G.R. No.

L-16318             October 21, 1921 originally binding upon all parties participating
in it.
PANG LIM and BENITO GALVEZ,
plaintiffs-appellees, HELD
vs.
LO SENG, defendant-appellant. NO. The bad faith of the plaintiffs in seeking to
FACTS deprive the defendant of this lease is strikingly
revealed in the circumstance that prior to the
Lo Seng and Pang Lim, Chinese residents of the acquisition of this property Pang Lim had been
City of Manila, were partners, under the firm partner with Lo Seng and Benito Galvez an
name of Lo Seng and Co., in the business of employee. Both therefore had been in relations
running a distillery, known as "El Progreso," in of confidence with Lo Seng and in that position
Paombong, Bulacan. The land on which said
had acquired knowledge of the possibilities of
distillery is located as well as the buildings and
improvements originally used in the business the property and possibly an experience which
were leased from Lo Yao, to the firm of Lo Seng would have enabled them, in case they had
and Co. for the term of three years. Upon the acquired possession, to exploit the distillery with
expiration of this lease a new written contract, profit. On account of his status as partner in the
represented by one Lo Shui as attorney in fact, firm of Lo Seng and Co., Pang Lim knew that
became effective whereby the lease was
the original lease had been extended for fifteen
extended for fifteen years. It was agreed that the
improvements should be effected at the expense years; and he knew the extent of valuable
of the lessees. improvements that had been made thereon.
Certainly, as observed in the appellant's brief, it
Pang Lim after some time sold all his interest in would be shocking to the moral sense if the
the distillery to his partner Lo Seng, thus placing condition of the law were found to be such that
the latter in the position of sole owner. Lo Shui,
again acting as attorney in fact of Lo Yao, Pang Lim, after profiting by the sale of his
executed and acknowledged before a notary interest in a business, worthless without the
public a deed purporting to convey to Pang Lim lease, could intervene as purchaser of the
and another Chinaman named Benito Galvez, property and confiscate for his own benefit the
the entire distillery plant including the land used. property which he had sold for a valuable
consideration to Lo Seng. The sense of justice
Thereafter Pang Lim and Benito Galvez
demanded possession from Lo Seng, but the recoils before the mere possibility of such
latter refused to yield; and the present action of eventuality.
unlawful detainer was initiated by Pang Lim and
Benito Galvez to recover possession of the Above all other persons in business relations,
premises. partners are required to exhibit towards each
other the highest degree of good faith. In fact the
From the decision of the justice of the peace the relation between partners is essentially fiduciary,
case was appealed to the Court of First Instance,
where judgment was rendered for the plaintiffs, each being considered in law, as he is in fact, the
Pang Lim and Benito Galvez. The defendant confidential agent of the other. It is therefore
thereupon appealed to the Supreme Court. accepted as fundamental in equity jurisprudence
that one partner cannot, to the detriment of
ISSUES another, apply exclusively to his own benefit the
Whether or not Pang Lim and Benito Galvez, as results of the knowledge and information gained
purchasers of the estate, are at liberty to in the character of partner. Thus, it has been held
terminate the lease, assuming that it was that if one partner obtains in his own name and
for his own benefit the renewal of a lease on Furthermore, every partner becomes a trustee for
property used by the firm, to commence at a date his co-partner with regard to any benefits or
subsequent to the expiration of the firm's lease, profits derived from his act as partner (Art.
1807, New Civil Code).
the partner obtaining the renewal is held to be a
constructive trustee of the firm as to such lease. Consequently, when Catalan redeemed the
And this rule has even been applied to a renewal properties in question, he became a trustee and
taken in the name of one partner after the held the same in trust for his co-partner
dissolution of the firm and pending its Gatchalian, subject to his right to demand from
liquidation. the latter his contribution to the amount of
redemption. The principle of subrogation cannot
ELIGIO CATALAN v. RAMON be applied because at the time Catalan redeemed
GATCHALIAN the property, Dr. Marave, the purchaser at public
G. R. No. L-11648 auction, had not yet become the absolute owner
April 22, 1959 of said properties. He never received the definite
and formal certificate of sale constituting
muniment of title, for the reason that redemption
FACTS: was made. Consequently, there was no title to
Eligio Catalan and Ramon Gatchalian, as the properties which he could convey to Catalan
partners, mortgaged to Dr. Dionisio Marave two as redemptioner.
lots in Tacloban City, including the
improvements thereon, all belonging to the
partnership, to secure the payment of a loan. The
partnership failed to pay the loan; the mortgage G.R. No. L-14617          
was foreclosed and the properties were sold at HANLON vs.HAUSSERMAN and BEAM
public auction to Dr. Marave. February 18, 1920

Before the expiration of the one year period of

redemption, Catalan, on his own behalf, FACTS
redeemed the properties with his private funds.
