Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-19819 October 26, 1977

WILLIAM UY, plaintiff-appellee,

vs.
BARTOLOME PUZON, substituted by FRANCO PUZON, defendant-appellant.

R.P. Sarandi for appellant.

Jose L. Uy & Andres P. Salvador for appellee.

CONCEPCION JR., J.: têñ.£îhq wâ£

Appeal from the decision of the Court of First Instanre of Manila, dissolving the "U.P. Construction
Company" and ordering the defendant Bartolome Puzon to pay the plaintiff the amounts of: (1)
P115,102.13, with legal interest thereon from the date of the filing of the complaint until fully paid; (2)
P200,000.00, as plaintiffs share in the unrealized profits of the "U.P. Construction Company" and (3)
P5,000.00, as and for attorney's fees.

It is of record that the defendant Bartolome Puzon had a contract with the Republic of the Philippines
for the construction of the Ganyangan Bato Section of the Pagadian Zamboanga City Road,
province of Zamboanga del Sur 1 and of five (5) bridges in the Malangas-Ganyangan Road. 2 Finding
difficulty in accomplishing both projects, Bartolome Puzon sought the financial assistance of the plaintiff,
William Uy. As an inducement, Puzon proposed the creation of a partnership between them which would
be the sub-contractor of the projects and the profits to be divided equally between them. William Uy
inspected the projects in question and, expecting to derive considerable profits therefrom, agreed to the
proposition, thus resulting in the formation of the "U.P. Construction Company" 3 which was subsequently
engaged as subcontractor of the construction projects. 4

The partners agreed that the capital of the partnership would be P100,000.00 of which each partner
shall contribute the amount of P50,000.00 in cash. 5 But, as heretofore stated, Puzon was short of cash
and he promised to contribute his share in the partnership capital as soon as his application for a loan
with the Philippine National Bank in the amount of P150,000.00 shall have been approved. However,
before his loan application could be acted upon, he had to clear his collaterals of its incumbrances first.
For this purpose, on October 24, 1956, Wilham Uy gave Bartolome Puzon the amount of P10,000.00 as
advance contribution of his share in the partnership to be organized between them under the firm name
U.P. CONSTRUCTION COMPANY which amount mentioned above will be used by Puzon to pay his
obligations with the Philippine National Bank to effect the release of his mortgages with the said
Bank. 6 On October 29, 1956, William Uy again gave Puzon the amount of P30,000.00 as his partial
contribution to the proposed partnership and which the said Puzon was to use in payment of his
obligation to the Rehabilitation Finance Corporation. 7 Puzon promised William Uy that the amount of
P150,000.00 would be given to the partnership to be applied thusly: P40,000.00, as reimbursement of the
capital contribution of William Uy which the said Uy had advanced to clear the title of Puzon's property;
P50,000.00, as Puzon's contribution to the partnership; and the balance of P60,000.00 as Puzon's
personal loan to the partnership. 8
Although the partnership agreement was signed by the parties on January 18, 1957,9 work on the
projects was started by the partnership on October 1, 1956 in view of the insistence of the Bureau of
Public Highways to complete the project right away. 10 Since Puzon was busy with his other projects,
William Uy was entrusted with the management of the projects and whatever expense the latter might
incur, would be considered as part of his contribution. 11 At the end of December, 1957, William Uy had
contributed to the partnership the amount of P115,453.39, including his capital. 12

The loan of Puzon was approved by the Philippine National Bank in November, 1956 and he gave to
William Uy the amount of P60,000.00. Of this amount, P40,000.00 was for the reimbursement of
Uy's contribution to the partnership which was used to clear the title to Puzon's property, and the
P20,000.00 as Puzon's contribution to the partnership capital. 13

To guarantee the repayment of the above-mentioned loan, Bartolome Puzon, without the knowledge
and consent of William Uy, 14 assigned to the Philippine National Bank all the payments to be received
on account of the contracts with the Bureau of Public Highways for the construction of the afore-
mentioned projects. 15 By virtue of said assignment, the Bureau of Public Highways paid the money due
on the partial accomplishments on the government projects in question to the Philippine National Bank
which, in turn, applied portions of it in payment of Puzon's loan. Of the amount of P1,047,181.07,
released by the Bureau of Public Highways in payment of the partial work completed by the partnership
on the projects, the amount of P332,539.60 was applied in payment of Puzon's loan and only the amount
of P27,820.80 was deposited in the partnership funds, 16 which, for all practical purposes, was also under
Puzon's account since Puzon was the custodian of the common funds.

As time passed and the financial demands of the projects increased, William Uy, who supervised the
said projects, found difficulty in obtaining the necessary funds with which to pursue the construction
projects. William Uy correspondingly called on Bartolome Puzon to comply with his obligations under
the terms of their partnership agreement and to place, at lest, his capital contribution at the disposal
of the partnership. Despite several promises, Puzon, however, failed to do so. 17 Realizing that his
verbal demands were to no avail, William Uy consequently wrote Bartolome Puzon pormal letters of
demand, 18 to which Puzon replied that he is unable to put in additional capital to continue with the
projects. 19

Failing to reach an agreement with William Uy, Bartolome Puzon, as prime contractor of the
construction projects, wrote the subcontractor, U.P. Construction Company, on November 20, 1957,
advising the partnership, of which he is also a partner, that unless they presented an immediate
solution and capacity to prosecute the work effectively, he would be constrained to consider the sub-
contract terminated and, thereafter, to assume all responsibilities in the construction of the projects
in accordance with his original contract with the Bureau of Public Highways. 20 On November 27,
1957, Bartolome Puzon again wrote the U.P.Construction Company finally terminating their subcontract
agreement as of December 1, 1957. 21

Thereafter, William Uy was not allowed to hold office in the U.P. Construction Company and his
authority to deal with the Bureau of Public Highways in behalf of the partnership was revoked by
Bartolome Puzon who continued with the construction projects alone. 22

On May 20, 1958, William Uy, claiming that Bartolome Puzon had violated the terms of their
partnership agreement, instituted an action in court, seeking, inter alia, the dissolution of the
partnership and payment of damages.

Answering, Bartolome Puzon denied that he violated the terms of their agreement claiming that it
was the plaintiff, William Uy, who violated the terms thereof. He, likewise, prayed for the dissolution
of the partnership and for the payment by the plaintiff of his, share in the losses suffered by the
partnership.
After appropriate proceedings, the trial court found that the defendant, contrary to the terms of their
partnership agreement, failed to contribute his share in the capital of the partnership applied
partnership funds to his personal use; ousted the plaintiff from the management of the firm, and
caused the failure of the partnership to realize the expected profits of at least P400,000.00. As a
consequence, the trial court dismissed the defendant's counterclaim and ordered the dissolution of
the partnership. The trial court further ordered the defendant to pay the plaintiff the sum of
P320,103.13.

Hence, the instant appeal by the defendant Bartolome Puzon during the pendency of the appeal
before this Court, the said Bartolome Puzon died, and was substituted by Franco Puzon.

The appellant makes in his brief nineteen (19) assignment of errors, involving questions of fact,
which relates to the following points:

(1) That the appellant is not guilty of breach of contract; and

(2) That the amounts of money the appellant has been order to pay the appellee is not supported by
the evidence and the law.

After going over the record, we find no reason for rejecting the findings of fact below, justifying the
reversal of the decision appealed from.

The findings of the trial court that the appellant failed to contribute his share in the capital of the
partnership is clear incontrovertible. The record shows that after the appellant's loan the amount of
P150,000.00 was approved by the Philippin National Bank in November, 1956, he gave the amount
P60,000.00 to the appellee who was then managing the construction projects. Of this amount,
P40,000.00 was to be applied a reimbursement of the appellee's contribution to the partnership
which was used to clear the title to the appellant's property, and th balance of P20,000.00, as
Puzon's contribution to the partnership. 23 Thereafter, the appellant failed to make any further
contributions the partnership funds as shown in his letters to the appellee wherein he confessed his
inability to put in additional capital to continue with the projects. 24

Parenthetically, the claim of the appellant that the appellee is equally guilty of not contributing his
share in the partnership capital inasmuch as the amount of P40,000.00, allegedly given to him in
October, 1956 as partial contribution of the appellee is merely a personal loan of the appellant which
he had paid to the appellee, is plainly untenable. The terms of the receipts signed by the appellant
are clear and unequivocal that the sums of money given by the appellee are appellee's partial
contributions to the partnership capital. Thus, in the receipt for P10,000.00 dated October 24,
1956, 25 the appellant stated:
ñé+.£ªwph!1

Received from Mr. William Uy the sum of TEN THOUSAND PESOS (P10,000.00) in
Check No. SC 423285 Equitable Banking Corporation, dated October 24, 1956, as
advance contribution of the share of said William Uy in the partnership to be
organized between us under the firm name U.P. CONSTRUCTION
COMPANY which amount mentioned above will be used by the undersigned to pay
his obligations with the Philippine National Bank to effect the release of his
mortgages with the said bank. (Emphasis supplied)

In the receipt for the amount of P30,000.00 dated October 29, 1956, 26 the appellant also said: ñé+ .£ªw ph!1

Received from William Uy the sum of THIRTY THOUSAND PESOS (P30,000.00) in

Check No. SC423287, of the Equitable Banking Corporation, as partial contribution
 of the share of the said William Uy to the U.P. CONSTRUCTION COMPANY for
which the undersigned will use the said amount in payment of his obligation to the
Rehabilitation Finance Corporation. (Emphasis supplied)

The findings of the trial court that the appellant misapplied partnership funds is, likewise, sustained
by competent evidence. It is of record that the appellant assigned to the Philippine National Bank all
the payments to be received on account of the contracts with the Bureau of Public Highways for the
construction of the aforementioned projects to guarantee the repayment of the bank. 27 By virtue of
the said appeflant's personal loan with the said bank assignment, the Bureau of Public Highways paid the
money due on the partial accomplishments on the construction projects in question to the Philippine
National Bank who, in turn, applied portions of it in payment of the appellant's loan. 28

The appellant claims, however, that the said assignment was made with the consent of the appellee
and that the assignment not prejudice the partnership as it was reimbursed by the appellant.

