not received a single penny for
expenses from Dada (elder brother). Why there are no expenses? We can not draw a single penny
from knitting (factory). Well I am not going to write you further, nor there is any need for it. This much
I am writing you because of the way you have conducted yourself. But remember, whenever I hale
the money I will not keep it myself Right now I have not got anything at all.

I am not going to write any further.

Keep your business clean with Naru. Otherwise he will discontinue because he likes to keep his
business very clean. 13

The said letter was in Sindhi language. It was translated to English by the First Secretary of the
Embassy of Pakistan, which translation was verified correct by the Chairman, Department of Sindhi,
University of Karachi.14

From the foregoing letter what could be gleaned is that—

 1. Choithram asked for the issuance of another power of attorney in their favor so they can
continue to represent Ishwar as Ortigas has sued them for unpaid installments. It also
appears therefrom that Ortigas learned of the revocation of the power of attorney so the
request to issue another.

2. Choithram reassured Ishwar to have confidence in him as he was not after money, and
that he was not interested in Ishwar's money.

3. To demonstrate that he can be relied upon, he said that he could have ante-dated the
sales agreement of the Ortigas lots before the issuance of the powers of attorney and
acquired the same in his name, if he wanted to, but he did not do so.

4. He said he had not received a single penny for expenses from Dada (their elder brother
Navalrai). Thus, confirming that if he was not given money by Ishwar to buy the Ortigas lots,
he could not have consummated the sale.

5. It is important to note that in said letter Choithram never claimed ownership of the property
in question. He affirmed the fact that he bought the same as mere agent and in behalf of
Ishwar. Neither did he mention the alleged temporary arrangement whereby Ishwar, being
an American citizen, shall appear to be the buyer of the said property, but that after
Choithram acquires Philippine citizenship, its ownership shall be transferred to Choithram.

This brings us to this temporary arrangement theory of Choithram.

The appellate court disposed of this matter in this wise

Choithram's claim that he purchased the two parcels of land for himself in 1966 but placed it
in the name of his younger brother, Ishwar, who is an American citizen, as a temporary
arrangement,' because as a British subject he is disqualified under the 1935 Constitution to
acquire real property in the Philippines, which is not so with respect to American citizens in
view of the Ordinance Appended to the Constitution granting them parity rights, there is
nothing in the records showing that Ishwar ever agreed to such a temporary arrangement.

During the entire period from 1965, when the US $ 150,000. 00 was transmitted to
Choithram, and until Ishwar filed a complaint against him in 1982, or over 16 years,
Choithram never mentioned of a temporary arrangement nor can he present any
memorandum or writing evidencing such temporary arrangement, prompting plaintiff-
appellant to observe:

The properties in question which are located in a prime industrial site in Ugong,
Pasig, Metro Manila have a present fair market value of no less than P22,364,000.00
(Exhibits T to T-14, inclusive), and yet for such valuable pieces of property,
Choithram who now belatedly that he purchased the same for himself did not
document in writing or in a memorandum the alleged temporary arrangement with
Ishwar' (pp. 4-41, Appellant's Brief).

Such verbal allegation of a temporary arrangement is simply improbable and inconsistent. It

has repeatedly been held that important contracts made without evidence are highly
improbable.
The improbability of such temporary arrangement is brought to fore when we consider that
Choithram has a son (Haresh Jethmal Ramnani) who is an American citizen under whose
name the properties in question could be registered, both during the time the contracts to
sell were executed and at the time absolute title over the same was to be delivered. At the
time the Agreements were entered into with defendant Ortigas & Co. in 1966, Haresh, was
already 18 years old and consequently, Choithram could have executed the deeds in trust
for his minor son. But, he did not do this. Three (3) years, thereafter, or in 1968 after Haresh
had attained the age of 21, Choithram should have terminated the temporary arrangement
with Ishwar, which according to him would be effective only pending the acquisition of
citizenship papers. Again, he did not do anything.

Evidence to be believed, said Vice Chancellor Van Fleet of New Jersey, must not
only proceed from the mouth of a credible witness, but it must be credible in itself—
such as the common experience and observation of mankind can approve as
probable under the circumstances. We have no test of the truth of human testimony,
except its conformity to our knowledge, observation and experience. Whatever is
repugnant to these belongs to the miraculous and is outside of judicial cognizance.
(Daggers vs. Van Dyek 37 M.J. Eq. 130, 132).

