Pang Lim and Benito Galvez vs Lo Seng

Facts: Lo Seng and Pang Lim were partners in the business of running a

distillery, known as "El Progreso” The land on which said distillery is located was to the firm of Lo Seng

and Co. for the term of three years. Upon the expiration of this lease a new written contract, in the making

of which Lo Yao was represented by one Lo Shui as attorney in fact, became effective whereby the lease was extended for fifteen years.

Pang Lim sold all his interest in the distillery to his partner Lo Seng, thus placing the latter in the position of sole owner

Lo Shui, again acting as attorney in fact of Lo Yao, executed and acknowledged before a notary public a deed purporting to convey to Pang Lim and another Chinaman named Benito Galvez, the entire distillery plant. But this document was never recorded in the registry of property.

Thereafter, Pang Lim and Benito Galvez demanded possession from Lo Seng, but the latter refused to yield; and the present action of unlawful detainer was thereupon initiated by Pang Lim and Benito Galvez in the court of the justice of the peace of Paombong to recover possession of the premises.

Plaintiff Pang Lim has occupied a double role in the transactions which gave rise to this litigation, namely, first, as one of the lessees; and secondly, as one of the purchasers now seeking to terminate the lease. These two positions are essentially antagonistic and incompatible. Every competent person is by law bond to maintain in all good faith the integrity of his own obligations; and no less certainly is he bound to respect the rights of any person whom he has placed in his own shoes as regards any contract previously entered into by himself.

Issue: WON Pang Lim, having been a participant in the contract of lease now in question, is in a position to terminate it: and this is a fatal obstacle to the maintenance of the action of unlawful detainer by him.

Held: NO.While yet a partner in the firm of Lo Seng and Co., Pang Lim participated in the creation of this lease, and when he sold out his interest in that firm to Lo Seng this operated as a transfer to Lo Seng of Pang Lim's interest in the firm assets, including the lease; and Pang Lim cannot now be permitted, in the guise of a purchaser of the estate, to destroy an interest derived from himself, and for which he has received full value.

Ratio: The bad faith of the plaintiffs in seeking to deprive the defendant of

this lease is strikingly revealed in the circumstance that prior to the

acquisition of this property Pang Lim had been partner with Lo Seng and Benito Galvez an employee. Both therefore had been in relations of confidence with Lo Seng and in that position had acquired knowledge of the possibilities of the property and possibly an experience which would have enabled them, in case they had acquired possession, to exploit the distillery with profit.

It would be shocking to the moral sense if the condition of the law were found to be such that Pang Lim, after profiting by the sale of his interest in a business, worthless without the lease, could intervene as purchaser of the property and confiscate for his own benefit the property which he had sold for a valuable consideration to Lo Seng.

Above all other persons in business relations, partners are required to exhibit towards each other the highest degree of good faith. In fact the relation between partners is essentially fiduciary, each being considered in law, as he is in fact, the confidential agent of the other.

If one partner obtains in his own name and for his own benefit the renewal of a lease on property used by the firm, to commence at a date subsequent to the expiration of the firm's lease, the partner obtaining the renewal is held to be a constructive trustee of the firm as to such lease.

As Lo Seng is vested with the possessory right as against Pang Lim, he cannot be ousted either by Pang Lim or Benito Galvez. Having lawful possession as against one cotenant, he is entitled to retain it against both.

Catalan Vs. Gatchalian105 Phil 1270 G.R. No. L-11648 April 22, 1959

Facts:Catalan and Gatchalian are partners. They mortgaged two lots to Dr. Marave together with the improvements thereon to secure a credit from the latter. The partnership failed to pay the obligation. The properties were sold to Dr. Marave at a public auction. Catalan redeemed the property and he contends that title should be cancelled and a new one must be issued in his name.

IssueDid Catalan’s redemption of the properties make him the absolute owner of the lands?

RulingNoThe right of redemption pertains to the owner of the property; as it was the partnership which owned the property, in this case, it was only the partnership which could properly exercise the right of redemption.

Under Article 1807 of the NCC every partner becomes a trustee for his copartner with regard to any benefits or profits derived from his act as a partner. Consequently, when Catalan redeemed the properties in question, he became a trustee and held the same in trust for his copartner Gatchalian,

subject to his right to demand from the latter his contribution to the amount of redemption.

Hanlon vs. Haussermann and Beam

Facts: This action was originally instituted by R. Y. Hanlon to compel the defendants, John W. Haussermann and A. W. Beam, to account for a share of the profits gained by them in rehabilitating the plant of the Benguet Consolidated Mining Company and in particular to compel them to surrender to the plaintiff 50,000 shares of the stock of said company, with dividendspaid thereon.It was initially agreed by Hanlon, Haussermann, Beam and Sellner that P75,000.00 was needed to rehabilitate the mine; P50,000.00 would come from Hanlon by securing and obtaining subscriptions for the company’s stocks, P25,000.00 would come from Haussermann and Beam.

They were to receive compensation in the form of shares of stock for the services rendered in the flotation of this proposition. The funds were needed on a certain date. It was also stated in the contract that Haussermann and Beam would be discharged if Sellner could not provide the amount due from him within the time frame stipulated. Hanlon was unable to raise the P75,000.00, so that Haussermann and Beam made arrangements to finance the rehabilitation of the mine. Because of this new arrangement, the company became profitable that it was able to pay dividends. Because of this, the value of thecompany’s stocks appreciated.

Held: Hanlon is not entitled to an accounting for his share in the profits of the company; Haussermann and Beam are absolved. Under the equitable doctrine, if the contracting parties have treated time as of the essence of the contract, the delinquency will not be excused and specific performance will not be granted; but on the other hand, if it appears that time has not been made of the essence of the contract, equity will relieve from the delinquency and specific performance may be granted, due compensation being made for the damage caused by the delay. Time is of the essence of the contract for the sale of an option on mining property, or a contract for the sale thereof, even though there is no express stipulation to that effect. The same idea is clearly applicable to a contract like that now under consideration which provides for the rehabilitation of a mining plant with funds to be supplied by the contractor within a limited period.