But, the appellee categorically stated that the assignment to the Philippine National Bank was made
without his prior knowledge and consent and that when he learned of said assignment, he cal the
attention of the appellant who assured him that the assignment was only temporary as he would
transfer the loan to the Rehabilitation Finance Corporation within three (3) months time. 29

The question of whom to believe being a matter large dependent on the trier's discretion, the findings
of the trial court who had the better opportunity to examine and appraise the fact issue, certainly
deserve respect.

That the assignment to the Philippine National Bank prejudicial to the partnership cannot be denied.
The record show that during the period from March, 1957 to September, 1959, the appellant
Bartolome Puzon received from the Bureau of Public highways, in payment of the work
accomplished on the construction projects, the amount of P1,047,181.01, which amount rightfully
and legally belongs to the partnership by virtue of the subcontract agreements between the appellant
and the U.P. Construction Company. In view of the assignemt made by Puzon to the Philippine
National Bank, the latter withheld and applied the amount of P332,539,60 in payment of the
appellant's personal loan with the said bank. The balance was deposited in Puzon's current account
and only the amount of P27,820.80 was deposited in the current account of the partnership. 30 For
sure, if the appellant gave to the partnership all that were eamed and due it under the subcontract
agreements, the money would have been used as a safe reserve for the discharge of all obligations of the
firm and the partnership would have been able to successfully and profitably prosecute the projects it
subcontracted.

When did the appellant make the reimbursement claimed by him?

For the same period, the appellant actually disbursed for the partnership, in connection with the
construction projects, the amount of P952,839.77. 31 Since the appellant received from the Bureau of
Public Highways the sum of P1,047,181.01, the appellant has a deficit balance of P94,342.24. The
appellant, therefore, did not make complete restitution.

The findings of the trial court that the appellee has been ousted from the management of the
partnership is also based upon persuasive evidence. The appellee testified that after he had
demanded from the appellant payment of the latter's contribution to the partnership capital, the said
appellant did not allow him to hold office in the U.P. Construction Company and his authority to deal
with the Bureau of Public Highways was revoked by the appellant.32
As the record stands, We cannot say, therefore, that the decis of the trial court is not sustained by
the evidence of record as warrant its reverw.

Since the defendantappellant was at fauh, the tral court properly ordered him to reimburse the
plaintiff-appellee whatever amount latter had invested in or spent for the partnership on account of
construction projects.

How much did the appellee spend in the construction projects question?

It appears that although the partnership agreement stated the capital of the partnership is
P100,000.00 of which each part shall contribute to the partnership the amount of P50,000.00
cash 33 the partners of the U.P. Construction Company did contribute their agreed share in the
capitalization of the enterprise in lump sums of P50,000.00 each. Aside from the initial amount
P40,000.00 put up by the appellee in October, 1956, 34 the partners' investments took, the form of cash
advances coveting expenses of the construction projects as they were incurred. Since the determination
of the amount of the disbursements which each of them had made for the construction projects require an
examination of the books of account, the trial court appointed two commissioners, designated by the
parties, "to examine the books of account of the defendant regarding the U.P. Construction Company and
his personal account with particular reference to the Public Works contract for the construction of the
Ganyangan-Bato Section, Pagadian-Zamboanga City Road and five (5) Bridges in Malangas-Ganyangan
Road, including the payments received by defendant from the Bureau of Public Highways by virtue of the
two projects above mentioned, the disbursements or disposition made by defendant of the portion thereof
released to him by the Philippine National Bank and in whose account these funds are deposited . 35

In due time, the loners so appointed, 36 submitted their report 37 they indicated the items wherein they
are in agreement, as well as their points of disagreement.

In the commissioners' report, the appellant's advances are listed under Credits; the money received
from the firm, under Debits; and the resulting monthly investment standings of the partners, under
Balances. The commissioners are agreed that at the end of December, 1957, the appellee had a
balance of P8,242.39. 38 It is in their respective adjustments of the capital account of the appellee that
the commissioners had disagreed.

Mr. Ablaza, designated by the appellant, would want to charge the appellee with the sum of
P24,239.48, representing the checks isssued by the appellant, 39 and encashed by the appellee or his
brother, Uy Han so that the appellee would owe the partnership the amount of P15,997.09.

Mr. Tayag, designated by the appellee, upon the other hand, would credit the appellee the following
additional amounts:

(1) P7,497.80 — items omitted from the books of partnership but recognized and charged to
Miscellaneous Expenses by Mr. Ablaza;

(2) P65,103.77 — payrolls paid by the appellee in the amount P128,103.77 less payroll remittances
from the appellant in amount of P63,000.00; and

(3) P26,027.04 other expeses incurred by the appellee at construction site.

With respect to the amount of P24,239.48, claimed by appellant, we are hereunder adopting the
findings of the trial which we find to be in accord with the evidence:
To enhance defendant's theory that he should be credited P24,239.48, he presented checks
allegedly given to plaintiff and the latter's brother, Uy Han, marked as Exhibits 2 to 11. However,
defendant admitted that said cheeks were not entered nor record their books of account, as
expenses for and in behalf of partnership or its affairs. On the other hand, Uy Han testified that of the
cheeks he received were exchange for cash, while other used in the purchase of spare parts
requisitioned by defendant. This testimony was not refuted to the satisfaction of the Court,
considering that Han's explanation thereof is the more plausible because if they were employed in
the prosecution of the partners projects, the corresponding disbursements would have certainly been
recorded in its books, which is not the case. Taking into account defendant is the custodian of the
books of account, his failure to so enter therein the alleged disbursements, accentuates the falsity of
his claim on this point. 40

Besides, as further noted by the trial court, the report Commissioner Ablaza is unreliable in view of
his proclivity to favor the appellant and because of the inaccurate accounting procedure adopted by
him in auditing the books of account of the partnership unlike Mr. Tayag's report which inspires faith
and credence. 41

As explained by Mr. Tayag, the amount of P7,497.80 represen expenses paid by the appellee out of
his personal funds which not been entered in the books of the partnership but which been
recognized and conceded to by the auditor designated by the appellant who included the said
amount under Expenses. 42

The explanation of Mr. Tayag on the inclusion of the amount of P65,103.77 is likewise clear and
convincing. 43

As for the sum of of P26,027.04, the same represents the expenses which the appelle paid in
connection withe the projects and not entered in the books of the partnership since all vouchers and
receipts were sent to the Manila office which were under the control of the appellant. However,
officer which were under the control of the appellant. However, a list of these expenses are
incorporated in Exhibits ZZ, ZZ-1 to ZZ-4.

In resume', the appelllee's credit balance would be as follows:

ñé+.£ªwph!1

Undisputed
balance as of
Dec. 1967

Add: Items P 8,242.

omitted from
the books but

recognized
and charged
to
Miscellaneous

Expenses by 7,497.80
Mr. Ablaza
 Add: Payrolls P128,103.77
paid by the
appellee

Less: 63,000.00 65,103.77

Payroll
remittances
received

Add: Other
expenses
incurred at
the

site (Exhs, 26,027.04

ZZ, ZZ-1 to
ZZ-4)

TOTAL P106,871.00

At the trial, the appellee presented a claim for the amounts of P3,917.39 and P4,665.00 which he
also advanced for the construction projects but which were not included in the Commissioner's
Report. 44

Appellee's total investments in the partnership would, therefore, be:

Appellee's total P106,871.00

credits

Add: 3,917,39
unrecorded
balances for
the month of
Dec. 1957
(Exhs. KKK,
KK-1 to
KKK_19,
KKK-22)

Add: 4,665.00
Payments to
Munoz, as
subcontractor
of five,(5)
Bridges (p.
264 tsn;
Exhs. KKK-
20, KKK-21)

Total Pl 15,453.39
Investments
Regarding the award of P200,000.00 as his share in the unrealized profits of the partnership, the
appellant contends that the findings of the trial court that the amount of P400,000.00 as reasonable
profits of the partnership venture is without any basis and is not supported by the evidence. The
appemnt maintains that the lower court, in making its determination, did not take into consideration
the great risks involved in business operations involving as it does the completion of the projects
within a definite period of time, in the face of adverse and often unpredictable circumstances, as well
as the fact that the appellee, who was in charge of the projects in the field, contributed in a large
measure to the failure of the partnership to realize such profits by his field management.

This argument must be overruled in the light of the law and evidence on the matter. Under Article
2200 of the Civil Code, indemnification for damages shall comprehend not only the value of the loss
suffered, but also that of the profits which the obligee failed to obtain. In other words lucrum
cessans is also a basis for indemnification.

Has the appellee failed to make profits because of appellant's breach of contract?

There is no doubt that the contracting business is a profitable one and that the U.P. Construction
Company derived some profits from' co io oa ects its sub ntracts in the construction of the road and
bridges projects its deficient working capital and the juggling of its funds by the appellant.