Another factor that can be counted against the temporary arrangement excuse is that upon
the revocation on February 4, 1971 of the Power of attorney dated January 24, 1966 in favor
of Navalrai and Choithram by Ishwar, Choithram wrote (tsn, p. 21, S. July 19, 1985) a letter
dated June 25, 1971 (Exhibits R, R-1, R-2 and R-3) imploring Ishwar to execute a new
power of attorney in their favor. That if he did not want to give power, then Ishwar could
make a letter in favor of Dada and another in his favor so that in any litigation involving the
properties in question, both of them could represent Ishwar and his wife. Choithram tried to
convince Ishwar to issue the power of attorney in whatever manner he may want. In said
letter no mention was made at all of any temporary arrangement.

On the contrary, said letter recognize(s) the existence of principal and attorney-in-fact
relationship between Ishwar and himself. Choithram wrote: . . . do you know that if I had
predated papers what could you have done? Or do you know that I have many papers
signed by you and if I had done anything or do then what can you do about it?' Choithram
was saying that he could have repudiated the trust and ran away with the properties of
Ishwar by predating documents and Ishwar would be entirely helpless. He was bitter as a
result of Ishwar's revocation of the power of attorney but no mention was made of any
temporary arrangement or a claim of ownership over the properties in question nor was he
able to present any memorandum or document to prove the existence of such temporary
arrangement.

Choithram is also estopped in pais or by deed from claiming an interest over the properties
in question adverse to that of Ishwar. Section 3(a) of Rule 131 of the Rules of Court states
that whenever a party has, by his own declaration, act, or omission intentionally and
deliberately led another to believe a particular thing true and act upon such belief, he cannot
in any litigation arising out of such declaration, act or omission be permitted to falsify it.'
While estoppel by deed is a bar which precludes a party to a deed and his privies from
asserting as against the other and his privies any right of title in derogation of the deed,
or from denying the truth of any material fact asserted in it (31 C.J.S. 195; 19 Am. Jur. 603).

Thus, defendants-appellees are not permitted to repudiate their admissions and

representations or to assert any right or title in derogation of the deeds or from denying the
truth of any material fact asserted in the (1) power of attorney dated January 24, 1966
(Exhibit A); (2) the Agreements of February 1, 1966 and May 16, 1966 (Exhibits B and
C); and (3) the Contract of Lease dated January 5, 1972 (Exhibit P).

. . . The doctrine of estoppel is based upon the grounds of public policy, fair dealing,
good faith and justice, and its purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one to whom they were directed and
who reasonably relied thereon. The doctrine of estoppel springs from equitable
principles and the equities in the case. It is designed to aid the law in the
administration of justice where without its aid injustice might result. It has been
applied by court wherever and whenever special circumstances of a case so
demands' (Philippine National Bank vs. Court of Appeals, 94 SCRA 357, 368 [1979]).

It was only after the services of counsel has been obtained that Choithram alleged for the
first time in his Answer that the General Power of attorney (Annex A) with the Contracts to
Sell (Annexes B and C) were made only for the sole purpose of assuring defendants'
acquisition and ownership of the lots described thereon in due time under the law; that said
instruments do not reflect the true intention of the parties (par. 2, Answer dated May 30,
1983), seventeen (17) long years from the time he received the money transmitted to him by
his brother, Ishwar.

Moreover, Choithram's 'temporary arrangement,' by which he claimed purchasing the two (2)
parcels in question in 1966 and placing them in the name of Ishwar who is an American
citizen, to circumvent the disqualification provision of aliens acquiring real properties in the
Philippines under the 1935 Philippine Constitution, as Choithram was then a British subject,
show a palpable disregard of the law of the land and to sustain the supposed "temporary
arrangement" with Ishwar would be sanctioning the perpetration of an illegal act and
culpable violation of the Constitution.

Defendants-appellees likewise violated the Anti-Dummy Law (Commonwealth Act 108, as

amended), which provides in Section 1 thereof that:

In all cases in which any constitutional or legal provision requires Philippine or any
other specific citizenship as a requisite for the exercise or enjoyment of a right,
franchise or privilege, . . . any alien or foreigner profiting thereby, shall be
punished . . . by imprisonment . . . and of a fine of not less than the value of the right,
franchise or privileges, which is enjoyed or acquired in violation of the provisions
hereof . . .

Having come to court with unclean hands, Choithram must not be permitted foist his
'temporary arrangement' scheme as a defense before this court. Being in delicto, he does
not have any right whatsoever being shielded from his own wrong-doing, which is not so with
respect to Ishwar, who was not a party to such an arrangement.