The Sheriff issued the corresponding certificate In the year 1909 the milling plant of said
of redemption in favor of Catalan. Upon company, situated near Baguio in the
Catalan's petition, the lower court ordered the subprovince of Benguet, Philippine Islands upon
cancellation of the title in the name of the a partially developed quartz mine, was badly
partnership and to issue in its stead another in damaged and partly destroyed by high water,
the name of Catalan. and in 1911 it was completely destroyed by like
ISSUE: causes. The company was thereafter without
Whether or not Catalan became the absolute working capital, and without credit, and
owner of the properties upon his redemption therefore unable to rebuild the plant.
over the property.
In October and November 1913, and for a long
HELD: time prior thereto, the defendant John W.
NO. The theory of Catalan, accepted by the trial Haussermann and A. W. Beam were
court, that he became the absolute owner of the shareholders in said mining company and
properties in question upon making the members of its board of directors, and were at
redemption because he was subrogated to the said time vice-president and secretary-treasurer,
rights of Dr. Marave who made the purchase at respectively, of said company. R. Y. Hanlon, an
public auction, is untenable. Under general experienced mining engineer, upon the
principles of law, a partner is an agent of the solicitation of the defendant Beam, presented to
partnership. (Art. 1818, New Civil Code). the board of directors of the Benguet
Consolidated Mining Company a proposition for case was conducted in all respects as if Hanlon
the rehabilitation of the company, and asked an and Sellner had been co-plaintiffs from the
option for thirty days within which to thoroughly beginning.
examine the property; which proposition, with
certain amendments, was finally accepted by At the hearing judgment was rendered requiring
said company. the defendants to surrender to Hanlon and
Sellner respectively 24,000 shares each of the
It was initially agreed by Hanlon, Haussermann, stock of said company, and to pay the dividends
Beam and Sellner that P75,000.00 was needed to declared and paid on said stock for the years
rehabilitate the mine; P50,000.00 would come 1916 and 1917. From this judgment the
from Hanlon by securing and obtaining defendants appealed.
subscriptions for the company’s stocks,
P25,000.00 would come from Haussermann and ISSUE
Beam. They were to receive compensation in the
form of shares of stock for the services rendered Whether or not Haussermann and Beam have
in the flotation of this proposition. The funds been discharged from the contract of November
were needed on a certain date. It was also stated 5, 1913, by the default of Sellner.
in the contract that Haussermann and Beam
would be discharged if Sellner could not provide HELD
the amount due from him within the time frame
stipulated. YES. In the present case Haussermann and
Beam were stockholders and officials in the
Sellner being in fact was wholly unable to fulfill mining company from a time long anterior to the
his undertaking. In this condition of affairs the beginning of their relations with Hanlon. They
period of six months specified in the contracts of were not merely co-adventurers with Hanlon,
November 5 and 6 for the raising of the sum of but in addition were in a fiduciary relation with
P75,000 passed. Thereafter Haussermann and the mining company and its other shareholders,
Beam assumed that they were absolved from the to whom they owned duties as well as to
obligations of their contract of November 5, Hanlon. It does not appear that the defendants
1913, with Hanlon and Sellner, and that the acquired any special knowledge of the mine or
mining company was no longer bound by its of the feasibility of its reconstruction by reason
contract of November 6, 1913, with Hanlon. of their relation with Hanlon which they did not
They therefore proceeded, as parties interest in already have; and they probably were in no
the rehabilitation of the mining company, to better situation as regards the facts relating to
make other arrangements for financing the the mine after the failure of the Hanlon contract
project. Because of this new arrangement, the than they were before. The fact of their having
company became profitable that it was able to been formerly associated with Hanlon certainly
pay dividends. Because of this, the value of the did not preclude them from making use of the
company’s stocks appreciated. information which they possessed as
stockholders and officers of the mining company
An action was instituted by R. Y. Hanlon to long before they came into contact with him.
