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Case No. 3: Lozana v. Depakakibo

G.R. No. L-13680, [April 27, 1960]

TOPIC: Property Rights of a Partner

Pedro

FACTS:
● On November 16, 1954 plaintiff Mauro Lozana (Lozana) entered into a contract with
defendant Serafin Depakakibo (Depakakibo) wherein they established a partnership
capitalized at the sum of P30,000, plaintiff furnishing 60% thereof and the defendant,
40%, for the purpose of maintaining, operating and distributing electric light and power
in the Municipality of Dumangas, Province of Iloilo, under a franchise issued to Mrs.
Piadosa Buenaflor (as proved during the hearings, that aforementioned Partnership
Contract, the plaintiff Lozana, contributed the amount of Eighteen Thousand Pesos
(P18,000.00); said contributions of both parties being the appraised values of their
respective properties brought into the partnership). However, the franchise or certificate
of public necessity and convenience in favor of the said Mrs. Piadosa Buenaflor was
cancelled and revoked by the Public Service Commission on May 15, 1955.
● A temporary certificate of public convenience was issued in the name of Olimpia D.
Decolongon on December 22, 1955.
● Because of the cancellation of the franchise in the name of Mrs. Piadosa Buenaflor,
plaintiff herein Lozana sold a generator, Buda (diesel), 75 hp. 30 KVA capacity, Serial
No. 479, to the new grantee Olimpia D. Decolongon, by a deed dated October 30, 1955.
● Defendant Depakakibo, on the other hand, sold one Crossly Diesel Engine to the
spouses Felix Jimenea and Felina Harder, by a deed dated July 10, 1956.
● On November 15, 1955, plaintiff Lozana brought an action against the defendant,
alleging that he is the owner of the Generator Buda (Diesel), valued at P8,000 and 70
wooden posts with the wires connecting the generator to the different houses supplied
by electric current in the Municipality of Dumangas, and that he is entitled to the
possession thereof, but that the defendant has wrongfully detained them as a
consequence of which plaintiff suffered damages.
● On December 5, 1955, defendant filed an answer, denying that the generator and the
equipment mentioned in the complaint belong to the plaintiff and alleging that the same
had been contributed by the plaintiff to the partnership entered into between them in the
same manner that defendant had contributed equipment also, and therefore that he is
not unlawfully detaining them.
● By way of counterclaim, defendant alleged that under the partnership agreement the
parties were to contribute equipment, plaintiff contributing the generator and the
defendant, the wires for the purpose of installing the main and delivery lines. Defendant,
therefore, among others, prayed that the court order dissolution of the partnership, after
the accounting and liquidation of the same.
● The lower court declared that the contract of partnership was null and void, because by
the contract of partnership, the parties thereto have become dummies of the owner of
the franchise. Judge Pantaleon A. Pelayo issued an order in said case authorizing the
sheriff to take possession of the generator and 70 wooden posts, upon plaintiff's filing
of a bond in the amount of P16,000 in favor of the defendant (for subsequent delivery to
the plaintiff).
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RTC RULING:

CA RULING:

ISSUE/S: Whether or not a property contributed to the partnership can be disposed by

the contributing partner – NO

ARGUMENTS

PETITIONER (MAURO LOZANA): RESPONDENT (SERAFIN DEPAKAKIBO):

Plaintiff alleged that he is the owner of the Defendant denied that the generator and the
Generator Buda (Diesel), valued at P8,000 equipment mentioned in the complaint belong
and 70 wooden posts with the wires to the plaintiff and alleging that the same had
connecting the generator to the different been contributed by the plaintiff to the
houses supplied by electric current in the partnership entered into between them in the
Municipality of Dumangas, and that he is same manner that defendant had contributed
entitled to the possession thereof, but that the equipment also, and therefore that he is not
defendant has wrongfully detained them as a unlawfully detaining them. By way of
consequence of which plaintiff suffered counterclaim, defendant alleged that under the
damages. Plaintiff prayed that said properties partnership agreement the parties were to
be delivered back to him. contribute equipment, plaintiff contributing the
generator and the defendant, the wires for the
purpose of installing the main and delivery
lines; that the plaintiff sold his contribution to
the partnership, in violation of the terms of their
agreement.

SC RULING:

The property contributed becomes the property of the partnership and as such cannot
be disposed of by the party contributing the same without the consent or approval of the
partnership or of the other partner.

As it appears from the above stipulation of facts that the plaintiff and the defendant entered into
the contract of partnership, plaintiff contributing the amount of P18,000, and as it is not stated
therein that there has been a liquidation of the partnership assets at the time plaintiff sold the
Buda Diesel Engine on October 15, 1955, and since the court below had found that the plaintiff
had actually contributed one engine and 70 posts to the partnership, it necessarily follows
that the Buda diesel engine contributed by the plaintiff had become the property of the
partnership. As properties of the partnership, the same could not be disposed of by the
party contributing the same without the consent or approval of the partnership or of the
other partner. (Clemente vs. Galvan, 67 Phil., 565).

The lower court’s declaration that the contract of partnership was null and void, because by the
contract of partnership, the parties thereto have become dummies of the owner of the franchise
is of no moment. The reason for the holding was the admission by defendant when being cross-
examined by the court that he and the plaintiff are dummies. We find that this admission by the
defendant is an error of law, not a statement of a fact. The Anti-Dummy law has not been
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violated as parties, plaintiff and defendant, are not aliens but Filipinos. The Anti-Dummy
law refers to aliens only (Commonwealth Act 108 as amended).

Upon examining the contract of partnership, especially the provision thereon wherein the parties
agreed to maintain, operate and distribute electric light and power under the franchise belonging
to Mrs. Buenaflor, we do not find the agreement to be illegal, or contrary to law and public
policy such as to make the contract of partnership, null and void ab initio. The agreement
could have been submitted to the Public Service Commission if the rules of the latter require
them to be so presented. But the fact of furnishing the current to the holder of the franchise
alone, without the previous approval of the Public Service Commission, does not per se make
the contract of partnership null and void from the beginning and render the partnership entered
into by the parties for the purpose also void and non-existent. Under the circumstances,
therefore, the court erred in declaring that the contract was illegal from the beginning and
that parties to the partnership are not bound therefor, such that the contribution of the
plaintiff to the partnership did not pass to it as its property. It also follows that the claim
of the defendant in his counterclaim that the partnership be dissolved and its assets
liquidated is the proper remedy, not for each contributing partner to claim back what he
had contributed.

ADDITIONAL NOTES (DOCTRINES)

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