The falsity of Choithram's defense is further aggravated by the material inconsistencies and
contradictions in his testimony. While on January 23, 1985 he testified that he purchased the
land in question on his own behalf (tsn, p. 4, S. Jan. 23, 1985), in the July 18, 1985 hearing,
forgetting probably what he stated before, Choithram testified that he was only an attorney-
in-fact of Ishwar (tsn, p. 5, S. July 18, 1985). Also in the hearing of January 23, 1985,
Choithram declared that nobody rented the building that was constructed on the parcels of
land in question (tsn, pp. 5 and 6), only to admit in the hearing of October 30, 1985, that he
was in fact renting the building for P12,000. 00 per annum (tsn, p. 3). Again, in the hearing of
July 19, 1985, Choithram testified that he had no knowledge of the revocation of the Power
 of Attorney (tsn, pp. 20- 21), only to backtrack when confronted with the letter of June 25,
1971 (Exhibits R to R-3), which he admitted to be in "his own writing," indicating knowledge
of the revocation of the Power of Attorney.

These inconsistencies are not minor but go into the entire credibility of the testimony of
Choithram and the rule is that contradictions on a very crucial point by a witness, renders s
testimony incredible People vs. Rafallo, 80 Phil. 22). Not only this the doctrine of falsus in
uno, falsus in omnibus is fully applicable as far as the testimony of Choithram is concerned.
The cardinal rule, which has served in all ages, and has been applied to all conditions of
men, is that a witness willfully falsifying the truth in one particular, when upon oath, ought
never to be believed upon the strength of his own testimony, whatever he may assert (U.S.
vs. Osgood 27 Feb. Case No. 15971-a, p. 364); Gonzales vs. Mauricio, 52 Phil, 728), for
what ground of judicial relief can there be left when the party has shown such gross
insensibility to the difference between right and wrong, between truth and falsehood? (The
Santisima Trinidad, 7 Wheat, 283, 5 U.S. [L. ed.] 454).

True, that Choithram's testimony finds corroboration from the testimony of his brother,
Navalrai, but the same would not be of much help to Choithram. Not only is Navalrai an
interested and biased witness, having admitted his close relationship with Choithram and
that whenever he or Choithram had problems, they ran to each other (tsn, pp. 17-18, S.
Sept. 20, 1985), Navalrai has a pecuniary interest in the success of Choithram in the case in
question. Both he and Choithram are business partners in Jethmal and Sons and/or Jethmal
Industries, wherein he owns 60% of the company and Choithram, 40% (p. 62, Appellant's
Brief). Since the acquisition of the properties in question in 1966, Navalrai was occupying
1,200 square meters thereof as a factory site plus the fact that his son (Navalrais) was
occupying the apartment on top of the factory with his family rent free except the amount of P
l,000.00 a month to pay for taxes on said properties (tsn, p. 17, S. Oct. 3, 1985).

Inherent contradictions also marked Navalrai testimony. "While the latter was very
meticulous in keeping a receipt for the P 10,000.00 that he paid Ishwar as settlement in
Jethmal Industries, yet in the alleged payment of P 100,000.00 to Ishwar, no receipt or
voucher was ever issued by him (tsn, p. 17, S. Oct. 3, 1983). 15

We concur.
The foregoing findings of facts of the Court of Appeals which are supported by the evidence is
conclusive on this Court. The Court finds that Ishwar entrusted US$150,000.00 to Choithram in 1965
for investment in the realty business. Soon thereafter, a general power of attorney was executed by
Ishwar in favor of both Navalrai and Choithram. If it is true that the purpose only is to enable
Choithram to purchase realty temporarily in the name of Ishwar, why the inclusion of their elder
brother Navalrai as an attorney-in-fact?

Then, acting as attorney-in-fact of Ishwar, Choithram purchased two parcels of land located in Barrio
Ugong Pasig, Rizal, from Ortigas in 1966. With the balance of the money of Ishwar, Choithram
erected a building on said lot. Subsequently, with a loan obtained from a bank and the income of the
said property, Choithram constructed three other buildings thereon. He managed the business and
collected the rentals. Due to their relationship of confidence it was only in 1970 when Ishwar
demanded for an accounting from Choithram. And even as Ishwar revoked the general power of
attorney on February 4, 1971, of which Choithram was duly notified, Choithram wrote to Ishwar on
June 25, 1971 requesting that he execute a new power of attorney in their favor.  When Ishwar did
16

not respond thereto, Choithram nevertheless proceeded as such attorney-in-fact to assign all the
rights and interest of Ishwar to his daughter-in-law Nirmla in 1973 without the knowledge and
consent of Ishwar. Ortigas in turn executed the corresponding deeds of sale in favor of Nirmla after
full payment of the purchase accomplice of the lots.