compel the defendants, John W. Haussermann
and A. W. Beam, to account for a share of the After the termination of an agency, partnership,
profits gained by them in rehabilitating the plant or joint adventure, each of the parties is free to
of the Benguet Consolidated Mining Company act in his own interest, provided he has done
and in particular to compel them to surrender to nothing during the continuance of the relation to
the plaintiff 50,000 shares of the stock of said lay a foundation for an undue advantage to
company, with dividends paid thereon. A few himself. To act as agent for another does not
days after the action was begun G. C. Sellner necessarily imply the creation of a permanent
was permitted to intervene in like interest with disability in the agent to act for himself in regard
Hanlon and to the same extent. Thereafter the to the same subject-matter; and certainly no case
has been called to our attention in which the licenses and permits were issued to and in
equitable doctrine above referred to has been so favor of petitioner Dan Fue Leung as the
applied as to prevent an owner of property from sole proprietor. Private Respondent, Leung
doing what he pleased with his own after such a Yiu adduced evidence to show that Sun Wah
contract as that of November 5, 1913, between
Panciteria was actually a partnership and
the parties to this lawsuit had lapsed.
that he was one of the partners having
Whether a party to a contract is impliedly contributed P4,000.00 to its initial
discharged by the failure of the other to comply establishment.
with a certain stipulation on or before the time
set for performance, must be determined with About the time the Sun Wah Panciteria
reference to the intention of the parties as started to become operational, Leung Yiu,
deduced from the contract itself in relation with private respondent, gave P4,000.00 as his
the circumstances under which the contract was contribution to the partnership. Feu Leung,
made. petitioner, acknowledged his acceptance of
the P4,000.00 by affixing his signature
An examination of the decisions of the
American and English courts reveals a great
thereto. Witnesses So Sia and Antonio Ah
mass of material devoted to the discussion of the Heng corroborated the private respondents
question whether in a given case time is of the testimony to the effect that they were both
essence of a contract. As presented in those present when the receipt was signed by the
courts, the question commonly arises where a petitioner. So Sia further testified that he
contracting party, who has himself failed to himself received from the petitioner a
comply with some agreement, tenders similar receipt evidencing delivery of his
performance after the stipulated time has passed, own investment in another amount of
and upon the refusal of the other party to accept P4,000.00. An examination was conducted
the delayed performance the delinquent party by the PC Crime Laboratory on orders of the
resorts to the court of equity to compel the other
trial court granting the private respondents
party to proceed. The equitable doctrine there
recognized as applicable in such situation is that
motion for examination of certain
if the contracting parties have treated time as of documentary exhibits. The signatures when
the essence of the contract, the delinquency will compared to the signature of the petitioner
not be excused and specific performance will not appearing in the pay envelopes of employees
be granted; but on the other hand, if it appears of the restaurant, namely Ah Heng and
that time has not been made of the essence of the Maria Wong showed that the signatures in
contract, equity will relieve from the the two receipts were indeed the signatures
delinquency and specific performance may be of the petitioner.
granted, due compensation being made for the
damage caused by the delay. In such cases the Furthermore, the private respondent
courts take account of the difference between received from the petitioner the amount of
that which is matter of substance and that which P12,000.00 covered by the latter's Equitable
is matter of mere form. Banking Corporation Check from the profits
G.R. No. 70926 of the operation of the restaurant for the year
DAN FUE LEUNG vs IAC and LEUNG YIU 1974. Another witness Elvira Rana of the
January 31, 1989 Equitable Banking Corporation testified that
FACTS the check in question was in fact and in truth
drawn by the petitioner and debited against
The Sun Wah Panciteria, a restaurant, his own account in said bank.
located in Sta. Cruz, Manila. It was
registered as a single proprietorship and its
The petitioner denied having received from :
the private respondent the amount of
P4,000.00. He contested and impugned the
genuineness of the receipt. The then Court
of First Instance of Manila declared private
respondent Leung Yiu a partner of petitioner
Dan Fue Leung in the business of Sun Wah
Panciteria and ordering the petitioner to pay
to the private respondent his share in the
annual profits of the said restaurant. The CA
affirmed the decision.
ISSUE
Whether or not Leung Yiu is a partner of
petitioner Dan Fue Leung in the business of
Sun Wah Panciteria
HELD
YES. The private respondent is a partner of
the petitioner in Sun Wah Panciteria. The
requisites of a partnership which are — 1)
two or more persons bind themselves to
contribute money, property, or industry to a
common fund; and 2) intention on the part
of the partners to divide the profits among
themselves have been established. As stated
by the respondent, a partner shares not only
in profits but also in the losses of the firm. If
excellent relations exist among the partners
at the start of business and all the partners
are more interested in seeing the firm grow
rather than get immediate returns, a
deferment of sharing in the profits is
perfectly plausible. It would be incorrect to
state that if a partner does not assert his
rights anytime within ten years from the
start of operations, such rights are
irretrievably lost. The private respondent's
cause of action is premised upon the failure
of the petitioner to give him the agreed
profits in the operation of Sun Wah
Panciteria. In effect the private respondent
was asking for an accounting of his interests
in the partnership.
.