Contrary to the appellant's claim, the partnership showed some profits during the period from July 2,
1956 to December 31, 1957. If the Profit and Loss Statement 45 showed a net loss of P134,019.43, this
was primarily due to the confusing accounting method employed by the auditor who intermixed h and
accthe cas ruamethod of accounting and the erroneous inclusion of certain items, like personal expenses
of the appellant and afteged extraordinary losses due to an accidental plane crash, in the operating
expenses of the partnership, Corrected, the Profit and Loss Statement would indicate a net profit of
P41,611.28.

For the period from January 1, 1958 to September 30, 1959, the partnership admittedly made a net
profit of P52,943.89. 46

Besides, as We have heretofore pointed out, the appellant received from the Bureau of Public
Highways, in payment of the zonstruction projects in question, the amount of P1,047,181.01 47 and
disbursed the amount of P952,839.77, 48 leaving an unaccounted balance of P94,342.24. Obviously, this
amount is also part of the profits of the partnership.

During the trial of this case, it was discovered that the appellant had money and credits receivable
froin the projects in question, in the custody of the Bureau of Public Highways, in the amount of
P128,669.75, representing the 10% retention of said projects.49 After the trial of this case, it was shown
50
that the total retentions Wucted from the appemnt amounted to P145,358.00. Surely, these retained
amounts also form part of the profits of the partnership.

Had the appellant not been remiss in his obligations as partner and as prime contractor of the
construction projects in question as he was bound to perform pursuant to the partnership and
subcontract agreements, and considering the fact that the total contract amount of these two
projects is P2,327,335.76, it is reasonable to expect that the partnership would have earned much
more than the P334,255.61 We have hereinabove indicated. The award, therefore, made by the trial
court of the amount of P200,000.00, as compensatory damages, is not speculative, but based on
reasonable estimate.

WHEREFORE, finding no error in the decision appealed from, the said decision is hereby affirmed
with costs against the appellant, it being understood that the liability mentioned herein shall be home
by the estate of the deceased Bartolome Puzon, represented in this instance by the administrator
thereof, Franco Puzon.

SO ORDERED.

Fernando (Chairman), Barredo, Antonio and Santos, JJ., concur. 1äw phï1.ñët

Aquino, J., concurs in the result.

Footnotes ñé+.£ªwph! 1

1 Known as Project No. 51-7-5-1, in the amount of P1,976,103.90 which was later on
increased to P2,037,880.12 (Exhibit A).

2 known as Project Nos. 51-7-4 (Spur 1) and 51-7-5-2, in the amount of P258,229.64
which was later on increased to P289,455.64 (Exhibit B).

3 Exhibit EEE.

4 Exhibits FFF, GGG.

5 paragraph 6, Exhibit EEE.

6 Exhibit HHH.

7 Exhibit HHH-1.

8 pp. 248, 313, t.s.n.

9 Exhibit EEE.

10 p. 230, t.s.n.; see also Exhibits FFF, GGG.

11 pp. 230, 241, 249, 299, t.s.n.

12 Exhibits CCC; pp. 263, 264, t.s.n.

13 p. 249, t.s.n.

14 p. 288, t.s.n.

15 Exhibits 59 and 60

16 Exhibit AAA

17 pp. 237, 238, t.s.n.

18 Exhibits III-1, III-3, III-5, III-8.

19 Exhibits III, III-4, III-6.

20 Exhibit III-2.

21 Exhibit III-7.

22 p. 276, t.s.n.; Exhibit LLL.

23 p. 249, t.s.n.

24 Exhibits III, III-4, III-6.

In his letter dated November 25,1957, the appellant said:

In all our previous conferences and discussions, cordial and sometimes high pitched,
to find a solution to our continuous losses. I have confessed to you my inability to put
additional cipital to continue on with the project. This has been brought about by any
the change of policy by the RFC in connection with my application filed with that
Office, on which is premised the assignment of the contract on my loan from the PNB
and which is with your full knowledge and approval.

xxx xxx xxx

Since we are depending on outside capital to help us in the prosecution of the

projects, since under the present circumstances and conditions, it is very hard to
bring about the necessary, outside capital, and because, whatever financing I may
be able to place is borrowed and temporary, which you can not conform, then I wish
to advise you that, I can no longer continue to go on with our partnership for the
reason that I cannot place additional capital beyond what I have placed including my
share of the obligation." (Exhibit III-4) The appellant's position "as no longer able to
put additional capital", was reiterated in his letter dated November 27, 1957. (See
Exhibit III-6).

25 Exhibit HHH.

26 Exhibit HHH-1.

27 Exhibits 59 and 60.

28 See Exhibit HHH-1.

29 William Uy's testimony reads, as follows:

Q When did vou first know that the two projects of Mr Puzon at Zamboanga del Sur
which was the subject maltter of the sub-contract agreement were encumbered by an
assignment, made by Mr. Puzon in favor of the Philippine National Bank?

A I think in January or February after my return from the projects. That was the time
he told me about th assignment. I have no knowledge of the assignment. (p. 288,
t.s.n.)
Q When you signed the partnership and sub-contract agreements Exhibits EE and
FF and also Exhibit GGG, you already knew that the projects were encumbered by
an assignment in favor of the Philippine National Bank?

A Yes, sir, but he informed me that it was only a formality, and that he will make the
necessary arrangement because I objected to it on that assignment.

Q So that in spite of the fact that you knew that the two projects subject matter of
these contracts Exhibits FFF and GGG were already assigned by Mr. Puzon to the
Philippine National Bank you still signed the subcontracts Exhibits FFF and GGG?

A I signed because of his promise to cancel that assignment and transfer it to the
RFC within three months time and continue in the meantime that P50,000.00 and if
he can not maintain that, he will get that from the outside source. (p. 290, tsn ).

30 Exhibit AAA.

31 Puzon's advances of P991.054.78 less the amounts of P16,265.01, which were

incurred for the personal expenses of Puzon, and P21,950.00, representing
questionable disbursements of which P20,00.00 was allegedly lost in an airplane
crash, equals P952,839.77 (See Exhibit BBB).

32 The appellee's testimony on this point, reads:

Q After you wrote Mr. Puzon Exhibits III-1 to III-9,what happened?

A After I have written these letters, I was being driven out of the company and then I
was not allowed to hold office that office we were supposed to be. Then he wrote a
letter a informing, the Bureau of Public Highways that I am no longer connected in
that projects and he issued a letter of revocation my power. So my hands are tied.

Q Showing to you this document which is a revocation of power of Mr. Puzon, what
reference has this with the revocation issued by Mr. Puzon?

A This is the very letter of revocation of power given to me

Q Whose signature is this which reads Bartolome Puzon

A That is the signature of Mr. Puzon.

Q Below, the signature, there appears a signature which reads Zenaida O. Beltran',
whose signature is that?

A That is the signature of one of the clerks of the company

ATTY. SALVADOR:

For purposes of Identification, we request that this revocation of Mr. Puzon he

marked as Exhibit LLL, for the plaintiff.
COURT:

Let is be marked. (pp. 276-277, tsn).

33 par. 6, Exhibit EEE.

34 Exhibits HHH, HHH-1.

35 p. 53, Record on Appeal.

36 Jesus B. Tayag, for the plaintiff, and Angel C. Ablaza, for the defendant.

37 p. 58, Record on Appeal.

38 pp. 61, 64, Record on Appeal.

39 Exhibits 2 to 11, inclusive.

40 pp. 241-242, Record on Appeal.

41 pp. 246-247. Record on Appeal.

42 pp. 163-167, t. s. n.

43 Mr. Tayag's testimony on this point reads:

Q We notice Mr. Tayag under the capital account in your report, Commissioner's
Report, you made adjustments in the form of payrolls paid in 1956 to 1957 in the
amount of P128,103.77, would you please explain why you made such adjustment?

A I believe, I have already explained in my comment. When I was examining the

books of the U.P. Construction Company, I found out that the amount charge to
salaries and wages were remittances by telegraphic transfers to the Zamboanga
Office. In proper accounting, remittances should not have been entered as salaries
immediately because you don't know what disposition would be made finally of the
amount remitted, until the amounts are actually paid and covered by payrolls in
Zamboanga Office, nothing should be recorded as salaries and wage. Instead, the
remittances should have been charged to the incharge or manager of the project or
payroll clerk asa ccount receivable. When the particular payrolls are reported back to
Manila, that is the time you enter the actual amount paid. Because while the
remittances in round figures say P10,000.00, the actual payroll would not be exactly
that amount. At the time of the receipt of the payrolls, that is the only time the
adjustment of salaries and wages should be made. So I asked the personnel of the
U.P. Construction Company whether there were payrolls in the files. I was told that
there were paurolls but they would not release to me without permission from Mr.
Puzon or his attorney. So, I contacted Mr. Uy by telephone whether there were
payrolls or papers in the project site. He told me that there were and that they were
sent to Manila. As a proof, he brought to me a list in detail containing the names of
the employees by the month and the amount received by them. When I returned
back to the Office of Mr. Puzon, I inquired again whether the payrolls will be lent to
me. There was much delay and later on I understood that Mrs. Barrera telephoned
the attorney of Mr. Puzon, who agreed release the payrolls to me. I checked over the
list of Mr. Uy with the payrolls. I found out that the amount corresponding to
employee in his list tally with those in the payrolls. But payrolls most of them were not
in total. So there was no way knowing the total amount in the payrolls. I believe there
reasonable proof that those were the payrolls that ;were paid Mr. Uy. That is the
reason why I included in my Exhibit A the amount of Pl 28,103.77.

Q Do you have the list of the persons to whom paymen were made by Mr. Uy which
you said was given to you prior your seeing the payrolls in the U.P. Construction
Company office and confronting it with the said payrolls which you foun that they
tally?