In the prefatory statement of their petition, Choithram pictured Ishwar to be so motivated by greed
and ungratefulness, who squandered the family business in New York, who had to turn to his wife for
support, accustomed to living in ostentation and who resorted to blackmail in filing several criminal
and civil suits against them. These statements find no support and should be stricken from the
records. Indeed, they are irrelevant to the proceeding.

Moreover, assuming Ishwar is of such a low character as Choithram proposes to make this Court to
believe, why is it that of all persons, under his temporary arrangement theory, Choithram opted to
entrust the purchase of valuable real estate and built four buildings thereon all in the name of
Ishwar? Is it not an unconscious emergence of the truth that this otherwise wayward brother of theirs
was on the contrary able to raise enough capital through the generosity of his father-in-law for the
purchase of the very properties in question? As the appellate court aptly observed if truly this
temporary arrangement story is the only motivation, why Ishwar of all people? Why not the own son
of Choithram, Haresh who is also an American citizen and who was already 18 years old at the time
of purchase in 1966? The Court agrees with the observation that this theory is an afterthought which
surfaced only when Choithram, Nirmla and Moti filed their answer.

When Ishwar asked for an accounting in 1970 and revoked the general power of attorney in 1971,
Choithram had a total change of heart. He decided to claim the property as his. He caused the
transfer of the rights and interest of Ishwar to Nirmla. On his representation, Ortigas executed the
deeds of sale of the properties in favor of Nirmla. Choithram obviously surmised Ishwar cannot stake
a valid claim over the property by so doing.

Clearly, this transfer to Nirmla is fictitious and, as admitted by Choithram, was intended only to place
the property in her name until Choithram acquires Philippine citizenship.  What appears certain is
17

that it appears to be a scheme of Choithram to place the property beyond the reach of Ishwar should
he successfully claim the same. Thus, it must be struck down.

Worse still, on September 27, 1990 spouses Ishwar filed an urgent motion for the issuance of a writ
of preliminary attachment and to require Choithram, et al. to submit certain documents, inviting the
attention of this Court to the following:

a) Donation by Choithram of his 2,500 shares of stock in General Garments Corporation in

favor of his children on December 29, 1989; 18

b) Sale on August 2, 1990 by Choithram of his 100 shares in Biflex (Phils.), Inc., in favor of
his children;  and
19

c) Mortgage on June 20, 1989 by Nirmla through her attorney-in-fact, Choithram, of the
properties subject of this litigation, for the amount of $3 Million in favor of Overseas Holding,
Co. Ltd., (Overseas for brevity), a corporation which appears to be organized and existing
under and by virtue of the laws of Cayman Islands, with a capital of only $100.00 divided into
100 shares of $1.00 each, and with address at P.O. Box 1790, Grand Cayman, Cayman
Islands.20

An opposition thereto was filed by Choithram, et al. but no documents were produced. A
manifestation and reply to the opposition was filed by spouses Ishwar.
All these acts of Choithram, et al. appear to be fraudulent attempts to remove these properties to the
detriment of spouses Ishwar should the latter prevail in this litigation.

On December 10, 1990 the court issued a resolution that substantially reads as follows:

Considering the allegations of petitioners Ishwar Jethmal Ramnani and Sonya Ramnani that
respondents Choithram Jethmal Ramnani, Nirmla Ramnani and Moti G. Ramnani have
fraudulently executed a simulated mortgage of the properties subject of this litigation dated
June 20, 1989, in favor of Overseas Holding Co., Ltd. which appears to be a corporation
organized in Cayman Islands, for the amount of $ 3,000,000.00, which is much more than
the value of the properties in litigation; that said alleged mortgagee appears to be a "shell"
corporation with a capital of only $100.00; and that this alleged transaction appears to be
intended to defraud petitioners Ishwar and Sonya Jethmal Ramnani of any favorable
judgment that this Court may render in this case;

Wherefore the Court Resolved to issue a writ of preliminary injunction enjoining and
prohibiting said respondents Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti G.
Ramnani and the Overseas Holding Co., Ltd. from encumbering, selling or otherwise
disposing of the properties and improvements subject of this litigation until further orders of
the Court. Petitioners Ishwar and Sonya Jethmal Ramnani are hereby required to post a
bond of P 100,000.00 to answer for any damages d respondents may suffer by way of this
injunction if the Court finally decides the said petitioners are not entitled thereto.

The Overseas Holding Co., Ltd. with address at P.O. Box 1790 Grand Cayman, Cayman
Islands, is hereby IMPLEADED as a respondent in these cases, and is hereby required to
SUBMIT its comment on the Urgent Motion for the Issuance of a Writ of Preliminary
Attachment and Motion for Production of Documents, the Manifestation and the Reply to the
Opposition filed by said petitioners, within Sixty (60) days after service by publication on it in
accordance with the provisions of Section 17, Rule 14 of the Rules of Court, at the expense
of petitioners Ishwar and Sonya Jethmal Ramnani.

