11 Lyons V Rosestock.docx

11 Lyons vs Rosenstock 56 Phil 632 FACTS:  Henry Elser and E.S. Lyons were real estate dealers who often associated with each other in business ventures where they shared profits equally. Both owned together three parcels of land.  Lyons, also a missionary, left for the US to join the Methodist mission. Lyons executed in favor of Elser a general power of attorney to manage and dispose the co-owned properties  In 1920 Elser got interested in a piece of land, containing about 1.5M sq.m, known as the San Juan Estate, offered by its owners for P570K. Elser purchased an option on this property for more time to raise funds.  Elser borrowed P50K from Chinese merchant for the first payment for the San Juan Estate with Fidelity as Surety. Elser mortaged the Carriedo property to Fidelity.  Elser organized a J.K. Pickering & Co. a limited partnership to develop the San Juan Estate. Elser owned majority shares but allocated 200 shares to Lyons who he believed would join him in the venture.  Elser wrote Lyons and tried to convince him to resign from the Methodist mission and raise as much funds to help him develop the property. Lyons declined the invitation.  Elser then tried to free the encumbrance on the mortgaged property he co-owned with Lyons and substitute with a property he solely owned but Lyons asked him to “let the Carriedo mortgage ride”. When Lyons returned to the Philippine Islands, he acted for a time as a board director of the J. K. Pickering & Co. but later sold his shares.  The development of the San Juan Estate was a success. When Elser died in June 1923 Lyons filed action against Rosenstock as administrator of Elser’s estate for a share of the partnership obtained from the mortgage of the common property in Carriedo, alleging that he and Eliser had been partners. The trial court ruled there was no partnership. ISSUE: Whether there is partnership between Lyons and Elser arising from co-ownership of the mortgaged property. HELD: NO. [Art 1769 (2) – co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property. In this case, there was clearly no general relation of partnership between the parties the mortgaging of the Carriedo property never resulted in damage to Lyons – not even a single cent; it is also evident that the risk imposed upon Lyons was negligible as Elser was solvent more than the value of the encumbrance. It is also plain that no money actually deriving from this mortgage was ever applied to the purchase of the San Juan Estate. What really happened was that Elser merely subjected the property to a contingent liability, and no actual liability ever resulted therefrom. The financing of the purchase of the San Juan Estate, apart from the modest financial participation of his three associates, was the work of Elser accomplished entirely upon his own account. The most that can be said is that Elser and Lyons had been co-participants in various transactions in real estate. No objection can be made to the use of the word partnership as a term descriptive of the relation in those particular transactions, but it must be remembered that it was in each case a particular partnership, under article 1678 of the Civil Code. It is clear that Elser, in buying the San Juan Estate, was not acting for any partnership composed of himself and Lyons, and the law cannot be distorted into a proposition which would make Lyons a participant in this in this deal contrary to his express determination. Therefore, there is no partnership. Affirmed.