A Yes, sir, I have the list given to me by Mr. Uy whic shows here 'Summary payrolls
for the month of October 1956 January 1957' already signed. (Witness handing to
counsel the plaintiff the said list).

ATTY. SALVADOR:

Consisting of nine pages, which for purposes of identification we request that the
same be marked as Exhibits YY, YY-1, to YY-8.

COURT:

Let them be so marked.

ATTY. SALVADOR:

Q Now, in your adjustment Mr. Tayag under the capital account of Mr. Uy, Exhibit A.
Tayug, there is a deduction fro said amount of P128,103.77, representing payrolls
paid by him in the amount of P63,000.00, what does this amoint represent?

A As I have said the amount charged to salaries an wages in the books of Mr. Puzon
were the remittances Zamboanga Office intended for the payment of the laborers;
The amount of P63,000.00 as mentioned by me in schedule 2, the same remittances
which I deducted from the total of th payrolls. I deducted this amount of P63,000.00
from the P128,000.00 plus resulting only in the amount of P65,108, which is the net
credit carried to the account of Mr. Uy. (pp 165169, tsn)

44 pp. 263-284, tsn; See also Exhibits KKK, KKK-1, KKK-2.

45 p. 68, Record on Appeal.

46 p. 70, Record on Appeal.

47 Exhibit AAA.

48 See footnote 31.

49 p. 135, Record on Appeal.

50 pp. 267268, Record on Appeal.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-13057 February 27, 1963

DELFIN MONTANO, plaintiff-appellee,

vs.
JOSE LIM ANG, ET AL., defendants.

ANGEL M. TINIO, third-party plaintiff-appellant,

vs.
MANILA TRADING & SUPPLY COMPANY, third-party defendant-appellant.

MANILA TRADING & SUPPLY COMPANY, fourth-party plaintiff-appellant,

vs.
AMADOR D. SANTOS, substituted by his wife DOLORES L. SANTOS, fourth-party defendant-
appellant.

AMADOR D. SANTOS, substituted by his wife DOLORES L. SANTOS, fifth-party plaintiff-

appellant,
vs.
MARCIANO VILLANUEVA and EUGENIO VILLANUEVA, fifth-party defendants-appellees.

MARCIANO VILLANUEVA and EUGENIO VILLANUEVA, cross-claimants-appellees,

vs.
JOSE LIM ANG, cross-defendant.

Roxas & Sarmiento for plaintiff-appellee Delfin Montano.

Arsenio R. Reyes for third-party plaintiff-appellant Angel M. Tinio.
Ross, Selph, Carrascoso & Janda for third-party defendant-appellant Manila Trading & Supply
Company.
Vicente J. Francisco, for cross-claimants-appellees Marciano Villanueva and Eugenio Villanueva.
Jose Lim Ang for and in his own-behalf as cross-defendant.

BAUTISTA ANGELO, J.:

Delfin Montano brought to the Philippines from the United States a Cadillac car which he registered
in his name in the Motor Vehicles Office and for which he obtained a certificate of registration. On
May 30, 1952, he sold the car to Jose Lim Ang and his wife Teodora A. Gonzales for the sum of
P28,000.00, payable in installments, for which the latter executed a promissory note. Having paid
part of the price, said spouses executed on the same date a chattel mortgage on the car in favor of
Montano to guarantee the payment of the balance. Because Montano did not want to transfer the
registration certificate to Jose Lim Ang before the registration of the mortgage, the latter was
registered in the office of the register of deeds on June 4, 1952, but Montano failed to notify the
Motor Vehicles Office of the execution of the mortgage pursuant to the requirement of Section 5(e)
of Act No. 3992, known as the Revised Motor Vehicle Law.
On June 12, 1952, Jose Lim Ang transferred the registration certificate to Eugenio Villanueva. On
June 18, 1952, Villanueva sold the car to Amador D. Santos for P25,000.00, transferring to the latter
the registration certificate. On the same date, Santos sold the car to the Manila Trading & Supply
Company for P25,000.00, and on the same date this company sold the car to Angel M. Tinio for
P26,000.00. Tinio made a down payment of P12,000.00 and for the balance he executed a
promissory note which he assumed to pay in monthly installments. He also executed a chattel
mortgage on the same car to secure the payment of the promissory note. This mortgage was
registered both in the office of the register of deeds as well as in the Motor Vehicles Office. After
paying his obligation in full, the mortgage executed by Tinio in favor of the Manila Trading & Supply
Company was cancelled, and as a consequence he secured the transfer to his name of the
certificate of registration from the Motor Vehicles Office. None of the transferees took the trouble of
investigating from whom Jose Lim Ang had acquired the Cadillac car, and neither did any of them
investigate in the office of the register of deeds if there was any encumbrance existing thereon.

Jose Lim Ang failed to pay the balance of the purchase price to Montano in spite of the latter's
demand and so on December 8, 1952 Montano requested the sheriff of Manila to sell the car in
accordance with the conditions agreed upon in the chattel mortgage. Having found, however, that
the car was no longer in the possession of Lim Ang but in that of Angel M. Tinio who claimed
ownership thereof, on July 8, 1953 Montano commenced the present action of replevin before the
Court of First Instance of Manila against spouses Jose Lim Ang and Teodora A. Gonzales and Angel
M. Tinio to recover the ownership and possession of the car in question (Civil Case No. 1998).

In order to obtain possession of the car, Montano put up a bond in the amount of P30,000.00 and,
accordingly, on July 11, 1953 an order for the seizure of the car was issued by the trial court. The
sheriff hauled the car from Tinio's garage only to return the same on the promise of Tinio to post a
counterbond to enable him to retain possession thereof. In effect, Tinio posted a counterbond in the
amount of P30,000.00, and forthwith filed a third-party complaint in the same case against the
Manila Trading & Supply Company from which he bought the car in question. This company in turn
filed a fourth-party complaint against Amador D. Santos, who in turn brought into the case as
defendants Marciano and Eugenio Villanueva. The Villanuevas filed a cross-claim against Jose Lim
Ang and his wife Teodora A. Gonzales. On March 29, 1954, these spouses were declared in default
for their failure to answer Montano's complaint within the reglementary period.

Meanwhile, during the pendency of the replevin case, it was brought to the attention of the court a
quo that on May 15, 1953, at the instance of Montano, the aforesaid spouses were accused of
estafa under Article 319, paragraph 2, of the Revised Penal Code for having sold the car in question
without the consent of Montano notwithstanding the existence thereon of the chattel mortgage
(Criminal Case No. 22627); that Atty. Abraham Sarmiento, Montano's counsel in the replevin case,
appeared as private prosecutor in the criminal case; and that having been awarded an indemnity in
the amount of P7,875.00 which is the same amount Montano seeks to recover in the civil case, said
award has the effect of a waiver on his part to further prosecute the same.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove
their case not covered by this stipulation of facts.1äwphï1.ñët

On September 24, 1955, the court a quo rendered decision the dispositive part of which reads:

(a) The court orders defendants Jose Lim Ang, Teodora A. Gonzales and Angel M. Tinio to
deliver the car in question to plaintiff Delfin Montano or to pay jointly and severally to plaintiff
Delfin Montano the sum of P6,000.00, plus 12% interest per annum from August 15, 1952,
until the amount is fully paid, with costs;
 (b) The court orders Manila Trading & Supply Co. to reimburse defendant and third-party
plaintiff Angel M. Tinio the amount of P6,000.00, plus interest at the rate of 12% per annum
from August 15, 1952, until the said amount is fully paid, with costs. This amount of
reimbursement shall be made by Manila Trading & Supply Co. even if defendant and third-
party plaintiff Angel M. Tinio delivers the car back to Delfin Montano. If Angel M. Tinio elects
to return the car to Delfin Montano instead of paying him the sum of P6,000.00 plus 12%
interest per annum, the value of the car must have been reduced to P6,000.00 only, or less,
due to its use. Manila Trading & Supply Co. as third-party defendant shall also pay to
defendant Angel M. Tinio as third-party plaintiff the sum of P3,000.00 for damages actual
and moral, expenses so far incurred by him in defending himself in this case, and attorney's
fees;

(c) The court orders fourth-party defendant Amador D. Santos to reimburse to fourth-party
plaintiff Manila Trading & Supply Co. the sum of P6,000.00, plus 12% interest per annum
from August 15, 1952, until this sum is paid by Manila Trading & Supply Co. to defendant
and third-party plaintiff Angel M. Tinio, plus costs. No reimbursement for damages and
attorney's fees is ordered because Manila Trading & Supply Co. waived damages and
attorney's fees from Amador D. Santos;

(d) The court orders defendant spouses Jose Lim Ang and Teodora A. Gonzales to pay
jointly and severally to Amador D. Santos, as reimbursement, all sums the said Amador D.
Santos shall have paid Manila Trading & Supply Co. in compliance with this decision.

Fifth-party defendants Marciano Villanueva and Eugenio Villanueva are absolved from the
fifth-party complaint of Amador D. Santos because the evidence is conclusive that Eugenio
Villanueva acted as dummy only of Jose Lim Ang. Amador D. Santos himself testified
expressly and positively that he refused to buy the car in question unless it was transferred
to the Villanuevas. Fifth-party defendants Eugenio Villanueva and Marciano Villanueva
conclusively proved that they received not a cent of the price of the car in question from
Amador D. Santos. The sum of P11,228.50, for which Amador D. Santos extended a
promissory note and which was paid by him the following day, was the price of Eugenio
Villanueva's Oldsmobile car. The Villanuevas conclusively established that on June 18,
1953, when the car in question was sold to Amador D. Santos, Eugenio Villanueva signed
the deed of sale in order to get the payment for his Oldsmobile car.