Let copies of this resolution be served on the Register of Deeds of Pasig, Rizal, and the
Provincial Assessor of Pasig, Rizal, both in Metro Manila, for its annotation on the transfer
Certificates of Titles Nos. 403150 and 403152 registered in the name of respondent Nirmla
V. Ramnani, and on the tax declarations of the said properties and its improvements subject
of this litigation.
21

The required injunction bond in the amount of P 100,000.00 was filed by the spouses Ishwar which
was approved by the Court. The above resolution of the Court was published in the Manila Bulletin
issue of December 17, 1990 at the expense of said spouses.  On December 19, 1990 the said
22

resolution and petition for review with annexes in G.R. Nos. 85494 and 85496 were transmitted to
respondent Overseas, Grand Cayman Islands at its address c/o Cayman Overseas Trust Co. Ltd.,
through the United Parcel Services Bill of Lading  and it was actually delivered to said company on
23

January 23, 1991. 24

On January 22, 1991, Choithram, et al., filed a motion to dissolve the writ of preliminary injunction
alleging that there is no basis therefor as in the amended complaint what is sought is actual
damages and not a reconveyance of the property, that there is no reason for its issuance, and that
acts already executed cannot be enjoined. They also offered to file a counterbond to dissolve the
writ.
A comment/opposition thereto was filed by spouses Ishwar that there is basis for the injunction as
the alleged mortgage of the property is simulated and the other donations of the shares of Choithram
to his children are fraudulent schemes to negate any judgment the Court may render for petitioners.

No comment or answer was filed by Overseas despite due notice, thus it is and must be considered
to be in default and to have lost the right to contest the representations of spouses Ishwar to declare
the aforesaid alleged mortgage nun and void.

This purported mortgage of the subject properties in litigation appears to be fraudulent and
simulated. The stated amount of $3 Million for which it was mortgaged is much more than the value
of the mortgaged properties and its improvements. The alleged mortgagee-company (Overseas)
was organized only on June 26,1989 but the mortgage was executed much earlier, on June 20,
1989, that is six (6) days before Overseas was organized. Overseas is a "shelf" company worth only
$100.00.  In the manifestation of spouses Ishwar dated April 1, 1991, the Court was informed that
25

this matter was brought to the attention of the Central Bank (CB) for investigation, and that in a letter
of March 20, 1991, the CB informed counsel for spouses Ishwar that said alleged foreign loan of
Choithram, et al. from Overseas has not been previously approved/registered with the CB. 26

Obviously, this is another ploy of Choithram, et al. to place these properties beyond the reach of
spouses Ishwar should they obtain a favorable judgment in this case. The Court finds and so
declares that this alleged mortgage should be as it is hereby declared null and void.

All these contemporaneous and subsequent acts of Choithram, et al., betray the weakness of their
cause so they had to take an steps, even as the case was already pending in Court, to render
ineffective any judgment that may be rendered against them.

The problem is compounded in that respondent Ortigas is caught in the web of this bitter fight. It had
all the time been dealing with Choithram as attorney-in-fact of Ishwar. However, evidence had been
adduced that notice in writing had been served not only on Choithram, but also on Ortigas, of the
revocation of Choithram's power of attorney by Ishwar's lawyer, on May 24, 1971.  A publication of
27

said notice was made in the April 2, 1971 issue of The Manila Times for the information of the
general public.  Such notice of revocation in a newspaper of general circulation is sufficient warning
28

to third persons including Ortigas.  A notice of revocation was also registered with the Securities and
29

Exchange Commission on March 29, 1 971. 30

Indeed in the letter of Choithram to Ishwar of June 25, 1971, Choithram was pleading that Ishwar
execute another power of attorney to be shown to Ortigas who apparently learned of the revocation
of Choithram's power of attorney.  Despite said notices, Ortigas nevertheless acceded to the
31

representation of Choithram, as alleged attorney-in-fact of Ishwar, to assign the rights of petitioner

Ishwar to Nirmla. While the primary blame should be laid at the doorstep of Choithram, Ortigas is not
entirely without fault. It should have required Choithram to secure another power of attorney from
Ishwar. For recklessly believing the pretension of Choithram that his power of attorney was still
good, it must, therefore, share in the latter's liability to Ishwar.

