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Testate Estate of Mota v.

Serra including the sugar plantation of the harvest year of 1920 to 1921,
February 14, 1925 covering all his property
TESTATE ESTATE OF LAZARO MOTA, deceased, ET AL., plaintiffs-appellants, o They were willing to assume the Serra's obligation to Mota et al
vs. o Contract, par. 5: xxx The vendee hereby obligates himself to respect
SALVADOR SERRA, defendant-appellee. the aforesaid contract (Contract of Partnership) and all obligations
VILLAMOR, J.: arising therefrom.
SUMMARY: Serra, as owner of Palma Central, entered into a contract of partnership  Before the delivery to the purchasers of the hacienda thus sold, Luzuriaga
with Mota et al, as owners of San Isidro Central, for the construction of a railroad line. renounced all his rights under the contract of sale in favor of Concepcion &
In said agreement, they stipulated that expenses will be borne by both parties 50-50 Whitaker.
although expenses will be initially for the account of Mota et. al. Subsequently  July 17, 1920: Thus, Concepcion, Whitaker & Serra executed another deed of
however, Serra sold Palma to Whitaker & Concepcion, the latter expressing absolute sale of the said "Palma" Estate for P1,695,961.90.
awareness of above contract and willingness to subrogate themselves into the o Serra received at the time of executing the deed and the balance was
obligations therefor. Thereafter, Concepcion & Whitaker also bought from Mota et al. payable by installments in the form and manner stipulated in the
the ½ of the railroad line and they agreed that the partnership "Palma" and "San contract.
Isidro," formed between Serra & Mota et al, should be dissolved upon the execution o Purchasers guaranteed the unpaid balance of the purchase price by a
of the contract. Serra being unable to pay his obligation under the contract of
first and special mortgage in favor of Serra upon the hacienda and the
partnership (1/2 of the expenses), Mota et. al. instituted an action for collection. As
central with all the improvements, buildings, machineries, and
defense, Serra alleged that at the termination of the partnership between them, his
appurtenances then existing on the said hacienda.
obligation therein has been extinguished. HELD: Serra is still liable to the partnership.
o Clause 6 of the deed: Whitaker & Concepcion state that they are aware
DOCTRINE: The dissolution of a firm does not relieve any of its members from
of the contract that Serra has with the proprietors of the "San Isidro"
liability for existing obligations, although it does save them from new obligations to
Central and hereby obligate themselves to respect the said
which they have not expressly or impliedly assented, and any of them may be
contract and subrogate themselves into the rights and obligations
discharged from old obligations by novation or other form of release. A partnership
thereunder. They also bind themselves to comply with all the contracts
continues, even after dissolution, for the purpose of winding up its affairs. At
heretofore entered by the vendor with the customers, coparceners on
the termination of the object for which it was created the partnership is extinguished,
shares and employees.
pending the winding up of some incidents and obligations of the partnership, but in
such case, the partnership will be reputed as existing until the juridical relations  Jan. 8, 1921: Concepcion & Whitaker bought from Mota et al. the ½ of the
arising out of the contract are dissolved. A partnership cannot be considered as railroad line pertaining to the latter, executing a Contract of Sale.
extinguished until all the obligations pertaining to it are fulfilled. o Price: P237,722.15, excluding any amount which Serra might be owing
FACTS: to Mota et al.
 Feb. 1, 1919: Defendant Salvador Serra, Lazaro Mota, now deceased, and Juan o Of the purchase price, Concepcion & Whitaker paid P47,544.43 only.
J. Vidaurrazaga for himself and in behalf of his brother, Felix and Dionisio o They agreed that the partnership "Palma" and "San Isidro," formed
Vidaurrazaga, entered into a contract of partnership for the construction and by the agreement of Feb. 1, 1919 should be dissolved upon the
exploitation of a railroad line of about 10 kms. from the "San Isidro" and "Palma" execution of the contract, and that the said partnership agreement
centrals to the place known as "Nandong." should be totally cancelled and of no force and effect whatever.
o Original capital stipulated: P150,000 to be paid by parties in equal parts  Thus, "Hacienda Palma," with the entire railroad, the subject-matter of the
o Mota et. al. were entrusted with the administration of the partnership. contract of partnership between Mota et al. and Serra, became the property of
o Mota et al owns "San Isidro" Central while Serra owns “Palma” Central Whitaker & Concepcion.
o The expenses until the termination of which shall be for the account of  Whitaker & Concepcion having failed to pay to Serra a part of the purchase price
the "San Isidro" Central (Mota et al) (P750,000), Serra, foreclosed the mortgage upon the said hacienda.
o ½ of expenses shall be borne by the "Palma" Central (Serra) with the o It was adjudicated to him at the public sale for P500,000. He was put in
obligation to reimburse Mota et al within 5 years with interest at the rate possession including what was planted at the time, together with all the
of 10% p.a. improvements made by Whitaker & Concepcion.