Their motions for reconsideration having been denied, defendant and third-party plaintiff Angel M.
Tinio, third-party defendant and fourth-party plaintiff Manila Trading & Supply Company, fourth-party
defendant and fifth-party plaintiff Amador D. Santos, fifth-party defendants and cross-claimants
Marciano Villanueva and Eugenio Villanueva appealed to the Court of Appeals. The case is now
before us upon certification of the Court of Appeals on the ground that only questions of law are
involved.

Amador D. Santos died during the pendency of this case and so he was substituted by his wife
Dolores L. Santos, special administratrix of his estate.

The issues posed in this appeal are: (1) whether or not the chattel mortgage executed by Jose Lim
Ang and his wife Teodora A. Gonzales on May 30, 1952 before the car was actually registered in
their name is valid and regular; (2) Whether or not the chattel mortgage executed by Jose Lim Ang
and Teodora A. Gonzales in favor of Delfin Montano is binding against third persons even if they
failed to give notice thereof to the Motor Vehicles Office as required by Section 5(e) of the Revised
Motor Vehicle Law; and (3) whether or not the intervention of Montano in the prosecution of the
criminal case against Jose Lim Ang and his wife for estafa under Article 319, paragraph 2, of the
Revised Penal Code wherein he was awarded an indemnity of P7,875.00 constitutes a waiver of his
right to foreclose the chattel mortgage executed by said spouses on the car in question.

Anent the first issue, appellants maintain the negative. They aver that since the chattel mortgage
was executed on May 30, 1952 and the transfer of the registration certificate was made only on June
7, 1952, said mortgage is invalid because the mortgagors were not yet the owners of the car when
the mortgage was executed. They bolster up their claim by invoking the testimony of Montano to the
effect that on May 31, 1952, he still considered himself owner of the car because he intended to
transfer its ownership to the mortgagors only after the registration of the mortgage in the office of the
register of deeds.

This contention is untenable. It is not disputed that Montano agreed to sell and the spouses Ang
agreed to buy the car for P28,000.00 for which a promissory note was executed and that to
guarantee the same the spouses executed a chattel mortgage and took possession of the car sold. It
is therefore safe to conclude that at the time of the sale wherein the parties agreed over the car and
the price, the contract became perfected, and when part of the purchase price was paid and the car
was delivered upon the execution of the promissory note and the mortgage, the same became
consummated.1 The fact that the registration certificate of the car has not as yet been transmitted to
the purchasers when the mortgage was constituted is of no moment for, as this Court well said: "The
registry of the transfer of automobiles and of the certificates of license for their use in the Bureau of
Public Works (now Motor Vehicles Office) merely constitutes an administrative proceeding which
does not bear any essential relation to the contract of sale entered into between the parties."2 At any
rate, this flaw, if any, is deemed to have been cured when after the registration of the mortgage the
registration certificate was transferred to the purchasers on June 4, 1952.

The second issue raised is not new. In a similar case3 decided by this Court, we said: "A mortgage in
order to affect third persons should not only be registered in the Chattel Mortgage Registry, but the
same should also be recorded in the Motor Vehicles Office as required by section 5(e) of the
Revised Motor Vehicle Law. And the failure of the respondent mortgagee to report the mortgage
executed in its favor had the effect of making said mortgage ineffective against Borlough, who had
his purchase registered in the said Motor Vehicles Office."' Adopting this view in our case the
inevitable conclusion is that as between Montano whose mortgage over the car was not recorded in
the Motor Vehicles Office and Angel M. Tinio who notified said office of his purchase and registered
the car in his name, the latter is entitled to preference considering that the mere registration of the
chattel mortgage in the office of the register of deeds is in itself not sufficient to hold it binding
against third persons.

Having reached the foregoing conclusion, we deem it unnecessary to discuss the third issue relative
to Montano's intervention in Criminal Case No. 22627.

With regard to the claim for damages of Angel M. Tinio, we find no factual basis to grant the same it
appearing that Montano filed the present case merely to protect his interest.

WHEREFORE, the decision appealed from is affirmed insofar as it orders defendants Jose Lim Ang
and his wife Teodora A. Gonzales to pay Delfin Montano the sum of P6,000.00, plus 12% interest
thereon per annum from August 15, 1952 until it is fully paid.

The rest of the decision is reversed, without pronouncement as to costs.

Bengzon, C.J., Padilla, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and
Makalintal, JJ., concur.
Footnotes

1Articles 1475, 1477, 1496 and 1497, Civil Code; De Santos, et al. v. The Secretary of
Agriculture and Natural Resources, et al., 48 O.G. No. 8, p.3367; Pilar Gil Vda. de Murciano
v. The Auditor General, et al., L-11744, May 28, 1958.

2 Chinchilla v. Rafel and Verdaguer, 39 Phil. 888.

3 Borlough v. Fortune Enterprises, Inc., et al., L-9451, March 29, 1957.

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 75305 September 26, 1989

MICHAEL PEÑALOSA, ET AL. and SAMAHANG DIWANG MANGGAGAWA SA RMC-FFW

CHAPTER and its MEMBERS, petitioners,
vs.
HON. CANDIDO P. VILLANUEVA and DEVELOPMENT BANK OF THE
PHILIPPINES, respondents.

Pablo B. Castillon for petitioners.

Ruben 0. Fruto, Bonifacio M. Abad & Winston D. Abuyuan for respondent DBP.

REGALADO, J.:

This original action for certiorari, prohibition and mandamus being interrelated with Development
Bank of the Philippines vs. Hon. LaborArbiterAriel Santos, et al., 1 recently decided by this Court and
involving the same parties, we reproduce the following, summary of the facts therein which are equally
relevant in the present case:

On November 29,1984, in NLRC-NCR Case No. 2517-84 entitled 'Philippine

Association of Free Labor Unions (PAFLU-RMC Chapter) and its Members v.
Riverside Mills Corporation, et al.", Labor Arbiter Manuel Caday awarded separation
pay, wage and/or living allowance increases and 13th month pay to the individual
complainants who comprise some of the respondents in this case.

On March 18, 1985, Labor Arbiter Teodorico Dogelio likewise awarded separation
pay, vacation and sick leave pay and unpaid increases in the basic wage and
allowances to the other private respondents herein in NLRC Case No. NCR-7- 2577-
84 entitled 'Michael Peñalosa, Jose Garcia and Apolinar Ray, et al. v. Riverside Mills
Corporation, et al., and Samahang Diwang Manggagawa sa RMC-FFW Chapter, et
al. v. Riverside Mills Corporation (RMC).' On March 29,1985, after the judgment had
become final and executory, Dogelio issued a writ of execution directing NLRC
Deputy Sheriff Juanito Atienza to collect the total sum of Eighty Five Million Nine
Hundred Sixty One Thousand Fifty-Eight & 70/100 Pesos (P85,961,058.70). The
Deputy Sheriff, however, failed to collect the amount so he levied upon personal and
real properties of RMC.

On April 25, 1985, a notice of levy on execution of certain real properties was
annotated on the certificate of title filed with the Register of Deeds of Pasig, Metro
Manila, where all the said properties are situated.

Meanwhile in the other development which led to this case, petitioner DBP obtained
a writ of possession on June 7, 1985 from the Regional Trial Court (RTC) of Pasig of
all the properties of RMC after having extra-judicially foreclosed the same at public
auction earlier in 1983. DBP subsequently leased the said properties to Egret
Trading and Manufacturing Corporation, Rosario Textile Mills and General Textile
Mills.

The writ of possession prevented the scheduled auction sale of the RMC properties
which were levied upon by the private respondents. As a result, on June 19, 1985,
the latter filed an incidental petition with the NLRC to declare their preference over
the levied properties. The petition entitled 'PAFLU-RMC Chapter and its members,
Michael Peñalosa, et al., and the Samahang Diwang Manggagawa sa RMC-FFW
Chapter and its members v. RMC and DBP, et al.', was docketed as NLRC Case No.
NCR- 7-2577-84. Petitioner DBP filed its position paper and memorandum in answer
to the petition.

On October 31, 1985, Dogelio issued an order recognizing and declaring the
respondents' first preference as regards wages and other benefits due them over and
above all earlier encumbrances on the aforesaid properties/assets of said company,
particularly those being asserted by respondent Development Bank of the
Philippines.

The petitioner appealed the order of Dogelio to the NLRC. The latter in turn, set
aside the order and remanded the case to public respondent Labor Arbiter Santos for
further proceedings.

Meanwhile, another set of complainants (who are also named as respondents

herein) filed, on April 7, 1986, a complaint for separation pay, underpayment,
damages, etc., entitled 'Jaime Arada, et al. v. RMC, DBP, Egret Trading and
Manufacturing Corp., docketed as NLRC Case NO. NCR-4-1278-86.' This case was
subsequently consolidated with the case pending before respondent Santos.
Accordingly, the latter conducted several hearings where the parties, particularly
DBP, General Textile Mills, Inc., and Rosario Textile Mills, Inc., were given the
opportunity to argue their respective theories of the case. Eventually, all the parties
agreed that the case shall be submitted for decision after their filing of position
papers and/or memorandums.