In the original complaint, the spouses Ishwar asked for a reconveyance of the properties and/or
payment of its present value and damages.  In the amended complaint they asked, among others,
32

for actual damages of not less than the present value of the real properties in litigation, moral and
exemplary damages, attorneys fees, costs of the suit and further prayed for "such other reliefs as
may be deemed just and equitable in the premises .  The amended complaint contain the following
33

positive allegations:
 7. Defendant Choithram Ramnani, in evident bad faith and despite due notice of the
revocation of the General Power of Attorney, Annex 'D" hereof, caused the transfer of the
rights over the said parcels of land to his daughter-in-law, defendant Nirmla Ramnani in
connivance with defendant Ortigas & Co., the latter having agreed to the said transfer
despite receiving a letter from plaintiffs' lawyer informing them of the said revocation; copy of
the letter is hereto attached and made an integral part hereof as Annex "H";

8. Defendant Nirmla Ramnani having acquired the aforesaid property by fraud is, by force of
law, considered a trustee of an implied trust for the benefit of plaintiff and is obliged to return
the same to the latter:

9. Several efforts were made to settle the matter within the family but defendants (Choithram
Ramnani, Nirmla Ramnani and Moti Ramnani) refused and up to now fail and still refuse to
cooperate and respond to the same; thus, the present case;

10. In addition to having been deprived of their rights over the properties (described in par. 3
hereof), plaintiffs, by reason of defendants' fraudulent act, suffered actual damages by way
of lost rental on the property which defendants (Choithram Ramnani, Nirmla Ramnani and
Moti Ramnani have collected for themselves; 34

In said amended complaint, spouses Ishwar, among others, pray for payment of actual damages in
an amount no less than the value of the properties in litigation instead of a reconveyance as sought
in the original complaint. Apparently they opted not to insist on a reconveyance as they are
American citizens as alleged in the amended complaint.

The allegations of the amended complaint above reproduced clearly spelled out that the transfer of
the property to Nirmla was fraudulent and that it should be considered to be held in trust by Nirmla
for spouses Ishwar. As above-discussed, this allegation is well-taken and the transfer of the property
to Nirmla should be considered to have created an implied trust by Nirmla as trustee of the property
for the benefit of spouses Ishwar. 35

The motion to dissolve the writ of preliminary injunction filed by Choithram, et al. should be denied.
Its issuance by this Court is proper and warranted under the circumstances of the case. Under
Section 3(c) Rule 58 of the Rules of Court, a writ of preliminary injunction may be granted at any
time after commencement of the action and before judgment when it is established:

(c) that the defendant is doing, threatens, or is about to do, or is procuring or suffering to be
done, some act probably in violation of plaintiffs's rights respecting the subject of the action,
and tending to render the judgment ineffectual.

As above extensively discussed, Choithram, et al. have committed and threaten to commit further
acts of disposition of the properties in litigation as well as the other assets of Choithram, apparently
designed to render ineffective any judgment the Court may render favorable to spouses Ishwar.

The purpose of the provisional remedy of preliminary injunction is to preserve the status quo of the
things subject of the litigation and to protect the rights of the spouses Ishwar respecting the subject
of the action during the pendency of the Suit  and not to obstruct the administration of justice or
36

prejudice the adverse party.  In this case for damages, should Choithram, et al. continue to commit
37

acts of disposition of the properties subject of the litigation, an award of damages to spouses Ishwar
would thereby be rendered ineffectual and meaningless. 38
Consequently, if only to protect the interest of spouses Ishwar, the Court hereby finds and holds that
the motion for the issuance of a writ of preliminary attachment filed by spouses Ishwar should be
granted covering the properties subject of this litigation.

Section 1, Rule 57 of the Rules of Court provides that at the commencement of an action or at any
time thereafter, the plaintiff or any proper party may have the property of the adverse party attached
as security for the satisfaction of any judgment that may be recovered, in, among others, the
following cases:

(d) In an action against a party who has been guilty of a fraud in contracting the debt or
incurring the obligation upon which the action is brought, or in concealing or disposing of the
property for the taking, detention or conversion of which the action is brought;

(e) In an action against a party who has removed or disposed of his property, or is about to
do so, with intent to defraud his creditors; . . .

Verily, the acts of Choithram, et al. of disposing the properties subject of the litigation disclose a
scheme to defraud spouses Ishwar so they may not be able to recover at all given a judgment in
their favor, the requiring the issuance of the writ of attachment in this instance.

Nevertheless, under the peculiar circumstances of this case and despite the fact that Choithram, et
al., have committed acts which demonstrate their bad faith and scheme to defraud spouses Ishwar
and Sonya of their rightful share in the properties in litigation, the Court cannot ignore the fact that
Choithram must have been motivated by a strong conviction that as the industrial partner in the
acquisition of said assets he has as much claim to said properties as Ishwar, the capitalist partner in
the joint venture.