 The agreed capital (P150k) however, did not prove sufficient, as the expenses up  Since Serra failed to pay ½ of the amount expended by Mota et al. upon the
to May 15, 1920, had reached P226,092.92 construction of the railroad line (P113,046.46), as well as Whitaker &
Concepcion, Mota et al. instituted the present action. PRAYER:
 Jan. 29, 1920: Serra entered into a contract of sale with Venancio Concepcion,
o (1) That the deed of Feb. 1, 1919 (Contract of Partnership) be declared
Phil. C. Whitaker, and Eusebio R. de Luzuriaga,
o Serra sold the estate and central known as "Palma" with its running valid and binding;
o (2) That after the execution of the said document, Serra improved
business, as well as all the improvements, machineries and buildings,
real and personal properties, rights, choses in action and interests, economically so as to be able to pay Mota et al. the amount owed, but
that he refused to pay either in part or in whole the said amount prevent the Serra from selling to them his "Hacienda Palma" with the
notwithstanding the several demands made on him for the purpose; and rights that he had over the railroad in question.
o (3) Serra be sentenced to pay Mota et al. P113,046.46, with the o Serra ceased to be a partner in said line and, therefore, Mota et al.
stipulated interest at 10% p.a. had to take the vendees as their new partners.
 Serra set up three special defenses: o Mota et al. had to come to an understanding with the new owners of the
o (1) The novation of the contract by the substitution of the debtor with the "Hacienda Palma" in connection with the railroad line "Palma-San
conformity of the creditors; Isidro-Nandong."
o (2) the confusion of the rights of the creditor and debtor; and  Mota et al. were not a party to the Contract of Sale between Serra, Whittaker,
o (3) the extinguishment of the contract (Contract of partnership) Concepcion & Luzuriaga. No stipulation whereby the obligation of the Serra was
 TC: Absolved Serra from the complaint. novated with the consent of the creditor
o There was a novation of the contract by the substitution of the debtor. MERGING OF DEBTOR & CREDITOR
Whitaker & Concepcion, upon purchasing the "Palma" Central, were  Serra: There was a merger of the rights of debtor and creditor, whereby the
subrogated in the place of the Serra in all his rights and obligations fulfillment of the obligation became extinguished.
under the contract relating to the railroad line existing between "Palma" o Debt of Serra was transferred to Whitaker & Concepcion by the
and "San Isidro" centrals and Mota et al. agreed to this subrogation Contract of Sale bet. Serra, Whittaker, Concepcion & Luzuriaga.
o As to the prayer that contract of partnership be declared valid and o These in turn acquired the credit of the Testate Estate of Lazaro Mota et
binding, there was no way of reviving the contract which the parties al. by virtue of the debt (Contract of Sale on ½ of the railroad); thus the
themselves in interest had spontaneously and voluntarily extinguished rights of the debtor and creditor were merged in one person.
thru the Contract of Sale bet. Concepcion, Whitaker & Mota et al. on ½  SC: No. The rights and titles which Mota et al. sold to Whitaker & Concepcion
of the railroad refer only to one-half of the railroad line. The credit which they had against Serra
 Mota et al. appealed to SC. for ½ of the cost of construction of the said line was not included in the sale
ISSUE: Whether Serra cannot be held liable to pay Mota et. al. a part of the cost of contained in the Contract of Sale on ½ of the railroad.
the construction of the railroad line stipulated in the contract of partnership by reason  That Mota et al. sold their rights and titles over ½ of the line, is evident from the
of the dissolution of the partnership? (NO, Serra is liable) very Contract of Sale. The purchasers, Whitaker and Concepcion, to secure the
RATIO: payment of the price, executed a mortgage in favor of Mota et al. on the same
NOVATION rights and titles that they had bought and also upon what they had purchased
 Serra: By the substitution of the debtor with the consent of the creditor, the from Serra.
obligation of Serra to pay his obligation under the contract of partnership was  In other words, Whitaker & Concepcion mortgaged unto Mota et al. what they
extinguished since there was a novation of the contract had bought from Mota et al. and also what they had bought from Serra.
 SC: There was no novation. There was none intended; Mota et. al have not  The rights and titles transferred by Mota et al. to Whitaker & Concepcion were
expressly consented to the substitution of Serra. only those they had over the other half of the railroad line.