On March 31, 1987, public respondent Santos rendered the questioned decision, the
dispositive portion of which reads:

WHEREFORE, it is hereby declared that all the complainants in the above-entitled

cases, as former employees of respondent Riverside Mills Corporation, enjoy first
preference as regards separation pay, unpaid wages and other benefits due them
over and above all earlier encumbrances on all of the assets/ properties of RMC
specifically those being asserted by respondent DBP.
 As a consequence of the above declaration, the decision dated March 18, 1983 of
the then Hon. Arbiter Teodorico Dogelio should be immediately enforced against
DBP who is hereby directed to pay all the monetary claims of complainants who were
former employees of respondent RMC.

Anent the Arada case, DBP is hereby directed to pay all the amounts as indicated
opposite the names of complainants listed from page 1 to page 5 of Annex 'A' of
complainants' complaint provided that their names are not among those listed in the
Peñalosa case.

It is hereby also declared that former employees whose names are not listed in the
complainants' position papers but can prove that they were former employees of
RMC prior to its bankruptcy, should also be paid the same monetary benefits being
granted to herein complainants.

Finally, DBP is hereby ordered to deposit with the National Labor Relations
Commission the proceeds of the sale of the assets of RMC between DBP on one
hand and General Textile Mills, Inc. and/or Rosario Textile Mills, Inc., on the other
hand, and that future payment being made by the latter to the former should also be
deposited with the National Labor Relations Commission for proper disposition

During the pendency of the abovementioned cases, on June 26, 1985 herein private respondent
Development Bank of the Philippines (DBP) filed with the Regional Trial Court, Branch CXLIV,
Makati, Metro Manila, a complaint for injunction and damages, with preliminary injunction, docketed
as Civil Case No. 10945 . 2 The defendants impleaded were Michael Peñalosa, Samahang Diwang
Manggagawa sa RMC-FFW Chapter, et al., Deputy Sheriff Juanito Atienza and Deputy Sheriff Romeo de
la Cruz. The complaint sought to enjoin the herein defendants, their agents or deputies from
implementing the writ of execution issued in NLRC Case No. NCR-7-2577-84 and for the return of the
properties that Sheriff Atienza had allegedly caused to be taken out from the RMC compound. Private
respondent bank also prayed to be declared the rightful owner of the properties involved in the case. On
the same date, a temporary restraining order was issued in connection with said case . 3

On July 5, 1985, an urgent motion to dismiss the complaint and to lift and dissolve the temporary
restraining order was filed by petitioners. Said motion was denied by the trial court in its order of
June 30, 1986 which, at the same time approved private respondent's application for writs of
preliminary prohibitory and mandatory injunction upon posting of a bond in the amount of
P50,000.00. Petitioners were required to file an answer within fifteen days from receipt of the order
.4

On the part of the petitioners, on April 9, 1986 they filed Civil Case No. 53333 in Branch 158 of the
Regional Trial Court at Pasig, Metro Manila, for the nullification of the lease agreement between
private respondent and Egret Trading, Inc. which were made defendants therein, 5 which case
appears in the records to still be pending.

In the present petition filed on July 31, 1 986, a jurisdictional question is raised by the petitioners. It
is averred that "(i)n denying petitioner's Motion to dismiss Complaint, lift and dissolve the ex
parte restraining Order, and in assuming jurisdiction over the same Complaint, by granting the writs
sought by respondent bank and by requiring the petitioners herein to file their Answer. to the
Complaint, the Honorable Candido P. Villanueva has acted without jurisdiction, in excess of
jurisdiction and with grave abuse of discretion." 6 This contention is premised on the claim that the
properties involved in the aforesaid case before the trial court are the same properties litigated in the
National Labor Relations Commission as NLRC-NCR Case No. 7-2577-84 wherein the resolution of the
principal issue of preferential right and/or lawful ownership over said properties was sought. Petitioners
contend that the "NLRC having taken jurisdiction over the subject matter of the case, involving as they do
similar or Identical causes of action with the civil complaint with the RTC, should continue to exercise
jurisdiction until the whole dispute is resolved" since to allow both actions to proceed would result in the
splitting of a cause of action . 7

Several months after the filing of the present petition, another petition for certiorari was filed on May
8, 1987 by private respondent DBP, this time questioning the March 31, 1987 decision of Labor
Arbiter Ariel Santos, the decretal portion and factual background of which have been earlier set forth.

On March 8, 1989, this Court promulgated its decision, quoted in part at the outset, in said DBP case
holding that said labor arbiter "committed grave abuse of discretion in ruling that the private
respondents may enforce their first preference in the satisfaction of their claim over those of the
petitioner (DBP) in the absence of a declaration of bankruptcy or judicial liquidation of RMC."
Consequently, the aforesaid decision of the labor arbiter of March 31, 1987 was annulled and set
aside. Nevertheless, it was ruled that there is nothing to prevent the respondents in that case, who
are petitioners herein, from instituting involuntary insolvency or other appropriate proceedings
against their employer RMC where their claims can be asserted with respect to their employer's
assets.

With the foregoing final decision in G.R. No. 78261-62, there is no further legal basis or necessity to
decide the issue of preferential right claimed by petitioners over the property of Riverside Mills
Corporation in NLRC-NCR Case No. 7-2577-84. Furthermore, that very property subject of their
aborted claim of first preference is alleged by DBP as no longer owned by said judgment debtor
corporation at the time the writ of execution issued by the commission was sought to be enforced,
hence said private respondent filed Civil Case No. 10945 seeking, inter alia, a declaration of its
ownership thereover.

As found by the Court in G.R. Nos. 78261-62 and hereinbefore quoted, "DBP obtained a writ of
possession on June 7, 1985 from the Regional Trial Court (RTC) of Pasig of all the properties of
RMC after having extra-judicially foreclosed the same at public auction earlier in 1983." The records
of said cases contain a copy of Transfer Certificate of Title No. (50170) 21602 of the Registry of
Deeds for Metro Manila (Province of Rizal), consisting of 10,776 square meters, located at Barrio
Rosario, Pasig, Rizal, in the name of Riverside Mills Corporation. 8 The following inscription appears
on the original of said certificate of title:

Entry No. 102414/0-346 — CERTIFICATE OF SALE in favor of the DEVELOPMENT

BANK OF THE PHILIPPINES, covering the parcel of land described, for the sum of P
42,486.25 in accordance with Cert. of Sale issued by the Regional Sheriff of Pasig,
Metro Manila, dated Aug. 19, 1983. The date of redemption will expire after one (1)
year after the date of registration of this cert. of sale.

Date of the inscription March 6, 1984 at 10:20 am.

The writ of execution in question is mentioned in a much later inscription on said certificate of title as
follows:

Entry No. 5910.0-346 — NOTICE OF LEVY AND EXECUTION affecting whatever

rights, interests and participation, of defendant, over the property described herein,
issued by Dionisio M. de la Cruz, Actg. Deputy Sheriff, National Labor Relations
Commission, NCR, Mla. NLRC Case No. 7-2577-84, entitled Michael Peñalosa, et al.
and Samahang Diwang Manggagawa sa RMC-FFW- Complainant vs. Riverside Mills
Corporation, Respondent.
 Date of the instrument-April 25,1985

Date of the inscription, April 25,1985.

If the disputed property did not belong to the judgment debtor in NLRC Case No. 7-2577-84, it could
not be validly levied upon by the sheriff for the satisfaction of the judgment therein. We,
consequently, reject the objections raised by herein petitioners to the jurisdiction of Branch CXLIV,
Makati, Metro Manila, presided over by respondent judge, to entertain the aforesaid Civil Case No.
10945 and to issue the questioned writs of preliminary injunction.

The rule is settled that even if a writ of execution is issued by a co-equal court, and we place the
National Labor Relations Commission in the same category for purposes of this case, respondent
judge could validly issue the temporary restraining order and, later, the writs of preliminary injunction
on the basis of DBP's claim of ownership over the properties levied upon. We have heretofore ruled
that —

Under Sec. 17 of Rule 39 a third person who claims property levied upon on
execution may vindicate such claim by action. Obviously, a judgment rendered in his
favor, declaring him to be the owner of the property, would not constitute interference
with the powers or processes of the court which rendered the judgment to enforce
which the execution was levied. If that be so-and it is so because the property being
that of a stranger is not subject to levy-then an interlocutory order, such as injunction,
upon a claim and prima facie showing of ownership by the claimant, cannot be
considered as such interference either. 9

It is true that, as a rule, no temporary or permanent injunction or restraining order in any case
involving or growing out of labor disputes shall be issued by any court. 10 It is likewise conceded that
the judgment account of Riverside Mills Corporation arose out of its labor dispute with the herein
petitioners who were the complainants in NLRC Case No. NCR-7-2577-84. The foregoing
notwithstanding, where the writ of execution issued by said commission is sought to be enforced upon
property of a stranger to the labor dispute, even upon a mere prima facie showing of ownership of such
claimant, a separate action for injunctive relief against such levy may be maintained in court since said
action neither involves nor grows out of a labor dispute insofar as the third party is concerned.

We have merely to reproduce what we said in National Mines and Allied Workers' Union, et al. vs.
Vera, etc., et al.11

Petitioners' reliance on the provisions of Art. 254 of the New Labor Code . . . which
prohibits injunctions or restraining orders in any case involving or growing out of a
labor dispute is not well- taken. This has no application to the case at bar. Civil Case
No. 2749 is one which neither 'involves' nor 'grows out' of a labor dispute. What
'involves' or 'grows out' of a labor dispute is the NLRC case between petitioners and
the judgment debtor, Philippine Iron Mines. The private respondents are not parties
to the said NLRC case. Civil Case No. 2749 does not put in issue either the fact or
validity of the proceeding in the NLRC case nor the decision therein rendered, much
less the writ of execution rendered thereunder. It does not seek to enjoin the
execution of the decision against the properties of the judgment debtor. What is
sought to be tried in Civil Case No. 2749, is whether the NLRC's decision and writ of
execution, above mentioned, shall be permitted to be satisfied against properties of
private respondents, and not of the judgment debtor named in the NLRC decision
and writ of execution. Such a recourse is allowed under the provisions of Section 17,
rule 39 of the Rules of Court.
The foregoing statements, mutatis mutandis, could very well have been said of the proceedings
before respondent judge which are assailed in the petition at bar.