The scenario is clear. Spouses Ishwar supplied the capital of $150,000.00 for the business.  They
1âwphi1

entrusted the money to Choithram to invest in a profitable business venture in the Philippines. For
this purpose they appointed Choithram as their attorney-in-fact.

Choithram in turn decided to invest in the real estate business. He bought the two (2) parcels of land
in question from Ortigas as attorney-in-fact of Ishwar- Instead of paying for the lots in cash, he paid
in installments and used the balance of the capital entrusted to him, plus a loan, to build two
buildings. Although the buildings were burned later, Choithram was able to build two other buildings
on the property. He rented them out and collected the rentals. Through the industry and genius of
Choithram, Ishwar's property was developed and improved into what it is now—a valuable asset
worth millions of pesos. As of the last estimate in 1985, while the case was pending before the trial
court, the market value of the properties is no less than P22,304,000.00.  It should be worth much
39

more today.

We have a situation where two brothers engaged in a business venture. One furnished the capital,
the other contributed his industry and talent. Justice and equity dictate that the two share equally the
fruit of their joint investment and efforts. Perhaps this Solomonic solution may pave the way towards
their reconciliation. Both would stand to gain. No one would end up the loser. After all, blood is
thicker than water.

However, the Court cannot just close its eyes to the devious machinations and schemes that
Choithram employed in attempting to dispose of, if not dissipate, the properties to deprive spouses
Ishwar of any possible means to recover any award the Court may grant in their favor. Since
Choithram, et al. acted with evident bad faith and malice, they should pay moral and exemplary
damages as well as attorney's fees to spouses Ishwar.
WHEREFORE, the petition in G.R. No. 85494 is DENIED, while the petition in G.R. No. 85496 is
hereby given due course and GRANTED. The judgment of the Court of Appeals dated October 18,
1988 is hereby modified as follows:

1. Dividing equally between respondents spouses Ishwar, on the one hand, and petitioner Choithram
Ramnani, on the other, (in G.R. No. 85494) the two parcels of land subject of this litigation, including
all the improvements thereon, presently covered by transfer Certificates of Title Nos. 403150 and
403152 of the Registry of Deeds, as well as the rental income of the property from 1967 to the
present.

2. Petitioner Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti C. Ramnani and respondent
Ortigas and Company, Limited Partnership (in G.R. No. 85496) are ordered solidarily to pay in cash
the value of said one-half (1/2) share in the said land and improvements pertaining to respondents
spouses Ishwar and Sonya at their fair market value at the time of the satisfaction of this judgment
but in no case less than their value as appraised by the Asian Appraisal, Inc. in its Appraisal Report
dated August 1985 (Exhibits T to T-14, inclusive).

3. Petitioners Choithram, Nirmla and Moti Ramnani and respondent Ortigas & Co., Ltd. Partnership
shall also be jointly and severally liable to pay to said respondents spouses Ishwar and Sonya
Ramnani one-half (1/2) of the total rental income of said properties and improvements from 1967 up
to the date of satisfaction of the judgment to be computed as follows:

a. On Building C occupied by Eppie's Creation and Jethmal Industries from 1967 to

1973, inclusive, based on the 1967 to 1973 monthly rentals paid by Eppie's Creation;

b. Also on Building C above, occupied by Jethmal Industries and Lavine from 1974 to
1978, the rental incomes based on then rates prevailing as shown under Exhibit "P";
and from 1979 to 1981, based on then prevailing rates as indicated under Exhibit
"Q";

c. On Building A occupied by Transworld Knitting Mills from 1972 to 1978, the rental
incomes based upon then prevailing rates shown under Exhibit "P", and from 1979 to
1981, based on prevailing rates per Exhibit "Q";

d. On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to 1978, the
rentals based on the Lease Contract, Exhibit "P", and from 1979 to 1980, the rentals
based on the Lease Contract, Exhibit "Q".

and thereafter commencing 1982, to account for and turn over the rental incomes paid or ought to be
paid for the use and occupancy of the properties and all improvements totalling 10,048 sq. m., based
on the rate per square meter prevailing in 1981 as indicated annually cumulative up to 1984. Then,
commencing 1985 and up to the satisfaction of the judgment, rentals shall be computed at ten
percent (10%) annually of the fair market values of the properties as appraised by the Asian
Appraisals, Inc. in August 1985. (Exhibits T to T-14, inclusive.)