 It should be noted that in order to give novation its legal effect, the law requires  No novation of the contract between Mota et al. and Serra, as regards the
that the creditor should consent to the substitution of a new debtor. This consent obligation of the latter to pay the former ½ of the cost of the construction of the
must be given expressly for the reason that, since novation extinguishes the said railroad line, and since Mota et al. did not include in the sale, evidenced by
personality of the first debtor who is to be substituted by new one, it implies on Contract of Sale, the credit that they had against the Serra.
the part of the creditor a waiver of the right that he had before the novation which  That the obligation of the Serra became extinguished by the merger of the rights
waiver must be express of creditor and debtor by the purchase of Whitaker and Concepcion is wholly
 The fact that Phil. C. Whitaker and Venancio Concepcion were willing to assume untenable.
the Serra's obligation to Mota et al. is of no avail, if the latter have not expressly TERMINATION OF PARTNERSHIP
consented to the substitution of the first debtor.  By virtue of the Contract of Sale on ½ of the railroad, the Testate Estate of
 Letter presented as proof of alleged consent of Mota et. al to the substitution of Lazaro Mota et al. and Phil. C. Whitaker and Venancio Concepcion, by common
Whitaker & Concepcion only shows that they asked the two to be their new consent, decided to dissolve the partnership between "Hacienda Palma" and
partners (not substituted). It is natural that Mota et al. should have done this. "Hacienda San Isidro," thus cancelling the contract of partnership of February 1,
Still, there was nothing to show the express consent, the manifest and deliberate 1919.
intention of Estate of Mota et al. to exempt Serra from his obligation and to  TC: By the termination of the partnership, as shown by the Contract of Sale bet.
transfer it to his successors in interest, Whitaker & Concepcion.
Concepcion, Whitaker & Mota et al, no legal rights can be derived therefrom.
o Serra transferred his hacienda to C. Whitaker & Concepcion and made
it known to Mota et al. that the new owners would hold themselves liable
 Serra: Mota et al. cannot enforce any right arising out of that contract of
partnership, which has been annulled, such as the right to claim now a part of the
for the cost of constructing the said railroad line. Mota et al. could not
cost of the construction of the railroad line stipulated in that contract.
 SC: Serra's contention signifies that any person, who has contracted a valid 5 years which the parties themselves had seen fit to stipulate. The provisions of
obligation with a partnership, is exempt from complying with his obligation by the Art. 113, regarding the fulfillment of pure obligations, must be applied in this
mere fact of the dissolution of the partnership. Serra's contention is untenable. case.
DISPOSITIVE: Judgment appealed from Reversed. Serra is indebted to Testate
 The dissolution of a partnership must not be understood in the absolute and strict Estate of Lazaro Mota, et al., for P113,046.46 with the agreed interest @ 10% p.a.
sense so that at the termination of the object for which it was created the from the date of the filing of the complaint.
partnership is extinguished, pending the winding up of some incidents and
obligations of the partnership, but in such case, the partnership will be
reputed as existing until the juridical relations arising out of the contract
are dissolved.
SC of Spain (Feb. 6, 1903): Upheld this doctrine
 FACTS: There was a partnership formed between several persons to purchase
some lands sold by the state. The partnership paid the purchase price and
distributed among its members the lands so acquired.
o After the lapse of some time, one of the partners instituted an action in
the court of Badajoz, praying that he be accepted as a partner with the
same rights and obligations as the others, for the reason that he had not
been allowed all that he had a right to.
o The court granted the petition, which judgment was affirmed by
the Audiencia de Caceres.
o From that decision, the other partner sued out a writ of error
 There is infringement of the Civil Code since all contracts are
reputed consummated and therefore extinguished, when
the contracting parties fulfill all the obligations arising
therefrom
 By the payment of the money and the granting and distribution
of the lands without any opposition, the juridical relations
between the contracting parties become extinguished and
none of the parties has any right of action under the
contract.
 HELD: Denied the writ. Some corrections and liquidations asked by the actor
were still pending. The articles cited were not infringed because a partnership
cannot be considered as extinguished until all the obligations pertaining to
it are fulfilled. (11 Manresa, page 312.)
 30 Cyc., page 659: The dissolution of a firm does not relieve any of its
members from liability for existing obligations, although it does save them
from new obligations to which they have not expressly or impliedly
assented, and any of them may be discharged from old obligations by
novation of other form of release. It is often said that a partnership
continues, even after dissolution, for the purpose of winding up its affairs
INTEREST
 Serra: As in the articles of partnership on Feb. 1, 1919, it was agreed that Serra
would put up ½ of the cost of the railroad line within 5 years from Feb. 1, 1919,
with interest at 10% p.a. Present action is premature since, from the execution of
the contract until the date of the complaint (Oct. 25, 1922), the 5 years, within
which the Serra could pay his part of the cost of the construction of the line, had
not yet elapsed.
 SC: Mora et.al and the successors in interest of the Serra, by mutual
consent, dissolved the partnership on June 16, 1920, cancelling the
contract of partnership to all of which Serra consented as evidenced by his
allegations in his answer. Thus, there is no reason for waiting for the expiration of

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