On either of the foregoing considerations, it is indisputable that the present petition cannot prosper
since the issue of first preference claimed by petitioners has been foreclosed by G.R. Nos. 78261-
62, while the proceedings and incidents in Civil Case No. 10945 are within the jurisdiction of
respondent judge. We make no pronouncement with respect to DBP's prayer for a declaration of
ownership and payment of damages sought in said Civil Case No. 10945 which, if still pending,
should be definitively resolved as early as practicable by the lower court.

ACCORDINGLY, the instant petition should be, as it is hereby DISMISSED.

SO ORDERED.

Melencio-Herrera, (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

Footnotes

1 G.R. No. 78261-62, Mar. 8,1989.

2 Petition, Annex N; Rollo, 101 -110.

3 Id., Annex 0; Ibid., 111.

4 Id., Annex W; Ibid., 170-174.

5 Id., Annex T; Ibid., 139-153.

6 Rollo, 28-29.

7 lbid., 29-30.

8 Annex E, Petition; Rollo, G. R. Nos. 78261-62, 64-65.

9 Abiera, et al. vs. Court of Appeals, et al., 45 SCRA 314 (1972). See also Bayer
Phil., Inc., et al. vs. Agana, et al., 63 SCRA 355 (1975); Arabay, Inc. vs. Salvador, et
al., 82 SCRA 139 (1978); Polaris Marketing Corporation vs. Plan, et al., 69 SCRA 93
(1976); Santos vs. Sibug, et al., 104 SCRA 520 (1981); Special Servicing
Corporation vs. Centro La Paz, 121 SCRA 748 (1984).

10 Art. 254, P.D. 442, Labor Code.

11 133 SCRA 259 (1984). 8 Annex E, Petition; Rollo, G.R. Nos. 78261-62, 64- 65.

epublic of the Philippines

SUPREME COURT
Manila
 EN BANC

G.R. No. 1011 May 13, 1903

JOSE MACHUCA, plaintiff-appellee,

vs.
CHUIDIAN, BUENAVENTURA & CO., defendants-appellants.

Simplicio del Rosario for appellants.

Joaquin Rodriguez Serra for appellee.

LADD, J.:

Most of the allegations of the complaint were admitted by the defendant at the hearing, and the
judgment of the court below is based on the state of facts appearing from such admissions, no
evidence having been taken.

The defendants are a regular general partnership, organized in Manila, December 29, 1882, as a
continuation of a prior partnership of the same name. The original partners constituting the
partnership of 1882 were D. Telesforo Chuidian, Doña Raymunda Chuidian, Doña Candelaria
Chuidian, and D. Mariano Buenaventura. The capital was fixed in the partnership agreement at
16,000 pesos, of which the first three partners named contributed 50,000 pesos each, and the last
named 10,000 pesos, and it was stipulated that the liability of the partners should be "limited to the
amounts brought in by them to form the partnership stock."

In addition to the amounts contributed by the partners to the capital, it appears from the partnership
agreement that each one of them had advanced money to the preexisting partnership, which
advances were assumed or accounts-current aggregated something over 665,000 pesos, of which
sum about 569,000 pesos represented the advances from the Chuidians and the balance that
balance that from D. Mariano Buenaventura.

Doña Raymunda Chuidian retired from the partnership November 4, 1885. On January 1, 1888, the
partnership went into liquidation, and it does not appear that the liquidation had been terminated
when this action was brought.

Down to the time the partnership went into liquidation the accounts-current of D. Telesforo Chuidian
and Doña Candelaria Chuidian had been diminished in an amount aggregating about 288,000
pesos, while that of D. Mariano Buenaventura had been increased about 51,000 pesos. During the
period from the commencement of the liquidation down to January 1, 1896, the account-current of
each of the Chuidians had been still further decreased, while that of D. Mariano Buenaventura had
been still further increased.

On January 1, 1894, D. Mariano Buenaventura died, his estate passing by will to his children, among
whom was D. Vicente Buenaventura. Upon the partition of the estate the amount of the interest of D.
Vicente Buenaventura in his father's account-current and in the capital was ascertained and
recorded in the books of the firm.

On December 15, 1898, D. Vicente Buenaventura executed a public instrument in which for a
valuable consideration he "assigns to D. Jose Gervasio Garcia . . . a 25 per cent share in all that
may be obtained by whatever right in whatever form from the liquidation of the partnership of
Chuidian, Buenaventura & Co., in the part pertaining to him in said partnership, . . . the assignee,
being expressly empowered to do in his own name, and as a part owner, by virtue of this assignment
in the assets of the partnership, whatever things may be necessary for the purpose of accelerating
the liquidation, and of obtaining on judicially or extrajudicially the payment of the deposits account-
current pertaining to the assignor, it being understood that D. Jose Gervasio Garcia is to receive the
25 per cent assigned to him, in the same form in which it may be obtained from said partnership,
whether in cash, credits, goods, movables or immovables, and on the date when Messrs. Chuidian,
Buenaventura & Co., in liquidation, shall have effected the operations necessary in order to satisfy
the credits and the share in the partnership capital hereinbefore mentioned."

The plaintiff claims under Garcia by virtue of a subsequent assignment, which has been notified to
the liquidator of the partnership.

The liquidator of the partnership having declined to record in the books of the partnership the
plaintiff's claim under the assignment as a credit due from the concern to him this action is brought to
compel such record to be made, and the plaintiff further asks that he be adjudicated to be a creditor
of the partnership in an amount equal to 25 per cent of D. Vicente Buenaventura's share in his
father's account-current, as ascertained when the record was made in the books of the partnership
upon the partition of the latters estate, with interest, less the liability to which the plaintiff is subject by
reason of his share in the capital; that the necessary liquidation being first had, the partnership pay
to the plaintiff the balance which may be found to be due him; and that if the partnership has no
funds with which to discharge this obligation an adjudication of bankruptcy be made. He also asks to
recover the damages caused by reason of the failure of the liquidator to record his credit in the
books of partnership.

The judgment of the court below goes beyond the relief asked by the plaintiff in the complaint, the
plaintiff being held entitled not only to have the credit assigned him recorded in the books of the
partnership but also to receive forthwith 25 per cent of an amount representing the share of D.
Vicente Buenaventura in the account-current at the time of the partition of his father's estate, with
interest, the payment of the 25 percent of Buenaventura's share in the capital to be postponed till the
termination of the liquidation. This point has not, however, been taken by counsel, and we have
therefore considered the case upon its merits.

The underlying question in the case relates to the construction of clause 19 of the partnership
agreement, by which it was stipulated that "upon the dissolution of the company, the pending
obligations in favor of outside parties should be satisfied, the funds of the minors Jose and Francisco
Chuidian [it does not appear what their interest in the partnership was or when or how it was
acquired] should be taken out, and afterwards the resulting balance of the account-current of each
one of those who had put in money (imponentes) should be paid."

Our construction of this clause is that it establishes a a basis for the final adjustment of the affairs of
the partnership; that that basis is that the liabilities to noncompartners are to be first discharged; that
the claims of the Chuidian minors are to be next satisfied; and that what is due to the respective
partners on account of their advances to the firm is to be paid last of all, leaving the ultimate residue,
of course, if there be any, to be distributed, among the partners in the proportions in which they may
be entitled thereto.

Although in a sense the partners, being at the same time creditors, were "outside parties," it is clear
that a distinction is made in this clause between creditors who were partners and creditors who were
not partners, and that the expression "outside parties" refers to the latter class. And the words
"pending obligations," we think, clearly comprehend outstanding obligations of every kind in favor of
such outside parties, and do not refer merely, as claimed by counsel for the plaintiff, to the
completion of mercantile operations unfinished at the time of the dissolution of the partnership, such
as consignments of goods and the like. As respects the claims of the Chuidian minors, the
suggestion of counsel is that the clause in question means that their accounts are to be adjusted
before those of the partners but not paid first. Such a provision would have been of no practical
utility, and the language used — that the funds should be "taken out" — (se dedujeran) does not
admit of such a construction.

Such being the basis upon which by agreement of the partners the assets of the partnership are to
be applied to the discharge of the various classes of the firm's liabilities, it follows that D. Vicente
Buenaventura, whose rights are those of his father, is in no case entitled to receive any part of the
assets until the creditors who are nonpartners and the Chuidian minors are paid. Whatever rights he
had either as creditor or partner, he could only transfer subject to this condition. And it is clear, from
the language of the instrument under which the plaintiff claims, that this conditional interest was all
that D. Vicente Buenaventura ever intended to transfer. By that instrument he undertakes to assign
to Garcia not a present interest in the assets of the partnership but an interest in whatever "may be
obtained from the liquidation of the partnership," which Garcia is to receive "in the same form in
which it may be obtained from said partnership," and "on the date when Messrs. Chuidian,
Buenaventura & Co., in liquidation, shall have effected the operations necessary in order to satisfy"
the claims of D. Vicente Buenaventura.