4. To determine the market value of the properties at the time of the satisfaction of this judgment and
the total rental incomes thereof, the trial court is hereby directed to hold a hearing with deliberate
dispatch for this purpose only and to have the judgment immediately executed after such
determination.
5. Petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, are also jointly and severally
liable to pay respondents Ishwar and Sonya Ramnani the amount of P500,000.00 as moral
damages, P200,000.00 as exemplary damages and attorney's fees equal to 10% of the total award.
to said respondents spouses.

6. The motion to dissolve the writ of preliminary injunction dated December 10, 1990 filed by
petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, is hereby DENIED and the said
injunction is hereby made permanent. Let a writ of attachment be issued and levied against the
properties and improvements subject of this litigation to secure the payment of the above awards to
spouses Ishwar and Sonya.

7. The mortgage constituted on the subject property dated June 20, 1989 by petitioners Choithram
and Nirmla, both surnamed Ramnani in favor of respondent Overseas Holding, Co. Ltd. (in G.R. No.
85496) for the amount of $3-M is hereby declared null and void. The Register of Deeds of Pasig,
Rizal, is directed to cancel the annotation of d mortgage on the titles of the properties in question.

8. Should respondent Ortigas Co., Ltd. Partnership pay the awards to Ishwar and Sonya Ramnani
under this judgment, it shall be entitled to reimbursement from petitioners Choithram, Nirmla and
Moti, all surnamed Ramnani.

9. The above awards shag bear legal rate of interest of six percent (6%) per annum from the time
this judgment becomes final until they are fully paid by petitioners Choithram Ramnani, Nirmla V.
Ramnani, Moti C. Ramnani and Ortigas, Co., Ltd. Partnership. Said petitioners Choithram, et al. and
respondent Ortigas shall also pay the costs.

SO ORDERED.

RAMNANI v. CA
196 scra 731; May 7, 1991
Ponente: J. Gancayco

FACTS:
         
Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of
the full blood. Ishwar and his spouse Sonya had their main business based in New York.
Realizing the difficulty of managing their investments in the Philippines they executed a
general power of attorney on January 24, 1966 appointing Navalrai and Choithram as
attorneys-in-fact, empowering them to manage and conduct their business concern in
the Philippines

On February 1, 1966 and on May 16, 1966, Choithram entered into two
agreements for the purchase of two parcels of land located in Barrio Ugong, Pasig,
Rizal, from Ortigas & Company, Ltd. Partnership. A building was constructed thereon by
Choithram in 1966. Three other buildings were built thereon by Choithram through a
loan of P100,000.00 obtained from the Merchants Bank as well as the income derived
from the first building.
 Sometime in 1970 Ishwar asked Choithram to account for the income and
expenses relative to these properties during the period 1967 to 1970. Choithram failed
and refused to render such accounting. Thereafter, Ishwar revoked the general power
of attorney. Choithram and Ortigas were duly notified of such revocation on April 1,
1971 and May 24, 1971, respectively. Said notice was also registered with the Securities
and Exchange Commission on March 29, 1971 and was published in the April 2, 1971
issue of The Manila Times for the information of the general public. 

Nevertheless, Choithram, transferred all rights and interests of Ishwar and Sonya
in favor of his daughter-in-law, Nirmla Ramnani, on February 19, 1973.

On October 6, 1982, Ishwar and Sonya filed a complaint against Choitram and/or
spouses Nirmla and Moti and Ortigas for reconveyance of said properties or payment of
its value and damages.

ISSUE:
         
          Whether Ishram can recover the entire properties subject in the ligitation

HELD:
         
          No, Ishram cannot recover the entire properties subject.

          The Supreme Court held that despite the fact that Choithram, et al., have
committed acts which demonstrate their bad faith and scheme to defraud spouses
Ishwar and Sonya of their rightful share in the properties in litigation, the Court cannot
ignore the fact that Choithram must have been motivated by a strong conviction that as
the industrial partner in the acquisition of said assets he has as much claim to said
properties as Ishwar, the capitalist partner in the joint venture.
         
Choithram in turn decided to invest in the real estate business. He bought the
two (2) parcels of land in question from Ortigas as attorney-in-fact of Ishwar. Instead
of paying for the lots in cash, he paid in installments and used the balance of the capital
entrusted to him, plus a loan, to build two buildings. Although the buildings were
burned later, Choithram was able to build two other buildings on the property. He
rented them out and collected the rentals. Through the industry and genius of
Choithram, Ishwar's property was developed and improved into what it is now.
    
         Justice and equity dictate that the two share equally the fruit of their joint
investment and efforts. Perhaps this Solomonic solution may pave the way towards
their reconciliation. Both would stand to gain. No one would end up the loser. After all,
blood is thicker than water.
28.)
30.)