Upon this interpretation of the assignment, it becomes unnecessary to inquire whether article 143 of
the Code of Commerce, prohibiting a partner from transferring his interest in the partnership without
the consent of the other partners, applies to partnerships in liquidation, as contended by the
defendant. The assignment by its terms is not to take effect until all the liabilities of the partnership
have been discharged and nothing remains to be done except to distribute the assets, if there should
be any, among the partners. Meanwhile the assignor, Buenaventura, is to continue in the enjoyment
of the rights and is to remain subject to the liabilities of a partner as though no assignment had been
made. In other words, the assignment does not purport to transfer an interest in the partnership, but
only a future contingent right to 25 per cent of such portion of the ultimate residue of the partnership
property as the assignor may become entitled to receive by virtue of his proportionate interest in the
capital.

There is nothing in the case to show either that the nonpartner creditors of the partnership have
been paid or that the claims of the Chuidian minors have been satisfied. Such rights as the plaintiff
has acquired against the partnership under the assignment still remain, therefore, subject to the
condition which attached to them in their origin, a condition wholly uncertain of realization, since it
may be that the entire assets of the partnership will be exhausted in the payment of the creditors
entitled to preference under the partnership agreement, thus extinguishing the plaintiff's right to
receive anything from the liquidation.

It is contended by the plaintiff that, as the partnership was without authority to enter upon new
mercantile operations after the liquidation commenced, the increase in D. Mariano Buenaventura's
account-current during that period was the result of a void transaction, and that therefore the plaintiff
is entitled to withdraw at once the proportion of such increase to which he is entitled under the
assignment. With reference to this contention, it is sufficient to say that it nowhere appears in the
case that the increase in D. Mariano Buenaventura's account-current during the period of liquidation
was the result of new advances to the firm, and the figures would appear to indicate that it resulted
from the accumulation of interest.

Counsel for the plaintiff have discussed at length in their brief the meaning of the clause in the
partnership agreement limiting the liability of the partners to the amounts respectively brought into
the partnership by them, and the effect of this stipulation upon their rights as creditors of the firm.
These are questions which relate to the final adjustment of the affairs of the firm, the distribution of
the assets remaining after all liabilities have been discharged, or, on the other hand, the
apportionment of the losses if the assets should not be sufficient to meet the liabilities. They are in
no way involved in the determination of the present case.

The plaintiff having acquired no rights under the assignment which are now enforceable against the
defendant, this action can not be maintained. The liquidator of the defendant having been notified of
the assignment, the plaintiff will be entitled to receive from the assets of the partnership, if any
remain, at the termination of the liquidation, 25 per cent of D. Vicente's resulting interest, both as
partner and creditor. The judgment in this case should not affect the plaintiff's right to bring another
action against the partnership when the affairs of the same are finally wound up. The proper
judgment will be that the action be dismissed. The judgment of the court below is reversed and the
case is remanded to that court with directions to enter a judgment of dismissal. So ordered.

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

McDonough, J., did not sit in this case.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-45662 April 26, 1939

ENRIQUE CLEMENTE, plaintiff-appellee,

vs.
DIONISIO GALVAN, defendant-appellee.
JOSE ECHEVARRIA, intervenor-appellant.

Engracio F. Clemeña and Celedonio Bernardo for appellant.

Vicente Bengson for defendant-appellee.
No appearance for other party.

DIAZ, J.:

The intervenor Jose Echevarria having lost in the Court of First Instance of manila which rendered
judgment against him, the pertinent portion of which reads: "and with respect to the complaint of the
intervenor, the mortgage executed in his favor by plaintiff is declared null and void, and said
complaint in intervention, as well as the counterclaim filed by the defendant against the intervenor, is
dismissed, without pronouncement as to costs," he appealed to this court on the ground that,
according to him, the lower court committed the errors assigned in his brief as follows:

I. The court a quo erred in finding in the appealed decision that plaintiff was unable to take
possession of the machines subject of the deed of mortgage Exhibit B either before or after
the execution thereof.
 II. The court a quo likewise erred in deciding the present case against the intervenor-
appellant, on the ground, among others, that "plaintiff has not adduced any evidence nor has
he testified to show that the machines mortgaged by him to the intervenor have ever
belonged to him, notwithstanding that said intervenor is his close relative.".

III. The lower court also erred in declaring null and void the mortgage executed by plaintiff in
favor of the intervenor and, thereby, dismissing the complaint in intervention.

IV. The lower court lastly erred in ordering the receiver J. D. Mencarini to deliver to the
defendant the aforesaid machines upon petition of the plaintiff.

In order to have a clear idea of the question, it is proper to state the facts bearing on the case as
they appear in the decision and judgment of the lower court and in the documents which constitute
all the evidence adduced by the parties during the trial.

On June 6, 1931, plaintiff and defendant organized a civil partnership which they named "Galvan y
Compañia" to engage in the manufacture and sale of paper and other stationery. they agreed to
invest therein a capital of P100,000, but as a matter of fact they did not cover more than one-fifth
thereof, each contributing P10,000. Hardly a year after such organization, the plaintiff commenced
the present case in the above-mentioned court to ask for the dissolution of the partnership and to
compel defendant to whom the management thereof was entrusted to submit an accounting of his
administration and to deliver to him his share as such partner. In his answer defendant expressed
his conformity to the dissolution of the partnership and the liquidation of its affairs; but by way of
counterclaim he asked that, having covered a deficit incurred by the partnership amounting to
P4,000 with his own money, plaintiff reimburse him of one-half of said sum. On petition of the plaintiff
a receiver and liquidator to take charge of the properties and business for the partnership while the
same was not yet definitely dissolved, was appointed, the person chosen being Juan D. Mencarini.
The latter was already discharging the duties of his office when the court, by virtue of a petition ex
parte of the plaintiff, issued the order of May 24, 1933, requiring said receiver to deliver to him
(plaintiff) certain machines which were then at Nos. 705-707 Ylaya Street, Manila but authorizing him
to charge their value of P4,500 against the portion which may eventually be due to said plaintiff. To
comply with said order, the receiver delivered to plaintiff the keys to the place where the machines
were found, which was the same place where defendant had his home; but before he could take
actual possession of said machines, upon the strong opposition of defendant, the court, on motion of
the latter, suspended the effects of its order of May 24, 1933. In the meantime the judgments
rendered in cases Nos. 42794 and 43070 entitled "Philippine Education Co., Inc. vs. Enrique
Clemente" for the recovery of a sum of money, and "Jose Echevarria vs. Enrique Clemente", also for
the recovery of a sum of money, respectively, were made executory; and in order to avoid the
attachment and subsequent sale of the machines by the sheriff for the satisfaction from the proceeds
thereof of the judgments rendered in the two cases aforecited, plaintiff agreed with the intervenor,
who is his nephew, to execute, as he in fact executed in favor of the latter, a deed of mortgage
Exhibit B encumbering the machines described in said deed in which it is stated that "they are
situated on Singalong Street No. 1163", which is a place entirely different from the house Nos. 705
and 707 on Ylaya Street hereinbefore mentioned. The one year agreed upon in the deed of
mortgage for the fulfillment by the plaintiff of the obligation he had contracted with the intervenor,
having expired, the latter commenced case No. 49629 to collect his mortgage credit. The intervenor,
as plaintiff in the said case, obtained judgment in his favor because the defendant did not interpose
any defense or objection, and, moreover, admitted being really indebted to the intervenor in the
amount set forth in the deed of mortgage Exhibit B. The machines which the intervenor said were
mortgaged to him were then in fact in custodia legis, as they were under the control of the receiver
and liquidator Juan D. Mencarini. It was, therefore, useless for the intervenor to attach the same in
view of the receiver's opposition; and the question having been brought to court, it decided that
nothing could be done because the receiver was not a party to the case which the intervenor
instituted to collect his aforesaid credit. (Civil case No. 49629.) The question ended thus because
the intervenor did not take any other step until he thought of joining in this case as intervenor.

1. From the foregoing facts, it is clear that plaintiff could not obtain possession of the
machines in question. The constructive possession deducible from the fact that he had the
keys to the place where the machines were found (Ylaya Street Nos. 705-707), as they had
been delivered to him by the receiver, does not help him any because the lower court
suspended the effects of the other whereby the keys were delivered to him a few days after
its issuance; and thereafter revoked it entirely in the appealed decision. Furthermore, when
he attempted to take actual possession of the machines, the defendant did not allow him to
do so. Consequently, if he did not have actual possession of the machines, he could not in
any manner mortgage them, for while it is true that the oft-mentioned deed of mortgage
Exhibit B was annotated in the registry of property, it is no less true the machines to which it
refers are not the same as those in question because the latter are on Ylaya Street Nos.
705-707 and the former are on Singalong Street No. 1163. It can not be said that Exhibit B-1,
allegedly a supplementary contract between the plaintiff and the intervenor, shows that the
machines referred to in the deed of mortgage are the same as those in dispute and which
are found on Ylaya Street because said exhibit being merely a private document, the same
cannot vary or alter the terms of a public document which is Exhibit B or the deed of
mortgage.

2. The second error attributed to the lower court is baseless. The evidence of record shows
that the machines in contention originally belonged to the defendant and from him were
transferred to the partnership Galvan y Compania. This being the case, said machines
belong to the partnership and not to him, and shall belong to it until partition is effected
according to the result thereof after the liquidation.

3. The last two errors attributed by the appellant to the lower court have already been
disposed of by the considerations above set forth. they are as baseless as the previous
ones.

In view of all the foregoing, the judgment appealed from is affirmed, with costs against the appellant.
So ordered.

Avanceña, C. J., Villa-Real, Imperial, Laurel, Concepcion, and Moran, JJ., concur.